APTARGROUP, INC. - Annual Report: 2008 (Form 10-K)
Table of Contents
United States Securities and
Exchange Commission
Washington, D.C.
20549
FORM 10-K
[X]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 |
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OR | ||
[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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FOR THE TRANSITION PERIOD FROM TO |
COMMISSION FILE NUMBER 1-11846
AptarGroup, Inc.
DELAWARE
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36-3853103 |
475 WEST TERRA COTTA AVENUE, SUITE E, CRYSTAL LAKE,
ILLINOIS 60014
815-477-0424
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
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Name of each exchange on which
registered
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Common Stock $.01 par value
|
New York Stock Exchange | |
Preferred Stock Purchase Rights
|
New York Stock Exchange |
Securities Registered Pursuant to Section 12 (g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes x | No o |
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes o | No x |
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days.
Yes x | No o |
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. x
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Act. (Check one):
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange Act).
Yes o | No x |
The aggregate market value of the common stock held by
non-affiliates as of June 30, 2008 was $2,772,941,397.
The number of shares outstanding of common stock, as of
February 23, 2009, was 67,795,527 shares.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to
stockholders in connection with the Annual Meeting of
Stockholders to be held May 6, 2009 are incorporated by
reference into Part III of this report.
AptarGroup, Inc.
FORM 10-K
For the Year Ended December 31, 2008
INDEX
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Table of Contents
PART I
ITEM 1. BUSINESS
BUSINESS OF
APTARGROUP
Our business was started in the late 1940s, manufacturing
and selling aerosol valves in the United States, and has grown
primarily through the acquisition of relatively small companies
and internal expansion. We were incorporated in Delaware in
1992. In this report, we may refer to AptarGroup, Inc. and its
subsidiaries as AptarGroup or the
Company.
We are a leading global supplier of a broad range of innovative
dispensing systems for the personal care, fragrance/cosmetic,
pharmaceutical, household and food/beverage markets. We provide
value-added dispensing systems (pumps, closures and aerosol
valves) to global consumer product marketers allowing them to
differentiate their products and meet consumers need for
convenience.
We have manufacturing facilities located throughout the world
including North America, Europe, Asia and South America. We have
over 5,000 customers with no single customer accounting for
greater than 7% of our 2008 net sales.
Sales of our dispensing systems have traditionally grown at a
faster rate than the overall packaging industry as
consumers preference for convenience has increased and
product differentiation through packaging design has become more
important to our customers. Consumer product marketers have
converted many of their products to packages with dispensers
that offer the benefit of enhanced shelf appeal, convenience,
cleanliness or accuracy of dosage. We expect this trend to
continue.
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 perfume and
pharmaceutical products to lotion pumps for more viscous
formulas.
Closures for us are primarily dispensing closures but to a
lesser degree can include non-dispensing closures. Dispensing
closures are plastic caps, primarily for plastic containers such
as bottles and tubes, which 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 continuous
spray valves, with the balance being metered dose inhaler valves.
AVAILABLE
INFORMATION
Our periodic and current reports are available, free of charge,
through a link on the Investor Relations page of our website
(www.aptargroup.com), as soon as reasonably practicable after
the material is electronically filed with, or furnished to, the
SEC. The Company has filed the required certificate with the
New York Stock Exchange (NYSE) confirming the
Companys compliance with the corporate governance listing
standards set out in Section 303A of the NYSE Listed
Company Manual. The Company has included as Exhibit 31 to
this Annual Report on
Form 10-K,
certificates of the Chief Executive Officer and Chief Financial
Officer of the Company certifying the quality of the
Companys public disclosure.
DESCRIPTION OF
APTARGROUPS REPORTING SEGMENTS
FINANCIAL
INFORMATION ABOUT SEGMENTS
The Company operates in the packaging components industry, which
includes the development, manufacture and sale of consumer
product dispensing systems. We are organized into three
reportable business segments. Operations that sell spray and
lotion dispensing systems and accessories primarily to the
personal care, fragrance/cosmetic and household markets form the
Beauty & Home segment. Operations that sell closures
to each market served by AptarGroup form the Closures segment.
Operations that sell dispensing systems to the pharmaceutical
market form the Pharma segment. Each of these three business
segments is described more fully below. A summary of revenue,
by segment, from external customers, profitability and total
assets for each of the last three years is shown in Note 17
to the Consolidated Financial Statements in Item 8 (which
is incorporated by reference herein).
BEAUTY &
HOME
The Beauty & Home segment is our largest segment in
terms of revenue and total assets representing 52% and 52% of
AptarGroups Net Sales and Total Assets, respectively. The
Beauty & Home segment primarily sells pumps and
aerosol valves and accessories to the personal care and
household and food/beverage markets and pumps and decorative
components to the fragrance/cosmetic market. We believe we are
the leading supplier of fragrance/cosmetic and personal care
fine mist spray pumps worldwide and the second largest supplier
of personal care lotion pumps worldwide. We believe we are also
one of the largest continuous spray aerosol valve suppliers
worldwide.
Fragrance/Cosmetic. Sales to the
fragrance/cosmetic market for Beauty & Home accounted
for approximately 60% of the segments total net sales in
2008. The fragrance/cosmetic market requires a broad range of
pump dispensing systems to meet functional as well as aesthetic
requirements. A considerable amount of research, time and
coordination with the customers development staff is
required to qualify a pump for use with their products. Within
the market, we expect the use of pumps to continue to increase,
particularly in the cosmetics and sampling sectors of this
market. In the cosmetic sector, packaging for certain products
such as anti-aging lotions continues to undergo a conversion
from non-dispensing to pump systems, which
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Table of Contents
continues to provide us with growth opportunities. Our airless
dispensing systems, spray and lotion sampling devices, and
decorative capabilities continue to contribute to our overall
growth.
Personal Care. Sales to the personal care
market for Beauty & Home accounted for approximately
32% of the segments total net sales in 2008. Personal care
products include fine mist spray pumps, lotion pumps and
continuous spray aerosol valves. Typical personal care spray
pump applications include hair care, sun care and deodorant
products. Typical lotion pump applications include skin
moisturizers and soap. Typical personal care continuous aerosol
valve applications include hair care products, deodorants,
shaving cream and most recently sun care lotions. Our research
and development teams continue to design unique accessories that
increase the value of our continuous aerosol valve offerings.
Further, our
bag-on-valve
technology continues to provide marketers with unparalleled
functionality. This technology physically separates the
propellant from the product to be dispensed. It offers improved
integrity of the product content, prevents expulsion of the
propellant into the atmosphere and allows spraying of the
product in any position. Sun care, tooth gel and nasal saline
applications are examples of product applications using this
technology.
Household. Sales to the household market for
Beauty & Home accounted for approximately 5% of the
segments total net sales in 2008. Household products
primarily use either continuous or metered dose spray aerosol
valves and to a lesser degree spray pumps. Applications for
continuous spray valves include disinfectants, spray paints,
insecticides and automotive products. Metered dose valves are
used for air fresheners. Spray pump applications primarily
include household and industrial cleaners.
Food/Beverage. Sales to the food/beverage
market accounted for approximately 1% of segment net sales in
2008. We traditionally sell aerosol valves to this market for
cooking sprays and oils and spray pumps for butter substitutes.
Our spray pumps can also be found on certain salad dressings.
CLOSURES
The Closures segment is our second largest segment in terms of
revenue and total assets representing 26% and 19% of
AptarGroups Net Sales and Total Assets, respectively. We
believe that we are the largest supplier of dispensing closures
in the United States, and the second largest supplier in
Europe. We primarily manufacture dispensing closures and, to a
lesser degree, non-dispensing closures.
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 no-drip
dispensing, inverted packaging and directional flow to make
packages simpler to use, cleaner and more appealing to
consumers. Closures are primarily sold to the personal care,
food/beverage and household markets.
Personal Care. Historically, the majority of
our dispensing closure sales have been to the personal care
market. Sales to the personal care market for Closures
accounted for approximately 58% of the segments total net
sales in 2008. Products with dispensing closures include
shampoos, shower gels, skin care lotions and toothpaste. While
many personal care products in the U.S. and Europe have
already converted from non-dispensing to dispensing closures, we
expect to benefit from similar conversions in other geographic
areas such as Eastern Europe (including Russia), Latin America
and Asia. Recent product innovations serving this market
include large, wide mouth, easy open jar closures with hinged
lids and a push-open closure for various products.
Food/Beverage. Sales to the food/beverage
market for Closures accounted for approximately 30% of the
segments total net sales in 2008. Sales of dispensing
closures to the food/beverage market have increased
significantly over the last several years as we continue to see
an increase of interest from food/beverage marketers using
dispensing closures for their products. Examples of
food/beverage products currently utilizing dispensing closures
include condiments, salad dressings, syrups, honey, water and
dairy creamers. We believe there are good growth opportunities
in the food/beverage market reflecting the continued and growing
acceptance in this market of our silicone valve dispensing
technology, and additional conversion from traditional packages
to packages using dispensing closure systems, in particular for
the single serve non-carbonated beverage industry.
Household. Sales to the household market for
Closures accounted for approximately 8% of the segments
total net sales in 2008. While we have had success worldwide in
selling dispensing closures to this market, it has not
represented a significant amount of total dispensing closure
sales. Products utilizing dispensing closures include
dishwashing detergents, laundry care products and household
cleaners.
Fragrance/Cosmetic. Sales to the
fragrance/cosmetic market are not a significant part of Closures
sales (approximately 1% of segment net sales in 2008), but are
mentioned here as an example of potential growth areas for the
Closures segment. We are optimistic that we will increase sales
to this market with our recent introduction of our Pinpoint
dispensing closure with a conical shaped silicone valve tip
targeted at cosmetic applications, in particular for eye creams
and other applications requiring specific targeted application
areas.
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PHARMA
While the Pharma segment is our third largest segment in terms
of revenue and total assets, accounting for 22% and 17% of
AptarGroups Net Sales and Total Assets, respectively, it
is our most profitable segment. We believe we are the leading
supplier of pumps and metered dose inhaler valves
(MDIs) to the pharmaceutical market
worldwide. 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,
Switzerland and the United States. We believe that the
conversion from traditional medication forms such as pills and
syringes to value-added, convenient dispensing will continue to
increase.
Pumps sold to the pharmaceutical market deliver medications
nasally, orally or topically. Currently the majority of our
pumps sold are for allergy, cold or flu treatments. Potential
opportunities for conversion from pills and syringes to pump
dispensing systems include treatment for vaccines, additional
cold and flu treatments, hormone replacement therapies and
sexual dysfunction.
MDIs are used for dispensing precise amounts of
medication. This aerosol technology allows medication to be
broken up into very fine particles, which enables the drug to be
delivered typically via the pulmonary system. We work with
pharmaceutical companies as they work to phase out the use of
chlorofluorocarbon (CFC) propellants. We continue
to increase our market share of MDIs to this market as
pharmaceutical companies replace CFCs with alternative
propellants and we expect our market share to continue to grow.
Currently the majority of our MDIs sold are used for
respiratory ailments.
We continue to work on new dispensing systems and accessories in
this segment such as a dose indicator feature for our MDIs
to let the patient know exactly how many doses are left in the
container. Also, we have developed a unique delivery system
which dispenses a consistent dosage independent of the force and
speed of actuation. While we expect that these 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
which use our dispensing systems.
GENERAL BUSINESS
INFORMATION
GROWTH
STRATEGY
We seek to enhance our position as a leading global supplier of
innovative dispensing systems by (i) expanding
geographically, (ii) converting non-dispensing applications
to dispensing systems, (iii) replacing current dispensing
applications with our dispensing products and
(iv) developing or acquiring new dispensing technologies.
We are committed to expanding geographically to serve
multinational customers in existing and emerging areas.
Targeted areas include Asia, South America, and Eastern Europe.
In 2007, we opened a new manufacturing facility in Thailand. In
2008, we opened a new larger facility in Brazil to expand our
injection molding and decorating (including serigraphy and hot
stamping) of plastic accessories primarily for the fragrance and
cosmetic markets.
We believe significant opportunities exist to introduce our
dispensing systems to replace non-dispensing applications.
Examples of these opportunities include potential conversion in
the food/beverage market for single serve non-carbonated
beverages, condiments, and cooking oils. In the
fragrance/cosmetic market, potential conversion includes creams
and lotions currently packaged in jars or tubes using removable
non-dispensing closures, converting to lotion pumps or
dispensing closures. We have developed and patented a thin
sprayable dispensing system that can be inserted into magazines
to replace the traditional scent strips. We believe this new
innovative system will offer growth opportunities, particularly
for fragrance samples. We are in the process of developing a
similar miniature flat sample for viscous creams as well as a
small pump for use on vials for cosmetic lotions.
In addition to introducing new dispensing applications, we
believe there are significant growth opportunities in converting
existing pharmaceutical delivery systems (syringes or pills) to
our more convenient dispensing pump or metered dose aerosol
valve systems. An example of a product for which we continue to
find new applications is the metered dose aerosol valve.
MDIs are used to dispense precise amounts of product in
very fine particles from pressurized containers. Traditionally,
MDIs are used to deliver medication via the pulmonary
route. Additional examples of opportunities in the
pharmaceutical market include nasal pumps to dispense treatments
for vaccines, additional cold and flu treatments, hormone
replacement therapies and sexual dysfunction.
We are committed to developing or acquiring new dispensing
technologies. Several years ago, we acquired intellectual
property (patents, licenses and know how) and equipment relating
to certain dry powder dispensing systems. We continue to
develop this new technology and hope to have a product to market
in the future. We acquired a contract service organization
specializing in analytical testing of nasal and inhalation
products on behalf of pharmaceutical, biotech, drug delivery and
device companies. We have entered into several exclusive
licensing arrangements with third party innovators allowing us
to continue to develop new dispensing systems using their
technologies which are in various stages of development. We
have also acquired businesses that manufacture aerosol valves
with
bag-on-valve
technology. These systems physically separate the propellant
from the product to be dispensed. It offers improved integrity
of the product content, prevents expulsion of the propellant
into the atmosphere and allows spraying of the product in any
position. We also acquired two companies that manufacture
decorative packaging components primarily for the high end of
the fragrance/cosmetic market. This technology includes
advanced molding capabilities as well as decoration (vacuum
metallization and varnishing) of plastic components.
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RESEARCH AND
DEVELOPMENT
One of our competitive strengths is our commitment to innovation
and providing innovative dispensing solutions for our
customers. This commitment to innovation is the result of our
emphasis on research and development. Our research and
development activities are directed toward developing innovative
dispensing systems, adapting existing products for new markets
or customer requirements, and reducing costs. We have research
and development organizations located in the United States,
France, Germany and Italy. 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. Expenditures for research and
development activities were $60.9 million,
$55.9 million and $48.2 million in 2008, 2007 and
2006, respectively.
PATENTS AND
TRADEMARKS
We sell a majority of our products under the names used by our
business units. The names used by our business units have been
trademarked. We customarily seek patent and trademark
protection for our products and currently own and have numerous
applications pending for United States and foreign patents and
trademarks. In addition, certain of our products are produced
under patent licenses granted by third parties. We believe that
we possess certain technical capabilities in making our products
that make it difficult for a competitor to duplicate.
TECHNOLOGY
Pumps and aerosol valves require the assembly of up to 15
different plastic, metal and rubber components using high-speed
equipment. When molding dispensing closures, or plastic
components to be used in pump or aerosol valve products, we use
advanced plastic injection molding technology, including large
cavitation plastic injection molds. We are able to mold within
tolerances as small as one one-thousandth of an inch and we
manufacture products in a high-speed, cost-effective manner.
Our injection molding capabilities include recent advances such
as spin-stack and cube molding which utilizes high-efficiency
rotating molds. We are also utilizing In-Molding Assembly
Technology (IMAT) which allows us to assemble products within
the molding process. We have experience in liquid silicone
rubber molding that we utilize in our dispensing closure
operations and certain of our pump products. We also have
technology to decorate plastic components using vacuum
metallization and varnishing for the fragrance/cosmetic and
personal care markets.
MANUFACTURING AND
SOURCING
More than half of our worldwide production is located outside of
the United States. In order to augment capacity and to maximize
internal capacity utilization (particularly for plastic
injection molding), we use subcontractors to supply certain
plastic, metal and rubber 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 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 increasing selling prices
over time, as allowed by market conditions. Our pharmaceutical
products often use specifically approved plastic resin for our
customers. Significant delays in receiving components from
these suppliers or discontinuance of an approved plastic resin
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.
SALES AND
DISTRIBUTION
Sales of products are primarily through our own sales force. To
a limited extent, we also use the services of independent
representatives and distributors who sell our products as
independent contractors to certain smaller customers and export
markets.
BACKLOG
Our sales are primarily made pursuant to standard purchase
orders for delivery of products. While most orders placed with
us are ready for delivery within 120 days, we continue to
experience a trend towards shorter lead times requested by our
customers. Some customers place blanket orders, which extend
beyond this delivery period. However, deliveries against
purchase orders are subject to change, and only a small portion
of the order backlog is noncancelable. The dollar amount
associated with the noncancelable portion is not material.
Therefore, we do not believe that backlog as of any particular
date is an accurate indicator of future results.
CUSTOMERS
The demand for our products is influenced by the demand for our
customers products. Demand for our customers
products may be affected by general economic conditions and
liquidity, government regulations, tariffs and other trade
barriers. Our customers include many of the largest personal
care, fragrance/cosmetic, pharmaceutical, household and
food/beverage marketers in the world. We have over 5,000
customers with no single customer accounting for greater than 7%
of 2008 net sales. Over the past few years, a
consolidation of our customer base has occurred. This trend is
expected to continue. A concentration of customers may result
in pricing pressures or a loss of volume. However, this
situation also presents opportunities for increasing sales due
to the breadth of our product line, our international presence
and our long-term relationships with certain customers.
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INTERNATIONAL
BUSINESS
A significant number of our operations are located outside the
United States. Sales in Europe for the years ended
December 31, 2008, 2007 and 2006 were approximately 62%,
63% and 61%, respectively, of net sales. We manufacture the
majority of units sold in Europe at facilities in the Czech
Republic, England, France, Germany, Ireland, Italy, Russia,
Spain and Switzerland. Other countries in which we operate
include Argentina, Brazil, Canada, China, India, Indonesia,
Japan, Mexico and Thailand which when aggregated represented
approximately 12%, 11% and 10% of our consolidated sales for the
years ended December 31, 2008, 2007 and 2006,
respectively. Export sales from the United States were
$100.1 million, $95.3 million and $82.1 million
in 2008, 2007 and 2006, respectively. For additional financial
information about geographic areas, please refer to Note 17
in the Notes to the Consolidated Financial Statements in
Item 8 (which is incorporated by reference herein).
FOREIGN
CURRENCY
A significant number of our operations are located outside of
the United States. Because of this, movements in exchange rates
may have a significant impact on the translation of the
financial statements of our foreign entities. Our primary
foreign exchange exposure is to the Euro, but we have foreign
exchange exposure to the British Pound, South American and Asian
currencies, among others. We manage our exposures to foreign
exchange principally with forward exchange contracts to hedge
certain transactions and firm purchase and sales commitments
denominated in foreign currencies. A strengthening
U.S. dollar relative to foreign currencies has a dilutive
translation effect on our financial statements. Conversely, a
weakening U.S. dollar has an additive effect. In some
cases, we sell products denominated in a currency different from
the currency in which the related costs are incurred. Changes
in exchange rates on such inter-country sales could materially
impact our results of operations.
WORKING CAPITAL
PRACTICES
Collection and payment periods tend to be longer for our
operations located outside the United States due to local
business practices. Historically, we have not needed to keep
significant amounts of finished goods inventory to meet customer
requirements.
EMPLOYEE AND
LABOR RELATIONS
AptarGroup has approximately 8,700 full-time employees. Of
the full-time employees, approximately 1,900 are located in
North America, 5,400 are located in Europe and the remaining
1,400 are located in Asia and South America. Approximately 170
of the North American employees are covered by a collective
bargaining agreement, while the majority of our European
employees are covered by collective bargaining arrangements made
at either the local or national level in their respective
countries. 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 2008 and management considers our employee
relations to be satisfactory.
COMPETITION
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. Our competitors range from regional to
international companies. We expect the market for our products
to remain competitive. We believe our competitive advantages
are consistent high levels of innovation, quality and service,
geographic diversity and breadth of products. Our manufacturing
strength lies in the ability to mold complex plastic components
in a cost-effective manner and to assemble products at high
speeds. Our business is capital intensive and it is becoming
more important to our customers to have global manufacturing
capabilities. Both of these act as barriers to entry for new
competitors wanting to enter our business.
While we have experienced some competition from low cost Asian
suppliers particularly in the low-end fragrance/cosmetic and
personal care market, this has not been significant.
Indirectly, some fragrance marketers are sourcing their
manufacturing requirements including filling of their product in
Asia and importing the finished product back into the United
States. However, some customers who had bought dispensing
packaging products from low cost Asian suppliers in the past
have reverted to purchasing our dispensing products again,
citing the higher quality offered by our products and the
logistical advantage of being closer to the customer.
ENVIRONMENT
Our manufacturing operations primarily involve plastic injection
molding and automated assembly processes 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.
Recently there is increased interest and awareness from the
public and our customers in sustainability or
producing sustainable products and measuring
carbon footprints. Several organizations including
the World Business Council for Sustainable Development in
conjunction with scientists from the United Nations
International Government Panel on Climate Change, have developed
protocols to identify and calculate the amount of greenhouse
gases manufacturing facilities generate. We are currently
evaluating opportunities to cut our energy costs while reducing
greenhouse gas emissions and reducing our carbon footprint.
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GOVERNMENT
REGULATION
Certain of our products are indirectly affected by government
regulation. Growth of packaging using aerosol valves has been
restrained by concerns relating to the release of certain
chemicals into the atmosphere. Both aerosol and pump packaging
are affected by government regulations regarding the release of
volatile organic compounds (VOCs) into the
atmosphere. Certain states within the United States have
regulations that required the reduction in the amount of
VOCs that can be released into the atmosphere and the
potential exists for this type of regulation to expand
worldwide. These regulations required our customers to
reformulate certain aerosol and pump products, which may have
affected the demand for such products. We own patents and have
developed systems to function with alternative propellant and
product formulations.
Future government regulations could include medical 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 to the pharmaceutical industry. 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. In general, government regulation
of our customers products could impact our sales to them
of our dispensing systems.
EXECUTIVE
OFFICERS
Our executive officers as of February 27, 2009 were as
follows:
Name | Age | Position with the Company | ||||
Peter Pfeiffer
|
60 | President and Chief Executive Officer, AptarGroup, Inc. | ||||
Mr. Peter Pfeiffer has been President and Chief Executive Officer since January 1, 2008 and was Vice Chairman of the Board since 1993. | ||||||
Stephen Hagge
|
57 | Executive Vice President and Chief Operating Officer, AptarGroup, Inc. | ||||
Mr. Stephen Hagge has been Chief Operating Officer since January 1, 2008 and Executive Vice President since 1993. Prior to 2008, Mr. Hagge was Chief Financial Officer of AptarGroup. | ||||||
Robert W. Kuhn
|
46 | Executive Vice President and Chief Financial Officer, AptarGroup, Inc. | ||||
Mr. Robert Kuhn has been Chief Financial Officer since September 30, 2008 and prior to this was Vice President Financial Reporting since 2000. | ||||||
Olivier Fourment
|
51 | President Aptar Pharma | ||||
Mr. Olivier Fourment has been President of Aptar Pharma since January 1, 2008 and was Co-President of Valois Group since 2000. | ||||||
Olivier de Pous
|
64 | President Aptar Beauty and Home | ||||
Mr. Olivier de Pous has been President of Aptar Beauty and Home since January 1, 2008 and was Co-President of Valois Group since 2000. | ||||||
Eric Ruskoski
|
61 | President Aptar Closures | ||||
Mr. Eric Ruskoski has been President Aptar Closures since January 1, 2008 and was President of Seaquist Closures Group since 1987. |
There were no arrangements or understandings between any of the
executive officers and any other person(s) pursuant to which
such officers were elected.
ITEM 1A. RISK
FACTORS
Set forth below and elsewhere in this report and in other
documents we file with the Securities and Exchange Commission
are risks and uncertainties that could cause our actual results
to materially differ from the results contemplated by the
forward-looking statements contained in this report and in other
documents we file with the Securities and Exchange Commission.
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 on
Form 10-K
before purchasing any shares of our common stock.
FACTORS AFFECTING
OPERATIONS OR OPERATING RESULTS
If we experience a long-term global recession, our business
and operating results could be materially adversely
impacted. Due to our strong balance sheet,
diverse product offerings, various end-markets served, and our
broad geographic presence, we are well positioned to withstand
slowness in any one particular region. However, given the
current crisis in global credit and financial markets (including
severely diminished liquidity and credit availability, declines
in consumer confidence, declines in economic growth, increases
in unemployment rates, and uncertainty about economic
stability), there can be no assurance that there will not be
further deterioration in economic conditions. These economic
uncertainties affect businesses such as ours in a number of
ways, making it difficult to accurately forecast and plan our
future business activities. The current tightening of credit in
financial markets may lead consumers and businesses to postpone
spending, which may cause our customers to cancel, decrease or
delay their existing and future orders with us. In addition,
financial difficulties experienced by
6 /ATR
2008
Form 10-K
Table of Contents
our suppliers, customers or distributors could result in product
delays, increased accounts receivable defaults and inventory or
supply challenges. Some of our materials may be
single-sourced. An interruption in supply would also impact our
ability to meet customer demands. The continuing disruption in
the credit markets has severely restricted access to capital.
As a result, the ability to incur additional indebtedness to
fund operations or refinance maturing obligations as they become
due may be significantly constrained. We are unable to predict
the likely duration and severity of the current disruptions in
the credit and financial markets and adverse global economic
conditions, and if the current uncertain economic conditions
continue or further deteriorate, our business and results of
operations could be materially and adversely affected.
Furthermore, it is not certain whether the duration or depth of
the crisis will be severe enough to cause a permanent shift in
consumer behavior leading to reduced spending on grooming
products and a substitution of economic utility over convenience.
In difficult market conditions, our high fixed costs combined
with potentially lower revenues may negatively impact our
results. Our business is characterized by high
fixed costs and, notwithstanding our utilization of third-party
manufacturing capacity, most of our production requirements are
met by our own manufacturing facilities. In difficult industry
environments like the one we are currently experiencing, we are
generally faced with a decline in the utilization rates of our
manufacturing facilities due to decreases in product demand.
During such periods, our plants do not operate at full capacity
and the costs associated with this excess capacity are charged
directly to cost of sales. The market conditions in the future
may continue to adversely affect our utilization rates and
consequently our future gross margins, and this, in turn, could
have a material negative impact on our business, financial
condition and results of operations.
We face strong global competition and our market share could
decline. All of the markets in which we operate
are highly competitive and we continue to experience price
competition in all product lines and segments. Competitors
include privately and publicly held entities. Our competitors
range from regional to international companies.
While we have experienced some competition from low cost Asian
suppliers in some of our markets, particularly in the low-end
fragrance/cosmetic and personal care market, this has not been
significant. Indirectly, some fragrance marketers are sourcing
their manufacturing requirements including filling of their
product in Asia and importing the finished product back into the
United States and Europe. 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 have foreign currency translation and transaction risks
that may materially adversely affect our operating
results. A significant number of our operations
are located outside of the United States. Because of this,
movements in exchange rates may have a significant impact on the
translation of the financial statements of our foreign
entities. Our primary foreign exchange exposure is to the Euro,
but we have foreign exchange exposure to South American and
Asian currencies, among others. We manage our exposures to
foreign exchange principally with forward exchange contracts to
hedge certain transactions and firm purchase and sales
commitments denominated in foreign currencies. A strengthening
U.S. dollar relative to foreign currencies has a dilutive
translation effect on our financial statements. Conversely, a
weakening U.S. dollar has an additive effect. In some
cases, we sell products denominated in a currency different from
the currency in which the related costs are incurred. The
volatility of currency exchange rates may materially affect our
operating results.
If our unionized employees were to engage in a strike or
other work stoppage, our business and operating results and
financial condition could be materially adversely
affected. Approximately 170 of our North American
employees are covered by a collective bargaining agreement,
while the majority of our European employees are covered by
collective bargaining arrangements made either at the local or
national level in their respective countries. Although we
believe that our relations with our employees are satisfactory,
no assurance can be given that this will continue. If disputes
with our unions arise, or if our unionized workers engage in a
strike or other work stoppage, we could incur higher labor costs
or experience a significant disruption of operations, which
could have a material adverse effect on our business, financial
position and results of operations.
If we were to incur a significant product liability claim
above our current insurance coverage, our operating results and
financial condition could be materially adversely
affected. Approximately 22% of our net sales are
made to customers in the pharmaceutical industry. If our
devices fail to operate as intended, medication prescribed for
patients may be under administered, or may be over
administered. The failure of our devices to operate as intended
may result in a product liability claim against us. We believe
we maintain adequate levels of product liability insurance
coverage. A product liability claim or claims in our Pharma
segment or our other segments in excess of our insurance
coverage may materially adversely affect our business, financial
position and results of operations.
The success or failure of our customers products,
particularly in the pharmaceutical market, may materially affect
our operating results and financial condition. In
the pharmaceutical market, the proprietary nature of our
customers products and the success or failure of their
products in the market using our dispensing systems may have a
material impact on our operating results and financial
condition. We may potentially work for years on modifying our
dispensing device to work in conjunction with a customers
drug formulation. If the customers product is not
successful on the market, the time and money spent may not be
recovered. On the contrary, a successful product launch from
one of our pharmaceutical customers may have a material positive
impact on our operating results and financial condition.
7 /ATR
2008
Form 10-K
Table of Contents
Higher raw material costs and an inability to increase our
selling prices may materially adversely affect our operating
results and financial condition. Raw material
costs increased significantly over the past few years and we
have generally been able to increase selling prices to cover
increased costs. In the future, market conditions may prevent
us from passing these increased costs on to our customers
through timely price increases. In addition, we may not be able
to improve productivity or realize our ongoing cost reduction
programs sufficiently to help offset the impact of these
increased raw material costs. As a result, higher raw material
costs could result in declining margins and operating results.
We have approximately $227 million in recorded goodwill
and changes in future business conditions could cause this asset
to become impaired, requiring write-downs that would reduce our
operating income. We evaluate the recoverability
of goodwill amounts annually, or more frequently when evidence
of potential impairment exists. The annual impairment test is
based on several factors requiring judgment. A decrease in
expected reporting unit cash flows or changes in market
conditions may indicate potential impairment of recorded
goodwill and, as a result, our operating results could be
materially adversely affected. See Critical Accounting
Policies and Estimates in Part II, Item 7 (which
is incorporated by reference herein).
FACTORS AFFECTING
APTARGROUP STOCK
Ownership by Certain Significant
Shareholders. Neuberger Berman Inc. and State
Farm Mutual Automobile Insurance Company each own approximately
13% and 9%, respectively, of our outstanding common stock. If
one of these significant shareholders decides to sell
significant volumes of our stock, this could put downward
pressure on the price of the stock.
Certain Anti-takeover Factors. Certain
provisions of our Certificate of Incorporation and Bylaws may
inhibit changes in control of AptarGroup not approved by the
Board of Directors. These provisions include (i) special
voting requirements for business combinations, (ii) a
classified board of directors, (iii) a prohibition on
stockholder action through written consents, (iv) a
requirement that special meetings of stockholders be called only
by the board of directors, (v) advance notice requirements
for stockholder proposals and nominations, (vi) limitations
on the ability of stockholders to amend, alter or repeal our
bylaws and (vii) provisions that require the vote of 70% of
the whole Board of Directors in order to take certain actions.
ITEM 1B. UNRESOLVED
STAFF COMMENTS
The Company has no unresolved comments from the SEC.
8 /ATR
2008
Form 10-K
Table of Contents
ITEM 2. PROPERTIES
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. The locations of our principal
manufacturing facilities, by country, are set forth below:
ARGENTINA Buenos Aires (1, 2 & 3) |
BRAZIL Sao Paulo (1 & 3) Maringá Paraná (1) |
CHINA Suzhou (1, 2 & 3) |
||
CZECH REPUBLIC Ckyne (3) |
FRANCE Annecy (1 & 2) Charleval (1) Le Neubourg (1) Le Vaudreuil (2) Oyonnax (1 & 3) Poincy (3) Verneuil Sur Avre (1) |
GERMANY Böhringen (1) Dortmund (1) Eigeltingen (2) Freyung (3) Menden (1) |
||
INDIA Himachal Pradesh (1) |
IRELAND Ballinasloe, County Galway (1) |
ITALY Manoppello (1) Milan (1) San Giovanni Teatino (Chieti) (1) |
||
MEXICO Queretaro (1 & 3) |
RUSSIA Vladimir (3) |
SWITZERLAND Messovico (2) Neuchâtel (1) |
||
SPAIN Torello (3) |
THAILAND Chonburi (1) |
UNITED KINGDOM Leeds, England (3) |
||
UNITED STATES Cary, Illinois (1) Congers, New York (1 & 2) Libertyville, Illinois (3) McHenry, Illinois (1) Midland, Michigan (3) Mukwonago, Wisconsin (3) Stratford, Connecticut (1) Torrington, Connecticut (1) |
(1) | Locations of facilities manufacturing for the Beauty & Home segment. | |
(2) | Locations of facilities manufacturing for the Pharma segment. | |
(3) | Locations of facilities manufacturing for the Closures segment. |
In addition to the above countries, we have sales offices or
other manufacturing facilities in Canada, Indonesia, and Japan.
Our corporate office is located in Crystal Lake, Illinois.
ITEM 3. LEGAL
PROCEEDINGS
Legal proceedings we are involved in generally relate to product
liability and patent infringement issues. In our opinion, the
outcome of pending claims and litigation is not likely to have a
material adverse effect on our financial position, results of
our operations or our cash flow. The costs to protect these
patents are not expected to have a significant impact on the
results of operations in the future.
Historically, amounts paid for product liability claims related
to our products have not been significant. However, the
increase in pump and aerosol valve applications for
pharmaceutical products may increase the risk associated with
product related claims.
9 /ATR
2008
Form 10-K
Table of Contents
ITEM 4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS, ISSUER PURCHASES OF EQUITY SECURITIES
AND SHARE PERFORMANCE
STOCKHOLDER MATTERS, ISSUER PURCHASES OF EQUITY SECURITIES
AND SHARE PERFORMANCE
MARKET FOR
REGISTRANTS COMMON EQUITY
Information regarding market prices of our Common Stock and
dividends declared may be found in Note 19 to the
Consolidated Financial Statements in Item 8 (which is
incorporated by reference herein). Our Common Stock is traded
on the New York Stock Exchange under the symbol ATR. As of
February 10, 2009, there were approximately 400 registered
holders of record.
RECENT SALES OF
UNREGISTERED SECURITIES
During the quarter ended December 31, 2008, the FCP Aptar
Savings Plan (the Plan) purchased 1,714 shares
of our common stock on behalf of the participants at an average
price of $30.52 per share, for an aggregate amount of $52.3
thousand. No shares were sold during the quarter. At
December 31, 2008, the Plan owns 17,168 shares of our
Common Stock. The employees of AptarGroup S.A.S. and Valois
S.A.S., our subsidiaries, are eligible to participate in the
Plan. All eligible participants are located outside of the
United States. An independent agent purchases shares of Common
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 Stock under the Plan. The agent under the
Plan is Banque Nationale de Paris Paribas Asset Management. 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.
ISSUER PURCHASES
OF EQUITY SECURITIES
The following table summarizes the Companys purchases of
its securities for the quarter ended December 31, 2008:
Total Number of Shares |
Maximum Number of |
|||||||||||
Total Number |
Purchased as Part of |
Shares that May Yet be |
||||||||||
Of Shares |
Average Price |
Publicly Announced |
Purchased Under the |
|||||||||
Period | Purchased | Paid Per Share | Plans or Programs | Plans or Programs | ||||||||
10/1 - 10/31/08
|
| $ | | | 4,548,557 | |||||||
11/1 - 11/30/08
|
| | | 4,548,557 | ||||||||
12/1 - 12/31/08 |
| | | 4,548,557 | ||||||||
Total
|
| $ | | | 4,548,557 |
The Company announced the existing repurchase program on
July 19, 2006. There is no expiration date for this
repurchase program.
10 /ATR
2008
Form 10-K
Table of Contents
SHARE
PERFORMANCE
The following graph shows a five year comparison of the
cumulative total stockholder return on AptarGroups common
stock as compared to the cumulative total return of two other
indexes: the Value Line Packaging & Container Industry
Group (Peer Group) and the Standard &
Poors 500 Composite Stock Price Index. The companies
included in the Peer Group are: American Greetings Corporation,
Inc., AptarGroup, Inc., Ball Corporation, Bemis Company, Inc.,
CLARCOR Inc., Crown Holdings, Inc., Greif, Inc., Mead Westvaco,
Owens-Illinois, Inc., Packaging Corporation of America,
Pactiv Corporation, Rock-Tenn Company, Sealed Air Corporation,
Silgan Holdings, Inc., Smurfit-Stone Container Corporation and
Sonoco Products Company. Changes in the Peer Group from year to
year result from companies being added to or deleted from the
Value Line Packaging & Container Industry Group.
These comparisons assume an initial investment of $100 and the
reinvestment of dividends.
Comparison of
5 Year Cumulative Stockholder Returns
![](https://www.sec.gov/Archives/edgar/data/0000896622/000095013709001365/c48702c4870200.gif)
12/31/2003 | 12/31/2004 | 12/31/2005 | 12/31/2006 | 12/31/2007 | 12/31/2008 | |||||||||||||||||||||||||
ATR
|
100 | 137 | 137 | 158 | 221 | 194 | ||||||||||||||||||||||||
S&P 500
|
100 | 111 | 116 | 135 | 142 | 90 | ||||||||||||||||||||||||
Peer Group
|
100 | 121 | 117 | 136 | 149 | 100 | ||||||||||||||||||||||||
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 Commission
or subject to Regulation 14A or 14C, or to the liabilities
of Section 18 of the Securities Exchange Act of 1934, as
amended.
11 /ATR
2008
Form 10-K
Table of Contents
ITEM 6. SELECTED
CONSOLIDATED FINANCIAL DATA
FIVE YEAR SUMMARY
OF SELECTED FINANCIAL DATA
In millions of dollars, except per share data | ||||||||||||||||||||
Years Ended December 31, | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Statement of Income Data:
|
||||||||||||||||||||
Net Sales
|
$ | 2,071.7 | $ | 1,892.2 | $ | 1,601.4 | $ | 1,380.0 | $ | 1,296.6 | ||||||||||
Cost of Sales (exclusive of depreciation shown below) (1)
|
1,411.3 | 1,283.8 | 1,086.3 | 927.6 | 866.9 | |||||||||||||||
% of Net Sales
|
68.1 | % | 67.9 | % | 67.8 | % | 67.2 | % | 66.8 | % | ||||||||||
Selling, Research & Development and
|
||||||||||||||||||||
Administrative (2)
|
300.8 | 274.2 | 238.9 | 203.4 | 194.4 | |||||||||||||||
% of Net Sales
|
14.5 | % | 14.5 | % | 14.9 | % | 14.7 | % | 15.0 | % | ||||||||||
Depreciation and Amortization
|
131.1 | 123.5 | 114.6 | 99.2 | 94.5 | |||||||||||||||
% of Net Sales
|
6.3 | % | 6.5 | % | 7.2 | % | 7.2 | % | 7.3 | % | ||||||||||
Operating Income
|
228.4 | 210.7 | 161.6 | 149.8 | 140.9 | |||||||||||||||
% of Net Sales
|
11.0 | % | 11.1 | % | 10.1 | % | 10.9 | % | 10.9 | % | ||||||||||
Income from Continuing Operations (3)
|
153.5 | 139.5 | 102.9 | 100.0 | 3.3 | |||||||||||||||
% of Net Sales
|
7.4 | % | 7.4 | % | 6.4 | % | 7.3 | % | 7.2 | % | ||||||||||
Income from Discontinued Operations
|
||||||||||||||||||||
Net of Tax
|
| 2.2 | | | | |||||||||||||||
% of Net Sales
|
| 0.1 | | | | |||||||||||||||
Net Income (3)
|
153.5 | 141.7 | 102.9 | 100.0 | 93.3 | |||||||||||||||
% of Net Sales
|
7.4 | % | 7.5 | % | 6.4 | % | 7.3 | % | 7.2 | % | ||||||||||
Net Income per Common Share (Basic):
|
||||||||||||||||||||
Continuing Operations (4)
|
$ | 2.26 | $ | 2.03 | $ | 1.48 | $ | 1.42 | $ | 1.29 | ||||||||||
Discontinued Operations (4)
|
| .03 | | | | |||||||||||||||
Net Income per Common Stock (Basic)
|
2.26 | 2.06 | 1.48 | 1.42 | 1.29 | |||||||||||||||
Net Income per Common Stock (Diluted):
|
||||||||||||||||||||
Continuing Operations (4)
|
2.18 | 1.95 | 1.44 | 1.39 | 1.26 | |||||||||||||||
Discontinued Operations (4)
|
| .03 | | | | |||||||||||||||
Net Income per Common Share (Diluted)
|
2.18 | 1.98 | 1.44 | 1.39 | 1.26 | |||||||||||||||
Cash Dividends Declared per Common Share
|
.56 | .50 | .42 | .35 | .22 | |||||||||||||||
Balance Sheet and Other Data:
|
||||||||||||||||||||
Capital Expenditures
|
$ | 203.6 | $ | 137.9 | $ | 107.7 | $ | 104.4 | $ | 119.7 | ||||||||||
Total Assets
|
1,831.8 | 1,911.9 | 1,592.0 | 1,357.3 | 1,374.0 | |||||||||||||||
Long-Term Obligations
|
226.9 | 146.7 | 168.9 | 144.5 | 142.6 | |||||||||||||||
Net Debt (5)
|
99.4 | 49.1 | 125.7 | 129.0 | 35.5 | |||||||||||||||
Stockholders Equity
|
1,131.0 | 1,119.0 | 946.4 | 809.4 | 873.2 | |||||||||||||||
Capital Expenditures% of Net Sales
|
9.8 | % | 7.3 | % | 6.7 | % | 7.6 | % | 9.2 | % | ||||||||||
Interest Bearing Debt to Total
|
||||||||||||||||||||
Capitalization (6)
|
20.4 | % | 24.5 | % | 23.8 | % | 23.4 | % | 19.1 | % | ||||||||||
Net Debt to Net Capitalization (7)
|
8.1 | % | 4.2 | % | 11.7 | % | 13.7 | % | 3.9 | % |
(1) | Cost of Sales includes a charge for the expensing of stock options of $1.1, $1.0 and $0.9 million in 2008, 2007, and 2006, respectively, and Redeployment Program costs $1.6 and $2.1 million in 2007 and 2006, respectively. | |
(2) | Selling, Research & Development and Administrative includes a charge of $10.0, $13.0 and $12.4 million for the expensing of stock options in 2008, 2007 and 2006, respectively. | |
(3) | Net Income includes a charge for the expensing of stock options of $8.0, $10.5 and $8.7 million in 2008, 2007 and 2006, respectively, and Redeployment Program costs of $1.1 and $1.4 million in 2007 and 2006, respectively. | |
(4) | Net Income per basic and diluted common share includes the negative effects of $0.12, $0.15 and $0.12 for the expensing of stock options in 2008, 2007 and 2006, respectively, and $0.02 and $0.03 for Redeployment Program costs in 2007 and 2006, respectively. | |
(5) | Net Debt is interest bearing debt less cash and cash equivalents. | |
(6) | Total Capitalization is Stockholders Equity plus interest bearing debt. | |
(7) | Net Capitalization is Stockholders Equity plus Net Debt. |
12 /ATR
2008
Form 10-K
Table of Contents
ITEM 7. MANAGEMENTS
DISCUSSION AND ANALYSIS OF CONSOLIDATED
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(In thousands, expect per share amounts or otherwise
indicated)
The objective of the following Managements Discussion and
Analysis of Consolidated Results of Operations and Financial
Condition (MD&A) is to help the reader
understand the financial performance of AptarGroup, Inc.
MD&A is presented in eight sections: Overview, Results of
Operations, Off-Balance Sheet Arrangements, Overview of
Contractual Obligations, Adoption of Accounting Standards,
Critical Accounting Policies and Estimates, Operations Outlook
and Forward-Looking Statements. MD&A is provided as a
supplement to, and should be read in conjunction with, our
consolidated financial statements and accompanying Notes to
Consolidated Financial Statements contained elsewhere in this
Report on
Form 10-K.
In MD&A, we, our, us,
AptarGroup, AptarGroup, Inc. and
the Company refer to AptarGroup, Inc. and its
subsidiaries.
OVERVIEW
GENERAL
We are a leading global supplier of a broad range of innovative
dispensing systems for the personal care, fragrance/cosmetic,
pharmaceutical, household and food/beverage markets. We focus
on providing value-added dispensing systems (pumps, closures and
aerosol valves) to global consumer product marketers to allow
them to differentiate their products and meet consumers
need for convenience.
2008 was a challenging year for AptarGroup. The previous year
(2007) set an all-time record for the company and made
comparisons very difficult. General economic conditions in the
last quarter of 2008 significantly affected our results and
throughout most of the year, we experienced unprecedented
volatility in material costs. Attempts to pass these costs on
to our customers were generally successful, but limited due to
existing contracts and increased pressure from competition. The
Pharma segment had an outstanding year in 2008 helping us to
offset weak results in both the Beauty & Home and
Closures segments. Nevertheless, we were still able to grow
consolidated sales and income before continuing operations.
2008
HIGHLIGHTS
| The year 2008 marked our 43rd consecutive year of increased revenue as sales grew 9% and eclipsed the $2 billion mark. |
| The strength of our Pharma segment helped offset profit declines at our other two operating segments. |
| We reported record diluted earnings per share from continuing operations of $2.18 or 12% more than the previous year record of $1.95 per share. |
| We repurchased more than 1.4 million shares of our common stock for approximately $57.6 million and increased our cash dividends paid to stockholders to $38.1 million from $34.4 million in 2007. |
| Our debt to capital is approximately 20% at the end of 2008 and our net debt (interest bearing debt less cash) to net capital (stockholders equity plus net debt) is approximately 8%. |
RESULTS OF
OPERATIONS
The following table sets forth the consolidated statements of
income and the related percentages of net sales for the periods
indicated:
Years Ended December 31, | 2008 | 2007 | 2006 | |||||||||||||||||||||
Amount in |
% of |
Amount in |
% of |
Amount in |
% of |
|||||||||||||||||||
$ Thousands | Net Sales | $ Thousands | Net Sales | $ Thousands | Net Sales | |||||||||||||||||||
Net sales
|
$ | 2,071,685 | 100.0 | % | $ | 1,892,167 | 100.0 | % | $ | 1,601,385 | 100.0 | % | ||||||||||||
Cost of sales (exclusive of depreciation shown below)
|
1,411,275 | 68.1 | 1,283,773 | 67.9 | 1,086,269 | 67.8 | ||||||||||||||||||
Selling, research & development and administrative
|
300,846 | 14.5 | 274,196 | 14.5 | 238,907 | 14.9 | ||||||||||||||||||
Depreciation and amortization
|
131,145 | 6.3 | 123,466 | 6.5 | 114,606 | 7.2 | ||||||||||||||||||
Operating income
|
228,419 | 11.0 | 210,732 | 11.1 | 161,603 | 10.1 | ||||||||||||||||||
Other expense
|
(7,451 | ) | (0.3 | ) | (10,737 | ) | (0.5 | ) | (13,297 | ) | (0.8 | ) | ||||||||||||
Income from continuing operations before income taxes
|
220,968 | 10.7 | % | 199,995 | 10.6 | % | 148,306 | 9.3 | % | |||||||||||||||
Income from continuing operations
|
153,495 | 7.4 | % | 139,507 | 7.4 | % | 102,896 | 6.4 | % | |||||||||||||||
Effective tax rate
|
30.5 | % | 30.2 | % | 30.6 | % | ||||||||||||||||||
Income from discontinued operations net of tax
|
| | 2,232 | 0.1 | % | | |
13 /ATR
2008
Form 10-K
Table of Contents
NET
SALES
Net sales increased more than 9% in 2008 to nearly
$2.1 billion compared to $1.9 billion recorded in
2007. The U.S. dollar weakened against several currencies
including the Euro (our primary foreign currency exposure) in
2008 compared to 2007, and as a result, changes in exchange
rates positively impacted sales and accounted for approximately
4% of the 9% sales growth. Approximately $9 million of the
$180 million increase in net sales (less than 1% of the 9%
increase) related to acquisitions completed during 2008. The
remaining 4% of sales growth was due primarily to the strength
of our Pharma segment. Sales price increases were primarily
pass-throughs of the raw material cost increases we incurred
during the year.
In 2007, net sales increased 18% to nearly $1.9 billion
compared to $1.6 billion recorded in 2006. The
U.S. dollar weakened slightly against several currencies in
2007 compared to 2006, and as a result, changes in exchange
rates positively impacted sales and accounted for approximately
7% of the 18% sales growth. Approximately $13.4 million of
the $291 million increase in net sales (approximately 1% of
the 18% increase) related to acquisitions completed during 2007
and 2006. The remaining 10% of sales growth was due primarily
to increased demand of our innovative dispensing systems. Sales
prices increased primarily to offset raw material cost increases.
For further discussion on net sales by reporting segment, please
refer to the segment analysis of net sales and operating income
on the following pages.
The following table sets forth, for the periods indicated, net
sales by geographic location:
Years Ended December 31, | 2008 | % of Total | 2007 | % of Total | 2006 | % of Total | ||||||||||||||||||
Domestic
|
$ | 531,054 | 26% | $ | 498,231 | 26% | $ | 470,405 | 29% | |||||||||||||||
Europe
|
1,288,667 | 62% | 1,180,443 | 63% | 974,967 | 61% | ||||||||||||||||||
Other Foreign
|
251,964 | 12% | 213,493 | 11% | 156,013 | 10% |
COST OF SALES
(EXCLUSIVE OF DEPRECIATION SHOWN BELOW)
Our cost of sales as a percentage of net sales increased
slightly in 2008 to 68.1% compared to 67.9% in 2007.
The following factors negatively impacted our cost of sales
percentage in 2008:
Rising Input Costs. Input costs, in particular
resin, tinplate, utilities and transportation costs, continued
to increase through the third quarter of 2008 over 2007,
primarily in the U.S. and Europe, but also in the rest of
the world. While we attempt to pass these rising input costs
along in our selling prices we experience a lag in the timing of
passing on these cost increases. We experienced decreases in
certain material costs towards the end of the fourth quarter.
However, the effects of these decreases do not offset the
increases taken during the first nine months of the year.
Weakening of the U.S. Dollar. We are a
net importer from Europe into the U.S. and other countries
of products produced in Europe with costs denominated in Euros.
As a result, when the U.S. dollar or other currencies
weaken against the Euro, products produced in Europe (with costs
denominated in Euros) and sold in currencies that are weaker
compared to the Euro, have a negative impact on cost of sales as
a percentage of net sales.
Underutilized Overhead Costs in Certain
Operations. Certain of our business operations in
the Beauty & Home and Closures business segments saw a
decrease in unit volumes sold and as a result of the lower
production levels, overhead costs were underutilized, thus
negatively impacting cost of goods sold as a percentage of net
sales.
The following factor positively impacted our cost of sales
percentage in 2008:
Favorable Product Mix. Increased sales of our
products to the pharmaceutical market which traditionally
generate higher margins helped positively impact our cost of
sales percentage in 2008.
Last in First Out (LIFO) Inventory
Valuation. Some of our U.S. operations use
LIFO as their inventory valuation method. As some material
costs, namely resins, dramatically decreased at the end of the
fourth quarter, the decrease to the LIFO reserve in 2008 was
approximately $2.3 million, thus positively impacting our
cost of sales percentage in 2008.
In 2007, our cost of sales as a percentage of net sales
increased to 67.9% compared to 67.8% in 2006.
The following factors negatively impacted our cost of sales
percentage in 2007:
Rising Raw Material Costs. Raw material costs,
in particular plastic resin costs in the U.S. and metal
(including nickel) prices worldwide, increased in 2007 compared
to 2006. While the majority of the plastic resin raw material
price increase has been passed on to customers through price
increases, the net effect is a reduction in the margin
percentage.
Last in First Out (LIFO) Inventory
Valuation. Some of our U.S. operations use
LIFO as their inventory valuation method. Due to the rising raw
material costs, the increase to the LIFO reserve in 2007 was
approximately $2.3 million, thus negatively impacting our
cost of sales percentage in 2007.
Weakening of the U.S. Dollar. We are a
net importer from Europe into the U.S. and other countries
of products produced in Europe with costs denominated in Euros.
As a result, when the U.S. dollar or other currencies
weaken against the Euro,
14 /ATR
2008
Form 10-K
Table of Contents
products produced in Europe (with costs denominated in Euros)
and sold in currencies that are weaker compared to the Euro,
have a negative impact on cost of sales as a percentage of net
sales.
The following factors positively impacted our cost of sales
percentage in 2007:
Leveraging of Fixed Manufacturing Costs. The
increase in sales volumes across all three business segments
allowed us to better leverage our fixed overhead manufacturing
expenses as a percentage of sales.
Favorable Product Mix. Increased sales of our
products to the pharmaceutical market which traditionally
generate higher margins helped positively impact our cost of
sales percentage in 2007.
Lower Compliance Costs For The Pharma
Industry. In 2006, we incurred additional costs
in our Pharma segment due to more stringent quality standards on
certain of our products. These costs included, among others,
higher personnel related costs to assure the level of quality
demanded by this market and higher scrap associated with the
destruction of non-usable components. Although the higher
quality standards remained, a majority of these costs did not
reoccur in 2007 and as a result had a positive impact on our
cost of sales percentage in 2007.
SELLING,
RESEARCH & DEVELOPMENT AND ADMINISTRATIVE
Our Selling, Research & Development and Administrative
expenses (SG&A) increased approximately 10% or
$26.7 million in 2008. Changes in currency rates accounted
for approximately $13.2 million of the increase or 5% of
the 10% increase. The remaining increase is primarily due to
inflationary cost increases, higher bad debt expense and higher
professional fees related to several corporate initiatives.
SG&A expenses as a percentage of sales remained consistent
with the prior year at 14.5%.
In 2007, our SG&A increased approximately 15% or
$35.3 million. Changes in currency rates accounted for
approximately $13.8 million of the increase or 6% of the
15% increase. Acquisitions completed during 2006 accounted for
$2.3 million or 1% of the 15% increase. The remainder of
the increase is primarily due to inflationary cost increases as
well as increased research and development costs associated with
our innovative products currently under development.
Nevertheless, SG&A as a percentage of sales decreased to
14.5% in 2007 compared to 14.9% in 2006.
DEPRECIATION AND
AMORTIZATION
Depreciation and amortization expense increased 6% or
$7.7 million in 2008 to $131.1 million compared to
$123.5 million in 2007. Changes in currency rates
accounted for approximately $6.7 million of the increase.
Depreciation and amortization expense decreased to 6.3% of net
sales in 2008 compared to 6.5% in 2007.
In 2007, depreciation and amortization expense increased 8% or
$8.9 million. Changes in currency rates accounted for
approximately $7.2 million of the increase and acquisitions
accounted for $0.9 million of the increase. An accelerated
depreciation of software retired in 2007 accounted for the
remainder of the increase. Depreciation and amortization
expense decreased to 6.5% of net sales in 2007 compared to 7.2%
in 2006.
OPERATING
INCOME
Operating Income increased approximately $17.7 million or
8% to $228.4 million. The increase in operating income is
primarily due to the increase in sales of our products to the
pharmaceutical market and the relative strength of the euro
compared to the U.S. dollar which has an additive effect on the
translation of our European results. This was partially offset
by higher input and SG&A costs as mentioned above.
Operating income as a percentage of sales slightly decreased to
11.0% in 2008 compared to 11.1% in 2007.
In 2007, operating income increased approximately
$49.1 million or 30% to $210.7 million. The increase
in operating income is primarily due to the increase in sales
volumes as well as the other reasons mentioned above. The
higher sales volumes allowed us to leverage some of our fixed
costs such as SG&A as well as Depreciation and
Amortization, thus contributing to the increase in operating
income. Operating income as a percentage of sales increased to
11.1% in 2007 compared to 10.1% in 2006.
NET OTHER
EXPENSES
Net other expenses in 2008 decreased to $7.5 million
compared to $10.7 million in 2007 principally reflecting
the higher interest income of $4.2 million due to higher
average cash balances in 2008 compared to 2007, offset partially
by higher foreign currency losses of $1.7 million
In 2007, net other expenses decreased to $10.7 million
compared to $13.3 million in 2006 principally reflecting
the higher interest income of $4.7 million due to higher
average cash balances in 2007 compared to 2006, offset partially
by higher interest expense of $2.5 million due to higher
average short term borrowings and slightly higher average
interest rates.
EFFECTIVE TAX
RATE ON INCOME FROM CONTINUING OPERATIONS
The reported effective tax rate on income from continuing
operations for 2008 increased slightly to 30.5% compared to
30.2% in 2007. The increase in the tax provision for 2008
reflects primarily a change in the mix of income earned by
country. This increase was partially offset by the benefits from
tax changes that became effective in the current year related to
an expanded R&D credit in France and lower tax rates in
Germany and Italy.
In 2007, the reported effective tax rate for 2007 decreased to
30.2% compared to 30.6% in 2006, primarily due to a tax law
change in Germany in 2007 reducing the statutory rate from 38%
to 30% effective in 2008. This tax law change required us to
reduce certain previously recorded net deferred tax liabilities
by approximately $2.3 million in 2007.
15 /ATR
2008
Form 10-K
Table of Contents
INCOME FROM
CONTINUING OPERATIONS
We reported income from continuing operations of
$153.5 million in 2008 compared to $139.5 million
reported in 2007 and $102.9 million reported in 2006.
INCOME FROM
DISCONTINUED OPERATIONS
In the fourth quarter of 2007, we sold our Australian operation
for approximately $6.7 million in cash and generated a gain
on the sale of approximately $3.9 million before tax or
$2.2 million after tax. Due to the immateriality of the
results of the Australian operation, only the net gain of
$2.2 million is reported in the Consolidated Statements of
Income in the line Income From Discontinued Operations Net of
Tax.
NET
INCOME
We reported net income of $153.5 million in 2008 compared
to $141.7 million reported in 2007 and $102.9 million
reported in 2006.
BEAUTY &
HOME SEGMENT
% Change |
% Change |
||||||||||||||||||
Years Ended December 31, | 2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||
Net Sales
|
$ | 1,072,478 | $ | 1,005,218 | $ | 837,093 | 6 | .7% | 20 | .1% | |||||||||
Segment Income (1)
|
91,516 | 99,553 | 72,396 | (8 | .1) | 37 | .5 | ||||||||||||
Segment Income as a percentage of Net Sales
|
8.5% | 9.9% | 8.6% | ||||||||||||||||
(1) | Segment income is defined as earnings before net interest, corporate expenses and income taxes. The Company evaluates performance of its business units and allocates resources based upon segment income. For a reconciliation of segment income to income before income taxes, see Note 17 to the Consolidated Financial Statements in Item 8. |
Net sales increased approximately 7% in 2008 to
$1.1 billion compared to $1.0 billion in 2007. The
weakening U.S. dollar compared to the Euro positively
impacted the sales increase and represented approximately 5% of
the increase while acquisitions were immaterial. The remaining
2% of the increase in sales was led by increased demand for our
products from the fragrance/cosmetic market. Sales excluding
changes in exchange rates of our products to the
fragrance/cosmetic market increased approximately 4% in 2008
reflecting a continued growth in developing markets such as
Latin America and Southeast Asia. Sales to Eastern Europe, the
US, and parts of Western Europe were down in the second half of
the year due to general economic conditions. Sales excluding
changes in exchange rates of our products to the personal care
and household markets were flat and down 4% respectively in
2008. We do not see any erosion in our customer base, but again
attribute this softness to the general economic conditions.
In 2007, net sales increased 20% in 2007 to $1.0 billion
compared to $837.1 million in 2006. The weakening
U.S. dollar compared to the Euro positively impacted the
sales increase and represented approximately 7% of the increase
while acquisitions accounted for approximately 1% of the 20%
increase in sales. The remaining 12% of the increase in sales
was led by strong demand for our products from the
fragrance/cosmetic and personal care markets. Sales excluding
changes in exchange rates of our products to the
fragrance/cosmetic market increased approximately 15% in 2007
reflecting a combination of strong general market demand both in
the high and low end of the market especially in developing
markets such as Latin America and Southeast Asia. Sales to
Eastern Europe and Russia also increased significantly. The
continued success of our innovative fragrance sampling products
also contributed to strong sales growth. Sales excluding
changes in exchange rates of our products to the personal care
market increased 10% in 2007, reflecting increased demand for
our aerosol valve products in Europe as well as our new and
innovative
bag-on-valve
and accessory products in North America. Sales excluding
changes in exchange rates to the household market increased
approximately 6% due primarily to an increase in insecticide
sprays.
Segment income decreased approximately 8% to $91.5 million
in 2008 compared to $99.6 million reported in 2007. The
decrease in segment income of $8.1 million is due primarily
to the significant increase in input costs for the first nine
months of the year and our inability to pass on these costs fast
enough to our customers. In addition, soft general economic
conditions in the fourth quarter lead to underutilized capacity
at some of our operations.
In 2007, segment income increased approximately 38% to
$99.6 million in 2007 compared to $72.4 million
reported in 2006. Acquisitions accounted for approximately
$2.4 million or 3% of the 38% increase in segment income.
The remainder of the increase in segment income of
$24.7 million is due primarily to the increase in sales
volumes mentioned above and the leveraging of fixed overhead
costs worldwide. In addition, an increase in sales of our
higher margin value added products helped contribute to the
increase in profitability in 2007.
16 /ATR
2008
Form 10-K
Table of Contents
CLOSURES
SEGMENT
% Change |
% Change |
|||||||||||||||||||
Years Ended December 31, | 2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | |||||||||||||||
Net Sales
|
$ | 541,745 | $ | 493,000 | $ | 441,203 | 9 | .9% | 11 | .7% | ||||||||||
Segment Income
|
45,327 | 50,036 | 44,031 | (9 | .4) | 13 | .6 | |||||||||||||
Segment Income as a percentage of Net Sales
|
8.4% | 10.1% | 10.0% | |||||||||||||||||
Net sales to the Closures segment increased nearly 10% in 2008
to $541.7 million compared to $493.0 million in 2007.
The weakening U.S. dollar compared to the Euro positively
impacted the sales increase and represented approximately 4% of
the increase. Of the remaining 6% growth, increased selling
prices due to the rising cost of resin accounted for
approximately 4% of the increase while sales of custom tooling
contributed 1%. 2008 also represented two dramatically
different halves of business for the Closures segment. The
first half of the year was positively impacted by favorable
exchange rates (mainly Euro), a higher resin pass through, and
higher tooling sales. Conversely, the second half of 2008 saw
an unfavorable exchange rate impact (Euro, Mexican Peso, and
Brazilian Real) and lower tooling sales, primarily in Europe.
For the full year, sales excluding changes in exchange rates of
our products to the food market increased 19% in 2008 mainly due
to new ketchup and salad dressing launches in the U.S. This
increase was offset by a 15% decrease in the household market
during 2008 reflecting the loss of a detergent cap customer as
well as a general slowdown in the closure personal care market.
In 2007, net sales to the Closures segment increased nearly 12%
in 2007 to $493.0 million compared to $441.2 million
in 2006. The weakening U.S. dollar compared to the Euro
positively impacted the sales increase and represented
approximately 5% of the increase while acquisitions accounted
for approximately 2% of the 12% increase in sales. Sales
excluding changes in exchange rates of our products to the
personal care market increased 7% in 2007 while acquisitions
accounted for nearly half of the growth. Sales excluding
changes in exchange rates of our products to the household and
food/beverage markets increased 8% and 10%, respectively, in
2007. Sales to the North American market decreased
approximately 3% in 2007 reflecting a general slowdown in the
closure personal care market. This decrease was more than
offset by strong growth in both the European and Latin American
markets.
Segment income decreased 9% to $45.3 million in 2008
compared to $50.0 million in 2007. As was the case with
the Beauty and Home segment, rising input costs during the first
nine months of the year and our inability to pass these
increased costs on to customers fast enough coupled with
underutilized fixed overhead costs particularly in Europe were
the primary reasons for the decrease in profitability.
In 2007, segment income increased 14% to $50.0 million in
2007 compared to $44.0 million in 2006. Segment income
from acquisitions was immaterial in 2007. A decrease in segment
income in North America was primarily due to the lower sales
volumes mentioned above as well as the normal delay of passing
on the rising cost of resin to our customers. This decrease was
more than offset by increases in segment income in both Europe
and Latin America due to the increase in sales in those regions.
PHARMA
SEGMENT
% Change |
% Change |
||||||||||||||||||||
Years Ended December 31, | 2008 | 2007 | 2006 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||
Net Sales
|
$ | 457,456 | $ | 393,868 | $ | 322,603 | 16 | .1% | 22 | .1% | |||||||||||
Segment Income
|
127,089 | 106,161 | 80,841 | 19 | .7 | 31 | .3 | ||||||||||||||
Segment Income as a percentage of Net Sales
|
27.8% | 27.0% | 25.1% | ||||||||||||||||||
Net sales to the Pharma segment increased more than 16% in 2008
to $457.5 million compared to $393.9 million in 2007.
Changes in foreign currency rates positively affected the sales
growth and accounted for 6% of the total growth. The remaining
increase is primarily related to increased demand for our
metered dose inhaler valve (MDIs) used to
dispense asthma medications and nasal spray pumps used to
dispense allergy medications.
In 2007, net sales to the Pharma segment increased more than 22%
in 2007 to $393.9 million compared to $322.6 million
in 2006. The weakening U.S. dollar compared to the Euro
positively impacted the sales increase and represented
approximately 8% of the 22% increase in sales. The remainder of
the increase was due to increased sales of our nasal spray pumps
and increased sales of our MDI valves relating primarily to new
customer launches.
Segment income increased 19.7% to $127.1 million in 2008
compared to $106.2 million reported in 2007. The increase
in segment income is primarily due to the higher sales volumes
detailed above.
In 2007, segment income increased 31% to $106.2 million in
2007 compared to $80.8 million reported in 2006. The
increase in segment income is primarily due to the higher sales
volumes mentioned above as well as a reduction in
quality-related and compliance costs compared to the prior year.
17 /ATR
2008
Form 10-K
Table of Contents
LIQUIDITY AND
CAPITAL RESOURCES
Our primary sources of liquidity are cash flow provided by our
operations and our revolving credit facility. Cash and
equivalents decreased to $192.1 million at the end of 2008
from $313.7 million at the end of 2007. Total short and
long-term interest bearing debt decreased to $291.5 million
at the end of 2008 from $362.9 million at the end of 2007.
The ratio of our Net Debt (interest bearing debt less cash and
cash equivalents) to Net Capital (Stockholders Equity plus
Net Debt) increased to 8% compared to 4% as of December 31,
2007.
In 2008, our operations provided $270.2 million in cash
flow. This compares with $273.5 million in 2007 and
$197.5 million in 2006. In each of the past three years,
we primarily derived cash flow from operations from earnings
before depreciation and amortization partially offset by an
increase in working capital needs to support the growth of the
business. During 2008, we utilized the majority of the
operating cash flows to finance capital expenditures and share
repurchases.
We used $225.5 million in cash for investing activities
during 2008, compared to $131.2 million during 2007 and
$141.8 million in 2006. This increase in cash used for
investing activities in 2008 is primarily due to increased
capital expenditures compared to the prior two years and
$14.4 million more cash spent for acquisitions of
businesses in 2008 compared to 2007. Capital expenditures
totaled $203.6 million in 2008, $137.9 million in 2007
and $107.7 million in 2006. The increase in capital
expenditures is primarily related to the purchase of a building
in the U.S. that had previously been leased, the expansion
of our Pharma segment facilities in France and Germany,
investment in a new worldwide ERP system, and investments
related to capacity increases for certain of our product lines.
Each year we invest in property, plant and equipment primarily
for new products, capacity increases, product line extensions
and maintenance of business. We estimate that we will spend
approximately $129 million (assuming current exchange
rates) on capital expenditures in 2009.
We used $151.6 million in cash for financing activities
during 2008 compared to $22.9 million in 2007 and
$17.3 million in 2006. We refinanced some of our short
term variable rate debt with a $100 million fixed rate
private placement debt in the third quarter of 2008.
$25 million of the private placement debt has a five year
maturity and a fixed interest rate of 5.41% while the remaining
$75 million matures in ten years and carries a 6.03% fixed
interest rate. In the fourth quarter of 2008, we borrowed
$100 million on an intercompany loan basis from one of our
European affiliates, taking advantage of certain temporary U.S. tax law
changes which enabled us to borrow the money on a short term
basis without adverse U.S. tax consequences. This
$100 million was used to pay down borrowings under our
revolving credit facility.
In 2006, we negotiated an amendment to our revolving credit
facility (including a $50 million increase in the amount of
the facility to $200 million). Under this credit
agreement, interest on borrowings is payable at a rate equal to
LIBOR plus an amount based on our financial condition. At
December 31, 2008, the amount unused and available under
this agreement was $175 million. We are required to pay a
nominal fee for this commitment based on our financial
condition. The Company exercised its option to extend the
maturity of this agreement during 2008. The agreement expires
on July 31, 2012, but the Company has an option to extend
the maturity by one additional year. The Company can also
request a $100 million increase in the total amount of the
facility. In 2006, we refinanced $50 million of existing
borrowings with ten year private placement debt at a fixed
interest rate of 6.0%.
Our revolving credit facility and certain long-term obligations
require us to satisfy certain financial and other covenants
including:
Requirement | Level at December 31, 2008 | |||
Debt to total capital ratio
|
55% | 21% |
Based upon the above debt to total capital ratio covenant we
would have the ability to borrow approximately an additional one
billion before the 55% requirement was exceeded.
Our foreign operations have historically met cash requirements
with the use of internally generated cash or borrowings. These
foreign subsidiaries have financing arrangements with several
foreign banks to fund operations located outside the U.S., but
all these lines are uncommitted. Cash generated by foreign
operations has generally been reinvested locally. The majority
of our $192 million in cash and equivalents is located
outside of the U.S.
We believe we are in a strong financial position and have the
financial resources to meet business requirements in the
foreseeable future. We have historically used cash flow from
operations as our primary source of liquidity. In the event
that customer demand would decrease significantly for a
prolonged period of time and negatively impact cash flow from
operations, we would have the ability to restrict and
significantly reduce capital expenditure levels, which
historically have been the most significant use of cash for us.
A prolonged and significant reduction in capital expenditure
levels could increase future repairs and maintenance costs as
well as have a negative impact on operating margins if we were
unable to invest in new innovative products.
OFF-BALANCE SHEET
ARRANGEMENTS
We lease certain warehouse, plant and office facilities as well
as certain equipment under noncancelable operating leases
expiring at various dates through the year 2018. Most of the
operating leases contain renewal options and certain equipment
leases include options to purchase during or at the end of the
lease term. Other than operating lease obligations, we do not
have any off-balance sheet arrangements. See the following
section Overview of Contractual Obligations for
future payments relating to operating leases.
18 /ATR
2008
Form 10-K
Table of Contents
OVERVIEW OF
CONTRACTUAL OBLIGATIONS
Below is a table of our outstanding contractual obligations and
future payments as of December 31, 2008:
2014 and |
||||||||||||||||||||
Payment Due by Period | Total | 2009 | 2010-2011 | 2012-2013 | After | |||||||||||||||
Long-term debt (1)
|
$ | 245,055 | $ | 23,901 | $ | 70,218 | $ | 25,694 | $ | 125,242 | ||||||||||
Capital lease obligations (1)
|
6,533 | 799 | 2,048 | 1,120 | 2,566 | |||||||||||||||
Operating leases
|
47,110 | 14,997 | 20,210 | 8,956 | 2,947 | |||||||||||||||
Interest obligations (2)
|
83,594 | 14,617 | 22,335 | 17,702 | 28,940 | |||||||||||||||
Required minimum pension contribution (3)
|
5,393 | | 5,393 | | | |||||||||||||||
Other liabilities reflected on the balance sheet under GAAP
(4)
|
34 | 34 | | | | |||||||||||||||
Total Contractual Obligations
|
$ | 387,719 | $ | 54,348 | $ | 120,204 | $ | 53,472 | $ | 159,695 | ||||||||||
(1) | The future payments listed above for capital lease obligations and long-term debt repayments reflect only principal payments. | |
(2) | Approximately 20% of our total interest bearing debt has variable interest rates. Using our variable rate debt outstanding as of December 31, 2008 of approximately $55.1 million at an average rate of approximately 3%, we included approximately $1.4 million of variable interest rate obligations in 2009. No variable interest rate obligations were included in subsequent years. | |
(3) | Amount represents the required minimum pension contribution obligation for the Companys U.S. plans at this time. The Company also makes contributions to its foreign pension plans but amounts are expected to be discretionary in 2009 and future years. Therefore amounts related to these plans are not included in the proceeding table. | |
(4) | Amount included represents the current portion of the liability for uncertain tax positions under FIN 48. Aside from deferred income taxes and minority interest, we have approximately $73.5 million of other deferred long-term liabilities on the balance sheet, which consist primarily of retirement plan obligations as described in Note 9 to the Consolidated Financial Statements and a FIN 48 long-term liability for uncertain tax positions described in Note 6 to the Consolidated Financial Statements. The Company is not able to reasonably estimate the timing of the long-term payments or the amount by which the FIN 48 liability will increase or decrease over time. Therefore, the long-term portion of the liability is excluded from the preceding table. |
ADOPTION OF
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued Statement of Accounting
Standard (SFAS) No. 141(R), Business
Combinations. SFAS No. 141(R) establishes
principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree and recognizes and measures the
goodwill acquired in the business combination or a gain from a
bargain purchase. SFAS No. 141(R) also sets forth the
disclosures required to be made in the financial statements to
evaluate the nature and financial effects of the business
combination. SFAS No. 141(R) applies prospectively to
business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period
beginning on or after December 15, 2008. Accordingly,
SFAS No. 141(R) will be applied by the Company to
business combinations occurring on or after January 1, 2009.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51.
SFAS No. 160 establishes accounting and reporting
standards that require that the ownership interests in
subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement
of financial position within equity, but separate from the
parents equity; the amount of consolidated net income
attributable to the parent and to the noncontrolling interest be
clearly identified and presented on the face of the consolidated
statement of income; and changes in a parents ownership
interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently.
SFAS No. 160 also requires that any retained
noncontrolling equity investment in the former subsidiary be
initially measured at fair value when a subsidiary is
deconsolidated. SFAS No. 160 also sets forth the
disclosure requirements to identify and distinguish between the
interests of the parent and the interests of the noncontrolling
owners. SFAS No. 160 applies to all entities that
prepare consolidated financial statements, except not-for-profit
organizations, but will affect only those entities that have an
outstanding noncontrolling interest in one or more subsidiaries
or that deconsolidate a subsidiary. SFAS No. 160 is
effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008.
Earlier adoption is prohibited. SFAS No. 160 must be
applied prospectively as of the beginning of the fiscal year in
which it is initially applied, except for the presentation and
disclosure requirements. The presentation and disclosure
requirements are applied retrospectively for all periods
presented. The Company currently has an immaterial
noncontrolling interest in a subsidiary. The Company does not
believe that the adoption of SFAS No. 160 will
materially impact the presentation of the financial results of
the Company.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133, (SFAS 161). SFAS 161 requires
enhanced disclosures about an entitys derivative
19 /ATR
2008
Form 10-K
Table of Contents
and hedging activities, including (i) how and why an entity
uses derivative instruments, (ii) how derivative
instruments and related hedged items are accounted for under
SFAS 133, and (iii) how derivative instruments and
related hedged items affect an entitys financial position,
financial performance, and cash flows. This standard becomes
effective on January 1, 2009. Earlier adoption of
SFAS 161 and, separately, comparative disclosures for
earlier periods at initial adoption are encouraged. As
SFAS 161 only requires enhanced disclosures, this standard
will have no impact on the financial position, results of
operations, or cash flows of the Company.
In April 2008, the FASB issued FSP
No. FAS 142-3,
Determination of the Useful Life of Intangible
Assets, (FSP
FAS 142-3).
FSP
FAS 142-3
amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under FASB Statement
No. 142, Goodwill and Other Intangible Assets,
(SFAS 142) in order to improve the consistency between
the useful life of a recognized intangible asset under
SFAS 142 and the period of expected cash flows used to
measure the fair value of the asset under SFAS 141(R) and
other GAAP. FSP
FAS 142-3
becomes effective on January 1, 2009. Management has
concluded that the adoption of FSP
FAS 142-3
will not have a material impact on the Financial Statements.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
The preparation of the financial statements requires us to make
estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. We continually
evaluate our estimates, including those related to bad debts,
inventories, intangible assets, income taxes, pensions and
contingencies. We base our estimates on historical experience
and on a variety of other assumptions believed to be reasonable
in order to make judgments about the carrying values of assets
and liabilities. Actual results may differ from these estimates
under different assumptions or conditions. We believe the
following critical accounting policies affect our more
significant judgments and estimates used in preparation of our
Consolidated Financial Statements. Management has discussed the
development and selection of these critical accounting estimates
with the audit committee of our Board of Directors and the audit
committee has reviewed our disclosure relating to it in this
Managements Discussion and Analysis of Consolidated
Results of Operations and Financial Condition
(MD&A).
IMPAIRMENT OF
GOODWILL
In accordance with SFAS No. 142, we evaluate our
goodwill for impairment on an annual basis at the end of the
fourth quarter or whenever indicators of impairment exist.
SFAS No. 142 requires that if the carrying value of a
reporting unit for which goodwill exists exceeds its fair value,
an impairment loss is recognized to the extent that the carrying
value of the reporting unit goodwill exceeds the implied
fair value of reporting unit goodwill.
As discussed in Note 4 to the Consolidated Financial
Statements, we have evaluated our goodwill for impairment and
have determined that the fair value of our reporting units
exceeds their carrying value, so we did not recognize an
impairment of goodwill. Goodwill of approximately
$227.0 million is shown on our balance sheet as of
December 31, 2008.
We believe that the accounting estimate related to determining
the fair value of our reporting units is a critical accounting
estimate because: (1) it is highly susceptible to change
from period to period because it requires company management to
make assumptions about the future cash flows for each reporting
unit over several years in the future, and (2) the impact
that recognizing an impairment would have on the assets reported
on our balance sheet as well as our results of operations could
be material. Managements assumptions about future cash
flows for the reporting units require significant judgment and
actual cash flows in the future may differ significantly from
those forecasted today. The estimate for future cash flows and
its impact on the impairment testing of goodwill is a critical
accounting estimate for all the segments of our business.
In estimating future cash flows, we use internally generated
budgets developed from our reporting units and reviewed by
management. We develop our budgets based upon recent sales
trends for the reporting units, discussions with our customers,
planned timing of new product launches, forecasted capital
expenditure needs, working capital needs, costing factors and
many other variables. From these internally generated budgets,
a projection of cash flows is made based upon expected sales
growth rates and fixed asset and working capital requirements
based upon historical needs. A discounted cash flow model is
used to discount the future cash flows back to the present using
a weighted-average cost of capital. This fair value for the
reporting unit is then corroborated by comparing it with a
market multiple analysis of the reporting unit. The market
multiple analysis is calculated by using AptarGroups
overall EBITDA (earnings before interest, taxes and
depreciation) multiple and applying it to the reporting unit
EBITDA for the current year.
The $227.0 million of goodwill is reported in three
reporting units. Two of the three reporting units have fair
values, which significantly exceed their carrying values. The
third reporting unit contains approximately $40.1 million
of the total $227.0 million in goodwill and has the
smallest excess of fair value over carrying value of the three
reporting units.
We believe our assumptions used in discounting future cash flows
are appropriately conservative. Any increase in estimated cash
flows would have no impact on the reported carrying amount of
goodwill. However, if our current estimates of cash flow for
this one reporting unit had been 57% lower, the fair value of
the reporting unit would have been lower than the carrying value
thus requiring us to perform an impairment test to determine the
implied value of goodwill. The excess of the
approximately $40.1 million in carrying value of goodwill
over the implied value of goodwill would need to be
written down for impairment. Without performing the second step
of the goodwill impairment test, it would be difficult to
determine the actual amount of impairment to be recorded, but
theoretically, the full $40.1 million of goodwill would be
at risk for impairment. A full
20 /ATR
2008
Form 10-K
Table of Contents
$40.1 million impairment loss would have reduced Total
Assets as of December 31, 2008 by approximately 2% and
would have reduced Income From Continuing Operations Before
Income Taxes in 2008 by approximately 18%.
If we had been required to recognize an impairment loss of the
full $40.1 million, it would likely not have affected our
liquidity and capital resources because, in spite of the
impairment loss, we would have been within the terms of our debt
covenants.
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
We record an allowance for doubtful accounts as an estimate of
the inability of our customers to make their required payments.
We determine the amount of our allowance for doubtful accounts
by looking at a variety of factors. First, we examine an aging
of the accounts receivable in each entity within the Company.
The aging lists past due amounts according to invoice terms. In
addition, we consider the current economic environment, the
credit rating of the customers and general overall market
conditions. In some countries we maintain credit insurance,
which can be used in certain cases of non-payment.
We believe that the accounting estimate related to the allowance
for doubtful accounts is a critical accounting estimate because:
(1) it requires management to make assumptions about the
ability to collect amounts owed from customers in the future,
and (2) changes to these assumptions or estimates could
have a material impact on our results of operations. The
estimate for the allowance for doubtful accounts is a critical
accounting estimate for all of our segments.
When we determine that a customer is unlikely to pay, we record
a charge to bad debt expense in the income statement and an
increase to the allowance for doubtful accounts. When it
becomes certain the customer cannot pay (typically driven by the
customer filing for bankruptcy) we write off the receivable by
removing the accounts receivable amount and reducing the
allowance for doubtful accounts accordingly. In 2008, we added
approximately $3.1 million to the allowance for doubtful
accounts while we wrote off or reduced the allowance for
doubtful accounts by $2.3 million. Please refer to
Schedule II Valuation and Qualifying Accounts
for activity in the allowance for doubtful accounts over the
past three years.
We had approximately $343.9 million in net accounts
receivable at December 31, 2008. At December 31,
2008, we had approximately $11.9 million recorded in the
allowance for doubtful accounts to cover all potential future
customer non-payments net of any credit insurance reimbursement
we would potentially recover. We believe our allowance for
doubtful accounts is adequate to cover any future non-payments
of our customers. However, if economic conditions deteriorate
significantly or one of our large customers was to declare
bankruptcy, a larger allowance for doubtful accounts might be
necessary. It is extremely difficult to estimate how much of an
additional reserve would be necessary, but we expect the largest
potential customer balance at any one time would not exceed
$17.0 million. An additional loss of $17.0 million
would reduce our Total Assets as of December 31, 2008 by
approximately 1% and would have reduced Income From Continuing
Operations Before Income Taxes by approximately 8%.
If we had been required to recognize an additional
$17.0 million in bad debt expense, it would likely not have
affected our liquidity and capital resources because, in spite
of the additional expense, we would have been within the terms
of our debt covenants.
VALUATION OF
PENSION BENEFITS
The benefit obligations and net periodic pension cost associated
with our domestic and foreign noncontributory pension plans are
determined using actuarial assumptions. Such assumptions
include discount rates to reflect the time value of money, rate
of employee compensation increases, demographic assumptions to
determine the probability and timing of benefit payments, and
the long-term rate of return on plan assets. The actuarial
assumptions are based upon managements best estimates,
after consulting with outside investment advisors and
actuaries. Because assumptions and estimates are used, actual
results could differ from expected results.
The discount rate is utilized principally in calculating our
pension obligations, which are represented by the Accumulated
Benefit Obligation (ABO) and the Projected Benefit Obligation
(PBO), and in calculating net periodic benefit cost. In
establishing the discount rate for our foreign plans, we review
a number of relevant interest rates including government
security yields and Aa corporate bond yields. In establishing
the discount rate for our domestic plans, we match the
hypothetical duration of our plans, using a weighted average
duration that is based upon projected cash payments, to a
simulated bond portfolio such as the Citigroup Pension Index
Curve. At December 31, 2008, the discount rates for our
domestic and foreign plans were 6.00% and 5.60%, respectively.
We believe that the accounting estimates related to determining
the valuation of pension benefits are critical accounting
estimates because: (1) changes in them can materially
affect net income, and (2) we are required to establish the
discount rate and the expected return on fund assets, which are
highly uncertain and require judgment. The estimates for the
valuation of pension benefits are critical accounting estimates
for all of our segments.
To the extent the discount rates increase (or decrease), our PBO
and net periodic benefit cost will decrease (or increase)
accordingly. The estimated effect of a 1% decrease in each
discount rate would be a $19.3 million increase in the PBO
($12.8 million for the domestic plans and $6.5 million
for the foreign plans) and a $2.5 million increase in net
periodic benefit cost ($1.7 million for the domestic plans and
$0.8 million for the foreign plans). To the extent the PBO
increases, the after-tax effect of such increase could reduce
Other Comprehensive Income and Stockholders Equity. The
estimated effect of a 1% increase in each discount rate would be
a $15.3 million decrease in the PBO ($10.1 million for
the domestic plans and $5.2 million for the foreign plans)
and a $1.5 million decrease in net periodic benefit cost
($1.0 million for the domestic plans and $0.5 million
for the foreign plans). A decrease of this magnitude in the PBO
would eliminate a substantial portion of the related reduction
in Other Comprehensive Income and Stockholders Equity.
21 /ATR
2008
Form 10-K
Table of Contents
The assumed expected long-term rate of return on assets is the
average rate of earnings expected on the funds invested to
provide for the benefits included in the PBO. Of domestic plan
assets, approximately 54% was invested in equities, 28% was
invested in fixed income securities, 14% was invested in
infrastructure and 4% was invested in a money market fund at
December 31, 2008. Of foreign plan assets, approximately
30% was invested in equities, 60% was invested in fixed income
securities and 10% was invested in real estate at
December 31, 2008.
The expected long-term rate of return assumptions are determined
based on our investment policy combined with expected risk
premiums of equities and fixed income securities over the
underlying risk-free rate. This rate is utilized principally in
calculating the expected return on the plan assets component of
the net periodic benefit cost. To the extent the actual rate of
return on assets realized over the course of a year is greater
or less than the assumed rate, that years net periodic
benefit cost is not affected. Rather, this gain (or loss)
reduces (or increases) future net periodic benefit cost over a
period of approximately 15 to 20 years. To the extent the
expected long-term rate of return on assets increases (or
decreases), our net periodic benefit cost will decrease (or
increase) accordingly. The estimated effect of a 1% decrease
(or increase) in each expected long-term rate of return on
assets would be a $0.6 million increase (or decrease) in
net periodic benefit cost.
The average rate of compensation increase is utilized
principally in calculating the PBO and the net periodic benefit
cost. The estimated effect of a 0.5% decrease in each rate of
expected compensation increase would be a $2.2 million decrease
in the PBO ($0.7 million for the domestic plans and $1.5
million for the foreign plans) and a $0.3 million decrease
to the net periodic benefit cost. The estimated effect of a
0.5% increase in each rate of expected compensation increase
would be a $2.4 million increase in the PBO
($0.8 million for the domestic plans and $1.6 million
for the foreign plans) and a $0.3 million increase to the net
periodic benefit cost.
Our primary pension related assumptions as of December 31,
2008 and 2007 were as follows:
Actuarial Assumptions as of December 31, | 2008 | 2007 | ||||||
Discount rate:
|
||||||||
Domestic plans
|
6.00% | 6.40% | ||||||
Foreign plans
|
5.60% | 5.25% | ||||||
Expected long-term rate of return on plan assets:
|
||||||||
Domestic plans
|
7.00% | 7.00% | ||||||
Foreign plans
|
6.00% | 6.00% | ||||||
Rate of compensation increase:
|
||||||||
Domestic plans
|
4.00% | 4.50% | ||||||
Foreign plans
|
3.00% | 3.00% |
In order to determine the 2009 net periodic benefit cost,
the Company expects to use the December 31, 2008 discount
rates, rates of compensation increase assumptions and expected
long-term returns on domestic and foreign plan assets. The
estimated impact of the changes to the assumptions as noted in
the table above on our 2009 net periodic benefit cost is
not expected to be significant.
SHARE-BASED
COMPENSATION
The Company uses the Black-Scholes option-valuation model to
value stock options, which requires the input of subjective
assumptions. These assumptions include the length of time
employees will retain their vested stock options before
exercising them (expected term), the estimated
volatility of the Companys stock price, risk-free interest
rate, the expected dividend yield and stock price. The expected
term of the options is based on historical experience of similar
awards, giving consideration to the contractual terms, vesting
schedules and expectations of future employee behavior. The
expected term determines the period for which the risk-free
interest rate and volatility must be applied. The risk-free
interest rate is based on the expected U.S. Treasury rate
over the expected term. Expected stock price volatility is
based on historical volatility of the Companys stock
price. Dividend yield is managements long-term estimate
of annual dividends to be paid as a percentage of share price.
For 2008, share-based compensation reduced our operating income
by $11.1 million and our diluted earnings per share by
approximately $0.11. Future changes in the subjective
assumptions used in the Black-Scholes option-valuation model or
estimates associated with forfeitures could impact our
share-based compensation expense. For example, a 1 year
reduction in the expected term of the options would decrease the
Black-Scholes valuation and reduce share-based compensation by
approximately $0.6 million. On the contrary, a 1 year
increase in the expected term of the option would increase the
Black-Scholes valuation and increase share-based compensation by
approximately $0.5 million. In addition, changes in the
stock price at the date of the grant would impact our
share-based compensation expense. For example, a $5 decrease in
the stock price would decrease the Black-Scholes valuation and
reduce share-based compensation by approximately
$1.1 million. On the contrary, a $5 increase in the stock
price would increase the Black-Scholes valuation and increase
share-based compensation by approximately $1.1 million.
22 /ATR
2008
Form 10-K
Table of Contents
OPERATIONS
OUTLOOK
Overall, there is a great deal of concern regarding the global
economy heading into 2009. The unprecedented uncertainty and
lack of visibility not only for AptarGroup but for our customers
has made it difficult to provide forecasts with any degree of
confidence. We believe that the strength of our balance sheet,
the breadth of our product offerings and the geographical
diversification of our business should allow us to withstand any
slowness in one particular region or segment of our business.
However, continued recessionary periods could adversely impact
our business and operating results.
To mitigate these risks, we are intensifying our review of our
operations and making adjustments where necessary, including
developing contingency plans to offset costs and reduce capital
expenditures. At the same time, we remain committed to being
the innovative leader and we will maintain the flexibility
needed to help our customers when their businesses regain
strength.
In 2008, the cost of raw materials, in particular resin and
metal components, increased significantly through the first
three quarters before decreasing in the fourth quarter. We are
not expecting these costs to change significantly in 2009. Our
ability to pass on any additional increases in raw material
prices to our customers depends on competitive forces in the
marketplace. Delays or difficulties encountered with passing on
price increases to our customers could have a negative impact on
our 2009 anticipated results.
We are anticipating gains in productivity and cost savings to
partially offset certain price declines and cost increases.
Should we be unable to attain these productivity gains and cost
savings, our results could be negatively impacted.
The U.S. dollar has recently strengthened compared to the
Euro and other currencies during the fourth quarter of 2008.
Since a majority of our sales are denominated in Euros, a
strengthening dollar will have a dilutive impact on the
translation of our Euro denominated financial statements into
U.S. dollars. However, as we have mentioned before, we are
a net importer of products produced in European countries with
Euro based costs, into the U.S. and sold in
U.S. dollars. A strengthened U.S. dollar compared to
the Euro makes imported European produced products less
expensive, thereby improving operating margins. The net impact
of the strengthened U.S. dollar is difficult to predict or
estimate, but it is likely that any negative impact realized
from translating Euro denominated financial statements into
U.S. dollars would only be partially offset by the lower
cost of imported products.
We expect the annual effective tax rate for 2009 to be in the
range of 29.0% to 31.0% compared to a rate of 30.5% for 2008.
We are anticipating diluted earnings per share for the first
quarter of 2009 to be in the range of $.35 to $.40 per share
compared to $.52 per share recorded in the prior year first
quarter.
23 /ATR
2008
Form 10-K
Table of Contents
FORWARD-LOOKING
STATEMENTS
This Managements Discussion and Analysis and certain other
sections of this
Form 10-K
contain forward-looking statements that involve a number of
risks and uncertainties. Words such as expects,
anticipates, believes,
estimates, and other similar expressions or future
or conditional verbs such as will,
should, would and could are
intended to identify such forward-looking statements.
Forward-looking statements are made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and are
based on our beliefs as well as assumptions made by and
information currently available to us. Accordingly, our actual
results may differ materially from those expressed or implied in
such forward-looking statements due to known or unknown risks
and uncertainties that exist in our operations and business
environment, including but not limited to:
| economic, environmental and political conditions worldwide; |
| changes in customer and/or consumer spending levels; |
| the availability of raw materials and components (particularly from sole sourced suppliers) as well as the financial viability of these suppliers; |
| the cost of materials and other input costs (particularly resin, metal, anodization costs and transportation and energy costs); |
| significant fluctuations in foreign currency exchange rates; |
| our ability to increase prices; |
| our ability to contain costs and improve productivity; |
| changes in capital availability or cost, including interest rate fluctuations |
| our ability to meet future cash flow estimates to support our goodwill impairment testing; |
| direct or indirect consequences of acts of war or terrorism; |
| difficulties in complying with government regulation; |
| competition, including technological advances; |
| our ability to protect and defend our intellectual property rights; |
| the timing and magnitude of capital expenditures; |
| our ability to identify potential new acquisitions and to successfully acquire and integrate such operations or products; |
| work stoppages due to labor disputes; |
| the demand for existing and new products; |
| fiscal and monetary policy, including changes in worldwide tax rates; |
| our ability to manage worldwide customer launches of complex technical products, in particular in developing markets; |
| the success of our customers products, particularly in the pharmaceutical industry; |
| difficulties in product development and uncertainties related to the timing or outcome of product development; |
| significant product liability claims; |
| our successful implementation of a new worldwide ERP system starting in 2009 without disruption to our operations and |
| other risks associated with our operations. |
Although we believe that our forward-looking statements are
based on reasonable assumptions, there can be no assurance that
actual results, performance or achievements will not differ
materially from any future results, performance or achievements
expressed or implied by such forward-looking statements.
Readers are cautioned not to place undue reliance on
forward-looking statements. We undertake no obligation to
update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise. Please
refer to Item 1A (Risk Factors) of Part I
included in the Companys Annual Report on
Form 10-K
for additional risk factors affecting the Company.
24 /ATR
2008
Form 10-K
Table of Contents
ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET
RISKS
A significant number of our operations are located outside of
the United States. Because of this, movements in exchange rates
may have a significant impact on the translation of the
financial condition and results of operations of our entities.
Our primary foreign exchange exposure is to the Euro, but we
also have foreign exchange exposure to the British Pound, South
American and Asian currencies, among others. A strengthening
U.S. dollar relative to foreign currencies has a dilutive
translation effect on our financial condition and results of
operations. Conversely, a weakening U.S. dollar has an
additive effect.
Additionally, in some cases, we sell products denominated in a
currency different from the currency in which the related costs
are incurred. Any changes in exchange rates on such
inter-country sales may impact our results of operations.
We manage our exposures to foreign exchange principally with
forward exchange contracts to hedge certain firm purchase and
sales commitments and intercompany cash transactions denominated
in foreign currencies.
The table below provides information, as of December 31,
2008, about our forward currency exchange contracts. The
majority of the contracts expire before the end of the fourth
quarter of 2009 with the exception of a few contracts on
intercompany loans that expire in the third quarter of 2013.
In thousands | ||||||||
Average |
||||||||
Year Ended December 31, 2008 |
Contractual |
|||||||
Buy/Sell | Contract Amount | Exchange Rate | ||||||
Euro/U.S. Dollar
|
$ | 127,696 | 1.3062 | |||||
Swiss Francs/Euro
|
36,210 | 0.6554 | ||||||
U.S. Dollar/Euro
|
8,482 | 0.7011 | ||||||
Euro/Brazilian Real
|
6,933 | 4.5197 | ||||||
U.S. Dollar/Chinese Yuan
|
6,000 | 6.8731 | ||||||
Euro/Russian Ruble
|
5,852 | 37.4988 | ||||||
Czech Koruna/Euro
|
4,610 | 0.0385 | ||||||
Argentinean Peso/U.S. Dollar
|
2,500 | 0.3076 | ||||||
Euro/ Chinese Yuan
|
2,332 | 9.5628 | ||||||
Canadian Dollar/U.S. Dollar
|
1,800 | 0.7981 | ||||||
Other
|
4,968 | |||||||
Total
|
$ | 207,383 | ||||||
As of December 31, 2008, we have recorded the fair value of
foreign currency forward exchange contracts of $11 million
in prepaid expenses and other current assets, $255 thousand in
accounts payable and accrued liabilities and $940 thousand in
deferred and other non-current liabilities in the balance sheet.
At December 31, 2008, we had a fixed-to-variable interest
rate swap agreement with a notional principal value of
$15 million, which requires us to pay a variable interest
rate (which was 2.4% at December 31, 2008) and receive
a fixed rate of 6.6%. The variable rate is adjusted semiannually
based on London Interbank Offered Rates (LIBOR).
Variations in market interest rates would produce changes in our
net income. If interest rates increase by 100 basis points,
net income related to the interest rate swap agreement would
decrease by less than $0.1 million, assuming a tax rate of
30%. As of December 31, 2008, we recorded the fair value of
the fixed-to-variable interest rate swap agreement of
$1 million in miscellaneous other assets with an offsetting
adjustment to debt. No gain or loss was recorded in the income
statement in 2008 as any hedge ineffectiveness for the period is
minimal.
As of December 31, 2008, the Company had one foreign
currency cash flow hedge. A French entity of AptarGroup,
AptarGroup Holding SAS, has hedged the risk of variability in
Euro equivalent associated with the cash flows of an
intercompany loan granted in Brazilian Real. The forward
contracts utilized were designated as a hedge of the changes in
the cash flows relating to the changes in foreign currency rates
relating to the loan and related forecasted interest. The
notional amount of the foreign currency forward contracts
utilized to hedge cash flow exposure was 5.5 million
Brazilian Real ($2.4 million) as of December 31, 2008.
The notional amount of the foreign currency forward contracts
utilized to hedge cash flow exposure was 6.7 million
Brazilian Real ($3.8 million) as of December 31, 2007.
During the year ended December 31, 2008, the Company did
not recognize any net gain (loss) as any hedge ineffectiveness
for the period was immaterial, and the Company did not recognize
any net gain (loss) related to the portion of the hedging
instrument excluded from the assessment of hedge effectiveness.
These foreign currency forward contracts hedge forecasted
transactions for approximately three years (March 2012).
25 /ATR
2008
Form 10-K
Table of Contents
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AptarGroup, Inc.
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per share amounts | ||||||||||||
Years Ended December 31, |
2008 | 2007 | 2006 | |||||||||
Net Sales
|
$ | 2,071,685 | $ | 1,892,167 | $ | 1,601,385 | ||||||
Operating Expenses:
|
||||||||||||
Cost of sales (exclusive of depreciation shown below)
|
1,411,275 | 1,283,773 | 1,086,269 | |||||||||
Selling, research & development and administrative
|
300,846 | 274,196 | 238,907 | |||||||||
Depreciation and amortization
|
131,145 | 123,466 | 114,606 | |||||||||
1,843,266 | 1,681,435 | 1,439,782 | ||||||||||
Operating Income
|
228,419 | 210,732 | 161,603 | |||||||||
Other Income (Expense):
|
||||||||||||
Interest expense
|
(18,687 | ) | (19,492 | ) | (16,985 | ) | ||||||
Interest income
|
13,120 | 8,918 | 4,214 | |||||||||
Equity in results of affiliates
|
310 | 483 | 506 | |||||||||
Minority interests
|
(6 | ) | 33 | (80 | ) | |||||||
Miscellaneous, net
|
(2,188 | ) | (679 | ) | (952 | ) | ||||||
(7,451 | ) | (10,737 | ) | (13,297 | ) | |||||||
Income from Continuing Operations Before Income Taxes
|
220,968 | 199,995 | 148,306 | |||||||||
Provision For Income Taxes
|
67,473 | 60,488 | 45,410 | |||||||||
Income From Continuing Operations
|
153,495 | 139,507 | 102,896 | |||||||||
Income From Discontinued Operations Net of Tax
|
| 2,232 | | |||||||||
Net Income
|
$ | 153,495 | $ | 141,739 | $ | 102,896 | ||||||
Net Income Per Common Share (Basic):
|
||||||||||||
Continuing Operations
|
$ | 2.26 | $ | 2.03 | $ | 1.48 | ||||||
Discontinued Operations
|
$ | | $ | 0.03 | $ | | ||||||
Net Income Per Common Share (Basic)
|
$ | 2.26 | $ | 2.06 | $ | 1.48 | ||||||
Net Income Per Common Share (Diluted):
|
||||||||||||
Continuing Operations
|
$ | 2.18 | $ | 1.95 | $ | 1.43 | ||||||
Discontinued Operations
|
$ | | $ | 0.03 | $ | | ||||||
Net Income Per Common Share (Diluted)
|
$ | 2.18 | $ | 1.98 | $ | 1.43 | ||||||
See accompanying notes to consolidated financial statements.
26 /ATR
2008
Form 10-K
Table of Contents
AptarGroup,
Inc.
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
In thousands, except per share amounts | |||||||||
December 31, | 2008 | 2007 | |||||||
Assets
|
|||||||||
Current Assets:
|
|||||||||
Cash and equivalents
|
$ | 192,072 | $ | 313,739 | |||||
Accounts and notes receivable, less allowance for
doubtful accounts of $11,900 in 2008 and $11,139 in 2007 |
343,937 | 360,736 | |||||||
Inventories
|
244,775 | 272,556 | |||||||
Prepayments and other
|
78,965 | 56,414 | |||||||
859,749 | 1,003,445 | ||||||||
Property, Plant and Equipment:
|
|||||||||
Buildings and improvements
|
297,093 | 264,535 | |||||||
Machinery and equipment
|
1,484,353 | 1,408,761 | |||||||
1,781,446 | 1,673,296 | ||||||||
Less: Accumulated depreciation
|
(1,078,063 | ) | (1,033,544 | ) | |||||
703,383 | 639,752 | ||||||||
Land
|
17,499 | 16,756 | |||||||
720,882 | 656,508 | ||||||||
Other Assets:
|
|||||||||
Investments in affiliates
|
712 | 4,085 | |||||||
Goodwill
|
227,041 | 222,668 | |||||||
Intangible assets
|
14,061 | 17,814 | |||||||
Miscellaneous
|
9,377 | 7,430 | |||||||
251,191 | 251,997 | ||||||||
Total Assets
|
$ | 1,831,822 | $ | 1,911,950 | |||||
See accompanying notes to consolidated financial statements.
27 /ATR
2008
Form 10-K
Table of Contents
AptarGroup,
Inc.
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
In thousands, except per share amounts | |||||||||
December 31, | 2008 | 2007 | |||||||
Liabilities and Stockholders Equity
|
|||||||||
Current Liabilities:
|
|||||||||
Notes payable
|
$ | 39,919 | $ | 190,176 | |||||
Current maturities of long-term obligations
|
24,700 | 25,983 | |||||||
Accounts payable and accrued liabilities
|
310,408 | 349,030 | |||||||
375,027 | 565,189 | ||||||||
Long-Term Obligations
|
226,888 | 146,711 | |||||||
Deferred Liabilities and Other:
|
|||||||||
Deferred income taxes
|
24,561 | 28,613 | |||||||
Retirement and deferred compensation plans
|
62,476 | 42,787 | |||||||
Deferred and other non-current liabilities
|
11,072 | 9,079 | |||||||
Commitments and contingencies
|
| | |||||||
Minority interests
|
768 | 553 | |||||||
98,877 | 81,032 | ||||||||
Stockholders Equity:
|
|||||||||
Preferred stock, $.01 par value, 1 million shares
authorized, none outstanding
|
| | |||||||
Common stock, $.01 par value, 199 million shares
authorized, and 80.1 and 79.4 million issued at 2008 and
2007, respectively
|
801 | 794 | |||||||
Capital in excess of par value
|
254,216 | 229,022 | |||||||
Retained Earnings
|
1,065,998 | 950,566 | |||||||
Accumulated other comprehensive income
|
139,300 | 214,294 | |||||||
Less: Treasury stock at cost, 12.5 million and
11.2 million shares in 2008 and 2007, respectively
|
(329,285 | ) | (275,658 | ) | |||||
1,131,030 | 1,119,018 | ||||||||
Total Liabilities and Stockholders Equity
|
$ | 1,831,822 | $ | 1,911,950 | |||||
See accompanying notes to consolidated financial statements.
28 /ATR
2008
Form 10-K
Table of Contents
AptarGroup,
Inc.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
In thousands | ||||||||||||
Years Ended December 31, | 2008 | 2007 | 2006 | |||||||||
Cash Flows from Operating Activities:
|
||||||||||||
Net income
|
$ | 153,495 | $ | 141,739 | $ | 102,896 | ||||||
Adjustments to reconcile net income to net cash provided by
operations:
|
||||||||||||
Depreciation
|
124,884 | 118,946 | 109,037 | |||||||||
Amortization
|
6,261 | 4,520 | 5,569 | |||||||||
Stock option based compensation
|
11,054 | 14,036 | 13,313 | |||||||||
Gain on disposition of business, net
|
| (2,232 | ) | | ||||||||
Provision for bad debts
|
3,063 | 1,970 | 1,893 | |||||||||
Labor redeployment
|
| (43 | ) | (1,327 | ) | |||||||
Minority interests
|
6 | (33 | ) | 80 | ||||||||
Deferred income taxes
|
(1,326 | ) | (11,783 | ) | (10,142 | ) | ||||||
Retirement and deferred compensation plans
|
1,564 | 1,809 | 6,223 | |||||||||
Equity in results of affiliates in excess of cash distributions
received
|
(113 | ) | (301 | ) | (506 | ) | ||||||
Changes in balance sheet items, excluding effects from foreign
currency adjustments:
|
||||||||||||
Accounts and notes receivable
|
(5,288 | ) | (8,347 | ) | (27,376 | ) | ||||||
Inventories
|
16,800 | (26,261 | ) | (22,801 | ) | |||||||
Prepaid and other current assets
|
(10,126 | ) | (2,960 | ) | 1,051 | |||||||
Accounts payable and accrued liabilities
|
(13,150 | ) | 32,745 | 17,477 | ||||||||
Income taxes payable
|
(23,327 | ) | 8,357 | 5,243 | ||||||||
Other changes, net
|
6,414 | 1,301 | (3,169 | ) | ||||||||
Net cash provided by operations
|
270,211 | 273,463 | 197,461 | |||||||||
Cash Flows from Investing Activities:
|
||||||||||||
Capital expenditures
|
(203,600 | ) | (137,944 | ) | (107,663 | ) | ||||||
Disposition of property and equipment
|
585 | 6,232 | 6,948 | |||||||||
Intangible assets
|
(1,323 | ) | (1,195 | ) | (4,696 | ) | ||||||
Acquisition of business, net of cash acquired
|
(19,501 | ) | (5,151 | ) | (36,787 | ) | ||||||
Disposition of business
|
| 6,653 | | |||||||||
Investment in affiliates
|
(801 | ) | | | ||||||||
Notes receivable, net
|
(901 | ) | 162 | 355 | ||||||||
Net cash used by investing activities
|
(225,541 | ) | (131,243 | ) | (141,843 | ) | ||||||
Cash Flows from Financing Activities:
|
||||||||||||
Proceeds from notes payable
|
| 88,699 | 2,128 | |||||||||
Repayments of notes payable
|
(149,123 | ) | | | ||||||||
Proceeds from long-term obligations
|
100,650 | 1,298 | 54,545 | |||||||||
Repayments of long-term obligations
|
(25,227 | ) | (26,030 | ) | (9,217 | ) | ||||||
Dividends paid
|
(38,063 | ) | (34,439 | ) | (29,279 | ) | ||||||
Proceeds from stock option exercises
|
13,913 | 19,050 | 19,535 | |||||||||
Purchase of treasury stock
|
(57,569 | ) | (76,391 | ) | (57,682 | ) | ||||||
Excess tax benefit from exercise of stock options
|
3,797 | 4,910 | 2,624 | |||||||||
Net cash used by financing activities
|
(151,622 | ) | (22,903 | ) | (17,346 | ) | ||||||
Effect of Exchange Rate Changes on Cash
|
(14,715 | ) | 23,846 | 14,669 | ||||||||
Net (decrease)/increase in Cash and Equivalents
|
(121,667 | ) | 143,163 | 52,941 | ||||||||
Cash and Equivalents at Beginning of Period
|
313,739 | 170,576 | 117,635 | |||||||||
Cash and Equivalents at End of Period
|
$ | 192,072 | $ | 313,739 | $ | 170,576 | ||||||
Supplemental Cash Flow Disclosure:
|
||||||||||||
Interest paid
|
$ | 16,057 | $ | 19,981 | $ | 14,029 | ||||||
Income taxes paid
|
76,002 | 63,336 | 50,500 | |||||||||
Capital lease obligations
|
| | 1,780 |
See accompanying notes to consolidated financial statements.
29 /ATR
2008
Form 10-K
Table of Contents
AptarGroup,
Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended December 31, 2008, 2007 and 2006
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended December 31, 2008, 2007 and 2006
In thousands | |||||||||||||||||||||||||||||||
Accumulated |
|||||||||||||||||||||||||||||||
Other |
Common |
Capital in |
|||||||||||||||||||||||||||||
Comprehensive |
Total |
Retained |
Comprehensive |
Stock |
Treasury |
Excess of |
|||||||||||||||||||||||||
Income | Equity | Earnings | Income/(Loss) | Par Value | Stock | Par Value | |||||||||||||||||||||||||
Balance December 31, 2005:
|
$ | 809,388 | $ | 771,304 | $ | 24,289 | $ | 386 | $ | (149,454 | ) | $ | 162,863 | ||||||||||||||||||
Net income
|
$ | 102,896 | 102,896 | 102,896 | |||||||||||||||||||||||||||
Foreign currency translation adjustments
|
88,678 | 88,678 | 88,678 | ||||||||||||||||||||||||||||
Minimum pension liability adjustment, net of tax
|
867 | 867 | 867 | ||||||||||||||||||||||||||||
Net loss on Derivatives
|
(28 | ) | (28 | ) | (28 | ) | |||||||||||||||||||||||||
Comprehensive income
|
$ | 192,413 | |||||||||||||||||||||||||||||
Stock option exercises & restricted stock vestings
|
35,861 | 6 | 3,375 | 32,480 | |||||||||||||||||||||||||||
Adjustment to initially adopt SFAS 158, net of tax
|
(4,301 | ) | (4,301 | ) | |||||||||||||||||||||||||||
Cash dividends declared on common stock
|
(29,279 | ) | (29,279 | ) | |||||||||||||||||||||||||||
Treasury stock purchased
|
(57,682 | ) | (57,682 | ) | |||||||||||||||||||||||||||
Balance December 31, 2006:
|
946,400 | 844,921 | 109,505 | 392 | (203,761 | ) | 195,343 | ||||||||||||||||||||||||
Net income
|
$ | 141,739 | 141,739 | 141,739 | |||||||||||||||||||||||||||
Foreign currency translation adjustments
|
103,757 | 103,757 | 103,757 | ||||||||||||||||||||||||||||
Changes in unrecognized pension gains/losses and related
amortization, net of tax
|
1,014 | 1,014 | 1,014 | ||||||||||||||||||||||||||||
Net gain on Derivatives
|
18 | 18 | 18 | ||||||||||||||||||||||||||||
Comprehensive income
|
$ | 246,528 | |||||||||||||||||||||||||||||
Stock option exercises & restricted stock vestings
|
38,575 | 9 | 4,494 | 34,072 | |||||||||||||||||||||||||||
Adjustment to initially adopt FIN 48
|
(1,655 | ) | (1,655 | ) | |||||||||||||||||||||||||||
Adjustment for stock split
|
393 | (393 | ) | ||||||||||||||||||||||||||||
Cash dividends declared on common stock
|
(34,439 | ) | (34,439 | ) | |||||||||||||||||||||||||||
Treasury stock purchased
|
(76,391 | ) | (76,391 | ) | |||||||||||||||||||||||||||
Balance December 31, 2007:
|
1,119,018 | 950,566 | 214,294 | 794 | (275,658 | ) | 229,022 | ||||||||||||||||||||||||
Net income
|
$ | 153,495 | 153,495 | 153,495 | |||||||||||||||||||||||||||
Foreign currency translation adjustments
|
(61,250 | ) | (61,250 | ) | (61,250 | ) | |||||||||||||||||||||||||
Changes in unrecognized pension gains/losses and related
amortization, net of tax
|
(13,164 | ) | (13,164 | ) | (13,164 | ) | |||||||||||||||||||||||||
Treasury Locks, net of tax
|
(595 | ) | (595 | ) | (595 | ) | |||||||||||||||||||||||||
Net gain on Derivatives, net of tax
|
15 | 15 | 15 | ||||||||||||||||||||||||||||
Comprehensive income
|
$ | 78,501 | |||||||||||||||||||||||||||||
Stock option exercises & restricted stock vestings
|
29,143 | 7 | 3,942 | 25,194 | |||||||||||||||||||||||||||
Cash dividends declared on common stock
|
(38,063 | ) | (38,063 | ) | |||||||||||||||||||||||||||
Treasury stock purchased
|
(57,569 | ) | (57,569 | ) | |||||||||||||||||||||||||||
Balance December 31, 2008:
|
$ | 1,131,030 | $ | 1,065,998 | $ | 139,300 | $ | 801 | $ | (329,285 | ) | $ | 254,216 | ||||||||||||||||||
See accompanying notes to consolidated financial statement.
30 /ATR
2008
Form 10-K
Table of Contents
AptarGroup,
Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Amounts in thousands unless otherwise indicated)
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF
BUSINESS
AptarGroup, Inc. is a global company that designs, manufactures
and sells consumer product dispensing systems. The Company
focuses on providing value-added components to a variety of
global consumer product marketers in the personal care,
fragrance/cosmetic, pharmaceutical, household and food/beverage
industries. The Company has manufacturing facilities located
throughout the world including North America, Europe, Asia and
South America.
BASIS OF
PRESENTATION
The accompanying consolidated financial statements include the
accounts of AptarGroup, Inc. and its subsidiaries. The terms
AptarGroup or Company as used herein
refer to AptarGroup, Inc. and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Certain previously reported amounts have been reclassified to
conform to the current period presentation.
STOCK
SPLIT
In May 2007, the Company effected a two-for-one stock split.
Previously reported information has been restated to reflect the
stock split.
ACCOUNTING
ESTIMATES
The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of
America (GAAP). This process requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CASH
MANAGEMENT
The Company considers all highly liquid investments with an
original maturity of three months or less when purchased to be
cash equivalents.
INVENTORIES
Inventories are stated at cost, which is lower than market.
Costs included in inventories are raw materials, direct labor
and manufacturing overhead. The costs of certain domestic and
foreign inventories are determined by using the
last-in,
first-out (LIFO) method, while the remaining
inventories are valued using the
first-in,
first-out (FIFO) method.
INVESTMENTS IN
AFFILIATED COMPANIES
The Company accounts for its investments in 20% to 50% owned
affiliated companies using the equity method. These investments
are in companies that manufacture and distribute products
similar to the Companys products. The Company received
dividends from affiliated companies of $197 and $182 in 2008 and
2007, respectively. The Company received no dividends from
affiliated companies in 2006. The Company has approximately
$726 million included in its December 31, 2008
consolidated retained earnings, which represent undistributed
earnings of affiliated companies accounted for by the equity
method.
PROPERTY AND
DEPRECIATION
Properties are stated at cost. Depreciation is determined on a
straight-line basis over the estimated useful lives for
financial reporting purposes and accelerated methods for income
tax reporting. Generally, the estimated useful lives are 25 to
40 years for buildings and improvements and 3 to
10 years for machinery and equipment.
FINITE-LIVED
INTANGIBLE ASSETS
Finite-lived intangibles, consisting of patents, non-compete
agreements and license agreements acquired in purchase
transactions, are capitalized and amortized over their useful
lives which range from 3 to 20 years.
GOODWILL AND
INDEFINITE-LIVED INTANGIBLE ASSETS
Management believes the excess purchase price over the fair
value of the net assets acquired (Goodwill) in
purchase transactions has continuing value. Goodwill and
indefinite-lived intangible assets must be tested annually, or
more frequently as circumstances dictate, for impairment.
Management has performed an analysis of the fair values of its
reporting units at December 31, 2008. The fair values of
the reporting units exceeded the carrying values in 2008 and
2007 and, therefore, no impairment of goodwill was recorded in
2008 and 2007. In 2006, a goodwill impairment loss for one
reporting unit of $1,615 was recognized for a research and
development company that works on electronic dispensing systems
due to a decrease in active customer projects and lack of new
potential applications.
IMPAIRMENT OF
LONG-LIVED ASSETS
Long-lived assets, such as property, plant and equipment and
finite-lived intangibles, are evaluated for impairment whenever
events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. An impairment loss is
31 /ATR
2008
Form 10-K
Table of Contents
recognized when estimated undiscounted future cash flows
expected to result from the use of the asset plus net proceeds
expected from disposition of the asset (if any) are less than
the carrying value of the asset. When impairment is identified,
the carrying amount of the asset is reduced to its fair value.
DERIVATIVES
INSTRUMENTS AND HEDGING ACTIVITIES
Derivative financial instruments are recorded in the
consolidated balance sheets at fair value as either assets or
liabilities. Changes in the fair value of derivatives are
recorded in each period in earnings or accumulated other
comprehensive income, depending on whether a derivative is
designated and effective as part of a hedge transaction.
RESEARCH &
DEVELOPMENT EXPENSES
Research and development costs are expensed as incurred. These
costs amounted to $60,855, $55,861 and $48,178 in 2008, 2007 and
2006, respectively.
INCOME
TAXES
The Company computes taxes on income in accordance with the tax
rules and regulations of the many taxing authorities where the
income is earned. The income tax rates imposed by these taxing
authorities may vary substantially. Taxable income may differ
from pretax income for financial accounting purposes. To the
extent that these differences create differences between the tax
basis of an asset or liability and its reported amount in the
financial statements, an appropriate provision for deferred
income taxes is made.
Except as noted below, the Company has the expressed intention
to reinvest the undistributed earnings of its
non-U.S. subsidiaries,
which meets the indefinite reversal criteria of Accounting
Principles Board Opinion Number 23, Accounting for Income
Taxes-Special Areas (APB 23). A provision has
not been made for U.S. or additional foreign taxes on
$726 million of undistributed earnings of
non-U.S. subsidiaries,
which has been designated as permanently reinvested as of
December 31, 2008. These earnings will continue to be
reinvested indefinitely and could become subject to additional
tax if they were remitted as dividends or lent to a
U.S. affiliate, or if the Company should sell its stock in
the subsidiaries. It is not practicable to estimate the amount
of additional tax that might be payable on these undistributed
non-U.S. earnings.
The Company will continue to evaluate annually if it will
repatriate
non-U.S. subsidiary
current year earnings or a portion thereof. In 2006 and 2007,
the Company decided to repatriate a portion of
non-U.S. subsidiary
current year earnings in 2007 and 2008, respectively, and
deferred taxes related to the repatriations were provided for in
the year the decision was made. The Company has no plans at
this time to repatriate funds to the U.S. during 2009.
The Company has adopted the provisions of FIN 48, which
clarifies the accounting for uncertainty in income taxes
recognized in the financial statements in accordance with
Statement of Financial Accounting Standards (SFAS)
109, Accounting for Income Taxes. FIN 48
provides that a tax benefit from an uncertain tax position may
be recognized when it is more likely than not that the position
will be sustained upon examination, including resolutions of any
related appeals or litigation processes, based on the technical
merits. Income tax positions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized
upon the adoption of FIN 48 and in subsequent periods.
This interpretation also provides guidance on measurement,
derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. See
Note 6 for more information.
TRANSLATION OF
FOREIGN CURRENCIES
The functional currencies of all the Companys foreign
operations are the local currencies. Assets and liabilities are
translated into U.S. dollars at the rates of exchange on
the balance sheet date. Sales and expenses are translated at
the average rates of exchange prevailing during the year. The
related translation adjustments are accumulated in a separate
section of Stockholders Equity. Realized and unrealized
foreign currency transaction gains and losses are reflected in
income, as a component of miscellaneous income and expense, and
represented a loss of $3,293, $1,636 and $1,698 in 2008, 2007
and 2006, respectively.
STOCK BASED
COMPENSATION
Effective January 1, 2006, the Company adopted Statement of
Financial Accounting Standards (SFAS) 123R,
Share-Based Payment. SFAS 123R requires that
all share-based compensation be recognized as an expense in the
financial statements and that such cost be measured at the fair
value of the award. Also under the standard, excess tax
benefits related to issuance of equity instruments under
share-based payment arrangements are considered financing
instead of operating cash flow activities. The Company adopted,
in 2006, the modified prospective method of applying
SFAS 123R, which requires the recognition of compensation
expense on a prospective basis.
SFAS 123R upon adoption required the application of the
non-substantive vesting approach which means that an award is
fully vested when the employees retention of the award is
no longer contingent on providing subsequent service. Under this
approach, compensation costs are recognized over the requisite
service period of the award instead of ratably over the vesting
period stated in the grant. As such, costs are recognized
immediately, if the employee is retirement eligible on the date
of grant or over the period from the date of grant until
retirement eligibility if retirement eligibility is reached
before the end of the vesting period stated in the grant. For
awards granted prior to adoption, the Company recognizes
compensation costs ratably over the vesting period with
accelerated recognition of the unvested portion upon actual
retirement. See Note 15 for more information.
32 /ATR
2008
Form 10-K
Table of Contents
REVENUE
RECOGNITION
Product Sales. In accordance with Staff
Accounting Bulletin Number 104: Revenue
Recognition, the Companys policy is to recognize
revenue from product sales when the title and risk of loss has
transferred to the customer, when the Company has no remaining
obligations regarding the transaction and when collection is
reasonably assured. The majority of the Companys products
shipped from the U.S. transfers title and risk of loss when
the goods leave the Companys shipping location. The
majority of the Companys products shipped from Europe
transfers title and risk of loss when the goods reach their
destination.
Services and Other. The Company occasionally
invoices customers for certain services. The Company also
receives revenue from other sources such as license or royalty
agreements. Revenue is recognized when services are rendered or
rights to use assets can be reliably measured and when
collection is reasonably assured. Service and other revenue is
not material to the Companys results of operations for any
of the years presented.
NOTE 2
DISCONTINUED OPERATIONS
In the fourth quarter of 2007, the Company sold its Australian
operation for approximately $6.7 million in cash. The
Australian operation was primarily a sales and distribution
facility with light final assembly of some products as well as
some molding of dispensing closures. In the future, the Company
will continue to sell its products into Australia using the
buyer of this company as an agent and distributor. The Company
recorded a gain after taxes on this sale of approximately
$2.2 million or approximately $.03 per diluted share. This
net gain has been reported in the consolidated statements of
income as discontinued operations. The Company elected only to
report the net gain as discontinued operations rather than
including the full operating results as discontinued operations
for all periods presented due to the immateriality of the
amounts (less than 1% of net sales and income before income
taxes). The Australian entity was previously reported in the
Beauty and Home segment.
NOTE 3
INVENTORIES
At December 31, 2008 and 2007, approximately 23% of the
total inventories are accounted for by the LIFO method.
Inventories, by component, consisted of:
2008 | 2007 | |||||||
Raw materials
|
$ | 93,081 | $ | 101,993 | ||||
Work-in-process
|
55,228 | 59,894 | ||||||
Finished goods
|
99,310 | 115,774 | ||||||
Total
|
247,619 | 277,661 | ||||||
Less LIFO reserve
|
(2,844 | ) | (5,105 | ) | ||||
Total
|
$ | 244,775 | $ | 272,556 | ||||
NOTE 4
GOODWILL AND OTHER INTANGIBLE ASSETS
The Company completed its annual analysis of the fair value of
its reporting units as of December 31, 2008 using both a
discounted cash flow analysis and market multiple approach.
The changes in the carrying amount of goodwill for the year
ended December 31, 2008, are as follows by reporting
segment:
Beauty & |
||||||||||||||||
Pharma | Home | Closures | Total | |||||||||||||
Balance as of December 31, 2007
|
$ | 25,413 | $ | 158,537 | $ | 38,718 | $ | 222,668 | ||||||||
Acquisitions (See Note 18)
|
3,735 | 3,421 | 2,575 | 9,731 | ||||||||||||
Foreign currency exchange effects
|
(1,015 | ) | (3,135 | ) | (1,208 | ) | (5,358 | ) | ||||||||
Balance as of December 31, 2008
|
$ | 28,133 | $ | 158,823 | $ | 40,085 | $ | 227,041 | ||||||||
The table below shows a summary of intangible assets for the
years ended December 31, 2008 and 2007.
2008 | 2007 | |||||||||||||||||||||||||||
Weighted Average |
Gross |
Gross |
||||||||||||||||||||||||||
Amortization Period |
Carrying |
Accumulated |
Net |
Carrying |
Accumulated |
Net |
||||||||||||||||||||||
(Years) | Amount | Amortization | Value | Amount | Amortization | Value | ||||||||||||||||||||||
Amortization intangible assets:
|
||||||||||||||||||||||||||||
Patents
|
14 | $ | 18,854 | $ | (13,357 | ) | $ | 5,497 | $ | 19,194 | $ | (12,230 | ) | $ | 6,964 | |||||||||||||
License agreements and other
|
7 | 25,641 | (17,077 | ) | 8,564 | 23,557 | (12,707 | ) | 10,850 | |||||||||||||||||||
Total intangible assets
|
10 | $ | 44,495 | $ | (30,434 | ) | $ | 14,061 | $ | 42,751 | $ | (24,937 | ) | $ | 17,814 | |||||||||||||
33 /ATR
2008
Form 10-K
Table of Contents
Aggregate amortization expense for the intangible assets above
for the years ended December 31, 2008, 2007 and 2006 was
$6,261, $4,520, and $3,954, respectively.
Estimated amortization expense for the years ending December 31
is as follows:
2009
|
$ | 4,183 | ||
2010
|
$ | 3,650 | ||
2011
|
$ | 2,374 | ||
2012
|
$ | 1,630 | ||
2013
|
$ | 1,373 |
Future amortization expense may fluctuate depending on changes
in foreign currency rates. The estimates for amortization
expense noted above are based upon foreign exchange rates as of
December 31, 2008.
NOTE 5
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At December 31, 2008 and 2007, accounts payable and accrued
liabilities consisted of the following:
2008 | 2007 | |||||||||||
Accounts payable, principally trade
|
$ | 133,575 | $ | 156,376 | ||||||||
Accrued employee compensation costs
|
78,502 | 83,231 | ||||||||||
Unearned income
|
30,251 | 24,029 | ||||||||||
Other accrued liabilities
|
68,080 | 85,394 | ||||||||||
Total
|
$ | 310,408 | $ | 349,030 | ||||||||
NOTE 6
INCOME TAXES
Income from continuing operations before income taxes consists
of:
Years Ended December 31, | 2008 | 2007 | 2006 | |||||||||
United States
|
$ | 21,771 | $ | 16,505 | $ | 21,846 | ||||||
International
|
199,197 | 183,490 | 126,460 | |||||||||
Total
|
$ | 220,968 | $ | 199,995 | $ | 148,306 | ||||||
The provision for income taxes from continuing operations is
comprised of:
Years Ended December 31, | 2008 | 2007 | 2006 | |||||||||
Current:
|
||||||||||||
U.S. Federal
|
$ | 11,520 | $ | 12,737 | $ | 16,612 | ||||||
State/Local
|
569 | 459 | 1,618 | |||||||||
International
|
56,710 | 59,075 | 37,322 | |||||||||
$ | 68,799 | $ | 72,271 | $ | 55,552 | |||||||
Deferred:
|
||||||||||||
U.S. Federal/State
|
$ | (8 | ) | $ | (5,110 | ) | $ | (9,870 | ) | |||
International
|
(1,318 | ) | (6,673 | ) | (272 | ) | ||||||
$ | (1,326 | ) | $ | (11,783 | ) | $ | (10,142 | ) | ||||
Total
|
$ | 67,473 | $ | 60,488 | $ | 45,410 | ||||||
The gain on the sale of the discontinued operations resulted in
additional tax expense of $1,714 in 2007.
34 /ATR
2008
Form 10-K
Table of Contents
The difference between the actual income tax provision and the
tax provision computed by applying the statutory federal income
tax rate of 35.0% in 2008, 2007 and 2006 to income before income
taxes is as follows:
Years Ended December 31, | 2008 | 2007 | 2006 | |||||||||
Income tax at statutory rate
|
$ | 77,339 | $ | 69,998 | $ | 51,907 | ||||||
State income taxes, net of federal benefit
|
499 | 189 | 947 | |||||||||
Research & development credits
|
(5,863 | ) | (3,193 | ) | (2,837 | ) | ||||||
Provision for distribution of foreign earnings
|
3,953 | 3,524 | 1,551 | |||||||||
German tax rate reduction
|
| (2,250 | ) | | ||||||||
German unremitted earnings tax credit
|
| | (1,584 | ) | ||||||||
Italian government special election
|
| (1,025 | ) | | ||||||||
Rate differential on earnings of foreign operations
|
(9,259 | ) | (6,046 | ) | (3,718 | ) | ||||||
Other items, net
|
804 | (709 | ) | (856 | ) | |||||||
Actual income tax provision
|
$ | 67,473 | $ | 60,488 | $ | 45,410 | ||||||
Effective income tax rate
|
30.5% | 30.2 | % | 30.6 | % |
The tax provision for 2008 reflects the benefits from tax
changes that became effective in the current year related to an
expanded R&D credit in France and lower tax rates in
Germany and Italy. These benefits helped to offset the
additional cost from increased repatriation to the US during
2008.
The tax provision for 2007 included a benefit of
$2.3 million from a reduction in the corporate tax rates in
Germany. The tax benefits reflected are attributable to the
revaluation of the deferred tax assets and liabilities using the
new rates as of December 31, 2007. The $1.0 million
reduction from Italy was due to a special election in connection
with the enactment of lower corporate tax rates, effective in
2008. The affect of the special election increased current
taxes by $0.6 million, which was offset by a reduction of
previously recorded deferred tax liabilities by
$1.6 million.
The tax provision for 2006 included a benefit of
$1.6 million from a change in German tax law as to the
manner in which corporations receive refunds that exist from the
corporate tax system that was in force in Germany until 2001.
The refund is payable over a 10 year period beginning in
2008 and is shown at the appropriate discounted amount.
Significant deferred tax assets and liabilities as of
December 31, 2008 and 2007 are comprised of the following
temporary differences:
2008 | 2007 | ||||||||
Deferred Tax Assets:
|
|||||||||
Pension liabilities
|
$ | 12,976 | $ | 6,218 | |||||
Stock options
|
7,094 | 4,033 | |||||||
Inventory
|
5,861 | 6,487 | |||||||
Vacation
|
3,633 | 3,505 | |||||||
Workers compensation
|
3,036 | 2,984 | |||||||
Net operating loss carryforwards
|
3,021 | 3,468 | |||||||
Allowance for doubtful accounts
|
2,307 | 2,024 | |||||||
Accruals
|
1,371 | 1,590 | |||||||
Foreign tax credit carryforwards
|
1,127 | 2,360 | |||||||
Other
|
578 | 574 | |||||||
Total gross deferred tax assets
|
41,004 | 33,243 | |||||||
Less valuation allowance
|
(2,903 | ) | (4,396 | ) | |||||
Net deferred tax assets
|
38,101 | 28,847 | |||||||
Deferred Tax Liabilities:
|
|||||||||
Depreciation and amortization
|
36,132 | 32,490 | |||||||
Leases
|
8,422 | 8,443 | |||||||
Undistributed earnings of foreign subsidiaries
|
| 2,200 | |||||||
Other
|
| 769 | |||||||
Total gross deferred tax liabilities
|
44,554 | 43,902 | |||||||
Net deferred tax liabilities
|
$ | 6,453 | $ | 15,055 | |||||
Gross deferred tax assets for tax loss carryforwards decreased
from $3.4 million at December 31, 2007 to
$3.0 million at December 31, 2008. Assets of
$1.2 million related to losses in non-US jurisdictions were
realized in 2008, offset by an increase of $0.6 million for
losses in non-US jurisdictions and $0.2 million of US state
losses. A portion of the non-US losses expire in the
35 /ATR
2008
Form 10-K
Table of Contents
years 2013 2016. The US state losses expire in the
years 2016 2024. Management does not believe the
benefit of the non-US losses ($0.4 million) nor the benefit
of the US state losses ($1.4 million) will be realized.
US foreign tax credit carryforwards decreased from
$2.4 million at December 31, 2007 to $1.1 million
at December 31, 2008. The Company was able to utilize a
portion of the carryforwards due to increased repatriation to
the US. The remaining credits begin to expire in 2014.
Management believes the Company will not be able to realize the
benefits of these deferred tax assets.
The Company has established a valuation allowance for the
deferred tax assets related primarily to the US state tax losses
and foreign tax credit carryforwards not expected to be
realized. The valuation allowance decreased from
$4.4 million at December 31, 2007 to $2.9 million
at December 31, 2008, reflecting the utilization of non-US
tax losses and US foreign tax credits not previously expected to
be realized.
No provision for taxes on the cumulative earnings of non-US
subsidiaries that have been permanently reinvested has been
made. These earnings relate to ongoing operations and, at
December 31, 2008, were approximately $726 million.
Deferred taxes are provided for earnings of non-US subsidiaries
when we plan to remit those earnings to the US.
The Company has not provided for taxes on certain tax-deferred
income of a foreign operation. The income arose predominately
from government grants. Taxes of approximately
$2.5 million would become payable in the event the income
was distributed.
INCOME TAX
UNCERTAINTIES
In accordance with the provisions of FASB Interpretation
No. 48, Accounting for Uncertainty in Income
Taxes, the Company provides a liability for the amount of
tax benefits realized from uncertain tax positions. A
reconciliation of the beginning and ending amount of income tax
uncertainties is as follows:
2008 | 2007 | |||||||
Balance at January 1
|
$ | 6,492 | $ | 7,000 | ||||
Increases based on tax positions for the current year
|
$ | 1,352 | $ | 1,115 | ||||
Increases based on tax positions for prior years
|
4,362 | 533 | ||||||
Decreases based on tax positions for prior years
|
(1,085 | ) | (182 | ) | ||||
Settlements
|
(24 | ) | (682 | ) | ||||
Lapse of statute of limitations
|
$ | (1,436 | ) | $ | (1,292 | ) | ||
Balance at December 31
|
$ | 9,661 | $ | 6,492 | ||||
The amount of income tax uncertainties that, if recognized,
would impact the effective tax rate is $8.9 million. For
the next twelve months, the Company does not anticipate any
material changes in its liability for income tax uncertainties.
The Company recognizes interest and penalties accrued related to
unrecognized tax benefits as a component of income taxes.
During 2008, the Company recognized $0.2 million in
interest and penalties. The Company had approximately
$1.4 million and $1.2 million accrued for the payment
of interest and penalties as of December 31, 2008 and 2007,
respectively.
The Company or its subsidiaries file income tax returns in the
U.S. Federal jurisdiction and various state and foreign
jurisdictions. The major tax jurisdictions the Company files
in, with the years still subject to income tax examinations, are
listed below:
Tax Years |
||||
Major Tax |
Subject to |
|||
Jurisdiction
|
Examination | |||
United States Federal
|
2005 2008 | |||
United States States
|
2004 2008 | |||
France
|
2006 2008 | |||
Germany
|
2006 2008 | |||
Italy
|
2004 2008 | |||
Switzerland
|
1997 2008 |
NOTE 7
DEBT
Average borrowings under unsecured lines of credit were
$156.3 million and $145.0 million for 2008 and 2007,
respectively, and the average annual interest rate on short-term
notes payable, which is included in the notes payable caption
under current liabilities of the balance sheet was approximately
3.6% for 2008 and 5.5% for 2007. There are no compensating
balance requirements associated with short-term borrowings. In
July of 2006, the Company entered into an amended five-year
$200 million revolving credit facility. Under this credit
agreement, interest on borrowings is payable at a rate equal to
London Interbank Offered Rates (LIBOR) plus an
amount based on the financial condition of the Company. The
Company is required to pay a fee for this commitment.
Commitment or facility fee payments in 2008, 2007 and 2006 were
not significant. The amounts borrowed under this agreement were
$25.0 million and $150.0 million at December 31,
2008 and 2007, respectively.
The revolving credit and the senior unsecured debt agreements
contain covenants, with which the Company is in compliance, that
include certain financial tests.
36 /ATR
2008
Form 10-K
Table of Contents
At December 31, the Companys long-term obligations
consisted of the following:
2008 | 2007 | ||||||||
Notes payable 0.5% 15.5%, due in monthly and annual
installments through 2015
|
$ | 4,787 | $ | 6,035 | |||||
Senior unsecured notes 6.6%, due in installments through
2011
|
65,268 | 86,596 | |||||||
Senior unsecured notes 5.1%, due in 2011
|
25,000 | 25,000 | |||||||
Senior unsecured notes 5.4% due in 2013
|
25,000 | | |||||||
Senior unsecured notes 6.0% due in 2016
|
50,000 | 50,000 | |||||||
Senior unsecured notes 6.0% due in 2018
|
75,000 | | |||||||
Mortgage payable at 2.1%, due in monthly and annual installments
through 2008
|
| 122 | |||||||
Capital lease obligations
|
6,533 | 4,941 | |||||||
251,588 | 172,694 | ||||||||
Current maturities of long-term obligations
|
(24,700 | ) | (25,983 | ) | |||||
Total long-term obligations
|
$ | 226,888 | $ | 146,711 | |||||
Based on the borrowing rates currently available to the Company
for long-term obligations with similar terms and average
maturities, the fair value of the Companys long-term
obligations approximates its book value.
Aggregate long-term maturities, excluding capital lease
obligations, which is discussed in Note 8, due annually for
the five years and thereafter beginning in 2009 are $23,901,
$22,171, $48,046, $346, $25,348 and $125,242 thereafter.
NOTE 8 LEASE
COMMITMENTS
The Company leases certain warehouse, plant, and office
facilities as well as certain equipment under noncancelable
operating and capital leases expiring at various dates through
the year 2018. Most of the operating leases contain renewal
options and certain leases include options to purchase during or
at the end of the lease term. In 2008, the Company purchased a
building that was under a lease expiring 2008 for
$9.5 million. This amount is approximately the amount
expended by the lessor for the purchase of the building and
improvements, which was the fair value of the facility at the
inception of the lease. The Company accounted for the purchase
transaction as a capital expenditure in 2008.
Amortization expense related to capital leases is included in
depreciation expense. Rent expense under operating leases
(including taxes, insurance and maintenance when included in the
rent) amounted to $24,382 $22,595 and $19,889 in 2008, 2007 and
2006, respectively.
Assets recorded under capital leases consist of:
2008 | 2007 | ||||||||
Buildings
|
$ | 22,393 | $ | 17,880 | |||||
Machinery and equipment
|
12,750 | 13,049 | |||||||
35,143 | 30,929 | ||||||||
Accumulated depreciation
|
(19,613 | ) | (17,147 | ) | |||||
$ | 15,530 | $ | 13,782 | ||||||
Future minimum payments, by year and in the aggregate, under the
capital leases and noncancelable operating leases with initial
or remaining terms of one year or more consisted of the
following at December 31, 2008:
Capital |
Operating |
|||||||||||
Leases | Leases | |||||||||||
2009
|
$ | 1,186 | $ | 14,997 | ||||||||
2010
|
1,402 | 11,461 | ||||||||||
2011
|
1,340 | 8,749 | ||||||||||
2012
|
991 | 5,808 | ||||||||||
2013
|
572 | 3,148 | ||||||||||
Subsequent to 2013
|
2,972 | 2,947 | ||||||||||
Total minimum lease payments
|
8,463 | $ | 47,110 | |||||||||
Amounts representing interest
|
(1,930 | ) | ||||||||||
Present value of future minimum lease payments
|
6,533 | |||||||||||
Lease amount due in one year
|
(799 | ) | ||||||||||
Total
|
$ | 5,734 | ||||||||||
37 /ATR
2008
Form 10-K
Table of Contents
NOTE 9
RETIREMENT AND DEFERRED COMPENSATION PLANS
The Company has various noncontributory retirement plans
covering certain of its domestic and foreign employees. Benefits
under the Companys retirement plans are based on
participants years of service and annual compensation as
defined by each plan. Annual cash contributions to fund pension
costs accrued under the Companys domestic plans are
generally at least equal to the minimum funding amounts required
by the Employee Retirement Income Security Act of 1974, as
amended (ERISA). Certain pension commitments under its foreign
plans are also funded according to local requirements or at the
Companys discretion.
In accordance with SFAS No. 158 Employers
Accounting for Defined Benefit Pension and Other Postretirement
Plans, an amendment of FASB Statements No. 87, 88, 106 and
132R (SFAS 158), which became effective
in the fourth quarter of 2006, AptarGroup is required to
recognize the over funded or unfunded status of our defined
benefit pension plans as an asset or liability on our balance
sheet as of December 31, 2008 and 2007.
In 2008, new regulations in France raised the pension benefits
of certain French employees under collective bargaining
agreements. The impact of these regulations increased the
benefit obligation of our foreign plans and is reflected as a
plan amendment.
The following table presents the changes in the benefit
obligations and plan assets for the most recent two years for
the Companys domestic and foreign plans.
Domestic Plans | Foreign Plans | ||||||||||||||||
2008 | 2007 | 2008 | 2007 | ||||||||||||||
Change in benefit obligation:
|
|||||||||||||||||
Benefit obligation at beginning of year
|
$ | 55,017 | $ | 51,405 | $ | 40,735 | $ | 36,107 | |||||||||
Service cost
|
4,098 | 3,879 | 1,644 | 1,584 | |||||||||||||
Interest cost
|
3,514 | 2,985 | 2,174 | 1,681 | |||||||||||||
Prior service cost
|
| | 112 | | |||||||||||||
Plan amendments
|
| | 5,183 | | |||||||||||||
Actuarial loss/(gain)
|
3,586 | (2,167 | ) | (3,128 | ) | (707 | ) | ||||||||||
Benefits paid
|
(1,261 | ) | (1,085 | ) | (1,224 | ) | (1,169 | ) | |||||||||
Foreign currency translation adjustment
|
| | (1,680 | ) | 3,239 | ||||||||||||
Benefit obligation at end of year
|
$ | 64,954 | $ | 55,017 | $ | 43,816 | $ | 40,735 | |||||||||
Domestic Plans | Foreign Plans | ||||||||||||||||
2008 | 2007 | 2008 | 2007 | ||||||||||||||
Change in plan assets:
|
|||||||||||||||||
Fair value of plan assets at beginning of year
|
$ | 46,116 | $ | 42,553 | $ | 14,495 | $ | 11,819 | |||||||||
Actual return on plan assets
|
(11,152 | ) | 2,648 | (1,331 | ) | 532 | |||||||||||
Employer contribution
|
3,250 | 2,000 | 5,388 | 1,975 | |||||||||||||
Benefits paid
|
(1,261 | ) | (1,085 | ) | (1,224 | ) | (1,169 | ) | |||||||||
Foreign currency translation adjustment
|
| | (768 | ) | 1,338 | ||||||||||||
Fair value of plan assets at end of year
|
$ | 36,953 | $ | 46,116 | $ | 16,560 | $ | 14,495 | |||||||||
Funded status at end of year
|
$ | (28,001 | ) | $ | (8,901 | ) | $ | (27,256 | ) | $ | (26,240 | ) |
The following table presents the funded status amounts
recognized in the Companys Consolidated Balance Sheet as
of December 31, 2008 and 2007.
Domestic Plans | Foreign Plans | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Non-current assets
|
$ | | $ | | $ | 690 | $ | 510 | ||||||||
Current liabilities
|
(291 | ) | (90 | ) | (557 | ) | (581 | ) | ||||||||
Non-current liabilities
|
(27,710 | ) | (8,811 | ) | (27,389 | ) | (26,169 | ) | ||||||||
$ | (28,001 | ) | $ | (8,901 | ) | $ | (27,256 | ) | $ | (26,240 | ) | |||||
38 /ATR
2008
Form 10-K
Table of Contents
The following table presents the amounts not recognized as
components of periodic benefit cost that are recognized in
accumulated other comprehensive loss as of December 31,
2008 and 2007.
Domestic Plans | Foreign Plans | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Net actuarial loss
|
$ | 18,535 | $ | 772 | $ | 6,347 | $ | 8,125 | ||||||||
Net prior service cost
|
21 | 26 | 5,787 | 759 | ||||||||||||
Tax effects
|
(6,958 | ) | (299 | ) | (3,831 | ) | (2,646 | ) | ||||||||
$ | 11,598 | $ | 499 | $ | 8,303 | $ | 6,238 | |||||||||
Changes in benefit obligations and plan assets recognized in
other comprehensive income in 2008 are as follows:
Domestic Plans | Foreign Plans | |||||||
Current year actuarial loss/(gain)
|
$ | 17,844 | $ | (956 | ) | |||
Amortization of (gain)
|
(81 | ) | (748 | ) | ||||
Current year prior service cost related to plan amendment
|
| 5,033 | ||||||
Amortization of prior service cost
|
(4 | ) | (79 | ) | ||||
$ | 17,759 | $ | 3,250 | |||||
The following table presents the amounts in accumulated other
comprehensive loss as of December 31, 2008 expected to be
recognized as components of periodic benefit cost in 2009.
Domestic Plans | Foreign Plans | |||||||
Amortization of net loss
|
$ | 239 | $ | 626 | ||||
Amortization of prior service cost
|
4 | 356 | ||||||
$ | 243 | $ | 982 | |||||
Components of net
periodic benefit cost:
Domestic Plans | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Service cost
|
$ | 4,098 | $ | 3,879 | $ | 3,949 | ||||||
Interest cost
|
3,514 | 2,985 | 2,642 | |||||||||
Expected return on plan assets
|
(3,107 | ) | (2,726 | ) | (2,416 | ) | ||||||
Amortization of net loss
|
81 | 218 | 605 | |||||||||
Amortization of prior service cost
|
4 | 4 | 4 | |||||||||
Net periodic benefit cost
|
$ | 4,590 | $ | 4,360 | $ | 4,784 | ||||||
Foreign Plans | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Service cost
|
$ | 1,644 | $ | 1,584 | $ | 1,373 | ||||||
Interest cost
|
2,174 | 1,681 | 1,367 | |||||||||
Expected return on plan assets
|
(830 | ) | (727 | ) | (581 | ) | ||||||
Amortization of net loss
|
748 | 513 | 601 | |||||||||
Amortization of prior service cost
|
79 | 74 | 77 | |||||||||
Net periodic benefit cost
|
$ | 3,815 | $ | 3,125 | $ | 2,837 | ||||||
The accumulated benefit obligation (ABO) for the
Companys domestic defined benefit pension plans was
$56.6 million and $47.4 million at December 31,
2008 and 2007, respectively. The accumulated benefit obligation
for the Companys foreign defined benefit pension plans was
$36.9 million and $34.5 million at December 31,
2008 and 2007, respectively.
39 /ATR
2008
Form 10-K
Table of Contents
The following table provides the projected benefit obligation
(PBO), ABO, and fair value of plan assets for all
pension plans with an ABO in excess of plan assets as of
December 31, 2008 and 2007.
Domestic Plans | Foreign Plans | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Projected benefit obligation
|
$ | 64,954 | $ | 2,452 | $ | 41,959 | $ | 29,172 | ||||||||
Accumulated benefit obligation
|
56,601 | 1,792 | 35,283 | 26,478 | ||||||||||||
Fair value of plan assets
|
36,953 | | 14,848 | 5,451 |
The following table provides the PBO, ABO, and fair value of
plan assets for all pension plans with a PBO in excess of plan
assets as of December 31, 2008 and 2007.
Domestic Plans | Foreign Plans | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Projected benefit obligation
|
$ | 64,954 | $ | 55,017 | $ | 42,885 | $ | 39,853 | ||||||||
Accumulated benefit obligation
|
56,601 | 47,377 | 36,083 | 33,782 | ||||||||||||
Fair value of plan assets
|
36,953 | 46,116 | 14,940 | 13,103 |
Assumptions:
Domestic Plans | Foreign Plans | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Weighted-average assumptions used to determine benefit
obligations at December 31:
|
||||||||||||||||
Discount rate
|
6.00% | 6.40% | 5.60% | 5.25% | ||||||||||||
Rate of compensation increase
|
4.00% | 4.50% | 3.00% | 3.00% | ||||||||||||
Weighted-average assumptions used to determine net periodic
benefit cost for years ended December 31:
|
||||||||||||||||
Discount rate
|
6.40% | 5.80% | 5.25% | 4.40% | ||||||||||||
Expected long-term return in plan assets
|
7.00% | 7.00% | 6.00% | 6.00% | ||||||||||||
Rate of compensation increase
|
4.50% | 4.50% | 3.00% | 3.00% |
The Company develops the expected long-term rate of return
assumptions based on historical experience and by evaluating
input from the plans asset managers, including the
managers review of asset class return expectations and
benchmarks, economic indicators and long-term inflation
assumptions.
In order to determine the 2009 net periodic benefit cost, the
Company expects to use the December 31, 2008 discount
rates, rates of compensation increase assumptions and the
expected long-term returns on domestic and foreign plan assets
used in 2008.
The Companys domestic and foreign pension plan
weighted-average asset allocations at December 31, 2008 and
2007 by asset category are as follows:
Plan
Assets:
Domestic Plans Assets |
Foreign Plans Assets |
||||||||||||||||
at December 31, | at December 31, | ||||||||||||||||
2008 | 2007 | 2008 | 2007 | ||||||||||||||
Equity securities
|
54% | 65% | 30% | 39% | |||||||||||||
Fixed income securities
|
28% | 21% | 60% | 54% | |||||||||||||
Infrastructure
|
14% | 11% | | | |||||||||||||
Money market
|
4% | 3% | | | |||||||||||||
Real estate
|
| | 10% | 7% | |||||||||||||
Total
|
100% | 100% | 100% | 100% | |||||||||||||
The Companys investment strategy for its domestic and
foreign pension plans is to maximize the long-term rate of
return on plan assets within an acceptable level of risk. The
investment policy strives to have assets sufficiently
diversified so that adverse or unexpected results from one
security type will not have an unduly detrimental impact on the
entire portfolio and accordingly, establishes a target
allocation for each asset category within the portfolio. The
domestic plan asset allocation is
40 /ATR
2008
Form 10-K
Table of Contents
reviewed on a quarterly basis and the foreign plan asset
allocation is reviewed annually. Rebalancing occurs as needed
to comply with the investment strategy. The domestic plan
target allocation for 2009 is 60% equity securities and 40%
fixed income securities and infrastructure. The foreign plan
target allocation for 2009 is 43% equity securities, 48% fixed
income securities and 8% real estate.
CONTRIBUTIONS
Annual cash contributions to fund pension costs accrued under
the Companys domestic plans are generally at least equal
to the minimum funding amounts required by ERISA. The Company
contributed $3.3 million to its domestic defined benefit
plans in 2008 and expects to contribute approximately
$10 million in 2009. Contributions to fund pension costs
accrued under the Companys foreign plans are made in
accordance with local laws or at the Companys discretion.
The Company contributed approximately $5.4 million to its
foreign defined benefit plan in 2008 and expects to contribute
approximately $10 million in 2009.
ESTIMATED FUTURE
BENEFIT PAYMENTS
As of December 31, 2008, the Company expects the plans to
make the following estimated benefit payments relating to its
defined benefit plans over the next ten years:
Domestic Plans | Foreign Plans | |||||||
2009
|
$ | 3,533 | $ | 1,677 | ||||
2010
|
3,893 | 1,736 | ||||||
2011
|
3,732 | 2,056 | ||||||
2012
|
4,845 | 2,223 | ||||||
2013
|
5,337 | 2,346 | ||||||
2014 2018
|
31,481 | 17,251 |
OTHER
PLANS
The Company has a non-qualified supplemental pension plan for
domestic employees which provides for pension amounts that would
have been payable from the Companys principal domestic
pension plan if it were not for limitations imposed by income
tax regulations. The liability for this plan, which is not
funded, was $3.2 million and $2.5 million at
December 31, 2008 and 2007, respectively. This amount is
included in the liability for domestic plans shown above.
The Company has a defined contribution 401(k) employee savings
plan available to substantially all domestic employees. Company
matching contributions are made in cash up to a maximum of 3% of
the participating employees salary subject to income tax
regulations. For each of the years ended December 31,
2008, 2007, and 2006, total contributions made by the Company
for these plans were approximately $2.2 million,
$1.9 million and $1.6 million, respectively.
The Company has several foreign defined contribution plans,
which require the Company to contribute a percentage of the
participating employees salary according to local
regulations. For each of the years ended December 31,
2008, 2007, and 2006, total contributions made by the Company
for these plans were approximately $1.8 million,
$2.4 million and $1.3 million, respectively.
The Company has no additional postretirement or postemployment
benefit plans.
NOTE 10
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company maintains a foreign exchange risk management policy
designed to establish a framework to protect the value of the
Companys non-functional denominated transactions from
adverse changes in exchange rates. Sales of the Companys
products can be denominated in a currency different from the
currency in which the related costs to produce the product are
denominated. Changes in exchange rates on such inter-country
sales impact the Companys results of operations. The
Companys policy is not to engage in speculative foreign
currency hedging activities, but to minimize its net foreign
currency transaction exposure defined as firm commitments and
transactions recorded and denominated in currencies other than
the functional currency. The Company may use foreign currency
forward exchange contracts, options and cross currency swaps to
hedge these risks.
The Company maintains an interest rate risk management strategy
to minimize significant, unanticipated earnings fluctuations
that may arise from volatility in interest rates.
For derivative instruments designated as hedges, the Company
formally documents the nature and relationships between the
hedging instruments and the hedged items, as well as the risk
management objectives, strategies for undertaking the various
hedge transactions, and the method of assessing hedge
effectiveness. Additionally, in order to designate any
derivative instrument as a hedge of an anticipated transaction,
the significant characteristics and expected terms of any
anticipated transaction must be specifically identified, and it
must be probable that the anticipated transaction will occur.
FAIR VALUE
HEDGES
The Company has an interest rate swap to convert a portion of
its fixed-rate debt into variable-rate debt. Under the interest
rate swap contract, the Company exchanges, at specified
intervals, the difference between fixed-rate and floating-rate
amounts, which are calculated based on an agreed upon notional
amount.
41 /ATR
2008
Form 10-K
Table of Contents
As of December 31, 2008, the Company has recorded the fair
value of derivative instruments of $1.1 million in
miscellaneous other assets with an offsetting adjustment to debt
related to a fixed-to-variable interest rate swap agreement with
a notional principal value of $15 million. No gain or loss
was recorded in the income statement in 2008, 2007 or 2006 as
any hedge ineffectiveness for the periods was immaterial.
CASH FLOW
HEDGES
As of December 31, 2008, the Company had one foreign
currency cash flow hedge. A French entity of AptarGroup,
AptarGroup Holding SAS, has hedged the risk of variability in
Euro equivalent associated with the cash flows of an
intercompany loan granted in Brazilian Real. The forward
contracts utilized were designated as a hedge of the changes in
the cash flows relating to the changes in foreign currency rates
relating to the loan and related forecasted interest. The
notional amount of the foreign currency forward contracts
utilized to hedge cash flow exposure was 5.5 million
Brazilian Real ($2.4 million) as of December 31,
2008. The notional amount of the foreign currency forward
contracts utilized to hedge cash flow exposure was
6.7 million Brazilian Real ($3.8 million) as of
December 31, 2007. These foreign currency forward
contracts hedge forecasted transactions for approximately three
years (March 2012).
During the year ended December 31, 2008, the Company did
not recognize any net gain (loss) as any hedge ineffectiveness
for the period was immaterial, and the Company did not recognize
any net gain (loss) related to the portion of the hedging
instrument excluded from the assessment of hedge effectiveness.
HEDGE OF NET
INVESTMENTS IN FOREIGN OPERATIONS
A significant number of the Companys operations are
located outside of the United States. Because of this,
movements in exchange rates may have a significant impact on the
translation of the financial condition and results of operations
of the Companys foreign entities. A strengthening
U.S. dollar relative to foreign currencies has a dilutive
translation effect on the Companys financial condition and
results of operations. Conversely, a weakening U.S. dollar
has an additive effect. The Company in some cases maintains
debt in these subsidiaries to offset the net asset exposure.
The Company does not otherwise actively manage this risk using
derivative financial instruments. In the event the Company
plans on a full or partial liquidation of any of its foreign
subsidiaries where the Companys net investment is likely
to be monetized, the Company will consider hedging the currency
exposure associated with such a transaction.
OTHER
As of December 31, 2008, the Company has recorded the fair
value of foreign currency forward exchange contracts of
$11 million in prepaid expenses and other current assets,
$255 thousand in accounts payable and accrued liabilities and
$940 thousand in deferred and other non-current liabilities in
the balance sheet. All forward exchange contracts outstanding
as of December 31, 2008 had an aggregate contract amount of
$207.4 million.
NOTE 11
COMMITMENTS AND CONTINGENCIES
The Company, in the normal course of business, is subject to a
number of lawsuits and claims both actual and potential in
nature. Management believes the resolution of these claims and
lawsuits will not have a material adverse or positive effect on
the Companys financial position, results of operations or
cash flows.
Under its Certificate of Incorporation, the Company has agreed
to indemnify its officers and directors for certain events or
occurrences while the officer or director is, or was serving, at
its request in such capacity. The maximum potential amount of
future payments the Company could be required to make under
these indemnification agreements is unlimited; however, the
Company has a directors and officers liability insurance policy
that covers a portion of its exposure. As a result of its
insurance policy coverage, the Company believes the estimated
fair value of these indemnification agreements is minimal. The
Company has no liabilities recorded for these agreements as of
December 31, 2008.
NOTE 12
PREFERRED STOCK PURCHASE RIGHTS
The Company has a preferred stock purchase rights plan (the
Rights Plan) and each share of common stock has
one-half of a preferred share purchase right (a
Right). Under the terms of the Rights Plan, if a
person or group acquires 15% or more of the outstanding common
stock, each Right will entitle its holder (other than such
person or members of such group) to purchase, at the
Rights then current exercise price, a number of shares of
the Companys common stock having a market value of twice
such price. In addition, under certain circumstances if the
Company is acquired in a merger or other business combination
transaction, each Right will entitle its holder to purchase, at
the Rights then current exercise price, a number of the
acquiring companys common shares having a market value of
twice such price.
Each Right entitles the holder under certain circumstances to
buy one one-thousandth of a share of Series B junior
participating preferred stock, par value $.01 per share, at an
exercise price of $150. Each share of Series B junior
participating preferred stock will entitle its holder to 2,000
votes and will have a minimum preferential quarterly dividend
payment equal to the greater of $1 per share or 2,000 times the
amount paid to holders of common stock. Currently,
99,000 shares of Series B junior participating
preferred stock have been reserved. The Rights will expire on
April 7, 2013, unless previously exercised or redeemed at
the option of the Board of Directors for $.01 per Right.
42 /ATR
2008
Form 10-K
Table of Contents
NOTE 13
STOCK REPURCHASE PROGRAM
The Company repurchased 1.4 million and 2.1 million
shares of its outstanding common stock in 2008 and 2007,
respectively, at a total cost of $57.6 million and
$76.4 million in 2008 and 2007, respectively. Shares
repurchased are returned to Treasury Stock. The Company has a
remaining authorization at December 31, 2008 to repurchase
4.5 million additional shares. The timing of and total
amount expended for the share repurchase program will depend
upon market conditions.
NOTE 14
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income consists of treasury
locks, foreign currency translation adjustments, net gain (loss)
on derivatives and minimum pension liability adjustments. The
following table summarized our accumulated other comprehensive
income activity for the years ended December 31, 2008, 2007
and 2006:
Foreign |
Accumulated |
|||||||||||||||
Currency |
Net Gain/ |
Other |
||||||||||||||
Translation |
(Loss) on |
Other |
Comprehensive |
|||||||||||||
Adjustments | Derivatives | Adjustments | Income | |||||||||||||
(1) | (2) | (3) | ||||||||||||||
Balance December 31, 2005
|
$ | 28,606 | $ | | $ | (4,317 | ) | $ | 24,289 | |||||||
Period change
|
88,678 | (28 | ) | (3,434 | ) | 85,216 | ||||||||||
Balance December 31, 2006
|
117,284 | $ | (28 | ) | (7,751 | ) | 109,505 | |||||||||
Period change
|
103,757 | 18 | 1,014 | 104,789 | ||||||||||||
Balance December 31, 2007
|
221,041 | (10 | ) | (6,737 | ) | 214,294 | ||||||||||
Period change
|
(61,250 | ) | 15 | (13,759 | ) | (74,994 | ) | |||||||||
Balance December 31, 2008
|
$ | 159,791 | $ | 5 | $ | (20,496 | ) | $ | 139,300 | |||||||
(1) | Income taxes are generally not provided for foreign currency translation adjustments. | |
(2) | Amount includes a reduction of deferred income tax assets by $5 and $6 for the net gain on derivatives at December 31, 2008 and 2007, respectively, and an increase in deferred income tax assets by $9 related to the net loss on derivatives at December 31, 2006. | |
(3) | Amounts include the effects of deferred income tax assets provided for minimum pension liability adjustments at December 31, 2008, 2007 and 2006 of $10,789, $2,945 and $4,638, respectively, and treasury locks of $595 at December 31, 2008. |
NOTE 15
STOCK-BASED COMPENSATION
The Company issues stock options and restricted stock units to
employees under Stock Awards Plans approved by shareholders.
Stock options are issued to non-employee directors for their
services as directors under Director Stock Option Plans approved
by shareholders. Options are awarded with the exercise price
equal to the market price on the date of grant and generally
become exercisable over three years and expire 10 years
after grant. Restricted stock units generally vest over three
years.
Compensation expense recorded attributable to stock options for
the year ended December 31, 2008 was approximately
$11.1 million ($8.0 million after tax), or $0.12 per
share basic and $0.11 per share diluted. The income tax benefit
related to this compensation expense was approximately
$3.1 million. Approximately $10.0 million of the
compensation expense was recorded in selling,
research & development and administrative expenses and
the balance was recorded in cost of sales. Compensation expense
recorded attributable to stock options for the year ended
December 31, 2007 was approximately $14.0 million
($10.5 million after tax), or $0.15 per share basic and
diluted. The income tax benefit related to this compensation
expense was approximately $3.5 million. Approximately
$13.1 million of the compensation expense was recorded in
selling, research & development and administrative
expenses and the balance was recorded in cost of sales.
Compensation expense recorded attributable to stock options for
the year ended December 31, 2006 was approximately
$13.3 million ($8.7 million after tax), or $0.12 per
share basic and diluted. The income tax benefit related to this
compensation expense was approximately $4.6 million.
Approximately $12.4 million of the compensation expense was
recorded in selling, research & development and
administrative expenses and the balance was recorded in cost of
sales.
The Company uses historical data to estimate expected life and
volatility. The weighted-average fair value of stock options
granted under the Stock Awards Plans was $10.02, $9.32 and $8.05
per share in 2008, 2007 and 2006, respectively. These
43 /ATR
2008
Form 10-K
Table of Contents
values were estimated on the respective dates of grant using the
Black-Scholes option-pricing model with the following
weighted-average assumptions:
Stock Awards Plans: |
||||||||||||
Years Ended December 31, | 2008 | 2007 | 2006 | |||||||||
Dividend Yield
|
1.4% | 1.4% | 1.6% | |||||||||
Expected Stock Price Volatility
|
22.4% | 24.6% | 24.8% | |||||||||
Risk-free Interest Rate
|
3.7% | 4.8% | 4.3% | |||||||||
Expected Life of Option (years)
|
6.9 | 7.0 | 7.0 |
The fair value of stock options granted under the Director Stock
Option Plan was $12.08. There were no stock options granted
under the Director Stock Option Plans in 2007. These values
were estimated on the respective date of the grant using the
Black-Scholes option-pricing model with the following
weighted-average assumptions:
Director Stock Option Plans: |
||||||||||||
Years Ended December 31, | 2008 | 2007 | 2006 | |||||||||
Dividend Yield
|
1.3% | | 1.5% | |||||||||
Expected Stock Price Volatility
|
22.3% | | 24.8% | |||||||||
Risk-free Interest Rate
|
3.8% | | 5.1% | |||||||||
Expected Life of Option (years)
|
6.9 | | 7.0 |
A summary of option activity under the Companys stock
option plans as of December 31, 2008, and changes during
the period then ended is presented below:
Stock Awards Plans | Director Stock Option Plans | |||||||||||||||
Weighted Average |
Weighted Average |
|||||||||||||||
Shares | Exercise Price | Shares | Exercise Price | |||||||||||||
Outstanding, January 1, 2008
|
7,405,338 | $ | 21.34 | 153,000 | $ | 22.70 | ||||||||||
Granted
|
1,252,000 | 37.52 | 4,000 | 44.16 | ||||||||||||
Exercised
|
(843,985 | ) | 15.49 | | | |||||||||||
Forfeited or expired
|
(69,526 | ) | 30.37 | | | |||||||||||
Outstanding at December 31, 2008
|
7,743,827 | $ | 24.51 | 157,000 | $ | 23.25 | ||||||||||
Exercisable at December 31, 2008
|
5,318,752 | $ | 20.43 | 157,000 | $ | 23.25 | ||||||||||
Weighted-Average Remaining
Contractual Term (Years): |
||||||||||||||||
Outstanding at December 31, 2008
|
6.1 | 5.1 | ||||||||||||||
Exercisable at December 31, 2008
|
5.0 | 5.1 | ||||||||||||||
Aggregate Intrinsic Value ($000):
|
||||||||||||||||
Outstanding at December 31, 2008
|
$ | 85,880 | $ | 1,918 | ||||||||||||
Exercisable at December 31, 2008
|
$ | 78,797 | $ | 1,918 | ||||||||||||
Intrinsic Value of Options Exercised
($000) During the Years Ended: |
||||||||||||||||
December 31, 2008
|
$ | 21,645 | $ | | ||||||||||||
December 31, 2007
|
$ | 26,028 | $ | 1,262 | ||||||||||||
December 31, 2006
|
$ | 18,972 | $ | 54 |
The fair value of shares vested during the years ended
December 31, 2008, 2007 and 2006 was $10.4 million,
$9.5 million and $8.3 million, respectively. Cash
received from option exercises was approximately
$13.9 million and the tax deduction from option exercises
was approximately $5.2 million in the year ended
December 31, 2008. As of December 31, 2008, the
remaining valuation of stock option awards to be expensed in
future periods was $6.1 million and the related
weighted-average period over which it is expected to be
recognized is 1.4 years.
44 /ATR
2008
Form 10-K
Table of Contents
The fair value of restricted stock grants is the market price of
the underlying shares on the grant date. A summary of
restricted stock unit activity as of December 31, 2008, and
changes during the period then ended is presented below:
Weighted-Average |
||||||||
Shares | Grant-Date Fair Value | |||||||
Nonvested at January 1, 2008
|
21,098 | $ | 29.36 | |||||
Granted
|
9,824 | 34.44 | ||||||
Vested
|
(9,183 | ) | 28.48 | |||||
Nonvested at December 31, 2008
|
21,739 | $ | 32.03 | |||||
Compensation expense recorded attributable to restricted stock
unit grants for the years ended December 31, 2008, 2007 and
2006 was approximately $378 thousand, $449 thousand and $388
thousand, respectively. The fair value of units vested during
the years ended December 31, 2008, 2007 and 2006 was $262
thousand, $212 thousand and $421 thousand, respectively. The
intrinsic value of units vested during the years ended
December 31, 2008, 2007 and 2006 was $324 thousand, $290
thousand and $384 thousand, respectively. As of
December 31, 2008, there was $33 thousand of total
unrecognized compensation cost relating to restricted stock unit
awards which is expected to be recognized over a weighted
average period of one year.
NOTE 16
EARNINGS PER SHARE
The reconciliation of basic and diluted earnings per share for
the years ended December 31, 2008, 2007 and 2006 are as
follows:
2008 | 2007 | 2006 | ||||||||||
Basic earnings per share computation
|
||||||||||||
Numerator:
|
||||||||||||
Income from continuing operations
|
$ | 153,495 | $ | 139,507 | $ | 102,896 | ||||||
Income from discontinued operations, net of tax
|
| 2,232 | | |||||||||
Net Income
|
$ | 153,495 | $ | 141,739 | $ | 102,896 | ||||||
Denominator:
|
||||||||||||
Basic shares outstanding
|
67,851 | 68,769 | 69,654 | |||||||||
Basic earnings per share from continuing operations
|
$ | 2.26 | $ | 2.03 | $ | 1.48 | ||||||
Basic earnings per share from discontinued operations
|
| 0.03 | | |||||||||
Basic net earnings per share
|
$ | 2.26 | $ | 2.06 | $ | 1.48 | ||||||
Diluted earnings per share computation
|
||||||||||||
Numerator:
|
||||||||||||
Income from continuing operations
|
$ | 153,495 | $ | 139,507 | $ | 102,896 | ||||||
Income from discontinued operations, net of tax
|
| 2,232 | | |||||||||
Net Income
|
$ | 153,495 | $ | 141,739 | $ | 102,896 | ||||||
Denominator:
|
||||||||||||
Basic shares outstanding
|
67,851 | 68,769 | 69,654 | |||||||||
Effect of Dilutive Securities
|
||||||||||||
Stock options
|
2,657 | 2,741 | 2,082 | |||||||||
Restricted stock
|
10 | 13 | 8 | |||||||||
Diluted shares outstanding
|
70,518 | 71,523 | 71,744 | |||||||||
Diluted earnings per share from continuing operations
|
$ | 2.18 | $ | 1.95 | $ | 1.43 | ||||||
Diluted earnings per share from discontinued operations
|
| 0.03 | | |||||||||
Diluted net earnings per share
|
$ | 2.18 | $ | 1.98 | $ | 1.43 | ||||||
45 /ATR
2008
Form 10-K
Table of Contents
NOTE 17
SEGMENT INFORMATION
The Company operates in the packaging components industry, which
includes the development, manufacture and sale of consumer
product dispensing systems. Operations that sell spray and
lotion dispensing systems primarily to the personal care,
fragrance/cosmetic and household markets form the
Beauty & Home segment. Operations that sell
dispensing systems to the pharmaceutical market form the Pharma
segment. Operations that sell closures to each market served by
AptarGroup form the Closures segment.
The accounting policies of the segments are the same as those
described in Note 1, Summary of Significant Accounting
Policies. The Company evaluates performance of its business
segments and allocates resources based upon earnings before
interest expense in excess of interest income, stock option and
corporate expenses and income taxes (collectively referred to as
Segment Income). These measures should not be
considered in isolation or as a substitute for net income, net
cash provided by operating activities or other income statement
or cash flow statement data prepared in accordance with GAAP or
as measures of profitability or liquidity. In addition, these
measures, as we determine them, may not be comparable to related
or similarly titled measures reported by other companies. The
Company accounts for intersegment sales and transfers as if the
sales or transfers were to third parties.
46 /ATR
2008
Form 10-K
Table of Contents
Financial information regarding the Companys reportable
segments is shown below:
Years Ended December 31, | 2008 | 2007 | 2006 | |||||||||
Total Sales:
|
||||||||||||
Beauty & Home
|
$ | 1,086,413 | $ | 1,015,694 | $ | 849,736 | ||||||
Closures
|
542,711 | 495,028 | 442,321 | |||||||||
Pharma
|
458,009 | 394,320 | 323,647 | |||||||||
Other
|
322 | 1,534 | 1,397 | |||||||||
Total Sales
|
$ | 2,087,455 | $ | 1,906,576 | $ | 1,617,101 | ||||||
Less: Intersegment Sales:
|
||||||||||||
Beauty & Home
|
$ | 13,935 | $ | 10,476 | $ | 12,643 | ||||||
Closures
|
966 | 2,028 | 1,118 | |||||||||
Pharma
|
553 | 452 | 1,044 | |||||||||
Other
|
316 | 1,453 | 911 | |||||||||
Total Intersegment Sales
|
$ | 15,770 | $ | 14,409 | $ | 15,716 | ||||||
Net Sales:
|
||||||||||||
Beauty & Home
|
$ | 1,072,478 | $ | 1,005,218 | $ | 837,093 | ||||||
Closures
|
541,745 | 493,000 | 441,203 | |||||||||
Pharma
|
457,456 | 393,868 | 322,603 | |||||||||
Other
|
6 | 81 | 486 | |||||||||
Net Sales
|
$ | 2,071,685 | $ | 1,892,167 | $ | 1,601,385 | ||||||
Segment Income:
|
||||||||||||
Beauty & Home
|
$ | 91,516 | $ | 99,553 | $ | 72,396 | ||||||
Closures
|
45,327 | 50,036 | 44,031 | |||||||||
Pharma
|
127,089 | 106,161 | 80,841 | |||||||||
Corporate and Other (1)
|
(37,397 | ) | (45,181 | ) | (36,191 | ) | ||||||
Income from continuing operations before interest and taxes
|
$ | 226,535 | $ | 210,569 | $ | 161,077 | ||||||
Interest expense, net
|
(5,567 | ) | (10,574 | ) | (12,771 | ) | ||||||
Income from continuing operations before income taxes
|
$ | 220,968 | $ | 199,995 | $ | 148,306 | ||||||
Depreciation and Amortization:
|
||||||||||||
Beauty & Home
|
$ | 76,117 | $ | 71,752 | $ | 65,584 | ||||||
Closures
|
30,696 | 29,341 | 26,101 | |||||||||
Pharma
|
22,231 | 20,894 | 19,083 | |||||||||
Other
|
2,101 | 1,479 | 3,838 | |||||||||
Depreciation and Amortization
|
$ | 131,145 | $ | 123,466 | $ | 114,606 | ||||||
Capital Expenditures:
|
||||||||||||
Beauty & Home
|
$ | 87,191 | $ | 63,089 | $ | 64,087 | ||||||
Closures
|
37,766 | 37,114 | 24,389 | |||||||||
Pharma
|
46,729 | 27,748 | 15,819 | |||||||||
Other
|
31,914 | 9,993 | 3,368 | |||||||||
Capital Expenditures
|
$ | 203,600 | $ | 137,944 | $ | 107,663 | ||||||
Total Assets:
|
||||||||||||
Beauty & Home
|
$ | 946,592 | $ | 993,703 | $ | 907,601 | ||||||
Closures
|
354,357 | 352,573 | 302,407 | |||||||||
Pharma
|
318,863 | 289,785 | 249,302 | |||||||||
Other
|
212,010 | 275,889 | 132,702 | |||||||||
Total Assets
|
$ | 1,831,822 | $ | 1,911,950 | $ | 1,592,012 |
(1) | Corporate Expenses & Other includes $11.1 million, $14.0 million, and $13.3 million related to stock option expenses for the twelve months ended December 31, 2008, 2007, and 2006 respectively. |
47 /ATR
2008
Form 10-K
Table of Contents
GEOGRAPHIC
INFORMATION
The following are net sales and long-lived asset information by
geographic area and product information for the years ended
December 31, 2008, 2007 and 2006:
2008 | 2007 | 2006 | ||||||||||
Net Sales to Unaffiliated Customers (2):
|
||||||||||||
United States
|
$ | 531,054 | $ | 498,231 | $ | 470,405 | ||||||
Europe:
|
||||||||||||
France
|
615,470 | 536,694 | 446,053 | |||||||||
Germany
|
284,043 | 265,246 | 226,985 | |||||||||
Italy
|
156,704 | 157,791 | 124,267 | |||||||||
Other Europe
|
232,450 | 220,712 | 177,662 | |||||||||
Total Europe
|
1,288,667 | 1,180,443 | 974,967 | |||||||||
Other Foreign Countries
|
251,964 | 213,493 | 156,013 | |||||||||
Total
|
$ | 2,071,685 | $ | 1,892,167 | $ | 1,601,385 | ||||||
Long-Lived Assets:
|
||||||||||||
United States
|
$ | 258,283 | $ | 225,074 | $ | 221,484 | ||||||
Europe:
|
||||||||||||
France
|
291,078 | 262,109 | 229,803 | |||||||||
Germany
|
168,729 | 168,096 | 147,990 | |||||||||
Italy
|
90,389 | 99,581 | 92,198 | |||||||||
Other Europe
|
98,794 | 89,118 | 80,399 | |||||||||
Total Europe
|
648,990 | 618,904 | 550,390 | |||||||||
Other Foreign Countries
|
60,661 | 61,971 | 56,088 | |||||||||
Total
|
$ | 967,934 | $ | 905,949 | $ | 827,962 | ||||||
Product Net Sales Information:
|
||||||||||||
Pumps
|
$ | 998,913 | $ | 948,855 | $ | 804,636 | ||||||
Closures
|
499,434 | 455,650 | 411,543 | |||||||||
Valves
|
309,034 | 281,831 | 221,909 | |||||||||
Other
|
264,304 | 205,831 | 163,297 | |||||||||
Total
|
$ | 2,071,685 | $ | 1,892,167 | $ | 1,601,385 | ||||||
(2) | Sales are attributed to countries based upon where the sales invoice to unaffiliated customers is generated. |
No single customer represents 10% or more of the Companys
net sales in 2008, 2007 or 2006.
NOTE 18
ACQUISITIONS
At the end of March 2008, the Company acquired 70% of the
outstanding shares of Next Breath LLC (Next Breath)
for approximately $4.1 million in cash. No debt was
assumed in the transaction. Next Breath, located in Baltimore,
Maryland, is a contract service organization specializing in
analytical testing of nasal and inhalation products on behalf of
pharmaceutical, biotech, drug delivery and device companies.
Next Breaths annual sales are approximately
$2.0 million. The excess purchase price over the fair
value of assets acquired and liabilities assumed was allocated
to Goodwill. Goodwill of approximately $3.7 million was
recorded on the transaction. Next Breath is included in the
Pharma reporting segment.
In April 2008, the Company acquired the equipment, inventory and
intellectual property of CCL Industries
bag-on-valve
business (CCLBOV) for approximately
$9.3 million in cash. No debt was assumed in the
transaction. CCLBOVs annual revenues are approximately
$9.0 million. The excess purchase price over the fair
value of assets acquired was allocated to Goodwill. Goodwill of
approximately $3.4 million was recorded on the
transaction. CCLBOV was located in Canada but the assets
purchased were transferred to existing AptarGroup facilities in
the U.S. before the end of the second quarter. CCLBOV is
included in the Beauty and Home reporting segment.
During the fourth quarter of 2008, the Company purchased the
remaining 50% that it did not already own of Seaplast S.A. for
approximately $6.3 million in cash. Seaplast S.A. is
located in Spain and primarily produces dispensing closures.
The consolidated statement of income includes Seaplast
S.A.s results of operations from October 29, 2008,
the date of the acquisition. Prior to this date, 50% of
Seaplast S.A.s results were included in equity and results
from affiliates. Goodwill of approximately $2.6 million
was recorded on the transaction. Seaplast S.A. is included in
the Closures reporting segment.
During the first quarter of 2007, the Company acquired Moderne
Verpackungssysteme GmbH (MVS) for approximately
$5.2 million in cash. No debt was assumed in the
transaction. MVS, located in Germany, is a supplier of
bag-on-valve
48 /ATR
2008
Form 10-K
Table of Contents
assembled products. The excess of the purchase price over the
fair value of assets acquired and liabilities assumed was
allocated to Goodwill. Goodwill of approximately
$3.5 million was recorded on the acquisition. The
condensed consolidated statement of income includes MVS
results of operations from February 15, 2007, the date of
the acquisition and the acquisition is included in the Beauty
and Home reporting segment.
During the first quarter of 2006, the Company acquired the net
assets of CCL Dispensing Systems, LLC (CCLDS) for
approximately $21.3 million in cash. No debt was assumed
in the transaction. CCLDS is located in Libertyville, Illinois
and produces primarily dispensing closures. The excess of the
purchase price over the fair value of assets acquired and
liabilities assumed was allocated to Goodwill. Goodwill of
approximately $9.5 million was recorded on the acquisition
and is deductible for tax purposes. CCLDS annual revenues
are approximately $18 million. The consolidated statements
of income include CCLDS results of operations from
February 6, 2006, the date of the acquisition.
During the third quarter of 2006, the Company acquired the net
assets of Augros do Brasil Ltda. (Augros) for
approximately $5.3 million in cash. Approximately
$1.8 million of debt was assumed in the transaction.
Augros is located in Brazil and is involved in injection molding
and decorating (including serigraphy and hot stamping) of
plastic components primarily for the fragrance and cosmetics
market. The excess of the purchase price over the fair value of
assets acquired and liabilities assumed was allocated to
Goodwill. Goodwill of approximately $2.4 million was
recorded on the acquisition. Augros annual revenues were
approximately $11 million. The condensed consolidated
statements of income include Augros results of operations
from July 28, 2006, the date of the acquisition.
During the third quarter of 2006, the Company also acquired the
remaining 65% that it did not already own of Seaquist Engelmann
S.A.I.C.F. e I. (Engelmann) for $7.5 million in
cash. No debt was assumed in the transaction. Engelmann is
located in Argentina and produces primarily dispensing
closures. The excess of the purchase price over the fair value
of assets acquired and liabilities assumed was allocated to
Goodwill. Goodwill of approximately $3.3 million was
recorded on the acquisition. Engelmann annual revenues were
approximately $8 million. The consolidated statements of
income include Engelmanns results of operations from
August 30, 2006, the date of the acquisition.
During the fourth quarter of 2006, the Company acquired the
remaining 40% of a consolidated subsidiary, Graphocolor SA
(Graphocolor), it did not previously own for
approximately $4.5 million. Graphocolor is located in
France and performs stamping and anodizing of metal components
used in some dispensing pumps for the fragrance/cosmetic and
pharmaceutical markets. No goodwill was recorded in the
transaction as the purchase price was less than the fair value
of assets acquired and liabilities assumed.
The aggregate value of the acquisitions during each year is
immaterial for pro forma disclosure.
49 /ATR
2008
Form 10-K
Table of Contents
NOTE 19
QUARTERLY DATA (UNAUDITED)
Quarterly results of operations and per share information for
the years ended December 31, 2008 and 2007 are as follows:
Quarter |
Total |
|||||||||||||||||||
First | Second | Third | Fourth | for Year | ||||||||||||||||
Year Ended December 31, 2008:
|
||||||||||||||||||||
Net sales
|
$ | 532,258 | $ | 551,319 | $ | 532,180 | $ | 455,928 | $ | 2,071,685 | ||||||||||
Gross profit (1)
|
137,751 | 145,305 | 134,305 | 118,164 | 535,525 | |||||||||||||||
Net Income
|
36,901 | 45,273 | 39,651 | 31,670 | 153,495 | |||||||||||||||
Per Common Share 2008:
|
||||||||||||||||||||
Net income
|
||||||||||||||||||||
Basic
|
$ | .54 | $ | .67 | $ | .59 | $ | .47 | $ | 2.26 | ||||||||||
Diluted
|
.52 | .64 | .57 | .46 | 2.18 | |||||||||||||||
Dividends declared
|
.13 | .13 | .15 | .15 | .56 | |||||||||||||||
Stock price high (2)
|
42.72 | 46.19 | 44.03 | 39.75 | 46.19 | |||||||||||||||
Stock price low (2)
|
32.87 | 38.98 | 30.70 | 23.74 | 23.74 | |||||||||||||||
Average number of shares outstanding:
|
||||||||||||||||||||
Basic
|
68,168 | 68,038 | 67,670 | 67,535 | 67,851 | |||||||||||||||
Diluted
|
71,072 | 70,563 | 69,937 | 69,225 | 70,518 | |||||||||||||||
Year Ended December 31, 2007:
|
||||||||||||||||||||
Net sales
|
$ | 449,841 | $ | 472,876 | $ | 485,692 | $ | 483,758 | $ | 1,892,167 | ||||||||||
Gross profit (1)
|
121,418 | 124,451 | 124,339 | 119,240 | 489,448 | |||||||||||||||
Income from continuing operations
|
29,580 | 36,968 | 39,395 | 33,564 | 139,507 | |||||||||||||||
Income from discontinued operations net of tax
|
| | | 2,232 | 2,232 | |||||||||||||||
Net Income
|
29,580 | 36,968 | 39,395 | 35,796 | 141,739 | |||||||||||||||
Per Common Share 2007:
|
||||||||||||||||||||
Net income
|
||||||||||||||||||||
Basic
|
||||||||||||||||||||
Continuing Operations
|
$ | .43 | $ | .54 | $ | .58 | $ | .49 | $ | 2.03 | ||||||||||
Discontinued Operations
|
| | | .03 | .03 | |||||||||||||||
Basic
|
.43 | .54 | .58 | .52 | 2.06 | |||||||||||||||
Diluted
|
||||||||||||||||||||
Continuing Operations
|
.41 | .52 | .56 | .47 | 1.95 | |||||||||||||||
Discontinued Operations
|
| | | .03 | .03 | |||||||||||||||
Diluted
|
.41 | .52 | .56 | .50 | 1.98 | |||||||||||||||
Dividends declared
|
.11 | .13 | .13 | .13 | .50 | |||||||||||||||
Stock price high (2)
|
35.17 | 38.49 | 40.09 | 44.75 | 44.75 | |||||||||||||||
Stock price low (2)
|
28.73 | 33.34 | 33.37 | 37.75 | 28.73 | |||||||||||||||
Average number of shares outstanding:
|
||||||||||||||||||||
Basic
|
69,188 | 69,037 | 68,488 | 68,376 | 68,769 | |||||||||||||||
Diluted
|
71,824 | 71,443 | 70,909 | 70,983 | 71,523 |
(1) | Gross profit is defined as net sales less cost of sales and depreciation. | |
(2) | The stock price high and low amounts are based upon intra-day New York Stock Exchange composite price history. |
NOTE 20
FAIR VALUE
In September 2006, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards SFAS No. 157, Fair Value
Measurements, which defines fair value, establishes a
framework for measuring fair value, and expands disclosures
about fair value measurements. The provisions of
SFAS No. 157 are effective as of the beginning of our
2008 fiscal year. However, the FASB deferred the effective date
of SFAS No. 157, until the beginning of our 2009
fiscal year, as it relates to fair value measurement
requirements for nonfinancial assets and liabilities that are
not remeasured at fair value on a recurring basis. These
nonfinancial assets and liabilities include goodwill, other
nonamortizable intangible assets and unallocated purchase price
for recent acquisitions which are included within other assets.
We partially adopted SFAS No. 157 as it relates to
financial assets and liabilities at the beginning of our 2008
fiscal year and our adoption did not have a material impact on
our financial statements.
50 /ATR
2008
Form 10-K
Table of Contents
The fair value framework requires the categorization of assets
and liabilities into three levels based upon the assumptions
(inputs) used to price the assets or liabilities. Level 1
provides the most reliable measure of fair value, whereas
Level 3 generally requires significant management judgment.
The three levels are defined as follows:
| Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities. | |
| Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. | |
| Level 3: Unobservable inputs reflecting managements own assumptions about the inputs used in pricing the asset or liability. |
As of December 31, 2008, the fair values of our financial
assets and liabilities were categorized as follows:
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets
|
||||||||||||||||
Interest rate swap (a)
|
$ | 1,068 | $ | | $ | 1,068 | $ | | ||||||||
Forward exchange contracts (b)
|
10,865 | | 10,865 | | ||||||||||||
Total assets at fair value
|
$ | 11,933 | $ | | $ | 11,933 | $ | | ||||||||
Liabilities
|
||||||||||||||||
Forward exchange contracts (b)
|
$ | 1,195 | $ | | $ | 1,195 | $ | | ||||||||
Total liabilities at fair value
|
$ | 1,195 | $ | | $ | 1,195 | $ | | ||||||||
(a) | Based on third party quotation from financial institution and managements evaluation of the quotation | |
(b) | Based on observable market transactions of spot and forward rates |
51 /ATR
2008
Form 10-K
Table of Contents
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of AptarGroup, Inc.:
In our opinion, the consolidated financial statements listed in
the index appearing under Item 15(a)(1) present fairly, in
all material respects, the financial position of AptarGroup,
Inc. and its subsidiaries at December 31, 2008 and
December 31, 2007, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 2008 in conformity with accounting principles
generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule
listed in the index appearing under Item 15(a)(2) presents
fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated
financial statements. Also in our opinion, the Company
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2008, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in Managements Report
on Internal Control over Financial Reporting, under
Item 9A. Our responsibility is to express opinions on
these financial statements, on the financial statement schedule,
and on the Companys internal control over financial
reporting based on our integrated audits. We conducted our
audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of
material misstatement and whether effective internal control
over financial reporting was maintained in all material
respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
As discussed in Note 6, to the consolidated financial
statements, the Company changed the manner in which it accounts
for uncertain tax positions in 2007.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
February 27, 2009
52 /ATR
2008
Form 10-K
Table of Contents
ITEM 9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS
AND PROCEDURES
DISCLOSURE
CONTROLS AND PROCEDURES
The Companys management has evaluated, with the
participation of the chief executive officer and chief financial
officer of the Company, the effectiveness of the Companys
disclosure controls and procedures (as such term is defined in
Rule 13a-15(e)
under the Securities Exchange Act of 1934) as of
December 31, 2008. Based on that evaluation, the chief
executive officer and chief financial officer have concluded
that these controls and procedures were effective as of such
date.
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in
Rule 13a-15(f)
under the Securities Exchange Act of 1934. Because of its
inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. The Companys
management has evaluated, with the participation of the chief
executive officer and chief financial officer of the Company,
the effectiveness of our internal control over financial
reporting as of December 31, 2008 based on the framework in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on that evaluation under the framework in
Internal Control Integrated Framework,
management has concluded that our internal control over
financial reporting was effective as of December 31, 2008.
PricewaterhouseCoopers LLP, independent registered public
accounting firm, has issued an attestation report on the
effectiveness of our internal control over financial reporting.
This report appears on page 52.
CHANGES IN
INTERNAL CONTROL OVER FINANCIAL REPORTING
No change in the Companys internal control over financial
reporting (as such term is defined in
Rule 13a-15(f)
under the Securities Exchange Act of 1934) occurred during
the Companys fiscal quarter ended December 31, 2008
that materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial
reporting.
ITEM 9B. OTHER
INFORMATION
None.
PART III
Certain information required to be furnished in this part of the
Form 10-K
has been omitted because the Company will file with the
Securities and Exchange Commission a definitive proxy statement
pursuant to Regulation 14A under the Securities Exchange
Act of 1934 no later than April 30, 2009.
ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to directors may be found under the
caption Proposal 1 Election of
Directors in the Companys Proxy Statement for the
Annual Meeting of Stockholders to be held on May 6, 2009
(the 2009 Proxy Statement) and is incorporated
herein by reference.
Information with respect to executive officers may be found
under the caption Executive Officers in Part I
of this report and is incorporated herein by reference.
Information with respect to audit committee members and audit
committee financial experts may be found under the caption
Corporate Governance Audit Committee in
the 2009 Proxy Statement and is incorporated herein by reference.
Information with respect to the Companys Code of Business
Conduct and Ethics may be found under the caption
Corporate Governance Code of Business Conduct
and Ethics in the 2009 Proxy Statement and is incorporated
herein by reference. Our Code of Business Conduct and Ethics is
available through the Corporate Governance link on the Investor
Relations page of our website (www.aptargroup.com).
The information set forth under the heading
Section 16(a) Beneficial Ownership Reporting
Compliance in the 2009 Proxy Statement is incorporated
herein by reference.
53 /ATR
2008
Form 10-K
Table of Contents
ITEM 11. EXECUTIVE
COMPENSATION
The information set forth under the headings Board
Compensation, Executive Officer Compensation
and Compensation Committee Report in the 2009 Proxy
Statement is incorporated herein by reference. The information
included under the heading Compensation Committee
Report in the 2009 Proxy Statement shall not be deemed to
be soliciting material or to be filed
with the Securities and Exchange Commission or subject to
Regulation 14A or 14C, or to the liabilities of
Section 18 of the Securities Exchange Act of 1934, as
amended.
ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information set forth under the heading Security
Ownership of Certain Beneficial Owners, Directors and
Management and Equity Compensation Plan
Information in the 2009 Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
AND DIRECTOR INDEPENDENCE
The information set forth under the heading Transactions
with Related Persons and Corporate
Governance Independence of Directors in the
2009 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES
Information with respect to the independent registered public
accounting firm fees and services may be found under the caption
Proposal 2 Ratification of the
Appointment of the Independent Registered Public Accounting
Firm in the 2009 Proxy Statement. Such information is
incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as a part of this
report:
Description | ||||||||
1 | ) | All Financial Statements | ||||||
The financial statements are set forth under Item 8 of this report on Form 10-K | ||||||||
Consolidated Statements of Income | 26 | |||||||
Consolidated Balance Sheets | 27 | |||||||
Consolidated Statements of Cash Flows | 29 | |||||||
Consolidated Statements of Changes in Equity | 30 | |||||||
Notes to Consolidated Financial Statements | 31 | |||||||
Report of Independent Registered Public Accounting Firm | 51 | |||||||
2 | ) | II Valuation and Qualifying Accounts | 56 | |||||
All other schedules have been omitted because they are not applicable or not required |
(b) | Exhibits required by Item 601 of Regulation S-K are incorporated by reference to the Exhibit Index on pages 57-59 of this report. |
54 /ATR
2008
Form 10-K
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15
(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized in the City of Crystal
Lake, State of Illinois on this 27th day of February 2009.
AptarGroup, Inc.
(Registrant)
By |
/s/ Robert
W. Kuhn
|
Robert W. Kuhn
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant in the capacities and on the date
indicated.
Signature | Title | Date | ||||
/s/ King
Harris King Harris |
Chairman of the Board and Director | February 27, 2009 | ||||
/s/ Peter
Pfeiffer Peter Pfeiffer |
President and Chief Executive Officer and Director (Principal Executive Officer) | February 27, 2009 | ||||
/s/
Stephen J. Hagge Stephen J. Hagge |
Executive Vice President, Chief Operating Officer, and Director | February 27, 2009 | ||||
/s/ Robert
W. Kuhn Robert W. Kuhn |
Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) |
February 27, 2009 | ||||
/s/ Stefan
A. Baustert Stefan A. Baustert |
Director | February 27, 2009 | ||||
/s/ Alain
Chevassus Alain Chevassus |
Director | February 27, 2009 | ||||
/s/ Rodney
L. Goldstein Rodney L. Goldstein |
Director | February 27, 2009 | ||||
/s/ Ralph
Gruska Ralph Gruska |
Director | February 27, 2009 | ||||
/s/ Leo
A. Guthart Leo A. Guthart |
Director | February 27, 2009 | ||||
/s/ Carl
A. Siebel Carl A. Siebel |
Director | February 27, 2009 | ||||
/s/ Dr. Joanne
C. Smith Dr. Joanne C. Smith |
Director | February 27, 2009 |
55 /ATR
2008
Form 10-K
Table of Contents
AptarGroup,
Inc.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2008, 2007 and 2006
Dollars in thousands | ||||||||||||||||||||
Balance at |
Charged to |
Additions to/ |
Balance |
|||||||||||||||||
Beginning |
Costs and |
(Deductions) from |
at End of |
|||||||||||||||||
of Period | Expenses | Acquisitions | Reserve (a) | Period | ||||||||||||||||
2008
|
||||||||||||||||||||
Allowance for doubtful accounts
|
$ | 11,139 | $ | 3,063 | $ | | $ | (2,302 | ) | $ | 11,900 | |||||||||
Inventory obsolescence reserve
|
27,079 | 5,880 | | (6,177 | ) | 26,782 | ||||||||||||||
Deferred tax valuation allowance
|
4,396 | | | (1,493 | ) | 2,903 | ||||||||||||||
2007
|
||||||||||||||||||||
Allowance for doubtful accounts
|
$ | 10,963 | $ | 1,970 | $ | | $ | (1,794 | ) | $ | 11,139 | |||||||||
Inventory obsolescence reserve
|
24,104 | 5,912 | | (2,937 | ) | 27,079 | ||||||||||||||
Deferred tax valuation allowance
|
3,282 | 1,114 | | | 4,396 | |||||||||||||||
2006
|
||||||||||||||||||||
Allowance for doubtful accounts
|
$ | 10,356 | $ | 1,893 | $ | 70 | $ | (1,356 | ) | $ | 10,963 | |||||||||
Inventory obsolescence reserve
|
19,456 | 4,592 | 66 | (10 | ) | 24,104 | ||||||||||||||
Deferred tax valuation allowance
|
1,864 | 751 | | 667 | 3,282 |
(a) | Write-off accounts considered uncollectible, net of recoveries and foreign currency transaction adjustments. |
56 /ATR
2008
Form 10-K
Table of Contents
(a) INDEX TO
EXHIBITS
Exhibit |
||
Number | Description | |
3(i)
|
Amended and Restated Certificate of Incorporation of AptarGroup, Inc., as amended, filed as Exhibit 4(a) to AptarGroup Inc.s Registration Statement on Form S-8, Registration Number 333-152525, filed on July 25, 2008 (the Form S-8), is hereby incorporated by reference. | |
3(ii)
|
Amended and Restated By-Laws of the Company, filed as Exhibit 3(ii) to the Companys Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 1-11846), is hereby incorporated by reference. | |
4.1
|
Rights Agreement dated as of April 7, 2003 between the Company and National City Bank, as rights agent, which includes the Form of Rights Certificate as Exhibit B, filed as Exhibit 1 to the Companys Registration Statement on Form 8-A filed on April 7, 2003 (File No. 1-11846), is hereby incorporated by reference. | |
4.2
|
Certificate of Designation to the Series B Junior Participating Preferred Stock of the Company, dated April 7, 2003, filed as Exhibit 2 of the Companys Registration Statement on Form 8-A filed on April 7, 2003 (File No. 1-11846), is hereby incorporated by reference. | |
The Company hereby agrees to provide the Commission, upon request, copies of instruments defining the rights of holders of long-term debt of the Registrant and its subsidiaries as are specified by item 601(b)(4)(iii)(A) of Regulation S-K. | ||
4.3
|
Note Purchase Agreement dated as of May 15, 1999 relating to $107 million senior unsecured notes, series 1999-A, filed as Exhibit 4.1 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-11846), is hereby incorporated by reference. | |
4.4
|
Amended and Restated Multicurrency Credit Agreement dated as of July 31, 2006 among AptarGroup, Inc., and AptarGroup Holding SAS, as borrowers, the lenders from time to time party thereto, Bank of America, N.A. as Administrative Agent, Banc of America Securities LLC as Sole Lead Arranger and Banc of America Securities LLC and JP Morgan Securities Inc. as Joint Bookrunners, filed as Exhibit 4.1 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2006 (File No. 1-11846), is hereby incorporated by reference. | |
4.5
|
Note Purchase Agreement dated as of July 31, 2006, among AptarGroup, Inc. and the purchasers listed on Schedule A thereto, filed as Exhibit 4.2 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2006 (File No. 1-11846), is hereby incorporated by reference. | |
4.6
|
Form of AptarGroup, Inc. 6.04% Series 2006-A Senior Notes Due July 31, 2016, filed as Exhibit 4.3 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2006 (File No. 1-11846), is hereby incorporated by reference. | |
4.7
|
Note Purchase Agreement dated as of July 31, 2008, among AptarGroup, Inc. and the purchasers listed on Schedule A thereto, filed as Exhibit 4.1 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference. | |
4.8
|
Form of AptarGroup, Inc. 5.41% Series 2008-A-1 Senior Notes Due July 31, 2013, filed as Exhibit 4.2 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference. | |
4.9
|
Form of AptarGroup, Inc. 6.03% Series 2008-A-2 Senior Notes Due July 31, 2018, filed as Exhibit 4.2 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference. | |
10.1
|
AptarGroup, Inc. 1996 Stock Awards Plan, filed as Appendix A to the Companys Proxy Statement, dated April 10, 1996 (File No. 1-11846), is hereby incorporated by reference.** | |
10.2
|
AptarGroup, Inc. 1996 Director Stock Option Plan, filed as Appendix B to the Companys Proxy Statement, dated April 10, 1996 (File No. 1-11846), is hereby incorporated by reference.** | |
10.3
|
AptarGroup, Inc. 2000 Stock Awards Plan, filed as Appendix A to the Companys Proxy Statement, dated April 6, 2000 (File No. 1-11846), is hereby incorporated by reference.** | |
10.4
|
AptarGroup, Inc. 2000 Director Stock Option Plan, filed as Appendix B to the Companys Proxy Statement, dated April 6, 2000 (File No. 1-11846), is hereby incorporated by reference.** | |
10.5
|
AptarGroup, Inc. 2004 Stock Awards Plan, filed as Appendix A to the Companys Proxy Statement, dated March 26, 2004 (File No. 1-11846), is hereby incorporated by reference.** | |
10.6
|
AptarGroup, Inc. 2004 Director Stock Option Plan, filed as Appendix B to the Companys Proxy Statement, dated March 26, 2004 (File No. 1-11846), is hereby incorporated by reference.** | |
10.7
|
AptarGroup, Inc., Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2004 Stock Awards Plan, filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-11846), is hereby incorporated by reference.** |
57 /ATR
2008
Form 10-K
Table of Contents
Exhibit |
||
Number | Description | |
10.8
|
AptarGroup, Inc. Stock Option Agreement for Non-Employee Directors pursuant to the AptarGroup, Inc. 2004 Director Option Plan, filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-11846), is hereby incorporated by reference.** | |
10.9
|
AptarGroup, Inc. Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2000 Stock Awards Plan, filed as Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-11846), is hereby incorporated by reference.** | |
10.10
|
AptarGroup, Inc. Restricted Stock Unit Award Agreement pursuant to the AptarGroup, Inc. 2000 Stock Awards Plan, filed as Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-11846), is hereby incorporated by reference.** | |
10.11
|
Supplementary Pension Plan France dated August 24, 2001, filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (File No. 1-11846), is hereby incorporated by reference.** | |
10.12
|
AptarGroup, Inc. Supplemental Retirement Plan dated October 6, 2008, filed as Exhibit 10.1 to the Companys quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-11846), is hereby incorporated by reference.** | |
10.13
|
Employment Agreement dated October 17, 2007 of Peter Pfeiffer, filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on October 17, 2007 (File No. 1-11846), is hereby incorporated by reference.** | |
10.14
|
German Employment Agreement dated October 17, 2007 of Peter Pfeiffer, filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed on October 17, 2007 (File No. 1-11846), is hereby incorporated by reference.** | |
10.15
|
Service Agreement dated April 30, 1981, of Carl A. Siebel, and related pension plan, filed as Exhibit 10.5 to the Companys Registration Statement on Form S-1, Registration Number 33-58132, filed February 10, 1993, is hereby incorporated by reference.** | |
10.16
|
First supplement dated 1989 pertaining to the pension plan between Perfect-Valois Ventil GmbH and Carl A. Siebel, filed as Exhibit 10.7 to the Companys Annual Report on Form 10-K for the year ended December 31, 1993 (file No. 1-11846), is hereby incorporated by reference.** | |
10.17
|
Second supplement dated December 19, 1994 pertaining to the pension plan between Perfect-Valois Ventil GmbH and Carl A. Siebel, filed as Exhibit 10.11 of the Companys Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-11846), is hereby incorporated by reference.** | |
10.18
|
Supplement to the Pension Scheme Arrangement dated October 17, 2007 pertaining to the pension plan between a subsidiary of AptarGroup, Inc. and Peter Pfeiffer, filed as Exhibit 10.3 to the Companys Current Report on Form 8-K filed on October 17, 2007 (File No. 1-11846), is hereby incorporated by reference.** | |
10.19
|
Consulting Agreement between AptarGroup, Inc. and Carl Siebel Consulting GmbH dated October 17, 2007, filed as Exhibit 10.4 to the Companys Current Report on Form 8-K filed on October 17, 2007 (File No. 1-11846), is hereby incorporated by reference.** | |
10.20
|
Indemnification Agreement dated January 1, 1996 of King Harris, filed as Exhibit 10.25 to the Companys quarterly report on Form 10-Q for the quarter ended March 31, 2001 (File No. 1-11846), is hereby incorporated by reference.** | |
10.21
|
Employment Agreement dated July 18, 2008 of Stephen J. Hagge, filed as Exhibit 10.7 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.** | |
10.22
|
Employment Agreement dated July 18, 2008 of Eric Ruskoski, filed as Exhibit 10.8 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.** | |
10.23
|
Employment Agreement dated January 18, 2008 of Olivier Fourment filed as Exhibit 10.9 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.**. | |
10.24
|
Employment Agreement dated January 18, 2008 of Olivier de Pous filed as Exhibit 10.10 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.**. | |
10.25
|
Severance Agreement dated July 18, 2008 of Robert Kuhn filed as Exhibit 10.2 to the Companys quarterly report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-11846), is hereby incorporated by reference.**. | |
10.26
|
AptarGroup, Inc. Annual Bonus Plan, filed as Exhibit 10.2 to AptarGroup, Inc.s Current Report on Form 8-K filed on May 1, 2008, is hereby incorporated by reference.** | |
10.27
|
AptarGroup, Inc. 2008 Stock Option Plan, filed as Exhibit 10.3 to AptarGroup, Inc.s Current Report on Form 8-K filed on May 1, 2008, is hereby incorporated by reference.** | |
10.28
|
AptarGroup, Inc. 2008 Director Stock Option Plan, filed as Exhibit 10.1 to AptarGroup, Inc.s Current Report on Form 8-K filed on May 1, 2008, is hereby incorporated by reference.** | |
10.29
|
Form of AptarGroup, Inc. Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2008 Stock Option Plan filed as Exhibit 10.4 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.** | |
10.30
|
Form of AptarGroup, Inc. Stock Option Agreement for Non-Employee Directors pursuant to the AptarGroup, Inc. 2008 Director Stock Option Plan filed as Exhibit 10.5 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.** |
58 /ATR
2008
Form 10-K
Table of Contents
Exhibit |
||
Number | Description | |
10.31
|
Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement pursuant to the AptarGroup, Inc. 2004 Stock Awards Plan, filed as Exhibit 10.6 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.**. | |
10.32
|
Summary of Director Compensation filed as Exhibit 10.35 to the Companys Annual Report on Form 10K for the year ended December 31, 2004 (File No. 1-11846), is hereby incorporated by reference.** | |
21*
|
List of Subsidiaries. | |
23*
|
Consent of Registered Public Accounting Firm. | |
31.1*
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2*
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1*
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2*
|
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Filed herewith. | |
** | Management contract or compensatory plan or arrangement. |
59 /ATR
2008
Form 10-K