-----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, J71JGP0gVw017XurZ2xPyJ0AAyk6NsADIh4uRePZG/U661D2Idai7nvb/8ookK6T rl+AQVZPj+0dDyUwfELB6w== 0000950131-02-001029.txt : 20020415 0000950131-02-001029.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950131-02-001029 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020322 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11846 FILM NUMBER: 02582552 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-K 1 d10k.txt FORM 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 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) Securities Registered Pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ---------------------- -------------------------- Common Stock $.01 par value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: None 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the Common Stock held by non-affiliates, based on the closing sales price for the Common Stock on the New York Stock Exchange on March 14, 2002, was approximately $1,151,876,562. The number of shares outstanding of Common Stock, as of March 14, 2002 was 35,880,331 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's 2001 Annual Report to Stockholders are incorporated by reference into Parts I and II of this report. Portions of the Registrant's Proxy Statement for the annual meeting of stockholders to be held on May 8, 2002 are incorporated by reference into Part III of this report. ================================================================================ AptarGroup, Inc. INDEX TO ANNUAL REPORT ON FORM 10-K For the Year Ended December 31, 2001 PART I
Page ---- Item 1 Business................................................................................ 3 Item 2 Properties.............................................................................. 11 Item 3 Legal Proceedings....................................................................... 11 Item 4 Submission of Matters to a Vote of Security Holders..................................... 12 PART II Item 5 Market for Registrant's Common Equity and Related Stockholder Matters................... 12 Item 6 Selected Financial Data................................................................. 12 Item 7 Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition............................................................................... 12 Item 7A Quantitative and Qualitative Disclosures about Market Risk.............................. 12 Item 8 Financial Statements and Supplementary Data............................................. 12 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 13 PART III Item 10 Directors and Executive Officers of the Registrant...................................... 13 Item 11 Executive Compensation.................................................................. 14 Item 12 Security Ownership of Certain Beneficial Owners and Management.......................... 14 Item 13 Certain Relationships and Related Transactions.......................................... 14 PART IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K......................... 14 Signatures...................................................................................... 15
2 PART I Item 1. Business (a) General Development of Business The Company's business began as a one-product, one-country operation that has become a multinational supplier of a broad line of dispensing packaging systems. The Company's business was started in the late 1940's, manufacturing and selling aerosol valves in the United States. The Company's business has grown primarily through the acquisition of relatively small companies and internal expansion. Information regarding acquisitions made over the past three years is set forth in Note 2 "Acquisitions" to the Consolidated Financial Statements contained in the 2001 Annual Report to Stockholders, page 61, which is incorporated herein by reference. (b) Financial Information about Segments The Company operates in the packaging components industry and is organized into five business units. The five business units sell value-added dispensing systems to global consumer product marketers and are similar in all aspects of business except historical economic performance. One of the business units ("SeaquistPerfect") has had historical economic performance lower than the other four business units and as a result is shown as a separate reportable segment for financial reporting purposes. The other four business units have similar historical economic performance and as a result have been aggregated into one reportable segment entitled "Dispensing Systems" for financial reporting purposes. Financial information relating to operations by geographic area for each of the three years in the period ended December 31, 2001 is set forth in Note 16 "Segment Information" to the Consolidated Financial Statements contained in the 2001 Annual Report to Stockholders, pages 76-79, which is incorporated herein by reference. Dispensing Systems The Dispensing Systems segment sells all three of the Company's principal product lines (pumps, closures and aerosol valves). Within the aerosol valve product line, the Dispensing Systems segment only sells pharmaceutical metered dose aerosol valves. The table below details the five principal markets served by the Company, which products are primarily sold by the Dispensing Systems segment.
Fragrance/Cosmetic Personal Care Pharmaceutical Household Food/Beverage ------------------ ------------- -------------- --------- ------------- Pumps Pumps Pumps Pumps Pumps Closures Aerosol Valves Closures Closures
SeaquistPerfect The SeaquistPerfect segment sells primarily aerosol valves and certain pumps limited to the personal care, household and, to a lesser degree, the food/beverage markets. The SeaquistPerfect segment does not sell closures, nor does it typically sell its products to the fragrance/cosmetic or pharmaceutical markets. The lower historical economic performance compared to the Dispensing Systems segment is primarily due to the non-pharmaceutical standard aerosol valve business. Competition for this product line of the business is especially strong and comes primarily from privately held companies. In recent years, the Company has taken various steps to improve profitability of the SeaquistPerfect segment. In 1997, the Company started a joint venture in the U.S. to manufacture aerosol spray caps and accessories to help offer more innovative dispensing solutions to customers of standard aerosol valves. In 1999, the Company expanded this strategy geographically when it purchased a European aerosol spray cap and accessory manufacturer. In 2000, the Company purchased the remaining 50% of the U.S. joint venture it did not previously own. The Company has also implemented several cost reduction efforts as well as implementing a price increase in 2001 to its North American aerosol valve customers. SeaquistPerfect has also devoted more of its research and development to expand its product offerings of various spray and lotion pumps. These factors have led to an increase in profitability that is expected to continue. In 3 addition, SeaquistPerfect will be selectively exiting some of the standard aerosol valve business in 2002 that is not strategically important and that does not offer adequate returns. (c) Narrative Description of Business General The Company is a leading global supplier of a broad range of innovative dispensing systems for the fragrance/cosmetic, personal care, pharmaceutical, household and food/beverage markets. The Company focuses on providing value-added dispensing systems (pumps, dispensing closures and aerosol valves) to global consumer product marketers to allow them to differentiate their products and meet the consumer's need for convenience. The Company has manufacturing facilities located throughout the world including North America, Europe, Asia and South America. The Company has over 3,000 customers with no single customer accounting for greater than 5% of the Company's 2001 net sales. For 2001, the percentage of net sales represented by sales to the fragrance/cosmetic, personal care, pharmaceutical, household and food/beverage markets were 32%, 31%, 22%, 9% and 6%, respectively. Pumps, dispensing closures and aerosol valves represented approximately 62%, 22% and 14%, respectively, of AptarGroup's 2001 net sales. The Company expects the mix of sales by product and by market to remain approximately the same in 2002. Sales of the Company's dispensing systems have traditionally grown at a faster rate than the overall packaging industry as consumer's preference for convenience has increased, and product differentiation through packaging design has become more important to the Company's customers. Consumer product marketers have converted many of their products to packages with dispensers that offer the benefit of enhanced shelf appeal, convenience, cleanliness or accuracy of dosage. The Company expects this trend to continue. Growth Strategy The Company seeks to enhance its position as a leading global supplier of innovative dispensing systems by (i) expanding geographically, (ii) converting non-dispensing applications to dispensing systems, (iii) replacing current dispensing applications with the Company's dispensing products and (iv) developing new dispensing technologies. The Company is committed to expanding geographically to serve multinational customers in existing and emerging areas. Targeted areas include Latin America, Eastern Europe and Asia. The Company believes there remain significant opportunities for growth in introducing the Company's dispensing products to non-dispensing applications. Examples include potential conversion in the food/beverage market for condiments, cooking oils, salad dressing, and single-serve non-carbonated beverages. In the fragrance/cosmetic market, potential conversion includes creams and lotions currently packaged in jars or tubes using screw off non-dispensing closures, converting to lotion pumps or dispensing closures. In addition to introducing new dispensing applications, the Company believes there are significant growth opportunities in converting existing pharmaceutical delivery systems (syringes or pills) to the Company's more convenient dispensing pump or metered dose aerosol valve systems. An example of a product for which the Company continues to find new applications is the metered dose aerosol valve. Metered dose aerosol valves are used to dispense precise amounts of product in very fine particles from pressurized containers. Traditionally metered dose valves were used to deliver medication via the pulmonary route. The Company is working with a bio-technology company that is developing proprietary technology to orally administer large molecule drugs to be absorbed through the inner linings of the mouth. Additional examples in the pharmaceutical market include nasal pumps to dispense vaccines, cold and flu treatments, and hormone replacement therapies. 4 The Company continues to develop an electronic dispensing system based on silicon etching technology primarily for the pharmaceutical market as an alternative to the traditional mechanical pump. In addition, the Company has internally developed a patented technology for dispensing fragrance samples in a lightweight blister package as an alternative to standard vials. This new product called "Clic and Dream" was successfully launched in 2001 and is expected to gain market share in the coming years in the sample fragrance market. Strategic Initiative In April 2001, the Company announced it had begun a project ("Strategic Initiative") to improve the efficiency of operations that produce pumps for its mass-market fragrance/cosmetic and personal care customers. In addition to improving efficiency and reducing costs, another objective of the Strategic Initiative is to improve customer service through reduced lead times and the ability to customize finished products on a local basis. As part of the Strategic Initiative, the Company closed one molding operation in the U.S. and will consolidate the molding and assembly of the base cartridge (standard internal components common to modular pumps) into one of the Company's facilities in Italy. In addition, the Company is rationalizing its mass-market pump product lines for these two markets by discontinuing production of non-modular pumps and increasing capacity for its modular pumps. Charges related to the Strategic Initiative are expected to be approximately $10 million before taxes and will consist primarily of costs related to the closing of the molding operation and discontinuance of its non-modular pumps (including asset impairment write-downs, accelerated depreciation associated with revised useful lives and utility abatement reimbursements) as well as employee severance and related benefit costs. Approximately $3 million of the charges are expected to be cash outlays while the remaining $7 million will be non-cash charges (asset impairment write-downs and accelerated depreciation associated with revised useful lives). The Strategic Initiative project relates to the Dispensing Systems segment and is expected to be completed before the end of 2002. Financial information relating to the Strategic Initiative for the year ended December 31, 2001 is set forth in Note 12 "Strategic Initiative Charges" to the Consolidated Financial Statements contained in the 2001 Annual Report to Stockholders, pages 70-72, which is incorporated herein by reference. Pumps (62% of 2001 net sales) AptarGroup believes it is the leading supplier of pharmaceutical, fragrance/cosmetic and personal care fine mist pumps worldwide and the second largest supplier of personal care lotion pumps worldwide. Pumps are finger-actuated dispensing systems that dispense a spray or lotion from non-pressurized containers. Pumps are sold to all five of the Company's markets. Traditional applications for pumps include perfumes, lotions, oral and nasal sprays, hair sprays and window cleaners. Applications for pumps have recently expanded to include more viscous products such as spray gels and specialized skin treatments, as well as an increasing number of food products such as butter substitutes and candy sprays. The style of pump used depends largely on the nature of the product being dispensed, from small, fine mist pumps used with perfume and pharmaceutical products to lotion pumps for more viscous formulas. In 2001, 2000 and 1999, pump sales accounted for approximately 62%, 62% and 61%, respectively, of AptarGroup's net sales. Fragrance/Cosmetic The fragrance/cosmetic market requires a broad range of pump dispensing systems to meet functional as well as aesthetic requirements. A considerable amount of research, time and coordination with the customers' development staff is required to qualify a pump for use with their products. Within the market, the Company expects the use of pumps to continue to increase, particularly in the cosmetic sector. For example, packaging for certain products such as skin moisturizers and anti-aging lotions is undergoing a conversion to pump systems, which may provide growth opportunities for the Company. 5 Pharmaceutical Pumps sold to the pharmaceutical market deliver medications orally, nasally or topically. Characteristics of this market include (i) governmental regulation of the Company's pharmaceutical customers, (ii) contaminant-controlled manufacturing environments, and (iii) a significant amount of time and research from initially working with pharmaceutical companies at the molecule development stage of a medication through the eventual distribution to the market. AptarGroup has clean room manufacturing facilities in France, Germany, Switzerland, China and the United States. The Company believes that the conversion from traditional medication forms such as pills and syringes to the use of pumps for the dispensing of medication will continue to increase. Potential opportunities for conversion from pills and syringes to pump dispensing systems include vaccines, cold and flu treatments and hormone replacement therapies. Personal Care Personal care pumps include both fine mist spray as well as lotion pumps. Sales of fine mist pumps, include use in hair care, sun care and deodorant products. The Company also supplies lotion pumps to the personal care market for products such as skin moisturizers and soap. Food/Beverage Historically, sales of the Company's pumps to this market have not been significant. However, the Company has recently increased its sales to this market with applications such as butter substitute sprays, candy sprays and condiments. The Company believes there will be additional applications for pumps in this market in the future. Closures (22% of 2001 net sales) The Company believes that it is the largest supplier of dispensing closures in the United States, and the second largest supplier in Europe. The Company manufactures primarily dispensing closures and, to a small degree, some non-dispensing closures. Dispensing closures are plastic caps, primarily for plastic containers, which allow a product to be dispensed without removing the cap. Closure sales accounted for approximately 22% of AptarGroup's net sales in 2001, 2000 and 1999. Sales of dispensing closures have grown as consumers worldwide have demonstrated a preference for a package utilizing the convenience of a dispensing closure. At the same time, consumer marketers are trying to differentiate their products by incorporating performance enhancing features such as no-drip dispensing, inverted packaging and directional flow to make them simpler to use, cleaner and more appealing to consumers. Personal Care Historically, the majority of the dispensing closure sales have been to the personal care market. Products with dispensing closures include shampoos, shower gels, sun care lotions and toothpaste. While many personal care products in the U.S. and Europe have already converted from non-dispensing to dispensing closures, the Company expects to benefit from similar conversions in other geographic areas. Household While the Company has had success worldwide in selling dispensing closures to this market, it has not represented a significant amount of total dispensing closure sales. Products utilizing dispensing closures include dishwashing detergents, laundry care products and household cleaners. The Company believes this market offers an opportunity for expansion as a result of conversion from non-dispensing to dispensing closures. 6 Food/Beverage Similar to the household market, sales of dispensing closures to the food/beverage market has not represented a significant amount of total dispensing closure sales. However, the Company has recently experienced an increase in the amount of interest from food marketers who are considering utilizing dispensing closures for their products. Examples of food/beverage products currently utilizing dispensing closures include salad dressings, syrups, condiments, honey, water and dairy creamers. The Company believes there are tremendous growth opportunities in the food/beverage market due to the size of the non-carbonated single-serve beverage market worldwide and additional conversion from traditional non-dispensing food packages to dispensing closure systems. Aerosol Valves (14% of 2001 net sales) AptarGroup believes it is one of the largest aerosol valve suppliers in North America. Aerosol valves dispense product from pressurized containers. The majority of the aerosol valves sold by the Company are continuous spray valves with the balance being metered dose valves. Demand for aerosol valves is dependent upon the consumers' preference for application, consumer perception of environmental impact, and changes in demand for the products in this market. Aerosol valve sales accounted for approximately 14%, 14% and 15% of AptarGroup's net sales in 2001, 2000 and 1999, respectively. The Company has invested in manufacturing capabilities to produce accessories that are complementary to the valve, such as customized spray-through overcaps. These overcaps provide a higher degree of differentiation and convenience since the cap does not need to be removed prior to usage. Personal Care The primary applications in the personal care market are continuous spray valves for hair care products, deodorants and shaving creams. In addition, the metered dose valve is used in this market for breath sprays. Household The primary applications for continuous spray valves in the household market include disinfectants, spray paints, insecticides and automotive products. Metered dose aerosol valves are used for air fresheners. Pharmaceutical Metered dose aerosol valves are used for dispensing precise amounts of medication. Aerosol technology allows medication to be broken up into very fine particles, which enables the drug to be delivered via the pulmonary system. The Company works with pharmaceutical companies as they work to phase out the use of aerosol chlorofluorocarbon ("CFC") propellants. The Company expects to increase its market share of metered dose valves to this market as pharmaceutical companies replace CFC products with alternative propellants. Research and Development One of the Company's competitive strengths is its commitment to innovation and providing innovative dispensing solutions for its customers. This commitment to innovation is the result of the Company's emphasis on research and development. The Company's research and development activities are directed toward developing innovative products, adapting existing products for new markets and customer requirements and lowering costs. The Company has research and development departments located in each of its five business units, which are located in the United States, France, Germany and Italy. In certain cases, the Company's customers share in the research and development expenses of customer initiated projects. This sharing of research and development expenses is not material to the total amount of the Company's research and development expenditures. 7 Expenditures for research and development activities were $25.9 million, $26.9 million and $25.6 million in 2001, 2000 and 1999, respectively. The 1999 amount excludes a $3.3 million write-off of purchased research and development costs. These costs were associated with a number of products in varying stages of development. Patents and Trademarks AptarGroup sells its products under the names used by its business units and is not currently offering any products under the AptarGroup name. The names used by its business units have been trademarked. AptarGroup customarily seeks patent and trademark protection for its products and currently owns and has numerous applications pending for United States and foreign patents and trademarks. In addition, certain of AptarGroup's products are produced under patent licenses granted by third parties. Management believes that it possesses certain technical capabilities in making its products that would also make it difficult for a competitor to duplicate them. Technology Pumps and aerosol valves require the assembly of up to 15 different plastic, metal and rubber components using high-speed equipment. When molding dispensing closures, or plastic components to be used in pump or aerosol valve products, the Company uses advanced plastic injection molding technology, including large cavitation plastic injection molds. These molds are required to maintain tolerances as small as one thousandth of an inch and manufacture products in a high-speed, cost-effective manner. The Company has experience in liquid silicone rubber molding that the Company utilizes in its dispensing closure operations. The Company also uses bi-injection molding technology in its various product lines to develop new innovative products for the packaging industry. Manufacturing and Sourcing The principal raw materials used in AptarGroup's production are plastic resins and certain metal products. AptarGroup believes an adequate supply of such raw materials is readily available from existing and alternative sources. The Company attempts to offset cost increases through improving productivity and increasing selling prices over time, as allowed by market conditions. AptarGroup also purchases plastic and metal components that are used in the final assembly of its products from suppliers near its production facilities. Certain suppliers of these components have unique technical abilities that make AptarGroup dependent on them, particularly for aerosol valve and pump production in North America. In addition, the Company's pharmaceutical products often use specific approved plastic resin for its customers. Significant delays in receiving components from these suppliers or discontinuance of an approved plastic resin would require AptarGroup to seek alternative sources, which could result in higher costs as well as impact the ability of the Company to supply products in the short term. Sales and Distribution Sales of products are primarily through AptarGroup's own sales force. To a limited extent, AptarGroup also uses the services of independent representatives and distributors who sell AptarGroup's products as independent contractors to certain smaller customers and export markets. Backlog AptarGroup's sales are primarily made pursuant to standard purchase orders for delivery of products. Most orders placed with the Company are ready for delivery within 120 days. Some customers place blanket orders, which extend beyond this delivery period. However, deliveries against purchase orders are subject to change, and only a small portion of the order backlog is noncancelable. The dollar amount associated with the noncancelable portion is not material. Therefore, AptarGroup does not believe that backlog as of any particular date is indicative of future results. 8 Customers The demand for AptarGroup's products is influenced by the demand for the products of AptarGroup's customers. Demand for the products of AptarGroup's customers may be affected by general economic conditions, government regulations, tariffs and other trade barriers. AptarGroup's customers include many of the largest fragrance/cosmetic, personal care, pharmaceutical, household products and food/beverage marketers in the world. The Company has over 3,000 customers with no single customer accounting for greater than 5% of 2001 net sales. Over the past few years, a consolidation of the Company's customer base has occurred. This trend is expected to continue. A concentration of customers may result in pricing pressures or a loss of volume. This situation also presents opportunities for increasing sales due to the breadth of the Company's product line, its international presence, and long-term relationships with certain customers. International Business A significant number of AptarGroup's operations are located outside the United States. Sales in Europe for the years ended December 31, 2001, 2000 and 1999 were approximately 54%, 53% and 54%, respectively, of net sales. The majority of units sold in Europe are manufactured at facilities in England, France, Germany, Ireland, Italy, Spain and Switzerland. Other geographic areas serviced by AptarGroup include Argentina, Australia, Brazil, Canada, Czech Republic, China, India, Indonesia, Japan and Mexico, and represent approximately 8%, 8% and 6% of AptarGroup's consolidated sales for the years ended December 31, 2001, 2000 and 1999, respectively. Export sales from the United States were $62.2 million, $44.3 million and $57.9 million in 2001, 2000 and 1999, respectively. The Company currently has a wholly owned subsidiary located in Argentina. In 2001, the wholly owned subsidiary had net sales of approximately $8 million, approximately one half of which was sold outside of Argentina and invoiced in U.S. dollars. The subsidiary purchases certain components in either U.S. dollars or Euros, and finishes the products locally. At December 31, 2001, the subsidiary had approximately $400 thousand of net liability exposure denominated in either U.S. dollars or Euros that was revalued using a devalued Argentine Peso. This revaluation of the net liability position resulted in an unrealized foreign exchange loss reported in the results of operations of approximately $140 thousand. The Company expects business in Argentina to be disrupted during the current economic crisis, but any negative impact is not expected to be significant to the overall worldwide results of operations in 2002. Foreign Currency A significant number of AptarGroup'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 statements of AptarGroup's foreign entities. The Company's primary foreign exchange exposure is to the Euro, but the Company has foreign exchange exposure to South American and Asian currencies as well as the British pound. The Company manages its exposures to foreign exchange principally with forward exchange contracts to hedge certain transactions and firm purchase and sales commitments denominated in foreign currencies. A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on the Company's financial statements. Conversely, a weakening U.S. dollar has an additive effect. 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 could materially impact the Company's results of operations. Working Capital Practices Collection and payment periods tend to be longer for the Company's operations located outside the United States due to local business practices. Historically, the Company has not needed to keep significant amounts of finished goods inventory to meet customer requirements. 9 Employee and Labor Relations AptarGroup has approximately 6,600 full-time employees. Of the full-time employees, approximately 1,600 are located in North America, 4,400 are located in Europe and the remaining 600 are located in Asia and South America. Approximately 200 of the North American employees are covered by a collective bargaining agreement, while the majority of the Company's international employees are covered by collective bargaining arrangements made at either the local or national level in their respective countries. Termination of employees at certain AptarGroup European operations could be costly due to local regulations regarding severance benefits. Management of AptarGroup considers its employee relations to be good. Competition All of the markets in which AptarGroup operates are highly competitive and the Company continues to experience price competition in all product lines and markets. Competitors include privately and publicly held entities. AptarGroup's competitors range from regional to international companies. AptarGroup expects the market for its products to remain competitive. AptarGroup believes its competitive advantages are consistent high levels of innovation, quality, service and geographic diversity and breadth of products. The Company's manufacturing strength lies in the ability to mold complex plastic components in a cost-effective manner and to assemble products at high speeds. Environment AptarGroup's manufacturing operations primarily involve plastic injection molding and automated assembly processes, and, to a limited degree, metal annodization. Historically, the environmental impact of these processes has been minimal, and management believes it meets current environmental standards in all material respects. Government Regulation To date, the manufacturing operations of AptarGroup have not been significantly affected by environmental laws and regulations relating to the environment. Certain AptarGroup products are indirectly affected by government regulation. Growth of packaging using aerosol valves has been restrained by concerns relating to the release of certain chemicals into the atmosphere. Both aerosol and pump packaging are affected by government regulations regarding the release of volatile organic compounds ("VOC's") into the atmosphere. Certain states within the United States have regulations that required the reduction in the amount of VOC's that can be released into the atmosphere and the potential exists for this type of regulation to expand to a worldwide basis. These regulations required the Company's customers to reformulate certain aerosol and pump products, which may have affected the demand for such products. The Company owns patents and has developed systems to function with alternative propellant and product formulations. Aerosol packaging of paints has also been adversely impacted by local regulations adopted in many large cities in the United States designed to address the problem of spray painted graffiti. Aerosol packaging may also be adversely impacted by insurance cost considerations relating to the storage of aerosol products. Future government regulations could include medical cost containment policies. For example, reviews by various governments to determine the number of drugs or prices thereof that will be paid by their insurance systems could affect future sales to the pharmaceutical industry. Such regulation could adversely affect prices of and demand for the Company's pharmaceutical products. The Company believes that the focus on the cost effectiveness 10 of the use of medications as compared to surgery and hospitalization provides an opportunity for the Company to expand sales to the pharmaceutical market. Regulatory requirements impact the Company's customers and could affect the Company's investment in and manufacturing of products for the pharmaceutical market. Item 2. Properties The principal offices and manufacturing facilities of AptarGroup are either owned or leased by the Company or its subsidiaries. None of the owned principal properties is subject to a lien or other encumbrance material to the operations of the Company. The Company believes that existing operating leases will be renegotiated as they expire, will be acquired through purchase options or that suitable alternative properties can be leased on acceptable terms. The Company considers the condition and extent of utilization of its manufacturing facilities and other properties to be generally good, and the capacity of its plants to be adequate for the needs of its business. The locations of the Company's principal manufacturing facilities, by country, are set forth below: FRANCE GERMANY CHINA Le Neubourg Bohringen Suzhou/2/ Le Vaudreuil Dortmund/1/ Poincy Eigeltingen Verneuil Sur Avre/2/ Freyung Annecy Menden/1/ ITALY NORTH AMERICA UNITED KINGDOM San Giovanni Teatino (Chieti) Cary, Illinois, USA/1/ Leeds, England Manoppello McHenry, Illinois, USA/1/ Milan/1/ Midland, Michigan, USA Mukwonago, Wisconsin, USA Congers, New York, USA Queretaro, Mexico/2/ Stratford, Connecticut, USA Torrington, Connecticut, USA SWITZERLAND IRELAND BRAZIL Messovico Tourmakeady, County Mayo Sao Paulo Ballinasloe, County Gallway ARGENTINA CZECH REPUBLIC Buenos Aires Ckyne
- -------- /1/ Locations of facilities dedicated to the SeaquistPerfect segment. /2/ Locations that have facilities for both the SeaquistPerfect and Dispensing Systems segments. All other locations not footnoted represent locations of facilities dedicated to the Dispensing Systems segment. In addition to the above countries, the Company has sales offices or other manufacturing facilities in Australia, Canada, India, Indonesia, Japan and Spain. The Company's corporate office is located in Crystal Lake, Illinois. Item 3. Legal Proceedings Legal proceedings involving the Company generally relate to product liability and patent infringement issues. In the opinion of AptarGroup's management, the outcome of pending claims and litigation is not likely to have a material adverse effect on the Company's financial position or the results of its operations. 11 Historically, product liability claims for all products of the Company have been minimal. However, the increase in pump and aerosol valve applications for pharmaceutical products may increase the risk associated with product liability claims. Quality control systems are specifically designed to prevent defects in the Company's products. Additionally, the Company maintains product liability insurance in excess of its historical claims experience. Item 4. Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The information set forth in Note 18 "Quarterly Data (Unaudited)" to the Consolidated Financial Statements contained in the Company's 2001 Annual Report to Stockholders, page 80, is incorporated herein by reference. The Common Stock of AptarGroup is traded on the New York Stock Exchange (symbol: ATR). As of March 14, 2002, stockholders of record totaled approximately 600. During the quarter ended December 31, 2001, the FCP Aptar Savings Plan (the "Plan") purchased 475 shares of Common Stock of the Company on behalf of the participants at an average price of $33.46 per share for an aggregate amount of approximately $16 thousand. At December 31, 2001, the Plan owns 5,020 shares of Common Stock of the Company. Employees of AptarGroup S.A.S. and Valois S.A.S., subsidiaries 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. Selected Financial Data The information set forth under the heading "Five Year Summary of Selected Financial Data" appearing on page 83 of the Company's 2001 Annual Report to Stockholders is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition The information set forth under the heading "Management's Discussion and Analysis" appearing on pages 84-95 of the Company's 2001 Annual Report to Stockholders is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures about Market Risk The information set forth under the heading "Management's Discussion and Analysis" appearing on pages 84-95 of the Company's 2001 Annual Report to Stockholders is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The information set forth under the headings "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Cash Flows," "Consolidated Statements of Changes in Equity," "Notes to Consolidated Financial Statements" and "Report of Independent Accountants" appearing on pages 52-81 of the Company's 2001 Annual Report to Stockholders is incorporated herein by reference. 12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Certain information required to be furnished in this part of the Form 10-K has been omitted because the Registrant will file with the Securities and Exchange Commission a definitive proxy statement pursuant to Regulation 14A under the Securities Exchange Act of 1934 not later than April 30, 2002. Item 10. Directors and Executive Officers of the Registrant The information set forth under the heading "Election of Directors" in the Registrant's Proxy Statement for the annual meeting of stockholders to be held on May 8, 2002 is incorporated herein by reference. In addition to Messrs. Carl A. Siebel, Peter Pfeiffer and Stephen J. Hagge, each of whom is a director and executive officer of the Company and information with respect to whom is incorporated by reference in this Item 10, executive officers of the Registrant are as follows: Jacques Blanie, age 55, has been Executive Vice President of SeaquistPerfect Dispensing L.L.C. since 1996 and Geschaftsfuhrer of SeaquistPerfect Dispensing GmbH since 1986. Francois Boutan, age 59, has served in the capacity of Vice President Finance-Europe since 1998. Mr. Boutan was Financial Director and Controller of the European operations of AptarGroup from 1988 to 1998. Olivier De Pous, age 57, has been Directeur General of Valois S.A.S. since January 2000. Mr. De Pous was Directeur de Division Parfumerie Cosmetique of Valois S.A.S from 1997 to 1999. Patrick Doherty, age 46, has served as President of SeaquistPerfect Dispensing L.L.C. since October 2000. Mr. Doherty was Executive Vice President, General Manager of SeaquistPerfect Dispensing L.L.C. since April 1999, and was Vice President of Operations of SeaquistPerfect Dispensing L.L.C. since April 1993. Olivier Fourment, age 44, has been Directeur General of Valois S.A.S. since January 2000. Mr. Fourment was Directeur de Division Pharmacie of Valois S.A.S. from 1997 to 1999. Lawrence Lowrimore, age 57, has been Vice President-Human Resources of AptarGroup since 1993. Francesco Mascitelli, age 51, has been Direttore Generale of Emsar S.p.A., an Italian subsidiary, since 1991. Emil Meshberg, age 54, has been Vice President of AptarGroup since February 1999, and has served as Chief Executive Officer and President of Emson Research, Inc. for more than the past five years. Eric S. Ruskoski, age 54, has been President of Seaquist Closures L.L.C. since 1987. Hans-Josef Schutz, age 57, has been Geschaftsfuhrer of the Pfeiffer Group since 1993. Rick Schofield, age 51, has been President of Emsar, Inc. since 1998. Mr. Schofield was President of Risdon AMS (USA), Inc. a Crown Cork and Seal Company from 1996 to 1998. The information set forth under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" in the Registrant's Proxy Statement for the annual meeting of stockholders to be held on May 8, 2002 is incorporated herein by reference. 13 Item 11. Executive Compensation The information set forth under the headings "Board Compensation" and "Executive Compensation" (other than "Compensation Committee Report on Executive Compensation" and "Performance Graph") in the Registrant's Proxy Statement for the annual meeting of stockholders to be held on May 8, 2002 is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information set forth under the heading "Security Ownership of Certain Beneficial Owners and Management" in the Registrant's Proxy Statement for the annual meeting of stockholders to be held on May 8, 2002, is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information set forth under the heading "Certain Transactions" in the Registrant's Proxy Statement for the annual meeting of stockholders to be held on May 8, 2002 is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) The following documents are filed as a part of this report:
Location -------- 1) Financial Statements required by Item 8 of this Form Consolidated Balance Sheets......................................................... Annual Report, page 52 Consolidated Statements of Income................................................... Annual Report, page 54 Consolidated Statements of Cash Flows............................................... Annual Report, page 55 Consolidated Statements of Changes in Equity........................................ Annual Report, page 56 Notes to Consolidated Financial Statements.......................................... Annual Report, page 58 Report of Independent Accountants................................................... Annual Report, page 81 2) Schedule required by Article 12 of Regulation S-X Report of Independent Accountants on Financial Statement Schedule................... page 16 II--Valuation and Qualifying Accounts............................................... page 17 All other schedules have been omitted because they are not applicable or not required. 3) Exhibits required by Item 601 of Regulation S-K are incorporated by reference to the Exhibit Index on pages 18-20 of this report.
(b) Reports on Form 8-K during the quarter ended December 31, 2001: No reports on Form 8-K were filed during the quarter ended December 31, 2001. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Crystal Lake, State of Illinois on this 21st day of March 2002. APTARGROUP, INC. (Registrant) By /S/ STEPHEN J. HAGGE ----------------------------------- Stephen J. Hagge Executive Vice President, Chief Financial Officer and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the date indicated. Signature Title Date --------- ----- ---- /S/ KING HARRIS Chairman of the Board and March 21, 2002 - ------------------------------- Director King Harris /S/ CARL A. SIEBEL President and Chief Executive March 21, 2002 - ------------------------------- Officer and Director Carl A. Siebel (Principal Executive Officer) /S/ PETER PFEIFFER Vice Chairman of the Board March 21, 2002 - ------------------------------- and Director Peter Pfeiffer /S/ STEPHEN J. HAGGE Executive Vice President, March 21, 2002 - ------------------------------- Chief Financial Officer, Stephen J. Hagge Secretary and Director (Principal Accounting and Financial Officer) /S/ PROF. DR. ROBERT W. HACKER Director March 21, 2002 - ------------------------------- Prof. Dr. Robert W. Hacker /S/ ALAIN CHEVASSUS Director March 21, 2002 - ------------------------------- Alain Chevassus /S/ RALPH GRUSKA Director March 21, 2002 - ------------------------------- Ralph Gruska /S/ LEO A. GUTHART Director March 21, 2002 - ------------------------------- Leo A. Guthart /S/ DR. JOANNE C. SMITH Director March 21, 2002 - ------------------------------- Dr. Joanne C. Smith 15 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Stockholders of AptarGroup, Inc. Our audits of the consolidated financial statements referred to in our report dated February 13, 2002, appearing in the 2001 Annual Report to Stockholders of AptarGroup, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /S/__PRICEWATERHOUSECOOPERS LLP PRICEWATERHOUSECOOPERS LLP Chicago, Illinois February 13, 2002 16 AptarGroup, Inc. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Dollars in Thousands)
Balance at Charged to Deductions Balance beginning costs and from at end of period expenses Acquisition reserve(a) of period ---------- ---------- ----------- ---------- --------- 2001 Allowance for doubtful accounts $6,927 $1,879 $ -- $1,440 $ 7,366 Inventory obsolescence reserve. 8,840 4,198 -- 2,444 10,594 2000 Allowance for doubtful accounts $6,865 $1,849 $ -- $1,787 $ 6,927 Inventory obsolescence reserve. 7,881 2,956 -- 1,997 8,840 1999 Allowance for doubtful accounts $5,132 $ 679 $2,013 $ 959 $ 6,865 Inventory obsolescence reserve. 6,815 2,548 512 1,994 7,881
- -------- (a) Write-off of accounts considered uncollectible, net of recoveries and foreign currency translation adjustments. 17 INDEX TO EXHIBITS
Number and Description of Exhibit - --------------------------------- 3(i) Amended and Restated Certificate of Incorporation of the Company, filed as Exhibit 3 (i) to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-11846), is hereby incorporated by reference. 3(ii) Amended and Restated By-Laws of the Company, filed as Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-11846), is hereby incorporated by reference. 4.1 Rights Agreement dated as of April 6, 1993 between the Company and Chemical Bank, as rights agent, filed as Exhibit 4.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (the "1993 10-K")(File No. 1-11846), is hereby incorporated by reference. 4.2 Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series A, of the Company, filed as Exhibit 6.4 of the Company's Registration Statement on Form 8-A filed under the Securities Exchange Act of 1934 on April 5, 1993 (File No. 1-11846), is hereby incorporated by reference. The Registrant hereby agrees to provide the Commission, upon request, copies of instruments defining the rights of holders of long-term debt of the Registrant and its subsidiaries as are specified by item 601(b)(4)(iii)(A) of Regulation S-K. 4.3 Note Purchase Agreement dated as of May 15, 1999 relating to $107 million senior unsecured notes, series 1999-A, filed as Exhibit 4.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-11846), is hereby incorporated by reference. 4.4 Multicurrency Credit Agreement dated as of June 30, 1999 among the Company, the lenders party thereto, Bank of America National Trust and Savings Association, as Agent, and Bank of America Securities LLC, as Arranger, filed as Exhibit 4.2 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-11846), is hereby incorporated by reference. 4.4.1 First Amendment Agreement dated as of December 14, 2000 relating to the Multicurrency Credit Agreement dated as of June 30, 1999 among the Company, the lender party thereto, Deutsche Bank AG New York Branch and/or Cayman Islands and Bank of America, National Association, as Agent for the Lenders (File No. 1-11846), is hereby incorporated by reference. 10.1 AptarGroup, Inc. 1992 Stock Awards Plan, filed as Exhibit 10.1 (included as Appendix B to the Prospectus) to the Company's Registration Statement on Form S-1, Registration Number 33-58132, filed on February 10, 1993 (the "Form S-1"), is hereby incorporated by reference. ** 10.2 AptarGroup, Inc. 1992 Director Stock Option Plan, filed as Exhibit 10.2 (included as Appendix C to the Prospectus) to the Form S-1, is hereby incorporated by reference. ** 10.3 Managing Director Employment Agreement dated January 2, 1981 of Mr. Peter Pfeiffer, filed as Exhibit 10.4 to the Form S-1, is hereby incorporated by reference. ** 10.4 Service Agreement dated April 30, 1981, of Carl A. Siebel, and related pension plan, filed as Exhibit 10.5 to the Form S-1, is hereby incorporated by reference. ** 10.5 Service Agreement dated April 22, 1993, between AptarGroup, Inc. and Peter Pfeiffer, and related pension plan, filed as Exhibit 10.6 to the 1993 10-K, is hereby incorporated by reference. ** 10.6 First supplement dated 1989 pertaining to the pension plan between Perfect-Valois Ventil GmbH and Carl A. Siebel, filed as Exhibit 10.7 to the 1993 10-K, is hereby incorporated by reference. **
18
Number and Description of Exhibit - --------------------------------- 10.7 Pittway Guarantee dated February 2, 1990, pertaining to the pension plan between Perfect-Valois Ventil GmbH and Carl A. Siebel, filed as Exhibit 10.8 to the 1993 10-K, is hereby incorporated by reference. **
10.8 Assignment, Assumption and Release as of April 22, 1993, among Pittway Corporation, AptarGroup, Inc., and Carl A. Siebel, filed as Exhibit 10.10 to the 1993 10-K, is hereby incorporated by reference. ** 10.9 Second supplement dated December 19, 1994 pertaining to the pension plan between Perfect-Valois Ventil GmbH and Carl A. Siebel, filed as Exhibit 10.11 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-11846), is hereby incorporated by reference. ** 10.10 Employment Agreement dated February 1, 1996 of Stephen J. Hagge, filed as Exhibit 10.14 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-11846), is hereby incorporated by reference. ** 10.11 AptarGroup, Inc. 1996 Stock Awards Plan, filed as Appendix A to the Company's Proxy Statement, dated April 10, 1996 (File No. 1-11846), is hereby incorporated by reference. ** 10.12 AptarGroup, Inc. 1996 Director Stock Option Plan, filed as Appendix B to the Company's Proxy Statement, dated April 10, 1996 (File No. 1-11846), is hereby incorporated by reference. ** 10.13 Stock Purchase Agreement dated as of February 16, 1999 between AptarGroup, Inc. and The Meshberg Family Trust, filed as Exhibit 2.1 to the Company's Report on Form 8-K filed on February 26, 1999 (File No. 1-11846), is hereby incorporated by reference. 10.14 Stock Purchase Agreement dated as of February 16, 1999 among AptarGroup, Inc., Emil Meshberg and Samuel Meshberg, filed as Exhibit 2.2 to the Company's Report on Form 8-K filed on February 26, 1999 (File No. 1-11846), is hereby incorporated by reference. 10.15 Agreement of Merger dated as of February 16, 1999 among AptarGroup, Inc., R Merger Corporation, R.P.M. manufacturing Company, Emil Meshberg and Ronald Meshberg, filed as Exhibit 2.3 to the Company's Report on Form 8-K filed on February 26, 1999 (File No. 1-11846), is hereby incorporated by reference. 10.16 Employment Agreement dated February 17, 1999, of Emil Meshberg, filed as Exhibit 10.20 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-11846), is hereby incorporated by reference. ** 10.17* Amendment dated February 17, 2002, to Employment Agreement dated February 17, 1999 of Emil Meshberg. ** 10.18 Amendment No.1 to Service Agreement dated January 1, 2000 of Carl A. Siebel, filed as Exhibit 10.21 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-11846), is hereby incorporated by reference. ** 10.19 AptarGroup, Inc. 2000 Stock Awards Plan, filed as Appendix A to the Company's Proxy Statement, dated April 6, 2000 (File No. 1-11846), is hereby incorporated by reference. ** 10.20 AptarGroup, Inc. 2000 Director Stock Option Plan, filed as Appendix B to the Company's Proxy Statement, dated April 6, 2000 (File No. 1-11846), is hereby incorporated by reference. ** 10.21 Employment Agreement dated March 6, 1996 of Eric S. Ruskoski, filed as Exhibit 10.17 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-11846), is hereby incorporated by reference. ** 10.22 Indemnification Agreement dated January 1, 1996 of King Harris, filed as Exhibit 10.25 of the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2001 (File No. 1-11846), is hereby incorporated by reference. **
19
Number and Description of Exhibit - --------------------------------- 10.23 Employment Agreement dated February 17, 2000, of Rick Schofield, filed as Exhibit 10.26 of the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2001 (File No. 1-11846), is hereby incorporated by reference. ** 10.24 Supplement to the pension scheme agreement dated October 16, 2001 pertaining to the pension plan between AptarGroup, Inc. and Peter Pfeiffer, filed as Exhibit 10.27 of the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2001 (File No. 1-11846), is hereby incorporated by reference. ** 13* 2001 Annual Report to Stockholders (such report, except to the extent specifically incorporated herein by reference, is being furnished for the information of the Securities and Exchange Commission only and is not to be deemed filed as a part of this Form 10-K). 21* List of Subsidiaries. 23* Consent of Independent Accountants.
- -------- * Filed herewith. ** Management contract or compensatory plan or arrangement. 20 EX-10.17 3 dex1017.txt AMENDMENT TO EMPLOYMENT AGREEMENT DATED 2/17/2002 AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment, dated as of February 17, 2002 (this "Amendment"), to the Employment Agreement, dated as of February 17, 1999 (the "Agreement"), is entered into between AptarGroup, Inc., a Delaware corporation (the "Company"), and Emil Meshberg (the "Executive"). WHEREAS, the Company and the Executive desire to amend the Agreement (i) to extend the term of the Agreement as provided herein and (ii) to modify certain other terms of the Agreement as provided herein; NOW, THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows: 1. Section 1 of the Agreement is amended by deleting the second sentence thereof and substituting therefor the following two sentences: "The term of employment of the Executive by the Company pursuant to this Agreement shall commence on the Effective Date and shall end on the third anniversary of the Effective Date, unless earlier terminated pursuant to Section 4 hereof; provided that the term of this Agreement shall be extended automatically for one additional year as of each anniversary of the Effective Date, commencing with the third anniversary of the Effective Date, unless earlier terminated pursuant to Section 4 hereof or unless not later than six months prior to any such renewal date either the Company or the Executive gives written notice to the other that the term of this Agreement shall not be so extended. The initial three-year term of this Agreement and any extension of such initial three-year term pursuant to this Section 1 shall be referred to herein as the "Employment Period." 2. The first sentence of Section 3(a) of the Agreement is amended by adding the following at the end thereof: ", and, commencing as of January 1, 2002 at the rate of $324,000 per annum." 3. Section 3(b) of the Agreement is amended to read in its entirety as follows: "(b) Annual Performance Bonus. The Executive shall be eligible to ------------------------- receive an annual performance bonus payable in cash for each fiscal year of the Company during the Employment Period. The amount of such annual performance bonus shall be calculated by the Company using the Emsar Annual Performance Bonus Plan formula." 4. The second sentence of Section 3(e) of the Agreement is amended by deleting therefrom the words "with coverage of $200,000 on the life of the Executive,". 5. Section 3(j) of the Agreement is amended by deleting therefrom the word "four" and substituting therefor the word "five". 6. Clause (i) of Section 4(d) of the Agreement is amended by deleting the word "or" at the end thereof and substituting therefor the words "without further extension or". 7. Clause (a) of the second sentence of Section 5 of the Agreement is amended by deleting therefrom the words "third anniversary of the Effective Date" and substituting therefor the words "last day of the Employment Period". 8. In all other respects, the Agreement shall not be amended and shall remain in full force and effect. IN WITNESS WHEREOF, the Company and the Executive have executed this Amendment as of the date first above written. APTARGROUP, INC. By: /s/ Stephen J. Hagge ------------------------------- EXECUTIVE /s/ Emil Meshberg ------------------------------------ Emil Meshberg 2 EX-13 4 dex13.txt 2001 ANNUAL REPORT Exhibit 13 CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
December 31, 2001 2000 ------------------------------------------------------------------------------------ ASSETS CURRENT ASSETS: Cash and equivalents $ 48,013 $ 55,559 Accounts and notes receivable, less allowance for doubtful accounts of $7,366 in 2001 and $6,927 in 2000 185,131 210,794 Inventories 120,531 121,522 Prepayments and other 21,240 19,674 --------- --------- 374,915 407,549 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Buildings and improvements 127,017 108,905 Machinery and equipment 690,882 665,991 --------- --------- 817,899 774,896 Less: Accumulated depreciation (441,829) (402,412) --------- --------- 376,070 372,484 Land 5,032 4,949 --------- --------- 381,102 377,433 --------- --------- OTHER ASSETS: Investments in affiliates 9,894 11,127 Goodwill, less accumulated amortization of $16,332 in 2001 and $13,093 in 2000 122,569 127,754 Miscellaneous 26,847 28,376 --------- --------- 159,310 167,257 --------- --------- TOTAL ASSETS $ 915,327 $ 952,239 ========= =========
See accompanying notes to consolidated financial statements. 52 AptarGroup: Consolidated Balance Sheets Exhibit 13 CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
December 31, 2001 2000 --------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ - $ 29,248 Current maturities of long-term obligations 13,168 10,326 Accounts payable and accrued liabilities 140,983 163,528 ---------- -------- 154,151 203,102 ---------- -------- LONG-TERM OBLIGATIONS 239,387 252,752 ---------- -------- DEFERRED LIABILITIES AND OTHER: Deferred income taxes 28,026 35,873 Retirement and deferred compensation plans 17,418 12,597 Minority interests 5,099 5,050 Deferred and other non-current liabilities 2,042 2,325 ---------- -------- 52,585 55,845 ---------- -------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 1 million shares authorized, none outstanding - - Common stock, $.01 par value, 99 million shares authorized, 37.0 and 36.6 million outstanding in 2001 and 2000, respectively 370 366 Capital in excess of par value 122,926 115,034 Retained earnings 490,229 439,258 Accumulated other comprehensive income (114,402) (89,163) Less: Treasury stock at cost, 1.2 and 1.0 million shares in 2001 and 2000, respectively (29,919) (24,955) ---------- -------- 469,204 440,540 ---------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 915,327 $952,239 ========== ========
See accompanying notes to consolidated financial statements. Consolidated Balance Sheet: AptarGroup 53 CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)
Years Ended December 31, 2001 2000 1999 ---------------------------------------------------------------------------------------------------- NET SALES $ 891,986 $ 883,481 $ 834,317 ---------- ------------------------ OPERATING EXPENSES: Cost of sales 562,814 553,642 519,704 Selling, research & development, and administrative 146,137 145,000 137,507 Depreciation and amortization 73,584 70,949 68,670 Strategic Initiative charges 7,583 - - ---------- ------------------------ 790,118 769,591 725,881 ---------- ------------------------ OPERATING INCOME 101,868 113,890 108,436 ---------- ------------------------ OTHER INCOME (EXPENSE): Interest expense (15,572) (19,002) (14,246) Interest income 1,822 1,764 1,170 Equity in results of affiliates (248) 506 (918) Minority interests (564) (756) (160) Miscellaneous, net 1,049 1,520 796 In-process research and development write-off - - (3,300) ---------- ------------------------ (13,513) (15,968) (16,658) ---------- ------------------------ INCOME BEFORE INCOME TAXES 88,355 97,922 91,778 PROVISION FOR INCOME TAXES 29,447 33,256 33,066 ---------- ------------------------ NET INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 58,908 64,666 58,712 CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (64) - - ---------- ------------------------ NET INCOME $ 58,844 $ 64,666 $ 58,712 ========== ======================== NET INCOME PER COMMON SHARE Basic $ 1.64 $ 1.80 $ 1.62 ========== ======================== Diluted $ 1.61 $ 1.78 $ 1.59 ========== ========================
See accompanying notes to consolidated financial statements. 54 AptarGroup: Consolidated Statements of income CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, brackets denote cash outflows)
Years Ended December 31, 2001 2000 1999 ---------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 58,844 $ 64,666 $ 58,712 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATIONS: Depreciation 68,832 65,987 64,405 Amortization 4,752 4,962 4,265 Provision for bad debts 1,879 1,849 679 Strategic Initiative charges 7,583 - - Minority interests 564 756 160 Cumulative effect of accounting change 64 - - Deferred income taxes (4,723) 3,870 5,615 Retirement and deferred compensation plans 2,255 (828) 1,030 Equity in results of affiliates in excess of cash distributions received 300 (389) 918 In-process research & development write-off - - 3,300 CHANGES IN BALANCE SHEET ITEMS, EXCLUDING EFFECTS FROM ACQUISITIONS AND FOREIGN CURRENCY ADJUSTMENTS: Accounts and notes receivable 12,839 (34,388) (8,422) Inventories (4,766) (19,625) (6,684) Prepaid and other current assets (3,053) (535) (4,841) Accounts payable and accrued liabilities (15,942) 27,920 (3,291) Income taxes payable (3,405) 18,517 (7,551) Other changes, net 1,855 (4,964) 10,137 ---------- ------------------------ NET CASH PROVIDED BY OPERATIONS 127,878 127,798 118,432 ---------- ------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (92,221) (93,933) (88,594) Disposition of property and equipment 1,477 2,906 2,154 Acquisition of businesses - (2,271) (144,189) Investments in affiliates (69) (3,788) (2,000) Collection (issuance) of notes receivable, net 314 (657) (59) ---------- ------------------------ NET CASH USED BY INVESTING ACTIVITIES (90,499) (97,743) (232,688) ---------- ------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable - 29,828 - Repayments of notes payable (31,087) - (4,089) Proceeds from long-term obligations 6,420 3,116 156,639 Repayments of long-term obligations (12,380) (14,876) (18,965) Dividends paid (7,873) (7,170) (6,532) Proceeds from stock option exercises 7,896 2,114 3,228 Purchase of treasury stock (4,964) (18,743) (6,212) ---------- ------------------------ NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (41,988) (5,731) 124,069 ---------- ------------------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,937) (1,181) (2,556) ---------- ------------------------ NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS (7,546) 23,143 7,257 CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 55,559 32,416 25,159 ---------- ------------------------ CASH AND EQUIVALENTS AT END OF PERIOD $ 48,013 $ 55,559 $ 32,416 ========== ======================== SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 15,963 $ 19,616 $ 12,178 Income taxes paid $ 39,171 $ 25,275 $ 35,445 SUPPLEMENTAL NON-CASH INVESTING ACTIVITIES: Net assets contributed to joint venture $ - $ 5,000 $ -
See accompanying notes to consolidated financial statements. Consolidated Statements of Cash Flows: AptarGroup 55 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Years Ended December 31, 2001, 2000 and 1999 (In thousands)
Comprehensive Total Income Equity -------------------------------------------------------------------------------------- BALANCE - DECEMBER 31, 1998 $ 415,508 Net income $ 58,712 58,712 Foreign currency translation adjustments (48,418) (48,418) ---------- Comprehensive income $ 10,294 ========== Stock option exercises 3,228 Stock issued for acquisitions 3,983 Cash dividends declared on common stock (6,532) Treasury stock purchased (6,212) ---------- BALANCE - DECEMBER 31, 1999 420,269 Net income $ 64,666 64,666 Foreign currency translation adjustments (20,596) (20,596) ---------- Comprehensive income $ 44,070 ========== Stock option exercises 2,114 Cash dividends declared on common stock (7,170) Treasury stock purchased (18,743) ---------- BALANCE - DECEMBER 31, 2000 440,540 Net income $ 58,844 58,844 Foreign currency translation adjustments (23,440) (23,440) Minimum pension liability adjustment (1,799) (1,799) ---------- Comprehensive income $ 33,605 ========== Stock option exercises 7,896 Cash dividends declared on common stock (7,873) Treasury stock purchased (4,964) ---------- BALANCE - DECEMBER 31, 2001 $ 469,204 ==========
See accompanying notes to consolidated financial statements. 56 AptarGroup: Consolidated financial statements.
Accumulated Other Common Capital in Retained Comprehensive Stock Treasury Excess of Earnings Income Par Value Stock Par Value ------------------------------------------------------------------------------ $ 329,582 $ (20,149) $ 361 $ - $ 105,714 58,712 (48,418) 2 3,226 2 3,981 (6,532) (6,212) ------------------------------------------------------------------------------ 381,762 (68,567) 365 (6,212) 112,921 64,666 (20,596) 1 2,113 (7,170) (18,743) ------------------------------------------------------------------------------ 439,258 (89,163) 366 (24,955) 115,034 58,844 (23,440) (1,799) 4 7,892 (7,873) (4,964) ------------------------------------------------------------------------------ $ 490,229 $ (114,402) $ 370 $ (29,919) $ 122,926 ==============================================================================
Consolidated Statements of Changes in Equity: AptarGroup 57 Notes to Consolidated Financial Statements (In thousands, except per share amounts or other wise indicated) NOTE 1: Summary of Significant Accounting Policies Nature of Business AptarGroup, Inc. is an international company that designs, manufactures and sells consumer product dispensing systems. The Company focuses on providing value-added components to a variety of global consumer product marketers in the fragrance/cosmetic, personal care, pharmaceutical, household and food/beverage industries. The Company has manufacturing facilities located throughout the world including North America, Europe, Asia and South America. Basis of Presentation The accompanying 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. All significant intercompany accounts and transactions have been eliminated. Certain previously reported amounts have been reclassified to conform to the current period presentation. 58 AptarGroup: Notes to Consolidated Financial Statements Accounting Estimates The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). This process requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash Management The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Inventories Inventories are stated at cost, which is lower than market. Costs included in inventories are raw materials, direct labor and manufacturing overhead. The costs 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. Investments in Affiliated Companies The Company accounts for its investments in 20% to 50% owned affiliated companies using the equity method. These investments are in companies that manufacture and distribute products similar to the Company's products or supply components to the Company. Dividends from affiliated companies received in 2001, 2000 and 1999 amounted to $52, $117, and $0 respectively. Property and Depreciation Properties are stated at cost. Depreciation is determined on a straight-line basis over the estimated useful lives for financial reporting purposes and accelerated methods for income tax reporting. Generally, the estimated useful lives are 25 to 40 years for buildings and improvements and 3 to 10 years for machinery and equipment. Intangible Assets Management believes the excess purchase price over the fair value of the net assets acquired ("Goodwill") in purchase transactions has continuing value. It has been the Company's policy to amortize such costs over lives ranging from 10 to 40 years using the straight-line method through 2001. Other intangibles, consisting of patents, non-compete agreements and license agreements, acquired in purchase transactions or developed, are capitalized and amortized over their useful lives. Management assesses the value of the recorded Goodwill and other intangibles using projected undiscounted cash flows to determine if impairment has occurred when underlying conditions warrant. It is management's opinion that no such impairment exists as of December 31, 2001. Significant Accounting Policies Not Yet Adopted The Company will adopt Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" in the first quarter of 2002. This statement eliminates the requirement that Goodwill and indefinite lived intangible assets arising from a business combination be amortized and charged to expense over time. Instead, the Goodwill and indefinite lived intangible assets must be tested annually, or as circumstances dictate, for impairment. Management has performed an analysis of the fair values of its reporting units. The fair Notes to Consolidated Financial Statements: AptarGroup 59 values of the reporting units exceed the carrying values and therefore, no impairment of Goodwill will be reported in the first quarter of 2002. The Company recorded amortization of Goodwill of approximately $3.6 million per year on a pre-tax basis and $3.5 million on an after-tax basis in 2001. Derivatives Instruments and Hedging Activities Derivative financial instruments are recorded in the consolidated balance sheets at fair value as either assets or liabilities. Changes in the fair value of derivatives are 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. Research & Development Expenses Research and development costs are expensed as incurred. These costs amounted to $25,913, $26,887, and $25,611 in 2001, 2000 and 1999, respectively. The 1999 amount excludes the $3,300 write-off of purchased in-process research and development ("IPR&D") costs described in Note 3. Income Taxes A provision has not been made for U.S. or additional foreign taxes on $342,504 of undistributed earnings of foreign subsidiaries. These earnings will continue to be reinvested indefinitely and could become subject to additional tax if they were remitted as dividends, or lent to a U.S. affiliate, or if the Company should sell its stock in the subsidiaries. It is not practicable to estimate the amount of additional tax that might be payable on these undistributed foreign earnings. Translation of Foreign Currencies The functional currencies of all the Company's foreign operations are the local currencies. Assets and liabilities are translated into U.S. dollars at the rates of exchange on the balance sheet date. Sales and expenses are translated at the average rates of exchange prevailing during the year. The related translation adjustments are accumulated in a separate section of stockholders' equity. Realized and unrealized foreign currency transaction gains and losses are reflected in income, as a component of miscellaneous income and expense, and are not significant to the consolidated results of operations for the years presented. Stock-Based Compensation The Company follows APB Opinion No. 25 "Accounting for Stock Issued to Employees" and the related Interpretations in accounting for its stock option plans. Since the Company's stock options have met certain criteria of APB Opinion No. 25, no compensation cost has been recognized. The required disclosure for SFAS No. 123 "Accounting for Stock-Based Compensation" can be found in Note 14. Revenue Recognition The Company's policy is to recognize revenue from product sales when the title and risk of loss has transferred to the customer and the Company has no remaining obligations regarding the transaction. The majority of the Company's products are shipped FOB shipping point and title and risk of loss transfers when the goods leave the Company's shipping location. In some instances (for example, certain cross border shipments) the shipping terms may be FOB destination. In these cases, the Company does not recognize the revenue or invoice the customer until the goods reach the customer's location. 60 AptarGroup: Notes to Consolidated Financial Statements NOTE 2: Acquisitions In the first quarter of 2000, the Company acquired the remaining 50% of a joint venture in the United States for approximately $2.3 million in cash, assumed the remaining $3.75 million in debt and entered into a license agreement with the former joint venture partner. The acquired business produces spray caps and specialty actuators for aerosol valves and pumps for the North American market. The acquisition of the remaining 50% was accounted for as a purchase business combination. Goodwill in this acquisition was approximately $2 million and is amortized on a straight-line basis over 20 years. During the first quarter of 1999, the Company acquired Emson Research, Inc. and related companies ("Emsar", formerly referred to as Emson) for approximately $123 million in cash and 148,371 shares of the Company's common stock (valued at approximately $4 million). Approximately $23 million of debt was assumed in the transaction. Emsar is a leading supplier of perfume pumps in the North American market and also maintains a significant position in the North American personal care and food pump markets. The Goodwill in this acquisition was approximately $86 million and is amortized on a straight-line basis over 40 years. During the third quarter of 1999, the Company acquired controlling interests in two companies and acquired a line of business from a third company for approximately $21 million in cash and approximately $4 million in assumed debt. The Goodwill in these acquisitions was approximately $4 million and is amortized on a straight-line basis over lives ranging from 10 to 40 years. Two of the three acquisitions involved companies that manufacture and distribute products similar to the Company's products. The third acquisition, involving a company called Microflow Engineering S.A. ("Microflow"), is a research and development company whose primary project is to develop an electronic dispensing system primarily for the pharmaceutical market. Based upon an independent appraisal, a one-time charge against pre-tax and net income of $3,300 for purchased IPR&D costs was recorded in conjunction with the purchase of 80% of this company. See Note 3 below for further disclosure on purchased IPR&D. Following are the Company's unaudited pro forma results for 2000 and 1999 assuming the acquisition occurred on January 1, 1999. The $3.3 million write-off of IPR&D in 1999 has been excluded from the pro forma results. 2000 1999 ------------------------------------------------------------------------- Net Sales $ 883,481 $ 845,479 Net Income $ 64,459 $ 59,999 Net Earnings per common share: Basic $ 1.80 $ 1.65 Diluted $ 1.77 $ 1.62 Weighted average shares outstanding: Basic 35,863 36,373 Diluted 36,369 36,933 These unaudited pro forma results have been prepared for comparative purposes only and may not be indicative of the results of operations, which would have actually resulted, had the combinations been in effect on January 1, 1999, or of future periods. Notes to Consolidated Financial Statements: AptarGroup 61 NOTE 3: Purchased In-Process Research and Development In connection with the acquisition of Microflow in 1999, the Company allocated $3,300 of the purchase price to acquired IPR&D, which was expensed as of the acquisition date. Microflow is a development company engaged primarily in the development of an electronic delivery device. This development effort is expected to be used by the Company primarily in drug delivery systems and may have applications in other markets as well. Microflow's electronic delivery device is not commercially viable at this time and has no known alternative future uses apart from use in a dispensing system. The Company acquired Microflow to expand its mechanical pump product line to include an electronic dispensing system. The Company used an independent professional appraisal consultant to assess and allocate value to the IPR&D. The valuation was determined using the income approach and the Company believes that the assumptions used in the forecast are reasonable. No assurance can be given, however that the underlying assumptions used to estimate expected sales, development costs or profitability, or the events associated with the project will transpire as estimated. For these reasons, actual results may vary from the projected results. Estimated net cash inflows from the acquired in-process technology related to the electronic delivery device were originally projected to commence in the year 2002, peak in 2006 and steadily decline at a rate of 20% through 2011. Subsequent to the acquisition, the Company has broadened the project to include potential applications in other markets in addition to the originally intended drug delivery system. This has delayed the original cash inflow projections from 2002 to 2004. However, offsetting this delay is the expectation of additional sales volumes coming from the expanded markets to which the Company intends to sell. Overall, the Company does not believe that these changes in estimates will have a material impact on the expected return on its investment. The operating income as a percentage of sales assumption that was used is consistent with the Company's current margins of similar products. The in-process technology was essentially completed in 2000; however, there will continue to be additional development costs incurred in 2002 to adapt the technology for specific applications. These additional costs are not expected to be material. An adjustment to the appraised value of the acquired IPR&D was made to reflect the percentage of completion, which was estimated at 65%. The cash flows related to the project were discounted using a 25% discount rate. Management expects to continue supporting the development of the electronic delivery device and believes the Company has a reasonable chance of successfully completing the project. The failure of the project would not, however, materially impact the Company's financial position or results of operations. NOTE 4: Derivative Instruments and Hedging Activities Effective January 1, 2001, the Company adopted 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 are 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. 62 AptarGroup: Notes to Consolidated Financial Statements In accordance with the transition provisions of SFAS No. 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 net income $ (64) ======== The Company maintains a foreign exchange risk management policy designed to establish a framework to protect the value of the Company's non-functional 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 for ward exchange contracts, 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 a hedge of an anticipated transaction, the significant characteristics and expected terms of any anticipated transaction must be specifically identified, and it must be probable that the anticipated transaction will occur. 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 December 31, 2001, the Company has recorded the fair value of derivative instrument assets of $3.8 million in miscellaneous other assets with an offsetting adjustment to debt related to fixed-to-variable interest rate swap agreements with a notional principal value of $50 million. No gain or loss was recorded in the income statement in 2001 since there was no hedge ineffectiveness. Notes to Consolidated Financial Statements: AptarGroup 63 Cash Flow Hedges The Company did not use any cash flow hedges in 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 condition 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 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, the Company will consider hedging the currency exposure associated with such a transaction. Other As of December 31, 2001, the Company has recorded the fair value of foreign currency forward exchange contracts of $205 in accounts payable and accrued liabilities and $87 in prepayments and other in the balance sheet. All forward exchange contracts outstanding as of December 31, 2001 had an aggregate contract amount of $20.4 million. NOTE 5: Inventories At December 31, 2001 and 2000, approximately 23% and 25%, respectively, of the total inventories are accounted for by the LIFO method. Inventories, by component, consisted of: 2001 2000 -------------------------------------------------------------------------- Raw materials $ 45,370 $ 55,429 Work-in-process 24,599 20,975 Finished goods 51,446 46,805 --------- --------- Total $ 121,415 $ 123,209 Less LIFO reserve (884) (1,687) --------- --------- Total $ 120,531 $ 121,522 ========= ========= NOTE 6: Accounts Payable and Accrued Liabilities At December 31, 2001 and 2000, accounts payable and accrued liabilities consisted of the following: 2001 2000 -------------------------------------------------------------------------- Accounts payable, principally trade $ 68,935 $ 84,085 Accrued employee compensation costs 33,507 32,841 Other accrued liabilities 38,541 46,602 --------- --------- Total $ 140,983 $ 163,528 ========= ========= 64 AptarGroup: Notes to Consolidated Financial Statements NOTE 7: Income Taxes Income before income taxes consists of:
2001 2000 1999 ---------------------------------------------------------------------------------------- Domestic $ 6,174 $ 11,017 $ 27,350 Foreign 82,181 86,905 64,428 -------- --------------------- Total $ 88,355 $ 97,922 $ 91,778 ======== ===================== The provision for income taxes is comprised of: 2001 2000 1999 ---------------------------------------------------------------------------------------- CURRENT: Federal $ 5,953 $ 3,449 $ 8,462 State/Local 1,264 52 997 Foreign 26,953 25,885 17,992 -------- --------------------- 34,170 29,386 27,451 -------- --------------------- DEFERRED: Federal/State (4,247) 969 934 Foreign (476) 2,901 4,681 -------- --------------------- (4,723) 3,870 5,615 -------- --------------------- Total $ 29,447 $ 33,256 $ 33,066 ======== =====================
The difference between the actual income tax provision and the tax provision computed by applying the statutory federal income tax rate of 35.0% in 2001, 2000 and 1999 to income before income taxes is as follows:
2001 2000 1999 ---------------------------------------------------------------------------------------- Income tax at statutory rate $ 30,924 $ 34,273 $ 32,122 State income taxes, net of federal benefit 879 34 746 Deferred tax impact due to foreign rate changes - (1,126) - Rate differential on earnings of foreign operations (2,286) (506) 348 Other items, net (70) 581 (150) -------- --------------------- Actual income tax provision $ 29,447 $ 33,256 $ 33,066 ======== ===================== Effective income tax rate 33.3% 34.0% 36.0%
Notes to Consolidated Financial Statements: AptarGroup 65 Significant deferred tax assets and liabilities as of December 31, 2001 and 2000 are comprised of the following temporary differences: 2001 2000 -------------------------------------------------------------------------- DEFERRED TAX ASSETS: Net operating loss carryforwards $ 1,419 $ 1,507 Asset bases differentials 1,392 1,757 Pensions 2,637 1,136 Bad debt reserve 1,557 1,746 Other 7,153 8,577 -------- -------- Total deferred tax assets 14,158 14,723 -------- -------- DEFERRED TAX LIABILITIES: Depreciation 28,060 32,997 Leases 3,489 3,317 Other 2,031 5,768 -------- -------- Total deferred tax liabilities 33,580 42,082 -------- -------- Net deferred tax liabilities $ 19,422 $ 27,359 ======== ======== On December 31, 2001, the Company had foreign tax net operating loss carryforwards of approximately $2,207, which have an indefinite carryforward period and approximately $1,263, which expire beginning in 2003 through 2007. The Company has not provided for taxes on certain tax-deferred income of a foreign operation. The income arose predominately from government grants. Taxes of approximately $1,353 would become payable at the time the income is distributed. NOTE 8: Debt The average annual interest rate on short-term notes payable under unsecured lines of credit was approximately 5.6% and 7.1% for 2001 and 2000, respectively. There are no compensating balance requirements associated with short-term borrowings. At December 2001 and 2000, the Company had a multi-year, multi-currency unsecured revolving credit agreement allowing borrowings of up to $100 million. Under this credit agreement, interest on borrowings is payable at a rate equal to London Interbank Offered Rates "LIBOR" plus an amount based on the financial condition of the Company. The Company is required to pay a fee for the unused portion of the commitment. Such payments in 2001, 2000 and 1999 were not significant. The agreement expires on June 30, 2004. The amount used under this agreement was $76 million and $85 million at December 31, 2001 and 2000, respectively. The credit available under the revolving credit agreement provides management with the ability to refinance certain short-term obligations on a long-term basis. Since management has the ability and intent to do so, short-term obligations of $76 million and $85 million have been recorded as long-term obligations and an additional $24 million and $15 million of short-term debt obligations representing the unused and available amount under the revolving credit agreement have been reclassified as long-term obligations as of December 31, 2001 and 2000, respectively. 66 AptarGroup: Notes to Consolidated Financial Statements The revolving credit and the senior unsecured debt agreements contain covenants with which the Company is in compliance that include certain financial tests, including minimum interest coverage, net worth and maximum borrowings. At December 31, the Company's long-term obligations consisted of the following:
2001 2000 ------------------------------------------------------------------------------------------ Borrowing under revolving credit agreement 2.7% and 7.5% at December 31, 2001 and 2000 $ 76,000 $ 85,000 Notes payable 0.5% - 5.8%, due in monthly and annual installments through 2009 11,528 17,137 Senior unsecured debt 7.1%, due in installments through 2005 14,286 17,857 Senior unsecured notes 6.6%, due in equal annual installments through 2011 110,751 107,000 Mortgages payable 2.1% - 8.0%, due in monthly and annual installments through 2008 6,007 8,970 Industrial revenue bond, interest at 79% of prime, (which was 7.4% at December 31, 2000) - 333 Capital lease obligations 9,983 11,781 --------- --------- 228,555 248,078 Less current portion (13,168) (10,326) Reclass of short-term obligations 24,000 15,000 --------- --------- Total long-term obligations $ 239,387 $ 252,752 ========= =========
All of the mortgages are payable by foreign subsidiaries to foreign banks. Interest rates on such borrowings vary due to differing market conditions in the countries in which such debt has been incurred. Mortgages payable are secured by the properties or assets for which the debt was obtained. Based on the borrowing rates currently available to the Company for long-term obligations with similar terms and average maturities, the fair value of the Company's long-term obligations approximates its book value. Aggregate long-term maturities, excluding capital lease obligations and the reclassifications of short-term obligations, due annually for the five years beginning in 2002 are $11,856, $5,912, $81,474, $7,119 and $112,211 thereafter. NOTE 9: Lease Commitments The Company leases certain warehouse, plant, and office facilities as well as certain equipment under noncancelable operating and capital leases expiring at various dates through the year 2018. Most of the operating leases contain renewal options and certain equipment leases include options to purchase during or at the end of the lease term. The Company has an option on one building lease to purchase the building during or at the end of the term of the lease at approximately the amount expended by the lessor for the purchase of the building and improvements. If the Company does not exercise the purchase option by the end of the lease, the Company may be required to pay an amount not to exceed $9.5 million. Amortization expense related to capital leases is included in depreciation expense. Rent expense under operating leases (including taxes, insurance and maintenance when included in the rent) amounted to $13,370, $12,228 and $10,170 in 2001, 2000 and 1999, respectively. Notes to Consolidated Financial Statements: AptarGroup 67 Assets recorded under capital leases consist of: 2001 2000 -------------------------------------------------------------------------- Buildings $ 16,719 $ 14,296 Machinery and equipment 7,364 9,007 -------- -------- 24,083 23,303 Accumulated depreciation (11,716) (11,506) -------- -------- $ 12,367 $ 11,797 ======== ======== Future minimum payments, by year and in the aggregate, under the capital leases and noncancelable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 2001:
Capital Operating Leases Leases -------- --------- 2002 $ 1,889 $ 8,145 2003 1,676 6,544 2004 2,045 5,824 2005 1,320 4,551 2006 1,332 3,814 Subsequent to 2006 3,952 3,649 -------- -------- Total minimum lease payments 12,214 $ 32,527 ======== Amounts representing interest (2,231) -------- Present value of future minimum lease payments 9,983 Less amount due in one year (1,312) -------- Total $ 8,671 ========
NOTE 10: Retirement and Deferred Compensation Plans The Company has various noncontributory retirement plans covering certain of its domestic and foreign employees. Benefits under the Company's retirement plans are based on participants' years of service and annual compensation as defined by each plan. Annual cash contributions to fund pension costs accrued under the Company's domestic plans are generally equal to the minimum funding amounts required by ERISA. Certain pension commitments under its foreign plans are also funded. Changes in the benefit obligation and plan assets of the Company's domestic and foreign plans are as follows: 68 AptarGroup: Notes to Consolidated Financial Statements
2001 2000 -------- -------- CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year $ 32,645 $ 30,833 Service cost 2,133 1,650 Interest cost 2,059 1,759 Amendments/new plan participants 581 237 Actuarial loss 3,100 1,025 Benefits paid (1,754) (2,278) Foreign currency translation adjustment (673) (581) -------- -------- Benefit obligation at end of year $ 38,091 $ 32,645 ======== ======== CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year $ 25,426 $ 22,505 Actual return on plan assets (276) 3,144 Employer contribution 704 1,625 Benefits paid with plan assets (1,232) (1,848) Foreign currency translation adjustment (139) - -------- -------- Fair value of plan assets at end of year $ 24,483 $ 25,426 ======== ======== Funded status $(13,608) $ (7,219) Unrecognized net actuarial loss/(gain) 2,854 (2,476) Unrecognized prior service cost 986 514 Unamortized net transition asset 34 72 -------- -------- Net accrued benefit cost included in the balance sheet $ (9,734) $ (9,109) ======== ======== AMOUNTS INCLUDED IN THE BALANCE SHEET CONSISTS OF: Accrued benefit cost $(13,429) $ (9,109) Intangible asset 805 - Accumulated other comprehensive loss 2,890 - -------- -------- Net accrued benefit cost included in the balance sheet $ (9,734) $ (9,109) ======== ========
2001 2000 1999 -------------------------------------------------------------------------------- COMPONENTS OF NET PERIODIC BENEFIT COST: Service cost $ 2,133 $ 1,650 $ 1,844 Interest cost 2,059 1,759 1,961 Expected return on plan assets (1,811) (1,524) (1,503) Net amortized and deferred gains and losses 102 (50) 47 ------- ------------------ Net periodic benefit cost $ 2,483 $ 1,835 $ 2,349 ======= ==================
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for plans with accumulated benefit obligations in excess of plan assets were $11.6 million, $10.6 million and $0.2 million, respectively, as of December 31, 2001. The Company did not have any plans with significant accumulated benefit obligations in excess of plan assets as of December 31, 2000. Notes to Consolidated Financial Statements: AptarGroup 69 Plan assets primarily consist of government obligations, investment grade corporate bonds and common and preferred stocks for the domestic and foreign plans. Although the proceeds of certain insurance contracts related to the Company's foreign plans could be used to partially offset pension commitments, the values of these contracts are not included in the Company's plan asset totals shown above. The projected benefit obligation for domestic plans was determined using assumed discount rates of 6.8% and 7.0% in 2001 and 2000, respectively. For the foreign plans, the projected benefit obligation was determined using assumed discount rates of 5.6% and 6.2% in 2001 and 2000, respectively. The assumed rates of increase in compensation were 4.8% for the domestic plans and 3.0%, for the foreign plans in 2001 and 2000. The expected long-term rate of return on plan assets was 8.3% in 2001 and 2000 for the domestic plans and 6.5% and 7.3% in 2001 and 2000, respectively, for the foreign plans. The Company has a non-qualified supplemental pension plan for domestic employees which provides for pension amounts that would have been payable from the Company's principal pension plan if it were not for limitations imposed by income tax regulations. The liability for this plan was $679 and $520 at December 31, 2001 and 2000, respectively. This amount is included in the liability for domestic plans shown above. The Company also has unfunded retirement compensation arrangements with certain former employees. The cost of these retirement agreements was provided ratably over the employees' active employment. The Company has no additional postretirement or postemployment benefit plans. NOTE 11: 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. NOTE 12: Strategic Initiative Charges In April 2001, the Company announced it had begun a project ("Strategic Initiative") to improve the efficiency of operations that produce pumps for its mass-market fragrance/cosmetic and personal care customers. In addition to improving efficiency and reducing costs, another objective of the Strategic Initiative is to improve customer service through reduced lead times and the ability to customize finished products on a local basis. As part of the Strategic Initiative, the Company closed one molding operation in the U.S. and will consolidate the molding and assembly of the base cartridge (standard internal components common to modular pumps) into one of the Company's facilities in Italy. In addition, the Company is rationalizing its mass-market pump product lines for these two markets by discontinuing production of non-modular pumps and increasing capacity for its modular pumps. Charges related to the Strategic Initiative are expected to be approximately $10 million before taxes and will consist primarily of costs related to the closing of the molding operation and discontinuance of its non-modular pumps (including asset impairment write-downs, accelerated depreciation associated with revised useful lives and utility abatement reimbursements) as well as employee severance and related benefit costs. Approximately $3 million of the charges are expected to be cash outlays while the remaining $7 million will be non-cash charges (asset impairment write-downs and accelerated depreciation associated with 70 AptarGroup: Notes to Consolidated Financial Statements revised useful lives). Approximately $9.6 million of such charges before tax and $6.0 million after-tax or approximately $0.17 per diluted share were recorded in 2001. Of the $9.6 million recorded in 2001, $1.9 million was included in the Company's depreciation and amortization expense, $0.2 million was included in the Company's cost of sales and $7.6 million was shown on a separate line of the income statement. Detail of the pre-tax charges (in thousands) is shown in the following table:
Charges for Beginning the twelve Charged Ending Reserve at months ended Cash Against Reserve at 1/1/01 12/31/01 Paid Assets 12/31/ 01 ---------------------------------------------------------------------------------------------------- Asset impairment write-downs $ - $ 5,498 $ - $ (5,498) $ - Employee severance - 800 (331) - 469 Other costs - 1,285 (229) - 1,056 -------------------------------------------------------------------- Subtotal $ - $ 7,583 $(560) $ (5,498) $ 1,525 Accelerated depreciation - 1,857 - (1,857) - Training Costs - 170 (170) - - -------------------------------------------------------------------- Total Strategic Initiative related costs $ - $ 9,610 $(730) $ (7,355) $ 1,525 ====================================================================
Charges for asset impairment write-downs are impairment charges recorded for fixed assets held and used in the manufacture of non-modular pumps. These non-modular pumps will continue to be sold during the Strategic Initiative project, but will be discontinued once adequate capacity to produce modular pumps has been established. The undiscounted expected future cash flows for products using these non-modular pumps during this phase out period were less than the carrying value of the specific identifiable assets used to generate these cash flows and thus an impairment charge was recognized in accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The impairment charge of $5.5 million was calculated by subtracting the fair market value of the assets held and used in the manufacture of non-modular pumps (determined by discounting the expected future cash flows for products using these non-modular pumps) from the carrying value of these assets. As part of the Strategic Initiative, certain long-lived assets will be taken out of service prior to the end of their normal service period due to the plant shut down and rationalization of the product lines. Accordingly, the Company has changed the estimated useful lives of such assets, resulting in an acceleration of depreciation ("Accelerated Depreciation"), of which $1.9 million was recognized in 2001. An additional charge of approximately $139 associated with Accelerated Depreciation is expected in future periods. The Strategic Initiative will result in personnel reductions in the U.S. of approximately 170 people or approximately 10% of all the Company's U.S. employees. The majority of these personnel reductions will be manufacturing related with a small reduction in administrative staff. Involuntary employee severance costs are based upon a formula including salary levels and years of service. Approximately $800 has been accrued and is included in the Strategic Initiative charges shown in the income statement. Offsetting these personnel reductions will be an increase in personnel of approximately 80 people in Italy to support the centralization of the base cartridge production and assembly. As of December 31, 2001, 70 people have been terminated resulting in a cash payment of $331. Notes to Consolidated Financial Statements: AptarGroup 71 In addition to the involuntary severance costs described above, a retention or stay bonus will be paid to employees who remain with the Company during the phase-out period. This stay bonus, which is estimated to be approximately $600, is also based upon salary levels and years of service. The stay bonus is being accrued over the future periods in which the employees earn the benefits. Approximately $485 of the stay bonus was accrued in 2001, of which approximately $229 was paid. In addition, as a result of closing down the molding operation, the Company will be required to refund an abatement of approximately $500 to a utility provider and expects to spend approximately $300 to refurbish the leased molding facility that is being vacated. These charges are included in other costs in the preceding table. During 2001, approximately $170 of training costs was incurred in Italy to train the new workers who were hired to support the centralization of the base cartridge production and assembly. These training costs are included in cost of sales in the income statement. It is expected that training costs over the course of the project will cost approximately $500. NOTE 13: Preferred Stock Purchase Rights The Company has a preferred stock purchase rights plan (the "Rights Plan") and each share of common stock has one preferred share purchase right (a "Right"). Under the terms of the Rights Plan, if a person or group other than certain exempt persons acquires 15% or more of the outstanding common stock, each Right will entitle its holder (other than such person or members of such group) to purchase, at the Right's then current exercise price, a number of shares of the Company's common stock having a market value of twice such price. Persons or groups can lose their exempt status under certain conditions. In addition, under certain circumstances if the Company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right's then current exercise price, a number of the acquiring company's common shares having a market value of twice such price. Each Right entitles the holder under certain circumstances to buy one two-thousandths of a share of Series A junior participating preferred stock, par value $.01 per share, at an exercise price of $35. Each share of Series A junior participating preferred stock will entitle its holder to 2,000 votes and will have a minimum preferential quarterly dividend payment equal to the greater of $10 per share or 2,000 times the amount paid to holders of common stock. Currently 49,500 shares of Series A junior participating preferred stock have been reserved. The Rights will expire on April 6, 2003, unless previously exercised or redeemed at the option of the Board of Directors for $.005 per Right. 72 AptarGroup: Notes to Consolidated Financial Statements NOTE 14: Stock Based Compensation At December 31, 2001, the Company has fixed stock-based compensation plans that are discussed below. Had compensation cost for the Company's Stock Awards Plans been recorded based on the fair value at the grant dates, consistent with the method of SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below. 2001 2000 1999 -------------------------------------------------------------------------- NET INCOME As reported $ 58,844 $ 64,666 $ 58,712 Pro forma $ 55,191 $ 61,315 $ 56,102 BASIC EARNINGS PER SHARE As reported $ 1.64 $ 1.80 $ 1.62 Pro forma $ 1.54 $ 1.71 $ 1.54 DILUTED EARNINGS PER SHARE As reported $ 1.61 $ 1.78 $ 1.59 Pro forma $ 1.51 $ 1.69 $ 1.52 The weighted average fair value of stock options granted under the Stock Awards Plans was $11.82, $10.47 and $11.37 per share in 2001, 2000 and 1999, respectively. These values were estimated on the respective dates of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: 2001 2000 1999 --------------------------------------------------------------------------- STOCK AWARDS PLANS Dividend yield .7% .6% .6% Expected stock price volatility 33.0% 32.8% 31.2% Risk-free interest rate 5.2% 6.6% 4.8% Expected life of option (years) 7.0 7.0 7.5 The fair value of stock options granted under the Director Stock Option Plans in 2001, 2000 and 1999 was $14.32, $12.03 and $13.48 per share, respectively. These values were estimated on the respective dates of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: 2001 2000 1999 --------------------------------------------------------------------------- DIRECTOR STOCK OPTION PLANS Dividend yield .8% .7% .6% Expected stock price volatility 32.4% 30.5% 33.1% Risk-free interest rate 5.4% 6.7% 5.7% Expected life of option (years) 7.0 7.0 7.5 Notes to Consolidated Financial Statements: AptarGroup 73 Under the Stock Awards Plans, the Company may grant stock options, stock appreciation rights, restricted stock and other stock awards to employees. The combined maximum number of shares, which may be issued under these plans, is 6 million. Options granted under these plans become exercisable annually over a three year period and expire ten years after the grant date. Director Stock Option Plans provide for the award of stock options to non-employee Directors who have not previously been awarded options. The combined maximum number of shares subject to options under these plans is 240 thousand. Options granted under these plans become exercisable over a three year period and expire ten years after the grant date. A summary of the status of the Company's stock option plans as of December 31, 2001, 2000 and 1999, and changes during the years ending on those dates is presented below.
Director Stock Stock Awards Plans Option Plans ------------------------------- ---------------------------- Option Price Option Price Option Shares Shares Per Share Shares Per Share ----------------------------------------------------------------------------------------- Outstanding, January 1, 1999 2,289,888 $ 9.19 . $28.00 84,000 $ 9.19 . $32.38 Granted 550,700 $24.94 . $28.25 4,000 $ 29.50 Exercised (263,304) $ 9.19 . $24.91 (2,000) $ 20.88 Canceled (23,135) $16.81 . $24.91 - --------- ------- Outstanding, December 31, 1999 2,554,149 $ 9.19 . $28.25 86,000 $ 9.19 . $32.38 Granted 535,800 $22.75 . $27.13 2,000 $ 27.38 Exercised (90,161) $ 9.19 . $27.19 (6,000) $ 20.88 Canceled (24,428) $16.81 . $27.19 - --------- ------- Outstanding, December 31, 2000 2,975,360 $ 9.19 . $28.25 82,000 $ 9.19 . $32.38 Granted 534,100 $28.06 . $33.27 48,000 $ 34.40 Exercised (381,108) $ 9.19 . $27.19 (30,000) $ 9.19 . $20.88 Canceled (29,255) $ 9.19 $28.06 - --------- ------- Outstanding, December 31, 2001 3,099,097 $ 9.19 . $33.27 100,000 $ 9.19 . $34.40 ========= =======
OPTIONS EXERCISABLE 12/31/99 1,557,631 72,000 12/31/00 1,929,524 82,000 12/31/01 2,053,301 64,000 AVAILABLE FOR FUTURE GRANTS 12/31/99 970,113 20,000 12/31/00 2,437,610 80,000 12/31/01 1,917,412 32,000 74 AptarGroup: Notes to Consolidated Financial Statements The following table summarizes information about stock options outstanding at December 31, 2001:
Options Outstanding Option Exercisable ----------------------------------------- ---------------------------- Weighted- Weighted- Weighted- Shares Average Average Shares Average Year Outstanding Remaining Exercise Exercisable Exercise Granted at Year-end Life Price at Year-end Price ------------------------------------------------------------------------------------------------------ STOCK AWARDS PLANS 1993 76,298 1.5 $ 9.19 76,298 $ 9.19 1994 170,752 2.1 10.31 170,752 10.31 1995 262,414 3.1 13.71 262,414 13.71 1996 258,368 4.1 18.00 258,368 18.00 1997 309,136 5.1 16.85 309,136 16.85 1998 467,266 6.1 24.91 467,266 24.91 1999 505,307 7.1 27.12 336,802 27.12 2000 517,806 8.1 22.76 172,265 22.76 2001 531,750 9.1 28.07 - - --------- --------- 3,099,097 6.3 $ 21.93 2,053,301 $ 19.78 ========= ========= DIRECTOR STOCK OPTION PLANS 1993 10,000 1.4 $ 9.19 10,000 $ 9.19 1997 30,000 5.4 20.88 30,000 20.88 1998 6,000 6.4 32.38 6,000 32.38 1999 4,000 7.4 29.50 4,000 29.50 2000 2,000 8.4 27.38 2,000 27.38 2001 48,000 9.4 34.40 12,000 34.00 --------- --------- 100,000 7.1 $ 27.36 64,000 $ 23.41 ========= =========
Restricted stock awards totaling 13,278 shares in 2001 at a fair market value of $22.88 per share and 21,331 shares in 2000 at a fair market value of $29.30 per share were issued under the Stock Awards Plans. A restricted stock grant for 200 shares was canceled in 2000. Compensation expense for the vesting of these restricted stock awards was $337, $202 and $66 for the years 2001, 2000 and 1999, respectively. These shares vest equally over three years and do not have voting or dividend rights prior to vesting. Amounts available for future stock option grants under the Stock Awards Plans have been reduced by restricted stock awards. Notes to Consolidated Financial Statements: AptarGroup 75 NOTE 15: Earnings Per Share The reconciliation of basic and diluted earnings for the years ending December 31, 2001, 2000 and 1999 are as follows:
Income Shares Per Share Numerator) (Denominator) Amount ------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 2001 BASIC EPS Income available to common stockholders $ 58,844 35,805 $ 1.64 EFFECT OF DILUTIVE SECURITIES Stock options - 724 ----------------------- DILUTED EPS Income available to common stockholders $ 58,844 36,529 $ 1.61 ==================================== FOR THE YEAR ENDED DECEMBER 31, 2000 BASIC EPS Income available to common stockholders $ 64,666 35,863 $ 1.80 EFFECT OF DILUTIVE SECURITIES Stock options - 506 ----------------------- DILUTED EPS Income available to common stockholders $ 64,666 36,369 $ 1.78 ==================================== FOR THE YEAR ENDED DECEMBER 31, 1999 BASIC EPS Income available to common stockholders $ 58,712 36,353 $ 1.62 EFFECT OF DILUTIVE SECURITIES Stock options - 560 ----------------------- DILUTED EPS Income available to common stockholders $ 58,712 36,913 $ 1.59 ====================================
The per share impact of the cumulative effect of a change in accounting principle recognized in 2001, represented less than $0.01 per share. NOTE 16: Segment Information The Company operates in the packaging components industry, which includes the development, manufacture and sale of consumer product dispensing systems. The Company is organized primarily based upon individual business units, which resulted from historic acquisitions or internally created business units. All of the business units sell primarily dispensing systems. These business units all require similar production processes, sell to similar classes of customers and markets, use the same methods to distribute products and operate in similar regulatory environments. Based on the current economic characteristics of the Company's business units, the Company has identified two reportable segments: Dispensing Systems and SeaquistPerfect. The Dispensing Systems segment is an aggregate of four of the Company's five business units. The Dispensing Systems segment sells primarily non-aerosol spray and lotion pumps, plastic dispensing and non-dispensing closures, and metered dose aerosol valves. These three products are sold to all of the markets served by the Company including the fragrance/cosmetic, pharmaceutical, personal care, household, and food/beverage markets. 76 AptarGroup: Notes to Consolidated Financial Statements SeaquistPerfect represents the Company's fifth business unit and sells primarily aerosol valves and accessories and certain non-aerosol spray and lotion pumps. These products are sold primarily to the personal care, household, and food/beverage markets. The accounting policies of the segments are the same as those described in Note 1, Summary of Significant Accounting Policies. The Company evaluates performance of its business units and allocates resources based upon earnings before interest expense in excess of interest income, corporate expenses and income taxes (collectively referred to as "EBIT") excluding unusual items. The Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties. Financial information regarding the Company's reportable segments is shown below.
Dispensing Seaquist Corporate Years ended December 31 Systems Perfect and other Totals TOTAL REVENUE 2001 $ 747,659 $ 154,159 $ 901,818 2000 745,391 150,777 896,168 1999 698,423 144,012 842,435 LESS: INTERSEGMENT SALES 2001 $ 1,203 $ 8,629 $ 9,832 2000 2,824 9,863 12,687 1999 1,288 6,830 8,118 NET SALES 2001 $ 746,456 $ 145,530 $ 891,986 2000 742,567 140,914 883,481 1999 697,135 137,182 834,317 EBIT 2001 $ 119,761 $ 5,843 $ (13,889) $ 111,715 2000 123,649 5,017 (13,506) 115,160 1999 116,297 4,962 (13,105) 108,154 TOTAL ASSETS 2001 $ 750,527 $ 118,881 $ 53,274 $ 922,682 2000 797,625 120,937 33,677 952,239 1999 744,158 98,699 20,441 863,298 DEPRECIATION AND AMORTIZATION 2001 $ 57,685 $ 13,229 $ 813 $ 71,727 2000 58,518 11,601 830 70,949 1999 57,609 10,138 923 68,670 CAPITAL EXPENDITURES 2001 $ 77,228 $ 14,628 $ 365 $ 92,221 2000 78,592 15,179 162 93,933 1999 75,654 11,739 1,201 88,594
Notes to consolidated Financial Statements: AptarGroup 77 Reconciliation of segment EBIT, depreciation and amortization, and total assets to consolidated totals is as follows:
2001 2000 1999 --------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES: Total EBIT for reportable segments $ 111,715 $ 115,160 $ 108,154 Strategic Initiative charges/(1)/ (9,610) - - IPR&D write-off - - (3,300) Interest expense, net (13,750) (17,238) (13,076) --------- -------------------- Income before Income taxes $ 88,355 $ 97,922 $ 91,778 ========= ==================== DEPRECIATION AND AMORTIZATION: Total depreciation and amortization for reportable segments $ 71,727 Strategic Initiative related costs/(1)/ 1,857 --------- Consolidated Total $ 73,584 ========= TOTAL ASSETS: Total Assets for reportable segments $ 922,682 Asset write-off as part of Strategic Initiative/(1)/ (7,355) --------- Consolidated Total $ 915,327 =========
(1) Strategic Initiative related costs are associated with the Dispensing Systems segment. Management evaluates the segment profitability excluding these costs and therefore these costs are shown as reconciling items to the consolidated totals. 78 AptarGroup: Notes to Consolidated Financial Statements Geographic Information The following are sales and long-lived asset information by geographic area and product information for the years ended December 31, 2001, 2000 and 1999:
2001 2000 1999 --------------------------------------------------------------------------------------------------------- SALES TO UNAFFILIATED CUSTOMERS/(1)/: United States $ 334,509 $ 343,825 $ 332,986 Europe: France 209,588 173,910 180,808 Germany 119,476 119,091 111,829 Italy 82,424 77,307 55,139 Other Europe 70,387 97,101 102,048 --------- --------------------- Total Europe 481,875 467,409 449,824 Other Foreign Countries 75,602 72,247 51,507 --------- --------------------- Total $ 891,986 $ 883,481 $ 834,317 ========= ===================== LONG-LIVED ASSETS: United States $ 220,024 $ 238,525 $ 216,894 Europe: France 111,780 113,402 106,534 Germany 97,359 91,771 97,141 Italy 58,941 56,313 55,555 Other Europe 22,467 20,529 19,784 --------- --------------------- Total Europe 290,547 282,015 279,014 Other Foreign Countries 24,980 24,132 19,121 --------- --------------------- Total $ 535,551 $ 544,672 $ 515,029 ========= =====================
(1) Sales are attributed to countries based upon where the sales invoice to unaffiliated customers is generated. Product Sales Information
2001 2000 1999 --------------------------------------------------------------------------------------------------------- Pumps $ 550,601 $ 546,148 $ 510,202 Closures 193,065 197,992 184,010 Valves 128,056 122,516 124,386 Other 20,264 16,825 15,719 --------- ---------------------- Total $ 891,986 $ 883,481 $ 834,317 ========= ======================
No single customer represents 10% or more of either of the Company's reportable segment's net sales. Notes to Consolidated Financial Statements: AptarGroup 79 NOTE 17: Stock Repurchase Program In 1999, the Board of Directors authorized the repurchase of a maximum of one million shares of the Company's outstanding common stock and in 2000, the Board of Directors authorized the repurchase of up to an additional two million shares of the Company's outstanding common stock. The timing of and total amount expended for the share repurchase program depends upon market conditions. The cumulative total number of shares repurchased at December 31, 2001 was 1,155,000 shares for an aggregate amount of $29.9 million. NOTE 18: Quarterly Data (Unaudited) Quarterly results of operations and per share information for the years ended December 31, 2001 and 2000 are as follows:
First Second Third Fourth Total Quarter Quarter Quarter Quarter For Year ---------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 Net sales $232,899 $ 231,769 $ 221,612 $ 205,706 $ 891,986 Gross profit/(1)/ 68,981 71,394 64,715 55,250 260,340 Net income 18,110 15,190 15,734 9,810 58,844 PER COMMON SHARE - 2001 Net income Basic/(2)/ $ .51 $ .42 $ .44 $ .27 $ 1.64 Diluted/(2)/ .50 .41 .43 .27 1.61 Dividends paid .05 .05 .06 .06 .22 Stock price high 31.60 37.21 37.00 35.10 37.21 Stock price low 26.44 29.25 28.50 27.10 26.44 AVERAGE NUMBER OF SHARES OUTSTANDING Basic 35,683 35,795 35,879 35,859 35,805 Diluted 36,344 36,649 36,661 36,602 36,529 YEAR ENDED DECEMBER 31, 2000 Net sales $217,646 $ 227,667 $ 224,691 $ 213,477 $ 883,481 Gross profit/(1)/ 66,259 69,310 65,251 63,032 263,852 Net income 16,276 17,792 16,240 14,358 64,666 PER COMMON SHARE - 2000 Net income Basic $ .45 $ .49 $ .45 $ .40 $ 1.80 Diluted .45 .49 .45 .40 1.78 Dividends paid .05 .05 .05 .05 .20 Stock price high 28.63 29.31 29.94 30.13 30.13 Stock price low 20.13 23.38 21.88 19.38 19.38 AVERAGE NUMBER OF SHARES OUTSTANDING Basic 36,136 35,949 35,774 35,600 35,863 Diluted 36,466 36,564 36,294 36,057 36,369
(1) Gross profit is defined as net sales less cost of sales and depreciation. (2) The second, third and fourth quarters include after tax Strategic Initiative costs of $4,643, $619 and $733, respectively, or $0.13, $0.02, and $0.02 per diluted share. 80 AptarGroup: Notes to Consolidated Financial Statements REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stock holders of AptarGroup, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and of changes in equity present fairly, in all material respects, the financial position of AptarGroup, Inc. and its subsidiaries at December 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of AptarGroup, Inc.'s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /S/ PricewaterhouseCoopers LLP Chicago, Illinois February 13, 2002 Report of Independent Accountants: AptarGroup 81 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The financial statements of AptarGroup, Inc. and its consolidated subsidiaries, and all other information presented in this Annual Report, are the responsibility of the management of the Company. These statements have been prepared in accordance with generally accepted accounting principles consistently applied and reflect in all material respects the substance of events and transactions that should be included. Management is responsible for the accuracy and objectivity of the financial statements, including estimates and judgments reflected therein, and fulfills this responsibility primarily by establishing and maintaining accounting systems and practices adequately supported by internal accounting controls. Management believes that the internal accounting controls in use are satisfactory to provide reasonable assurance that the Company's assets are safeguarded, that transactions are executed in accordance with management's authorizations, and that the financial records are reliable for the purpose of preparing financial statements. Independent accountants were selected by the Board of Directors, upon the recommendation of the Audit Committee, to audit the financial statements in accordance with generally accepted auditing standards. Their audits include a review of internal accounting control policies and procedures and selected tests of transactions. The Audit Committee of the Board of Directors, which consists of three directors who are not officers or employees of the Company, meets regularly with management and the independent accountants to review matters relating to financial reporting, internal accounting controls, and auditing. The independent accountants have unrestricted access to the Audit Committee. /s/ Carl A. Siebel Carl A. Siebel President and Chief Executive Officer /s/ Stephen J. Hagge Stephen J. Hagge Executive Vice President and Chief Financial Officer 82 AptarGroup: Management's Responsibility for Financial Statements FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA (In millions, except per share amounts)
Year Ended December 31, 2001 2000 1999 1998 1997 ----------------------------------------------------------------------------------------------------------------------- STATEMENT OF INCOME DATA: Net Sales $ 892.0 $ 883.5 $ 834.3 $ 713.5 $ 655.4 Cost of Sales 562.8 553.6 519.7 444.6 418.1 % Of Net Sales 63.1% 62.7% 62.3% 62.3% 63.8% Selling, Research & Development, and Administrative 146.1 145.0 137.5 119.3 108.4 % of Net Sales 16.4% 16.4% 16.5% 16.7% 16.5% Depreciation and Amortization 73.6 70.9 68.7 54.4 49.9 % of Net Sales 8.3% 8.0% 8.2% 7.6% 7.6% Operating Income 101.9 113.9 108.4 95.2 79.0 % of Net Sales 11.4% 12.9% 13.0% 13.3% 12.1% Net Income/(1)/ 58.8 64.7 58.7 60.8 46.5 % of Net Sales 6.6% 7.3% 7.0% 8.5% 7.1% PER COMMON SHARE: Net Income Basic $ 1.64 $ 1.80 $ 1.62 $ 1.69 $ 1.29 Diluted/(2)/ 1.61 1.78 1.59 1.65 1.27 Cash Dividends Declared 0.22 0.20 0.18 0.16 0.15 BALANCE SHEET AND OTHER DATA: Capital Expenditures $ 92.2 $ 93.9 $ 88.6 $ 79.8 $ 71.2 Total Assets 915.3 952.2 863.3 714.7 585.4 Long-Term Obligations 239.4 252.8 235.6 80.9 70.7 Net Debt 204.5 236.8 238.4 92.9 55.9 Stockholders' Equity 469.2 440.5 420.3 415.5 342.1 Capital Expenditures % of Net Sales 10.3% 10.6% 10.6% 11.2% 10.8% Interest Bearing Debt to Total Capitalization 35.0% 39.9% 39.2% 22.1% 17.7% Net Debt to Total Net Capitalization/(3)/ 30.4% 35.0% 36.2% 18.3% 14.0%
(1) Net income includes Strategic Initiative charges of $6.0 million in 2001, $3.3 million of IPR&D write-off in 1999, and $6.1 million favorable lawsuit settlements in 1998. (2) Net income per diluted common share includes the negative effects of $0.17 for Strategic Initiative charges in 2001, $0.09 for IPR&D write-off in 1999, and a positive effect of $0.16 for favorable lawsuit settlements in 1998. (3) Net Debt is interest bearing debt less cash and cash equivalents. Net Capitalization is Stockholder's Equity plus Net Debt. Five Year Summary of Selected Financial Data: AptarGroup 83 Management's Discussion and Analysis (In thousands, except per share amounts or otherwise indicated) RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage relationship of certain items to net sales. Year Ended December 31, 2001 2000 1999 ------------------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% Cost of sales 63.1 62.7 62.3 Selling, research & development, and administrative 16.4 16.4 16.5 Depreciation and amortization 8.2 8.0 8.2 Strategic Initiative charges 0.9 - - ----- ----------------- Operating income 11.4 12.9 13.0 Other income (expenses): IPR&D write-off - - (0.4) Net other expense (1.5) (1.8) (1.6) ----- ----------------- Income before income taxes 9.9 11.1 11.0 Provision for income taxes 3.3 3.8 4.0 ----- ----------------- Net income 6.6% 7.3% 7.0% ===== ================= 84 AptarGroup: Management's Discussion Analysis and Net Sales Net Sales AptarGroup posted net sales in 2001 of $892.0 million, an increase of 1.0% when compared to net sales of $883.5 million in 2000. Net sales, excluding changes in foreign currency exchange rates and acquisitions ("Core Sales"), grew 3% compared to the prior year. Core Sales of pumps to the worldwide fragrance/cosmetic market were strong in the first half of 2001 and began to decrease starting in the third quarter and continuing into the fourth quarter of 2001 compared to 2000. For the year, Core Sales of pumps to the worldwide fragrance/cosmetic market increased moderately compared to 2000. Core Sales of aerosol valves, pumps and dispensing closures to the worldwide personal care market decreased slightly from the prior year. Core Sales of metered dose aerosol valves and pumps to the pharmaceutical market showed moderate growth over the prior year. Pricing had a slightly negative impact on sales during 2001 due in part to reduced plastic resin prices passed through to customers who purchased dispensing closures. Net sales in 2000 totaled $883.5 million, an increase of 6% when compared to net sales of $834.3 million in 1999. Approximately 1% of the net sales growth was related to increases in selling prices primarily related to the pass through to customers of material cost increases. 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 1999. Core Sales grew 12% compared to the prior year. Core Sales of pumps to the worldwide fragrance/cosmetic market were strong throughout 2000. Core Sales of aerosol valves, pumps and dispensing closures to the European personal care market also increased significantly over the prior year. Core Sales to the pharmaceutical market grew moderately over the prior year. These strengths were offset somewhat by weak sales of the Company's products to the U.S. personal care market. The following table sets forth, for the periods indicated, net sales by geographic location.
2001 % of Total 2000 % of Total 1999 % of Total --------------------------------------------------------------------------------------------------- Domestic $ 334,509 38% $ 343,825 39% $332,986 40% Europe 481,875 54% 467,409 53% 449,824 54% Other Foreign 75,602 8% 72,247 8% 51,507 6%
Cost of Sales Cost of sales increased slightly as a percentage of net sales in 2001 to 63.1% compared to 62.7% in 2000. The cost of sales percentage was negatively impacted by the following factors in 2001: . Underutilized fixed costs worldwide due to the decrease in sales in the fourth quarter. . Increase in labor costs due to the full year impact of the reduced 35 hour work week in France. Offsetting these negative factors were the following positive impacts in 2001: . Cost reduction programs implemented primarily in the U.S. . Lower raw material prices, particularly plastic resin and metal parts, compared to 2000. Management's Discussion and Analysis: AptarGroup 85 Cost of sales as a percentage of net sales in 2000 increased slightly to 62.7% compared to 62.3% in 1999. The cost of sales percentage was negatively impacted by the following factors: . Increases in raw material prices, particularly plastic resin and metal in 2000 that were passed on to customers by increased selling prices, thus having a slightly negative impact on operating margins. . Partial year impact of implementation of the reduced 35 hour work week in France. . Underutilized fixed cost in the U.S. due to the weak sales in 2000 to the U.S. personal care market. Offsetting these negative factors were the following positive impacts: . Better utilization of fixed costs in Europe due to strong sales to the fragrance/cosmetic market. . The effect of manufacturing products in Europe and incurring costs in Euros and then 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 Selling, Research & Development and Administrative expenses ("SG&A") increased approximately $1.1 million in 2001 compared to the prior year but remained constant as a percentage of sales at 16.4%. SG&A in 2000 increased by approximately $7.5 million compared to 1999 but decreased slightly as a percentage of sales to 16.4% from 16.5% in 1999. This reduction as a percent of sales is mainly due to cost reduction efforts implemented in late 2000. Depreciation and Amortization Depreciation and amortization increased nearly $2.7 million to $73.6 million in 2001 compared to $70.9 million in 2000. As part of the Company's Strategic Initiative (described below), certain long-lived assets will be taken out of service prior to the end of the normal service period due to the plant shutdown and rationalization of product line. Accordingly, the Company has changed the estimated useful lives of such assets resulting in an acceleration of depreciation ("Accelerated Depreciation"), of which $1.9 million was recorded in 2001 and included in depreciation and amortization in the income statement. Excluding this Accelerated Depreciation, depreciation and amortization increased $800 in 2001. Depreciation and amortization increased nearly $2.2 million to $70.9 million in 2000 from $68.7 million recorded in 1999. The primary reason for the increase was due to higher amortization expense attributed to a full year of goodwill amortization on acquisitions completed in 1999 as well as higher depreciation charges related to expenditures for geographic expansion in 2000 and 1999. Strategic Initiative Charges In April 2001, the Company announced it had begun a project ("Strategic Initiative") to improve the efficiency of operations that produce pumps for its mass-market fragrance/cosmetic and personal care customers. In addition to improving efficiency and reducing costs, another objective of the Strategic Initiative is to improve customer service through reduced lead times and the ability to customize finished products on a local basis. As part of the Strategic Initiative, the Company closed one molding operation in the U.S. and will consolidate the molding and assembly of the base cartridge (standard internal components common to modular 86 AptarGroup: Management's Discussion and Analysis pumps) into one of the Company's facilities in Italy. In addition, the Company is rationalizing its mass-market pump product lines for these two markets by discontinuing production of non-modular pumps and increasing capacity for its modular pumps. Strategic Initiative charges totaled $7.6 million for the year ended 2001. The $7.6 million primarily relates to non-cash fixed asset impairment charges of $5.5 million for fixed assets held for use related to non-modular pumps that are going to be discontinued. These non-modular pumps will continue to be sold during the Strategic Initiative project but will be discontinued once there is adequate capacity for the modular pumps. The undiscounted expected future cash flows for the products using these non-modular pumps during this phase out period were less than the carrying value of the specific identifiable assets used to generate these cash flows and thus an impairment charge was recognized in accordance with SFAS No. 121 "Accounting for the Impairment of the Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The remaining Strategic Initiative charges related primarily to accrued severance costs and related benefits for approximately 170 U.S. employees who will be involuntarily terminated, accrued utility abatement reimbursements and accrued costs to refurbish a leased facility that the Company will be moving out of as a result of the Strategic Initiative. Strategic Initiative charges plus Accelerated Depreciation and other related costs such as training are hereinafter referred to as "Total Strategic Initiative Related Costs." The Total Strategic Initiative Related Costs are expected to be approximately $10 million before taxes by the end of the project in 2002, of which $9.6 million are included in the 2001 results of operations. Operating Income Operating income for 2001 decreased approximately $12.0 million compared to 2000. Excluding $9.6 million of Total Strategic Initiative Related Costs, operating income decreased $2.4 million or 2.1% compared to the prior year. Operating income as a percentage of net sales for 2001, excluding the Total Strategic Initiative Related Costs, decreased slightly to 12.5% compared to 12.9% a year ago. The decreased operating income as a percentage of net sales is due to the increases in cost of sales mentioned earlier. The net of translating the Company's foreign denominated results with the impact of incurring manufacturing costs in currencies different than the selling currencies was not material in 2001. Operating income in 2000 increased to $113.9 million compared to $108.4 million in 1999. Operating income as a percentage of net sales for 2000 decreased slightly to 12.9% compared to 13.0% in 1999. The decreased operating income percentage is primarily due to the increases in cost of sales mentioned earlier. This includes a negative effect of translating the Company's foreign denominated results into a stronger U.S. dollar relative to the same period in 1999. The net of this negative translation impact with the positive impact of incurring manufacturing costs in Euros and selling in currencies that gained strength against the Euro in 2000 was a negative impact of approximately $2 million. Net Other Expenses Net other expenses in 2001 decreased to $13.5 million from $16.0 million in 2000. The decrease is primarily related to the net of the following items: [_] A net decrease in interest expense in excess of interest income ("Net Interest Expense"), of approximately $3.5 million, due primarily to decreased interest rates in both North America and Europe combined with decreasing debt levels. [_] A reduction in equity in results of affiliates of nearly $800 due to start-up losses related to a joint venture created in 2000. Management's Discussion and Analysis: AptarGroup 87 Net other expenses in 2000 increased to $16.0 million compared to $13.4 million in 1999 excluding the write-off purchased In Process Research & Development ("IPR&D"). The change was due primarily to an increase in Net Interest Expense, of approximately $4.2 million related to a full year of interest expense associated with the acquisitions completed in 1999, additional borrowings related to the Company's stock repurchase plan, and increased average interest rates. Effective Tax Rate The reported effective tax rate was 33.3% in 2001 compared to 34.0% in 2000. Excluding the impact of the after-tax Total Strategic Initiative Related Costs, the effective tax rate would have been 33.7% for 2001 compared to the 34.0% recorded in 2000. The decrease compared to the prior year reflects the benefits of reductions in certain European corporate income tax rates as well as the mix of where the Company's income was earned. The effective income tax rate in 2000 decreased to 34.0% from 36.0% in 1999. This decrease is due primarily to the positive effect of reductions in European corporate tax rates on the Company's deferred income taxes in 2000. Net Income Net income as reported for the year 2001 decreased to $58.8 million compared to $64.7 million in 2000. Excluding the after-tax effect of Total Strategic Initiative Related Costs, net income remained relatively flat at $64.8 million in 2001 compared to $64.7 million in 2000. Net income increased 4.3% to $64.7 million compared to $62.0 million excluding the write-up of IPR&D recorded in 1999. Net income as reported increased 10.2% to $64.7 million in 2000 compared to $58.7 million in 1999. DISPENSING SYSTEMS SEGMENT The Dispensing Systems segment is an aggregate of four of the Company's five business units. The Dispensing Systems segment sells primarily non-aerosol spray and lotion pumps, plastic dispensing and non-dispensing closures, and metered dose aerosol valves. These three products are sold to all of the markets served by the Company including the fragrance/cosmetic, personal care, pharmaceutical, household, and food/beverage markets. Net sales in 2001 increased approximately 1% to $746.5 million compared to $742.6 million in 2000. Net sales in 2000 increased approximately 7% over 1999 sales of $697.1 million. Net sales of the segment's products to the pharmaceutical market grew moderately in 2001 compared to 2000, while sales to this market increased moderately from 1999 to 2000. Sales of this segment's products to the fragrance/cosmetic market increased moderately compared to 2000 and significantly over 1999 levels. Sales to the fragrance/cosmetic market were particularly strong in the first half of 2001 and decreased significantly in the fourth quarter. Sales of this segment's products to the personal care market decreased moderately over 2000, while they increased significantly in 2000 from 1999. Segment EBIT (defined as earnings before net interest, corporate expenses, income taxes and unusual items), decreased approximately 3% to $119.8 million from $123.6 million in 2000. The decrease in EBIT is primarily related to the sharp decrease in sales to the fragrance/cosmetic market in the second half of the year, causing significant under utilization of fixed costs. Segment EBIT in 2000 increased approximately 6% compared to $116.3 million in 1999. The increase in EBIT in 2000 was primarily related to the significant increase in sales to the fragrance/cosmetic market in 2000 compared to 1999. 88 AptarGroup: Management's Discussion and Analysis SEAQUISTPERFECT SEGMENT SeaquistPerfect represents the Company's fifth business unit and sells primarily aerosol valves and accessories and certain non-aerosol spray and lotion pumps. These products are sold primarily to the personal care, household, and food/beverage markets. Net sales in 2001 increased approximately 3% to $145.5 million compared to $140.9 million in 2000. The increase in sales in 2001 is due primarily to an increase in sales to the European personal care market. Sales in Europe of both aerosol valves and non-aerosol spray and lotion pumps increased nearly 6% over 2000 levels. Sales in North America decreased slightly, due primarily to decreased sales of non-aerosol spray and lotion pumps to the personal care market. Sales in 2000 increased approximately 3% compared to $137.2 million in 1999. The increase was due primarily to an increase in Europe of sales of non-aerosol spray and lotion pumps to the personal care market. Worldwide sales of aerosol valves remained flat compared to 1999. Segment EBIT in 2001 increased approximately 16% to $5.8 million compared to $5.0 million in 2000, primarily due to the North American cost savings efforts and an aerosol valve price increase implemented in 2001. Segment EBIT in 2000 was up slightly compared to 1999. The slight increase in EBIT was primarily due to the increase in sales volumes. MARKET RISKS 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 condition 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. 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 December 31, 2001, about the Company's forward currency exchange contracts. All the contracts expire before the end of the third quarter of 2002. Average Contractual Buy/Sell Contract Amount Exchange Rate -------------------------------------------------------------------------- Euro/U.S. Dollar $ 15,307 1.1166 U.S. Dollar/Chinese Yuan 1,738 .1208 Euro/Japanese Yen 982 .0092 Euro/Brazilian Real 936 .4409 Euro/British Pound 845 1.6023 Hong Kong Dollar/Euro 640 6.9620 -------- Total $ 20,448 ======== Management's Discussion and Analysis: AptarGroup 89 As of December 31, 2001, the Company has recorded the fair value of foreign currency forward exchange contracts of $205 in accounts payable and accrued liabilities and $87 in prepayments and other in the balance sheet. All forward exchange contracts outstanding as of December 31, 2000 had an aggregate contract amount of $23.4 million. At December 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 (which was 2.0% at December 31, 2001) and receive a fixed rate of 6.6%. 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 interest rates increase by 10%, net income related to the interest rate swap agreements would decrease by approximately $100 assuming a tax rate of 33%. As of December 31, 2001, the Company has recorded the fair value of derivative instrument assets of $3.8 million in miscellaneous other assets with an offsetting adjustment to debt related to the fixed-to-variable interest rate swap agreements. No gain or loss was recorded in the income statement in 2001 since there was no hedge ineffectiveness. The Company currently has a wholly owned subsidiary located in Argentina. In 2001, the wholly owned subsidiary had net sales of approximately $8 million, approximately one half of which was sold outside of Argentina and invoiced in U.S. dollars. The subsidiary purchases certain components in either U.S. dollars or Euros, and finishes the products locally. At December 31, 2001, the subsidiary had approximately $400 of a net liability exposure denominated in either U.S. dollars or Euros that was revalued using a devalued Argentine Peso. This revaluation of the net liability position resulted in an unrealized foreign exchange loss reported in the results of operations of approximately $140. The Company expects business in Argentina to be disrupted during the current economic crisis, but any negative impact is not expected to be significant to the overall worldwide results of operations in 2002. LIQUIDITY AND CAPITAL RESOURCES Net cash generated from operating activities increased slightly to $127.9 million in 2001 compared to $127.8 million and $118.4 million in 2000 and 1999, respectively. In each of these years, cash flow from operations was primarily derived from earnings before depreciation and amortization. During 2001, the Company utilized the majority of such cash flows to finance capital expenditures, pay down existing debt obligations, repurchase Company stock, and pay dividends to shareholders. Cash and equivalents were $48.0 million at December 31, 2001 versus $55.6 million at December 31, 2000 and $32.4 million at December 31, 1999. Working capital increased $16.4 million to $220.8 million at December 31, 2001 compared to $204.4 million and $191.3 million at December 31, 2000 and 1999, respectively. While accounts receivable and inventory balances decreased in 2001 from the prior year, short-term notes payable and accounts payable and accrued liabilities, in aggregate, decreased by a larger amount. The Company used $90.5 million in cash for investing activities during 2001 compared to $97.7 million and $232.7 million during 2000 and 1999, respectively. The slight decrease in cash used for investing activities in 2001 was due to the fact that no new businesses were acquired in 2001 and no significant increases in equity investments and affiliates were made. The significant decrease in cash used for investing activities from 1999 to 2000 was due primarily to the Emsar acquisition of $144 million made in 1999. Capital expenditures 90 AptarGroup: Management's Discussion and Analysis totaled $92.2 million in 2001 as the Company continued to invest in property, plant and equipment primarily for new products, capacity increases, product line extensions, and capital costs related to the Strategic Initiative, compared to $93.9 million and $88.6 million in 2000 and 1999, respectively. Cash outlays for capital expenditures for 2002 are estimated to be approximately $80 million. The Company estimates that approximately 35% of next year's capital will be spent on maintenance of the business. During the third quarter of 2000, the Company contributed assets worth approximately $7.4 million and liabilities worth approximately $2.4 million into a joint venture to produce airless pump dispensing systems for the fragrance/cosmetic market. Prior to creating the joint venture, the Company had annual sales of approximately $15 million of airless dispensing systems that are now sold as part of the joint venture and are therefore not included in net sales. The impact on profitability in 2000 was not significant. The Company's share of the joint venture loss in 2001 was approximately $800. The results derived from the joint venture are shown in the income statement in equity as results of affiliates. Net cash (used) provided by financing activities was ($42.0) million in 2001 compared to ($5.7) million and $124.1 million provided in 2000 and 1999, respectively. The net cash used by financing activities in 2001 was primarily due to the repayment of short-term and long-term debt as well as dividends paid to shareholders and the Company's stock repurchase program. The Company is authorized to repurchase a maximum of 3 million shares of the Company's outstanding common stock. As of December 31, 2001, 1.2 million shares have been repurchased for an aggregate amount of $29.9 million. 155 thousand shares were repurchased in 2001 for an aggregate amount of $5.0 million. The ratio of the Company's Net Debt (interest bearing debt less cash and cash equivalents) to Net Capital (stockholder's equity plus Net Debt) was 30.3% and 35.0% as of December 31, 2001 and 2000, respectively. In May 1999, the Company entered into a $107 million twelve-year private debt placement agreement. The private placement is comprised of $107 million of 6.6% senior unsecured notes. The notes will be repaid in equal annual installments of $21.4 million beginning on May 30, 2007 and ending on May 30, 2011. During the third quarter of 1999, the Company entered into interest rate swap agreements with two different banks for a notional amount of $25 million each or total of $50 million. The agreements swapped the 6.6% fixed interest rate on the private placement described above for variable floating rates equal to the six month LIBOR, less a spread ranging from 8.3 to 10.5 basis points. The amortization schedule for the swap agreements was designed to match the amortization of the underlying private placement. 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 borrowing is payable at a rate equal to LIBOR plus an amount based on the financial condition of the Company. At December 31, 2001 the amount unused and available under this agreement was $24 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 debt obligations on a long-term basis. Since management has the ability and intent to do so, an additional $24 million of short-term debt obligations representing the unused and available amount under the credit agreement have been reclassified as long-term obligations as of December 31, 2001. Management's Discussion and Analysis: AptarGroup 91 As mentioned in Note 9 - Lease Commitments, the Company leases certain warehouse, plant, and office facilities as well as certain equipment under noncancelable operating and capital leases expiring at various dates through the year 2018. Most of the operating leases contain renewal options and certain equipment leases include options to purchase during or at the end of the lease term. The Company has an option on one building lease to purchase the building during or at the end of the term of the lease at approximately the amount expended by the lessor for the purchase of the building and improvements. If the Company does not exercise the purchase option by the end of the lease, the Company may be required to pay an amount not to exceed $9.5 million. The Company has obligations and commitments to make future payments under contracts such as debt and lease agreements, but otherwise has no off balance sheet arrangements. Below is a table of those future payments:
Payments Due by Period --------------------------------------------------------------- Contractual Subsequent Obligations Total 2002 2003 2004 2005 to 2005 -------------------------------------------------------------------------------------------- Long-term Debt $218,572 $ 11,856 $ 5,912 $ 81,474 $ 7,119 $112,211 Capital Lease Obligations 12,214 1,889 1,676 2,045 1,320 5,284 Operating Leases 32,527 8,145 6,544 5,824 4,551 7,463 ------------------------------------------------------------------------- Totals $263,313 $ 21,890 $ 14,132 $ 89,343 $ 12,990 $124,958 =========================================================================
The Company's foreign operations have historically met cash requirements with the use of internally generated cash or borrowings. Foreign subsidiaries have financing arrangements with several foreign banks to fund operations located outside the U.S., but all these lines are uncommitted. Cash generated by foreign operations has generally been reinvested locally. While management currently intends to reinvest such cash from foreign operations, the timing of the decision to transfer such cash to the U.S. 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. The Company believes it is in a strong financial position and has the financial resources to meet business requirements in the foreseeable future. The Company has historically used cash flow from operations as its primary source of liquidity. In the case that customer demand would decrease significantly for a prolonged period of time and negatively impact cash flow from operations, the Company would have the ability to restrict and significantly reduce capital expenditure levels which historically have been the most significant use of cash for the Company. ADOPTION OF ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires companies to use the purchase method of accounting for all business combinations initiated after June 30, 2001 and eliminates the use of the pooling of interest method of accounting for business combinations. All of the Company's acquisitions to 92 AptarGroup: Management's Discussion and Analysis date have been accounted for using the purchase method of accounting for business combinations. SFAS No. 141 also establishes criteria that must be used to determine whether acquired intangible assets should be recognized separately from goodwill in a Company's financial statements. SFAS No. 142 details the method by which companies will account for goodwill and intangible assets after a business combination has been completed. This accounting standard eliminates the requirement that goodwill and indefinite lived intangible assets arising from a business combination be amortized and charged to expense over time. Instead, goodwill and indefinite lived intangible assets must be tested annually, or as circumstances dictate, for impairment. If the carrying value of indefinite lived intangible assets exceed their fair value, an impairment loss is recognized in an amount equal to that excess. If the carrying value of the related reporting unit exceeds its fair value, an impairment loss is recognized to the extent that the carrying value of reporting unit goodwill exceeds the "implied fair value" of reporting unit goodwill. As required by SFAS No. 142, the Company will adopt this standard effective with the start of its new fiscal year beginning January 1, 2002. Before the issuance of its first quarter financial statements, the Company must complete an assessment of the categorization of its existing intangible assets and goodwill in accordance with the new criteria and report them appropriately. Intangible assets that have indefinite lives must be assessed for impairment in the first quarter of adoption. Intangible assets with finite lives will continue to be subject to amortization over their expected useful lives. Within six months of adoption, the Company must complete a valuation of each reporting unit's goodwill to determine if there has been any impairment. The Company has already performed an analysis of the fair value of its reporting units. The fair value of the reporting units exceeds the carrying values and therefore, no impairment of goodwill will be reported in the first quarter of 2002. The Company recorded amortization of goodwill of approximately $3.6 million per year on a pre-tax basis and $3.5 million on an after-tax basis in 2001. In July 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated for the retirement of tangible long-lived assets and the associated retirement costs. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company has performed a preliminary assessment and has determined that this standard will not have any immediate impact on the Company upon adoption. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement is effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company believes it is in compliance with the application of this statement today and does not foresee any impact upon adoption next year. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of the financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company continually evaluates its estimates, including those related to bad debts, inventories, intangible assets, income Management's Discussion and Analysis: AptarGroup 93 taxes, pensions and contingencies. The Company bases its estimates on historical experience and on a variety of other assumptions believed to be reasonable in order to make judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in preparation of its consolidated financial statements. The Company records an allowance for doubtful accounts for estimated losses from the inability of its customers to make required payments. If the financial condition of the Company's customers were to deteriorate, their ability to make payments may decrease and thus an additional allowance for doubtful accounts may be required. The Company records a reserve for obsolete inventory. If actual market conditions are less favorable than management has estimated, additional reserves for obsolete inventory may be required. The Company has recorded deferred tax assets for net operating loss carryforwards at certain of its foreign subsidiaries. The Company believes these net operating loss carryforwards will be utilized against future taxable income and thus no valuation allowance is required. If the expectation of future taxable income of these foreign subsidiaries declines, a valuation allowance may be required against the deferred tax assets and would be charged against income. Although the Company currently does not anticipate an impairment charge in the first quarter of 2002 related to goodwill, this conclusion is based on fair market values of the Company's reporting units exceeding carrying values. Should the fair values of the reporting units decline in the future, an impairment charge may need to be recorded. OUTLOOK The Company anticipates a relatively slow beginning to the year 2002 compared to the start of 2001. However, based on discussion with customers and a variety of current projects in process, the Company expects business to gradually improve throughout 2002. The demand for the Company's fragrance/cosmetic and personal care products is expected to improve over the depressed levels in the fourth quarter of 2001. However, due to the strength of the business in the first quarter of 2001, it will be difficult to improve on last year's first quarter results. The positive trend for the Company's products sold to the pharmaceutical market that began in the second half of 2001 is expected to continue in 2002. The Company anticipates Core Sales for the first quarter to be below the prior year by approximately 3% to 6%, but gradually improving throughout the remainder of 2002. For the full year, the Company expects double digit earnings growth on a comparable basis over 2001. Excluding Total Strategic Initiative Related Costs, the Company expects the effective tax rate for 2002 to be in the range of 33% to 34% compared to a rate of 32.7% for 2001 after adjusting for the elimination of goodwill amortization. The Company experienced a slight decrease in the cost of raw materials in 2001, in particular, plastic resins and metal components. The Company does not anticipate any significant increases or decreases to the cost of its raw materials in 2002. Should raw materials increase or decrease dramatically in 2002, this could have an impact on the anticipated results for 2002. 94 AptarGroup: Management's Discussion and Analysis The Strategic Initiative project is scheduled to be completed by the end of 2002. The Company is anticipating cost savings in 2002 of approximately $2 million. While the project is currently on schedule to be completed in 2002, it is estimated that every delay of one month in completing the project will equate to a lost savings opportunity of approximately $500 per month for each month the project is delayed. Also in 2002, the Company's new U.S. pharmaceutical production facility is expected to begin production. The start up of this facility is dependent upon approvals to be received from the Company's pharmaceutical customers. A delay in receiving customer approvals to begin production in the new facility could result in additional overhead costs, due to the fact that the Company may be required to maintain some existing customer approved production at the old facility while supporting the start up of the new facility. The Company uses specific plastic resin for certain of its pharmaceutical products. These specific resins need to be approved by the customers and by the Food and Drug Administration (FDA) in the United States when the customer is obtaining approval to market its product. Should these plastic resins become unavailable to purchase on the market, the Company could suffer a delay in shipping product to its pharmaceutical customers. Due to the relatively high fixed cost nature of the Company's business, sudden significant decreases in business may have a significant impact on the Company's results of operations, as seen in the fourth quarter of 2001. The Company has difficulty, due to the fixed cost nature of its businesses, particularly in Europe, to reduce costs fast enough to offset the decline in business. The Company in some cases sells products denominated in a currency different than 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. FORWARD LOOKING STATEMENTS This Management's Discussion and Analysis and certain other sections of this annual report contain forward-looking statements that involve a number of risks and uncertainties. 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 or unknown risks and uncertainties that exist in the Company's operations and business environment, including but not limited to direct or indirect consequences of acts of war or terrorism, 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 timing and magnitude of capital expenditures and acquisitions, currency exchange rates, interest rates, economic and market conditions in the United States, 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. Management's Discussion and Analysis: AptarGroup 95 EX-21 5 dex21.txt LIST OF SUBSIDIARIES EX-21 List of Subsidiaries APTARGROUP, INC. LIST OF SUBSIDIARIES
State or Other Jurisdiction of Percentage Incorporation Owned ------------- ----- AptarGroup International L.L.C. Delaware 100% AptarGroup Foreign Sales Corporation Barbados 100% AptarGroup International Holding B.V. Netherlands 100% Valois (Ireland) Limited Ireland 100% AptarGroup Holding S.A.S. France 100% Aptar GmbH Germany 100% Ing. Erich Pfeiffer GmbH Germany 100% Pfeiffer Vaporisateurs France SARL France 100% P & S Japan Ltd. Japan 100% Pfeiffer U.K. Limited United Kingdom 100% P&P Promotion of German Manufacturing Technologies GmbH Germany 100% Vallis Leasobjekt GmbH Germany 100% Seaplast S.A. Spain 50% Seaquist-Loffler Kunststoffwerk GmbH Germany 100% Loeffler Kunststoffwerk spol. s.r.o. Czech Republic 100% SeaquistPerfect Dispensing GmbH Germany 100% Valois Deutschland GmbH Germany 100% SeaquistPerfect Plastic GmbH Germany 100% AptarGroup S.A.S. France 100% Dispensing One S.A.S. France 100% Aptar South Europe SARL France 100% Novares S.p.A. Italy 100% EMSAR S.p.A. Italy 100% EMSAR France SCA France 100% AptarGroup SAR Finance Unlimited Ireland 100% EMSAR GmbH Germany 100% SAR (U.K.) Limited United Kingdom 100% Somova S.r.l. Italy 100% Spruhventile GmbH Germany 100% Caideil M.P. Teoranta Ireland 100% General Plastics S.A. France 100% Graphocolor S.A. France 60% Moulage Plastique de Normandie S.A. France 100% Perfect-Valois U.K. Limited United Kingdom 100% Seaquist-Loffler Limited United Kingdom 100% Valois S.A.S. France 100% Valois Dispray S.A. Switzerland 100% Valois Espana S.A. Spain 100% Valois Italiana S.r.l. Italy 100% Ensyma S.A. Switzerland 100% Microflow Engineering S.A. Switzerland 80% Airlessystems S.A.S. France 50%
Aptar India Private Limited India 100% Valois India Private Ltd. India 100% EMSAR Dispensing Systems Ltd. Hong Kong 100% EMSAR Brasil Ltda. Brazil 100% EMSAR S.A. Argentina 100% Seaquist Canada Ltd. Canada 100% Seaquist Finance Unlimited Ireland 100% Seaquist-Valois Australia Pty. Ltd. Australia 100% Seaquist-Valois do Brasil Ltda. Brazil 100% Seaquist-Valois Japan, Inc. Japan 100% SeaquistPerfect Dispensing de Mexico S.A. de C.V. Mexico 100% Aptar Suzhou Dispensing Systems Co., Ltd. P.R. China 100% SeaquistPerfect Molding L.L.C. Illinois 100% Emson Research, Inc. Connecticut 100% EMSAR UK Ltd. United Kingdom 100% Emson Foreign Sales Corporation U.S. Virgin Islands 100% EMSAR, Inc. Connecticut 100% EMSAR Ventures, Inc. Connecticut 100% P.T. Emsar Ongko Indonesia Indonesia 100% Emson Spraytech India Private Ltd. India 100% Global Precision, Inc. Florida 100% Liquid Molding Systems, Inc. Delaware 100% Philson, Inc. Connecticut 100% Pfeiffer of America, Inc. Delaware 100% P Merger Corporation Connecticut 100% Seaquist Closures L.L.C. Delaware 100% Seaquist Closures Foreign, Inc. Delaware 100% Seaquist de Mexico S.A. de C.V. Mexico 75% SeaquistPerfect Dispensing L.L.C. Delaware 100% SeaquistPerfect Dispensing Foreign, Inc. Delaware 100% Valois of America, Inc. Connecticut 100%
EX-23 6 dex23.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 33-64320, 33-80408, 333-40326 and 333-05325) of AptarGroup, Inc. of our report dated February 13, 2002 relating to the financial statements, which appears in the Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 13, 2002 relating to the financial statement schedule, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLP - ------------------------------ PricewaterhouseCoopers LLP Chicago, Illinois March 21, 2002 -----END PRIVACY-ENHANCED MESSAGE-----