<PAGE>
<PAGE> 1 SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ----to----
COMMISSION FILE NUMBER 1-11846
APTARGROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-3853103
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
475 WEST TERRA COTTA AVENUE, SUITE E
CRYSTAL LAKE, ILLINOIS 60014
- ------------------------------------ -----
Address of Principal Executive Offices) (Zip Code)
815-477-0424
------------
(Registrant=s Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer=s
classes of common stock, as of the latest practicable date (August 2, 1996)
COMMON STOCK 17,941,286
<PAGE>
<PAGE> 2
APTARGROUP, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 1996
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
ITEM 1. Financial statements (Unaudited)
Consolidated Statements of Income -
Three and Six Months Ended June 30, 1996
and 1995 3
Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 8
ITEM 2. Management=s Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of
Security Holders 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 16
<PAGE>
<PAGE> 3
AptarGroup, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Data)
(UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
----------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
NET SALES $151,047 $142,396 $304,001 $278,025
------- ------- ------- -------
OPERATING EXPENSES:
Cost of sales .................. 97,859 90,627 196,573 177,243
Selling, general and
administrative ............... 26,161 24,956 51,173 47,763
Depreciation and amortization .. 12,255 10,854 23,744 21,296
------- ------- ------- -------
136,275 126,437 271,490 246,302
------- ------- ------- -------
OPERATING INCOME................... 14,772 15,959 32,511 31,723
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense................ (1,661) (1,249) (3,435) (2,864)
Interest income................. 381 277 642 507
Equity in income of affiliates.. 217 587 567 1,402
Minority interests.............. (95) (41) (150) (78)
Miscellaneous, net.............. 397 77 1,035 345
------- ------- ------- -------
(761) (349) (1,341) (688)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES......... 14,011 15,610 31,170 31,035
PROVISION FOR INCOME TAXES......... 5,184 5,683 11,670 11,483
------- ------- ------- -------
NET INCOME.........................$ 8,827 $ 9,927 19,500 19,552
======= ======= ======= =======
PER COMMON SHARE:
Net Income.......................$ .49 $ .55 1.09 1.09
======= ======= ======= =======
Average number of shares
outstanding (in thousands)...... 17,938 17,917 17,934 17,916
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 4
AptarGroup, Inc.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
June 30, December 31,
ASSETS 1996 1995
-------- -----------
CURRENT ASSETS:
Cash and equivalents........... $ 21,698 $ 17,332
Accounts and notes receivable,
less allowance for doubtful
accounts of $3,181 in 1996
and $3,296 in 1995............ 125,414 119,011
Inventories.................... 73,194 73,339
Prepayments and other.......... 17,532 14,188
------- -------
237,838 223,870
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Buildings and improvements..... 73,097 75,696
Machinery and equipment........ 411,919 397,169
------- -------
485,016 472,865
Less: Accumulated depreciation. (246,231) (231,152)
------- -------
238,785 241,713
Land........................... 4,236 4,268
------- -------
243,021 245,981
------- -------
OTHER ASSETS:
Investments in affiliates...... 15,030 14,951
Goodwill, less accumulated
amortization of $4,963 in
1996 and $4,409 in 1995....... 47,087 48,387
Miscellaneous.................. 23,632 26,027
------- -------
85,749 89,365
------- -------
TOTAL ASSETS $566,608 $559,216
======= =======
See accompanying notes to consolidated financial statements.<PAGE>
<PAGE> 5 AptarGroup, Inc.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
LIABILITIES AND June 30, December 31,
STOCKHOLDERS= EQUITY 1996 1995
----------- ------------
CURRENT LIABILITIES:
Notes payable............... $ 4,020 $ 8,322
Current maturities of
long-term obligations...... 6,534 8,737
Accounts payable and
accrued liabilities........ 104,681 106,147
------- -------
115,235 123,206
------- -------
LONG-TERM OBLIGATIONS........... 83,623 80,712
------- -------
DEFERRED LIABILITIES AND OTHER:
Deferred income taxes........ 22,281 21,992
Retirement and deferred
compensation plans.......... 12,665 12,487
Minority interests........... 4,967 1,033
Deferred and other non-
current liabilities......... 6,851 7,500
------- -------
46,764 43,012
------- -------
STOCKHOLDERS= EQUITY:
Common stock, $.01 par value . 179 179
Capital in excess of
par value.................... 103,229 102,954
Retained earnings............. 217,850 200,860
Cumulative foreign currency
translation adjustment...... (272) 8,293
------- -------
320,986 312,286
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS= EQUITY $ 566,608 $559,216
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 6 AptarGroup, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
(Dollars in Thousands)
(UNAUDITED) Six Months Ended
June 30,
-----------------------
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: -------- --------
Net income............................... $ 19,500 $ 19,552
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation ........................... 22,411 20,380
Amortization ........................... 1,333 916
Provision for bad debts................. 243 489
Minority interests...................... 150 78
Deferred income taxes................... 2,598 1,914
Retirement and deferred
compensation plans..................... (489) 762
Equity in income of affiliates in
excess of cash distributions received.. (567) (1,233)
Changes in balance sheet items,
excluding effects from foreign
currency adjustments:
Increase in accounts receivable........ (9,402) (20,838)
Increase in inventories................ (2,244) (10,784)
Increase in prepaid and other
current assets........................ (5,968) (1,983)
Increase in accounts payable
and accrued liabilities............... 1,953 2,015
Increase in income taxes payable....... 1,218 2,435
Other changes, net..................... (1,622) 90
------ ------
NET CASH PROVIDED BY OPERATIONS.......... 29,114 13,793
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................... (25,507) (24,867)
Disposition of property and equipment.... 449 633
Disposition of businesses................ 3,320 -
Collections of notes receivable, net..... 465 (747)
Investments in affiliates................ (11) (135)
------ ------
NET CASH USED BY INVESTING ACTIVITIES.... (21,284) (25,116)
------ ------
<PAGE>
<PAGE> 7 AptarGroup, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (cont=d)
For the Six Months Ended June 30, 1996 and 1995
(Dollars in Thousands)
(UNAUDITED)
Six Months Ended
June 30,
---------------------
1996 1995
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease)increase in notes payable...... $ (2,795) $ 7,870
Proceeds from long-term obligations..... 6,840 4,206
Repayments of long-term obligations..... (4,740) (5,950)
Dividends paid.......................... (2,510) (2,150)
Proceeds from stock options exercised... 274 61
------ ------
NET CASH (USED)PROVIDED BY FINANCING
ACTIVITIES.............................. (2,931) 4,037
------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH... (533) 599
------ ------
NET INCREASE(DECREASE) IN CASH AND
EQUIVALENTS............................. 4,366 (6,687)
CASH AND EQUIVALENTS AT BEGINNING OF
PERIOD.................................. 17,332 20,125
------ ------
CASH AND EQUIVALENTS AT END OF PERIOD..... $ 21,698 $ 13,438
====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 8
APTARGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands, except per share data)
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements included the
accounts of AptarGroup, Inc. and its subsidiaries. The terms AAptarGroup@
or ACompany@ as used herein refer to AptarGroup, Inc. and its subsidiaries.
In the opinion of management, the unaudited consolidated financial
statements include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of financial position and
results of operations for the interim periods presented. The accompanying
unaudited consolidated financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosure normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company
believes that the disclosures made are adequate to make the information
presented not misleading. Accordingly, these financial statements and
related notes should be read in conjunction with the financial statements
and notes thereto included in the Company=s Annual Report to Shareholders
incorporated by reference into the Company=s Annual Report on Form 10-K for
the year ended December 31, 1995. The results of operations of any interim
period are not necessarily indicative of the results that may be expected
for a fiscal year.
<PAGE>
<PAGE> 9
NOTE 2 - INVENTORIES
At June 30, 1996 and December 31, 1995, inventories, by component,
consisted of:
June 30, December 31,
1996 1995
-------- -----------
Raw Materials $ 23,722 $ 25,152
Work in progress 22,940 21,927
Finished goods 28,350 28,013
------- -------
Total 75,012 75,092
Less LIFO reserve (1,818) (1,753)
------- -------
Total $ 73,194 $ 73,339
======= =======
<PAGE>
<PAGE> 10
ITEM 2. MANAGEMENT=S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter and six months ended June 30, 1996 totaled $151.0
million and $304.0 million, respectively, increases of approximately 6% and
9% when compared to the corresponding periods of 1995. The increase for
the quarter and six months ended June 30, 1996, is primarily attributed to
sales volume increases of pumps to the pharmaceutical market and closures
to the personal care market, acquisitions made during the fourth quarter of
1995 and the mix of products sold. These increases were partially offset
by continued price competition, decreased demand from customers in the
fragrance/cosmetics market and the transactional impact of exchange rate
fluctuations on sales.
Sales to customers by European operations represented approximately 58% of
net sales for the quarter and six months ended June 30, 1996, compared to
63% for the same periods a year ago.
The translation of AptarGroup=s foreign sales was negatively affected by
the stronger U.S. dollar relative to certain European currencies when
compared to the same six month period in 1995. The stronger U.S. dollar
reduced the Company=s sales growth by approximately 2% in the quarter and
1% for the six months. If the U.S. dollar exchange rate had been constant
and the effect of acquisitions ($4.9 million for the quarter and $10.0
million for the six months) were excluded from 1996 results, translated
sales for the quarter and six months ended June 30, 1996, would have
increased 5% and 7%, respectively.
Cost of sales as a percent of net sales increased to 64.8% in the second
quarter of 1996 compared to 63.6% in the same period a year ago. For the
first six months of 1996, cost of sales as a percent of net sales increased
to 64.7% compared to 63.8% in the same period a year ago. The increase is
primarily attributed to under-utilized overhead in the Company's fragrance
operations, continued price competition, the mix of products sold and a
reduction in earnings from changes in exchange rates.
Selling, general and administrative expenses (SG&A) increased 5% to $26.2
million in the second quarter of 1996 compared to $25.0 million in the same
period a year ago. As a percent of net sales, SG&A decreased in the second <PAGE>
<PAGE> 11
quarter of 1996 to 17.3% from 17.5% a year ago. SG&A for the six months
ended June 30, 1996 increased 7% to $51.2 million compared to $47.8 million
a year. As a percent of net sales, SG&A decreased in the first six months
of 1996 to 16.8% compared to 17.2% a year ago.
Operating income decreased to $14.8 million in the second quarter of 1996
compared to $16.0 million for the same period a year ago. European
operations represented 64% of operating income in the second quarter of
1996, compared to 88% for the same period a year ago. U.S. operations
represented 48% of operating income in the second quarter compared to 32%
in the second quarter of 1995. For the six months ended, Europe's share of
operating income decreased from 85% in 1995 to 68% in 1996 and the U.S's
share of operating income increased from 34% in 1995 to 42% in 1996. The
difference between Europe and U.S. operations and total operating income is
due to income from other foreign operations and corporate expenses.
The reduction in European operating income is attributed to under-utilized
overhead, softness in the demand for fragrance/cosmetics pumps, increased
price competition, the mix of products sold and changes in exchange rates
of European currencies in relation to one another on inter-currency sales
transactions (particularly the British pound, Italian lira, French franc
and German mark). These factors are expected to continue to affect the
Company in the near term. The increase in U.S. operating income is due
primarily to increased sales of closures to the personal care market.
Net other expenses during the quarter increased to $761 thousand from $349
thousand a year ago. For the first six months of 1996, net other expenses
increased to $1.3 million from $688 thousand a year ago. The increases in
both periods is attributable to higher interest expense due to an increase
in interest-bearing debt from $76.4 million to $94.2 million, primarily
related to the acquisitions completed in the fourth quarter of 1995.
During the fourth quarter of 1995, the Company completed the purchase of a
35% interest in Loffler Kunststoffwerk GmbH & Co. KG ("Loffler"), a leading
manufacturer of closures in Germany. During the second quarter of 1996,
the Company sold 35% interests in the Company's other European dispensing
closure operations to Loffler for approximately $3.8 million. The gain on
the sale of the minority interests was not significant. The sale of the
minority interests further strategically aligns the two companies and
<PAGE>
<PAGE> 12
improves the Company's capability to serve the growing dispensing closure
needs of European and global customers.
The effective tax rate for the second quarter and six months ended June 30,
1996 was 37.0% and 37.4% compared to 36.4% and 37.0% for the same periods a
year ago. The rate differential is due to the mix of income earned by
country.
Net income for the second quarter decreased 11% to $8.8 million compared to
$9.9 million in the second quarter of 1995. Net income for the six months
ended June 30, 1996, was flat at $19.5 million compared to $19.6 million in
the same period a year ago.
Foreign Currency
A significant portion of AptarGroup=s operations are located outside the
United States. Because of this, movements in exchange rates may have a
significant impact on the translation of the financial condition and
results of operations of AptarGroup=s foreign entities. The Company, at
times, uses forward exchange contracts, primarily with banks, to hedge the
currency risk associated with future cash receipts or payments. In
general, since the majority of the Company=s operations are based in Europe
- - primarily France, Germany and Italy - a weakening U.S. dollar relative to
the major European currencies has an additive translation
effect on the Company=s financial condition and results of operations.
Conversely, a strengthening U.S. dollar would have a dilutive effect.
Certain AptarGroup sales are denominated in currencies which differ from
the production currency. Differences in the sales and production currency
can have a transactional impact on earnings. In general, when the
production currency strengthens relative to the sales currency, earnings
from export sales are negatively impacted. The net transactional impact of
exchange rate changes between the British pound, French franc, German mark,
Italian lira and U.S. dollar on sales and earnings was approximately $.5
million or $.03 per share during the second quarter of 1996. This
reduction in earnings was primarily due to the strengthening Italian lira
which reduced net earnings by approximately $1.2 million, but was partially
offset by a weakening French franc and German mark.
<PAGE>
<PAGE> 13
If exchange rates as of June 30, 1996 remain constant through the end of
the year, the Company does not expect exchange rates to have a material
translation and transactional impact on earnings for the remainder of 1996.
Quarterly Trends
AptarGroup=s results of operations in the second half of the year typically
are negatively impacted by European summer holidays and customer plant
shutdowns in December. In the future, AptarGroup=s results of operations
in a quarterly period could be impacted by factors such as changes in
product mix, changes in material costs, changes in growth rates in the
industries to which AptarGroup=s products are sold or changes in general
economic conditions in any of the countries in which AptarGroup does
business.
Liquidity and Capital Resources
Historically, AptarGroup has generated positive cash flow from operations
and has utilized the majority of such cash flows to invest in capital
projects. Net cash provided by operations in the first six months of 1996
was $29.1 million compared to $13.8 million in the same period a year ago.
The increase is primarily attributed to changes in working capital,
principally smaller increases in accounts receivables and inventories, as
compared to the same period a year ago. Total net working capital at June
30, 1996 was $122.6 million compared to $100.7 million at December 31,
1995.
Net cash used by investing activities decreased to $21.3 million from $25.1
million a year ago. Management anticipates that capital expenditures for
all of 1996 will total between $60 and $65 million.
Net cash used by financing activities was $2.9 million in the first six
months of 1996 compared to net cash provided by financing activities of
$4.0 million in 1995. The change is due primarily to a reduction in notes
payable. The ratio of interest-bearing debt to total capitalization was
23% at June 30, 1996 compared to 24% at December 31, 1995.
The majority of the Company=s debt has been and continues to be,
denominated in foreign currency. AptarGroup has historically borrowed<PAGE>
<PAGE> 14
locally to hedge potential currency fluctuations for assets that were
purchased outside of the U.S. It is expected that this practice will
continue.
The Company has a multi-year, unsecured revolving credit agreement allowing
borrowings of up to $25 million. Under this credit agreement, interest on
borrowings is payable at a rate equal to the London Interbank Offered Rate
(LIBOR) plus an amount based on the financial condition of the Company. At
June 30, 1996, the amount unused and available under this agreement was $25
million. The Company is required to pay a fee for the unused portion of
the commitment. The agreement expires on April 29, 2001. The credit
available under the revolving credit agreement provides management with the
ability to refinance certain short-term obligations on a long-term basis.
As it is management=s intent to do so, short-term obligations of $25
million have been reclassified as long-term obligations as of June 30, 1996
and December 31, 1995.
On October 10, 1995, the Company issued a private placement of $25 million
principal amount of 7.08% senior unsecured notes due in 2005.
The revolving credit agreement and the private placement agreement contain
covenants that include certain financial tests, including minimum interest
coverage, net worth and maximum borrowings.
On July 24, 1996, the Board of Directors declared a quarterly dividend of
$.07 per share payable on August 27, 1996 to shareholders of record as of
August 6, 1996.
<PAGE>
<Page 15>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 15, 1996. A vote was
taken by ballot for the election of three directors to hold office until
the 1999 Annual Meeting of Stockholders. The following nominees received
the number of votes as set forth below:
Broker
Nominee For Withhold Non-votes
- -------------- -------- -------- ---------
King Harris 14,690,558 337,822 13,000
Ervin J. LeCoque 14,690,558 337,822 13,000
Peter Pfeiffer 14,490,549 537,831 13,000
No votes were cast for any other nominee for director. The directors
continuing in office until the 1997 Annual Meeting of Stockholders are
Eugene L. Barnett, Ralph Gruska, and Leo A. Guthart. Director continuing
in office until the 1998 Annual Meeting are William W. Harris, Alfred Pilz,
and Carl A. Siebel.
A vote was taken by ballot for the proposals to approve (i) the 1996 Stock
Awards Plan and (ii) the 1996 Director Stock Option Plan. The following
votes were cast with respect to each proposal:
Broker
Proposal For Against Abstain Non-Votes
-------- --- ------- ------- ---------
Approve 1996 Stock
Awards Plan 12,420,045 1,296,949 68,150 254,216
Approve 1996
Director Stock
Option Plan 12,838,772 864,182 82,189 254,216
No other matters were submitted to a vote by ballot at the 1996 Annual
Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 is included with this report.
(b) No reports on Form 8-K were filed for the quarter ended
June 30, 1996.
<PAGE>
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AptarGroup, Inc.
(Registrant)
By /s/ Stephen J. Hagge
-----------------------
Stephen J. Hagge
Executive Vice President and Chief
Financial Officer, Secretary and
Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
Date: August 5, 1996
<PAGE>
<PAGE> 17
EXHIBIT INDEX
EXHIBIT
NO DESCRIPTION
- ------- -----------
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 21,698
<SECURITIES> 0
<RECEIVABLES> 125,414
<ALLOWANCES> (3,181)
<INVENTORY> 73,194
<CURRENT-ASSETS> 237,838
<PP&E> 489,252
<DEPRECIATION> (246,231)
<TOTAL-ASSETS> 566,608
<CURRENT-LIABILITIES> 115,235
<BONDS> 83,623
0
0
<COMMON> 179
<OTHER-SE> 320,807
<TOTAL-LIABILITY-AND-EQUITY> 566,608
<SALES> 304,001
<TOTAL-REVENUES> 304,001
<CGS> 196,573
<TOTAL-COSTS> 271,490
<OTHER-EXPENSES> 74,917
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,435)
<INCOME-PRETAX> 31,170
<INCOME-TAX> 11,670
<INCOME-CONTINUING> 19,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,500
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
</TABLE>
