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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:
Title of each class Name of each exchange on which registered
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Common Stock $.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the Common Stock held by non-affiliates,
based on the closing sales price for the Common Stock on the New York Stock
Exchange on March 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
PART I
Page
----
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
2
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.
Start-up/
Date Business Country Acquisition Initial Product Line
- ---- --------------------------------------- ----------- ---------------------- ------------------------
1968 SeaquistPerfect Dispensing GmbH Germany Acquisition Aerosol valves
(formerly Perfect-Valois Ventil GmbH)
1970 Valois S.A. France Acquisition Aerosol valves
1976 Seaquist Closures 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
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.
3
(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.
5
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.
6
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
7
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
8
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.
9
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
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
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
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
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:
Location
--------
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.
(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
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.
Signature Title Date
--------- ----- ----
/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
15
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
AptarGroup, Inc.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in Thousands)
Balance at Charged to Deductions Balance
beginning costs and from at end
of period expenses Acquisition reserve (a) of period
---------- ---------- ----------- ---------- ---------
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
- --------
(a) Write-off of accounts considered uncollectible, net of recoveries and
foreign currency translation adjustments.
17
INDEX TO EXHIBITS
Number and Description of Exhibit
---------------------------------
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.**
18
Number and Description of Exhibit
---------------------------------
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
- --------
* Filed herewith.
** Management contract or compensatory plan or arrangement.
19