Edgar Filing: APTARGROUP INC

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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 JUNE 30, 2014

[ ] 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 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 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 July 29, 2014
Common Stock, $.01 par value per share		65,178,148 shares

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AptarGroup, Inc.

Form 10-Q

Quarter Ended June 30, 2014

INDEX

Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income - Three and Six Months Ended June 30, 2014 and 2013	1

	Condensed Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2014 and 2013	2

	Condensed Consolidated Balance Sheets – June 30, 2014 and December 31, 2013	3

	Condensed Consolidated Statements of Changes in Equity – Six Months Ended June 30, 2014 and 2013	5

	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2014 and 2013	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24

Item 4.	Controls and Procedures	24

Part II.	OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 6.	Exhibits	25

	Signature	26

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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 June 30,						Six Months Ended June 30,
	2014			2013			2014			2013

Net Sales	$	670,631		$	641,441		$	1,346,682		$	1,259,074
Operating Expenses:
Cost of sales (exclusive of depreciation and amortization shown below)	451,051			431,351			904,462			849,837
Selling, research & development and administrative	96,486			88,111			203,160			182,418
Depreciation and amortization	38,466			38,614			75,713			74,785
Restructuring initiatives	--			2,511			--			6,578
	586,003			560,587			1,183,335			1,113,618
Operating Income	84,628			80,854			163,347			145,456

Other Income (Expense):
Interest expense	(5,246		)	(5,442		)	(10,127		)	(10,523		)
Interest income	1,047			846			2,063			1,695
Equity results of affiliates	(198		)	(61		)	(1,744		)	(323		)
Miscellaneous, net	(525		)	73			(153		)	(633		)
	(4,922)			(4,584		)	(9,961		)	(9,784		)

Income before Income Taxes	79,706			76,270			153,386			135,672

Provision for Income Taxes	26,622			26,390			51,894			45,814

Net Income	$	53,084		$	49,880		$	101,492		$	89,858

Net Income Attributable to Noncontrolling Interests	$	(8	)	$	(78	)	$	(27	)	$	(27	)

Net Income Attributable to AptarGroup, Inc.	$	53,076		$	49,802		$	101,465		$	89,831

Net Income Attributable to AptarGroup, Inc. per Common Share:
Basic	$	0.81		$	0.75		$	1.55		$	1.36
Diluted	$	0.79		$	0.73		$	1.49		$	1.31

Average Number of Shares Outstanding:
Basic	65,328			66,420			65,397			66,288
Diluted	67,438			68,106			68,042			68,339

Dividends per Common Share	$	0.28		$	0.25		$	0.53		$	0.50

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

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AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

In thousands

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013

Net Income	$	53,084		$	49,880		$	101,492		$	89,858
Other Comprehensive Income (Loss):
Foreign currency translation adjustments	(5,164		)	6,551			(4,601		)	(29,062		)
Changes in treasury locks, net of tax	6			15			12			30
Defined benefit pension plan, net of tax
Amortization of prior service cost included in net income, net of tax	53			61			106			122
Amortization of net loss included in net income, net of tax	664			954			1,329			2,072
Total defined benefit pension plan, net of tax	717			1,015			1,435			2,194
Total other comprehensive (loss)/income	(4,441		)	7,581			(3,154		)	(26,838		)

Comprehensive Income	48,643			57,461			98,338			63,020

Comprehensive Income Attributable to Noncontrolling Interests	(9		)	(82		)	(18		)	(32		)

Comprehensive Income Attributable to AptarGroup, Inc.	$	48,634		$	57,379		$	98,320		$	62,988

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

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AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

In thousands

	June 30,			December 31,
	2014			2013

Assets

Current Assets:
Cash and equivalents	$	341,288		$	309,861
Accounts and notes receivable, less allowance for doubtful accounts of $4,205 in 2014 and $4,416 in 2013	509,324			438,221
Inventories	371,747			353,159
Prepaid and other	104,576			97,170
	1,326,935			1,198,411
Property, Plant and Equipment:
Buildings and improvements	381,211			377,300
Machinery and equipment	2,038,274			1,982,195
	2,419,485			2,359,495
Less: Accumulated depreciation	(1,569,388		)	(1,518,894		)
	850,097			840,601
Land	24,042			24,061
	874,139			864,662

Other Assets:
Investments in affiliates	6,580			8,243
Goodwill	358,302			358,865
Intangible assets, net	47,339			49,951
Miscellaneous	15,949			17,630
	428,170			434,689
Total Assets	$	2,629,244		$	2,497,762

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

	June 30,			December 31,
	2014			2013

Liabilities and Stockholders’ Equity

Current Liabilities:
Notes payable	$	214,686		$	138,445
Current maturities of long-term obligations	1,104			1,325
Accounts payable and accrued liabilities	411,016			403,051
	626,806			542,821

Long-Term Obligations	354,622			354,814

Deferred Liabilities and Other:
Deferred income taxes	39,411			42,072
Retirement and deferred compensation plans	76,583			71,883
Deferred and other non-current liabilities	5,010			5,864
Commitments and contingencies	--			--
	121,004			119,819

Stockholders’ Equity:
AptarGroup, Inc. stockholders’ equity
Common stock, $.01 par value, 199 million shares authorized; 85.9 and 85.4 million shares issued as of June 30, 2014 and December 31, 2013, respectively	858			853
Capital in excess of par value	529,684			493,947
Retained earnings	1,686,191			1,619,419
Accumulated other comprehensive income	106,606			109,751
Less treasury stock at cost, 20.7 and 20.0 million shares as of June 30, 2014 and December 31, 2013, respectively	(797,096		)	(744,213		)
Total AptarGroup, Inc. Stockholders’ Equity	1,526,243			1,479,757
Noncontrolling interests in subsidiaries	569			551

Total Stockholders’ Equity	1,526,812			1,480,308
Total Liabilities and Stockholders’ Equity	$	2,629,244		$	2,497,762

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

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

Balance – December 31, 2012:	$	1,513,558		$	60,683		$	840	$	(625,401	)	$	430,210	$	608		$	1,380,498

Net income	89,831													27			89,858
Foreign currency translation adjustments				(29,067		)								5			(29,062		)
Changes in unrecognized pension gains/losses and related amortization, net of tax				2,194													2,194
Changes in treasury locks, net of tax				30													30
Stock option exercises & restricted stock vestings							10		1			44,824					44,835
Cash dividends declared on common stock	(33,103		)														(33,103		)
Treasury stock purchased									(44,588		)						(44,588		)
Balance – June 30, 2013:	$	1,570,286		$	33,840		$	850	$	(669,988	)	$	475,034	$	640		$	1,410,662

Balance – December 31, 2013:	$	1,619,419		$	109,751		$	853	$	(744,213	)	$	493,947	$	551		$	1,480,308

Net income	101,465													27			101,492
Foreign currency translation adjustments				(4,592		)								(9		)	(4,601		)
Changes in unrecognized pension gains/losses and related amortization, net of tax				1,435													1,435
Changes in treasury locks, net of tax				12													12
Stock option exercises & restricted stock vestings							5		1			35,737					35,743
Cash dividends declared on common stock	(34,693		)														(34,693		)
Treasury stock purchased									(52,884		)						(52,884		)
Balance – June 30, 2014:	$	1,686,191		$	106,606		$	858	$	(797,096	)	$	529,684	$	569		$	1,526,812

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

Six Months Ended June 30,	2014			2013

Cash Flows from Operating Activities:
Net income	$	101,492		$	89,858
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	72,946			72,303
Amortization	2,767			2,482
Stock based compensation	12,058			9,324
Recovery of doubtful accounts	(69		)	(723		)
Deferred income taxes	(3,808		)	(6,756		)
Defined benefit plan expense	8,452			9,668
Equity in results of affiliates in excess of cash distributions received	1,744			323
Changes in balance sheet items, excluding effects from foreign currency adjustments:
Accounts receivable	(71,208		)	(67,815		)
Inventories	(19,565		)	(22,591		)
Prepaid and other current assets	(5,868		)	(9,670		)
Accounts payable and accrued liabilities	17,898			19,745
Income taxes payable	(21,572		)	9,258
Retirement and deferred compensation plans	(6,559		)	(7,752		)
Other changes, net	20,920			11,954
Net Cash Provided by Operations	109,628			109,608

Cash Flows from Investing Activities:
Capital expenditures	(87,068		)	(71,741		)
Disposition of property and equipment	2,287			2,946
Investment in unconsolidated affiliate	--			(13		)
Notes receivable, net	(163		)	(159		)
Net Cash Used by Investing Activities	(84,944		)	(68,967		)

Cash Flows from Financing Activities:
Proceeds (Repayments) of notes payable	77,019			(37,407		)
Repayments of long-term obligations	(308		)	(1,537		)
Dividends paid	(34,693		)	(33,103		)
Credit facility costs	(299		)	(498		)
Proceeds from stock option exercises	19,391			31,100
Purchase of treasury stock	(52,884		)	(44,588		)
Excess tax benefit from exercise of stock options	3,802			3,912
Net Cash Provided (Used) by Financing Activities	12,028			(82,121		)

Effect of Exchange Rate Changes on Cash	(5,285		)	1,715

Net Increase (Decrease) in Cash and Equivalents	31,427			(39,765		)
Cash and Equivalents at Beginning of Period	309,861			229,755
Cash and Equivalents at End of Period	$	341,288		$	189,990

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 our subsidiaries. The terms “AptarGroup” or “Company” as used herein refer to AptarGroup, Inc. and our 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, comprehensive income, 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. Also, certain financial position data included herein was derived from the Audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 but does not include all disclosures required by GAAP. Accordingly, these Unaudited Condensed Consolidated Financial Statements and related notes should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. 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

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 has only a minimal 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 Unaudited Condensed Consolidated Financial Statements other than disclosure. Additional information can be found in Note 6 of the Unaudited 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 Unaudited Condensed Consolidated Financial Statements other than disclosure. Additional information can be found in Note 7 of the Unaudited Notes to the Condensed 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 Unaudited Condensed 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 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 our reported amount in the financial statements, an appropriate provision for deferred income taxes is made.

In our 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 our 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 our accumulated

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foreign earnings and will only 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. Since no distribution to the U.S. of foreign earnings is expected in 2014, the effective tax rate for 2014 includes no tax cost of repatriation. Although the Company does not expect to repatriate foreign earnings back to the U.S. in 2014, dividends on certain earnings within Europe are expected to be made to our European holding company. These dividends are expected to generate an additional tax cost of approximately $3 million in the third quarter.

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 4 of the Unaudited Notes to the Condensed Consolidated Financial Statements for more information.

NOTE 2 - INVENTORIES

At June 30, 2014 and December 31, 2013, approximately 19% and 20%, respectively, of the total inventories are accounted for by using the LIFO method. Inventories, by component, consisted of:

	June 30,			December 31,
	2014			2013

Raw materials	$	124,356		$	114,501
Work in process	110,587			108,924
Finished goods	144,378			137,591
Total	379,321			361,016
Less LIFO Reserve	(7,574		)	(7,857		)
Total	$	371,747		$	353,159

NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill since the year ended December 31, 2013 are as follows by reporting segment:

	Beauty +						Food +			Corporate
	Home			Pharma			Beverage			& Other			Total

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
Acquisition	--			--			--			--			--
Foreign currency exchange effects	(81		)	(417		)	(65		)	--			(563		)
Goodwill	$	180,921		$	159,532		$	17,849		$	1,615		$	359,917
Accumulated impairment losses	--			--			--			(1,615		)	(1,615		)
Balance as of June 30, 2014	$	180,921		$	159,532		$	17,849		$	--		$	358,302

The table below shows a summary of intangible assets as of June 30, 2014 and December 31, 2013.

		June 30, 2014							December 31, 2013

Weighted Average		Gross							Gross
Amortization		Carrying		Accumulated			Net		Carrying		Accumulated			Net
Period (Years)		Amount		Amortization			Value		Amount		Amortization			Value

Amortized intangible assets:
Patents	7	$	20,092	$	(19,793	)	$	299	$	20,165	$	(19,732	)	$	433
Acquired technology	15	40,393		(5,386		)	35,007		40,546		(4,055		)	36,491
License agreements and other	5	35,565		(23,532		)	12,033		35,259		(22,232		)	13,027
Total intangible assets	10	$	96,050	$	(48,711	)	$	47,339	$	95,970	$	(46,019	)	$	49,951

Aggregate amortization expense for the intangible assets above for the quarters ended June 30, 2014 and 2013 was $1,369 and $1,245, respectively. Aggregate amortization expense for the intangible assets above for the six months ended June 30, 2014 and 2013 was $2,767 and $2,482, respectively.

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

2014	$	2,800	(remaining estimated amortization for 2014)
2015	5,325
2016	4,316
2017	3,598
2018 and thereafter	31,300

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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 June 30, 2014.

NOTE 4 — INCOME TAX UNCERTAINTIES

The Company had approximately $7.0 and $8.0 million recorded for income tax uncertainties as of June 30, 2014 and December 31, 2013, respectively. The $1.0 million change in income tax uncertainties was primarily the result of an audit settlement in the U.S and a lapse in the statute of limitations on two tax related issues. The amount, if recognized, that would impact the effective tax rate is $6.8 and $7.8 million, respectively. The Company estimates that it is reasonably possible that the liability for uncertain tax positions will decrease by no more than $5 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 5 — RETIREMENT AND DEFERRED COMPENSATION PLANS

Components of Net Periodic Benefit Cost:

	Domestic Plans						Foreign Plans
Three months ended June 30,	2014			2013			2014			2013

Service cost	$	2,010		$	2,045		$	1,081		$	959
Interest cost	1,482			1,246			699			658
Expected return on plan assets	(1,646		)	(1,474		)	(510		)	(447		)
Amortization of net loss	717			1,117			313			348
Amortization of prior service cost	--			1			80			92
Net periodic benefit cost	$	2,563		$	2,935		$	1,663		$	1,610

	Domestic Plans						Foreign Plans
Six months ended June 30,	2014			2013			2014			2013

Service cost	$	4,021		$	4,270		$	2,160		$	1,928
Interest cost	2,964			2,496			1,398			1,323
Expected return on plan assets	(3,292		)	(2,888		)	(1,020		)	(899		)
Amortization of net loss	1,434			2,551			626			700
Amortization of prior service cost	--			2			161			185
Net periodic benefit cost	$	5,127		$	6,431		$	3,325		$	3,237

EMPLOYER CONTRIBUTIONS

Although the Company has no minimum funding requirement, we plan to contribute approximately $10 million to our domestic defined benefit plans in 2014. No 2014 contributions were made as of June 30, 2014. The Company also expects to contribute approximately $5.6 million to our foreign defined benefit plans in 2014 and, as of June 30, 2014, we have contributed approximately $1.5 million.

NOTE 6 — ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in Accumulated Other Comprehensive Income by Component:

	Foreign			Defined Benefit
	Currency			Pension Plans			Other			Total

Balance – December 31, 2012	$	120,097		$	(59,248	)	$	(166	)	$	60,683
Other comprehensive loss before reclassifications	(29,067		)	--			--			(29,067		)
Amounts reclassified from accumulated other comprehensive income	--			2,194			30			2,224
Net current-period other comprehensive (loss)/income	(29,067		)	2,194			30			(26,843		)
Balance - June 30, 2013	$	91,030		$	(57,054	)	$	(136	)	$	33,840

Balance – December 31, 2013	$	149,965		$	(40,093	)	$	(121	)	$	109,751
Other comprehensive loss before reclassifications	(4,252		)	--			--			(4,252		)
Amounts reclassified from accumulated other comprehensive income	(340		)	1,435			12			1,107
Net current-period other comprehensive (loss)/income	(4,592		)	1,435			12			(3,145		)
Balance - June 30, 2014	$	145,373		$	(38,658	)	$	(109	)	$	106,606

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Reclassifications Out of Accumulated Other Comprehensive Income:

Details about Accumulated Other	Amount Reclassified from Accumulated						Affected Line in the Statement
Comprehensive Income Components	Other Comprehensive Income						Where Net Income is Presented
Three months ended June 30,	2014			2013

Defined Benefit Pension Plans
Amortization of net loss	$	1,030		$	1,465		(a)
Amortization of prior service cost	80			93			(a)
	1,110			1,558			Total before tax
	(393		)	(543		)	Tax benefit
	$	717		$	1,015		Net of tax

Other
Changes in treasury locks	10			23			Interest Expense
	10			23			Total before tax
	(4		)	(8		)	Tax benefit
	$	6		$	15		Net of tax

Total reclassifications for the period	$	723		$	1,030

(a) These accumulated other comprehensive income components are included in the computation of net periodic benefit costs, net of tax (see Note 5 — Retirement and Deferred Compensation Plans for additional details).

Details about Accumulated Other	Amount Reclassified from Accumulated						Affected Line in the Statement
Comprehensive Income Components	Other Comprehensive Income						Where Net Income is Presented
Six months ended June 30,	2014			2013

Defined Benefit Pension Plans
Amortization of net loss	$	2,060		$	3,251		(b)
Amortization of prior service cost	161			187			(b)
	2,221			3,438			Total before tax
	(786		)	(1,244		)	Tax benefit
	$	1,435		$	2,194		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	19			46			Interest Expense
	19			46			Total before tax
	(7		)	(16		)	Tax benefit
	$	12		$	30		Net of tax

Total reclassifications for the period	$	1,107		$	2,224

(b) These accumulated other comprehensive income components are included in the computation of net periodic benefit costs, net of tax (see Note 5 – Retirement and Deferred Compensation Plans for additional details).

NOTE 7 — 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

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of operations. The Company’s policy is not to engage in speculative foreign currency hedging activities, but to minimize our 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.

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 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 our 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 June 30, 2014, the Company has recorded the fair value of foreign currency forward exchange contracts of $0.7 million in prepaid and other, $0.1 million in miscellaneous other assets, $1.6 million in accounts payable and accrued liabilities, and $0.2 million in deferred and other non-current liabilities in the balance sheet. All forward exchange contracts outstanding as of June 30, 2014 had an aggregate contract amount of $154 million.

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets as of June 30, 2014

and December 31, 2013

Derivative Contracts Not Designated as Hedging Instruments	Balance Sheet Location	June 30, 2014		December 31, 2013

Derivative Assets
Foreign Exchange Contracts	Prepaid and other	$	688	$	3,003
Foreign Exchange Contracts	Miscellaneous Other Assets	69		985
		$	757	$	3,988
Derivative Liabilities
Foreign Exchange Contracts	Accounts payable and accrued liabilities	$	1,586	$	522
Foreign Exchange Contracts	Deferred and other non-current liabilities	232		110
		$	1,818	$	632

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

for the Quarters Ended June 30, 2014 and June 30, 2013

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
		2014			2013

Foreign Exchange Contracts	Other Income (Expense) Miscellaneous, net	$	(1,335	)	$	2,555
		$	(1,335	)	$	2,555

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

for the Six Months Ended June 30, 2014 and June 30, 2013

Derivatives Not Designated as Hedging Instruments	Location of Loss Recognized in Income on Derivative	Amount of Loss Recognized in Income on Derivative
		2014			2013

Foreign Exchange Contracts	Other Income (Expense) Miscellaneous, net	$	(1,494	)	$	(43	)
		$	(1,494	)	$	(43	)

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				Net Amounts		Gross Amounts not Offset in the
			Gross Amounts	Presented in		Statement of Financial Position
	Gross		Offset in the	the Statement of		Financial	Cash Collateral	Net
	Amount		Financial Position	Financial Position		Instruments	Received	Amount

Description
June 30, 2014
Derivative Assets	$	757	--	$	757	--	--	$	757
Total Assets	$	757	--	$	757	--	--	$	757

Derivative Liabilities	$	1,818	--	$	1,818	--	--	$	1,818
Total Liabilities	$	1,818	--	$	1,818	--	--	$	1,818

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

NOTE 8 — 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 June 30, 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 (a)	$	757	$	--	$	757	$	--
Total assets at fair value	$	757	$	--	$	757	$	--

*Liabilities*
Forward exchange contracts (a)	$	1,818	$	--	$	1,818	$	--
Total liabilities at fair value	$	1,818	$	--	$	1,818	$	--

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 (a)	$	3,988	$	--	$	3,988	$	--
Total assets at fair value	$	3,988	$	--	$	3,988	$	--

*Liabilities*
Forward exchange contracts (a)	$	632	$	--	$	632	$	--
Total liabilities at fair value	$	632	$	--	$	632	$	--

(a) 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 our 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 $371 million as of June 30, 2014 and $363 million as of December 31, 2013.

NOTE 9 — 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 our Certificate of Incorporation, the Company has agreed to indemnify our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our 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 our exposure. As a result of our 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 June 30, 2014.

NOTE 10 — STOCK REPURCHASE PROGRAM

During the three and six months ended June 30, 2014, the Company repurchased approximately 600 thousand and 800 thousand shares for approximately $39.9 million and $52.9 million, respectively. As of June 30, 2014, the Company has a remaining authorization to repurchase 3.2 million additional shares. The timing of and total amount expended for the share repurchases depends upon market conditions.

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 six months of 2014 was approximately $12.0 million ($7.8 million after tax). The income tax benefit related to this compensation expense was approximately $4.2 million. Approximately $10.8 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 six months of 2013 was approximately $9.3 million ($6.2 million after tax). The income tax benefit related to this compensation expense was approximately $3.1 million. Approximately $8.3 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 $14.84 and $10.07 per share in 2014 and 2013, 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:
Six months ended June 30,	2014		2013

Dividend Yield	1.7	%	1.8	%
Expected Stock Price Volatility	22.2	%	22.7	%
Risk-free Interest Rate	2.3	%	1.2	%
Expected Life of Option (years)	6.9		6.9

The fair value of stock options granted under the Director Stock Option Plan during the second quarter of 2014 was $14.07. The fair value of stock options granted under the Director Stock Option Plan during the second quarter of 2013 was $10.89. 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:
Six months ended June 30,	2014		2013

Dividend Yield	1.8	%	1.9	%
Expected Stock Price Volatility	22.2	%	23.0	%
Risk-free Interest Rate	2.2	%	1.3	%
Expected Life of Option (years)	6.9		6.9

A summary of option activity under the Company’s stock plans during the first half of 2014 is presented below:

Stock Awards Plans

Director Stock Option Plans

Weighted Average

Shares

Exercise Price

Shares

Exercise Price

Outstanding, January 1, 2014

7,815,932

41.26

313,834

48.85

Granted

1,349,850

68.00

95,000

66.59

Exercised

(523,959

)

31.92

(40,166

)

47.96

Forfeited or expired

(24,067

)

51.10

Outstanding at June 30, 2014

8,617,756

45.99

368,668

53.52

Exercisable at June 30, 2014

5,945,005

39.68

188,159

45.98

Weighted-Average Remaining Contractual Term (Years):

Outstanding at June 30, 2014

6.3

7.8

Exercisable at June 30, 2014

5.2

6.4

Aggregate Intrinsic Value ($000):

Outstanding at June 30, 2014

183,123

5,008

Exercisable at June 30, 2014

163,021

3,973

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

June 30, 2014

18,050

741

June 30, 2013

28,188

285

The fair value of shares vested during the six months ended June 30, 2014 and 2013 was $13.9 million and $12.9 million, respectively. Cash received from option exercises was approximately $19.4 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $5.5 million in the six months ended June 30, 2014. As of June 30, 2014, the remaining valuation of stock option awards to be expensed in future periods was $18.7 million and the related weighted-average period over which it is expected to be recognized is 1.6 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 June 30, 2014, and changes during the period then ended is presented below:

			Weighted-Average
	Shares		Grant-Date Fair Value

Nonvested at January 1, 2014	25,681		$	53.49
Granted	43,671		67.57
Vested	(9,355	)	52.50
Nonvested at June 30, 2014	59,997		$	63.90

Compensation expense recorded attributable to restricted stock unit grants for the first half of 2014 and 2013 was approximately $1.1 million and $493 thousand, respectively. The fair value of units vested during the six months ended June 30, 2014 and 2013 was $491 thousand and $496 thousand, respectively. The intrinsic value of units vested during the six months ended June 30, 2014 and 2013 was $613 thousand and $582 thousand, respectively. As of June 30, 2014 there was $2.4 million of total unrecognized compensation cost relating to restricted stock unit awards which is expected to be recognized over a weighted-average period of 1.7 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 shareholder return of our common stock during a three year performance period. Total expense related to this program is expected to be approximately $1.2 million over the performance period, of which $320 thousand was recognized in the first half of 2014.

NOTE 12 — 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

June 30, 2014

June 30, 2013

Diluted

Basic