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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-11846
APTARGROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-3853103
(State of Incorporation) (I.R.S. Employer Identification No.)
475 West Terra Cotta Avenue, Suite E,
Crystal Lake, Illinois 60014
(Address of Principal Executive Offices) (Zip Code)
815-477-0424
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock $.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12 (g) of the Act : None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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 25, 1998, was approximately $915,122,000. The number of shares outstanding
of Common Stock, as of March 25, 1998 was 18,002,860 shares held by
approximately 900 shareholders of record.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1997 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 13, 1998 are incorporated by reference into Part
III of this report.
Page 2
APTARGROUP, INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1997
PART I
Page
Item 1 Business 3
Item 2 Properties 10
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Security-Holders 11
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters 11
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of Consolidated
Results of Operations and Financial Condition 11
Item 7A Quantitative and Qualitative Disclosures about Market
Risk 11
Item 8 Financial Statements and Supplementary Data 11
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 11
PART III
Item 10 Directors and Executive Officers of the Registrant 11
Item 11 Executive Compensation 12
Item 12 Security Ownership of Certain Beneficial
Owners and Management 12
Item 13 Certain Relationships and Related Transactions 12
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 13
Signatures 14
Page 3
PART I
Item 1. Business
(a) General Development of Business
AptarGroup, Inc. became an independent publicly-owned corporation in April, 1993
as a result of a spin-off from Pittway Corporation (Pittway). The terms
"AptarGroup" or "Company" as used herein refer to AptarGroup, Inc. and its
subsidiaries or the former Seaquist Group as appropriate in the circumstance.
The Company's business began as a one-product, one-country operation that has
become a multinational supplier of a broad line of dispensing packaging systems.
The business was started in the late 1940's through its SeaquistPerfect
Dispensing division which manufactured and sold aerosol valves in the United
States. In 1964, this business was acquired by Pittway. The Company's business
has grown primarily through the acquisition of relatively small companies and
internal expansion.
Start-up/
Date Business Country Acquisition Initial Product Line
- ---- -------- ------- ----------- --------------------
1968 SeaquistPerfect
Dispensing GmbH
(formerly Perfect
Valois Ventil GmbH) Germany Acquisition Aerosol valves
1970 Valois S.A. France Acquisition Aerosol valves
1976 Seaquist Closures U.S. Start-up 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 Closures
1983 STEP S.A. France Acquisition Pumps
1989 SAR S.p.A. Italy Acquisition Pumps
1993 Remainder of the
Pfeiffer Group Germany Acquisition Pumps
1995 Liquid Molding
Systems, Inc. (LMS) U.S. Acquisition Silicone molded
products
1995 35% of Loffler
Kunststoffwerk GmbH
& Co. KG Germany Acquisition Closures
1995 General Plastics, S.A. France Acquisition Closures
1997 Aptar Suzhou Dispensing
Systems, Co., Ltd China Start-up Aerosol valves,
pumps,closures
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in the packaging components industry. Financial
information relating to operations by geographic area for each of the three
years in the period ended December 31, 1997, is set forth in Note 14 ("Segment
Information") to the Consolidated Financial Statements contained in the 1997
Annual Report to Stockholders, page 44, which is incorporated herein by
reference.
Page 4
(c) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The Company designs, manufactures and sells consumer product dispensing
systems. The Company focuses on providing value-added components to global
consumer product marketers in the fragrance/cosmetics, personal care,
pharmaceutical, household products and food industries. Value-added packaging
allows consumers to conveniently dispense a product, in an aesthetic looking
package, which consistently meets basic dosage characteristics as required. The
Company believes it is the largest supplier of dispensing closures, aerosol
valves, personal care fine mist pumps and pharmaceutical pumps in North America
and the largest supplier of fragrance/cosmetic pumps and pharmaceutical pumps in
Europe. The Company has manufacturing facilities primarily located in North
America and Europe which serve over 1,000 customers. The Company began
production of aerosol valves, pumps and closures in China in 1997.
PUMPS
Pumps are finger-actuated dispensing systems which disperse a spray or
lotion from non-pressurized containers. Pumps are principally sold to four
markets: fragrance/cosmetics, pharmaceutical, personal care and household
products. Examples of pump applications in these markets include 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.
AptarGroup believes it is the leading supplier of pharmaceutical pumps
to the world, fragrance/cosmetic pumps to Europe and personal care fine mist
pumps to North America. 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. The Company has sales
offices in Japan and in 1997, began producing pumps in China to enhance its
position in the Asian markets. In 1997, 1996 and 1995, pump sales accounted for
approximately 60%, 63% and 65%, respectively, of AptarGroup's net sales.
FRAGRANCE/COSMETICS
The Company believes it is the leading supplier of pumps to the
fragrance/cosmetics market in Europe. Pumps are manufactured to meet exacting
size and performance requirements. Significant research, time and coordination
with the customers development staff is required to qualify a pump for use with
their products. Recently, the Company developed several new pumps for the
fragrance/cosmetics market. An example is a pump that permanently affixes to a
bottle without the need for crimping, enabling customers to assemble their
finished product more easily, efficiently and economically. Another example is a
tubeless pump. The conventional tube, the device that takes the product up from
the bottom of the container when the button on top is pushed down, was removed.
In its place, a reservoir was substituted. During 1997, the REPLICA(R) pump was
introduced for miniature fragrance packages. REPLICA is 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.
Within the market, the Company expects the use of pumps to continue to
increase, particularly in the cosmetics sector. For example, packaging for
certain products such as skin moisturizers and anti-aging lotions is undergoing
a conversion to pump systems, which may provide growth opportunities for the
Company.
PHARMACEUTICAL
The Company considers itself to be the leading supplier of pumps to the
pharmaceutical industry worldwide. AptarGroup has clean room manufacturing
facilities in France, Germany and Switzerland which produce pumps in a
contaminant-controlled environment. The Company believes the use of pumps in the
dispensing of pharmaceuticals will continue to increase. Demand is increasing
for the Company's pumps which provide consistent doses of particular drugs.
During 1997, AptarGroup expanded its sales of unit dose pumps to applications
that deliver medicine for migraine relief in a nasal spray. This system ensures
that medication is administered quickly and effectively. AptarGroup is also
working with pharmaceutical companies to design dispensing systems for the
delivery of such medications as flu vaccines and cold remedies.
Page 5
PERSONAL CARE
The Company believes it is the largest supplier of personal care fine
mist pumps in North America. 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 has been 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 America.
OTHER
The Company has not focused on the household pump market. Household
products primarily utilize trigger or other high output pumps, for such
applications as bathroom cleaners, window sprays, and general household
cleaners. The Company manufactures high output pumps for the household market;
however, it currently does not manufacture a trigger pump. Pumps have not been
extensively used in the food industry.
CLOSURES
Dispensing closures are plastic caps, primarily for squeezable
containers, which allow a product to be dispensed without removing the cap.
Although the Company sells dispensing closures to all markets, the majority of
the Company's sales have been to the personal care market. The Company believes
that it is the largest manufacturer of dispensing closures in North America. In
1997, 1996 and 1995, dispensing closure sales accounted for approximately 19%,
18% and 16%, 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 dispensing closure business is to
gain greater market share in the European, South American and Asian markets, to
develop new innovative products and to adapt existing products for new markets.
PERSONAL CARE
Historically, the Company's primary focus for dispensing closures has
been the personal care industry. Products with dispensing closures include
shampoos, skin lotions, conditioners and toothpaste. In order to expand its
business in this market, the Company has focused on the development of new
products including SimpliSqueeze(R), a no-leak, invertible closure with one-hand
dispensing convenience. SimpliSqueeze 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 is expected to grow as a result of its current use with
hair care, shower gel and moisturizing lotion products and other expected
customer applications.
HOUSEHOLD
The Company has not had significant dispensing closure sales to the
household market. The Company believes this market offers an opportunity for
expansion. The Company is building stronger relationships with the consumer
product marketers operating in the household market. The Company adapts existing
products to target this market. For example, the Directional Pour Spout(TM)
incorporates an elongated spout that enables the consumer to pinpoint the
dispensing of the product in exactly the desired direction.
FOOD
In the food market, the Company believes opportunities for future
applications exist comparable to the conversion of ketchup packaging to a
dispensing closure. The trend of food manufacturers to offer products in a
squeezable dispensing package has increased, for example, in mayonnaise, jellies
and salad dressing products. An increase in the conversion of packaging for food
products, such as edible oils, to squeezable dispensing closures could
Page 6
provide growth opportunities for the Company. The Company's Directional Pour
Spout can also be used with food products.
During 1997, 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 requirements. Due to
this success, AptarGroup is tailoring the SimpliSqueeze technology into other
food/beverage markets.
OTHER
Sales of dispensing closures to the pharmaceutical market has not been
significant. The Company is developing products for this market. In addition,
the SimpliSqueeze technology is being expanded into the automotive market.
AEROSOL VALVES
Aerosol valves are mechanisms which dispense product from pressurized
containers. The Company sells two different types of aerosol valves. The first
type is a continuous spray valve frequently used with hair spray, spray paint,
insecticide, automotive products and laundry products. The second type of valve
is a metered aerosol valve used to dispense precise amounts of product. This
valve is primarily sold to the pharmaceutical market for lung and heart
medications. In 1997, 1996 and 1995, aerosol valve sales accounted for
approximately 19%, 17% and 18%, respectively, of AptarGroup's net sales.
Over the past 25 years, the number of aerosol valve companies 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 Companys aerosol valves
have historically been targeted primarily to the personal care and household
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
The primary applications for valves in the household market include
disinfectants, spray paints, insecticides, automotive products and laundry
sprays. The Company sells several customized overcaps that allow product to be
dispensed by actuating a valve situated in the cap on the can. These overcaps
are used, for instance, in household disinfectant sprays and room fresheners.
They provide a higher degree of differentiation and convenience relative to
competing sprays since the cap does not need to be removed prior to usage.
PHARMACEUTICAL
Metered dose aerosol valves are primarily used for the dispensing of
medication for the lungs or heart. Aerosol technology allows medication to be
broken up into very fine particles, which enables the drug to be delivered to
the lungs or heart with greater efficiency than pills
OTHER
Aerosol valves are not widely used in the food industry. In the
fragrance/cosmetics industry, aerosol valves have been largely replaced by pumps
as the preferred dispensing mechanism.
RESEARCH AND DEVELOPMENT
The Company is continuously involved in developing innovative products
and adapting existing products for new markets. Expenditures for research and
development activities were $20.8 million, $20.1 million, and $17.5 million in
1997, 1996 and 1995, respectively. These costs were associated with a number of
products in varying stages of development.
Page 7
PATENTS AND TRADEMARKS
AptarGroup will continue to sell its products under the names used by
its operating units and is not currently offering any products under the
AptarGroup name. The names used by its operating units have been trademarked.
AptarGroup customarily seeks patent and trademark protection for its
products and currently owns and has numerous applications pending for United
States and foreign patents and trademarks. In addition, certain of AptarGroup's
products are produced under patent licenses granted by third parties. The
majority of AptarGroup's net sales are generated by products which have patent
protection on either the product or a component of the product. Management
believes that it possesses certain technical capabilities in making its products
that would also make it difficult for a competitor to duplicate them.
TECHNOLOGY
Pumps and aerosol valves require the assembly of up to 15 different
plastic, metal and rubber components using high speed equipment. When molding
dispensing closures, or plastic components to be used in pump or aerosol valve
products, the Company uses advanced plastic injection molding technology,
including large cavitation plastic injection molds. These molds are required to
maintain tolerances as small as one thousandth of an inch and produce in a
high-speed, cost-efficient manner. The acquisitions of LMS and General Plastics
added significant new molding technologies. LMSs experience in liquid silicone
rubber molding allows the Company to pursue opportunities to use silicone
molding in other product lines. The Company plans to use the bi-injection
molding technology used by General Plastics to develop new innovative products
for the packaging industry.
MANUFACTURING AND SOURCING
The principal raw materials used in AptarGroup's production are plastic
resins and certain metal products. AptarGroup believes an adequate supply of
such raw materials is readily available from existing and alternate sources. The
Company attempts to offset inflation through cost containment and increased
selling prices over time, as allowed by market conditions. AptarGroup also
purchases plastic and metal components that are used in the final assembly of
its products from suppliers in North America and Europe. Certain suppliers of
these components have unique technical abilities that make AptarGroup dependent
on them, particularly for aerosol valve and pump production in North America.
Significant delays in receiving components from these suppliers would require
AptarGroup to seek alternate sources, which could result in higher costs as well
as impact the ability of the Company to supply products in the short term. The
Company has not experienced such delays in the past.
SALES AND DISTRIBUTION
Sales of products are primarily through AptarGroup's own sales force. To
a limited extent, AptarGroup also uses the services of independent
representatives and distributors who sell AptarGroup's products as independent
contractors to certain smaller customers and export markets. Backlogs are not a
significant factor in the industry in which the Company operates. Most orders
placed with the Company are for delivery within 120 days. Some customers place
blanket orders which extend beyond this delivery period; however, deliveries
against these orders are subject to change.
CUSTOMERS
The demand for AptarGroup's products is influenced by the demand for the
products of AptarGroup's customers. Demand for the products of AptarGroup's
customers may be affected by general economic conditions, government
regulations, tariffs and other trade barriers. AptarGroup's customers include
many of the largest fragrance/cosmetics, personal care, pharmaceutical,
household products and food marketers in the U.S. and Europe. The Company has
over 1,000 customers with no single customer accounting for greater than 10% of
1997 net sales. Over the past few years, a consolidation of the Company's
customer base has occurred. This trend is expected to continue. A concentration
of customers may result in pricing pressures or a loss of volume. This situation
also presents opportunities for increasing sales due to the breadth of the
Company's product line and its international presence.
Page 8
INTERNATIONAL BUSINESS
A significant portion of AptarGroup's operations is located in Europe.
Sales in Europe for the years ended December 31, 1997, 1996 and 1995 were
approximately 55%, 58%, and 60%, respectively, of net sales. The majority of
units sold in Europe are manufactured at facilities in France, Germany, Ireland,
Italy, Spain and Switzerland. Other foreign geographic areas serviced by
AptarGroup include Argentina, Australia, Brazil, Canada, England, Japan, and
Mexico, though the combined sales from these areas is not significant to
AptarGroup's consolidated sales. During 1996, the Company established a
manufacturing facility in China that began producing valves in early 1997. In
late 1997, production of pumps and dispensing closures were added at this
facility.
FOREIGN CURRENCY
A significant portion of AptarGroup's operations is located outside of
the United States. Because of this, movements in exchange rates may have a
significant impact on the translation of financial position and results of
operations of AptarGroup's foreign entities. In general, since the majority of
the Company's foreign operations are based in Europe, a weakening U.S. dollar
relative to the major European currencies has a positive translation effect on
the Company's financial condition and results of operations. Conversely, a
strengthening U.S. dollar would have the opposite effect. AptarGroup has
historically borrowed locally to hedge potential currency fluctuations for
assets that were purchased outside of the United States.
In some cases, the Company sells products denominated in a currency
different from the currency in which the respective costs are incurred. Changes
in exchange rates on such inter-country sales impacts the Company's results of
operations. The Company, at times, uses forward exchange contracts, primarily
with banks, to hedge the currency risk associated with future cash receipts or
payments.
WORKING CAPITAL PRACTICES
Collection and payment periods tend to be longer for the Company's
operations located outside the United States due to local business 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 4,100 full-time employees. Of the full-time
employees, approximately 1,100 are located in North America and substantially
all of the remaining 3,000 are located in Europe. No North American employee is
covered by a collective bargaining agreement, while the majority of the
Company's international employees are covered by collective bargaining
arrangements made at either the local or government level in their respective
countries. Termination of employees at certain AptarGroup European operations
could be costly due to local regulations regarding severance benefits.
Management of AptarGroup considers its employee relations to be good.
COMPETITION
All of the markets in which AptarGroup operates are highly competitive
and the Company continues to experience price competition in all product lines
and markets. Competitors include privately and publicly-held entities, the
majority being privately-held. AptarGroup's competitors range from regional to
international companies. AptarGroup expects the market for its products to
continue to be competitive.
AptarGroup believes its competitive advantages are consistent high
levels of quality, service and innovation, geographic diversity and breadth of
products. The Company's manufacturing strengths lie in the ability to mold
complex plastic components in a cost-effective manner and to assemble products
at high speeds.
ENVIRONMENT
AptarGroup's manufacturing operations primarily involve plastic
injection molding and automated assembly processes. Historically, the
environmental impact of these processes has been minimal, and management
believes it meets current environmental standards in all material respects.
Page 9
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 VOCs (volatile organic compounds) into the atmosphere. Certain states within
the United States have regulations requiring the reduction in the amount of VOCs
that can be released into the atmosphere and the potential exists for this type
of regulation to expand to a worldwide basis, including Europe. These
regulations require the Company's customers to reformulate certain aerosol and
pump products which may affect the demand for such products. The Company owns
patents and has developed systems to function with alternate propellant and
product formulations.
Aerosol packaging of paints has also been adversely impacted by local
regulations adopted in many large cities in the United States designed to
address the problem of spray painted graffiti. Aerosol packaging may be
adversely impacted by insurance cost considerations relating to the storage of
aerosol products.
Government regulation in the dispensing closure product line primarily
relates to waste reduction. The Company's dispensing closures are plastic and
mainly consist of polypropylene, a recyclable plastic. The Company also uses
recycled plastic in its manufacturing process.
Future government regulations could include medical cost containment
elements. For example, reviews by various governments to determine the number of
drugs or prices thereof that will be paid by their insurance systems could
affect future sales to the pharmaceutical industry. Such regulation could
adversely affect prices of and demand for the Company's pharmaceutical products.
The Company believes that the recent focus on the cost effectiveness of the use
of medications as compared to surgery and hospitalization provides an
opportunity for the Company to expand sales to the pharmaceutical market.
Regulatory requirements impact the Company's customers and could affect the
Company's investment in and manufacturing of products for the pharmaceutical
market.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Financial information concerning foreign and domestic operations and
export sales is set forth in Note 14 ("Segment Information") to the Consolidated
Financial Statements contained in the 1997 Annual Report to Stockholders, page
44, which is incorporated herein by reference.
Page 10
Item 2. PROPERTIES
The principal offices and manufacturing facilities of AptarGroup are
either owned or leased by the Company or its subsidiaries. None of the owned
principal properties is subject to a lien or other encumbrance material to the
operations of the Company. The Company believes that existing operating leases
will be renegotiated as they expire or that suitable alternative properties can
be leased on acceptable terms. The Company considers the condition and extent of
utilization of its manufacturing facilities and other properties to be generally
good, and the capacity of its plants to be adequate for the needs of its
business.
The locations of the Company's principal manufacturing facilities, by
country, are set forth below:
FRANCE GERMANY CHINA
Caen Bohringen Suzhou
Le Neubourg Dortmund
Le Vaudreuil Eigeltingen
Meaux
Verneuil Sur Avre
ITALY NORTH AMERICA UNITED KINGDOM
San Giovanni Teatino (Chieti) Cary, Illinois, USA Leeds, England
Manoppello Midland, Michigan, USA
Mukwonago, Wisconsin, USA
Norwalk, Connecticut, USA
Queretaro, Mexico
SWITZERLAND
Messovico
In addition to the above countries, the Company has sales offices or
other manufacturing facilities in Argentina, Australia, Brazil, Canada, England,
Ireland, Japan, and Spain. The Company's corporate offices are located in
Crystal Lake, Illinois.
Item 3. LEGAL PROCEEDINGS
LEGAL PROCEEDINGS
Legal proceedings involving the Company generally relate to product
liability and patent infringement issues. In the opinion of AptarGroup's
management, the outcome of pending claims and litigation is not likely to have a
material adverse effect on the Company's financial position or the results of
its operations.
Historically, product liability claims for all products of the Company
have been minimal. However, the increase in pump and aerosol valve applications
for pharmaceutical products may result in an increase in product 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.
During the second quarter of 1997, the Company received a judgment in
its favor as plaintiff in a patent infringement lawsuit relating to an aerosol
valve component. The Company was awarded $7.8 million plus interest. The
decision has been appealed and the Company cannot predict the ultimate outcome
or timing of such appeal. This award is not included in the 1997 financial
results.
Page 11
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 15 "Quarterly Data (Unaudited)" to the
Consolidated Financial Statements contained in the Company's 1997 Annual Report
to Stockholders, page 45, is incorporated herein by reference. The Common Stock
of AptarGroup is traded on the New York Stock Exchange (symbol: ATR). As of
December 31, 1997, stockholders of record totaled approximately 900.
Item 6. SELECTED FINANCIAL DATA
The information set forth under the heading "Five Year Summary of
Selected Financial Data" appearing on page 47 of the Company's 1997 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 48-51 of the Company's 1997 Annual Report to Stockholders is
incorporated herein by reference.
Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth under the headings "Consolidated Statements of
Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows,"
"Consolidated Statements of Stockholders' Equity," "Notes to Consolidated
Financial Statements" and "Report of Independent Accountants" appearing on pages
28-46 of the Company's 1997 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 29, 1998.
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 13, 1998, 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:
Page 12
Jacques Blanie, age 51, Executive Vice President of SeaquistPerfect
Dispensing division since 1996 and Geschaftsfuhrer (i.e., Managing Director) of
SeaquistPerfect Dispensing GmbH since 1986. In 1996, Perfect-Valois Ventil GmbH
changed its name to SeaquistPerfect Dispensing GmbH.
Francois Boutan, age 55, Financial Director and Controller of the
European operations of AptarGroup. Mr. Boutan has served in this capacity since
1988.
Pierre Cheru, age 64, Directeur General of Valois S.A. Mr. Cheru has
served in this capacity since 1978.
Stephen J. Hagge, age 46, Executive Vice President and Chief Financial
Officer, Secretary and Treasurer of AptarGroup since 1993. From 1985 to 1993 Mr.
Hagge was the Vice President of Finance of the Seaquist Group.
Lawrence Lowrimore, age 53, Vice President-Human Resources of AptarGroup
since 1993. From 1990 to 1993, Mr. Lowrimore was the Vice President of Human
Resources of the Seaquist Group.
Francesco Mascitelli, age 47, Direttore Generale of SAR S.p.A., an
Italian subsidiary. Mr. Mascitelli has served in this capacity since 1991.
James R. Reed, age 61, President of the SeaquistPerfect Dispensing
division. Mr. Reed was President of the Seaquist Valve division since 1987. In
1993, Seaquist Valve changed its name to Seaquist Dispensing and in 1996 to
SeaquistPerfect Dispensing.
Eric S. Ruskoski, age 50, President of the Seaquist Closures division.
Mr. Ruskoski has served in this capacity since 1987.
Hans-Josef Schutz, age 53, Geschsftsfuhrer of the Pfeiffer Group. Mr.
Schutz has served in this capacity since May of 1993. From 1983 through April of
1993, Mr. Schutz was the Vice President of the Pfeiffer Group.
Alain Vichot, age 64, Directeur General Adjoint of Valois S.A. since
1994. From 1987 to 1994, Mr. Vichot was Directeur General of STEP S.A. In early
1998, Mr. Vichot became Vice-President Marketing of AptarGroup.
Item 11.EXECUTIVE COMPENSATION
The information set forth under the headings "Compensation Committee
Interlocks and Insider Participation," "Board Compensation" and "Executive
Compensation" (other than "Compensation Committee Report on Executive
Compensation" and "Performance Graph") in the Registrant's Proxy Statement for
the annual meeting of stockholders to be held on May 13, 1998, 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 13, 1998, 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 13, 1998, is incorporated herein by reference.
Page 13
PART IV
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
Location
--------
1)Financial Statements required by Item 8 of
this Form
Consolidated Balance Sheets Annual Report, page 28
Consolidated Statements of Income Annual Report, page 30
Consolidated Statements of Cash Flows Annual Report, page 31
Consolidated Statements of Stockholders'
Equity Annual Report, page 32
Notes to Consolidated Financial Statements Annual Report, page 33
Report of Independent Accountants Annual Report, page 46
2)Schedule required by Article 12 of Regulation S-X
Report of Independent Accountants on
Financial Statement Schedule page 16
II - Valuation and Qualifying Accounts page 17
All other schedules have been omitted because they are not
applicable or not required.
3)Exhibits required by Item 601 of Regulation S-K are incorporated by
reference to the Exhibit Index on pages 18-19 of this report.
(b) Reports on Form 8-K during the quarter ended December 31, 1997:
No reports on Form 8-K were filed during the quarter ended December 31,
1997.
Page 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on this 27th day of March
1998.
AptarGroup, Inc.
(Registrant)
By /s/ Stephen J. Hagge
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.
NAME TITLE DATE
- ---- ----- ----
/s/ King Harris Chairman of the Board and Director March 27, 1998
King Harris
/s/ Carl Siebel President and Chief Executive Officer and March 27, 1998
Carl Siebel Director (Principal Executive Officer)
/s/ Peter Pfeiffer Vice Chairman of the Board and Director March 27, 1998
Peter Pfeiffer
/s/ Stephen J. Hagge Executive Vice President and Chief March 27, 1998
Stephen J. Hagge Financial Officer, Secretary and Treasurer
(Principal Accounting and Financial Officer)
Page 15
NAME TITLE DATE
- ---- ----- ----
/s/ Eugene L. Barnett Director March 27, 1998
Eugene L. Barnett
/s/ Ralph Gruska Director March 27, 1998
Ralph Gruska
/s/ Leo A. Guthart Director March 27, 1998
Leo A. Guthart
/s/ William Harris Director March 27, 1998
William Harris
/s/ Ervin J. LeCoque Director March 27, 1998
Ervin J. LeCoque
/s/ Alfred Pilz Director March 27, 1998
Alfred Pilz
Page 16
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of AptarGroup, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 19, 1998, appearing on page 46 of the 1997 Annual Report
to Stockholders of AptarGroup, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Chicago, Illinois
February 19, 1998
Page 17
AptarGroup, Inc.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands)
Balance at Charged to Deductions Balance
beginning costs and from at end
of period expenses Acquisition reserve(a) of period
--------- -------- ----------- ---------- ---------
1997
Allowance for doubtful
accounts $3,623 $1,261 $ -- $1,072 $3,812
1996
Allowance for doubtful
accounts $3,296 $1,148 $ -- $ 821 $3,623
1995
Allowance for doubtful
accounts $1,697 $1,580 $ 76 $ 57 $3,296
(a) Write-off of accounts considered uncollectible, net of recoveries and
foreign currency translation adjustments, net.
Page 18
INDEX TO EXHIBITS
Sequential
Number and Description of Exhibit Page Number***
3(i) Amended and Restated Certificate of Incorporation of the Company, filed
as Exhibit 6.1 to the Company's Registration Statement on Form 8-A filed
under the Exchange Act on April 5, 1993 (File No. 1-11846), is hereby
incorporated by reference.
3(ii) Amended and Restated By-Laws of the Company, 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.
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.**
Page 19
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.**
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 Managing Director Employment Agreement dated November 15, 1993 of
Hans-Josef Schutz, and related pension plan dated October 20, 1989,
filed as Exhibit 10.12 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 (File No. 1-11846), is hereby
incorporated by reference.**
10.13 Amendment to Agreement of Employment dated November 20, 1995 of Ervin J.
LeCoque, filed as Exhibit 10.13 of the Company's Annual Report on Form
10-K for the year ended December 31, 1995 (File No. 1-11846), is hereby
incorporated by reference.**
10.14 Executive Employment Agreement dated February 1, 1996 of Stephen J.
Hagge, filed as Exhibit 10.14 of the Company's Annual Report on Form
10-K for the year ended December 31, 1995 (File No. 1-11846), is hereby
incorporated by reference.**
10.15 AptarGroup, Inc. 1996 Stock Awards Plan, filed as Appendix A to the
Company's Proxy Statement, dated April 10, 1996 (File No. 1-11846), is
hereby incorporated by reference.**
10.16 AptarGroup, Inc. 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.**
10.17 Employment Agreement dated March 6, 1996 of Eric S. Ruskoski.**
10.18 Amendment to Agreement of Employment dated November 15, 1993 of
Hans-Joseph Schutz, filed as exhibit 10.18 of the Company's Quarterly
Report on Form 10-Q, for the quarter ended June 30, 1997 (File No.
1-11846), is hereby incorporated by reference.**
13* 1997 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
27.1* Financial Data Schedule (restated)
27.2* Financial Data Schedule (restated)
* Filed herewith.
** Management contract or compensatory plan or arrangement.
*** This information appears only in the manually signed original of this
Form 10-K.