10-Q 1 atr-20170331x10q.htm 10-Q atr_Current folio_10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017

 

OR

 

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM             TO           

 


 

COMMISSION FILE NUMBER 1-11846

 

ag_logo_rgb_k_cg10_5545_small  jpg

AptarGroup, Inc.

 

 

 

 

DELAWARE

 

36-3853103

(State of Incorporation)

 

(I.R.S. Employer Identification No.)

 

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

 

815-477-0424

 

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 ☑ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☑ No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

 

 

 

 

 

Large accelerated filer ☑

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

 

 

(Do not check if a smaller

reporting company)

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☑

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at April 24, 2017

Common Stock, $.01 par value per share

 

62,428,755 shares

 

 

 

 

 


 

 

 

 

AptarGroup, Inc.

 

Form 10-Q

 

Quarter Ended March 31, 2017

 

INDEX

 

 

Part I. 

FINANCIAL INFORMATION

 

 

 

 

Item 1. 

Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Income - Three Months Ended March 31, 2017 and 2016

1

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2017 and 2016

2

 

 

 

 

Condensed Consolidated Balance Sheets – March 31, 2017 and December 31, 2016

3

 

 

 

 

Condensed Consolidated Statements of Changes in Equity – Three Months Ended March 31, 2017 and 2016

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2017 and 2016

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

31

 

 

 

Item 4. 

Controls and Procedures

31

 

 

 

Part II. 

OTHER INFORMATION

 

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

32

 

 

 

Item 6. 

Exhibits

33

 

 

 

 

Signature

34

 

 

 

 

i


 

PART I – FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

 

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

In thousands, except per share amounts

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2017

 

2016

    

 

 

 

 

 

 

 

 

Net Sales

    

$

601,316

    

$

582,338

 

Operating Expenses:

 

 

 

 

 

 

 

Cost of sales (exclusive of depreciation and amortization shown below)

 

 

384,932

 

 

374,203

 

Selling, research & development and administrative

 

 

101,516

 

 

103,015

 

Depreciation and amortization

 

 

37,331

 

 

35,887

 

 

 

 

523,779

 

 

513,105

 

Operating Income

 

 

77,537

 

 

69,233

 

 

 

 

 

 

 

 

 

Other (Expense) Income:

 

 

 

 

 

 

 

Interest expense

 

 

(8,262)

 

 

(8,591)

 

Interest income

 

 

330

 

 

584

 

Equity in results of affiliates

 

 

(48)

 

 

(121)

 

Miscellaneous, net

 

 

(77)

 

 

(1,260)

 

 

 

 

(8,057)

 

 

(9,388)

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

69,480

 

 

59,845

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

17,675

 

 

15,979

 

 

 

 

 

 

 

 

 

Net Income

 

$

51,805

 

$

43,866

 

 

 

 

 

 

 

 

 

Net Loss (Income) Attributable to Noncontrolling Interests

 

$

15

 

$

(3)

 

 

 

 

 

 

 

 

 

Net Income Attributable to AptarGroup, Inc.

 

$

51,820

 

$

43,863

 

 

 

 

 

 

 

 

 

Net Income Attributable to AptarGroup, Inc. per Common Share:

 

 

 

 

 

 

 

Basic

 

$

0.83

 

$

0.70

 

Diluted

 

$

0.81

 

$

0.67

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

 

62,355

 

 

62,722

 

Diluted

 

 

64,234

 

 

65,063

 

 

 

 

 

 

 

 

 

Dividends per Common Share

 

$

0.32

 

$

0.30

 

 

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

 

1


 

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2017

 

2016

 

 

 

 

 

 

 

 

 

Net Income

 

$

51,805

 

$

43,866

 

Other Comprehensive Income:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

23,186

 

 

65,172

 

Changes in treasury locks, net of tax

 

 

 7

 

 

 7

 

Defined benefit pension plan, net of tax

 

 

 

 

 

 

 

Amortization of prior service cost included in net income, net of tax

 

 

67

 

 

57

 

Amortization of net loss included in net income, net of tax

 

 

812

 

 

776

 

Total defined benefit pension plan, net of tax

 

 

879

 

 

833

 

Total other comprehensive income

 

 

24,072

 

 

66,012

 

Comprehensive Income

 

 

75,877

 

 

109,878

 

Comprehensive Loss (Income) Attributable to Noncontrolling Interests

 

 

13

 

 

(4)

 

Comprehensive Income Attributable to AptarGroup, Inc.

 

$

75,890

 

$

109,874

 

 

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

 

2


 

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

March 31,

    

 

December 31,

 

 

 

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and equivalents

 

$

284,727

 

$

466,287

 

Accounts and notes receivable, less allowance for doubtful accounts of $3,193 in 2017 and $2,989 in 2016

 

 

474,957

 

 

433,127

 

Inventories

 

 

309,592

 

 

296,914

 

Prepaid and other

 

 

87,458

 

 

73,842

 

 

 

 

1,156,734

 

 

1,270,170

 

Property, Plant and Equipment:

 

 

 

 

 

 

 

Buildings and improvements

 

 

378,474

 

 

368,260

 

Machinery and equipment

 

 

1,983,899

 

 

1,938,352

 

 

 

 

2,362,373

 

 

2,306,612

 

Less: Accumulated depreciation

 

 

(1,587,690)

 

 

(1,545,384)

 

 

 

 

774,683

 

 

761,228

 

Land

 

 

23,947

 

 

23,093

 

 

 

 

798,630

 

 

784,321

 

Other Assets:

 

 

 

 

 

 

 

Investments in affiliates

 

 

9,262

 

 

4,241

 

Goodwill

 

 

411,272

 

 

407,522

 

Intangible assets

 

 

92,991

 

 

94,489

 

Miscellaneous

 

 

54,750

 

 

46,042

 

 

 

 

568,275

 

 

552,294

 

Total Assets

 

$

2,523,639

 

$

2,606,785

 

 

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

 

3


 

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

In thousands, except share and per share amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

March 31,

    

 

December 31,

 

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Notes payable

 

$

5,680

 

$

169,213

 

Current maturities of long-term obligations, net of unamortized debt issuance costs

 

 

4,258

 

 

4,603

 

Accounts payable and accrued liabilities

 

 

402,993

 

 

369,139

 

 

 

 

412,931

 

 

542,955

 

Long-Term Obligations, net of unamortized debt issuance costs

 

 

771,291

 

 

772,737

 

Deferred Liabilities and Other:

 

 

 

 

 

 

 

Deferred income taxes

 

 

16,269

 

 

16,803

 

Retirement and deferred compensation plans

 

 

77,107

 

 

94,545

 

Deferred and other non-current liabilities

 

 

5,424

 

 

5,503

 

Commitments and contingencies

 

 

 —

 

 

 

 

 

 

98,800

 

 

116,851

 

Stockholders’ Equity:

 

 

 

 

 

 

 

AptarGroup, Inc. stockholders’ equity

 

 

 

 

 

 

 

Common stock, $.01 par value, 199 million shares authorized, 66.2 and 66.0 million shares issued as of March 31, 2017 and December 31, 2016, respectively

 

 

662

 

 

660

 

Capital in excess of par value

 

 

563,657

 

 

546,682

 

Retained earnings

 

 

1,215,037

 

 

1,197,234

 

Accumulated other comprehensive (loss)

 

 

(295,639)

 

 

(319,709)

 

Less: Treasury stock at cost, 3.7 and 3.9 million shares as of March 31, 2017 and December 31, 2016, respectively

 

 

(243,379)

 

 

(250,917)

 

Total AptarGroup, Inc. Stockholders’ Equity

 

 

1,240,338

 

 

1,173,950

 

Noncontrolling interests in subsidiaries

 

 

279

 

 

292

 

Total Stockholders’ Equity

 

 

1,240,617

 

 

1,174,242

 

Total Liabilities and Stockholders’ Equity

 

$

2,523,639

 

$

2,606,785

 

 

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

 

4


 

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AptarGroup, Inc. Stockholders’ Equity

 

 

 

 

 

 

 

 

    

 

    

Accumulated

    

 

    

 

    

 

    

 

    

 

 

 

 

 

 

Other

 

Common

 

 

 

Capital in

 

Non-

 

 

 

 

 

Retained

 

Comprehensive

 

Stock

 

Treasury

 

Excess of

 

Controlling

 

Total

 

 

 

Earnings

 

(Loss) Income

 

Par Value

 

Stock

 

Par Value

 

Interest

 

Equity

 

Balance - December 31, 2015

 

$

1,185,681

 

$

(262,347)

 

$

667

 

$

(270,052)

 

$

495,462

 

$

295

 

$

1,149,706

 

Net income

 

 

43,863

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 3

 

 

43,866

 

Foreign currency translation adjustments

 

 

 —

 

 

65,171

 

 

 —

 

 

 —

 

 

 —

 

 

 1

 

 

65,172

 

Changes in unrecognized pension gains/losses and related amortization, net of tax

 

 

 —

 

 

833

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

833

 

Changes in treasury locks, net of tax

 

 

 —

 

 

 7

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 7

 

Stock awards and option exercises

 

 

 —

 

 

 —

 

 

 3

 

 

10,533

 

 

24,945

 

 

 —

 

 

35,481

 

Cash dividends declared on common stock

 

 

(18,770)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(18,770)

 

Common stock repurchased and retired

 

 

(7,860)

 

 

 —

 

 

(1)

 

 

 —

 

 

(780)

 

 

 —

 

 

(8,641)

 

Balance - March 31, 2016

 

$

1,202,914

 

$

(196,336)

 

$

669

 

$

(259,519)

 

$

519,627

 

$

299

 

$

1,267,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2016

 

$

1,197,234

 

$

(319,709)

 

$

660

 

$

(250,917)

 

$

546,682

 

$

292

 

$

1,174,242

 

Net income

 

 

51,820

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(15)

 

 

51,805

 

Foreign currency translation adjustments

 

 

 —

 

 

23,184

 

 

 —

 

 

 —

 

 

 —

 

 

 2

 

 

23,186

 

Changes in unrecognized pension gains/losses and related amortization, net of tax

 

 

 —

 

 

879

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

879

 

Changes in treasury locks, net of tax

 

 

 —

 

 

 7

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 7

 

Stock awards and option exercises

 

 

 —

 

 

 —

 

 

 4

 

 

7,538

 

 

18,912

 

 

 —

 

 

26,454

 

Cash dividends declared on common stock

 

 

(19,937)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(19,937)

 

Common stock repurchased and retired

 

 

(14,080)

 

 

 —

 

 

(2)

 

 

 —

 

 

(1,937)

 

 

 —

 

 

(16,019)

 

Balance - March 31, 2017

 

$

1,215,037

 

$

(295,639)

 

$

662

 

$

(243,379)

 

$

563,657

 

$

279

 

$

1,240,617

 

 

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

 

5


 

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

In thousands, brackets denote cash outflows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

    

 

2017

    

 

2016

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net income

 

$

51,805

 

$

43,866

 

Adjustments to reconcile net income to net cash provided by operations:

 

 

 

 

 

 

 

Depreciation

 

 

34,902

 

 

34,401

 

Amortization

 

 

2,429

 

 

1,486

 

Stock based compensation

 

 

7,748

 

 

10,104

 

Provision for doubtful accounts

 

 

147

 

 

13

 

Deferred income taxes

 

 

(2,492)

 

 

(867)

 

Defined benefit plan expense

 

 

4,239

 

 

4,194

 

Equity in results of affiliates

 

 

48

 

 

121

 

Changes in balance sheet items, excluding effects from foreign currency adjustments:

 

 

 

 

 

 

 

Accounts and other receivables

 

 

(35,865)

 

 

(70,863)

 

Inventories

 

 

(7,913)

 

 

(1,792)

 

Prepaid and other current assets

 

 

(13,320)

 

 

(14,646)

 

Accounts payable and accrued liabilities

 

 

26,269

 

 

11,362

 

Income taxes payable

 

 

1,981

 

 

(737)

 

Retirement and deferred compensation plan liabilities

 

 

(21,272)

 

 

(15,151)

 

Other changes, net

 

 

(7,733)

 

 

10,386

 

Net Cash Provided by Operations

 

 

40,973

 

 

11,877

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Capital expenditures

 

 

(34,848)

 

 

(24,218)

 

Proceeds from sale of property and equipment, including insurance proceeds

 

 

989

 

 

1,234

 

Maturity of short-term investments

 

 

 —

 

 

29,485

 

Acquisition of business, net of cash acquired

 

 

 —

 

 

(202,985)

 

Acquisition of intangible assets

 

 

 —

 

 

(2,514)

 

Investment in unconsolidated affiliate

 

 

(5,000)

 

 

 —

 

Notes receivable, net

 

 

445

 

 

319

 

Net Cash Used by Investing Activities

 

 

(38,414)

 

 

(198,679)

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

(Repayments of) proceeds from notes payable

 

 

(163,665)

 

 

75,180

 

Proceeds from long-term obligations

 

 

 —

 

 

101

 

Repayments of long-term obligations

 

 

(2,268)

 

 

(1,047)

 

Dividends paid

 

 

(19,937)

 

 

(18,770)

 

Proceeds from stock option exercises

 

 

15,908

 

 

20,960

 

Common stock repurchased and retired

 

 

(16,019)

 

 

(8,641)

 

Excess tax benefit from exercise of stock options

 

 

 —

 

 

3,764

 

Net Cash (Used) Provided by Financing Activities

 

 

(185,981)

 

 

71,547

 

Effect of Exchange Rate Changes on Cash

 

 

1,862

 

 

11,326

 

Net Decrease in Cash and Equivalents

 

 

(181,560)

 

 

(103,929)

 

Cash and Equivalents at Beginning of Period

 

 

466,287

 

 

489,901

 

Cash and Equivalents at End of Period

 

$

284,727

 

$

385,972

 

 

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

 

6


 

AptarGroup, Inc.

Notes to Condensed Consolidated Financial Statements

(Dollars in Thousands, Except per Share Amounts, or as Otherwise Indicated)

(Unaudited)

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

BASIS OF PRESENTATION

 

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of AptarGroup, Inc. and our subsidiaries.  The terms “AptarGroup”, “Aptar” or “Company” as used herein refer to AptarGroup, Inc. and our subsidiaries.  All significant intercompany accounts and transactions have been eliminated.

In the opinion of management, the Unaudited Condensed Consolidated Financial Statements include all normal recurring adjustments necessary for a fair statement of consolidated financial position, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented.  The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading.  Also, certain financial position data included herein was derived from the Audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 but does not include all disclosures required by U.S. GAAP.  Accordingly, these Unaudited Condensed Consolidated Financial Statements and related notes should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.  The results of operations of any interim period are not necessarily indicative of the results that may be expected for the year.

  

ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

 

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification.

In May 2014, the FASB amended the guidance for recognition of revenue from customer contracts.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In August 2015, the FASB decided to defer the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date.  The FASB also decided to allow early adoption of the standard, but not before the original effective date of December 15, 2016. Subsequent to the initial standards, the FASB has also issued several ASUs to clarify specific revenue recognition topics.  We continue to evaluate the impact the adoption of this standard will have on our Consolidated Financial Statements.  The majority of our revenues are derived from product sales and tooling sales and we are in the process of assessing the impact of the new guidance on these revenue streams.  We are also evaluating our license, exclusivity and royalty arrangements, which will need to be reviewed individually to ensure proper accounting under the new standard. Based on our reviews performed to date, we continue to anticipate adopting the full retrospective transition method for implementing this guidance on the standard’s effective date.

In July 2015, the FASB issued new guidance for simplifying the measurement of inventory.  The core principle of the guidance is that an entity should measure inventory at the lower of cost and net realizable value.  This standard is effective for annual reporting periods beginning after December 15, 2016.  The Company has adopted the requirements of the standard and has determined that the impact is not material to our current year financial statements.

In March 2016, the FASB issued guidance that eliminates the requirement that an investor retrospectively apply equity method accounting when an investment that it had accounted for by another method initially qualifies for the equity method. The guidance requires that an equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The new standard is effective for fiscal years and interim periods beginning after December 15, 2016.  The adoption of the new rules did not have an impact on our financial statements. 

7


 

In March 2016, the FASB issued guidance that changes the accounting for certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The new standard is effective for fiscal years and interim periods beginning after December 15, 2016.  The Company has prospectively adopted the standard resulting in $2.7 million of additional tax deductions that would have been previously recorded in stockholders’ equity now being reported as a reduction in tax expense for the quarter ended March 31, 2017.  The amount of excess tax benefits and deficiencies recognized in the provision for income taxes will fluctuate from period to period based on the price of the Company’s stock, the volume of share-based instruments settled or vested, and the value assigned to share-based instruments under U.S. GAAP. We have also prospectively adopted the standard for the presentation of the condensed consolidated statements of cash flows.  The impact of excess tax benefits from exercise of stock options is now shown within cash flows from operating activities instead of cash flows from financing activities.  In addition, the Company has elected to continue its current practice of estimating expected forfeitures.

Other accounting standards that have been issued by the FASB or other standards-setting bodies did not have a material impact on our Consolidated Financial Statements.

RETIREMENT OF COMMON STOCK

 

During the first quarter of 2017 and 2016, the Company repurchased and immediately retired 210 thousand and 113 thousand shares of common stock, respectively.  Common stock was reduced by the number of shares retired at $0.01 par value per share.  The excess of purchase price over par value may be charged entirely to retained earnings or may be allocated between additional paid-in capital and retained earnings. The Company has elected to allocate the excess purchase price over par value between additional paid-in capital and retained earnings.

INCOME TAXES

 

The Company computes taxes on income in accordance with the tax rules and regulations of the many taxing authorities where income is earned.  The income tax rates imposed by these taxing authorities may vary substantially.  Taxable income may differ from pre-tax income for financial accounting purposes.  To the extent that these differences create differences between the tax basis of an asset or liability and our reported amount in the financial statements, an appropriate provision for deferred income taxes is made.

In making the determination of which foreign earnings are permanently reinvested in foreign operations, the Company considers numerous factors, including the financial requirements of the U.S. parent company and those of our foreign subsidiaries, the U.S. funding needs for dividend payments and stock repurchases, and the tax consequences of remitting earnings to the U.S.  From this analysis, current year repatriation decisions are made in an attempt to provide a proper mix of debt and stockholder capital both within the U.S. and for non-U.S. operations.  During 2016, the Company decided to repatriate a portion of our 2016 and 2017 foreign earnings.  In the first quarter of 2017, the Company repatriated $263 million, most of which was used to reduce existing debt levels and fund stock repurchases.  To better balance our capital structure, the Company is also planning to repatriate an additional $750 million of earnings previously designated as indefinitely reinvested, and therefore has removed the indefinite reinvestment assertion on such amounts.  There are no significant tax consequences expected from either repatriation due to the amount of tax credits associated with the repatriation under current U.S. tax law.  The Company maintains its assertion that the approximately $550 million of remaining foreign earnings are permanently reinvested.  As such, the Company does not provide for taxes on these earnings. 

The Company provides a liability for the amount of unrecognized tax benefits from uncertain tax positions.  This liability is provided whenever the Company determines that a tax benefit will not meet a more-likely-than-not threshold for recognition.  See Note 4 of the Unaudited Notes to the Condensed Consolidated Financial Statements for more information.

  

 

 

 

 

 

 

 

8


 

NOTE 2 - INVENTORIES

 

Inventories, by component, consisted of:

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

    

2017

    

2016

 

 

 

 

 

 

 

 

 

Raw materials

 

$

101,195

 

$

98,014

 

Work in process

 

 

91,029

 

 

91,646

 

Finished goods

 

 

117,368

 

 

107,254

 

Total

 

$

309,592

 

$

296,914

 

 

 

 

 

 

 

 

 

NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS

 

The changes in the carrying amount of goodwill since December 31, 2016 are as follows by reporting segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Beauty +

    

 

 

    

Food +

    

Corporate

    

 

 

 

 

 

Home

 

Pharma

 

Beverage

 

& Other

 

Total

 

Goodwill

 

$

211,371

 

$

180,050

 

$

16,101

 

$

1,615

 

$

409,137

 

Accumulated impairment losses

 

 

 —

 

 

 —

 

 

 —

 

 

(1,615)

 

 

(1,615)

 

Balance as of December 31, 2016

 

$

211,371

 

$

180,050

 

$

16,101

 

$

 —

 

$

407,522

 

Foreign currency exchange effects

 

 

1,558

 

 

2,118

 

 

74

 

 

 —

 

 

3,750

 

Goodwill

 

$

212,929

 

$

182,168

 

$

16,175

 

$

1,615

 

$

412,887

 

Accumulated impairment losses

 

 

 —

 

 

 —

 

 

 —

 

 

(1,615)

 

 

(1,615)

 

Balance as of March 31, 2017

 

$

212,929

 

$

182,168

 

$

16,175

 

$

 —

 

$

411,272

 

 

The table below shows a summary of intangible assets as of March 31, 2017 and December 31, 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2017

 

 

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average

 

Gross

 

 

 

 

 

 

 

Gross

 

 

 

 

 

 

 

Amortization Period

 

Carrying

 

Accumulated

 

Net

 

Carrying

 

Accumulated

 

Net

 

 

    

(Years)

    

Amount

    

Amortization

    

Value

    

Amount

    

Amortization

    

Value

 

Amortized intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patents

 

0.2

 

$

6,946

 

$

(6,928)

 

$

18

 

$

6,859

 

$

(6,839)

 

$

20

 

Acquired technology

 

14.9

 

 

42,263

 

 

(10,874)

 

 

31,389

 

 

41,731

 

 

(10,040)

 

 

31,691

 

Customer relationships

 

11.8

 

 

63,542

 

 

(8,144)

 

 

55,398

 

 

63,006

 

 

(6,696)

 

 

56,310

 

License agreements and other

 

8.0

 

 

18,399

 

 

(12,213)

 

 

6,186

 

 

18,516

 

 

(12,048)

 

 

6,468

 

Total intangible assets

 

11.7

 

$

131,150

 

$

(38,159)

 

$

92,991

 

$

130,112

 

$

(35,623)

 

$

94,489

 

 

Aggregate amortization expense for the intangible assets above for the quarters ended March 31, 2017 and 2016 was $2,429 and $1,486, respectively. 

 

Future estimated amortization expense for the years ending December 31 is as follows:

 

 

 

 

 

 

 

2017

    

$

7,334

 

(remaining estimated amortization for 2017)

2018

 

 

9,755

 

 

2019

 

 

9,587

 

 

2020

 

 

8,476

 

 

2021 and thereafter

 

 

57,839

 

 

 

9


 

Future amortization expense may fluctuate depending on changes in foreign currency rates.  The estimates for amortization expense noted above are based upon foreign exchange rates as of March 31, 2017.

 

NOTE 4 — INCOME TAX UNCERTAINTIES

 

The Company had approximately $6.5 and $6.4 million recorded for income tax uncertainties as of March 31, 2017 and December 31, 2016, respectively.  The increase is attributable to changes in existing tax positions as well as currency fluctuations. The uncertain amounts, if recognized, that would impact the effective tax rate are $6.5 and $6.4 million, respectively. The Company estimates that it is reasonably possible that the liability for uncertain tax positions will decrease by no more than $4.6 million in the next twelve months from the resolution of various uncertain positions as a result of the completion of tax audits, litigation and the expiration of the statute of limitations in various jurisdictions.

 

NOTE 5 – LONG –TERM OBLIGATIONS

 

At March 31, 2017, the Company’s long-term obligations consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized

 

 

 

 

    

 

    

Debt Issuance

    

 

 

 

    

Principal

    

Costs

    

Net

 

Notes payable 0.61% – 16.00%, due in monthly and annual installments through 2025

 

$

16,616

 

$

 —

 

$

16,616

 

Senior unsecured notes 6.0%, due in 2018

 

 

75,000

 

 

30

 

 

74,970

 

Senior unsecured notes 3.8%, due in 2020

 

 

84,000

 

 

113

 

 

83,887

 

Senior unsecured notes 3.2%, due in 2022

 

 

75,000

 

 

132

 

 

74,868

 

Senior unsecured notes 3.5%, due in 2023

 

 

125,000

 

 

247

 

 

124,753

 

Senior unsecured notes 3.4%, due in 2024

 

 

50,000

 

 

101

 

 

49,899

 

Senior unsecured notes 3.5%, due in 2024

 

 

100,000

 

 

247

 

 

99,753

 

Senior unsecured notes 3.6%, due in 2025

 

 

125,000

 

 

261

 

 

124,739

 

Senior unsecured notes 3.6%, due in 2026

 

 

125,000

 

 

261

 

 

124,739

 

Capital lease obligations

 

 

1,325

 

 

 —

 

 

1,325

 

 

 

$

776,941

 

$

1,392

 

$

775,549

 

Current maturities of long-term obligations

 

 

(4,258)

 

 

 —

 

 

(4,258)

 

Total long-term obligations

 

$

772,683

 

$

1,392

 

$

771,291

 

 

At December 31, 2016, the Company’s long-term obligations consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized

 

 

 

 

    

 

    

Debt Issuance

    

 

 

 

    

Principal

    

Costs

    

Net

 

Notes payable 0.61% – 16.00%, due in monthly and annual installments through 2025

 

$

18,246

 

$

 —

 

$

18,246

 

Senior unsecured notes 6.0%, due in 2018

 

 

75,000

 

 

37

 

 

74,963

 

Senior unsecured notes 3.8%, due in 2020

 

 

84,000

 

 

119

 

 

83,881

 

Senior unsecured notes 3.2%, due in 2022

 

 

75,000

 

 

138