AMETEK INC

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Total international sales for 2023 were $3,128.2 million or 47.4% of net sales, an increase of $131.9 million or 4.4%, compared with international sales of $2,996.3 million or 48.7% of net sales in 2022. The increase in international sales was primarily driven by strong demand in Europe and Asia as well as contributions from recent acquisitions. Export shipments from the United States, which are included in total international sales, were $1,732.4 million in 2023, an increase of $43.7 million or 2.6%, compared with $1,688.7 million in 2022.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Cash provided by financing activities totaled $697.3 million in 2023, compared with $575.7 million of cash used by financing activities in 2022. At December 31, 2023, total debt, net was $3,313.3 million, compared with $2,385.0 million at December 31, 2022. In 2023, total borrowings increased by $892.3 million, compared with a decrease of $73.7 million in 2022. At December 31, 2023, the Company had available borrowing capacity of $1,829.3 million under its revolving credit facility and term loan, including the $700 million accordion feature.

Current wording

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

Previous wording

On May 12, 2022, the Company along with certain of its foreign subsidiaries amended and restated its Credit Agreement dated as of September 22, 2011, as amended and restated as of March 10, 2016 and as further amended and restated as of October 30, 2018, with the lenders, JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., PNC Bank, National Association, Trust Bank and Wells Fargo Bank, National Association, as Co-Syndication Agents. The credit agreement amends and restates the Company’s existing revolving credit facility to increase the size from $1.5 billion to $2.3 billion and terminates the $800 million term loan. The credit agreement places certain restrictions on allowable additional indebtedness. In November 2021, the Company further amended the Credit Agreement to address the cessation of LIBOR on certain currencies. At December 31, 2023, the Company had $1,116.0 million outstanding on the revolver with a maturity date of May 2027. The amount outstanding under the revolver that the Company expects, but is not required, to repay in 2024 is recorded in current liabilities on the consolidated balance sheet at December 31, 2023.

Current wording

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

Previous wording

The debt-to-capital ratio was 27.5% at December 31, 2023, compared with 24.2% at December 31, 2022. The net debt-to-capital ratio (total debt, net less cash and cash equivalents divided by the sum of net debt and stockholders’ equity) was 25.0% at December 31, 2023, compared with 21.4% at December 31, 2022. The net debt-to-capital ratio is presented because the Company is aware that this measure is used by third parties in evaluating the

Current wording

In the third quarter of 2024, the Company paid in full, at maturity, a $300 million in aggregate principal amount of 3.73% senior notes. The debt-to-capital ratio was 17.7% at December 31, 2024, compared with 27.5% at December 31, 2023. The net debt-to-capital ratio (total debt, net less cash and cash equivalents divided by the sum of net debt and stockholders’ equity) was 15.0% at December 31, 2024, compared with 25.0% at December 31, 2023. The net debt-to-capital ratio is presented because the Company is aware that this measure is used by third parties in evaluating the Company. (See "Non-GAAP Financial Measures" for a reconciliation of U.S. GAAP measures to comparable non-GAAP measures).

Previous wording

In 2023, the Company repurchased approximately 0.1 million shares of its common stock for $7.8 million, compared with $332.8 million used for repurchases of approximately 2.7 million shares in 2022. Effective May 5, 2022, the Company's Board of Directors approved a $1 billion share repurchase authorization. This authorization replaces an earlier $500 million share repurchase authorization approved by the Board in February 2019. At December 31, 2023, $816.1 million was available under the Company’s Board of Directors authorization for future share repurchases.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

As a result of all of the Company’s cash flow activities in 2023, cash and cash equivalents at December 31, 2023 totaled $409.8 million, compared with $345.4 million at December 31, 2022. At December 31, 2023, the Company had $375.9 million in cash outside the United States, compared with $344.0 million at December 31, 2022. The Company utilizes this cash to fund its international operations, as well as to acquire international businesses. The Company is in compliance with all covenants, including financial covenants, for all of its debt agreements. The Company believes it has sufficient cash-generating capabilities from domestic and unrestricted foreign sources, available credit facilities and access to long-term capital funds to enable it to meet its operating needs and contractual obligations for the foreseeable future.

Current wording

As a result of all of the Company’s cash flow activities in 2024, cash and cash equivalents at December 31, 2024 totaled $374.0 million, compared with $409.8 million at December 31, 2023. At December 31, 2024, the Company had $361.5 million in cash outside the United States, compared with $375.9 million at December 31, 2023. The Company utilizes this cash to fund its international operations, as well as to acquire international businesses. The Company is in compliance with all covenants, including financial covenants, for all of its debt agreements. The Company believes it has sufficient cash-generating capabilities from domestic and unrestricted foreign sources, available credit facilities and access to long-term capital funds to enable it to meet its operating needs and contractual obligations for the foreseeable future.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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

Previous wording

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

Current wording

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