APTARGROUP, INC. [ATR] Filings

10-Q 1 atr-20220630.htm 10-Q atr-20220630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

☐ 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.


Delaware						36-3853103
(State of Incorporation)						(I.R.S. Employer Identification No.)

265 EXCHANGE DRIVE, SUITE 100, CRYSTAL LAKE, IL 60014

815-477-0424

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	ATR	New York Stock Exchange

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 þ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated
filer

☐

Smaller reporting
company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of shares outstanding of common stock, as of July 22, 2022, was 65,337,000 shares.

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AptarGroup, Inc.

Form 10-Q

Quarter Ended June 30, 2022

INDEX


Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income – Three and Six Months Ended June 3 0 , 2022 and 2021	1

	Condensed Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 3 0 , 2022 and 2021	2

	Condensed Consolidated Balance Sheets – June 3 0 , 2022 and December 31, 2021	3

	Condensed Consolidated Statements of Changes in Equity – Three and Six Months Ended June 3 0 , 2022 and 2021	5

	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 3 0 , 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48

Item 4.	Controls and Procedures	48

Part II.	OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

Item 6.	Exhibits	50

	Signature	51

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


In thousands, except per share amounts

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Net Sales	$	844,543	$	811,032	$	1,689,475	$	1,587,786
Operating Expenses:
Cost of sales (exclusive of depreciation and amortization shown below)	549,010		523,050		1,091,738		1,011,755
Selling, research & development and administrative	135,382		140,913		280,923		275,261
Depreciation and amortization	58,552		57,790		117,217		115,228
Restructuring initiatives	428		4,876		719		8,548
Total Operating Expenses	743,372		726,629		1,490,597		1,410,792
Operating Income	101,171		84,403		198,878		176,994

Other (Expense) Income:
Interest expense	(11,982)		(7,175)		(20,912)		(14,590)
Interest income	989		624		1,277		1,005
Net investment (loss) gain	(483)		(1,611)		(1,733)		15,198
Equity in results of affiliates	(276)		81		(362)		(434)
Miscellaneous, net	52		(2,028)		(1,051)		(2,991)
Total Other (Expense) Income	(11,700)		(10,109)		(22,781)		(1,812)

Income before Income Taxes	89,471		74,294		176,097		175,182

Provision for Income Taxes	25,858		19,020		50,113		35,969

Net Income	$	63,613	$	55,274	$	125,984	$	139,213

Net Income Attributable to Noncontrolling Interests	$	12	$	2	$	64	$	15

Net Income Attributable to AptarGroup, Inc.	$	63,625	$	55,276	$	126,048	$	139,228

Net Income Attributable to AptarGroup, Inc. per Common Share:
Basic	$	0.97	$	0.84	$	1.92	$	2.12
Diluted	$	0.95	$	0.81	$	1.88	$	2.05

Average Number of Shares Outstanding:
Basic	65,475		65,818		65,509		65,525
Diluted	66,900		68,086		66,969		67,869

Dividends per Common Share	$	0.38	$	0.38	$	0.76	$	0.74

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

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AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


In thousands

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Net Income	$	63,613	$	55,274	$	125,984	$	139,213
Other Comprehensive Income (Loss):
Foreign currency translation adjustments	(68,845)		21,109		(91,887)		(27,373)
Changes in derivative gains, net of tax	533		289		121		809
Defined benefit pension plan, net of tax
Actuarial gain (loss), net of tax	33		123		(750)		442
Prior service cost, net of tax	—		—		—		—
Amortization of prior service cost included in net income, net of tax	25		32		53		65
Amortization of net loss included in net income, net of tax	1,572		2,354		3,152		4,708
Total defined benefit pension plan, net of tax	1,630		2,509		2,455		5,215
Total other comprehensive (loss) income	(66,682)		23,907		(89,311)		(21,349)
Comprehensive (Loss) Income	(3,069)		79,181		36,673		117,864
Comprehensive Income Attributable to Noncontrolling Interests	826		2		840		15
Comprehensive (Loss) Income Attributable to AptarGroup, Inc.	$	(2,243)	$	79,183	$	37,513	$	117,879

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

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AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In thousands

	June 30, 2022		December 31, 2021
Assets
Cash and equivalents	$	240,474	$	122,925
Short-term investments	—		740
Total Cash and equivalents and Short-term investments	240,474		123,665
Accounts and notes receivable, less current expected credit loss ("CECL") of $9,414 in 2022 and $7,374 in 2021	703,000		671,350
Inventories	470,600		441,464
Prepaid and other	144,567		121,729
Total Current Assets	1,558,641		1,358,208
Land	29,632		31,436
Buildings and improvements	638,497		631,897
Machinery and equipment	2,788,792		2,862,142
Property, Plant and Equipment, Gross	3,456,921		3,525,475
Less: Accumulated depreciation	(2,199,929)		(2,249,598)
Property, Plant and Equipment, Net	1,256,992		1,275,877
Investments in equity securities	53,838		59,485
Goodwill	936,107		974,157
Intangible assets, net	329,285		362,343
Operating lease right-of-use assets	62,626		62,454
Miscellaneous	60,621		48,840
Total Other Assets	1,442,477		1,507,279
Total Assets	$	4,258,110	$	4,141,364

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

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AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In thousands, except share and per share amounts

	June 30, 2022		December 31, 2021
Liabilities and Stockholders’ Equity
Current Liabilities:
Notes payable, revolving credit facility and overdrafts	$	2,300	$	147,276
Current maturities of long-term obligations, net of unamortized debt issuance costs	67,986		142,351
Accounts payable, accrued and other liabilities	751,746		692,865
Total Current Liabilities	822,032		982,492
Long-Term Obligations, net of unamortized debt issuance costs	1,271,752		907,024
Deferred income taxes	22,096		27,547
Retirement and deferred compensation plans	105,335		116,809
Operating lease liabilities	46,973		48,010
Deferred and other non-current liabilities	41,458		74,882
Commitments and contingencies	—		—
Total Deferred Liabilities and Other	215,862		267,248
AptarGroup, Inc. stockholders’ equity
Common stock, $.01 par value, 199 million shares authorized, 70.6 million and 70.4 million shares issued as of June 30, 2022 and December 31, 2021, respectively	706		704
Capital in excess of par value	939,897		916,534
Retained earnings	1,865,634		1,789,413
Accumulated other comprehensive loss	(404,576)		(316,041)
Less: Treasury stock at cost, 5.2 million and 4.9 million shares as of June 30, 2022 and December 31, 2021, respectively	(467,550)		(421,203)
Total AptarGroup, Inc. Stockholders’ Equity	1,934,111		1,969,407
Noncontrolling interests in subsidiaries	14,353		15,193
Total Stockholders’ Equity	1,948,464		1,984,600
Total Liabilities and Stockholders’ Equity	$	4,258,110	$	4,141,364

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

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AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


In thousands

Three Months Ended	AptarGroup, Inc. Stockholders’ Equity
June 30, 2022 and 2021	Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Common Stock Par Value		Treasury Stock		Capital in Excess of Par Value		Non- Controlling Interest		Total Equity

Balance - March 31, 2021	$	1,704,336	$	(326,965)	$	700	$	(352,282)	$	874,623	$	383	$	1,900,795
Net income (loss)	55,276		—		—		—		—		(2)		55,274


Foreign currency translation adjustments	—		21,109		—		—		—		—		21,109
Changes in unrecognized pension gains and related amortization, net of tax	—		2,509		—		—		—		—		2,509
Changes in derivative gains, net of tax	—		289		—		—		—		—		289
Stock awards and option exercises	—		—		2		7,900		23,759		—		31,661
Cash dividends declared on common stock	(24,974)		—		—		—		—		—		(24,974)

Balance - June 30, 2021	$	1,734,638	$	(303,058)	$	702	$	(344,382)	$	898,382	$	381	$	1,986,663

Balance - March 31, 2022	$	1,826,924	$	(338,708)	$	705	$	(434,867)	$	929,218	$	15,179	$	1,998,451
Net income (loss)	63,625		—		—		—		—		(12)		63,613

Foreign currency translation adjustments	—		(68,031)		—		—		—		(814)		(68,845)
Changes in unrecognized pension gains and related amortization, net of tax	—		1,630		—		—		—		—		1,630
Changes in derivative gains, net of tax	—		533		—		—		—		—		533
Stock awards and option exercises	—		—		1		4,422		10,679		—		15,102
Cash dividends declared on common stock	(24,915)		—		—		—		—		—		(24,915)
Treasury stock purchased	—		—		—		(37,105)		—		—		(37,105)
Balance - June 30, 2022	$	1,865,634	$	(404,576)	$	706	$	(467,550)	$	939,897	$	14,353	$	1,948,464

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In thousands

Six Months Ended	AptarGroup, Inc. Stockholders’ Equity
June 30, 2022 and 2021	Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Common Stock Par Value		Treasury Stock		Capital in Excess of Par Value		Non- Controlling Interest		Total Equity

Balance - December 31, 2020	$	1,643,825	$	(281,709)	$	695	$	(361,583)	$	849,161	$	396	$	1,850,785
Net income (loss)	139,228		—		—		—		—		(15)		139,213


Foreign currency translation adjustments	—		(27,373)		—		—		—		—		(27,373)
Changes in unrecognized pension gains and related amortization, net of tax	—		5,215		—		—		—		—		5,215
Changes in derivative gains, net of tax	—		809		—		—		—		—		809
Stock awards and option exercises	—		—		7		17,201		49,221		—		66,429
Cash dividends declared on common stock	(48,415)		—		—		—		—		—		(48,415)

Balance - June 30, 2021	$	1,734,638	$	(303,058)	$	702	$	(344,382)	$	898,382	$	381	$	1,986,663

Balance - December 31, 2021	$	1,789,413	$	(316,041)	$	704	$	(421,203)	$	916,534	$	15,193	$	1,984,600
Net income (loss)	126,048		—		—		—		—		(64)		125,984

Foreign currency translation adjustments	—		(91,111)		—		—		—		(776)		(91,887)
Changes in unrecognized pension gains and related amortization, net of tax	—		2,455		—		—		—		—		2,455
Changes in derivative gains, net of tax	—		121		—		—		—		—		121
Stock awards and option exercises	—		—		2		6,741		23,363		—		30,106
Cash dividends declared on common stock	(49,827)		—		—		—		—		—		(49,827)
Treasury stock purchased	—		—		—		(53,088)		—		—		(53,088)
Balance - June 30, 2022	$	1,865,634	$	(404,576)	$	706	$	(467,550)	$	939,897	$	14,353	$	1,948,464

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

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AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


In thousands, brackets denote cash outflows

Six Months Ended June 30,	2022		2021

Cash Flows from Operating Activities:
Net income	$	125,984	$	139,213
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	95,123		95,606
Amortization	22,094		19,622
Stock-based compensation	22,136		21,805
Provision for CECL	2,338		(240)
(Gain) loss on disposition of fixed assets	(179)		5
Net loss (gain) on remeasurement of equity securities	1,733		(15,198)
Deferred income taxes	(5,484)		(6,865)
Defined benefit plan expense	12,347		14,650
Equity in results of affiliates	362		434
Change in fair value of contingent consideration	(2,265)		1,950
Changes in balance sheet items, excluding effects from foreign currency adjustments:
Accounts and other receivables	(60,045)		(76,735)
Inventories	(49,242)		(55,873)
Prepaid and other current assets	(24,091)		(19,793)
Accounts payable, accrued and other liabilities	62,973		69,139
Income taxes payable	822		(5,261)
Retirement and deferred compensation plan liabilities	(19,727)		(9,657)
Other changes, net	(8,225)		2,779
Net Cash Provided by Operations	176,654		175,581
Cash Flows from Investing Activities:
Capital expenditures	(147,262)		(137,039)
Proceeds from government grants	12,794		—
Proceeds from sale of property, plant and equipment	507		4,571
Maturity of short-term investment	740		243

Acquisition of business, net of cash acquired and release of escrow	—		(4,834)


Proceeds from sale of investment in equity securities	1,088		—
Notes receivable, net	(6,992)		(29)
Net Cash Used by Investing Activities	(139,125)		(137,088)
Cash Flows from Financing Activities:
Proceeds from notes payable and overdrafts	20,457		7,410
Repayments of notes payable and overdrafts	(21,010)		(4,615)
Repayments and proceeds of short term revolving credit facility, net	(144,345)		(52,000)
Proceeds from long-term obligations	402,244		7,888
Repayments of long-term obligations	(80,453)		(7,001)
Debt issuance costs	(4,009)		(1,718)

Dividends paid	(49,827)		(48,415)
Proceeds from stock option exercises	11,416		53,038
Purchase of treasury stock	(53,088)		—
Net Cash Provided (Used) by Financing Activities	81,385		(45,413)
Effect of Exchange Rate Changes on Cash	(1,365)		(6,555)
Net Increase (Decrease) in Cash and Equivalents	117,549		(13,475)
Cash and Equivalents at Beginning of Period	122,925		304,970
Cash and Equivalents at End of Period	$	240,474	$	291,495

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

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AptarGroup, Inc.

Notes to Condensed Consolidated Financial Statements

(Dollars in Thousands, Except per Share Amounts, or as Otherwise Indicated)

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of AptarGroup, Inc. and our subsidiaries. The terms “AptarGroup”, “Aptar”, “Company”, “we”, “us” or “our” as used herein refer to AptarGroup, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated.

In the opinion of management, the unaudited Condensed Consolidated Financial Statements (the “Condensed Consolidated Financial Statements”) include all normal recurring adjustments necessary for a fair statement of consolidated financial position, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented. The accompanying Condensed Consolidated Financial Statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to make the information presented not misleading. Also, certain financial position data included herein was derived from the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 but does not include all disclosures required by U.S. GAAP. Accordingly, these Condensed Consolidated Financial Statements and related notes should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations of any interim period are not necessarily indicative of the results that may be expected for the year.

The extent to which the COVID-19 pandemic impacts our financial results and operations for all three of our business segments will depend on future developments which are highly uncertain and cannot be predicted, including the emergence of new variants, the availability, adoption and efficacy of vaccines and boosters, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extended in response to any further resurgence of the virus and numerous other uncertainties. No impairments were recorded as of June 30, 2022 related to the COVID-19 pandemic. However, due to the general uncertainty surrounding the situation, including areas such as cost inflation, supply chain disruptions and labor shortages, future results could be materially impacted.

As of June 30, 2022, the war in Ukraine has not had a significant direct impact on our business, though the near-term visibility for this situation is expected to remain fluid and uncertain for the next several quarters. However, we have experienced some indirect impacts on our business, including higher input costs and certain supply chain disruptions.

ADOPTION OF RECENT ACCOUNTING STANDARDS

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy including the nature of the transaction, the financial statement line items affected by the transaction and any significant terms and conditions associated with the transactions. We adopted this guidance in the fourth quarter of 2021 using the prospective approach.

In March 2020, the FASB issued ASU 2020-04, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments to this update apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 was further amended in January 2021 by ASU 2021-01 which clarified the applicability of certain provisions. Both standards are effective upon issuance and can be adopted any time prior to December 31, 2022. The guidance in ASU 2020-04 and ASU 2021-01 is optional and may be elected over time as reference rate reform activities occur. During 2021, we amended the revolving credit facility to provide mechanics relating to a transition away from LIBOR (in the case of USD) and the designated benchmark rates for other available currencies and the replacement of any such applicable benchmark by a replacement alternative benchmark rate or mechanism for loans made in the applicable currency. We are evaluating any further impact this standard may have on our Condensed Consolidated Financial Statements and anticipate no further significant impacts.

Other accounting standards that have been issued by the FASB or other standards-setting bodies did not have a material impact on our Condensed Consolidated Financial Statements.

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INCOME TAXES

We compute taxes on income in accordance with the tax rules and regulations of the many taxing authorities where income is earned. The income tax rates imposed by these taxing authorities may vary substantially. Taxable income may differ from pre-tax income for financial accounting purposes. To the extent that these differences create timing differences between the tax basis of an asset or liability and our reported amount in the financial statements, an appropriate provision for deferred income taxes is made.

We maintain our assertion that the cash and distributable reserves at our non-U.S. affiliates are indefinitely reinvested. As of June 30, 2022, under currently enacted laws, we do not have a balance of foreign earnings that will be subject to U.S. taxation upon repatriation. We will provide for the necessary withholding and local income taxes when management decides that an affiliate should make a distribution. These decisions are made taking into consideration the financial requirements of the non-U.S. affiliates and our global cash management goals.

We provide a liability for the amount of unrecognized tax benefits from uncertain tax positions. This liability is provided whenever we determine that a tax benefit will not meet a more-likely-than-not threshold for recognition.

We are subject to the examination of our returns and other tax matters by the U.S. Internal Revenue Service and other tax authorities and governmental bodies. We believe that we have adequately provided a tax reserve for any adjustments that may result from tax examinations or uncertain tax positions. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner inconsistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. The resolution of each of these audits is not expected to be material to our Condensed Consolidated Financial Statements.

NOTE 2 – REVENUE

Revenue by segment and geography for the three and six months ended June 30, 2022 and 2021 is as follows:


	For the Three Months Ended June 30, 2022
Segment	Europe		Domestic		Latin America		Asia		Total
Pharma	$	209,118	$	108,414	$	6,339	$	16,360	$	340,231
Beauty + Home	202,276		102,354		40,504		26,212		371,346
Food + Beverage	33,571		78,034		12,299		9,062		132,966
Total	$	444,965	$	288,802	$	59,142	$	51,634	$	844,543


	For the Three Months Ended June 30, 2021
Segment	Europe		Domestic		Latin America		Asia		Total
Pharma	$	212,220	$	93,527	$	5,294	$	14,302	$	325,343
Beauty + Home	192,371		103,679		38,882		25,314		360,246
Food + Beverage	32,402		71,974		11,885		9,182		125,443
Total	$	436,993	$	269,180	$	56,061	$	48,798	$	811,032


	For the Six Months Ended June 30, 2022
Segment	Europe		Domestic		Latin America		Asia		Total
Pharma	$	420,125	$	214,755	$	14,194	$	33,619	$	682,693
Beauty + Home	411,359		198,170		77,702		52,314		739,545
Food + Beverage	68,612		155,882		24,990		17,753		267,237
Total	$	900,096	$	568,807	$	116,886	$	103,686	$	1,689,475

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	For the Six Months Ended June 30, 2021
Segment	Europe		Domestic		Latin America		Asia		Total
Pharma	$	420,167	$	182,822	$	10,664	$	25,522	$	639,175
Beauty + Home	381,611		202,486		73,224		49,871		707,192
Food + Beverage