Aptargroup Inc (ATR) 2018 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to AptarGroup's 2018 First Quarter Conference Call. (Operator Instructions)

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

Thank you, Kevin, and welcome, everyone. Participating on the call today are Stephan Tanda, President and Chief Executive Officer; and Bob Kuhn, Executive Vice President, Chief Financial Officer and Secretary. Stephan will begin our call with a brief overview of our performance. Bob will then discuss a few financial deals and turn it back over to Stephan before we 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 Aptar'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 Aptar undertakes no obligation to update the forward-looking information contained therein.

I would now like to turn the conference call over to Stephan.

Thanks, Matt, and good morning, everyone, and thanks for joining us today. I will start with some general comments about the quarter, and we'll then move to Slide 4 of the accompanying presentation to provide an update on our business transformation. Then I will turn it over to Bob.

As you saw yesterday, we reported a positive start to the year, with a strong first quarter. Sales growth was robust, both on a reported basis and on a core basis after neutralizing for currency effects. We also had corresponding strong bottom line growth. Each business segment achieved core growth at/or above our long-term growth targets.

Our Beauty + Home segment achieved core sales growth of 8% in the first quarter, thanks to increased demand for our innovative dispensing solutions, especially in our 2 large markets, beauty and personal care. Demand was broad-based across our different end markets and geographic regions. We are seeing increased demand in both large and small accounts so the general underlying current is positive.

Let me give you some examples. In the quarter we helped Walgreens Boots launch a new global facial skincare boost serum, with a successful brand No7 that features our Airless serum dropper. Uriage brand selected a different airless solution, with an integrated lockable, on-off system for its global launch of a new skincare line called Age Protect.

In the North American home care market, our spray accessory and valve are featured on a new Clorox -- on the new Clorox Scentiva Bathroom Foam Cleaner, and our dual-action spray trigger accessory and valve were selected for a new insect control product called Zevo by P&G.

We are early in the implementation stages of our transformation. The growth we are seeing in the quarter is clearly a result of market-driven growth, with some added benefits and positives coming from our transformation initiatives.

Profit margins in the segment improved over the prior year but were negatively impacted by rising raw material cost.

Our Pharma segment had another excellent quarter, with core sales growth of 6% in the quarter. This business continues to benefit from strong demand for our leading drug delivery systems, and the aggressive flu season in the first quarter helped to drive demand for our nasal spray and saline systems.

Our spray systems with bag-on-valve technology was used on Zarbee's soothing saline nasal mist in the U.S. Also, in the quarter, our ophthalmic squeeze dispenser was featured on Bio Canada's, new hydraSense allergy therapy eye drops and our Advanced Preservative Free dispensing system is found on a new moisturizing eyelid spray for CVS in North America.

In the U.K., our metering valve was chosen by Cipla for their Seroflo treatment of asthma and COPD.

Our Food + Beverage segment had a strong first quarter, with core sales growth of 10%, helped by an increase in custom tooling sales. We continue to expand and grow in newer categories like infant nutrition and premium bottled water while growing our market share in key mainstay categories like condiments.

In the food market, our custom closure had featured on a new DanoneWave coffee creamer for the North American market called Left Field Farms. In China, our custom solutions are improving the customer experience for infant nutrition products from Yashili and from Yili and our beverage sport closure was chosen for a new flavored soda water by [Lingwu].

If you now look to our presentation slide deck that was posted on our website, I'd like to turn to Slide 4 which provides a brief update on our business transformation. The initiatives we are putting in place are beginning to gain traction, including the execution of commercial excellence initiatives, manufacturing and supply chain efficiencies and purchasing savings. We expect our benefit to lag our implementation costs, while we're doing this a bit, a gradual ramp up in benefits over the next 12 to 24 months.

We remain focused on executing our strategies across each of our businesses to ensure that they will achieve our long-term financial objectives and position the company for success for many years to come.

We are also looking at current market trends, and we react accordingly. Similarly to what we have done in recent years in Latin America, we are recognizing increasing inflationary environment in the U.S. and in Europe, and are implementing price increases in the coming months, in addition to our normal resin pass-through mechanisms.

Last but not least, I continue to be impressed by our talented people and their drive to help our customers win with our broad portfolio of differentiating dispensing solutions. We operate in attractive markets and have a proven ability to generate strong cash flows. Our balance sheet remained strong, and we will continue to seek out opportunities that generate value.

With that, I will now turn it over to Bob, who is going to walk through some of the financial details that impacted the first quarter. Afterwards, I will come back and close out our prepared remarks. Bob?

Thank you, Stephan, and good morning, everyone. I'll briefly walk through some of the details concerning our first quarter results. If you're following the slides that accompany our remarks, you can refer to Slide 5.

We reported excellent sales growth of 17%. That was comprised of solid core growth of 7% and positive currency effects of 10%. Before I speak to the segment and market results for the quarter, I wanted to mention that custom tooling sales, while not overly significant to our consolidated results, can directly impact the quarterly sales growth rates in our different markets as they did this quarter, and I'll speak to those when I review growth by market.

As you saw in our press release, Beauty + Home core sales, keeping currencies constant, increased 8%. When we looked at profitability, our Beauty + Home segments adjusted EBITDA margin improved to 14%. This was despite negative impacts from the timing of passing through higher raw material cost of approximately $1 million compared to the prior year.

Looking at sales growth by market on a constant currency basis, core sales to the beauty market increased 11%, primarily driven by strength in the facial skincare, fragrance and color cosmetics markets. Core sales to the personal care market increased 6% due to increased demand in the body care and cleansing markets. Core sales to the home care market were flat compared to the prior year, due primarily to lower custom tooling sales. However, product demand increased across a wide variety of end applications.

Our Pharma segment achieved the core sales growth of 6% and an EBITDA margin of 35%. Core sales to the prescription market were even with the prior year, primarily due to lower custom tooling sales. Demand for our drug delivery systems increased and was particularly strong in the central nervous system and asthma and COPD therapeutic areas. Core sales to the consumer health care market increased 17%, driven primarily by increased demand for nasal sprays for decongestants and saline rinses.

Lastly, core sales to the injectables market increased 9% as demand was strong for our injectable components, primarily used with vaccines.

Our Food + Beverage segments core sales increased 10% helped by an increase in custom tooling sales and increased demand for our innovative dispensing and sealing systems. The segment reported an adjusted EBITDA margin of 13%. Margins were negatively impacted by the mix of products sold and the timing of passing through higher raw material costs of approximately $1 million.

Looking at each market. Core sales to the food market increased 16%, primarily due to increased custom tooling sales. Demand for our dispensing closures and sealing solutions increased in the infant nutrition and condiment categories.

Core sales to the beverage market were even with the prior year, in part due to lower custom tooling sales and weak volumes in China. However, we did see an increased demand in the bottled water and juice categories.

Comparable adjusted earnings per share, excluding the business transformation initiatives in the current period, totaled $0.99, and this compares to the $0.81 reported in the prior year and to the currency adjusted $0.90 in the prior year.

On Slide 6, we can see that our adjusted EBITDA for the first quarter rose 17%, and this included positive effects from sales growth, currency translation and efficiencies, which were partially offset by negative headwinds from the timing of our pass-through of higher raw material costs as well as higher corporate costs.

Moving to Slide 7. I can provide an update on the U.S. tax reform. Based on recent new interpretive guidance, our present understanding regarding the limitation on the utilization of our foreign tax credits results in an increase in our previously estimated effective tax rate. We've used this updated rate in both our first quarter results and our second quarter EPS guidance.

Turning to Slide 8 and our outlook. We are expecting earnings per share for the second quarter to be in the range of $0.99 to $1.04, using an expected tax rate range of 30% to 32%. This compares to the current Street consensus of $1.02, which according to our information is mostly based on an effective tax rate of 28%.

Our guidance range compares to prior year reported earnings per share of $1.01 and prior year currency-adjusted earnings per share of $1.08. Prior year's reported effective tax rate was approximately 18%. Had prior year's results been tax affected at our current guidance effective tax rate range, prior year earnings per share would have been lower by approximately $0.16.

I have a few other details to share, and then I will hand it back to Stephan. Cash flow from operations in the quarter was approximately $50 million. Capital expenditures were approximately $40 million, and our free cash flow is approximately $10 million compared to $6 million a year ago.

Looking at our balance sheet capitalization on a gross basis, debt to capital was approximately 47%, while on a net basis, it was approximately 27%. And we remain slightly over 1x levered compared to our trailing 12-months adjusted EBITDA.

At this time, Stephan will summarize the key takeaways from our remarks today.

Thank you, Bob. So in closing and as noted on Slide 9, I'd like to sum up our key takeaways as follows: first, it's been a positive start to the year, with core sales growth across all segments; second, our business transformation is progressing well, and we are gaining traction on our initiatives; and third, while we have a higher ongoing effective tax rate, we expect our good momentum to continue and have a positive outlook for the second quarter.

With that, I would now like to open up for your questions.

(Operator Instructions) Our first question comes from Debbie Jones with Deutsche Bank.

Our next question comes from Jon Andersen with William Blair.

I wanted to ask first, just a bigger-picture question. Your customers, many of which are consumer -- branded consumer products companies as well as private label operations, are having difficulty raising prices to offset some of the inflation that they are experiencing in the system, whether it be freight and warehousing, certain ingredients. And I guess, what I'm trying to understand from your perspective, how this, if at all, impacts you as a supplier to many of those companies your ability to price to offset resin movements, et cetera, whether that's just something that's kind of baked into your arrangements and nonnegotiable, or if there are kind of other considerations here as well? And Stephan, I know you mentioned some pricing in your prepared comments. I'm not sure if that's in certain product areas or certain geographies. But if you could talk a little bit just broadly about the pricing backdrop, what you're experiencing and where you think you can take price if you can?

Sure. Look, I think everybody who's following the current environment sees inflationary pressures coming, and there's no way to escape that. We are clearly putting our foot forward and making sure that we pass on not only the increased raw material from a polymer point of view, which by and large is contractual and is an automated mechanism and that's no different now. But also the additional increases that we see come to pike, whether it's other materials, metals, freight, packaging and other inflationary increases. And of course, each situation is different. But as you know, we are serving a very broad set of customers in different markets, and each negotiation is by itself. But clearly, we are growing across the board, and the magnitude of the increase is different by segment and so on. But clearly, these price increases will happen. And that's just the current reality.

Also had a question about the nature of your customer set. It sounds like you're making good progress with large customers. I know there's been a focus on maybe upping your game with smaller customers, smaller brands that seem to be growing faster in the current environment in many cases. Is that the case? Can you talk about some of the efforts that -- and results you're getting with, with kind of smaller may be more rapidly growing customers? And do you have to serve those customers as there are different go-to-market strategy for those customers? And can they be as profitable, just given that you're probably dealing in kind of smaller volumes?

Okay. Yes. Maybe let's step back for everyone's benefit. So our overall approach is that the -- we are strengthening the regional market and business teams by giving them the resources and the authority and the accountability to win the business in the regions with the large accounts, small accounts, whatever is appropriate for their environment. Indeed, we've been very happy to see that the large customers are growing again and certainly, contributed to the quarter. But actually, smaller customers are growing faster. And we saw a good growth on not only in the big regions but also, for example, Latin America has very good growth also with smaller customers. So we think this is paying off. And I know it sounds simple, but it isn't. It's just simply going where the growth is. And we are -- have adjusted our structure so that we can go where the growth is. And to your question on profitability, that's really a multi-faceted question. I think sometimes smaller customers, independent brands with a premium offering where that can accommodate a higher price that more than offsets any inefficiencies for smaller lot sizes, sometimes -- not sometimes, we go through distribution and often, we go -- also, go direct particularly, when it seems like a winning player who will become large pretty quickly or might be brought up by a larger player. So I wouldn't say that the smaller customers are less profitable, not at all. And certainly, the very large customers have a different negotiation power. So there's no rule of thumb here. Maybe to anticipate another question, the resources we are adding to the regions and to the smaller business teams, of course, we are largely deploying resources that have been held at global, where they maybe where -- had been less effective and are now more focused on the business at hand, which is fueling some of the growth, although it's still early days in the transformation.

Very helpful. One quick follow-up, I think, maybe more for Bob. What was the tooling contribution to the core growth in the quarter overall? Yes. I'll just leave it at that.

Sure, John. Overall, it was flat on a consolidated basis. It was down in Pharma and it was up in Food + Beverage. And it was relatively flat to slightly down in Beauty + Home. But on a overall consolidated basis, it was essentially flat.

Our next question comes from Debbie Jones with Deutsche Bank.

I wanted to ask -- you actually just mentioned adjusting where the growth is. And I'm assuming you might -- you're just focusing some of those smaller customers or where industry trends are, can you clarify that? And then just what you have to do? Or how hard is it to make these adjustments? And then I have a follow-up.

Debbie, look, it is really depending on each segment and geography. And all we are doing and it sounds simple is to look much harder, okay, in which geography, in which segment, which customer set we're going after. So we've done a much more thorough job in segmenting our customary base and making sure that customers we haven't served, we are going after and good opportunities. And in other cases, we adjust our resource level that is commensurate with the opportunity. And clearly, from a macro point of view that also means deploying more resources in high-growth economies, by and large. But it's not an all -- one-size-fits-all, again, depends on the segment. So we put more into infant nutrition in China or more into the color cosmetics area in Asia, and maybe less in some other markets and for sure, less at the global level.

Okay. And then just one more on volumes. You mentioned I think Brazil being strong. Any other regions that you would call out driving above trend growth? And then you've also been putting these incentives in place and the accountability with your teams. How much of that do you think has been driving some of the growth you see in the last couple of quarters?

Debbie, this is Bob. So I'll take your kind of regional growth question. So really it was pretty widespread on a consolidated basis, with the exception of Asia. On a consolidated basis, both the U.S. and Europe were up 7% core and Latin America was up 20% core for us. And as I mentioned, Asia was flat. So again, even within Asia, though we were up in Beauty + Home and Pharma, but down in Food + Beverage because of the Chinese beverage customer we mentioned. And Stephan?

Yes. Maybe just to add to Bob's point. Certainly I would also highlight the consumer health care in North America has very much benefited from aggressive flu season and it certainly had above-trend growth in quarter 1 that contributed. Now to your second question, clearly, what we're seeing is a tremendous increase in ownership, entrepreneurship drive of the regional teams. How much of that is attributable to just the empowerment and the more -- the increased freedom to operate they feel as opposed to the incentive? I think that's hard to quantify.

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

This is actually Molly Baum sitting in for George Staphos. My first question is on the beverage closure trends in China. I know this trend's been a lingering one. Should we expect a stronger trend at some point? And why or why not, if you can comment?

Yes. Molly, to be perfectly honest, this is a bit of a limited visibility situation. It is one single large customer, a good customer. We continue the good business with them. Clearly, Q1 has been lower than prior year. If you exclude that, the rest is growing like by leaps and bounds. But of course, it's a big thing to include. And certainly, when I talk to my people, we never exclude anything, and the bottom line performance is what counts. But we thought we had lost it. Looks like Q1 was not as strong as we had hoped and the visibility is -- continues to be limited. Again, it's a single customer, dual-source situation. And you have demand volatility and you have sourcing volatility of the customer.

Got it. And then my next question and then kind of the related follow-up are on the Pharma segment. So the first half of that is, do you think you're gaining share in injectables? And is this the type of market where competitors can respond to share trends? Or is it more driven by the product pipeline? And then my related follow-up, is there a way to either qualitatively or quantitatively to size the Pharma backlog that you have right now?

We really don't think of it as a gaining share. One is please remember that this is still a small part of our Pharma business, about 20%, and we are a small part of that industry. And any given quarterly volume trend is more driven by what projects we are in, what projects come online. And -- but certainly, we had a good quarter in injectables. Overall, backlog is hard to describe but certainly, we feel good about the momentum in the pharma business. Clearly, it's a long cycle business. So changes in trends happen over years, not over quarters.

Yes. And I would add that the backlog remains strong. But I mean, due to confidentiality, we wouldn't ever be able to give you size and potential in that without breaching confidentiality with certain customers. So I'm not sure how meaningful that would be. But the backlog, overall, in terms of number of project remains strong.

Our next question comes from Ghansham Panjabi with Robert W. Baird.

I guess, first half on Beauty + Home. It's been a very long time since Aptar reported such strong growth numbers and clearly, the end markets are also better based on comments out of your customers publicly. Can you touch on how the organization is responding to this increase from a productivity standpoint given the inflection in growth? Any bottlenecks in manufacturing, et cetera, that you see, just curious as to your perspective on the incremental margin that at current, in the context of your transformation initiatives?

Well, maybe I'll take the big picture and, Bob, you can add. I mean, look, any team that hasn't been winning for a while and starts winning feels very good. So it's certainly from a momentum and reinforcement of what we're doing with transformation, this is really helpful to the team. People are working very hard under the new cadence and the new commercial excellence systems. And to put a few wins on the board is positive for the organization. The nice part about this business is the capacity increment tends to be very small. So it's not that you have large expansions that you need to do, but you might add another press here and a bigger mold there. And so we are able to accommodate the increased demand. And in addition, of course, it does help productivity gains.

Yes. And Ghansham, I'll take the bottleneck question. So I mean, what we're doing is we're taking a look at obviously, the order book for the remainder of the year and what bottlenecks. But the beautiful thing I would add about the transformation is that as we continue to improve efficiencies, we essentially gain more capacity. But we are taking a look at that we need to accelerate may be some investments that we'd earmarked in the latter half of the year, placing those orders sooner to better time it. So I think our guidance is up slightly, both because of currency effects but also because we're looking at that and expecting slightly higher CapEx commitments in 2018.

That's helpful. And then as you think about the large customers versus the small-run customers, the smaller counts that you called out. How are the commercial teams been adjusted? The organization's ability again to respond to this flexible manufacturing that's needed to be able to target small accounts. It sounds easy in theory, but it's much harder to obviously execute. Just curious as to where you are in that process as well as in organization?

Yes. May be again stepping back, so in the large markets, what we're doing is we are sub-segmenting, first, the P&L ownership from -- make it simple in the U.S. We used to have Beauty + Home U.S. and now we have a beauty business and home and personal care business with their own designated P&L leaders. In Europe, we're heading to break it into 4 units, the beauty unit, fragrance unit, the skincare and color unit, the personal care unit, the home care unit and dedicated custom beauty leadership. So breaking down the big P&Ls into smaller P&Ls with their own entrepreneurial leaders. In addition, we have talked to you before that we start or have the segmented customers into smaller universes and then adjusted the sales force to be specifically target at that kind of customer that bodes from a end use point of view, but also from a size and customer characteristics point of view. And at the same time strengthened our key account management approach to the large accounts. And you overlay that with more autonomy and accountability for which each of these teams are doing, while still being fully connected to the technology and know-how backbone of the global company. That just creates a lot more accountability and drives in ownership and driving the business forward.

Our next question comes from Chris Manuel with Wells Fargo.

Couple questions for you. First, a real simple one, Bob. Could you actually give us what the tooling numbers were? Or what the year-over-year differential was for the 3 segments?

Sure. So in total, we reported a little over $17 million in tooling in the quarter, $17.2 million to be exact. And last year reported was $16.8 million. So obviously, there's a little bit of currency in there. But pharma was roughly about $3 million. Beauty + Home was roughly $5.5 million and Food + Beverage was a little over $8.5 million in the quarter. So that was a pretty significant decrease for pharma, about $5 million on a reported basis, $6.5 million on a constant currency basis. And then you got kind of the offset there, with Food + Beverage being up by about $6 million on a reported and constant currency. And then Beauty + Home was down slightly.

Perfect. That's helpful. Next question I had was from there looks like the -- or what you told us, the growth rate out of injectables business was pretty strong, again 9%. I think some point this year, you were planning on commencing major shipments out of the Congers facility. Last quarter, I think you talked to us about still doing some testing and shipping up samples and things. Where are you at with the process? I would have to guess that you're getting close to tap out with what you had over in France out of that, that the next leg to continued growth is for significant shipments out of there. Can you kind of give us an update on where you are in that process? Or when you anticipate ramping that up?

Sure. The good news is the facility is up and running as been fully qualified customers are really happy, and it's just a matter of a gradual ramp up. It's not that we are flat out unlimited in Europe. It's what the strategic investment to make sure that we can absorb future growth and also give peace of mind to North American customers. So some of it will be absorbed in new growth, and some of it might be over time moving things from Europe to the U.S. They're fully operational.

Okay. And customers have qualified -- they'll accept shipments from there then?

Yes.

Okay. Perfect. Last question I had. I mean, I know last quarter, you talked about a significant acquisition that you did not make that was out in the space. You're still sitting on a pretty healthy -- you're the apple of the packaging land, sitting on a pretty healthy cash balance there, almost $0.75 billion. What are you seeing in the marketplace? Is there anything still big out there that you're looking at? Or should we kind of anticipate share repurchase, ramping up as the year goes on? Or what's kind of the thoughts there for redeployment?

I'm going to put this on my wall, the apple of the packaging land. Thanks for that quote. But seriously, look, we will continue to remain a disciplined acquirer. We are very conscious of our balance sheet and to put shareholders moneys to good use. But in the end, it needs to be a good deal. We've talked about before, certainly, Aptar's history, my history is an acquisitive one, but not at the expense of value generation. So we continue to look at deals. Valuations continue to look challenging. And one of these days, a willing seller and a willing buyer will meet, but -- more than that, we can't really not tell you.

Our next question comes from Anojja Shah with BMO Capital Markets.

I just wanted to talk about corporate cost. It's seemed a little higher this quarter. Is there anything in there you can call out specifically? And what's your outlook for that for the rest of the year?

Sure. So nothing of noteworthy that we can talk about. It's a little higher professional fees. As we've talked, we have added some new corporate level positions to support our growth strategy, some new leaders in Asia, strategy team, et cetera. Going forward, I think it will be reasonable to target in the $12 million to $13 million per quarter range.

Okay. Great. And then switching over to Brazil. We're getting some mix reads from the packagers about Brazil. Some people have seen quite a recovery, some have not. Can you detail what you're seeing there? I know you mentioned that was pretty strong. But just kind of some details on that market? And what you -- how you think the outlook is for the rest of this year?

Yes. I think a couple of things. One is it's not just Brazil. It's Latin America, in general, is strong, but certainly, Brazil had a great quarter. Also in the context of a fairly easy comparable. Remember, a year ago, things didn't look so bright. And certainly, with our kind of end market mix, particular, with fragrances we've seen a rebound. There might have been also some rebuilding of stock that was depleted. The visibility there is not perfect, particularly, as you deal with some multilevel players, you're never quite sure what is in the collective value chain inventory. But certainly, it's been a strong quarter and things look up from a year ago.

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

You had another good quarter in Beauty + Home and was wondering how much of that was due to the transformational initiatives versus a general recovery in the market.

Jason, yes, look, certainly, I mean, the macro environment is very good. I read somewhere that 95% of IMF member countries have reported growth, which is almost unprecedented. That has a read through to our consumers feel and how they spend. And while a lot of our end users are not so sensitive to overall consumer sentiments, certainly the premium beauty side will benefit from that. Now having said that, clearly, the efforts we are making in transformation both on the top line, all the sales efforts that I talked to, some share regains are helping the top line, but also the bottom line activity, the productivity, the purchasing gaining traction. So we feel good about where we are in the transformation. I want to make sure everybody understands. We're still early days. This is a 12 to -- this is a 24-months program that was started in Q4. So we are early into the transformation, and we certainly expect efforts to ramp up. But clearly, there's a benefit in the results.

And speaking of the bottom line, are you able to quantify any of the purchasing or manufacturing savings that you might have realized so far? Or is it just too early in the process?

No. I think what we said is we're going to give you what are the costs that occurred in the quarter, and we will continue to do so. And we also said that the benefits will somewhat lag the onetime costs. But by the end of year 3, we will have had the full benefit to the bottom line.

And then just a question on tax rate. Is that 30% to 32% rate a good rate to use for the second half of the year and 2019?

That's a great question. So I want to qualify that by saying that, last year, the accounting rules changed in terms of how we account for the additional tax deduction you get on stock option exercises. So that becomes really, really difficult to predict. So in that 30% to 32% rate, we've got about $0.02 per share baked in as a rough estimate of stock option exercises. But that number could change depending on the value of the stock price and the number of employees that would like to exercise in the quarter. So there's no easy way to predict that. But just as a reference point, we had about $0.07 per share positive in the first quarter because our stock price was at a pretty good level. So I'll leave you with that. I can't give you any more than that because it's really -- there's variables that we don't know how they're going to play out.

Our next question comes from Chip Dillon with Vertical Research.

Salvator Tiano filling in Chip. So my first question, trying to understand, with all these raw material inflation and you called out resin prices for one of your segments. In the core sales growth, how should we thinking about volumes versus price contribution this quarter and going forward?

So Salvator, in the quarter, we estimate that about 1% of our sales growth was from the pass-through of the higher raw material cost in Q2. So difficult to say going forward. I mean, we don't really try to predict what resin is going to do. We can tell you though that right now, we're hearing that going from Q1 to Q2, resin costs are expected to trend slightly lower heading into Q2.

Okay. Understood. And then can you provide us a little bit more color in Food + Beverage? You called out obviously resin and mix, but this was unusually low margin even for this quarter. So can you provide a little bit more color here? And when should we expect to see the margin of recovery from resin price, from the pass-through of higher resin costs in Q2, Q3 perhaps?

Sure. Well, I'll take that one as well. So in the quarter, Food + Beverage had about a $1 million headwind coming from the timing of the pass-through of those raw material costs. So our timings of the pass-throughs vary depending on customers, but we would expect that in a fairly stable resin environment that we would be able to catch up sometime in the next quarter on that pass-through. In terms of product mix, certainly we said that some of our beverage capabilities with the valve technology do have some pretty good margins on it. So less sales of some of the beverage closures, particularly in Asia this quarter. And then also the higher tooling didn't really help much either. Looking forward, I mean, if you look at the pattern of our Food + Beverage business, we -- in Q1, we tend to build for the heavy summer months in Q2 and Q3, and then Q4 is also a little bit difficult to predict. But we typically see higher margins in our second quarter and third quarter.

Perfect. Since you brought up the -- or with the closures here. In the U.S., I think a peer of yours mentioned that they may have seen some pull forward of demand for kind of warm weather-related items, be it closures or plastic packaging. Are you seeing anything like that in Food + Beverage? And perhaps anything outdoors related in Beauty + Home?

It's still -- but we haven't heard anything from our internal discussion. The only thing I can say at least in Food + Beverage is our condiment sales were strong. So maybe that's in relation to our customers thinking that, that warm summer season, more outdoor use and things like that.

Our next question comes from Brian Rafn with Morgan Dempsey.

Go back and talk a little bit -- Stephan talked a little bit about some of the smaller-size customers, some of the regional even maybe local customers. I'm wondering how innovative, relative to dispenser delivery technology are they -- how adaptive, how transformational are they? Or did they just tend to kind of copy with the time lag some of the multinational, the global consumer-branded companies?

Yes. Thanks, Brian. Without offending some of our large customers let's say, the upper half of these smaller independent brands is certainly very innovative and comes up with new product gestures with new ways of positioning their products. And certainly, next to the traditional centers of New York, Paris, you see a lot of innovation coming out of the West Coast, out of Korea, out of even Latin American countries. And as you see in may be Unilever, not too long ago, that they just tend to buy the most successful of those. They bought the very successful Korean beauty company not too long ago. And I mean, even some of the retail products that we highlighted, the Walgreens Boots, No7 is a very innovative packaging. So I wouldn't say that they copy the big ones. They're just smaller, faster, maybe not everything buttoned up from a supply chain and technology where we can add more value. But many times, they demand up also in the hands of larger customers. Now having said that, we are, of course, also very closely working with high-end premium, even luxury customers in France, with our custom beauty business. That is probably the leading-edge, every new product has to be unique and different. As you'll remember that also created sometime some issues that we had with our custom beauty facility. So -- but maybe just a sidebar on that. We continue to make progress on our custom beauty facility in Europe. And still, we're about drag of about $1 million in the quarter, but the drag continues to decline. So hopefully that by the middle of the year, this is behind us from a year-over-year impact. And certainly, the custom beauty premium houses continue to drive innovation in this space.

All right. Good. No, I appreciate the color on that. I'm wondering maybe another big picture question. If you look at, I guess, the markets tend to become a little more robust. I'm wondering, what are you seeing on the life cycles in kind of the brand imaging? Are you seeing shorter life cycles with more product changes, bottle shapes, styles, innovative technology? Or are you still seeing longer cycles, with may be more dramatic brand imaging or packaging imaging changes?

Yes. Look, that's a very hard question to answer in the aggregate. Clearly, innovation works very differently into different segments. And where we have the biggest acceleration always is if a category starts to switch from nondispensing to dispensing. The biggest runway we see there still in the food business with conversions, whether it's in infant nutrition, whether it's in the dairy space. But also, in the pharma space, we talked before about we see a potential trend of established drugs that used to be administered may be by injection to -- and people look at whether they can administer them nasally. For example, some CNS drugs. The one that is very well known is Narcan, unfortunately in this country. So that is also conversion from -- that is in our favor. Clearly, when things are going well, the premium luxury good makers will accelerate their innovation cycle and come up with new formats, but then I think it's too early to call this a trend.

Okay. And then just a follow-up, Bob, what are you guys seeing kind of on big quote activity? Is it -- does it continue to remain robust as we kind of go forward? What's your thoughts the potential big quote?

I'm not sure I follow what big quote.

You mean in terms of like volume? Like...

Yes. I'm just -- I'm just -- yes. Yes, I'm wondering if you're looking at the first quarter, Bob or Stephan. Are you seeing kind of -- you've got some nice robust, you've got some good projects demand. Are you seeing kind of follow-on, big quotes? And looking at new project designs and that type of thing, as we move into the year versus just kind of a pent-up demand or a couple of quarters cycle, I'm just wondering kind of the runway that you guys are seeing, if at all, you can speak to that in packaging.

Yes. Look, we've given a positive guidance for quarter 2. We certainly see good momentum, a combination both of the macro picture, but also our own activity. So are we seeing more opportunities? Are we bidding on more business? Of course, that's the result of our commercial excellence effort that we are much more in the front foot and going after opportunities and making sure we not only have a bid in, but the winning bid. But I cannot give you color whether they become bigger or smaller. Maybe the only other point I would mention on the previous question. The other driver for innovation is, of course, the whole e-commerce development. So we see more and more requests for e-commerce proofing of existing packaging in there with our -- we have many different options, whether it's locking mechanisms, whether it's clips, whether it's redesigning a pump or dispensing closure. E-commerce, also, will continue to be a good momentum for us because it drives innovation.

Our next question comes from Adam Josephson with KeyBanc Capital.

One, Bob, just on resin for a second, you mentioned sequentially a bit lower. Is that more in Europe or the states that you're seeing that?

It's like, I mean, if you look at it going from Q4 to Q1, the U.S. increased more, while Europe kind of remained flat. So what we're seeing is on the way down, the U.S. is expected to decline kind of back to -- almost back to Q4 levels, while Europe is down just slightly in contract.

Sure. And just a couple on Beauty + Home. Has anything structurally changed in that industry in recent months? I ask because obviously, you've been doing significantly better, partly because of market growth being better, partly because of your execution being better. But have the competitive dynamics changed at all? I mean, it's typically been highly competitive and you guys have talked about that frequently. Has that changed at all of late?

No. We don't see any major change in ownership or consolidation or behavior, say, may be ours. So don't really see that, but clearly, increased effort to make sure we tap all of the opportunities there.

Yes. The only thing I would add, Adam, might be is what we're asking our customers today is obviously, consumer confidence is up, and how much of this is potentially refeeding the pipeline in terms of inventory, and we don't have really good data on there. But I'm sure with the macro environment improving, we've seen in past years that obviously, our customers don't want to be left with our product on the shelf as well. So I think we've kind of over the last several years worked through the inventory destocking in multiple markets. So that also could be a potential and you're seeing a little bit of a pent-up demand to refill the store shelves.

And just to that point. Maybe can you remind us how economically sensitive that business is? Obviously, the beauty piece is, some of the other stuff less so, but just broadly speaking?

Sure. So obviously, personal care, we don't believe is very economically sensitive. So the best comparison we got is going back to 2008 when everybody thought the world was going to fall apart. Our Beauty business was down about 30% in the first quarter of 2008. But it didn't stay down, it rebounded quite nicely in the back half of the year. And in fact, the following year, we were back to where we were at record levels in 2007. So I think you can see a short-term pullback in an extreme macro change environment, but we're still really talking about affordable luxuries here. And I think most people, we would see probably a trade-off from going to spas and things like that and -- but before would make its way down to skincare and cosmetics and things like that.

Yes. I mean, if you zoom out from that I mean, I mentioned it before, but Aptar is really very much advantage that most of the markets we serve are not sensitive. I mean, people don't stop taking their drugs. They don't stop eating breakfast, lunch and dinner. Indeed, they might cut back on their luxury fragrance for quarter. But most of our portfolio is not sensitive to the economic cycle, supply chain whiplash is notwithstanding. Yes.

Sure. And just one back to your balance sheet. I know as Chris said, you're the apple of every packagers eye in terms of your balance sheet. I mean, do you -- are you at all bothered by the fact that you're as underlevered as you are? Is that something that you intend to change in the years to come? Are you quite comfortable being as, with your leverage being as low as it is just as a general statement?

Yes. As a general statement, I certainly would love to use the shareholders money as effectively as possible. And I think we are certainly comfortable in this 1 to 3 leverage range. So for the right opportunity, we'll not hesitate to pull the trigger. On the other end, certainly my experience and probably agree with me is overpaying for acquisitions, you never see the end of it and you work for the seller for the rest of your life, nobody enjoys that. So for the right acquisition, we will pull the trigger, no doubt about it. Having said all that, I get fewer and fewer comments from investors on this topic because we look at the rising interest rate environment and they don't dislike necessarily our balance sheet as much as when there was zero interest rate.

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

Just a quick question on currency. Do you guys call out what the currency impact is on the bottom line? If you didn't, would it be possible?

What we do try to do, Molly, is take last years and kind of give you a comparative EPS compared to this year. That's kind of the direction we go.

Our next question comes from Chris Manuel with Wells Fargo.

Just one quick one, being again that you are the apple of the packaging land. You're going to keep hearing that for a while. The -- along those lines, when I look at interest expense, I usually net it income expense. It was notably lower this quarter and it's been for a long, long time. What -- do you have a assumption that you could give us for the year? Or is this a reasonable run rate, running around $6 million of net income expense over the coming quarters? How should we think about that?

Yes. Chris, let me explain a little bit. So the -- remember, we repatriated almost $1 billion from Europe to the U.S., right? So in Europe, that was made up of roughly $500 million in cash on hand, and then we took on some additional borrowings in Europe. We timed it really well in that. The borrowings we got in Europe were historically low rates. Now when it was invested in Europe, it was essentially at zero interest income rates, right? Bringing it back to the U.S., we're getting anywhere between 1% and 1.5%. So now we got $700-and-x million in cash in the U.S. earning between 1% and 1.5%. The other thing we did in the fourth quarter is we paid off early some of our higher U.S. private placement debt, which is around 6%. So our all-in average interest rate on our debt is much, much lower than it has been in the past. So you combine those 2 factors, I think a reasonable assumption is that the run rate from here going forward, borrowing any other M&A activity that Stephan has been talking about is a right assumption.

Okay. So current run rate, good assumption going forward. That's what I needed to know.

There are no further questions in the queue at this time. I'd like to turn the call back over to Mr. Tanda for closing remarks.

All right. Well, thanks, again, for joining us and enjoy the rest of your day. Talk to you after Q2.

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