Aptargroup Inc (ATR) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to AptarGroup's 2014 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, Kevin, 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 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. 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. Yesterday, AptarGroup reported third-quarter revenues and earnings per share that were record levels for the Company. Demand for our industry-leading innovative dispensing solutions continue to be broad-based. Compared to the prior year, core sales increased in each of our business segments and each geographic region.

Our business in Asia and Latin America generated excellent core sales growth in the quarter. I'm particularly encouraged by the fact that our strong growth in Latin America was due in part to further penetration from our food and beverage and pharma segments, which traditionally these have been our smaller businesses in that region.

In the US, we saw positive growth over the prior year and you may recall this region declined year over year in the second quarter.

Europe, our largest region in terms of sales, was up modestly, but at a slower growth rate than we've seen earlier this year. Certain customers in Europe had become more cautious in light of recent economic indicators.

Despite some of the challenges in the quarter, we reported earnings per share of $0.73, which was our highest reported EPS for any third quarter. Earnings reflected strong performance by our food and beverage and pharma segments, a decline of segment income in our beauty and home segment, and the negative impact of some tax-related items that we will cover later.

I would like to offer a few comments on our business segments before I turn it over to Bob for a review of our financials. Our beauty and home segment continued to face soft conditions in the US, with a decline of sales in the region. Weak demand from our US personal care and beauty markets was partially offset by increased sales to the home care market.

Growth in other regions offset the decline in the US and the overall segment reported an increase in quarter sales. Profitability was negatively impacted by the softness in the US and some facility startup costs that we have continuing in Latin America. We do continue to implement cost-saving measures throughout the segment.

It was a very active quarter in terms of new product introductions by our customers and I will go over just a few of them. I'm very pleased to report that we have two new technologies in the beauty market.

The first is a new fine mist pump that delivers a long, continuous spray with a very soft actuation force. This new technology was chosen by Bvlgari for one of their prestige fragrance lines.

Another new technology on the market is our airless pen-like system that was chosen by L'Oreal to dispense an anti-wrinkle serum. And in the personal care market, we participated in several new sun care and spray deodorant introductions in Europe and Latin America, including on P&G's Gillette and Old Spice brands.

And finally in the home care market, Gillette restaged their Ajax multipurpose cleaning gel in Europe with our Simply Squeeze dispensing closure technology.

Now turning to our pharma segment, our pharma business had another good quarter, with sales and profits increasing over the prior year. Sales growth was driven by increased demand from the prescription drug and the consumer healthcare markets.

In particular, I was pleased to see increases in the pain, central nervous system, and eye care categories, which are smaller, but rapidly growing categories for us. Sales to the injectable market decreased in the quarter due in part to some inventory de-stocking by certain customers and also a very difficult comparison to record levels achieved a year ago.

We continue to provide the best delivery solutions to the pharmaceutical industry as we combine our decades of experience in the regulatory environment with state-of-the-art dispensing and filling technology.

In the quarter, we participated in several new customer product introductions, including a generic equivalent to Advair that launched in the prescription drug market in Europe using our metered dose inhaler valve system. And CVS Stores chose our Bag-On-Valve system for their store-brand nasal saline mist for the consumer healthcare market here in the US.

Now looking at our food and beverage segment, this business had an outstanding quarter. Segment sales and income increased in the quarter on strong demand for our leading dispensing closures from both the food and the beverage markets. We also reported a good level of custom tooling sales in the quarter.

Our commitment to developing regions is paying off as we continue to gain further market shares in both beverage and food. It was also a very active quarter for this segment in terms of customer product launches.

In the food market, I am pleased to announce that our first food product using our Bag-On-Valve technology was launched in Europe. A world leader in the production of olive oil, based in Spain, has chosen our dispensing solution for a line of cooking sprays.

Also in the food market, ConAgra has repackaged their flagship Hunt's Ketchup in Mexico with an inverted Simply Squeeze dispensing closure.

In the beverage market, we are now supplying our innovative dispensing closures on liquid concentrate flavorings in Latin America and Eastern Europe, also where we participated in several new single serve beverage launches.

Now looking ahead, as we mentioned in the press release, the fourth quarter will be challenging. Certain markets in Latin America and Europe are expected to be weaker than we've seen in recent quarters.

Further, we do not see the US economic situation changing dramatically. In addition, we face tough comparison to a strong fourth quarter of the prior year, where we reposted double-digit topline growth. And certainly, foreign currency exchange rates are much more favorable last year than they are today.

However, our long-term outlook is extremely promising. We continue to invest in projects that help us grow profitably and we will continue to identify new opportunities for innovative dispensing technologies across each of our segments.

Our financial condition continues to be very strong. We are positioned to continue to invest in our business and return value to shareholders in the form of share repurchases and dividends.

And as you've read in the press release, our Board of Directors has approved a new share repurchase authorization for up to $350 million and this new authorization allows us to pursue a more aggressive approach to repurchases.

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

Thank you, Steve, and good morning, everyone. As Steve mentioned, we had a record third quarter supported by broad-based growth and core sales grew by 6%.

Comparable earnings per share were $0.74 for this year versus $0.70 a year ago. Current quarter earnings per share include a $0.01 negative impact for the net effect of tax-related items.

The tax related items include charges equal to approximately $0.04 per share from our legal reorganization in Europe. The impact of these charges was mostly offset by $0.03 per share related to certain foreign tax credits.

Cash flow from operations this quarter totaled $90 million compared to $85 million a year ago. Capital expenditures this quarter were approximately $38 million compared to approximately $39 million in the prior year.

Therefore, free cash flow, which we define as cash flow from operations less capital expenditures, was $52 million in the quarter compared to $46 million in the prior year. At the end of the quarter, on a gross basis, debt to capital was approximately 30%, while on a net basis, it was 15%.

Regarding our share repurchase program, we spent approximately $38 million to repurchase 600,000 shares in the quarter. For the year, we deployed approximately $91 million to repurchase 1.4 million shares. And as Steve mentioned, we announced a new share repurchase authorization of up to $350 million and this new authorization replaces any previous authorizations.

Turning to our quarterly market details by business segment, our beauty and home segment's core sales increased 2% 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 decreased 1%, and sales to the home care market increased 3%.

Our pharma segment's core sales increased 5% over the prior year. Looking at our markets on a constant currency basis compared to the prior year, sales to the prescription market increased 7%, sales to the consumer healthcare market increased 8%, while sales to the injection market decreased 5%.

Our food and beverage segment had a very strong quarter, with core sales up 25% over the prior year. Increases in custom tooling sales contributed 6% to the sales growth, so excluding tooling sales, product sales increased 19%.

On a constant currency basis, sales to the beverage market increased 42%, or 28% excluding the tooling sales. Sales to the food market increased 13%.

Taking a look at core sales, excluding currency effects on a regional basis, Europe was up 1% in the quarter, while the US grew by 3%. And Latin American core sales increased by 20% and Asia was up 29%.

Looking at a few year-to-date figures, year-to-date cash flow from operations totaled $200 million compared to $194 million in the prior year and capital expenditures were approximately $125 million compared to approximately $110 million in the prior year. Therefore, free cash flow, which we define as cash flow from operations less capital expenditures, was approximately $75 million compared to $84 million in the prior year.

Going forward, we expect depreciation and amortization for 2014 to be in the area of $150 million and capital expenditures to be approximately $170 million. For the upcoming quarter, we expect earnings per share using a 33% effective tax rate to be in the range of $0.58 to $0.63 per share compared to $0.54 per share reported in the prior year.

Comparable earnings per share for the fourth quarter -- prior-year fourth quarter -- were $0.60 per share. I would like to take a minute to walk you from last year's adjusted Q4 earnings per share of $0.69 to the $0.60 number, which is comparable to this year's fourth quarter.

So starting with the $0.69 adjusted earnings per share, we estimate that changes in currency rates make up about $0.04 of the delta between this year's fourth quarter and last year's fourth quarter. Concerning the French tax, which was $0.10 in the fourth quarter last year, we need to leave in $0.03, or the fourth quarter's impact, into the fourth quarter, so that's another $0.03.

And then the delta of $0.02 is a net of tax-related items -- positive tax-related items that occurred in the fourth quarter last year that are not anticipated to repeat again in the fourth quarter this year. So all in all, our forecasted effective tax rate in the fourth quarter of 33% is very comparable, then, to the 33% after making these adjustments for last year's numbers.

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

(Operator Instructions) Ghansham Panjabi, Robert W. Baird.

First off, on the new products you highlighted -- for example, the fine mist pump. Can you give us a sense as to how the margins for these are relative to previous new products you've had for comparable products in the segment historically?

Because it seems like your competitors also have comparable products to some extent. So has the margin profile changed significantly versus maybe some of these new products historically?

No, I think -- on our new products, our margins tend to be above the average for new products. That is consistent with what we've had in prior years. And again, we are targeting -- I think it's important that when -- particularly in beauty and home, a lot of these products are for niches and aren't going to come back and apply to 40% or 50% of the overall sales within that particular segment. But overall, margins are consistent and they're generally up from what they were beyond average, Ghansham.

Okay. And then just in terms of the share buyback announcement or the authorization, I should say. Since 2005, looking back, your share count is down about 5 million shares on a net basis, which, relative to your peer group, isn't all that significant in terms of a decline.

Are you signaling a more aggressive phase for the Company in terms of buybacks? Thanks so much.

Thanks Ghansham. Yes, I think -- and again, I've specifically said in terms of my comments, both in the press release and then on this call, we are looking to be more aggressive.

When we have looked our business in terms of abilities to fund from our free cash flow, capital expenditures, potential merger and acquisition activities for us, we feel that the balance sheet has got more ability to come back and do more share repurchase. So we intend to be more aggressive as we go into both the fourth quarter and the first part of 2015.

Okay, thank you.

Mark Wilde, BMO Capital Markets.

I would like to just first follow on on that buyback. Steve, can you give us any sense of what you think the pace of that may look like?

Mark, it's difficult to say. I can -- the only thing it is we've been doing is roughly about 2 million shares in terms of number of share repurchase or that number I would anticipate being up considerably as we start to go back -- looking back over the next quarter and into next year. But right now, I am not -- have be able to come back to give you more detail around that.

Okay. And then my follow on is just in regards to that pharma business, the margin that you put up again this quarter is at the upper end of the range. I know this question has come up before, but what's it going to take so that you can continue to operate at the upper end of that, I think, 23% to 28% range you've given us in the past?

Well, again, I think -- Mark, what we're doing is we still think that the range is 23% to 28% and that depends on the mix of the business. So our -- today, for example, our elastomer business that is in the injectable is at a lower margin, but frankly, at a very significant overall contributor to Aptar.

So if we can continue to generate sales there, it may drive the margin down slightly percentagewise, but overall, profitability will be positively impacted. So we still think that the margins of anywhere between 23% and 20% are realistic for this business going out.

But as you said, we've been fortunate this year, we've been more to the high side, but I can't tell you that that's going to be a long term where we are going to trend for -- from now going out.

Okay, that seems prudent. Good luck in the fourth quarter.

Chip Dillon, Vertical Research.

Yes, good morning, gentlemen. And question I have to start with is on the injection business. And I seem to remember last year, there were some pretty big quarters and I just didn't know if this decline in sales was a result of the tougher comparison or is there something else going on there where you would say you see a slower growth trajectory going forward?

That's a good question, Chip. And what you are correct is that last year, particularly in the third quarter, we had one of our strongest quarters in terms of the elastomer business.

What we've seen is a little bit of inventory contraction and I think that's pretty consistent with we've seen with other companies that are in the sector talking about. So for us, it's tough comps, somewhat of inventory contraction, but we continue to be very bullish on the elastomer part of our business as we go into -- particularly as we go into 2015.

Okay. And then the bridge comparing this year to last year is very helpful. And I know there's some soft issues in the fourth quarter in seasonality, but just taking a stab at least early 2015 -- let's say at least the first quarter.

If I look at these $0.09 of items, I would assume that $0.02 that are kind of the other tax things won't repeat, but if the currencies stay where they are and you still had the French tax, I would imagine that you still kind of have a $0.07 headwind year over year in the first quarter. And would that dissipate by the second half or how should we think about that?

Well, let me give you -- on the French tax. The French tax is already in our first quarter, so first quarter to first quarter, that's already in. You won't see that. The $0.02 that Bob talked about, the kind of the one time, yes, those will actually go away and you won't see those recur.

And currency is kind of who knows. If it stays where it's at today, the first quarter will be impacted, because the dollar has strengthened, particularly the euro. That would -- given the exchange rates that we had in the first quarter, you would still see some negative impact on our earnings in the first quarter.

I see. So the way to look at it is is that the $0.05 that are related to the tax items obviously do not repeat year over year, because you saw that in the first quarter of 2014. So the headwind is a lot less in the first quarter.

That is correct.

Okay.

In rough numbers, your numbers are roughly about -- I would agree with that.

Okay, good. Thank you.

Adam Josephson, KeyBanc Capital Markets.

Bob, just a couple questions on the guidance. One, just in terms of -- given all the adjustments you talked about, would you say the fourth quarter guidance represents a fairly normalized number in terms of the expected tax rate -- any other items, assuming current FX rates stay where they are?

In terms of the 33% tax rate that we gave, normally, we are between 33.5% and 34.5%, given any one quarter. So maybe the fourth quarter, 33% is slightly on the lower side than normal.

On the currency side, it's really a factor of where we project the fourth-quarter earnings, which is at the end of the third quarter, so where spot rates are at the end of September. And that's going to change quarter to quarter.

And you really have to just benchmark against where first quarter was, where fourth quarter was, but definitely looking at the spot rates in September compared to where the fourth-quarter average rates of last year ended up, the dollar's stronger against almost all currencies and negligibly weaker against a couple others, so it's really -- it's a headwind on most of our business.

Got it. And just, Bob, one follow-on on the guidance. So you earned $0.74 in this quarter you just reported. You haven't earned lower than $0.71 in any quarter this year, but you are guiding to about $0.60, $0.61 in the fourth quarter. So how much of that sequential decline is FX and what are the other factors at work?

Because my understanding is the fourth quarter is typically not that much lower than other three quarters, because your business is not particularly seasonal. So I'm just trying to understand the magnitude of the sequential earnings decline in the fourth quarter.

Yes, typically, Q4 for us is a very challenging one to forecast, because you have -- depending on which way things are going macroeconomically, we could have customers pushing out stuff into the following year.

But to address the currency question you asked, if you think about third quarter ended up -- and I'm going to only use -- I'm only going to peg to the euro. We were at about a $1.32 average rate in the third quarter. We're looking at a $1.26 rate for the fourth quarter.

So if you look at last year, $1.36, going from $1.26 to $1.36, roughly $0.04, $1.32 to $1.26, you are somewhere between $0.02 and $0.04 on the sequential side. The rest really relates to really a lot of the macroeconomic uncertainties.

It's a little bit of the anticipated softening that we're seeing in Europe that Steve talked about; it's continued softness in US for the fourth quarter. And again, we are starting to see some slowdown in Latin America. So it's really just due more to the uncertainty.

Let me follow on just a little bit to that macro issue, Adam, because I think we have to take that into context. When we are having discussions with our customers, I would tell you they continue to be pretty optimistic as they going to 2015.

What they are is very cautious around short-term issues, whether that's the effect of Ebola on their business or Eastern Europe or some of these other issues. But when I look to 2015 and I look at the project portfolio that we are working at with across all three of our segments, I would get a much more positive, frankly, overview out as I get into early 2015 as opposed to more cautiousness in the fourth quarter of 2014.

Thanks. Bob, just one last one. So from 4Q from your $0.60 to $0.61 to 1Q 2015, can you remind me -- I think Chip was asking about this, but is there anything unusual in the 4Q number that shouldn't repeat sequentially into 1Q 2015?

Nothing that we are seeing. We would have called that out if we thought that there was something either unusually positive or negative in the snapshot, like we usually do. So no, I don't see anything that's in our projected fourth quarter that's a one-off item that won't be in Q1.

Okay. Thanks so much, Bob.

George Staphos, Bank of America.

A lot of my questions have already -- asked. So I guess my first question would be what drove -- if you can identify -- if you've discussed already and I missed it, I apologize. What drove the growth in beverage in the quarter and were you pleased with the incremental margin you got in food and beverage broadly?

And then the other question I had, more bigger picture, I was just scanning my model here, going back a few years, and earnings have been more or less in the same range, at least back to 2011 in the, call it, $2.50 to high $2 range without much of the slope -- an upward slope.

If we look back over the last few years, what's been the biggest impediment do you think to seeing a little bit better growth out of your business on a bottomline base? Has it been FX, has it been composition, has it been the macro? Thanks.

Thanks, George. Let me -- I will try to deal with the beverage issue in the quarter. We were I think really pleased on the beverage side. And also, by the way, on the food side, which we've been somewhat flattish on food growth over the last couple quarters and we saw good growth coming into the third quarter.

But specific to your question on beverage, what is I think very positive for us was the growth in Asia and Latin America together with both the US and Europe. So it was broad-based growth and it's a reflection of new projects that we've got coming on on those markets and a continued expansion of the business.

I will tell you that we were somewhat surprised at the high level of growth. We're not going to be -- I think it was 19% product side. That is in a continual ongoing quarter-to-quarter growth rate for us, so we had a lot of things go well. People filling inventories, doing whatever, so that was a positive coming back.

In terms of the growth rates, we've had some impacts that have been challenging if you look back over time that I think we're not going to be seeing as we going into 2015. Some of those have been -- we'v4e started up two facilities in Latin America that had some negative impact on us.

We did some restructuring in Europe; we are now starting to see the benefit of that. We are putting in some restructuring in North America that will impact, starting already a little bit in the fourth quarter, but having a very positive impact on beauty and home we see in 2015.

So if you come back -- those are the encouraging things that we see going into 2015 and we tend to be pretty cautiously optimistic about 2015 as we look forward. And we are -- Bob and I are just now going through all the budgets, getting -- as we getting a first look at what our expectations are for next year.

Just the related points there. I had asked about the incremental margins in food and beverage. Were you pleased with them and could we continue this going forward?

And on the restructuring answer to my other question, are you suggesting that it takes you two, three years to get a benefit from restructuring, since we are already stripping out the restructuring from earnings? Thank you.

Again, I think on incremental margin, we were positive coming back in terms of what we got. More, we're going to leverage off of those. We will actually see that increasing, if we get that kind of a bigger pop in the future. But overall, I still was saying we are pretty positive about where the margins were.

The question on the restructuring, what you've got is you actually have restructuring in Europe that we are seeing some of those. That was offset, frankly, by some weakness that we've seen in the US.

So unfortunately, we did get to see some of the restructuring savings and we saw it within the timeframe we were looking for. Unfortunately, within beauty and home, it got offset by some weakness we saw in the US, so it didn't translate to bottomline growth. Again, from our perspective, we look to be more capitalizing that on 2015 as we get North America straightened out.

Thank you.

Al Kabili, Macquarie Capital.

I just wanted if you could, maybe, Steve, just expand a little bit on the commentary of seeing a bit of weakening in Latin America and Europe in certain markets. Where specifically?

I assume that's in beauty and home? And maybe just the size of that weakening? Dramatic or just incrementally. Give us a sense just on the sense of the direction of the trajectory there. Thanks.

Okay. Again, I think if you looked at it, Al, it tends to be -- when we saw weakening, I think it's more cautiousness with our customers. And actually, it's consciousness across all three segments. It's not just one.

Now let me take Latin America. Certainly in Latin America, our beauty and home is our predominant segment selling there, so what you've -- come back, if you looked at the election in Brazil or what's going on in Argentina, there's just more conservative -- conservativism on our customers as they are launching products and selling products.

So if you saw in the third quarter, we had a very strong Latin America third quarter, so I think it's reflection -- boy, I'm not -- a little bit of our customers are going, I'm not sure what's going on in terms of what the fourth quarter is going to bring.

When we look to Europe, again, we've had a very strong first three quarters in Europe. We've done well, particularly against the overall macroeconomic, but things have slowed down in Europe.

And I think there's a question -- Europe gets also influence from our customers as they look to Eastern Europe, which is an indirect indicator for us, as they ship product into the Ukraine or Russia. Certainly, those type of products have been slowed somewhat. And while it's difficult for us to actually quantify that, we're also feeling that in some of their projections until they get that region stabilized a bit more.

Okay, that's helpful. I appreciate that. And then I wanted to follow up on beauty and home, which has kind of been the drag and offsetting some of the growth you are seeing in the pharma and the food and beverage side. And then you highlighted earlier the drag from the US side and the startup costs in Latin America on the two facilities.

Do those -- do you feel like those headwinds -- will you lap those and we can start to see growth, all else equal, next year because of that? And related to those startup costs in Latin America, do we need volume to absorb the fixed cost or is it more of an operational thing at this point, especially given the slowing we are starting to see in Latin America? Thanks. Appreciate it and good luck.

Thanks. Again, I would tell you I think overall, we are positive about where beauty and home is going, particularly as we get into 2015. You mentioned a couple of the things.

I think the startup costs we will start to lap. Certainly, volume is a big impact to there in Latin America, but we are going to be no worse than we were in the first quarter, so in effect year on year, we should see growth.

And right now, those startup costs have gone from over $1 million per quarter down to around $600,000 to $700,000. So I think we're going to start to see the benefit of that new facility.

Again, in Latin America, what I would stress is that it's not that we are seeing no growth, it's just a reduced level of the growth we've seen in the past. The US going into 2015 -- what we're doing, I'm convinced we will start to see impact as we get into even the fourth quarter, but particularly as we going to 2015.

So -- and our customer outlook is the last area. The customers that I've talked to are still pretty bullish about 2015. So we are right now very cautiously optimistic that we will see improvements in beauty and home as we get into next year.

Okay, thank you very much. I appreciate it and good luck.

Chris Manuel, Wells Fargo Securities.

Couple questions for you. Along the lines of startup costs, where you are just walking through how that's been moving down. I know both of you hate talking about out quarters and thinking about first quarter, second quarter beginning of next year, but as you start the Stelmi facility up, do you have maybe a gut feel for what you think startup costs will be?

If I think back to previous times and you've had pharma startups, they tend to be a bit higher, usually a couple million a quarter. But is that a reasonable ballpark to think about Q1, Q2, Q3 next year of a potential headwind?

You know, Chris, as Steve said, we are -- we still are just now getting into the 2015 budget, so I will know a little bit more in the coming weeks on that. I don't have a good estimate for it.

I think it's reasonable to assume that heading into 2015, we will see some slight increase in the structure cost. But remember, a lot of that -- that additional capacity is going to be coming onstream early in the second half of the year.

And then we will be validating it with customers, so it will be a while before we are actually selling through some of that. I can't tell you right now the timing of when some of the adding of the costs are going to be in until we get a better look at where the budgets are.

That's helpful. Two other housekeeping questions. One, if we were to peg currency where it's at as we sit today, the headwind over all of 2015, if I did my math, is probably in that $0.08 to $0.11 range. Does that sound about right?

Again, it's hard until I can see the mix of where the sales are coming from next year. What we can -- what we can try to do is model this year's once we get fourth quarter's in, but we have to really wait to see where it is.

I can't really tell you how close that is. It sounds to be close in the range, but I won't know until I see where the mix of the sales by countries are going to be.

Okay. Last housekeeping question was CapEx came down about $20 million. Is that kind of a slide or is that a -- maybe adjustment for currency?

No -- well, it's a little bit on the adjustment of currency, but very little in the third. I think the fourth is going to be more currency-related and then some of the Stelmi -- actual cash expenditures related to that will be leaking into 2015. So it's a better view at this point of where we think the capacity on the actual cash spend -- where it's going to fall.

That's helpful. Thank you.

Debbie Jones, Deutsche Bank.

Could you guys talk about the cost-saving efforts in the US that you mentioned and just maybe what type of potential benefits you are hoping to achieve from this?

When we talked at the analyst day, when we had that back in September, we had estimated that those costs will be $10 million or above. They are coming from three different areas.

It's some labor savings that we're going through and we are implementing some of those today. It's taking a look at some of the products we have and eliminating some of the unprofitable products. And also tactical price increases.

So is coming from those three buckets. That process is well underway as we start now and again, the biggest benefit we will start to see is that as we get into 2015.

Okay, that's helpful. I wondered also if you could just -- I know you referenced a little bit here about trends you've seen recently, but have you seen a meaningful shift from September to the first 30 days in October and just how concerned do you think some of your customers are about the impact of Ebola and travel concerns on your beauty and home business in things like fragrances and things like that?

Again, if I look to the fragrance business, there's a lot of on the prestige side, and frankly, we've seen that earlier. We have actually had a very good year in our beauty sales up through the third quarter. I think we're up 6% overall on a worldwide basis.

I think what I'm seeing, Debbie, is less reduction in -- right now, it's more cautiousness in placing orders. So we haven't seen anybody backing off orders that they've placed with us, but they are cautious about what orders they're placing.

So the mood, I think, has turned a little bit more cautious rather than pessimistic and that's been balanced by people that -- again, almost with every customer saying. That being said, we are looking for a pretty good 2015.

Okay, thanks. That's helpful.

Jon Andersen, William Blair.

Hey, just a point of clarification. As you have talked about the fourth quarter and some incremental weakness in Latin America and Europe, I'm assuming that that is -- that's based on macro concerns. Is there anything Company-specific or share-related there or are we just talking kind of caution on behalf of some of your customers, given the macro backdrop?

I think, Jon, it is definitely macro. In fact, I would say right now, we are at or above market share positions that we've been in the past. So we continue to do well in terms of markets that we are selling.

It is definitely macro from our customers on what they are doing. And I think if you look at customers like the Walmarts of the world, you just get people that are out there being cautious as they look forward and I think that is reacting back to the Procters and the L'Oreals and guys that we sell to.

Thanks. This may be a little bit of a stretch, but I'll ask it anyways. Procter is shedding quite a few brands and we are hearing about significant cost-saving efforts by other manufacturers, your customers, in the consumer staples arena, given the tough demand environment.

Does the M&A or the brand divestiture activity help or hurt you, number one, or is it kind of -- are you agnostic to it? And then in terms of just cost-saving efforts by some of your customers, does that tend to trickle down in terms of pricing pressure or potential less new product activity?

The brand has a double impact for us. One, if they sell the brand. Whoever buys it typically tries to re-energize the brand. So for us net net, that actually might prove to be a long-term plus.

If Procter decides just to get rid of the brand, in theory, that should level itself out in customer behavior to other brands, either within Procter or someone else. So net net, I would say that we probably view this as neutral to positive.

In terms of price, it's always been a challenging price market. Certainly, as all of these customers look at price, they are going to challenge us on the price. But I would point out that they are also looking for product differentiation, which is as critical as reducing just the price of the product, is how can they end up changing the product to make it more acceptable to all of us as consumers. So we tend to benefit from the second and we continue to get challenged with the price on the first part.

That's great. Great color, thanks. Just a last one for me. Oil prices have turned down quite a bit here as -- does that work its way into resin prices or how do you think about that maybe impacting your cost structure during coming quarters? Thanks.

Okay, Jon, let me give you a little bit of what's happened that we've seen in terms of resin price. Again, polypropylene is the biggest resin that we use worldwide. If you look at polypropylene prices in terms of the Indexes, in the US, we saw a price increase of $0.03 to 0.05 a pound based on -- depending on what the Index is at -- in the month of October, relatively flat in Europe in the month of October.

And then the projections are that November and December, both markets should see decreases. Depending how quick and how fast they come, that should be a net positive for Aptar, because there is a bit of a time lag as we pass the decrease.

The big challenge is is when those price decreases -- if they do come about, when do they come about? Is it late November, mid-December, when they are going to come through?

Great. Thanks, guys, and good luck.

Jason Rodgers, Great Lakes Review.

Looking at the North American plan restructuring, did you give any detail as far as the size of that restructuring and potential benefits?

Well, again, the benefits we see to be around $10 million. The cost of that is actually relatively low and it's already included in the numbers. There is no -- it doesn't have the significance that we had in Europe a couple years ago.

So again, it goes across both pricing issues, rationalization of product, as well as taking a look at our internal cost structure. So we have actually started that process, but again, the gross number for that is a $10 million-plus number that we are looking for.

That's $10 million in savings for the full year 2015?

2015 -- it would be more of a 2015 look by the time it gets implemented. So it would be savings -- as both topline as well as savings. It's a combination of both of those, Jason.

And then I know it's early in the budgeting forecasts, but any early thoughts on CapEx, at least directionally compared to 2014, as well as the tax rate?

Tax rate -- again, I would probably anticipate next year to be in that 33.5% to 34.5% rate. In CapEx, we've been trending slightly above D&A the last few years. Again, we're going to take a look at it on a project-by-project basis.

Our starting point is always slightly below D&A and based on what we see as opportunities out there in the market will dictate the number that we will forecast coming back into January.

Speaking of opportunities, you mentioned your product portfolio that the positive forecast for that for next year. Is that broad-based or are there segments that you think will really benefit from that?

Well, I think it's broad-based. That's what I think is encouraging as we start to look out. If I look at our pharma segment, we've seen excellent growth this year. You just saw that our food and beverages had good growth.

We see both of those continuing. And frankly, our topline growth in our beauty and home has been 4% for the year, so again, when I look at that, it's not been a sales growth issue for us. It's been more of making sure we get the margins coming out of the business. So right now, again, we tend to be cautiously optimistic across all three segments going into 2015.

Thanks a lot.

Brian Rafn, Morgan Dempsey.

Give me a sense -- Steve, you talked a little bit about being fairly positive about your pipeline going into 2015. Given the size, the scope, the constitution, the mix of that pipeline, what chance, if any, is there if the muted caution of the fourth quarter bleeds into 2015 that some of those projects could be delayed or stretched out or maybe volume shrunk. Or are those things pretty much booked and locked?

I think there's always -- there's always a risk that there will be a slowdown to that. Now again, some of those projects are still fairly far long, but I would tell you if there's a dramatic issue that's out there or that you have some other event, our customers are going to end up reacting to offset those.

So I don't view it as a high risk, but there's always a risk, Brian, that someone is going to pull back on a project that they wanted to launch in January, February, and make that later to see what's happening economically.

Yes, okay. Give me a sense -- you talk a little bit about maybe the cosmetic and the perfume fragrance area, you mentioned a little about prestige. How do you see that market, being that all of the holiday Christmas stuff should be bought? What do you see for Christmas holiday 2014?

Again, I can only give you anecdotally from the discussion with the customers and what I'm seeing here little bit in the US and discussion in Europe. Overall, the Christmas season is at least projected to be relatively good.

And actually, this currency issue for some of the prestige guys, where the euro has weakened, actually helped some of our customers as they distribute their product outside of Europe, if you are a French-based perfumer.

So I think, again, we've had a good beauty -- sales to the beauty market are up 6% on a year-to-date basis through the first three quarters, so I think we've got our customers relatively optimistic about where Christmas is going. And we will see if we get any emergency backorders to fill some of those as we get into late this year and in particular, early part of next year.

Okay. And then on -- back to your pipeline, Steve. Any sense of changes versus the last few years in the size of projects? Maybe the unit volume to launch is geographic, whether be more regional, national, or international? And would you say the pipeline is more smaller projects or fewer, but much larger projects?

I think the trend that we've seen, particularly over the last two to three years, is continuing. So I don't think there's much change that we've seen over that. There are -- and again, it's very dependent on the customers. Some do much more over worldwide launch; some start products and go region to region, and it's very different.

And again, what we're talking about is much more beauty and home here as opposed to food and beverage and pharma, which tend to be heavily more regulatory or more regional based. But there hasn't been, Brian, a big change from that over the last two to three years in terms of launch volumes, etc.

Yes, okay. And I have just one more. Steve, a lot -- relative and primarily on the consumer products, maybe the hygiene and the personal care area -- has been this redesign of product, where you used to get 16 ounces for $2.69 in shampoo. Now you get the same container, same color, same shape, but it's now 12 ounces.

Are you still seeing a lot of that shrinkage in volume for the same price? It's kind of an embedded inflation.

Well, I mean certainly -- it's again, what we're seeing from our customers is package size, they differentiate. And generally when they are differentiating, you are getting less product in the containers.

So that trend, from what I'm seeing is -- or at least as a business, we are seeing that, again, in beauty and home and a little bit in the food and beverage side. But yes, I think that trend, you are going to still continue to see that through 2015.

All right, guys. Have a good holiday. We will see you. Thanks.

Mark Wilde, BMO Capital Markets.

Yes, just a couple of follow-ups. Steve, I thought in your comments at the start, you mentioned something about the US changing dramatically recently. Did I misread that or -- can you just clarify?

I apologize if I maybe misstate that. What I said was I didn't see the US changing dramatically. So it's not going up or down. So in effect, I do think we will see a slight improvement, but it's not going to be something that's going to be material, Mark.

Yes, okay. That's very helpful. And secondly Steve, just going back to Stelmi, I think when you acquired them, part of the idea was that you were going to be able to expand that business and take them into markets where historically, they hadn't been regionally.

So you buy a number three player and really expand their footprint. How successful do you feel like you've been with that strategy and is that a good template for your pharma and healthcare business going forward?

Yes, no, I think right now, we are just starting to begin to see some of the fruits of that. Now having it back in, particularly when you get into regulatory markets like the Stelmi, the elastomer business, you need to get qualified.

But given Aptar's worldwide presence, we're having a lot more opportunities in Asia and in the US and outside of kind of the Stelmi footprint.

In addition, we continue to look at do we have to supplement -- not full manufacturing, but even partial finishing for our elastomer products in regions outside of Europe. So the base that we're going to do with the expansion with Stelmi is going to give us a great base to be able to take this business and make it much more worldwide.

So again, I -- the strategy that we put in place and we thought about, we still continue to feel very positive as we go forward.

Would you say it's a longer ramp-up than you might have expected initially?

No. In fact, I would tell you that what we were surprised at was how quickly our products, particularly over the last year and a half -- even prior to 2014 -- ramped up. Again, we were -- being in the regulatory business, Mark, it's a difficult long-term side.

But what I am very encouraged with is the number of new projects that we are working on that, frankly, I don't think Stelmi would have been working on if there wasn't an Aptar ownership of that.

And when would you think, Steve, we should start to really see some fruit from this?

I think you're going to start to see the big one is we will get the new plant done as we get through the middle of 2015. We now need to get qualified by customers, so it's probably a late 2015 into 2016 before you start to see some volume -- some substantive volume increases.

Okay, that's helpful. Thanks very much.

George Staphos, Bank of America.

I will ask them in sequence, since we're late in the call. First, the obligatory -- any change in rate of competition in any of your markets that you'd want to call out?

Secondly, given the recent news on health concerns around the world, have you seen any kind of pickup in any of your products that are aimed at hand sanitizer, recognizing you are not the largest guy in that market?

And then lastly, Steve, last time we visited, you had talked about multiples being a little bit higher than normal. In fact, perhaps somewhat peakish on private deals. Has that market at all calmed down or are you still seeing the same level here? Thanks and good luck in the quarter.

Thanks, George. Let me see if I can come back. I will try to deal with all three of them. On the competitive side, I don't think there's been a substantive change in terms of where competition is.

It's been a -- we deal in a competitive market. I think we have great products and we can compete very effectively in those markets. So I don't see anything in the competitive landscape that's changed substantively for us.

In terms of the healthcare market, you're right, we are starting to see -- and again, this is very early. When we got into N1H1 several years ago, the hand sanitizer market picked up. Lotions picked up.

I think you're going to see an increase to that. I don't think it's going to be a needle mover for us and we're still early on as to what that's going to do. And we will have to see how that impacts in terms of our other pharma sales, if there's anything there.

I hate to say this, but at least in the short term, the Ebola issue through that is probably more of a positive than a negative, if it stays where it's at today.

The last one in terms of multiples, they tend to -- the multiples that we've looked at for M&A are a bit -- have been a bit elevated, but actually have come back maybe a half a turn or so since we were talking three or four months ago. So I think they're starting to become more aligned in terms of what we would -- that would make sense for us.

Thanks a lot, guys.

Adam Josephson, KeyBanc Capital Markets.

First for Steve, Steve, this might be a bit of a stretch, but other packaging companies have been talking about lower gas prices potentially being a significant benefit to spending in the US.

Do you buy into that? Your comments seem to suggest otherwise in that you are saying you don't expect much of a pickup domestically, but just curious as to your thoughts on that.

And obviously, GDP growth here has been quite good, but we're just not seeing it on the consumer side and haven't been for some time. Do you have any thoughts as to what accounts for this seemingly growing disconnect between the two?

It's hard for me to relate to what the other packaging companies are seeing, but what I've tried to do is go to our customers, and if you look at Procter & Gamble or Unilever or some of the retailers like Walmart, I don't think you're seeing huge -- at least up to this point, huge pluses. I would tell you that my personal feeling is that lower gas prices should help.

And I think maybe that comes back a little bit of the feeling that Christmas maybe of a better Christmas season than we've had in a couple years here in North America. So on whole, lower gas prices have to help us, but again, I still think our customers -- at least the ones that we're talking to -- are still cautious. So I don't think they are ready to bet the farm yet.

Got it. And just one on beauty and home. Fourth quarter of last year, margins were fairly low, at 6.3%. Do you expect them to be down year on year this quarter or are you expecting some improvement there?

Right now, we're coming back. I don't see huge improvements coming back in the fourth quarter. Most of the improvements we're going to see in margin are going to be 2015 based.

So I would say that we are hoping to be at or above last year's level and not substantial -- but it's not going to be a substantial issue. So we will end up seeing where those go, but it's still too early to tell where the quarter is going to end up.

Thanks so much, Steve. Appreciate it.

I'm not showing any further questions at this time. I'd like to turn the call back over to Mr. Hagge for closing remarks.

Thank you very much. This concludes our call today. I wish everybody a happy Halloween and I would like to thank everybody for joining us. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.