Aptar Reports Third Quarter 2020 Results

CRYSTAL LAKE, Ill.--(BUSINESS WIRE)--AptarGroup, Inc. (NYSE:ATR) today reported third quarter results for 2020 and provided an update related to COVID-19 including the Company’s continued supply of essential products for critical industries.

Third Quarter 2020 Summary

• Reported sales increased 8%, including positive effects of currency translation rates and recent acquisitions, and core sales increased 2%
• Strong reported and core growth in our Pharma segment
• Core sales growth in the food, personal care and home care markets
• Sales to the beauty and beverage markets continue to be impacted by COVID-19 pandemic
• Recent acquisitions are performing well
• Reported earnings per share totaled $0.95 (an increase of 12% compared to the prior year)
• Adjusted earnings per share totaled $1.00 (an increase of 3% compared to the prior year)
• Reported net income totaled $64 million (an increase of 12% compared to the prior year)
• Adjusted EBITDA totaled $157 million (an increase of 7% compared to the prior year)
• Cash flow from operations was $381 million in the first nine months of 2020 (a slight increase over the prior year)
• Free cash flow was $208 million in the first nine months of 2020 (an increase of 8% compared to the prior year)
• Declared quarterly dividend of $0.36 per share

COVID-19 Update

“As we continue to rigorously monitor the ongoing COVID-19 situation across the globe, our priorities remain the health and safety of our employees and continued production for our customers,” said Stephan Tanda, Aptar President and CEO. “Millions of people around the world rely on Aptar solutions to dispense the medicines and products they need and we are delivering on our promises to our customers.” During the pandemic, we have continuously adapted our safety and cleaning procedures and remote working protocols in accordance with the legislation or regulations applicable to each of our facilities.

Third Quarter Results

For the quarter ended September 30, 2020, reported sales increased 8% to $759 million compared to $701 million in the prior year. Core sales, excluding the impacts from changes in currency exchange rates and acquisitions, increased approximately 2%.

Third Quarter Segment Sales Analysis (Change Over Prior Year)
	Beauty + Home	Pharma	Food + Beverage	Total AptarGroup
Core Sales Growth	(5%)	11%	2%	2%
Acquisitions	7%	2%	0%	4%
Currency Effects (1)	1%	4%	0%	2%
Total Reported Sales Growth	3%	17%	2%	8%
(1) - Currency effects are approximated by translating last year's amounts at this year's foreign exchange rates.

Commenting on the quarter, Tanda said, “Overall, we had a very good quarter that speaks to the resilience of our diverse and growing end markets. Our Pharma segment reported impressive growth compared to a strong quarter a year ago. This was in part due to solid underlying demand for existing medicines during the pandemic, such as influenza vaccines, and allergy and asthma treatments, that are administered using our drug delivery devices and components for injection systems. We also performed well in other markets and grew core sales in the food, personal care and home care markets. Collectively this drove top line and earnings per share growth despite the challenges posed by the pandemic.” Aptar’s Pharma segment experienced increased broad-based demand with particularly strong growth in our injectables and active packaging divisions. Sales of consumer health care and prescription drug delivery devices increased over a particularly strong quarter a year ago. Aptar’s Beauty + Home segment benefitted from strong sales to the personal care market related to hand sanitizers and liquid soaps and increased sales to the home care market primarily related to cleaners and disinfectants. Sales to the beauty market continued to be negatively impacted by the effects of COVID-19. Aptar’s Food + Beverage segment reported positive sales growth with strong sales to the food market due to the demand for pantry staples with consumers continuing to cook at home during the pandemic. Sales to the beverage market continued to be impacted by lower demand for on-the-go beverages related to the pandemic. In addition, the effects of passing through lower resin prices to customers also affected the segment’s overall growth.

Aptar reported third quarter earnings per share of $0.95 compared to $0.85 during the same period a year ago, an increase of 12%. Current year adjusted earnings per share, excluding restructuring expenses and acquisition-related costs, were $1.00 and increased 3% from the prior year adjusted earnings per share, including comparable exchange rates, of $0.97.

Year-to-Date Results

For the nine months ended September 30, 2020, reported sales of $2.18 billion were in line with $2.19 billion reported a year ago. The core sales decline of 2% and the negative effects of currency translation rates were offset by the positive contribution from acquisitions.

Nine Months Year-to-Date Segment Sales Analysis (Change Over Prior Year)
	Beauty + Home	Pharma	Food + Beverage	Total AptarGroup
Core Sales Growth	(9%)	8%	(5%)	(2%)
Acquisitions	4%	3%	0%	3%
Currency Effects (1)	(2%)	0%	(2%)	(1%)
Total Reported Sales Growth	(7%)	11%	(7%)	0%
(1) - Currency effects are approximated by translating last year's amounts at this year's foreign exchange rates.

Tanda commented on the year-to-date results, “Our Pharma segment continued to perform very well through the first nine months of the year on top of a very strong period a year ago. Our Beauty + Home and Food + Beverage segments experienced a more difficult first nine months due to the impacts of COVID-19. However, we saw progressive signs of improvement for Beauty + Home and positive results for Food + Beverage as we moved further into the year. We are also very pleased with the performance of our recent acquisitions, in particular FusionPKG and Noble.”

For the nine months year-to-date, Aptar’s reported earnings per share were $2.42, and down 17%, compared to $2.93 reported a year ago. Current year adjusted earnings per share, which exclude restructuring costs and acquisition-related expenses, were $2.72 and down 14% from prior year adjusted earnings per share, including comparable exchange rates, of $3.15.

Strong Cash Flow

Cash generated from operations for the nine months year-to-date reached $381 million and was a slight improvement over the prior year primarily due to better working capital management. The company generated $208 million of free cash flow (cash flow from operations less capital expenditures) for the first nine months of 2020, an increase of 8% over $194 million in the prior year. Tanda commented, “We continue to generate free cash flow above the prior year levels which is a testament to our resilient business, especially during difficult economic conditions.”

Outlook

“We expect the company to continue to achieve core sales growth in the fourth quarter. Rising demand in many end markets is expected to more than offset COVID-19 related declines in some of our other end markets. We are proud of the way our employees have responded to the difficult year and we are performing well. We expect our Pharma business to continue to do well with existing business and increased opportunities directly and indirectly related to the pandemic,” said Tanda.

Aptar expects earnings per share for the fourth quarter of 2020, excluding any restructuring expenses and acquisition-related costs, to be in the range of $0.84 to $0.92. This guidance is based on an effective tax rate range of 27% to 29%.

Cash Dividend

As previously announced, the Board declared a quarterly cash dividend of $0.36 per share. The payment date is November 18, 2020, to stockholders of record as of October 28, 2020.

Open Conference Call

There will be a conference call on Friday, October 30, 2020 at 8:00 a.m. Central Time to discuss the Company’s third quarter results for 2020. The call will last approximately one hour. Interested parties are invited to listen to a live webcast by visiting the Investor Relations page at www.aptar.com. Replay of the conference call can also be accessed for a limited time on the Investor Relations page of the website.

About Aptar

Aptar is a global leader in the design and manufacturing of a broad range of drug delivery, consumer product dispensing and active packaging solutions. Aptar uses insights, design, engineering and science to create dosing, dispensing and protective technologies for the world’s leading brands, in turn making a meaningful difference in the lives, looks, health and homes of millions of people around the world. Aptar’s innovative solutions and services serve a variety of end markets including pharmaceutical, beauty, personal care, home, food and beverage. Aptar is headquartered in Crystal Lake, Illinois and has 14,000 dedicated employees in 20 countries. For more information, visit www.aptar.com.

Presentation of Non-GAAP Information

This press release refers to certain non-GAAP financial measures, including current year adjusted earnings per share and adjusted EBITDA, which exclude the impact of business transformation charges (restructuring initiatives), acquisition-related expenses and certain purchase accounting adjustments related to acquisitions and investments. Core sales and adjusted earnings per share also neutralize the impact of foreign currency translation effects when comparing current results to the prior year. Non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures provided by other companies. Aptar’s management believes these non-GAAP financial measures provide useful information to our investors because they allow for a better period over period comparison of operating results by removing the impact of items that, in management’s view, do not reflect Aptar’s core operating performance. These non-GAAP financial measures also provide investors with certain information used by Aptar’s management when making financial and operational decisions. Free cash flow is calculated as cash provided by operating activities less capital expenditures. We use free cash flow to measure cash flow generated by operations that is available for dividends, share repurchases, acquisitions and debt repayment. We believe that it is meaningful to investors in evaluating our financial performance and measure our ability to generate cash internally to fund our initiatives. These non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial results but should be read in conjunction with the unaudited condensed consolidated statements of income and other information presented herein. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in the accompanying tables. Our outlook is provided on a non-GAAP basis because certain reconciling items are dependent on future events that either cannot be controlled, such as exchange rates, or reliably predicted because they are not part of the Company's routine activities, such as restructuring and acquisition costs.

This press release contains forward-looking statements, including certain statements set forth under the “Outlook” section of this press release and statements regarding the anticipated impact of the COVID-19 pandemic. Words such as “expects,” “anticipates,” “believes,” “estimates,” “future,” “potential” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to identify such forward-looking statements. 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 or other events 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: outbreaks of pandemics, including the impact of the COVID-19 pandemic on our global supply chain and our global customers and operations; the successful integration of acquisitions and the achievement of the expected benefits of acquisitions and investments; the impact of tax reform legislation including changes in tax rates and other tax-related events or transactions that could impact our effective tax rate; the execution of the business transformation plan; economic conditions worldwide including potential deflationary or inflationary conditions or economic downturn or uncertainty in regions we rely on for growth as a result of the COVID-19 pandemic or otherwise; political conditions worldwide; significant fluctuations in foreign currency exchange rates; changes in customer and/or consumer spending levels; financial conditions of customers and suppliers; consolidations within our customer or supplier bases; fluctuations in the cost of materials, components and other input costs; the availability of raw materials and components; our ability to successfully implement facility expansions and new facility projects; our ability to increase prices, contain costs and improve productivity; changes in capital availability or cost, including interest rate fluctuations; volatility of global credit markets; cybersecurity threats that could impact our networks and reporting systems; fiscal and monetary policies and other regulations; direct or indirect consequences of acts of war or terrorism; and work stoppages due to labor disputes. For additional information on these and other risks and uncertainties, please see our filings with the Securities and Exchange Commission, including the discussion under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K and Form 10-Qs. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

AptarGroup, Inc.
Condensed Consolidated Financial Statements (Unaudited)
(In Thousands, Except Per Share Data)
Consolidated Statements of Income
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2020				2019				2020				2019
Net Sales	$	759,153			$	701,278			$	2,180,011			$	2,188,399
Cost of Sales (exclusive of depreciation and amortization shown below)		479,672				444,237				1,372,630				1,382,810
Selling, Research & Development and Administrative		121,850				111,559				371,407				346,526
Depreciation and Amortization		55,179				49,218				162,414				144,574
Restructuring Initiatives		3,415				6,019				15,585				17,286
Operating Income		99,037				90,245				257,975				297,203
Other Income/(Expense):
Interest Expense		(8,851	)			(8,898	)			(25,973	)			(26,868	)
Interest Income		249				957				599				3,738
Equity in Results of Affiliates		(256	)			238				(1,383	)			152
Miscellaneous, net		(1,040	)			(269	)			(3,375	)			148
Income before Income Taxes		89,139				82,273				227,843				274,373
Provision for Income Taxes		25,404				25,504				66,998				80,684
Net Income	$	63,735			$	56,769			$	160,845			$	193,689
Net Income Attributable to Noncontrolling Interests		(19	)			(19	)			(37	)			(20	)
Net Income Attributable to AptarGroup, Inc.	$	63,716			$	56,750			$	160,808			$	193,669
Net Income Attributable to AptarGroup, Inc. per Common Share:
Basic	$	0.99			$	0.89			$	2.50			$	3.05
Diluted	$	0.95			$	0.85			$	2.42			$	2.93
Average Numbers of Shares Outstanding:
Basic		64,562				64,010				64,278				63,485
Diluted		66,922				66,702				66,483				66,163

AptarGroup, Inc.
Condensed Consolidated Financial Statements (Unaudited)
(continued)
($ In Thousands)
Consolidated Balance Sheets
	September 30, 2020			December 31, 2019
ASSETS
Cash and Equivalents	$	226,546		$	241,970
Receivables, net		593,418			558,428
Inventories		375,177			375,795
Other Current Assets		132,055			115,048
Total Current Assets		1,327,196			1,291,241
Net Property, Plant and Equipment		1,139,899			1,087,678
Goodwill		878,015			763,461
Other Assets		516,639			419,739
Total Assets	$	3,861,749		$	3,562,119
LIABILITIES AND EQUITY
Short-Term Obligations	$	161,256		$	110,247
Accounts Payable, Accrued and Other Liabilities		625,865			573,028
Total Current Liabilities		787,121			683,275
Long-Term Obligations		1,039,935			1,085,453
Deferred Liabilities		274,738			221,139
Total Liabilities		2,101,794			1,989,867
AptarGroup, Inc. Stockholders' Equity		1,759,572			1,571,916
Noncontrolling Interests in Subsidiaries		383			336
Total Equity		1,759,955			1,572,252
Total Liabilities and Equity	$	3,861,749		$	3,562,119

AptarGroup, Inc.
Reconciliation of Adjusted EBIT and Adjusted EBITDA to Net Income (Unaudited)
($ In Thousands)
	Three Months Ended
	September 30, 2020
	Consolidated			Beauty + Home			Pharma			Food + Beverage			Corporate & Other			Net Interest
Net Sales	$	759,153			337,231			315,758			106,164			-			-
Reported net income	$	63,735
Reported income taxes		25,404
Reported income before income taxes		89,139			7,944			92,202			10,884			(13,289	)		(8,602	)
Adjustments:
Restructuring initiatives		3,415			3,144			300			(31	)		2
Transaction costs related to acquisitions		221			11			210
Adjusted earnings before income taxes		92,775			11,099			92,712			10,853			(13,287	)		(8,602	)
Interest expense		8,851															8,851
Interest income		(249	)														(249	)
Adjusted earnings before net interest and taxes (Adjusted EBIT)		101,377			11,099			92,712			10,853			(13,287	)		-
Depreciation and amortization		55,179			23,634			19,724			9,498			2,323			-
Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)	$	156,556		$	34,733		$	112,436		$	20,351		$	(10,964	)	$	-
Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)		20.6	%		10.3	%		35.6	%		19.2	%
	Three Months Ended
	September 30, 2019
	Consolidated			Beauty + Home			Pharma			Food + Beverage			Corporate & Other			Net Interest
Net Sales	$	701,278			328,182			269,251			103,845			-			-
Reported net income	$	56,769
Reported income taxes		25,504
Reported income before income taxes		82,273			15,413			78,418			9,323			(12,940	)		(7,941	)
Adjustments:
Restructuring initiatives		6,019			5,341			168			204			306
Transaction costs related to acquisitions		708			34			520			154
Purchase accounting adjustments related to acquisitions and investments		647						647
Adjusted earnings before income taxes		89,647			20,788			79,753			9,681			(12,634	)		(7,941	)
Interest expense		8,898															8,898
Interest income		(957	)														(957	)
Adjusted earnings before net interest and taxes (Adjusted EBIT)		97,588			20,788			79,753			9,681			(12,634	)		-
Depreciation and amortization		49,218			20,687			16,793			9,047			2,691			-
Purchase accounting adjustments included in Depreciation and amortization above		(647	)					(647	)
Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)	$	146,159		$	41,475		$	95,899		$	18,728		$	(9,943	)	$	-
Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)		20.8	%		12.6	%		35.6	%		18.0	%

AptarGroup, Inc.
Reconciliation of Adjusted EBIT and Adjusted EBITDA to Net Income (Unaudited)
($ In Thousands)
	Nine Months Ended
	September 30, 2020
	Consolidated			Beauty + Home			Pharma			Food + Beverage			Corporate & Other			Net Interest
Net Sales	$	2,180,011			961,577			914,213			304,221			-			-
Reported net income	$	160,845
Reported income taxes		66,998
Reported income before income taxes		227,843			2,297			267,523			25,365			(41,968	)		(25,374	)
Adjustments:
Restructuring initiatives		15,585			15,375			158			147			(95	)
Transaction costs related to acquisitions		4,812			4,602			210
Purchase accounting adjustments related to acquisitions and investments		4,642			3,221			1,421
Adjusted earnings before income taxes		252,882			25,495			269,312			25,512			(42,063	)		(25,374	)
Interest expense		25,973															25,973
Interest income		(599	)														(599	)
Adjusted earnings before net interest and taxes (Adjusted EBIT)		278,256			25,495			269,312			25,512			(42,063	)		-
Depreciation and amortization		162,414			70,159			56,232			28,031			7,992			-
Purchase accounting adjustments included in Depreciation and amortization above		(3,367	)		(2,700	)		(667	)
Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)	$	437,303		$	92,954		$	324,877		$	53,543		$	(34,071	)	$	-
Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)		20.1	%		9.7	%		35.5	%		17.6	%
	Nine Months Ended
	September 30, 2019
	Consolidated			Beauty + Home			Pharma			Food + Beverage			Corporate & Other			Net Interest
Net Sales	$	2,188,399			1,037,921			823,891			326,587			-			-
Reported net income	$	193,689
Reported income taxes		80,684
Reported income before income taxes		274,373			66,407			244,101			29,234			(42,239	)		(23,130	)
Adjustments:
Restructuring initiatives		17,286			14,869			381			826			1,210
Transaction costs related to acquisitions		1,767			34			1,579			154
Purchase accounting adjustments related to acquisitions and investments		869						869
Adjusted earnings before income taxes		294,295			81,310			246,930			30,214			(41,029	)		(23,130	)
Interest expense		26,868															26,868
Interest income		(3,738	)														(3,738	)
Adjusted earnings before net interest and taxes (Adjusted EBIT)		317,425			81,310			246,930			30,214			(41,029	)		-
Depreciation and amortization		144,574			62,101			48,623			26,149			7,701			-
Purchase accounting adjustments included in Depreciation and amortization above		(869	)					(869	)
Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)	$	461,130		$	143,411		$	294,684		$	56,363		$	(33,328	)	$	-
Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)		21.1	%		13.8	%		35.8	%		17.3	%

AptarGroup, Inc.
Reconciliation of Adjusted Earnings Per Diluted Share (Unaudited)
(In Thousands, Except Per Share Data)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Income before Income Taxes	$	89,139		$	82,273		$	227,843		$	274,373
Adjustments:
Restructuring initiatives		3,415			6,019			15,585			17,286
Transaction costs related to acquisitions		221			708			4,812			1,767
Purchase accounting adjustments related to acquisitions and investments		-			647			4,642			869
Foreign currency effects (1)					3,650						302
Adjusted Earnings before Income Taxes	$	92,775		$	93,297		$	252,882		$	294,597
Provision for Income Taxes	$	25,404		$	25,504		$	66,998		$	80,684
Adjustments:
Restructuring initiatives		598			1,691			3,304			4,857
Transaction costs related to acquisitions		25			101			713			154
Purchase accounting adjustments related to acquisitions and investments		-			123			1,026			165
Foreign currency effects (1)					1,132						89
Adjusted Provision for Income Taxes	$	26,027		$	28,551		$	72,041		$	85,949
Net Income Attributable to Noncontrolling Interests	$	(19	)	$	(19	)	$	(37	)	$	(20	)
Net Income Attributable to AptarGroup, Inc.	$	63,716		$	56,750		$	160,808		$	193,669
Adjustments:
Restructuring initiatives		2,817			4,328			12,281			12,429
Transaction costs related to acquisitions		196			607			4,099			1,613
Purchase accounting adjustments related to acquisitions and investments		-			524			3,616			704
Foreign currency effects (1)					2,518						213
Adjusted Net Income Attributable to AptarGroup, Inc.	$	66,729		$	64,727		$	180,804		$	208,628
Average Number of Diluted Shares Outstanding		66,922			66,702			66,483			66,163
Net Income Attributable to AptarGroup, Inc. Per Diluted Share	$	0.95		$	0.85		$	2.42		$	2.93
Adjustments:
Restructuring initiatives		0.05			0.06			0.19			0.19
Transaction costs related to acquisitions		-			0.01			0.06			0.02
Purchase accounting adjustments related to acquisitions and investments		-			0.01			0.05			0.01
Foreign currency effects (1)					0.04						-
Adjusted Net Income Attributable to AptarGroup, Inc. Per Diluted Share	$	1.00		$	0.97		$	2.72		$	3.15
(1) Foreign currency effects are approximations of the adjustment necessary to state the prior year earnings and earnings per share using current period foreign currency exchange rates.

AptarGroup, Inc.
Reconciliation of Free Cash Flow to Net Cash Provided by Operations (Unaudited)
(In Thousands)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net Cash Provided by Operations	$	153,741	$	159,241	$	381,427	$	380,381
Less:
Capital Expenditures	$	50,379	$	62,067	$	173,365	$	186,841
Free Cash Flow	$	103,362	$	97,174	$	208,062	$	193,540

AptarGroup, Inc.
Reconciliation of Adjusted Earnings Per Diluted Share (Unaudited)
(In Thousands, Except Per Share Data)
	Three Months Ending
	December 31,
	Expected 2020	2019
Income before Income Taxes		$	67,696
Adjustments:
Restructuring initiatives			3,186
Transaction costs related to acquisitions			2,160
Purchase accounting adjustments related to acquisitions and investments			333
Foreign currency effects (1)			4,236
Adjusted Earnings before Income Taxes		$	77,611
Provision for Income Taxes		$	19,158
Adjustments:
Restructuring initiatives			895
Transaction costs related to acquisitions			379
Purchase accounting adjustments related to acquisitions and investments			53
Foreign currency effects (1)			1,199
Adjusted Provision for Income Taxes		$	21,684
Net Income Attributable to Noncontrolling Interests		$	(5	)
Net Income Attributable to AptarGroup, Inc.		$	48,533
Adjustments:
Restructuring initiatives			2,291
Transaction costs related to acquisitions			1,781
Purchase accounting adjustments related to acquisitions and investments			280
Foreign currency effects (1)			3,037
Adjusted Net Income Attributable to AptarGroup, Inc.		$	55,922
Average Number of Diluted Shares Outstanding			66,192
Net Income Attributable to AptarGroup, Inc. Per Diluted Share (2)		$	0.73
Adjustments:
Restructuring initiatives			0.03
Transaction costs related to acquisitions			0.03
Purchase accounting adjustments related to acquisitions and investments			0.01
Foreign currency effects (1)			0.04
Adjusted Net Income Attributable to AptarGroup, Inc. Per Diluted Share (2)	$0.84 - $0.92	$	0.84
(1) Foreign currency effects are approximations of the adjustment necessary to state the prior year earnings per share using foreign currency exchange rates as of September 30, 2020.
(2) AptarGroup’s expected earnings per share range for the fourth quarter of 2020 is based on an effective tax rate range of 27% to 29%. This tax rate range compares to our fourth quarter of 2019 effective tax rate of 28% on reported and adjusted earnings per share.