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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ----to----
COMMISSION FILE NUMBER 1-11846
AptarGroup, Inc.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-3853103
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
475 West Terra Cotta Avenue, Suite E, Crystal Lake, Illinois 60014
- ------------------------------------------------------------ -----
(Address of Principal Executive Offices) (Zip Code)
815-477-0424
------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ________
-------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date (May 8, 2001).
Common Stock 35,758,379
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AptarGroup, Inc.
Form 10-Q
Quarter Ended March 31, 2001
INDEX
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income -
Three Months Ended March 31, 2001
and 2000 (Unaudited) 3
Consolidated Balance Sheets -
March 31, 2001 and December 31, 2000
(Unaudited) 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2001 and 2000
(Unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 16
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
2
AptarGroup, Inc.
Consolidated Statements of Income
For the Three Months Ended March 31, 2001 and 2000
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
-------------------
2001 2000
-------- --------
Net Sales.............................................. $232,899 $217,646
-------- --------
Operating Expenses:
Cost of sales......................................... 146,347 134,318
Selling, research & development and administrative.... 36,581 36,357
Depreciation and amortization......................... 18,697 18,380
-------- --------
201,625 189,055
-------- --------
Operating Income....................................... 31,274 28,591
-------- --------
Other Income (Expense):
Interest expense...................................... (4,634) (4,122)
Interest income....................................... 671 179
Equity in results of affiliates....................... (36) (225)
Minority interests.................................... (240) (57)
Miscellaneous, net.................................... 252 829
-------- --------
(3,987) (3,396)
-------- --------
Income Before Income Taxes............................. 27,287 25,195
Provision for Income Taxes............................. 9,113 8,919
-------- --------
Net Income Before Cumulative Effect of a Change in
Accounting Principle for Derivative Instruments and
Hedging Activities.................................... $ 18,174 $ 16,276
-------- --------
Cumulative Effect of a Change in Accounting Principle.. (64) --
-------- --------
Net Income............................................. $ 18,110 $ 16,276
======== ========
Net Income Per Common Share:
Basic................................................. $ .51 $ .45
======== ========
Diluted............................................... $ .50 $ .45
======== =========
Average number of shares outstanding:
Basic................................................. 35,683 36,136
Diluted............................................... 36,344 36,466
See accompanying notes to consolidated financial statements.
3
AptarGroup, Inc.
Consolidated Balance Sheets
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
March 31, December 31,
2001 2000
--------- ------------
Assets
Current Assets:
Cash and equivalents........................................ $ 55,689 $ 55,559
Accounts and notes receivable, less allowance for doubtful
accounts of $6,708 in 2001 and $6,927 in 2000.............. 206,105 210,794
Inventories................................................. 122,706 121,522
Prepayments and other....................................... 20,482 19,674
--------- ---------
404,982 407,549
--------- ---------
Property, Plant and Equipment:
Buildings and improvements.................................. 106,442 108,905
Machinery and equipment..................................... 662,362 665,991
-------- ---------
768,804 774,896
Less: Accumulated depreciation.............................. (408,980) (402,412)
--------- ---------
359,824 372,484
Land........................................................ 4,695 4,949
--------- ---------
364,519 377,433
--------- ---------
Other Assets:
Investments in affiliates................................... 10,587 11,127
Goodwill, less accumulated amortization of $13,479
in 2001 and $13,093 in 2000................................ 124,454 127,754
Miscellaneous............................................... 26,838 28,376
--------- ---------
161,879 167,257
--------- ---------
Total Assets............................................ $ 931,380 $ 952,239
========= =========
See accompanying notes to consolidated financial statements.
4
AptarGroup, Inc.
Consolidated Balance Sheets
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
March 31, December 31,
2001 2000
--------- ------------
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable...................................... $ 24,110 $ 29,248
Current maturities of long-term obligations........ 8,460 10,326
Accounts payable and accrued liabilities........... 160,361 163,528
--------- --------
192,931 203,102
--------- --------
Long-Term Obligations............................... 252,819 252,752
--------- --------
Deferred Liabilities and Other:
Deferred income taxes.............................. 35,334 35,873
Retirement and deferred compensation plans......... 12,162 12,597
Minority interests................................. 4,998 5,050
Deferred and other non-current liabilities......... 1,824 2,325
--------- --------
54,318 55,845
--------- --------
Stockholders' Equity:
Common stock, $.01 par value....................... 368 366
Capital in excess of par value..................... 117,105 115,034
Retained earnings.................................. 455,584 439,258
Accumulated other comprehensive income............. (116,053) (89,163)
Less treasury stock at cost, 1,025 shares in 2001
and 1,000 shares in 2000........................ (25,692) (24,955)
--------- --------
431,312 440,540
--------- --------
Total Liabilities and Stockholders' Equity......... $ 931,380 $952,239
========= ========
See accompanying notes to consolidated financial statements.
5
AptarGroup, Inc.
Consolidated Statements of Cash Flows
(Amounts in Thousands, brackets denote cash outflows)
(Unaudited)
Three Months Ended March 31,
----------------------------
2001 2000
-------- --------
Cash Flows From Operating Activities:
Net income................................................................. $ 18,110 $ 16,276
Adjustments to reconcile net income to net cash provided by operations:
Depreciation.............................................................. 17,571 17,069
Amortization.............................................................. 1,126 1,311
Provision for bad debts................................................... 385 323
Minority interests........................................................ 240 57
Cumulative effect of accounting change, net of tax........................ 64 --
Deferred income taxes..................................................... (1,168) (58)
Retirement and deferred compensation plans................................ (1,053) 1,102
Equity in results of affiliates in excess of cash distributions received.. 36 225
Changes in balance sheet items, excluding effects from foreign currency
adjustments:
Accounts receivable..................................................... (8170) (15,501)
Inventories............................................................. (6,928) (12,801)
Prepaid and other current assets........................................ (1,789) (8,033)
Accounts payable and accrued liabilities................................ 2,193 7,877
Other changes, net...................................................... 8,598 12,804
-------- --------
Net Cash Provided by Operations............................................. 29,215 20,651
-------- --------
Cash Flows From Investing Activities:
Capital expenditures....................................................... (20,462) (16,381)
Disposition of property and equipment...................................... 209 1,988
Acquisition of businesses.................................................. -- (2,271)
Investments in affiliates.................................................. (32) --
-------- --------
Net Cash (Used) by Investing Activities..................................... (20,285) (16,664)
-------- --------
Cash Flows From Financing Activities:
Change in notes payable.................................................... (4,854) 11,165
Proceeds from long-term obligations........................................ 3,068 1,534
Repayments of long-term obligations........................................ (2,821) (2,959)
Dividends paid............................................................. (1,782) (1,808)
Proceeds from stock options exercised...................................... 2,073 290
Purchase of treasury stock................................................. (737) (9,363)
-------- --------
Net Cash (Used) by Financing Activities..................................... (5,053) (1,141)
-------- --------
Effect of Exchange Rate Changes on Cash..................................... (3,747) (1,100)
-------- --------
Net Increase in Cash and Equivalents........................................ 130 1,746
Cash and Equivalents at Beginning of Period................................. 55,559 32,416
-------- --------
Cash and Equivalents at End of Period....................................... $ 55,689 $ 34,162
======== ========
See accompanying notes to consolidated financial statements.
6
AptarGroup, Inc.
Notes to Consolidated Financial Statements
(Amounts in Thousands, Except per Share Data, or Otherwise Indicated)
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of AptarGroup, Inc. and its subsidiaries. The terms "AptarGroup" or
"Company" as used herein refer to AptarGroup, Inc. and its subsidiaries.
In the opinion of management, the unaudited consolidated financial statements
include all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of consolidated financial position and results
of operations for the interim periods presented. The accompanying unaudited
consolidated financial statements have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP) have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not misleading.
Accordingly, these unaudited consolidated financial statements and related notes
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report to Shareholders
incorporated by reference into the Company's Annual Report on Form 10-K for the
year ended December 31, 2000. The results of operations of any interim period
are not necessarily indicative of the results that may be expected for the year.
Note 2 - Inventories
At March 31, 2001 and December 31, 2000, approximately 23% and 25%,
respectively, of the total inventories are accounted for by the LIFO method.
Inventories, by component, consisted of:
March 31, December 31,
2001 2000
--------- ------------
Raw materials................. $ 53,029 $ 55,429
Work in progress.............. 21,860 20,975
Finished goods................ 49,729 46,805
-------- --------
124,618 123,209
Less LIFO Reserve............. (1,912) (1,687)
-------- --------
Total......................... $122,706 $121,522
======== ========
Inventories are stated at cost, which is lower than market. Costs included in
inventories are raw materials, direct labor and manufacturing overhead. The
cost of certain domestic and foreign inventories are determined by using the
last-in, first-out "LIFO" method, while the remaining inventories are valued
using the first-in, first-out (FIFO) method.
7
Note 3 - Comprehensive (Loss)/Income
AptarGroup's total comprehensive (loss)/income was as follows:
Three Months Ended March 31,
----------------------------
2001 2000
------- -------
Net income..................................... $ 18,110 $ 16,276
Less: foreign currency translation adjustment.. (26,890) (16,086)
------- --------
Total comprehensive (loss) income.............. $ (8,780) $ 190
======== ========
Note 4 - Stock Repurchase Program
In 1999, the Board of Directors authorized the repurchase of a maximum of one
million shares of the Company's outstanding shares and in the fourth quarter of
2000, the Board of Directors authorized the repurchase of up to an additional
two million of the Company's outstanding shares. The timing of and total amount
expended for the share repurchase depends upon market conditions. During the
quarter ended March 31, 2001, the Company repurchased 25 thousand shares for an
aggregate amount of $737 thousand. The cumulative total number of shares
repurchased at March 31, 2001 was 1,025,000 shares for an aggregate amount of
$25.7 million.
Note 5 - Derivative Instruments and Hedging Activities
Effective January 1, 2001, the Company adopted Statement of Financial Account
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities", and its related amendment SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." These standards require
that all derivative financial instruments be recorded in the consolidated
balance sheets at fair value as either assets or liabilities. Changes in the
fair value of derivatives will be recorded in each period in earnings or
accumulated other comprehensive income, depending on whether a derivative is
designated and effective as part of a hedge transaction.
In accordance with the transition provisions of SFAS 133, the Company recorded
the following cumulative effect adjustment in earnings as of January 1, 2001:
Related to designated fair value hedging relationships
Fair value of interest rate swaps $ 1,868
Offsetting changes in fair value of debt (1,868)
Related to foreign currency forward exchange contracts
Fair value of foreign currency forward exchange contracts (965)
Previously deferred gains and losses 1,027
Related to cross currency swap
Fair value of cross currency swap 1,436
Previously deferred gains and losses (1,576)
Tax effect on above items 14
-------
Total cumulative effect of adoption on earnings, net of tax $ (64)
=======
8
The Company maintains a foreign exchange risk management policy designed to
establish a framework to protect the value of the Company's foreign denominated
transactions from adverse changes in exchange rates. Sales of the Company's
products can be denominated in a currency different from the currency in which
the related costs to produce the product are denominated. Changes in exchange
rates on such inter-country sales impact the Company's results of operations.
The Company's policy is not to engage in speculative foreign currency hedging
activities, but to minimize its net foreign currency transaction exposure
defined as firm commitments and transactions recorded and denominated in
currencies other than the functional currency. The Company may use foreign
currency forward exchange contracts, currency swaps, options and cross currency
swaps to hedge these risks.
The Company maintains an interest rate risk management strategy to minimize
significant, unanticipated earnings fluctuations that may arise from volatility
in interest rates.
For derivative instruments designated as hedges, the Company formally documents
the nature and relationships between the hedging instruments and the hedged
items, as well as the risk management objectives, strategies for undertaking the
various hedge transactions, and the method of assessing hedge effectiveness.
Additionally, in order to designate any derivative instrument as hedges of
anticipated transactions, the significant characteristics and expected terms of
any anticipated transaction must be specifically identified, and it must be
probable that the anticipated transaction will occur.
Fair Value Hedges
The Company uses interest rate swaps to convert a portion of its fixed-rate debt
into variable-rate debt. Under the interest rate swap contracts, the Company
exchanges at specified intervals, the difference between fixed-rate and
floating-rate amounts, which is calculated based on an agreed upon notional
amount.
As of March 31, 2001, the Company has recorded the fair value of derivative
instrument assets of $3 million in miscellaneous other assets with an offsetting
adjustment to debt.
No gain or loss was recorded in the income statement for the quarter ended
March 31, 2001 since there was no hedge ineffectiveness.
Cash Flow Hedges
The Company did not use any cash flow hedges in the quarter ended March 31,
2001.
Hedge of Net Investments in Foreign Operations
A significant number of the Company's 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 conditions and results of
operations of the Company's foreign entities. A strengthening U.S. dollar
relative to foreign currencies has a dilutive translation effect on the
Company's financial condition and results of operations. Conversely, a weakening
U.S. dollar has an additive effect. The Company in some cases maintains debt in
these subsidiaries to offset the net asset exposure. The Company does not
otherwise actively manage this risk using derivative financial instruments. In
the event the
9
Company plans on a full or partial liquidation of any of its foreign
subsidiaries where the Company's net investment is likely to be monetized,
corporate treasury will consider hedging the currency exposure associated with
such a transaction.
Other
As of March 31, 2001, the Company has recorded the fair value of foreign
currency forward exchange contracts of $398 thousand in the accounts payable and
accrued liabilities in the balance sheet.
Note 6 - Contingencies
The Company, in the normal course of business, is subject to a number of
lawsuits and claims both actual and potential in nature. Management believes the
resolution of these claims and lawsuits will not have a material adverse effect
on the Company's financial position or results of operations.
10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net sales for the quarter ended March 31, 2001 totaled $232.9 million, an
increase of approximately $15.3 million or 7% from the corresponding period of
2000. Net sales were negatively affected by the translation of AptarGroup's
foreign sales into U.S. dollars due to the stronger U.S. dollar relative to the
same three-month period of 2000. Net sales, excluding changes in foreign
currency exchange rates ("Core Sales"), grew 12% compared to the prior year.
Core Sales to the fragrance/cosmetics market continued at a strong level. Core
Sales to the European personal care market also remained strong while sales to
the U.S. personal care market showed modest signs of improvement. Core Sales to
the food/beverage and pharmaceutical markets also improved over the prior year.
Increased selling prices did not have a material impact on Core Sales growth in
the first quarter 2001.
The following table sets forth (in thousands of dollars), for the periods
indicated, net sales by geographic region.
2000 % of Total 1999 % of Total
- -------------------------------------------------------------------------------
Domestic $ 84,927 37% $ 83,947 39%
Europe 128,653 55% 117,538 54%
Other Foreign 19,315 8% 16,161 7%
Cost of sales as a percent of net sales increased to 62.8% in the first quarter
of 2001 compared to 61.7% in the same period a year ago. The effect of LIFO
inventory valuation increased cost of sales $225 thousand in the first quarter
2001. The cost of sales percentage was negatively impacted by the following
factors:
. The consolidation of a former joint venture for the entire quarter ended
March 31, 2001 that was accounted for on the equity method of accounting for
the first two months of 2000; and
. The mix of the products sold in the quarter compared to the prior year; and
Offsetting these negative factors were the following positive impacts:
. Better utilization of fixed costs in Europe due to the strong sales to the
fragrance/cosmetic market; and
. The effect of the Company manufacturing products in Europe and incurring
costs in Euros and selling these products in countries outside of Europe in
currencies that were stronger than the Euro relative to the prior year.
Selling, research & development and administrative expenses (SG&A) increased
slightly to $36.6 million in the first quarter of 2001 compared to $36.4 million
in the same period a year ago. SG&A decreased as a percentage of net sales to
15.7% from 16.7% recorded a year ago. The decrease in SG&A as a percentage of
net sales is primarily due to cost containment efforts while continuing to grow
the business.
11
Depreciation and amortization increased approximately $300 thousand to $18.7
million compared to $18.4 million a year ago. The increase in depreciation and
amortization is primarily related to higher depreciation charges associated with
expenditures for new products and increases in capacity offset somewhat by the
effect of translating the depreciation of foreign entities into U.S. dollars
using a stronger U.S. dollar relative to the same period a year ago.
Operating income increased to $31.3 million compared to $28.6 million in the
prior year primarily due to the reasons mentioned above. This includes the
negative effect of translating the Company's foreign denominated results into a
stronger U.S. dollar relative to the same period a year ago. The net of this
negative translation impact with the positive impact of incurring manufacturing
costs in Europe and selling in currencies that gained strength against the Euro
in 2001 was a negative impact of approximately $500 thousand.
Net other expenses increased to $4.0 million in the first quarter 2001 from $3.4
million in the prior year. The change was due primarily to less gains on foreign
exchange transactions in 2001 compared to the prior year. Interest expense in
excess of interest income (Net Interest Expense) remained unchanged from the
prior year.
The effective tax rate for the three months ended March 31, 2001 was 33.4%,
compared to 35.4% for the same period a year ago. The decrease in the effective
tax rate is primarily attributed to lower corporate tax rates in both France and
Germany. The Company expects the effective tax rate for 2001 to be in the range
of 33% to 34%.
Net income after cumulative effect of a change in accounting principle for the
first quarter increased 11% to $18.1million compared to $16.3 million in the
first quarter of 2000.
Foreign Currency
A significant number of the Company's 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 conditions and results of
operations of AptarGroup's foreign entities. The Company's primary foreign
exchange exposure is to the Euro, but the Company also has foreign exchange
exposure to South American and Asian currencies as well as the British Pound. A
strengthening U.S. dollar relative to foreign currencies has a dilutive
translation effect on the Company's financial condition and results of
operations. Conversely, a weakening U.S. dollar has an additive effect.
Additionally, in some cases, the Company sells products denominated in a
currency different from the currency in which the related costs are incurred.
Changes in exchange rates on such inter-country sales impact the Company's
results of operations.
Quarterly Trends
AptarGroup's results of operations in the second half of the year typically are
negatively impacted by European summer holidays and customer plant shutdowns in
December. In the future, AptarGroup's results of operations in a quarterly
period could be impacted by factors such as changes in product mix, changes in
material costs, changes in growth rates in the industries to which AptarGroup's
12
products are sold, and changes in general economic conditions in any of the
countries in which AptarGroup does business.
Liquidity and Capital Resources
Historically, AptarGroup has generated positive cash flow from operations and
has utilized the majority of such cash flows for acquisitions and to invest in
capital projects. Net cash provided by operations in the first three months of
2001 was $29.2 million compared to $20.7 million in the same period a year ago.
The increase is primarily attributed to less cash used for working capital
related accounts in 2001 than for the same period a year ago as well as higher
net income.
Net cash used by investing activities in the three months of 2001 increased to
$20.3 million from $16.7 million in the same period a year ago. Capital
expenditures in the first quarter of 2001 were approximately $20 million or $4
million higher than capital expenditures in the first quarter of 2000 as the
Company continues to invest in property, plant and equipment primarily for
product line enhancements, new products and capacity increases. Management
anticipates that cash outlays for capital expenditures for all of 2001 will be
approximately $90 million.
Net cash used by financing activities increased to $5.1 million in the first
three months of 2001 compared to $1.1 million in 2000. The increase in net cash
used by financing activities is primarily due to a decrease or repayment in
short term notes payable in 2001 compared to an increase in the prior year. The
ratio of net debt to total net capitalization was 34.7% and 35.0% at March 31,
2001 and December 31, 2000, respectively. Net debt is defined as debt less cash
and cash equivalents and total net capitalization is defined as stockholder's
equity plus net debt.
The Company amended its multi-year, multi-currency unsecured revolving credit
agreement in December of 2000 to increase maximum borrowings allowed from $75
million to $100 million. Under this credit agreement, interest on borrowings is
payable at a rate equal to LIBOR plus an amount based on the financial condition
of the Company. At March 31, 2001, the amount unused and available under this
agreement was $17 million. At December 31, 2000, the amount unused and available
under this agreement was $15 million. The Company is required to pay a fee for
the unused portion of the commitment. The agreement expires on June 30, 2004.
The credit available under the revolving credit agreement provides management
with the ability to refinance certain short-term obligations on a long-term
basis. As it is management's intent to do so, an additional $17 million and $15
million of short-term obligations representing the unused and available amount
under the credit agreement have been reclassified as long-term obligations as of
March 31, 2001 and December 31, 2000, respectively.
The Company's foreign operations have historically met cash requirements with
the use of internally generated cash and borrowings. Foreign subsidiaries have
financing arrangements with several foreign banks to fund operations located
outside of the U.S., but all of these lines are uncommitted. Cash generated by
foreign operations has been reinvested locally and the Company intends to
continue to reinvest the undistributed earnings of foreign subsidiaries. A
decision to change this past practice and to transfer such cash to the United
States in the future may be impacted to the extent management believes the
transaction costs and taxes associated with such transfers are less than the
expected benefits of continued reinvestment.
13
The Company believes that it has the financial resources needed to meet business
requirements and stock repurchases in the foreseeable future, including capital
expenditures, working capital requirements, future dividends and potential
acquisitions.
The Board of Directors declared a quarterly dividend of $.05 per share payable
on May 23, 2001 to shareholders of record as of May 2, 2001.
Outlook
The demand for the Company's fragrance/cosmetic products remains strong for the
second quarter. Sales to the pharmaceutical market are expected to be slightly
better in the second quarter compared to the first quarter of 2001 and are
expected to continue to increase for the remainder of the year as certain new
customer projects are expected to be launched in the second half of 2001. The
outlook for the sales of the Company's products to the other markets for the
second quarter also remains positive.
In the second quarter of 2001, the Company has begun a strategic initiative to
improve the efficiency of operations that produce pumps for the mass-market
fragrance/cosmetic and personal care customers. Certain manufacturing operations
will be consolidated in order to realize production efficiencies in making base
cartridges (standard internal components) of the pumps, while final assembly
will remain in local geographic areas. The Company expects these changes to be
completed by the end of 2002 with cash savings estimated to exceed $5 million
annually. Expenses related to this initiative are expected to include non-
recurring cash outlays of approximately $3 million that primarily relate to a
net labor reduction of approximately 100 people. In addition, based upon a
preliminary evaluation of plant and equipment, the Company anticipates non-
recurring non-cash charges to be in the range of $6 to $9 million. These charges
will be recorded in future quarters based on when they are recognizable for
accounting purposes.
The Company expects to achieve its previously announced full year 2001 guidance
of earnings per share of $1.95 to $2.05 per share excluding any non-recurring
charges relating to the strategic initiative discussed above.
14
Forward-Looking Statements
In addition to the historical information presented in this quarterly report,
the Company has made and will make certain forward-looking statements in this
report, other reports filed by the Company with the Securities and Exchange
Commission, reports to stockholders and in certain other contexts relating to
future net sales, costs of sales, other expenses, profitability, financial
resources, products and production schedules. Statements relating to the
foregoing or that predict or indicate future events and trends and which do not
relate solely to historical matters identify forward-looking statements.
Forward-looking statements are made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and are based on management's beliefs as well as
assumptions made by and information currently available to management.
Accordingly, the Company's actual results may differ materially from those
expressed or implied in such forward-looking statements due to known and unknown
risks and uncertainties that exist in the Company's operations and business
environment, including, among other factors, government regulation including tax
rate policies, competition and technological change, intellectual property
rights, the failure by the Company to produce anticipated cost savings or
improve productivity, the ability to successfully execute the Company's
strategic initiative, the timing and magnitude of capital expenditures and
acquisitions, currency exchange rates, economic and market conditions in North
America, Europe and the rest of the world, changes in customer spending levels,
the demand for existing and new products, the cost and availability of raw
materials, the successful integration of the Company's acquisitions, and other
risks associated with the Company's operations. Although the Company believes
that its 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.
15
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company manages its 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 March 31, 2001 about the Company's
forward currency exchange contracts. All the contracts expire before the end of
the third quarter of 2001.
Average
Contractual
Buy/Sell Contract Amount Exchange Rate
- -----------------------------------------------------
EURO/USD.. $17,214 1.1006
EURO/YEN.. 1,342 .009836
EURO/GBP.. 1,235 1.587303
Other..... 973
-------
Total..... $20,764
=======
The other contracts in the above table represent contracts to buy or sell
various other currencies (principally Asian and Australian). If the Company
cancelled the forward exchange contracts at March 31, 2001, the Company would
have paid approximately $0.4 million based on the fair value of the contracts on
that date.
All forward exchange contracts outstanding as of March 31, 2000 had an aggregate
contract amount of $29.1 million.
The Company had a cross-currency interest rate swap to hedge an intercompany
lending transaction that was cancelled during the quarter. The loss on
cancellation of this swap was immaterial.
At March 31, 2001, the Company has fixed-to-variable interest rate swap
agreements with a notional principal value of $50 million which require the
Company to pay an average variable interest rate of 6.61% and receive a fixed
rate of 6.62%. The variable rates are adjusted semiannually based on London
Interbank Offered Rates ("LIBOR"). Variations in market interest rates would
produce changes in the Company's net income. If there were a hypothetical 10%
increase in interest rates, net income related to the interest rate swap
agreements would decrease by approximately $0.2 million assuming a tax rate of
33%. If the Company canceled the swaps at March 31, 2001, the Company would have
received approximately $3.0 million based on the fair value of the swaps on that
date.
16
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended March 31, 2001, the FCP Aptar Savings Plan (the "Plan")
purchased 60 shares of Common Stock of the Company on behalf of the participants
at an average price of $27.00 per share for an aggregate amount of $1,620.
During the same quarter, the Plan sold 200 shares of Common Stock of the Company
at the average price of $30.24 per share for an aggregate amount of $6,048. At
March 31, 2001, the Plan owns 3,795 shares of Common Stock of the Company.
Employees of AptarGroup S.A., a French subsidiary of the Company, are eligible
to participate in the Plan. All eligible participants are located outside of the
United States. An agent independent of the Company purchases shares of Common
Stock available under the Plan for cash on the open market and the Company
issues no shares. The Company does not receive any proceeds from the purchase of
Common Stock under the Plan. The agent under the Plan is Banque Nationale de
Paris. 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) See the attached Index To Exhibits
b) No reports on Form 8-K were filed for the quarter ended March 31,
2001.
17
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/ Stephen J. Hagge
--------------------
Stephen J. Hagge
Executive Vice President, Chief
Financial Officer and Secretary
(Duly Authorized Officer and
Principal Financial Officer)
Date: May 11, 2001
18
INDEX TO EXHIBITS
Number and Description of Exhibit
- ---------------------------------
10.25* Indemnification Agreement dated January 1, 1996, between AptarGroup,
Inc. and King Harris.
* Filed herewith.
19