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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
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, 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)
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 20, 1997, was approximately $587,478,000. The number of shares outstanding
of Common Stock, as of March 20, 1997 was 17,957,039 shares held by
approximately 1,000 shareholders of record.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1996 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 14, 1997 are incorporated by reference into Part
III of this report.
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APTARGROUP, INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1996
PART I
PAGE
Item 1 Business 3
Item 2 Properties 10
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of
Security-Holders 10
PART II
Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters 11
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis
of Consolidated Results of Operations
and Financial Condition 11
Item 8 Financial Statements and Supplementary
Data 11
Item 9 Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure 11
PART III
Item 10 Directors and Executive Officers
of the Registrant 11
Item 11 Executive Compensation 12
Item 12 Security Ownership of Certain
Beneficial Owners and Management 12
Item 13 Certain Relationships and Related
Transactions 12
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on Form 8-K 13
Signatures 14
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PART I
Item 1. Business
(a) General Development of Business
AptarGroup, Inc. became an independent publicly-owned corporation in April, 1993
as a result of a spin-off from Pittway Corporation ("Pittway"). The terms
"AptarGroup" or "Company" as used herein refer to AptarGroup, Inc. and its
subsidiaries or the former Seaquist Group as appropriate in the circumstance.
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 business was started in the late 1940's through its SeaquistPerfect
Dispensing division which manufactured and sold aerosol valves in the United
States. In 1964, this business was acquired by Pittway. The Company's business
has grown primarily through the acquisition of relatively small companies and
internal expansion.
Start-up/
Date Business Country Acquisition Initial Product Line
- - ---- ---------------------- ------- ----------- --------------------
1968 SeaquistPerfect
Dispensing GmbH Germany Acquisition Aerosol valves
(formerly Perfect
Valois Ventil GmbH)
1970 Valois S.A. France Acquisition Aerosol valves
1976 Seaquist Closures U.S. Start-up Closures
1976 35% of certain Pfeiffer Germany Acquisition Pumps
Group companies
1981 AR Valve product line U.S. Acquisition Aerosol valves
1981 RDW Industries, Inc. U.S. Acquisition Closures
1983 STEP S.A. France Acquisition Pumps
1989 SAR S.p.A. Italy Acquisition Pumps
1993 Remainder of the
Pfeiffer Group Germany Acquisition Pumps
1995 Liquid Molding U.S. Acquisition Silicone Molded
Systems, Inc. ("LMS") Products
1995 35% of Loffler Germany Acquisition Closures
Kunststoffwerk GmbH
& Co. KG
1995 General Plastics, S.A. France Acquisition Closures
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in the packaging components industry. Financial
information relating to operations by geographic area for each of the three
years in the period ended December 31, 1996, is set forth in Note 15 ("Segment
Information") to the Consolidated Financial Statements contained in the 1996
Annual Report to Stockholders, page 32, which is incorporated herein by
reference.
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(c) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The Company designs, manufactures and sells consumer product dispensing
systems. The Company focuses on providing value-added components to global
consumer product marketers in the fragrance/cosmetics, personal care,
pharmaceutical, household products and food industries. Value-added packaging
allows consumers to conveniently dispense a product, in an aesthetic looking
package, which consistently meets basic dosage characteristics as required. The
Company believes it is the largest supplier of dispensing closures, aerosol
valves, personal care fine mist pumps and pharmaceutical pumps in North America
and the largest supplier of fragrance fine mist pumps and pharmaceutical pumps
in Europe. The Company has manufacturing facilities primarily located in North
America and Europe which serve over 1,000 customers. The Company began
production of aerosol valves in China in early 1997. No single customer
accounted for greater than 10% of the Company's 1996 net sales.
PUMPS
Pumps are finger-actuated dispensing systems which disperse a spray or
lotion from non-pressurized containers. Pumps are principally sold to four
markets: fragrance/cosmetics, pharmaceutical, personal care and household
products. Examples of pump applications in these markets include perfume, skin
creams, oral and nasal sprays, hair spray and window cleaners. The style of pump
used depends largely on the nature of the product being dispensed, from smaller,
fine mist pumps used with perfume products to high-output trigger pumps used
with household cleaner products.
AptarGroup believes it is the leading supplier of pharmaceutical pumps to
the world, fragrance/cosmetic pumps to Europe and personal care pumps to North
America. An element of the Company's growth strategy is the geographic expansion
of pump operations. In 1996, over 90% of the Company's pumps sold were
manufactured in Europe. Adding to the Company's personal care pump manufacturing
capabilities in the U.S., the Company began assembling fragrance/cosmetics pumps
in the United States in early 1995. The Company has sales offices in Japan and
is pursuing production opportunities in China to enhance its position in the
Asian markets. In 1996, pump sales accounted for approximately 63% of
AptarGroup's net sales.
FRAGRANCE/COSMETICS
The Company believes it is the leading supplier of pumps to the
fragrance/cosmetics market in Europe. Pumps are manufactured to meet exacting
size and performance requirements. Significant research, time and coordination
with the customers' development staff is required to qualify a pump for use with
their products. Recently, the Company developed several new pumps for the
fragrance/cosmetics market. An example is a pump that permanently affixes to a
bottle without the need for crimping, enabling customers to assemble their
finished product more easily, efficiently and economically. Another example is a
tubeless pump. The conventional tube, the device that takes the product up from
the bottom of the container when the button on top is pushed down, was removed.
In its place, a reservoir was substituted.
Within the market, the Company expects the use of pumps to continue to
increase, particularly in the cosmetics 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.
PHARMACEUTICAL
The Company considers itself to be the leading supplier of pumps to the
pharmaceutical industry worldwide. AptarGroup has clean room manufacturing
facilities in France, Germany and Switzerland which produce pumps in a
contaminant-controlled environment. The Company believes the use of pumps in the
dispensing of pharmaceuticals will continue to increase. Demand is increasing
for the Company's pumps which provide consistent doses of particular drugs. The
Company's extensive experience with pharmaceutical pumps position it to supply
other industries, including cosmetics, for such applications as anti-aging
lotions.
PERSONAL CARE
The Company believes it is the largest supplier of personal care fine mist
pumps in North America. Sales of fine mist pumps to this market have increased
significantly over the last several years. The Company has been a supplier of
lotion pumps to the personal care market primarily in Europe and plans to expand
sales of lotion pumps to the personal care market in North America.
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OTHER
The Company has not focused on the household pump market. Household
products primarily utilize trigger or other high output pumps, for such
applications as bathroom cleaners, window sprays, and general household
cleaners. The Company manufactures high output pumps for the household market;
however, it currently does not manufacture a trigger pump. Pumps have not been
extensively used in the food industry.
CLOSURES
Dispensing closures are plastic caps, primarily for squeezable containers,
which allow a product to be dispensed without removing the cap. Although the
Company sells dispensing closures to all markets, the majority of the Company's
sales have been primarily to the personal care market. The Company believes that
it is the largest manufacturer of dispensing closures in North America.
Sales of dispensing closures have grown over the past 10 years as consumers
worldwide have demonstrated a preference for a package utilizing the convenience
of a dispensing closure. As a result of this trend, consumer marketers are
continually evaluating opportunities to convert non-dispensing closures to
dispensing closures in order to differentiate their products and make them more
appealing to customers. An example of this is the conversion of shampoo packages
from twist-off caps to dispensing closures. Similar conversions have occurred
with toothpaste, ketchup and skin care products. The Company believes future
growth opportunities exist for converting other products to dispensing closures.
The Company's growth strategy for the dispensing closure business is to
gain greater market share in the European, South American and Asian markets, to
develop new innovative products and to adapt existing products for new markets.
In 1996, approximately 79% of the Company's dispensing closures sold were
manufactured in North America with the remainder primarily manufactured in
Europe. In 1996, dispensing closure sales accounted for approximately 18% of
AptarGroup's net sales.
PERSONAL CARE
Historically, the Company's primary focus for dispensing closures has been
the personal care industry. Products with dispensing closures include shampoos,
skin lotions, conditioners and toothpaste. In order to expand its business in
this market, the Company has focused on the development of new products
including SimpliSqueeze(R) , a no-leak, invertible closure with one-hand
dispensing convenience. SimpliSqueeze(R) features a silicone valve that enables
the product to be dispensed with a slight squeeze of the bottle, and upon
release, closes firmly and does not leak. Consumer awareness of the innovative
SimpliSqueeze(R) closure is expected to grow as a result of its current use with
hair care, shower gel and moisturizing lotion products and other expected
customer applications.
HOUSEHOLD
The Company has not had significant dispensing closure sales to the
household market. The Company believes this market offers an opportunity for
expansion. The Company is building stronger relationships with the consumer
product marketers operating in the household market. The Company adapts existing
products to target this market. For example, the Directional Pour Spout(TM)
incorporates an elongated spout that enables the consumer to pinpoint the
dispensing of the product in exactly the desired direction.
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FOOD
In the food market, the Company believes opportunities for future
applications exist comparable to the conversion of ketchup packaging to a
dispensing closure. The trend of food manufacturers to offer products in a
squeezable dispensing package has increased, for example, in mayonnaise, jellies
and salad dressing products. An increase in the conversion of packaging for food
products, such as edible oils, to squeezable dispensing closures could provide
growth opportunities for the Company. The Company's Directional Pour Spout(TM)
can also be used with food products.
OTHER
Sales of dispensing closures to the pharmaceutical market has not been
significant. The Company is developing products for this market.
AEROSOL VALVES
Aerosol valves are mechanisms which dispense product from pressurized
containers. The Company sells two different types of aerosol valves. The first
type is a continuous spray valve frequently used with hair spray, spray paint,
insecticide, automotive products and laundry products. The second type of valve
is a metered aerosol valve used to dispense precise amounts of product. This
valve is primarily sold to the pharmaceutical market for lung and heart
medications.
Over the past 25 years, the number of aerosol valve companies in North
America has decreased significantly. The majority of the North American market
is concentrated in three companies. AptarGroup believes it is the largest
aerosol valve manufacturer in North America. The Company's aerosol valves have
historically been targeted primarily to the personal care and household markets.
In 1996, approximately 58% of the Company's aerosol valves sold were
manufactured in North America. with the remaining having been manufactured
primarily in Europe. In 1996, aerosol valve sales accounted for approximately
17% of AptarGroup's net sales.
PERSONAL CARE
The primary applications in the personal care market include hair products,
deodorants and shaving creams. 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.
HOUSEHOLD
The primary applications for valves in the household market include
disinfectants, spray paints, insecticides, automotive products and laundry
sprays. The Company sells several customized overcaps that allow product to be
dispensed by actuating a valve situated in the cap on the can. These overcaps
are used, for instance, in household disinfectant sprays and room fresheners.
They provide a higher degree of differentiation and convenience relative to
competing sprays since the cap does not need to be removed prior to usage.
PHARMACEUTICAL
Metered dose aerosol valves are primarily used for the dispensing of
medication for the lungs or heart. Aerosol technology allows medication to be
broken up into very fine particles, which enables the drug to be delivered to
the lungs or heart with greater efficiency than pills or injections.
OTHER
Aerosol valves are not widely used in the food industry. In the
fragrance/cosmetics industry, aerosol valves have been largely replaced by pumps
as the preferred dispensing mechanism.
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RESEARCH AND DEVELOPMENT
The Company is continuously involved in developing innovative products and
adapting existing products for new markets. Expenditures for research and
development activities were $20.1 million, $17.5 million, and $15.3 million in
1996, 1995 and 1994, respectively. These costs were associated with a number of
products in varying stages of development.
PATENTS AND TRADEMARKS
AptarGroup will continue to sell its products under the names used by its
operating units and is not currently offering any products under the AptarGroup
name. The names used by its operating 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. The
majority of AptarGroup's net sales are generated by products which have patent
protection on either the product or a component of the product. 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 produce in a
high-speed, cost-efficient manner. The acquisitions of LMS and General Plastics
added significant new molding technologies. LMS's experience in liquid silicone
rubber molding allows the Company to pursue opportunities to use silicone
molding in other product lines. The Company plans to use the bi-injection
molding technology used by General Plastics to develop new innovative products
for the packaging industry.
MANUFACTURING AND SOURCING
In 1996, approximately 96% of AptarGroup's finished products were
manufactured or assembled at facilities owned or leased by AptarGroup. The
balance was manufactured by subcontractors using plastic injection molds owned
by AptarGroup. These subcontractors are primarily located in North America. 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 alternate sources. The Company
attempts to offset inflation through cost containment and increased 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 in North America and Europe. 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.
Significant delays in receiving components from these suppliers would require
AptarGroup to seek alternate sources, which could result in higher costs as well
as impact the ability of the Company to supply products in the short term. The
Company has not experienced such delays in the past.
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. Backlogs are not a significant
factor in the industry in which the Company operates. Most orders placed with
the Company are for delivery within 120 days. Some customers place blanket
orders which extend beyond this delivery period; however, deliveries against
these orders are subject to change.
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/cosmetics, personal care, pharmaceutical,
household products and food marketers in the U.S. and Europe. The Company has
over 1,000 customers with no single customer accounting for greater than 10% of
1996 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 and its international presence.
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INTERNATIONAL BUSINESS
A significant portion of AptarGroup's operations is located in Europe.
Sales in Europe for the years ended December 31, 1996, 1995 and 1994 were
approximately 58%, 60%, and 59%, respectively, of net sales. The majority of
units sold in Europe are manufactured at facilities in France, Germany, Ireland,
Italy, Spain and Switzerland. Other foreign geographic areas serviced by
AptarGroup include Australia, Brazil, Canada, England, Japan, and Mexico, though
the combined sales from these areas is not significant to AptarGroup's
consolidated sales. During 1996, the Company established a manufacturing
facility in China that began producing aerosol valves in early 1997. Production
of dispensing closures and pumps are planned to be added at this facility later
in 1997.
FOREIGN CURRENCY
A significant portion of AptarGroup's operations is located outside of the
United States. Because of this, movements in exchange rates may have a
significant impact on the translation of financial position and results of
operations of AptarGroup's foreign entities. In general, since the majority of
the Company's operations are based in Europe, a weakening U.S. dollar relative
to the major European currencies has a positive translation effect on the
Company's financial condition and results of operations. Conversely, a
strengthening U.S. dollar would have the opposite effect. AptarGroup has
historically borrowed locally to hedge potential currency fluctuations for
assets that were purchased outside of the United States.
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. The Company, at times, uses forward exchange contracts, primarily
with banks, to hedge the currency risk associated with future cash receipts or
payments.
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 customs.
Historically, the Company has not needed to keep significant amounts of finished
goods inventory to meet customer requirements.
EMPLOYEE AND LABOR RELATIONS
AptarGroup has approximately 3,900 full-time employees. Of the full-time
employees, approximately 1,100 are located in North America and substantially
all of the remaining 2,800 are located in Europe. No North American employee is
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 government 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, the majority
being privately-held. AptarGroup's competitors range from regional to
international companies. AptarGroup expects the market for its products to
continue to be competitive.
AptarGroup believes its competitive advantages are consistent high levels
of quality, service and innovation, geographic diversity and breadth of
products. The Company's manufacturing strengths lie 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. Historically, the environmental impact
of these processes has been minimal, and management believes it meets current
environmental standards in all material respects.
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GOVERNMENT REGULATION
To date, the manufacturing and assembly operations of AptarGroup have not
been significantly affected by environmental laws and regulations relating to
the environment.
Certain AptarGroup products are 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 VOC's
(volatile organic compounds) into the atmosphere. Certain states within the
United States have regulations requiring 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, including Europe. These
regulations require the Company's customers to reformulate certain aerosol and
pump products which may affect the demand for such products. The Company owns
patents and has developed systems to function with alternate 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 be
adversely impacted by insurance cost considerations relating to the storage of
aerosol products.
Government regulation in the dispensing closure product line primarily
relates to waste reduction. The Company's dispensing closures are plastic and
mainly consist of polypropylene, a recyclable plastic. The Company also uses
recycled plastic in its manufacturing process.
Future government regulations could include medical cost containment
elements. 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 recent focus on the cost effectiveness 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 decisions impact the Company's customers and could affect the
Company's investment in products for the pharmaceutical market.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Financial information concerning foreign and domestic operations and export
sales is set forth in Note 15 ("Segment Information") to the Consolidated
Financial Statements contained in the 1996 Annual Report to Stockholders, page
32, which is incorporated herein by reference.
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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 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
Caen Bohringen Suzhou
Le Neubourg Dortmund
Le Vaudreuil Eigeltingen
Meaux
Verneuil Sur Avre
ITALY NORTH AMERICA
San Giovanni Teatino (Chieti) Cary, Illinois, USA
Midland, Michigan, USA
Mukwonago, Wisconsin, USA
Norwalk, Connecticut, USA
Queretaro, Mexico
In addition to the above countries, the Company has sales offices or other
manufacturing facilities in Australia, Brazil, Canada, China, England, Ireland,
Japan, Mexico, Spain, and Switzerland. The Company's corporate offices are
located in Crystal Lake, Illinois.
Item 3. LEGAL PROCEEDINGS
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.
Historically, product liability claims for all products of the Company have
been minimal. However, with the expected increase in pump and aerosol valve
applications for pharmaceutical products, product liability claims may increase.
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.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth in Note 16 "Quarterly Data (Unaudited)" to the
Consolidated Financial Statements contained in the Company's 1996 Annual Report
to Stockholders, page 33, is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information set forth under the heading "Five Year Summary of Selected
Financial Data" appearing on page 35 of the Company's 1996 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 of Consolidated Results of Operations and Financial Condition"
appearing on pages 36-39 of the Company's 1996 Annual Report to Stockholders is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth under the headings "Consolidated Statements of
Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows,"
"Consolidated Statements of Stockholders' Equity," "Notes to Consolidated
Financial Statements" and "Report of Independent Accountants" appearing on pages
18-34 of the Company's 1996 Annual Report to Stockholders is incorporated herein
by reference.
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 24, 1997.
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 14, 1997, is incorporated herein by reference.
In addition to Messrs. Carl A. Siebel and Peter Pfeiffer, 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 50, Executive Vice President of SeaquistPerfect
Dispensing division since 1996 and Geschaftsfuhrer (i.e., Managing Director) of
SeaquistPerfect Dispensing GmbH since 1986. In 1996, Perfect-Valois Ventil GmbH
changed its name to SeaquistPerfect Dispensing GmbH.
Francois Boutan, age 54, Financial Director and Controller of the European
operations of AptarGroup. Mr. Boutan has served in this capacity since 1988.
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Pierre Cheru, age 63, Directeur General of Valois S.A. Mr. Cheru has
served in this capacity since 1978.
Stephen J. Hagge, age 45, Executive Vice President and Chief Financial
Officer, Secretary and Treasurer of AptarGroup since 1993. From 1985 to 1993 Mr.
Hagge was the Vice President of Finance of the Seaquist Group.
Lawrence Lowrimore, age 52, Vice President-Human Resources of AptarGroup
since 1993. From 1990 to 1993, Mr. Lowrimore was the Vice President of Human
Resources of the Seaquist Group.
Francesco Mascitelli, age 46, Direttore Generale of SAR S.p.A., an Italian
subsidiary. Mr. Mascitelli has served in this capacity since 1991.
James R. Reed, age 60, President of the SeaquistPerfect Dispensing
division. Mr. Reed was President of the Seaquist Valve division since 1987. In
1993, Seaquist Valve changed its name to Seaquist Dispensing and in 1996 to
SeaquistPerfect Dispensing.
Eric S. Ruskoski, age 49, President of the Seaquist Closures division. Mr.
Ruskoski has served in this capacity since 1987.
Hans-Josef Schutz, age 52, Geschaftsfuhrer of the Pfeiffer Group. Mr.
Schutz has served in this capacity since May of 1993. From 1983 through April of
1993, Mr. Schutz was the Vice President of the Pfeiffer Group.
Alain Vichot, age 63, Directeur General Adjoint of Valois S.A since 1994.
From 1987 to 1994, Mr. Vichot was Directeur General of STEP S.A.
Item 11. EXECUTIVE COMPENSATION
The information set forth under the headings "Compensation Committee
Interlocks and Insider Participation," "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 14, 1997, 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 14, 1997, 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 14, 1997, is incorporated herein by reference.
<PAGE>
Page 13
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 Statements
of Income Annual Report, page 18
Consolidated Balance Sheets Annual Report, page 19
Consolidated Statements of Cash Flows Annual Report, page 20
Consolidated Statements of Stockholders'
Equity Annual Report, page 21
Notes to Consolidated Financial Statements Annual Report, page 22
Report of Independent Accountants Annual Report, page 34
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 18-19 of this report.
(b)Reports on Form 8-K during the quarter ended December 31, 1996:
No reports on Form 8-K were filed during the quarter ended December 31,
1996.
<PAGE>
Page 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 on this day 21st of March
1997.
APTARGROUP, INC.
----------------
(Registrant)
By /s/Stephen J. Hagge
-------------------
Executive Vice President and Chief
Financial Officer, Secretary and Treasurer
(Principal Accounting and Financial Officer)
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.
NAME TITLE DATE
- - ---- ----- ----
/s/ King Harris Chairman of the Board and Director March 21, 1997
King Harris
/s/ Carl Siebel President and Chief Executive Officer and
Carl Siebel Director (Principal Executive Officer) March 21, 1997
/s/ Peter Pfeiffer Vice Chairman of the Board and Director March 21, 1997
Peter Pfeiffer
/s/ Stephen H. Hagge Executive Vice President and Chief
Stephen J. Hagge Financial Officer, Secretary and
Treasurer March 21, 1997
<PAGE>
Page 15
NAME TITLE DATE
/s/ Eugene L. Barnett Director March 21, 1997
Eugene L. Barnett
/s/ Ralph Gruska Director March 21, 1997
Ralph Gruska
/s/ Leo A. Guthart Director March 21, 1997
Leo A. Guthart
/s/ William Harris Director March 21, 1997
William Harris
/s/ Ervin J. LeCoque Director March 21, 1997
Ervin J. LeCoque
/s/ Alfred Pilz Director March 21, 1997
Alfred Pilz
<PAGE>
Page 16
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of AptarGroup, Inc.
Our audits of the consolidated financial statements referred
to in our report dated February 20, 1997, appearing on page 34 of
the 1996 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/ Price Waterhouse LLP
------------------------
PRICE WATERHOUSE LLP
Chicago, Illinois
February 20, 1997
<PAGE>
Page 17
AptarGroup, Inc.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
Balance at Charged to Deductions Balance
beginning costs and from at end
of period expenses Acquisition reserve (a) of period
--------- -------- ----------- ----------- ---------
<CAPTION>
<S> <C> <C> <C> <C> <C>
1996
Allowance for doubtful
accounts $3,296 $1,148 $ -- $ 821 $3,623
1995
Allowance for doubtful
accounts $1,697 $1,580 $ 76 $ 57 $3,296
1994
Allowance for doubtful
accounts $1,719 $ 977 $ -- $ 999 $1,697
</TABLE>
(a) Write-off of accounts considered uncollectible, net of recoveries.
Includes valuation accounts of divested companies and foreign currency
translation adjustments, net.
<PAGE>
Page 18
INDEX TO EXHIBITS
Sequential
Number and Description of Exhibit Page Number***
3(i) Amended and Restated Certificate of Incorporation of the Company, filed
as Exhibit 6.1 to the Company's Registration Statement on Form 8-A
filed under the Exchange Act on April 5, 1993 (File No. 1-11846), is
hereby incorporated by reference.
3(ii) Amended and Restated By-Laws of the Company.
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 (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 Exchange Act 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.
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, 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 Company's
Registration Statement on Form S-1, Registration Number 33-58132, filed
on February 10, 1993, is hereby incorporated by reference.**
10.3 Agreement of Employment dated as of March 28, 1990 of Ervin J. LeCoque,
filed as Exhibit 10.3 to the Company's Registration Statement on Form
S-1, Registration Number 33-58132, filed on February 10, 1993, is
hereby incorporated by reference.**
10.4 Managing Director Employment Agreement dated January 2, 1981 of Mr.
Peter Pfeiffer, filed as Exhibit 10.4 to the Company's Registration
Statement on Form S-1, Registration Number 33-58132, filed on February
10, 1993, is hereby incorporated by reference.**
10.5 Service Agreement dated April 30, 1981, of Carl A. Siebel, and related
pension plan, filed as Exhibit 10.5 to the Company's Registration
Statement on Form S-1, Registration Number 33-58132, filed on February
10, 1993, is hereby incorporated by reference.**
10.6 Service agreement dated April 22, 1993, between AptarGroup, Inc. and
Peter Pfeiffer, and related pension plan, filed as Exhibit 10.6 of the
Company s Annual Report on Form 10-K for the year ended December 31,
1993 (File No. 1-11846), is hereby incorporated by reference.**
10.7 First supplement dated 1989 pertaining to the pension plan between
Perfect-Valois Ventil GmbH and Carl A. Siebel, filed as Exhibit 10.7 of
the Company s Annual Report on Form 10-K for the year ended December
31, 1993 (File No. 1-11846), is hereby incorporated by reference.**
10.8 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 of the Company s Annual Report on Form 10-K for the year
ended December 31, 1993 (File No. 1-11846), is hereby incorporated by
reference.**
10.9 Assignment, Assumption and Release as of April 22, 1993, among Pittway
Corporation, AptarGroup, Inc., and Ervin J. LeCoque, filed as Exhibit
10.9 of the Company s Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-11846), is hereby incorporated by
reference.**
10.10 Assignment, Assumption and Release as of April 22, 1993, among Pittway
Corporation, AptarGroup, Inc., and Carl A. Siebel, filed as Exhibit
10.10 the Company s Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-11846), is hereby incorporated by
reference.**
10.11 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.**
<PAGE>
Page 19
10.12 Managing Director Employment Agreement dated November 15, 1993 of
Hans-Josef Schutz, and related pension plan dated October 20, 1989,
filed as Exhibit 10.12 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.**
10.13 Amendment to Agreement of Employment dated November 20, 1995 of Ervin
J. LeCoque, filed as Exhibit 10.13 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.**
10.14 Executive 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.**
10.15 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.**
10.16 AptarGroup, Inc. 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.**
10.17* Employment Agreement dated March 6, 1996 of Eric S. Ruskoski.**
13* 1996 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.
27* Financial Data Schedule
* Filed herewith.
** Management contract or compensatory plan or arrangement.
*** This information appears only in the manually signed original of this
Form 10-K.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT between AptarGroup, Inc., a Delaware
corporation (the "Company"), and Eric S. Ruskoski (the "Executive") is entered
into on February 1, 1996. In consideration of the covenants contained herein,
the parties agree as follows:
1. Employment. The Company shall employ the Executive, and the
Executive agrees to be employed by the Company, upon the terms and subject to
the conditions set forth herein for the period beginning on February 1, 1996 and
ending on February 1, 1999, unless earlier terminated pursuant to Section 4
hereof; provided, however, that such term shall automatically be extended as of
each February 1, commencing February 1, 1997, for one additional year unless
either the Company or the Executive shall have terminated this automatic
extension provision by written notice to the other party at least 30 days prior
to the automatic extension date; and provided further that in no event shall
such term extend beyond September 12, 2012. The term of employment in effect
from time to time hereunder is hereinafter called the "Employment Period."
2. Position and Duties. During the Employment Period, the Executive
shall serve as the President of the Closures Division or in such other executive
position as determined by the Chief Executive Officer of the Company (the
"Company CEO") and shall have the normal duties, responsibilities and authority
of an executive serving in such position, subject to the direction of the Chief
Executive Officer of the Company (the "Company CEO"). The Executive shall have
the title of President of the Division or such other title denoting an executive
office as determined by the Company CEO and shall report to the Company CEO or
such other executive officer of the Company as determined by the Company CEO.
During the Employment Period, the Executive shall devote his best efforts and
his full business time to the business and affairs of the Company.
3. Compensation and Benefits. (a) The Company shall pay the Executive a
salary during the Employment Period, in monthly installments, initially at the
rate of $210,000.00 per annum. The Company CEO may, in his sole discretion (i)
increase (but not decrease) such salary from time to time and (ii) award a bonus
to the Executive for any calendar year during the Employment Period.
(b) The Company shall reimburse the Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time.
(c) During the Employment Period, the Executive shall be entitled to
participate in the Company's executive benefit programs on the same basis as
other executives of the Company having the same level of responsibility, which
programs consist of those benefits (including insurance, vacation, company car
or car allowance and/or other benefits) for which substantially all of the
executives of the Company are from time to time generally eligible, as
determined from time to time by the Board.
(d) In addition to participation in the Company's executive benefit
programs pursuant to Sec.3(c), the Executive shall be entitled during the
Employment Period to:
(i) additional term life insurance coverage in an amount equal to
the Executive's salary; but only if and so long as such
additional coverage is available at standard rates from the
insurer providing term life insurance coverage under the
Executive benefit programs or a comparable insurer acceptable
to the Company (If the Executive is not participating in term
life insurance coverage under the Executive benefit programs
and if such additional coverage would be available at standard
rates from such insurer if the Executive were so
participating, the Executive shall instead be entitled to an
amount each calendar year, payable monthly, equal to the
amount the Company would have been required to pay for such
additional coverage for such year); or if the executive is not
participating in the additional life insurance coverage and if
the Employment Period ends on account of the Executive's
death, the Company shall pay to the Executive's estate (or
such person or persons as the Executive may designate in a
written instrument signed by him and delivered to the Company
prior to his death), amounts equal to one-half of the amounts
the Executive would have received as salary (based on the
Executive's salary then in effect) had the Employment Period
remained in effect until the second anniversary of the date of
the Executive's death, at the times such amounts would have
been paid.
(ii) supplementary long-term disability coverage in an amount which
will increase maximum covered annual compensation to $330,000
and maximum monthly payments to $18,333; but only if and so
long as such supplementary coverage is available at standard
rates from the insurer providing long-term disability coverage
under the Executive benefit program or a comparable insurer
acceptable to the Company.
4. Termination of Employment. (a) The Employment period shall end upon
the first to occur of: (i) the expiration of the term of this Agreement pursuant
to Section 1 hereof, (ii) retirement of the Executive at age 65 ("Retirement"),
(iii) termination of the Executive's employment by the Company on account of the
Executive's having become unable (as determined by the Board in good faith) to
regularly perform his duties hereunder by reason of illness or incapacity for a
period of more than six consecutive months ("Termination for Disability"), (iv)
termination of the Executive's employment by the Company for Cause ("Termination
for Cause"), (v) termination of the executive's employment by the Company other
than a Termination for Disability or a Termination for (Cause ("Termination
Without Cause"), (vi) the Executive's death or (vii) termination of the
Executive's employment by the Executive for any reason following written notice
to the Company at least 90 days prior to the date of such termination
("Termination by the Executive").
(b) For purposes of the Agreement, "Cause" shall mean (i) the
commission of a felony involving moral turpitude, (ii) the commission of a
fraud, (iii) the commission of any act involving dishonesty with respect to the
Company or any of its subsidiaries or affiliates, (iv) gross negligence or
willful misconduct with respect to the Company or any of its subsidiaries or
affiliates, (v) breach of any provision of Section 5 or Section 6 hereof or (vi)
any other breach of this Agreement which is material and which is not cured
within 30 days following written notice thereof to the Executive by the Company.
(c) If the Employment Period ends for any reason set forth in Section
4(a), except as otherwise provided in this Section 4, the Executive shall cease
to have any rights to salary, bonus (if any) or benefits hereunder, other than
(i) any unpaid salary accrued through the date of such termination, (ii) any
bonus payable, but only if such termination occurs during the third or fourth
quarter of the Company's fiscal year, such bonus to be prorated in accordance
with Company policy, (iii) any unpaid expenses which shall have been incurred as
of the date of such termination and (iv) to the extent provided in any benefit
plan in which the Executive has participated, any plan benefits which by their
terms extend beyond termination of the Executive's employment. Notwithstanding
the foregoing, if the Employment Period ends on account of Termination by the
Executive or Termination for Cause, the Executive shall not be entitled to any
unpaid bonus accrued through the date of such termination.
(d) If the Employment Period ends on account of Retirement, the Company
shall make no payments to the Executive other than as provided in Section 4(c)
hereof.
(e) If the Employment Period ends on account of Termination for
Disability, the Company shall pay to the Executive, in addition to the amounts
described in Section 4(c) hereof, amounts equal to one-half of the amounts the
Executive would have received as salary (based on the Executive's salary then in
effect) had the Employment Period remained in effect until the second
anniversary of the date of such termination, at the times such amounts would
have been paid, less any payments to which the Executive shall be entitled
during such salary continuance period under any disability benefit plan in which
the Executive has participated as an employee of the Company.
(f) If the Employment Period ends on account of the Executive's death,
the Company shall pay to the Executive's estate (or such person or persons as
the Executive may designate in a written instrument signed by him and delivered
to the Company prior to his death) amounts equal to one-half of the amounts the
Executive would have received as salary (based on the Executive's salary then in
effect) had the Employment Period remained in effect until the second
anniversary of the date of the Executive's death, at the times such amounts
would have been paid.
(g) If the Employment Period ends on account of Termination without
Cause, in addition to the amounts described in Section 4 (c) hereof, the Company
shall pay to the Executive amounts equal to the amounts the Executive would have
received as salary (based on the Executive's salary then in effect) had the
Employment Period remained in effect until the date on which (without any
extension thereof, or, if previously extended, without any further extension
thereof) it was then scheduled to end, at the times such amounts would have been
paid (in the event the Executive is entitled during the payment period to any
payments under any disability benefit plan or the like in which the Executive
has participated as an employee of the Company, less such payments); provided,
however, that in the event of the Executive's death during the payment period,
the Company shall pay to the Executive's estate (or such person or persons as
Executive may designate in a written instrument signed by him and delivered to
the Company prior to his death) amounts during the remainder of the payment
period equal to one-half of the amounts which would have been paid to the
Executive but for his death. It is expressly understood that the Company's
payment obligation under this section 4 (g) shall cease in the event the
Executive shall breach any provision of Section 5 or Section 6 hereof.
(h) Notwithstanding the foregoing provisions of this Section 4, in the
event of a Change in Control (as defined in Section 4 (i) hereof), the
employment of the Executive hereunder shall not be terminated by the Company or
any successor to the Company within two years following such Change in Control
unless the Executive receives written notice of such termination from the
Company at least six months prior to the date of such termination. In the event
of such termination of employment by the Company within two years following a
Change in Control, or in the event that the Executive terminates his employment
hereunder for Good Reason (as defined in Section 4 (i) hereof) within two years
following a Change in Control, the Executive shall be entitled to receive the
amounts the Executive would have received as salary (based on the Executive's
salary then in effect) at the times such amounts would otherwise have been paid
had the Employment Period remained in effect for the period commencing on the
date of such termination and ending 18 months following the date of such
termination. The Executive agrees that he shall not terminate his employment
hereunder, other than for Good Reason, within one year following a Change in
Control unless the Company receives written notice of such termination from the
Executive at least six months prior to the date of such termination. In the
event of such termination by the Executive other than for Good Reason, the
Executive shall be entitled to receive the amounts the Executive would have
received as salary (based on the Executive's salary then in effect) at the times
such amounts would otherwise have been paid had the Employment Period remained
in effect for six months following the date of such termination.
(i) For purposes of this Agreement (i) a "Change in Control" shall be
deemed to have occurred if any person becomes the holder of securities
representing a majority of the voting power of the Company, whether by merger,
consolidation, tender offer or otherwise and (ii) "Good Reason" shall mean (x) a
reduction by the Company in the Executive's rate of annual salary in effect
immediately prior to the Change in Control, (y) a material reduction in any
benefit afforded to the Executive pursuant to any benefit plan of the Company in
effect immediately prior to the Change in Control, unless all comparable
executives of the Company suffer a substantially similar reduction or (z) the
relocation of the Executive's office to a location more than 60 miles from
Crystal Lake, Illinois.
(j) Notwithstanding anything in this Agreement to the contrary, in the
event it shall be determined that any payment or distribution by the Company or
its affiliated companies to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this agreement
or otherwise, but determined without regard to any adjustment required under
this Section 4 (j)) (in the aggregate, the "Total Payments") would be subject to
the excise tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code), then the payments due hereunder
shall be reduced so that the Total Payments are one Dollar ($1) less than such
maximum amount.
(k) All determinations required to be made under Section 4 (j),
including whether and when a reduction pursuant to Section 4 (j) in the amount
payable hereunder is required and the amount of any such reduction and the
assumptions to be utilized in arriving at such determination, shall be made by
the Company's public accounting firm (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
payment, or such earlier time as is requested by the Company or the Executive.
In the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change in Control, the Executive
shall appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the Executive
with a written option that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that the
reduction in the amount payable hereunder pursuant to Section 4 (j) will have
been less than that required by the calculations to be made hereunder. In such
event the Executive shall promptly pay to the Company the amount of any
additional reduction.
(5) Confidential Information. The Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
pursuant to this Agreement, as well as those obtained by him while employed by
the Company or any of its subsidiaries or affiliates or any predecessor thereof
prior to the date of this Agreement, concerning the business or affairs of the
Company or any of its subsidiaries or affiliates or any predecessor thereof
("Confidential Information") are the property of the Company or such subsidiary
or affiliate. Therefore, the Executive agrees that he shall not disclose to any
unauthorized person or use for his own account any Confidential Information
without the prior written consent of the Company CEO unless and except to the
extent that such Confidential Information becomes generally known to and
available for use by the public other than as a result of the Executive's acts
or omissions to act. The Executive shall deliver to the Company at the
termination of the Employment Period, or at any other time the Company may
request, all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential Information or the business of the Company or any of its
subsidiaries or affiliates which he may then possess or have under his control.
6. Noncompetition; Nonsolicitation. (a) The Executive acknowledges that
in the course of his employment with the Company pursuant to this Agreement he
will become familiar, and during the course of his employment by the Company or
any of its subsidiaries or affiliates or any predecessor thereof prior to the
date of this Agreement he has become familiar, with trade secrets and customer
lists of and other confidential information concerning the Company and its
subsidiaries and affiliates and predecessors thereof and that his services have
been and will be of special, unique and extraordinary value to the Company.
(b) The Executive agrees that during the Employment Period and for one
year thereafter, in the case of either Termination for Good Reason following a
Change in Control or Termination without Cause, or for two years thereafter in
the case of termination of employment for any other reason, (the "Noncompetition
Period") he shall not in any manner, directly or indirectly, through any person,
firm or corporation, alone or as a member of a partnership or as an officer,
director, stockholder, investor or employee of or in any other corporation or
enterprise or otherwise, engage or be engaged, or assist any other person, firm
corporation or enterprise in engaging or being engaged, in any business then
actively being conducted by the Company in any geographic area in which the
Company is conducting such business (whether through manufacturing or
production, calling on customers or prospective customers, or otherwise).
Notwithstanding the foregoing, subsequent to the Employment period the Executive
may engage or be engaged, or assist any other person, firm corporation or
enterprise in engaging or being engaged, in any business activity which is not
competitive with a business activity being conducted by the Company at the time
subsequent to the Employment Period that the Executive first engages or assists
in such business activity.
(c) The Executive further agrees that during the Noncompetition Period
he shall not in any manner, directly or indirectly (i) induce or attempt to
induce any employee of the Company or of any of its subsidiaries or affiliates
to terminate or abandon his employment, or any customer of the company or any of
its subsidiaries or affiliates to terminate or abandon its relationship, for any
purpose whatsoever, or (ii) in connection with any business to which (b) above
applies, call on, service, solicit or otherwise do business with any then
current or prospective customer of the Company or any of its subsidiaries or
affiliates.
(d) Nothing in this Section 6 shall prohibit the Executive from being
(i) a stockholder in a mutual fund or a diversified investment company or (ii) a
passive owner of not more than 2% of the outstanding stock of any class of a
corporation any securities of which are publicly traded, so long as the
Executive has no active participation in the business of such corporation.
(e) If, at the time of enforcement of this Section 6, a court holds
that the restrictions stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum period, scope and area
permitted by law.
7. Enforcement. Because the services of the Executive are unique and
the Executive has access to confidential information of the Company, the parties
hereto agree that the Company would be damaged irreparably in the event any
provision of Section 5 or Section 6 hereof were not performed in accordance with
their respective terms or were otherwise breached and that money damages would
be in an inadequate remedy for any such nonperformance or breach. Therefore, the
Company or its successors or assigns shall be entitled, in addition to other
rights and remedies existing in their favor, to an injunction or injunctions to
prevent any breach or threatened breach of any of such provisions and to enforce
such provisions specifically (without posting a bond or other security).
8. Survival. Sections 5, 6 and 7 hereof shall survive and continue in full
force and effect in accordance with their respective terms, notwithstanding any
termination of the Employment Period.
9. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or sent by certified mail,
return receipt requested, postage paid, addressed (a) if to the Executive, to
21865 Old Farm Rd., Barrington, Illinois 60010, and if to the Company, to
AptarGroup, Inc. 475 West Terra Cotta Avenue, Suite E, Crystal Lake, Illinois
60014, attention: Stephen J. Hagge, Executive Vice President, Chief Financial
Officer, Secretary and Treasurer, or (b) to such other address as either party
shall have furnished to the other in accordance with this Section 9.
10. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
11. Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties with respect to the subject matter hereof
and supersedes and preempts any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related in any manner to the subject matter hereof.
12. Successors and Assigns. This Agreement shall inure to the benefit of
and be enforceable by the Executive and his heirs, executors and personal
representatives, and the Company and its successors and assigns. Any successor
or assign of the Company shall assume the liabilities of the Company hereunder.
13. Governing Law. This Agreement shall be governed by the internal laws
(as opposed to the conflicts of law provisions) of the State of Illinois.
14. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and the
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
APTARGROUP, INC.
By: /s/ Carl A. Siebel
Its: CEO
/s/ Eric S. Ruskoski
Eric S. Ruskoski March 6, 1996
(Executive)
<PAGE>
Page 18
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(Dollars in thousands,
except per share) 1996 1995 1994
----------------- ---- ---- ----
NET SALES $615,808 $557,455 $474,266
-------- -------- --------
OPERATING EXPENSES:
Cost of sales 399,654 358,418 301,547
Selling, research & development
and administrative 104,282 96,237 85,672
Depreciation and amortization 47,876 43,502 38,377
------- -------- --------
551,812 498,157 425,596
------- -------- --------
OPERATING INCOME 63,996 59,298 48,670
------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (6,330) (5,918) (8,173)
Interest income 1,132 1,339 1,291
Equity in income of affiliates 691 1,888 1,942
Minority interests (324) (87) 186
Miscellaneous, net 1,008 1,082 (580)
-------- -------- ---------
(3,823) (1,696) (5,334)
-------- -------- ---------
INCOME BEFORE INCOME TAXES 60,173 57,602 43,336
PROVISION FOR INCOME TAXES 22,625 21,888 16,078
-------- -------- ---------
NET INCOME $ 37,548 $ 35,714 $ 27,258
======== ======== =========
NET INCOME PER COMMON SHARE $ 2.09 $ 1.99 $ 1.65
======== ======== =========
See accompanying notes to consolidated financial statements.
<PAGE>
Page 19
CONSOLIDATED BALANCE SHEETS
December 31, (Dollars in thousands,
except per share) 1996 1995
---- ----
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 16,386 $ 17,332
Accounts and notes receivable, less allowance
for doubtful accounts of $3,623 in 1996
and $3,296 in 1995 130,885 119,011
Inventories 75,930 73,339
Prepayments and other 14,030 14,188
------- -------
237,231 223,870
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Buildings and improvements 75,971 75,696
Machinery and equipment 440,743 397,169
------- -------
516,714 472,865
Less: Accumulated depreciation (265,780) (231,152)
------- -------
250,934 241,713
Land 4,395 4,268
------- -------
255,329 245,981
------- -------
OTHER ASSETS:
Investments in affiliates 14,970 14,951
Goodwill, less accumulated amortization
of $5,505 in 1996 and $4,409 in 1995 47,261 48,387
Miscellaneous 21,345 26,027
------- -------
83,576 89,365
------- -------
TOTAL ASSETS $576,136 $559,216
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 4,145 $ 8,322
Current maturities of long-term
obligations 9,540 8,737
Accounts payable and accrued liabilities 102,574 106,147
------- -------
116,259 123,206
------- -------
LONG-TERM OBLIGATIONS 76,569 80,712
------- -------
DEFERRED LIABILITIES AND OTHER:
Deferred income taxes 22,884 21,992
Retirement and deferred
compensation plans 12,952 12,487
Minority interests 4,381 1,033
Deferred and other non-current liabilities 7,392 7,500
------- -------
47,609 43,012
------- -------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1 million
shares authorized, none outstanding
Common stock, $.01 par value,
45 million shares authorized,
17.9 million outstanding in 1996 and 1995 179 179
Capital in excess of par value 103,572 102,954
Retained earnings 233,385 200,860
Cumulative foreign currency
translation adjustment (1,437) 8,293
------- -------
335,699 312,286
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $576,136 $559,216
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
Page 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, (Dollars in thousands) 1996 1995 1994
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 37,548 $ 35,714 $ 27,258
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 44,798 41,446 36,261
Amortization 3,078 2,056 2,116
Provision for bad debts 1,148 1,580 977
Minority interests 324 87 (186)
Deferred income taxes 4,149 2,762 817
Retirement and deferred
compensation plans 381 2,501 907
Equity in income of affiliates
in excess of cash distributions received (590) (1,721) (1,691)
Changes in balance sheet items, excluding
effects from acquisitions and foreign
currency adjustments:
Increase in accounts and notes
receivable (15,828) (13,263) (9,630)
Increase in inventories (5,211) (9,142) (5,220)
(Increase)/decrease in prepaid and
other current assets (631) 4,409 (111)
Increase/(decrease) in accounts
payable and accrued liabilities 630 (3,543) 5,512
Other changes, net (2,480) (1,190) (2,013)
------ ------ ------
NET CASH PROVIDED BY OPERATIONS 67,316 61,696 54,997
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (62,794) (55,481) (41,870)
Disposition of property and equipment 858 1,980 2,397
Disposition/(acquisition) of
businesses, net 1,942 (20,310) (1,314)
Investments in affiliates (11) (9,798) (780)
Collection (issuance) of notes
receivable, net 804 (1,136) 63
------ ------ ------
NET CASH USED BY INVESTING ACTIVITIES (59,201) (84,745) (41,504)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable -- 3,871 --
Repayments of notes payable (2,521) -- (27,874)
Proceeds from long-term obligations 7,935 31,018 4,424
Repayments of long-term obligations (9,629) (10,745) (28,008)
Dividends paid (5,023) (4,659) (3,808)
Proceeds from sale of common stock -- -- 44,029
Proceeds from stock options exercised 618 234 10
------ ------ ------
NET CASH (USED)/ PROVIDED BY
FINANCING ACTIVITIES (8,620) 19,719 (11,227)
------ ------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (441) 537 1,443
------ ------ ------
NET (DECREASE)/ INCREASE IN CASH AND
EQUIVALENTS (946) (2,793) 3,709
CASH AND EQUIVALENTS AT BEGINNING
OF PERIOD 17,332 20,125 16,416
------ ------ ------
CASH AND EQUIVALENTS AT END OF PERIOD $16,386 $17,332 $20,125
====== ====== ======
Supplemental Cash Flow Disclosure:
Interest paid $ 6,218 $ 5,653 $ 7,571
Income taxes paid $ 19,121 $ 15,280 $ 15,747
See accompanying notes to consolidated financial statements.
<PAGE>
Page 21
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Cumulative
Foreign
Common Stock Capital in Currency
Years Ended December 31, 1996, 1995 and 1994 Excess of Retained Translation
(Amounts in thousands, except per share) Shares Par Value Par Value Earnings Adjustment
------ --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1993 16,079 $ 161 $ 58,700 $ 146,355 $(14,854)
Sale of common stock 1,835 18 44,011
Net income 27,258
Options exercised -- -- 9
Cash dividends declared on
common stock- $ .23 per share (3,808)
Translation adjustment 12,760
------ -------- -------- ----------- --------
BALANCE- DECEMBER 31, 1994 17,914 179 102,720 169,805 (2,094)
Net income 35,714
Options exercised 11 -- 234
Cash dividends declared on
common stock- $ .26 per share (4,659)
Translation adjustment 10,387
------ ------- -------- ----------- --------
BALANCE- DECEMBER 31, 1995 17,925 179 102,954 200,860 8,293
Net income 37,548
Options exercised 25 -- 618
Cash dividends declared on
common stock- $ .28 per share (5,023)
Translation adjustment (9,730)
------ -------- --------- ----------- --------
BALANCE- DECEMBER 31, 1996 17,950 $ 179 $ 103,572 $ 233,385 $ (1,437)
====== ======== ========= =========== ========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Page 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTs (Dollars in thousands, except
per share)
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 fragrance/cosmetics, personal care, pharmaceutical, household
products and food industries. The Company has manufacturing facilities primarily
located in the United States and Europe.
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.
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. Cost of substantially all domestic inventories and the inventory of
one foreign operation is 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
minority 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 1996, 1995 and 1994 amounted to $101, $167, and
$251, 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 goodwill acquired in purchase transactions
has continuing value. It is the Company's policy to amortize such costs
primarily over a period of 40 years using the straight-line method. 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 an impairment has occurred. It is management's opinion that no such
impairment exists.
DERIVATIVES Gains and losses on hedges of existing assets or liabilities are
included in the carrying amount of those assets or liabilities and are
ultimately recognized in income as part of those carrying amounts. Gains and
losses related to qualifying hedges of firm commitments also are deferred and
are recognized in income or as adjustments of carrying amounts when the hedged
transaction occurs.
RESEARCH & DEVELOPMENT EXPENSES Research and development costs are expensed as
incurred. These costs amounted to $20,120, $17,473, and $15,272 in 1996, 1995
and 1994, respectively.
<PAGE>
Page 23
INCOME TAXES A provision has not been made for U.S. or additional foreign taxes
on $154,512 of undistributed earnings of foreign subsidiaries. These earnings
will continue to be reinvested 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 the foreign earnings should
they be distributed.
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.
Revenue and expenses are translated at the average rates of exchange prevailing
during the year and the related translation adjustments are accumulated in a
separate section of stockholders' equity. 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.
EARNINGS PER SHARE Earnings per common share for 1996, 1995 and 1994 has been
calculated based upon the weighted average number of shares of common stock
outstanding during the year of approximately 17.9 million, 17.9 million and 16.5
million, respectively.
NOTE 2--SALE OF COMMON STOCK
In October 1994, the Company sold an additional 1,834,500 shares of its common
stock. Net proceeds to the Company totaled approximately $44 million. The
Company used substantially all of such proceeds to repay debt and to position
the Company for financing future acquisitions.
NOTE 3--ACQUISITIONS AND DISPOSITIONS
Acquisitions and dispositions in 1996 were not significant.
During 1995, the Company acquired a controlling interest in two companies for
approximately $22 million in cash and $3 million in assumed debt. These
acquisitions have been accounted for as purchases. In addition, the Company also
acquired a minority interest in a company for an initial payment of
approximately $9 million. The minority interest purchase agreement includes a
provision that adjusts the purchase price based on earnings of the company from
1995 through 1997. The Company does not believe that any additional payment or
refund as a result of the purchase price adjustment will be material to the
financial statements. If the transactions noted above had occurred at the
beginning of 1995, Net Sales, Net Income and Earnings per Share would have been
$580,049, $36,129 and $2.02, respectively (unaudited).
In October of 1994, the Company sold a non-strategic foreign subsidiary. If this
sale had occurred at the beginning of 1994, Net Sales, Net Income and Earnings
per Share would have been $466,834, $28,473 and $1.72, respectively.
NOTE 4--FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company has limited involvement with derivative financial instruments and
does not trade them. In accordance with the Company's policy, derivatives may be
used to manage certain interest rate and foreign exchange exposures. In 1995,
the Company entered into a cross-currency interest rate swap to hedge an
intercompany lending transaction. This swap requires the Company to pay
principal of 37,031 French Francs plus interest at 8% and receive principal of
$7,500 plus interest at 7.08% over ten years. If the Company canceled the swap
at December 31, 1996, the Company would have been required to pay approximately
$482 based on the market value of the swap on that date.
The Company principally used only forward exchange contracts, with terms of less
than one year, to hedge certain firm purchase and sale commitments and
intercompany cash transactions denominated in foreign currencies. The notional
value of the Company's forward exchange contracts was $6.1 million and $3.5
million at December 31, 1996 and 1995, respectively. Deferred realized and
unrealized gains and losses from firm foreign currency commitments were not
significant at December 31, 1996 and 1995. Deferred gains and losses are
recognized in earnings as part of the underlying transaction when the
transaction is settled. Such gains and losses were not significant to the
Company's financial results in 1996 or 1995. The Company is exposed to
credit-related losses in the event of nonperformance by counter parties to
financial instruments, but it does not expect any counter parties to fail to
meet their obligations. The credit exposure of forward foreign exchange
contracts is represented by the difference between the forward contract rate and
the spot rate at the time of settlement.
<PAGE>
Page 24
NOTE 5--INVENTORIES
At December 31, 1996 and 1995, approximately 24% and 22%, respectively, of the
total inventories are accounted for by the LIFO method. Inventories consisted
of:
1996 1995
---- ----
Raw materials $25,150 $25,152
Work-in-process 23,533 21,927
Finished goods 29,283 28,013
------- -------
Total 77,966 75,092
Less LIFO reserve (2,036) (1,753)
------- -------
Total $75,930 $73,339
======= =======
NOTE 6--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At December 31, 1996 and 1995, accounts payable and accrued liabilities
consisted of the following:
1996 1995
---- ----
Accounts payable, principally trade $ 65,953 $ 64,081
Accrued employee compensation costs 17,417 14,753
Other accrued liabilities 19,204 27,313
-------- --------
Total $102,574 $106,147
======== ========
NOTE 7--INCOME TAXES
Income before income taxes consists of:
1996 1995 1994
---- ---- ----
Domestic $18,995 $14,371 $17,093
Foreign 41,178 43,231 26,243
------- ------- -------
$60,173 $57,602 $43,336
======= ======= =======
The provision for income taxes is comprised of:
1996 1995 1994
---- ---- ----
CURRENT:
Federal $ 6,318 $ 5,660 $ 5,040
State/local 1,413 1,291 1,113
Foreign 10,745 12,175 9,108
------ ------ ------
18,476 19,126 15,261
------ ------ ------
DEFERRED:
Federal/State (946) (1,534) 405
Foreign 5,095 4,296 412
------ ------ ------
4,149 2,762 817
------ ------ ------
Total $22,625 $21,888 $16,078
====== ====== ======
<PAGE>
Page 25
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 1996,
34.6% in 1995 and 34.3% in 1994 to income before income taxes is as follows:
1996 1995 1994
---- ---- ----
Income tax at statutory rate $ 21,060 $ 19,930 $ 14,864
State income taxes, net of federal
benefit 806 723 771
Foreign government grants and
incentives -- (353) (790)
Research and development tax credits (401) (910) (730)
Rate differential on earnings of
foreign operations 1,775 1,354 1,659
Other items, net (615) 1,144 304
------- ------- -------
Actual income tax provision $ 22,625 $ 21,888 $ 16,078
======= ======= =======
Effective income tax rate 37.6 % 38.0% 37.1%
Significant deferred tax assets and liabilities as of December 31, 1996 and 1995
are comprised of the following temporary differences:
1996 1995
---- ----
DEFERRED TAX ASSETS:
Employee compensation $ 1,256 $ 1,170
Net operating loss carryforwards 14,285 16,480
Patents 1,820 2,342
Pensions 2,226 2,260
Other 7,699 6,703
------ ------
Total deferred tax assets 27,286 28,955
------ ------
DEFERRED TAX LIABILITIES:
Depreciation 28,607 26,498
Capitalized costs 813 1,302
Leases 3,232 2,886
Other 5,465 4,229
------ ------
Total deferred tax liabilities 38,117 34,915
------ ------
Net deferred tax liabilities $10,831 $ 5,960
====== ======
On December 31, 1996, the Company had federal foreign tax net operating loss
carryforwards of approximately $20,307 which have an indefinite carryforward
period and approximately $1,068 which expire in 1997, 1998, 1999 and 2001.
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 $3,859 would become payable at the time the income is
distributed.
<PAGE>
Page 26
NOTE 8--DEBT
The average annual interest rate on short-term notes payable under unsecured
lines of credit was approximately 4.6% and 6.7% for 1996 and 1995, respectively.
There are no compensating balance requirements associated with short-term
borrowings. At December 31, 1996 and 1995, the Company had an 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. The Company is required to pay a fee for the unused
portion of the commitment. Such payments in 1996 and 1995 were not significant.
The agreement expires on April 29, 2001. At December 31, 1996, the amount unused
and available under this agreement was $25 million. 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 December 31, 1996 and 1995.
In 1995, the Company entered into a $25 million ten-year private placement
agreement. The private placement is comprised of $25 million in 7.08% senior
unsecured notes.
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. At December 31, the Company's
long-term obligations consisted of the following:
1996 1995
---- ----
Notes payable 3.7% - 14.1%, due in monthly and
annual installments through 2009 $ 12,345 $ 9,239
Senior unsecured debt 7.08%, due in installments
through 2005 25,000 25,000
Mortgages payable 4.5% - 13.6%, due in monthly and
annual installments through 2007 10,349 12,859
Industrial revenue bond, interest at 79% of prime,
(which was 6.4% and 6.8% at December 31, 1996
and 1995), due in quarterly installments
through 2001 1,666 1,999
Capital lease obligations 11,749 15,352
------- -------
61,109 64,449
Less current portion (9,540) (8,737)
Reclass of short-term obligations 25,000 25,000
------- -------
Total long-term obligations $ 76,569 $ 80,712
======= =======
All of the notes and 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, due
annually for the five years beginning in 1997 are $7,583, $4,275, $6,964,
$6,885, $31,255 and $17,398 thereafter.
<PAGE>
Page 27
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 2013. 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. 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 $4,702, $3,961 and $2,925 in 1996, 1995 and 1994, respectively. Assets
recorded under capital leases consist of:
1996 1995
---- ----
Buildings $ 10,292 $ 11,290
Machinery and equipment 12,782 13,800
------- -------
23,074 25,090
Accumulated depreciation (9,213) (7,333)
------- -------
$ 13,861 $ 17,757
======= =======
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, 1996:
Capital Operating
Leases Leases
------ ------
1997 $ 2,998 $ 2,476
1998 2,432 1,908
1999 1,944 1,187
2000 1,673 726
2001 1,483 622
Subsequent to 2001 6,373 2,278
------- -----
Total minimum lease payments 16,903 $ 9,197
Amounts representing interest (5,154) =====
-------
Present value of future minimum
lease payments 11,749
Less amount due in one year (1,957)
-------
$ 9,792
=======
<PAGE>
Page 28
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 participantsO 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 while pension commitments under its foreign plans are
partially offset by the cash surrender value of insurance contracts purchased by
the Company. The components of net pension cost for the plans consisted of the
following:
1996 1995 1994
---- ---- ----
Service cost benefits earned during the year $1,297 $1,201 $1,092
Interest cost on projected benefit obligation 1,335 1,320 1,104
Actual return on plan assets (1,970) (3,591) 387
Net amortized and deferred gains and losses 684 2,622 (1,416)
----- ----- -----
Net pension cost $1,346 $1,552 $1,167
===== ===== =====
The reconciliation of the funded status of the plans at year end follows:
1996 1995
---- ----
DOMESTIC PLANS
Actuarial present value of benefit
obligations:
Vested $ (9,327) $ (9,317)
Non-vested (551) (453)
------ ------
Accumulated benefit obligation (9,878) (9,770)
Excess of projected benefit obligation
over accumulated benefit obligation (2,569) (2,478)
------ ------
Projected benefit obligation (12,447) (12,248)
Plan assets at fair value 13,954 12,898
------ ------
Plan assets in excess of projected
benefit obligation 1,507 650
Unrecognized net gain (3,761) (2,575)
Unrecognized prior service cost 167 174
Unamortized net transition asset (761) (1,085)
------ ------
Liability for pension cost included
in the balance sheet $ (2,848) $ (2,836)
====== ======
FOREIGN PLANS
Actuarial present value of benefit
obligations:
Vested $(7,087) $(5,972)
Non-vested (56) (7)
------ ------
Accumulated benefit obligation (7,143) (5,979)
Excess of projected benefit obligation
over accumulated benefit obligation (1,171) (1,827)
------ ------
Projected benefit obligation (8,314) (7,806)
Plan assets at fair value 1,464 1,378
------ ------
Projected benefit obligation in excess
of plan assets (6,850) (6,428)
Unrecognized net loss 1,666 1,688
Unrecognized prior service cost 450 322
Unamortized net transition obligation 198 235
------ ------
Liability for pension cost included in
the balance sheet $(4,536) $(4,183)
====== ======
<PAGE>
Page 29
Plan assets primarily consist of U.S. government obligations, investment grade
corporate bonds and common and preferred stocks for the domestic plans and
insurance contracts for the foreign plans. The projected benefit obligation for
domestic plans was determined using assumed discount rates of 7.50% and 7.25% in
1996 and 1995, respectively. For the foreign plans, the projected benefit
obligation was determined using an assumed discount rate of 6.0% in 1996 and
1995. The assumed rates of increase in compensation used in 1996 and 1995 were
5.0% for the domestic plans and 4.0% for the foreign plans. The expected
long-term rate of return on plan assets was 8.5% in 1996 and 1995 for the
domestic plans and 6.0% in 1996 and 1995 for the foreign plans.
The Company has a non-qualified supplemental pension plan 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 $328 and $250 at December 31, 1996 and 1995,
respectively. This amount is included in the liability for domestic plans shown
above.
The Company also has unfunded retirement compensation arrangements with certain
employees. The cost of these retirement agreements is provided currently as it
relates to prior service agreements and ratably over the employees' future
employment as it applies to future service agreements. 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--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
one-thousandths of a share of Series A junior participating preferred stock, par
value $ .01 per share, at an exercise price of $70. Each share of Series A
junior participating preferred stock will entitle its holder to 1,000 votes and
will have a minimum preferential quarterly dividend payment equal to the greater
of $10 per share or 1,000 times the amount paid to holders of common stock.
Currently 45 thousand 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 $ .01 per
Right.
<PAGE>
Page 30
NOTE 13--STOCK OPTIONS
At December 31, 1996, the Company has four fixed stock-based compensation plans
which are discussed below. The Company follows APB Opinion No. 25 and the
related Interpretations in accounting for its stock option plans. Accordingly,
no significant compensation cost has been recognized for its stock awards. 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 FASB Statement
No. 123, the Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated below.
1996 1995
---- ----
Net Income
As Reported $37,548 $35,714
Pro Forma $36,814 $35,390
Earnings per Share
As Reported $ 2.09 $ 1.99
Pro Forma $ 2.05 $ 1.98
The fair value of stock options granted in 1996 and 1995 was $12.62 and $11.11
per share, respectively. These values were estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions for 1996 and 1995, respectively: dividend yield of .9% for both
years, expected volatility of 21.2% and 22.7%, risk-free interest rate of 5.6%
and 7.5% and an expected life of 7.5 years for both years. The pro forma amounts
reflected above are not likely to be representative of the pro forma amounts in
future years due to the FASB Statement No.123 transition rules which require pro
forma disclosure only for awards granted after 1994, although the Company
granted stock options in both 1994 and 1993.
Under the 1996 and 1992 Stock Awards Plans (collectively, 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 2 million. Options
granted under these plans become exercisable annually over a three year period
and expire ten years after the grant date. The 1996 and 1992 Director Stock
Option Plans provide for the award of stock options to non-employee Directors
who have not previously been awarded new Board options under each of these
plans. The combined maximum number of shares subject to options under these
plans is 80 thousand. Options granted under these plans become exercisable
ratably over a three year period and expire ten years after the grant date.
<PAGE>
Page 31
A summary of the status of the Company's stock option plans as of December 31,
1996, 1995 and 1994, 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, 1994 335,807 $18.375 24,000 $18.375
Granted 145,027 $20.625 --
Exercised (476) $18.375 --
Canceled (17,887) $18.375-$20.625 --
------- ------
Outstanding, December 31, 1994 462,471 $18.375-$20.625 24,000 $18.375
Granted 188,500 $26.75-$35.50 --
Exercised (5,371) $18.375-$20.625 (5,000) $18.375
Canceled (3,083) $18.375 --
------- ------
Outstanding, December 31, 1995 642,517 $18.375-$35.50 19,000 $18.375
Granted 163,800 $36.00 --
Exercised (23,090) $18.375-$26.75 (1,000) $18.375
Canceled (2,855) $18.375-$36.00 --
------- ------
Outstanding, December 31, 1996 780,372 $18.375-$36.00 18,000 $18.375
======= ======
Options
Exercisable at 12/31/94 109,067 12,000
12/31/95 254,909 13,000
12/31/96 446,005 18,000
Available for
future grants 12/31/94 537,053 16,000
12/31/95 348,326 16,000
12/31/96 1,185,585 40,000
The following table summarizes information about stock options outstanding at
December 31,1996:
Options Outstanding Options Exercisable
------------------- -------------------
Shares Weighted- Weighted- Shares Weighted-
Year Outstanding Average Average Exercisable Average
Granted at Year-End Remaining Life Exercise Price at Year-End Exercise Price
- - ------- ----------- -------------- -------------- ----------- --------------
1993 295,453 6.5 $18.375 295,453 $18.375
1994 135,884 7.1 20.625 89,116 20.625
1995 186,435 8.1 27.231 61,436 27.259
1996 162,600 9.1 36.000 -- 36.000
- - ---- ------- -------
780,372 7.5 24.555 446,005 20.048
======= =======
Restricted stock totaling 1,796 shares in 1996 and 3,310 shares in 1995 were
issued under the Stock Awards Plans. 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 have been reduced by restricted stock awards.
<PAGE>
Page 32
NOTE 14--RELATED PARTY TRANSACTIONS
During 1994, the Company acquired 100% ownership of a company that was 50% owned
by the Vice Chairman of the Company for approximately $1.5 million. This company
assembled certain components produced and supplied by the Company. The total
amount of services purchased from this entity in 1994, prior to the acquisition,
was approximately $1.3 million.
The Company purchased materials from an entity majority-Downed by the Vice
Chairman and certain other members of his family. The total amount of materials
purchased from this entity in 1996, 1995 and 1994 was approximately $0, $472 and
$600, respectively.
NOTE 15--SEGMENT INFORMATION
The Company operates in the packaging components industry, which includes the
development, manufacture and sale of consumer product dispensing systems. Sales
within the segment and between geographic areas are made at arm's-length prices.
Operating income consists of sales less operating expenses. Identifiable assets
are those assets that are specifically identified with the geographic area in
which the operations are conducted. Eliminations include intercompany sales
between geographic areas and related intercompany accounts. Export sales were
not material and no single customer accounted for ten percent or more of sales.
<TABLE>
<CAPTION>
Other
Domestic European Foreign Corporate
Geographic Areas Operations Operations Operations Expenses Eliminations Consolidated
- - ---------------- ---------- ---------- ---------- -------- ------------ ------------
1996
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $233,329 $355,699 $ 26,780 $ -- $ -- $615,808
Sales between geographic areas 6,205 59,512 1,418 -- (67,135) --
------- ------- ------- ------- ------- -------
Net Sales $239,534 $415,211 $ 28,198 $ -- $(67,135) $615,808
======= ======= ======= ======= ======= =======
Operating Income $ 28,090 $ 43,624 $ 673 $ (8,714) $ 323 $ 63,996
Identifiable Assets $154,392 $442,702 $ 17,092 $ -- $(38,050) $576,136
1995
Sales to unaffiliated customers $202,868 $334,213 $ 20,374 $ -- $ -- $557,455
Sales between geographic areas 4,915 53,871 3,165 -- (61,951) --
------- ------- ------ ------- ------- -------
Net Sales $207,783 $388,084 $ 23,539 $ -- $(61,951) $557,455
======= ======= ====== ======= ======= =======
Operating Income $ 20,928 $ 48,645 $ 624 $(10,917) $ 18 $ 59,298
Identifiable Assets $142,247 $435,024 $ 12,591 $ -- $(30,646) $559,216
1994
Sales to unaffiliated customers $180,828 $279,476 $ 13,962 $ -- $ -- $474,266
Sales between geographic areas 5,773 30,839 12 -- (36,624) --
------- ------- ------- ------- ------- -------
Net Sales $186,601 $310,315 $ 13,974 $ -- $(36,624) $474,266
======= ======= ======= ======= ======= =======
Operating Income $ 22,594 $ 34,585 $ 763 $ (9,523) $ 251 $ 48,670
Identifiable Assets $132,231 $359,485 $ 9,558 $ -- $(35,879) $465,395
</TABLE>
<PAGE>
Page 33
NOTE 16--QUARTERLY DATA (UNAUDITED)
Quarterly results of operations and per share information for the years ended
December 31, 1996 and 1995 are as follows:
Quarter
---------------------------------------
Total
First Second Third Fourth For Year
----- ------ ----- ------ --------
YEAR ENDED
DECEMBER 31, 1996
Net sales $152,954 $151,047 $155,917 $155,890 $615,808
Gross profit $ 43,447 $ 41,570 $ 42,271 $ 44,069 $171,357
Net income $ 10,673 $ 8,827 $ 9,007 $ 9,041 $ 37,548
PER COMMON SHARE - 1996
Net income $ .60 $ .49 $ .50 $ .50 $ 2.09
Dividends paid $ .07 $ .07 $ .07 $ .07 $ .28
Stock price high $ 41 7/8 $ 43 1/8 $ 37 1/8 $ 36 $ 43 1/8
Stock price low $ 34 3/4 $ 29 $ 30 3/8 $ 30 1/2 $ 29
Average number of shares
outstanding 17,930 17,938 17,941 17,947 17,939
YEAR ENDED
DECEMBER 31, 1995
Net sales $135,629 $142,396 $140,630 $138,800 $557,455
Gross profit $ 39,005 $ 41,398 $ 39,177 $ 38,011 $157,591
Net income $ 9,625 $ 9,927 $ 8,475 $ 7,687 $ 35,714
PER COMMON SHARE - 1995
Net income $ .54 $ .55 $ .47 $ .43 $ 1.99
Dividends paid $ .06 $ .06 $ .07 $ .07 $ .26
Stock price high $ 29 3/8 $ 32 1/8 $ 34 1/4 $ 38 1/4 $ 38 1/4
Stock price low $ 24 5/8 $ 27 7/8 $ 31 $ 31 1/8 $ 24 5/8
Average number of shares
outstanding 17,915 17,917 17,919 17,923 17,918
*As of December 31, 1996, stockholders of record totaled approximately 1,000.
<PAGE>
Page 34
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of AptarGroup, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of stockholders' equity
present fairly, in all material respects, the financial position of AptarGroup,
Inc. and its subsidiaries at December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
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 generally accepted auditing standards 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 the opinion expressed
above.
/s/ Price Waterhouse
Chicago, Illinois
February 20, 1997
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 two 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 /s/ Stephen J. Hagge
- - ------------------ --------------------
Carl A. Siebel Stephen J. Hagge
President and Executive Vice President
Chief Executive Officer and Chief Financial Officer,
Secretary and Treasurer
<PAGE>
Page 35
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
Year Ended December 31,
------------------------------------
(In millions of dollars, except per
share data) 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
STATEMENT OF INCOME DATA:
Net Sales $615.8 $557.5 $474.3 $411.5 $370.3
Cost of Sales 399.7 358.4 301.5 262.5 244.9
% of Net Sales 64.9% 64.3% 63.6% 63.8% 66.1%
Selling, Research & Development, and
Administrative 104.3 96.2 85.7 75.8 63.3
% of Net Sales 16.9% 17.3% 18.1% 18.4% 17.1%
Depreciation and Amortization 47.9 43.5 38.4 32.1 26.2
% of Net Sales 7.8% 7.8% 8.1% 7.8% 7.1%
Operating Income 64.0 59.3 48.7 41.0 35.9
% of Net Sales 10.4% 10.6% 10.2% 10.0% 9.7%
Income Before Accounting Change (1) 37.5 35.7 27.3 21.6 19.5
Net Income 37.5 35.7 27.3 23.0 19.5
% of Net Sales 6.1% 6.4% 5.7% 5.6% 5.3%
PER COMMON SHARE: (2)
Income Before Accounting Change (1) $ 2.09 $ 1.99 $ 1.65 $ 1.34 $ --
Net Income 2.09 1.99 1.65 1.43 --
Cash Dividends Declared 0.28 0.26 0.23 0.10 --
BALANCE SHEET AND OTHER DATA:
Capital Expenditures $ 62.8 $ 55.5 $ 41.9 $ 46.7 $ 37.8
Total Assets 576.1 559.2 465.4 408.0 301.5
Long-Term Obligations 76.6 80.7 53.8 41.3 28.6
Stockholders' Equity 335.7 312.3 270.6 190.4 137.4
Debt to Total Capitalization 21.1% 23.8% 19.2% 37.5% 33.2%
(1)In the first quarter of 1993, the Company adopted SFAS 109 entitled
"Accounting for Income Taxes".
(2)Income per share has been omitted for 1992 since the Company had no capital
stock publicly outstanding during that year.
<PAGE>
Page 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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, 1996 1995 1994
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of sales 64.9 64.3 63.6
Selling, research & development,
and administrative 16.9 17.3 18.1
Depreciation and amortization 7.8 7.8 8.1
----- ----- -----
Operating income 10.4 10.6 10.2
Other expenses, net (0.6) (0.3) (1.1)
----- ----- -----
Income before income taxes 9.8 10.3 9.1
Provision for income taxes 3.7 3.9 3.4
----- ----- -----
Net income 6.1% 6.4% 5.7%
===== ===== =====
1996 COMPARED TO 1995 Net sales in 1996 totaled $615.8 million, an increase of
10.5% when compared to net sales of $557.5 million in 1995. Excluding the
effects of the acquisitions made in the fourth quarter of 1995, sales grew 6.9%
in 1996. The translation of foreign sales to U.S. dollars in 1996 was affected
by changes in exchange rates. If the U.S. dollar exchange rates had been
constant throughout the year and the effect of the acquisitions were excluded,
net sales for the year ended December 31, 1996 would have increased
approximately 8.4%. The increase in sales is primarily attributed to increased
sales volume of pumps to the pharmaceutical market and volume increases in
pumps, dispensing closures and aerosol valves to the personal care market. These
volume increases were partially offset by price decreases and softness of pump
sales to customers in the European fragrance/cosmetics market. European sales
represented approximately 58% of the Company's total sales compared to 60% in
1995.
During the fourth quarter of 1995, the Company acquired Liquid Molding Systems,
Inc. ("LMS"), a U.S. company that owns the patent and the liquid silicone
molding expertise to produce valves for the SimpliSqueeze[registered trademark]
dispensing closure system, and General Plastics S.A. ("General Plastics"), a
French company which manufactures primarily dispensing closures. General
Plastics uses bi-injection molding technology, which allows for the molding of
two colors or two materials in the same cycle. Also during the fourth quarter of
1995, the Company purchased a 35% minority interest in Loeffler Kunststoffwerk
GmbH & Co. KG ("Loeffler"), a privately-held German manufacturer of dispensing
and standard closures. The two acquisitions have been accounted for as purchases
and the minority interest has been accounted for under the equity method. The
effect of these transactions on the Company's net income for 1996 and 1995 was
not significant.
The purchase agreement between the Company and Loeffler includes a provision
that adjusts the purchase price for the 35% interest based on earnings of
Loeffler from 1995 through 1997. The Company does not believe that any
additional payment or refund as a result of the purchase price adjustment
provision will be material to the financial statements.
To further align the Company's European closures strategy with its European
closure business partner, Loeffler, in 1996 the Company sold a 35% interest in
certain of the Company's European dispensing closure operations to Loeffler for
approximately $3.8 million. The net gain on the sale of the minority interests
was not significant.
Cost of sales as a percent of net sales increased in 1996 to 64.9% compared to
64.3% in 1995. The increase was primarily attributed to underutilized capacity
in the Company's fragrance operations, continued price competition and the mix
of products sold. The impact of changes in raw material costs, including plastic
resin and metal, in 1996 was not significant.
<PAGE>
Page 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
Selling, research & development, and administrative ("SG&A") increased to $104.3
million compared to $96.2 million in 1995. The increase was primarily due to the
acquisitions made in the fourth quarter of 1995 and increased spending for
research and development. However, as a percent of sales, SG&A decreased from
17.3% in 1995 to 16.9% in 1996. The decrease in relation to net sales is the
result of an increase in sales coupled with lower administrative expenses as a
percentage of sales.
Depreciation and amortization expenses increased from $43.5 million in 1995 to
$47.9 million in 1996. As a percent of sales, depreciation and amortization
remained consistent between the years at 7.8%.
Operating income from European operations (excluding corporate expenses)
represented 68% and 82% of total operating income in 1996 and 1995,
respectively. Operating income in 1996 from U.S. operations (excluding corporate
expenses) represented 44% of total operating income compared to 35% in 1995. The
decrease in the percentage of operating income attributable to European
operations was due to underutilized capacity as a result of softness in the
fragrance/cosmetic market.
Net other expenses increased to $3.8 million in 1996 from $1.7 million in 1995.
The increase is primarily attributable to lower income of affiliates and higher
net interest costs in 1996.
The effective income tax rate decreased from 38.0% in 1995 to 37.6% in 1996. The
decreased effective tax rate is due to the mix of income earned.
Net income increased 5% to $37.5 million in 1996 compared to $35.7 million in
1995. The increase in net income is primarily attributable to higher sales
volume and continued cost containment.
1995 COMPARED TO 1994 Net sales in 1995 totaled $557.5 million, an increase of
17.5% when compared to net sales of $474.3 million in 1994. Excluding the
effects of the acquisitions and disposition made in 1995 and 1994, sales grew
19% in 1995. The translation of foreign sales to U.S. dollars in 1995 was
affected by changes in exchange rates. If the U.S. dollar rates had been
constant throughout the year and the effect of the acquisitions and disposition
were excluded, net sales for the year ended December 31, 1995 would have
increased approximately 14%. Although the 1995 sales were affected by price
competition in all product lines and markets, an increase in pump sales volume
offset lower selling prices and was primarily responsible for the sales growth.
The growth in pump sales came principally from the fragrance/cosmetics and
pharmaceutical markets. Unit sales of aerosol valves were down from 1994 levels
while dispensing closure unit sales remained flat. Sales in the U.S. and
European markets increased during the year. U.S. sales increased to
fragrance/cosmetics, pharmaceutical, household and food markets but were offset
by a downturn in the U.S. personal care market. Sales growth in Europe came
primarily from the fragrance/cosmetics and pharmaceutical markets. European
sales represented approximately 60% of the Company's total sales compared to 59%
a year ago.
In October of 1994, the Company sold a non-strategic subsidiary. The sale of
this subsidiary did not result in a significant gain or loss. For the year ended
December 31, 1994, this subsidiary had sales of approximately $7.4 million and a
net loss of approximately $1.2 million.
Cost of sales as a percent of net sales increased in 1995 to 64.3% compared to
63.6% in 1994. The increase was primarily attributed to increases in raw
material costs including plastic resin, the mix of products sold and start-up
costs related to a manufacturing facility in the U.S. The Company continued to
experience escalation in resin prices during the first part of 1995. Gradually,
resin prices declined during the last six months of 1995, although prices at
year end were still above beginning of the year levels. The Company was able to
pass-through a portion of the increase in raw material costs to customers.
<PAGE>
Page 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
SG&A increased to $96.2 million compared to $85.7 million in 1994. However, as a
percent of sales, SG&A decreased from 18.1% in 1994 to 17.3% in 1995. The
decrease in relation to net sales was the result of continued cost containment
efforts.
Depreciation and amortization expenses increased from $38.4 million in 1994 to
$43.5 million in 1995. As a percent of sales, depreciation and amortization
decreased to 7.8% from 8.1% a year ago due to the sales growth experienced by
the Company during the year.
Operating income from European operations (excluding corporate expenses)
represented 82% and 71% of total operating income in 1995 and 1994,
respectively. Operating income in 1995 from U.S. operations (excluding corporate
expenses) represented 35% of total operating income compared to 46% in 1994. The
increase in the percentage of operating income attributable to European
operations is due to the strength of demand in the fragrance/cosmetics market,
increased sales to the pharmaceutical market and reduced sales in the U.S.
market for aerosol valves.
Net other expenses decreased to $1.7 million in 1995 from $5.3 million in 1994.
Lower interest rates and reduced levels of debt as a result of a common stock
offering in October 1994 resulted in a reduction in net interest expense of $2.3
million when compared to 1994. Miscellaneous other income increased by $1.7
million due particularly to lower foreign currency transaction losses.
The effective income tax rate increased from 37.1% in 1994 to 38.0% to 1995. The
higher effective tax rate was due to an increase in the French tax rate and the
mix of foreign earnings.
Net income increased 31% to $35.7 million in 1995 compared to $27.3 million in
1994. The increase in net income was primarily attributable to higher sales
volume, continued cost containment efforts and lower interest expense.
FOREIGN CURRENCY A significant portion of the Company's operations is located
outside of the United States. Because of this, movements in exchange rates may
have a significant impact on the translation of the financial conditions and
results of operations of AptarGroup's foreign entities. 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.
LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has generated positive
cash flows from operations. During 1996, the Company utilized cash flows from
financing activities principally to finance acquisitions and utilized cash flows
from operations principally to finance capital expenditures. Net cash provided
by operations was $67.3 million, $61.7 million, and $55.0 million during 1996,
1995 and 1994, respectively. In each of these years, cash flow from operations
was primarily derived from earnings before depreciation and amortization and
from changes in working capital. Cash and equivalents was $16.4 million at
December 31, 1996 versus $17.3 million at December 31, 1995 and $20.1 million at
December 31, 1994.
Working capital increased to $121.0 million at December 31, 1996 compared to
$100.7 million and $78.1 million at December 31, 1995 and 1994, respectively.
The increase in working capital in 1996 was primarily due to increases in
accounts receivable and decreases in short term borrowings. The increase in
working capital in 1995 was primarily due to acquisitions completed in 1995,
increased sales and changes in exchange rates.
<PAGE>
P39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
Net cash used for investing activities totaled $59.2 million, $84.7 million and
$41.5 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The decrease between 1995 and 1996 is primarily due to
acquisitions made in 1995. The dispensing packaging industry is capital
intensive. Capital expenditures were $62.8 million, $55.5 million and $41.9
million for the years ended December 31, 1996, 1995 and 1994, respectively.
Capital expenditures for 1997 are estimated to be approximately $65-70 million.
Net cash (used) provided by financing activities was $(8.6) million, $19.7
million, and $(11.2) million for the years ended December 31, 1996, 1995 and
1994, respectively. The principal reason for the change in 1995 from the other
two years was the proceeds from a private placement of $25 million in October
1995. Net proceeds of approximately $44 million in 1994 were primarily used to
repay short-term obligations and position the Company for future acquisitions.
The Company's debt to total capitalization ratio was 21% and 24% as of December
31, 1996 and 1995, respectively. For each of these years, the majority of debt
was denominated in foreign currency. AptarGroup has historically borrowed
locally to hedge potential currency fluctuation for assets that were purchased
outside of the United States. It is expected that this practice will continue.
At December 31, 1996 and 1995, the Company had an unsecured revolving credit
agreement allowing borrowings of up to $25 million. This agreement expires in
April, 2001 and the Company had no borrowings outstanding against this agreement
at December 31, 1996.
The Company's foreign operations have historically met cash requirements with
the use of internally generated cash and borrowings. Foreign subsidiaries have
financing arrangements with several foreign banks to fund operations located
outside of the U.S., but all of 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.
In late 1996, the Company formed a 50/50 joint venture in the United States with
Coster Tecnologie Speciali S.p.A., an Italian company, to produce spray caps and
specialty actuators for the North American aerosol valve market. Initial total
capitalization of this venture will be approximately $10 million, of which
AptarGroup will contribute $5 million in 1997.
OUTLOOK For most of 1996, demand by customers in the fragrance/cosmetics market
was lower than in 1995. During the fourth quarter of 1996, sales to this market
increased over the prior year. The Company cannot determine whether the trend of
increased sales to this market will continue.
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 additional price pressure or loss of volume. This situation also
presents opportunities for increasing sales due to the breadth of the Company's
product line and its international presence.
The impact of changes in raw material costs was not significant. The Company
will attempt to offset inflation through cost containment and increase selling
prices over time, as allowed by market conditions.
As the Company expands geographically, investments may be made in countries that
are not as politically stable as the U.S. or the western European countries in
which the Company primarily had operations at the end of 1996. The Company
intends to monitor its exposure in these other countries to minimize risk.
APTARGROUP, INC.
LIST OF SUBSIDIARIES
State or Other
Jurisdiction of Percentage
Incorporation Owned
AptarGroup Foreign Sales Corporation Barbados 100%
AptarGroup Holding S.A. France 100%
Aptar GmbH Germany 100%
Seaquist-Loeffler Verwaltungs GmbH Germany 35%
Seaquist-Loeffler Kunststoffwerk GmbH
& Co. KG Germany 35%
Seaquist-Loeffler Kunststoffwerk
Spol. S.R.O. Czech Republic 100%
SeaquistPerfect Dispensing GmbH Germany 100%
Seaplast S.A. Spain 50%
Erich Pfeiffer GmbH Germany 100%
Pfeiffer Vaporisateurs France S.a.r.L. France 100%
P & S Japan Japan 100%
Pfeiffer, Inc. Connecticut 100%
Pfeiffer (U.K.) Limited United Kingdom 100%
Vallis Leasobjekt Gesellschaft GmbH Germany 51%
P&P Promotion of German Manufacturing Germany 100%
Technologies GmbH
Aptar Europe B.V. Holland 100%
AptarGroup S.A. France 100%
Caideil M.P. Teoranta Ireland 100%
Graphocolor SA France 50%
Perfect-Valois U.K., Limited United Kingdom 100%
SAR S.p.A. Italy 100%
Dispray GmbH Germany 80%
Dispray S.A. Switzerland 90%
MAS S.p.A. Italy 100%
NOVARES S.p.A. Italy 100%
Plas S.r.l. Italy 100%
Rap Micropumps Pty. Ltd. South Africa 70%
SAR France SCA France 100%
AptarGroup SAR Ireland 100%
Finance Unlimited
SAR (U.K.) Limited United Kingdom 100%
Tes S.p.A. Italy 35%
Seaquist-Loeffler Limited United Kingdom 65%
Seaquist-Loeffler S.A.S. France 65%
General Plastics S.A. France 100%
Moulage Plastique de Normandie S.A. France 100%
Valois S.A. France 100%
Valois Espana S.A. Spain 100%
Valois Italiana S.r.l. Italy 100%
Aptar Suzhou Dispensing Ltd. P.R. China 100%
CosterSeaquist L.L.C. Illinois 50%
Global Precision, Inc. Florida 100%
Liquid Molding Systems, Inc. Delaware 100%
Pfeiffer of America, Inc. Delaware 100%
Sar Dispensing Systems Ltd. Hong Kong 100%
SAR Do Brasil Ltda. Brazil 100%
SAR U.S.A. Incorporated Delaware 100%
Seaquist Canada Ltd. Canada 100%
Seaquist Finance Ireland 100%
Seaquist Closures Foreign, Inc. Delaware 100%
Seaquist de Mexico, S.A. de C.V. Mexico 75%
SeaquistPerfect Dispensing Foreign, Inc. Delaware 100%
Seaquist-Valois Australia Pty. Ltd. Australia 100%
Seaquist-Valois Japan, Inc. Japan 100%
Valois of America, Inc. Connecticut 100%
Valois Far East Limited Hong Kong 80%
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-64320 and 33-80408) of AptarGroup, Inc. of our
report dated February 20, 1997 appearing on page 34 of 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 on the Financial
Statement Schedule, which appears on page 17 of this Form 10-K.
/s/ Price Waterhouse
Chicago, Illinois
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This schedule contains summary financial information extracted from the
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