Aptargroup Inc (ATR) 2010 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to AptarGroup's fourth quarter 2010 annual results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

Introducing today's conference is Mr. Ralph Poltermann, Executive Vice President and Treasurer of AptarGroup. Please go ahead, sir.

Thank you, Kevin.

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.

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, information contained in the replay will be dated. It should be used for background information only. The Company undertakes no obligation to update material changes in forward-looking information contained therein.

Participating on the 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 Peter.

Thank you, Ralph. Good morning, everyone. I will comment on our overall results and outlook, and then discuss our Beauty & Home segment. Steve will follow me with his comments on our Closures and Pharma segments, and then Bob will review our financials.

I'm pleased to report that our previously announced realignment of segments to become more market focused has gone very well, and we are preparing to report under the new segment structure beginning of the first quarter of 2011.

Turning to 2010, it proved to be an exceptional year ,especially after following one of the most challenging years in our history. We achieved all-time highs in both sales and income for the year. Focusing specifically on the quarter overall, this was another strong quarter for us in which we achieved record fourth quarter sales and profits. Generally, the broad-based positive demand trends that we saw in the third quarter continued into the fourth quarter. Strong core sales growth was partially offset by the adverse translation effect. Compared to the prior year, our Beauty & Home and Pharma segments posted increases in segment income, but income for the Closure segment was negatively impacted by weaker demand from the personal care market, as well as some operational issues.

Looking forward, over the long-term we expect sales growth rates, excluding currency, to turn to more normal levels. During 2010, we generally saw upward movement in input costs, mainly concentrated in the resin area, but we are beginning to see cost pressures expanding into other areas, like steel and aluminum. We intend to pass along these increases as soon as possible, where market conditions allow. There continues to be a high level of new project -- the project activity, particularly in the food and beverage market and the fragrance/cosmetic market.

Turning now to some specifics on our Beauty & Home segment performance, we saw improvement in both sales and income for the Beauty & Home segment in the quarter. Compared to prior year, reported sales increased 9%, changes in exchange rates negatively affected the sensation of sales by 4%. Excluding currency changes, core sales increased 13%. Demand from all three of the primary markets served by the Beauty & Home segment increased during the quarter. Excluding changes in exchange rates, sales to the fragrance/cosmetic market increased 20%, sales to the personal care market increased 3%, and sales to the household market decreased 14%.

Turning to a couple of new products, our locking actuators are used on some new varieties of Proctor & Gamble's Old Spice men's body spray line, and one of our preservative-free lotion pumps is used on a new skin care product from L'Oreal.

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

Thanks, Peter, and good morning, everyone. I'll provide my comments on the Closure and Pharma segments, and then turn the call over to Bob to review our financial results.

First, looking at the Closure segment, compared to the prior year, reported sales in the quarter increased 5%. If you exclude currency changes, our core sales increased by 8%. The pass through of higher resin costs accounted for 3% of the sales increase, and an increase in custom tooling accounted for a 5% increase. Excluding currency changes, sales to the personal care market decreased 9%. And again, excluding currency changes, sales to the food/beverage market were up about 31%. Lower sales to the personal care market and some operational challenges we incurred, as a result of the high level of new project activity, adversely affected segment income in the quarter. A few examples of new products in the Closure segment, are number one, a new -- our dispensing closures are used on two new formulas of the Aveeno baby skin care products. And also, our products are now on the restaging of Clorox's Pine Sol Multi-Surface cleaner.

Now looking at the Pharma segment, we had another very good quarter in Pharma. Reported sales increased 5%, while core sales increased by 10% in the quarter. Higher custom tooling sales accounted for about 6% of the sales increase, and the remainder of the increase was primarily due to strong sales of our metered dose valves. Now looking at some new products, we entered into a new Pharma category, with one of our pumps being introduced in the US on a generic spray form of the Ambien sleep medication. In addition, our nasal spray pump is being used on an over-the-counter nasal decongestant, introduced in the US under the Mucinex brand name.

Now, I'll turn it over to Bob to discuss our financials.

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

First, I'd like to comment on the consolidated results for the fourth quarter. As you have seen, our overall sales -- our overall reported sales increased 7% and, excluding currency changes, core sales increased 11% in the quarter. Sales of custom tooling increased during the quarter and this represented about 3% of the increase in core sales. From a geographic standpoint, sales to customers by our European operations represented approximately 59% of net sales in both years, while sales to customers by our US operations accounted for 26% of sales in 2010 versus 28% in the prior year.

Reported diluted earnings per share increased to a record fourth quarter of $0.59 per share, compared to the $0.52 per share reported in the prior year, or $0.54 per share excluding the reorganization charges recorded in the fourth quarter of last year. Free cash flow, which we define as cash flow from operations less capital expenditures, was roughly $51 million for the quarter versus $29 million in the prior year. Our cash flow from operations for the quarter was around $83 million versus $71 million in the prior year, and capital expenditures were approximately $32 million in the quarter compared to $42 million in the same quarter of last year.

During the quarter, we spent roughly $27.7 million to repurchase approximately 600,000 of our shares and the remaining authorization at the end of the year is approximately 1.7 million shares. We took advantage of relatively low long-term interest rates and termed out some of our borrowings through a $100 million private placement at the end of November. The mix of our debt at the end of the quarter is now roughly 85% fixed versus 15% variable, and the average interest rate is around 4.75%. On a gross basis, debt to capital is about 22%, while on a net basis it is about 2% negative.

Taking a look at the year, reported sales increased 13% and, excluding currency changes, core sales increased 14% for the year. From a geographic standpoint, sales for the year to customers by our European operations represented approximately 57% of net sales compared to 58% in 2009, while sales to customers by our US operations accounted for 29% of sales in 2010 versus 28% in the prior year. The increase in the LIFO reserve in 2010 was $939,000 higher on a pre tax basis than the reserve increase in 2009.

Reported diluted earnings per share for the year increased to an all-time annual high of $2.48 per share versus $1.79 per share reported in 2009, or $1.86 per share excluding the reorganization charges. Free cash flow for the year was approximately $143 million versus roughly $149 million in 2009. Our cash flow from operations for the year was about $262 million in the current year compared to about $294 million in 2009, while our capital expenditures for the year finished around $119 million compared to about $145 million in 2009.

Looking forward, our capital expenditures were less than depreciation and amortization in 2010, due to the delay in the timing of some of the projects until 2011. Presently, we expect depreciation and amortization for all of 2011 to be in the area of $135 million, with capital expenditures to be approximately $155 million. I would like to remind you that these amounts could vary depending on exchange rates. The effective tax rate for the full year 2011 is expected to be between 32% and 33%.

When looking at the first quarter 2011 guidance in relation to the fourth quarter 2010 results, please keep in mind that, due to accounting rules on our stock option expense, it is heavily weighted to the first quarter of each year. For example, stock option expense on a pre tax basis in the first quarter of 2011 is projected to be about $5.5 million higher than the stock option expense recorded in the fourth quarter of 2010.

Lastly, we currently estimate that diluted earnings per share for the first quarter of 2011 will be in the range of $0.60 to $0.65 per share, compared to the $0.56 per share reported in the first quarter of 2010. And the average exchange rate for the Euro compared to the US dollar in the first quarter of 2010 was almost $1.38, whereas at the end of the fourth quarter the 2010 rate of $1.34 was used for our forecasted range.

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

(Operator Instructions)

Our first question comes from Ghansham Panjabi with Baird.

Hello. Good morning.

Good morning, Ghansham.

From your comments, you noted that there's a high level of new project activity in Closures. Can you give us a sense as to how this current pipeline for new products compares to what you typically see at this time of the year? Presumably, your customers have seen a big rebound in volumes over the last 18 months, and are we back to near 2007 levels, in terms of their confidence?

I think, Ghansham, in the new project activity, this is heavily weighted right now to the food and beverage activity in Closures. And those are actually new projects, and some new markets that we're getting into. So, if you look at it on a comparable basis, it's actually new market segments and new penetration that we're going into that we weren't there a year ago.

In terms of our existing business, in terms of Closures, you can see for the first nine months we had a pretty strong year. When we got to the end of the year, the personal care side, we started to see, I think, some inventory management by our customers. We started to see, last year, remember, the H1N1 crisis was going on, we had a lot of sales coming from that, and we've also moved out some unprofitable business. You've got a couple of things that are affecting the Closure market.

Okay.

In terms of Pharma volumes. Obviously, very, very strong in 2010, and it sounds like you have some momentum flowing into 2011 as well. Are there any other new products, apart from what you mentioned your prepared comments, that we should be aware of as it relates to your customers, both in terms of US and also in Europe?

Again, there's nothing new that I -- other than what we've talked about. I think the sleep medication, again, any new market for us is very interesting and that, on top of the pain products that we've talked about in the last couple quarters, I think bode well for Pharma as we go forward.

Okay. All right. Thank you very much.

Our next question comes from Chris Manuel with KeyBanc Capital Markets.

Hello. Good morning, gentlemen.

Good morning, Chris.

A couple questions for you.

First, if I could dig a little bit into what you indicated were some of the issues in Closures, and sounds like you're launching some new product there, there might have been some start-up costs or things of that nature. Is a there a way that you could quantify for those, and do you anticipate that continuing into 1Q?

I think -- you're right, exactly, we've got several new projects, as we're starting up both molds and machinery, we ran into some operational challenges around that. We're continuing to improve on those, so I think those will get better as we get into the first quarter. We anticipate that actually having -- trying to get done with that by the second quarter of the year. But we do expect quarter to quarter improvement. That, together with those operational issues, with the slowdown in personal care that I mentioned earlier, is giving -- we are estimating that amounts to about $3 million to $4 million, on a pre-tax basis, hit for us in the fourth quarter.

So again, we should start to sequentially improve on that and actually see the benefit of the new projects, as well as some of the operational changes, as we get into the second, third and fourth quarter of 2011.

That's helpful.

And then, I know probably it's tough to break these up or think about them separately, but when you think about what happened in personal care in particular, I think you mentioned in one of your other components that personal care was up a couple points in something. But -- or maybe that was full year, and I got them confused. Was there anything, as you've gotten now into 1Q, has that activity resumed, was it related to timing of orders, or-- ? Maybe a little color there would be helpful,

I'll deal with Closures, and then I'll turn it over to Peter.

You were right, though, the 3% increase that is in the Beauty & Home area, so we did see an increase in that sector. On the Closure side, what we saw is some inventory we felt reduction or inventory management by our customers, and as we get into the first quarter, that's not there. The other thing, though, is certain -- we have actually gone, intentionally, and have reduced some of our unprofitable projects that we've had and are replacing those with some of these new projects. So you'll see a little bit of a ramp up as we go through the year.

Maybe, Peter, you can talk about the Beauty & Home area.

In the Beauty & Home are, we are seeing also some weaknesses, especially in the US, it's lower demand for these kind of products in the last two or three quarters. Basically, we think this is a temporary issue. It does not show any long-term effect on this. In the remainder of the world, Beauty & Home, the personal care area is doing reasonably well.

Okay. That's helpful. I'll jump back in the queue.

Thanks.

Our next question comes from George Staphos from Bank of America.

Hello. Good afternoon. Congratulations on the year.

The first question I had, it's more a question than comment, but wanted your thoughts. Is your view that the destocking in personal care for Closures was more market related or related to your products? One of the -- I wouldn't say they're a peer company, but one of the plastic packaging companies that reported recently saw a similar decline in their personal care volumes, wanted to see if you thought that was an industry phenomena or specific to Aptar.

I think on the Closures side, I do think it's some industry issues, because I think that was across, we feel, what the whole market was. And then again, as I mentioned, we were actually intentionally getting rid of some of our lower margin business. So, you had a little bit of both of those, George.

Okay.

I guess it was -- your answering Chris's question about the impact within Closures between the stocking and the operational issues. Did you say the $3 million to $4 million was the combined effect of those two, or was that merely related to the operational issues?

No, we view that -- and again it's so difficult because one gets tied to the other.

Sure.

We really feel that it's $3 million to $4 million on a combined basis, just not operational or the PC reduction.

Okay. I will turn it over. Thank you.

Our next question comes from Chip Dillon with Credit Suisse.

Good morning.

When you look at the overall company and you mentioned, you know, let's forget currency, the 11% sales growth, we see 3% is from tooling and roughly 2% or 3% is from the resin pass through, so that would leave us with about 5% or so for volume, and you mentioned you expect volume growth to grow at a more normal rate in the future. First of all, would you agree with my math, and what would you say, how much lower would volume growth be at a more normal level?

I want to just make a comment on the resin pass through, really it's related to the -- the 2% or 3% is really related to the Closure segment only, which only represents about a quarter of the overall consolidated sales. So you're really looking at less than 1% overall, in terms of the resin pass through, on the impact.

So the volume is more like 7% then, across the Company?

Yes, that was what we came back to, the 7 % to 8%, and that's been pretty strong throughout the year. So, we've had a very strong first quarter, in terms of recovery, and even in the fourth quarter, those trends we see going forward, being that 6% to 8% year on year growth. It will be more challenging, certainly, in 2011 because, you know, we didn't have the drop that we did between 2009 and 2010.

Of course. Would something closer to 5% be a better proxy?

It's going to be difficult, because one of the things I think to keep in mind on the sales side, we will be trying to pass, as Peter said, all of these increasing input costs on materials, et cetera, through. That will have a positive impact on the top line but not a big impact on the income line, because we're passing those through mostly on a dollar for dollar basis.

Got you.

And last question, I'll jump back in, is -- the tooling accounted for 3%, which I'm guessing is a little bit more than normal, and does that sort of -- is that a precursor to better demand in the future, when you have a big tooling year?

Yes. Chip, it was, for us, it was a record year. We finished the year at about $71.5 million in tooling. Typically we're usually around, you know, $55 million to $65 million in tooling, so it was a good year. Generally, you're correct, it is a precursor to new business in the future, primarily on some of the Closure type of products, both in personal care and food and beverage.

The retooling has basically two reasons, it's restaging of existing products and it's new product, so the restaging certainly has not such a big impact on the future sales, but new product will come on stream next year.

Got you. Thank you.

Our next question comes from Mark Wilde with Deutsch Bank.

Good morning.

Hello, Mark.

I wondered if you could just talk, with the shifts in the segment structure this year, I assume that that means you're going to be moving around sales coverage on accounts and things like that, and I wondered if you could just talk briefly about what you're doing to sort of minimize the risk of some hiccups there as you shift people around on accounts.

You talking about the realignment of our organization?

Yes, exactly.

The reason why we are doing this is really to get closer to our customers. In the past, we have gotten a lot of complaints from our customers that it is very difficult to do business with AptarGroup because of our pretty complex organization. This is -- this is one of the reasons we are doing this. And certainly some people have got new jobs and have new contacts with the customers, but we are looking for a rather positive effect on the realignment than we are seeing problems.

Okay.

The other key issue I think with that, Mark, is this transition that we're talking about has really been going on all through 2010, so this is -- and as Peter mentioned in his opening remarks, it has gone, in our view very well, so I think these account issues we don't anticipate any major hiccups in 2011.

Okay, Steve.

And if I could, just as a follow-on, when you mentioned the European and the US sales, which are, you know, about 85% of the Company total, it just seems like in the recovery that we've seen, the growth has been so much stronger in the emerging markets, and I wondered if there's any rethinking on your part about how much business and how much manufacturing on the ground you want to have in places like Latin America or Asia?

Yes, Mark, I'd like to say -- for the year it was actually pretty evenly split across all four regions. If I look at it, the US for the year was up about 14%, Europe was 15%, Asia was 13% and Latin America was 17%, so again, we're seeing pretty consistent growth, again, off of 2009.

But your point is well-taken. We've been investing more of our capital, for several years now, in some of the growth areas, so that is -- we are producing more locally. Certainly our goal is to produce locally what we're selling in that area. So, that process has been ongoing now for several years.

I think I have to underline just what Bob said, our long-term surge is really to strengthen our footprint in these growth areas which is Latin America and Asia, and maybe also in Russia, because also this market is picking up quite a bit in the last quarter.

One last follow-on to that, Mark, too, that I think is important, because even though we see an increase in Europe, for example in our sales, in the fragrance cosmetics, that is a heavy export market, so a lot of our customers' products are ending up -- a lot of their growth has been fueled by these developing markets. So indirectly, we're actually participating in that today.

Okay. Fair enough. Thanks.

Our next question comes from Meggan Friedman with William Blair and Company.

Hello. I wanted to talk a little bit more about the new end market alignment. Some of the initiatives that you talked about in the quarter, reducing the unprofitable businesses and entering new markets, and it sounds like between food and beverage and Pharma there are a lot of new market opportunities there. Are these initiatives that you're undertaking in conjunction with the realignment, and can you talk a little bit how you're assessing which new markets to enter?

I think it's already an outcome of our realignment. Steve has already mentioned that we are working under these new conditions, already since the beginning of 2010. And one of the outcomes was the new created food and beverage market has got much more attention in our organization, and the outcome was higher project portfolios than in the past, and this will continue. We will try to use the cross fertilization of our products through these new segments, and already we are seeing a very positive effect on this.

Okay. Great.

And then, can you talk a little bit about the acquisition pipeline and the expected valuations for target companies and generally uses for cash?

Acquisitions targets are getting even longer in the last months, but as I always say, it's very difficult without the agreement of the counterparts to finalize these acquisitions. Maybe Steve can give you a little bit more.

I think to the multiples, Meggan, what we're seeing is more normalized multiples coming back. We saw a relatively good year in 2010 across the segments, so I think the multiples, whether that's in the packaging sector anywhere from 5.5 to 6.5 up to 7 or 8, we're still seeing those. And I think, as Peter said, the balance sheet gives us good opportunity to come back and leverage potential growth in that area.

And I think, Meggan, on your uses of cash, our priorities really haven't changed. Our first priority, obviously, is for acquisitions, and again, we continue to evaluate the dividend payout ratio and the share repurchase, in that order.

Okay. Great. Thank you.

Our next question comes from Jason Rodgers with Great Lakes Review.

Hello. Good morning.

Hello, Jason.

Good morning, Jason.

Would you mind just running through again the different sub segments of the Beauty & Home and the Closures, what they were up or down for the quarter?

Sure.

In the quarter, within Beauty & Home, the personal care side was up 3% on a core basis, fragrance cosmetic was up 20% and household was up 14%. So you get to a combined, if you will, core then of the 9%, after taking out the 4% -- I'm sorry, 9% reported, 13% core after excluding the FX.

Okay. And then, in the Closures?

Did you want Closures, as well? Closures, the personal care side was down 9%, household was down 27% -- I'm sorry, was up 27%, and food was up 31%, and the total was 8%.

Okay.

And then, wondered if you could just comment on the inventory, which had about an 18% increase year-over-year.

Last year was a little bit of an anomaly, because I think what you saw last year is, you saw the reverse effect. We were pretty slow throughout the first three quarters and then we had the fourth quarter picking up, and was a record for us. This year, while it was a good quarter, we were pretty much stable throughout. You had a lot of different factors, but typically at the end of the year a lot of what we're producing is shipped into the first quarter ,depending on when the customers have their shutdowns and things like that. So comparing year to year we had a little bit of different dynamics in where the growth was coming and our steady growth this year.

Finally, do you have the figure just for R&D for the full year?

I don't have the specifics, but again, it hasn't changed materially from prior years, so I mean we're probably still in that 3% of sales range, so we're working on the year-end disclosures right now. But I don't have that, that specific, in front of me right now.

Okay. Thank you.

Our next question comes from Brian Rafn with Morgan Dempsey Capital.

Good morning.

Hello, Brian.

Can you give us a sense -- you talked a little bit about resin inflation. You also said there was some spillover into aluminum and steel some of the containers. Can you put a magnitude? Is it low single digits? Mid-single digits? Give us a sense.

I think if you look at the resin, again you have to separate these between the different parts of the world. Resin in the US saw some pretty dramatic increases coming into January, where polypropylene jumped quite a bit. How long that will stay is still subject to what the markets are going to do. What we have seen is both tin plate, steel, aluminum going up progressively over the fourth quarter, so you're probably into double digit increases in all of those categories as we go in through 2011.

Okay.

Relative to the kind of general inflation, you had a very good year. Anything with head count hiring, overtime, adding shifts, any third-party flex temporary workers? Give us -- what's the labor situation look like?

If you look at the volume, because we haven't shut any facilities down, what we've done is basically come back, and a lot of our operations were back to a 24-hour, 7-day-a-week operating side. Some of that was filled early in the year with overtime, and then we've either replaced people as we needed to based on the current volume, and we've also added capital into that and stream-lined the efficiency. So, I don't think there's anything -- today we've got, in the fragrance cosmetic area, in particular, some longer lead times, and we'll see how that goes through the year. So, it bodes well at least going into 2011.

How would you categorize how you saw the one, the fragrance perfume area, kind of segregate the economy, the teenage brands versus maybe the higher end premium brands, and how would you say the Christmas holiday season was for 2010?

First of all, the Christmas holiday season seemed to be -- was pretty good. The information we got from our customers, that they were really happy with the Christmas season.

What we are seeing is really a nice pickup in business in the higher end of the fragrance and cosmetic market, and we are also seeing, because younger people have more money available, they are going into the more fashionable products. So Beauty & Home, especially fragrance and cosmetic markets worldwide, is picking up quite a bit.

When you talk about product line launches, Peter, historically, you've seen that expand and contract. On a unit volume basis, are you seeing launches in the millions or are you still seeing kind of regional launches in the hundreds of thousands of units?

What we are seeing is a trend which goes back to former years where the launches are becoming more world wide. The launches are -- bigger launches than in the past. (inaudible) the launches were smaller. Now it seems that companies are investing more on a world wide basis.

Okay.

And then relative to packaged food, how much of a driver of the packaged food is the SimpliSqueeze?

SimpliSqueeze as we've had, is a major factor into condiment area, and we continue to expand in that area, and we're looking at other areas, but condiments has been the biggest piece of the food market for SimpliSqueeze.

Okay. And then the --

Brian, we probably ought to try to -- why don't you get back in line, and we'll get back to you?

All right. That sounds good.

Kevin, are there any more questions?

Yes, there are. One moment.

Our next question comes from Tim Burns with Cranial Capital.

Good afternoon, Peter.

Good afternoon, Tim.

And, good morning, Steve, Bob, and I'm sure that Ralph's around, somewhere. Couple of questions.

You know, one comment, the way you can continue to grow sales and earnings kind of leads me to believe that you might be taking some illegal steroids through a dispensing device, probably between the toes or something, but anyhow, my question is -- a couple of them. Let's get the negative one out first.

You've been reading a lot about the pharmaceutical companies, Steve, having the consolidation and then the resultant cut backs in cost centers and people, and in the UK in particular, they just had an interesting article about what's happening to their R&D. Does this mean that you could actually grow your proportion of R&D to the less amount of companies?

I think, certainly, the dynamics in the pharmaceutical market have changed over the last couple years. There is more and more cost pressure, and I think that actually bodes well for us in terms of working with our customers on more cost-effective dispensing advices. And the other side certainly is the regulatory environment. So I guess, Tim it's too early to tell. What we are seeing is potentially some volume increases as we get into more people are being covered, as for example in the United States.

So today, there's some negatives and some positives and right now, at least for us, since we are pretty -- it's a pretty niche market for us in what we participate in, we don't see any dramatic changes or reductions in our business, certainly, going forward and if anything, a slight positive.

Thank you.

I would assume that the pipeline that you all are talking about includes the new technology, I think it's called Bobco?

That would be Babco, and that would be the bonded aluminum, it's a bonding technology, to bound that to plastics. That's true. And that affects more of our personal care and food and beverage business today than it certainly does our pharmaceutical, though.

I've seen some wide mouth jars that have been -- they weren't labeled but they were kind of products to come that I would think would be maybe even more lucrative than the juice market, but that's another story.

My last question, sorry if I'm taking so long, but my last question is -- Peter, Steve, how do you feel about the general economy and is there a sense of urgency or a need to spread your wings and go south or east?

We have already spread our wings to go south and east. As I already have mentioned, it is one of our long-term strategy to go more into the emerging markets. I don't know that we can call them still emerging markets, but they are getting pretty mature, like China and Brazil. The world is, I think, is on the way up, increasing business again. I think we are coming slowly out of the crisis. Some countries are ahead, some are a little slower. Certainly ,we have not seen big drops in the emerging markets. We are seeing some improvements in Europe, France, for example, and Germany are doing reasonably well, and those are the two big countries in Europe. North America is still struggling a little bit, but it seems that also they are the biggest -- showing some improvements, slowly now.

So I would say 2011 for me is a pretty optimistic picture for the world economy.

Got you. Got you. Well, another great quarter and one piece of advice, and it's one man's opinion, I'd rent my buildings in China.

I don't know, maybe India as well, as a good choice.

Thanks, and have a good day everybody.

All right.

Our next question comes from Mike Hamilton with RBC.

Hello, everyone.

Hello, Mike.

Wondering if you could parse a little bit, the tooling. From my numbers that's record by quite a bit. Could you give some picture as to how it breaks out by segment, if possible, and also kind of a picture year-over-year of number of projects that you're involved in.

Sure, Mike. Let me give you the quarter and then a year-to-date by segment.

So the quarter, again we were at about $15 million in the Pharma division, that was up about $5.6 million compared to the fourth quarter last year. B & H had about $5.1 million in tooling, that was pretty close to last year, it was up about $300,000. Closures had $10.4 million, that was up about $6.4 million compared to last year in the quarter. So for the quarter, we were about $30.6 million in sales or up about $12.3 million.

For the year, I had mentioned we finished about $71.5 million in total, $39.9 million of that was coming from the Pharma division. That was up roughly $9.8 million year-over-year. B & H finished slightly lower at $13.7 million. That was down about $1.5 million. And Closures was -- finished at about $27 million, or up about $3.5 million from last year Those are all on a reported basis and not on a constant currency basis.

In terms of record by a long shot, I think our previous high was back in 2008 when we hit about $66 million for the year.

Yes, yes.

How about relative projects fourth quarter over fourth quarter?

I don't know if we have actual visibility in terms of ongoing projects, other than what Steve had already mentioned in terms of the food and beverage being really the newest and most different, I would say. You know, it's probably pretty comparable, you know, in the rest of the segments.

Okay. Thank you very much, and congratulations.

Thank you.

Thank you.

Our next question comes from Chris Manuel from KeyBanc Capital Markets.

Hello again.

How you doing, Chris?

Two follow-up questions I wanted to ask.

First is on the Pharma side, 6, 12, 18 months back you put in a new facility in Europe, I believe, for --principally to help out with some of the metered dose with the counters on the landmark stuff. Any updates with respect to customer adoption, when that becomes more main stream and out in the public domain?

I think -- first of all, you're right, we did expand two facilities, actually, about a year ago, year and a half ago, expanded the facilities rather than build new. We have been able to use those for ongoing production. The counting device continues -- we're working with several customers and we're hopeful that we may be something coming up in Europe in terms of 2011. So again, we're continuing to move forward on those going through with our customers all the regulatory issues.

Okay. That would be encouraging.

And then the follow-up questions -- or the second question I had was, on the capacity side, if I look at where and kind of use your tooling as a proxy of where the business is back at with respect to pre -- downturn levels, seemingly your volumes ought to be back to kind of peak or beyond former peak levels. With some of the culling of lower margin products adding higher, are you at a point where, from a capacity standpoint, you begin to feel constrained and want to make adjustment to places that you need to add capacity, or can you maybe give us a sense how you are globally or by different product lines?

There are certainly some product lines still where we have a pretty long lead time, especially in the fragrance cosmetic area, and we are -- part of our capital expenditures always also to adjust our capacities in areas where we are growing. So this is a normal business we are doing every year.

I think the other one, Chris, that we are seeing some growth in that we'll be taking a look and see what capacities, is in the food and beverage markets. A lot of these new projects that we have, how that fits, and that's something that we continue to evaluate, going forward. The rest, I think we're not in too bad a shape. That's one that we see pretty dramatic growth and we'll need to consider how we add capacity over the next year.

If you can indulge me one last little follow-up kind of along those lines, as you look at adding capacity, for some areas, I understand Pharma or parts of fragrance cosmetic it's tough to do it other than on your own, but as you look at some of the food and bev opportunities, how do you balance doing a green field or expanding on your own versus acquiring, or is that even a debate that you have?

I think there's three things on that. There's one, is where you continue to use, in certain of that business, external manufacturers to help balance our risk. We look at green field and we definitely look at acquisitions. So Chris, it's an area where we evaluate all three as we go forward.

Okay. Thank you.

Next question comes from Mark Wilde with Deutsch Bank.

I just wanted to come back to that inflation issue that you kind of flagged in your outlook comments in the release this morning. Could you talk about which segments you think that may be the biggest challenge for, and then also just remind us of how sort of the lead lags kind of compare from segment to segment?

Certainly the increases, especially in the input cost is mainly hitting our Closures business. We are seeing there are some increases also in the first and second quarter of next year, but there we have the pass through possibility and we are using this extensively.

In the other areas, especially in the fragrance cosmetic areas, the steel and aluminum costs are hitting us. We are able to pass these through if we don't have long-term contract with our customers, so this is basically a normal business for us. Also in the past we saw these kind of tendencies.

Peter, how much of a lag would you have on those pass-throughs, let say in the -- for resin in the Closures area?

In the Closures area, it's between one and three months, usually the pass through period.

Okay. Very good. Thanks.

Our next question comes from Brian Rafn from Morgan Dempsey Capital.

Steve, maybe you could talk a little bit about how much of the pressure were you looking at the overall inflation in commodity feed stocks, you're seeing a lot of the packaged food manufacturers, packaged consumer products, you know, it the old you got 16 ounces for $2.69, now you a get a 12 ounce bottle. That whole shrinkage of size, and maintaining price while delivering a smaller unit volume to the consumer, how much of that and how strong of that going into 2011, does that drive packaging changes?

It's certainly -- you can see it, as you said, you can see that it's out there. It's difficult for us to come back and quantify what that is. Generally, it is a positive for us. So I would say it tends to be a positive, but Brian, we just don't have a number to come back and give you how much of that would be --

Would you say it's a dynamic positive or would you say it's more of a peripheral issue?

I think it's a little bit more of the peripheral issue, because you do have even some offset to that where the for club stores you're actually getting larger output where you're getting one container. So you've got a bit of a mix. Net-net for us, we think it's a net help. But it's impossible for us to come back quantify it.

Okay.

And then I'm going to ask you, as I do every quarter, Steve, your odyssey to deliver a better package to the milk industry, is that going anywhere or is that still being delayed?

We're actually -- in that area we continue to work with several customers on that specifically, and right now, until they come to market, there's nothing really we can talk about.

Okay, okay.

Some of the new products that you have, you know bond on aluminum, Bag-On-Valve, blister packs, any of those things, one, having material rollouts and two, when you have new technology like that, are you -- is Aptar pushing that technology on customers or are customers demanding that and pulling that?

Usually when we have a new technology on stream, we are trying to use this through all of our segments. It's not only used in the food and beverage area, you are trying to bring this also into the Beauty & Home area and some extent, even into the Pharma business.

Okay.

We are pushing this to our customers.

Okay, okay.

On the property, plant and equipment, I think you said that $155 million CapEx, how much of that would be maintenance?

At least, probably about 45% of that would be maintenance, and the rest it's hard for us, because typically when we replace equipment, we're replacing it with higher efficiency, more output, so it's really a combination of capacity, increased cost savings and maintenance of business. I mean our -- It's hard for us to --

Sure, sure. I think you've answered --

Bob, what impact do the accelerated depreciation for 2011 and 2012 have on the CapEx number at $155 million? Are you moving any CapEx forward or is that immaterial for you?

No. There's a little bit of the spillover from 2010 projects that will leak into 2011, but for the most part up until now it's a pretty normal capital.

I think the accelerated depreciation is really cash-flow driven for on a tax basis rather than it's not a book basis.

Okay, okay.

You have the mix by chance, for 2010 on pumps, caps, Closures and aerosol valves? You usually put that in your annual report, but I wonder if you have that --

We don't have the figures right now, but it's really not going to be a material change from what you saw in the past. It's pretty comparable.

Okay.

Then on -- you don't have a dollar number on the treasury purchases? You talked about shares, you don't have an average weighted dollar price, do you by chance?

For the quarter or for the year?

For the year, Bob.

I probably do have that, somewhere. I've got it for year-to-date. For the quarter, it was about $46.13.

Okay.

Something less than that, on a year-to-date basis.

You have done a superb job.

Probably about $43, on a year-to-date basis.

You are like the Energizer bunny, you just keep going. So, keep it up. Good work.

Thank you, Brian.

Our next question comes from Jason Rodgers with Great Lakes Review.

Thanks for taking the follow-up.

I just wanted to inquire about the gross margin pressure in the quarter, how much of that was due to the higher resin costs versus these temporary issues in the Closures?

Are you talking now consolidated or in the segment, Jason?

Consolidated.

On a consolidated basis you didn't have a huge impact on the resin, that's going to be more of a 2011 issue. You do have, certainly, the impact of the pass-throughs for higher tooling sales will again move that margin down. The pass-through of the resin does have an impact. And, finally the Closures impact on the operational side. Those will be the biggest issues we had.

Somehow also the product mix, which also (inaudible).

Okay, thanks.

I'm not showing any further questions at this time.

Thank you very much. I would like to thank everyone for participating in today's call.

Thank you and good-bye until the next time.