AptarGroup, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed February 9, 2024. This is an annual report, not a standalone fourth-quarter report. Aptar designs and manufactures pharmaceutical drug-delivery and consumer-product dispensing and protection technologies. Effective January 1, 2023, the company reorganized its reporting segments as Aptar Pharma, Aptar Beauty and Aptar Closures; prior-period segment data was recast.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 | Change / context |
|---|---|---|---|
| Net sales | $3.487 billion | $3.322 billion | Up 5% reported; core sales up 3%, excluding currency and acquisitions |
| Operating income | $404.0 million | $379.3 million | Up 7%; operating margin 11.6% vs. 11.4% |
| Net income attributable to AptarGroup | $284.5 million | $239.3 million | Up 19%; diluted EPS $4.25 vs. $3.59, up 18% |
| Adjusted EBITDA | $707.7 million | $616.7 million | Up 15%; adjusted EBITDA margin 20.3% vs. 18.6%. Non-GAAP measure. |
| Net cash from operations | $575.2 million | $478.6 million | Increase attributed mainly to improved earnings and working-capital management |
| Capital expenditures | $312.3 million | $310.4 million | FY 2023 free cash flow was $262.9 million; non-GAAP measure |
| Cash and equivalents | $223.6 million | $141.7 million | At year-end |
| Total debt | $1.139 billion | $1.175 billion | Net debt $915.8 million; net debt to net capital 28.3% vs. 33.3% |
Cost of sales declined to 63.8% of sales from 65.0%, aided by higher-margin Pharma mix and moderating inflation. SG&A was 16.2% of sales vs. 16.4%. The effective tax rate declined to 24.2% from 28.4%.
Segment results
- Aptar Pharma: Sales of $1.521 billion, up 12% reported and 10% core; adjusted EBITDA $502.6 million, up 14%, with margin of 33.0% vs. 32.4%. Growth in prescription and consumer healthcare delivery systems more than offset declines in injectables and active material science.
- Aptar Beauty: Sales of $1.268 billion, up 4% reported and 2% core; adjusted EBITDA $163.7 million, up 8%, with margin of 12.9% vs. 12.4%. Beauty/fragrance growth was partly offset by weaker personal care and home care demand.
- Aptar Closures: Sales of $698.8 million, down 5% reported and 7% core; adjusted EBITDA $103.7 million, up 20%, with margin of 14.8% vs. 11.7%. Lower resin pass-through and customer destocking weighed on sales, while operational improvements supported profitability.
Material changes and notable items
- Reported sales growth included a 2% positive currency effect; acquisitions had no significant effect on consolidated sales. Europe represented 57% of sales, up from 53% in 2022; domestic sales fell to 29% from 33%.
- Restructuring expense was $45.0 million in 2023 versus $6.6 million in 2022. Cumulative expense for the optimization initiative reached $51.6 million; the year-end reserve was $29.9 million.
- Pharma results faced approximately $16 million of costs from validation of new injectables capacity and ERP-related inefficiencies. Injectables and active material science sales also compared against elevated 2022 COVID-related demand.
- Other income included a $6.6 million insurance settlement related to the 2016 Annecy facility fire. A PureCycle investment generated a $1.4 million net investment gain; fair-value changes can affect reported earnings.
- 2023 acquisitions included iD SCENT and 80% of Gulf Closures. The company also agreed to acquire 40% of Jinyu for approximately $84 million, subject to conditions and expected to close in 2024.
Outlook, risks and contingencies
- For Q1 2024, Aptar forecast diluted EPS of $1.10–$1.18, excluding restructuring, fair-value changes in equity investments and acquisition-related costs; guidance assumes a 24.5%–26.5% tax rate. Management expected continued demand for Pharma proprietary delivery systems and biologics components, and a progressive North American recovery benefiting Beauty and Closures.
- Management expected 2024 capital spending of $280–$300 million and financing cash outlays of approximately $458.2 million for short- and long-term debt obligations. It said expected 2024 operating cash flow should cover working-capital needs and purchase commitments.
- Debt covenants were met at year-end: leverage ratio 1.46x against a 3.50x maximum, and interest coverage 16.06x against a 3.00x minimum. The revolving facility provides up to $600 million and matures in June 2026. Management identified substantial 2024 debt maturities and expected to fund them with cash or revolver borrowings.
- Key risks include economic weakness and customer destocking, price competition, raw-material and labor cost volatility, reliance on certain single-source materials and manufacturing sites, foreign-exchange exposure, geopolitical and supply-chain disruption, cybersecurity, regulatory changes affecting packaging materials and pharmaceutical products, and possible goodwill impairment. Goodwill was $963.4 million; no impairment was recorded in 2023.
- Customs-duty claims were approximately $13 million in principal plus $5–$6 million in interest and penalties; the company was contesting them and had recorded no liability because outcome and timing were uncertain. The filing also describes ordinary-course litigation and claims, with no assurance against an unfavorable outcome.
- PwC issued an unqualified opinion on the financial statements and internal control over financial reporting; management also concluded controls were effective at December 31, 2023. The audit identified goodwill impairment assessment and product-sales revenue recognition as critical audit matters.
Important facts for investors to verify
- Whether Pharma growth and the projected North American recovery continue, particularly given continued softness or normalization in Closures and certain Beauty markets.
- Progress on the optimization initiative: remaining restructuring costs, realized savings and effects on margins and operations.
- Execution and returns from injectables capacity expansion and ERP implementation, including whether operational disruptions have fully abated.
- How the company will refinance or repay 2024 maturities, and the effect of borrowing rates on interest expense and cash flow.
- Status and funding of the proposed Jinyu investment, and resolution of customs-duty claims and other contingencies.
- Assumptions supporting the $963.4 million goodwill balance, especially for Injectables and Active Material Science Solutions, and sensitivity to business performance.