Aptargroup Inc (ATR) 2005 Q4 法說會逐字稿

Welcome to AptarGroup's 2005 fourth quarter and annual results conference call. [OPERATOR INSTRUCTIONS] Introducing today's conference call is Mr. Ralph Poltermann, Vice President and Treasurer AptarGroup. Sir, you may begin.

Thank you. Before we begin, I would like to be point out that the discussions that follow include some forward-looking comments. And that actual results or outcomes could differ materially from those projected or contained in the forward-looking statements. To review important factors that could cause actual results may materially from those projected or contained in the forward-looking statements please refer to AptarGroup's SEC filings. The information in this conference call is relevant on the date of this live call.

Although the Company will post a replay of this conference call on its Website, as a service to those investors who are not able to listen today, the information contained in the replay will be dated and should be used for background information only. The Company undertakes no obligation to update material changes and forward-looking information contained therein. Our speakers for today are Mr. Carl Siebel, President and Chief Executive Officer of AptarGroup, and Mr. Steve Hagge, Executive Vice President and Chief Financial Officer. I would now like to turn the conference over to Mr. Siebel.

Thank you, Ralph. Ladies and gentlemen, good morning. This is Carl Siebel. I will briefly discuss the quarter, full year 2005 and outlook before turning it over to Steve Hagge who will provide more detailed information about our results. In yesterday's release we reported a slight decline in sales and a modest increase in diluted earnings share for the fourth quarter of 2005 versus the prior year. I would like to remind you that sales to the makers of generic pharmaceutical markets were strong in the fourth quarter of 2004 and this resulted in very tough comparisons.

The decrease in sales to the pharmaceutical market was mitigated by increased sales to the food and beverage market as well as additional sales from acquisitions. Lower tooling sales by about $4 million in the fourth quarter suppressed our top-line growth. Despite the shift of the mix of sales away from the pharmaceutical market, we were basically able to maintain our operating margin. Our reported fourth quarter net income was adversely affected by about $0.01 per diluted share by the charges recorded relating to our previously announced plan to reduce and redeploy some of our work force in our French fragrance/cosmetic operations. This program is going well and we expect to generate savings of approximately $1.8 million in 2006.

Reflecting on the year. 2005, was our 40th consecutive year of increased sales and net income broke the $100 million mark for the first time ever. I am also pleased to report that we achieved record free cash flow in the year. The year also marked one of our busiest years from the standpoint of new production introductions. I would like to take a moment to highlight one of them. We have mentioned in the past, that we were developing a sampling system to replace scent strips that typically are sent in magazines. And we are free to discuss this in greater detail following Estee Lauder's introduction of our system, which we have named Imagin, on a sample of their Pleasures fragrance that was included in December 5 issue of Us Weekly. This innovative spray system provides consumers with a true representation of the fragrance versus scent strips and has potential beyond just magazine inserts.

We have also been quite active on the acquisition front. In the first quarter of 2005 we acquired EP Spray. Early in the fourth quarter we acquired MBF. Later in the fourth quarter, we bought out our partner in a joint venture that makes airless systems for the cosmetic market. And earlier this week we completed the acquisition of CCL Dispensing. These acquisitions provide unique technology, quality products and valuable market share and fit nicely into our portfolio of companies.

Looking forward, excluding changes in exchange rates, we expect sales to our major markets to increase in the first quarter of 2006 over the prior year. Beginning in the first quarter of 2006, our results will include the effect of adoption of the new accounting standard relating to stock options. We estimate the effect of this new accounting standard on the first quarter EPS to be around $0.13. Steve will discuss this in further detail in a moment.

We anticipate that diluted earnings per share for the first quarter, including the expense relating to stock options, which I previously mentioned, to be in the range of $0.53 to $0.58 per share or $0.66 to $0.71 per share, excluding the stock option cost, versus the $0.60 per share reported for the first quarter of 2005, which did not include stock option expense. I would like now to turn it over to Steve for his comments.

Thanks Carl and good morning, everyone. I'll review our financial highlights and then Carl and I will be happy to answer any of our questions. First looking at the quarter, reported sales decreased approximately 1%, whereas sales excluding the impact of foreign currency translation grew by approximately 3% over the prior year. Custom tooling sales decreased $4 million in the quarter from the previous year. Finally, acquisitions accounted for 17.5 million of sales for the quarter.

Looking at sales to each of the markets for the quarter, excluding changes in exchange rate, personal care grew at about 3%, fragrance/cosmetics was up 12%, our pharmaceutical market was down approximately 12%, household was down 1%, and our growth in the food market was up 25%. The decrease in tooling primarily affected growth rates in the personal care and pharmaceutical markets. Excluding the decline in tooling sales, sales to the personal care market were up approximately 6% and the pharmaceutical sales were down approximately 10%. As Carl mentioned we recorded a pretax charge of almost 750,000 related to the reduction and redeployment of some of the workers in our French fragrance operation. After tax, this amounted to $0.01 per diluted share.

Bottom line, we reported earnings per share of $0.66, compared to $0.65 per share a year ago. From a geographic standpoint, sales to customer by our European operations represented 61% of net sales in the quarter, versus 63% last year. And sales to customers by U.S. operations accounted for 29% of sales in both years. Excluding exchange rates -- excluding changes in exchange rates, the dispensing system's sales increased by 2% and our SeaquistPerfect segment sales increased approximately 8%.

Free cash flow, defined as cash flow from operations less capital expenditures, for the quarter was approximately 12 million, compared to 6 million in the prior year. With cash flow from operations for the quarter a little over 41 million versus 50 million in the prior year. And capital expenditures in the quarter slightly under 30 million, compared to 44 million in 2004. We spent approximately 7 million to repurchase 150,000 shares during the quarter, at an Average cost of approximately 49 per share. This brings the total number of shares repurchased during the year to slightly over 1.2 million shares, at a total cost of approximately $61 million and an average cost per share of around $50.

We have an outstanding authorization, as of the end of the year, to purchase an additional 1.1 million shares. The mix of debt between fixed and floating rates at the end of the quarter, is approximately 50/50. And our average interest rate is a little over 5%. Our return on average equity was approximately 12% and our net debt to net cap is approximately 14%.

Now taking a look at the full year, 2005, our reported sales increased approximately 6%. And the impact of changes in foreign currency exchange rates on sales for the year was not significant. Tooling sales decreased by almost 19 million from the prior year, with the majority of the decrease related to the personal care and the food markets. Our acquisitions accounted for approximately $27 million of the increase in sales during the year.

Again, looking at sales to each of the markets for the year. Excluding changes in exchange rates, personal care was up 12%, fragrance/cosmetics was up 4%, pharmaceutical was basically flat from year to year, household was down 2%, and our food and beverage market was up 17%. Our break down of sales by market for the year in the personal care market is 34%, compared to 32% a year ago. Our fragrance/cosmetic is about 28% in both years. Our pharmaceutical makes up about 22% of our '05 sales, compared to 24% a year ago.

Household makes up 7% of our sales, compared to 8% in '04. And food and other makes up 9%, compared to 8% a year ago. The breakdown of sales by product for the year is as follows; Pumps were 55% in 2005,compared to 56% a year ago. Closures represents 25% of our sales, compared to 22% in '04. Aerosol valves were 14% in both years. And other sales were 6% in '05, compared to 8% a year ago. On a year to date basis, we reported record annual diluted earnings per share of $2.77 versus reported earnings per share of $2.51 per share for the prior year or an increase of 10%.

Our free cash flow for the year was approximately $90 million, compared to $63 million in 2004. Comprising this, our cash flow from operations for the year was approximately 195 million, compared to 183 million for the year. And our capital expenditures were approximately 104 million, compared to 120 million a year ago. We spent approximately 100 million, including assumed debt in 2005, for the acquisitions that Carl mentioned. And the acquisition of the CCL closure business in early 2006 cost us an additional 21 million.

Now as we look forward to 2006, our total cash outlays for capital expenditures in 2006 are expected to be similar to our depreciation and amortization for the year. And we estimate these amounts to be in the area of $110 million. And again, this will be very dependent on exchange rates. Beginning in the first quarter of 2006, as Carl mentioned, we will report the cost of stock options on the face of our income statement. We expect that this will have an negative impact on the 2006 annual results by approximately $0.24 per diluted share.

I would like to point out that although the number of shares granted to employees for options in 2006 will be around the same level as the prior year; the effect on diluted earnings per share for stock options in '06 is about $0.07 higher per share than it would have been under the prior accounting treatment. And this is due to the technicalities of the new accounting rules. Since our grants are made in January, the impact of expensing stock options will be weighted more towards the first quarter. And we indicated in the press release that we estimate the impact of these options to be $0.13 per share in the first quarter, with the balance to be recorded ratably over the remainder of 2006.

I would like to point out that the pre-tax expense for options in '06 is estimated to be approximately $13.5 million. And roughly 90% to 95% of this will be included in our selling, research and development and administrative expense line on our income statement. With the balance included in the cost of sales line.

Lastly, our effective tax rate for 2006 expected to be in the area of around 32%. At this time Carl and I would be glad to answer any of your questions.

At this time we'll be glad to take any questions.

[OPERATOR INSTRUCTIONS] First question comes from Amanda Tepper with J.P. Morgan. Your question, please. Ma'am, your line is open. We'll move on. We have Michael Pock with Bank of America.

Good morning. Just a couple of questions here, one just -- a little housekeeping. Steve, what was the impact of options expense in 4Q '05 and for the full year of '05?

We're estimating for the full year of '05 to be around $0.17 and we're going to have $0.03 to $0.04 in the fourth quarter.

Okay. Great. And then how much of your sales variance is attributed to the price pass-through impact? Can you sort of isolate that for us?

I think if you look at it, we -- as we indicated on the third quarter, we're estimating that the increase in sales amounted to about 1% to 1.5% of the total sales are increases for the year. But as you know during the fourth quarter, we saw pretty significant acceleration in the cost of raw materials, particularly our plastic resin. And we're on a time lag in terms of our pass-through on that. So we're estimating that while we were able to increase prices to offset the majority of that through the year, the negative impact in the fourth quarter alone by the raw material increase was over $1 million.

Yes, and at the same time we are now seeing some deceleration and some decreases in the raw materials so that we hope -- that we believe will have a positive effect on both sides and one side by the price increases, which we instituted in the fourth quarter and which will have a positive effect in the first quarter. And then because of the lag passing on decreases we should have also the positive impact of the decrease in the first quarter.

Okay. So if I'm to understand correctly, pricing was a minus $1 million for the quarter?

The net effect of pricing was about 1-- a little over 1 million on the pre-tax line, correct. Net effects between price and raw material costs.

Okay. And profit. What about on the top line?

Well again, the top line is about a positive 1% to 1.5% as a result of increases throughout the year.

Okay. All right. Great. And then just last thing here -- or a couple of last things. Your new product outlook for '06, do you think that's more positive in '05? And if it is, why?

We have had very high activity in new product introductions in 2005. And in fact I would say, that we have never introduced as many new products in a given year as we did in 2005. Now -- which naturally means that the impact in terms of sales in the first -- in 2005 will be much less and then we'll expect for 2006. So we believe that starting in the first quarter, 2006, we will see some impact and good impact for the year for our new product introductions, which were developed in the preceding years and introduced in 2005.

Okay. And then just -- your tax rate came in a little bit lower than what we were expecting. Steve, what sort of guidance for '06? Is it still the effective rate of about 32%?

Yes, I had indicated -- we're looking at around 32 for the year. And I think, for the fourth quarter it's interesting to note that those are really positive -- the tax rates are positive cash flow for items. And frankly, one of the strengths in our free cash flow for the year was some of the significant tax savings we have had. We're able in the fourth quarter to pick up some additional research and development tax credits both in Europe and the States. And also continue to effectively leverage our businesses throughout the world in terms of using the tax rates best for the Company.

Okay. And then can you give us a sense of your guidance and what kind of resin environment is reflected in that?

Well, I think if you look at the first quarter what we have got is -- as Carl mentioned, the estimates that we have given you were reflecting what we have seen in January, which are reflecting somewhat of a drop in the resins from what they were in December. Frankly, for the rest of the year it's really difficult to estimate where resins are going. So, it's -- our intent is to try to follow that as closely as possible. And we will be passing through, or in case of drops, passing through the reductions of pricing to our major customers, particularly in our dispensing closure section of the business.

Thank you very much.

Thank you. Our next question comes from [Gonsham Punjabi] with Wachovia Securities. Your line is open.

Good morning. The FDA is looking at banning some non-prevention inhalers. Can you just kind of talk about the effect that it could have on your business on the pharma side?

Gonsham, I don't think it has any material effect really. First of all, it is a very old product. Secondly we were not supplying that product. It was supplied by one of our competitors. And it may even have a positive impact because it is a non-prescription drug. And there has been discussion that for this kind of as asthmatic illnesses, it is preferable to use rather prescription drugs. And since we have -- we are supplying most of the prescription drugs for this kind of markets, we may even benefit from that. Because if there would be a move from non-prescription to prescription it could be positive.

Okay. And just finally on the food side you seem to have shown a very solid comp given that fourth quarter of '04 was also a very very good quarter. Has there been some sequential acceleration there? Are there some new products driving that between Q3 and Q4?

Well I don't know whether it's specifically between quarter three and quarter four, but we have continued to penetrate specifically with our Seaquist closure valve system into this market, also with non-valve closures. And the trends for inverted packaging is accelerating also. So, we continue quarter by quarter to see more interest and to see more product introductions from using our patented dispensing systems in the food and the beverage area. So, I believe that with the continued trend, as I mentioned, and our strength in development of new products and then R&D. And I may remind you that we are spending about 3.3% of our sales for R&D every year and that is certainly significantly over our industry. And with that -- with these investments we continue to drive new applications and especially we have been very successful in the food and beverage business.

Okay. Great. Thank you so much.

You are welcome.

Thank you. We have Mike Hamilton with RBC Dain. Your question, please.

Good morning. I was wondering if you could just walk through your thoughts on relative impacts in the fourth quarter on pharma and what was behind the performance there? And then kind of roll forward into your thinking in that business in '06?

Yes. Mike, the biggest issue, as we have pointed out in the past, is that we had very tough comparisons fourth quarter 2005 compared to fourth quarter 2004. Because the second half of 2004 was the period when several generic companies were doing pipeline filling and storage fillings for a potential approval by the FDA of a product, which would -- which has come off patent in May 2004. And so this was specifically strong in the end of 2004. And afterwards, since the FDA and up to this day, as far as I know, has not approved any generics; naturally these customers have completely stopped buying. So at this point in 2005, we did not have a repeat of any of those sales. And this is also profitable business and significant sales, this is the really -- the major, and really all of the reason, for the decline of the sales in our pharmaceutical products in the fourth quarter 2004 compared to 2004 -- 2005 compared to 2004.

And then thinking as we go out in '06?

And in 2006, so we have this difficult comparison, evidently and what we are seeing right now is a good increase in sales quarter to quarter.

Thanks. And could you highlight some of the momentum you are seeing in new product areas?

Yes. Certainly. As I mentioned before, we have never been as active and as successful, if I may say, in introducing new products in any given year. And that is specifically true in the perfumery/cosmetic business where we have introduced several new sampling systems. And one of these sampling system was then featured by Estee Lauder as a really ground-breaking new technology.

It is the first flat perfume spray sample system worldwide. It's a completely new technology. And it has several -- it naturally has a very big advantage for the consumer, compared to the scent strip. But also, it gives more room for advertising than on traditional vials. And it's not only usable in magazines, it can also be used for handing out at events or in-store promotions, mailing related marketing activities, credit card bills. We have one project with one customer who wants to distribute it parallel with a CD, so music and fragrance together. So there is a lot of potential in this kind of product.

And another system, which we have introduced is a new low cost sampling system. So, it's still a pump. But the pump is designed such that there is no contact of the perfume-- of the marketer together with the -- with metal and with rubber. So, that's a technical advantage and reduces the risks of compatibility, which is important for fragrance. So again, we have never seen an immediate success is as with this product in such a sort time. We are sold out with our capacity for the first half of 2006.

We are continuing to invest heavily in the pharmaceutical field in research and development. We are working, as we have told -- as we have mentioned before, we have invested in intellectual property rights and knowhow in a dry power inhaler system. And the dry powder inhaler system, we're now continuing to develop that. And that is naturally out five -- maybe three to five years still. But again, this device in this market of dry powder distribution would give us a potentially very, very good position. Because we believe that our product is superior to existing dispensing systems in the area.

How --?

Amanda Tepper with J.P. Morgan, your question please.

Hi, good morning, guys. I'm sorry about the technical problem earlier. I wanted to ask about the couple of extra acquisitions that you did. How is that impacting in your Q1 earnings and revenues? And how should we be look about that going through?

I think Amanda, if you take a look at the acquisitions we did in 2005 it's going to add on, an incremental basis, between '05 and '06 around 80 to 85 million in the revenue line. And also, we're looking at today incremental earnings per share in that area of $0.01 to $0.02 per share per quarter. So, anywhere from $0.04 or $0.05, to $0.08 on top of what we have already added in '05.

Okay. That's great. And can you give me a little color about what SAS does -- how that fits out? Why you decided out in now is the time to buy out your partner? And then similarly, CCL and on an operating and strategic basis how that fits in with your current base?

Well, CCL Amanda is a manufacturer and seller of dispensing closures in the U.S. market. So they add to us capacity, market share and technology. So it's a great fit. We have been traditionally subcontracting part of our business in the U.S. And -- however, we need to keep a balance between in-house and subcontracted business and therefore, we needed additional capacity. So, we have the benefit of the market share in dispensing closures in the United States. They have, as I mentioned, manufacturing technologies and molding technologies, which will enhance our capabilities and they will give us additional capacity.

Are they sell going different end markets than you are? Or are you saying that they are somebody you were already subcontracting to?

No, we have already been subcontracting to them for quite some years and therefore, we were comfortable with making judgments on this business. And they are, however, servicing as a competitor to our business in the past, the same end markets.

Okay. So it's an easy fit it sounds like.

Yes, it is an easy fit. As I mentioned, it's an increase in our market share in the U.S., which is one of the most interesting world markets for dispensing closures and it reinforces our position in technology as I said.

Okay. Where would you put your market share in the U.S. at this point?

Steve, can you answer that?

Again, on the dispensing closure side, we're probably in the 30 to 35 -- we are certainly the leader in the United States in the dispensing closure market, ex what I would call push/pulls.

Okay. And then what about --?

There's a lot of opportunity because traditionally and historically, we have yet to have as strong a market share outside of the U.S. So, that's why we are transferring our products and our manufacturing knowhow and so on to other parts of the world where there's an interesting potential of growth for our Seaquist closure division in the dispensing closure area outside the U.S.

And then what about SAS? I'm not was familiar with that.

That would be the AirlesSytems, that was a joint venture we had. Maybe Carl, you can talk a little bit about AirlesSytems.

Yes, we created together with the French company called Pechiney, a point venture in what we call AirlesSytems. These are dispensing systems, which keeps the air from coming into the container, so that you need less preservatives and so on. And that product line, especially in the cosmetic cream area, has seen considerable growth. The -- with the acquisition of Pechiney by Alcan, Alcan visibly, is concentrating on their core businesses. They seem to have judged that this business was not part of their core business. So, they were willing to sell this to us. And since we believe that in the context of our total product offering it's really a nice addition and the business is profitable and is growing very nicely. So, we felt it was a good idea to make this a 100% subsidiary of AptarGroup.

Sure. With this stepped up activity on the M&A front, we're hearing there are many more properties coming potentially to market in the [pumps] and dispensing closures area, some which would be much, much larger than the ones you have done. What is your pipeline looking at? And could we potentially see a larger deal or two out of you guys this year?

We are continuously evaluating our potentials. But, as you will appreciate, we cannot comment on any individual targets. We are continuing to look at strategically interesting acquisitions, adding geographic positions, which we may not have, adding new products, adding technologies. And we are at this time, we're still evaluating a number of potential acquisitions. We are also at this time, we're looking worldwide, we're looking also in Asia. We are looking in the United States, in the U.S. and Europe.But there is no specific project which I could comment on at this point.

It is safe to say you are looking at more opportunities now though, than you were say, a year ago?

No, I wouldn't say that. Because if you look at your activity in 2005, again, 2005 was the year of the largest number of acquisitions we have ever done.

Right.

So, we had a large list in beginning of 2005. Yes, we still have a considerable list beginning of 2006.

Okay. Thank you.

You're welcome.

Next question comes from Tim Byrnes with Cranial Capital. Your question, please.

I come on a little late, I hope I didn't miss anything too good. I have an idea for you. I know the scent you can use for Jimi Hendrix 'Purple Haze' CD cross-marketing.

Thank you.

So, give me a call if you need it. The question I have -- some of the companies in the pharma space are really kind of vertically integrating in some cases. Some with great success. Some without success at all, in fact, failure. I guess what I'm talking about is to win let's say the valve or dispensing business for a drug, they are willing to invest in raw protein development for new drug compounds. Is that something that you guys would consider? Or do you think it's kind of a fool's pass?

We have -- Tim, we have not considered that. I think it would require a considerable change in our business model if we wanted to do it. Because if I get you right, what you are describing would really -- us getting into pharmaceutical product medication research, right?

Correct.

Yes. What we are doing is we are trying to increase our product offering by additional lap services, by potential filling services, by helping our customers prepare in clinical trials and things like that.

Yes.

We have quite an advance there. Also, we have a special department -- or build-up over the years in working with the regulatory authorities and in helping our customers to get FDA and other countries' regulatory authority approvals. These kind of services we have been adding in there have been certainly helpful in maintaining or increasing our market share.

Got it. Okay. Yes. There was a company that took a turn towards not wanting to be a packaging company and more of a pharma services company. And it looked good for a while but it actually backfired. So, I just wanted to double check on that. The other question I had for you is; with all of the activity in food and beverage, these are such new and different markets. Especially structurally, you are dealing with much much bigger customers, the volumes are extraordinary. How is that whole process going along from the days of a lot of emphasis on fragrance and cosmetics.?

Well, we believe that we have prepared the Company strategically to better address individual industries' needs in the past. I would not say that we didn't have experience in working with large customers. We have been working for all of the years in the personal care market and the fragrance market with people like P&G and Proctor Unilever and [Wyeth]. And we have also sold our SimpliSqueeze system way back when, I don't even remember how many years ago already, to Coca-Cola. So, we have the experience in working with large accounts. And we have specialized and organized our business by end markets. And we have built up an organization where beginning from research over manufacturing to selling; people are specialized on the requirements of a certain industry, a certain market like food, like beverage or pharmaceutical and so on. I think that we as the Company are well positioned for those strategies and the ensuing organization to meet the requirements and to take advantage of potential like you are rightfully saying we see in the food and beverage business.

Got it. And if you were to ramp -- if you were to have to ramp-up large new volumes for let's say beverages on a global basis; let's just say, I don't know milk packages or something goofy like that, where they would throw a dispenser on; could you do it through your existing infrastructure, or would you need some additional capacity?

I think we could partly do it in some areas through our existing organization and structure. But we would certainly need to invest -- if it is major volumes, we would need to invest in additional equipment. And at the very end potentially also specializing a factory in an area where that requirement exists. Beginning quantities, as we have done in the past, already we will be able to hand our existing capacities and organization, but in -- if it goes beyond a certain limit, we definitely need additional capital expenditures.

My last question I couldn't get off without asking about China. The market, the use of it as a sourcing tool as a low-cost manufacturing base, where do you see it, Carl, at this point?

Tim, we are -- I hate to slap on our own shoulders but we have already decided in 1993 to set up operations in China. We started producing in '94, '95, so we have now a 10 year experience there and we have grown nicely. Now always without difficulties, it had it's challenges but we now have a presence there. We know the market. We know our competitors and so on. We have -- the basic and the fundamental goal was to participate in those local markets. We did not do this with the idea we get cheap labor and cheap manufacturing costs to reimport into Europe and the U.S.A. Now, for everything there are naturally exceptions. We had some cases where, for example, we have produced components there. But as you understand our business, our business is very highly automated. The percentage of direct labor in most of -- in our products when we scale up and when we have high volumes, is considerably below 10%.

Got it.

Take 5%. If you now produce those products in China, you have -- because we are business to business, we are supplying our -- we are resupplying industries, the service which is required from our customers in the U.S. and in Europe would make it extremely difficult to service correctly from these countries. The transportation costs is considerably high, it eats up on, -- certainly automated products eats up the cost advantage most likely. So, with exceptions, we believe that our strategy of serving the local markets and participating in their interest and growth in these areas, is the most important goal of our presence there. And that's by the way true also, for other developing countries and developing markets like in South America, like in Eastern Europe. Like in Russia where we also now have operations since about 1.5 years.

Great. Carl, thanks to you and Steve.

We have Mary Kovak with KeyBanc Capital.

Your line is open. Congratulations gentlemen on a great quarter. I'm actually in for Chris, I apologize. He just had to step off the call for a minutes. I just have a few questions. First, Carl it sounds from your comments like new products have really picked up. Along those lines are you expecting organic growth to accelerate back to your 6% to 8% average? Where do you see your best opportunities kind of by segment there?

Well, we can say that we have seen from -- in generally, that we have had good growth with -- starting into the first quarter. We have also good orders received, so we believe that on the quarter to quarter comparison, first quarter 2006 compared to 2005, we will see good growth. And that's partly because some of our customers are indicating for example, the perfumery and cosmetic market, that they are cautiously optimistic going into the new year. And also, as you just suggested, the new products.

Great. Thank you and another question. Along the lines of new products as well, Exubera, which was recently approved, I know -- I don't think you guys are working on that.

No, we are not.

But do you think this does help your product in any way or potentially hurt your product?

Yes, I think it could potentially help us. I mentioned before today that we are working on developing our own dry powder inhaler technology, since a couple of years. We believe we will come out with a superior dispensing system there, which we believe will create consumer interest on the market. And therefore, if the acceptance of dry powder inhaler for different drugs is approved and reinforced in the eyes of the public by Exubera coming to the market, yes, that could help us.

Do you have any sort of time frame for your product then?

Well, that is evidently always very very difficult to put an exact time frame on. But what we are seeing is revenues starting in an area rather three to five years. Because first, now we will potentially start presenting this to our -- to some of our major customers in 2006. And then they are -- the result hopefully will be potential collaboration on development for specific molecules between the customers and ourselves. And then the next -- then comes the clinical trials and then potential introduction. So, you are looking at a longer time frame in terms of when something like this will hit the market. But we may get some income before because of the collaboration agreements.

Okay. Great. Thanks and my last question is in regards to the competitive landscape. Do you guys have any comments on how that has changed or how you anticipate that changing following the sale of Crown's closure business? And since we have been hearing that the Calmar unit is going to be sold by Saint-Gobain, if you guys have any outlook on how that is expected to change or how you've already seen these changes?

Our business is absolutely in a very competitive environment and has always been. We have been successful mitigating the negative effects of that by investing a lot in R&D and by really seeing compe -- innovation as our number one competitive advantage. And that will continue to be the best and only way to continue to make the kind of margins we're expecting and to have the kind of rolls which we need. So it will certainly not get easier, there's no question. With the business having become really global nowadays, the e challenges will rather increase. But we believe also that we have done the right things to prepare the Company for those challenges.

Great. Thank you very much gentlemen. And again, congratulations on a great quarter.

[OPERATOR INSTRUCTIONS] The next question comes from Greg Halter with Great Lakes Review.

Hi, guys, good morning. The last call or two you've talked about the EP Spray and it's potential moving from Europe into U.S. with a major marketer. And I'm just wondering how that is progressing?

For a simple, fast answer, it is progressing very well and in line with our expectations. The equipment, which is necessary for this production, has arrived in the United States, and is in the bugging stage. So we may be able to start shipping already out of the U.S. in February -- no, in March. So, in this quarter. And the product -- the back on valve system is meeting a lot of interest. We have one major customer who is out with our system on the market. It's Coppertone from Schering and we have observed that it is -- that they have problems to keep it on the shelves because they are selling so well. So, we have very good orders already before even the equipment has really started running. We believe this will be a very successful introduction to the U.S. market.

And those orders are they being filled by Europe at this point?

At this point, yes. Up to now they are filled from Europe. And they will be -- but they will not -- we did not have the total market yet and we will get the total market share of this customer hopefully. And it will then be filled out of the U.S..

And the Coppertone, I presume is suntan lotion?

Yes. Yes.

Okay. And it's been over a year now that the -- you had a supplier situation -- a supplying resins. I'm just wondering if anything has some come out of that that at this point?

We were able to achieve a settlement, which has included, I I think Steve it's $470,000?

It's a little bit over 450,000. That's correct Carl.

Yes, we reached a settlement with that supplier in the fourth quarter.

And I presume that's them paying you, not you paying them?

Yes. Yes. Thank you for clarifying.

You have today discussed quite a bit about new products. Is there any sort of metric that you can give us? Is it 50% of your sales have come from new products introduced over the last two or three or five years or some sort of metric like that?

I don't think we have that but -- I don't think it's in the area of 40% or 50%.

The difficulty we've had, Greg in that process, is again the definition of new product. As you can appreciate, a lot of our customer go through reformulations and you get kind of improvements to the package. We generally participate, that's a lot of work for us as we go through that, That may not be viewed as a "new product" kind of -- maybe to the outside market but a lot of work for ours is internal. And that's a new product from ours. Because it's got a new color. It has got new systems around that. So, it has been a challenge. We looked at our customers generally are turning the products, probably we get a turnover in their product every three to four years, as we're getting new products coming out. So, there's a lot of activity in the new product area.

Okay. I can appreciate that. And just one housekeeping item, I wondered if you had the accounts payable balance at 12/31/05?

To be honest with you, I don't have that in front of me. I'll have to -- why don't I touch base with you on that one Greg? I'll give you a call.

Okay. One last one, if I could sneak it in here. Regarding the share repurchase, do you expect to continue to be active in '06?

Well as we've indicated, we'll continue to monitoring that. We were pretty active I think in '05 as well as '04. And right now the intention is, we'll continue to be in the market from time to time as we go into '06.

Okay. Great thank you and good luck on the future.

Thank you very much, Greg.

[OPERATOR INSTRUCTIONS] We have a follow-up from Tim Byrnes Cranial Capital. Your question, please.

I already know the answer to this but I have to ask. The Company is now pushing in excess of a 1.5 billion. That's a lot of resin and I guess it begs -- and a lot of injection molding. It begs the question of can you now with your resources, attack historically to Aptar lower -- deemed lower value-added markets? ie. let's say technical closures if not dispensing or pumps or valves? Does it make any sense or is that still a field you don't want to plow at this time?

Well, Tim, if -- basically our strategy has always been, as you know, going to the rather higher value-added with an intellectual property content, which is interesting and giving us uniqueness, and IPR protection in the market. Yes, theoretically we could do that. But I believe that we should do this only if we would find a way to make the kind of margins we have been making in the past. To go into a business where we would not be able to generate the same margins as we have had -- as in average at Aptar, I don't think this would be a good idea.

You guys want to remain the beauty queen. The high maintenance chick on the block.

Right.

Well I'm not going to argue with it. I just wanted to ask. Good luck.

Thank you, Tim.

Ladies and gentlemen, that does conclude our Q&A session and I'll turn the conference back to the speakers for any closing comments.

Ladies and gentlemen, I thank everyone for this participation in our call today. So thank you, and goodbye.

Thank you, ladies and gentlemen. That does conclude today's conference call. You may now disconnect