Table of Contents


United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10‑K10-K

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 20172019

OR

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO 


COMMISSION FILE NUMBER 1‑118461-11846

Graphic

AptarGroup, Inc.

DELAWARE

36‑385310336-3853103

475 WEST TERRA COTTA AVENUE,265 EXCHANGE DRIVE, SUITE E, 100, CRYSTAL LAKE, ILLINOIS60014

815‑477‑0424815-477-0424

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value

ATR

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‑knownwell-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

No

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

No

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

No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑TS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes

No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of registrant’s 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.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑acceleratednon-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b‑212b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non‑acceleratedNon-accelerated filer

Smaller reporting company

Emerging growth company

(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑212b-2 of the Act).

Yes

No

The aggregate market value of the common stock held by non‑affiliatesnon-affiliates as of June 30, 201728, 2019 was $5,835,925,185.$7,975,902,822.

The number of shares outstanding of common stock, as of February 19, 2018,18, 2020, was 62,111,611 64,054,138 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 2, 20186, 2020 are incorporated by reference into Part III of this report.


AptarGroup, Inc.

FORM 10‑K10-K

For the Year Ended December 31, 20172019

INDEX

INDEX

81

i/ATR

2017Index of Exhibits

82

Signatures

87

i/ATR

2019 Form 10-K


PART I

ITEM 1. BUSINESSBUSINESS

BUSINESS OF APTARGROUPWHO ARE WE AND WHAT DO WE DO

We areAptar is a leading global providersupplier of a broad range of innovative dispensing, sealing, active packaging dispensingsolutions and sealing solutions, primarilyservices for the beauty, personal care, home care, prescription drug, consumer health care, injectables, active packaging, food and beverage markets. Our creativeAptar uses insights, design, engineering and science to create innovative packaging solutions enhancetechnologies that build brand value for its customers, and, in turn, make a meaningful difference in the convenience, safetylives, looks, health and securityhomes of consumerspeople around the globeworld. Aptar is headquartered in Crystal Lake, Illinois and allow our customers to differentiate their productshas approximately 14,000 dedicated employees in the market.20 different countries. For more information, visit www.aptar.com.

Our business was started in the late 1940’s, manufacturing and selling aerosol valves in the United States, and has grown primarily through the acquisition of relatively small companiesacquisitions and internal expansion. We were incorporated in Delaware in 1992. In this report, we may refer to AptarGroup, Inc. and its subsidiaries as “AptarGroup”, “Aptar” or the “Company”.

We have manufacturing facilities located throughout the world including North America, Europe, Asia and South America. We have approximately 5,0007,000 customers with no single customer or group of affiliated customers accounting for greater than 7%6% of our 2017 net sales.2019 Net Sales.

Consumers’ preference for convenience and product differentiation through packaging design and function are important to our customers and they have converted many of their packages from non-dispensing formats to dispensing systems that offer enhanced shelf appeal, convenience, cleanliness and accuracy of dosage.

While we offer a wide variety of dispensing, sealing and sealingactive packaging solutions, our primary products are dispensing pumps, closures, aerosol valves and elastomeric primary packaging components.

Dispensing pumps are finger‑actuatedfinger-actuated dispensing systems that dispense a spray or lotion from non‑pressurizednon-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 are primarily dispensing closures but to a lesser degree can include non‑dispensingnon-dispensing closures. Dispensing closures are plastic caps whichthat 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 valves.

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

During 2018 and 2019, we acquired several companies to strengthen and broaden our portfolio, including the business combinations of the following entities:

-October 2019 – Noble International Holdings, Inc., Genia Medical, Inc. and JBCB Holdings, LLC (collectively referred to as “Noble”) for cash paid at close of approximately $62.3 million (net of $1.6 million of cash acquired) and contingent consideration liability due to sellers related to earn-out.  
-June 2019 – Nanopharm Ltd. (“Nanopharm”) for cash paid at close of approximately $38.1 million (net of $1.8 million of cash acquired).
-May 2019 – Gateway Analytical LLC (“Gateway”) for cash paid at close of approximately $7.0 million and $3.0 million contingent consideration liability due to sellers related to earn-out.
-August 2018 – CSP Technologies S.à r.l. (“CSP Technologies”) for cash paid at close of approximately $553.5 million.
-May 2018 – Reboul SAS (“Reboul”) for cash paid at close of approximately $3.6 million (net of $112 thousand of cash acquired).

During August 2019 we completed the asset acquisition of Bapco Closures Holdings Limited (“Bapco”) for $3.8 million (net of $2.9 million of cash acquired) and we also invested an aggregate amount of $3.5 million in two preferred equity investments in sustainability companies Loop and PureCycle Technologies (“PureCycle”). In addition, during January 2020, we acquired 49% of the equity interests in three related companies: Suzhou Hsing Kwang, Suqian Hsing Kwang and Suzhou BTY, (collectively referred to as “BTY”). Refer to Note 20- Acquisitions in Item 8 – Consolidated Financial Statements and Supplementary Data for further details on acquisition activities.

1/ATR

2019 Form 10-K

AVAILABLE INFORMATION

Our periodic and current reports, and any amendments to those reports, are available, free of charge, through a link on the Investors page of our website (www.aptar.com), as soon as reasonably practicable after the material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). These filings are also available to the public over the Internet at the SEC’s website (http://www.sec.gov).  You may also read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Please call the SEC at 1-800-SEC-0330 for further information on the reference room.

Also posted on our website are the charters for our Audit, Management Development and Compensation, Governance and Executive Committees, our Governance Principles, our Code of Business Conduct & Ethics, our Director Independence Standards and our Conflict Minerals Statement. Within the time period required by the SEC and the New York Stock Exchange (“NYSE”), we will post on our website any amendment or waiver to the Code of Business Conduct & Ethics applicable to any executive officer or director. The information provided on our website is not part of this report and is therefore not incorporated herein by reference.

1/ATR

2017 Form 10-K


OUR STRATEGY

We seek to enhance our position as a leading global provider of innovative packaging dispensing, sealing, active packaging solutions and sealing solutionsservices and deliver increased value to our customers and stockholders through strategic focus and execution in the following areas:

(i)

Successful Transformation: To strengthen our performance and deepen our position as a true market shaper, we need to continually evaluate our business. We haveIn late 2017, we launched a comprehensive business transformation plan spanning all ofwithin our Beauty + Home segment and for key corporate support functions including Finance, HR, ITHuman Resources, Information Systems and Purchasing.

(ii)

Focus on Organic Growth: We will beare focused strongly on accelerating our top line growth with added emphasis on high growth economies. In order to develop this focus,Accordingly, we are creating empowered, regional, cross functional cross-functional profit and loss (“P&L&L”) teams who are fully accountable to drive profitable growth.

(iii)

Excellence in Core Business Functions: We have established three pillars of functional excellence to ensure we perform at best in class levels in the core functions of any manufacturing business, namely “innovate”,“innovate,” “produce” and “sell,” and that our business teams are supported in the areas of Innovation, Operations and Commercial Excellence.

(iv)

Focus on Talent and Leadership: Execution of our strategy requires a talented, motivated, diverse, international team. We have a focused talent acquisition and development strategy to ensure our teams have the right skills to execute our strategy.

(v)

Partnerships and Acquisitions: We will continue to focus on growing the companyCompany through appropriate business acquisition opportunities as well as developing partnerships to expand the scope of our technologies, geographic presence and product offerings.

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

DESCRIPTION OF APTARGROUP’SOUR REPORTING SEGMENTS

INFORMATION ABOUT SEGMENTS

AptarGroup’sOur organizational structure consists of three market‑focusedmarket-focused business segments which aresegments: Beauty + Home, Pharma and Food + Beverage. This is a strategic structure which allows us to be more closely aligned with our customers and the markets in which they operate. We primarily sell our products and services through our own sales force to beauty, personal care, pharmaceutical, home care, pharmaceutical, food and beverage marketers. To a limited extent, we use independent representatives and distributors to increase our reach to smaller customers and export markets.

Operations that sell dispensing systems and sealing solutions primarily to the beauty, personal care and home care markets form the Beauty + Home segment. Operations that sell dispensing systems and sealing solutions and services to the prescription drug, consumer health care, injectables and injectablesactive packaging markets form the Pharma segment. Operations that sell dispensing systems and sealing solutions to the food and beverage markets form the Food + Beverage segment. Each of these three business segments is described more fully below. A summary

2/ATR

2019 Form 10-K

BEAUTY + HOME

The Beauty + Home segment is our largest segment in terms of net sales and total assets representing 53%47% and 43%39% of AptarGroup’sour Net Sales and Total Assets, respectively, in 2017.2019. The Beauty + Home segment primarily sells pumps, closures, aerosol valves, accessories and sealing solutions to the personal care and home care markets and pumps and decorative components to the beauty market. We believe we are a leading supplier for the majority of the products we sell primarily to the beauty and personal care markets.

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2017 Form 10-K


Beauty. Sales to the beauty market accounted for approximately 48%51% of the segment’s total net sales in 2017.2019. The beauty market requires a broad range of spray and lotion pumps, closures, elastomeric flow-control components and sampling dispensing systems to meet functional as well as aesthetic requirements. A considerable amount of research, time and coordination with our customers 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. In the cosmetic sector, packaging for certain products such as natural and organic cosmetics and anti‑aginganti-aging lotions continue to provide us with growth opportunities. We are a leading provider of packaging solutions for prestige and mass market fragrance products. Our cosmetic lotion pumps, airless dispensing systems, lotion sampling devices and decorative capabilities along with our focus on color cosmetics including lip stick and lip gloss products will also provide growth opportunities. We see continued growth opportunities in Latin America and significant opportunities for growth in the sale of our products for cosmetic skin care and color cosmetic applications in Asia.

Personal Care. Sales to the personal care market accounted for approximately 44%42% of the segment’s total net sales in 20172019 and primarily included sales of fine mist spray pumps, lotion pumps, closures, elastomeric flow-control components and continuous spray aerosol valves. Personal care spray pump applications include hair care, body care and sun care products. Typical lotion pump applications include skin moisturizers, hand sanitizers and soap. Personal care closures applications include shampoos and conditioners. Personal care continuous spray aerosol valve applications include hair care products, deodorants, shaving creams and sun care products. Our research and development teams continue to design unique accessories that increase the value of our continuous spray aerosol valve offerings.

Home Care. Sales to the home care market accounted for approximately 8%7% of the segment’s total net sales in 20172019 and primarily included sales of continuous or metered dose spray aerosol valves, closures and to a lesser degree spray and lotion pumps. Applications for continuous spray valves include disinfectants, spray paints, insecticides and automotive products. Metered dose valves are used for air fresheners. Closure applications include liquid detergents, automotive products and household cleansers. Spray and lotion pump applications primarily include household, insect repellant and industrial cleaners.

PHARMA

The Pharma segment is our second largest segment in terms of net sales and total assets, accounting for 33%38% and 28%40% of AptarGroup’sour Net Sales and Total Assets, respectively, in 2017 and is our most profitable segment.2019. We believe we are a leading supplier of pumps and metered dose inhaler valves (“MDIs”) to the pharmaceutical market worldwide and we are aan important supplier of elastomer for injectable primary packaging components worldwide. Characteristics of this market include (i) governmental regulation of our pharmaceutical customers, (ii) contaminant‑controlledcontaminant-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‑roomclean-room manufacturing facilities in Argentina, China, France, Germany, India, Switzerland and the United States. We believe that providing an alternative to traditional medication forms such as pills with value‑added,value-added, convenient dispensing systems will continue to offer opportunities for our business. In addition, we believe there are opportunities for growth in the over-the-counter and generic pharmaceutical categories.

Prescription Drug. Sales to the prescription drug market accounted for approximately 54%50% of the segment’s total net sales in 2017.2019. Pumps sold to the prescription drug market deliver medications nasally, orally or topically. Currently the majority of our pumps sold are for nasal allergy treatments. Recently, thereSales of pumps to deliver prescription allergy medicine that is a trendnow available over-the-counter remains part of nasal allergy products moving from prescription‑only to being sold over-the-counter without a prescription.our prescription drug division. This trend could provide us with growth opportunities as thisthe movement could allowto over-the-counter availability allows consumers easier access to these types of treatments. Our nasal pumps and unit dose and bidose devices are also used to deliver pain management products. Potential opportunities for providing alternatives to traditional pill and injectable dosage forms of medication include pump dispensing systems for vaccines, cold and flu treatments, central nervous systems applications and hormone replacement therapies.

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

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2019 Form 10-K

We continue to develop new dispensing systems and accessories in this segment. For example, we provide single dose delivery devices suitable for central nervous system applications. While we expect that these types of new products will come to market in the future, it is difficult to estimate when, as the rigors of pharmaceutical regulations affect the timing of product introductions by our pharmaceutical customers whichthat use our dispensing systems.

3/ATR

2017 Form 10-K


Consumer Health Care. Sales to the consumer health care market accounted for approximately 27%24% of the segment’s total net sales in 2017.2019. Applications for this market are similar to the prescription market; however, these applications are sold over-the-counter without a prescription. Typical consumer health care spray pump applications include nasal decongestants, nasal salines and cough and cold applications. Typical consumer health care valve applications include nasal saline using our bag‑onbag-on valve technology. We have developed a multi dose ophthalmic dispensing device suitable for unpreserved formulations. This technology is successfully marketed in Europe, North America and Latin America and is under development for other markets both for over-the-counter and prescription applications. Other products sold to this market include airless pump systems for dermal drug delivery applications. We have recently seen a trend to more child resistant and senior‑friendlysenior-friendly packaging solutions and have developed products to meet these market needs.

Injectables. Sales to the injectables market accounted for approximately 19%16% of the segment’s total net sales in 2017.2019. Injectables are elastomeric primary packaging components for injectable drug delivery. Injectable products offered include stoppers for vials and pre‑filledpre-filled syringe components, such as plungers, needle shields, tip caps and components for cartridges. Our recent investment in this business allows us to market coated stoppers which better preserve the contents of the vial and adds value to our customers and the consumer. Pharmaceutical applications for this market include vaccines, anti‑thrombotic,anti-thrombotic, small molecules and biologics.

Active Packaging. Active packaging is a new technology for Aptar since the CSP Technologies Acquisition in the third quarter of 2018. Sales of active packaging products accounted for approximately 10% of the segment’s total net sales in 2019. Through proprietary material science expertise, we deliver active packaging solutions such as desiccant material to enhance the shelf life and effectiveness of diagnostic and solid dose products.

FOOD + BEVERAGE

The Food + Beverage segment is our smallest segment in terms of net sales and total assets, representing 14% and 9% 15%of AptarGroup’sour Net Sales and Total Assets respectively, in 20172019, but has been experiencing strong product growth over recent years. We primarily sell dispensing closures and, to a lesser degree, non‑dispensingnon-dispensing closures, elastomeric flow control components, spray pumps and aerosol valves.

Sales of dispensing closures have grown as consumers worldwide have demonstrated a preference for a package utilizing the convenience of a dispensing closure. At the same time, consumer marketers are trying to differentiate their products by incorporating performance enhancing features such as bonded aluminum liners to plastic, flow‑controlflow-control and no‑dripno-drip dispensing, inverted packaging and directional flow to make packages simpler to use, cleaner and more appealing to consumers. We also have a number of product solutions that address the increased use of flexible packaging formats.

Food. Sales to the food market accounted for approximately 61%68% of the segment’s total net sales in 20172019 and primarily include sales of dispensing closures and elastomeric flow‑controlflow-control components. To a lesser degree we also sell non‑dispensingnon-dispensing closures, continuous spray aerosol valves and spray pumps to this market. Applications for dispensing closures include sauces, condiments, infant nutrition and other food products. Applications for continuous spray aerosol valves include cooking sprays. Spray pump applications primarily include butter or salad dressing sprays. With the completion of the CSP Technologies Acquisition in the third quarter of 2018, we have started to sell and further develop packaging solutions to the food service market to enhance the shelf life of those products.

Beverage. Sales to the beverage market accounted for approximately 39%32% of the segment’s total net sales in 20172019 and primarily include sales of dispensing closures and elastomeric flow‑controlflow-control components. Sales of dispensing closures to the beverage market have increased significantly over the last several years as we continue to see an increase of interest from marketers using dispensing closures for their products. Examples of beverage products currently utilizing dispensing closures include bottled water, sport and energy drinks, juices and concentrated water flavorings.

GENERAL BUSINESS INFORMATION

RESEARCH AND DEVELOPMENT

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

4/ATR

2019 Form 10-K

PATENTS AND TRADEMARKS

We customarily seek patent and trademark protection for our products and brands. We own and currently have numerous applications pending for patents and trademarks in many regions of the world. 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. While valuable to our overall product portfolio, sales of any one individually patented product are not considered material to any specific segment or to the Company’sour consolidatedresults.

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2017 Form 10-K


TECHNOLOGY

TECHNOLOGY

We have technical expertise regarding injection molding, robotics, clean-room facilities and high‑speedhigh-speed assembly. We also have expertise regarding the formulation and finishing of elastomer and silicone components. In addition, we offer a variety of sterilization options for elastomeric components for the pharmaceutical industry.and active packaging technologybased on proprietary material science expertise. Pumps and aerosol valves require the assembly of several different plastic, metal and rubber components using high‑speedhigh-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‑thousandthone-thousandth of an inch and we assemble products in a high‑speed, cost‑effectivehigh-speed, cost-effective manner. We are experts in molding liquid silicone that is used in certain dispensing closures as well as rubber gasket formulation and production primarily for the prescription drug and consumer health care markets. We also provide analytical expertise within our pharma service technology businesses.  

MANUFACTURING AND SOURCING

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

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

We have approximately 5,0007,000 customers with no single customer or group of affiliated customers accounting for greater than 7%6% of 2017 net sales.2019 Net Sales. A consolidation of our customer base has been occurring and this trend is expected to continue. A concentration of customers presents opportunities for increasing sales due to the breadth of our product line, our international presence and our long‑termlong-term relationships with certain customers. However, consolidation of our customers could lead to pricing pressures, concentration of credit risk and fewer opportunities to introduce new products to the market.

INTERNATIONAL BUSINESS

We are geographically diverse with manufacturing and sales operations in Asia, Europe, Latin America (including Mexico) and North America. Europe is our largest region in terms of sales, where sales for the years ended December 31, 2017, 20162019 and 20152018 were approximately 58%, 57% and 56%59%, respectively.respectively, of our consolidated sales. Asia and Latin America when aggregated represented approximately 16%, 16%14% and 17%15% of our consolidated sales for the years ended December 31, 2017, 20162019 and 2015,2018, respectively. Export sales from the United States were $152.8 million, $165.1$170.0 million and $151.2$171.7 million in 2017, 20162019 and 2015,2018, respectively. We are a net exporter of goods from the U.S. and Europe and a net importer of goods to the Asian and Latin American regions. 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).

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2019 Form 10-K

FOREIGN CURRENCY

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

5/ATR

2017 Form 10-K


During the quarter ended June 30, 2018, we concluded that Argentina has become a highly inflationary economy primarily based on published estimates, which indicate that Argentina's three-year cumulative inflation rate has exceeded 100%. Beginning July 1, 2018, we applied highly inflationary accounting for our Argentinian subsidiaries. We have changed the functional currency from the Argentinian peso to the U.S. dollar.

WORKING CAPITAL PRACTICES

Collection and payment periods tend to be longer for our operations located outside the United States due to local business practices. We have also seen an increasing trend in pressure from certain customers to lengthen their payment terms. As the majority of our products are made to order, we have not needed to keep significant amounts of finished goods inventory to meet customer requirements. However, some of our contracts specify an amount of finished goods safety stock we are required to maintain.

To the extent our financial position allows and there is a clear financial benefit, we from time-to-time benefit from early payment discounts with some suppliers. We are also lengthening the payment terms with our suppliers to be in line with customer trends. While we have offered third party alternatives for our suppliers to receive payments sooner, we have not utilized these offerings from our customers as the economic conditions currently are not beneficial for us.

EMPLOYEE AND LABOR RELATIONS

AptarGroup has approximately 13,200 full‑time14,000 full-time employees. Of the full‑timefull-time employees, approximately 8,2008,700 are located in Europe, 3,0002,900 are located in Asia and South America and the remaining 2,0002,400 are located in North America. The majority of our European and Latin American employees are covered by collective bargaining arrangements made at either the local or national level in their respective countries and approximately 140100 of the North American employees are covered by a collective bargaining agreement. 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 20172019 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 that range from regional to international companies. We expect the market for our products to remain competitive.competitive, as consolidation among our competitors is increasing in the current economic climate. We believe our competitive advantages are consistent high levels of innovation, quality and service, geographic diversity, financial strength and stability and breadth of products.products and services. Our manufacturing strength lies in the ability to mold complex plastic components and formulate and finish elastomer and silicone components in a cost‑effectivecost-effective manner and to assemble products at high speeds. Our business is somewhat capital intensive and it is becoming more important to our customers for Aptar tothat we have global manufacturing capabilities. Both of these serve as barriers to entry for new competitors wanting to enter our business. Furthermore, within our Pharma business, increasing regulatory hurdles present a barrier for new competitors to enter the market.

While we have experienced some competition in Europe, Latin America and the United States from low cost Asian suppliers, particularly in the low‑endlow-end beauty and personal care market, this has not been significant. Although using low cost Asian suppliessuppliers may have a cost advantage, some customers prefer local suppliers citing better quality, better customer service and shorter lead times. We have also recently reduced our carbon footprint due to shorter supply chain networks being utilized, which we see as a competitive advantage.

ENVIRONMENT

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

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2019 Form 10-K

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

We are actively collaborating with our customers on reliable products by supporting our customers’ participation in the circular e-commerce platform called “Loop,” in addition to being an investor in Loop ourselves. We also invested in and partnered with PureCycle, to prepare for the introduction of Ultra-Pure Recycled Polypropylene (UPRP) into dispensing applications.

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

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

GOVERNMENT REGULATION

Certain of our products are directly or indirectly affected by government regulation. The European Union has adopted a circular economy package. The package maps out a series of actions planned over several years. Some actions have resulted in regulations aimed to reduce marine litter, increase plastic recycling rates, prohibit single-use plastic packaging and introduce new taxes in relation to the end-of-life management of packaging. In parts of the United States, regulations require food and beverage companies to tether plastic caps to ensure the caps stay with the package, thus improving the likelihood the caps will enter the recycling stream. The potential exists for these types of regulations to expand worldwide. We have established an innovation team that focuses on designing for and converting into more sustainable options like post-consumer recycled resin and Food and Drug Administration approved resin alternatives. We are designing for sustainability by providing products that improve recyclability and use less material, and we offer multiple tethered options. We are also partnering with global and regional thought leaders to drive a more circular economy.

Demand for aerosol and pump packaging is also affected by government regulations regarding the release of volatile organic compounds (“VOCs”) into the atmosphere. Europe and the United States have regulations that require 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 certain of 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.

6/ATR

2017 Form 10-K


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

7/ATR

2019 Form 10-K

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Our executive officers as of February 26, 201824, 2020 are as follows:

Name

Age

Position with the Company

Stephan Tanda

5254

President and Chief Executive Officer

Mr. Tanda has been President and Chief Executive Officer since February 2017. Prior to this, Mr. Tanda was an Executive Managing Board Director at Royal DSM NV, a leading global supplier of ingredients and material solutions for the food, dietary supplement, personal care, medical device, automotive, paint, electronic and bio-material markets, from March 2007 to January 2017.

Robert Kuhn

5557

Executive Vice President, Chief Financial Officer and Secretary

Mr. Kuhn has been Executive Vice President and Chief Financial Officer since September 2008. Mr. Kuhn has been Secretary since June 2011.

Eldon Schaffer

5254

Executive Vice President, Aptar Beauty + HomeStrategic Projects and Commercial Excellence

Mr. Schaffer has been Executive Vice President of Strategic Projects and Commercial Excellence since December 2019.  Prior to this, Mr. Schaffer was President of Aptar Beauty + Home sincefrom January 2016.  Prior2016 to this, Mr. Schaffer wasDecember 2019, President of Aptar Food + Beverage from 2012 to 2015 and President of Aptar Beauty + Home North America from 2010 to 2011.

Gael TouyaMarc Prieur

4854

President, Aptar Beauty + Home

Mr. Prieur has been President of Aptar Beauty + Home since December 2019. Prior to this, Mr. Prieur was President of Aptar Food + Beverage from September 2018 to November 2019, VP of Aptar Operational Excellence from June 2017 to August 2018, President EMEA Sales & Operations – Consumer Health Care from June 2013 to June 2017 and President of our Pharma business in Asia from June 2008 to June 2013.

Hedi Tlili

45

President, Aptar Food + Beverage

Mr. TouyaTlili has been President of Aptar Food + Beverage since January 2016.December 2019. Prior to this, Mr. Tlili was President of Aptar EMEA Beauty + Home from June 2018 to November 2019 and President of Aptar EMEA Food + Beverage from May 2016 to May 2018. Prior to joining Aptar, Mr. Tlili held leadership positions at our packaging solutions peers Albéa and Sonoco. He was a Cluster Deputy Manager in Albéa Group from September 2014 to March 2016, Country General Manager in Sonoco from April 2013 to June 2014 and European Sales and Marketing Director from September 2011 to March 2013 in Sonoco.

Gael Touya

50

President, Aptar Pharma

Mr. Touya has been President of Aptar Pharma since September 2018. Prior to this, Mr. Touya was President of Aptar Food + Beverage from 2016 to August 2018, President of Aptar Food + Beverage Europe from 2012 to 2015 and Business Development Vice President Skin Care and Color Cosmetics from 2010 to 2011.

Salim HaffarXiangwei Gong

4450

President, Aptar PharmaAsia

Mr. HaffarMs. Gong has been President of Aptar PharmaAsia since January 2014. From 2012October 2018. Prior to 2013 Mr. Haffar worked with Capsugel, a leading pharmaceutical supplier of gelatin capsulesthis, Ms. Gong held various leadership positions at Royal DSM for the oral drug delivery industry. From 2010 to 2012, heover 22 years. She was President of Aptar Pharma’s Prescription division.DSM Hydrocolloids from 2014 to 2018, President Asia of DSM Food Specialties from 2011 to 2014, Vice President of Channel Marketing from 2008 to 2011 and Vice President of Personal Care in DSM North America from 2005 to 2008.

Ursula Saint‑LégerShiela Vinczeller

5456

Vice President ofChief Human Resources Officer

Ms. Saint‑LégerVinczeller has been Vice President ofChief Human Resources Officer since October 2010.November 2018. Prior to this, Ms. Vinczeller spent 12 years in Human Resources leadership roles at International Paper, one of the world’s leading producers of fiber-based packaging, pulp and paper.

There were no arrangements or understandings between any of the executive officers and any other person(s) pursuant to which such officers were elected.

7/8/ATR

20172019 Form 10-K


ITEM 1A. RISK FACTORSFACTORS

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 or other events to materially differ from the results or events contemplated by the forward‑lookingforward-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‑K10-K before purchasing any shares of our common stock.

If there is deterioration in economic conditions in a particular region or market, our business and operating results could be materially adversely impacted. Due to our strong balance sheet, diverse product offerings, various end‑marketsend-markets served, and our broad geographic presence, we believe we are well positioned to withstand slowness in any one particular region or market. However, economic uncertainties affect businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. A tightening of credit in financial markets or other factors 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 our suppliers, customers or distributors could result in product delays, increased accounts receivable defaults, inventory or supply challenges and pricing pressures. An interruption in supply may also impact our ability to meet customer demands. Consumer demand for our customers’ products and shifting consumer preferences are unpredictable and could have a negative impact on our customers and our customers’ demand for our products.

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 mainlyentities that range from regional to international companies. We expect the market for our products to remain competitive, as consolidation among our competitors is increasing in the current economic climate. If we are unable to compete successfully, our market share may decline, which could materially adversely affect our results of operations and financial condition.

Geopolitical conditions, including trade disputes and direct or indirect acts of war or terrorism, could have a material adverse effect on our operations and financial results. Our operations could be disrupted by geopolitical conditions such as Brexit, trade disputes, international boycotts and sanctions, acts of war, terrorist activity or other similar events. Such events could make it difficult, impossible or impossiblemore expensive to manufacture or deliver products to our customers, receive production materials from our suppliers, or perform critical functions, all of which could adversely affect our business globally or in certain regions. While we maintain similar manufacturing capacities at different locations and coordinate multi‑source supplier programs on many of our materials which would better enable us to respond to these types of events, we cannot be sure that our plans will fully protect us from all such disruptions. In addition, our customers may export their finished products using our dispensing devices that were sold in other regions and an adverse geopolitical event may impact the sales of our customers’ products and thus indirectly negatively impact the demand for our dispensing solutions. However, our business is well-diversified across nine end markets and many geographies as we produce in seventeen countries and while we do face some risk related to specific trade policies, we believe our diverse business model, coupled with our diverse and global customer base, allow some protection from dependency on any one geographic region, country or even trade route.

We have foreign currency translation and transaction risks that may materially adversely affect our operating results. A majority of our operations are located outside of the United States. Because of this, movements in exchange rates may have an impact on the translation of the financial statements of our foreign entities. Our primary foreign exchange exposure is to the Euro,euro, but we have foreign exchange exposure to the Chinese Yuan,yuan, Brazilian Real,real, Mexican Peso,peso, Swiss Franc,franc, and other Asian, European and South American currencies. A weakeningstrengthening U.S. dollar relative to foreign currencies has an additivea dilutive translation effect on our financial statements. Conversely, a strengtheningweakening U.S. dollar has a dilutivean additive translation effect. In some cases, we sell products denominated in a currency different from the currency in which the related costs are incurred. We manage our exposures to foreign exchange principally with forward exchange contracts to economically hedge certain transactions and firm purchase and sales commitments denominated in foreign currencies. The volatility of currency exchange rates may materially affect our operating results.

Government regulation on environmental matters regarding recycling or environmental sustainability policies could impact our business. Future government regulations mandating the use or limitations of certain materials could impact our manufacturing processes or the technologies we use forcing us to invest infaster development and adoption of alternative materials or assets used in the production of our products.

Future government regulations of healthcare cost containment policies may impact our pharmaceutical sales. Review by governments of the number of drugs and prices thereof that will be paid by their insurance systems could affect future sales to the pharmaceutical industry and thereby adversely affect prices of and demand for our pharmaceutical products.

9/ATR

2019 Form 10-K

Consolidation of customer base could impact our business. We believe mergers and acquisitions within our customer base create opportunities for increasing sales due to the breadth of our product line, our international presence and our long‑termlong-term relationships with certain customers. However, consolidation of our customers could lead to pricing pressures, concentration of credit risk and fewer opportunities to introduce new products to the market.

8/ATR

2017 Form 10-K


If our expansion initiatives are unsuccessful, our operating results and reputation may suffer. We are expanding our operations in a number of geographies and markets, including facilities expansions in NorthLatin America Europe and Asia.Asia, and market expansions such as active packaging. Expansion of our operations require a significant amount of time and attention from our senior management and/or capital investment. These activities present considerable challenges and risks, including the general economic and political conditions in the markets that we enter, attracting, training and retaining qualified and talented employees, infrastructure disruptions, fluctuations in currency exchange rates, the imposition of restrictions by governmental authorities, compliance with current, new and changing governmental laws and regulations and the cost of such compliance activities. If any of our expansion efforts are unsuccessful, our operating results and reputation may suffer.

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 customer’s drug formulation. If the customer’s pharmaceutical product is not approved by regulatory bodies or it is not successful on the market, the associated costs may not be recovered.

Higher raw material costs and other inputs and an inability to increase our selling prices may materially adversely affect our operating results and financial condition. The cost of raw materials and other inputs (particularly plastic resin, rubber, metal, anodization costs and transportation and energy costs) are volatile and susceptible to rapid and substantial changes due to factors beyond our control, such as changing economic conditions, currency fluctuations, weather conditions, political unrest and instability in energy‑producingenergy-producing nations, and supply and demand pressures. Raw material costs may increase in the coming years and, although we have generally been able to increase selling prices to cover increased costs, 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 savings from our cost reduction programs sufficiently enough to offset the impact of increased raw material costs. As a result, higher raw material costs could result in declining margins and operating results.

In difficult market conditions, our fixed costs structure combined with potentially lower revenues may negatively impact our results. Our business is characterized by relatively high fixed costs and, notwithstanding our utilization of third‑partythird-party manufacturing capacity, most of our production requirements are met by our own manufacturing facilities. In difficult environments, 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 domay not operate at full capacity and the costs associated with this excess capacity are charged directly to cost of sales. Difficult market conditions in the future may 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.

If our unionized employees were to engage in a strike or other work stoppage, our business, operating results and financial position could be materially adversely affected. The majority of our European and Latin American employees are covered by collective bargaining arrangements made either at the local or national level in their respective countries and approximately 140100 of our North American employees are covered by a collective bargaining agreement. 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, operating results and financial position.

Single sourced materials and manufacturing sites could adversely impact our ability to deliver product.  The Company sources We source certain materials, especially some resins and rubber components for our pharmaceutical segment, from a single source. Any disruption in the supply of these materials could adversely impact our ability to deliver product to our customers. Similarly, we have certain components and / or products that are manufactured at a single location or from a single machine or mold. Any disruption to the manufacturing process could also adversely impact our ability to deliver product to our customers.

If we were to incur a significant product liability claim above our current insurance coverage, our business, operating results and financial condition could be materially adversely affected. 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 in excess of our insurance coverage or not covered by existing insurance may materially adversely affect our business, operating results and financial condition.

9/10/ATR

20172019 Form 10-K


Increased cybersecurity threats could pose a risk to our operations. Increased global information security threats and more sophisticated, targeted computer crime pose a risk to the confidentiality, availability and integrity of our data, operations and infrastructure.infrastructure, as well as the data of our customers. We continue to assess potential threats and make investments seeking to reduce the risk of these threats by employing a number of security measures, including employee training, comprehensive monitoring of our networks and systems, ensuring strong data protection standards are in place, and maintenance of backup and protective systems.safeguarding our critical information assets. We also periodically test our systems for vulnerabilities and haveregularly rely on occasion used a third partyparties to conduct such tests. To date, we have seen no material impact on our business or operations from these threats; however, we cannot guarantee that our security efforts will prevent unauthorized access or loss of functionality to our or our third-party providers’ systems. Even with these mitigations, our information systems remain potentially vulnerable to sophisticated cybersecurity threats. Depending on their nature and scope, such threats could potentially lead to the compromise of confidential information, improper use of our systems and networks, manipulation and destruction of data, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.

If our integration of acquisitions are unsuccessful, our operating results and reputation in the investment community may suffer. We continue to pursue growth through acquisitions, including the recent Noble, Nanopharm, Gateway, CSP Technologies and Reboul acquisitions. If our integration efforts, including unlocking synergies, are unsuccessful we may not realize the full potential of the acquisitions and as a result our financial performance may suffer.

We have approximately $443.9$763.5 million in recorded goodwill at December 31, 2017,2019, and changes in future business conditions could cause this asset to become impaired, requiring write‑downswrite-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 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 Estimates” in Part II, Item 7 for additional information.

We are subject to tax regulations in the many jurisdictions in which we operate, and changes in tax regulations could materially impact our results. Future changes in tax laws or in the interpretation of tax laws in jurisdictions where we have significant operations could materially impact our provision for income taxes, the amount of taxes payable and our deferred tax asset and liability balances.  We recorded a provisional tax expense of $24.7 million in 2017 related to the tax law changes enacted in the U.S. This amount could materially change as we continue to evaluate the law and its impacts on our business and as additional regulatory guidance is issued.

We are currently implementing a business transformation plan, with the main objective to return our Beauty + Home segment to historical growth and profit margins. Certain elements of this transformation plan can be disruptive to our business and our associatesemployees if we do not manage the change properly. Furthermore, the transformation plan may take longer to complete than currently expected, may be more costly to complete than currently expected and may not be successful in returning Beauty + Home to historical growth and profit margins. Any such effects could materially adversely impact our business.

We may be adversely affected by changes in the method of determining the London Interbank Offered Rate (“LIBOR”) or other Interbank Rates (IBORs) for our variable rate loans, derivative contracts and other financial assets and liabilities.We have loans, derivative contracts and other financial instruments which are directly or indirectly dependent on LIBOR to establish their interest rate and/or value. The U.K. Financial Conduct Authority announced in 2017 that it would no longer compel banks to submit rates for the calculation of LIBOR after 2021. It is not possible to predict whether banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published or supported before or after 2021 or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. It is expected that a transition away from the widespread use of LIBOR to alternative rates is likely to occur during the next couple years. The transition from LIBOR may cause us to incur increased costs and additional risk. Uncertainty as to the nature of alternative reference rates and as to potential changes in or other reforms to LIBOR may adversely affect LIBOR rates and the value of LIBOR-based loans originated prior to 2021. If LIBOR rates are no longer available, any successor or replacement interest rates may perform differently, which may affect our net interest expense, change our market risk profile and require changes to our risk, pricing and hedging strategies. We will continue our impact assessment and monitor regulatory developments during the transition period.

Ownership by Certain Significant Stockholders. Currently, Aptar has four institutional stockholders who each own between 6% and 11% of our outstanding common stock. None of these stockholders have direct representation on our Board of Directors. If one of these stockholders decides to sell significant volumes of our stock, this could put downward pressure on the price of the stock.

11/ATR

2019 Form 10-K

We have significant international sales and operations and face risks related to health epidemics which could adversely affect our business and results of operations.Our business and operations could be materially and adversely affected by the effects of a widespread outbreak of a contagious disease, including the recent outbreak of the respiratory illness caused by a coronavirus strain first identified in Wuhan, Hubei Province, China, or any other outbreak of contagious diseases, and other adverse public health developments. These effects could include disruptions or restrictions on our employees’ ability to travel, as well as temporary closures of our facilities or the facilities of our customers, suppliers, or other vendors in our supply chain. We have restricted travel to China by our employees and have instituted facilities closures in line with instructions from the local authorities as a response to the coronavirus epidemic. Approximately 4% of our Net Sales in 2019 were related to Chinese operations and any disruption of our supply chain or customers could adversely impact our business and results of operations, as our multinational customers export their products to China or sell via travel retail channels. Accordingly, the coronavirus could result in a reduction in demand from our customers outside of China and adversely impact our European and North American sales. Although we do not source a significant amount of products or components from China, the indirect impact of our suppliers who may be sourcing raw materials via China is unknown at this time. As such, we are conducting a supply chain analysis by region to determine if any disruptions could occur. We will also communicate with customers as needed regarding any significant changes to our supply chain should they become evident, though at this time, we don’t anticipate any significant disruptions.

ITEM 1B. UNRESOLVED STAFF COMMENTSCOMMENTS

The Company hasWe have no unresolved comments from the SEC.

10/12/ATR

20172019 Form 10-K


ITEM 2. PROPERTIESPROPERTIES

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

GERMANY

SPAINTHAILAND

Berazategui (1 & 2)

Böhringen (1 & 2)

MadridChonburi (1)

Tortuguitas (1 & 3)

Dortmund (1)

Torello (1 & 3)

Eigeltingen (2)

UNITED KINGDOM

BRAZIL

Freyung (1 & 3)

SWITZERLANDLeeds, England (1 & 3)

CajamarBahia (1)

Menden (1)

Mezzovico (2)

Cajamar (1)

Villingen-Schwenningen (1 & 2)

UNITED STATES

Maringá Paraná (1 & 3)

Villingen-Schwenningen (1 & 2)

Atlanta, Georgia (3)

Jundiai (1)

INDIA

THAILANDAuburn, Alabama (2 & 3)

INDIA

Chonburi (1)

CHINA

Himachal Pradesh (1)

Suzhou (1, 2 & 3)

Hyderabad (1 & 3)

UNITED KINGDOM

Mumbai (2)

Leeds, England (1 & 3)

COLOMBIA

Cali (1)

INDONESIA

UNITED STATES

Cikarang, Bekasi (1)

Cary, Illinois (1, 2 & 3)

CZECH REPUBLICCHINA

Mumbai (2)

Congers, New York (2)

CkyneGuangzhou (1, 2 & 3)

IRELAND

Eatontown, New Jersey (1 & 2)

Suzhou (1, 2 & 3)

IRELAND

Lincolnton, North Carolina (3)

Ballinasloe, County Galway (1)

Libertyville, Illinois (1 & 3)

FRANCE

Lincolnton, North Carolina (3)

Annecy (1 & 2)

ITALY

McHenry, Illinois (1 & 2)

Brecey (2)COLOMBIA

Manoppello (1)

Midland, Michigan (1 & 3)

Charleval (1 & 2)Cali (1)

ITALY

Mukwonago, Wisconsin (1, 2 & 3)

Manoppello (1)

Stratford, Connecticut (1)

CZECH REPUBLIC

San Giovanni Teatino (Chieti) (1 & 3)

Mukwonago, Wisconsin (1, 2 & 3)Torrington, Connecticut (1)

Granville (2)Ckyne (1 & 3)

Stratford,Watertown, Connecticut (1)

Le Neubourg (1)

MEXICO

Torrington, Connecticut (1)

Le Vaudreuil (2)FRANCE

Queretaro (1 & 3)

Watertown, Connecticut (1)

Oyonnax (1)Annecy (1 & 2)

Brecey (2)

RUSSIA

Charleval (1 & 2)

Vladimir (1 & 3)

Granville (2)

Le Neubourg (1)

SPAIN

Le Vaudreuil (2)

Madrid (1)

Niederbronn-les-Bains (2)

Torello (1 & 3)

Oyonnax (1)

Poincy (1 & 3)

RUSSIASWITZERLAND

Verneuil Sur Avre (1)

Vladimir (1 & 3)Mezzovico (2)


(1)

(1)

Locations of facilities manufacturing for the Beauty + Home segment.

(2)

(2)

Locations of facilities manufacturing for the Pharma segment.

(3)

(3)

Locations of facilities manufacturing for the Food + Beverage segment.

We also have sales personnel in countries other than those listed above. Our corporate office is located in Crystal Lake, Illinois. We also have service facilities and corporate offices in locations in addition to those listed above.  

ITEM 3. LEGAL PROCEEDINGSPROCEEDINGS

The Company, inIn the normal course of business, iswe are subject to a number of lawsuits and claims both actual and potential in nature. While management believes the resolution of these claims and lawsuits will not have a material adverse effect on the Company’sour financial position or results of operations or cash flows, claims and legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur that could include amounts in excess of any accruals which management has established. Were such unfavorable final outcomes to occur, it is possible that they could have a material adverse effect on our financial position, results of operations and cash flows.

ITEM 4. MINE SAFETY DISCLOSURESDISCLOSURES

Not applicable.

11/13/ATR

20172019 Form 10-K


PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY,EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR REGISTRANT’S COMMON EQUITY

Our Common Stock is traded on the New York Stock Exchange under the symbol ATR. Information regarding market prices of our Common Stock and dividends declared may be found in Note 21 to the Consolidated Financial Statements in Item 8 (which is incorporated by reference herein)“ATR”. As of February 19, 2018,18, 2020, there were approximately 215190 holders of record of our Common Stock. A substantially greater number of holders of our Common Stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.

DIVIDENDS

On January 29, 2020, our Board of Directors declared a quarterly cash dividend of $0.36 per share of Common Stock, which was paid on February 19, 2020 to stockholders of record as of January 29, 2020. While we expect to continue to pay a regular quarterly dividend of $0.36 per share in 2020, the timing, declaration, amount and payment of any future cash dividends are at the discretion of the Board of Directors and will depend on our available cash, working capital, financial condition, results of operations, capital requirements, covenants in our credit facility, applicable law and other factors that our Board of Directors considers relevant.

RECENT SALES OF UNREGISTERED SECURITIES

Certain French employees are eligible to participate in the FCP Aptar Savings Plan (the “Plan”). 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 Fund Services. No underwriters are used under the Plan. All shares are sold in reliance upon the exemption from registration under the Securities Act of 1933 provided by Regulation S promulgated under that Act. During the quarter ended December 31, 2017,2019, the Plan purchased 1,4174,993 shares of our Common Stock on behalf of the participants at an average price of $85.62$112.16 per share, for an aggregate amount of $121$560 thousand, and sold 2,380350 shares of our Common Stock on behalf of the participants at an average price of $85.85$114.32 per share, for an aggregate amount of $204$40 thousand. At December 31, 2017,2019, the Plan owned 74,17390,193 shares of our Common Stock.

ISSUER PURCHASES OF EQUITY SECURITIES

On October 20, 2016, the CompanyApril 18, 2019, we announced a share repurchase authorization of up to $350 million of Common Stock. This authorization replaces previous authorizations and has no expiration date. AptarWe may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions.

The CompanyWe spent $48.3$31.6 million to repurchase approximately 555286 thousand shares during the fourth quarter of 2017.2019.

The following table summarizes the Company’sour purchases of its securities for the quarter ended December 31, 2017:2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

Dollar Value Of

 

 

 

 

 

 

 

 

Total Number Of Shares

 

Shares that May Yet be

 

 

 

 

Total Number

 

 

 

Purchased as Part Of

 

 Purchased Under The

 

 

  

  

Of Shares

 

Average Price

 

Publicly Announced

 

Plans or Programs

 

Period

 

 

Purchased

    

Paid Per Share

    

Plans Or Programs

    

(in millions)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

10/1 – 10/31/17

 

 

 —

 

$

 —

 

 —

 

$

190.2

 

11/1 – 11/30/17

 

 

240,000

 

 

86.15

 

240,000

 

 

169.5

 

12/1 – 12/31/17

 

 

315,000

 

 

87.60

 

315,000

 

 

141.9

 

Total

 

 

555,000

 

$

86.97

 

555,000

 

$

141.9

 

    

    

    

    

Dollar Value Of

 

Total Number Of Shares

Shares that May Yet be

 

Total Number

Purchased as Part Of

 Purchased Under The

 

  

  

Of Shares

Average Price

Publicly Announced

Plans or Programs

 

Period

Purchased

    

Paid Per Share

    

Plans Or Programs

    

(in millions)

   

 

10/1 – 10/31/19

 

8,600

$

118.73

 

8,600

$

309.1

11/1 – 11/30/19

 

219,335

 

110.14

 

219,335

 

284.9

12/1 – 12/31/19

 

57,601

 

111.90

 

57,601

 

278.5

Total

 

285,536

$

110.75

 

285,536

$

278.5

12/14/ATR

20172019 Form 10-K


Table of Contents

SHARE PERFORMANCE

The following graph shows a five year comparison of the cumulative total stockholder return on AptarGroup’sour Common Stock as compared to the cumulative total return of the Standard & Poor’s 500 Composite Stock Price Index and to an index of peer group companies we selected. In 2019, we changed our peer group to align with the compensation peer group used by our Management Development and Compensation Committee which includes companies that align more closely with our current business structure. The companies included in the new peer group are: A. Schulman,Albemarle Corporation, Ashland Global Holdings Inc., BemisBerry Global Group, Inc., Catalent, Inc., CCL Industries Inc., Hill-Rom Holdings, Inc., ICU Medical, Inc., Ingredion Inc., International Flavors & Fragrances, Inc., McCormick & Company, Inc., Sealed Air Corporation, Sensient Technologies Corporation, Silgan Holdings, Inc., Sonoco Products Company, Stericycle, Inc., STERIS plc, Teleflex Inc. and West Pharmaceutical Services, Inc. The companies included in our old peer group are: Berry Global Group, Inc., Crown Holdings, Inc., Graphic Packaging Holding Company, Greif Inc., H.B. Fuller Company, International Flavors & Fragrances, Inc., KapStone Paper and Packaging Corporation, Owen’s‑Owen’s Illinois, Inc., Packaging Corporation of America, PH Glatfelter Company., Rayonier Inc., Sealed Air Corporation, Sensient Technologies Corporation, Silgan Holdings, Inc., Sonoco Products Company, Stepan Company, TriMas Corporation and West Pharmaceutical Services Inc.

Comparison of 5 Year Cumulative Stockholder Returns

Graphic

The graph and other information furnished in the section titled “Share Performance” under this Part II, Item 5 of this Form 10‑K10-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.

13/15/ATR

20172019 Form 10-K


Table of Contents

ITEM 6. SELECTED FINANCIAL DATADATA

FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA

Dollars in millions, except per share data

 

Years Ended December 31,

     

 

2019

     

 

2018

     

 

2017

     

 

2016

     

 

2015

Statement of Income Data:

Net Sales

 

$

2,859.7

 

$

2,764.8

 

$

2,469.3

 

$

2,330.9

 

$

2,317.1

Cost of sales (exclusive of depreciation and amortization shown below) (1)

1,818.4

1,813.0

1,603.1

1,496.2

1,499.0

% of Net Sales

63.6

%  

65.6

%  

64.9

%  

64.2

%  

64.7

%

Selling, research & development and administrative

454.6

430.0

387.4

366.3

349.1

% of Net Sales

15.9

%  

15.6

%  

15.7

%  

15.7

%  

15.1

%

Depreciation and amortization

194.6

171.7

153.1

154.8

138.9

% of Net Sales

6.8

%  

6.2

%  

6.2

%  

6.6

%  

6.0

%

Restructuring initiatives

20.5

63.8

2.2

% of Net Sales

0.7

%  

2.3

%  

0.1

%  

%  

%

Operating Income

371.7

286.3

323.5

313.7

330.2

% of Net Sales

13.0

%  

10.3

%  

13.1

%  

13.5

%  

14.2

%

Net Income

242.2

194.8

220.0

205.6

199.3

% of Net Sales

8.5

%  

7.0

%  

8.9

%  

8.8

%  

8.6

%

Net Income Attributable to AptarGroup, Inc.

242.2

194.7

220.0

205.6

199.3

% of Net Sales

8.5

%  

7.0

%  

8.9

%  

8.8

%  

8.6

%

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

Basic

3.81

3.12

3.52

3.27

3.19

Diluted

3.66

3.00

3.41

3.17

3.09

Balance Sheet and Other Data:

Capital Expenditures

 

$

242.3

 

$

211.3

 

$

156.6

 

$

129.0

 

$

149.3

Total Assets

3,562.1

3,377.7

3,137.8

2,606.8

2,437.0

Long-Term Obligations

1,085.5

1,126.0

1,191.1

772.7

760.8

Net Debt (2)

953.7

1,028.1

544.7

480.3

298.1

Total Stockholders’ Equity

1,572.3

1,422.9

1,312.0

1,174.2

1,149.7

Capital Expenditures % of Net Sales

8.5

%  

7.6

%  

6.3

%  

5.5

%  

6.4

%

Interest Bearing Debt to Total Capitalization (3)

43.2

%  

47.6

%  

48.9

%  

44.6

%  

41.6

%

Net Debt to Net Capital (4)

37.8

%  

41.9

%  

29.3

%  

29.0

%  

20.6

%

Cash Dividends Declared per Common Share

1.42

1.32

1.28

1.22

1.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dollars in millions, except per share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

     

 

2017

     

 

 

2016

     

 

 

2015

     

 

 

2014

     

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Income Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

2,469.3

 

 

$

2,330.9

 

 

$

2,317.1

 

 

$

2,597.8

 

 

$

2,520.0

 

Cost of sales (exclusive of depreciation and amortization shown below)  (1)

 

 

1,604.2

 

 

 

1,498.1

 

 

 

1,502.7

 

 

 

1,755.3

 

 

 

1,708.9

 

% of Net Sales

 

 

65.0

%  

 

 

64.3

%  

 

 

64.8

%  

 

 

67.6

%  

 

 

67.8

%

Selling, research & development and administrative

 

 

388.3

 

 

 

367.6

 

 

 

351.5

 

 

 

383.9

 

 

 

364.7

 

% of Net Sales

 

 

15.7

%  

 

 

15.8

%  

 

 

15.2

%  

 

 

14.8

%  

 

 

14.4

%

Depreciation and amortization

 

 

153.1

 

 

 

154.8

 

 

 

138.9

 

 

 

152.2

 

 

 

150.0

 

% of Net Sales

 

 

6.2

%  

 

 

6.6

%  

 

 

6.0

%  

 

 

5.8

%  

 

 

6.0

%

Restructuring initiatives

 

 

2.2

 

 

 

 —

 

 

 

 —

 

 

 

 —

 

 

 

11.8

 

% of Net Sales

 

 

0.1

%  

 

 

 —

 

 

 

 —

 

 

 

 —

%  

 

 

0.5

%

Operating Income

 

 

321.5

 

 

 

310.5

 

 

 

324.1

 

 

 

306.4

 

 

 

284.6

 

% of Net Sales

 

 

13.0

%  

 

 

13.3

%  

 

 

14.0

%  

 

 

11.8

%  

 

 

11.3

%

Net Income

 

 

220.0

 

 

 

205.6

 

 

 

199.3

 

 

 

191.6

 

 

 

171.9

 

% of Net Sales

 

 

8.9

%  

 

 

8.8

%  

 

 

8.6

%  

 

 

7.4

%  

 

 

6.8

%

Net Income Attributable to AptarGroup, Inc.

 

 

220.0

 

 

 

205.6

 

 

 

199.3

 

 

 

191.7

 

 

 

172.0

 

% of Net Sales

 

 

8.9

%  

 

 

8.8

%  

 

 

8.6

%  

 

 

7.4

%  

 

 

6.8

%

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3.52

 

 

 

3.27

 

 

 

3.19

 

 

 

2.95

 

 

 

2.60

 

Diluted

 

 

3.41

 

 

 

3.17

 

 

 

3.09

 

 

 

2.85

 

 

 

2.52

 

Balance Sheet and Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures

 

$

156.6

 

 

$

129.0

 

 

$

149.3

 

 

$

161.9

 

 

$

151.5

 

Total Assets

 

 

3,137.8

 

 

 

2,606.8

 

 

 

2,437.0

 

 

 

2,436.5

 

 

 

2,497.1

 

Long-Term Obligations

 

 

1,191.1

 

 

 

772.7

 

 

 

760.8

 

 

 

588.2

 

 

 

354.1

 

Net Debt (2)

 

 

544.7

 

 

 

480.3

 

 

 

298.1

 

 

 

440.4

 

 

 

184.0

 

AptarGroup, Inc. Stockholders’ Equity

 

 

1,311.7

 

 

 

1,174.0

 

 

 

1,149.4

 

 

 

1,103.4

 

 

 

1,479.8

 

Capital Expenditures % of Net Sales

 

 

6.3

%  

 

 

5.5

%  

 

 

6.4

%  

 

 

6.2

%  

 

 

6.0

%

Interest Bearing Debt to Total Capitalization (3)

 

 

48.9

%  

 

 

44.6

%  

 

 

41.6

%  

 

 

43.2

%  

 

 

25.0

%

Net Debt to Net Capitalization (4)

 

 

29.3

%  

 

 

29.0

%  

 

 

20.6

%  

 

 

28.5

%  

 

 

11.1

%

Cash Dividends Declared per Common Share

 

 

1.28

 

 

 

1.22

 

 

 

1.14

 

 

 

1.09

 

 

 

1.00

 


(1)

(1)

Cost of sales includes $7.4 million reduction in expense for 2015 due to a change in accounting method relating to our inventory accounting methods.  

(2)

(2)

Net Debt is interest bearing debt less cash and cash equivalents.

(3)

(3)

Total Capitalization is AptarGroup, Inc.Total Stockholders’ Equity plus Interest Bearing Debt.

(4)

(4)

Net CapitalizationCapital is AptarGroup, Inc.Total Stockholders’ Equity plus Net Debt.

Net Debt to Net Capital is a non-U.S. GAAP financial measure. See the reconciliation of non-U.S. GAAP measures starting on page 22.

14/16/ATR

20172019 Form 10-K


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONCONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts or as otherwise indicated)

The objective of the following Management’s Discussion and Analysis of ConsolidatedFinancial Condition and 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, Liquidity and Capital Resources, Off‑BalanceOff-Balance Sheet Arrangements, Overview of Contractual Obligations, Recently Issued Accounting Pronouncements, Critical Accounting Estimates, Operations Outlook and Forward‑LookingForward-Looking Statements. MD&A should be read in conjunction with our Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10‑K.10-K.

In MD&A, “we,” “our,” “us,” “AptarGroup,” “AptarGroup, Inc.”, “Aptar” and the “Company” refer to AptarGroup, Inc. and its consolidated subsidiaries.

OVERVIEW

GENERAL

We areAptar is a leading global providersupplier of a broad range of innovative dispensing, sealing, active packaging dispensingsolutions and sealing solutions primarilyservices for the beauty, personal care, home care, prescription drug, consumer health care, injectables, active packaging, food and beverage markets. Our creativeWe use insights, design, engineering and science to create innovative packaging solutions enhancetechnologies that build brand value for our customers, and, in turn, make a meaningful difference in the convenience, safetylives, looks, health and securityhomes of consumerspeople around the globe and allow our customers to differentiate their products in the market.world.

In addition to the information presented herein that conforms to accounting principles generally accepted in the United States of America (“U.S. GAAP,GAAP”), we also present certain financial information that does not conform to U.S. GAAP, which are referred to as non-U.S. GAAP financial measures. Management may assess our financial results both on a U.S. GAAP basis and on a non-U.S. GAAP basis. We believe it is useful to present these non-U.S.GAAP financial measures because they allow for a better period over period comparison of operating results by removing the impact of items that, in management’s view, do not reflect Aptar’s core operating performance. These non-U.S. GAAP financial measures should not be considered in isolation or as a substitute for U.S. GAAP financial results, but should be read in conjunction with the audited consolidated statements of income and other information presented herein. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures. Further, investors are urged to review and consider carefully the adjustments made by management to the most directly comparable U.S. GAAP financial measure to arrive at these non-U.S. GAAP financial measures. See the reconciliation of non-U.S. GAAP measures starting on page 23.  22.

For the year ended December 31, 2017,2019, reported sales increased 6%3% to $2.5$2.86 billion from $2.3$2.76 billion a year ago. ExcludingCore sales, excluding the positive impactsimpact from changes in currency exchange rates and acquisitions, core salesacquisition effects, increased approximately 4%3%. A reconciliation of core sales growth to reported net sales growth, the most directly comparable U.S. GAAP measure, can be found on page 16.18. During 2017, we developed a business transformation plan to address challenges within Beauty2019, top line growth in our Pharma and Food + Home and began implementing company-wide operating, commercial and innovation excellence initiatives. With the start of some of these initiatives and the strong finish to the year,Beverage segments compensated for lower sales in our Beauty + Home segment achieveddue to softness in our personal care market. Excluding a gain on sale of investment in 2018 of $6.5 million, all three segments showed improvement in adjusted EBITDA margins resulting from core sales growth for 2017. Our Pharma segment delivered another strong year with core sales growth in each end market, and we invested in additional capacity to better serve our customers inacross the U.S. injectables market.  Our Food + Beverage segment also grew core sales in each end market, primarily driven by strong demand for our innovative dispensing closures in the infant nutrition and bottled water categories.  We also broke ground in the second half of the year on a new facility in southern China to position us for growth in this critical country and across Asia. Due to the executionmajority of our growth strategy, each segment reported core sales growthmarkets, acquisitions we made in 2017 within their long-term target rates.  We increased core sales in each region2018 and within each market, with2019 and the exceptionpositive impact of home care, as demand for our dispensing and drug delivery systems was strong.transformation activities.

20172019 HIGHLIGHTS

·

Reported sales increased 6% to $2.5 billion due to core3%. Core sales, growth (+4%), positive impacts fromexcluding currency rates (+1%) and theacquisition effects, of an acquisition completed in early 2016 (+1%)also grew 3%.

·

Reported annual earnings per share of $3.41 versus $3.17 in the prior year.

·

Reported annual net income increased 24%. Adjusted EBITDA, excluding among other things restructuring expenses, acquisition costs and purchase accounting adjustments related to $220 million.

acquired inventory and backlog, increased 8% and our adjusted EBITDA margin was 21% in 2019 compared to 20% a year ago.

·

Adjusted annual EBITDA decreased slightlyNet cash provided by operations increased to $475 million.

$514.5 million in 2019 compared to $313.6 million in 2018.

·

Free cash flow, which reflects net cash provided by operations less capital expenditures, increased to $272.2 million in 2019 compared to $102.4 million in 2018.

Acquired strategic technologies and capabilities (Noble, Bapco, Nanopharm and Gateway) to continue expanding our product and service offerings.

We paid increased annual dividends for the 24th2019 was our 26th consecutive year (current annualized dividend is $1.28 per share).

of paying an increased dividend.
Named one of the “Top 100 Most Sustainable U.S. Companies” by Barron’s and one of “America’s Most Responsible Companies 2020” by Newsweek.

15/17/ATR

20172019 Form 10-K


Table of Contents

RESULTS OF OPERATIONS

The following table sets forth the consolidated statements of income and the related percentages of net sales for the periods indicated:indicated. Refer to Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for additional information regarding Results of Operations for the year ended December 31, 2018 as compared to the year ended December 31, 2017. Certain previously reported amounts have been reclassified to conform to the current period presentation:

Year Ended December 31,

2019

2018

Amount in

    

% of

    

Amount in

    

% of

    

$ Thousands

Net Sales

$ Thousands

Net Sales

Net sales

$

2,859,732

100.0

%  

 

$

2,764,761

100.0

%  

Cost of sales (exclusive of depreciation and amortization shown below)

1,818,398

63.6

1,812,961

65.6

Selling, research & development and administrative

454,617

15.9

429,955

15.6

Depreciation and amortization

194,552

6.8

171,747

6.2

Restructuring initiatives

20,472

0.7

63,829

2.3

Operating income

371,693

13.0

286,269

10.3

Other expense

(29,624)

(1.0)

(20,249)

(0.7)

Income before income taxes

342,069

12.0

266,020

9.6

Net Income

242,227

8.5

194,766

7.0

Effective tax rate

29.2

%  

26.8

%  

Adjusted EBITDA margin (1)

20.7

%  

19.9

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

2017

 

2016

 

2015

 

 

Amount in

    

% of

    

 

Amount in

    

% of

    

 

Amount in

    

% of

 

 

$ Thousands

 

Net Sales

 

 

$ Thousands

 

Net Sales

 

 

$ Thousands

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

2,469,283

 

100.0

%  

 

$

2,330,934

 

100.0

%  

 

$

2,317,149

 

100.0

%

Cost of sales (exclusive of depreciation and amortization shown below)

 

1,604,181

 

65.0

 

 

 

1,498,070

 

64.3

 

 

 

1,502,650

 

64.8

 

Selling, research & development and administrative

 

388,281

 

15.7

 

 

 

367,562

 

15.8

 

 

 

351,461

 

15.2

 

Depreciation and amortization

 

153,094

 

6.2

 

 

 

154,802

 

6.6

 

 

 

138,893

 

6.0

 

Restructuring initiatives

 

2,208

 

0.1

 

 

 

 —

 

 —

 

 

 

 —

 

 —

 

Operating income

 

321,519

 

13.0

 

 

 

310,500

 

13.3

 

 

 

324,145

 

14.0

 

Other expense

 

(26,694)

 

(1.1)

 

 

 

(30,003)

 

(1.3)

 

 

 

(29,574)

 

(1.3)

 

Income before income taxes

 

294,825

 

11.9

 

 

 

280,497

 

12.0

 

 

 

294,571

 

12.7

 

Net Income

 

220,029

 

8.9

 

 

 

205,604

 

8.8

 

 

 

199,295

 

8.6

 

Effective tax rate

 

25.4

%  

 

 

 

 

26.7

%  

 

 

 

 

32.3

%  

 

 

Adjusted EBITDA margin (1)

 

19.2

%  

 

 

 

 

20.4

%  

 

 

 

 

19.6

%  

 

 


(1)

(1)

Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation of Non-U.S. GAAP measures starting on page 23.

22.

NET SALES

For the year ended December 31, 2017,2019, reported net sales increased 6%3% to $2.47$2.86 billion from $2.33$2.76 billion a year ago. The average U.S. dollar exchange rate weakened compared to the Euro while the impact of the other major currencies related to our business was mixed.  This resulted in a positive currency translation impact of 1%.  The February 29, 2016 acquisition of Mega Airless positively impacted sales by 1%.  Therefore, sales excluding acquisitions and changes in foreign currency rates (“core sales”) increased 4% over the prior year. 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2017

    

Beauty

    

 

 

Food +

    

 

    

Net Sales Change versus Prior Year

    

+ Home

    

Pharma

 

Beverage

    

Total

    

 

 

 

 

 

 

 

 

 

 

Core Sales Growth

 

 2

%  

 8

%

 6

%  

 4

%  

Acquisitions

 

 1

%  

 —

%

 —

%  

 1

%  

Currency Effects

 

 1

%  

 1

%

 —

%  

 1

%  

Total Reported Net Sales Growth

 

 4

%  

 9

%

 6

%  

 6

%  

In 2016, we reported net sales of $2.33 billion, 1% above 2015 reported net sales of $2.32 billion.  While the average U.S. dollar exchange rate compared to the Euro remained stable, the U.S. dollar strengthened compared to the majoritymost of otherour major operating currencies, impacting our business, resulting in a negative currency translation impact of 2%4%. The acquisitionacquisitions of Mega AirlessCSP Technologies, Gateway, Nanopharm and Noble positively impacted sales by 3%4%. Therefore, core sales were even with the prior year. for 2019 increased 3% over 2018 as growth in our Pharma and Food + Beverage segments compensated for slightly negative core sales to our Beauty + Home segment.

Year Ended December 31, 2019

    

Beauty

    

Food +

    

    

Net Sales Change versus Prior Year

    

+ Home

    

Pharma

Beverage

    

Total

    

Core Sales Growth

 

(1)

%  

10

%

3

%  

3

%  

Acquisitions

 

%  

9

%

7

%  

4

%  

Currency Effects (1)

 

(4)

%  

(5)

%

(2)

%  

(4)

%  

Total Reported Net Sales Growth

 

(5)

%  

14

%

8

%  

3

%  

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2016

    

Beauty

    

 

 

Food +

    

 

    

Net Sales Change versus Prior Year

    

+ Home

    

Pharma

 

Beverage

    

Total

    

 

 

 

 

 

 

 

 

 

 

Core Sales Growth

 

(2)

%  

 5

%

 1

%  

 —

%  

Acquisitions

 

 4

%  

 1

%

 —

%  

 3

%  

Currency Effects

 

(3)

%  

(2)

%

(2)

%  

(2)

%  

Total Reported Net Sales Growth

 

(1)

%  

 4

%

(1)

%  

 1

%  

Foreign currency

(1)Currency effects are approximations of the adjustment necessary to state the prior year net sales using current periodcalculated by translating last year’s amounts at this year’s foreign exchange rates.

For further discussion on net sales by reporting segment, please refer to the segment analysis of net sales and operating income on the following pages.

16/ATR

2017 Form 10-K


The following table sets forth, for the periods indicated, net sales by geographic location:

Years Ended December 31,

2019

   

% of Total

    

 

2018

   

% of Total

    

Domestic

 

$

836,768

 

29

%  

$

726,336

 

26

%  

Europe

1,638,469

 

57

%  

1,627,478

 

59

%  

Other Foreign

384,495

 

14

%  

410,947

 

15

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

 

2017

    

% of Total

    

 

2016

    

% of Total

    

 

2015

    

% of Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

$

642,164

 

26

%  

$

619,814

 

27

%  

$

633,522

 

27

%

Europe

 

 

1,426,173

 

58

%  

 

1,329,398

 

57

%  

 

1,287,309

 

56

%

Other Foreign

 

 

400,946

 

16

%  

 

381,722

 

16

%  

 

396,318

 

17

%

18/ATR

2019 Form 10-K

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

Our cost of sales as a percent of net sales increased to 65.0% in 2017 compared to 64.3% in 2016.  Our cost of sales percentage was negatively impacted by approximately $6.1 million of higher material costs in 2017 compared to 2016. The main driver was higher resin costs.  We also experienced continued operational inefficiencies in our custom decorative packaging business in Europe. Tooling sales were also approximately $10.1 million higher in 2017 compared to the prior year.  Sales of custom tooling typically generates lower margins than product sales, so higher tooling sales negatively impacts cost of sales as a percentage of sales. 

In 2016, our cost of sales(“COS”) as a percent of net sales decreased to 64.3%63.6% in 2019 compared to 64.8%65.6% in 2015.  The decrease2018. Our COS percentage was due to thepositively impacted by our mix of business and lower material costs. The mix of business positively impacted results as the sales across our different business segments.  Our Pharma segment sales represented a higher percentagegrowth of our overall sales in 2016 compared to 2015. This positively impacts our cost of sales percentage as margins on our pharmaceuticalhigher margin Pharma products typically are higherwas greater than the overall Company average. Also, tooling sales were approximately $7.3 million lowergrowth of products in 2016 compared to the prior year.  As mentioned above, sales of custom tooling typically generate lower margins than product sales, so lower tooling sales positively impacts cost of sales as a percentage of sales.other two segments. We also realized lower raw material input costs which helped offset $2.6 millionin 2019 compared to 2018 and the associated positive impact from the timing of incremental costs duepassing through resin cost reductions to a purchase accounting adjustment related to the write-up to fair value of the Mega Airless inventory in 2016.  Results in 2015 were positively impacted by the $7.4 million change in accounting principle related to inventory valuation methods in the prior year. our customers.

SELLING, RESEARCH & DEVELOPMENT AND ADMINISTRATIVE

Our Selling, Research & Development and Administrative expenses (“SG&A”) increased approximately 6% or $20.7$24.7 million to $388.3$454.6 million in 20172019 compared to $367.6$430.0 million in 2016.2018. Excluding changes in foreign currency rates, SG&A increased by approximately $16.9$40.7 million compared to the same period a year ago. The reported increase is mainlyprimarily due to $20.0 million of incremental operational costs during 2019 related to our acquired companies. We also recognized increases in professional fees and salary expenses related to specific projects during the third and fourth quarters of 2017 along with other normal inflationary increases.  During 2017, we also recognized $1.3 million of professional fees related to our acquisition of a minority investmenthigher personnel costs in Kali Care, Inc. and $1.5 million of incremental operating costs related to the two additional months of Mega Airless activity.  We also recognized $2.5 million of additional long-term incentive compensation costs related to the performance of our common stock, $1.5 million for the estimated costs to remediate environmental contamination found at the Company’s facility in Brazil and $1.3 million of higher research & development costs due to lower research tax credits available in certain jurisdictions during 2017. These increases were partially offset by one-time transaction costs of $5.6 million related to the Mega Airless acquisition in 2016, which did not repeat in 2017. Due to higher sales, SG&A as a percentage of net sales decreased to 15.7% compared to 15.8% in the same period of the prior year.

In 2016, our SG&A increased approximately 5% or $16.1 million compared to the same period a year ago.  Excluding changes in foreign currency rates, SG&A increased by approximately $22.9 million compared to the same period a year ago.  The increase is mainly due to transaction costs of $5.6 million related to the Mega Airless acquisition, along with $8.5 million of Mega Airless operational expenses. We also incurred higher information technology costs associatedaccordance with our ongoing enterprise resource planning system implementation along with general increases in compensation expense.  For 2016,growth strategy. SG&A as a percentage of net sales increased to 15.8%15.9% compared to 15.2%15.6% in the same period of the prior year.

DEPRECIATION AND AMORTIZATION

Reported depreciation and amortization expense decreased approximately 1% or $1.7 million to $153.1 million in 2017 compared to $154.8 million in 2016.  Excluding changes in foreign currency rates, depreciation and amortization decreased by approximately $4.0 million compared to the same period a year ago.  The decrease is due to several large investments becoming fully depreciated during 2017 partially offset by incremental depreciation and amortization costs of $2.6 million related to the two additional months of Mega Airless activity in 2017. As depreciation expenses decreased due to the lapsing of these large investments, depreciation and amortization as a percentage of net sales decreased to 6.2% compared to 6.6% in the same period a year ago.cost increases mentioned above.

17/ATR

2017 Form 10-K


DEPRECIATION AND AMORTIZATION

In 2016,Reported depreciation and amortization expense increased approximately 11%13% or $15.9$22.8 million to $194.6 million in 2019 compared to the same period a year ago.$171.7 million in 2018. Excluding changes in foreign currency rates, depreciation and amortization increased by approximately $18.0$29.2 million compared to the same period a year ago. The reported increase is mainly due to $14.0$20.0 million of incremental depreciation and amortizationcosts related to our acquisitions. We also increased our capital spending during the Mega Airless acquisition along with incremental costs associated withcurrent and prior year to support our continued investments in new products and the roll-out of our global enterprise resource planning system.  Due to these higher expenses, depreciationgrowth strategy. Depreciation and amortization as a percentage of net sales increased to 6.6%6.8% in 2019 compared to 6.0% for6.2% in the same period aof the prior year ago.due to the incremental increase in expenses noted above.

RESTRUCTURING INITIATIVES

In late 2017, Aptar began a business transformation plan to drive profitable sales growth, increase operational excellence, enhance our approach to innovation and improve organizational effectiveness. The primary focus of the plan will beis the Beauty + Home segment; however, certain global general and administrative functions willare also bebeing addressed. During 2017, we recognized approximately $2.2 million of restructuringRestructuring costs related to this plan with approximately $0.5 million being reported withinfor the Beauty + Home segmentyears ended December 31, 2019 and $1.7 million being reported within the Food + Beverage segment.  Using current exchange rates, we estimate2018 are as follows:

Year Ended December 31,

    

2019

    

2018

    

Restructuring Initiatives by Segment

Beauty + Home

$

17,682

$

52,244

Pharma

 

632

 

3,589

Food + Beverage

 

391

 

4,185

Corporate & Other

1,767

3,811

Total Restructuring Initiatives

$

20,472

$

63,829

We expect total implementation costs of approximately $90$110 million over the next three years.for these initiatives. The cumulative expense incurred to date is $86.5 million. We also anticipate making capital investments related to the business transformation plan of approximately $45$55 million, in 2018.of which $38 million has been incurred to date. We expect this business transformation plan to yieldare progressing towards our initial target of $80 million annualized incremental EBITDA by the end of approximately $80 million by 2020, principally within the Beauty + Home segment. segment, related to our ongoing restructuring initiatives. However, ongoing changes in customer and vendor negotiations, material indices, macro-economic trends and other factors represent continuing headwinds to the Beauty + Home segment, and have offset the consolidated net benefits from these initiatives.

OPERATING INCOME

OperatingReported operating income increased approximately $11.0$85.4 million or 4%30% to $321.5$371.7 million in 20172019 compared to $310.5$286.3 million in 2016.2018. Excluding changes in currency rates, operating income increased by approximately $7.6$101.0 million in 20172019 compared to 2016.  Higher2018. We incurred lower restructuring costs and realized improved margins related to our acquisitions and full year impact of CSP Technologies during 2019 compared to the prior year period. Additionally, this increase is related to lower restructuring costs, higher sales along with lower depreciationvolumes in Pharma and amortization expenses more than offset higher SG&AFood + Beverage products and restructuring costs.  However, reported operatingadditional income related to acquired businesses. Operating income as a percentage of net sales decreasedincreased to 13.0% in 20172019 compared to 13.3%10.3% for the same periodprior year.

19/ATR

2019 Form 10-K

NET OTHER EXPENSE

Net other expense increased in the prior year as incremental sales volumes were not at the same gross margin percentage mainly due2019 to higher cost of sales as discussed above.

In 2016, operating income decreased approximately $13.6 million or 4% to $310.5$29.6 million compared to $324.1$20.2 million in 2015. The prior year’s operating income includes the positive impact of $7.4 million from a change in accounting principle related2018. This increase is partly due to inventory valuation methods.  Excluding changes in currency rates and the effects of this change in accounting principle, operating income decreased approximately $1.9 million in 2016.  Improvements in our gross margin were offset by higher SG&A and depreciation and amortization costs along with $5.6$5.7 million of Mega Airlesshigher net interest expense due to recent acquisition costs and a $2.6 million purchase accounting adjustment related to the write-up to fair value of the Mega Airless inventory which was purchased and subsequently soldactivity, including CSP Technologies during the firstthird quarter of 2016.  Reported operating income as a percentage of net sales decreased to 13.3% in 2016 compared to 14.0% for the same period2018. Included in the prior year due to the same factors mentioned above.

NET OTHER EXPENSES

Net other expenses in 2017 decreased to $26.72018 miscellaneous income is also a gain of approximately $6.5 million compared to $30.0 million in 2016.  This decrease is mainly driven by a $10.6 million gain on insurance recovery related to a fire in our Annecy, France facility and an additional $2.8 million of interest income on U.S. cash balances available after our current year repatriation activities.  These decreases in net other expenses were offset by $4.7 million of incremental interest expense incurred to prepay two of our private placement facilities during the fourth quarter of 2017. Prior year results also included a $2.0 million gain on the sale of our minority interest in an injectable drug delivery device company in 2016. 

In 2016, net other expenses increased to $30.0 million compared to $29.6 million in 2015.  We recognized lower interest income and higher interest expense as we funded our Mega Airless acquisition with cash on hand and borrowings on our revolving line of credit.  We also recognized a $2.0 million gain on the sale of our minority interest in an injectable drug delivery device company in 2016 while we reported a $2.9 million gain due to an insurance recoveryobservable price change on the involuntary conversion of fixed assets related to a fireour investment in one of our Brazilian facilities in 2015.Reciprocal Labs Corporation, doing business as Propeller Health (“Propeller Health”).

EFFECTIVE TAX RATE

The reported effective tax rate on net income before income taxes for 20172019 and 20162018 was 25.4%29.2% and 26.7%26.8%, respectively.  The lowerhigher tax rate for 20172019 primarily reflects the impact of loss operations not tax effected (+2.2%).

At December 31, 2019, as a benefit from the new accounting standard for employee share-based payments, which the Company adopted in 2017 (-3.5%).  The current year also includes items attributable to the U.S. tax legislation as described below.  The tax rate impact from the legislation includes a provisional tax charge related to the tax on unremitted earnings (+10.7%) which is partially offset by a provisional deferred tax benefit related to the enacted lower U.S. corporate tax rate (-2.3%).  The current year tax rate also includes a benefit from the resolution of a forward contract transaction (-8.1%).  The comparable prior year reflects higher tax benefits from European investment incentives (+1.4%).

18/ATR

2017 Form 10-K


On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”). The TCJA makes broad and complex changes to the U.S. tax code that impacted 2017 results including, but not limited to:

(1)

reducing the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018, which required us to remeasure our deferred tax accounts, and

(2)

requiring a one-time transition tax on certain unremitted foreign earnings.

The TCJA also puts in place new tax laws that will impact our taxable income beginning in 2018, which include, but are not limited to:

(1)

creating a Base Erosion Anti-abuse Tax (“BEAT”), which is a new minimum tax,

(2)

generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries,

(3)

a provision designed to currently tax global intangible low-taxed income (“GILTI”),

(4)

a provision that could limit the amount of deductible interest expense,

(5)

the repeal of the domestic production activity deduction, and

(6)

limitations on the deductibility of certain executive compensation.

Shortly after the TCJA was enacted, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) which provides guidance on accounting for the TCJA’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the TCJA enactment date, during which a company acting in good faith may complete the accounting for the impacts of the TCJA under ASC Topic 740. In accordance with SAB 118, the Company must reflect the income tax effects of the TCJA in the reporting period in which the accounting under ASC Topic 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete, the Company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the first reporting period in which a reasonable estimate can be determined.

The transition tax is a 2017 tax on the previously untaxed accumulated and current earnings and profits (“E&P”) of our foreign subsidiaries. In order to determine the amount of the transition tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the subsidiaries, as well as the amount of non-U.S. income taxes paid on such E&P. We were able to make a reasonable estimate of the transition tax and recorded a provisional transition tax obligation of $31.6 million which we expect to be fully offset by the utilization of foreign tax credits.

To reflect the reductionresult of the U.S. corporate tax rate, we have recorded a provisional adjustment to our net deferred tax balances, with a corresponding discrete net tax provisional benefit of $6.8 million in the current period. 

The TCJA includes a provision designed to currently tax GILTI starting in 2018. Due to the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the TCJAglobal intangible low taxed income (“GILTI”) and the application of ASC Topic 740.  We are also considering available accounting policy alternatives. For these reasons, we are not yet able to reasonably estimate the effect of this provision of the TCJA. Therefore, we have not made any adjustments relating to potential GILTI tax in our financial statements and have not made a policy decision regarding our accounting for GILTI.

The2017 transition tax noted above results in the previously untaxed foreign earnings being included in the U.S. federal and state 2017 taxable income. Therefore, as of December 31, 2017, the Company doesprovisions, we do not have a balance of foreign earnings that have not beenwill be subject to U.S. taxation.  We are currently analyzingcontinually analyze our global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries made a distribution of their cash or distributable reserves. TheThese liabilities would include local country withholding and income tax and potential U.S. state taxation.  As of December 31, 2017, the2019, all other cash or distributable reserve amounts will continuecontinued to be reinvested indefinitely and would become subject to these additional taxes if they were remitted as dividends. We estimate the additional tax that would be payable on these earnings to be in the range of $25$20 million to $35$30 million.

The reported effective tax rate on net income for 2016 and 2015 was 26.7% and 32.3%, respectively.  The lower tax rate for 2016 reflects the reduction in the French corporate tax rate (1.7%) and higher investment incentives in both France and Italy (2.2%).  The Company also recorded a benefit from the resolution of uncertain tax positions in France and Italy (0.8%) during 2016.

NET INCOME ATTRIBUTABLE TO APTARGROUP, INC.

We reported net income of $220.0$242.2 million compared to $205.6$194.7 million reported in 2016 and $199.3 million reported in 2015.2018.

19/ATR

2017 Form 10-K


BEAUTY + HOME SEGMENT

    

    

    

% Change

    

Year Ended December 31,

 

2019

2018

2019 vs. 2018

Net Sales

 

$

1,352,714

 

$

1,426,382

 

(5.2)

%  

Adjusted EBITDA (1)

181,150

185,926

(2.6)

Adjusted EBITDA margin (1)

13.4

%  

13.0

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

 

    

 

 

 

    

% Change

    

% Change

 

Years Ended December 31,

 

2017

 

 

2016

 

 

2015

 

2017 vs. 2016

 

2016 vs. 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

1,313,786

 

 

$

1,261,086

 

 

$

1,272,946

 

4.2

%  

(0.9)

%

Segment Income (1)

 

 

93,805

 

 

 

100,569

 

 

 

98,707

 

(6.7)

 

1.9

 

Segment Income as a percentage of Net Sales

 

 

7.1

%  

 

 

8.0

%  

 

 

7.8

%  

 

 

 

 

Adjusted EBITDA margin  (2)

 

 

13.2

%  

 

 

14.8

%  

 

 

13.7

%  

 

 

 

 


(1)

(1)

Segment incomeAdjusted EBITDA is definedcalculated as earnings before net interest, expense, certaintaxes, depreciation, amortization, unallocated corporate expenses, restructuring, initiativesacquisition-related costs, 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.

(2)

other special items. Adjusted EBITDA margin ismargins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation of Non-U.S.non-U.S. GAAP measures starting on page 23.

22.

Reported net sales increased approximately 4% in 2017 to $1.31 billion compared to $1.26 billion in 2016. The Mega Airless acquisition positively impacted net sales by 1% in 2017 while changes in currency rates positively impacted net sales by 1%.  Therefore, core sales increased 2% in 2017 compared to the same period in the prior year. The majority of this increase is due to higher product sales.  Tooling sales and the pass-through of higher resin prices to our customers also positively impacted sales by $4.0 million and $0.6 million, respectively. Core sales to the personal care and beauty markets each increased 2% while core sales to the home care market declined slightly during 2017 compared to the same period in the prior year.  The beauty market increased as strong sales to the facial skin care application field and higher sampling and promotion sales more than offset lower sales to our prestige fragrance market.  The personal care markets also showed improvement over the prior year due to strong body care and hair care application field sales. Sales to the home care market decreased 1% as new product sales to the automotive market were not able to completely offset lower insecticide sales, predominately in North America and Latin America related to the unusually high demand for these products in 2016.

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2017

 

Personal

 

 

 

Home

 

 

 

Net Sales Change over Prior Year

    

Care

    

Beauty

    

Care

    

Total

 

 

 

 

 

 

 

 

 

 

 

Core Sales Growth

 

 2

%

 2

%

(1)

%

 2

%

Acquisitions

 

 1

%

 1

%

 —

%

 1

%

Currency Effects

 

 1

%

 2

%

 2

%

 1

%

Total Reported Net Sales Growth

 

 4

%

 5

%

 1

%

 4

%

In 2016, reportedReported net sales decreased approximately 1%5% in 2019 to $1.26$1.35 billion compared to $1.27$1.43 billion in 2015. The Mega Airless acquisition positively impacted net sales by 4% in 2016 while changes2018. Changes in currency rates negatively impacted net sales by 3%4%. Therefore, core sales decreased 2%1% in 20162019 compared to the same period in the prior year. The majority of this decrease is due to lower toolingreduced demand from the personal care market and a $1.5 million reduction of sales anddue to the pass-through of lower resin prices to our customers, which negatively impactedcustomers. Core sales to the personal care market decreased 6%. The decrease is mostly related to a general softness in demand across most of our major applications, especially body care and hair care products, as political and economic uncertainties are leading to some customer destocking. We also recognized lower product and tooling sales in 2019 related to a large product launch for 2016 by $15.4 million and $4.5 million, respectively.a specific North America customer during the second quarter of 2018. Core sales to the beauty market were flat while core sales to both the personalincreased 4% on strong growth in skin care and home care markets declined 4% during 2016 compared tofragrance dispensing systems, primarily driven by the same period in the prior year.  For the beautyChinese luxury market growth inand retail travel. Higher sales of our products toused on air care and dish care applications drove the color cosmetics and facial skin care application fields were offset by lower tooling sales.  Sales of our products to the personal care markets experienced soft customer demand across their main application fields with the exception of body care.  Strong insecticide and industrial productcore sales togrowth in the home care market were offset by lower customer demand in laundry care.market.

Year Ended December 31, 2019

Personal

Home

Net Sales Change over Prior Year

  

Care

    

Beauty

    

Care

    

Total

Core Sales Growth

(6)

%

4

%

1

%

(1)

%

Acquisitions

%

%

%

%

Currency Effects (1)

(3)

%

(5)

%

(3)

%

(4)

%

Total Reported Net Sales Growth

(9)

%

(1)

%

(2)

%

(5)

%

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2016

 

Personal

 

 

 

Home

 

 

 

Net Sales Change over Prior Year

    

Care

    

Beauty

    

Care

    

Total

 

 

 

 

 

 

 

 

 

 

 

Core Sales Growth

 

(4)

%

 —

%

(4)

%

(2)

%

Acquisitions

 

 3

%

 6

%

 —

%

 4

%

Currency Effects

 

(3)

%

(2)

%

(2)

%

(3)

%

Total Reported Net Sales Growth

 

(4)

%

 4

%

(6)

%

(1)

%

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

20/ATR

2019 Form 10-K

Segment incomeTable of Contents

Adjusted EBITDA for 20172019 decreased to $93.8$181.2 million from $100.6$185.9 million reported in 2016. Gains on sales volume increases were offset by higher2018. During 2019, we experienced favorable material cost impacts due to lower raw material input costs and operational inefficiencies, mainlythe associated positive impact from the timing delay of passing through resin cost to our customers.  We also realized improved profitability on our tooling projects, but these favorable variances were not enough to overcome the softening demand from our personal care customers as discussed above.  Adjusted EBITDA as a percentage of sales improved to 13.4% in our custom decorative packaging business in Europe. As discussed above, we have initiated a business transformation plan to address these challenges. During 2017, we also recognized a charge of $1.5 million for the estimated costs to remediate environmental contamination found at the Company’s anodizing facility in Brazil.

20/ATR

2017 Form 10-K


Segment income for 2016 increased slightly to $100.6 million from $98.7 million reported in 2015, in spite of the decrease in net sales. The increase2019 compared to the prior year is partly related to our mix of product sales13.0% in 2018 due to the contributionpositive impact of airless product sales related to our Mega Airless acquisition.  We also continue to focus on operational and material cost savings initiatives. Segment income was negatively impacted by $2.2 million due to a purchase accounting adjustment related totransformation initiatives along with the write-up to fair value of the Mega Airless inventory we purchased and subsequently sold during the first quarter.other positive factors mentioned above.

PHARMA SEGMENT

    

    

    

% Change

    

Year Ended December 31,

 

 

2019

 

2018

2019 vs. 2018

Net Sales

$

1,091,051

 

$

954,652

 

14.3

%  

Adjusted EBITDA (1)

387,483

343,706

12.7

Adjusted EBITDA margin (1)

35.5

%  

36.0

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

 

    

 

 

 

    

% Change

    

% Change

 

Years Ended December 31,

 

 

2017

 

 

 

2016

 

 

 

2015

 

2017 vs. 2016

 

2016 vs. 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

805,880

 

 

$

741,473

 

 

$

712,220

 

8.7

%  

4.1

%

Segment Income

 

 

234,790

 

 

 

219,039

 

 

 

210,509

 

7.2

 

4.1

 

Segment Income as a percentage of Net Sales

 

 

29.1

%  

 

 

29.5

%  

 

 

29.6

%  

 

 

 

 

Adjusted EBITDA margin

 

 

34.2

%  

 

 

35.0

%  

 

 

34.6

%  

 

 

 

 

(1)Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring, acquisition-related costs and other special items. Adjusted EBITDA margins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation of non-U.S. GAAP measures starting on page 22.

Reported net sales increased approximately 9%14% in 20172019 to $805.9 million$1.09 billion compared to $741.5$954.7 million in 2016.2018. Changes in currency rates positively impactedcurrencies negatively affected net sales by 1%.5% while our acquisitions of CSP Technologies, Gateway, Nanopharm and Noble positively impacted sales by 9% in 2019. Therefore, core sales increased 8%10% in 20172019 compared to the same period in the prior year. All threeSales increased in all of our markets reported increases during 2017 with core2019. Core sales to the prescription drug market increased 13% mainly driven by strong demand for our products sold for central nervous system and allergic rhinitis treatments. We also benefitted from the realization of $1.8 million of revenue for achieving a development milestone related to a customer project. Core sales to the consumer health care and injectables markets increasing 7%, 7% and 9%, respectively. Consumer health care realized strongmarket increased 6% on increased demand for our products used on nasal decongestantseye care and nasal salines. The prescription drug market reported core sales increases across all applications with strong sales of our devices used on asthma, COPD and allergic rhinitis products driving the growth in 2017.saline treatments. Core sales of our products to the injectables markets increasedgrew 8% due to improved salesincreased demand across the majority of our components used on antithromboticproduct offerings and small molecule products. Forin all regions. Active packaging core sales comparisons are from our acquisition of CSP Technologies at the segment, customer toolingend of August 2018. The core sales excluding foreign currency changes, decreased $3.2 million in 2017increase is mostly due to $30.1strong pre-commercial sales activity for our new active blister packaging solution for oral solid dose drug delivery.

Year Ended December 31, 2019

Prescription

Consumer

Active

Net Sales Change over Prior Year

    

Drug

    

Health Care

    

Injectables

    

Packaging

    

Total

Core Sales Growth

13

%

6

%

8

%

15

%

10

%

Acquisitions

1

%

%

4

%

221

%

9

%

Currency Effects (1)

(5)

%

(5)

%

(5)

%

(4)

%

(5)

%

Total Reported Net Sales Growth

9

%

1

%

7

%

232

%

14

%

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

Adjusted EBITDA for 2019 increased to $387.5 million compared to $33.3$343.7 million in 2018. The strong product sales growth discussed above along with incremental profit related to our acquisitions led to the prior year.

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2017

 

Prescription

 

Consumer

 

 

 

 

 

Net Sales Change over Prior Year

    

Drug

    

Health Care

    

Injectables

    

Total

 

 

 

 

 

 

 

 

 

 

 

Core Sales Growth

 

 7

%

 7

%

 9

%

 8

%

Currency Effects

 

 1

%

 1

%

 2

%

 1

%

Total Reported Net Sales Growth

 

 8

%

 8

%

11

%

 9

%

increase in reported results for 2019 compared to 2018.  2018 results also include a gain of approximately $6.5 million on our investment in Propeller Health. Adjusted EBITDA as a percentage of sales declined to 35.5% in 2019 compared to 36.0% in 2018.  Excluding the Propeller Health gain in 2018, the adjusted EBITDA percentage would have improved slightly during 2019.

In 2016, reportedFOOD + BEVERAGE SEGMENT

    

    

% Change

    

Year Ended December 31,

 

 

2019

 

2018

2019 vs. 2018

Net Sales

$

415,967

 

$

383,727

 

8.4

%  

Adjusted EBITDA (1)

68,108

57,589

18.3

Adjusted EBITDA margin (1)

16.4

%  

15.0

%  

(1)Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring, acquisition-related costs and other special items. Adjusted EBITDA margins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation of non-U.S. GAAP measures starting on page 22.

21/ATR

2019 Form 10-K

Reported net sales increased by approximately 4%8% in 2019 to $741.5$416.0 million compared to $712.2$383.7 million in 2015. The Mega Airless2018. Incremental sales from our CSP Technologies acquisition positively impacted net sales by 1% in 20167% while changes in currency rates negatively impacted net sales by 2%. Therefore, core sales increased 5%3% in 2016 compared to the same period in the prior year. All three markets reported increases during 2016 with core sales to the prescription drug, consumer health care and injectables markets increasing 2%, 11% and 4%, respectively. Prescription growth was led bystrong demand for allergic rhinitis and central nervous system product sales.  We also experienced strong demand for our products sold to the eye care and dermal drug delivery application fields in the consumer health care market. Injectables sales also grew across the majority of their application fields. Customer tooling sales, excluding foreign currency changes, increased $11.2 million in 2016 to $31.5 million compared to $20.3 million in the prior year.

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2016

 

Prescription

 

Consumer

 

 

 

 

 

Net Sales Change over Prior Year

    

Drug

    

Health Care

    

Injectables

    

Total

 

 

 

 

 

 

 

 

 

 

 

Core Sales Growth

 

 2

%

11

%

 4

%

 5

%

Acquisitions

 

 —

%

 5

%

 —

%

 1

%

Currency Effects

 

(1)

%

(4)

%

 —

%

(2)

%

Total Reported Net Sales Growth

 

 1

%

12

%

 4

%

 4

%

Segment income for 2017 increased approximately 7% to $234.8 million compared to $219.0 million in 2016. Strong sales volumes across all three markets were able to offset unfavorable manufacturing variances, $1.3 million of professional fees related to our acquisition of a minority investment in Kali Care, Inc. and start-up costs related to our new injectable capacity in North America.

21/ATR

2017 Form 10-K


In 2016, segment income increased approximately 4% to $219.0 million compared to $210.5 million in 2015. This increase is due to the additional product and tooling sales discussed above along with favorable product mix within the segment.  Cost savings initiatives partially offset costs related to an enterprise resource system implementation and the impact of a purchase accounting adjustment of $0.4 million related to the write-up to fair value of the Mega Airless inventory we purchased and subsequently sold during the first quarter of 2016. We also recognized a $2.0 million gain on the sale of our minority interest in an injectable drug delivery device company in 2016.

FOOD + BEVERAGE SEGMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

    

 

 

 

    

% Change

    

% Change

 

Years Ended December 31,

 

 

2017

 

 

 

2016

 

 

 

2015

 

2017 vs. 2016

 

2016 vs. 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

349,617

 

 

$

328,375

 

 

$

331,983

 

6.5

%  

(1.1)

%

Segment Income

 

 

38,183

 

 

 

37,697

 

 

 

42,731

 

1.3

 

(11.8)

 

Segment Income as a percentage of Net Sales

 

 

10.9

%  

 

 

11.5

%  

 

 

12.9

%  

 

 

 

 

Adjusted EBITDA margin

 

 

18.0

%  

 

 

18.8

%  

 

 

19.3

%  

 

 

 

 

Reported net sales increased by approximately 6% in 2017 to $349.6 million compared to $328.4 million in 2016. Changes in foreign currency rates had no impact on the current year results. Therefore, core sales increased 6% in 20172019 compared to the prior year. Core sales to the food andmarket increased 7% while core sales to the beverage markets increased 6% and 7%, respectively in 2017market decreased 2% compared to the same period of the prior year.2018. Sales to the food market increased due to strong sales of our products used on sauces and condiments. We also realizedacross all of our largest applications, including increases in sales ofto our products used on spreads, jellysauces and honey,condiments, non-beverage dairy, and infant nutrition products.and granular powder customers. For the beverage market, strong sales of our products to our bottled water and concentrate customers offset a decrease in functional drink application sales. Sales for 2017 were also favorably impacted by higher tooling sales of $7.0 million.

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2017

 

 

 

 

 

 

 

 

 

Net Sales Change over Prior Year

    

 

 

Food

    

Beverage

    

Total

 

 

 

 

 

 

 

 

 

 

 

Core Sales Growth

 

 

 

 6

%

 7

%

 6

%

Currency Effects

 

 

 

 —

%

 —

%

 —

%

Total Reported Net Sales Growth

 

 

 

 6

%

 7

%

 6

%

In 2016, reported net sales decreased by approximately 1% to $328.4 million compared to $332.0 million in 2015. Excluding a 2% negative impact from the changes in foreign currency rates, core sales increased 1%. Higher product sales were offset by a decline in beverage closure volumes related to a customer in China. Lower tooling sales and the pass-through of lower resin prices to our customers and lower tooling sales of $4.0 million and $3.1 million, respectively, in 2016 compared to the prior year.  Core sales of our products to the food market increased 9% while core sales of our products to the beverage market decreased approximately 7% in 2016 compared to the prior year.  Sales to the food market increased with strong demand for our sauces and condiments products along with increases in the dairy and infant formula application fields.  For the beverage market, we experienced a decrease in the demand for our products to the functional drink applications, mainly in China.

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2016

 

 

 

 

 

 

 

 

 

Net Sales Change over Prior Year

    

 

 

Food

    

Beverage

    

Total

 

 

 

 

 

 

 

 

 

 

 

Core Sales Growth

 

 

 

 9

%

(7)

%

 1

%

Currency Effects

 

 

 

(2)

%

(3)

%

(2)

%

Total Reported Net Sales Growth

 

 

 

 7

%

(10)

%

(1)

%

Segment income increased approximately 1% to $38.2 million in 2017 compared to $37.7 million in 2016. Increased product and tooling sales more than offset price concessions to customers to secure long-term agreements. Improvements in productivity were able to offset increased legal fees to defend our intellectual property.

In 2016, segment income decreased approximately 12% to $37.7 million compared to $42.7 million in 2015. Profit associated with increased sales to the food market along with cost savings initiatives did not completely offset the decrease in profitability from the shortfall in sales of our products to the beverage market.  Lower demand also led to lower operating performance in China along with a negative impact due to the mix of products sold during 2016 compared to the same period in the prior year.  Resin costschanges also negatively impacted segment incomecore sales compared to 2018 by approximately $0.9 million in 2016.and $5.1 million, respectively.

Year Ended December 31, 2019

Net Sales Change over Prior Year

    

Food

    

Beverage

    

Total

Core Sales Growth

7

%

(2)

%

3

%

Acquisitions

11

%

%

7

%

Currency Effects (1)

(2)

%

(3)

%

(2)

%

Total Reported Net Sales Growth

16

%

(5)

%

8

%

22/ATR

(1)

2017 Form 10-K

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


passing on resin cost decreases from previous quarters to our customers. During 2018, we recognized an impairment of $1.6 million related to prepaid royalties as a result of lower than expected sales during the contractual period. This impairment does not impact our current product portfolio or future project pipeline related to the underlying technology. Adjusted EBITDA as a percentage of sales improved to 16.4% in 2019 compared to 15.0% in 2018 due to favorable operational performance along with the other positive factors discussed above.

CORPORATE & OTHER

Certain costs that are not allocatedIn addition to our three operating businessreporting segments, are classified asAptar assigns certain costs to “Corporate & Other,” which is presented separately in Note 1718 of the Notes to the Consolidated Financial Statements. For Corporate & Other, Adjusted EBITDA (which excludes net interest, taxes, depreciation, amortization, restructuring, acquisition-related costs and other special items) primarily includes certain corporate compensation, professional fees, certaincompensation and information system costs and LIFO inventory adjustments (priorwhich are not allocated directly to our accounting change in the second quarter of 2015 discussed in Note 1 of the Notes to Consolidated Financial Statements).

reporting segments.  Corporate & Other expense in 2017 decreased2019 increased to $34.6$44.4 million compared to $44.2$36.3 million in 2016. Excluding the $10.6 positive impact of a gain on insurance recovery related to a 2016 fire in our Annecy, France facility on our 2017 results and a $5.6 million negative impact of Mega Airless acquisition transaction costs on our 2016 results, Corporate & Other expense increased $4.6 million in 2017 compared to the prior year.  This increase is mainly due increases in professional fees and salary expenses related to specific internal projects.  We also recognized $1.7 million of additional long-term incentive compensation costs related to the performance of our common stock.

In 2016, Corporate & Other expense increased to $44.2 million compared to $28.4 million in 2015. Excluding the impact of a favorable $7.4 million change in accounting principle related to our inventory valuation method in the prior year, Corporate & Other expense increased $8.4 million in 2016 compared to the prior year.  This2018. As discussed above, this increase is mainly due to $5.6 million of transactionhigher professional fees and personnel costs relatedas we continue to the Mega Airless acquisition reported in the first quarter of 2016. In addition, the prior year Corporate & Other expense was reduced by $2.9 million of gain due to an insurance recovery on the involuntary conversion of fixed assets related to a fire in one ofimplement our Brazilian facilities.growth strategy.  

NON-U.S. GAAP MEASURES

In addition to the information presented herein that conforms to U.S. GAAP, we also present financial information that does not conform to U.S. GAAP, which are referred to as non-U.S. GAAP financial measures. Management may assess our financial results both on a U.S. GAAP basis and on a non-U.S. GAAP basis. We believe it is useful to present these non-U.S.GAAPnon-U.S. GAAP financial measures because they allow for a better period-over-period comparison of operating results by removing the impact of items that, in management’s view, do not reflect Aptar’s core operating performance. These non-U.S. GAAP financial measures should not be considered in isolation or as a substitute for U.S. GAAP financial results, but should be read in conjunction with the audited consolidated statements of income and other information presented herein. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures. Further, investors are urged to review and consider carefully the adjustments made by management to the most directly comparable U.S. GAAP financial measure to arrive at these non-U.S. GAAP financial measures.

22/ATR

2019 Form 10-K

In our MD&A, we exclude the impact of foreign currency translation when presenting net sales and other information, which we define as “constant currency.” Changes in net sales excluding the impact of foreign currency translation is a non-U.S. GAAP financial measure. As a worldwide business, it is important that we take into account the effects of foreign currency translation when we view our results and plan our strategies. Consequently, when our management looks at our financial results to measure the core performance of our business, we exclude the impact of foreign currency translation by translating our prior period results at current period foreign currency exchange rates. As a result, our management believes that these presentations are useful internally and may be useful to investors. We also exclude the impact of material acquisitions and dispositions and other special items when comparing results to prior periods. Changes in operating results excluding the special itemsimpact of acquisitions are non-U.S. GAAP financial measures. We feelbelieve it is useful to investorsimportant to exclude the impact of these itemsacquisitions on year-over-yearperiod over period results in order to evaluate performance on a more comparable basis.

We present earnings before net interest and taxes (“EBIT”) and earnings before net interest, taxes, depreciation and amortization (“EBITDA”). We also present our adjusted earnings before net interest and taxes (“Adjusted EBIT”) and adjusted earnings before net interest, taxes, depreciation and amortization (“Adjusted EBITDA”), both of which excludesexclude, among other special items, the impactbusiness transformation charges and acquisition-related costs.Our Operations Outlook is also provided on a non-U.S. GAAP basis because certain reconciling items are dependent on future events that either cannot be controlled, such as tax and exchange rates, or reliably predicted because they are not part of a gain from an insurance recoveryour routine activities, such as restructuring and restructuring initiative charges in 2017. Adjusted EBITDA also excludes transaction costs and purchase accounting adjustments that affected the inventory values related to the Mega Airless acquisition in 2016.acquisition-related costs.

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

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

Year Ended

December 31, 2019

  

Consolidated

  

Beauty + Home

  

Pharma

  

Food + Beverage

  

Corporate & Other

  

Net Interest

Net Sales

$

2,859,732

$

1,352,714

$

1,091,051

$

415,967

$

-

$

-

Reported net income

$

242,227

Reported income taxes

99,842

Reported income before income taxes

342,069

80,281

317,897

31,835

(56,629)

(31,315)

Adjustments:

Restructuring initiatives

20,472

17,682

632

391

1,767

Transaction costs related to acquisitions

3,927

409

3,364

154

Purchase accounting adjustments related to acquired companies' backlog

1,202

1,202

Adjusted earnings before income taxes

367,670

98,372

323,095

32,380

(54,862)

(31,315)

Interest expense

35,489

35,489

Interest income

(4,174)

(4,174)

Adjusted earnings before net interest and taxes (Adjusted EBIT)

398,985

98,372

323,095

32,380

(54,862)

-

Depreciation and amortization

194,552

82,778

65,590

35,728

10,456

-

Backlog amortization included in Depreciation and amortization above

(1,202)

(1,202)

Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)

$

592,335

$

181,150

$

387,483

$

68,108

$

(44,406)

$

-

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)

20.7%

13.4%

35.5%

16.4%

23/ATR

20172019 Form 10-K


Year Ended

December 31, 2018

  

Consolidated

  

Beauty + Home

  

Pharma

  

Food + Beverage

  

Corporate & Other

  

Net Interest

Net Sales

$

2,764,761

$

1,426,382

$

954,652

$

383,727

$

-

$

-

Reported net income

$

194,766

Reported income taxes

71,254

Reported income before income taxes

266,020

49,443

276,550

23,956

(58,359)

(25,570)

Adjustments:

Restructuring initiatives

63,829

52,244

3,589

4,185

3,811

Transaction costs related to acquisitions

9,598

574

9,024

Purchase accounting adjustments related to acquired companies' inventory

14,172

119

12,072

1,981

Adjusted earnings before income taxes

353,619

102,380

292,211

30,122

(45,524)

(25,570)

Interest expense

32,626

32,626

Interest income

(7,056)

(7,056)

Adjusted earnings before net interest and taxes (Adjusted EBIT)

379,189

102,380

292,211

30,122

(45,524)

-

Depreciation and amortization

171,747

83,546

51,495

27,467

9,239

-

Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)

$

550,936

$

185,926

$

343,706

$

57,589

$

(36,285)

$

-

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)

19.9%

13.0%

36.0%

15.0%

Net Debt to Net Capital Reconciliation

    

December 31,

    

December 31,

 

2019

2018

Notes payable, revolving credit facility and overdrafts

  

$

44,259

   

$

101,293

 

Current maturities of long-term obligations, net of unamortized debt issuance costs

65,988

62,678

Long-Term Obligations, net of unamortized debt issuance costs

1,085,453

1,125,993

Total Debt

1,195,700

1,289,964

Less:

Cash and equivalents

241,970

261,823

Net Debt

$

953,730

$

1,028,141

Total Stockholders' Equity

$

1,572,252

$

1,422,871

Net Debt

953,730

1,028,141

Net Capital

$

2,525,982

$

2,451,012

Net Debt to Net Capital

37.8%

41.9%

Free Cash Flow Reconciliation

    

December 31,

    

December 31,

2019

2018

Net Cash Provided by Operations

  

$

514,457

   

$

313,628

Less:

Capital Expenditures

242,276

211,252

Free Cash Flow

$

272,181

$

102,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

December 31, 2017

 

 

 

 

 

  

Consolidated

  

Beauty + Home

  

Pharma

  

Food + Beverage

  

Corporate & Other

  

Net Interest

Net Sales

 

$

2,469,283

 

$

1,313,786

 

$

805,880

 

$

349,617

 

$

 -

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported net income

 

$

220,029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported income taxes

 

 

74,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported income before income taxes

 

 

294,825

 

 

93,276

 

 

234,790

 

 

36,504

 

 

(34,618)

 

 

(35,127)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring initiatives

 

 

2,208

 

 

529

 

 

 

 

 

1,679

 

 

 

 

 

 

Gain on insurance recovery

 

 

(10,648)

 

 

 

 

 

 

 

 

 

 

 

(10,648)

 

 

 

Adjusted earnings before income taxes

 

 

286,385

 

 

93,805

 

 

234,790

 

 

38,183

 

 

(45,266)

 

 

(35,127)

Interest expense

 

 

40,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,597

Interest income

 

 

(5,470)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,470)

Adjusted earnings before net interest and taxes (Adjusted EBIT)

 

 

321,512

 

 

93,805

 

 

234,790

 

 

38,183

 

 

(45,266)

 

 

 -

Depreciation and amortization

 

 

153,094

 

 

79,422

 

 

41,143

 

 

24,720

 

 

7,809

 

 

 -

Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)

 

$

474,606

 

$

173,227

 

$

275,933

 

$

62,903

 

$

(37,457)

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment income margins (Income before income taxes / Reported Net Sales)

 

 

 

 

 

7.1%

 

 

29.1%

 

 

10.4%

 

 

 

 

 

 

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)

 

 

19.2%

 

 

13.2%

 

 

34.2%

 

 

18.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

December 31, 2016

 

 

 

 

 

  

Consolidated

  

Beauty + Home

  

Pharma

  

Food + Beverage

  

Corporate & Other

  

Net Interest

Net Sales

 

$

2,330,934

 

$

1,261,086

 

$

741,473

 

$

328,375

 

$

 -

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported net income

 

$

205,604

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported income taxes

 

 

74,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported income before income taxes

 

 

280,497

 

 

100,569

 

 

219,039

 

 

37,697

 

 

(44,214)

 

 

(32,594)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction costs related to the Mega Airless acquisition

 

 

5,640

 

 

 

 

 

 

 

 

 

 

 

5,640

 

 

 

Purchase accounting adjustments related to Mega Airless inventory

 

 

2,577

 

 

2,151

 

 

426

 

 

 

 

 

 

 

 

 

Adjusted earnings before income taxes

 

 

288,714

 

 

102,720

 

 

219,465

 

 

37,697

 

 

(38,574)

 

 

(32,594)

Interest expense

 

 

35,237

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,237

Interest income

 

 

(2,643)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,643)

Adjusted earnings before net interest and taxes (Adjusted EBIT)

 

 

321,308

 

 

102,720

 

 

219,465

 

 

37,697

 

 

(38,574)

 

 

 -

Depreciation and amortization

 

 

154,802

 

 

84,273

 

 

39,776

 

 

23,891

 

 

6,862

 

 

 -

Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)

 

$

476,110

 

$

186,993

 

$

259,241

 

$

61,588

 

$

(31,712)

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment income margins (Income before income taxes / Reported Net Sales)

 

 

 

 

 

8.0%

 

 

29.5%

 

 

11.5%

 

 

 

 

 

 

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)

 

 

20.4%

 

 

14.8%

 

 

35.0%

 

 

18.8%

 

 

 

 

 

 

24/ATR

20172019 Form 10-K


 

 

 

 

 

 

 

 

Net Debt to Net Capital Reconciliation

    

 

December 31,

    

 

December 31,

 

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

Notes payable

  

$

4,336

   

$

169,213

 

Current maturities of long-term obligations, net of unamortized debt issuance costs

 

 

61,833

 

 

4,603

 

Long-Term Obligations, net of unamortized debt issuance costs

 

 

1,191,146

 

 

772,737

 

Total Debt

 

 

1,257,315

 

 

946,553

 

Less:

 

 

 

 

 

 

 

Cash and equivalents

 

 

712,640

 

 

466,287

 

Net Debt

 

$

544,675

 

$

480,266

 

 

 

 

 

 

 

 

 

Total Stockholders' Equity

 

$

1,312,048

 

$

1,174,242

 

Net Debt

 

 

544,675

 

 

480,266

 

Net Capital

 

$

1,856,723

 

$

1,654,508

 

 

 

 

 

 

 

 

 

Net Debt to Net Capital

 

 

29.3%

 

 

29.0%

 

LIQUIDITY AND CAPITAL RESOURCES

We believe we are in a strong financial position and have the financial resources to meet our business requirements in the foreseeable future. We have historically used cash flow from operations, our revolving credit facilities, proceeds from stock options and debt, as needed, as our primary sources of liquidity. Our primary uses of liquidity are to invest in equipment and facilities that are necessary to support our growth, cost efficiencies, and to make acquisitions that will contribute to the achievement of our strategic objectives.

Other uses of liquidity include paying dividends to stockholders and repurchasing shares of our common stock.  The majority of these cash needs are met using U.S. funds.  We voluntarily repatriated approximately €250 million ($263 million) in the first quarter of 2017stock and another €700 million ($751 million) in the third quarter of 2017 from Europepaying dividends to the U.S. We believe that these repatriations provide us with significant resources to meet our U.S. funding needs for the next several years.stockholders. 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, as well as evaluate our acquisition strategy and dividend and share repurchase programs. 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. Refer to Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for additional information regarding Liquidity and Capital Resources for the year ended December 31, 2018 as compared to the year ended December 31, 2017.

Cash and equivalents decreased to $242.0 million at December 31, 2019 from $261.8 million at December 31, 2018. Total short and long-term interest bearing debt of $1.2 billion at December 31, 2019 decreased from the $1.3 billion at December 31, 2018 resulting from repayments made during the year on our group credit facilities and long-term debt obligations. The ratio of our Net Debt (interest bearing debt less cash and cash equivalents) to Net Capital (stockholders’ equity plus Net Debt) decreased to 37.8% at December 31, 2019 compared to 41.9% at December 31, 2018. See the reconciliation of non-U.S. GAAP measures starting on page 22.

In 2017,2019, our operations provided approximately $324.7$514.5 million in cash flow compared to $325.3$313.6 million in 2016 and $323.8 million in 2015.2018. Cash flow from operations was primarily derived from earnings before depreciation and amortization. The increase in 2019 cash flow from operations in 2017 wascompared to 2018 is primarily attributable to improvements in earningslower restructuring costs, improved profitability and better working capital partially offset by an additional $30 million contribution to our domestic pension plan over the amount contributed in 2016.   Comparing 2016 to 2015, the increase is mainly due to profit growth offset by an increased use of cash for working capital.management.

We used $224.8$336.3 million in cash for investing activities during 20172019 compared to $300.5$735.5 million during 20162018. The lower cash utilization in 2019 compared to 2018 is mainly due to less cash outflows related to acquisitions. During 2019, approximately $106.3 million of cash was utilized to fund our Gateway, Nanopharm and $176.2Noble acquisitions; we also released $4.0 million during 2015. During 2017, we spent $203.0relating to the final escrow settlement on our acquisition of CSP Technologies and invested $3.5 million less on acquisitions. However, in 2017 we did use $66.2two preferred equity investments. We also received $16.5 million to settle a derivative and increasedfrom the sale of our investment in Propeller Health in 2019. Our investment in capital projects by $27.6increased $31.0 million during 2019 as compared to 2016.2018. Our cash utilization in 2018 is mainly due to acquisitions and capital investments to support our growth strategy. During 2018, approximately $524.4 million of our cash (net of $24.1 million of cash acquired and $5.0 million in escrow) was utilized to fund our acquisition of CSP Technologies. We also invested $5 million for a 20% minority interest in Kali Care, a technology company that provides digital monitoring systems for medical devices. Comparing 2016 to 2015, the increase in cash used for investing activities is due primarily to the Mega Airless acquisition partially offset by the maturity of $29.5$10.0 million in short-term investmentspreferred stock of Propeller Health and a decrease in capital expendituresacquired Reboul for an initial purchase price of $20.3 million.  Our 2018 estimatedapproximately $3.5 million (net of $112 thousand of cash outlays for capital expenditures are expected to be approximately $200 million but could vary due to changes in exchange rates as well as the timing of capital projects.acquired).

Financing activities provided $114.8utilized $197.1 million in cash during 2017,2019, compared to net cash used forutilized by financing activities of $29.7$14.9 million during 2016 and $32.3 million in 2015.  During 2017,2018. In 2019, we borrowed approximately $800 million in Europe (see details below) and used the proceeds along with cash on hand to repatriate $1.0 billion from Europe to the U.S.  These funds were used to repay $160 million outstanding on the U.S.net short term revolving credit facility repurchase $161.5of $52.1 million, pay $67.3 million of long-term debt and pay $90.2 million of dividends, received net proceeds from stock option exercises of $90.8 million and repurchased $86.5 million of common stock and prepay $159 million of private placement debt.  For 2016,that was placed into treasury. In 2018, we received net proceeds from notes payable were used to partially finance the acquisition of Mega Airlessour short term credit facility and to repurchase and retire common stock.  During 2015, we repurchased shares of common stock for retirement at a total cost of $13.9 million.  Proceeds from stock option exercises were offset by theof $81.1 million and $88.2 million, respectively. We used cash paidon hand to stockholders inrepay $72.3 million of long-term debt, pay $82.3 million of dividends during 2017, 2016 and 2015.repurchase $61.7 million of common and treasury stock.  

25/ATR

2017 Form 10-K


CashWe hold U.S. dollar and equivalents increasedeuro-denominated debt to $712.6 million at the end of 2017 from $466.3 million at the end of 2016 mainly due to additional borrowings in Europe and current year earnings.  During 2017, we repatriated $1.0 billion from Europe to the U.S. as discussed above.  Total short and long-term interest bearing debt increased to $1.3 billion at the end of 2017 from $946.6 million at the end of 2016 primarily due to the additional debt taken on in Europe to fund the repatriation.  The ratio ofalign our Net Debt (interest bearing debt less cash and cash equivalents less short-term investments) to Net Capital (stockholder’s equity plus Net Debt) was 29.3% at December 31, 2017 compared to 29.0% at December 31, 2016.  See the reconciliation of Non-U.S. GAAP measures starting on page 23.

On July 20, 2017, the Company replaced its $300 million revolving credit facilitycapital structure with our earnings base. We also maintain a new 5-year multi-currency revolving credit facility with two tranches, providing for unsecured financing of up to $300 million that is available in the U.S. and up to €150 million that is available to our wholly ownedwholly-owned UK subsidiary. Each borrowing under the credit facility will bear interest at rates based on LIBOR, prime rates or other similar rates, in each case plus an applicable margin. A facility fee on the total amount of the facility is also payable quarterly, regardless of usage. The applicable margins for borrowings under the credit facility and the facility fee percentage may change from time to time depending on changes in Aptar’sour consolidated leverage ratio. At$25.0 million was utilized under our U.S. facility and no balance was utilized under our euro-based revolving credit facility as of December 31, 2017, we had no outstanding2019. No balance was utilized under theour U.S. facility and €69.0 million was utilized under our euro-based revolving credit facility.  Atfacility as of December 31, 2016, we had an outstanding balance of $166 million under the credit facility.  We incurred approximately $1.5 million and $2.0 million2018. Credit facility balances are included in interest and fees related to thisnotes payable, revolving credit facility during 2017 and 2016, respectively.overdrafts on the Condensed Consolidated Balance Sheets.

25/ATR

2019 Form 10-K

Table of Contents

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

Requirement

Level at December 31, 20172019

Consolidated Leverage Ratio (a)(1)

Maximumof 3.50 to 1.00

1.211.71 to 1.00

Consolidated Interest Coverage Ratio (a)(1)

Minimum of 3.00 to 1.00

11.7716.21 to 1.00


(1)

(a)

Definitions of ratios are included as part of the revolving credit facility agreement.

Based upon the above consolidated leverage ratio covenant, we would have the ability to borrow approximately an additional $1.1$1.0 billion before the 3.50 to 1.00 ratio requirement would be exceeded.

Our foreign operations have historically met cash requirements with the use of internally generated cash or uncommitted short-term borrowings. Following the repatriation of cash to the U.S. discussed above, the majority of our $714 million in cash and equivalents is located within the U.S. and we nowWe also have committed financing arrangements in both the U.S. and the UK as detailed below.above. We manage our global cash requirements considering (i) available funds among the many subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances.

During the third quarter of 2017, the Company entered into the borrowing arrangements summarized below through our wholly owned UK subsidiary to better balance our capital structure.

 

 

 

 

 

 

 

 

 

Debt Type

  

Amount

  

Term/Maturity

  

Interest Rate

  

Bank term loan

 

$

280,000

 

5 year amortizing/July 2022

 

2.62% floating swapped to 1.36% fixed

 

Bank revolver

 

150,000

 

5 year/July 2022

 

1.10% floating

 

Private placement

 

100,000

 

6 year/July 2023

 

0.98% fixed

 

Private placement

 

200,000

 

7 year/July 2024

 

1.17% fixed

 

Aptar also entered into a EUR/USD floating-to-fixed cross currency swap on July 20, 2017 to mitigate the currency risk of U.S. dollar debt on a Euro functional currency entity and to also mitigate the risk of variability in interest rates on the $280 million bank term loan. The Company expects its future European cash flows will be sufficient to service this new debt.

OFF‑BALANCEOFF-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 2027.leases. Most of the operating leases contain renewal options and certain equipment leases include options to purchase during or at the end of the lease term. Other than operating lease obligations,As a result of the adoption of ASU 2016-02 and subsequent amendments, which requires organizations to recognize leases on the balance sheet, we do notno longer have any off‑balancesignificant off-balance sheet arrangements. SeePlease refer to Note 8 – Lease Commitments of the following section “Overview of Contractual Obligations”Notes to Condensed Consolidated Financial Statements for future payments relating to operating leases.lease arrangements that have not yet commenced and therefore are not included on the balance sheet.

26/ATR

2017 Form 10-K


OVERVIEW OF CONTRACTUAL OBLIGATIONS

Below is a table of our outstanding contractual obligations and future payments as of December 31, 2017:2019:

    

    

    

    

    

2025 and

 

Payment Due by Period

 

 

Total

 

 

2020

 

2021-2022

 

2023-2024

 

After

Long-term obligations (1)

 

$

1,123,730

 

$

61,670

 

$

196,661

 

$

614,995

 

$

250,404

Finance lease obligations (1)

29,952

4,318

6,185

3,849

15,600

Operating leases (1)

71,854

16,578

21,142

13,238

20,896

Notes payable, revolving credit facility and overdrafts (2)

44,259

44,259

Purchase obligations (3)

23,429

22,948

461

18

2

Interest obligations (4)

54,375

8,278

15,479

18,519

12,099

Total Contractual Obligations

 

$

1,347,599

 

$

158,051

 

$

239,928

 

$

650,619

 

$

299,001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

2023 and

 

Payment Due by Period

 

 

Total

 

 

2018

 

2019-2020

 

2021-2022

 

After

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt (1)

 

$

1,255,634

 

$

61,227

 

$

117,604

 

$

190,887

 

$

885,916

 

Capital lease obligations (1)

 

 

741

 

 

606

 

 

135

 

 

 

 

 

 —

 

Operating leases

 

 

75,591

 

 

21,467

 

 

26,962

 

 

13,949

 

 

13,213

 

Notes payable (2)

 

 

4,336

 

 

4,336

 

 

 —

 

 

 —

 

 

 —

 

Purchase obligations (3)

 

 

79,165

 

 

57,110

 

 

21,612

 

 

443

 

 

 —

 

Interest obligations (4)

 

 

202,798

 

 

33,274

 

 

65,290

 

 

60,402

 

 

43,832

 

Total Contractual Obligations

 

$

1,618,265

 

$

178,020

 

$

231,603

 

$

265,681

 

$

942,961

 


(1)

(1)

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

(2)

(2)

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

(3)

(3)

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

(4)

(4)

Approximately 22.33%15.0% of our total interest bearing long‑termlong-term debt has variable interest rates. Using our long‑termlong-term variable rate debt outstanding as of December 31, 20172019 of approximately $280.6$168.0 million at an average rate of approximately 2.60%3.2%, we included approximately $7.4$1.8 million of variable interest rate obligations in 2017. No variable interesteach of the years for 2020, 2021 and 2022 reflecting timing of anticipated debt repayments. Interest rate obligations were included in subsequent years.

also include anticipated interest on the finance and operating lease liabilities.

The Company makesWe make contributions to itsour domestic pension plans but doescurrently we are not currently haverequired to make a required minimum pension contribution obligation forto those plans. The CompanyWe also makes contributionscontribute to itsour foreign pension plans but amounts are expected to be discretionary in 20182019 and future years. Therefore, amounts related to these plans are not included in the preceding table.

The Company doesWe do not record a current portion of the liability for uncertain tax positions. The income tax liability, if any, arising as a result of the TCJA transition tax would be eligible to be paid over a period of 8 years.  Based on our provisional estimate we do not expect to have any current liability for the transition tax .

Aside from deferred income taxes, we have approximately $86.1$124.2 million of other deferred long‑termlong-term liabilities on the balance sheet, which consist primarily of retirement plan obligations as described in Note 8 to the Consolidated Financial Statements. The Company isobligations. We are not able to reasonably estimate the timing of the long‑termlong-term payments or the amount by which the liability will increase or decrease over time. Therefore, the long‑termlong-term portion of the liability is excluded from the preceding table.

26/ATR

2019 Form 10-K

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTSSTANDARDS

We have reviewed the recently issued accounting standards updates to FASB’s Accounting Standards Codification that have future effective dates. Standards which are effective for 20172019 are discussed in Note 1 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.

In May 2014, the FASB amended the guidance for recognition of revenue from customer contracts.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In August 2015, the FASB decided to defer the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date.  The FASB also decided to allow early adoption of the standard, but not before the original effective date of December 15, 2016. Subsequent to the initial standards, the FASB has also issued several ASUs to clarify specific revenue recognition topics.  We continue to evaluate the impact the adoption of this standard will have on our Consolidated Financial Statements.  The majority of our revenues are derived from product sales and tooling sales.  We are also evaluating our service, license, exclusivity and royalty arrangements, which need to be reviewed individually to ensure proper accounting under the new standard. To date, our internal project team has reviewed a substantial portion of contracts.  We believe the pronouncement will mainly impact the timing of when we account for both product and tooling sales.  We currently recognize revenue for these contracts when the title and risk of loss transfers to the customer.  Under the new guidance, we will recognize revenue for certain contracts over the time required to manufacture the product or build the tool.  We also continue to progress in updating our internal controls along with reviewing and developing the additional disclosures required by the standard.  We will adopt the modified retrospective transition method for implementing this guidance in the first quarter of 2018.

27/ATR

2017 Form 10-K


In January 2016, the FASB issued new guidance that generally requires companies to measure investments in other entities, except those accounted for under the equity method, at fair value and recognize any changes in fair value in net income.  The new standard is effective for fiscal years and interim periods beginning after December 15, 2017.  The Company does not believe that this new guidance will have a material impact on its consolidated financial statements.

In February 2016, the FASB issued new guidance to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.  The new standard is effective for fiscal years and interim periods beginning after December 15, 2018.  The Company is currently evaluating the impact of adopting this guidance. 

In June 2016, the FASB issued guidance that changes the accounting for measurement of credit losses on financial instruments. The guidanceASU 2016-13, which replaces the incurred loss impairment methodology in current accounting principles generally accepted in the United States of America ("U.S. GAAPGAAP") with a new impairment model commonly referred to as the Current Expected Credit Loss ("CECL") methodology. CECL methodology that reflectswill require an entity to measure, at each reporting date, the expected credit losses and requires consideration of a broader rangefinancial instruments not measured at fair value, such as accounts receivable, over their contractual lives. The change in loss impairment methodology could increase our provision for credit losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of reasonable and supportable information when recording credit loss estimates.the beginning of the period of adoption. The new standardguidance is effective for fiscal years and interim periods beginning after December 15, 2019.  The Company is2019, including interim periods within those fiscal years. We are currently evaluating the impact of adopting this guidance. new standard; however, we do not expect the impact to be material. We will adopt the requirement of this standard during the first quarter of 2020.

In January 2017, the FASB issued ASU 2017-04, which provides guidance to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As a result, impairment charges will be required for the amount by which a reporting unit’s carrying amount exceeds its fair value up to the amount of its allocated goodwill. The new standard is effective for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company doesWe do not believe that this new guidance will have a material impact on its consolidated financial statements.our Consolidated Financial Statements.

In March 2017,August 2018, the FASB issued guidanceASU 2018-13, which amends disclosure requirements for fair value measurements. The new standard modifies disclosure requirements including removing requirements to disaggregatedisclose the current service cost component fromvaluation process for Level 3 measurements and adding requirements to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. The new standard is effective for interim and annual periods beginning after December 15, 2019. We are currently evaluating the impact of the adoption of this standard to our disclosures.

In August 2018, the FASB issued ASU 2018-14, which amends disclosure requirements for defined benefit pension and other postretirement plans. The new standard removes requirements to disclose the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit costs.cost over the next fiscal year and the effects of a one-percentage-point changes in assumed health care cost trend rates. The standard also adds requirements to disclose the reasons for significant gains and losses related to changes in the benefit obligations for the period and the accumulated benefit obligation (“ABO”) for plans with ABOs in excess of plan assets. The new standard will be effective for fiscal years ending after December 15, 2020. We are currently evaluating the impact of the adoption of this standard to our disclosures.

In August 2018, the FASB issued ASU 2018-15 to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service cost component should be presented within compensationcontract with the requirements for capitalizing implementation costs whileincurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the other components should be presented outside of income from operations. Theamendments require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance also clarifies that onlyin Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service cost componentcontract and which costs to expense. The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is eligible for capitalization.a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017.  The Company is2019. We are currently evaluating the impact of adopting this guidance.

In May 2017, the FASB issued clarification on applying the standards for stock compensation accounting.  The new standard provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting.  The new standard is effective for fiscal years and interim periods beginning after December 15, 2017.  The Company is currently evaluating the impact of adopting this guidance.

In February 2018, the FASB issued guidance on the reclassification of certain tax effects from accumulated other comprehensive income.  This guidance allows for the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the TCJA.  The new standard is effective for fiscal years and interim periods beginning after December 15, 2018.  The Company is currently evaluating the impact of adopting this guidance.

Other accounting standards that have been issued by the FASB or other standards‑settingstandards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

27/ATR

2019 Form 10-K

CRITICAL ACCOUNTING ESTIMATES

The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, pensions and contingencies. We base our estimates on historical experience and on a variety of other assumptions believed to be reasonable in order to make judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in preparation of our Consolidated Financial Statements. Management has discussed the development and selection of these critical accounting estimates with the audit committee of our Board of Directors and the audit committee has reviewed our disclosure relating to it in this Management’s Discussion and Analysis of Consolidated Results of Operations and Financial Condition.MD&A.

28/ATR

2017 Form 10-K


IMPAIRMENT OF GOODWILL

In accordance with current accounting standards, goodwill has an indefinite life and is not amortized. We evaluate our goodwill for impairment at the reporting unit level on an annual basis, or whenever indicators of impairment exist. We have determined that our Beauty + Home and Food + Beverage business segments represent reporting units. Within the Pharma segment, the injectables division qualifiesand active packaging divisions qualify as a separate reporting unitunits for goodwill impairment testing apart from the remaining Pharma business. As of December 31, 2017,2019, we have $443.9$763.5 million of goodwill, which is allocated as follows: $97.3 million is allocated to the Pharma reporting unit, $105.8 million is allocated to the Injectables reporting unit, $223.9 million is allocated to the Beauty + Home reporting unit and $16.9 million is allocated to the Food + Beverage reporting unit.

Reporting Unit

  

 

Balance at December 31, 2019

  

Pharma

$

116,561

Injectables

134,353

Active Packaging

162,736

Beauty + Home

221,658

Food + Beverage

128,153

Total

$

763,461

We believe that the accounting estimateestimates 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, and (2) the impact that recognizing an impairment would have on the assets reported on our balance sheet as well as our results of operations could be material. Management’s assumptions aboutdetermination of the fair value of our reporting units, based on future cash flows for the reporting units, requirerequires significant judgment and actualthe use of estimates and assumptions related to projected revenue growth rates, the terminal growth factor, as well as the discount rate. Actual cash flows in the future may differ significantly from those forecasted today. The estimateestimates and assumptions for future cash flows and its impact on the impairment testing of goodwill is a critical accounting estimate.

For our goodwill impairment assessment, we first consider qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (greater than 50 percent chance) that the fair value of a reporting unit is less than its carrying amount (the ”step“step zero” approach). Such qualitative factors may include the following: macroeconomic conditions; industry and market considerations; cost factors; overall financial performance, and other relevant entity‑specificentity-specific events. In the absence of sufficient qualitative factors, goodwill impairment is determined utilizing a two‑steptwo-step quantitative process. If it is determined that the fair value of a reporting unit is below its carrying amount, where necessary, goodwill will be impaired at that time.

We performed our annualThe Company has historically evaluated its goodwill for impairment assessmentannually as of December 31 2017or more frequently if impairment indicators arose in accordance with Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other.” In the fourth quarter of 2019, the Company changed the date of its annual assessment of goodwill to October 1 for each of ourall reporting units. The change in testing date for goodwill is a change in accounting principle, which management believes is preferable as the new date of the assessment better aligns with the Company’s budgeting process and will create a more efficient and timely process surrounding the impairment tests. The change in the assessment date does not delay, accelerate or avoid a potential impairment charge. The Company has determined that it is impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each October 1 of prior reporting periods without the use of hindsight. As such, the Company prospectively applied the change in annual goodwill impairment testing date from October 1, 2019. No impairment was recognized during the years ended December 31, 2019, 2018 or 2017.

28/ATR

2019 Form 10-K

Based on our qualitative assessment of macroeconomic, industry, and market events and circumstances as well as the overall financial performance of the reporting units, we determined it was more likely than not that the fair value of goodwill attributed to these reporting units was greater than itstheir carrying amount.amounts. As such, the annual two‑steptwo-step impairment test was deemed not necessary to be performed for our reporting units for the year ended December 31, 2017.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

We record an allowance for doubtful accounts as an estimate2019. During the third quarter of 2019, we performed a separate quantitative impairment assessment using a discounted cash flow analysis of the inabilityActive Packaging reporting unit, which was formed as a result of the CSP Technologies acquisition in the third quarter of 2018. We calculated the fair value of the Active Packaging reporting unit and compared it with the associated carrying value (the “step one” approach) as of July 1, 2019. Based on this quantitative analysis, the fair value of the reporting unit exceeded the carrying value and therefore no impairment loss was recognized.

INCOME TAXES

In the ordinary course of business, we make estimates of the tax treatment of many transactions, even though the ultimate tax outcome may remain uncertain for some time. These estimates become part of the annual income tax expense reported in our customersfinancial statements. Subsequent to year-end, we finalize our tax analysis and file income tax returns. Tax authorities periodically audit these income tax returns and examine our tax filing positions, including (among other things) the timing and amounts of deductions, and the allocation of income among tax jurisdictions. If necessary, we adjust income tax expense in our financial statements in the periods in which the actual outcome becomes more certain.

Our tax liability for unrecognized tax benefits contains uncertainties because management is required to make their required payments. We determineassumptions and to apply judgment to estimate the exposures related to our various filing positions.

Our effective tax rate is also impacted by changes in tax laws, the current mix of earnings by taxing jurisdiction, and the results of current tax audits and assessments. In December 2017, the U.S. enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (TCJA), which resulted in significant changes to U.S. federal income tax law affecting us. Current and expected impacts are based on our current knowledge of the legislation and other authoritative guidance, which has been issued, including proposed regulations.

At December 31, 2019 and 2018, we had $116.0 million and $96.3 million, respectively, of net deferred tax assets on our balance sheet, a significant portion of which is related to net operating losses and other tax carryforwards. The ultimate realization of these deferred tax assets is dependent upon the amount, source, and timing of future taxable income. In cases where we believe it is more likely than not that we may not realize the future potential tax benefits, we establish a valuation allowance against them.

Changes in U.S. and foreign tax laws could impact assumptions related to the repatriation of certain foreign earnings. Audits by various taxing authorities continue as governments look for ways to raise additional revenue. Based upon past audit experience, we do not expect any material changes to our allowance for doubtful accounts by looking attax liability as a varietyresult of factors. First,this audit activity; however, we examine an aging reportcould incur additional tax expense if we have audit adjustments higher than recent historical experience. The likelihood of recovery of net operating losses and other tax carryforwards has been closely evaluated and is based upon such factors as the accounts receivable in each entity within the Company. The aging report lists past due amounts according to invoice terms. In addition, we consider historical experience with the customers, the current economic environment, the credit rating of the customerstime remaining before expiration, viable tax planning strategies, and general overall market conditions. In some countries we maintain credit insurance, which can be used in certain cases of non‑payment.

future taxable earnings expectations. We believe that appropriate valuation allowances have been recorded as necessary. However, if earnings expectations or other assumptions change such that additional valuation allowances are required, we could incur additional tax expense. Likewise, if fewer valuation allowances are needed, we could incur reduced tax expense.

ACQUISITIONS

We account for business combinations using the accounting estimate related to the allowance for doubtful accounts is a critical accounting estimate because: (1) itacquisition method, which requires management to makeestimate the fair value of identifiable assets acquired and liabilities assumed, and to properly allocate purchase price consideration to the individual assets acquired and liabilities assumed. Goodwill is measured as the excess amount of consideration transferred, compared to fair value of the assets acquired and the liabilities assumed. The allocation of the purchase price utilizes significant estimates and assumptions aboutin determining the abilityfair values of identifiable assets acquired and liabilities assumed, especially with respect to collect amounts owed from customersintangible assets. These estimates are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset. The purchase price allocation for business acquisitions contains uncertainties because it requires management's judgment.

Management applied judgment in determining the fair value of the acquired assets with respect to the acquisitions of Noble, Nanopharm, Gateway, CSP Technologies and Reboul. The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated life of the assets, can materially impact net income in periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the futurefuture. In particular, judgment was applied with respect to determining the fair value of customer relationships intangible assets, which involved the use of significant estimates and (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 increasewith respect to the allowance for doubtful accounts. When it becomes certaintiming and amounts of cash flow projections, the revenue growth rates, the customer cannot pay (typically driven byattrition rates, the customer filing for bankruptcy) we write offEBITDA margins and the receivable by removing the accounts receivable amount and reducing the allowance for doubtful accounts accordingly. In 2017, we increased the allowance for doubtful accounts by approximately $235 thousand and we wrote off doubtful accounts of $63 thousand. 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 $510.4 million in net accounts receivable at December 31, 2017. At December 31, 2017, we had approximately $3.2 million recorded in the allowance for doubtful accounts to cover 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 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 $23.6 million. An additional loss of $23.6 million would reduce our Total Assets as of December 31, 2017 by approximately 0.8% and would have reduced Income before Income Taxes by approximately 8.0%.

discount rate.

29/ATR

20172019 Form 10-K


If we had been required to recognize an additional $23.6 million in bad debt expense, it would likely not have significantly affected our liquidity and capital resources because, in spite of any such additional expense, we would still 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‑termlong-term rate of return on plan assets. The actuarial assumptions are based upon management’s best estimates, after consulting with outside investment advisors and actuaries. Because assumptions and estimates are used, actual results could differ from expected results.

The discount rate is utilized principally in calculating our pension obligations, which are represented by the Accumulated Benefit Obligation (ABO) and the Projected Benefit Obligation (PBO)(“PBO”), and in calculating net periodic benefit cost. In establishing the discount rate for our foreign plans, we review a number of relevant interest rates including Aa corporate bond yields. In establishing the discount rate for our domestic plans, we match the hypothetical duration of our plans, using a weighted average duration that is based upon projected cash payments, to a simulated bond portfolio (Citigroup(FTSE Pension Index Curve). At December 31, 2017,2019, the discount rates for our domestic and foreign plans were 3.55%3.2% and 1.62%1.04%, 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 $63.4$68.2 million increase in the PBO ($45.251.0 million for the domestic plans and $18.2$17.2 million for the foreign plans) and a $6.8$7.5 million increase in net periodic benefit cost ($5.76.0 million for the domestic plans and $1.1$1.5 million for the foreign plans). To the extent the PBO increases, the after‑taxafter-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 $49.4$53.1 million decrease in the PBO ($34.739.0 million for the domestic plans and $14.7$14.1 million for the foreign plans) and a $5.5$5.1 million decrease in net periodic benefit cost ($4.53.8 million for the domestic plans and $1.0$1.3 million for the foreign plans). A decrease of this magnitude in the PBO would eliminate the current year reduction recognized in Other Comprehensive Income and Stockholders’ Equity as related to pension assumptions.

The assumed expected long‑termlong-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 42%49% was invested in equities, 25%29% was invested in fixed income securities, 9%10% was invested in hedge funds, 6% was invested in infrastructure securities, 5% was invested in real estate securities and 13%1% was invested in money market funds, at December 31, 2017.2019. Of foreign plan assets, approximately 91%89% was invested in investment funds, 4% was invested in equity securities, 3% was invested in corporate securities, 1% was invested in fixed income securities and 1%3% was invested in cashmoney market funds at December 31, 2017.2019.

The expected long‑termlong-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‑freerisk-free rate. This rate is utilized principally in calculating the expected return on the plan assets component of the net periodic benefit cost. To the extent the actual rate of return on assets realized over the course of a year is greater or less than the assumed rate, that year’s net periodic benefit cost is not affected. Rather, this gain (or loss) reduces (or increases) future net periodic benefit cost over a period of approximately 15 to 20 years. To the extent the expected long‑termlong-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‑termlong-term rate of return on assets would be a $2.1$2.3 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 $7.2$8.0 million decrease in the PBO ($1.82.2 million for the domestic plans and $5.4$5.8 million for the foreign plans) and a $1.2$1.3 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 $7.8$8.4 million increase in the PBO ($2.02.2 million for the domestic plans and $5.8$6.2 million for the foreign plans) and a $1.3$1.4 million increase to the net periodic benefit cost.

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20172019 Form 10-K


Our primary pension related assumptions as of December 31, 2017, 20162019 and 20152018 were as follows:

 

 

 

 

 

 

 

Actuarial Assumptions as of December 31,

     

2017

    

2016

    

2015

 

     

2019

    

2018

    

 

 

 

 

 

 

 

Discount rate:

 

 

 

 

 

 

 

Domestic plans

 

3.55

%  

4.05

%  

4.24

%

 

3.20

%  

4.20

%  

Foreign plans

 

1.62

%  

1.65

%  

2.10

%

 

1.04

%  

1.82

%  

Expected longterm rate of return on plan assets:

 

 

 

 

 

 

 

Domestic plans

 

7.00

%  

7.00

%  

7.00

%

 

7.00

%  

7.00

%  

Foreign plans

 

3.66

%  

3.66

%  

3.66

%

 

3.69

%  

3.57

%  

Rate of compensation increase:

 

 

 

 

 

 

 

Domestic plans

 

4.00

%  

4.00

%  

4.00

%

 

4.00

%  

4.00

%  

Foreign plans

 

3.02

%  

3.00

%  

3.00

%

 

3.05

%  

3.01

%  

In order to determine the 20182020 net periodic benefit cost, the Company expectswe expect to use the discount rates, expected long‑termlong-term rates of return on plan assets and rates of compensation increase assumptions as of December 31, 2017.2019. The estimated impact of the changes to the assumptions as noted in the table above on our 20172020 net periodic benefit cost is expected to be an increase of approximately $1.5$7.2 million.

SHARE‑BASED COMPENSATIONOPERATIONS OUTLOOK

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 employeesWhile there will retain their vested stock options before exercising them (“expected term”), the estimated volatility of the Company’s 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 Company’s stock price. Dividend yield is management’s long‑term estimate of annual dividendscontinue to be paid as a percentage of share price.

For 2017, expense related to share‑based compensationnear-term challenges, we are optimistic about the long-term opportunities for employee stock option plans was $15.2 million. Future changes in the subjective assumptions used in the Black‑Scholes option‑valuation model or estimates associated with forfeitures could impactgrowth and we are excited about our share‑based compensation expense. For example, a one year reduction in the expected term of the options would decrease the Black‑Scholes valuationrecent strategic acquisitions and reduce share‑based compensation by approximately $0.4 million. In comparison, a one year increase in the expected term of the option would increase the Black‑Scholes valuation and increase share‑based compensation by approximately $0.7 million. In addition, changes in the share 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 $0.4 million. In comparison, a $5 increase in the share price would increase the Black‑Scholes valuation and increase share‑based compensation by approximately $0.7 million.

OPERATIONS OUTLOOK

investments. Looking to the first quarter, of 2018, we expect somecertain Beauty + Home customers are continuing to focus on inventory reductions considering current macroeconomic uncertainties including the negative impact of the momentum fromcoronavirus outbreak. In addition, the fourth quartertravel retail industry, which is a significant part of 2017the beauty market, is particularly exposed. Our Pharma segment is facing difficult comparisons compared to carry over into the first quarter of 2018.  We currently expect each segment to report increased revenues over the prior year.  Despite several changes in tax policies, particularly withyear’s exceptional growth and our Food + Beverage segment’s Asian business may also be negatively affected by the recent U.S. tax reform, we expect very little change in our near-term overall effective tax rate given the nature of our international business and the related consequences of the new tax laws.coronavirus impact.

Aptar expects earnings per share for the first quarter of 2020, excluding any restructuring costs related to our business transformation plan, which amounts cannot be reasonably estimated,and acquisition-related expenses, to be in the range of $0.90$0.85 to $0.95 compared to $0.81 per share reported in the prior year. Our$0.93 and this guidance is based on an effective tax rate range of 27%28% to 29%, which includes estimated effects of the recent tax reform legislation.  Adjusted for changes in currency translation rates, comparable earnings per share for the prior year were approximately $0.91 using the prior year effective tax rate of 26%30%.

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2017 Form 10-K


FORWARD-LOOKING STATEMENTS

FORWARD‑LOOKING STATEMENTS

Certain statements in Management’s Discussion and AnalysisMD&A and other sections of this Form 10‑K10-K are forward‑lookingforward-looking and involve a number of risks and uncertainties, including certain statements set forth in the Restructuring Initiatives, Liquidity and Capital Resources, Off‑Balance Sheet Arrangements,Contingencies and Operations Outlook sections of this Form 10‑K.10-K. Words such as “expects,” “anticipates,” “believes,” “estimates,” “future”, “potential” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to identify such forward‑lookingforward-looking statements. Forward‑lookingForward-looking statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are based on our beliefs as well as assumptions made by and information currently available to us. Accordingly, our actual results or other events may differ materially from those expressed or implied in such forward‑lookingforward-looking statements due to known or unknown risks and uncertainties that exist in our operations and business environment, including but not limited to:

·

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

·

political conditions worldwide;

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

·

outbreaks of epidemics, including the impact of the coronavirus on our global supply chain and our Chinese customers and operations;

significant fluctuations in foreign currency exchange rates or our effective tax rate;

·

the impact of tax reform legislation;

legislation, changes in tax rates and other tax-related events or transactions that could impact our effective tax rate;

·

financial conditions of customers and suppliers;

·

consolidations within our customer or supplier bases;

·

changes in customer and/or consumer spending levels;

·

loss of one or more key accounts;

·

the availability of raw materials and components (particularly from sole sourced suppliers) as well as the financial viability of these suppliers;

·

fluctuations in the cost of materials, components and other input costs (particularly resin, metal, anodization costs and transportation and energy costs);

·

the impact and extent of contamination found at the Company’s facility in Brazil;

·

our ability to successfully implement facility expansions and new facility projects;

·

the impact of the UK leaving the European Union (Brexit) on our UK operations;

·

our ability to offset inflationary impacts with cost containment, productivity initiatives or price increases;

31/ATR

·2019 Form 10-K

changes in capital availability or cost, including interest rate fluctuations;

·

volatility of global credit markets;

·

the timing and magnitude of capital expenditures;

·

our ability to identify potential new acquisitions and to successfully acquire and integrate such operations or products;

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

·

direct or indirect consequences of acts of war, terrorism or social unrest;

·

cybersecurity threats that could impact our networks and reporting systems;

·

the impact of natural disasters and other weather-related occurrences;

·

fiscal and monetary policies and other regulations, including changes in worldwide tax rates;

regulations;

·

changes or difficulties in complying with government regulation;

·

changing regulations or market conditions regarding environmental sustainability;

·

work stoppages due to labor disputes;

·

competition, including technological advances;

·

our ability to protect and defend our intellectual property rights, as well as litigation involving intellectual property rights;

·

the outcome of any legal proceeding that has been or may be instituted against us and others;

·

our ability to meet future cash flow estimates to support our goodwill impairment testing;

·

the demand for existing and new products;

·

the success of our customers’ products, particularly in the pharmaceutical industry;

·

our ability to manage worldwide customer launches of complex technical products, particularly in developing markets;

·

difficulties in product development and uncertainties related to the timing or outcome of product development;

·

significant product liability claims;

·

the execution of our business transformation plan; and

·

other risks associated with our operations.

Although we believe that our forward‑lookingforward-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‑lookingforward-looking statements. Readers are cautioned not to place undue reliance on forward‑lookingforward-looking statements. We undertake no obligation to update publicly any forward‑lookingforward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Please refer to Part 1, Item 1A (“Risk Factors”) of Part IFactors included in this Form 10‑K10-K for additional risk factors affecting the Company.

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20172019 Form 10-K


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKRISK

MARKET RISKS

A significant number of our operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of our subsidiaries. Our primary foreign exchange exposure is to the Euro,euro, but we also have foreign exchange exposure to the Chinese Yuan,yuan, Brazilian Real,real, Mexican Peso,peso, Swiss Francfranc and other Asian, European and South American currencies. A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on our financial condition and results of operations. Conversely, a weakening U.S. dollar relative to foreign currencies has an additive translation effect on our financial condition and results of operations. Conversely, a strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on our financial condition and results of operations.

Additionally, in some cases, we sell products denominated in a currency different from the currency in which the related costs are incurred. Any changes in exchange rates on such inter‑countryinter-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, 20172019 about our forward currency exchange contracts. The majority of the contracts expire before the end of the first quarter of 2018.2020.

 

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

Year Ended December 31, 2017

 

 

Average

    

Min / Max

 

 

 

 

Contract Amount

    

Contractual

 

Notional

 

Buy/Sell

 

 

(in thousands)

 

Exchange Rate

 

Volumes

 

 

 

 

 

 

 

 

 

 

Swiss Franc / Euro

 

$

55,680

 

0.8765

 

54,826-55,680

 

Euro / Brazilian Real

 

 

14,299

 

3.8934

 

14,108-14,558

 

Euro / U.S. Dollar

 

 

13,581

 

1.1877

 

13,581-23,466

 

Euro / Indian Rupee

 

 

11,195

 

77.7776

 

11,175-11,316

 

British Pound / Euro

 

 

4,207

 

1.1277

 

335-4,207

 

U.S. Dollar / Euro

 

 

3,826

 

0.8458

 

3,826-4,376

 

Euro / Indonesian Rupiah

 

 

2,292

 

16,785.0000

 

2,292-2,292

 

Czech Koruna / Euro

 

 

1,321

 

0.0393

 

1,273-3,603

 

Euro / British Pound

 

 

1,305

 

0.8867

 

0-1,305

 

Euro / Chinese Renminbi

 

 

1,201

 

7.8490

 

1,081-1,802

 

U.S. Dollar / Chinese Renminbi

 

 

1,000

 

6.6648

 

1,000-3,000

 

Euro / Mexican Peso

 

 

469

 

22.7017

 

258-501

 

Mexican Peso / U.S. Dollar

 

 

358

 

0.0521

 

0-358

 

Total

 

$

110,734

 

 

 

 

 

In thousands

 

Year Ended December 31, 2019

Average

    

Min / Max

Contract Amount

    

Contractual

Notional

 

Buy/Sell

 

 

(in thousands)

 

Exchange Rate

 

Volumes

EUR / USD

$

15,368

 

1.1096

 

15,368-20,420

EUR / BRL

12,105

 

4.6722

 

11,522-12,185

USD / EUR

8,266

 

0.8989

 

4,022-8,266

EUR / IDR

4,754

 

15.7427

 

4,698-4,754

EUR / INR

3,996

 

79.7500

 

3,985-4,017

USD / CNY

2,000

 

7.0663

 

0-2,000

EUR / CHF

 

1,496

 

1.0972

 

0-1,496

EUR / CNY

1,344

7.8771

0-1,344

GBP / EUR

859

 

1.1539

 

657-1,807

EUR / MXN

372

 

21.4988

 

311-588

USD / CHF

325

 

0.9861

 

0-325

MXN / USD

226

0.0514

226-767

CHF / EUR

203

0.9119

203-6,668

EUR / GBP

202

0.8540

0-608

Total

 

$

51,516

As of December 31, 2017, the Company has2019, we have recorded the fair value of foreign currency forward exchange contracts of $0.7$0.2 million in prepaymentsprepaid and other and $1.6$0.4 million in accounts payable, accrued and accruedother liabilities in the Consolidated Balance Sheets. Aptar also entered into a EUR/USD floating-to-fixed cross currency swap on July 20, 2017 to effectively hedge the foreign exchange and interest rate exposure on the $280 million bank term loan drawn by its wholly owned UK subsidiary. The fair value of this cash flow hedge is $16.3$2.6 million and is reported in accounts payableprepaid and accrued liabilitiesother in the Consolidated Balance Sheets.

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20172019 Form 10-K


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATADATA

AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF INCOME

 

 

 

 

 

 

 

 

 

 

 

In thousands, except per share amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

    

2017

    

2016

    

2015

 

Net Sales

 

$

2,469,283

 

$

2,330,934

 

$

2,317,149

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of depreciation and amortization shown below)

 

 

1,604,181

 

 

1,498,070

 

 

1,502,650

 

Selling, research & development and administrative

 

 

388,281

 

 

367,562

 

 

351,461

 

Depreciation and amortization

 

 

153,094

 

 

154,802

 

 

138,893

 

Restructuring initiatives

 

 

2,208

 

 

 —

 

 

 —

 

 

 

 

2,147,764

 

 

2,020,434

 

 

1,993,004

 

Operating Income

 

 

321,519

 

 

310,500

 

 

324,145

 

Other (Expense) Income:

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(40,597)

 

 

(35,237)

 

 

(34,615)

 

Interest income

 

 

5,470

 

 

2,643

 

 

5,596

 

Equity in results of affiliates

 

 

(229)

 

 

(191)

 

 

(718)

 

Miscellaneous, net

 

 

8,662

 

 

2,782

 

 

163

 

 

 

 

(26,694)

 

 

(30,003)

 

 

(29,574)

 

Income before Income Taxes

 

 

294,825

 

 

280,497

 

 

294,571

 

Provision for Income Taxes

 

 

74,796

 

 

74,893

 

 

95,276

 

Net Income

 

$

220,029

 

$

205,604

 

$

199,295

 

Net Loss (Income) Attributable to Noncontrolling Interests

 

 

 1

 

 

(14)

 

 

53

 

Net Income Attributable to AptarGroup, Inc.

 

$

220,030

 

$

205,590

 

$

199,348

 

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

 

 

 

 

 

 

 

 

 

 

Basic

 

$

3.52

 

$

3.27

 

$

3.19

 

Diluted

 

$

3.41

 

$

3.17

 

$

3.09

 

In thousands, except per share amounts

 

 

Year Ended December 31,

    

2019

    

2018

    

2017

 

Net Sales

$

2,859,732

$

2,764,761

$

2,469,283

Operating Expenses:

Cost of sales (exclusive of depreciation and amortization shown below)

 

1,818,398

 

1,812,961

 

1,603,070

Selling, research & development and administrative

 

454,617

 

429,955

 

387,424

Depreciation and amortization

 

194,552

 

171,747

 

153,094

Restructuring initiatives

 

20,472

 

63,829

 

2,208

 

2,488,039

 

2,478,492

 

2,145,796

Operating Income

 

371,693

 

286,269

 

323,487

Other (Expense) Income:

Interest expense

 

(35,489)

 

(32,626)

 

(40,597)

Interest income

 

4,174

 

7,056

 

5,470

Equity in results of affiliates

 

135

 

(229)

 

(229)

Miscellaneous, net

 

1,556

 

5,550

 

6,694

 

(29,624)

 

(20,249)

 

(28,662)

Income before Income Taxes

 

342,069

 

266,020

 

294,825

Provision for Income Taxes

 

99,842

 

71,254

 

74,796

Net Income

$

242,227

$

194,766

$

220,029

Net (Income) Loss Attributable to Noncontrolling Interests

 

(25)

 

(21)

 

1

Net Income Attributable to AptarGroup, Inc.

$

242,202

$

194,745

$

220,030

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

Basic

$

3.81

$

3.12

$

3.52

Diluted

$

3.66

$

3.00

$

3.41

See accompanying notes to consolidated financial statements.

34/ATR

20172019 Form 10-K


AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

    

2017

    

2016

    

2015

 

Net Income

 

$

220,029

 

$

205,604

 

$

199,295

 

Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

74,404

 

 

(53,183)

 

 

(163,887)

 

Changes in treasury locks, net of tax

 

 

28

 

 

26

 

 

25

 

Loss on derivatives, net of tax

 

 

(3,186)

 

 

 —

 

 

 —

 

Defined benefit pension plan, net of tax

 

 

 

 

 

 

 

 

 

 

Actuarial (loss) / gain, net of tax

 

 

(7,906)

 

 

(7,151)

 

 

7,253

 

Prior service cost, net of tax

 

 

(1,038)

 

 

(466)

 

 

(538)

 

Amortization of prior service cost included in net income, net of tax

 

 

296

 

 

248

 

 

168

 

Amortization of net loss included in net income, net of tax

 

 

3,828

 

 

3,144

 

 

4,664

 

Total defined benefit pension plan, net of tax

 

 

(4,820)

 

 

(4,225)

 

 

11,547

 

Total other comprehensive income (loss)

 

 

66,426

 

 

(57,382)

 

 

(152,315)

 

Comprehensive Income

 

 

286,455

 

 

148,222

 

 

46,980

 

Comprehensive (Income) Loss Attributable to Noncontrolling Interests

 

 

(18)

 

 

 6

 

 

66

 

Comprehensive Income Attributable to AptarGroup, Inc.

 

$

286,437

 

$

148,228

 

$

47,046

 

In thousands

 

 

Year Ended December 31,

   

2019

   

2018

   

2017

 

Net Income

$

242,227

$

194,766

$

220,029

Other Comprehensive Income:

Foreign currency translation adjustments

 

(8,727)

 

(62,914)

 

74,404

Changes in treasury locks, net of tax

 

 

17

 

28

Changes in derivative gains (losses), net of tax

 

(37)

 

1,547

 

(3,186)

Defined benefit pension plan, net of tax

Actuarial (loss) gain, net of tax

 

(25,877)

 

5,292

 

(7,906)

Prior service cost, net of tax

320

(26)

(1,038)

Amortization of prior service cost included in net income, net of tax

 

2,541

 

533

 

296

Amortization of net loss included in net income, net of tax

 

332

 

4,991

 

3,828

Total defined benefit pension plan, net of tax

 

(22,684)

 

10,790

 

(4,820)

Total other comprehensive (loss) income

 

(31,448)

 

(50,560)

 

66,426

Comprehensive Income

 

210,779

 

144,206

 

286,455

Comprehensive Loss (Income) Attributable to Noncontrolling Interests

 

21

 

16

 

(18)

Comprehensive Income Attributable to AptarGroup, Inc.

$

210,800

$

144,222

$

286,437

See accompanying notes to consolidated financial statements.

35/ATR

20172019 Form 10-K


Table of Contents

AptarGroup, Inc.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

    

2017

    

2016

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and equivalents

 

$

712,640

 

$

466,287

 

Accounts and notes receivable, less allowance for doubtful accounts of $3,161 in 2017 and $2,989 in 2016

 

 

510,426

 

 

433,127

 

Inventories

 

 

337,216

 

 

296,914

 

Prepayments and other

 

 

109,791

 

 

73,842

 

 

 

 

1,670,073

 

 

1,270,170

 

Property, Plant and Equipment:

 

 

 

 

 

 

 

Buildings and improvements

 

 

416,241

 

 

368,260

 

Machinery and equipment

 

 

2,237,655

 

 

1,938,352

 

 

 

 

2,653,896

 

 

2,306,612

 

Less: Accumulated depreciation

 

 

(1,811,819)

 

 

(1,545,384)

 

 

 

 

842,077

 

 

761,228

 

Land

 

 

25,829

 

 

23,093

 

 

 

 

867,906

 

 

784,321

 

Other Assets:

 

 

 

 

 

 

 

Investments in affiliates

 

 

9,444

 

 

4,241

 

Goodwill

 

 

443,887

 

 

407,522

 

Intangible assets

 

 

95,460

 

 

94,489

 

Miscellaneous

 

 

51,053

 

 

46,042

 

 

 

 

599,844

 

 

552,294

 

Total Assets

 

$

3,137,823

 

$

2,606,785

 

In thousands

 

 

December 31,

    

2019

    

2018

 

Assets

Current Assets:

Cash and equivalents

$

241,970

$

261,823

Accounts and notes receivable, less allowance for doubtful accounts of $3,626 in 2019 and $3,541 in 2018

 

558,428

569,630

Inventories

 

375,795

381,110

Prepaid and other

 

115,048

118,245

 

1,291,241

1,330,808

Property, Plant and Equipment:

Buildings and improvements

 

504,328

453,572

Machinery and equipment

 

2,521,737

2,368,332

 

3,026,065

2,821,904

Less: Accumulated depreciation

 

(1,963,520)

(1,855,810)

 

1,062,545

966,094

Land

 

25,133

25,519

 

1,087,678

991,613

Other Assets:

Investments in equity securities

 

8,396

25,448

Goodwill

 

763,461

712,095

Intangible assets

 

291,084

254,904

Operating lease right-of-use assets

72,377

Miscellaneous

 

47,882

62,867

 

1,183,200

1,055,314

Total Assets

$

3,562,119

$

3,377,735

See accompanying notes to consolidated financial statements.

36/ATR

20172019 Form 10-K


Table of Contents

AptarGroup, Inc.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

In thousands, except share and per share amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

    

2017

    

2016

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Notes payable

 

$

4,336

 

$

169,213

 

Current maturities of long-term obligations, net of unamortized debt issuance costs

 

 

61,833

 

 

4,603

 

Accounts payable and accrued liabilities

 

 

461,579

 

 

369,139

 

 

 

 

527,748

 

 

542,955

 

Long-Term Obligations, net of unamortized debt issuance costs

 

 

1,191,146

 

 

772,737

 

Deferred Liabilities and Other:

 

 

 

 

 

 

 

Deferred income taxes

 

 

20,995

 

 

16,803

 

Retirement and deferred compensation plans

 

 

80,278

 

 

94,545

 

Deferred and other non-current liabilities

 

 

5,608

 

 

5,503

 

Commitments and contingencies

 

 

 —

 

 

 

 

 

 

106,881

 

 

116,851

 

Stockholders’ Equity:

 

 

 

 

 

 

 

AptarGroup, Inc. stockholders’ equity

 

 

 

 

 

 

 

Common stock, $.01 par value, 199 million shares authorized, 66.7 and 66.0 million shares issued as of December 31, 2017 and 2016, respectively

 

 

667

 

 

660

 

Capital in excess of par value

 

 

609,471

 

 

546,682

 

Retained earnings

 

 

1,301,147

 

 

1,197,234

 

Accumulated other comprehensive (loss)

 

 

(253,302)

 

 

(319,709)

 

Less: Treasury stock at cost, 4.9 and 3.9 million shares as of December 31, 2017 and 2016, respectively

 

 

(346,245)

 

 

(250,917)

 

Total AptarGroup, Inc. Stockholders’ Equity

 

 

1,311,738

 

 

1,173,950

 

Noncontrolling interests in subsidiaries

 

 

310

 

 

292

 

Total Stockholders’ Equity

 

 

1,312,048

 

 

1,174,242

 

Total Liabilities and Stockholders’ Equity

 

$

3,137,823

 

$

2,606,785

 

In thousands, except share and per share amounts

 

 

December 31,

    

2019

    

2018

 

Liabilities and Stockholders’ Equity

Current Liabilities:

Notes payable, revolving credit facility and overdrafts

$

44,259

$

101,293

Current maturities of long-term obligations, net of unamortized debt issuance costs

 

65,988

 

62,678

Accounts payable, accrued and other liabilities

 

573,028

 

525,199

 

683,275

 

689,170

Long-Term Obligations, net of unamortized debt issuance costs

 

1,085,453

 

1,125,993

Deferred Liabilities and Other:

Deferred income taxes

 

41,388

 

53,917

Retirement and deferred compensation plans

 

101,225

 

62,319

Operating lease liabilities

55,276

Deferred and other non-current liabilities

 

23,250

 

23,465

Commitments and contingencies

 

 

 

221,139

 

139,701

Stockholders’ Equity:

AptarGroup, Inc. stockholders’ equity

Common stock, $.01 par value, 199 million shares authorized, 68.6 and 67.3 million shares issued as of December 31, 2019 and 2018, respectively

 

686

 

673

Capital in excess of par value

 

770,596

 

678,769

Retained earnings

 

1,523,820

 

1,371,826

Accumulated other comprehensive loss

 

(341,948)

 

(310,504)

Less: Treasury stock at cost, 4.8 and 4.4 million shares as of December 31, 2019 and 2018, respectively

 

(381,238)

 

(318,208)

Total AptarGroup, Inc. Stockholders’ Equity

 

1,571,916

 

1,422,556

Noncontrolling interests in subsidiaries

 

336

 

315

Total Stockholders’ Equity

 

1,572,252

 

1,422,871

Total Liabilities and Stockholders’ Equity

$

3,562,119

$

3,377,735

See accompanying notes to consolidated financial statements.

37/ATR

20172019 Form 10-K


Table of Contents

AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN EQUITY

 

 

 

 

 

 

 

 

 

 

 

In thousands, brackets denote cash outflows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

    

 

2017

    

 

2016

    

2015

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

Net income

 

$

220,029

 

$

205,604

 

$

199,295

 

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

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

142,755

 

 

145,485

 

 

134,647

 

Amortization

 

 

10,339

 

 

9,317

 

 

4,246

 

Stock based compensation

 

 

18,924

 

 

19,824

 

 

20,612

 

Provision for (recovery of) doubtful accounts

 

 

235

 

 

561

 

 

(813)

 

Gain on sale of investment in unconsolidated affiliate

 

 

 —

 

 

(2,013)

 

 

 —

 

Debt prepayment costs

 

 

4,710

 

 

 —

 

 

 —

 

Deferred income taxes

 

 

2,238

 

 

(11,112)

 

 

(7,141)

 

Defined benefit plan expense

 

 

17,200

 

 

16,786

 

 

20,685

 

Equity in results of affiliates

 

 

229

 

 

191

 

 

718

 

Changes in balance sheet items, excluding effects from foreign currency adjustments:

 

 

 

 

 

 

 

 

 

 

Accounts and other receivables

 

 

(44,658)

 

 

(41,721)

 

 

(27,759)

 

Inventories

 

 

(12,989)

 

 

(834)

 

 

(18,925)

 

Prepaid and other current assets

 

 

(33,959)

 

 

(5,968)

 

 

(6,982)

 

Accounts payable and accrued liabilities

 

 

58,245

 

 

(12,474)

 

 

39,330

 

Income taxes payable

 

 

(8,753)

 

 

15,056

 

 

3,397

 

Retirement and deferred compensation plan liabilities

 

 

(41,004)

 

 

(9,380)

 

 

(30,332)

 

Other changes, net

 

 

(8,812)

 

 

(4,023)

 

 

(7,219)

 

Net Cash Provided by Operations

 

 

324,729

 

 

325,299

 

 

323,759

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(156,624)

 

 

(128,986)

 

 

(149,323)

 

Proceeds from sale of property and equipment

 

 

2,036

 

 

1,693

 

 

827

 

Insurance proceeds

 

 

709

 

 

986

 

 

3,739

 

Settlement of derivative

 

 

(66,155)

 

 

 —

 

 

 —

 

Purchase of short-term investments

 

 

 —

 

 

 —

 

 

(32,769)

 

Maturity of short-term investments

 

 

 —

 

 

29,485

 

 

 —

 

Acquisition of business, net of cash acquired

 

 

 —

 

 

(202,985)

 

 

 —

 

Acquisition of intangible assets

 

 

 —

 

 

(2,492)

 

 

 —

 

Proceeds from sale of investment in unconsolidated affiliate

 

 

 —

 

 

1,204

 

 

 —

 

Investment in unconsolidated affiliate

 

 

(5,000)

 

 

 —

 

 

 —

 

Notes receivable, net

 

 

234

 

 

593

 

 

1,296

 

Net Cash Used by Investing Activities

 

 

(224,800)

 

 

(300,502)

 

 

(176,230)

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

(Repayments of) proceeds from notes payable

 

 

(169,213)

 

 

163,148

 

 

(227,362)

 

Proceeds from long-term obligations

 

 

625,628

 

 

5,963

 

 

225,236

 

Repayments of long-term obligations

 

 

(165,798)

 

 

(55,314)

 

 

(16,981)

 

Dividends paid

 

 

(79,944)

 

 

(76,659)

 

 

(71,247)

 

Credit facility costs

 

 

(3,542)

 

 

 —

 

 

(1,216)

 

Debt prepayment costs

 

 

(4,710)

 

 

 —

 

 

 —

 

Proceeds from stock option exercises

 

 

73,905

 

 

55,347

 

 

64,759

 

Purchase of treasury stock

 

 

(120,540)

 

 

 —

 

 

 —

 

Common stock repurchased and retired

 

 

(40,994)

 

 

(131,371)

 

 

(13,887)

 

Excess tax benefit from exercise of stock options

 

 

 —

 

 

9,171

 

 

8,388

 

Net Cash Provided (Used) by Financing Activities

 

 

114,792

 

 

(29,715)

 

 

(32,310)

 

Effect of Exchange Rate Changes on Cash

 

 

31,632

 

 

(18,696)

 

 

(25,080)

 

Net Increase (Decrease) in Cash and Equivalents

 

 

246,353

 

 

(23,614)

 

 

90,139

 

Cash and Equivalents at Beginning of Period

 

 

466,287

 

 

489,901

 

 

399,762

 

Cash and Equivalents at End of Period

 

$

712,640

 

$

466,287

 

$

489,901

 

Supplemental Cash Flow Disclosure:

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

38,838

 

$

36,265

 

$

31,664

 

Income taxes paid

 

 

77,349

 

 

82,201

 

 

79,502

 

Years Ended December 31, 2019, 2018 and 2017

In thousands

AptarGroup, Inc. Stockholders’ Equity

    

    

Accumulated

    

    

    

    

    

Other

Common

Capital in

Non-

Retained

Comprehensive

Stock

Treasury

Excess of

Controlling

Total

Earnings

(Loss) Income

Par Value

Stock

Par Value

Interest

Equity

 

Balance - December 31, 2016

$

1,197,234

$

(319,709)

$

660

$

(250,917)

$

546,682

$

292

$

1,174,242

Net income

 

220,030

(1)

220,029

Foreign currency translation adjustments

 

74,385

19

74,404

Changes in unrecognized pension gains (losses) and related amortization, net of tax

 

(4,820)

(4,820)

Changes in treasury locks, net of tax

 

28

28

Changes in derivative gains (losses), net of tax

(3,186)

(3,186)

Stock awards and option exercises

 

12

 

25,212

67,605

92,829

Cash dividends declared on common stock

 

(79,944)

(79,944)

Treasury stock purchased

(120,540)

(120,540)

Common stock repurchased and retired

(36,173)

(5)

 

(4,816)

(40,994)

Balance - December 31, 2017

$

1,301,147

$

(253,302)

$

667

$

(346,245)

$

609,471

$

310

$

1,312,048

Net income

 

194,745

21

194,766

Adoption of revenue recognition standard

2,937

2,937

Reclassification of stranded tax effects

6,658

(6,658)

Foreign currency translation adjustments

 

(62,898)

(16)

(62,914)

Changes in unrecognized pension gains (losses) and related amortization, net of tax

 

10,790

10,790

Changes in treasury locks, net of tax

 

17

17

Changes in derivative gains (losses), net of tax

 

1,547

1,547

Stock awards and option exercises

 

12

 

31,942

75,763

107,717

Cash dividends declared on common stock

 

(82,346)

(82,346)

Treasury stock purchased

(3,905)

(3,905)

Common stock repurchased and retired

(51,315)

(6)

 

(6,465)

(57,786)

Balance - December 31, 2018

$

1,371,826

$

(310,504)

$

673

$

(318,208)

$

678,769

$

315

$

1,422,871

Net income

 

242,202

25

242,227

Foreign currency translation adjustments

 

(8,723)

(4)

(8,727)

Changes in unrecognized pension gains (losses) and related amortization, net of tax

 

(22,684)

(22,684)

Changes in derivative gains (losses), net of tax

 

(37)

(37)

Stock awards and option exercises

 

13

 

23,467

91,827

115,307

Cash dividends declared on common stock

 

(90,208)

(90,208)

Treasury stock purchased

 

(86,497)

(86,497)

Balance - December 31, 2019

$

1,523,820

$

(341,948)

$

686

$

(381,238)

$

770,596

$

336

$

1,572,252

See accompanying notes to consolidated financial statements.

38/ATR

20172019 Form 10-K


Table of Contents

AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYCASH FLOWS

Years Ended December 31, 2017, 2016

In thousands, brackets denote cash outflows

 

Year Ended December 31,

    

2019

    

2018

    

2017

 

Cash Flows from Operating Activities:

Net income

$

242,227

$

194,766

$

220,029

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

Depreciation

 

166,944

 

156,292

 

142,755

Amortization

 

27,608

 

15,455

 

10,339

Stock-based compensation

 

23,893

 

19,561

 

18,924

Provision for doubtful accounts

 

782

 

923

 

235

Loss (gain) on disposition of fixed assets

 

344

 

(770)

 

387

Gain on remeasurement of equity securities

(6,500)

Debt prepayment costs

 

 

 

4,710

Deferred income taxes

 

8,746

 

(23,352)

 

2,238

Defined benefit plan expense

 

15,342

 

19,501

 

17,200

Equity in results of affiliates

 

(135)

 

229

 

229

Changes in balance sheet items, excluding effects from foreign currency adjustments:

Accounts and other receivables

 

8,811

 

(66,968)

 

(44,658)

Inventories

 

605

 

(25,183)

 

(12,989)

Prepaid and other current assets

 

6,596

 

(9,437)

 

(33,959)

Accounts payable, accrued and other liabilities

 

(779)

 

37,155

 

58,245

Income taxes payable

 

5,658

 

(3,155)

 

(8,753)

Retirement and deferred compensation plan liabilities

 

(3,956)

 

(22,762)

 

(41,004)

Other changes, net

 

11,771

 

27,873

 

(9,199)

Net Cash Provided by Operations

 

514,457

 

313,628

 

324,729

Cash Flows from Investing Activities:

Capital expenditures

 

(242,276)

 

(211,252)

 

(156,624)

Proceeds from sale of property, plant and equipment

 

4,301

 

4,466

 

2,036

Insurance proceeds

10,631

709

Settlement of derivative

 

 

 

(66,155)

Acquisition of business, net of cash acquired

(106,328)

(527,916)

Acquisition of intangible assets, net

 

(4,806)

 

(611)

 

Investment in equity securities

 

(3,530)

 

(10,000)

 

(5,000)

Proceeds from sale of investment in equity securities

16,487

Notes receivable, net

 

(116)

 

(779)

 

234

Net Cash Used by Investing Activities

 

(336,268)

 

(735,461)

 

(224,800)

Cash Flows from Financing Activities:

Proceeds from notes payable and overdrafts

 

50,854

49,069

 

Repayments of notes payable and overdrafts

 

(53,269)

(29,994)

 

Proceeds and repayments of short term revolving credit facility, net

(52,096)

81,063

(169,213)

Proceeds from long-term obligations

 

10,523

 

13,161

 

625,628

Repayments of long-term obligations

 

(67,276)

 

(72,290)

 

(165,798)

Dividends paid

 

(90,208)

 

(82,346)

 

(79,944)

Credit facility costs

 

 

 

(3,542)

Debt prepayment costs

 

 

 

(4,710)

Proceeds from stock option exercises

 

90,834

 

88,156

 

73,905

Purchase of treasury stock

 

(86,497)

 

(3,905)

 

(120,540)

Common stock repurchased and retired

(57,786)

(40,994)

Net Cash (Used) Provided by Financing Activities

 

(197,135)

 

(14,872)

 

114,792

Effect of Exchange Rate Changes on Cash

 

(904)

 

(9,112)

 

31,632

Net (Decrease) Increase in Cash and Equivalents and Restricted Cash

 

(19,850)

 

(445,817)

 

246,353

Cash and Equivalents and Restricted Cash at Beginning of Period

 

266,823

 

712,640

 

466,287

Cash and Equivalents and Restricted Cash at End of Period

$

246,973

$

266,823

$

712,640

Supplemental Cash Flow Disclosure:

Interest paid

$

34,422

$

32,005

$

38,838

Income taxes paid

 

86,097

 

96,048

 

77,349

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2019 Form 10-K

Table of Contents

Restricted cash included in the line item prepaid and 2015other on the Consolidated Balance Sheets as shown below represents amounts held in escrow related to the Noble acquisition in 2019 and the CSP Technologies acquisition in 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AptarGroup, Inc. Stockholders’ Equity

 

 

 

 

 

 

 

 

    

 

    

Accumulated

    

 

    

 

    

 

    

 

    

 

 

 

 

 

 

Other

 

Common

 

 

 

Capital in

 

Non-

 

 

 

 

 

Retained

 

Comprehensive

 

Stock

 

Treasury

 

Excess of

 

Controlling

 

Total

 

 

 

Earnings

 

(Loss) Income

 

Par Value

 

Stock

 

Par Value

 

Interest

 

Equity

 

Balance - December 31, 2014

 

$

1,740,005

 

$

(110,045)

 

$

862

 

$

(1,026,117)

 

$

498,702

 

$

509

 

$

1,103,916

 

Net income

 

 

199,348

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(53)

 

 

199,295

 

Foreign currency translation adjustments

 

 

 —

 

 

(163,874)

 

 

 —

 

 

 —

 

 

 —

 

 

(13)

 

 

(163,887)

 

Changes in unrecognized pension gains/losses and related amortization, net of tax

 

 

 —

 

 

11,547

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

11,547

 

Changes in treasury locks, net of tax

 

 

 —

 

 

25

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

25

 

Stock awards and option exercises

 

 

 —

 

 

 —

 

 

14

 

 

5,447

 

 

79,107

 

 

 —

 

 

84,568

 

Cash dividends declared on common stock

 

 

(71,247)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(71,247)

 

Treasury stock purchased

 

 

 —

 

 

 —

 

 

 —

 

 

(50,000)

 

 

50,000

 

 

 —

 

 

 —

 

Treasury stock retired

 

 

(669,801)

 

 

 —

 

 

(207)

 

 

800,618

 

 

(130,610)

 

 

 —

 

 

 —

 

Common stock repurchased and retired

 

 

(12,624)

 

 

 —

 

 

(2)

 

 

 —

 

 

(1,261)

 

 

 —

 

 

(13,887)

 

Non controlling interest repurchased

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(476)

 

 

(148)

 

 

(624)

 

Balance - December 31, 2015

 

$

1,185,681

 

$

(262,347)

 

$

667

 

$

(270,052)

 

$

495,462

 

$

295

 

$

1,149,706

 

Net income

 

 

205,590

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

14

 

 

205,604

 

Foreign currency translation adjustments

 

 

 —

 

 

(53,163)

 

 

 —

 

 

 —

 

 

 —

 

 

(20)

 

 

(53,183)

 

Changes in unrecognized pension gains/losses and related amortization, net of tax

 

 

 —

 

 

(4,225)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(4,225)

 

Changes in treasury locks, net of tax

 

 

 —

 

 

26

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

26

 

Stock awards and option exercises

 

 

 —

 

 

 —

 

 

10

 

 

19,135

 

 

65,198

 

 

 —

 

 

84,343

 

Cash dividends declared on common stock

 

 

(76,659)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(76,659)

 

Common stock repurchased and retired

 

 

(117,378)

 

 

 —

 

 

(17)

 

 

 —

 

 

(13,976)

 

 

 —

 

 

(131,371)

 

Non controlling interest addition

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(2)

 

 

 3

 

 

 1

 

Balance - December 31, 2016

 

$

1,197,234

 

$

(319,709)

 

$

660

 

$

(250,917)

 

$

546,682

 

$

292

 

$

1,174,242

 

Net income

 

 

220,030

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1)

 

 

220,029

 

Foreign currency translation adjustments

 

 

 —

 

 

74,385

 

 

 —

 

 

 —

 

 

 —

 

 

19

 

 

74,404

 

Changes in unrecognized pension gains/losses and related amortization, net of tax

 

 

 —

 

 

(4,820)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(4,820)

 

Changes in treasury locks, net of tax

 

 

 —

 

 

28

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

28

 

Changes in derivative gains/losses, net of tax

 

 

 —

 

 

(3,186)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,186)

 

Stock awards and option exercises

 

 

 —

 

 

 —

 

 

12

 

 

25,212

 

 

67,605

 

 

 —

 

 

92,829

 

Cash dividends declared on common stock

 

 

(79,944)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(79,944)

 

Treasury stock purchased

 

 

 —

 

 

 —

 

 

 —

 

 

(120,540)

 

 

 —

 

 

 —

 

 

(120,540)

 

Common stock repurchased and retired

 

 

(36,173)

 

 

 —

 

 

(5)

 

 

 —

 

 

(4,816)

 

 

 —

 

 

(40,994)

 

Balance - December 31, 2017

 

$

1,301,147

 

$

(253,302)

 

$

667

 

$

(346,245)

 

$

609,471

 

$

310

 

$

1,312,048

 

Year Ended December 31,

    

2019

    

2018

    

2017

 

Cash and equivalents

$

241,970

$

261,823

$

712,640

Restricted cash included in prepaid and other

5,003

5,000

Total Cash and Equivalents and Restricted Cash shown in the Statement of Cash Flows

$

246,973

$

266,823

$

712,640

See accompanying notes to consolidated financial statements.

39/40/ATR

20172019 Form 10-K


Table of Contents

AptarGroup, Inc.

AptarGroup,��Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

AptarGroup’s organizational structure consists of three market‑focused lines of3 market-focused business segments which are Beauty + Home, Pharma and Food + Beverage. This is a strategic structure which allows us to be more closely aligned with our customers and the markets in which they operate.

In late 2017, Aptar began a business transformation plan to drive profitable sales growth, increase operational excellence, enhance our approach to innovation and improve organizational effectiveness (see Note 2021 – Restructuring Initiatives for further details). The primary focus of the plan will beis the Beauty + Home segment; however, certain global general and administrative functions willare also be addressed. During 2019, 2018 and 2017, we recognized approximately $20.5 million, $63.8 million and $2.2 million, respectively, of restructuring costs related to this plan with approximately $0.5 million being reported within the Beauty + Home segment and $1.7 million being reported within the Food + Beverage segment.plan.

CHANGE IN ACCOUNTING PRINCIPLE

During the second quarter of 2015,ended June 30, 2018, primarily based on published estimates which indicate that Argentina's three-year cumulative inflation rate has exceeded 100%, we concluded that Argentina has become a highly inflationary economy. Beginning July 1, 2018, we have applied highly inflationary accounting for our Argentinian subsidiaries. We have changed the Company changed its inventory valuation method for certain operating entities in its North American businessfunctional currency from the Argentinian peso to the first-in first-out (“FIFO”) method from the last-in first-out (“LIFO”) method. Prior to the change, the Company utilized two methods of inventory costing: LIFO for inventories in these operating entitiesU.S. dollar. Local currency monetary assets and FIFO for inventories in other operating entities. The Company believes that the FIFO method is preferableliabilities were remeasured into U.S. dollars using exchange rates as it better reflects the current value of inventory on the Company's Consolidated Balance Sheet, provides better matching of revenues and expenses, results in uniformity across the Company's global operations with respect to the method of inventory accounting and improves comparability with the Company's peers. The cumulative pre-tax effect of this change is a gain of approximately $7.4 million and was recognized as a decrease to Cost of sales (exclusive of depreciation and amortization). The effect of the change on Net Income Attributablelatest balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in net earnings. During the last half of 2018, we recognized approximately $0.8 million of currency gains due to AptarGroup wasthese changes. Our Argentinian operations contributed approximately $4.8 million, representing approximately $0.08 per diluted share. We have determined that this change is not material toless than 2.0% of consolidated net assets and revenues at and for the Company's previously issued financial statements and that the cumulative effect of the change is not material to current operations or to the trend of reported results of operations. Therefore, we conclude it was appropriate to recognize the cumulative effect of the change as an operating item in the current period's Consolidated Statement of Income and not to adopt the change by retrospective application.year ended December 31, 2019.

ACCOUNTING ESTIMATES

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

CASH MANAGEMENTAND CASH EQUIVALENTS

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

INVENTORIES

Inventories are stated at lower of cost or net realizable value. Costs included in inventories are raw materials, direct labor and manufacturing overhead. As discussed above, the Company changed its inventory valuation method for certain operating entities in its North American business to the FIFO method from the LIFO method during the second quarter of 2015 resulting in all entities utilizing the FIFO method at the end of 2015.

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2017 Form 10-K


Table of Contents

INVESTMENTS IN AFFILIATED COMPANIESEQUITY SECURITIES

The Company accountsWe account for its investments inour 20% to 50% owned affiliated companiesinvestments using the equity method. Equity investments that do not result in consolidation and are not accounted for under the equity method are measured at fair value. Any related changes in fair value is recognized in net income unless the investments qualify for a practicality exception. In May 2018, we invested $10.0 million in preferred equity stock of Reciprocal Labs Corporation, doing business as Propeller Health.During 2018, we increased the value of this investment by approximately $6.5 million due to fair value inputs. This investment was ultimately sold during January 2019 for an amount of $16.5 million (see Note 20 – Acquisitions for further details). During August 2019, we also invested an aggregate amount of $3.5 million in two preferred equity investments that are accounted for at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. There were no indications of impairment nor were there any changes from observable price changes noted for the year ended December 31, 2019. There were 0 dividends received from affiliated companies in 2017, 20162019, 2018 and 2015.  During the fourth quarter2017.

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2019 Form 10-K

Table of 2016, we sold our investment in an injectable drug delivery device company for a $2.0 million gain.  During the first quarter of 2017, we acquired a 20% minority interest in Kali Care, Inc. (”Kali Care”) for $5.0 million. Kali Care is a Silicon Valley-based technology company, which provides digital monitoring systems for ophthalmic medication (see Note 19 Acquisitions for further details).  The Company accounts for its investments less than 20% on the cost method.Contents

PROPERTY AND DEPRECIATION

Properties are stated at cost. Depreciation is determined on a straight‑linestraight-line basis over the estimated useful lives for financial reporting purposes and accelerated methods for income tax reporting. Generally, the estimated useful lives are 10 to 40 years for buildings and improvements and 3 to 15 years for machinery and equipment.

FINITE‑LIVEDFINITE-LIVED INTANGIBLE ASSETS

Finite‑livedFinite-lived intangibles, consisting of patents, acquired technology, customer relationships, trademarks and trade names and license agreements acquired in purchase transactions, are capitalized and amortized over their useful lives which range from 31 to 20 years.

GOODWILL

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

We believe that the accounting estimates related to determining the fair value of our reporting units is a critical accounting estimate because: (1) it is highly susceptible to change from period to period because it requires management to make assumptions about the future cash flows for each reporting unit over several years, and (2) the impact that recognizing an impairment would have on the assets reported on our balance sheet as well as our results of operations could be material. Management’s determination of the fair value of our reporting units, based on future cash flows for the reporting units, requires significant judgment and the use of estimates and assumptions related to projected revenue growth rates, the terminal growth factor, as well as the discount rate. Actual cash flows in the future may differ significantly from those forecasted today. The estimates and assumptions for future cash flows and its impact on the impairment testing of goodwill is a critical accounting estimate.

Management believes goodwill in purchase transactions has continuing value. Goodwill is not amortized and must be tested annually, or more frequently as circumstances dictate, for impairment. The annual goodwill impairment test may first consider qualitative factors to determine whether it is more likely than not (i.e., greater than 50 percent chance) that the fair value of a reporting unit is less than its book value. This is sometimes referred to as the “step zero” approach and is an optional step in the annual goodwill impairment analysis. Management has performed this qualitative assessment as of December 31, 2017October 1, 2019 for all foureach of our reporting units. Based on our review of macroeconomic, industry, and market events and circumstances as well as the overall financial performance of the reporting units, we determined that it was more likely than not that the fair value of goodwill attributed to all four of ourthese reporting units was greater than itstheir carrying amount. Thereforeamounts.

During the third quarter of 2019, we performed a separate quantitative impairment assessment using a discounted cash flow analysis of the Active Packaging reporting unit, which was formed as a result of the CSP Technologies Acquisition in the third quarter of 2018. We calculated the fair value of the Active Packaging reporting unit and compared it with the associated carrying value (the “step one” approach) as of July 1, 2019. Based on this quantitative analysis, the fair value of the reporting unit exceeded the carrying value and therefore no impairment of goodwill has been recorded. loss was recognized.

IMPAIRMENT OF LONG‑LIVEDLONG-LIVED ASSETS

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

DERIVATIVES INSTRUMENTS AND HEDGING ACTIVITIES

Derivative financial instruments are recorded in the consolidated balance sheetsConsolidated 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.

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Table of Contents

RETIREMENT OF COMMON STOCK

During 2017, the Company2019, we repurchased 1.9 million779 thousand shares of common stock, all of which were returned to treasury stock. During 2018, we repurchased 668 thousand shares of common stock, of which 512623 thousand shares were immediately retired.  During 2016, the Company repurchased and immediately retired 1.7 million shares of common stock.Common stock was reduced by the number of shares retired at $0.01 par value per share. The Company allocatesWe allocate the excess purchase price over par value between additional paid-in capital and retained earnings.

RESEARCH & DEVELOPMENT EXPENSES

Research and development costs, net of any customer funded research and development or government research and development credits, are expensed as incurred. These costs amounted to $82.8 million, $75.3 million and $68.2 million $66.2 millionin 2019, 2018 and $67.1 million in 2017, 2016 and 2015, respectively.

INCOME TAXES

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

41/ATR

2017 Form 10-K


The Company has recorded a net provisional chargeour non-U.S. earnings are subject to U.S. taxation, either from the transition tax enacted in the current period related to the impact of the U.S. legislation enacted on December 22, 2017, commonly referred to asby the Tax Cuts and Jobs Act (the “TCJA”(“TCJA”).  These provisional amounts are recorded in accordance with SAB 118, which was issued by the SEC shortly after enactment on accumulated non-U.S. earnings as of the TCJA.  The Company will reflect, withinend of 2017 or the one year measurement period provided, theglobal intangible low-taxed income tax effects of the TCJA in the reporting period in which the accounting under ASC Topic 740 is complete.

The Company considers numerous factors to determine which foreign(“GILTI”) provisions on non-U.S. earnings are permanently reinvested in foreign operations. These include the financial requirements of the U.S. parent company and those ofthereafter. We maintain our foreign subsidiaries, the U.S. funding needs for dividend payments and stock repurchases, and the tax consequences of remitting earnings to the U.S.  The TCJA imposed a one-time transition tax on all unremitted foreign earnings.  The Company recognized a provisional charge of $31.6 million during 2017, representing the estimate of the Company’s obligation for this new tax.  Therefore, as of December 31, 2017, the Company does not have a balance of earnings that have not been subject to U.S. federal taxation.  For investment holdings outside the U.S., the Company maintains its assertion that the cash and distributable reserves at itsour non-U.S. affiliates are indefinitely reinvested. As such, the Company does notWe will provide for the necessary withholding and local income taxes when management decides that would become due ifan affiliate should make a distribution. These decisions are made taking into consideration the amounts were distributed.financial requirements of the non-U.S. affiliates and the global cash management goals of the Company.

The Company providesWe provide a liability for the amount of unrecognized tax benefits from uncertain tax positions. This liability is provided whenever the Company determineswe determine that a tax benefit will not meet a more-likely-than-not threshold for recognition. See Note 56 – Income Taxes for more information.

TRANSLATION OF FOREIGN CURRENCIES

The functional currencies of the majority of the Company'sour foreign operations are the local currencies. Assets and liabilities of the Company’sour foreign operations are translated into U.S. dollars at the rates of exchange on the balance sheet date. Sales and expenses are translated at the average rates of exchange prevailing during the year. The related translation adjustments are accumulated in a separate section of Stockholders’ Equity. Realized and unrealized foreign currency transaction gains and losses are reflected in income, as a component of miscellaneous income and expense, and represented losses of $1.7 million, $1.7 million and $5.0 million $326 thousandin 2019, 2018 and $3.9 million in 2017, 2016 and 2015, respectively.

STOCK BASEDSTOCK-BASED COMPENSATION

Accounting standards require the application of the non‑substantivenon-substantive vesting approach which means that an award is fully vested when the employee’s retention of the award is no longer contingent on providing future service. Under this approach, compensation costs are recognized over the requisite service period of the award instead of ratably over the vesting period stated in the grant. As such, costs are recognized immediately if the employee is retirement eligible on the date of grant or over the period from the date of grant until retirement eligibility if retirement eligibility is reached before the end of the vesting period stated in the grant. See Note 1516 – Stock-Based Compensation for more information.

REVENUE RECOGNITION

Product and Tooling Sales.  The Company’s policy is to recognize revenue from product sales when the price is fixed and determinable, when the title and riskAt inception 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 Company’s products shipped from the U.S. transfers title and risk of loss whencontracts, we assess the goods leaveand services promised in order to identify a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the Company’s shipping location. The majority of the Company’s products shipped from non‑U.S. operations transfer title and risk of loss whenperformance obligations, we consider all the goods reach their destination. Tooling revenue is also recognized whenor services promised in the title and risk of loss transferscontract, whether explicitly stated or implied based on customary business practices. For a contract that has more than one performance obligation, we allocate the total contract consideration to the customer.

Services and Other.  The Company invoices customers for certain services. The Company also receives revenue from other sources such as license, exclusivity or royalty agreements.each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when services(or as) the performance obligations are renderedsatisfied (i.e., when the customer obtains control of the good or rights to use assets can be reliably measuredservice). The majority of our revenues are derived from product and when collection is reasonably assured. License,tooling sales; however, we also receive revenues from service, license, exclusivity and royalty revenuesarrangements, which are typically recognized when the contractual termsconsidered insignificant. See specific discussions about methods of each agreementaccounting for control transfers of product and tooling sales in Note 2 – Revenue.

LEASES

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

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2019 Form 10-K

Table of Contents

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

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

Certain vehicle lease contracts include guaranteed residual value that is considered in the determination of lease classification. The probability of having to satisfy a residual value guarantee is not material toconsidered for the Company’s resultspurpose of operations for any of the years presented.lease classification, but is considered when measuring a lease liability.

ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

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

In August 2017, the FASB issued new guidance to improve the accounting for hedging activities.  The guidance changes the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements.  In addition, the guidance makes certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP.  The new standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years.  However, early application is permitted in any interim period after the issuance of this guidance.  The Company adopted this standard in the third quarter of 2017.  See details in Note 10 – Derivative Instruments and Hedging Activities.

42/ATR

2017 Form 10-K


In AugustFebruary 2016, the FASB issued guidance ona new standard related to leases to increase transparency and comparability among organizations. Most prominent among the classification of certain cash receipts and cash payments within the statement of cash flows.  This guidance provides clarification for the following types of transactions: debt prepayment or extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, distributions received from equity method investees and beneficial interest in securitization transactions. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. However, early adoption is permitted and an entity that elects early adoption must adopt all of the amendments on a retrospective basischanges in the period of adoption. The Company adopted this standard in the fourth quarter of 2017.

In March 2016, the FASB issued guidance that changes the accounting for certain aspects of share-based payments to employees.  The guidance requiresis the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools.  The guidance also allowsROU assets and lease liabilities by lessees for the employer to repurchase more of an employee’s sharesthose leases classified as operating leases, as our accounting for tax withholding purposes without triggering liability accounting.  In addition,finance leases remained substantially unchanged. Under the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis.  The new standard, is effective for fiscal yearsdisclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and interim periods beginning after December 15, 2016.  The Company has prospectivelyuncertainty of cash flows arising from leases. We adopted the standard resultingon January 1, 2019 using a modified retrospective transition, with the effective date method. Under this method, financial results reported in $10.4 millionperiods prior to 2019 are not recast. We elected the package of additional tax deductions that would have been previously recorded in stockholders’ equity now being reported as a reduction in tax expense forpractical expedients permitted under the year ended December 31, 2017.  The amounttransition guidance within the new standard, which among other things, allows companies to carry forward their historical lease classification. We also implemented internal controls and key system functionality to enable the preparation of excess tax benefits and deficiencies recognized in the provision for income taxes will fluctuate from period to period basedfinancial information on the price of the Company’s stock, the volume of share-based instruments settled or vested, and the value assigned to share-based instruments under U.S. GAAP.  We have also prospectively adopted the standard for the presentation of the consolidated statements of cash flows.adoption. The impact of excess tax benefits from exercise of stock options is now shown within cash flows from operating activities instead of cash flows from financing activities.  In addition, the Company has elected to continue its current practice of estimating expected forfeitures.

In March 2016, the FASB issued guidance that eliminates the requirement that an investor retrospectively apply equity method accounting when an investment that it had accounted for by another method initially qualifies for the equity method.  The guidance requires that an equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting.  The new standard is effective for fiscal years and interim periods beginning after December 15, 2016.  The adoption of the new rules did not have an impact on our financial statements.standard to previously reported results is shown below.

In July 2015, the FASB issued new guidance for simplifying the measurement of inventory.  The core principle of the guidance is that an entity should measure inventory at the lower of cost or net realizable value.  This standard is effective for annual reporting periods beginning after December 15, 2016. The Company adopted the requirements of the standard and the impact was not material to our current year financial statements.

   

Balance at

Balance at

    

December 31,

    

    

January 1,

2018

Adjustments

2019

Consolidated Balance Sheets

Operating lease right-of-use assets

$

$

83,222

$

83,222

Prepaid and other

118,245

(1,383)

116,862

Property, plant and equipment

991,613

5,876

997,489

Current maturities of long-term obligations, net of unamortized debt issuance costs

62,678

2,631

65,309

Accounts payable, accrued and other liabilities

525,199

20,508

545,707

Operating lease liabilities

61,331

61,331

Long-term obligations, net of unamortized debt issuance costs

1,125,993

3,245

1,129,238

In May 2014, the FASB issued ASU 2014-09, which amended the guidance for recognition of revenue from customer contracts. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015,On January 1, 2018, we adopted this standard and all the FASB decided to deferrelated amendments (the “new revenue standard”) for all contracts. This adoption was accounted for using the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date.  The FASB also decided to allow early adoptionmodified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard but not before the original effective date of December 15, 2016. Subsequentas an adjustment to the initialJanuary 1, 2018 opening balance of retained earnings. Comparative information for the prior periods has not been restated and continues to be reported under the accounting standards the FASB has also issued several ASUsin effect prior to clarify specific revenue recognition topics.  We continue to evaluate the impact the adoptionJanuary 1, 2018.

44/ATR

2019 Form 10-K

Table of this standard will have on our Consolidated Financial Statements.  TheContents

    

Balance at

    

    

Balance at

 

December 31, 2017

Adjustment

January 1, 2018

Consolidated Balance Sheets

Assets

Inventories

$

337,216

$

(7,064)

$

330,152

Prepaid and other

109,791

6,411

116,202

Liabilities

Accounts payable, accrued and other liabilities

461,579

(5,706)

455,873

Deferred income taxes

20,995

1,292

22,287

Deferred and other non-current liabilities

5,608

824

6,432

Stockholders’ Equity

Retained earnings

1,301,147

2,937

1,304,084

A majority of our revenues are derived from product sales and tooling sales.  We are also evaluating our service, license, exclusivity and royalty arrangements, which needrevenue continues to be reviewed individually to ensure proper accounting under the new standard. To date,recognized when products are shipped from our internal project team has reviewed a substantial portion of contracts.  We believe the pronouncement will mainly impact the timing of when we account for bothmanufacturing facilities. For certain custom product and tooling sales. We currentlysales where revenue was previously recognized when the products were shipped, we now recognize revenue for these contracts when the title and risk of loss transfers to the customer.  Under the new guidance, we will recognize revenue for certain contracts over the time required to manufacture the product or build the tool.tool in accordance with the new revenue standard. We also continuehave certain extended warranty contracts, which under the new standard are considered a separate performance obligation and are required to progressbe deferred and recognized into revenue over the life of the agreement.

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated statements of income and balance sheets is as follows:

    

For the Year Ended December 31, 2018

 

    

Balances

 

    

Without

Effect of

 

    

As

    

Adoption of

    

Change

 

Reported

ASC 606

Higher/(Lower)

Consolidated Statements of Income

Net Sales

Beauty + Home

$

1,426,382

$

1,424,701

$

1,681

Pharma

954,652

954,497

155

Food + Beverage

383,727

385,001

(1,274)

Costs and Expenses

Cost of sales (exclusive of depreciation and amortization)

1,812,961

1,811,290

1,671

Provision for income taxes

71,254

71,541

(287)

Net income

194,766

195,588

(822)

    

December 31, 2018

 

    

Balances

 

    

Without

Effect of

 

    

As

    

Adoption of

    

Change

 

Reported

ASC 606

Higher/(Lower)

Consolidated Balance Sheets

Assets

Inventories

$

381,110

$

391,315

$

(10,205)

Prepaid and other

118,245

108,490

9,755

Liabilities

Accounts payable, accrued and other liabilities

525,199

529,168

(3,969)

Deferred income taxes

53,917

52,912

1,005

Deferred and other non-current liabilities

23,465

23,066

399

Stockholders’ Equity

Retained earnings

1,371,826

1,369,711

2,115

45/ATR

2019 Form 10-K

Table of Contents

In January 2016, the FASB issued ASU 2016-01, which provides guidance on the classification and measurement of financial assets and liabilities (equity securities and financial liabilities) under the fair value option and the presentation and disclosure requirements for financial instruments. In February 2018, ASU 2018-03 was issued to clarify certain aspects of the guidance issued in updating our internal controls along with reviewingJanuary 2016. The guidance modifies how entities measure equity investments and developingpresent changes in the additional disclosuresfair value of financial liabilities. Under the new guidance, entities measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any related changes in fair value in net income unless the investments qualify for the new practicality exception. A measurement alternative exists for those equity investments that do not have a readily determinable fair value. These investments may be measured at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. The standard also includes a new impairment model for equity investments without readily determinable fair values. The new model is a single-step model under which we are required byto perform a qualitative assessment each reporting period to identify impairment. When a qualitative assessment indicates that an impairment exists, we will estimate the standard.fair value of the investment and recognize in current earnings an impairment loss equal to the difference between the fair value and the carrying amount of the equity investment. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017. We will adoptadopted the modified retrospective transition method for implementingrequirements of this guidance instandard during the first quarter of 2018.

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

In February 2018, the FASB issued ASU 2018-02, which provides guidance on the reclassification of certain tax effects from accumulated other comprehensive income. This guidance allows for the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the TCJA. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018. We elected to early adopt this standard in the fourth quarter of 2018. As part of this adoption, we elected to reclassify $6.7 million of stranded income tax effects of the TCJA from accumulated other comprehensive income to retained earnings at the beginning of the fourth quarter of 2018.

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

NOTE 2 REVENUE

Revenue by segment and geography for the years ended December 31, 2019 and 2018 is as follows:

    

For the Year Ended December 31, 2019

 

Latin

Segment

Europe

Domestic

America

Asia

Total

 

Beauty + Home

$

792,255

$

310,411

$

160,048

$

90,000

$

1,352,714

Pharma

729,882

297,871

26,344

36,954

1,091,051

Food + Beverage

116,332

228,486

33,996

37,153

415,967

Total

$

1,638,469

$

836,768

$

220,388

$

164,107

$

2,859,732

    

For the Year Ended December 31, 2018

Latin

Segment

Europe

Domestic

America

Asia

Total

Beauty + Home

$

816,359

$

334,881

$

178,392

$

96,750

$

1,426,382

Pharma

696,079

196,928

25,485

36,160

954,652

Food + Beverage

115,040

194,527

31,742

42,418

383,727

Total

$

1,627,478

$

726,336

$

235,619

$

175,328

$

2,764,761

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

43/46/ATR

20172019 Form 10-K


The opening and closing balances of Aptar’s contract asset and contract liabilities are as follows:

    

Balance as of

    

Balance as of

Increase/

 

    

December 31, 2018

    

December 31, 2019

    

(Decrease)

 

(opening)

(closing)

 

Contract asset (current)

$

15,858

$

16,245

$

387

Contract asset (long-term)

$

$

$

Contract liability (current)

$

68,134

$

79,305

$

11,171

Contract liability (long-term)

$

11,261

$

9,779

$

(1,482)

The differences in the opening and closing balances of our contract asset and contract liabilities are primarily the result of acquisitions and timing differences between our performance and the customer’s payment. The total amount of revenue recognized during the current year against contract liabilities is $61.3 million, including $32.6 million relating to contract liabilities at the beginning of the year.

Determining the Transaction Price

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

Point in Time Performance Obligations

For product and tooling sales considered to be point in time, Aptar typically assesses, among other things, the shipping terms of the contract, shipping being one of the indicators of transfer of control. For free on board (“FOB”) shipping point terms, revenue is recognized at the time of shipment. The performance obligation with respect to the sale of goods is satisfied at the time of shipment because the customer gains control at that time. Once the goods are shipped, we are precluded from redirecting the shipment to another customer. With respect to FOB destination sales, shipping and/or handling costs that occur before the customer obtains control of the goods are deemed to be fulfilment activities and are accounted for as fulfilment costs and revenue is recorded upon final delivery to the customer location.

Over Time Performance Obligations

For performance obligations related to manufacturing of highly customized products that have no alternative use for us and for which we have an enforceable right to payment for performance completed to date, we transfer control and recognize revenue over time by measuring progress towards complete satisfaction using the Output Method based on the number of products produced. For similar performance obligations related to our tooling sales, we transfer control and recognize revenue over time by measuring progress towards complete satisfaction using the Input Method based on costs incurred relative to total estimated costs to completion. We believe these measurements provide a faithful depiction of the transfer of goods as the costs incurred reflect the value of the products produced.

Product Sales

Aptar primarily manufactures dispensing systems for our Beauty + Home, Pharma and Food + Beverage customers. The amount of consideration is typically fixed for such customers. At the time of delivery, the customer is invoiced the agreed-upon price. Revenue from product sales is typically recognized upon manufacture or shipment, when control of the goods transfers to the customer.

To determine when the control transfers, Aptar typically assesses, among other things, the shipping terms of the contract, shipping being one of the indicators of transfer of control. A majority of product sales are sold FOB shipping point. For FOB shipping point shipments, control of the goods transfers to the customer at the time of shipment of the goods. Therefore, Aptar's performance obligation is satisfied at the time of shipment. Aptar has elected to account for shipping and handling costs that occur after the customer has obtained control of a good as fulfillment costs rather than as a promised service. Aptar does not have any material significant payment terms as payment is typically received shortly after the point of sale.

47/ATR

2019 Form 10-K

There also exist instances where Aptar manufactures highly customized products that have no alternative use to Aptar and for which Aptar has an enforceable right to payment for performance completed to date. For these products, we transfer control and recognizes revenue over time by measuring progress towards completion using the Output Method based on the number of products produced. As we normally make our products to a customer’s order, the time between production and shipment of our products is typically within a few weeks.

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

During the second quarterAs a part of 2017, the Company determinedits customary business practice, Aptar offers a standard warranty that the impactproducts will materially comply with the technical specifications and will be free from material defects. Because such warranties are not sold separately, do not provide for any service beyond a guarantee of restricted stock unit (RSU) vestinga product’s initial specifications, and are not required by law, there is no revenue deferral for these types of warranties.

Tooling Sales

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

In certain instances, Aptar offers extended warranties on our tools above and beyond the normal standard warranties. Aptar normally receives payment at the inception of the contract and recognizes revenue over the term of the contract. At December 31, 2018, $758 thousand of unearned revenue associated with outstanding contracts was incorrectly presentedreported in Accounts Payable, Accrued and Other Liabilities. At December 31, 2019, the unearned amount was $515 thousand. Aptar expects to recognize approximately $228 thousand of the unearned amount in 2020 and $287 thousand thereafter.

Service Sales

Aptar also provides services to its pharmaceutical customers. As with product sales, Aptar recognizes revenue based on completion of each performance obligation of the service contract.

Contract Costs

Aptar does not incur significant costs to obtain or fulfill revenue contracts.

Practical Expedients

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

Remaining performance obligations: Aptar elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts that are one year or less, as the revenue is expected to be recognized within the next year. In addition, we have elected not to disclose the expected consideration related to performance obligations where we recognize revenue in the Condensed Consolidated Statement of Cash Flows. The effect of correcting this error resulted inamount it has a reductionright to Net Cash Provided by Operations with a corresponding increase to Net Cash (Used) Provided by Financing Activities. As this correction represented a reclassification between two accounts within the Condensed Consolidated Statement of Cash Flows, the Condensed Consolidated Statements of Income, the Condensed Consolidated Balance Sheet and the Condensed Consolidated Statements of Changes in Equity were not impacted by this change. The Company determined the correction was not material to previously issued financial statements but was significant enough to revise.invoice (e.g., usage-based pricing terms).

NOTE 3 INVENTORIES

Following is a summary of the previously reported financial statement line items impacted by this revision of all periods and statements included in this report:

 

 

 

 

 

 

 

 

 

 

 

 

 

As Previously

 

 

 

 

 

 

 

 

    

Reported

    

Adjustment

    

As Revised

 

Revised Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

Retirement and deferred compensation plan liabilities

 

$

(7,486)

 

$

(1,894)

 

$

(9,380)

 

Net Cash Provided by Operations

 

 

327,193

 

 

(1,894)

 

 

325,299

 

Proceeds from stock option exercises

 

 

53,453

 

 

1,894

 

 

55,347

 

Net Cash Provided (Used) by Financing Activities

 

 

(31,609)

 

 

1,894

 

 

(29,715)

 

Year Ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

Retirement and deferred compensation plan liabilities

 

$

(29,576)

 

$

(756)

 

$

(30,332)

 

Net Cash Provided by Operations

 

 

324,515

 

 

(756)

 

 

323,759

 

Proceeds from stock option exercises

 

 

64,003

 

 

756

 

 

64,759

 

Net Cash Provided (Used) by Financing Activities

 

 

(33,066)

 

 

756

 

 

(32,310)

 

NOTE 2 INVENTORIES

Inventories, by component net of reserves, consisted of:

 

 

 

 

 

 

 

    

2017

    

2016

 

   

2019

   

2018

 

Raw materials

 

$

99,196

 

$

98,014

 

$

111,653

$

110,720

Work in process

 

 

107,307

 

 

91,646

 

 

123,750

 

131,091

Finished goods

 

 

130,713

 

 

107,254

 

 

140,392

 

139,299

Total

 

$

337,216

 

$

296,914

 

$

375,795

$

381,110

48/ATR

2019 Form 10-K

NOTE 34 GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the year ended December 31, 20172019 are as follows by reporting segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Beauty +

    

 

 

    

Food +

    

Corporate

    

 

 

 

 

Home

 

Pharma

 

Beverage

 

& Other

 

Total

 

Balance as of December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

164,590

 

$

129,360

 

$

16,290

 

$

1,615

 

$

311,855

 

Accumulated impairment losses

 

 

 —

 

 

 —

 

 

 —

 

 

(1,615)

 

 

(1,615)

 

 

$

164,590

 

$

129,360

 

$

16,290

 

$

 —

 

$

310,240

 

Acquisition

 

 

49,735

 

 

55,827

 

 

 —

 

 

 —

 

 

105,562

 

Foreign currency exchange effects

 

 

(2,954)

 

 

(5,137)

 

 

(189)

 

 

 —

 

 

(8,280)

 

Balance as of December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

211,371

 

$

180,050

 

$

16,101

 

$

1,615

 

$

409,137

 

Accumulated impairment losses

 

 

 —

 

 

 —

 

 

 —

 

 

(1,615)

 

 

(1,615)

 

 

$

211,371

 

$

180,050

 

$

16,101

 

$

 —

 

$

407,522

 

Foreign currency exchange effects

 

 

12,576

 

 

23,019

 

 

770

 

 

 

 

 

36,365

 

    

Beauty +

    

    

Food +

    

Corporate

    

 

Home

Pharma

Beverage

& Other

Total

 

Balance as of December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

223,947

 

$

203,069

 

$

16,871

 

$

1,615

 

$

445,502

 

$

223,947

$

203,069

$

16,871

$

1,615

$

445,502

Accumulated impairment losses

 

 

 —

 

 

 —

 

 

 —

 

 

(1,615)

 

 

(1,615)

 

 

 

 

(1,615)

 

(1,615)

 

$

223,947

 

$

203,069

 

$

16,871

 

$

 —

 

$

443,887

 

$

223,947

$

203,069

$

16,871

$

$

443,887

Acquisition

5,565

174,343

103,678

283,586

Reallocation, net

(8,048)

8,048

Foreign currency exchange effects

(5,579)

 

(9,481)

 

(318)

 

 

(15,378)

Balance as of December 31, 2018

Goodwill

$

223,933

$

359,883

$

128,279

$

1,615

$

713,710

Accumulated impairment losses

 

 

 

(1,615)

 

(1,615)

$

223,933

$

359,883

$

128,279

$

$

712,095

Acquisition

57,934

57,934

Foreign currency exchange effects

 

(2,275)

 

(4,167)

 

(126)

 

 

(6,568)

Balance as of December 31, 2019

Goodwill

$

221,658

$

413,650

$

128,153

$

1,615

$

765,076

Accumulated impairment losses

 

 

 

 

(1,615)

 

(1,615)

$

221,658

$

413,650

$

128,153

$

$

763,461

44/ATR

2017 Form 10-K


2018, certain CSP Technologies product lines were transferred from Pharma segment to the Food + Beverage segment affecting the Active Packaging and Food + Beverage reporting units to better align our customer needs. The changes resulted in the reassignment of the assets and liabilities to the reporting units affected. The goodwill was reallocated to the reporting units affected using the relative fair value approach.

During the third quarter of 2019, we performed a separate quantitative impairment assessment using a discounted cash flow analysis of the Active Packaging reporting unit, which was formed as a result of the CSP Technologies Acquisition in the third quarter of 2018. We calculated the fair value of the Active Packaging reporting unit and compared it with the associated carrying value (the “step one” approach) as of July 1, 2019. Based on this quantitative analysis, the fair value of the reporting unit exceeded the carrying value and therefore 0 impairment loss was recognized.

The Company hasWe have completed the annual impairment analysis of itsour reporting units as of December 31, 2017October 1, 2019 using a qualitative analysis of goodwill commonly referred to as the “step zero” approach.approach for each of our reporting units. Based on our review of macroeconomic, industry, and market events and circumstances as well as the overall financial performance of the reporting units, we determined that it was more likely than not that the fair value of goodwillthese reporting units was greater than itstheir carrying amount for all four reporting units. Therefore, noamounts. No impairment was recognized during the years ended December 31, 2019, 2018 or 2017.

49/ATR

2019 Form 10-K

The table below shows a summary of intangible assets for the years ended December 31, 20172019 and 2016.2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

2019

2018

Weighted Average

Weighted Average

 

Gross

 

 

 

 

 

 

 

Gross

 

 

 

 

 

 

 

Weighted Average

Gross

Gross

 

Amortization Period

Amortization Period

 

Carrying

 

Accumulated

 

Net

 

Carrying

 

Accumulated

 

Net

 

Amortization Period

Carrying

Accumulated

Net

Carrying

Accumulated

Net

 

    

(Years)

    

Amount

    

Amortization

    

Value

    

Amount

    

Amortization

    

Value

 

    

(Years)

    

Amount

    

Amortization

    

Value

    

Amount

    

Amortization

    

Value

 

Amortized intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patents

 

0.2

 

$

7,819

 

$

(7,806)

 

$

13

 

$

6,859

 

$

(6,839)

 

$

20

 

 

7.2

$

2,804

(1,318)

$

1,486

$

5,427

$

(5,294)

$

133

Acquired technology

 

15.0

 

 

47,571

 

 

(14,624)

 

 

32,947

 

 

41,731

 

 

(10,040)

 

 

31,691

 

 

13.0

 

100,511

(25,430)

 

75,081

 

92,389

 

(18,304)

 

74,085

Customer relationships

 

12.2

 

 

68,886

 

 

(13,401)

 

 

55,485

 

 

63,006

 

 

(6,696)

 

 

56,310

 

13.6

217,934

(33,924)

184,010

179,597

(20,439)

159,158

Trademarks and trade names

7.0

35,015

(11,003)

24,012

21,243

(5,914)

15,329

License agreements and other

 

7.6

 

 

21,827

 

 

(14,812)

 

 

7,015

 

 

18,516

 

 

(12,048)

 

 

6,468

 

 

10.3

 

16,153

(9,658)

 

6,495

 

13,852

 

(7,653)

 

6,199

Total intangible assets

 

11.8

 

$

146,103

 

$

(50,643)

 

$

95,460

 

$

130,112

 

$

(35,623)

 

$

94,489

 

 

12.6

$

372,417

$

(81,333)

$

291,084

$

312,508

$

(57,604)

$

254,904

Aggregate amortization expense for the intangible assets above for the years ended December 31, 2019, 2018 and 2017 2016was $27,608, $15,455 and 2015 was $10,339, $9,317 and $4,246, respectively.

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

 

 

 

 

2018

    

$

11,024

2019

 

 

10,838

2020

 

 

9,621

2021

 

 

9,430

2022 and thereafter

 

 

54,547

2020

    

$

31,135

2021

 

29,582

2022

 

29,343

2023

 

29,171

2024 and thereafter

 

171,853

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, 2017.2019.

NOTE 45 ACCOUNTS PAYABLE, ACCRUED AND ACCRUEDOTHER LIABILITIES

At December 31, 20172019 and 2016,2018, accounts payable, accrued and accruedother liabilities consisted of the following:

 

 

 

 

 

 

 

    

2017

    

2016

 

    

2019

    

2018

 

Accounts payable, principally trade

 

$

153,862

 

$

115,514

 

$

192,739

$

164,528

Accrued employee compensation costs

 

 

144,175

 

 

119,767

 

 

163,839

 

168,349

Customer deposits and other unearned income

 

 

45,196

 

 

44,068

 

 

86,820

 

67,775

Other accrued liabilities

 

 

118,346

 

 

89,790

 

 

129,630

 

124,547

Total

 

$

461,579

 

$

369,139

 

$

573,028

$

525,199

NOTE 56 INCOME TAXES

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“TCJA”) was enacted by the, which significantly changed U.S. federal government.tax law.  The legislationTCJA lowered the Company’s U.S. statutory federal corporateincome tax rate from 35.0%35% to 21.0%,21% effective January 1, 2018, and imposedwhile imposing a one-time transitiondeemed repatriation tax on previously unremitted earningsdeferred foreign income. The Company completed its accounting for the income tax effects of non-U.S. subsidiaries as of December 31, 2017. In addition, there are many new provisions effectivethe TCJA during 2018, in 2018, including changes to bonus depreciation,accordance with the deduction for executive compensationU.S. Securities and interest expense, a tax on global intangible low-taxed income provisions (“GILTI”), the base erosion anti-abuse tax (“BEAT”), and a deduction for foreign-derived intangible income (“FDII”).

45/ATR

2017 Form 10-K


The SEC issuedExchange Commission Staff Accounting Bulletin No. 118 (“SAB 118”), which provides us with up to one year to finalize accounting for the impacts118.

50/ATR

2019 Form 10-K

Income before income taxes consists of:

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

    

2017

    

2016

    

2015

 

    

2019

    

2018

    

2017

 

United States

 

$

36,139

 

$

55,278

 

$

73,492

 

$

94,612

$

34,404

$

36,139

International

 

 

258,686

 

 

225,219

 

 

221,079

 

 

247,457

 

231,616

 

258,686

Total

 

$

294,825

 

$

280,497

 

$

294,571

 

$

342,069

$

266,020

$

294,825

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

 

 

 

 

 

 

 

Years Ended December 31,

 

2017

 

2016

 

2015

 

2019

2018

2017

 

Current:

 

 

 

 

 

 

 

U.S. Federal

 

$

(342)

 

$

24,045

 

$

19,749

 

$

2,129

$

10,273

$

(342)

State/Local

 

 

230

 

 

449

 

 

82

 

 

883

 

877

 

230

International

 

 

72,670

 

 

61,511

 

 

82,586

 

 

88,084

 

83,456

 

72,670

 

$

72,558

 

$

86,005

 

$

102,417

 

$

91,096

$

94,606

$

72,558

Deferred:

 

 

 

 

 

 

 

U.S. Federal/State

 

$

2,570

 

$

(4,002)

 

$

1,605

 

$

4,670

$

(17,019)

$

2,570

International

 

 

(332)

 

 

(7,110)

 

 

(8,746)

 

 

4,076

 

(6,333)

 

(332)

 

$

2,238

 

$

(11,112)

 

$

(7,141)

 

$

8,746

$

(23,352)

$

2,238

Total

 

$

74,796

 

$

74,893

 

$

95,276

 

$

99,842

$

71,254

$

74,796

The difference between the actual income tax provision and the tax provision computed by applying the statutory federal income tax rate of 21.0% in 2019 and 2018, and 35.0% in 2017 2016 and 2015 to income before income taxes is as follows:

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

    

2017

    

2016

    

2015

 

    

2019

    

2018

    

2017

 

Income tax at statutory rate

 

$

103,189

 

$

98,174

 

$

103,100

 

$

71,835

$

55,864

$

103,189

State income (benefits) taxes, net of federal (tax) benefit

 

 

(594)

 

 

(980)

 

 

(1,254)

 

State income taxes (benefits), net of federal (tax) benefit

 

2,622

 

(1,516)

 

(2,620)

Investment incentives

 

 

(1,900)

 

 

(6,413)

 

 

(3,082)

 

(2,530)

(1,900)

(1,900)

Tax resolutions

 

 

(5,188)

 

 

(7,205)

 

 

2,375

 

(1,915)

(3,400)

(5,188)

Excess tax benefits from equity compensation

 

 

(10,383)

 

 

 —

 

 

 —

 

Excess tax benefits from share-based compensation

(12,520)

(10,800)

(10,383)

Deferred benefits from tax rate changes

 

 

(5,055)

 

 

 —

 

 

 —

 

(2,800)

(5,055)

U.S. GILTI and BEAT

(1,485)

5,625

U.S. tax reform - transition tax

 

 

31,575

 

 

 —

 

 

 —

 

(2,570)

31,575

Results of forward contract

 

 

(23,883)

 

 

 —

 

 

 —

 

(23,883)

Provision for distribution of current foreign earnings

 

 

2,843

 

 

3,494

 

 

2,031

 

Valuation allowance

10,623

3,170

1,344

Rate differential on earnings of foreign operations

 

 

(17,318)

 

 

(12,037)

 

 

(5,688)

 

 

29,807

 

26,424

 

(16,097)

Other items, net

 

 

1,510

 

 

(140)

 

 

(2,206)

 

 

3,405

 

3,157

 

3,814

Actual income tax provision

 

$

74,796

 

$

74,893

 

$

95,276

 

$

99,842

$

71,254

$

74,796

Effective income tax rate

 

 

25.4

%  

 

26.7

%  

 

32.3

%  

 

29.2

%  

 

26.8

%  

 

25.4

%  

The 2019 tax provision was favorably impacted by excess tax benefits on deductible share-based compensation. The tax provision for 2019 reflects a $12.5 million benefit from this item. The mix of pretax income has an unfavorable impact, because the majority of our income is earned in higher tax jurisdictions. Additionally, we have incurred losses in jurisdictions where we cannot tax effect the loss. We have elected to account for the tax on the U.S. GILTI as a period cost and not as a measure of deferred taxes.

The 2018 tax provision was favorably impacted by excess tax benefits on deductible stock compensation. The tax provision for 2018 reflects a $10.8 million benefit from this item. The mix of pretax income has an unfavorable impact, reflecting that the majority of our income is earned in higher tax jurisdictions. The U.S. GILTI tax and Base Erosion Anti-Abuse Tax (“BEAT”) also had a $5.6 million unfavorable impact.

The 2017 tax provision was favorably impacted by the mix of pretax income in various non-U.S. tax jurisdictions. The tax provision for 2017 reflects $10.4 million related to the excess tax benefits on deductible stock compensation, which is new for 2017. The deferred tax benefit of $5.1 million is net of a provisional benefit of $6.8 million recorded for the change in the U.S. tax rate and a charge of $1.7 million for tax rate changes in France and Argentina.Argentina. The $5.2 million related to tax resolutions includes an amount of $3.2 million related to uncertain tax positions in Europe. The remaining $2.0 million is a refund from a distribution tax paid in France. Furthermore, the tax provision for 2017 reflects a provisional charge of $31.6 million from the transition tax enacted as part of the U.S. tax reform. This was partially offset by a benefit of $23.9 million from the forward contracts discussed in Note 1011 – Derivative Instruments and Hedging Activities.

46/51/ATR

20172019 Form 10-K


The state income tax provision for 2016 reflects a benefit of $1.6 million related to the reduction of valuation allowances mostly associated with U.S. state tax credits.  The tax provision for 2016 also reflects benefits of $6.4 million associated with the exceptional depreciation allowances enacted in France and Italy.  The $7.2 million related to tax resolutions includes an amount of $5.0 million related to dividends previously taxed in France.  The remaining $2.2 million is a net amount related to uncertain tax positions in France, Italy and Germany.  The $3.5 million charge pertaining to the distribution of earnings reflects $2.1 million of tax incurred in 2016 for income recognized under the U.S. deemed dividend provisions and $1.4 million for cash movements in Europe during 2016. The rate differential on earnings of foreign operations reflects a $4.7 million benefit due to the reduction in the corporate income tax rate in France from 38.00% to 34.43%.  In addition, the rate differential on earnings of foreign operations reflects benefits of $2.0 million, $2.2 million, and $2.2 million due to reductions in the corporate income tax rates in Germany, Switzerland, and China, respectively.

The tax provision for 2015 reflects a benefit of $1.1 million related to the reduction of valuation allowances mostly associated with U.S. state tax credits.  Additional benefits of $3.1 million associated with the exceptional depreciation allowances enacted in France during 2015 were partially offset by a $2.4 million charge for expected income tax assessments in France for a transfer pricing issue.  While the Company expects to seek compensating offsets for this amount, no receivable has been recorded at this time.  The $2.0 million charge pertaining to the distribution of earnings reflects $1.6 million of tax incurred in 2015 for income recognized under the U.S. deemed dividend provisions and $0.4 million for planned cash movements in Europe during 2016.

Significant deferred tax assets and liabilities as of December 31, 20172019 and 20162018 are composed of the following temporary differences:

 

 

 

 

 

    

2017

    

2016

 

    

2019

    

2018

 

Deferred Tax Assets:

 

 

 

 

 

Net operating loss carryforwards

$

24,941

$

22,462

Operating and finance leases

25,440

Pension liabilities

 

$

19,393

 

$

27,087

 

24,925

15,405

Stock compensation

 

 

9,101

 

18,943

 

Foreign tax credit carryforward

 

 

8,320

 

10,813

 

Net operating loss carryforwards

 

 

10,803

 

5,150

 

Share-based compensation

 

6,082

10,130

U.S. federal tax credits

8,575

12,045

U.S. state tax credits

 

 

9,384

 

8,103

 

 

7,881

10,186

Vacation

 

 

4,748

 

4,783

 

Vacation and bonus

 

7,645

6,891

Research and development

7,539

6,945

Inventory

5,993

6,038

Workers compensation

 

 

4,534

 

3,575

 

 

3,835

3,373

Other

 

 

4,660

 

 

12,651

 

 

16,496

13,985

Total gross deferred tax assets

 

 

70,943

 

91,105

 

 

139,352

107,460

Less valuation allowance

 

 

(5,414)

 

 

(4,070)

 

 

(23,320)

(11,189)

Net deferred tax assets

 

 

65,529

 

 

87,035

 

 

116,032

96,271

Deferred Tax Liabilities:

 

 

 

 

 

Depreciation, amortization and leases

 

 

25,062

 

39,189

 

Acquisition related intangibles

 

 

27,866

 

 

30,417

 

 

62,851

59,004

Depreciation and amortization

28,284

31,140

Operating and finance leases

27,555

2,034

Other

 

6,215

10,351

Total gross deferred tax liabilities

 

 

52,928

 

 

69,606

 

 

124,905

102,529

Net deferred tax assets

 

$

12,601

 

$

17,429

 

Net deferred tax (liabilities) assets

$

(8,873)

$

(6,258)

The $12.1 million increase in our valuation allowance in 2019 is primarily due to losses in foreign tax credit carryforward will expire injurisdictions where we cannot record the years 2024 and 2026. There is no expiration date on $6.9 millionbenefit of the tax‑effected net operating loss carry forwards and $3.9 million (tax effected) will expire in the years 2018 to 2037. The U.S. state tax credit carryforwards of $9.4 million (tax effected) will expire in the years 2018 to 2032. It is currently expected that U.S. state tax credit carryforwards of $0.1 million will expire unused in 2018.losses.

The Company evaluatesWe evaluate the deferred tax assets and recordsrecord a valuation allowance when it is believed it is more likely than not that the benefit will not be realized. The Company hasWe have established a valuation allowance of $2.7for $20.2 million of the $10.8$24.9 million of tax effected net operating loss carry forwards.carryforwards. These losses are generally in start‑up jurisdictions or locations that have not produced ancumulative three year operating profit to date.profit. A valuation allowance of $2.7$3.1 million has also been established against the $9.4$7.9 million of U.S. state tax credit carry forwards.carryforwards.

The U.S. federal tax credits will expire in the years 2026 and 2027. There is no expiration date on $20.8 million of the tax-effected net operating loss carryforwards and $4.1 million (tax effected) will expire in the years 2020 to 2038. The U.S. state tax credit carryforwards of $7.9 million (tax effected) will expire in the years 2020 to 2034.

As a result of U.S. tax reform all previouslyand the U.S. GILTI provisions, none of the non-U.S. unremitted earnings as of December 31, 2017 will be included in thesubject to U.S. federal and state taxable income.  The Company maintains itstaxation. We maintain our assertion that theall other cash and distributable reserves at itsour non-U.S. affiliates arewill continue to be indefinitely reinvested. We estimate the amount of additional local and withholding tax that would be payable on these amountsdistributions to be in the range of $25$20 million to $35$30 million.

The Company hasWe have not provided for taxes on certain tax‑deferredtax-deferred income of a foreign operation. The income arose predominately from government grants. Taxes of approximately $1.7$1.6 million would become payable in the event the terms of the grant are not fulfilled.

47/52/ATR

20172019 Form 10-K


Income Tax Uncertainties

INCOME TAX UNCERTAINTIES

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

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

    

2015

 

    

2019

    

2018

    

2017

 

Balance at January 1

 

$

6,356

 

$

7,934

 

$

6,408

 

$

3,559

$

3,080

$

6,356

Increases based on tax positions for the current year

 

 

370

 

 

270

 

 

255

 

 

412

360

370

Increases based on tax positions of prior years

 

 

1,562

 

 

1,283

 

 

2,684

 

 

663

610

1,562

Decreases based on tax positions of prior years

 

 

 —

 

 

(1,472)

 

 

(518)

 

Settlements

 

 

(4,874)

 

 

(1,444)

 

 

(207)

 

 

(558)

(491)

(4,874)

Lapse of statute of limitations

 

 

(334)

 

 

(215)

 

 

(688)

 

 

(429)

(334)

Balance at December 31

 

$

3,080

 

$

6,356

 

$

7,934

 

$

3,647

$

3,559

$

3,080

The amount of income tax uncertainties that, if recognized, would impact the effective tax rate is approximately $3.1$3.6 million. The Company estimatesWe estimate that it is reasonably possible that the liability for uncertain tax positions will decrease no more than $1.4$1.8 million in the next twelve months from the resolution of various uncertain positions as a result of the completion of tax audits, litigation and the expiration of the statute of limitations in various jurisdictions.

The Company recognizesWe recognize interest and penalties accrued related to unrecognized tax benefits as a component of income taxes. As of December 31, 2019, 2018 and 2017, 2016 and 2015, the Companywe had approximately $1.6$1.7 million, $1.5$1.9 million and $1.1$1.6 million, respectively, accrued for the payment of interest and penalties, of which approximately $0.1$0.2 million was recognized as a tax benefit for the year ended 2019 and $0.4 million and $0.4$0.1 million was recognized in income tax expense in the years ended December 31, 2018 and 2017, 2016 and 2015, respectively.

The CompanyAptar 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 fileswe file in, with the years still subject to income tax examinations, are listed below:

Tax Years

Major Tax

Tax YearsSubject to

Major TaxJurisdiction

Subject toExamination

Jurisdiction

Examination

United States — Federal

2014-20172014-2019

United States — State

2009-20172010-2019

France

2015-20172016-2019

Germany

2015-20172015-2019

Italy

2013-20172014-2019

China

2008-20172010-2019

NOTE 7 DEBT

NOTE 6 DEBTNotes Payable, Revolving Credit Facility and Overdrafts

The Company maintains certain short-termAt December 31, 2019 and 2018, our notes payable, including a revolving credit facility.  These short-term notes payable are reported as notes payablefacility and overdrafts, consisted of the following:

  

2019

    

2018

    

Revolving credit facility

$

25,000

$

79,000

Notes payable

1,436

4,544

Overdrafts

17,823

17,749

$

44,259

$

101,293

We maintain a multi-currency revolving credit facility with two tranches that matures in July 2022 which provides for unsecured financing of up to $300 million that is available in the current liabilities section of the Consolidated Balance Sheets. Average borrowingsU.S. and up to €150 million that is available to our wholly-owned UK subsidiary. $25.0 million was utilized under these short-term notes payable were $64.5 millionour U.S. facility and $90.9 million for 2017 and 2016, respectively.  The average annual interest rate on short‑term notes payable0 balance was approximately 1.9% for 2017 and 2.2% for 2016. The lower average annual interest rate in 2017 is due to the extinguishment of higher interest rate debt.  Ourutilized under our euro-based revolving credit facility has a lower interest rate thanas of December 31, 2019. NaN balance was utilized under our short-term borrowings in other countries. U.S. facility and €69.0 million was utilized under our euro-based revolving credit facility as of December 31, 2018.

There are no0 compensating balance requirements associated with short‑term borrowings.our revolving credit facility. Each borrowing under the credit facility will bear interest at rates based on LIBOR, prime rates or other similar rates, in each case plus an applicable margin. A facility fee on the total amount of the facility is also payable quarterly, regardless of usage. The applicable margins for borrowings under the credit facility and the facility fee percentage may change from time to time depending on changes in AptarGroup’s consolidated leverage ratio. The outstanding balance under the credit facility was $0 and $166.0 million at December 31, 2017 and 2016, respectively.  We incurred approximately $1.5 million and $2.0 million in interest and fees related to this credit facility during 2017both 2019 and 2016, respectively.2018.

The Company also maintains long-term notes obligations, including private placement facilities.  During the third quarter of 2017, the Company entered into the borrowing arrangements summarized below through our wholly owned UK subsidiary to better balance our capital structure.

48/53/ATR

20172019 Form 10-K


Debt Type

  

Amount

  

Term/Maturity

  

Interest Rate

  

Bank term loan

 

$

280,000

 

5 year amortizing/July 2022

 

2.62% floating swapped to 1.36% fixed

 

Bank revolver

 

150,000

 

5 year/July 2022

 

1.10% floating

 

Private placement

 

100,000

 

6 year/July 2023

 

0.98% fixed

 

Private placement

 

200,000

 

7 year/July 2024

 

1.17% fixed

 

Average borrowings under the revolving credit facility and notes payable were $34.1 million and $40.0 million for 2019 and 2018, respectively. The average annual interest rate on the revolving credit facility and notes payable was 1.6% and 1.9% for 2019 and 2018, respectively.

Our repatriation of foreign earnings to the U.S. in the third quarter of 2017 also enabled us to prepay two of our higher interest private placement facilities during the fourth quarter of 2017: the $75 million senior unsecured note due in 2018 and the $84 million senior unsecured note due in 2020.Long-Term Obligations

At December 31, 2017, the Company’s long‑term obligations consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized

 

 

 

 

    

 

    

Debt Issuance

    

 

 

 

    

Principal

    

Costs

    

Net

 

Notes payable 0.61% – 18.00%, due in monthly and annual installments through 2025

 

$

15,349

 

$

 —

 

$

15,349

 

Senior unsecured notes 3.2%, due in 2022

 

 

75,000

 

 

113

 

 

74,887

 

Senior unsecured debts 2.6% floating, equal annual installments through 2022

 

 

280,000

 

 

692

 

 

279,308

 

Senior unsecured notes 3.5%, due in 2023

 

 

125,000

 

 

217

 

 

124,783

 

Senior unsecured notes 1.0%, due in 2023

 

 

120,095

 

 

526

 

 

119,569

 

Senior unsecured notes 3.4%, due in 2024

 

 

50,000

 

 

89

 

 

49,911

 

Senior unsecured notes 3.5%, due in 2024

 

 

100,000

 

 

217

 

 

99,783

 

Senior unsecured notes 1.2%, due in 2024

 

 

240,190

 

 

1,066

 

 

239,124

 

Senior unsecured notes 3.6%, due in 2025

 

 

125,000

 

 

238

 

 

124,762

 

Senior unsecured notes 3.6%, due in 2026

 

 

125,000

 

 

238

 

 

124,762

 

Capital lease obligations

 

 

741

 

 

 —

 

 

741

 

 

 

$

1,256,375

 

$

3,396

 

$

1,252,979

 

Current maturities of long-term obligations

 

 

(61,833)

 

 

 

 

 

(61,833)

 

Total long-term obligations

 

$

1,194,542

 

$

3,396

 

$

1,191,146

 

At December 31, 2016, the Company’s2019, our long-term obligations consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized

 

 

 

    

 

    

Debt Issuance

    

 

 

    

Principal

    

Costs

    

Net

 

Notes payable 0.61% – 16.00%, due in monthly and annual installments through 2025

 

$

18,246

 

$

 —

 

$

18,246

 

Senior unsecured notes 6.0%, due in 2018

 

 

75,000

 

 

37

 

 

74,963

 

Senior unsecured notes 3.8%, due in 2020

 

 

84,000

 

 

119

 

 

83,881

 

Unamortized

    

    

Debt Issuance

    

 

    

Principal

    

Costs

    

Net

 

Notes payable 0.00% – 10.90%, due in monthly and annual installments through 2028

$

19,220

$

$

19,220

Senior unsecured notes 3.2%, due in 2022

 

 

75,000

 

 

138

 

 

74,862

 

 

75,000

 

64

 

74,936

Senior unsecured debts 3.2% USD floating swapped to 1.36% EUR fixed, equal annual installments through 2022

 

168,000

 

390

 

167,610

Senior unsecured notes 3.5%, due in 2023

 

 

125,000

 

 

256

 

 

124,744

 

125,000

144

124,856

Senior unsecured notes 1.0%, due in 2023

112,170

356

111,814

Senior unsecured notes 3.4%, due in 2024

 

 

50,000

 

 

104

 

 

49,896

 

 

50,000

 

63

 

49,937

Senior unsecured notes 3.5%, due in 2024

 

 

100,000

 

 

256

 

 

99,744

 

100,000

144

99,856

Senior unsecured notes 1.2%, due in 2024

224,340

742

223,598

Senior unsecured notes 3.6%, due in 2025

 

 

125,000

 

 

269

 

 

124,731

 

125,000

169

124,831

Senior unsecured notes 3.6%, due in 2026

 

 

125,000

 

 

269

 

 

124,731

 

125,000

169

124,831

Capital lease obligations

 

 

1,542

 

 

 —

 

 

1,542

 

 

$

778,788

 

$

1,448

 

$

777,340

 

Finance Lease Liabilities

 

29,952

 

 

29,952

$

1,153,682

$

2,241

$

1,151,441

Current maturities of long-term obligations

 

 

(4,603)

 

 

 —

 

 

(4,603)

 

 

(65,988)

 

 

(65,988)

Total long-term obligations

 

$

774,185

 

$

1,448

 

$

772,737

 

$

1,087,694

$

2,241

$

1,085,453

At December 31, 2018, our long-term obligations consisted of the following:

Unamortized

    

    

Debt Issuance

    

    

Principal

    

Costs

    

Net

 

Notes payable 0.00% – 16.00%, due in monthly and annual installments through 2028

$

15,531

$

$

15,531

Senior unsecured notes 3.2%, due in 2022

 

75,000

 

88

 

74,912

Senior unsecured debts 4.0% USD floating swapped to 1.36% EUR fixed, equal annual installments through 2022

 

224,000

 

541

 

223,459

Senior unsecured notes 3.5%, due in 2023

125,000

181

124,819

Senior unsecured notes 1.0%, due in 2023

114,535

432

114,103

Senior unsecured notes 3.4%, due in 2024

 

50,000

 

76

 

49,924

Senior unsecured notes 3.5%, due in 2024

100,000

181

99,819

Senior unsecured notes 1.2%, due in 2024

229,070

904

228,166

Senior unsecured notes 3.6%, due in 2025

125,000

207

124,793

Senior unsecured notes 3.6%, due in 2026

125,000

208

124,792

Capital lease obligations

 

8,353

 

 

8,353

$

1,191,489

$

2,818

$

1,188,671

Current maturities of long-term obligations

 

(62,678)

(62,678)

Total long-term obligations

$

1,128,811

$

2,818

$

1,125,993

The aggregate long-term maturities, excluding finance lease liabilities, which are discussed in Note 8, due annually for the next five years are $61,670, $61,337, $135,324, $239,826, $375,169 and $250,404 thereafter.

54/ATR

2019 Form 10-K

Table of Contents

Covenants

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

Requirement

Level at December 31, 20172019

Consolidated Leverage Ratio (a)(1)

Maximumof 3.50 to 1.00

1.211.71 to 1.00

Consolidated Interest Coverage Ratio (a)(1)

Minimum of 3.00 to 1.00

11.7716.21 to 1.00


(1)

(a)

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

49/ATR

2017 Form 10-K


The aggregate long‑term maturities, excluding capital lease obligations, which is discussed in Note 7, due annually for the five years are $61,227, $59,663, $57,941, $57,943, $132,944 and $885,916 thereafter.

NOTE 78 LEASE COMMITMENTS

The Company leasesWe lease certain warehouse, plant, and office facilities as well as certain equipment under noncancelable operating and capitalfinance leases expiring at various dates through the year 2027.2032. Most of the operating leases contain renewal options and certain leases include options to purchase the related asset during or at the end of the lease term.

Amortization expense related to capitalfinance leases is included in depreciation expense while rent expense related to operating leases is included within cost of sales and Selling Researchselling research & Developmentdevelopment and Administrativeadministrative expenses (“SG&A”). Rent expense underrelated to operating leases (including taxes, insurance and maintenance when included in the rent) amounted to $30,274, $27,360 and $26,583$32.7 million in 2017, 2016 and 2015, respectively.

Assets recorded under capital leases consist of:

 

 

 

 

 

 

 

 

 

    

2017

    

2016

 

Buildings

 

$

2,415

 

$

2,119

 

Machinery and equipment

 

 

2,265

 

 

2,527

 

 

 

$

4,680

 

$

4,646

 

Accumulated depreciation

 

 

(2,357)

 

 

(2,102)

 

 

 

$

2,323

 

$

2,544

 

Future minimum payments, by year and in the aggregate,2018 under the capitalold lease accounting standard.

The components of lease expense for the current period were as follows:

Year Ended December 31,

2019

Operating lease cost

$

23,410

Finance lease cost:

Amortization of right-of-use assets

$

4,217

Interest on lease liabilities

1,353

Total finance lease cost

$

5,570

Short-term lease and variable lease costs

$

8,629

Supplemental cash flow information related to leases was as follows:

Year Ended December 31,

  

2019

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

Operating cash flows from operating leases

$

21,872

Operating cash flows from finance leases

1,245

Financing cash flows from finance leases

4,730

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

Operating leases

$

15,226

Finance leases

15,957

55/ATR

2019 Form 10-K

Supplemental balance sheet information related to leases was as follows:

  

December 31, 2019

Operating Leases

Operating lease right-of-use assets

$

72,377

Accounts payable, accrued and other liabilities

$

16,578

Operating lease liabilities

55,276

Total operating lease liabilities

$

71,854

Finance Leases

Property, plant and equipment, gross

$

47,020

Accumulated depreciation

(4,271)

Property, plant and equipment, net

$

42,749

Current maturities of long-term obligations, net of unamortized debt issuance cost

$

4,318

Long-term obligations, net of unamortized debt issuance cost

25,634

Total finance lease liabilities

$

29,952

Weighted Average Remaining Lease Term (in years)

Operating leases

6.1

Finance leases

7.0

Weighted Average Discount Rate

Operating leases

5.05

%

Finance leases

5.13

%

Maturities of lease liabilities as of December 31, 2019, were as follows:

Operating

Finance

 

 

Leases

 

Leases

Year 1

$

19,652

$

5,655

Year 2

 

15,411

 

4,787

Year 3

 

10,740

 

3,870

Year 4

 

9,365

 

3,099

Year 5

 

6,998

 

2,658

Thereafter

 

22,331

 

18,051

Total lease payments

 

84,497

38,120

Less imputed interest

 

(12,643)

(8,168)

Total

$

71,854

$

29,952

Maturities of lease liabilities as of December 31, 2018 under the old lease accounting standard were as follows:

Operating

Capital

 

Leases

 

Leases

Year 1

$

26,512

$

1,828

Year 2

 

21,386

 

1,653

Year 3

 

16,529

 

1,546

Year 4

 

12,549

 

1,160

Year 5

 

10,225

 

880

Thereafter

 

21,932

 

3,827

Total lease payments

$

109,133

10,894

Less imputed interest

 

(2,541)

Present value of future lease payments

$

8,353

As of December 31, 2019, we have additional operating and noncancelablefinance leases, primarily for buildings, that have not yet commenced of $1.8 million. These operating and finance leases will commence in 2020 with initial or remaininglease terms of one year or more consisted3 to 10 years.

56/ATR

2019 Form 10-K

 

 

 

 

 

 

 

 

 

 

Capital

 

Operating

 

 

 

Leases

 

Leases

 

2018

 

$

678

 

$

21,467

 

2019

 

 

138

 

 

16,751

 

2020

 

 

30

 

 

10,211

 

2021

 

 

 —

 

 

7,479

 

2022

 

 

 —

 

 

6,470

 

Subsequent to 2022

 

 

 

 

13,213

 

Total minimum lease payments

 

 

846

 

$

75,591

 

Amounts representing interest

 

 

(105)

 

 

 

 

Present value of future minimum lease payments

 

 

741

 

 

 

 

Lease amount due in one year

 

 

(606)

 

 

 

 

Total

 

$

135

 

 

 

 

NOTE 89 RETIREMENT AND DEFERRED COMPENSATION PLANS

The Company hasWe have various noncontributory retirement plans covering certain of itsour domestic and foreign employees. Benefits under the Company’sour 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 Company’sour 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)(“ERISA”). Certain pension commitments under itsour foreign plans are also funded according to local requirements or at the Company’sour discretion.

50/ATR

2017 Form 10-K


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

 

 

 

 

 

 

 

 

 

 

    Domestic Plans    

 

      Foreign Plans      

 

   

2017

   

2016

   

2017

   

2016

 

    Domestic Plans    

      Foreign Plans      

 

   

2019

   

2018

   

2019

   

2018

 

Change in benefit obligation:

 

 

 

 

 

 

 

 

 

Benefit obligation at beginning of year

 

$

175,879

 

$

160,995

 

$

93,178

 

$

84,807

 

$

180,803

$

198,450

$

104,911

$

109,030

Service cost

 

 

9,706

 

9,041

 

 

5,526

 

4,556

 

 

11,093

11,396

 

5,921

5,954

Interest cost

 

 

7,010

 

6,776

 

 

1,747

 

1,892

 

 

7,381

6,878

 

2,023

1,828

Special termination benefit charge

64

62

Plan Amendment

 

 

18

Curtailment/Settlement

 

 

(271)

(1,751)

Transfer

939

Business acquired

1,937

Prior service cost

 

 

 —

 

 —

 

 

1,419

 

655

 

(451)

35

Actuarial loss (gain)

 

 

21,085

 

4,278

 

 

(2,653)

 

6,663

 

 

39,209

(23,510)

 

13,575

(3,743)

Benefits paid

 

 

(15,230)

 

(5,211)

 

 

(3,489)

 

(2,244)

 

 

(11,211)

(12,411)

 

(4,130)

(3,288)

Foreign currency translation adjustment

 

 

 

 

 

 

13,302

 

 

(3,151)

 

 

 

(2,109)

(5,153)

Benefit obligation at end of year

 

$

198,450

 

$

175,879

 

$

109,030

 

$

93,178

 

$

227,275

$

180,803

$

120,490

$

104,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Domestic Plans    

 

      Foreign Plans      

 

  

2017

 

2016

 

2017

  

2016

 

    Domestic Plans    

      Foreign Plans      

 

   

2019

   

2018

   

2019

   

2018

 

Change in plan assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year

 

$

126,246

 

$

112,934

 

$

61,912

 

$

58,517

 

$

169,958

$

169,600

$

68,992

$

73,384

Actual return on plan assets

 

 

18,372

 

 

8,414

 

 

2,472

 

 

2,168

 

 

29,618

(7,642)

 

3,851

(487)

Employer contribution

 

 

40,212

 

 

10,109

 

 

3,824

 

 

5,209

 

 

436

20,411

 

6,542

2,780

Benefits paid

 

 

(15,230)

 

 

(5,211)

 

 

(3,489)

 

 

(2,244)

 

 

(11,211)

(12,411)

 

(4,130)

(3,288)

Transfer

 

 

359

Foreign currency translation adjustment

 

 

 

 

 

 

8,665

 

 

(1,738)

 

 

 

(1,425)

(3,397)

Fair value of plan assets at end of year

 

$

169,600

 

$

126,246

 

$

73,384

 

$

61,912

 

$

188,801

$

169,958

$

74,189

$

68,992

Funded status at end of year

 

$

(28,850)

 

$

(49,633)

 

$

(35,646)

 

$

(31,266)

 

$

(38,474)

$

(10,845)

$

(46,301)

$

(35,919)

The following table presents the funded status amounts recognized in the Company’sour Consolidated Balance Sheets as of December 31, 20172019 and 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Domestic Plans    

 

      Foreign Plans      

 

 

    

2017

    

2016

    

2017

    

2016

 

Non-current assets

 

$

 —

 

$

 —

 

$

297

 

$

170

 

Current liabilities

 

 

(423)

 

 

(302)

 

 

(9)

 

 

 —

 

Non-current liabilities

 

 

(28,427)

 

 

(49,331)

 

 

(35,934)

 

 

(31,436)

 

 

 

$

(28,850)

 

$

(49,633)

 

$

(35,646)

 

$

(31,266)

 

2018.

    Domestic Plans    

      Foreign Plans      

 

    

2019

   

2018

   

2019

   

2018

 

Non-current assets

$

$

207

$

938

$

500

Current liabilities

(449)

(430)

(44)

(8)

Non-current liabilities

 

(38,025)

(10,622)

 

(47,195)

(36,411)

$

(38,474)

$

(10,845)

$

(46,301)

$

(35,919)

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, 20172019 and 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Domestic Plans    

 

      Foreign Plans      

 

 

    

2017

    

2016

    

2017

    

2016

 

Net actuarial loss

 

$

58,260

 

$

48,872

 

$

33,703

 

$

38,550

 

Net prior service cost

 

 

 —

 

 

 —

 

 

5,341

 

 

4,342

 

Tax effects

 

 

(20,057)

 

 

(18,327)

 

 

(12,651)

 

 

(13,661)

 

 

 

$

38,203

 

$

30,545

 

$

26,393

 

$

29,231

 

2018.

    Domestic Plans    

      Foreign Plans      

 

   

2019

   

2018

   

2019

   

2018

 

Net actuarial loss

$

68,789

$

48,776

$

40,442

$

29,761

Net prior service cost

 

 

3,774

4,656

Tax effects

 

(15,821)

(17,876)

 

(14,040)

(4,855)

$

52,968

$

30,900

$

30,176

$

29,562

51/57/ATR

20172019 Form 10-K


Changes in benefit obligations and plan assets recognized in other comprehensive income in 2017, 20162019, 2018 and 20152017 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Plans

 

 

    

2017

    

2016

    

2015

 

Current year actuarial (loss) gain

 

$

(12,593)

 

$

(4,335)

 

$

11,048

 

Amortization of net loss

 

 

3,205

 

 

3,283

 

 

5,404

 

 

 

$

(9,388)

 

$

(1,052)

 

$

16,452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Plans

 

 

    

2017

    

2016

    

2015

 

Current year actuarial (loss) gain

 

$

2,952

 

$

(6,251)

 

$

568

 

Current year prior service cost

 

 

(1,399)

 

 

(656)

 

 

(821)

 

Amortization of net loss

 

 

1,895

 

 

1,540

 

 

1,812

 

Amortization of prior service cost

 

 

400

 

 

350

 

 

256

 

 

 

$

3,848

 

$

(5,017)

 

$

1,815

 

Domestic Plans

 

    

2019

   

2018

   

2017

 

Current year actuarial (loss) gain

$

(21,970)

$

4,611

$

(12,593)

Amortization of net loss

 

1,957

4,873

3,205

$

(20,013)

$

9,484

$

(9,388)

Foreign Plans

 

    

2019

    

2018

    

2017

 

Current year actuarial (loss) gain

$

(11,999)

$

534

$

2,952

Current year prior service cost

 

451

(35)

(1,399)

Transfer Prior service Cost

(18)

Transfer Actuarial (loss) gain

(126)

Recognition due to curtailment

1,692

Amortization of net loss

 

1,444

1,716

1,895

Amortization of prior service cost

 

449

720

400

$

(9,799)

$

4,627

$

3,848

The following table presents the amounts in accumulated other comprehensive loss as of December 31, 20172019 expected to be recognized as components of periodic benefit cost in 2018.

 

 

 

 

 

 

 

 

 

    

Domestic Plans

    

Foreign Plans

 

Amortization of net loss

 

$

4,657

 

$

1,744

 

Amortization of prior service cost

 

 

 

 

504

 

 

 

$

4,657

 

$

2,248

 

2020.

   

Domestic Plans

   

Foreign Plans

 

Amortization of net loss

$

5,719

$

2,092

Amortization of prior service cost

 

 

391

$

5,719

$

2,483

Components of net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

Domestic Plans

 

    

2017

    

2016

    

2015

 

Domestic Plans

 

    

2019

    

2018

    

2017

 

Service cost

 

$

9,706

 

$

9,041

 

$

10,016

 

$

11,093

$

11,396

$

9,706

Interest cost

 

 

7,010

 

 

6,776

 

 

6,355

 

 

7,381

6,878

7,010

Expected return on plan assets

 

 

(9,880)

 

 

(8,471)

 

 

(7,590)

 

 

(12,379)

(11,257)

(9,880)

Amortization of net loss

 

 

3,205

 

 

3,283

 

 

5,404

 

 

1,957

4,873

3,205

Net periodic benefit cost

 

$

10,041

 

$

10,629

 

$

14,185

 

$

8,052

$

11,890

$

10,041

 

 

 

 

 

 

 

 

 

 

 

Foreign Plans

 

    

2017

    

2016

    

2015

 

Foreign Plans

 

    

2019

   

2018

   

2017

 

Service cost

 

$

5,526

 

$

4,556

 

$

4,570

 

$

5,921

$

5,954

$

5,526

Interest cost

 

 

1,747

 

 

1,892

 

 

1,654

 

 

2,023

1,828

1,747

Expected return on plan assets

 

 

(2,409)

 

 

(2,181)

 

 

(1,792)

 

 

(2,366)

(2,610)

(2,409)

Amortization of net loss

 

 

1,895

 

 

1,540

 

 

1,676

 

 

1,444

1,716

1,895

Amortization of prior service cost

 

 

400

 

 

350

 

 

256

 

 

449

720

400

Net periodic benefit cost

 

$

7,159

 

$

6,157

 

$

6,364

 

$

7,471

$

7,608

$

7,159

Settlement

 

 

 —

 

 

 —

 

 

136

 

Curtailment

 

(246)

(59)

Special termination benefit charge

65

62

Total Net periodic benefit cost

 

$

7,159

 

$

6,157

 

$

6,500

 

$

7,290

$

7,611

$

7,159

The accumulated benefit obligation (“ABO”) for the Company’sour domestic defined benefit pension plans was $178.9$205.3 million and $159.4$163.0 million at December 31, 20172019 and 2016,2018, respectively. The ABO for the Company’sour foreign defined benefit pension plans was $84.7$91.8 million and $71.6$80.9million at December 31, 20172019 and 2016,2018, respectively.

58/ATR

2019 Form 10-K

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, 20172019 and 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Plans

 

Foreign Plans

 

 

    

2017

    

2016

    

2017

    

2016

 

Projected benefit obligation

 

$

11,478

 

$

175,879

 

$

89,618

 

$

84,517

 

Accumulated benefit obligation

 

 

9,291

 

 

159,398

 

 

65,524

 

 

62,913

 

Fair value of plan assets

 

 

 —

 

 

126,246

 

 

54,052

 

 

53,082

 

2018.

Domestic Plans

Foreign Plans

 

    

2019

   

2018

   

2019

   

2018

 

Projected benefit obligation

$

227,275

$

11,052

$

92,561

$

93,029

Accumulated benefit obligation

 

205,326

9,216

 

65,062

68,981

Fair value of plan assets

 

188,801

 

46,371

56,611

52/ATR

2017 Form 10-K


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, 20172019 and 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Plans

 

Foreign Plans

 

 

    

2017

    

2016

    

2017

    

2016

 

Projected benefit obligation

 

$

198,450

 

$

175,879

 

$

84,799

 

$

84,517

 

Accumulated benefit obligation

 

 

178,878

 

 

159,398

 

 

59,383

 

 

62,913

 

Fair value of plan assets

 

 

169,600

 

 

126,246

 

 

49,233

 

 

53,082

 

2018.

Assumptions:

Domestic Plans

Foreign Plans

 

    

2019

   

2018

   

2019

   

2018

 

Projected benefit obligation

$

227,275

$

11,052

$

102,310

$

92,555

Accumulated benefit obligation

 

205,326

9,216

 

73,943

68,506

Fair value of plan assets

 

188,801

 

55,260

56,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Plans

 

Foreign Plans

 

 

    

2017

          

2016

          

2015

       

2017

         

2016

          

2015

          

Weighted-average assumptions used to determine benefit obligations at December 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

3.55

%  

4.05

%  

4.24

%

1.62

%  

1.65

%  

2.10

%  

Rate of compensation increase

 

4.00

%  

4.00

%  

4.00

%

3.02

%  

3.00

%  

3.00

%  

Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

4.05

%  

4.24

%  

3.83

%  

1.65

%  

2.10

%  

1.90

%

Expected long-term return on plan assets

 

7.00

%  

7.00

%  

7.00

%  

3.66

%  

3.66

%  

3.54

%

Rate of compensation increase

 

4.00

%  

4.00

%  

4.00

%  

3.00

%  

3.00

%  

3.00

%

During 2018, our domestic employee retirement plan has plan assets in excess of the PBO.

The Company developsAssumptions:

Domestic Plans

Foreign Plans

 

    

2019

          

2018

          

2017

       

2019

         

2018

          

2017

          

Weighted-average assumptions used to determine benefit obligations at December 31:

Discount rate

 

3.20

%  

4.20

%  

3.55

%

1.04

%  

1.82

%  

1.62

%  

Rate of compensation increase

 

4.00

%  

4.00

%  

4.00

%

3.05

%  

3.01

%  

3.02

%  

Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31:

Discount rate

 

4.20

%  

3.55

%  

4.05

%  

1.84

%  

1.62

%  

1.65

%

Expected long-term return on plan assets

 

7.00

%  

7.00

%  

7.00

%  

3.69

%  

3.66

%  

3.66

%

Rate of compensation increase

 

4.00

%  

4.00

%  

4.00

%  

3.05

%  

3.02

%  

3.00

%

We develop the expected long‑termlong-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‑termlong-term inflation assumptions.

In order to determine the 20182020 net periodic benefit cost, the Company expectswe expect to use the December 31, 20172019 discount rates, December 31, 20172019 rates of compensation increase assumptions and the same assumed long‑termlong-term returns on domestic and foreign plan assets used for the 20172019 net periodic benefit cost.

The Company’sOur domestic and foreign pension plan weighted‑averageweighted-average asset allocations at December 31, 20172019 and 20162018 by asset category are as follows:

Plan Assets:

Domestic Plans Assets

Foreign Plans Assets

 

at December 31,

at December 31,

 

    

2019

    

2018

      

2019

    

2018

      

Equity securities

 

49

%

44

%

4

%

4

%

Fixed income securities

 

29

%

29

%

1

%

1

%

Corporate debt securities

3

%

3

%

Infrastructure

 

6

%

7

%

Hedge funds

10

%

10

%

Money market

 

1

%

5

%

3

%

1

%

Investment Funds

 

89

%

91

%

Real estate

 

5

%

5

%

Total

 

100

%

100

%

100

%

100

%

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Plans Assets

 

Foreign Plans Assets

 

 

 

at December 31,

 

at December 31,

 

 

    

2017

    

2016

      

2017

    

2016

      

Equity securities

 

42

%

48

%

 4

%

 4

%

Fixed income securities

 

25

%

28

%

 1

%

 1

%

Corporate debt securities

 

 —

 

 —

 

 3

%

 3

%

Infrastructure

 

 6

%

 7

%

 —

 

 —

 

Hedge funds

 

 9

%

11

%

 —

 

 —

 

Money market

 

13

%

 1

%

 1

%

 3

%

Investment Funds

 

 —

 

 —

 

91

%

89

%

Real estate

 

 5

%

 5

%

 —

 

 —

 

Total

 

100

%

100

%

100

%

100

%

59/ATR

2019 Form 10-K

The Company’sOur investment strategy for itsour domestic and foreign pension plans is to maximize the long‑termlong-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 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 20182020 is 60% equity securities and 40% fixed income securities and infrastructure. The foreign plan target allocation for 20182020 is 100% investment funds.

53/ATR

2017 Form 10-K


Authoritative guidelines require 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 management’s own assumptions about the inputs used in pricing the asset or liability.

Domestic Fair Value Measurement

Foreign Fair Value Measurement

 

at December 31, 2019

at December 31, 2019

 

(In Thousands $)

  

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Cash and Short-term Securities (a)

$

1,988

$

1,988

$

$

$

2,030

$

2,030

$

$

USD

 

 

1,988

 

 

 

 

 

 

EUR

 

 

 

 

 

 

2,012

 

 

Others

 

 

 

 

 

 

18

 

 

Equity Securities (a)

$

81,997

$

81,997

 

$

2,995

$

2,995

 

 

U.S. Large Cap Equities

 

 

48,580

 

 

 

 

 

 

U.S. Small Cap Equities

 

 

9,921

 

 

 

 

 

 

International Equities

 

 

23,496

 

 

 

 

2,995

 

 

Fixed Income (a&b)

$

35,898

$

35,898

 

$

820

$

820

 

 

Corporate debts securities

 

 

 

 

$

2,115

$

2,115

 

 

Euro Corporate Bonds (a)

 

 

 

 

 

 

2,115

 

 

Investment Funds

 

 

 

 

$

66,229

$

23,797

$

42,432

 

Mutual Funds in Equities (a)

 

 

 

 

 

 

4,025

 

 

Mutual Funds in Bonds (a)

 

 

 

 

 

 

18,881

 

 

Mutual Funds Diversified (a&b)

 

 

 

 

 

 

891

 

42,432

 

Total Investments in Fair Value Hierarchy

$

119,883

$

119,883

$

$

$

74,189

$

31,757

$

42,432

$

Investments at Net Asset Value per Share

68,918

Total Investments

$

188,801

$

119,883

$

$

$

74,189

$

31,757

$

42,432

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Fair Value Measurement

 

Foreign Fair Value Measurement

 

 

 

at December 31, 2017

 

at December 31, 2017

 

(In Thousands $)

  

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Cash and Short-term Securities (a)

 

$

21,644

 

$

21,644

 

$

 —

 

$

 —

 

$

432

 

$

432

 

$

 —

 

$

 —

 

USD

 

 

 —

 

 

21,644

 

 

 

 

 

 

 —

 

 

 —

 

 

 

 

 —

 

EUR

 

 

 —

 

 

 —

 

 

 

 

 

 

 —

 

 

432

 

 

 

 

 —

 

Equity Securities (a)

 

$

63,799

 

$

63,799

 

 

 —

 

 

 —

 

$

3,111

 

$

3,111

 

 

 —

 

 

 —

 

U.S. Large Cap Equities

 

 

 —

 

 

37,456

 

 

 

 

 

 

 —

 

 

 —

 

 

 

 

 —

 

U.S. Small Cap Equities

 

 

 —

 

 

7,569

 

 

 

 

 

 

 —

 

 

 —

 

 

 

 

 —

 

International Equities

 

 

 —

 

 

18,774

 

 

 

 

 

 

 —

 

 

3,111

 

 

 

 

 —

 

Fixed Income (a&b)

 

$

27,904

 

$

27,904

 

 

 —

 

 

 —

 

$

779

 

$

779

 

 

 —

 

 

 —

 

Corporate debts securities

 

 

 —

 

 

 

 

 

 

 

$

2,256

 

$

2,256

 

 

 —

 

 

 —

 

Euro Corporate Bonds (a)

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

2,256

 

 

 —

 

 

 —

 

Investment Funds

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

$

66,807

 

$

24,810

 

$

41,997

 

 

 —

 

Mutual Funds in Equities (a)

 

 

 —

 

 

 

 

 —

 

 

 

 

 —

 

 

4,356

 

 

 

 

 —

 

Mutual Funds in Bonds (a)

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

19,639

 

 

 

 

 —

 

Mutual Funds Diversified (a&b)

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

815

 

 

41,997

 

 

 —

 

Total Investments in Fair Value Hierarchy

 

$

113,347

 

$

113,347

 

$

 —

 

$

 —

 

$

73,384

 

$

31,387

 

$

41,997

 

$

 —

 

Investments at Net Asset Value per Share

 

 

56,253

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Total Investments

 

$

169,600

 

$

113,347

 

$

 —

 

$

 —

 

$

73,384

 

$

31,387

 

$

41,997

 

$

 —

 

54/60/ATR

20172019 Form 10-K


Domestic Fair Value Measurement

Foreign Fair Value Measurement

 

at December 31, 2018

at December 31, 2018

 

(In Thousands $)

  

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

��   

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Cash and Short-term Securities (a)

$

8,964

$

8,964

$

$

$

718

$

718

$

$

USD

 

 

8,964

 

 

 

 

 

 

EUR

 

 

 

 

 

 

718

 

 

Equity Securities (a)

$

66,707

$

66,707

 

 

$

2,591

$

2,591

 

 

U.S. Large Cap Equities

 

 

38,804

 

 

 

 

 

 

U.S. Small Cap Equities

 

 

7,747

 

 

 

 

 

 

International Equities

 

 

20,156

 

 

 

 

2,591

 

 

Fixed Income (a&b)

$

32,272

$

32,272

 

$

717

$

717

 

 

Corporate debts securities

 

 

 

 

$

2,097

$

2,097

 

 

Euro Corporate Bonds (a)

 

 

 

 

 

 

2,097

 

 

Investment Funds

 

 

 

 

$

62,869

$

22,122

$

40,747

 

Mutual Funds in Equities (a)

 

 

 

 

 

 

3,339

 

 

Mutual Funds in Bonds (a)

 

 

 

 

 

 

18,060

 

 

Mutual Funds Diversified (a&b)

 

 

 

 

 

 

723

 

40,747

 

Total Investments in Fair Value Hierarchy

$

107,943

$

107,943

$

$

$

68,992

$

28,245

$

40,747

$

Investments at Net Asset Value per Share

62,015

Total Investments

$

169,958

$

107,943

$

$

$

68,992

$

28,245

$

40,747

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Fair Value Measurement

 

Foreign Fair Value Measurement

 

 

 

at December 31, 2016

 

at December 31, 2016

 

(In Thousands $)

  

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Cash and Short-term Securities (a)

 

$

821

 

$

821

 

$

 —

 

$

 —

 

$

1,585

 

$

1,585

 

$

 —

 

$

 —

 

USD

 

 

 —

 

 

821

 

 

 

 

 

 

 —

 

 

 

 

 —

 

 

 —

 

EUR

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

1,585

 

 

 —

 

 

 —

 

Equity Securities (a)

 

$

54,013

 

$

54,013

 

 

 —

 

 

 —

 

$

2,539

 

$

2,539

 

 

 —

 

 

 —

 

U.S. Large Cap Equities

 

 

 —

 

 

32,672

 

 

 

 

 

 

 —

 

 

 

 

 —

 

 

 —

 

U.S. Small Cap Equities

 

 

 —

 

 

5,929

 

 

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

International Equities

 

 

 —

 

 

15,412

 

 

 

 

 

 

 —

 

 

2,539

 

 

 —

 

 

 —

 

Fixed Income (a&b)

 

$

22,944

 

$

22,944

 

 

 —

 

 

 —

 

$

680

 

$

680

 

 

 —

 

 

 —

 

Corporate debts securities

 

 

 —

 

 

 

 

 

 

 

$

1,725

 

$

1,725

 

 

 —

 

 

 —

 

Euro Corporate Bonds (a)

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

1,725

 

 

 —

 

 

 —

 

Investment Funds

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

$

55,383

 

$

21,082

 

$

34,301

 

 

 —

 

Mutual Funds in Equities (a)

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

3,393

 

 

 —

 

 

 —

 

Mutual Funds in Bonds (a)

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

17,027

 

 

 —

 

 

 —

 

Mutual Funds Diversified (a&b)

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

662

 

 

34,301

 

 

 —

 

Total Investments in Fair Value Hierarchy

 

$

77,778

 

$

77,778

 

$

 —

 

$

 —

 

$

61,912

 

$

27,611

 

$

34,301

 

$

 —

 

Investments at Net Asset Value per Share

 

 

48,468

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Total Investments

 

$

126,246

 

$

77,778

 

$

 —

 

$

 —

 

$

61,912

 

$

27,611

 

$

34,301

 

$

 —

 


(a)

(a)

Based on third party quotation from financial institution.

(b)

(b)

Based on observable market transactions.

CONTRIBUTIONSContributions

Annual cash contributions to fund pension costs accrued under the Company’sour domestic plans are generally at least equal to the minimum funding amounts required by ERISA. The CompanyWe contributed $40.2$0.4 million to itsour domestic defined benefit plans in 20172019 and although the Company has nowe have 0 minimum funding requirement, we plan to contribute approximately $0.4 million to pay our ongoing SERP annuity contracts in 2018.2020. Contributions to fund pension costs accrued under the Company’sour foreign plans are made in accordance with local laws or at the Company’sour discretion. The CompanyWe contributed approximately $3.8$6.5 million to itsour foreign defined benefit plan in 20172019 and expectsexpect to contribute approximately $3.1 $0.7��million in 2018.2020.

ESTIMATED FUTURE BENEFIT PAYMENTSEstimated Future Benefit Payments

As of December 31, 2017, the Company expects2019, we expect the plans to make the following estimated benefit payments relating to itsour defined benefit plans over the next ten years:

 

 

 

 

 

 

 

    

Domestic Plans

    

Foreign Plans

 

2018

 

$

9,960

 

$

2,194

 

2019

 

 

9,922

 

 

3,344

 

   

Domestic Plans

   

Foreign Plans

 

2020

 

 

10,471

 

 

3,510

 

$

11,064

$

5,382

2021

 

 

11,037

 

 

3,455

 

 

11,134

 

2,904

2022

 

 

11,634

 

 

3,638

 

 

11,665

 

3,155

2023 - 2027

 

 

67,818

 

 

30,389

 

2023

 

12,467

 

4,676

2024

 

13,077

 

6,537

2025 - 2029

 

74,584

 

34,386

55/61/ATR

20172019 Form 10-K


Other Plans

OTHER PLANS

The Company hasWe have a non‑qualifiednon-qualified supplemental pension plan for domestic employees which provides for pension amounts that would have been payable from the Company’sour 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 $11.5$12.6 million and $9.6$11.1 million at December 31, 20172019 and 2016,2018, respectively. This amount is included in the liability for domestic plans shown above.

The Company hasWe have 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 employee’s salary subject to income tax regulations. For each of the years ended December 31, 2017, 20162019, 2018 and 2015,2017, total contributions made by the Company to these plans were approximately $4.1 million, $3.7 million and $3.3 million, $3.1 million and $3.0 million, respectively.

The Company hasWe have several foreign defined contribution plans, which require the Companyus to contribute a percentage of the participating employee’s salary according to local regulations. For each of the years ended December 31, 2017, 20162019, 2018 and 2015,2017, total contributions made by the Company to these plans were approximately $2.3 million, $2.4 million and $2.2 million, $1.9 million and $2.1 million, respectively.

The Company hasWe have no additional postretirement or postemployment benefit plans.

NOTE 910 ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

Changes in Accumulated Other Comprehensive Income/(Loss) by Component:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Foreign

    

Defined Benefit

    

 

 

    

 

 

 

 

 

Currency

 

Pension Plans

 

Derivatives

 

Total

 

Balance -  December 31, 2014

 

$

(42,851)

 

$

(67,097)

 

$

(97)

 

$

(110,045)

 

Other comprehensive loss before reclassifications

 

 

(163,874)

 

 

6,715

 

 

 

 

(157,159)

 

Amounts reclassified from accumulated other comprehensive income

 

 

 —

 

 

4,832

 

 

25

 

 

4,857

 

Net current-period other comprehensive income

 

 

(163,874)

 

 

11,547

 

 

25

 

 

(152,302)

 

Balance -  December 31, 2015

 

$

(206,725)

 

$

(55,550)

 

$

(72)

 

$

(262,347)

 

Other comprehensive income before reclassifications

 

 

(52,795)

 

 

(7,617)

 

 

 

 

(60,412)

 

Amounts reclassified from accumulated other comprehensive income

 

 

(368)

 

 

3,392

 

 

26

 

 

3,050

 

Net current-period other comprehensive income

 

 

(53,163)

 

 

(4,225)

 

 

26

 

 

(57,362)

 

Balance -  December 31, 2016

 

$

(259,888)

 

$

(59,775)

 

$

(46)

 

$

(319,709)

 

Other comprehensive income before reclassifications

 

 

74,385

 

 

(8,944)

 

 

(11,806)

 

 

53,635

 

Amounts reclassified from accumulated other comprehensive income

 

 

 —

 

 

4,124

 

 

8,648

 

 

12,772

 

Net current-period other comprehensive income

 

 

74,385

 

 

(4,820)

 

 

(3,158)

 

 

66,407

 

Balance -  December 31, 2017

 

$

(185,503)

 

$

(64,595)

 

$

(3,204)

 

$

(253,302)

 

    

Foreign

    

Defined Benefit

    

    

 

Currency

Pension Plans

Derivatives

Total

 

Balance - December 31, 2016

$

(259,888)

$

(59,775)

$

(46)

$

(319,709)

Other comprehensive income (loss) before reclassifications

 

74,385

 

(8,944)

 

(11,806)

 

53,635

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

4,124

 

8,648

 

12,772

Net current-period other comprehensive income (loss)

 

74,385

 

(4,820)

 

(3,158)

 

66,407

Balance - December 31, 2017

$

(185,503)

$

(64,595)

$

(3,204)

$

(253,302)

Other comprehensive (loss) income before reclassifications

 

(62,898)

 

5,266

 

16,624

 

(41,008)

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

5,524

 

(15,060)

 

(9,536)

Net current-period other comprehensive (loss) income

 

(62,898)

 

10,790

 

1,564

 

(50,544)

Reclassification of stranded tax effects

(6,658)

(6,658)

Balance - December 31, 2018

$

(248,401)

$

(60,463)

$

(1,640)

$

(310,504)

Other comprehensive (loss) income before reclassifications

 

(8,723)

 

(25,557)

 

8,026

 

(26,254)

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

2,873

 

(8,063)

 

(5,190)

Net current-period other comprehensive (loss) income

 

(8,723)

 

(22,684)

 

(37)

 

(31,444)

Balance - December 31, 2019

$

(257,124)

$

(83,147)

$

(1,677)

$

(341,948)

56/62/ATR

20172019 Form 10-K


Reclassifications Out of Accumulated Other Comprehensive Income/(Loss):

Amount Reclassified from

 

Details about Accumulated Other

Accumulated Other

Affected Line in the Statement

 

Comprehensive Income Components

Comprehensive Income

Where Net Income is Presented

 

Year Ended December 31,

    

2019

    

2018

    

2017

    

    

 

Defined Benefit Pension Plans

Amortization of net loss

$

3,401

$

6,589

 

$

5,100

 

(1)

Amortization of prior service cost

 

449

 

720

 

 

400

 

(1)

 

3,850

 

7,309

 

 

5,500

 

Total before tax

 

(977)

 

(1,785)

 

 

(1,376)

 

Tax benefit

$

2,873

$

5,524

 

$

4,124

 

Net of tax

Derivatives

Changes in treasury locks

$

$

26

 

$

42

 

Interest Expense

Changes in cross currency swap: interest component

(4,805)

(5,150)

(1,526)

Interest Expense

Changes in cross currency swap: foreign exchange component

 

(3,258)

 

(13,025)

 

 

11,911

 

Miscellaneous, net

 

(8,063)

 

(18,149)

 

 

10,427

 

Total before tax

 

 

3,089

 

 

(1,779)

 

Tax benefit

$

(8,063)

$

(15,060)

 

$

8,648

 

Net of tax

Total reclassifications for the period

$

(5,190)

$

(9,536)

$

12,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount Reclassified from

 

 

 

Details about Accumulated Other

 

Accumulated Other

 

Affected Line in the Statement

 

Comprehensive Income Components

 

Comprehensive Income

 

Where Net Income is Presented

 

Year Ended December 31,

    

2017

    

2016

    

2015

    

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defined Benefit Pension Plans

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net loss

 

$

5,100

 

$

4,823

 

$

7,216

 

(a)

 

Amortization of prior service cost

 

 

400

 

 

350

 

 

256

 

(a)

 

 

 

 

5,500

 

 

5,173

 

 

7,472

 

Total before tax

 

 

 

 

(1,376)

 

 

(1,781)

 

 

(2,640)

 

Tax benefit

 

 

 

$

4,124

 

$

3,392

 

$

4,832

 

Net of tax

 

Foreign Currency

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency gain

 

$

 —

 

$

(368)

 

$

 —

 

Miscellaneous, net

 

 

 

 

 —

 

 

(368)

 

 

 —

 

Total before tax

 

 

 

 

 —

 

 

 —

 

 

 —

 

Tax benefit

 

 

 

$

 —

 

$

(368)

 

$

 —

 

Net of tax

 

Derivatives

 

 

 

 

 

 

 

 

 

 

 

 

Changes in treasury locks

 

$

42

 

$

40

 

$

39

 

Interest Expense

 

Changes in cross currency swap: interest component

 

 

(1,526)

 

 

 —

 

 

 —

 

Interest Expense

 

Changes in cross currency swap: foreign exchange component

 

 

11,911

 

 

 —

 

 

 —

 

Miscellaneous, net

 

 

 

 

10,427

 

 

40

 

 

39

 

Total before tax

 

 

 

 

(1,779)

 

 

(14)

 

 

(14)

 

Tax benefit

 

 

 

$

8,648

 

$

26

 

$

25

 

Net of tax

 

Total reclassifications for the period

 

$

12,772

 

$

3,050

 

$

4,857

 

 

 


(1)

(a)

These accumulated other comprehensive income components are included in the computation of total net periodic benefit costs, net of tax (see Note 89 - Retirement and Deferred Compensation Plans for additional details).

NOTE 1011 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company maintainsWe maintain a foreign exchange risk management policy designed to establish a framework to protect the value of the Company’s non‑functionalour non-functional currency denominated transactions from adverse changes in exchange rates. Sales of the Company’sour 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‑countryinter-country sales or intercompany loans can impact the Company’sour results of operations. The Company’sOur policy is not to engage in speculative foreign currency hedging activities, but to minimize itsour net foreign currency transaction exposure defined as firm commitments and transactions recorded and denominated in currencies other than the functional currency. The CompanyWe may use foreign currency forward exchange contracts, options and cross currency swaps to economically hedge these risks.

For derivative instruments designated as hedges, the Companywe formally documentsdocument 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 at inception. Quarterly thereafter, the Companywe formally assessesassess whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair value or cash flows of the hedged item. 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. All derivative financial instruments used as hedges are recorded at fair value in the Consolidated Balance Sheets (See Note 1112 – Fair Value).

CASH FLOW HEDGECash Flow Hedge

For derivative instruments that are designated and qualify as a cash flow hedge,hedges, the changes in fair values are recorded in accumulated other comprehensive loss and included in unrealized (losses) gains on cash flow hedges.changes in derivative gain/loss. The changes in the fair values of derivatives designated as cash flow hedges are reclassified from accumulated other comprehensive loss to net income when the underlying hedged item is recognized in earnings. Cash flows from the settlement of derivative contracts designated as cash flow hedges offset cash flows from the underlying hedged items and are included in operating activities in the Consolidated Statements of Cash Flows.

57/63/ATR

20172019 Form 10-K


As disclosed in Note 67 – Debt, our wholly owned UK subsidiary borrowed $280 million in term loan borrowings under a new credit facility. In order to mitigate the currency risk of U.S. dollar debt on a Euroeuro functional currency entity and to mitigate the risk of variability in interest rates, we entered into a EUR/USD floating-to-fixed cross currency swap on July 20, 2017 in the notional amount of $280 million to effectively hedge the foreign exchange and interest rate exposure on the $280 million term loan. Related to this hedge, approximately $3.2$1.7 million and $1.6 million, respectively, of net after-tax loss is included in accumulated other comprehensive earningsloss at December 31, 2017.2019 and 2018. The amount expected to be recognized into earnings during the next 12 months related to the interest component of our cross currency swap, based on prevailing foreign exchange and interest rates at December 31, 20172019, is $3.1$2.8 million. The amount expected to be recognized into earnings during the next 12 months related to the foreign exchange component of our cross currency swap is dependent on fluctuations in currency exchange rates. As of December 31, 2017,2019, the fair value of the cross currency swap was a $16.3$2.6 million liability.asset. The swap contract expires on July 20, 2022.

HEDGE OF NET INVESTMENTS IN FOREIGN OPERATIONSHedge of Net Investments in Foreign Operations

A significant number of the Company’sour 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 Company’sour foreign entities. A weakening U.S. dollar relative to foreign currencies has an additive translation effect on the Company’sour financial condition and results of operations. Conversely, a strengthening U.S. dollar has a dilutive effect. The Company inIn some cases maintainswe maintain debt in these subsidiaries to offset the net asset exposure. The Company doesWe do not otherwise actively manage this risk using derivative financial instruments. In the event the Company planswe plan on a full or partial liquidation of any of itsour foreign subsidiaries where the Company’sour net investment is likely to be monetized, the Companywe will consider hedging the currency exposure associated with such a transaction.

OTHEROther

As of December 31, 2017, the Company has2019, we have recorded the fair value of foreign currency forward exchange contracts of $0.6$0.2 million in prepayments,prepaid and $1.6other and $0.4 million in accounts payable, accrued and other liabilities in the balance sheet. All forward exchange contracts outstanding as of December 31, 20172019 had an aggregate notional contract amount of $110.7$51.5 million.


Fair Value of Derivative Instruments in the Consolidated Balance Sheets as of

December 31, 20172019 and December 31, 20162018

    

    

December 31, 2019

    

December 31, 2018

 

Derivatives

Derivatives

Derivatives

not

Derivatives

not

Designated

Designated

Designated

Designated

Balance Sheet

as Hedging

as Hedging

as Hedging

as Hedging

Location

Instruments

Instruments

Instruments

Instruments

 

Derivative Assets

 

Foreign Exchange Contracts

 

Prepaid and other

$

$

206

$

$

259

Cross Currency Swap Contract (1)

 

Prepaid and other

 

2,552

 

 

 

$

2,552

$

206

$

$

259

Derivative Liabilities

Foreign Exchange Contracts

 

Accounts payable, accrued and other liabilities

$

$

401

$

$

331

Cross Currency Swap Contract (1)

 

Accounts payable, accrued and other liabilities

 

 

 

1,040

 

$

$

401

$

1,040

$

331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

December 31, 2017

    

December 31, 2016

 

 

 

 

 

 

 

Derivatives

 

 

 

Derivatives

 

 

 

 

 

Derivatives

 

not

 

Derivatives

 

not

 

 

 

 

 

Designated

 

Designated

 

Designated

 

Designated

 

 

 

Balance Sheet

 

as Hedging

 

as Hedging

 

as Hedging

 

as Hedging

 

 

 

Location

 

Instruments

 

Instruments

 

Instruments

 

Instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Exchange Contracts

 

Prepayments and other

 

$

 —

 

$

663

 

$

 —

 

$

1,612

 

 

 

 

 

$

 —

 

$

663

 

$

 —

 

$

1,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Exchange Contracts

 

Accounts payable and accrued liabilities

 

$

 —

 

$

1,604

 

$

 —

 

$

2,881

 

Cross Currency Swap Contract (1)

 

Accounts payable and accrued liabilities

 

 

16,309

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

$

16,309

 

$

1,604

 

$

 —

 

$

2,881

 


(1)

(1)

This cross currency swap contract is composed of both an interest component and a foreign exchange component.

58/64/ATR

20172019 Form 10-K



The Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss) for the

Fiscal Years Ended December 31, 20172019 and December 31, 20162018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of Gain (Loss)

 

Total Amount

 

 

Amount of Gain (Loss)

 

Location of (Loss)

 

Reclassified from

 

of Affected

 

Amount of Gain (Loss)

Total Amount

Amount of Gain (Loss)

Location of (Loss)

Reclassified from

of Affected

Derivatives in Cash

 

Recognized in

 

Gain Recognized

 

Accumulated

 

Income

 

Recognized in

Gain Recognized

Accumulated

Income

Flow Hedging

 

Other Comprehensive

 

in Income on

 

Other Comprehensive

 

Statement

 

Other Comprehensive

in Income on

Other Comprehensive

Statement

Relationships

 

Income on Derivative

 

Derivatives

 

Income on Derivative

 

Line Item

 

Income on Derivative

Derivatives

Income on Derivative

Line Item

  

2017

  

2016

  

 

  

2017

  

2016

  

 

 

  

2019

  

2018

  

  

2019

  

2018

  

 

Cross currency swap contract:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest component

 

$

(2,313)

 

$

 —

 

Interest expense

 

$

1,526

 

$

 —

 

$

(40,597)

 

 

$

5,103

$

7,014

Interest expense

$

4,805

$

5,150

$

(35,489)

Foreign exchange component

 

 

(11,911)

 

 

 —

 

Miscellaneous, net

 

 

(11,911)

 

 

 —

 

 

8,662

 

 

3,258

13,025

Miscellaneous, net

3,258

13,025

1,556

 

$

(14,224)

 

$

 —

 

 

 

$

(10,385)

 

$

 —

 

$

(31,935)

 

$

8,361

$

20,039

$

8,063

$

18,175

The Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income for the Fiscal Years Ended December 31, 20172019 and December 31, 20162018

 

 

 

 

 

 

 

 

 

 

 

Amount of (Loss) Gain

 

Amount of (Loss) Gain

Derivatives Not Designated

 

Location of (Loss) Gain Recognized

 

Recognized in Income

 

Location of (Loss) Gain Recognized

Recognized in Income

as Hedging Instruments

 

in Income on Derivatives

 

on Derivatives

 

in Income on Derivatives

on Derivatives

  

 

  

2017

  

2016

 

  

  

2019

  

2018

 

Foreign Exchange Contracts

 

Other (Expense) Income:
Miscellaneous, net

 

$

(65,587)

 

$

(2,560)

 

 

Other (Expense) Income:
Miscellaneous, net

$

(141)

$

652

 

 

 

$

(65,587)

 

$

(2,560)

 

$

(141)

$

652


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Amounts not Offset

 

 

 

 

 

 

 

 

Gross Amounts

 

Net Amounts

 

in the Statement of

 

 

 

 

 

 

 

 

Offset in the

 

Presented in

 

Financial Position

 

 

 

 

    

Gross

    

Statement of

 

the Statement of

    

Financial

    

Cash Collateral

    

Net

 

 

Amount

 

Financial Position

 

Financial Position

 

Instruments

 

Received

 

Amount

 

Gross Amounts not Offset

 

Gross Amounts

Net Amounts

in the Statement of

 

Offset in the

Presented in

Financial Position

 

   

Gross

    

Statement of

the Statement of

    

Financial

    

Cash Collateral

    

Net

 

Amount

Financial Position

Financial Position

Instruments

Received

Amount

 

Description

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

December 31, 2019

December 31, 2019

Derivative Assets

 

$

663

 

 

$

663

 

 

 

$

663

 

$

2,758

 

$

2,758

 

 

$

2,758

Total Assets

 

$

663

 

 

$

663

 

 

 

$

663

 

$

2,758

 

$

2,758

 

 

$

2,758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Liabilities

 

$

17,913

 

 

$

17,913

 

 

 

$

17,913

 

$

401

 

$

401

 

 

$

401

Total Liabilities

 

$

17,913

 

 

$

17,913

 

 

 

$

17,913

 

$

401

 

$

401

 

 

$

401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

December 31, 2018

December 31, 2018

Derivative Assets

 

$

1,612

 

 

$

1,612

 

 —

 

 —

 

$

1,612

 

$

259

 

$

259

 

 

$

259

Total Assets

 

$

1,612

 

 

$

1,612

 

 —

 

 —

 

$

1,612

 

$

259

 

$

259

 

 

$

259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Liabilities

 

$

2,881

 

 

$

2,881

 

 —

 

 —

 

$

2,881

 

$

1,371

 

$

1,371

 

 

$

1,371

Total Liabilities

 

$

2,881

 

 

$

2,881

 

 —

 

 —

 

$

2,881

 

$

1,371

 

$

1,371

 

 

$

1,371

As part of our repatriation activities, during the second quarter of 2017 we had a €700 million intercompany receivable balance on a U.S. Dollar functional subsidiary. In order to minimize the foreign currency risk, the Company executed foreign currency forward contracts to sell Euros and receive U.S. Dollars. These foreign currency forward contracts matured on July 27, 2017, which coincided with the date of the planned repatriation and resulted in the Company delivering €700 million in cash and receiving approximately $751 million in cash. At maturity, the foreign exchange transaction loss on the forward contract amounted to $66.2 million. This impact was offset by the revaluation of the €700 million intercompany accounts receivable balance that had $69.5 million gain during the same period. Therefore, the forward points on these forward contracts had a $3.3 million favorable impact on other (expense) income miscellaneous, net for 2017.

59/65/ATR

20172019 Form 10-K


NOTE 1112 FAIR VALUE

Authoritative guidelines require 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 management’s own assumptions about the inputs used in pricing the asset or liability.

As of December 31, 2017,2019, the fair values of our financial assets and liabilities were categorized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Total

    

Level 1

    

Level 2

    

Level 3

 

    

Total

    

Level 1

    

Level 2

    

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts (1)

 

$

663

 

$

 

$

663

 

$

 

$

206

$

$

206

$

Cross currency swap contract (1)

2,552

2,552

Total assets at fair value

 

$

663

 

$

 

$

663

 

$

 

$

2,758

$

$

2,758

$

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts (1)

 

$

1,604

 

$

 

$

1,604

 

$

 

$

401

$

$

401

$

Cross currency swap contract (1)

 

 

16,309

 

 

 —

 

 

16,309

 

 

 —

 

Contingent consideration obligation

5,930

5,930

Total liabilities at fair value

 

$

17,913

 

$

 

$

17,913

 

$

 

$

6,331

$

$

401

$

5,930

As of December 31, 2016,2018, the fair values of our financial assets and liabilities were categorized as follows:

   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets

Foreign exchange contracts (1)

$

259

$

$

259

$

Total assets at fair value

$

259

$

$

259

$

Liabilities

Foreign exchange contracts (1)

$

331

$

$

331

$

Cross currency swap contract (1)

1,040

1,040

Total liabilities at fair value

$

1,371

$

$

1,371

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Total

    

Level 1

    

Level 2

    

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts (1)

 

$

1,612

 

$

 

$

1,612

 

$

 

Total assets at fair value

 

$

1,612

 

$

 

$

1,612

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts (1)

 

$

2,881

 

$

 

$

2,881

 

$

 

Total liabilities at fair value

 

$

2,881

 

$

 

$

2,881

 

$

 


(1)

(1)

Market approach valuation technique based on observable market transactions of spot and forward rates.

The carrying amounts of the Company’sour other current financial instruments such as cash and equivalents, accounts and notes receivable, notes payable and current maturities of long‑termlong-term obligations approximate fair value due to the short‑termshort-term maturity of the instrument. The Company considers its long‑termWe consider our long-term obligations a Level 2 liability and utilizesutilize the market approach valuation technique based on interest rates that are currently available to the Companyus for issuance of debt with similar terms and maturities. The estimated fair value of the Company’s long‑termour long-term obligations was $1.1 billion as of December 31, 20172019 and $739December 31, 2018.

As discussed in Note 20 – Acquisitions, we have a contingent consideration obligation to the selling equity holders of Noble in connection with the Noble Acquisition (as defined herein) based on 2024 cumulative performance targets and a contingent consideration obligation to the selling equity holder of Gateway in connection with the Gateway Acquisitions (as defined herein) based on 2020 and 2022 performance targets. We consider these obligations a Level 3 liability and have estimated the aggregate fair value for these contingent consideration arrangements to be $2.9 million and $3.0 million, respectively, as of December 31, 20162019. Additionally, during the year ended December 31, 2018, we had a contingent consideration obligation to the selling shareholders of Reboul SAS (“Reboul”) in connection with the Reboul Acquisition (as defined herein) based on 2018 earnings before net interest, taxes, depreciation and amortization (“EBITDA”). We consider this obligation a Level 3 liability; however, we estimated the aggregate fair value for this contingent consideration arrangement to be 0 as of December 31, 2018.

66/ATR

2019 Form 10-K

NOTE 1213 COMMITMENTS AND CONTINGENCIES

The Company, inIn the normal course of business, iswe are subject to a number of lawsuits and claims both actual and potential in nature. While management believes the resolution of these claims and lawsuits will not have a material adverse effect on the Company’sour financial position or results of operations or cash flows, claims and legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur that could include amounts in excess of any accruals which management has established. Were such unfavorable final outcomes to occur, it is possible that they could have a material adverse effect on our financial position, results of operations and cash flows.

Under our Certificate of Incorporation, the Company haswe have agreed to indemnify our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments the Companywe could be required to make under these indemnification agreements is unlimited; however, the Company haswe have a directors and officers liability insurance policy that covers a portion of our exposure. As a result of our insurance policy coverage, the Company believeswe believe the estimated fair value of these indemnification agreements is minimal. The Company has noWe have 0 liabilities recorded for these agreements as of December 31, 2017.2019.

60/ATR

2017 Form 10-K


An environmental investigation, undertaken to assess areas of possible contamination, was completed at the Company’sour facility in Jundiaí, São Paulo, Brazil. The facility is primarily an internal supplier of anodized aluminum components for certain of our dispensing systems. The testing indicated that soil and groundwater in certain areas of the facility were impacted above acceptable levels established by local regulations. In March 2017, the Companywe reported the findings to the relevant environmental authority, the Environmental Company of the State of São Paulo – CETESB. The Company is currently assessing the affected areas to determine the full extent of the impact and the scope of any required remediation.  Initial costs for further investigation and possible remediation, which are based on assumptions about the area of impact and customary remediation costs, are estimated to be in the rangeBased upon our best estimate, we recorded a reserve of $1.5 million (operating expense) in the first quarter of 2017 relating to $3.0this contingency. For the year ended December 31, 2019, we have paid approximately $0.6 million and made adjustments to the accrual based on our future anticipated expenditures. As of December 31, 2019, our outstanding reserve is $0.5 million. The range of possibleultimate loss associated with this environmental contingency is subject to considerable uncertainty due to the incomplete status of the investigation and preliminary natureongoing review of our discussions withthe CETESB. We will continue to evaluate the range of likely costs as the investigation proceeds and we have further clarity on the nature and extent of remediation that will be required. We note that the contamination, or any failure to complete any required remediation in a timely manner, could potentially result in fines or penalties.  We accrued $1.5 million (operating expense)

In March 2017, the Supreme Court of Brazil issued a decision that a certain state value added tax should not be included in the calculation of federal gross receipts taxes. The decision reduces our gross receipts tax in Brazil prospectively and, potentially, retrospectively. During the first quarter of 20172019, we received a favorable court decision of $2.7 million for the retrospective right to recover part of our claim. This amount is recorded in cost of sales as a favorable impact of $1.7 million and $1.0 million was recognized as interest income. During the fourth quarter of 2018, we recorded an amount of $631 thousand based on the favorable court decision. If the Judicial Court grants full retrospective recovery, we estimate remaining potential recoveries of approximately $3 million to $10 million, including interest, depending on the future decisions of the Supreme Court of Brazil. Due to uncertainties around our remaining court recovery claims, we have not recorded any further amounts relating to the retrospective nature of this contingency.  The amount is periodically reviewed,matter.

In December 2019, tax authorities in Brazil notified us of a tax assessment of approximately $7.9 million, including interest and adjusted as necessary, aspenalties of $3.0 million and $1.0 million, respectively, relating to differences in tax classification codes used for import duties for the matter continuesperiod from January 2015 to evolve.  Based onAugust 2018. We are vigorously contesting the current statusassessment, including interest and penalties, and have filed an administrative defense appeal in December 2019. Considering the complex nature of the investigation, no adjustmentassessment, we expect the appeal process to go through different levels of administrative and/or judicial processes. Accordingly, due to uncertainty of the accrual was necessarytiming and amounts of assessment, 0 liability is recorded as of December 31, 2019.

NOTE 14 STOCK REPURCHASE PROGRAM

We announced the $350 million share repurchase program in effect for the year ended December 31, 2017.

NOTE 13 STOCK REPURCHASE PROGRAM

On2018 on October 20, 2016, the Company2016.  On April 18, 2019, we announced a new share repurchase authorization of up to $350 million of common stock. This authorization replacedreplaces previous authorizations and has no expiration date. Aptar may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions.

In 20172019 and 2016, the Company2018, we repurchased approximately 1.9 million779 thousand and 1.7 million668 thousand shares of itsour outstanding common stock at a total cost of $161.5$86.5 million and $131.4$61.7 million, respectively. As of December 31, 2017,2019, there was $141.9$278.5 million of authorized share repurchases available to the Company.us.

67/ATR

2019 Form 10-K

NOTE 1415 CAPITAL STOCK

We have 199 million authorized shares of common stock. The number of shares of common stock and treasury stock and the share activity were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

Treasury Shares

 

 

    

2017

    

2016

    

2017

    

2016

 

Balance at the beginning of the year

 

66,012,843

 

66,685,378

 

3,865,863

 

4,168,489

 

Employee option exercises

 

1,173,936

 

1,001,748

 

(394,991)

 

(302,626)

 

Director option exercises

 

 —

 

22,167

 

 —

 

 —

 

Restricted stock vestings

 

67,708

 

30,228

 

 —

 

 —

 

Common stock repurchases

 

 —

 

 —

 

1,411,017

 

 —

 

Common stock repurchased and retired

 

(511,997)

 

(1,726,678)

 

 —

 

 —

 

Balance at the end of the year

 

66,742,490

 

66,012,843

 

4,881,889

 

3,865,863

 

Common Shares

Treasury Shares

 

    

2019

    

2018

    

2019

    

2018

 

Balance at the beginning of the year

 

67,341,316

 

66,742,490

 

4,424,884

4,881,889

Employee option exercises

 

1,079,841

 

1,182,547

 

(367,705)

(502,005)

Director option exercises

 

146,083

 

 

Restricted stock vestings

 

41,268

 

39,691

 

Common stock repurchases

 

 

 

778,848

45,000

Common stock repurchased and retired

(623,412)

Balance at the end of the year

 

68,608,508

67,341,316

4,836,027

4,424,884

The cash dividends paid on the common stock for the years ended December 31, 2019, 2018 and 2017 2016aggregated $90.2 million, $82.3 million and 2015 aggregated $79.9 million, $76.7 million and $71.2 million, respectively.

NOTE 16 STOCK-BASED COMPENSATION

NOTE 15 STOCK‑BASED COMPENSATION

The Company issuesHistorically we have issued stock options and restricted stock units (“RSUs”), which consist of time-based and performance-based awards, to employees under Stock Awards Plansstock awards plans approved by stockholders. In addition, RSUs are issued to non-employee directors under a Director Restricted Stock Unit Plan andAward Agreement for Directors pursuant to the 20162018 Equity Incentive Plan, andPlan. Previously, non-employee directors were issued stock options were formerly issued to non-employee directors under a Director Stock Option Plan. OptionsStock options are awarded with the exercise price equal to the market price on the date of grant and generally become exercisablevest over three years and expire 10 years after grant.  

RSUs granted to employees vest according to a specified performance period and/or vesting period. Time-based RSUs generally vest over three years. Performance-based RSUs vest at the end of the specified performance period, generally three years, assuming required performance or market vesting conditions are met. Performance-based RSUs have one of two vesting conditions: (1) based on Aptar’s internal financial performance metrics and (2) based on Aptar’s total shareholder return (“TSR”) relative to total shareholder returns of an industrial peer group, subject to discretion if the overall TSR is negative at the conclusion of the performance period. At the time of vesting, Aptar will issue or cause to be issued in the employee’s name the vested shares of common stock. In addition, RSU awards are generally net settled (shares are withheld to cover the employee tax obligation). Director RSUs are only time-based and generally vest over one year.

61/ATR

2017 Form 10-K


Compensation expense recorded attributable to stock options for the year ended December 31, 20172019 was approximately $15.2$5.7 million ($10.54.5 million after tax). The income tax benefit related to this compensation expense was approximately $4.7 million. Approximately $13.2$4.8 million of the compensation expense was recorded in SG&A expenses and the balance was recorded in cost of sales. Compensation expense recorded attributable to stock options for the year ended December 31, 20162018 was approximately $16.9$10.9 million ($11.38.4 million after tax). The income tax benefit related to this compensation expense was approximately $5.6 million. Approximately $15.0$8.7 million of the compensation expense was recorded in SG&A and the balance was recorded in cost of sales. Compensation expense recorded attributable to stock options for the year ended December 31, 20152017 was approximately $17.9$15.2 million ($11.610.5 million after tax). The income tax benefit related to this compensation expense was approximately $6.3 million. Approximately $15.7$13.2 million of the compensation expense was recorded in SG&A expenses and the balance was recorded in cost of sales.

The Company usesFor stock option grants, we used historical data to estimate expected life and volatility. The weighted‑averageweighted-average fair value of stock options granted under the Stock Awards Plans was $11.86, $10.59$14.82 and $12.83$11.86 per share in 2017, 20162018 and 2015,2017, respectively. These values were estimated on the respective dates of grant using the Black‑Scholes option‑pricingBlack-Scholes option-pricing model with the following weighted‑averageweighted-average assumptions:

Stock Awards Plans:

    

 

Years Ended December 31,

2018

    

2017

Dividend Yield

 

1.5

%

1.7

%  

Expected Stock Price Volatility

 

14.2

%

15.8

%  

Risk-free Interest Rate

 

2.8

%

2.2

%  

Expected Life of Option (years)

 

6.6

6.7

 

 

 

 

 

 

 

 

Stock Awards Plans:

    

 

 

 

 

 

 

Years Ended December 31,

 

2017

    

2016

    

2015

 

 

 

 

 

 

 

 

 

Dividend Yield

 

1.7

%  

1.8

%

1.7

%  

Expected Stock Price Volatility

 

15.8

%  

16.9

%

21.9

%  

Risk-free Interest Rate

 

2.2

%  

1.6

%

1.6

%  

Expected Life of Option (years)

 

6.7

 

6.7

 

6.9

 

68/ATR

2019 Form 10-K

A summary of option activity under the Company’sour stock option plans as of December 31, 2017,2019, and changes during the period then ended is presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Awards Plans

 

Director Stock Option Plans

 

 

    

 

 

    

Weighted Average

    

 

    

Weighted Average

 

 

 

 

Options

 

Exercise Price

 

Options

 

Exercise Price

 

Outstanding, January 1, 2017

 

 

8,070,444

 

$

56.36

 

281,334

 

$

56.45

 

Granted

 

 

1,622,082

 

 

74.90

 

 —

 

 

 —

 

Exercised

 

 

(1,501,210)

 

 

46.65

 

(66,367)

 

 

53.23

 

Forfeited or expired

 

 

(131,997)

 

 

70.70

 

 

 

 —

 

Outstanding at December 31, 2017

 

 

8,059,319

 

$

61.67

 

214,967

 

$

57.44

 

Exercisable at December 31, 2017

 

 

5,151,257

 

$

55.72

 

214,967

 

$

57.44

 

Weighted-Average Remaining Contractual Term (Years):

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2017

 

 

6.1

 

 

 

 

5.0

 

 

 

 

Exercisable at December 31, 2017

 

 

4.8

 

 

 

 

5.0

 

 

 

 

Aggregate Intrinsic Value:

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2017

 

$

198,358

 

 

 

$

6,199

 

 

 

 

Exercisable at December 31, 2017

 

$

157,436

 

 

 

$

6,199

 

 

 

 

Intrinsic Value of Options Exercised During the Years Ended:

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

$

51,140

 

 

 

$

1,995

 

 

 

 

December 31, 2016

 

$

44,972

 

 

 

$

548

 

 

 

 

December 31, 2015

 

$

43,041

 

 

 

$

1,478

 

 

 

 

Stock Awards Plans

Director Stock Option Plans

 

    

    

Weighted Average

    

    

Weighted Average

 

Options

Exercise Price

Options

Exercise Price

 

Outstanding, January 1, 2019

 

6,761,055

$

65.76

 

155,200

$

58.13

Granted

 

 

 

 

Exercised

 

(1,560,047)

 

57.10

 

(19,949)

 

55.99

Forfeited or expired

 

(156,828)

 

73.15

 

 

Outstanding at December 31, 2019

 

5,044,180

$

68.32

 

135,251

$

58.45

Exercisable at December 31, 2019

 

4,288,542

$

66.01

 

135,251

$

58.45

Weighted-Average Remaining Contractual Term (Years):

Outstanding at December 31, 2019

 

5.4

3.2

 

Exercisable at December 31, 2019

 

5.0

3.2

 

Aggregate Intrinsic Value:

Outstanding at December 31, 2019

$

239,033

$

7,732

Exercisable at December 31, 2019

$

212,745

$

7,732

Intrinsic Value of Options Exercised During the Years Ended:

December 31, 2019

$

87,251

$

1,172

December 31, 2018

$

72,951

$

2,286

December 31, 2017

$

51,140

$

1,995

The grant date fair value of options vested during the years ended December 31, 2019, 2018 and 2017 2016 and 2015 was $16.9$17.5 million, $17.2$16.5 million and $16.1$16.9 million, respectively. Cash received from option exercises was approximately $73.9$90.2 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $15.8$19.5 million in the year ended December 31, 2017.2019. As of December 31, 2017,2019, the remaining valuation of stock option awards to be expensed in future periods was $13.6$2.3 million and the related weighted‑averageweighted-average period over which it is expected to be recognized is 1.8 years.1.0 year.

62/ATR

2017 Form 10-K


The fair value of RSU grantsboth time-based RSUs and performance-based RSUs pertaining to internal performance metrics is determined using the marketclosing price of the underlying sharesour common stock and expected dividend on the grant date. The fair value of performance-based RSUs pertaining to TSR is estimated using a Monte Carlo simulation. Inputs and assumptions used to calculate the fair value are shown in the table below. The fair value of these RSUs is expensed over the vesting period using the straight-line method or using the graded vesting method when an employee becomes eligible to retain the award at retirement.

Year Ended December 31,

2019

2018

    

Fair value per stock award

$

134.97

$

128.70

Grant date stock price

$

104.51

$

89.42

Assumptions:

Aptar's stock price expected volatility

16.50

%

12.30

%

Expected average volatility of peer companies

31.90

%

27.50

%

Correlation assumption

37.40

%

20.20

%

Risk-free interest rate

2.19

%

2.42

%

Dividend yield assumption

1.30

%

1.43

%

A summary of restricted stock unitRSU activity as of December 31, 2017,2019, and changes during the period then ended is presented below:

 

Time-Based RSUs

Performance-Based RSUs

 

 

    

    

Weighted Average

    

    

Weighted Average

Units

Grant-Date Fair Value

Units

Grant-Date Fair Value

Nonvested at January 1, 2019

261,487

$

91.78

69,990

$

111.55

Granted

295,412

 

97.80

123,246

 

119.35

Vested

(51,433)

88.77

Forfeited

(24,737)

 

98.72

(11,556)

 

117.04

Nonvested at December 31, 2019

480,729

$

95.45

181,680

$

117.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Director Restricted

 

 

 

Stock Awards Plans

 

Stock Unit Plan

 

 

 

    

    

Weighted Average

    

 

    

Weighted Average

 

 

 

RSUs

 

Grant-Date Fair Value

 

RSUs

 

Grant-Date Fair Value

 

Nonvested at January 1,  2017

 

72,127

 

$

69.31

 

15,745

 

$

75.56

 

Granted

 

89,110

 

 

74.43

 

14,793

 

 

80.45

 

Vested

 

(51,963)

 

 

68.52

 

(15,745)

 

 

75.56

 

Nonvested at December 31, 2017

 

109,274

 

$

73.86

 

14,793

 

$

80.45

 

69/ATR

2019 Form 10-K

Included in the December 31, 2019 time-based RSUs are 11,490 units awarded to non-employee directors and 14,257 units vested related to non-employee directors.

Compensation expense recorded attributable to restricted stock unit grantsRSUs for the years ended December 31, 2017, 20162019, 2018 and 20152017 was approximately $3.7$18.2 million, $3.0$8.7 million and $2.7$3.7 million, respectively. The actual tax benefit realized for the tax deduction from RSUs was approximately $1.6$1.0 million for the year ended December 31, 2017.2019. The fair value of units vested during the years ended December 31, 2019, 2018 and 2017 2016was $4.6 million, $3.0 million and 2015 was $4.7 million, $1.9 million and $757 thousand, respectively. The intrinsic value of units vested for the years ended December 31, 2019, 2018 and 2017 2016was $5.4 million, $3.7 million and 2015 was $5.2 million, $2.3 million and $877 thousand, respectively. As of December 31, 2017,2019, there was $5.0$28.9 million of total unrecognized compensation cost relating to restricted stock unitRSU awards which is expected to be recognized over a weighted average period of 1.92.9 years.

During the first quarter of 2014, the Company approvedWe have a new long-term incentive program for certain employees. Each award is based on the cumulative total stockholder returnTSR of our common stock during a three year performance period.  Totalperiod compared to a peer group. The total expense related to this program for awards outstanding as of December 31, 2019 is expected to be approximately $3.4 million over the performance period.$2.7 million. For the years ended December 31, 2017, 20162019, 2018 and 2015,2017, we recognized expense of $1.5$0.8 million, income of $1.0$1.2 million and expense$0.7 million, respectively. The accrued awards will be paid in the first quarter of $1.2 million, respectively.2020 with no future grants anticipated as this TSR incentive program is no longer awarded.

NOTE 1617 EARNINGS PER SHARE

Basic net income per share is calculated by dividing net income attributable to Aptar by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing the net income attributable to Aptar by the weighted-average number of common and common equivalent shares outstanding during the applicable period. The difference between basic and diluted earnings per share is attributable to stock based compensation awards. Share-based compensation awards for which total employee proceeds exceed the average market price over the applicable period would have an antidilutive effect on earnings per share, and accordingly, are excluded from the calculation of diluted earnings per share. The reconciliation of basic and diluted earnings per share (“EPS”) for the years ended December 31, 2017, 20162019, 2018 and 20152017 are as follows:

63/ATR

2017 Form 10-K


 

 

 

 

 

 

 

 

 

 

 

    

Income

    

Shares

    

Per Share

 

 

 

(Numerator)

 

(Denominator)

 

Amount

 

For the Year Ended December 31, 2017

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

220,030

 

62,435

 

$

3.52

 

Effect of Dilutive Securities

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

2,106

 

 

 

 

Restricted stock

 

 

 

 

55

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

220,030

 

64,596

 

$

3.41

 

For the Year Ended December 31, 2016

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

205,590

 

62,804

 

$

3.27

 

Effect of Dilutive Securities

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

1,988

 

 

 

 

Restricted stock

 

 

 

 

57

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

205,590

 

64,849

 

$

3.17

 

For the Year Ended December 31, 2015

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

199,348

 

62,585

 

$

3.19

 

Effect of Dilutive Securities

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

1,864

 

 

 

 

Restricted stock

 

 

 

 

43

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

Income available to common stockholders

 

$

199,348

 

64,492

 

$

3.09

 

    

Income

   

Shares

   

Per Share

 

(Numerator)

(Denominator)

Amount

 

For the Year Ended December 31, 2019

Basic EPS

Income available to common stockholders

$

242,202

 

63,574

$

3.81

Effect of Dilutive Securities

Stock options

 

2,344

Restricted stock

 

 

232

Diluted EPS

Income available to common stockholders

$

242,202

 

66,150

$

3.66

For the Year Ended December 31, 2018

Basic EPS

Income available to common stockholders

$

194,745

 

62,437

$

3.12

Effect of Dilutive Securities

Stock options

 

2,440

Restricted stock

 

 

81

Diluted EPS

Income available to common stockholders

$

194,745

 

64,958

$

3.00

For the Year Ended December 31, 2017

Basic EPS

Income available to common stockholders

$

220,030

 

62,435

$

3.52

Effect of Dilutive Securities

Stock options

 

2,106

Restricted stock

 

 

55

Diluted EPS

Income available to common stockholders

$

220,030

 

64,596

$

3.41

NOTE 1718 SEGMENT INFORMATION

The Company isWe are organized into three3 reporting segments. Operations that sell dispensing systems and sealing solutions primarily to the beauty, personal care beauty and home care markets form the Beauty + Home segment. Operations that sell dispensing systems and sealing solutions to the prescription drug, consumer health care, injectables and injectablesactive packaging markets form the Pharma segment. Operations that sell dispensing systems and sealing solutions primarily to the food and beverage markets form the Food + Beverage segment.

70/ATR

2019 Form 10-K

The accounting policies of the segments are the same as those described in Note 1 Summary of Significant Accounting Policies. The Company evaluates performanceIn order to more closely align with how the markets analyze our segment results, we have changed our non-U.S. GAAP segment measure of its business segmentsprofitability from Segment Income to Adjusted EBITDA beginning in 2018. All internal segment reporting and allocates resourcesdiscussions of results with our Chief Operating Decision Maker (CODM) are now based uponon segment income. Segment income is defined as earnings before net interest expense, certain corporate expenses and income taxes.Adjusted EBITDA. All references to segment profitability have been updated for this change.

64/ATR

2017 Form 10-K


Financial information regarding the Company’sour reporting segments is shown below:

Year Ended December 31,

2019

    

2018

    

2017

    

Total Sales:

Beauty + Home

$

1,376,027

$

1,446,231

$

1,333,048

Pharma

 

1,100,463

 

955,069

 

805,913

Food + Beverage

 

418,017

 

386,689

 

352,483

Total Sales

$

2,894,507

$

2,787,989

$

2,491,444

Less: Intersegment Sales:

Beauty + Home

$

23,313

$

19,849

$

19,262

Pharma

 

9,412

 

417

 

33

Food + Beverage

 

2,050

 

2,962

 

2,866

Total Intersegment Sales

$

34,775

$

23,228

$

22,161

Net Sales:

Beauty + Home

$

1,352,714

$

1,426,382

$

1,313,786

Pharma

 

1,091,051

 

954,652

 

805,880

Food + Beverage

 

415,967

 

383,727

 

349,617

Net Sales

$

2,859,732

$

2,764,761

$

2,469,283

Adjusted EBITDA (1):

Beauty + Home

$

181,150

$

185,926

$

173,227

Pharma

 

387,483

 

343,706

 

275,933

Food + Beverage

 

68,108

 

57,589

 

62,903

Corporate & Other, unallocated

 

(44,406)

 

(36,285)

 

(37,457)

Acquisition-related costs (2)

(3,927)

(23,770)

Restructuring Initiatives (3)

 

(20,472)

 

(63,829)

 

(2,208)

Gain on insurance recovery (4)

10,648

Depreciation and amortization (5)

(194,552)

(171,747)

(153,094)

Interest Expense

(35,489)

(32,626)

(40,597)

Interest Income

 

4,174

 

7,056

 

5,470

Income before Income Taxes

$

342,069

$

266,020

$

294,825

Depreciation and Amortization:

Beauty + Home

$

82,778

$

83,546

$

79,422

Pharma

 

65,590

 

51,495

 

41,143

Food + Beverage

 

35,728

 

27,467

 

24,720

Corporate & Other

 

10,456

 

9,239

 

7,809

Depreciation and Amortization

$

194,552

$

171,747

$

153,094

Capital Expenditures:

Beauty + Home

$

96,040

$

101,371

$

76,425

Pharma

 

89,702

 

54,433

 

33,005

Food + Beverage

 

45,130

 

41,236

 

38,730

Corporate & Other

 

13,933

 

25,739

 

18,924

Transfer of Corporate Technology Expenditures (6)

(2,529)

(11,527)

(10,460)

Capital Expenditures

$

242,276

$

211,252

$

156,624

Total Assets:

Beauty + Home

$

1,378,292

$

1,373,816

$

1,358,283

Pharma

 

1,422,815

 

1,324,696

 

881,443

Food + Beverage

 

534,527

 

501,700

 

296,271

Corporate & Other

 

226,485

 

177,523

 

601,826

Total Assets

$

3,562,119

$

3,377,735

$

3,137,823

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

2017

    

2016

    

2015

    

Total Sales:

 

 

 

 

 

 

 

 

 

 

Beauty + Home

 

$

1,333,048

 

$

1,278,151

 

$

1,291,545

 

Pharma

 

 

805,913

 

 

741,473

 

 

712,220

 

Food + Beverage

 

 

352,483

 

 

330,231

 

 

335,365

 

Total Sales

 

$

2,491,444

 

$

2,349,855

 

$

2,339,130

 

Less: Intersegment Sales:

 

 

 

 

 

 

 

 

 

 

Beauty + Home

 

$

19,262

 

$

17,065

 

$

18,599

 

Pharma

 

 

33

 

 

 —

 

 

 —

 

Food + Beverage

 

 

2,866

 

 

1,856

 

 

3,382

 

Total Intersegment Sales

 

$

22,161

 

$

18,921

 

$

21,981

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

Beauty + Home

 

$

1,313,786

 

$

1,261,086

 

$

1,272,946

 

Pharma

 

 

805,880

 

 

741,473

 

 

712,220

 

Food + Beverage

 

 

349,617

 

 

328,375

 

 

331,983

 

Net Sales

 

$

2,469,283

 

$

2,330,934

 

$

2,317,149

 

Segment Income:

 

 

 

 

 

 

 

 

 

 

Beauty + Home

 

$

93,805

 

$

100,569

 

$

98,707

 

Pharma

 

 

234,790

 

 

219,039

 

 

210,509

 

Food + Beverage

 

 

38,183

 

 

37,697

 

 

42,731

 

Restructuring Initiatives (2)

 

 

(2,208)

 

 

 —

 

 

 —

 

Corporate & Other

 

 

(34,618)

 

 

(44,214)

 

 

(28,357)

 

Interest Expense

 

 

(40,597)

 

 

(35,237)

 

 

(34,615)

 

Interest Income

 

 

5,470

 

 

2,643

 

 

5,596

 

Income before Income Taxes

 

$

294,825

 

$

280,497

 

$

294,571

 

Depreciation and Amortization:

 

 

 

 

 

 

 

 

 

 

Beauty + Home

 

$

79,422

 

$

84,273

 

$

75,289

 

Pharma

 

 

41,143

 

 

39,776

 

 

36,008

 

Food + Beverage

 

 

24,720

 

 

23,891

 

 

21,347

 

Corporate & Other

 

 

7,809

 

 

6,862

 

 

6,249

 

Depreciation and Amortization

 

$

153,094

 

$

154,802

 

$

138,893

 

Capital Expenditures:

 

 

 

 

 

 

 

 

 

 

Beauty + Home

 

$

76,425

 

$

75,165

 

$

61,156

 

Pharma

 

 

33,005

 

 

58,970

 

 

48,133

 

Food + Beverage

 

 

38,730

 

 

21,533

 

 

25,337

 

Corporate & Other

 

 

18,924

 

 

17,490

 

 

23,149

 

Transfer of Corporate Technology Expenditures (1)

 

 

(10,460)

 

 

(44,172)

 

 

(8,452)

 

Capital Expenditures

 

$

156,624

 

$

128,986

 

$

149,323

 

Total Assets:

 

 

 

 

 

 

 

 

 

 

Beauty + Home

 

$

1,358,283

 

$

1,270,858

 

$

1,086,482

 

Pharma

 

 

881,443

 

 

831,569

 

 

591,500

 

Food + Beverage

 

 

296,271

 

 

259,282

 

 

250,369

 

Corporate & Other

 

 

601,826

 

 

245,076

 

 

508,694

 

Total Assets

 

$

3,137,823

 

$

2,606,785

 

$

2,437,045

 


(1)We evaluate performance of our reporting segments and allocate resources based upon Adjusted EBITDA. Adjusted EBITDA is defined as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring, acquisition-related costs and insurance recoveries.
(2)Acquisition-related costs include transaction costs and purchase accounting adjustments related to inventory for acquisitions (see Note 20 – Acquisitions for further details).

71/ATR

(1)2019 Form 10-K

(3)
Restructuring Initiatives includes expense items for the years ended December 31, 2019 and 2018 as follows (see Note 21 – Restructuring Initiatives for further details):

Year Ended December 31,

    

2019

    

2018

    

2017

    

Restructuring Initiatives by Segment

Beauty + Home

$

17,682

$

52,244

$

529

Pharma

 

632

 

3,589

 

Food + Beverage

 

391

 

4,185

 

1,679

Corporate & Other

1,767

3,811

Total Restructuring Initiatives

$

20,472

$

63,829

$

2,208

(4)The gain on insurance recovery relates to the Annecy fire (see Note 19 – Insurance Settlement Receivable for further details).
(5)Depreciation and amortization includes amortization related to acquisition purchase accounting adjustments for backlog.  See the reconciliation of Non-U.S. GAAP measures starting on page 22.
(6)The transfer of corporate technology expenditures represents amounts of projects managed by corporate for the benefit of specific entities within each segment. Once the projects are complete, all related costs are allocated from corporate to and paid by the appropriate entity and the associated assets are then depreciated at the entity level.

(2)

Restructuring Initiatives includes the following income/(expense) items for the twelve months ended December 31, 2017 as follows:

 

 

 

 

 

Year Ended December 31,

    

2017

 

Business Transformation Plan

 

 

 

 

Employee Severance and Other Costs

 

 

2,208

 

Total Restructuring Initiatives

 

$

2,208

 

Restructuring Initiatives by Segment

 

 

 

 

Beauty + Home

 

$

529

 

Food + Beverage

 

 

1,679

 

Total Restructuring Initiatives

 

$

2,208

 

65/ATR

2017 Form 10-K


Geographic Information

GEOGRAPHIC INFORMATION

The following are net sales and long‑livedlong-lived asset information by geographic area and product information for the years ended December 31, 2017, 20162019, 2018 and 2015:2017:

    

2019

    

2018

    

2017

 

Net Sales to Unaffiliated Customers (1):

United States

$

836,768

$

726,336

$

642,164

Europe:

France

 

895,110

862,364

744,856

Germany

 

452,409

474,369

416,802

Italy

 

141,867

144,044

131,523

Other Europe

 

149,083

146,701

132,992

Total Europe

 

1,638,469

1,627,478

1,426,173

Other Foreign Countries

 

384,495

410,947

400,946

Total

$

2,859,732

$

2,764,761

$

2,469,283

Property, Plant and Equipment

United States

$

300,820

$

265,004

$

182,434

Europe:

France

 

338,288

308,250

266,804

Germany

 

163,782

154,505

163,948

Italy

 

53,562

54,978

57,080

Other Europe

 

63,636

59,411

59,963

Total Europe

 

619,268

577,144

547,795

Other Foreign Countries

 

167,590

149,465

137,677

Total

$

1,087,678

$

991,613

$

867,906

 

 

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

    

2015

 

Net Sales to Unaffiliated Customers (1):

 

 

 

 

 

 

 

 

 

 

United States

 

$

642,164

 

$

619,814

 

$

633,522

 

Europe:

 

 

 

 

 

 

 

 

 

 

France

 

 

744,856

 

 

695,727

 

 

712,470

 

Germany

 

 

416,802

 

 

386,553

 

 

326,782

 

Italy

 

 

131,523

 

 

126,890

 

 

125,511

 

Other Europe

 

 

132,992

 

 

120,228

 

 

122,546

 

Total Europe

 

 

1,426,173

 

 

1,329,398

 

 

1,287,309

 

Other Foreign Countries

 

 

400,946

 

 

381,722

 

 

396,318

 

Total

 

$

2,469,283

 

$

2,330,934

 

$

2,317,149

 

Property, Plant and Equipment

 

 

 

 

 

 

 

 

 

 

United States

 

$

182,434

 

$

175,578

 

$

175,367

 

Europe:

 

 

 

 

 

 

 

 

 

 

France

 

 

266,804

 

 

228,082

 

 

216,966

 

Germany

 

 

163,948

 

 

154,588

 

 

125,186

 

Italy

 

 

57,080

 

 

51,732

 

 

43,631

 

Other Europe

 

 

59,963

 

 

54,575

 

 

54,483

 

Total Europe

 

 

547,795

 

 

488,977

 

 

440,266

 

Other Foreign Countries

 

 

137,677

 

 

119,766

 

 

149,750

 

Total

 

$

867,906

 

$

784,321

 

$

765,383

 

Product Net Sales Information:

 

 

 

 

 

 

 

 

 

 

Pumps

 

$

1,123,184

 

$

1,028,720

 

$

991,583

 

Closures

 

 

547,204

 

 

525,421

 

 

558,212

 

Valves

 

 

326,819

 

 

288,563

 

 

306,367

 

Injectables

 

 

149,391

 

 

150,785

 

 

130,503

 

Other

 

 

322,685

 

 

337,445

 

 

330,484

 

Total

 

$

2,469,283

 

$

2,330,934

 

$

2,317,149

 


(1)

(1)

Sales are attributed to countries based upon where the sales invoice to unaffiliated customers is generated.

No single customer represents 10%6% or more of the Company’sour net sales in 2017, 20162019, 2018 or 2015.2017.

NOTE 1819 INSURANCE SETTLEMENT RECEIVABLE

A fire caused damage to Aptar’sour facility in Annecy, France in June 2016. The fire was contained to one of three production units and there were no reported injuries. Aptar Annecy supplies anodized aluminum components for certain Aptar dispensing systems. While repairsWe are underway, Aptar will source from its network of suppliers as well as from its anodizing facility in Brazil. The Company is insured for the damages caused by the fire, including business interruption insurance, and it doeswe do not expect this incident to have a material impact on itsour financial results.

72/ATR

2019 Form 10-K

Losses related to the Annecy fire of $20.3$18.9 million and $10.7$20.3 million were incurred during 2018 and 2017, and 2016, respectively. As ofFor the year ended December 31, 2017,2019, we have received insurance proceeds of $19.1 million. We$3.4 million, and have established an0 insurance receivable of $14.2 million for known losses for which insurance reimbursement was received in January 2018, which is included in Prepayments and Other in the Consolidated Balance Sheet. In many cases, our insurance coverage exceeds the amount of these incurred losses.at year-end. Operating Income was negatively impacted by $5.8 million during 2018. These 2018 losses negatively impacted the Beauty + Home and Pharma segments by $3.8 million and $2.0 million, respectively. Operating income was negatively impacted by $5.6 million and $2.7 million during 2017 and 2016, respectively.2017. During 2017, we also recognized $10.6 million of gain due to the insurance recovery on the involuntary conversion of fixed assets related to this fire, which is included in Other (Expense) Income on the Consolidated Statements of Income. These costs are included in2017 amounts impacted the Beauty + Home segment. The final settlement is still in process of negotiation with the insurance company.

NOTE 20 ACQUISITIONS

Business Combinations

66/ATR

2017 Form 10-K


A separate fire caused damage to the roof and production area of one100% of the Company’s facilitiesequity interests of Noble International Holdings, Inc., Genia Medical, Inc. and JBCB Holdings, LLC (collectively referred to as “Noble”).  Noble, based in Brazil in September 2014. There were no injuries. The facility is primarily an internal supplier of anodized aluminum components for certain dispensing systems sold to the regional beauty and personal care markets. Repairs of the facility were essentially completed in the fourth quarter 2015.  AptarGroup is insured for the damages caused by the fire, including business interruption insurance.  The final insurance settlement was received in the fourth quarter of 2016.  During 2016, we recognized $559 thousand of gain related to this fire, which is included in Other (Expense) Income on the Consolidated Statements of Income.  The cumulative gain recognized is $3.5 million.

NOTE 19 ACQUISITIONS

On February 29, 2016, the Company completed its acquisition of MegaPlast GmbH and its subsidiaries along with Megaplast France S.a.r.l and Mega Pumps L.P. (“Mega Airless”).  Mega AirlessOrlando, FL, is a leading provider of innovative all-plastic airless dispensing systemsin developing patient-centric advanced drug delivery system training devices including autoinjector, prefilled syringe, onbody and respiratory devices for the beauty, personal careworld’s leading biopharmaceutical companies and pharmaceutical markets and operates two manufacturing facilities in Germany and one in the United States.original equipment manufacturers. The purchase price paid for Mega Airless was approximately $223.2$62.3 million ($203.0(net of $1.6 million net of cash received)acquired) and was funded by cash on handhand. As part of the Noble Acquisition, we are also obligated to pay to the selling equityholders of Noble certain contingent consideration based on 2024 cumulative financial performance metrics defined in the purchase agreement. Based on projection as of the acquisition date, we estimated the aggregate fair value for this contingent consideration arrangement to be $2.9 million utilizing the Black-Scholes valuation model. We are in the process of finalizing purchase accounting. As of December 31, 2019, $5 million was held in restricted cash pending the finalization of a working capital adjustment. The results of Noble’s operations have been included in the Condensed Consolidated Financial Statements within our Pharma segment since the date of acquisition.

On June 5, 2019, we completed our acquisition (the “Nanopharm Acquisition”) of all of the outstanding capital stock of Nanopharm Ltd. (“Nanopharm”). Nanopharm, located in Newport, UK, is a science-driven, leading provider of orally inhaled and borrowingsnasal drug product design and development services. The purchase price was approximately $38.1 million (net of $1.8 million of cash acquired) and was funded by cash on hand. The results of Nanopharm’s operations have been included in the Condensed Consolidated Financial Statements within our revolving linePharma segment since the date of credit.acquisition.

Mega AirlessOn May 31, 2019, we completed our acquisition (the “Gateway Acquisition”) of all of the outstanding equity interests of Gateway Analytical LLC (“Gateway”). Gateway, located in Gibsonia, PA, provides industry-leading particulate detection and predictive analytical services to customers developing injectable medicines. The purchase price was approximately $7.0 million and was funded by cash on hand. As part of the Gateway Acquisition, we are also obligated to pay to the selling equityholder of Gateway certain contingent consideration based on 2020 and 2022 performance targets defined in the purchase agreement. Based on projections as of the acquisition date, we estimated the aggregate fair value for this contingent consideration arrangement to be $3.0 million. The results of Gateway’s operations have been included in the Condensed Consolidated Financial Statements within our Pharma segment since the date of acquisition.

On August 27, 2018, we completed our acquisition (the “CSP Technologies Acquisition”) of all of the outstanding capital stock of CSP Technologies S.à r.l. (“CSP Technologies”). CSP Technologies is a leader in active packaging technology based on proprietary material science expertise for the pharma and food service markets. CSP Technologies operates manufacturing locations in the U.S. and France. The preliminary purchase price was approximately $553.5 million and was funded by cash on hand. As of December 31, 2018, $5 million was held in restricted cash pending the finalization of a working capital adjustment. The $5 million cash amount was released from restriction in January 2019 after the finalization of the working capital adjustment, resulting in a refund of $1.0 million.

CSP Technologies contributed net sales of $59.4$48.9 million and pretax incomeloss of $4.1$10.2 million for the year ended December 31, 2016.2018. Sales of $33.9 million and $15.0 million were reported in the Pharma and Food + Beverage segments, respectively, for the year ended December 31, 2018. Pretax loss of $10.3 million and pretax income of $0.1 million were reported in the Pharma and Food + Beverage segments, respectively, for the year ended December 31, 2018. Included in pretax income is a purchase accounting adjustment$14.1 million of $2.6 million related to the fair value ofadjustment amortization for inventory acquired.  The results of the acquired business from the acquisition date are included in the accompanying consolidated financial statements and are reported in the Beauty + Home and Pharma reporting segments.sold during 2018.

For the year ended December 31, 2016,2019, we recognized $5.6$3.4 million in transaction costs related to the acquisitions of Noble, Nanopharm and Gateway. For the year ended December 31, 2018, we recognized $9.0 million in transaction costs related to the acquisition of Mega Airless.CSP Technologies. These costs are reflected in the SG&Aselling, research & development and administration section of the Consolidated Statements of Income.Income and within acquisition-related costs as disclosed in Note 18 – Segment Information.

73/ATR

2019 Form 10-K

The following table summarizes the assets acquired and liabilities assumed as of the acquisition date at estimated fair value.

 

 

 

 

    

February 29, 2016

 

   

2019

   

2018

 

Assets

 

 

 

 

Cash and equivalents

 

$

20,197

 

$

3,427

$

24,053

Accounts receivable

 

 

8,275

 

 

3,504

 

20,847

Inventories

 

 

8,373

 

 

 

42,169

Prepaid and other

 

 

378

 

 

2,478

 

3,995

Property, plant and equipment

 

 

47,768

 

 

4,267

 

99,194

Goodwill

 

 

105,561

 

 

59,143

 

278,020

Intangible assets

 

 

72,106

 

 

52,980

 

177,120

Other miscellaneous assets

 

 

 8

 

 

430

 

1,039

Liabilities

 

 

 

 

Current maturities of long-term obligations

 

 

319

 

 

 

129

Accounts payable and accrued liabilities

 

 

7,398

 

Accounts payable, accrued and other liabilities

 

5,388

 

31,989

Long-term obligations

 

 

13,402

 

 

 

6,037

Deferred income taxes

 

 

18,366

 

 

2,592

 

38,442

Retirement and deferred compensation plans

1,038

Deferred and other non-current liabilities

 

1,598

 

15,344

Net assets acquired

 

$

223,181

 

$

116,651

$

553,458

The following table is a summary of the fair value estimates of the acquired identifiable intangible assets and weighted-average useful lives as of the acquisition date:

 

 

 

 

 

 

    

Weighted-Average

    

Estimated

 

 

Useful Life

 

Fair Value

 

 

(in years)

 

of Asset

 

2019

2018

    

Weighted-Average

    

Estimated

    

Weighted-Average

    

Estimated

 

Useful Life

Fair Value

Useful Life

Fair Value

 

(in years)

of Asset

(in years)

of Asset

 

Acquired technology

 

8

$

9,160

 

12

$

46,700

Customer relationships

 

11

 

$

57,120

 

 

11

 

39,379

 

16

 

113,300

Technology

 

15

 

 

10,838

 

Trademark

 

4

 

 

4,148

 

Trademarks and trade names

4

2,457

9

14,600

License agreements and other

 

1

 

1,984

 

11

 

2,520

Total

 

 

 

$

72,106

 

$

52,980

$

177,120

67/ATR

2017 Form 10-K


Goodwill in the amount of $105.6$59.1 million and $278.0 million was recorded forrelated to the acquisition of Mega Airless, of which $49.8 million2019 and $55.82018 acquisitions, respectively. For 2019, $59.1 million is included in the BeautyPharma segment and, for 2018, $174.3 million and $103.7 million is included in the Pharma and Food + Home and PharmaBeverage segments, respectively. Goodwill is calculated as the excess of the consideration transferred over the net assets acquired and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill largely consists of leveraging the Company’sour commercial presence in selling the Mega Airless lineNoble, Nanopharm, Gateway and CSP Technologies lines of products in markets where Mega Airlessthey did not previously operate and the abilityabilities of Mega Airlessthe acquired companies to maintain itstheir competitive advantage from a technical viewpoint. Goodwill will not be amortized, but will be tested for impairment at least annually. WeFor 2019 acquisitions, goodwill of $29.6 million will be deductible for tax purposes. For the 2018 acquisitions, we do not expect any of the goodwill will be deductible for tax purposes.

Pro forma results of operations for 2019 acquisitions have not been presented as the effects of these business combinations individually and in aggregate were not material to the consolidated results of operations.

The unaudited pro forma results presented below include the effects of the Mega AirlessCSP Technologies acquisition as if it had occurred as of January 1, 2015.2017. The unaudited pro forma results reflect certain adjustments related to the acquisition, such as theintangible asset amortization, associated with estimates for the acquired intangible assets and fair value adjustments for inventory.inventory and financing costs related to the change in our debt structure. The 20162018 pro forma earnings were adjusted to exclude $4.2$16.7 million after tax ($5.622.0 million pretax) of transaction and other costs. The aforementioned costs includinginclude compensation, consulting, legal and advisory fees. The 20162018 pro forma earnings were also adjusted to exclude $1.7$10.9 million after tax ($2.614.1 million pretax) of nonrecurring expense related to the fair value adjustment to acquisition-date inventory. The 20152017 pro forma earnings were adjusted to include these adjustments.

The pro forma results do not include any synergies or other expected benefits of the acquisition. Accordingly, the unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been completed on the dates indicated.

 

 

 

 

 

 

 

 

Years Ended December 31,

    

2016

    

2015

 

($ millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

2,340

 

$

2,386

 

Net Income Attributable to AptarGroup Inc.

 

 

213

 

 

194

 

Net Income per common share — basic

 

 

3.39

 

 

3.11

 

Net Income per common share — diluted

 

 

3.29

 

 

3.01

 

74/ATR

2019 Form 10-K

Years Ended December 31,

   

   

2018

   

2017

 

Net Sales

$

2,857,765

$

2,605,095

Net Income Attributable to AptarGroup Inc.

 

 

208,717

 

230,753

Net Income per common share — basic

 

 

3.34

 

3.70

Net Income per common share — diluted

 

 

3.21

 

3.57

In February 2017,On May 1, 2018, we acquired 100% of the Company acquiredcommon stock of Reboul, a 20% minority interestFrench manufacturer specializing in Kali Carestamping, decorating and assembling metal and plastic packaging for $5.0 million. Kali Care is a Silicon Valley-based technology company, which provides digital monitoring systemsthe cosmetics and luxury markets, for ophthalmic medication. Kali Care’s sensing technology allows clinicians to collect real time compliance data and is a powerful tool for ophthalmologistsan initial purchase price of approximately $3.5 million (net of $112 thousand of cash acquired) (the “Reboul Acquisition”). The results of Reboul’s operations have been included in managing the care of their patients and represents an additional investment into connected devices forconsolidated financial statements within our Pharma applications.  This investment is being accounted for under the equity method of accounting fromBeauty + Home segment since the date of acquisition. As part of the Reboul Acquisition, we were obligated to pay to the selling shareholders of Reboul certain contingent consideration based on 2018 EBITDA as defined in the purchase agreement. These targets were not achieved and we did not pay any contingent consideration.

Subsequent to year end, on February 13, 2020, we entered into a securities purchase agreement to acquire 100% of the membership interests of Fusion Packaging I, LP (“Fusion”), contingent on the closing date of the transaction. Fusion, based in Dallas, TX, is a global leader in the design, engineering, manufacturing and distribution of luxury packaging for the beauty industry. The transaction is subject to customary regulatory approvals and other customary closing conditions. The purchase will be funded with available cash on hand and/or borrowings under our revolving credit facility.

Asset Acquisition

On August 2, 2019, we completed our asset acquisition (the “Bapco Acquisition”) of the remaining 80% ownership interest in the capital stock of Bapco Closures Holdings Limited (“Bapco”), for $3.8 million (net of $2.9 million of cash acquired). The 20% ownership investment previously held in Bapco is now included within the intangible assets acquired. Bapco, located in Horesell, UK, provides innovative closures sealing technology that provides package integrity and tamper evidence. The results of Bapco’s operations have been included in the Condensed Consolidated Financial Statements within our Food + Beverage segment since the date of acquisition.

Equity and Other Investments

On October 1, 2019, we entered into a strategic definitive agreement to acquire 49% of the equity interests in three related companies: Suzhou Hsing Kwang, Suqian Hsing Kwang and Suzhou BTY, (collectively referred to as “BTY”), contingent on the settlement date of the transaction. We have a call option to acquire an additional 26% to 31% of BTY’s equity interests following the initial lock-up period of 5 years based on a predetermined formula. Subsequent to the second lock-up period, which ends 3 years subsequent to the initial lock-up period, we have a call option to acquire the remaining equity interests of BTY based on a predetermined formula. Additionally, the selling shareholders of BTY have a put option for the remaining equity interest to be acquired by Aptar based on a predetermined formula. The BTY entities are leading Chinese manufacturers of high quality, decorative metal components, metal-plastic sub-assemblies, and complete color cosmetics packaging solutions for the beauty industry. Subsequent to the year ended December 31, 2019, on January 1, 2020 the transaction closed for an approximate purchase price of $32 million for our 49% share.

During August 2019, we also invested an aggregate amount of $3.5 million in 2 preferred equity investments in sustainability companies that are accounted for at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. There were no indications of impairment nor were there any changes from observable price changes noted in the three months ended December 31, 2019.

In May 2018, we invested $10.0 million in preferred equity stock of Reciprocal Labs Corporation, doing business as Propeller Health, consistent with measurement alternative guidance described in Note 1 above. NaN impairment charge was recorded during 2018 against this investment. We recorded a gain of approximately $6.5 million during the fourth quarter of 2018 by adjusting the carrying amount to its expected sales proceeds as this investment was subsequently sold during January 2019.

75/ATR

2019 Form 10-K

NOTE 2021 RESTRUCTURING INITIATIVES

In late 2017, Aptarwe began a business transformation plan to drive profitable sales growth, increase operational excellence, enhance our approach to innovation and improve organizational effectiveness. The primary focus of the plan will be the Beauty + Home segment; however, certain global general and administrative functions will also be addressed. During 2017,2019 and 2018, we recognized approximately $2.2$20.5 million and $63.8 million of restructuring costs related to this plan, with approximately $0.5 million being reported within the Beauty + Home segment and $1.7 million being reported within the Food + Beverage segment.respectively. Using current exchange rates, we estimateexpect total implementation costs of approximately $90$110 million over the next three years.for these initiatives. The cumulative expense incurred to date was $86.5 million. We also anticipate making capital investments related to the transformation plan of approximately $45$55 million, of which the majority will be in 2018. $38 million has been incurred to date.

As of December 31, 20172019 we have recorded the following activity associated with the transformation plan:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Beginning

    

Net Charges

    

 

 

    

 

 

    

Ending

 

 

 

Reserve at

 

for the Year

 

 

 

 

 

 

 

Reserve at

 

 

 

12/31/16

 

Ended 12/31/17

 

Cash Paid

 

FX Impact

 

12/31/17

 

Employee severance

 

$

 —

 

$

2,208

 

$

 —

 

$

50

 

$

2,258

 

Totals

 

$

 —

 

$

2,208

 

$

 —

 

$

50

 

$

2,258

 

    

Beginning

    

Net Charges

    

    

    

Ending

 

Reserve at

for the Year

Interest and

Reserve at

 

12/31/2018

Ended 12/31/2019

Cash Paid

FX Impact

12/31/2019

 

Employee severance

$

3,934

$

8,104

$

(4,813)

$

(135)

$

7,090

Professional fees and other costs

 

11,101

 

12,368

 

(19,795)

 

(65)

 

3,609

Totals

$

15,035

$

20,472

$

(24,608)

$

(200)

$

10,699

68/ATR

2017 Form 10-K


NOTE 2122 QUARTERLY DATA (UNAUDITED)

Quarterly results of operations and per share information for the years ended December 31, 20172019 and 20162018 are as follows:

Quarter

Total

 

 

First

 

Second

 

Third

 

Fourth

 

for Year

 

Year Ended December 31, 2019:

Net sales

$

744,460

$

742,661

$

701,278

$

671,333

$

2,859,732

Gross profit (1)

 

233,841

 

231,739

 

215,222

 

193,588

 

874,390

Net Income

 

62,999

 

73,921

 

56,769

 

48,538

 

242,227

Net Income Attributable to AptarGroup, Inc.

 

63,004

 

73,915

 

56,750

 

48,533

 

242,202

Per Common Share — 2019:

Net Income Attributable to AptarGroup, Inc.

Basic

$

1.00

$

1.16

$

.89

$

.76

$

3.81

Diluted

 

.96

 

1.12

 

.85

 

.73

 

3.66

Average number of shares outstanding:

Basic

 

62,964

 

63,471

 

64,010

 

63,835

 

63,574

Diluted

 

65,349

 

66,232

 

66,702

 

66,192

 

66,150

Year Ended December 31, 2018:

Net sales

$

703,350

$

710,608

$

665,775

$

685,028

$

2,764,761

Gross profit (1)

 

209,171

 

209,018

 

192,544

 

184,775

 

795,508

Net Income

 

59,288

 

55,781

 

39,022

 

40,675

 

194,766

Net Income Attributable to AptarGroup, Inc.

 

59,300

 

55,775

 

38,996

 

40,674

 

194,745

Per Common Share — 2018:

Net Income Attributable to AptarGroup, Inc.

Basic

$

.95

$

.89

$

.63

$

.65

$

3.12

Diluted

 

.92

 

.86

 

.60

 

.62

 

3.00

Average number of shares outstanding:

Basic

 

62,128

 

62,402

 

62,378

 

62,834

 

62,437

Diluted

 

64,414

 

64,850

 

65,129

 

65,344

 

64,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter

 

Total

 

 

    

First

    

Second

    

Third

    

Fourth

    

for Year

 

Year Ended December 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

601,316

 

$

617,746

 

$

624,326

 

$

625,895

 

$

2,469,283

 

Gross profit (1)

 

 

181,481

 

 

183,056

 

 

178,866

 

 

178,944

 

 

722,347

 

Net Income

 

 

51,805

 

 

65,189

 

 

53,529

 

 

49,506

 

 

220,029

 

Net Income Attributable to AptarGroup, Inc.

 

 

51,820

 

 

65,174

 

 

53,523

 

 

49,513

 

 

220,030

 

Per Common Share — 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Attributable to AptarGroup, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

.83

 

$

1.04

 

$

.86

 

$

.80

 

$

3.52

 

Diluted

 

 

.81

 

 

1.01

 

 

.83

 

 

.77

 

 

3.41

 

Dividends declared

 

 

.32

 

 

.32

 

 

.32

 

 

.32

 

 

1.28

 

Stock price high (2)

 

 

77.87

 

 

87.94

 

 

90.79

 

 

89.68

 

 

90.79

 

Stock price low (2)

 

 

71.44

 

 

75.49

 

 

80.69

 

 

84.22

 

 

71.44

 

Average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

62,355

 

 

62,631

 

 

62,592

 

 

61,944

 

 

62,435

 

Diluted

 

 

64,234

 

 

64,828

 

 

64,821

 

 

64,528

 

 

64,596

 

Year Ended December 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

582,338

 

$

619,999

 

$

589,729

 

$

538,868

 

$

2,330,934

 

Gross profit (1)

 

 

173,734

 

 

192,495

 

 

171,574

 

 

149,576

 

 

687,379

 

Net Income

 

 

43,866

 

 

59,051

 

 

53,100

 

 

49,587

 

 

205,604

 

Net Income Attributable to AptarGroup, Inc.

 

 

43,863

 

 

59,048

 

 

53,098

 

 

49,581

 

 

205,590

 

Per Common Share — 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Attributable to AptarGroup, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

.70

 

$

.94

 

$

.84

 

$

.79

 

$

3.27

 

Diluted

 

 

.67

 

 

.91

 

 

.82

 

 

.77

 

 

3.17

 

Dividends declared

 

 

.30

 

 

.30

 

 

.30

 

 

.32

 

 

1.22

 

Stock price high (2)

 

 

79.04

 

 

80.36

 

 

81.50

 

 

78.10

 

 

81.50

 

Stock price low (2)

 

 

66.33

 

 

74.16

 

 

75.01

 

 

70.32

 

 

66.33

 

Average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

62,722

 

 

63,053

 

 

62,858

 

 

62,586

 

 

62,804

 

Diluted

 

 

65,063

 

 

64,785

 

 

64,690

 

 

64,220

 

 

64,849

 


(1)

(1)

Gross profit is defined as net sales less cost of sales and depreciation.

NOTE 23 SUBSEQUENT EVENTS

On January 1, 2020, the BTY transaction closed for an approximate purchase price of $32 million for our 49% share. Refer to Note 20- Acquisitions for further details on the investment.

OnFebruary 13, 2020, we entered into a securities purchase agreement to acquire 100% of the membership interests of Fusion. Refer to Note 20 – Acquisitions for further details on the acquisition.

(2)

The stock price high and low amounts are based upon intra‑day New York Stock Exchange composite price history.

69/76/ATR

20172019 Form 10-K


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of AptarGroup, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of AptarGroup, Inc. and its subsidiaries (the “Company”) as of December 31, 20172019 and 2016,2018, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2017,2019, including the related notes and schedule of valuation and qualifying accounts for each of the financial statement schedulethree years in the period ended December 31, 2019 listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172019 and 2016,2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20172019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in “Management'sManagement’s Report on Internal Control over Financial Reporting”,Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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 described in Management’s Report on Internal Control over Financial Reporting, management has excluded Nanopharm Ltd. and Noble International Holdings, Inc., Genia Medical Inc., and JBCB Holdings, LLC (collectively referred to as “Noble”) from its assessment of internal control over financial reporting as of December 31, 2019 because the entities were acquired by the Company in purchase business combinations during 2019. We have also excluded Nanopharm Ltd. and Noble from our audit of internal control over financial reporting. Nanopharm Ltd. and Noble are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2019.

77/ATR

2019 Form 10-K

Definition and Limitations of Internal Control over Financial Reporting

A company’s 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 company’s 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 company’s 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.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment – Active Packaging Reporting Unit

As described in Note 1 and 4 to the consolidated financial statements, the Company’s consolidated goodwill balance was $763 million as of December 31, 2019. As disclosed by management, the goodwill associated with the Active Packaging reporting unit was $163 million as of December 31, 2019. During the third quarter of 2019, management performed a quantitative impairment assessment using a discounted cash flow analysis of the Active Packaging reporting unit. Management calculated the fair value of the Active Packaging reporting unit and compared it with the associated carrying amount as of July 1, 2019, and, upon management’s change to the Company’s goodwill impairment testing date, performed a qualitative impairment assessment as of October 1, 2019. Management’s determination of the fair value of the Company’s reporting units, based on future cash flows for the reporting units, requires significant judgment and the use of estimates and assumptions related to projected revenue growth rates, the terminal growth factor, as well as the discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of Active Packaging reporting unit is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the reporting unit. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s future cash flows, including the significant assumptions related to projected revenue growth rates, the terminal growth factor, and the discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Active Packaging reporting unit. These procedures also included, among others, testing management’s process for developing the fair value estimate of the reporting unit; evaluating the appropriateness of management’s discounted cash flow model; testing the completeness and accuracy of underlying data used in the model; and evaluating the significant assumptions used by management, including the projected revenue growth rates, the terminal growth factor, and the discount rate. Evaluating management’s assumption related to projected revenue growth rates involved evaluating whether the assumption used by management was reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether this assumption was consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and certain significant assumptions, including the terminal growth factor and the discount rate.

78/ATR

2019 Form 10-K

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 26, 201824, 2020

We have served as the Company’s auditor since 1992.

70/79/ATR

20172019 Form 10-K


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURESPROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

The Company’s managementManagement has evaluated, with the participation of the chief executive officer and chief financial officer of the Company, the effectiveness of the Company’sour disclosure controls and procedures (as such term is defined in Rule 13a‑15(e)13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2017.2019. 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.

MANAGEMENT’S 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)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 Company’s managementOn June 5, 2019 and October 31, 2019, we completed our acquisitions of Nanopharm Ltd. and Noble International Holdings, Inc., Genia Medical, Inc. and JBCB Holdings, LLC (collectively referred to as “Noble”) respectively, as discussed in Item 8, Note 20 - Acquisitions to the Consolidated Financial Statements. Management excluded Nanopharm Ltd. and Noble from its assessment of our internal control over financial reporting as they were acquired during the fiscal year. Nanopharm Ltd. and Noble’s total assets and total revenues represent less than 1% of the Consolidated Financial Statement amounts as of and for the year ended December 31, 2019. 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, 20172019 based on the framework in Internal Control—Integrated Framework (2013) 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, 2017.2019.

PricewaterhouseCoopers LLP, an 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 70.77.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

NoDuring the fiscal quarter ended December 31, 2019, the Company implemented enterprise resource planning (“ERP”) systems at one operating facility.  Consequently, the control environments have been modified at this location to incorporate the controls contained within the new ERP systems. Except for the foregoing, no changes in the Company’sour internal control over financial reporting (as such term is defined in Rule 13a‑15(f)13a-15(f) under the Securities Exchange Act of 1934) occurred during the Company’sour fiscal quarter ended December 31, 20172019 that materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting. As noted above, we excluded Nanopharm Ltd. and Noble from our evaluation of internal control over financial reporting as of December 31, 2019 because these acquisitions were completed during the fiscal year.

ITEM 9B. OTHER INFORMATIONINFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEGOVERNANCE

Information with respect to directors may be found under the caption “Proposal 1—Election“Election of Directors” in the Company’sour Proxy Statement for the Annual Meeting of Stockholders to be held on May 2, 20186, 2020 (the “2018“2020 Proxy Statement”) and is incorporated herein by reference.

Information with respect to executive officers may be found under the caption “Executive“Information About Our 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 20182020 Proxy Statement and is incorporated herein by reference.

80/ATR

2019 Form 10-K

Information with respect to the Company’sour Code of Business Conduct and Ethics may be found under the caption “Corporate Governance—Code of Business Conduct and Ethics” in the 20182020 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 RelationsInvestors page of our website (www.aptar.com).

The information set forth under the heading “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” in the 20182020 Proxy Statement is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATIONCOMPENSATION

The information set forth under the headings “Board Compensation”, “Executive Officer Compensation” and “Management Development and Compensation Committee Report” in the 20182020 Proxy Statement is incorporated herein by reference. The information included under the heading “Management Development and Compensation Committee Report” in the 20182020 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 OWNERSOWNERS AND 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 20182020 Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information set forth under the heading “Transactions with Related Persons” and “Corporate Governance—Independence of Directors” in the 20182020 Proxy Statement is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESSERVICES

Information with respect to the independent registered public accounting firm fees and services may be found under the caption “Proposal [4]—Ratification“Ratification of the Appointment of PricewaterhouseCoopers LLP as the Independent Registered Public Accounting Firm for 2018”2020” in the 20182020 Proxy Statement. Such information is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSCHEDULES

(a)

(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 for the Years Ended December 31, 2019, 2018 and 2017

34

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017

35

Consolidated Balance Sheets as of December 31, 2019 and 2018

36

Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017

38

Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017

39

Notes to Consolidated Financial Statements

41

Report of Independent Registered Public Accounting Firm

77

2)

II – Valuation and Qualifying Accounts

88

All other schedules have been omitted because they are not applicable or not required.

 

 

 

 

 

 

 

    

 

    

 

 

 

 

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 for the Years Ended December 31, 2017, 2016 and 2015

 

34

 

 

 

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016 and 2015

 

35

 

 

 

Consolidated Balance Sheets as of December 31, 2017 and 2016

 

36

 

 

 

Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015

 

38

 

 

 

Consolidated Statements of Changes in Equity for the Years Ended December 31, 2017, 2016 and 2015

 

39

 

 

 

Notes to Consolidated Financial Statements

 

40

 

 

 

Report of Independent Registered Public Accounting Firm

 

70

 

2)

 

II – Valuation and Qualifying Accounts

 

79

 

 

 

 

 

 

 

 

 

All other schedules have been omitted because they are not applicable or not required.

 

 

 

(b)

(b)

Exhibits required by Item 601 of Regulation S‑KS-K are incorporated by reference to the Exhibit Index on pages 73-7782-86 of this report.

ITEM 16. FORM 10‑K SUMMARY10-K SUMMARY

None.

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20172019 Form 10-K


INDEX TO EXHIBITS

Exhibit
Number

Description

Exhibit
Number

Description

2.12.2

ShareStock Purchase Agreement, dated as of January 25, 2016,July 26, 2018, between shareholders of MEGAPLAST GmbH, Megaplast France S.a.r.l.AptarGroup, Inc. and MEGA Pumps L.P.CSP Technologies Parent S.A., and Aptargroup Holding SAS, filed as Exhibit 2.12.2 to the Company’s annualquarterly report on Form 10-K10-Q for the yearquarter ended December 31, 2015 (File No. 1‑11846),September 30, 2018, is hereby incorporated by reference.

3(i)

Amended and Restated Certificate of Incorporation of AptarGroup, Inc., as amended, filed as Exhibit 4(a) to the Company’s Registration Statement on Form S-8, Registration Number 333-152525, filed on July 25, 2008, is hereby incorporated by reference.

3(ii)

Amended and Restated By‑LawsBy-Laws of the Company, filed as Exhibit 3.1 to the Company’s Form 8‑K8-K filed on October 24, 2016, (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‑termlong-term debt of the RegistrantCompany and its subsidiaries as are specified by item 601(b)(4)(iii)(A) of Regulation S‑K.S-K.

4.1

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 Company’s quarterly report on Form 10‑Q for the quarter ended June 30, 2006 (File No. 1‑11846), is hereby incorporated by reference.

4.2

Form of AptarGroup, Inc. 6.04% Series 2006‑A Senior Notes Due July 31, 2016, filed as Exhibit 4.3 to the Company’s quarterly report on Form 10‑Q for the quarter ended June 30, 2006 (File No. 1‑11846), is hereby incorporated by reference.

4.3

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 Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended June 30, 2008, (File No. 1‑11846), is hereby incorporated by reference.

4.44.2

Form of AptarGroup, Inc. 6.03% Series 2008‑A‑2 Senior Notes Due July 31, 2018, filed as Exhibit 4.3 to the Company’s quarterly report on Form 10‑Q for the quarter ended June 30, 2008 (File No. 1‑11846), is hereby incorporated by reference.

4.5

First Amendment to 2006 Note Purchase Agreement, dated as of November 30, 2010, among the Company and each of the institutions listed as signatories thereto, filed as Exhibit 4.1 to the Company’s current report on Form 8‑K filed on December 1, 2010 (File No. 1‑11846), is hereby incorporated by reference.

4.6

First Amendment to 2008 Note Purchase Agreement, dated as of November 30, 2010, among the Company and each of the institutions listed as signatories thereto, filed as Exhibit 4.2 to the Company’s current report on Form 8‑K8-K filed on December 1, 2010, (File No. 1‑11846), is hereby incorporated by reference.

4.74.3

Supplemental Note Purchase Agreement, dated as of November 30, 2010, among the Company and each of the purchasers listed in Exhibit A thereto, filed as Exhibit 4.3 to the Company’s current report on Form 8‑K8-K filed on December 1, 2010, (File No. 1‑11846), is hereby incorporated by reference.

4.84.4

Form of AptarGroup, Inc. 2.33% Series 2008‑B‑1 Senior Notes due November 30, 2015, filed as Exhibit 4.4 to the Company’s current report on Form 8‑K filed on December 1, 2010 (File No. 1‑11846), is hereby incorporated by reference.

4.9

Form of AptarGroup, Inc. 3.78% Series 2008‑B‑22008-B-2 Senior Notes due November 30, 2020, filed as Exhibit 4.5 to the Company’s current report on Form 8‑K8-K filed on December 1, 2010, (File No. 1‑11846), is hereby incorporated by reference.

4.104.5

Second Supplemental Note Purchase Agreement, dated as of September 5, 2012, among the Company and each of the purchasers listed in Exhibit A thereto, filed as Exhibit 4.1 to the Company’s current report on Form 8‑K8-K filed on September 5, 2012, (File No. 1‑11846), is hereby incorporated by reference.

4.114.6

Form of AptarGroup, Inc. 3.25% Series 2008‑C‑12008-C-1 Senior Notes Due September 5, 2022, filed as Exhibit 4.2 to the Company’s current report on Form 8‑K8-K filed on September 5, 2012, (File No. 1‑11846), is hereby incorporated by reference.

4.124.7

Form of AptarGroup, Inc. 3.40% Series 2008‑C‑22008-C-2 Senior Notes Due September 5, 2024, filed as Exhibit 4.3 to the Company’s current report on Form 8‑K8-K filed on September 5, 2012, (File No. 1‑11846), is hereby incorporated by reference.

4.134.8

Note Purchase Agreement, dated as of December 16, 2014, among the Company and each of the purchasers listed in Schedule B thereto, filed as Exhibit 4.1 to the Company’s current report on Form 8‑K8-K filed on December 17, 2014, (File No. 1‑11846), is hereby incorporated by reference.

4.144.9

Form of AptarGroup, Inc. 3.49% Series 2014‑A‑12014-A-1 Senior Notes due December 16, 2023 (included as a part of Exhibit 4.13)4.8), filed as Exhibit 4.2 to the Company’s  current report on Form 8‑K8-K filed on December 17, 2014, (File No. 1‑11846), is hereby incorporated by reference.

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2017 Form 10-K


Exhibit
Number

Description

4.154.10

Form of AptarGroup, Inc. 3.49% Series 2014‑A‑22014-A-2 Senior Notes due February 26, 2024 (included as a part of Exhibit 4.13)4.8), filed as Exhibit 4.3 to the Company’s  current report on Form 8‑K8-K filed on December 17, 2014, (File No. 1‑11846), is hereby incorporated by reference.

4.164.11

Form of AptarGroup, Inc. 3.61% Series 2014‑A‑32014-A-3 Senior Notes due December 16, 2025 (included as a part of Exhibit 4.13)4.8), filed as Exhibit 4.4 to the Company’s  current report on Form 8‑K8-K filed on December 17, 2014, (File No. 1‑11846), is hereby incorporated by reference.

4.174.12

Form of AptarGroup, Inc. 3.61% Series 2014‑A‑42014-A-4 Senior Notes due February 26, 2026 (included as a part of Exhibit 4.13)4.8), filed as Exhibit 4.5 to the Company’s  current report on Form 8‑K8-K filed on December 17, 2014, (File No. 1‑11846), is hereby incorporated by reference.

4.184.13

Second Amendment to 2006 Note Purchase Agreement, dated as of December 16, 2014, among the Company and each of the noteholders listed on the signature pages thereto, filed as Exhibit 4.6 to the Company’s current report on Form 8‑K filed on December 17, 2014 (File No. 1‑11846), is hereby incorporated by reference.

4.19

Second Amendment to 2008 Note Purchase Agreement, dated as of December 16, 2014, among the Company and each of the noteholders listed on the signature pages thereto, filed as Exhibit 4.7 to the Company’s current report on Form 8‑K8-K filed on December 17, 2014, (File No. 1‑11846), is hereby incorporated by reference.

4.204.14

Note Purchase and Guaranty Agreement, dated as of July 19, 2017, among AptarGroup UK Holdings, Limited and each of the purchasers listed in Purchasers Schedule thereto, filed as Exhibit 4.1 to the Company’s current report on Form 8-K filed on July 25, 2017, (File No. 1‑11846), is hereby incorporated by reference.

4.214.15

Form of AptarGroup, Inc. 0.98% Series D Senior Notes due July 19, 2023 (included as a part of Exhibit 4.20)4.14), filed as Exhibit 4.2 to the Company’s  current report on Form 8-K filed on July 25, 2017, (File No. 1‑11846), is hereby incorporated by reference.

4.2282/ATR

2019 Form 10-K

Exhibit
Number

Description

4.16

Form of AptarGroup, Inc. 1.17% Series E Senior Notes due July 19, 2024 (included as a part of Exhibit 4.20)4.14), filed as Exhibit 4.3 to the Company’s current report on Form 8-K filed on July 25, 2017, (File No. 1‑11846), is hereby incorporated by reference.

4.234.17

Third Amendment to the 2008 Note Purchase Agreement, dated as of July 19, 2017, among the Company and each of the noteholders listed on the signature pages thereto, filed as Exhibit 4.4 to the Company’s  current report on Form 8-K filed on July 25, 2017, (File No. 1‑11846), is hereby incorporated by reference.

4.244.18

First Amendment to 2014 Note Purchase Agreement, dated as of July 19, 2017, among the Company and each of the noteholders listed on the signature pages thereto, filed as Exhibit 4.5 to the Company’s  current report on Form 8-K filed on July 25, 2017, (File No. 1‑11846), is hereby incorporated by reference.

10.14.19*

Description of the Company’s Securities

10.1

AptarGroup, Inc. 2000 Stock Awards Plan, filed as Appendix A to the Company’s  Proxy Statement, dated April 6, 2000, (File No. 1‑11846), is hereby incorporated by reference.**

10.2

AptarGroup, Inc. 2004 Stock Awards Plan, filed as Appendix A to the Company’s  Proxy Statement, dated March 26, 2004, (File No. 1‑11846), is hereby incorporated by reference.**

10.3

AptarGroup, Inc. 2004 Director Stock Option Plan, filed as Appendix B to the Company’s  Proxy Statement, dated March 26, 2004, (File No. 1‑11846), is hereby incorporated by reference.**

10.4

AptarGroup, Inc., Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2004 Stock Awards Plan, filed as Exhibit 10.1 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended September 30, 2004, (File No. 1‑11846), is hereby incorporated by reference.**

10.5

AptarGroup, Inc. Stock Option Agreement for Non‑EmployeeNon-Employee Directors pursuant to the AptarGroup, Inc. 2004 Director Option Plan, filed as Exhibit 10.2 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended September 30, 2004, (File No. 1‑11846), is hereby incorporated by reference.**

10.6

AptarGroup, Inc. Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2000 Stock Awards Plan, filed as Exhibit 10.3 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended September 30, 2004, (File No. 1‑11846), is hereby incorporated by reference.**

10.7

AptarGroup, Inc. Restricted Stock Award Agreement pursuant to the AptarGroup, Inc. 2000 Stock Awards Plan, filed as Exhibit 10.4 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended September 30, 2004, (File No. 1‑11846), is hereby incorporated by reference.**

10.8

Form of AptarGroup, Inc. Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2014 Stock Awards Plan, filed as Exhibit 10.2 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended June 30, 2014, (File No. 1‑11846), is hereby incorporated by reference.**

10.9

Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement pursuant to the AptarGroup, Inc. 2014 Stock Awards Plan, filed as Exhibit 10.3 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended June 30, 2014, (File No. 1‑11846), is hereby incorporated by reference.**

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2017 Form 10-K


Exhibit
Number

Description

10.10

Supplementary Pension Plan—France dated August 24, 2001, filed as Exhibit 10.2 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended March 31, 2004, (File No. 1‑11846), is hereby incorporated by reference.**

10.11

AptarGroup, Inc. Supplemental Retirement Plan (amended and restated effective January 1, 2009), filed as Exhibit 10.1 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended September 30, 2008, (File No. 1‑11846), is hereby incorporated by reference.**

10.12

Indemnification Agreement dated January 1, 1996 of King Harris, filed as Exhibit 10.25 to the Company’s quarterly report on Form 10‑Q for the quarter ended March 31, 2001 (File No. 1‑11846), is hereby incorporated by reference.**

10.13

Employment Agreement effective January 1, 2012 of Stephen J. Hagge, filed as Exhibit 10.1 to the Company’s quarterly report on Form 10‑Q for the quarter ended September 30, 2012 (File No. 1‑11846), is hereby incorporated by reference.**

10.14

Letter Agreement, dated November 21, 2016, between AptarGroup, Inc. and Stephen Hagge, filed as Exhibit 10.2 to the Company’s current report on Form 8‑K filed on November 22, 2016 (File No. 1‑11846), is hereby incorporated by reference.**

10.15

Employment Agreement, dated November 21, 2016, between AptarGroup, Inc. and Stephan B. Tanda, filed as Exhibit 10.1 to the Company’s  current report on Form 8‑K8-K filed on November 22, 2016, (File No. 1‑11846), is hereby incorporated by reference.**

10.1610.13

Employment Agreement effective January 1, 2012 of Robert W. Kuhn, filed as Exhibit 10.2 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended September 30, 2012, (File No. 1‑11846), is hereby incorporated by reference.**

10.1710.14

Employment Agreement effective January 1, 2012 of Patrick F. Doherty, filed as Exhibit 10.3 to the Company’s quarterly report on Form 10‑Q for the quarter ended September 30, 2012 (File No. 1‑11846), is hereby incorporated by reference.**

10.18

Employment Agreement effective January 1, 2012 of Eldon W. Schaffer, filed as Exhibit 10.4 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended September 30, 2012, (File No. 1‑11846), is hereby incorporated by reference.**

10.1910.15

Employment Agreement dated March 30, 2011 and as amended February 10, 2016 of Gael Touya, filed as Exhibit 10.17 to the Company’s  annual report on Form 10‑K10-K for the fiscal year ended December 31, 2015, (File No. 1‑11846), is hereby incorporated by reference.**

10.2010.16

Employment Agreement effective October 1, 2010 of Ursula Saint Léger, filed as Exhibit 10.21 to the Company’s annual report on Form 10‑K for the fiscal year ended December 31, 2010 (File No. 1‑11846), is hereby incorporated by reference. **

10.21

Employment Agreement effective August 1, 2014 of Salim Haffar, filed as Exhibit 10.4 to the Company’s quarterly report on Form 10‑Q for the quarter ended June 30, 2014 (File No. 1‑11846), is hereby incorporated by reference. **

10.22

AptarGroup, Inc. 2008 Stock Option Plan, filed as Exhibit 10.3 to the Company’s  current report on Form 8‑K8-K filed on May 1, 2008, (File No. 1‑11846), is hereby incorporated by reference.**

10.2310.17

AptarGroup, Inc. 2008 Director Stock Option Plan, filed as Exhibit 10.1 to the Company’s  current report on Form 8‑K8-K filed on May 1, 2008, (File No. 1‑11846), is hereby incorporated by reference.**

10.2410.18

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 Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended June 30, 2008, (File No. 1‑11846), is hereby incorporated by reference.**

10.2583/ATR

2019 Form 10-K

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Exhibit
Number

Description

10.2910.23

AptarGroup, Inc. 2011 Stock Awards Plan, filed as Exhibit 10.1 to the Company’s  current report on Form 8‑K8-K filed on May 10, 2011, (File No. 1‑11846), is hereby incorporated by reference.**

10.3010.24

AptarGroup, Inc. 2014 Stock Awards Plan, filed as Exhibit 10.1 to the Company’s  current report on Form 8‑K8-K filed on May 12, 2014, (File No. 1‑11846), is hereby incorporated by reference.**

10.3110.25

Amendment to Stock Option Award Agreements, filed as Exhibit 10.1 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended September 30, 2015, (File No. 1‑11846), is hereby incorporated by reference.**

10.3210.26

AptarGroup Performance Incentive Plan, filed as Exhibit 10.1 to the Company’s  current report on Form 8‑K8-K filed on May 13, 2013, (File No. 1‑11846), is hereby incorporated by reference.**

10.3310.27

AptarGroup, Inc. 2014 Long‑TermLong-Term Incentive Program (as Amended and Restated) under the AptarGroup, Inc. Performance Incentive Plan, filed as Exhibit 10.28 to the Company’s  annual report on Form 10‑K10-K for the fiscal year ended December 31, 2013, (File No. 1‑11846), is hereby incorporated by reference.**

10.3410.28

AptarGroup, Inc. 2014 Long‑TermLong-Term Incentive Program (as Amended and Restated) under the AptarGroup, Inc. Performance Incentive Plan filed as Exhibit 10.31 to the Company’s  annual report on Form 10‑K10-K for the fiscal year ended December 31, 2014, (File No. 1‑11846), is hereby incorporated by reference.**

10.3510.29

AptarGroup, Inc. 2015 Director Restricted Stock Unit Plan, filed as Exhibit 4(c) to the Company’s  Registration Statement on Form S-8, Registration Number 333-203905, filed on May 6, 2015, is hereby incorporated by reference.**

10.3610.30

Form of AptarGroup, Inc. 2015 Restricted Stock Unit Award Agreement for Directors pursuant to the AptarGroup, Inc. 2015 Director Restricted Stock Unit Plan, filed as Exhibit 10.2 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended June 30, 2015, (File No. 1‑11846), is hereby incorporated by reference.**

10.3710.31

AptarGroup, Inc. 2016 Equity Incentive Plan, filed as Exhibit 10.1 to the Company’s  current report on Form 8‑K8-K filed on May 9, 2016, (File No. 1‑11846), is hereby incorporated by reference.**

10.3810.32

Form of AptarGroup, Inc. Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2016 Equity Incentive Plan, filed as Exhibit 10.1 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended March 31, 2016, (File No. 1‑11846), is hereby incorporated by reference.**

10.3910.33

Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement pursuant to the AptarGroup, Inc. 2016 Equity Incentive Plan, filed as Exhibit 10.2 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended March 31, 2016, (File No. 1‑11846), is hereby incorporated by reference.**

10.4010.34

Form of AptarGroup, Inc. 2016 Restricted Stock Unit Award Agreement for Directors pursuant to the AptarGroup, Inc. 2016 Equity Incentive Plan, filed as Exhibit 10.3 to the Company’s  quarterly report on Form 10‑Q10-Q for the quarter ended March 31, 2016, (File No. 1‑11846), is hereby incorporated by reference.**

10.4110.35

Credit Agreement, dated as of July 20, 2017 among AptarGroup, Inc., AptarGroup UK Holdings, Limited and the financial institutions party thereto as Lenders, Wells Fargo Bank, National Association, as administrative agent, Bank of America, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A., as co-syndication agents, BNP Paribas as documentation agent, and Wells Fargo Securities, LLC, HSBC Bank USA, N.A., J.P. Morgan Chase Bank N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and joint bookrunners, filed as Exhibit 10.1 to the Company’s  current report on Form 8-K filed on July 25, 2017, (File No. 1‑11846), is hereby incorporated by reference.

10.4210.36

AptarGroup 2018 Performance Incentive Plan, filed as Exhibit 10.1 to the Company’s current report on Form 8-K filed on February 08,8, 2018, (File No. 1‑11846), is hereby incorporated by reference.**

10.43*10.37

AptarGroup, Inc. Restricted Stock Unit Award Agreement (Service-Based Vesting Form)., filed as Exhibit 10.43 to the Company’s  annual report on Form 10-K for the fiscal year ended December 31, 2017, is hereby incorporated by reference.**

10.44*84/ATR

2019 Form 10-K

Exhibit
Number

Description

10.38

AptarGroup, Inc. Restricted Stock Unit Award Agreement (Performance-Based Vesting Form)., filed as Exhibit 10.44 to the Company’s  annual report on Form 10-K for the fiscal year ended December 31, 2017, is hereby incorporated by reference.**

21*10.39

List of Subsidiaries.AptarGroup, Inc. 2018 Equity Incentive Plan, filed as Exhibit 10.1 to the Company’s  current report on Form 8-K filed on May 3, 2018 , is hereby incorporated by reference.**

23*10.40

2018 Equity Incentive Plan Restricted Stock Unit Award Agreement (Service-Based Vesting Form), filed as Exhibit 10.1 to the Company’s  quarterly report on Form 10-Q for the quarter ended June 30, 2018, is hereby incorporated by reference.**

10.41

2018 Equity Incentive Plan Restricted Stock Unit Award Agreement (Performance-Based Vesting Form), filed as Exhibit 10.2 to the Company’s  quarterly report on Form 10-Q for the quarter ended June 30, 2018, is hereby incorporated by reference.**

10.42

2018 Equity Incentive Plan Restricted Stock Unit Award Agreement for Directors, filed as Exhibit 10.3 to the Company’s  quarterly report on Form 10-Q for the quarter ended June 30, 2018, is hereby incorporated by reference.**

10.43

Form of AptarGroup, Inc. Retention Award Restricted Stock Unit Award Agreement (Service-Based Vesting Form) (French employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan, filed as Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, is hereby incorporated by reference.**

10.44

Form of AptarGroup, Inc. Retention Award Restricted Stock Unit Award Agreement (Service-Based Vesting Form) (Non-French employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan, filed as Exhibit 10.2 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, is hereby incorporated by reference.**

10.45

Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Service-Based Vesting Form) (French employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan, filed as Exhibit 10.3 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, is hereby incorporated by reference.**

10.46

Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Service-Based Vesting Form) (Non-French employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan, filed as Exhibit 10.4 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, is hereby incorporated by reference.**

10.47

Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Service-Based Vesting Form) (Chinese employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan, filed as Exhibit 10.5 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, is hereby incorporated by reference.**

10.48

Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Performance-Based Vesting Form) (French employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan, filed as Exhibit 10.6 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, is hereby incorporated by reference.**

10.49

Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Performance-Based Vesting Form) (Non-French employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan, filed as Exhibit 10.7 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, is hereby incorporated by reference.**

10.50

AptarGroup, Inc. Employment Agreement of Xiangwei Gong as of May 30, 2018, filed as Exhibit 10.8 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, is hereby incorporated by reference.**

21*

List of Subsidiaries.

23*

Consent of Independent Registered Public Accounting Firm.

31.1*

Certification Pursuant to Section 302 of the Sarbanes‑OxleySarbanes-Oxley Act of 2002.

31.2*

Certification Pursuant to Section 302 of the Sarbanes‑OxleySarbanes-Oxley Act of 2002.

32.1*

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes‑OxleySarbanes-Oxley Act of 2002.

32.2*

Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes‑OxleySarbanes-Oxley Act of 2002.

76/85/ATR

20172019 Form 10-K


Exhibit
Number

Description

101*

Exhibit
Number

Description

101*

The following financial information from AptarGroup, Inc.’s annual report on Form 10‑K10-K for the fiscal year ended December 31, 2017,2019, filed with the SEC on February 26, 2018,24, 2020, formatted in Inline Extensible Business Reporting Language (XBRL): (1)(i) the consolidated statementsCover Page (ii) the Consolidated Statements of incomeIncome for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, (2)(iii) the consolidated statementsConsolidated Statements of comprehensive incomeComprehensive Income for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, (3)(iv) the consolidated balance sheetsConsolidated Balance Sheets as of December 31, 20172019 and 2016, (4)2018, (v) the consolidated statementsConsolidated Statements of cash flowsCash Flows for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, (5)(vi) the consolidated statementsConsolidated Statements of changesChanges in equityEquity for the years ended December 31, 2019, 2018 and 2017 2016 and 2015 and (6) notes(vii) Notes to the consolidated financial statements, tagged as blocks of text.


*Filed or furnished herewith.

**Management contract or compensatory plan or arrangement.

Consolidated Financial Statements.

77/ATR104*

2017Cover Page Interactive Data File (embedded within the Inline XBRL document).

*

Filed or furnished herewith.

**

Management contract or compensatory plan or arrangement.

Omitted schedules will be furnished supplementally to the SEC upon request.

86/ATR

2019 Form 10-K


SIGNATURES

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.

AptarGroup, Inc.

AptarGroup, Inc.

(Registrant)

(Registrant)

Date: February 24, 2020

By

/s/ Robert W. Kuhn

��

Date: February 26, 2018

By

/s/ Robert W. Kuhn

Robert W. KuhnExecutive Vice President,

Executive Vice President,

Chief Financial Officer and Secretary

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

Signature

Title

Date

/s/ George L. Fotiades

George L. Fotiades

/s/ King Harris

King Harris

Chairman of the Board and Director

February 26, 201824, 2020

/s/ Stephan B. Tanda

Stephan B. Tanda

President and Chief Executive Officer and

Director (Principal Executive Officer)

February 26, 201824, 2020

/s/ Robert W. Kuhn

Robert W. Kuhn

Executive Vice President,

Chief Financial Officer and Secretary

(Principal Accounting and Financial Officer)

February 26, 201824, 2020

/s/ Alain Chevassus

Alain Chevassus

Director

February 26, 2018

/s/ George L. Fotiades

George L. Fotiades

Director

February 26, 2018

/s/ Maritza Gomez Montiel

Maritza Gomez Montiel

Director

February 26, 201824, 2020

/s/ Giovanna Kampouri-Monnas

Giovanna Kampouri-Monnas

Director

February 24, 2020

/s/ Stephen J. HaggeAndreas Kramvis

Stephen J. HaggeAndreas Kramvis

Director

February 26, 201824, 2020

/s/ B. Craig Owens

B. Craig Owens

Director

February 24, 2020

/s/ Giovanna Kampouri-MonnasIsabel Marey-Semper

Giovanna Kampouri-MonnasIsabel Marey-Semper

Director

February 26, 201824, 2020

/s/ Andreas Kramvis

Andreas Kramvis

Director

February 26, 2018

/s/ Craig Owens

Craig Owens

Director

February 26, 2018

/s/ Dr. Joanne C. Smith

Dr. Joanne C. Smith

Director

February 26, 201824, 2020

/s/ Jesse Wu

Jesse Wu

Director

February 24, 2020

/s/ Jesse Wu

Jesse Wu

Director

February 26, 2018

/s/ Ralf Wunderlich

Ralf Wunderlich

Director

February 24, 2020

/s/ Ralf Wunderlich

Ralf Wunderlich87/ATR

Director

February 26, 20182019 Form 10-K

78/ATR

2017 Form 10-K


AptarGroup, Inc.

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTSACCOUNTS

For the years ended December 31, 2017, 20162019, 2018 and 20152017

Dollars in thousands

 

 

    

Balance at

    

Charged to

    

Charged

  

Deductions

    

Balance

 

Beginning

Costs and

to Other

from

at End of

 

Of Period

Expenses

Accounts

Reserve (a)

Period

 

2019

Allowance for doubtful accounts

$

3,541

$

782

$

$

(697)

$

3,626

Deferred tax valuation allowance

 

11,189

 

12,058

 

1,508

 

(1,435)

 

23,320

2018

Allowance for doubtful accounts

$

3,161

$

923

$

$

(543)

$

3,541

Deferred tax valuation allowance

 

5,414

 

4,230

 

2,604

 

(1,059)

 

11,189

2017

Allowance for doubtful accounts

$

2,989

$

235

$

$

(63)

$

3,161

Deferred tax valuation allowance

 

4,070

 

3,640

 

 

(2,296)

 

5,414

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance at

    

Charged to

    

Deductions

    

Balance

 

 

 

Beginning

 

Costs and

 

from

 

at End of

 

 

 

Of Period

 

Expenses

 

Reserve (a)

 

Period

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

2,989

 

$

235

 

$

(63)

 

$

3,161

 

Deferred tax valuation allowance

 

 

4,070

 

 

3,640

 

 

(2,296)

 

 

5,414

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

2,710

 

$

561

 

$

(282)

 

$

2,989

 

Deferred tax valuation allowance

 

 

6,125

 

 

535

 

 

(2,590)

 

 

4,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

4,251

 

$

(813)

 

$

(728)

 

$

2,710

 

Deferred tax valuation allowance

 

 

7,734

 

 

564

 

 

(2,173)

 

 

6,125

 


(a)

(a)

Write-off accounts considered uncollectible, net of recoveries and foreign currency impact adjustments.

79/88/ATR

20172019 Form 10-K