Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 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 AptarGroup, Inc. Delaware 36-3853103 (State of Incorporation) (I.R.S. Employer Identification No.) 265 EXCHANGE DRIVE ...

AptarGroup, Inc. (NYSE:ATR) Q4 2022 Earnings Conference Call February 17, 2023 9:00 AM ET Company Participants Mary Skafidas - SVP, IR & Communications Stephan Tanda - President & CEO Bob Kuhn - EVP & CFO Conference Call Participants Matthew Krueger - Baird George Staphos - Bank of America Daniel Rizzo - Jefferies Kyle White - Deutsche Bank Gabe Hajde - Wells Fargo Securities Operator Ladies and gentlemen, thank you for standing by. Welcome to Aptar's 2022 Fourth Quarter Conference Call. At this time all pa ...

Q4 2022 Review February 17, 2023 8:00 AM CT Speakers: Stephan Tanda, President and CEO; Bob Kuhn, Executive Vice President and CFO Forward Looking Statements & Non-GAAP Financial Measures This presentation includes forward-looking statements. Forward-looking statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are based on management's beliefs and assumptions in light of information currently availa ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Aptar leads in drug delivery and consumer product dispensing, operating through three segments with a 2023 realignment, driven by organic growth and operational excellence - Aptar is a **global leader** in designing and manufacturing a wide range of **drug delivery**, **consumer product dispensing**, and **active material science solutions** for markets including pharmaceutical, beauty, personal care, home care, food, and beverage[7](index=7&type=chunk) - The company has approximately **13,500 employees** in **20 countries** and serves around **5,000 customers**, with no single customer accounting for more than **5% of 2022 Net Sales**[7](index=7&type=chunk)[8](index=8&type=chunk) - Effective **January 1, 2023**, Aptar realigned its reporting segments from Pharma, Beauty + Home, and Food + Beverage to **Aptar Pharma, Aptar Beauty, and Aptar Closures** to enhance market focus and operational efficiency[19](index=19&type=chunk) - The company's growth strategy emphasizes **organic growth**, **talent and leadership**, **excellence in core functions** (innovate, produce, sell), **fixed cost management**, and **strategic acquisitions and partnerships**[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk) [Description of Reporting Segments](index=5&type=section&id=Description%20of%20Reporting%20Segments) Aptar's 2022 operations were structured into Pharma, Beauty + Home, and Food + Beverage segments, with Pharma leading in adjusted EBITDA and Beauty + Home in net sales 2022 Segment Financial Contribution | Segment | % of Net Sales | % of Adjusted EBITDA (excl. corporate costs) | % of Total Assets | | :--- | :--- | :--- | :--- | | Pharma | 41% | 65% | 45% | | Beauty + Home | 43% | 24% | 39% | | Food + Beverage | 16% | 11% | 13% | - The Pharma segment is a **leading supplier** of **nasal drug delivery pumps**, **metered dose inhaler valves**, and **elastomeric components for injectables**; its markets include **Prescription Drug (41%)**, **Consumer Health Care (23%)**, **Injectables (21%)**, and **Active Material Science Solutions (14%)**[22](index=22&type=chunk)[23](index=23&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - The Beauty + Home segment sells **pumps, closures, and aerosol valves** to the **beauty (51%)**, **personal care (42%)**, and **home care (7%)** markets[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The Food + Beverage segment primarily sells **dispensing closures** and **elastomeric flow-control components** to the **food (75%)** and **beverage (25%)** markets[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [General Business Information](index=8&type=section&id=General%20Business%20Information) Aptar emphasizes R&D, intellectual property, and diverse global manufacturing, with **53% of 2022 sales from Europe**, managing **13,500 employees** and committed to sustainability - The company emphasizes **R&D** to develop **new, sustainable, and innovative packaging and drug delivery solutions**, and it protects its innovations through **patents and trademarks**[36](index=36&type=chunk)[37](index=37&type=chunk) - Manufacturing is **geographically diverse**, with the **majority of production located outside the U.S**; **Europe** is the largest region, accounting for approximately **53% of consolidated sales in 2022**[39](index=39&type=chunk)[41](index=41&type=chunk) - As of **December 31, 2022**, Aptar had approximately **13,500 full-time employees**, with **49.3% covered by collective bargaining agreements**, primarily in Europe and Latin America[45](index=45&type=chunk) - Aptar is committed to **sustainability**, with **science-based targets** to reduce **Scope 1, 2, and 3 emissions** and a goal to source **100% renewable electricity by 2030**; the company has received **high ratings from CDP and EcoVadis** for its environmental performance[54](index=54&type=chunk)[58](index=58&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) Aptar faces diverse risks including economic downturns, geopolitical instability, cybersecurity threats, supply chain disruptions, foreign currency fluctuations, and evolving environmental regulations - **Operational Risks:** The company is exposed to risks from **deteriorating economic conditions**, **geopolitical conflicts** (e.g., **Russia's invasion of Ukraine** leading to **higher energy costs**), **global cybersecurity threats**, and **strong global competition**[73](index=73&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk)[79](index=79&type=chunk) - **Supply Chain and Cost Risks:** Risks include **higher raw material costs** (**plastic resin, rubber, metal**), potential **supply disruptions from single-sourced materials**, and **labor cost inflation**[85](index=85&type=chunk)[87](index=87&type=chunk)[78](index=78&type=chunk) - **Financial and Regulatory Risks:** The company faces risks from **foreign currency translation**, potential **impairment** of its **$945.6 million in goodwill**, **changes in tax laws**, and **evolving government regulations** on **environmental matters** like recycling and material inputs[90](index=90&type=chunk)[91](index=91&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk) - **Pandemic and Market Risks:** The **COVID-19 pandemic** has previously affected **sales** and continues to pose **uncertainty**; **Consolidation of the customer base** could also lead to **pricing pressures**[82](index=82&type=chunk)[83](index=83&type=chunk) [Properties](index=18&type=section&id=Item%202.%20Properties) As of **December 31, 2022**, Aptar operates **49 manufacturing facilities globally**, with **25 in Europe** and its corporate headquarters in Crystal Lake, Illinois Manufacturing Facilities by Region (as of Dec 31, 2022) | Geographic Region/Country | Number of Facilities | | :--- | :--- | | France | 12 | | Germany | 6 | | Rest of Europe | 7 | | North America | 9 | | Latin America | 7 | | China | 5 | | Other Asia | 3 | | **Total** | **49** | [Legal Proceedings](index=18&type=section&id=Item%203.%20Legal%20Proceedings) Aptar is involved in routine legal proceedings, which management does not expect to materially impact its financial position, operations, or cash flows - Aptar is involved in a number of **lawsuits and claims** arising in the **ordinary course of business**, but management does not expect them to have a **material adverse impact**[110](index=110&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=19&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Aptar's common stock trades on the NYSE as "ATR", demonstrating a **29-year dividend growth history** and active share repurchases, with **$108.3 million** remaining in its authorization - The company has paid an **increased annual cash dividend** for **29 consecutive years**, with **$99.5 million** paid to stockholders in 2022[117](index=117&type=chunk) - A **share repurchase program** authorized up to **$350 million** is in place with **no expiration date**; as of **year-end 2022**, **$108.3 million remained available** for repurchases[119](index=119&type=chunk) Q4 2022 Share Repurchases | Period | Total Shares Purchased | Average Price Paid Per Share | Total Cost (approx.) | | :--- | :--- | :--- | :--- | | Q4 2022 | 191,000 | $103.65 | $19.8 million | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=21&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, Aptar achieved **3% reported sales growth** to **$3.32 billion** and **9% core sales growth**, with **adjusted EBITDA up 2%** to **$617 million**, while strengthening its financial position with **$478.6 million cash from operations** 2022 Financial Highlights vs. 2021 | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $3.32 B | $3.23 B | +3% | | Core Sales | - | - | +9% | | Net Income | $239 M | $244 M | -2% | | Diluted EPS | $3.59 | $3.61 | -1% | | Adjusted EBITDA | $617 M | $607 M | +2% | - The **9% core sales growth** was driven approximately **half by volume growth**, particularly in the Pharma segment, and **half by price adjustments** to pass through **inflationary costs**[127](index=127&type=chunk)[134](index=134&type=chunk) - The **effective tax rate increased to 28.4% in 2022 from 24.3% in 2021**, primarily due to **lower tax benefits from share-based compensation** and **increased taxes from a legal entity reorganization**[146](index=146&type=chunk) - For the **first quarter of 2023**, the company expects **adjusted EPS** to be in the range of **$0.85 to $0.93**[200](index=200&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) For **2022**, Aptar's reported net sales grew **3% to $3.32 billion** with **9% core sales growth**, while operating income increased **9% to $379.3 million**, despite a slight rise in cost of sales Consolidated Statement of Income Summary (2022 vs 2021) | Line Item | 2022 (in millions) | 2021 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $3,322.2 | $3,227.2 | +3% | | Cost of Sales | $2,158.4 | $2,070.5 | +4% | | Operating Income | $379.3 | $347.3 | +9% | | Net Income | $239.6 | $243.6 | -2% | Net Sales Growth Breakdown by Component (2022) | Component | Pharma | Beauty + Home | Food + Beverage | Total | | :--- | :--- | :--- | :--- | :--- | | Core Sales Growth | 13% | 7% | 5% | 9% | | Acquisitions | 1% | 0% | 0% | 0% | | Currency Effects | -8% | -7% | -2% | -6% | | **Total Reported Growth** | **6%** | **0%** | **3%** | **3%** | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Aptar maintains a strong financial position with **$141.7 million cash** at year-end **2022**, significantly improved **cash from operations to $478.6 million**, and a reduced **Net Debt to Net Capital ratio of 33.3%** Key Liquidity Metrics (2022 vs 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operations | $478.6 M | $363.4 M | | Free Cash Flow | $196.0 M | $57.5 M | | Net Debt to Net Capital | 33.3% | 35.1% | - In **March 2022**, the company issued **$400 million of 3.60% Senior Notes due 2032**[174](index=174&type=chunk)[298](index=298&type=chunk) - The company has a **$600 million multi-currency revolving credit facility maturing in June 2026**, with **no borrowings outstanding** as of **December 31, 2022**[176](index=176&type=chunk)[295](index=295&type=chunk) - **Capital investments for 2023** are expected to be in the range of **$260 million to $280 million**[173](index=173&type=chunk) [Critical Accounting Estimates](index=31&type=section&id=Critical%20Accounting%20Estimates) Management's critical accounting estimates involve significant judgment for **goodwill impairment ($945.6 million)**, income taxes, business acquisition valuations, and pension benefit obligations, which are sensitive to actuarial assumptions - **Goodwill Impairment:** The company has **$945.6 million in goodwill**; it performed a **qualitative assessment ("step zero")** and concluded that **no impairment was necessary for 2022**[183](index=183&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk) - **Income Taxes:** The calculation of tax liabilities involves **significant judgment** regarding **uncertain tax positions** and the realization of **deferred tax assets ($114.8 million net of valuation allowance)**[187](index=187&type=chunk)[188](index=188&type=chunk) - **Acquisitions:** The allocation of purchase price for acquisitions like **Metaphase, Voluntis, and Hengyu** requires **significant estimates** for the **fair value of intangible assets** such as technology and customer relationships[189](index=189&type=chunk)[190](index=190&type=chunk) - **Pension Benefits:** Valuation of pension obligations is **sensitive to changes in actuarial assumptions**; a **1% decrease in the discount rate** would **increase the Projected Benefit Obligation (PBO) by an estimated $43.7 million**[191](index=191&type=chunk)[194](index=194&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Aptar's primary market risk is foreign currency exchange rate fluctuations, mainly the euro, which it mitigates using forward contracts and a **$203 million** cross-currency interest rate swap - The company's **primary market risk** is **foreign exchange exposure**, with the **euro** being the **most significant currency**; a **strengthening U.S. dollar** has a **dilutive effect on financial results**[205](index=205&type=chunk) - As of **December 31, 2022**, the company held **foreign currency forward exchange contracts** with an **aggregate notional amount of $52.2 million** to **hedge transaction exposures**[345](index=345&type=chunk) - In **July 2022**, Aptar entered into a **seven-year USD/EUR cross-currency interest rate swap**, effectively **converting $203 million of 3.60% fixed USD debt into €200 million of 2.5224% fixed EUR debt** to **hedge its net investment in euro-denominated assets**[207](index=207&type=chunk)[344](index=344&type=chunk) [Financial Statements and Supplementary Data](index=37&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The **December 31, 2022**, consolidated financial statements report **$3.32 billion in net sales**, **$239.6 million net income**, **$4.20 billion total assets**, and an unqualified audit opinion from PricewaterhouseCoopers LLP Consolidated Financial Highlights (Year Ended Dec 31, 2022) | Metric | Amount (in millions) | | :--- | :--- | | **Income Statement:** | | | Net Sales | $3,322.2 | | Operating Income | $379.3 | | Net Income | $239.6 | | **Balance Sheet:** | | | Total Assets | $4,203.5 | | Total Liabilities | $2,135.3 | | Total Stockholders' Equity | $2,068.2 | | **Cash Flow Statement:** | | | Net Cash from Operations | $478.6 | | Net Cash Used by Investing | ($295.6) | | Net Cash Used by Financing | ($162.1) | [Notes to Consolidated Financial Statements](index=44&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, revenue recognition, debt structure, retirement plans, derivative instruments, stock-based compensation, segment information, and recent acquisitions like Metaphase, Voluntis, and Hengyu - **Note 1 (Accounting Policies):** Outlines the **basis of presentation**, including the **segment structure**, impact of COVID-19, and **critical accounting estimates for goodwill, taxes, and pensions**[220](index=220&type=chunk)[225](index=225&type=chunk) - **Note 7 (Debt):** Details the company's **debt structure**, including a **$600 million revolving credit facility (undrawn at year-end)** and **$1.17 billion in long-term obligations**; the company was in **compliance with all financial covenants**[295](index=295&type=chunk)[300](index=300&type=chunk)[303](index=303&type=chunk) - **Note 18 (Segment Information):** Provides a **breakdown of sales, adjusted EBITDA, assets, and capital expenditures** for the **Pharma, Beauty + Home, and Food + Beverage segments for 2020-2022**[378](index=378&type=chunk) - **Note 19 (Acquisitions):** Details the **2022 acquisition of Metaphase for ~$5.1 million** and the **2021 acquisitions of Voluntis and Hengyu**, including **purchase price allocation** and **goodwill recorded**[386](index=386&type=chunk)[387](index=387&type=chunk)[389](index=389&type=chunk) [Controls and Procedures](index=83&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of **December 31, 2022**, management, including the CEO and CFO, concluded that Aptar's disclosure controls and internal control over financial reporting were effective, a finding affirmed by PricewaterhouseCoopers LLP - Based on an evaluation as of **December 31, 2022**, the **CEO and CFO** concluded that the company's **disclosure controls and procedures were effective**[424](index=424&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of **December 31, 2022**, based on the **COSO framework**[425](index=425&type=chunk) - **No material changes** to the **internal control over financial reporting** occurred during the **fourth quarter of 2022**[427](index=427&type=chunk) Part III [Directors, Executive Officers, Compensation, and Governance](index=84&type=section&id=Items%2010-14) Information on directors, executive officers, compensation, and governance is incorporated by reference from the company's definitive Proxy Statement for the **May 3, 2023**, Annual Meeting of Stockholders - Information for **Items 10 through 14** is **incorporated by reference** from the **2023 Proxy Statement**[430](index=430&type=chunk)[432](index=432&type=chunk)[433](index=433&type=chunk)[434](index=434&type=chunk)[435](index=435&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=85&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides a comprehensive list of financial statements, schedules, and exhibits, including the independent auditor's report and Schedule II – Valuation and Qualifying Accounts, filed with the Form 10-K - This section contains the list of all **financial statements, schedules, and exhibits** filed with the **Form 10-K**[436](index=436&type=chunk) - **Schedule II – Valuation and Qualifying Accounts** provides a **roll-forward** of the **allowance for expected credit losses (CECL)** and the **deferred tax valuation allowance for 2020, 2021, and 2022**[447](index=447&type=chunk)

AptarGroup, Inc. (NYSE:ATR) Q3 2022 Earnings Conference Call October 28, 2022 9:00 AM ET Company Participants Mary Skafidas - SVP, IR & Communications Stephan Tanda - President & CEO Bob Kuhn - EVP & CFO Conference Call Participants George Staphos - Bank of America Securities Kyle White - Deutsche Bank Adam Josephson - KeyBanc Capital Markets Ghansham Panjabi - Robert W. Baird Mark Wilde - BMO Capital Markets Angel Castillo - Morgan Stanley Gabrial Hajde - Wells Fargo Securities Operator Ladies and gentleme ...

Financial Performance & Capital Allocation - Aptar reported a **4%** increase in sales and a **10%** increase in core sales for the second quarter of 2022[23] - Aptar's capital expenditures for the first half of 2022 were approximately **$150 million**, primarily in the Pharma segment[20] - The company returned over **$100 million** to shareholders through dividends and share repurchases in the first half of 2022[20] - Year-to-date 2022 adjusted EPS was **$2.00**, compared to **$2.50** in 2021, impacted by a higher effective tax rate[47] Segment Performance (Q2 2022) - Aptar Pharma achieved **12%** core sales growth, driven by increased volumes across all end markets[57] - Aptar Beauty + Home achieved **10%** core sales growth[61] - Aptar Food + Beverage achieved **8%** core sales growth[66] Strategic Priorities & Sustainability - Aptar deployed over **$3 billion** since 2017, balanced across investing in the business, acquisitions, dividends, and share repurchases[20] - Aptar's 2021 Corporate Sustainability Report was released on June 22nd[13] - Aptar is targeting **4-7%** sales growth and **20-22%** EBITDA margin by 2025[72] - Aptar has over **5,000** active patents[7]

Financial Data and Key Metrics Changes - The company reported a 4% increase in sales, with a solid core growth of 10% when adjusting for currency effects [17][24] - Adjusted earnings per share were $0.96, with adjusted EBITDA of $160 million, reflecting ongoing inflation and supply chain disruptions [17][18] - Year-to-date cash flow from operations was $177 million, and free cash flow was $42 million, slightly ahead of prior year levels [23] Business Line Data and Key Metrics Changes - **Pharma Segment**: Core sales increased by 12%, driven by strong demand and price adjustments related to inflation [19][20] - **Beauty + Home Segment**: Core sales grew by 10%, with a significant increase in prestige fragrance and facial skin care [20][21] - **Food & Beverage Segment**: Core sales grew by 8%, primarily driven by pricing initiatives, although margins were impacted by softer food demand [22] Market Data and Key Metrics Changes - Europe saw a 15% increase in core sales, with strong performance across all segments [44] - The company noted a recovery in demand for beauty products as consumers returned to travel and social activities [40] Company Strategy and Development Direction - The company is focused on capital allocation, having deployed over $3 billion in the past 5.5 years across investments, acquisitions, and shareholder returns [11] - The company is investing in capacity in its pharma and beauty segments to align with customer growth as markets recover [7][28] - The company aims to maintain a strong balance sheet to weather economic uncertainties and selectively invest in growth opportunities [26][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the prescription drug and consumer healthcare markets, supported by a strong order book [27][28] - The company anticipates continued challenges from inflation and supply chain issues, particularly in the US [24][39] - Management highlighted the importance of innovation and R&D in maintaining competitive advantage and driving future growth [13][28] Other Important Information - The company is committed to sustainability and has made significant progress in its ESG initiatives [12][13] - A new state-of-the-art facility in France is expected to enhance operational efficiency and sustainability [82][83] Q&A Session Summary Question: Start-up costs in Pharma and operating leverage in Food and Beverage - Management indicated that start-up costs in the Pharma segment would be around a couple of million dollars each quarter as capacity ramps up [33] - In Food and Beverage, lower volumes have led to decreased efficiencies, impacting margins despite revenue growth [34] Question: European activity and energy preparation - Management noted strong demand in Europe, particularly in pharma and beauty, but acknowledged significant inflation challenges, especially related to energy costs [39][41] Question: Onetime payments and price/cost recovery - A onetime payment of about $0.05 is included in the third quarter guidance, with ongoing efforts to recover prior year's cost increases [48][49] Question: Labor tightness in the US - Management reported that labor tightness has improved slightly but remains a challenge, impacting manufacturing efficiency and sales opportunities [72] Question: Pharma growth cadence and margin progression - Management is comfortable with a 6% to 10% growth range for the Pharma segment, with strong growth expected across all divisions [75][76] Question: Drug grading facility in France - A new facility is set to open in spring next year, consolidating operations to improve efficiency and sustainability [82][83] Question: Nasally delivered vaccines - Management acknowledged interest in nasally delivered vaccines but noted that such developments are in early clinical stages and take time to commercialize [85]