-----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, Ex0PWA7jcV/J6AVPW/xMPbWSy55klz4WlHDilBQCVtYz8qlGFdDeX+/PfCP1KXG3 21Z1u9zUaTj37FO56Kf0qw== 0000896622-97-000007.txt : 19970814 0000896622-97-000007.hdr.sgml : 19970814 ACCESSION NUMBER: 0000896622-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97658896 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 Page 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, 1997 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 8, 1997) Common Stock 17,971,094 ---------- Page 2 APTARGROUP, INC. FORM 10-Q QUARTER ENDED JUNE 30, 1997 INDEX PART I. FINANCIAL INFORMATION Page ITEM 1. Financial statements (Unaudited) Consolidated Statements of Income - Three and Six Months Ended June 30, 1997 and 1996 3 Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders 11 ITEM 6. Exhibits and Reports on Form 8-K 11 SIGNATURE 12 Page 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, ------------------- ------------------- 1997 1996 1997 1996 ---- ---- ---- ---- NET SALES .................. $ 171,811 $ 151,047 $ 330,101 $ 304,001 OPERATING EXPENSES: Cost of sales ............ 110,456 97,859 211,307 196,573 Selling, research & development and administrative .......... 28,249 26,161 53,801 51,173 Depreciation and amortization ............ 12,781 12,255 25,300 23,744 --------- --------- --------- --------- 151,486 136,275 290,408 271,490 --------- --------- --------- --------- OPERATING INCOME ........... 20,325 14,772 39,693 32,511 --------- --------- --------- --------- OTHER INCOME (EXPENSE): Interest expense ......... (1,375) (1,661) (2,839) (3,435) Interest income .......... 274 381 476 642 Equity in income of affiliate ............... 149 217 331 567 Minority interests ....... (104) (95) (184) (150) Miscellaneous, net ....... 449 397 724 1,035 --------- --------- --------- --------- (607) (761) (1,492) (1,341) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES . 19,718 14,011 38,201 31,170 PROVISION FOR INCOME TAXES . 7,637 5,184 14,707 11,670 --------- --------- --------- --------- NET INCOME ................. $ 12,081 $ 8,827 $ 23,494 $ 19,500 ========= ========= ========= ========= NET INCOME PER COMMON SHARE: $ .67 $ .49 $ 1.31 $ 1.09 ========= ========= ========= ========= Average number of shares outstanding (in thousands) 17,961 17,938 17,957 17,934 See accompanying notes to consolidated financial statements. Page 4 APTARGROUP, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (UNAUDITED) June 30, December 31, 1997 1996 ---- ---- ASSETS CURRENT ASSETS: Cash and equivalents .......................... $ 25,742 $ 16,386 Accounts and notes receivable, less allowance for doubtful accounts of $3,595 in 1997 and $3,623 in 1996 ........................... 139,000 130,885 Inventories ................................... 76,054 75,930 Prepayments and other ......................... 16,078 14,030 --------- --------- 256,874 237,231 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Buildings and improvements .................... 73,010 75,971 Machinery and equipment ....................... 438,426 440,743 --------- --------- 511,436 516,714 Less: Accumulated depreciation ................ (270,621) (265,780) --------- --------- 240,815 250,934 Land .......................................... 4,038 4,395 --------- --------- 244,853 255,329 --------- --------- OTHER ASSETS: Investments in affiliates ..................... 14,295 14,970 Goodwill, less accumulated amortization of $5,480 in 1997 and $5,505 in 1996 ............ 42,274 47,261 Miscellaneous ................................. 17,432 21,345 --------- --------- 74,001 83,576 --------- --------- TOTAL ASSETS .............................. $ 575,728 $ 576,136 ========= ========= See accompanying notes to consolidated financial statements. Page 5 APTARGROUP, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (UNAUDITED) June 30, December 31, 1997 1996 ---- ---- LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Notes payable .................................. $ 6,277 $ 4,145 Current maturities of long-term obligations .... 7,808 9,540 Accounts payable and accrued liabilities ....... 118,711 102,574 --------- --------- 132,796 116,259 --------- --------- LONG-TERM OBLIGATIONS ........................... 71,925 76,569 --------- --------- DEFERRED LIABILITIES AND OTHER: Deferred income taxes .......................... 19,318 22,884 Retirement and deferred compensation plans ..... 12,290 12,952 Minority interests ............................. 4,471 4,381 Deferred and other non-current liabilities ..... 6,850 7,392 --------- --------- 42,929 47,609 --------- --------- STOCKHOLDERS' EQUITY: Common stock, $.01 par value ................... 180 179 Capital in excess of par value ................ 103,884 103,572 Retained earnings .............................. 254,365 233,385 Cumulative foreign currency translation adjustment ................................... (30,351) (1,437) --------- --------- 328,078 335,699 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $ 575,728 $ 576,136 ========= ========= See accompanying notes to consolidated financial statements. Page 6 APTARGROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1997 and 1996 (Dollars in Thousands, brackets denote cash outflows) (UNAUDITED) Six Months Ended June 30, -------------------------- 1997 1996 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ......................................... $ 23,494 $ 19,500 Adjustments to reconcile net income to net cash provided by operations: Depreciation ...................................... 23,940 22,411 Amortization ...................................... 1,360 1,333 Provision for bad debts ........................... 359 243 Minority interests ................................ 184 150 Deferred income taxes ............................. 298 2,598 Retirement and deferred compensation plans ........ 1,098 (489) Equity in income of affiliates in excess of cash distributions received ........... (331) (567) Changes in balance sheet items, excluding effects from foreign currency adjustments: Accounts receivable ............................... (19,535) (9,402) Inventories ....................................... (6,777) (2,244) Prepaid and other current assets .................. (2,542) (5,968) Accounts payable and accrued liabilities .......... 24,072 3,171 Other changes, net ................................ (646) (1,622) -------- -------- NET CASH PROVIDED BY OPERATIONS ................... 44,974 29,114 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures .............................. (34,560) (25,507) Disposition of property and equipment ............. 445 449 Disposition of businesses ......................... -- 3,320 (Proceeds) collections of notes receivable, net ... (48) 465 Investments in affiliates ......................... -- (11) -------- -------- NET CASH USED BY INVESTING ACTIVITIES ............. (34,163) (21,284) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in notes payable .............. 5,172 (2,795) Proceeds from long-term obligations ............... 980 6,840 Repayments of long-term obligations ............... (3,664) (4,740) Dividends paid .................................... (2,514) (2,510) Proceeds from stock options exercised ............. 311 274 -------- -------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES .. 285 (2,931) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH ............. (1,740) (533) -------- -------- NET INCREASE IN CASH AND EQUIVALENTS ................ 9,356 4,366 CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ......... 16,386 17,332 -------- -------- CASH AND EQUIVALENTS AT END OF PERIOD ............... $ 25,742 $ 21,698 ======== ======== See accompanying notes to consolidated financial statements. Page 7 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 "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 financial position and results of operations for the interim periods presented. The accompanying unaudited consolidated financial statements have been prepared by the Company 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 audited 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, 1996. The results of operations of any interim period are not necessarily indicative of the results that may be expected for a fiscal year. NOTE 2 - INVENTORIES At June 30, 1997 and December 31, 1996, inventories, by component, consisted of: June 30, December 31, 1997 1996 ---- ---- Raw Materials ................ $ 24,149 $ 25,150 Work in progress ............. 23,669 23,533 Finished goods ............... 30,422 29,283 -------- -------- Total ............... 78,240 77,966 Less LIFO reserve ............ (2,186) (2,036) -------- -------- Total ............... $ 76,054 $ 75,930 ======== ======== Page 8 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, 1997 totaled $171.8 million and $330.1 million, respectively, increases of approximately 14% and 9% when compared to the corresponding periods of 1996. The translation of AptarGroup's foreign sales was negatively affected by the stronger U.S. dollar relative to the same three and six month periods of 1996. If the dollar exchange rate had been constant, sales for the three and six months ended June 30, 1997 would have increased approximately 20% and 15%, respectively. The increase for the quarter and six months ended June 30, 1997, is primarily attributed to volume increases in the Company's primary markets. The Company continues to experience price competition in all of its markets. Sales to customers by European operations represented approximately 56% and 57%, of net sales for the quarter and six months ended June 30, 1997, respectively, compared to 58% for the same periods a year ago. Sales to customers by U.S. operations represented 40% and 39% of net sales for the quarter and six months ended June 30, 1997 compared to 39% and 37% for the same periods a year ago. Cost of sales as a percent of net sales decreased to 64.3% in the second quarter of 1997 compared to 64.8% in the same period a year ago. For the first six months of 1997, cost of sales as a percent of net sales decreased to 64.0% compared to 64.7% in the same period a year ago. The decrease for the quarter and six months ended June 30, 1997 is attributed to the mix of products sold, cost savings and a net gain from changes in exchange rates between the comparable quarters on inter-country transactions. Selling, general and administrative expenses (SG&A) increased 8% to $28.2 million in the second quarter of 1997 compared to $26.2 million in the same period a year ago. As a percent of net sales, SG&A decreased in the second quarter of 1997 to 16.4% from 17.3% a year ago. SG&A for the six months ended June 30, 1997 increased 5% to $53.8 million compared to $51.2 million a year. As a percent of net sales, SG&A decreased in the first six months of 1997 to 16.3% compared to 16.8% a year ago. The decrease in relation to net sales was the result of continued cost containment efforts. Operating income increased to $20.3 million in the second quarter of 1997 compared to $14.8 million for the same period a year ago. The increase is due to higher sales volume, change in mix of products sold, and cost savings. In addition, approximately $1 million of the increase is due to the positive effect of gains on inter-country transactions net of the negative impact of translation. European operations represented 70% and 71% of operating income in the second quarter and year to date of 1997, respectively, as compared to 64% and 68% in the same periods Page 9 a year ago. U.S. operations represented 44% and 42% of operating income in the second quarter and year to date in 1997 as compared to 48% and 42% in the corresponding periods of 1996. The difference between Europe and U.S. operations to total operating income is due to operating income from other foreign operations and corporate expenses. The effective tax rate for the second quarter and six months ended June 30, 1997 was 38.7% and 38.5% compared to 37.0% and 37.4% for the same periods a year ago. The rate differential is due to a change in the mix of countries where income was earned. After quarter end, the French government announced a proposal to increase the French corporate tax rate by 5% from approximately 36.7% to 41.7% that will be retroactive to the first of the year. This proposal is expected to be enacted during the third quarter. The Company cannot predict the exact effect of this change on the overall tax rate due to the uncertainty of mix of income by country. However, the impact of this rate change for 1997 is estimated to increase the Company's effective tax rate by approximately 1.5%. In addition, the impact of the adjustment to deferred taxes due to the French tax rate increase is estimated to be approximately $1.2 million. Net income for the second quarter increased 37% to $12.1 million compared to $8.8 million in the second quarter of 1996. Net income for the six months ended June 30, 1997, increased 20% to $23.5 million as compared to $19.5 million in the same period a year ago. The increase in net income for the quarter and six months ended June 30, 1997 is primarily due to higher sales volume and cost containment efforts. 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. In general, since the majority of the Company's operations are based in Europe, primarily France, Germany and Italy, a strengthening U.S. dollar relative to the major European currencies has a dilutive translation effect on the Company's financial condition and results of operations. Conversely, a weakening U.S. dollar would have an additive effect. Additionally, in some cases, the Company sells products denominated in a currency different from the currency in which the respective 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 have been 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 Page 10 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 1997 was $45.0 million compared to $29.1 million in the same period a year ago. The increase is primarily attributed to changes in working capital. Total net working capital at June 30, 1997 was $124.1 million compared to $121.0 million at December 31, 1996. Net cash used by investing activities increased to $34.2 million from $21.3 million a year ago. Management anticipates that capital expenditures for all of 1997 will be approximately $70 million. Net cash provided by financing activities was $285 thousand in the first six months of 1997 compared to net cash used by financing activities of $2.9 million in 1996. The ratio of interest-bearing debt to total capitalization was 21% at June 30, 1997 and December 31, 1996. The majority of the Company's debt has been, and continues to be, denominated in foreign currency. AptarGroup has historically borrowed 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, 1997, 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, 1997 and December 31, 1996. The revolving credit agreement and a private placement agreement contain covenants that include certain financial tests, including minimum interest coverage, net worth and maximum borrowings. On July 24, 1997, the Board of Directors declared a quarterly dividend of $.08 per share payable on August 26, 1997 to shareholders of record as of August 5, 1997. The $.08 per share represents an increase of 14% over the previous quarter's dividend. Page 11 LITIGATION During the second quarter of 1997, the Company received a judgment in its favor as plaintiff in a patent infringement lawsuit relating to an aerosol valve component. The Company was awarded $7.8 million plus interest. The decision has been appealed and the Company cannot predict the ultimate outcome or timing of such appeal. This award is not included in the financial results. ADOPTION OF NEW ACCOUNTING STANDARDS Effective for periods ending after December 15, 1997, the Company is required to adopt SFAS 128 (Statement of Financial Accounting Standards No. 128, "Earnings Per Share"). SFAS 128 requires companies to calculate basic and diluted earnings per share based upon standards designed to provide consistency and compatibility with calculations of other countries and with that of the International Accounting Standards Committee. The Company does not expect earnings per share as reported to be materially different than basic or diluted earnings per share to be reported upon adoption of the new accounting standard. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders was held on May 14, 1997. A vote was taken by ballot for the election of three directors to hold office until the 2000 Annual Meeting of Stockholders. The following nominees received the number of votes as set forth below: Broker Nominee For Withhold Non-votes --------- ---- -------- --------- Eugene Barnett ..................... 14,941,436 186,157 -0- Ralph Gruska ..................... . 14,942,080 185,513 -0- Leo A. Guthart ..................... 14,948,117 179,476 -0- No votes were cast for any other nominee for director. The directors continuing in office until the 1998 Annual Meeting of Stockholders are William W. Harris, Alfred Pilz, and Carl A. Siebel. Directors continuing in office until the 1999 Annual Meeting are King Harris, Ervin J. LeCoque and Peter Pfeiffer. No other matters were submitted to a vote by ballot at the 1997 Annual Meeting. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.18 and 27 are included with this report. (b) No reports on Form 8-K were filed for the quarter ended June 30, 1997. Page 12 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 13, 1997 EX-10 2 EXHIBIT 10.18 SCHUTZ EMPLOYMENT AGREEMENT AGREEMENT between Ing. Erich Pfeiffer GmbH Oeschlestr. 124-126 78315 Radolfzell and Hans-Josef Schutz Kreidenweg 22 78166 Donaueschingen Paragraph 12 of the Employment Agreement between Ing. Erich Pfeiffer GmbH and Hans-Josef Schutz dated November 15, 1993 will be modified as follows: The Employment Agreement is extended by five further years and will be automatically extended by another year. It will start on May 1, 1998. The Employment can be terminated after these five years by either party with a notice of 12 months per December 31 of a year. /s/ Hans-Josef Schutz /s/ Peter Pfeiffer - --------------------- ------------------ Hans-Josef Schutz Ing. Erich Pfeiffer GmbH May 15, 1997 May 15, 1997 - ------------ ------------ Date Date EX-27 3 FDS --
5 0000896622 AptarGroup,Inc. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 25,742 0 139,000 (3,595) 76,054 256,874 515,474 (270,621) 575,728 132,796 71,925 0 0 180 103,884 575,728 304,001 304,001 211,307 290,408 79,101 0 (2,839) 38,201 14,707 23,494 0 0 0 23,494 1.31 1.31
-----END PRIVACY-ENHANCED MESSAGE-----