Aptargroup Inc (ATR) 2009 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Aptar's third-quarter results conference call. (Operator Instructions). Introducing today's conference call is Mr. Ralph Poltermann, Executive Vice President and Treasurer for AptarGroup. Please go ahead, sir.

Thank you, Devon. Before we begin, I would like to point out that the discussion to follow includes 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 to differ 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 were not able to listen today, 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 in forward-looking information contained therein.

Participating on this call today are Peter Pfeiffer, President and Chief Executive Officer of AptarGroup; Steve Hagge, Executive Vice President and Chief Operating Officer; and Bob Kuhn, Executive Vice President and Chief Financial Officer.

I would now like to turn the conference over to Mr. Pfeiffer.

Good morning, everyone. I will comment on our overall results and outlook and then briefly comment on the (inaudible) acquisition we completed in South America. I will then provide insight into our Beauty & Home segment. Steve will follow me with his comments on our Closures and Pharma segments, and then Bob will review our financials.

Focusing on the quarter overall, we are encouraged by the sequential improvement in consolidated third-quarter earnings over the second quarter of this year. Relative to the prior year, business conditions continued to be challenging. Our overall results were adversely affected primarily by the strong dollar and weakness in our Beauty & Home segment, largely due to the continued soft demand from the fragrance/cosmetic market.

The availability of capacity in the market allows our customers to place orders with relatively short lead times. As a result, our visibility continues to be very limited. Several customers have mentioned to us that they are of the opinion that inventory levels are bottoming out, and this is validated in some cases by our receipt of emergency orders.

In light of the caution and conservatism that still exists in the market, we still believe that the recovery in demand will be more of a gradual nature than a quick snapback.

We mentioned in the press release that we completed the acquisition of Covit do Brasil. Covit do Brasil is a fairly small but growing company that develops and supplies anodized aluminum parts primarily to the fragrance/cosmetic market. Their stamping and anodizing capabilities will allow us to reinforce our product offerings and better serve our customers in the fast-growing South American market.

Turning now to our Beauty & Home segment, we had sequential improvement from the second quarter in both sales and income for Beauty & Home segment. Compared to the prior year, reported third-quarter sales decreased 12%. Changes in exchange rates adversely affected sales by 5%. Excluding currency changes, sales declined by 7% in the quarter, mainly due to the softness in the fragrance/cosmetic market.

Our customers continue to be very cautious, and we experienced weak demands in each market served by the Beauty & Home segment. Excluding changes in exchange rates, sales to the fragrance/cosmetic market decreased 15%, sales to the personal care market increased 9%, and sales to the household market increased 4%.

Reorganization charges of $1.2 million pretax and the continued underutilized capacity due to the drop in demand from the fragrance/cosmetic market were the main cause of the decline in the Beauty & Home segment's income from the prior year.

On a positive note, flu virus transmission concerns have led to an increase in demand for our Beauty & Home segment's lotion pumps, which are used to dispense antibacterial or liquid soap products.

Briefly turning to some products, our bag-on-valve aerosol system was launched in the US on AquaFresh and Sensodyne oral care products that transform from a gel into a foam during use. Our twist lock actuators were introduced on several types of foot sprays under the Lotrimin brand name. We continue to see interest in our dispensing systems for private label products.

I would like now to turn the call over to Steve.

Thanks, Peter, and good morning, everyone. I will provide my comments and then turn the call over to Bob to review our financial results.

First, looking at the Closures segment, compared to the prior year, second-quarter reported sales declined 12%. Changes in exchange rates negatively impacted sales by about 5%. An acquisition made in the fourth quarter of last year accounted for about 2% of sales. Excluding currency, changes and acquisitions, sales declined by 9%, of which approximately 8% is due to the pass-through of lower resin costs compared to the prior year.

Excluding currency changes and acquisitions, sales to the personal care market decreased 13%. Adjusting this for the lower custom tooling sales and pass-through of lower resin costs, sales to the personal care market decreased approximately 2%.

In the food and beverage market, excluding currency changes and acquisitions, the market decreased by 3%. Again, adjusting this for the lower tooling sales and the pass-through of lower resin costs, sales to this food beverage market increased approximately 8% from the prior year.

From a geographic standpoint, we saw some improvement in the US, but we had weak conditions in Europe, particularly in Germany and France. Segment income as a percent of sales declined slightly from the prior year; however, segment income for the third quarter of this year includes approximately $1.4 million of expenses related to our previously announced restructuring.

Adjusting out these restructuring charges, segment income in the quarter decreased in absolute dollars, but as a percent of sales, it increased to 9.5% from 8.6% a year ago. We saw resin costs spiking towards the end of the quarter, and our normal delay in passing through of resin cost increases adversely affected the segment income for the quarter.

Looking at some of our new products, we see an increasing demand for dispensing closures for antibacterial applications such as what Peter had talked about in his comments. Secondly, we are seeing increased applications for dispense enclosures in the food market, including areas in pancakes, syrups, ice cream toppings, pickle relish, some of which are in the private label area.

Finally, we are seeing an increase in the use of our easy open jar lids, increasing for non-liquid products such as cleansing pads.

Now looking at our Pharma segment, reported sales declined 7%, mainly due to a 4% negative impact from changes in exchange rate on the translation of sales. Excluding changes in exchange rates, sales declined by 3% in the quarter. The decline in sales excluding currency is mainly due to decreased demand for our metered dose aerosol valves.

Turning to products, one of our nasal spray pumps is used on a medication called Astepro, which is marketed by Meta Pharmaceutical. It was approved earlier in the year in the US for the treatment of seasonal allergies and was most recently approved for the treatment of every day allergies. It is the first nasal anti-histamine to offer the convenience once-daily dosing for patients. And Nycomed received European approval for their medication called Instanyl, which used one of our nasal pumps. It is the first fast-acting nasal spray medication approved for the management of postoperative cancer pain.

Now I will turn it over to Bob to discuss our financials.

Thank you, Steve, and good morning, everyone. I will provide my comments, and then Peter, Steve and I will be happy to answer your questions.

First, commenting on the results for the quarter, as you have seen in the press release, our overall reported sales decreased 11%. Changes in exchange rates negatively impacted sales by approximately 5%, and acquisitions accounted for 1% of the sales. Excluding currency changes and acquisitions, sales declined by 7%.

From a geographic standpoint, sales to customers by our European operations represented approximately 58% of net sales compared to 60% last year, while sales to customers by our US operations accounted for 29% of sales this year versus 26% in the prior year.

During the quarter we recorded expenses totaling $2.6 million pretax related to our restructuring program, which is about evenly split between our Beauty & Home and Closures segments. Reported diluted earnings per share decreased to $0.48 per share from $0.57 per share in the prior year. After-tax restructuring charges negatively impacted earnings per share by about $0.03 per share.

Excluding this, earnings per share were $0.51 per share. Despite the decline in our net income in the quarter compared to last year, free cash flow increased significantly. Our cash flow from operations for the quarter was approximately $83 million compared to about $105 million in the prior year, and capital expenditures were approximately $33 million in the quarter compared to $67 million in the same quarter of last year. Free cash flow, which we define as cash flow from operations less capital expenditures, was $50 million for the quarter versus $38 million in the prior year.

During the quarter we spent about $3.5 million to buy approximately 100,000 shares, and our repurchase authorization at the end of the quarter was approximately 4.2 million shares. With the stabilization of the credit markets and our current cash flow generation, we plan to increase our repurchase activity in the future.

The mix of debt at the end of the quarter was roughly 75% fixed versus 25% variable, and the average interest rate was around 5%. On a gross basis, debt to capital is about 19%, while on a net basis, it is approximately 1%.

Briefly turning to the nine months, reported sales decreased approximately 17%, and changes in exchange-rate accounted for about 8% of that decrease. Acquisitions added 1%, thus leaving a decrease in organic sales of about 10% through the first nine months.

Reported diluted earnings per share year-to-date decreased to $1.27 per share versus $1.72 per share last year. Reported diluted earnings per share includes approximately $0.05 per share drag from the restructuring charges that I mentioned during the third-quarter comments.

Looking forward we presently expect depreciation and amortization for all of 2009 to be in the range of $125 million to $130 million with capital expenditures expected to be roughly in the same range. I would like to point out that these 2009 amounts could vary depending on where exchange rates move in the fourth quarter.

The effective tax rate for the full year of 2009 is expected to be in the area of 32%. I would like to emphasize that the range of EPS guidance in the fourth quarter that we mentioned in our press release does not include any reorganization charges. We previously announced that we estimated the total reorg cost to be in the area of $7 million, of which $5.7 million has been recorded through the third quarter.

Also when comparing our fourth-quarter guidance to last year's results, please keep in mind that the fourth quarter of last year included a favorable $5.2 million pretax or about $0.05 per share after tax benefit for the reduction in our LIFO reserve. Last year's earnings per share for the fourth quarter, excluding the favorable LIFO impact, was $0.41 per share. The decrease in the LIFO reserve last year was mainly due to a significant decrease in resin costs during the fourth quarter of last year, and we do not expect the same situation to occur in the fourth quarter of this year.

At this point Peter, Steve and I would be glad to answer any of your questions.

(Operator Instructions). Ghansham Panjabi, Robert Baird.

Would you give us some color on inter-quarter volume trajectory across all three businesses, please -- Beauty & Home, Closures and Pharma?

When you talk inter-quarter, are you talking between second and third?

No, no, from the beginning of 3Q to the end of 3Q.

I think if you look at it, I think what we saw is August, remember, comes in the middle of the quarter. So from across all three, we had a relatively strong July. August tends to be our softest of the three quarter, and that again followed this year. In September we had a pretty strong September again, which is again pretty typical for us coming off the summer holiday period, particularly in August.

Okay. So seasonally compared to last year, it is pretty much in line with what you would have expected then?

Yes, again, it followed the same trends.

Okay. And can you quantify the impact of higher polypropylene costs for the quarter?

Well, again, when we looked at it, again just pointing out when you looked at the second quarter and the first quarter, we were passing on resin drops, which was a favorable impact in terms of timing. We started to see that flatten in resin going up starting in the third quarter. Our rough estimate is between the second and the third quarter that had a negative impact on the Closures earnings of in the area of $2.5 million to $3 million.

Okay. And just one final question, if I could. I think you guys commented on the fact that inventory levels on your some of your consumer discretionary facing businesses seems to be bottoming, and that is probably a positive sign looking ahead. What about the pharmaceutical business? What are your customers saying about that particular business and the inventory levels there?

I think on the inventory levels in Pharma we have not seen big movements. The only area we have seen it is some of our metered dose valves where some of our customers were shipping into Eastern Europe and into Latin America. And we saw some buildup of inventory in 2008, and we have seen some bleed off of that inventory going through 2009. Outside of that particular area, I think inventories are about the same as what they have been in the past.

George Staphos, Bank of America/Merrill Lynch.

Let's maybe first question piggyback off of Ghansham's question. What kind of volume run-rates have you seen early in the fourth quarter, and what core growth is embedded in your guidance?

Well, we are not going to be able to talk -- I mean, the core growth we expect to be better in the fourth quarter in terms of where we were at in volumes from a year ago. But I don't want to get into specifics in the fourth quarter. We have always just given earnings estimates at this point, George.

Okay. I would figure it would be worth a shot, but you expect it to be positive. Can you comment on what early October has looked like?

No, we are not going to get into the fourth quarter.

Okay. One question, just going back there were some transition difficulties on our end. Can you review again the end market changes in Beauty & Home that you saw in the third quarter?

I can give you the sales to the fragrance/cosmetic market was decreasing 15%, sales to the personal care market increased 9%, and sales to the household market increased 4%.

Thanks, Peter. Okay. Now in terms of the sequential change in SG&A, it looks like you did a very good job in reducing costs. Were there any other items or things we should recall that drove the lower SG&A?

Similar question. Interest expense dropped pretty nicely sequentially, although in looking at the press release yesterday evening, I did not see much of a change in (inaudible) sequentially. Can you remind us what might have been going on on those two line items?

Sure. George, on the SG&A side, the only other thing I can give you really is that it is a slight favorable impact on the exchange rates in the quarter. Some of our SG&A obviously is based in Europe. So that with the stronger dollar in the quarter compared to last year, we get a slight positive impact if you are looking at just a gross SG&A cost.

And then on the interest expense, we had an additional month of our private placement in the quarter. So that gives us, if you will, a slightly higher average interest rate in the quarter compared to last year. But offsetting that, you have got also the effect of the lower interest income that we have got on our investments in Europe, which is now for the quarter was at about 1% and is now sitting at about 0.5% at the end of the quarter.

All right. I will circle back to you on that, Bob. And I guess a few last questions and I will turn it over.

One, can you give us tooling by segment if possible? If you provided it, I missed it. And then as we think about the next couple of years, what do you think will be the major drivers of free cash flow, or if you had to help us think about what a normal level of free cash flow would be versus what we have seen in the last couple of years, how would you have us think about that? Thank you very much.

All right, George. Let me take the first part of your question here. Tooling sales in the quarter we have roughly about $13 million in total in tooling sales in the quarter. About $3.5 million of that was in Pharma, about $5.7 million of that was in B&H, and Closures was about $4 million. It is roughly at the same level as Q3 of 2008. There was a slight flip comparative between the B&H and the Closures segments. B&H would have been up about $3.8 million, and Closures would have been down about $4 million.

I will talk a little bit about the free cash flow. As you can see, so far this year we have had very strong free cash flow, which is pretty much as we expected. Last year's 2008 flow was impacted by some high capital -- one-time capital expenditures.

So going forward we would expect free cash flow to continue to be running at the same pace that we have today given increased earnings. In other words, as earnings go up, free cash flow should go up. We would anticipate that our capital expenditures outside of acquisitions, which is the largest use of our free cash flow, would be approximately equal to depreciation over the next couple of years. So again, positive look in terms of where free cash flow is going over the next couple of years.

Claudia Hueston, JPMorgan.

Just going back to the guidance for the fourth quarter, I was hoping you could just maybe talk about what the variability is between the low end and the high end? Is it mostly volumes, and then what are your FX assumptions for fourth quarter?

I will take the FX side. Typically when we do our forecast, we use the rate at the time the forecast was done. So it would have been the rate that was sitting at the end of September (multiple speakers) about 146.

146 and last year's rate I think is (multiple speakers) 132 for the quarter.

The other side, in terms of the variability, as Peter has talked about and really I talked about and as we look out, visibility is still very cautious. And the one big question mark for us is always when we get to the fourth what is going to happen in December. December a lot of times inventories get adjusted by our customers -- either sales get pulled back and pulled forward. So that is the most difficult month out of the quarter to try to project, so that gives you the variability and the range.

Okay. And would you say visibility is worse than it was a year ago, or is it about the same?

I would say it is about the same. It started in the fourth quarter last year that we have had some problems to look forward a few months, and the visibility has not changed. As I mentioned, the lead times are very short. So our customers are really playing with this and trying to lay off orders as much as possible.

But I think the one thing that is different from this year compared to a year ago, while we are still seeing very short lead times, there is probably more of a positive attitude, and we're seeing that in different areas of our business, where the customers are still -- last year was a really negative time. Now they is at least more positive, and they are starting to look in terms of more optimistically at where 2010 may end up for them.

And we have some indications for that, too. I mean what has picked up in the last weeks is that the promotion activities we are seeing at the high-end of the fragrance/cosmetic area, which could be somehow an early indicator for the next months.

Okay. That is helpful. And then just on the cash side, I don't know if you want to provide some updated thoughts on how you are thinking about the balance sheet and the strong cash flow you have generated. It does not look like you bought back any stock in the quarter, but maybe just an update on that as well.

Sure. We bought back about 100,000 in the quarter, which is pretty consistent with what we have done in the first two quarters. And then I had mentioned that we would be looking at accelerating that rate into the future now that the credit markets seemed to be stabilizing, and our cash flow generation has still been positive.

Meggan Friedman, William Blair & Co.

A couple of questions. First, could you talk a little bit more about the emergency orders that you referenced? How does the volume of emergency orders compare to Q2? And then can you talk about the phasings -- did they accelerate or deaccelerate during the quarter?

I mean the amount has not really changed. It has become a little bit more in the recent past. But what we are seeing is that the people are really playing the short lead times. So it's very difficult to predict how it will continue at this point.

Okay. But over the course of the quarter, how did it -- how was it --?

We will get a little bit more in September only because we are getting -- people are back from the holiday side. So you probably had it more weighted to September. We would anticipate that we are going to get more of that as we get closer to the end of the year because inventories for a lot of our customers are pretty low right now.

And then in the Pharma segment, can you provide a little more color on what is driving the softer demand for metered dose valves? Is it the inventory issue that you talked about, and if so, are you expecting that will continue through Q4?

When looking at it again, it primarily relates -- I guess a couple of things that have been positive, first of all, in the Pharma area is sales of generics in the United States continue to be very positive, and we're seeing that increasing over last year's level.

The softness is occurring in the metered dose aerosol valves as I mentioned, and a good part of that right now is relating to a couple of our customers, and they have told us it relates to their shipments going into Latin America and into Eastern Europe. So right now we don't expect that to have a huge pickup into the fourth, but we would anticipate that becoming much more normalized as we get into 2010.

Okay. Great. And then final question, could you talk a little bit about the risen pricing assumptions that you have incorporated into the guidance?

On the resin pricing right now, what we have done is used resin pricing as what it was as of the end of September. Looking forward there are some rumors that resin may go up, and we are also hearing that potentially there may be some downward pressure towards the end of the year. In our guidance we have used basically resin pricing as of the end of September.

Chris Manuel, KeyBanc Capital Markets.

A couple of questions for you. I want to make sure that I heard you correctly. When you talked about fourth-quarter organic growth -- and I do realize you typically give us an earnings guidance. You don't typically try to get that granular with rates. But thus far, as I think, Bob, you pointed out, through nine months, you are minus 10%. If I heard you correctly, did you say fourth quarter will likely be positive?

No, I said fourth quarter should be improving in terms of volume expectations over what it was a year ago. So we do not expect to be following the same trend we did in the first three.

Okay. That is helpful. Heading into 2010, though -- how to say this -- but the comps get a lot easier. And would it be reasonable in your mind -- and again, I know you're not trying to give guidance beyond the quarter -- but at some point, given improving trajectory would it be reasonable to assume that starting probably first quarter next year, we might actually turn positive to some degree?

Well, certainly I think the key issue that you said is that the comps will become easier. We saw our biggest reductions in terms of the first and second quarter of this year. There is, and I've mentioned this, there is a bit more optimism on our customer side. Inventories we feel, as Peter mentioned, have somewhat stabilized. So if you add those together, it should be more positive as we start the year.

Okay, that is helpful. And then, Bob, if I can drill down a little further into your share repurchase activity picking up. As you pointed out, your debt levels you are happy with where they are. You don't have with some of the private placements a lot of debt that you can pay off without calling. If you are generating 100 to 150-ish of free cash, pre-dividend in that range, would it be unreasonable to assume that the bulk of your free cash outside of an acquisition coming is likely to go to repurchase? Is that essentially what you are signaling?

I would not say the balk of it. I mean in the past we have been repurchasing about -- if you go back historically before the crisis -- we were about 2 million shares annually. We could see it potentially getting to that point. As far as acquisitions, we do also have some of the short-term that we can pay down. But I would say the historical trend of about $2 million prior to the crisis would be a good benchmark.

Okay, that is helpful. And then if we can go kind of a different direction. You talked about some of the private label customers coming to you more now looking for some solutions and things of that nature. In your view as you are shipping to customers, a), do you have any sort of mix as to what you think your branded versus private label is? And then b), as you see it, does it appear as though private label is continuing to pick up share in the marketplace? It has over the last six months, year obviously. But I have been also under the impression that that is more stabilized. So I would like a little -- maybe your thoughts or some color there as well.

Chris, I think that the private label business is increasing also in the future. Because it really fits very well into today's economic situation, people are going much more in most cases to cheaper products. This is a trend which we have seen in Europe since quite some time. It is now also in the states, and we are pretty sure that this will continue. So the split between private label and marketed products is very difficult for us to publish. So we have not -- these figures are not available for the time being.

Okay. Just last question kind of along those lines. Private label in developing regions, have you seen introduction of more private label type products there? Has that accelerated at all?

Not so far. We have not seen this at least in a bigger scale in the Latin American area and not in the Asian area. Although these tendencies usually are also picked up in this area, in most cases in a later stage.

But Chris, I think we also ought to make a bit of a distinction here. Because when we talk Latin America, what we are seeing is when we talk private label, it is private label compared to a Proctor & Gamble or a Unilever. When you go down to Brazil or Argentina, you are going to have to earn some very strong local suppliers, which we are a major supplier to. And those are continuing to grow both in terms of quality and in some case going outside the region. And then we are a strong supplier to, if you will, that second tier of customers.

That is helpful. Thanks for the color, guys. Good luck in the quarter.

Chip Dillon, Credit Suisse.

I was wondering if you could give us a little more color on the breakdown of the sales change -- of course, not counting currency and acquisitions -- between volume and price? I know the overall change was 7% for the Company, but if you wanted to comment also about three segments, that would be great too. Especially I'm interested in the volume change.

Well, I think if you looked at it, first of all, going back to the Pharma and to the B&H area, the majority of what you have seen in the drop equates to volume. There is not as much price impact to that.

The biggest side we have in terms of pricing was that 8% drop because of the resin drop in the quarter for the closure. So combined that equates to about 2% to 3% overall for Aptar at the top line as a result of pricing when I take out currency. But I would tell you between the other two segments, pricing is not a big factor in either the Pharma or the Beauty & Home area.

Got you. So it is all happening in Closures? Okay. And then as you look to the next couple of years, you've mentioned that you see pretty much CapEx remaining in the range of what DD&A are. If we get some surprises in 2010 and 2011 on the outside and business is strong, is that sort of saying that you would see either your current footprint as being adequate to handle a big jump in orders, or are you saying that maybe you think you could make acquisitions more effectively to handle better times vis-a-vis making CapEx?

I think a couple of things you have. Number one, we continue to improve our capital through different improvements in our efficiencies. So each time we are adding capital during the year, we are actually adding additional capacity because we are getting more efficient. So that is one generation.

Secondly, the advantage for Aptar is that we have been established in terms of the developing markets whether it is China, Latin America, even in Eastern Europe. So we have a good platform that we are able to go into and be able to add reasonable amounts of capital rather than a lot of bricks and mortar. So that is how -- we think that we will be able to handle, let's call it -- if the market grows by 30%, that is a different game. But if the market grows at a reasonable level, we think we will be able to be able to grow with that with the capital being roughly equal to the depreciation and amortization level.

(multiple speakers) -- through 2011?

We have also mentioned during our last conference call that we are not cutting back in capacities because of the crisis. We wanted to be prepared that the market is coming back.

Got you. Okay. And then if you look at -- you mentioned about the share buyback. I know you still have about $4.2 million left on your authorization. I would guess that should be enough to get you through most of next year almost under any scenario. In other words, we should not look for you to increase or get a new authorization probably until I would imagine late next year at the earliest. Is that fair?

I would say that is reasonable. Again, if you look at the historic being about $2 million with $4.2 million, yes, we would -- I think that is a reasonable assumption to.

Got you. And last question, on the tax rate, you mentioned 32% for the year. Do you see any reason to think that is going to be much different next year? I guess you could say with the dollar a little bit weaker, maybe that would make it go down a little bit. Is that a way to look at it?

No, it is primarily driven really where the mix of the income is earned. So this quarter you saw it at about a 32.5% rate compared I think it was 31.9% last year in the third quarter. That was because the US earnings were stronger relatively speaking compared to Europe quarter to quarter. So I would say the big driver of any rate movement at this point, barring any new tax legislation in the US, would be really where the mix of the income is earned.

Jason Rodgers, Great Lakes Review.

I was wondering if you could provide an update on your ERP system implementation.

Yes, we have -- and this is the one we have talked about. We are implementing a Companywide new ERP system through the end of the third quarter. We have actually gone through one of our major operations and have installed that. We have introduced our second operation beginning of the fourth quarter. So we are in the rollout phase of that, and everything is pretty much going on on a planned basis.

And any change in the competitive environment?

I mean the competitive environment is still very tough in these times. Everybody is looking for business. There is no dropout of a competitor yet, so to speak. But it is always difficult in those times because everybody is fighting for business for capacities.

Okay. And then finally, just looking at your appetite for acquisitions, you made a small one here recently. I just wanted to get your take on where you see acquisitions going forward, and if you're willing to consider a bigger type of targets, or is this pretty much the range that you are looking at?

Well, I think if you look at it we continue to have an appetite for acquisitions that make strategic sense. So it is not done for growth's sake; it is really for the strategic part of the business.

We do think over the next period of time whether that is three months to 18 months that there are going to be additional opportunities given the strong balance sheet that Aptar has in terms of acquisitions. So, frankly, the fact that with credit the way it is and some of the financial sponsors not being as active in this space, we think there are more opportunities going forward than there has been in the last year.

(Operator Instructions). Mike Hamilton, RBC Capital Markets.

Nice validation of your business model again in the quarter. Nicely done. Three questions if I could. One, could you kind of give a picture in terms of benchmarks of size of your flu an antibacterial-related businesses and what kind of growth you are seeing right now as a result of H1N1 and other awareness?

Let me try that because it is a good question and a tough answer. What -- the hand sanitizer market, Mike, we went back and looked at, and the hand sanitizer market just that market by itself, in the past for us has been we sell to both pumps and closures to that market. And we estimated that in 2008 the market was in the area of $4 million to $5 million of overall sales. So a relatively small market. Today's run-rate that is doubled. It is about $8 million to $10 million just on the hand sanitizer.

Now another offshoot to that, though, which is almost impossible for us to see is the soap market, you know, the lotion market. Both of those are increasing as a result of people being more conscious about washing their hands, etc. So those have been a positive. But it is difficult to come back and give you an exact number.

Sure. Thanks. Next, could you just kind of give your thoughts of relative picture in the geographic markets, kind of where we are in your thinking on the economic curve for your customers?

Well, let me come back and I will let Peter maybe talk about that. Just to go back on that hand sanitizer that I gave you, the numbers I was giving you were our sales, not the market size.

Right. I took -- (multiple speakers)

Okay. I just wanted to make sure I was clear on that. Maybe, Peter --

My spouse has 4 million at home right now by herself.

Okay, talking a little bit about the economic situation in the different regions. We are seeing a little pickup in the United States, especially in the personal care market, which is a positive side. We are still seeing a lot of problems in Europe. Europe is still pretty weak in all markets we are serving. The reason might be that the people are a little bit uncertain about their future. The unemployment rates are supposed to increase for the next few months, so people are unsure. They are holding back their spendings.

The biggest growth market for us for the time being is Latin America. We are still growing in Latin America at a double-digit rage, which is very positive for us, and that was also one of the reasons why we had made this acquisition in Brazil to better serve these markets. And the Asian market is more or less flat for the time being. They also saw a little bit of the increases, but the flatness is mainly coming from the third quarter. So it's a very recent tendency there. Whether this will continue, it is very difficult to predict.

Final question. Could you give a picture of your feeling of product launches, what the appetite is out of your customer base, how they are feeling about new launch activity?

In the fragrance/cosmetic market, we are seeing quite a lot of new products being developed. The problem is that the customers are not yet ready to launch the new products. So our activities, our R&D activities, for these guys is pretty high. The problem is, as I said, it might be because of the financing issues they have, and they are not seeing yet the consumer being ready to buy these products. So it could accelerate in the future even more, but for the time being, it does not show up in our sales.

The other side, I think in going back on one of the other markets, the food beverage market, we still are seeing a strong conversion from non-dispensing to dispensing. So when people are introducing new salad dressings, new condiments, all types of different areas, we are seeing a positive. And we are even seeing that coming into the personal care where we have now seen for the first time an aerosolized toothpaste with AquaFresh being introduced in the US. So sometimes it is not a new product, but it is a reformulation or repackaging that we are seeing some benefit from.

(Operator Instructions). I'm showing no further questions.

Okay. In this case I would like to thank everyone for participating in today's call. Thank you and goodbye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect.