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United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

FOR THE TRANSITION PERIOD FROM ________ TO ________

COMMISSION FILE NUMBER 1-11846

AptarGroup, Inc.

475 WEST TERRA COTTA AVENUE, SUITE E, CRYSTAL LAKE, ILLINOIS 60014

815-477-0424

Securities Registered Pursuant to Section 12(b) of the Act:

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 (§229.405 of this chapter) 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.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x  No ¨

The aggregate market value of the common stock held by non-affiliates as of June 30, 2002 was $1,059,001,846.

The number of shares outstanding of common stock, as of February 26, 2003 was 35,952,239 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held May 7, 2003, are incorporated by reference into Part III of this report.

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AptarGroup, Inc.

FORM 10-K

For the Year Ended December 31, 2002

INDEX

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PART I

ITEM 1.     BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

Our business began as a one-product, one-country operation that has become a multinational supplier of a broad line of dispensing packaging systems. Our business was started in the late 1940’s, manufacturing and selling aerosol valves in the United States, and has grown primarily through the acquisition of relatively small companies and internal expansion. We were incorporated in Delaware in 1992.

Our periodic and current reports are available, free of charge, on our website (www.aptargroup.com), as soon as reasonably practicable after the material is electronically filed with, or furnished, to the SEC.

FINANCIAL INFORMATION ABOUT SEGMENTS

We operate in the packaging components industry, which includes the development, manufacture and sale of consumer product dispensing systems. We are organized into five business units. The five business units sell value-added dispensing systems to global consumer product marketers. These business units all require similar production processes, sell to similar classes of customers and markets, use the same methods to distribute products, operate in similar regulatory environments 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. A summary of revenue from external customers, profitability and total assets for each of the last three years is shown in Note 16 to the Consolidated Financial Statements in Item 8.

DISPENSING SYSTEMS

The Dispensing Systems segment sells all three of our 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 we serve and which products are primarily sold by the Dispensing Systems segment.

SEAQUISTPERFECT

The SeaquistPerfect segment sells primarily aerosol valves and certain pumps 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, we have taken various steps to improve profitability of the SeaquistPerfect segment. We have implemented several cost reduction efforts as well as implemented a price increase in 2001 to our 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. In addition, SeaquistPerfect has selectively exited some of the standard aerosol valve business in 2002 that was not strategically important and that did not offer adequate returns. These factors have led to an increase in profitability that is expected to continue.

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NARRATIVE DESCRIPTION OF BUSINESS

GENERAL

We are a leading global supplier of a broad range of innovative dispensing systems for the personal care, fragrance/cosmetic, pharmaceutical, household and food/beverage markets. We focus on providing value-added dispensing systems (pumps, closures and aerosol valves) to global consumer product marketers to allow them to differentiate their products and meet the consumer’s need for convenience. We have manufacturing facilities located throughout the world including North America, Europe, Asia and South America. We have over 3,000 customers with no single customer accounting for greater than 6% of our 2002 net sales.

For 2002, the percentages of net sales represented by sales to the personal care, fragrance/cosmetic, pharmaceutical, household and food/beverage and other markets were 32%, 29%, 23%, 9% and 7%, respectively. Pumps, closures and aerosol valves represented approximately 60%, 22% and 15%, respectively, of our 2002 net sales. We expect the mix of sales by product and by market to remain approximately the same in 2003.

Sales of our 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 our 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. We expect this trend to continue.

GROWTH STRATEGY

We seek to enhance our 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 our dispensing products and (iv) developing new dispensing technologies.

We are committed to expanding geographically to serve multinational customers in existing and emerging areas. Targeted areas include Eastern Europe, Asia and South America.

We believe significant opportunities exist to introduce our dispensing products to non-dispensing applications. Examples of significant opportunities include potential conversion in the food/beverage market for single serve non-carbonated beverages, condiments, cooking oils and salad dressing. 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, we believe there are significant growth opportunities in converting existing pharmaceutical delivery systems (syringes or pills) to our more convenient dispensing pump or metered dose aerosol valve systems. An example of a product for which we continue 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. We continue to work 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 of opportunities in the pharmaceutical market include nasal pumps to dispense vaccines, cold and flu treatments, and hormone replacement therapies.

We have 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 launched in 2001 and is expected to gain market share in 2003 in the sample fragrance market.

STRATEGIC INITIATIVE

In April 2001, we announced a project (“Strategic Initiative”) to improve the efficiency of operations that produce pumps for our mass-market fragrance/cosmetic and personal care customers. In addition to improving efficiency and reducing costs, another objective of the Strategic Initiative was 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, we closed one molding operation in the U.S. and have consolidated the molding and assembly of the base cartridge (standard internal components common to modular pumps) into one of our facilities in Italy. We have also closed several of our sales offices in certain countries. In addition, we are rationalizing our mass-market pump product lines for these two markets by discontinuing production of non-modular pumps and increasing capacity for our modular pumps. The project is essentially complete as of December 31, 2002 and no additional expense related to this project is expected in 2003. For details of the charges related to the Strategic Initiative, please refer to Note 14 of the Notes to the Consolidated Financial Statements in Item 8.

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PUMPS (60% OF 2002 NET SALES)

We believe we are 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 our 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 2002, 2001 and 2000, pump sales accounted for approximately 60%, 62% and 62%, respectively, of our 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, we expect 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 continue to provide us with growth opportunities.

Pharmaceutical.    Pumps sold to the pharmaceutical market deliver medications orally, nasally or topically. Characteristics of this market include (i) governmental regulation of our pharmaceutical customers, (ii) contaminant-controlled manufacturing environments, and (iii) a significant amount of time and research from initially working with pharmaceutical companies at the molecular development stage of a medication through the eventual distribution to the market. We have clean-room manufacturing facilities in France, Germany, Switzerland, China and the United States. We believe 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. Applications using fine mist pumps include use in hair care, sun care and deodorant products. We also supply lotion pumps to the personal care market for products such as skin moisturizers and soap.

Food/Beverage.    Historically, sales of our pumps to this market have not been significant. However, we have recently increased our sales to this market with applications such as butter substitute sprays, candy sprays and condiments. We believe there will be additional applications for pumps in this market in the future.

CLOSURES (22% OF 2002 NET SALES)

We believe that we are the largest supplier of dispensing closures in the United States, and the second largest supplier in Europe. We primarily manufacture 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 our net sales for each of the past three years.

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 packages simpler to use, cleaner and more appealing to consumers.

Personal Care.    Historically, the majority of our 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, we expect to benefit from similar conversions in other geographic areas.

Household.    While we have 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

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dishwashing detergents, laundry care products and household cleaners. We believe this market offers an opportunity for expansion and as a result are focusing on new product developments for this market to accelerate the conversion from non-dispensing to dispensing closures.

Food/Beverage.    Similar to the household market, sales of dispensing closures to the food/beverage market have not represented a significant amount of total dispensing closure sales. However, we have recently experienced an increase in the amount of interest from food marketers who have begun to utilize dispensing closures for their products. Examples of food/beverage products currently utilizing dispensing closures include condiments, salad dressings, syrups, honey, water and dairy creamers. We believe there are tremendous growth opportunities in the food/beverage market reflecting the continued and growing acceptance in this market of our valve dispensing technology, and additional conversion from traditional packages to packages using dispensing closure systems.

AEROSOL VALVES (15% OF 2002 NET SALES)

We believe we are one of the largest aerosol valve suppliers worldwide. Aerosol valves dispense product from pressurized containers. The majority of the aerosol valves that we sell 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. In 2002, 2001 and 2000, aerosol valve sales accounted for approximately 15%, 14% and 14%, respectively of our net sales.

We have 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 typically via the pulmonary system. We work with pharmaceutical companies as they work to phase out the use of chlorofluorocarbon (“CFC”) propellants. We have increased our market share of metered dose valves to this market as pharmaceutical companies replace CFC’s with alternative propellants and we expect our market share to continue to grow.

RESEARCH AND DEVELOPMENT

One of our competitive strengths is our commitment to innovation and providing innovative dispensing solutions for our customers. This commitment to innovation is the result of our emphasis on research and development. Our research and development activities are directed toward developing innovative products, adapting existing products for new markets or customer requirements, and lowering costs. We have research and development departments located in each of our five business units, which are located in the United States, France, Germany and Italy. In certain cases, our 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 our research and development expenditures. Expenditures for research and development activities were $27.7 million, $25.9 million and $26.9 million in 2002, 2001 and 2000, respectively.

PATENTS AND TRADEMARKS

We sell our products under the names used by our business units and are not currently offering any products under the AptarGroup name. The names used by our business units have been trademarked. We customarily seek patent and trademark protection for our products and currently own and have numerous applications pending for United

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States and foreign patents and trademarks. In addition, certain of our products are produced under patent licenses granted by third parties. We believe that we possess certain technical capabilities in making our 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, we use advanced plastic injection molding technology, including large cavitation plastic injection molds. These molds are required to maintain tolerances as small as one one-thousandth of an inch and manufacture products in a high-speed, cost-effective manner. We have experience in liquid silicone rubber molding that we utilize in our dispensing closure operations and certain of our pump products. We also use bi-injection molding technology in our various product lines to develop new innovative products for the packaging industry.

MANUFACTURING AND SOURCING

The principal raw materials used in our production are plastic resins and certain metal products. We believe an adequate supply of such raw materials is available from existing and alternative sources. We attempt to offset cost increases through improving productivity and increasing selling prices over time, as allowed by market conditions. We also purchase plastic and metal components that are used in the final assembly of our products from suppliers near our production facilities. Certain suppliers of these components have unique technical abilities that make us dependent on them, particularly for aerosol valve and pump production in North America. In addition, our pharmaceutical products often use specific approved plastic resin for our customers. Significant delays in receiving components from these suppliers or discontinuance of an approved plastic resin would require us to seek alternative sources, which could result in higher costs as well as impact our ability to supply products in the short term.

SALES AND DISTRIBUTION

Sales of products are primarily through our own sales force. To a limited extent, we also use the services of independent representatives and distributors who sell our products as independent contractors to certain smaller customers and export markets.

BACKLOG

Our sales are primarily made pursuant to standard purchase orders for delivery of products. Most orders placed with us 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, we do not believe that backlog as of any particular date is an accurate indicator of future results.

CUSTOMERS

The demand for our products is influenced by the demand for our customers’ products. Demand for our customers’ products may be affected by general economic conditions, government regulations, tariffs and other trade barriers. Our customers include many of the largest personal care, fragrance/cosmetic, pharmaceutical, household products and food/beverage marketers in the world. We have over 3,000 customers with no single customer accounting for greater than 6% of 2002 net sales. Over the past few years, a consolidation of our 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 our product line, our international presence and our long-term relationships with certain customers.

INTERNATIONAL BUSINESS

A significant number of our operations are located outside the United States. Sales in Europe for the years ended December 31, 2002, 2001 and 2000 were approximately 56%, 54% and 53%, respectively, of net sales. The majority of units sold in Europe are manufactured at facilities in England, France, Germany, Ireland, Italy, Spain and

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Switzerland. Other geographic areas we service include Argentina, Australia, Brazil, Canada, Czech Republic, China, India, Indonesia, Japan and Mexico, and represent approximately 8% of our consolidated sales for the past three years. Export sales from the United States were $62.7 million, $62.2 million and $44.3 million in 2002, 2001 and 2000, respectively. For additional financial information about geographic areas, please refer to Note 16 in the Notes to the Consolidated Financial Statements in Item 8.

FOREIGN CURRENCY

A significant number of our 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 our foreign entities. Our primary foreign exchange exposure is to the Euro, but we have foreign exchange exposure to South American and Asian currencies, as well as the Swiss Franc and British pound. We manage our exposures to foreign exchange principally with forward exchange contracts to hedge certain transactions and firm purchase and sales commitments denominated in foreign currencies. A weakening U.S. dollar relative to foreign currencies has an additive translation effect on our financial statements. Conversely, a strengthening U.S. dollar has a dilutive effect. In some cases, we sell 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 our results of operations.

WORKING CAPITAL PRACTICES

Collection and payment periods tend to be longer for our operations located outside the United States due to local business practices. Historically, we have not needed to keep significant amounts of finished goods inventory to meet customer requirements.

EMPLOYEE AND LABOR RELATIONS

AptarGroup has approximately 6,700 full-time employees. Of the full-time employees, approximately 1,500 are located in North America, 4,600 are located in Europe and the remaining 600 are located in Asia and South America. Approximately 100 of the North American employees are covered by a collective bargaining agreement, while the majority of our European employees are covered by collective bargaining arrangements made at either the local or national level in their respective countries. Termination of employees at certain of our European operations could be costly due to local regulations regarding severance benefits. Management considers our employee relations to be good.

COMPETITION

All of the markets in which we operate are highly competitive and we continue to experience price competition in all product lines and markets. Competitors include privately and publicly held entities. Our competitors range from regional to international companies. We expect the market for our products to remain competitive. We believe our competitive advantages are consistent high levels of innovation, quality, service and geographic diversity and breadth of products. Our manufacturing strength lies in the ability to mold complex plastic components in a cost-effective manner and to assemble products at high speeds.

ENVIRONMENT

Our 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 we believe we meet current environmental standards in all material respects.

GOVERNMENT REGULATION

To date, our manufacturing operations have not been significantly affected by environmental laws and regulations relating to the environment. Certain of our 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

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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 our customers to reformulate certain aerosol and pump products, which may have affected the demand for such products. We own patents and have 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 our pharmaceutical products. We believe that the focus on the cost effectiveness of the use of medications as compared to surgery and hospitalization provides us with an opportunity to expand sales to the pharmaceutical market. Regulatory requirements impact our customers and could affect our investment in and manufacturing of products for the pharmaceutical market.

EXECUTIVE OFFICERS

The positions and ages listed below are as of February 26, 2003. There were no arrangements or understandings between any of the executive officers and any other person(s) pursuant to which such officers were elected.

Carl Siebel, age 68, has been President and Chief Executive Officer of AptarGroup since 1995. From 1993 through 1995, he was President and Chief Operating Officer of AptarGroup.

Peter Pfeiffer, age 54, has been Vice Chairman of the Board since 1993.

Stephen Hagge, age 51, has been Executive Vice President, Chief Financial Officer and Secretary of AptarGroup since 1993. From 1993 to 2000, Mr. Hagge was also Treasurer of AptarGroup.

Jacques Blanié, age 56, has been Executive Vice President of SeaquistPerfect Dispensing L.L.C. since 1996 and Geschäftsführer of SeaquistPerfect Dispensing GmbH since 1986.

Francois Boutan, age 60, 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 58, has been Directeur Général of Valois S.A.S. since January 2000. Mr. de Pous was Directeur de Division Parfumerie Cosmétique of Valois S.A.S from 1997 to 1999.

Patrick Doherty, age 47, 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. from April 1999 to October 2000, and was Vice President of Operations of SeaquistPerfect Dispensing L.L.C. from April 1993 to April 1999.

Olivier Fourment, age 45, has been Directeur Général 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 58, has been Vice President-Human Resources of AptarGroup since 1993.

Francesco Mascitelli, age 52, has been President of Emsar, Inc. since December 2002 and has been Direttore Generale of Emsar S.p.A., an Italian subsidiary, since 1991.

Emil Meshberg, age 55, 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 Ruskoski, age 55, has been President of Seaquist Closures L.L.C. since 1987.

Hans-Josef Schütz, age 58, has been Geschäftsführer of the Pfeiffer Group since 1993.

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ITEM 2.     PROPERTIES

We lease or own our principal offices and manufacturing facilities. None of the owned principal properties is subject to a lien or other encumbrance material to our operations. We believe that existing operating leases will be renegotiated as they expire, will be acquired through purchase options or that suitable alternative properties will be leased on acceptable terms. We consider the condition and extent of utilization of our manufacturing facilities and other properties to be generally good, and the capacity of our plants to be adequate for the needs of our business. The locations of our principal manufacturing facilities, by country, are set forth below:

In addition to the above countries, we have sales offices or other manufacturing facilities in Australia, Canada, India, Indonesia, Japan and Spain. Our corporate office is located in Crystal Lake, Illinois.

ITEM 3.     LEGAL PROCEEDINGS

Legal proceedings we are involved in generally relate to product liability and patent infringement issues. In our opinion, the outcome of pending claims and litigation is not likely to have a material adverse effect on our financial position, results of our operations or our cash flow.

Historically, product liability claims for all of our products 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 our products. Additionally, we maintain product liability insurance in excess of our historical claims experience. Due to rising cost of insurance premiums in 2002, we have taken on additional self-insured retentions and higher deductibles.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5.     MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Information regarding market prices of our Common Stock and dividends paid may be found in Note 18 to the Consolidated Financial Statements in Item 8.

Our Common Stock is traded on the New York Stock Exchange under the symbol ATR. As of February 26, 2003, there were approximately 600 registered holders of record.

During the quarter ended December 31, 2002, the FCP Aptar Savings Plan (the “Plan”) sold 160 shares of our Common Stock on behalf of the participants at an average price of $29.74 for an aggregate amount of $4,758. At December 31, 2002, the Plan owns 5,155 shares of our Common Stock. The employees of AptarGroup S.A.S. and Valois S.A.S., our subsidiaries, are eligible to participate in the Plan. All eligible participants are located outside of the United States. An independent agent purchases shares of Common Stock available under the Plan for cash on the open market and we do not issue shares. We do not receive any proceeds from the purchase of Common Stock under the Plan. The agent under the plan is Banque Nationale de Paris Paribas Asset Management. 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.

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ITEM 6.     SELECTED FINANCIAL DATA

FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA

In millions of dollars, except per share data

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ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED RESULTS

OF OPERATIONS AND FINANCIAL CONDITION

(In thousands, except per share amounts or otherwise indicated)

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage relationship of certain items to net sales:

NET SALES

For 2002, we achieved record net sales of $926.7 million, or 4% above 2001 net sales of $892.0 million, reflecting the diversification of our products and the markets we serve. The U.S. dollar weakened compared to the Euro throughout 2002 and finished on average approximately 5% weaker than the Euro compared to 2001. Excluding changes in foreign currency rates, net sales increased in 2002 approximately 2% instead of the 4% reported. Sales of our products to the fragrance/cosmetic industry in 2002 were below 2001 levels reflecting general weak economic conditions, pricing pressure and the continued reduction of inventory levels in the market. Offsetting the decline in sales to the fragrance/cosmetic market was an increase in sales to the other four markets that we serve. In spite of ongoing competitive price pressure, sales of our products to the personal care market in 2002 increased over 2001 levels due primarily to the strength of our products sold to this market as well as new customer launches utilizing our products and accessories. Sales of our products to the pharmaceutical market in 2002 also increased compared to 2001, primarily due to increased use of our metered dose aerosol valves by customers in this market who have converted from chlorofluorocarbons (“CFC”) to alternative propellants. Sales of our products to the food/beverage market in 2002 increased strongly due to the increasing acceptance of valved dispensing closure technology for food applications such as ketchup, honey and other condiments as well as beverage applications. Sales of our products to the household market in 2002 increased over 2001 due primarily to the success of our dispensing closures on a variety of household related products as well as the use of metered aerosol valves for room scenting air fresheners.

For 2001, our net sales totaled $892.0 million, an increase of 1% when compared to net sales of $883.5 million in 2000. Excluding changes in foreign currency rates, net sales grew 3% compared to the prior year. Sales of our products to the worldwide fragrance/cosmetic market were strong in the first half of 2001 and decreased starting in the third quarter and continued into the fourth quarter of 2001 compared to 2000. For the year 2001, sales of pumps to the worldwide fragrance/cosmetic market increased moderately compared to 2000. Sales of aerosol valves, pumps and dispensing closures to the worldwide personal care market decreased slightly in 2001 compared to 2000. Sales of metered dose aerosol valves and pumps to the pharmaceutical market showed moderate growth in 2001 over 2000. Pricing had a slightly negative impact on sales during 2001 due in part to reduced plastic resin prices passed through to customers who purchased dispensing closures.

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The following table sets forth, for the periods indicated, net sales by geographic location:

COST OF SALES (EXCLUSIVE OF DEPRECIATION SHOWN BELOW)

Our cost of sales as a percentage of net sales increased in 2002 to 64.1% compared to 63.1% in 2001. Our cost of sales percentage was negatively influenced by the following factors in 2002:

Underutilized Fixed Costs.    Due to the decrease in sales to the fragrance/cosmetic market we had underutilized fixed manufacturing costs, particularly in Europe.

Rising Insurance Costs.    Insurance costs rose dramatically in 2002, particularly property and casualty insurance, which increased nearly $2.5 million from 2001.

Continued Price Pressure.    Pricing pressure continues to be strong in all the markets we serve, particularly in the dispensing closure product range. Price reductions greater than cost savings achieved through productivity gains had a negative impact on the cost of sales as a percentage of net sales.

Strengthening of the Euro.    We are a net importer to the U.S. of products produced in Europe. As a result, when the Euro strengthens against the U.S. dollar, products produced in Europe (with costs denominated in Euros) and imported to the U.S. increase in cost, thus having a negative impact on cost of sales.

Offsetting these negative factors was the following positive impact in 2002:

Cost Reduction Efforts.    We continued to reduce costs worldwide and, in particular, our Strategic Initiative, which began in 2001 led to labor savings as well as productivity improvements, both of which reduced cost of goods sold.

Our cost of sales as a percentage of net sales in 2001 increased slightly to 63.1% compared to 62.7% in 2000. Our cost of sales percentage was negatively influenced by the following factors:

Underutilized Fixed Costs.    Due to decreased sales in the fourth quarter of 2001, many of the plants worldwide had significant underutilized fixed manufacturing costs.

Increase in Labor Costs.    Our French operations implemented a government required reduction in working hours to 35 hours per week late in 2000. The full year impact of this reduction to 35 hours negatively impacted the cost of sales in 2001.

Offsetting these negative factors were the following positive impacts in 2001:

Cost Reduction Programs.    We implemented several cost reduction programs, primarily in the U.S., most notably the Strategic Initiative project in 2001.

Lower Raw Material Prices.    Due to market conditions and an emphasis on reducing costs, raw material cost savings, particularly for plastic resin and metal parts, were achieved compared to 2000.

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SELLING, RESEARCH & DEVELOPMENT AND ADMINISTRATIVE

Our Selling, Research & Development and Administrative expenses (“SG&A”) increased approximately $2.2 million in 2002 over 2001. Approximately 56% of our business is based in Europe and have costs denominated in Euros. Excluding the impact of the strengthened Euro compared to the U.S. dollar, SG&A actually decreased approximately $1.4 million in 2002. We were able to reduce SG&A costs in 2002 through our cost reduction efforts, which offset increased pension and insurance costs. SG&A as a percentage of sales decreased to 16.0% from 16.4% in 2001.

SG&A increased approximately $1.1 million in 2001 compared to the prior year but remained constant as a percentage of sales at 16.4%.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense decreased nearly $1.5 million in 2002 to $72.1 million compared to $73.6 million in 2001. Depreciation and amortization expense in 2001 included approximately $3.6 million of amortization of goodwill while 2002 did not include any goodwill amortization. In addition, 2001 also included approximately $1.9 million of depreciation expense related to the Strategic Initiative (described below). Certain long-lived assets were taken out of service prior to the end of their normal service period due to the plant shutdown and rationalization of product lines. Accordingly, we changed the estimated useful lives of these assets, resulting in an acceleration of depreciation (“Accelerated Depreciation”) of $1.9 million. Depreciation and amortization in 2002 includes only $0.1 million of Accelerated Depreciation. Excluding this change in Accelerated Depreciation and goodwill amortization, depreciation and amortization increased approximately $4 million in 2002. Approximately $2 million of the increase is related to the stronger Euro compared to the U.S. dollar in 2002. The remainder of the increase in depreciation and amortization expense is due to capital expenditures in excess of depreciation over the past few years.

Depreciation and amortization increased nearly $2.7 million to $73.6 million in 2001 compared to $70.9 million in 2000. Included in 2001 depreciation and amortization is approximately $1.9 million of Accelerated Depreciation as part of our Strategic Initiative. Excluding this Accelerated Depreciation, depreciation and amortization increased $800 in 2001.

STRATEGIC INITIATIVE CHARGES

In April 2001, we announced a Strategic Initiative project to improve the efficiency of our operations that produce pumps for our mass-market fragrance/cosmetic and personal care customers. In addition to improving efficiency and reducing costs, another objective of the Strategic Initiative was 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, we closed one molding operation in the U.S. and have consolidated the molding and assembly of the base cartridge (standard internal components common to modular pumps) into one of our facilities in Italy. We also closed several of our sales offices in certain foreign countries. In addition, we are rationalizing our mass-market pump product lines for these two markets by discontinuing production of non-modular pumps and increasing capacity for our modular pumps. The project is essentially complete as of December 31, 2002 and no additional expense related to this project is expected.

Strategic Initiative charges totaled $1.2 million in 2002 compared to $7.6 million recorded in 2001. The $1.2 million of charges recorded in 2002 relates to accrued severance and employee benefits related to additional employees who were involuntarily terminated in 2002. The $7.6 million of Strategic Initiative charges recorded in 2001 primarily related to non-cash fixed asset impairment charges of $5.5 million for fixed assets held for use related to non-modular pumps that were discontinued. These non-modular pumps were sold during the Strategic Initiative project but have been discontinued now that there is adequate capacity for the modular pumps. The undiscounted expected future cash flows for the products using these non-modular pumps during the phase out period were less than the carrying value of the specific identifiable assets used to generate these cash flows and thus an impairment charge was recognized in accordance with SFAS No. 121 “Accounting for the Impairment of the Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” The remaining Strategic Initiative charges related primarily to accrued severance costs and related benefits for U.S. employees who were involuntarily terminated, accrued utility abatement reimbursements and accrued costs to refurbish a leased facility that we vacated. Strategic Initiative charges plus Accelerated Depreciation and other related costs such as training are hereinafter referred to as “Total Strategic Initiative Related Costs.” The Total Strategic Initiative Related Costs from inception of the project were approximately $11.3 million before taxes.

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PATENT DISPUTE SETTLEMENT

In May 2002, we announced an agreement settling an outstanding patent dispute to avoid the time and expense of a trial that was scheduled to begin in late 2002. As part of the settlement, the parties have entered into a cross-license agreement. Patent dispute settlement charges of $4.2 million are included in 2002.

OPERATING INCOME

The following table details the calculation of operating income on a comparable basis by adjusting reported operating income for goodwill amortization recorded in 2001 and 2000, Strategic Initiative Related Costs recorded in 2002 and 2001 and patent dispute settlement charges recorded in 2002.

Comparable operating income decreased approximately $2.2 million to $112.9 million in 2002 compared to $115.1 million in 2001 primarily related to the reduction in sales to the fragrance/cosmetic market in 2002.

Comparable operating income decreased approximately $2.3 million in 2001 to $115.1 million compared to $117.4 million recorded in 2000 due to the low level of sales in the fourth quarter of 2001.

NET OTHER EXPENSES

Net other expenses in 2002 decreased to $8.7 million compared to $13.5 million in 2001 reflecting decreased interest expense of approximately $4.9 million. The decrease in interest expense is due primarily to lower interest rates worldwide as well as a reduction in interest bearing debt.

Net other expenses in 2001 decreased to $13.5 million from $16.0 million in 2000 also reflecting decreased interest expense of approximately $3.4 million. Interest rates began decreasing in 2001 and this decrease, combined with the reduction in interest bearing debt, helped reduce interest expense.

EFFECTIVE TAX RATE

The reported effective tax rate for 2002 decreased to 32.2% in 2002 compared to 33.3% in 2001. The reduction in the effective tax rate reflects the mix of where our income was earned.

The reported effective tax rate was 33.3% in 2001 compared to 34.0% in 2000. The decrease compared to the prior year reflects the benefits of reductions in certain European corporate income tax rates in 2001 as well as the mix of where our income was earned.

NET INCOME

We reported net income of $66.6 million in 2002 compared to $58.8 million reported in 2001. Excluding the after-tax effect of Total Strategic Initiative Related Costs, the Patent Dispute Settlement and goodwill amortization, net income was $70.4 million in 2002 compared to $68.3 million in 2001.

Net income as reported in 2001 decreased to $58.8 million compared to $64.7 million in 2000. Excluding the after-tax effect of Total Strategic Initiative Related Costs and goodwill amortization, net income increased slightly to $68.3 million in 2001 compared to $68.1 million in 2000.

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DISPENSING SYSTEMS SEGMENT

The Dispensing Systems segment is an aggregate of four of our five business units. The Dispensing Systems segment sells primarily non-aerosol spray and lotion pumps, plastic dispensing closures, and metered dose aerosol valves. These three products are sold to all of the markets we serve.

Our net sales for the Dispensing Systems segment grew by approximately 2% over 2001 levels reflecting strong sales of our dispensing closure product range to the personal care, household, and food/beverage markets. Sales of our pumps and metered dose aerosol valves to the pharmaceutical market increased in 2002 over 2001, but were offset by a decrease in sales of pumps to the fragrance/cosmetic market.

Net sales in 2001 increased approximately 1% to $746.5 million compared to $742.6 million in 2000. Net sales of this segment’s products to the pharmaceutical and fragrance/cosmetic market grew moderately in 2001 compared to 2000. Sales to the fragrance/cosmetic market were particularly strong in the first half of 2001 and decreased significantly in the fourth quarter. Sales of this segment’s products to the personal care market decreased moderately over 2000.

Segment EBIT (defined as earnings before net interest, corporate expenses, income taxes and unusual items) decreased approximately 4% in 2002 due primarily to the underutilized fixed costs relating to the decrease in sales to the fragrance/cosmetic market as well as pricing pressure across all products and markets, in particular for dispensing closures.

Segment EBIT in 2001 decreased approximately 3% to $119.8 million from $123.6 million in 2000. The decrease in EBIT is primarily related to the decrease in sales to the fragrance/cosmetic market in the second half of the year, which caused significant underutilization of fixed costs.

SEAQUISTPERFECT SEGMENT

SeaquistPerfect represents our fifth business unit and sells primarily aerosol valves and accessories and certain non-aerosol spray and lotion pumps. These products are sold primarily to the personal care, household, and food/beverage markets.

Net sales for the SeaquistPerfect segment in 2002 increased 12% from 2001, reflecting strong sales growth of aerosol valves and pumps and their related accessories, particularly to the personal care market. Sales of aerosol valve units increased in Europe, particularly to Eastern European countries where growth rates have exceeded those of Western European countries. Sales of aerosol valve units have decreased in the U.S. as we have selectively shifted away from lower-margin business. Pump unit sales also increased particularly in Europe where we have benefited from the success of new pump packaging categories such as sun care. Lotion pump unit sales to the personal care market also increased over 2001 as this product line is growing at a higher rate than the overall personal care market, due primarily to an increased consumer focus on skin care products.

Net sales in 2001 increased approximately 3% to $145.5 million compared to $140.9 million in 2000. The increase in sales in 2001 is due primarily to an increase in sales to the European personal care market. Sales in Europe of both aerosol valves and non-aerosol spray and lotion pumps increased nearly 6% over 2000 levels. Sales in North America decreased slightly, due primarily to decreased sales of non-aerosol spray and lotion pumps to the personal care market.

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Segment EBIT in 2002 increased significantly over 2001, due primarily to the increased sales volumes mentioned above. In addition, this segment’s focus on innovation and providing our customers more value-enhanced products or specialty designs has led to an increase in higher-priced custom products and specialty accessories, thus allowing us to improve profitability.

Segment EBIT in 2001 increased approximately 16% to $5.8 million compared to $5.0 million in 2000, primarily due to the North American cost savings efforts and an aerosol valve price increase implemented in 2001.

LIQUIDITY AND CAPITAL RESOURCES

Our financial condition strengthened in 2002. Cash and equivalents increased to $90.2 million from $48.0 million in 2001. Total short and long-term interest bearing debt decreased to $226.9 million from $252.6 million in 2001. The ratio of our Net Debt (interest bearing debt less cash and cash equivalents) to Net Capital (stockholder’s equity plus Net Debt) decreased to 19% compared to 30% as of December 31, 2001.

For 2002, net cash generated from operating activities increased to $154.5 million compared to $128.7 million in 2001 and $130.5 million in 2000. In each of these years, cash flow from operations was primarily derived from earnings before depreciation and amortization. The increase in cash generated from operating activities in 2002 reflects the increase in net income and depreciation expense as well as a continuing reduction in accounts receivable and inventory, net of currency fluctuations. During 2002, we utilized the majority of these cash flows to finance capital expenditures, pay down existing debt obligations, repurchase Company stock, and pay dividends to shareholders.

We used $87.7 million in cash for investing activities during 2002, compared to $91.4 million during 2001 and $100.5 million in 2000. This decrease in 2002 is primarily due to a reduction in capital expenditures compared to 2001. Capital expenditures totaled $89.8 million in 2002, $92.2 million in 2001 and $93.9 million in 2000. Each year we invested in property, plant and equipment primarily for new products, capacity increases, product line extensions, and maintenance of business. Cash used for investing activities decreased in 2001 compared to 2000. Cash used for acquisitions and affiliates was lower in 2001 compared to 2000. Cash outlays for capital expenditures for 2003 are estimated to be in the range of $80 to $85 million, subject to changes in exchange rates. We estimate that approximately 30% of capital is spent on maintenance of the business.

During the third quarter of 2000, we contributed assets worth approximately $7.4 million and liabilities worth approximately $2.4 million into a joint venture to produce airless pump dispensing systems for the fragrance/cosmetic market. Prior to creating the joint venture, we had annual sales of approximately $15 million of airless dispensing systems that are now sold as part of the joint venture and are therefore not included in our sales. The impact on profitability in 2000 was not significant. Our share of the joint venture loss was approximately $200 in 2002 and $800 in 2001. The results derived from the joint venture are shown in the income statement in equity as results of affiliates.

We used $34.5 million in cash for financing activities during 2002, compared to $42.0 million in 2001 and $5.7 million in 2000. The majority of the cash used for financing activities in all three years was used to pay down long and short-term debt, to pay dividends to our shareholders and to buy back shares of our stock. We are authorized to repurchase a maximum of 3 million shares of the Company’s outstanding common stock. As of December 31, 2002, 1.3 million shares have been repurchased for an aggregate amount of $35.1 million. In 2002, 180 thousand shares were repurchased for an aggregate amount of $5.2 million.

In 2002, we canceled an interest rate swap agreement which had a notional amount of $25 million. The cancellation of the interest rate swap agreement netted approximately $4.0 million. The net economic effect of canceling the swap agreement converted a variable interest rate on $25 million of debt to an effective fixed interest rate of 3.8%.

We have a $100 million unsecured revolving credit agreement. Under this credit agreement, interest on borrowings is payable at a rate equal to LIBOR plus an amount based on our financial condition. At December 31, 2002 the amount unused and available under this agreement was $27 million. We are required to pay a fee for the unused portion of the commitment. The agreement expires on June 30, 2004. The credit available under the revolving credit agreement provides us with the ability to refinance certain short-term debt obligations on a long-term basis. Since management has the ability and intent to do so, an additional $12.5 million of short-term debt obligations have been reclassified as long-term obligations as of December 31, 2002. If we were unable to renegotiate or extend the terms of the unsecured revolving credit agreement before June 30, 2003, the entire amount borrowed against the revolver at June 30, 2003 would be shown as short-term obligations in the Consolidated Financial Statements.

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Our foreign operations have historically met cash requirements with the use of internally generated cash or borrowings. Foreign subsidiaries have financing arrangements with several foreign banks to fund operations located outside the U.S., but all these lines are uncommitted. Cash generated by foreign operations has generally been reinvested locally. The majority of our $90.2 million in cash and equivalents is located outside of the U.S. We are currently in an overall foreign loss (“OFL”) tax situation in the U.S. Any foreign dividend repatriated back to the U.S. would be taxed up to the extent of the OFL. The negative tax consequences of the OFL would impact approximately the first $10 million in foreign dividends repatriated back to the U.S. Assuming we repatriated approximately $10 million in dividends from foreign entities, we estimate that the cash cost to repatriate these dividends would be approximately $2 million.

We believe we are in a strong financial position and have the financial resources to meet business requirements in the foreseeable future. We have historically used cash flow from operations as our primary source of liquidity. In the case that customer demand would decrease significantly for a prolonged period of time and negatively impact cash flow from operations, we would have the ability to restrict and significantly reduce capital expenditure levels which historically have been the most significant use of cash for us.

Insurance costs have risen sharply in 2002. In addition to the increased insurance premiums we paid in 2002, we have also taken on additional self-insured retentions and higher deductibles.

OFF-BALANCE SHEET ARRANGEMENTS

We lease certain warehouse, plant, and office facilities as well as certain equipment under noncancelable operating leases expiring at various dates through the year 2018. Most of the operating leases contain renewal options and certain equipment leases include options to purchase during or at the end of the lease term. We have an option on one building lease to purchase the building during or at the end of the term of the lease at approximately the amount expended by the lessor for the purchase of the building and improvements. If we do not exercise the purchase option by the end of the lease, we would be required to pay an amount not to exceed $9.5 million. Other than operating lease obligations, we do not have any off-balance sheet arrangements. See the following section “Overview of Contractual Obligations” for future payments relating to operating leases.

OVERVIEW OF CONTRACTUAL OBLIGATIONS

Below is a table of our outstanding contractual obligations and future payments as of December 31, 2002:

The capital lease obligation future payments listed above include future interest payments while the long-term debt repayments reflect only principal payments. We have approximately $23.6 million of other long-term obligations on the balance sheet for retirement and deferred compensation plans. Future payments related to these obligations are difficult to determine as they are based upon governmental contribution requirements which fluctuate annually. Approximately 50% of our long-term debt has variable interest rates. If market conditions should change dramatically and interest rates rise in the future, our future obligations relating to interest payments will increase.

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ADOPTION OF ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143 “Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. This statement is effective for financial statements issued for fiscal years beginning after September 15, 2002. We have performed a preliminary assessment and have determined that this statement will not have a material impact on us upon adoption.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement will address the accounting for costs associated with disposal activities or with exit (or restructuring) activities previously covered by Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring),” and nullifies Issue 94-3 in its entirety. SFAS No. 146 would be applied prospectively to exit or disposal activities initiated after December 31, 2002. We will adopt this standard at the beginning of fiscal year 2003.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.” This statement amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements for SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The new transition requirements are effective for financial statements of fiscal years ending after December 15, 2002. Interim disclosures are required for reports containing condensed financial statements for periods beginning after December 15, 2002. We have not changed to a fair value based method of accounting for stock-based employee compensation and, as a result, the transition requirements do not affect us. We have adopted the new disclosure requirements which are shown in Note 1 of the Notes to the Consolidated Financial Statements in Item 8. We will provide the interim disclosures beginning with the first quarter of 2003.

In November 2002, the FASB issued Interpretation No. (“FIN”) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The interpretation expands on the accounting guidance of SFAS Nos. 5, 57 and 107 and incorporates without change the provisions of FIN No. 34, which is superceded. The interpretation elaborates on the existing disclosure requirements for most guarantees, including loan guarantees, such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee, and must disclose that information in its interim and annual financial statements. We typically do not provide any guarantees and do not have any guarantees existing at this time, but will apply the measurement provisions and provide the necessary disclosure requirements should we issue a guarantee in the future.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities.” The objective of FIN 46 is to improve financial reporting by companies involved with variable interest entities. Prior to FIN 46, companies have generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk or loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. Consolidation by a primary beneficiary of the assets, liabilities and results of activities of variable interest entities will provide more complete information about the resources, obligations, risks and opportunities of the consolidated company. We do not have any investments in variable interest entities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, pensions and contingencies. We base our estimates on historical experience and on a variety of other assumptions believed to be reasonable in order to make judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in preparation of our Consolidated Financial Statements.

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IMPAIRMENT OF GOODWILL

In accordance with SFAS 142, we evaluate our goodwill for impairment on an annual basis or whenever indicators of impairment exist. SFAS 142 requires that if the carrying value of a reporting unit for which the goodwill relates to exceeds its fair value, an impairment loss is recognized to the extent that the carrying value of the reporting unit goodwill exceeds the “implied fair value” of reporting unit goodwill.

As we discuss in the notes to the financial statements, we have evaluated our goodwill for impairment and have determined that the fair value of our reporting units exceeds their carrying value, so we did not recognize an impairment of goodwill. Goodwill of approximately $128.9 million is shown on our balance sheet as of December 31, 2002.

We believe that the accounting estimate related to determining the fair value of our reporting units is a critical accounting estimate because: (1) it is highly susceptible to change from period to period because it requires company management to make assumptions about the future cash flows for each reporting unit over several years in the future, and (2) the impact that recognizing an impairment would have on the assets reported on our balance sheet as well as our results of operations could be material. Management’s assumptions about future cash flows for the reporting units require significant judgment and actual cash flows in the future may differ significantly from those forecasted today. The estimate for future cash flows and its impact on the impairment testing of goodwill is a critical accounting estimate for the Dispensing Systems segment of our business. Management has discussed the development and selection of this critical accounting estimate with the audit committee of our Board of Directors and the audit committee has reviewed our disclosure relating to it in this Management’s Discussion and Analysis of Consolidated Results of Operations and Financial Condition (“MD&A”).

In estimating future cash flows, we use internally generated budgets developed from our reporting units and reviewed by management. We develop our budgets based upon recent sales trends for the reporting units, discussions with our customers, planned timing of new product launches, forecasted capital expenditure needs, working capital needs, costing factors and many other variables. From these internally generated budgets, a four year projection of cash flows is made based upon expected sales growth rates and capital and working capital requirements based upon historical needs. A discounted cash flow model is used to discount the future cash flows back to the present using an independent, third party generated weighted-average cost of capital and verified by management. This fair value for the reporting unit is then corroborated by comparing it with a market multiple analysis of the reporting unit. Additionally, a market multiple analysis is calculated by using AptarGroup’s overall EBITDA (earnings before interest, taxes and depreciation) multiple and applying it to the reporting unit EBITDA for the current year.

The $128.9 million of goodwill is reported in five reporting units. Four of the five reporting units have fair values which significantly exceed their carrying values. The fifth reporting unit contains approximately $91 million of the total $128.9 million in goodwill and has the smallest excess of fair value over carrying value of the five reporting units.

We believe our assumptions used in discounting future cash flows are conservative. Any increase in estimated cash flows would have no impact on the reported carrying amount of goodwill. However, if our current estimates of cash flow for this one reporting unit had been 25% lower, the fair value of the reporting unit would have been lower than the carrying value thus requiring us to perform an impairment test to determine the “implied value” of goodwill. The excess of the approximately $91 million in carrying value of goodwill over the “implied value” of goodwill would need to be written down for impairment. Without performing the second step of the goodwill impairment test it would be difficult to determine the actual amount of impairment to be recorded, but theoretically, the full $91 million of goodwill would be at risk for impairment. A full $91 million impairment loss would have reduced Total Assets as of December 31, 2002 by approximately 9% and would have reduced Income Before Income Taxes by nearly 93%.

If we had been required to recognize an impairment loss of the full $91 million, it would not likely have affected our liquidity and capital resources because, in spite of the impairment loss, we would have been within the terms of our debt covenants.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

We record an allowance for doubtful accounts as an estimate of the inability of our customers to make their required payments. We determine the amount of our allowance for doubtful accounts by looking at a variety of factors. First we examine an aging of the accounts receivable in each entity within the Company. The aging lists past due amounts according to invoice terms. In addition, we consider the current economic environment, the

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credit rating of the customers and general overall market conditions. In some countries we maintain credit insurance which can be used in certain cases of non-payment.

We believe that the accounting estimate related to the allowance for doubtful accounts is a critical accounting estimate because: (1) it requires management to make assumptions about the ability to collect amounts owed from customers in the future, and (2) changes to these assumptions or estimates could have a material impact on our results of operations. The estimate for the allowance for doubtful accounts is a critical accounting estimate for both of our segments. Management has discussed the development and selection of these critical accounting estimates with the audit committee of our Board of Directors and the audit committee has reviewed our disclosure relating to it in this MD&A.

When we determine that a customer is unlikely to pay, we will record a charge to bad debt expense in the income statement and an increase to the allowance for doubtful accounts. When it becomes certain the customer cannot pay (typically the customer will file for bankruptcy) we write off the receivable by removing the accounts receivable amount and reducing the allowance for doubtful accounts accordingly. In 2002, we added approximately $2.5 million to the allowance for doubtful accounts while we wrote off or reduced the allowance for doubtful accounts by $1.6 million. Please refer to page 58 in this Form 10-K (Schedule II – Valuation and Qualifying Accounts) for activity in the allowance for doubtful accounts over the past three years.

We had approximately $200 million in outstanding accounts receivable at December 31, 2002. At December 31, 2002 we had approximately $8.2 million recorded in the allowance for doubtful accounts to cover all potential future customer non-payments net of any credit insurance reimbursement we would potentially recover. We believe our allowance for doubtful accounts is adequate to cover any future non-payments of our customers. However, if economic conditions deteriorate significantly or one of our large customers was to declare bankruptcy, a larger allowance for doubtful accounts might be necessary. It is extremely difficult to estimate how much of an additional reserve would be necessary, but the largest potential customer balance at any one time would not exceed $10 million. An additional loss of $10 million would reduce our Total Assets as of December 31, 2002 by approximately 1% and would have reduced Income Before Income Taxes by nearly 10%.

If we had been required to recognize an additional $10 million in bad debt expense, it would likely not have affected our liquidity and capital resources because, in spite of the additional expense, we would have been within the terms of our debt covenants.

VALUATION OF PENSION BENEFITS

The benefit obligations and net periodic pension cost associated with our domestic and foreign noncontributory pension plans are determined using actuarial assumptions. Such assumptions include discount rates to reflect the time value of money, employee compensation increase rates, demographic assumptions to determine the probability and timing of benefit payments, and the long-term rate of return on plan assets. The actuarial assumptions are based upon management’s best estimates, after consulting with outside investment advisors and actuaries. Because assumptions and estimates are used, actual results could differ from expected results.

The discount rate is utilized principally in calculating our pension obligations, which are represented by the Accumulated Benefit Obligation (ABO) and the Projected Benefit Obligation (PBO), and in calculating net periodic benefit cost. In establishing the discount rates for our domestic and foreign plans, we review a number of relevant interest rates including government security yields and Aa corporate bond yields. At December 31, 2002, the discount rates for our domestic and foreign plans were 6.25% and 5.35%, respectively.

We believe that the accounting estimates related to determining the valuation of pension benefits are critical accounting estimates because: (1) changes in them can materially affect net income, and (2) we are required to establish the discount rate and the expected return on fund assets which are highly uncertain and require judgment. The estimates for the valuation of pension benefits are critical accounting estimates for both of our segments. Management has discussed the development and selection of these critical accounting estimates with the audit committee of our Board of Directors and the audit committee has reviewed our disclosure relating to them in this MD&A.

To the extent the discount rate increases (or decreases), our ABO and net periodic benefit cost will decrease (or increase) accordingly. The estimated effect of a 1% decrease in each discount rate would be an $8.0 million increase in the ABO and a $1.3 million increase in net periodic benefit cost. To the extent the ABO increases, the after-tax effect of such increase could reduce Other Comprehensive Income and Shareholders’ Equity. The estimated effect of a 1% increase in each discount rate would be a $6.3 million decrease in the ABO and a $0.7 million decrease in net periodic benefit cost. A decrease of this magnitude in the ABO would eliminate a substantial portion of the Additional Minimum Pension Liability, and the reduction in Other Comprehensive Income and Shareholders’ Equity.

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The assumed expected long-term rate of return on assets is the average rate of earnings expected on the funds invested to provide for the benefits included in the PBO. Approximately 83% of our consolidated pension plan assets at December 31, 2002 related to domestic plans, with the remainder relating to foreign plans. Of domestic plan assets, approximately 65% is invested in equities and 35% is invested in fixed income securities. Of foreign plans assets, approximately 40% is invested in equities and 60% is invested in fixed income securities.

The expected long-term rate of return assumption is determined based on our investment policy combined with expected risk premiums of equities and fixed income securities over the underlying risk-free rate. This rate is utilized principally in calculating the expected return on the plan assets component of the net periodic benefit cost. To the extent the actual rate of return on assets realized over the course of a year is greater than the assumed rate, that year’s net periodic benefit cost is not affected. Rather, this gain reduces future net periodic benefit cost over a period of approximately 15 to 20 years. Likewise, to the extent the actual rate of return on assets realized over the course of a year is less than the assumed rate, that year’s net periodic benefit cost is not affected. Rather, this loss increases future net periodic benefit cost over a period of approximately 15 to 20 years. To the extent the expected long-term rate of return on assets increases (or decreases), our net periodic benefit cost will decrease (or increase) accordingly. The estimated effect of a 1% decrease in each expected long-term rate of return on assets would be a $0.2 million increase in net periodic benefit cost. The estimated effect of a 1% increase in the expected long-term rate of return on assets would be a $0.2 million decrease in net periodic benefit cost.

The average rate of compensation increase is utilized principally in calculating the PBO and the net periodic benefit cost. The estimated effect of a 0.25% change in the expected compensation increase would not be material to the PBO or to net periodic benefit cost.

Our primary pension related assumptions as of December 31, 2002 and 2001 were as follows:

Assuming no impact from the movement in foreign currency exchange rates, the estimated impact of the changes in the actuarial assumptions as noted in the table above on our 2003 net periodic benefit cost is a net increase of approximately $1 million.

INCOME TAXES ON UNDISTRIBUTED EARNINGS OF FOREIGN SUBSIDIARIES

Our policy has been to continue to reinvest earnings of our foreign subsidiaries indefinitely. As of December 31, 2002, we have approximately $387 million of undistributed earnings of foreign subsidiaries. Since our intent is to reinvest the earnings of our foreign subsidiaries indefinitely, we have not provided deferred taxes in our financial statements for any future repatriation in accordance with Accounting Principles Board Opinion (“APB”) No. 23, “Accounting for Income Taxes-Special Areas.”

We believe that the accounting policy to indefinitely reinvest the earnings of our foreign subsidiaries is a critical accounting policy because: (1) any change or deviation from that policy could trigger additional tax expense for us that is not provided for in the financial statements today thus increasing our overall effective tax rate, reducing earnings per share and reducing cash flow; and (2) a majority of our $90 million in cash and equivalents are located outside of the U.S. The policy to reinvest earnings of our foreign subsidiaries indefinitely is a critical accounting policy for the company as a whole and does not directly impact either of our segments. Management has discussed the development and selection of this critical accounting estimate with the audit committee of our Board of Directors and the audit committee has reviewed our disclosure relating to it in this MD&A.

Currently we have no future plans for use in the U.S. of any of the cash located outside of the U.S. and as a result have no plans to repatriate any past or future foreign earnings. However, if a significant short-term liquidity

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crisis would arise, it would be reasonably likely that we would have to consider repatriating some or all of our $90 million in cash to the U.S.

Calculating the effect of taxes on repatriated foreign earnings can be extremely complex. Taxes have to reflect the expected form of repatriation (generally, dividend, sale or liquidation, or loan to the parent). That form of repatriation will result in different characteristics of income (ordinary versus capital gain) or different amounts of deemed-paid foreign tax credits available. If we were to repatriate $90 million of cash to the U.S. in the next year in the form of a dividend, we estimate that the additional cash taxes required to be paid could range from $7 million to $10 million. This additional tax would increase our future effective tax rate from the 33% to 34% anticipated to 39% to 43% and reduce earnings per share by approximately $.19 to $.27 per share.

ACCOUNTING FOR STOCK BASED COMPENSATION

We follow APB No. 25 “Accounting for Stock Issued to Employees” and the related Interpretations in accounting for our stock option plans. Since our stock option plans meet certain criteria of APB No. 25, we do not recognize any compensation cost in the income statement. SFAS No. 123, “Accounting for Stock-Based Compensation” issued subsequent to APB No. 25, defines a “fair value based method” of accounting for employee stock options but allows companies to continue to measure compensation cost for employee stock options using the “intrinsic value based method” prescribed in APB No. 25.

We believe that applying the intrinsic value based method of accounting for stock options prescribed by APB No. 25 is a critical accounting policy because application of SFAS No. 123 would require us to estimate the fair value of employee stock options at the date of the grant and record an expense in the income statement over the vesting period for the fair value calculated, thus reducing net income and earnings per share. Our accounting policy to follow APB No. 25 in accounting for our stock option plans is a critical accounting policy for both of our reportable segments. Management has discussed the development and selection of this critical accounting policy with the audit committee of our board of directors and the audit committee has reviewed our disclosure relating to it in this MD&A.

We have no immediate plans at this time to voluntarily change our accounting policy to the fair value based method; however, we continue to evaluate this alternative. In accordance with SFAS No. 123, we have been disclosing in the Notes to the Consolidated Financial Statements the impact on our net income and earnings per share had we adopted the fair value based method. If we had adopted the fair value based method in 2002, our net income would have been $4.3 million lower than reported or approximately $.12 per share lower than reported. If we had applied the fair value based method and recorded the additional after-tax expense of $4.3 million, it would not have affected our liquidity and capital resources because, in spite of the additional expense, we would have been within the terms of our debt covenants.

OUTLOOK

The strong sales we experienced in the fourth quarter of 2002 are expected to continue into the first quarter of 2003. We are seeing an improvement in incoming orders for our high-end fragrance/cosmetic products and we are cautiously optimistic that this will continue throughout 2003. We anticipate that expanding applications of our products will result in significant growth in sales to the food/beverage market in 2003. We also have new product introductions and variations of existing products targeted for the personal care and household markets which are both expected to grow in 2003. We saw weakening demand in the pharmaceutical market during the fourth quarter of 2002, which we believe is due to inventory corrections by certain customers. We anticipate this weakness to continue into the first quarter of 2003 but improve gradually throughout the remainder of the year. We anticipate diluted earnings per share for the first quarter to be in the range of $.48 to $.53 per share.

Our results may be negatively impacted by a prolonged or escalating situation in the Middle East. A portion of fragrance/cosmetic sales are sold through duty-free outlets located in international airports and could be negatively impacted if travel declines. Additionally, customer promotional activities and new product introductions across all markets could be delayed and end-consumer spending could be negatively affected. The magnitude of these impacts on our results cannot be reasonably estimated.

The Euro has strengthened significantly compared to the U.S. dollar in the fourth quarter of 2002 and this strength has continued into the first quarter of 2003. Since a majority of our sales are denominated in Euros, the strengthening Euro will have a positive impact on the translation of our Euro denominated financial statements into U.S. dollars. However, as we have mentioned before, we are a net importer of products produced in European

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countries with Euro based costs, into the U.S. and sold in U.S. dollars. The strengthening Euro compared to the U.S. dollar makes imported European produced products more expensive thus reducing operating margins. The net impact of the strengthening Euro is difficult to predict or estimate, but it is likely that any positive impact achieved from translating Euro denominated financial statements into U.S. dollars may be offset by the reduction in operating margins on imported products.

We expect the effective tax rate for 2003 to be in the range of 33% to 34% compared to a rate of 32.2% for 2002.

We expect resin prices to increase in 2003. Should raw material costs increase dramatically in 2003, this could have a negative impact on the anticipated results if delays or difficulties are encountered in passing through these additional costs to customers.

The Strategic Initiative project is essentially complete at the end of 2002. We do not anticipate any additional charges related to this project in 2003.

We use specific plastic resin for certain of our pharmaceutical products. These specific resins need to be approved by the customers and by the Food and Drug Administration (FDA) in the United States when the customer is obtaining approval to market its product. Should these plastic resins become unavailable to purchase on the market, we could suffer a delay in shipping product to pharmaceutical customers. We are not aware of any potential shortages of specific resins used in the pharmaceutical market for the foreseeable future.

Due to the relatively high fixed cost nature of our business, sudden significant decreases in business may have a significant impact on our results of operations, as seen in the fragrance/cosmetic industry in 2002 and late 2001. Due to the fixed cost nature of our businesses, particularly in Europe, it is difficult to reduce costs fast enough to offset the decline in business.

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis and certain other sections of this Form 10-K contain forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are based on our beliefs as well as assumptions made by and information currently available to us. Accordingly, our actual results may differ materially from those expressed or implied in such forward-looking statements due to known or unknown risks and uncertainties that exist in our operations and business environment, including but not limited to direct or indirect consequences of acts of war or terrorism, government regulation including tax rate policies, competition and technological change, intellectual property rights, the failure by us to produce anticipated cost savings or improve productivity, the timing and magnitude of capital expenditures and acquisitions, currency exchange rates, interest rates, economic and market conditions in the United States, Europe and the rest of the world, changes in customer spending levels, the demand for existing and new products, the cost and availability of raw materials, and other risks associated with our operations. Although we believe that our forward-looking statements are based on reasonable assumptions, there can be no assurance that actual results, performance or achievements will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements.

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ITEM 7a.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISKS

A significant number of our 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 condition and results of operations of our entities. Our primary foreign exchange exposure is to the Euro, but we also have foreign exchange exposure to South American and Asian currencies, as well as the Swiss Franc and the British pound. A weakening U.S. dollar relative to foreign currencies has an additive translation effect on our financial condition and results of operations. Conversely, a strengthening U.S. dollar has a dilutive effect.

Additionally, in some cases, we sell products denominated in a currency different from the currency in which the related costs are incurred. Any changes in exchange rates on such inter-country sales may impact our results of operations.

We manage our exposures to foreign exchange principally with forward exchange contracts to hedge certain firm purchase and sales commitments and intercompany cash transactions denominated in foreign currencies.

The table below provides information as of December 31, 2002, about our forward currency exchange contracts. All the contracts expire before the end of the third quarter of 2003.

As of December 31, 2002, we have recorded the fair value of foreign currency forward exchange contracts of $3 thousand in accounts payable and accrued liabilities and $1.2 million in prepayments and other in the balance sheet. All forward exchange contracts outstanding as of December 31, 2001 had an aggregate contract amount of $20.4 million.

At December 31, 2002, we had a fixed-to-variable interest rate swap agreement with a notional principal value of $25 million which requires us to pay a variable interest rate of 1.4% and receive a fixed rate of 6.6%. The variable rate is adjusted semiannually based on London Interbank Offered Rates (“LIBOR”). Variations in market interest rates would produce changes in our net income. If interest rates increase by 100 basis points, net income related to the interest rate swap agreement would decrease by approximately $200, assuming a tax rate of 33%. As of December 31, 2002, we recorded the fair value of the fixed-to-variable interest rate swap agreement of $4.6 million in miscellaneous other assets with an offsetting adjustment to debt. No gain or loss was recorded in the income statement in 2002 since there was no hedge ineffectiveness.

In 2002, we canceled an interest rate swap agreement which had a notional amount of $25 million. The cancellation of the interest rate swap agreement netted approximately $4 million. The net economic effect of canceling the swap agreement converted a variable interest rate on $25 million of debt to an effective fixed interest rate of 3.8%.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF INCOME

In thousands, except per share amounts

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED BALANCE SHEETS

In thousands, except per share amounts

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED BALANCE SHEETS

In thousands, except per share amounts