AMETEK, INC. 
This report includes forward-looking statements based on the Company's current assumptions, expectations and projections about future events. When used in this report, the words "believes," "anticipates," "may," "expect," "intend," "estimate," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. In this report, the Company discloses important factors that could cause actual results to differ materially from management's expectations. For more information on these and other factors, see "Forward-Looking Information" herein. The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with "Item 1A. Risk Factors," and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Business Overview
AMETEK's operations are affected by global, regional and industry economic factors. However, the Company's strategic geographic and industry diversification, and its mix of products and services, have helped to mitigate the potential adverse impact of any unfavorable developments in any one industry or the economy of any single country on its consolidated operating results. In 2021, the Company posted record sales, operating income, operating margins, net income, diluted earnings per share, backlog, and orders. The Company's record backlog, contributions from recent acquisitions, and continued focus on and implementation of Operating Excellence initiatives, had a positive impact on 2021 results. The Company also benefited from its strategic initiatives under AMETEK's four key strategies: Operational Excellence, Strategic Acquisitions, Global & Market Expansion and New Products.
Highlights of 2021 were:
•Net sales for 2021 were a record$5,546.5 million , an increase of$1,006.5 million or 22.2%, compared with net sales of$4,540.0 million in 2020. The increase in net sales for 2021 was due to a 15% organic sales increase, a 7% increase from acquisitions, and a favorable 1% effect of foreign currency translation, partially offset by an unfavorable divestiture impact.
•Net income for 2021 was a record
•Diluted earnings per share for 2021 were a record
•Orders for 2021 were a record$6,474.4 million , an increase of$1,850.0 million or 40.0%, compared with$4,624.4 million in 2020. The increase in orders was due to a 26% organic order increase, a favorable 15% from acquisitions, partially offset by an unfavorable 1% effect of foreign currency translation. As a result, the Company's backlog of unfilled orders atDecember 31, 2021 was a record$2,730.1 million .
•During 2021, the Company spent
•In
•In
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•In
•InApril 2021 , AMETEK acquiredNSI-MI Technologies ("NSI-MI"), a leading provider of radio frequency and microwave test and measurement systems for niche applications across the aerospace, defense, automotive, wireless communications, and research markets. •InApril 2021 , AMETEK acquiredAbaco Systems, Inc. ("Abaco"), specializing in open-architecture computing and electronic systems for aerospace, defense, and specialized industrial markets and is a leading provider of mission critical embedded computing systems. •InNovember 2021 , AMETEK acquired Alphasense, a leading provider of gas and particulate sensors for use in environmental, health and safety, and air quality applications. •Cash flow provided by operating activities for 2021 was$1,160.5 million . Free cash flow (cash flow provided by operating activities less capital expenditures) was$1,049.8 million in 2021.
•EBITDA (earnings before interest, income taxes, depreciation, and amortization)
was a record
•The Company continued its emphasis on investment in research, development and engineering, spending$299.6 million in 2021. Sales from products introduced in the past three years were$1,244.0 million .
Impact of COVID-19 Pandemic on our Business
The COVID-19 pandemic resulted in significant global economic disruption and had an adverse impact on our financial results throughout 2020. As the global economy has begun to recover, we eliminated certain of the temporary cost saving actions put in place in 2020, but continue to closely monitor fixed costs, capital expenditure plans, inventory, and capital resources to respond to changing conditions and to ensure we have the resources to meet our future needs. We have experienced sequential improvement in our financial results since the third quarter of 2020, and this trend has continued throughout 2021. The current economic environment in which we operate is characterized by increased material cost inflation, logistics challenges, labor availability issues, and component part shortages. As we move into 2022, we continue to monitor and closely manage through these conditions and have taken steps to mitigate the impacts of the challenging economic environment. We are closely tracking developments regarding vaccine mandates. Until it was prohibited by a federal court order inDecember 2021 , we had taken steps to comply with the federal contractor vaccine mandate, requiring employees in ourU.S. workforce to be fully vaccinated against COVID-19 byJanuary 18, 2022 , except in limited circumstances. Although the federal contractor mandate has been temporarily suspended, pending the outcome of an appeal, we continue to encourage all employees to be vaccinated, including booster shots. If the mandate is reinstated, or new mandates implemented, it is uncertain to what extent compliance with such vaccine mandates may result in workforce attrition. Our top priority during this pandemic is the health and safety of our employees. All global manufacturing facilities remained fully operational during 2021 and continue to operate with safety protocols in place to ensure the health and safety of our employees and communities. We will continue to evaluate the nature and extent of future impacts of the COVID-19 pandemic on its business. Please refer to "Risk Factors", Part I, Item 1A of this Form 10-K for more information. 24
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Results of Operations
The following table sets forth net sales and income by reportable segment and on
a consolidated basis:
Year Ended December 31,
2021 2020 2019
(In thousands)
Net sales:
Electronic Instruments $ 3,763,758 $ 2,989,928 $ 3,322,881
Electromechanical 1,782,756 1,550,101 1,835,676
Consolidated net sales $ 5,546,514 $ 4,540,029 $ 5,158,557
Operating income and income before income taxes:
Segment operating income:
Electronic Instruments $ 958,183 $ 770,620 $ 865,307
Electromechanical 437,378 324,962 387,931
Total segment operating income 1,395,561 1,095,582 1,253,238
Corporate administrative expenses (86,891) (67,698) (75,858)
Consolidated operating income 1,308,670 1,027,884 1,177,380
Interest expense (80,381) (86,062) (88,481)
Other (expense) income, net (5,119) 140,487 (19,151)
Consolidated income before income taxes $ 1,223,170 ______________________
The following "Results of Operations of the year endedDecember 31, 2021 compared with the year endedDecember 31, 2020 " section presents an analysis of the Company's consolidated operating results displayed in the Consolidated Statement of Income. A discussion regarding our financial condition and results of operations for the year endedDecember 31, 2020 compared to the year endedDecember 31, 2019 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 , filed with theSecurities and Exchange Commission onFebruary 18, 2021 .
Results of Operations for the year ended
Net sales for 2021 were a record
Total international sales for 2021 were a record$2,745.6 million or 49.5% of net sales, an increase of$535.7 million or 24.2%, compared with international sales of$2,209.9 million or 48.7% of net sales in 2020. The increase in international sales was primarily driven by strong demand inEurope andAsia as well as contributions from recent acquisitions. Export shipments fromthe United States , which are included in total international sales, were$1,475.6 million in 2021, an increase of$279.2 million or 23.3%, compared with$1,196.4 million in 2020. Orders for 2021 were a record$6,474.4 million , an increase of$1,850.0 million or 40.0% compared with$4,624.4 million in 2020. The increase in orders was due to a 26% organic order increase, a favorable 15% from acquisitions, partially offset by an unfavorable 1% effect of foreign currency translation. The Company's backlog of unfilled orders atDecember 31, 2021 was a record$2,730.1 million , an increase of$927.9 million or 51.5%, compared with$1,802.2 million atDecember 31, 2020 . 25
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Segment operating income for 2021 was$1,395.6 million , an increase of$300.0 million or 27.4%, compared with segment operating income of$1,095.6 million in 2020. Segment operating income, as a percentage of net sales, increased to 25.2% in 2021, compared with 24.1% in 2020. The Company recorded 2020 realignment costs of$43.7 million in response to the impact of a weak global economy as a result of the COVID-19 pandemic. The 2020 realignment costs were composed of$35.3 million in severance costs for a reduction of workforce and$8.4 million of asset write-downs, primarily inventory, which decreased margins by 100 basis points. Segment operating income and segment operating margins were positively impacted in 2021 by the increase in net sales discussed above as well as the Company's Operational Excellence initiatives, including ongoing savings from the 2020 realignment actions. Cost of sales for 2021 was$3,633.9 million or 65.5% of net sales, an increase of$637.4 million or 21.3%, compared with$2,996.5 million or 66.0% of net sales for 2020. The cost of sales increase was primarily due to the net sales increase discussed above. The 2020 cost of sales included the realignment costs discussed above. Selling, general and administrative expenses for 2021 were$603.9 million or 10.9% of net sales, an increase of$88.3 million or 17.1%, compared with$515.6 million or 11.4% of net sales in 2020. Selling, general and administrative expenses increased primarily due to the increase in net sales discussed above. Consolidated operating income was a record$1,308.7 million or a record 23.6% of net sales for 2021, an increase of$280.8 million or 27.3%, compared with$1,027.9 million or 22.6% of net sales in 2020. The consolidated operating income and operating income margins were positively impacted in 2021 by the increase in net sales discussed above as well as the benefits of the Company's Operational Excellence initiatives. The 2021 acquisitions of Abaco,Magnetrol ,NSI-MI ,Crank Software , EGS, and Alphasense diluted operating margins by 110 basis points. Excluding the acquisitions, operating income margins would have been 24.7% for 2021. The consolidated operating income margins were negatively impacted by 100 basis points in 2020 due to the realignment costs discussed above. Other expense, net was$5.1 million for 2021, compared with$140.5 million of other income in 2020, a change of$145.6 million . InMarch 2020 , the Company completed the sale of its Reading Alloys business ("Reading") toKymera International for net proceeds of$245.3 million in cash. The sale resulted in a pre-tax gain of$141.0 million . The effective tax rate for 2021 was 19.1%, compared with 19.4% in 2020. See Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further details. Net income for 2021 was a record$990.1 million , an increase of$117.7 million or 13.5%, compared with$872.4 million in 2020. The net of tax gain of$109.6 million on the sale of Reading and net of tax expense of$33.6 million on the 2020 realignment costs are included in net income in 2020. Diluted earnings per share for 2021 were a record$4.25 , an increase of$0.48 or 12.7%, compared with$3.77 per diluted share in 2020. The net of tax gain of$0.47 per diluted share on the sale of Reading and net of tax expense of$0.15 per diluted share on the 2020 realignment costs are included in diluted earnings per share in 2020. Segment Results EIG's net sales totaled$3,763.8 million for 2021, an increase of$773.9 million or 25.9%, compared with$2,989.9 million in 2020. The net sales increase was due to a 14% organic sales increase, an 11% increase from acquisitions, and a favorable 1% effect of foreign currency translation. EIG's operating income was$958.2 million for 2021, an increase of$187.6 million or 24.3%, compared with$770.6 million in 2020. EIG's operating margins were 25.5% of net sales for 2021, compared with 25.8% of net sales in 2020. EIG's operating income and operating margins in 2021 were positively impacted by the sales increase discussed above as well as the Company's Operational Excellence initiatives. The 2021 acquisitions of Abaco,Magnetrol ,NSI-MI ,Crank Software , and Alphasense diluted operating margins by 180 basis points. Excluding the 26
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acquisitions, EIG operating margins would have been 27.3% for 2021. EIG's operating margins were negatively impacted in 2020 by 70 basis points due to the 2020 realignment costs discussed above.
EMG's net sales totaled$1,782.8 million for 2021, an increase of$232.7 million or 15.0%, compared with$1,550.1 million in 2020. The net sales increase was due to a 15% organic sales increase, a favorable 1% effect of foreign currency translations, partially offset by an unfavorable 1% impact from the Reading divestiture. EMG's operating income was$437.4 million for 2021, an increase of$112.4 million or 34.6%, compared with$325.0 million in 2020. EMG's operating margins were 24.5% of net sales for 2021, compared with 21.0% of net sales in 2020. EMG's operating income and operating margins in 2021 were positively impacted by the sales increase discussed above as well as the Company's Operational Excellence initiatives. EMG's 2020 operating margins were negatively impacted by 130 basis points due to the 2020 realignment costs discussed above.
Liquidity and Capital Resources
Cash provided by operating activities totaled$1,160.5 million in 2021, a decrease of$120.5 million or 9.4%, compared with$1,281.0 million in 2020. The decrease in cash provided by operating activities for 2021 was primarily due to higher working capital requirements, partially offset by higher net income, net of the gain on the sale of the Reading business in 2020. Free cash flow (cash flow provided by operating activities less capital expenditures) was$1,049.8 million in 2021, compared with$1,206.8 million in 2020. EBITDA (earnings before interest, income taxes, depreciation and amortization) was a record$1,594.3 million in 2021, compared with$1,421.6 million in 2020. Free cash flow and EBITDA are presented because the Company is aware that they are measures used by third parties in evaluating the Company. (See "Non-GAAP Financial Measures" for a reconciliation ofU.S. GAAP measures to comparable non-GAAP measures). Cash used by investing activities totaled$2,055.8 million in 2021, compared with cash provided by investing activities of$61.6 million in 2020. In 2021, the Company paid$1,959.2 million , net of cash acquired, to purchase Abaco Systems,Magnetrol International ,NSI-MI Technologies ,Crank Software , EGS Automation, and Alphasense compared to$116.5 million to acquire IntelliPower in 2020. In 2020, the Company received proceeds of$245.3 million from the sale of its Reading business. Additions to property, plant and equipment totaled$110.7 million in 2021, compared with$74.2 million in 2020. Cash provided by financing activities totaled$39.3 million in 2021, compared with$539.4 million of cash used by financing activities in 2020. AtDecember 31, 2021 , total debt, net was$2,544.2 million , compared with$2,413.7 million atDecember 31, 2020 . In 2021, total borrowings increased by$183.9 million , driven by the 2021 acquisitions, compared with a decrease of$430.9 million in 2020. AtDecember 31, 2021 , the Company had available borrowing capacity of$2,447.5 million under its revolving credit facility and term loan, including the$500 million accordion feature. OnApril 26, 2021 , the Company along with certain of its foreign subsidiaries amended its credit agreement dated as ofSeptember 22, 2011 , as amended and restated as ofMarch 10, 2016 and as further amended and restated as ofOctober 30, 2018 , with the lenders,JPMorgan Chase Bank, N.A ., asAdministrative Agent andBank of America, N.A .,PNC Bank, National Association ,Trust Bank andWells Fargo Bank, National Association , as Co-Syndication Agents. The credit agreement amends the Company's existing revolving credit facility to add a new five-year, delayed draw, term loan for up to$800 million . The credit agreement places certain restrictions on allowable additional indebtedness. InNovember 2021 , the Company further amended the Credit Agreement to address the cessation of LIBOR on certain currencies. AtDecember 31, 2021 , the Company had$150.0 million outstanding on the term loan. In the fourth quarter of 2021,55 million Swiss franc ($59.7 million ) 2.44% senior note matured and was paid. In the third quarter of 2020, an80 million British pound ($102.9 million ) 4.68% senior note matured and was paid. The debt-to-capital ratio was 27.0% atDecember 31, 2021 , compared with 28.9% atDecember 31, 2020 . The net 27
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debt-to-capital ratio (total debt, net less cash and cash equivalents divided by the sum of net debt and stockholders' equity) was 24.2% atDecember 31, 2021 , compared with 16.8% atDecember 31, 2020 . The net debt-to-capital ratio is presented because the Company is aware that this measure is used by third parties in evaluating the Company. (See "Non-GAAP Financial Measures" for a reconciliation ofU.S. GAAP measures to comparable non-GAAP measures). In 2021, the Company repurchased approximately 113,000 shares of its common stock for$14.7 million , compared with$4.7 million used for repurchases of approximately 55,000 shares in 2020. AtDecember 31, 2021 ,$469.7 million was available under the Company's Board of Directors authorization for future share repurchases. Additional financing activities for 2021 included cash dividends paid of$184.6 million , compared with$165.0 million in 2020. OnFebruary 11, 2021 , the Company's Board of Directors approved an 11% increase in the quarterly cash dividend on the Company's common stock to$0.20 per common share from$0.18 per common share. Proceeds from the exercise of employee stock options were$60.3 million in 2021, compared with$64.9 million in 2020. As a result of all of the Company's cash flow activities in 2021, cash and cash equivalents atDecember 31, 2021 totaled$346.8 million , compared with$1,212.8 million atDecember 31, 2020 . AtDecember 31, 2021 , the Company had$334.0 million in cash outsidethe United States , compared with$344.0 million atDecember 31, 2020 . The Company utilizes this cash to fund its international operations, as well as to acquire international businesses. The Company is in compliance with all covenants, including financial covenants, for all of its debt agreements. The Company believes it has sufficient cash-generating capabilities from domestic and unrestricted foreign sources, available credit facilities and access to long-term capital funds to enable it to meet its operating needs and contractual obligations for the foreseeable future.
Subsequent Event
Effective
Contractual Obligations and Other Commitments
Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, and leases. See Note 10 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of debt obligations.
Leases expire over a range of years from 2022 to 2032, except for a single land lease with 62 years remaining. Most of the leases contain renewal or purchase options, subject to various terms and conditions. See Note 14 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on the nature and timing of lease obligations. Purchase obligations primarily consist of contractual commitments to purchase certain inventories at fixed prices. AtDecember 31, 2021 , the Company had$840.4 million of purchase obligations due within one year and$50.5 million of purchase obligations due in more than one year. The Company has standby letters of credit and surety bonds of$56.2 million related to performance and payment guarantees atDecember 31, 2021 . Based on experience with these arrangements, the Company believes that any obligations that may arise will not be material to its financial position. 28
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Non-GAAP Financial Measures
EBITDA represents earnings before interest, income taxes, depreciation and amortization. EBITDA is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. It should not be considered, however, as an alternative to operating income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of the Company's overall liquidity as presented in the Company's consolidated financial statements. Furthermore, EBITDA measures shown for the Company may not be comparable to similarly titled measures used by other companies. The following table presents the reconciliation of net income reported in accordance withU.S. generally accepted accounting principles ("GAAP") to EBITDA: Year Ended December 31, 2021 2020 2019 (In millions) Net income$ 990.1 $ 872.4 $ 861.3 Add (deduct): Interest expense 80.4 86.1 88.5 Interest income (1.4) (2.1) (4.0) Income taxes 233.1 209.9 208.5 Depreciation 108.5 101.3 101.4 Amortization 183.6 154.0 132.6 Total adjustments 604.2 549.2 527.0 EBITDA$ 1,594.3 $ 1,421.6 $ 1,388.3 Free cash flow represents cash flow from operating activities less capital expenditures. Free cash flow is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of cash flow from operating activities reported in accordance withU.S. GAAP to free cash flow: Year Ended December 31, 2021 2020 2019 (In millions) Cash provided by operating activities$ 1,160.5 $ 1,281.0 $ 1,114.4 Deduct: Capital expenditures (110.7) (74.2) (102.3) Free cash flow$ 1,049.8 $ 1,206.8 $ 1,012.1 Net debt represents total debt, net minus cash and cash equivalents. Net debt is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of total debt, net reported in accordance withU.S. GAAP to net debt: December 31, 2021 2020 (In millions) Total debt, net$ 2,544.2 $ 2,413.7 Less: Cash and cash equivalents (346.8) (1,212.8) Net debt 2,197.4 1,200.9 Stockholders' equity 6,871.9 5,949.3
Capitalization (net debt plus stockholders' equity)
24.2 % 16.8 %
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Table of Contents Internal Reinvestment Capital Expenditures Capital expenditures were$110.7 million or 2.0% of net sales in 2021, compared with$74.2 million or 1.6% of net sales in 2020. In 2021, approximately 63% of capital expenditures were for improvements to existing equipment or additional equipment to increase productivity and expand capacity. Capital expenditures in 2022 are expected to be approximately 2% of net sales, with a continued emphasis on spending to improve productivity.
Research, Development and Engineering
The Company is committed to, and has consistently invested in, research, development and engineering activities to design and develop new and improved products and solutions. Research, development and engineering costs before customer reimbursement were$299.6 million in 2021,$246.2 million in 2020 and$260.3 million in 2019. These amounts included research and development expenses of$194.2 million ,$158.9 million and$161.9 million in 2021, 2020, and 2019, respectively. All such expenditures were directed toward the development of new products and solutions and the improvement of existing products and solutions.
Environmental Matters
Information with respect to environmental matters is set forth in Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
Critical accounting policies are those policies that can have a significant impact on the presentation of the Company's financial condition and results of operations and that require the use of complex and subjective estimates based on the Company's historical experience and management's judgment. Because of the uncertainty inherent in such estimates, actual results may differ materially from the estimates used. Below are the policies used in preparing the Company's financial statements that management believes are the most dependent upon the application of estimates and assumptions. A complete list of the Company's significant accounting policies is in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. •Business Combinations. The Company allocates the purchase price of an acquired company, including when applicable, the acquisition date fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. Third party appraisal firms and other consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed. Estimating fair values requires significant judgments, estimates and assumptions, including but not limited to: discount rates, future cash flows and the economic lives of trade names, technology, and customer relationships. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. •Goodwill and Other Intangible Assets.Goodwill and other intangible assets with indefinite lives, primarily trademarks and trade names, are not amortized; rather, they are tested for impairment at least annually. The Company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its reporting units are less than the respective carrying values of those reporting units. The Company elected to bypass performing the qualitative screen and performed the quantitative analysis of the goodwill impairment test in the current year. The Company may elect to perform the qualitative analysis in future periods. The Company principally relies on a discounted cash flow analysis to determine the fair value of each reporting unit, which considers forecasted cash flows discounted at an appropriate discount rate. The 30
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Company believes that market participants would use a discounted cash flow analysis to estimate the fair value of its reporting units in a sale transaction. The annual goodwill impairment test requires the Company to make a number of assumptions and estimates concerning future levels of revenue growth, operating margins, depreciation, amortization and working capital requirements, which are based on the Company's long-range plan and are considered level 3 inputs. The Company's long-range plan is updated as part of its annual planning process and is reviewed and approved by management. The discount rate is an estimate of the overall after-tax rate of return required by a market participant whose weighted average cost of capital includes both equity and debt, including a risk premium. While the Company uses the best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances. While there are always changes in assumptions to reflect changing business and market conditions, the Company's overall methodology and the population of assumptions used have remained unchanged. In order to evaluate the sensitivity of the goodwill impairment test to changes in the fair value calculations, the Company applied a hypothetical 10% decrease in fair values of each reporting unit. The 2021 results (expressed as a percentage of carrying value for the respective reporting unit) showed that, despite the hypothetical 10% decrease in fair value, the fair values of the Company's reporting units still exceeded their respective carrying values by 118% to 534%. The impairment test for indefinite-lived intangibles other than goodwill (primarily trademarks and trade names) consists of a comparison of the estimated fair value of the indefinite-lived intangible asset to the carrying value of the asset as of the impairment testing date. The Company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its indefinite-lived intangible assets are less than the respective carrying values of those assets. The Company elected to bypass performing the qualitative screen. The Company may elect to perform the qualitative analysis in future periods. The Company estimates the fair value of its indefinite-lived intangibles using the relief from royalty method using level 3 inputs, which is a widely used valuation technique for such assets. The fair value derived from the relief from royalty method is determined by applying a royalty rate to a projection of net revenues discounted using an appropriate discount rate. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Certain impairment models have discount rates calculated based on a debt/equity cost of capital. While the Company uses the best available information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded intangible balances. While there are always changes in assumptions to reflect changing business and market conditions, the Company's overall methodology and the population of assumptions used have remained unchanged. The Company's acquisitions have generally included a significant goodwill component and the Company expects to continue to make acquisitions. AtDecember 31, 2021 , goodwill and other indefinite-lived intangible assets totaled$6,113.1 million or 51.4% of the Company's total assets. The Company completed its required annual impairment tests in the fourth quarter of 2021 and determined that the carrying values of the Company's goodwill and indefinite-lived intangibles were not impaired. There can be no assurance that goodwill or indefinite-lived intangibles impairment will not occur in the future. •Pensions. The Company hasU.S. and foreign defined benefit and defined contribution pension plans. The most significant elements in determining the Company's pension income or expense are the assumed pension liability discount rate and the expected return on plan assets. The pension discount rate reflects the current interest rate at which the pension liabilities could be settled at the valuation date. At the end of each year, the Company determines the assumed discount rate to be used to discount plan liabilities. In estimating this rate for 2021, the Company considered rates of return on high-quality, fixed-income investments that have maturities consistent with the anticipated funding requirements of the plan. In estimating theU.S. and foreign discount rates, the Company's actuaries developed a customized discount rate appropriate to the plans' projected benefit cash flow based on yields derived from a database of long-term bonds at consistent maturity dates. The Company determines the expected long-term rate of return based primarily on its expectation of future returns for the pension plans' investments. Additionally, the 31
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Company considers historical returns on comparable fixed-income and equity investments and adjusts its estimate as deemed appropriate.
•Income Taxes. The process of providing for income taxes and determining the related balance sheet accounts requires management to assess uncertainties, make judgments regarding outcomes and utilize estimates. The Company conducts a broad range of operations around the world and is therefore subject to complex tax regulations in numerous international taxing jurisdictions, resulting at times in tax audits, disputes and potential litigation, the outcome of which is uncertain. Management must make judgments currently about such uncertainties and determine estimates of the Company's tax assets and liabilities. To the extent the final outcome differs, future adjustments to the Company's tax assets and liabilities may be necessary. The Company assesses the realizability of its deferred tax assets, taking into consideration the Company's forecast of future taxable income, available net operating loss carryforwards and available tax planning strategies that could be implemented to realize the deferred tax assets. Based on this assessment, management must evaluate the need for, and the amount of, valuation allowances against the Company's deferred tax assets. To the extent facts and circumstances change in the future, adjustments to the valuation allowances may be required. The Company assesses the uncertainty in its tax positions, by applying a minimum recognition threshold which a tax position is required to meet before a tax benefit is recognized in the financial statements. Once the minimum threshold is met, using a more likely than not standard, a series of probability estimates is made for each item to properly measure and record a tax benefit. The tax benefit recorded is generally equal to the highest probable outcome that is more than 50% likely to be realized after full disclosure and resolution of a tax examination. The underlying probabilities are determined based on the best available objective evidence such as recent tax audit outcomes, published guidance, external expert opinion, or by analogy to the outcome of similar issues in the past. There can be no assurance that these estimates will ultimately be realized given continuous changes in tax policy, legislation and audit practice. The Company recognizes interest and penalties accrued related to uncertain tax positions in income tax expense.
Recent Accounting Pronouncements
See Note 2, Recent Accounting Pronouncements, to the Company's Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements.
Forward-Looking Information
Certain matters discussed in this Form 10-K are "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which
involve risk and uncertainties that exist in the Company's operations and
business environment and can be affected by inaccurate assumptions, or by known
or unknown risks and uncertainties. Many such factors will be important in
determining the Company's actual future results. The Company wishes to take
advantage of the "safe harbor" provisions of the PSLRA by cautioning readers
that numerous important factors in some cases have caused, and in the future
could cause, the Company's actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company. Some, but not all, of the factors or uncertainties that could cause
actual results to differ from present expectations are set forth above and under
Item 1A. Risk Factors. The Company undertakes no obligation to publicly update
any forward-looking statements, whether as a result of new information,
subsequent events or otherwise, unless required by the securities laws to do so.
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