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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. MD&A is presented in eight sections: Overview, Results of Operations, Liquidity and Capital Resources, Off-Balance Sheet Arrangements, Overview of Contractual Obligations, 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 innovative drug delivery and consumer product dispensing, sealing, active packaging solutions and services for the prescription drug, consumer health care, injectables, active packaging, beauty, personal care, home care, food and beverage markets. We use insights, design, engineering and science to create dosing, dispensing, and protective packaging technologies for many of the world's leading brands, in turn, making a meaningful difference in the lives, looks, health and homes of people 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" starting on page24.

For the year ended December 31, 2020, reported sales increased 2% to $2.93 billion from $2.86 billion a year ago. Core sales, excluding the positive impact from changes in currency exchange rates and acquisition effects, were in line with the prior year. A reconciliation of core sales growth to reported net sales growth, the most directly comparable U.S. GAAP measure, can be found on page20. During 2020, strong top line growth in our Pharma segment compensated for lower sales to the beauty market in our Beauty + Home segment and the beverage market in our Food + Beverage segment which were significantly impacted by the COIVD-19 pandemic. However, along with lower sales related to COVID-19, our facilities remained open and were temporarily impacted by additional costs, inefficiencies and under-absorption in our manufacturing processes which negatively impacted our profitability during the year.

2020 HIGHLIGHTS

•Diversified business drove performance throughout the pandemic with considerable improvement in the second half of the year

•Reported sales growth of 2% with core sales equal to the prior year

•Reported earnings per share of $3.21 (a decrease of 12% compared to the prior year)

•Adjusted earnings per share of $3.64 (a decrease of 9% compared to the prior year when neutralizing currency effects)

•Earnings were negatively impacted by the effects of the global pandemic on the beauty and beverage markets

•Record cash flow from operations of $570 million (an increase of 11% compared to the prior year)

•Record free cash flow of $324 million (an increase of 19% compared to the prior year)

•Achieved our 27th consecutive year of increasing our aggregate annual dividend amount, returning $93 million to shareholders

•Acquired Fusion, a leader in high quality, prestige airless and color cosmetics packaging, and conception-to-launch turnkey solutions for the North American beauty market

•Expanded our portfolio of digital health offerings through a partnership with Sonmol, the acquisition of the assets of Cohero Health, and the launch of a connected inhaler program for respiratory diseases in India with Lupin Limited

•Furthered our ESG commitments and received additional recognition (Newsweek’s Most Responsible Companies, Barron's Most Sustainable Companies, CDP's A List Company and Supplier Engagement leader, ISS ESG Prime Status, EcoVadis Gold)

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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 Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for additional information regarding Results of Operations for the year ended December 31, 2019 as compared to the year ended December 31, 2018. Certain previously reported amounts have been reclassified to conform to the current period presentation:

Amount inThousands $ % ofNet Sales Amount in Thousands $ % ofNet Sales

Effective tax rate 28.9 % 29.2 %

Adjusted EBITDA margin (1) 20.0 % 20.7 %

(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, financial results and operations were adversely impacted by the COVID-19 pandemic. The significance of the impacts to our segments are discussed herein and include, but are not limited to, the adverse impact on sales of our products to certain applications such as our beauty products sold via duty free travel and retail stores and a reduction of our products used for on-the-go beverage applications.

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 remained operational during the year. 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 2021 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 effectiveness of a vaccine, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties. Incremental operating costs related to heightened cleaning and sanitizing procedures at our factories, personal protective equipment for our employees and temporary labor costs necessary to address absenteeism, among others have been and will continue to be necessary as the pandemic continues in the near-term. No impairments were recorded as of December 31, 2020 related to the COVID-19 pandemic. See Part I, Item 1A, “Risk Factors,” included in this report for information on material risks associated with COVID-19.

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NETSALES

For the year ended December 31, 2020, reported net sales increased 2% to $2.93 billion from $2.86 billion a year ago. Strong sales growth in certain markets were offset by changes in currency exchange rates, passing-through lower resin costs to customers and COVID-19 related effects on other markets we serve. While the average U.S. dollar exchange rate weakened compared to the euro and other European currencies, it strengthened compared to most of our other major operating currencies, resulting in a negative currency translation impact of 1%. The acquisitions of Gateway, Nanopharm, Noble and Fusion positively impacted sales by 3%. Therefore, core sales, which excludes acquisitions and changes in foreign currency rates, for 2020 were in line with 2019. While our Pharma segment reported strong product sales growth during 2020, both our Beauty + Home and Food + Beverage segments were impacted by the COVID-19 pandemic and the negative impact of passing through lower resin costs to our customers.

Year Ended December 31, 2020 Pharma Beauty+Home Food +Beverage Total

Core Sales Growth 9 % (7) % (1) % — %

Acquisitions 2 % 4 % — % 3 %

Currency Effects (1) 1 % (1) % (2) % (1) %

Total Reported Net Sales Growth 12 % (4) % (3) % 2 %

(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:

Years Ended December 31, 2020 % of Total 2019 % of Total

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

Our cost of sales (“COS”) as a percent of net sales decreased to 62.9% in 2020 compared to 63.6% in 2019. Our COS percentage was positively impacted by our mix of business as we reported sales growth in our higher margin Pharma segment and from cost containment efforts made to mitigate the impact of the COVID-19 pandemic. However, we did experience some additional costs in 2020 due to under-absorbed fixed overhead coming from lower volumes in our dedicated beauty facilities and also from special bonus payments to certain employees who worked to maintain supply to our customers and keep our facilities running, both of which increased our COS percentage during the current year.

SELLING, RESEARCH & DEVELOPMENT AND ADMINISTRATIVE

Our Selling, Research & Development and Administrative expenses (“SG&A”) increased approximately 10% or $45.6 million to $500.2 million in 2020 compared to $454.6 million in 2019. Excluding changes in foreign currency rates, SG&A increased by approximately $46.3 million compared to the prior year. The reported increase is mainly due to $20.8 million of incremental operational costs during 2020 related to our acquired companies. We also recognized $9.4 million of retention and earn-out compensation for acquired company key employees as part of the Fusion and Noble acquisitions which was partially offset by lower travel costs due to the COVID-19 pandemic. SG&A as a percentage of net sales increased to 17.1% compared to 15.9% in the prior year due to the cost increases mentioned above.

DEPRECIATION AND AMORTIZATION

Reported depreciation and amortization expense increased approximately 13% or $25.7 million to $220.3 million in 2020 compared to $194.6 million in 2019. The increase was not impacted by changes in foreign currency rates. The majority of this increase is due to $14.7 million of 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 increased to 7.5% in 2020 compared to 6.8% in the prior year.

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RESTRUCTURING INITIATIVES

In late 2017, Aptar 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, 2020 and 2019 are as follows:

Restructuring Initiatives by Segment

We have successfully implemented the vast majority of our planned initiatives related to our transformation over the past three years, including successfully 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 2020 COVID-19 global pandemic has caused several initiatives that were expected to be completed in 2020 to be delayed, including the planned closure of two facilities in the U.S., and 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. Though we believe the beauty market remains a long-term attractive growth market and we remain committed to completing our remaining 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. We expect total implementation costs of approximately $125 million for these initiatives. The cumulative expense incurred to date is $113 million. We have also made capital investments of approximately $50 million related to this plan, with no further significant capital investments expected.

OPERATING INCOME

Reported operating income decreased approximately $32.2 million or 9% to $339.5 million in 2020 compared to $371.7 million in 2019. Excluding changes in currency rates, operating income decreased by approximately $37.6 million in 2020 compared to 2019. The majority of this decrease occurred during the second quarter of 2020 due to the impact of lower sales and operational inefficiencies related to the COVID-19 pandemic. Operating income as a percentage of net sales decreased to 11.6% in 2020 compared to 13.0% for the prior year.

NET OTHER EXPENSE

Net other expense increased in 2020 to $38.3 million compared to $29.6 million in 2019. Interest expense, net of interest income, increased by approximately $1.0 million due to lower cash on hand after our acquisition of Fusion at the beginning of the second quarter of 2020. Miscellaneous expenses increased by approximately $3.2 million as a result of higher pension costs due to the decline in discount rates in 2020 compared to 2019, a $3.0 million other than temporary impairment on the Kali Care investment and higher costs to hedge certain Latin American currencies. These expenses were partially offset by a gain of approximately $3.1 million due to an observable price increase which determines the account value on our minority investment in PureCycle.

PROVISION FOR INCOME TAXES

The reported effective tax rate on income before income taxes for 2020 and 2019 was 28.9% and 29.2%, respectively. The tax rate for 2020 was lower compared to 2019 due primarily to our mix of earnings, with lower results in our high tax jurisdictions and improved results in our loss jurisdictions. This was offset by a $4.7 million charge taken in 2020 to adjust the income tax payable balances.

At December 31, 2020, under currently enacted laws, we do not have a balance of foreign earnings that will be subject to U.S. taxation. We continually analyze our global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries made a distribution of their cash or distributable reserves. These liabilities would include local country withholding and income tax and potential U.S. state taxation. During 2020, we removed our assertion that pre-2020 earnings in Italy, Switzerland, and Columbia are indefinitely reinvested. We recorded a liability of $0.9 million to reflect the taxes that would be paid when these amounts are distributed. As of December 31, 2020, all other cash or distributable reserve amounts continue to be reinvested indefinitely and would become subject to these additional taxes if they were remitted as dividends. We estimate the additional tax that would be payable on these earnings to be in the range of $15 million to $25 million.

NET INCOME ATTRIBUTABLE TO APTARGROUP, INC.

We reported net income of $214.0 million in 2020 compared to $242.2 million reported in 2019.

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PHARMA SEGMENT

Adjusted EBITDA margin (1) 35.0 % 35.5 %

(1)Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring initiatives, acquisition-related costs 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 12% in 2020 to $1.23 billion compared to $1.09 billion in 2019. Changes in currencies positively affected net sales by 1% while our acquisitions of Noble, Nanopharm and Gateway positively impacted sales by 2% in 2020. Therefore, core sales increased 9% in 2020 compared to the prior year. Sales increased in all the segment's markets during 2020. Core sales to the prescription drug market were up against difficult comparisons due to strong sales growth in 2019, but still increased 2% mainly driven by strong demand for our drug delivery systems sold for central nervous system and asthma treatments. Prior year prescription drug sales benefited from the realization of $1.8 million of revenue for achieving a development milestone related to a customer project. Core sales to the consumer health care market increased 5% on increased demand for our drug delivery systems used on nasal decongestant, cough and cold and eye care treatments. Core sales of our products to the injectables markets grew 22% on price increases and higher COVID-19 related demand for primary components used with injected medicines such as existing seasonal flu vaccines and other injected medications related to higher levels of hospitalization. Active packaging core sales increased 28% as a result of strong growth in our Probiotics and ActivFilm products along with $12.0 million of non-recurring tooling sale activities.

Core Sales Growth 2 % 5 % 22 % 28 % 9 %

Acquisitions — % — % 12 % — % 2 %

Currency Effects (1) 1 % 2 % 2 % 1 % 1 %

Total Reported Net Sales Growth 3 % 7 % 36 % 29 % 12 %

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

Adjusted EBITDA for 2020 increased to $428.5 million compared to $387.5 million in 2019. Strong product sales growth across all the segment's markets, along with incremental profit related to our acquisitions was able to compensate for $3.9 million of additional stock-based compensation expense, a $3.0 million other than temporary impairment on the Kali Care investment and $1.0 million of retention and earn-out compensation for the Noble acquisition. While the Pharma segment did not experience a significant sales impact from COVID-19, our margins were negatively impacted by an unfavorable mix of sales within our portfolio of products . We also made special bonus payments to certain employees who worked to maintain supply to our customers and keep our facilities running during the pandemic.

BEAUTY + HOME SEGMENT

Adjusted EBITDA margin (1) 10.0 % 13.4 %

(1)Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring initiatives, acquisition-related costs, 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".

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Reported net sales decreased approximately 4% in 2020 to $1.30 billion compared to $1.35 billion in 2019. Changes in currency rates negatively impacted net sales by 1% while our acquisition of Fusion positively impacted sales by 4% in 2020. Therefore, core sales decreased 7% in 2020 compared to the prior year. The COVID-19 pandemic negatively impacted core sales to the beauty market during 2020 due to a significant reduction in retail sales and in duty free sales due to domestic and international travel reductions. Core sales of our products to the beauty market decreased 20% as we experienced a significant reduction in orders from customers providing both fragrance and skin care products, mainly in the travel retail and standard retail settings. However, personal care core sales increased 7% as increased sales of our hand sanitizer and liquid soap dispensers more than compensated for softness in our deodorant, hair care and sun care applications as many consumers continue to shelter in place. Core sales to the home care markets increased 3% on strong demand for our household cleaner and disinfectant products.

Year Ended December 31, 2020 Personal Care Beauty Home Care Total

Core Sales Growth 7 % (20) % 3 % (7) %

Acquisitions — % 8 % — % 4 %

Currency Effects (1) (2) % (1) % — % (1) %

Total Reported Net Sales Growth 5 % (13) % 3 % (4) %

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

Adjusted EBITDA for 2020 decreased to $129.3 million from $181.2 million reported in 2019. As discussed above, the COVID-19 pandemic affected our profitability due to overall lower sales volumes. Our profitability was further impacted by lower overhead absorption due to fluctuations in demand primarily in our facilities that manufacture beauty products and by special bonus payments to certain employees who worked to maintain supply to our customers and keep our facilities running. We also incurred $6.5 million of retention and earn-out compensation for the Fusion acquisition.

FOOD + BEVERAGE SEGMENT

Adjusted EBITDA margin (1) 17.8 % 16.4 %

(1)Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring initiatives, acquisition-related costs 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 decreased by approximately 3% in 2020 to $405.4 million compared to $416.0 million in 2019. Changes in currency rates negatively impacted net sales by 2%. Therefore, core sales decreased 1% in 2020 compared to the prior year. The pass-through of lower resin costs and lower tooling sales negatively impacted 2020 sales by $13.7 million and $4.2 million, respectively. The changes in core sales by market were impacted by the COVID-19 pandemic in different ways. Core sales to the food market increased 7% due to the increased demand across several applications for pantry staples as consumers continued to cook at home during the pandemic. However, core sales to the beverage market decreased 20% as sales of our products used on premium single-serve bottled water and on-the-go functional drink products continue to be negatively impacted as consumers demand less on-the-go beverages during the COVID-19 pandemic.

Year Ended December 31, 2020 Food Beverage Total

Core Sales Growth 7 % (20) % (1) %

Acquisitions — % — % — %

Currency Effects (1) (1) % (2) % (2) %

Total Reported Net Sales Growth 6 % (22) % (3) %

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

Adjusted EBITDA increased to $72.0 million in 2020 compared to $68.1 million in 2019. Higher product sales to the food markets discussed above, along with the benefits we received from our cost containment activities and other operational improvements realized during 2020 more than compensated for lower tooling sales and other negative COVID-19 impacts, mainly on our on-the-go beverage market applications.

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CORPORATE & OTHER

In addition to our three reporting segments, Aptar assigns certain costs to “Corporate & Other,” which is presented separately in Note 18 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 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 2020 decreased to $43.4 million compared to $44.4 million in 2019. We recognized slightly higher operating costs during 2020 as we were able to mitigate higher variable compensation and other personnel costs with cost containment activities such as reduced travel spending. However, this increase was more than offset by a gain of approximately $3.1 million due to an observable price increase on our investment in PureCycle.

NON-U.S. GAAPMEASURES

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 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.

In our MD&A, 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, and purchase accounting adjustments related to acquisitions and investments. 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, cash equivalents and short-term investments while Net Capital is calculated as stockholder’s 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. 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.

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Consolidated Pharma Beauty + Home Food + Beverage Corporate & Other Net Interest

Reported income taxes 87,065

Adjustments:

Transaction costs related to acquisitions 4,812 210 4,602

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Consolidated Pharma Beauty + Home Food + Beverage Corporate & Other Net Interest

Reported income taxes 99,842

Adjustments:

Net Debt to Net Capital Reconciliation December 31, 2020 December 31, 2019

Notes payable, revolving credit facility and overdrafts $ 52,200 $ 44,259

Less:

Short-term investments 243 —

Net Debt to Net Capital 32.0 % 37.8 %

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Free Cash Flow Reconciliation December 31, 2020 December 31, 2019

Less:

LIQUIDITY AND CAPITAL RESOURCES

Given the diversification of our segments, the 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 and to make acquisitions that will contribute to the achievement of our strategic objectives. Amid the COVID-19 pandemic, we have been focused on preserving our liquidity and therefore temporarily suspended our share repurchase plan and discretionary contributions to our defined benefit plans in 2020. While we will continue to assess the impact the pandemic is having on our business throughout 2021, we are removing the aforementioned suspension in order to preserve our flexibility to make repurchases from time to time depending on market conditions and provide discretionary contributions to our defined benefit plans. We intend to continue to pay quarterly dividends to stockholders, invest in our business and make acquisitions as we consider necessary to achieve our strategic objectives. In the event that customer demand would decrease significantly for a prolonged period of time due to the COVID-19 pandemic and adversely impact 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, negatively impact our future growth opportunities, as well as have a negative impact on operating margins if we were unable to invest in new innovative products.Refer to Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for additional information regarding Liquidity and Capital Resources for the year ended December 31, 2019 as compared to the year ended December 31, 2018.

Cash and equivalents increased to $300.1 million at December 31, 2020 from $242.0 million at December 31, 2019.Total short and long-term interest bearing debtof $1.17 billionat December 31, 2020 decreased from the $1.20 billion at December 31, 2019 resulting from repayments made during the year on our group credit facilities and long-term debt obligations. The ratio of our NetDebt (interest bearing debt less cash and cash equivalents) to Net Capital (stockholders’ equity plus Net Debt) decreased to 32.0% at December 31, 2020 compared to 37.8% at December 31, 2019. See the reconciliation under "Non-U.S. GAAP Measures" starting on page24.

In 2020, our operations provided approximately $570.2 million in cash flow compared to $514.5 million in 2019. Cash flow from operations was primarily derived from earnings before depreciation and amortization. The increase in 2020 cash flow from operations compared to 2019 is primarily attributable to better working capital management which offset lower net income.

We used $452.0 million in cash for investing activities during 2020 compared to $336.3 million during 2019. The higher cash utilization in 2020 compared to 2019 is mainly due to increased cash outflows related to acquisitions. During 2020, $162.7 million of cash was utilized to fund the Fusion acquisition. We invested $32.0 million in our 49% equity interest of BTY and $5.0 million in our 30% equity interest of Sonmol, which are accounted for as equity method investments and invested an additional $1.4 million in our Loop and PureCycle preferred equity investments. Additionally, we paid $1.5 million of additional working capital and escrow settlement related to our Noble Acquisition. During 2019, approximately $106.3 million of cash was utilized to fund our Gateway, Nanopharm and Noble Acquisitions; we also released $4.0 million relating to the final escrow settlement on our acquisition of CSP Technologies and invested $3.5 million in Loop and PureCycle. We also received $16.5 million from the sale of our investment in Propeller Health in 2019. Our investment in capital projects increased $3.7 million during 2020 as compared to 2019. Our cash utilization in 2020 is mainly due to acquisitions and capital investments to support our growth strategy.

Financing activities utilized $73.7 million in cash during 2020, compared to $197.1 million during 2019. In 2020, we used cash on hand to pay $92.7 million of dividends and repaid $64.7 million of long-term debt and $14.0 million of net notes payable, while in 2019 we used cash on hand to repay net short term revolving debt of $52.1 million, repay $67.3 million of long-term debt and pay $90.2 million of dividends. Additionally, contributing to our lower utilization of financing activities in 2020 compared to 2019 was the repurchase of $86.5 million of common stock that was placed into treasury during 2019 while no treasury shares were repurchased during 2020. Finally, we received net proceeds from stock option exercises of $68.6 million and net proceeds from our revolving credit facility of $27.0 million in 2020 compared to net proceeds from stock option exercises of $90.8 million in 2019.

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We hold U.S. dollar and euro-denominated debt to align our capital structure with our earnings base. We also maintain a multi-currency revolving credit facility with two tranches, providing for unsecured financing of up to $300 million that is available in the U.S. and up to €150 million that is available to our wholly-owned UK subsidiary. Each borrowing under the credit facility will bear interest at rates based on LIBOR, prime rates or other similar rates, in each case plus an applicable margin. A facility fee on the total amount of the facility is also payable quarterly, regardless of usage. The applicable margins for borrowings under the credit facility and the facility fee percentage may change from time to time depending on changes in our consolidated leverage ratio.We utilized $52 million under our U.S. facility and no balance was utilized under our euro-based revolving credit facility as of December 31, 2020. We utilized $25 million under our U.S. facility and no balance was utilized under our euro-based revolving credit facility as of December 31, 2019.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:

Requirement Level at December 31, 2020

Consolidated Leverage Ratio (1) Maximum of 3.50 to 1.00 1.63 to 1.00

Consolidated Interest Coverage Ratio (1) Minimum of 3.00 to 1.00 16.86 to 1.00

(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 $1.1 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 balance was utilized under this arrangement as of December 31, 2020.

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, 2020, and 2019, the amounts due to suppliers participating in the SCF and included in Accounts payable, accrued and other liabilities were approximately $23 million and $17 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.

OFF-BALANCE SHEET ARRANGEMENTS

We lease certain warehouse, plant and office facilities as well as certain equipment under noncancelable operating leases. Most of the operating leases contain renewal options and certain equipment leases include options to purchase during or at the end of the lease term. As a result of the adoption of ASU 2016-02 and subsequent amendments, which requires organizations to recognize leases on the balance sheet, we do not have significant off-balance sheet arrangements. Please refer to Note 8 – Lease Commitments of the Notes to Consolidated Financial Statements.

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OVERVIEW OF CONTRACTUAL OBLIGATIONS

Below is a table of our outstanding contractual obligations and future payments as of December 31, 2020:

Notes payable, revolving credit facility and overdrafts (2) 52,200 52,200 — — —

(1)The future payments listed above for long-term debt repayments and lease obligations reflect only principal payments.

(2)Notes payable mainly includes foreign short-term borrowings. The future payments listed above assume that no additional amounts will be drawn under the credit facility.

(3)Purchase obligations are agreements to purchase goods or services that are enforceable and legally binding on us that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transactions.

(4)Approximately 10.3% of our total interest bearing long-term debt has variable interest rates. Using our long-term variable rate debt outstanding as of December 31, 2020 of approximately $112.0 million at an average rate of approximately 1.72%, we included approximately $1.9 million and $1.0 million of variable interest rate obligations in 2021 and 2022, respectively, reflecting timing of anticipated debt repayments. Interest rate obligations also include anticipated interest on the finance and operating lease liabilities.

We make contributions to our domestic pension plans but currently we are not required to make a minimum pension contribution to those plans. We also contribute to our foreign pension plans but amounts are expected to be discretionary in 2021 and future years. Therefore, amounts related to these plans are not included in the preceding table.

We do not record a current portion of the liability for uncertain tax positions. Aside from deferred income taxes, we have approximately $214.5 million of other deferred long-term liabilities on the balance sheet, which consist primarily of retirement plan obligations. We are not able to reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease over time. Therefore, the long-term portion of the liability is excluded from the preceding table.

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 2020 are discussed in Note 1 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-4, 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. The new standard is effective upon issuance and can be adopted any time prior to December 31, 2022. We do not anticipate that this new guidance will have a significant impact on our consolidated financial statements.

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.

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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 packaging divisions of the Pharma segment qualify as separate reporting units for goodwill impairment testing apart from the remaining Pharma business. As of December 31, 2020, we have $898.5 million of goodwill, which is allocated as follows:

Reporting Unit Balance at December 31, 2020

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 because 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.

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.

The Company has historically evaluated its goodwill for impairment annually as of December 31 or more frequently if impairment indicators arose in accordance with Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other.” In the fourth quarter of 2019, the Company changed the date of its annual assessment of goodwill to October 1 for all reporting units. The change in testing date for goodwill is a change in accounting principle, which management believes is preferable as the new date of the assessment better aligns with the Company’s budgeting process and will create a more efficient and timely process surrounding the impairment tests. The change in the assessment date does not delay, accelerate or avoid a potential impairment charge. The Company has determined that it is impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each October 1 of prior reporting periods without the use of hindsight. As such, the Company prospectively applied the change in annual goodwill impairment testing date from October 1, 2019. No impairment was recognized during the years ended December 31, 2019 or 2018.

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. Due to the passage of time since the last quantitative assessment, management determined it appropriate to calculate the fair value of the reporting units and compare with their associated carrying amounts as of October 1, 2020. Based on this quantitative analysis, we determined the fair value of our reporting units are not less than their carrying value and therefore no impairment of goodwill was recognized during the year ended December 31, 2020.

We believe our assumptions used in discounting future cash flows are appropriate. Any increase in estimated cash flows would have no impact on the reported carrying amount of goodwill. However, if our current estimates of cash flows for the Active Packaging reporting unit had been 59% lower, the fair value of the reporting unit would have been lower than the carrying value thus requiring us to record an impairment loss. The excess of approximately $169.0 million in carrying value of goodwill over the implied value would need to be written down for impairment. A full $169.0 million impairment loss would have reduced Total Assets as of December 31, 2020 by approximately 4.2% and would have reduced Income before Income Taxes in 2020 by approximately 56.1%. If we had been required to recognize an impairment loss of the full $169.0 million, it would likely not have significantly affected our liquidity and capital resources because, in spite of any such impairment loss, we would have been within the terms of our debt covenants.

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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 judgement 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 the Company's financial condition and operating results.

At December 31, 2020 and 2019, we had $124.8 million and $116.0 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 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. 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 Fusion, Noble, Nanopharm, and Gateway. 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 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 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, 2020, the discount rates for our domestic and foreign plans were 2.40% and 0.54%, respectively.

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 $84.7 million increase in the PBO ($65.4 million for the domestic plans and $19.3 million for the foreign plans) and a $8.4 million increase in net periodic benefit cost ($7.0 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 $65.3 million decrease in the PBO ($49.5 million for the domestic plans and $15.8 million for the foreign plans) and a $7.1 million decrease in net periodic benefit cost ($5.8 million for the domestic plans and $1.3 million for the foreign plans).

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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, 28% was invested in fixed income securities, 10% was invested in hedge funds, 7% was invested in infrastructure securities, 5% was invested in real estate securities and 2% was invested in money market funds, at December 31, 2020. Of foreign plan assets, approximately 92% was invested in investment funds, 5% was invested in equity securities, 2% was invested in corporate securities, 1% was invested in fixed income securities and no amount was invested in money market funds at December 31, 2020.

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 $2.5 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 $8.4 million decrease in the PBO ($2.1 million for the domestic plans and $6.3 million for the foreign plans) and a $1.5 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 $8.9 million increase in the PBO ($2.1 million for the domestic plans and $6.8 million for the foreign plans) and a $1.8 million increase to the net periodic benefit cost.

Our primary pension related assumptions as of December 31, 2020 and 2019 were as follows:

Discount rate:

Expected long‐term rate of return on plan assets:

Rate of compensation increase:

In order to determine the 2021 net periodic benefit cost, we expect to use the discount rates, expected long-term rates of return on plan assets and rates of compensation increase assumptions as of December 31, 2020. The estimated impact of the changes to the assumptions as noted in the table above on our 2021 net periodic benefit cost is expected to be an increase of approximately $5.6 million.

OPERATIONS OUTLOOK

Looking to the first quarter, we expect continued growth in our injectables components, active material solutions and dispensing systems for sanitizers, cleaners and food products. Our demand in the beauty fragrance and on-to-go beverage markets is expected to remain under pressure in the near-term. We are also experiencing a drawdown of inventories by certain prescription drug and consumer health care customer in response to fewer cold and flu illnesses resulting from pandemic-related confinements and social distancing and fewer non-critical doctor visits. We are optimistic about the long-term opportunities for growth, based on strong innovation and customer project pipelines across each of our businesses and we continue to take significant steps to invest in growth capacity.

Aptar expects earnings per share for the first quarter of 2021, excluding any restructuring expenses and acquisition-related costs, to be in the range of $0.86 to $0.94 and this guidance is based on an effective tax rate range of 28% to 30%.

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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:

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

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

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

•political conditions worldwide, including the impact of the UK leaving the European Union (Brexit) on our UK and European operations;

•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;

•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 and other input costs (particularly resin, metal, anodization costs and transportation and energy costs);

•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 or products, including the successful integration of the businesses we have acquired, including contingent consideration valuation;

•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;

•the execution of our business transformation plan; and

•other risks associated with our operations.

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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISKS

A significant number of our operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of our subsidiaries. Our primary foreign exchange exposure is to the euro, but we also have foreign exchange exposure to the Chinese yuan, Brazilian real, Mexican peso, Swiss franc and other Asian, European and South American currencies. A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on our financial condition and results of operations. Conversely, a weakening U.S. dollar relative to foreign currencies has an additive translation effect on our financial condition and results of operations. Additionally, in some cases, we sell products denominated in a currency different from the currency in which the related costs are incurred. Any changes in exchange rates on such inter-country sales may impact our results of operations.

The table below provides information as of December 31, 2020 about our forward currency exchange contracts. The majority of the contracts expire before the end of the first quarter of 2021.

In thousands

As of December 31, 2020, we have recorded the fair value of foreign currency forward exchange contracts of $0.3 million in prepaid and other and $0.1 million in accounts payable, accrued and other liabilities in the Consolidated Balance Sheets. Aptar also entered into a EUR/USD floating-to-fixed cross currency swap on July 20, 2017 to effectively hedge the foreign exchange and interest rate exposure on the $280 million bank term loan drawn by its wholly owned UK subsidiary. The fair value of this cash flow hedge is $8.3 million and is reported in accounts payable, accrued and other liabilities in the Consolidated Balance Sheets.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF INCOME

In thousands, except per share amounts

Operating Expenses:

Other (Expense) Income:

Net Income Attributable to Noncontrolling Interests (50) (25) (21)

Net Income Attributable to AptarGroup, Inc. per Common Share:

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In thousands

Other Comprehensive Income:

Changes in treasury locks, net of tax — — 17

Changes in derivative gains (losses), net of tax 315 (37) 1,547

Defined benefit pension plan, net of tax

Amortization of net loss included in net income, net of tax 5,920 332 4,991

Comprehensive Income Attributable to Noncontrolling Interests (60) (21) (5)

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED BALANCE SHEETS

In thousands

Assets

Short-term investments 243 —

Total Cash and equivalents and Short-term investments 300,380 241,970

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED BALANCE SHEETS

In thousands, except share and per share amounts

Liabilities and Stockholders’ Equity

Notes payable, revolving credit facility and overdrafts $ 52,200 $ 44,259

Accounts payable, accrued and other liabilities 662,463 573,028

Deferred and other non-current liabilities 68,528 23,250

Commitments and contingencies — —

AptarGroup, Inc. stockholders’ equity

Noncontrolling interests in subsidiaries 396 336

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31, 2020, 2019 and 2018

In thousands

AptarGroup, Inc. Stockholders’ Equity

Adoption of revenue recognition standard 2,937 — — — — — 2,937

Reclassification of stranded tax effects 6,658 (6,658) — — — — —

Foreign currency translation adjustments — (62,898) — — — (16) (62,914)

Changes in treasury locks, net of tax — 17 — — — — 17

Changes in derivative gains (losses), net of tax — 1,547 — — — — 1,547

Cash dividends declared on common stock (82,346) — — — — — (82,346)

Treasury stock purchased — — — (3,905) — — (3,905)

Foreign currency translation adjustments — (8,723) — — — (4) (8,727)

Changes in derivative gains (losses), net of tax — (37) — — — — (37)

Cash dividends declared on common stock (90,208) — — — — — (90,208)

Treasury stock purchased — — — (86,497) — — (86,497)

Adoption of CECL standard (1,377) — — — — — (1,377)

Foreign currency translation adjustments — 79,099 — — — 10 79,109

Changes in derivative gains (losses), net of tax — 315 — — — — 315

Cash dividends declared on common stock (92,658) — — — — — (92,658)

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands, brackets denote cash outflows

Cash Flows from Operating Activities:

Adjustments to reconcile net income to net cash provided by operations:

Loss (gain) on disposition of fixed assets 2,627 344 (770)

Net gain on remeasurement of equity securities (64) — (6,500)

Change in fair value of contingent consideration 5,230 — —

Retirement and deferred compensation plan liabilities (7,267) (3,956) (22,762)

Cash Flows from Investing Activities:

Proceeds from sale of property, plant and equipment 5,261 4,301 4,466

Insurance proceeds — — 10,631

Purchase of short-term investments (243) — —

Acquisition of intangible assets, net (6,092) (4,806) (611)

Proceeds from sale of investment in equity securities — 16,487 —

Cash Flows from Financing Activities:

Payment of contingent consideration obligation (2,765) — —

Common stock repurchased and retired — — (57,786)

Supplemental Cash Flow Disclosure:

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Restricted cash included in the line item prepaid and other on the Consolidated Balance Sheets as shown below represents amounts held in escrow related to the Fusion acquisition in 2020, the Noble acquisition in 2019 and the CSP Technologies acquisition in 2018.

Restricted cash included in prepaid and other 4,833 5,003 5,000

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Share and per Share Amounts, or as Otherwise Indicated)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of AptarGroup, Inc. and our subsidiaries. The terms “AptarGroup”, “Aptar”, “Company”, “we”, “us” or “our” as used herein refer to AptarGroup, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain previously reported amounts have been reclassified to conform to the current period presentation.

AptarGroup’s organizational structure consists ofthreemarket-focused business segments which are Pharma, Beauty + Home and Food + Beverage. This is a strategic structure which allows us to be more closely aligned with our customers and the markets in which they operate.

In late 2017, Aptar began a business transformation plan to drive profitable sales growth, increase operational excellence, enhance our approach to innovation and improve organizational effectiveness (see Note 21 – Restructuring Initiatives for further details). The primary focus of the plan is the Beauty + Home segment; however, certain global general and administrative functions have also been addressed. During 2020, 2019 and 2018, we recognized approximately$26.5 million,$20.5 million and$63.8 million, respectively, of restructuring costs related to this plan.

Beginning July 1, 2018, we have applied highly inflationary accounting for our Argentinian subsidiary pursuant to U.S. GAAP. We have changed the functional currency from the Argentinian peso to the U.S. dollar. We remeasure our peso denominated assets and liabilities using the official rate. In September 2019, the President of Argentina reinstituted exchange controls restricting foreign currency purchases in an attempt to stabilize Argentina’s financial markets. As a result of these currency controls, a legal mechanism known as the Blue Chip Swap emerged in Argentina for reporting entities to transfer U.S. dollars. The Blue Chip Swap rate has diverged significantly from Argentina’s “official rate” due to the economic environment. During the second quarter of 2020, we transferred U.S. dollars into Argentina through the Blue Chip Swap method and we recognized a gain of $1.0 million. This gain helped to offset foreign currency losses due to our Argentinian peso exposure and devaluation against the U.S. dollar. Our Argentinian operations contributed approximately less than 2.0%of consolidated net assets and revenues at and for the year ended December 31, 2020.

There are many uncertainties regarding the current COVID-19 pandemic, including the availability, adoption, and effectiveness of a vaccine, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties. The pandemic has impacted certain markets within our business, our operations and our financial results during the year ended December 31, 2020 including an overall reduction to net sales within those markets. No impairments were recorded as of December 31, 2020 related to the COVID-19 pandemic. While the disruption is currently expected to be temporary, there is uncertainty around the duration. Due to significant uncertainty surrounding the situation, future results could change and therefore our results could be materially impacted.

ACCOUNTING ESTIMATES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). This process requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

We consider all investments that are readily convertible to known amounts of cash with an original maturity of three months or less when purchased to be cash equivalents.

ACCOUNTS RECEIVABLE AND CURRENT EXPECTED CREDIT LOSSES

At December 31, 2020, we reported $567 million of accounts receivable, net of CECL of $5.9 million. The allowance is estimated using reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Changes in CECL were not material for the year ended December 31, 2020.

INVENTORIES

Inventories are stated at lower of cost or net realizable value. Costs included in inventories are raw materials, direct labor and manufacturing overhead.

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INVESTMENTS IN EQUITY SECURITIES

We account for our 20% to 50% owned investments using the equity method. Equity investments that do not result in consolidation and are not accounted for under the equity method are measured at fair value. Any related changes in fair value is recognized in net income unless the investments qualify for a practicality exception. In May 2018, we invested$10.0 million in preferred equity stock of Reciprocal Labs Corporation, doing business as Propeller Health.During 2018, we increased the value of this investment by approximately$6.5 million due to fair value inputs. This investment was ultimately sold during January 2019 for an amount of$16.5 million. During August 2019, we also invested an aggregate amount of$3.5 million in two preferred equity investments, Loop and PureCycle, that are accounted for at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. During 2020, we invested an additional $1.4 million in these two equity investments and also received $333 thousand of equity in PureCycle in exchange for our resource dedication for technological partnership and support. In November 2020, we increased the value of the PureCycle investment by $3.1 million based on observable price changes and recorded the gain in miscellaneous income in the Consolidated Statements of Income. During the fourth quarter of 2020, we recognized an other than temporary impairment of $3.0 million on our underlying assets in our Kali Care investment as a result of a reassessment of the future value of the business and continued reduction in operating cash flows. There werenodividends received from affiliated companies in 2020, 2019 and 2018.

PROPERTY AND DEPRECIATION

Properties are stated at cost. Depreciation is determined on a straight-line basis over the estimated useful lives for financial reporting purposes and accelerated methods for income tax reporting. Generally, the estimated useful lives are10to40 years for buildings and improvements and 3to15 years for machinery and equipment.

FINITE-LIVED INTANGIBLE ASSETS

Finite-lived intangibles, consisting of patents, acquired technology, customer relationships, trademarks and trade names and license agreements acquired in purchase transactions, are capitalized and amortized over their useful lives which range from1to20 years.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, such as property, plant and equipment and finite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset.

GOODWILL

The Company has historically evaluated the excess of purchase price over the fair value of the net assets acquired (“goodwill”) for impairment annually as of December 31 or more frequently if impairment indicators arose in accordance with Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other.” In the fourth quarter of 2019, the Company changed the date of its annual assessment of goodwill to October 1 for all reporting units. The change in testing date for goodwill is a change in accounting principle, which management believes is preferable as the new date of the assessment better aligns with the Company’s budgeting process and will create a more efficient and timely process surrounding the impairment tests. The change in the assessment date does not delay, accelerate or avoid a potential impairment charge. The Company has determined that it is impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each October 1 of prior reporting periods without the use of hindsight. As such, the Company prospectively applied the change in annual goodwill impairment testing date from October 1, 2019.

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 because 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 its impact on the impairment testing of goodwill is a critical accounting estimate.

Management believes goodwill in purchase transactions has continuing value. Goodwill is not amortized and must be tested annually, or more frequently as circumstances dictate, for impairment. The annual goodwill impairment test may first consider qualitative factors to determine whether it is more likely than not (i.e., greater than 50 percent chance) that the fair value of a reporting unit is less than its book value. This is sometimes referred to as the “step zero” approach and is an optional step in the annual goodwill impairment analysis. Management has performed this qualitative assessment as of October 1, 2019 and December 31, 2018 for each of our reporting units. Based on our review of macroeconomic, industry, and market events and circumstances as well as the overall financial performance of the reporting units, we determined that it was more likely than not that the fair value of these reporting units was greater than their carrying amounts.

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Due to the passage of time since the last quantitative assessment, management determined it appropriate to calculate the fair value of the reporting units and compare with their associated carrying amounts (the "step one" approach) as of October 1, 2020. Based on this quantitative analysis, we determined the fair value of our reporting units are not less than their carrying value and therefore no impairment of goodwill is required.

DERIVATIVES INSTRUMENTS AND HEDGING ACTIVITIES

Derivative financial instruments are recorded in the Consolidated Balance Sheets at fair value as either assets or liabilities. Changes in the fair value of derivatives are recorded in each period in earnings or other comprehensive income, depending on whether a derivative is designated and effective as part of a hedge transaction.

RETIREMENT OF COMMON STOCK

During 2020, we did not repurchase any shares of our common stock. In 2019, we repurchased779 thousand shares, all of which were returned to treasury stock. Common stock was reduced by the number of shares retired at$0.01par value per share. We allocate the excess purchase price over par value between additional paid-in capital and retained earnings.

RESEARCH & DEVELOPMENT EXPENSES

Research and development costs, net of any customer funded research and development or government research and development credits, are expensed as incurred. These costs amounted to$92.5 million,$82.8 million and$75.3 million in 2020, 2019 and 2018, respectively.

INCOME TAXES

We compute taxes on income in accordance with the tax rules and regulations of the many taxing authorities where the income is earned. The income tax rates imposed by these taxing authorities may vary substantially. Taxable income may differ from pre-tax income for financial accounting purposes. To the extent that these differences create timing differences between the tax basis of an asset or liability and its reported amount in the financial statements, an appropriate provision for deferred income taxes is made.

With the exception of pre-2020 earnings in Italy, Switzerland, and Colombia, we maintain our assertion that the cash and distributable reserves at our non-U.S. affiliates are indefinitely reinvested. Under current U.S. tax laws, all of our non-U.S. earnings are subject to U.S. taxation. We will provide for the necessary withholding and local income taxes when management decides that an affiliate should make a distribution. These decisions are made taking into consideration the financial requirements of the non-U.S. affiliates and the global cash management goals of the Company.

We provide a liability for the amount of unrecognized tax benefits from uncertain tax positions. This liability is provided whenever we determine that a tax benefit will not meet a more-likely-than-not threshold for recognition. See Note 6 – Income Taxes for more information.

We are subject to taxation and file income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner inconsistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. The resolution of each of these audits is not expected to be material to our Consolidated Financial Statements.

TRANSLATION OF FOREIGN CURRENCIES

The functional currencies of the majority of our foreign operations are the local currencies. Assets and liabilities of our foreign operations are translated into U.S. dollars at the rates of exchange on the balance sheet date. Sales and expenses are translated at the average rates of exchange prevailing during the year. The related translation adjustments are accumulated in a separate section of Stockholders’ Equity. Realized and unrealized foreign currency transaction gains and losses are reflected in income, as a component of miscellaneous income and expense, and represented losses of$5.9 million,$1.7 million and$1.7 million in 2020, 2019 and 2018, respectively.

STOCK-BASED COMPENSATION

Accounting standards require the application of the non-substantive vesting approach which means that an award is fully vested when the employee’s retention of the award is no longer contingent on providing future service. Under this approach, compensation costs are recognized over the requisite service period of the award instead of ratably over the vesting period stated in the grant. As such, costs are recognized immediately if the employee is retirement eligible on the date of grant or over the period from the date of grant until retirement eligibility if retirement eligibility is reached before the end of the vesting period stated in the grant. See Note 16 – Stock-Based Compensation for more information.

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REVENUE RECOGNITION

At inception of customer contracts, we assess the goods and services promised in order to identify a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, we consider all the goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. For a contract that has more than one performance obligation, we allocate the total contract consideration to each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when (or as) the performance obligations are satisfied (i.e., when the customer obtains control of the good or service). The majority of our revenues are derived from product, tooling and service contract sales; however, we also receive revenues from license, exclusivity and royalty arrangements, which collectively are not material to the results. See specific discussions about methods of accounting for control transfers of product, tooling and service contract sales in Note 2 – Revenue.

LEASES

We determine if an arrangement is a lease at inception. Operating lease assets are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities are included in accounts payable accrued and other liabilities in our Consolidated Balance Sheets. Finance leases are included in property, plant and equipment, current maturities of long-term obligations and long-term obligations in our Consolidated Balance Sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit rate when readily determinable. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date of the lease in determining the present value of lease payments. The operating lease ROU asset includes any lease payments made as well as initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, we account for the lease and non-lease components as a single lease component. We have elected not to recognize right-of-use assets and lease liabilities that arise from short-term leases (a lease whose term is 12 months or less and does not include a purchase option that we are reasonably certain to exercise).

Certain vehicle lease contracts include guaranteed residual value that is considered in the determination of lease classification. The probability of having to satisfy a residual value guarantee is not considered for the purpose of lease classification, but is considered when measuring a lease liability.

ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification.

In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases, as our accounting for finance leases remained substantially unchanged. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We adopted the standard on January 1, 2019 using a modified retrospective transition, with the effective date method. Under this method, financial results reported in periods prior to 2019 are not recast. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows companies to carry forward their historical lease classification. We also implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The impact of adoption of the standard to previously reported results is shown below.

Balance at December 31,2018 Adjustments Balance at January 1,2019

Consolidated Balance Sheets

Operating lease right-of-use assets $ — $ 83,222 $ 83,222

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In May 2014, the FASB issued ASU 2014-9, which amended the guidance for recognition of revenue from customer contracts. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On January 1, 2018, we adopted this standard and all the related amendments (the “new revenue standard”) for all contracts. This adoption was accounted for using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as a $2.9 million adjustment to the January 1, 2018 opening balance of retained earnings.

A majority of our sales revenue continues to be recognized when products are shipped from our manufacturing facilities. For certain custom product and tooling sales where revenue was previously recognized when the products were shipped, we now recognize revenue over the time required to manufacture the product or build the tool in accordance with the new revenue standard. We also have certain extended warranty contracts, which under the new standard are considered a separate performance obligation and are required to be deferred and recognized into revenue over the life of the agreement.

In January 2016, the FASB issued ASU 2016-1, which provides guidance on the classification and measurement of financial assets and liabilities (equity securities and financial liabilities) under the fair value option and the presentation and disclosure requirements for financial instruments. In February 2018, ASU 2018-3 was issued to clarify certain aspects of the guidance issued in January 2016. The guidance modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any related changes in fair value in net income unless the investments qualify for the new practicality exception. A measurement alternative exists for those equity investments that do not have a readily determinable fair value. These investments may be measured at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. The standard also includes a new impairment model for equity investments without readily determinable fair values. The new model is a single-step model under which we are required to perform a qualitative assessment each reporting period to identify impairment. When a qualitative assessment indicates that an impairment exists, we will estimate the fair value of the investment and recognize in current earnings an impairment loss equal to the difference between the fair value and the carrying amount of the equity investment. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017. We adopted the requirements of this standard during the first quarter of 2018.

In November 2016, the FASB issued ASU 2016-18, which provides guidance to address the diversity in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in this standard require that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017. We adopted the requirements of this standard during the first quarter of 2018 and appropriate disclosures are included on the statement of cash flows to the extent applicable.

In January 2017, the FASB issued ASU 2017-4, which provides guidance to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As a result, impairment charges are required for the amount by which a reporting unit’s carrying amount exceeds its fair value up to the amount of its allocated goodwill. We adopted the standard on January 1, 2020 and did not record any impairment charges.

In February 2018, the FASB issued ASU 2018-2, which provides guidance on the reclassification of certain tax effects from accumulated other comprehensive income. This guidance allows for the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("TCJA"). The new standard is effective for fiscal years and interim periods beginning after December 15, 2018. We elected to early adopt this standard in the fourth quarter of 2018. As part of this adoption, we elected to reclassify$6.7 million of stranded income tax effects of the TCJA from accumulated other comprehensive income to retained earnings at the beginning of the fourth quarter of 2018.

In August 2018, the FASB issued ASU 2018-15 to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. We adopted the standard on January 1, 2020 and no material impacts were noted.

In August 2018, the FASB issued ASU 2018-13, which amends disclosure requirements for fair value measurements. The new standard modifies disclosure requirements including removing requirements to disclose the valuation process for Level 3 measurements and adding requirements to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. We adopted the standard on January 1, 2020 and no material impacts were noted.

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In August 2018, the FASB issued ASU 2018-14, which amends disclosure requirements for defined benefit pension and other postretirement plans. The amendments in this update remove disclosures that are no longer considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. We adopted the standard during the fourth quarter of 2020 and appropriate disclosures are included in the notes to the financials statement to the extent applicable. The provisions of the new standard do not have any effect on the Company's financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as well as the clarifying amendments subsequently issued. We applied the guidance using a modified retrospective approach and accordingly recognized an amount of $1.4 million as the cumulative adjustment to opening retained earnings in the first quarter of 2020. This is based on management's best estimates of specific losses on individual exposures particularly on current trade receivables, as well as the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. On an ongoing basis, we will contemplate forward-looking economic conditions in recording lifetime expected credit losses for our financial assets measured at cost, such as our trade receivables and certain other assets.

Other accounting standards that have been issued by the FASB or other standards-setting bodies did not have a material impact on our consolidated financial statements.

NOTE 2 REVENUE

Revenue by segment and geography based on shipped from locations for the years ended December 31, 2020, 2019, and 2018 is as follows:

For the Year Ended December 31, 2020

Segment Europe Domestic LatinAmerica Asia Total

For the Year Ended December 31, 2019

Segment Europe Domestic LatinAmerica Asia Total

For the Year Ended December 31, 2018

Segment Europe Domestic LatinAmerica Asia Total

We perform our obligations under a contract with a customer by transferring goods and/or services in exchange for consideration from the customer. The timing of performance will sometimes differ from the timing of the receipt of the associated consideration from the customer, thus resulting in the recognition of a contract asset or a contract liability. We recognize a contract asset when we transfer control of goods or services to a customer prior to invoicing for the related performance obligation. The contract asset is transferred to accounts receivable when the product is shipped and invoiced to the customer. We recognize a contract liability if the customer's payment of consideration precedes the entity's performance.

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The opening and closing balances of our contract asset and contract liabilities are as follows:

(opening) (closing)

Contract asset (long-term) $ — $ — $ —

The differences in the opening and closing balances of our contract asset and contract liabilities are primarily the result of timing differences between our performance and the customer’s payment. The total amount of revenue recognized during 2020 against contract liabilities is $107.7 million, including$57.8 million relating to contract liabilities at the beginning of the year. Current contract assets and long-term contract assets are included within the Prepaid and Other and Miscellaneous assets, respectively, while current contract liabilities and long-term contract liabilities are included within Accounts Payable, Accrued and Other Liabilities and Deferred and Other Non-current Liabilities, respectively, within our Consolidated Balance Sheets.

Determining the Transaction Price

In most cases, the transaction price for each performance obligation is stated in the contract. In determining the variable amounts of consideration within the transaction price (such as volume-based customer rebates), we include an estimate of the expected amount of consideration as revenue. We apply the expected value method based on all of the information (historical, current, and forecast) that is reasonably available and identifies reasonable estimates based on this information. We apply the method consistently throughout the contract when estimating the effect of an uncertainty on the amount of variable consideration to which it will be entitled.

Product Sales

We primarily manufacture and sell drug delivery, dispensing, sealing, and active packaging solutions. The amount of consideration is typically fixed for such customers. At the time of delivery, the customer is invoiced the agreed-upon price. Revenue from product sales is typically recognized upon manufacture or shipment, when control of the goods transfers to the customer.

To determine when the control transfers, we typically assess, among other things, the shipping terms of the contract, shipping being one of the indicators of transfer of control. A majority of product sales are sold FOB shipping point. For FOB shipping point shipments, control of the goods transfers to the customer at the time of shipment of the goods. Once the goods are shipped, we are precluded from redirecting the shipment to another customer. Therefore, our performance obligation is satisfied at the time of shipment. With respect to FOB destination sales, shipping and/or handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs and revenue is recorded upon final delivery to the customer location. We have elected to account for shipping and handling costs that occur after the customer has obtained control of a good as fulfillment costs rather than as a promised service. We do not have any material significant payment terms as payment is typically received shortly after the point of sale.

There also exist instances where we manufacture highly customized products that have no alternative use to us and for which we have an enforceable right to payment for performance completed to date. For these products, we transfer control and recognizes revenue over time by measuring progress towards completion using the Output Method based on the number of products produced. As we normally make our products to a customer’s order, the time between production and shipment of our products is typically within a few weeks. We believe this measurement provides a faithful depiction of the transfer of goods as the costs incurred reflect the value of the products produced.

As a part of its customary business practice, we offer a standard warranty that the products will materially comply with the technical specifications and will be free from material defects. Because such warranties are not sold separately, do not provide for any service beyond a guarantee of a product’s initial specifications, and are not required by law, there is no revenue deferral for these types of warranties.

Tooling Sales

We also build or contract for molds and other tools (collectively defined as “tooling”) necessary to produce our products. As with product sales, we recognize revenue when control of the tool transfers to the customer. If the tooling is highly customized with no alternative use to us and we have an enforceable right to payment for performance completed to date, we transfer control and recognize revenue over time by measuring progress towards completion using the Input Method based on costs incurred relative to total estimated costs to completion. Otherwise, revenue for the tooling is recognized at the point in time when the customer approves the tool. We do not have any material significant payment terms as payment is typically either received during the mold-build process or shortly after completion.

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In certain instances, we offer extended warranties on our tools above and beyond the normal standard warranties. We normally receive payment at the inception of the contract and recognize revenue over the term of the contract. At December 31, 2019,$515 thousand of unearned revenue associated with outstanding contracts was reported in Accounts Payable, Accrued and Other Liabilities. At December 31, 2020, the unearned amount was$536 thousand. We expect to recognize approximately $136 thousandof the unearned amount in 2021 and $400 thousandthereafter.

Service Sales

We also provide services to our pharmaceutical customers. As with product sales, we recognize revenue based on completion of each performance obligation of the service contract.

Contract Costs

We do not incur significant costs to obtain or fulfill revenue contracts.

Credit Risk

We are exposed to credit losses primarily through our product sales, tooling sales and services to our customers. We assess each customer’s ability to pay for the products we sell by conducting a credit review. The credit review considers our expected billing exposure and timing for payment and the customer’s established credit rating or our assessment of the customer’s creditworthiness based on our analysis of their financial statements when a credit rating is not available. We also consider contract terms and conditions, country and political risks, and business strategy in our evaluation. A credit limit is established for each customer based on the outcome of this review.

We monitor our ongoing credit exposure through active review of customer balances against contract terms and due dates. Our activities include timely account reconciliation, dispute resolution and payment confirmation. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

Current uncertainty in credit and market conditions due to the COVID-19 pandemic may slow our collection efforts if customers experience significant difficulty accessing credit and paying their obligations, which may lead to higher than normal accounts receivable and increased CECL charges

Practical Expedients

Significant financing component: We elected not to adjust the promised consideration for the time value of money for contracts where the difference between the time of payment and performance is one year or less.

Remaining performance obligations: We elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for our contracts that are one year or less, as the revenue is expected to be recognized within the next year. In addition, we have elected not to disclose the expected consideration related to performance obligations where we recognize revenue in the amount it has a right to invoice (e.g., usage-based pricing terms).

NOTE 3 INVENTORIES

Inventories, by component net of reserves, consisted of:

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NOTE 4 GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the year ended December 31, 2020 are as follows by reporting segment:

Pharma Beauty +Home Food +Beverage Corporate& Other Total

Accumulated impairment losses — — — (1,615) (1,615)

Accumulated impairment losses — — — (1,615) (1,615)

Accumulated impairment losses — — — (1,615) (1,615)

We have completed the annual impairment analysis of our reporting units as of October 1, 2020 using a discounted cash flow analysis for each of our reporting units. Based on our review of macroeconomic, industry, and market events and circumstances as well as the overall financial performance of the reporting units, we determined that it was more likely than not that the fair value of these reporting units was greater than their carrying amounts. No impairment was recognized during the years ended December 31, 2020, 2019 or 2018.

The table below shows a summary of intangible assets for the years ended December 31, 2020 and 2019.

Amortized intangible assets:

Aggregate amortization expense for the intangible assets above for the years ended December 31, 2020, 2019 and 2018 was$39,787,$27,608and$15,455, respectively.

Future estimated amortization expense for the years ending December 31 is as follows:

Future amortization expense may fluctuate depending on changes in foreign currency rates. The estimates for amortization expense noted above are based upon foreign exchange rates as of December 31, 2020.

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NOTE 5 ACCOUNTS PAYABLE, ACCRUED AND OTHER LIABILITIES

At December 31, 2020 and 2019, accounts payable, accrued and other liabilities consisted of the following:

Customer deposits and other unearned income 87,052 86,820

NOTE 6 INCOME TAXES

On December 22, 2017, the U.S. enacted the TCJA, which significantly changed U.S. tax law. The TCJA lowered the Company’s U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018, while imposing a deemed repatriation tax on previously deferred foreign income.

Income before income taxes consists of:

The provision (benefit) for income taxes is composed of:

Current:

Deferred:

A reconciliation of the provision for income taxes with the amount computed by applying the statutory federal income tax rate of 21% to income before provision for income taxes is as follows:

State income taxes (benefits), net of federal tax effect 2,396 2,622 (1,516)

Excess tax benefits from share-based compensation (11,625) (15,370) (13,400)

Deferred tax charges (benefits), incl. tax rate changes 4,110 — (2,800)

U.S. tax reform - transition tax — — (2,570)

Effective income tax rate 28.9 % 29.2 % 26.8 %

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The 2020 provision for income tax was favorably impacted by excess tax benefits on deductible share-based compensation. The tax provision for 2020 reflects a $11.6 million benefit from this item. The 2020 tax provision reflects a one-time adjustment of U.S. GILTI tax in response to regulations issued by the U.S. Department of the Treasury in July 2020. The 2020 provision also reflects a $3.0 million deferred tax charge to reflect a prior year true-up. Since a majority of our pretax income is earned in higher tax jurisdictions, this mix of income has an unfavorable tax rate impact.

The 2019 tax provision was favorably impacted by excess tax benefits on deductible share-based compensation. The tax provision for 2019 reflects a $15.4 million benefit from this item. The mix of pretax income has an unfavorable impact, because the majority of our income is earned in higher tax jurisdictions. Additionally, we have incurred losses in jurisdictions where we cannot tax effect the loss.

The 2018 tax provision was favorably impacted by excess tax benefits on deductible stock compensation. The tax provision for 2018 reflects a $13.4 million benefit from this item. The mix of pretax income has an unfavorable impact, reflecting that the majority of our income is earned in higher tax jurisdictions. The U.S. GILTI tax and BEAT also had a $5.6 million unfavorable impact.

Significant deferred tax assets and liabilities as of December 31, 2020 and 2019 are composed of the following temporary differences:

Deferred Tax Assets:

Deferred Tax Liabilities:

Net deferred tax assets (liabilities) $ 5,169 $ (8,873)

We evaluate the deferred tax assets and record a valuation allowance when it is believed it is more likely than not that the benefit will not be realized. We have established a valuation allowance for $16.7 million of the $19.4 million of tax effected net operating loss carryforwards. These losses are generally in locations that have not produced cumulative three year operating profit. A valuation allowance of $3.7 million has also been established against the $7.0 million of U.S. state tax credit carryforwards.

The U.S. federal tax credits will expire in the years 2026 and 2027. There is no expiration date on $15.8 million of the tax-effected net operating loss carryforwards and $3.6 million (tax effected) will expire in the years 2020 to 2038. The U.S. state tax credit carryforwards of $7.0 million (tax effected) will expire in the years 2021 to 2034.

None of the non-U.S. unremitted earnings will be subject to U.S. taxation. Aside from the pre-2020 earnings in Italy, Switzerland, and Colombia, we maintain our assertion that all other cash and distributable reserves at our non-U.S. affiliates will continue to be indefinitely reinvested. We estimate the amount of additional local and withholding tax that would be payable on distributions to be in the range of $15 million to $25 million.

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We have not provided for taxes on certain tax-deferred income related to a foreign operation. The income arose predominately from government grants. Taxes of approximately $1.5 million would become payable in the event the terms of the grant are not fulfilled.

Income Tax Uncertainties

We provide a liability for the amount of tax benefits realized from uncertain tax positions. A reconciliation of the beginning and ending amount of income tax uncertainties is as follows:

Increases based on tax positions for the current year 212 412 360

Increases based on tax positions of prior years 790 663 610

Lapse of statute of limitations (145) (429) —

The amount of income tax uncertainties that, if recognized, would impact the effective tax rate is approximately $4.5 million. We estimate that it is reasonably possible that the liability for uncertain tax positions will decrease no more than $2.6 million in the next twelve months from the resolution of various uncertain positions as a result of the completion of tax audits, litigation and the expiration of the statute of limitations in various jurisdictions.

We recognize interest and penalties accrued related to unrecognized tax benefits as a component of income taxes. As of December 31, 2020, 2019 and 2018, we had approximately $3.6 million, $1.7 million and $1.9 million, respectively, accrued for the payment of interest and penalties, of which approximately none and $0.2 million were recognized as a tax benefit for the years ended 2020 and 2019, respectively, and $0.4 million was recognized in income tax expense in the year ended December 31, 2018.

Aptar or its subsidiaries file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. The major tax jurisdictions we file in, with the years still subject to income tax examinations, are listed below:

Major TaxJurisdiction Tax YearsSubject toExamination

NOTE 7 DEBT

Notes Payable, Revolving Credit Facility and Overdrafts

At December 31, 2020 and 2019, our notes payable, revolving credit facility and overdrafts, consisted of the following:

We maintain a multi-currency revolving credit facility with two tranches that matures in July 2022 which provides for unsecured financing of up to $300 million that is available in the U.S. and up to €150 million that is available to our wholly-owned UK subsidiary. We utilized $52 million under our U.S. facility and no balance was utilized under our euro-based revolving credit facility as of December 31, 2020. We utilized $25 million under our U.S. facility and no balance was utilized under our euro-based revolving credit facility as of December 31, 2019.

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There are no compensating balance requirements associated with our revolving credit facility. Each borrowing under the credit facility will bear interest at rates based on LIBOR, prime rates or other similar rates, in each case plus an applicable margin. A facility fee on the total amount of the facility is also payable quarterly, regardless of usage. The applicable margins for borrowings under the credit facility and the facility fee percentage may change from time to time depending on changes in AptarGroup’s consolidated leverage ratio. We incurred approximately $2.5 million and $1.5 million in interest and fees related to this credit facility during both 2020 and 2019.

Average borrowings under the revolving credit facility and notes payable were$108.1 million and$34.1 million for 2020 and 2019, respectively. The average annual interest rate on the revolving credit facility and notes payable was1.5%and1.6%for 2020 and 2019, respectively.

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, 2020.

Long-Term Obligations

At December 31, 2020 and 2019, our long-term obligations consisted of the following:

Unamortized debt issuance costs (1,663) (2,241)

Current maturities of long-term obligations (65,666) (65,988)

The aggregate long-term maturities, excluding finance lease liabilities, which are discussed in Note 8, due annually for the next five years and thereafter are:

Covenants

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

Requirement Level at December 31, 2020

Consolidated Leverage Ratio (1) Maximum of 3.50 to 1.00 1.63 to 1.00

Consolidated Interest Coverage Ratio (1) Minimum of 3.00 to 1.00 16.86 to 1.00

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

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NOTE 8 LEASE COMMITMENTS

We lease certain warehouse, plant, and office facilities as well as certain equipment under noncancelable operating and finance leases expiring at various dates through the year 2034. Most of the operating leases contain renewal options and certain leases include options to purchase the related asset during or at the end of the lease term.

Amortization expense related to finance leases is included in depreciation expense while rent expense related to operating leases is included within cost of sales and selling research & development and administrative expenses (“SG&A”).

The components of lease expense for the years ended December 31, 2020 and 2019 were as follows:

Finance lease cost:

Amortization of right-of-use assets $ 3,982 $ 4,217

Interest on lease liabilities 1,414 1,353

Short-term lease and variable lease costs $ 9,421 $ 8,629

Supplemental cash flow information related to leases was as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 23,484 $ 21,872

Operating cash flows from finance leases 1,372 1,245

Financing cash flows from finance leases 4,436 4,730

Right-of-use assets obtained in exchange for lease obligations:

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Supplemental balance sheet information related to leases was as follows:

Operating Leases

Operating lease right-of-use assets $ 69,845 $ 72,377

Accounts payable, accrued and other liabilities $ 18,804 $ 16,578

Total operating lease liabilities $ 71,016 $ 71,854

Finance Leases

Property, plant and equipment, gross $ 49,760 $ 47,020

Property, plant and equipment, net $ 42,502 $ 42,749

Long-term obligations, net of unamortized debt issuance cost 25,767 25,634

Weighted Average Remaining Lease Term (in years)

Operating leases 5.0 6.1

Finance leases 7.2 7.0

Weighted Average Discount Rate

Maturities of lease liabilities as of December 31, 2020, were as follows:

OperatingLeases FinanceLeases

As of December 31, 2020, we have additional operating leases that have not yet commenced of$0.1 million and no finance leases that have not yet commenced. These operating leases will commence in 2021 with lease terms of3to4 years.

NOTE 9 RETIREMENT AND DEFERRED COMPENSATION PLANS

We have various noncontributory retirement plans covering certain of our domestic and foreign employees. Benefits under our retirement plans are based on participants’ years of service and annual compensation as defined by each plan. Annual cash contributions to fund pension costs accrued under our domestic plans are generally at least equal to the minimum funding amounts required by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Certain pension commitments under our foreign plans are also funded according to local requirements or at our discretion.

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Effective January 1, 2021, the domestic plans were amended to provide that no individual who became an employee after December 31, 2020 could become a participant and that no employee whose employment terminated and who was rehired after December 31, 2020 may accrue benefits under the plans with respect to the period of employment which begins on the date that his reemployment commences. These employees will instead be eligible for additional contribution to their defined contribution 401(k) employee savings plan. All domestic employees with hire/rehire dates prior to January 1, 2021 will still be eligible for the domestic pension plans and will still continue to accrue plan benefits after this date.

The following table presents the changes in the benefit obligations and plan assets for the most recent two years for our domestic and foreign plans.

Domestic Plans Foreign Plans

Change in benefit obligation:

Special termination benefit charge — — — 64

Plan Amendment — — — 18

Curtailment/Settlement — — — (271)

Transfer — — — 939

Prior service cost — — (2,701) (451)

Foreign currency translation adjustment — — 11,252 (2,109)

Domestic Plans Foreign Plans

Change in plan assets:

Transfer — — — 359

Foreign currency translation adjustment — — 6,508 (1,425)

The following table presents the funded status amounts recognized in our Consolidated Balance Sheets as of December 31, 2020 and 2019.

Domestic Plans Foreign Plans

Non-current assets $ — $ — $ 81 $ 938

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The following table presents the amounts not recognized as components of periodic benefit cost that are recognized in accumulated other comprehensive loss as of December 31, 2020 and 2019.

Domestic Plans Foreign Plans

Net prior service cost — — 675 3,774

Changes in benefit obligations and plan assets recognized in other comprehensive income in 2020, 2019 and 2018 are as follows:

Domestic Plans

Foreign Plans

Current year actuarial (loss) gain $ (2,530) $ (11,999) $ 534

Current year prior service cost 2,701 451 (35)

Transfer Prior service Cost — (18) —

Transfer Actuarial (loss) gain — (126) —

Recognition due to curtailment — — 1,692

Amortization of prior service cost 398 449 720

Components of net periodic benefit cost:

Domestic Plans

Foreign Plans

Amortization of prior service cost 398 449 720

Special termination benefit charge — 65 62

The accumulated benefit obligation (“ABO”) for our domestic defined benefit pension plans was $249.8 million and$205.3 million at 2020 and 2019, respectively. The ABO for our foreign defined benefit pension plans was$103.1 million and$91.8 million at December 31, 2020 and 2019, respectively.

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The following table provides the projected benefit obligation (“PBO”), ABO, and fair value of plan assets for all pension plans with an ABO in excess of plan assets as of December 31, 2020 and 2019.

Domestic Plans Foreign Plans

The following table provides the PBO, ABO and fair value of plan assets for all pension plans with a PBO in excess of plan assets as of December 31, 2020 and 2019.

Domestic Plans Foreign Plans

Assumptions:

Domestic Plans Foreign Plans

We develop the expected long-term rate of return assumptions based on historical experience and by evaluating input from the plans’ asset managers, including the managers’ review of asset class return expectations and benchmarks, economic indicators and long-term inflation assumptions.

In order to determine the 2021 net periodic benefit cost, we expect to use the December 31, 2020 discount rates, December 31, 2020 rates of compensation increase assumptions and the same assumed long-term returns on domestic and foreign plan assets used for the 2020 net periodic benefit cost.

Our domestic and foreign pension plan weighted-average asset allocations at December 31, 2020 and 2019 by asset category are as follows:

Plan Assets:

Domestic Plans Assets at December 31, Foreign Plans Assets at December 31,

Equity securities 48 % 49 % 5 % 4 %

Fixed income securities 28 % 29 % 1 % 1 %

Corporate debt securities — — 2 % 3 %

Infrastructure 7 % 6 % — —

Hedge funds 10 % 10 % — —