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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1999
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 60014
Lake, Illinois (Zip Code)
(Address of Principal Executive Offices)
815-477-0424
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
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<CAPTION>
Title of each class Name of each exchange on which registered
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<S> <C>
Common Stock $.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>
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 16, 2000, was approximately $780,000,000. The number of
shares outstanding of Common Stock, as of March 16, 2000 was 35,885,368 shares
held by approximately 800 shareholders of record.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1999 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 10, 2000 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, 1999
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<C> <S> <C>
PART I
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Page
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Item 1 Business..................................................... 3
Item 2 Properties................................................... 11
Item 3 Legal Proceedings............................................ 11
Item 4 Submission of Matters to a Vote of Security-Holders.......... 12
PART II
Market for Registrant's Common Equity and Related Stockholder
Item 5 Matters...................................................... 12
Item 6 Selected Financial Data...................................... 12
Item 7 Management's Discussion and Analysis of Consolidated Results
of Operations and Financial Condition........................ 12
Item 7A Quantitative and Qualitative Disclosures about Market Risk... 12
Item 8 Financial Statements and Supplementary Data.................. 13
Changes in and Disagreements with Accountants on Accounting
Item 9 and Financial Disclosure..................................... 13
PART III
Item 10 Directors and Executive Officers of the Registrant........... 13
Item 11 Executive Compensation....................................... 14
Security Ownership of Certain Beneficial Owners and
Item 12 Management................................................... 14
Item 13 Certain Relationships and Related Transactions............... 14
PART IV
Exhibits, Financial Statement Schedules and Reports on Form
Item 14 8-K.......................................................... 14
Signatures ............................................................. 15
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PART I
Item 1. Business
(a) General Development of Business
The Company's business began as a one-product, one-country operation that
has become a multinational supplier of a broad line of dispensing packaging
systems. The Company's business was started in the late 1940's through its
subsidiary SeaquistPerfect Dispensing L.L.C., which manufactured and sold
aerosol valves in the United States. The Company's business has grown
primarily through the acquisition of relatively small companies and internal
expansion.
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Start-up/
Date Business Country Acquisition Initial Product Line
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1968 SeaquistPerfect Dispensing GmbH Germany Acquisition Aerosol valves
(formerly Perfect-Valois Ventil GmbH)
1970 Valois S.A. France Acquisition Aerosol valves
1976 Seaquist Closures L.L.C. U.S. Start-up Dispensing closures
1976 35% of certain Pfeiffer Group companies Germany Acquisition Pumps
1981 AR Valve product line U.S. Acquisition Aerosol valves
1981 RDW Industries, Inc. U.S. Acquisition Dispensing 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
1994 Seaquist de Mexico, S.A. de C.V. Mexico Start-up Dispensing closures
1995 Liquid Molding Systems, Inc. U.S. Acquisition Silicone molded products
1995 35% of Loffler Kunststoffwerk Germany Acquisition Closures
GmbH & Co. KG
1995 General Plastics, S.A. France Acquisition Closures
1997 50% of CosterSeaquist L.L.C. U.S. Start-up joint venture Aerosol spray caps and
accessories
1997 Aptar Suzhou Dispensing China Start-up Aerosol valves, pumps,
Systems, Co., Ltd closures
1998 65% of Loffler Kunststoffwerk Germany Acquisition Closures
GmbH & Co. KG
1998 Inairic S.A. Argentina Acquisition Pumps
1999 Emson Research, Inc. U.S. Acquisition Pumps
1999 Seaquist-Valois do Brasil Ltda. Brazil Start-up Dispensing closures and
pumps
1999 Somova S.r.l. Italy Acquisition Pumps and aerosol spray
caps and accessories
1999 80% of Microflow Engineering S.A. Switzerland Acquisition Research and
development company
</TABLE>
In 1999, the Company acquired privately held Emson Research, Inc. and
related companies (Emson). Emson is a leading supplier of fragrance/cosmetics
pumps in the North American market. It also has a significant position in the
North American personal care and food pump markets and a growing presence in
selected international markets. Emson sales for the year ended December 31,
1999 were approximately $84 million.
As a result of its internal product line expansion and its acquisition
program, the Company has become a leader in its markets. The Company believes
there are future growth opportunities available to it in terms of (i) further
geographic and product line extension and (ii) additional acquisitions.
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(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, 1999 is set forth in Note 16 ("Segment
Information") to the Consolidated Financial Statements contained in the 1999
Annual Report to Stockholders, pages 46 and 47, which is incorporated herein
by reference.
(c) Narrative Description of Business
General
The Company is a leader in the design, manufacture and sale of three
categories of consumer product dispensing systems: pumps, closures and aerosol
valves. The Company focuses on providing value-added dispensing systems to
global consumer product marketers in the personal care, fragrance/cosmetics,
pharmaceutical, household/industrial products and food industries. Value-added
packaging allows consumers to conveniently dispense a product, in an
aesthetically attractive package, which consistently meets required usage or
dosage characteristics. The Company believes it is the largest supplier of
pharmaceutical, fragrance/cosmetics, and personal care fine mist pumps
worldwide, the largest supplier of aerosol valves in North America and the
largest supplier of dispensing closures in the United States. The Company has
manufacturing facilities located throughout the world including facilities in
the United States, Europe, Asia and South America. The Company has over 2,500
customers with no single customer accounting for greater than 6% of the
Company's 1999 net sales.
For 1999, the percentage of net sales represented by sales to the personal
care, fragrance/cosmetics, pharmaceutical, household/industrial and food
markets were 33%, 29%, 24%, 8% and 6% respectively. Pumps, dispensing closures
and aerosol valves represented approximately 61%, 22% and 15%, respectively,
of AptarGroup's net sales. The Company expects the mix of sales by product and
by market to remain approximately the same in 2000.
Pumps are finger-actuated dispensing systems that dispense a spray or
lotion from non-pressurized containers. Pumps are principally sold to four
markets: fragrance/cosmetics, pharmaceutical, personal care and
household/industrial. Examples of pump applications in these markets include
perfumes, skin creams, oral and nasal sprays, hair sprays and window cleaners.
Dispensing closures are plastic caps, primarily for plastic containers, which
allow a product to be dispensed without removing the cap. The majority of the
Company's dispensing closure sales have been to the personal care market, and
the Company is selling to and is pursuing opportunities in the food and
household/industrial markets for additional applications of dispensing
closures. Products with dispensing closures include shampoos, skin lotions,
conditioners, household/industrial cleaners, ketchup and salad dressing
products. Aerosol valves are mechanisms which dispense product from
pressurized containers. Continuous spray aerosol valves are frequently used
with hair sprays, spray paints, insecticides, automotive products and laundry
products. Metered dose aerosol valves are used to dispense precise amounts of
product and are sold to the pharmaceutical market for lung and heart
medications, to the personal care market for breath sprays and to the
household/industrial market for air fresheners.
Sales of the Company's dispensing systems, especially pumps, dispensing
closures and metered dose aerosol valves have grown at a faster rate than the
overall packaging industry during the past five years as consumer demand
shifted to products with more convenient dispensing systems. The Company
expects this trend to continue. Consumer product marketers have converted many
of their products to packages with dispensers that offer the benefit of
increased convenience, cleanliness or accuracy of dosage. For example, the
Company is developing applications for SimpliSqueeze(R), a no-leak, invertible
closure with one-hand dispensing convenience. SimpliSqueeze 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 closure has grown as a result of its
current use in the personal care market with hair care, shower gel and
moisturizing lotion products. The advantages of SimpliSqueeze were applied in
the non-carbonated beverage
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market. AptarGroup worked with The Coca-Cola Company to incorporate the
SimpliSqueeze valve into their sports drink packaging requirements. Due to
this success, AptarGroup is continuing to apply the SimpliSqueeze technology
into other food/beverage products. Another example of a system that offers
increased convenience is a unit dose pump that dispenses a single exact dosage
of medication nasally as an alternative to pills or syringes.
Pumps (61% of 1999 net sales)
Pumps are finger-actuated dispensing systems which dispense a spray or
lotion from non-pressurized containers. Pumps are principally sold to four
markets: fragrance/cosmetics, pharmaceutical, personal care and
household/industrial products. Examples of pump applications in these markets
include perfumes, skin creams, oral and nasal sprays, hair sprays 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 pumps used with household cleaner products. The food market is
beginning to emerge as the fifth market that utilizes pumps. An example of
pump applications for the food market is butter sprays.
AptarGroup believes it is the leading supplier of pharmaceutical,
fragrance/cosmetics and personal care fine mist pumps worldwide. An element of
the Company's growth strategy is the geographic expansion of pump operations.
Adding to the Company's personal care fine mist pump manufacturing
capabilities in the U.S., the Company began assembling fragrance/cosmetics
pumps in the United States in early 1995 and began production of personal care
lotion pumps in 1997. In 1998, the Company began production of pharmaceutical
pumps in the United States. In 1999, the Company began assembling
fragrance/cosmetics pumps in Brazil. Also in 1999, the Company purchased
Emson. Emson manufactures fine mist pumps for the fragrance/cosmetics,
personal care and food markets mainly in the United States. The Company has
sales offices in Japan and in 1997 began producing pumps in China to enhance
its position in the Asian markets. In 1999, 1998 and 1997, pump sales
accounted for approximately 61%, 60%, and 60% respectively, of AptarGroup's
net sales.
Fragrance/Cosmetics
The Company believes it is the leading supplier of pumps to the
fragrance/cosmetics market worldwide. Pumps for this market 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. The Company has developed several new
pumps for the fragrance/cosmetics market. An example is an aluminized airless
bag pump system that protects lotions from oxygen and light contamination.
Another 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. The REPLICA is an example of a small
fine mist pump, with a mechanism just 32 millimeters in length. Despite its
size, REPLICA combines aesthetically pleasing design with the same high level
of performance as AptarGroup's conventional pumps. The Company began to sell a
pump that sprays in the inverted position in 1999. This is an example of yet
another unique system that allows customers to differentiate their products in
the market.
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 market worldwide. AptarGroup has clean-room manufacturing
facilities in France, Germany, Switzerland and the United States, which
produce pumps in a contaminant-controlled environment. The Company believes
that the use of pumps in the dispensing of pharmaceuticals will continue to
increase. Demand is increasing for the Company's pumps that provide consistent
dosages of particular drugs. AptarGroup has developed an ecological pump with
a reduced number of components that contains no metal parts and which is made
from the same plastic resin. This pump reduces the risk of chemical
incompatibility between the product formula and the material used in the pump.
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The Company also has a nasal bidose delivery system for the nasal delivery of
two shots of liquid spray. The Company is working with pharmaceutical
companies for the delivery of such medications as flu vaccines and cold
remedies. In 1999, the Company acquired 80% of Microflow Engineering S.A.
("Microflow"), a research and development company whose objective is to
develop an electronic dispensing system based on silicone etching technology
primarily for the pharmaceutical market as an alternative to the traditional
mechanical pump.
Personal Care
The Company believes it is the largest supplier of personal care fine mist
pumps worldwide. Personal care pumps are primarily sold for use in hair care
and deodorant products. Sales of fine mist pumps to this market have increased
significantly over the last several years. The Company is a supplier of lotion
pumps to the personal care market primarily in Europe and is expanding sales
of lotion pumps to the personal care market in North and South America.
Other
The Company has not focused on the household/industrial pump market.
Household/industrial products primarily utilize trigger or other high output
pumps, for such applications as bathroom cleaners, window sprays, and general
household/industrial cleaners. The Company manufactures high output pumps for
the household/industrial market; however, it currently does not manufacture a
trigger pump. Pumps have not been extensively used in the food industry with
the exception of butter sprays.
Closures (22% of 1999 net sales)
The Company manufactures both closures and dispensing closures with the
majority of sales in dispensing closures. Dispensing closures are plastic
caps, primarily for plastic containers, which allow a product to be dispensed
without removing the cap. Products with dispensing closures include shampoos,
skin lotions, conditioners, household cleaners, ketchup and salad dressing
products. Although the Company sells dispensing closures to all markets, the
majority of the Company's sales have been to the personal care market. The
Company believes that it is the largest manufacturer of dispensing closures in
the United States. In 1999, 1998 and 1997, closure sales accounted for
approximately 22%, 22% and 19%, respectively, of AptarGroup's net sales.
Sales of dispensing closures have grown 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 closure business is to continue to
focus on selling dispensing closures. The Company plans to increase market
share in the European, South American and Asian markets, to develop new
innovative products and to adapt existing products for new markets.
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
products such as SimpliSqueeze, a no-leak, invertible closure with one-hand
dispensing convenience. SimpliSqueeze 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 closure has grown as a result of its current use with hair care,
shower gel and moisturizing lotion products and other customer applications.
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Household/Industrial
The Company has not had significant dispensing closure sales to the
household/industrial 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/industrial market.
The Company adapts existing products to target this market. For example, the
Directional Pour Spout incorporates an elongated spout that enables the
consumer to pinpoint the dispensing of the product in exactly the desired
direction. In addition, SimpliSqueeze technology has been expanded for use
with automotive products. The Company believes that additional applications
for this market will arise in the near future.
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,
honey, syrup, jellies and salad dressing products. An increase in the
conversion of food products, such as edible oils, from traditional non-
dispensing packages to squeezable dispensing closures could provide growth
opportunities for the Company. The Company's Directional Pour Spout is also
used with food products.
The advantages of SimpliSqueeze were applied in the non-carbonated beverage
market. AptarGroup worked with The Coca-Cola Company to incorporate the
SimpliSqueeze valve into their sports drink packaging requirements. Due to
this success, AptarGroup is tailoring the SimpliSqueeze technology into other
food/beverage products.
Other
Sales of dispensing closures to the pharmaceutical market have not been
significant. Dispensing closures have not been used extensively in the
fragrance market, but cosmetics applications are increasing.
Aerosol Valves (15% of 1999 net sales)
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 dose aerosol valve used to dispense precise amounts of
product. This valve is sold to the pharmaceutical market for lung and heart
medications, to the personal care market for breath sprays and to the
household/industrial market for air fresheners. In 1999, 1998 and 1997,
aerosol valve sales accounted for approximately 15%, 16% and 19%,
respectively, of AptarGroup's net sales.
Over the past 25 years, the number of aerosol valve companies operating in
North America and Europe has decreased significantly. The majority of the
North American market is concentrated in three companies. AptarGroup believes
it is the largest aerosol valve supplier in North America. The Company's
aerosol valves have historically been targeted primarily to the personal care
and household/industrial markets.
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/Industrial
The primary applications for continuous spray valves in the
household/industrial market include disinfectants, spray paints, insecticides,
automotive products and laundry sprays. In addition, metered dose
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aerosol valves are used in the household/industrial market for air fresheners.
The Company sells several customized overcaps that allow product to be
dispensed by actuating a valve which is 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 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. The Company works with
pharmaceutical companies as they work to comply with environmental regulations
such as phasing out aerosol chlorofluorocarbon (CFC) usage, and changing to
alternative propellants.
Other
Aerosol valves are not significantly used in the food industry. In the
fragrance/cosmetics market, pumps have largely replaced valves as the
preferred dispensing mechanism.
Research and Development
The Company is continuously involved in developing innovative products and
adapting existing products for new markets and customer requirements.
Expenditures for research and development activities were $25.6 million
(excluding a $3.3 million write-off of purchased in-process research and
development associated with the Microflow acquisition), $23.6 million and
$20.8 million in 1999, 1998 and 1997, 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 manufacture
products in a high-speed, cost-efficient manner. The Company has experience in
liquid silicone rubber molding that the Company utilizes in its dispensing
closure operations. The Company also uses bi-injection molding technology in
its various product lines to develop new innovative products for the packaging
industry. The Microflow acquisition provides electronic capabilities that the
Company did not previously possess.
Manufacturing and Sourcing
The principal raw materials used in AptarGroup's production are plastic
resins and certain metal products. AptarGroup believes an adequate supply of
such raw materials is readily available from existing and alternative sources.
The Company attempts to offset inflation through cost containment and
increased selling prices over
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time, as allowed by market conditions. AptarGroup also purchases plastic and
metal components that are used in the final assembly of its products from
suppliers near its production facilities. Certain suppliers of these
components have unique technical abilities that make AptarGroup dependent on
them, particularly for aerosol valve and pump production in North America. In
addition, the Company's pharmaceutical products often use specific approved
plastic resin for its customers. Significant delays in receiving components
from these suppliers or discontinuance of an approved plastic resin would
require AptarGroup to seek alternative sources, which could result in higher
costs as well as impact the ability of the Company to supply products in the
short term. 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. Most orders placed with the Company are ready for
delivery within 120 days. Some customers place blanket orders which extend
beyond this delivery period; however, deliveries against 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 personal care, fragrance/cosmetics, pharmaceutical,
household/industrial products and food marketers in the world. The Company has
over 2,500 customers with no single customer accounting for greater than 6% of
1999 net sales. Over the past few years, a consolidation of the Company's
customer base has occurred. This trend is expected to continue. A
concentration of customers may result in pricing pressures or a loss of
volume. This situation also presents opportunities for increasing sales due to
the breadth of the Company's product line, its international presence, and
long-term relationships with certain customers.
International Business
A significant number of AptarGroup's operations are located in Europe.
Sales in Europe for the years ended December 31, 1999, 1998 and 1997 were
approximately 54%, 57% and 55%, respectively, of net sales. The majority of
units sold in Europe are manufactured at facilities in England, France,
Germany, Ireland, Italy, Spain and Switzerland. Other geographic areas
serviced by AptarGroup include Argentina, Australia, Brazil, Canada, Czech
Republic, China, India, Indonesia, Japan, and Mexico, though the combined
sales from these areas is not significant to AptarGroup's consolidated sales.
Export sales were $57.9 million, $21.4 million, and $20.2 million in 1999,
1998 and 1997, respectively.
Foreign Currency
A significant number of AptarGroup's operations are located outside of the
United States. Because of this, movements in exchange rates may have a
significant impact on the translation of financial conditions and results of
operations of AptarGroup's foreign entities. The Company's most significant
foreign exchange exposure is to the Euro. In addition, with the recent
geographic expansion, the Company now has foreign exchange exposure to South
American currencies as well as the Chinese Renminbi. The Company manages its
exposures to foreign exchange principally with forward exchange contracts to
hedge certain firm purchase and sales commitments and intercompany cash
transactions denominated in foreign currencies. A strengthening U.S. dollar
relative to foreign currencies has a dilutive translation effect on the
Company's financial condition and results of operations. Conversely, a
weakening U.S. dollar would have an additive effect.
In some cases, the Company sells products denominated in a currency
different from the currency in which the related costs are incurred. Changes
in exchange rates on such inter-country sales could materially impact the
Company's results of operations.
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Working Capital Practices
Collection and payment periods tend to be longer for the Company's
operations located outside the United States due to local business practices.
Historically, the Company has not needed to keep significant amounts of
finished goods inventory to meet customer requirements.
Employee and Labor Relations
AptarGroup has approximately 6,200 full-time employees. Of the full-time
employees, approximately 1,600 are located in North America, 4,100 are located
in Europe and the remaining 500 are located in Asia and South America.
Approximately 490 of the North American employees are covered by a collective
bargaining agreement, while the majority of the Company's international
employees are covered by collective bargaining arrangements made at either the
local or national 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.
AptarGroup's competitors range from regional to international companies.
AptarGroup expects the market for its products to remain competitive.
AptarGroup believes its competitive advantages are consistent high levels
of innovation, quality, service and geographic diversity and breadth of
products. The Company's manufacturing strength lies in the ability to mold
complex plastic components in a cost-effective manner and to assemble products
at high speeds.
Environment
AptarGroup's manufacturing operations primarily involve plastic injection
molding and automated assembly processes. Historically, the environmental
impact of these processes has been minimal, and management believes it meets
current environmental standards in all material respects.
Government Regulation
To date, the manufacturing 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. 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 alternative propellant and
product formulations.
Aerosol packaging of paints has also been adversely impacted by local
regulations adopted in many large cities in the United States designed to
address the problem of spray painted graffiti. Aerosol packaging may 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.
10
<PAGE>
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 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 requirements impact the Company's customers and could affect the
Company's investment in and manufacturing of products for the pharmaceutical
market.
Item 2. Properties
The principal offices and manufacturing facilities of AptarGroup are either
owned or leased by the Company or its subsidiaries. None of the owned
principal properties is subject to a lien or other encumbrance material to the
operations of the Company. The Company believes that existing operating leases
will be renegotiated as they expire 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 Freyung
Poincy
Verneuil Sur Avre
ITALY NORTH AMERICA UNITED KINGDOM
San Giovanni Teatino (Chieti) Cary, Illinois, USA Leeds, England
Manoppello Midland, Michigan, USA
Milan Mukwonago, Wisconsin, USA
Norwalk, Connecticut, USA
Queretaro, Mexico
Stratford, Connecticut, USA
SWITZERLAND IRELAND BRAZIL
Messovico Tourmakeady, County Mayo Sao Paulo
ARGENTINA CHECH REPUBLIC
Buenos Aires Ckyne
In addition to the above countries, the Company has sales offices or other
manufacturing facilities in Australia, Canada, India, Indonesia, Japan, and
Spain. The Company's corporate office is located in Crystal Lake, Illinois.
Item 3. Legal Proceedings
Legal proceedings involving the Company generally relate to product
liability and patent infringement issues. In the opinion of AptarGroup's
management, the outcome of pending claims and litigation is not likely to have
a material adverse effect on the Company's financial position or the results
of its operations.
Historically, product liability claims for all products of the Company have
been minimal. However, the increase in pump and aerosol valve applications for
pharmaceutical products may result in an increase in product
11
<PAGE>
liability claims. Quality control systems are specifically designed to prevent
defects in the Company's products. Additionally, the Company maintains product
liability insurance in excess of its historical claims experience.
In October 1999, Philson, Inc. a subsidiary of AptarGroup acquired as part
of the Emson acquisition, entered into a Consent Agreement with the
Connecticut Department of Environmental Protection relating to alleged
wastewater discharge permit violations at its Watertown facility, which
violations predated the acquisition by AptarGroup. Philson paid a $40,000
civil penalty and contributed $70,000 to the Naugatuck River restoration fund
in settlement of the claims. The foregoing amounts were reimbursed in full to
AptarGroup by the sellers of the Philson business in accordance with the terms
of the acquisition agreement.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information set forth in Note 19 "Quarterly Data (Unaudited)" to the
Consolidated Financial Statements contained in the Company's 1999 Annual
Report to Stockholders, page 48, is incorporated herein by reference. The
Common Stock of AptarGroup is traded on the New York Stock Exchange (symbol:
ATR). As of March 16, 2000, stockholders of record totaled approximately 800.
During the quarter ended December 31, 1999, 1,775 shares of Common Stock of
the Company were sold to participants in the FCP Aptar Savings Plan, (the
"Plan") at an average price of $26.05 per share. At December 31, 1999, the
Plan owns 2,445 shares of Common Stock of the Company. Employees of AptarGroup
S.A., a subsidiary of the Company, are eligible to participate in the Plan.
All eligible participants are located outside of the United States. An agent
independent of the Company purchases shares of Common Stock available under
the Plan for cash on the open market and the Company issues no shares. The
Company does not receive any proceeds from the purchase of Common Stock under
the Plan. The agent under the Plan is Banque Nationale de Paris. No
underwriters are used under the Plan. All shares are sold in reliance upon the
exemption from registration under the Securities Act of 1933 provided by
Regulation S promulgated under that Act.
Item 6. Selected Financial Data
The information set forth under the heading "Five Year Summary of Selected
Financial Data" appearing on page 50 of the Company's 1999 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 51-57 of the Company's 1999 Annual Report to Stockholders
is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The information set forth under the heading "Management's Discussion and
Analysis of Consolidated Results of Operations and Financial Condition"
appearing on pages 51-57 of the Company's 1999 Annual Report to Stockholders
is incorporated herein by reference.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data
The information set forth under the headings "Consolidated Balance Sheets,"
"Consolidated Statements of Income," "Consolidated Statements of Cash Flows,"
"Consolidated Statements of Changes in Equity," "Notes to Consolidated
Financial Statements" and "Report of Independent Accountants" appearing on
pages 30-49 of the Company's 1999 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 28, 2000.
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 10, 2000 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 53 has been Executive Vice President of SeaquistPerfect
Dispensing L.L.C. since 1996 and Geschaftsfuhrer of SeaquistPerfect Dispensing
GmbH since 1986. In 1996, Perfect-Valois Ventil GmbH changed its name to
SeaquistPerfect Dispensing GmbH.
Francois Boutan, age 57 has served in the capacity of Vice President
Finance-Europe since 1998. Mr. Boutan was Financial Director and Controller of
the European operations of AptarGroup from 1988 to 1998.
Stephen J. Hagge, age 48, has been Executive Vice President and Chief
Financial Officer, Secretary and Treasurer of AptarGroup since 1993.
Lawrence Lowrimore, age 55, has been Vice President-Human Resources of
AptarGroup since 1993.
Francesco Mascitelli, age 49, has been Direttore Generale of Emsar S.p.A.,
an Italian subsidiary, since 1991. In 1999, Sar S.p.A. changed its name to
Emsar S.p.A.
Emil Meshberg, age 52, has been Vice President of AptarGroup since February
1999, and has served as Chief Executive Officer and President of Emson
Research, Inc. for more than the past five years.
James R. Reed, age 63, has served as President of SeaquistPerfect
Dispensing L.L.C. (formerly known as Seaquist Valve and as Seaquist
Dispensing) since 1987.
Eric S. Ruskoski, age 52, has been President of Seaquist Closures L.L.C.
since 1987.
Hans-Josef Schutz, age 55, has been Geschaftsfuhrer of the Pfeiffer Group
since 1993.
Alain Vichot, age 66, has been Vice President-Marketing of AptarGroup since
1998. From 1994 to 1998, Mr. Vichot was Directeur General Adjoint of Valois
S.A.
13
<PAGE>
Olivier Fourment, age 42, has been Directeur General of Valois S.A. since
January 2000. Mr. Fourment was Directeur de Division Pharmacie of Valois S.A.
from 1997 to 1999 and Directeur Commercial, Division Pharmacie of Valois S.A.
from 1990 to 1997.
Olivier De Pous, age 55, has been Directeur General of Valois S.A. since
January 2000. Mr. De Pous was Directeur de Division Parfumerie Cosmetique of
Valois S.A. from 1997 to 1999 and Directeur Technique, Division Parfumerie
Cosmetique of Valois S.A. from 1992 to 1997.
Item 11. Executive Compensation
The information set forth under the headings "Board Compensation" and
"Executive Compensation" (other than "Compensation Committee Report on
Executive Compensation" and "Performance Graph") in the Registrant's Proxy
Statement for the annual meeting of stockholders to be held on May 10, 2000 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 10, 2000, 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 10, 2000 is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
Location
--------
<C> <S> <C>
1) Financial Statements required by Item 8 of this
Form
Consolidated Balance Sheets....................... Annual Report, page 30
Consolidated Statements of Income................. Annual Report, page 32
Consolidated Statements of Cash Flows............. Annual Report, page 33
Consolidated Statements of Changes in Equity...... Annual Report, page 34
Notes to Consolidated Financial Statements........ Annual Report, page 35
Report of Independent Accountants................. Annual Report, page 49
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 19-21 of this report.
</TABLE>
(b)Reports on Form 8-K during the quarter ended December 31, 1999:
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized in the City of
Crystal Lake, State of Illinois on this 21st day of March 2000.
AptarGroup, Inc.
(Registrant)
/s/ Stephen J. Hagge
By __________________________________
Stephen J. Hagge
Executive Vice President and Chief
Financial Officer, Secretary and
Treasurer
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ King Harris Chairman of the Board and March 21, 2000
____________________________________ Director
King Harris
/s/ Carl Siebel President and Chief March 21, 2000
____________________________________ Executive Officer and
Carl Siebel Director (Principal
Executive Officer)
/s/ Peter Pfeiffer Vice Chairman of the Board March 21, 2000
____________________________________ and Director
Peter Pfeiffer
/s/ Stephen J. Hagge Executive Vice President and March 21, 2000
____________________________________ Chief Financial Officer,
Stephen J. Hagge Secretary and Treasurer
(Principal Accounting and
Financial Officer)
/s/ Eugene L. Barnett Director March 21, 2000
____________________________________
Eugene L. Barnett
/s/ Robert Barrows Director March 21, 2000
____________________________________
Robert Barrows
/s/ Ralph Gruska Director March 21, 2000
____________________________________
Ralph Gruska
/s/ Leo A. Guthart Director March 21, 2000
____________________________________
Leo A. Guthart
/s/ Dr. Joanne C. Smith Director March 21, 2000
____________________________________
Dr. Joanne C. Smith
/s/ Alfred Pilz Director March 21, 2000
____________________________________
Alfred Pilz
</TABLE>
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders
of AptarGroup, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 16, 2000, appearing in the 1999 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 schedules listed in Item
14(a)(2) of this Form 10-K. In our opinion, these financial statement
schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
- --------------------------
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
March 21, 2000
16
<PAGE>
AptarGroup, Inc.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Balance at Charged to Deductions Balance
beginning costs and from at end
of period expenses Acquisition reserve (a) of period
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1999
Allowance for doubtful
accounts............... $5,132 $ 679 $2,013 $ 959 $6,865
Inventory obsolescence
reserve................ 6,815 2,548 512 1,994 7,881
1998
Allowance for doubtful
accounts............... $3,812 $1,912 $ 147 $ 739 $5,132
Inventory obsolescence
reserve................ 5,439 1,682 74 380 6,815
1997
Allowance for doubtful
accounts............... $3,623 $1,261 $ -- $1,072 $3,812
Inventory obsolescence
reserve................ 5,921 909 -- 1,391 5,439
</TABLE>
- --------
(a) Write-off of accounts considered uncollectible, net of recoveries and
foreign currency translation adjustments.
17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number and Description of Exhibit
---------------------------------
<C> <S>
3(i) Amended and Restated Certificate of Incorporation of the Company,
filed as Exhibit 3(i) to the Company's quarterly report on Form 10-Q
for the quarter ended June 30, 1999 (File No. 1-11846), is hereby
incorporated by reference.
3(ii) Amended and Restated By-Laws of the Company, filed as Exhibit 3(ii)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (File No. 1-11846) is hereby incorporated by
reference.
4.1 Rights Agreement dated as of April 6, 1993 between the Company and
Chemical Bank, as rights agent, filed as Exhibit 4.1 of the
Company's Annual Report on Form 10-K for the year ended December 31,
1993 (the "1993 10-K")(File No. 1-11846), is hereby incorporated by
reference.
4.2 Certificate of Designation, Preferences and Rights of Junior
Participating Preferred Stock, Series A, of the Company, filed as
Exhibit 6.4 of the Company's Registration Statement on Form 8-A
filed under the 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.
4.3 Note Purchase Agreement dated as of May 15, 1999 relating to $107
million senior unsecured notes, series 1999-A, filed as Exhibit 4.1
to the Company's quarterly report on Form 10-Q for the quarter ended
June 30, 1999 (File No. 1-11846), is hereby incorporated by
reference.
4.4 Multicurrency Credit Agreement dated as of June 30, 1999 among the
Company, the lenders party thereto, Bank of America National Trust
and Savings Association, as Agent, and Bank of America Securities
LLC, as Arranger, filed as Exhibit 4.2 to the Company's quarterly
report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-
11846), is hereby incorporated by reference.
10.1 AptarGroup, Inc. 1992 Stock Awards Plan, filed as Exhibit 10.1
(included as Appendix B to the Prospectus) to the Company's
Registration Statement on Form S-1, Registration Number 33-58132,
filed on February 10, 1993 (the "Form S-1"), is hereby incorporated
by reference.**
10.2 AptarGroup, Inc. 1992 Director Stock Option Plan, filed as Exhibit
10.2 (included as Appendix C to the Prospectus) to the Form S-1, is
hereby incorporated by reference.**
10.3 Agreement of Employment dated as of March 28, 1990 of Ervin J.
LeCoque, filed as Exhibit 10.3 to the Form S-1 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 Form S-1, 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 Form S-1, 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 to
the 1993 10-K, 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
to the 1993 10-K, 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 to the 1993 10-K, 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 to the 1993 10-K, 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 to the 1993 10-K, is hereby incorporated by
reference.**
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Number and Description of Exhibit
---------------------------------
<C> <S>
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.**
10.12 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.**
10.13 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.**
10.14 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.**
10.15 AptarGroup, Inc. 1996 Director Stock Option Plan, filed as Appendix
B to the Company's Proxy Statement, dated April 10, 1996 (File No.
1-11846), is hereby incorporated by reference.**
10.16 Stock Purchase Agreement dated as of February 16, 1999 between
AptarGroup, Inc. and The Meshberg Family Trust, filed as Exhibit
2.1 to the Company's Report on Form 8-K filed on February 26, 1999
(File No. 1-11846), is hereby incorporated by reference.
10.17 Stock Purchase Agreement dated as of February 16, 1999 among
AptarGroup, Inc., Emil Meshberg and Samuel Meshberg, filed as
Exhibit 2.2 to the Company's Report on Form 8-K filed on
February 26, 1999 (File No. 1-11846), is hereby incorporated by
reference.
10.18 Agreement of Merger dated as of February 16, 1999 among AptarGroup,
Inc., R Merger Corporation, R.P.M. manufacturing Company, Emil
Meshberg and Ronald Meshberg, filed as Exhibit 2.3 to the Company's
Report on Form 8-K filed on February 26, 1999 (File No. 1-11846),
is hereby incorporated by reference.
10.19* Employment Agreement dated October 19, 1995, of James R. Reed.**
10.20* Employment Agreement dated February 17, 1999, of Emil Meshberg.**
10.21* Amendment No.1 to Service Agreement dated January 1, 2000 of Carl
A. Siebel.**
13* 1999 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
</TABLE>
- --------
* Filed herewith.
** Management contract or compensatory plan or arrangement.
19
<PAGE>
EXHIBIT 10.19
7/31/95
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT between AptarGroup, Inc., a Delaware
corporation (the "Company"), and James R. Reed (the "Executive") is entered into
on October 19, 1995, effective as of April 22, 1995. 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 continued employment by the Company, upon the terms and
subject to the conditions set forth herein for the period beginning on April 22,
1995 and ending on April 22, 2001, unless earlier terminated pursuant to Section
4 hereof (the "Employment Period").
2. Position and Duties. During the Employment Period, the Executive
-------------------
shall serve as the President of the Seaquist Dispensing division of the Company
(the "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 Board of Directors of the Company (the "Board")
or 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 Division or such other business unit of the Company
as determined by the Company CEO.
3. Compensation. (a) The Company shall pay the Executive a salary
------------
during the Employment Period, in monthly installments, initially at the rate of
$200,000 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.
<PAGE>
(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. During the Employment Period, the
Executive shall also be entitled to participate in a supplemental executive
retirement program, the principal terms of which are set forth in Exhibit A
hereto (the "SERP").
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) 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"), (iii) termination of the Executive's employment
by the Company for Cause ("Termination for Cause"), (iv) the Executive's death
or (v) 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 this 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 extend provided in any benefit
plan in which the Executive has participated, including
2
<PAGE>
the SERP, 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 prior to April 22, 2001 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 continuation period under any disability benefit
plan in which the Executive has participated as an employee of the company.
(e) If the Employment Period ends prior to April 22, 2001 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.
(f) Notwithstanding the foregoing provisions of this Section 4, in
the event of a Change in Control (as defined in Section 4(g) hereof), the
employment of the Executive hereunder shall not be terminated by the Company or
any successor to the Company or the Division following such Change in Control
unless the Executive receives written notice of such termination from the
Company at least 12 months (or such lesser number of months remaining until the
end of the employment period) prior to the date of such termination. In the
event of such termination of employment by the Company following a Change in
Control, or in the event that the Executive terminates his employment hereunder
for Good Reason (as defined in Section 4(g) hereof) 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, and the Executive
shall accrue benefits under the SERP, as if the Employment Period had remained
in effect until April 22, 2001. The Executive agrees that he shall not terminate
his employment hereunder, other than for Good Reason, within one year following
a Change in Control
3
<PAGE>
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, and the Executive shall accrue
benefits under the SERP, as if the Employment Period had remained in effect
until the date which is six months following the date of such termination or
April 22, 2001, whichever occurs first.
(g) 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, or the Division is sold by the Company
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.
(h) 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(h)) (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.
(i) All determinations required to be made under Section 4(h),
including whether and when a reduction pursuant to Section 4(h) 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
4
<PAGE>
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 opinion 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(h) 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
5
<PAGE>
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 two
years thereafter if this Agreement is terminated prior to April 22, 2001 or five
years thereafter if this Agreement is terminated on or after April 22, 2001 (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 than 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 of 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
6
<PAGE>
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 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 prepaid, addressed a) if to the Executive, to
James R. Reed, 6712 Rhode Island Trail, Crystal Lake, Illinois 60012, 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
7
<PAGE>
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: President and COO
------------------------------------------
/s/ James R. Reed
----------------------------------------------
James R. Reed
8
<PAGE>
Exhibit A
---------
Principal Terms
of
Supplemental Executive Retirement Program
-----------------------------------------
The SERP benefit will be paid in full in accordance with the schedule
set forth below (the "Schedule") if the Executive is employed by the Company
until he reaches age 65 or if, following a change in control the Company
terminates the Executives employment, or if the Executive terminates his
employment for Good Reason. If the employment of the Executive is terminated
prior to his attaining age 65 on account of Termination for Disability,
Termination for Cause or Termination by the Executive, the SERP benefit accrued
through the date of termination of employment will be paid in accordance with
the Schedule beginning at age 65. If the employment of the Executive terminates
on account of his death prior to his attaining age 65, 50 percent of the SERP
benefit accrued through the date of termination of employment in accordance with
the Schedule will be paid to his spouse. If the Executive dies following the
termination of his employment, 50 percent of the SERP payable to the Executive
at the date of his death in accordance with the Schedule will be paid to his
spouse. The SERP is not a qualified plan for federal income tax purposes.
Schedule of Payments
--------------------
Amount of
Annual Payment
Period Earned for 10 Years
------------- ------------
4/22/95-4/22/96 $ 8,500
4/23/96-4/22/97 17,000
4/23/97-4/22/98 25,500
4/23/98-4/22/99 34,000
4/23/99-4/22/2000 42,500
4/23/2000-4/22/2001 50,000
<PAGE>
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT between AptarGroup, Inc., a Delaware
corporation (the "Company"), and Emil Meshberg (the "Executive") is entered into
as of February 17, 1999. 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, effective upon the consummation (the "Effective
Date") of the transactions (the "Stock Purchase") contemplated by the Stock
Purchase Agreement dated as of the date hereof between the Company and The
Meshberg Family Trust (the "Stock Purchase Agreement"). The term of employment
of the Executive by the Company pursuant to this Agreement (the "Employment
Period") shall commence on the Effective Date and shall end on the third
anniversary of the Effective Date, unless earlier terminated pursuant to Section
4 hereof; provided, however, that this Agreement shall terminate and shall be of
no further force or effect if the Stock Purchase Agreement shall be terminated
and the Stock Purchase shall not be consummated pursuant to the terms of the
Stock Purchase Agreement.
2. Position and Duties. During the Employment Period, the Executive
-------------------
shall be responsible for the performance of Emson Research, Inc. and its
subsidiaries, Philson, Inc. and R.P.M. Manufacturing Company (collectively,
"Emson") and the SAR group of companies controlled by the Company (collectively,
"SAR"). The Executive shall have the normal duties and authority of an
executive having the responsibility for the performance of Emson and SAR,
subject to the direction of the Board of Directors of the Company (the "Board"),
the Chief Executive Officer of the Company (the "Company CEO") and the Vice
Chairman of the Company (the "Company Vice Chairman"). The Executive shall have
the titles of Vice President of the Company and Chief Executive Officer of Emson
Research, Inc. and shall report to the Company Vice Chairman. During the
Employment Period, the Executive shall devote his best efforts and his full
business time to the business and affairs of the Company. During the Employment
Period, the Executive's office shall be located in Stratford, Connecticut. On
or before December 31, 1999, the Executive shall resign as an officer of NIOB
Ltd.
3. Compensation.
------------
(a) Salary. The Company shall pay the Executive a salary during the
------
Employment Period, in monthly installments, initially at the rate of $300,000
per annum. Such base salary shall be reviewed annually and shall be increased
(but shall not be decreased) annually, as determined by the Company CEO and the
Company Vice Chairman. In no event shall any annual percentage increase be less
than the percentage increase, if any, in the CPI (as defined below) for the
immediately preceding calendar year. As used in this Agreement, the term "CPI"
means the Consumer Price Index (all items) of the United States Bureau of Labor
Statistics for the Northeast Region of the United States, or, if that index is
not in use, its successor, or, if there is no successor, an index that the
Company CEO or the Company Vice Chairman reasonably selects, which index is
intended to reflect the change in the cost of living in the Northeast Region of
the United States.
<PAGE>
(b) Annual Performance Bonus. The Executive shall be entitled to
------------------------
receive an annual performance bonus payable in cash for each fiscal year of the
Company during the Employment Period in accordance with a bonus plan agreed upon
by the Company and the Executive. The annual performance bonus payable under
such bonus plan shall be based upon (i) aggregate Company results, (ii)
divisional results, 50 percent of which shall be determined from the performance
of Emson and 50 percent of which shall be determined from the performance of
SAR, and (iii) personal objectives agreed upon by the Company and the Executive.
The Executive shall participate fully in such bonus plan for the Company's 1999
fiscal year, as if the Employment Period commenced January 1, 1999.
(c) Stock Options. On the Effective Date, the Compensation Committee
-------------
of the Board shall grant to the Executive non-qualified options (the "Initial
Options") to purchase 20,000 shares of common stock, par value $.01 per share,
of the Company ("Common Stock"). Thereafter, the Executive shall be eligible,
on the same basis as peer executives of the Company located in the United
States, to be granted additional non-qualified options (the "Subsequent
Options") to purchase Common Stock. The Initial Options shall be subject to the
terms and provisions of the AptarGroup, Inc. 1996 Stock Awards Plan and the
stock option agreement relating to the Initial Options, which stock option
agreement shall be in the form customarily used by the Company, except that such
stock option agreement shall provide that if the Company terminates the
employment of the Executive without "Cause," as defined in Section 4(b)(i)
hereof, or if the Executive terminates his employment for "Good Reason," as
defined in Section 4(b)(ii) hereof, any unexercisable Initial Options shall
immediately become exercisable and may thereafter be exercised in full for a
period of one year following such termination. The Subsequent Options shall be
subject to the terms and provisions of the stock option plan pursuant to which
they are granted and the stock option agreement relating to the Subsequent
Options, which stock option agreement shall be in the form then customarily used
by the Company.
(d) Medical and Dental Insurance. The Executive and his qualified
----------------------------
dependents shall be entitled to continue to participate in the medical plan of
Emson Incorporated, and the Company shall cause Emson Incorporated to continue
to provide coverage thereunder to the Executive and his qualified dependents if
they elect to continue such participation, until December 31, 1999. The
Executive and his qualified dependents shall be eligible to participate in the
medical and dental plans of the Company in accordance with the terms thereof
following any open enrollment period thereunder and, upon such participation,
coverage for the Executive and his qualified dependents under the medical plan
of Emson Incorporated shall terminate.
(e) Life Insurance. During the Employment Period, the Company shall
--------------
cause Emson Research, Inc., at its cost, to continue to provide the Executive
with coverage under the split-dollar insurance policy on the life of the
Executive currently in effect. In addition, the Executive shall be eligible to
participate, commencing on the Effective Date and continuing during the
Employment Period, in the Company's life insurance plan in accordance with the
terms thereof, with coverage of $200,000 on the life of the Executive, the cost
of which shall be paid by the Company. During the Employment Period, the
Executive also shall be entitled to participate, at his own expense, in the
optional life insurance program of the Company in accordance with the terms
thereof.
2
<PAGE>
(f) Liability Insurance. The Company shall provide coverage to the
-------------------
Executive under the Company's directors and officers liability insurance policy
in accordance with the terms thereof to the extent that the Company continues to
provide such insurance to its officers.
(g) Pension Plan; Profit Sharing and Savings Plan. Commencing on the
---------------------------------------------
Effective Date, the Executive shall be eligible to participate in the Company's
pension plan in accordance with the terms thereof and shall be fully vested in
the benefits thereunder. Commencing on the Effective Date, the Executive shall
be eligible to participate in the Company's profit sharing and savings plan in
accordance with the terms thereof and shall be fully vested in Company
contributions on behalf of the Executive thereunder.
(h) Automobile. During the Employment Period, the Company shall
----------
provide the Executive with the use of an automobile of the type normally leased
by the Company for its officers located in the United States or, if the
Executive so elects, of the type currently used by the Executive and leased by
Emson Incorporated, with the Company paying lease payments in an amount equal to
those for an automobile of the type normally leased by the Company for its
officers located in the United States and the Executive paying any lease
payments in excess thereof.
(i) Country Club Membership. During the Employment Period, the
-----------------------
Company shall reimburse the Executive for the dues, assessments and charges,
other than charges for personal use, for membership in one country club selected
by the Executive.
(j) Vacation. During the Employment Period, the Executive shall be
--------
entitled each calendar year to four weeks of paid vacation in addition to
holidays observed by the Company.
(k) Other Benefits. During the Employment Period, the Executive shall
--------------
be entitled to participate in any benefit programs of the Company which are in
addition to those set forth in this Section 3 on the same basis as other peer
executives of the Company located in the United States having the same level of
responsibility, which programs shall consist of those 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.
(l) Reimbursement of Expenses. 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.
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) the retirement of the Executive at age 65,
(iii) the 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, (iv) the Executive's death, (v)
the termination of the Executive's employment by the Company with or without
Cause or (vi) the termination of the Executive's employment by the Executive
with or without Good Reason.
3
<PAGE>
(b) For purposes of this Agreement, the following terms shall have
the respective meanings set forth below:
(i) "Cause" shall mean (A) the commission of a felony, (B) habitual
drunkenness or repeated malfeasance for which written notice thereof is
given to the Executive by the Board (and such malfeasance, if curable,
shall not have been cured within 30 days thereafter) or (C) the breach of
any provision of the Employee Confidentiality Agreement or the Conflict of
Interest Policy referred to in Section 5 hereof.
(ii) "Good Reason" shall mean, without the written consent of the
Executive (A) any reduction in the responsibilities of the Executive as set
forth in Section 2 hereof, (B) any demotion of the Executive in terms of
title or reporting responsibilities as set forth in Section 2 hereof, (C)
any "Change in Control" of the Company, as defined in Section 4(b)(iii)
hereof, (D) any relocation of the Executive's office to a location more
than 20 miles from its location on the Effective Date or (E) any breach of
this Agreement by the Company which is not cured promptly following written
notice thereof given by the Executive to the Company, provided that an
isolated, insubstantial or inadvertent action taken in good faith shall not
constitute Good Reason.
(iii) "Change in Control" shall mean any person becoming the holder
of securities representing a majority of the voting power of the Company,
whether by merger, consolidation, tender offer or otherwise.
(c) If the Employment Period ends for any reason set forth in
Section 4(a) hereof, except as otherwise provided in Section 4(d), Section 4(e)
or Section 5 hereof, 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 unpaid expenses which shall have
been incurred as of the date of such termination, (iii) 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 and
(iv) if the Executive so elects, insurance coverage for the Executive and his
qualified dependents at the Executive's own expense under the medical plan of
Emson Incorporated or the medical and dental plan of the Company in which the
Executive and his qualified dependents are participating at the date of such
termination of employment, as the case may be, for a period of up to 18 months
after the date of such termination of employment or as otherwise provided by the
Consolidated Omnibus Budget Reconciliation Act of 1985.
(d) If the Employment Period ends on account of the termination of
the Executive's employment by the Company without Cause or by the Executive for
Good Reason, in addition to the amounts and benefits described in Section 4(c)
hereof and, if applicable, Section 4(e) 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 later to occur of the date (i) on which the
Employment Period would have expired pursuant to Section 1 hereof or (ii) which
is 24 months following the date of such termination of employment, such payments
to be made at the times such amounts would have been paid had the Employment
Period remained in effect.
4
<PAGE>
(e) If the Employment Period ends for any reason set forth in Section
4(a) hereof, other than termination of the Executive's employment by the Company
for Cause or by the Executive without Good Reason, the Company shall pay to the
Executive any bonus payable for the Company's fiscal year in which such
termination of employment occurs, such bonus to be prorated in accordance with
Company policy and paid at the time that bonuses for such year are paid to other
executives of the Company.
5. Confidentiality Agreement and Conflict of Interest Policy.
---------------------------------------------------------
Simultaneously with the execution of this Agreement, the Company and the
Executive are entering into an Employee Confidentiality Agreement in the form
attached hereto as Exhibit A (the "Confidentiality Agreement") and the Executive
is acknowledging the Company's Conflict of Interest Policy in the form attached
hereto as Exhibit B (the "Conflict of Interest Policy"). As set forth in
Sections 9 and 10 of the Confidentiality Agreement, the period during which the
Executive is prohibited from competing with the Company and Emson and their
respective subsidiaries and affiliates and is prohibited from soliciting any of
their employees (the "Noncompetition Period") shall commence on the Effective
Date and shall continue until the later to occur of (a) the third anniversary of
the Effective Date and (b) the last day of the period during which the Executive
is receiving any payments pursuant to Section 3 or Section 4 hereof. If the
Employment Period terminates for any reason set forth in Section 4(a) hereof and
on the date of such termination the Noncompetition Period does not, pursuant to
the provisions of the Confidentiality Agreement, extend for at least one year
following such termination, the Company may, in its sole discretion, extend the
Noncompetition Period for an additional period (the "Additional Noncompetition
Period") so that the Noncompetition Period, as extended by the Additional
Noncompetition Period, shall end no later than one year after such termination
of the Employment Period. In the event of such extension of the Noncompetition
Period, provided that the Executive complies with such prohibition on
competition and solicitation during the Noncompetition Period and the Additional
Noncompetition Period, the Company shall pay to the Executive during the
Additional Noncompetition Period amounts equal to the amounts that the Executive
would have received as salary (based on the Executive's salary then in effect)
had the Employment Period been in effect during the Additional Noncompetition
Period, such payments to be made at the times such amounts would have been paid
had the Employment Period been in effect during the Additional Noncompetition
Period; provided, however, that the amounts shall cease to be payable to the
Executive pursuant to this sentence upon the Executive obtaining full time
employment at any time during the Additional Noncompetition Period (it being
understood that any such employment shall not violate the Executive's
noncompetition obligations described in this Agreement or the Confidentiality
Agreement or shorten the duration of the Additional Noncompetition Period).
6. Personal Property. The Executive represents to the Company that
-----------------
all furniture, wall hangings and other furnishings located in the Executive's
office on the Effective Date shall be the personal property of the Executive
and, based on such representation, the Company hereby agrees that it shall take
no action to cause such personal property not to remain the personal property of
the Executive.
7. 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 prepaid, addressed (a) if to the Executive, to
his address as set forth in the records of the
5
<PAGE>
Company, and if to the Company, to AptarGroup, Inc., 475 W. Terra Cotta Ave.,
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 7.
8. 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.
9. Entire Agreement. This Agreement, the Confidentiality Agreement
----------------
and Conflict of Interest Policy constitute the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersede and preempt 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.
10. 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.
11. Governing Law. This Agreement shall be governed by the internal
-------------
laws (as opposed to the conflicts of law provisions) of the State of Illinois.
12. 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.
13. Emson Europe Limited. At any time from and after the Effective
--------------------
Date, at the request of the Company, the Executive shall assign, convey and
deliver the 1 share of Emson Europe Limited held by the Executive to a Person
designated by the Company.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
APTARGROUP, INC.
By: /s/ Pfeiffer
--------------------------------------
Its: Vice Chairman
-------------------------------------
EXECUTIVE
/s/ Emil Meshberg
-----------------------------------------
Emil Meshberg
7
<PAGE>
EXHIBIT 10.21
AMENDMENT NO. 1 TO SERVICE AGREEMENT
------------------------------------
Amendment No. 1 dated as of January 1, 2000 (this "Amendment") to that
certain Service Agreement dated as of April 30, 1981 (the "Service Agreement")
between SeaquistPerfect Dispensing GmbH, formerly Perfect-Valois GmbH, (the
"Company") and Carl A. Siebel (the "Manager"). Capitalized terms used but not
otherwise defined herein shall have the respective meanings specified in the
Service Agreement.
WHEREAS, the parties have heretofore entered into the Service
Agreement; and
WHEREAS, in order to set forth certain understandings of the parties,
the parties desire to enter into this Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
A. Section 6(1) of the Service Agreement is deleted in its entirety
and replaced with the following:
(1) This Agreement shall continue until December 31, 2000 (the
"Original Term") and shall thereafter automatically be renewed for
successive one-year periods (each, a "Renewal Term"), unless terminated in
writing by the Company or the Manager with a notice of at least seven
months before the end of the Original Term or any Renewal Term.
B. Section 6(3) of the Service Agreement is deleted in its entirety
and replaced with the following:
(3) The Agreement terminates automatically upon the death of the
Manager.
C. A new Section 6(4) of the Service Agreement is added to read as
follows:
(4) Notwithstanding anything contained herein to the contrary, any
payments due to the Manager's survivors under Section 4(2) shall survive a
termination of this Agreement pursuant to Section 6(3).
D. The following miscellaneous provisions shall apply to this
Amendment:
(a) Except as amended herein, the Service Agreement remains in full
force and effect.
1
<PAGE>
(b) This Amendment may be executed in several counterparts, each of
which will be deemed an original, but all of which together will constitute
one and the same instrument.
(c) Wherever possible, each provision hereof shall be interpreted in
such manner as to be effective and valid under applicable law, but in case
any one or more of the provisions contained herein shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of
such invalidity, illegality or unenforceability without invalidating the
remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
Aptar GmbH
By: /s/ Pfeiffer
-----------------------------------
Name: Peter Pfeiffer
/s/ Carl A. Siebel
-----------------------------------
Carl A. Siebel
3
<PAGE>
AptarGroup, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share)
<TABLE>
<CAPTION>
December 31,
--------------------
1999 1998
--------- --------
<S> <C> <C>
Assets
Current Assets:
Cash and equivalents $ 32,416 $ 25,159
Accounts and notes receivable, less allowance for
doubtful accounts of $6,865 in 1999 and $5,132 in 1998 188,507 173,289
Inventories 109,151 101,091
Prepayments and other 21,160 17,110
--------- ---------
351,234 316,649
--------- ---------
Property, Plant and Equipment:
Buildings and improvements 96,427 90,768
Machinery and equipment 615,665 565,460
--------- ---------
712,092 656,228
Less: Accumulated depreciation (357,733) (335,650)
--------- ---------
354,359 320,578
Land 4,199 4,601
--------- ---------
358,558 325,179
--------- ---------
Other Assets:
Investments in affiliates 3,969 3,217
Goodwill, less accumulated amortization
of $9,943 in 1999 and $7,757 in 1998 127,214 49,689
Miscellaneous 22,323 19,939
--------- ---------
153,506 72,845
--------- ---------
Total Assets $ 863,298 $ 714,673
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
AptarGroup, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share)
<TABLE>
<CAPTION>
December 31,
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 25,499 $ 29,663
Current maturities of long-term obligations 9,648 7,561
Accounts payable and accrued liabilities 124,758 130,209
--------- ---------
159,905 167,433
--------- ---------
Long-Term Obligations 235,649 80,875
--------- ---------
Deferred Liabilities and Other:
Deferred income taxes 25,529 24,989
Retirement and deferred compensation plans 14,658 14,957
Minority interests 4,118 4,189
Deferred and other non-current liabilities 3,170 6,722
--------- ---------
47,475 50,857
--------- ---------
Stockholders' Equity:
Preferred stock, $.01 par value, 1 million shares authorized, none outstanding -- --
Common stock, $.01 par value, 99 million shares authorized,
36.5 and 36.1 million outstanding in 1999 and 1998, respectively 365 361
Capital in excess of par value 112,921 105,714
Retained earnings 381,762 329,582
Accumulated other comprehensive income (68,567) (20,149)
Less treasury stock at cost, 235.5 thousand shares in 1999 (6,212) --
--------- ---------
420,269 415,508
--------- ---------
Total Liabilities and Stockholders' Equity $863,298 $714,673
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
AptarGroup, Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1999 1998 1997
<S> <C> <C> <C>
Net Sales $834,317 $713,506 $655,390
---------- --------- ---------
Operating Expenses:
Cost of sales 519,704 444,615 418,110
Selling, research & development, and administrative 137,507 119,287 108,372
Depreciation and amortization 68,670 54,446 49,917
---------- --------- ---------
725,881 618,348 576,399
---------- --------- ---------
Operating Income 108,436 95,158 78,991
---------- --------- ---------
Other Income (Expense):
Interest expense (14,246) (6,451) (5,293)
Interest income 1,170 1,146 1,172
Equity in results of affiliates (918) 219 1,991
Minority interests (160) (389) (286)
Miscellaneous, net 796 (375) 2,021
Lawsuit settlements - 9,881 -
In-process research and development write-off (3,300) - -
---------- --------- ---------
(16,658) 4,031 (395)
---------- --------- ---------
Income Before Income Taxes 91,778 99,189 78,596
Provision For Income Taxes 33,066 38,368 32,067
---------- --------- ---------
Net Income $ 58,712 $ 60,821 $ 46,529
========== ========= =========
Net Income Per Common Share
Basic $ 1.62 $ 1.69 $ 1.29
========== ========= =========
Diluted $ 1.59 $ 1.65 $ 1.27
========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
AptarGroup 1999
Consolidated Statements of Cash Flows
(Dollars in thousands, brackets denote cash outflows)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 58,712 $ 60,821 $ 46,529
Adjustments to reconcile net income to net cash provided by operations:
Depreciation 64,405 51,808 47,199
Amortization 4,265 2,638 2,718
Provision for bad debts 679 1,912 1,261
Minority interests 160 389 286
Deferred income taxes 5,615 5,031 (26)
Retirement and deferred compensation plans 1,030 2,607 2,003
Equity in results of affiliates in excess of cash distributions received 918 (219) (1,991)
In-process research & development write-off 3,300 - -
Changes in balance sheet items, excluding effects from acquisitions
and foreign currency adjustments:
Accounts and notes receivable (8,422) (8,637) (28,799)
Inventories (6,684) (8,727) (11,639)
Prepaid and other current assets (4,841) 1,465 709
Accounts payable and accrued liabilities (10,842) (19,287) 32,449
Other changes, net 10,137 (4,822) (4,513)
--------- -------- --------
Net cash provided by operations 118,432 84,979 86,186
--------- -------- --------
Cash Flows from Investing Activities:
Capital expenditures (88,594) (79,811) (71,228)
Disposition of property and equipment 2,154 1,911 3,181
Acquisition of businesses (144,189) (20,027) -
Investments in affiliates (2,000) (1,300) (1,219)
(Issuance) collection of notes receivable, net (59) 330 (468)
--------- -------- --------
Net cash used by investing activities (232,688) (98,897) (69,734)
--------- -------- --------
Cash Flows from Financing Activities:
Proceeds from notes payable - 28,698 -
Repayments of notes payable (4,089) - (4,033)
Proceeds from long-term obligations 156,639 7,621 4,901
Repayments of long-term obligations (18,965) (11,374) (9,617)
Dividends paid (6,532) (5,763) (5,390)
Proceeds from stock options exercised 3,228 1,196 1,128
Purchase of treasury stock (6,212) - -
--------- -------- --------
Net cash provided (used) by financing activities 124,069 20,378 (13,011)
--------- -------- --------
Effect of Exchange Rate Changes on Cash (2,556) 982 (2,110)
--------- -------- --------
NET Increase in Cash and Equivalents 7,257 7,442 1,331
Cash and Equivalents at Beginning of Period 25,159 17,717 16,386
--------- -------- --------
Cash and Equivalents at End of Period $ 32,416 $ 25,159 $ 17,717
========= ======== ========
Supplemental Cash Flow Disclosure:
Interest paid $ 12,178 $ 6,347 $ 5,389
Income taxes paid $ 35,445 $ 36,400 $ 15,620
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE>
AptarGroup, Inc.
Consolidated Statements of Changes in Equity
Years Ended December 31, 1999, 1998 and 1997
(Amounts in thousands, except per share)
<TABLE>
<CAPTION>
Accumulated
Other Common Capital in
Comprehensive Total Retained Comprehensive Stock Treasury Excess of
Income Equity Earnings Income Par Value Stock Par Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1996 $335,699 $233,385 $ (1,437) $179 $103,572
Net income $ 46,529 46,529 46,529
Foreign currency translation
adjustments (35,911) (35,911) (35,911)
---------
Comprehensive income $ 10,618
=========
Stock awards 1,128 1 1,127
Cash dividends declared on
common stock (5,390) (5,390)
-------- --------- --------- --------- ------- ----------
Balance - December 31, 1997 342,055 274,524 (37,348) 180 104,699
Net income $ 60,821 60,821 60,821
Foreign currency translation
adjustments 17,199 17,199 17,199
---------
Comprehensive income $ 78,020
=========
Stock awards 1,196 1,196
Adjustment for stock split 181 (181)
Cash dividends declared on
common stock (5,763) (5,763)
-------- --------- --------- --------- ------- ----------
Balance - December 31, 1998 415,508 329,582 (20,149) 361 105,714
Net income $ 58,712 58,712 58,712
Foreign currency translation
adjustments (48,418) (48,418) (48,418)
---------
Comprehensive income $ 10,294
Stock awards ========= 3,228 2 3,226
Stock issued for acquisitions 3,983 2 3,981
Cash dividends declared on
common stock (6,532) (6,532)
Treasury stock purchased (6,212) (6,212)
-------- --------- --------- --------- ------- ----------
Balance - December 31, 1999 $420,269 $381,762 $(68,567) $365 $(6,212) $112,921
======== ========= ========= ========= ======= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
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 personal care, fragrance/cosmetics, pharmaceutical,
household/industrial products and food industries. The Company has manufacturing
facilities located throughout the world including facilities in the United
States, Europe, Asia and South America.
Basis of Presentation The accompanying consolidated financial statements
include the accounts of AptarGroup, Inc. and its subsidiaries. The terms
"AptarGroup" or "Company" as used herein refer to AptarGroup, Inc. and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Certain previously reported amounts have been reclassified to
conform to the current period presentation.
Stock Split In August 1998, the Company effected a two-for-one stock split.
Previously reported information has been restated to reflect the stock split.
Accounting Estimates The financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). This process requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash Management The Company considers all highly liquid investments with an
original maturity of three months or less when purchased to be cash equivalents.
35
<PAGE>
Inventories Inventories are stated at cost, which is lower than market. Costs
included in inventories are raw materials, direct labor and manufacturing
overhead. The costs of two domestic and two foreign inventories are determined
by using the last-in, first-out ("LIFO") method, while the remaining inventories
are valued using the first-in, first-out (FIFO) method.
Investments in Affiliated Companies The Company accounts for its investments in
20% to 50% owned affiliated companies which it does not control using the equity
method. These investments are in companies that manufacture and distribute
products similar to the Company's products or supply components or equipment to
the Company. No dividends from affiliated companies were received in 1999, 1998,
or 1997.
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 over lives ranging from 10 to 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 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 $25,611, $23,567, and $20,843 in 1999, 1998
and 1997, respectively. The 1999 amount excludes the $3,300 write-off of
purchased in-process research and development ("IPR&D") costs described in Note
3.
Income Taxes A provision has not been made for U.S. or additional foreign taxes
on $250,753 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 these undistributed foreign
earnings.
Translation of Foreign Currencies The functional currencies of all the
Company's foreign operations are the local currencies. Assets and liabilities
are translated into U.S. dollars at the rates of exchange on the balance sheet
date. Sales and expenses are translated at the average rates of exchange
prevailing during the year. The related translation adjustments are accumulated
in a separate section of stockholders' equity. Foreign currency transaction
gains and losses are reflected in income, as a component of miscellaneous income
and expense, and are not significant to the consolidated results of operations
for the years presented.
Stock-Based Compensation The Company follows APB Opinion No. 25 and the related
Interpretations in accounting for its stock option plans. Accordingly, no
significant compensation cost has been recognized for its stock awards. The
required disclosure for SFAS 123 "Accounting for Stock-Based Compensation" can
be found in Note 14.
36
<PAGE>
Note 2 - Acquisitions and Dispositions
During the first quarter of 1999, the Company acquired Emson Research, Inc.
and related companies ("Emson") for approximately $123 million in cash and
148,371 shares of the Company's common stock (valued at approximately $4
million). Approximately $23 million of debt was assumed in the transaction.
Emson is a leading supplier of perfume pumps in the North American market and
also maintains a significant position in the North American personal care and
food pump markets. The excess purchase price over the fair value of the net
assets acquired ("Goodwill") in these acquisitions was approximately $81 million
and is being amortized on a straight-line basis over 40 years.
During the third quarter of 1999, the Company acquired controlling
interests in two companies and acquired a line of business from a third company
for approximately $21 million in cash and approximately $4 million in assumed
debt. The Goodwill in these acquisitions was approximately $4 million and is
being amortized on a straight-line basis over lives ranging from 10 to 40 years.
Two of the three acquisitions are in companies that manufacture and distribute
products similar to the Company's products. The third acquisition, a company
called Microflow Engineering S.A. (Microflow), is a research and development
company whose objective is to develop an electronic dispensing system primarily
for the pharmaceutical market. Based upon an independent appraisal, a one-time
charge against pretax and net income of $3,300 for purchased IPR&D costs was
recorded in conjunction with the purchase of 80% of this company. See Note 3
below for further disclosure on purchased IPR&D.
During 1998 the Company acquired a controlling interest in three companies
and increased its interest in a fourth, for approximately $20 million in cash,
and 50,000 shares of the Company's common stock (valued at approximately $1.5
million). The Goodwill in these acquisitions was approximately $8 million and is
being amortized on a straight-line basis over 40 years. These acquisitions are
in companies that manufacture and distribute products similar to the Company's
products or supply components to the Company.
The acquisitions described above were accounted for by the purchase method
of accounting for business combinations. Accordingly, the accompanying
consolidated statements of income do not include any revenues or expenses
related to these acquisitions prior to their respective closing dates. Following
are the Company's unaudited pro forma results for 1999 and 1998, assuming the
acquisitions occurred on January 1, 1998 (in thousands, except for per share
data). The $3,300 write-off of IPR&D in 1999 has been excluded from the pro
forma results.
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Net Sales $845,479 $832,427
Net Income $ 60,699 $ 58,324
Net Earnings per common share:
Basic $ 1.67 $ 1.61
Diluted $ 1.64 $ 1.58
Weighted average shares outstanding:
Basic 36,373 36,221
Diluted 36,933 36,969
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and may not be indicative of the results of operations which would
have actually resulted had the combinations been in effect on January 1, 1998,
or of future periods.
Note 3 - Purchased In-Process Research and Development
In connection with the acquisition of Microflow, the Company allocated
$3,300 of the purchase price to acquired IPR&D which was expensed as of the
acquisition date. Microflow is a development company engaged primarily in the
development of an electronic delivery device. This narrow development effort is
expected to be used by the Company primarily in drug delivery systems and may
have applications in other markets as well. However, Microflow's electronic
delivery device is not commercially viable at this time and has no known
alternative future uses apart from use in a dispensing system. The Company
acquired Microflow to expand its mechanical pump product line to include an
electronic dispensing system.
37
<PAGE>
The Company used an independent professional appraisal consultant to assess
and allocate value to the IPR&D. The valuation was determined using the income
approach and the Company believes that the assumptions used in the forecast are
reasonable. No assurance can be given, however that the underlying assumptions
used to estimate expected sales, development costs or profitability, or the
events associated with the project will transpire as estimated. For these
reasons, actual results may vary from the projected results.
Estimated net cash inflows from the acquired in-process technology related
to the electronic delivery device are projected to commence in the year 2002,
peak in 2006 and steadily decline at a rate of 20% through 2011. The operating
income as a percentage of sales assumption that was used is consistent with the
Company's current margins of similar products. The in-process technology is
expected to be completed in late 2000. As of the date of the acquisition,
approximately $1,458 had been expended to develop the project and the estimated
cost to complete the project is approximately $800, to be incurred in 2000. An
adjustment to the appraised value of the acquired IPR&D was made to reflect the
percentage of completion, which was estimated at 65%. The cash flows related to
the project were discounted using a 25% discount rate.
Management expects to continue supporting the development of the electronic
delivery device and believes the Company has a reasonable chance of successfully
completing the project. However, there can be no assurance such efforts will be
successful. Without successful completion of the efforts on the acquired in-
process technologies, the Company would not realize the future revenues
attributed to the acquired IPR&D, and ultimately, the Company would fail to
realize the expected return on its investment. The failure of the project would
not, however, materially impact the Company's financial position or results of
operations.
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. The
Company has a cross-currency interest rate swap to hedge an intercompany lending
transaction. This swap requires the Company to pay principal of 31,741 French
Francs plus interest at 8% and receive principal of $6,429 plus interest at
7.08% over ten years. If the Company canceled the swap at December 31, 1999, the
Company would have received approximately $1.1 million based on the fair value
of the swap on that date.
At December 31, 1999, the Company has fixed to variable interest rate swap
agreements with a notional principal value of $50,000 which require the Company
to pay an average variable interest rate of 5.95% and receive a fixed rate of
6.62%. The variable rates are adjusted semiannually based on London Interbank
Offered Rates ("LIBOR"). If the Company canceled the swaps at December 31, 1999,
the Company would have paid approximately $1.7 million based on the fair value
of the swaps 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 $31.0 million and $24.7
million at December 31, 1999 and 1998, respectively. 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. If the Company cancelled the forward exchange
contracts at December 31, 1999, the Company would have paid approximately $1.1
million based on the fair value of the contracts on that date. 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.
Note 5 - Inventories
At December 31, 1999 and 1998, approximately 25% and 22%, respectively, of
the total inventories are accounted for by the LIFO method. The LIFO reserve was
approximately $0.8 million in 1999, and not material in 1998. Inventories
consisted of:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Raw materials $ 41,858 $ 35,709
Work-in-process 28,370 29,441
Finished goods 38,923 35,941
-------- --------
Total $109,151 $101,091
======== ========
</TABLE>
38
<PAGE>
Note 6 - Accounts Payable and Accrued Liabilities
At December 31, 1999 and 1998, accounts payable and accrued liabilities
consisted of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Accounts payable, principally trade $ 65,915 $ 66,086
Accrued employee compensation costs 32,089 32,004
Other accrued liabilities 26,754 32,119
-------- --------
Total $124,758 $130,209
======== ========
</TABLE>
Note 7 - Income Taxes
Income before income taxes consists of:
1999 1998 1997
------- -------- --------
Domestic $27,350 $ 34,185 $ 22,968
Foreign 64,428 65,004 55,628
------- -------- --------
Total $91,778 $ 99,189 $ 78,596
======= ======== ========
The provision for income taxes is comprised of:
1999 1998 1997
------- -------- --------
Current:
Federal $ 8,462 $ 11,898 $ 7,977
State/local 997 1,625 1,738
Foreign 17,992 19,814 22,378
------- -------- --------
27,451 33,337 32,093
------- -------- --------
Deferred:
Federal/State 934 254 (1,391)
Foreign 4,681 4,777 1,365
------- -------- --------
5,615 5,031 (26)
------- -------- --------
Total $33,066 $ 38,368 $ 32,067
======= ======== ========
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 1999,
1998 and 1997 to income before income taxes is as follows:
1999 1998 1997
------- -------- --------
Income tax at statutory rate $32,122 $34,716 $27,509
State income taxes, net of federal benefit 746 1,105 836
Rate differential on earnings of foreign operations 348 2,434 4,364
Other items, net (150) 113 (642)
------- -------- -------
Actual income tax provision $33,066 $38,368 $32,067
======= ======== =======
Effective income tax rate 36.03% 38.7% 40.8%
39
<PAGE>
Significant deferred tax assets and liabilities as of December 31, 1999 and
1998 are comprised of the following temporary differences:
1999 1998
-------- --------
Deferred Tax Assets:
Net operating loss carryforwards $ 1,972 $ 4,787
Asset bases differentials 2,920 3,800
Pensions 2,580 2,428
Other 10,553 10,354
------- -------
Total deferred tax assets 18,025 21,369
------- -------
Deferred Tax Liabilities:
Depreciation 26,770 30,211
Leases 3,566 3,652
Other 6,549 3,453
------- -------
Total deferred tax liabilities 36,885 37,316
------- -------
Net deferred tax liabilities $18,860 $15,947
======= =======
The impact of changes in enacted foreign tax rates on the accounting for
deferred taxes under FAS 109 was not significant to the provision for income
taxes to the years presented above.
On December 31, 1999, the Company had foreign tax net operating loss
carryforwards of approximately $3,304, which have an indefinite carryforward
period and approximately $1,674, which expire in 2003, 2004 and 2005.
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 $2,407 would become payable at the time the income is
distributed.
Note 8 - Debt
The average annual interest rate on short-term notes payable under unsecured
lines of credit was approximately 6.3% and 6.0% for 1999 and 1998, respectively.
There are no compensating balance requirements associated with short-term
borrowings. Prior to June 30, 1999, the Company had an unsecured revolving
credit agreement allowing borrowings of up to $25 million. The Company entered
into a new multi-year, multi-currency unsecured revolving credit agreement on
June 30, 1999 allowing borrowings of up to $75 million. Under this credit
agreement, interest on borrowings is payable at a rate equal to 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 1999,
1998 and 1997 were not significant. The agreement expires on June 30, 2004. The
amount used under this agreement was $70 million and $25 million at December 31,
1999 and 1998 respectively. The credit available under the revolving credit
agreement provides management with the ability to refinance certain short-term
obligations on a long-term basis. As it is management's intent to do so, short-
term obligations of $70 million have been recorded as long-term obligations and
an additional $5 million of short-term obligations representing the unused and
available amount under the new credit agreement have been reclassified as long-
term obligations as of December 31, 1999. Short-term obligations of $25 million
have been recorded as long-term obligations as of December 31, 1998 under the
prior revolving credit agreement.
The revolving credit and the senior unsecured debt agreements contain
covenants that include certain financial tests, including minimum interest
coverage, net worth and maximum borrowings.
40
<PAGE>
At December 31, the Company's long-term obligations consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Borrowing under revolving credit agreement 6.85% and 5.9%
At December 31, 1999 and 1998 $ 70,000 $25,000
Notes payable 1.2% - 17.2%, due in monthly and annual installments
through 2009 17,024 15,905
Senior unsecured debt 7.08%, due in installments through 2005 21,429 25,000
Senior unsecured notes 6.62%, due in equal annual installments
through 2011 107,000 -
Mortgages payable 2.1% - 7.2%, due in monthly and annual installments
through 2008 10,427 10,377
Industrial revenue bond, interest at 79% of prime, (which was 8.5% and 6.1%
at December 31, 1999 and 1998), due in quarterly installments
through 2001 666 999
Capital lease obligations 13,751 11,155
-------- -------
240,297 88,436
Less current portion (9,648) (7,561)
Reclass of short-term obligations 5,000 -
-------- -------
Total long-term obligations $235,649 $80,875
======== =======
</TABLE>
Substantially 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 2000 are $7,903, $14,071, $7,159,
$6,318 and $191,095 thereafter.
Note 9 - Lease Commitments
The Company leases certain warehouse, plant, and office facilities as well as
certain equipment under noncancelable operating and capital leases expiring at
various dates through the year 2009. 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 $10,170, $5,949 and $4,696 in 1999, 1998 and 1997, respectively.
Asset recorded under capital leases consist of:
1999 1998
-------- --------
Buildings $ 15,046 $ 12,393
Machinery and equipment 9,854 12,811
24,900 25,204
-------- --------
Accumulated depreciation (10,357) (12,598)
-------- --------
$ 14,543 $ 12,606
======== ========
41
<PAGE>
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, 1999:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
2000 $ 2,645 $ 6,734
2001 2,196 5,201
2002 2,017 3,796
2003 1,857 3,311
2004 1,761 2,753
Subsequent to 2004 7,369 4,403
------- --------
Total minimum lease payments 17,845 $ 26,198
--------
Amounts representing interest (4,094)
-------
Present value of future minimum lease payments 13,751
Less amount due in one year (1,745)
-------
Total $12,006
=======
</TABLE>
Note 10 - Retirement and Deferred Compensation Plans
The Company has various noncontributory retirement plans covering certain
of its domestic and foreign employees. Benefits under the Company's retirement
plans are based on participants' years of service and annual compensation as
defined by each plan. Annual cash contributions to fund pension costs accrued
under the Company's domestic plans are generally equal to the minimum funding
amounts required by ERISA while pension commitments under its foreign plans are
partially offset by the cash surrender value of insurance contracts purchased by
the Company. Changes in the benefit obligation and plan assets of the Company's
domestic and foreign plans are as follows:
<TABLE>
<CAPTION>
1999 1998
Change in benefit obligation: -------- --------
<S> <C> <C>
Benefit obligation at beginning of year $ 28,328 22,424
Service cost 1,844 2,319
Interest cost 1,961 1,506
Actuarial (gain)/loss (1,375) 2,224
Benefits paid (1,891) (799)
Foreign currency translation adjustment (1,391) 654
-------- --------
Benefit obligation at end of year $ 27,476 $ 28,328
-------- --------
</TABLE>
<TABLE>
<S> <C> <C>
Change in plan assets:
Fair value of plan assets at beginning of year $ 17,890 $ 18,194
Actual return on plan assets 4,254 (767)
Employer contribution 1,229 1,164
Benefits paid (1,891) (799)
Foreign currency translation adjustment (202) 98
-------- --------
Fair value of plan assets at end of year $ 21,280 $ 17,890
-------- --------
Funded status $ (6,196) $(10,438)
Unrecognized net actuarial (gain)/loss (1,658) 2,810
Unrecognized prior service cost 338 472
Unamortized net transition asset (94) (244)
-------- --------
Accrued benefit cost included in the balance sheet $ (7,610) $ (7,400)
======== ========
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Components of net periodic benefit cost: 1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Service cost $ 1,844 $ 2,319 $ 1,276
Interest cost 1,961 1,506 1,360
Expected return on plan assets (1,503) (1,435) (1,246)
Net amortized and deferred gains and losses 47 (103) (171)
------- ------- -------
Net periodic benefit cost $ 2,349 $ 2,287 $ 1,219
======= ======= =======
</TABLE>
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 7.25% and 6.75% in
1999 and 1998, respectively. For the foreign plans, the projected benefit
obligation was determined using an assumed discount rate of 5.5% in 1999 and
1998. The assumed rates of increase in compensation used in 1999 and 1998 were
4.75% for the domestic plans and 3.0% for the foreign plans. The expected long-
term rate of return on plan assets was 8.25% in 1999 and 1998 for the domestic
plans and 7.3% and 6.0% in 1999 and 1998 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 $545 and $378 at December 31, 1999 and 1998,
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 - Lawsuit Settlements
During 1998, the Company recorded approximately $9.9 million in settlements
of patent infringement lawsuits. The most significant settlement is attributed
to a favorable judgement in a lawsuit relating to an aerosol valve component
that was recorded in the fourth quarter of 1998. Diluted earnings per share was
positively impacted in 1998 by $.16 per share related to these lawsuit
settlements.
Note 13 - Preferred Stock Purchase Rights
The Company has a preferred stock purchase rights plan (the "Rights Plan")
and each share of common stock has one preferred share purchase right (a
"Right"). Under the terms of the Rights Plan, if a person or group other than
certain exempt persons acquires 15% or more of the outstanding common stock,
each Right will entitle its holder (other than such person or members of such
group) to purchase, at the Right's then current exercise price, a number of
shares of the Company's common stock having a market value of twice such price.
Persons or groups can lose their exempt status under certain conditions. In
addition, under certain circumstances if the Company is acquired in a merger or
other business combination transaction, each Right will entitle its holder to
purchase, at the Right's then current exercise price, a number of the acquiring
company's common shares having a market value of twice such price.
Each Right entitles the holder under certain circumstances to buy one two-
thousandths of a share of Series A junior participating preferred stock, par
value $.01 per share, at an exercise price of $35. Each share of Series A junior
participating preferred stock will entitle its holder to 2,000 votes and will
have a minimum preferential quarterly dividend payment equal to the greater of
$10 per share or 2,000 times the amount paid to holders of common stock.
Currently 49,500 shares of Series A junior participating preferred stock have
been reserved. The Rights will expire on April 6, 2003 unless previously
exercised or redeemed at the option of the Board of Directors for $.005 per
Right.
43
<PAGE>
Note 14 - Stock Based Compensation
At December 31, 1999, the Company has four fixed stock-based compensation
plans that are discussed below. Had compensation cost for the Company's stock
awards plans been recorded based on the fair value at the grant dates,
consistent with the method of FAS 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net Income
As Reported $ 58,712 $ 60,821 $ 46,529
Pro Forma $ 56,102 $ 58,987 $ 45,343
Basic Earnings per Share
As Reported $ 1.62 $ 1.69 $ 1.29
Pro Forma $ 1.54 $ 1.64 $ 1.26
Diluted Earnings per Share
As Reported $ 1.59 $ 1.65 $ 1.27
Pro Forma $ 1.52 $ 1.60 $ 1.24
</TABLE>
The fair value of stock options granted under the 1996 and 1992 Stock
Awards Plans (collectively, the "Stock Awards Plans") was $11.37 and $9.87 per
share in 1999 and 1998, 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 1999 and 1998, respectively: dividend yield of
.6% for 1999 and .7% for 1998, expected volatility of 31.2% for 1999 and 26.1%
for 1998, risk-free interest rate of 4.8% and 5.6% and an expected life of 7.5
years for both years. The fair value of stock options granted under the Director
Stock Option Plans in 1999 and 1998 was $13.48 and $13.10 per share. This value
was estimated on the date of the grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions for 1999 and 1998:
dividend yield of .6%, expected volatility of 33.1% and 25.8%, risk-free
interest rate of 5.7% and an expected life of 7.5 years for both years.
Under the Stock Awards Plans, the Company may grant stock options, stock
appreciation rights, restricted stock and other stock awards to employees. The
combined maximum number of shares which may be issued under these plans is 4
million. Options granted under these plans become exercisable annually over a
three year period and expire ten years after the grant date. Director Stock
Option Plans provide for the award of stock options to non-employee Directors
who have not previously been awarded options. The combined maximum number of
shares subject to options under these plans is 160 thousand. Options granted
under these plans become exercisable over a three year period and expire ten
years after the grant date.
44
<PAGE>
A summary of the status of the Company's stock option plans as of December 31,
1999, 1998 and 1997, and changes during the years ending on those dates is
presented below.
<TABLE>
<CAPTION>
Director Stock
Stock Awards Plans Option Plans
----------------------------- ---------------------------
Option Price Option Price
Option Shares Shares Per Share Shares Per Share
------------- ------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Outstanding, January 1, 1997 1,560,744 $ 9.19 - $18.00 36,000 $ 9.19
Granted 366,500 $16.81 - $28.00 56,000 $ 20.88
Exercised (70,536) $ 9.19 - $18.00 (4,000) $ 9.19
Canceled (15,576) $13.38 - $18.00 -
--------- ------
Outstanding, December 31, 1997 1,841,132 $ 9.19 - $28.00 88,000 $9.19 - $20.88
Granted 533,500 $ 24.91 6,000 $ 32.38
Exercised (64,950) $ 9.19 - $18.00 (6,000) $ 9.19
Canceled (19,794) $ 9.19 - $18.00 (4,000) $ 20.88
--------- ------
Outstanding, December 31, 1998 2,289,888 $ 9.19 - $28.00 84,000 $9.19 - $32.38
Granted 550,700 $24.94 - $28.25 4,000 $ 29.50
Exercised (263,304) $ 9.19 - $24.91 (2,000) $ 20.88
Canceled (23,135) $16.81 - $24.91 -
--------- ------
Outstanding, December 31, 1999 2,554,149 $ 9.19 - $28.25 86,000 $9.19 - $32.38
========= ======
Options Exercisable at 12/31/97 1,147,390 46,000
Options Exercisable at 12/31/98 1,426,752 55,500
Options Exercisable at 12/31/99 1,557,631 72,000
Available for future grants
12/31/97 2,019,184 24,000
12/31/98 1,497,378 22,000
12/31/99 970,113 20,000
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------ ---------------------------------
Weighted-
Shares Average Weighted- Shares Weighted-
Year Outstanding Remaining Average Exercisable Average
Granted at Year-end Life Exercise Price at Year-end Exercise Price
- ------------ ------------ --------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Stock Awards Plans
1993 319,838 3.5 $ 9.19 319,838 $ 9.19
1994 204,340 4.1 10.31 204,340 10.31
1995 332,698 5.1 13.64 332,698 13.63
1996 296,636 6.1 18.00 296,636 18.00
1997 345,034 7.1 16.84 230,491 16.84
1998 514,703 8.1 24.91 173,628 24.91
1999 540,900 9.1 27.13 --
----------- ---------
2,554,149 6.7 18.88 1,557,631 14.85
----------- ---------
Director Stock Option Plans
1993 26,000 3.4 9.19 26,000 9.19
1997 50,000 7.4 20.88 40,000 20.88
1998 6,000 8.4 32.38 4,000 32.38
1999 4,000 9.4 29.50 2,000 29.50
----------- ---------
86,000 6.4 18.55 72,000 17.53
=========== =========
</TABLE>
45
<PAGE>
Restricted stock totaling 8,100 shares in 1998 and 1,062 shares in 1997 were
issued under the Stock Awards Plans and a restricted stock grant for 300 shares
was cancelled in 1999. These shares vest equally over three years and do not
have voting or dividend rights prior to vesting. Amounts available for future
stock option grants under the Stock Awards Plans have been reduced by restricted
stock awards.
Note 15 - Earnings Per Share
The reconciliations of basic and diluted earnings for the years ending
December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
<S> <C> <C> <C>
For the Year Ended December 31, 1999
Basic EPS
Income available to common stockholders $58,712 36,353 $1.62
=====
Effect of Dilutive Securities
Stock options - 560
------- ------
Diluted EPS
Income available to common stockholders $58,712 36,913 $1.59
======= ====== =====
For the Year Ended December 31, 1998
Basic EPS
Income available to common stockholders $60,821 36,051 $1.69
=====
Effect of Dilutive Securities
Stock options - 748
------- ------
Diluted EPS
Income available to common stockholders $60,821 36,799 $1.65
======= ====== =====
For the Year Ended December 31, 1997
Basic EPS
Income available to common stockholders $46,529 35,938 $1.29
=====
Effect of Dilutive Securities
Stock options - 580
------- ------
Diluted EPS
Income available to common stockholders $46,529 36,518 $1.27
======= ====== =====
</TABLE>
Note 16 - SEGMENT INFORMATION
The Company operates in the packaging components industry, which includes the
development, manufacture and sale of consumer product dispensing systems. The
Company is organized primarily based upon individual business units, which
resulted from historic acquisitions or internally created business units. All of
the business units sell primarily dispensing systems. These business units all
involve similar production processes, sell to similar classes of customers and
markets, use the same methods to distribute their products and operate in
similar regulatory environments. Management believes it operates in one segment.
46
<PAGE>
The following are sales and long-lived asset information by geographic area
and product information for the years ended December 31, 1999, 1998 and 1997:
Geographic Information
- ----------------------
<TABLE>
<CAPTION>
Sales to Unaffiliated
Customers (a) Long-Lived Assets
--------------------- -----------------
<S> <C> <C>
1999
- ----
United States $332,986 $216,894
Europe:
France 180,808 106,534
Germany 111,829 97,141
Italy 55,139 55,555
Other Europe 102,048 19,784
-------- --------
Total Europe 449,824 279,014
Other Foreign Countries 51,507 19,121
-------- --------
Total $834,317 $515,029
======== ========
1998
- ----
United States $271,960 $ 97,325
Europe:
France 172,739 105,225
Germany 89,004 104,197
Italy 63,109 55,700
Other Europe 79,440 24,289
-------- --------
Total Europe 404,292 289,411
Other Foreign Countries 37,254 10,253
-------- --------
Total $713,506 $396,989
======== ========
1997
- ----
United States $263,589 $ 89,586
Europe:
France 148,003 81,449
Germany 82,498 84,136
Italy 63,090 44,975
Other Europe 65,153 17,685
-------- --------
Total Europe 358,744 228,245
Other Foreign Countries 33,057 6,847
-------- --------
Total $655,390 $324,678
======== ========
</TABLE>
(a) Sales are attributed to countries based upon where sales to unaffiliated
customers are invoiced.
Product Information
- -------------------
1999 1998 1997
-------- -------- --------
Pumps $510,202 $430,827 $390,467
Closures 184,010 155,243 127,037
Valves 124,386 113,908 124,405
Other 15,719 13,528 13,481
------- -------- --------
Total $834,317 $713,506 $655,390
======== ======== ========
47
<PAGE>
Note 17 - STOCK REPURCHASE PROGRAM
The Board of Directors authorized on October 20, 1999 the repurchase of a
maximum of 1,000,000 shares of the Company's outstanding shares. The timing of
and total amount to be expended for the share repurchase will depend upon market
conditions. As of December 31, 1999, 235,500 shares have been repurchased for an
aggregate amount of $6,212.
Note 18 - RELATED PARTIES
As a result of the acquisition of Emson, the Company leases real estate from,
purchases materials from and sells products to entities related to a Vice
President of the Company or certain members of his family. Total amounts for
1999 are as follows: rents $504, purchases $80 and sales $134.
Note 19 - Quarterly Data (Unaudited)
Quarterly results of operations and per share information for the years ended
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Quarter Total
-------------------------------------
First Second Third Fourth For Year
----- ------ ----- ------ --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1999
- ----------------------------
Net sales $198,227 $208,860 $210,479 $216,751 $834,317
Gross profit $ 58,028 $ 62,794 $ 63,451 $ 65,936 $250,209
Net income (1) $ 14,269 $ 16,180 $ 12,894 $ 15,369 $ 58,712
Per Common Share - 1999
- -----------------------
Net income
Basic (1) $ .39 $ .45 $ .35 $ .42 $ 1.62
Diluted (1) $ .39 $ .44 $ .35 $ .42 $ 1.59
Dividends paid $ .04 $ .04 $ .05 $ .05 $ .18
Stock price high $ 29.63 $ 31.50 $ 30.88 $ 29.25 $ 31.50
Stock price low $ 23.13 $ 23.88 $ 22.50 $ 23.88 $ 22.50
Average number of shares outstanding
Basic 36,189 36,344 36,440 36,435 36,353
Diluted 36,845 37,026 37,039 36,943 36,913
Year Ended December 31, 1998
- ----------------------------
Net sales $170,942 $181,752 $182,692 $178,120 $713,506
Gross profit $ 51,312 $ 55,211 $ 56,246 $ 54,316 $217,085
Net income (2) $ 13,181 $ 14,264 $ 14,518 $ 18,858 $ 60,821
Per Common Share - 1998
- -----------------------
Net income
Basic (2) $ .37 $ .40 $ .40 $ .52 $ 1.69
Diluted (2) $ .36 $ .39 $ .39 $ .51 $ 1.65
Dividends paid $ .04 $ .04 $ .04 $ .04 $ .16
Stock price high $ 31.81 $ 32.94 $ 33.44 $ 30.13 $ 33.44
Stock price low $ 23.97 $ 28.00 $ 21.75 $ 19.69 $ 19.69
Average number of shares outstanding
Basic 35,992 36,024 36,087 36,098 36,051
Diluted 36,716 36,852 36,867 36,773 36,799
</TABLE>
(1) The third quarter includes a $3.3 million write-off of IPR&D.
(2) The second quarter includes $0.5 million and the fourth quarter includes
$5.6 million after tax income related to favorable lawsuit settlements.
48
<PAGE>
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 changes in
equity present fairly, in all material respects, the financial position of
AptarGroup, Inc. and its subsidiaries at December 31, 1999 and 1998 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with generally accepted
accounting principles in the United States. 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 in the United States 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/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
February 16, 2000
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The financial statements of AptarGroup, Inc. and its consolidated
subsidiaries, and all other information presented in this Annual Report, are the
responsibility of the management of the Company. These statements have been
prepared in accordance with generally accepted accounting principles
consistently applied and reflect in all material respects the substance of
events and transactions that should be included.
Management is responsible for the accuracy and objectivity of the financial
statements, including estimates and judgments reflected therein, and fulfills
this responsibility primarily by establishing and maintaining accounting systems
and practices adequately supported by internal accounting controls. Management
believes that the internal accounting controls in use are satisfactory to
provide reasonable assurance that the Company's assets are safeguarded, that
transactions are executed in accordance with management's authorizations, and
that the financial records are reliable for the purpose of preparing financial
statements.
Independent accountants were selected by the Board of Directors, upon the
recommendation of the Audit Committee, to audit the financial statements in
accordance with generally accepted auditing standards. Their audits include a
review of internal accounting control policies and procedures and selected tests
of transactions.
The Audit Committee of the Board of Directors, which consists of three
directors who are not officers or employees of the Company, meets regularly with
management and the independent accountants to review matters relating to
financial reporting, internal accounting controls, and auditing. The independent
accountants have unrestricted access to the Audit Committee.
/s/ Carl A. Siebel /s/ Stephen J. Hagge
Carl A. Siebel Stephen J. Hagge
President and Chief Executive Officer Executive Vice President and Chief
Financial Officer, Secretary and
Treasurer
49
<PAGE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
(In millions of dollars,
except per share data) 1999 1998 1997 1996 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net Sales $834.3 $713.5 $655.4 $615.8 $557.5
Cost of Sales 519.7 444.6 418.1 399.7 358.4
% Of Net Sales 62.3% 62.3% 63.8% 64.9% 64.3%
Selling, Research & Development, and
Administrative 137.5 119.3 108.4 104.3 96.2
% of Net Sales 16.5% 16.7% 16.5% 16.9% 17.3%
Depreciation and Amortization 68.7 54.4 49.9 47.9 43.5
% of Net Sales 8.2% 7.6% 7.6% 7.8% 7.8%
Operating Income 108.4 95.2 79.0 64.0 59.3
% of Net Sales 13.0% 13.3% 12.1% 10.4% 10.6%
Net Income 58.7 60.8 46.5 37.5 35.7
% of Net Sales 7.0% 8.5% 7.1% 6.1% 6.4%
Net Income - Adjusted (1) 62.0 54.7 46.5 37.5 35.7
% of Net Sales 7.4% 7.7% 7.1% 6.1% 6.4%
Per Common Share:
Net Income
Basic $ 1.62 $ 1.69 $ 1.29 $ 1.05 $ 1.00
Diluted 1.59 1.65 1.27 1.03 0.99
Diluted - Adjusted (1) 1.68 1.49 1.27 1.03 0.99
Cash Dividends Declared 0.18 0.16 0.15 0.14 0.13
Balance Sheet and Other Data:
Capital Expenditures $ 88.6 $ 79.8 $ 71.2 $ 62.8 $ 55.5
Total Assets 863.3 714.7 585.4 576.1 559.2
Long-Term Obligations 235.6 80.9 70.7 76.6 80.7
Stockholders' Equity 420.3 415.5 342.1 335.7 312.3
Interest Bearing Debt to
Total Capitalization 39.2% 22.1% 17.7% 21.1% 23.8%
Net Debt to Total Net Capitalization (2) 36.2% 18.3% 14.0% 18.0% 20.5%
</TABLE>
(1) Adjusted reflects the exclusion of an IPR&D write-off in 1999 and favorable
lawsuit settlements in 1998.
(2) Net Debt is debt less cash and cash equivalents. Net Capitalization is
Stockholder's Equity plus Net Debt.
50
<PAGE>
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.
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 62.3 62.3 63.8
Selling, research & development, and administrative 16.5 16.7 16.5
Depreciation and amortization 8.2 7.7 7.6
----- ----- -----
Operating income 13.0 13.3 12.1
Other income (expenses):
IPR&D write-off (0.4) - -
Lawsuit settlements - 1.4 -
Net other expense (1.6) (0.8) (0.1)
----- ----- -----
Income before income taxes 11.0 13.9 12.0
Provision for income taxes 4.0 5.4 4.9
----- ----- -----
Net income 7.0% 8.5% 7.1%
===== ===== =====
</TABLE>
1999 Compared to 1998
Net sales in 1999 totaled $834.3 million, an increase of 16.9% when compared to
net sales of $713.5 million in 1998. Sales were negatively affected by the
translation of AptarGroup's foreign sales due to the stronger U.S. dollar
relative to 1998. If the U.S. dollar exchange rates had not changed from year to
year, net sales for 1999 would have increased approximately 20%. Acquisitions
completed in 1999 and 1998 accounted for approximately $103 million of the
$120.8 million increase in sales. Internal growth for the year excluding the
impact of acquisitions and foreign currency was approximately 6%. Sales of pumps
51
<PAGE>
to the fragrance/cosmetics market were slow in the first half of 1999 and began
to rebound during the second half. In addition, U.S. sales of dispensing
closures across all markets were negatively affected by the implementation of an
enterprise wide information system in the second quarter of 1999. Offsetting
these negative effects, was the increase of pump and metered valve sales to the
pharmaceutical industry.
European sales represented approximately 54% of the Company's total sales
compared to 57% in 1998. U.S. sales represented approximately 40% of the
Company's total sales compared to 38% in 1998. Sales from other foreign
operations represented 6% of the Company's total sales compared to 5% in 1998.
Cost of sales as a percent of net sales remained constant in 1999 at 62.3%.
The negative effects of increases in raw material costs in 1999 on the LIFO
inventory valuation in the U.S., particularly plastic resin, was primarily
offset by productivity increases, selected price increases, and the mix of
products sold.
Selling, research & development, and administrative ("SG&A") decreased
slightly as a percent of sales in 1999 to 16.5% from 16.7% in 1998. The decrease
was primarily due to the acquisitions in 1999 which had lower SG&A as a
percentage of sales.
Depreciation and amortization increased to 8.2% of sales in 1999 compared
to 7.7% in 1998. The primary reasons for the increase in depreciation and
amortization as a percentage of sales are an increase in goodwill amortization
and depreciation expense related to the acquisitions made in 1999 and the
increased depreciation due to plant and geographic expansions in 1999 and 1998.
Operating income increased to $108.4 million compared to $95.2 million in
1998, primarily due to the acquisitions made in 1999 as well as the increased
sales to the pharmaceutical market. The net impact on operating income due to
the stronger U.S. dollar in 1999 was insignificant.
Operating income from European operations (excluding corporate expenses)
represented 69% and 76% of total operating income in 1999 and 1998,
respectively. Operating income in 1999 from U.S. operations (excluding corporate
expenses) represented 41% of total operating income compared to 37% in 1998. The
increase in the percentage of operating income attributable to U.S. operations
was primarily due to the acquisition of Emson in 1999. The reconciling
difference between European and U.S. operating income to total operating income
is income from other foreign operations, corporate expenses and inter-geographic
consolidation eliminations.
In 1999, the results included a $3.3 million write-off of IPR&D related to
the acquisition of Microflow in the third quarter. The 1998 results included
approximately $9.9 million in favorable lawsuit settlements received.
Net other expense excluding the write-off of IPR&D increased to $13.4
million expense in 1999 from $5.9 million expense in 1998 excluding the lawsuit
settlement. The change was due primarily to the increased interest expense of
approximately $7.8 million related to the acquisitions made in 1999 and late
1998.
The effective income tax rate decreased to 36.0% in 1999 from 38.7% in
1998. The ongoing rationalization of tax rates combined with the mix of income
earned, and a decrease in effective corporate tax rates in both France and
Germany helped contribute to the decrease in the effective tax rate. Offsetting
the positive impacts on the effective tax rate is the non-deductible write-off
of IPR&D and goodwill amortization associated with the acquisitions in 1999. The
Company expects the effective tax rate for 2000 to be in the range of 35%
to 36%.
Excluding the effects of the IPR&D write-off in 1999 and the lawsuit
settlements in 1998 mentioned above, net income increased 13% to $62.0 million
compared to $54.7 million recorded in 1998. Net income as reported decreased
3.5% to $58.7 million in 1999 compared to $60.8 million in 1998.
52
<PAGE>
1998 Compared to 1997
Sales in 1998 totaled $713.5 million, an increase of 8.9% when compared to net
sales of $655.4 million in 1997. Sales were negatively affected by the
translation of AptarGroup's foreign sales due to the stronger U.S. dollar
relative to 1997. If the U.S. dollar exchange rates had not changed from year to
year, net sales for 1998 would have increased approximately 10%. More than half
of the increase (approximately 56%) was attributable to increased volume of the
Company's major product lines in all the markets served except for aerosol valve
sales in the U.S. to the personal care and household markets, and pump sales
worldwide to the low to mid-priced fragrance/cosmetics market. The remainder of
the increase was due to sales from acquisitions completed in 1998.
European sales represented approximately 57% of the Company's total sales
compared to 55% in 1997. U.S. sales represented approximately 38% of the
Company's total sales compared to 40% in 1997. Sales from other foreign
operations represented 5% of the Company's total sales in both 1998 and 1997.
Cost of sales as a percent of net sales decreased in 1998 to 62.3% compared
to 63.8% in 1997. The decrease is attributed to the mix of products sold and
cost savings. The impact of changes in raw material costs, including plastic
resin and metal, in 1998 was not significant.
SG&A increased as a percent of sales in 1998 to 16.7% from 16.5% in 1997.
The increase is due to increased spending on research and development projects
and an increase in information technology expenses related to the Euro
introduction and implementation of new enterprise software systems at two major
operations.
Depreciation and amortization represented 7.7% and 7.6% of sales for 1998
and 1997, respectively.
Operating income increased to $95.2 million compared to $79.0 million in
1997, primarily due to the product mix and cost savings mentioned above. The
impact on operating income due to the slightly stronger U.S. dollar in 1998 was
insignificant.
Operating income from European operations (excluding corporate expenses)
represented 76% and 74% of total operating income in 1998 and 1997,
respectively. Operating income in 1998 from U.S. operations (excluding corporate
expenses) represented 37% of total operating income compared to 41% in 1997. The
increase in the percentage of operating income attributable to European
operations was primarily due to the mix of products sold. The reconciling
difference between European and U.S. operating income to total operating income
is income from other foreign operations, corporate expenses and inter-geographic
consolidation eliminations.
The 1998 results include approximately $9.9 million in favorable lawsuit
settlements received.
Net other expense excluding the effect of the favorable lawsuit settlements
received in 1998 increased to $5.9 million expense in 1998 from $0.4 million
expense in 1997. The change was primarily due to a decrease of $1.8 million in
income of affiliates due to the consolidation in 1998 of two subsidiaries in
which the Company purchased majority interests during the year. These
subsidiaries were previously recorded on the equity method of accounting. In
addition, $2.5 million in net foreign currency transaction losses from 1997 to
1998 also negatively impacted the net other income (expense). The net realized
transaction losses were primarily due to the U.S. dollar weakening against the
major European currencies in the second half of the year.
The effective income tax rate decreased to 38.7% in 1998 from 40.1% in
1997. The 1997 effective tax rate includes an adjustment to the balance of
deferred taxes due to the increase in the French corporate tax rate in 1997.
This adjustment did not reoccur in 1998. In addition, the ongoing
rationalization of tax rates combined with the mix of income earned also helped
contribute to the decrease in the effective tax rate.
Excluding the lawsuit settlements, net income increased 18% to $54.7
million compared to the $46.5 million recorded in 1997. Net income as reported
increased 30.7% to $60.8 million in 1998 compared to $46.5 million in 1997.
53
<PAGE>
Foreign Currency
A significant number of the Company's operations are located outside of the
United States. Because of this, movements in exchange rates may have a
significant impact on the translation of the financial conditions and results of
operations of AptarGroup's foreign entities. The Company's significant foreign
exchange exposures are to the Euro. In addition, with the recent geographic
expansion, the Company now has foreign exchange exposure to South American
currencies as well as the Chinese Renminbi. A strengthening U.S. dollar relative
to foreign currencies has a dilutive translation effect on the Company's
financial condition and results of operations. Conversely, a weakening U.S.
dollar would have an additive effect. Additionally, in some cases, the Company
sells products denominated in a currency different from the currency in which
the related costs are incurred. Changes in exchange rates on such inter-country
sales impact the Company's results of operations.
The Company manages its exposures to foreign exchange principally with
forward exchange contracts to hedge certain firm purchase and sales commitments
and intercompany cash transactions denominated in foreign currencies.
The table below provides information as of December 31, 1999 about the
Company's forward currency exchange contracts. All the contracts expire before
the end of the second quarter of 2000.
<TABLE>
<CAPTION>
Average Contractual
Buy/Sell Contract Amount Exchange Rate
- -------- --------------- -------------------
<S> <C> <C>
EURO/USD $21,715 .9656
EURO/GBP 8,286 1.5479
EURO/YEN 598 .0088
Other 440 --
---------------
Total $31,039
===============
</TABLE>
The other contracts in the above table represent contracts to buy or sell
various other currencies (principally European and Australian). If the Company
cancelled the forward exchange contracts at December 31, 1999, the Company would
have paid approximately $1.1 million based on the fair value of the contracts on
that date. All forward exchange contracts outstanding as of December 31, 1998
had an aggregate contract amount of $24.7 million.
The Company has a cross-currency interest rate swap to hedge an
intercompany lending transaction. This swap requires the Company to pay
principal of 31,741 French Francs plus interest at 8% and receive principal of
$6,429 plus interest at 7.08% through 2005. If the Company canceled the swap at
December 31, 1999, the Company would have received approximately $1,139 based on
the fair value of the swap on that date.
The table below presents the cash flows in both foreign currency and U.S.
dollars that are expected to be exchanged over the duration of the contract.
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 2005
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Pay FRF FRF 7,822 7,400 6,992 6,560 6,137 5,713
Receive USD $1,525 1,450 1,377 1,299 1,223 1,147
</TABLE>
At December 31, 1999, the Company has fixed-to-variable interest rate swap
agreements with a notional principal value of $50,000 which require the Company
to pay an average variable interest rate of 5.95% and receive a fixed rate of
6.62%. The variable rates are adjusted semiannually based on London Interbank
Offered Rates ("LIBOR"). Variations in market interest rates would produce
changes in the Company's net income. If interest rates increase by 10%, net
income related to the interest rate swap agreements would decrease by
approximately $190 assuming a tax rate of 36%. If the Company canceled the swaps
at December 31, 1999, the Company would have paid approximately $1,651 based on
the fair value of the swaps on that date.
54
<PAGE>
Liquidity and Capital Resources
Net cash generated from operating activities rose to $118.4 million in 1999
compared to $85.0 million and $86.2 million in 1998 and 1997, 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. During 1999, the Company utilized the majority of such cash flows to
finance acquisitions and capital expenditures. Cash and equivalents were $32.4
million at December 31, 1999 versus $25.2 million at December 31, 1998 and $17.7
million at December 31, 1997.
Working capital increased $42.1 million to $191.3 million at December 31,
1999 compared to $149.2 million and $130.8 million at December 31, 1998 and
1997, respectively. Acquisitions accounted for more than half the increase in
working capital in 1999. The remainder of the increase in working capital was
primarily due to lower accounts payable and accrued liabilities in 1999. At
December 31, 1998, the Company had higher income taxes payable than at December
31, 1999. This is due to higher tax rates in 1998 and the timing of European
estimated tax payments in 1999.
The Company used $232.7 million in cash for investing activities during
1999 compared to $98.9 million, and $69.7 million during 1998 and 1997,
respectively, as the Company completed four acquisitions in 1999. The Company
acquired Emson for $122.8 million in cash and approximately $4 million of the
Company's common stock. The Company assumed approximately $23 million of debt in
the transaction. The Company made three other acquisitions during the third
quarter of 1999. The Company paid approximately $21 million in cash and assumed
approximately $4 million in debt in the three other transactions. Capital
expenditures totaled $88.6 million in 1999 as the Company continued to invest in
property, plant and equipment primarily for product line enhancements, new
products and geographic expansion, compared to $79.8 million and $71.2 million
in 1998 and 1997, respectively. Cash outlays for capital expenditures for 2000
are estimated to be approximately $95 million.
Net cash provided (used) by financing activities was $124.1 million in
1999, compared to $20.4 million and ($13.0 million) in 1998 and 1997,
respectively. The net cash provided by financing activities was used to help
fund acquisitions completed during 1999 as well as fund the Company's stock
repurchase program. The Board of Directors authorized on October 20, 1999 the
repurchase of a maximum of 1 million shares of the Company's outstanding shares.
As of December 31, 1999, 235.5 thousand shares have been repurchased for an
aggregate amount of $6.2 million. The ratio of the Company's total interest
bearing debt net of cash to total capitalization net of cash was 36.2% and 18.3%
as of December 31, 1999 and 1998, respectively.
In May 1999, the Company entered into a $107 million, twelve-year private
debt placement agreement. The private placement is comprised of $107 million of
6.62% senior unsecured notes. The notes will be repaid in equal annual
installments of $21.4 million beginning on May 30, 2007 and ending on May 30,
2011.
During the third quarter of 1999, the Company entered into interest rate
swap agreements with two different banks for a notional amount of $25,000 each
or a total of $50,000. The agreements swapped the 6.62% fixed interest rate on
the private placement described above for variable floating rates equal to the
six month LIBOR less a spread ranging from 8.25 to 10.5 basis points. The
amortization schedule for the swap agreements was designed to match the
amortization of the underlying private placement.
The Company entered into a new multi-year, multi-currency unsecured
revolving credit agreement on June 30, 1999 allowing borrowings of up to $75
million. Under this credit agreement, interest on borrowings is payable at a
rate equal to LIBOR plus an amount based on the financial condition of the
Company. At December 31, 1999, the amount unused and available under this
agreement was $5 million. The Company is required to pay a fee for the unused
portion of the commitment. The agreement expires on June 30, 2004. The credit
available under the revolving credit agreement provides management with the
ability to refinance certain short-term obligations on a long-term basis. As it
is management's intent to do so, an additional $5 million of short-term
obligations representing the unused and available amount under the new credit
agreement have been reclassified as long-term obligations as of December 31,
1999.
The revolving credit agreement and private placement agreements contain
covenants that include certain financial tests, such as minimum interest
coverage, net worth and maximum borrowings.
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.
The Company believes that it has the financial resources needed to meet
business requirements in the foreseeable future, including capital expenditures,
working capital requirements, future dividends and potential acquisitions.
55
<PAGE>
Year 2000
The Company implemented a Year 2000 ("Y2K") readiness program with the objective
of having all significant computer systems and other equipment with embedded
chips or processors (collectively, "Enterprise Systems"), functioning properly
with respect to the Y2K issue. This program was completed as of December 31,
1999. As of the date of this report, the Company's Enterprise Systems are
functioning properly and no material disruption or significant problem has
arisen with respect to the Y2K issue. The cost incurred to implement the
readiness program including certain system upgrades, was approximately $2.2
million.
Although the Company has a significant number of key business partners,
including suppliers and customers, the Company has not experienced any material
disruption in its business due to supplier or customer Y2K issues. More
specifically, the Company, through the date of this report, has not received any
information that would lead it to believe that any significant supplier or
customer suffered business interruption due to Y2K issues.
Adoption of Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement requires that entities
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Due to the
complexity of this new standard, the Company is still assessing the impact it
will have on the financial position or results of operations, but does not
anticipate it having a material impact on the financial statements. In June
1999, the FASB issued SFAS No. 137, which amended the effective date of SFAS
133. The new effective date for implementation of SFAS 133 is now for all fiscal
quarters of all fiscal years beginning after June 15, 2000.
Outlook
The general slowdown in the demand for pumps from the fragrance/cosmetics
market, which began in the second half of 1998 and continued through the first
half of 1999, appears to be showing signs of recovery. This recovery began in
the third quarter of 1999 and is continuing into the first quarter of 2000.
Sales of dispensing closures in the U.S. are expected to be adversely affected
in the first quarter of 2000 due to certain customers reducing inventory levels
in 2000. The sale of the Company's other products to other markets all are
showing signs of growth in 2000.
The consolidation of the Company's customer base continued in 1999, and is
expected to continue. While no material adverse effects have occurred due to
this consolidation, 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, its
international presence, and long-term relationships with certain customers.
The Company saw an increase in the cost of its raw materials in 1999, in
particular plastic resins. To help offset this increase in costs, the Company
announced selected selling price increases late in 1999 and in the first quarter
of 2000.
56
<PAGE>
The Company has made several acquisitions over the past two years. The
integration of these acquisitions is ongoing and is on schedule. The Company's
acquisition strategy is to expand geographically, acquire new products and
technology and/or enter new markets.
The Company is expecting to continue to expand geographically in 2000,
particularly into Asia and South America. Investments may be made in countries
that may not be as politically stable as the U.S. or the western European
countries. The Company intends to monitor its exposure in these other countries
to minimize risk.
The European Community introduced a common European monetary unit called
the Euro effective January 1, 1999. While the Euro has had significant
accounting and systems impacts, the introduction has not had a material effect
on the results of operations. As more customers and suppliers become more
comfortable in working with the single currency in the future, the Euro could
impact prices and costs. The Company believes that any negative impact coming
from price adjustments will be more than offset by the increase in consumer
demand that a stronger European Community will bring in the future.
Forward-Looking Statements
This Management's Discussion and Analysis and certain other sections of this
annual report contain forward-looking statements that involve a number of risks
and uncertainties. Forward-looking statements are made pursuant to the safe
harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 and are based on management's beliefs as
well as assumptions made by and information currently available to management.
Accordingly, the Company's actual results may differ materially from those
expressed or implied in such forward-looking statements due to known or unknown
risks and uncertainties that exist in the Company's operations and business
environment, including, among other factors, government regulation including tax
rate policies, competition and technological change, intellectual property
rights, the failure by the Company to produce anticipated cost savings or
improve productivity, the timing and magnitude of capital expenditures and
acquisitions, currency exchange rates, economic and market conditions in the
United States, Europe and the rest of the world, changes in customer spending
levels, the demand for existing and new products, the cost and availability of
raw materials, the successful integration of the Company's acquisitions, and
other risks associated with the Company's operations. Although the Company
believes that its forward-looking statements are based on reasonable
assumptions, there can be no assurance that actual results, performance or
achievements will not differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Readers
are cautioned not to place undue reliance on forward-looking statements.
57
<PAGE>
EXHIBIT 21
List of Subsidiaries
APTARGROUP, INC.
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
State or Other
Jurisdiction of Percentage
Incorporation Owned
--------------- ----------
<S> <C> <C>
AptarGroup International L.L.C. Delaware 100%
AptarGroup Foreign Sales Corporation Barbados 100%
AptarGroup Holding S.A. France 100%
Aptar GmbH Germany 100%
Erich Pfeiffer GmbH Germany 100%
Pfeiffer Vaporisateurs France S.a.r.L. France 100%
P & S Japan Ltd. Japan 100%
Pfeiffer (U.K.) Limited United Kingdom 100%
P&P Promotion of German Manufacturing
Technologies GmbH Germany 100%
Vallis Leasobjekt Gesellschaft GmbH Germany 51%
Seaplast S.A. Spain 50%
Seaquist-Loffler Kunststoffwerke GmbH Germany 100%
Loeffler Kunststoffwerk spol. s.r.o. Czech Republic 100%
SeaquistPerfect Dispensing GmbH Germany 100%
Valois Deutschland GmbH Germany 100%
AptarGroup S.A. France 100%
Aptar South Europe SARL France 100%
Novares S.p.A. Italy 100%
EMSAR S.p.A. Italy 100%
EMSAR France SCA France 100%
AptarGroup SAR Finance Unlimited Ireland 100%
EMSAR GmbH Germany 100%
SAR (U.K.) Limited United Kingdom 100%
Tes S.p.A. Italy 8%
Somova S.r.l. Italy 100%
Spruhventile GmbH Germany 100%
Caideil M.P. Teoranta Ireland 100%
General Plastics S.A. France 100%
Graphocolor France 60%
Moulage Plastique de Normandie S.A. France 100%
Perfect-Valois U.K. Limited United Kingdom 100%
Seaquist-Loeffler Limited United Kingdom 100%
Valois S.A. France 100%
Valois Dispray S.A. Switzerland 100%
Valois Espana S.A. Spain 100%
Valois Italiana S.r.l. Italy 100%
Ensyma S.A. Switzerland 100%
Microflow Engineering S.A. Switzerland 80%
Aptar India Private Limited India 100%
EMSAR Dispensing Systems Ltd. Hong Kong 100%
EMSAR Brasil Ltda. Brazil 100%
Inairic S.A. Argentina 100%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Seaquist Canada Ltd. Canada 100%
Seaquist Finance Unlimited Ireland 100%
Seaquist-Valois Australia Pty. Ltd. Australia 100%
Seaquist-Valois do Brasil Ltda. Brazil 100%
Seaquist-Valois Japan, Inc. Japan 100%
Aptar Suzhou Dispensing Ltd. P.R. China 100%
CosterSeaquist L.L.C. Illinois 100%
Emson Research, Inc. Connecticut 100%
EMSAR UK Ltd. United Kingdom 100%
Emson Foreign Sales Corporation U.S. Virgin Islands 100%
EMSAR, Inc. Connecticut 100%
EMSAR Ventures, Inc. Connecticut 100%
P.T. Emson Ongko Indonesia Indonesia 100%
Emson Spraytech India Private Ltd. India 51%
Global Precision, Inc. Florida 100%
Liquid Molding Systems, Inc. Delaware 100%
Philson, Inc. Connecticut 100%
Pfeiffer of America, Inc. Delaware 100%
P Merger Corporation Connecticut 100%
Seaquist Closures L.L.C. Delaware 100%
Seaquist Closures Foreign, Inc. Delaware 100%
Seaquist de Mexico, S.A. de C.V. Mexico 75%
SeaquistPerfect Dispensing L.L.C. Delaware 100%
SeaquistPerfect Dispensing Foreign, Inc. Delaware 100%
SeaquistPerfect Dispensing de Mexico
S.A. de C.V. Mexico 100%
Valois of America, Inc. Connecticut 100%
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-64320 and 33-80408) of AptarGroup, Inc. of our
report dated February 16, 2000 relating to the financial statements, which
appears in the Annual Report to Stockholders which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report dated February 16, 2000 relating to the financial statement
schedules, which appears in this Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
- ----------------------------------
PricewaterhouseCoopers LLP
Chicago, Illinois
March 21, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 32,416
<SECURITIES> 0
<RECEIVABLES> 188,507
<ALLOWANCES> (6,865)
<INVENTORY> 109,151
<CURRENT-ASSETS> 351,234
<PP&E> 716,291
<DEPRECIATION> (357,733)
<TOTAL-ASSETS> 863,298
<CURRENT-LIABILITIES> 159,905
<BONDS> 235,649
0
0
<COMMON> 365
<OTHER-SE> 419,904
<TOTAL-LIABILITY-AND-EQUITY> 863,298
<SALES> 834,317
<TOTAL-REVENUES> 834,317
<CGS> 519,704
<TOTAL-COSTS> 725,881
<OTHER-EXPENSES> 206,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14,246)
<INCOME-PRETAX> 91,778
<INCOME-TAX> 33,066
<INCOME-CONTINUING> 58,712
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,712
<EPS-BASIC> 1.62
<EPS-DILUTED> 1.59
</TABLE>
