Aptar is a global leader in the design and manufacturing of a broad range of drug delivery,and consumer product dosing, dispensing and active material science solutions and services. Aptar's innovative solutions and services serveprotection technologies. Aptar serves a varietynumber of attractive end markets including pharmaceutical, beauty, food, beverage, personal care, and home care, food and beverage.care. Using insights,market expertise, proprietary design, engineering and science to create dispensing, dosing and protective technologiesinnovative solutions for many of the world's leading brands, Aptar in turn makes a meaningful difference in the lives, looks, health and homes of millions of patients and consumers around the world. Aptar is headquartered in Crystal Lake, Illinois and has approximately 13,00013,800 dedicated employees in 20 different countries. For more information, visit www.aptar.com.

Our business was started in the late 1940’s, manufacturing and selling aerosol valves in the United States, and has grown primarily through acquisitions and internal expansion. In this report, we may refer to AptarGroup, Inc. and its subsidiaries as “AptarGroup”, “Aptar” or the “Company”.

We have manufacturing facilities located throughout the world including North America, Europe, Asia and SouthLatin America. We have approximately 5,000 customers with no single customer or group of affiliated customers accounting for greater than 5% of our 20212023 Net Sales.

Consumers’ preferenceand patients' preferences for convenience and product differentiation through drug delivery and packaging design and function are important to our customers and they have converted many of their packages from non-dispensing formats to dispensing systems that offer enhanced shelf appeal, convenience, cleanliness and accuracy of dosage. We design our products with both people and the environment in mind. Many of our product solutions for the beauty, personal care, home care, food and beverage markets are recyclable, reusable or made with recycled content.

We partner with our customers by providing innovative delivery systemssolutions and a suite of comprehensive services to help them succeed.end market expertise. While we offer a wide variety of services and products, our primary products are dispensing pumps, closures, aerosol valves, elastomeric primary packaging components, active material science solutions and digital health solutions.

Dispensing pumps are finger-actuated dispensing systems that dispense a spray or lotion from non-pressurized containers. The style of pump used depends largely on the nature of the product being dispensed, from small, fine mist pumps used with pharmaceutical products and perfume to lotion pumps for more viscous formulas.

Closures are primarily dispensing closures but to a lesser degree can include non-dispensing closures. Dispensing closures are plastic caps that allow a product to be dispensed without removing the cap.

Aerosol valves dispense product from pressurized containers. The majority of the aerosol valves that we sell are metered dosecontinuous spray valves, with the balance being bag-on valvemetered dose valves and continuous spraybag-on valves.

We also manufacture and sell elastomeric primary packaging components. These components are used in the injectables market. Products include stoppers for infusion, antibiotic, lyophilization and diagnostic vials. Our elastomeric components also include pre-filled syringe components, such as plungers, needle shields, tip caps and components for cartridges.

We provide active material science solutions using our platform technology to maintain container closure integrity, extend shelf-life, control moisture and protectoxygen while also protecting drug products from overall environmental exposures and degradations.

TheOur digital health solutions aim to improve patients' treatment experience and outcomes. We leverage companion and regulated software solutions, connected devices diagnostic and digital therapeuticsdiagnostic tools that support patients to manage their disease as well as enabling care teams to remotely monitor the health of the patients when needed. Available as standalone or as a fully integrated offering in our existing range of drug delivery solutions, we have digital health solutions covering a wide range of therapeutic areas including, but not limited to, pulmonary, oncology, neurology, diabetes, immunology and neurology.rare disease.

During 20212023 and 2020,2022, we acquired several companies to strengthen and broaden our portfolio, including the following business combinations and asset purchases:combinations:

We seek to enhance our position as a leading global provider ofin drug delivery,and consumer productdosing, dispensing and active material science solutions and servicesprotection technologies to deliver increased value to our customers and stockholders through strategic focus and execution in the following areas:

Facilitating the execution of our strategy are our core values, which dictate how we interact internally and externally with our employees, customers, suppliers and all stakeholders.

OurDuring the year ended December 31, 2022, our organizational structure consistsconsisted of three market-focused business segments: Pharma, Beauty + Home and Food + Beverage. This is a strategic structure which allowsEffective January 1, 2023, we realigned two of our segments, allowing us to be more closely aligned withbetter serve our customers and positioning us for long-term profitable growth. We continue to have three reporting segments; Aptar Pharma and Aptar Beauty are named for the markets in which they operate. Weserve with multiple product platforms, while Aptar Closures is named primarily sell our products and services through our own sales force to pharmaceutical, health care, beauty,for a single product platform that serves all available markets.

The Aptar Closures business serves multiple markets, including food, beverage, personal care, home care, beauty and healthcare. Closures that were developed in Beauty + Home moved to Aptar Closures together with the operations of the legacy Food + Beverage segment. Aptar's food protection business and beverage marketers. To a limited extent,our elastomeric flow-control technology business continue to report through the Aptar Closures segment. The realignment brings us closer to how our customers are structured and operate their businesses.

At the same time, we use independent representativeshave simplified and distributorsfocused our Beauty + Home segment to better leverage our complex spray and dispensing solutions for prestige and mass brands in the beauty, personal care and home care markets. For many of our customers, personal care products are considered part of "beauty" and so we renamed this segment, Aptar Beauty.

These changes are intended to help us increase our rate of innovation, broaden our market reach, streamline operations, increase effectiveness and raise capital efficiencies. Additionally, we intend to smaller customers and export markets.continue to focus on sustainability because leadership in sustainability remains a key differentiator across all of our segments.

Our Aptar Pharma segment accountsis our largest segment in terms of net sales and total assets, representing 44% and 47% of our Net Sales and Total Assets, respectively, for 2023 and accounted for 65% of our Adjusted EBITDA excluding non-allocated corporate costs and is our second largest segment in terms of net sales and our largest segment in terms of total assets, representing 40% and 44% of our Net Sales and Total Assets, respectively, in 2021.2023. We are a leading supplier of nasal drug delivery spray pumps and metered dose inhaler valves (“MDIs”) to the pharmaceutical and health care markets worldwide and we are an important supplier of elastomer for injectable primary packaging components worldwide. We also provide services designed to accelerate and de-risk the development and regulatory approvals of drugs using drug delivery devices. Characteristics of this market include (i) governmental regulation of our pharmaceutical customers, (ii) contaminant-controlled manufacturing environments and (iii) a significant amount of time and research from initially working with pharmaceutical companies at the molecular development stage of a medication through the eventual distribution to the market. We have clean-room manufacturing facilities in Argentina, China, France, Germany, India, Switzerland and the United States. We believe that providing value-added, convenient drug delivery and dispensing systems will continue to offer opportunities for our business. In addition, we believe there are opportunities for growth in the over-the-counter and generic pharmaceutical categories.

MDIs are used for dispensing precise amounts of aerosolized medication. This technology allows medication to be broken up into very fine particles, which enables the drug to be delivered typically via the pulmonary route. Currently the majority of our MDIs sold are used for respiratory ailments such as asthma and COPD (chronicchronic obstructive pulmonary disease)disease (COPD).

We continue to develop newproprietary drug delivery and dispensing systems and accessories in this segment.division. While we expect that these types of new products will come to market in the future, it is difficult to estimate when, as the rigors of pharmaceutical regulations affect the timing of product introductions by our pharmaceutical customers that use our proprietary drug delivery and dispensing systems.

Our Aptar Beauty + Home segment accountsis our second largest segment in terms of net sales and total assets, representing 36% and 32% of our Net Sales and Total Assets, respectively, for 23%2023 and accounted for 21% of our Adjusted EBITDA excluding non-allocated corporate costs in 2023. The Aptar Beauty segment sells a broad variety of pumps, airless systems and is our largest segment in terms of net sales and our second largest in terms of total assets, representing 44% and 39% of our Net Sales and Total Assets, respectively, in 2021. The Beauty + Home segment primarily sells pumps and decorative componentsvalves to the beauty market and pumps, closures, aerosol valves, accessories and sealing solutions to thefragrance, color cosmetics, facial skincare, personal care and home care markets. We believe we are a leading supplier for the majority of the products we sell primarily to the beauty and personal care markets.

Our Food + BeverageAptar Closures segment accountsaccounted for 12%20% of our Net Sales, 17% of our Total Assets and 14% of our Adjusted EBITDA excluding non-allocated corporate costs 16% of our Net Sales and 14% of our Total Assets in 2021.for 2023. We primarily sell dispensing closures and, to a lesser degree, non-dispensing closures, elastomeric flow control components, spray pumps and aerosol valves.closures.

SalesIn recent years, sales of dispensing closures have grown as consumers worldwide have demonstrated a preference for a package utilizing the convenience of a dispensing closure. At the same time, consumer marketers are trying to differentiate their products by incorporating performance enhancing features such as bonded aluminum liners to plastic, flow-control and no-drip dispensing, e-commerce capable solution, inverted packaging and directional flow to make packages simpler to use, cleaner and more appealing to consumers. Aptar Closures is also evolving its product offering to make it more sustainable for example through light weighting, use of post-consumer recycled (PCR) resin, thermoplastic elastomers (TPE) flow control or by adding features such as tethered closures and non-detachable tamper evident packaging for beverages. We also have an increasing number of product solutions that address the increased use of flexible packaging formats.

Our commitment to innovation, one of our competitive strengths, has resulted in an emphasis on research and development directed toward developing affordable, new, sustainable and innovative packaging, drug delivery solutions and connected devices and adapting existing products for new markets or customer requirements. In certain cases, our customers share in the research and development expenses of customer initiated projects. Occasionally, we acquire or license from third parties technologies or products that are in various stages of development.

The majority of our worldwide production is located outside of the United States. Our philosophy is to produce as much as possible in the region where it will be sold. In order to augment capacity and to maximize internal capacity utilization (particularly for plastic injection molding), we use subcontractors to supply certain plastic and metal components. Certain suppliers of these components have unique technical abilities that make us dependent on them, particularly for aerosol valve and pump production. The principal raw materials used in our production are plastic resins, silicone, rubber and certain metal products. We believe an adequate supply of such raw materials is available from existing and alternative sources. We attempt to offset cost increases through improving productivity and developing new, higher margin solutions and increasing selling prices, as allowed by market conditions or contractual commitments. We source certain materials, especially some resins and rubber components for our pharmaceutical segment, from a single source. Significant delays in receiving these components or discontinuance of an approved raw material would require us to seek alternative sources, which could result in higher costs as well as impact our ability to supply products in the short-term. We believe we have adequate safety stock to mitigate any significant supply concerns.

We have approximately 5,000 customers with no single customer or group of affiliated customers accounting for greater than 5% of 20212023 Net Sales.

We are geographically diverse with manufacturing and sales operations in Asia, Europe, Latin America (including Mexico) and North America. Europe is our largest region in terms of sales, where sales (including exports) for the years ended December 31, 20212023 and 20202022 were approximately 53%57% and 55%, respectively,53% of our consolidated sales.sales, respectively. Asia and Latin America when aggregated represented approximately 13%14% and 12%14% of our consolidated sales for the years ended December 31, 20212023 and 2020,2022, respectively. Export sales from the United States were $204.6$196.6 million and $179.0$211.1 million in 20212023 and 2020,2022, respectively. Although Europe represents the largest region for us in terms of sales, our beauty and pharmaceutical customers often export their finished products using our technology around the world for consumption. We are a net exporter of goods from Europe and a net importer of goods to the North American, Asian and Latin American regions.

Because of our international presence, movements in exchange rates have a significant impact on the translation of the financial statements of our foreign subsidiaries. Our primary foreign exchange exposure is to the euro, but we have foreign exchange exposure to the Chinese yuan, Brazilian real, Argentine peso, Mexican peso, Swiss franc and other Asian, European and SouthLatin American currencies. A strengtheningweakening U.S. dollar relative to foreign currencies has a dilutivean additive translation effect on our financial statements. Conversely, a weakeningstrengthening U.S. dollar has an additivea dilutive effect. We manage our exposures to foreign exchange principally with forward exchange contracts to economically hedge recorded transactions and firm purchase and sales commitments denominated in foreign currencies.

As of December 31, 2021,2023, Aptar hashad approximately 13,00013,800 full-time employees. Of the full-time employees, approximately 8,000 are8,400 were located in Europe, 2,600 are2,800 were located in Asia and SouthLatin America and the remaining 2,400 are2,600 were located in North America. The majority of our European and Latin American employees are covered by collective bargaining arrangements made at either the local or national level in their respective countries. The total labor force covered by a collective bargaining agreement represents approximately 55% of the total employee population. Termination of employees at certain of our international operations could be costly due to local regulations regarding severance benefits. There were no material work stoppages in 20212023 and management considers our employee relations to be satisfactory.

Aptar is included in the SPDR SSGA Gender Diversity Index ETF (SHE) which invests in companies that rank among the highest in gender diversity within senior leadership. Aptar is also a participant in the Catalyst CEO Champions for Change and the Gender and Diversity KPI Alliance. In 2021, Aptar launched a new Black/African American and/or African descent employee resource group and a new employee resource group for the LBGTQ+ community. In November 2021, Aptar was named on the World's Top Female-Friendly Companies by Forbes for 2022 and 2023. Aptar was also recognized by Women's Forum of NY for having 50% female board directors. Additionally, SHero has recognized Aptar Greater China as one of the Best Companies for Female Executives 2022. Aptar launched its first Diversity Supplier Program in 2023. Aspiring to build a Global Top 10 Female-Friendly Company by Forbes.diverse and inclusive culture that fosters fairness and belonging continues to be part of Aptar's strategic priorities.

All of the markets in which we operate are highly competitive and we continue to experience price competition in all product lines and markets. Competitors include privately and publicly held entities that range from regional to international companies. We expect the market for our products to remain competitive, as consolidation among our competitors is increasingcontinue to grow both organically and through consolidation and/or changing of ownership in the current economic climate. We believe our competitive advantages areinclude our consistent high levels of innovation, quality and service, geographic diversity, financial strength and stability and breadth of products and services. Our manufacturing strength lies in the ability to mold complex plastic components and formulate and finish elastomer and silicone components in a cost-effective manner and to assemble products at high speeds. Our business is somewhat capital intensive and it is becoming more important to our customers that we have global manufacturing capabilities. Both of these serve as barrierscapabilities though we continue to entry for new competitors wanting to enter our business. Furthermore, within our Pharma business, increasing regulatory hurdles present a challenge for new competitors to enter the market.face meaningful competition from local and regional competitors.

While we have experienced some competition in Europe, Latin America and the United States from low cost Asian suppliers, particularly in the beauty and personal care market, this has not been significant. Although using low cost Asian suppliers may have a cost advantage, more and more customers often prefer local suppliers citing shorter lead times, higher reactivity and service, and stronger safety of supply. We have also reduced our carbon footprint due to the increased use of lower-carbon fuels within some of our shipping lanes, which we see as a competitive advantage.

Our manufacturing operations primarily involve plastic injection molding, automated assembly processes, elastomer and silicone formulation and finishing and, to a limited degree, metal anodization and vacuum metallization of plastic components. Historically, the environmental impact of these processes has been minimal, and we believe we meet current environmental standards in all material respects. To date, our manufacturing operations have not been significantly affected by environmental laws and regulations relating to the environment.

In 2020, we formalized our science-based targets, setting a Scope 1 +and Scope 2 emissions reduction goal consistent with requirements to keep global warming well-belowwell below 2° Celsius by year 2030, and a Scope 3 reduction goal consistent with requirements to keep global warming at 2° Celsius by year 2030. We surpassed our original Scope 1 and Scope 2 reduction target within the first year of validation by the Science Based Targets Initiative (SBTi). Therefore, in 2022 we began working with SBTi to revise the Scope 1 and Scope 2 target to a more aggressive ambition, and to align it to the requirements to keep global warming at 1.5° Celsius by 2030. This updated target was validated by SBTi in early 2023. With this update, Aptar’s Scope 3 ambition remains the same, as does our commitment to increase annual sourcing of renewable electricity to 100% by 2030. This science-based approach incorporates our own operations and operations within the value chain. In addition, we annually undergo data assurance as part of our sustainability reporting. This assurance process allows for data on consumption of electricity, fuel oil, and natural gas and renewable energy purchases to be verified for accuracy and completeness by an external organization. Globally this process is certified to the ISO 14064 standard for energy and greenhouse gas emission reporting.

Compared to our 2019 baseline, Aptar has made progress cutting emissions, and continues efforts to mitigate climate risks and further the low-carbon economy, as reported by the Company through global environmental non-profit CDP's 20212023 climate change questionnaire. Through significant, demonstrable action on climate change, weand water questionnaires. We believe Aptar is leading on corporate environmental ambition, action and transparency worldwide. Aptar was named toworldwide as proven by our "A-" letter grade on the CDP Supplier Engagement Leaderboard in both 2020climate change assessment and 2021.our "B" letter grade on the CDP water assessment.

There continues to be increased interest and awareness from consumers and our customers in products with environmentally sustainable products,features, especially through the sourcing of sustainable materials. We are focused on reducing our environmental impacts through product life cycle assessments, sustainable material trials, operational eco-efficiency initiatives and renewable energy sourcing. We have teams dedicated to designing for sustainability by providing products that improve recyclability and use less material. Aptar has launched products and components in North America, Europe and Asia made with post-consumer recycled (PCR) resins (PCR) and continues to explore additional opportunities for alternative resins and recyclable products.

Connecting with other companies through organizations like Ellen MacArthur Foundation’s New Plastics Economy and the World Business Council for Sustainable Development (WBCSD) provides an invaluable opportunity to share best practices and work on larger projects with aligned objectives towardstoward a more circular economy.

Future regulations on environmental matters regarding recycling or material inputs could impact our business.

Certain of our products are directly or indirectly affected by government regulation. TheIn 2022, the United Nations Environment Assembly adopted a resolution to end plastic waste pollution and forge an internationally binding agreement by 2024. In addition, the European Union (EU) has adopted a circular economy package. The package maps out a series of actions planned over several years. Some actions have resulted in regulations aimed to reduce marine litter, increase plastic recycling rates, prohibit single-use plastic packaging and introduce new taxes in relation to the end-of-life management of packaging. For example, the EU released in 2022 a draft regulation on packaging and packaging waste with a focus on recyclability, recycled content, compostability and reusability. The final version is expected in 2024. In Europe and in parts of the United States (including California), regulations require food and beverage companies to tether plastic caps to ensure the caps stay with the package, thus improving the likelihood the caps will enter the recycling stream. The EU and the United States are planning new regulationregulations to ban perfluoroalkyl and polyfluoroalkyl substances (PFAS) materials used in the packaging industry. The potential exists for these types of regulations to expand worldwide. We have established an innovation team that focuses on designing for and converting into more sustainable options like post-consumer recycled (PCR) resin and Food and Drug Administration approved resin alternatives. We are designing for sustainability by providing products that improve recyclability, use sustainable material and use less material, and we offer multiple tethered options. Our new product offerings include: Purity Lite, a mono-material, lightweight, fully-recyclable closure; SimpliCycle, an award winning recyclable valve; Rocket, a sports cap awarded Best in Cap at the 17th Global Water Drinks Congress in 2020, tethered and with no losable component; Future, a mono-material, fully-recyclable pump.pump; APF Futurity, our highly recyclable nasal spray pump and Mono Micro, our mono-material and fully recyclable airless dispenser. We are also partnering with global and regional thought leaders to drive a more circular economy.

On October 15, 2016, 197 countries adopted an amendment to phase down hydrofluorocarbon (HFC)("HFC") propellants in order to reduce greenhouse gas emission under the Montreal Protocol in Kigali, Rwanda. Under the amendment, countries committed to cut the production and consumption of HFC propellants by more than 80% over the next 30 years. This type of propellant is used for pressurized metered-dose inhalers (pMDI)("pMDI"). The phase down plan has an exemption for pharmaceutical product applications of pMDIs; however, customers are looking for alternative propellants to reduce greenhouse gas emissions. We are working with the suppliers of these alternative propellants and our customers to develop new solutions.

Pharma regulatory agencies in the United States and European UnionEU have developed and introduced Combination Products specific guidelines for more complex drug delivery products, including dispensing systems. These guidelines have increased the complexity of the registration process for these products and recognize the existence of a device part in the drug delivery product, which now is required to be appropriately designed, developed and documented.

Future government regulations could include healthcare cost containment policies. For example, reviews by various governments to determine the number of drugs, or prices thereof, that will be paid by their insurance systems could affect future sales of our pharmaceutical customers’ products and thus adversely impact our sales to these customers. Such regulation could adversely affect prices of and demand for our pharmaceutical products. We believe that the focus on the cost effectiveness of the use of medications as compared to surgery and hospitalization provides us with an opportunity to expand sales to the pharmaceutical market.

Set forth below and elsewhere in this report and in other documents we file with the Securities and Exchange CommissionSEC are risks and uncertainties that could cause our actual results or other events to materially differ from the results or events contemplated by the forward-looking statements contained in this report and in other documents we file with the Securities and Exchange Commission.SEC. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations. You should carefully consider the following factors in addition to other information contained in this report before purchasing any shares of our common stock.

Customers and consumers are increasingly requesting solutions that can be refilled and reused as the market moves toward more sustainable products. A competitor'sOur competitors' design innovation or ability to provide more sustainable products could have an adverse impact on our business. If we are unable to compete successfully, our market share may decline, which could materially adversely affect our results of operations and financial condition.

We are also subject to examination of our returns and other tax matters by the U.S. Internal Revenue Service and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of itsour provision for taxes. There can be no assurance as to the outcome of these examinations. We are also periodically subject to tax assessments resulting from custom duties, including those described in Note 13 - Commitments and Contingencies of the Notes to Consolidated Financial Statements. If our effective tax rates were to increase in jurisdictions where we have significant operations, or if the ultimate determination of taxes owed or other tax liability is for an amount in excess of amounts previously accrued, our financial condition and operating results could be materially and adversely affected.

We have no unresolved comments from the SEC.

We lease or own our principal offices and manufacturing facilities. None of the owned principal properties is subject to a lien or other encumbrance material to our operations. We believe that existing operating leases will be renegotiated as they expire, will be acquired through purchase options or that suitable alternative properties will be leased on acceptable terms. We consider the condition and extent of utilization of our manufacturing facilities and other properties to be generally good, and the capacity of our plants to be adequate for the needs of our business. We manufacture products in 4750 locations, with 1713 of those facilities serving two segments and 6four serving all three of our segments.segments as of December 31, 2023. The locations of our manufacturing facilities, by geographic region/country, are set forth below:

In the normal course of business, we are subject to a number of lawsuits and claims both actual and potential in nature. While management believes the resolution of these claims and lawsuits will not have a material adverse effect on our financial position or results of operations or cash flows, claims and legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur that could include amounts in excess of any accruals which management has established. Were such unfavorable final outcomes to occur, it is possible that they could have a material adverse effect on our financial position, results of operations and cash flows. Please refer to Note 13 -– Commitments and Contingencies in Part II, Item 8 – Financial Statements and Supplementary Data for further discussion of contingencies affecting our business.

Not applicable.

Our Common Stockcommon stock is traded on the New York Stock Exchange under the symbol “ATR”. As of February 14, 2022,5, 2024, there were approximately 170152 holders of record of our Common Stock.common stock. A substantially greater number of holders of our Common Stockcommon stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.

On January 20, 2022,18, 2024, our Board of Directors declared a quarterly cash dividend of $0.38$0.41 per share of Common Stock,common stock, which will be paid on February 23, 202222, 2024 to stockholders of record as of February 3, 2022. We have paid an increased dividend to stockholders each year for the past 28 years.1, 2024. During 2021,2023, we paid $98.5$103.7 million in dividends to stockholders. While we expect to continue to pay a regular quarterly dividend of $0.38$0.41 per share in 2022,2024, the timing, declaration, amount and payment of any future cash dividends are at the discretion of the Board of Directors and will depend on our available cash, working capital, financial condition, results of operations, capital requirements, covenants in our credit facility, applicable law and other factors that ourthe Board of Directors considers relevant.

Certain French employees are eligible to participate in the FCP Aptar Savings Plan (the “Plan”). An independent agent purchases shares of Common Stockcommon stock available under the Plan for cash on the open market and we do not issue shares. We do not receive any proceeds from the purchase of Common Stockcommon stock under the Plan. The agent under the Plan is BNP Paribas Fund Services. No underwriters are used under the Plan. All shares are sold in reliance upon the exemption from registration under the Securities Act of 1933 provided by Regulation S promulgated under that Act. During the quarter ended December 31, 2021,2023, the Plan purchased 3,888did not purchase any shares of our Common Stockcommon stock on behalf of the participants. The Plan sold 6,533 shares of our common stock on behalf of the participants at an average price of $116.20$124.57 per share, for an aggregate amount of $452 thousand, and sold 1,986 shares of our Common Stock on behalf of the participants at an average price of $128.32 per share, for an aggregate amount of $255$814 thousand. At December 31, 2021,2023, the Plan owned 108,884113,946 shares of our Common Stock.common stock.

On April 18, 2019, we announced a share repurchase authorization of up to $350 million of Common Stock.common stock. This authorization replaces previous authorizations and has no expiration date. We may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions.

During the fourth quarter of 2021,2023, we repurchased approximately 39581 thousand shares for approximately $49.7$10.3 million.

The following graph shows a five year comparison of the cumulative total stockholder return on our Common Stockcommon stock as compared to the cumulative total return of the Standard & Poor’s 500 Composite Stock Price Index and to an index of peer group companies we selected. The companies included in the peer group are: Albemarle Corporation, Ashland Global Holdings Inc., Berry Global Group, Inc., Catalent, Inc., CCL Industries Inc., Hill-Rom Holdings, Inc. (included through December 13, 2021 when it was acquired by Baxter International Inc.),Enovis Corporation, ICU Medical, Inc., Ingredion Inc., International Flavors & Fragrances, Inc., McCormick & Company, Inc., Perrigo Company plc, Revvity, Inc., Sealed Air Corporation, Sensient Technologies Corporation, Silgan Holdings, Inc., Sonoco Products Company, Stericycle, Inc., STERIS plc, Teleflex Inc. and West Pharmaceutical Services, Inc. The peer group is consistent with the peer companies used by the Management Development and Compensation Committee of our Board of Directors (“MD&C Committee”) in connection with certain aspects of our executive compensation programs. The MD&C Committee selected companies that (i) compete with Aptar for market share, operate in similar industries (e.g., packaging, specialty chemicals, specialty materials) and are based in the U.S.; (ii) provide similar intermediate products (e.g., structured materials, packaging, closures, spray products) to similar end-use markets (e.g., consumer, beauty, home, pharmaceutical, medical, healthcare, food, beverage); (iii) fall within a reasonable range of Aptar's size and scale based on several factors (e.g., revenue, assets, invested capital, number of employees, market capitalization); (iv) earn a considerable amount of their revenue outside of the U.S.; (v) appear to be valued like Aptar by the stock market based on their market capitalization to revenue versus Aptar’s; and (vi) compete with Aptar for senior executive talent (companies Aptar potentially would recruit senior talent from, and possibly lose senior talent to).

The graph and other information furnished in the section titled “Share Performance” under this Part II, Item 5 of this Form 10-K shall not be deemed to be “soliciting” material or to be “filed” with the Securities and Exchange CommissionSEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.

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 performancecondition and results of operations of AptarGroup, Inc. from management's perspective. MD&A is presented in eight sections: Overview, Results of Operations, Liquidity and Capital Resources, Recently Issued Accounting Pronouncements,Standards, 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.

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

In addition to the information presented herein that conforms to accounting principles generally accepted in the United States of America (“U.S. GAAP”), we also present certain financial information that does not conform to U.S. GAAP, which are referred to as non-U.S. GAAP financial measures. Management may assess our financial results both on a U.S. GAAP basis and on a non-U.S. GAAP basis. We believe it is useful to present these non-U.S.GAAP financial measures because they allow for a bettermore meaningful 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 statementsConsolidated Statements of incomeIncome and other information presented herein. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures. Further, investors are urged to review and consider carefully the adjustments made by management to the most directly comparable U.S. GAAP financial measure to arrive at these non-U.S. GAAP financial measures. See the reconciliation under "Non-U.S. GAAP Measures" below.

For the year ended December 31, 2021,2023, reported sales increased 10%5% to $3.23$3.49 billion from $2.93$3.32 billion a year ago. Core sales, excluding the positive impact from changes in currency exchange rates and acquisition effects, increased 7%3% from 2020.2022. A reconciliation of core sales growth to reported net sales growth, the most directly comparable U.S. GAAP measure, can be found under "Net Sales" below. During 2021, our Beauty + Home and Food + Beverage segments both reported strong core sales growth as sales of our products used in certain applications recovered from depressed sales during 2020 due to the COVID-19 pandemic. Our Pharma segment reported strong product growth in our injectables and active material science solutions markets; however, we continued to be negatively impacted by the prolonged drawing down of inventory by certain customers as fewer illnesses and fewer doctor visits have resulted in lower consumption of allergic rhinitis, cough and cold and certain pulmonary medicines using our drug delivery devices.

The following table sets forth the consolidated statementsConsolidated Statements of incomeIncome and the related percentages of net sales for the periods indicated. Refer to Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 20202022 for additional information regarding Results of Operations for the year ended December 31, 20202022 as compared to the year ended December 31, 2019. Certain previously reported amounts have been reclassified to conform to the current period presentation.2021.

For the year ended December 31, 2021,2023, reported net sales increased 10%5% to $3.23$3.49 billion from $2.93$3.32 billion a year ago. The average U.S. dollar exchange rate weakened compared to the euro and other major currencies in which we operate, resulting in a positive currency translation impact of 2%. The acquisition of Fusion Packaging, Inc. ("Fusion") positively impacted sales by 1%. There was no significant impact from our acquisitions of VoluntisMetaphase, iD SCENT, and HengyuGulf Closures on our consolidated net sales during 2021. Therefore, core2023. Core sales, which exclude acquisitions and changes in foreign currency rates, increased by 7%3% in 20212023 compared to 2020. Price increases to2022. Volume growth, especially for products in our customers due to rising inflationary costsprescription, consumer healthcare and beauty applications, had a strongpositive impact on our core sales during 2021. Of our 7% core sales increase, approximately 4% is due to price adjustments related to the passing throughin spite of highera 1% headwind on resin and other input costs. All three segments reported sales growth excluding the inflationary pass-throughs mentioned above. Our Beauty + Home and Food + Beverage segments both reported strong core sales growth as sales of our products used in certain market categories recovered from depressed sales during 2020 due to the COVID-19 pandemic. Our Pharma segment reported strong product growth in our injectables and active material science solutions markets; however, we were negatively impacted early in the year by the prolonged drawing down of inventory by certain customers as fewer illnesses and fewer doctor visits have resulted in lower consumption of allergic rhinitis, cough and cold and certain pulmonary medicines using our drug delivery devices.cost pass-through reductions.

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.

Our cost of sales (“COS”) as a percent of net sales increaseddecreased to 64.1%63.8% in 20212023 compared to 62.9%65.0% in 2020.2022, in spite of approximately $16 million additional costs related to the validation of the new injectables expansion capacity as well as inefficiencies in the first part of the year due to the Enterprise Resource Planning ("ERP") system implementation. Our COS percentage was negativelypositively impacted by both changes in ouran improved mix of sales and significant input cost increases across multiple substrates used in our products. During 2021, we reported a lower percentage of our higher-margin Pharma product sales compared to 2020. As discussed above,the same period in 2022. We also benefited from the moderation of inflationary cost increases. Since we also experienced increases in several input costs including resin, metals, freight and labor. While we maintainmaintained our normal pass-through of resin pricescosts during 2023 and have implemented general price increases to offset other cost increases, there is no margin on these pass-throughs which increasespass-through costs, the decrease in resin prices caused a decrease in our COS as a percentage of sales.

Our selling, research & development and administrative expenses (“SG&A”) increased approximately 10%4% or $51.0$21.5 million to $551.2$565.8 million in 20212023 compared to $500.2$544.3 million in 2020.2022. Excluding changes in foreign currency rates, SG&A increased by approximately $40.2$14.7 million compared to the prior year. Of this increase, $10.0$1.5 million relates to incremental SG&A costs in 20212023 due to our acquisitions of Metaphase, iD SCENT, and Gulf Closures. Improvements from the inclusion of our acquired companies compared to the prior year. The remaining increase is mainly due tooverhead cost management initiatives during 2023 were more than offset by higher compensation costs, and professional fees, which includes transaction costsincluding accruals related to our announced acquisitions. In 2021current short-term and long-term incentive compensation programs, along with higher travel costs. SG&A as a percentage of net sales, remained constant with 2020 at 17.1%.however, decreased to 16.2% in 2023 compared to 16.4% in the prior year.

Reported depreciationDepreciation and amortization expense increased approximately 7%6% or $14.6$14.9 million to $234.9$248.6 million in 20212023 compared to $220.3$233.7 million in 2020.2022. Excluding changes in foreign currency rates, depreciation and amortization expense increased by approximately $9.9$11.4 million compared to the prior year. Approximately $5.4$0.9 million of this increase is due to incremental depreciationour acquisitions of Metaphase, iD SCENT, and amortization costs relatedGulf Closures. The remaining increase relates to our acquired companies. We also increased ourhigher capital spending during the current and prior yearyears to support our growth strategy.strategy, including several new manufacturing facilities commencing operations during 2023. Depreciation and amortization as a percentage of net sales decreasedincreased to 7.3%7.1% in 20212023 compared to 7.5%7.0% in the prior year.

Operating income increased approximately $24.7 million or 7% to $404.0 million in 2023 compared to $379.3 million in 2022. Excluding changes in foreign currency rates, operating income increased by approximately $14.7 million in 2023 compared to 2022. Strong Aptar Pharma segment sales growth along with our lower COS percentage and SG&A leverage discussed above more than compensated for our higher restructuring costs. Operating income as a percentage of net sales increased to 11.6% in 2023 compared to 11.4% for the prior year.

In late 2017,Interest expense decreased by $0.4 million in 2023 to $40.4 million compared to $40.8 million in 2022. During 2022, we beganrepaid part of our private placement debt, which included a business transformation plan to drive profitable sales growth, increase operational excellence, enhance our approach to innovation and improve organizational effectiveness. The primary focus$0.4 million make-whole payment for the early redemption during the second quarter of 2022 which did not repeat during 2023. See Note 7 – Debt of the plan isConsolidated Financial Statements for further details. On March 7, 2022, we issued $400 million aggregate principal amount of 3.60% Senior Notes due March 2032 in an underwritten public offering. We have been able to successfully offset the Beauty + Home segment; however, certain global general and administrative functions have also been addressed. Restructuringhigher borrowing costs related to this plan for the years ended December 31, 2021 and 2020 are as follows:

Net other expense decreased $12.7(income) increased $15.0 million to $11.2 million of income in 2021 to $25.7 million2023 compared to $38.3$3.7 million of expense in 2020. We recorded2022. During the fourth quarter of 2023, we reached a $2.0$6.6 million realized gain andsettlement for disputed amounts with our insurance company to recover for losses caused by a $2.7fire at our facility in Annecy, France (the 'Annecy Settlement'). $3.5 million unrealized gain onof the $15 million increase is due to the change in fair value of our investment in PureCycle Technologies (“PureCycle” or "PCT") during 2021.investment. As discussed in Note 20 -– Investment in Equity Securities of the Consolidated Financial Statements, ourthis investment in PureCycle was converted into shares of PCT, a publicly traded entity, during the first quarter of 2021. This investment is now recorded at fair value based on observable market prices for identical assets andwith the change in fair value isbeing recorded as a net investment gain or loss in theour Consolidated Statements of Income. We believe that unrealized cost investment gains and losses from changes in market prices are not considered relevant to understanding our reported consolidated earnings or evaluating our periodic economic performance and are removed when reporting Adjusted EBITDA below. Other than the investment gain in PCT,During 2023, we benefited from $5.7 million of lower net interest expenses due to lower interest rates and a lower average outstanding debt balance during 2021. We also recordedrecognized $1.8 million of interest income relatedimproved performance in our equity investments along with $3.2 million in lower pension costs compared to a Brazilian value added tax adjustment as discussed in Note 13-Commitments and Contingencies within the Notes to Consolidated Financial Statements. Miscellaneous expense also improved as a net favorable impact on foreign currency contracts2022, which more than compensated for higher pension costs relatedoffset $2.4 million of foreign exchange losses due to the decline in discount rates.devaluation of the Argentine peso during the fourth quarter of 2023.

The reported effective tax rate on income before income taxes for 20212023 and 20202022 was 24.3%24.2% and 28.9%28.4%, respectively. The tax rate for 20212023 was lower compared to 20202022 due primarily to excess tax benefits on deductible stock-based compensation. The 2021 tax rate was lower also due to a more favorablebetter mix of earnings including aand increased tax rate reduction in France.benefits from share-based compensation.

At December 31, 2021,2023, with the exceptions identified below, we continuecontinued to assert permanentindefinite reinvestment of foreign earnings from Aptar's foreign operations. Therefore, weWe do not have a balance of foreign earnings that will be subject to U.S. tax upon repatriation under the currently enacted U.S. tax laws. We continually analyze our global working capital requirements as well as local country operation needs.needs in developing our repatriation plans.

During 2023, we recorded a liability of $2.8 million in connection with the distribution of all pre-2023 earnings of a China subsidiary that were previously asserted to be indefinitely reinvested. We also previously removed our indefinite reinvestment assertion with respect to undistributed earnings accumulated in Germany. We also previously removed the indefinite reinvestment assertion for the pre-2020 earnings in Italy, Switzerland and Colombia. We continue to assert indefinite reinvestment with respect to foreign earnings from other countries. We estimate that if the non-U.S. subsidiaries were to make a distribution of their cash or distributable reserves to the U.S., we would incur local country withholding tax and income taxes in the range of $15 million to $25$20 million. We would recognize such tax expense in our Consolidated Statements of Income and Consolidated Balance Sheets should we change the current permanentindefinite reinvestment assertion on foreign earnings.

Reported net sales increased approximately 5%12% in 20212023 to $1.28$1.52 billion compared to $1.23$1.36 billion in 2020.2022. Changes in currenciescurrency rates positively affected net sales by 3%. The2%, while the acquisition of Metaphase did not have a significant impact of our Voluntis and Hengyu acquisitions was immaterial to our segment's full year results.during 2023. Therefore, core sales increased 2%10% in 20212023 compared to the prior year. Strong core sales growth for our proprietary drug delivery systems to the prescription drug and consumer health care markets more than compensated for lower sales to the injectables and active material science solutions markets. Core sales of our proprietary drug delivery systems to the prescription drug market increased 26% on continued strong demand for our allergic rhinitis, asthma and emergency medicines and central nervous system devices. The 17% core sales growth in the consumer health care market was driven by higher demand for our nasal decongestant, saline rinses, eye care and cough and cold solutions. Core sales of our products to the injectables market increased 16%declined 7% primarily due to continuedthe shutdown of operations for the implementation of our new ERP system in the first quarter of 2023. In addition, we were up against strong demandprior year comparisons as we experienced strong sales of our elastomeric components for our vaccine components. SalesCOVID-19 and other vaccines during 2022. Similarly, core sales of our active material science solutions grew 12%decreased 22% mainly on increasedstrong prior year period demand for our diagnostics and probiotics products. We also experienced increased demand for our Activ-Film™ technologyactive film products used to enhance the integrity of certain diagnostic tests includingwith at-home COVID-19 antigen test kits. Corekits and tooling sales of our products to the consumer health care market increased 4% as strong revenue from our eye care customers more than compensated for softness for mostthat did not repeat during 2023. Digital Health currently does not represent a significant percentage of the year in the nasal saline and decongestant markets. Core sales of our products to the prescription drug market decreased 8% as fewer non-critical doctor visits and lower incidence of cold and flu illnesses this year have resulted in certaintotal Pharma customers drawing down inventory as sectors such as allergic rhinitis are impacted by low levels of patient consumption.sales.

Adjusted EBITDA for 2021 decreased2023 increased approximately 14% to $425.7$502.6 million compared to $428.5$441.6 million in 2020. While we reported2022. The positive impact of our strong productcore sales growth in the prescription drug and consumer healthcare divisions was partially offset by the additional expenses related to our injectables ERP system implementation in the first quarter of 2023 and the impact of lower COVID-19 related sales in our injectables and active material science solutions markets, lower sales in certain of our higher-margin prescription products drovedivisions, as discussed above. Overall, our Adjusted EBITDA margin improved modestly to 33.0% in 2023 compared to 32.4% in 2022.

Reported net sales increased approximately 4% in 2023 to $1.27 billion compared to $1.22 billion in 2022. Changes in currency rates positively impacted net sales by 2%, while our acquisition of iD SCENT did not have a material impact on the sales for 2023. Therefore, core sales increased 2% in 2023 compared to the prior year. Regionally, strong sales growth in Europe and Latin America more than offset lower North American demand. Core sales of our products to the beauty market increased 10% during 2021. We were also impacted by the inflationary environment discussed above2023 on higher sales in both prestige and mass fragrance, along with continued growth for our cosmetic solutions. Personal care core sales decreased 7% as higher input costs negatively impacteddemand for our margins.sun care applications was offset by softness in baby and hair care product sales mainly due to customer destocking in North America. Core sales to the home care markets decreased 22% over 2022 mainly due to lower demand from our air care and surface cleaner customers.

Reported net sales increaseddecreased approximately 10%5% in 20212023 to $1.43 billion$698.8 million compared to $1.30 billion$738.5 million in 2020.2022. Changes in currency rates positively impacted net sales by 2%1%, while ourthe acquisition of Fusion positively impacted sales byGulf Closures also had a positive impact of 1% in 2021.. Therefore, core sales increaseddecreased 7% in 20212023 compared to the prior year. Approximately 4%half of thisthe core sales growth came from pass-through of higher input cost while the remaining amountdecrease is due to increasedpassing through lower input costs, mainly due to lower resin prices during 2023. Tooling sales and product volumes were also lower as sales for many of our productscustomers continued to gradually recover from the COVID-19 pandemic. Core sales of our products to the beauty market increased 11% during 2021 as we experienced an increasework through their inventory levels, primarily in demand for both fragrance and skin care products. Personal care core sales increased 3% as higher sales of our hair care and body care products more than offset the lower demand for our hand sanitizer dispensing solutions.North America. Core sales to the homefood and personal care markets decreased 9% and 16%, respectively, while core sales to the beverage market increased 6% on5% during 2023 compared to the prior year. For the food market, we were up against strong prior year period comparisons, mainly for sauces and condiment applications and our infant nutrition products. The personal care market was also negatively impacted by lower sales of our body and hair care applications, while the beverage market reported growth mainly from higher demand for our dish carebottled water and concentrate products.

Adjusted EBITDA for 20212023 increased approximately 20% to $154.7$103.7 million from $129.3compared to $86.1 million in 2020.2022. Our profitability was positively impacted by a focus on operational improvements and containing costs within our new segment structure. As discussed above, increases in product sales volumes drove the majorityapproximately half of our Adjusted EBITDA growth in 2021. Inflationary increases negatively impacted our current year results and margins as resin price pass throughs and other general price increases were not enough to offset the full effect of rising material and labor costs. However, we were further able to compensate for this impact with improved operational performance during 2021.

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

Corporate & Other expenses in 2021 increased2023 decreased to $52.3$62.3 million compared to $43.4$62.9 million in 2020. Approximately $2.1 million of this increase2022. This expense decrease is mainly due to higher foreign exchange rates during 2021. The majorityrealized gains on the sale of the remaining increase relatesPCT shares related to higher compensation costsour PureCycle investment. Our results include approximately $4.2 million and higher professional fees during 2021 compared to the prior year. Our 2021 Adjusted EBITDA includes a $2.0$1.2 million realized gaingains on sales of PCT shares while our 2020 results include a $3.1 million gain on our PureCycle investment prior to it being converted into shares of PCT.for 2023 and 2022, respectively. As noted above, any unrealized investment gains or losses are removed from our Adjusted EBITDA calculation as we believe that unrealized cost investment gains and losses from changes in market prices are not considered relevant to understanding our reported consolidated earnings or evaluating our periodic economic performance. The remaining cost increases are mainly due to higher professional fees for corporate projects and higher incentive compensation costs, including accruals related to our current short-term and equity compensation programs.

In addition to the information presented herein that conforms to U.S. GAAP, we also present financial information that does not conform to U.S. GAAP, which are referred to as non-U.S. GAAP financial measures. Management may assess our financial results both on a U.S. GAAP basis and on a non-U.S. GAAP basis. We believe it is useful to present these non-U.S. GAAP financial measures because they allow for a better period-over-period comparison of operating results by removing the impact of items that, in management’s view, do not reflect our core operating performance. These non-U.S. GAAP financial measures should not be considered in isolation or as a substitute for U.S. GAAP financial results, but should be read in conjunction with the audited consolidated statementsConsolidated Statements of incomeIncome 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 measuremeasures to arrive at these non-U.S. GAAP financial measures.

In our Management's Discussion and Analysis, we exclude the impact of foreign currency translation when presenting net sales and other information, which we define as “constant currency.” Changes in net sales excluding the impact of foreign currency translation is a non-U.S. GAAP financial measure. As a worldwide business, it is important that we take into account the effects of foreign currency translation when we view our results and plan our strategies. Consequently, when our management looks at our financial results to measure the core performance of our business, we may 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),restructuring initiatives, acquisition-related costs, purchase accounting adjustments related to acquisitions and investments and net unrealized investment gains and losses related to observable market price changes on equity securities. Our Operations Outlook is also provided on a non-U.S. GAAP basis because certain reconciling items are dependent on future events that either cannot be controlled, such as taxexchange rates and exchange rates,changes in the fair value of equity investments, or reliably predicted because they are not part of our routine activities, such as restructuring initiatives and acquisition-related costs.

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

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