10-Q 1 atr-20180630x10q.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 JUNE 30, 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

 

 

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 July 25, 2018

Common Stock, $.01 par value per share

 

62,183,164 shares

 

 

 

 

 


 

 

 

 

AptarGroup, Inc.

 

Form 10-Q

 

Quarter Ended June 30, 2018

 

INDEX

 

 

Part I. 

FINANCIAL INFORMATION

 

 

 

 

Item 1. 

Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Income – Three and Six Months Ended June 30, 2018 and 2017

1

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2018 and 2017

2

 

 

 

 

Condensed Consolidated Balance Sheets – June 30, 2018 and December 31, 2017

3

 

 

 

 

Condensed Consolidated Statements of Changes in Equity – Six Months Ended June 30, 2018 and 2017

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 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

28

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

42

 

 

 

Item 4. 

Controls and Procedures

42

 

 

 

Part II. 

OTHER INFORMATION

 

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

43

 

 

 

Item 6. 

Exhibits

44

 

 

 

 

Signature

45

 

 

 

 

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 June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

    

$

710,608

    

$

617,746

    

$

1,413,958

    

$

1,219,062

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

464,244

 

 

399,664

 

 

920,066

 

 

784,348

 

Selling, research & development and administrative

 

 

107,111

 

 

95,456

 

 

219,572

 

 

196,738

 

Depreciation and amortization

 

 

40,101

 

 

37,242

 

 

81,276

 

 

74,573

 

Restructuring initiatives

 

 

18,214

 

 

 —

 

 

24,150

 

 

 —

 

 

 

 

629,670

 

 

532,362

 

 

1,245,064

 

 

1,055,659

 

Operating Income

 

 

80,938

 

 

85,384

 

 

168,894

 

 

163,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Expense) Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(7,964)

 

 

(7,712)

 

 

(16,019)

 

 

(15,974)

 

Interest income

 

 

2,521

 

 

643

 

 

4,769

 

 

973

 

Equity in results of affiliates

 

 

(20)

 

 

(22)

 

 

(85)

 

 

(70)

 

Miscellaneous, net

 

 

(577)

 

 

1,275

 

 

(1,444)

 

 

716

 

 

 

 

(6,040)

 

 

(5,816)

 

 

(12,779)

 

 

(14,355)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

74,898

 

 

79,568

 

 

156,115

 

 

149,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

19,117

 

 

14,379

 

 

41,046

 

 

32,054

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

55,781

 

$

65,189

 

$

115,069

 

$

116,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (Income) Loss Attributable to Noncontrolling Interests

 

$

(6)

 

$

(15)

 

$

 6

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Attributable to AptarGroup, Inc.

 

$

55,775

 

$

65,174

 

$

115,075

 

$

116,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.89

 

$

1.04

 

$

1.85

 

$

1.87

 

Diluted

 

$

0.86

 

$

1.01

 

$

1.78

 

$

1.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

62,402

 

 

62,631

 

 

62,266

 

 

62,494

 

Diluted

 

 

64,850

 

 

64,828

 

 

64,640

 

 

64,519

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per Common Share

 

$

0.32

 

$

0.32

 

$

0.64

 

$

0.64

 

 

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

 

1


 

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

    

2018

 

2017

 

2018

    

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

55,781

 

$

65,189

    

$

115,069

 

$

116,994

 

Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(66,223)

 

 

28,416

 

 

(43,288)

 

 

51,602

 

Changes in treasury locks, net of tax

 

 

 7

 

 

 7

 

 

14

 

 

14

 

Loss on derivatives, net of tax

 

 

1,866

 

 

 —

 

 

2,212

 

 

 —

 

Defined benefit pension plan, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

92

 

 

69

 

 

188

 

 

136

 

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

 

 

1,251

 

 

827

 

 

2,511

 

 

1,639

 

Total defined benefit pension plan, net of tax

 

 

1,343

 

 

896

 

 

2,699

 

 

1,775

 

Total other comprehensive (loss) income

 

 

(63,007)

 

 

29,319

 

 

(38,363)

 

 

53,391

 

Comprehensive (Loss) Income

 

 

(7,226)

 

 

94,508

 

 

76,706

 

 

170,385

 

Comprehensive Loss (Income) Attributable to Noncontrolling Interests

 

 

10

 

 

(20)

 

 

11

 

 

(7)

 

Comprehensive (Loss) Income Attributable to AptarGroup, Inc.

 

$

(7,216)

 

$

94,488

 

$

76,717

 

$

170,378

 

 

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

 

2


 

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

In thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

June 30,

    

 

December 31,

 

 

 

 

2018

 

 

2017

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and equivalents

 

$

718,091

 

$

712,640

 

Accounts and notes receivable, less allowance for doubtful accounts of $2,886 in 2018 and $3,161 in 2017

 

 

583,496

 

 

510,426

 

Inventories

 

 

343,170

 

 

337,216

 

Prepaid and other

 

 

104,998

 

 

109,791

 

 

 

 

1,749,755

 

 

1,670,073

 

Property, Plant and Equipment:

 

 

 

 

 

 

 

Buildings and improvements

 

 

415,403

 

 

416,241

 

Machinery and equipment

 

 

2,247,733

 

 

2,237,655

 

 

 

 

2,663,136

 

 

2,653,896

 

Less: Accumulated depreciation

 

 

(1,819,229)

 

 

(1,811,819)

 

 

 

 

843,907

 

 

842,077

 

Land

 

 

23,629

 

 

25,829

 

 

 

 

867,536

 

 

867,906

 

Other Assets:

 

 

 

 

 

 

 

Investments in affiliates

 

 

19,241

 

 

9,444

 

Goodwill

 

 

440,227

 

 

443,887

 

Intangible assets

 

 

88,760

 

 

95,460

 

Miscellaneous

 

 

56,736

 

 

51,053

 

 

 

 

604,964

 

 

599,844

 

Total Assets

 

$

3,222,255

 

$

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

June 30,

    

 

December 31,

 

 

 

 

2018

 

 

2017

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Notes payable

 

$

6,592

 

$

4,336

 

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

 

 

65,170

 

 

61,833

 

Accounts payable and accrued liabilities

 

 

509,118

 

 

461,579

 

 

 

 

580,880

 

 

527,748

 

Long-Term Obligations, net of unamortized debt issuance costs

 

 

1,182,894

 

 

1,191,146

 

Deferred Liabilities and Other:

 

 

 

 

 

 

 

Deferred income taxes

 

 

19,586

 

 

20,995

 

Retirement and deferred compensation plans

 

 

84,741

 

 

80,278

 

Deferred and other non-current liabilities

 

 

6,642

 

 

5,608

 

Commitments and contingencies

 

 

 —

 

 

 

 

 

 

110,969

 

 

106,881

 

Stockholders’ Equity:

 

 

 

 

 

 

 

AptarGroup, Inc. stockholders’ equity

 

 

 

 

 

 

 

Common stock, $.01 par value, 199 million shares authorized, 66.8 and 66.7 million shares issued as of June 30, 2018 and December 31, 2017, respectively

 

 

668

 

 

667

 

Capital in excess of par value

 

 

646,449

 

 

609,471

 

Retained earnings

 

 

1,328,034

 

 

1,301,147

 

Accumulated other comprehensive (loss)

 

 

(291,660)

 

 

(253,302)

 

Less: Treasury stock at cost, 4.7 and 4.9 million shares as of June 30, 2018 and December 31, 2017, respectively

 

 

(336,278)

 

 

(346,245)

 

Total AptarGroup, Inc. Stockholders’ Equity

 

 

1,347,213

 

 

1,311,738

 

Noncontrolling interests in subsidiaries

 

 

299

 

 

310

 

Total Stockholders’ Equity

 

 

1,347,512

 

 

1,312,048

 

Total Liabilities and Stockholders’ Equity

 

$

3,222,255

 

$

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

 

 

116,994

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

116,994

 

Foreign currency translation adjustments

 

 

 —

 

 

51,595

 

 

 —

 

 

 —

 

 

 —

 

 

 7

 

 

51,602

 

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

 

 

 —

 

 

1,775

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,775

 

Changes in treasury locks, net of tax

 

 

 —

 

 

14

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

14

 

Stock awards and option exercises

 

 

 —

 

 

 —

 

 

10

 

 

19,914

 

 

52,279

 

 

 —

 

 

72,203

 

Cash dividends declared on common stock

 

 

(39,932)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(39,932)

 

Treasury stock purchased

 

 

 —

 

 

 —

 

 

 —

 

 

(26,728)

 

 

 —

 

 

 —

 

 

(26,728)

 

Common stock repurchased and retired

 

 

(36,173)

 

 

 —

 

 

(5)

 

 

 —

 

 

(4,816)

 

 

 —

 

 

(40,994)

 

Balance - June 30, 2017

 

$

1,238,123

 

$

(266,325)

 

$

665

 

$

(257,731)

 

$

594,145

 

$

299

 

$

1,309,176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2017

 

$

1,301,147

 

$

(253,302)

 

$

667

 

$

(346,245)

 

$

609,471

 

$

310

 

$

1,312,048

 

Net income

 

 

115,075

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(6)

 

 

115,069

 

Adoption of accounting standards

 

 

2,937

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,937

 

Foreign currency translation adjustments

 

 

 —

 

 

(43,283)

 

 

 —

 

 

 —

 

 

 —

 

 

(5)

 

 

(43,288)

 

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

 

 

 —

 

 

2,699

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,699

 

Changes in treasury locks, net of tax

 

 

 —

 

 

14

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

14

 

Changes in derivative gains/losses, net of tax

 

 

 —

 

 

2,212

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,212

 

Stock awards and option exercises

 

 

 —

 

 

 —

 

 

 7

 

 

13,872

 

 

43,444

 

 

 —

 

 

57,323

 

Cash dividends declared on common stock

 

 

(39,810)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(39,810)

 

Treasury stock purchased

 

 

 —

 

 

 —

 

 

 —

 

 

(3,905)

 

 

 —

 

 

 —

 

 

(3,905)

 

Common stock repurchased and retired

 

 

(51,315)

 

 

 —

 

 

(6)

 

 

 —

 

 

(6,466)

 

 

 —

 

 

(57,787)

 

Balance - June 30, 2018

 

$

1,328,034

 

$

(291,660)

 

$

668

 

$

(336,278)

 

$

646,449

 

$

299

 

$

1,347,512

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

    

 

2018

    

 

2017

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net income

 

$

115,069

 

$

116,994

 

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

 

 

 

 

 

 

 

Depreciation

 

 

75,703

 

 

69,638

 

Amortization

 

 

5,573

 

 

4,935

 

Stock-based compensation

 

 

10,903

 

 

11,719

 

Provision for doubtful accounts

 

 

196

 

 

49

 

Gain on disposition of fixed assets

 

 

(1,036)

 

 

(164)

 

Deferred income taxes

 

 

(4,027)

 

 

1,091

 

Defined benefit plan expense

 

 

9,688

 

 

8,547

 

Equity in results of affiliates

 

 

85

 

 

70

 

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

 

 

 

 

 

 

 

Accounts and other receivables

 

 

(92,388)

 

 

(45,760)

 

Inventories

 

 

(30,787)

 

 

(5,971)

 

Prepaid and other current assets

 

 

4,038

 

 

(10,602)

 

Accounts payable and accrued liabilities

 

 

61,727

 

 

29,147

 

Income taxes payable

 

 

10,541

 

 

(2,150)

 

Retirement and deferred compensation plan liabilities

 

 

(3,356)

 

 

(22,331)

 

Other changes, net

 

 

(7,420)

 

 

(6,290)

 

Net Cash Provided by Operations

 

 

154,509

 

 

148,922

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Capital expenditures

 

 

(91,753)

 

 

(66,705)

 

Proceeds from sale of property and equipment

 

 

3,961

 

 

978

 

Insurance proceeds

 

 

10,631

 

 

 —

 

Acquisition of business, net of cash acquired

 

 

(3,510)

 

 

 —

 

Acquisition of intangible assets

 

 

(124)

 

 

 —

 

Investment in unconsolidated affiliate

 

 

(10,000)

 

 

(5,000)

 

Notes receivable, net

 

 

109

 

 

396

 

Net Cash Used by Investing Activities

 

 

(90,686)

 

 

(70,331)

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

8,815

 

 

 —

 

Repayments of notes payable

 

 

(5,256)

 

 

 —

 

Proceeds and repayments of short term credit facility, net

 

 

 —

 

 

(167,014)

 

Proceeds from long-term obligations

 

 

4,617

 

 

2,535

 

Repayments of long-term obligations

 

 

(5,403)

 

 

(4,727)

 

Dividends paid

 

 

(39,810)

 

 

(39,932)

 

Proceeds from stock option exercises

 

 

46,420

 

 

60,484

 

Purchase of treasury stock

 

 

(3,905)

 

 

(26,728)

 

Common stock repurchased and retired

 

 

(57,787)

 

 

(40,994)

 

Net Cash Used by Financing Activities

 

 

(52,309)

 

 

(216,376)

 

Effect of Exchange Rate Changes on Cash

 

 

(6,063)

 

 

8,413

 

Net Increase (Decrease) in Cash and Equivalents

 

 

5,451

 

 

(129,372)

 

Cash and Equivalents at Beginning of Period

 

 

712,640

 

 

466,287

 

Cash and Equivalents at End of Period

 

$

718,091

 

$

336,915

 

 

 

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. Certain previously reported amounts have been reclassified to conform to the current period presentation.

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.

During the quarter ended June 30, 2018, primarily based on published estimates, which indicate that Argentina's three-year cumulative inflation rate has exceeded 100%, we concluded that Argentina has become a highly inflationary economy. Beginning July 1, 2018, we expect to apply highly inflationary accounting for our Argentinian subsidiaries. We will change the functional currency from the Argentinian peso to the U.S. dollar. Local currency monetary assets and liabilities will be remeasured into U.S. dollars using exchange rates as of the latest balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in net earnings. Our Argentinian operations contributed less than 2.0% of consolidated net revenues in the six months ended June 30, 2018.

  

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 periods have 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

 

 

7


 

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.

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 June 30, 2018

 

 

    

 

 

 

 

Balances

 

 

 

 

 

    

 

 

 

 

Without

 

 

Effect of

 

 

    

 

As

    

 

Adoption of

    

 

Change

 

 

 

 

Reported

 

 

ASC 606

 

 

Higher/(Lower)

 

Consolidated Statements of Income

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

Beauty + Home

 

$

368,536

 

$

370,267

 

$

(1,731)

 

Pharma

 

 

241,209

 

 

241,311

 

 

(102)

 

Food + Beverage

 

 

100,863

 

 

100,859

 

 

 4

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of depreciation and amortization)

 

 

464,244

 

 

465,343

 

 

(1,099)

 

Provision for income taxes

 

 

19,117

 

 

19,347