AptarGroup, Inc. (ATR) reported fourth-quarter 2013 adjusted earnings of 69 cents per share, which rose 21% year over year. The bottom line beat the Zacks Consensus Estimate of 65 cents. Earnings came ahead of the company’s guidance range of 62 to 67 cents.
Notably, the reported figure excludes the negative impact of the French Tax of 10 cents per share and restructuring charges of 5 cents. The prior-year quarter figure excluded restructuring charges related to European Operations Optimization plan of 5 cents. Including these, earnings increased 3.8% to 54 cents per share from the year-ago quarter figure of 52 cents.
Operational Update
Total revenue rose 12% year over year to record $637 million. The results surpassed the Zacks Consensus Estimate of $603 million. Core sales increased 10% excluding currency effects. Changes in currency exchange rates accounted for 2% of the sales growth in the quarter. Custom tooling sales contributed an additional 2% to sales growth.
Cost of sales went up 11% year over year to $435 million. Gross profit improved 12.5% to $202 million from $179.7 million in the year-ago quarter. Consequently, gross margin expanded 20 basis points (bps) to 31.7%.
Selling, research, development and administrative expenses increased 12% year over year to $95 million. Adjusted operating income increased 19% year over year to $68.8 million with operating margin expanding 70 basis points (bps) to 10.8%.
Segmental Performance
Total revenue in the Beauty + Homes segment increased 7% year over year to $373.6 million. Operating income however, declined 12.5% $23.5 million from the year-earlier quarter due to continued softness in the U.S., currency effects and Latin American facility start-up costs. The segment’s operating margin decreased 140 bps to 6.3%.
Total revenue in the Pharma segment rose 15.7% year over year to $184.7 million. Operating income increased 30% to $48.5 million from the year-ago quarter, driven by higher sales. Operating margin expanded 300 bps year over year to 26.3%.
Total revenue in the Food + Beverage segment increased 25.6% year over year to $78.9 million. Operating income rose 13% to $7 million from the prior-year quarter. Operating margin contracted 100 bps to 9%.
Financial Performance
AptarGroup ended 2013 with cash and cash equivalents of $309.8 million, up from $229.7 million as of 2012 end. Long-term debt of the company increased to $354.8 billion as of Dec 31, 2013 from $352.8 billion as of Dec 31, 2012. Debt-to-capitalization ratio expanded 140 bps to 25% as of Dec 31, 2013 from 23.6% as of Dec 31, 2012.
AptarGroup repurchased 2 million shares for $119 million in 2013. Exiting 2013, the company has nearly 4 million shares authorized for repurchase. The company also paid dividends worth over $65 million to shareholders during the full year.
Fiscal 2013 Performance
For full-year 2013, AptarGroup reported record adjusted earnings per share of $2.79, up 10.7% from $2.52 in 2012. The results surpassed the Zacks Consensus Estimate of $2.75. Including one-time items, earnings per share (EPS) was $2.52 versus $2.38 in the prior year.
Revenues for the year 2013 increased 8% year over year to record $2.52 billion, ahead of the Zacks Consensus Estimate of $2.48 billion.
Optimization Plan of European Operations
In the said quarter, AptarGroup incurred expenses of around $4.3 million from its European optimization plan. For the year 2013, the company had about $14.6 million of expenses related to the plan. The plan was substantially completed at the end of 2013 with total costs of approximately $19 million and savings in the range of $10 million to $12 million on an annualized basis.
Noncontrolling Interest & Exclusive Global License
In the reported quarter, AptarGroup acquired 20% noncontrolling stake in Bapco Closures Holding Limited for around $5 million. The company also secured an exclusive global license related to innovative closures sealing technology that provides package integrity and tamper evidence.
Outlook
AptarGroup expects earnings in the range of 65 to 70 cents per share for the first quarter of 2014. The guidance does not include any impact from the European Operations Optimization plan.
AptarGroup remains committed to cost containment and development of innovative products. However, earnings will be negatively impacted by the continuing softness in the U.S. markets.
Crystal Lake, Illinois-based AptarGroup is a leading global supplier of a broad range of innovative dispensing systems for the fragrance/cosmetic, personal care, pharmaceutical, household and food/beverage markets.
AptarGroup currently carries a Zacks Rank #4 (Sell).
Performance of Peers
Among AptarGroup’s competitors, Bemis Company, Inc. (BMS) reported fourth-quarter 2013 adjusted earnings of 54 cents per share, in line with the Zacks Consensus Estimate but up 4% from the year-ago quarter. Earnings were within management’s guidance range of 50–56 cents per share.
Sealed Air Corporation (SEE) reported fourth-quarter 2013 adjusted net earnings from continuing operations at 34 cents per share, up 6% from the year-ago figure of 32 cents per share. The results, however, fell short of the Zacks Consensus Estimate of 37 cents.
MeadWestvaco Corporation (MWV) reported fourth-quarter 2013 adjusted earnings of 29 cents per share, which compared favorably with the year-ago quarter loss of 5 cents. Despite sluggish consumer demand, growth across targeted packaging and specialty chemicals end markets, improved pricing and operational performance led to the year-over-year rise. Earnings surpassed the Zacks Consensus Estimate of 23 cents.
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