APTARGROUP, INC. (ATR) FY 2021 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts or as otherwise indicated)

The objective of the following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to help the reader understand the financial performance of AptarGroup, Inc. from management's perspective. MD&A is presented in eight sections: Overview, Results of Operations, Liquidity and Capital Resources, Recently Issued Accounting Pronouncements, Critical Accounting Estimates, Operations Outlook and Forward-Looking Statements. MD&A should be read in conjunction with our Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.

In MD&A, “we,” “our,” “us,” “AptarGroup,” “AptarGroup, Inc.”, “Aptar” and the “Company” refer to AptarGroup, Inc. and its consolidated subsidiaries.

OVERVIEW

GENERAL

Aptar is a global leader in the design and manufacturing of a broad range of drug delivery, consumer product dispensing and active material science solutions and services for the pharmaceutical, beauty, personal care, home care, food and beverage markets. Using insights, proprietary design, engineering and science to create dispensing, dosing and protective technologies for many of the world's leading brands, Aptar in turn, makes a meaningful difference in the lives, looks, health and homes of millions of patients and consumers around the world.

In addition to the information presented herein that conforms to accounting principles generally accepted in the United States of America (“U.S. GAAP”), we also present certain financial information that does not conform to U.S. GAAP, which are referred to as non-U.S. GAAP financial measures. Management may assess our financial results both on a U.S. GAAP basis and on a non-U.S. GAAP basis. We believe it is useful to present these non-U.S.GAAP financial measures because they allow for a better period over period comparison of operating results by removing the impact of items that, in management’s view, do not reflect Aptar’s core operating performance. These non-U.S. GAAP financial measures should not be considered in isolation or as a substitute for U.S. GAAP financial results, but should be read in conjunction with the audited consolidated statements of income and other information presented herein. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures. Further, investors are urged to review and consider carefully the adjustments made by management to the most directly comparable U.S. GAAP financial measure to arrive at these non-U.S. GAAP financial measures. See the reconciliation under "Non-U.S. GAAP Measures" below.

For the year ended December 31, 2021, reported sales increased 10% to $3.23 billion from $2.93 billion a year ago. Core sales, excluding the positive impact from changes in currency exchange rates and acquisition effects, increased 7% from 2020. A reconciliation of core sales growth to reported net sales growth, the most directly comparable U.S. GAAP measure, can be found under "Net Sales" below. During 2021, our Beauty + Home and Food + Beverage segments both reported strong core sales growth as sales of our products used in certain applications recovered from depressed sales during 2020 due to the COVID-19 pandemic. Our Pharma segment reported strong product growth in our injectables and active material science solutions markets; however, we continued to be negatively impacted by the prolonged drawing down of inventory by certain customers as fewer illnesses and fewer doctor visits have resulted in lower consumption of allergic rhinitis, cough and cold and certain pulmonary medicines using our drug delivery devices.

2021 HIGHLIGHTS

•Top line growth across each segment drove record annual sales of $3.2 billion

•Reported sales grew 10% and core sales increased 7%

•Reported earnings per share increased 12% to $3.61

•Reported net income totaled $244 million, exceeding 2019 pre-pandemic levels

•Adjusted EBITDA totaled $607 million, exceeding 2019 pre-pandemic levels

•Acquired Voluntis, a pioneer in digital therapeutics, and 80% of Weihai Hengyu Medical Products, a leading Chinese manufacturer of elastomeric and plastic components used in injectable drug delivery

•28th consecutive year of paying an increased annual dividend

•Our ESG performance resulted in the following recognitions over the past year:

◦Number one on the Forbes Green Growth 50 2021 list;

◦Forbes 2021 World's Top 10 Female-Friendly Companies;

◦Number ten on Newsweek's America's Most Responsible Companies 2022 list, and number one in our industry category, with this being our third year on the list;

◦Number two on JUST Capital's 2021 list of America's Top 10 Companies Leading on Environmental Impact;

◦JUST Capital's America's Most JUST Companies 2022, and ranked in the top 20 overall and first in our industry for the category of Leading on Environmental Impact;

◦3BL Media's 100 Best Corporate Citizens 2021 ranking;

◦Barron's 2022 100 Most Sustainable Companies in the U.S., our fourth year on the list;

Table of Contents

◦Le Point's 2022 Most Responsible Companies in France, our second year on the list;

◦2021 CDP Supplier Engagement Leaderboard, our second year on the list; and

◦Platinum 2021 EcoVadis Sustainability Rating.

RESULTS OF OPERATIONS

The following table sets forth the consolidated statements of income and the related percentages of net sales for the periods indicated. Refer to Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for additional information regarding Results of Operations for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Certain previously reported amounts have been reclassified to conform to the current period presentation.

(1)Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation under "Non-U.S. GAAP Measures".

SIGNIFICANT DEVELOPMENTS

During 2020 the COVID-19 pandemic adversely affected the sales of several of our products, including sales to our prescription pharma customers due to lower incidences of common illnesses and doctor appointments and to our travel and retail beauty business and to our on-the-go beverage customers. We also benefited, to some extent, from increased demand for our personal care pumps and closures on certain types of hand sanitizers and our active material science solutions film for at-home COVID-19 test kits. While during 2021 we have experienced a return toward pre-pandemic levels in several of our markets, there remain uncertainties related to the pandemic that could adversely affect our business. The significance of these and other impacts to our segments are discussed herein.

As each of our segments produce dispensing systems that have been determined to be essential products by various government agencies around the world, our facilities have remained operational during the pandemic. We have taken a variety of measures to ensure the availability and functioning of our critical infrastructure, to promote the safety and security of our employees and to support the communities in which we operate. These measures include requiring remote working arrangements for employees where practicable. We are following public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the promotion of social distancing and the adoption of work-from-home arrangements, and all of these policies and initiatives have impacted our operations.

The extent to which the COVID-19 pandemic impacts our financial results and operations for fiscal year 2022 and going forward for all three of our business segments will depend on future developments which are highly uncertain and cannot be predicted, including the availability, adoption and efficacy of vaccines and boosters, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extended in response to any further resurgence of the virus and numerous other uncertainties. No impairments were recorded as of December 31, 2021 related to the COVID-19 pandemic. However, due to the general uncertainty surrounding the situation, including areas such as cost inflation, supply chain disruptions and labor shortages, future results could be materially impacted. See Part I, Item 1A - Risk Factors, included in this report for information on material risks associated with COVID-19.

Table of Contents

NET SALES

For the year ended December 31, 2021, reported net sales increased 10% to $3.23 billion from $2.93 billion a year ago. The average U.S. dollar exchange rate weakened compared to the euro and other major currencies in which we operate, resulting in a positive currency translation impact of 2%. The acquisition of Fusion Packaging, Inc. ("Fusion") positively impacted sales by 1%. There was no significant impact from our acquisitions of Voluntis and Hengyu during 2021. Therefore, core sales, which exclude acquisitions and changes in foreign currency rates, increased by 7% in 2021 compared to 2020. Price increases to our customers due to rising inflationary costs had a strong impact on our core sales during 2021. Of our 7% core sales increase, approximately 4% is due to price adjustments related to the passing through of higher resin and other input costs. All three segments reported sales growth excluding the inflationary pass-throughs mentioned above. Our Beauty + Home and Food + Beverage segments both reported strong core sales growth as sales of our products used in certain market categories recovered from depressed sales during 2020 due to the COVID-19 pandemic. Our Pharma segment reported strong product growth in our injectables and active material science solutions markets; however, we were negatively impacted early in the year by the prolonged drawing down of inventory by certain customers as fewer illnesses and fewer doctor visits have resulted in lower consumption of allergic rhinitis, cough and cold and certain pulmonary medicines using our drug delivery devices.

(1)Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.

For further discussion on net sales by reporting segment, please refer to the segment analysis of net sales and operating income on the following pages.

The following table sets forth, for the periods indicated, net sales by geographic location:

COST OF SALES (EXCLUSIVE OF DEPRECIATION AND AMORTIZATION SHOWN BELOW)

Our cost of sales (“COS”) as a percent of net sales increased to 64.1% in 2021 compared to 62.9% in 2020. Our COS percentage was negatively impacted by both changes in our mix of sales and significant input cost increases across multiple substrates used in our products. During 2021, we reported a lower percentage of our higher-margin Pharma product sales compared to 2020. As discussed above, we also experienced increases in several input costs including resin, metals, freight and labor. While we maintain our normal pass-through of resin prices and have implemented general price increases to offset other cost increases, there is no margin on these pass-throughs which increases our COS as a percentage of sales.

SELLING, RESEARCH & DEVELOPMENT AND ADMINISTRATIVE

Our selling, research & development and administrative expenses (“SG&A”) increased approximately 10% or $51.0 million to $551.2 million in 2021 compared to $500.2 million in 2020. Excluding changes in foreign currency rates, SG&A increased by approximately $40.2 million compared to the prior year. Of this increase, $10.0 million relates to incremental SG&A costs in 2021 from the inclusion of our acquired companies compared to the prior year. The remaining increase is mainly due to higher compensation costs and professional fees, which includes transaction costs related to our announced acquisitions. In 2021 SG&A as a percentage of net sales remained constant with 2020 at 17.1%.

DEPRECIATION AND AMORTIZATION

Reported depreciation and amortization expense increased approximately 7% or $14.6 million to $234.9 million in 2021 compared to $220.3 million in 2020. Excluding changes in foreign currency rates, depreciation and amortization expense increased by approximately $9.9 million compared to the prior year. Approximately $5.4 million of this increase is due to incremental depreciation and amortization costs related to our acquired companies. We also increased our capital spending during the current and prior year to support our growth strategy. Depreciation and amortization as a percentage of net sales decreased to 7.3% in 2021 compared to 7.5% in the prior year.

Table of Contents

RESTRUCTURING INITIATIVES

In late 2017, we began a business transformation plan to drive profitable sales growth, increase operational excellence, enhance our approach to innovation and improve organizational effectiveness. The primary focus of the plan is the Beauty + Home segment; however, certain global general and administrative functions have also been addressed. Restructuring costs related to this plan for the years ended December 31, 2021 and 2020 are as follows:

As of the end of 2021, we have successfully completed the vast majority of our planned initiatives related to our transformation plan, including implementing new commercial strategies, reducing costs and adding capabilities in Asia and in fast growing application fields that we believe will position the segment for future growth and profitability. However, the COVID-19 global pandemic resulted in a significant decline in our beauty business. While our Beauty + Home segment continues to be profitable, the disruption caused by the pandemic, including higher operating costs, have more than offset any expected growth in earnings from our transformation. Although we believe the beauty market remains a long-term attractive growth market and we remain committed to completing our transformation initiatives, we expect the return to growth to be gradual and non-linear as this market is highly correlated to the return to post-pandemic normal consumer behavior, including travel, which has proven to be sporadic and uncertain. The cumulative expense incurred for this transformation plan is approximately $136 million. We also made capital investments of approximately $50 million related to this plan. We do not expect to incur additional restructuring expense or have additional significant cash outflows related to our transformation plan in 2022.

OPERATING INCOME

Reported operating income increased approximately $7.9 million or 2% to $347.3 million in 2021 compared to $339.5 million in 2020. Excluding changes in foreign currency rates, operating income decreased by approximately $3.9 million in 2021 compared to 2020. The majority of this decrease is due to changing segment sales mix along with significantly higher input costs, including both materials and labor, related to the current inflationary environment. Operating income as a percentage of net sales decreased to 10.8% in 2021 compared to 11.6% for the prior year.

NET OTHER EXPENSE

Net other expense decreased $12.7 million in 2021 to $25.7 million compared to $38.3 million in 2020. We recorded a $2.0 million realized gain and a $2.7 million unrealized gain on our investment in PureCycle Technologies (“PureCycle” or "PCT") during 2021. As discussed in Note 20 - Investment in Equity Securities of the Consolidated Financial Statements, our investment in PureCycle was converted into shares of PCT, a publicly traded entity, during the first quarter of 2021. This investment is now recorded at fair value based on observable market prices for identical assets and the change in fair value is recorded as a net investment gain or loss in the Consolidated Statements of Income. We believe that unrealized cost investment gains and losses from changes in market prices are not considered relevant to understanding our reported consolidated earnings or evaluating our periodic economic performance and are removed when reporting Adjusted EBITDA below. Other than the investment gain in PCT, we benefited from $5.7 million of lower net interest expenses due to lower interest rates and a lower average outstanding debt balance during 2021. We also recorded $1.8 million of interest income related to a Brazilian value added tax adjustment as discussed in Note 13-Commitments and Contingencies within the Notes to Consolidated Financial Statements. Miscellaneous expense also improved as a net favorable impact on foreign currency contracts more than compensated for higher pension costs related to the decline in discount rates.

PROVISION FOR INCOME TAXES

The reported effective tax rate on income before income taxes for 2021 and 2020 was 24.3% and 28.9%, respectively. The tax rate for 2021 was lower compared to 2020 due primarily to excess tax benefits on deductible stock-based compensation. The 2021 tax rate was lower also due to a more favorable mix of earnings, including a tax rate reduction in France.

At December 31, 2021, we continue to assert permanent reinvestment of foreign earnings from Aptar's foreign operations. Therefore, we do not have a balance of foreign earnings that will be subject to U.S. tax upon repatriation under the currently enacted U.S. tax laws. We continually analyze our global working capital requirements as well as local country operation needs. We estimate that if the non-U.S. subsidiaries were to make a distribution of their cash or distributable reserves to the U.S., we would incur local country withholding tax and income taxes in the range of $15 million to $25 million. We would recognize such tax expense in our Consolidated Statements of Income and Consolidated Balance Sheets should we change the current permanent reinvestment assertion on foreign earnings.

Table of Contents

NET INCOME ATTRIBUTABLE TO APTARGROUP, INC.

We reported net income of $244.1 million in 2021 compared to $214.0 million reported in 2020.

(1)Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring initiatives, acquisition-related costs, net unrealized investment gains and losses related to observable market price changes on equity securities and other special items. Adjusted EBITDA margins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation under "Non-U.S. GAAP Measures."

Reported net sales increased approximately 5% in 2021 to $1.28 billion compared to $1.23 billion in 2020. Changes in currencies positively affected net sales by 3%. The impact of our Voluntis and Hengyu acquisitions was immaterial to our segment's full year results. Therefore, core sales increased 2% in 2021 compared to the prior year. Core sales of our products to the injectables market increased 16% due to continued strong demand for our vaccine components. Sales of our active material science solutions grew 12% on increased demand for our diagnostics and probiotics products. We also experienced increased demand for our Activ-Film™ technology used to enhance the integrity of certain diagnostic tests including at-home COVID-19 test kits. Core sales of our products to the consumer health care market increased 4% as strong revenue from our eye care customers more than compensated for softness for most of the year in the nasal saline and decongestant markets. Core sales of our products to the prescription drug market decreased 8% as fewer non-critical doctor visits and lower incidence of cold and flu illnesses this year have resulted in certain Pharma customers drawing down inventory as sectors such as allergic rhinitis are impacted by low levels of patient consumption.

(1)Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.

Adjusted EBITDA for 2021 decreased to $425.7 million compared to $428.5 million in 2020. While we reported strong product growth in our injectables and active material science solutions markets, lower sales in certain of our higher-margin prescription products drove our Adjusted EBITDA margins lower during 2021. We were also impacted by the inflationary environment discussed above as higher input costs negatively impacted our margins.

(1)Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring initiatives, acquisition-related costs, net unrealized investment gains and losses related to observable market price changes on equity securities and other special items. Adjusted EBITDA margins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation under "Non-U.S. GAAP Measures".

Table of Contents

Reported net sales increased approximately 10% in 2021 to $1.43 billion compared to $1.30 billion in 2020. Changes in currency rates positively impacted net sales by 2% while our acquisition of Fusion positively impacted sales by 1% in 2021. Therefore, core sales increased 7% in 2021 compared to the prior year. Approximately 4% of this core sales growth came from pass-through of higher input cost while the remaining amount is due to increased volumes, as sales for many of our products continued to gradually recover from the COVID-19 pandemic. Core sales of our products to the beauty market increased 11% during 2021 as we experienced an increase in demand for both fragrance and skin care products. Personal care core sales increased 3% as higher sales of our hair care and body care products more than offset the lower demand for our hand sanitizer dispensing solutions. Core sales to the home care markets increased 6% on strong demand for our dish care products.

(1)Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.

Adjusted EBITDA for 2021 increased to $154.7 million from $129.3 million in 2020. As discussed above, increases in product sales volumes drove the majority of our Adjusted EBITDA growth in 2021. Inflationary increases negatively impacted our current year results and margins as resin price pass throughs and other general price increases were not enough to offset the full effect of rising material and labor costs. However, we were further able to compensate for this impact with improved operational performance during 2021.

(1)Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring initiatives, acquisition-related costs, net unrealized investment gains and losses related to observable market price changes on equity securities and other special items. Adjusted EBITDA margins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation under "Non-U.S. GAAP Measures".

Reported net sales increased approximately 25% in 2021 to $508.6 million compared to $405.4 million in 2020. Changes in currency rates positively impacted net sales by 2%. Therefore, core sales increased 23% in 2021 compared to the prior year. Strong product and tooling sales, along with the pass-through of higher material costs, positively impacted 2021 sales. Approximately 14% of the core sales increase is due to passing through higher resin and other input costs. Core sales to the food market increased 21% while core sales to the beverage market increased 29% during 2021 compared to the prior year. For the food markets, we realized strong growth in several product applications including sauces and condiments, dairy and granulars/powders as consumers continued to cook at home. The beverage market also reported growth as sales of our premium single-serve bottled water and on-the-go functional drink products continued to recover from the lower COVID-19 pandemic levels last year.

(1)Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.

Adjusted EBITDA for 2021 increased to $79.4 million compared to $72.0 million in 2020. Higher product and tooling sales discussed above more than compensated for the impact of increasing input costs and higher compensation costs. While we maintain our normal pass-through of resin prices and have implemented general price increases to offset other cost increases, there is no margin on these pass-throughs which negatively impacts our Adjusted EBITDA margins.

Table of Contents

CORPORATE & OTHER

In addition to our three reporting segments, Aptar assigns certain costs to “Corporate & Other,” which is presented separately in Note 18 — Segment Information of the Notes to the Consolidated Financial Statements. For Corporate & Other, Adjusted EBITDA (which excludes net interest, taxes, depreciation, amortization, restructuring initiatives, acquisition-related costs, net unrealized investment gains and losses related to observable market price changes on equity securities and other special items) primarily includes certain professional fees, compensation and information system costs which are not allocated directly to our reporting segments.

Corporate & Other expenses in 2021 increased to $52.3 million compared to $43.4 million in 2020. Approximately $2.1 million of this increase is due to higher foreign exchange rates during 2021. The majority of the remaining increase relates to higher compensation costs and higher professional fees during 2021 compared to the prior year. Our 2021 Adjusted EBITDA includes a $2.0 million realized gain on sales of PCT shares, while our 2020 results include a $3.1 million gain on our PureCycle investment prior to it being converted into shares of PCT. As noted above, any unrealized investment gains or losses are removed from our Adjusted EBITDA calculation as we believe that unrealized cost investment gains and losses from changes in market prices are not considered relevant to understanding our reported consolidated earnings or evaluating our periodic economic performance.

NON-U.S. GAAP MEASURES

In addition to the information presented herein that conforms to U.S. GAAP, we also present financial information that does not conform to U.S. GAAP, which are referred to as non-U.S. GAAP financial measures. Management may assess our financial results both on a U.S. GAAP basis and on a non-U.S. GAAP basis. We believe it is useful to present these non-U.S. GAAP financial measures because they allow for a better period-over-period comparison of operating results by removing the impact of items that, in management’s view, do not reflect our core operating performance. These non-U.S. GAAP financial measures should not be considered in isolation or as a substitute for U.S. GAAP financial results, but should be read in conjunction with the audited consolidated statements of income and other information presented herein. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures. Further, investors are urged to review and consider carefully the adjustments made by management to the most directly comparable U.S. GAAP financial measure to arrive at these non-U.S. GAAP financial measures.

In our Management's Discussion and Analysis, we exclude the impact of foreign currency translation when presenting net sales and other information, which we define as “constant currency.” Changes in net sales excluding the impact of foreign currency translation is a non-U.S. GAAP financial measure. As a worldwide business, it is important that we take into account the effects of foreign currency translation when we view our results and plan our strategies. Consequently, when our management looks at our financial results to measure the core performance of our business, we exclude the impact of foreign currency translation by translating our prior period results at current period foreign currency exchange rates. As a result, our management believes that these presentations are useful internally and may be useful to investors. We also exclude the impact of material acquisitions when comparing results to prior periods. Changes in operating results excluding the impact of acquisitions are non-U.S. GAAP financial measures. We believe it is important to exclude the impact of acquisitions on period over period results in order to evaluate performance on a more comparable basis.

We present earnings before net interest and taxes (“EBIT”) and earnings before net interest, taxes, depreciation and amortization (“EBITDA”). We also present our adjusted earnings before net interest and taxes (“Adjusted EBIT”) and adjusted earnings before net interest, taxes, depreciation and amortization (“Adjusted EBITDA”), both of which exclude the business transformation charges (restructuring initiatives), acquisition-related costs, purchase accounting adjustments related to acquisitions and investments and net unrealized investment gains and losses related to observable market price changes on equity securities. Our Operations Outlook is also provided on a non-U.S. GAAP basis because certain reconciling items are dependent on future events that either cannot be controlled, such as tax and exchange rates, or reliably predicted because they are not part of our routine activities, such as restructuring initiatives and acquisition-related costs.

We provide a reconciliation of Net Debt to Net Capital as a non-U.S. GAAP measure. "Net Debt" is calculated as interest bearing debt less cash and equivalents and short-term investments while "Net Capital" is calculated as stockholders' equity plus Net Debt. Net Debt to Net Capital measures a company’s financial leverage, which gives users an idea of a company's financial structure, or how it is financing its operations, along with insight into its financial strength. We believe that it is meaningful to take into consideration the balance of our cash, cash equivalents and short-term investments when evaluating our leverage. If needed, such assets could be used to reduce our gross debt position.

Finally, we provide a reconciliation of free cash flow as a non-U.S. GAAP measure. Free cash flow is calculated as cash provided by operating activities less capital expenditures plus proceeds from government grants related to capital expenditures. We use free cash flow to measure cash flow generated by operations that is available for dividends, share repurchases, acquisitions and debt repayment. We believe that it is meaningful to investors in evaluating our financial performance and measuring our ability to generate cash internally to fund our initiatives.

Table of Contents

(1)Net unrealized investment gain represents the change in fair value of our investment in PCT (see Note 20 - Investment in Equity Securities for further details).

Table of Contents

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

Given our current low level of leverage relative to others in our industry and our ability to generate strong levels of cash flow from operations, we believe we are in a strong financial position and have the financial resources to meet our business requirements in the foreseeable future. We have historically used cash flow from operations, our revolving credit facilities, proceeds from stock options and debt, as needed, as our primary sources of liquidity. Our primary uses of liquidity are to invest in equipment and facilities that are necessary to support our growth, pay quarterly dividends to stockholders and to make acquisitions that will contribute to the achievement of our strategic objectives. Due to uncertainty amid the COVID-19 pandemic, in the event that customer demand decreases significantly for a prolonged period of time and adversely impacts our cash flows from operations, we would have the ability to restrict and significantly reduce capital expenditure levels as well as evaluate our acquisition strategy. A prolonged and significant reduction in capital expenditure levels could increase future repairs and maintenance costs as well as have a negative impact on operating margins if we were unable to invest in new innovative products.

Cash and equivalents decreased to $122.9 million at December 31, 2021 from $300.1 million at December 31, 2020 while total short and long-term interest bearing debt of $1.20 billion at December 31, 2021 increased from $1.17 billion at December 31, 2020. The use of cash and increase in debt was primarily to fund our acquisitions and return cash to stockholders in the form of dividends and share repurchases. The ratio of our Net Debt (interest bearing debt less cash and cash equivalents) to Net Capital (stockholders’ equity plus Net Debt) increased to 35.1% at December 31, 2021 compared to 32.0% at December 31, 2020. See the reconciliation under "Non-U.S. GAAP Measures".

In 2021, our operations provided approximately $363.4 million in cash flow compared to $570.2 million in 2020. Cash flow from operations was primarily derived from earnings before depreciation and amortization. The decrease in 2021 cash flow from operations compared to 2020 is primarily attributable to an increase in working capital driven by our sales growth along with pricing increases related to the passing through of higher resin and other input costs as well as increased inventory due to inflation. We believe that our 2022 operating cash flow will be more than sufficient to fund our working capital needs, scheduled repayments of debt and outstanding purchase commitments as discussed in Note 13 - Commitments and Contingencies and lease arrangements as discussed in Note 8 - Lease Commitments.

We used $457.2 million in cash for investing activities during 2021 compared to $452.0 million during 2020. The higher cash utilization in 2021 compared to 2020 is mainly due to a $62.0 million increase in capital expenditures, partially offset by a $15.8 million decrease related to acquisitions and a $32.8 million decrease for investment in equity securities. During 2021, approximately $89.7 million and $53.8 million of cash was utilized to fund the Voluntis and Hengyu acquisitions, respectively, while in 2020, $162.7 million of cash was utilized to fund the Fusion acquisition. Additionally, in 2021 we invested $6.9 million in equity securities while in 2020 we invested $32.0 million in our 49% equity interest of BTY, $5.0 million in our 30% equity interest of Sonmol and $1.4 million in our Loop and PureCycle preferred equity investments. In 2022, we expect our capital investments to be in the range of $300 million to $330 million.

Financing activities utilized $81.5 million of cash during 2021, compared to $73.7 million during 2020, mainly due to an increase of returns to stockholders not fully offset by additional borrowings. In 2021, we paid $98.5 million in dividends to stockholders and repaid $68.8 million of long-term debt, while in 2020, we paid $92.7 million of dividends to stockholders and repaid $64.7 million of long-term debt and $14.0 million of net notes payable. Additionally, contributing to our higher utilization of financing activities in 2021 compared to 2020 was the repurchase of $78.1 million of common stock that was placed into treasury during 2021 while no treasury shares were repurchased during 2020. Finally, we received net proceeds from stock option exercises of $59.9 million and net proceeds from our revolving credit facility of $92.9 million in 2021 compared to net proceeds from stock option exercises of $68.5 million and net proceeds from our revolving credit facility of $27.0 million in 2020. In 2022, we expect to have financing cash outlays of approximately $283.0 million to fund short- and long-term debt obligations present as of December 31, 2021 as they come due as discussed in Note 7 - Debt, which will be covered by cash on hand or additional borrowings on our revolving credit facility.

Refer to Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for additional information regarding cash flows for the year ended December 31, 2020 as compared to the year ended December 31, 2019.

Table of Contents

On June 30, 2021, we entered into an amended and restated multi-currency revolving credit facility (the "revolving credit facility") to replace the existing facility (the "prior credit facility") maturing July 2022 and to amend and restate the unsecured term loan facility extended to our wholly-owned UK subsidiary under the prior credit facility (as amended, the "amended term facility"). The revolving credit facility matures in June 2026, subject to a maximum of two one-year extensions in certain circumstances, and provides for unsecured financing of up to $600 million available in the U.S. and to our wholly-owned UK subsidiary. The amended term facility matures in July 2022. The revolving credit facility can be drawn in various currencies including USD, EUR, GBP and CHF to the equivalent of $600 million, which may be increased by up to $300 million subject to the satisfaction of certain conditions. Each borrowing under the revolving credit facility will bear interest at rates based on LIBOR (in the case of USD), EURIBOR (in the case of EUR), SONIA (in the case of GBP), SARON (in the case of CHF), prime rates or other similar rates, in each case plus an applicable margin. The revolving credit facility provides mechanics relating to a transition away from LIBOR (in the case of USD) and the designated benchmark rates for other available currencies and the replacement of any such applicable benchmark by a replacement alternative benchmark rate or mechanism for loans made in the applicable currency. A facility fee on the total amount of the revolving credit facility is also payable quarterly, regardless of usage. The applicable margins for borrowings under the revolving credit facility and the facility fee percentage may change from time to time depending on changes in our consolidated leverage ratio. As of December 31, 2021, $133 million was utilized under the revolving credit facility in the U.S., €10 million (approximately $11.4 million) was utilized by our wholly-owned UK subsidiary and $56 million remained outstanding under the amended term facility. As of December 31, 2020, under our prior credit facility, we utilized $52 million under our U.S. revolving facility and no balance was utilized under our euro-based revolving credit facility. Credit facility balances are included in notes payable, revolving credit facility and overdrafts on the Consolidated Balance Sheets.

Our revolving credit facility and certain long-term obligations require us to satisfy certain financial and other covenants including:

(1)Definitions of ratios are included as part of the revolving credit facility agreement.

Based upon the above consolidated leverage ratio covenant, we would have the ability to borrow approximately an additional $1.0 billion before the 3.50 to 1.00 maximum ratio requirement would be exceeded.

In addition, in October 2020, we entered into an unsecured money market borrowing arrangement to provide short term financing of up to $30 million that is available in the U.S. No borrowing on this facility is permitted over a quarter end date. As such, no balance was utilized under this arrangement as of December 31, 2021.

Our foreign operations have historically met cash requirements with the use of internally generated cash or uncommitted short-term borrowings. We also have committed financing arrangements in both the U.S. and the UK as detailed above. We manage our global cash requirements considering (i) available funds among the many subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances.

We facilitate a supply chain finance program ("SCF") across Europe and the U.S. that is administered by a third-party platform. Eligible suppliers can elect to receive early payment of invoices, less an interest deduction, and negotiate their receivable sales arrangements through the third-party platform on behalf of the respective SCF bank. We are not a party to those agreements, and the terms of our payment obligations are not impacted by a supplier's participation in the SCF. Accordingly, we have concluded that this program continues to be a trade payable program and is not indicative of a borrowing arrangement.

All outstanding amounts related to suppliers participating in the SCF are recorded within Accounts payable, accrued and other liabilities in our Consolidated Balance Sheets, and associated payments are included in operating activities within our Consolidated Statements of Cash Flows. As of December 31, 2021 and 2020, the amounts due to suppliers participating in the SCF and included in Accounts payable, accrued and other liabilities were approximately $30 million and $23 million, respectively.

Collection and payment periods tend to be longer for our operations located outside the United States due to local business practices. We have also seen an increasing trend in pressure from certain customers to lengthen their payment terms. As the majority of our products are made to order, we have not needed to keep significant amounts of finished goods inventory to meet customer requirements. However, some of our contracts specify an amount of finished goods safety stock we are required to maintain.

To the extent our financial position allows and there is a clear financial benefit, we from time-to-time benefit from early payment discounts with some suppliers. We are also lengthening the payment terms with our suppliers to be in line with customer trends. While we have offered third party alternatives for our suppliers to receive payments sooner, we generally do not utilize these offerings from our customers as the economic conditions currently are not beneficial for us.

Table of Contents

RECENTLY ISSUED ACCOUNTING STANDARDS

We have reviewed the recently issued accounting standards updates to FASB’s Accounting Standards Codification that have future effective dates. Standards which are effective for 2021 are discussed in Note 1 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments to this update apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 was further amended in January 2021 by ASU 2021-01 which clarified the applicability of certain provisions. Both standards are effective upon issuance and can be adopted any time prior to December 31, 2022. The guidance in ASU 2020-04 and ASU 2021-01 is optional and may be elected over time as reference rate reform activities occur. As of December 31, 2021, we have amended the revolving credit facility to provide mechanics relating to a transition away from LIBOR (in the case of USD) and the designated benchmark rates for other available currencies and the replacement of any such applicable benchmark by a replacement alternative benchmark rate or mechanism for loans made in the applicable currency. We are evaluating any further impact this standard may have on our Consolidated Financial Statements and anticipate no further significant impacts.

Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our Consolidated Financial Statements upon adoption.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, pensions and contingencies. We base our estimates on historical experience and on a variety of other assumptions believed to be reasonable in order to make judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in preparation of our Consolidated Financial Statements. Management has discussed the development and selection of these critical accounting estimates with the audit committee of our Board of Directors and the audit committee has reviewed our disclosure relating to it in this MD&A.

IMPAIRMENT OF GOODWILL

In accordance with current accounting standards, goodwill has an indefinite life and is not amortized. We evaluate our goodwill for impairment at the reporting unit level on an annual basis, or whenever indicators of impairment exist. We have determined that our Beauty + Home and Food + Beverage business segments represent reporting units. In addition to the Pharma business reporting unit, the injectables and active material science solutions divisions of the Pharma segment qualify as separate reporting units for goodwill impairment testing apart from the remaining Pharma business. As of December 31, 2021, we have $974.2 million of goodwill, which is allocated as follows:

We believe that the accounting estimates related to determining the fair value of our reporting units is a critical accounting estimate because: (1) it is highly susceptible to change from period to period as it requires management to make assumptions about the future cash flows for each reporting unit over several years, and (2) the impact that recognizing an impairment would have on the assets reported on our balance sheet as well as our results of operations could be material. Management’s determination of the fair value of our reporting units, based on future cash flows for the reporting units, requires significant judgment and the use of estimates and assumptions related to projected revenue growth rates, the terminal growth factor, as well as the discount rate. Actual cash flows in the future may differ significantly from those forecasted today. The estimates and assumptions for future cash flows and their impact on the impairment testing of goodwill is a critical accounting estimate.

Table of Contents

For our goodwill impairment assessment, we first consider qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (greater than 50 percent chance) that the fair value of a reporting unit is less than its carrying amount (the “step zero” approach). Such qualitative factors may include the following: macroeconomic conditions; industry and market considerations; cost factors; overall financial performance, and other relevant entity-specific events. In the absence of sufficient qualitative factors, if it is determined that the fair value of a reporting unit is below its carrying amount, where necessary, goodwill will be impaired at that time.

Based on our qualitative assessment of macroeconomic, industry, and market events and circumstances as well as the overall financial performance of the reporting units, we determined it was more likely than not that the fair value of these reporting units was greater than their carrying amounts and therefore no impairment of goodwill was recognized during the year ended December 31, 2021.

INCOME TAXES

We recognize tax benefits from uncertain tax positions if it more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater-than-50% likelihood of being realized upon ultimate settlement. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of U.S. GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with management's expectations could have a material impact on our financial condition and operating results.

At December 31, 2021 and 2020, we had $130.2 million and $124.8 million, respectively, of deferred tax assets net of valuation allowance on our balance sheet, a significant portion of which is related to net operating losses and other tax attribute carryforwards. The ultimate realization of these deferred tax assets is dependent upon the amount, source, and timing of future taxable income. In cases where we believe it is more likely than not that we may not realize the future potential tax benefits, we establish a valuation allowance against the deferred tax assets.

ACQUISITIONS

We account for business combinations using the acquisition method, which requires management to estimate the fair value of identifiable assets acquired and liabilities assumed, and to properly allocate purchase price consideration to the individual assets acquired and liabilities assumed. Goodwill is measured as the excess amount of consideration transferred, compared to fair value of the assets acquired and the liabilities assumed. The allocation of the purchase price utilizes significant estimates and assumptions in determining the fair values of identifiable assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset and are reviewed by consulting with outside valuation experts. The purchase price allocation for business acquisitions contains uncertainties because it requires management's judgment.

Management applied judgment in determining the fair value of the acquired assets with respect to the acquisitions of Voluntis, Hengyu and Fusion, including the fair values of acquired intangibles including acquired technology and customer relationships. The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated life of the assets, can materially impact net income in periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. In particular, judgment was applied with respect to determining the fair value of acquired technology and customer relationships intangible assets, which involved the use of significant estimates and assumptions with respect to the timing and amounts of cash flow projections, the revenue growth rates, the customer attrition rates, the technology obsolescence rate, the EBITDA margins and the discount rate.

VALUATION OF PENSION BENEFITS

The benefit obligations and net periodic pension cost associated with our domestic and foreign noncontributory pension plans are determined using actuarial assumptions. Such assumptions include discount rates to reflect the time value of money, rate of employee compensation increases, demographic assumptions to determine the probability and timing of benefit payments, and the long-term rate of return on plan assets. The actuarial assumptions are based upon management’s best estimates, after consulting with outside investment advisors and actuaries. Because assumptions and estimates are used, actual results could differ from expected results.

The discount rate is utilized principally in calculating our pension obligations, which are represented by the Accumulated Benefit Obligation ("ABO") and the Projected Benefit Obligation (“PBO”), and in calculating net periodic benefit cost. In establishing the discount rate for our foreign plans, we review a number of relevant interest rates including AA corporate bond yields. In establishing the discount rate for our domestic plans, we match the hypothetical duration of our plans, using a weighted average duration that is based upon projected cash payments, to a simulated bond portfolio (FTSE Pension Index Curve). At December 31, 2021, the discount rates for our domestic and foreign plans were 2.75% and 1.09%, respectively.

Table of Contents

We believe that the accounting estimates related to determining the valuation of pension benefits are critical accounting estimates because: (1) changes in them can materially affect net income and (2) we are required to establish the discount rate and the expected return on fund assets, which are highly uncertain and require judgment. The estimates for the valuation of pension benefits are critical accounting estimates for all of our segments.

To the extent the discount rates increase (or decrease), our PBO and net periodic benefit cost will decrease (or increase) accordingly. The estimated effect of a 1% decrease in each discount rate would be a $77.8 million increase in the PBO ($61.2 million for the domestic plans and $16.6 million for the foreign plans) and a $12.0 million increase in net periodic benefit cost ($10.6 million for the domestic plans and $1.4 million for the foreign plans). To the extent the PBO increases, the after-tax effect of such increase could reduce Other Comprehensive Income and Stockholders’ Equity. The estimated effect of a 1% increase in each discount rate would be a $60.3 million decrease in the PBO ($46.6 million for the domestic plans and $13.7 million for the foreign plans) and a $9.4 million decrease in net periodic benefit cost ($8.2 million for the domestic plans and $1.2 million for the foreign plans).

The assumed expected long-term rate of return on assets is the average rate of earnings expected on the funds invested to provide for the benefits included in the PBO. Of domestic plan assets, approximately 48% was invested in equities, 27% was invested in fixed income securities, 11% was invested in hedge funds, 8% was invested in infrastructure securities, 5% was invested in real estate securities and 1% was invested in money market funds, at December 31, 2021. Of foreign plan assets, approximately 90% was invested in investment funds, 6% was invested in equity securities, 2% was invested in corporate securities, 1% was invested in fixed income securities and 1% was invested in money market funds at December 31, 2021.

The expected long-term rate of return assumptions are determined based on our investment policy combined with expected risk premiums of equities and fixed income securities over the underlying risk-free rate. This rate is utilized principally in calculating the expected return on the plan assets component of the net periodic benefit cost. To the extent the actual rate of return on assets realized over the course of a year is greater or less than the assumed rate, that year’s net periodic benefit cost is not affected. Rather, this gain (or loss) reduces (or increases) future net periodic benefit cost over a period of approximately 15 to 20 years. To the extent the expected long-term rate of return on assets increases (or decreases), our net periodic benefit cost will decrease (or increase) accordingly. The estimated effect of a 1% decrease (or increase) in each expected long-term rate of return on assets would be a $2.6 million increase (or decrease) in net periodic benefit cost.

The average rate of compensation increase is utilized principally in calculating the PBO and the net periodic benefit cost. The estimated effect of a 0.5% decrease in each rate of expected compensation increase would be a $7.8 million decrease in the PBO ($1.9 million for the domestic plans and $5.9 million for the foreign plans) and a $1.4 million decrease to the net periodic benefit cost. The estimated effect of a 0.5% increase in each rate of expected compensation increase would be a $7.5 million increase in the PBO ($2.0 million for the domestic plans and $5.5 million for the foreign plans) and a $1.5 million increase to the net periodic benefit cost.

Our primary pension related assumptions as of December 31, 2021 and 2020 were as follows:

In order to determine the 2022 net periodic benefit cost, we expect to use the discount rates, expected long-term rates of return on plan assets and rates of compensation assumptions as of December 31, 2021. The estimated impact of the changes to the assumptions as noted in the table above on our 2022 net periodic benefit cost is expected to be a decrease of approximately $4.5 million.

OPERATIONS OUTLOOK

Looking to the first quarter, we expect solid growth in our Pharma segment. The prescription division is expected to report growth in the allergy category as we see signs of the destocking ending across most accounts. Our beauty and beverage businesses are showing signs of recovery. Other COVID-19 variants may impact the pace of these recoveries and supply chain disruptions are expected to continue in the near term, impacting certain customers in both Beauty + Home and Food + Beverage segments.

Table of Contents

Aptar expects earnings per share for the first quarter of 2022, excluding any restructuring expenses, changes in the fair value of equity investments and acquisition-related costs to be in the range of $0.92 to $1.00 and this guidance is based on an effective tax rate range of 27% to 29%.

FORWARD-LOOKING STATEMENTS

Certain statements in MD&A and other sections of this Form 10-K are forward-looking and involve a number of risks and uncertainties, including certain statements set forth in the Significant Developments, Restructuring Initiatives, Liquidity and Capital Resources, Contingencies and Operations Outlook sections of this Form 10-K. Words such as “expects,” “anticipates,” “believes,” “estimates,” “future”, “potential”, "are optimistic" and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to identify such forward-looking statements. Forward-looking statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are based on our beliefs as well as assumptions made by and information currently available to us. Accordingly, our actual results or other events may differ materially from those expressed or implied in such forward-looking statements due to known or unknown risks and uncertainties that exist in our operations and business environment, including but not limited to:

•the impact of COVID-19 and its variants on our global supply chain and our global customers, employees and operations, which has elevated and will continue to elevate many of the risks and uncertainties discussed below;

•economic conditions worldwide, including potential deflationary or inflationary conditions in regions we rely on for growth;

•the availability of direct labor workers and the increase in direct labor costs, especially in North America;

•our ability to preserve organizational culture and maintain employee productivity in the work-from-home environment caused by the current pandemic;

•the availability of raw materials and components (particularly from sole sourced suppliers) as well as the financial viability of these suppliers;

•fluctuations in the cost of materials, components, transportation cost as a result of supply chain disruptions and labor shortages, and other input costs (particularly resin, metal, anodization costs and energy costs);

•political conditions worldwide;

•significant fluctuations in foreign currency exchange rates or our effective tax rate;

•the impact of tax reform legislation, changes in tax rates and other tax-related events or transactions that could impact our effective tax rate;

•financial conditions of customers and suppliers;

•consolidations within our customer or supplier bases;

•changes in customer and/or consumer spending levels;

•loss of one or more key accounts;

•our ability to successfully implement facility expansions and new facility projects;

•our ability to offset inflationary impacts with cost containment, productivity initiatives or price increases;

•changes in capital availability or cost, including interest rate fluctuations;

•volatility of global credit markets;

•our ability to identify potential new acquisitions and to successfully acquire and integrate such operations, including the successful integration of the businesses we have acquired, including contingent consideration valuation;

•our ability to build out acquired businesses and integrate the product/service offerings of the acquired entities into our existing product/service portfolio;

•direct or indirect consequences of acts of war, terrorism or social unrest;

•cybersecurity threats that could impact our networks and reporting systems;

•the impact of natural disasters and other weather-related occurrences;

•fiscal and monetary policies and other regulations;

•changes or difficulties in complying with government regulation;

•changing regulations or market conditions regarding environmental sustainability;

•work stoppages due to labor disputes;

•competition, including technological advances;

•our ability to protect and defend our intellectual property rights, as well as litigation involving intellectual property rights;

•the outcome of any legal proceeding that has been or may be instituted against us and others;

•our ability to meet future cash flow estimates to support our goodwill impairment testing;

•the demand for existing and new products;

•the success of our customers’ products, particularly in the pharmaceutical industry;

•our ability to manage worldwide customer launches of complex technical products, particularly in developing markets;

•difficulties in product development and uncertainties related to the timing or outcome of product development;

•significant product liability claims; and

•other risks associated with our operations.

Table of Contents

Although we believe that our forward-looking statements are based on reasonable assumptions, there can be no assurance that actual results, performance or achievements will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Please refer to Part 1, Item 1A - Risk Factors included in this Form 10-K for additional risk factors affecting the Company.