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, 2011

[ ] 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 27, 2011
Common Stock, $.01 par value per share		66,070,238 shares

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AptarGroup, Inc.

Form 10-Q

Quarter Ended September 30, 2011

INDEX

Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income - Three and Nine Months Ended September 30, 2011 and 2010	1

	Condensed Consolidated Balance Sheets - September 30, 2011 and December 31, 2010	2

	Condensed Consolidated Statements of Changes in Equity - Nine Months Ended September 30, 2011 and 2010	4

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2011 and 2010	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	22

Item 4.	Controls and Procedures	22

Part II.	OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 5.	Other Information	23

Item 6.	Exhibits	23

	Signature	24

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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,
	2011			2010			2011			2010

Net Sales	$	601,196		$	517,537		$	1,792,643		$	1,545,929
Operating Expenses:
Cost of sales (exclusive of depreciation and amortization shown below)	406,768			342,539			1,198,919			1,018,870
Selling, research & development and administrative	86,716			71,105			267,485			221,014
Depreciation and amortization	33,505			32,403			102,024			98,877
Facilities consolidation and severance	—			381			—			381
	526,989			446,428			1,568,428			1,339,142
Operating Income	74,207			71,109			224,215			206,787

Other Income (Expense):
Interest expense	(4,141		)	(3,477		)	(13,368		)	(10,580		)
Interest income	1,626			774			4,722			2,048
Equity in results of affiliates	126			—			126			—
Miscellaneous, net	(580		)	(260		)	(1,286		)	(2,401		)
	(2,969		)	(2,963		)	(9,806		)	(10,933		)

Income before Income Taxes	71,238			68,146			214,409			195,854

Provision for Income Taxes	21,995			21,125			69,411			62,979

Net Income	$	49,243		$	47,021		$	144,998		$	132,875

Net Loss (Income) Attributable to Noncontrolling Interests	$	54		$	(38	)	$	65		$	(175	)

Net Income Attributable to AptarGroup, Inc.	$	49,297		$	46,983		$	145,063		$	132,700

Net Income Attributable to AptarGroup, Inc. Per Common Share:
Basic	$	0.74		$	0.70		$	2.17		$	1.97
Diluted	$	0.72		$	0.68		$	2.08		$	1.90

Average Number of Shares Outstanding:
Basic	66,381			67,213			66,747			67,471
Diluted	68,677			69,374			69,616			69,921

Dividends per Common Share	$	0.22		$	0.18		$	0.58		$	0.48

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,
	2011			2010

Assets

Current Assets:
Cash and equivalents	$	371,429		$	376,427
Accounts and notes receivable, less allowance for doubtful accounts of $8,658 in 2011 and $8,560 in 2010	400,451			357,110
Inventories, net	297,430			272,255
Prepaid and other	87,170			58,191
	1,156,480			1,063,983

Property, Plant and Equipment:
Buildings and improvements	338,479			316,415
Machinery and equipment	1,699,222			1,621,475
	2,037,701			1,937,890
Less: Accumulated depreciation	(1,310,456		)	(1,231,557		)
	727,245			706,333
Land	20,912			18,651
	748,157			724,984

Other Assets:
Investments in affiliates	978			853
Goodwill	227,702			227,029
Intangible assets, net	3,387			5,242
Miscellaneous	9,657			10,627
	241,724			243,751
Total Assets	$	2,146,361		$	2,032,718

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,
	2011			2010

Liabilities and Stockholders’ Equity

Current Liabilities:
Notes payable	$	142,348		$	45,440
Current maturities of long-term obligations	3,472			50,126
Accounts payable and accrued liabilities	344,938			327,756
	490,758			423,322

Long-Term Obligations	255,801			258,773

Deferred Liabilities and Other:
Deferred income taxes	19,665			22,134
Retirement and deferred compensation plans	34,425			39,362
Deferred and other non-current liabilities	9,206			9,353
Commitments and contingencies	—			—
	63,296			70,849

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; 82.5 and 81.8 million shares issued as of September 30, 2011 and December 31, 2010, respectively	825			817
Capital in excess of par value	352,416			318,346
Retained earnings	1,385,307			1,279,013
Accumulated other comprehensive income	119,771			123,766
Less treasury stock at cost, 16.5 and 15.0 million shares as of September 30, 2011 and December 31, 2010, respectively	(522,590		)	(443,019		)
Total AptarGroup, Inc. Stockholders’ Equity	1,335,729			1,278,923
Noncontrolling interests in subsidiaries	777			851

Total Stockholders’ Equity	1,336,506			1,279,774
Total Liabilities and Stockholders’ Equity	$	2,146,361		$	2,032,718

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, 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

Balance — December 31, 2010:				$	1,279,013		$	123,766		$	817	$	(443,019	)	$	318,346	$	851		$	1,279,774

Net income (loss)	144,998			145,063													(65		)	144,998
Foreign currency translation adjustments	(5,256		)				(5,274		)								18			(5,256		)
Changes in unrecognized pension gains/losses and related amortization, net of tax	1,213						1,213													1,213
Changes in treasury locks, net of tax	65						65													65
Net gain on Derivatives, net of tax	1						1													1
Comprehensive income	$	141,021
Stock option exercises & restricted stock vestings										8		69			34,070					34,147
Cash dividends declared on common stock				(38,769		)														(38,769		)
Non-Controlling interest distribution																	(27		)	(27		)
Treasury stock purchased												(79,640		)						(79,640		)
Balance — September 30, 2011:				$	1,385,307		$	119,771		$	825	$	(522,590	)	$	352,416	$	777		$	1,336,506

See accompanying unaudited notes to condensed consolidated financial statements.

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AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

In thousands, brackets denote cash outflows

Nine Months Ended September 30,	2011			2010

Cash Flows from Operating Activities:
Net income	$	144,998		$	132,875
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	100,099			96,237
Amortization	1,925			2,640
Stock option based compensation	12,160			9,818
Provision for bad debts	1,188			333
Deferred income taxes	(4,710		)	(6,432		)
Facilities consolidation and severance	—			381
Retirement and deferred compensation plan expense	8,126			8,134
Changes in balance sheet items, excluding effects from foreign currency adjustments:
Accounts receivable	(19,655		)	(57,571		)
Inventories	(29,230		)	(42,910		)
Prepaid and other current assets	(31,111		)	(10,851		)
Accounts payable and accrued liabilities	15,252			51,518
Income taxes payable	(3,747		)	15,294
Retirement and deferred compensation plans	(13,770		)	(8,780		)
Other changes, net	3,250			(4,227		)
Net Cash Provided by Operations	184,775			186,459

Cash Flows from Investing Activities:
Capital expenditures	(126,710		)	(87,043		)
Disposition of property and equipment	1,656			1,062
Intangible assets acquired	129			(77		)
Acquisition of businesses, net of cash acquired	—			(3,014		)
Notes receivable, net	48			—
Net Cash Used by Investing Activities	(124,877		)	(89,072		)

Cash Flows from Financing Activities:
Proceeds from notes payable	97,360			7,047
Proceeds from long-term obligations	—			1,789
Repayments of long-term obligations	(49,342		)	(25,885		)
Dividends paid	(38,769		)	(32,412		)
Proceeds from stock options exercises	17,098			23,590
Purchase of treasury stock	(79,640		)	(58,785		)
Excess tax benefit from exercise of stock options	4,564			3,532
Net Cash Used by Financing Activities	(48,729		)	(81,124		)

Effect of Exchange Rate Changes on Cash	(16,167		)	(21,002		)

Net Decrease in Cash and Equivalents	(4,998		)	(4,739		)
Cash and Equivalents at Beginning of Period	376,427			332,964
Cash and Equivalents at End of Period	$	371,429		$	328,225

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, 2010. The results of operations of any interim period are not necessarily indicative of the results that may be expected for the year.

As previously discussed in the AptarGroup Form 10-Q for the quarterly period ended March 31, 2011, the Company revised certain foreign currency cash flow effects that should not have been reported within cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows. Accordingly, the Company changed the classification of these foreign currency effects to appropriately reflect such amounts within effect of exchange rate changes on cash within the Condensed Consolidated Statements of Cash Flows and has revised our Statement of Cash Flows for the nine months ended September 30, 2010 presented herein.

Effective at the beginning of fiscal year 2011, AptarGroup’s new organizational structure consists of three market-focused lines of business which are Beauty + Home, Pharma and Food + Beverage. This new structure is a strategic step to become more closely aligned with our customers and the markets in which they operate. Prior period information has been conformed to the new reporting structure.

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 October 2009, the FASB issued an update to existing guidance on revenue recognition for arrangements with multiple deliverables. This update allowed companies to allocate consideration received for qualified separate deliverables using estimated selling price for both delivered and undelivered items when vendor-specific objective evidence or third-party evidence is unavailable. Additional disclosures discussing the nature of multiple element arrangements, the types of deliverables under the arrangements, the general timing of their delivery, and significant factors and estimates used to determine estimated selling prices are required. The standard is effective for fiscal years beginning on or after June 15, 2010. The adoption of this standard had no impact on the Consolidated Financial Statements.

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.

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 only will make a distribution out of current year earnings to meet the cash needs at the parent company. As such, the Company does not provide for taxes on earnings that are deemed to be permanently reinvested. The effective tax rate for 2011 includes the estimated tax cost of repatriating $82 million of current year earnings, which was repatriated in the second quarter of 2011.

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.

NOTE 2 - INVENTORIES

At September 30, 2011 and December 31, 2010, approximately 19% and 20%, respectively, of the total inventories are accounted for by using the LIFO method. Inventories, by component and net of reserves, consisted of:

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	September 30,			December 31,
	2011			2010

Raw materials	$	115,774		$	106,870
Work in progress	77,208			67,591
Finished goods	110,448			102,423
Total	303,430			276,884
Less LIFO Reserve	(6,000		)	(4,629		)
Total	$	297,430		$	272,255

NOTE 3 — GOODWILL AND OTHER INTANGIBLE ASSETS

As previously discussed in Note 1, we have changed our segments to align with our new organization structure. Upon this change, we reassigned our goodwill based on relative fair value to our reporting units. This reassignment is reflected in the below table in our gross opening goodwill balance.

The changes in the carrying amount of goodwill since the year ended December 31, 2010 are as follows by reporting segment:

	Beauty +				Food +			Corporate
	Home		Pharma		Beverage			and Other			Total

Goodwill	$	171,515	$	37,678	$	17,836		$	1,615		$	228,644
Accumulated impairment losses	—		—		—			(1,615		)	(1,615		)
Balance as of December 31, 2010	$	171,515	$	37,678	$	17,836		$	—		$	227,029
Foreign currency exchange effects	172		505		(4		)	—			673
Goodwill	$	171,687	$	38,183	$	17,832		$	1,615		$	229,317
Accumulated impairment losses	—		—		—			(1,615		)	(1,615		)
Balance as of September 30, 2011	$	171,687	$	38,183	$	17,832		$	—		$	227,702

The table below shows a summary of intangible assets as of September 30, 2011 and December 31, 2010.

		September 30, 2011							December 31, 2010
	Weighted Average	Gross							Gross
	Amortization	Carrying		Accumulated			Net		Carrying		Accumulated			Net
	Period (Years)	Amount		Amortization			Value		Amount		Amortization			Value

Amortized intangible assets:
Patents	11	$	19,662	$	(18,490	)	$	1,172	$	18,489	$	(16,008	)	$	2,481
License agreements and other	4	23,005		(20,790		)	2,215		25,345		(22,584		)	2,761
Total intangible assets	7	$	42,667	$	(39,280	)	$	3,387	$	43,834	$	(38,592	)	$	5,242

Aggregate amortization expense for the intangible assets above for the quarters ended September 30, 2011 and 2010 was $186 and $806, respectively. Aggregate amortization expense for the intangible assets above for the nine months ended September 30, 2011 and 2010 was $1,925 and $2,640, respectively.

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

2011	$	258	(remaining estimated amortization for 2011)
2012	617
2013	597
2014	704
2015	391

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, 2011.

NOTE 4 — RETIREMENT AND DEFERRED COMPENSATION PLANS

Components of Net Periodic Benefit Cost:

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	Domestic Plans						Foreign Plans
Three months ended September 30,	2011			2010			2011			2010

Service cost	$	1,405		$	1,220		$	517		$	404
Interest cost	1,165			1,072			650			571
Expected return on plan assets	(1,566		)	(1,054		)	(462		)	(333		)
Amortization of net loss	398			164			200			62
Amortization of prior service cost	1			1			97			87
Net periodic benefit cost	$	1,403		$	1,403		$	1,002		$	791

	Domestic Plans						Foreign Plans
Nine months ended September 30,	2011			2010			2011			2010

Service cost	$	4,095		$	3,587		$	1,547		$	1,233
Interest cost	3,392			3,151			1,945			1,745
Expected return on plan assets	(3,608		)	(3,098		)	(1,383		)	(1,018		)
Amortization of net loss	1,245			482			599			189
Amortization of prior service cost	3			3			291			265
Net periodic benefit cost	$	5,127		$	4,125		$	2,999		$	2,414

EMPLOYER CONTRIBUTIONS

In order to meet or exceed minimum funding levels required by U.S. law, the Company has contributed $12.2 million, as of September 30, 2011, to its domestic defined benefit plans and does not anticipate any further contribution during 2011. The Company also expects to contribute approximately $2.1 million to its foreign defined benefit plans in 2011, and as of September 30, 2011, has contributed approximately $0.7 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 can 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

During 2011, the Company maintained 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 exchanged, at specified intervals, the difference between fixed-rate and floating-rate amounts, which was calculated based on an agreed upon notional amount. On May 31, 2011, this interest rate swap contract matured and was not renewed. No gain or loss was recorded in the income statement in 2010 or nine months ended September 30, 2011 as any hedge ineffectiveness for the period was immaterial.

CASH FLOW HEDGES

As of September 30, 2011, the Company had one foreign currency cash flow hedge. A French subsidiary 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 1.3 million Brazilian Real ($0.7 million) as of September 30, 2011. 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.

During the three and nine months ended September 30, 2011, 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 approximately six months (March 2012).

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 weakening U.S. dollar relative to foreign currencies has an additive translation effect on the Company’s financial condition and results of operations. Conversely, a strengthening U.S. dollar has a dilutive effect. The

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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.

OTHER

As of September 30, 2011, the Company has recorded the fair value of foreign currency forward exchange contracts of $0.9 million in prepaid and other, $2.4 million in accounts payable and accrued liabilities, and $1.9 million in deferred and other non-current liabilities in the balance sheet. All forward exchange contracts outstanding as of September 30, 2011 had an aggregate contract amount of $182.9 million.

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets as of September 30, 2011

and December 31, 2010

Derivative Contracts Designated as Hedging Instruments	Balance Sheet Location	September 30, 2011				December 31, 2010

Derivative Assets
Interest Rate Contracts	Miscellaneous	$			—	$	155
		$			—	$	155
Derivative Liabilities
Foreign Exchange Contracts	Accounts payable and accrued liabilities	$	274			$	309
Foreign Exchange Contracts	Deferred and other non-current liabilities	—				377
		$	274			$	686
Derivative Contracts Not Designated as Hedging Instruments
Derivative Assets
Foreign Exchange Contracts	Prepaid and other	$		866		$	1,660
		$		866		$	1,660
Derivative Liabilities
Foreign Exchange Contracts	Accounts payable and accrued liabilities	$		2,084		$	1,089
Foreign Exchange Contracts	Deferred and other non-current liabilities	1,891				2,448
		$		3,975		$	3,537

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Income

for the Quarters Ended September 30, 2011 and September 30, 2010

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)
	2011				2010
Foreign Exchange Contracts		$	(5	)		$	(6	)
		$	(5	)		$	(6	)

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
		2011			2010
Foreign Exchange Contracts	Other (Expense) Miscellaneous, net		$	168		$	(3,207	)
			$	168		$	(3,207	)

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Income

for the Nine Months Ended September 30, 2011 and September 30, 2010

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)
	2011		2010
Foreign Exchange Contracts	$	6	$	6
	$	6	$	6

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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
		2011			2010
Foreign Exchange Contracts	Other (Expense) Miscellaneous, net	$	(3,360	)	$	(4,334	)
		$	(3,360	)	$	(4,334	)

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 including the proceeding noted below. 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.

A competitor has filed a lawsuit against AptarGroup, Inc. alleging that certain processes utilized by AptarGroup, Inc. in the manufacture of a specific type of diptube infringe patents owned by the counterparty. This lawsuit seeks an exclusion order barring the manufacture of this specific diptube. The Company believes it has meritorious defenses against the suit and any unfavorable outcome is not expected to have a material impact on the Company’s financial condition or results of operations. Therefore, no accrual has been recorded related to this matter.

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, 2011.

NOTE 7 — STOCK REPURCHASE PROGRAM

On July 19, 2011, the Company’s Board of Directors authorized the Company to repurchase an additional four million shares of its outstanding common stock. There is no expiration date for this repurchase program.

During the three and nine months ended September 30, 2011, the Company repurchased approximately 800 thousand and 1.6 million shares for aggregate amounts of $38.8 million and $79.6 million, respectively. As of September 30, 2011, the Company had a remaining authorization to repurchase 4.1 million additional shares. The timing of and total amount expended for the share repurchase depends upon market conditions.

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, 2011				September 30, 2010
	Diluted		Basic		Diluted		Basic

Consolidated operations
Income available to common stockholders	$	49,297	$	49,297	$	46,983	$	46,983

Average equivalent shares
Shares of common stock	66,381		66,381		67,213		67,213
Effect of dilutive stock based compensation
Stock options	2,291		—		2,147		—
Restricted stock	5		—		14		—
Total average equivalent shares	68,677		66,381		69,374		67,213
Net income per share	$	0.72	$	0.74	$	0.68	$	0.70

	Nine months ended
	September 30, 2011				September 30, 2010
	Diluted		Basic		Diluted		Basic

Consolidated operations
Income available to common stockholders	$	145,063	$	145,063	$	132,700	$	132,700

Average equivalent shares
Shares of common stock	66,747		66,747		67,471		67,471
Effect of dilutive stock based compensation
Stock options	2,863		—		2,438		—
Restricted stock	6		—		12		—
Total average equivalent shares	69,616		66,747		69,921		67,471
Net income per share	$	2.08	$	2.17	$	1.90	$	1.97

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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 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 dispensing systems 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 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The Company evaluates performance of its business segments and allocates resources based upon segment income. Segment income is defined as earnings before interest expense in excess of interest income, certain corporate expenses and income taxes. Beginning in 2011, the Company changed the segment income measure to include stock option and certain information technology costs that were historically maintained within Corporate & Other. Prior period information has been conformed to incorporate this change.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Total Revenue:
Beauty + Home	$	391,535		$	348,858		$	1,178,065		$	1,037,772
Pharma	146,521			117,543			417,793			348,889
Food + Beverage	68,101			54,295			211,350			169,714
Other	40			38			122			109
Total Revenue	606,197			520,734			1,807,330			1,556,484

Less: Intersegment Sales:
Beauty + Home	$	4,034		$	2,750		$	11,564		$	8,421
Pharma	76			23			641			104
Food + Beverage	851			387			2,360			1,922
Other	40			37			122			108
Total Intersegment Sales	$	5,001		$	3,197		$	14,687		$	10,555

Net Sales:
Beauty + Home	$	387,501		$	346,108		$	1,166,501		$	1,029,351
Pharma	146,445			117,520			417,152			348,785
Food + Beverage	67,250			53,908			208,990			167,792
Other	—			1			—			1
Net Sales	$	601,196		$	517,537		$	1,792,643		$	1,545,929

Segment Income (1):
Beauty + Home	$	32,025		$	34,324		$	104,555		$	101,316
Pharma	44,801			35,091			124,058			98,510
Food + Beverage	6,891			6,443			23,076			24,758
Corporate & Other	(9,964		)	(5,009		)	(28,634		)	(20,198		)
Income before interest and taxes	$	73,753		$	70,849		$	223,055		$	204,386
Interest expense, net	(2,515		)	(2,703		)	(8,646		)	(8,532		)
Income before income taxes	$	71,238		$	68,146		$	214,409		$	195,854

(1) Included in the Segment Income figures reported above are consolidation/severance expenses, for the three and nine months ended September 30, 2011 and September 30, 2010, as follows:

CONSOLIDATION/SEVERANCE EXPENSES

Beauty + Home	$	—	$	(444	)	$	—	$	(444	)
Pharma	—		—			—		—
Food + Beverage	—		63			—		63
Total Consolidation/Severance Expenses	$	—	$	(381	)	$	—	$	(381	)

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 statement of income. The assets acquired are included in the Food + Beverage reporting segment.

This acquisition did not have a material impact on the results of operations in 2011 or 2010 and therefore no proforma information is required.

NOTE 11 — STOCK-BASED COMPENSATION

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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 2011 was approximately $12.1 million ($8.5 million after tax), or $0.13 per basic share and $0.12 per diluted share. The income tax benefit related to this compensation expense was approximately $3.6 million. Approximately $11.2 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 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.

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 $11.36 and $9.18 per share in 2011 and 2010, 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,	2011		2010


Dividend Yield	1.7	%	1.8	%
Expected Stock Price Volatility	23.3	%	22.7	%
Risk-free Interest Rate	2.7	%	3.7	%
Expected Life of Option (years)	6.9		6.9

The fair value of stock options granted under the Director Stock Option Plan during the third quarter of 2011 was $12.00. The fair value of stock options granted under the Director Stock Option Plan during the third quarter of 2010 was $10.07. 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,	2011		2010

Dividend Yield	1.6	%	1.7	%
Expected Stock Price Volatility	22.9	%	22.6	%
Risk-free Interest Rate	2.5	%	3.4	%
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, 2011, and changes during the nine months then ended is presented below:

Stock Awards Plans

Director Stock Option Plans

Weighted Average

Shares

Exercise Price

Shares

Exercise Price

Outstanding, January 1, 2011

8,208,736

28.91

219,000

30.40

Granted

1,284,150

48.21

85,500

51.26

Exercised

(859,487

)

20.79

(34,500

)

22.79

Forfeited or expired

(37,030

)

33.72

—

Outstanding at September 30, 2011

8,596,369

32.59

270,000

37.98

Exercisable at September 30, 2011

6,104,374

28.91

125,836

29.15

Weighted-Average Remaining Contractual Term (Years):

Outstanding at September 30, 2011

6.1

7.3

Exercisable at September 30, 2011

4.9

5.3

Aggregate Intrinsic Value ($000):

Outstanding at September 30, 2011

107,324

2,369

Exercisable at September 30, 2011

95,097

1,953

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

September 30, 2011

25,475

970

September 30, 2010

24,034

703

The fair value of shares vested during the nine months ended September 30, 2011 and 2010 was $11.1 million and $11.7 million, respectively. Cash received from option exercises was approximately $17.1 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $6.3 million in the nine months ended September 30, 2011. 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. As of September 30,

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2011, the remaining valuation of stock option awards to be expensed in future periods was $9.8 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, 2011, and changes during the period then ended is presented below:

			Weighted-Average
	Shares		Grant-Date Fair Value

Nonvested at January 1, 2011	22,303		$	34.71
Granted	5,035		49.63
Vested	(10,045	)	34.44
Nonvested at September 30, 2011	17,293		$	39.21

Compensation expense recorded attributable to restricted stock unit grants for the first nine months of 2011 and 2010 was approximately $247 and $452 thousand, respectively. The fair value of units vested during the nine months ended September 30, 2011 and 2010 was $346 and $298 thousand, respectively. The intrinsic value of units vested during the nine months ended September 30, 2011 and 2010 was $492 and $330 thousand, respectively. As of September 30, 2011 there was $125 thousand of total unrecognized compensation cost relating to restricted stock unit awards which is expected to be recognized over a weighted average period of 1.4 years.

NOTE 12 — INCOME TAX UNCERTAINTIES

The Company had approximately $10.0 and $10.9 million recorded for income tax uncertainties as of September 30, 2011 and December 31, 2010, respectively. The $0.9 million change in income tax uncertainties reflects the settlement of a tax examination. The amount, if recognized, that would impact the effective tax rate is $9.2 and $10.1 million, respectively. The Company estimates that it is reasonably possible that the liability for uncertain tax positions will decrease between $1 and $6 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.

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, 2011, the fair values of our financial assets and liabilities were categorized as follows:

	Total		Level 1		Level 2		Level 3
*Assets*
Forward exchange contracts (b)	866		—		866		—
Total assets at fair value	$	866	$	—	$	866	$	—

*Liabilities*
Forward exchange contracts (b)	$	4,249	$	—	$	4,249	$	—
Total liabilities at fair value	$	4,249	$	—	$	4,249	$	—

As of December 31, 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)	$	155	$	—	$	155	$	—
Forward exchange contracts (b)	1,660		—		1,660		—
Total assets at fair value	$	1,815	$	—	$	1,815	$	—

*Liabilities*
Forward exchange contracts (b)	$	4,223	$	—	$	4,223	$	—
Total liabilities at fair value	$	4,223	$	—	$	4,223	$	—

(a) Based on third party quotation from financial institution

(b) 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 fair

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value of the Company’s long-term obligations is 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 $282 million as of September 30, 2011 and $274 million as of December 31, 2010.

NOTE 14 — FACILITIES CONSOLIDATION AND SEVERANCE

In the second quarter of 2009, the Company announced a plan to consolidate two French dispensing closure manufacturing facilities and several sales offices in North America and Europe and has subsequently expanded the program to include additional headcount reductions. The total costs associated with the consolidation/severance programs are $7.7 million. The plan has been substantially completed, subject to the settlement of remaining reserve balances.

As of September 30, 2011 we have recorded the following activity associated with our consolidation/severance programs:

Beginning