Edgar Filing: APTARGROUP INC

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549-1004

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-11846

Aptargroup, Inc.

DELAWARE		36-3853103
(State of Incorporation)		(I.R.S. Employer Identification No.)

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

815-477-0424

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(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 Exchange Act). Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date

Class		Outstanding at October 28, 2010
Common Stock, $.01 par value per share		67,074,203 shares

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Aptargroup, Inc.

Form 10-Q

Quarter Ended September 30, 2010

INDEX


Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income - Three and Nine Months Ended September 30, 2010 and 2009	1

	Condensed Consolidated Balance Sheets - September 30, 2010 and December 31, 2009	2

	Condensed Consolidated Statements of Changes in Equity - Nine Months Ended September 30, 2010 and 2009	4

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2010 and 2009	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21

Item 4.	Controls and Procedures	21

Part II.	OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 6.	Exhibits	22

	Signature	23

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Aptargroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

In thousands, except per share amounts

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009

Net Sales	$	517,537		$	473,668		$	1,545,929		$	1,345,992
Operating Expenses:
Cost of sales (exclusive of depreciation shown below)	342,539			320,675			1,018,870			899,222
Selling, research & development and administrative	71,105			64,370			221,014			204,971
Depreciation and amortization	32,403			33,054			98,877			94,590
Facilities consolidation and severance	381			2,631			381			5,726
	446,428			420,730			1,339,142			1,204,509
Operating Income	71,109			52,938			206,787			141,483

Other Income (Expense):
Interest expense	(3,477		)	(3,965		)	(10,580		)	(12,569		)
Interest income	774			772			2,048			2,758
Miscellaneous, net	(260		)	(164		)	(2,401		)	(1,393		)
	(2,963		)	(3,357		)	(10,933		)	(11,204		)

Income Before Income Taxes	68,146			49,581			195,854			130,279

Provision for Income Taxes	21,125			16,114			62,979			41,746

Net Income	$	47,021		$	33,467		$	132,875		$	88,533

Net (Income) Loss Attributable to Noncontrolling Interests	$	(38	)	$	31		$	(175	)	$	90

Net Income Attributable to Aptargroup, Inc.	$	46,983		$	33,498		$	132,700		$	88,623

Net Income Attributable to Aptargroup, Inc. Per Common Share:
Basic	$	0.70		$	0.49		$	1.97		$	1.31
Diluted	$	0.68		$	0.48		$	1.90		$	1.27

Average Number of Shares Outstanding:
Basic	67,213			67,691			67,471			67,691
Diluted	69,374			69,489			69,921			69,790

Dividends Per Common Share	$	0.18		$	0.15		$	0.48		$	0.45

See accompanying unaudited notes to condensed consolidated financial statements.

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Aptargroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

In thousands, except per share amounts

	September 30,			December 31,
	2010			2009
Assets

Current Assets:
Cash and equivalents	$	328,225		$	332,964
Accounts and notes receivable, less allowance for doubtful accounts of $9,174 in 2010 and $9,923 in 2009	368,086			319,787
Inventories, net	269,953			230,807
Prepaid and other	74,680			59,933
	1,040,944			943,491

Property, Plant and Equipment:
Buildings and improvements	319,222			322,498
Machinery and equipment	1,622,388			1,612,945
	1,941,610			1,935,443
Less: Accumulated depreciation	(1,226,720		)	(1,190,576		)
	714,890			744,867
Land	18,753			19,201
	733,643			764,068

Other Assets:
Investments in affiliates	855			898
Goodwill	227,440			230,578
Intangible assets, net	5,929			9,088
Miscellaneous	9,003			8,070
	243,227			248,634
Total Assets	$	2,017,814		$	1,956,193

See accompanying unaudited notes to condensed consolidated financial statements.

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Aptargroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

In thousands, except per share amounts

	September 30,			December 31,
	2010			2009
Liabilities and Equity

Current Liabilities:
Notes payable	$	110,486		$	103,240
Current maturities of long-term obligations	50,428			25,115
Accounts payable and accrued liabilities	337,463			288,960
	498,377			417,315

Long-Term Obligations	159,660			209,616

Deferred Liabilities and Other:
Deferred income taxes	17,535			20,992
Retirement and deferred compensation plans	37,826			40,462
Deferred and other non-current liabilities	13,607			14,172
Commitments and contingencies	—			—
	68,968			75,626

Stockholders’ Equity:
Aptargroup, Inc. stockholders’ equity
Preferred stock, $.01 par value, 1 million shares authorized, none outstanding	—			—
Common stock, $.01 par value, 199 million shares authorized, and 81.5 and 80.6 million issued at September 30, 2010 and December 31, 2009, respectively	814			806
Capital in excess of par value	309,699			272,471
Retained earnings	1,250,305			1,150,017
Accumulated other comprehensive income	144,346			186,099
Less treasury stock at cost, 14.5 and 13.3 million shares as of September 30, 2010 and December 31, 2009, respectively	(415,333		)	(356,548		)
Total Aptargroup, Inc. Stockholders’ Equity	1,289,831			1,252,845
Noncontrolling interests in subsidiaries	978			791

Total Equity	1,290,809			1,253,636
Total Liabilities and Stockholders’ Equity	$	2,017,814		$	1,956,193

See accompanying unaudited notes to condensed consolidated financial statements.

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Aptargroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

In thousands, except per share amounts

				Aptargroup, Inc. Stockholders’ Equity
							Accumulated
							Other			Common					Capital in		Non-
	Comprehensive			Retained			Comprehensive			Stock		Treasury			Excess of		Controlling			Total
	Income			Earnings			Income/(Loss)			Par Value		Stock			Par Value		Interest			Equity

Balance - December 31, 2008:				$	1,065,998		$	139,300		$	801	$	(329,285	)	$	254,216	$	768		$	1,131,798

Net income	88,533			88,623													(90		)	88,533
Foreign currency translation adjustments	66,988						66,939										49			66,988
Changes in unrecognized pension gains/losses and related amortization, net of tax	596						596													596
Changes in treasury locks, net of tax	60						60													60
Net gain on Derivatives, net of tax	2						2													2
Comprehensive income	$	156,179
Stock option exercises & restricted stock vestings										4		2,308			13,021					15,333
Cash dividends declared on common stock				(30,460		)														(30,460		)
Treasury stock purchased												(11,733		)						(11,733		)
Balance — September 30, 2009:				$	1,124,161		$	206,897		$	805	$	(338,710	)	$	267,237	$	727		$	1,261,117

Balance — December 31, 2009:				$	1,150,017		$	186,099		$	806	$	(356,548	)	$	272,471	$	791		$	1,253,636

Net income	132,875			132,700													175			132,875
Foreign currency translation adjustments	(42,379		)				(42,391		)								12			(42,379		)
Changes in unrecognized pension gains/losses and related amortization, net of tax	575						575													575
Changes in treasury locks, net of tax	62						62													62
Net gain on Derivatives, net of tax	1						1													1
Comprehensive income	$	91,134
Stock option exercises & restricted stock vestings										8					37,228					37,236
Cash dividends declared on common stock				(32,412		)														(32,412		)
Treasury stock purchased												(58,785		)						(58,785		)
Balance — September 30, 2010:				$	1,250,305		$	144,346		$	814	$	(415,333	)	$	309,699	$	978		$	1,290,809

See accompanying unaudited notes to condensed consolidated financial statement.

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Aptargroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

In thousands, brackets denote cash outflows

Nine Months Ended September 30,	2010			2009

Cash Flows from Operating Activities:
Net income	$	132,875		$	88,533
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	96,237			90,409
Amortization	2,640			4,181
Stock option based compensation	9,818			8,440
Provision for bad debts	333			973
Facilities consolidation and severance	381			4,679
Deferred income taxes	(6,432		)	(6,299		)
Retirement and deferred compensation plan expense	8,134			8,260
Changes in balance sheet items, excluding effects from foreign currency adjustments:
Accounts receivable	(57,571		)	31,777
Inventories	(42,910		)	24,992
Prepaid and other current assets	(10,851		)	7,012
Accounts payable and accrued liabilities	43,444			(40,362		)
Income taxes payable	15,294			2,197
Retirement and deferred compensation plans	(8,780		)	(14,326		)
Other changes, net	(4,227		)	11,682
Net Cash Provided by Operations	178,385			222,148

Cash Flows from Investing Activities:
Capital expenditures	(87,043		)	(103,021		)
Disposition of property and equipment	1,062			1,295
Intangible assets acquired	(77		)	(270		)
Acquisition of businesses, net of cash acquired	(3,014		)	(7,577		)
Collection of notes receivable, net	—			54
Net Cash Used by Investing Activities	(89,072		)	(109,519		)

Cash Flows from Financing Activities:
Proceeds from notes payable	7,047			26,654
Proceeds from long-term obligations	1,789			7,975
Repayments of long-term obligations	(25,885		)	(25,667		)
Dividends paid	(32,412		)	(30,460		)
Proceeds from stock options exercises	23,590			4,959
Purchase of treasury stock	(58,785		)	(11,070		)
Excess tax benefit from exercise of stock options	3,532			1,151
Net Cash Used by Financing Activities	(81,124		)	(26,458		)

Effect of Exchange Rate Changes on Cash	(12,928		)	16,608

Net (Decrease)/Increase in Cash and Equivalents	(4,739		)	102,779
Cash and Equivalents at Beginning of Period	332,964			192,072
Cash and Equivalents at End of Period	$	328,225		$	294,851

See accompanying unaudited notes to condensed consolidated financial statements.

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Aptargroup, Inc.

Notes to Condensed Consolidated Financial Statements

(Amounts in Thousands, Except per Share Amounts, or Otherwise Indicated)

(Unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of Aptargroup, Inc. and 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.

In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of consolidated financial position, results of operations, changes in equity and cash flows for the interim periods presented. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. Accordingly, these unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The results of operations of any interim period are not necessarily indicative of the results that may be expected for the year.

ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (“FASB”) issued new standards for improving disclosures about fair value measurements. This guidance requires enhanced disclosures regarding transfers in and out of the levels within the fair value hierarchy. Separate disclosures are required for transfers in and out of Level 1 and 2 fair value measurements, and the reasons for the transfers must be disclosed. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009. As this standard is disclosure related, it did not have a material impact on our financial statements.

The Company has also adopted a new accounting standard which provides amendments to previous guidance on the consolidation of variable interest entities. This standard clarifies the characteristics that identify a variable interest entity (“VIE”) and changes how a reporting entity identifies a primary beneficiary that would consolidate the VIE from a quantitative risk and rewards calculation to a qualitative approach based on which variable interest holder has a controlling financial interest and the ability to direct the most significant activities that impact the VIE’s economic performance. This statement requires the primary beneficiary assessment to be performed on a continuous basis. The standard is effective for fiscal years beginning after November 15, 2009. The adoption did not have an impact on our financial statements and disclosures.

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 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.

The Company has expressed the intention to reinvest the undistributed earnings of its non-U.S. subsidiaries. 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. Undistributed earnings will continue to be reinvested indefinitely and could become subject to 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. It is not practicable to estimate the amount of additional tax that might be payable on these undistributed non-U.S. earnings. The Company will continue to periodically evaluate if it will repatriate non-U.S. subsidiary current year earnings or a portion thereof. The Company repatriated approximately $80 million of current year earnings in the second quarter of 2010.

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 12 for more information.

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NOTE 2 - INVENTORIES

At September 30, 2010 and December 31, 2009, approximately 20% and 21%, respectively, of the total inventories are accounted for by using the LIFO method. Inventories, by component and net of reserves, consisted of:

	September 30,			December 31,
	2010			2009

Raw materials	$	98,650		$	81,452
Work in progress	72,376			66,431
Finished goods	103,107			86,192
Total	274,133			234,075
Less LIFO Reserve	(4,180		)	(3,268		)
Total	$	269,953		$	230,807

NOTE 3 — GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill since the year ended December 31, 2009 are as follows by reporting segment:

				Beauty &						Corporate
	Pharma			Home			Closures			and Other			Total

Goodwill	$	28,424		$	161,816		$	40,338		$	1,615		$	232,193
Accumulated impairment losses	—			—			—			(1,615		)	(1,615		)
Balance as of December 31, 2009	$	28,424		$	161,816		$	40,338		$	—		$	230,578
Foreign currency exchange effects	(1,023		)	(889		)	(1,226		)	—			(3,138		)
Goodwill	$	27,401		$	160,927		$	39,112		$	1,615		$	229,055
Accumulated impairment losses	—			—			—			(1,615		)	(1,615		)
Balance as of September 30, 2010	$	27,401		$	160,927		$	39,112		$	—		$	227,440

The table below shows a summary of intangible assets as of September 30, 2010 and December 31, 2009.

		September 30, 2010							December 31, 2009
	Weighted Average	Gross							Gross
	Amortization	Carrying		Accumulated			Net		Carrying		Accumulated			Net
	Period (Years)	Amount		Amortization			Value		Amount		Amortization			Value

Amortized intangible assets:
Patents	14	$	18,670	$	(16,011	)	$	2,659	$	19,368	$	(15,655	)	$	3,713
License agreements and other	6	23,848		(20,578		)	3,270		26,261		(20,886		)	5,375
Total intangible assets	10	$	42,518	$	(36,589	)	$	5,929	$	45,629	$	(36,541	)	$	9,088

Aggregate amortization expense for the intangible assets above for the quarters ended September 30, 2010 and 2009 was $806 and $2,113, respectively. Aggregate amortization expense for the intangible assets above for the nine months ended September 30, 2010 and 2009 was $2,640 and $4,181, respectively.

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

2010	$	884	(remaining estimate amortization for 2010)
2011	1,950
2012	871
2013	711
2014	648

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 September 30, 2010.

NOTE 4 — RETIREMENT AND DEFERRED COMPENSATION PLANS

Components of Net Periodic Benefit Cost:

	Domestic Plans						Foreign Plans

Three months ended September 30,	2010			2009			2010			2009

Service cost	$	1,220		$	1,091		$	404		$	479
Interest cost	1,072			955			571			638
Expected return on plan assets	(1,054		)	(932		)	(333		)	(251		)
Amortization of net loss	164			60			62			160
Amortization of prior service cost	1			1			87			97
Net periodic benefit cost	$	1,403		$	1,175		$	791		$	1,123

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	Domestic Plans						Foreign Plans

Nine months ended September 30,	2010			2009			2010			2009

Service cost	$	3,587		$	3,273		$	1,233		$	1,315
Interest cost	3,151			2,865			1,745			1,835
Expected return on plan assets	(3,098		)	(2,796		)	(1,018		)	(720		)
Amortization of net loss	482			180			189			459
Amortization of prior service cost	3			3			265			278
Net periodic benefit cost	$	4,125		$	3,525		$	2,414		$	3,167

EMPLOYER CONTRIBUTIONS

In order to meet or exceed minimum funding levels required by U.S. law, the Company has contributed $7.4 million, as of September 30, 2010, to its domestic defined benefit plans. The Company also expects to contribute approximately $6.7 million to its foreign defined benefit plans in 2010, and as of September 30, 2010, has contributed approximately $0.6 million.

NOTE 5 — 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 impact the Company’s results of operations. The Company’s policy is not to engage in speculative foreign currency hedging activities, 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 economically hedge these risks.

The Company maintains an interest rate risk management strategy to minimize significant, unanticipated earnings fluctuations that may arise from volatility in interest rates.

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.

FAIR VALUE HEDGES

The Company has an interest rate swap to convert a portion of its fixed-rate debt into variable-rate debt. Under the interest rate swap contract, the Company exchanges, at specified intervals, the difference between fixed-rate and floating-rate amounts, which is calculated based on an agreed upon notional amount.

As of September 30, 2010, the Company recorded the fair value of the interest rate swap as $0.3 million in miscellaneous other assets with a corresponding increase to debt related to the fixed-to-variable interest rate swap agreement with a notional principal value of $5 million. No gain or loss was recorded in the income statement in 2009 or for the three and nine months ended September 30, 2010 as any hedge ineffectiveness for the period was immaterial.

CASH FLOW HEDGES

As of September 30, 2010, the Company had one foreign currency cash flow hedge. A French entity of Aptargroup, Aptargroup Holding SAS, has hedged the risk of variability in Euro equivalent associated with the cash flows of an intercompany loan granted in Brazilian Real. The forward contracts utilized were designated as a hedge of the changes in the cash flows relating to the changes in foreign currency rates relating to the loan and related forecasted interest. The notional amount of the foreign currency forward contracts utilized to hedge cash flow exposure was 2.7 million Brazilian Real ($1.6 million) as of September 30, 2010. The notional amount of the foreign currency forward contracts utilized to hedge cash flow exposure was 4.2 million Brazilian Real ($2.4 million) as of September 30, 2009.

During the nine months ended September 30, 2010, the Company did not recognize any net gain (loss) as any hedge ineffectiveness for the period was immaterial, and the Company did not recognize any net gain (loss) related to the portion of the hedging instrument excluded from the assessment of hedge effectiveness. The Company’s foreign currency forward contracts hedge forecasted transactions for less than two years.

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 use derivative financial instruments to manage this risk. 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.

OTHER

As of September 30, 2010, the Company has recorded the fair value of foreign currency forward exchange contracts of $0.7 million in prepayments and other, $2.0 million in accounts payable and accrued liabilities, and $2.5 million in deferred and other

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non-current liabilities in the balance sheet. All forward exchange contracts outstanding as of September 30, 2010 had an aggregate contract amount of $81.2 million.

Fair Value of Derivative Instruments in the Statements of Financial Position as of September 30, 2010

and December 31, 2009

Derivative Contracts Designated as Hedging Instruments	Balance Sheet Location	September 30, 2010		December 31, 2009

Derivative Assets
Interest Rate Contracts	Miscellaneous	$	302	$	574
		$	302	$	574
Derivative Liabilities
Foreign Exchange Contracts	Accounts payable and accrued liabilities	$	336	$	293
Foreign Exchange Contracts	Deferred and other non-current liabilities	275		437
		$	611	$	730
Derivative Contracts Not Designated as Hedging Instruments

Derivative Assets
Foreign Exchange Contracts	Prepaid and other	$	668	$	902
		$	668	$	902
Derivative Liabilities
Foreign Exchange Contracts	Accounts payable and accrued liabilities	$	1,672	$	885
Foreign Exchange Contracts	Deferred and other non-current liabilities	2,256		2,020
		$	3,928	$	2,905

The Effect of Derivative Instruments on the Statements of Financial Performance

for the Quarters Ended September 30, 2010 and September 30, 2009

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)
	2010			2009
Foreign Exchange Contracts	$	(6	)	$	17
	$	(6	)	$	17

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on Derivative
		2010			2009
Foreign Exchange Contracts	Miscellaneous, net	$	(3,207	)	$	(1,149	)
		$	(3,207	)	$	(1,149	)

The Effect of Derivative Instruments on the Statements of Financial Performance

for the Nine Months Ended September 30, 2010 and September 30, 2009

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)
	2010		2009
Foreign Exchange Contracts	$	6	$	7
	$	6	$	7

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on Derivative
		2010			2009
Foreign Exchange Contracts	Miscellaneous, net	$	(4,334	)	$	(3,253	)
		$	(4,334	)	$	(3,253	)

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NOTE 6 — 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. Management believes the resolution of these claims and lawsuits will not have a material adverse or positive effect on the Company’s financial position, results of operations or cash flow.

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 had no liabilities recorded for these agreements as of September 30, 2010.

NOTE 7 — STOCK REPURCHASE PROGRAM

During the three and nine months ended September 30, 2010, the Company repurchased approximately 600 thousand and 1.4 million shares for aggregate amounts of $25.8 million and $58.8 million, respectively. As of September 30, 2010, the Company has a remaining authorization to repurchase 2.3 million additional shares. The timing of and total amount expended for the share repurchase depends upon market conditions. There is no time limit on the repurchase authorization.

NOTE 8 — EARNINGS PER SHARE

Aptargroup’s authorized common stock consists of 199 million shares, having a par value of $.01 each. Information related to the calculation of earnings per share is as follows:

	Three months ended
	September 30, 2010				September 30, 2009
	Diluted		Basic		Diluted		Basic
Consolidated operations
Income available to common stockholders	$	46,983	$	46,983	$	33,498	$	33,498

Average equivalent shares
Shares of common stock	67,213		67,213		67,691		67,691
Effect of dilutive stock based compensation
Stock options	2,147		—		1,791		—
Restricted stock	14		—		7		—
Total average equivalent shares	69,374		67,213		69,489		67,691
Net income per share	$	0.68	$	0.70	$	0.48	$	0.49

	Nine months ended
	September 30, 2010				September 30, 2009
	Diluted		Basic		Diluted		Basic
Consolidated operations
Income available to common stockholders	$	132,700	$	132,700	$	88,623	$	88,623

Average equivalent shares
Shares of common stock	67,471		67,471		67,691		67,691
Effect of dilutive stock based compensation
Stock options	2,438		—		2,094		—
Restricted stock	12		—		5		—
Total average equivalent shares	69,921		67,471		69,790		67,691
Net income per share	$	1.90	$	1.97	$	1.27	$	1.31

NOTE 9 — SEGMENT INFORMATION

The Company operates in the packaging components industry, which includes the development, manufacture and sale of consumer product dispensing systems. The Company is organized into three reporting segments. Operations that sell spray and lotion dispensing systems primarily to the personal care, fragrance/cosmetic and household markets form the Beauty & Home segment. Operations that sell dispensing systems to the pharmaceutical market form the Pharma segment. Operations that sell closures to each market served by Aptargroup form the Closures segment.

The accounting policies of the segments are the same as those described in Note 1, Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The Company evaluates performance of its business segments and allocates resources based upon earnings before interest expense in excess of interest income, stock option and certain corporate expenses, income taxes and unusual items (collectively referred to as “Segment Income”). Financial information regarding the Company’s reportable segments is shown below:

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Total Revenue:
Beauty & Home	$	270,372		$	242,485		$	805,670		$	673,612
Closures	139,097			124,867			421,672			365,302
Pharma	112,020			109,382			331,944			315,989
Other	38			49			108			126
Total Revenue	521,527			476,783			1,559,394			1,355,029

Less: Intersegment Sales:
Beauty & Home	$	3,559		$	2,864		$	11,698		$	8,378
Closures	134			79			886			251
Pharma	260			124			774			284
Other	37			48			107			124
Total Intersegment Sales	$	3,990		$	3,115		$	13,465		$	9,037

Net Sales:
Beauty & Home	$	266,813		$	239,621		$	793,972		$	665,234
Closures	138,963			124,788			420,786			365,051
Pharma	111,760			109,258			331,170			315,705
Other	1			1			1			2
Net Sales	$	517,537		$	473,668		$	1,545,929		$	1,345,992

Segment Income (1):
Beauty & Home	$	30,630		$	16,815		$	87,760		$	38,769
Closures	15,403			10,443			51,890			35,800
Pharma	35,169			31,269			96,811			91,752
Corporate & Other	(10,391		)	(5,722		)	(32,250		)	(26,141		)
Income from continuing operations before interest and taxes	$	70,811		$	52,805		$	204,211		$	140,180
Interest expense, net	(2,703		)	(3,193		)	(8,532		)	(9,811		)
Net income/(Loss) Attributable to Noncontrolling Interests	38			(31		)	175			(90		)
Income from continuing operations before income taxes	$	68,146		$	49,581		$	195,854		$	130,279

(1) Included in the Segment Income figures reported above are consolidation/severance expenses, for the three and nine months ended September 30, 2010 and September 30 2009, as follows:

CONSOLIDATION/SEVERANCE EXPENSES
Beauty & Home	$	—		$	(1,246	)	$	—		$	(1,503	)
Closures	(381		)	(1,385		)	(381		)	(4,223		)
Pharma	—			—			—			—
Total Consolidation/Severance Expenses	$	(381	)	$	(2,631	)	$	(381	)	$	(5,726	)

NOTE 10 — ACQUISITIONS

In March 2010, the Company acquired certain equipment, inventory and intellectual property rights for approximately $3.0 million in cash. No debt was assumed in the transaction. The purchase price approximated the fair value of the assets acquired and therefore no goodwill was recorded. The results of operations subsequent to the acquisition are included in the reported income statement. The assets acquired are included in the Closures reporting segment.

In August 2009, the Company acquired Covit do Brasil Componentes de Alumínio para Perfumaria Ltda. (Covit do Brasil) for approximately $7.6 million in cash. Covit do Brasil has been operating in Brazil since 2005 developing and supplying anodized aluminum parts primarily for the fragrance/cosmetic market. Covit do Brasil generally supplies parts to other companies within Aptargroup. No debt was assumed in the transaction. Covit do Brasil’s annual revenues were approximately $7.0 million, of which approximately $6.0 million were with Aptargroup subsidiaries. The excess purchase price over the fair value of assets acquired was allocated to Goodwill. Goodwill of approximately $0.7 million was recorded on the transaction. The results of operations subsequent to the acquisition are included in the reported income statement. Covit do Brasil is included in the Beauty & Home reporting segment.

Neither of these acquisitions had a material impact on the results of operations in 2010 or 2009 and therefore no proforma information is presented.

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NOTE 11 — 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 first nine months of 2010 was approximately $9.8 million ($7.0 million after tax), or $0.10 per share (basic and diluted). The income tax benefit related to this compensation expense was approximately $2.9 million. Approximately $8.8 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 first nine months of 2009 was approximately $8.4 million ($6.3 million after tax), or $0.09 per share (basic and diluted). The income tax benefit related to this compensation expense was approximately $1.7 million. Approximately $7.6 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 $9.18 and $7.33 per share in 2010 and 2009, 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:

Nine months ended September 30,	2010		2009

Dividend Yield	1.8	%	1.6	%
Expected Stock Price Volatility	22.7	%	24.2	%
Risk-free Interest Rate	3.7	%	2.2	%
Expected Life of Option (years)	6.9		6.9

The fair value of stock options granted under the Director Stock Option Plan was $10.07 and $7.90 per share in 2010 and 2009, 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:

Nine months ended September 30,	2010		2009

Dividend Yield	1.7	%	1.7	%
Expected Stock Price Volatility	22.6	%	24.9	%
Risk-free Interest Rate	3.4	%	3.1	%
Expected Life of Option (years)	6.9		6.9

A summary of option activity under the Company’s stock option plans as of September 30, 2010, and changes during the period then ended is presented below:

Stock Awards Plans

Director Stock Option Plans

Weighted Average

Shares

Exercise Price

Shares

Exercise Price

Outstanding, January 1, 2010

8,376,677

26.13

205,000

24.87

Granted

1,223,630

36.42

64,000

40.34

Exercised

(1,130,295

)

18.99

(34,000

)

21.95

Forfeited or expired

(13,560

)

32.57

—

Outstanding at September 30, 2010

8,456,452

28.56

235,000

29.50

Exercisable at September 30, 2010

6,001,629

26.09

139,000

24.36

Weighted-Average Remaining Contractual Term (Years):

Outstanding at September 30, 2010

6.1

6.4

Exercisable at September 30, 2010

4.9

4.2

Aggregate Intrinsic Value ($000):

Outstanding at September 30, 2010

143,394

3,799

Exercisable at September 30, 2010

116,676

2,962

Intrinsic Value of Options Exercised ($000) During the Nine Months Ended:

September 30, 2010

24,034

703

September 30, 2009

7,733

—

The fair value of shares vested during the nine months ended September 30, 2010 and 2009 was $11.7 million and $11.0 million, respectively. Cash received from option exercises was approximately $23.6 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $5.4 million in the nine months ended September 30, 2010. Cash received from option exercises was approximately $5.0 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $1.7 million in the nine months ended September 30, 2009. As of September 30,

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2010, the remaining valuation of stock option awards to be expensed in future periods was $7.5 million and the related weighted-average period over which it is expected to be recognized is 1.5 years.

The fair value of restricted stock unit grants is the market price of the underlying shares on the grant date. A summary of restricted stock unit activity as of September 30, 2010, and changes during the period then ended is presented below:

			Weighted-Average
	Shares		Grant-Date Fair Value

Nonvested at January 1, 2010	15,178		$	32.04
Granted	16,500		35.53
Vested	(9,375	)	31.84
Nonvested at September 30, 2010	22,303		$	34.71

Compensation expense recorded attributable to restricted stock unit grants for the first nine months of 2010 and 2009 was approximately $452 and $136 thousand, respectively. The fair value of units vested during the nine months ended September 30, 2010 and 2009 was $298 and $323 thousand, respectively. The intrinsic value of units vested during the nine months ended September 30, 2010 and 2009 was $330 and $319 thousand, respectively. As of September 30, 2010 there was $136 thousand of total unrecognized compensation cost relating to restricted stock unit awards which is expected to be recognized over a weighted average period of 1.7 years.

NOTE 12 — INCOME TAX UNCERTAINTIES

The Company had approximately $11.6 and $10.8 million recorded for income tax uncertainties as of September 30, 2010 and December 31, 2009, respectively. The $0.8 million change in income tax uncertainties was primarily the result of a $1.4 million decrease related to the favorable settlements of foreign tax audits and lapse of applicable statute of limitations and $2.3 million increase related to changes in estimate on prior period tax uncertainties for certain foreign jurisdictions. The amount, if recognized, that would impact the effective tax rate is $10.7 and $10.0 million, respectively. The Company does not anticipate any significant changes to the amount recorded for income tax uncertainties over the next 12 months.

NOTE 13 — 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 September 30, 2010, the fair values of our financial assets and liabilities were categorized as follows:

	Total		Level 1		Level 2		Level 3
*Assets*
Interest rate swap (a)	$	302	$	—	$	302	$	—
Forward exchange contracts (b)	668		—		668		—
Total assets at fair value	$	970	$	—	$	970	$	—

*Liabilities*
Forward exchange contracts (b)	$	4,539	$	—	$	4,539	$	—
Total liabilities at fair value	$	4,539	$	—	$	4,539	$	—

As of December 31, 2009, the fair values of our financial assets and liabilities were categorized as follows:

	Total		Level 1		Level 2		Level 3
*Assets*
Interest rate swap (a)	$	574	$	—	$	574	$	—
Forward exchange contracts (b)	902		—		902		—
Total assets at fair value	$	1,476	$	—	$	1,476	$	—

*Liabilities*
Forward exchange contracts (b)	$	3,635	$	—	$	3,635	$	—
Total liabilities at fair value	$	3,635	$	—	$	3,635	$	—

(a) Based on third party quotation from financial institution

(b) Based on observable market transactions of spot and forward rates

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Based on the variable borrowing rates currently available to the Company for long-term obligations with similar terms and average maturities, the fair value of the Company’s long-term obligations approximates its book value.

NOTE 14 — FACILITIES CONSOLIDATION AND SEVERANCE