Aptargroup Inc (ATR) 2012 Q2 法說會逐字稿

Welcome to AptarGroup's 2012 second quarter results conference call. (Operator Instructions). Introducing today's conference call is Mr. Matt DellaMaria, Vice President 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 quarterly performance. Bob will then discuss our financial results in greater detail, after which, we'll open it up for questions. Information that will be 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 actual results to differ materially from those projected or contained in the forward-looking statements. We'll post a replay of this conference call on our website. AptarGroup undertakes no obligation to update the forward-looking information contained therein. I'd now like to turn the conference over to Steve.

Thanks, Matt, and good morning, everyone. Yesterday, we reported results for the second quarter, that were in line with the updated guidance we issued a couple of weeks ago. We also announced that we completed the Stelmi acquisition in early July. We view this transaction as a very positive expansion of our pharma segment's product portfolio. I'm happy to report that the underlying Stelmi business is doing very well, and our integration work has already begun, and that the customer feedback on the transaction has been very positive.

Bob will discuss the financial impact of the transaction a bit later. The second quarter was a challenging one. Currency exchange rates had a significant negative effect on our sales and earnings. Also, broad based softness in Europe affected each of our business segments, but on a positive side, we experienced strong growth in Latin America and Asia. Overall, we were able to grow core sales in spite of the challenges, thanks to our innovative industry leading products, our widespread global presence, and the variety of markets we serve and the dedication of our talented employees. Even with the difficult economic environment, I'm very encouraged by the level of project activity across each of our segments.

Now looking at our segments performance for the second quarter, our beauty and home segment primarily serves the fragrance, cosmetic and personal care markets. These two markets were affected by the slowdown in Europe in this quarter. Project activity remains at a good level for beauty and home products, and we participated in several new launches by customers this quarter. Including several new fragrances, a new men's skin care line, several new cosmetic products, while using our innovative dispensing solutions, including our fully recyclable airless pump. We also participated in several hair care product launches by some of our large multinational customers, and several body lotion and spray products, that are equipped with our dispensing systems, that were launched in Russia, Poland and Thailand.

Now, looking at our pharma segment. Strong demand for our nasal delivery devices, from the prescription drug market, was partially offset by weaker sales to the consumer healthcare market. We're particularly pleased that we began shipping from our new facility, in Mumbai, India, during the quarter as anticipated. Also it was an exciting quarter in terms of approvals of new drugs that are equipped with our delivery systems. There were a couple of approvals that happened in the quarter that did not impact our results, but are important nonetheless, as they relate to the debut of our patented dose indicator called Landmark. SkyePharma's flutiform, a combination steroid treatment for asthma, has been approved in Europe and is expected to be on the market before the end of the year.

Flutiform is equipped with Aptar Pharma's Landmark dose indicator and a metered dose valve. Also a nasal aerosol allergy treatment, distributed by Sunovion Pharmaceuticals, has been approved by the FDA and also uses our Landmark system. This treatment is planned to be on the market in the US later in the third quarter, just ahead of the fall allergy system.

On the generic front, the FDA approved Sun Pharma's generic Astelin nasal spray, which is equipped with our nasal delivery device, and this again, is expected to be on the market in the second half of 2012. We also had several interesting consumer health care launches, including a new eye moisturizing product in Europe that uses our preservative-free pump, several nasal saline launches in Brazil and Argentina, using are our Bag-On-Valve system. And in China, several customers launched antiseptic sprays using various topical spray pumps of ours.

Now turning to our food and beverage segment. Once again, we saw very strong demand for our innovative dispensing closures from the beverage market and a small decline in demand from the food market in the quarter. I'm happy to report that our Lincolnton facility continues to ramp up production, and we're encouraged by the new project activity for that facility. Regarding a few of the new products launched this quarter in the US, Trader Joe's launched a humus salad dressing, using our Ecolite pour spout closure. We successfully helped several different customers in Mexico, launch different brands of chili and soy sauces.

We were chosen to supply beverage closures on several new isotonic drinks in Latin America and Eastern Europe, and our beverage business in Asia continues to do extremely well. As we look to the third quarter, we currently expect softness in Europe and the challenging currency exchange rate environment to continue into the third quarter. We're seeing some continued caution on the part of customers, particularly from customers in the fragrance, cosmetic, personal care, and consumer health care markets in Europe.

In spite of this difficult economic period, we continue to be optimistic regarding some interesting new projects across each segment. While we can't control the macro environments that affect our business, we can face the challenges with the same focus we have had in the past. We know the importance of maintaining our commitment to innovation, and research and development. Our balance sheet continues to be in excellent condition, and we'll stick to our plan to invest and grow our business profitability. We'll continue to prove we have the best products and services in the industry, and that our business model is a successful and fundamentally sound one. Now I'll turn it over to Bob, who will review our quarter financial results in more detail.

Thank you, Steve, and good morning, everyone. I'd like to comment first on our consolidated results for the quarter and year-to-date, and then I will discuss the segment results for the quarter. As announced in our press release, reported second quarter sales declined 6%, but as Steve mentioned, we are in a challenging exchange rate environment. Currency exchange rates had a significant negative impact on second quarter sales of approximately 8%. Therefore, on a constant currency basis, our core sales grew 2% and this includes a decline in custom tooling sales of approximately 1%. From a geographic standpoint, our European operations represented approximately 53% of sales this year versus 58% of sales in the prior year, while our US operations accounted for 29% of sales versus 27% last year.

I'd like to take a few minutes to speak about foreign currency transaction effects and their impact on our result in the quarter. We define transaction effects as, intra-country sales and purchases transactions, involving two different currencies. If we take a look at changes in currency rates in the quarter, the Euro devalued versus the dollar, the Euro devalued versus the Swiss Franc and the Brazilian Real devalued versus both the Euro and the US dollar. Some examples of transactions that we have in these currencies are the following; some of our pharma products are manufactured in Switzerland and sold to certain customers outside of Switzerland in Euros.

Since we don't produce our entire product portfolio in Latin America, we are still importing certain components and finished goods from both Europe and the US. And lastly, we still import to the US, certain components in finished goods from Europe. Based on our calculations, we estimate that the positive and negative transaction affects offset each other in the quarter, this means that the translation effect at the top line, the 8% negative headwind, drops to the bottom line for the quarter. Now if we look at last year's second quarter, we reported $0.74 per share. If we roll forward that $0.74 using this year's currency rates, we have the 8% negative currency impact, that's about $0.06 per share. We have the $0.05 from the Stelmi acquisition cost that hit in the quarter, and the remaining $0.02 to arrive at our reported $0.61 for this year. Relate to a decrease in operating margin as a result of the slowdown in Europe as well as the start up costs of our Lincolnton, NC facility.

Turning to free cash flow, which we define as cash flow from operations less capital expenditures. In the quarter we had a positive free cash flow of approximately $18 million, compared to nearly $16 million a year ago. Our cash flow from operations for the quarter was approximately $71 million, compared to $70 million in the prior year. Capital expenditures were approximately $53 million in the quarter, compared to approximately $54 million in the second quarter of last year. On a gross basis, debt to capital is about 22%, while on a net basis, it is roughly 6%.

Turning to our business segments. Our beauty and home segments reported sales decreased 8% from the prior year, and all of the decrease is related to the negative impact of changes in currency rates. Therefore, on a constant currency basis, segment sales were flat. Looking at the markets on a constant currency basis, sales to both the fragrance cosmetic and personal care markets were flat with the prior year. Our pharma segments reported sales declined 4%. Again, changes in currency rates had a similar negative effect of 8%, putting core sales growth at 4%. If we look at our markets on a constant currency basis, sales to the prescription market increased 7%, and sales to the consumer health care market decreased 2%.

Our food and beverage segment reported sales growth of 2%. Currencies also had a negative impact of 4%, therefore core sales were up 6% over the prior year, and this included a negative impact of 3% from decreased custom tooling sales. On a constant currency basis, sales to the beverage market were again very strong, and were up 39% compared to the prior year. And sales to the food market increased -- decreased, rather, 10%. We didn't have any share repurchase activity during the quarter, due to our self-imposed blackout period surrounding the Stelmi acquisition. Therefore, we still had 3.4 million shares authorized for repurchase at the end of the second quarter.

The Board of Directors also declared a quarterly dividend of $0.22 per share, payable on August 30, to shareholders of record at the close of business on August 9. Looking at our year-to-date results, our year-to-date reported sales decreased 2%, with changes in exchange rates having a negative impact of 6%. Therefore, core sales increased 4% over the first half of 2011. Custom tooling sales were flat year-over-year for the first six months. Reported diluted earnings per share, which included a negative impact of $0.06 per share related to the Stelmi acquisition costs, decreased 9% to $1.24 per share, compared to $1.37 per share a year ago. Again, if the 2012 exchange rates were in place in 2011, we estimate that earnings per share for the first six months of 2011 would have been approximately $1.30 per share.

I'd like to review what was stated in our press release regarding the Stelmi acquisition. Our second quarter and year-to-date results were negatively affected by approximately $5.5 million or roughly $0.05 per share, and $5.8 million or approximately $0.06 per share, respectively, of professional fees associated with the acquisition. We will begin to include the operating results from Stelmi beginning with the third quarter, but I would like to talk about an unusual impact that should only effect the third quarter. Due to purchase price accounting adjustments and a small amount of additional professional fees related to the transaction, we anticipate that Stelmi's results will have a negative impact of approximately $0.01 per share on earnings in the third quarter.

Stelmi sales in the third quarter are expected to be approximately $25 million. After the third quarter, we expect the acquisition to contribute to our earnings growth and we expect that Stelmi's results to be accretive on an annual basis in the range of $0.12 to $0.16 per share, again, assuming current exchange rates. Looking forward, presently we expect depreciation and amortization for 2012 to be in the area of $140 million, with capital expenditures expected to be in the area of $180 million. I'd like to point out that these could vary depending upon changes in exchange rates. We currently anticipate that our full year tax rate will be between 33% and 34%. I'd also like to point out, that we expect strong currency headwinds to continue into to third quarter. The average exchange rate for the Euro to the US dollar in the third quarter of 2011 was 141, where as a spot rate at last week was at 122, and this is what we used for our forecasted third quarter range.

We currently estimate that diluted earnings per share for the third quarter of 2012 will be in the range of $0.61 to $0.66 per share, compared to $0.72 per share reported in the prior year third quarter. Once again, had today's currency exchange rates been in place a year ago, we would estimate that the prior year's third quarter earnings per share would have been approximately $0.65 per share. In addition, prior year results were positively impacted by approximately $0.02 per share related to a lower effective tax rate. At this time, Steve and I would be glad to answer any of your questions.

(Operator Instructions). Our first question comes from the line of George Staphos, Bank of America. Your question, please.

Good morning, guys. It's actually Benjamin Wong filling in for George. I think you talked about the growth in fragrance and cosmetic and beauty and home, but can you also talk about the personal care and household within that segment?

Sure. The personal care was also flat in the quarter overall, and for the year it's up about 1%. Household was down about 3% in the quarter, and is up about 2% for the year.

Okay, appreciate that. At this stage, does the weakness you're seeing, does it appear to be underlying demand weakness or perhaps inventory destocking?

We think it's a little of both, Ben. I think it's primarily due to some consumer demand, and again, most of that is sitting in Europe from the demand side. Our customers are still a bit cautious, so there may be some inventory contraction. On the positive side, we're still hearing our customers introducing new products and our project portfolio continues to be very positive, so it's a bit of a balance on both of those.

Great, thank you.

Thank you. Our next questions from the line of Ghansham Panjabi, from Robert W. Baird. Your question, please.

Hey guys, good morning. On the OTC side under pharma, looked like you had pretty good momentum in that business over the last several quarters. You mentioned core sales down 2%. Can you just give us some more color there of what's happening?

First of all, I think, Ghansham, it's a good point. Because if you look back, we had really outstanding growth in that segment last year. Second quarter alone last year, we were up 26% on a year-on-year basis, and in the third quarter of 2011 we were up 32%, so we had a very strong year. What we're seeing a bit this year is, there's been some inventory, some inventory replenishment last year that isn't occurring this year, and also, right now we're seeing a little bit of a slowdown coming from our customers as they serve the Eastern European markets. Again, it's coming off -- I'd say high comps from last year, that we think will continue into the third quarter.

Just on that same thought. A lot of your customers' products also get shipped around. You mentioned some FX mismatches for you guys. Just from your conversations with them, do you have a sense as to how much of the slowdown in Europe relates to domestic Europe versus perhaps what is being exported to other regions, Brazil, China, India, et cetera?

That's a difficult one. What we're doing, again, our customers seem to be still very positive about -- particularly in the prestige fragrance markets, very positive about the upcoming Christmas season. I think it's not -- I think they are seeing some weaknesses, particularly in Italy and Spain within Europe. So it's not all so just broad based. I think it tends to be more one off markets. Again, I think it's more what we're seeing today is ordering being at the consumption level, and again we had a very strong first half of 2011 in the fragrance cosmetic market. So I think we're getting back to more consumption today.

Okay, makes sense. Thanks so much.

Thanks.

Thank you. Our next question comes from the line of Alex Ovshey, from Goldman Sachs. Your question, please.

Good morning, guys.

How are you doing, Alex?

Well, thank you. On the fragrance and cosmetic side with home beauty, is there a way that you can talk to what the organic volume trend you're seeing currently is in Europe, and whether there's any visibility from your customer base around how that trends over the next couple of quarters?

In Europe, again, most of our movement is going to be volume-based. In Europe, we were down about 8% on the fragrance cosmetic side, so again, I would estimate that most of that would be volume. But as Steve mentioned, the first half was very strong and slower a little bit in the back half, so I think that's a little bit of what you're seeing there.

Thanks, Bob. On resin, I didn't hear you talk to it, I know usually it's not going to be a big driver. But polypropylene did come off very materially. Are you expecting any impact from resin over the next couple of quarters?

Yes. Certainly, we've got that built into our assumptions. We had a slight positive in the second quarter on the lag, and we'll be catching up on some of that going into the third.

Should be a tailwind for you in the third?

Yes.

Yes.

Got it. Thank you very much.

Thanks.

Thank you. Our next question comes from the line of James Armstrong, from Vertical Research. Your question, please.

Good morning. Two questions. First, on volumes in beauty and home have slowed a bit. How much of the slowness would you attribute to Europe and is there any other specific areas that are seeing softness?

I think, frankly, on the beauty and home area, almost everything we saw in the quarter was all Europe. The rest of the regions, frankly, again, we pointed this out in kind of the opening comments, were very strong both in Asia, Latin America. And we're actually seeing increases in the United States in the fragrance cosmetic area. It was primarily Europe. Again, I want to come back, and as Bob mentioned, that's against a very strong second quarter last year in that segment, so it's not totally unexpected that we'd see difficult comparisons.

Okay, very helpful. Switching gears just a bit, as the global economy muddles through a bit, have customers demand to innovate been impacted, especially in food and beverage?

Actually, what we're seeing is the customers continue to take a look at innovation as a way to differentiate on the market. So what's been encouraging to me, I've been in Europe several times over the last month and I just got back from a trip to Latin America, we're seeing significant project activity with customers looking at ways to cost effectively innovate their products. From my prospective, that's actually very encouraging for Aptar going forward.

Okay, thank you very much.

Thank you. Our next question comes from the line of Alton Stump, from Longbow Research. Your question, please.

Thank you. Good morning.

Good morning, Alton.

First off, on the currency front, it seems in the past that you always had a hedge with the cross region shipping. and I think you mentioned in the press release, that we haven't seen a hedge play out here recently. Is there any major factor that is keeping that hedge from offsetting some of the currency pressure?

Yes. Again, what you've got, Alton, is you've got some pretty wide swings intra-currencies even from the first to the second. If you take the Brazilian Real, for example, it devalued almost 19% compared to the US dollar in the second quarter. It was nowhere near that in the first quarter, and it also devalued versus the Euro. As you can see, as our business continues to grow in Latin America, that negatively impacts any components or finished goods that we'll import into that region. On the other side, you're starting to see for the first time, really a movement between the Euro and the Swiss Franc. One of our consumer health care pharmaceutical plants is based in Switzerland, and some of the customers that they sell to outside of Switzerland and Europe, the invoicing is done in Euros. So that also is having a negative impact.

Offsetting that, and what has traditionally offset that in the past, has been our net import basis back to the US from Europe. And a big part of that in the past, was some of our pharmaceutical components and finished goods, and I think what we've been talking about over the last couple of years is we've been adding production capabilities in the US. So you've seen that positive hedge, if you will, decrease as we put more and more local production in the US. A lot of different moving variables, which is what makes it somewhat difficult to predict on a quarter-to-quarter basis, but you had very different dynamics first quarter to second quarter, and we'll just have to see how it plays out in the third quarter.

That's helpful. Secondly, on the Stelmi acquisition, obviously it is in a bit different area than what your core business has been in pharma. Is there any synergy opportunities, from cost standpoint, or is this more of a top line synergy play?

I think it's more of a top line. We do buy some elastomers, which is similar for our gas getting products in our pharma business. But when we've looked at it, which really it is not a raw material or a cost savings play. The synergies are we're going to be able to reinforce the overall growth opportunities of Stelmi with our worldwide position, which I think will provide top line and then also bottom line side on a much quicker basis. And the other thing I think that's important, we'll be moving Stelmi away from a family held business, very front-centric, to now an international business. And our customers, the Stelmi customers that we've talked to, that's a real positive. We think that over time that will also have a significant impact.

Okay, great. Thanks, guys.

Thanks.

Thank you. Our next question comes from the line of Chris Manuel, from Wells Fargo. Your question, please.

Gentlemen.

Good morning, Chris.

Couple questions for you. First, if I could, I'd like to go back to the currency issue for a moment. Is there any reason to believe that over the next -- I realize that things moved around pretty rapidly and demand levels kind of shifted around a good bit in 2Q and likely are liable to be a bit volatile here in 3Q. But, through time, is there any reason to believe that the natural linkage between how you're selling and doing cross-border activities won't reengage the natural hedging mechanisms that you have in place?

Chris, certainly, as you said, it's difficult because it's all going to depend on what happens with all of the currency rates, and we tend to get all focused on the Euro, and that's kind of what you see in the press every day. Certainly our assumptions going into the third, is that the dynamics that we saw in the second would repeat in the third, but we would talk about that again in the third when it comes up. But that's our assumptions going into the third.

Okay, that's helpful. Next question I had was with respect to Stelmi. I recognize it's very, very early days, but Steve, do you have any early wins or opportunities that you can talk about? Whether it's, maybe, opportunities to talk to folks in other geographies where they're not present, or when I look at some of the products that -- droppers and rubber stoppers and things, that seems like a product area that would be very, very ripe for all of the very innovative solutions that you guys typically provide?

You know, I think, Chris, it's probably a little early to talk about the individual specifics. But what I found encouraging, is when we talked to Stelmi's customers about the transaction. They're very positive and see the ability to grow. We are taking an early look at where we may want do some type of additional production using Aptar's facility to expand the Stelmi line, over the next six months to a year or whatever. So the initial signs are positive, but we don't have a specific project that I can talk to you about.

Okay, that's helpful. The last question is, I recognize that you were under a self-imposed blackout for repurchase, but would there be any reason to assume that you don't kind of resume more normalized repurchase activities going forward?

That's certainly our plan for the third quarter, is to get back to more historic levels of repurchases beginning in the third quarter.

Okay, thank you. Good luck.

Thank you.

Thank you. Our next question comes from the line of Adam Josephson, from KeyBanc Capital. Your question, please.

Good morning, everyone.

Good morning.

Good morning, Adam.

You mentioned that sales were down 10% to the food market, I believe. What happened in that business?

Well, there's a couple of things. Actually, we had some significant tooling a year ago, so tooling -- of that 10% drop, tooling accounted for 7% of that. So, we're actually down on a 3% level year-on-year. What we saw in that, is we saw customers like Heinz, and if you've seen their financials a lot of that has been driven out of the US -- has been actually a bit slow coming back into the period. So I think it's more of a timing issue, than it is a change in the marketplace, Adam.

Thanks for that, Steve. Bob, you provided accretion guidance for Stelmi of $0.12 to $0.16 on an annual basis. Was that roughly in line with what you were expecting before going through all of the purchase accounting adjustments?

In honesty, purchase price accounting adjustments are such a huge impact on that accretion side. We couldn't even begin to guess, but if your question really is, are we seeing operating results consistent to where we were when we were projecting, I would say the answer to that is yes to even slightly positive. As Steve mentioned, we're very happy with, not only the way the integration is going, but the way the business has performed in 2012 and the outlook going forward. So yes, I would say it's a positive from our projections.

Thanks for that, Bob. One more, forgive me if I missed this. To what extent did volume in Europe taper off as the quarter progressed, and has July been any better or worse than what you experienced in the second quarter?

We don't talk so much month-to-month, but I can tell you that overall, on a consolidated basis, sales were pretty linear throughout the quarter. April was a bit slower, but May and June were pretty consistent.

Okay, thanks, Bob.

Sure.

Thank you. Our next question comes from the line of Mark Wilde, from Deutsche Bank. Your question, please.

Good morning.

Good morning.

Curious in beauty and home, I don't want to flog this thing to death, but I'm curious in fragrance particularly. Is there any sign of things slowing down, in places like China, are having any effect on that business, down at the consumer level?

Actually, we've seen pretty strong both in both Asia and Latin America. We had double digit growth in both of those in the second. Again, I have to come back. It's a smaller market for us, so it's a little bit of the law of small numbers, Mark. But we're not seeing any big change in the consumer side. In Latin America what you hear from some of our customers, is that instead of maybe 15% growth, they're looking at 8% to 10% growth. So there's a bit more conservatism, I think, on some of the customers, particularly in Brazil. But in China we're seeing continued very strong growth.

Do you have any visibility, at this point, into what some of those customers of yours are planning for the holiday season?

Yes, actually right now -- it's interesting, we've looked at the backlogs. Backlogs actually look pretty good for the fragrance cosmetic side. Our customers this year, I think, will be even a bigger launch year for new fragrances and cosmetics, than 2011 was. Right now, our customers are saying they're pretty optimistic about the Christmas season, but a bit cautious. So, it's an optimism trying to come back and gauge where the consumers are going to go. We're certainly not seeing anything like what we saw back in 2008, when all of a sudden everybody was getting really nervous and not doing any introductions.

Okay, just one other question. It has seemed to me in the first couple of quarters of the year, that sort of the ramp up in food and beverage, has been a little bit slower than I might have expected. Do you have any thoughts on that?

It's been a little bit slower than what we had actually budgeted. Some of this is kind of timing based. For example, as we talked about last quarter, we're on a product with Tropicana on their orange juice product. What Tropicana has been indicating, is that the product sales that we're on, are doing very well. But they're having some internal production problems in their filling plant in Florida, so it's somewhat delayed their uptick of the product, and they're continuing to work on that. So we're a little bit slower than that in some of the introductions. But outside of it, the new project activity and some of the new things we're working on, we continue to be very bullish on.

Mark, the other thing to mention with that, as Steve mentioned, the new project activity. We are seeing an interest in a lot of custom type projects, and those time take time, if you will, to industrialize, to develop and to engineer. While we remain very bullish on the food and beverage growth, some of those projects that are in the pipeline are just taking a little bit longer to industrialize.

That's helpful, Bob. Thanks as well, Steve. Good luck in the third quarter.

Thanks, Mark.

Thank you. Our next question comes from the line of Albert Kabili, from Credit Suisse. Your question, please.

Good morning.

Good morning, Al.

Just a question. Maybe you could help us parse out across the segments or business, how the US did in terms of sales versus Europe?

Sure. If I take a look at the US market, beverages was very strong. Now beverage for us is not a big part of the US market, so you've got all of these are a little bit relative, but beverage was up about 40%. Our Rx business on the pharma side was up about 10%. That was driven primarily by strong sales to the allergy market. Fragrance cosmetic was up about 3%. CHC in the US, again, not a big element for us in the US, was up about 13%, and food was down about 10%. As Steve said, the majority of that is in the US and that was primarily tooling. If you take out tooling, it was down about 3%. Personal care was down 2%.

Okay. So it does sound like, correct me if I'm wrong, but it does sound like based on what I'm hearing on the US side, that while Europe was a big part of the weakness, it does sound like the US business seems to be slowing, at least relative to the rates we saw over the last couple of quarters. Would that be fair?

Yes, that's a fair statement. If you look at it all blended in, we were up about 1% in the second quarter and we we're up about 7% in Q1. So yes, that's an accurate statement.

Okay. And then I guess the next question would be on -- you know Landmark, the metered dose and the dose indicators there. What are you seeing there? What's the opportunity for -- it sounds like you've got some good -- you're getting something traction with it and I'm wondering if you've got a view of what penetration of Landmark could get to over the next few years?

Well, again, that one's difficult to predict on the timing now. I think we're really encouraged -- frankly, it's taken longer for it to get out than we thought. We thought this would have been out about a year ago, and some of the approval sides for our customers to get through is taking a little bit longer. But the fact that we're going have actually two projects done with Landmark in the third and fourth quarter, we think will help accelerate that. So it's hard for me to give you any specifics, but it's just encouraging that it's a nice value-added product for us and we think we'll have a bigger impact, particularly as we get into 2013 and 2014.

I think with any of our new products like that, certainly the ones that are very new and very innovative, it always is helpful, as Steve said, to get some of those in the market. You're going to have some -- the other nice thing is you're going to have one of those in the US and one of those in Europe. So you're going to get that product visibility in two of the major markets. It's early to tell, but certainly that's got to spur some interest.

Okay, all right, terrific. And I guess as a follow-up to that. Is there any recent talk on any regulatory requirements along those lines?

There's been nothing, frankly new, in the last six to nine months that I'm aware of. There continues to be -- in the asthma area, continues to be for all new products being introduced, requirements to have dose counters on. So, it's any new products coming into the market are actually going to be a requirement to have those.

Okay, great. Thank you.

Thanks, Al.

(Operator Instructions). Our next question comes from the line of Jason Rodgers, from Great Lakes. Your question, please.

Good morning.

Good morning, Jason.

Just to follow-up on the last question. Just looking at the regions overall, Europe, US and other countries, would you provide the performance for the quarter there?

Sure. Again, reiterating US was up about 1%, Europe was down 5%, again, I'm giving you blended here. Latin America was up 19%, and Asia was up 48%.

Okay.

And for that Asian number, about 10% was coming from our acquisition in India last year.

And looking at the professional fees, the $5.5 million in the quarter. Where is that located on your P&L?

That would be in selling and G&A.

And that also comes, Jason, that will come in the pharma segment.

Correct.

So you'll see that impacting the pharma margins.

Okay. Just looking at pricing. Did pricing have any impact on the quarter and have you seen pricing pressure, given the current environment in Europe?

I think you've got -- we've actually seen prices probably come back a little bit as the resin has come down, we'll adjust the resin pass through. I don't think in the quarter it had a significant impact. In terms of price pressure from our customers, it's always been there. And certainly any kind of economic conditions we've got now there's continue to be focus on price. What I can tell you, though, is we haven't lost any market share, and if anything, we've looked at several of our markets, we've probably even gained. Our customers are concerned about price, but even more concerned about differentiating their products on the shelves, so we tend to do pretty well in these kind of economic conditions.

Thank you.

Thank you. Our next question comes from the line of Brian Rafn, from Morgan Dempsey Capital. Your question, please

Good morning, guys.

Hi, Brian.

Steve, would you talk a little bit more on the cosmetic perfume side. Do you see any differentiation stratification between the level of business in -- you talked a little bit about the high-end premium line versus some of the lower, more of the economy commodity fragrances?

I think on the Prestige line, differentiation is absolutely critical. If you come back and if you look at, Estee Lauder, or Givenchy or Dior, every one of the packages they'll have, will have a differentiated look. If you come back and look at products that Avon may come back with, you'll see much more of a consistency, there may be color differences on the dispensing side. That trend hasn't changed over the past several years, so it's a very different side in terms of how we treat the market.

Sure, sure. You guys talked and I think you said that the new product launches, the pipeline are still pretty solid. Can you delineate at all on any of the new product launches? Is it still multi-million units, is it still national or international launches, or are they smaller and more regional?

They have gotten slightly larger over the last couple of years, in terms of being more worldwide. And again, what I'm talking about here would be on the Prestige lines. You're going to get some other of the fragrances being much more targeted to the local markets on some of the lower end brands. But the other ones, they are looking at major introductions, both US, Europe, Latin America, Asia, on a worldwide basis.

You talked, too, a little bit about customers still being very proactive to either the dispensing and innovative packaging. Steve, is that strictly on look and design, and ergonomics or might that be on product dispensing volumes, or spoilage of the product, or is it strictly on sex and sizzle?

No, I think it's much more than the differentiation. To give you an example, if we're coming back, we have an airless package that we sell, which basically allows us -- our customers not to put preservatives into cosmetic products, and even into food products. That type of functionality is really critical to our customers, so it's much more than just the look. It's also the function.

Then one final. Any progress on the milk industry relative to changing some of the dispensing?

Again, we discontinued -- the good news is for us, we continued to do a lot in the non-dairy creamer. That continues to expand. But in the milk per se, we don't have anything that's out there today.

Okay, thanks, Steve.

Thanks.

Thank you. Our next question comes from the line of Jon Andersen, from William Blair. Your question, please.

Good morning, guys.

Good morning, John.

Just wanted to ask about the margins in food and beverage. You did have sequential improvement in operating margins there. With the ramp up of the new facility in Lincolnton, did you expect to kind of move towards that long-term target range of 11% to 14% in the back half of the year?

I think it will continue to move up. It's going to be based on some of the timing we get through in terms of volume, but we do anticipate it to continue to progressively move up to the remainder of the year, and then hopefully get close to the target.

In the pharma business, you talked about some of the new applications and new approvals, that are likely to provide opportunities to ship in the second half. How should we think about that impacting the organic growth rate, looking to the back half of the year, or is it more of a 2013 event?

It's probably more of the 2013 in terms of on the ramping to those, and we'll how the product introduction -- because there's not one of those that's going to be, let's call it, a needle mover by itself. It's more of a combination of having a lot of those different projects.

Okay, thanks, guys, good luck.

Thanks.

Thanks, John.

Thank you. This does conclude the question and answer session of today's program. I'd like to turn the program back to Mr. Hagge.

Thank you very much. This concludes our call today and I'd like to thank everyone for joining us. Good bye.

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