Edgar Filing: APTARGROUP INC

Weighted-Average

Shares

Grant-Date Fair Value

Nonvested at January 1, 2014

25,681

Granted

47,671

Vested

Table of Contents

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 SEPTEMBER 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 ¨

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.

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 November 3, 2014
Common Stock, $.01 par value per share		64,727,773 shares

Table of Contents

AptarGroup, Inc.

Form 10-Q

Quarter Ended September 30, 2014

INDEX

Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income - Three and Nine Months Ended September 30, 2014 and 2013	1

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

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

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

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 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

Table of Contents

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,
	2014			2013			2014			2013

Net Sales	$	651,942		$	623,644		$	1,998,624		$	1,882,718
Operating Expenses:
Cost of sales (exclusive of depreciation and amortization shown below)	443,520			424,011			1,347,982			1,273,848
Selling, research & development and administrative	91,649			86,917			294,809			269,335
Depreciation and amortization	38,158			37,222			113,871			112,007
Restructuring initiatives	--			2,180			--			8,758
	573,327			550,330			1,756,662			1,663,948
Operating Income	78,615			73,314			241,962			218,770

Other Income (Expense):
Interest expense	(5,332		)	(4,841		)	(15,459		)	(15,364		)
Interest income	1,386			576			3,449			2,271
Equity results of affiliates	(124		)	(286		)	(1,868		)	(609		)
Miscellaneous, net	(429		)	(437		)	(582		)	(1,070		)
	(4,499		)	(4,988		)	(14,460		)	(14,772		)

Income before Income Taxes	74,116			68,326			227,502			203,998

Provision for Income Taxes	25,496			23,094			77,390			68,908

Net Income	$	48,620		$	45,232		$	150,112		$	135,090

Net (Income) Loss Attributable to Noncontrolling Interests	$	(25	)	$	32		$	(52	)	$	5

Net Income Attributable to AptarGroup, Inc.	$	48,595		$	45,264		$	150,060		$	135,095

Net Income Attributable to AptarGroup, Inc. per Common Share:
Basic	$	0.75		$	0.68		$	2.30		$	2.04
Diluted	$	0.73		$	0.67		$	2.21		$	1.98

Average Number of Shares Outstanding:
Basic	64,886			66,092			65,225			66,222
Diluted	66,845			67,986			67,761			68,273

Dividends per Common Share	$	0. 28		$	0.25		$	0. 81		$	0.75

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

In thousands

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2014			2013		2014			2013

Net Income	$	48,620		$	45,232	$	150,112		$	135,090
Other Comprehensive Income:
Foreign currency translation adjustments	(118,758		)	45,344		(123,359		)	16,282
Changes in treasury locks, net of tax	6			9		18			39
Defined benefit pension plan, net of tax
Amortization of prior service cost included in net income, net of tax	51			61		157			183
Amortization of net loss included in net income, net of tax	658			1,039		1,987			3,111
Total defined benefit pension plan, net of tax	709			1,100		2,144			3,294
Total other comprehensive (loss) income	(118,043		)	46,453		(121,197		)	19,615

Comprehensive (Loss) Income	(69,423		)	91,685		28,915			154,705

Comprehensive (Income) Loss Attributable To Noncontrolling Interests	(29		)	30		(47		)	(2		)

Comprehensive (Loss) Income Attributable To AptarGroup, Inc.	$	(69,452	)	$	91,715	$	28,868		$	154,703

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

In thousands

	September 30,			December 31,
	2014			2013

Assets

Current Assets:
Cash and equivalents	$	347,394		$	309,861
Accounts and notes receivable, less allowance for doubtful accounts of $4,215 in 2014 and $4,416 in 2013	468,182			438,221
Inventories	340,952			353,159
Prepaid and other	102,644			97,170
	1,259,172			1,198,411

Property, Plant and Equipment:
Buildings and improvements	362,485			377,300
Machinery and equipment	1,951,876			1,982,195
	2,314,361			2,359,495
Less: Accumulated depreciation	(1,505,822		)	(1,518,894		)
	808,539			840,601
Land	22,475			24,061
	831,014			864,662

Other Assets:
Investments in affiliates	6,053			8,243
Goodwill	339,275			358,865
Intangible assets, net	42,551			49,951
Miscellaneous	21,174			17,630
	409,053			434,689
Total Assets	$	2,499,239		$	2,497,762

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited)

In thousands, except per share amounts

	September 30,			December 31,
	2014			2013

Liabilities and Stockholders’ Equity

Current Liabilities:
Notes payable	$	243,983		$	138,445
Current maturities of long-term obligations	2,547			1,325
Accounts payable and accrued liabilities	385,343			403,051
	631,873			542,821

Long-Term Obligations	355,583			354,814

Deferred Liabilities and Other:
Deferred income taxes	29,501			42,072
Retirement and deferred compensation plans	66,545			71,883
Deferred and other non-current liabilities	4,859			5,864
Commitments and contingencies	--			--
	100,905			119,819

Stockholders’ Equity:
AptarGroup, Inc. stockholders’ equity
Common stock, $.01 par value, 199 million shares authorized; 86.0 and 85.4 million shares issued as of September 30, 2014 and December 31, 2013, respectively	859			853
Capital in excess of par value	539,055			493,947
Retained earnings	1,716,536			1,619,419
Accumulated other comprehensive (loss) income	(11,441		)	109,751
Less treasury stock at cost, 21.3 and 20.0 million shares as of September 30, 2014 and December 31, 2013, respectively	(834,729		)	(744,213		)
Total AptarGroup, Inc. Stockholders’ Equity	1,410,280			1,479,757
Noncontrolling interests in subsidiaries	598			551

Total Stockholders’ Equity	1,410,878			1,480,308
Total Liabilities and Stockholders’ Equity	$	2,499,239		$	2,497,762

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

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 (loss)	135,095													(5		)	135,090
Foreign currency translation adjustments				16,275										7			16,282
Changes in unrecognized pension gains/losses and related amortization, net of tax				3,294													3,294
Changes in treasury locks, net of tax				39													39
Stock option exercises & restricted stock vestings							12		1			55,523					55,536
Cash dividends declared on common stock	(49,674		)														(49,674		)
Treasury stock purchased									(80,222		)						(80,222		)
Balance – September 30, 2013:	$	1,598,979		$	80,291		$	852	$	(705,622	)	$	485,733	$	610		$	1,460,843

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

Net income	150,060													52			150,112
Foreign currency translation adjustments				(123,354		)								(5		)	(123,359		)
Changes in unrecognized pension gains/losses and related amortization, net of tax				2,144													2,144
Changes in treasury locks, net of tax				18													18
Stock option exercises & restricted stock vestings							6		1			45,108					45,115
Cash dividends declared on common stock	(52,943		)														(52,943		)
Treasury stock purchased									(90,517		)						(90,517		)
Balance – September 30, 2014:	$	1,716,536		$	(11,441	)	$	859	$	(834,729	)	$	539,055	$	598		$	1,410,878

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

In thousands, brackets denote cash outflows

Nine Months Ended September 30,	2014			2013

Cash Flows from Operating Activities:
Net income	$	150,112		$	135,090
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	109,821			108,259
Amortization	4,050			3,748
Stock based compensation	15,025			11,538
Provision for doubtful accounts	228			(516		)
Deferred income taxes	(12,701		)	(5,612		)
Defined benefit plan expense	12,622			14,531
Equity in results of affiliates in excess of cash distributions received	1,868			609
Changes in balance sheet items, excluding effects from foreign currency adjustments:
Accounts receivable	(57,220		)	(42,531		)
Inventories	(11,386		)	(27,168		)
Prepaid and other current assets	(14,984		)	(15,416		)
Accounts payable and accrued liabilities	5,236			8,544
Income taxes payable	(13,334		)	10,312
Retirement and deferred compensation plans	(9,803		)	(18,717		)
Other changes, net	20,426			11,850
Net Cash Provided by Operations	199,960			194,521

Cash Flows from Investing Activities:
Capital expenditures	(125,465		)	(110,350		)
Disposition of property and equipment	1,002			2,207
Investment in unconsolidated affiliate	--			(13		)
Notes receivable, net	(2,820		)	(159		)
Net Cash Used by Investing Activities	(127,283		)	(108,315		)

Cash Flows from Financing Activities:
Proceeds from notes payable	106,455			31,908
Proceeds from long-term obligations	2,816			--
Repayments of long-term obligations	--			(25,491		)
Dividends paid	(52,943		)	(49,674		)
Credit facility costs	(299		)	(498		)
Proceeds from stock option exercises	24,564			38,368
Purchase of treasury stock	(90,517		)	(80,222		)
Excess tax benefit from exercise of stock options	4,959			5,058
Net Cash Used by Financing Activities	(4,965		)	(80,551		)

Effect of Exchange Rate Changes on Cash	(30,179		)	12,441

Net Increase in Cash and Equivalents	37,533			18,096
Cash and Equivalents at Beginning of Period	309,861			229,755
Cash and Equivalents at End of Period	$	347,394		$	247,851

See accompanying Unaudited Notes to Condensed Consolidated Financial Statements.

Table of Contents

AptarGroup, Inc.

Notes to Condensed Consolidated Financial Statements

(Amounts in Thousands, Except Share and 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 Condensed 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 stockholder capital both within the U.S. and for non-U.S. operations. The Company’s policy is to permanently reinvest our accumulated foreign earnings and will only make a distribution out of current year earnings to meet the cash needs at the parent company.

Table of Contents

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 to our European holding company are expected to increase in 2014 as part of a legal reorganization of our non-U.S. subsidiaries. Due to this legal reorganization, additional tax costs in the third quarter of 2014 were approximately $3.1 million, of which $2.8 million related to the change in our reinvestment assertion within Europe.

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 September 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:

	September 30,			December 31,
	2014			2013

Raw materials	$	115,575		$	114,501
Work in process	103,262			108,924
Finished goods	130,055			137,591
Total	348,892			361,016
Less LIFO Reserve	(7,940		)	(7,857		)
Total	$	340,952		$	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	(6,574		)	(12,383		)	(633		)	--			(19,590		)
Goodwill	$	174,428		$	147,566		$	17,281		$	1,615		$	340,890
Accumulated impairment losses	--			--			--			(1,615		)	(1,615		)
Balance as of September 30, 2014	$	174,428		$	147,566		$	17,281		$	--		$	339,275

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

		September 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	$	18,282	$	(18,067	)	$	215	$	20,165	$	(19,732	)	$	433
Acquired technology	15	37,260		(5,589		)	31,671		40,546		(4,055		)	36,491
License agreements and other	5	33,490		(22,825		)	10,665		35,259		(22,232		)	13,027
Total intangible assets	10	$	89,032	$	(46,481	)	$	42,551	$	95,970	$	(46,019	)	$	49,951

Aggregate amortization expense for the intangible assets above for the quarters ended September 30, 2014 and 2013 was $1,283 and $1,266, respectively. Aggregate amortization expense for the intangible assets above for the nine months ended September 30, 2014 and 2013 was $4,050 and $3,748, respectively.

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

2014	$	1,291	(remaining estimated amortization for 2014)
2015	4,960
2016	4,024
2017	3,338
2018 and thereafter	28,938

Table of Contents

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, 2014.

NOTE 4 – INCOME TAX UNCERTAINTIES

The Company had approximately $6.6 and $8.0 million recorded for income tax uncertainties as of September 30, 2014 and December 31, 2013, respectively. The $1.4 million change in income tax uncertainties is primarily the result of an audit settlement and the lapse in the statute of limitations for certain tax items. The amount, if recognized, that would impact the effective tax rate is $6.4 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 September 30,	2014			2013			2014			2013

Service cost	$	2,011		$	2,135		$	1,043		$	974
Interest cost	1,482			1,248			676			668
Expected return on plan assets	(1,647		)	(1,443		)	(494		)	(454		)
Amortization of net loss	718			1,276			303			353
Amortization of prior service cost	--			--			78			93
Net periodic benefit cost	$	2,564		$	3,216		$	1,606		$	1,634

	Domestic Plans						Foreign Plans
Nine months ended September 30,	2014			2013			2014			2013

Service cost	$	6,032		$	6,405		$	3,203		$	2,902
Interest cost	4,446			3,744			2,074			1,991
Expected return on plan assets	(4,939		)	(4,331		)	(1,514		)	(1,353		)
Amortization of net loss	2,152			3,827			929			1,053
Amortization of prior service cost	--			2			239			278
Net periodic benefit cost	$	7,691		$	9,647		$	4,931		$	4,871

EMPLOYER CONTRIBUTIONS

Although the Company has no minimum funding requirement, the Company contributed $10.0 million to our U.S. plan during the third quarter and the first nine months of 2014 and does not expect to make any contribution to the U.S. plan in the last quarter of 2014. The Company expects to contribute approximately $5.6 million to our foreign defined benefit plans in 2014 and, as of September 30, 2014, we have contributed approximately $2.0 million.

NOTE 6 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in Accumulated Other Comprehensive Income by Component:

	Foreign Currency			Defined Benefit Pension Plans			Other			Total

Balance – December 31, 2012	$	120,097		$	(59,248	)	$	(166	)	$	60,683
Other comprehensive income before reclassifications	16,275			--			--			16,275
Amounts reclassified from accumulated other comprehensive income	--			3,294			39			3,333
Net current-period other comprehensive income	16,275			3,294			39			19,608
Balance – September 30, 2013	$	136,372		$	(55,954	)	$	(127	)	$	80,291

Balance – December 31, 2013	$	149,965		$	(40,093	)	$	(121	)	$	109,751
Other comprehensive loss before reclassifications	(123,014		)	--			--			(123,014		)
Amounts reclassified from accumulated other comprehensive income	(340		)	2,144			18			1,822
Net current-period other comprehensive (loss) income	(123,354		)	2,144			18			(121,192		)
Balance – September 30, 2014	$	26,611		$	(37,949	)	$	(103	)	$	(11,441	)

Table of Contents

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 September 30,	2014			2013

Defined Benefit Pension Plans
Amortization of net loss	$	1,021		$	1,629		(a)
Amortization of prior service cost	78			93			(a)
Total before tax	1,099			1,722
	(390		)	(622		)	Tax benefit
Net of tax	$	709		$	1,100

Other
Changes in treasury locks	9			14			Interest Expense
Total before tax	9			14
	(3		)	(5		)	Tax benefit
Net of tax	$	6		$	9

Total reclassifications for the period	$	715		$	1,109

(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
Nine months ended September 30,	2014			2013

Defined Benefit Pension Plans
Amortization of net loss	$	3,081		$	4,880		(b)
Amortization of prior service cost	239			280			(b)
Total before tax	3,320			5,160
	(1,176		)	(1,866		)	Tax benefit
Net of tax	$	2,144		$	3,294

Foreign Currency
Foreign currency gain	(340		)	--			Miscellaneous, net
Total before tax	(340		)	--
	--			--			Tax benefit
Net of tax	$	(340	)	$	--

Other
Changes in treasury locks	28			60			Interest Expense
Total before tax	28			60
	(10		)	(21		)	Tax benefit
Net of tax	$	18		$	39

Total reclassifications for the period	$	1,822		$	3,333

(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).

Table of Contents

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 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 subsidiaries. A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on the Company’s financial condition and results of operations. Conversely, a weakening U.S. dollar has an additive effect. The Company in some cases maintains debt in these subsidiaries to offset the net asset exposure. The Company does not otherwise actively manage this risk using derivative financial instruments. In the event the Company plans on a full or partial liquidation of any of 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 September 30, 2014, the Company has recorded the fair value of foreign currency forward exchange contracts of $0.8 million in prepaid and other, $0.1 million in miscellaneous other assets, $3.0 million in accounts payable and accrued liabilities, and $0.3 million in deferred and other non-current liabilities in the balance sheet. All forward exchange contracts outstanding as of September 30, 2014 had an aggregate contract amount of $155 million.

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

and December 31, 2013

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

Derivative Assets
Foreign Exchange Contracts	Prepaid and other	$	801	$	3,003
Foreign Exchange Contracts	Miscellaneous Other Assets	62		985
		$	863	$	3,988

Derivative Liabilities
Foreign Exchange Contracts	Accounts payable and accrued liabilities	$	3,044	$	522
Foreign Exchange Contracts	Deferred and other non-current liabilities	345		110
		$	3,389	$	632

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

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

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

Foreign Exchange Contracts	Other Income (Expense) Miscellaneous, net	$	(1,965	)	$	2,894
		$	(1,965	)	$	2,894

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

for the Nine Months Ended September 30, 2014 and September 30, 2013

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

Foreign Exchange Contracts	Other Income (Expense) Miscellaneous, net	$	(3,459	)	$	2,851
		$	(3,459	)	$	2,851

Table of Contents

				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
September 30, 2014
Derivative Assets	$	863	--	$	863	--	--	$	863
Total Assets	$	863	--	$	863	--	--	$	863

Derivative Liabilities	$	3,389	--	$	3,389	--	--	$	3,389
Total Liabilities	$	3,389	--	$	3,389	--	--	$	3,389

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 September 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)	$	863	$	--	$	863	$	--
Total assets at fair value	$	863	$	--	$	863	$	--

*Liabilities*
Forward exchange contracts (a)	$	3,389	$	--	$	3,389	$	--
Total liabilities at fair value	$	3,389	$	--	$	3,389	$	--

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 $370 million as of September 30, 2014 and $363 million as of December 31, 2013.

Table of Contents

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.

NOTE 10 – STOCK REPURCHASE PROGRAM

During the three and nine months ended September 30, 2014, the Company repurchased approximately 600 thousand and 1.4 million shares for approximately $37.6 million and $90.5 million, respectively. As of September 30, 2014, the Company has a remaining authorization to repurchase 2.6 million additional shares. The timing of and total amount expended for the share repurchases depends upon market conditions. On October 30, 2014, the Company announced a new share repurchase authorization of up to $350 million of common stock. This new authorization replaces previous authorizations. AptarGroup may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions.

NOTE 11 – STOCK-BASED COMPENSATION

The Company issues stock options and restricted stock units to employees under Stock Awards Plans approved by stockholders. Stock options are issued to non-employee directors under Director Stock Option Plans approved by stockholders. Options are awarded with the exercise price equal to the closing 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 2014 was approximately $15.0 million ($9.8 million after tax). The income tax benefit related to this compensation expense was approximately $5.2 million. Approximately $13.4 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 2013 was approximately $11.5 million ($7.7 million after tax). The income tax benefit related to this compensation expense was approximately $3.8 million. Approximately $10.2 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 of stock options. The weighted-average fair value of stock options granted under the Stock Awards Plans was $14.82 and $10.16 per share during the first nine months of 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:
Nine months ended September 30,	2014		2013

Dividend Yield	1.7	%	1.8	%
Expected Stock Price Volatility	22.1	%	22.7	%
Risk-free Interest Rate	2.3	%	1.3	%
Expected Life of Option (years)	6.9		6.9

The fair value of stock options granted under the Director Stock Option Plan was $14.07 and $10.89 per share during the first nine months of 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:

Director Stock Option Plans:
Nine months ended September 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 option plans during the nine months ended September 30, 2014 is presented below:

Table of Contents

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

1,379,850

67.93

95,000

66.59

Exercised

(665,671

)

32.23

(40,166

)

47.96

Forfeited or expired

(31,417

)

49.86

Outstanding at September 30, 2014

8,498,694

46.27

368,668

53.52

Exercisable at September 30, 2014

5,832,623

39.94

188,159

45.98

Weighted-Average Remaining Contractual Term (Years):

Outstanding at September 30, 2014

6.1

7.5

Exercisable at September 30, 2014

5.0

6.1

Aggregate Intrinsic Value:

Outstanding at September 30, 2014

132,612

3,208

Exercisable at September 30, 2014

121,124

2,769

Intrinsic Value of Options Exercised During the Nine Months Ended:

September 30, 2014

22,386

741

September 30, 2013

33,123

732

The fair value of options vested during the nine months ended September 30, 2014 and 2013 was $14.1 million and $12.9 million, respectively. Cash received from option exercises was approximately $24.6 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $7.0 million in the nine months ended September 30, 2014. As of September 30, 2014, the remaining valuation of stock option awards to be expensed in future periods was $16.1 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 closing market price of the underlying shares on the grant date. A summary of restricted stock unit activity during the nine months ended September 30, 2014 is presented below: