Aptargroup Inc (ATR) 2013 Q3 法說會逐字稿

Welcome to AptarGroup's 2013 third quarter conference call.

(Operator Instructions)

Introducing today's conference call is Mr. Matt DellaMaria, Vice President, Investor Relations. Please go ahead sir.

Thank you, Sade, 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 will 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 will post a replay of this conference call on our website, and AptarGroup undertakes no obligation to update the forward-looking information contained therein.

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

Thanks, Matt, and good morning, everyone. I'd like to wish everybody a Happy Halloween, and also congratulate those Boston Red Sox fans.

Yesterday we reported a good quarter for Aptar, with record quarter revenue of $624 million and strong earnings of $0.70 per share before restructuring charges. We're able to achieve these results even though we faced some challenges in the quarter.

We continue to see good growth in all regions other than the US. The timing of passing through resin-cost increases had a negative impact on our bottom line. And we experienced negative foreign currency transaction effects, primarily related to our operations in Latin America. However, given all that we encountered, I'm pleased that we were able to achieve record third-quarter sales, and grow earnings over the prior year.

I'd like to take a few minutes to summarize our business segment performances, and then turn it over to Bob. Our beauty and home segment saw good sales growth in the quarter. Continued weak demand across each of the markets served in the US was more than offset by growth in Europe, Latin America, and Asia. Profitability was negatively affected by the slowness in the US and the timing of pass-through of the increased cost of resin.

Customer sentiment seems to indicate that we are not out of the woods yet in the US, but our ongoing dialogue regarding potential new projects remains at a good level. In the quarter, we participated in several new launches by our customers, including Bath & Body Works' signature line of body lotions and shower gels that are packaged with our custom dispensing closures; Lancome's DreamTone cosmetic lotion utilizes our custom airless dispensing solution; and our fine-mist pumps can be found on several new celebrity fragrances. And finally, our flat sampling system, which we refer to as Imagin, was chosen by P&G to promote their Dolce & Gabbana fragrance, Intense, and this will be distributed inside of 12 different magazines across Europe, the Middle East, and Latin America.

Now turning to our pharma segment, which performed very well in the quarter. Sales growth was driven by increased demand from the consumer healthcare and injection markets. Sales to the prescription market were down slightly, mainly due to lower custom tooling sales compared to the prior year. Profitability was at a good level and within our long-term target range for this segment.

In the quarter, there were several interesting consumer healthcare launches, primarily in the nasal decongestant category, with two new products from NeilMed hitting the market in the US, and another decongestant launching in Europe, each equipped with a reliable nasal spray system.

Now, looking at our last segment, food and beverage, we had a mixed quarter. Sales to the food market increased over the prior year, while sales to the beverage market were basically even with the prior year, when currency and custom tooling were excluded. The soft demand from the beverage market was expected. This is consistent what we're hearing from other companies regarding the cooler weather conditions resulting in a lower demand for single-serve beverages. Profitability was negatively impact by the timing of passing through of the increased cost of resin.

It was an active quarter in terms of new product launches in both the food and beverage markets. First of all, in the food market, our Ecolite Pour Spout closure was chosen by Costco for their Kirkland-brand maple syrup. WhiteWave expanded their coffee creamer line with the introduction of Dunkin' Donuts-brand coffee creamer using our custom closure. And we're very encouraged by the numerous new cooking and soy sauce introductions in Latin America using our innovative dispensing closures. Now, in the beverage market, we participated in several new functional drink introductions in China and Latin America, and three new bottled-water products that were launched also in Latin America using our dispensing closures.

Now, as we look ahead to the fourth quarter, we expect core sales for each of our segments to increase over the prior year. However, we anticipate that our earnings will be negatively impacted by the continuing soft conditions in the US market served by our beauty and home segment. Also, Europe continues to recover, and in the emerging markets we expect to see continued good growth across the various markets we serve.

I'd like to underscore that the strength of our diversified business portfolio with the industry's broadest product offering, presence in multiple geographies, serving many markets and customers, we're able to achieve growth even though pockets of softness may occur in certain markets or regions. And lastly, our Organization and our customers continue to benefit from the dedication of our people, who, even in difficult times, always put their best foot forward and strive for excellence in all they do.

At this time, I will turn it over to Bob who will review the details behind our financial results.

Thank you, Steve, and good morning, everyone. As announced in our press release, our reported sales increased 6% to a record third-quarter level. On a constant-currency basis, our core sales increased 4% in the quarter. We've now lapped the Stelmi acquisition date and, therefore, for the quarter, there is no separate acquisition effect.

Our third-quarter earnings-per-share guidance did not include any costs from our European restructuring plan, which was about $0.03 in the quarter. So, on a comparable basis to our guidance, we earned $0.70 in the quarter. This compares to $0.66 in the prior year when the negative impact from the write up of inventory related to the Stelmi acquisition is excluded from the prior-year results. That negative effect was about $0.04 per share. On a reported basis, earnings per share increased 8% over the prior year.

Free cash flow, which we define as cash flow from operations less capital expenditures, was $46 million in the quarter compared to $76 million the same period a year ago. The decrease in free cash flow in the quarter was due in part to the timing of our pension plan contributions. On a gross basis, debt to capital is about 23%, while on a net basis it is roughly 11%.

We paid approximately $17 million in dividends in the quarter, representing $0.25 per share. Regarding our share repurchase program, we spent approximately $35.6 million to repurchase 600,000 shares in the quarter. This brings the remaining balance of shares authorized for repurchase to approximately $4.6 million.

Turning to market details by business segment, our beauty and home segment's core sales increased 4% over the prior year. Looking at our markets on a constant-currency basis compared to the prior year, sales to the beauty market increased 5%. Sales to the personal care market increased 4%, while sales to the home care market decreased 5%. In addition to the negative operational impact coming from the softness in the US market, our beauty and home segment's income was negatively impacted by approximately $1.4 million related to higher resin costs.

Our pharma segment core sales increased 7% over the prior year. Looking at the markets on a constant-currency basis compared to the prior year, sales to the consumer healthcare market increased 21%. Sales to the injection market increased 27%, while sales to the prescription market decreased 4%, nearly all of which was related to lower custom tooling sales compared to last year. Our pharma segment reported good profitability in the quarter.

Our food and beverage segment's core sales decreased 1%, primarily due to lower custom tooling sales. If we exclude the effect of lower tooling sales, product sales actually increased mid-single digits over the prior year. As we look to the two markets served by the segment, the decrease in custom tooling sales compared to the prior year had an impact on the overall sales to each market. On a constant-currency basis, sales to the food market increased 4%. However, if we exclude the impact from the decrease in tooling sales, product sales to the food market increased 8%.

Sales to the beverage market decreased 7%. However, if we exclude the impact from a decrease in tooling sales, product sales to the beverage market were equal to the prior year. Similar to our beauty and home segment, higher resin costs had a negative impact of about $1.7 million on our food and beverage segment income in the quarter.

Now, looking at our year-to-date results, our reported sales grew 7%. On a constant-currency basis, and excluding Aptar Stelmi sales from the first half of this year, our core sales increased 2%.

On a comparable basis, when you adjust for the negative impact of about $0.12 from a European restructuring plan, we earned $2.10 per share thus far this year. And this compares to $1.95 per share in the prior year when transaction costs and inventory write up related to the Stelmi acquisition are excluded from prior-year results. These two prior-year effects totaled approximately $0.09 per share.

We also generated free cash flow in the nine months year to date of $84 million, which is an increase of $19 million over last year's free cash flow of approximately $65 million. Regarding our European restructuring plan, we are on track in terms of both costs and savings.

Looking forward, we are holding to our previous guidance on depreciation and amortization for 2013, and expect to be in the area of $150 million, and we still expect capital expenditures 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.

We currently estimate that diluted earnings per share for the fourth quarter of 2013 will be in the range of $0.62 to $0.67 per share compared to $0.57 per share in the prior-year fourth quarter, when charges relating to our restructuring plan are excluded from both years. I would like to emphasize that the fourth-quarter range I just mentioned does not include a potential negative impact from the pending French tax legislation mentioned in the press release, that we estimate could be as much as $0.09 per share.

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

Thank you.

(Operator Instructions)

And our first question comes from Ghansham Panjabi the from Robert W. Baird.

Hi guys, good morning.

Good morning.

Going back to the North American personal care business Steve, can you help us understand if this a customer alignment issue that you're sort of exposed to or is this broad-based weakness in the personal care markets across the board? Because it seems like some customers are doing better than others in North America. Do you think you're maintaining your share in terms of the new products that are being introduced for some of these initiatives that you sort of called out earlier?

There are a couple things, Ghansham, related to that. In North America, we've done a couple things over the last couple years strategically. So as you've seen we are doing mostly some of our developing market business on a imported basis. Some of that was coming from the US. So we've continued to move more to local production there. So that's affected some of our production.

Realistically, frankly we expected to be seeing faster growth in North America and hope to fill some of those gaps, with new business. And we're probably a bit behind in terms of our timing to that. I also mentioned in a couple calls that we did walk away from some of profitable business also which had an impact. That being said we're still very comfortable that we still have maintained the majority of the market share we have. And we're actually very enthusiastic about or are very encouraged at this point about the number of new projects that we're working on. And so what we see is hopefully more of a temporary issue in areas. We are continuing to challenge our cost makeup in each of our business segments in the US, make sure that we're appropriately staffed.

Okay, and then in terms of the margin volatility in the food and beverage business. I know you called out resin, but tooling I thought was pretty low margin business. So shouldn't the margins have been up a bit more on a year over year basis? If you adjust for resin?

Yes, that's a good point. I mean if you adjust for resin I think it's important that if you took the resin out we would've been about a 12% operating margin for the food and beverage which is pretty much where we're targeting. Tooling doesn't have as much margin, but again given the overhead structure it didn't have a significant impact on us. So we were probably down because of utilization given the beverage side so that had, that offset some of that tooling, call it negative profitability, Ghansham.

Okay. Got it. Thanks so much.

Thank you.

Our next question comes from Chip Dillon from Vertical Research.

Yes, good morning.

Yes.

Yes, thanks for calling out the resin impact. And I just had a question. What's the -- and I think you said $1.4 million in beauty and health and $1.7 million food and beverage was there any in pharma?

No, not anything of significance. The majority of those resin increases are really coming from the United States. So a lot of our pharma business obviously is European-based manufacturing-wise so the effect on the pharma side was really not material.

Got you. As a way of thinking about it, was this, the numbers you gave us, the $3.1 million, was that a lag, in another words what I am trying to say is, did you get the resin cost going up and no pricing? Or was it sort of a moving target where the resin cost increase might've been more than that and you recovered all but $3.1 million of that?

It's really more, Chip, a comparison to where we were last year. So without getting too technical on how we calculate that it's quarter to quarter comparing third quarter this year to third quarter last year. The lag in the pass through was approximately $3.1 million negative compared to where we were last year in the third quarter.

But also, Chip, I think it's important to your's, we will recover all the pass-through's, so essentially we do get back that resin it is only a timing issue for us.

Got you. And as we look at CapEx, you guys have a very consistent, relatively consistent pattern, vis-à-vis depreciation. And I know you mentioned that you probably aren't as at a higher utilization rate say in food and beverage as you thought you might be here in the states. On the other hand it seems like from what you're saying in the pharma segment you are doing quite well noting the injection volumes etc., so is it fair to say that you have a similar CapEx number next year, but it might be tilted more toward the pharma segment than it might've been in the last year or two?

One thing to keep in mind is that the announcement we made last quarter on the expansion of Stelmi for approximately $26 million, virtually nothing of that is going to fall in 2013. So by definition all else being equal we would be adding that $26 million on top of what the D&A. So, yes, there might be a slight additional weighting on the pharma side, but I just wanted to point out that that $26 million that we talked about is really going to fall into 2014.

Thank you. Our next question comes from Chris Manuel from Wells Fargo.

Good morning, gentlemen.

Morning, Chris.

Turn the circle around a couple different items. First a couple housekeeping items, if you could maybe tell us what tooling sales were actually in this quarter versus last year?

Sure. So looking at tooling sales in the third quarter overall, we are about $14.5 million dollars and that would compare in the third quarter last year of about roughly $22 million.

Okay that helps. And then two last ones. One would be -- could you give us a little more color around the French tax issue? Is that something that it's a one-year issue, it hit this year would that be something that if legislation did go through would impact things on a go forward basis? Maybe a little more color there would be helpful.

Sure. As usual, we're early on in that process and there's several proposals that are out to the government to evaluate. So one of which is a general increase, if you will, in the effective tax rate. They're trying different methods as to how to implement that. There's different proposals on the floor one of which is an increase in the surtax which we talked about I think about a year-and-a-half ago. That's one of things. And also they're challenging various deductions again in terms of business one of which is interest expense. So there's several proposals out there and it makes it very difficult to evaluate which ones are eventually going to get passed.

And also I think on the retroactive side, we're really just speculating based on what we know now and based on what we've seen in the past that it would be retroactive to the beginning of the year. But again we have to wait to see what eventually makes it through and what eventually gets enacted by the end of the year. But if the surtax gets enacted obviously we're going to have that retro impact for this year but it will be an ongoing spread throughout all of 2014. And same thing on some of the deduction limitations. So it will be an ongoing type of cost it just won't be $0.09 per quarter it'll be closer to $0.02 per quarter.

Okay that's helpful. And then, Steve, one question for you with respect to maybe if you could comment on I know you don't want to comment on anything specific, but certain -- what you might be seeing out the acquisition markets? It looks like things have been heating up again and there are some different dispensing assets and closure assets and things on the market. What you're seeing with respect to are multiples looking attractive to you are they looking a little inflated etc.? How you're feeling about M&A?

Well, Chris, I think you're right. I guess what I -- we're not going to comment on any specific transaction as you alluded to in the question. But what we are seeing is there are more properties coming to market. We've seen that over the last probably month and a half. How those end up getting priced well is kind of a subject for debate. But right now the one thing is the M&A market seems to be more active than it was three to six months ago.

Thank you. Our next question comes from George Staphos from Merrill Lynch.

Hi guys, good morning. I wanted to ask a couple of questions realizing that Stelmi build out is early days where do you stand in those early days in terms of being on project, on budget? Any issues, hopefully not, that maybe have arisen with the build out? And then you might've mentioned earlier and I missed it, should we take away anything from the fact that tooling sales are down in a couple of your segments in terms of what it means for customers' expectations for new products and the like in the next several quarters?

Okay let me, George, let me take that on the Stelmi side. Frankly, we've started the process on Stelmi and as we've talked about in the call last quarter, we're going through getting permits and getting all the material and stuff ordered. The good news is for that all of that process is going pretty much exactly to the timeline we set up when we started that. So we look to be in line in terms of cost and in timing. We would expect the final permits to come through in the early part of 2014 through the first or early second quarter. And the cost related to that again we're pretty much in line with.

On the tooling, I think if you followed us you'll find that tooling does vary quarter to quarter and it really largely depends on when the tooling actually comes online for us. But we're very comfortable that we haven't lost anything in terms of the momentum in tooling. And if we look at our projects or custom projects we're getting still as the market leader the majority of those products. So, we're not concerned about the timing, George.

Okay, would there come a time, let's say it's a couple quarters from now, where if you have, and I'm not saying this is going to happen but just hypothetically, if tooling stays lower than the year on year period would that be more of a yellow flag for us to pay attention to?

I don't think so because, well, one of the things that we'd have to look at is remember tooling for us is when customers want to customize their projects. So sometimes when you're looking at more cost effective solutions, they'll look at our stock products and we'll be able to do that. So what we'd have to do is compare how new products are getting introduced and if we're missing new products, then we've got reason for concern. If it's a shift between custom tooling and stock, frankly for us we're somewhat ambivalent.

Okay that's fair. Last one and I'll turn it over. Have you called out in the past and if you have I apologize for not recalling, what the, if you will, frictional costs from the Stelmi build out will be next year? Obviously, you know it's not going to be a zero on the P&L next year, at least I wouldn't think so. So what kind of headwind should we build in for that from a P&L standpoint for next year if that's the available at this time? Thanks.

Right now we're still going through the process to that. I do expect, and we talked about this, we'll be adding probably a little bit in the SG&A portion to Stelmi to reinforce some of the staff. I don't expect it to be a material amount of money. But I don't have a number to be able to give you at this time, George.

Thank you. Our next question comes from Adam Josephson from KeyBanc.

Thanks, good morning everyone.

Good morning, Adam.

Steve, how would you characterize how your discussions with customers have changed at all in recent months? I mean in light of the fact that Europe is improving, the US appears not really to be, and emerging markets are still growing I mean there doesn't appear to be any kind of discernible general trend, but perhaps you'd disagree.

I think the discussion with customers and again it's very dependent on the market so if I talked to our pharma customers they're concerned about the regulatory issues around Obamacare. What they're doing in that area. When you talk to the personal care and fragrance cosmetic, those type of customers, I think, are still coming back in a relatively positive going forward. Cautiously optimistic.

If I look at our food and beverage customers, there's been some transformation in that market. One of our largest customers being Heinz was recently acquired so they're going through some internal transactions. So I think there's a lot of different dynamics, Adam, but there's not one side that's out there. Other than I'll tell you I would say it's more generally on the positive side in terms of growth than it has been over the last couple years. There're more positive initiatives going forward than there were probably two years ago.

That's across regions, Steve?

That's pretty much across regions, in fact. I mean certainly with Latin America and Asia for us, which has been growing double digits for this year, there still continued to be momentum. The challenge in those markets particularly Latin America has been the currency.

Got it, now thanks for that. And just on your balance sheet, how do you view your leverage ratio at the moment? And what might you do over the next year or two with the cash you expect to generate after the dividend and after repurchasing shares to offset dilution?

Adam, we've looked at that on a really on an ongoing basis. We are exploring some opportunities. We are under levered. I think one of the good things is that we continue to earn one of the higher internal rate of return on our own investments. And we -- capacity increases as we announced in Stelmi are good examples of how partially on a smaller scale we're redeploying some of that capital. But we are looking at some different alternatives. And again as we discussed at the analyst day, and in line with what Steve's saying in terms of M&A activity increasing, we're really balancing and evaluating a lot of different impacts.

Thanks a lot, appreciate it.

Our next question comes from Phil Gresh from JP Morgan.

Hi, good morning.

Hi, Phil.

So just I guess follow up on that with the evaluation of the M&A alternatives out there more properties coming to market. Stelmi was the largest deal I believe that you've done and it's gone fairly well. So I'm kind of wondering how you feel about, I mean obviously you have the balance sheet capacity, but wondering how you feel about given the CapEx you're spending and the growth you're focused on with Stelmi how do you feel about kind I guess your operational capacity to do something of potentially a larger size? Or would you say the things you're looking at are kind of Stelmi or smaller? To the extent you can comment.

I think, I guess Phil, we're going to continue to look at companies that would add strategic value to Aptar. One of the things, and we've mentioned this in the past that we would be looking for as we look at any acquisition, is we need good management. One of the things that we recognize we're not very good at is turnaround from an operational perspective. So we want companies that operate well.

As a result of that, I think if they have good operations we can end up doing certainly a bigger scale than what we did with Stelmi. As you point out I think when you get to some of these bolt on acquisitions they tend to be able to -- we can integrate them a lot quicker and there is certainly less risk. So if I had my preference those would be doing three of those versus one big one would probably be a preference. But the key for us, it needs to be strategic space where we need to be adding value.

Okay, that's helpful. My second question is just with respect to the utilization issues that you've had in North America, is there a way to think about maybe the amount of growth you feel like you do need to kind of overcome those issues at this point? Is it a year of growth, is it two years of growth? I mean how are you kind of thinking about what it'll take to get you back to where you want to be?

It's a good question and it's difficult because it's done by product line. So I think as we look at it we're seeing and we're talking about beauty and home in this case because we're seeing pretty good growth in terms of overall year-to-date food and beverage growth in North America. What we didn't anticipate and I can tell you at the beginning of the year we didn't anticipate the market, the overall market being somewhat flat. What we are seeing is some new projects coming, but we need probably growth in the beauty and home market at 4% to 5% to be able to fill our operations on an effective basis. And if not we'll need to be continuing to look at how we adjust to react to deal with those market sides. The good news is with our products we're entering new markets and we have a lot of new opportunities.

Is that beauty and personal care, or is it one or the other that you feel like you need that type of growth?

It's really on a combined basis. And I think one of the things on beauty that it's important to come back is, you saw our fragrance business was up about 5% to 6% in the quarter. A lot of that is Europe, but a good portion of that Europe gets re-exported back to the US. So, in effect, we are improving in the states indirectly through our customers' products coming back to the states. But the numbers that we're giving you related to both beauty and personal care.

Thank you. Our next question comes from Jon Andersen from William Blair.

Good morning, everybody.

Hi, Jon.

I wanted just some clarification. You said the injectable market was up, your business was up, 27% in the quarter is that accurate?

That's correct.

Is that a figure that you've provided before and I guess is it kind of consistent with recent trends?

We haven't provided it before, Jon, because quite frankly, this is the first quarter where we're comparable where Stelmi is included in the third quarter last year and is included in the third quarter of this year. What we have indicated in the past in particularly in analyst day, is that through the first six months we were up about 13% if we were to look at just the pure Stelmi business. Even though that's not the impact that's affecting us.

Yes, and I think, Jon, that's when [when we call our] injectables, we hope to be adding more to that market but that today is almost entirely the Aptar Stelmi operation.

Yes, that's what I thought and I guess that's part of my, second part of my question would be, the acceleration I guess that you saw in the third quarter relative to the first half. Any color there just on some of the developments that are driving that? And is that kind of sustainable for the foreseeable future or how are you thinking about the growth rate going forward there?

Well couple things obviously being that we acquired them early in the third quarter last year we were just beginning the integration phase. We were just beginning the analysis of customers and volumes and products and all those things to a much deeper level. So what you have is you have the twofold affect, one, the volumes in this overall primary component of elastomer had been growing, really across the board. So we've been benefiting from that so I would say general normal economic growth in that area.

But also you have, I think, also an increase in some pricing. One of the things that we brought to the table as part of the integration was really a better analytical view of who they're selling to, what products, the pricing. And quite honestly there hadn't been a whole lot of price increases prior to the acquisition. So what you've got is a little bit of combined mixture of both pricing and volume. But to answer your question on a go forward basis we're just getting into looking into looking at 2014 budgets but at least on the near-term, what we're seen and hearing is that volume growth that we're experiencing today is expected to continue in the near future.

Thanks, that's helpful. If I could just squeeze in one more on the food and beverage business. Beverages I guess being flat ex tooling in the quarter. It sounds like some of that was expected due to cooler weather or shouldn't have been a surprise affecting demand for certain beverages. Is that something we should view as more transitory related to that and we'd see kind of a recovery sooner rather than later in that part of the business? Thanks.

Yes, I think, Jon, to your side that we did anticipate that. It was related to kind of the coolness of the season. So we view that as more of a temporary not a market indicator on a long-term basis. And we're still comfortable that we're going to be seeing double-digit growth in terms of our food and beverage business as we go forward.

Thank you, our next question comes from Al Kabili from Macquarie.

Hi, thanks, good morning. On the European restructuring, were you, did you get any benefit in the third quarter? And how about how are we thinking about it this year? I know it ramps more with next year, but are we getting anything this year from that?

We are, Al, in fact we didn't call it out in the press release because it was a pretty significant quarter in terms of equipment movement from facilities. And so the savings that we realized, if you will, were somewhat mitigated or offset by some startup costs, if you will, in getting that equipment up and running in some of the newer plants, so the net impact of the overall savings was immaterial. We're going to have similar movements into the fourth-quarter. So again, while we're comfortable in 2014 with the $12 million, it's really because we are seeing the identified savings that we were targeting are materializing. And these start up of getting the equipment online are really more short-term in nature and we would expect most of those bugs to be worked off as we get into the first part of 2014.

Okay that's helpful. On the resin headwinds that you called out in the third quarter, does your guidance reflect that those will be similarly temporary tailwinds in 4Q? Can you just help us with that?

I think, Al, what we gave going into the, we're not going third quarter to fourth quarter we are going fourth to fourth, which is also an important side. So when I look at fourth quarter last year and compare it to what we expect this year, we expect relatively small headwinds. We don't expect it to be positive, but not nearly to the extent of that $3.1 million we saw. So we expect it to be somewhat negative but not to the levels we saw this year.

Okay, that's helpful, and then the last question I had is just the, with the slowing economies we're seeing in South America and Brazil, I was wondering if you could talk about, I know it's still growing for you there, but just a trajectory that you're seeing down there and the trends you saw kind of inter-quarter?

I think if you look at inter-quarter there's no question when you go down there and talk to our customers they're feeling no longer the 20% to 25% they may be down to 10% to 15%, That being said, at least on my last visit, which was in August, the customers that I talked to were still very bullish in terms of their growth perspective. So a bit from maybe down from kind of the upper teens down to the lower teens but still nice growth going forward. So, again what we're trying to do is actively manage how we do on an import basis. And as I mentioned strategically try to localize as much production as we can to avoid some of the currency issues.

Thank you, our next question comes from Brian Rafn from Morgan Capital Management.

Morning guys.

Hi, Brian.

Give me a sense, Steve, you talked about personal care was the weakness in US personal care was it number of projects? Was it the size or volumes of launches? Was it more regional versus national/international? And the new project pipeline that you talked about, is that accelerating enough materially to replace some of that maybe import business you might be doing in country in Latin America or international?

I think on the personal care side a couple things to it. I think there was more general market conditions in terms of we've seen and you can see this with the Procter & Gamble's and the Unilever's just haven't been overly strong in terms of their sales. So it's been relatively small. The other thing that's important when we look at personal care, and we talked about this in previous quarters, we're a major provider to the sun care market, and the sun care market in the US was relatively soft this year, and I think that's more a one-off issue and we'll see that as we get into 2014 starting to improve. That being said, again we see a nice project profile of new things coming back on with our customers and we would anticipate seeing growth as we get into the fourth quarter and certainly as we get into 2014.

How does the Christmas holiday season in bookings and projects look for in the cosmetic/perfume area?

I think again, as Bob mentioned when he was going through our market stuff, we're around 5% or so up in fragrances in the quarter. And that reflects some of our customers filling the pipelines to get ready for Christmas. As our senior management has talked to our customers, I don't know that people would say it is going to be a blowout Christmas and it'll be up 20%. But they're optimistic that it will be at or above last year's levels at least at this stage.

Okay, and just one more. Given the atrocious launch to the Obamacare websites, if the exchanges collapse or if it's just a nightmare, does that have any disruptive effect in your pharma drug area for new product development?

At this point it's really difficult to say what Obamacare will do to us. Our view was on whole, it will probably increase our customer sales because they'll end up using more product. The fact that may not go to plan, we've not had any customers, frankly, building inventory for Obamacare. So they're taking a little bit, I think, what the country's doing, I'm going to wait and see what the impact of it is.

Thank you, our next question cousin Jason Rodgers from Great Lakes Review.

Hi, good morning.

Good morning, Jason.

Could you provide a breakdown of the performance in the quarter by region, US versus Europe versus Latin America and Asia?

I have not yet but I can. So the US overall, and again this is all segments blended together and this is core sales growth so this is excluding any currency impacts, so the US was down about 10% in the core sales basis, Europe and Asia were up both about 9%, and Latin America was up 14%.

And given the new category injectables in the pharma segment, would you provide the percentage of the segment sales by injectables versus Rx versus consumer?

Sure. So what we've got, let me give you more of what we believe on a year-to-date basis it will be because again third quarter is a little bit different in that you've got a big slower August type of thing. But overall we would expect on a 12 month basis, Stelmi to represent about 14% of the overall pharma sales, CHC to represent about 26%, and then the legacy Rx, if you will, would be making up the remainder, or about 60%.

Thank you.

Our next question comes from Todd Wenning from MorningStar

Hi, good morning everyone.

Hi, Todd.

Between the syringe pump and valve drug delivery systems, where have you seen the most competitive pressure over the past quarter? And in which areas do expect to see the most pressure going into 2014?

You know I don't know that it's easy to compare those because they're really very different. One tends to be a component which is our elastomer parts. As we're growing that market I think there's, we've always seen competitive pressure in the markets. But I don't know that there's one that's more than the others. And we want to continue to react with our customers to be the most cost-effective supplier of products that they've got. So there isn't one that stands out over the other particularly over in the last quarter.

Okay, great. And do you expect any negative impact on your food and beverage business if the proposed soda and junk food tax proposal goes through in Mexico?

We're going to continue to look at that. We don't think so because in terms of a lot of the products that we're even selling are water-based and we're coming back it's not even the junk food side. And the other side that is important remember is a lot of those are screw-off caps and not dispensing systems. So we're really in a niche of that market. So we would not anticipate maybe as large of a hit as someone else who's supplying kind of screw-off caps to that market.

So at this point we see a lot of discussion but we're not expecting any big negative. In fact, we've actually got several interesting new projects that we're working on in the beverage market to differentiate products in Latin America which from ours may show nice growth as we go forward.

Okay, great. Thank you very much, guys.

And our next question comes from Debbie Jones from Deutsche Bank.

Hi, good morning.

Hi, Debbie.

I was wondering if you could talk about their utilization rate at your North Carolina food and beverage plants? And then if you're still continuing to see a shift into your dispensing closure applications in that segment?

You know right now I think we're, it's a large facility, the facility we've got our operating efficiencies are continuing to increase really on a month by month basis. So, but we've still got quite a bit of room to be able to grow in that facility. It's about a 300,000 square foot facility and we're probably occupying about a third of that right now. So we've got quite a bit of growth potential going forward. The good thing is from us is that we're seen operating efficiencies improve on the products that we're producing there. So that'd be the biggest thing that I guess coming back to that market.

Okay. And are you able to parse out kind of your growth rates projections for food versus beverage? I know in general it's supposed to be about 10% long-term. But is there one category that will be driving that at a faster rate?

It's really difficult for us to do that. I think it depends on the new applications. So as we got into the flavored water market last year that had a big impact. As we've got into orange juice and then we started looking at new food products. I talked about in my comments soy sauce in Latin America. Those open new application fields. So the hope for us is we'll see good growth in both of them.

Okay and the final question. Can you just sort of comment on your capacity expansion in Columbia? And then who is your competition in that market?

I think it's a unique site. So number one, we expect to be into production, and when I say production is assembly. We're not going to be doing molding there to start with. And we'll be doing assembly primarily for our beauty and home type products. And those products we're going to be moving actually to localize some of the things we've been importing that market. So that market for us is between $30 million and $40 million, the Andean region. So we'll be localizing some of those products, which I think right away fills the facility. So I think that's a plus. The other thing that for us has been critical in terms of Columbia and broader-based the Andean, we'll be the first company of our competitors to go into that market. So we'll have that what we hope is a first-mover advantage.

Okay, but your current competition existing in the region?

Yes, our current competition is doing what we're doing they're actually importing to the region from other Latin American countries like Brazil or the US or Europe, which is how we've been serving that market today.

Okay. All right, thank you.

Thank you.

(Operator Instructions)

And our next question comes from Mark Wilde from Deutsche Bank.

My question's been asked. Thank you.

Thank you. We do have a follow-up question from Chip Dillon from Vertical Research.

Yes, thanks. Steve, when you look at -- you mentioned the M&A market was heating up a little bit and you've got a, I think, a pretty high-class challenge in sort of looking at buying back your stock with the earnings yield, or should I say free cash flow yield, which is 5%-ish versus an acquisition which would seem to, with the low interest rates, probably provide a pretty immediate accretion. And yet you've got a very high quality business mix that you don't want to see that diminished at all. So how do you kind of weigh, even though probably any deal you did would be accretive, how do you weigh the culture issue as well as the creativity issue that makes Aptar see the very high returns it's experienced?

That's a good question, Chip. And I think it goes back to what I talked about a little bit earlier in the call is that when we look at acquisition it has to fit a need for us, a strategic need. So when we're looking for that the other, it needs to fit that number one. So that's the first side. The other side, the cultural fit, is really very important for us. As we integrate businesses into Aptar we want it to be able to fit within Aptar's growth profile that we've got. So we take a very hard look at that. And the good news is from us while we were into a short interest rate environment today, we also recognize that that can change so we take a long-term view of it. So, in terms of the M&A we're going to look to see if it fits with us. Because even if the product may not have necessarily the profile today, if we can start to take that worldwide or to use the resources of Aptar, it may end up making what may off the surface not be a great transaction into a very good one, and Stelmi would be kind of the best example to that.

Got you. Thank you.

Thank you. And I'm showing no further questions at this time, gentlemen. I would like to hand the conference back over to Mr. Hagge for closing remarks.

Again I'd like to thank everyone for attending today's conference, and we look forward to talking to you at our next one back in February. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program for today. You may all disconnect and have a wonderful day.