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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, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
COMMISSION FILE NUMBER 1-11846
AptarGroup, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-3853103
(State of Incorporation) (I.R.S. Employer Identification No.)
475 West Terra Cotta Avenue, Suite E, Crystal Lake, Illinois 60014
(Address of Principal Executive Offices) (Zip Code)
815-477-0424
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
---------------------- --------------------------
Common Stock $.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates, based
on the closing sales price for the Common Stock on the New York Stock Exchange
on March 14, 2002, was approximately $1,151,876,562. The number of shares
outstanding of Common Stock, as of March 14, 2002 was 35,880,331 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 2001 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 8, 2002 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, 2001
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
Item 5 Market for Registrant's Common Equity and Related Stockholder 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............................................. 12
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 13
PART III
Item 10 Directors and Executive Officers of the Registrant...................................... 13
Item 11 Executive Compensation.................................................................. 14
Item 12 Security Ownership of Certain Beneficial Owners and Management.......................... 14
Item 13 Certain Relationships and Related Transactions.......................................... 14
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 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, manufacturing
and selling aerosol valves in the United States. The Company's business has
grown primarily through the acquisition of relatively small companies and
internal expansion. Information regarding acquisitions made over the past three
years is set forth in Note 2 "Acquisitions" to the Consolidated Financial
Statements contained in the 2001 Annual Report to Stockholders, page 61, which
is incorporated herein by reference.
(b) Financial Information about Segments
The Company operates in the packaging components industry and is organized
into five business units. The five business units sell value-added dispensing
systems to global consumer product marketers and are similar in all aspects of
business except historical economic performance. One of the business units
("SeaquistPerfect") has had historical economic performance lower than the
other four business units and as a result is shown as a separate reportable
segment for financial reporting purposes. The other four business units have
similar historical economic performance and as a result have been aggregated
into one reportable segment entitled "Dispensing Systems" for financial
reporting purposes. Financial information relating to operations by geographic
area for each of the three years in the period ended December 31, 2001 is set
forth in Note 16 "Segment Information" to the Consolidated Financial Statements
contained in the 2001 Annual Report to Stockholders, pages 76-79, which is
incorporated herein by reference.
Dispensing Systems
The Dispensing Systems segment sells all three of the Company's principal
product lines (pumps, closures and aerosol valves). Within the aerosol valve
product line, the Dispensing Systems segment only sells pharmaceutical metered
dose aerosol valves. The table below details the five principal markets served
by the Company, which products are primarily sold by the Dispensing Systems
segment.
Fragrance/Cosmetic Personal Care Pharmaceutical Household Food/Beverage
------------------ ------------- -------------- --------- -------------
Pumps Pumps Pumps Pumps Pumps
Closures Aerosol Valves Closures Closures
SeaquistPerfect
The SeaquistPerfect segment sells primarily aerosol valves and certain pumps
limited to the personal care, household and, to a lesser degree, the
food/beverage markets. The SeaquistPerfect segment does not sell closures, nor
does it typically sell its products to the fragrance/cosmetic or pharmaceutical
markets. The lower historical economic performance compared to the Dispensing
Systems segment is primarily due to the non-pharmaceutical standard aerosol
valve business. Competition for this product line of the business is especially
strong and comes primarily from privately held companies. In recent years, the
Company has taken various steps to improve profitability of the SeaquistPerfect
segment. In 1997, the Company started a joint venture in the U.S. to
manufacture aerosol spray caps and accessories to help offer more innovative
dispensing solutions to customers of standard aerosol valves. In 1999, the
Company expanded this strategy geographically when it purchased a European
aerosol spray cap and accessory manufacturer. In 2000, the Company purchased
the remaining 50% of the U.S. joint venture it did not previously own. The
Company has also implemented several cost reduction efforts as well as
implementing a price increase in 2001 to its North American aerosol valve
customers. SeaquistPerfect has also devoted more of its research and
development to expand its product offerings of various spray and lotion pumps.
These factors have led to an increase in profitability that is expected to
continue. In
3
addition, SeaquistPerfect will be selectively exiting some of the standard
aerosol valve business in 2002 that is not strategically important and that
does not offer adequate returns.
(c) Narrative Description of Business
General
The Company is a leading global supplier of a broad range of innovative
dispensing systems for the fragrance/cosmetic, personal care, pharmaceutical,
household and food/beverage markets. The Company focuses on providing
value-added dispensing systems (pumps, dispensing closures and aerosol valves)
to global consumer product marketers to allow them to differentiate their
products and meet the consumer's need for convenience. The Company has
manufacturing facilities located throughout the world including North America,
Europe, Asia and South America. The Company has over 3,000 customers with no
single customer accounting for greater than 5% of the Company's 2001 net sales.
For 2001, the percentage of net sales represented by sales to the
fragrance/cosmetic, personal care, pharmaceutical, household and food/beverage
markets were 32%, 31%, 22%, 9% and 6%, respectively. Pumps, dispensing closures
and aerosol valves represented approximately 62%, 22% and 14%, respectively, of
AptarGroup's 2001 net sales. The Company expects the mix of sales by product
and by market to remain approximately the same in 2002.
Sales of the Company's dispensing systems have traditionally grown at a
faster rate than the overall packaging industry as consumer's preference for
convenience has increased, and product differentiation through packaging design
has become more important to the Company's customers. Consumer product
marketers have converted many of their products to packages with dispensers
that offer the benefit of enhanced shelf appeal, convenience, cleanliness or
accuracy of dosage. The Company expects this trend to continue.
Growth Strategy
The Company seeks to enhance its position as a leading global supplier of
innovative dispensing systems by (i) expanding geographically, (ii) converting
non-dispensing applications to dispensing systems, (iii) replacing current
dispensing applications with the Company's dispensing products and (iv)
developing new dispensing technologies.
The Company is committed to expanding geographically to serve multinational
customers in existing and emerging areas. Targeted areas include Latin America,
Eastern Europe and Asia.
The Company believes there remain significant opportunities for growth in
introducing the Company's dispensing products to non-dispensing applications.
Examples include potential conversion in the food/beverage market for
condiments, cooking oils, salad dressing, and single-serve non-carbonated
beverages. In the fragrance/cosmetic market, potential conversion includes
creams and lotions currently packaged in jars or tubes using screw off
non-dispensing closures, converting to lotion pumps or dispensing closures.
In addition to introducing new dispensing applications, the Company believes
there are significant growth opportunities in converting existing
pharmaceutical delivery systems (syringes or pills) to the Company's more
convenient dispensing pump or metered dose aerosol valve systems. An example of
a product for which the Company continues to find new applications is the
metered dose aerosol valve. Metered dose aerosol valves are used to dispense
precise amounts of product in very fine particles from pressurized containers.
Traditionally metered dose valves were used to deliver medication via the
pulmonary route. The Company is working with a bio-technology company that is
developing proprietary technology to orally administer large molecule drugs to
be absorbed through the inner linings of the mouth. Additional examples in the
pharmaceutical market include nasal pumps to dispense vaccines, cold and flu
treatments, and hormone replacement therapies.
4
The Company continues to develop an electronic dispensing system based on
silicon etching technology primarily for the pharmaceutical market as an
alternative to the traditional mechanical pump. In addition, the Company has
internally developed a patented technology for dispensing fragrance samples in
a lightweight blister package as an alternative to standard vials. This new
product called "Clic and Dream" was successfully launched in 2001 and is
expected to gain market share in the coming years in the sample fragrance
market.
Strategic Initiative
In April 2001, the Company announced it had begun a project ("Strategic
Initiative") to improve the efficiency of operations that produce pumps for its
mass-market fragrance/cosmetic and personal care customers. In addition to
improving efficiency and reducing costs, another objective of the Strategic
Initiative is to improve customer service through reduced lead times and the
ability to customize finished products on a local basis. As part of the
Strategic Initiative, the Company closed one molding operation in the U.S. and
will consolidate the molding and assembly of the base cartridge (standard
internal components common to modular pumps) into one of the Company's
facilities in Italy. In addition, the Company is rationalizing its mass-market
pump product lines for these two markets by discontinuing production of
non-modular pumps and increasing capacity for its modular pumps.
Charges related to the Strategic Initiative are expected to be approximately
$10 million before taxes and will consist primarily of costs related to the
closing of the molding operation and discontinuance of its non-modular pumps
(including asset impairment write-downs, accelerated depreciation associated
with revised useful lives and utility abatement reimbursements) as well as
employee severance and related benefit costs. Approximately $3 million of the
charges are expected to be cash outlays while the remaining $7 million will be
non-cash charges (asset impairment write-downs and accelerated depreciation
associated with revised useful lives). The Strategic Initiative project relates
to the Dispensing Systems segment and is expected to be completed before the
end of 2002. Financial information relating to the Strategic Initiative for the
year ended December 31, 2001 is set forth in Note 12 "Strategic Initiative
Charges" to the Consolidated Financial Statements contained in the 2001 Annual
Report to Stockholders, pages 70-72, which is incorporated herein by reference.
Pumps (62% of 2001 net sales)
AptarGroup believes it is the leading supplier of pharmaceutical,
fragrance/cosmetic and personal care fine mist pumps worldwide and the second
largest supplier of personal care lotion pumps worldwide. Pumps are
finger-actuated dispensing systems that dispense a spray or lotion from
non-pressurized containers. Pumps are sold to all five of the Company's
markets. Traditional applications for pumps include perfumes, lotions, oral and
nasal sprays, hair sprays and window cleaners. Applications for pumps have
recently expanded to include more viscous products such as spray gels and
specialized skin treatments, as well as an increasing number of food products
such as butter substitutes and candy sprays. The style of pump used depends
largely on the nature of the product being dispensed, from small, fine mist
pumps used with perfume and pharmaceutical products to lotion pumps for more
viscous formulas. In 2001, 2000 and 1999, pump sales accounted for
approximately 62%, 62% and 61%, respectively, of AptarGroup's net sales.
Fragrance/Cosmetic
The fragrance/cosmetic market requires a broad range of pump dispensing
systems to meet functional as well as aesthetic requirements. A considerable
amount of research, time and coordination with the customers' development staff
is required to qualify a pump for use with their products. Within the market,
the Company expects the use of pumps to continue to increase, particularly in
the cosmetic 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.
5
Pharmaceutical
Pumps sold to the pharmaceutical market deliver medications orally, nasally
or topically. Characteristics of this market include (i) governmental
regulation of the Company's pharmaceutical customers, (ii)
contaminant-controlled manufacturing environments, and (iii) a significant
amount of time and research from initially working with pharmaceutical
companies at the molecule development stage of a medication through the
eventual distribution to the market. AptarGroup has clean room manufacturing
facilities in France, Germany, Switzerland, China and the United States. The
Company believes that the conversion from traditional medication forms such as
pills and syringes to the use of pumps for the dispensing of medication will
continue to increase. Potential opportunities for conversion from pills and
syringes to pump dispensing systems include vaccines, cold and flu treatments
and hormone replacement therapies.
Personal Care
Personal care pumps include both fine mist spray as well as lotion pumps.
Sales of fine mist pumps, include use in hair care, sun care and deodorant
products. The Company also supplies lotion pumps to the personal care market
for products such as skin moisturizers and soap.
Food/Beverage
Historically, sales of the Company's pumps to this market have not been
significant. However, the Company has recently increased its sales to this
market with applications such as butter substitute sprays, candy sprays and
condiments. The Company believes there will be additional applications for
pumps in this market in the future.
Closures (22% of 2001 net sales)
The Company believes that it is the largest supplier of dispensing closures
in the United States, and the second largest supplier in Europe. The Company
manufactures primarily dispensing closures and, to a small degree, some
non-dispensing closures. Dispensing closures are plastic caps, primarily for
plastic containers, which allow a product to be dispensed without removing the
cap. Closure sales accounted for approximately 22% of AptarGroup's net sales in
2001, 2000 and 1999.
Sales of dispensing closures have grown as consumers worldwide have
demonstrated a preference for a package utilizing the convenience of a
dispensing closure. At the same time, consumer marketers are trying to
differentiate their products by incorporating performance enhancing features
such as no-drip dispensing, inverted packaging and directional flow to make
them simpler to use, cleaner and more appealing to consumers.
Personal Care
Historically, the majority of the dispensing closure sales have been to the
personal care market. Products with dispensing closures include shampoos,
shower gels, sun care lotions and toothpaste. While many personal care products
in the U.S. and Europe have already converted from non-dispensing to dispensing
closures, the Company expects to benefit from similar conversions in other
geographic areas.
Household
While the Company has had success worldwide in selling dispensing closures
to this market, it has not represented a significant amount of total dispensing
closure sales. Products utilizing dispensing closures include dishwashing
detergents, laundry care products and household cleaners. The Company believes
this market offers an opportunity for expansion as a result of conversion from
non-dispensing to dispensing closures.
6
Food/Beverage
Similar to the household market, sales of dispensing closures to the
food/beverage market has not represented a significant amount of total
dispensing closure sales. However, the Company has recently experienced an
increase in the amount of interest from food marketers who are considering
utilizing dispensing closures for their products. Examples of food/beverage
products currently utilizing dispensing closures include salad dressings,
syrups, condiments, honey, water and dairy creamers. The Company believes there
are tremendous growth opportunities in the food/beverage market due to the size
of the non-carbonated single-serve beverage market worldwide and additional
conversion from traditional non-dispensing food packages to dispensing closure
systems.
Aerosol Valves (14% of 2001 net sales)
AptarGroup believes it is one of the largest aerosol valve suppliers in
North America. Aerosol valves dispense product from pressurized containers. The
majority of the aerosol valves sold by the Company are continuous spray valves
with the balance being metered dose valves. 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.
Aerosol valve sales accounted for approximately 14%, 14% and 15% of
AptarGroup's net sales in 2001, 2000 and 1999, respectively.
The Company has invested in manufacturing capabilities to produce
accessories that are complementary to the valve, such as customized
spray-through overcaps. These overcaps provide a higher degree of
differentiation and convenience since the cap does not need to be removed prior
to usage.
Personal Care
The primary applications in the personal care market are continuous spray
valves for hair care products, deodorants and shaving creams. In addition, the
metered dose valve is used in this market for breath sprays.
Household
The primary applications for continuous spray valves in the household market
include disinfectants, spray paints, insecticides and automotive products.
Metered dose aerosol valves are used for air fresheners.
Pharmaceutical
Metered dose aerosol valves are used for dispensing precise amounts of
medication. Aerosol technology allows medication to be broken up into very fine
particles, which enables the drug to be delivered via the pulmonary system. The
Company works with pharmaceutical companies as they work to phase out the use
of aerosol chlorofluorocarbon ("CFC") propellants. The Company expects to
increase its market share of metered dose valves to this market as
pharmaceutical companies replace CFC products with alternative propellants.
Research and Development
One of the Company's competitive strengths is its commitment to innovation
and providing innovative dispensing solutions for its customers. This
commitment to innovation is the result of the Company's emphasis on research
and development. The Company's research and development activities are directed
toward developing innovative products, adapting existing products for new
markets and customer requirements and lowering costs. The Company has research
and development departments located in each of its five business units, which
are located in the United States, France, Germany and Italy. In certain cases,
the Company's customers share in the research and development expenses of
customer initiated projects. This sharing of research and development expenses
is not material to the total amount of the Company's research and development
expenditures.
7
Expenditures for research and development activities were $25.9 million,
$26.9 million and $25.6 million in 2001, 2000 and 1999, respectively. The 1999
amount excludes a $3.3 million write-off of purchased research and development
costs. These costs were associated with a number of products in varying stages
of development.
Patents and Trademarks
AptarGroup sells its products under the names used by its business units and
is not currently offering any products under the AptarGroup name. The names
used by its business 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.
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-effective 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.
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 cost increases through improving productivity
and increasing 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 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.
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.
Backlog
AptarGroup's sales are primarily made pursuant to standard purchase orders
for delivery of products. 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 purchase orders are
subject to change, and only a small portion of the order backlog is
noncancelable. The dollar amount associated with the noncancelable portion is
not material. Therefore, AptarGroup does not believe that backlog as of any
particular date is indicative of future results.
8
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/cosmetic, personal care, pharmaceutical,
household products and food/beverage marketers in the world. The Company has
over 3,000 customers with no single customer accounting for greater than 5% of
2001 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 outside the
United States. Sales in Europe for the years ended December 31, 2001, 2000 and
1999 were approximately 54%, 53% and 54%, 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, and represent
approximately 8%, 8% and 6% of AptarGroup's consolidated sales for the years
ended December 31, 2001, 2000 and 1999, respectively. Export sales from the
United States were $62.2 million, $44.3 million and $57.9 million in 2001, 2000
and 1999, respectively.
The Company currently has a wholly owned subsidiary located in Argentina. In
2001, the wholly owned subsidiary had net sales of approximately $8 million,
approximately one half of which was sold outside of Argentina and invoiced in
U.S. dollars. The subsidiary purchases certain components in either U.S.
dollars or Euros, and finishes the products locally. At December 31, 2001, the
subsidiary had approximately $400 thousand of net liability exposure
denominated in either U.S. dollars or Euros that was revalued using a devalued
Argentine Peso. This revaluation of the net liability position resulted in an
unrealized foreign exchange loss reported in the results of operations of
approximately $140 thousand. The Company expects business in Argentina to be
disrupted during the current economic crisis, but any negative impact is not
expected to be significant to the overall worldwide results of operations in
2002.
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 the financial statements of
AptarGroup's foreign entities. The Company's primary foreign exchange exposure
is to the Euro, but the Company has foreign exchange exposure to South American
and Asian currencies as well as the British pound. The Company manages its
exposures to foreign exchange principally with forward exchange contracts to
hedge certain transactions and firm purchase and sales commitments denominated
in foreign currencies. A strengthening U.S. dollar relative to foreign
currencies has a dilutive translation effect on the Company's financial
statements. Conversely, a weakening U.S. dollar has 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.
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.
9
Employee and Labor Relations
AptarGroup has approximately 6,600 full-time employees. Of the full-time
employees, approximately 1,600 are located in North America, 4,400 are located
in Europe and the remaining 600 are located in Asia and South America.
Approximately 200 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 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, and, to a limited degree, metal
annodization. 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 operations of AptarGroup have not been
significantly affected by environmental laws and regulations relating to the
environment.
Certain AptarGroup products are indirectly 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 volatile organic compounds ("VOC's") into the atmosphere. Certain
states within the United States have regulations that required 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 required the Company's customers to reformulate certain aerosol and
pump products, which may have affected 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 also be
adversely impacted by insurance cost considerations relating to the storage of
aerosol products.
Future government regulations could include medical cost containment
policies. 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
10
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, will be acquired through purchase options 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
Le Neubourg Bohringen Suzhou/2/
Le Vaudreuil Dortmund/1/
Poincy Eigeltingen
Verneuil Sur Avre/2/ Freyung
Annecy Menden/1/
ITALY NORTH AMERICA UNITED KINGDOM
San Giovanni Teatino (Chieti) Cary, Illinois, USA/1/ Leeds, England
Manoppello McHenry, Illinois, USA/1/
Milan/1/ Midland, Michigan, USA
Mukwonago, Wisconsin, USA
Congers, New York, USA
Queretaro, Mexico/2/
Stratford, Connecticut, USA
Torrington, Connecticut, USA
SWITZERLAND IRELAND BRAZIL
Messovico Tourmakeady, County Mayo Sao Paulo
Ballinasloe, County Gallway
ARGENTINA CZECH REPUBLIC
Buenos Aires Ckyne
- --------
/1/ Locations of facilities dedicated to the SeaquistPerfect segment.
/2/ Locations that have facilities for both the SeaquistPerfect and Dispensing
Systems segments. All other locations not footnoted represent locations of
facilities dedicated to the Dispensing Systems segment.
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.
11
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 increase the risk associated with 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.
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 18 "Quarterly Data (Unaudited)" to the
Consolidated Financial Statements contained in the Company's 2001 Annual Report
to Stockholders, page 80, is incorporated herein by reference. The Common Stock
of AptarGroup is traded on the New York Stock Exchange (symbol: ATR). As of
March 14, 2002, stockholders of record totaled approximately 600.
During the quarter ended December 31, 2001, the FCP Aptar Savings Plan (the
"Plan") purchased 475 shares of Common Stock of the Company on behalf of the
participants at an average price of $33.46 per share for an aggregate amount of
approximately $16 thousand. At December 31, 2001, the Plan owns 5,020 shares of
Common Stock of the Company. Employees of AptarGroup S.A.S. and Valois S.A.S.,
subsidiaries 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 83 of the Company's 2001 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" appearing on pages 84-95 of the Company's 2001 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" appearing on pages 84-95 of the Company's 2001 Annual Report to
Stockholders is incorporated herein by reference.
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 52-81 of the Company's 2001 Annual Report to Stockholders is incorporated
herein by reference.
12
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 30, 2002.
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 8, 2002 is incorporated herein by reference.
In addition to Messrs. Carl A. Siebel, Peter Pfeiffer and Stephen J. Hagge,
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 55, has been Executive Vice President of SeaquistPerfect
Dispensing L.L.C. since 1996 and Geschaftsfuhrer of SeaquistPerfect Dispensing
GmbH since 1986.
Francois Boutan, age 59, 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.
Olivier De Pous, age 57, has been Directeur General of Valois S.A.S. since
January 2000. Mr. De Pous was Directeur de Division Parfumerie Cosmetique of
Valois S.A.S from 1997 to 1999.
Patrick Doherty, age 46, has served as President of SeaquistPerfect
Dispensing L.L.C. since October 2000. Mr. Doherty was Executive Vice President,
General Manager of SeaquistPerfect Dispensing L.L.C. since April 1999, and was
Vice President of Operations of SeaquistPerfect Dispensing L.L.C. since April
1993.
Olivier Fourment, age 44, has been Directeur General of Valois S.A.S. since
January 2000. Mr. Fourment was Directeur de Division Pharmacie of Valois S.A.S.
from 1997 to 1999.
Lawrence Lowrimore, age 57, has been Vice President-Human Resources of
AptarGroup since 1993.
Francesco Mascitelli, age 51, has been Direttore Generale of Emsar S.p.A.,
an Italian subsidiary, since 1991.
Emil Meshberg, age 54, 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.
Eric S. Ruskoski, age 54, has been President of Seaquist Closures L.L.C.
since 1987.
Hans-Josef Schutz, age 57, has been Geschaftsfuhrer of the Pfeiffer Group
since 1993.
Rick Schofield, age 51, has been President of Emsar, Inc. since 1998. Mr.
Schofield was President of Risdon AMS (USA), Inc. a Crown Cork and Seal Company
from 1996 to 1998.
The information set forth under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Registrant's Proxy Statement for the
annual meeting of stockholders to be held on May 8, 2002 is incorporated herein
by reference.
13
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 8, 2002 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 8, 2002, 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 8, 2002 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 52
Consolidated Statements of Income................................................... Annual Report, page 54
Consolidated Statements of Cash Flows............................................... Annual Report, page 55
Consolidated Statements of Changes in Equity........................................ Annual Report, page 56
Notes to Consolidated Financial Statements.......................................... Annual Report, page 58
Report of Independent Accountants................................................... Annual Report, page 81
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 18-20 of this report.
(b) Reports on Form 8-K during the quarter ended December 31, 2001:
No reports on Form 8-K were filed during the quarter ended December 31,
2001.
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 2002.
APTARGROUP, INC.
(Registrant)
By
/S/ STEPHEN J. HAGGE
-----------------------------------
Stephen J. Hagge
Executive Vice President, Chief
Financial Officer and Secretary
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, 2002
- ------------------------------- Director
King Harris
/S/ CARL A. SIEBEL President and Chief Executive March 21, 2002
- ------------------------------- Officer and Director
Carl A. Siebel (Principal Executive
Officer)
/S/ PETER PFEIFFER Vice Chairman of the Board March 21, 2002
- ------------------------------- and Director
Peter Pfeiffer
/S/ STEPHEN J. HAGGE Executive Vice President, March 21, 2002
- ------------------------------- Chief Financial Officer,
Stephen J. Hagge Secretary and Director
(Principal Accounting and
Financial Officer)
/S/ PROF. DR. ROBERT W. HACKER Director March 21, 2002
- -------------------------------
Prof. Dr. Robert W. Hacker
/S/ ALAIN CHEVASSUS Director March 21, 2002
- -------------------------------
Alain Chevassus
/S/ RALPH GRUSKA Director March 21, 2002
- -------------------------------
Ralph Gruska
/S/ LEO A. GUTHART Director March 21, 2002
- -------------------------------
Leo A. Guthart
/S/ DR. JOANNE C. SMITH Director March 21, 2002
- -------------------------------
Dr. Joanne C. Smith
15
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders
of AptarGroup, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 13, 2002, appearing in the 2001 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/__PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 13, 2002
16
AptarGroup, Inc.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(Dollars in Thousands)
Balance at Charged to Deductions Balance
beginning costs and from at end
of period expenses Acquisition reserve(a) of period
---------- ---------- ----------- ---------- ---------
2001
Allowance for doubtful accounts $6,927 $1,879 $ -- $1,440 $ 7,366
Inventory obsolescence reserve. 8,840 4,198 -- 2,444 10,594
2000
Allowance for doubtful accounts $6,865 $1,849 $ -- $1,787 $ 6,927
Inventory obsolescence reserve. 7,881 2,956 -- 1,997 8,840
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
- --------
(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 Securities Exchange Act of 1934 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.
4.4.1 First Amendment Agreement dated as of December 14, 2000 relating to the Multicurrency Credit
Agreement dated as of June 30, 1999 among the Company, the lender party thereto, Deutsche Bank
AG New York Branch and/or Cayman Islands and Bank of America, National Association, as Agent
for the Lenders (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 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. **
10.4 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. **
10.5 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. **
10.6 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. **
18
Number and Description of Exhibit
- ---------------------------------
10.7 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. **
10.8 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. **
10.9 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. **
10.10 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. **
10.11 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. **
10.12 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. **
10.13 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.
10.14 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.
10.15 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.
10.16 Employment Agreement dated February 17, 1999, of Emil Meshberg, filed as Exhibit 10.20 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-11846),
is hereby incorporated by reference. **
10.17* Amendment dated February 17, 2002, to Employment Agreement dated February 17, 1999 of Emil
Meshberg. **
10.18 Amendment No.1 to Service Agreement dated January 1, 2000 of Carl A. Siebel, filed as Exhibit
10.21 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File
No. 1-11846), is hereby incorporated by reference. **
10.19 AptarGroup, Inc. 2000 Stock Awards Plan, filed as Appendix A to the Company's Proxy Statement,
dated April 6, 2000 (File No. 1-11846), is hereby incorporated by reference. **
10.20 AptarGroup, Inc. 2000 Director Stock Option Plan, filed as Appendix B to the Company's Proxy
Statement, dated April 6, 2000 (File No. 1-11846), is hereby incorporated by reference. **
10.21 Employment Agreement dated March 6, 1996 of Eric S. Ruskoski, filed as Exhibit 10.17 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-11846),
is hereby incorporated by reference. **
10.22 Indemnification Agreement dated January 1, 1996 of King Harris, filed as Exhibit 10.25 of the
Company's quarterly report on Form 10-Q for the quarter ended March 31, 2001 (File No. 1-11846),
is hereby incorporated by reference. **
19
Number and Description of Exhibit
- ---------------------------------
10.23 Employment Agreement dated February 17, 2000, of Rick Schofield, filed as Exhibit 10.26 of the
Company's quarterly report on Form 10-Q for the quarter ended June 30, 2001 (File No. 1-11846), is
hereby incorporated by reference. **
10.24 Supplement to the pension scheme agreement dated October 16, 2001 pertaining to the pension plan
between AptarGroup, Inc. and Peter Pfeiffer, filed as Exhibit 10.27 of the Company's quarterly
report on Form 10-Q for the quarter ended September 30, 2001 (File No. 1-11846), is hereby
incorporated by reference. **
13* 2001 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.
- --------
* Filed herewith.
** Management contract or compensatory plan or arrangement.
20