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United States Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
    FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014    

 

 

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

LOGO

AptarGroup, Inc.

DELAWARE   36-3853103

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

815-477-0424

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class
 
Name of each exchange on which registered

 

 

 
Common Stock $.01 par value   New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ý   No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o   No ý

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 ý   No o

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 ý   No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
    (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o   No ý

The aggregate market value of the common stock held by non-affiliates as of June 30, 2014 was $4,258,697,782.

The number of shares outstanding of common stock, as of February 23, 2015, was 62,334,070 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held May 6, 2015 are incorporated by reference into Part III of this report.


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AptarGroup, Inc.

FORM 10-K

For the Year Ended December 31, 2014

INDEX


 
   
  Page  
Part I  

Item 1.

 

Business

 

 

1

 

Item 1A.

 

Risk Factors

 

 

7

 

Item 1B.

 

Unresolved Staff Comments

 

 

9

 

Item 2.

 

Properties

 

 

9

 

Item 3.

 

Legal Proceedings

 

 

11

 

Item 4.

 

Mine Safety Disclosures

 

 

11

 

Part II

 

Item 5.

 

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

 

11

 

Item 6.

 

Selected Financial Data

 

 

13

 

Item 7.

 

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

 

 

14

 

Item 7A.

 

Quantitative and Qualitative Disclosure about Market Risk

 

 

26

 

Item 8.

 

Financial Statements and Supplementary Data

 

 

27

 

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

 

60

 

Item 9A.

 

Controls and Procedures

 

 

60

 

Item 9B.

 

Other Information

 

 

60

 

Part III

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

 

60

 

Item 11.

 

Executive Compensation

 

 

61

 

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

 

61

 

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

 

61

 

Item 14.

 

Principal Accountant Fees and Services

 

 

61

 

Part IV

 

Item 15.

 

Exhibits and Financial Statement Schedules

 

 

61

 


 

Signatures

 

 

62

 

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PART I

ITEM 1.    BUSINESS

BUSINESS OF APTARGROUP

 We are a leading global solution provider of a broad range of innovative packaging delivery solutions primarily for the beauty, personal care, home care, prescription drug, consumer health care, injectables, food and beverage markets. Our creative packaging solutions enhance the convenience, safety and security of consumers around the globe and allow our customers to differentiate their products in the market.

        Our business was started in the late 1940's, manufacturing and selling aerosol valves in the United States, and has grown primarily through the acquisition of relatively small companies and internal expansion. We were incorporated in Delaware in 1992. In this report, we may refer to AptarGroup, Inc. and its subsidiaries as "AptarGroup" or the "Company".

        We have manufacturing facilities located throughout the world including North America, Europe, Asia and South America. We have approximately 5,000 customers with no single customer or group of affiliated customers accounting for greater than 5% of our 2014 net sales.

        Sales of our dispensing systems have traditionally grown at a faster rate than the overall packaging industry as consumers' preference for convenience has increased and product differentiation through packaging design has become more important to our customers. Consumer product marketers have converted many of their products to packages with dispensing systems that offer the benefit of enhanced shelf appeal, convenience, cleanliness or accuracy of dosage. We expect this trend to continue.

        While we offer a wide variety of dispensing and sealing solutions, our primary products are dispensing pumps, closures, aerosol valves and elastomer primary packaging components.

        Dispensing pumps are finger-actuated dispensing systems that dispense a spray or lotion from non-pressurized containers. The style of pump used depends largely on the nature of the product being dispensed, from small, fine mist pumps used with perfume and pharmaceutical products to lotion pumps for more viscous formulas.

        Closures are primarily dispensing closures but to a lesser degree can include non-dispensing closures. Dispensing closures are plastic caps, primarily for plastic containers such as bottles and tubes, which allow a product to be dispensed without removing the cap.

        Aerosol valves dispense product from pressurized containers. The majority of the aerosol valves that we sell are continuous spray valves, with the balance being metered dose inhaler valves.

        We also manufacture and sell elastomer primary packaging components. These components are used in the injectables market. Products include stoppers for infusion, antibiotic, lyophilization and diagnostic vials. Our elastomer components also include pre-filled syringe components, such as plungers, needle shields, tip caps and cartridges, as well as dropper bulbs and disposable syringe plungers.


AVAILABLE INFORMATION

 Our periodic and current reports are available, free of charge, through a link on the Investors page of our website (www.aptar.com), as soon as reasonably practicable after the material is electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC"). Also posted on our website are the charters for our Audit, Compensation, Governance and Executive Committees, our Governance Principles, our Code of Business Conduct & Ethics, our Director Independence Standards and our Conflict Minerals Statement. Within the time period required by the SEC and the New York Stock Exchange ("NYSE"), we will post on our website any amendment or waiver to the Code of Business Conduct & Ethics applicable to any executive officer or director. The information provided on our website is not part of this report and is therefore not incorporated herein by reference.


DESCRIPTION OF APTARGROUP'S REPORTING SEGMENTS

FINANCIAL INFORMATION ABOUT SEGMENTS

 AptarGroup's organizational structure consists of three market-focused business segments which are Beauty + Home, Pharma and Food + Beverage. This is a strategic structure which allows us to be more closely aligned with our customers and the markets in which they operate. Operations that sell dispensing systems primarily to the beauty, personal care and home care markets form the Beauty + Home segment. Operations that sell dispensing systems or primary packaging components to the prescription drug, consumer health care and injectables markets form the Pharma segment. Operations that sell dispensing systems to the food and beverage markets form the Food + Beverage segment. Each of these three business segments is described more fully below. A summary of sales, segment income and total assets based upon this reporting structure for each of the last three years is shown in Note 17 to the Consolidated Financial Statements in Item 8 (which is incorporated by reference herein).

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BEAUTY + HOME

 The Beauty + Home segment is our largest segment in terms of net sales and total assets representing 58% and 49% of AptarGroup's Net Sales and Total Assets, respectively. The Beauty + Home segment primarily sells pumps, closures, aerosol valves and accessories to the personal care and home care markets and pumps and decorative components to the beauty market. We believe we are a leading supplier for the majority of the products we sell primarily to the beauty, personal care and home care markets.

 Beauty.    Sales to the beauty market accounted for approximately 46% of the segment's total net sales in 2014. The beauty market requires a broad range of spray pumps and sampling dispensing systems to meet functional as well as aesthetic requirements. A considerable amount of research, time and coordination with our customers is required to qualify a pump for use with their products. Within the market, we expect the use of pumps to continue to increase, particularly in the cosmetics and sampling sectors of this market. In the cosmetic sector, packaging for certain products such as natural and organic cosmetics and anti-aging lotions continue to provide us with growth opportunities. We are a leading provider of packaging solutions for prestige and mass market fragrance products. Our cosmetic lotion pumps, airless dispensing systems and lotion sampling devices, and decorative capabilities will also provide growth opportunities. We have experienced significant growth in recent years in Latin America, particularly in the sales of our products to the beauty market, and we believe there are significant opportunities for growth in the sale of our products for cosmetic applications in Asia.

 Personal Care.    Sales to the personal care market accounted for approximately 45% of the segment's total net sales in 2014 and primarily included sales of fine mist spray pumps, lotion pumps, closures and continuous spray aerosol valves. Personal care spray pump applications include hair care, body care and sun care products. Typical lotion pump applications include skin moisturizers, hand sanitizers and soap. Personal care closures applications include shampoos and conditioners. Personal care continuous spray aerosol valve applications include hair care products, deodorants, shaving creams and sun care products. Our research and development teams continue to design unique accessories that increase the value of our continuous spray aerosol valve offerings.

 Home Care.    Sales to the home care market accounted for approximately 8% of the segment's total net sales in 2014 and primarily included sales of continuous or metered dose spray aerosol valves, closures and to a lesser degree spray and lotion pumps. Applications for continuous spray valves include disinfectants, spray paints, insecticides and automotive products. Metered dose valves are used for air fresheners. Closure applications include liquid detergents and household cleansers. Spray and lotion pump applications primarily include household and industrial cleaners. There is a trend towards concentrated cleaners and laundry care products that could provide opportunities for incorporating our dosing dispensing technologies.

PHARMA

 The Pharma segment is our second largest segment in terms of net sales and total assets, accounting for 29% and 25% of AptarGroup's Net Sales and Total Assets, respectively, and is our most profitable segment. We believe we are the leading supplier of pumps and metered dose inhaler valves ("MDI's") to the pharmaceutical market worldwide and we believe we are the number three supplier of elastomer for injectables primary packaging components worldwide. Characteristics of this market include (i) governmental regulation of our pharmaceutical customers, (ii) contaminant-controlled manufacturing environments and (iii) a significant amount of time and research from initially working with pharmaceutical companies at the molecular development stage of a medication through the eventual distribution to the market. We have clean-room manufacturing facilities in Argentina, China, France, Germany, India, Switzerland and the United States. We believe that providing an alternative to traditional medication forms such as pills with value-added, convenient dispensing systems will continue to offer opportunities for our business. In addition, with the trend towards heath care reform we believe there are opportunities for growth in the over the counter and generic pharmaceutical categories.

 Prescription Drug.    Sales to the prescription drug market accounted for approximately 54% of the segment's total net sales in 2014. Pumps sold to the prescription drug market deliver medications nasally, orally or topically. Currently the majority of our pumps sold are for nasal allergy treatments. Recently, there is a trend of nasal allergy products moving from prescription-only to being sold over the counter without a prescription. This trend could provide us with growth opportunities as this movement could allow customers easier access to these types of treatments. Our nasal pumps and unit dose device are also used to deliver pain management products. Potential opportunities for providing alternatives to the traditional pill and injectable dosage forms of medication include pump dispensing systems for vaccine treatment, additional cold and flu treatments, central nervous systems applications and hormone replacement therapies.

        MDI's are used for dispensing precise amounts of medication. This aerosol technology allows medication to be broken up into very fine particles, which enables the drug to be delivered typically via the pulmonary system. Currently the majority of our MDI's sold are used for respiratory ailments such as asthma and COPD.

        We continue to develop new dispensing systems and accessories in this segment. We have developed new delivery device technologies featuring lock-out capabilities. We also provide single dose delivery devices suitable for central nervous system applications and hormone replacement therapies. While we expect that these new products will come to market in the

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future, it is difficult to estimate when, as the rigors of pharmaceutical regulations affect the timing of product introductions by our pharmaceutical customers which use our dispensing systems.

 Consumer Health Care.    Sales to the consumer health care market accounted for approximately 27% of the segment's total net sales in 2014. Applications for this market are similar to the pharmaceutical market; however, these applications are sold over the counter without a prescription. Typical consumer health care spray pump applications include nasal decongestants, nasal salines and cough and cold applications. Typical consumer health care valve applications include nasal saline using our bag-on valve technology. We have developed a new multi dose ophthalmic dispensing device suitable for unpreserved medicinal formulations. This technology is successfully marketed in Europe and is under development for other markets. Other products sold to this market include airless pump systems for dermal applications. We have recently seen a trend to more child resistant and senior-friendly packaging solutions and are developing products to meet these market needs.

 Injectables.    Sales to the injectables market accounted for approximately 19% of the segment's total net sales in 2014. Injectables are elastomer primary packaging components for injectable drug delivery. Injectable products offered include stoppers for vials. Injectables also include pre-filled syringe components, such as plungers, needle shields, tip caps and components for cartridges, as well as disposable syringe plungers. Pharmaceutical applications for this market include vaccines, anti-thrombotic, small molecules and biologics.

FOOD + BEVERAGE

 The Food + Beverage segment is our smallest segment in terms of net sales and total assets representing 13% and 11% of AptarGroup's Net Sales and Total Assets, respectively, but has been our fastest growing segment. We primarily sell dispensing closures and, to a lesser degree, non-dispensing closures, spray pumps and aerosol valves primarily to the food and beverage markets.

        Sales of dispensing closures have grown as consumers worldwide have demonstrated a preference for a package utilizing the convenience of a dispensing closure. At the same time, consumer marketers are trying to differentiate their products by incorporating performance enhancing features such as bonded to plastic aluminum liners, flow-control and no-drip dispensing, inverted packaging and directional flow to make packages simpler to use, cleaner and more appealing to consumers.

 Food.    Sales to the food market accounted for approximately 55% of the segment's total net sales in 2014 and primarily include sales of dispensing closures and elastomeric flow-control components. To a lesser degree we also sell non-dispensing closures, continuous spray aerosol valves and spray pumps to this market. Applications for dispensing closures include sauces, condiments and food products. Applications for non-dispensing closures include granular and powder food products along with baby food closures. Applications for continuous spray aerosol valves include cooking sprays. Spray pump applications primarily include butter or salad dressing sprays.

 Beverage.    Sales to the beverage market accounted for approximately 43% of the segment's total net sales in 2014 and primarily include sales of dispensing closures and elastomeric flow-control components. Sales of dispensing closures to the beverage market have increased significantly over the last several years as we continue to see an increase of interest from marketers using dispensing closures for their products. Examples of beverage products currently utilizing dispensing closures include bottled water, sport and energy drinks, juices and concentrated water flavorings. Examples of beverage products currently utilizing lotion pump technologies include syrups and concentrates.


GENERAL BUSINESS INFORMATION

GROWTH STRATEGY

 We seek to enhance our position as a leading global solution provider of innovative packaging delivery solutions by (i) expanding geographically, (ii) converting less convenient or non-dispensing applications to convenient dispensing systems or replacing current dispensing applications with more value-added dispensing products and (iii) developing or acquiring new dispensing, safety or security technologies.

        We are committed to expanding geographically to serve local and multinational customers in existing and emerging areas. In 2014, we opened manufacturing operations in Colombia to better serve the Andean region.

        We believe opportunities exist to introduce our dispensing systems to replace non-dispensing applications. Examples of these opportunities in the food and beverage markets include single and multi-serve non-carbonated beverages, condiments, cooking oils, infant formula and pouch dispensing fitments. In the beauty market, potential conversion opportunities include creams and lotions currently packaged in jars or tubes using removable non-dispensing closures, converting to lotion pumps or dispensing closures. Other opportunities in the beauty and personal care markets include replacing closures on skin care applications with spray technology and creating new ways for our consumers to dispense beauty products such as our bulb atomizers for fragrances and pen-like applicators for high-end cosmetic serums. We also continue to believe there are growth opportunities for convenient dispensing pump or MDI systems for pharmaceutical

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applications such as vaccines, cold and flu treatments, hormone replacement therapies, pain medication, sleep aids and ophthalmic applications.

        We are committed to developing or acquiring new dispensing technologies that can lead to the development of completely new dispensing systems or can complement our existing product offerings. In the consumer health care market we have developed a multi-use preservative free dispensing product for eye wetting applications to replace single-use packaging. We have liner-less hot-fill dispensing technologies, which are being used on a variety of single-serve beverages and we have developed coating technologies for our elastomer components that will expand our offerings within the injectables market.

RESEARCH AND DEVELOPMENT

 One of our competitive strengths is our commitment to innovation. Our commitment to innovation has resulted in an emphasis on research and development. Our research and development activities are directed toward developing affordable, new, innovative packaging delivery solutions and adapting existing products for new markets or customer requirements. In certain cases, our customers share in the research and development expenses of customer initiated projects. Occasionally, we acquire or license from third parties technologies or products that are in various stages of development. Expenditures for research and development activities, net of certain research and development credits, were $76.2 million, $71.8 million and $65.4 million in 2014, 2013 and 2012, respectively.

PATENTS AND TRADEMARKS

 We customarily seek patent and trademark protection for our products and brands. We own and currently have numerous applications pending for patents and trademarks in many regions of the world. In addition, certain of our products are produced under patent licenses granted by third parties. We believe that we possess certain technical capabilities in making our products that make it difficult for a competitor to duplicate. While valuable to our overall product portfolio, sales of any one individually patented product are not considered material to any specific segment or to the Company's consolidated results.

TECHNOLOGY

 We have technical expertise regarding injection molding, robotics, cleanroom facilities and high-speed assembly. We also have expertise regarding the formulation and finishing of elastomer and silicone components. In addition, we offer a variety of sterilization options for elastomer components for the pharmaceutical industry. Pumps and aerosol valves require the assembly of several different plastic, metal and rubber components using high-speed equipment. When molding dispensing closures, or plastic components to be used in pump or aerosol valve products, we use advanced plastic injection molding technology, including large cavitation plastic injection molds. We are able to mold within tolerances as small as one one-thousandth of an inch and we assemble products in a high-speed, cost-effective manner. Our injection molding capabilities include recent advances such as spin-stack and cube molding which utilize high-efficiency rotating molds. We are also utilizing In-Molding Assembly Technology (IMAT) which allows us to assemble products within the molding process. We are experts in molding liquid silicone that is used in certain dispensing closures as well as rubber gasket formulation and production primarily for the prescription drug and consumer health care markets. We also have technology to decorate plastic and metal components sold primarily to the beauty and personal care markets.

MANUFACTURING AND SOURCING

 More than half of our worldwide production is located outside of the United States. In order to augment capacity and to maximize internal capacity utilization (particularly for plastic injection molding), we use subcontractors to supply certain plastic, metal and rubber components. Certain suppliers of these components have unique technical abilities that make us dependent on them, particularly for aerosol valve and pump production. The principal raw materials used in our production are plastic resins, rubber and certain metal products. We believe an adequate supply of such raw materials is available from existing and alternative sources. We attempt to offset cost increases through improving productivity and increasing selling prices over time, as allowed by market conditions or contractual commitments. Our pharmaceutical products often use resin and rubber components specifically approved by our customers. Significant delays in receiving components from these suppliers or discontinuance of an approved raw material would require us to seek alternative sources, which could result in higher costs as well as impact our ability to supply products in the short term.

SALES AND DISTRIBUTION

 Sales of products are primarily through our own sales force. To a limited extent, we also use the services of independent representatives and distributors who sell our products as independent contractors to certain smaller customers and export markets.

BACKLOG

 Our sales are primarily made pursuant to standard purchase orders for delivery of products. While most orders placed with us are ready for delivery within 120 days, we continue to experience a trend towards shorter lead times requested by our customers. Some customers place blanket orders, which extend beyond this delivery period. However, deliveries against purchase orders are subject to change, and only a small portion of the order backlog is noncancelable. The dollar amount

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associated with the noncancelable portion is not material. Therefore, we do not believe that backlog as of any particular date is an accurate indicator of future results.

CUSTOMERS

 The demand for our products is influenced by the demand for our customers' products. Demand for our customers' products may be affected by general economic conditions, government regulations, tariffs and other trade barriers. Our customers include many of the largest beauty, personal care, pharmaceutical, home care, food and beverage marketers in the world. We have approximately 5,000 customers with no single customer or group of affiliated customers accounting for greater than 5% of 2014 net sales. A consolidation of our customer base has occurred and this trend is expected to continue. A concentration of customers presents opportunities for increasing sales due to the breadth of our product line, our international presence and our long-term relationships with certain customers. However, this situation also may result in pricing pressures, concentration of credit risk or a loss of volume.

INTERNATIONAL BUSINESS

 We have grown geographically by serving both large multi-national customers and local customers in developing regions. Sales in Europe for the years ended December 31, 2014, 2013 and 2012 were approximately 58%, 58% and 54%, respectively, of net sales. We manufacture the majority of units sold in Europe at facilities in the Czech Republic, England, France, Germany, Ireland, Italy, Russia, Spain and Switzerland. Other countries in which we operate include Argentina, Brazil, China, Colombia, India, Indonesia, Japan, Mexico and Thailand which when aggregated represented approximately 17%, 17% and 18% of our consolidated sales for the years ended December 31, 2014, 2013 and 2012, respectively. Export sales from the United States were $161.4 million, $143.9 million and $152.9 million in 2014, 2013 and 2012, respectively. For additional financial information about geographic areas, please refer to Note 17 in the Notes to the Consolidated Financial Statements in Item 8 (which is incorporated by reference herein).

FOREIGN CURRENCY

 Because of our international presence, movements in exchange rates may have a significant impact on the translation of the financial statements of our foreign subsidiaries. Our primary foreign exchange exposure is to the Euro, but we have foreign exchange exposure to the Brazilian Real, British Pound, Swiss Franc and other South American and Asian currencies, among others. A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on our financial statements. Conversely, a weakening U.S. dollar has an additive effect. In some cases, we sell products denominated in a currency different from the currency in which the related costs are incurred. We manage our exposures to foreign exchange principally with forward exchange contracts to economically hedge recorded transactions and firm purchase and sales commitments denominated in foreign currencies. Changes in exchange rates on such inter-country sales could materially impact our results of operations.

WORKING CAPITAL PRACTICES

 Collection and payment periods tend to be longer for our operations located outside the United States due to local business practices. We have also seen an increasing trend in pressure from certain customers to lengthen their payment terms or completely outsource their payable function. As the majority of our products are made to order, we have not needed to keep significant amounts of finished goods inventory to meet customer requirements.

EMPLOYEE AND LABOR RELATIONS

 AptarGroup has approximately 13,000 full-time employees. Of the full-time employees, approximately 7,400 are located in Europe, 3,500 are located in Asia and South America and the remaining 2,100 are located in North America. The majority of our European and Latin American employees are covered by collective bargaining arrangements made at either the local or national level in their respective countries and approximately 200 of the North American employees are covered by a collective bargaining agreement. Termination of employees at certain of our international operations could be costly due to local regulations regarding severance benefits. There were no material work stoppages in 2014 and management considers our employee relations to be satisfactory.

COMPETITION

 All of the markets in which we operate are highly competitive and we continue to experience price competition in all product lines and markets. Competitors include privately and publicly held entities that range from regional to international companies. We expect the market for our products to remain competitive. We believe our competitive advantages are consistent high levels of innovation, quality and service, geographic diversity and breadth of products. Our manufacturing strength lies in the ability to mold complex plastic components and formulate and finish elastomer and silicone components in a cost-effective manner and to assemble products at high speeds. Our business is capital intensive and it is becoming more important to our customers to have global manufacturing capabilities. Both of these serve as barriers to entry for new competitors wanting to enter our business.

        While we have experienced some competition in Europe, Latin America and the United States from low cost Asian suppliers, particularly in the low-end beauty and personal care market, this has not been significant. Indirectly, some

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fragrance marketers are sourcing their manufacturing requirements, including filling of their product, in Asia and importing the finished product back into the United States or Europe. However, some customers who had bought dispensing packaging products from low cost Asian suppliers in the past have reverted to purchasing our dispensing products, citing the higher quality offered by our products and the logistical advantage of being closer to the customer.

ENVIRONMENT

 Our manufacturing operations primarily involve plastic injection molding, automated assembly processes, elastomer and silicone formulation and finishing and, to a limited degree, metal anodization and vacuum metallization of plastic components. Historically, the environmental impact of these processes has been minimal, and we believe we meet current environmental standards in all material respects. To date, our manufacturing operations have not been significantly affected by environmental laws and regulations relating to the environment.

        Recently there is increased interest and awareness from the public and our customers in sustainability or producing environmentally sustainable products and measuring carbon footprints. We are focused on becoming more energy efficient and improving our carbon footprint. We are also designing products that improve recyclability and use less material. Future regulations on environmental matters regarding recycling or sustainability policies could impact our business.

GOVERNMENT REGULATION

 Certain of our products are indirectly affected by government regulation. Demand for aerosol and pump packaging is affected by government regulations regarding the release of volatile organic compounds ("VOCs") into the atmosphere. Europe and the United States have regulations that require the reduction in the amount of VOCs that can be released into the atmosphere and the potential exists for this type of regulation to expand worldwide. These regulations required certain of our customers to reformulate certain aerosol and pump products, which may have affected the demand for such products. We own patents and have developed systems to function with alternative propellant and product formulations.

        Future government regulations could include medical cost containment policies. For example, reviews by various governments to determine the number of drugs, or prices thereof, that will be paid by their insurance systems could affect future sales to the pharmaceutical industry. Such regulation could adversely affect prices of and demand for our pharmaceutical products. We believe that the focus on the cost effectiveness of the use of medications as compared to surgery and hospitalization provides us with an opportunity to expand sales to the pharmaceutical market.

EXECUTIVE OFFICERS

 Our executive officers as of February 27, 2015 are as follows:

Name
  Age
  Position with the Company
 
 
Stephen Hagge     63   President and Chief Executive Officer
Mr. Hagge has been President and Chief Executive Officer since January 2012. Prior to this, Mr. Hagge was Chief Operating Officer from 2008 to 2011, Executive Vice President from 1993 to 2011, Secretary from 1993 to June 2011 and Chief Financial Officer of AptarGroup from 1993 to 2007.

Robert Kuhn

 

 

52

 

Executive Vice President, Chief Financial Officer and Secretary
Mr. Kuhn has been Executive Vice President and Chief Financial Officer since September 2008. Mr. Kuhn has been Secretary since June 2011. Prior to this, Mr. Kuhn was Vice President Financial Reporting from 2000 to 2008.

Patrick Doherty

 

 

59

 

President, Aptar Beauty + Home
Mr. Doherty has been President of Aptar Beauty + Home since October 2010. Prior to this, Mr. Doherty was Co-President of Aptar Beauty + Home from January 2010 to October 2010 and served as President of SeaquistPerfect Dispensing Group from 2000 to 2009.

Eldon Schaffer

 

 

49

 

President, Aptar Food + Beverage
Mr. Schaffer has been President of Aptar Food + Beverage since January 2012. Prior to this, Mr. Schaffer was President of Aptar Beauty + Home North America from 2010 to 2011 and was Seaquist Closures' General Manager of North America from 2004 to 2009.

Salim Haffar

 

 

41

 

President, Aptar Pharma
Mr. Haffar has been President of Aptar Pharma since January 2014. From 2012 to 2013 Mr. Haffar worked with Capsugel, a leading pharmaceutical supplier of gelatin capsules for the oral drug delivery industry. From 2010 to 2012, he was President of Aptar Pharma's Prescription division. From 2008 to 2010, he was Co-President of the Company's Valois Group and President of Valois' Pharma division. Prior to 2008, Mr. Haffar held various sales and marketing positions within the Company's Valois Pharma division.

Ursula Saint-Léger

 

 

51

 

Vice President of Human Resources
Ms. Saint-Léger has been Vice President of Human Resources since October 2010. Prior to joining AptarGroup in 2010, Ms. Saint-Léger was Sr. Group Vice President Human Resources at TAQA (industrialization and energy services) from 2009 to 2010 and was Senior Vice President Human Resources at Umicore S.A. from 2004 to 2009.

        There were no arrangements or understandings between any of the executive officers and any other person(s) pursuant to which such officers were elected.

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ITEM 1A.    RISK FACTORS

 Set forth below and elsewhere in this report and in other documents we file with the Securities and Exchange Commission are risks and uncertainties that could cause our actual results to materially differ from the results contemplated by the forward-looking statements contained in this report and in other documents we file with the Securities and Exchange Commission. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations. You should carefully consider the following factors in addition to other information contained in this report on Form 10-K before purchasing any shares of our common stock.

FACTORS AFFECTING OPERATIONS OR OPERATING RESULTS

 We have foreign currency translation and transaction risks that may materially adversely affect our operating results.    A significant number of our operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial statements of our foreign entities. Our primary foreign exchange exposure is to the Euro, but we have foreign exchange exposure to the Brazilian Real, British Pound, Swiss Franc, and other South American and Asian currencies, among others. A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on our financial statements. Conversely, a weakening U.S. dollar has an additive translation effect. In some cases, we sell products denominated in a currency different from the currency in which the related costs are incurred. We manage our exposures to foreign exchange principally with forward exchange contracts to economically hedge certain transactions and firm purchase and sales commitments denominated in foreign currencies. The volatility of currency exchange rates may materially affect our operating results.

 If there is deterioration in economic conditions in a particular region or market, our business and operating results could be materially adversely impacted.    Due to our strong balance sheet, diverse product offerings, various end-markets served, and our broad geographic presence, we believe we are well positioned to withstand slowness in any one particular region or market. However, economic uncertainties affect businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. A tightening of credit in financial markets or other factors may lead consumers and businesses to postpone spending, which may cause our customers to cancel, decrease or delay their existing and future orders with us. In addition, financial difficulties experienced by our suppliers, customers or distributors could result in product delays, increased accounts receivable defaults, inventory or supply challenges and pricing pressures. An interruption in supply may also impact our ability to meet customer demands. Consumer demand for our customers' products and shifting consumer preferences are unpredictable and could have a negative impact on our customers and our customers' demand for our products. A disruption in the credit markets could also restrict our access to capital.

 Geopolitical conditions, such as recent events in Eastern Europe, could have a material adverse effect on our operations and financial results.    Our operations could be disrupted by geopolitical conditions such as international boycotts, acts of war, terrorist activity or other similar events. Such events could make it difficult or impossible to manufacture or deliver products to our customers, receive production materials from our suppliers, or perform critical functions, which could adversely affect our business globally or in certain regions. While we maintain similar manufacturing capacities at different locations and coordinate multi-source supplier programs on many of our materials which would better enable us to respond to these types of events, we cannot be sure that our plans will fully protect us from all such disruptions. In addition, our customers may export their finished products using our dispensing devices that were sold in other regions and an adverse geopolitical event such as recent conflicts in Eastern Europe, may impact the sales of our customers' products and thus indirectly negatively impact the demand for our dispensing solutions.

 If our expansion initiatives are unsuccessful, our operating results and reputation may suffer.    We are expanding our operations in a number of new and existing markets and jurisdictions, including facilities expansions in France and Latin America. Expansion of our operations will continue to require a significant amount of time and attention from our senior management and capital investment. Our expansion activities present considerable challenges and risks, including the general economic and political conditions existing in new markets and jurisdictions that we enter, attracting, training and retaining qualified and talented employees, infrastructure and labor disruptions, fluctuations in currency exchange rates, the imposition of restrictions by governmental authorities, compliance with current, new and changing governmental laws and regulations and the cost of such compliance activities. We may have limited or no prior experience in certain of these new markets and there is no assurance any of our expansion efforts will be successful. If any of our expansion efforts are unsuccessful, our operating results and reputation may suffer.

 Higher raw material costs and other inputs and an inability to increase our selling prices may materially adversely affect our operating results and financial condition.    The cost of raw materials and other inputs (particularly resin, rubber, metal, anodization costs and transportation and energy costs) are volatile and susceptible to rapid and substantial changes due to factors beyond our control, such as changing economic conditions, currency fluctuations, weather conditions, political unrest and instability in energy-producing nations, and supply and demand pressures. Raw material costs may increase in the coming years and, although we have generally been able to increase selling prices to cover increased costs,

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future market conditions may prevent us from passing these increased costs on to our customers through timely price increases. In addition, we may not be able to improve productivity or realize savings from our cost reduction programs sufficiently enough to offset the impact of increased raw material costs. As a result, higher raw material costs could result in declining margins and operating results.

 In difficult market conditions, our fixed costs structure combined with potentially lower revenues may negatively impact our results.    Our business is characterized by high fixed costs and, notwithstanding our utilization of third-party manufacturing capacity, most of our production requirements are met by our own manufacturing facilities. In difficult environments, we are generally faced with a decline in the utilization rates of our manufacturing facilities due to decreases in product demand. During such periods, our plants do not operate at full capacity and the costs associated with this excess capacity are charged directly to cost of sales. Difficult market conditions in the future may adversely affect our utilization rates and consequently our future gross margins, and this, in turn, could have a material negative impact on our business, financial condition and results of operations.

 We face strong global competition and our market share could decline.    All of the markets in which we operate are highly competitive and we continue to experience price competition in all product lines and segments. Competitors include privately and publicly held entities. Our competitors mainly range from regional to international companies, and we also experience some local competition mainly in Asia and Latin America. Some fragrance marketers are sourcing their manufacturing requirements including filling of their product in Asia and importing the finished product back into the United States or Europe. If we are unable to compete successfully, our market share may decline, which could materially adversely affect our results of operations and financial condition.

 If our unionized employees were to engage in a strike or other work stoppage, our business, operating results and financial condition could be materially adversely affected.    The majority of our European and Latin American employees are covered by collective bargaining arrangements made either at the local or national level in their respective countries and approximately 200 of our North American employees are covered by a collective bargaining agreement. Although we believe that our relations with our employees are satisfactory, no assurance can be given that this will continue. If disputes with our unions arise, or if our unionized workers engage in a strike or other work stoppage, we could incur higher labor costs or experience a significant disruption of operations, which could have a material adverse effect on our business, operating results and financial position.

 If we were to incur a significant product liability claim above our current insurance coverage, our business, operating results and financial condition could be materially adversely affected.    Approximately 29% of our net sales are made to customers in the pharmaceutical industry. If our devices fail to operate as intended, medication prescribed for patients may be under administered, or may be over administered. The failure of our devices to operate as intended may result in a product liability claim against us. We believe we maintain adequate levels of product liability insurance coverage. A product liability claim or claims in our Pharma segment or our other segments in excess of our insurance coverage or not covered by existing insurance may materially adversely affect our business, operating results and financial condition.

 The success or failure of our customers' products, particularly in the pharmaceutical market, may materially affect our operating results and financial condition.    In the pharmaceutical market, the proprietary nature of our customers' products and the success or failure of their products in the market using our dispensing systems may have a material impact on our operating results and financial condition. We may potentially work for years on modifying our dispensing device to work in conjunction with a customer's drug formulation. If the customer's pharmaceutical product is not approved by regulatory bodies or it is not successful on the market, the associated costs may not be recovered.

 Single sourced materials and manufacturing sites could adversely impact our ability to deliver product.    The Company sources certain materials, especially some resins and rubber components for our pharmaceutical segment, from a single source. Any disruption in the supply of these materials could adversely impact our ability to deliver product to our customers. Similarly, we have certain components and / or products that are manufactured at a single location or from a single machine or mold. Any disruption to the manufacturing process could also adversely impact our ability to deliver product to our customers.

 We have approximately $330 million in recorded goodwill and changes in future business conditions could cause this asset to become impaired, requiring write-downs that would reduce our operating income.    We evaluate the recoverability of goodwill amounts annually, or more frequently when evidence of potential impairment exists. The impairment test is based on several factors requiring judgment. A decrease in expected reporting unit cash flows or changes in market conditions may indicate potential impairment of recorded goodwill and, as a result, our operating results could be materially adversely affected. See "Critical Accounting Estimates" in Part II, Item 7 for additional information.

 Government regulation on environmental matters regarding recycling or environmental sustainability policies could impact our business.    Future government regulations mandating the use or limitations of certain materials could impact our

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manufacturing processes or the technologies we use forcing us to reinvest in alternative materials or assets used in the production of our products.

 Increased cybersecurity threats could pose a risk to our operations.    Increased global information security threats and more sophisticated, targeted computer crime pose a risk to the confidentiality, availability and integrity of our data, operations and infrastructure. While we do not believe we have experienced a specific cyber incident such as unauthorized access to our systems or disruption of functionality, we attempt to mitigate these types of risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems. We also periodically test our systems for vulnerabilities and have recently on occasion used a third party to conduct such tests. Even with these mitigations, our information systems remain potentially vulnerable to sophisticated cybersecurity threats. Depending on their nature and scope, such threats could potentially lead to the compromise of confidential information, improper use of our systems and networks, manipulation and destruction of data, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.

 Consolidation of customer base could impact of business.    We believe mergers and acquisitions within our customer base create opportunities for increasing sales due to the breadth of our product line, our international presence and our long-term relationships with certain customers. However, consolidation of our customers could lead to pricing pressures, concentration of credit risk and fewer opportunities to introduce new products to the market.

FACTOR AFFECTING APTARGROUP STOCK

 Ownership by Certain Significant Shareholders.    Currently, Aptar has six shareholders who each own between 5% and 11% of our outstanding common stock. If one of these significant shareholders decides to sell significant volumes of our stock, this could put downward pressure on the price of the stock.


ITEM 1B.    UNRESOLVED STAFF COMMENTS

 The Company has no unresolved comments from the SEC.


ITEM 2.    PROPERTIES

 We lease or own our principal offices and manufacturing facilities. None of the owned principal properties is subject to a lien or other encumbrance material to our operations. We believe that existing operating leases will be renegotiated as they expire, will be acquired through purchase options or that suitable alternative properties will be leased on acceptable terms. We consider the condition and extent of utilization of our manufacturing facilities and other properties to be generally good,

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and the capacity of our plants to be adequate for the needs of our business. The locations of our principal manufacturing facilities, by country, are set forth below:

ARGENTINA
Florencio Varela (1 & 2)
Tortuguitas (1 & 3)

BRAZIL
Cajamar (1)
Maringá Paraná (1 & 3)
Jundiai (1)

CHINA
Suzhou (1, 2 & 3)

COLOMBIA
Cali (1)

CZECH REPUBLIC
Ckyne (1 & 3)

FRANCE
Annecy (1 & 2)
Brecey (2)
Charleval (1 & 2)
Granville (2)
Le Neubourg (1)
Le Vaudreuil (2)
Oyonnax (1)
Poincy (1 & 3)
Verneuil Sur Avre (1)
  GERMANY
Böhringen (1 & 2)
Dortmund (1)
Eigeltingen (2)
Freyung (1 & 3)
Menden (1)

INDIA
Himachal Pradesh (1)
Hyderabad (1 & 3)
Mumbai (2)

INDONESIA
Cikarang, Bekasi (1)

IRELAND
Ballinasloe, County Galway (1)

ITALY
Manoppello (1)
San Giovanni Teatino (Chieti) (1 & 3)

MEXICO
Queretaro (1 & 3)

RUSSIA
Vladimir (1 & 3)
  SPAIN
Madrid (1)
Torello (1 & 3)

SWITZERLAND
Mezzovico (2)

THAILAND
Chonburi (1)

UNITED KINGDOM
Leeds, England (1 & 3)

UNITED STATES
Cary, Illinois (1, 2 & 3)
Congers, New York (2)
Libertyville, Illinois (1 & 3)
Lincolnton, North Carolina (3)
McHenry, Illinois (1 & 2)
Midland, Michigan (1 & 3)
Mukwonago, Wisconsin (1, 2 & 3)
Stratford, Connecticut (1 & 3)
Torrington, Connecticut (1 & 3)
Watertown, Connecticut (1 & 3)
(1)
Locations of facilities manufacturing for the Beauty + Home segment.
(2)
Locations of facilities manufacturing for the Pharma segment.
(3)
Locations of facilities manufacturing for the Food + Beverage segment.

        We also have sales personnel in Canada and Japan. Our corporate office is located in Crystal Lake, Illinois.

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ITEM 3.    LEGAL PROCEEDINGS

 The Company, in the normal course of business, is subject to a number of lawsuits and claims both actual and potential in nature. While management believes the resolution of these claims and lawsuits will not have a material adverse effect on the Company's financial position or results of operations or cash flows, claims and legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur that could include amounts in excess of any accruals which management has established. Were such unfavorable final outcomes to occur, it is possible that they could have a material adverse effect on our financial position, results of operations and cash flows.


ITEM 4.    MINE SAFETY DISCLOSURES

 Not applicable.


PART II


ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR REGISTRANT'S COMMON EQUITY

 Information regarding market prices of our Common Stock and dividends declared may be found in Note 21 to the Consolidated Financial Statements in Item 8 (which is incorporated by reference herein). Our Common Stock is traded on the New York Stock Exchange under the symbol ATR. As of February 10, 2015, there were approximately 300 holders of record of our Common Stock.


RECENT SALES OF UNREGISTERED SECURITIES

 The employees of AptarGroup S.A.S. and Aptar France S.A.S., our subsidiaries, are eligible to participate in the FCP Aptar Savings Plan (the "Plan"). All eligible participants are located outside of the United States. An independent agent purchases shares of Common Stock available under the Plan for cash on the open market and we do not issue shares. We do not receive any proceeds from the purchase of Common Stock under the Plan. The agent under the Plan is Banque Nationale de Paris Paribas Fund Services. No underwriters are used under the Plan. All shares are sold in reliance upon the exemption from registration under the Securities Act of 1933 provided by Regulation S promulgated under that Act. During the quarter ended December 31, 2014, the Plan purchased 800 shares of our common stock on behalf of the participants at an average price of $68.38 per share, for an aggregate amount of $54.7 thousand, and sold 3,980 shares of our Common Stock on behalf of the participants at an average price of $64.33 per share, for an aggregate amount of $256.0 thousand. At December 31, 2014, the Plan owned 46,356 shares of our Common Stock.


ISSUER PURCHASES OF EQUITY SECURITIES

 The Company announced the repurchase program in effect through October 30, 2014 on July 18, 2013, which authorized the Company to repurchase up to four million shares of our outstanding Common Stock. Under this program, the Company repurchased approximately 1.4 million shares of its outstanding Common Stock in 2014 at a total cost of $91 million.

        On October 30, 2014, the Company announced a new share repurchase authorization of up to $350 million of Common Stock. This new authorization replaces previous authorizations and has no expiration date. AptarGroup may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions.

        On December 16, 2014, the Company entered into an agreement to repurchase approximately $250 million of its Common Stock under an accelerated share repurchase program (the "ASR program"). On that date, the Company paid $250 million to Wells Fargo Bank N.A. ("Wells Fargo") in exchange for approximately 3.1 million shares, currently estimated to represent approximately 80% of the total number of shares expected to be purchased in the ASR program based on market prices at that time. The ultimate number of shares to be repurchased under the ASR program will be based on the volume-weighted average price of the Company's common stock during the term of the ASR program, less a discount. Final settlement of the ASR program is expected to be completed by the end of September 2015, although the settlement may be accelerated at Wells Fargo's option. The ASR program is part of the Company's $350 million share repurchase authorization.

        For the year ended December 31, 2014, Aptar spent $341 million to repurchase approximately 4.5 million shares.

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        The following table summarizes the Company's purchases of its securities for the quarter ended December 31, 2014:

   
 
 
Period
  Total Number
Of Shares
Purchased

  Average Price
Paid Per Share

  Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs

  Approximate Dollar Value of
Shares that May Yet be
Purchased Under the
Plans or Programs
(in millions)

 
 
 
10/1 - 10/31/14       $       $ 350.0  
11/1 - 11/30/14                 350.0  
12/1 - 12/31/14
    3,133,814
(a)
 
       63.82
   
3,133,814
   
         100.0
 
Total     3,133,814 (a) $ 63.82     3,133,814   $ 100.0  
(a)
Represents shares delivered under our accelerated share repurchase program (the "ASR program") as described above.


SHARE PERFORMANCE

 The following graph shows a five year comparison of the cumulative total stockholder return on AptarGroup's common stock as compared to the cumulative total return of the Standard & Poor's 500 Composite Stock Price Index and to an index of peer group companies we selected. The companies included in the peer group are: AEP Industries Inc., Bemis Company, Inc., Crown Holdings, Inc., Graphic Packaging Holding Company, Greif Inc., MeadWestvaco Corporation, Owen's-Illinois, Inc., Packaging Corporation of America, Rock-Tenn Company, Sealed Air Corporation, Silgan Holdings, Inc., Sonoco Products Company, and West Pharmaceutical Services Inc.

Comparison of 5 Year Cumulative Stockholder Returns

GRAPHIC

        The graph and other information furnished in the section titled "Share Performance" under this Part II, Item 5 of this Form 10-K shall not be deemed to be "soliciting" material or to be "filed" with the Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.

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ITEM 6.    SELECTED FINANCIAL DATA

FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA

Dollars in millions, except per share data  
 
 
Years Ended December 31,
  2014
  2013
  2012
  2011
  2010
 
 
 

Statement of Income Data:

                               

Net Sales

  $ 2,597.8   $ 2,520.0   $ 2,331.0   $ 2,337.2   $ 2,076.7  

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

    1,755.3     1,708.9     1,590.4     1,568.3     1,378.8  

% of Net Sales

    67.6 %   67.8 %   68.2 %   67.1 %   66.4 %

Selling, research & development and administrative

    383.9     364.7     341.6     347.6     296.9  

% of Net Sales

    14.8 %   14.4 %   14.7 %   14.9 %   14.3 %

Depreciation and amortization (1)

    152.2     150.0     137.0     134.2     133.0  

% of Net Sales

    5.8 %   6.0 %   5.9 %   5.7 %   6.4 %

Restructuring initiatives

        11.8     3.1     (0.1 )   0.1  

% of Net Sales

        0.5 %   0.1 %        

Operating Income

    306.4     284.6     258.9     287.1     268.0  

% of Net Sales

    11.8 %   11.3 %   11.1 %   12.3 %   12.9 %

Net Income

    191.6     171.9     162.4     183.6     173.6  

% of Net Sales

    7.4 %   6.8 %   7.0 %   7.9 %   8.4 %

Net Income Attributable to AptarGroup, Inc.

    191.7     172.0     162.6     183.7     173.5  

% of Net Sales

    7.4 %   6.8 %   7.0 %   7.9 %   8.4 %

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

   
 
   
 
   
 
   
 
   
 
 

Basic

    2.95     2.60     2.45     2.76     2.58  

Diluted

    2.85     2.52     2.38     2.65     2.48  

Balance Sheet and Other Data:

   
 
   
 
   
 
   
 
   
 
 

Capital Expenditures

  $ 161.9   $ 151.5   $ 174.1   $ 179.7   $ 118.8  

Total Assets

    2,437.2     2,497.8     2,324.4     2,159.3     2,032.7  

Long-Term Obligations

    588.9     354.8     352.9     254.9     258.8  

Net Debt (2)

    441.1     184.7     197.8     61.0     (22.1 )

AptarGroup, Inc. Stockholders' Equity

    1,103.4     1,479.8     1,379.9     1,289.8     1,278.9  

Capital Expenditures % of Net Sales

    6.2 %   6.0 %   7.5 %   7.7 %   5.7 %

Interest Bearing Debt to Total Capitalization (3)

    43.2 %   25.1 %   23.7 %   25.4 %   21.7 %

Net Debt to Net Capitalization (4)

    28.6 %   11.1 %   12.5 %   4.5 %   (1.8 %)

Cash Dividends Declared per Common Share

    1.0 9   1.0 0   .8 8   .8 0   .6 6
(1)
Depreciation and amortization includes $2.7 million and $1.6 million of accelerated depreciation related to the European restructuring plan for the year ended December 31, 2013 and 2012, respectively.
(2)
Net Debt is interest bearing debt less cash and cash equivalents.
(3)
Total Capitalization is AptarGroup, Inc. Stockholders' Equity plus Interest Bearing Debt.
(4)
Net Capitalization is AptarGroup, Inc. Stockholders' Equity plus Net Debt.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands, expect per share amounts or otherwise indicated)

 The objective of the following Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition ("MD&A") is to help the reader understand the financial performance of AptarGroup, Inc. MD&A is presented in eight sections: Overview, Results of Operations, Liquidity and Capital Resources, Off-Balance Sheet Arrangements, Overview of Contractual Obligations, Recently Issued Accounting Pronouncements, Critical Accounting Estimates, Operations Outlook and Forward-Looking Statements. MD&A should be read in conjunction with our consolidated financial statements and accompanying Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.

        In MD&A, "we," "our," "us," "AptarGroup," "AptarGroup, Inc." and "the Company" refer to AptarGroup, Inc. and its consolidated subsidiaries.


OVERVIEW

GENERAL

 We are a leading global solution provider of a broad range of innovative packaging delivery solutions primarily for the beauty, personal care, home care, prescription drug, consumer health care, injectables, food and beverage markets. Our creative packaging solutions enhance the convenience, safety and security of consumers around the globe and allow our customers to differentiate their products in the market.

        We define core sales as net sales excluding acquisitions and changes in foreign currency rates. Core sales is a non-GAAP financial measure. We present this measure as supplemental information to help our investors better understand the trends in our business results over time. Our management uses core sales to evaluate our business on a consistent basis. A reconciliation of core sales growth to net sales growth, the most comparable GAAP measure, can be found on page 15.

        Our diverse product offering and broad global reach drove core sales growth in 2014. In spite of softer macroeconomic conditions and inventory destocking in certain markets, we were able to grow core sales by 5% over the prior year. We saw improvement in year over year core sales growth in each of our business segments, end markets and geographic regions. Earnings growth was under pressure, particularly within our Beauty + Home segment, as we had certain start-up costs related to our expansion in Latin America, negative currency transaction effects and the negative impact on margins from softer volumes at different times throughout the year. However, strong results from our Pharma and Food + Beverage segments drove record annual earnings per share. On a geographic basis excluding currency effects, we benefitted from strong sales growth rates in Latin America and Asia while we had more moderate growth in Europe the U.S.

2014 HIGHLIGHTS

·
Diluted earnings per share increased 13% to a record $2.85 per share compared to $2.52 per share in the prior year.
·
Core sales increased 5%, while reported sales increased 3% due to foreign currency headwinds.
·
Sales growth across all three business segments, end markets and geographic regions drove results.
·
Pharma and Food + Beverage segments reported strong results.
·
Beauty + Home segment sales growth was affected by soft demand in several markets, start-up costs for our Colombian operations and a fire in one of our Brazilian facilities.
·
We spent approximately $341 million to repurchase 4.5 million shares of our common stock, including 3.1 million shares that were acquired as part of our accelerated share repurchase program executed during the fourth quarter.
·
We increased the quarterly dividend by 12% making this our 21st consecutive year of paying an increased annual dividend. We made total dividend payments to our shareholders totaling approximately $71 million.

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RESULTS OF OPERATIONS

 The following table sets forth the consolidated statements of income and the related percentages of net sales for the periods indicated:

   
 
 
 
  2014   2013   2012  
Years Ended December 31,
  Amount in
$ Thousands

  % of
Net Sales

  Amount in
$ Thousands

  % of
Net Sales

  Amount in
$ Thousands

  % of
Net Sales

 
 
 

Net sales

  $ 2,597,809     100.0 % $ 2,520,013     100.0 % $ 2,331,036     100.0 %

Cost of sales (exclusive of depreciation shown below)

    1,755,266     67.6     1,708,936     67.8     1,590,365     68.2  

Selling, research & development and administrative

    383,909     14.8     364,747     14.4     341,634     14.7  

Depreciation and amortization

    152,218     5.8     149,956     6.0     137,022     5.9  

Restructuring initiatives

            11,800     0.5     3,102     0.1  

Operating income

    306,416     11.8     284,574     11.3     258,913     11.1  

Other expense

    (20,115 )   (0.8 )   (20,191 )   (0.8 )   (17,540 )   (0.8 )

Income before income taxes

    286,301     11.0     264,383     10.5     241,373     10.3  

Net Income

    191,624     7.4     171,926     6.8     162,420     7.0  

Effective tax rate

    33.1%           35.0%           32.7%        

NET SALES

 We reported net sales of $2.6 billion for 2014, 3% above 2013 reported net sales of $2.5 billion. The negative translation effect of 2% mainly relates to the strength of the U.S. Dollar compared to Latin American and Asian currencies as the Euro rates remained relatively stable when compared to the U.S. Dollar for the full year. All three operating segments saw core sales increases in 2014, but the consolidated 5% core sales growth was mainly driven by the strong results of our Food + Beverage and Pharma segments.

        In 2013, we reported net sales of $2.5 billion for 2013, 8% above 2012 reported net sales of $2.3 billion. Stelmi, which was acquired in July of 2012, reported sales for the first six months of 2013 of $74.0 million which contributed 3% to the reported increase in 2013 net sales. The negative translation effect from weakening Latin American and Asian currencies was offset by the stronger Euro compared to prior year. This resulted in a 1% positive impact from changes in exchange rates on our reported sales growth. Although all three operating segments saw core sales increases in 2013, the 4% core sales growth was mainly driven by the strong results of our Food + Beverage and Pharma segments.

Net Sales Change over Prior Year
  2014
  2013
 
 
 

Core Sales

    5%     4%  

Currency Effects

    (2% )   1%  

Acquisitions

        3%  

Total Reported Net Sales Growth

    3%     8%  

        Foreign currency effects are approximations of the adjustment necessary to state the prior year earnings per share using current period exchange rates. For further discussion on net sales by reporting segment, please refer to the segment analysis of net sales and operating income on the following pages.

        The following table sets forth, for the periods indicated, net sales by geographic location:

   
 
 
Years Ended December 31,
  2014
  % of Total
  2013
  % of Total
  2012
  % of Total
 
 
 

Domestic

  $ 642,060     25%   $ 634,418     25%   $ 650,637     28%  

Europe

    1,506,992     58%     1,452,041     58%     1,269,289     54%  

Other Foreign

    448,757     17%     433,554     17%     411,110     18%  

COST OF SALES (EXCLUSIVE OF DEPRECIATION SHOWN BELOW)

 Our cost of sales as a percentage of net sales decreased in 2014 to 67.6% compared to 67.8% in 2013.

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The following factors positively impacted our cost of sales percentage in 2014:

 Mix of Products Sold.    Our Pharma segment sales represented a higher percentage of our overall sales in 2014 compared to 2013. This positively impacts our cost of sales percentage as margins on our pharmaceutical products typically are higher than the overall Company average.

 Incremental Cost Savings from Restructuring Plan.    On November 1, 2012, the Company announced a plan to optimize certain capacity in Europe. Due to increased production efficiencies and to better position the Company for future growth in Europe, AptarGroup transferred and consolidated production capacity involving twelve facilities. The plan was substantially completed in 2013 and in 2014 we realized a full year of savings primarily in our Beauty & Home segment.

The following factors negatively impacted our cost of sales percentage in 2014:

 U.S. Overhead Utilization.    Soft demand in certain product lines negatively impacted our North American cost of sales, mainly in our Beauty + Home segment.

 Additional Latin American Costs.    During 2014, our cost of sales was negatively impacted by several events in Latin America which primarily impacted our Beauty + Home segment. We recognized approximately $3.0 million in one-time costs related to the start-up of our Colombian operations. Due to the significant devaluation of certain Latin American currencies, we recognized approximately $3.3 million of negative transaction effects related to the importing of components from different regions. In addition, we incurred $1.3 million of expenses related to a fire that occurred in one of our Brazilian facilities. The expenses related to the fire are expected to be reimbursed in future periods by insurance proceeds which will be recognized in the period they are realizable in accordance with accounting rules.

Our cost of sales as a percentage of net sales decreased in 2013 to 67.8% compared to 68.2% in 2012.

The following factors positively impacted our cost of sales percentage in 2013:

 Mix of Products Sold.    Excluding acquisitions and foreign currency, our Pharma segment sales represented a higher percentage of our overall sales. This positively impacts our cost of sales percentage as margins on our pharmaceutical products typically are higher than the overall Company average.

 Stelmi Acquisition.    In 2012, approximately $3.8 million of inventory fair value adjustments related to the acquisition of Stelmi negatively impacted our cost of sales percentage. However, Stelmi margins are also higher than our Company average margins. Therefore, the strong sales volumes for a full year in 2013 also have a positive impact on the 2013 cost of sales percentage.

The following factors negatively impacted our cost of sales percentage in 2013:

 Weakening of the U.S. Dollar.    We are a net importer from Europe into the U.S. of products produced in Europe with costs denominated in Euros. As a result, when the U.S. dollar or other currencies weaken against the Euro, products produced in Europe (with costs denominated in Euros), and sold in currencies that are weaker compared to the Euro, have a negative impact on cost of sales as a percentage of net sales.

 U.S. Overhead Utilization.    Soft demand in certain product lines, along with costs related to our enterprise system rollouts, negatively impacted our North American cost of sales, mainly in our Beauty + Home segment.

SELLING, RESEARCH & DEVELOPMENT AND ADMINISTRATIVE

 Our Selling, Research & Development and Administrative expenses ("SG&A") increased approximately 5% or $19.2 million in 2014 compared to the same period a year ago. Excluding changes in foreign currency rates, SG&A increased by approximately $24.2 million compared to the same period a year ago. The increase is due to several factors, including higher research and development costs mainly related to our bonded aluminum to plastic technology. We also realized higher information technology costs associated with our ongoing enterprise resource planning system roll-ins along with higher stock compensation expense. For 2014, SG&A as a percentage of net sales increased to 14.8% compared to 14.4% of net sales in the same period of the prior year due primarily due to higher expenses during the current year.

        In 2013, our SG&A expenses increased approximately 7% or $23.1 million compared to the same period a year ago. Excluding changes in foreign currency rates, SG&A increased by approximately $20.3 million compared to the same period a year ago. Part of the increase is related to the Stelmi acquisition. In the first half of 2013, the Stelmi Group contributed approximately $9.9 million to our SG&A expense totals, while in 2012, we recorded $5.9 million of professional fees related to the acquisition. Also contributing to the increase were additional personnel costs and professional fees related to our North American enterprise system rollouts along with facility start-up costs in Latin America. For 2013, SG&A as a percentage of net sales decreased to 14.4% compared to 14.7% of net sales in the same period of the prior year due primarily to the increase in sales noted above.

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DEPRECIATION AND AMORTIZATION

 Depreciation and amortization expense increased approximately 2% or $2.3 million in 2014. Excluding changes in foreign currency rates, depreciation and amortization increased by approximately $3.6 million compared to the same period a year ago. The investments in our new products and the continued roll-out of our global enterprise resource planning system mentioned above exceeded exceptional charges incurred in 2013. Depreciation and amortization as a percentage of net sales decreased slightly to 5.8% compared to 6.0% for the same period a year ago mainly due to the increase in sales in the current year.

        In 2013, depreciation and amortization expense increased approximately 9% or $12.9 million. Excluding changes in foreign currency rates, depreciation and amortization increased by approximately $11.1 million compared to the same period a year ago. Incremental Stelmi depreciation and amortization for the first six months of 2013 represented $4.8 million of this increase while the accelerated depreciation on certain corporate assets and the European restructuring plan represented $4.2 million. Additional investments in our business make up the remaining increase. Excluding acquisitions, depreciation and amortization as a percentage of net sales increased slightly to 6.0% compared to 5.9% for the same period a year ago mainly due to the increase in expenses noted above.

RESTRUCTURING INITIATIVES

 On November 1, 2012, the Company announced a plan to optimize certain capacity in Europe. Due to increased production efficiencies and to better position the Company for future growth in Europe, AptarGroup transferred and consolidated production capacity involving twelve facilities. Under the plan, two facilities closed which impacted approximately 170 employees. During 2013, we recognized $11.8 million of restructuring expenses along with $2.7 million accelerated depreciation of assets mentioned above. The plan was substantially completed at the end of 2013 with total costs of approximately $19.5 million.

OPERATING INCOME

 Operating income increased approximately $21.8 million or 8% to $306.4 million in 2014. Excluding changes in currency rates, operating income increased by approximately $22.7 million in 2014. 2013 results included the negative impact of the European restructuring plan charges of $11.8 million. The remaining $10.9 million increase in operating income over the prior year is due to additional operating income from our sales growth, primarily from the Pharma and Food + Beverage segments. Reported operating income as a percentage of net sales increased to 11.8% in 2014 compared to 11.3% for the same period in the prior year due to the costs associated with our European restructuring plan in 2013.

        In 2013, operating income increased approximately $25.7 million or 10% to $284.6 million. Excluding acquisitions and restructuring costs operating income increased by $11.3 million. The increase is mainly related to the sales growth across all three segments as discussed above. In 2013, the positive impact of Stelmi, which had operating income of $14.4 million in the first six months of 2013, was offset by the negative impact related to restructuring plan charges of $14.6 million. The 2012 results were negatively impacted by restructuring plan charges of $4.9 million, $5.9 million of Stelmi acquisition costs and $3.8 million related to Stelmi inventory fair value adjustments as mentioned above. Reported operating income, as a percentage of sales, increased slightly to 11.3% in 2013 compared to 11.1% in 2012 mainly due to the increase in sales discussed above.

NET OTHER EXPENSES

 Net other expenses in 2014 decreased slightly to $20.1 million compared to $20.2 million in 2013. Higher interest income and lower hedging costs were mostly offset by the recognition of a $1.5 million write-down on a non-controlling investment taken during the first quarter of 2014 to align with the current fair value.

        In 2013, net other expenses increased to $20.2 million compared to $17.5 million in 2012. This increase is mainly due to $1.6 million higher interest expense and increased losses in the fourth quarter on foreign currency transactions mainly due to the significant devaluation of the Argentine Peso, Brazilian Real and Indian Rupee when compared to the U.S. Dollar.

EFFECTIVE TAX RATE

 The reported effective tax rate on net income for 2014 and 2013 was 33.1% and 35.0%, respectively. The Company did not repatriate any earnings from foreign jurisdictions to the U.S. in 2014 and this reduced our reported effective tax rate compared to the prior year.

        The reported effective tax rate on net income for 2013 and 2012 was 35.0% and 32.7%, respectively. The higher tax rate for 2013 is primarily the result of tax regulation changes enacted in France, offset partially by the tax benefits resulting from an Italian tax law change as well as the expected use of a Brazilian net operating loss.

NET INCOME ATTRIBUTABLE TO APTARGROUP, INC.

 We reported net income of $191.7 million compared to $172.0 million reported in 2013 and $162.6 million reported in 2012.

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BEAUTY + HOME SEGMENT

   
 
 
Years Ended December 31,
  2014
  2013
  2012
  % Change
2014 vs. 2013

  % Change
2013 vs. 2012

 
 
 

Net Sales

  $ 1,498,297   $ 1,488,145   $ 1,453,940     0.7 %   2.4 %

Segment Income (1)

    98,368     109,272     123,527     (10.0 )   (11.5 )

Segment Income as a percentage of Net Sales

    6.6%     7.3%     8.5%              
(1)
Segment income is defined as earnings before net interest expense, certain corporate expenses, restructuring initiatives and income taxes. The Company evaluates performance of its business units and allocates resources based upon segment income. For a reconciliation of segment income to income before income taxes, see Note 17 to the Consolidated Financial Statements in Item 8.

Net sales increased approximately 1% in 2014 to $1.50 billion compared to $1.49 billion in 2013. Changes in foreign currency negatively impacted reported sales for 2014 by 2%. Excluding changes in exchange rates, sales increased 3% in 2014 compared to the prior year. Sales of our products, excluding foreign currency changes, to the beauty market increased approximately 4% while sales to the personal care and home care markets increased approximately 3% and 4%, respectively, in 2014 compared to 2013. The increase in beauty sales is primarily due to growth of our prestige fragrance and skin care products. Personal care increased over the prior year due to stronger sales to our personal cleansing and sun care customers while the home care market increased mainly due to improved laundry care sales. Geographically, all four regions reported increases in net sales with strong core sales growth in our emerging markets along with moderate growth in Europe and the U.S. Customer tooling sales, excluding foreign currency changes, decreased in 2014 to $33.9 million compared to $37.7 million in the prior year.

        In 2013, net sales increased approximately 2% to $1.49 billion compared to $1.45 billion in 2012. Changes in foreign currency rates did not have a material impact on reported sales for 2013. Sales of our products, excluding foreign currency changes, to the beauty market increased approximately 2% while sales to the personal care market increased approximately 4% in 2013 compared to 2012. Softer sun care sales due to cooler weather conditions were offset by strong sales growth in Asia and Latin America. Sales of our home care products, excluding foreign currency changes, decreased approximately 4% mainly due to exiting certain unprofitable businesses in Europe. Geographically, increases in Europe, Asia and Latin America offset the softness in North America. Customer tooling sales, excluding foreign currency changes, decreased in 2013 to $38.6 million compared to $42.8 million in the prior year.

        Segment income for 2014 decreased approximately 10% to $98.4 million from $109.3 million reported in 2013. Soft demand in certain product lines negatively impacted our North American region. We also recognized approximately $3.0 million in one-time costs related to the start-up of our Colombian operations. Due to the significant devaluation of certain Latin American currencies, we recognized approximately $3.3 million of negative transaction effects related to the importing of components from different regions. In addition, we incurred $1.3 million of expense related to a fire that occurred in one of our Brazilian facilities. The expenses related to the fire are expected to be reimbursed in future periods by insurance proceeds which will be recognized in the period they are realizable.

        In 2013, segment income decreased approximately 12% to $109.3 million from $123.5 million reported in 2012. Increased earnings from the strong sales in Europe, Asia and Latin America were not able to offset the higher labor costs and operational inefficiencies brought on by softness in the North American region and facility start-up costs in Brazil and Colombia. Additional personnel costs and professional fees related to our North American enterprise system rollouts also negatively impacted segment income in 2013.

PHARMA SEGMENT

   
 
 
Years Ended December 31,
  2014
  2013
  2012
  % Change
2014 vs. 2013

  % Change
2013 vs. 2012

 
 
 

Net Sales

  $ 751,226   $ 708,774   $ 588,693     6.0 %   20.4 %

Segment Income

    204,698     189,689     141,912     7.9     33.7  

Segment Income as a percentage of Net Sales

    27.2%     26.8%     24.1%              

Net sales increased 6% in 2014 to $751.2 million compared to $708.8 million in 2013. Foreign currency changes negatively impacted total segment sales by 1%. Excluding changes in exchange rates, sales increased 7% in 2014 compared to the prior year. Excluding foreign currency rate changes, sales of our products increased in each end market and geographic region we serve. Sales to the prescription drug market increased 6% on strong demand for our metered dose inhaler valves for various asthma and COPD treatments, including new generic launches in developing regions. We also continued to see

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strong demand for our consumer health care products, which increased 12% partially due to preservative free eye care launches in Europe using our innovative ophthalmic squeeze dispenser along with strong sales of our products used for nasal decongestant. Excluding foreign currency rate changes, sales to the injectables market increased 1%. Customer tooling sales, excluding foreign currency changes, decreased in 2014 to $16.9 million compared to $21.1 million in the prior year.

        In 2013, net sales increased 20% to $708.8 million compared to $588.7 million in 2012. Stelmi sales were $74.0 million during the first half of 2013 and represented 12% of the increase. Foreign currency changes had a positive impact of 2% on total segment sales. Excluding acquisitions and changes in exchange rates, sales increased 6% in 2013 compared to the prior year. Excluding acquisitions and foreign currency rate changes, sales of our products to the prescription drug and consumer health care markets increased 2% and 11%, respectively, in 2013 compared to the prior year. Decreases in the first quarter related to destocking of inventory by our customers serving the generic allergy market, especially in North America, and softness in the consumer health care market in Europe were more than offset by the increase in sales during the last nine months of the year. We also increased second half injectables sales during 2013 compared to 2012 due to strong volumes and selective pricing increases. Customer tooling sales, excluding foreign currency changes, also increased in 2013 to $22.0 million compared to $18.6 million in the prior year.

        Segment income increased 8% to $204.7 million in 2014 compared to $189.7 million in 2013. This increase is mainly attributed to higher sales for the prescription and consumer health care markets discussed above. The Pharma segment also recognized a $1.5 million expense in the first quarter of 2014 related to the write-down of a non-controlling investment to fair value.

        In 2013, segment income increased 34% to $189.7 million compared to $141.9 million in 2012. Stelmi segment income was $14.5 million in the first six months of 2013. We also reported the $5.9 million of acquisition fees and $3.8 million of fair value adjustments related to Stelmi during 2012. Excluding Stelmi and the related acquisition fees, segment income increased $23.6 million in 2013 compared to the prior year. This increase is attributed to the higher sales in each of the markets we serve by this segment along with improved overhead absorption at our Pharma operating facilities.

FOOD + BEVERAGE SEGMENT

   
 
 
Years Ended December 31,
  2014
  2013
  2012
  % Change
2014 vs. 2013

  % Change
2013 vs. 2012

 
 
 

Net Sales

  $ 348,286   $ 323,094   $ 288,403     7.8 %   12.0 %

Segment Income

    37,728     35,186     30,415     7.2     15.7  

Segment Income as a percentage of Net Sales

    10.8%     10.9%     10.5%              

Net sales increased by approximately 8% in 2014 to $348.3 million compared to $323.1 million in 2013. Excluding changes in foreign currency rates, sales increased 9%. Sales of our products, excluding foreign currency changes, to the food market increased 7% and sales of our products to the beverage market increased approximately 11% in 2014 compared to the prior year. The food sales increase is mainly due to improving sales of our products used to dispense sauces/condiments and dairy creamers. The beverage sales increase is driven by the continued success of our products used on functional beverages in the Asian region as well as growth in the concentrate flavoring market in Europe. Customer tooling sales, excluding foreign currency changes, also increased in 2014 to $28.5 million compared to $27.2 million in the prior year.

        In 2013, net sales increased by approximately 12% to $323.1 million compared to $288.4 million in 2012. Excluding changes in foreign currency rates, sales increased 11%. Sales of our products, excluding foreign currency changes, to the food market increased 10% and sales of our products to the beverage market increased approximately 13% in 2013 compared to the prior year. The sales increase to the food market is driven by strong product sales to the condiment, dairy and infant formula markets along with tooling sales, which increased $2.2 million over 2012. The increase in sales to the beverage market is mainly due to increased product sales globally, especially in Asia for the functional bottled water market.

        Segment income increased 7% to $37.7 million in 2014 compared to $35.2 million in 2013. This increase is mainly driven by the increase in product sales to both the food and beverage markets.

        In 2013, segment income increased 16% to $35.2 million compared to $30.4 million in 2012. Strong growth in product sales along with improved manufacturing productivity and cost absorption contributed to the improvements in 2013 compared to the prior year.

CORPORATE & OTHER

 Certain costs that are not allocated to our three operating business segments are classified as "Corporate & Other," which is presented separately in Note 17 of the Notes to the Consolidated Financial Statements. Corporate & Other primarily includes certain corporate compensation, professional fees, certain information system costs and LIFO inventory adjustments.

        Corporate & Other expense in 2014 increased slightly to $38.3 million compared to $38.0 million in 2013. The increase is mainly due to increases in professional fees associated with our legal entity reorganization project in 2014. The 2013 Corporate & Other expense included a $1.5 million adjustment for accelerated depreciation recognized on certain corporate assets in 2013.

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        In 2013, Corporate & Other expense increased to $38.0 million compared to $33.8 million in 2012. The increase is mainly due to a $1.5 million adjustment for accelerated depreciation on certain corporate assets and increased realized foreign currency translation losses due to the devaluation of certain currencies relative to the U.S. Dollar.


LIQUIDITY AND CAPITAL RESOURCES

 Our primary sources of liquidity are cash flows provided by our operations and our revolving credit facility. In 2014, our operations provided cash flows that totaled $314.6 million compared to $285.4 million in 2013 and $313.9 million in 2012. The increase in cash flow from operations in 2014 is mainly due to lower cash used for working capital compared to the prior year. A majority of the operating cash flows were utilized to finance capital expenditures. Comparing 2013 to 2012, the decrease in cash flow from operations relates to an increase in working capital needs in 2013 compared to 2012 mainly due to higher sales levels.

        We used $159.2 million in cash for investing activities during 2014, compared to $157.1 million during 2013 and $359.5 million during 2012. The increase was primarily related to the increase in capital expenditures of approximately $10.4 million during the year. Comparing 2013 to 2012, the decrease in cash used for investing activities is primarily due a decrease in capital expenditures of approximately $22.5 million as well as the Stelmi acquisition in July of 2012 which utilized $188 million in cash. We estimate that we will spend approximately $150 million (assuming current exchange rates) on capital expenditures in 2015.

        Our net cash used for financing activities in 2014 was $19.0 million compared to $67.1 million in 2013 and $99.4 million in 2012. In 2014, the decrease in cash used for financing activities was due to an increase in our proceeds from long-term debt which was primarily used to fund share repurchases through our accelerated share repurchase program. Comparing 2013 to 2012, the decrease in cash used for financing activities was primarily due to an increase in our borrowings which was used in part to fund a $39.0 million increase in share repurchases.

        Cash and equivalents increased $89.9 million to $399.8 million at the end of 2014 from $309.9 million at the end of 2013. Total short and long-term interest bearing debt increased to $840.9 million at the end of 2014 from $494.6 million at the end of 2013. The ratio of our Net Debt (interest bearing debt less cash and cash equivalents) to Net Capital (Stockholders' Equity plus Net Debt) increased to 28.6% compared to 11.1% as of December 31, 2013.

        On January 31, 2012, we entered into a revolving credit facility that provides for unsecured financing of up to $300 million. Each borrowing under this credit facility will bear interest at rates based on LIBOR, prime rates or other similar rates, in each case plus an applicable margin. A facility fee on the total amount of the facility is also payable quarterly, regardless of usage. The applicable margins for borrowings under the new credit facility and the facility fee percentage may change from time to time depending on changes in AptarGroup's consolidated leverage ratio. On January 31, 2013, we amended the revolving credit facility to, among other things, add a swingline loan sub-facility and extend the maturity date for the revolving credit facility by one year, to January 31, 2018. On January 31, 2014, we amended the revolving credit facility to, among other things, increase the amount of permitted receivables transactions from $100 to $150 million, reduce the cost of committed funds by 12.5 basis points and uncommitted funds by 2.5 basis points, and extend the maturity date of the revolving credit facility by one year, to January 31, 2019. On December 16, 2014, we amended the credit facility to, among other things, change our financial covenants to the leverage and interest coverage ratios shown in the table below, and extend the maturity date of the revolving credit facility to December 16, 2019. The outstanding balance under the credit facility was $230 million at December 31, 2014 and $110 million at December 31, 2013 and is reported as notes payable in the current liabilities section of the Consolidated Balance Sheets. We incurred approximately $2.7 million and $1.0 million in interest and fees related to this credit facility during 2014 and 2013, respectively.

        Our revolving credit facility and certain long-term obligations require us to satisfy certain financial and other covenants including:

 
  Requirement
  Level at December 31, 2014

Consolidated Leverage Ratio (a)

  Maximum of 3.50 to 1.00   1.09 to 1.00

Consolidated Interest Coverage Ratio (a)

  Minimum of 3.00 to 1.00   21.80 to 1.00
    (a)
    Definitions of ratios are included as part of the revolving credit facility agreement.

        Based upon the above consolidated leverage ratio covenant, we would have the ability to borrow approximately an additional $1.1 billion before the 3.50 to 1.00 ratio requirement was exceeded.

        Our foreign operations have historically met cash requirements with the use of internally generated cash or borrowings. These foreign subsidiaries have financing arrangements with several foreign banks to fund operations located outside the U.S., but the majority of these arrangements are uncommitted. Cash generated by foreign operations has generally been reinvested locally. The majority of our $399.8 million in cash and equivalents is located outside of the U.S. We manage our global cash requirements considering (i) available funds among the many subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances. The repatriation of non-U.S. cash balances from certain subsidiaries could have adverse tax consequences as we may be required to pay income tax on those funds. Historically, the tax consequences associated with repatriating current year earnings to the U.S. has been between 10% and 14% of the repatriated amount. We do not expect future impacts to be materially different.

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        We believe we are in a strong financial position and have the financial resources to meet our business requirements in the foreseeable future. We have historically used cash flow from operations as our primary source of liquidity. Our primary uses of liquidity are to invest in equipment and facilities that are necessary to support our growth and to make acquisitions that will contribute to the achievement of our strategic objectives. Other uses of liquidity include paying dividends to shareholders and repurchasing shares of our common stock. In the event that customer demand would decrease significantly for a prolonged period of time and negatively impact cash flow from operations, we would have the ability to restrict and significantly reduce capital expenditure levels, as well as evaluate our acquisition strategy and dividend and share repurchase programs. A prolonged and significant reduction in capital expenditure levels could increase future repairs and maintenance costs as well as have a negative impact on operating margins if we were unable to invest in new innovative products.


OFF-BALANCE SHEET ARRANGEMENTS

 We lease certain warehouse, plant and office facilities as well as certain equipment under noncancelable operating leases expiring at various dates through the year 2027. Most of the operating leases contain renewal options and certain equipment leases include options to purchase during or at the end of the lease term. Other than operating lease obligations, we do not have any off-balance sheet arrangements. See the following section "Overview of Contractual Obligations" for future payments relating to operating leases.


OVERVIEW OF CONTRACTUAL OBLIGATIONS

 Below is a table of our outstanding contractual obligations and future payments as of December 31, 2014:

   
 
 
Payment Due by Period
  Total
  2015
  2016-2017
  2018-2019
  2020 and
After

 
 
 

Long-term debt (1)

  $ 605,160   $ 18,057   $ 51,217   $ 75,000   $ 460,886  

Capital lease obligations (1)

    2,424     635     1,296     493      

Operating leases

    84,873     19,292     26,308     17,916     21,357  

Notes payable (2)

    233,284     233,284              

Purchase obligations (3)

    31,850     21,084         10,766      

Interest obligations (4)

    165,373     24,561     43,257     35,044     62,511  

Required minimum pension contribution (5)

                     

Other liabilities reflected on the balance sheet under GAAP (6)

                     
                   

Total Contractual Obligations

  $ 1,122,964   $ 316,913   $ 122,078   $ 139,219   $ 544,754  
(1)
The future payments listed above for capital lease obligations and long-term debt repayments reflect only principal payments.
(2)
Notes payable mainly includes our revolving credit facility. The future payments listed above assume that the amounts under this credit facility will be paid in 2015; however the final maturity date of the facility is in 2019. The future payments listed above also assume that no additional amounts will be drawn under this credit facility.
(3)
Purchase obligations are agreements to purchase goods or services that are enforceable and legally binding on the Company that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transactions.
(4)
Approximately 0.3% of our total interest bearing long-term debt has variable interest rates. Using our long-term variable rate debt outstanding as of December 31, 2014 of approximately $1.7 million at an average rate of approximately 6.7%, we included approximately $0.1 million of variable interest rate obligations in 2014. No variable interest rate obligations were included in subsequent years.
(5)
This line represents the required minimum pension contribution obligation for the Company's U.S. plans. At this time, the Company is not required to make a contribution. The Company also makes contributions to its foreign pension plans but amounts are expected to be discretionary in 2015 and future years. Therefore amounts related to these plans are not included in the preceding table.
(6)
This line represents the current portion of the liability for uncertain tax positions. Aside from deferred income taxes, we have approximately $110.6 million of other deferred long-term liabilities on the balance sheet, which consist primarily of retirement plan obligations as described in Note 8 to the Consolidated Financial Statements. The Company is not able to reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease over time. Therefore, the long-term portion of the liability is excluded from the preceding table.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 We have reviewed the recently issued accounting standards updates to the FASB's Accounting Standards Codification that have future effective dates. Standards which are effective for 2014 are discussed in Note 1 of the Notes to Consolidated Financial Statements.

        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. The guidance will be effective for the Company's fiscal year beginning after December 15, 2016. Early application is not permitted. We are currently evaluating the effect that the guidance will have on our financial statements.

        Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.


CRITICAL ACCOUNTING ESTIMATES

 The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, pensions and contingencies. We base our estimates on historical experience and on a variety of other assumptions believed to be reasonable in order to make judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in preparation of our Consolidated Financial Statements. Management has discussed the development and selection of these critical accounting estimates with the audit committee of our Board of Directors and the audit committee has reviewed our disclosure relating to it in this Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition ("MD&A").

IMPAIRMENT OF GOODWILL

 In accordance with current accounting standards, goodwill has an indefinite life and is not amortized. We evaluate our goodwill for impairment at the reporting unit level on an annual basis, or whenever indicators of impairment exist. We have determined that our business segments represent our reporting units except for Injectables which, based on our review, qualifies as a separate reporting unit for goodwill impairment testing. As of December 31, 2014, we have $329.7 million of goodwill, which is allocated as follows: $35.0 million is allocated to the Pharma reporting unit, $106.6 million is allocated to the Injectables reporting unit, $171.1 million is allocated to the Beauty + Home reporting unit and $17.0 million is allocated to the Food + Beverage reporting unit.

        We believe that the accounting estimate related to determining the fair value of our reporting units is a critical accounting estimate because: (1) it is highly susceptible to change from period to period because it requires Company management to make assumptions about the future cash flows for each reporting unit over several years in the future, and (2) the impact that recognizing an impairment would have on the assets reported on our balance sheet as well as our results of operations could be material. Management's assumptions about future cash flows for the reporting units require significant judgment and actual cash flows in the future may differ significantly from those forecasted today. The estimate for future cash flows and its impact on the impairment testing of goodwill is a critical accounting estimate for all the segments of our business.

        For our goodwill impairment assessment we have adopted a standard that provides an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (greater than 50 percent chance) that the fair value of a reporting unit is less than its carrying amount. Such qualitative factors may include the following: macroeconomic conditions; industry and market considerations; cost factors; overall financial performance; and other relevant entity-specific events. In the absence of sufficient qualitative factors, goodwill impairment is determined utilizing a two-step process. If it is determined that the fair value of a reporting unit is below its carrying amount, where necessary, goodwill will be impaired at that time.

        We performed our annual goodwill impairment assessment as of December 31, 2014 for each of our reporting units. Based on our qualitative assessment of macroeconomic, industry, and market events and circumstances as well as the overall financial performance of the reporting units, we determined it was more likely than not that the fair value of goodwill attributed to these reporting units was greater than its carrying amount. As such, the annual two-step impairment test was deemed not necessary to be performed for our reporting units for the year ended December 31, 2014.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

 We record an allowance for doubtful accounts as an estimate of the inability of our customers to make their required payments. We determine the amount of our allowance for doubtful accounts by looking at a variety of factors. First, we examine an aging report of the accounts receivable in each entity within the Company. The aging report lists past due amounts according to invoice terms. In addition, we consider historical experience with the customers, the current economic

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environment, the credit rating of the customers and general overall market conditions. In some countries we maintain credit insurance, which can be used in certain cases of non-payment.

        We believe that the accounting estimate related to the allowance for doubtful accounts is a critical accounting estimate because: (1) it requires management to make assumptions about the ability to collect amounts owed from customers in the future, and (2) changes to these assumptions or estimates could have a material impact on our results of operations. The estimate for the allowance for doubtful accounts is a critical accounting estimate for all of our segments.

        When we determine that a customer is unlikely to pay, we record a charge to bad debt expense in the income statement and an increase to the allowance for doubtful accounts. When it becomes certain the customer cannot pay (typically driven by the customer filing for bankruptcy) we write off the receivable by removing the accounts receivable amount and reducing the allowance for doubtful accounts accordingly. In 2014, we increased the allowance for doubtful accounts by approximately $741 thousand and we wrote off doubtful accounts of $906 thousand. Please refer to Schedule II—Valuation and Qualifying Accounts for activity in the allowance for doubtful accounts over the past three years.

        We had approximately $407.0 million in net accounts receivable at December 31, 2014. At December 31, 2014, we had approximately $4.3 million recorded in the allowance for doubtful accounts to cover potential future customer non-payments net of any credit insurance reimbursement we would potentially recover. We believe our allowance for doubtful accounts is adequate to cover future non-payments of our customers. However, if economic conditions deteriorate significantly or one of our large customers was to declare bankruptcy, a larger allowance for doubtful accounts might be necessary. It is extremely difficult to estimate how much of an additional reserve would be necessary, but we expect the largest potential customer balance at any one time would not exceed $26 million. An additional loss of $26 million would reduce our Total Assets as of December 31, 2014 by approximately 1% and would have reduced Income Before Income Taxes by approximately 9%.

        If we had been required to recognize an additional $26 million in bad debt expense, it would likely not have significantly affected our liquidity and capital resources because, in spite of any such additional expense, we would have been within the terms of our debt covenants.

VALUATION OF PENSION BENEFITS

 The benefit obligations and net periodic pension cost associated with our domestic and foreign noncontributory pension plans are determined using actuarial assumptions. Such assumptions include discount rates to reflect the time value of money, rate of employee compensation increases, demographic assumptions to determine the probability and timing of benefit payments, and the long-term rate of return on plan assets. The actuarial assumptions are based upon management's best estimates, after consulting with outside investment advisors and actuaries. Because assumptions and estimates are used, actual results could differ from expected results.

        The discount rate is utilized principally in calculating our pension obligations, which are represented by the Accumulated Benefit Obligation (ABO) and the Projected Benefit Obligation (PBO), and in calculating net periodic benefit cost. In establishing the discount rate for our foreign plans, we review a number of relevant interest rates including Aa corporate bond yields. In establishing the discount rate for our domestic plans, we match the hypothetical duration of our plans, using a weighted average duration that is based upon projected cash payments, to a simulated bond portfolio (Citigroup Pension Index Curve). At December 31, 2014, the discount rates for our domestic and foreign plans were 3.83% and 1.90%, respectively.

        We believe that the accounting estimates related to determining the valuation of pension benefits are critical accounting estimates because: (1) changes in them can materially affect net income, and (2) we are required to establish the discount rate and the expected return on fund assets, which are highly uncertain and require judgment. The estimates for the valuation of pension benefits are critical accounting estimates for all of our segments.

        To the extent the discount rates increase (or decrease), our PBO and net periodic benefit cost will decrease (or increase) accordingly. The estimated effect of a 1% decrease in each discount rate would be a $54.3 million increase in the PBO ($39.7 million for the domestic plans and $14.6 million for the foreign plans) and a $5.7 million increase in net periodic benefit cost ($4.5 million for the domestic plans and $1.2 million for the foreign plans). To the extent the PBO increases, the after-tax effect of such increase could reduce Other Comprehensive Income and Stockholders' Equity. The estimated effect of a 1% increase in each discount rate would be a $41.9 million decrease in the PBO ($30.2 million for the domestic plans and $11.7 million for the foreign plans) and a $4.6 million decrease in net periodic benefit cost ($3.6 million for the domestic plans and $1.0 million for the foreign plans). A decrease of this magnitude in the PBO would eliminate the current year reduction recognized in Other Comprehensive Income and Stockholders' Equity as related to pension assumptions.

        The assumed expected long-term rate of return on assets is the average rate of earnings expected on the funds invested to provide for the benefits included in the PBO. Of domestic plan assets, approximately 47% was invested in equities, 27% was invested in fixed income securities, 3% was invested in money market funds, 15% was invested in hedge funds and 8% was invested in infrastructure securities at December 31, 2014. Of foreign plan assets, approximately 80% was invested in investment funds, 12% was invested in corporate securities, 1% was invested in fixed income securities, 5% was invested in equity securities and 2% was invested in cash at December 31, 2014.

        The expected long-term rate of return assumptions are determined based on our investment policy combined with expected risk premiums of equities and fixed income securities over the underlying risk-free rate. This rate is utilized principally in calculating the expected return on the plan assets component of the net periodic benefit cost. To the extent the

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actual rate of return on assets realized over the course of a year is greater or less than the assumed rate, that year's net periodic benefit cost is not affected. Rather, this gain (or loss) reduces (or increases) future net periodic benefit cost over a period of approximately 15 to 20 years. To the extent the expected long-term rate of return on assets increases (or decreases), our net periodic benefit cost will decrease (or increase) accordingly. The estimated effect of a 1% decrease (or increase) in each expected long-term rate of return on assets would be a $1.4 million increase (or decrease) in net periodic benefit cost.

        The average rate of compensation increase is utilized principally in calculating the PBO and the net periodic benefit cost. The estimated effect of a 0.5% decrease in each rate of expected compensation increase would be a $6.2 million decrease in the PBO ($1.7 million for the domestic plans and $4.5 million for the foreign plans) and a $1.0 million decrease to the net periodic benefit cost. The estimated effect of a 0.5% increase in each rate of expected compensation increase would be a $6.7 million increase in the PBO ($1.8 million for the domestic plans and $4.9 million for the foreign plans) and a $1.1 million increase to the net periodic benefit cost.

        Our primary pension related assumptions as of December 31, 2014 and 2013 were as follows:

   
 
 
Actuarial Assumptions as of December 31,
  2014
  2013
  2012
 
 
 

Discount rate:

                   

Domestic plans

    3.83%     4.75%     3.80%  

Foreign plans

    1.90%     3.24%     3.19%  

Expected long-term rate of return on plan assets:

   
 
   
 
   
 
 

Domestic plans

    7.00%     7.00%     7.00%  

Foreign plans

    3.54%     3.79%     3.78%  

Rate of compensation increase:

   
 
   
 
   
 
 

Domestic plans

    4.00%     4.00%     4.00%  

Foreign plans

    3.00%     3.00%     3.00%  

        In order to determine the 2015 net periodic benefit cost, the Company expects to use the December 31, 2014 discount rates, December 31, 2014 rates of compensation increase assumptions and expected long-term returns on domestic and foreign plan assets assumptions used for the 2014 net periodic benefit cost. The estimated impact of the changes to the assumptions as noted in the table above on our 2015 net periodic benefit cost is expected to be an increase of approximately $5.8 million.

SHARE-BASED COMPENSATION

 The Company uses the Black-Scholes option-valuation model to value stock options, which requires the input of subjective assumptions. These assumptions include the length of time employees will retain their vested stock options before exercising them ("expected term"), the estimated volatility of the Company's stock price, risk-free interest rate, the expected dividend yield and stock price. The expected term of the options is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. The expected term determines the period for which the risk-free interest rate and volatility must be applied. The risk-free interest rate is based on the expected U.S. Treasury rate over the expected term. Expected stock price volatility is based on historical volatility of the Company's stock price. Dividend yield is management's long-term estimate of annual dividends to be paid as a percentage of share price.

        For 2014, expense related to share-based compensation was $18.0 million. Future changes in the subjective assumptions used in the Black-Scholes option-valuation model or estimates associated with forfeitures could impact our share-based compensation expense. For example, a one year reduction in the expected term of the options would decrease the Black-Scholes valuation and reduce share-based compensation by approximately $0.7 million. In comparison, a one year increase in the expected term of the option would increase the Black-Scholes valuation and increase share-based compensation by approximately $0.6 million. In addition, changes in the share price at the date of the grant would impact our share-based compensation expense. For example, a $5 decrease in the stock price would decrease the Black-Scholes valuation and reduce share-based compensation by approximately $0.8 million. In comparison, a $5 increase in the share price would increase the Black-Scholes valuation and increase share-based compensation by approximately $0.8 million.


OPERATIONS OUTLOOK

 We currently anticipate that certain foreign currency exchange rates, especially with the Euro, will continue to be a significant headwind on our translated results. Also, the soft demand in select markets that we saw in the fourth quarter could continue into the first quarter and make for difficult comparisons to our strong performance a year ago.

        AptarGroup expects earnings per share for the first quarter to be in the range of $0.60 to $0.65 per share compared to $0.71 per share reported in the prior year. Assuming a comparable foreign currency exchange rate environment, we estimate that comparable earnings per share for the prior year would have been approximately $0.60 per share.

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FORWARD-LOOKING STATEMENTS

 Certain statements in Management's Discussion and Analysis and other sections of this Form 10-K are forward-looking and involve a number of risks and uncertainties, including certain statements set forth in the Liquidity and Capital Resources, Off-Balance Sheet Arrangements, and Operations Outlook sections of this Form 10-K. Words such as "expects," "anticipates," "believes," "estimates," and other similar expressions or future or conditional verbs such as "will," "should," "would" and "could" are intended to identify such 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 our beliefs as well as assumptions made by and information currently available to us. Accordingly, our actual results may differ materially from those expressed or implied in such forward-looking statements due to known or unknown risks and uncertainties that exist in our operations and business environment, including but not limited to:

·
economic conditions worldwide, including potential deflationary conditions in regions we rely on for growth;
·
political conditions worldwide, including current conflicts in Eastern Europe;
·
changes in customer and/or consumer spending levels;
·
financial conditions of customers and suppliers;
·
fluctuations in the cost of materials, components and other input costs (particularly resin, metal, anodization costs and transportation and energy costs);
·
the availability of raw materials and components (particularly from sole sourced suppliers) as well as the financial viability of these suppliers;
·
our ability to contain costs and improve productivity;
·
our ability to successfully implement facility expansions and new facility projects, including the Stelmi expansion;
·
our ability to increase prices, contain costs and improve productivity;
·
significant fluctuations in foreign currency exchange rates;
·
changes in capital availability or cost, including interest rate fluctuations;
·
volatility of global credit markets;
·
the timing and magnitude of capital expenditures;
·
our ability to identify potential new acquisitions and to successfully acquire and integrate such operations or products;
·
direct or indirect consequences of acts of war or terrorism;
·
cybersecurity threats that could impact our networks and reporting systems;
·
the impact of natural disasters and other weather-related occurrences;
·
fiscal and monetary policies and other regulations, including changes in worldwide tax rates;
·
changes or difficulties in complying with government regulation;
·
changing regulations or market conditions regarding environmental sustainability;
·
work stoppages due to labor disputes;
·
competition, including technological advances;
·
our ability to protect and defend our intellectual property rights, as well as litigation involving intellectual property rights;
·
the outcome of any legal proceeding that has been or may be instituted against us and others;
·
our ability to meet future cash flow estimates to support our goodwill impairment testing;
·
the demand for existing and new products;
·
our ability to manage worldwide customer launches of complex technical products, in particular in developing markets;
·
the success of our customers' products, particularly in the pharmaceutical industry;
·
difficulties in product development and uncertainties related to the timing or outcome of product development;
·
significant product liability claims; and
·
other risks associated with our operations.

        Although we believe that our forward-looking statements are based on reasonable assumptions, there can be no assurance that actual results, performance or achievements will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Please refer to Item 1A ("Risk Factors") of Part I included in this Form 10-K for additional risk factors affecting the Company.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


MARKET RISKS

 A significant number of our operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of our entities. Our primary foreign exchange exposure is to the Euro, but we also have foreign exchange exposure to the Brazilian Real, British Pound and Swiss Franc, among others. Recently we have experienced volatility in certain currencies, including the Argentine Peso, Brazilian Real, Indian Rupee and the Russian Ruble. A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on our financial condition and results of operations. Conversely, a weakening U.S. dollar has an additive effect.

        Additionally, in some cases, we sell products denominated in a currency different from the currency in which the related costs are incurred. Any changes in exchange rates on such inter-country sales may impact our results of operations.

        We manage our exposures to foreign exchange principally with forward exchange contracts to hedge certain firm purchase and sales commitments and intercompany cash transactions denominated in foreign currencies.

        The table below provides information, as of December 31, 2014, about our forward currency exchange contracts. The majority of the contracts expire before the end of the first quarter of 2015.

In thousands  
 
 
Year Ended December 31, 2014

Buy/Sell

  Contract Amount
  Average
Contractual
Exchange Rate

  Min/Max
Notional
Volumes

 
 
 

Swiss Franc/Euro

  $ 67,876   0.8307   51,404-67,876  

Euro/Brazilian Real

    17,664   3.3226   17,664-24,449  

Euro/U.S. Dollar

    16,490   1.2364   8,135-23,570  

British Pound/Euro

    9,182   1.2602   7,850-10,014  

Czech Koruna/Euro

    8,787   0.0363   5,165-8,787  

Euro/Mexican Peso

    8,693   18.8756   4,398-10,448  

Euro/Colombian Peso

    6,574   2,959.3783   0-6,574  

Euro/Indian Rupee

    5,265   86.2674   3,012-5,495  

U.S. Dollar/Brazilian Real

    4,053   2.6518   760-4,053  

U.S. Dollar/Euro

    2,111   0.8121   200-3,891  

Euro/Indonesian Rupiah

    2,077   16,598.8238   0-2,077  

Euro/Thai Baht

    1,891   44.9300   280-1,974  

U.S. Dollar/Chinese Yuan

    1,870   6.2413   1,870-10,840  

Other

    2,518          
   

Total

  $ 155,051          

        As of December 31, 2014, the Company has recorded the fair value of foreign currency forward exchange contracts of $1.0 million in prepayments and other, $700 thousand in miscellaneous other assets, $2.4 million in accounts payable and accrued liabilities and $0.1 million in deferred and other non-current liabilities in the Consolidated Balance Sheets.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF INCOME

In thousands, except per share amounts
   
   
   
 
   
 
 
Years Ended December 31,
  2014
  2013
  2012
 
 
 

Net Sales

  $ 2,597,809   $ 2,520,013   $ 2,331,036  
           

Operating Expenses:

                   

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

    1,755,266     1,708,936     1,590,365  

Selling, research & development and administrative

    383,909     364,747     341,634  

Depreciation and amortization

    152,218     149,956     137,022  

Restructuring initiatives

        11,800     3,102  
           

    2,291,393     2,235,439     2,072,123  
           

Operating Income

    306,416     284,574     258,913  
           

Other (Expense) Income:

                   

Interest expense

    (21,029 )   (20,514 )   (18,950 )

Interest income

    4,797     3,233     2,996  

Equity in results of affiliates

    (1,917 )   (883 )   (457 )

Miscellaneous, net

    (1,966 )   (2,027 )   (1,129 )
           

    (20,115 )   (20,191 )   (17,540 )
           

Income before Income Taxes

    286,301     264,383     241,373  

Provision for Income Taxes

   
94,677
   
92,457
   
78,953
 
           

Net Income

  $ 191,624   $ 171,926   $ 162,420  
               

Net Loss Attributable to Noncontrolling Interests

    34     68     192  
           

Net Income Attributable to AptarGroup, Inc.

  $ 191,658   $ 171,994   $ 162,612  
               

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

                   

Basic

  $ 2.95   $ 2.60   $ 2.45  
               

Diluted

  $ 2.85   $ 2.52   $ 2.38  
               

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In thousands
   
   
   
 
   
 
 
Years Ended December 31,
  2014
  2013
  2012
 
 
 

Net Income

  $ 191,624   $ 171,926   $ 162,420  
           

Other Comprehensive (Loss) Income:

                   

Foreign currency translation adjustments

    (192,824 )   29,879     19,507  

Changes in treasury locks, net of tax

    24     45     209  

Net loss on derivatives, net of tax

            (7 )

Defined benefit pension plan, net of tax

                   

Actuarial (loss) / gain, net of tax

    (29,842 )   14,791     (22,316 )

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

    206     234     239  

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

    2,632     4,130     2,737  
           

Total defined benefit pension plan, net of tax

    (27,004 )   19,155     (19,340 )
           

Total other comprehensive (loss) income

    (219,804 )   49,079     369  
           

Comprehensive (Loss) Income

    (28,180 )   221,005     162,789  

Comprehensive Loss Attributable to Noncontrolling Interests

    42     57     188  
           

Comprehensive (Loss) Income Attributable to AptarGroup, Inc.

  $ (28,138 ) $ 221,062   $ 162,977  
               

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED BALANCE SHEETS

In thousands
   
   
 
   
 
 
December 31,
  2014
  2013
 

Assets

   
 
   
 
 

Current Assets:

             

Cash and equivalents

  $ 399,762   $ 309,861  

Accounts and notes receivable, less allowance for doubtful accounts of $4,251 in 2014 and $4,416 in 2013

    406,976     438,221  

Inventories

    311,072     353,159  

Prepayments and other

    96,128     97,170  
       

    1,213,938     1,198,411  
       

Property, Plant and Equipment:

             

Buildings and improvements

    353,683     377,300  

Machinery and equipment

    1,919,507     1,982,195  
       

    2,273,190     2,359,495  

Less: Accumulated depreciation

    (1,484,546 )   (1,518,894 )
       

    788,644     840,601  

Land

    23,011     24,061  
       

    811,655     864,662  
       

Other Assets:

             

Investments in affiliates

    5,760     8,243  

Goodwill

    329,741     358,865  

Intangible assets

    40,045     49,951  

Miscellaneous

    36,051     17,630  
       

    411,597     434,689  
       

Total Assets

  $ 2,437,190   $ 2,497,762  
           

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED BALANCE SHEETS

In thousands, except per share amounts
   
   
 
   
 
 
December 31,
  2014
  2013
 

Liabilities and Stockholders' Equity

   
 
   
 
 

Current Liabilities:

             

Notes payable

  $ 233,284   $ 138,445  

Current maturities of long-term obligations

    18,692     1,325  

Accounts payable and accrued liabilities

    352,762     403,051  
       

    604,738     542,821  
       

Long-Term Obligations

    588,892     354,814  
       

Deferred Liabilities and Other:

   
 
   
 
 

Deferred income taxes

    25,521     42,072  

Retirement and deferred compensation plans

    109,517     71,883  

Deferred and other non-current liabilities

    4,606     5,864  

Commitments and contingencies

         
       

    139,644     119,819  
       

Stockholders' Equity:

             

AptarGroup, Inc. stockholders' equity

             

Common stock, $.01 par value, 199 million shares authorized, and 86.3 and 85.4 million shares issued at 2014 and 2013, respectively

    862     853  

Capital in excess of par value

    507,313     493,947  

Retained earnings

    1,740,005     1,619,419  

Accumulated other comprehensive (loss) income

    (110,045 )   109,751  

Less: Treasury stock at cost, 24.3 million and 20.0 million shares in 2014 and 2013, respectively

    (1,034,728 )   (744,213 )
       

Total AptarGroup, Inc. Stockholders' Equity

    1,103,407     1,479,757  

Noncontrolling interests in subsidiaries

    509     551  
       

Total Stockholders' Equity

    1,103,916     1,480,308  
       

Total Liabilities and Stockholders' Equity

  $ 2,437,190   $ 2,497,762  
           

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands, brackets denote cash outflows
   
   
   
 
   
 
 
Years Ended December 31,
  2014
  2013
  2012
 
 
 

Cash Flows from Operating Activities:

                   

Net income

  $ 191,624   $ 171,926   $ 162,420  

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

                   

Depreciation

    146,893     144,923     133,845  

Amortization

    5,325     5,033     3,177  

Stock option based compensation

    17,971     13,728     12,695  

Provisions for/(recoveries of) bad debts

    741     (385 )   (595 )

Deferred income taxes

    (18,973 )   6,844     (9,015 )

Defined benefit plan expense

    16,699     19,408     14,611  

Equity in results of affiliates

    1,917     883     457  

Changes in balance sheet items, excluding effects from foreign currency adjustments and impact of acquisition:

                   

Accounts and other receivables

    (16,322 )   (32,806 )   16,689  

Inventories

    5,205     (29,918 )   (19,712 )

Prepaid and other current assets

    (6,496 )   (6,394 )   10,124  

Accounts payable and accrued liabilities

    (24,319 )   1,144     (824 )

Income taxes payable

    (10,949 )   16,712     2,969  

Retirement and deferred compensation plan liabilities

    (370 )   (19,441 )   (2,073 )

Other changes, net

    5,605     (6,221 )   (10,876 )
           

Net cash provided by operations

    314,551     285,436     313,892  
           

Cash Flows from Investing Activities:

   
 
   
 
   
 
 

Capital expenditures

    (161,940 )   (151,510 )   (174,053 )

Disposition of property and equipment

    5,106     436     2,629  

Intangible assets

    (9 )   (725 )    

Acquisition of business, net of cash acquired

            (187,840 )

Investment in unconsolidated affiliate

        (5,256 )   (279 )

Notes receivable, net

    (2,357 )   (65 )   84  
           

Net cash used by investing activities

    (159,200 )   (157,120 )   (359,459 )
           

Cash Flows from Financing Activities:

   
 
   
 
   
 
 

Proceeds from notes payable

    95,816     94,184      

Repayments of notes payable

            (134,034 )

Proceeds from long-term obligations

    253,520     2,994     125,000  

Repayments of long-term obligations

    (778 )   (28,320 )   (3,042 )

Dividends paid

    (71,072 )   (66,133 )   (58,442 )

Credit facility costs

    (720 )   (498 )   (1,518 )

Proceeds from stock option exercises

    37,793     43,348     44,637  

Purchase of treasury stock

    (340,517 )   (118,813 )   (79,793 )

Excess tax benefit from exercise of stock options

    6,998     6,104     7,809  
           

Net cash used by financing activities

    (18,960 )   (67,134 )   (99,383 )
           

Effect of Exchange Rate Changes on Cash

   
(46,490

)
 
18,924
   
(2,911

)
           

Net increase/(decrease) in Cash and Equivalents

   
89,901
   
80,106
   
(147,861

)

Cash and Equivalents at Beginning of Period

    309,861     229,755     377,616  
           

Cash and Equivalents at End of Period

  $ 399,762   $ 309,861   $ 229,755  
               

Supplemental Cash Flow Disclosure:

                   

Interest paid

  $ 20,352   $ 20,679   $ 17,464  

Income taxes paid

    94,578     47,445     64,523  

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended December 31, 2014, 2013 and 2012

In thousands
   
   
   
   
   
   
   
 
   
 
 
 
  AptarGroup, Inc. Stockholders' Equity    
   
 
 
  Retained
Earnings

  Accumulated
Other
Comprehensive
(Loss) Income

  Common
Stock
Par Value

  Treasury
Stock

  Capital in
Excess of
Par Value

  Non-
Controlling
Interest

  Total
Equity

 
 
   
   
   
   
   
 

Balance – December 31, 2011:

  $ 1,409,388   $ 60,318   $ 827   $ (545,612 ) $ 364,855   $ 796   $ 1,290,572  

Net income

    162,612                             (192 )   162,420  

Foreign currency translation adjustments

          19,503                       4     19,507  

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

          (19,340 )                           (19,340 )

Changes in treasury locks, net of tax

          209                             209  

Net loss on derivatives, net of tax

          (7 )                           (7 )

Stock option exercises & restricted stock vestings

                13     4     65,355           65,372  

Cash dividends declared on common stock

    (58,442 )                                 (58,442 )

Treasury stock purchased

                      (79,793 )               (79,793 )
                               

Balance – December 31, 2012:

  $ 1,513,558   $ 60,683   $ 840   $ (625,401 ) $ 430,210   $ 608   $ 1,380,498  
                               

Net income

    171,994                             (68 )   171,926  

Foreign currency translation adjustments

          29,868                       11     29,879  

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

          19,155                             19,155  

Changes in treasury locks, net of tax

          45                             45  

Stock option exercises & restricted stock vestings

                13     1     63,737           63,751  

Cash dividends declared on common stock

    (66,133 )                                 (66,133 )

Treasury stock purchased

                      (118,813 )               (118,813 )
                               

Balance – December 31, 2013:

  $ 1,619,419   $ 109,751   $ 853   $ (744,213 ) $ 493,947   $ 551   $ 1,480,308  
                               

Net income

    191,658                             (34 )   191,624  

Foreign currency translation adjustments

          (192,816 )                     (8 )   (192,824 )

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

          (27,004 )                           (27,004 )

Changes in treasury locks, net of tax

          24                             24  

Stock option exercises & restricted stock vestings

                9     2     63,366           63,377  

Cash dividends declared on common stock

    (71,072 )                                 (71,072 )

Treasury stock purchased

                      (290,517 )   (50,000 )         (340,517 )
                               

Balance – December 31, 2014:

  $ 1,740,005   $ (110,045 ) $ 862   $ (1,034,728 ) $ 507,313   $ 509   $ 1,103,916  
                               

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands unless otherwise indicated)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

 We create dispensing solutions that enhance the convenience, safety and security of consumers around the globe and allow our customers to differentiate their products in the market. The Company focuses on providing value-added packaging delivery systems to a variety of global consumer product marketers in the beauty, personal care, home care, prescription drug, consumer health care, injectables, food and beverage industries. The Company has manufacturing facilities located throughout the world including North America, Europe, Asia and Latin America.

BASIS OF PRESENTATION

 The accompanying consolidated financial statements include the accounts of AptarGroup, Inc. and its subsidiaries. The terms "AptarGroup" or "Company" as used herein refer to AptarGroup, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain previously reported amounts have been reclassified to conform to the current period presentation.

        AptarGroup's organizational structure consists of three market-focused lines of business which are Beauty + Home, Pharma and Food + Beverage. This is a strategic structure which allows us to be more closely aligned with our customers and the markets in which they operate.

        On November 1, 2012, the Company initiated our European restructuring plan (see Note 20 Restructuring Initiatives for further details). During 2013, the Company recognized approximately $14.6 million of expense related to the plan, of which $2.7 million was accelerated depreciation. For presentation purposes, the accelerated depreciation related to this plan is reported in Depreciation and Amortization within the Consolidated Statements of Income.

ACCOUNTING ESTIMATES

 The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). This process requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

CASH MANAGEMENT

 The Company considers all investments which are readily convertible to known amounts of cash with an original maturity of three months or less when purchased to be cash equivalents.

INVENTORIES

 Inventories are stated at lower of cost or market. Costs included in inventories are raw materials, direct labor and manufacturing overhead. The costs of certain domestic and foreign inventories are determined by using the last-in, first-out ("LIFO") method, while the remaining inventories are valued using the first-in, first-out ("FIFO") method.

INVESTMENTS IN AFFILIATED COMPANIES

 The Company accounts for its investments in 20% to 50% owned affiliated companies using the equity method. There were no dividends received from affiliated companies in 2014, 2013 and 2012. The Company accounts for its investments less than 20% on the cost method.

PROPERTY AND DEPRECIATION

 Properties are stated at cost. Depreciation is determined on a straight-line basis over the estimated useful lives for financial reporting purposes and accelerated methods for income tax reporting. Generally, the estimated useful lives are 25 to 40 years for buildings and improvements, 3 to 10 years for machinery and equipment, and 3 to 7 years for software.

FINITE-LIVED INTANGIBLE ASSETS

 Finite-lived intangibles, consisting of patents, non-compete agreements and license agreements acquired in purchase transactions, are capitalized and amortized over their useful lives which range from 3 to 20 years.

GOODWILL

 Management believes the excess purchase price over the fair value of the net assets acquired ("Goodwill") in purchase transactions has continuing value. Goodwill is not amortized and must be tested annually, or more frequently as circumstances dictate, for impairment. The annual goodwill impairment test may first consider qualitative factors to determine whether it is more likely than not (i.e. greater than 50 percent chance) that the fair value of a reporting unit is less than its book value. This is sometimes referred to as the "step zero" approach and is an optional step in the annual goodwill impairment analysis. Management has performed this qualitative assessment as of December 31, 2014 for all four of our reporting units.

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Based on our review of macroeconomic, industry, and market events and circumstances as well as the overall financial performance of the reporting units, we determined it was more likely than not that the fair value of goodwill attributed to all four of our reporting units was greater than its carrying amount. Therefore, no impairment of goodwill has been recorded.

IMPAIRMENT OF LONG-LIVED ASSETS

 Long-lived assets, such as property, plant and equipment and finite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. During 2013, we recognized a $1.5 million adjustment for accelerated depreciation on certain corporate assets to reduce the carrying amount to the fair value.

DERIVATIVES INSTRUMENTS AND HEDGING ACTIVITIES

 Derivative financial instruments are recorded in the consolidated balance sheets at fair value as either assets or liabilities. Changes in the fair value of derivatives are recorded in each period in earnings or accumulated other comprehensive income, depending on whether a derivative is designated and effective as part of a hedge transaction.

RESEARCH & DEVELOPMENT EXPENSES

 Research and development costs, net of any customer funded research and development or government research and development credits, are expensed as incurred. These costs amounted to $76.2 million, $71.8 million and $65.4 million in 2014, 2013 and 2012, respectively.

INCOME TAXES

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

        In its determination of which foreign earnings are permanently reinvested in foreign operations, the Company considers numerous factors, including the financial requirements of the U.S. parent company and those of its foreign subsidiaries, the U.S. funding needs for dividend payments and stock repurchases, and the tax consequences of remitting earnings to the U.S. From this analysis, current year repatriation decisions are made in an attempt to provide a proper mix of debt and shareholder capital both within the U.S. and for non-U.S. operations. The Company's policy is to permanently reinvest its accumulated foreign earnings and will only make a distribution to the U.S. out of current year earnings in order to meet the cash needs at the parent company. As such, the Company does not provide taxes on earnings that are deemed to be permanently reinvested.

        The Company provides a liability for the amount of tax benefits realized 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 for more information.

TRANSLATION OF FOREIGN CURRENCIES

 The functional currencies of the majority of the Company's foreign operations are the local currencies. Assets and liabilities of the Company's foreign operations are translated into U.S. dollars at the rates of exchange on the balance sheet date. Sales and expenses are translated at the average rates of exchange prevailing during the year. The related translation adjustments are accumulated in a separate section of Stockholders' Equity. Realized and unrealized foreign currency transaction gains and losses are reflected in income, as a component of miscellaneous income and expense, and represented a loss of $37 thousand in 2014, a loss of $6.3 million in 2013, and a loss of $1.6 million in 2012.

STOCK BASED COMPENSATION

 Accounting standards require the application of the non-substantive vesting approach which means that an award is fully vested when the employee's retention of the award is no longer contingent on providing subsequent service. Under this approach, compensation costs are recognized over the requisite service period of the award instead of ratably over the vesting period stated in the grant. As such, costs are recognized immediately if the employee is retirement eligible on the date of grant or over the period from the date of grant until retirement eligibility if retirement eligibility is reached before the end of the vesting period stated in the grant. See Note 15 for more information.

REVENUE RECOGNITION

 Product Sales.    The Company's policy is to recognize revenue from product sales when price is fixed and determinable, when the title and risk of loss has transferred to the customer, when the Company has no remaining obligations regarding the transaction and when collection is reasonably assured. The majority of the Company's products shipped from the U.S. transfers title and risk of loss when the goods leave the Company's shipping location. The majority of the Company's

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products shipped from non-U.S. operations transfer title and risk of loss when the goods reach their destination. Tooling revenue is also recognized when the title and risk of loss transfers to the customer.

 Services and Other.    The Company occasionally invoices customers for certain services. The Company also receives revenue from other sources such as license or royalty agreements. Revenue is recognized when services are rendered or rights to use assets can be reliably measured and when collection is reasonably assured. Service and other revenue is not material to the Company's results of operations for any of the years presented.

ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

 Changes to GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of accounting standards updates to the FASB's Accounting Standards Codification.

        In July 2013, the FASB issued authoritative guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This standard requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The guidance is effective for the Company's fiscal years beginning after December 15, 2013. This standard did not impact our current year financial statements as this was already the Company's existing reporting treatment.

        In March 2013, the FASB issued authoritative guidance which permits an entity to release cumulative translation adjustments into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, or if a controlling financial interest is no longer held. The guidance is effective for the Company's fiscal years beginning after December 15, 2013. This standard did not have a material impact on our current year financial statements.

        In February 2013, the FASB issued authoritative guidance that amends the presentation of accumulated other comprehensive income and clarifies how to report the effect of significant reclassifications out of accumulated other comprehensive income. The guidance requires footnote disclosures regarding the changes in accumulated other comprehensive income by component and the line items affected in the statements of earnings. The adoption of this standard had no impact on the Consolidated Financial Statements other than disclosure. Additional information can be found in Note 9 of the Notes to the Consolidated Financial Statements.

        In January 2013, the FASB issued authoritative guidance requiring new asset and liability offsetting disclosures for derivatives, repurchase agreements and security lending transactions to the extent that they are offset in the financial statements or are subject to an enforceable master netting arrangement or similar agreement. We do not have any repurchase agreements and do not participate in securities lending transactions. Our derivative instruments are not offset in the financial statements. Accordingly, the adoption of this standard had no impact on the Consolidated Financial Statements other than disclosure. Additional information can be found in Note 10 of the Notes to the Consolidated Financial Statements.

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

NOTE 2 INVENTORIES

 At December 31, 2014 and 2013, approximately 19% and 20%, respectively, of the total inventories are accounted for by the LIFO method. Inventories, by component, consisted of:

 
 
 
  2014
  2013
 

Raw materials

  $ 108,618   $ 114,359

Work in process

    94,414     108,924

Finished goods

    115,809     137,591
     

Total

    318,841     360,874

Less LIFO reserve

    (7,769)     (7,715)
     

Total

  $ 311,072   $ 353,159
         

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NOTE 3 GOODWILL AND OTHER INTANGIBLE ASSETS

 The changes in the carrying amount of goodwill for the year ended December 31, 2014 are as follows by reporting segment:

   
 
 
 
  Beauty +
Home

  Pharma
  Food +
Beverage

  Corporate
& Other

  Total
 
 
 

Goodwill

  $ 179,890   $ 153,978   $ 17,684   $ 1,615   $ 353,167  

Accumulated impairment losses

                (1,615 )   (1,615 )
                   

Balance as of December 31, 2012

  $ 179,890   $ 153,978   $ 17,684   $   $ 351,552  
                       

Foreign currency exchange effects

    1,112     5,971     230         7,313  
                   

Goodwill

  $ 181,002   $ 159,949   $ 17,914   $ 1,615   $ 360,480  

Accumulated impairment losses

                (1,615 )   (1,615 )
                   

Balance as of December 31, 2013

  $ 181,002   $ 159,949   $ 17,914   $   $ 358,865  
                       

Foreign currency exchange effects

    (9,853 )   (18,357 )   (914 )       (29,124 )
                   

Goodwill

  $ 171,149   $ 141,592   $ 17,000   $ 1,615   $ 331,356  

Accumulated impairment losses

                (1,615 )   (1,615 )
                   

Balance as of December 31, 2014

  $ 171,149   $ 141,592   $ 17,000   $   $ 329,741  
                       

        The Company has also completed the annual impairment analysis of its reporting units as of December 31, 2014 using a qualitative analysis of goodwill commonly referred to as the "step zero" approach. Based on our review of macroeconomic, industry, and market events and circumstances as well as the overall financial performance of the reporting units, we determined it was more likely than not that the fair value of goodwill attributed to all four of our reporting units was greater than its carrying amount. Therefore, no impairment of goodwill has been recorded.

        The table below shows a summary of intangible assets for the years ended December 31, 2014 and 2013.

   
 
 
 
   
  2014   2013  
Weighted Average
Amortization Period
(Years)

  Gross
Carrying
Amount

  Accumulated
Amortization

  Net
Value

  Gross
Carrying
Amount

  Accumulated
Amortization

  Net
Value

 
 
 

Amortization intangible assets:

                                         

Patents

  7   $ 17,001   $ (16,852 ) $ 149   $ 20,165   $ (19,732 ) $ 433  

Acquired Technology

  15     35,701     (5,950 )   29,751     40,546     (4,055 )   36,491  

License agreements and other

  5     32,804     (22,659 )   10,145     35,259     (22,232 )   13,027  
                               

Total intangible assets

  10   $ 85,506   $ (45,461 ) $ 40,045   $ 95,970   $ (46,019 ) $ 49,951  
                               

        Aggregate amortization expense for the intangible assets above for the years ended December 31, 2014, 2013 and 2012 was $5,325, $5,033 and $3,177, respectively.

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

  2015   $ 4,467  
  2016     3,887  
  2017     3,431  
  2018     3,432  
  2019 and thereafter     24,828  

        Future amortization expense may fluctuate depending on changes in foreign currency rates. The estimates for amortization expense noted above are based upon foreign exchange rates as of December 31, 2014.

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NOTE 4 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 At December 31, 2014 and 2013, accounts payable and accrued liabilities consisted of the following:

 
 
 
  2014
  2013
 

Accounts payable, principally trade

  $ 116,374   $ 150,122

Accrued employee compensation costs

    125,227     126,845

Customer deposits and other unearned income

    42,641     37,084

Other accrued liabilities

    68,520     89,000
     

Total

  $ 352,762   $ 403,051
         


NOTE 5 INCOME TAXES

 Income before income taxes consists of:

   
 
 
Years Ended December 31,
  2014
  2013
  2012
 
 
 

United States

  $ 31,681   $ 28,968   $ 58,250  

International

    254,620     235,415     183,123  
           

Total

  $ 286,301   $ 264,383   $ 241,373  

        The provision (benefit) for income taxes is comprised of:


Years Ended December 31,
  2014
  2013
  2012
 

Current:

                   

U.S. Federal

  $ 14,023   $ 7,174   $ 17,027  

State/Local

    42     (631 )   491  

International

    99,585     79,070     70,450  
           

  $ 113,650   $ 85,613   $ 87,968  
           

Deferred:

                   

U.S. Federal/State

  $ (10,130 ) $ 9,575   $ 8,757  

International

    (8,843 )   (2,731 )   (17,772 )
           

  $ (18,973 ) $ 6,844   $ (9,015 )
           

Total

  $ 94,677   $ 92,457   $ 78,953  

        The difference between the actual income tax provision and the tax provision computed by applying the statutory federal income tax rate of 35.0% in 2014, 2013 and 2012 to income before income taxes is as follows:

   
 
 
Years Ended December 31,
  2014
  2013
  2012
 
 
 

Income tax at statutory rate

  $ 100,205   $ 92,534   $ 84,481  

State income taxes (benefits), net of federal benefit (tax)

    770     (610 )   717  

Provision for distribution of current foreign earnings

    695     11,388     9,552  

Rate differential on earnings of foreign operations

    (5,478 )   (10,167 )   (14,865 )

Other items, net

    (1,515 )   (688 )   (932 )
           

Actual income tax provision

  $ 94,677   $ 92,457   $ 78,953  

Effective income tax rate

    33.1 %   35.0 %   32.7 %

        In 2014, we did not repatriate foreign earnings to the U.S. Therefore, the 2014 tax provision is lower than the prior year as 2013 included $10.1 million of net additional tax expense due to repatriations.

        The tax provision for 2013 reflects an increase of $6.7 million due to tax law changes in France. These changes were enacted on December 31, 2013 but retroactive to January 1, 2013. An additional $2.3 million of tax was incurred as a result of

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new French distribution taxes effective for distributions after August 17, 2012. The increases were partially offset by a benefit of $3.6 million from the expected use of net operating losses in Brazil and a benefit of $1.4 million from a tax law change in Italy.

        The tax provision for 2012 reflects the benefit of $0.7 million in Brazil related to claims filed under a program to encourage equity funding of Brazilian entities and deferred tax benefits of $1.8 million, due in part to the merger of some of the company's Indian operations. These benefits were partially offset by $0.7 million of additional expense created by tax law changes enacted in 2012 in France.

        Significant deferred tax assets and liabilities as of December 31, 2014 and 2013 are comprised of the following temporary differences:


 
  2014
  2013
 

Deferred Tax Assets:

             

Pension liabilities

  $ 35,582   $ 21,106  

Stock options

    15,672     10,785  

Foreign tax credit carryforward

    10,348      

Net operating loss carryforwards

    7,896     6,675  

U.S. state tax credits

    7,641     6,192  

Vacation

    5,892     6,109  

Workers compensation

    4,526     4,180  

Other

    9,584     15,709  
       

Total gross deferred tax assets

    97,141     70,756  

Less valuation allowance

    (7,734 )   (4,840 )
       

Net deferred tax assets

    89,407     65,916  
       

Deferred Tax Liabilities:

             

Depreciation, amortization and leases

    53,121     61,316  

Acquisition related intangibles

    18,058     20,100  
       

Total gross deferred tax liabilities

    71,179     81,416  
       

Net deferred tax assets / (liabilities)

  $ 18,228   $ (15,500 )

        The foreign tax credit carryforward will expire in the years 2023 and 2024. There is no expiration date on $6.2 million of the tax-effected net operating loss carry forwards and $1.7 million (tax effected) will expire in the years 2015 to 2034. The U.S. state tax credit carryforwards of $7.6 million (tax effected) will expire in the years 2015 to 2029. The total amount of both net operating losses and state tax credit carryforwards that will expire in 2015 is $0.1 million. This amount is not expected to be used.

        The Company evaluates the deferred tax assets and records a valuation allowance when it is believed it is more likely than not that the benefit will not be realized. The Company has established a valuation allowance of $2.2 million of the $7.9 million of tax effected net operating loss carry forwards. These losses are generally in start-up jurisdictions or locations that have not produced an operating profit to date. A valuation allowance of $5.4 million has been established against the $7.6 million of U.S. state tax credit carry forwards. A valuation allowance of $0.1 million has been established related to other future tax deductions in non-U.S. jurisdictions, the benefit of which management believes will not be realized.

        The Company repatriated a portion of foreign subsidiary earnings in 2013 and 2012 in the amount of $79 million each year. All of these amounts were received from our European operations except for $1.3 million from Canada in 2012. All repatriations from Europe were from current year earnings and not from funds previously considered permanently reinvested. The $1.3 million of Canadian funds were distributed as the result of the completion of our 2009 restructuring activities within Canada. The tax effects related to these repatriations were recorded in the period the repatriation decision was made. The Company made no distributions of foreign earnings to the U.S. in 2014.

        As of December 31, 2014, the Company had $1.3 billion of undistributed earnings from non-U.S. subsidiaries which have been designated as permanently reinvested. The Company has not made a provision for U.S. or additional foreign taxes on this amount. However, we estimate the amount of additional tax that might be payable on these earnings to be in the range of $100 million to $125 million. These earnings will continue to be reinvested indefinitely and could become subject to the additional tax if they were remitted as dividends or lent to a U.S. affiliate, or if the Company should sell its stock in the subsidiaries.

        The Company has not provided for taxes on certain tax-deferred income of a foreign operation. The income arose predominately from government grants. Taxes of approximately $2.2 million would become payable in the event the terms of the grant are not fulfilled.

38 /ATR

2014 Form 10-K


Table of Contents

INCOME TAX UNCERTAINTIES

 The Company provides a liability for the amount of tax benefits realized from uncertain tax positions. A reconciliation of the beginning and ending amount of income tax uncertainties is as follows:

   
  2014
  2013
  2012
 
   
 
 

Balance at January 1

  $ 7,988   $ 8,464   $ 9,071  
 

Increases based on tax positions for the current year

    113     110     245  
 

Increases based on tax positions of prior years

    228     381     107  
 

Decreases based on tax positions of prior years

    (1,073 )   (92 )   (257 )
 

Settlements

    (407 )   (515 )   (21 )
 

Lapse of statute of limitations

    (441 )   (360 )   (681 )
             
 

Balance at December 31

  $ 6,408   $ 7,988   $ 8,464  
 

        The amount of income tax uncertainties that, if recognized, would impact the effective tax rate is $6.3 million. The Company estimates that it is reasonably possible that the liability for uncertain tax positions will decrease no more than $5.0 million in the next twelve months from the resolution of various uncertain positions as a result of the completion of tax audits, litigation and the expiration of the statute of limitations in various jurisdictions.

        The Company recognizes interest and penalties accrued related to unrecognized tax benefits as a component of income taxes. As of December 31, 2014, 2013 and 2012, the Company had approximately $0.7 million, $0.9 million and $1.3 million, respectively, accrued for the payment of interest and penalties, of which approximately ($0.2) million, ($0.4) million and ($0.1) million was recognized in income tax expense in the years ended December 31, 2014, 2013 and 2012, respectively.

        The Company or its subsidiaries file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. The major tax jurisdictions the Company files in, with the years still subject to income tax examinations, are listed below:

 
Major Tax
Jurisdiction
  Tax Years
Subject to
Examination
  United States — Federal   2011 – 2014
  United States — State   2009 – 2014
  France   2012 – 2014
  Germany   2011 – 2014
  Italy   2010 – 2014
  China   2012 – 2014

NOTE 6 DEBT

 Average borrowings under short-term notes payable were $198.3 million and $61.4 million for 2014 and 2013, respectively. The average annual interest rate on short-term notes payable, which is included in the notes payable caption under current liabilities of the balance sheet was approximately 1.5% for 2014 and 3.1% for 2013. There are no compensating balance requirements associated with short-term borrowings.

        On January 31, 2012, we entered into a revolving credit facility that provides for unsecured financing of up to $300 million. Each borrowing under this credit facility will bear interest at rates based on LIBOR, prime rates or other similar rates, in each case plus an applicable margin. A facility fee on the total amount of the facility is also payable quarterly, regardless of usage. The applicable margins for borrowings under the new credit facility and the facility fee percentage may change from time to time depending on changes in AptarGroup's consolidated leverage ratio. On January 31, 2013, we amended the revolving credit facility to, among other things, add a swingline loan sub-facility and extend the maturity date for the revolving credit facility by one year, to January 31, 2018. On January 31, 2014, we amended the revolving credit facility to, among other things, increase the amount of permitted receivables transactions from $100 to $150 million, reduce the cost of committed funds by 12.5 basis points and uncommitted funds by 2.5 basis points, and extend the maturity date of the revolving credit facility by one year, to January 31, 2019. On December 16, 2014, we amended the credit facility to, among other things, change our financial covenants to leverage and interest coverage ratios, and extend the maturity date of the revolving credit facility to December 16, 2019. The outstanding balance under the credit facility was $230 million and $110 million at December 31, 2014 and 2013, respectively, and is reported as notes payable in the current liabilities section of the Consolidated Balance Sheets. We incurred approximately $2.7 million and $1.0 million in interest and fees related to this credit facility during 2014 and 2013, respectively. The revolving credit and the senior unsecured debt agreements contain covenants, with which the Company is in compliance, that include certain financial tests.

39 /ATR

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Table of Contents

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


 
  2014
  2013
 

Notes payable 0.61% – 31.25%, due in monthly and annual installments through 2027

  $ 5,160   $ 3,230  

Senior unsecured notes 2.3%, due in 2015

    16,000     16,000  

Senior unsecured notes 6.0%, due in 2016

    50,000     50,000  

Senior unsecured notes 6.0%, due in 2018

    75,000     75,000  

Senior unsecured notes 3.8%, due in 2020

    84,000     84,000  

Senior unsecured notes 3.2%, due in 2022

    75,000     75,000  

Senior unsecured notes 3.5%, due in 2023

    125,000      

Senior unsecured notes 3.4%, due in 2024

    50,000     50,000  

Senior unsecured notes 3.6%, due in 2025

    125,000      

Capital lease obligations

    2,424     2,909  
       

    607,584     356,139  

Current maturities of long-term obligations

    (18,692 )   (1,325 )
       

Total long-term obligations

  $ 588,892   $ 354,814  

        Aggregate long-term maturities, excluding capital lease obligations, which is discussed in Note 7, due annually for the five years beginning in 2015 are $18,057, $51,217, $0, $75,000, $0 and $460,886 thereafter.


NOTE 7 LEASE COMMITMENTS

 The Company leases certain warehouse, plant, and office facilities as well as certain equipment under noncancelable operating and capital leases expiring at various dates through the year 2027. Most of the operating leases contain renewal options and certain leases include options to purchase during or at the end of the lease term.

        Amortization expense related to capital leases is included in depreciation expense. Rent expense under operating leases (including taxes, insurance and maintenance when included in the rent) amounted to $30,813, $30,720 and $26,911 in 2014, 2013 and 2012, respectively.

        Assets recorded under capital leases consist of:


 
  2014
  2013
 

Buildings

  $ 2,434   $ 15,162  

Machinery and equipment

    1,076      
       

  $ 3,510   $ 15,162  

Accumulated depreciation

    (758 )   (11,705 )
       

  $ 2,752   $ 3,457  

        Future minimum payments, by year and in the aggregate, under the capital leases and noncancelable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 2014:

    
 
   
    
 
 
  Capital
Leases

  Operating Leases
 

2015

  $ 695   $ 19,292  

2016

    733     14,465  

2017

    674     11,843  

2018

    512     9,248  

2019

        8,668  

Subsequent to 2019

        21,357  
       

Total minimum lease payments

    2,614   $ 84,873  

Amounts representing interest

    (190 )      
         

Present value of future minimum lease payments

    2,424        

Lease amount due in one year

    (635 )      
         

Total

  $ 1,789        

40 /ATR

2014 Form 10-K


Table of Contents


NOTE 8 RETIREMENT AND DEFERRED COMPENSATION PLANS

 The Company has various noncontributory retirement plans covering certain of its domestic and foreign employees. Benefits under the Company's retirement plans are based on participants' years of service and annual compensation as defined by each plan. Annual cash contributions to fund pension costs accrued under the Company's domestic plans are generally at least equal to the minimum funding amounts required by the Employee Retirement Income Security Act of 1974, as amended (ERISA). Certain pension commitments under its foreign plans are also funded according to local requirements or at the Company's discretion.

        The following table presents the changes in the benefit obligations and plan assets for the most recent two years for the Company's domestic and foreign plans.

   
 
      
   
   
   
 
 
  Domestic Plans   Foreign Plans  
 
  2014
  2013
  2014
  2013
 

Change in benefit obligation:

                         

Benefit obligation at beginning of year

  $ 129,448   $ 136,321   $ 84,660   $ 80,610  

Service cost

    8,042     8,539     4,186     3,901  

Interest cost

    5,928     4,992     2,711     2,676  

Business acquired

                 

Curtailment/Settlement

                (1,342 )

Actuarial (gain) loss

    33,058     (14,260 )   14,765     (1,752 )

Benefits paid

    (4,975 )   (6,144 )   (3,111 )   (2,952 )

Foreign currency translation adjustment

            (12,051 )   3,519  
               

Benefit obligation at end of year

  $ 171,501   $ 129,448   $ 91,160   $ 84,660  

 

 
  Domestic Plans   Foreign Plans  
 
  2014
  2013
  2014
  2013
 

Change in plan assets:

                         

Fair value of plan assets at beginning of year

  $ 100,567   $ 84,587   $ 54,075   $ 47,876  

Actual return on plan assets

    5,431     12,063     2,875     1,742  

Employer contribution

    10,071     10,061     8,016     5,419  

Business acquired

                 

Benefits paid

    (4,975 )   (6,144 )   (3,111 )   (2,952 )

Foreign currency translation adjustment

            (6,461 )   1,990  
               

Fair value of plan assets at end of year

  $ 111,094   $ 100,567   $ 55,394   $ 54,075  

Funded status at end of year

  $ (60,407 ) $ (28,881 ) $ (35,766 ) $ (30,585 )

        The following table presents the funded status amounts recognized in the Company's Consolidated Balance Sheets as of December 31, 2014 and 2013.

 
  Domestic Plans   Foreign Plans  
 
  2014
  2013
  2014
  2013
 

Current liabilities

  $ (471 ) $ (809 ) $   $  

Non-current liabilities

    (59,936 )   (28,072 )   (35,766 )   (30,585 )

  $ (60,407 ) $ (28,881 ) $ (35,766 ) $ (30,585 )

        The following table presents the amounts not recognized as components of periodic benefit cost that are recognized in accumulated other comprehensive loss as of December 31, 2014 and 2013.

 
  Domestic Plans   Foreign Plans  
 
  2014
  2013
  2014
  2013
 

Net actuarial loss

  $ 64,272   $ 32,930   $ 36,219   $ 24,844  

Net prior service cost

            3,471     3,784  

Tax effects

    (24,102 )   (12,349 )   (12,762 )   (9,116 )

  $ 40,170   $ 20,581   $ 26,928   $ 19,512  

41 /ATR

2014 Form 10-K


Table of Contents

        Changes in benefit obligations and plan assets recognized in other comprehensive income in 2014 are as follows:

 
  Domestic Plans   Foreign Plans  

Current year actuarial loss

  $ (34,211 ) $ (12,589 )

Amortization of net loss

    2,869     1,214  

Amortization of prior service cost

        313  

  $ (31,342 ) $ (11,062 )

        The following table presents the amounts in accumulated other comprehensive loss as of December 31, 2014 expected to be recognized as components of periodic benefit cost in 2015.

 
  Domestic Plans   Foreign Plans  

Amortization of net loss

  $ 5,536   $ 1,826  

Amortization of prior service cost

        279  

  $ 5,536   $ 2,105  

Components of net periodic benefit cost:

   
 
      
   
   
 
 
  Domestic Plans  
 
  2014
  2013
  2012
 

Service cost

  $ 8,042   $ 8,539   $ 7,217  

Interest cost

    5,928     4,992     4,913  

Expected return on plan assets

    (6,585 )   (5,775 )   (5,604 )

Amortization of net loss

    2,869     5,103     3,854  

Amortization of prior service cost

        3     4  
           

Net periodic benefit cost

  $ 10,254   $ 12,862   $ 10,384  

Curtailment

             

Total Net periodic benefit cost

  $ 10,254   $ 12,862   $ 10,384  

 

 
  Foreign Plans  
 
  2014
  2013
  2012
 

Service cost

  $ 4,186   $ 3,901   $ 2,244  

Interest cost

    2,711     2,676     2,658  

Expected return on plan assets

    (1,979 )   (1,821 )   (1,538 )

Amortization of net loss

    1,214     1,416     475  

Amortization of prior service cost

    313     373     361  
           

Net periodic benefit cost

  $ 6,445   $ 6,545   $ 4,200  

Curtailment

        1      

Total Net periodic benefit cost

  $ 6,445   $ 6,546   $ 4,200  

        The accumulated benefit obligation ("ABO") for the Company's domestic defined benefit pension plans was $153.8 million and $114.6 million at December 31, 2014 and 2013, respectively. The accumulated benefit obligation for the Company's foreign defined benefit pension plans was $70.7 million and $67.0 million at December 31, 2014 and 2013, respectively.

        The following table provides the projected benefit obligation ("PBO"), ABO, and fair value of plan assets for all pension plans with an ABO in excess of plan assets as of December 31, 2014 and 2013.

 
  Domestic Plans   Foreign Plans  
 
  2014
  2013
  2014
  2013
 

Projected benefit obligation

  $ 171,501   $ 129,448   $ 87,759   $ 77,475  

Accumulated benefit obligation

    153,778     114,592     67,317     60,707  

Fair value of plan assets

    111,094     100,567     51,993     47,753  

42 /ATR

2014 Form 10-K


Table of Contents

        The following table provides the PBO, ABO, and fair value of plan assets for all pension plans with a PBO in excess of plan assets as of December 31, 2014 and 2013.

 
  Domestic Plans   Foreign Plans  
 
  2014
  2013
  2014
  2013
 

Projected benefit obligation

  $ 171,501   $ 129,448   $ 87,759   $ 81,158  

Accumulated benefit obligation

    153,778     114,592     67,317     63,527  

Fair value of plan assets

    111,094     100,567     51,993     50,573  

Assumptions:

   
 
      
   
   
   
   
   
 
 
  Domestic Plans   Foreign Plans  
 
  2014
  2013
  2012
  2014
  2013
  2012
 
 
 

Weighted-average assumptions used to determine benefit obligations at December 31:

                                     

Discount rate

    3.83%     4.75%     3.80%     1.90%     3.24%     3.19%  

Rate of compensation increase

    4.00%     4.00%     4.00%     3.00%     3.00%     3.00%  

Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31:

   
 
   
 
   
 
   
 
   
 
   
 
 

Discount rate

    4.75%     3.80%     4.40%     3.24%     3.19%     5.10%  

Expected long-term return on plan assets

    7.00%     7.00%     7.00%     3.79%     3.79%     3.83%  

Rate of compensation increase

    4.00%     4.00%     4.00%     3.00%     3.00%     3.00%  

        The Company develops the expected long-term rate of return assumptions based on historical experience and by evaluating input from the plans' asset managers, including the managers' review of asset class return expectations and benchmarks, economic indicators and long-term inflation assumptions.

        In order to determine the 2015 net periodic benefit cost, the Company expects to use the December 31, 2014 discount rates, December 31, 2014 rates of compensation increase assumptions and the same assumed long-term returns on domestic and foreign plan assets used for the 2014 net periodic benefit cost.

        The Company's domestic and foreign pension plan weighted-average asset allocations at December 31, 2014 and 2013 by asset category are as follows:

Plan Assets:

   
    
 
 
  Domestic Plans Assets at December 31,   Foreign Plans Assets at December 31,  
 
  2014
  2013
  2014
  2013
 
 
      
   
   
   
 

Equity securities

    47%     49%     5%     5%  

Fixed income securities

    27%     24%     1%     4%  

Corporate debt securities

            12%     12%  

Infrastructure

    8%     8%          

Hedge funds

    15%     10%          

Money market

    3%     9%     2%     1%  

Investment Funds

            80%     78%  
               

Total

    100%     100%     100%     100%  

        The Company's investment strategy for its domestic and foreign pension plans is to maximize the long-term rate of return on plan assets within an acceptable level of risk. The investment policy strives to have assets sufficiently diversified so that adverse or unexpected results from one security type will not have an unduly detrimental impact on the entire portfolio and accordingly, establishes a target allocation for each asset category within the portfolio. The domestic plan asset allocation is reviewed on a quarterly basis and the foreign plan asset allocation is reviewed annually. Rebalancing occurs as needed to comply with the investment strategy. The domestic plan target allocation for 2015 is 60% equity securities and 40% fixed income securities and infrastructure. The foreign plan target allocation for 2015 is 99% investment funds and 1% money market.

43 /ATR

2014 Form 10-K


Table of Contents

        Authoritative guidelines require the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3: Unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset or liability.

 
  Domestic Fair Value Measurement
at December 31, 2014
  Foreign Fair Value Measurement
at December 31, 2014
 
(In Thousands $)
  Total
  (Level 1)
  (Level 2)
  (Level 3)
  Total
  (Level 1)
  (Level 2)
  (Level 3)
 

Cash and Short Term Securities (a)

  $ 3,190   $ 3,190   $   $   $ 1,289   $ 1,289   $   $  

USD

        3,190                          

EUR

                        1,289          

Equity Securities (a)

  $ 52,840   $ 52,840           $ 2,625   $ 2,625          

US Large Cap Equities

        29,381                          

US Small Cap Equities

        8,493                          

International Equities

        14,966                 2,625          

Fixed Income (a)

  $ 29,762   $ 19,713     10,049       $ 574   $ 574          

Corporate debts securities

                  $ 6,758   $ 6,758          

Euro Corporate Bonds (a)

                        6,758          

Hedge Fund (b &c)

  $ 16,371         16,099   $ 272                  

Investment Funds

                  $ 44,148   $ 14,643   $ 29,505      

Mutual Funds in Equities (a)

                        2,687          

Mutual Funds in Bonds (a)

                        11,386          

Mutual Funds Diversified (a &b)

                        570     29,505      

Infrastructure (c)

  $ 8,931           $ 8,931                  
                               

Total Investments

  $ 111,094   $ 75,743   $ 26,148   $ 9,203   $ 55,394   $ 25,889   $ 29,505   $  

 

 
  Domestic Fair Value Measurement
at December 31, 2013
  Foreign Fair Value Measurement
at December 31, 2013
 
(In Thousands $)
  Total
  (Level 1)
  (Level 2)
  (Level 3)
  Total
  (Level 1)
  (Level 2)
  (Level 3)
 

Cash and Short Term Securities (a)

  $ 9,070   $ 9,070   $   $   $ 757   $ 757   $   $  

USD

        9,070                          

EUR

                        757          

Equity Securities (a)

  $ 49,261   $ 49,261           $ 2,547   $ 2,547          

US Large Cap Equities

        20,159                          

US Small Cap Equities

        14,521                          

International Equities

        14,581                 2,547          

Core Fixed Income (a)

  $ 23,918   $ 23,918             1,950     1,950          

Corporate debts securities

                  $ 6,560   $ 6,560          

Euro Corporate Bonds (a)

                        6,560          

Hedge Fund (c)

  $ 9,731           $ 9,731                  

Investment Funds

                  $ 42,261   $ 15,501   $ 26,760      

Mutual Funds in Equities (a)

                        3,628          

Mutual Funds in Bonds (a)

                        10,040          

Mutual Funds Diversified (a &b)

                        1,833     26,760      

Infrastructure (c)

  $ 8,587           $ 8,587                  
                               

Total Investments

  $ 100,567   $ 82,249   $   $ 18,318   $ 54,075   $ 27,315   $ 26,760   $  
(a)
Based on third party quotation from financial institution.
(b)
Based on observable market transactions.
(c)
Based on a quarterly statement prepared by the fund manager that reflects contributions, distributions and realized/unrealized gains and losses.

44 /ATR

2014 Form 10-K


Table of Contents

        The following table sets forth a summary of changes in fair value of the pension plan investments classified as Level 3 for the year ended December 31, 2014.

   
  Infrastructure Fund
  Hedge Fund
 
   
 
 

Balance, 12/31/12

  $ 8,015   $ 8,575  
 

Return on assets held

    725     1,156  
 

Admin fees and other

    (153 )    
 
 

Balance, 12/31/13

  $ 8,587   $ 9,731  
 
 

Purchases, sales and settlements, net

        (9,387 )
 

Return on assets held

    476     (72 )
 

Admin fees and other

    (132 )    
 
 

Balance, 12/31/14

  $ 8,931   $ 272  
 

CONTRIBUTIONS

 Annual cash contributions to fund pension costs accrued under the Company's domestic plans are generally at least equal to the minimum funding amounts required by ERISA. The Company contributed $10.1 million to its domestic defined benefit plans in 2014 and although the Company has no minimum funding requirement, we plan to contribute approximately $10.0 million in 2015. Contributions to fund pension costs accrued under the Company's foreign plans are made in accordance with local laws or at the Company's discretion. The Company contributed approximately $8.0 million to its foreign defined benefit plan in 2014 and expects to contribute approximately $13.7 million in 2015.

ESTIMATED FUTURE BENEFIT PAYMENTS

 As of December 31, 2014, the Company expects the plans to make the following estimated benefit payments relating to its defined benefit plans over the next ten years:

   
 
      
   
 
 
  Domestic Plans
  Foreign Plans
 

2015

  $ 6,777   $ 1,951  

2016

    8,275     1,877  

2017

    8,925     2,470  

2018

    9,436     2,921  

2019

    9,617     4,569  

2020 – 2024

    62,132     22,853  

OTHER PLANS

 The Company has a non-qualified supplemental pension plan for domestic employees which provides for pension amounts that would have been payable from the Company's principal domestic pension plan if it were not for limitations imposed by income tax regulations. The liability for this plan, which is not funded, was $8.5 million and $6.5 million at December 31, 2014 and 2013, respectively. This amount is included in the liability for domestic plans shown above.

        The Company has a defined contribution 401(k) employee savings plan available to substantially all domestic employees. Company matching contributions are made in cash up to a maximum of 3% of the participating employee's salary subject to income tax regulations. For each of the years ended December 31, 2014, 2013 and 2012, total contributions made by the Company to these plans were approximately $2.8 million, $2.6 million and $2.6 million, respectively.

        The Company has several foreign defined contribution plans, which require the Company to contribute a percentage of the participating employee's salary according to local regulations. For each of the years ended December 31, 2014, 2013 and 2012, total contributions made by the Company to these plans were approximately $2.3 million, $2.1 million and $1.8 million, respectively.

        The Company has no additional postretirement or postemployment benefit plans.

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NOTE 9 ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

Changes in Accumulated Other Comprehensive Income by Component:

 
  Foreign
Currency
  Defined Benefit
Pension Plans
  Other   Total  

Balance — December 31, 2012

  $ 120,097   $ (59,248 ) $ (166 ) $ 60,683  

Other comprehensive income before reclassifications

    29,868     14,791         44,659  

Amounts reclassified from accumulated other comprehensive income

        4,364     45     4,409  

Net current-period other comprehensive income

    29,868     19,155     45     49,068  

Balance — December 31, 2013

  $ 149,965   $ (40,093 ) $ (121 ) $ 109,751  

Other comprehensive income before reclassifications

    (192,476 )   (29,842 )       (222,318 )

Amounts reclassified from accumulated other comprehensive income

    (340 )   2,838     24     2,522  

Net current-period other comprehensive income

    (192,816 )   (27,004 )   24     (219,796 )

Balance — December 31, 2014

  $ (42,851 ) $ (67,097 ) $ (97 ) $ (110,045 )

Reclassifications Out of Accumulated Other Comprehensive Income:

 
  Amount
Reclassified from
Accumulated Other
Comprehensive
Income
   
Details about Accumulated Other
Comprehensive Income Components
Years Ended December 31,

  Affected Line in the Statement
Where Net Income is Presented

  2014
  2013
   

Defined Benefit Pension Plans

               

Amortization of net loss

  $ 4,083   $ 6,519   (a)

Amortization of prior service cost

    313     376   (a)

    4,396     6,895   Total before tax

    (1,558 )   (2,531 ) Tax benefit

  $ 2,838   $ 4,364   Net of tax

Foreign Currency

               

Foreign currency gain

    (340 )     Miscellaneous, net

    (340 )     Total before tax

          Tax benefit

  $ (340 ) $   Net of tax

Other

               

Changes in treasury locks

    38     69   Interest Expense

Net loss on derivatives

          Interest Income

    38     69   Total before tax

    (14 )   (24 ) Tax benefit

  $ 24   $ 45   Net of tax

Total reclassifications for the period

  $ 2,522   $ 4,409    
(a)
These accumulated other comprehensive income components are included in the computation of net periodic benefit costs, net of tax (see Note 8—Retirement and Deferred Compensation Plans for additional details).

NOTE 10 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

 The Company maintains a foreign exchange risk management policy designed to establish a framework to protect the value of the Company's non-functional denominated transactions from adverse changes in exchange rates. Sales of the Company's products can be denominated in a currency different from the currency in which the related costs to produce the product are denominated. Changes in exchange rates on such inter-country sales or intercompany loans can impact the Company's results of operations. The Company's policy is not to engage in speculative foreign currency hedging activities,

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but to minimize its net foreign currency transaction exposure defined as firm commitments and transactions recorded and denominated in currencies other than the functional currency. The Company may use foreign currency forward exchange contracts, options and cross currency swaps to hedge these risks.

        For derivative instruments designated as hedges, the Company formally documents the nature and relationships between the hedging instruments and the hedged items, as well as the risk management objectives, strategies for undertaking the various hedge transactions, and the method of assessing hedge effectiveness. Additionally, in order to designate any derivative instrument as a hedge of an anticipated transaction, the significant characteristics and expected terms of any anticipated transaction must be specifically identified, and it must be probable that the anticipated transaction will occur.

HEDGE OF NET INVESTMENTS IN FOREIGN OPERATIONS

 A significant number of the Company's operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of the Company's foreign entities. A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on the Company's financial condition and results of operations. Conversely, a weakening U.S. dollar has an additive effect. The Company in some cases maintains debt in these subsidiaries to offset the net asset exposure. The Company does not otherwise actively manage this risk using derivative financial instruments. In the event the Company plans on a full or partial liquidation of any of its foreign subsidiaries where the Company's net investment is likely to be monetized, the Company will consider hedging the currency exposure associated with such a transaction.

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OTHER

 As of December 31, 2014, the Company has recorded the fair value of foreign currency forward exchange contracts of $1.0 million in prepayments and other, $7 thousand in miscellaneous other assets, $2.4 million in accounts payable and accrued liabilities and $0.1 million in deferred and other non-current liabilities in the balance sheet. All forward exchange contracts outstanding as of December 31, 2014 had an aggregate contract amount of $155 million.


Fair Value of Derivative Instruments in the Consolidated Balance Sheets as of December 31, 2014 and December 31, 2013

Derivative Contracts Not Designated as
Hedging Instruments

  Balance Sheet Location
  December 31,
2014

  December 31,
2013

 
Derivative Assets                  
Foreign Exchange Contracts   Prepayments and other   $ 1,037   $ 3,003  
Foreign Exchange Contracts   Miscellaneous Other Assets     7     985  
        $ 1,044   $ 3,988  
Derivative Liabilities                  
Foreign Exchange Contracts   Accounts payable and accrued liabilities   $ 2,378   $ 522  
Foreign Exchange Contracts   Deferred and other non-current liabilities     115     110  
        $ 2,493   $ 632  

The Effect of Derivative Instruments on the Consolidated Statements of Income
for the Fiscal Years Ended December 31, 2014 and December 31, 2013

Derivatives Not Designated
as Hedging Instruments

  Location of (Loss) Gain Recognized
in Income on Derivative

  Amount of (Loss) Gain
Recognized in Income
on Derivative

 
 
   
  2014
  2013
 
Foreign Exchange Contracts   Other (Expense) Income
Miscellaneous, net
  $ (2,368 ) $ 3,307  
        $ (2,368 ) $ 3,307  

 

 
   
   
   
  Gross Amounts not Offset
in the Statement of
Financial Position
   
 
 
   
  Gross Amounts
Offset in the
Financial Position

  Net Amounts
Presented in
the Statement of
Financial Position

   
 
 
  Gross
Amount

  Financial
Instruments

  Cash Collateral
Received

  Net
Amount

 

Description

                                     

December 31, 2014

                                     

Derivative Assets

  $ 1,044       $ 1,044           $ 1,044  

Total Assets

  $ 1,044       $ 1,044           $ 1,044  

Derivative Liabilities

 
$

2,493
   
 
$

2,493
   
   
 
$

2,493
 

Total Liabilities

  $ 2,493       $ 2,493           $ 2,493  

December 31, 2013

   
 
   
 
   
 
   
 
   
 
   
 
 

Derivative Assets

  $ 3,988       $ 3,988           $ 3,988  

Total Assets

  $ 3,988       $ 3,988           $ 3,988  

Derivative Liabilities

 
$

632
   
 
$

632
   
   
 
$

632
 

Total Liabilities

  $ 632       $ 632           $ 632  

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NOTE 11 FAIR VALUE

 Authoritative guidelines require the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

    Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.
    Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
    Level 3: Unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset or liability.

        As of December 31, 2014, the fair values of our financial assets and liabilities were categorized as follows:

 
  Total
  Level 1
  Level 2
  Level 3
 

Assets

                         

Forward exchange contracts (1)

  $ 1,044   $   $ 1,044   $  

Total assets at fair value

  $ 1,044   $   $ 1,044   $  

Liabilities

                         

Forward exchange contracts (1)

  $ 2,493   $   $ 2,493   $  

Total liabilities at fair value

  $ 2,493   $   $ 2,493   $  

        As of December 31, 2013, the fair values of our financial assets and liabilities were categorized as follows:

 
  Total
  Level 1
  Level 2
  Level 3
 

Assets

                         

Forward exchange contracts (1)

  $ 3,988   $   $ 3,988   $  

Total assets at fair value

  $ 3,988   $   $ 3,988   $  

Liabilities

                         

Forward exchange contracts (1)

  $ 632   $   $ 632   $  

Total liabilities at fair value

  $ 632   $   $ 632   $  

(1)
Market approach valuation technique based on observable market transactions of spot and forward rates.

        The carrying amounts of the Company's other current financial instruments such as cash and equivalents, notes payable and current maturities of long-term obligations approximate fair value due to the short-term maturity of the instrument. The Company considers its long-term obligations a Level 2 liability and utilizes the market approach valuation technique based on interest rates that are currently available to the Company for issuance of debt with similar terms and maturities. The estimated fair value of the Company's long-term obligations was $606 million as of December 31, 2014 and $363 million as of December 31, 2013.


NOTE 12 COMMITMENTS AND CONTINGENCIES

 The Company, in the normal course of business, is subject to a number of lawsuits and claims both actual and potential in nature. While management believes the resolution of these claims and lawsuits will not have a material adverse effect on the Company's financial position or results of operations or cash flows, claims and legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur that could include amounts in excess of any accruals which management has established. Were such unfavorable final outcomes to occur, it is possible that they could have a material adverse effect on our financial position, results of operations and cash flows.

        Under its Certificate of Incorporation, the Company has agreed to indemnify its officers and directors for certain events or occurrences while the officer or director is, or was serving, at its request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a directors and officers liability insurance policy that covers a portion of its exposure. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of December 31, 2014.

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NOTE 13 STOCK REPURCHASE PROGRAM

 On October 30, 2014, the Company announced a new share repurchase authorization of up to $350 million of common stock. This new authorization replaces previous authorizations and has no expiration date. AptarGroup may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions.

        On December 17, 2014, the Company entered into an agreement to repurchase approximately $250 million of its common stock under an accelerated share repurchase program (the "ASR program"). The ASR program is part of the Company's $350 million share repurchase authorization. The Company paid $250 million to Wells Fargo Bank N.A. in exchange for approximately 3.1 million shares, currently estimated to represent approximately 80% of the total number of shares expected to be purchased in the ASR program based on market prices at that time. The ultimate number of shares to be repurchased under the ASR program will be based on the volume-weighted average price of the Company's common stock during the term of the ASR program, less a discount.

        The Company repurchased approximately 4.5 million and 2.0 million shares of its outstanding common stock in 2014 and 2013, respectively, at a total cost of $340.5 million and $118.8 million in 2014 and 2013, respectively. Shares repurchased are returned to Treasury Stock.

NOTE 14 CAPITAL STOCK

 We have 199 million authorized shares of common stock. The number of shares of common stock and treasury stock and the share activity were as follows:

 
  Common Shares
  Treasury Shares
 
 
  2014
  2013
  2014
  2013
 

Balance at the beginning of the year

    85,364,303     84,086,341     19,979,833     18,158,002  

Employee option exercises

    851,396     1,217,583     (177,280 )   (179,169 )

Director option exercises

    41,844     48,333          

Restricted stock vestings

    9,924     12,046          

Common stock repurchases

            4,533,814     2,001,000  

Balance at the end of the year

    86,267,467     85,364,303     24,336,367     19,979,833  

        The cash dividends paid on the common stock for the years ended December 31, 2014, 2013, and 2012 aggregated $71.1 million, $66.1 million and $58.4 million, respectively.

NOTE 15 STOCK-BASED COMPENSATION

 The Company issues stock options and restricted stock units to employees under Stock Awards Plans approved by shareholders. Stock options are issued to non-employee directors for their services as directors under Director Stock Option Plans approved by shareholders. Options are awarded with the exercise price equal to the market price on the date of grant and generally become exercisable over three years and expire 10 years after grant. Restricted stock units generally vest over three years.

        Compensation expense recorded attributable to stock options for the year ended December 31, 2014 was approximately $18.0 million ($11.7 million after tax). The income tax benefit related to this compensation expense was approximately $6.3 million. Approximately $16.0 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. Compensation expense recorded attributable to stock options for the year ended December 31, 2013 was approximately $13.7 million ($9.2 million after tax). The income tax benefit related to this compensation expense was approximately $4.5 million. Approximately $12.1 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. Compensation expense recorded attributable to stock options for the year ended December 31, 2012 was approximately $12.7 million ($8.5 million after tax). The income tax benefit related to this compensation expense was approximately $4.2 million. Approximately $11.3 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales.

        The Company uses historical data to estimate expected life and volatility. The weighted-average fair value of stock options granted under the Stock Awards Plans was $14.82, $10.16 and $10.35 per share in 2014, 2013 and 2012,

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respectively. These values were estimated on the respective dates of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

   
 
 
Stock Awards Plans:
Years ended December 31,
  2014
  2013
  2012
 
 
 

Dividend Yield

    1.7%     1.8%     1.8%  

Expected Stock Price Volatility

    22.2%     22.7%     22.9%  

Risk-free Interest Rate

    2.3%     1.3%     1.3%  

Expected Life of Option (years)

    6.9     6.9     6.9  

        The fair value of stock options granted under the Director Stock Option Plan was $14.07, $10.89 and $10.59 per share in 2014, 2013 and 2012, respectively. These values were estimated on the respective date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

   
 
 
Director Stock Option Plans:
Years ended December 31,
  2014
  2013
  2012
 
 
 

Dividend Yield

    1.8%     1.9%     1.7%  

Expected Stock Price Volatility

    22.2%     23.0%     22.5%  

Risk-free Interest Rate

    2.2%     1.3%     1.3%  

Expected Life of Option (years)

    6.9     6.9     6.9  

        A summary of option activity under the Company's stock option plans as of December 31, 2014, and changes during the period then ended is presented below:

   
 
 
 
  Stock Awards Plans   Director Stock Option Plans  
 
  Shares
  Weighted Average
Exercise Price

  Shares
  Weighted Average
Exercise Price

 
 
 

Outstanding, January 1, 2014

    7,815,932   $ 41.26     313,834   $ 48.85  

Granted

    1,379,850     67.93     95,000     66.59  

Exercised

    (1,028,676 )   33.23     (40,166 )   47.96  

Forfeited or expired

    (59,300 )   51.46          
               

Outstanding at December 31, 2014

    8,107,806   $ 46.74     368,668   $ 53.52  

Exercisable at December 31, 2014

    5,468,032   $ 40.26     188,159   $ 45.98  

Weighted-Average Remaining Contractual Term (Years):

   
 
   
 
   
 
   
 
 

Outstanding at December 31, 2014

    6.0                 7.3  

Exercisable at December 31, 2014

    4.8                 5.9  

Aggregate Intrinsic Value:

   
 
   
 
   
 
   
 
 

Outstanding at December 31, 2014

  $ 164,487               $ 4,912  

Exercisable at December 31, 2014

  $ 145,338               $ 3,924  

Intrinsic Value of Options Exercised During the Years Ended:

   
 
   
 
   
 
   
 
 

December 31, 2014

  $ 33,059               $ 741  

December 31, 2013

  $ 37,822               $ 732  

December 31, 2012

  $ 42,226               $ 1,674  

        The fair value of shares vested during the years ended December 31, 2014, 2013 and 2012 was $14.1 million, $13.0 million and $12.1 million, respectively. Cash received from option exercises was approximately $37.8 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $10.0 million in the year ended December 31, 2014. As of December 31, 2014, the remaining valuation of stock option awards to be expensed in future periods was $13.2 million and the related weighted-average period over which it is expected to be recognized is 1.4 years.

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        The fair value of restricted stock grants is the market price of the underlying shares on the grant date. A summary of restricted stock unit activity as of December 31, 2014, and changes during the period then ended is presented below:

   
 
 
 
  Shares
  Weighted-Average
Grant-Date Fair Value

 
 
 

Nonvested at January 1, 2014

    25,681   $ 53.49  

Granted

    47,671     67.08  

Vested

    (11,602 )   52.96  
       

Nonvested at December 31, 2014

    61,750   $ 64.09  

        Compensation expense recorded attributable to restricted stock unit grants for the years ended December 31, 2014, 2013 and 2012 was approximately $1.8 million, $664 thousand and $501 thousand, respectively. The fair value of units vested during the years ended December 31, 2014, 2013 and 2012 was $614 thousand, $571 thousand and $316 thousand, respectively. The intrinsic value of units vested during the years ended December 31, 2014, 2013 and 2012 was $761 thousand, $661 thousand and $448 thousand, respectively. As of December 31, 2014, there was $1.9 million of total unrecognized compensation cost relating to restricted stock unit awards which is expected to be recognized over a weighted average period of 1.5 years.

        During the first quarter of 2014, the Company approved a new long-term incentive program for certain employees. The program is based on the cumulative total stockholder return of our common stock during a three year performance period. Total expense related to this program is expected to be approximately $1.0 million over the performance period, of which $530 thousand was recognized for the year ended December 31, 2014.

NOTE 16 EARNINGS PER SHARE

 The reconciliation of basic and diluted earnings per share for the years ended December 31, 2014, 2013 and 2012 are as follows:

 
  Income
(Numerator)

  Shares
(Denominator)

  Per Share
Amount

 

For the Year Ended December 31, 2014

                 

Basic EPS

                 

Income available to common stockholders

  $ 191,658   65,009   $ 2.95  

Effect of Dilutive Securities

                 

Stock options

        2,248        

Restricted stock

      35        
             

Diluted EPS

                 

Income available to common stockholders

  $ 191,658   67,292   $ 2.85  

For the Year Ended December 31, 2013

                 

Basic EPS

                 

Income available to common stockholders

  $ 171,994   66,090   $ 2.60  

Effect of Dilutive Securities

                 

Stock options

        2,106        

Restricted stock

      12        
             

Diluted EPS

                 

Income available to common stockholders

  $ 171,994   68,208   $ 2.52  

For the Year Ended December 31, 2012

                 

Basic EPS

                 

Income available to common stockholders

  $ 162,612   66,392   $ 2.45  

Effect of Dilutive Securities

                 

Stock options

        1,990        

Restricted stock

      13        
             

Diluted EPS

                 

Income available to common stockholders

  $ 162,612   68,395   $ 2.38  

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NOTE 17 SEGMENT INFORMATION

 The Company operates in the packaging components industry, which includes the development, manufacture and sale of consumer product dispensing solutions. The Company is organized into three reporting segments. Operations that sell dispensing solutions primarily to the personal care, beauty and home care markets form the Beauty + Home segment. Operations that sell dispensing solutions to the prescription drug, consumer health care and injectables markets form the Pharma segment. Operations that sell dispensing solutions primarily to the food and beverage markets form the Food + Beverage segment.

        The accounting policies of the segments are the same as those described in Note 1, Summary of Significant Accounting Policies. The Company evaluates performance of its business segments and allocates resources based upon segment income. Segment income is defined as earnings before net interest expense, certain corporate expenses, restructuring initiatives and income taxes.

        Financial information regarding the Company's reportable segments is shown below:

   
 
      
   
   
 
Years Ended December 31,
  2014
  2013
  2012
 

Total Sales:

                   

Beauty + Home

  $ 1,522,444   $ 1,501,611   $ 1,468,599  

Pharma

    751,226     709,058     588,853  

Food + Beverage

    349,297     323,469     288,995  

Total Sales

  $ 2,622,967   $ 2,534,138   $ 2,346,447  

Less: Intersegment Sales:

   
 
   
 
   
 
 

Beauty + Home

  $ 24,147   $ 13,466   $ 14,659  

Pharma

        284     160  

Food + Beverage

    1,011     375     592  

Total Intersegment Sales

  $ 25,158   $ 14,125   $ 15,411  

Net Sales:

   
 
   
 
   
 
 

Beauty + Home

  $ 1,498,297   $ 1,488,145   $ 1,453,940  

Pharma

    751,226     708,774     588,693  

Food + Beverage

    348,286     323,094     288,403  

Net Sales

  $ 2,597,809   $ 2,520,013   $ 2,331,036  

Segment Income (1):

   
 
   
 
   
 
 

Beauty + Home

  $ 98,368   $ 109,272   $ 123,527  

Pharma

    204,698     189,689     141,912  

Food + Beverage

    37,728     35,186     30,415  

Restructuring Initiatives and Related Depreciation

        (14,525 )   (4,678 )

Corporate & Other

    (38,261 )   (37,958 )   (33,849 )

Income before interest and taxes

  $ 302,533   $ 281,664   $ 257,327  

Interest expense, net

    (16,232 )   (17,281 )   (15,954 )

Income before income taxes

  $ 286,301   $ 264,383   $ 241,373  

Depreciation and Amortization (1):

   
 
   
 
   
 
 

Beauty + Home

  $ 85,469   $ 83,328   $ 82,828  

Pharma

    41,690     39,812     33,122  

Food + Beverage

    20,179     18,871     15,605  

Restructuring Initiatives

        2,725     1,576  

Corporate & Other

    4,880     5,220     3,891  

Depreciation and Amortization

  $ 152,218   $ 149,956   $ 137,022  

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Years Ended December 31,
  2014
  2013
  2012
 

Capital Expenditures:

                   

Beauty + Home

  $ 76,544   $ 81,247   $ 97,010  

Pharma

    37,455     32,643     24,953  

Food + Beverage

    32,148     19,339     32,282  

Corporate & Other

    15,793     18,281     19,808  

Capital Expenditures

  $ 161,940   $ 151,510   $ 174,053  

Total Assets:

   
 
   
 
   
 
 

Beauty + Home

  $ 1,193,370   $ 1,318,933   $ 1,240,101  

Pharma

    619,304     676,420     659,132  

Food + Beverage

    263,742     253,774     233,553  

Corporate & Other

    360,774     248,635     191,626  

Total Assets

  $ 2,437,190   $ 2,497,762   $ 2,324,412  
(1)
The Company evaluates performance of its business units and allocates resources based upon segment income. Segment income is defined as earnings before net interest expense, certain corporate expenses, restructuring initiatives and income taxes. Restructuring Initiatives and related Depreciation includes the following income/(expense) items for the twelve months ended December 31, 2014, 2013 and 2012 as follows:

 
   
   
   
 
Years Ended December 31,
  2014
  2013
  2012
 

European Restructuring Plan

                   

Depreciation

  $   $ 2,725   $ 1,576  

Employee Severance and Other Costs

        11,844     3,314  

Prior Year Initiatives

        (44 )   (212 )

Total Restructuring Initiatives and Related Depreciation Expense

  $   $ 14,525   $ 4,678  

Restructuring Initiatives and Related Depreciation Expense by Segment

   
 
   
 
   
 
 

Beauty + Home

  $   $ 14,548   $ 4,787  

Pharma

             

Food + Beverage

        (23 )   (109 )

Total Restructuring Initiatives and Related Depreciation Expense

  $   $ 14,525   $ 4,678  

54 /ATR

2014 Form 10-K


Table of Contents

GEOGRAPHIC INFORMATION

 The following are net sales and long-lived asset information by geographic area and product information for the years ended December 31, 2014, 2013 and 2012:

   
 
      
   
   
 
 
  2014
  2013
  2012
 

Net Sales to Unaffiliated Customers (1):

                   

United States

  $ 642,060   $ 634,418   $ 650,637  

Europe:

                   

France

    850,817     810,528     650,226  

Germany

    363,898     339,858     311,205  

Italy

    141,808     136,617     144,163  

Other Europe

    150,469     165,038     163,695  

Total Europe

    1,506,992     1,452,041     1,269,289  

Other Foreign Countries

    448,757     433,554     411,110  

Total

  $ 2,597,809   $ 2,520,013   $ 2,331,036  

Plant, Property & Equipment:

   
 
   
 
   
 
 

United States

  $ 192,265   $ 226,917   $ 191,697  

Europe:

                   

France

    228,049     263,913     251,015  

Germany

    136,491     156,970     137,203  

Italy

    48,940     57,729     65,743  

Other Europe

    57,946     72,297     72,404  

Total Europe

    471,426     550,909     526,365  

Other Foreign Countries

    147,964     86,836     130,171  

Total

  $ 811,655   $ 864,662   $ 848,233  

Product Net Sales Information:

   
 
   
 
   
 
 

Pumps

  $ 1,111,536   $ 1,093,514   $ 1,044,226  

Closures

    611,144     594,135     605,493  

Valves

    350,106     327,635     327,251  

Injectables (2)

    143,631     142,116     56,465  

Other

    381,392     362,613     297,601  

Total

  $ 2,597,809   $ 2,520,013   $ 2,331,036  
(1)
Sales are attributed to countries based upon where the sales invoice to unaffiliated customers is generated.
(2)
Injectables represent six month sales in 2012 from the date of acquisition.

No single customer represents 10% or more of the Company's net sales in 2014, 2013 or 2012.

NOTE 18 NONRECURRING EVENTS

 A fire caused damages to the roof and production area of an AptarGroup subsidiary, Graphocolor do Brasil Embalagens Ltda, on September 1, 2014. Graphocolor is located in Jundiai, Brazil. There were no reported injuries. Graphocolor is primarily an internal supplier to AptarGroup of anodized aluminum components for certain dispensing systems sold to the regional beauty and personal care markets. Repairs of the facility are progressing as planned and this event has not impacted our ability to service our customers. AptarGroup is insured for the damages caused by the fire, including business interruption insurance, and it does not expect this incident to have a material impact on its financial results. Costs, including the write-off of damaged fixed assets and inventory along with labor and other direct costs related to the fire, of $5.5 million were incurred during 2014, for which we have already received advanced insurance proceeds of $1.8 million. We have established an additional insurance receivable of $2.4 million for known losses for which insurance reimbursement is probable. In many cases, our insurance coverage exceeds the amount of these covered losses. No gain contingencies have been recognized as our ability to realize those gains remains uncertain. Therefore, we are reporting net expenses of $1.3 million related to the Graphocolor fire during 2014. These costs are included in the Beauty + Home segment.

55 /ATR

2014 Form 10-K


Table of Contents

NOTE 19 ACQUISITIONS

 On July 3, 2012, the Company completed its acquisition of Rumpler—Technologies S.A., together with its direct and indirect subsidiaries ("Stelmi"). Stelmi is a producer of elastomer primary packaging components for injectable drug delivery and operates two manufacturing plants located in the Normandy region of France and also has a research and development facility located near Paris. The Company acquired all of the shares of Stelmi. The purchase price paid for Stelmi (net of cash acquired) was approximately $188 million and was funded by cash on hand.

        Stelmi contributed net sales of $144.1 million, $143.1 million and $56.8 million and pretax income of $23.9 million, $24.7 million and $1.5 million (including $6.6 million of fair value and other acquisition adjustments) for the years ended December 31, 2014, December 31, 2013 and December 31, 2012, respectively. The results of the acquired business for the period from the acquisition date are included in the accompanying consolidated financial statements and are reported in the Pharma reporting segment.

        For the year ended December 31, 2012, we recognized $5.9 million in transaction costs related to the acquisition of Stelmi. These costs are reflected in the selling, research & development and administrative section of the Consolidated Statements of Income.

        The following table summarizes the assets acquired and liabilities assumed at estimated fair value.

   
 
 
 
  July 3, 2012
 
 
 

Assets

       

Cash and equivalents

  $ 68,335  

Accounts receivable

    23,540  

Inventories

    16,826  

Prepaid and other

    3,256  

Property, plant and equipment

    42,073  

Goodwill

    111,031  

Intangible assets

    47,134  

Other miscellaneous assets

    6,092  

Liabilities

   
 
 

Current maturities of long-term obligations

    675  

Accounts payable and accrued liabilities

    26,064  

Long-term obligations

    885  

Deferred income taxes

    22,440  

Retirement and deferred compensation plans

    12,049  
   

Net assets acquired

  $ 256,174  
   

        The following table is a summary of the fair value estimates of the acquired identifiable intangible assets and weighted-average useful lives as of the acquisition date:

   
 
 
 
  Weighted-Average
Useful Life
(in years)

  Estimated
Fair Value
of Asset

 
 
 

Customer relationships

  15   $ 7,438  

Technology

  15     37,191  

Trademark

  4     2,505  
   

Total

      $ 47,134  
   

56 /ATR

2014 Form 10-K


Table of Contents

        Goodwill in the amount of $111.0 million was recorded for the acquisition of Stelmi and is included in the Pharma segment. Goodwill is calculated as the excess of the consideration transferred over the net assets acquired and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill largely consists of leveraging the Company's commercial presence in selling the Stelmi line of products in markets where Stelmi didn't previously operate and the ability of Stelmi to maintain its competitive advantage from a technical viewpoint. Goodwill will not be amortized, but will be tested for impairment at least annually. We do not expect any of the goodwill will be deductible for tax purposes.

        The unaudited pro forma results presented below include the effects of the Stelmi acquisition as if it had occurred as of January 1, 2011. The unaudited pro forma results reflect certain adjustments related to the acquisition, such as the amortization associated with estimates for the acquired intangible assets and fair value adjustments for inventory. The 2012 supplemental pro forma earnings were adjusted to exclude $4.2 million (after tax) of transaction costs, including consulting, legal, and advisory fees. The 2012 supplemental pro forma earnings were also adjusted to exclude $2.5 million (after tax) of nonrecurring expense related to the fair value adjustment to acquisition-date inventory.

        The pro forma results do not include any synergies or other expected benefits of the acquisition. Accordingly, the unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been completed on the dates indicated.

   
 
 
Years Ended December 31,
  2014
  2013
  2012
 
 
 

Net Sales

  $ 2,598   $ 2,520   $ 2,395  

Net Income Attributable to AptarGroup Inc.

    192     172     174  

Net Income per common share — basic

    2.95     2.60     2.62  

Net Income per common share — diluted

    2.85     2.52     2.54  

 

 

 

 

 

 

 

 

 

 

 
   

        In December 2013, AptarGroup acquired a 20% non-controlling investment in Bapco Closures Holding Limited (Bapco) for approximately $5.2 million. In addition to this equity stake, the Company secured an exclusive global license related to innovative closures sealing technology that provides package integrity and tamper evidence. This investment is being accounted for under the equity method of accounting from the date of acquisition and, since it does not have a material impact on the results of operations in 2014 or 2013, pro forma information is not presented.


NOTE 20 RESTRUCTURING INITIATIVES

 In November 2012, the Company announced a plan to optimize certain capacity in Europe. Due to increased production efficiencies and to better position the Company for future growth in Europe, AptarGroup transferred and consolidated production capacity involving twelve facilities. Two facilities have closed impacting approximately 170 employees. The locations involved in the plan are facilities serving the beauty, personal care, food, beverage, and consumer health care markets. As of December 31, 2013, the plan was substantially complete. The cumulative expense incurred was $19.5 million. As of December 31, 2014 we have recorded the following activity associated with our plan:

 
  Beginning
Reserve at
12/31/13

  Net Charges for
the Year
Ended 12/31/14

  Cash Paid
  FX Impact
  Ending
Reserve at
12/31/14

 
 
 

Employee severance

  $ 2,521   $   $ (2,049 ) $ (113 ) $ 359  

Other costs

    1,735         (1,695 )   (40 )    
                   

Totals

  $ 4,256   $   $ (3,744 ) $ (153 ) $ 359  

57 /ATR

2014 Form 10-K


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NOTE 21 QUARTERLY DATA (UNAUDITED)

 Quarterly results of operations and per share information for the years ended December 31, 2014 and 2013 are as follows:

   
 
      
   
   
   
   
 
 
  Quarter    
 
 
  Total
for Year

 
 
  First
  Second
  Third
  Fourth
 

Year Ended December 31, 2014:

                               

Net sales

  $ 676,051   $ 670,631   $ 651,942   $ 599,185   $ 2,597,809  

Gross profit (1)

    186,791     182,483     171,547     154,829     695,650  

Net Income

    48,408     53,084     48,620     41,512     191,624  

Net Income Attributable to AptarGroup, Inc.

    48,389     53,076     48,595     41,598     191,658  

Per Common Share — 2014:

   
 
   
 
   
 
   
 
   
 
 

Net Income Attributable to AptarGroup, Inc.

                               

Basic

  $ .74   $ .81   $ .75   $ .65   $ 2.95  

Diluted

    .71     .79     .73     .63     2.85  

Dividends declared

    .25     .28     .28     .28     1.09  

Stock price high (2)

    68.78     67.84     68.00     68.67     68.78  

Stock price low (2)

    61.18     64.54     60.52     55.59     55.59  

Average number of shares outstanding:

   
 
   
 
   
 
   
 
   
 
 

Basic

    65,468     65,328     64,886     64,368     65,009  

Diluted

    68,232     67,438     66,845     66,121     67,292  

Year Ended December 31, 2013:

   
 
   
 
   
 
   
 
   
 
 

Net sales

  $ 617,633   $ 641,441   $ 623,644   $ 637,295   $ 2,520,013  

Gross profit (1)

    164,213     172,721     163,677     165,543     666,154  

Net Income

    39,978     49,880     45,232     36,836     171,926  

Net Income Attributable to AptarGroup, Inc.

    40,029     49,802     45,264     36,899     171,994  

Per Common Share — 2013:

   
 
   
 
   
 
   
 
   
 
 

Net Income Attributable to AptarGroup, Inc.

                               

Basic

  $ .61   $ .75   $ .68   $ .56   $ 2.60  

Diluted

    .59     .73     .67     .54     2.52  

Dividends declared

    .25     .25     .25     .25     1.00  

Stock price high (2)

    57.47     57.76     60.75     67.86     67.86  

Stock price low (2)

    48.14     54.13     55.36     59.19     48.14  

Average number of shares outstanding:

   
 
   
 
   
 
   
 
   
 
 

Basic

    66,155     66,420     66,092     65,700     66,090  

Diluted

    68,296     68,106     67,986     67,853     68,208  
(1)
Gross profit is defined as net sales less cost of sales and depreciation.
(2)
The stock price high and low amounts are based upon intra-day New York Stock Exchange composite price history.

58 /ATR

2014 Form 10-K


Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of AptarGroup, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of AptarGroup, Inc. and its subsidiaries at December 31, 2014 and December 31, 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in "Management's Report on Internal Control over Financial Reporting", under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS LLP

Chicago, Illinois
February 27, 2015

59 /ATR

2014 Form 10-K


Table of Contents

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 None.


ITEM 9A.    CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

 The Company's management has evaluated, with the participation of the chief executive officer and chief financial officer of the Company, the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2014. Based on that evaluation, the chief executive officer and chief financial officer have concluded that these controls and procedures were effective as of such date.


MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company's management has evaluated, with the participation of the chief executive officer and chief financial officer of the Company, the effectiveness of our internal control over financial reporting as of December 31, 2014 based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation under the framework in Internal Control—Integrated Framework, management has concluded that our internal control over financial reporting was effective as of December 31, 2014.

        PricewaterhouseCoopers LLP, independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting. This report appears on page 59.


CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 No changes in the Company's internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the Company's fiscal quarter ended December 31, 2014 that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.


ITEM 9B.    OTHER INFORMATION

 On February 26, 2015, the Company completed the issuance and sale of $100,000,000 aggregate principal amount of 3.49% Series 2014-A-2 Senior Notes due February 26, 2024 and $125,000,000 aggregate principal amount 3.61% Series-A-4 Senior Notes due February 26, 2026 from a previously announced private placement.


PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 Information with respect to directors may be found under the caption "Proposal 1—Election of Directors" in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on May 6, 2015 (the "2015 Proxy Statement") and is incorporated herein by reference.

        Information with respect to executive officers may be found under the caption "Executive Officers" in Part I of this report and is incorporated herein by reference.

        Information with respect to audit committee members and audit committee financial experts may be found under the caption "Corporate Governance—Audit Committee" in the 2015 Proxy Statement and is incorporated herein by reference.

        Information with respect to the Company's Code of Business Conduct and Ethics may be found under the caption "Corporate Governance—Code of Business Conduct and Ethics" in the 2015 Proxy Statement and is incorporated herein by reference. Our Code of Business Conduct and Ethics is available through the Corporate Governance link on the Investor Relations page of our website (www.aptar.com).

        The information set forth under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" in the 2015 Proxy Statement is incorporated herein by reference.

60 /ATR

2014 Form 10-K


Table of Contents


ITEM 11.    EXECUTIVE COMPENSATION

 The information set forth under the headings "Board Compensation", "Executive Officer Compensation" and "Compensation Committee Report" in the 2015 Proxy Statement is incorporated herein by reference. The information included under the heading "Compensation Committee Report" in the 2015 Proxy Statement shall not be deemed to be "soliciting" material or to be "filed" with the Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.


ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 The information set forth under the heading "Security Ownership of Certain Beneficial Owners, Directors and Management" and "Equity Compensation Plan Information" in the 2015 Proxy Statement is incorporated herein by reference.


ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 The information set forth under the heading "Transactions with Related Persons" and "Corporate Governance—Independence of Directors" in the 2015 Proxy Statement is incorporated herein by reference.


ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

 Information with respect to the independent registered public accounting firm fees and services may be found under the caption "Proposal [4]—Ratification of the Appointment of PricewaterhouseCoopers LLP as the Independent Registered Public Accounting Firm for 2015" in the 2015 Proxy Statement. Such information is incorporated herein by reference.


PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)
The following documents are filed as a part of this report:

      Description    

 

1)

 

All Financial Statements

 

 
      The financial statements are set forth under Item 8 of this report on Form 10-K    
      Consolidated Statements of Income   27
      Consolidated Statements of Comprehensive Income   28
      Consolidated Balance Sheets   29
      Consolidated Statements of Cash Flows   31
      Consolidated Statements of Changes in Equity   32
      Notes to Consolidated Financial Statements   33
      Report of Independent Registered Public Accounting Firm   59
  2)   II – Valuation and Qualifying Accounts   63

 

 

 

All other schedules have been omitted because they are not applicable or not required.

 

 
(b)
Exhibits required by Item 601 of Regulation S-K are incorporated by reference to the Exhibit Index on pages 63-66 of this report.

61 /ATR

2014 Form 10-K


Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    AptarGroup, Inc.
(Registrant)
   

Date: February 27, 2015

 

By

 

/s/ ROBERT W. KUHN


 

 
        Robert W. Kuhn
Executive Vice President,
Chief Financial Officer and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the date indicated.

  Signature
  Title
  Date

 

 

 

 

 

 
  /s/ KING HARRIS

King Harris
  Chairman of the Board and Director   February 27, 2015

 

/s/ STEPHEN J. HAGGE

Stephen J. Hagge

 

President and Chief Executive Officer and Director
(Principal Executive Officer)

 

February 27, 2015

 

/s/ ROBERT W. KUHN

Robert W. Kuhn

 

Executive Vice President,
Chief Financial Officer and Secretary
(Principal Accounting and Financial Officer)

 

February 27, 2015

 

/s/ ALAIN CHEVASSUS

Alain Chevassus

 

Director

 

February 27, 2015

 

/s/ LESLIE DESJARDINS

Leslie Desjardins

 

Director

 

February 27, 2015

 

/s/ GEORGE L. FOTIADES

George L. Fotiades

 

Director

 

February 27, 2015

 

/s/ LEO A. GUTHART

Leo A. Guthart

 

Director

 

February 27, 2015

 

/s/ GIOVANNA KAMPOURI-MONNAS

Giovanna Kampouri-Monnas

 

Director

 

February 27, 2015

 

/s/ ANDREAS KRAMVIS

Andreas Kramvis

 

Director

 

February 27, 2015

 

/s/ PETER PFEIFFER

Peter Pfeiffer

 

Director

 

February 27, 2015

 

/s/ DR. JOANNE C. SMITH

Dr. Joanne C. Smith

 

Director

 

February 27, 2015

 

/s/ RALF WUNDERLICH

Ralf Wunderlich

 

Director

 

February 27, 2015

62 /ATR

2014 Form 10-K


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AptarGroup, Inc.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

For the years ended December 31, 2014, 2013 and 2012

Dollars in thousands
 
 
 
 
  Balance at
Beginning
Of Period

  Charged to
Costs and
Expenses

  Deductions
from
Reserve (a)

  Balance
at End of
Period

 
 
 

2014

                         

Allowance for doubtful accounts

  $ 4,416   $ 741   $ (906 ) $ 4,251  

Deferred tax valuation allowance

    4,840     3,396     (502 )   7,734  

2013

   
 
   
 
   
 
   
 
 

Allowance for doubtful accounts

  $ 6,751   $ (381 ) $ (1,954 ) $ 4,416  

Deferred tax valuation allowance

    7,033     2,708     (4,901 )   4,840  

2012

   
 
   
 
   
 
   
 
 

Allowance for doubtful accounts

  $ 8,257   $ (595 ) $ (911 ) $ 6,751  

Deferred tax valuation allowance

    6,326     1,362     (655 )   7,033  
(a)
Write-off accounts considered uncollectible, net of recoveries and foreign currency impact adjustments.

INDEX TO EXHIBITS

Exhibit
Number

  Description
2.1   Share Purchase Agreement, dated as of May 30, 2012, between Mr. Jean-Jacques Rumpler, Mr. Gérard Rumpler, Ms. Annette Pomerat, Ms. Evelyne Fournier Rumpler and Aptargroup Holding SAS, filed as Exhibit 2.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2012 (File No. 1-11846), is hereby incorporated by reference.
3(i)   Amended and Restated Certificate of Incorporation of AptarGroup, Inc., as amended, filed as Exhibit 4(a) to AptarGroup Inc.'s Registration Statement on Form S-8, Registration Number 333-152525, filed on July 25, 2008, is hereby incorporated by reference.
3(ii)   Amended and Restated By-Laws of the Company, filed as Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 1-11846), is hereby incorporated by reference.
    The Company hereby agrees to provide the Commission, upon request, copies of instruments defining the rights of holders of long-term debt of the Registrant and its subsidiaries as are specified by item 601(b)(4)(iii)(A) of Regulation S-K.
4.1   Note Purchase Agreement dated as of July 31, 2006, among AptarGroup, Inc. and the purchasers listed on Schedule A thereto, filed as Exhibit 4.2 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2006 (File No. 1-11846), is hereby incorporated by reference.
4.2   Form of AptarGroup, Inc. 6.04% Series 2006-A Senior Notes Due July 31, 2016, filed as Exhibit 4.3 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2006 (File No. 1-11846), is hereby incorporated by reference.
4.3   Note Purchase Agreement dated as of July 31, 2008, among AptarGroup, Inc. and the purchasers listed on Schedule A thereto, filed as Exhibit 4.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.
4.4   Form of AptarGroup, Inc. 6.03% Series 2008-A-2 Senior Notes Due July 31, 2018, filed as Exhibit 4.2 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.
4.5   First Amendment to 2006 Note Purchase Agreement, dated as of November 30, 2010, among the Company and each of the institutions listed as signatories thereto, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on December 1, 2010 (File No. 1-11846), is hereby incorporated by reference.
4.6   First Amendment to 2008 Note Purchase Agreement, dated as of November 30, 2010, among the Company and each of the institutions listed as signatories thereto, filed as Exhibit 4.2 to the Company's Current Report on Form 8-K filed on December 1, 2010 (File No. 1-11846), is hereby incorporated by reference.
4.7   Supplemental Note Purchase Agreement, dated as of November 30, 2010, among the Company and each of the purchasers listed in Exhibit A thereto, filed as Exhibit 4.3 to the Company's Current Report on Form 8-K filed on December 1, 2010 (File No. 1-11846), is hereby incorporated by reference.

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Table of Contents

Exhibit
Number

  Description
4.8   Form of AptarGroup, Inc. 2.33% Series 2008-B-1 Senior Notes due November 30, 2015, filed as Exhibit 4.4 to the Company's Current Report on Form 8-K filed on December 1, 2010 (File No. 1-11846), is hereby incorporated by reference.
4.9   Form of AptarGroup, Inc. 3.78% Series 2008-B-2 Senior Notes due November 30, 2020, filed as Exhibit 4.5 to the Company's Current Report on Form 8-K filed on December 1, 2010 (File No. 1-11846), is hereby incorporated by reference.
4.10   Second Supplemental Note Purchase Agreement, dated as of September 5, 2012, among the Company and each of the purchasers listed in Exhibit A thereto, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on September 5, 2012 (File No. 1-11846), is hereby incorporated by reference.
4.11   Form of AptarGroup, Inc. 3.25% Series 2008-C-1 Senior Notes Due September 5, 2022, filed as Exhibit 4.2 to the Company's Current Report on Form 8-K filed on September 5, 2012 (File No. 1-11846), is hereby incorporated by reference.
4.12   Form of AptarGroup, Inc. 3.40% Series 2008-C-2 Senior Notes Due September 5, 2024, filed as Exhibit 4.3 to the Company's Current Report on Form 8-K filed on September 5, 2012 (File No. 1-11846), is hereby incorporated by reference.
4.13   Note Purchase Agreement, dated as of December 16, 2014, among the Company and each of the purchasers listed in Schedule B thereto, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on December 17, 2014 (File No. 1-11846), is hereby incorporated by reference.
4.14   Form of AptarGroup, Inc. 3.49% Series 2014-A-1 Senior Notes due December 16, 2023 (included as a part of Exhibit 4.13), filed as Exhibit 4.2 to the Company's Current Report on Form 8-K filed on December 17, 2014 (File No. 1-11846), is hereby incorporated by reference.
4.15   Form of AptarGroup, Inc. 3.49% Series 2014-A-2 Senior Notes due February 26, 2024 (included as a part of Exhibit 4.13), filed as Exhibit 4.3 to the Company's Current Report on Form 8-K filed on December 17, 2014 (File No. 1-11846), is hereby incorporated by reference.
4.16   Form of AptarGroup, Inc. 3.61% Series 2014-A-3 Senior Notes due December 16, 2025 (included as a part of Exhibit 4.13), filed as Exhibit 4.4 to the Company's Current Report on Form 8-K filed on December 17, 2014 (File No. 1-11846), is hereby incorporated by reference.
4.17   Form of AptarGroup, Inc. 3.61% Series 2014-A-4 Senior Notes due February 26, 2026 (included as a part of Exhibit 4.13), filed as Exhibit 4.5 to the Company's Current Report on Form 8-K filed on December 17, 2014 (File No. 1-11846), is hereby incorporated by reference.
4.18   Second Amendment to 2006 Note Purchase Agreement, dated as of December 16, 2014, among the Company and each of the noteholders listed on the signature pages thereto, filed as Exhibit 4.6 to the Company's Current Report on Form 8-K filed on December 17, 2014 (File No. 1-11846), is hereby incorporated by reference.
4.19   Second Amendment to 2008 Note Purchase Agreement, dated as of December 16, 2014, among the Company and each of the noteholders listed on the signature pages thereto, filed as Exhibit 4.7 to the Company's Current Report on Form 8-K filed on December 17, 2014 (File No. 1-11846), is hereby incorporated by reference.
10.1   AptarGroup, Inc. 2000 Stock Awards Plan, filed as Appendix A to the Company's Proxy Statement, dated April 6, 2000 (File No. 1-11846), is hereby incorporated by reference.**
10.2   AptarGroup, Inc. 2004 Stock Awards Plan, filed as Appendix A to the Company's Proxy Statement, dated March 26, 2004 (File No. 1-11846), is hereby incorporated by reference.**
10.3   AptarGroup, Inc. 2004 Director Stock Option Plan, filed as Appendix B to the Company's Proxy Statement, dated March 26, 2004 (File No. 1-11846), is hereby incorporated by reference.**
10.4   AptarGroup, Inc., Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2004 Stock Awards Plan, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-11846), is hereby incorporated by reference.**
10.5   AptarGroup, Inc. Stock Option Agreement for Non-Employee Directors pursuant to the AptarGroup, Inc. 2004 Director Option Plan, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-11846), is hereby incorporated by reference.**
10.6   AptarGroup, Inc. Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2000 Stock Awards Plan, filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-11846), is hereby incorporated by reference.**
10.7   AptarGroup, Inc. Restricted Stock Unit Award Agreement pursuant to the AptarGroup, Inc. 2000 Stock Awards Plan, filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-11846), is hereby incorporated by reference.**
10.8   Form of AptarGroup, Inc. Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2014 Stock Awards Plan, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (File No. 1-11846), is hereby incorporated by reference.**

64 /ATR

2014 Form 10-K


Table of Contents

Exhibit
Number

  Description
10.9   Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement pursuant to the AptarGroup, Inc. 2014 Stock Awards Plan, filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (File No. 1-11846), is hereby incorporated by reference.**
10.10   Supplementary Pension Plan—France dated August 24, 2001, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (File No. 1-11846), is hereby incorporated by reference.**
10.11   AptarGroup, Inc. Supplemental Retirement Plan dated October 6, 2008, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-11846), is hereby incorporated by reference.**
10.12   Indemnification Agreement dated January 1, 1996 of King Harris, filed as Exhibit 10.25 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2001 (File No. 1-11846), is hereby incorporated by reference.**
10.13   Employment Agreement effective January 1, 2012 of Stephen J. Hagge, filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2012 (File No. 1-11846), is hereby incorporated by reference.**
10.14   Employment Agreement effective January 1, 2012 of Robert W. Kuhn, filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2012 (File No. 1-11846), is hereby incorporated by reference.**
10.15   Employment Agreement effective January 1, 2012 of Patrick F. Doherty, filed as Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2012 (File No. 1-11846), is hereby incorporated by reference.**
10.16   Employment Agreement effective January 1, 2012 of Eldon W. Schaffer, filed as Exhibit 10.4 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2012 (File No. 1-11846), is hereby incorporated by reference.**
10.17   Employment Agreement dated January 18, 2008 of Olivier Fourment, filed as Exhibit 10.9 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.**
10.18   Employment Agreement dated October 1, 2010 of Ursula Saint Léger, filed as Exhibit 10.21 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2010 (File No. 1-11846), is hereby incorporated by reference. **
10.19   Employment Agreement effective August 1, 2014 of Salim Haffar, filed as Exhibit 10.4 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2014 (File No. 1-11846), is hereby incorporated by reference. **
10.20   AptarGroup, Inc. 2008 Stock Option Plan, filed as Exhibit 10.3 to AptarGroup, Inc.'s Current Report on Form 8-K filed on May 1, 2008, is hereby incorporated by reference.**
10.21   AptarGroup, Inc. 2008 Director Stock Option Plan, filed as Exhibit 10.1 to AptarGroup, Inc.'s Current Report on Form 8-K filed on May 1, 2008, is hereby incorporated by reference.**
10.22   Form of AptarGroup, Inc. Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2008 Stock Option Plan, filed as Exhibit 10.4 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.**
10.23   Form of AptarGroup, Inc. Stock Option Agreement for Non-Employee Directors pursuant to the AptarGroup, Inc. 2008 Director Stock Option Plan, filed as Exhibit 10.5 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), is hereby incorporated by reference.**
10.24   Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement pursuant to the AptarGroup, Inc. 2004 Stock Awards Plan, filed as Exhibit 10.6 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 1-11846), and amended as of January 1, 2010.**
10.25   Form of AptarGroup, Inc. Stock Option Agreement for Employees pursuant to the AptarGroup, Inc. 2011 Stock Awards Plan, filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2011 (File No. 1-11846), is hereby incorporated by reference.**
10.26   Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement pursuant to the AptarGroup, Inc. 2011 Stock Awards Plan, filed as Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2011 (File No. 1-11846), is hereby incorporated by reference.**
10.27   AptarGroup, Inc. 2011 Stock Awards Plan, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 10, 2011 (File No. 1-11846), is hereby incorporated by reference.**
10.28   AptarGroup, Inc. 2014 Stock Awards Plan, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 12, 2014 (File No. 1-11846), is hereby incorporated by reference.**
10.29   AptarGroup Performance Incentive Plan, filed as Exhibit 10.1 to AptarGroup, Inc.'s Current Report on Form 8-K filed on May 13, 2013 (File No. 1-11846), is hereby incorporated by reference.**

65 /ATR

2014 Form 10-K


Table of Contents

Exhibit
Number

  Description
10.30   AptarGroup, Inc. 2014 Long-Term Incentive Program (as Amended and Restated) under the AptarGroup, Inc. Performance Incentive Plan, filed as Exhibit 10.28 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2013 (File No. 1-11846), is hereby incorporated by reference.**
10.31*   AptarGroup, Inc. 2014 Long-Term Incentive Program (as Amended and Restated) under the AptarGroup, Inc. Performance Incentive Plan.
10.32   Credit Agreement dated as of January 31, 2012 among AptarGroup, Inc. and the financial institutions party thereto as Lenders, Wells Fargo Bank, National Association, as administrative agent, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as co-syndication agents, HSBC Bank USA, N.A. and Union Bank, N.A., as co-documentation agents, and Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as joint lead arrangers and joint bookrunners, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on February 3, 2012 (File No. 1-11846), is hereby incorporated by reference (replaced herein by Exhibit 10.33).
10.33   Amendment No. 1 to Credit Agreement dated as of January 31, 2013 by and among AptarGroup, Inc., and the financial institutions party thereto as Lenders and Wells Fargo Bank, National Association, as administrative agent and swingline lender, filed as Exhibit 4.4 to the Company's Annual Report on Form 10-K filed on February 28, 2013 (File No. 1-11846), is hereby incorporated by reference.
10.34   Amendment No. 2 to Credit Agreement dated as of January 31, 2014 by and among AptarGroup, Inc., and the financial institutions party thereto as Lenders and Wells Fargo Bank, National Association, as administrative agent and swingline lender, filed as Exhibit 10.31 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2013 (File No. 1-11846), is hereby incorporated by reference.
10.35   Amendment No. 3 to Credit Agreement, dated as of December 16, 2014, among the Company, the financial institutions party thereto as Lenders and Wells Fargo Bank, National Association, as administrative agent and swingline lender, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 17, 2014 (File No. 1-11846), is hereby incorporated by reference.
10.36†*   Trade Confirmation, dated December 16, 2014, between AptarGroup, Inc. and Wells Fargo Bank, National Association.
21*   List of Subsidiaries.
23*   Consent of Independent Registered Public Accounting Firm.
31.1*   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*   Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*   Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*   The following financial information from AptarGroup, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on February 27, 2015, formatted in Extensible Business Reporting Language (XBRL): (1) the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012, (2) the consolidated statements of comprehensive income for the years ended December 31, 2014, 2013 and 2012, (3) the consolidated balance sheets as of December 31, 2014 and 2013, (4) the consolidated statements of cash flows for the years ended December 31, 2014, 2013 and 2012, (5) the consolidated statements of changes in equity for the years ended December 31, 2014, 2013 and 2012 and (6) notes to the consolidated financial statements, tagged as blocks of text.

*
Filed herewith.
**
Management contract or compensatory plan or arrangement.
Confidential portions of this exhibit have been omitted and filed separately with the SEC pursuant to a request for confidential treatment.

66 /ATR

2014 Form 10-K






Exhibit 10.31

 

APTARGROUP, INC.
2014 LONG-TERM INCENTIVE PROGRAM
(AS AMENDED AND RESTATED)

 

I.  INTRODUCTION

 

1.1                               Purposes.  The purposes of this 2014 Long-Term Incentive Program, as established by AptarGroup, Inc., a Delaware corporation (the “Company”), are (i) to provide incentive compensation to certain officers of the Company and its subsidiaries based on the Company’s total shareholder return performance relative to the S&P 400 MidCap Index over three-year performance periods, (ii) to advance the interests of the Company and its stockholders by attracting and retaining highly competent officers and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.  This Program shall be subject to, and administered pursuant to, the terms and conditions of the AptarGroup Performance Incentive Plan (the “Plan”).

 

1.2                               Certain Definitions.  For purposes of the Program, the following capitalized terms shall have the respective meanings set forth below.  Capitalized terms not defined herein shall have the respective meanings specified in the Plan.

 

(a)                                 Accumulated Shares” means periodic adjustments made to a share of Common Stock over the Performance Period and the 20 consecutive trading days immediately preceding the first day of the Performance Period, which is solely for the purpose of determining the Company TSR and reflecting a hypothetical reinvestment of dividends on the Accumulated Shares during such period.  The number of Accumulated Shares shall be equal to the sum of (i) one share and (ii) the cumulative number of shares of Common Stock that would be purchased with the dividends paid on Common Stock for which the dividend payment date occurs during the Performance Period or the 20 consecutive trading days immediately preceding the Performance Period, assuming such dividends are immediately reinvested in shares of Common Stock at the closing price of a share of Common Stock on the applicable dividend payment date.

 

(b)                                 Award” means an award conferring a right, contingent upon the attainment of the Company TSR performance goals set forth in Section 2.2 within the Performance Period, to receive cash, as determined by the Committee.

 

(c)                                  Beginning Stock Value” means the average over the 20 consecutive trading days immediately preceding the first day of the Performance Period of the product of (i) the number of Accumulated Shares times (ii) the closing transaction price of a share of Common Stock, as reported on The New York Stock Exchange (or such other principal national stock exchange on which shares of Common Stock are traded).

 

(d)                                 Board” means the Board of Directors of the Company.

 

(e)                                  Cause” means (i) the commission of a felony involving moral turpitude, (ii) the commission of a fraud, (iii) the commission of any material act involving dishonesty with respect to the Company or any of its subsidiaries or affiliates, (iv) gross negligence or willful misconduct with respect to the Company or any of its subsidiaries or affiliates, (v) the willful and continued failure by the Participant to substantially perform the Participant’s duties with the Company

 



 

(other than any such failure resulting from the Participant’s incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to Participant by the Company, which demand specifically identifies the manner in which the Company believes that the Participant has not substantially performed the Participant’s duties, (vi) breach of any restrictive covenant provision or agreement with the Company or (vii) any breach by the Participant of any written agreement with the Company or any of its subsidiaries or affiliates which is material and which is not cured within 30 days following written notice thereof to the Participant by the Company.

 

(f)                                   Change in Control” means:

 

(i)                                     the acquisition by any individual, entity or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of more than 50% of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of a conversion or exchange privilege in respect of outstanding convertible or exchangeable securities unless such outstanding convertible or exchangeable securities were acquired directly from the Company); (B) any acquisition by the Company; (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation involving the Company, if, immediately after such reorganization, merger or consolidation, each of the conditions described in clauses (A), (B) and (C) of subsection (iii) of this definition shall be satisfied; and provided further that, for purposes of clause (B), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of more than 50% of the Outstanding Company Common Stock or more than 50% of the Outstanding Company Voting Securities by reason of an acquisition by the Company and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Company Common Stock or any additional Outstanding Company Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control;

 

(ii)                                  individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a director of the Company subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to have been a member of the Incumbent Board; and provided further, that no individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors or any other actual or

 

2



 

threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to have been a member of the Incumbent Board;

 

(iii)                               consummation of a reorganization, merger or consolidation unless, in any such case, immediately after such reorganization, merger or consolidation, (A) 50% or more of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and 50% or more of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation and in substantially the same proportions relative to each other as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or the corporation resulting from such reorganization, merger or consolidation (or any corporation controlled by the Company) and any Person which beneficially owned, immediately prior to such reorganization, merger or consolidation, directly or indirectly, more than 50% of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock of such corporation or more than 50% of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such reorganization, merger or consolidation; or

 

(iv)                              consummation of (A) a plan of complete liquidation or dissolution of the Company or (B) the sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, immediately after such sale or other disposition, (1) 50% or more of the then outstanding shares of common stock thereof and 50% or more of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such sale or other disposition and in substantially the same proportions relative to each other as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or such corporation (or any corporation controlled by the Company) and any Person which beneficially owned, immediately prior to such sale or other disposition, directly or indirectly, more than 50% of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of common stock thereof or more than 50% of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors and (3) at least a majority of the

 

3



 

members of the board of directors thereof were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition.

 

(g)                                  Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(h)                                 Committee” shall mean the Compensation Committee of the Board.

 

(i)                                     Common Stock” shall mean Common Stock, par value $.01 per share, of the Company.

 

(j)                                    Company TSR” means the cumulative total shareholder return of the Common Stock during the Performance Period, assuming the reinvestment of dividends during the Performance Period, which shall be equal to (i) the quotient of (A) the Ending Stock Value divided by (B) the Beginning Stock Value, minus (ii) one (1).

 

(k)                                 Disability” means the Participant’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

 

(l)                                     Ending Stock Value” means the average over the 20 consecutive trading days through the last day of the Performance Period of the product of (i) the number of Accumulated Shares times (ii) the closing transaction price of a share of Common Stock, as reported on The New York Stock Exchange (or such other principal national stock exchange on which shares of Common Stock are traded).

 

(m)                             Exchange Act” means the Securities Exchange Act of 1934, as then in effect, or any successor federal statute of substantially similar effect.

 

(n)                                 Good Reason” shall mean any of the following actions, if taken without the express written consent of the Participant:  (i) a material diminution in the Participant’s base salary; (ii) a material diminution in the Participant’s authority, duties or responsibilities; or (iii) a material breach by the Company of any material agreement between the Company and the Participant.  A Participant’s employment with the Company may be terminated for Good Reason only if (A) the Participant provides written notice to the Company of the occurrence of the Good Reason event (as described above) within 90 days after the Participant has knowledge of the circumstances constituting Good Reason, which notice shall specifically identify the circumstances which the Participant believes constitute Good Reason, (B)  the Company fails to correct the circumstances constituting “Good Reason” within 30 days after such notice and (C) the Participant resigns within 120 days after the initial existence of such circumstances.

 

(o)                                 Grant Acceptance Agreement” means the Grant Acceptance Agreement between the Company and the recipient of an Award hereunder.

 

(p)                                 Individual Award Opportunity” means a Participant’s Award opportunity set forth in the Participant’s Grant Acceptance Agreement, expressed as a percentage of the Participant’s base salary (determined as of the beginning of the Performance Period).

 

4



 

(q)                                 Participant” means a person holding an outstanding Award granted under the Program.

 

(r)                                    Program” means this AptarGroup, Inc. 2014 Long-Term Incentive Program, as amended from time to time.

 

(s)                                   Retirement” means the Participant’s termination of employment after (i) attaining age 55, but prior to age 65, with at least ten years of continuous service to the Company or its subsidiaries or (ii) attaining age 65.

 

(t)                                    S&P 400 MidCap Comparator Group” means the companies that are included in the S&P 400 MidCap Index (including the Company) on both the first day and the last day of the Performance Period.

 

(u)                                 S&P 400 MidCap Constituent Company Returns” means, for each company in the S&P 400 MidCap Comparator Group, the cumulative total shareholder return during the Performance Period, assuming the reinvestment of dividends during the Performance Period, which shall be equal to (i) the quotient of (A) the average closing price of the S&P 400 MidCap Comparator Group over the 20 consecutive trading days through the last day of the Performance Period divided by (B) the average closing price of the S&P 400 MidCap Comparator Group over the 20 consecutive trading days immediately preceding the first day of the Performance Period, minus (ii) one (1).

 

1.3                               Administration.  The Program shall be administered by the Committee.  The Committee shall, in its sole and absolute discretion and subject only to the terms of the Program and the Plan, have the full power and authority to interpret the Program and the application thereof, establish (and rescind) any rules and regulations it may deem necessary, appropriate or desirable for the administration of the Program, establish the conditions to the payment of all or a portion of each Award and provide that the Company TSR will be adjusted, subject to the terms of the Plan, to reflect extraordinary events, and impose, incidental to the grant of an Award, conditions with respect to the Award, such as limiting competitive employment or other activities.  All interpretations, rules, regulations, conditions and other acts of the Committee shall be final, binding and conclusive on all parties.

 

The Committee may delegate some or all of its power and authority hereunder to the Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided, however, that with respect to any person who is a “covered employee” within the meaning of Section 162(m) of the Code or who, in the Committee’s judgment, is likely to be a covered employee at any time during the Performance Period, only the Committee shall be permitted to (a) designate such person to participate in the Program for such Performance Period, (b) establish Individual Award Opportunities for such person, and (c) certify the achievement of the Company TSR performance goal.  The Committee may also delegate ministerial administrative functions, such as receipt of notices, implementation of Program payments and mathematical calculations, to one or more employees or consultants as the Committee may deem necessary or desirable.

 

No member of the Board or Committee, and neither the Chief Executive Officer nor any other person to whom the Committee delegates any of its power and authority hereunder, shall be

 

5



 

liable for any act, omission, interpretation, construction or determination made in connection with this Program in good faith, and each such person shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Certificate of Incorporation and/or By-laws) and under any directors’ and officers’ liability insurance that may be in effect from time to time.

 

II.  TERMS OF AWARDS

 

2.1                               Eligibility.  Participants in the Program shall consist of such officers or other employees of the Company and its subsidiaries and affiliates as the Committee in its sole discretion may select from time to time.  For purposes of the Program, references to employment by the Company shall also mean employment by a subsidiary or an affiliate of the Company.  A grant of an Award to any person shall not entitle such person to an additional grant of Awards or similar awards at any subsequent time.

 

2.2                                                                               Terms of Awards(a)  In General.  Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Program and the Plan, as the Committee shall deem advisable.

 

(b)                                 Performance-Based Vesting.  Subject to (i) the Participant’s continuous employment with the Company through the last day of the applicable Performance Period (the “Vesting Date”) and (ii) the certification by the Committee of the Company TSR performance level achieved, and except as otherwise provided in Section 2.2(c) and Section 2.2(d), the Participant shall become vested in the percentage of his or her Individual Award Opportunity determined in accordance with the schedule set forth below, based on the extent to which the Company TSR exceeds the S&P 400 Midcap Constituent Company Returns, as such terms are defined herein, over the three-year performance period specified in the Participant’s Grant Acceptance Agreement (each, a “Performance Period”).  For purposes of this Program, the Participant’s employment relationship shall be treated as continuing intact while the individual is on military or sick leave or other bona fide leave of absence approved by the Company.

 

Performance Level

 

Company TSR Percentile
Rank vs. S&P 400 MidCap
Constituent Company
Returns*

 

Percentage of Individual
Award Opportunity
Vested**

 

Below Target

 

Below the 50th percentile

 

0

%

Target

 

50th percentile

 

100

%

Mid-point

 

75th percentile

 

200

%

Maximum

 

90th percentile and above

 

250

%

 


*                                         If the Company’s TSR for the Performance Period is negative, but exceeds the 50th percentile of the S&P 400 MidCap Constituent Company Returns, the

 

6



 

percentage of the Individual Award Opportunity that is vested shall be capped at 100%.

 

**                                  The vesting percentage of the Individual Award Opportunity shall be determined using straight-line interpolation between Target and Mid-point performance levels and the Mid-point and Maximum performance levels.

 

(c)                                  Termination of Employment.

 

(i)                                     Termination of Employment by the Company without Cause, by the Participant for Good Reason or by Reason of Death, Disability, or Retirement.  If, prior to the Vesting Date, the Participant’s employment is terminated by the Company without Cause, by the Participant for Good Reason or by reason of death, Disability or Retirement, the Participant or the Participant’s beneficiary, as the case may be, shall be entitled to a prorated payment.  Such prorated payment shall be determined in accordance with Section 2.2(b) at the end of the Performance Period based on the actual performance during the Performance Period multiplied by a fraction, the numerator of which shall equal the number of days such Participant was employed with the Company during the Performance Period and the denominator of which shall equal the number of days in the Performance Period.  The portion of the Award that does not become vested pursuant to this clause (i) shall be immediately forfeited.

 

(ii)                                  Termination of Employment by the Company for Cause or by the Participant Other Than for Good Reason or Retirement.                                 Subject to Section 2.2(d), if, prior to the Vesting Date, a Participant’s employment is terminated by the Company for Cause or by the Participant other than for Good Reason or Retirement, such Participant’s Award shall be immediately forfeited.

 

(d)                                 Change in Control.  In the event of a Change in Control prior to the Vesting Date, the Performance Period shall end as of the date on which the Change in Control is consummated (the “Change in Control Performance Period”) and the Participant shall be eligible to receive an Award determined in accordance with Section 2.2(b) based on actual Company TSR during the Change in Control Performance Period;  provided, however, if the Change in Control occurs after the date on which a Participant’s employment is terminated by the Company without Cause, by the Participant for Good Reason, or by reason of death, Disability or Retirement, pursuant to Section 2.2(c)(i), the Participant shall be eligible to receive an Award determined in accordance with Section 2.2(b) based on actual Company TSR during the Change in Control Performance Period and prorated in accordance with Section 2.2(c)(i) based on the number of days such Participant was employed with the Company during the Performance Period.  In the event of a Change in Control prior to the Vesting Date and after the date on which a Participant’s employment is terminated by the Company for Cause or by the Participant other than for Good Reason or Retirement, such Participant’s Award shall already have been forfeited pursuant to Section 2.2(c)(ii) and the Participant shall not be eligible for any payment with respect to such Award.

 

(e)                                  Payment.  As soon as practicable after the Vesting Date or, if applicable, the end of the Change in Control Performance Period (but no later than the March 15th occurring immediately after the Vesting Date or the end of Change in Control Performance Period, as

 

7



 

applicable), the Participant shall receive a lump sum cash payment from the Company in an amount equal, as determined by the Committee, to the value of the Award.

 

III.  GENERAL

 

3.1                               Effective Date and Term of Program.  The Program shall be effective as of January 1, 2014, and shall continue until such time as it is terminated by the Board or the Committee.

 

3.2                               Amendments.  The Board or the Committee may amend the Program as it shall deem advisable in the exercise of its sole and absolute discretion; provided, however that no such amendment may materially impair the rights granted to a Participant with respect to an Award without the consent of such Participant.

 

3.3                               Non-Transferability.  No Award or any rights thereunder shall be transferable other than by will or the laws of descent and distribution or pursuant to any beneficiary designation procedures as may be approved by the Committee for such purpose.  Except as permitted by the preceding sentence, no Award hereunder shall be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process.  Upon any attempt by the holder of an Award to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of such Award, such Award and all rights thereunder shall immediately become null and void.

 

3.4                               Tax and Other Withholding.  The Company shall have the right to deduct from any amounts paid pursuant to the Program (or from other compensation payable by the Company to the Participant) all Federal, state, local and other taxes and any other amounts which may be required under law or elected by the Participant to be withheld or paid in connection with the settlement of an Award or any other payment made hereunder.

 

3.5                               No Right of Participation or Employment.  No person shall have any right to participate in the Program or to be granted Awards under the Program.  Neither the Program nor any Agreement relating to an Award granted hereunder shall confer upon any person any right to be employed, reemployed or continue employment by the Company or any subsidiary or affiliate of the Company or affect in any manner the right of the Company or any subsidiary or affiliate of the Company to terminate the employment of any person with or without notice at any time for any reason without liability hereunder.  Nothing herein shall confer any right or benefit or any entitlement to any benefit on any Participant unless and until a benefit is actually vested pursuant to the Program.  The adoption and maintenance of the Program shall not be deemed to constitute a contract of employment or otherwise between the Company or any of its subsidiaries or affiliates and any Participant, or to be a consideration for or an inducement or condition of any employment.  Neither the provisions of the Program nor any action taken by the Company or the Board or the Committee pursuant to the provisions of the Program shall be deemed to create any trust, express or implied, or any fiduciary relationship between or among the Company, the Board or Committee, any member of the Board or Committee, or any employee, former employee or beneficiary thereof.

 

3.6                               Unfunded Arrangement.  The Program shall at all times be entirely unfunded and no provision shall at any time be made with respect to segregating assets of the Company for payment of any benefit hereunder.  No holder of an Award shall have any interest in any

 

8



 

particular assets of the Company or any of its subsidiaries or affiliates by reason of the right to receive a benefit under the Program and any such holder shall have only the rights of an unsecured creditor of the Company with respect to any rights under the Program.

 

3.7                               Governing Law.  This Program, each Award granted hereunder and its related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.

 

3.8                               Governing Documents.  The Awards granted hereunder shall be governed by the terms of the Plan, this Program and the Grant Acceptance Agreement.  Notwithstanding anything to the contrary, the terms of a Participant’s employment agreement governing the payout of any bonuses or severance benefits following a termination of such Participant’s employment shall not apply to the Awards granted hereunder.

 

3.9                               Section 409A of the CodeThis Program and the Awards granted hereunder are intended to be exempt from Section 409A of the Code as short-term deferrals pursuant to U.S., Treasury Regulation §1.409A-1(b)(4), and shall be interpreted and construed accordingly.

 

3.10                        Awards Subject to ClawbackThe Awards granted under this Program and any cash payment delivered pursuant to an Award are subject to forfeiture, recovery by the Company or other action pursuant to any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.

 

9






Exhibit 10.36

 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

GRAPHIC

 

To:

 

AptarGroup, Inc.

 

 

475 West Terra Cotta Avenue

 

 

Suite E

 

 

Crystal Lake, Illinois 60014

Attention:

 

North America Legal Counsel

Phone:

 

(815) 261-3219

Fax:

 

(815) 477-0481

 

 

 

From:

 

Wells Fargo Bank, National Association

 

The purpose of this communication (this “Confirmation”) is to confirm the terms and conditions of the transaction entered into between Wells Fargo Bank, National Association (“Wells Fargo”) and AptarGroup, Inc. (“Counterparty”) on the Trade Date specified below (the “Transaction”).  This Confirmation constitutes a “Confirmation” as referred to in the Agreement specified below.

 

This Confirmation is subject to, and incorporates, the definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”).  In the event of any inconsistency between the Equity Definitions and this Confirmation, this Confirmation will prevail.

 

1.                                      This Confirmation evidences a complete and binding agreement between Wells Fargo and Counterparty as to the terms of the Transaction to which this Confirmation relates.  This Confirmation shall supplement, form a part of, and be subject to an agreement in the form of the 2002 ISDA Master Agreement (the “Agreement”) as if Wells Fargo and Counterparty had executed an agreement in such form (but without any Schedule except for the election of (i) the law (and not the law of conflicts) of the State of New York as the governing law and (ii) United States dollars as the Termination Currency) on the Trade Date.  In the event of any inconsistency between provisions of the Agreement and this Confirmation, this Confirmation will prevail for the purpose of the Transaction to which this Confirmation relates.  The parties hereby agree that no Transaction other than the Transaction to which this Confirmation relates shall be governed by the Agreement.  This Transaction is a Share Forward Transaction within the meaning set forth in the Equity Definitions.

 

2.                                      The terms of the particular Transaction to which this Confirmation relates are as follows:

 

General Terms:

 

Trade Date:

 

December 16, 2014

 

 

 

Seller:

 

Wells Fargo

 

 

 

Buyer:

 

Counterparty

 

 

 

Shares:

 

The common stock of Counterparty (the “Issuer”), par value USD 0.01 per share (NYSE ticker symbol: “ATR”)

 

 

 

Variable Obligation:

 

Applicable

 

 

 

VWAP Price:

 

For any Averaging Date, the 10b-18 volume-weighted average

 



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

 

 

price per Share at which the Shares trade for the regular trading session (including any extensions thereof) of the Exchange on such Averaging Date (without regard to pre-open or after hours trading outside of such regular trading session), as reported by Bloomberg at 4:15 p.m. New York City time (or 15 minutes following the end of any extension of the regular trading session) on such Averaging Date, on Bloomberg Page “ATR.N <Equity> AQR_SEC” (or any successor thereto). If such price is not reported on such Averaging Date for any reason or is, in the Calculation Agent’s good faith and commercially reasonable discretion, erroneous, such VWAP Price shall be determined by the Calculation Agent in good faith and in a commercially reasonable manner.

 

 

 

Exchange:

 

New York Stock Exchange

 

 

 

Related Exchange(s):

 

All Exchanges

 

 

 

Prepayment:

 

Applicable

 

 

 

Prepayment Date:

 

One Currency Business Day after the Trade Date.

 

 

 

Prepayment Amount:

 

As specified in Appendix A.

 

 

 

Initial Shares:

 

As specified in Appendix A.

 

 

 

Initial Share Delivery Date:

 

The Prepayment Date. On the Initial Share Delivery Date, Seller shall deliver a number of Shares equal to the Initial Shares to Buyer in accordance with Section 9.4 of the Equity Definitions, with the Initial Share Delivery Date deemed to be a “Settlement Date” for purposes of such Section 9.4.

 

Valuation Terms:

 

 

 

 

Valuation Date:

 

As specified in Appendix A.

 

 

 

Averaging:

 

Applicable

 

 

 

Averaging Dates:

 

As specified in Appendix A.

 

 

 

Averaging Period:

 

All Averaging Dates.

 

 

 

Settlement Price:

 

The arithmetic average of the VWAP Prices for all Averaging Dates minus the Price Adjustment.

 

 

 

Price Adjustment:

 

As specified in Appendix A.

 

 

 

Valuation Disruption:

 

The definition of “Market Disruption Event” in Section 6.3(a) of the Equity Definitions is hereby amended by replacing the words “at any time during the one-hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be” with “at any time on any Scheduled Trading Day during the Averaging Period” in the third line thereof.

 

 

 

 

 

Section 6.3(d) of the Equity Definitions is hereby amended by

 

2



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

 

 

 

 

 

deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.

 

 

 

 

 

Notwithstanding anything to the contrary in the Equity Definitions, if any Averaging Date in the Averaging Period is a Disrupted Day, the Calculation Agent shall have the option in its commercially reasonable discretion either (i) to elect to extend the Averaging Period by a number of Scheduled Trading Days equal to the number of Disrupted Days during the Averaging Period and/or (ii) determine that such Averaging Date is a Disrupted Day only in part, in which case the Calculation Agent shall (x) determine the VWAP Price for such Disrupted Day based on Rule 10b-18 eligible transactions in the Shares on such Disrupted Day taking into account the nature and duration of such Market Disruption Event and (y) determine the Settlement Price based on an appropriately weighted average instead of the arithmetic average described under “Settlement Price” below, with such adjustments determined in a commercially reasonable manner based on, among other factors, the duration of any Market Disruption Event and the volume, historical trading patterns and price of the Shares and/or (iii) to suspend the Averaging Period, as appropriate, until the circumstances giving rise to such suspension have ceased; provided, that the Calculation Agent shall not be entitled to determine that such Averaging Date is a Disrupted Day only in part if such Averaging Date is deemed to be a Disrupted Day as a result of an Additional Market Disruption Event consisting of a Regulatory Disruption. Any day on which the Exchange is scheduled to close prior to its normal closing time shall be considered a Disrupted Day in whole.

 

 

 

Additional Market Disruption Events:

 

If Seller determines, in its good faith and commercially reasonable discretion and based on the advice of counsel, on any Scheduled Trading Day during any Averaging Period that it is appropriate for it or its affiliates to refrain from or decrease any market activities in connection with the Transaction as a result of any legal, regulatory or self-regulatory requirements or related policies and procedures whether or not such legal, regulatory or self-regulatory requirements, policies or procedures are imposed by law or have been voluntarily adopted by Seller (a “Regulatory Disruption”), Seller shall notify Buyer and a Market Disruption Event shall be deemed to have occurred. Seller shall subsequently notify Buyer in writing on the day Seller reasonably believes in good faith and upon the advice of counsel that it may resume its market activity.

 

If on any Averaging Date that is a Potential Liquidity Disruption Day (i) the trading volume or liquidity of trading in the Shares is materially reduced from levels prevailing on the Trade Date, (ii) the Calculation Agent determines in its commercially reasonable discretion that such reduction has had a materially adverse effect on Seller’s ability to effect a commercially reasonable hedge of its obligations under this Transaction and (iii) the Calculation Agent determines in its commercially reasonable discretion that as a result it would be appropriate to treat such Averaging Date as a Disrupted Day, then Seller shall notify Buyer and a Market Disruption Event shall be deemed to have occurred.

 

3



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

Potential Liquidity Disruption Day:

 

As specified in Appendix A.

 

Settlement Terms:

 

Settlement Currency:

 

USD

 

 

 

Share Amount:

 

The Prepayment Amount divided by the Settlement Price.

 

 

 

Number of Shares to be Delivered:

 

A number of Shares equal to (i) the Share Amount minus (ii) the Initial Shares; provided that a number of Shares less than a whole number shall be rounded upward.

 

 

 

Settlement Method Election:

 

Not Applicable; provided that if the Number of Shares to be Delivered is a negative number, Counterparty may elect Physical Settlement in lieu of Cash Settlement by written notice to Seller delivered no later than 9:00 a.m. (New York City time) on the first Scheduled Trading Day immediately following the earlier of (i) notice of the designation of the final day of the Averaging Period or (ii) the Valuation Date; provided further that (x) Counterparty on the date of such election shall be deemed to have repeated as of such date the representation set forth in paragraph 6(a)(i)(B) below and shall represent and warrant that Counterparty is making such election in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws and (y) such notice shall specify whether settlement will be effected with Free Shares or Restricted Shares, each as contemplated by “Physical Settlement by Counterparty” below.

 

 

 

Default Settlement Method:

 

If the Number of Shares to be Delivered is a positive number, the Default Settlement Method shall be Physical Settlement; provided that the representation set forth in Section 9.11 of the Equity Definitions shall be modified by excluding any representation therein relating to restrictions, obligations, limitations or requirements under applicable securities laws arising as a result of the fact that Counterparty is the Issuer of the Shares. If the Number of Shares to be Delivered is a negative number, the Default Settlement Method shall be Cash Settlement.

 

 

 

Physical Settlement:

 

Applicable if the Number of Shares to be Delivered is (1) a positive number, in which case Physical Settlement means that on the applicable Settlement Date, Seller shall deliver to Counterparty the Number of Shares to be Delivered, or (2) a negative number and Counterparty has validly elected Physical Settlement pursuant to “Settlement Method Election” above, in which case Physical Settlement means that, on the applicable Settlement Date, Counterparty shall deliver to Seller the absolute value of the Number of Shares to be Delivered subject to “Physical Settlement by Counterparty” and Section 11 below.

 

 

 

Physical Settlement by Counterparty:

 

If Physical Settlement by Counterparty applies, Counterparty shall have the right to elect that the Shares delivered (“Physical Settlement Shares”) (and any Make-Whole Shares, as such term is defined below) shall be (i) sold in transactions registered under the

 

4



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

 

 

Securities Act of 1933, as amended (the “Securities Act”) with such election being subject to the conditions set forth in clause (i) of Section 11 (Registration Provisions) (“Free Shares”), or (ii) sold in transactions exempt from registration under the Securities Act pursuant to clause (ii) of Section 11 (Registration Provisions) (“Restricted Shares”). No fractional Shares shall be delivered in connection with Physical Settlement by Counterparty, and the value of any fractional Share otherwise deliverable shall be rounded up to the nearest whole Share. All Physical Settlement Shares delivered shall be freely transferable and free and clear of any lien, charge or other encumbrance, other than in the case of Restricted Shares restrictions on transfers relating to the exemption from registration under the Securities Act.

 

(a)  If Counterparty elects to deliver Free Shares, Counterparty shall deliver a number of Free Shares equal to the absolute value of the Number of Shares to be Delivered on the applicable Settlement Date.

 

(b) If Counterparty elects to deliver Restricted Shares or does not make an election or fails to satisfy the conditions to delivery of Free Shares, Counterparty shall deliver to Seller an initial number of Restricted Shares on the applicable Settlement Date as determined by the following formula:

 

 

Where,

 

s = the absolute value of the Cash Settlement Amount (as defined below); and

 

p = the price per Share determined by Seller in a commercially reasonable manner.

 

In the case of this clause (b), on the applicable Settlement Date, a balance (the “Settlement Balance”) shall be established with an initial balance equal to the absolute value of the Cash Settlement Amount. Following the sale of the Restricted Shares by Seller, the Settlement Balance shall be reduced by an amount equal to the aggregate proceeds (net of any brokerage and customary private placement fees for offerings of a similar type and size) received by Seller upon the sale of the Restricted Shares. If following the sale of some but not all of the Restricted Shares, the Settlement Balance has been reduced to zero, no additional Restricted Shares shall be sold by Seller and Seller shall redeliver to Counterparty any remaining Restricted Shares. If following the sale of the Restricted Shares, the Settlement Balance has not been reduced to zero, then Counterparty shall, at its election, (i) promptly deliver to Seller an additional number of Shares (the “Make-Whole Shares”) equal to (x) the Settlement Balance as of such date divided by (y) the price per Restricted Share determined by Seller in a commercially reasonable manner (the “Make-Whole Price”), subject to Section 6(h) or (ii) promptly deliver to Seller cash in an amount equal to the then remaining Settlement Balance. This provision shall be applied successively (provided that references to “Restricted Shares” herein shall be deemed to refer to the previous Make-Whole Shares) until

 

5



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

 

 

the Settlement Balance is reduced to zero. The period until the Settlement Balance is reduced to zero shall be considered to be part of the Averaging Period for purposes of the representations, warranties and covenants and other provisions herein as the context requires (but, for the avoidance of doubt, not for purposes of determining the Settlement Price).

 

 

 

Cash Settlement:

 

Applicable if the Number of Shares to be Delivered is a negative number and Counterparty does not validly make the election above for “Physical Settlement” pursuant to “Settlement Method Election” above, in which case Counterparty shall pay Seller the Cash Settlement Amount on the Cash Settlement Payment Date.

 

 

 

Cash Settlement Payment Date:

 

The first Currency Business Day following the last day of the Settlement Valuation Period.

 

 

 

Cash Settlement Amount:

 

The Number of Shares to be Delivered multiplied by the Cash Settlement Price.

 

 

 

Cash Settlement Price:

 

The volume weighted average price per Share at which Seller effects the purchases contemplated in “Settlement Valuation Period” below.

 

 

 

Settlement Valuation Period:

 

A number of Scheduled Trading Days following the end of the applicable Averaging Period during which Seller purchases in a commercially reasonable manner over a commercially reasonable period, a number of shares equal to the absolute value of the Number of Shares to be Delivered. For the avoidance of doubt, if the Number of Shares to be Delivered is negative, there shall be a Settlement Valuation Period hereunder if Counterparty elects Cash Settlement or elects to deliver Restricted Shares in connection with Physical Settlement, but no Settlement Valuation Period if Counterparty elects to deliver Free Shares in connection with Physical Settlement.

 

 

 

Settlement Date:

 

If the Number of Shares to be Delivered is positive, the earlier of (i) the date that follows the Valuation Date by one Settlement Cycle and (ii) the first Clearance System Business Day following the Scheduled Valuation Date (as defined in Annex A). If the Number of Shares to be Delivered is negative, and (x) if Counterparty elects to deliver Free Shares, the first Clearance System Business Day following the Valuation Date, or (y) if Counterparty elects to deliver Restricted Shares, the first Clearance System Business Day following the last day of the Settlement Valuation Period.

 

Share Adjustments:

 

Potential Adjustment Event:

 

It shall constitute an additional Potential Adjustment Event if a Market Disruption Event has been deemed to have occurred or if Seller otherwise suspends trading in the Shares for all or any portion of a Scheduled Trading Day within the Averaging Period pursuant to “Valuation Disruption” or “Additional Market Disruption Events” above, in which case the Calculation Agent may, in its commercially reasonable discretion, adjust any relevant terms of the Transaction as appropriate to account for the economic effect on the Transaction of such Market Disruption Event or trading suspension.

 

6



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

 

 

Notwithstanding anything to the contrary in Section 11.2(e) of the Equity Definitions, the issuance of additional stock options, restricted stock or restricted stock units in the ordinary course pursuant to Counterparty’s employee benefit plans shall not constitute a Potential Adjustment Event.

 

 

 

Method of Adjustment:

 

Calculation Agent Adjustment

 

 

 

Excess Dividend:

 

For any fiscal quarter, any dividend or distribution on the Shares with an ex-dividend date occurring during such fiscal quarter (other than any dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions) (a “Dividend”) the amount or value of which (as determined by the Calculation Agent), when aggregated with the amount or value of any and all previous Dividends with ex-dividend dates occurring in the same fiscal quarter, exceeds the Ordinary Dividend Amount. For the avoidance of doubt, the Calculation Agent shall not make any adjustment for an Excess Dividend or for a Dividend that does not exceed the Ordinary Dividend Amount.

 

 

 

Extraordinary Dividend:

 

The cash dividend or distribution per Share, or a portion thereof, declared by Counterparty on the Shares that is classified by the board of directors of Counterparty as an “extraordinary” dividend. For the avoidance of doubt, an Extraordinary Dividend shall not be deemed to be an Excess Dividend.

 

 

 

Ordinary Dividend Amount:

 

As specified in Appendix A

 

 

 

Change in Timing of Ordinary Dividend Payment:

 

If an ex-dividend date for any Dividend that is not (x) an Excess Dividend, (y) a dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions or (z) an Extraordinary Dividend, occurs during any fiscal quarter (in whole or in part) during the Relevant Dividend Period and is different from the Expected Ex-Dividend Date for the relevant fiscal quarter (as determined by the Calculation Agent), the Calculation Agent shall make such adjustment to the exercise, settlement, payment or any other terms of the Transaction as the Calculation Agent determines appropriate to account for the economic effect on the Transaction of the change in timing of such dividend.

 

 

 

Expected Ex-Dividend Dates:

 

As specified in Appendix A

 

 

 

Relevant Dividend Period:

 

The period from and including the Trade Date to and including the Relevant Dividend Period End Date.

 

 

 

Relevant Dividend Period End Date:

 

If the Number of Shares to be Delivered is negative, the last day of the Settlement Valuation Period; otherwise, the Valuation Date.

 

 

 

Extraordinary Events:

 

Upon (x) the occurrence or effective designation of an Early Termination Date in respect of the Transaction or (y) the occurrence of an Extraordinary Event that results in the cancellation or termination of the Transaction pursuant to Section 12.2, 12.3, 12.6 or 12.9 of the Equity Definitions (any such event as described

 

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in clause (x) or (y) above, an “Early Termination Event”) (except as a result of (i) in the case of clause (y), an Extraordinary Event that is a Nationalization, Insolvency, a Merger Event or a Tender Offer, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash, or a Merger Event or Tender Offer that is within Counterparty’s control, or (ii) an Event of Default in which Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected Party other than an Event of Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or (viii) of the Agreement or a Termination Event of the type described in Section 5(b) of the Agreement, in each case that resulted from an event or events outside Counterparty’s control), if one party would owe any amount to the other party pursuant to Section 6(d)(ii) of the Agreement or any Cancellation Amount pursuant to Section 12.2, 12.3, 12.6, 12.7, 12.8 or 12.9 of the Equity Definitions (any such amount, a “Payment Amount”), then on the date on which any Payment Amount is due, in lieu of any payment or delivery of such Payment Amount, Counterparty may elect, by prior written notice to Wells Fargo as provided in the succeeding paragraph, that the party owing such amount shall deliver to the other party a number of Shares (or, in the case of a Merger Event, Tender Offer, Nationalization or Insolvency, a number of units, each comprising the number or amount of the securities or property that a hypothetical holder of one Share would receive in such Extraordinary Event (each such unit, an “Alternative Termination Delivery Unit” and, the securities or property comprising such unit, “Alternative Termination Property”)) with a value equal to the Payment Amount, as determined in a commercially reasonable manner by the Calculation Agent (and the parties agree that, in making such determination of value, the Calculation Agent may take into account a number of factors, including the market price of the Shares or Alternative Termination Property as of the Early Termination Date or the date as of which the Cancellation Amount is determined and, if such delivery is made by Wells Fargo, the prices at which Wells Fargo purchases Shares or Alternative Termination Property to fulfil its delivery obligations, to the extent doing so provides a commercially reasonable result) over a number of Scheduled Trading Days selected by Calculation Agent in good faith and in its commercially reasonable discretion based on the number of Scheduled Trading Days that would be appropriate to unwind a commercially reasonable hedge position; provided that in determining the composition of any Alternative Termination Delivery Unit, if the relevant Extraordinary Event involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.

 

If Counterparty elects for Wells Fargo to settle any Payment Amount owed by Wells Fargo to it in Shares or Alternative Termination Property, then on the date such Payment Amount is due, a settlement balance (the “Payment Amount Settlement Balance”) shall be established with an initial balance equal to the Payment Amount. On such date, Wells Fargo shall commence purchasing Shares or Alternative Termination Property over a

 

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commercially reasonable period for delivery to Counterparty and in a commercially reasonable manner to unwind a commercially reasonable hedge position. At the end of each Scheduled Trading Day on which Wells Fargo purchases Shares or Alternative Termination Property pursuant to this paragraph, Wells Fargo shall reduce the Payment Amount Settlement Balance by the amount paid by Wells Fargo to purchase the Shares or Alternative Termination Property purchased on such Scheduled Trading Day. Wells Fargo shall deliver any Shares or Alternative Termination Property purchased on a Scheduled Trading Day to Counterparty on the third Clearance System Business Day following the relevant Scheduled Trading Day. Wells Fargo shall continue purchasing Shares or Alternative Termination Property over a commercially reasonable period until the Payment Amount Settlement Balance has been reduced to zero. If delivery of Shares or Alternative Termination Property is to be made by Wells Fargo pursuant to this paragraph, the period during which Wells Fargo purchases Shares or Alternative Termination Property to fulfill its delivery obligations under this paragraph shall be referred to as the “Seller Termination Purchase Period.”

 

 

 

 

 

If Counterparty elects to settle any Payment Amount owed to Wells Fargo in Shares or Alternative Termination Property it must do so pursuant to Section 11 of this Confirmation and in a manner such that the value received by Wells Fargo (net of all commercially reasonable fees, expenses or discounts to compensate for any discount from the public market price of the Shares incurred on the sale of such Shares in a private placement) is not less than the Payment Amount, as determined by the Calculation Agent. For the avoidance of doubt, notwithstanding anything to the contrary in the Definitions or this Confirmation, the Payment Amount will not reflect the value associated with any Excess Dividend declared or paid by Counterparty to holders of record of any Shares as of any date occurring on or after the Trade Date and prior to the date on which the Payment Amount is received.

 

 

 

Announcement Date:

 

The definition of “Announcement Date” in Section 12.1(l) of the Equity Definitions shall be amended by (i) replacing the words “a firm” with the word “any” in the second and fourth lines thereof, (ii) replacing the word “leads to the” in the third and the fifth lines thereof with the words “, if completed, would lead to a”, (iii) replacing the words “voting shares” in the fifth line thereof with the word “Shares”, (iv) inserting the words “by any entity” after the word “announcement” in the second and the fourth lines thereof, (v) inserting the words “or to explore the possibility of engaging in” after the words “engage in” in the second line thereof, (vi) inserting the words “or to explore the possibility of purchasing or otherwise obtaining” after the word “obtain” in the fourth line thereto, (vii) deleting the parenthetical in the fifth line thereof and (viii) adding immediately after the words “Tender Offer” in the fifth line thereof “, and any publicly announced change or amendment to such an announcement (including the announcement of an abandonment of such intention)”.

 

For purpose of this Transaction, the definition of “Merger Date” in

 

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[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

 

 

Section 12.1(c) of the Equity definitions shall be amended by inserting the following proviso after “Calculation Agent” therein: “; provided that, in the event of a Share-for-Other Merger Event, Merger Date shall mean, as selected by Wells Fargo in its commercially reasonable discretion, any date from and including the Announcement Date to and including the closing date of such Merger Event (or, where a closing date cannot be determined under local law applicable to such Merger Event, such other date as determined by the Calculation Agent).” For purposes of this Transaction, the definition of “Tender Offer Date” in Section 12.1(e) of the Equity Definitions shall be amended to read “Tender Offer Date shall mean the Announcement Date; provided that, in the event of a Share-for-Other Tender Offer, Tender Offer Date shall mean, as selected by Wells Fargo in its commercially reasonable discretion, any date from and including the Announcement Date to and including the date on which voting shares in the amount of the applicable percentage threshold are actually purchased or otherwise obtained (as determined by the Calculation Agent).”

 

Consequences of Merger Events:

 

Share-for-Share:

 

Modified Calculation Agent Adjustment

 

 

 

Share-for-Other:

 

Cancellation and Payment

 

 

 

Share-for Combined:

 

Component Adjustment

 

 

 

New Shares:

 

In the definition of “New Shares” in Section 12.1(i) of the Equity Definitions, the text in clause (i) thereof shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors).”

 

 

 

Tender Offer:

 

Applicable

 

 

 

Consequences of Tender Offers:

 

 

 

 

Share-for-Share:

 

Modified Calculation Agent Adjustment

 

 

 

Share-for-Other:

 

Cancellation and Payment

 

 

 

Share-for-Combined:

 

Component Adjustment

 

 

 

Composition of Combined Consideration:

 

Not Applicable; provided that notwithstanding Sections 12.1(f) and 12.5(b) of the Equity Definitions, to the extent that the composition of the consideration for the relevant Shares in connection with a Merger Event or Tender Offer could be determined by a holder of the Shares, the Calculation Agent shall, in its sole discretion, determine the composition of such consideration for purposes of determining the consequences of such Merger Event or Tender Offer under the Transaction.

 

 

 

Nationalization, Insolvency or

 

Cancellation and Payment

 

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[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

Delisting:

 

In addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be the Exchange.

 

 

 

Additional Disruption Events:

 

 

 

 

 

Change in Law:

 

Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “, or public announcement of, the formal or informal interpretation”, (ii) by replacing the word “Shares” where it appears in clause (X) thereof with the words “Shares or Hedge Positions” and (iii) by immediately following the word “Transaction” in clause (X) thereof, adding the phrase “in the manner contemplated by the Hedging Party on the Trade Date”; provided further that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by replacing the parenthetical beginning after the word “regulation” in the second line thereof the words “(including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute)”.

 

 

 

Failure to Deliver:

 

Not Applicable

 

 

 

Insolvency Filing:

 

Applicable

 

 

 

Loss of Stock Borrow:

 

Applicable, it being understood that the rate to borrow Shares shall be determined by reference to the terms of a commercially reasonable share borrowing arrangement and without regard to cost of funding in connection with such borrowings.

 

 

 

Maximum Stock Loan Rate:

 

As specified in Appendix A.

 

 

 

Hedging Party:

 

Wells Fargo

 

 

 

Increased Cost of Stock Borrow:

 

Applicable, it being understood that the rate to borrow Shares shall be determined by reference to the terms of a commercially reasonable share borrowing arrangement and without regard to cost of funding in connection with such borrowings.

 

 

 

Initial Stock Loan Rate:

 

As specified in Appendix A.

 

 

 

Hedging Party:

 

Wells Fargo

 

 

 

Determining Party for all Extraordinary Events:

 

Wells Fargo

 

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Miscellaneous:

 

 

 

 

 

Non-Reliance:

 

Applicable

 

 

 

Agreements and Acknowledgments Regarding Hedging Activities:

 

Applicable

 

 

 

Additional Acknowledgments:

 

Applicable

 

 

 

3.

Calculation Agent:

 

Wells Fargo; provided that, following the occurrence and during the continuation of an Event of Default pursuant to Section 5(a)(vii) of the Agreement with respect to which Wells Fargo is the Defaulting Party, Counterparty shall have the right to select a leading equity derivatives dealer in the market for U.S. corporate equity derivatives reasonably acceptable to Wells Fargo to replace Dealer as Calculation Agent, and the parties shall work in good faith to execute any appropriate documentation required by such replacement Calculation Agent.

 

 

 

 

4.

Account Details:

 

 

 

Wells Fargo’s USD payment instructions:

 

ABA: 121-000-248

 

 

Wells Fargo Bank, National Association

 

 

Charlotte, NC

 

 

Internal Acct No. 01020304464228

 

 

A/C Name: WFB Equity Derivatives

 

 

 

Wells Fargo’s delivery instructions:

 

DTC Number:

2072

 

 

Agent ID:

52196

 

 

Institution ID:

52196

 

 

 

Counterparty’s payment and

 

 

delivery instructions:

 

USD Payment Instructions:

 

 

Bank of America

 

 

AptarGroup, Inc.

 

 

Acct No.  8188900150

 

 

 

 

 

Share Delivery Instructions:

 

 

Transfer Agent:  Wells Fargo Bank, National

 

 

Association Shareowner Services

 

 

Email: wfssrelationshipmanagement@wellsfargo.com

 

 

Phone:  1-855-217-6361

 

5.

 

Offices:

 

 

 

 

 

(a)

The Office of Wells Fargo for the Transaction is:

 

 

 

Wells Fargo Bank, National Association

 

 

375 Park Avenue

 

 

New York, NY 10152

 

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[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

For notices with respect to the Transaction:

 

Notwithstanding anything to the contrary in the Agreement, all notices to Wells Fargo in connection with the Transaction are effective only upon receipt of email message to

CorporateDerivativeNotifications@wellsfargo.com

 

(b)         The Office of Counterparty for the Transaction is:  None

 

For notices with respect to the Transaction:

 

AptarGroup, Inc.

475 West Terra Cotta Avenue

Suite E

Crystal Lake, Illinois 60014

Attn: North America Legal Counsel

 

6.                                      Additional Provisions.

 

(a)                                 Buyer Representations and Agreements.  Buyer represents and warrants to, and agrees with, Seller as follows:

 

(i)                                     Public Reports.

 

(A)                               As of the Trade Date, Buyer is in compliance with its reporting obligations under the Exchange Act of 1934, as amended (the “Exchange Act”), and all reports and other documents filed by Buyer with the Securities and Exchange Commission (“SEC”) pursuant to the Exchange Act, when considered as a whole (with the most recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

 

(B)                               Without limiting the generality of the foregoing, as of the Trade Date and as of the date of any election with respect to the Transaction (including any date that Buyer elects to physically settle its obligations hereunder), Buyer and its officers and directors are not aware of any material non-public information regarding Buyer or the Shares.

 

(ii)                                  Regulation M.  Buyer is not on the Trade Date engaged in a “distribution,” as such term is used in Regulation M, that would preclude purchases by Buyer of Shares.  In the event that Buyer reasonably concludes that it or any of its affiliates or agents will take any action that would cause Regulation M to be applicable to any purchases of Shares, or any security for which the Shares is a “reference security” (as defined in Regulation M), by Buyer or any of its “affiliated purchasers” (as defined in Regulation M) on any day prior to the second Scheduled Trading Day immediately following the later of the (i) the Valuation Date, (ii) the last day of the Settlement Valuation Period and (iii) the last day of the Seller Termination Purchase Period, as applicable, Buyer shall provide Seller at least five Scheduled Trading Days’ written notice of such fact prior to the beginning of the restricted period applicable to such distribution under Regulation M.  Buyer acknowledges that any such action could cause the occurrence of an Additional Market Disruption Event (and, accordingly, a Potential Adjustment Event).  Accordingly, Buyer acknowledges that its actions in relation to any such notice must comply with the standards set forth in Section 6(b)(iii) below.

 

(iii)                               No Manipulation.  Buyer is not entering into the Transaction to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares) or otherwise in violation of the Exchange Act and will not engage in any other securities or derivative transaction to such ends.

 

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(iv)                              No Distribution.  Buyer is not entering into the Transaction to facilitate a distribution of the Shares (or any security that may be converted into or exercised or exchanged for Shares, or whose value under its terms may in whole or in significant part be determined by the value of the Shares) or in connection with any future issuance of securities.

 

(v)                                 Solvency.  As of the Trade Date, the Initial Share Delivery Date, the Prepayment Date and the Settlement Date, (a) the aggregate fair market value of Buyer’s assets will exceed its liabilities (including contingent, subordinated, unmatured and unliquidated liabilities), (b) it has not engaged in and will not engage in any business or transaction after which the property remaining with it will be unreasonably small in relation to its business, (c) it has not incurred and does not intend to incur debts beyond its ability to pay as they mature, and (d) as a result of entering into and performing its obligations under the Transaction, (x) it has not violated and will not violate any relevant state law provision applicable to the acquisition or redemption by an issuer of its own securities and (y) it would not be nor would it be rendered “insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”)).

 

(vi)                              Eligible Contract Participant.  It is an “eligible contract participant,” as defined under the Commodity Exchange Act (7 U.S.C. § 1a(18)) and CFTC regulations (17 CFR § 1.3) because it is a corporation, partnership, organization, trust, or other entity (other than a commodity pool or a proprietorship) that has total assets exceeding $10,000,000.

 

(vii)                           Tender Offers.  The purchase or writing of the Transaction by Buyer will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

 

(viii)                        Investment Company.  Buyer is not, and after giving effect to the transactions contemplated hereby will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

 

(ix)                              Accounting Treatment.  Without limiting the generality of Section 13.1 of the Equity Definitions, Buyer acknowledges that Seller is not making any representations or warranties with respect to the treatment of the Transaction under any accounting standards including FASB Statements 128, 133, 149 (each as amended), or 150, EITF Issue No. 00-19, 01-6, 03-6 or 07-5 (or any successor issue statements) or under FASB’s Liabilities & Equity Project.

 

(x)                                 Authorization and Disclosure.  Upon Seller’s request, Buyer shall deliver to Seller a resolution of Buyer’s board of directors authorizing the Transaction, and upon Seller’s reasonable request, an incumbency certificate.  Buyer has publicly disclosed on October 30, 2014 its authorization to repurchase Shares.

 

(xi)                              Buyer’s Actions. Buyer is not bound by any obligation that prohibits it from effecting settlement under the Transaction, and it agrees not to enter into any such obligation during the term of the Transaction.

 

(xii)                           Rule 10b-18 purchases.  Buyer represents and warrants to Seller that neither it nor any “affiliated purchaser” (as defined in Rule 10b-18 under the Exchange Act) has made any purchases of blocks pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act during either (i) the four full calendar weeks immediately preceding the Trade Date or (ii) during the calendar week in which the Trade Date occurs.

 

(b)                                Rule 10b5-1.

 

(i)                                     Buyer intends the Transaction to comply with the requirements of Rule 10b5-1(c) under the Exchange Act.  Buyer represents that it is entering into the Transaction in good faith and not as part of a plan or scheme to evade the antifraud or anti-manipulation provisions of the federal or applicable state securities laws and that it has not entered into or altered any hedging transaction relating to the Shares corresponding to or offsetting the Transaction.  Buyer represents and warrants that it has consulted with its

 

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own advisors as to the legal aspects of its adoption and implementation of the Transaction under Rule 10b5-1 under the Exchange Act.

 

(ii)                                 Buyer shall not, at any time during any Averaging Period, Settlement Valuation Period or Seller Termination Purchase Period, communicate, directly or indirectly, any material nonpublic information concerning itself or the Shares or purchases or sales of Shares by Seller (or its agent or affiliate) to any Relevant Bank Personnel.  “Relevant Bank Personnel” means any employees or agents of Seller or any affiliate of Seller that Seller has notified Buyer in writing are “Relevant Bank Personnel”; provided that Wells Fargo may amend the list of Relevant Bank Personnel at any time by delivering a revised list to Counterparty.  “Relevant Bank Personnel” shall initially mean any personnel of the equity derivatives trading group of Seller or its affiliates who are responsible for, or have the ability to influence, the execution of this Transaction and of Wells Fargo’s hedge in relation thereto.

 

(iii)                              Buyer agrees that Buyer shall not enter into or alter any hedging transaction relating to the Shares corresponding to or offsetting the Transaction.  Buyer also acknowledges and agrees that any amendment, modification, waiver or termination of this Confirmation must be effected in accordance with the requirements for the amendment or termination of a “plan” as defined in Rule 10b5-1(c) under the Exchange Act.  Without limiting the generality of the foregoing, any such amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5, and no such amendment, modification, waiver or termination shall be made at any time at which Buyer or any officer, director, manager or similar person of Buyer is aware of any material non-public information regarding Buyer or the Shares.

 

(iv)                               Buyer acknowledges and agrees that it does not have, and shall not attempt to exercise, any influence over how, when or whether Seller effects any purchases of Shares in connection with the Transaction.

 

(c)                                  U.S. Private Placement and Other RepresentationsEach party acknowledges that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, each party hereby represents and warrants to the other party as of the date hereof that:

 

(i)                                     It is an “accredited investor” (as defined in Regulation D under the Securities Act) and has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the Transaction, and it is able to bear the economic risk of the Transaction.

 

(ii)                                   It is entering into the Transaction for its own account and not with a view to the distribution or resale of the Transaction or its rights thereunder.

 

(iii)                                It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing.

 

(iv)                               It has the power to execute this Confirmation and any other documentation relating to this Confirmation to which it is a party, to deliver this Confirmation and any other documentation relating to this Confirmation that it is required by this Confirmation to deliver and to perform its obligations under this Confirmation and has taken all necessary action to authorize such execution, delivery and performance.

 

(v)                                  Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets.

 

(d)                                Securities Contract; Swap Agreement.   The parties hereto agree and acknowledge that Seller is a “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of the Bankruptcy Code. The parties hereto further agree and acknowledge that this Transaction is (i) a “securities contract” as

 

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such term is defined in Section 741(7) of the Bankruptcy Code, in which case each payment and delivery made pursuant to this Transaction is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment,” within the meaning of Section 546 of the Bankruptcy Code and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “transfer,” as such term is defined in Section 101(54) of the Bankruptcy Code and a “payment or other transfer of property” within the meaning of Sections 362 and 546 of the Bankruptcy Code, and that Seller is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 362(o), 546(e), 546(g), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

 

(e)                                Bankruptcy Status.  Wells Fargo acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the transactions contemplated hereby that are senior to the claims of Counterparty’s common stockholders in the event of Counterparty’s bankruptcy; provided that nothing herein shall be deemed to limit Wells Fargo’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to this Confirmation and the Agreement; and provided, further, that nothing herein shall limit or shall be deemed to limit Wells Fargo’s rights in respect of any transaction other than this Transaction.

 

(f)                                   No Collateral or Setoff.  Notwithstanding any provision of this Confirmation, the Agreement, or any other agreement between the parties to the contrary, the obligations of Counterparty under this Transaction are not secured by any collateral.  Each party agrees not to set off or net amounts due from the other party with respect to this Transaction against amounts due from such party to the other party under obligations (including pursuant to Section 6 of the Agreement), and each party hereby waives any such right of setoff, netting or recoupment.

 

(g)                                Additional Termination Event.  Notwithstanding any other provision hereof, an “Additional Termination Event” shall occur and Counterparty shall be the sole Affected Party pursuant to such Additional Termination Event if: (i) at any time on or prior to the Valuation Date, the price per Share on the Exchange, as determined by the Calculation Agent, is at or below the Threshold Price as specified in Appendix A; or  (ii) Counterparty declares an Excess Dividend with an ex-dividend date which occurs or is scheduled to occur during the Relevant Dividend Period.  For the avoidance of doubt, such Excess Dividend shall not constitute a Potential Adjustment Event.

 

(h)                                Maximum Number of Shares. Notwithstanding any provisions of this Confirmation, the Agreement or the Equity Definitions to the contrary, in no event shall the aggregate number of Shares that Counterparty shall be obligated to deliver in connection with this Transaction exceed 7,834,535 Shares, as such number may be proportionately adjusted by the Calculation Agent to reflect stock splits or similar events.

 

(i)                                     Agreements to Deliver Documents.  Each of Buyer and Seller will deliver to the other party, upon execution of this Confirmation, evidence reasonably satisfactory to the other party as to the names, true signatures and authority of the officers or officials signing this Confirmation on its behalf.  Such documents shall be covered by the representation set forth in Section 3(d) of the Agreement.  In addition, Buyer agrees to complete (accurately and in a manner reasonably satisfactory to the other party), execute, and deliver to Seller, United States Internal Revenue Service Form W-8 or Form W-9, as applicable, or any successor of such form, (i) upon execution of this Confirmation, (ii) promptly upon reasonable demand by Seller, and (iii) promptly upon learning that any such form previously provided by it has become obsolete or incorrect.

 

(j)                                    Indemnity.  Buyer shall indemnify and hold harmless Seller and any of its affiliates, directors, officers, employees, partners, controlling entities or agents (each, an “Indemnified Party”) from and against any and all claims, losses, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (“Losses”), arising out of or attributable to any breach of any representation, warranty or covenant made by Buyer under this Agreement.  Buyer will not be liable under the foregoing indemnification provision to the extent

 

16



 

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[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

that any Loss is found in a nonappealable judgment by a court of competent jurisdiction to have resulted solely from the gross negligence or bad faith of any Indemnified Party. This indemnity agreement shall be in addition to any liability that Buyer otherwise may have. The provisions of this paragraph shall survive the termination of this Confirmation.

 

(k)                                 Counterparty Purchases. Without the prior written consent of Wells Fargo (such consent not to be unreasonably withheld to the extent such requested purchases do not exceed 1% of the ADTV (as such term is defined in Rule 10b-18(a)(1)) on any Exchange Business Day), Counterparty shall not, and shall cause its “affiliates” and “affiliated purchasers” (each as defined in Rule 10b-18) not to, directly or indirectly (including, without limitation, by means of a derivative) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any Shares (or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) or any security convertible into or exchangeable for Shares during the Averaging Period, Settlement Valuation Period or Seller Termination Purchase Period, except through Wells Fargo Securities, LLC, which is an affiliate of Wells Fargo.

 

(l)                                     Merger-related Transactions.  During the Averaging Period, Settlement Valuation Period and Seller Termination Purchase Period, as applicable, Counterparty shall (i) notify Wells Fargo prior to the opening of trading in the Shares on any day on which Counterparty makes, or expects to be made (to the extent within Counterparty’s control), any public announcement (as defined in Rule 165(f) under the Securities Act) of any merger, acquisition, or similar transaction involving a recapitalization relating to Counterparty as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act (other than any such transaction in which the consideration consists solely of cash and there is no valuation period, a “Merger Transaction”), (ii) promptly notify Wells Fargo following any such announcement that such announcement has been made, and (iii) promptly deliver to Wells Fargo following the making of any such announcement a certificate indicating (A) Counterparty’s average daily Rule 10b-18 purchases (as defined in Rule 10b-18) during the three full calendar months preceding the date of the announcement of such transaction and (B) Counterparty’s block purchases (as defined in Rule 10b-18) effected pursuant to paragraph (b)(4) of Rule 10b-18 during the three full calendar months preceding the date of the announcement of such transaction.  In addition, Counterparty shall promptly notify Wells Fargo of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders.  Counterparty acknowledges that any such public announcement may cause the terms of the Transaction to be adjusted or terminated. Accordingly, Counterparty acknowledges that its actions in relation to any such announcement or transaction must comply with the standards set forth in Section 6(b) above.  Wells Fargo may (i) make adjustments in a commercially reasonable manner to the terms of the Transaction, including, without limitation, the Price Adjustment and/or suspend the Averaging Period to preserve the economics of the transaction to Wells Fargo or (ii) treat the occurrence of such public announcement as an Additional Termination Event with Counterparty as the sole Affected Party and the Transaction hereunder as the Affected Transaction and with the amount under Section 6(e) of the Agreement determined taking into account the fact that the Averaging Period had fewer Scheduled Trading Days than originally anticipated.

 

(m)                             Acknowledgments and Agreements Regarding Hedging.  Counterparty acknowledges and agrees that (i) during the Averaging Period, Wells Fargo and its affiliates may (x) buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to adjust its hedge position with respect to the Transaction and (y) be active in the market for Shares other than in connection with hedging activities in relation to the Transaction, (ii) Wells Fargo shall make its own determination as to whether, when or in what manner any hedging or market activities in Counterparty’s securities shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Settlement Price and/or the VWAP Price and (iii) any market activities of Wells Fargo and its affiliates with respect to Shares may affect the market price and volatility of Shares, as well as the Settlement Price and/or the VWAP Price, each in a manner that may be adverse to Counterparty.

 

7.                                      [Intentionally Omitted]

 

17



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

8.                                      Special Provisions regarding Acquisition Transaction Announcements.

 

(a)                                 If an Acquisition Transaction Announcement occurs on or prior to the Settlement Date, then the Calculation Agent shall make such adjustments to the exercise, settlement, payment or any other terms of the Transaction (including, without limitation, the Number of Shares to be Delivered and the Price Adjustment) as the Calculation Agent determines appropriate, at such time or at multiple times as the Calculation Agent determines appropriate, to account for the economic effect on such Transaction of such Acquisition Transaction Announcement (provided that adjustments will be made to account solely for changes in price, volatility, stock loan rate and liquidity relevant to the Shares, to the Transaction or to commercially reasonable hedge positions in respect of the Transaction).  If an Acquisition Transaction Announcement occurs after the Trade Date, but prior to the Scheduled Earliest Acceleration Date, the Scheduled Earliest Acceleration Date shall be the date of such Acquisition Transaction Announcement.

 

(b)           “Acquisition Transaction Announcement” means (i) the announcement of an Acquisition Transaction or an event that, if consummated, would result in an Acquisition Transaction, (ii) an announcement that Buyer or any of its subsidiaries has entered into an agreement, a letter of intent or an understanding designed to result in an Acquisition Transaction, (iii) the announcement of the intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, an Acquisition Transaction, (iv) any other announcement that in the reasonable judgment of the Calculation Agent may result in an Acquisition Transaction, or (v) any announcement of any change or amendment to any previous Acquisition Transaction Announcement (including any announcement of the abandonment of any such previously announced Acquisition Transaction, agreement, letter of intent, understanding or intention). For the avoidance of doubt, announcements as used in the definition of Acquisition Transaction Announcement refer to any public announcement whether made by the Buyer or a third party.

 

(c)           “Acquisition Transaction” means (i) any Merger Event (for purposes of this definition the definition of Merger Event shall be read with the references therein to “100%” being replaced by “15%” and to “50%” by “75%” and without reference to the clause beginning immediately following the definition of Reverse Merger therein to the end of such definition), Tender Offer or Merger Transaction or any other transaction involving the merger of Buyer with or into any third party, (ii) the sale or transfer of all or substantially all of the assets of Buyer, (iii) a recapitalization, reclassification, binding share exchange or other similar transaction with respect to Buyer, (iv) any acquisition by Counterparty or any of its subsidiaries where the aggregate consideration transferable by Counterparty or any of its subsidiaries exceeds 50% of the market capitalization of Counterparty, (v) any lease, exchange, transfer, disposition (including by way of spin-off or distribution) of assets (including any capital stock or other ownership interests in subsidiaries) or other similar event by Buyer or any of its subsidiaries where the aggregate consideration transferable or receivable by or to Buyer or its subsidiaries exceeds 15% of the market capitalization of Buyer and (vi) any transaction in which Buyer or its board of directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to Rule 14e-2 under the Exchange Act or otherwise).

 

9.                                      Staggered Settlement.  Notwithstanding anything to the contrary herein, Wells Fargo may, by prior notice to Counterparty, satisfy its obligation to deliver any Shares or other securities on any date due (an “Original Delivery Date”) by making separate deliveries of Shares or such securities, as the case may be, at more than one time on or prior to such Original Delivery Date, so long as the aggregate number of Shares and other securities so delivered on or prior to such Original Delivery Date is equal to the number required to be delivered on such Original Delivery Date.

 

10.                               Transfer and Assignment.  Notwithstanding anything to the contrary in the Agreement, Wells Fargo may assign, transfer and set over all its rights, title and interest, powers, privileges and remedies under any Transaction, in whole or in part, to an affiliate of Wells Fargo, without the consent of Counterparty; provided that to the extent any of Wells Fargo’s obligations in respect of the Transaction is not completed by such assignee or transferee, Wells Fargo shall be obligated to continue to perform or to cause any other of its affiliates to perform in respect of such obligations.

 

18



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

11.                               Registration Provisions.  Counterparty hereby agrees that if, in the good faith and commercially reasonable judgment of Wells Fargo, any Shares acquired by Wells Fargo for the purpose of hedging its obligations pursuant to the Transaction or otherwise delivered by the Counterparty to Wells Fargo for any reason hereunder cannot be sold in the public market by Wells Fargo without registration under the Securities Act, Counterparty shall, at its election: (i) in order to allow Wells Fargo to sell such Shares in a registered offering, make available to Wells Fargo an effective registration statement under the Securities Act to cover the resale of such Shares and (A) enter into an agreement, in form and substance reasonably satisfactory to Wells Fargo, substantially in the form of an underwriting agreement for a registered offering of similar size, (B) provide accountant’s “comfort” letters in customary form for registered offerings of equity securities of similar size, (C) provide disclosure opinions of nationally recognized outside counsel to Counterparty reasonably acceptable to Wells Fargo, (D) provide other customary opinions, certificates and closing documents customary in form for registered offerings of equity securities of similar size and (E) afford Wells Fargo a reasonable opportunity to conduct a “due diligence” investigation with respect to Counterparty customary in scope for underwritten offerings of equity securities of similar size; provided that if Wells Fargo, in its commercially reasonable discretion, is not satisfied with access to due diligence materials, the results of its due diligence investigation, or the procedures and documentation for the registered offering referred to above, then clause (ii) of this Section 11 shall apply; or (ii) in order to allow Wells Fargo to sell such Shares in a private placement, enter into a private placement agreement substantially similar to private placement purchase agreements customary for private placements of equity securities of similar size, in form and substance satisfactory to Wells Fargo, including customary representations, covenants, blue sky and other governmental filings and/or registrations, indemnities to Wells Fargo, due diligence rights (for Wells Fargo or any designated buyer or buyers of the Shares from Wells Fargo), opinions and certificates and such other documentation as is customary for private placements agreements, all commercially reasonably acceptable to Wells Fargo (in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, using commercially reasonable judgment, to compensate Wells Fargo for any discount from the public market price of the Shares incurred on the sale of such Shares in a private placement).

 

12.                               Calculations and Payment Date upon Early TerminationThe parties acknowledge and agree that in calculating (a) the Close-Out Amount pursuant to Section 6 of the Agreement and (b) the amount due upon cancellation or termination of the Transaction (whether in whole or in part) pursuant to Article 12 of the Equity Definitions as a result of an Extraordinary Event, Wells Fargo may (but need not) determine such amount based on the price at which one or more market participants would offer to sell to the Seller a block of Shares equal in number to the Seller’s hedge position in relation to the Transaction.  Notwithstanding anything to the contrary in Section 6(d)(ii) of the Agreement or Article 12 of the Equity Definitions, all amounts calculated as being due in respect of an Early Termination Date under Section 6(e) of the Agreement or upon cancellation or termination of the Transaction under Article 12 of the Equity Definitions will be payable on the day that notice of the amount payable is effective.

 

13.                              Counterparts.  This Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Confirmation by signing and delivering one or more counterparts.

 

14.                               Waiver of Trial by Jury.  EACH PARTY HEREBY IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF WELLS FARGO, THE AGENT OR THEIR AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

15.                               Adjustments.  For the avoidance of doubt, whenever the Seller, Calculation Agent, Wells Fargo or Determining Party are called upon to make an adjustment or determination pursuant to the terms of this Confirmation or the Definitions to take into account the effect of an event, the Seller, Calculation Agent and Determining shall make such adjustment or determination by reference to the effect of such event on

 

19



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

the Hedging Party, assuming that the Hedging Party maintains a commercially reasonable Hedge Position at the time of the event.  All adjustments, calculations and determinations by Wells Fargo hereunder whether as Seller, Calculation Agent or as Determining Party or following the occurrence of an Early Termination Date shall be made in good faith and in a commercially reasonable manner.  Seller shall provide to Counterparty prompt notice of any such adjustments, calculations or determinations made with respect to the Transaction, and shall, upon Counterparty’s request, also provide within seven Scheduled Trading Days following such request, a schedule or other reasonably detailed explanation of the basis for and determination of each adjustment, calculation or determination (including the methodology and inputs) and information from internal sources used in making such calculation, adjustment or determination, but without disclosing any confidential or proprietary models or any confidential or proprietary information.

 

16.                               Amendments to the Equity Definitions.

 

(a)                                 Section 11.2(a) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative” and replacing them with the words “an”; and adding the phrase “or such Transaction” at the end of the sentence.

 

(b)                                 Section 11.2(c) of the Equity Definitions is hereby amended by (i) replacing the words “a diluting or concentrative” with “an” in the fifth line thereof, (ii) adding the phrase “or such Transaction” after the words “the relevant Shares” in the same sentence, (iii) deleting the words “dilutive or concentrative” in the sixth to last line thereof, and (iv) deleting the phrase “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing it with the phrase “(and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares).”

 

(c)                                  Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative” and replacing them with the word “a material”; and adding the phrase “or the relevant Transaction” at the end of the sentence.

 

(d)                                 Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (i) deleting from the fourth line thereof the word “or” after the word “official” and inserting a comma therefor, and (ii) deleting the semi-colon at the end of subsection (B) thereof and inserting the following words therefor “or (C) at Wells Fargo’s option, the occurrence of any of the events specified in Section 5(a)(vii) (1) through (9) of the ISDA Master Agreement with respect to that Issuer.”

 

(e)                                  Section 12.9(b)(iv) of the Equity Definitions is hereby amended by:

 

(i)                                     deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); and

 

(ii)                                  replacing the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares” with the phrase “such Lending Party does not lend Shares” in the penultimate sentence.

 

(f)                                   Section 12.9(b)(v) of the Equity Definitions is hereby amended by:

 

(i)                                     adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and

 

(ii)                                  (1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C), (3) deleting the penultimate sentence in its entirety and replacing it with the sentence “The Hedging Party will determine the Cancellation Amount payable by one party to the other” and (4) deleting clause (X) in the final sentence.

 

20



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a copy of this Confirmation and returning it to CorporateDerivativeNotifications@wellsfargo.com.

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

APTARGROUP, INC.

 

 

 

 

 

 

By:

/s/ Thomas Yates

 

By:

/s/ Robert W. Kuhn

 

Name: Thomas Yates

 

 

Name: Robert W. Kuhn

 

Title: Managing Director

 

 

Title:

Executive Vice President,

 

 

 

 

Chief Financial Officer and Secretary

 

21



 

CONFIDENTIAL TREATMENT

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission

 

Appendix A

 

Initial Shares:

 

3,133,814 Shares; provided that if Wells Fargo is unable to borrow or otherwise acquire a number of Shares equal to the Initial Shares for delivery to Counterparty on the Initial Share Delivery Date, the Initial Shares delivered on the Initial Share Delivery Date shall be reduced to such number of Shares that Seller is able to so borrow or otherwise acquire.

 

 

 

Prepayment Amount:

 

$250,000,000

 

 

 

Threshold Price:

 

$31.91

 

 

 

Valuation Date:

 

[DELETED] (or if such date is not an Exchange Business Day, the next following Exchange Business Day) (such date, the “Scheduled Valuation Date”); provided that Seller shall have the right in its absolute discretion, to accelerate the Valuation Date to any date that is on or after [DELETED] (or if such date is not an Exchange Business Day, the next following Exchange Business Day) (such date, the “Scheduled Earliest Acceleration Date”), by giving notice prior to 8:00 pm New York City time on the Scheduled Trading Day following such date.

 

 

 

Averaging Dates:

 

Each Scheduled Trading Day starting on the first Scheduled Trading Day following the Trade Date and ending on, and including, the Valuation Date.

 

 

 

Price Adjustment:

 

[DELETED]

 

 

 

Ordinary Dividend Amount:

 

$0.28

 

 

 

Expected Ex-Dividend Dates:

 

January 26, 2015
April 27, 2015
July 27, 2015

 

 

 

Potential Liquidity Disruption Day:

 

Any Averaging Date on which the 5 day market-wide average daily trading volume of the Shares prior to (but excluding) such Averaging Date, as determined by the Calculation Agent, is less than [DELETED] Shares.

 

 

 

Maximum Stock Loan Rate:

 

200 basis points per annum

 

 

 

Initial Stock Loan Rate:

 

25 basis points per annum

 






Exhibit 21

 

APTARGROUP, INC.

 

LIST OF SUBSIDIARIES

 

 

 

State or Other

 

 

 

 

 

Jurisdiction of

 

Percentage

 

 

 

Incorporation

 

Owned

 

 

 

 

 

 

 

AptarGroup International L.L.C.

 

Delaware

 

100

%

Seaquist Canada Ltd.

 

Canada

 

100

%

Asia Pacific Inspection Center (Suzhou) Co., Ltd.

 

China

 

55

%

AIGE LLC

 

Delaware

 

100

%

PT. Aptar B&H Indonesia

 

Indonesia

 

100

%

AptarGroup Global Holding S.a.r.l.

 

Luxembourg

 

100

%

Aptar Ventures LLC

 

Delaware

 

100

%

Aptar Queretaro S.A. de C.V.

 

Mexico

 

100

%

AptarGroup International Holding S.a.r.l.

 

Luxembourg

 

100

%

Aptar B&H S.A.

 

Argentina

 

100

%

H. Engelmann S.A.I.C.F. el

 

Argentina

 

100

%

Aptar B&H Embalagens Ltda.

 

Brazil

 

100

%

Graphocolor do Brasil Embalagens Ltda.

 

Brazil

 

100

%

MBF Embalagens Ltda.

 

Brazil

 

100

%

Aptar Cali SAS

 

Colombia

 

100

%

Aptar Andina SAS

 

Colombia

 

100

%

Aptargroup UK Holdings Ltd.

 

United Kingdom

 

100

%

AptarGroup International Investment Limited

 

Ireland

 

100

%

Aptar (Thailand) Ltd.

 

Thailand

 

100

%

AptarGroup Holding S.A.S.

 

France

 

100

%

Aptargroup Holding GmbH

 

Germany

 

100

%

Desotec GmbH

 

Germany

 

23.5

%

Aptar Radolfzell GmbH

 

Germany

 

100

%

Aptar Pharma Japan Ltd.

 

Japan

 

100

%

P&P Promotion of German Manufacturing Technologies GmbH

 

Germany

 

100

%

Seaquist Closures Spain, S.A.

 

Spain

 

100

%

Aptar Freyung GmbH

 

Germany

 

100

%

Aptar Ckyne s.r.o.

 

Czech Republic

 

100

%

Aptar Dortmund GmbH

 

Germany

 

100

%

Aptar Menden GmbH

 

Germany

 

100

%

AptarGroup S.A.S.

 

France

 

100

%

Aptar South Europe SARL

 

France

 

100

%

Aptar Italia S.p.A.

 

Italy

 

100

%

Aptar Milano S.r.l.

 

Italy

 

100

%

Seaquist Closures France S.A.S.

 

France

 

100

%

Graphocolor S.A.S.

 

France

 

100

%

Aptar Stelmi SAS

 

France

 

100

%

Aptar France S.A.S.

 

France

 

100

%

GIE Aptar Louveciennes

 

France

 

100

%

MBF Developpement S.A.S.

 

France

 

100

%

MBF Plastiques S.A.S.

 

France

 

100

%

Aptar Ballinasloe Limited

 

Ireland

 

100

%

Aptar Madrid S.A.

 

Spain

 

100

%

Aptar Mezzovico S.A.

 

Switzerland

 

100

%

EP Systems S.A. en Liquidation

 

Switzerland

 

100

%

OOO Aptar Vladimir

 

Russia

 

100

%

Aptar UK Ltd.

 

United Kingdom

 

100

%

Valois U.K. Limited

 

United Kingdom

 

100

%

Seaquist Perfect Dispensing Limited

 

United Kingdom

 

100

%

Seaquist Closures, Ltd.

 

United Kingdom

 

100

%

EMSAR UK Ltd.

 

United Kingdom

 

100

%

Bapco Closures Holdings Limited

 

United Kingdom

 

20

%

Oval Medical Technologies Limited

 

United Kingdom

 

15.64

%

 



 

 

 

State or Other

 

 

 

 

 

Jurisdiction of

 

Percentage

 

 

 

Incorporation

 

Owned

 

 

 

 

 

 

 

Aptar Suzhou Dispensing Systems Co. Ltd.

 

China

 

100

%

Aptar Beauty + Home India Private Ltd.

 

India

 

100

%

Aptar Pharma India Private Limited

 

India

 

100

%

Next Breath LLC

 

Maryland

 

70

%

Philson, Inc.

 

Connecticut

 

100

%

American Stelmi Corporation

 

Delaware

 

100

%

 






EXHIBIT 23

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (333-40326, 333-115872, 333-152525, 333-156761, 333-174549 and 333-197862) of AptarGroup, Inc. of our report dated February 27, 2015, relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

 

/s/ PRICEWATERHOUSECOOPERS LLP

 

PricewaterhouseCoopers LLP

 

 

 

 

 

Chicago, Illinois

 

February 27, 2015

 

 






Exhibit 31.1

 

CERTIFICATION

 

I, Stephen J. Hagge, certify that:

 

1.     I have reviewed this annual report on Form 10-K of AptarGroup, Inc,;

 

2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.              The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and we have:

a)             designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)             designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)              evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)             disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.              The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of  the registrant’s  board of directors:

a)             all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:

February 27, 2015

 

 

 

 

 

 

 

By:

/s/ STEPHEN J. HAGGE

 

 

Stephen J. Hagge

 

 

President and Chief Executive Officer

 






Exhibit 31.2

 

CERTIFICATION

 

I, Robert W. Kuhn, certify that:

 

1.              I have reviewed this annual report on Form 10-K of AptarGroup, Inc,;

 

2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.              The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and we have:

a)             designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)             designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)              evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)             disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.              The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of  the registrant’s  board of directors:

a)             all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:

February 27, 2015

 

 

 

 

 

 

 

By:

/s/ ROBERT W. KUHN

 

 

Robert W. Kuhn

 

 

Executive Vice President,

 

 

Chief Financial Officer and Secretary

 






Exhibit 32.1

 

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Stephen J. Hagge, the president and chief executive officer of AptarGroup, Inc., certify that (i) the Annual Report on Form 10-K of AptarGroup, Inc. for the year ended December 31, 2014 (the “Form 10-K”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of AptarGroup, Inc.

 

 

 

/s/ Stephen J. Hagge

 

Stephen J. Hagge

 

President and Chief Executive Officer

 

 

 

February 27, 2015

 






Exhibit 32.2

 

Certificate Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

 

I, Robert W. Kuhn, executive vice president, chief financial officer and secretary of AptarGroup, Inc., certify that (i) the Annual Report on Form 10-K of AptarGroup, Inc. for the year ended December 31, 2014 (the “Form 10-K”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of AptarGroup, Inc.

 

 

 

By:

/s/ Robert W. Kuhn

 

 

Robert W. Kuhn

 

 

Executive Vice President,

 

 

Chief Financial Officer and Secretary

 

 

 

 

 

February 27, 2015

 



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