-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ie59Cvbyiw3WICTfkqW6ApXzkkcpQH10p2HbIzKqAPxoMaSKdeh0gHL7dIUabrr5 7MtI15GbH/ALnYkZHzkoqA== 0000896622-96-000007.txt : 19960806 0000896622-96-000007.hdr.sgml : 19960806 ACCESSION NUMBER: 0000896622-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960805 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: APTARGROUP INC CENTRAL INDEX KEY: 0000896622 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 363853103 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11846 FILM NUMBER: 96603896 BUSINESS ADDRESS: STREET 1: 475 W TERRA COTTA AVE STREET 2: STE E CITY: CRYSTAL LAKE STATE: IL ZIP: 60014 BUSINESS PHONE: 8154770424 MAIL ADDRESS: STREET 1: 475 W. TERRA COTTA AVE. SUITE E CITY: CRYSTAL LAKE STATE: IL ZIP: 60014 10-Q 1 SECOND QUARTER FORM 10Q 1 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 JUNE 30, 1996 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 (August 2, 1996) COMMON STOCK 17,941,286 2 APTARGROUP, INC. FORM 10-Q QUARTER ENDED JUNE 30, 1996 INDEX PART I. FINANCIAL INFORMATION PAGE ---- ITEM 1. Financial statements (Unaudited) Consolidated Statements of Income - Three and Six Months Ended June 30, 1996 and 1995 3 Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995 6 Notes to Consolidated Financial Statements 8 ITEM 2. Management=s Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders 15 ITEM 6. Exhibits and Reports on Form 8-K 15 SIGNATURE 16 3 AptarGroup, Inc. CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Data) (UNAUDITED) Three Months Six Months Ended June 30, Ended June 30, ----------------- ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- NET SALES $151,047 $142,396 $304,001 $278,025 ------- ------- ------- ------- OPERATING EXPENSES: Cost of sales .................. 97,859 90,627 196,573 177,243 Selling, general and administrative ............... 26,161 24,956 51,173 47,763 Depreciation and amortization .. 12,255 10,854 23,744 21,296 ------- ------- ------- ------- 136,275 126,437 271,490 246,302 ------- ------- ------- ------- OPERATING INCOME................... 14,772 15,959 32,511 31,723 ------- ------- ------- ------- OTHER INCOME (EXPENSE): Interest expense................ (1,661) (1,249) (3,435) (2,864) Interest income................. 381 277 642 507 Equity in income of affiliates.. 217 587 567 1,402 Minority interests.............. (95) (41) (150) (78) Miscellaneous, net.............. 397 77 1,035 345 ------- ------- ------- ------- (761) (349) (1,341) (688) ------- ------- ------- ------- INCOME BEFORE INCOME TAXES......... 14,011 15,610 31,170 31,035 PROVISION FOR INCOME TAXES......... 5,184 5,683 11,670 11,483 ------- ------- ------- ------- NET INCOME.........................$ 8,827 $ 9,927 19,500 19,552 ======= ======= ======= ======= PER COMMON SHARE: Net Income.......................$ .49 $ .55 1.09 1.09 ======= ======= ======= ======= Average number of shares outstanding (in thousands)...... 17,938 17,917 17,934 17,916 ======= ======= ======= ======= See accompanying notes to consolidated financial statements. 4 AptarGroup, Inc. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (UNAUDITED) June 30, December 31, ASSETS 1996 1995 -------- ----------- CURRENT ASSETS: Cash and equivalents........... $ 21,698 $ 17,332 Accounts and notes receivable, less allowance for doubtful accounts of $3,181 in 1996 and $3,296 in 1995............ 125,414 119,011 Inventories.................... 73,194 73,339 Prepayments and other.......... 17,532 14,188 ------- ------- 237,838 223,870 ------- ------- PROPERTY, PLANT AND EQUIPMENT: Buildings and improvements..... 73,097 75,696 Machinery and equipment........ 411,919 397,169 ------- ------- 485,016 472,865 Less: Accumulated depreciation. (246,231) (231,152) ------- ------- 238,785 241,713 Land........................... 4,236 4,268 ------- ------- 243,021 245,981 ------- ------- OTHER ASSETS: Investments in affiliates...... 15,030 14,951 Goodwill, less accumulated amortization of $4,963 in 1996 and $4,409 in 1995....... 47,087 48,387 Miscellaneous.................. 23,632 26,027 ------- ------- 85,749 89,365 ------- ------- TOTAL ASSETS $566,608 $559,216 ======= ======= See accompanying notes to consolidated financial statements. 5 AptarGroup, Inc. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (UNAUDITED) LIABILITIES AND June 30, December 31, STOCKHOLDERS= EQUITY 1996 1995 ----------- ------------ CURRENT LIABILITIES: Notes payable............... $ 4,020 $ 8,322 Current maturities of long-term obligations...... 6,534 8,737 Accounts payable and accrued liabilities........ 104,681 106,147 ------- ------- 115,235 123,206 ------- ------- LONG-TERM OBLIGATIONS........... 83,623 80,712 ------- ------- DEFERRED LIABILITIES AND OTHER: Deferred income taxes........ 22,281 21,992 Retirement and deferred compensation plans.......... 12,665 12,487 Minority interests........... 4,967 1,033 Deferred and other non- current liabilities......... 6,851 7,500 ------- ------- 46,764 43,012 ------- ------- STOCKHOLDERS= EQUITY: Common stock, $.01 par value . 179 179 Capital in excess of par value.................... 103,229 102,954 Retained earnings............. 217,850 200,860 Cumulative foreign currency translation adjustment...... (272) 8,293 ------- ------- 320,986 312,286 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS= EQUITY $ 566,608 $559,216 ======= ======= See accompanying notes to consolidated financial statements. 6 AptarGroup, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1996 and 1995 (Dollars in Thousands) (UNAUDITED) Six Months Ended June 30, ----------------------- 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: -------- -------- Net income............................... $ 19,500 $ 19,552 Adjustments to reconcile net income to net cash provided by operations: Depreciation ........................... 22,411 20,380 Amortization ........................... 1,333 916 Provision for bad debts................. 243 489 Minority interests...................... 150 78 Deferred income taxes................... 2,598 1,914 Retirement and deferred compensation plans..................... (489) 762 Equity in income of affiliates in excess of cash distributions received.. (567) (1,233) Changes in balance sheet items, excluding effects from foreign currency adjustments: Increase in accounts receivable........ (9,402) (20,838) Increase in inventories................ (2,244) (10,784) Increase in prepaid and other current assets........................ (5,968) (1,983) Increase in accounts payable and accrued liabilities............... 1,953 2,015 Increase in income taxes payable....... 1,218 2,435 Other changes, net..................... (1,622) 90 ------ ------ NET CASH PROVIDED BY OPERATIONS.......... 29,114 13,793 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures..................... (25,507) (24,867) Disposition of property and equipment.... 449 633 Disposition of businesses................ 3,320 - Collections of notes receivable, net..... 465 (747) Investments in affiliates................ (11) (135) ------ ------ NET CASH USED BY INVESTING ACTIVITIES.... (21,284) (25,116) ------ ------ 7 AptarGroup, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (cont=d) For the Six Months Ended June 30, 1996 and 1995 (Dollars in Thousands) (UNAUDITED) Six Months Ended June 30, --------------------- 1996 1995 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease)increase in notes payable...... $ (2,795) $ 7,870 Proceeds from long-term obligations..... 6,840 4,206 Repayments of long-term obligations..... (4,740) (5,950) Dividends paid.......................... (2,510) (2,150) Proceeds from stock options exercised... 274 61 ------ ------ NET CASH (USED)PROVIDED BY FINANCING ACTIVITIES.............................. (2,931) 4,037 ------ ------ EFFECT OF EXCHANGE RATE CHANGES ON CASH... (533) 599 ------ ------ NET INCREASE(DECREASE) IN CASH AND EQUIVALENTS............................. 4,366 (6,687) CASH AND EQUIVALENTS AT BEGINNING OF PERIOD.................................. 17,332 20,125 ------ ------ CASH AND EQUIVALENTS AT END OF PERIOD..... $ 21,698 $ 13,438 ====== ====== See accompanying notes to consolidated financial statements. 8 APTARGROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands, except per share data) (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements included the accounts of AptarGroup, Inc. and its subsidiaries. The terms AAptarGroup@ or ACompany@ 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 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 generally accepted accounting principles 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 financial statements and related notes should be read in conjunction with the 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, 1995. The results of operations of any interim period are not necessarily indicative of the results that may be expected for a fiscal year. 9 NOTE 2 - INVENTORIES At June 30, 1996 and December 31, 1995, inventories, by component, consisted of: June 30, December 31, 1996 1995 -------- ----------- Raw Materials $ 23,722 $ 25,152 Work in progress 22,940 21,927 Finished goods 28,350 28,013 ------- ------- Total 75,012 75,092 Less LIFO reserve (1,818) (1,753) ------- ------- Total $ 73,194 $ 73,339 ======= ======= 10 ITEM 2. MANAGEMENT=S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales for the quarter and six months ended June 30, 1996 totaled $151.0 million and $304.0 million, respectively, increases of approximately 6% and 9% when compared to the corresponding periods of 1995. The increase for the quarter and six months ended June 30, 1996, is primarily attributed to sales volume increases of pumps to the pharmaceutical market and closures to the personal care market, acquisitions made during the fourth quarter of 1995 and the mix of products sold. These increases were partially offset by continued price competition, decreased demand from customers in the fragrance/cosmetics market and the transactional impact of exchange rate fluctuations on sales. Sales to customers by European operations represented approximately 58% of net sales for the quarter and six months ended June 30, 1996, compared to 63% for the same periods a year ago. The translation of AptarGroup=s foreign sales was negatively affected by the stronger U.S. dollar relative to certain European currencies when compared to the same six month period in 1995. The stronger U.S. dollar reduced the Company=s sales growth by approximately 2% in the quarter and 1% for the six months. If the U.S. dollar exchange rate had been constant and the effect of acquisitions ($4.9 million for the quarter and $10.0 million for the six months) were excluded from 1996 results, translated sales for the quarter and six months ended June 30, 1996, would have increased 5% and 7%, respectively. Cost of sales as a percent of net sales increased to 64.8% in the second quarter of 1996 compared to 63.6% in the same period a year ago. For the first six months of 1996, cost of sales as a percent of net sales increased to 64.7% compared to 63.8% in the same period a year ago. The increase is primarily attributed to under-utilized overhead in the Company's fragrance operations, continued price competition, the mix of products sold and a reduction in earnings from changes in exchange rates. Selling, general and administrative expenses (SG&A) increased 5% to $26.2 million in the second quarter of 1996 compared to $25.0 million in the same period a year ago. As a percent of net sales, SG&A decreased in the second 11 quarter of 1996 to 17.3% from 17.5% a year ago. SG&A for the six months ended June 30, 1996 increased 7% to $51.2 million compared to $47.8 million a year. As a percent of net sales, SG&A decreased in the first six months of 1996 to 16.8% compared to 17.2% a year ago. Operating income decreased to $14.8 million in the second quarter of 1996 compared to $16.0 million for the same period a year ago. European operations represented 64% of operating income in the second quarter of 1996, compared to 88% for the same period a year ago. U.S. operations represented 48% of operating income in the second quarter compared to 32% in the second quarter of 1995. For the six months ended, Europe's share of operating income decreased from 85% in 1995 to 68% in 1996 and the U.S's share of operating income increased from 34% in 1995 to 42% in 1996. The difference between Europe and U.S. operations and total operating income is due to income from other foreign operations and corporate expenses. The reduction in European operating income is attributed to under-utilized overhead, softness in the demand for fragrance/cosmetics pumps, increased price competition, the mix of products sold and changes in exchange rates of European currencies in relation to one another on inter-currency sales transactions (particularly the British pound, Italian lira, French franc and German mark). These factors are expected to continue to affect the Company in the near term. The increase in U.S. operating income is due primarily to increased sales of closures to the personal care market. Net other expenses during the quarter increased to $761 thousand from $349 thousand a year ago. For the first six months of 1996, net other expenses increased to $1.3 million from $688 thousand a year ago. The increases in both periods is attributable to higher interest expense due to an increase in interest-bearing debt from $76.4 million to $94.2 million, primarily related to the acquisitions completed in the fourth quarter of 1995. During the fourth quarter of 1995, the Company completed the purchase of a 35% interest in Loffler Kunststoffwerk GmbH & Co. KG ("Loffler"), a leading manufacturer of closures in Germany. During the second quarter of 1996, the Company sold 35% interests in the Company's other European dispensing closure operations to Loffler for approximately $3.8 million. The gain on the sale of the minority interests was not significant. The sale of the minority interests further strategically aligns the two companies and 12 improves the Company's capability to serve the growing dispensing closure needs of European and global customers. The effective tax rate for the second quarter and six months ended June 30, 1996 was 37.0% and 37.4% compared to 36.4% and 37.0% for the same periods a year ago. The rate differential is due to the mix of income earned by country. Net income for the second quarter decreased 11% to $8.8 million compared to $9.9 million in the second quarter of 1995. Net income for the six months ended June 30, 1996, was flat at $19.5 million compared to $19.6 million in the same period a year ago. Foreign Currency A significant portion of AptarGroup=s operations are located outside 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 AptarGroup=s foreign entities. The Company, at times, uses forward exchange contracts, primarily with banks, to hedge the currency risk associated with future cash receipts or payments. In general, since the majority of the Company=s operations are based in Europe - - primarily France, Germany and Italy - a weakening U.S. dollar relative to the major European currencies has an additive translation effect on the Company=s financial condition and results of operations. Conversely, a strengthening U.S. dollar would have a dilutive effect. Certain AptarGroup sales are denominated in currencies which differ from the production currency. Differences in the sales and production currency can have a transactional impact on earnings. In general, when the production currency strengthens relative to the sales currency, earnings from export sales are negatively impacted. The net transactional impact of exchange rate changes between the British pound, French franc, German mark, Italian lira and U.S. dollar on sales and earnings was approximately $.5 million or $.03 per share during the second quarter of 1996. This reduction in earnings was primarily due to the strengthening Italian lira which reduced net earnings by approximately $1.2 million, but was partially offset by a weakening French franc and German mark. 13 If exchange rates as of June 30, 1996 remain constant through the end of the year, the Company does not expect exchange rates to have a material translation and transactional impact on earnings for the remainder of 1996. 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 products are sold or 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 to invest in capital projects. Net cash provided by operations in the first six months of 1996 was $29.1 million compared to $13.8 million in the same period a year ago. The increase is primarily attributed to changes in working capital, principally smaller increases in accounts receivables and inventories, as compared to the same period a year ago. Total net working capital at June 30, 1996 was $122.6 million compared to $100.7 million at December 31, 1995. Net cash used by investing activities decreased to $21.3 million from $25.1 million a year ago. Management anticipates that capital expenditures for all of 1996 will total between $60 and $65 million. Net cash used by financing activities was $2.9 million in the first six months of 1996 compared to net cash provided by financing activities of $4.0 million in 1995. The change is due primarily to a reduction in notes payable. The ratio of interest-bearing debt to total capitalization was 23% at June 30, 1996 compared to 24% at December 31, 1995. The majority of the Company=s debt has been and continues to be, denominated in foreign currency. AptarGroup has historically borrowed 14 locally to hedge potential currency fluctuations for assets that were purchased outside of the U.S. It is expected that this practice will continue. The Company has a multi-year, unsecured revolving credit agreement allowing borrowings of up to $25 million. Under this credit agreement, interest on borrowings is payable at a rate equal to the London Interbank Offered Rate (LIBOR) plus an amount based on the financial condition of the Company. At June 30, 1996, the amount unused and available under this agreement was $25 million. The Company is required to pay a fee for the unused portion of the commitment. The agreement expires on April 29, 2001. 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, short-term obligations of $25 million have been reclassified as long-term obligations as of June 30, 1996 and December 31, 1995. On October 10, 1995, the Company issued a private placement of $25 million principal amount of 7.08% senior unsecured notes due in 2005. The revolving credit agreement and the private placement agreement contain covenants that include certain financial tests, including minimum interest coverage, net worth and maximum borrowings. On July 24, 1996, the Board of Directors declared a quarterly dividend of $.07 per share payable on August 27, 1996 to shareholders of record as of August 6, 1996. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders was held on May 15, 1996. A vote was taken by ballot for the election of three directors to hold office until the 1999 Annual Meeting of Stockholders. The following nominees received the number of votes as set forth below: Broker Nominee For Withhold Non-votes - -------------- -------- -------- --------- King Harris 14,690,558 337,822 13,000 Ervin J. LeCoque 14,690,558 337,822 13,000 Peter Pfeiffer 14,490,549 537,831 13,000 No votes were cast for any other nominee for director. The directors continuing in office until the 1997 Annual Meeting of Stockholders are Eugene L. Barnett, Ralph Gruska, and Leo A. Guthart. Director continuing in office until the 1998 Annual Meeting are William W. Harris, Alfred Pilz, and Carl A. Siebel. A vote was taken by ballot for the proposals to approve (i) the 1996 Stock Awards Plan and (ii) the 1996 Director Stock Option Plan. The following votes were cast with respect to each proposal: Broker Proposal For Against Abstain Non-Votes -------- --- ------- ------- --------- Approve 1996 Stock Awards Plan 12,420,045 1,296,949 68,150 254,216 Approve 1996 Director Stock Option Plan 12,838,772 864,182 82,189 254,216 No other matters were submitted to a vote by ballot at the 1996 Annual Meeting. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 27 is included with this report. (b) No reports on Form 8-K were filed for the quarter ended June 30, 1996. 16 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 and Chief Financial Officer, Secretary and Treasurer (Duly Authorized Officer and Principal Financial Officer) Date: August 5, 1996 17 EXHIBIT INDEX EXHIBIT NO DESCRIPTION - ------- ----------- 27 Financial Data Schedule, which is submitted electronically to the Securities and Exchange Commission for information only and not filed. EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME 1,000 6-MOS DEC-31-1996 JUN-30-1996 21,698 0 125,414 (3,181) 73,194 237,838 489,252 (246,231) 566,608 115,235 83,623 0 0 179 320,807 566,608 304,001 304,001 196,573 271,490 74,917 0 (3,435) 31,170 11,670 19,500 0 0 0 19,500 1.09 1.09
-----END PRIVACY-ENHANCED MESSAGE-----