AptarGroup, Inc. (NYSE:ATR) Q3 2020 Earnings Conference Call October 30, 2020 9:00 AM ET Company Participants Matt DellaMaria – Senior Vice President, Investor Relations and Communications Stephan Tanda – President and Chief Executive Officer Bob Kuhn – Executive Vice President, Chief Financial Officer and Secretary Conference Call Participants John Kreger – William Blair Ghansham Panjabi – Baird Mark Wilde – BMO Capital Markets Neel Kumar – Morgan Stanley Adam Josephson – KeyBanc Salvator Tiano – Seaport G ...

Part I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) AptarGroup's unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2020 and 2019, are presented, detailing income, balance sheets, and cash flows [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q3 2020 net sales increased to **$759.2 million** and net income to **$63.7 million**, while nine-month net sales remained flat at **$2.18 billion** with a decrease in net income to **$160.8 million** Key Income Statement Data (in thousands, except per share amounts) | Metric | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $759,153 | $701,278 | $2,180,011 | $2,188,399 | | **Operating Income** | $99,037 | $90,245 | $257,975 | $297,203 | | **Net Income Attributable to AptarGroup, Inc.** | $63,716 | $56,750 | $160,808 | $193,669 | | **Diluted EPS** | $0.95 | $0.85 | $2.42 | $2.93 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2020, total assets increased to **$3.86 billion**, total liabilities rose to **$2.10 billion**, and total stockholders' equity grew to **$1.76 billion** compared to year-end 2019 Balance Sheet Summary (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $1,327,196 | $1,291,241 | | **Goodwill** | $878,015 | $763,461 | | **Total Assets** | **$3,861,749** | **$3,562,119** | | **Total Current Liabilities** | $787,121 | $683,275 | | **Long-Term Obligations** | $1,039,935 | $1,085,453 | | **Total Liabilities** | **$2,101,794** | **$1,990,167** | | **Total Stockholders' Equity** | **$1,759,955** | **$1,572,252** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2020, net cash from operations was **$381.4 million**, while investing activities used **$377.9 million** due to acquisitions, and financing activities used **$26.7 million** Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | **Net Cash Provided by Operations** | $381,427 | $380,381 | | **Net Cash Used by Investing Activities** | ($377,892) | ($223,998) | | **Net Cash Used by Financing Activities** | ($26,734) | ($146,158) | | **Net (Decrease) Increase in Cash** | ($15,594) | $3,754 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details accounting policies and financial results, including revenue recognition, goodwill, debt, leases, acquisitions, segment performance, and restructuring, alongside the impact of CECL adoption and COVID-19 - The company adopted ASU 2016-13 (CECL) on January 1, 2020, resulting in a **$1.4 million** cumulative adjustment to opening retained earnings[28](index=28&type=chunk) - The COVID-19 pandemic has impacted certain markets, operations, and financial results, including an overall reduction in net sales in those markets. However, no impairments were recorded as of September 30, 2020[26](index=26&type=chunk) Q3 2020 Revenue by Segment (in thousands) | Segment | Europe | Domestic | Latin America | Asia | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Beauty + Home | $165,701 | $109,175 | $37,921 | $24,434 | $337,231 | | Pharma | $206,376 | $92,932 | $4,846 | $11,604 | $315,758 | | Food + Beverage | $29,688 | $60,439 | $6,668 | $9,369 | $106,164 | | **Total** | **$401,765** | **$262,546** | **$49,435** | **$45,407** | **$759,153** | - On April 1, 2020, the company acquired Fusion Packaging, Inc. for approximately **$163.8 million**, adding **$99.6 million** to goodwill in the Beauty + Home segment[125](index=125&type=chunk)[133](index=133&type=chunk) - The company's business transformation plan, initiated in late 2017, has incurred cumulative expenses of **$102.1 million** as of September 30, 2020, out of an estimated total of **$125 million**[145](index=145&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 and nine-month 2020 financial results, noting an **8% increase** in Q3 net sales driven by acquisitions and Pharma, while addressing COVID-19 impacts on other segments and providing a Q4 earnings outlook [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Q3 2020 net sales increased **8%** to **$759.2 million**, driven by **17%** reported growth in Pharma, while Beauty + Home core sales declined **5%** due to COVID-19, and operating income rose to **$99.0 million** Q3 2020 Net Sales Growth vs. Q3 2019 | Segment | Core Sales Growth | Acquisitions | Currency Effects | Total Reported Growth | | :--- | :--- | :--- | :--- | :--- | | **Beauty + Home** | (5)% | 7% | 1% | 3% | | **Pharma** | 11% | 2% | 4% | 17% | | **Food + Beverage** | 2% | —% | —% | 2% | | **Total** | **2%** | **4%** | **2%** | **8%** | - The Pharma segment's core sales grew **11%** in Q3, driven by a **27%** increase in injectables and a **56%** increase in active packaging, partly due to large tooling projects and anticipation of COVID-19 vaccines[182](index=182&type=chunk)[183](index=183&type=chunk) - The Beauty + Home segment's core sales declined **5%** in Q3, with beauty market sales down **21%** due to reduced travel retail, partially offset by a **12%** increase in personal care and **6%** in home care sales[176](index=176&type=chunk)[177](index=177&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2020, the company maintained **$231.4 million** in cash and **$1.2 billion** in total debt, with a Net Debt to Net Capital ratio of **35.6%**, while suspending share repurchases to preserve liquidity amid COVID-19 - To preserve liquidity amid the COVID-19 pandemic, the company has temporarily suspended its share repurchase program and discretionary contributions to defined benefit plans[211](index=211&type=chunk) Key Liquidity Metrics | Metric | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Cash and Equivalents** | $226.5 million | $242.0 million | | **Total Debt** | $1.20 billion | $1.20 billion | | **Net Debt to Net Capital** | 35.6% | 37.8% | - The company has the ability to borrow an additional **$938.1 million** under its credit facility before exceeding the maximum consolidated leverage ratio covenant of **3.50 to 1.00**[217](index=217&type=chunk) [Outlook](index=49&type=section&id=Outlook) Management anticipates continued core growth in Q4 2020, driven by rising demand in markets like Pharma, and projects adjusted earnings per share in the range of **$0.84 to $0.92** - The company projects adjusted earnings per share for Q4 2020 to be in the range of **$0.84 to $0.92**, based on an effective tax rate of **27% to 29%**[228](index=228&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risk primarily from foreign currency exchange rate fluctuations, particularly the euro, and manages these exposures using forward exchange contracts and a cross-currency swap - The company's primary foreign exchange exposure is to the euro, but also includes the Chinese yuan, Brazilian real, Mexican peso, and Swiss franc[233](index=233&type=chunk) - To mitigate currency and interest rate risk on a **$280 million** term loan, the company utilizes a EUR/USD cross-currency swap, which had a fair value liability of **$3.2 million** as of September 30, 2020[234](index=234&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with an ERP system implementation modifying the control environment, while COVID-19 remote work had no material impact - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2020[235](index=235&type=chunk) - Remote work arrangements implemented due to the COVID-19 pandemic have not materially affected the company's internal control over financial reporting[236](index=236&type=chunk) Part II. OTHER INFORMATION [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) This section supplements prior risk factors, emphasizing the ongoing adverse effects of the COVID-19 pandemic, which has negatively impacted sales and poses risks of further business disruption and reduced customer demand - The COVID-19 pandemic is highlighted as a significant risk factor, having adversely affected sales in the travel and retail beauty business and on-the-go beverage markets during the first nine months of 2020[238](index=238&type=chunk) - Potential future impacts from the pandemic include further decreases in customer demand, business and manufacturing disruptions, inventory shortages, and increased risk associated with customer payments[238](index=238&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details equity activities, confirming no share repurchases in Q3 2020 and the temporary suspension of the repurchase program to preserve liquidity, with **$278.5 million** remaining available under authorization - The company did not repurchase any shares during the three and nine months ended September 30, 2020[242](index=242&type=chunk) - The share repurchase program has been temporarily suspended to preserve liquidity due to the COVID-19 pandemic. As of September 30, 2020, **$278.5 million** of the authorization remained available[242](index=242&type=chunk) [Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including an employment agreement amendment, Sarbanes-Oxley Act certifications, and financial data in Inline XBRL format

Financial Data and Key Metrics Changes - For Q2 2020, reported sales declined by 6%, negatively impacted by currency exchange rates, lower resin costs passed to customers, and COVID-19 related impacts [16][20] - Adjusted earnings per share totaled $0.80, down from $1.14 in the prior year [20] - Year-to-date performance showed a 4% core sales decline and adjusted earnings per share down 21% from the prior year [20] Business Line Data and Key Metrics Changes - Pharma segment achieved core sales growth of 6% with an adjusted EBITDA margin of 35% [16][17] - Core sales to the prescription market decreased by 6%, while consumer healthcare increased by 10%, injectables by 26%, and active packaging by 21% [17][19] - Beauty and Home segment saw core sales decrease by 13%, with beauty market sales down 33% and personal care market sales up 11% [17][18] - Food and Beverage segment experienced a 15% core sales decrease, attributed to lower tooling sales and beverage closure sales [18][19] Market Data and Key Metrics Changes - Core sales to the beauty market decreased by 33% due to reduced orders from customers in travel retail and standard retail settings [18] - Core sales to the personal care market increased by 11%, driven by higher demand for hand sanitizers [18] - Core sales to the beverage market decreased by 37%, significantly affected by COVID-19 impacts [19] Company Strategy and Development Direction - The company continues to invest for long-term growth despite COVID-19 uncertainties, focusing on product innovation and cash generation [23] - The recent acquisition of FusionPKG is expected to enhance agility in adapting to changing beauty demands [14] - The company is monitoring the evolving status of the pandemic and the trajectory of reopening by country and state [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Pharma segment's growth potential, particularly related to COVID-19 vaccines and therapies [9][21] - The company anticipates a gradual improvement in the second half of the year, dependent on the pace of economic recovery and consumer confidence [21] - Management highlighted the importance of maintaining operational readiness and flexibility in response to market changes [12][23] Other Important Information - The company reported strong cash flow from operations totaling approximately $143 million and capital expenditures of approximately $61 million [21] - The company welcomed Kimberly Chainey as the new Executive Vice President and Global General Counsel, enhancing the leadership team [15] Q&A Session Summary Question: Expansion on COVID-19 vaccine supply chain management - Management noted that they are closely following numerous COVID-related projects, with a significant portion related to vaccines and treatments [26] Question: Breakdown of Beauty and Home segment performance by month - Management indicated that April was the low point, with improvements in May and a strong June due to effective reopenings [29] Question: Update on COVID project activity and dosage per packs - Management confirmed that the number of COVID-related projects has increased significantly, with expectations for multi-dose vials in the U.S. and a mix of prefilled syringes in other regions [33][34] Question: Expectations for a stronger flu season - Management acknowledged that a heavy flu season could positively impact the business, particularly in the decongestant and vaccination markets [36] Question: Capacity additions for injectables - Management indicated plans to increase capacity in line with market share growth, with ongoing discussions with customers regarding supply chain needs [42] Question: Areas of weakness in the prescription business - Management identified softness in allergic rhinitis and CNS areas, attributed to tough year-over-year comparisons [44]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including statements of income, comprehensive income, balance sheets, changes in equity, and cash flows, along with detailed notes on significant accounting policies, revenue, goodwill, debt, leases, and recent acquisitions [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) **Three Months Ended June 30:** | Metric | 2020 ($) | 2019 ($) | Change (%) | | :----- | :------- | :------- | :--------- | | Net Sales | 699,305 | 742,661 | -5.84% | | Operating Income | 70,478 | 109,864 | -35.85% | | Net Income | 41,860 | 73,921 | -43.37% | | Basic EPS | 0.65 | 1.16 | -44.00% | | Diluted EPS | 0.63 | 1.12 | -43.75% | | Dividends per Common Share | 0.36 | 0.36 | 0.00% | **Six Months Ended June 30:** | Metric | 2020 ($) | 2019 ($) | Change (%) | | :----- | :------- | :------- | :--------- | | Net Sales | 1,420,858 | 1,487,121 | -4.45% | | Operating Income | 158,938 | 206,958 | -23.20% | | Net Income | 97,110 | 136,920 | -29.08% | | Basic EPS | 1.51 | 2.17 | -30.41% | | Diluted EPS | 1.47 | 2.08 | -29.47% | | Dividends per Common Share | 0.72 | 0.70 | 2.86% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) **Three Months Ended June 30:** | Metric | 2020 ($) | 2019 ($) | Change (%) | | :----- | :------- | :------- | :--------- | | Net Income | 41,860 | 73,921 | -43.37% | | Foreign currency translation adjustments | 19,096 | 9,414 | 102.85% | | Total other comprehensive income (loss) | 19,803 | 9,651 | 105.19% | | Comprehensive Income | 61,663 | 83,572 | -26.22% | **Six Months Ended June 30:** | Metric | 2020 ($) | 2019 ($) | Change (%) | | :----- | :------- | :------- | :--------- | | Net Income | 97,110 | 136,920 | -29.08% | | Foreign currency translation adjustments | (23,133) | (197) | -11642.64% | | Total other comprehensive income (loss) | (19,307) | 368 | -5345.92% | | Comprehensive Income | 77,803 | 137,288 | -43.33% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) **Assets (June 30, 2020 vs. December 31, 2019):** | Asset Category | June 30, 2020 ($) | December 31, 2019 ($) | Change ($) | Change (%) | | :------------- | :---------------- | :-------------------- | :--------- | :--------- | | Cash and equivalents | 247,656 | 241,970 | 5,686 | 2.35% | | Accounts and notes receivable, net | 575,655 | 558,428 | 17,227 | 3.08% | | Inventories | 381,939 | 375,795 | 6,144 | 1.64% | | Total Current Assets | 1,343,571 | 1,291,241 | 52,330 | 4.05% | | Property, Plant and Equipment, net | 1,097,920 | 1,087,678 | 10,242 | 0.94% | | Investments in equity securities | 44,193 | 8,396 | 35,797 | 426.35% | | Goodwill | 861,928 | 763,461 | 98,467 | 12.90% | | Intangible assets, net | 352,740 | 291,084 | 61,656 | 21.18% | | Total Assets | 3,814,016 | 3,562,119 | 251,897 | 7.07% | **Liabilities and Stockholders' Equity (June 30, 2020 vs. December 31, 2019):** | Liability/Equity Category | June 30, 2020 ($) | December 31, 2019 ($) | Change ($) | Change (%) | | :------------------------ | :---------------- | :-------------------- | :--------- | :--------- | | Notes payable, revolving credit facility and overdrafts | 150,831 | 44,259 | 106,572 | 240.79% | | Current maturities of long-term obligations | 66,248 | 65,988 | 260 | 0.39% | | Accounts payable, accrued and other liabilities | 612,688 | 573,028 | 39,660 | 6.92% | | Total Current Liabilities | 829,767 | 683,275 | 146,492 | 21.44% | | Long-Term Obligations, net | 1,082,742 | 1,085,453 | -2,711 | -0.25% | | Total Liabilities | 2,168,030 | 1,989,867 | 178,163 | 8.95% | | Total Stockholders' Equity | 1,645,986 | 1,572,252 | 73,734 | 4.69% | | Total Liabilities and Stockholders' Equity | 3,814,016 | 3,562,119 | 251,897 | 7.07% | [Condensed Consolidated Statements of Changes in Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) **Changes in Equity (Six Months Ended June 30, 2020):** | Item | Amount ($) | | :--- | :--------- | | Balance - December 31, 2019 | 1,572,252 | | Net income | 97,092 | | Adoption of CECL standard | (1,377) | | Foreign currency translation adjustments | (23,134) | | Changes in unrecognized pension gains (losses) and related amortization, net of tax | 3,076 | | Changes in derivative gains (losses), net of tax | 750 | | Stock awards and option exercises | 43,451 | | Cash dividends declared on common stock | (46,143) | | Balance - June 30, 2020 | 1,645,986 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) **Six Months Ended June 30:** | Cash Flow Category | 2020 ($) | 2019 ($) | Change ($) | Change (%) | | :----------------- | :------- | :------- | :--------- | :--------- | | Net Cash Provided by Operations | 227,686 | 221,140 | 6,546 | 2.96% | | Net Cash Used by Investing Activities | (317,127) | (157,158) | -159,969 | -101.79% | | Net Cash Provided (Used) by Financing Activities | 91,340 | (31,775) | 123,115 | 387.46% | | Effect of Exchange Rate Changes on Cash | 8,522 | 3,920 | 4,602 | 117.40% | | Net Increase in Cash and Equivalents and Restricted Cash | 10,421 | 36,127 | -25,706 | -71.16% | | Cash and Equivalents and Restricted Cash at End of Period | 257,394 | 302,950 | -45,556 | -15.04% | - Key Investing Activities (2020): * Capital expenditures: **$(122,986)** (vs. **$(124,774)** in 2019) * Acquisition of business, net of cash acquired: **$(159,570)** (vs. **$(49,131)** in 2019)

AptarGroup Inc. (NYSE:ATR) Q1 2020 Earnings Conference Call May 1, 2020 9:00 AM ET Company Participants Matt DellaMaria - Investor Relations Stephan Tanda - Chief Executive Officer Bob Kuhn - Chief Financial Officer Conference Call Participants Ghansham Panjabi - Baird Adam Josephson - KeyBanc Neel Kumar - Morgan Stanley George Staphos - Bank of America Gabe Hajde - WF Securities Debbie Jones - Deutsche Bank Courtney Owens - William Blair Operator Ladies and gentlemen, thank you for standing by, and welcome ...

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, 2020 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 ...