-----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, E5HupzZZ4BnO6WgtavHqnU2Je7XL9DkJd2XR8gkxbMYY48NirdcL/5mxfqV95nhd sDdRD6wWzYytkhliyFaGgQ== 0000896622-97-000010.txt : 19971114 0000896622-97-000010.hdr.sgml : 19971114 ACCESSION NUMBER: 0000896622-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 001-11846 FILM NUMBER: 97712762 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 THIRD QUARTER FORM 10Q 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 September 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 (November 10, 1997) Common Stock 17,985,347 Page 2 APTARGROUP, INC. FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1997 INDEX PART I. FINANCIAL INFORMATION Page ITEM 1. Financial statements (Unaudited) Consolidated Statements of Income - Three and Nine Months Ended September 30, 1997 and 1996 3 Consolidated Balance Sheets - September 30, 1997 and December 31, 1996 4 Consolidated Statements of Cash Flows - Nine Months Ended September 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 6. Exhibits and Reports on Form 8-K 11 SIGNATURE 12 Page 3 APTARGROUP, INC. CONSOLIDATED STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1997 and 1996 (Dollars in Thousands, Except Per Share Data) (Unaudited) Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1997 1996 1997 1996 ---- ---- ---- ---- NET SALES .................. $ 163,525 $ 155,917 $ 493,626 $ 459,918 OPERATING EXPENSES: Cost of sales ............. 104,461 101,774 315,768 298,347 Selling, research & development and administrative ........... 26,786 25,849 80,587 77,022 Depreciation and amortization.............. 11,772 12,727 37,072 36,471 --------- --------- --------- --------- 143,019 140,350 433,427 411,840 --------- --------- --------- --------- OPERATING INCOME ........... 20,506 15,567 60,199 48,078 --------- --------- --------- --------- OTHER INCOME (EXPENSE): Interest expense .......... (1,329) (1,623) (4,168) (5,058) Interest income ........... 232 168 708 810 Equity in income of affiliates................ 215 325 546 892 Minority interests ........ (102) (46) (286) (196) Miscellaneous, net ........ 762 137 1,486 1,172 --------- --------- --------- --------- (222) (1,039) (1,714) (2,380) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES . 20,284 14,528 58,485 45,698 PROVISION FOR INCOME TAXES . 7,810 5,521 22,517 17,191 --------- --------- --------- --------- NET INCOME ................. $ 12,474 $ 9,007 $ 35,968 $ 28,507 ========= ========= ========= ========= PER COMMON SHARE: Net income................. $ .69 $ .50 $ 2.00 $ 1.59 ========= ========= ========= ========= Average number of shares outstanding (in thousands). 17,975 17,941 17,963 17,936 See accompanying notes to consolidated financial statements. Page 4 APTARGROUP, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) September 30, December 31, 1997 1996 ---- ---- ASSETS CURRENT ASSETS: Cash and equivalents .............................. $ 29,803 $ 16,386 Accounts and notes receivable, less allowance for doubtfulaccounts of $3,895 in 1997 and $3,623 in 1996 .......................................... 144,628 130,885 Inventories ....................................... 78,568 75,930 Prepayments and other ............................. 16,733 14,030 --------- --------- 269,732 237,231 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Buildings and improvements ........................ 74,743 75,971 Machinery and equipment ........................... 450,142 440,743 --------- --------- 524,885 516,714 Less: Accumulated depreciation .................... (279,204) (265,780) --------- --------- 245,681 250,934 Land .............................................. 4,215 4,395 --------- --------- 249,896 255,329 --------- --------- OTHER ASSETS: Investments in affiliates ......................... 15,020 14,970 Goodwill, less accumulated amortization of $5,720 in 1997 and $5,505 in 1996 ....................... 41,694 47,261 Miscellaneous ..................................... 15,680 21,345 --------- --------- 72,394 83,576 --------- --------- TOTAL ASSETS ...................................... $ 592,022 $ 576,136 ========= ========= See accompanying notes to consolidated financial statements. Page 5 APTARGROUP, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) September 30, December 31, LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996 ---- ---- CURRENT LIABILITIES: Notes payable ..................................... $ 8,931 $ 4,145 Current maturities of long-term obligations ....... 7,579 9,540 Accounts payable and accrued liabilities .......... 124,188 102,574 --------- --------- 140,698 116,259 --------- --------- LONG-TERM OBLIGATIONS .............................. 71,458 76,569 --------- --------- DEFERRED LIABILITIES AND OTHER: Deferred income taxes ............................. 19,153 22,884 Retirement and deferred compensation plans ........ 11,583 12,952 Minority interests ................................ 4,577 4,381 Deferred and other non-current liabilities ........ 6,864 7,392 --------- --------- 42,177 47,609 --------- --------- STOCKHOLDERS' EQUITY: Common stock, $.01 par value ...................... 180 179 Capital in excess of par value ................... 104,262 103,572 Retained earnings ................................. 265,402 233,385 Cumulative foreign currency translation adjustment. (32,155) (1,437) --------- --------- 337,689 335,699 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........ $ 592,022 $ 576,136 ========= ========= See accompanying notes to consolidated financial statements. Page 6 APTARGROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Dollars in Thousands, brackets denote cash outflows) (Unaudited) Nine Months Ended September 30, CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 ---- ---- Net income ..................................... $ 35,968 $ 28,507 Adjustments to reconcile net income to net cash provided by operations: Depreciation ................................... 35,116 34,283 Amortization ................................... 1,956 2,188 Provision for bad debts ........................ 704 905 Minority interests ............................. 285 196 Deferred income taxes .......................... 2 2,866 Retirement and deferred compensation plans ..... 1,277 (482) Equity in income of affiliates in excess of cash distributions received ......... (546) (892) Changes in balance sheet items, excluding effects from foreign currency adjustments: Accounts receivable ............................ (25,854) (18,771) Inventories .................................... (9,755) (1,254) Prepaid and other current assets ............... (2,925) (4,170) Accounts payable and accrued liabilities ....... 29,042 3,126 Other changes, net ............................. 278 (2,071) -------- -------- NET CASH PROVIDED BY OPERATIONS ................ 65,548 44,431 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ........................... (52,076) (44,889) Disposition of property and equipment .......... 1,122 669 Disposition of businesses ...................... -- 3,319 (Proceeds) collections of notes receivable, net (565) 283 Investments in affiliates ...................... (400) (11) -------- -------- NET CASH USED BY INVESTING ACTIVITIES .......... (51,919) (40,629) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in notes payable ...................... 8,109 236 Proceeds from long-term obligations ............ 1,557 7,613 Repayments of long-term obligations ............ (4,701) (6,951) Dividends paid ................................. (3,951) (3,766) Proceeds from stock options exercised .......... 690 365 -------- -------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 1,704 (2,503) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH ......... (1,916) (370) -------- -------- NET INCREASE IN CASH AND EQUIVALENTS ............ 13,417 929 CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ..... 16,386 17,332 -------- -------- CASH AND EQUIVALENTS AT END OF PERIOD ........... $ 29,803 $ 18,261 ======== ======== 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 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 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, 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 September 30, 1997 and December 31, 1996, inventories, by component, consisted of: September 30, December 31, 1997 1996 ---- ---- Raw materials ..................... $ 24,375 $ 25,150 Work in progress .................. 24,555 23,533 Finished goods .................... 31,874 29,283 -------- -------- Total .................... 80,804 77,966 Less LIFO reserve ................. (2,236) (2,036) -------- -------- Total .................... $ 78,568 $ 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 nine months ended September 30, 1997 totaled $163.5 million and $493.6 million, respectively, increases of approximately 5% and 7% when compared to the corresponding periods of 1996. Sales were negatively affected by the translation of AptarGroup's foreign sales due to the stronger U.S. dollar relative to the same three and nine month periods of 1996. If the dollar exchange rate had been constant, sales for the three and nine months ended September 30, 1997 would have increased approximately 16%. The increase for the quarter and nine months ended September 30, 1997 is primarily attributed to continued strength of sales of the Company's major product lines to all markets despite a competitive pricing environment. Sales to customers by European operations represented approximately 52% and 55%, respectively, of net sales for the quarter and nine months ended September 30, 1997, compared to 58% for the same periods a year ago. Sales to customers by U.S. operations represented 43% and 40% of net sales for the quarter and nine months ended September 30, 1997 compared to 38% for the same periods a year ago. Cost of sales as a percent of net sales decreased to 63.9% in the third quarter of 1997 compared to 65.3% in the same period a year ago. For the first nine months of 1997, cost of sales as a percent of net sales decreased to 64.0% compared to 64.9% in the same period a year ago. The decrease for the quarter and nine months ended September 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, R&D and administrative expenses (SG&A) increased 3.6% to $26.8 million in the third quarter of 1997, compared to $25.8 million in the same period a year ago. As a percent of net sales, SG&A decreased in the third quarter of 1997 to 16.4% from 16.6% a year ago. SG&A for the nine months ended September 30, 1997, increased 4.6% to $80.6 million compared to $77.0 million a year ago. As a percent of net sales, SG&A decreased in the first nine months of 1997 to 16.3% compared to 16.7% a year ago. The decrease in relation to net sales was the result of continued cost containment efforts. Operating income increased to $20.5 million in the third quarter of 1997 compared to $15.6 million for the same period a year ago. For the first nine months of 1997, operating income increased to $60.2 million compared to $48.1 million for the same period a year ago. The increase for the quarter and nine months ended September 30, 1997 is due to higher sales volume, change in mix of products sold and cost savings. In addition, approximately $1.7 million and $3.1 million of the increase for the quarter and nine months ended September 30, 1997, respectively, is due to the positive effect of gains on inter-country transactions net of the negative impact of translation. Page 9 European operations represented 74% of total operating income in the third quarter and year to date of 1997, respectively, compared to 72% and 69% for the same periods a year ago. U.S. operations represented 41% and 40% of operating income in the third quarter and year to date in 1997, compared to 39% and 41% in the corresponding periods in 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 third quarter and nine months ended September 30, 1997 was 38.5%, compared to 38.0% and 37.6% for the same periods a year ago. The rate differential is due to a change in mix of countries where income was earned. On October 22, 1997, the French Parliament adopted an increase in the corporate tax rate from 36.7% to 41.7% retroactive to January 1, 1997. Since the taxable income in France for 1997 is uncertain, it is difficult to predict the exact effect of this change for the year. However, based upon projected 1997 taxable income in France, the Company estimates the impact of the rate increase for the full year to be an increase in income tax expense of approximately $1.6 million which will be recorded in the fourth quarter. Of this amount, approximately $300 thousand relates to an adjustment to deferred taxes. Net income for the third quarter increased 38.5% to $12.5 million compared to $9.0 million in the third quarter of 1996. Net income for the nine months ended September 30, 1997, increased 26.2% to $36.0 million compared to $28.5 million in the same period a year ago. The increase in net income for the quarter and nine months ended September 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 an 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 also impact the Company's results of operations. Page 10 QUARTERLY TRENDS AptarGroup's results of operations for the fourth quarter typically have been negatively impacted by customer plant shutdowns and holidays 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 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 to invest in capital projects. Net cash provided by operations in the first nine months of 1997 was $65.5 million compared to $44.4 million in the same period a year ago. The increase is primarily attributed to less cash used for working capital in 1997. Total net working capital at September 30, 1997 was $129.0 million compared to $121.0 million at December 31, 1996. Net cash used by investing activities in the first nine months of 1997 increased to $51.9 million from $40.6 million in the same period a year ago. Management anticipates that capital expenditures for all of 1997 will be approximately $70 million. Net cash provided by financing activities was $1.7 million in the first nine months of 1997 compared to net cash used by financing activities of $2.5 million in 1996. The ratio of interest-bearing debt to total capitalization was 21% at September 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 September 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 September 30, 1997 and December 31, 1996. Page 11 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 October 23, 1997, the Board of Directors declared a quarterly dividend of $.08 per share payable on November 25, 1997 to shareholders of record as of November 4, 1997. 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. In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information". Both Statements are effective for fiscal years beginning after December 15, 1997. Statement No. 130 requires the presentation of comprehensive income and its components in a full set of financial statements. Statement No. 131 establishes standards for reporting information about operating segments and related disclosures about products and services, geographic areas and major customers in annual financial statements and interim financial reports. The Company is currently evaluating both of the new Statements and plans to adopt the standards during the year ending December 31, 1998. PART II - OTHER INFORMATION 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 September 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: November 11, 1997 EX-27 2 FDS --
5 0000896622 AptarGroup,Inc. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 29,803 0 144,628 (3,895) 78,568 269,732 529,100 (279,204) 592,022 140,698 71,458 0 0 180 104,262 592,022 493,626 493,626 315,768 433,427 117,659 0 (4,168) 58,485 22,517 35,968 0 0 0 35,968 2.00 2.00
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