10-Q 1 atr-20180331x10q.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, 2018

 

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.)

 

265 EXCHANGE DRIVE, SUITE 100, CRYSTAL LAKE, ILLINOIS 60014

Formerly 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 26, 2018

Common Stock, $.01 par value per share

 

62,386,933 shares

 

 

 

 

 


 

 

 

 

AptarGroup, Inc.

 

Form 10-Q

 

Quarter Ended March 31, 2018

 

INDEX

 

 

Part I. 

FINANCIAL INFORMATION

 

 

 

 

Item 1. 

Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Income - Three Months Ended March 31, 2018 and 2017

1

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2018 and 2017

2

 

 

 

 

Condensed Consolidated Balance Sheets – March 31, 2018 and December 31, 2017

3

 

 

 

 

Condensed Consolidated Statements of Changes in Equity – Three Months Ended March 31, 2018 and 2017

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2018 and 2017

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

Item 2. 

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

25

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

35

 

 

 

Item 4. 

Controls and Procedures

35

 

 

 

Part II. 

OTHER INFORMATION

 

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

36

 

 

 

Item 6. 

Exhibits

37

 

 

 

 

Signature

38

 

 

 

 

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,

2018

 

2017

    

 

 

 

 

 

 

 

Net Sales

$

703,350

    

$

601,316

 

Operating Expenses:

 

 

 

 

 

 

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

 

455,822

 

 

384,684

 

Selling, research & development and administrative

 

112,461

 

 

101,282

 

Depreciation and amortization

 

41,175

 

 

37,331

 

Restructuring initiatives

 

5,936

 

 

 —

 

 

 

615,394

 

 

523,297

 

Operating Income

 

87,956

 

 

78,019

 

 

 

 

 

 

 

 

Other (Expense) Income:

 

 

 

 

 

 

Interest expense

 

(8,055)

 

 

(8,262)

 

Interest income

 

2,248

 

 

330

 

Equity in results of affiliates

 

(65)

 

 

(48)

 

Miscellaneous, net

 

(867)

 

 

(559)

 

 

 

(6,739)

 

 

(8,539)

 

 

 

 

 

 

 

 

Income before Income Taxes

 

81,217

 

 

69,480

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

21,929

 

 

17,675

 

 

 

 

 

 

 

 

Net Income

$

59,288

 

$

51,805

 

 

 

 

 

 

 

 

Net Loss Attributable to Noncontrolling Interests

$

12

 

$

15

 

 

 

 

 

 

 

 

Net Income Attributable to AptarGroup, Inc.

$

59,300

 

$

51,820

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Basic

$

0.95

 

$

0.83

 

Diluted

$

0.92

 

$

0.81

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

Basic

 

62,128

 

 

62,355

 

Diluted

 

64,414

 

 

64,234

 

 

 

 

 

 

 

 

Dividends per Common Share

$

0.32

 

$

0.32

 

 

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,

 

2018

 

2017

 

 

 

 

 

 

 

 

 

Net Income

 

$

59,288

 

$

51,805

 

Other Comprehensive Income:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

22,935

 

 

23,186

 

Changes in treasury locks, net of tax

 

 

 7

 

 

 7

 

Loss on derivatives, net of tax

 

 

346

 

 

 —

 

Defined benefit pension plan, net of tax

 

 

 

 

 

 

 

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

 

 

96

 

 

67

 

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

 

 

1,260

 

 

812

 

Total defined benefit pension plan, net of tax

 

 

1,356

 

 

879

 

Total other comprehensive income

 

 

24,644

 

 

24,072

 

Comprehensive Income

 

 

83,932

 

 

75,877

 

Comprehensive Loss Attributable to Noncontrolling Interests

 

 

 1

 

 

13

 

Comprehensive Income Attributable to AptarGroup, Inc.

 

$

83,933

 

$

75,890

 

 

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

 

2


 

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

March 31,

    

 

December 31,

 

 

 

 

2018

 

 

2017

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and equivalents

 

$

741,062

 

$

712,640

 

Accounts and notes receivable, less allowance for doubtful accounts of $3,125 in 2018 and $3,161 in 2017

 

 

586,592

 

 

510,426

 

Inventories

 

 

347,791

 

 

337,216

 

Prepaid and other

 

 

117,678

 

 

109,791

 

 

 

 

1,793,123

 

 

1,670,073

 

Property, Plant and Equipment:

 

 

 

 

 

 

 

Buildings and improvements

 

 

428,269

 

 

416,241

 

Machinery and equipment

 

 

2,304,892

 

 

2,237,655

 

 

 

 

2,733,161

 

 

2,653,896

 

Less: Accumulated depreciation

 

 

(1,873,502)

 

 

(1,811,819)

 

 

 

 

859,659

 

 

842,077

 

Land

 

 

24,892

 

 

25,829

 

 

 

 

884,551

 

 

867,906

 

Other Assets:

 

 

 

 

 

 

 

Investments in affiliates

 

 

9,554

 

 

9,444

 

Goodwill

 

 

451,243

 

 

443,887

 

Intangible assets

 

 

94,745

 

 

95,460

 

Miscellaneous

 

 

50,478

 

 

51,053

 

 

 

 

606,020

 

 

599,844

 

Total Assets

 

$

3,283,694

 

$

3,137,823

 

 

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,

 

 

 

 

2018

 

 

2017

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Notes payable

 

$

8,839

 

$

4,336

 

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

 

 

61,505

 

 

61,833

 

Accounts payable and accrued liabilities

 

 

496,409

 

 

461,579

 

 

 

 

566,753

 

 

527,748

 

Long-Term Obligations, net of unamortized debt issuance costs

 

 

1,199,975

 

 

1,191,146

 

Deferred Liabilities and Other:

 

 

 

 

 

 

 

Deferred income taxes

 

 

20,578

 

 

20,995

 

Retirement and deferred compensation plans

 

 

84,930

 

 

80,278

 

Deferred and other non-current liabilities

 

 

6,682

 

 

5,608

 

Commitments and contingencies

 

 

 —

 

 

 

 

 

 

112,190

 

 

106,881

 

Stockholders’ Equity:

 

 

 

 

 

 

 

AptarGroup, Inc. stockholders’ equity

 

 

 

 

 

 

 

Common stock, $.01 par value, 199 million shares authorized, 67.1 and 66.7 million shares issued as of March 31, 2018 and December 31, 2017, respectively

 

 

671

 

 

667

 

Capital in excess of par value

 

 

638,223

 

 

609,471

 

Retained earnings

 

 

1,332,218

 

 

1,301,147

 

Accumulated other comprehensive (loss)

 

 

(228,669)

 

 

(253,302)

 

Less: Treasury stock at cost, 4.7 and 4.9 million shares as of March 31, 2018 and December 31, 2017, respectively

 

 

(337,976)

 

 

(346,245)

 

Total AptarGroup, Inc. Stockholders’ Equity

 

 

1,404,467

 

 

1,311,738

 

Noncontrolling interests in subsidiaries

 

 

309

 

 

310

 

Total Stockholders’ Equity

 

 

1,404,776

 

 

1,312,048

 

Total Liabilities and Stockholders’ Equity

 

$

3,283,694

 

$

3,137,823

 

 

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, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2017

 

$

1,301,147

 

$

(253,302)

 

$

667

 

$

(346,245)

 

$

609,471

 

$

310

 

$

1,312,048

 

Net income

 

 

59,300

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(12)

 

 

59,288

 

Adoption of accounting standards

 

 

2,937

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,937

 

Foreign currency translation adjustments

 

 

 —

 

 

22,924

 

 

 —

 

 

 —

 

 

 —

 

 

11

 

 

22,935

 

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

 

 

 —

 

 

1,356

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,356

 

Changes in treasury locks, net of tax

 

 

 —

 

 

 7

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 7

 

Changes in derivative gains/losses, net of tax

 

 

 —

 

 

346

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

346

 

Stock awards and option exercises

 

 

 —

 

 

 —

 

 

 5

 

 

12,174

 

 

30,212

 

 

 —

 

 

42,391

 

Cash dividends declared on common stock

 

 

(19,830)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(19,830)

 

Treasury stock purchased

 

 

 —

 

 

 —

 

 

 —

 

 

(3,905)

 

 

 —

 

 

 —

 

 

(3,905)

 

Common stock repurchased and retired

 

 

(11,336)

 

 

 —

 

 

(1)

 

 

 —

 

 

(1,460)

 

 

 —

 

 

(12,797)

 

Balance - March 31, 2018

 

$

1,332,218

 

$

(228,669)

 

$

671

 

$

(337,976)

 

$

638,223

 

$

309

 

$

1,404,776

 

 

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,

    

 

2018

    

 

2017

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net income

 

$

59,288

 

$

51,805

 

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

 

 

 

 

 

 

 

Depreciation

 

 

38,357

 

 

34,902

 

Amortization

 

 

2,818

 

 

2,429

 

Stock-based compensation

 

 

7,511

 

 

7,748

 

Provision for doubtful accounts

 

 

94

 

 

147

 

Deferred income taxes

 

 

(2,733)

 

 

(2,492)

 

Defined benefit plan expense

 

 

4,872

 

 

4,239

 

Equity in results of affiliates

 

 

65

 

 

48

 

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

 

 

 

 

 

 

 

Accounts and other receivables

 

 

(67,484)

 

 

(35,865)

 

Inventories

 

 

(18,575)

 

 

(7,913)

 

Prepaid and other current assets

 

 

129

 

 

(13,320)

 

Accounts payable and accrued liabilities

 

 

26,744

 

 

26,269

 

Income taxes payable

 

 

3,255

 

 

1,981

 

Retirement and deferred compensation plan liabilities

 

 

(5,381)

 

 

(24,069)

 

Other changes, net

 

 

2,059

 

 

(7,733)

 

Net Cash Provided by Operations

 

 

51,019

 

 

38,176

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Capital expenditures

 

 

(40,019)

 

 

(34,848)

 

Proceeds from sale of property and equipment

 

 

2,848

 

 

989

 

Insurance proceeds

 

 

10,631

 

 

 —

 

Acquisition of intangible assets

 

 

(124)

 

 

 —

 

Investment in unconsolidated affiliate

 

 

 —

 

 

(5,000)

 

Notes receivable, net

 

 

208

 

 

445

 

Net Cash Used by Investing Activities

 

 

(26,456)

 

 

(38,414)

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

8,564

 

 

 —

 

Repayments of notes payable

 

 

(3,956)

 

 

 —

 

Proceeds and repayments of short term credit facility, net

 

 

 —

 

 

(163,665)

 

Proceeds from long-term obligations

 

 

2,524

 

 

 —

 

Repayments of long-term obligations

 

 

(3,855)

 

 

(2,268)

 

Dividends paid

 

 

(19,830)

 

 

(19,937)

 

Proceeds from stock option exercises

 

 

34,880

 

 

18,705

 

Purchase of treasury stock

 

 

(3,905)

 

 

 —

 

Common stock repurchased and retired

 

 

(12,797)

 

 

(16,019)

 

Net Cash Provided (Used) by Financing Activities

 

 

1,625

 

 

(183,184)

 

Effect of Exchange Rate Changes on Cash

 

 

5,930

 

 

1,862

 

Net Increase (Decrease) in Cash and Equivalents and Restricted Cash

 

 

32,118

 

 

(181,560)

 

Cash and Equivalents and Restricted Cash at Beginning of Period

 

 

712,640

 

 

466,287

 

Cash and Equivalents and Restricted Cash at End of Period

 

$

744,758

 

$

284,727

 

 

Restricted cash included in the line item prepaid and other on the Condensed Consolidated Balance Sheets as shown below represents amounts recorded into escrow.  See details in Note 19 – Subsequent Events.

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

    

 

2018

    

 

2017

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

741,062

 

$

284,727

 

Restricted cash included in prepaid and other

 

 

3,696

 

 

 —

 

Total Cash and Equivalents and Restricted Cash shown in the Statement of Cash Flows

 

$

744,758

 

$

284,727

 

 

 

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 (the “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 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, 2017 but does not include all disclosures required by U.S. GAAP.  Accordingly, these 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, 2017.  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.  On January 1, 2018, we adopted this standard and all the related amendments (the “new revenue standard”) for all contracts.  This adoption was accounted for using the modified retrospective method.  We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the January 1, 2018 opening balance of retained earnings.  Comparative information for the prior period has not been restated and continues to be reported under the accounting standards in effect prior to January 1, 2018. 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

Balance at

    

 

 

    

 

Balance at

 

 

 

 

December 31, 2017

 

 

Adjustment

 

 

January 1, 2018

 

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

Inventories

 

$

337,216

 

$

(14,637)

 

$

322,579

 

Prepaid and other

 

 

109,791

 

 

13,984

 

 

123,775

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

461,579

 

 

(5,706)

 

 

455,873

 

Deferred income taxes

 

 

20,995

 

 

1,292

 

 

22,287

 

Deferred and other non-current liabilities

 

 

5,608

 

 

824

 

 

6,432

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

1,301,147

 

 

2,937

 

 

1,304,084

 

 

A majority of our sales revenue continues to be recognized when products are shipped from our manufacturing facilities.  For certain custom product and tooling sales where revenue was previously recognized when the products were shipped, we now recognize revenue over the time required to manufacture the product or build the tool in accordance with the new revenue standard.  We also have certain extended warranty contracts, which under the new standard are considered a separate performance obligation and are required to be deferred and recognized into revenue over the life of the agreement.

7


 

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated statements of income and balance sheets is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

For the Three Months Ended March 31, 2018

 

 

    

 

 

 

 

Balances

 

 

 

 

 

    

 

 

 

 

Without

 

 

Effect of

 

 

    

 

As

    

 

Adoption of

    

 

Change

 

 

 

 

Reported

 

 

ASC 606

 

 

Higher/(Lower)

 

Consolidated Statements of Income

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

Beauty + Home

 

$

378,173

 

$

376,868

 

$

(1,305)

 

Pharma

 

 

230,127

 

 

230,462

 

 

335

 

Food + Beverage

 

 

95,050

 

 

95,100

 

 

50

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

455,822

 

 

454,900

 

 

(922)

 

Provision for income taxes

 

 

21,929

 

 

21,925

 

 

(4)

 

Net income

 

 

59,288

 

 

59,294

 

 

 6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

March 31, 2018

 

 

    

 

 

 

 

Balances

 

 

 

 

 

    

 

 

 

 

Without

 

 

Effect of

 

 

    

 

As

    

 

Adoption of

    

 

Change

 

 

 

 

Reported

 

 

ASC 606

 

 

Higher/(Lower)

 

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

Accounts and notes receivable

 

$

586,592

 

$

600,576

 

$

13,984

 

Inventories

 

 

347,791

 

 

348,713

 

 

922

 

Prepaid and other

 

 

117,678

 

 

104,193

 

 

(13,485)

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

496,409

 

 

497,815

 

 

1,406

 

Deferred income taxes

 

 

20,578

 

 

20,574

 

 

(4)

 

Deferred and other non-current liabilities

 

 

6,682

 

 

6,695

 

 

13

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

1,332,218

 

 

1,332,224

 

 

 6

 

 

 

In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments within the statement of cash flows.  This guidance provides clarification for the following types of transactions: debt prepayment or extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, distributions received from equity method investees and beneficial interest in securitization transactions. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. However, early adoption was permitted and an entity that elects early adoption must adopt all of the amendments on a retrospective basis in the period of adoption. The Company adopted this standard in the fourth quarter of 2017.

In November 2016, the FASB issued guidance to address the diversity in the classification and presentation of changes in restricted cash on the statement of cash flows.  The amendments in this standard require that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  The new standard is effective for fiscal years and interim periods beginning after December 15, 2017.  The Company has adopted the requirements of this standard during the first quarter of 2018 and appropriate disclosures are included on the statement of cash flows.

In March 2017, the FASB issued guidance to disaggregate the current service cost component from the other components of net periodic benefit costs.  The service cost component should be presented within compensation costs while the other components should be presented outside of income from operations. The guidance also clarifies that only the service cost component is eligible for capitalization.  The new standard is effective for fiscal years and interim periods beginning after December 15, 2017.  The Company has adopted the requirements of this standard during the first quarter of 2018 and the prior periods were restated as follows:

8


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Original

 

 

 

 

Revised

 

 

    

Balance

    

Adjustment

    

Balance

 

Revised Condensed Consolidated Statements of Income

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2017

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

$

384,932

 

$

(248)

 

$

384,684

 

Selling, research & development and administrative

 

 

101,516

 

 

(234)

 

 

101,282

 

Total Operating Expenses

 

 

523,779

 

 

(482)

 

 

523,297

 

Operating Income

 

 

77,537

 

 

482

 

 

78,019

 

Miscellaneous, net

 

 

(77)

 

 

(482)

 

 

(559)

 

Total Other (Expense) Income

 

 

(8,057)

 

 

(482)

 

 

(8,539)

 

Income before Income Taxes

 

 

69,480

 

 

 —

 

 

69,480

 

 

In May 2017, the FASB issued clarification on applying the standards for stock compensation accounting.  The new standard provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting.  The new standard is effective for fiscal years and interim periods beginning after December 15, 2017.  The Company has adopted the requirements of this standard during the first quarter of 2018.

In August 2017, the FASB issued new guidance to improve the accounting for hedging activities.  The guidance changes the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the guidance makes certain targeted improvements to simplify the application of the hedge accounting guidance in current U.S. GAAP. The new standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years.  However, early application is permitted in any interim period after the issuance of this guidance.  The Company adopted this standard in the third quarter of 2017.  See details in Note 9 – Derivative Instruments and Hedging Activities.

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

RETIREMENT OF COMMON STOCK

 

During the first quarter of 2018, the Company repurchased 189 thousand shares of common stock, of which 144 thousand shares were immediately retired.  During the first quarter of 2017, the Company repurchased and immediately retired 210 thousand shares of common stock.  Common stock was reduced by the number of shares retired at $0.01 par value per share.  The Company allocates 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 temporary 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.

The Tax Cuts and Jobs Act (the “TCJA”) was enacted in the United States (“U.S.”) on December 22, 2017. The TCJA lowered the corporate tax rate from 35.0% to 21.0% and imposed a one-time transition tax on unremitted earnings as of the end of 2017, and featured many other tax law provisions.  New provisions for 2018 include, most notably, a tax on global intangible low-taxed income (“GILTI”) and the base erosion anti-abuse tax (“BEAT”).  The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the U.S. GAAP application of the TCJA.  SAB 118 provides us up to a year to finalize accounting for the impacts of the TCJA.

The Company estimated provisional tax amounts related to the transition tax and components of the revaluation of deferred tax assets and liabilities for the period ended December 31, 2017.  We recognized a net tax charge of approximately $24.7 million, comprised of a provisional charge of $31.6 million for the transition tax and a provisional benefit of $6.8 million related to the corporate rate change.  There have been no changes to those provisional amounts as of March 31, 2018.  The Company expects these amounts to be finalized in the second half of 2018 when the 2017 tax return is filed.  The Company has elected to account for the tax on GILTI as a period cost and not as a measure of deferred taxes in the current period.

9


 

All of the Company’s non-U.S. earnings are subject to U.S. taxation, either from the TCJA transition tax on accumulated non-U.S. earnings as of the end of 2017 or the GILTI provisions on non-U.S. earnings going forward.  The Company maintains its assertion that the cash and distributable reserves at its non-U.S. affiliates are indefinitely reinvested.  The Company will provide for the necessary withholding and local income taxes when management decides that an affiliate should make a distribution.  These decisions are made taking into consideration the financial requirements of the non-U.S. affiliates and the global cash management goals of the Company.   

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 5 - Income Taxes for more information.

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

During the second quarter of 2017, the Company determined that the impact of restricted stock unit (RSU) vesting was incorrectly presented in the Condensed Consolidated Statement of Cash Flows. The effect of correcting this error results in a reduction to Net Cash Provided by Operations with a corresponding increase to Net Cash (Used) Provided by Financing Activities. As this error represents a reclassification between two accounts within the Condensed Consolidated Statement of Cash Flows, the Condensed Consolidated Statements of Income, the Condensed Consolidated Balance Sheet and the Condensed Consolidated Statements of Changes in Equity are not impacted by this change. The Company determined the error is not material to previously issued financial statements but was significant enough to revise. Following is a summary of the previously issued financial statement line items impacted by this revision for all periods and statements included in this report:

 

<