SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

☒

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

FOR THE QUARTERLY PERIOD ENDEDMARCH 31, ~~2020~~

2021

☐

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

FOR THE TRANSITION PERIOD FROMTO

AptarGroup, Inc.

265 EXCHANGE DRIVE,, SUITE 100,, CRYSTAL LAKE,~~, ILLINOIS~~ IL60014

~~815~~-~~477-0424~~

Securities registered pursuant to Section 12(b) of the Act:

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐◻ No þ

The number of shares outstanding of common stock, as of April ~~24, 2020,~~23, 2021, was ~~64,186,756~~65,714,946 shares.

Quarter Ended March 31, ~~2020~~

2021

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

In thousands, except per share amounts

Three Months Ended March 31,

2020

2019


Net Sales

$
721,553

$
744,460

Operating Expenses:

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

451,256

469,132

Selling, research & development and administrative

126,192

121,215

Depreciation and amortization

50,806

47,489

Restructuring initiatives

4,839

9,530

633,093

647,366

Operating Income

88,460

97,094

Other (Expense) Income:

Interest expense

(8,388)

(9,214)

Interest income

175

1,748

Equity in results of affiliates

(799)

(95)

Miscellaneous, net

(1,412)

466

(10,424)

(7,095)

Income before Income Taxes

78,036

89,999

Provision for Income Taxes

22,786

27,000

Net Income

$
55,250

$
62,999

Net Loss Attributable to Noncontrolling Interests

$
3

$
5

Net Income Attributable to AptarGroup, Inc.

$
55,253

$
63,004

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

Basic

$
0.86

$
1.00

Diluted

$
0.84

$
0.96

Average Number of Shares Outstanding:

Basic

64,009

62,964

Diluted

66,111

65,349

Dividends per Common Share

$
0.36

$
0.34

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

In thousands

Three Months Ended March 31,
2020

2019

Net Income
$
55,250

$
62,999

Other Comprehensive (Loss) Income:

Foreign currency translation adjustments

(42,229)

(9,611)

Changes in derivative gains (losses), net of tax

1,483

(393)

Defined benefit pension plan, net of tax

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

71

84

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

1,565

637

Total defined benefit pension plan, net of tax

1,636

721

Total other comprehensive loss

(39,110)

(9,283)

Comprehensive Income

16,140

53,716

Comprehensive Loss (Income) Attributable to Noncontrolling Interests

3

(3)

Comprehensive Income Attributable to AptarGroup, Inc.
$
16,143

$
53,713

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

In thousands

March 31,

December 31,

2020

2019

Assets

Current Assets:

Cash and equivalents

$
410,840

$
241,970

Accounts and notes receivable, less current expected credit loss ("CECL") of $5,657 in 2020 and $3,626 in 2019

602,027

558,428

Inventories

371,859

375,795

Prepaid and other

129,926

115,048

1,514,652

1,291,241

Property, Plant and Equipment:

Buildings and improvements

502,706

504,328

Machinery and equipment

2,506,084

2,521,737

3,008,790

3,026,065

Less: Accumulated depreciation

(1,961,683)

(1,963,520)

1,047,107

1,062,545

Land

24,312

25,133

1,071,419

1,087,678

Other Assets:

Investments in equity securities

39,167

8,396

Goodwill

756,081

763,461

Intangible assets

284,121

291,084

Operating lease right-of-use assets

65,925

72,377

Miscellaneous

45,187

47,882

1,190,481

1,183,200

Total Assets

$
3,776,552

$
3,562,119

AptarGroup, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

In thousands, except share and per share amounts

March 31,

December 31,

2020

2019

Liabilities and Stockholders’ Equity

Current Liabilities:

Notes payable, revolving credit facility and overdrafts

$
220,511

$
44,259

Current maturities of long-term obligations, net of unamortized debt issuance costs

65,049

65,988

Accounts payable, accrued and other liabilities

605,738

573,028

891,298

683,275

Long-Term Obligations, net of unamortized debt issuance costs

1,075,745

1,085,453

Deferred Liabilities and Other:

Deferred income taxes

39,795

41,388

Retirement and deferred compensation plans

104,140

101,225

Operating lease liabilities

49,004

55,276

Deferred and other non-current liabilities

28,947

23,250

Commitments and contingencies

—

—

221,886

221,139

Stockholders’ Equity:

AptarGroup, Inc. stockholders’ equity

Common stock, $.01 par value, 199 million shares authorized, 68.9 and 68.6 million shares issued as of March 31, 2020 and December 31, 2019, respectively

689

686

Capital in excess of par value

785,567

770,596

Retained earnings

1,554,665

1,523,820

Accumulated other comprehensive loss

(381,058)

(341,948)

Less: Treasury stock at cost, 4.7 and 4.8 million shares as of March 31, 2020 and December 31, 2019, respectively

(372,573)

(381,238)

Total AptarGroup, Inc. Stockholders’ Equity

1,587,290

1,571,916

Noncontrolling interests in subsidiaries

333

336

Total Stockholders’ Equity

1,587,623

1,572,252

Total Liabilities and Stockholders’ Equity

$
3,776,552

$
3,562,119

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

(Loss) Income

Par Value

Stock

Par Value

Interest

Equity

Balance - December 31, 2018

$
1,371,826

$
(310,504)

$
673

$
(318,208)

$
678,769

$
315

$
1,422,871

Net income (loss)

63,004

—

—

—

—

(5)

62,999

Foreign currency translation adjustments

—

(9,619)

—

—

—

8

(9,611)

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

—

721

—

—

—

—

721

Changes in derivative gains (losses), net of tax

—

(393)

—

—

—

—

(393)

Stock awards and option exercises

—

—

3

5,337

22,164

—

27,504

Cash dividends declared on common stock

(21,377)

—

—

—

—

—

(21,377)

Treasury stock purchased

—

—

—

(15,000)

—

—

(15,000)

Balance - March 31, 2019

$
1,413,453

$
(319,795)

$
676

$
(327,871)

$
700,933

$
318

$
1,467,714

Balance - December 31, 2019

$
1,523,820

$
(341,948)

$
686

$
(381,238)

$
770,596

$
336

$
1,572,252

Net income (loss)

55,253

—

—

—

—

(3)

55,250

Adoption of CECL standard

(1,377)

—

—

—

—

—

(1,377)

Foreign currency translation adjustments

—

(42,229)

—

—

—

—

(42,229)

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

—

1,636

—

—

—

—

1,636

Changes in derivative gains (losses), net of tax

—

1,483

—

—

—

—

1,483

Stock awards and option exercises

—

—

3

8,665

14,971

—

23,639

Cash dividends declared on common stock

(23,031)

—

—

—

—

—

(23,031)

Balance - March 31, 2020

$
1,554,665

$
(381,058)

$
689

$
(372,573)

$
785,567

$
333

$
1,587,623

AptarGroup, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Table of Contents

In thousands, brackets denote cash outflows

Three Months Ended March 31,

2020

2019

Cash Flows from Operating Activities:

Net income

$
55,250

$
62,999

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

Depreciation

42,792

41,487

Amortization

8,014

6,002

Stock-based compensation

9,141

6,565

Provision for CECL

1,251

497

Loss on disposition of fixed assets

54

310

Deferred income taxes

6

671

Defined benefit plan expense

5,775

3,858

Equity in results of affiliates

799

95

Changes in balance sheet items, excluding effects from foreign currency adjustments:

Accounts and other receivables

(64,764)

(35,301)

Inventories

(8,615)

(13,097)

Prepaid and other current assets

(11,787)

(2,282)

Accounts payable, accrued and other liabilities

45,458

6,865

Income taxes payable

(5,278)

3,511

Retirement and deferred compensation plan liabilities

(1,312)

(5,940)

Other changes, net

8,249

1,396

Net Cash Provided by Operations

85,033

77,636

Cash Flows from Investing Activities:

Capital expenditures

(61,625)

(51,742)

Proceeds from sale of property, plant and equipment

166

178

Acquisition of business, release of escrow

(1,463)

(4,036)

Acquisition of intangible assets, net

(3,955)

(221)

Investment in equity securities

(20,423)

—

Proceeds from sale of investment in equity securities

—

16,487

Notes receivable, net

(785)

231

Net Cash Used by Investing Activities

(88,085)

(39,103)

Cash Flows from Financing Activities:

Proceeds from notes payable and overdrafts

8,148

16,783

Repayments of notes payable and overdrafts

(2,030)

(21,130)

Proceeds and repayments of short term revolving credit facility, net

175,000

(78,222)

Proceeds from long-term obligations

—

10,446

Repayments of long-term obligations

(2,386)

(3,227)

Dividends paid

(23,031)

(21,377)

Proceeds from stock option exercises

18,602

20,939

Purchase of treasury stock

—

(15,000)

Net Cash Provided (Used) by Financing Activities

174,303

(90,788)

Effect of Exchange Rate Changes on Cash

(3,381)

2,809

Net Increase (Decrease) in Cash and Equivalents and Restricted Cash

167,870

(49,446)

Cash and Equivalents and Restricted Cash at Beginning of Period

246,973

266,823

Cash and Equivalents and Restricted Cash at End of Period

$
414,843

$
217,377

Restricted cash included in the line item prepaid and other on the Condensed Consolidated Balance Sheets as shown below represents amounts held in escrow related to the Fusion Acquisition and the Noble ~~Acquisition (as defined herein).~~

Three Months Ended March 31,

2020

2019

Cash and equivalents

$
410,840

$
217,377

Restricted cash included in prepaid and other

4,003

—

Total Cash and Equivalents and Restricted Cash shown in the Statement of Cash Flows

$
414,843

$
217,377

Acquisition.

See accompanying unaudited Notes to Condensed Consolidated Financial Statements.

AptarGroup, Inc.

Notes to Condensed Consolidated Financial Statements

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

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”, “Aptar”, “Company”, “we”, “us” or “our” as used herein refer to AptarGroup, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Certain previously reported amounts have been reclassified to conform to the current period presentation.

In the opinion of management, the unaudited Condensed Consolidated Financial Statements (the “Condensed Consolidated Financial Statements”) include all 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 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 disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe 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 our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 but does not include all disclosures required by U.S. GAAP. Accordingly, these Condensed Consolidated Financial Statements and related notes should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. The results of operations of any interim period are not necessarily indicative of the results that may be expected for the year.

There are many uncertainties regarding the current COVID-19 pandemic, including the ~~scope~~availability, adoption, and effectiveness of ~~scientific~~a vaccine, the length of time it takes for normal economic and ~~health issues, the anticipated duration~~operating conditions to resume, additional governmental actions that may be taken and/or extensions of ~~the pandemic~~time for restrictions that have been imposed to date, and ~~the extent of local and worldwide social, political and economic disruption it may cause.~~numerous other uncertainties. The pandemic has impacted certain markets within our business, our operations and our financial results during the ~~quarter~~three months ended March 31, ~~2020 including an overall reduction to net sales.~~2021. NaN impairments were recorded as of March 31, ~~2020.~~2021 related to the COVID-19 pandemic. While the disruption is currently expected to be temporary, there is uncertainty around the duration. Due to significant uncertainty surrounding the situation, ~~our judgment regarding~~ future results could change and therefore our results could be materially impacted.

ADOPTION OF RECENT ACCOUNTING STANDARDS

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification.

Effective January 1, 2021, we adopted ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC's regulations, and no material impacts were noted.

Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, issued by the FASB in June 2016, as well as the clarifying amendments subsequently issued. We applied the guidance using a modified retrospective approach and accordingly recognized an amount of $1.4 million as the cumulative adjustment to opening retained earnings in the first quarter of 2020. This is based on management's best estimates of specific losses on individual exposures particularly on current trade receivables, as well as the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. On an ongoing basis, we will contemplate forward-looking economic conditions in recording lifetime expected credit losses for our financial assets measured at cost, such as our trade receivables and certain other assets.

In January 2017, the FASB issued ASU 2017-04, which provides guidance to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As a result, impairment charges are required for the amount by which a reporting unit’s carrying amount exceeds its fair value up to the amount of its allocated goodwill. We adopted the standard on January 1, 2020 and did not record any impairment charges.

In August 2018, the FASB issued ASU 2018-13, which amends disclosure requirements for fair value measurements. The new standard modifies disclosure requirements including removing requirements to disclose the valuation process for Level 3 measurements and adding requirements to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. We adopted the standard on January 1, 2020 and no material impacts were noted.

In August 2018, the FASB issued ASU 2018-14, which amends disclosure requirements for defined benefit pension and other postretirement plans. The amendments in this update remove disclosures that are no longer considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. We adopted the standard during the fourth quarter of 2020 and appropriate disclosures are included in the notes to the financial statements to the extent applicable. The provisions of the new standard do not have any effect on our financial statements.

In August 2018, the FASB issued ASU 2018-15 to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. We adopted the standard on January 1, 2020 and no material impacts were noted.

~~Table of Contents~~

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

INCOME TAXES

We compute 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 pre-tax income for financial accounting purposes. To the extent that these differences create timing 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.

We maintain our assertion that the cash and distributable reserves at our non-U.S. affiliates are indefinitely reinvested. ~~Under current U.S. tax~~At March 31, 2021, under currently enacted laws, ~~all~~we do not have a balance of ~~our non-U.S.~~foreign earnings ~~are~~that will be subject to U.S. taxation. We will provide for the necessary withholding and local income taxes when management decides that an affiliate should make a distribution. These decisions are made taking into consideration the financial requirements of the non-U.S. affiliates and the global cash management goals of the Company.

We provide a liability for the amount of unrecognized tax benefits from uncertain tax positions. This liability is provided whenever we determine that a tax benefit will not meet a more-likely-than-not threshold for recognition.

~~The Company is~~

We are subject to ~~taxation~~the examination of our returns and ~~files income~~other tax ~~returns in~~matters by the U.S. ~~federal jurisdiction~~Internal Revenue Service and ~~many state~~other tax authorities and ~~foreign jurisdictions. The Company believes~~governmental bodies. We believe that an adequate provision ~~has been made~~ for any adjustments that may result from tax ~~examinations.~~examinations exists. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in ~~the Company’s~~our tax audits are resolved in a manner inconsistent with ~~its~~our expectations, ~~the Company~~we could be required to adjust its provision for income taxes in the period such resolution occurs. The resolution of each of these audits is not expected to be material to our Condensed Consolidated Financial Statements.

NOTE 2 – REVENUE

At contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, we consider all the goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. For a contract that has more than one performance obligation, we allocate the total contract consideration to each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when (or as) the performance obligations are satisfied (i.e., when the customer obtains control of the good or service). The majority of our revenues are derived from product and tooling sales; however, we also receive revenues from service, license, exclusivity and royalty arrangements, which collectively are not material to the year-to-date results.

Revenue by segment and geography for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 is as follows:

For the Three Months Ended March 31, 2020

Latin

Segment

Europe

Domestic

America

Asia

Total

Beauty + Home

$
186,950

$
81,845

$
36,181

$
19,584

$
324,560

Pharma

190,130

90,965

6,579

9,522

297,196

Food + Beverage

28,769

57,590

8,034

5,404

99,797

Total

$
405,849

$
230,400

$
50,794

$
34,510

$
721,553

For the Three Months Ended March 31, 2019

Latin

Segment

Europe

Domestic

America

Asia

Total

Beauty + Home

$
216,233

$
86,979

$
42,642

$
21,805

$
367,659

Pharma

184,174

71,772

7,656

9,099

272,701

Food + Beverage

30,961

55,120

7,884

10,135

104,100

Total

$
431,368

$
213,871

$
58,182

$
41,039

$
744,460


	For the Three Months Ended March 31, 2021
Segment	Europe		Domestic		Latin America		Asia		Total
Pharma	$	207,947	$	89,295	$	5,370	$	11,220	$	313,832
Beauty + Home	189,240		98,807		34,342		24,557		346,946
Food + Beverage	28,502		67,063		9,253		11,158		115,976
Total	$	425,689	$	255,165	$	48,965	$	46,935	$	776,754

We perform our obligations under a contract with a customer by transferring goods and/or services in exchange for consideration from the customer. The timing of performance will sometimes differ from the timing of the receipt of the associated consideration from the customer, thus resulting in the recognition of a contract asset or a contract liability. We recognize a contract asset when we transfer control of goods or services to a customer prior to invoicing for the related performance obligation. The contract asset is transferred to accounts receivable when the product is shipped and invoiced to the customer. We recognize a contract liability if the customer's payment of consideration precedes the entity's performance.

The opening and closing balances of our contract asset and contract liabilities are as follows:

Balance as of

Balance as of

Increase/


December 31, 2019

March 31, 2020

(Decrease)

Contract asset (current)

$
16,245

$
13,457

$
(2,788)

Contract asset (long-term)

$
—

$
—

$
—

Contract liability (current)

$
79,305

$
78,974

$
(331)

Contract liability (long-term)

$
9,779

$
14,994

$
5,215

The differences in the opening and closing balances of our contract asset and contract liabilities are primarily the result of timing differences between our performance and the customer’s payment. The total amount of revenue recognized during the current year against contract liabilities is ~~$12.5~~$18.7 million, including ~~$10.6~~$13.0 million relating to contract liabilities at the beginning of the year.

Current contract assets and long-term contract assets are included within the Prepaid and Other and Miscellaneous assets, respectively, while current contract liabilities and long-term contract liabilities are included within Accounts Payable, Accrued and Other Liabilities and Deferred and Other Non-current Liabilities, respectively, within our Condensed Consolidated Balance Sheets.

Determining the Transaction Price

In most cases, the transaction price for each performance obligation is stated in the contract. In determining the variable amounts of consideration within the transaction price (such as volume-based customer rebates), we include an estimate of the expected amount of consideration as revenue. We apply the expected value method based on all of the information (historical, current, and forecast) that is reasonably available and identify reasonable estimates based on this information. We apply the method consistently throughout the contract when estimating the effect of an uncertainty on the amount of variable consideration to which we will be entitled.

We primarily manufacture and sell drug delivery, dispensing, sealing and active ~~packaging~~material science solutions. The amount of consideration is typically fixed for such customers. At the time of delivery, the customer is invoiced the agreed-upon price. Revenue from product sales is typically recognized upon manufacture or shipment, when control of the goods transfers to the customer.

To determine when the control transfers, we typically assess, among other things, the shipping terms of the contract, shipping being one of the indicators of transfer of control. A majority of product sales are sold ~~free on board (“FOB”)~~FOB shipping point. For FOB shipping point shipments, control of the goods transfers to the customer at the time of shipment of the goods. Once the goods are shipped, we are precluded from redirecting the shipment to another customer. Therefore, our performance obligation is satisfied at the time of shipment. With respect to FOB destination sales, shipping and/or handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs and revenue is recorded upon final delivery to the customer location. We have elected to account for shipping and handling costs that occur after the customer has obtained control of a good as fulfillment costs rather than as a promised service. We do not have any material significant payment terms as payment is typically received shortly after the point of sale.

There also exist instances where we manufacture highly customized products that have no alternative use to us and for which we have an enforceable right to payment for performance completed to date. For these products, we transfer control and recognize revenue over time by measuring progress towards completion using the Output Method based on the number of products produced. As we normally make our products to a customer’s order, the time between production and shipment of our products is typically within a few weeks.

We believe this measurement provides a faithful depiction of the transfer of goods as the costs incurred reflect the value of the products produced.

As a part of our customary business practice, we offer a standard warranty that the products will materially comply with the technical specifications and will be free from material defects. Because such warranties are not sold separately, do not provide for any service beyond a guarantee of a product’s initial specifications, and are not required by law, there is no revenue deferral for these types of warranties.

~~Table of Contents~~

Tooling Sales

We also build or contract ~~to build~~for molds and other tools (collectively defined as “tooling”) necessary to produce our products. As with product sales, we recognize revenue when control of the tool transfers to the customer. If the tooling is highly customized with no alternative use to us and we have an enforceable right to payment for performance completed to date, we transfer control and recognize revenue over time by measuring progress towards completion using the Input Method based on costs incurred relative to total estimated costs to completion. Otherwise, revenue for the tooling is recognized at the point in time when the customer approves the tool. We do not have any material significant payment terms as payment is typically either received during the mold-build process or shortly after completion.

In certain instances, we offer extended warranties on ~~tools sold to~~ our ~~customers~~tools above and beyond the normal standard warranties. We normally receive payment at the inception of the contract and recognize revenue over the term of the contract. At December 31, ~~2019, $515~~2020, $536 thousand of unearned revenue associated with outstanding contracts was reported in Accounts Payable, Accrued and Other Liabilities. At March 31, ~~2020,~~2021, the unearned amount was ~~$432~~$523 thousand. We expect to recognize approximately ~~$172~~$98 thousand of the unearned amount during the remainder of ~~2020, $123~~2021, $142 thousand in ~~2021,~~2022, and ~~$137~~$283 thousand thereafter.

Service Sales

We also provide services to our pharmaceutical customers. As with product sales, we recognize revenue based on completion of each performance obligation of the service contract.

Contract Costs

We do not incur significant costs to obtain or fulfill revenue contracts.

Credit Risk

We are exposed to credit losses primarily through our product sales, tooling sales and services to our customers. We assess each customer’s ability to pay for the products we sell by conducting a credit review. The credit review considers our expected billing exposure and timing for payment and the customer’s established credit rating or our assessment of the customer’s creditworthiness based on our analysis of their financial statements when a credit rating is not available. We also consider contract terms and conditions, country and political risks, and business strategy in our evaluation. A credit limit is established for each customer based on the outcome of this review.

We monitor our ongoing credit exposure through active review of customer balances against contract terms and due dates. Our activities include timely account reconciliation, dispute resolution and payment confirmation. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

~~At March 31, 2020, we reported $602 million of accounts receivable, net of CECL of $5.7 million. Changes in the allowance were not material for the three months ended March 31, 2020.~~

Current uncertainty in credit and market conditions due to the COVID-19 pandemic may slow our collection efforts if customers experience significant difficulty accessing credit and paying their obligations, which may lead to higher than normal accounts receivable and increased CECL charges.

NOTE 3 - INVENTORIES

Inventories, by component net of reserves, consisted of:



	March 31, 2021		December 31, 2020
Raw materials	$	115,645	$	116,029
Work in process	124,097		115,870
Finished goods	154,437		147,480
Total	$	394,179	$	379,379

Table of Contents

March 31,

December 31,

2020

2019

Raw materials

$
106,787

$
111,653

Work in process

120,151

123,750

Finished goods

144,921

140,392

Total

$
371,859

$
375,795

NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill by reporting segment since December 31, ~~2019~~2020 are as follows:

Beauty +

Food +

Corporate

Home

Pharma

Beverage

& Other

Total

Goodwill

$
221,658

$
413,650

$
128,153

$
1,615

$
765,076

Accumulated impairment losses

—

—

—

(1,615)

(1,615)

Balance as of December 31, 2019

$
221,658

$
413,650

$
128,153

$
—

$
763,461

Acquisition

—

463

—

—

463

Foreign currency exchange effects

(2,201)

(5,543)

(99)

—

(7,843)

Goodwill

$
219,457

$
408,570

$
128,054

$
1,615

$
757,696

Accumulated impairment losses

—

—

—

(1,615)

(1,615)

Balance as of March 31, 2020

$
219,457

$
408,570

$
128,054

$
—

$
756,081



	Pharma		Beauty + Home		Food + Beverage		Corporate & Other		Total
Goodwill	$	436,731	$	333,111	$	128,679	$	1,615	$	900,136
Accumulated impairment losses	0		0		0		(1,615)		(1,615)
Balance as of December 31, 2020	$	436,731	$	333,111	$	128,679	$	0	$	898,521

Foreign currency exchange effects	(10,456)		(4,266)		(256)		0		(14,978)
Goodwill	$	426,275	$	328,845	$	128,423	$	1,615	$	885,158
Accumulated impairment losses	0		0		0		(1,615)		(1,615)
Balance as of March 31, 2021	$	426,275	$	328,845	$	128,423	$	0	$	883,543

~~Table of Contents~~

The table below shows a summary of intangible assets as of March 31, ~~2020~~2021 and December 31, ~~2019.~~

March 31, 2020

December 31, 2019

Weighted Average

Gross

Gross

Amortization Period

Carrying

Accumulated

Net

Carrying

Accumulated

Net


(Years)

Amount

Amortization

Value

Amount

Amortization

Value

Amortized intangible assets:

Patents

7.9

$
3,001

(1,304)

$
1,697

$
2,804

$
(1,318)

$
1,486

Acquired technology

13.0

99,437

(27,143)

72,294

100,511

(25,430)

75,081

Customer relationships

13.7

216,198

(37,774)

178,424

217,934

(33,924)

184,010

Trademarks and trade names

6.9

34,131

(11,919)

22,212

35,015

(11,003)

24,012

License agreements and other

17.6

19,671

(10,177)

9,494

16,153

(9,658)

6,495

Total intangible assets

13.0

$
372,438

$
(88,317)

$
284,121

$
372,417

$
(81,333)

$
291,084

2020.



		March 31, 2021						December 31, 2020
Weighted Average Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization		Net Value		Gross Carrying Amount		Accumulated Amortization		Net Value
Amortized intangible assets:
Patents	13.8	$	2,810	$	(1,440)	$	1,370	$	2,861	$	(1,477)	$	1,384
Acquired technology	12.2	109,508		(38,415)		71,093		111,854		(36,943)		74,911
Customer relationships	13.5	283,761		(61,214)		222,547		286,644		(56,714)		229,930
Trademarks and trade names	6.8	45,444		(18,615)		26,829		46,174		(17,437)		28,737
License agreements and other	36.7	18,981		(9,788)		9,193		19,208		(9,861)		9,347
Total intangible assets	13.3	$	460,504	$	(129,472)	$	331,032	$	466,741	$	(122,432)	$	344,309

Aggregate amortization expense for the intangible assets above for the ~~quarters~~three months ended March 31, 2021 and 2020 was $9,811 and ~~2019 was~~ $8,014, ~~and $6,002,~~ respectively.

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

2020

$
20,725

(remaining estimated amortization for 2020)
2021

27,154

2022

26,915

2023

26,835

2024 and thereafter

182,492


2021	$	27,995	(remaining estimated amortization for 2021)
2022	38,815
2023	38,545
2024	35,406
2025 and thereafter	190,271

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 March 31, ~~2020.~~

2021.

NOTE 5 – INCOME TAXES

The effective tax rate for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, was ~~29.2%~~16.8% and ~~30.0%~~29.2%. The ~~decrease in the~~reported effective tax rate for the three months ended March 31, ~~2020 was primarily due to~~2021 reflects additional tax benefits from employee stock-based compensation of $5.1 million and a ~~larger tax~~$2.9 million benefit from ~~employee share-based compensation offset~~changes in ~~part by~~U.S. state tax laws during the quarter. A lower tax rate in France for 2021 and a more favorable mix of ~~other discrete items.~~

earnings also contributed to the lower tax rate in the current quarter.

Table of Contents

NOTE 6 – DEBT

Notes Payable, Revolving Credit Facility and Overdrafts

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, our notes payable, revolving credit facility and overdrafts, consisted of the following:

March 31,

December 31,


2020

2019

Notes payable 8.10% due in 2020

$
2,664

$
1,436

Revolving credit facility 1.88% due in 2020

200,000

25,000

Overdrafts 5.68% - 7.82% due in 2020

17,847

17,823

$
220,511

$
44,259


	March 31, 2021		December 31, 2020
Notes payable 0.0%	$	0	$	200
Revolving credit facility 0.00%	0		52,000
Overdrafts 8.10%	1,036		0
	$	1,036	$	52,200

~~Table of Contents~~

We maintain a multi-currency revolving credit facility with ~~two~~2 tranches that matures in July 2022 which provides for unsecured financing of up to $300 million that is available in the U.S. and up to €150 million that is available to our wholly-owned UK subsidiary. ~~$200.0 million~~NaN balance was utilized under our U.S. facility ~~and 0 balance was utilized under~~or our euro-based revolving credit facility as of March 31, ~~2020. $25.0~~2021. We utilized $52.0 million ~~was utilized~~ under our U.S. facility and 0 balance was utilized on our euro-based revolving credit facility as of December 31, ~~2019.~~

2020.

There are 0 compensating balance requirements associated with our revolving credit facility. Each borrowing under the credit facility will bear interest at rates based on LIBOR, prime rates or other similar rates, in each case plus an applicable margin. A facility fee on the total amount of the facility is also payable quarterly, regardless of usage. The applicable margins for borrowings under the credit facility and the facility fee percentage may change from time to time depending on changes in our consolidated leverage ratio.

In October 2020, we entered into an unsecured money market borrowing arrangement to provide short term financing of up to $30 million that is available in the U.S. No borrowing on this facility is permitted over a quarter end date. As such, 0 balance was utilized under this arrangement as of March 31, 2021 or December 31, 2020.

Long-Term Obligations

At March 31, 2021 and December 31, 2020, our long-term obligations consisted of the following:


	March 31, 2021		December 31, 2020
Notes payable 0.00% – 10.90%, due in monthly and annual installments through 2028	$	12,108	$	14,002
Senior unsecured notes 3.2%, due in 2022	75,000		75,000
Senior unsecured debts 1.5% USD floating swapped to 1.36% EUR fixed, equal annual installments through 2022	112,000		112,000
Senior unsecured notes 3.5%, due in 2023	125,000		125,000
Senior unsecured notes 1.0%, due in 2023	117,260		122,100
Senior unsecured notes 3.4%, due in 2024	50,000		50,000
Senior unsecured notes 3.5%, due in 2024	100,000		100,000
Senior unsecured notes 1.2%, due in 2024	234,520		244,200
Senior unsecured notes 3.6%, due in 2025	125,000		125,000
Senior unsecured notes 3.6%, due in 2026	125,000		125,000
Finance Lease Liabilities	28,389		30,025
Unamortized debt issuance costs	(1,518)		(1,663)
	$	1,102,759	$	1,120,664
Current maturities of long-term obligations	(64,776)		(65,666)
Total long-term obligations	$	1,037,983	$	1,054,998

Unamortized




Debt Issuance



Principal

Costs

Net

Notes payable 0.00% – 10.90%, due in monthly and annual installments through 2028

$
15,551

$
—

$
15,551

Senior unsecured notes 3.2%, due in 2022

75,000

59

74,941

Senior unsecured debts 3.1% USD floating swapped to 1.36% EUR fixed, equal annual installments through 2022

168,000

352

167,648

Senior unsecured notes 3.5%, due in 2023

125,000

135

124,865

Senior unsecured notes 1.0%, due in 2023

110,315

341

109,974

Senior unsecured notes 3.4%, due in 2024

50,000

60

49,940

Senior unsecured notes 3.5%, due in 2024

100,000

135

99,865

Senior unsecured notes 1.2%, due in 2024

220,630

701

219,929

Senior unsecured notes 3.6%, due in 2025

125,000

157

124,843

Senior unsecured notes 3.6%, due in 2026

125,000

157

124,843

Finance Lease Liabilities

28,395

—

28,395

$
1,142,891

$
2,097

$
1,140,794

Current maturities of long-term obligations

(65,049)

—

(65,049)

Total long-term obligations

$
1,077,842

$
2,097

$
1,075,745

~~At December 31, 2019, our long-term obligations consisted~~

Table of ~~the following:~~

Contents

Unamortized




Debt Issuance



Principal

Costs

Net

Notes payable 0.00% – 10.90%, due in monthly and annual installments through 2028

$
19,220

$
—

$
19,220

Senior unsecured notes 3.2%, due in 2022

75,000

64

74,936

Senior unsecured debts 3.2% USD floating swapped to 1.36% EUR fixed, equal annual installments through 2022

168,000

390

167,610

Senior unsecured notes 3.5%, due in 2023

125,000

144

124,856

Senior unsecured notes 1.0%, due in 2023

112,170

356

111,814

Senior unsecured notes 3.4%, due in 2024

50,000

63

49,937

Senior unsecured notes 3.5%, due in 2024

100,000

144

99,856

Senior unsecured notes 1.2%, due in 2024

224,340

742

223,598

Senior unsecured notes 3.6%, due in 2025

125,000

169

124,831

Senior unsecured notes 3.6%, due in 2026

125,000

169

124,831

Finance Lease Liabilities

29,952

—

29,952

$
1,153,682

$
2,241

$
1,151,441

Current maturities of long-term obligations

(65,988)

—

(65,988)

Total long-term obligations

$
1,087,694

$
2,241

$
1,085,453

The aggregate long-term maturities, excluding finance lease liabilities, which are disclosed in Note 7, due annually from the current balance sheet date for the next five years ~~are $61,181, $60,285, $134,343, $337,444, $270,846 and $250,397 thereafter.~~

are:


Year One	$	60,808
Year Two	134,839
Year Three	344,773
Year Four	285,040
Year Five	250,259
Thereafter	169

~~Table of Contents~~

~~Covenants~~

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

~~Requirement~~

Requirement

Level at March 31, ~~2020~~

2021

Consolidated Leverage Ratio (1)

~~Maximum~~

Maximum of 3.50 to 1.00

~~1.73~~1.55 to 1.00

Consolidated Interest Coverage Ratio (1)

Minimum of 3.00 to 1.00

~~16.32~~17.69 to 1.00

(1)Definitions of ratios are included as part of the revolving credit facility agreement and the private placement agreements.

~~(1)~~

~~Definitions of ratios are included as part of the revolving credit facility agreement and the note purchase agreements.~~

NOTE 7 – LEASES

We lease certain warehouse, plant and office facilities as well as certain equipment under noncancelable operating and finance leases expiring at various dates through the year ~~2032.~~2034. Most of the operating leases contain renewal options and certain leases include options to purchase the related asset during or at the end of the lease term.

Amortization expense related to finance leases is included in depreciation expense while rent expense related to operating leases is included within cost of sales and selling, research & development and administrative expenses (“SG&A”).

The components of lease expense for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:

Three Months Ended March 31,

2020

2019

Operating lease cost

$
5,254

$
6,004

Finance lease cost:

Amortization of right-of-use assets

$
1,199

$
872

Interest on lease liabilities

348

315

Total finance lease cost

$
1,547

$
1,187

Short-term lease and variable lease costs

$
2,448

$
1,942



Three Months Ended March 31,	2021		2020
Operating lease cost	$	5,789	$	5,254

Finance lease cost:
Amortization of right-of-use assets	$	976	$	1,199
Interest on lease liabilities	$	312	$	348
Total finance lease cost	$	1,288	$	1,547

Short-term lease and variable lease costs	$	3,128	$	2,448

Supplemental cash flow information related to leases was as follows:


Three Months Ended March 31,	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,755	$	5,328
Operating cash flows from finance leases	349		369
Financing cash flows from finance leases	1,198		1,657

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	1,496	$	5,233
Finance leases	47		220

Table of Contents

Three Months Ended March 31,

2020

2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$
5,328

$
6,469

Operating cash flows from finance leases

369

243

Financing cash flows from finance leases

1,657

1,140

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

$
5,233

$
4,515

Finance leases

220

10,697

NOTE 8 – RETIREMENT AND DEFERRED COMPENSATION PLANS

Effective January 1, 2021, our domestic noncontributory retirement plans were amended to provide that no individual who became an employee after December 31, 2020 could become a participant and that no employee whose employment terminated and who was rehired after December 31, 2020 may accrue benefits under the plan with respect to the period of employment which begins on the date that reemployment commences. These employees will instead be eligible for additional contribution to their defined contribution 401(k) employee savings plan. All domestic employees with hire/rehire dates prior to January 1, 2021 will still be eligible for the domestic pension plans and will still continue to accrue plan benefits after this date.

Components of Net Periodic Benefit Cost:

Domestic Plans

Foreign Plans

Three Months Ended March 31,

2020

2019

2020

2019

Service cost

$
3,577

$
2,773

$
1,768

$
1,460

Interest cost

1,987

1,845

340

501

Expected return on plan assets

(3,422)

(3,094)

(634)

(592)

Amortization of net loss

1,548

489

514

363

Amortization of prior service cost

—

—

97

113

Net periodic benefit cost

$
3,690

$
2,013

$
2,085

$
1,845


	Domestic Plans				Foreign Plans
Three Months Ended March 31,	2021		2020		2021		2020
Service cost	$	4,227	$	3,577	$	2,078	$	1,768
Interest cost	1,611		1,987		218		340
Expected return on plan assets	(3,073)		(3,422)		(723)		(634)
Amortization of net loss	2,503		1,548		589		514
Amortization of prior service cost	0		0		45		97
Net periodic benefit cost	$	5,268	$	3,690	$	2,207	$	2,085

The components of net periodic benefit cost, other than the service cost component, are included in the line ~~“Miscellaneous, net”~~Miscellaneous, net in the ~~income statement.~~

Condensed Consolidated Statements of Income.

~~Table of Contents~~

EMPLOYER CONTRIBUTIONS

~~Although we~~

We currently have 0 minimum funding ~~requirement, we contributed $204thousand~~requirements for our domestic and foreign plans. There were 0 payments to our ongoing domestic supplemental ~~employee~~executive retirement plan ~~(“SERP”)~~(SERP) annuity contracts during the three months ended March 31, ~~2020. We plan to contribute approximately an~~2021 and we do not expect additional ~~$200 thousand to pay our ongoing SERP annuity contracts~~significant payments during ~~2020.~~2021. We have contributed approximately ~~$711thousand~~$1.0 million to our foreign defined benefit plans during the three months ended March 31, ~~2020~~2021 and do not expect additional significant contributions during ~~2020.~~

2021.

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in Accumulated Other Comprehensive (Loss) Income by Component:


	Foreign Currency		Defined Benefit Pension Plans		Derivatives		Total
Balance - December 31, 2019	$	(257,124)	$	(83,147)	$	(1,677)	$	(341,948)
Other comprehensive (loss) income before reclassifications	(42,229)		0		5,026		(37,203)
Amounts reclassified from accumulated other comprehensive income (loss)	0		1,636		(3,543)		(1,907)
Net current-period other comprehensive (loss) income	(42,229)		1,636		1,483		(39,110)
Balance - March 31, 2020	$	(299,353)	$	(81,511)	$	(194)	$	(381,058)

Balance - December 31, 2020	$	(178,025)	$	(102,322)	$	(1,362)	$	(281,709)
Other comprehensive income (loss) before reclassifications	(48,482)		319		5,061		(43,102)
Amounts reclassified from accumulated other comprehensive income (loss)	0		2,387		(4,541)		(2,154)
Net current-period other comprehensive (loss) income	(48,482)		2,706		520		(45,256)
Balance - March 31, 2021	$	(226,507)	$	(99,616)	$	(842)	$	(326,965)

Table of Contents

Foreign

Defined Benefit

Currency

Pension Plans

Derivatives

Total

Balance - December 31, 2018

$
(248,401)

$
(60,463)

$
(1,640)

$
(310,504)

Other comprehensive (loss) income before reclassifications

(9,619)

—

5,738

(3,881)

Amounts reclassified from accumulated other comprehensive income (loss)

—

721

(6,131)

(5,410)

Net current-period other comprehensive (loss) income

(9,619)

721

(393)

(9,291)

Balance - March 31, 2019

$
(258,020)

$
(59,742)

$
(2,033)

$
(319,795)

Balance - December 31, 2019

$
(257,124)

$
(83,147)

$
(1,677)

$
(341,948)

Other comprehensive (loss) income before reclassifications

(42,229)

—

5,026

(37,203)

Amounts reclassified from accumulated other comprehensive income (loss)

—

1,636

(3,543)

(1,907)

Net current-period other comprehensive (loss) income

(42,229)

1,636

1,483

(39,110)

Balance - March 31, 2020

$
(299,353)

$
(81,511)

$
(194)

$
(381,058)

Reclassifications Out of Accumulated Other Comprehensive (Loss) Income:

Amount Reclassified from

Details about Accumulated Other

Accumulated Other

Affected Line in the Statement

Comprehensive Income Components

Comprehensive Income

Where Net Income is Presented

Three Months Ended March 31,

2020

2019



Defined Benefit Pension Plans

Amortization of net loss

$
2,062

$
852

(1)

Amortization of prior service cost

97

113

(1)

2,159

965

Total before tax

(523)

(244)

Tax benefit

$
1,636

$
721

Net of tax

Derivatives

Changes in cross currency swap: interest component

$
(763)

$
(1,454)

Interest Expense

Changes in cross currency swap: foreign exchange component

(2,780)

(4,677)

Miscellaneous, net

$
(3,543)

$
(6,131)

Net of tax

Total reclassifications for the period

$
(1,907)

$
(5,410)

~~(1)~~

These accumulated other comprehensive income components are included in the computation of net periodic benefit costs, net of tax. See Note 8 – Retirement and Deferred Compensation Plans for additional details.


Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line in the Statement Where Net Income is Presented
Three Months Ended March 31,	2021		2020

Defined Benefit Pension Plans
Amortization of net loss	$	3,092	$	2,062	(1)
Amortization of prior service cost	45		97		(1)
	3,137		2,159		Total before tax
	(750)		(523)		Tax impact
	$	2,387	$	1,636	Net of tax
Derivatives
Changes in cross currency swap: interest component	$	(12)	$	(763)	Interest Expense
Changes in cross currency swap: foreign exchange component	(4,529)		(2,780)		Miscellaneous, net
	$	(4,541)	$	(3,543)	Net of tax
Total reclassifications for the period	$	(2,154)	$	(1,907)

~~Table of Contents~~

NOTE 10 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We maintain a foreign exchange risk management policy designed to establish a framework to protect the value of our non-functional currency denominated transactions from adverse changes in exchange rates. Sales of our 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 our results of operations. Our 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. We may use foreign currency forward exchange contracts, options and cross currency swaps to economically hedge these risks.

For derivative instruments designated as hedges, we formally document 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 at inception. Quarterly thereafter, we formally assess whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair value or cash flows of the hedged item. 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. All derivative financial instruments used as hedges are recorded at fair value in the Condensed Consolidated Balance ~~Sheets. See~~Sheets (See Note 11 - Fair ~~Value for additional details.~~

Value).

Cash Flow Hedge

For derivative instruments that are designated and qualify as cash flow hedges, the changes in fair values are recorded in accumulated other comprehensive loss and included in changes in derivative gain/loss. The changes in the fair values of derivatives designated as cash flow hedges are reclassified from accumulated other comprehensive loss to net income when the underlying hedged item is recognized in earnings. Cash flows from the settlement of derivative contracts designated as cash flow hedges offset cash flows from the underlying hedged items and are included in operating activities in the Condensed Consolidated Statements of Cash Flows.

During 2017, our wholly-owned UK subsidiary borrowed $280 million in term loan borrowings under a new credit facility. In order to mitigate the currency risk of U.S. dollar debt on a euro functional currency entity and to mitigate the risk of variability in interest rates, we entered into a EUR/USD floating-to-fixed cross currency swap in the notional amount of $280 million to effectively hedge the foreign exchange and interest rate exposure on the $280 million term loan. This EUR/USD swap agreement fixed our U.S. dollar floating-rate debt to 1.36% euro fixed-rate debt. Related to this hedge, approximately ~~$0.2~~$0.8 million of loss is included in accumulated other comprehensive loss at March 31, ~~2020.~~2021. The amount expected to be recognized into earnings during the next 12 months related to the interest component of our cross currency swap based on prevailing foreign exchange and interest rates at March 31, ~~2020~~2021 is ~~$2.2~~a loss of $0.5 million. The amount expected to be recognized into earnings during the next 12 months related to the foreign exchange component of our cross currency swap is dependent on fluctuations in currency exchange rates. As of March 31, ~~2020,~~2021, the fair values of the cross currency swap were a ~~$6.8~~$3.0 million ~~asset.~~liability. The swap contract expires on July 20, 2022.

Table of Contents

Hedge of Net Investments in Foreign Operations

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

Other

As of March 31, ~~2020,~~2021, we have recorded the fair value of foreign currency forward exchange contracts of ~~$2.1~~$0.2 million in prepaid and other and $0.5 million in accounts payable, accrued and ~~accrued~~other liabilities on the balance sheet. All forward exchange contracts outstanding as of March 31, ~~2020~~2021 had an aggregate notional contract amount of ~~$56.1~~$52.0 million.

~~Table of Contents~~

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets as of March 31, ~~2020~~2021 and December 31, ~~2019~~

March 31, 2020

December 31, 2019

Derivatives

Derivatives

Derivatives

not

Derivatives

not

Designated

Designated

Designated

Designated

Balance Sheet

as Hedging

as Hedging

as Hedging

as Hedging

Location

Instruments

Instruments

Instruments

Instruments

Derivative Assets

Foreign Exchange Contracts

Prepaid and other

$
—

$
2,061

$
—

$
206

Cross Currency Swap Contract (1)

Prepaid and other

6,769

—

2,552

—

$
6,769

$
2,061

$
2,552

$
206

Derivative Liabilities

Foreign Exchange Contracts

Accounts payable, accrued and other liabilities

$
—

$
505

$
—

$
401

$
—

$
505

$
—

$
401

2020


		March 31, 2021				December 31, 2020
	Balance Sheet Location	Derivatives Designated as Hedging Instruments		Derivatives not Designated as Hedging Instruments		Derivatives Designated as Hedging Instruments		Derivatives not Designated as Hedging Instruments
Derivative Assets
Foreign Exchange Contracts	Prepaid and other	$	0	$	166	$	0	$	322

		$	0	$	166	$	0	$	322

Derivative Liabilities
Foreign Exchange Contracts	Accounts payable, accrued and other liabilities	$	0	$	504	$	0	$	146
Cross Currency Swap Contract (1)	Accounts payable, accrued and other liabilities	3,027		0		8,309		0
		$	3,027	$	504	$	8,309	$	146

__________________________

(1)This cross currency swap contract is composed of both an interest component and a foreign exchange component.

~~(1)~~	~~This cross currency swap contract is composed of both an interest component and a foreign exchange component.~~

The Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss) for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~

Amount of Gain (Loss)

Total Amount

Amount of Gain (Loss)

Location of (Loss)

Reclassified from

of Affected

Derivatives in Cash

Recognized in

Gain Recognized

Accumulated

Income

Flow Hedging

Other Comprehensive

in Income on

Other Comprehensive

Statement

Relationships

Income on Derivative

Derivatives

Income on Derivative

Line Item

2020

2019

2020

2019

Cross currency swap contract:

Interest component

$
2,246

$
1,392

Interest expense

$
763

$
1,454

$
(8,388)

Foreign exchange component

2,780

4,677

Miscellaneous, net

2,780

4,677

(1,412)

$
5,026

$
6,069

$
3,543

$
6,131

2020


Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative				Location of (Loss) Gain Recognized in Income on Derivatives	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income on Derivative				Total Amount of Affected Income Statement Line Item
	2021		2020			2021		2020
Cross currency swap contract:
Interest component	$	532	$	2,246	Interest expense	$	12	$	763	$	(7,415)
Foreign exchange component	4,529		2,780		Miscellaneous, net	4,529		2,780		(963)
	$	5,061	$	5,026		$	4,541	$	3,543

Table of Contents

The Effect of Derivatives Not Designated as Hedging Instruments on the Condensed Consolidated Statements of Income for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~

Amount of (Loss) Gain

Derivatives Not Designated

Location of (Loss) Gain Recognized

Recognized in Income

as Hedging Instruments

in Income on Derivatives

on Derivatives

2020

2019

Foreign Exchange Contracts

Other (Expense) Income:
Miscellaneous, net

$
1,747

$
(263)

$
1,747

$
(263)

2020

~~Table of Contents~~


Derivatives Not Designated as Hedging Instruments	Location of (Loss) Gain Recognized in Income on Derivatives	Amount of (Loss) Gain Recognized in Income on Derivatives
		2021		2020
Foreign Exchange Contracts	Other (Expense) Income: Miscellaneous, net	$	(513)	$	1,747
		$	(513)	$	1,747

Gross Amounts not Offset

Gross Amounts

Net Amounts

in the Statement of

Offset in the

Presented in

Financial Position

Gross

Statement of

the Statement of

Financial

Cash Collateral

Net

Amount

Financial Position

Financial Position

Instruments

Received

Amount

Description

March 31, 2020

Derivative Assets

$
8,830

—

$
8,830

—

—

$
8,830

Total Assets

$
8,830

—

$
8,830

—

—

$
8,830

Derivative Liabilities

$
505

—

$
505

—

—

$
505

Total Liabilities

$
505

—

$
505

—

—

$
505

December 31, 2019

Derivative Assets

$
2,758

—

$
2,758

—

—

$
2,758

Total Assets

$
2,758

—

$
2,758

—

—

$
2,758

Derivative Liabilities

$
401

—

$
401

—

—

$
401

Total Liabilities

$
401

—

$
401

—

—

$
401

NOTE 11 – FAIR VALUE

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

●

~~Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.~~

●

Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

●

~~Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.~~

•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 March 31, 2021, the fair values of our financial assets and liabilities were categorized as follows:

Investment in equity securities (1)

Foreign exchange contracts (2)

Cross currency swap contract (2)

As of December 31, 2020, the fair values of our financial assets and liabilities were categorized as follows:

Foreign exchange contracts (2)

Cross currency swap contract (2)

(1)

AsInvestment in PureCycle Technologies (PCT). See Note 17 - Investment in Equity Securities for discussion of ~~December 31, 2019, the fair values of our financial assets and liabilities were categorized as follows:~~

Total

Level 1

Level 2

Level 3

Assets

Foreign exchange contracts ⁽¹⁾

$
206

$
—

$
206

$
—

Cross currency swap contract ⁽¹⁾

2,552

—

2,552

—

Total assets at fair value

$
2,758

$
—

$
2,758

$
—

Liabilities

Foreign exchange contracts ⁽¹⁾

$
401

$
—

$
401

$
—

Contingent consideration obligation

5,930

—

—

5,930

Total liabilities at fair value

$
6,331

$
—

$
401

$
5,930

this investment.

~~Table of Contents~~

The carrying amounts of our other current financial instruments such as cash and equivalents, accounts and notes receivable, notes payable and current maturities of long-term obligations approximate fair value due to the short-term maturity of the instruments. We consider our long-term obligations a Level 2 liability and utilize the market approach valuation technique based on interest rates that are currently available to us for issuance of debt with similar terms and maturities. The estimated fair value of our long-term obligations was ~~$1.0~~$1.1 billion as of March 31, ~~2020~~2021 and $1.1 billion as of December 31, ~~2019.~~

2020.

As discussed in Note 1719 - Acquisitions of our Annual Report on Form 10-K for the year ended December 31, 2020, we have a contingent consideration obligation to the selling equity holders ~~of Noble~~of:

–Fusion Packaging, Inc. ("Fusion") in connection with the acquisition of 100% of the equity interests of Fusion (the "Fusion Acquisition") based on 2022 cumulative performance targets, and

–Noble ~~Acquisition (as defined herein)~~International Holdings, Inc., Genia Medical, Inc. and JBCB Holdings, LLC (collectively referred to as "Noble") in connection with the acquisition of 100% of the equity interests of Noble (the "Noble Acquisition") based on 2024 cumulative performance ~~targets and a contingent consideration obligation to the selling equity holder of Gateway in connection with the Gateway Acquisition (as defined herein) based on 2020 and 2022 performance~~ targets.

We consider these obligations a Level 3 ~~liability~~liabilities and have estimated the aggregate fair value for these contingent consideration arrangements as follows:


	March 31, 2021		December 31, 2020
Fusion Acquisition	$	27,460	$	26,910
Noble Acquisition	4,655		4,230

	$	32,115	$	31,140

Table of Contents

Changes in the fair value of these obligations are recorded within selling, research & development and administrative expenses in our Condensed Consolidated Statements of Income. Significant changes to ~~be $2.9 million and $3.0 million, respectively,~~the inputs, as noted above, can result in a significantly higher or lower fair value measurement. The following table provides a summary of ~~March 31, 2020 and December 31, 2019.~~

changes in our Level 3 fair value measurements:


Balance, December 31, 2020	$	31,140

Increase in fair value recorded in earnings	975

Balance, March 31, 2021	$	32,115

NOTE 12 - COMMITMENTS AND CONTINGENCIES

~~The Company, in~~

In the normal course of business, iswe are 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 our financial position, our results of operations or cash flows, claims and legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur and 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, we have 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 we could be required to make under these indemnification agreements is unlimited; however, we have a directors and officers liability insurance policy that covers a portion of our exposure. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. We have 0 liabilities recorded for these agreements as of March 31, ~~2020~~2021 and December 31, ~~2019.~~

A fire caused damage to our facility in Annecy, France in June 2016. We are insured for the damages caused by the fire, including business interruption insurance. For the three months ended March 31, 2020, we did not receive any insurance proceeds, and have 0 insurance receivable as of March 31, 2020. During the three months ended March 31, 2020 and 2019, profitability was not impacted. The final settlement continues to be negotiated. In many cases, our insurance coverage exceeds the amount of our recognized losses. However, 0 gain contingencies were recognized during the three months ended March 31, 2020 as our ability to realize those gains remains uncertain.

An environmental investigation, undertaken to assess areas of possible contamination, was completed at our facility in Jundiaí, São Paulo, Brazil. The facility is primarily an internal supplier of anodized aluminum components for certain of our dispensing systems. The testing indicated that soil and groundwater in certain areas of the facility were impacted above acceptable levels established by local regulations. In March 2017, we reported the findings to the relevant environmental authority, the Environmental Company of the State of São Paulo – CETESB. Based upon our best estimate, we recorded a reserve of $1.5 million (operating expense) in the first quarter of 2017 related to this contingency. During 2019, we paid approximately $0.6 million. For the three months ended March 31, 2020, we paid approximately $0.1 million and made adjustments to the accrual based on our future anticipated expenditures. As of March 31, 2020, our outstanding reserve is $0.4 million. The ultimate loss associated with this environmental contingency is subject to the investigation and ongoing review of the CETESB. We will continue to evaluate the range of likely costs as the investigation proceeds and we have further clarity on the nature and extent of remediation that will be required. We note that the contamination, or any failure to complete any required remediation in a timely manner, could potentially result in fines or penalties.

In March 2017, the Supreme Court of Brazil issued a decision that a certain state value added tax should not be included in the calculation of federal gross receipts taxes. The decision reduces our gross receipts tax in Brazil prospectively and, potentially, retrospectively. During the first quarter of 2019, we received a favorable court decision of $2.7 million for the retrospective right to recover part of our claim. This amount is recorded in cost of sales as a favorable impact of $1.7 million and $1.0 million was recognized as interest income. If the ~~Judicial~~Supreme Court of Brazil grants full retrospective recovery, we estimate remaining potential recoveries of approximately $2$1.0 million to $8$6.8 million, including ~~interest, depending on the future decisions of the Supreme Court of Brazil.~~interest. Due to uncertainties around our remaining court recovery claims, we have not recorded any further amounts relating to the retrospective nature of this matter.

In December 2019, tax authorities in Brazil notified us of a tax assessment of approximately $6.1 million, including interest and penalties of $2.3 million and $0.8 million, respectively, relating to differences in tax classification codes used for import duties for the period from January 2015 to August 2018. We are vigorously contesting the assessment, including interest and penalties, and have filed an administrative defense appeal in December 2019. ~~Considering~~In June 2020, an unfavorable decision was issued on the ~~complex nature of the assessment,~~first administrative defense appeal. We filed a second administrative defense appeal in August 2020. We still believe we ~~expect the appeal process to go through different levels of administrative and/or judicial review. Accordingly, due~~have a strong defense. Due to uncertainty in the amount of assessment and the timing ~~and amounts~~ of ~~assessment,~~our appeal, 0 liability is recorded as of March 31, ~~2020.~~

2021.

~~Table of Contents~~

NOTE 13 – STOCK REPURCHASE PROGRAM

On April 18, 2019, we announced a share repurchase authorization of up to $350 million of common stock. This authorization replaces previous authorizations and has no expiration date. We may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions.

During the three months ended March 31, 2021 and 2020, we did not repurchase any shares. ~~During the three months ended March 31, 2019, the Company repurchased approximately 159 thousand shares for approximately $15.0 million.~~ As of March 31, ~~2020,~~2021, there was $278.5 million of authorized share repurchases available to us.

NOTE 14 – STOCK-BASED COMPENSATION

We issue restricted stock units (“RSUs”), which consist of time-based and performance-based awards, to employees under stock awards plans approved by stockholders. In addition, RSUs are issued to non-employee directors under a Restricted Stock Unit Award Agreement for Directors pursuant to the Company’s 2018 Equity Incentive Plan. RSUs granted to employees vest according to a specified performance period and/or vesting period. Time-based RSUs generally vest over three years. Performance-based RSUs vest at the end of the specified performance period, generally three years, assuming required performance or market vesting conditions are met. Performance-based RSUs have one of two vesting conditions: (1) based on our internal financial performance metrics and (2) based on our total shareholder return (“TSR”) relative to total shareholder returns of an industrial peer group. At the time of vesting, the vested shares of common stock are issued in the employee’s name. In addition, RSU awards are generally net settled (shares are withheld to cover the employee tax obligation). RSUs granted to directors are only time-based and generally vest over one year.

Table of Contents

The fair value of both time-based RSUs and performance-based RSUs pertaining to internal performance metrics is determined using the closing price of our common stock on the grant date. The fair value of performance-based RSUs pertaining to TSR is estimated using a Monte Carlo simulation. Inputs and assumptions used to calculate the fair value are shown in the table below. The fair value of these RSUs is expensed over the vesting period using the straight-line method or using the graded vesting method when an employee becomes eligible to retain the award at retirement.

Three Months Ended March 31,

2020

2019

Fair value per stock award

$
94.98

$
134.97

Grant date stock price

$
83.93

$
104.51

Assumptions:

Aptar's stock price expected volatility

23.80
%

16.50
%

Expected average volatility of peer companies

48.50
%

31.90
%

Correlation assumption

63.50
%

37.40
%

Risk-free interest rate

0.31
%

2.19
%

Dividend yield assumption

1.72
%

1.30
%


Three Months Ended March 31,	2021			2020
Fair value per stock award	$	171.63		$	94.98
Grant date stock price	$	141.59		$	83.93
Assumptions:
Aptar's stock price expected volatility	21.40		%	23.80		%
Expected average volatility of peer companies	50.00		%	48.50		%
Correlation assumption	58.10		%	63.50		%
Risk-free interest rate	0.32		%	0.31		%
Dividend yield assumption	1.02		%	1.72		%

A summary of RSU activity as of March 31, ~~2020~~2021 and changes during the three month period then ended is presented below:

Time-Based RSUs

Performance-Based RSUs



Weighted Average



Weighted Average

Units

Grant-Date Fair Value

Units

Grant-Date Fair Value

Nonvested at January 1, 2020

480,729

$
95.45

181,680

$
117.26

Granted

176,424

81.75

206,408

90.85

Vested

(112,515)

82.64

—

—

Forfeited

(217)

100.14

(589)

120.61

Nonvested at March 31, 2020

544,421

$
92.11

387,499

$
103.23



	Time-Based RSUs			Performance-Based RSUs
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2021	576,198	$	92.47	590,064	$	100.27
Granted	128,297	137.97		169,268	152.47
Vested	(118,349)	89.95		(71,994)	128.70
Forfeited	(2,785)	95.77		(31,338)	91.23
Nonvested at March 31, 2021	583,361	$	106.33	656,000	$	111.05

Included in the March 31, ~~2020~~2021 time-based RSUs are ~~11,490~~12,379 units granted to non-employee directors.

~~Compensation expense recorded attributable to RSUs for the first three months of 2020 and 2019 was approximately $8.3 million and $4.7 million, respectively.~~


Three Months Ended March 31,	2021		2020
Compensation expense	$	11,262	$	8,281
Fair value of units vested	19,116		9,303
Intrinsic value of units vested	25,699		11,475

The actual tax benefit realized for the tax deduction from RSUs was approximately ~~$1.5~~$2.1 million in the three months ended March 31, 2020. The fair value of units vested during the three months ended March 31, 2020 and 2019 was $9.3 million and $2.7 million, respectively. The intrinsic value of units vested during the three months ended March 31, 2020 and 2019 was $11.5 million and $3.2 million, respectively.2021. As of March 31, ~~2020,~~2021, there was ~~$62.7~~$69.9 million of total unrecognized compensation cost relating to RSU awards which is expected to be recognized over a weighted-average period of ~~2.3~~1.9 years.

~~Table of Contents~~

Historically we issued stock options to our employees and non-employee directors. Beginning in 2019, we no longer issue stock options. Stock options were awarded with the exercise price equal to the market price on the date of grant and generally vest over three years and expire 10 years after grant. ~~Compensation expense attributable~~For stock option grants, we used historical data to ~~employee~~estimate expected life and volatility.

Table of Contents

A summary of option activity under our stock ~~options for~~plans during the ~~first~~ three months of 2020 was approximately $0.9 million ($0.7 million after tax). Approximately $0.7 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 attributable to stock options for the first three months of 2019 was approximately $1.8 million ($1.5 million after tax). Approximately $1.6 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. ended March 31, 2021 is presented below:



	Stock Awards Plans				Director Stock Option Plans
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding, January 1, 2021	3,998,047		$	70.28	99,200		$	60.80
Granted	0		0		0		0
Exercised	(507,468)		63.37		(29,500)		58.76
Forfeited or expired	(4,519)		75.27		0		0
Outstanding at March 31, 2021	3,486,060		$	71.28	69,700		$	61.66
Exercisable at March 31, 2021	3,486,060		$	71.28	69,700		$	61.66
Weighted-Average Remaining Contractual Term (Years):
Outstanding at March 31, 2021	4.7				2.5
Exercisable at March 31, 2021	4.7				2.5
Aggregate Intrinsic Value:
Outstanding at March 31, 2021	$	245,389			$	5,577
Exercisable at March 31, 2021	$	245,389			$	5,577
Intrinsic Value of Options Exercised During the Three Months Ended:
March 31, 2021	$	37,454			$	2,474
March 31, 2020	$	18,202			$	1,385


Three Months Ended March 31,	2021		2020
Compensation expense (included in SG&A)	$	185	$	743
Compensation expense (included in Cost of sales)	42		117
Compensation expense, Total	$	227	$	860
Compensation expense, net of tax	174		648
Grant date fair value of options vested	2,421		7,565

The reduction in stock option expense is due to our move to RSUs as discussed above. ~~For stock option grants, we used historical data to estimate expected life and volatility.~~

~~A summary of option activity under our stock plans during the three months ended March 31, 2020 is presented below:~~

Stock Awards Plans

Director Stock Option Plans




Weighted Average



Weighted Average

Options

Exercise Price

Options

Exercise Price

Outstanding, January 1, 2020

5,044,180

$
68.32

135,251

$
58.45

Granted

—

—

—

—

Exercised

(292,090)

55.16

(21,251)

51.20

Forfeited or expired

(6,630)

65.60

—

—

Outstanding at March 31, 2020

4,745,460

$
69.20

114,000

$
59.80

Exercisable at March 31, 2020

4,583,864

$
68.43

114,000

$
59.80

Weighted-Average Remaining Contractual Term (Years):

Outstanding at March 31, 2020

5.3

3.2

Exercisable at March 31, 2020

5.1

3.2

Aggregate Intrinsic Value:

Outstanding at March 31, 2020

$
143,971

$
4,530

Exercisable at March 31, 2020

$
142,195

$
4,530

Intrinsic Value of Options Exercised During the Three Months Ended:

March 31, 2020

$
18,202

$
1,385

March 31, 2019

$
14,047

$
51

~~The grant date fair value of options vested during the three months ended March 31, 2020 and 2019 was $7.6 million and $12.2 million, respectively.~~ Cash received from option exercises was approximately~~$18.6 million and the~~ $31.9 million. The actual tax benefit realized for the tax deduction from option exercises was approximately $9.1 million and $4.8 million in the three months ended March 31, ~~2020.~~2021 and March 31, 2020, respectively. As of March 31, ~~2020, the~~2021, there is no remaining valuation of stock option awards to be expensed in future ~~periods was $1.5 million and the related weighted-average period over which it is expected to be recognized is 0.9 years.~~

periods.

NOTE 15 – EARNINGS PER SHARE

Basic net income per share is calculated by dividing net income attributable to Aptar by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing the net income attributable to Aptar by the weighted-average number of common and common equivalent shares outstanding during the applicable period. The difference between basic and diluted earnings per share is attributable to stock-based compensation awards. Stock-based compensation awards for which total employee proceeds exceed the average market price over the applicable period would have an antidilutive effect on earnings per share, and accordingly, are excluded from the calculation of diluted earnings per share. The reconciliation of basic and diluted earnings per share for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 is as follows:

Table of Contents

Three Months Ended

March 31, 2020

March 31, 2019

Diluted

Basic

Diluted

Basic

Consolidated operations

Income available to common stockholders

$
55,253

$
55,253

$
63,004

$
63,004

Average equivalent shares

Shares of common stock

64,009

64,009

62,964

62,964

Effect of dilutive stock-based compensation

Stock options

1,810

—

2,222

—

Restricted stock

292

—

163

—

Total average equivalent shares

66,111

64,009

65,349

62,964

Net income per share

$
0.84

$
0.86

$
0.96

$
1.00


	Three Months Ended
	March 31, 2021				March 31, 2020
	Diluted		Basic		Diluted		Basic
Consolidated operations
Income available to common stockholders	$	83,952	$	83,952	$	55,253	$	55,253

Average equivalent shares
Shares of common stock	65,229		65,229		64,009		64,009
Effect of dilutive stock-based compensation
Stock options	1,869		—		1,810		—
Restricted stock	550		—		292		—
Total average equivalent shares	67,648		65,229		66,111		64,009
Net income per share	$	1.24	$	1.29	$	0.84	$	0.86

NOTE 16 – SEGMENT INFORMATION

We are organized into 3 reporting segments. ~~Our Beauty + Home segment sells~~Operations that sell dispensing systems, drug delivery systems, sealing solutions and services to ~~the personal care, beauty and home care markets. Our Pharma segment serves customers in~~ the prescription drug, consumer health care, injectables, and active ~~packaging markets. Our Food~~material science solutions markets form the Pharma segment. Operations that sell dispensing systems and sealing solutions primarily to the beauty, personal care and home care markets form the Beauty + ~~Beverage segment sells~~Home segment. Operations that sell dispensing systems and sealing solutions to the food and beverage ~~markets.~~

markets form the Food + Beverage segment.

The accounting policies of the segments are the same as those described in Part II, Item 8, Note 1 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. We evaluate performance of our ~~business units~~reporting segments and allocate resources based upon Adjusted EBITDA. Adjusted EBITDA is defined as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring initiatives, acquisition-related costs, net investment gains and ~~acquisition-related costs. All internal segment reporting~~losses related to observable market price changes on equity securities and ~~discussions~~other special items.

Table of ~~results with our Chief Operating Decision Maker (CODM) are based on segment Adjusted EBITDA.~~

Contents

Financial information regarding our reporting segments is shown below:



Three Months Ended March 31,	2021		2020
Total Sales:
Pharma	$	315,811	$	299,590
Beauty + Home	353,377		330,466
Food + Beverage	116,703		100,301
Total Sales	$	785,891	$	730,357
Less: Intersegment Sales:
Pharma	$	1,979	$	2,394
Beauty + Home	6,431		5,906
Food + Beverage	727		504
Total Intersegment Sales	$	9,137	$	8,804
Net Sales:
Pharma	$	313,832	$	297,196
Beauty + Home	346,946		324,560
Food + Beverage	115,976		99,797
Net Sales	$	776,754	$	721,553
Adjusted EBITDA (1):
Pharma	$	108,484	$	108,342
Beauty + Home	35,356		34,247
Food + Beverage	19,990		15,407
Corporate & Other, unallocated	(11,607)		(13,828)
Acquisition-related costs (2)	0		(2,274)
Restructuring Initiatives (3)	(3,672)		(4,839)
Net investment gain (4)	16,809		0
Depreciation and amortization	(57,438)		(50,806)
Interest Expense	(7,415)		(8,388)
Interest Income	381		175
Income before Income Taxes	$	100,888	$	78,036

(1)

Three Months Ended March 31,

2020

2019

Total Sales:

Beauty + Home

$
330,466

$
373,503

Pharma

299,590

274,494

Food + Beverage

100,301

104,727

Total Sales

$
730,357

$
752,724

Less: Intersegment Sales:

Beauty + Home

$
5,906

$
5,844

Pharma

2,394

1,793

Food + Beverage

504

627

Total Intersegment Sales

$
8,804

$
8,264

Net Sales:

Beauty + Home

$
324,560

$
367,659

Pharma

297,196

272,701

Food + Beverage

99,797

104,100

Net Sales

$
721,553

$
744,460

Adjusted EBITDA (1):

Beauty + Home

$
34,247

$
53,191

Pharma

108,342

97,357

Food + Beverage

15,407

16,691

Corporate & Other, unallocated

(13,828)

(12,755)

Acquisition-related costs (2)

(2,274)

—

Restructuring Initiatives (3)

(4,839)

(9,530)

Depreciation and amortization

(50,806)

(47,489)

Interest Expense

(8,388)

(9,214)

Interest Income

175

1,748

Income before Income Taxes

$
78,036

$
89,999

We evaluate performance of our reporting segments and allocate resources based upon Adjusted EBITDA. Adjusted EBITDA is defined as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring initiatives, acquisition-related costs, net investment gains and losses related to observable market price changes on equity securities and other special items.

(2)Acquisition-related costs include transaction costs and purchase accounting adjustments related to acquisitions and investments (see Note 17 – Acquisitions in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 for further details).

(3)Restructuring Initiatives includes expense items for the three months ended March 31, 2021 and 2020 as follows (see Note 18 – Restructuring Initiatives for further details):



Three Months Ended March 31,	2021		2020
Restructuring Initiatives by Segment
Pharma	$	35	$	(31)
Beauty + Home	1,096		4,907
Food + Beverage	(79)		103
Corporate & Other	2,620		(140)
Total Restructuring Initiatives	$	3,672	$	4,839

~~(1)~~

We evaluate performance of our reporting segments and allocate resources based upon Adjusted EBITDA. Adjusted EBITDA is defined as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring and acquisition-related costs.

(4)Net investment gain represents the change in fair value of our investment in PCT (see Note 17 – Investment in Equity Securities for further details).

Table of Contents

~~(2)~~

Acquisition-related costs include transaction costs and purchase accounting adjustments related to acquisitions and investments (see Note 17 – Acquisitions and Note 18 – Investment in Equity Securities for further details).

~~(3)~~

~~Restructuring Initiatives includes expense items for the three months ended March 31, 2020 and 2019 as follows (see Note 19 – Restructuring Initiatives for further details):~~

Three Months Ended March 31,

2020

2019

Restructuring Initiatives by Segment

Beauty + Home

$
4,907

$
8,269

Pharma

(31)

326

Food + Beverage

103

510

Corporate & Other

(140)

425

Total Restructuring Initiatives

$
4,839

$
9,530

~~NOTE 17 – ACQUISITIONS~~

~~Business Combinations~~

On February 13, 2020, we entered into a securities purchase agreement to acquire 100% of the equity interests (the “Fusion Acquisition”) of Fusion Packaging, Inc. (“Fusion”). Subsequent to the quarter end, on April 1, 2020 we closed on the Fusion Acquisition for a purchase price of approximately $165 million. Fusion, based in Dallas, TX, is a global leader in the design, engineering and distribution of luxury packaging for the beauty industry. The purchase agreement also provides an earn-out provision providing for the payment of up to $33.9 million based on Fusion’s financial performance during a 3 year measurement period.

On October 31, 2019, we completed our acquisition (the “Noble Acquisition”) of 100% of the equity interests of Noble International Holdings, Inc., Genia Medical, Inc. and JBCB Holdings, LLC (collectively referred to as “Noble”). Noble, based in Orlando, FL, is a leading provider in developing patient-centric advanced drug delivery system training devices including autoinjector, prefilled syringe, onbody and respiratory devices for the world’s leading biopharmaceutical companies and original equipment manufacturers. The purchase price was approximately $62.3 million (net of $1.6 million of cash acquired) and was funded by cash on hand. As part of the Noble Acquisition, we are also obligated to pay to the selling equityholders of Noble certain contingent consideration based on 2024 cumulative financial performance metrics defined in the purchase agreement. Based on projection as of the acquisition date, we estimated the aggregate fair value for this contingent consideration arrangement to be $2.9 million utilizing the Black-Scholes valuation model. As of December 31, 2019, $5 million was held in restricted cash pending the finalization of a working capital adjustment and indemnity escrow. During the first quarter of 2020, $1.0 million related to the working capital escrow was released from restriction, resulting in an additional $463 thousand payment due to the seller and a corresponding increase to our purchase price and associated goodwill balance. The results of Noble’s operations have been included in the Condensed Consolidated Financial Statements within our Pharma segment since the date of acquisition.

On June 5, 2019, we completed our acquisition (the “Nanopharm Acquisition”) of all of the outstanding capital stock of Nanopharm Ltd. (“Nanopharm”). Nanopharm, located in Newport, UK, is a science-driven, leading provider of orally inhaled and nasal drug product design and development services. The purchase price was approximately $38.1 million (net of $1.8 million of cash acquired) and was funded by cash on hand. The results of Nanopharm’s operations have been included in the Condensed Consolidated Financial Statements within our Pharma segment since the date of acquisition.

On May 31, 2019, we completed our acquisition (the “Gateway Acquisition”) of all of the outstanding equity interests of Gateway Analytical LLC (“Gateway”). Gateway, located in Gibsonia, PA, provides industry-leading particulate detection and predictive analytical services to customers developing injectable medicines. The purchase price was approximately $7.0 million and was funded by cash on hand. As part of the Gateway Acquisition, we are also obligated to pay to the selling equityholder of Gateway certain contingent consideration based on 2020 and 2022 performance targets defined in the purchase agreement. Based on projections as of the acquisition date, we estimated the aggregate fair value for this contingent consideration arrangement to be $3.0 million. The results of Gateway’s operations have been included in the Condensed Consolidated Financial Statements within our Pharma segment since the date of acquisition.

~~Table of Contents~~

~~The following table summarizes the assets acquired and liabilities assumedas of the acquisition date at estimated fair value.~~

2019

Assets

Cash and equivalents

$
3,427

Accounts receivable

3,504

Prepaid and other

2,478

Property, plant and equipment

4,267

Goodwill

59,143

Intangible assets

52,980

Other miscellaneous assets

430

Liabilities

Accounts payable, accrued and other liabilities

5,388

Deferred income taxes

2,592

Deferred and other non-current liabilities

1,598

Net assets acquired

$
116,651

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

2019

Weighted-Average

Estimated

Useful Life

Fair Value

(in years)

of Asset

Acquired technology

8

$
9,160

Customer relationships

11

39,379

Trademarks and trade names

4

2,457

License agreements and other

1

1,984

Total

$
52,980

Goodwill in the amount of $59.1 million was recorded related to the 2019 acquisitions which is included in the Pharma segment. Goodwill is calculated as the excess of the consideration transferred over the net assets acquired and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill largely consists of leveraging our commercial presence in selling the Noble, Nanopharm and Gateway lines of products in markets where they did not previously operate and the abilities of the acquired companies to maintain their competitive advantage from a technical viewpoint. Goodwill will not be amortized, but will be tested for impairment at least annually. For 2019 acquisitions, goodwill of $29.6 million will be deductible for tax purposes.

~~Asset Acquisition~~

On August 2, 2019, we completed our asset acquisition (the “Bapco Acquisition”) of the remaining 80% ownership interest in the capital stock of Bapco Closures Holdings Limited (“Bapco”), for $3.8 million (net of $2.9 million of cash acquired). The 20% ownership investment previously held in Bapco is now included within the intangible assets acquired. Bapco, located in Leeds, UK, provides innovative closures sealing technology that provides package integrity and tamper evidence. The results of Bapco’s operations have been included in the Condensed Consolidated Financial Statements within our Food + Beverage segment since the date of acquisition.

NOTE ~~18 –INVESTMENT~~17 – INVESTMENT IN EQUITY SECURITIES

Our investment in equity securities consisted of the following:

March 31,

December 31,

2020

2019

Equity Method Investments:

BTY

$
31,043

$
119

Kali Care

3,772

3,881

Desotec GmbH

811

858

Other Investments

3,541

3,538

$
39,167

$
8,396


	March 31, 2021		December 31, 2020
Equity Method Investments:
BTY	$	32,632	$	33,020
Sonmol	5,400		5,598
Kali Care	456		535
Desotec GmbH	897		964

Other Investments:
PureCycle	22,206		5,397
Loop	2,894		2,894
Others	1,617		1,679
	$	66,102	$	50,087

~~Table of Contents~~

Equity method investments

BTY

On ~~October~~January 1, ~~2019~~2020, we ~~entered into a strategic definitive agreement to acquire~~acquired 49% of the equity interests in 3 related companies: Suzhou Hsing Kwang, Suqian Hsing Kwang and Suzhou BTY (collectively referred to as “BTY”)~~, contingent on the settlement date~~ for an approximate purchase price of ~~the transaction.~~$32 million. We have a call option to acquire an additional 26% to 31% of BTY’s equity interests following the initial lock-up period of 5 years based on a predetermined formula. Subsequent to the second lock-up period, which ends 3 years ~~subsequent to~~after the initial lock-up period, we have a call option to acquire the remaining equity interests of BTY based on a predetermined formula. Additionally, the selling shareholders of BTY have a put option for the remaining equity interest to be acquired by Aptar based on a predetermined formula. The BTY entities are leading Chinese manufacturers of high quality, decorative metal components, metal-plastic sub-assemblies, and complete color cosmetics packaging solutions for the beauty industry.

Sonmol

On ~~January~~April 1, 2020, we invested $5 million to acquire 30% of the ~~transaction closed~~equity interests in Healthcare, Inc., Shanghai Sonmol Internet Technology Co., Ltd. and its subsidiary, Shanghai Sonmol Medical Equipment Co., Ltd. (collectively referred to as “Sonmol”), a pharmaceutical and leading Chinese digital respiratory therapeutics company that provides connected devices for ~~an approximate purchase price of $31 million for our 49% share. As of March 31, 2020, we paid approximately $20 million, with the remaining amount of $11 million included in Accounts payable, accrued~~asthma control and develops digital therapies and services platforms targeting chronic respiratory illnesses and other ~~liabilities. The amount is payable after certain conditions under the definitive agreement are fulfilled and is expected to be paid during the second quarter of 2020.~~

diseases.

Kali Care

During 2017, we invested $5 million to acquire 20% of the equity interests in Kali Care, a technology company that provides digital monitoring systems for medical devices.

During the fourth quarter of 2020, we recognized an other than temporary impairment of $3.0 million ($2.3 million after-tax) on our underlying assets in this investment as a result of a reassessment of the future value of the business and continued reduction in operating cash flows.

Desotec GmbH

During 2009, we invested €574 thousand to acquire 23% of the equity interests in Desotec GmbH, a leading manufacturer of special assembly machines for bulk processing for the pharmaceutical, beauty and home and food and beverages markets.

~~Healthcare, Inc.~~

Subsequent to the quarter end, on April 1, 2020, we invested $5 million to acquire 30% of the equity interests in Healthcare, Inc., Shanghai Sonmol Internet Technology Co., Ltd. and its subsidiary, Shanghai Sonmol Medical Equipment Co., Ltd., a pharmaceutical company that provides connected devices for asthma control.

Other investments

During August 2019, we invested an aggregate amount of $3.5 million in 2 preferred equity investments in sustainability companies Loop and ~~Purecycle~~PureCycle Technologies (“PureCycle”) that ~~are~~were accounted for at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. During 2020, we invested an additional $1.4 million in these 2 equity investments and also received $333 thousand of equity in PureCycle in exchange for our resource dedication for technological partnership and support. In November 2020, we increased the value of the PureCycle investment by $3.1 million based on observable price changes.

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In March 2021, PureCycle was purchased by a special purpose acquisition company and was subsequently listed on Nasdaq under the ticker PCT. At that time, our investment in PureCycle was converted into shares of PCT. This investment is now recorded at fair value based on observable market prices for identical assets and the change in fair value is recorded as a net investment gain or loss in the Condensed Consolidated Statements of Income. In March 2021, we recorded an unrealized gain on our investment in PureCycle of $16.8 million.

There were 0 indications of impairment ~~nor were there any changes from observable price changes~~ noted in the three months ended March 31, ~~2020.~~

2021 related to these investments.

NOTE 1918 – RESTRUCTURING INITIATIVES

In late 2017, we began a business transformation to drive profitable sales growth, increase operational excellence, enhance our approach to innovation and improve organizational effectiveness. The primary focus of the plan is the Beauty + Home segment; however, certain global general and administrative functions are also being addressed. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, we recognized ~~$4.8~~$3.7 million and ~~$9.5~~$4.8 million of restructuring costs related to this plan, respectively. Using current exchange rates, we estimate total implementation costs of approximately ~~$110~~$125 million for these initiatives, including costs that have been recognized to date. The cumulative expense incurred as of March 31, ~~2020~~2021 was ~~$91.3~~$116.7 million. We have also ~~anticipate making~~made total capital investments related to ~~the transformation~~this plan of approximately $50 million, ~~of which $40 million has been incurred to date.~~

with no further significant capital investments expected.

As of March 31, ~~2020~~2021 we have recorded the following activity associated with the business transformation:


	Beginning Reserve at 12/31/2020		Net Charges for the Three Months Ended 3/31/2021		Cash Paid		Interest and FX Impact		Ending Reserve at 3/31/2021
Employee severance	$	7,956	$	(260)	$	(2,425)	$	(163)	$	5,108
Professional fees and other costs	2,533		3,932		(3,223)		(42)		3,200
Totals	$	10,489	$	3,672	$	(5,648)	$	(205)	$	8,308

Beginning

Net Charges for

Ending

Reserve at

the Three Months

Interest and

Reserve at

12/31/2019

Ended 3/31/2020

Cash Paid

FX Impact

3/31/2020

Employee severance

$
7,090

$
4,066

$
(503)

$
187

$
10,840

Professional fees and other costs

3,609

773

(3,069)

(9)

1,304

Totals

$
10,699

$
4,839

$
(3,572)

$
178

$
12,144

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~~NOTE 20 – SUBSEQUENT EVENTS~~

On April 1, 2020, the Fusion Acquisition closed for an approximate purchase price of $165 million, plus an earn-out, to acquire 100% of the membership interests. Refer to Note 17 – Acquisitions for further details on the acquisition.

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, OR AS OTHERWISE INDICATED)

RESULTS OF OPERATIONS

Three Months Ended March 31,

2020

2019

Net sales

100.0
%

100.0
%

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

62.5

63.0

Selling, research & development and administrative

17.5

16.3

Depreciation and amortization

7.0

6.4

Restructuring initiatives

0.7

1.3

Operating income

12.3

13.0

Other expense

(1.5)

(0.9)

Income before income taxes

10.8

12.1

Net Income

7.7

8.5

Effective tax rate

29.2
%

30.0
%

Adjusted EBITDA margin (1)

20.0
%

20.8
%



Three Months Ended March 31,	2021		2020
Net sales	100.0	%	100.0	%
Cost of sales (exclusive of depreciation and amortization shown below)	62.9		62.5
Selling, research & development and administrative	17.3		17.5
Depreciation and amortization	7.4		7.0
Restructuring initiatives	0.5		0.7
Operating income	11.9		12.3
Other income (expense)	1.1		(1.5)
Income before income taxes	13.0		10.8
Net Income	10.8		7.7
Effective tax rate	16.8	%	29.2	%
Adjusted EBITDA margin (1)	19.6	%	20.0	%

~~(1)~~

~~Adjusted EBITDA margins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation of non-U.S. GAAP measures starting on page 31.~~

(1)

Adjusted EBITDA margins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation under "Non-U.S. GAAP Measures".

SIGNIFICANT DEVELOPMENTS

During the first quarter of ~~2020,~~2021, financial results and operations ~~were~~continued to be adversely impacted by the ~~current~~novel coronavirus ~~(“COVID-19”~~("COVID-19") pandemic. The significance of the impacts to our segments ~~during the first quarter of 2020~~ are discussed ~~herein~~herein. While we have certain applications that have benefited from the pandemic such as injectables and ~~include, but~~personal care, these benefits are ~~not limited to,~~more than offset by the adverse impact on sales of our beauty products ~~to our~~sold via duty free travel and retail ~~beauty business~~stores and a reduction of our products used for bottled water and on-the-go beverage customers. The extent to which the COVID-19 pandemic impacts our financial results and operations for fiscal year 2020 and going forward for all three of our business segments will depend on future developments which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the outbreak and the international actions being taken to contain and treat it. No impairments were recorded as of March 31, 2020. While the disruption is currently expected to be temporary, there is uncertainty around the duration. Due to significant uncertainty surrounding the situation, our judgment regarding future results could change and therefore our results could be materially impacted.

applications.

As each of our segments produce dispensing systems that have been determined to be essential products by various government agencies around the world, ~~the majority of~~ our facilities remained operational during the ~~first quarter of 2020.~~quarter. We ~~are taking~~have taken a variety of measures to ensure the availability and functioning of our critical infrastructure, to promote the safety and security of our employees and to support the communities in which we operate. ~~These measures include requiring remote working arrangements for employees where practicable.~~ We are following public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the promotion of social distancing and the adoption of work-from-home arrangements, and all of these policies and initiatives ~~could impact~~have impacted our operations. Due to the ~~speed with which~~dynamic nature of the situation, ~~is developing,~~ we are not able at this time to estimate the impact of COVID-19 on our future financial results and operations, but the impact could be material for the remainder of fiscal year ~~2020~~2021 and could be material during any future periods affected either directly or indirectly by this pandemic. ~~See Part II, Item 1A, “Risk Factors,” included elsewhere in this report for information on material risks associated with COVID-19.~~

NET SALES

~~We reported~~

Reported net sales for the first three months of 2021 increased 8% to $776.8 million compared to $721.6 million for the ~~quarter ended March 31, 2020, which represents a 3% decrease compared to $744.5 million reported during the~~ first ~~quarter~~three months of ~~2019.~~2020. The average U.S. dollar exchange rate ~~strengthened~~weakened compared to ~~most~~the euro and other major currencies in which we operate, ~~in,~~ resulting in a ~~negative~~positive currency translation impact of 2%5%. The ~~acquisitions~~acquisition of ~~Gateway, Nanopharm and Noble~~Fusion Packaging, Inc. ("Fusion") positively impacted sales by 1%2%. Therefore, core sales, which exclude acquisitions and changes in foreign currency rates, ~~decreased~~increased by 2%1% in the first ~~quarter~~three months of ~~2020~~2021 compared to the same period in ~~2019. During~~2020 due to the ~~first quarter~~positive impact of ~~2020,~~the increase in resin prices. Operationally, strong sales growth within our ~~consolidated core~~injectables market was offset by inventory drawdowns in our prescription and consumer healthcare markets. We also recognized strong sales ~~were negatively~~growth within our food market while the beauty and beverage markets continued to be significantly impacted by the COVID-19 ~~pandemic, especially within our Beauty + Home segment. Beauty sales within~~pandemic.


Three Months Ended March 31, 2021 Net Sales Change over Prior Year	Pharma		Beauty + Home		Food + Beverage		Total
Core Sales Growth	—	%	(3)	%	14	%	1	%
Acquisitions	—	%	6	%	—	%	2	%
Currency Effects (1)	6	%	4	%	2	%	5	%
Total Reported Net Sales Growth	6	%	7	%	16	%	8	%

(1)Currency effects are calculated by translating last year’s amounts at this segment were significantly impacted by the loss of travel and retail sales during the first quarter 2020. Our Food + Beverage segment also realized lower core sales due to the negative impact of COVID-19, especially on our single-serving beverage product sales along with a significant decline in the resin price pass-through to our customers during the quarter. Our Pharma segment realized strong core sales growth during the first quarter of 2020 as all four of our divisions posted improved results compared to the same prior year period.

year’s foreign exchange rates.

Table of Contents

Three Months Ended March 31, 2020

Beauty

Food +

Net Sales Change over Prior Year

+ Home

Pharma

Beverage

Total

Core Sales Growth

(9)
%
7
%
(2)
%
(2)
%
Acquisitions

—
%
4
%
—
%
1
%
Currency Effects (1)

(3)
%
(2)
%
(2)
%
(2)
%
Total Reported Net Sales Growth

(12)
%
9
%
(4)
%
(3)
%

~~(1)~~

~~Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.~~

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

Three Months Ended March 31,

2020

% of Total

2019

% of Total

Domestic

$
230,400

32%

$
213,871

29%

Europe

405,849

56%

431,368

58%

Latin America

50,794

7%

58,182

8%

Asia

34,510

5%

41,039

5%



Three Months Ended March 31,	2021		% of Total		2020		% of Total

Domestic	$	255,165	33	%	$	230,400	32	%
Europe	425,689		55	%	405,849		56	%
Latin America	48,965		6	%	50,794		7	%
Asia	46,935		6	%	34,510		5	%

For further discussion on net sales by reporting segment, please refer to the analysis of segment net sales and segment Adjusted EBITDA on the following pages.

COST OF SALES (EXCLUSIVE OF DEPRECIATION AND AMORTIZATION SHOWN BELOW)

Cost of sales ~~(“COS”~~("COS") as a percent of net sales ~~decreased~~increased slightly to 62.9% in the first three months of 2021 compared to 62.5% in the ~~first quarter of 2020 compared~~same period a year ago. This increase in COS is mainly due to ~~63.0% in~~ the ~~first quarter of 2019. Our COS~~decreased sales mix and smaller percentage ~~was positively impacted by our mix of business and lower material costs. The mix of business positively impacted results as we reported sales growth~~ of our ~~higher margin~~ Pharma ~~products compared to sales declines in the other two segments. We also realized approximately $5.2 million in lower raw material input costs during the quarter as both resin and metal prices declined~~business compared to the ~~prior year. We did experience some additional costs and temporary disruptions to our manufacturing capacities~~total during the first quarter of ~~2020~~2021. As discussed below, within the Pharma segment we experienced declines in sales to our higher margin prescription and consumer healthcare markets which leads to an overall increase in COS as a percentage of net sales. We also experienced higher resin costs, higher freight costs and logistic delays, and temporary inefficiencies in our manufacturing process related to the COVID-19 pandemic. For example, we declared a special bonus payment to certain employees who worked to maintain supply to our customers and keep our facilities running, which increased our COS percentage by approximately 0.4% during the first quarter of 2020.

SELLING, RESEARCH & DEVELOPMENT AND ADMINISTRATIVE

Selling, research & development and administrative expenses (“("SG~~&A”~~&A") increased by ~~approximately $5.0~~$8.2 million to ~~$126.2~~$134.3 million in the first ~~quarter~~three months of ~~2020~~2021 compared to ~~$121.2~~$126.2 million during the same period ~~in 2019.~~a year ago. Excluding changes in foreign currency rates, SG&A increased by approximately ~~$7.6~~$2.8 million in the ~~quarter.~~first three months of 2021 compared to the first three months of 2020. The increase is ~~partly~~ due to ~~$2.8~~$3.4 million of incremental ~~operational~~SG&A costs ~~during the first quarter~~from our acquisition of ~~2020~~Fusion completed subsequent to March 31, 2020. The remaining decrease in SG&A is related to ~~our acquired companies. We also recognized increases~~cost saving initiatives put in ~~professional fees~~place due to COVID-19, such as lower travel and ~~higher personnel costs, including $2.7 million in stock-based compensation, in accordance with our growth strategy.~~entertainment spending. SG&A as a percentage of net sales ~~increased~~decreased to ~~17.5%~~17.3% compared to ~~16.3%~~17.5% in the same period of the prior year primarily due to ~~the~~these cost ~~increases mentioned above.~~

savings measures.

DEPRECIATION AND AMORTIZATION

Reported depreciation and amortization expenses increased by approximately ~~$3.3~~$6.6 million to ~~$50.8~~$57.4 million in the first ~~quarter~~three months of ~~2020~~2021 compared to ~~$47.5~~$50.8 million during the same period a year ago. Excluding changes in foreign currency rates, depreciation and amortization increased by approximately ~~$4.4~~$4.3 million in the ~~quarter~~first three months of 2021 compared to the same period ~~in 2019. This~~a year ago. The majority of this increase is ~~partly~~ due to ~~$2.0~~$2.4 million of incremental depreciation and amortization costs related to our ~~acquisitions.~~Fusion acquisition. We have also increased our capital spending during the ~~first quarter~~current and ~~the~~ prior year to support our growth strategy. Depreciation and amortization as a percentage of net sales increased to ~~7.0%~~7.4% in the first ~~quarter~~three months of ~~2020~~2021 compared to ~~6.4%~~7.0% in the same period of the prior ~~year primarily due to the incremental increase in expenses noted above.~~

year.

RESTRUCTURING INITIATIVES

In late 2017, we began a business transformation plan to drive profitable sales growth, increase operational excellence, enhance our approach to innovation and improve organizational effectiveness. The primary focus of the plan is the Beauty + Home segment; however, certain global general and administrative functions are also being addressed. Restructuring costs related to this plan for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 are as follows:



Three Months Ended March 31,	2021		2020
Restructuring Initiatives by Segment
Pharma	$	35	$	(31)
Beauty + Home	1,096		4,907
Food + Beverage	(79)		103
Corporate & Other	2,620		(140)
Total Restructuring Initiatives	$	3,672	$	4,839

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We have successfully implemented the vast majority of our planned initiatives related to our transformation plan, including successfully implementing new commercial strategies, reducing costs and adding capabilities in Asia and in fast growing application fields that we believe will position the segment for future growth and profitability. However, the COVID-19 global pandemic has caused several initiatives that were expected to be completed in 2020 to be delayed, including the planned closure of two facilities in the U.S., and resulted in a significant decline in our beauty business. While our Beauty + Home segment continues to be profitable, the disruption caused by the pandemic, including higher operating costs, have more than offset any expected growth in earnings from our transformation. Though we believe the beauty market remains a long-term attractive growth market and we remain committed to completing our remaining transformation initiatives, we expect the return to growth to be gradual and non-linear as this market is highly correlated to the return to post-pandemic normal consumer behavior, including travel, which has proven to be sporadic and uncertain. We estimate total implementation costs of approximately ~~$110~~$125 million ~~including costs that~~for these initiatives. The cumulative expense incurred to date is $116.7 million. We have ~~been recognized to date. We~~ also ~~anticipate making~~made capital investments ~~related to the business transformation~~ of approximately $50 million ~~of which $40 million has been incurred~~related to date. Based on our ongoing restructuring initiatives, we are progressing towards our initial target of $80 million annualized incremental EBITDA by the end of 2020, principally within the Beauty + Home segment. However, in addition to impacts of COVID-19, ongoing changes in customer and vendor negotiations, material indices, macro-economic trends and other factors represent continuing headwinds to the Beauty + Home segment, and have offset the consolidated net benefits from these initiatives.

this plan, with no further significant capital investments expected.

OPERATING INCOME

~~Operating~~

For the first three months of 2021, operating income ~~decreased~~increased approximately ~~$8.6~~$4.1 million to $92.6 million compared to $88.5 million in the ~~first quarter of 2020 compared to the~~ same period ~~a year ago.~~of the prior year. Excluding changes in foreign currency rates, operating income decreased by approximately ~~$6.2~~$2.8 million in the ~~quarter~~first three months of 2021 compared to the same period a year ago. The majority of this decrease is due to the impact of lower sales and operational inefficiencies related to the COVID-19 pandemic when comparing the current quarter results to the pre-COVID-19 results in the first quarter of 2020. We also experienced higher input costs with increased resin and transportation prices. Operating income as a percentage of net sales ~~declined~~decreased to ~~12.3%~~11.9% in the first ~~quarter~~three months of ~~2020~~2021 compared to ~~13.0%~~12.3% for the same period in the prior year mainly due to the increases in SG&A and depreciation and amortization when compared to a lower sales base as discussed above. These cost increases are partially offset by our lower COS percentage and the reduction in restructuring costs during the first quarter of 2020 compared to the prior year.

NET OTHER ~~EXPENSE~~

INCOME (EXPENSE)

Net other ~~expense in the first quarter of 2020 increased $3.3~~income (expense) improved $18.7 million to $8.3 million of income for the three months ended March 31, 2021 from $10.4 million ~~from $7.1 million~~of expense in the same period of the prior year. ~~Miscellaneous expenses increased~~$16.8 million of this improvement is a gain on our investment in PureCycle Technologies (“PureCycle”). As discussed in Note 17 - Investment in Equity Securities of the Condensed Consolidated Financial Statements, our investment in PureCycle was converted into shares of PCT, a publicly traded entity, during the first quarter of 2021. This investment is now recorded at fair value based on observable market prices for identical assets and the change in fair value is recorded as a net investment gain or loss in the Condensed Consolidated Statements of Income. We believe that investment gains and losses, whether realized from sales or unrealized from changes in market prices, are not considered relevant to understanding our reported consolidated earnings or evaluating our periodic economic performance. We believe the net investment gains and losses recorded in earnings, including the changes in market prices for equity securities, in any given period has little analytical or predictive value. We also realized $1.0 million of lower interest expense during the first quarter of 2021 as we continue to reduce outstanding debt with our strong free cash flow generation over the past year. Within miscellaneous expense, an increase in pension costs was more than offset by ~~approximately $1.9 million in part due~~a net favorable impact on our hedging activities during the first quarter of 2021 compared to the ~~high costs to hedge certain Latin American and Asian currencies. We also experienced higher pension costs due to the decline in discount rates in 2020 compared to 2019.~~

~~EFFECTIVE TAX RATE~~

prior year period.

PROVISION FOR INCOME TAXES

The tax provision for interim periods is determined using the estimated annual effective consolidated tax rate, based on the current estimate of full-year earnings and related estimated full year-taxes, adjusted for the impact of discrete quarterly items. The effective tax rate for the three months ended March 31, 2021 and 2020, respectively, was 16.8% and ~~2019 was~~ 29.2% ~~and 30.0%, respectively.~~. The ~~decrease in the~~reported effective tax rate for the three months ended March 31, ~~2020 was primarily due to~~2021 reflects additional tax benefits from employee stock-based compensation of $5.1 million and a ~~larger tax~~$2.9 million benefit from ~~employee share-based compensation offset~~changes in ~~part by~~U.S. state tax laws during the quarter. A lower tax rate in France for 2021 and a more favorable mix of ~~other discrete items.~~

earnings also contributed to the lower tax rate in the current quarter.

NET INCOME ATTRIBUTABLE TO APTARGROUP, INC.

We reported net income attributable to AptarGroup of ~~$55.3~~$84.0 million in the three months ended March 31, ~~2020,~~2021, compared to ~~$63.0~~$55.3 million for the same period in the prior year.

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PHARMA SEGMENT

Operations that sell dispensing systems, drug delivery systems, sealing solutions and services to the prescription drug, consumer health care, injectables and active material science solutions markets form the Pharma segment.



Three Months Ended March 31,	2021			2020

Net Sales	$	313,832		$	297,196
Adjusted EBITDA (1)	108,484			108,342
Adjusted EBITDA margin (1)	34.6		%	36.5		%

(1)Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization,unallocated corporate expenses,restructuring initiatives, acquisition-related costs, net investment gains and losses related to observable market price changes on equity securities and other special items. Adjusted EBITDA margins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation under "Non-U.S. GAAP Measures".

Net sales for the first three months of 2021 increased by 6% to $313.8 million compared to $297.2 million in the first three months of 2020. Changes in currency rates positively impacted net sales by 6%. Therefore, core sales for the first three months of 2021 were even with the same period of the prior year. Core sales of our products to the injectables and active material science solutions markets increased 14% and 5% respectively due to strong demand for our vaccine components and active material science solutions. Core sales to the prescription drug and consumer health care markets decreased 8% and 1%, respectively as fewer non-critical doctor visits and lower incidence of cold and flu illnesses this season have resulted in certain Pharma customers drawing down inventory levels of allergy and other respiratory treatment delivery devices.


Three Months Ended March 31, 2021 Net Sales Change over Prior Year	Prescription Drug		Consumer Health Care		Injectables		Active Material Science Solutions		Total
Core Sales Growth	(8)	%	(1)	%	14	%	5	%	—	%

Currency Effects (1)	6	%	7	%	7	%	3	%	6	%
Total Reported Net Sales Growth	(2)	%	6	%	21	%	8	%	6	%

(1)Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.

Adjusted EBITDA in the first three months of 2021 increased slightly to $108.5 million compared to $108.3 million reported in the same period of the prior year. While first quarter core sales were at the same level as the first quarter of 2020, we experienced lower margins due to a shift in mix away from our more profitable prescription and consumer healthcare products. This reduction in margin was more than offset by cost savings initiatives and the translation of our foreign entity results to the U.S. dollar.

BEAUTY + HOME SEGMENT

Operations that sell dispensing systems and sealing solutions to the beauty, personal care ~~beauty~~ and home care markets form the Beauty + Home segment.

Three Months Ended March 31,

2020

2019

Net Sales

$
324,560

$
367,659

Adjusted EBITDA (1)

34,247

53,191

Adjusted EBITDA margin (1)

10.6%

14.5%

~~(1)~~

Adjusted EBITDA is calculated as earnings before net interest, taxes, depreciation, amortization, unallocated corporate expenses, restructuring and acquisition-related costs. Adjusted EBITDA margins are calculated as Adjusted EBITDA divided by Reported Net Sales. See the reconciliation of non-U.S. GAAP measures starting on page 31.



Three Months Ended March 31,	2021			2020

Net Sales	$	346,946		$	324,560
Adjusted EBITDA (1)	35,356			34,247
Adjusted EBITDA margin (1)	10.2		%	10.6		%

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~~Reported~~For the first three months of 2021, net sales ~~for the quarter ended March 31, 2020 decreased 12%~~increased 7% to ~~$324.6~~$346.9 million compared to ~~$367.7~~$324.6 million in the first ~~quarter~~three months of the prior year. Changes in currency rates ~~negatively~~positively impacted net sales by ~~3%. Therefore, core~~4% while our acquisition of Fusion improved sales ~~decreased 9%~~by 6% in the first quarter of ~~2020~~2021. Therefore, core sales decreased by 3% in the first three months of 2021 compared to the same ~~quarter of~~period in the prior year. The COVID-19 pandemic continued to negatively ~~impacted~~impact core sales to the beauty market during the first quarter of ~~2020.~~2021 due to lower retail sales and duty free sales related to domestic and international travel reductions. Core sales of our products to the beauty market decreased ~~13%~~10% during the first three months of 2021 as we experienced ~~reduced~~a reduction in orders from customers providing ~~prestige beauty~~both fragrance and skin care products ~~mainly~~as the first quarter of 2020 was only in the ~~travel retail and standard retail settings. Many beauty stores began closing toward the end~~beginning stages of the ~~quarter~~COVID-19 pandemic. However, personal care core sales increased 2% as increased sales of our hand sanitizer and liquid soap dispensers more than compensated for softness in ~~response~~our deodorant, hair care and sun care applications while many consumers continue to ~~government~~ shelter in ~~place regulations.~~place. Core sales to the ~~personal care and~~ home care markets ~~decreased 5% and 6%, respectively. Increased~~increased 13% on strong demand for our ~~dispensing solutions for hand sanitizers~~air care, industrial and ~~cleaners was not enough to offset declines in other personal care and home care categories such as sun care and hair care applications, which were also negatively impacted~~automotive products.


Three Months Ended March 31, 2021 Net Sales Change over Prior Year	Personal Care		Beauty		Home Care		Total
Core Sales Growth	2	%	(10)	%	13	%	(3)	%
Acquisitions	—	%	11	%	—	%	6	%
Currency Effects (1)	4	%	5	%	4	%	4	%
Total Reported Net Sales Growth	6	%	6	%	17	%	7	%

(1)Currency effects are calculated by ~~travel restrictions and shelter in place regulations.~~

Three Months Ended March 31, 2020

Personal

Home

Net Sales Change over Prior Year

Care

Beauty

Care

Total

Core Sales Growth

(5)
%
(13)
%
(6)
%
(9)
%
Currency Effects (1)

(2)
%
(3)
%
(2)
%
(3)
%
Total Reported Net Sales Growth

(7)
%
(16)
%
(8)
%
(12)
%
translating last year’s amounts at this year’s foreign exchange rates.

~~(1)~~

~~Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.~~

Adjusted EBITDA in the first ~~quarter~~three months of ~~2020 decreased 36%~~2021 increased 3% to $35.4 million compared to $34.2 million ~~compared to $53.2 million~~reported in the same period in the prior year. As discussed above, the COVID-19 pandemic affected our profitability as sales were impacted by travel restrictions and government shelter in place regulations. Our profitability was further impacted by special bonus payments to certain employees who worked to maintain supply to our customers and keep our facilities running as well as lower overhead absorptionThis improvement is due to ~~fluctuations in demand primarily in~~the incremental profit from our facilities that manufacture beauty products. During the first quarter of 2020, we experienced a favorable impact of approximately $1.4 million due to lower raw material input costs, however this was not enough to offset the general economic uncertainties which has led to lower sales to our customers across our markets.

~~PHARMA SEGMENT~~

~~Operations that sell drug delivery, sealing and active packaging solutions primarily to the prescription drug, consumer health care, injectables and active packaging markets form the Pharma segment.~~

Three Months Ended March 31,

2020

2019

Net Sales

$
297,196

$
272,701

Adjusted EBITDA (1)

108,342

97,357

Adjusted EBITDA margin (1)

36.5%

35.7%

~~(1)~~

Net sales for the Pharma segment increased 9% in the first quarter of 2020 to $297.2 million compared to $272.7 million in the first quarter of 2019. Changes in currencies negatively affected net sales by 2% while our acquisitions of Gateway, Nanopharm and Noble positively impacted sales by 4% in the first quarter of 2020. Therefore, core sales increased by 7% in the first quarter of 2020 compared to the first quarter of 2019. Our Pharma segment had another good quarter with core sales growth across each end market with particularly strong growth in our injectables and active packaging businesses. As these two markets are currently smaller than our prescription and consumer health care markets, there is a smaller impact on the overall segment growth. The segment was not significantly impacted by the COVID-19 pandemicFusion acquisition during the first quarter of ~~2020. Core~~2021, partially offset by lower sales to the ~~prescription drug~~beauty market increased 2%, mainly on continued growth in sales of our allergic rhinitis products. Core sales to the consumer health care market also increased 2% as increased demand for our products used on nasal decongestant and eye care treatments more than compensated for some softness in demand for our nasal saline products. Injectables core sales grew 21% on increased demand across a variety of components while active packaging core sales improved 26% primarily due to our new Activ Blister packaging for the launch of an oral HIV preventative drug.

~~Table of Contents~~

Three Months Ended March 31, 2020

Prescription

Consumer

Active

Net Sales Change over Prior Year

Drug

Health Care

Injectables

Packaging

Total

Core Sales Growth

2
%
2
%
21
%
26
%
7
%
Acquisitions

1
%
—
%
19
%
—
%
4
%
Currency Effects (1)

(2)
%
(1)
%
(3)
%
(1)
%
(2)
%
Total Reported Net Sales Growth

1
%
1
%
37
%
25
%
9
%

~~(1)~~

~~Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.~~

~~Adjusted EBITDA in the first quarter of 2020 increased 11% to $108.3 million compared to $97.4 million reported in the same period of the prior year. The strong product sales growth discussed~~noted above along with incremental profit related to our acquisitions led to the increase in reported results for the first quarter of 2020 compared to the first quarter of 2019. While we didn’t experience a significant impact from COVID-19 on our Pharma segment sales, we did recognize the special bonus payments discussed above which negatively impacted our adjusted EBITDAhigher resin and other input costs incurred during the first quarter of ~~2020.~~

2021. These cost increases are partially offset by operational improvements which are mainly driven from our transformation initiatives.

FOOD + BEVERAGE SEGMENT

Operations that sell dispensing systems and sealing solutions to the food and beverage markets form the Food + Beverage segment.

Three Months Ended March 31,

2020

2019

Net Sales

$
99,797

$
104,100

Adjusted EBITDA (1)

15,407

16,691

Adjusted EBITDA margin (1)

15.4%

16.0%

~~(1)~~



Three Months Ended March 31,	2021			2020

Net Sales	$	115,976		$	99,797
Adjusted EBITDA (1)	19,990			15,407
Adjusted EBITDA margin (1)	17.2		%	15.4		%

Net sales for the ~~quarter ended March 31, 2020 decreased approximately 4%~~first three months of 2021 increased by 16% to ~~$99.8~~$116.0 million compared to ~~$104.1~~$99.8 million in the first ~~quarter~~three months of 2020. Changes in currency rates positively impacted net sales by 2%. Therefore, core sales increased by 14% in the first three months of 2021 compared to the same period in the prior year. Strong product sales and the pass-through of higher resin costs positively impacted the first three months of 2021 by $7.5 million and $6.2 million, respectively. Core sales to the food market increased 19% while core sales to the beverage market increased 2% in the first three months of 2021 compared to the same period of the prior year. ~~Foreign currency rates had an unfavorable impact~~For the food markets, the strong pantry stocking that we experienced during the fourth quarter of ~~2% on total segment sales. Therefore, core sales decreased by 2% in~~2020 continued into the first quarter of ~~2020 compared~~2021 as consumers continued to cook at home during the ~~first~~COVID-19 pandemic. While the beverage market reported 2% growth in core sales during the quarter, ~~of 2019. This decrease~~this increase is ~~due to the passing on of lower resin costs to our customers as well as lower single-serving beverage closure sales which appears to be~~all related to the ~~COVID-19 crisis. For the food market, we realized increased sales~~pass through of higher resin prices. Sales of our ~~products used on dairy and spreads applications. For the beverage market, increased demand for our~~premium bottled water ~~products was not enough to offset a decline in sales of our~~and on-the-go functional drink products ~~that were significantly affected~~continued to be negatively impacted by the COVID-19 ~~impacts.~~

Three Months Ended March 31, 2020

Net Sales Change over Prior Year


Food

Beverage

Total

Core Sales Growth

2
%
(13)
%
(2)
%
Currency Effects (1)

(1)
%
(2)
%
(2)
%
Total Reported Net Sales Growth

1
%
(15)
%
(4)
%
pandemic.

~~(1)~~

~~Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.~~

Table of Contents


Three Months Ended March 31, 2021 Net Sales Change over Prior Year	Food		Beverage		Total
Core Sales Growth	19	%	2	%	14	%

Currency Effects (1)	2	%	2	%	2	%
Total Reported Net Sales Growth	21	%	4	%	16	%

(1)Currency effects are calculated by translating last year’s amounts at this year’s foreign exchange rates.

Adjusted EBITDA in the first ~~quarter~~three months of ~~2020 decreased 8%~~2021 increased 30% to ~~$15.4~~$20.0 million compared to ~~$16.7~~$15.4 million reported in the same period of the prior year. ~~The COVID-19 impacts~~Strong product sales to the food market, as discussed above, ~~along with special bonus payments to certain employees who worked to maintain supply to~~drove a large part of our ~~customers and keep our facilities running, more than offset the benefits we received from lower resin input costs and other operational improvements realized~~adjusted EBITDA growth during the first quarter of ~~2020.~~

2021.

CORPORATE & OTHER

In addition to our three reporting segments, we assign certain costs to “Corporate & Other,” which is presented separately in Note 16 – Segment Information toof the Notes to the Condensed Consolidated Financial Statements. For Corporate & Other, Adjusted EBITDA (which excludes net interest, taxes, depreciation, amortization, restructuring initiatives, acquisition-related costs, net investment gains and ~~acquisition-related costs)~~losses related to observable market price changes on equity securities and other special items) primarily includes certain professional fees, compensation and information system costs which are not allocated directly to our reporting segments. ~~For the quarter ended March 31, 2020,~~ Corporate & Other expenses ~~increased~~in the first three months of 2021 decreased to $11.6 million compared to $13.8 million reported in the same period of the prior year. On a constant currency basis, Corporate & Other expense decreased $3.5 million. As discussed above, part of this decrease is due to cost saving initiatives put in place due to COVID-19. We also benefited from ~~$12.8 million in~~a net favorable impact on our hedging activities during the first quarter of ~~2019. This increase is mainly due to higher stock-compensation expense, professional feesand other personnel costs as we continue to implement our growth strategy.~~

2021.

~~Table of Contents~~

NON-U.S. GAAP ~~MEASURE~~S

MEASURES

In addition to the information presented herein that conforms to U.S. GAAP, we also present financial information that does not conform to U.S. GAAP, which are referred to as non-U.S. GAAP financial measures. Management may assess our financial results both on a U.S. GAAP basis and on a non-U.S. GAAP basis. We believe it is useful to present these non-U.S. GAAP financial measures because they allow for a better period over period comparison of operating results by removing the impact of items that, in management’s view, do not reflect our core operating performance. These non-U.S. GAAP financial measures should not be considered in isolation or as a substitute for U.S. GAAP financial results, but should be read in conjunction with the unaudited Condensed Consolidated Statements of Income and other information presented herein. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures. Further, investors are urged to review and consider carefully the adjustments made by management to the most directly comparable U.S. GAAP financial measure to arrive at these non-U.S. GAAP financial measures.

In our Management’s Discussion and Analysis, we exclude the impact of foreign currency translation when presenting net sales information, which we define as “constant currency.” Changes in net sales excluding the impact of foreign currency translation is a non-U.S. GAAP financial measure. As a worldwide business, it is important that we take into account the effects of foreign currency translation when we view our results and plan our strategies. Consequently, when our management looks at our financial results to measure the core performance of our business, we may exclude the impact of foreign currency translation by translating our prior period results at current period foreign currency exchange rates. As a result, our management believes that these presentations are useful internally and may be useful to investors. We also exclude the impact of material acquisitions when comparing results to prior periods. Changes in operating results excluding the impact of acquisitions are non-U.S. GAAP financial measures. We believe it is important to exclude the impact of acquisitions on period over period results in order to evaluate performance on a more comparable basis.

We present earnings before net interest and taxes (“EBIT”) and earnings before net interest, taxes, depreciation and amortization (“EBITDA”). We also present our adjusted earnings before net interest and taxes (“Adjusted EBIT”) and ~~consolidated~~ adjusted earnings before net interest, taxes, depreciation and amortization (“Adjusted EBITDA”), both of which exclude the business transformation charges (restructuring initiatives), acquisition-related costs, ~~and~~ purchase accounting adjustments related to acquisitions and ~~investments.~~investments and net investment gains and losses related to observable market price changes on equity securities. Our ~~“Outlook” discussion below~~Outlook is also provided on a non-U.S. GAAP basis because certain reconciling items are dependent on future events that either cannot be controlled, such as tax and exchange rates, or reliably predicted because they are not part of our routine activities, such as restructuring initiatives and acquisition-related costs.

We provide a reconciliation of Net Debt to Net Capital as a non-U.S. GAAP measure. “Net Debt” is calculated as interest bearing debt less cash and equivalents and short-term investments while “Net Capital” is calculated as stockholders’ equity plus Net Debt. Net Debt to Net Capital measures a company’s financial leverage, which gives users an idea of a company's financial structure, or how it is financing its operations, along with insight into its financial strength. We believe that it is meaningful to take into consideration the balance of our cash, ~~and~~cash equivalents and short-term investments when evaluating our leverage. If needed, such assets could be used to reduce our gross debt position.

Table of Contents

Finally, we provide a reconciliation of free cash flow as a non-U.S. GAAP measure. Free cash flow is calculated as cash provided by operating activities less capital expenditures. We use free cash flow to measure cash flow generated by operations that is available for dividends, share repurchases, acquisitions and debt repayment. We believe that it is meaningful to investors in evaluating our financial performance and measuring our ability to generate cash internally to fund our initiatives.


	Three Months Ended
	March 31, 2021

	Consolidated			Pharma			Beauty + Home			Food + Beverage			Corporate & Other		Net Interest
Net Sales	$	776,754		$	313,832		$	346,946		$	115,976		$	—	$	—

Reported net income	$	83,939
Reported income taxes	16,949
Reported income before income taxes	100,888			87,670			9,688			10,010			554		(7,034)
Adjustments:
Restructuring initiatives	3,672			35			1,096			(79)			2,620
Net investment gain	(16,809)												(16,809)


Adjusted earnings before income taxes	87,751			87,705			10,784			9,931			(13,635)		(7,034)
Interest expense	7,415														7,415
Interest income	(381)														(381)
Adjusted earnings before net interest and taxes (Adjusted EBIT)	94,785			87,705			10,784			9,931			(13,635)		—
Depreciation and amortization	57,438			20,779			24,572			10,059			2,028

Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)	$	152,223		$	108,484		$	35,356		$	19,990		$	(11,607)	$	—

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)	19.6		%	34.6		%	10.2		%	17.2		%

Table of Contents


	Three Months Ended
	March 31, 2020

	Consolidated			Pharma			Beauty + Home			Food + Beverage			Corporate & Other		Net Interest
Net Sales	$	721,553		$	297,196		$	324,560		$	99,797		$	—	$	—

Reported net income	$	55,250
Reported income taxes	22,786
Reported income before income taxes	78,036			89,854			7,108			5,962			(16,675)		(8,213)
Adjustments:
Restructuring initiatives	4,839			(31)			4,907			103			(140)

Transaction costs related to acquisitions	1,384			—			1,384			—			—
Purchase accounting adjustments related to acquisitions and investments	1,390			1,128			262			—			—
Adjusted earnings before income taxes	85,649			90,951			13,661			6,065			(16,815)		(8,213)
Interest expense	8,388														8,388
Interest income	(175)														(175)
Adjusted earnings before net interest and taxes (Adjusted EBIT)	93,862			90,951			13,661			6,065			(16,815)		—
Depreciation and amortization	50,806			17,891			20,586			9,342			2,987
Purchase accounting adjustments included in Depreciation and amortization above	(500)			(500)			—			—			—
Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)	$	144,168		$	108,342		$	34,247		$	15,407		$	(13,828)	$	—

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)	20.0		%	36.5		%	10.6		%	15.4		%

Table of Contents

Three Months Ended

March 31, 2020


Consolidated

Beauty + Home

Pharma

Food + Beverage

Corporate & Other

Net Interest
Net Sales

$
721,553

$
324,560

$
297,196

$
99,797

$
-

$
-

Reported net income

$
55,250

Reported income taxes

22,786

Reported income before income taxes

78,036

7,108

89,854

5,962

(16,675)

(8,213)
Adjustments:

Restructuring initiatives

4,839

4,907

(31)

103

(140)

Transaction costs related to acquisitions

1,384

1,384

Purchase accounting adjustments related to acquisitions and investments

1,390

262

1,128

Adjusted earnings before income taxes

85,649

13,661

90,951

6,065

(16,815)

(8,213)
Interest expense

8,388

8,388
Interest income

(175)

(175)
Adjusted earnings before net interest and taxes (Adjusted EBIT)

93,862

13,661

90,951

6,065

(16,815)

-
Depreciation and amortization

50,806

20,586

17,891

9,342

2,987

-
Purchase accounting adjustments included in Depreciation and amortization above

(500)

(500)

Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)

$
144,168

$
34,247

$
108,342

$
15,407

$
(13,828)

$
-

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)

20.0%

10.6%

36.5%

15.4%

Three Months Ended

March 31, 2019


Consolidated

Beauty + Home

Pharma

Food + Beverage

Corporate & Other

Net Interest
Net Sales

$
744,460

$
367,659

$
272,701

$
104,100

$
-

$
-

Reported net income

$
62,999

Reported income taxes

27,000

Reported income before income taxes

89,999

24,181

81,258

7,716

(15,690)

(7,466)
Adjustments:

Restructuring initiatives

9,530

8,269

326

510

425

Adjusted earnings before income taxes

99,529

32,450

81,584

8,226

(15,265)

(7,466)
Interest expense

9,214

9,214
Interest income

(1,748)

(1,748)
Adjusted earnings before net interest and taxes (Adjusted EBIT)

106,995

32,450

81,584

8,226

(15,265)

-
Depreciation and amortization

47,489

20,741

15,773

8,465

2,510

-
Adjusted earnings before net interest, taxes, depreciation and amortization (Adjusted EBITDA)
��
$
154,484

$
53,191

$
97,357

$
16,691

$
(12,755)

$
-

Adjusted EBITDA margins (Adjusted EBITDA / Reported Net Sales)

20.8%

14.5%

35.7%

16.0%


Net Debt to Net Capital Reconciliation	March 31,			December 31,
	2021			2020

Notes payable, revolving credit facility and overdrafts	$	1,036		$	52,200
Current maturities of long-term obligations, net of unamortized debt issuance costs	64,776			65,666
Long-Term Obligations, net of unamortized debt issuance costs	1,037,983			1,054,998
Total Debt	1,103,795			1,172,864
Less:
Cash and equivalents	254,852			300,137
Short-term investments	—			243
Net Debt	$	848,943		$	872,484

Total Stockholders' Equity	$	1,900,795		$	1,850,785
Net Debt	848,943			872,484
Net Capital	$	2,749,738		$	2,723,269

Net Debt to Net Capital	30.9		%	32.0		%

~~Table of Contents~~


Free Cash Flow Reconciliation	March 31,		March 31,
	2021		2020

Net Cash Provided by Operations	$	72,185	$	85,033

Less:
Capital Expenditures	63,884		61,625
Free Cash Flow	$	8,301	$	23,408

Net Debt to Net Capital Reconciliation

March 31,

December 31,

2020

2019

Notes payable, revolving credit facility and overdrafts

$
220,511

$
44,259

Current maturities of long-term obligations, net of unamortized debt issuance costs

65,049

65,988

Long-Term Obligations, net of unamortized debt issuance costs

1,075,745

1,085,453

Total Debt

1,361,305

1,195,700

Less:

Cash and equivalents

410,840

241,970

Net Debt

$
950,465

$
953,730

Total Stockholders' Equity

$
1,587,623

$
1,572,252

Net Debt

950,465

953,730

Net Capital

$
2,538,088

$
2,525,982

Net Debt to Net Capital

37.4%

37.8%

Free Cash Flow Reconciliation


March 31,


March 31,

2020

2019

Net Cash Provided by Operations

$
85,033

$
77,636

Less:

Capital Expenditures

61,625

51,742

Free Cash Flow

$
23,408

$
25,894

FOREIGN CURRENCY

Because of our international presence, movements in exchange rates may have a significant impact on the translation of the financial statements of our foreign subsidiaries. Our primary foreign exchange exposure is to the euro, but we also have foreign exchange exposure to the Chinese yuan, Brazilian real, Mexican peso, Swiss franc and other Asian, European and South American currencies. A ~~strengthening~~weakening U.S. dollar relative to foreign currencies has ~~a dilutive~~an additive translation effect on our financial statements. Conversely, a ~~weakening~~strengthening U.S. dollar has ~~an additive~~a dilutive effect. In some cases, we sell products denominated in a currency different from the currency in which the related costs are incurred. We manage our exposures to foreign exchange principally with forward exchange contracts to economically hedge recorded transactions and firm purchase and sales commitments denominated in foreign currencies. ChangesAny changes in exchange rates on such inter-country sales could materially impact our results of operations. During the first quarter of ~~2020~~2021, the U.S. dollar ~~strengthened~~weakened compared to the ~~euro~~major European currencies and ~~other currencies in~~the Chinese yuan, while it appreciated against most Latin America ~~and Asia.~~currencies. This resulted in ~~a dilutive~~an additive impact on our translated results during the first quarter of ~~2020~~2021 when compared to the first quarter of ~~2019.~~

2020.

QUARTERLY TRENDS

Our results of operations in the last quarter of the year typically are negatively impacted by customer plant shutdowns in December. ~~In addition to~~Several of the ~~impacts~~markets we serve are impacted by the seasonality of ~~COVID-19,~~underlying consumer products. This, in turn, may have an impact on our net sales and results of operations for those markets. However, we believe the diversification of our product portfolio minimizes fluctuations in aour overall quarterly ~~period could be impacted by factors such as the~~financial statements and results in immaterial seasonality ~~of certain products within~~impact on our segments, changes in foreign currency rates, changes in product mix, changes in material costs, changes in growth rates in the markets to which our products are sold and changes in general economic conditions in any of the countries in which we do business.

Condensed Consolidated Financials Statements when viewed quarter over quarter.

LIQUIDITY AND CAPITAL RESOURCES

Given the diversification of our segments, the low level of leverage relative to others in our industry and our ability to generate strong levels of cash flow from operations, we believe we are in a strong financial position and have the financial resources to meet our business requirements in the foreseeable future. ~~Our Pharma segment provided strong operating~~We have historically used cash ~~flows to balance out the temporary softness in some~~flow from operations, our revolving credit facilities, proceeds from stock options and debt, as needed, as our primary sources of ~~our Beauty + Home and Food + Beverage markets during the first quarter of 2020.~~liquidity. Our primary uses of liquidity are to invest in equipment and facilities that are necessary to support our growth ~~cost efficiencies~~ and to make acquisitions that will contribute to the achievement of our strategic objectives. Amid the COVID-19 pandemic, we ~~are~~have been focused on preserving our ~~liquidity and therefore we have temporarily suspended repurchasing shares of our common stock and contributions to our defined benefit plans. However,~~liquidity; however, we intend to continue to pay quarterly dividends to our stockholders, invest in our business and make acquisitions as ~~considered~~we consider necessary to achieve our strategic objectives. In the event that customer demand ~~would decrease~~decreases significantly for a prolonged period of time due to the COVID-19 pandemic and adversely ~~impact~~impacts our cash ~~flow~~flows from operations, we would have the ability to restrict and significantly reduce capital expenditure levels as well as evaluate our acquisition strategy. A prolonged and significant reduction in capital expenditure levels could increase future repairs and maintenance costs as well as have a negative impact on operating margins if we were unable to invest in new innovative products.

Cash and equivalents ~~increased~~and restricted cash decreased to ~~$414.8~~$259.7 million at March 31, ~~2020~~2021 from ~~$247.0~~$305.0 million at December 31, ~~2019.~~2020. Total short and long-term interest bearing debt of ~~$1.4~~$1.1 billion at March 31, ~~2020 increased from~~2021 was slightly lower than the $1.2 billion at December 31, ~~2019 resulting from $175.0 million in net proceeds from our group credit facility during the first quarter of 2020 the majority of which was utilized to fund the second quarter Fusion acquisition.~~2020. The ratio of our Net Debt (interest bearing debt less cash and equivalents) to Net Capital (stockholders’ equity plus Net Debt) decreased to ~~37.4%~~30.9% at March 31, ~~2010~~2021 compared to ~~37.8%~~32.0% at December 31, ~~2019.~~2020. See the reconciliation ~~of non-U.S.~~under "Non-U.S. GAAP ~~measures starting on page 31.~~

Measures".

In the first three months of ~~2020,~~2021, our operations provided approximately ~~$85.0~~$72.2 million in net cash flow compared to ~~$77.6~~$85.0 million for the same period a year ago. In both periods, cash flow from operations was primarily derived from earnings before depreciation and amortization. The ~~increase~~decrease in cash provided by operations during the first three months of ~~2020~~2021 is primarily attributable to ~~the lower restructuring costs and better~~an increase in working capital ~~management.~~

requirements which offset higher net income.

We used ~~$88.1~~$63.9 million in cash for investing activities during the first three months of ~~2020~~2021 compared to ~~$39.1~~$88.1 million during the same period a year ago. Our investment in capital projects increased ~~$9.9~~$2.3 million during the first three months of ~~2020~~2021 compared to the first three months of ~~2019, as projects in progress at year end were paid during the first quarter of~~ 2020. During the first three months of 2020, we invested $20.4 million in our 49% equity interest of BTY, which is accounted for as an equity method investment. Additionally, we released $1.0 million relating to the working capital escrow settlement and paid an additional $463 thousand as a working capital payment related to our acquisition of Noble. Our ~~2020~~2021 estimated cash outlays for capital expenditures are expected to be in the range of approximately ~~$220~~$300 to ~~$240~~$330 million but could vary due to changes in exchange rates as well as the timing of capital projects.

Our decline in cash utilization is a result of no payments for business combinations or equity investments during the first three months of 2021, whereas during the first three months of 2020 we invested approximately $20.4 million in our BTY investment.

Financing activities ~~provided $174.3~~used $45.0 million in cash during the first three months of ~~2020~~2021 compared to ~~$90.8~~$174.3 million in cash ~~used~~provided by financing activities during the same period a year ago. During the first three months of ~~2020,~~2021, we ~~received net proceeds from our U.S. short term credit facility of $175.0 million and stock option exercises of $18.6 million. We~~ used cash on hand to ~~pay $23.0~~repay net short term revolving debt of $52.0 million and paid $23.4 million of ~~dividends and repayments~~dividends. We received proceeds from stock option exercises of ~~$4.4 million related to our outstanding debt obligations.~~

$31.9 million.

We hold U.S. dollar and euro-denominated debt to align our capital structure with our earnings base. We also maintain a multi-currency revolving credit facility with two tranches, providing for unsecured financing of up to $300 million that is available in the U.S. and up to €150 million that is available to our wholly-owned UK subsidiary. Each borrowing under the credit facility will bear interest at rates based on LIBOR, prime rates or other similar rates, in each case plus an applicable margin. A facility fee on the total amount of the facility is also payable quarterly, regardless of usage. The applicable margins for borrowings under the credit facility and the facility fee percentage may change from time to time depending on changes in our consolidated leverage ratio. ~~$200.0 million~~No balance was utilized under our U.S. facility ~~and no balance was utilized under~~or our euro-based revolving credit facility as of March 31, ~~2020.~~2021. The ~~$25.0~~$52.0 million balance at December 31, ~~2019~~2020 under our U.S. credit facility was repaid during the first quarter of ~~2020.~~2021. Credit facility balances are included in notes payable, including revolving credit facilities on the Condensed Consolidated Balance Sheets.

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

(1)

Definitions of ratios are included as part of the revolving credit facility agreement and the private placement agreements.

Based upon the above consolidated leverage ratio covenant, we have the ability to borrow approximately an additional ~~$1.0~~$1.1 billion before the 3.50 to 1.00 maximum ratio requirement is exceeded.

In addition, in October 2020, we entered into an unsecured money market borrowing arrangement to provide short term financing of up to $30 million that is available in the U.S. No balance was utilized under this arrangement as of March 31, 2021.

Our foreign operations have historically met cash requirements with the use of internally generated cash or uncommitted short-term borrowings. We also have committed financing arrangements in both the U.S. and the UK as detailed above. We manage our global cash requirements considering (i) available funds among the many subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances.

We facilitate a supply chain finance program ("SCF") across Europe and the U.S. that is administered by a third-party platform. Eligible suppliers can elect to receive early payment of invoices, less an interest deduction, and negotiate their receivable sales arrangements through the third-party platform on behalf of the respective SCF bank. We are not a party to those agreements, and the terms of our payment obligations are not impacted by a supplier's participation in the SCF. Accordingly, we have concluded that this program continues to be a trade payable program and is not indicative of a borrowing arrangement.

All outstanding amounts related to suppliers participating in the SCF are recorded within Accounts payable, accrued and other liabilities in our Condensed Consolidated Balance Sheets, and associated payments are included in operating activities within our Condensed Consolidated Statements of Cash Flows. As of March 31, 2021 and December 31, 2020, the amounts due to suppliers participating in the SCF and included in Accounts payable, accrued and other liabilities were approximately $26 million and $23 million, respectively.

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

To the extent our financial position allows and there is a clear financial benefit, we from time-to-time benefit from early payment discounts with some suppliers. We are also lengthening the payment terms with our suppliers to be in line with customer trends. While we have offered third party alternatives for our suppliers to receive payments sooner, we generally do not utilize these offerings from our customers as the economic conditions currently are not beneficial for us.

On April 15, ~~2020,~~2021, the Board of Directors declared a quarterly cash dividend of ~~$0.36~~$0.38 per share payable on May ~~20, 2020~~19, 2021 to stockholders of record as of April ~~29, 2020.~~

28, 2021.

The Company, in the normal course of business, is subject to a number of lawsuits and claims both actual and potential in nature. Please refer to Note 12 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements for a discussion of contingencies affecting our business.

OFF-BALANCE SHEET ARRANGEMENTS

We lease certain warehouse, plant and office facilities as well as certain equipment under noncancelable operating leases. Most of the operating leases contain renewal options and certain equipment leases include options to purchase during or at the end of the lease term. As a result of the adoption of ASU 2016-02 and subsequent amendments, which requires organizations to recognize leases on the balance sheet, we do not have significant off-balance sheet arrangements. ~~Please refer to Note 7 – Leases of the Notes to Condensed Consolidated Financial Statements.~~

RECENTLY ISSUED ACCOUNTING STANDARDS

We have reviewed the recently issued accounting standards updates to the FASB’s Accounting Standards Codification that have future effective dates. Standards that ~~are effective for 2020~~have been adopted during 2021 are discussed in Note 1 – Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements.

In ~~August 2018,~~March 2020, the FASB issued ASU ~~2018-14,~~2020-04, which ~~amends disclosure requirements~~provides optional expedients and exceptions for ~~defined benefit pension~~applying U.S. GAAP to contracts, hedging relationships and other ~~postretirement plans.~~transactions affected by reference rate reform if certain criteria are met. The amendments into this update ~~remove disclosures~~apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 was further amended in January 2021 by ASU 2021-01 which clarified the applicability of certain provisions. Both standards are ~~no longer considered cost beneficial, clarify~~effective upon issuance and can be adopted any time prior to December 31, 2022. The guidance in ASU 2020-04 and ASU 2021-01 is optional and may be elected over time as reference rate reform activities occur. As of March 31, 2021, we have not yet modified any contracts as a result of reference rate reform and are evaluating the ~~specific requirements of disclosures, and add disclosure requirements identified as relevant. The new~~impact this standard ~~is effective for fiscal years ending after December 15, 2020. As this update amends disclosure requirements, we do not expect any significant impact around adopting this guidance.~~

may have on our Condensed Consolidated Financial Statements.

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

OUTLOOK

~~Factors that could impact~~

Current underlying demand conditions in our ~~second quarter results, include among other things, the duration and severity of the COVID-19 pandemic, the pace and scope of reopening in regions that~~markets are ~~currently under government confinement orders, the speed at which beauty and other retail stores open, the willingness of consumers~~not expected to ~~participate in those shopping channels, the rate at which airline travel will resume and the general level of on-the-go consumption particularly with certain beverage products.~~

~~Aptar expects the near-term effects related to the COVID-19 pandemic to continue through the second quarter and anticipates that they will be more pronounced than the Company~~change dramatically from what we experienced in the first quarter. ~~The results of Aptar’s Beauty + Home segment are expected to be significantly impacted by continued softness across each end market primarily related~~We anticipate that demand for our prescription drug and consumer health care devices will remain under pressure compared to the ~~effects of COVID-19.~~prior year as customers continue to reduce existing inventories. In ~~addition, the Food + Beverage segment, which had very strong growth in~~certain other markets, we expect to have easier comparisons to the prior year second quarter ~~is expected~~which was the period most severely impacted by pandemic lockdowns. We also expect our results to ~~see continued softness in the on-the-go beverage market primarily related to COVID-19~~be negatively impacted by timing of passing through higher resin and ~~the impact from passing on lower resin~~other raw material costs. Aptar’s Pharma segment is facing difficult comparisons compared to the prior year’s exceptional growth, especially within its prescription division. Aptar’s second quarter results are expected to include expenses of approximately $3.6 million (pretax) related to the Thank You Award being given to employees who have made it possible for Aptar to continue to supply critical infrastructure industries during the COVID-19 crisis.

We expect earnings per share for the second quarter of ~~2020,~~2021, excluding any restructuring expenses, ~~and~~ acquisition-related costs and changes in the fair value of equity investments, to be in the range of ~~$0.58~~$0.91 to ~~$0.73~~$0.99 and this guidance is based on an effective tax rate range of ~~31%~~26% to ~~33%~~28%.

~~Table of Contents~~

FORWARD-LOOKING STATEMENTS

Certain statements in Management’s Discussion and Analysis and other sections of this Form 10-Q are forward-looking and involve a number of risks and uncertainties, including certain statements set forth in the Significant Developments, Restructuring Initiatives, Quarterly Trends, Liquidity and Capital Resources, Contingencies and Outlook sections of this Form 10-Q. Words such as “expects,” “anticipates,” “believes,” “estimates,” “future,” “potential”, "are optimistic" and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to identify such forward-looking statements. Forward-looking statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 ~~(the “Exchange Act”)~~ and are based on our beliefs as well as assumptions made by and information currently available to us. Accordingly, our actual results may differ materially from those expressed or implied in such forward-looking statements due to known or unknown risks and uncertainties that exist in our operations and business environment including, but not limited to:

●

•~~outbreaks of~~ pandemics, including the impact of COVID-19 on our global supply chain and our global customers and operations, which has elevated and may or will continue to elevate many of the risks and uncertainties discussed below;

•our ability to preserve organizational culture and maintain employee productivity in the work-from-home environment caused by the current pandemic;

•the availability of raw materials and components (particularly from sole sourced suppliers) as well as the financial viability of these suppliers;

•economic conditions worldwide, including potential deflationary or inflationary conditions in regions we rely on for growth;

•political conditions worldwide;

•significant fluctuations in foreign currency exchange rates or our effective tax rate;

•the impact of tax reform legislation, changes in tax rates and other tax-related events or transactions that could impact our effective tax rate;

•financial conditions of customers and suppliers;

•consolidations within our customer or supplier bases;

•changes in customer and/or consumer spending levels;

•loss of one or more key accounts;

•fluctuations in the cost of materials, components, transportation cost as a result of on-going container shortages, and other input costs (particularly resin, metal, anodization costs, and energy costs);

•our ability to successfully implement facility expansions and new facility projects;

•our ability to offset inflationary impacts with cost containment, productivity initiatives or price increases;

•changes in capital availability or cost, including interest rate fluctuations;

•volatility of global credit markets;

•our ability to identify potential new acquisitions and to successfully acquire and integrate such operations and products, including the successful integration of the businesses we have acquired, including contingent consideration valuation;

•direct or indirect consequences of acts of war, terrorism or social unrest;

•cybersecurity threats that could impact our networks and reporting systems;

•the impact of natural disasters and other weather-related occurrences;

•fiscal and monetary policies and other regulations;

•changes or difficulties in complying with government regulation;

•changing regulations or market conditions regarding environmental sustainability;

•work stoppages due to labor disputes;

•competition, including technological advances;

•our ability to protect and defend our intellectual property rights, as well as litigation involving intellectual property rights;

•the outcome of any legal proceeding that has been or may be instituted against us and others;

•our ability to meet future cash flow estimates to support our goodwill impairment testing;

•the demand for existing and new products;

•the success of our customers’ products, particularly in the pharmaceutical industry;

•our ability to manage worldwide customer launches of complex technical products, particularly in developing markets;

•difficulties in product development and uncertainties related to the timing or outcome of product development;

•significant product liability claims;

•the execution of our business transformation plan; and

•

●	~~economic conditions worldwide, including potential deflationary or inflationary conditions in regions we rely on for growth;~~

●	~~political conditions worldwide, including the impact of the UK leaving the European Union (Brexit) on our UK operations;~~

●	~~significant fluctuations in foreign currency exchange rates or our effective tax rate;~~

●	~~the impact of tax reform legislation, changes in tax rates and other tax-related events or transactions that could impact our effective tax rate;~~

●	~~financial conditions of customers and suppliers;~~

●	~~consolidations within our customer or supplier bases;~~

●	~~changes in customer and/or consumer spending levels;~~

●	~~loss of one or more key accounts;~~

●	~~the availability of raw materials and components (particularly from sole sourced suppliers) as well as the financial viability of these suppliers;~~

●	~~fluctuations in the cost of materials, components and other input costs (particularly resin, metal, anodization costs and transportation and energy costs);~~

●	~~our ability to successfully implement facility expansions and new facility projects;~~

●	~~our ability to offset inflationary impacts with cost containment, productivity initiatives or price increases;~~

●	~~changes in capital availability or cost, including interest rate fluctuations;~~

●	~~volatility of global credit markets;~~

●	our ability to identify potential new acquisitions and to successfully acquire and integrate such operations and products, including the successful integration of the businesses we have acquired, including contingent consideration valuation;

●	~~direct or indirect consequences of acts of war, terrorism or social unrest;~~

●	~~cybersecurity threats that could impact our networks and reporting systems;~~

●	~~the impact of natural disasters and other weather-related occurrences;~~

●	~~fiscal and monetary policies and other regulations;~~

●	~~changes or difficulties in complying with government regulation;~~

●	~~changing regulations or market conditions regarding environmental sustainability;~~

●	~~work stoppages due to labor disputes;~~

●	~~competition, including technological advances;~~

●	~~our ability to protect and defend our intellectual property rights, as well as litigation involving intellectual property rights;~~

●	~~the outcome of any legal proceeding that has been or may be instituted against us and others;~~

●	~~our ability to meet future cash flow estimates to support our goodwill impairment testing;~~

●	~~the demand for existing and new products;~~

●	~~the success of our customers’ products, particularly in the pharmaceutical industry;~~

●	~~our ability to manage worldwide customer launches of complex technical products, particularly in developing markets;~~

●	~~difficulties in product development and uncertainties related to the timing or outcome of product development;~~

●	~~significant product liability claims;~~

●	~~the execution of our business transformation plan; and~~

●	other risks associated with our operations.

Table of Contents

~~Table of Contents~~

Although we believe that our forward-looking statements are based on reasonable assumptions, there can be no assurance that actual results, performance or achievements will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Please refer to Item 1A (Risk Factors) of Part I included in our Annual Report on Form 10-K for the year ended December 31, ~~2019 and to Item 1A (Risk Factors) of Part II of this report for additional risk factors affecting the Company.~~

2020.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A significant number of our operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of our ~~entities.~~subsidiaries. Our primary foreign exchange exposure is to the euro, but we also have foreign exchange exposure to the Chinese yuan, Brazilian real, Mexican peso, ~~and~~ Swiss franc ~~among~~and other Asian, European, and South American currencies. A weakening U.S. dollar relative to foreign currencies has an additive translation effect on our financial condition and results of operations. Conversely, a strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on our financial condition and results of operations.

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

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

The table below provides information as of March 31, ~~2020~~2021 about our forward currency exchange contracts. The majority of the contracts expire before the end of the second quarter of ~~2020.~~

Average

Min / Max



Contract Amount

Contractual

Notional

Buy/Sell

(in thousands)

Exchange Rate

Volumes

EUR / USD

$
22,646

1.1074

18,669-22,646

EUR / BRL

9,376

4.8745

9,376-11,407

CHF / EUR

6,089

0.9387

6,040-6,605

EUR / INR

3,781

79.7800

3,781-3,981

CZK / EUR

3,169

0.0384

0-3,169

EUR / MXN

2,137

21.5937

1,999-2,239

USD / EUR

2,085

0.8972

1,322-4,978

USD / CNY

2,000

7.0663

2,000-2,000

EUR / CHF

1,773

1.0587

0-1,773

MXN / USD

1,384

0.0519

557-1,384

CHF / USD

835

1.0367

0-835

GBP / EUR

718

1.1774

718-1,544

USD / CHF

130

0.9551

0-130

Total

$
56,123

2021.


Buy/Sell	Contract Amount (in thousands)		Average Contractual Exchange Rate	Min / Max Notional Volumes

EUR / USD	$	17,784	1.2069	11,457 - 18,027
EUR / BRL	9,112		6.5198	9,112 - 9,652
CZK / EUR	5,450		0.0383	3,572 - 5,450
EUR / INR	3,880		89.8200	3,880 - 3,918
EUR / THB	4,143		36.5925	3,635 - 4,143
MXN / USD	1,300		0.0485	0 - 1,300
EUR / GBP	70		0.8707	70 - 990
CHF / EUR	3,220		0.9186	3,220 - 3,585
EUR / CNY	1,172		7.7831	0 - 1,172
EUR / MXN	645		24.7225	366 - 645
GBP / EUR	992		1.1355	992 - 1,876
USD / EUR	1,086		0.8316	1,086 - 5,696
USD / CNY	3,100		6.5175	0 - 3,100
Total	$	51,954

As of March 31, ~~2020,~~2021, we have recorded the fair value of foreign currency forward exchange contracts of ~~$2.1~~$0.2 million in prepaid and other and $0.5 million in accounts payable, accrued and ~~accrued~~other liabilities on the ~~balance sheet.~~Condensed Consolidated Balance Sheets. We also entered into a EUR/USD floating-to-fixed cross currency swap on July 20, 2017 to effectively hedge the foreign exchange and interest rate exposure on the $280 million bank term loan drawn by our wholly-owned UK subsidiary. The fair value of this cash flow hedge is ~~$6.8~~$3.0 million reported in ~~prepaid~~accounts payable, accrued and other liabilities on the ~~balance sheet.~~

Condensed Consolidated Balance Sheets.

ITEM 4. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Management has evaluated, with the participation of the chief executive officer and chief financial officer of the Company, the effectiveness of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, ~~2020.~~2021. Based on that evaluation, the chief executive officer and chief financial officer have concluded that these controls and procedures were effective as of such date.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the fiscal quarter ended March 31, 2020, we implemented enterprise resource planning (“ERP”) systems at two operating facilities. Consequently, the control environments have been modified at these locations to incorporate the controls contained within the new ERP systems. Except for the foregoing, no

No changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during our fiscal quarter ended March 31, ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Table of Contents~~

Amid the COVID-19 pandemic, we have implemented remote work arrangements and restricted non-essential business travel. These arrangements have not materially affected our ability to maintain our business operations, including the operation of financial reporting systems, internal control over financial reporting and disclosure controls and procedures.

Table of Contents

PART II - OTHER INFORMATION

~~ITEM 1A. RISK FACTORS~~

The following risk factors are in addition to the risks described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 under Item 1A, “Risk Factors” filed with the SEC pursuant to the Exchange Act. The effects of the events and circumstances described in the following risk factors have elevated and may or will continue to elevate many of the risks contained in the Company’s Form 10-K, including the risks relating to a deterioration in economic conditions in a particular region or market, our fixed costs structure, reliance on single sourced materials and manufacturing sites and potential asset impairments.

~~The COVID-19 pandemic is currently adversely affecting our business. Additional factors could exacerbate such negative consequences and/or cause other materially adverse effects.~~ The COVID-19 pandemic adversely affected our sales of products to our travel and retail beauty business and on-the-go beverage customers in the quarter ended March 31, 2020 and that adverse impact has continued into the second quarter. Since the end of the quarter, economic and health conditions in the United States and across most of the globe have changed rapidly. Customer demand across all segments, particularly our Beauty + Home and Food + Beverage segments, may decrease further from historical levels depending on the duration and severity of the COVID-19 pandemic, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties. Such events may result in business and manufacturing disruption, inventory shortages due to disruptions to our supply chain and distribution channels, delivery delays, increased risk associated with customer payments and reduced sales and operations, any of which could materially affect our stock price, business prospects, financial condition, results of operations and liquidity.

~~The ability of our employees to work may be significantly impacted by COVID-19.~~The majority of our office and management personnel are working remotely and the majority of our facilities remained operational during the first quarter of 2020 as each of our segments produce dispensing systems that have been determined to be essential products by various government agencies around the world. The health and safety of our workforce is of primary concern and we may need to enact further precautionary measures to help minimize the risk of our employees being exposed to the virus. Further, our management team is focused on mitigating the adverse effects of the COVID-19 pandemic, which has required and will continue to require a large investment of time and resources across the entire company, thereby diverting their attention from other priorities that existed prior to the outbreak of the pandemic. If these conditions worsen, or last for an extended period of time, our ability to manage our business may be impaired, and operational risks, cybersecurity risks and other risks facing us even prior to the pandemic may be elevated.

ITEM 2. UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

RECENT SALES OF UNREGISTERED SECURITIES

Certain French employees are eligible to participate in the FCP Aptar Savings Plan (the “Plan”). An independent agent purchases shares of common stock available under the Plan for cash on the open market and we do not issue shares. We do not receive any proceeds from the purchase of common stock under the Plan. The agent under the Plan is Banque Nationale de Paris Paribas Fund Services. No underwriters are used under the Plan. All shares are sold in reliance upon the exemption from registration under the Securities Act of 1933 provided by Regulation S promulgated under that Act. During the quarter ended March 31, ~~2020,~~2021, the Plan purchased ~~10,487~~15,003 shares of our common stock on behalf of the participants at an average price of ~~$98.22,~~$134.57, for an aggregate amount of ~~$1.0~~$2.0 million. The Plan sold ~~12,202~~4,378 shares of our common stock on behalf of the participants at an average price of ~~$98.35,~~$141.47, for an aggregate amount of ~~$1.2 million~~$619 thousand during the same period. At March 31, ~~2020,~~2021, the Plan owned ~~88,478~~95,752 shares of our common stock.

ISSUER PURCHASES OF EQUITY SECURITIES

On April 18, 2019, we announced a share purchase authorization of up to $350 million of common stock. This authorization replaces previous authorizations and has no expiration date. We may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions.

During the three months ended March 31, ~~2020,~~2021, we did not repurchase any shares. As of March 31, ~~2020,~~2021, there was $278.5 million of authorized share repurchases available to us. Amid the COVID-19 pandemic, we ~~are~~have been focused on preserving our liquidity and therefore ~~we have~~ temporarily suspended ~~repurchasing shares~~our share repurchase plan in 2020. While we continue to assess the impact the pandemic is having on our business throughout 2021, we removed the aforementioned suspension during the first quarter of 2021 in order to preserve our ~~common stock.~~

flexibility to make repurchases from time to time depending on market conditions.

Table of Contents

ITEM 6. EXHIBITS


Exhibit 10.1			Addendum to Employment Agreement between Aptar Mezzovico SA and Marc Prieur dated April 14, 2021.

~~Exhibit 10.1~~		~~Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Performance-Based Vesting Form) (U.S./Mexico/Argentina employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan.~~

~~Exhibit 10.2~~	~~Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Performance-Based Vesting Form) (French employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan.~~

~~Exhibit 10.3~~	~~Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Performance-Based Vesting Form) (All Other Employees) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan.~~

~~Exhibit 10.4~~	~~Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Service-Based Vesting Form) (U.S./Mexico/Argentina employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan.~~

~~Exhibit 10.5~~	~~Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Service-Based Vesting Form) (non-French employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan.~~

~~Exhibit 10.6~~	~~Form of AptarGroup, Inc. Restricted Stock Unit Award Agreement (Service-Based Vesting Form) (French employee version) pursuant to the AptarGroup, Inc. 2018 Equity Incentive Plan.~~

Exhibit 31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2			Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101			The following information from our Quarterly Report on Form 10-Q for the first quarter of fiscal ~~2020,~~2021, filed with the SEC on ~~May 1, 2020,~~April 30, 2021, formatted in Inline Extensible Business Reporting Language (XBRL): (i) the Cover Page, (ii) the Condensed Consolidated Statements of Income – Three Months Ended March 31, ~~2020~~2021 and ~~2019,~~2020, (iii) the Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, ~~2020~~2021 and ~~2019,~~2020, (iv) the Condensed Consolidated Balance Sheets – March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, (v) the Condensed Consolidated Statements of Changes in Equity – Three Months Ended March 31, ~~2020~~2021 and ~~2019,~~2020, (vi) the Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020 and (vii) the Notes to Condensed Consolidated Financial Statements.
Exhibit 104			Cover Page Interactive Data File (embedded within the Inline XBRL document).

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~AptarGroup, Inc.~~
		~~(Registrant)~~ AptarGroup, Inc.
		(Registrant)
	By
	By	/s/ ROBERT W. KUHN
		Robert W. Kuhn
		Executive Vice President
and Chief Financial Officer ~~and Secretary~~
		(Duly Authorized Officer and
		Principal Accounting and Financial Officer)


		Date: ~~May 1, 2020~~ April 30, 2021


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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	ATR	New York Stock Exchange


Part I.		FINANCIAL INFORMATION

Item 1.
~~Part I.~~	~~FINANCIAL INFORMATION~~

~~Item 1.~~	Financial Statements (Unaudited)

		Condensed Consolidated Statements of Income – Three Months Ended March ~~31, 2020~~ 3 1 , 2021 and ~~2019~~2020		1

		Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March ~~31, 2020~~3 1 , 2021 and ~~2019~~2020		2

		Condensed Consolidated Balance Sheets – March ~~31, 2020~~ 3 1 , 202 1 and December 31, ~~2019~~20 20		3

		Condensed Consolidated Statements of Changes in Equity – Three Months Ended March 31 ~~2020~~, 2021 and ~~2019~~2020		5

		Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31 ~~2020~~, 202 1 and ~~2019~~20 20		6

		Notes to Condensed Consolidated Financial Statements		7 8

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		26 27

Item 3.		Quantitative and Qualitative Disclosures about Market Risk		38 40

Item 4.		Controls and Procedures		38 40

Part II.		OTHER INFORMATION

~~Item 1A.~~		~~Risk Factors~~	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		40 41

Item 6.		Exhibits		41 42

		Signature		42 43


In thousands

	March 31, 2021		December 31, 2020
Assets
Cash and equivalents	$	254,852	$	300,137
Short-term investments	0		243
Total Cash and equivalents and Short-term investments	254,852		300,380
Accounts and notes receivable, less current expected credit loss ("CECL") of $6,151 in 2021 and $5,918 in 2020	621,093		566,623
Inventories	394,179		379,379
Prepaid and other	136,854		122,613
Total Current Assets	1,406,978		1,368,995
Land	28,773		28,334
Buildings and improvements	577,724		579,616
Machinery and equipment	2,777,028		2,808,623
Property, Plant and Equipment, Gross	3,383,525		3,416,573
Less: Accumulated depreciation	(2,200,492)		(2,217,825)
Property, Plant and Equipment, Net	1,183,033		1,198,748
Investments in equity securities	66,102		50,087
Goodwill	883,543		898,521
Intangible assets, net	331,032		344,309
Operating lease right-of-use assets	64,118		69,845
Miscellaneous	57,833		59,548
Total Other Assets	1,402,628		1,422,310
Total Assets	$	3,992,639	$	3,990,053


	Balance as of December 31, 2020		Balance as of March 31, 2021		Increase/ (Decrease)
Contract asset (current)	$	16,109	$	15,490	$	(619)
Contract asset (long-term)	$	0	$	0	$	0
Contract liability (current)	$	87,188	$	102,721	$	15,533
Contract liability (long-term)	$	21,584	$	25,747	$	4,163


In thousands, except per share amounts


Three Months Ended March 31,	2021		2020

Net Sales	$	776,754	$	721,553
Operating Expenses:
Cost of sales (exclusive of depreciation and amortization shown below)	488,705		451,256
Selling, research & development and administrative	134,348		126,192
Depreciation and amortization	57,438		50,806
Restructuring initiatives	3,672		4,839
Total Operating Expenses	684,163		633,093
Operating Income	92,591		88,460

Other Income (Expense):
Interest expense	(7,415)		(8,388)
Interest income	381		175
Net investment gain	16,809		0
Equity in results of affiliates	(515)		(799)
Miscellaneous, net	(963)		(1,412)
Total Other Income (Expense)	8,297		(10,424)

Income before Income Taxes	100,888		78,036

Provision for Income Taxes	16,949		22,786

Net Income	$	83,939	$	55,250

Net Loss Attributable to Noncontrolling Interests	$	13	$	3

Net Income Attributable to AptarGroup, Inc.	$	83,952	$	55,253

Net Income Attributable to AptarGroup, Inc. per Common Share:
Basic	$	1.29	$	0.86
Diluted	$	1.24	$	0.84

Average Number of Shares Outstanding:
Basic	65,229		64,009
Diluted	67,648		66,111

Dividends per Common Share	$	0.36	$	0.36


In thousands, except per share amounts

Three Months Ended March 31,	2020		2019

Net Sales	$	721,553	$	744,460
Operating Expenses:
Cost of sales (exclusive of depreciation and amortization shown below)		451,256		469,132
Selling, research & development and administrative		126,192		121,215
Depreciation and amortization		50,806		47,489
Restructuring initiatives		4,839		9,530
		633,093		647,366
Operating Income		88,460		97,094

Other (Expense) Income:
Interest expense		(8,388)		(9,214)
Interest income		175		1,748
Equity in results of affiliates		(799)		(95)
Miscellaneous, net		(1,412)		466
		(10,424)		(7,095)

Income before Income Taxes		78,036		89,999

Provision for Income Taxes		22,786		27,000

Net Income	$	55,250	$	62,999

Net Loss Attributable to Noncontrolling Interests	$	3	$	5

Net Income Attributable to AptarGroup, Inc.	$	55,253	$	63,004

Net Income Attributable to AptarGroup, Inc. per Common Share:
Basic	$	0.86	$	1.00
Diluted	$	0.84	$	0.96

Average Number of Shares Outstanding:
Basic		64,009		62,964
Diluted		66,111		65,349

Dividends per Common Share	$	0.36	$	0.34


In thousands

Three Months Ended March 31,	2020		2019

Net Income	$	55,250	$	62,999
Other Comprehensive (Loss) Income:
Foreign currency translation adjustments		(42,229)		(9,611)
Changes in derivative gains (losses), net of tax		1,483		(393)
Defined benefit pension plan, net of tax
Amortization of prior service cost included in net income, net of tax		71		84
Amortization of net loss included in net income, net of tax		1,565		637
Total defined benefit pension plan, net of tax		1,636		721
Total other comprehensive loss		(39,110)		(9,283)
Comprehensive Income		16,140		53,716
Comprehensive Loss (Income) Attributable to Noncontrolling Interests		3		(3)
Comprehensive Income Attributable to AptarGroup, Inc.	$	16,143	$	53,713


In thousands

		March 31,		December 31,
		2020		2019
Assets
Current Assets:
Cash and equivalents	$	410,840	$	241,970
Accounts and notes receivable, less current expected credit loss ("CECL") of $5,657 in 2020 and $3,626 in 2019		602,027		558,428
Inventories		371,859		375,795
Prepaid and other		129,926		115,048
		1,514,652		1,291,241
Property, Plant and Equipment:
Buildings and improvements		502,706		504,328
Machinery and equipment		2,506,084		2,521,737
		3,008,790		3,026,065
Less: Accumulated depreciation		(1,961,683)		(1,963,520)
		1,047,107		1,062,545
Land		24,312		25,133
		1,071,419		1,087,678
Other Assets:
Investments in equity securities		39,167		8,396
Goodwill		756,081		763,461
Intangible assets		284,121		291,084
Operating lease right-of-use assets		65,925		72,377
Miscellaneous		45,187		47,882
		1,190,481		1,183,200
Total Assets	$	3,776,552	$	3,562,119


In thousands, except share and per share amounts

	March 31, 2021		December 31, 2020
Liabilities and Stockholders’ Equity
Current Liabilities:
Notes payable, revolving credit facility and overdrafts	$	1,036	$	52,200
Current maturities of long-term obligations, net of unamortized debt issuance costs	64,776		65,666
Accounts payable, accrued and other liabilities	690,117		662,463
Total Current Liabilities	755,929		780,329
Long-Term Obligations, net of unamortized debt issuance costs	1,037,983		1,054,998
Deferred income taxes	32,790		37,242
Retirement and deferred compensation plans	146,568		145,959
Operating lease liabilities	47,530		52,212
Deferred and other non-current liabilities	71,044		68,528
Commitments and contingencies	0		0
Total Deferred Liabilities and Other	297,932		303,941
AptarGroup, Inc. stockholders’ equity
Common stock, $.01 par value, 199 million shares authorized, 70.0 and 69.5 million shares issued as of March 31, 2021 and December 31, 2020, respectively	700		695
Capital in excess of par value	874,623		849,161
Retained earnings	1,704,336		1,643,825
Accumulated other comprehensive loss	(326,965)		(281,709)
Less: Treasury stock at cost, 4.4 and 4.5 million shares as of March 31, 2021 and December 31, 2020, respectively	(352,282)		(361,583)
Total AptarGroup, Inc. Stockholders’ Equity	1,900,412		1,850,389
Noncontrolling interests in subsidiaries	383		396
Total Stockholders’ Equity	1,900,795		1,850,785
Total Liabilities and Stockholders’ Equity	$	3,992,639	$	3,990,053


In thousands

	AptarGroup, Inc. Stockholders’ Equity
			Accumulated
			Other		Common				Capital in		Non-
	Retained		Comprehensive		Stock		Treasury		Excess of		Controlling		Total
	Earnings		(Loss) Income		Par Value		Stock		Par Value		Interest		Equity
Balance - December 31, 2018	$	1,371,826	$	(310,504)	$	673	$	(318,208)	$	678,769	$	315	$	1,422,871
Net income (loss)		63,004		—		—		—		—		(5)		62,999
Foreign currency translation adjustments		—		(9,619)		—		—		—		8		(9,611)
Changes in unrecognized pension gains (losses) and related amortization, net of tax		—		721		—		—		—		—		721
Changes in derivative gains (losses), net of tax		—		(393)		—		—		—		—		(393)
Stock awards and option exercises		—		—		3		5,337		22,164		—		27,504
Cash dividends declared on common stock		(21,377)		—		—		—		—		—		(21,377)
Treasury stock purchased		—		—		—		(15,000)		—		—		(15,000)
Balance - March 31, 2019	$	1,413,453	$	(319,795)	$	676	$	(327,871)	$	700,933	$	318	$	1,467,714

Balance - December 31, 2019	$	1,523,820	$	(341,948)	$	686	$	(381,238)	$	770,596	$	336	$	1,572,252
Net income (loss)		55,253		—		—		—		—		(3)		55,250
Adoption of CECL standard		(1,377)		—		—		—		—		—		(1,377)
Foreign currency translation adjustments		—		(42,229)		—		—		—		—		(42,229)
Changes in unrecognized pension gains (losses) and related amortization, net of tax		—		1,636		—		—		—		—		1,636
Changes in derivative gains (losses), net of tax		—		1,483		—		—		—		—		1,483
Stock awards and option exercises		—		—		3		8,665		14,971		—		23,639
Cash dividends declared on common stock		(23,031)		—		—		—		—		—		(23,031)
Balance - March 31, 2020	$	1,554,665	$	(381,058)	$	689	$	(372,573)	$	785,567	$	333	$	1,587,623


In thousands, brackets denote cash outflows

Three Months Ended March 31,	2021		2020

Cash Flows from Operating Activities:
Net income	$	83,939	$	55,250
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	47,627		42,792
Amortization	9,811		8,014
Stock-based compensation	11,489		9,141
Provision for CECL	342		1,251
Loss on disposition of fixed assets	91		54
Gain on remeasurement of equity securities	(16,809)		0
Deferred income taxes	(3,580)		6
Defined benefit plan expense	7,475		5,775
Equity in results of affiliates	515		799
Change in fair value of contingent consideration	975		0
Changes in balance sheet items, excluding effects from foreign currency adjustments:
Accounts and other receivables	(70,194)		(64,764)
Inventories	(26,428)		(8,615)
Prepaid and other current assets	(16,995)		(11,787)
Accounts payable, accrued and other liabilities	49,764		51,523
Income taxes payable	(3,121)		(5,278)
Retirement and deferred compensation plan liabilities	(5,156)		(1,312)
Other changes, net	2,440		2,184
Net Cash Provided by Operations	72,185		85,033
Cash Flows from Investing Activities:
Capital expenditures	(63,884)		(61,625)
Proceeds from sale of property, plant and equipment	318		166
Maturity of short-term investment	243		0
Acquisition of business, net of cash acquired and release of escrow	0		(1,463)
Acquisition of intangible assets, net	0		(3,955)
Investment in equity securities	0		(20,423)

Notes receivable, net	(593)		(785)
Net Cash Used by Investing Activities	(63,916)		(88,085)
Cash Flows from Financing Activities:
Proceeds from notes payable and overdrafts	4,019		8,148
Repayments of notes payable and overdrafts	(3,180)		(2,030)
Repayments and proceeds of short term revolving credit facility, net	(52,000)		175,000
Proceeds from long-term obligations	2,053		0
Repayments of long-term obligations	(4,337)		(2,386)

Dividends paid	(23,441)		(23,031)
Proceeds from stock option exercises	31,871		18,602

Net Cash (Used) Provided by Financing Activities	(45,015)		174,303
Effect of Exchange Rate Changes on Cash	(8,539)		(3,381)
Net (Decrease) Increase in Cash and Equivalents and Restricted Cash	(45,285)		167,870
Cash and Equivalents and Restricted Cash at Beginning of Period	304,970		246,973
Cash and Equivalents and Restricted Cash at End of Period	$	259,685	$	414,843


	For the Three Months Ended March 31, 2020
					Latin
Segment	Europe		Domestic		America		Asia		Total
Beauty + Home	$	186,950	$	81,845	$	36,181	$	19,584	$	324,560
Pharma		190,130		90,965		6,579		9,522		297,196
Food + Beverage		28,769		57,590		8,034		5,404		99,797
Total	$	405,849	$	230,400	$	50,794	$	34,510	$	721,553


	Balance as of		Balance as of		Increase/
	December 31, 2019		March 31, 2020		(Decrease)
Contract asset (current)	$	16,245	$	13,457	$	(2,788)
Contract asset (long-term)	$	—	$	—	$	—
Contract liability (current)	$	79,305	$	78,974	$	(331)
Contract liability (long-term)	$	9,779	$	14,994	$	5,215


	Beauty +				Food +		Corporate
	Home		Pharma		Beverage		& Other		Total
Goodwill	$	221,658	$	413,650	$	128,153	$	1,615	$	765,076
Accumulated impairment losses		—		—		—		(1,615)		(1,615)
Balance as of December 31, 2019	$	221,658	$	413,650	$	128,153	$	—	$	763,461
Acquisition		—		463		—		—		463
Foreign currency exchange effects		(2,201)		(5,543)		(99)		—		(7,843)
Goodwill	$	219,457	$	408,570	$	128,054	$	1,615	$	757,696
Accumulated impairment losses		—		—		—		(1,615)		(1,615)
Balance as of March 31, 2020	$	219,457	$	408,570	$	128,054	$	—	$	756,081


		March 31, 2020							December 31, 2019
Weighted Average		Gross						Gross
Amortization Period		Carrying		Accumulated		Net		Carrying		Accumulated		Net
	(Years)	Amount		Amortization		Value		Amount		Amortization		Value
Amortized intangible assets:
Patents	7.9	$	3,001		(1,304)	$	1,697	$	2,804	$	(1,318)	$	1,486
Acquired technology	13.0		99,437		(27,143)		72,294		100,511		(25,430)		75,081
Customer relationships	13.7		216,198		(37,774)		178,424		217,934		(33,924)		184,010
Trademarks and trade names	6.9		34,131		(11,919)		22,212		35,015		(11,003)		24,012
License agreements and other	17.6		19,671		(10,177)		9,494		16,153		(9,658)		6,495
Total intangible assets	13.0	$	372,438	$	(88,317)	$	284,121	$	372,417	$	(81,333)	$	291,084


2020	$	20,725	(remaining estimated amortization for 2020)
2021		27,154
2022		26,915
2023		26,835
2024 and thereafter		182,492


			Unamortized
			Debt Issuance
	Principal		Costs		Net
Notes payable 0.00% – 10.90%, due in monthly and annual installments through 2028	$	15,551	$	—	$	15,551
Senior unsecured notes 3.2%, due in 2022		75,000		59		74,941
Senior unsecured debts 3.1% USD floating swapped to 1.36% EUR fixed, equal annual installments through 2022		168,000		352		167,648
Senior unsecured notes 3.5%, due in 2023		125,000		135		124,865
Senior unsecured notes 1.0%, due in 2023		110,315		341		109,974
Senior unsecured notes 3.4%, due in 2024		50,000		60		49,940
Senior unsecured notes 3.5%, due in 2024		100,000		135		99,865
Senior unsecured notes 1.2%, due in 2024		220,630		701		219,929
Senior unsecured notes 3.6%, due in 2025		125,000		157		124,843
Senior unsecured notes 3.6%, due in 2026		125,000		157		124,843
Finance Lease Liabilities		28,395		—		28,395
	$	1,142,891	$	2,097	$	1,140,794
Current maturities of long-term obligations		(65,049)		—		(65,049)
Total long-term obligations	$	1,077,842	$	2,097	$	1,075,745


	Domestic Plans				Foreign Plans
Three Months Ended March 31,	2020		2019		2020		2019
Service cost	$	3,577	$	2,773	$	1,768	$	1,460
Interest cost		1,987		1,845		340		501
Expected return on plan assets		(3,422)		(3,094)		(634)		(592)
Amortization of net loss		1,548		489		514		363
Amortization of prior service cost		—		—		97		113
Net periodic benefit cost	$	3,690	$	2,013	$	2,085	$	1,845


	Foreign		Defined Benefit
	Currency		Pension Plans		Derivatives		Total
Balance - December 31, 2018	$	(248,401)	$	(60,463)	$	(1,640)	$	(310,504)
Other comprehensive (loss) income before reclassifications		(9,619)		—		5,738		(3,881)
Amounts reclassified from accumulated other comprehensive income (loss)		—		721		(6,131)		(5,410)
Net current-period other comprehensive (loss) income		(9,619)		721		(393)		(9,291)
Balance - March 31, 2019	$	(258,020)	$	(59,742)	$	(2,033)	$	(319,795)

Balance - December 31, 2019	$	(257,124)	$	(83,147)	$	(1,677)	$	(341,948)
Other comprehensive (loss) income before reclassifications		(42,229)		—		5,026		(37,203)
Amounts reclassified from accumulated other comprehensive income (loss)		—		1,636		(3,543)		(1,907)
Net current-period other comprehensive (loss) income		(42,229)		1,636		1,483		(39,110)
Balance - March 31, 2020	$	(299,353)	$	(81,511)	$	(194)	$	(381,058)


	Amount Reclassified from
Details about Accumulated Other	Accumulated Other				Affected Line in the Statement
Comprehensive Income Components	Comprehensive Income				Where Net Income is Presented
Three Months Ended March 31,	2020		2019

Defined Benefit Pension Plans
Amortization of net loss	$	2,062	$	852	(1)
Amortization of prior service cost		97		113	(1)
		2,159		965	Total before tax
		(523)		(244)	Tax benefit
	$	1,636	$	721	Net of tax
Derivatives
Changes in cross currency swap: interest component	$	(763)	$	(1,454)	Interest Expense
Changes in cross currency swap: foreign exchange component		(2,780)		(4,677)	Miscellaneous, net
	$	(3,543)	$	(6,131)	Net of tax
Total reclassifications for the period	$	(1,907)	$	(5,410)


		Amount of (Loss) Gain
Derivatives Not Designated	Location of (Loss) Gain Recognized	Recognized in Income
as Hedging Instruments	in Income on Derivatives	on Derivatives
		2020		2019
Foreign Exchange Contracts	Other (Expense) Income: Miscellaneous, net	$	1,747	$	(263)
		$	1,747	$	(263)



			Gross Amounts Offset in the Statement of Financial Position	Net Amounts Presented in the Statement of Financial Position		Gross Amounts not Offset in the Statement of Financial Position
	Gross Amount					Financial Instruments	Cash Collateral Received	Net Amount
Description
March 31, 2021
Derivative Assets	$	166	—	$	166	—	—	$	166
Total Assets	$	166	—	$	166	—	—	$	166

Derivative Liabilities	$	3,531	—	$	3,531	—	—	$	3,531
Total Liabilities	$	3,531	—	$	3,531	—	—	$	3,531

December 31, 2020
Derivative Assets	$	322	—	$	322	—	—	$	322
Total Assets	$	322	—	$	322	—	—	$	322

Derivative Liabilities	$	8,455	—	$	8,455	—	—	$	8,455
Total Liabilities	$	8,455	—	$	8,455	—	—	$	8,455


						Gross Amounts not Offset
			Gross Amounts	Net Amounts		in the Statement of
			Offset in the	Presented in		Financial Position
	Gross		Statement of	the Statement of		Financial	Cash Collateral	Net
	Amount		Financial Position	Financial Position		Instruments	Received	Amount
Description
March 31, 2020
Derivative Assets	$	8,830	—	$	8,830	—	—	$	8,830
Total Assets	$	8,830	—	$	8,830	—	—	$	8,830

Derivative Liabilities	$	505	—	$	505	—	—	$	505
Total Liabilities	$	505	—	$	505	—	—	$	505

December 31, 2019
Derivative Assets	$	2,758	—	$	2,758	—	—	$	2,758
Total Assets	$	2,758	—	$	2,758	—	—	$	2,758

Derivative Liabilities	$	401	—	$	401	—	—	$	401
Total Liabilities	$	401	—	$	401	—	—	$	401


	Total		Level 1		Level 2		Level 3
Assets
Investment in equity securities (1)	$	22,206	$	22,206	$	0	$	0
Foreign exchange contracts (2)	166		0		166		0

Total assets at fair value	$	22,372	$	22,206	$	166	$	0
Liabilities
Foreign exchange contracts (2)	$	504	$	0	$	504	$	0
Cross currency swap contract (2)	3,027		0		3,027		0
Contingent consideration obligation	32,115		0		0		32,115
Total liabilities at fair value	$	35,646	$	0	$	3,531	$	32,115


	Total		Level 1		Level 2		Level 3
Assets
Foreign exchange contracts ⁽¹⁾	$	2,061	$	—	$	2,061	$	—
Cross currency swap contract ⁽¹⁾		6,769		—		6,769		—
Total assets at fair value	$	8,830	$	—	$	8,830	$	—
Liabilities
Foreign exchange contracts ⁽¹⁾	$	505	$	—	$	505	$	—
Contingent consideration obligation		5,930		—		—		5,930
Total liabilities at fair value	$	6,435	$	—	$	505	$	5,930


	Time-Based RSUs			Performance-Based RSUs
		Weighted Average			Weighted Average
	Units	Grant-Date Fair Value		Units	Grant-Date Fair Value
Nonvested at January 1, 2020	480,729	$	95.45	181,680	$	117.26
Granted	176,424		81.75	206,408		90.85
Vested	(112,515)		82.64	—		—
Forfeited	(217)		100.14	(589)		120.61
Nonvested at March 31, 2020	544,421	$	92.11	387,499	$	103.23


	Three Months Ended
	March 31, 2020				March 31, 2019
	Diluted		Basic		Diluted		Basic
Consolidated operations
Income available to common stockholders	$	55,253	$	55,253	$	63,004	$	63,004

Average equivalent shares
Shares of common stock		64,009		64,009		62,964		62,964
Effect of dilutive stock-based compensation
Stock options		1,810		—		2,222		—
Restricted stock		292		—		163		—
Total average equivalent shares		66,111		64,009		65,349		62,964
Net income per share	$	0.84	$	0.86	$	0.96	$	1.00


	2019
	Weighted-Average	Estimated
	Useful Life	Fair Value
	(in years)	of Asset
Acquired technology	8	$	9,160
Customer relationships	11		39,379
Trademarks and trade names	4		2,457
License agreements and other	1		1,984
Total		$	52,980


	Beginning		Net Charges for						Ending
	Reserve at		the Three Months				Interest and		Reserve at
	12/31/2019		Ended 3/31/2020		Cash Paid		FX Impact		3/31/2020
Employee severance	$	7,090	$	4,066	$	(503)	$	187	$	10,840
Professional fees and other costs		3,609		773		(3,069)		(9)		1,304
Totals	$	10,699	$	4,839	$	(3,572)	$	178	$	12,144


Three Months Ended March 31, 2020	Beauty				Food +
Net Sales Change over Prior Year	+ Home		Pharma		Beverage		Total

Core Sales Growth	(9)	%	7	%	(2)	%	(2)	%
Acquisitions	—	%	4	%	—	%	1	%
Currency Effects (1)	(3)	%	(2)	%	(2)	%	(2)	%
Total Reported Net Sales Growth	(12)	%	9	%	(4)	%	(3)	%


Three Months Ended March 31,	2020		% of Total	2019		% of Total
Domestic	$	230,400	32%	$	213,871	29%
Europe		405,849	56%		431,368	58%
Latin America		50,794	7%		58,182	8%
Asia		34,510	5%		41,039	5%


Three Months Ended March 31, 2020	Personal				Home
Net Sales Change over Prior Year	Care		Beauty		Care		Total

Core Sales Growth	(5)	%	(13)	%	(6)	%	(9)	%
Currency Effects (1)	(2)	%	(3)	%	(2)	%	(3)	%
Total Reported Net Sales Growth	(7)	%	(16)	%	(8)	%	(12)	%


Three Months Ended March 31, 2020	Prescription		Consumer				Active
Net Sales Change over Prior Year	Drug		Health Care		Injectables		Packaging		Total

Core Sales Growth	2	%	2	%	21	%	26	%	7	%
Acquisitions	1	%	—	%	19	%	—	%	4	%
Currency Effects (1)	(2)	%	(1)	%	(3)	%	(1)	%	(2)	%
Total Reported Net Sales Growth	1	%	1	%	37	%	25	%	9	%


Three Months Ended March 31, 2020
Net Sales Change over Prior Year	Food		Beverage		Total

Core Sales Growth	2	%	(13)	%	(2)	%
Currency Effects (1)	(1)	%	(2)	%	(2)	%
Total Reported Net Sales Growth	1	%	(15)	%	(4)	%