UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2019~~MARCH 31, 2020

☐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 1-11846

AptarGroup, Inc.


DELAWARE		36-3853103
(State of Incorporation)		(I.R.S. Employer Identification No.)

265 EXCHANGE DRIVE, SUITE 100, CRYSTAL LAKE, ILLINOIS 60014

815-477-0424

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

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 þ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

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


Large accelerated filer þ	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth 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-2 of the Exchange Act). Yes ◻ No þ

The number of shares outstanding of common stock, as of ~~October 25, 2019,~~April 24, 2020, was ~~63,927,079~~64,186,756 shares.

Table of Contents

AptarGroup, Inc.

Form 10-Q

Quarter Ended ~~September 30, 2019~~March 31, 2020

INDEX


Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	1

	Condensed Consolidated Statements of Comprehensive Income – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	2

	Condensed Consolidated Balance Sheets – ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019	3

	Condensed Consolidated Statements of Changes in Equity – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	5

	Condensed Consolidated Statements of Cash Flows - ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2926

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4438

Item 4.	Controls and Procedures	4438

Part II.	OTHER INFORMATION

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4540

Item 6.	Exhibits	4641

	Signature	4742

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


In thousands, except per share amounts	In thousands, except per share amounts									In thousands, except per share amounts

		Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
Three Months Ended March 31,											2020		2019

Net Sales		$	701,278	$	665,775	$	2,188,399	$	2,079,733		$	721,553	$	744,460
Operating Expenses:
Cost of sales (exclusive of depreciation and amortization shown below)			444,237		435,379		1,382,810		1,355,445			451,256		469,132
Selling, research & development and administrative			111,559		103,574		346,526		323,146			126,192		121,215
Depreciation and amortization			49,218		41,857		144,574		123,133			50,806		47,489
Restructuring initiatives			6,019		23,852		17,286		48,002			4,839		9,530
			611,033		604,662		1,891,196		1,849,726			633,093		647,366
Operating Income			90,245		61,113		297,203		230,007			88,460		97,094

Other (Expense) Income:
Interest expense			(8,898)		(8,735)		(26,868)		(24,754)			(8,388)		(9,214)
Interest income			957		1,537		3,738		6,306			175		1,748
Equity in results of affiliates			238		(45)		152		(130)			(799)		(95)
Miscellaneous, net			(269)		(2,928)		148		(4,372)			(1,412)		466
			(7,972)		(10,171)		(22,830)		(22,950)			(10,424)		(7,095)

Income before Income Taxes			82,273		50,942		274,373		207,057			78,036		89,999

Provision for Income Taxes			25,504		11,920		80,684		52,966			22,786		27,000

Net Income		$	56,769	$	39,022	$	193,689	$	154,091		$	55,250	$	62,999

Net Income Attributable to Noncontrolling Interests		$	(19)	$	(26)	$	(20)	$	(20)
Net Loss Attributable to Noncontrolling Interests											$	3	$	5

Net Income Attributable to AptarGroup, Inc.		$	56,750	$	38,996	$	193,669	$	154,071		$	55,253	$	63,004

Net Income Attributable to AptarGroup, Inc. per Common Share:
Basic		$	0.89	$	0.63	$	3.05	$	2.47		$	0.86	$	1.00
Diluted		$	0.85	$	0.60	$	2.93	$	2.38		$	0.84	$	0.96

Average Number of Shares Outstanding:
Basic			64,010		62,378		63,485		62,304			64,009		62,964
Diluted			66,702		65,129		66,163		64,822			66,111		65,349

Dividends per Common Share		$	0.36	$	0.34	$	1.06	$	0.98		$	0.36	$	0.34

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


In thousands

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Three Months Ended March 31,									2020		2019

Net Income	$	56,769	$	39,022	$	193,689	$	154,091	$	55,250	$	62,999
Other Comprehensive Income:
Other Comprehensive (Loss) Income:
Foreign currency translation adjustments		(42,540)		(9,869)		(42,737)		(53,157)		(42,229)		(9,611)
Changes in treasury locks, net of tax		—		3		—		17
Changes in derivative gains (losses), net of tax		279		(1,166)		(593)		1,046		1,483		(393)
Defined benefit pension plan, net of tax
Amortization of prior service cost included in net income, net of tax		82		90		249		278		71		84
Amortization of net loss included in net income, net of tax		631		1,243		1,901		3,754		1,565		637
Total defined benefit pension plan, net of tax		713		1,333		2,150		4,032		1,636		721
Total other comprehensive loss		(41,548)		(9,699)		(41,180)		(48,062)		(39,110)		(9,283)
Comprehensive Income		15,221		29,323		152,509		106,029		16,140		53,716
Comprehensive Income Attributable to Noncontrolling Interests		(7)		(15)		(8)		(4)
Comprehensive Loss (Income) Attributable to Noncontrolling Interests										3		(3)
Comprehensive Income Attributable to AptarGroup, Inc.	$	15,214	$	29,308	$	152,501	$	106,025	$	16,143	$	53,713

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In thousands

		September 30,		December 31,		March 31,		December 31,
		2019		2018		2020		2019
Assets
Current Assets:
Cash and equivalents	$	270,577	$	261,823	$	410,840	$	241,970
Accounts and notes receivable, less allowance for doubtful accounts of $3,775 in 2019 and $3,541 in 2018		552,289		569,630
Accounts and notes receivable, less current expected credit loss ("CECL") of $5,657 in 2020 and $3,626 in 2019						602,027		558,428
Inventories		383,491		381,110		371,859		375,795
Prepaid and other		118,371		118,245		129,926		115,048
		1,324,728		1,330,808		1,514,652		1,291,241
Property, Plant and Equipment:
Buildings and improvements		479,233		453,572		502,706		504,328
Machinery and equipment		2,432,515		2,368,332		2,506,084		2,521,737
		2,911,748		2,821,904		3,008,790		3,026,065
Less: Accumulated depreciation		(1,893,520)		(1,855,810)		(1,961,683)		(1,963,520)
		1,018,228		966,094		1,047,107		1,062,545
Land		24,511		25,519		24,312		25,133
		1,042,739		991,613		1,071,419		1,087,678
Other Assets:
Investments in equity securities		8,264		25,448		39,167		8,396
Goodwill		722,070		712,095		756,081		763,461
Intangible assets		259,712		254,904		284,121		291,084
Operating lease right-of-use assets		72,481		—		65,925		72,377
Miscellaneous		35,145		62,867		45,187		47,882
		1,097,672		1,055,314		1,190,481		1,183,200
Total Assets	$	3,465,139	$	3,377,735	$	3,776,552	$	3,562,119

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In thousands, except share and per share amounts

		September 30,		December 31,		March 31,		December 31,
		2019		2018		2020		2019
Liabilities and Stockholders’ Equity
Current Liabilities:
Notes payable, including revolving credit facilities	$	46,276	$	101,293
Notes payable, revolving credit facility and overdrafts					$	220,511	$	44,259
Current maturities of long-term obligations, net of unamortized debt issuance costs		64,941		62,678		65,049		65,988
Accounts payable and accrued liabilities		537,620		525,199
Accounts payable, accrued and other liabilities						605,738		573,028
		648,837		689,170		891,298		683,275
Long-Term Obligations, net of unamortized debt issuance costs		1,075,153		1,125,993		1,075,745		1,085,453
Deferred Liabilities and Other:
Deferred income taxes		36,072		53,917		39,795		41,388
Retirement and deferred compensation plans		67,546		62,319		104,140		101,225
Operating lease liabilities		55,278		—		49,004		55,276
Deferred and other non-current liabilities		28,274		23,465		28,947		23,250
Commitments and contingencies		—		—		—		—
		187,170		139,701		221,886		221,139
Stockholders’ Equity:
AptarGroup, Inc. stockholders’ equity
Common stock, $.01 par value, 199 million shares authorized, 68.5 and 67.3 million shares issued as of September 30, 2019 and December 31, 2018, respectively		685		673
Common stock, $.01 par value, 199 million shares authorized, 68.9 and 68.6 million shares issued as of March 31, 2020 and December 31, 2019, respectively						689		686
Capital in excess of par value		756,988		678,769		785,567		770,596
Retained earnings		1,498,300		1,371,826		1,554,665		1,523,820
Accumulated other comprehensive loss		(351,672)		(310,504)		(381,058)		(341,948)
Less: Treasury stock at cost, 4.6 and 4.4 million shares as of September 30, 2019 and December 31, 2018, respectively		(350,645)		(318,208)
Less: Treasury stock at cost, 4.7 and 4.8 million shares as of March 31, 2020 and December 31, 2019, respectively						(372,573)		(381,238)
Total AptarGroup, Inc. Stockholders’ Equity		1,553,656		1,422,556		1,587,290		1,571,916
Noncontrolling interests in subsidiaries		323		315		333		336
Total Stockholders’ Equity		1,553,979		1,422,871		1,587,623		1,572,252
Total Liabilities and Stockholders’ Equity	$	3,465,139	$	3,377,735	$	3,776,552	$	3,562,119

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

In thousands

Three Months Ended

AptarGroup, Inc. Stockholders’ Equity

September 30, 2019 and 2018



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 - June 30, 2018

$
1,328,034

$
(291,660)

$
668

$
(336,278)

$
646,449

$
299

$
1,347,512

Net income

38,996

—

—

—

—

26

39,022

Foreign currency translation adjustments

—

(9,858)

—

—

—

(11)

(9,869)

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

—

1,333

—

—

—

—

1,333

Changes in treasury locks, net of tax

—

3

—

—

—

—

3

Changes in derivative gains (losses), net of tax

—

(1,166)

—

—

—

—

(1,166)

Stock awards and option exercises

—

—

4

12,137

24,261

—

36,402

Cash dividends declared on common stock

(21,179)

—

—

—

—

—

(21,179)

Balance - September 30, 2018

$
1,345,851

$
(301,348)

$
672

$
(324,141)

$
670,710

$
314

$
1,392,058

Balance - June 30, 2019

$
1,464,607

$
(310,136)

$
683

$
(317,380)

$
743,332

$
316

$
1,581,422

Net income

56,750

—

—

—

—

19

56,769

Foreign currency translation adjustments

—

(42,528)

—

—

—

(12)

(42,540)

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

—

713

—

—

—

—

713

Changes in derivative gains (losses), net of tax

—

279

—

—

—

—

279

Stock awards and option exercises

—

—

2

2,512

13,656

—

16,170

Cash dividends declared on common stock

(23,057)

—

—

—

—

—

(23,057)

Treasury stock purchased

—

—

—

(35,777)

—

—

(35,777)

Balance - September 30, 2019

$
1,498,300

$
(351,672)

$
685

$
(350,645)

$
756,988

$
323

$
1,553,979


In thousands

Nine Months Ended	AptarGroup, Inc. Stockholders’ Equity
September 30, 2019 and 2018			Accumulated
			Other		Common				Capital in		Non-				AptarGroup, Inc. Stockholders’ Equity
	Retained		Comprehensive		Stock		Treasury		Excess of		Controlling		Total				Accumulated
	Earnings		(Loss) Income		Par Value		Stock		Par Value		Interest		Equity				Other		Common				Capital in		Non-
Balance - December 31, 2017	$	1,301,147	$	(253,302)	$	667	$	(346,245)	$	609,471	$	310	$	1,312,048
Net income		154,071		—		—		—		—		20		154,091
Adoption of revenue recognition standard		2,937		—		—		—		—		—		2,937
Foreign currency translation adjustments		—		(53,141)		—		—		—		(16)		(53,157)
Changes in unrecognized pension gains (losses) and related amortization, net of tax		—		4,032		—		—		—		—		4,032
Changes in treasury locks, net of tax		—		17		—		—		—		—		17
Changes in derivative gains (losses), net of tax		—		1,046		—		—		—		—		1,046
Stock awards and option exercises		—		—		11		26,009		67,705		—		93,725
Cash dividends declared on common stock		(60,989)		—		—		—		—		—		(60,989)
Treasury stock purchased		—		—		—		(3,905)		—		—		(3,905)
Common stock repurchased and retired		(51,315)		—		(6)		—		(6,466)		—		(57,787)
Balance - September 30, 2018	$	1,345,851	$	(301,348)	$	672	$	(324,141)	$	670,710	$	314	$	1,392,058
															Retained		Comprehensive		Stock		Treasury		Excess of		Controlling		Total
															Earnings		(Loss) Income		Par Value		Stock		Par Value		Interest		Equity
Balance - December 31, 2018	$	1,371,826	$	(310,504)	$	673	$	(318,208)	$	678,769	$	315	$	1,422,871	$	1,371,826	$	(310,504)	$	673	$	(318,208)	$	678,769	$	315	$	1,422,871
Net income		193,669		—		—		—		—		20		193,689
Net income (loss)																63,004		—		—		—		—		(5)		62,999
Foreign currency translation adjustments		—		(42,725)		—		—		—		(12)		(42,737)		—		(9,619)		—		—		—		8		(9,611)
Changes in unrecognized pension gains (losses) and related amortization, net of tax		—		2,150		—		—		—		—		2,150		—		721		—		—		—		—		721
Changes in derivative gains (losses), net of tax		—		(593)		—		—		—		—		(593)		—		(393)		—		—		—		—		(393)
Stock awards and option exercises		—		—		12		22,436		78,219		—		100,667		—		—		3		5,337		22,164		—		27,504
Cash dividends declared on common stock		(67,195)		—		—		—		—		—		(67,195)		(21,377)		—		—		—		—		—		(21,377)
Treasury stock purchased		—		—		—		(54,873)		—		—		(54,873)		—		—		—		(15,000)		—		—		(15,000)
Balance - September 30, 2019	$	1,498,300	$	(351,672)	$	685	$	(350,645)	$	756,988	$	323	$	1,553,979
Balance - March 31, 2019															$	1,413,453	$	(319,795)	$	676	$	(327,871)	$	700,933	$	318	$	1,467,714

Balance - December 31, 2019															$	1,523,820	$	(341,948)	$	686	$	(381,238)	$	770,596	$	336	$	1,572,252
Net income (loss)																55,253		—		—		—		—		(3)		55,250
Adoption of CECL standard																(1,377)		—		—		—		—		—		(1,377)
Foreign currency translation adjustments																—		(42,229)		—		—		—		—		(42,229)
Changes in unrecognized pension gains (losses) and related amortization, net of tax																—		1,636		—		—		—		—		1,636
Changes in derivative gains (losses), net of tax																—		1,483		—		—		—		—		1,483
Stock awards and option exercises																—		—		3		8,665		14,971		—		23,639
Cash dividends declared on common stock																(23,031)		—		—		—		—		—		(23,031)
Balance - March 31, 2020															$	1,554,665	$	(381,058)	$	689	$	(372,573)	$	785,567	$	333	$	1,587,623

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


In thousands, brackets denote cash outflows

Nine Months Ended September 30,		2019		2018
Three Months Ended March 31,						2020		2019

Cash Flows from Operating Activities:
Net income	$	193,689	$	154,091	$	55,250	$	62,999
Adjustments to reconcile net income to net cash provided by operations:
Depreciation		124,787		113,555		42,792		41,487
Amortization		19,787		9,578		8,014		6,002
Stock-based compensation		18,075		14,829		9,141		6,565
Provision for doubtful accounts		930		190
Loss (gain) on disposition of fixed assets		303		(979)
Provision for CECL						1,251		497
Loss on disposition of fixed assets						54		310
Deferred income taxes		5,948		(5,414)		6		671
Defined benefit plan expense		11,517		14,466		5,775		3,858
Equity in results of affiliates		(152)		130		799		95
Changes in balance sheet items, excluding effects from foreign currency adjustments:
Accounts and other receivables		724		(72,620)		(64,764)		(35,301)
Inventories		(16,025)		(41,183)		(8,615)		(13,097)
Prepaid and other current assets		(1,721)		(807)		(11,787)		(2,282)
Accounts payable and accrued liabilities		15,047		55,921
Accounts payable, accrued and other liabilities						45,458		6,865
Income taxes payable		6,729		(7,481)		(5,278)		3,511
Retirement and deferred compensation plan liabilities		(935)		(21,534)		(1,312)		(5,940)
Other changes, net		1,678		(3,157)		8,249		1,396
Net Cash Provided by Operations		380,381		209,585		85,033		77,636
Cash Flows from Investing Activities:
Capital expenditures		(186,841)		(145,321)		(61,625)		(51,742)
Proceeds from sale of property, plant and equipment		3,658		4,056		166		178
Insurance proceeds		—		10,631
Acquisition of business, net of cash acquired		(49,062)		(527,916)
Acquisition of business, release of escrow						(1,463)		(4,036)
Acquisition of intangible assets, net		(4,621)		(346)		(3,955)		(221)
Investment in equity securities		(3,530)		(10,000)		(20,423)		—
Proceeds from sale of investment in equity securities		16,487		—		—		16,487
Notes receivable, net		(89)		216		(785)		231
Net Cash Used by Investing Activities		(223,998)		(668,680)		(88,085)		(39,103)
Cash Flows from Financing Activities:
Proceeds from notes payable		36,893		18,003
Repayments of notes payable		(41,145)		(6,395)
Proceeds and repayments of short term credit facility, net		(47,253)		139,384
Proceeds from notes payable and overdrafts						8,148		16,783
Repayments of notes payable and overdrafts						(2,030)		(21,130)
Proceeds and repayments of short term revolving credit facility, net						175,000		(78,222)
Proceeds from long-term obligations		10,524		10,092		—		10,446
Repayments of long-term obligations		(64,924)		(67,026)		(2,386)		(3,227)
Dividends paid		(67,195)		(60,989)		(23,031)		(21,377)
Proceeds from stock option exercises		81,815		78,896		18,602		20,939
Purchase of treasury stock		(54,873)		(3,905)		—		(15,000)
Common stock repurchased and retired		—		(57,787)
Net Cash (Used) Provided by Financing Activities		(146,158)		50,273
Net Cash Provided (Used) by Financing Activities						174,303		(90,788)
Effect of Exchange Rate Changes on Cash		(6,471)		(7,436)		(3,381)		2,809
Net Increase (Decrease) in Cash and Equivalents and Restricted Cash		3,754		(416,258)		167,870		(49,446)
Cash and Equivalents and Restricted Cash at Beginning of Period		266,823		712,640		246,973		266,823
Cash and Equivalents and Restricted Cash at End of Period	$	270,577	$	296,382	$	414,843	$	217,377

Restricted cash included in the line item prepaid and other on the Condensed Consolidated Balance Sheets as shown below represents amounts held in escrow related to the ~~CSP Technologies~~Noble Acquisition (as defined herein).


Nine Months Ended September 30,		2019		2018
Three Months Ended March 31,						2020		2019

Cash and equivalents	$	270,577	$	291,382	$	410,840	$	217,377
Restricted cash included in prepaid and other		—		5,000		4,003		—
Total Cash and Equivalents and Restricted Cash shown in the Statement of Cash Flows	$	270,577	$	296,382	$	414,843	$	217,377

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

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AptarGroup, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of AptarGroup, Inc. and our subsidiaries. The terms “AptarGroup”, “Aptar”, “Company”, “we”, “us” or “our” as used herein refer to AptarGroup, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated.

In the opinion of management, the unaudited Condensed Consolidated Financial Statements (the “Condensed Consolidated Financial Statements”) include all normal recurring adjustments necessary for a fair statement of consolidated financial position, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented. The accompanying Condensed Consolidated Financial Statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to make the information presented not misleading. Also, certain financial position data included herein was derived from the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 but does not include all disclosures required by U.S. GAAP. Accordingly, these Condensed Consolidated Financial Statements and related notes should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. The results of operations of any interim period are not necessarily indicative of the results that may be expected for the year.

~~During~~There are many uncertainties regarding the current COVID-19 pandemic, including the scope of scientific and health issues, the anticipated duration of the pandemic and the extent of local and worldwide social, political and economic disruption it may cause. The pandemic has impacted our business, operations and financial results during the quarter 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 functional currency from the Argentinian pesoMarch 31, 2020 including an overall reduction to ~~the U.S. dollar. Local currency monetary assets and liabilities have been remeasured into U.S. dollars using exchange rates~~net sales. NaN impairments were recorded as of March 31, 2020. While the ~~latest balance sheet date, with remeasurement adjustments~~disruption is currently expected to be temporary, there is uncertainty around the duration. Due to significant uncertainty surrounding the situation, our judgment regarding future results could change and other transaction gains and losses recognized in net earnings. Our Argentinian operations contributed less than 2% of consolidated net assets and revenues at and for the nine months ended September 30, 2019 and 2018.therefore our results could be materially impacted.

ADOPTION OF RECENT ACCOUNTING STANDARDS

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

Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, issued by the FASB in June 2016, as well as the clarifying amendments subsequently issued. We applied the guidance using a modified retrospective approach and accordingly recognized an amount of $1.4 million as the cumulative adjustment to opening retained earnings in the first quarter of 2020. This is based on management's best estimates of specific losses on individual exposures particularly on current trade receivables, as well as the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. On an ongoing basis, we will contemplate forward-looking economic conditions in recording lifetime expected credit losses for our financial assets measured at cost, such as our trade receivables and certain other assets.

In ~~February 2016,~~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 new standard related to leases to increase transparency and comparability among organizations. Most prominent among the changes in the standard is the recognition of right-of-use (“ROU”) assets and lease liabilities by lessees for those leases classified as operating leases, as our accounting for finance leases remained substantially unchanged. Under the new standard, disclosuresresult, impairment charges are required ~~to meet the objective of enabling users of financial statements to assess~~for the amount ~~timing, and uncertainty~~by which a reporting unit’s carrying amount exceeds its fair value up to the amount of ~~cash flows arising from leases.~~its allocated goodwill. We adopted the standard on January 1, ~~2019 using~~2020 and did not record any impairment charges.

In August 2018, the FASB issued ASU 2018-15 to help entities evaluate the accounting for fees paid by a ~~modified retrospective transition,~~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 contract with the ~~effective date method. Under this method, financial results reported~~requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments require an entity (customer) in ~~periods prior~~a hosting arrangement that is a service contract to ~~2019 are not recast. We elected~~follow the ~~package~~guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments also require the entity (customer) to expense the capitalized implementation costs of ~~practical expedients permitted under~~a hosting arrangement that is a service contract over the transition 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 financial information on adoption. The impact of adoptionterm of the hosting arrangement, which includes reasonably certain renewals. We adopted the standard ~~to previously reported results is shown below.~~

on January 1, 2020 and no material impacts were noted.

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 and accrued 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

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In ~~February~~August 2018, the FASB issued ASU ~~2018-02,~~2018-13, which ~~provides guidance on~~amends disclosure requirements for fair value measurements. The new standard modifies disclosure requirements including removing requirements to disclose the ~~reclassification of certain tax effects from accumulated other comprehensive income. This guidance allows~~valuation process for Level 3 measurements and adding requirements to disclose the changes in unrealized gains and losses for the ~~reclassification from accumulated~~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 ~~retained earnings for stranded tax effects resulting from~~develop Level 3 measurements. We adopted the ~~Tax Cuts~~standard on January 1, 2020 and Jobs Act of 2017 (“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.no material impacts were noted.

Other accounting standards that have been issued by the FASB or other standards-setting bodies did not have a material impact on our Condensed Consolidated Financial Statements.

~~LEASES~~

We determine if an arrangement is a lease at inception. Operating lease assets are included in operating lease ROU assets and operating lease liabilities are included in accounts payable and accrued liabilities and operating lease liabilities 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.

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 considered for the purpose of lease classification, but is considered when measuring a lease liability.

~~GOODWILL~~

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.

Management believes goodwill, or the excess purchase price over the fair value of the net assets acquired in purchase transactions has continuing value. Goodwill is not amortized and must be tested annually, or more frequently as circumstances dictate, for impairment. During the third quarter of 2019, we performed a separate quantitative impairment assessment using the 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 amount (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.

~~RETIREMENT OF COMMON STOCK~~

During the first nine months of 2019, we repurchased 493 thousand shares of common stock, all of which were returned to treasury stock. During the first nine months of 2018, we repurchased 668 thousand shares of common stock, of which 623 thousand shares were immediately retired. Common stock was reduced by the number of shares retired at $0.01 par value per share. We allocate the excess purchase price over par value between additional paid-in capital and retained earnings.

~~Table of Contents~~

INCOME TAXES

We 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 pre-tax income for financial accounting purposes. To the extent that these differences create ~~temporary~~timing differences between the tax basis of an asset or liability and our reported amount in the financial statements, an appropriate provision for deferred income taxes is made.

All of our non-U.S. earnings are subject to U.S. taxation, either from the transition tax enacted in the U.S. by the TCJA on accumulated non-U.S. earnings as of the end of 2017 or the global intangible low-taxed income (“GILTI”) provisions on non-U.S. earnings thereafter. We maintain our assertion that the cash and distributable reserves at our non-U.S. affiliates are indefinitely reinvested. Under current U.S. tax laws, all of our non-U.S. earnings are subject to U.S. taxation. We will provide for the necessary withholding and local income taxes when management decides that an affiliate should make a distribution. These decisions are made taking into consideration the financial requirements of the non-U.S. affiliates and the global cash management goals of the Company.

We provide a liability for the amount of unrecognized tax benefits from uncertain tax positions. This liability is provided whenever we determine that a tax benefit will not meet a more-likely-than-not threshold for recognition. ~~See Note 5 - Income Taxes~~

The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions. The Company believes that an adequate provision has been made for ~~more information.~~any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner inconsistent with its expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. The resolution of each of these audits is not expected to be material to our Condensed Consolidated Financial Statements.

NOTE 2 – REVENUE

At contract inception, we assess the goods and services promised in our contracts with customers and 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 performance obligations, we consider all the goods or services promised in the contract, 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 each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when (or as) the performance obligations are satisfied (i.e., when the customer obtains control of the good or service). The majority of our revenues are derived from product and tooling sales; however, we also receive revenues from service, license, exclusivity and royalty arrangements, which collectively are not material to the ~~quarterly and~~ year-to-date results. Revenue by segment and geography for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:

For the Three Months Ended September 30, 2019

Latin

Segment

Europe

Domestic

America

Asia

Total

Beauty + Home

$
188,542

$
75,931

$
40,261

$
23,448

$
328,182

Pharma

174,252

78,259

6,366

10,374

269,251

Food + Beverage

28,718

57,307

8,058

9,762

103,845

Total

$
391,512

$
211,497

$
54,685

$
43,584

$
701,278

For the Three Months Ended September 30, 2018

Latin

Segment

Europe

Domestic

America

Asia

Total

Beauty + Home

$
190,267

$
83,353

$
44,653

$
23,487

$
341,760

Pharma

161,733

50,126

6,165

9,491

227,515

Food + Beverage

29,472

47,870

7,476

11,682

96,500

Total

$
381,472

$
181,349

$
58,294

$
44,660

$
665,775


	For the Nine Months Ended September 30, 2019										For the Three Months Ended March 31, 2020
					Latin										Latin
Segment	Europe		Domestic		America		Asia		Total		Europe		Domestic		America		Asia		Total
Beauty + Home	$	607,316	$	236,883	$	124,352	$	69,370	$	1,037,921	$	186,950	$	81,845	$	36,181	$	19,584	$	324,560
Pharma		549,080		226,073		21,100		27,638		823,891		190,130		90,965		6,579		9,522		297,196
Food + Beverage		92,015		177,587		25,153		31,832		326,587		28,769		57,590		8,034		5,404		99,797
Total	$	1,248,411	$	640,543	$	170,605	$	128,840	$	2,188,399	$	405,849	$	230,400	$	50,794	$	34,510	$	721,553


	For the Nine Months Ended September 30, 2018										For the Three Months Ended March 31, 2019
					Latin										Latin
Segment	Europe		Domestic		America		Asia		Total		Europe		Domestic		America		Asia		Total
Beauty + Home	$	622,184	$	252,709	$	140,238	$	73,338	$	1,088,469	$	216,233	$	86,979	$	42,642	$	21,805	$	367,659
Pharma		520,574		132,496		19,229		26,552		698,851		184,174		71,772		7,656		9,099		272,701
Food + Beverage		90,185		143,005		23,343		35,880		292,413		30,961		55,120		7,884		10,135		104,100
Total	$	1,232,943	$	528,210	$	182,810	$	135,770	$	2,079,733	$	431,368	$	213,871	$	58,182	$	41,039	$	744,460

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We perform our 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. We recognize a contract asset when we transfer 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. We recognize a contract liability if the customer's payment of consideration precedes the entity's performance.

The opening and closing balances of our contract asset and contract liabilities are as follows:


	Balance as of		Balance as of		Increase/		Balance as of		Balance as of		Increase/
	December 31, 2018		September 30, 2019		(Decrease)		December 31, 2019		March 31, 2020		(Decrease)
Contract asset (current)	$	15,858	$	19,044	$	3,186	$	16,245	$	13,457	$	(2,788)
Contract asset (long-term)	$	—	$	—	$	—	$	—	$	—	$	—
Contract liability (current)	$	68,134	$	59,500	$	(8,634)	$	79,305	$	78,974	$	(331)
Contract liability (long-term)	$	11,261	$	12,705	$	1,444	$	9,779	$	14,994	$	5,215

The differences in the opening and closing balances of our contract asset and contract liabilities are primarily the result of timing differences between our performance and the customer’s payment. The total amount of revenue recognized during the current year against contract liabilities is ~~$40.9~~$12.5 million, including ~~$22.6~~$10.6 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), we include an estimate of the expected amount of consideration as revenue. We apply the expected value method based on all of the information (historical, current, and forecast) that is reasonably available and identify 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 we will be entitled.

Product Sales

We primarily manufacture and sell dispensing, sealing and active packaging solutions. 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, we typically assess, 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 free on board (“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, our performance obligation is satisfied at the time of shipment. We have 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. We do not have any material significant payment terms as payment is typically received shortly after the point of sale.

There also exist instances where we manufacture highly customized products that have no alternative use to us and for which we have an enforceable right to payment for performance completed to date. For these products, we transfer control and recognize 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.

As a part of our customary business practice, we offer a standard warranty that the products 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 a product’s initial specifications, and are not required by law, there is no revenue deferral for these types of warranties.

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Tooling Sales

We also build, or contract to build molds and other tools (collectively defined as “tooling”) necessary to produce our products. As with product sales, we recognize revenue when control of the tool transfers to the customer. If the tooling is highly customized with no alternative use to us and we have 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. We do 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, we offer extended warranties on tools sold to our customers above and beyond the normal standard warranties. We normally receive payment at the inception of the contract and recognize revenue over the term of the contract. At December 31, ~~2018, $758~~2019, $515 thousand of unearned revenue associated with outstanding contracts was reported in Accounts Payable, Accrued and Other Liabilities. At ~~September 30, 2019,~~March 31, 2020, the unearned amount was ~~$504~~$432 thousand. We expect to recognize approximately ~~$49~~$172 thousand of the unearned amount during the remainder of ~~2019, $260~~2020, $123 thousand in ~~2020,~~2021, and ~~$195~~$137 thousand thereafter.

Credit Risk

We are exposed to credit losses primarily through our product sales, tooling sales and services to our customers. We assess each customer’s ability to pay for the products we sell by conducting a credit review. The credit review considers our expected billing exposure and timing for payment and the customer’s established credit rating or our assessment of the customer’s creditworthiness based on our analysis of their financial statements when a credit rating is not available. We also consider contract terms and conditions, country and political risks, and business strategy in our evaluation. A credit limit is established for each customer based on the outcome of this review.

We monitor our ongoing credit exposure through active review of customer balances against contract terms and due dates. Our activities include timely account reconciliation, dispute resolution and payment confirmation. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

At March 31, 2020, we reported $602 million of accounts receivable, net of CECL of $5.7 million. Changes in the allowance were not material for the three months ended March 31, 2020. Current uncertainty in credit and market conditions due to the COVID-19 pandemic may slow our collection efforts if customers experience significant difficulty accessing credit and paying their obligations, which may lead to higher than normal accounts receivable and increased CECL charges.

NOTE 3 - INVENTORIES

Inventories, by component, consisted of:


	September 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Raw materials	$	111,551	$	110,720	$	106,787	$	111,653
Work in process		129,753		131,091		120,151		123,750
Finished goods		142,187		139,299		144,921		140,392
Total	$	383,491	$	381,110	$	371,859	$	375,795

NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill by reporting segment since December 31, ~~2018~~2019 are as follows:


	Beauty +				Food +		Corporate				Beauty +				Food +		Corporate
	Home		Pharma		Beverage		& Other		Total		Home		Pharma		Beverage		& Other		Total
Goodwill	$	223,933	$	359,883	$	128,279	$	1,615	$	713,710	$	221,658	$	413,650	$	128,153	$	1,615	$	765,076
Accumulated impairment losses		—		—		—		(1,615)		(1,615)		—		—		—		(1,615)		(1,615)
Balance as of December 31, 2018	$	223,933	$	359,883	$	128,279	$	—	$	712,095
Balance as of December 31, 2019											$	221,658	$	413,650	$	128,153	$	—	$	763,461
Acquisition		—		28,138		—		—		28,138		—		463		—		—		463
Foreign currency exchange effects		(4,994)		(12,876)		(293)		—		(18,163)		(2,201)		(5,543)		(99)		—		(7,843)
Goodwill	$	218,939	$	375,145	$	127,986	$	1,615	$	723,685	$	219,457	$	408,570	$	128,054	$	1,615	$	757,696
Accumulated impairment losses		—		—		—		(1,615)		(1,615)		—		—		—		(1,615)		(1,615)
Balance as of September 30, 2019	$	218,939	$	375,145	$	127,986	$	—	$	722,070
Balance as of March 31, 2020											$	219,457	$	408,570	$	128,054	$	—	$	756,081

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 amount (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.

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The table below shows a summary of intangible assets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.


			September 30, 2019							December 31, 2018							March 31, 2020							December 31, 2019
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		3.0	$	5,972		(4,635)	$	1,337	$	5,427	$	(5,294)	$	133		7.9	$	3,001		(1,304)	$	1,697	$	2,804	$	(1,318)	$	1,486
Acquired technology		13.4		93,153		(22,856)		70,297		92,389		(18,304)		74,085		13.0		99,437		(27,143)		72,294		100,511		(25,430)		75,081
Customer relationships		13.9		187,994		(29,336)		158,658		179,597		(20,439)		159,158		13.7		216,198		(37,774)		178,424		217,934		(33,924)		184,010
Trademarks and trade names		7.2		33,026		(9,564)		23,462		21,243		(5,914)		15,329		6.9		34,131		(11,919)		22,212		35,015		(11,003)		24,012
License agreements and other		11.0		14,830		(8,872)		5,958		13,852		(7,653)		6,199		17.6		19,671		(10,177)		9,494		16,153		(9,658)		6,495
Total intangible assets		12.8	$	334,975	$	(75,263)	$	259,712	$	312,508	$	(57,604)	$	254,904		13.0	$	372,438	$	(88,317)	$	284,121	$	372,417	$	(81,333)	$	291,084

Aggregate amortization expense for the intangible assets above for the quarters ended ~~September 30,~~March 31, 2020 and 2019 was $8,014 and ~~2018 was $7,399 and $4,005, respectively. Aggregate amortization expense for the intangible assets above for the nine months ended September 30, 2019 and 2018 was $19,787 and $9,578,~~$6,002, respectively.

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


2019	$	7,683	(remaining estimated amortization for 2019)
2020		26,340		$	20,725	(remaining estimated amortization for 2020)
2021		25,484			27,154
2022		25,247			26,915
2023 and thereafter		174,958
2023					26,835
2024 and thereafter					182,492

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 ~~September 30, 2019.~~March 31, 2020.

NOTE 5 – INCOME TAXES

The tax provision for interim periods is determined using the estimated annual effective consolidated tax rate, based on the current estimate of full-year earnings and related estimated full year-taxes, adjusted for the ~~three months ended September 30, 2019~~impact of 31.0% reflects a $2.1 million charge from the increase in the tax rate in France, which is retroactive to the beginning of 2019, offset by a $2.0 million benefit from the excess tax benefits from employee stock-based compensation. discrete quarterly items.

The effective tax rate for the three months ended ~~September 30, 2018 of 23.4%~~March 31, 2020 and 2019, respectively, was ~~favorably impacted by net tax benefits of $5.0 million from discrete events. This included a $4.5 million benefit from~~29.2% and 30.0%. The decrease in the ~~excess tax benefits from employee stock-based compensation and a $1.9 million benefit related to U.S. tax reform legislation, offset by other discrete charges.~~

~~The~~ effective tax rate for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 was primarily due to a larger tax benefit from employee share-based compensation offset in part by a mix of other discrete items.

NOTE 6 – DEBT

Notes Payable, Revolving Credit Facility and Overdrafts

At March 31, 2020 and December 31, 2019, ~~of 29.4% was favorably impacted by net tax benefits of $4.3 million from discrete events. This~~our notes payable, revolving credit facility and overdrafts, consisted of ~~a favorable impact of $13.6 million from~~ the excess tax benefits from employee stock-based compensation offset by, among other items, a $7.0 million charge recognized to record a valuation allowance to properly reflect the realization of recorded deferred tax assets and the $2.1 million charge from the French tax rate increase. The effective tax rate for the nine months ended September 30, 2018 of 25.6% was favorably impacted by net tax benefits of $15.1 million from discrete items. This included a favorable impact of $9.9 million from the excess tax benefits from employee stock-based compensation and a $5.4 million benefit related to U.S. tax reform legislation.following:


	March 31,		December 31,
	2020		2019
Notes payable 8.10% due in 2020	$	2,664	$	1,436
Revolving credit facility 1.88% due in 2020		200,000		25,000
Overdrafts 5.68% - 7.82% due in 2020		17,847		17,823
	$	220,511	$	44,259

1211

Table of Contents

~~NOTE 6 – DEBT~~

We ~~hold U.S. dollar and euro-denominated debt to align our capital structure with our earnings base. At September 30, 2019, our long-term obligations consisted of the following:~~

Unamortized




Debt Issuance



Principal

Costs

Net

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

$
19,907

$
—

$
19,907

Senior unsecured notes 3.2%, due in 2022

75,000

70

74,930

Senior unsecured debts 3.8% USD floating swapped to 1.36% EUR fixed, equal annual installments through 2022

168,000

428

167,572

Senior unsecured notes 3.5%, due in 2023

125,000

153

124,847

Senior unsecured notes 1.0%, due in 2023

109,005

371

108,634

Senior unsecured notes 3.4%, due in 2024

50,000

66

49,934

Senior unsecured notes 3.5%, due in 2024

100,000

153

99,847

Senior unsecured notes 1.2%, due in 2024

218,010

782

217,228

Senior unsecured notes 3.6%, due in 2025

125,000

181

124,819

Senior unsecured notes 3.6%, due in 2026

125,000

181

124,819

Finance Lease Liabilities

27,557

—

27,557

$
1,142,479

$
2,385

$
1,140,094

Current maturities of long-term obligations

(64,941)

—

(64,941)

Total long-term obligations

$
1,077,538

$
2,385

$
1,075,153

~~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

Aggregate long-term maturities, excluding finance lease liabilities, due annually from the current balance sheet date for the next five years are $61,085, $61,515, $135,217, $112,121, $494,402 and $250,582 thereafter.

~~We also~~ maintain a multi-currency revolving credit facility with two tranches ~~providing~~that matures in July 2022 which provides 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-owned UK subsidiary. $200.0 million was utilized under our U.S. facility and 0 balance was utilized under our euro-based revolving credit facility as of March 31, 2020. $25.0 million was utilized under our U.S. facility and 0 balance was utilized on our euro-based revolving credit facility as of December 31, 2019.

There are 0 compensating balance requirements associated with 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 our consolidated leverage ratio. ~~The~~

Long-Term Obligations

At March 31, 2020, our long-term obligations consisted of the following:


			Unamortized
			Debt Issuance
	Principal		Costs		Net
Notes payable 0.00% – 10.90%, due in monthly and annual installments through 2028	$	15,551	$	—	$	15,551
Senior unsecured notes 3.2%, due in 2022		75,000		59		74,941
Senior unsecured debts 3.1% USD floating swapped to 1.36% EUR fixed, equal annual installments through 2022		168,000		352		167,648
Senior unsecured notes 3.5%, due in 2023		125,000		135		124,865
Senior unsecured notes 1.0%, due in 2023		110,315		341		109,974
Senior unsecured notes 3.4%, due in 2024		50,000		60		49,940
Senior unsecured notes 3.5%, due in 2024		100,000		135		99,865
Senior unsecured notes 1.2%, due in 2024		220,630		701		219,929
Senior unsecured notes 3.6%, due in 2025		125,000		157		124,843
Senior unsecured notes 3.6%, due in 2026		125,000		157		124,843
Finance Lease Liabilities		28,395		—		28,395
	$	1,142,891	$	2,097	$	1,140,794
Current maturities of long-term obligations		(65,049)		—		(65,049)
Total long-term obligations	$	1,077,842	$	2,097	$	1,075,745

At December 31, ~~2018 outstanding~~2019, our long-term obligations consisted of the following:


			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		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		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		63		49,937
Senior unsecured notes 3.5%, due in 2024		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		169		124,831
Senior unsecured notes 3.6%, due in 2026		125,000		169		124,831
Finance Lease Liabilities		29,952		—		29,952
	$	1,153,682	$	2,241	$	1,151,441
Current maturities of long-term obligations		(65,988)		—		(65,988)
Total long-term obligations	$	1,087,694	$	2,241	$	1,085,453

The aggregate long-term maturities, excluding finance lease liabilities, which are disclosed in Note 7, due annually from the current balance ~~of €69.0 million on~~sheet date for the ~~euro-based revolving credit facility was paid in the first quarter of 2019. €27.0 million was utilized as of September 30, 2019. Credit facility balances~~next five years are ~~included in notes payable, including revolving credit facilities on the Condensed Consolidated Balance Sheet.~~$61,181, $60,285, $134,343, $337,444, $270,846 and $250,397 thereafter.

1312

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 ~~September 30, 2019~~March 31, 2020
Consolidated Leverage Ratio (1)	Maximum of 3.50 to 1.00	~~1.68~~1.73 to 1.00
Consolidated Interest Coverage Ratio (1)	Minimum of 3.00 to 1.00	~~16.07~~16.32 to 1.00

(1)	Definitions of ratios are included as part of the revolving credit facility agreement and the note purchase agreements.

NOTE 7 – ~~LEASE COMMITMENTS~~LEASES

We lease certain warehouse, plant and office facilities as well as certain equipment under noncancelable operating and finance leases expiring at various dates through the year ~~2028.~~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 finance leases is included in depreciation expense while rent expense related to operating leases is included within cost of sales and selling research & development and administrative expenses (“SG&A”). Rent expense related to operating leases (including taxes, insurance and maintenance when included in the rent) amounted to $8.3 million and $24.2 million in the three and nine months ended September 30, 2018, respectively, under the old lease accounting standard.

The components of lease expense for the ~~current period~~three months ended March 31, 2020 and 2019 were as follows:


	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Three Months Ended March 31,					2020		2019
Operating lease cost	$	6,001	$	17,442	$	5,254	$	6,004

Finance lease cost:
Amortization of right-of-use assets	$	1,165	$	3,041	$	1,199	$	872
Interest on lease liabilities		344		984		348		315
Total finance lease cost	$	1,509	$	4,025	$	1,547	$	1,187

Short-term lease and variable lease costs	$	1,757	$	6,027	$	2,448	$	1,942

Supplemental cash flow information related to leases was as follows:


Nine Months Ended September 30,	2019
Three Months Ended March 31,			2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	15,874	$	5,328	$	6,469
Operating cash flows from finance leases		877		369		243
Financing cash flows from finance leases		3,365		1,657		1,140

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	11,673	$	5,233	$	4,515
Finance leases		12,401		220		10,697

~~Table of Contents~~

~~Supplemental balance sheet information related to leases was as follows:~~

September 30, 2019

Operating Leases

Operating lease right-of-use assets

$
72,481

Accounts payable and accrued liabilities

$
16,351

Operating lease liabilities

55,278

Total operating lease liabilities

$
71,629

Finance Leases

Property, plant and equipment, gross

$
43,042

Accumulated depreciation

(3,125)

Property, plant and equipment, net

$
39,917

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

$
3,856

Long-term obligations, net of unamortized debt issuance cost

23,701

Total finance lease liabilities

$
27,557

Weighted Average Remaining Lease Term (in years)

Operating leases

6.0

Finance leases

7.1

Weighted Average Discount Rate

Operating leases

5.06
%
Finance leases

5.34
%

~~Maturities of lease liabilities as of September 30, 2019, were as follows:~~

Operating

Finance

Leases

Leases

Year 1

$
19,113

$
5,028

Year 2

15,763

4,470

Year 3

11,167

3,659

Year 4

9,515

2,794

Year 5

7,177

2,340

Thereafter

21,337

17,433

Total lease payments

84,072

35,724

Less imputed interest

(12,443)

(8,167)

Total

$
71,629

$
27,557

~~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 September 30, 2019, we have additional operating and finance leases, primarily for buildings, that have not yet commenced of $3.8 million. These operating and finance leases will commence in years 2019 and 2020 with lease terms of 3 to 10 years.

~~Table of Contents~~

NOTE 8 – RETIREMENT AND DEFERRED COMPENSATION PLANS

Components of Net Periodic Benefit Cost:

Domestic Plans

Foreign Plans

Three Months Ended September 30,

2019

2018

2019

2018

Service cost

$
2,772

$
2,853

$
1,429

$
1,457

Interest cost

1,845

1,713

491

445

Expected return on plan assets

(3,095)

(2,803)

(581)

(645)

Amortization of net loss

490

1,214

356

422

Amortization of prior service cost

—

—

111

122

Net periodic benefit cost

$
2,012

$
2,977

$
1,806

$
1,801


	Domestic Plans				Foreign Plans				Domestic Plans				Foreign Plans
Nine Months Ended September 30,	2019		2018		2019		2018
Three Months Ended March 31,									2020		2019		2020		2019
Service cost	$	8,320	$	8,546	$	4,334	$	4,479	$	3,577	$	2,773	$	1,768	$	1,460
Interest cost		5,536		5,139		1,487		1,374		1,987		1,845		340		501
Expected return on plan assets		(9,284)		(8,409)		(1,759)		(1,982)		(3,422)		(3,094)		(634)		(592)
Amortization of net loss		1,468		3,642		1,078		1,301		1,548		489		514		363
Amortization of prior service cost		—		—		337		376		—		—		97		113
Net periodic benefit cost	$	6,040	$	8,918	$	5,477	$	5,548	$	3,690	$	2,013	$	2,085	$	1,845

The components of net periodic benefit cost, other than the service cost component, are included in the line “Miscellaneous, net” in the income statement.

Table of Contents

EMPLOYER CONTRIBUTIONS

Although we have 0 minimum funding requirement, we contributed ~~$365~~$204 thousand to our ongoing domestic supplemental employee retirement plan (“SERP”) annuity contracts during the three months ended March 31, 2020. We plan to contribute approximately an additional $200 thousand to pay our ongoing SERP annuity contracts during 2020. We have contributed approximately $711thousand to our foreign defined benefit plans during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and do not expect additional significant contributions during ~~2019. We expect to contribute approximately $4.3million to our foreign defined benefit plans in 2019, and as of September 30, 2019, we have contributed approximately $1.5million of that amount.~~2020.

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE INCOME

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


	Foreign		Defined Benefit						Foreign		Defined Benefit
	Currency		Pension Plans		Derivatives		Total
Balance - December 31, 2017	$	(185,503)	$	(64,595)	$	(3,204)	$	(253,302)
Other comprehensive (loss) income before reclassifications		(53,141)		—		12,507		(40,634)
Amounts reclassified from accumulated other comprehensive income (loss)		—		4,032		(11,444)		(7,412)
Net current-period other comprehensive (loss) income		(53,141)		4,032		1,063		(48,046)
Balance - September 30, 2018	$	(238,644)	$	(60,563)	$	(2,141)	$	(301,348)
									Currency		Pension Plans		Derivatives		Total
Balance - December 31, 2018	$	(248,401)	$	(60,463)	$	(1,640)	$	(310,504)	$	(248,401)	$	(60,463)	$	(1,640)	$	(310,504)
Other comprehensive (loss) income before reclassifications		(42,725)		—		11,806		(30,919)		(9,619)		—		5,738		(3,881)
Amounts reclassified from accumulated other comprehensive income (loss)		—		2,150		(12,399)		(10,249)		—		721		(6,131)		(5,410)
Net current-period other comprehensive (loss) income		(42,725)		2,150		(593)		(41,168)		(9,619)		721		(393)		(9,291)
Balance - September 30, 2019	$	(291,126)	$	(58,313)	$	(2,233)	$	(351,672)
Balance - March 31, 2019									$	(258,020)	$	(59,742)	$	(2,033)	$	(319,795)

Balance - December 31, 2019									$	(257,124)	$	(83,147)	$	(1,677)	$	(341,948)
Other comprehensive (loss) income before reclassifications										(42,229)		—		5,026		(37,203)
Amounts reclassified from accumulated other comprehensive income (loss)										—		1,636		(3,543)		(1,907)
Net current-period other comprehensive (loss) income										(42,229)		1,636		1,483		(39,110)
Balance - March 31, 2020									$	(299,353)	$	(81,511)	$	(194)	$	(381,058)

~~Table of Contents~~

Reclassifications Out of Accumulated Other Comprehensive (Loss) Income:

Amount Reclassified from

Details about Accumulated Other

Accumulated Other

Affected Line in the Statement

Comprehensive Income Components

Comprehensive Income

Where Net Income is Presented

Three Months Ended September 30,

2019

2018

Defined Benefit Pension Plans

Amortization of net loss

$
846

$
1,636

(1)

Amortization of prior service cost

111

122

(1)

957

1,758

Total before tax

(244)

(425)

Tax benefit

$
713

$
1,333

Net of tax

Derivatives

Changes in treasury locks

$
—

$
4

Interest Expense

Changes in cross currency swap: interest component

(1,309)

(1,337)

Interest Expense

Changes in cross currency swap: foreign exchange component

(6,491)

(2,131)

Miscellaneous, net

(7,800)

(3,464)

Total before tax

—

588

Tax benefit

$
(7,800)

$
(2,876)

Net of tax

Total reclassifications for the period

$
(7,087)

$
(1,543)


	Amount Reclassified from					Amount Reclassified from
Details about Accumulated Other	Accumulated Other				Affected Line in the Statement	Accumulated Other				Affected Line in the Statement
Comprehensive Income Components	Comprehensive Income				Where Net Income is Presented	Comprehensive Income				Where Net Income is Presented
Nine Months Ended September 30,	2019		2018
Three Months Ended March 31,						2020		2019

Defined Benefit Pension Plans
Amortization of net loss	$	2,546	$	4,943	(1)	$	2,062	$	852	(1)
Amortization of prior service cost		337		376	(1)		97		113	(1)
		2,883		5,319	Total before tax		2,159		965	Total before tax
		(733)		(1,287)	Tax benefit		(523)		(244)	Tax benefit
	$	2,150	$	4,032	Net of tax	$	1,636	$	721	Net of tax
Derivatives
Changes in treasury locks	$	—	$	26	Interest Expense
Changes in cross currency swap: interest component		(4,315)		(3,824)	Interest Expense	$	(763)	$	(1,454)	Interest Expense
Changes in cross currency swap: foreign exchange component		(8,084)		(9,984)	Miscellaneous, net		(2,780)		(4,677)	Miscellaneous, net
		(12,399)		(13,782)	Total before tax	$	(3,543)	$	(6,131)	Net of tax
		—		2,338	Tax benefit
	$	(12,399)	$	(11,444)	Net of tax
Total reclassifications for the period	$	(10,249)	$	(7,412)		$	(1,907)	$	(5,410)

(1)	These accumulated other comprehensive income components are included in the computation of net periodic benefit costs, net of tax. See Note 8 – Retirement and Deferred Compensation Plans for additional details.

Table of Contents

NOTE 10 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We maintain a foreign exchange risk management policy designed to establish a framework to protect the value of our non-functional denominated transactions from adverse changes in exchange rates. Sales of our products can be denominated in a currency different from the currency in which the related costs to produce the product are denominated. Changes in exchange rates on such inter-country sales or intercompany loans can impact our results of operations. Our policy is not to engage in speculative foreign currency hedging activities, but to minimize our net foreign currency transaction exposure, defined as firm commitments and transactions recorded and denominated in currencies other than the functional currency. We may use foreign currency forward exchange contracts, options and cross currency swaps to economically hedge these risks.

~~Table of Contents~~

For derivative instruments designated as hedges, we formally document 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, we formally assess 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 Condensed Consolidated Balance Sheets. See Note 11 - Fair Value for additional details.

~~CASH FLOW HEDGE~~Cash Flow Hedge

For derivative instruments that are designated and qualify as cash flow hedges, the changes in fair values are recorded in accumulated other comprehensive loss and included in 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 Condensed Consolidated Statements of Cash Flows.

During 2017, 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 euro functional currency entity and to mitigate the risk of variability in interest rates, we entered into a cross currency swap in the notional amount of $280 million to effectively hedge the foreign exchange and interest rate exposure on the $280 million term loan. This EUR/USD swap agreement fixed our U.S. dollar floating-rate debt to 1.36% euro fixed-rate debt. Related to this hedge, approximately ~~$2.2~~$0.2 million of loss is included in accumulated other comprehensive loss at ~~September 30, 2019.~~March 31, 2020. 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 ~~September 30, 2019~~March 31, 2020 is ~~$4.2~~$2.2 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 ~~September 30, 2019,~~March 31, 2020, the fair values of the cross currency swap were a ~~$6.7~~$6.8 million asset. The swap contract expires on July 20, 2022.

~~HEDGE OF NET INVESTMENTS IN FOREIGN OPERATIONS~~Hedge of Net Investments in Foreign Operations

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

~~OTHER~~Other

As of ~~September 30, 2019,~~March 31, 2020, we have recorded the fair value of foreign currency forward exchange contracts of ~~$38 thousand~~$2.1 million in prepaid and other and ~~$0.6~~$0.5 million in accounts payable and accrued liabilities on the balance sheet. All forward exchange contracts outstanding as of ~~September 30, 2019~~March 31, 2020 had an aggregate notional contract amount of ~~$43.9~~$56.1 million.

1815

Table of Contents

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019


		September 30, 2019				December 31, 2018					March 31, 2020				December 31, 2019
				Derivatives				Derivatives					Derivatives				Derivatives
		Derivatives		not		Derivatives		not			Derivatives		not		Derivatives		not
		Designated		Designated		Designated		Designated			Designated		Designated		Designated		Designated
	Balance Sheet	as Hedging		as Hedging		as Hedging		as Hedging		Balance Sheet	as Hedging		as Hedging		as Hedging		as Hedging
	Location	Instruments		Instruments		Instruments		Instruments		Location	Instruments		Instruments		Instruments		Instruments
Derivative Assets
Foreign Exchange Contracts	Prepaid and other	$	—	$	38	$	—	$	259	Prepaid and other	$	—	$	2,061	$	—	$	206
Cross Currency Swap Contract (1)	Prepaid and other		6,673		—		—		—	Prepaid and other		6,769		—		2,552		—
		$	6,673	$	38	$	—	$	259		$	6,769	$	2,061	$	2,552	$	206

Derivative Liabilities
Foreign Exchange Contracts	Accounts payable and accrued liabilities	$	—	$	597	$	—	$	331	Accounts payable, accrued and other liabilities	$	—	$	505	$	—	$	401
Cross Currency Swap Contract (1)	Accounts payable and accrued liabilities		—		—		1,040		—
		$	—	$	597	$	1,040	$	331		$	—	$	505	$	—	$	401

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

The Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss) for the ~~Quarters~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Amount of Gain (Loss)

Total Amount

Amount of Gain (Loss)

Total Amount

Amount of Gain (Loss)

Location of (Loss)

Reclassified from

of Affected

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

2019

2018

2019

2018

2020

2019

2020

2019

Cross currency swap contract:

Interest component

1,586

(68)

Interest expense

1,309

1,337

(8,898)

2,246

1,392

Interest expense

763

1,454

(8,388)

Foreign exchange component

6,491

2,131

Miscellaneous, net

6,491

2,131

(269)

2,780

4,677

Miscellaneous, net

2,780

4,677

(1,412)

8,077

2,063

7,800

3,468

5,026

6,069

3,543

6,131

The Effect of ~~Cash Flow Hedge Accounting~~Derivatives Not Designated as Hedging Instruments on ~~Accumulated Other Comprehensive~~the Condensed Consolidated Statements of Income ~~(Loss)~~ for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

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

Flow Hedging

Other Comprehensive

in Income on

Other Comprehensive

Statement

Relationships

Income on Derivative

Derivatives

Income on Derivative

Line Item

2019

2018

2019

2018

Cross currency swap contract:

Interest component

$
4,058

$
5,084

Interest expense

$
4,315

$
3,824

$
(26,868)

Foreign exchange component

8,084

9,984

Miscellaneous, net

8,084

9,984

148

$
12,142

$
15,068

$
12,399

$
13,808


		Amount of (Loss) Gain
Derivatives Not Designated	Location of (Loss) Gain Recognized	Recognized in Income
as Hedging Instruments	in Income on Derivatives	on Derivatives
		2020		2019
Foreign Exchange Contracts	Other (Expense) Income: Miscellaneous, net	$	1,747	$	(263)
		$	1,747	$	(263)

1916

Table of Contents


						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
March 31, 2020
Derivative Assets	$	8,830	—	$	8,830	—	—	$	8,830
Total Assets	$	8,830	—	$	8,830	—	—	$	8,830

Derivative Liabilities	$	505	—	$	505	—	—	$	505
Total Liabilities	$	505	—	$	505	—	—	$	505

December 31, 2019
Derivative Assets	$	2,758	—	$	2,758	—	—	$	2,758
Total Assets	$	2,758	—	$	2,758	—	—	$	2,758

Derivative Liabilities	$	401	—	$	401	—	—	$	401
Total Liabilities	$	401	—	$	401	—	—	$	401

~~The Effect of Derivatives Not Designated as Hedging Instruments on the Condensed Consolidated Statements of Income for the Quarters Ended September 30, 2019 and 2018~~

Amount of (Loss) Gain

Derivatives Not Designated

Location of (Loss) Gain Recognized

Recognized in Income

as Hedging Instruments

in Income on Derivatives

on Derivatives

2019

2018

Foreign Exchange Contracts

Other (Expense) Income:
Miscellaneous, net

$
(15)

$
(1,011)

$
(15)

$
(1,011)

~~The Effect of Derivatives Not Designated as Hedging Instruments on the Condensed Consolidated Statements of Income for the Nine Months Ended September 30, 2019 and 2018~~

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

September 30, 2019

Derivative Assets

$
6,711

—

$
6,711

—

—

$
6,711

Total Assets

$
6,711

—

$
6,711

—

—

$
6,711

Derivative Liabilities

$
597

—

$
597

—

—

$
597

Total Liabilities

$
597

—

$
597

—

—

$
597

December 31, 2018

Derivative Assets

$
259

—

$
259

—

—

$
259

Total Assets

$
259

—

$
259

—

—

$
259

Derivative Liabilities

$
1,371

—

$
1,371

—

—

$
1,371

Total Liabilities

$
1,371

—

$
1,371

—

—

$
1,371

NOTE 11 – 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.

~~Table of Contents~~

As of ~~September 30,~~March 31, 2020, 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⁾	$	2,061	$	—	$	2,061	$	—
Cross currency swap contract ⁽¹⁾		6,769		—		6,769		—
Total assets at fair value	$	8,830	$	—	$	8,830	$	—
Liabilities
Foreign exchange contracts ⁽¹⁾	$	505	$	—	$	505	$	—
Contingent consideration obligation		5,930		—		—		5,930
Total liabilities at fair value	$	6,435	$	—	$	505	$	5,930

As of December 31, 2019, 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⁾

$
38

$
—

$
38

$
—

Cross currency swap contract ⁽¹⁾

6,673

—

6,673

—

Total assets at fair value

$
6,711

$
—

$
6,711

$
—

Liabilities

Foreign exchange contracts ⁽¹⁾

$
597

$
—

$
597

$
—

Contingent consideration obligation

3,000

—

—

3,000

Total liabilities at fair value

$
3,597

$
—

$
597

$
3,000

~~As of December 31, 2018, 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⁾	$	259	$	—	$	259	$	—	$	206	$	—	$	206	$	—
Cross currency swap contract ⁽¹⁾										2,552		—		2,552		—
Total assets at fair value	$	259	$	—	$	259	$	—	$	2,758	$	—	$	2,758	$	—
Liabilities
Foreign exchange contracts ⁽¹⁾	$	331	$	—	$	331	$	—	$	401	$	—	$	401	$	—
Cross currency swap contract⁽¹⁾		1,040		—		1,040		—
Contingent consideration obligation										5,930		—		—		5,930
Total liabilities at fair value	$	1,371	$	—	$	1,371	$	—	$	6,331	$	—	$	401	$	5,930

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

Table of Contents

The carrying amounts of our other current financial instruments such as cash and equivalents, accounts and notes receivable, notes payable and current maturities of long-term obligations approximate fair value due to the short-term maturity of the instruments. We consider our long-term obligations a Level 2 liability and utilize the market approach valuation technique based on interest rates that are currently available to us for issuance of debt with similar terms and maturities. The estimated fair value of our long-term obligations was $1.0 billion as of March 31, 2020 and $1.1 billion as of ~~September 30, 2019 and~~ December 31, ~~2018.~~ 2019.

As discussed in Note ~~18 –~~17 - Acquisitions, we have a contingent consideration obligation to the selling ~~equityholder~~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 ~~Analytical LLC (“Gateway”)~~ in connection with the Gateway Acquisition (as defined herein) based on 2020 and 2022 performance ~~targets defined in the purchase agreement.~~targets. We consider ~~this~~these obligations a Level 3 liability and ~~on a quarterly basis we assess~~have estimated the ~~projected results~~aggregate fair value for ~~the acquired business in comparison~~these contingent consideration arrangements to ~~the earnout targets~~be $2.9 million and ~~adjust the liability accordingly.~~$3.0 million, respectively, as of March 31, 2020 and December 31, 2019.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

The Company, in the normal course of business, is subject to a number of lawsuits and claims both actual and potential in nature. While management believes the resolution of these claims and lawsuits will not have a material adverse effect on our financial position, results of operations or cash flows, claims and legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur and 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, we 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 we could be required to make under these indemnification agreements is unlimited; however, we have a directors and officers liability insurance policy that covers a portion of our exposure. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. We have 0 liabilities recorded for these agreements as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

A fire caused damage to our facility in Annecy, France in June 2016. We are insured for the damages caused by the fire, including business interruption insurance. For the three months ended March 31, 2020, we did not receive any insurance proceeds, and have 0 insurance receivable as of March 31, 2020. During the three months ended March 31, 2020 and 2019, profitability was not impacted. The final settlement continues to be negotiated. In many cases, our insurance coverage exceeds the amount of our recognized losses. However, 0 gain contingencies were recognized during the three months ended March 31, 2020 as our ability to realize those gains remains uncertain.

An environmental investigation, undertaken to assess areas of possible contamination, was completed at our 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, we reported the findings to the relevant environmental authority, the Environmental Company of the State of São Paulo – CETESB. Based upon our best estimate, we recorded a reserve of $1.5 million (operating expense) in the first quarter of 2017 related to this contingency. ~~For the nine months ended September 30,~~During 2019, we ~~have~~ paid approximately $0.6 million. For the three months ended March 31, 2020, we paid approximately $0.1 million and made adjustments to the accrual based on our future anticipated expenditures. As of ~~September 30, 2019,~~March 31, 2020, our outstanding reserve is ~~$0.5~~$0.4 million. The ultimate loss associated with this environmental contingency is subject to the investigation and ongoing review of the 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.

~~Table of Contents~~

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 2019, 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 ~~$10~~$2 million to $8 million, including ~~interest.~~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 matter. ~~However,~~

In December 2019, tax authorities in Brazil notified us of a tax assessment of approximately $6.1 million, including interest and penalties of $2.3 million and $0.8 million, respectively, relating to differences in tax classification codes used for import duties for the period from January 2015 to August 2018. We are vigorously contesting the assessment, including interest and penalties, and have filed an administrative defense appeal in December 2019. Considering the complex nature of the assessment, we ~~anticipate decisions on our remaining claims in~~expect the appeal process to go through different levels of administrative and/or judicial review. Accordingly, due to uncertainty of the timing and amounts of assessment, 0 liability is recorded as of March 31, 2020.

Table of Contents

NOTE 13 – STOCK REPURCHASE PROGRAM

On April 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. We may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020, we did not repurchase any shares. During the three months ended March 31, 2019, wethe Company repurchased approximately ~~300 thousand and 493~~159 thousand shares for approximately ~~$35.8 million and $54.9 million, respectively. During the nine months ended September 30, 2018, we repurchased approximately 668 thousand shares for approximately $61.7~~$15.0 million. ~~We did not repurchase any shares during the quarter ended September 30, 2018.~~ As of ~~September 30, 2019,~~March 31, 2020, there was ~~$310.1~~$278.5 million of authorized share repurchases available to us.

NOTE 14 – STOCK-BASED COMPENSATION

~~Historically we have issued stock options and~~We issue restricted stock units (“RSUs”), which ~~consisted~~consist of time-based and performance-based awards, to employees under stock awards plans approved by stockholders. ~~Beginning in 2019, we no longer issue stock options to employees.~~ In addition, RSUs are issued to non-employee directors under a Restricted Stock Unit Award Agreement for Directors pursuant to the Company’s 2018 Equity Incentive Plan. Previously, non-employee directors were issued stock options under a Director Stock Option Plan. Stock options were awarded with the exercise price equal to the market price on the date of grant and generally vest 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 our internal financial performance metrics and (2) based on our total shareholder return (“TSR”) relative to total shareholder returns of an industrial peer group. At the time of vesting, the vested shares of common stock are issued in the employee’s name. In addition, RSU awards are generally net settled (shares are withheld to cover the employee tax obligation). RSUs granted to directors are only time-based and generally vest over one year.

Compensation expense attributable to employee stock options for the first nine months of 2019 was approximately $4.4 million ($3.6 million after tax). Approximately $3.7 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. Compensation expense attributable to stock options for the first nine months of 2018 was approximately $8.9 million ($6.9 million after tax). Approximately $7.1 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. The reduction in stock option expense is due to our move to RSUs as discussed above.

For stock option grants, we used historical data to estimate expected life and volatility. The weighted-average fair value of stock options granted under the stock awards plans was $14.82 per share during the first nine months of 2018. This value was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:


~~Stock Awards Plans:~~
~~Nine Months Ended September 30,~~	~~2018~~
~~Dividend Yield~~	~~1.5~~	%
~~Expected Stock Price Volatility~~	~~14.2~~	%
~~Risk-free Interest Rate~~	~~2.8~~	%
~~Expected Life of Option (years)~~	~~6.6~~

~~Table of Contents~~

~~A summary of option activity under our stock plans during the nine months ended September 30, 2019 is presented below:~~

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

(1,382,639)

57.24

(14,200)

62.33

Forfeited or expired

(131,067)

71.67

—

—

Outstanding at September 30, 2019

5,247,349

$
67.96

141,000

$
57.71

Exercisable at September 30, 2019

4,464,502

$
65.61

141,000

$
57.71

Weighted-Average Remaining Contractual Term (Years):

Outstanding at September 30, 2019

5.6

3.3

Exercisable at September 30, 2019

5.1

3.3

Aggregate Intrinsic Value:

Outstanding at September 30, 2019

$
263,304

$
8,508

Exercisable at September 30, 2019

$
234,118

$
8,508

Intrinsic Value of Options Exercised During the Nine Months Ended:

September 30, 2019

$
76,797

$
722

September 30, 2018

$
62,895

$
2,187

The grant date fair value of options vested during the nine months ended September 30, 2019 and 2018 was $12.2 million and $16.5 million, respectively. Cash received from option exercises was approximately $81.8 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $17.2 million in the nine months ended September 30, 2019. As of September 30, 2019, the remaining valuation of stock option awards to be expensed in future periods was $3.8 million and the related weighted-average period over which it is expected to be recognized is 1.0 year.

The fair value of both time-based RSUs and performance-based RSUs pertaining to internal performance metrics is determined using the closing price of our common stock 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.


Nine Months Ended September 30,		2019			2018
Three Months Ended March 31,								2020			2019
Fair value per stock award	$	134.97		$	128.70		$	94.98		$	134.97
Grant date stock price	$	104.51		$	89.42		$	83.93		$	104.51
Assumptions:
Aptar's stock price expected volatility		16.50	%		12.30	%		23.80	%		16.50	%
Expected average volatility of peer companies		31.90	%		27.50	%		48.50	%		31.90	%
Correlation assumption		37.40	%		20.20	%		63.50	%		37.40	%
Risk-free interest rate		2.19	%		2.42	%		0.31	%		2.19	%
Dividend yield assumption		1.30	%		1.43	%		1.72	%		1.30	%

A summary of RSU activity as of ~~September 30, 2019~~March 31, 2020 and changes during the ~~nine~~three month period then ended is presented below:

Time-Based RSUs

Performance-Based RSUs

Time-Based RSUs

Performance-Based RSUs

Weighted Average

Units

Grant-Date Fair Value

Units

Grant-Date Fair Value

Units

Grant-Date Fair Value

Units

Grant-Date Fair Value

Nonvested at January 1, 2019

261,487

91.78

69,990

111.55

Nonvested at January 1, 2020

480,729

95.45

181,680

117.26

Granted

173,333

92.63

123,246

119.35

176,424

81.75

206,408

90.85

Vested

(46,912)

87.38

—

(112,515)

82.64

—

Forfeited

(22,613)

98.82

(9,237)

117.45

(217)

100.14

(589)

120.61

Nonvested at September 30, 2019

365,295

92.32

183,999

117.34

Nonvested at March 31, 2020

544,421

92.11

387,499

103.23

Included in the ~~September 30, 2019~~March 31, 2020 time-based RSUs are 11,490 units granted to non-employee ~~directors and 14,257 units vested related to non-employee~~ directors.

~~Table of Contents~~

Compensation expense recorded attributable to RSUs for the first ~~nine~~three months of ~~2019~~2020 and ~~2018~~2019 was approximately ~~$13.7~~$8.3 million and ~~$5.9~~$4.7 million, respectively. The actual tax benefit realized for the tax deduction from RSUs was approximately ~~$719 thousand~~$1.5 million in the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The fair value of units vested during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$4.1~~$9.3 million and ~~$2.6~~$2.7 million, respectively. The intrinsic value of units vested during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$4.9~~$11.5 million and ~~$3.1~~$3.2 million, respectively. As of ~~September 30, 2019,~~March 31, 2020, there was ~~$32.3~~$62.7 million of total unrecognized compensation cost relating to RSU awards which is expected to be recognized over a weighted-average period of 2.3 years.

~~During 2017, we provided a long-term incentive program for certain employees. Each award is based on the cumulative TSR~~19

Table of our common stock during a three-year performance period compared to a peer group. The total expected expense related to this program for awards outstanding as of September 30, 2019 is approximately $3.0 million, of which $789 thousand and $1.0 million was recognized in the first nine months of 2019 and 2018, respectively.

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Historically we issued stock options to our employees and non-employee directors. Beginning in 2019, we no longer issue stock options. Stock options were awarded with the exercise price equal to the market price on the date of grant and generally vest over three years and expire 10 years after grant. Compensation expense attributable to employee stock options for the first three months of 2020 was approximately $0.9 million ($0.7 million after tax). Approximately $0.7 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. Compensation expense attributable to stock options for the first three months of 2019 was approximately $1.8 million ($1.5 million after tax). Approximately $1.6 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. The reduction in stock option expense is due to our move to RSUs as discussed above. For stock option grants, we used historical data to estimate expected life and volatility.

A summary of option activity under our stock plans during the three months ended March 31, 2020 is presented below:

Stock Awards Plans

Director Stock Option Plans

Weighted Average

Options

Exercise Price

Options

Exercise Price

Outstanding, January 1, 2020

5,044,180

68.32

135,251

58.45

Granted

—

Exercised

(292,090)

55.16

(21,251)

51.20

Forfeited or expired

(6,630)

65.60

—

Outstanding at March 31, 2020

4,745,460

69.20

114,000

59.80

Exercisable at March 31, 2020

4,583,864

68.43

114,000

59.80

Weighted-Average Remaining Contractual Term (Years):

Outstanding at March 31, 2020

5.3

3.2

Exercisable at March 31, 2020

5.1

3.2

Aggregate Intrinsic Value:

Outstanding at March 31, 2020

143,971

4,530

Exercisable at March 31, 2020

142,195

4,530

Intrinsic Value of Options Exercised During the Three Months Ended:

March 31, 2020

18,202

1,385

March 31, 2019

14,047

The grant date fair value of options vested during the three months ended March 31, 2020 and 2019 was $7.6 million and $12.2 million, respectively. Cash received from option exercises was approximately$18.6 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $4.8 million in the three months ended March 31, 2020. As of March 31, 2020, the remaining valuation of stock option awards to be expensed in future periods was $1.5 million and the related weighted-average period over which it is expected to be recognized is 0.9 years.

NOTE 15 – 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. Stock-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 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:

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Three Months Ended

September 30, 2019

September 30, 2018

Diluted

Basic

Diluted

Basic

Consolidated operations

Income available to common stockholders

$
56,750

$
56,750

$
38,996

$
38,996

Average equivalent shares

Shares of common stock

64,010

64,010

62,378

62,378

Effect of dilutive stock-based compensation

Stock options

2,367

—

2,659

—

Restricted stock

325

—

92

—

Total average equivalent shares

66,702

64,010

65,129

62,378

Net income per share

$
0.85

$
0.89

$
0.60

$
0.63


	Nine Months Ended								Three Months Ended
	September 30, 2019				September 30, 2018				March 31, 2020				March 31, 2019
	Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic
Consolidated operations
Income available to common stockholders	$	193,669	$	193,669	$	154,071	$	154,071	$	55,253	$	55,253	$	63,004	$	63,004

Average equivalent shares
Shares of common stock		63,485		63,485		62,304		62,304		64,009		64,009		62,964		62,964
Effect of dilutive stock-based compensation
Stock options		2,425		—		2,440		—		1,810		—		2,222		—
Restricted stock		253		—		78		—		292		—		163		—
Total average equivalent shares		66,163		63,485		64,822		62,304		66,111		64,009		65,349		62,964
Net income per share	$	2.93	$	3.05	$	2.38	$	2.47	$	0.84	$	0.86	$	0.96	$	1.00

NOTE 16 – SEGMENT INFORMATION

We are organized into 3 reporting segments. Our Beauty + Home segment sells to the personal care, beauty and home care markets. Our Pharma segment serves customers in the prescription drug, consumer health care, injectables and active packaging markets. Our Food + Beverage segment sells to the food and beverage markets.

~~Table of Contents~~

The accounting policies of the segments are the same as those described in Part II, Item 8, Note 1 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. We evaluate performance of our business units and allocate resources based upon Adjusted EBITDA. Adjusted EBITDA is defined as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring and acquisition-related costs. All internal segment reporting and discussions of results with our Chief Operating Decision Maker (CODM) are based on segment Adjusted EBITDA.

Financial information regarding our reporting segments is shown below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Three Months Ended March 31,									2020		2019
Total Sales:
Beauty + Home	$	333,870	$	346,040	$	1,056,626	$	1,103,664	$	330,466	$	373,503
Pharma		271,608		227,691		830,679		699,105		299,590		274,494
Food + Beverage		104,458		97,297		328,280		294,362		100,301		104,727
Total Sales		709,936		671,028	$	2,215,585	$	2,097,131	$	730,357	$	752,724
Less: Intersegment Sales:
Beauty + Home	$	5,688	$	4,280	$	18,705	$	15,195	$	5,906	$	5,844
Pharma		2,357		176		6,788		254		2,394		1,793
Food + Beverage		613		797		1,693		1,949		504		627
Total Intersegment Sales	$	8,658	$	5,253	$	27,186	$	17,398	$	8,804	$	8,264
Net Sales:
Beauty + Home	$	328,182	$	341,760	$	1,037,921	$	1,088,469	$	324,560	$	367,659
Pharma		269,251		227,515		823,891		698,851		297,196		272,701
Food + Beverage		103,845		96,500		326,587		292,413		99,797		104,100
Net Sales	$	701,278	$	665,775	$	2,188,399	$	2,079,733	$	721,553	$	744,460
Adjusted EBITDA:
Adjusted EBITDA (1):
Beauty + Home	$	41,475	$	42,174	$	143,411	$	141,155	$	34,247	$	53,191
Pharma		96,546		84,516		295,553		250,709		108,342		97,357
Food + Beverage		18,728		15,482		56,363		46,284		15,407		16,691
Corporate & Other, unallocated		(9,943)		(7,954)		(33,328)		(28,576)		(13,828)		(12,755)
Acquisition-related costs (1)		(1,355)		(10,369)		(2,636)		(12,932)
Restructuring Initiatives (2)		(6,019)		(23,852)		(17,286)		(48,002)
Acquisition-related costs (2)										(2,274)		—
Restructuring Initiatives (3)										(4,839)		(9,530)
Depreciation and amortization		(49,218)		(41,857)		(144,574)		(123,133)		(50,806)		(47,489)
Interest Expense		(8,898)		(8,735)		(26,868)		(24,754)		(8,388)		(9,214)
Interest Income		957		1,537		3,738		6,306		175		1,748
Income before Income Taxes	$	82,273	$	50,942	$	274,373	$	207,057	$	78,036	$	89,999

(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 and acquisition-related costs.

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(2)	Acquisition-related costs include transaction costs and purchase accounting adjustments related to ~~inventory~~acquisitions and ~~backlog for acquisitions~~investments (see Note 17 – Acquisitions and Note 18 – ~~Acquisitions~~Investment in Equity Securities for further details).

~~(2)~~(3)

Restructuring Initiatives includes expense items for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ as follows (see Note 19 – Restructuring Initiatives for further details):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Three Months Ended March 31,									2020		2019
Restructuring Initiatives by Segment
Beauty + Home	$	5,341	$	18,854	$	14,869	$	38,501	$	4,907	$	8,269
Pharma		168		2,008		381		3,596		(31)		326
Food + Beverage		204		2,638		826		4,307		103		510
Corporate & Other		306		352		1,210		1,598		(140)		425
Total Restructuring Initiatives	$	6,019	$	23,852	$	17,286	$	48,002	$	4,839	$	9,530

~~Note 17 – INSURANCE SETTLEMENT RECEIVABLE~~

A fire caused damage to our 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. We are insured for the damages caused by the fire, including business interruption insurance, and we do not expect this incident to have a material impact on our financial results.

~~Table of Contents~~

Losses related to the fire of $3.2 million and $14.1 million were incurred during the three and nine months ended September 30, 2018, respectively. For the nine months ended September 30, 2019, we received insurance proceeds of $3.4 million, and have 0 insurance receivable as of September 30, 2019. The final settlement continues to be negotiated. In many cases, our insurance coverage exceeds the amount of our recognized losses. However, 0 gain contingencies were recognized during the three and nine months ended September 30, 2019 as our ability to realize those gains remains uncertain. During the three and nine months ended September 30, 2019, profitability was not impacted. Profitability was negatively impacted by $1.5 million and $4.4 million during the three and nine months ended September 30, 2018, respectively. These 2018 losses negatively impacted the Beauty + Home and Pharma segments.

NOTE 1817 – ACQUISITIONS

Business Combinations

On ~~August 2,~~February 13, 2020, we entered into a securities purchase agreement to acquire 100% of the equity interests (the “Fusion Acquisition”) of Fusion Packaging, Inc. (“Fusion”). Subsequent to the quarter end, on April 1, 2020 we closed on the Fusion Acquisition for a purchase price of approximately $165 million. Fusion, based in Dallas, TX, is a global leader in the design, engineering and distribution of luxury packaging for the beauty industry. The purchase agreement also provides an earn-out provision providing for the payment of up to $33.9 million based on Fusion’s financial performance during a 3 year measurement period.

On October 31, 2019, we completed our ~~asset~~ acquisition (the ~~“Bapco~~“Noble Acquisition”) of 100% of the ~~remaining 80% ownership interest~~equity interests of Noble International Holdings, Inc., Genia Medical, Inc. and JBCB Holdings, LLC (collectively referred to as “Noble”). Noble, based in Orlando, FL, is a leading provider in developing patient-centric advanced drug delivery system training devices including autoinjector, prefilled syringe, onbody and respiratory devices for the ~~capital stock of Bapco Closures Holdings Limited (“Bapco”), for $3.8~~world’s leading biopharmaceutical companies and original equipment manufacturers. The purchase price was approximately $62.3 million (net of ~~$2.9~~$1.6 million of cash acquired)~~. The 20% ownership investment previously~~ and was funded by cash on hand. 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. As of December 31, 2019, $5 million was held in ~~Bapco is now included within~~restricted cash pending the ~~intangible assets acquired. Bapco, located~~finalization of a working capital adjustment and indemnity escrow. During the first quarter of 2020, $1.0 million related to the working capital escrow was released from restriction, resulting in ~~Horesell, UK, provides innovative closures sealing technology that provides package integrity~~an additional $463 thousand payment due to the seller and ~~tamper evidence.~~a corresponding increase to our purchase price and associated goodwill balance. The results of ~~Bapco’s~~Noble’s operations have been included in the Condensed Consolidated Financial Statements within our ~~Food + Beverage~~Pharma segment since the date of acquisition.

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 in the three months ended September 30, 2019.

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 nasal 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 Pharma segment since the date of acquisition. ~~We are in the process of finalizing purchase accounting.~~

On 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. ~~We are in the process of finalizing purchase accounting.~~ 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 2 manufacturing locations in the U.S. and 1 in France. The purchase price was approximately $553.5 million and was funded by cash on hand. At acquisition, we maintained $5.0 million in an escrow account and classified this amount as restricted cash pending the finalization of a working capital adjustment. These funds were released from restriction in January 2019, which resulted in a refund of $964 thousand and a corresponding reduction of our purchase price and the associated goodwill balance in the amount of the refund.

~~The following table summarizes the assets acquired and liabilities assumed related to the CSP Technologies Acquisition as of the acquisition date at estimated fair value.~~

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


	August 27, 2018		2019
Assets
Cash and equivalents	$	24,053	$	3,427
Accounts receivable		20,847		3,504
Inventories		42,169
Prepaid and other		3,995		2,478
Property, plant and equipment		99,194		4,267
Goodwill		278,020		59,143
Intangible assets		177,120		52,980
Other miscellaneous assets		1,039		430
Liabilities
Current maturities of long-term obligations		129
Accounts payable and accrued liabilities		31,989
Long-term obligations		6,037
Accounts payable, accrued and other liabilities				5,388
Deferred income taxes		38,442		2,592
Retirement and deferred compensation plans		1,038
Deferred and other non-current liabilities		15,344		1,598
Net assets acquired	$	553,458	$	116,651

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 related to the CSP Technologies Acquisition:~~date:


				2019
	Weighted-Average	Estimated		Weighted-Average	Estimated
	Useful Life	Fair Value		Useful Life	Fair Value
	(in years)	of Asset		(in years)	of Asset
Acquired technology	12	$	46,700	8	$	9,160
Customer relationships	16		113,300	11		39,379
Trademarks and trade names	9		14,600	4		2,457
License agreements and other	11		2,520	1		1,984
Total		$	177,120		$	52,980

Goodwill ~~net of working capital settlement,~~ in the amount of ~~$277.1~~$59.1 million was recorded ~~for~~related to the ~~CSP Technologies Acquisition, of~~2019 acquisitions which ~~$173.4 million and $103.7 million~~ is included in the Pharma ~~and Food + Beverage segments, respectively.~~segment. 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 our commercial presence in selling the ~~CSP Technologies line~~Noble, Nanopharm and Gateway lines of products in markets where ~~CSP Technologies~~they did not previously operate and the ~~ability~~abilities of ~~CSP Technologies~~the acquired companies to maintain ~~its~~their competitive advantage from a technical viewpoint. Goodwill will not be amortized, but will be tested for impairment at least annually. ~~We do not expect any~~For 2019 acquisitions, goodwill of ~~the goodwill~~$29.6 million will be deductible for tax purposes.

~~The unaudited pro forma results presented below include the effects~~Asset Acquisition

On August 2, 2019, we completed our asset acquisition (the “Bapco Acquisition”) of the ~~CSP Technologies Acquisition as if it had occurred as~~remaining 80% ownership interest in the capital stock of ~~January 1, 2017.~~Bapco Closures Holdings Limited (“Bapco”), for $3.8 million (net of $2.9 million of cash acquired). The ~~unaudited pro forma~~20% ownership investment previously held in Bapco is now included within the intangible assets acquired. Bapco, located in Leeds, UK, provides innovative closures sealing technology that provides package integrity and tamper evidence. The results ~~reflect certain adjustments related to~~of Bapco’s operations have been included in the ~~acquisition, such as intangible asset amortization, fair value adjustments for inventory and financing costs related to~~Condensed Consolidated Financial Statements within our Food + Beverage segment since the ~~change~~date of acquisition.

NOTE 18 –INVESTMENT IN EQUITY SECURITIES

Our investment in ~~our debt structure. The pro forma results do not include any synergies or other expected benefits~~equity securities consisted 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 date indicated.following:


		Three Months Ended		Nine Months Ended	March 31,		December 31,
		September 30, 2018		September 30, 2018	2020		2019
Equity Method Investments:
BTY					$	31,043	$	119
Kali Care						3,772		3,881
Desotec GmbH						811		858

Net Sales	$	687,201	$	2,172,737
Net Income Attributable to AptarGroup Inc.		48,034		158,527
Net Income per common share — basic		0.77		2.54
Net Income per common share — diluted		0.74		2.45
Other Investments						3,541		3,538
					$	39,167	$	8,396

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Equity method investments

BTY

On ~~May~~October 1, ~~2018,~~2019 we ~~acquired 100%~~entered into a strategic definitive agreement to acquire 49% of the ~~common stock~~equity interests in 3 related companies: Suzhou Hsing Kwang, Suqian Hsing Kwang and Suzhou BTY (collectively referred to as “BTY”), contingent on the settlement date of ~~Reboul SAS (“Reboul”),~~the transaction. We have a ~~French manufacturer specializing in stamping, decorating and assembling metal and plastic packaging~~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 ~~and luxury markets,~~packaging solutions for athe beauty industry. On January 1, 2020, the transaction closed for an approximate purchase price of $31 million for our 49% share. As of March 31, 2020, we paid approximately ~~$3.6~~$20 million, ~~(net~~with the remaining amount of ~~$112 thousand of cash acquired). The results of Reboul’s operations have been~~$11 million included in Accounts payable, accrued and other liabilities. The amount is payable after certain conditions under the ~~Condensed Consolidated Financial Statements within our Beauty + Home segment since~~definitive agreement are fulfilled and is expected to be paid during the ~~date~~second quarter of ~~acquisition.~~2020.

~~In May 2018,~~Kali Care

During 2017, we invested ~~$10.0~~$5 million to acquire 20% of the equity interests in Kali Care, a technology company that provides digital monitoring systems for medical devices.

Desotec GmbH

During 2009, we invested €574 thousand to acquire 23% of the equity interests in Desotec GmbH, a leading manufacturer of special assembly machines for bulk processing for the pharmaceutical, beauty and home and food and beverages markets.

Healthcare, Inc.

Subsequent to the quarter end, on April 1, 2020, we invested $5 million to acquire 30% of the equity interests in Healthcare, Inc., Shanghai Sonmol Internet Technology Co., Ltd. and its subsidiary, Shanghai Sonmol Medical Equipment Co., Ltd., a pharmaceutical company that provides connected devices for asthma control.

Other investments

During August 2019, we invested an aggregate amount of $3.5 million in 2 preferred equity ~~stock of Reciprocal Labs Corporation, doing business as Propeller Health (“Reciprocal Labs”), which was~~investments in sustainability companies Loop and Purecycle Technologies that are accounted for at ~~cost. NaN~~cost less impairment, ~~charges~~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 ~~recorded during 2018 or 2019 against this investment. During~~0 indications of impairment nor were there any changes from observable price changes noted in the ~~fourth quarter of 2018, we recorded a gain of approximately $6.5 million by adjusting the carrying amount to its expected proceeds as this investment was ultimately sold during January 2019.~~

three months ended March 31, 2020.

NOTE 19 – RESTRUCTURING INITIATIVES

In late 2017, we began a business transformation to drive profitable sales growth, increase operational excellence, enhance our approach to innovation and improve organizational effectiveness. The primary focus of the plan is the Beauty + Home segment; however, certain global general and administrative functions are also being addressed. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, we recognized ~~$6.0~~$4.8 million and ~~$17.3 million of restructuring costs related to this plan, respectively. For the three and nine months ended September 30, 2018, we recognized $23.9 million and $48.0~~$9.5 million of restructuring costs related to this plan, respectively. Using current exchange rates, we estimate total implementation costs of approximately ~~$90~~$110 million ~~over three years,~~for these initiatives, including costs that have been recognized to date. The cumulative expense incurred as of ~~September 30, 2019~~March 31, 2020 was ~~$83.3~~$91.3 million. We also anticipate making capital investments related to the transformation plan of approximately $50 million, of which ~~$32~~$40 million has been incurred to date.

As of ~~September 30, 2019~~March 31, 2020 we have recorded the following activity associated with the business transformation:


	Beginning		Net Charges for						Ending		Beginning		Net Charges for						Ending
	Reserve at		the Nine Months				Interest and		Reserve at		Reserve at		the Three Months				Interest and		Reserve at
	12/31/2018		Ended 9/30/2019		Cash Paid		FX Impact		9/30/2019		12/31/2019		Ended 3/31/2020		Cash Paid		FX Impact		3/31/2020
Employee severance	$	3,934	$	7,566	$	(4,023)	$	(258)	$	7,219	$	7,090	$	4,066	$	(503)	$	187	$	10,840
Professional fees and other costs		11,101		9,720		(18,958)		(71)		1,792		3,609		773		(3,069)		(9)		1,304
Totals	$	15,035	$	17,286	$	(22,981)	$	(329)	$	9,011	$	10,699	$	4,839	$	(3,572)	$	178	$	12,144

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NOTE 20 – SUBSEQUENT EVENTS

~~Subsequent~~On April 1, 2020, the Fusion Acquisition closed for an approximate purchase price of $165 million, plus an earn-out, to ~~the quarter end, 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 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. The transaction, which is expected to close by the end of 2019 or early 2020, is subject to customary regulatory approvals and other customary closing conditions and the purchase will be funded with available cash on hand and/or borrowings under our revolving credit facilities.

~~Subsequent to the quarter end, on October 31, 2019 we acquired~~ 100% of the ~~equity interests of Noble International Inc., Genia Medical, Inc. and JBCB Holdings, LLC (collectively referred~~membership interests. Refer to ~~as “Noble”),~~Note 17 – Acquisitions for approximately $62 million. Noble, based in Orlando, FL, is a leading provider in developing patient-centric advanced drug delivery system training devices including autoinjector, prefilled syringe, onbody and respiratory devices forfurther details on the world’s leading biopharmaceutical companies and original equipment manufacturers. The purchase agreement also provides an earn-out provision providing for the payment of up to $31.3 million based on Noble’s financial performance during a 5 year measurement period. acquisition.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, OR AS OTHERWISE INDICATED)

RESULTS OF OPERATIONS


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019		2018
Three Months Ended March 31,											2020		2019

Net sales		100.0	%		100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales (exclusive of depreciation and amortization shown below)		63.3			65.4		63.2		65.2		62.5		63.0
Selling, research & development and administrative		15.9			15.5		15.8		15.5		17.5		16.3
Depreciation and amortization		7.0			6.3		6.6		5.9		7.0		6.4
Restructuring initiatives		0.9			3.6		0.8		2.3		0.7		1.3
Operating income		12.9			9.2		13.6		11.1		12.3		13.0
Other expense		(1.2)			(1.5)		(1.1)		(1.1)		(1.5)		(0.9)
Income before income taxes		11.7			7.7		12.5		10.0		10.8		12.1
Net Income		8.1			5.9		8.9		7.4		7.7		8.5
Effective tax rate		31.0	%		23.4	%	29.4	%	25.6	%	29.2	%	30.0	%
Adjusted EBITDA margin (1)		20.9	%		20.2	%	21.1	%	19.7	%	20.0	%	20.8	%

(1)	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 ~~36.~~31.

SIGNIFICANT DEVELOPMENTS

During the first quarter of 2020, financial results and operations were adversely impacted by the current coronavirus (“COVID-19”) pandemic. The significance of the impacts to our segments during the first quarter of 2020 are discussed herein and include, but are not limited to, the adverse impact on sales of products to our travel and retail beauty business and on-the-go beverage customers. The extent to which the COVID-19 pandemic impacts our financial results and operations for fiscal year 2020 and going forward for all three of our business segments will depend on future developments which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the outbreak and the international actions being taken to contain and treat it. No impairments were recorded as of March 31, 2020. While the disruption is currently expected to be temporary, there is uncertainty around the duration. Due to significant uncertainty surrounding the situation, our judgment regarding future results could change and therefore our results could be materially impacted.

As each of our segments produce dispensing systems that have been determined to be essential products by various government agencies around the world, the majority of our facilities remained operational during the first quarter of 2020. We are taking a variety of measures to ensure the availability and functioning of our critical infrastructure, to promote the safety and security of our employees and to support the communities in which we operate. These measures include requiring remote working arrangements for employees where practicable. We are following public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the promotion of social distancing and the adoption of work-from-home arrangements, and all of these policies and initiatives could impact our operations. Due to the speed with which the situation is developing, we are not able at this time to estimate the impact of COVID-19 on our future financial results and operations, but the impact could be material for the remainder of fiscal year 2020 and could be material during any future periods affected either directly or indirectly by this pandemic. See Part II, Item 1A, “Risk Factors,” included elsewhere in this report for information on material risks associated with COVID-19.

NET SALES

We reported net sales of ~~$701.3~~$721.6 million for the quarter ended ~~September 30, 2019,~~March 31, 2020, which represents a ~~5% increase~~3% decrease compared to ~~$665.8~~$744.5 million reported during the ~~third~~first quarter of ~~2018.~~2019. The average U.S. dollar exchange rate strengthened compared to most major currencies we operate in, resulting in a negative currency translation impact of 3%2%. The acquisitions of ~~CSP Technologies,~~ Gateway, Nanopharm and ~~Nanopharm~~Noble positively impacted sales by 4%1%. Therefore, core sales, which exclude acquisitions and changes in foreign currency rates, ~~increased~~decreased by 4%2% in the ~~third~~first quarter of ~~2019~~2020 compared to the ~~third~~same period in 2019. During the first quarter of ~~2018. The~~2020, our consolidated core sales ~~growth was primarily driven~~were negatively impacted by ~~strong demand for~~the COVID-19 pandemic, especially within our ~~drug delivery devices~~Beauty + Home segment. Beauty sales within this segment were significantly impacted by the loss of travel and ~~components for injectable medicines produced by our Pharma segment.~~retail sales during the first quarter 2020. Our Food + Beverage segment also realized ~~moderate~~lower core sales due to the negative impact of COVID-19, especially on our single-serving beverage product sales along with a significant decline in the resin price pass-through to our customers during the quarter. Our Pharma segment realized strong core sales growth ~~despite~~during the ~~negative effects~~first quarter of 2020 as all four of our pass-through of lower resin costs to our customers. Our Beauty + Home segment experienced volume declines in certain markets that resulted in a slight decrease in core sales. On a consolidated basis, an increase in tooling sales of $4.1 million in the Pharma segment was offset by the negative effect of $3.1 million related to the pass-through of lower resin prices to our customers.

Third Quarter 2019

Beauty

Food +

Net Sales Change over Prior Year

+ Home

Pharma

Beverage

Total

Core Sales Growth

(1)
%
13
%
2
%
4
%
Acquisitions

—
%
9
%
8
%
4
%
Currency Effects (1)

(3)
%
(4)
%
(2)
%
(3)
%
Total Reported Net Sales Growth

(4)
%
18
%
8
%
5
%

~~(1)~~

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

For the first nine months of 2019, we reported net sales of $2.2 billion, 5% above the first nine months of 2018 reported net sales of $2.1 billion. The average U.S. dollar exchange rate strengthened compared to all major currencies we operate in, resulting in a negative currency translation impact of 5%. The acquisitions of CSP Technologies, Reboul, Gateway and Nanopharm positively impacted sales by 5%. Core sales for the first nine months of 2019 increased 5% compared to the first nine months of 2018 as our Pharma and Food + Beverage segments reported strong growth over the first nine months of 2018. Core sales were negatively impacted by lower tooling sales of $6.8 million for the first nine months of 2019divisions posted improved results compared to the same ~~period in the~~ prior year ~~primarily in our Beauty + Home segment.~~period.

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Nine Months Ended September 30, 2019	Beauty				Food +
Three Months Ended March 31, 2020									Beauty				Food +
Net Sales Change over Prior Year	+ Home		Pharma		Beverage		Total		+ Home		Pharma		Beverage		Total

Core Sales Growth	—	%	12	%	5	%	5	%	(9)	%	7	%	(2)	%	(2)	%
Acquisitions	—	%	12	%	10	%	5	%	—	%	4	%	—	%	1	%
Currency Effects (1)	(5)	%	(6)	%	(3)	%	(5)	%	(3)	%	(2)	%	(2)	%	(2)	%
Total Reported Net Sales Growth	(5)	%	18	%	12	%	5	%	(12)	%	9	%	(4)	%	(3)	%

(1)

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

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		% of Total	2018		% of Total	2019		% of Total	2018		% of Total

Three Months Ended March 31,													2020		% of Total	2019		% of Total
Domestic	$	211,497	30%	$	181,349	27%	$	640,543	29%	$	528,210	25%	$	230,400	32%	$	213,871	29%
Europe		391,512	56%		381,472	57%		1,248,411	57%		1,232,943	59%		405,849	56%		431,368	58%
Latin America		54,685	8%		58,294	9%		170,605	8%		182,810	9%		50,794	7%		58,182	8%
Asia		43,584	6%		44,660	7%		128,840	6%		135,770	7%		34,510	5%		41,039	5%

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

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

Cost of sales (“COS”) as a percent of net sales decreased to ~~63.3%~~62.5% in the ~~third~~first quarter of ~~2019~~2020 compared to ~~65.4%~~63.0% in the ~~third~~first quarter of ~~2018.~~2019. Our COS percentage was positively impacted by our mix of business and lower material costs. The mix of business positively impacted results as ~~the~~we reported sales growth of our higher margin Pharma products ~~was greater than the~~compared to sales ~~growth of products~~declines in the other two segments. We also realized approximately $5.2 million in lower raw material input costs induring the quarter as both resin and ~~the associated positive impact from the timing of passing through resin cost reductions to our customers.~~

Cost of sales as a percent of net sales decreased to 63.2% in the first nine months of 2019 compared to 65.2% in the same period a year ago. As mentioned above, our COS was favorably impacted by the mix of Pharma business and the timing of resin pass-throughs to our customers. We also recognized lower custom tooling sales in the first nine months of 2019metal prices declined compared to the prior ~~year period. Sales~~year. We did experience some additional costs and temporary disruptions to our manufacturing capacities during the first quarter of ~~custom tooling typically generates lower margins than product sales, so lower tooling sales positively impacts cost~~2020 related to the COVID-19 pandemic. For example, we declared a special bonus payment to certain employees who worked to maintain supply to our customers and keep our facilities running, which increased our COS percentage by approximately 0.4% during the first quarter of ~~sales as a percentage of sales.~~2020.

SELLING, RESEARCH & DEVELOPMENT AND ADMINISTRATIVE

Selling, research & development and administrative expenses (“SG&A”) increased by approximately ~~$8.0~~$5.0 million to ~~$111.6~~$126.2 million in the ~~third~~first quarter of ~~2019~~2020 compared to ~~$103.6~~$121.2 million during the same period in ~~2018.~~2019. Excluding changes in foreign currency rates, SG&A increased by approximately ~~$10.6~~$7.6 million in the quarter. The increase is ~~mainly~~partly due to ~~$5.0~~$2.8 million of incremental operational costs during the ~~third~~first quarter of ~~2019~~2020 related to our acquired companies. We also recognized increases in professional fees and higher personnel costs, including $2.7 million in stock-based compensation, in accordance with our growth strategy. SG&A as a percentage of net sales increased to ~~15.9%~~17.5% compared to ~~15.5%~~16.3% in the same period of the prior year due to the cost increases mentioned above.

SG&A increased by $23.4 million to $346.5 million in the first nine months of 2019 compared to $323.1 million during the same period a year ago. Excluding changes in foreign currency rates, SG&A increased by approximately $37.2 million in the first nine months of 2019 compared to the first nine months of 2018. As discussed above, the increase is related to $18.0 million of incremental costs from our acquired companies along with higher professional fees and personnel costs to implement our growth strategy. SG&A as a percentage of net sales increased to 15.8% compared to 15.5% in the same period of the prior year.

DEPRECIATION AND AMORTIZATION

Reported depreciation and amortization expenses increased by approximately ~~$7.3~~$3.3 million to ~~$49.2~~$50.8 million in the ~~third~~first quarter of ~~2019~~2020 compared to ~~$41.9~~$47.5 million during the same period a year ago. Excluding changes in foreign currency rates, depreciation and amortization increased by approximately ~~$8.5~~$4.4 million in the quarter compared to the same period ~~a year ago.~~in 2019. This increase is ~~mainly~~partly due to ~~$5.1~~$2.0 million of incremental costs related to our acquisitions. We also increased our capital spending during the ~~current~~first quarter and the prior year to support our growth strategy. Depreciation and amortization as a percentage of net sales increased to 7.0% in the ~~third~~first quarter of ~~2019~~2020 compared to ~~6.3%~~6.4% in the same period of the prior year primarily due to the incremental increase in expenses noted above.

~~Table of Contents~~

For the first nine months of 2019, reported depreciation and amortization expenses increased by approximately $21.4 million compared to the first nine months of 2018. Excluding changes in foreign currency rates, depreciation and amortization increased by approximately $26.9 million compared to the same period a year ago. As discussed above, this increase is mainly due to $17.9 million of incremental costs from our acquisitions and increased capital spending in the prior and current year to support the growth in our business. Depreciation and amortization as a percentage of net sales increased to 6.6% in the first nine months of 2019 compared to 5.9% in the same period of the prior year.

RESTRUCTURING INITIATIVES

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Restructuring Initiatives by Segment

Beauty + Home

$
5,341

$
18,854

$
14,869

$
38,501

Pharma

168

2,008

381

3,596

Food + Beverage

204

2,638

826

4,307

Corporate & Other

306

352

1,210

1,598

Total Restructuring Initiatives

$
6,019

$
23,852

$
17,286

$
48,002

Table of Contents


Three Months Ended March 31,	2020		2019
Restructuring Initiatives by Segment
Beauty + Home	$	4,907	$	8,269
Pharma		(31)		326
Food + Beverage		103		510
Corporate & Other		(140)		425
Total Restructuring Initiatives	$	4,839	$	9,530

We estimate total implementation costs of approximately ~~$90~~$110 million, ~~over three years,~~ including costs that have been recognized to date. ~~We expect most of these costs to be incurred by the end of 2019.~~ We also anticipate making capital investments related to the business transformation of approximately $50 million, of which ~~$32~~$40 million has been incurred to date. Based on our ongoing restructuring initiatives, we are progressing towards our initial target of $80 million annualized incremental EBITDA by the end of 2020, principally within the Beauty + Home segment. ~~Ongoing~~However, in addition to impacts of COVID-19, ongoing changes in customer and vendor negotiations, material indices, macro-economic trends and other factors ~~subsequent~~represent continuing headwinds to ~~our initial restructuring initiatives may impact~~the Beauty + Home segment, and have offset the consolidated net benefits from these initiatives.

OPERATING INCOME

Operating income ~~increased~~decreased approximately ~~$29.1~~$8.6 million in the ~~third~~first quarter of ~~2019~~2020 compared to the same period a year ago. Excluding changes in foreign currency rates, operating income ~~increased~~decreased by approximately ~~$32.4~~$6.2 million in the quarter compared to the same period a year ago. We incurred lower restructuring costs and realized improved margins related to our acquisitions in the third quarter of 2019 compared to the prior year period. Additionally, this increase is partly due to the shift in product sales to our more profitable Pharma products, thus leading to a lower cost of sales. Operating income as a percentage of net sales ~~increased~~declined to ~~12.9%~~12.3% in the ~~third~~first quarter of ~~2019~~2020 compared to ~~9.2% for the same period~~13.0% in the prior year ~~due to these improvements.~~

Operating income increased approximately $67.2 million to $297.2 million in the first nine months of 2019 compared to $230.0 million in the same period of the prior year. Excluding changes in foreign currency rates, operating income increased by approximately $81.8 million in the first nine months of 2019 compared to the same period a year ago. As discussed above, this increase is due to improvements in gross marginmainly due to the ~~change~~increases in SG&A and depreciation and amortization when compared to a lower sales base as discussed above. These cost increases are partially offset by our ~~sales mix along with incremental margins associated with our acquisitions~~lower COS percentage and ~~lower~~the reduction in restructuring costs ~~reported~~ during the first ~~nine months~~quarter of ~~2019. Operating income as a percentage of net sales increased to 13.6% in the first nine months of 2019~~2020 compared to ~~11.1% for the same period in~~ the prior year.

NET OTHER EXPENSE

Net other expense in the ~~third~~first quarter of ~~2019 decreased $2.2~~2020 increased $3.3 million to ~~$8.0~~$10.4 million from ~~$10.2~~$7.1 million in the same period of the prior year. ~~For 2019, miscellaneous~~Miscellaneous expenses ~~decreased by approximately $2.7 million as a result of lower volatility in our forward contracts during 2019 compared to 2018.~~

Net other expenses for the nine months ended September 30, 2019 decreased slightly to $22.8 million from $23.0 million in the same period of the prior year. For 2019, miscellaneous expenses decreased $4.5 million due to lower volatility in our forward contracts, while net interest expense increased by approximately ~~$4.7~~$1.9 million ~~as a result of~~in part due to the ~~CSP Technologies acquisition during~~high costs to hedge certain Latin American and Asian currencies. We also experienced higher pension costs due to the ~~third quarter of 2018.~~decline in discount rates in 2020 compared to 2019.

~~Table of Contents~~

EFFECTIVE TAX RATE

The tax provision for interim periods is determined using the estimated annual effective consolidated tax rate, based on the current estimate of full-year earnings and related estimated full year-taxes, adjusted for the impact of discrete quarterly items. The effective tax rate for the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~of 31.0% reflects a $2.1 million charge from the increase~~was 29.2% and 30.0%, respectively. The decrease in the ~~tax rate in France, which is retroactive to the beginning of 2019, offset by a $2.0 million benefit from the excess tax benefits from employee stock-based compensation. The~~ effective tax rate for the three months ended ~~September 30, 2018 of 23.4%~~March 31, 2020 was ~~favorably impacted by net~~primarily due to a larger tax ~~benefits of $5.0 million from discrete events. This included a $4.5 million~~ benefit from ~~the excess tax benefits from~~ employee ~~stock-based~~share-based compensation ~~and~~offset in part by a ~~$1.9 million benefit related to U.S. tax reform legislation, offset by~~mix of other discrete ~~charges.~~items.

The effective tax rate for the nine months ended September 30, 2019 of 29.4% was favorably impacted by net tax benefits of $4.3 million from discrete events. This consisted of a favorable impact of $13.6 million from the excess tax benefits from employee stock-based compensation offset by, among other items, a $7.0 million charge recognized to record a valuation allowance to properly reflect the realization of recorded deferred tax assets and the $2.1 million charge from the French tax rate increase. The effective tax rate for the nine months ended September 30, 2018 of 25.6% was favorably impacted by net tax benefits of $15.1 million from discrete items. This included a favorable impact of $10.5 million from the excess tax benefits from employee stock-based compensation and a $5.3 million benefit related to U.S. tax reform legislation.

NET INCOME ATTRIBUTABLE TO APTARGROUP, INC.

We reported net income attributable to AptarGroup of ~~$56.8 million and $193.7~~$55.3 million in the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$39.0 million and $154.1~~$63.0 million for the same ~~periods~~period in the prior year.

BEAUTY + HOME SEGMENT

Operations that sell dispensing systems and sealing solutions to the personal care, beauty and home care markets form the Beauty + Home segment.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Three Months Ended March 31,									2020		2019

Net Sales	$	328,182	$	341,760	$	1,037,921	$	1,088,469	$	324,560	$	367,659
Adjusted EBITDA (1)		41,475		42,174		143,411		141,155		34,247		53,191
Adjusted EBITDA margin (1)		12.6%		12.3%		13.8%		13.0%		10.6%		14.5%

(1)

Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring and acquisition-related costs. 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 ~~36.~~31.

Table of Contents

Reported sales for the quarter ended ~~September 30, 2019~~March 31, 2020 decreased 4%12% to ~~$328.2~~$324.6 million compared to ~~$341.8~~$367.7 million in the ~~third~~first quarter of the prior year. Changes in currency rates negatively impacted net sales by 3%. Therefore, core sales decreased 1%9% in the ~~third~~first quarter of ~~2019~~2020 compared to the same quarter of the prior year. The ~~majority~~COVID-19 pandemic negatively impacted core sales during the first quarter of this decrease is due to reduced demand from the personal care market and a $1.5 million reduction of sales due to the pass-through of lower resin prices to our customers. Core sales to the personal care market decreased 8%. The decrease is mostly related to a general softening of 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.2020. Core sales of our products to the beauty market ~~increased 5% on strong growth in skin care and fragrance dispensing systems, primarily driven by the Chinese luxury market and retail travel. Higher sales of our~~decreased 13% as we experienced reduced orders from customers providing prestige beauty products, ~~used on insecticide applications drove the 4% core sales growth~~mainly in the ~~home care market.~~

Third Quarter 2019

Personal

Home

Net Sales Change over Prior Year

Care

Beauty

Care

Total

Core Sales Growth

(8)
%
5
%
4
%
(1)
%
Acquisitions

—
%
—
%
—
%
—
%
Currency Effects (1)

(2)
%
(3)
%
(2)
%
(3)
%
Total Reported Net Sales Growth

(10)
%
2
%
2
%
(4)
%

~~(1)~~

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

~~Table of Contents~~

~~Reported sales decreased 5% in~~travel retail and standard retail settings. Many beauty stores began closing toward the ~~first nine months of 2019 to $1.0 billion compared to $1.1 billion in the first nine months~~end of the ~~prior year. Changes~~quarter in ~~currency rates negatively impacted net sales by 5%. Core sales were flat for the first nine months of 2019 compared~~response to ~~the same period~~government shelter in ~~the prior year.~~place regulations. Core sales to the personal care market were down 5% due to general softness in demand noted above and lower product and tooling sales related to large product launch for a specific North America customer during the second quarter of 2018. Consistent with the quarter results, sales were higher across the other two markets as beauty and home care ~~increased by~~markets decreased 5% and 4%6%, ~~respectively, over the prior year period. Strong sales across all applications drove the strong results~~respectively. Increased demand for our dispensing solutions for hand sanitizers and cleaners was not enough to offset declines in ~~the beauty market, while higher product and tooling sales used on air~~other personal care and ~~insecticide applications drove the improvements in the~~ home care ~~market.~~categories such as sun care and hair care applications, which were also negatively impacted by travel restrictions and shelter in place regulations.


Nine Months Ended September 30, 2019	Personal				Home
Three Months Ended March 31, 2020									Personal				Home
Net Sales Change over Prior Year	Care		Beauty		Care		Total		Care		Beauty		Care		Total

Core Sales Growth	(5)	%	5	%	4	%	—	%	(5)	%	(13)	%	(6)	%	(9)	%
Acquisitions	—	%	1	%	—	%	—	%
Currency Effects (1)	(4)	%	(6)	%	(4)	%	(5)	%	(2)	%	(3)	%	(2)	%	(3)	%
Total Reported Net Sales Growth	(9)	%	—	%	—	%	(5)	%	(7)	%	(16)	%	(8)	%	(12)	%

(1)

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

Adjusted EBITDA in the ~~third~~first quarter of ~~2019~~2020 decreased 2%36% to ~~$41.5~~$34.2 million compared to ~~$42.2~~$53.2 million ~~reported~~ in the same period in the prior year. As discussed above, the COVID-19 pandemic affected our profitability as sales were impacted by travel restrictions and government shelter in place regulations. Our profitability was further impacted by special bonus payments to certain employees who worked to maintain supply to our customers and keep our facilities running as well as lower overhead absorption due to fluctuations in demand primarily in our facilities that manufacture beauty products. During the ~~third~~first quarter of ~~2019,~~2020, we experienced a favorable ~~material cost impacts~~impact of approximately $1.4 million due to lower raw material input costs, ~~and the 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~~however this was not enough to ~~overcome~~offset the ~~soft demand from~~general economic uncertainties which has led to lower sales to our ~~personal care customers.~~

Adjusted EBITDA in the first nine months of 2019 increased 2% to $143.4 million compared to $141.2 million reported in the same period in the prior year. Targeted price increases and favorable material cost impacts discussed above were able to offset pockets of softening sales and manufacturing headwinds at certain facilities.customers across our markets.

PHARMA SEGMENT

Operations that sell drug delivery, sealing and active packaging solutions primarily to the prescription drug, consumer health care, injectables and active packaging markets form the Pharma segment.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Three Months Ended March 31,									2020		2019

Net Sales	$	269,251	$	227,515	$	823,891	$	698,851	$	297,196	$	272,701
Adjusted EBITDA (1)		96,546		84,516		295,553		250,709		108,342		97,357
Adjusted EBITDA margin (1)		35.9%		37.1%		35.9%		35.9%		36.5%		35.7%

(1)

Net sales for the Pharma segment increased ~~18%~~9% in the ~~third~~first quarter of ~~2019~~2020 to ~~$269.3~~$297.2 million compared to ~~$227.5~~$272.7 million in the ~~third~~first quarter of ~~2018.~~2019. Changes in currencies negatively affected net sales by 4%2% while our acquisitions of ~~CSP Technologies,~~ Gateway, Nanopharm and ~~Nanopharm~~Noble positively impacted sales by 9%4% in the ~~third~~first quarter of ~~2019.~~2020. Therefore, core sales increased by ~~13%~~7% in the ~~third~~first quarter of ~~2019~~2020 compared to the ~~third~~first quarter of ~~2018.~~2019. Our Pharma segment had another good quarter with core sales growth across each end market with particularly strong growth in our injectables and active packaging businesses. As these two markets are currently smaller than our prescription and consumer health care markets, there is a smaller impact on the overall segment growth. The segment was not significantly impacted by the COVID-19 pandemic during the first quarter of 2020. Core sales to the prescription drug market ~~were particularly strong and~~ increased ~~17%~~2%, mainly ~~driven by increased demand for~~on continued growth in sales of our ~~innovative drug delivery systems for~~ allergic rhinitis ~~central nervous system and asthma.~~products. Core sales to the consumer health care market also increased 3%2% as increased demand for our products used on nasal ~~saline~~decongestant and eye care treatments more than compensated for some softness in demand for our ~~cough & cold and~~ nasal ~~decongestant~~saline products. ~~Core~~Injectables core sales grew ~~12% to the injectables market from~~21% on increased demand across a variety of ~~components. Active~~components while active packaging core sales ~~comparisons are~~improved 26% primarily due to our new Activ Blister packaging for the ~~one month ended September 30 since our acquisition~~launch of ~~CSP Technologies was at the end of August 2018. The increase is mostly due to strong sales of our products used for diabetes related products.~~an oral HIV preventative drug.

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Third Quarter 2019

Prescription

Consumer

Active

Net Sales Change over Prior Year

Drug

Health Care

Injectables

Packaging

Total

Core Sales Growth

17
%
3
%
12
%
19
%
13
%
Acquisitions

2
%
—
%
5
%
186
%
9
%
Currency Effects (1)

(4)
%
(3)
%
(4)
%
(7)
%
(4)
%
Total Reported Net Sales Growth

15
%
—
%
13
%
198
%
18
%

~~(1)~~

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

Net sales for the first nine months of 2019 increased by 18% to $823.9 million compared to $698.9 million in the first nine months of 2018. Changes in currencies negatively affected net sales by 6% while our acquisitions of CSP Technologies, Nanopharm and Gateway positively impacted sales by 12% in the first nine months of 2019. Therefore, core sales increased 12% in the first nine months of 2019 compared to the same period in the prior year. As discussed above, the prescription drug market core sales increase of 18% was 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 market increased 6% as increased demand for our products used on eye care and nasal saline treatments more than offset lower tooling sales. Core sales of our products to the injectables markets grew 6% due to increased demand across a variety of components. Active packaging core sales comparisons are for the one month ended September 30 since our acquisition of CSP Technologies was at the end of August 2018. The increase is mostly due to strong sales of our products used for diabetes treatment and favorable timing of some of our customer orders.


Nine Months Ended September 30, 2019	Prescription		Consumer				Active
Three Months Ended March 31, 2020											Prescription		Consumer				Active
Net Sales Change over Prior Year	Drug		Health Care		Injectables		Packaging		Total		Drug		Health Care		Injectables		Packaging		Total

Core Sales Growth	18	%	6	%	6	%	19	%	12	%	2	%	2	%	21	%	26	%	7	%
Acquisitions	1	%	—	%	2	%	805	%	12	%	1	%	—	%	19	%	—	%	4	%
Currency Effects (1)	(6)	%	(7)	%	(6)	%	(21)	%	(6)	%	(2)	%	(1)	%	(3)	%	(1)	%	(2)	%
Total Reported Net Sales Growth	13	%	(1)	%	2	%	803	%	18	%	1	%	1	%	37	%	25	%	9	%

(1)

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

Adjusted EBITDA in the ~~third~~first quarter of ~~2019~~2020 increased ~~14%~~11% to ~~$96.5~~$108.3 million compared to ~~$84.5~~$97.4 million reported in the same period of the prior year. The strong product sales growth discussed above along with incremental profit related to our acquisitions led to the increase in reported results for the ~~third~~first quarter of ~~2019~~2020 compared to the ~~third~~first quarter of ~~2018.~~

~~Adjusted~~2019. While we didn’t experience a significant impact from COVID-19 on our Pharma segment sales, we did recognize the special bonus payments discussed above which negatively impacted our adjusted EBITDA induring the first ~~nine months~~quarter of 2019 increased 18% to $295.6 million compared to $250.7 million reported in the same period of the prior year. The increased sales and results of acquisitions discussed above offset higher overhead costs and lower profitability on some tooling projects.2020.

FOOD + BEVERAGE SEGMENT

Operations that sell dispensing systems and sealing solutions to the food and beverage markets form the Food + Beverage segment.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Three Months Ended March 31,									2020		2019

Net Sales	$	103,845	$	96,500	$	326,587	$	292,413	$	99,797	$	104,100
Adjusted EBITDA (1)		18,728		15,482		56,363		46,284		15,407		16,691
Adjusted EBITDA margin (1)		18.0%		16.0%		17.3%		15.8%		15.4%		16.0%

(1)

~~Table of Contents~~

Net sales for the quarter ended ~~September 30, 2019 increased~~March 31, 2020 decreased approximately 8%4% to ~~$103.8~~$99.8 million compared to ~~$96.5~~$104.1 million in the ~~third~~first quarter of the prior year. ~~Incremental sales from our CSP Technologies acquisition positively impacted sales by 8% while changes in foreign~~Foreign currency rates had an unfavorable impact of 2% on total segment sales. Therefore, core sales ~~increased~~decreased by 2% in the ~~third~~first quarter of ~~2019~~2020 compared to the ~~third~~first quarter of ~~2018. For the segment, we realized strong product sales growth offset by a $1.6 million~~2019. This decrease ~~in the pass-through of resin price changes in the quarter ended September 30, 2019 compared~~is due to the ~~third quarter~~passing on of ~~the prior year. Core~~lower resin costs to our customers as well as lower single-serving beverage closure sales which appears to be related to the ~~food market increased 3% while core sales to the beverage market increased 1% in the third quarter of 2019 compared to the same period of the prior year.~~COVID-19 crisis. For the food market, we realized increased sales of our products used on dairy and ~~granular/powder~~spreads applications. For the beverage market, ~~high~~increased demand for our bottled water products ~~more than~~was not enough to offset ~~lower~~a decline in sales of our ~~products used on~~on-the-go functional drink ~~and juice applications, mainly in China.~~

Third Quarter 2019

Net Sales Change over Prior Year


Food

Beverage

Total

Core Sales Growth

3
%
1
%
2
%
Acquisitions

12
%
—
%
8
%
Currency Effects (1)

(2)
%
(2)
%
(2)
%
Total Reported Net Sales Growth

13
%
(1)
%
8
%

~~(1)~~

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

~~Net sales for the first nine months of 2019 increased~~products that were significantly affected by 12% to $326.6 million compared to $292.4 million in the first nine months of 2018. Incremental sales from our CSP Technologies acquisition positively impacted sales by 10% while changes in currency rates negatively impacted net sales by 3% in the first nine months of 2019. Therefore, core sales increased by 5% in the first nine months of 2019 compared to the same period in the prior year. Core sales to the food market increased 7% while core sales to the beverage market increased 3% in the first nine months of 2019 compared to the same period of the prior year. Sales to the food market increased due to strong sales of our products used on granular/powder and sauces/condiments applications, which more than offset lower tooling sales. For the beverage market, increased sales of our products used on bottled water and dairy applications compensated for a decrease in functional drink application sales in China and Europe, as the European region experienced lower temperatures early in the filling season. Lower tooling sales and the pass-through of resin price changes negatively impacted core sales compared to the first nine months of 2018 by $1.8 million and $1.4 million, respectively.COVID-19 impacts.


Nine Months Ended September 30, 2019
Three Months Ended March 31, 2020
Net Sales Change over Prior Year	Food		Beverage		Total		Food		Beverage		Total

Core Sales Growth	7	%	3	%	5	%	2	%	(13)	%	(2)	%
Acquisitions	16	%	—	%	10	%
Currency Effects (1)	(3)	%	(4)	%	(3)	%	(1)	%	(2)	%	(2)	%
Total Reported Net Sales Growth	20	%	(1)	%	12	%	1	%	(15)	%	(4)	%

(1)

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

Adjusted EBITDA in the ~~third~~first quarter of ~~2019 increased 21%~~2020 decreased 8% to ~~18.7~~$15.4 million compared to ~~$15.5~~$16.7 million reported in the same period of the prior year. This increase is due to incremental profit related to our CSP Technologies acquisition and solid core sales growth discussed above. We also benefitted from the positive timing delay of passing on resin cost decreases from previous quarters to our customers.

~~Adjusted EBITDA in the first nine months of 2019 increased 22% to $56.4 million compared to $46.3 million reported in the same period of the prior year. As~~The COVID-19 impacts discussed above, ~~our profitability was favorably impacted by our strong core sales growth, pass-through of lower resin costs~~along with special bonus payments to certain employees who worked to maintain supply to our customers and ~~incremental profit related to~~keep our ~~CSP Technologies acquisition.~~facilities running, more than offset the benefits we received from lower resin input costs and other operational improvements realized during the first quarter of 2020.

CORPORATE & OTHER

In addition to our three reporting segments, we assign certain costs to “Corporate & Other,” which is presented separately in Note 16 – Segment Information to the Notes to the Condensed Consolidated Financial Statements. For Corporate & Other, Adjusted EBITDA (which excludes net interest, taxes, depreciation, amortization, restructuring and acquisition-related costs) primarily includes certain professional fees, compensation and information system costs which are not allocated directly to our reporting segments. For the quarter ended ~~September 30, 2019,~~March 31, 2020, Corporate & Other expenses increased to ~~$9.9~~$13.8 million from ~~$8.0~~$12.8 million in the ~~third~~first quarter of ~~2018.~~2019. This increase is mainly due to higher stock-compensation expense, professional feesand other personnel costs as we continue to implement our growth strategy.

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Corporate & Other expenses in the first nine months of 2019 increased to $33.3 million compared to $28.6 million reported in the same period of the prior year. As discussed above, this increase is mainly due to higher costs as we continue to implement our 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. GAAP financial measures because they allow for a better period over period comparison of operating results by removing the impact of items that, in management’s view, do not reflect our core operating performance. These non-U.S. GAAP financial measures should not be considered in isolation or as a substitute for U.S. GAAP financial results, but should be read in conjunction with the unaudited Condensed 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.

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

We present adjusted earnings before net interest and taxes (“Adjusted EBIT”) and consolidated adjusted earnings before net interest, taxes, depreciation and amortization (“Adjusted EBITDA”), both of which exclude the business transformation charges (restructuring initiatives), acquisition-related costs and purchase accounting adjustments ~~that affected inventory values.~~related to acquisitions and investments. Our “Outlook” discussion below ~~as well as the estimated annual effective tax rate above, are~~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 exchange rates, or reliably predicted because they are not part of our routine activities, such as restructuring and acquisition-related costs.

~~Finally, we~~We provide a reconciliation of Net Debt to Net Capital as a non-U.S. GAAP measure. “Net Debt” is calculated as interest bearing debt less cash and equivalents and short-term investments while “Net Capital” is calculated as stockholders’ equity plus Net Debt. Net Debt to Net Capital measures a company’s financial leverage, which gives users an idea of a company's financial structure, or how it is financing its operations, along with insight into its financial strength. We believe that it is meaningful to take into consideration the balance of our cash and 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 measuring our ability to generate cash internally to fund our initiatives.

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Table of Contents


	Three Months Ended												Three Months Ended
	September 30, 2019												March 31, 2020

	Consolidated		Beauty + Home		Pharma		Food + Beverage		Corporate & Other		Net Interest		Consolidated		Beauty + Home		Pharma		Food + Beverage		Corporate & Other		Net Interest
Net Sales	$	701,278	$	328,182	$	269,251	$	103,845	$	-	$	-	$	721,553	$	324,560	$	297,196	$	99,797	$	-	$	-

Reported net income	$	56,769											$	55,250
Reported income taxes		25,504												22,786
Reported income before income taxes		82,273		15,413		78,418		9,323		(12,940)		(7,941)		78,036		7,108		89,854		5,962		(16,675)		(8,213)
Adjustments:
Restructuring initiatives		6,019		5,341		168		204		306				4,839		4,907		(31)		103		(140)
Transaction costs related to acquisitions		708		34		520		154						1,384		1,384
Purchase accounting adjustments related to acquired companies' inventory and backlog		647				647
Purchase accounting adjustments related to acquisitions and investments														1,390		262		1,128
Adjusted earnings before income taxes		89,647		20,788		79,753		9,681		(12,634)		(7,941)		85,649		13,661		90,951		6,065		(16,815)		(8,213)
Interest expense		8,898										8,898		8,388										8,388
Interest income		(957)										(957)		(175)										(175)
Adjusted earnings before net interest and taxes (Adjusted EBIT)		97,588		20,788		79,753		9,681		(12,634)		-		93,862		13,661		90,951		6,065		(16,815)		-
Depreciation and amortization		49,218		20,687		16,793		9,047		2,691		-		50,806		20,586		17,891		9,342		2,987		-
Purchase accounting adjustments included in Depreciation and amortization above														(500)				(500)
Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)	$	146,806	$	41,475	$	96,546	$	18,728	$	(9,943)	$	-	$	144,168	$	34,247	$	108,342	$	15,407	$	(13,828)	$	-

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)		20.9%		12.6%		35.9%		18.0%						20.0%		10.6%		36.5%		15.4%


	Three Months Ended													Three Months Ended
	September 30, 2018													March 31, 2019

	Consolidated		Beauty + Home		Pharma		Food + Beverage		Corporate & Other		Net Interest			Consolidated		Beauty + Home		Pharma		Food + Beverage		Corporate & Other		Net Interest
Net Sales	$	665,775	$	341,760	$	227,515	$	96,500	$	-	$	-		$	744,460	$	367,659	$	272,701	$	104,100	$	-	$	-

Reported net income	$	39,022												$	62,999
Reported income taxes		11,920													27,000
Reported income before income taxes		50,942		3,471		67,016		5,481		(17,828)		(7,198)			89,999		24,181		81,258		7,716		(15,690)		(7,466)
Adjustments:
Restructuring initiatives		23,852		18,854		2,008		2,638		352					9,530		8,269		326		510		425
Transaction costs related to acquisitions		7,082								7,082
Purchase accounting adjustments related to acquired companies' inventory		3,287				2,761		526
Adjusted earnings before income taxes		85,163		22,325		71,785		8,645		(10,394)		(7,198)			99,529		32,450		81,584		8,226		(15,265)		(7,466)
Interest expense		8,735										8,735			9,214										9,214
Interest income		(1,537)										(1,537)			(1,748)										(1,748)
Adjusted earnings before net interest and taxes (Adjusted EBIT)		92,361		22,325		71,785		8,645		(10,394)		-			106,995		32,450		81,584		8,226		(15,265)		-
Depreciation and amortization		41,857		19,849		12,731		6,837		2,440		-			47,489		20,741		15,773		8,465		2,510		-
Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)	$	134,218	$	42,174	$	84,516	$	15,482	$	(7,954)	$	-	��	$	154,484	$	53,191	$	97,357	$	16,691	$	(12,755)	$	-

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)		20.2%		12.3%		37.1%		16.0%							20.8%		14.5%		35.7%		16.0%

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Table of Contents

Nine Months Ended

September 30, 2019


Consolidated

Beauty + Home

Pharma

Food + Beverage

Corporate & Other

Net Interest
Net Sales

$
2,188,399

$
1,037,921

$
823,891

$
326,587

$
-

$
-

Reported net income

$
193,689

Reported income taxes

80,684

Reported income before income taxes

274,373

66,407

244,101

29,234

(42,239)

(23,130)
Adjustments:

Restructuring initiatives

17,286

14,869

381

826

1,210

Transaction costs related to acquisitions

1,767

34

1,579

154

Purchase accounting adjustments related to acquired companies' inventory and backlog

869

869

Adjusted earnings before income taxes

294,295

81,310

246,930

30,214

(41,029)

(23,130)
Interest expense

26,868

26,868
Interest income

(3,738)

(3,738)
Adjusted earnings before net interest and taxes (Adjusted EBIT)

317,425

81,310

246,930

30,214

(41,029)

-
Depreciation and amortization

144,574

62,101

48,623

26,149

7,701

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

$
461,999

$
143,411

$
295,553

$
56,363

$
(33,328)

$
-

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)

21.1%

13.8%

35.9%

17.3%


Net Debt to Net Capital Reconciliation		March 31,		December 31,
		2020		2019

Notes payable, revolving credit facility and overdrafts	$	220,511	$	44,259
Current maturities of long-term obligations, net of unamortized debt issuance costs		65,049		65,988
Long-Term Obligations, net of unamortized debt issuance costs		1,075,745		1,085,453
Total Debt		1,361,305		1,195,700
Less:
Cash and equivalents		410,840		241,970
Net Debt	$	950,465	$	953,730

Total Stockholders' Equity	$	1,587,623	$	1,572,252
Net Debt		950,465		953,730
Net Capital	$	2,538,088	$	2,525,982

Net Debt to Net Capital		37.4%		37.8%

Nine Months Ended

September 30, 2018


Consolidated

Beauty + Home

Pharma

Food + Beverage

Corporate & Other

Net Interest
Net Sales

$
2,079,733

$
1,088,469

$
698,851

$
292,413

$
-

$
-

Reported net income

$
154,091

Reported income taxes

52,966

Reported income before income taxes

207,057

40,688

208,915

21,736

(45,834)

(18,448)
Adjustments:

Restructuring initiatives

48,002

38,501

3,596

4,307

1,598

Transaction costs related to acquisitions

9,526

574

8,952

Purchase accounting adjustments related to acquired companies' inventory

3,406

119

2,761

526

Adjusted earnings before income taxes

267,991

79,882

215,272

26,569

(35,284)

(18,448)
Interest expense

24,754

24,754
Interest income

(6,306)

(6,306)
Adjusted earnings before net interest and taxes (Adjusted EBIT)

286,439

79,882

215,272

26,569

(35,284)

-
Depreciation and amortization

123,133

61,273

35,437

19,715

6,708

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

$
409,572

$
141,155

$
250,709

$
46,284

$
(28,576)

$
-

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)

19.7%

13.0%

35.9%

15.8%

~~Table of Contents~~

Net Debt to Net Capital Reconciliation

September 30,

December 31,

2019

2018

Notes payable, including revolving credit facilities

$
46,276

$
101,293

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

64,941

62,678

Long-Term Obligations, net of unamortized debt issuance costs

1,075,153

1,125,993

Total Debt

1,186,370

1,289,964

Less:

Cash and equivalents

270,577

261,823

Net Debt

$
915,793

$
1,028,141

Total Stockholders' Equity

$
1,553,979

$
1,422,871

Net Debt

915,793

1,028,141

Net Capital

$
2,469,772

$
2,451,012

Net Debt to Net Capital

37.1%

41.9%


Free Cash Flow Reconciliation		March 31,		March 31,
		2020		2019

Net Cash Provided by Operations	$	85,033	$	77,636

Less:
Capital Expenditures		61,625		51,742
Free Cash Flow	$	23,408	$	25,894

FOREIGN CURRENCY

Because of our international presence, movements in exchange rates may have a significant impact on the translation of the financial statements of our foreign subsidiaries. Our primary foreign exchange exposure is to the euro, but we also have foreign exchange exposure to the Chinese yuan, Brazilian real, Mexican peso, Swiss franc 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 statements. Conversely, a weakening U.S. dollar has an additive effect. In some cases, we sell products denominated in a currency different from the currency in which the related costs are incurred. 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. Changes in exchange rates on such inter-country sales could materially impact our results of operations. During the ~~third~~first quarter of ~~2019~~2020 the U.S. dollar strengthened compared to the ~~euro.~~euro and other currencies in Latin America and Asia. This resulted in a dilutive impact on our translated results during the ~~third~~first quarter of ~~2019~~2020 when compared to the ~~third~~first quarter of 2018. Beginning July 1, 2018, we have applied highly inflationary accounting for our Argentinian subsidiaries. We have changed the functional currency from the Argentinian peso to the U.S. dollar. Our Argentinian operations contributed less than 2% of consolidated net assets and revenues at and for the nine months ended September 30, 2019.

QUARTERLY TRENDS

Our results of operations in the last quarter of the year typically are negatively impacted by customer plant shutdowns in December. In addition to the ~~future,~~impacts of COVID-19, our results of operations in a quarterly period could be impacted by factors such as the seasonality of certain products within our segments, changes in foreign currency rates, changes in product mix, changes in material costs, changes in growth rates in the markets to which our products are sold and changes in general economic conditions in any of the countries in which we do business.

Historically, we have incurred higher employee stock compensation expense in the first quarter compared with the rest of the fiscal year due to the timing and recognition of stock option expense. During 2019, we transitioned from employee stock options to RSUs and PSUs and therefore we do not anticipate as much variability in expense between quarters in the future. Our estimated total stock-based compensation expense on a pre-tax basis (in $ millions) for the year 2019 compared to 2018 is as follows:

2019

2018

First Quarter

$
6.5

$
7.5

Second Quarter

6.5

3.4

Third Quarter

5.1

3.9

Fourth Quarter (estimated for 2019)

6.1

4.8

$
24.2

$
19.6

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LIQUIDITY AND CAPITAL RESOURCES

WeGiven the diversification of our segments, 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~~Our Pharma segment provided strong operating cash ~~flow from operations,~~flows to balance out the temporary softness in some of our ~~revolving credit facilities~~Beauty + Home and ~~debt, as needed, as our primary sources~~Food + Beverage markets during the first quarter of ~~liquidity.~~2020. 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~~Amid the COVID-19 pandemic, we are focused on preserving our liquidity ~~include~~and therefore we have temporarily suspended repurchasing shares of our common stock and ~~paying~~contributions to our defined benefit plans. However, we intend to continue to pay quarterly dividends to ~~stockholders.~~our stockholders, invest in our business and make acquisitions, as considered necessary to achieve our strategic objectives. In the event that customer demand would decrease significantly for a prolonged period of time due to the COVID-19 pandemic and ~~negatively~~adversely impact our 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.~~strategy. 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.

Cash and equivalents increased to ~~$270.6~~$414.8 million at ~~September 30, 2019~~March 31, 2020 from ~~$261.8~~$247.0 million at December 31, ~~2018.~~2019. Total short and long-term interest bearing debt of ~~$1.2~~$1.4 billion at ~~September 30, 2019 decreased~~March 31, 2020 increased from ~~the $1.3~~$1.2 billion at December 31, ~~2018~~2019 resulting from ~~repayments made during the year on~~$175.0 million in net proceeds from our group credit ~~facilities and long-term debt obligations.~~facility during the first quarter of 2020 the majority of which was utilized to fund the second quarter Fusion acquisition. The ratio of our Net Debt (interest bearing debt less cash and equivalents) to Net Capital (stockholders’ equity plus Net Debt) decreased to ~~37.1%~~37.4% at ~~September 30, 2019~~March 31, 2010 compared to ~~41.9%~~37.8% at December 31, ~~2018.~~2019. See the reconciliation of non-U.S. GAAP measures starting on page ~~36.~~31.

In the first ~~nine~~three months of ~~2019,~~2020, our operations provided approximately ~~$380.4~~$85.0 million in net cash flow compared to ~~$209.6~~$77.6 million for the same period a year ago. In both periods, cash flow from operations was primarily derived from earnings before depreciation and amortization. The increase in cash provided by operations during the first ~~nine~~three months of ~~2019~~2020 is primarily attributable to the lower restructuring costs ~~improved profitability~~ and better working capital management.

We used ~~$224.0~~$88.1 million in cash for investing activities during the first ~~nine~~three months of ~~2019~~2020 compared to ~~$668.7~~$39.1 million during the same period a year ago. Our investment in capital projects increased ~~$41.5~~$9.9 million during the first ~~nine~~three months of ~~2019~~2020 compared to the first ~~nine months of 2018, which was driven by $19.3 million of additions related to our CSP Technologies and Nanopharm acquisitions. During the first nine~~three months of 2019, $48.9 million of cash was utilized to fund our Gateway, Nanopharm and Bapco acquisitions; we also released $4.0 million relating to the final escrow settlement on our acquisition of CSP Technologies and invested $3.5 millionas projects in ~~two preferred equity investments which are accounted for~~progress at cost. We received $16.5 million from the sale of our investment in Reciprocal Labs Corporation, doing business as Propeller Health. During the first nine months of 2018, approximately $553.5 million of our cash (net of $24.1 million of cash acquired) was utilized to fund our acquisition of CSP Technologies during 2018. $5.0 million was held in restricted cash pending the finalization of the working capital adjustment, which was completedyear end were paid during the first quarter of ~~2019. We also~~2020. During the first three months of 2020, we invested ~~$10.0~~$20.4 million in ~~preferred~~our 49% equity ~~stock~~interest of ~~Reciprocal Labs Corporation,~~BTY, which ~~was~~is accounted for ~~at cost,~~as an equity method investment. Additionally, we released $1.0 million relating to the working capital escrow settlement and ~~acquired Reboul,~~paid an additional $463 thousand as a ~~French manufacturer specializing in stamping, decorating and assembling metal and plastic packaging for the cosmetics and luxury markets, for an initial purchase price~~working capital payment related to our acquisition of ~~approximately $3.6 million (net of $112 thousand of cash acquired).~~Noble. Our ~~2019~~2020 estimated cash outlays for capital expenditures are expected to be in the range of approximately ~~$240~~$220 to ~~$260~~$240 million but could vary due to changes in exchange rates as well as the timing of capital projects.

Financing activities ~~used $146.2~~provided $174.3 million in cash during the first ~~nine~~three months of ~~2019~~2020 compared to ~~$50.3~~$90.8 million in cash ~~provided~~used by financing activities during the same period a year ago. During the first ~~nine~~three months of ~~2019,~~2020, we received net proceeds from our U.S. short term credit facility of $175.0 million and stock option exercises of ~~$81.8~~$18.6 million. We used cash on hand to pay ~~$67.2~~$23.0 million of dividends ~~repay $47.3~~and repayments of $4.4 million onrelated to our ~~revolving credit facility and repurchase $54.9 million of treasury stock.~~outstanding debt obligations.

We hold U.S. dollar and euro-denominated debt to align our capital structure with our earnings base. We also maintain a 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-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 our consolidated leverage ratio. ~~The December 31, 2018 outstanding~~$200.0 million was utilized under our U.S. facility and no balance ~~of €69.0 million on the~~was utilized under our euro-based revolving credit facility as of March 31, 2020. The $25.0 million balance at December 31, 2019 under our U.S. credit facility was ~~paid in~~repaid during the first quarter of ~~2019. €27.0 million was utilized as of September 30, 2019.~~2020. Credit facility balances are included in notes payable, including revolving credit facilities on the Condensed Consolidated Balance ~~Sheet.~~Sheets.

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


	Requirement	Level at ~~September 30, 2019~~March 31, 2020
Consolidated Leverage Ratio (1)	Maximum of 3.50 to 1.00	~~1.68~~1.73 to 1.00
Consolidated Interest Coverage Ratio (1)	Minimum of 3.00 to 1.00	~~16.07~~16.32 to 1.00

(1)	Definitions of ratios are included as part of the revolving credit facility agreement and the note purchase agreements.

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

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Our foreign operations have historically met cash requirements with the use of internally generated cash or uncommitted short-term borrowings. We also have committed financing arrangements in both the U.S. and UK as detailed 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.

On ~~October 17, 2019,~~April 15, 2020, the Board of Directors declared a quarterly cash dividend of $0.36 per share payable on ~~November~~May 20, ~~2019~~2020 to stockholders of record as of ~~October 30, 2019.~~April 29, 2020.

CONTINGENCIES

The Company, in the normal course of business, is subject to a number of lawsuits and claims both actual and potential in nature. Please refer to Note 12 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements for a discussion of contingencies affecting our business.

OFF-BALANCE SHEET ARRANGEMENTS

We lease certain warehouse, plant and office facilities as well as certain equipment under noncancelable operating 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. 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 not have significant off-balance sheet arrangements. Please refer to Note 7 – ~~Lease Commitments~~Leases of the Notes to Condensed Consolidated Financial ~~Statements for lease arrangements that have not yet commenced and therefore are not included on the balance sheet.~~Statements.

RECENTLY ISSUED ACCOUNTING STANDARDS

We have reviewed the recently issued accounting standards updates to the FASB’s Accounting Standards Codification that have future effective dates. Standards that are effective for ~~2019~~2020 are discussed in Note 1 – Summary of Significant Accounting Policies of the Notes to ~~Condensed Consolidated Financial Statements.~~

In June 2016, the FASB issued ASU 2016-13, which changes the accounting guidance for measurement of credit losses on financial instruments. The guidance replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information when recording credit loss estimates. The new standard is effective for fiscal years and interim periods beginning after December 15, 2019. We are currently evaluating the impact of adopting this guidance.

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. We do not believe that this new guidance will have a material impact on our Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-14, which amends disclosure requirements for defined benefit pension and other postretirement plans. The amendments in this update remove disclosures that are no longer considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The new standard is effective for fiscal years ending after December 15, 2020. As this update amends disclosure requirements, we do not expect any significant impact around adopting this guidance.

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 contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. The new standard is effective for fiscal years beginning after December 15, 2019. We are currently evaluating the impact of adopting this guidance.

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Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our Condensed Consolidated Financial Statements upon adoption.

OUTLOOK

Factors that could impact our second quarter results, include among other things, the duration and severity of the COVID-19 pandemic, the pace and scope of reopening in regions that are currently under government confinement orders, the speed at which beauty and other retail stores open, the willingness of consumers to participate in those shopping channels, the rate at which airline travel will resume and the general level of on-the-go consumption particularly with certain beverage products.

Aptar expects the near-term effects related to the COVID-19 pandemic to continue through the second quarter and anticipates that they will be more pronounced than the Company experienced in the first quarter. The results of Aptar’s Beauty + Home segment are expected to be significantly impacted by continued softness across each end market primarily related to the effects of COVID-19. In addition, the Food + Beverage segment, which had very strong growth in the prior year second quarter, is expected to see continued softness in the on-the-go beverage market primarily related to COVID-19 and the impact from passing on lower resin costs. Aptar’s Pharma segment is facing difficult comparisons compared to the prior year’s exceptional growth, especially within its prescription division. Aptar’s second quarter results are expected to include expenses of approximately $3.6 million (pretax) related to the Thank You Award being given to employees who have made it possible for Aptar to continue to supply critical infrastructure industries during the COVID-19 crisis.

We expect earnings per share for the ~~fourth~~second quarter of 2020, excluding any restructuring ~~costs~~expenses and ~~acquisition related expenses,~~acquisition-related costs, to be in the range of ~~$0.74~~$0.58 to ~~$0.80~~$0.73 and this guidance is based on an effective tax rate range of ~~30%~~31% to ~~32%. The effective tax rate on adjusted earnings for the prior year fourth quarter was approximately 29%~~33%.

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FORWARD-LOOKING STATEMENTS

Certain statements in Management’s Discussion and Analysis and other sections of this Form 10-Q are forward-looking and involve a number of risks and uncertainties, including certain statements set forth in the Significant Developments, Restructuring Initiatives, Quarterly Trends, Liquidity and Capital Resources, Contingencies and Outlook sections of this Form 10-Q. 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-looking statements. Forward-looking statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and are based on our beliefs as well as assumptions made by and information currently available to us. Accordingly, our actual results may differ materially from those expressed or implied in such forward-looking statements due to known or unknown risks and uncertainties that exist in our operations and business environment including, but not limited to:

●	outbreaks of pandemics, including the impact of COVID-19 on our global supply chain and our global customers and operations, which has elevated and may or will continue to elevate many of the risks and uncertainties discussed below;

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

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

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

●	the impact of tax reform 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);

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

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

●	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 and products, including the successful integration of the businesses we have ~~acquired;~~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;

●	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;

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●	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.

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Although we believe that our forward-looking statements are based on reasonable assumptions, there can be no assurance that actual results, performance or achievements will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Please refer to Item 1A ~~(“Risk Factors”)~~(Risk Factors) of Part I included in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 and to Item 1A (Risk Factors) of Part II of this report for additional risk factors affecting the Company.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A significant number of our operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of our entities. Our primary foreign exchange exposure is to the euro, but we also have foreign exchange exposure to the Chinese yuan, Brazilian real, Mexican peso and Swiss franc, among other Asian, European, and South American currencies. A ~~strengthening~~weakening U.S. dollar relative to foreign currencies has ~~a dilutive~~an additive translation effect on our financial condition and results of operations. Conversely, a ~~weakening~~strengthening U.S. dollar relative to foreign currencies has ~~an additive~~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-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 ~~September 30, 2019~~March 31, 2020 about our forward currency exchange contracts. The majority of the contracts expire before the end of the ~~third~~second quarter of ~~2019.~~2020.


			Average	Min / Max			Average	Min / Max
		Contract Amount	Contractual	Notional		Contract Amount	Contractual	Notional
Buy/Sell		(in thousands)	Exchange Rate	Volumes		(in thousands)	Exchange Rate	Volumes

EUR / USD	$	14,138	1.1164	13,919-28,394	$	22,646	1.1074	18,669-22,646
EUR / BRL		11,688	4.6254	11,646-12,814		9,376	4.8745	9,376-11,407
CHF / EUR		6,518	0.9079	6,518-6,792		6,089	0.9387	6,040-6,605
EUR / IDR		4,673	17.1408	4,409-4,673
EUR / INR		4,042	78.6460	3,975-4,138		3,781	79.7800	3,781-3,981
GBP / EUR		1,360	1.1158	831-1,360
CZK / EUR						3,169	0.0384	0-3,169
EUR / MXN		613	22.1501	613-687		2,137	21.5937	1,999-2,239
USD / EUR		473	0.8940	473-7,245		2,085	0.8972	1,322-4,978
USD / CNY						2,000	7.0663	2,000-2,000
EUR / CHF						1,773	1.0587	0-1,773
MXN / USD						1,384	0.0519	557-1,384
CHF / USD		352	1.0179	10-519		835	1.0367	0-835
MXN / USD		29	0.0518	9-29
GBP / EUR						718	1.1774	718-1,544
USD / CHF						130	0.9551	0-130
Total	$	43,887			$	56,123

As of ~~September 30, 2019,~~March 31, 2020, we have recorded the fair value of foreign currency forward exchange contracts of ~~$0.04~~$2.1 million in prepaid and other and ~~$0.6~~$0.5 million in accounts payable and accrued liabilities on the balance sheet. We 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 our wholly-owned UK subsidiary. The fair value of this cash flow hedge is ~~$6.7~~$6.8 million reported in prepaid and other on the balance sheet.

ITEM 4. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Management has evaluated, with the participation of the chief executive officer and chief financial officer of the Company, the effectiveness of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of ~~September 30, 2019.~~March 31, 2020. 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.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

NoDuring the fiscal quarter ended March 31, 2020, we implemented enterprise resource planning (“ERP”) systems at two operating facilities. Consequently, the control environments have been modified at these locations to incorporate the controls contained within the new ERP systems. Except for the foregoing, no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during our fiscal quarter ended ~~September 30, 2019~~March 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Amid the COVID-19 pandemic, we have implemented remote work arrangements and restricted non-essential business travel. These arrangements have not materially affected our ability to maintain our business operations, including the operation of financial reporting systems, internal control over financial reporting and disclosure controls and procedures.

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PART II - OTHER INFORMATION

ITEM 1A. RISK FACTORS

The following risk factors are in addition to the risks described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 under Item 1A, “Risk Factors” filed with the SEC pursuant to the Exchange Act. The effects of the events and circumstances described in the following risk factors have elevated and may or will continue to elevate many of the risks contained in the Company’s Form 10-K, including the risks relating to a deterioration in economic conditions in a particular region or market, our fixed costs structure, reliance on single sourced materials and manufacturing sites and potential asset impairments.

The COVID-19 pandemic is currently adversely affecting our business. Additional factors could exacerbate such negative consequences and/or cause other materially adverse effects. The COVID-19 pandemic adversely affected our sales of products to our travel and retail beauty business and on-the-go beverage customers in the quarter ended March 31, 2020 and that adverse impact has continued into the second quarter. Since the end of the quarter, economic and health conditions in the United States and across most of the globe have changed rapidly. Customer demand across all segments, particularly our Beauty + Home and Food + Beverage segments, may decrease further from historical levels depending on the duration and severity of the COVID-19 pandemic, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties. Such events may result in business and manufacturing disruption, inventory shortages due to disruptions to our supply chain and distribution channels, delivery delays, increased risk associated with customer payments and reduced sales and operations, any of which could materially affect our stock price, business prospects, financial condition, results of operations and liquidity.

The ability of our employees to work may be significantly impacted by COVID-19.The majority of our office and management personnel are working remotely and the majority of our facilities remained operational during the first quarter of 2020 as each of our segments produce dispensing systems that have been determined to be essential products by various government agencies around the world. The health and safety of our workforce is of primary concern and we may need to enact further precautionary measures to help minimize the risk of our employees being exposed to the virus. Further, our management team is focused on mitigating the adverse effects of the COVID-19 pandemic, which has required and will continue to require a large investment of time and resources across the entire company, thereby diverting their attention from other priorities that existed prior to the outbreak of the pandemic. If these conditions worsen, or last for an extended period of time, our ability to manage our business may be impaired, and operational risks, cybersecurity risks and other risks facing us even prior to the pandemic may be elevated.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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 ~~September 30, 2019,~~March 31, 2020, the Plan purchased ~~1,931~~10,487 shares of our common stock on behalf of the participants at an average price of ~~$118.55,~~$98.22, for an aggregate amount of ~~$229 thousand.~~$1.0 million. The Plan sold ~~1,992~~12,202 shares of our common stock on behalf of the participants at an average price of ~~$122.38,~~$98.35, for an aggregate amount of ~~$244 thousand~~$1.2 million during the same period. At ~~September 30, 2019,~~March 31, 2020, the Plan owned ~~85,550~~88,478 shares of our common stock.

ISSUER PURCHASES OF EQUITY SECURITIES

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

During the three months ended ~~September 30, 2019,~~March 31, 2020, we ~~repurchased approximately 300 thousand~~did not repurchase any shares. As of March 31, 2020, there was $278.5 million of authorized share repurchases available to us. Amid the COVID-19 pandemic, we are focused on preserving our liquidity and therefore we have temporarily suspended repurchasing shares ~~for approximately $35.8 million.~~

~~The following table summarizes our purchases~~ of our ~~securities for the quarter ended September 30, 2019:~~common stock.

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)

7/1 – 7/31/19

38,721

$
122.95

38,721

$
341.1

8/1 – 8/31/19

82,462

119.27

82,462

331.3

9/1 – 9/30/19

178,938

118.37

178,938

310.1

Total

300,121

$
119.21

300,121

$
310.1

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ITEM 6. EXHIBITS




Exhibit 10.1		Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Performance-Based Vesting Form) (U.S./Mexico/Argentina employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan.

Exhibit 10.2		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.

Exhibit 10.3		Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Performance-Based Vesting Form) (All Other Employees) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan.

Exhibit 10.4		Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Service-Based Vesting Form) (U.S./Mexico/Argentina employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan.

Exhibit 10.5		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.

Exhibit 10.6		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.

Exhibit 31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101		The following information from our Quarterly Report on Form 10-Q for the ~~third~~first quarter of fiscal ~~2019,~~2020, filed with the SEC on ~~November~~May 1, ~~2019,~~2020, formatted in Inline Extensible Business Reporting Language (XBRL): (i) the Cover Page, (ii) the Condensed Consolidated Statements of Income – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ (iii) the Condensed Consolidated Statements of Comprehensive Income – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ (iv) the Condensed Consolidated Balance Sheets – ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, (v) the Condensed Consolidated Statements of Changes in Equity – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ (vi) the Condensed Consolidated Statements of Cash Flows - ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ and (vii) the Notes to Condensed Consolidated Financial Statements.
Exhibit 104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

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Table of Contents

SIGNATURE

Pursuant to the requirements 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.
		(Registrant)

	By	/s/ ROBERT W. KUHN
		Robert W. Kuhn
		Executive Vice President,
		Chief Financial Officer and Secretary
		(Duly Authorized Officer and
		Principal Accounting and Financial Officer)


		Date: ~~November~~May 1, ~~2019~~2020

4742


		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 and accrued 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


	September 30, 2019
Operating Leases
Operating lease right-of-use assets	$	72,481

Accounts payable and accrued liabilities	$	16,351
Operating lease liabilities		55,278
Total operating lease liabilities	$	71,629

Finance Leases
Property, plant and equipment, gross	$	43,042
Accumulated depreciation		(3,125)
Property, plant and equipment, net	$	39,917

Current maturities of long-term obligations, net of unamortized debt issuance cost	$	3,856
Long-term obligations, net of unamortized debt issuance cost		23,701
Total finance lease liabilities	$	27,557

Weighted Average Remaining Lease Term (in years)
Operating leases		6.0
Finance leases		7.1

Weighted Average Discount Rate
Operating leases		5.06	%
Finance leases		5.34	%


	Operating		Finance
	Leases		Leases
Year 1	$	19,113	$	5,028
Year 2		15,763		4,470
Year 3		11,167		3,659
Year 4		9,515		2,794
Year 5		7,177		2,340
Thereafter		21,337		17,433
Total lease payments		84,072		35,724
Less imputed interest		(12,443)		(8,167)
Total	$	71,629	$	27,557


	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


Third Quarter 2019	Beauty				Food +
Net Sales Change over Prior Year	+ Home		Pharma		Beverage		Total

Core Sales Growth	(1)	%	13	%	2	%	4	%
Acquisitions	—	%	9	%	8	%	4	%
Currency Effects (1)	(3)	%	(4)	%	(2)	%	(3)	%
Total Reported Net Sales Growth	(4)	%	18	%	8	%	5	%


	2019		2018
First Quarter	$	6.5	$	7.5
Second Quarter		6.5		3.4
Third Quarter		5.1		3.9
Fourth Quarter (estimated for 2019)		6.1		4.8
	$	24.2	$	19.6


					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)

7/1 – 7/31/19	38,721	$	122.95	38,721	$	341.1
8/1 – 8/31/19	82,462		119.27	82,462		331.3
9/1 – 9/30/19	178,938		118.37	178,938		310.1
Total	300,121	$	119.21	300,121	$	310.1