AMETEK INC/ (AME)

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report includes forward-looking statements based on the Company’s current assumptions, expectations and projections about future events. When used in this report, the words “believes,” “anticipates,” “may,” “expect,” “intend,” “estimate,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. In this report, the Company discloses important factors that could cause actual results to differ materially from management’s expectations. For more information on these and other factors, see “Forward-Looking Information” herein.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with “Item 1A. Risk Factors,” and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Business Overview

AMETEK’s operations are affected by global, regional and industry-specific economic factors. However, the Company’s strategic geographic and industry diversification, and its mix of products and services, have helped to mitigate the potential adverse impact of any unfavorable developments in any one industry or the economy of any single country on its consolidated operating results. In 2024, the Company posted record sales, operating income, net income, diluted earnings per share, and operating cash flow. Positive market trends, the Company's backlog, contributions from recent acquisitions, and continued focus on and implementation of Operational Excellence initiatives had a positive impact on 2024 results. The Company also benefited from its strategic initiatives under AMETEK's four key strategies: Operational Excellence, Strategic Acquisitions, Global & Market Expansion and New Products.

Highlights in 2024 were:

•Net sales for 2024 were a record $6,941.2 million, an increase of $344.2 million or 5.2%, compared with net sales of $6,597.0 million in 2023.

•Net income for 2024 was a record $1,376.1 million, an increase of $62.9 million or 4.8%, compared with $1,313.2 million in 2023.

•Diluted earnings per share for 2024 were a record $5.93, an increase of $0.26 or 4.5%, compared with $5.67 per diluted share in 2023.

•Cash provided by operating activities totaled a record $1,828.8 million in 2024, an increase of $93.5 million or 5.4%, compared with cash provided by operating activities of $1,735.3 million in 2023.

•The Company's backlog of unfilled orders at December 31, 2024 was $3,403.2 million.

•In October 2024, the Company spent $117.5 million in cash, net of cash acquired, to purchase Virtek Vision International ("Virtek"), a leading provider of advanced laser-based projection and inspection systems.

•EBITDA (earnings before interest, income taxes, depreciation, and amortization) was a record $2,151.6 million in 2024, compared with $2,014.7 million in 2023.

•In the third quarter of 2024, the Company paid in full, at maturity, a $300 million in aggregate principal amount of 3.73% senior notes.

•The Company continued its emphasis on investment in research, development and engineering, spending $371.9 million in 2024. Approximately 27% of sales in 2024 were from products introduced in the past three years.

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Results of Operations

The following “Results of Operations of the year ended December 31, 2024 compared with the year ended December 31, 2023” section presents an analysis of the Company’s consolidated operating results displayed in the Consolidated Statement of Income. A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on February 22, 2024.

Results of Operations for the year ended December 31, 2024 compared with the year ended December 31, 2023

Net sales for 2024 were $6,941.2 million, an increase of $344.2 million or 5.2%, compared with net sales of $6,597.0 million in 2023. The increase in net sales for 2024 was due to a 7% increase from acquisitions, partially offset by a 2% organic sales decline. EIG net sales were $4,659.9 million in 2024, an increase of 0.8%, compared with $4,624.3 million in 2023. EMG net sales were $2,281.3 million in 2024, an increase of 15.6%, compared with $1,972.7 million in 2023.

Total international sales for 2024 were $3,291.7 million or 47.4% of net sales, an increase of $163.5 million or 5.2%, compared with international sales of $3,128.2 million or 47.4% of net sales in 2023. The increase in international sales was primarily driven by strong demand in Europe and Asia, as well as contributions from the 2023 acquisitions. Export shipments from the United States, which are included in total international sales, were $1,880.8 million in 2024, an increase of $148.4 million or 8.6%, compared with $1,732.4 million in 2023.

Orders for 2024 were $6,810.3 million, a decrease of $102.1 million or 1.5% compared with $6,912.4 million in 2023. The decrease in orders was due to a 2% organic order decrease, a 1% unfavorable effect of foreign currency translation, partially offset by a 2% increase from acquisitions. The organic orders decrease is due to customer inventory normalization in our automation and engineered solutions core businesses. The Company’s backlog of unfilled orders at December 31, 2024 was $3,403.2 million, a decrease of $130.9 million or 3.7%, compared with $3,534.1 million at December 31, 2023.

Segment operating income for 2024 was $1,884.9 million, an increase of $77.4 million or 4.3%, compared with segment operating income of $1,807.5 million in 2023. Segment operating income, as a percentage of net sales, decreased to 27.2% in 2024, compared with 27.4% in 2023. Segment operating income and operating margins in 2024 included $29.2 million of integration costs related to the Paragon acquisition, which negatively impacted segment operating margins by 40 basis points. The dilutive impact of the 2023 acquisitions negatively impacted segment operating margins by 110 basis points in 2024. Excluding the dilutive impact of the 2023 acquisitions and the Paragon integration costs, segment operating margins increased 130 basis points compared to 2023, due to the continued benefits from the Company's Operational Excellence initiatives.

Cost of sales for 2024 was $4,464.7 million or 64.3% of net sales, an increase of $252.2 million or 6.0%, compared with $4,212.5 million or 63.9% of net sales for 2023. The cost of sales increase was primarily due to the net sales increase discussed above.

Selling, general and administrative expenses for 2024 were $696.9 million or 10.0% of net sales, an increase of $19.9 million or 2.9%, compared with $677.0 million or 10.3% of net sales in 2023. Selling expenses increased primarily due to the increase in net sales discussed above. General and administrative expenses for 2024 were $105.3 million, compared with $100.1 million in 2023.

Consolidated operating income was $1,779.6 million or 25.6% of net sales for 2024, an increase of $72.1 million or 4.2%, compared with $1,707.5 million or 25.9% of net sales in 2023.

Other expense, net was $5.1 million for 2024, compared with $19.3 million of other expense in 2023, a change of $14.2 million. During 2024, the Company recorded higher pension income of $6.5 million and lower acquisition-related due diligence expense compared to 2023.

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The effective tax rate for 2024 was 17.2%, compared with 18.3% in 2023. See Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further details.

Net income for 2024 was $1,376.1 million, an increase of $62.9 million or 4.8%, compared with $1,313.2 million in 2023.

Diluted earnings per share for 2024 were $5.93, an increase of $0.26 or 4.5%, compared with $5.67 per diluted share in 2023.

Segment Results

EIG’s net sales totaled a record $4,659.9 million for 2024, an increase of $35.6 million or 0.8%, compared with $4,624.3 million in 2023. The net sales increase was due to a 2% increase from acquisitions, partially offset by a 1% organic sales decrease.

EIG’s operating income was a record $1,428.4 million for 2024, an increase of $117.4 million or 9.0%, compared with $1,311.0 million in 2023. EIG’s operating margins were a record 30.7% of net sales for 2024, compared with 28.3% of net sales in 2023. EIG's operating margins increased in 2024 compared to 2023 due to the continued benefits from the Company's Operational Excellence initiatives.

EMG’s net sales totaled a record $2,281.3 million for 2024, an increase of $308.6 million or 15.6%, compared with $1,972.7 million in 2023. The net sales increase was due to a 20% increase from acquisitions, partially offset by a 5% organic sales decrease. The organic sales decrease for 2024 is due to customer inventory normalization in our automation and engineered solutions core businesses.

EMG’s operating income was $456.5 million for 2024, a decrease of $40.1 million or 8.1%, compared with $496.6 million in 2023. EMG’s operating margins were 20.0% of net sales for 2024, compared with 25.2% of net sales in 2023. EMG's operating margins were negatively impacted by the dilutive impact of the 2023 acquisitions. EMG's operating income and operating margins for 2024 included $29.2 million of integration costs related to the Paragon acquisition, which negatively impacted segment operating margins by 130 basis points. The dilutive impact of the 2023 acquisitions negatively impacted EMG operating margins by 270 basis points in 2024. Excluding the dilutive impact of the 2023 acquisitions and the Paragon integration costs, EMG operating margins decreased 120 basis points compared to 2023, due to the organic sales decrease discussed above.

Liquidity and Capital Resources

Cash provided by operating activities totaled $1,828.8 million in 2024, an increase of $93.5 million or 5.4%, compared with cash provided by operating activities of $1,735.3 million in 2023. The increase in cash provided by operating activities for 2023 was primarily due to higher net income, net of higher noncash depreciation and amortization expense related to recent acquisitions, and improved working capital management.

Free cash flow (cash flow provided by operating activities less capital expenditures) was $1,701.7 million in 2024, compared with $1,599.1 million in 2023. EBITDA (earnings before interest, income taxes, depreciation and amortization) was $2,151.7 million in 2024, compared with $2,014.7 million in 2023. Free cash flow and EBITDA are presented because the Company is aware that they are measures used by third parties in evaluating the Company. (See "Non-GAAP Financial Measures" for a reconciliation of U.S. GAAP measures to comparable non-GAAP measures).

Cash used by investing activities totaled $244.8 million in 2024, compared with cash used by investing activities of $2,376.4 million in 2023. In 2024, the Company paid $117.5 million, net of cash acquired, to purchase Virtek Vision International, compared to $2,237.9 million, net of cash acquired, to purchase Bison Gear & Engineering Corp., United Electronic Industries, Amplifier Research Corp. and Paragon Medical in 2023. Additions to property, plant and equipment totaled $127.1 million in 2024, compared with $136.2 million in 2023.

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Cash used by financing activities totaled $1,602.5 million in 2024, compared with $697.3 million of cash provided by financing activities in 2023. At December 31, 2024, total debt, net was $2,079.7 million, compared with $3,313.3 million at December 31, 2023. In 2024, total borrowings decreased by $1,189.7 million, compared with an increase of $892.3 million in 2023. At December 31, 2024, the Company had available borrowing capacity of $2,020.3 million under its revolving credit facility and term loan, excluding the $700 million accordion feature.

At December 31, 2024, the Company had $230.0 million outstanding on the revolver with a maturity date of May 2027. The amount outstanding under the revolver that the Company expects, but is not required, to repay in 2025 is recorded in current liabilities on the consolidated balance sheet at December 31, 2024.

In the third quarter of 2024, the Company paid in full, at maturity, a $300 million in aggregate principal amount of 3.73% senior notes. The debt-to-capital ratio was 17.7% at December 31, 2024, compared with 27.5% at December 31, 2023. 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 15.0% at December 31, 2024, compared with 25.0% at December 31, 2023. 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. (See "Non-GAAP Financial Measures" for a reconciliation of U.S. GAAP measures to comparable non-GAAP measures).

In 2024, the Company repurchased approximately 1.2 million shares of its common stock for $212.0 million, compared with $7.8 million used for repurchases of approximately 0.1 million shares in 2023. At December 31, 2024, $604.1 million was available under the Company’s Board of Directors authorization for future share repurchases.

Additional financing activities for 2024 included cash dividends paid of $258.8 million, compared with $230.3 million in 2023. Effective February 9, 2024, the Company’s Board of Directors approved a 12% increase in the quarterly cash dividend on the Company’s common stock to $0.28 per common share from $0.25 per common share. Proceeds from the exercise of employee stock options were $66.9 million in 2024, compared with $50.9 million in 2023.

As a result of all of the Company’s cash flow activities in 2024, cash and cash equivalents at December 31, 2024 totaled $374.0 million, compared with $409.8 million at December 31, 2023. At December 31, 2024, the Company had $361.5 million in cash outside the United States, compared with $375.9 million at December 31, 2023. 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 for the foreseeable future.

Subsequent Events

On January 6, 2025, the Company established a commercial paper program under which it may issue short-term, unsecured commercial paper notes. Amounts available under the commercial paper program may be borrowed, repaid and re-borrowed, with the aggregate face or principal amount of the notes outstanding under the commercial paper program at any time not to exceed $2.3 billion. The notes will have maturities of up to 364 days from the date of issue. The Company intends the commercial paper program to provide additional financing flexibility for various purposes including acquisitions. The Company expects that outstanding indebtedness of the Company under both the revolving credit facility and the commercial paper program will not exceed $2.3 billion at any time.

Effective February 7, 2025, the Company's Board of Directors approved an 11% increase in the quarterly cash dividend on its common stock to $0.31 per share from $0.28 per share.

Effective February 7, 2025, the Company's Board of Directors approved a $1.25 billion share repurchase authorization. This new authorization replaces the previous $1 billion share repurchase authorization approved in May 2022.

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Acquisition subsequent to December 31, 2024

In January 2025, the Company acquired Kern Microtechnik ("Kern"), a leading manufacturer of high-precision machining and optical inspection solutions supporting a wide range of applications within the medical, semiconductor, research, and space markets. Kern has annual sales of approximately 50 million Euros. Kern will join EIG.

Contractual Obligations and Other Commitments

Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, and leases. See Note 10 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of debt obligations.

Leases expire over a range of years from 2025 to 2038. Most of the leases contain renewal or purchase options, subject to various terms and conditions. See Note 14 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of lease obligations.

Purchase obligations primarily consist of contractual commitments to purchase certain inventories at fixed prices. At December 31, 2024, the Company had $695.9 million of purchase obligations due within one year and $66.0 million of purchase obligations due in more than one year.

The Company has standby letters of credit and surety bonds of $173.1 million related to performance and payment guarantees at December 31, 2024. Based on experience with these arrangements, the Company believes that any obligations that may arise will not be material to its financial position.

Non-GAAP Financial Measures

EBITDA represents earnings before interest, income taxes, depreciation and amortization. EBITDA is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. It should not be considered, however, as an alternative to operating income as an indicator of the Company’s operating performance or as an alternative to cash flows as a measure of the Company’s overall liquidity as presented in the Company’s consolidated financial statements. Furthermore, EBITDA measures shown for the Company may not be comparable to similarly titled measures used by other companies. The following table presents the reconciliation of net income reported in accordance with U.S. generally accepted accounting principles (“GAAP”) to EBITDA:

Free cash flow represents cash flow from operating activities less capital expenditures. Free cash flow is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in

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evaluating the Company. The following table presents the reconciliation of cash flow from operating activities reported in accordance with U.S. GAAP to free cash flow:

Net debt represents total debt, net minus cash and cash equivalents. Net debt is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of total debt, net reported in accordance with U.S. GAAP to net debt:

Internal Reinvestment

Capital Expenditures

Capital expenditures were $127.1 million or 1.8% of net sales in 2024, compared with $136.2 million or 2.1% of net sales in 2023. Capital expenditures in 2025 are expected to be approximately 2% of net sales, with a continued emphasis on spending to improve productivity.

Research, Development and Engineering

The Company is committed to, and has consistently invested in, research, development and engineering activities to design and develop new and improved products and solutions. Research, development and engineering costs were $371.9 million in 2024, $351.7 million in 2023 and $322.1 million in 2022. These amounts included research and development expenses of $236.6 million, $220.8 million and $198.8 million in 2024, 2023, and 2022, respectively. All such expenditures were directed toward the development of new products and solutions and the improvement of existing products and solutions.

Environmental Matters

Information with respect to environmental matters is set forth in Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Critical accounting policies are those policies that can have a significant impact on the presentation of the Company’s financial condition and results of operations and that require the use of complex and subjective estimates based on the Company’s historical experience and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ materially from the estimates used. Below are the policies used in preparing

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the Company's financial statements that management believes are the most dependent upon the application of estimates and assumptions. A complete list of the Company’s significant accounting policies is in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

•Business Combinations. The Company allocates the purchase price of an acquired company, including when applicable, the acquisition date fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. Third party appraisal firms and other consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed. In the absence of a third party appraisal, the Company uses internal valuation estimates based on pertinent data from comparable prior acquisitions. Estimating fair values requires significant judgments, estimates and assumptions, including but not limited to: discount rates, future cash flows and the economic lives of trade names, technology, and customer relationships. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

•Goodwill and Other Intangible Assets. Goodwill and other intangible assets with indefinite lives, primarily trademarks and trade names, are not amortized; rather, they are tested for impairment at least annually. The Company performs either a qualitative or quantitative analysis to determine if it is more likely than not that the fair values of its reporting units are less than the respective carrying values of those reporting units. The Company elected to bypass performing the qualitative screen and performed a quantitative analysis of the goodwill impairment test in the current year. The Company may elect to perform a qualitative analysis in future periods.

The Company principally relies on a discounted cash flow analysis to determine the fair value of each reporting unit, which considers cash flows discounted at an appropriate discount rate. The annual goodwill impairment test requires the Company to make a number of assumptions and estimates concerning future levels of revenue growth, operating margins, depreciation, amortization and working capital requirements, which are based on the Company’s long-range plan and are considered level 3 inputs. The discount rate is an estimate of the overall after-tax rate of return required by a market participant whose weighted average cost of capital includes both equity and debt, including a risk premium. While the Company uses the best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances. While there are always changes in assumptions to reflect changing business and market

conditions, the Company’s overall methodology and the population of assumptions used have remained

unchanged. In order to evaluate the sensitivity of the goodwill impairment test to changes in the fair value

calculations, the Company applied a hypothetical 10% decrease in fair values of each reporting unit. The

2024 results (expressed as a percentage of carrying value for the respective reporting unit) showed that,

despite the hypothetical 10% decrease in fair value, the fair values of the Company’s reporting units still

exceeded their respective carrying values by 95% to 388%.

The impairment test for indefinite-lived intangibles other than goodwill (primarily trademarks and trade names) consists of a comparison of the estimated fair value of the indefinite-lived intangible asset to the carrying value of the asset as of the impairment testing date. The Company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its indefinite-lived intangible assets are less than the respective carrying values of those assets. The Company elected to bypass the performing the qualitative screen. The Company may elect to perform the qualitative analysis in future periods. The Company estimates the fair value of its indefinite-lived intangibles using the relief from royalty method using level 3 inputs, which is a widely used valuation technique for such assets. The fair value derived from the relief from royalty method is determined by applying a royalty rate to a projection of net revenues discounted using an appropriate discount rate. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Certain impairment models have discount rates calculated based on a debt/equity cost of capital. While the Company uses the

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best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded intangible balances. While there are always changes in assumptions to reflect changing business and market conditions, the Company’s overall methodology and the population of assumptions used have remained unchanged.

The Company’s acquisitions have generally included a significant goodwill component and the Company expects to continue to make acquisitions. At December 31, 2024, goodwill and other indefinite-lived intangible assets totaled $7,579.2 million or 51.8% of the Company’s total assets. The Company completed its required annual impairment tests in the fourth quarter of 2024 and determined that the carrying values of the Company’s goodwill and indefinite-lived intangibles were not impaired. There can be no assurance that goodwill or indefinite-lived intangibles impairment will not occur in the future.

•Income Taxes. The process of providing for income taxes and determining the related balance sheet accounts requires management to assess uncertainties, make judgments regarding outcomes and utilize estimates. The Company conducts a broad range of operations around the world and is therefore subject to complex tax regulations in numerous international taxing jurisdictions, resulting at times in tax audits, disputes and potential litigation, the outcome of which is uncertain. Management must make judgments currently about such uncertainties and determine estimates of the Company’s tax assets and liabilities. To the extent the final outcome differs, future adjustments to the Company’s tax assets and liabilities may be necessary.

The Company assesses the realizability of its deferred tax assets, taking into consideration the Company’s forecast of future taxable income, available net operating loss carryforwards and available tax planning strategies that could be implemented to realize the deferred tax assets. Based on this assessment, management must evaluate the need for, and the amount of, valuation allowances against the Company’s deferred tax assets. To the extent facts and circumstances change in the future, adjustments to the valuation allowances may be required.

The Company assesses the uncertainty in its tax positions by applying a minimum recognition threshold which a tax position is required to meet before a tax benefit is recognized in the financial statements. Once the minimum threshold is met, using a more likely than not standard, a series of probability estimates is made for each item to properly measure and record a tax benefit. The tax benefit recorded is generally equal to the highest probable outcome that is more than 50% likely to be realized after full disclosure and resolution of a tax examination. The underlying probabilities are determined based on the best available objective evidence such as recent tax audit outcomes, published guidance, external expert opinion, or by analogy to the outcome of similar issues in the past. There can be no assurance that these estimates will ultimately be realized given continuous changes in tax policy, legislation and audit practice. The Company recognizes interest and penalties accrued related to uncertain tax positions in income tax expense.

Recent Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements, to the Company’s Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements.

Forward-Looking Information

Certain matters discussed in this Form 10-K are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”), which involve risk and uncertainties that exist in the Company’s operations and business environment and can be affected by inaccurate assumptions, or by known or unknown risks and uncertainties. Many such factors will be important in determining the Company’s actual future results. The Company wishes to take advantage of the “safe harbor” provisions of the PSLRA by cautioning readers that numerous important factors in some cases have caused, and in the future could cause, the Company’s actual

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results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Some, but not all, of the factors or uncertainties that could cause actual results to differ from present expectations are set forth above and under Item 1A. Risk Factors. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, subsequent events or otherwise, unless required by the securities laws to do so.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report includes forward-looking statements based on the Company’s current assumptions, expectations and projections about future events. When used in this report, the words “believes,” “anticipates,” “may,” “expect,” “intend,” “estimate,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. In this report, the Company discloses important factors that could cause actual results to differ materially from management’s expectations. For more information on these and other factors, see “Forward-Looking Information” herein.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with “Item 1A. Risk Factors,” and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Business Overview

AMETEK’s operations are affected by global, regional and industry-specific economic factors. However, the Company’s strategic geographic and industry diversification, and its mix of products and services, have helped to mitigate the potential adverse impact of any unfavorable developments in any one industry or the economy of any single country on its consolidated operating results. In 2023, the Company posted record sales, operating income, operating margins, net income, diluted earnings per share, orders, backlog, and operating cash flow. Positive market trends, the Company's record backlog, contributions from recent acquisitions, and continued focus on and implementation of Operational Excellence initiatives had a positive impact on 2023 results. The Company also benefited from its strategic initiatives under AMETEK's four key strategies: Operational Excellence, Strategic Acquisitions, Global & Market Expansion and New Products.

Highlights in 2023 were:

•Net sales for 2023 were a record $6,597.0 million, an increase of $446.5 million or 7.3%, compared with net sales of $6,150.5 million in 2022. The increase in net sales for 2023 was due to a 4% organic sales increase and a 3% increase from acquisitions.

•Net income for 2023 was a record $1,313.2 million, an increase of $153.7 million or 13.3%, compared with $1,159.5 million in 2022.

•Diluted earnings per share for 2023 were a record $5.67, an increase of $0.66 or 13.2%, compared with $5.01 per diluted share in 2022.

•Cash provided by operating activities totaled a record $1,735.3 million in 2023, an increase of $585.9 million or 51.0%, compared with cash provided by operating activities of $1,149.4 million in 2022.

•The Company's backlog of unfilled orders at December 31, 2023 was a record $3,534.1 million.

•During 2023, the Company spent $2,237.9 million in cash, net of cash acquired, to purchase four businesses:

•In March 2023, AMETEK acquired Bison Gear & Engineering Corp. ("Bison"), a designer and manufacturer of custom motion control solutions.

•In August 2023, AMETEK acquired United Electronic Industries ("UEI"), a designer and manufacturer of high-performance test, measurement, simulation and control solutions.

•In October 2023, AMETEK acquired Amplifier Research Corp. ("Amplifier Research"), a leading provider of amplifiers and electromagnetic compatibility testing equipment.

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•In December 2023, AMETEK acquired Paragon Medical ("Paragon"), a leading provider of highly engineered medical components and instruments.

•EBITDA (earnings before interest, income taxes, depreciation, and amortization) was a record $2,014.7 million in 2023, compared with $1,829.7 million in 2022.

•The Company continued its emphasis on investment in research, development and engineering, spending $351.7 million in 2023. Approximately 25% of sales in 2023 were from products introduced in the past three years.

Results of Operations

The following table sets forth net sales and income by reportable segment and on a consolidated basis:

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The following “Results of Operations of the year ended December 31, 2023 compared with the year ended December 31, 2022” section presents an analysis of the Company’s consolidated operating results displayed in the Consolidated Statement of Income. A discussion regarding our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on February 21, 2023.

Results of Operations for the year ended December 31, 2023 compared with the year ended December 31, 2022

Net sales for 2023 were $6,597.0 million, an increase of $446.5 million or 7.3%, compared with net sales of $6,150.5 million in 2022. The increase in net sales for 2023 was due to a 4% organic sales increase and a 3% increase from acquisitions. EIG net sales were $4,624.3 million in 2023, an increase of 9.3%, compared with $4,229.4 million in 2022. EMG net sales were $1,972.7 million in 2023, an increase of 2.7%, compared with $1,921.2 million in 2022.

Total international sales for 2023 were $3,128.2 million or 47.4% of net sales, an increase of $131.9 million or 4.4%, compared with international sales of $2,996.3 million or 48.7% of net sales in 2022. The increase in

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international sales was primarily driven by strong demand in Europe and Asia as well as contributions from recent acquisitions. Export shipments from the United States, which are included in total international sales, were $1,732.4 million in 2023, an increase of $43.7 million or 2.6%, compared with $1,688.7 million in 2022.

Orders for 2023 were $6,912.4 million, an increase of $273.3 million or 4.1% compared with $6,639.1 million in 2022. The increase in orders was due to a 7% increase from acquisitions, a 1% favorable effect of foreign currency translation, partially offset by an organic order decrease. The Company’s backlog of unfilled orders at December 31, 2023 was a record $3,534.1 million, an increase of $315.5 million or 9.8%, compared with $3,218.6 million at December 31, 2022.

Segment operating income for 2023 was $1,807.5 million, an increase of $214.2 million or 13.4%, compared with segment operating income of $1,593.3 million in 2022. Segment operating income, as a percentage of net sales, increased to 27.4% in 2023, compared with 25.9% in 2022. Segment operating income and operating margins were positively impacted by the increase in sales discussed above, which was primarily driven by our higher margin businesses, as well as continued benefits from the Company's Operational Excellence initiatives.

Cost of sales for 2023 was $4,212.5 million or 63.9% of net sales, an increase of $207.2 million or 5.2%, compared with $4,005.3 million or 65.1% of net sales for 2022. The cost of sales increase was primarily due to the net sales increase discussed above.

Selling, general and administrative expenses for 2023 were $677.0 million or 10.3% of net sales, an increase of $32.4 million or 5.0%, compared with $644.6 million or 10.5% of net sales in 2022. Selling expenses increased primarily due to the increase in net sales discussed above. General and administrative expenses for 2023 were $100.1 million, compared with $92.6 million in 2022. The general and administrative expenses in 2023 include higher employee compensation costs compared to 2022.

Consolidated operating income was $1,707.5 million or 25.9% of net sales for 2023, an increase of $206.8 million or 13.8%, compared with $1,500.7 million or 24.4% of net sales in 2022.

Other expense, net was $19.3 million for 2023, compared with $11.2 million of other income in 2022, a change of $30.5 million. During 2023, the Company recorded lower pension income of $21.1 million and higher acquisition-related due diligence expense compared to 2022.

The effective tax rate for 2023 was 18.3%, compared with 18.8% in 2022. See Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further details.

Net income for 2023 was $1,313.2 million, an increase of $153.7 million or 13.3%, compared with $1,159.5 million in 2022.

Diluted earnings per share for 2023 were $5.67, an increase of $0.66 or 13.2%, compared with $5.01 per diluted share in 2022.

Segment Results

EIG’s net sales totaled $4,624.3 million for 2023, an increase of $394.9 million or 9.3%, compared with $4,229.4 million in 2022. The net sales increase was due to a 6% organic sales increase and a 3% increase from acquisitions.

EIG’s operating income was $1,311.0 million for 2023, an increase of $221.3 million or 20.3%, compared with $1,089.7 million in 2022. EIG’s operating margins were 28.3% of net sales for 2023, compared with 25.8% of net sales in 2022. EIG's operating margins increased in 2023 compared to 2022 due to the sales increase discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.

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EMG’s net sales totaled $1,972.7 million for 2023, an increase of $51.5 million or 2.7%, compared with $1,921.2 million in 2022. The net sales increase was due to a 5% increase from acquisitions, partially offset by an organic sales decrease.

EMG’s operating income was $496.6 million for 2023, a decrease of $7.0 million or 1.4%, compared with $503.6 million in 2022. EMG’s operating margins were 25.2% of net sales for 2023, compared with 26.2% of net sales in 2022. EMG's operating margins were negatively impacted by the dilutive impact of the 2023 acquisitions. In 2022, EMG's operating income included a $7.1 million gain on the sale of a facility, which increased EMG operating margins by 40 basis points. Excluding the dilutive impact of the 2023 acquisitions and the gain on the sale of a facility, EMG operating margins increased 70 basis points compared to 2022.

Liquidity and Capital Resources

Cash provided by operating activities totaled $1,735.3 million in 2023, an increase of $585.9 million or 51.0%, compared with cash provided by operating activities of $1,149.4 million in 2022. The increase in cash provided by operating activities for 2023 was primarily due to improved working capital management and higher net income.

Free cash flow (cash flow provided by operating activities less capital expenditures) was $1,599.1 million in 2023, compared with $1,010.4 million in 2022. EBITDA (earnings before interest, income taxes, depreciation and amortization) was $2,014.7 million in 2023, compared with $1,829.7 million in 2022. Free cash flow and EBITDA are presented because the Company is aware that they are measures used by third parties in evaluating the Company. (See "Non-GAAP Financial Measures" for a reconciliation of U.S. GAAP measures to comparable non-GAAP measures).

Cash used by investing activities totaled $2,376.4 million in 2023, compared with cash used by investing activities of $552.8 million in 2022. In 2023, the Company paid $2,237.9 million, net of cash acquired, to purchase Bison Gear & Engineering Corp., United Electronic Industries, Amplifier Research Corp. and Paragon Medical, compared to $429.7 million, net of cash acquired, to purchase Navitar, Inc. and RTDS Technologies Inc. in 2022. Additions to property, plant and equipment totaled $136.2 million in 2023, compared with $139.0 million in 2022.

Cash provided by financing activities totaled $697.3 million in 2023, compared with $575.7 million of cash used by financing activities in 2022. At December 31, 2023, total debt, net was $3,313.3 million, compared with $2,385.0 million at December 31, 2022. In 2023, total borrowings increased by $892.3 million, compared with a decrease of $73.7 million in 2022. At December 31, 2023, the Company had available borrowing capacity of $1,829.3 million under its revolving credit facility and term loan, 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 indebtedness. In November 2021, the Company further amended the Credit Agreement to address the cessation of LIBOR on certain currencies. At December 31, 2023, the Company had $1,116.0 million outstanding on the revolver with a maturity date of May 2027. The amount outstanding under the revolver that the Company expects, but is not required, to repay in 2024 is recorded in current liabilities on the consolidated balance sheet at December 31, 2023.

The debt-to-capital ratio was 27.5% at December 31, 2023, compared with 24.2% at December 31, 2022. 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 25.0% at December 31, 2023, compared with 21.4% at December 31, 2022. The net debt-to-capital ratio is presented because the Company is aware that this measure is used by third parties in evaluating the

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Company. (See "Non-GAAP Financial Measures" for a reconciliation of U.S. GAAP measures to comparable non-GAAP measures).

In 2023, the Company repurchased approximately 0.1 million shares of its common stock for $7.8 million, compared with $332.8 million used for repurchases of approximately 2.7 million shares in 2022. 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. At December 31, 2023, $816.1 million was available under the Company’s Board of Directors authorization for future share repurchases.

Additional financing activities for 2023 included cash dividends paid of $230.3 million, compared with $202.2 million in 2022. Effective February 9, 2023, the Company’s Board of Directors approved a 14% increase in the quarterly cash dividend on the Company’s common stock to $0.25 per common share from $0.22 per common share. Proceeds from the exercise of employee stock options were $50.9 million in 2023, compared with $49.9 million in 2022.

As a result of all of the Company’s cash flow activities in 2023, cash and cash equivalents at December 31, 2023 totaled $409.8 million, compared with $345.4 million at December 31, 2022. At December 31, 2023, the Company had $375.9 million in cash outside the United States, compared with $344.0 million at December 31, 2022. 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 for the foreseeable future.

Subsequent Event

Effective February 9, 2024, the Company’s Board of Directors approved a 12% increase in the quarterly cash dividend on the Company’s common stock to $0.28 per common share from $0.25 per common share.

Contractual Obligations and Other Commitments

Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, and leases. See Note 10 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of debt obligations.

Leases expire over a range of years from 2024 to 2032. Most of the leases contain renewal or purchase options, subject to various terms and conditions. See Note 14 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of lease obligations.

Purchase obligations primarily consist of contractual commitments to purchase certain inventories at fixed prices. At December 31, 2023, the Company had $723.6 million of purchase obligations due within one year and $66.4 million of purchase obligations due in more than one year.

The Company has standby letters of credit and surety bonds of $193.6 million related to performance and payment guarantees at December 31, 2023. Based on experience with these arrangements, the Company believes that any obligations that may arise will not be material to its financial position.

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Non-GAAP Financial Measures

EBITDA represents earnings before interest, income taxes, depreciation and amortization. EBITDA is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. It should not be considered, however, as an alternative to operating income as an indicator of the Company’s operating performance or as an alternative to cash flows as a measure of the Company’s overall liquidity as presented in the Company’s consolidated financial statements. Furthermore, EBITDA measures shown for the Company may not be comparable to similarly titled measures used by other companies. The following table presents the reconciliation of net income reported in accordance with U.S. generally accepted accounting principles (“GAAP”) to EBITDA:

Free cash flow represents cash flow from operating activities less capital expenditures. Free cash flow is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of cash flow from operating activities reported in accordance with U.S. GAAP to free cash flow:

Net debt represents total debt, net minus cash and cash equivalents. Net debt is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of total debt, net reported in accordance with U.S. GAAP to net debt:

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Internal Reinvestment

Capital Expenditures

Capital expenditures were $136.2 million or 2.1% of net sales in 2023, compared with $139.0 million or 2.3% of net sales in 2022. In 2023, approximately 64% of capital expenditures were for improvements to existing equipment or additional equipment to increase productivity and expand capacity. Capital expenditures in 2024 are expected to be approximately 2% of net sales, with a continued emphasis on spending to improve productivity.

Research, Development and Engineering

The Company is committed to, and has consistently invested in, research, development and engineering activities to design and develop new and improved products and solutions. Research, development and engineering costs before customer reimbursement were $351.7 million in 2023, $322.1 million in 2022 and $299.6 million in 2021. These amounts included research and development expenses of $220.8 million, $198.8 million and $194.2 million in 2023, 2022, and 2021, respectively. All such expenditures were directed toward the development of new products and solutions and the improvement of existing products and solutions.

Environmental Matters

Information with respect to environmental matters is set forth in Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Critical accounting policies are those policies that can have a significant impact on the presentation of the Company’s financial condition and results of operations and that require the use of complex and subjective estimates based on the Company’s historical experience and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ materially from the estimates used. Below are the policies used in preparing the Company's financial statements that management believes are the most dependent upon the application of estimates and assumptions. A complete list of the Company’s significant accounting policies is in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

•Business Combinations. The Company allocates the purchase price of an acquired company, including when applicable, the acquisition date fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. Third party appraisal firms and other consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed. In the absence of a third party appraisal, the Company uses internal valuation estimates based on pertinent data from comparable prior acquisitions. Estimating fair values requires significant judgments, estimates and assumptions, including but not limited to: discount rates, future cash flows and the economic lives of trade names, technology, and customer relationships. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

•Goodwill and Other Intangible Assets. Goodwill and other intangible assets with indefinite lives, primarily trademarks and trade names, are not amortized; rather, they are tested for impairment at least annually. The Company performs either a qualitative or quantitative analysis to determine if it is more likely than not that the fair values of its reporting units are less than the respective carrying values of those reporting units.

When testing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely

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than not that the estimated fair value of a reporting unit is less than its carrying amount. If the Company performs a qualitative assessment and determines that an impairment is more likely than not, then performance of a quantitative impairment test is required. In conducting a qualitative assessment, the Company analyzes actual and forecasted net sales and selling profit for each reporting unit, as well as historical performance and the results of prior quantitative tests performed. Additionally, the Company assesses critical areas that may impact its business, including macroeconomic conditions, industry and market conditions, cost factors, or any relevant events and factors that may impact projected financial results.

If performed, the quantitative goodwill impairment test uses a discounted cash flow analysis to determine the fair value of each reporting unit, which considers cash flows discounted at an appropriate discount rate. The annual goodwill impairment test requires the Company to make a number of assumptions and estimates concerning future levels of revenue growth, operating margins, depreciation, amortization and working capital requirements, which are based on the Company’s long-range plan and are considered level 3 inputs. The discount rate is an estimate of the overall after-tax rate of return required by a market participant whose weighted average cost of capital includes both equity and debt, including a risk premium. While the Company uses the best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances.

The impairment test for indefinite-lived intangibles other than goodwill (primarily trademarks and trade names) consists of a comparison of the estimated fair value of the indefinite-lived intangible asset to the carrying value of the asset as of the impairment testing date. The Company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its indefinite-lived intangible assets are less than the respective carrying values of those assets. The Company elected to bypass performing the qualitative screen. The Company may elect to perform the qualitative analysis in future periods. The Company estimates the fair value of its indefinite-lived intangibles using the relief from royalty method using level 3 inputs, which is a widely used valuation technique for such assets. The fair value derived from the relief from royalty method is determined by applying a royalty rate to a projection of net revenues discounted using an appropriate discount rate. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Certain impairment models have discount rates calculated based on a debt/equity cost of capital. While the Company uses the best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded intangible balances. While there are always changes in assumptions to reflect changing business and market conditions, the Company’s overall methodology and the population of assumptions used have remained unchanged.

The Company’s acquisitions have generally included a significant goodwill component and the Company expects to continue to make acquisitions. At December 31, 2023, goodwill and other indefinite-lived intangible assets totaled $7,471.4 million or 49.7% of the Company’s total assets. The Company completed its required annual qualitative goodwill impairment test in the fourth quarter of 2023 and determined that the carrying values of the Company’s goodwill was not impaired. The Company completed its required annual indefinite-lived intangibles impairment tests in the fourth quarter of 2023 and determined that the carrying values of certain of the Company’s indefinite-lived intangibles were impaired primarily as a result of higher discount rates associated with higher interest rates, as well as decreased forecasted sales growth of specific product lines. As a result, in the fourth quarter of 2023, the Company recorded an immaterial non-cash impairment charge related to certain of the Company's trade names. There can be no assurance that goodwill or indefinite-lived intangibles impairment will not occur in the future.

•Pensions. The Company has U.S. and foreign defined benefit and defined contribution pension plans. The most significant elements in determining the Company’s pension income or expense are the assumed pension liability discount rate and the expected return on plan assets. The pension discount rate reflects the current interest rate at which the pension liabilities could be settled at the valuation date. At the end of each

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year, the Company determines the assumed discount rate to be used to discount plan liabilities. In estimating this rate for 2023, the Company considered rates of return on high-quality, fixed-income investments that have maturities consistent with the anticipated funding requirements of the plan. In estimating the U.S. and foreign discount rates, the Company’s actuaries developed a customized discount rate appropriate to the plans’ projected benefit cash flow based on yields derived from a database of long-term bonds at consistent maturity dates. The Company determines the expected long-term rate of return based primarily on its expectation of future returns for the pension plans’ investments. Additionally, the Company considers historical returns on comparable fixed-income and equity investments and adjusts its estimate as deemed appropriate.

•Income Taxes. The process of providing for income taxes and determining the related balance sheet accounts requires management to assess uncertainties, make judgments regarding outcomes and utilize estimates. The Company conducts a broad range of operations around the world and is therefore subject to complex tax regulations in numerous international taxing jurisdictions, resulting at times in tax audits, disputes and potential litigation, the outcome of which is uncertain. Management must make judgments currently about such uncertainties and determine estimates of the Company’s tax assets and liabilities. To the extent the final outcome differs, future adjustments to the Company’s tax assets and liabilities may be necessary.

The Company assesses the realizability of its deferred tax assets, taking into consideration the Company’s forecast of future taxable income, available net operating loss carryforwards and available tax planning strategies that could be implemented to realize the deferred tax assets. Based on this assessment, management must evaluate the need for, and the amount of, valuation allowances against the Company’s deferred tax assets. To the extent facts and circumstances change in the future, adjustments to the valuation allowances may be required.

The Company assesses the uncertainty in its tax positions, by applying a minimum recognition threshold which a tax position is required to meet before a tax benefit is recognized in the financial statements. Once the minimum threshold is met, using a more likely than not standard, a series of probability estimates is made for each item to properly measure and record a tax benefit. The tax benefit recorded is generally equal to the highest probable outcome that is more than 50% likely to be realized after full disclosure and resolution of a tax examination. The underlying probabilities are determined based on the best available objective evidence such as recent tax audit outcomes, published guidance, external expert opinion, or by analogy to the outcome of similar issues in the past. There can be no assurance that these estimates will ultimately be realized given continuous changes in tax policy, legislation and audit practice. The Company recognizes interest and penalties accrued related to uncertain tax positions in income tax expense.

Recent Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements, to the Company’s Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements.

Forward-Looking Information

Certain matters discussed in this Form 10-K are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”), which involve risk and uncertainties that exist in the Company’s operations and business environment and can be affected by inaccurate assumptions, or by known or unknown risks and uncertainties. Many such factors will be important in determining the Company’s actual future results. The Company wishes to take advantage of the “safe harbor” provisions of the PSLRA by cautioning readers that numerous important factors in some cases have caused, and in the future could cause, the Company’s actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Some, but not all, of the factors or uncertainties that could cause actual results to differ from present expectations are set forth above and under Item 1A. Risk Factors. The Company undertakes no obligation to

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publicly update any forward-looking statements, whether as a result of new information, subsequent events or otherwise, unless required by the securities laws to do so.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report includes forward-looking statements based on the Company’s current assumptions, expectations and projections about future events. When used in this report, the words “believes,” “anticipates,” “may,” “expect,” “intend,” “estimate,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. In this report, the Company discloses important factors that could cause actual results to differ materially from management’s expectations. For more information on these and other factors, see “Forward-Looking Information” herein.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with “Item 1A. Risk Factors,” and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Business Overview

AMETEK’s operations are affected by global, regional and industry-specific economic factors. However, the Company’s strategic geographic and industry diversification, and its mix of products and services, have helped to mitigate the potential adverse impact of any unfavorable developments in any one industry or the economy of any single country on its consolidated operating results. In 2022, the Company posted record sales, operating income, operating margins, net income, diluted earnings per share, backlog, and orders. The Company also benefited from its strategic initiatives under AMETEK's four key strategies: Operational Excellence, Strategic Acquisitions, Global & Market Expansion and New Products.

Highlights in 2022 were:

•Net sales for 2022 were a record $6,150.5 million, an increase of $604.0 million or 10.9%, compared with net sales of $5,546.5 million in 2021. The increase in net sales for 2022 was due to an 11% organic sales increase, a 2% increase from acquisitions, partially offset by an unfavorable 2% effect of foreign currency translation.

•Net income for 2022 was a record $1,159.5 million, an increase of $169.4 million or 17.1%, compared with $990.1 million in 2021.

•Diluted earnings per share for 2022 were a record $5.01, an increase of $0.76 or 17.8%, compared with $4.25 per diluted share in 2021.

•Orders for 2022 were a record $6,639.1 million, an increase of $164.7 million or 2.5%, compared with $6,474.4 million in 2021. The increase in orders was due to a 9% organic order increase, partially offset by a 3% unfavorable effect of foreign currency translation, as well as a 3% decrease from the year-over-year impact of acquisitions. As a result, the Company's backlog of unfilled orders at December 31, 2022 was a record $3,218.6 million.

•During 2022, the Company spent $429.7 million in cash, net of cash acquired, to purchase two businesses:

•In September 2022, AMETEK acquired Navitar, Inc. ("Navitar"), a designer and manufacturer of customized, fully integrated optical imaging systems, components, and software.

•In October 2022, AMETEK acquired RTDS Technologies Inc. ("RTDS"), a leading provider of real-time power simulation systems used by utilities, and research and education institutions in the development and testing of the electric power grid and renewable energy applications.

•Cash flow provided by operating activities for 2022 was $1,149.4 million. Free cash flow (cash flow provided by operating activities less capital expenditures) was $1,010.4 million in 2022.

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•EBITDA (earnings before interest, income taxes, depreciation, and amortization) was a record $1,829.7 million in 2022, compared with $1,594.3 million in 2021.

•The Company continued its emphasis on investment in research, development and engineering, spending $322.1 million in 2022. Sales from products introduced in the past three years were $1,674.2 million.

Recent Events and Market Conditions

Recent events and market conditions impacting our business include the inflationary cost environment, rising interest rates, supply chain constraints, the COVID-19 pandemic, and the ongoing conflict in Ukraine. As a result of these events and conditions, we anticipate the challenging global economic environment to continue into 2023.

Beginning in 2021, we experienced heightened levels of inflation in material and transportation costs. We have taken steps to mitigate the impacts of material and transportation cost 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 inflationary environment has also resulted in central banks raising short-term interest rates. We expect inflation to continue into 2023 and will continue to take actions to mitigate this inflationary pressure.

There still remains uncertainty concerning the COVID-19 pandemic, its effect on labor, government mandated lockdowns and other restrictive measures, and the pandemic's ultimate duration. Lockdowns in China during 2022 limited our ability to access customer sites, operate certain facilities, and placed additional constraints on our supply chain. Depending on the course of the pandemic, additional lockdowns in China or elsewhere could impact our operations and results of operations.

The invasion of Ukraine by Russia and the sanctions imposed in response to this conflict have increased global economic and political uncertainty. While we do not have operations in Russia or Ukraine and do not have significant exposure to customers and vendors in those countries, 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.

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Results of Operations

The following table sets forth net sales and income by reportable segment and on a consolidated basis:

______________________

The following “Results of Operations of the year ended December 31, 2022 compared with the year ended December 31, 2021” section presents an analysis of the Company’s consolidated operating results displayed in the Consolidated Statement of Income. A discussion regarding our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on February 22, 2022.

Results of Operations for the year ended December 31, 2022 compared with the year ended December 31, 2021

Net sales for 2022 were a record $6,150.5 million, an increase of $604.0 million or 10.9%, compared with net sales of $5,546.5 million in 2021. The increase in net sales for 2022 was due to an 11% organic sales increase, a 2% increase from acquisitions, partially offset by an unfavorable 2% effect of foreign currency translation. EIG net sales were $4,229.4 million in 2022, an increase of 12.4%, compared with $3,763.8 million in 2021. EMG net sales were $1,921.2 million in 2022, an increase of 7.8%, compared with $1,782.8 million in 2021.

Total international sales for 2022 were $2,996.3 million or 48.7% of net sales, an increase of $250.7 million or 9.1%, compared with international sales of $2,745.6 million or 49.5% of net sales in 2021. The increase in international sales was primarily driven by strong demand in all regions as well as contributions from recent acquisitions. Export shipments from the United States, which are included in total international sales, were $1,688.7 million in 2022, an increase of $213.1 million or 14.4%, compared with $1,475.6 million in 2021.

Orders for 2022 were a record $6,639.1 million, an increase of $164.7 million or 2.5% compared with $6,474.4 million in 2021. The increase in orders was due to a 9% organic order increase, partially offset by a 3% unfavorable effect of foreign currency translation, as well as a 3% decrease from the year-over-year impact of acquisitions. The Company’s backlog of unfilled orders at December 31, 2022 was a record $3,218.6 million, an increase of $488.5 million or 17.9%, compared with $2,730.1 million at December 31, 2021.

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Segment operating income for 2022 was $1,593.3 million, an increase of $197.7 million or 14.2%, compared with segment operating income of $1,395.6 million in 2021. Segment operating income was positively impacted in 2022 by the increased sales discussed above. Segment operating income, as a percentage of net sales, increased to 25.9% in 2022, compared with 25.2% in 2021. Segment operating margins for 2022 were negatively impacted by the dilutive impact of the 2021 acquisitions. Excluding the dilutive impact of recent acquisitions, segment operating margins for the core businesses increased 120 basis points compared to 2021, due to the Company's Operational Excellence initiatives.

Cost of sales for 2022 was $4,005.3 million or 65.1% of net sales, an increase of $371.4 million or 10.2%, compared with $3,633.9 million or 65.5% of net sales for 2021. The cost of sales increase was primarily due to the net sales increase discussed above.

Selling, general and administrative expenses for 2022 were $644.6 million or 10.5% of net sales, an increase of $40.7 million or 6.7%, compared with $603.9 million or 10.9% of net sales in 2021. Selling, general and administrative expenses increased primarily due to the increase in net sales discussed above.

Consolidated operating income was $1,500.7 million or a record 24.4% of net sales for 2022, an increase of $192.0 million or 14.7%, compared with $1,308.7 million or 23.6% of net sales in 2021.

Other income, net was $11.2 million for 2022, compared with $5.1 million of other expense in 2021, a change of $16.3 million. During 2022, the Company recorded higher pension income of $9.9 million and lower acquisition-related due diligence expense compared to 2021.

The effective tax rate for 2022 was 18.8%, compared with 19.1% in 2021. See Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further details.

Net income for 2022 was a record $1,159.5 million, an increase of $169.4 million or 17.1%, compared with $990.1 million in 2021.

Diluted earnings per share for 2022 were a record $5.01, an increase of $0.76 or 17.8%, compared with $4.25 per diluted share in 2021.

Segment Results

EIG’s net sales totaled a record $4,229.4 million for 2022, an increase of $465.6 million or 12.4%, compared with $3,763.8 million in 2021. The net sales increase was due to an 11% organic sales increase, a 4% increase from acquisitions, partially offset by an unfavorable 3% effect of foreign currency translation.

EIG’s operating income was a record $1,089.7 million for 2022, an increase of $131.5 million or 13.7%, compared with $958.2 million in 2021. EIG’s operating margins were 25.8% of net sales for 2022, compared with 25.5% of net sales in 2021. EIG's operating margins in 2022 were negatively impacted by the dilutive impact of the 2021 acquisitions. Excluding the dilutive impact of the 2021 acquisitions, EIG operating margins increased 100 basis points compared to 2021, due to the increase in net sales discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.

EMG’s net sales totaled a record $1,921.2 million for 2022, an increase of $138.4 million or 7.8%, compared with $1,782.8 million in 2021. The net sales increase was due to an 11% organic sales increase, partially offset by an unfavorable 3% effect of foreign currency translations.

EMG’s operating income was a record $503.6 million for 2022, an increase of $66.2 million or 15.1%, compared with $437.4 million in 2021. EMG's operating income included a $7.1 million gain on the sale of a facility during 2022. EMG’s operating margins were a record 26.2% of net sales for 2022, compared with 24.5% of net sales in 2021. Excluding the gain on the sale of a facility, EMG operating margins increased 130 basis points compared to

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2021, due to the increase in net sales discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.

Liquidity and Capital Resources

Cash provided by operating activities totaled $1,149.4 million in 2022, a decrease of $11.1 million or 1.0%, compared with $1,160.5 million in 2021. The decrease in cash provided by operating activities for 2022 was due to higher working capital levels, primarily driven by 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 $1,010.4 million in 2022, compared with $1,049.8 million in 2021. EBITDA (earnings before interest, income taxes, depreciation and amortization) was a record $1,829.7 million in 2022, compared with $1,594.3 million in 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. (See "Non-GAAP Financial Measures" for a reconciliation of U.S. GAAP measures to comparable non-GAAP measures).

Cash used by investing activities totaled $552.8 million in 2022, compared with cash used by investing activities of $2,055.8 million in 2021. In 2022, the Company paid $429.7 million, net of cash acquired, to purchase Navitar, Inc. and RTDS Technologies Inc., compared to $1,959.2 million, net of cash acquired, to purchase Abaco Systems, Magnetrol International, NSI-MI Technologies, Crank Software, EGS Automation, and Alphasense in 2021. Additions to property, plant and equipment totaled $139.0 million in 2022, compared with $110.7 million in 2021.

Cash used by financing activities totaled $575.7 million in 2022, compared with $39.3 million of cash provided by financing activities in 2021. At December 31, 2022, total debt, net was $2,385.0 million, compared with $2,544.2 million at December 31, 2021. In 2022, total borrowings decreased by $73.7 million, compared with an increase of $183.9 million in 2021. At December 31, 2022, the Company had available borrowing capacity of $2,745.2 million under its revolving credit facility and term loan, 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 indebtedness. In November 2021, the Company further amended the Credit Agreement to address the cessation of LIBOR on certain currencies. At December 31, 2022, the Company had $219.0 million outstanding on the revolver with a maturity date of May 2027.

In the fourth quarter of 2021, a 55 million Swiss franc ($59.7 million) 2.44% senior note matured and was paid. The debt-to-capital ratio was 24.2% at December 31, 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 21.4% at December 31, 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. (See "Non-GAAP Financial Measures" for a reconciliation of U.S. GAAP measures to comparable non-GAAP measures).

In 2022, the Company repurchased approximately 2.7 million shares of its common stock for $332.8 million, compared with $14.7 million used for repurchases of approximately 113,000 shares in 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. At December 31, 2022, $823.9 million was available under the Company’s Board of Directors authorization for future share repurchases.

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Additional financing activities for 2022 included cash dividends paid of $202.2 million, compared with $184.6 million in 2021. On 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. Proceeds from the exercise of employee stock options were $49.9 million in 2022, compared with $60.3 million in 2021.

As a result of all of the Company’s cash flow activities in 2022, cash and cash equivalents at December 31, 2022 totaled $345.4 million, compared with $346.8 million at December 31, 2021. At December 31, 2022, the Company had $334.1 million in cash outside the United States, compared with $344.0 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 for the foreseeable future.

Subsequent Event

Effective February 9, 2023, the Company’s Board of Directors approved a 14% increase in the quarterly cash dividend on the Company’s common stock to $0.25 per common share from $0.22 per common share.

Contractual Obligations and Other Commitments

Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, and leases. See Note 10 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of debt obligations.

Leases expire over a range of years from 2023 to 2032. Most of the leases contain renewal or purchase options, subject to various terms and conditions. See Note 14 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of lease obligations.

Purchase obligations primarily consist of contractual commitments to purchase certain inventories at fixed prices. At December 31, 2022, the Company had $1,003.9 million of purchase obligations due within one year and $115.8 million of purchase obligations due in more than one year.

The Company has standby letters of credit and surety bonds of $64.9 million related to performance and payment guarantees at December 31, 2022. Based on experience with these arrangements, the Company believes that any obligations that may arise will not be material to its financial position.

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Non-GAAP Financial Measures

EBITDA represents earnings before interest, income taxes, depreciation and amortization. EBITDA is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. It should not be considered, however, as an alternative to operating income as an indicator of the Company’s operating performance or as an alternative to cash flows as a measure of the Company’s overall liquidity as presented in the Company’s consolidated financial statements. Furthermore, EBITDA measures shown for the Company may not be comparable to similarly titled measures used by other companies. The following table presents the reconciliation of net income reported in accordance with U.S. generally accepted accounting principles (“GAAP”) to EBITDA:

Free cash flow represents cash flow from operating activities less capital expenditures. Free cash flow is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of cash flow from operating activities reported in accordance with U.S. GAAP to free cash flow:

Net debt represents total debt, net minus cash and cash equivalents. Net debt is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of total debt, net reported in accordance with U.S. GAAP to net debt:

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Internal Reinvestment

Capital Expenditures

Capital expenditures were $139.0 million or 2.3% of net sales in 2022, compared with $110.7 million or 2.0% of net sales in 2021. In 2022, approximately 64% of capital expenditures were for improvements to existing equipment or additional equipment to increase productivity and expand capacity. Capital expenditures in 2023 are expected to be approximately 2% of net sales, with a continued emphasis on spending to improve productivity.

Research, Development and Engineering

The Company is committed to, and has consistently invested in, research, development and engineering activities to design and develop new and improved products and solutions. Research, development and engineering costs before customer reimbursement were $322.1 million in 2022, $299.6 million in 2021 and $246.2 million in 2020. These amounts included research and development expenses of $198.8 million, $194.2 million and $158.9 million in 2022, 2021, and 2020, respectively. All such expenditures were directed toward the development of new products and solutions and the improvement of existing products and solutions.

Environmental Matters

Information with respect to environmental matters is set forth in Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Critical accounting policies are those policies that can have a significant impact on the presentation of the Company’s financial condition and results of operations and that require the use of complex and subjective estimates based on the Company’s historical experience and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ materially from the estimates used. Below are the policies used in preparing the Company's financial statements that management believes are the most dependent upon the application of estimates and assumptions. A complete list of the Company’s significant accounting policies is in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

•Business Combinations. The Company allocates the purchase price of an acquired company, including when applicable, the acquisition date fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. Third party appraisal firms and other consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed. Estimating fair values requires significant judgments, estimates and assumptions, including but not limited to: discount rates, future cash flows and the economic lives of trade names, technology, and customer relationships. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

•Goodwill and Other Intangible Assets. Goodwill and other intangible assets with indefinite lives, primarily trademarks and trade names, are not amortized; rather, they are tested for impairment at least annually. The Company performs either a qualitative or quantitative analysis to determine if it is more likely than not that the fair values of its reporting units are less than the respective carrying values of those reporting units.

When testing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If the Company performs a qualitative assessment and determines that an impairment is more likely than not, then performance of a quantitative impairment test is required. In conducting a qualitative assessment, the

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Company analyzes actual and forecasted net sales and selling profit for each reporting unit, as well as historical performance and the results of prior quantitative tests performed. Additionally, the Company assesses critical areas that may impact its business, including macroeconomic conditions, industry and market conditions, cost factors, or any relevant events and factors that may impact projected financial results.

If performed, the quantitative goodwill impairment test uses a discounted cash flow analysis to determine the fair value of each reporting unit, which considers cash flows discounted at an appropriate discount rate. The annual goodwill impairment test requires the Company to make a number of assumptions and estimates concerning future levels of revenue growth, operating margins, depreciation, amortization and working capital requirements, which are based on the Company’s long-range plan and are considered level 3 inputs. The discount rate is an estimate of the overall after-tax rate of return required by a market participant whose weighted average cost of capital includes both equity and debt, including a risk premium. While the Company uses the best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances.

The impairment test for indefinite-lived intangibles other than goodwill (primarily trademarks and trade names) consists of a comparison of the estimated fair value of the indefinite-lived intangible asset to the carrying value of the asset as of the impairment testing date. The Company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its indefinite-lived intangible assets are less than the respective carrying values of those assets. The Company elected to perform its annual goodwill impairment test using the quantitative analysis method. The Company may elect to perform the quantitative analysis in future periods. The Company estimates the fair value of its indefinite-lived intangibles using the relief from royalty method using level 3 inputs, which is a widely used valuation technique for such assets. The fair value derived from the relief from royalty method is determined by applying a royalty rate to a projection of net revenues discounted using an appropriate discount rate. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Certain impairment models have discount rates calculated based on a debt/equity cost of capital. While the Company uses the best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded intangible balances. While there are always changes in assumptions to reflect changing business and market conditions, the Company’s overall methodology and the population of assumptions used have remained unchanged.

The Company’s acquisitions have generally included a significant goodwill component and the Company expects to continue to make acquisitions. At December 31, 2022, goodwill and other indefinite-lived intangible assets totaled $6,262.2 million or 50.4% of the Company’s total assets. The Company completed its required annual indefinite-lived intangibles impairment tests in the fourth quarter of 2022 and determined that the carrying values of certain of the Company’s indefinite-lived intangibles were impaired as a result of higher discount rates driven by higher interest rates. As a result, in the fourth quarter of 2022, the Company recorded an immaterial non-cash impairment charge related to certain of the Company's trade names. The Company completed its annual qualitative goodwill impairment test in the fourth quarter of 2022 and determined the carrying values of its goodwill intangibles were not impaired. There can be no assurance that goodwill or indefinite-lived intangibles impairment will not occur in the future.

•Pensions. The Company has U.S. and foreign defined benefit and defined contribution pension plans. The most significant elements in determining the Company’s pension income or expense are the assumed pension liability discount rate and the expected return on plan assets. The pension discount rate reflects the current interest rate at which the pension liabilities could be settled at the valuation date. At the end of each year, the Company determines the assumed discount rate to be used to discount plan liabilities. In estimating this rate for 2022, the Company considered rates of return on high-quality, fixed-income investments that have maturities consistent with the anticipated funding requirements of the plan. In estimating the U.S. and foreign discount rates, the Company’s actuaries developed a customized discount

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rate appropriate to the plans’ projected benefit cash flow based on yields derived from a database of long-term bonds at consistent maturity dates. The Company determines the expected long-term rate of return based primarily on its expectation of future returns for the pension plans’ investments. Additionally, the Company considers historical returns on comparable fixed-income and equity investments and adjusts its estimate as deemed appropriate.

•Income Taxes. The process of providing for income taxes and determining the related balance sheet accounts requires management to assess uncertainties, make judgments regarding outcomes and utilize estimates. The Company conducts a broad range of operations around the world and is therefore subject to complex tax regulations in numerous international taxing jurisdictions, resulting at times in tax audits, disputes and potential litigation, the outcome of which is uncertain. Management must make judgments currently about such uncertainties and determine estimates of the Company’s tax assets and liabilities. To the extent the final outcome differs, future adjustments to the Company’s tax assets and liabilities may be necessary.

The Company assesses the realizability of its deferred tax assets, taking into consideration the Company’s forecast of future taxable income, available net operating loss carryforwards and available tax planning strategies that could be implemented to realize the deferred tax assets. Based on this assessment, management must evaluate the need for, and the amount of, valuation allowances against the Company’s deferred tax assets. To the extent facts and circumstances change in the future, adjustments to the valuation allowances may be required.

The Company assesses the uncertainty in its tax positions, by applying a minimum recognition threshold which a tax position is required to meet before a tax benefit is recognized in the financial statements. Once the minimum threshold is met, using a more likely than not standard, a series of probability estimates is made for each item to properly measure and record a tax benefit. The tax benefit recorded is generally equal to the highest probable outcome that is more than 50% likely to be realized after full disclosure and resolution of a tax examination. The underlying probabilities are determined based on the best available objective evidence such as recent tax audit outcomes, published guidance, external expert opinion, or by analogy to the outcome of similar issues in the past. There can be no assurance that these estimates will ultimately be realized given continuous changes in tax policy, legislation and audit practice. The Company recognizes interest and penalties accrued related to uncertain tax positions in income tax expense.

Recent Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements, to the Company’s Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements.

Forward-Looking Information

Certain matters discussed in this Form 10-K are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”), which involve risk and uncertainties that exist in the Company’s operations and business environment and can be affected by inaccurate assumptions, or by known or unknown risks and uncertainties. Many such factors will be important in determining the Company’s actual future results. The Company wishes to take advantage of the “safe harbor” provisions of the PSLRA by cautioning readers that numerous important factors in some cases have caused, and in the future could cause, the Company’s actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Some, but not all, of the factors or uncertainties that could cause actual results to differ from present expectations are set forth above and under Item 1A. Risk Factors. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, subsequent events or otherwise, unless required by the securities laws to do so.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report includes forward-looking statements based on the Company’s current assumptions, expectations and projections about future events. When used in this report, the words “believes,” “anticipates,” “may,” “expect,” “intend,” “estimate,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. In this report, the Company discloses important factors that could cause actual results to differ materially from management’s expectations. For more information on these and other factors, see “Forward-Looking Information” herein.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with “Item 1A. Risk Factors,” and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Business Overview

AMETEK’s operations are affected by global, regional and industry economic factors. However, the Company’s strategic geographic and industry diversification, and its mix of products and services, have helped to mitigate the potential adverse impact of any unfavorable developments in any one industry or the economy of any single country on its consolidated operating results. In 2021, the Company posted record sales, operating income, operating margins, net income, diluted earnings per share, backlog, and orders. The Company's record backlog, contributions from recent acquisitions, and continued focus on and implementation of Operating Excellence initiatives, had a positive impact on 2021 results. The Company also benefited from its strategic initiatives under AMETEK's four key strategies: Operational Excellence, Strategic Acquisitions, Global & Market Expansion and New Products.

Highlights of 2021 were:

•Net sales for 2021 were a record $5,546.5 million, an increase of $1,006.5 million or 22.2%, compared with net sales of $4,540.0 million in 2020. The increase in net sales for 2021 was due to a 15% organic sales increase, a 7% increase from acquisitions, and a favorable 1% effect of foreign currency translation, partially offset by an unfavorable divestiture impact.

•Net income for 2021 was a record $990.1 million, an increase of $117.7 million or 13.5%, compared with $872.4 million in 2020.

•Diluted earnings per share for 2021 were a record $4.25, an increase of $0.48 or 12.7%, compared with $3.77 per diluted share in 2020.

•Orders for 2021 were a record $6,474.4 million, an increase of $1,850.0 million or 40.0%, compared with $4,624.4 million in 2020. The increase in orders was due to a 26% organic order increase, a favorable 15% from acquisitions, partially offset by an unfavorable 1% effect of foreign currency translation. As a result, the Company's backlog of unfilled orders at December 31, 2021 was a record $2,730.1 million.

•During 2021, the Company spent $1,959.2 million in cash, net of cash acquired, to purchase six businesses:

•In February 2021, AMETEK acquired EGS Automation ("EGS"), a designer and manufacturer of highly engineered, customized robotic solutions used in critical applications for the medical, food and beverage, and general industrial markets.

•In March 2021, AMETEK acquired Magnetrol International ("Magnetrol"), a leading provider of level and flow control solutions for challenging process applications across a diverse set of end markets including medical, pharmaceutical, oil and gas, food and beverage, and general industrial.

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•In March 2021, AMETEK acquired Crank Software, a leading provider of embedded graphical user interface software and services.

•In April 2021, AMETEK acquired NSI-MI Technologies ("NSI-MI"), a leading provider of radio frequency and microwave test and measurement systems for niche applications across the aerospace, defense, automotive, wireless communications, and research markets.

•In April 2021, AMETEK acquired Abaco Systems, Inc. ("Abaco"), specializing in open-architecture computing and electronic systems for aerospace, defense, and specialized industrial markets and is a leading provider of mission critical embedded computing systems.

•In November 2021, AMETEK acquired Alphasense, a leading provider of gas and particulate sensors for use in environmental, health and safety, and air quality applications.

•Cash flow provided by operating activities for 2021 was $1,160.5 million. Free cash flow (cash flow provided by operating activities less capital expenditures) was $1,049.8 million in 2021.

•EBITDA (earnings before interest, income taxes, depreciation, and amortization) was a record $1,594.3 million in 2021, compared with $1,421.6 million in 2020.

•The Company continued its emphasis on investment in research, development and engineering, spending $299.6 million in 2021. Sales from products introduced in the past three years were $1,244.0 million.

Impact of COVID-19 Pandemic on our Business

The COVID-19 pandemic resulted in significant global economic disruption and had an adverse impact on our financial results throughout 2020. As the global economy has begun to recover, we eliminated certain of the temporary cost saving actions put in place in 2020, but continue to closely monitor fixed costs, capital expenditure plans, inventory, and capital resources to respond to changing conditions and to ensure we have the resources to meet our future needs. We have experienced sequential improvement in our financial results since the third quarter of 2020, and this trend has continued throughout 2021. The current economic environment in which we operate is characterized by increased material cost inflation, logistics challenges, labor availability issues, and component part shortages. As we move into 2022, we continue to monitor and closely manage through these conditions and have taken steps to mitigate the impacts of the challenging economic environment.

We are closely tracking developments regarding vaccine mandates. Until it was prohibited by a federal court order in December 2021, we had taken steps to comply with the federal contractor vaccine mandate, requiring employees in our U.S. workforce to be fully vaccinated against COVID-19 by January 18, 2022, except in limited circumstances. Although the federal contractor mandate has been temporarily suspended, pending the outcome of an appeal, we continue to encourage all employees to be vaccinated, including booster shots. If the mandate is reinstated, or new mandates implemented, it is uncertain to what extent compliance with such vaccine mandates may result in workforce attrition.

Our top priority during this pandemic is the health and safety of our employees. All global manufacturing facilities remained fully operational during 2021 and continue to operate with safety protocols in place to ensure the health and safety of our employees and communities. We will continue to evaluate the nature and extent of future impacts of the COVID-19 pandemic on its business. Please refer to "Risk Factors", Part I, Item 1A of this Form 10-K for more information.

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Results of Operations

The following table sets forth net sales and income by reportable segment and on a consolidated basis:

______________________

The following “Results of Operations of the year ended December 31, 2021 compared with the year ended December 31, 2020” section presents an analysis of the Company’s consolidated operating results displayed in the Consolidated Statement of Income. A discussion regarding our financial condition and results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission on February 18, 2021.

Results of Operations for the year ended December 31, 2021 compared with the year ended December 31, 2020

Net sales for 2021 were a record $5,546.5 million, an increase of $1,006.5 million or 22.2%, compared with net sales of $4,540.0 million in 2020. The increase in net sales for 2021 was due to a 15% organic sales increase, a 7% increase from acquisitions, and a favorable 1% effect of foreign currency translation, partially offset by an unfavorable divestiture impact. EIG net sales were $3,763.8 million in 2021, an increase of 25.9%, compared with $2,989.9 million in 2020. EMG net sales were $1,782.8 million in 2021, an increase of 15.0%, compared with $1,550.1 million in 2020.

Total international sales for 2021 were a record $2,745.6 million or 49.5% of net sales, an increase of $535.7 million or 24.2%, compared with international sales of $2,209.9 million or 48.7% of net sales in 2020. The increase in international sales was primarily driven by strong demand in Europe and Asia as well as contributions from recent acquisitions. Export shipments from the United States, which are included in total international sales, were $1,475.6 million in 2021, an increase of $279.2 million or 23.3%, compared with $1,196.4 million in 2020.

Orders for 2021 were a record $6,474.4 million, an increase of $1,850.0 million or 40.0% compared with $4,624.4 million in 2020. The increase in orders was due to a 26% organic order increase, a favorable 15% from acquisitions, partially offset by an unfavorable 1% effect of foreign currency translation. The Company’s backlog of unfilled orders at December 31, 2021 was a record $2,730.1 million, an increase of $927.9 million or 51.5%, compared with $1,802.2 million at December 31, 2020.

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Segment operating income for 2021 was $1,395.6 million, an increase of $300.0 million or 27.4%, compared with segment operating income of $1,095.6 million in 2020. Segment operating income, as a percentage of net sales, increased to 25.2% in 2021, compared with 24.1% in 2020. The Company recorded 2020 realignment costs of $43.7 million in response to the impact of a weak global economy as a result of the COVID-19 pandemic. The 2020 realignment costs were composed of $35.3 million in severance costs for a reduction of workforce and $8.4 million of asset write-downs, primarily inventory, which decreased margins by 100 basis points. Segment operating income and segment operating margins were positively impacted in 2021 by the increase in net sales discussed above as well as the Company's Operational Excellence initiatives, including ongoing savings from the 2020 realignment actions.

Cost of sales for 2021 was $3,633.9 million or 65.5% of net sales, an increase of $637.4 million or 21.3%, compared with $2,996.5 million or 66.0% of net sales for 2020. The cost of sales increase was primarily due to the net sales increase discussed above. The 2020 cost of sales included the realignment costs discussed above.

Selling, general and administrative expenses for 2021 were $603.9 million or 10.9% of net sales, an increase of $88.3 million or 17.1%, compared with $515.6 million or 11.4% of net sales in 2020. Selling, general and administrative expenses increased primarily due to the increase in net sales discussed above.

Consolidated operating income was a record $1,308.7 million or a record 23.6% of net sales for 2021, an increase of $280.8 million or 27.3%, compared with $1,027.9 million or 22.6% of net sales in 2020. The consolidated operating income and operating income margins were positively impacted in 2021 by the increase in net sales discussed above as well as the benefits of the Company's Operational Excellence initiatives. The 2021 acquisitions of Abaco, Magnetrol, NSI-MI, Crank Software, EGS, and Alphasense diluted operating margins by 110 basis points. Excluding the acquisitions, operating income margins would have been 24.7% for 2021. The consolidated operating income margins were negatively impacted by 100 basis points in 2020 due to the realignment costs discussed above.

Other expense, net was $5.1 million for 2021, compared with $140.5 million of other income in 2020, a change of $145.6 million. In March 2020, the Company completed the sale of its Reading Alloys business ("Reading") to Kymera International for net proceeds of $245.3 million in cash. The sale resulted in a pre-tax gain of $141.0 million.

The effective tax rate for 2021 was 19.1%, compared with 19.4% in 2020. See Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further details.

Net income for 2021 was a record $990.1 million, an increase of $117.7 million or 13.5%, compared with $872.4 million in 2020. The net of tax gain of $109.6 million on the sale of Reading and net of tax expense of $33.6 million on the 2020 realignment costs are included in net income in 2020.

Diluted earnings per share for 2021 were a record $4.25, an increase of $0.48 or 12.7%, compared with $3.77 per diluted share in 2020. The net of tax gain of $0.47 per diluted share on the sale of Reading and net of tax expense of $0.15 per diluted share on the 2020 realignment costs are included in diluted earnings per share in 2020.

Segment Results

EIG’s net sales totaled $3,763.8 million for 2021, an increase of $773.9 million or 25.9%, compared with $2,989.9 million in 2020. The net sales increase was due to a 14% organic sales increase, an 11% increase from acquisitions, and a favorable 1% effect of foreign currency translation.

EIG’s operating income was $958.2 million for 2021, an increase of $187.6 million or 24.3%, compared with $770.6 million in 2020. EIG’s operating margins were 25.5% of net sales for 2021, compared with 25.8% of net sales in 2020. EIG’s operating income and operating margins in 2021 were positively impacted by the sales increase discussed above as well as the Company's Operational Excellence initiatives. The 2021 acquisitions of Abaco, Magnetrol, NSI-MI, Crank Software, and Alphasense diluted operating margins by 180 basis points. Excluding the

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acquisitions, EIG operating margins would have been 27.3% for 2021. EIG's operating margins were negatively impacted in 2020 by 70 basis points due to the 2020 realignment costs discussed above.

EMG’s net sales totaled $1,782.8 million for 2021, an increase of $232.7 million or 15.0%, compared with $1,550.1 million in 2020. The net sales increase was due to a 15% organic sales increase, a favorable 1% effect of foreign currency translations, partially offset by an unfavorable 1% impact from the Reading divestiture.

EMG’s operating income was $437.4 million for 2021, an increase of $112.4 million or 34.6%, compared with $325.0 million in 2020. EMG’s operating margins were 24.5% of net sales for 2021, compared with 21.0% of net sales in 2020. EMG’s operating income and operating margins in 2021 were positively impacted by the sales increase discussed above as well as the Company's Operational Excellence initiatives. EMG’s 2020 operating margins were negatively impacted by 130 basis points due to the 2020 realignment costs discussed above.

Liquidity and Capital Resources

Cash provided by operating activities totaled $1,160.5 million in 2021, a decrease of $120.5 million or 9.4%, compared with $1,281.0 million in 2020. The decrease in cash provided by operating activities for 2021 was primarily due to higher working capital requirements, partially offset by higher net income, net of the gain on the sale of the Reading business in 2020.

Free cash flow (cash flow provided by operating activities less capital expenditures) was $1,049.8 million in 2021, compared with $1,206.8 million in 2020. EBITDA (earnings before interest, income taxes, depreciation and amortization) was a record $1,594.3 million in 2021, compared with $1,421.6 million in 2020. Free cash flow and EBITDA are presented because the Company is aware that they are measures used by third parties in evaluating the Company. (See "Non-GAAP Financial Measures" for a reconciliation of U.S. GAAP measures to comparable non-GAAP measures).

Cash used by investing activities totaled $2,055.8 million in 2021, compared with cash provided by investing activities of $61.6 million in 2020. In 2021, the Company paid $1,959.2 million, net of cash acquired, to purchase Abaco Systems, Magnetrol International, NSI-MI Technologies, Crank Software, EGS Automation, and Alphasense compared to $116.5 million to acquire IntelliPower in 2020. In 2020, the Company received proceeds of $245.3 million from the sale of its Reading business. Additions to property, plant and equipment totaled $110.7 million in 2021, compared with $74.2 million in 2020.

Cash provided by financing activities totaled $39.3 million in 2021, compared with $539.4 million of cash used by financing activities in 2020. At December 31, 2021, total debt, net was $2,544.2 million, compared with $2,413.7 million at December 31, 2020. In 2021, total borrowings increased by $183.9 million, driven by the 2021 acquisitions, compared with a decrease of $430.9 million in 2020. At December 31, 2021, the Company had available borrowing capacity of $2,447.5 million under its revolving credit facility and term loan, including the $500 million accordion feature.

On April 26, 2021, the Company along with certain of its foreign subsidiaries amended 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 the Company’s existing revolving credit facility to add a new five-year, delayed draw, term loan for up to $800 million. The credit agreement places certain restrictions on allowable additional indebtedness. In November 2021, the Company further amended the Credit Agreement to address the cessation of LIBOR on certain currencies. At December 31, 2021, the Company had $150.0 million outstanding on the term loan.

In the fourth quarter of 2021, 55 million Swiss franc ($59.7 million) 2.44% senior note matured and was paid. In the third quarter of 2020, an 80 million British pound ($102.9 million) 4.68% senior note matured and was paid. The debt-to-capital ratio was 27.0% at December 31, 2021, compared with 28.9% at December 31, 2020. The net

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debt-to-capital ratio (total debt, net less cash and cash equivalents divided by the sum of net debt and stockholders’ equity) was 24.2% at December 31, 2021, compared with 16.8% at December 31, 2020. 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. (See "Non-GAAP Financial Measures" for a reconciliation of U.S. GAAP measures to comparable non-GAAP measures).

In 2021, the Company repurchased approximately 113,000 shares of its common stock for $14.7 million, compared with $4.7 million used for repurchases of approximately 55,000 shares in 2020. At December 31, 2021, $469.7 million was available under the Company’s Board of Directors authorization for future share repurchases.

Additional financing activities for 2021 included cash dividends paid of $184.6 million, compared with $165.0 million in 2020. On February 11, 2021, the Company’s Board of Directors approved an 11% increase in the quarterly cash dividend on the Company’s common stock to $0.20 per common share from $0.18 per common share. Proceeds from the exercise of employee stock options were $60.3 million in 2021, compared with $64.9 million in 2020.

As a result of all of the Company’s cash flow activities in 2021, cash and cash equivalents at December 31, 2021 totaled $346.8 million, compared with $1,212.8 million at December 31, 2020. At December 31, 2021, the Company had $334.0 million in cash outside the United States, compared with $344.0 million at December 31, 2020. 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 for the foreseeable future.

Subsequent Event

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.

Contractual Obligations and Other Commitments

Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, and leases. See Note 10 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of debt obligations.

Leases expire over a range of years from 2022 to 2032, except for a single land lease with 62 years remaining. Most of the leases contain renewal or purchase options, subject to various terms and conditions. See Note 14 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of lease obligations.

Purchase obligations primarily consist of contractual commitments to purchase certain inventories at fixed prices. At December 31, 2021, the Company had $840.4 million of purchase obligations due within one year and $50.5 million of purchase obligations due in more than one year.

The Company has standby letters of credit and surety bonds of $56.2 million related to performance and payment guarantees at December 31, 2021. Based on experience with these arrangements, the Company believes that any obligations that may arise will not be material to its financial position.

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Non-GAAP Financial Measures

EBITDA represents earnings before interest, income taxes, depreciation and amortization. EBITDA is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. It should not be considered, however, as an alternative to operating income as an indicator of the Company’s operating performance or as an alternative to cash flows as a measure of the Company’s overall liquidity as presented in the Company’s consolidated financial statements. Furthermore, EBITDA measures shown for the Company may not be comparable to similarly titled measures used by other companies. The following table presents the reconciliation of net income reported in accordance with U.S. generally accepted accounting principles (“GAAP”) to EBITDA:

Free cash flow represents cash flow from operating activities less capital expenditures. Free cash flow is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of cash flow from operating activities reported in accordance with U.S. GAAP to free cash flow:

Net debt represents total debt, net minus cash and cash equivalents. Net debt is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of total debt, net reported in accordance with U.S. GAAP to net debt:

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Internal Reinvestment

Capital Expenditures

Capital expenditures were $110.7 million or 2.0% of net sales in 2021, compared with $74.2 million or 1.6% of net sales in 2020. In 2021, approximately 63% of capital expenditures were for improvements to existing equipment or additional equipment to increase productivity and expand capacity. Capital expenditures in 2022 are expected to be approximately 2% of net sales, with a continued emphasis on spending to improve productivity.

Research, Development and Engineering

The Company is committed to, and has consistently invested in, research, development and engineering activities to design and develop new and improved products and solutions. Research, development and engineering costs before customer reimbursement were $299.6 million in 2021, $246.2 million in 2020 and $260.3 million in 2019. These amounts included research and development expenses of $194.2 million, $158.9 million and $161.9 million in 2021, 2020, and 2019, respectively. All such expenditures were directed toward the development of new products and solutions and the improvement of existing products and solutions.

Environmental Matters

Information with respect to environmental matters is set forth in Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Critical accounting policies are those policies that can have a significant impact on the presentation of the Company’s financial condition and results of operations and that require the use of complex and subjective estimates based on the Company’s historical experience and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ materially from the estimates used. Below are the policies used in preparing the Company's financial statements that management believes are the most dependent upon the application of estimates and assumptions. A complete list of the Company’s significant accounting policies is in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

•Business Combinations. The Company allocates the purchase price of an acquired company, including when applicable, the acquisition date fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. Third party appraisal firms and other consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed. Estimating fair values requires significant judgments, estimates and assumptions, including but not limited to: discount rates, future cash flows and the economic lives of trade names, technology, and customer relationships. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

•Goodwill and Other Intangible Assets. Goodwill and other intangible assets with indefinite lives, primarily trademarks and trade names, are not amortized; rather, they are tested for impairment at least annually. The Company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its reporting units are less than the respective carrying values of those reporting units. The Company elected to bypass performing the qualitative screen and performed the quantitative analysis of the goodwill impairment test in the current year. The Company may elect to perform the qualitative analysis in future periods.

The Company principally relies on a discounted cash flow analysis to determine the fair value of each reporting unit, which considers forecasted cash flows discounted at an appropriate discount rate. The

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Company believes that market participants would use a discounted cash flow analysis to estimate the fair value of its reporting units in a sale transaction. The annual goodwill impairment test requires the Company to make a number of assumptions and estimates concerning future levels of revenue growth, operating margins, depreciation, amortization and working capital requirements, which are based on the Company’s long-range plan and are considered level 3 inputs. The Company’s long-range plan is updated as part of its annual planning process and is reviewed and approved by management. The discount rate is an estimate of the overall after-tax rate of return required by a market participant whose weighted average cost of capital includes both equity and debt, including a risk premium. While the Company uses the best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances. While there are always changes in assumptions to reflect changing business and market conditions, the Company’s overall methodology and the population of assumptions used have remained unchanged. In order to evaluate the sensitivity of the goodwill impairment test to changes in the fair value calculations, the Company applied a hypothetical 10% decrease in fair values of each reporting unit. The 2021 results (expressed as a percentage of carrying value for the respective reporting unit) showed that, despite the hypothetical 10% decrease in fair value, the fair values of the Company’s reporting units still exceeded their respective carrying values by 118% to 534%.

The impairment test for indefinite-lived intangibles other than goodwill (primarily trademarks and trade names) consists of a comparison of the estimated fair value of the indefinite-lived intangible asset to the carrying value of the asset as of the impairment testing date. The Company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its indefinite-lived intangible assets are less than the respective carrying values of those assets. The Company elected to bypass performing the qualitative screen. The Company may elect to perform the qualitative analysis in future periods. The Company estimates the fair value of its indefinite-lived intangibles using the relief from royalty method using level 3 inputs, which is a widely used valuation technique for such assets. The fair value derived from the relief from royalty method is determined by applying a royalty rate to a projection of net revenues discounted using an appropriate discount rate. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Certain impairment models have discount rates calculated based on a debt/equity cost of capital. While the Company uses the best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded intangible balances. While there are always changes in assumptions to reflect changing business and market conditions, the Company’s overall methodology and the population of assumptions used have remained unchanged.

The Company’s acquisitions have generally included a significant goodwill component and the Company expects to continue to make acquisitions. At December 31, 2021, goodwill and other indefinite-lived intangible assets totaled $6,113.1 million or 51.4% of the Company’s total assets. The Company completed its required annual impairment tests in the fourth quarter of 2021 and determined that the carrying values of the Company’s goodwill and indefinite-lived intangibles were not impaired. There can be no assurance that goodwill or indefinite-lived intangibles impairment will not occur in the future.

•Pensions. The Company has U.S. and foreign defined benefit and defined contribution pension plans. The most significant elements in determining the Company’s pension income or expense are the assumed pension liability discount rate and the expected return on plan assets. The pension discount rate reflects the current interest rate at which the pension liabilities could be settled at the valuation date. At the end of each year, the Company determines the assumed discount rate to be used to discount plan liabilities. In estimating this rate for 2021, the Company considered rates of return on high-quality, fixed-income investments that have maturities consistent with the anticipated funding requirements of the plan. In estimating the U.S. and foreign discount rates, the Company’s actuaries developed a customized discount rate appropriate to the plans’ projected benefit cash flow based on yields derived from a database of long-term bonds at consistent maturity dates. The Company determines the expected long-term rate of return based primarily on its expectation of future returns for the pension plans’ investments. Additionally, the

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Company considers historical returns on comparable fixed-income and equity investments and adjusts its estimate as deemed appropriate.

•Income Taxes. The process of providing for income taxes and determining the related balance sheet accounts requires management to assess uncertainties, make judgments regarding outcomes and utilize estimates. The Company conducts a broad range of operations around the world and is therefore subject to complex tax regulations in numerous international taxing jurisdictions, resulting at times in tax audits, disputes and potential litigation, the outcome of which is uncertain. Management must make judgments currently about such uncertainties and determine estimates of the Company’s tax assets and liabilities. To the extent the final outcome differs, future adjustments to the Company’s tax assets and liabilities may be necessary.

The Company assesses the realizability of its deferred tax assets, taking into consideration the Company’s forecast of future taxable income, available net operating loss carryforwards and available tax planning strategies that could be implemented to realize the deferred tax assets. Based on this assessment, management must evaluate the need for, and the amount of, valuation allowances against the Company’s deferred tax assets. To the extent facts and circumstances change in the future, adjustments to the valuation allowances may be required.

The Company assesses the uncertainty in its tax positions, by applying a minimum recognition threshold which a tax position is required to meet before a tax benefit is recognized in the financial statements. Once the minimum threshold is met, using a more likely than not standard, a series of probability estimates is made for each item to properly measure and record a tax benefit. The tax benefit recorded is generally equal to the highest probable outcome that is more than 50% likely to be realized after full disclosure and resolution of a tax examination. The underlying probabilities are determined based on the best available objective evidence such as recent tax audit outcomes, published guidance, external expert opinion, or by analogy to the outcome of similar issues in the past. There can be no assurance that these estimates will ultimately be realized given continuous changes in tax policy, legislation and audit practice. The Company recognizes interest and penalties accrued related to uncertain tax positions in income tax expense.

Recent Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements, to the Company’s Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements.

Forward-Looking Information

Certain matters discussed in this Form 10-K are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”), which involve risk and uncertainties that exist in the Company’s operations and business environment and can be affected by inaccurate assumptions, or by known or unknown risks and uncertainties. Many such factors will be important in determining the Company’s actual future results. The Company wishes to take advantage of the “safe harbor” provisions of the PSLRA by cautioning readers that numerous important factors in some cases have caused, and in the future could cause, the Company’s actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Some, but not all, of the factors or uncertainties that could cause actual results to differ from present expectations are set forth above and under Item 1A. Risk Factors. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, subsequent events or otherwise, unless required by the securities laws to do so.

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