Aptargroup Inc (ATR) 2011 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to AptarGroup's 2011 fourth-quarter and annual results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. And now, introducing today's call is the one, the only, Mr. Matt DellaMaria, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Jonathan, and welcome, everyone. Participating on the call today are Steve Hagge, President and Chief Executive Officer, and Bob Kuhn, Executive Vice President, Chief Financial Officer, and Secretary. Steve will begin our call with an overview of our annual and quarterly performance. Bob will then discuss our financial results in greater detail, after which we will open it up for questions.

Information discussed on today's call includes some forward-looking comments. Actual results or outcomes could differ from those projected or contained in the forward-looking statements. Please refer to AptarGroup's SEC filings to review factors that could cause our actual results to differ materially from those projected or contained in the forward-looking statements. We will post the replay of this conference call on our website as we've done in the past. AptarGroup undertakes no obligation to update the forward-looking information, and at this time I would like to turn the conference over to Steve Hagge.

Thanks, Matt and good morning, everyone. I'm pleased to report that 2011 was another record year for AptarGroup. I would like to recognize the hard work of our talented employees have put into our business this past year. Their dedication is the reason for our success and why we're the leader in our industry.

As we look back on 2011, it was an exciting year. We began reporting the results of our newly aligned business segments. Each of our three segments reported sales growth over the prior year. We entered new market categories, we expanded our global presence, and we enhanced shareholder value. I will briefly recap the full-year performance of our segments and then comment on the fourth quarter.

I will begin with our beauty and home segment which completed the year with organic sales growth of 6%. Demand for our products from the fragrance, cosmetic and household markets remained strong throughout much of the year, while demand from our personal care market also increased over the prior year. However, profit margins were pressured due to a competitive market, under utilized capacity towards the end of the year, increased professional fees, and our overall product mix.

Our pharma segment had an outstanding year with strong organic sales growth of 10%. We entered a new category in the consumer healthcare segment with our preservative-free ophthalmic dispenser, and we saw continued growth in our prescription segment, particularly from strong demand from the generic market in the US. Our pharma segments profitability remained strong throughout the year, reflecting our ability to help our customers grow in this highly specialized and regulated industry.

Our newest segment, food and beverage, also had a good year posting organic sales growth of 18%, primarily driven by strong demand for our unique dispensing systems for beverage products. An example of a new category that we entered in 2011 is the water flavoring category. Kraft Foods launched their MiO water enhancer using our custom simply squeeze closure. They have expanded their line recently and we're now selling an energy version. In spite of our strong sales growth, profitability was restrained by cost to establish this new segment and start-up costs associated with the new facility in the US.

With our ability to generate strong free cash flow, we were able to invest in several growth opportunities during the year. In May, we announced that we had purchased a facility in Lincolnton, North Carolina, that will become our first facility dedicated to serving our food and beverage customers. I'm happy to say that the retrofitting of the facility has gone according to plan. We've hired a terrific team, and we're on schedule to begin production in the first quarter of this year. In October, we announced that we had purchased an injection molder in India to expand our presence there to serve our multi-national and also local customers. The company we purchased had been a licensee of our products since 2006.

Also at that time we announced that we're opening a clean room manufacturing facility in India to serve our Indian pharmaceutical customers as they grow in India and abroad. I'm also happy to report that this facility was dedicated in January and production will begin in the first quarter. We've also upgraded and expanded our capacity in other important regions such as Brazil, Mexico, Russia, and China. And in November, we announced that we had entered in the auto injector field through an acquisition of a minority stake in a UK-based medical device company called Oval Medical Technologies. With these steps we're in excellent position to continue our long-term growth.

Our strong financial condition in 2011 also allowed us to take action to enhance shareholder returns. In July we increased our quarterly dividend 22%. This equates to an $0.88 per share dividend for the full year. In 2011 we returned approximately $53 million to shareholders in the form of dividend payments. We've also been active in our share repurchase program. We repurchased approximately 2.1 million shares in 2011 for approximately $103 million. Our board also authorized an additional 4 million shares for repurchase in July.

Now turning to our fourth quarter performance, as expected, the fourth quarter was softer relative to the early quarters of the year. Our beauty and home segment organic sales were in line with the prior year level. The top line was negatively affected by soft demand as certain fragrance, cosmetic and personal care customers became cautious and conservatively managed inventories given the uncertain economic conditions in both the US and Europe. Profitability was negatively affected by under utilized capacity due to the softness I just mentioned, but also in part due to some business that we purposely exited, work related to organizing and consolidating some of our Latin-American facilities, and our continued rollout of our global SAP system.

Our pharma segment turned in another excellent quarter with strong organic sales growth of 7%, which includes a negative impact of lower tooling sales of about 5% compared to the prior year. On a pure product sales basis, we were up 12%. We continue to see growth in both our consumer healthcare and prescription businesses, and our profitability remains strong in the quarter. Our food and beverage segment completed a good quarter with organic sales of 11%, primarily on strong demand for our dispensing closures with the beverage market. Profits were negatively impacted by the higher structure costs for this new segment and start-up costs associated with our Lincolnton, North Carolina, facility.

Now, as we look ahead to 2012, there continues to be a lot of uncertainty surrounding consumer spending and the tenuous economic conditions in both the US and Europe. Our business is well diversified in terms of the breadth of products we offer, our high quality broad customer base, and the different end markets we serve and, of course, our geographic presence. We're optimistic that 2012 will be another exciting year for AptarGroup. Customer project activity remains active across all three of our segments and through our market focused strategy, we'll continue to discover and penetrate new categories.

Now I will turn it over to Bob who will review our financial results in more detail.

Thank you, Steve and good morning, everyone. I would like to comment first on our consolidated results for the quarter and then later I will provide some additional details by business segment and give you a recap of the year. As announced in our press release, we reported record fourth-quarter sales with core sales growth of 3%. Currency rates were similar to where they were a year ago, and therefore did not impact the sales growth. Tooling sales declined slightly compared to a year ago and had a negative effect of 1% on the top-line growth. From a geographic standpoint, our European operations represented approximately 56% of sales this year versus 59% of sales in the prior year, while our US operations accounted for 27% of sales versus 26% last year.

Reported diluted earnings per share decreased 3% to $0.57 per share, compared to a fourth-quarter record $0.59 per share in the prior year, but I would like to point out that our effective tax rate in the fourth quarter of 2011 jumped to 36.2%, primarily due to a surtax enacted by the French government late in December. Compared to our effective rate of 30.4% in the fourth quarter last year, the effective -- the increased effective tax rate resulted in about $0.05 per share of additional tax expense. Free cash flow, which we define as cash flow from operations less capital expenditures, was approximately $29 million for the quarter versus roughly $60 million in the prior year. Our cash flow from operations from the quarter was approximately $82 million, compared to approximately $92 million in the prior year. Capital expenditures were approximately $53 million in the quarter, compared to $32 million in the same quarter of last year. The mix of debt at the end of the quarter is roughly 58% fixed versus 42% variable, and the average interest rate is around 3.3%. On a gross basis debt-to-capital is about 25%, while on a net basis it is roughly 5%.

Turning to our business segments, as Steve mentioned, our beauty and home segment experienced some softness in the quarter, and sales were in line with the prior year. On a constant currency basis, sales to the fragrance, cosmetic and personal care markets were in line with the prior year, while sales to the household market increased 7%.

Our pharma segment reported sales growth of 7% over the prior year. Changes in currency rates did not have an impact on the sales growth in the quarter, but tooling sales decreased from the prior year and had a negative impact of 5% on the growth. On a constant currency basis, sales to the prescription market increased 8%. Tooling sales declined and had a negative impact of 7%, so core product growth was 15% in prescription market. Sales to the consumer healthcare market increased 3%.

Our food and beverage segment reported sales growth of 10% over the prior year. On a constant currency basis, sales to the food market decreased 15% and tooling was approximately 9% of that decrease, and therefore core product sales declined about 6%, while sales to the beverage market were very strong and doubled in the quarter compared to the prior year. Regarding our share repurchase activity during the quarter, we spent $22.9 million to buy back approximately 470,000 shares of our common stock.

Recapping the full year, we set another annual sales record topping $2.3 billion. This is a reported increase of approximately 13%. Changes in exchange rates accounted for 4% of the increase, resulting in a core sales increase of 9%. From a geographic standpoint, sales by our European operations represented approximately 57% of net sales, which was in line with the prior year percentage. Sales by our US operations accounted for 27% of sales, compared to 29% in the prior year. Reported diluted earnings per share for the year increased 7% to $2.65 per share, compared to $2.48 per share last year. The increase also includes approximately a $0.02 per share drag coming from the French surtax that I spoke about earlier.

Free cash flow for the year was approximately $87 million versus roughly $160 million in 2010. Our cash flow from operations for the year was about $267 million in the current year, compared to about $279 million in 2010. Capital expenditures for the year were around $180 million, compared to about $119 million in 2010. Our capital expenditures for 2011 reflect our increased investment in our food and beverage segment, including approximately $25 million that was invested in a new facility in Lincolnton, North Carolina. Looking forward, presently we expect depreciation and amortization for 2012 to be in the area of $150 million, with capital expenditures expected to be in the area of $160 million. I would like to point out that these amounts could vary depending upon changes in exchange rates. The French surtax that was enacted in 2011 was enacted for two years and is reflected in our 2012 estimated tax rate of 33%.

When looking at the first quarter of 2012 guidance, please keep in mind that, due to the accounting rules, our stock option expense is heavily weighted to the first quarter of each year when we make our annual grants. For example, stock option expense pre-tax in the first quarter of 2012 is projected to be about $6 million higher than the expense in the fourth quarter of 2011. In addition, the average exchange rate for the euro to the US dollar in the first quarter of 2011 was almost 1.37, where as at the end of the year 2011 the spot rate was closer to 1.29, which we used for our forecasted range. Lastly, we currently estimate that diluted earnings per share for the first quarter of 2012 will be in the range of $0.60 to $0.65 per share, compared to the $0.64 per share reported in the first quarter of 2011.

At this time Steve and I would be glad to answer any of your questions.

(Operator Instructions). Chip Dillon, Vertical Research.

First question is to do with, if could you give us some feel, I know you may not want to be too detailed in terms of the sales improvement we saw both in pharma and food and beverage, how much of that might have been -- was it pretty much all volume, or was there any kind of pass-through effect in the quarter of costs?

On the pharma side it was primarily volume related. It was all volume related. On the food and beverage side, there was less than a 1% impact on the pass-through of the resin, but mostly for us it's all volume.

Then as a quick follow-up, and I just might have missed the number, I know in overall the beauty and home business was flat, and I think you mentioned that household products were up 7% but the other two categories were flat. Either that means household is very tiny or maybe there was something I missed in there.

No, there is a weighting side to the household. Household is less than 5% of our total beauty and home business. We also had -- we had about a 1% negative impact on exchange and a 1% positive coming from the acquisition. Overall it was up slightly, but basically flat.

Could you just clarify a little bit about the tax rate? I think you mentioned 33% would include, for this year, would include the French surtax. Is that something that is ongoing that we should keep in our numbers in future years, or is it something that is temporary?

Well, the way the law was written, it is only expected to be for two years. 2011 and in 2012. As you know, once those taxes get enacted it may be tough. There's going to be a change in the political environment potentially next year, so we will have to wait and see where that goes, but for sure it's in our 33% rate for 2012 and we'll have to wait and see what that means going forward.

George Staphos, Bank of America.

I had a couple of questions regarding the volume trends and what drove it. If I remember correctly, within pharma the consumer side didn't seem to do nearly as well as past quarters in the fourth quarter if I heard you right. And the same thing in food. I think you said the core rate was down 6% or 9%, I have to go back to my notes here. What was driving those two things? I would imagine it's probably more timing on project than competition, but could you provide some color?

You're right, it really is -- it's timing. If you looked at our consumer healthcare business, that had been growing in the 20% plus, which was extraordinary for our first three-quarters, so it's really more of that is a timing issue, and we continue to expect good growth in that part of the business going forward. On the food part of the business, it is a bit of timing. Some of our products are much -- are pushed to the summer season. The ketchup condiment types of areas, so the fourth quarter tends to be a bit softer for us. Again, I would say that's more of a timing, and certainly no loss of any competitive position.

Same theme for my second question. There's been some discussion in the market about increased competition from new airlift systems from some of your peers. Can you comment to the degree to which your airlift systems are as state of the art as peers, or do you think perhaps you've lost some ground versus some of the other companies that are in the market?

On the airlift side, certainly from our business it has continued to grow. We're up probably double digits on that side in 2011. In terms of what we see in the market, there is, first of all, I think it's important to note there's a general market increase in airless products being sold worldwide. We're getting, if you will, a rising tide that lifts all ships. But in terms of our products we've been focused for the most part historically at the upper end of the market, and I can tell you we haven't lost any share to that. In 2010 and '11 we've introduced several new products targeted at the mid level, and we've been seeing some awards in those things in terms of sustainability, et cetera, and are picking up additional market, even in the personal care market. I think overall what you're hearing is more of a strong tendency for overall growth in the market but we don't feel we've lost any share in that charge.

Chris Manuel, Wells Fargo.

As we come into 1Q, I recognize that some of the components are -- traditionally there's always higher stock option expense and at the beginning of the year you typically get lots of odd things to kind of start the year timing and stuff anyway. But it would appear as though, from an organic growth rate, some slowing from where you've been, at least the last several quarters in 4Q. Could you maybe give us some color as to what you're anticipating or sort of have baked into that for 1Q, thinking about the divisions?

Well, I think if you looked at -- first of all, I think if you take a look at Aptar overall, the first quarter for us in 2011 was a record first quarter. We were up 10% on an organic basis last year. What we're hearing from the customers, and I pointed out in some of the comments and we put it in the press release, we're still seeing lots of activity in new projects. There we're somewhat based on when the customers are going to come out. In the first quarter, our customers are still somewhat cautious as you read the paper about what inflation rates are doing, the economic issues in the US and Europe. Overall we're still, I would say, optimistic as we look to '12, but I think as you said, it's a bit of a slow start and we're going to be somewhat dependent on when customers will be introducing products in each of the different markets that we serve.

Nothing with respect to scaling back projects or anything of that nature in big ways, or have you seen any of that?

No, in fact, I would tell you, over the last two months, as I've talked to customers, I think they're cautious, but frankly, if I even take the fragrance, cosmetic market as an example, we're seeing a lot of discussion on new launches coming back scheduling throughout 2012. The food and beverage market for us in terms of projects, we've got several nice projects that we expect to be introduced by customers in the year, opening up different markets for us. And in the pharma market, our continued move in the consumer healthcare and even in the prescription shows a lot of new projects. I would tell you on balance we continue to be positive for the year.

My follow-up question has to do with capacity. You talked a little bit about under utilization in some areas and things of that nature. And it looks like, given some of the capital spend last year and a lot of the capacity adds you mentioned from Russia, Brazil, Mexico, India, North Carolina, et cetera, how would you -- and I know this is tough because each unit is a little bit different and each product is a little different, but how would you characterize spare capacity, if you will, and where you are? And is there a way to kind of put a number on what you felt under utilization may have impacted you?

It's going to be a tough question to answer. When we look at -- it depends on where we're at in the fourth and where we are going to be in the first. The fourth quarter historically for us is a bit of a slower quarter generally as people take a look at inventories.

As you -- but if you would balance that out, where we saw some softness was some of our -- in the product line basis, some of our fragrance product lines, in the fourth quarter those have kind of ramped back up as we've gone into the first. Some of our dispensing closures lines in Europe in particular were a bit soft in the fourth quarter because that's some business that we've walked away from given the margin characteristics. Overall, I think with the capital adds that we've had and the expansion, we should be in good shape going into 2012, but as you point out it's almost on a product by product basis we have to look at this.

Ghansham Panjabi, Robert W Baird.

Good morning it is Matt Wooten in for Ghansham today. We were hoping that you guys could provide some detail on the volume trajectory inter quarter. Was it consistent month to month?

Overall, you are talking Q4 to Q4? Yes, it was pretty consistent compared to the prior year. There wasn't any swings within the quarter that were significant.

Then for your first quarter 2012 guidance, what is the assumption for resin prices? I think there's some pretty high nominations for polypropylene in February.

I think we had a couple of things going. We had some resin drops in the fourth quarter. First of all, I'm going to give you where we -- for us it's important to break these between US and Europe. What I will be giving you is on the US market. Europe for us was relatively flat in the fourth quarter and not significant increases in the first quarter. In the US, we were down somewhat in the fourth for polypropylene, and we expect in the first quarter increases in the area of 15% to 20% is what the number is being tossed around. Again, those -- we've seen the February discussion of increases. Those are picked up in our projections. It's unsure what margin is going to be.

Al Kabili, Credit Suisse.

On the beauty and home side, maybe, Bob, could you help us rank order in terms of the decline year over year you saw in operating profit, what was volume, FX, mix, under utilization? Maybe just help us rank order of the different pieces there that dragged on it.

That will be a little bit difficult, but let me take a shot at it anyways. I don't think a lot of it is going to be volume related, because if you look for the year we were up 6% on a core sales growth. Again, as Steve mentioned, there are certain pockets in certain areas, so some of the under utilized capacity was in certain product lines. We talked about purposely walking away from certain business. Earlier in the year we talked a little bit about some pricing pressure across a few of our product lines. Again, I would say that the underutilization and some of the pricing were much more key than anything else.

FX, overall really not a huge impact on that. Really if you look at it, we had -- we talked about, in earlier quarters, we've had some higher professional fees during the year in defending some patent litigation and things of that nature. I would say it was really more that than volume.

A little bit also on the fourth quarter, a little bit on the mix. When you talked about in the third quarter that in the US the sun care products were getting relabeled for some SPF regulations, so those shipments got delayed until the first quarter of '12, and that is one of our higher margin products. That's kind of an example of some mix issues we've had.

Do we expect a similar -- what do volumes to have do in the segment before the under utilization stops being a drag, particularly I guess what do volumes need to do before this becomes a drag, stops being drag?

I think if you look at the volumes, we would anticipate volumes for on an ongoing basis long-term in that beauty and home segment to be between 4% and 7% volume growth. I think you will see that continuing to improve. The other thing we're doing, and we don't talk as much about, but we're taking certain cost initiatives. I talked about we're consolidating a couple facilities in Latin America. That's going to help that under utilization and become more efficient. We're doing the same things, both in Europe and the US. I think overall we need to get to that 3% to 4%, 5% growth in beauty and home, then also continue to work on the cost benefits.

Then final question along these lines is, with the emerging markets, I know they would be growing faster, I would imagine, than the developed markets. Is there a mix impact from that? Is that hurting margins at all, and can you just talk a little bit about the geographic differences you saw in the quarter as well?

Let me give you first some of the geographic growth, growth by geographies in the quarter and year-to-date. In the US, we're up about 7% in the fourth quarter and that's pretty consistent for the year-to-date as well. Europe actually was down about 2% in the fourth quarter, but was up 6% for the full year. Latin America, as you alluded to, slowing growth, 9%, but for the year it was still 16%. Asia we had very strong growth, closer to 40% excluding the acquisition we did in India, and for the year came in about 33%. You're right in the fact that the margin profile on some of those businesses in those emerging markets is not the same, so that has some impact on that.

Is there a way to quantify it or help us think about the impact there?

I don't know. It would be tough to hang an exact number on that to be honest with you.

[Ted Winning], Morningstar.

Question on pricing. Have you had any input cost pass-throughs to customers recently and are you finding that there's any resistance in any specific business areas or geographic areas for those price increases?

I think you have to take a look at pricing -- let's take it on a macro basis. A lot of the contracts we have, or a lot of the business we have in our dispensing closure line is a pass-through business. The resin gets passed through a bit with a delay, either up or down. That has continued, and we expect that to continue into 2012. In terms of some of the other areas, we've seen input costs raise for transportation, some aluminum, some metal. We've been very successful, we think, in 2011 moving those price increases through.

The challenge continues to be every time there's an increase, I wouldn't be here telling you it's easy to come back and get raw materials passed through to our customers, but we have continued to be successful. The other challenge that I see, going particularly into late 2011 into '12, is some of the inflation areas, the inflation base not in the developed markets but in the developing, like Latin America, like Asia. Now we're starting to see inflation rates in those areas sometimes exceeding 10% to 15%. Those we're continuing to pass through, but those markets haven't been used for awhile to that kind of inflation so that is a challenge. One of the things we're trying to do to offset all of that is to continue to look at long-term contracts, which I think we've been successful with that have provisions to pass through these raw materials.

Are you seeing, in Europe, is there disjoined weakness between, say, northern Europe and southern Europe, or is it mostly in the south where you're finding any weakness?

We've got a couple of things. First of all, I would tell you that we were in three main countries in Europe, Italy, France, and Germany. Certainly the German and French overall markets, if you read the newspapers, are doing reasonably well.

Now, the other thing I think is important, when we talk about Europe, is looking at our products, because our products are going into two markets that are really world markets, the French perfume market is not really based on the French economy. It's based on the world economy, and those tend to be doing reasonably well. The same thing about our pharmaceutical business, which we produce a fair amount in both Germany and France. A lot of that gets exported around the world. It's not as dependent on the French economy as what we might look at.

David Woodyatt, Keeley Asset Management.

The tax increase, I think you mentioned this point but I wanted to go over it again, tax increase equals $0.05 a share but the French increase of $1.7 million is only $0.03. What was the other $0.02?

David, the $0.05 that I was alluding to is if you're looking fourth quarter this year to fourth quarter last year. Our tax rate in the fourth quarter last year was, I would say, unusually low. We had some positives that came into the fourth quarter last year. If you just take the fourth quarter to fourth quarter, that's how you get to the $0.05.

I see that. Maybe the relevant question then is, you mentioned the surtax would continue. Would it be proper to assume, or best guess at this point for your overall 2012 tax rate will be roughly the same as 2011?

Yes, 2011 came in about 33.2%, if I remember right, and we're forecasting 33%, approximately so we're right in that net area.

Jon Andersen, William Blair.

Hello this is Ryan Sundby in for Jon. I just wanted to follow up on George's question on pharma. Steve, I know you mentioned timing, but with a relatively soft cough, cold-flu season and mild weather across the United States, does this put any pressure on your business at all?

I think in total it's more of a worldwide business. We haven't seen as much of our customers saying it's been a big negative. I'm certainly, on the margin, it's probably got an impact, Ryan, but we haven't seen anything that is marked out that it's specific. Again, you look at where we're seeing good growth is a lot of our customers continue to take products moving into the eastern European markets and those continue to do very well.

Then I was just wondering if you could talk about how you feel in terms of inventory levels at retail and with your customers. I know there can be a draw down around the year end, and if that did occur, have you begun to see reorders as we enter into Q1 here?

Yes, I think what we saw, and again, I think you can see this -- it's a bit different by sector but in general, we saw cautiousness coming in from our general customers going into the fourth quarter. There was some concern we had that could be like what it was in 2008 to 2009, and that certainly wasn't the case. We felt it was a bit of a draw down in inventories. We think that's basically abated somewhat and that inventories today are roughly at reasonable levels, and there shouldn't be a huge take-down in inventories across all of the segments, so that we should be getting closer to where the consumer -- the consumer usage will be equaling our sales going forward. We're getting customers cautious. They're certainly not out building inventories. We don't see anybody out saying, I'm going drive down inventories by 10% or 20%.

Gregory Macosko, Lord Abbett.

Just looking at SG&A, that was up about 5.7%, yet corporate and other was down almost 10%. Just give me some color on that.

The corporate and other is really just timing in the quarter of where some of our professional fees and things drop in. Overall, as Steve alluded to, we've continued our ERP rollout, and we had a couple that moved on to the ERP system in the fourth quarter. When you get that, you tend to get a lot of expense-type items relating to training and customization and things like that. It's really more related to professional fees overall IT expenses.

Then just finally, regarding the top-line growth, just hearing the discussions, et cetera, clearly the majority, the large majority of volume in sales comes from Europe and the US. Some of the numbers you mentioned with regard to the newer markets were quite strong. Your discussions on India, et cetera. Is it fair to say that the Company is much more focused on those areas, and that's where we might see more of the CapEx spending and some of the SG&A investment will be placed over the next year or two?

Well, I think it's a couple things when you look at that, Gregory. One, we are seeing higher growth. As Bob said, we're seeing double-digit growth in both -- in Latin America and in Asia. But again, I've got to caution, that's off a bit of a smaller base, so we've got to compare an apple to an apple. We have continued to invest in those markets. But I also want to come back and reinforce, we see good growth both in Europe and in North America, particularly as we get into new market areas.

As we've talked about, as we get into, on the food side, these flavored water markets, that's got significant growth potential, and that is really a North American market and we see that moving potentially to Europe. I don't want to underplay -- so the percentages may be higher in the other Latin America and Asia, but I think overall growth numbers are still pretty strong also we see in Europe and US.

George Staphos, Bank of America.

I want to come back to the European revenue trend which you said dropped 2% or 3%. That was also in line with the figures you cited earlier. I'm going to assume that pharma kept growing, so -- and there's not a lot of food and beverage in Europe. Correct me on that if I'm incorrect. I'm assuming most of the decline was in beauty and home. Could you provide some additional color in terms of what was driving Europe's revenue decline?

Well, I think, first of all, you're kind of -- I have to correct a little bit. We actually have a pretty good sized food and beverage business, particularly on the beverage side of the business in Europe. That actually did grow. But you're right, the majority of the drop we saw was in the beauty and home marketplace, and we saw fragrance going down as well as personal care. Again, I think that's where we saw the biggest inventory corrections coming back. What we've seen though, again, George, to buffer that a little bit, is our customers in the fragrance, cosmetic market what we're hearing from them and what we're seeing in some of their publications is that the Christmas season came out a bit better than they expected. I think that should help us as we go into 2012.

Steve, I know it's hard to project way going forward, and certainly you don't, as is customary, give a lot of forward guidance. Given what you know right now, would you expect that Europe on a constant currency basis is up year-on-year versus first quarter of 2011, or that the difficult accomplish -- just as a sidebar, I would imagine Europe tends to have more operating leverage, both up and down, than your other geographies, would that be fair or would that be incorrect?

First of all, on the operating leverage, the answer is correct. We have more operating leverage going up, and we see that when business goes up. I think what we've tried to do is to be cautious, particularly in the outlook for the first quarter. I think for us, given the strength we had in 2011 in the first quarter, we're saying that Europe may be at or may be slightly above those levels, but I wouldn't call it -- we're not being overly bullish in the first quarter for the European sales level on comparison to 2011's level.

Chip Dillon, Vertical Research.

Yes, could you just give us some high-level guidance in terms of the corporate and other expense line. I noticed, it looks like that's gone up quite a bit when you look at it from a year over year basis, and even more so when you go back to 2009. Maybe it's pension, maybe there's some other things going on there. But do you see that staying in a normalized mid-$30 million level, or even going higher, or sort of back down to where we saw it in the past?

No, Chip, if I were to look at it going forward, holding currencies equal, I would expect that the run rate would be closer to where we finished this year, which is in that mid-$30 million, as you said.

(Operator Instructions). Brian Rafn, Morgan Dempsey.

I missed your opening comments. Can you give me kind of a flavor as to how the Christmas holiday season was for 2011? Probably specifically with the perfume, cosmetic side.

Again, from what we're hearing, Brian, when we went in, our customers that we saw that in that market were pretty cautious. When you start to see some of what we've looked at with some of the public disclosures from Dior, from L' Oreal, overall the Christmas season was, I'm guessing at or slightly above their expectations. More positive than negative to that. Again, when we've come back, we will see that more as we've gone out. The other thing that I think anecdotal to that, is when I've been talking to customers they are still looking at quite a few new product introductions going into 2012, so that I see as at least a positive.

Yes, Steve, on those introductions, are those more regional, national, or international, and are they back to the multi-million unit type launches?

I still think there are some that are going to be, let's call it the worldwide launches, but I think it's following the trends we've seen in the last couple years. It's more on a regional basis, then expanding to the international, depending on the success of the brand.

On capacity utilization, maybe, if would you talk about kind of global capacity, maybe based upon, say, labor shifts, amount of contract or third-party labor, you might be using flex labor, and or how much overtime you might be spending around the world.

That's such a broad level. We do use some temporary labor, particularly in Europe, as we come back, which gives us some flexibility in that marketplace. I think we're in reasonable position in terms of overall labor. Our overtime with the capacity we've put in, we've kept that down to demand specific, so I don't think that's a -- that's not a high run rate.

Then anything on dairy, on the packaging area? Certainly an area that if you got a decent cap or dispenser on that would certainly be a nice growth market.

Well, the other thing -- dairy specific, the dairy creamer side, on the coffee creamer, that market continues to expand. We've actually got some interesting projects we're working on that are kind of tied to that on the auxiliary side, other different devices for that. Overall good, nothing straight in terms of the milk market.

Then anything, one final one, on kind of packaging redesign. You guys have talked about where they bring out, rebrand, you get the shampoo which used to be 16 ounces is now 12 ounces. Anything in the 2012 as we get into more markets of higher inflation where you are going to see companies maintain price at the shelf, but actually lower the unit volume size where obviously would amount to a redesign in package for you guys?

In fact, I think you are seeing that. It's interesting. I think they are looking at different markets saying that the consumer may have limited amount of money to buy, so you have to get a price point to be able to come back that they can buy it at. You've got kind of this bifurcated market, the Sam's Club that has the larger ounces per package, but then you've got a lot of packages that are in there that are that $1 and $2 sale. For us we're actually seeing a little bit of both sides of that.

Greg Halter, Great Lakes Review.

You made reference to the sun care market with some delays on the SPF rulings and so forth, or guidelines, can you expand on that a little bit and what you expect into 2012?

Yes, I think what happened is, as we mentioned in the call in the end of the third quarter, we saw the US came back with some new regulations about how effective the SPF ratings are, which came back and had some labeling requirements. That -- generally we see some filling for the sun season, let's say in '12 in the fourth quarter of '11. That actually got pushed off until those regulations got finalized. Overall we're still seeing positive reaction to the sun care. It has moved somewhat from 2011 to the first quarter of -- first and second quarter of 2012.

Okay, but that business is certainly not going away by any stretch.

No, in fact we're seeing even a couple new product introductions that we saw on some other -- I think that the brand proliferation continues to expand to that. There's no drop-off in the demand.

Thank you. I'm not showing any further questions in the queue at this time. I would like to turn the program back to Steve Hagge for any further remarks.

Thanks, Jonathan. This concludes our call today. I would like to thank everyone for joining us. Look forward to talking to you next quarter.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.