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AMETEK INC/ - Quarter Report: 2022 June (Form 10-Q)

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission File Number 1-12981
_________________________
AMETEK, Inc.
(Exact name of registrant as specified in its charter)
_________________________
Delaware
(State or other jurisdiction of
incorporation or organization)

1100 Cassatt Road
Berwyn, Pennsylvania
(Address of principal executive offices)
14-1682544
(I.R.S. Employer
Identification No.)

19312-1177
(Zip Code)
Registrant’s telephone number, including area code: (610) 647-2121
_________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
_________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common StockAMENew York Stock Exchange
The number of shares of the registrant’s common stock outstanding as of the latest practicable date was: Common Stock, $0.01 Par Value, outstanding at July 29, 2022 was 229,578,316 shares.



AMETEK, Inc.
Form 10-Q
Table of Contents
Page
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Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMETEK, Inc.
Consolidated Statement of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net sales$1,514,552 $1,386,346 $2,973,077 $2,602,088 
Cost of sales988,175 912,712 1,937,008 1,702,104 
Selling, general and administrative161,535 157,023 317,987 290,028 
Total operating expenses1,149,710 1,069,735 2,254,995 1,992,132 
Operating income364,842 316,611 718,082 609,956 
Interest expense(20,350)(20,442)(39,920)(39,389)
Other income (expense), net1,973 (4,414)4,525 (6,356)
Income before income taxes346,465 291,755 682,687 564,211 
Provision for income taxes64,092 60,076 127,867 113,299 
Net income$282,373 $231,679 $554,820 $450,912 
Basic earnings per share$1.23 $1.00 $2.40 $1.96 
Diluted earnings per share$1.22 $1.00 $2.39 $1.94 
Weighted average common shares outstanding:
Basic shares230,100 230,828 230,790 230,632 
Diluted shares231,247 232,841 232,156 232,569 
Dividends declared and paid per share$0.22 $0.20 $0.44 $0.40 
See accompanying notes.
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AMETEK, Inc.
Condensed Consolidated Statement of Comprehensive Income
(In thousands)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Total comprehensive income$222,033 $237,673 $479,334 $448,499 
See accompanying notes.
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AMETEK, Inc.
Consolidated Balance Sheet
(In thousands)
June 30,
2022
December 31,
2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$348,653 $346,772 
Receivables, net885,080 829,213 
Inventories, net966,609 769,175 
Other current assets211,272 183,605 
Total current assets2,411,614 2,128,765 
Property, plant and equipment, net597,153 617,138 
Right of use assets, net168,829 169,924 
Goodwill5,173,411 5,238,726 
Other intangibles, net3,234,443 3,368,629 
Investments and other assets399,521 375,005 
Total assets$11,984,971 $11,898,187 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt, net$354,791 $315,093 
Accounts payable540,667 470,252 
Customer advanced payments327,537 298,728 
Income taxes payable35,216 35,904 
Accrued liabilities and other374,818 443,337 
Total current liabilities1,633,029 1,563,314 
Long-term debt, net2,147,362 2,229,148 
Deferred income taxes711,541 719,675 
Other long-term liabilities542,948 514,166 
Total liabilities5,034,880 5,026,303 
Stockholders’ equity:
Common stock2,695 2,689 
Capital in excess of par value1,040,951 1,012,526 
Retained earnings8,353,735 7,900,113 
Accumulated other comprehensive loss(545,930)(470,444)
Treasury stock(1,901,360)(1,573,000)
Total stockholders’ equity6,950,091 6,871,884 
Total liabilities and stockholders’ equity$11,984,971 $11,898,187 
See accompanying notes.
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AMETEK, Inc.
Consolidated Statement of Stockholders’ Equity
(In thousands)
(Unaudited)
Three months ended June 30,Six months ended June 30,
2022202120222021
Capital stock
Common stock, $0.01 par value
Balance at the beginning of the period$2,693 $2,678 $2,689 $2,676 
Shares issued2 6 
Balance at the end of the period2,695 2,684 2,695 2,684 
Capital in excess of par value
Balance at the beginning of the period1,018,433 928,412 1,012,526 921,752 
Issuance of common stock under employee stock plans9,562 24,226 5,898 19,446 
Share-based compensation expense12,956 12,153 22,527 23,593 
Balance at the end of the period1,040,951 964,791 1,040,951 964,791 
Retained earnings
Balance at the beginning of the period8,121,781 7,267,856 7,900,113 7,094,656 
Net income282,373 231,679 554,820 450,912 
Cash dividends paid(50,419)(46,134)(101,197)(92,167)
Other — (1)— 
Balance at the end of the period8,353,735 7,453,401 8,353,735 7,453,401 
Accumulated other comprehensive (loss) income
Foreign currency translation:
Balance at the beginning of the period(291,511)(260,785)(275,365)(250,748)
Translation adjustments(87,391)7,547 (114,576)(13,953)
Change in long-term intercompany notes(16,252)1,329 (23,119)(5,566)
Net investment hedge instruments gain (loss), net of tax of $(13,777) and $1,459 for the quarter ended June 30, 2022 and 2021 and $(19,608) and $(4,479) for the six months ended June 30, 2022 and 2021, respectively
42,303 (4,512)60,209 13,846 
Balance at the end of the period(352,851)(256,421)(352,851)(256,421)
Defined benefit pension plans:
Balance at the beginning of the period(194,079)(252,090)(195,079)(253,720)
Amortization of net actuarial loss and other, net of tax of $(326) and $(527) for the quarter ended June 30, 2022 and 2021 and $(652) and $(1,054) for the six months ended June 30, 2022 and 2021, respectively
1,000 1,630 2,000 3,260 
Balance at the end of the period(193,079)(250,460)(193,079)(250,460)
Accumulated other comprehensive loss at the end of the period(545,930)(506,881)(545,930)(506,881)
Treasury stock
Balance at the beginning of the period(1,725,629)(1,565,323)(1,573,000)(1,565,270)
Issuance of common stock under employee stock plans(1,076)(492)3,019 7,452 
Purchase of treasury stock(174,655)(4,881)(331,379)(12,878)
Balance at the end of the period(1,901,360)(1,570,696)(1,901,360)(1,570,696)
Total stockholders’ equity$6,950,091 $6,343,299 $6,950,091 $6,343,299 
See accompanying notes.
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AMETEK, Inc.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Six months ended June 30,
20222021
Cash provided by (used for):
Operating activities:
Net income$554,820 $450,912 
Adjustments to reconcile net income to total operating activities:
Depreciation and amortization155,218 139,814 
Deferred income taxes(19,459)27,482 
Share-based compensation expense22,527 23,593 
Gain on sale of facilities(7,054)— 
Net change in assets and liabilities, net of acquisitions(245,958)(58,497)
Pension contributions(3,884)(4,094)
Other, net(18,973)(7,767)
Total operating activities437,237 571,443 
Investing activities:
Additions to property, plant and equipment(52,540)(41,005)
Purchases of businesses, net of cash acquired (1,840,845)
Proceeds from sale of facilities11,754 — 
Other, net(247)(292)
Total investing activities(41,033)(1,882,142)
Financing activities:
Net change in short-term borrowings56,490 569,949 
Repurchases of common stock(331,379)(12,878)
Cash dividends paid(101,197)(92,167)
Proceeds from stock option exercises17,827 31,112 
Other, net(12,134)(4,420)
Total financing activities(370,393)491,596 
Effect of exchange rate changes on cash and cash equivalents(23,930)(3,075)
Increase (decrease) in cash and cash equivalents1,881 (822,178)
Cash and cash equivalents:
Beginning of period346,772 1,212,822 
End of period$348,653 $390,644 
See accompanying notes.
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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)

1.    Basis of Presentation
The accompanying consolidated financial statements are unaudited. AMETEK, Inc. (the “Company”) believes that all adjustments (which primarily consist of normal recurring accruals) necessary for a fair presentation of the consolidated financial position of the Company at June 30, 2022, the consolidated results of its operations for the three and six months ended June 30, 2022 and 2021 and its cash flows for the six months ended June 30, 2022 and 2021 have been included. Quarterly results of operations are not necessarily indicative of results for the full year. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the U.S. Securities and Exchange Commission.
2.    Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncement
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"), which provides a single comprehensive accounting model for the acquisition of contract balances under ASC 805. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company early adopted the ASU on January 1, 2022, and the amendments in this ASU were applied on a prospective basis to all periods presented. The adoption of ASU 2021-08 did not impact the Company's consolidated results of operations, financial position, cash flows, or financial statement disclosures.
3.    Revenues
The outstanding contract asset and liability accounts were as follows:
20222021
(In thousands)
Contract assets—January 1$95,274 $68,971 
Contract assets – June 30107,902 73,853 
Change in contract assets – increase (decrease)12,628 4,882 
Contract liabilities – January 1328,816 215,093 
Contract liabilities – June 30369,926 333,409 
Change in contract liabilities – (increase) decrease(41,110)(118,316)
Net change$(28,482)$(113,434)
The net change for the six months ended June 30, 2022 was primarily driven by contract liabilities, specifically broad-based growth in advance payments from customers. For the six months ended June 30, 2022 and 2021, the Company recognized revenue of $219.3 million and $145.2 million, respectively, that was previously included in the beginning balance of contract liabilities.
Contract assets are reported as a component of Other current assets in the consolidated balance sheet. At June 30, 2022 and December 31, 2021, $42.4 million and $30.1 million of Customer advanced payments (contract liabilities), respectively, were recorded in Other long-term liabilities in the consolidated balance sheets.
The remaining performance obligations not expected to be completed within one year as of June 30, 2022 and December 31, 2021 were $422.1 million and $342.5 million, respectively. Remaining performance obligations represent the transaction price of firm, non-cancelable orders, with expected delivery dates to customers greater than one year from the balance sheet date, for which the performance obligation is unsatisfied or partially unsatisfied. These performance obligations will be substantially satisfied within two to three years.


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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)
Geographic Areas
Net sales were attributed to geographic areas based on the location of the customer. Information about the Company’s operations in different geographic areas was as follows for the three and six months ended June 30:
Three months ended June 30, 2022Six months ended June 30, 2022
EIG
EMG
Total
EIGEMGTotal
(In thousands)
United States$551,967 $240,436 $792,403 $1,035,593 $471,813 $1,507,406 
International(1):
United Kingdom19,050 31,620 50,670 47,005 60,251 107,256 
European Union countries109,425 108,031 217,456 230,139 222,193 452,332 
Asia255,232 70,225 325,457 511,652 133,064 644,716 
Other foreign countries92,574 35,992 128,566 191,618 69,749 261,367 
Total international476,281 245,868 722,149 980,414 485,257 1,465,671 
Consolidated net sales$1,028,248 $486,304 $1,514,552 $2,016,007 $957,070 $2,973,077 
________________
(1)    Includes U.S. export sales of $394.7 million and $801.2 million for the three and six months ended June 30, 2022.

Three months ended June 30, 2021Six months ended June 30, 2021
EIGEMGTotalEIGEMGTotal
(In thousands)
United States$495,039 $225,912 $720,951 $883,940 $436,094 $1,320,034 
International(1):
United Kingdom20,649 28,568 49,217 42,596 58,619 101,215 
European Union countries117,856 103,604 221,460 221,521 198,901 420,422 
Asia217,854 65,449 283,303 415,415 126,643 542,058 
Other foreign countries82,536 28,879 111,415 161,386 56,973 218,359 
Total international438,895 226,500 665,395 840,918 441,136 1,282,054 
Consolidated net sales$933,934 $452,412 $1,386,346 $1,724,858 $877,230 $2,602,088 
______________
(1)    Includes U.S. export sales of $365.5 million and $696.4 million for the three and six months ended June 30, 2021.

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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)
Major Products and Services
The Company’s major products and services in the reportable segments were as follows:
Three months ended June 30, 2022Six months ended June 30, 2022
EIGEMGTotalEIGEMGTotal
(In thousands)
Process and analytical instrumentation$768,261 $ $768,261 $1,460,953 $ $1,460,953 
Aerospace and power259,987 137,340 397,327 555,054 264,082 819,136 
Automation and engineered solutions 348,964 348,964  692,988 692,988 
Consolidated net sales$1,028,248 $486,304 $1,514,552 $2,016,007 $957,070 $2,973,077 

Three months ended June 30, 2021Six months ended June 30, 2021
EIGEMGTotalEIGEMGTotal
(In thousands)
Process and analytical instrumentation$644,121 $— $644,121 $1,220,680 $— $1,220,680 
Aerospace and power289,813 126,466 416,279 504,178 248,639 752,817 
Automation and engineered solutions— 325,946 325,946 — 628,591 628,591 
Consolidated net sales$933,934 $452,412 $1,386,346 $1,724,858 $877,230 $2,602,088 
Timing of Revenue Recognition
Three months ended June 30, 2022Six months ended June 30, 2022
EIG
EMG
Total
EIGEMGTotal
(In thousands)
Products transferred at a point in time$839,948 $423,506 $1,263,454 $1,652,896 $836,160 $2,489,056 
Products and services transferred over time188,300 62,798 251,098 363,111 120,910 484,021 
Consolidated net sales$1,028,248 $486,304 $1,514,552 $2,016,007 $957,070 $2,973,077 

Three months ended June 30, 2021Six months ended June 30, 2021
EIG
EMG
Total
EIGEMGTotal
(In thousands)
Products transferred at a point in time$767,514 $408,569 $1,176,083 $1,414,766 $791,600 $2,206,366 
Products and services transferred over time166,420 43,843 210,263 310,092 85,630 395,722 
Consolidated net sales$933,934 $452,412 $1,386,346 $1,724,858 $877,230 $2,602,088 

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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)
Product Warranties
The Company provides limited warranties in connection with the sale of its products. The warranty periods for products sold vary among the Company’s operations, but the majority do not exceed one year. The Company calculates its warranty expense provision based on its historical warranty experience and adjustments are made periodically to reflect actual warranty expenses. Product warranty obligations are reported as a component of Accrued liabilities and other in the consolidated balance sheet.
Changes in the accrued product warranty obligation were as follows:
Six Months Ended June 30,
20222021
(In thousands)
Balance at the beginning of the period$27,478 $27,839 
Accruals for warranties issued during the period5,143 5,964 
Settlements made during the period(6,023)(6,620)
Warranty accruals related to acquired businesses and other during the period(632)2,169 
Balance at the end of the period$25,966 $29,352 
Accounts Receivable
The Company maintains allowances for estimated losses resulting from the inability of customers to meet their financial obligations to the Company. The Company recognizes an allowance for credit losses, on all accounts receivable and contract assets, which considers risk of future credit losses based on factors such as historical experience, contract terms, as well as general and market business conditions, country, and political risk. Balances are written off when determined to be uncollectible.
At June 30, 2022, the Company had $885.1 million of accounts receivable, net of allowances of $11.2 million. Changes in the allowance were not material for the three and six months ended June 30, 2022.
4.    Earnings Per Share
The calculation of basic earnings per share is based on the weighted average number of common shares considered outstanding during the periods. The calculation of diluted earnings per share reflects the effect of all potentially dilutive securities (principally outstanding stock options and restricted stock grants). Securities that are anti-dilutive have been excluded and are not significant. The number of weighted average shares used in the calculation of basic earnings per share and diluted earnings per share was as follows:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(In thousands)
Weighted average shares:
Basic shares230,100 230,828 230,790 230,632 
Equity-based compensation plans1,147 2,013 1,366 1,937 
Diluted shares231,247 232,841 232,156 232,569 
5.    Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
The Company utilizes a valuation hierarchy for disclosure of the inputs to the valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active
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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)
markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following table provides the Company’s assets that are measured at fair value on a recurring basis, consistent with the fair value hierarchy, at June 30, 2022 and December 31, 2021:
June 30, 2022December 31, 2021
Fair Value
Fair Value
(In thousands)
Mutual fund investments$11,365 $10,703 
The fair value of mutual fund investments, which are valued as level 1 investments, was based on quoted market prices. The mutual fund investments are shown as a component of investments and other assets on the consolidated balance sheet.
For the six months ended June 30, 2022 and 2021, gains and losses on the investments noted above were not significant. No transfers between level 1 and level 2 investments occurred during the six months ended June 30, 2022 and 2021.
Financial Instruments
Cash, cash equivalents and mutual fund investments are recorded at fair value at June 30, 2022 and December 31, 2021 in the accompanying consolidated balance sheet.
The following table provides the estimated fair values of the Company’s financial instrument liabilities, for which fair value is measured for disclosure purposes only, compared to the recorded amounts at June 30, 2022 and December 31, 2021:
June 30, 2022December 31, 2021
Recorded
Amount
Fair Value
Recorded
Amount
Fair Value
(In thousands)
Long-term debt (including current portion)$(2,150,381)$(2,071,751)$(2,233,705)$(2,378,930)
The fair value of net short-term borrowings approximates the carrying value. Net short-term borrowings are valued as level 2 liabilities as they are corroborated by observable market data. The Company’s net long-term debt is all privately held with no public market for this debt, therefore, the fair value of net long-term debt was computed based on comparable current market data for similar debt instruments and is considered a level 3 liability.
Foreign Currency
At June 30, 2022, the Company had a Euro forward contract for a total notional value of 40.0 million Euros and a Canadian dollar forward contract for a notional value of 8.0 million Canadian dollars. For the six months ended June 30, 2022, realized and unrealized gains and losses on the foreign currency forward contracts were not significant.
6.    Hedging Activities
The Company has designated certain foreign-currency-denominated long-term borrowings as hedges of the net investment in certain foreign operations. As of June 30, 2022, these net investment hedges included British-pound-and Euro-denominated long-term debt. These borrowings were designed to create net investment hedges in certain designated foreign subsidiaries. The Company designated the British-pound- and Euro-denominated loans referred to above as hedging instruments to offset translation gains or losses on the net investment due to changes in the British pound and Euro exchange rates. These net investment hedges are evidenced by management’s contemporaneous documentation supporting the hedge designation. Any gain or loss on the hedging instruments (the debt) following hedge designation is reported in
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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)
accumulated other comprehensive income in the same manner as the translation adjustment on the hedged investment based on changes in the spot rate, which is used to measure hedge effectiveness.
At June 30, 2022, the Company had $273.6 million of British-pound-denominated loans, which were designated as a hedge against the net investment in British pound functional currency foreign subsidiaries. At June 30, 2022, the Company had $559.9 million in Euro-denominated loans, which were designated as a hedge against the net investment in Euro functional currency foreign subsidiaries. As a result of the British-pound- and Euro-denominated loans designated and 100% effective as net investment hedges, $79.8 million of pre-tax currency remeasurement gains have been included in the foreign currency translation component of other comprehensive income for the six months ended June 30, 2022.
7.    Inventories, net
June 30,
2022
December 31,
2021
(In thousands)
Finished goods and parts$117,959 $89,985 
Work in process148,998 122,356 
Raw materials and purchased parts699,652 556,834 
Total inventories, net$966,609 $769,175 
8.    Leases
The Company has commitments under operating leases for certain facilities, vehicles and equipment used in its operations. Cash used in operations for operating leases was not materially different from operating lease expense for the six months ended June 30, 2022 and 2021. The Company's leases have initial lease terms ranging from four months to 16 years. Certain lease agreements contain provisions for future rent increases.
The components of lease expense were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
(In thousands)
Operating lease cost$15,346 $12,006 $30,724 $23,523 
Variable lease cost2,399 1,402 4,652 2,872 
Total lease cost$17,745 $13,408 $35,376 $26,395 
Supplemental balance sheet information related to leases was as follows:
June 30,
2022
December 31,
2021
(In thousands)
Right of use assets, net$168,829 $169,924 
Lease liabilities included in Accrued Liabilities and other47,398 47,353 
Lease liabilities included in Other long-term liabilities127,174 129,101 
Total lease liabilities$174,572 $176,454 

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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)
Maturities of lease liabilities as of June 30, 2022 were as follows:
Lease Liability Maturity Analysis
Operating Leases
(In thousands)
Remaining 2022$27,042 
202346,817 
202435,024 
202525,611 
202618,758 
Thereafter28,245 
Total lease payments181,497 
Less: imputed interest6,925 
$174,572 
The Company does not have any significant leases that have not yet commenced.
9.    Goodwill
The changes in the carrying amounts of goodwill by segment were as follows:
EIGEMGTotal
(In millions)
Balance at December 31, 2021$4,073.8 $1,164.9 $5,238.7 
Purchase price allocation adjustments and other4.2  4.2 
Foreign currency translation adjustments(38.8)(30.7)(69.5)
Balance at June 30, 2022$4,039.2 $1,134.2 $5,173.4 

The Company finalized its measurements of certain tangible and intangible assets and liabilities for its November 2021 acquisition of Alphasense, which had no material impact to the consolidated statement of income and balance sheet.

10.    Income Taxes
At June 30, 2022, the Company had gross uncertain tax benefits of $161.2 million, of which $118.7 million, if recognized, would impact the effective tax rate.
The following is a reconciliation of the liability for uncertain tax positions (in millions):
Balance at December 31, 2021$147.0 
Additions for tax positions14.6 
Reductions for tax positions(0.4)
Balance at June 30, 2022$161.2 
The additions above primarily reflect the tax positions for foreign tax planning initiatives. The Company recognizes interest and penalties accrued related to uncertain tax positions in income tax expense. The amounts recognized in income tax expense for interest and penalties during the three and six months ended June 30, 2022 and 2021 were not significant.
The effective tax rate for the three months ended June 30, 2022 was 18.5%, compared with 20.6% for the three months ended June 30, 2021. The lower effective tax rate in the second quarter of 2022 is primarily due to improved foreign-derived intangible income ("FDII") benefits on exported products and favorable foreign deferred taxes. The higher effective tax rate in 2021 included an increase in the foreign rate differential and the remeasurement of the deferred tax liabilities due to an increase in the UK tax rate in 2021.
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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)

11.    Debt
On May 12, 2022, the Company along with certain of its foreign subsidiaries amended and restated its credit agreement dated as of September 22, 2011, as amended and restated as of March 10, 2016 and as further amended and restated as of October 30, 2018, with the lenders, JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., PNC Bank, National Association, Trust Bank and Wells Fargo Bank, National Association, as Co-Syndication Agents. The credit agreement amends and restates the Company’s existing revolving credit facility to increase the size from $1.5 billion to $2.3 billion and terminates the $800 million term loan. The credit agreement places certain restrictions on allowable additional indebtedness. At June 30, 2022, the Company had $360.0 million outstanding on the revolver with a maturity date of May 2027.


12.    Share-Based Compensation
The Company's share-based compensation plans are described in Note 11, Share-Based Compensation, to the consolidated financial statements in Part II, Item 8, filed on the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Share Based Compensation Expense
Total share-based compensation expense was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
(In thousands)
Stock option expense$3,383 $3,326 $6,823 $7,249 
Restricted stock expense5,253 5,690 10,031 11,917 
Performance restricted stock unit expense4,320 3,137 5,673 4,427 
Total pre-tax expense$12,956 $12,153 $22,527 $23,593 
Pre-tax share-based compensation expense is included in the consolidated statement of income in either Cost of sales or Selling, general and administrative expenses, depending on where the recipient’s cash compensation is reported.
Stock Options
The fair value of each stock option grant is estimated on the grant date using a Black-Scholes-Merton option pricing model. The following weighted average assumptions were used in the Black-Scholes-Merton model to estimate the fair values of stock options granted during the periods indicated:
Six Months Ended
June 30, 2022
Year Ended December 31,
2021
Expected volatility24.5 %24.2 %
Expected term (years)5.05.0
Risk-free interest rate2.33 %0.85 %
Expected dividend yield0.65 %0.66 %
Black-Scholes-Merton fair value per stock option granted$32.54 $25.63 

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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)
The following is a summary of the Company’s stock option activity and related information:
SharesWeighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life 
Aggregate
Intrinsic
Value
(In thousands)(Years)(In millions)
Outstanding at December 31, 20213,352 $76.08 
Granted608 134.69 
Exercised(291)62.97 
Forfeited(54)99.43 
Outstanding at June 30, 20223,615 $86.64 6.5$104.8 
Exercisable at June 30, 20222,438 $72.77 5.4$92.6 
The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2022 was $18.3 million. The total fair value of stock options vested during the six months ended June 30, 2022 was $11.2 million. As of June 30, 2022, there was approximately $24.3 million of expected future pre-tax compensation expense related to the 1.2 million non-vested stock options outstanding, which is expected to be recognized over a weighted average period of approximately two years.

Restricted Stock
The following is a summary of the Company’s non-vested restricted stock activity and related information:
SharesWeighted
Average
 Grant Date
Fair Value
(In thousands)
Non-vested restricted stock outstanding at December 31, 2021413 $96.07 
Granted181 134.63 
Vested(155)85.97 
Forfeited(25)105.34 
Non-vested restricted stock outstanding at June 30, 2022414 $116.13 
The total fair value of restricted stock vested during the six months ended June 30, 2022 was $13.3 million. As of June 30, 2022, there was approximately $37.9 million of expected future pre-tax compensation expense related to the 0.4 million non-vested restricted shares outstanding, which is expected to be recognized over a weighted average period of approximately two years.
Performance Restricted Stock Units
In March 2022, the Company granted performance restricted stock units ("PRSU") to officers and certain key management-level employees. The PRSUs vest over a period up to three years from the grant date based on continuous service, with the number of shares earned (0% to 200% of the target award) depending upon the extent to which the Company achieves certain financial and market performance targets measured over the period from January 1 of the year of grant to December 31 of the third year. Half of the PRSUs were valued in a manner similar to restricted stock as the financial targets are based on the Company’s operating results, which represents a performance condition. The grant date fair value of these PRSUs are recognized as compensation expense over the vesting period based on the probable number of awards to vest at each reporting date.
The other half of the PRSUs were valued using a Monte Carlo model as the performance target is related to the Company’s total shareholder return compared to a group of peer companies, which represents a market condition. The Company recognizes the grant date fair value of these awards as compensation expense ratably over the vesting period.
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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)

The following is a summary of the Company’s non-vested performance restricted stock activity and related information:
SharesWeighted
Average
 Grant Date
Fair Value
(In thousands)
Non-vested performance restricted stock outstanding at December 31, 2021289 $85.29 
Granted87 134.69 
Performance assumption change 1
66 81.76 
Vested(161)81.76 
Forfeited(3)96.93 
Non-vested performance restricted stock outstanding at June 30, 2022278 $101.95 
_________________________________________
1 Reflects the number of PRSUs above target levels based on performance metrics.
As of June 30, 2022, there was approximately $13.2 million of expected future pre-tax compensation expense related to the 0.3 million non-vested restricted shares outstanding, which is expected to be recognized over a weighted average period of less than one year.
13.    Retirement and Pension Plans
The components of net periodic pension benefit expense (income) were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
(In thousands)
Defined benefit plans:
Service cost$1,331 $2,030 $2,705 $4,051 
Interest cost5,032 4,581 10,152 9,148 
Expected return on plan assets(15,033)(14,221)(30,301)(28,395)
Amortization of net actuarial loss and other2,123 4,379 4,297 8,732 
Pension income(6,547)(3,231)(13,147)(6,464)
Other plans:
Defined contribution plans9,811 7,961 23,072 16,416 
Foreign plans and other2,077 2,123 4,395 4,357 
Total other plans11,888 10,084 27,467 20,773 
Total net pension expense$5,341 $6,853 $14,320 $14,309 
For defined benefit plans, the net periodic benefit income, other than the service cost component, is included in “Other (expense) income, net” in the consolidated statement of income.
For the six months ended June 30, 2022 and 2021, contributions to the Company’s defined benefit pension plans were $3.9 million and $4.1 million, respectively. The Company’s current estimate of 2022 contributions to its worldwide defined benefit pension plans is in line with the range disclosed in Note 12 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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AMETEK, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(Unaudited)
14.    Contingencies
Asbestos Litigation
The Company (including its subsidiaries) has been named as a defendant in a number of asbestos-related lawsuits. Certain of these lawsuits relate to a business which was acquired by the Company and do not involve products which were manufactured or sold by the Company. In connection with these lawsuits, the seller of such business has agreed to indemnify the Company against these claims (the “Indemnified Claims”). The Indemnified Claims have been tendered to, and are being defended by, such seller. The seller has met its obligations, in all respects, and the Company does not have any reason to believe such party would fail to fulfill its obligations in the future. To date, no judgments have been rendered against the Company as a result of any asbestos-related lawsuit. The Company believes that it has good and valid defenses to each of these claims and intends to defend them vigorously.
Environmental Matters
Certain historic processes in the manufacture of products have resulted in environmentally hazardous waste by-products as defined by federal and state laws and regulations. At June 30, 2022, the Company is named a Potentially Responsible Party (“PRP”) at 13 non-AMETEK-owned former waste disposal or treatment sites (the “non-owned” sites). The Company is identified as a “de minimis” party in 12 of these sites based on the low volume of waste attributed to the Company relative to the amounts attributed to other named PRPs. In eight of these sites, the Company has reached a tentative agreement on the cost of the de minimis settlement to satisfy its obligation and is awaiting executed agreements. The tentatively agreed-to settlement amounts are fully reserved. In the other four sites, the Company is continuing to investigate the accuracy of the alleged volume attributed to the Company as estimated by the parties primarily responsible for remedial activity at the sites to establish an appropriate settlement amount. At the remaining site where the Company is a non-de minimis PRP, the Company is participating in the investigation and/or related required remediation as part of a PRP Group and reserves have been established to satisfy the Company’s expected obligations. The Company historically has resolved these issues within established reserve levels and reasonably expects this result will continue. In addition to these non-owned sites, the Company has an ongoing practice of providing reserves for probable remediation activities at certain of its current or previously owned manufacturing locations (the “owned” sites). For claims and proceedings against the Company with respect to other environmental matters, reserves are established once the Company has determined that a loss is probable and estimable. This estimate is refined as the Company moves through the various stages of investigation, risk assessment, feasibility study and corrective action processes. In certain instances, the Company has developed a range of estimates for such costs and has recorded a liability based on the best estimate. It is reasonably possible that the actual cost of remediation of the individual sites could vary from the current estimates and the amounts accrued in the consolidated financial statements; however, the amounts of such variances are not expected to result in a material change to the consolidated financial statements. In estimating the Company’s liability for remediation, the Company also considers the likely proportionate share of the anticipated remediation expense and the ability of the other PRPs to fulfill their obligations.
Total environmental reserves at June 30, 2022 and December 31, 2021 were $37.6 million and $37.2 million, respectively, for both non-owned and owned sites. For the six months ended June 30, 2022, the Company recorded $4.5 million in reserves. Additionally, the Company spent $4.1 million on environmental matters for the six months ended June 30, 2022.
The Company has agreements with other former owners of certain of its acquired businesses, as well as new owners of previously owned businesses. Under certain of the agreements, the former or new owners retained, or assumed and agreed to indemnify the Company against, certain environmental and other liabilities under certain circumstances. The Company and some of these other parties also carry insurance coverage for some environmental matters.
The Company believes it has established reserves for the environmental matters described above, which are sufficient to perform all known responsibilities under existing claims and consent orders. In the opinion of management, based on presently available information and the Company’s historical experience related to such matters, an adequate provision for probable costs has been made and the ultimate cost resulting from these actions is not expected to materially affect the consolidated results of operations, financial position or cash flows of the Company.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
The following table sets forth net sales and income by reportable segment and on a consolidated basis:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
(In thousands)
Net sales:
Electronic Instruments$1,028,248 $933,934 $2,016,007 $1,724,858 
Electromechanical486,304 452,412 957,070 877,230 
Consolidated net sales$1,514,552 $1,386,346 $2,973,077 $2,602,088 
Operating income and income before income taxes:
Segment operating income:
Electronic Instruments$265,115 $226,637 $509,889 $433,534 
Electromechanical124,371 112,434 252,580 217,467 
Total segment operating income389,486 339,071 762,469 651,001 
Corporate administrative expenses(24,644)(22,460)(44,387)(41,045)
Consolidated operating income364,842 316,611 718,082 609,956 
Interest expense(20,350)(20,442)(39,920)(39,389)
Other income (expense), net1,973 (4,414)4,525 (6,356)
Consolidated income before income taxes$346,465 $291,755 $682,687 $564,211 
Recent Events and Market Conditions
Recent events and market conditions impacting our business include the COVID-19 pandemic, increased material and transportation cost inflation, supply chain constraints, and the ongoing conflict in Ukraine. As a result of these events and conditions, we anticipate a challenging global economic environment for the remainder of 2022. There still remains uncertainty around the COVID-19 pandemic, its effect on labor, government mandated lockdowns and other restrictive measures, and the pandemic's ultimate duration. The recent lockdowns in China limited our ability to access customer sites, operate certain facilities, and placed additional constraints on our supply chain during the second quarter. Depending on the course of the pandemic, additional lockdowns in China or elsewhere could impact our operations and results of operations. Beginning in 2021, we experienced heightened levels of inflation in material and transportation costs and we expect elevated levels of cost inflation to persist throughout 2022. We have taken steps to mitigate the impacts of inflation by implementing pricing actions. We experienced additional pressure in our supply chain due to component shortages and strained transportation capacity, as well as the impact of continued elevated customer demand. In response to these supply chain pressures, we have taken actions to build inventory and seek alternative sources of supply to support sales and backlog growth. The invasion of Ukraine by Russia and the sanctions imposed in response to this conflict have increased global economic and political uncertainty. Russia and Ukraine represent an insignificant portion of our business, but a significant expansion of the conflict's current scope could further complicate the economic environment. While the ultimate impact of these events remains uncertain, we will continue to evaluate the extent to which these factors will impact our business, financial condition, and results of operations.
Results of operations for the second quarter of 2022 compared with the second quarter of 2021
For the quarter ended June 30, 2022, the Company posted record sales, operating income, and backlog as well as strong orders. The Company achieved these results from organic sales growth in both EIG and EMG, as well as the Company's Operational Excellence initiatives.
Net sales for the second quarter of 2022 were a record $1,514.6 million, an increase of $128.3 million or 9.2%, compared with net sales of $1,386.3 million for the second quarter of 2021. The increase in net sales for the second quarter of 2022 was due to a 12% increase in organic sales, a 1% increase from acquisitions, partially offset by an unfavorable 3% effect of foreign currency translation.
Total international sales for the second quarter of 2022 were $721.4 million or 47.6% of net sales, an increase of $55.7 million or 8.4%, compared with international sales of $665.7 million or 48.0% of net sales for the second quarter of 2021. The increase in international sales was primarily driven by strong demand in Asia during the quarter as well as contributions from recent acquisitions.
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Orders for the second quarter of 2022 were $1,644.5 million, a decrease of $269.2 million or 14.1%, compared with $1,913.7 million for the second quarter of 2021. The decrease in orders for the second quarter of 2022 was due to a 20% decrease from $371 million of acquired backlog from the 2021 acquisitions, an unfavorable 5% effect of foreign currency translation, partially offset by an 11% increase in organic orders. As a result, the Company's backlog of unfilled orders at June 30, 2022 was a record $3,104.4 million, an increase of $374.3 million or 13.7% compared with $2,730.1 million at December 31, 2021.
Segment operating income for the second quarter of 2022 was $389.5 million, an increase of $50.4 million or 14.9%, compared with segment operating income of $339.1 million for the second quarter of 2021. Segment operating income was positively impacted in 2022 by the increase in sales discussed above. Segment operating margins, as a percentage of net sales, increased to 25.7% for the second quarter of 2022, compared with 24.5% for the second quarter of 2021. Excluding the dilutive impact of the 2021 acquisitions, segment operating margins for the core businesses increased 130 basis points compared to the second quarter of 2021, due to benefits from the Company's Operational Excellence initiatives.
Cost of sales for the second quarter of 2022 was $988.2 million or 65.2% of net sales, an increase of $75.5 million or 8.3%, compared with $912.7 million or 65.8% of net sales for the second quarter of 2021. The cost of sales increase was primarily due to the net sales increase discussed above.
Selling, general and administrative expenses for the second quarter of 2022 were $161.5 million or 10.7% of net sales, an increase of $4.5 million or 2.9%, compared with $157.0 million or 11.3% of net sales for the second quarter of 2021.
Consolidated operating income was a record $364.8 million or 24.1% of net sales for the second quarter of 2022, an increase of $48.2 million or 15.2%, compared with $316.6 million or 22.8% of net sales for the second quarter of 2021.
Other income, net was $2.0 million for the second quarter of 2022, compared with $4.4 million of other expense, net for the second quarter of 2021, a change of $6.4 million. The second quarter of 2022 includes higher pension income of $2.5 million and lower due diligence expense compared to the second quarter of 2021.
The effective tax rate for the second quarter of 2022 was 18.5%, compared with 20.6% for the second quarter of 2021. The lower effective tax rate in the second quarter of 2022 is primarily due to improved foreign-derived intangible income ("FDII") benefits on exported products and favorable foreign deferred taxes.
Net income for the second quarter of 2022 was a record $282.4 million, an increase of $50.7 million or 21.9%, compared with $231.7 million for the second quarter of 2021.
Diluted earnings per share for the second quarter of 2022 were $1.22, an increase of $0.22 or 22.0%, compared with $1.00 per diluted share for the second quarter of 2021.
Segment Results
EIGs net sales totaled $1,028.2 million for the second quarter of 2022, an increase of $94.3 million or 10.1%, compared with $933.9 million for the second quarter of 2021. The net sales increase was due to a 12% increase in organic sales, a 1% increase from acquisitions, partially offset by an unfavorable 3% effect of foreign currency translation.
EIG’s operating income was $265.1 million for the second quarter of 2022, an increase of $38.5 million or 17.0%, compared with $226.6 million for the second quarter of 2021. EIG’s operating margins were 25.8% of net sales for the second quarter of 2022, compared with 24.3% for the second quarter of 2021. Excluding the dilutive impact of recent acquisitions, EIG operating margins for the core business increased 170 basis points compared to the second quarter of 2021, due to benefits from the Company's Operational Excellence initiatives.
EMG’s net sales totaled $486.3 million for the second quarter of 2022, an increase of $33.9 million or 7.5%, compared with $452.4 million for the second quarter of 2021. The net sales increase was due to an 11% organic sales increase, partially offset by an unfavorable 3% effect of foreign currency translation.
EMG’s operating income was $124.4 million for the second quarter of 2022, an increase of $12.0 million or 10.6%, compared with $112.4 million for the second quarter of 2021. EMG’s operating margins were 25.6% of net sales for the second quarter of 2022, compared with 24.9% for the second quarter of 2021. EMG operating margins increased compared to the second quarter of 2021 due to benefits from the Company's Operational Excellence initiatives.
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Results of operations for the first six months of 2022 compared with the first six months of 2021
Net sales for the first six months of 2022 were $2,973.1 million, an increase of $371.0 million or 14.3%, compared with net sales of $2,602.1 million for the first six months of 2021. The increase in net sales for the first six months of 2022 was due to a 13% organic sales increase, a 3% increase from acquisitions, partially offset by an unfavorable 2% effect of foreign currency translation.
Total international sales for the first six months of 2022 were $1,465.7 million or 49.3% of net sales, an increase of $183.6 million or 14.3%, compared with international sales of $1,282.1 million or 49.3% of net sales for the first six months of 2021. The increase in international sales was primarily driven by strong demand in Europe and Asia as well as contributions from recent acquisitions.
Orders for the first six months of 2022 were $3,347.4 million, an increase of $36.0 million or 1.1%, compared with $3,311.4 million for the first six months of 2021. The increase in orders for the first six months of 2022 was due to a 14% organic order increase, partially offset by a 10% decrease from acquisitions, as well as a 3% unfavorable effect of foreign currency translation.
Segment operating income for the first six months of 2022 was $762.5 million, an increase of $111.5 million or 17.1%, compared with segment operating income of $651.0 million for the first six months of 2021. Segment operating income was positively impacted in 2022 by the increase in sales discussed above, as well as a $7.1 million gain on the sale of a facility. Segment operating margins, as a percentage of net sales, increased to 25.6% for the first six months of 2022, compared with 25.0% for the first six months of 2021. Segment operating margins for the first six months of 2022 were negatively impacted by the dilutive impact of recent acquisitions. Excluding the dilutive impact of recent acquisitions and the gain on the sale of a facility, segment operating margins for the core businesses increased 140 basis points compared to the first six months of 2021, due to the Company's Operational Excellence initiatives.
Cost of sales for the first six months of 2022 was $1,937.0 million or 65.2% of net sales, an increase of $234.9 million or 13.8%, compared with $1,702.1 million or 65.4% of net sales for the first six months of 2021. The cost of sales increase was primarily due to the net sales increase discussed above.
Selling, general and administrative expenses for the first six months of 2022 were $318.0 million or 10.7% of net sales, an increase of $28.0 million or 9.6%, compared with $290.0 million or 11.1% of net sales for the first six months of 2021. Selling, general and administrative expenses increased primarily due to the net sales increase discussed above.
Consolidated operating income was $718.1 million or 24.2% of net sales for the first six months of 2022, an increase of $108.1 million or 17.7%, compared with $610.0 million or 23.4% of net sales for the first six months of 2021. The consolidated operating income and operating income margins for the first six months of 2022 were positively impacted by the increase in net sales discussed above as well as the benefits of the Company's Operational Excellence initiatives.
Other income, net was $4.5 million for the first six months of 2022, compared with $6.4 million of other expense, net for the first six months of 2021, a change of $10.9 million. The first six months of 2022 includes higher pension income of $5.0 million and lower acquisition-related due diligence expense compared to the first six months of 2021.
The effective tax rate for the first six months of 2022 was 18.7%, compared with 20.1% for the first six months of 2021. The lower effective tax rate in 2022 is primarily due to improved FDII benefits and a favorable foreign tax rate differential.
Net income for the first six months of 2022 was $554.8 million, an increase of $103.9 million or 23.0%, compared with $450.9 million for the first six months of 2021.
Diluted earnings per share for the first six months of 2022 were $2.39, an increase of $0.45 or 23.2%, compared with $1.94 per diluted share for the first six months of 2021.

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Segment Results
EIG’s net sales totaled $2,016.0 million for the first six months of 2022, an increase of $291.1 million or 16.9%, compared with $1,724.9 million for the first six months of 2021. The net sales increase was due to a 14% organic sales increase, a 5% increase from acquisitions, partially offset by an unfavorable 2% effect of foreign currency translation.
EIG’s operating income was $509.9 million for the first six months of 2022, an increase of $76.4 million or 17.6%, compared with $433.5 million for the first six months of 2021. EIG’s operating margins were 25.3% of net sales for the first six months of 2022, compared with 25.1% for the first six months of 2021. EIG's operating margins in the first six months of 2022 were negatively impacted by the dilutive impact of the 2021 acquisitions. Excluding the dilutive impact of recent acquisitions, EIG operating margins increased 160 basis points compared to the first six months of 2021, due to benefits from the Company's Operational Excellence initiatives.
EMG’s net sales totaled $957.1 million for the first six months of 2022, an increase of $79.9 million or 9.1%, compared with $877.2 million for the first six months of 2021. The net sales increase was due to an 11% organic sales increase, partially offset by an unfavorable 2% effect of foreign currency translation.
EMG’s operating income was $252.6 million for the first six months of 2022, an increase of $35.1 million or 16.1%, compared with $217.5 million for the first six months of 2021. EMG's operating income included a $7.1 million gain on the sale of a facility during the first six months of 2022. EMG’s operating margins were 26.4% of net sales for the first six months of 2022, compared with 24.8% for the first six months of 2021. Excluding the gain on the sale of a facility, EMG operating margins increased 90 basis points compared to the first six months of 2021, due to the Company's Operational Excellence initiatives.

Financial Condition
Liquidity and Capital Resources
Cash provided by operating activities totaled $437.2 million for the first six months of 2022, a decrease of $134.2 million or 23.5%, compared with $571.4 million for the first six months of 2021. The decrease in cash provided by operating activities for the first six months of 2022 was primarily due to higher investments in inventory to support sales and backlog growth, and to mitigate inventory supply chain constraints, partially offset by higher net income.
Free cash flow (cash flow provided by operating activities less capital expenditures) was $384.7 million for the first six months of 2022, compared with $530.4 million for the first six months of 2021. EBITDA (earnings before interest, income taxes, depreciation and amortization) was $877.2 million for the first six months of 2022, compared with $742.5 million for the first six months of 2021. Free cash flow and EBITDA are presented because the Company is aware that they are measures used by third parties in evaluating the Company.
Cash used by investing activities totaled $41.0 million for the first six months of 2022, compared with cash used by investing activities of $1,882.1 million for the first six months of 2021. For the first six months of 2022, the Company received proceeds of $11.8 million from the sale of a facility. For the first six months of 2021, the Company paid $1,840.8 million, net of cash acquired, to purchase Abaco Systems, Magnetrol International, NSI-MI Technologies, Crank Software, and EGS Automation. Additions to property, plant and equipment totaled $52.5 million for the first six months of 2022, compared with $41.0 million for the first six months of 2021.
Cash used by financing activities totaled $370.4 million for the first six months of 2022, compared with cash provided by financing activities of $491.6 million for the first six months of 2021. At June 30, 2022, total debt, net was $2,502.2 million, compared with $2,544.2 million at December 31, 2021. For the first six months of 2022, total borrowings increased by $56.5 million compared with a $569.9 million increase for the first six months of 2021. At June 30, 2022, the Company had available borrowing capacity of $2,600.1 million under its revolving credit facility, including the $700 million accordion feature.
On May 12, 2022, the Company along with certain of its foreign subsidiaries amended and restated its credit agreement dated as of September 22, 2011, as amended and restated as of March 10, 2016 and as further amended and restated as of October 30, 2018, with the lenders, JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., PNC Bank, National Association, Trust Bank and Wells Fargo Bank, National Association, as Co-Syndication Agents. The credit agreement amends and restates the Company’s existing revolving credit facility to increase the size from $1.5 billion to $2.3 billion and terminates the $800 million term loan. The credit agreement places certain restrictions on allowable additional
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indebtedness. At June 30, 2022, the Company had $360.0 million outstanding on the revolver with a maturity date of May 2027.
The debt-to-capital ratio was 26.5% at June 30, 2022, compared with 27.0% at December 31, 2021. The net debt-to-capital ratio (total debt, net less cash and cash equivalents divided by the sum of net debt and stockholders’ equity) was 23.7% at June 30, 2022, compared with 24.2% at December 31, 2021. The net debt-to-capital ratio is presented because the Company is aware that this measure is used by third parties in evaluating the Company.
Additional financing activities for the first six months of 2022 included cash dividends paid of $101.2 million, compared with $92.2 million for the first six months of 2021. Effective February 9, 2022, the Company’s Board of Directors approved a 10% increase in the quarterly cash dividend on the Company’s common stock to $0.22 per common share from $0.20 per common share. The Company repurchased $331.4 million of its common stock for the first six months of 2022, compared with $12.9 million for the first six months of 2021. Effective May 5, 2022, the Company's Board of Directors approved a $1 billion share repurchase authorization. This authorization replaces an earlier $500 million share repurchase authorization approved by the Board in February 2019. Proceeds from stock option exercises were $17.8 million for the first six months of 2022, compared with $31.1 million for the first six months of 2021.
As a result of all of the Company’s cash flow activities for the first six months of 2022, cash and cash equivalents at June 30, 2022 totaled $348.7 million, compared with $346.8 million at December 31, 2021. At June 30, 2022, the Company had $326.8 million in cash outside the United States, compared with $334.0 million at December 31, 2021. The Company utilizes this cash to fund its international operations, as well as to acquire international businesses. The Company is in compliance with all covenants, including financial covenants, for all of its debt agreements. The Company believes it has sufficient cash-generating capabilities from domestic and unrestricted foreign sources, available credit facilities and access to long-term capital funds to enable it to meet its operating needs and contractual obligations in the foreseeable future.
Critical Accounting Policies
The Company’s critical accounting policies are detailed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition of its Annual Report on Form 10-K for the year ended December 31, 2021. Primary disclosure of the Company’s significant accounting policies is also included in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of its Annual Report on Form 10-K.
Forward-Looking Information
Information contained in this discussion, other than historical information, is considered “forward-looking statements” and is subject to various factors and uncertainties that may cause actual results to differ significantly from expectations. These factors and uncertainties include risks related to the COVID-19 pandemic and its potential impact on AMETEK’s operations, supply chain, and demand across key end markets; general economic conditions affecting the industries the Company serves; changes in the competitive environment or the effects of competition in the Company’s markets; risks associated with international sales and operations; the Company’s ability to consummate and successfully integrate future acquisitions; the Company’s ability to successfully develop new products, open new facilities or transfer product lines; the price and availability of raw materials; compliance with government regulations, including environmental regulations; and the ability to maintain adequate liquidity and financing sources. A detailed discussion of these and other factors that may affect the Company’s future results is contained in AMETEK’s filings with the U.S. Securities and Exchange Commission, including its most recent reports on Form 10-K, 10-Q, and 8-K. AMETEK disclaims any intention or obligation to update or revise any forward-looking statements, unless required by the securities laws to do so.
Item 4. Controls and Procedures
The Company maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management in a timely manner. Under the supervision and with the participation of our management, including the Company’s principal executive officer and principal financial officer, we have evaluated the effectiveness of our system of disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of June 30, 2022. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level.
Such evaluation did not identify any change in the Company’s internal control over financial reporting during the quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Purchase of equity securities by the issuer and affiliated purchasers.
The following table reflects purchases of AMETEK, Inc. common stock by the Company during the three months ended June 30, 2022:
Period
Total Number
of Shares
Purchased (1)(2)
Average Price
Paid per Share
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plan (2)
Approximate
Dollar Value of
Shares that
May Yet Be
Purchased Under
the Plan
April 1, 2022 to April 30, 2022— $— — $313,006,100 
May 1, 2022 to May 31, 20221,444,565 120.91 1,444,565 825,344,405 
June 1, 2022 to June 30, 2022— — — 825,344,405 
Total1,444,565 $120.91 1,444,565 
________________
(1)    Includes 14,945 shares surrendered to the Company to satisfy tax withholding obligations in connection with employees’ share-based compensation awards.

(2)     Consists of the number of shares purchased pursuant to the Company’s Board of Directors $1 billion authorization for the repurchase of its common stock announced in May 2022, which replaces the previous $500 million authorization for the repurchase of its common stock announced in February 2019. Such purchases may be effected from time to time in the open market or in private transactions, subject to market conditions and at management’s discretion.
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Item 6. Exhibits
Exhibit
Number
Description
101.INS*XBRL Instance Document.
101.SCH*XBRL Taxonomy Extension Schema Document.
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
________________
*    Filed electronically herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMETEK, Inc.
By:/s/ WILLIAM J. BURKE
William J. Burke
Executive Vice President – Chief Financial Officer
August 2, 2022
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