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 MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ----to----
COMMISSION FILE NUMBER 1-11846
APTARGROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-3853103
(State of Incorporation) (I.R.S. Employer Identification No.)
475 WEST TERRA COTTA AVENUE, SUITE E, CRYSTAL LAKE, ILLINOIS 60014
(Address of Principal Executive Offices) (Zip Code)
815-477-0424
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (May 2, 1997)
Common Stock 17,959,863
----------
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APTARGROUP, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1997
INDEX
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income -
Three Months Ended March 31, 1997 and 1996 3
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
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APTARGROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1997 and 1996
(Dollars in Thousands, Except Per Share Data)
(UNAUDITED)
Three Months Ended
March 31,
1997 1996
---- ----
NET SALES ............................................ $ 158,290 $ 152,954
--------- ---------
OPERATING EXPENSES:
Cost of sales ...................................... 100,851 98,714
Selling, research & development and administrative . 25,552 25,012
Depreciation and amortization ...................... 12,519 11,489
--------- ---------
138,922 135,215
--------- ---------
OPERATING INCOME ..................................... 19,368 17,739
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense ................................... (1,464) (1,774)
Interest income .................................... 202 261
Equity in income of affiliates ..................... 182 350
Minority interests ................................. (80) (55)
Miscellaneous, net ................................. 275 638
--------- ---------
(885) (580)
--------- ---------
INCOME BEFORE INCOME TAXES ........................... 18,483 17,159
PROVISION FOR INCOME TAXES ........................... 7,070 6,486
--------- ---------
NET INCOME ........................................... $ 11,413 $ 10,673
========= =========
Net Income Per Common Share........................... $ .64 $ .60
========= =========
Average number of shares outstanding (in thousands).. 17,954 17,930
See accompanying notes to consolidated financial statements.
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APTARGROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
March 31, December 31,
1997 1996
---- ----
ASSETS
CURRENT ASSETS:
Cash and equivalents ............................... $ 19,272 $ 16,386
Accounts and notes receivable, less allowance for
doubtful accounts of $3,479 in 1997 and $3,623 in
1996 .............................................. 137,104 130,885
Inventories ........................................ 75,615 75,930
Prepayments and other .............................. 14,745 14,030
--------- ---------
246,736 237,231
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Buildings and improvements ......................... 72,906 75,971
Machinery and equipment ............................ 431,207 440,743
--------- ---------
504,113 516,714
Less: Accumulated depreciation ..................... (264,460) (265,780)
--------- ---------
239,653 250,934
Land ............................................... 4,112 4,395
--------- ---------
243,765 255,329
--------- ---------
OTHER ASSETS:
Investments in affiliates .......................... 14,654 14,970
Goodwill, less accumulated amortization of $5,333
in 1997 and $5,505 in 1996 ....................... 43,633 47,261
Miscellaneous ...................................... 20,098 21,345
--------- ---------
78,385 83,576
--------- ---------
TOTAL ASSETS ................................. $ 568,886 $ 576,136
========= =========
See accompanying notes to consolidated financial statements.
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APTARGROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
March 31, December 31,
1997 1996
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable ...................................... $ 12,291 $ 4,145
Current maturities of long-term obligations ........ 8,391 9,540
Accounts payable and accrued liabilities ........... 102,764 102,574
--------- ---------
123,446 116,259
--------- ---------
LONG-TERM OBLIGATIONS ................................ 73,904 76,569
--------- ---------
DEFERRED LIABILITIES AND OTHER:
Deferred income taxes .............................. 22,326 22,884
Retirement and deferred compensation plans ......... 12,424 12,952
Minority interests ................................. 4,402 4,381
Deferred and other non-current liabilities ......... 7,025 7,392
--------- ---------
46,177 47,609
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value ....................... 180 179
Capital in excess of par value ..................... 103,731 103,572
Retained earnings .................................. 243,542 233,385
Cumulative foreign currency translation adjustment . (22,094) (1,437)
--------- ---------
325,359 335,699
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $ 568,886 $ 576,136
========= =========
See accompanying notes to consolidated financial statements.
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APTARGROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands, brackets denote cash outflows)
(UNAUDITED)
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................... $ 11,413 $ 10,673
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation ..................................... 11,839 10,792
Amortization ..................................... 680 697
Provision for bad debts .......................... 125 93
Minority interests ............................... 80 55
Deferred income taxes ............................ (62) 2,203
Retirement and deferred compensation plans ....... 952 686
Equity in income of affiliates in excess of cash
distributions received .......................... (182) (350)
Changes in balance sheet items, excluding effects
from foreign currency adjustments:
Accounts receivable ............................ (14,689) (7,282)
Inventories .................................... (4,417) (2,310)
Prepaid and other current assets ............... (1,054) (3,295)
Accounts payable and accrued liabilities ....... 6,783 2,286
Other changes, net ............................. (510) (1,096)
-------- --------
NET CASH PROVIDED BY OPERATIONS ...................... 10,958 13,152
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................... (15,139) (10,832)
Disposition of property and equipment .............. 164 85
(Issuance)/collection of notes receivable, net ..... (68) 562
Investments in affiliates .......................... -- (12)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES ................ (15,043) (10,197)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in notes payable ............................ 10,436 (1,722)
Proceeds from long-term obligations ................ 42 1,635
Repayments of long-term obligations ................ (1,073) (1,497)
Dividends paid ..................................... (1,257) (1,254)
Proceeds from stock options exercised .............. 159 229
-------- --------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES ..... 8,307 (2,609)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .............. (1,336) (269)
-------- --------
NET INCREASE IN CASH AND EQUIVALENTS ................ 2,886 77
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD .......... 16,386 17,332
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD ................ $ 19,272 $ 17,409
======== ========
See accompanying notes to consolidated financial statements.
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APTARGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands, Except per Share Data)
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of AptarGroup, Inc. and its subsidiaries. The terms "AptarGroup"
or "Company" as used herein refer to AptarGroup, Inc. and its subsidiaries.
In the opinion of management, the unaudited consolidated financial
statements include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of financial position and
results of operations for the interim periods presented. The accompanying
unaudited consolidated financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosure normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures made are adequate to make the information presented not
misleading. Accordingly, these financial statements and related notes should
be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report to Shareholders incorporated by
reference into the Company's Annual Report on Form 10-K for the year ended
December 31, 1996. The results of operations of any interim period are not
necessarily indicative of the results that may be expected for a fiscal
year.
NOTE 2 - INVENTORIES
At March 31, 1997 and December 31, 1996, inventories, by component,
consisted of:
March 31, December 31,
1997 1996
-------- -----------
Raw materials ....................... $ 24,444 $ 25,150
Work in progress .................... 22,763 23,533
Finished goods ...................... 30,519 29,283
-------- --------
Total ............................. 77,726 77,966
Less LIFO reserve ................... (2,111) (2,036)
-------- --------
Total ............................. $ 75,615 $ 75,930
======== ========
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NOTE 3 - SUBSEQUENT EVENT
After the end of the first quarter of 1997, the Company received a favorable
judgment as plaintiff in a patent infringement lawsuit relating to an
aerosol valve component. The amount of the award is $7.8 million plus
interest in an amount to be determined. The decision could be subject to
appeal and the Company cannot predict the ultimate outcome or timing of such
appeal. This award is not included in the first quarter results.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the three months ended March 31, 1997 totaled $158.3 million,
an increase of 3% when compared to the three months ended March 31, 1996.
The translation of AptarGroup's foreign sales was negatively affected by the
stronger U.S. dollar relative to the same three month period in 1996. If the
dollar exchange rate had been constant, sales for the three months ended
March 31, 1997 would have increased approximately 10%. Sales increased to
each of the Company's primary markets - fragrance/cosmetics, personal care
and pharmaceutical. The increase in sales was primarily attributed to volume
increases. The Company continues to experience price competition in all of
its markets.
Sales to customers by European operations represented approximately 58% of
net sales for the quarter ended March 31, 1997, compared to 59% for the same
period a year ago. Sales to customers by U.S. operations represented 39% of
net sales for the quarter ended March 31, 1997 compared to 38% in the prior
year.
Cost of sales as a percent of net sales decreased to 63.7% in the first
quarter compared to 64.5% in the same period a year ago. Generally, the
decrease is attributed to the mix of products sold, cost savings and a net
gain from changes in exchange rates between the comparable quarters on
inter-country transactions.
Selling, research & development, and administrative expenses (SG&A) were
$25.6 million in the first quarter of 1997 compared to $25.0 million in the
prior year quarter. As a percent of total net sales, SG&A decreased to 16.1%
from 16.4% a year ago.
Operating income increased to $19.4 million in the first quarter of 1997
compared to $17.7 million a year ago. As a percentage of sales, operating
income increased to 12.2% in 1997 from 11.6% in 1996.
European operations represented 72% of operating income in the first quarter
of 1997, compared to 70% for the same period a year ago. U.S. operations
represented 39% of operating income in the first quarter of 1997, compared
to 38% in the first quarter of 1996. The difference between Europe and U.S.
operations to total operating income is due to operating income from other
foreign operations and corporate expenses.
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European operating income for the quarter increased due to increased sales
of pumps to the fragrance/cosmetics market, increased sales of pumps and
metered dose aerosol valves to the pharmaceutical market and a net gain from
differences in exchange rates between the periods on inter-country
transactions. The increase in U.S. operating income is due primarily to
increased sales of closures and pumps to the personal care market.
The effective tax rate for the three months ended March 31, 1997 was 38.3%
compared to 37.8% for the same period a year ago. The increased effective
rate is due to a change in the mix of countries where income was earned.
Net income for the first quarter increased 7% to $11.4 million compared to
$10.7 million in the first quarter of 1997. The increase in net income is
due primarily to higher sales volume. The adverse effect of the stronger
dollar on the translation of foreign denominated results was offset by a net
gain from differences in exchange rates between the comparable periods on
various inter-country transactions.
FOREIGN CURRENCY
A significant portion of AptarGroup's operations are located outside the
United States. Because of this, movements in exchange rates may have a
significant impact on the translation of the financial condition and results
of operations of AptarGroup's foreign entities. In general, since the
majority of the Company's operations are based in Europe, primarily France,
Germany and Italy, a strengthening U.S. dollar relative to the major
European currencies has a dilutive translation effect on the Company's
financial condition and results of operations. Conversely, a weakening U.S.
dollar would have an additive effect.
Additionally, in some cases, the Company sells products denominated in a
currency different from the currency in which the respective costs are
incurred. Changes in exchange rates on such inter-country sales impacts the
Company's results of operations.
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 three months of 1997
was $11.0 million compared to $13.2 million in the same period a year ago.
The decrease is primarily attributed to changes in working capital,
principally an increase in accounts receivable as compared to the same period
a year ago. Total net working capital at March 31, 1997 was $123.3 million
compared to $121.0 million at December 31, 1996.
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Net cash used by investing activities increased to $15.0 million from $10.2
million a year ago. Management anticipates that capital expenditures for all
of 1997 will total between $65 and $70 million.
Net cash provided by financing activities was $8.3 million in 1997 compared
to net cash used by financing activities of $2.6 million in 1996. The change
is due primarily to an increase in notes payable. The ratio of
interest-bearing debt to total capitalization was 23% at March 31, 1997
compared to 21% at December 31, 1996.
The majority of the Company's debt has been and continues to be, denominated
in foreign currency. AptarGroup has historically borrowed locally to hedge
potential currency fluctuations for assets that were purchased outside of
the U.S. It is expected that this practice will continue.
The Company has a multi-year, unsecured revolving credit agreement allowing
borrowings of up to $25 million. Under this credit agreement, interest on
borrowings is payable at a rate equal to the London Interbank Offered Rate
(LIBOR) plus an amount based on the financial condition of the Company. At
March 31, 1997, the amount unused and available under this agreement was $25
million. The Company is required to pay a fee for the unused portion of the
commitment. The agreement expires on April 29, 2001. The credit available
under the revolving credit agreement provides management with the ability to
refinance certain short-term obligations on a long-term basis. As it is
management's intent to do so, short-term obligations of $25 million have
been reclassified as long-term obligations as of March 31, 1997 and December
31, 1996.
On April 24, 1997, the Board of Directors declared a quarterly dividend of
$.07 per share payable on May 28, 1997 to shareholders of record as of May
7, 1997.
ADOPTION OF NEW ACCOUNTING STANDARDS
Effective for periods ending after December 15, 1997, the Company is
required to adopt SFAS 128 (Statement of Financial Accounting Standards No.
128, "Earnings Per Share"). SFAS 128 requires companies to calculate basic
and diluted earnings per share based upon standards designed to provide
consistency and compatibility with calculations of other countries and with
that of the International Accounting Standards Committee. The Company does
not expect earnings per share as reported to be materially different than
basic or diluted earnings per share to be reported upon adoption of the new
accounting standard.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 is included with this report.
(b) No reports on Form 8-K were filed for the quarter ended
March 31, 1997.
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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: May 7, 1997
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