AptarGroup, Inc. — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021; it is not a standalone fourth-quarter report. Aptar designs and manufactures drug-delivery, consumer dispensing, and active material science products. Its reporting segments are Pharma, Beauty + Home, and Food + Beverage. Amounts below are in U.S. dollars unless stated otherwise.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Net sales | $3.227 billion | $2.929 billion |
| Operating income / margin | $347.3 million / 10.8% | $339.5 million / 11.6% |
| Net income attributable to AptarGroup | $244.1 million | $214.0 million |
| Diluted EPS | $3.61 | $3.21 |
| Adjusted EBITDA / margin | $607.5 million / 18.8% | $586.3 million / 20.0% |
| Cash provided by operations | $363.4 million | $570.2 million |
| Capital expenditures | $307.9 million | $246.0 million |
| Free cash flow (non-GAAP) | $57.5 million | $324.2 million |
| Total debt / cash and equivalents | $1.197 billion / $122.9 million | $1.173 billion / $300.1 million |
| Net debt / net debt to net capital | $1.073 billion / 35.1% | $872.5 million / 32.0% |
Reported sales rose 10%; core sales, excluding currency and acquisition effects, grew 7%. About 4 percentage points of core growth reflected price increases passed through for higher resin and other input costs. The cost-of-sales ratio increased to 64.1% from 62.9%, implying a lower gross margin before depreciation and amortization. The effective tax rate fell to 24.3% from 28.9%.
Segment net sales and Adjusted EBITDA were: Pharma $1.285 billion and $425.7 million; Beauty + Home $1.434 billion and $154.7 million; Food + Beverage $508.6 million and $79.4 million. Sales growth was strongest in Food + Beverage (25% reported; 23% core), while Pharma core sales grew 2%. Pharma EBITDA declined slightly, and Food + Beverage EBITDA margin fell to 15.6% from 17.8%; Beauty + Home EBITDA increased 20% and margin rose to 10.8% from 10.0%.
At year-end, current assets were $1.358 billion and current liabilities $982.5 million. The $600 million unsecured revolving facility matures in 2026; $144.4 million was drawn under it at year-end, alongside a $56 million term facility due in July 2022. Covenant ratios were within limits: leverage 1.84x against a 3.50x maximum, and interest coverage 19.65x against a 3.00x minimum. The company paid $98.5 million in dividends and repurchased $78.1 million of shares in 2021.
Material changes versus 2020
- Sales recovered across Beauty + Home and Food + Beverage as pandemic-depressed markets improved; the latter also benefited from strong food and beverage demand and higher selling prices.
- Pharma growth in injectables and active material science was offset by lower prescription-drug sales and customer inventory drawdowns. Prescription drug core sales declined 8%.
- Operating income grew only 2% despite 10% sales growth; higher materials, freight and labor costs and an unfavorable sales mix reduced operating and Adjusted EBITDA margins.
- Operating cash flow decreased by $206.7 million, mainly from working-capital investment, including higher receivables and inventory. Capital spending increased by $62.0 million.
- Net debt increased about $200.5 million, reflecting acquisition funding and capital returns; cash balances fell materially.
Outlook, commentary, risks and unusual items
For first-quarter 2022, Aptar guided to diluted EPS of $0.92–$1.00, excluding restructuring expenses, changes in fair value of equity investments, and acquisition-related costs, using an estimated tax rate of 27%–29%. Management expected solid Pharma growth, signs of recovery in beauty and beverage, and prescription allergy growth as customer destocking appeared to be ending. Supply-chain disruption was expected to persist near term, and COVID-19 variants could slow market recoveries. Planned 2022 capital investment was $300–$330 million; management expected operating cash flow to cover working-capital needs and scheduled debt repayments.
Key risks include pandemic uncertainty, input-cost inflation and inability to pass costs through, supply-chain and labor constraints, reliance on certain single-source materials, foreign-exchange movements, competitive pressure, environmental and packaging regulation, and execution of acquisitions. The company identified approximately 2% of consolidated sales as coming from Russia and Ukraine and did not expect a material impact from escalation based on its exposure at year-end 2021.
2021 included $23.2 million of restructuring expense; the company said most transformation initiatives were complete and did not expect significant additional restructuring expense or cash outflows in 2022. Net investment gains included $2.0 million realized and $2.7 million unrealized gains on PureCycle shares. A favorable Brazilian tax recovery contributed $5.6 million to cost of sales and $1.8 million to interest income. No COVID-related goodwill impairment was recorded. Goodwill totaled $974.2 million.
Unresolved matters include a contested Brazilian import-tax assessment of approximately $6.1 million, for which no liability was recorded, and ordinary-course lawsuits and claims whose outcomes are uncertain. The company disclosed $91 million of unconditional purchase commitments over the next two years and $33.9 million of contingent consideration liabilities related to acquisitions.
Important facts for investors to verify
- Whether price increases and productivity gains can offset ongoing material, freight, energy and labor inflation without further margin erosion.
- Whether Pharma prescription demand and customer inventory levels recover, and whether strong injectables and diagnostics demand is sustained.
- Cash conversion and working-capital trends, given the sharp decline in operating cash flow and free cash flow alongside elevated capital spending.
- Debt maturities, refinancing of the $56 million term facility due in July 2022, and the effect of increased net debt on capital returns and investment plans.
- Acquisition integration and contingent consideration outcomes, including the valuation assumptions for Voluntis technology and Fusion performance obligations.
- Developments in the Brazilian tax assessment, litigation, supply commitments, and evolving sustainability and packaging regulations.