AptarGroup, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with 2021. Aptar designs and manufactures drug-delivery, dispensing, packaging and active material science solutions. Its 2022 reporting segments were Pharma, Beauty + Home, and Food + Beverage.
Financial performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Net sales | $3.322 billion | $3.227 billion | +3% reported; +9% core |
| Operating income | $379.3 million | $347.3 million | +9% |
| Operating margin | 11.4% | 10.8% | +0.6 percentage points |
| Net income attributable to AptarGroup | $239.3 million | $244.1 million | −2% |
| Diluted EPS | $3.59 | $3.61 | −1% |
| Adjusted EBITDA | $616.7 million | $607.5 million | +2% |
| Adjusted EBITDA margin | 18.6% | 18.8% | −0.2 percentage points |
| Cash from operations | $478.6 million | $363.4 million | +32% |
| Capital expenditures | $310.4 million | $307.9 million | +1% |
| Free cash flow (non-GAAP) | $196.0 million | $57.5 million | Higher, including greater government grants |
Core sales growth excludes currency and acquisition effects. Approximately half reflected price increases that passed through higher input costs; the remainder was principally volume growth. A stronger U.S. dollar reduced reported sales growth by about 6%.
Segments
| 2022 segment | Net sales | Core sales growth | Adjusted EBITDA / margin |
|---|---|---|---|
| Pharma | $1.361 billion | 13% | $441.6 million / 32.4% (2021: 33.1%) |
| Beauty + Home | $1.439 billion | 7% | $166.5 million / 11.6% (2021: 10.8%) |
| Food + Beverage | $522.5 million | 5% | $71.5 million / 13.7% (2021: 15.6%) |
Pharma’s growth was led by prescription, consumer healthcare and active material science products. Beauty + Home benefited from beauty demand, while home care declined. Food + Beverage earnings fell despite sales growth, reflecting lower-margin tooling and material-cost pass-throughs, as well as North American operating inefficiencies.
Liquidity, debt and capital allocation
- Cash and equivalents were $141.7 million at year-end. Total debt was approximately $1.175 billion; net debt was $1.034 billion, and net debt to net capital improved to 33.3% from 35.1%.
- The $600 million unsecured revolving credit facility matures in June 2026; there were no year-end borrowings under it. Covenant ratios were within limits: leverage 1.71x versus a 3.50x maximum, and interest coverage 15.00x versus a 3.00x minimum.
- Aptar issued $400 million of 3.60% senior notes due 2032 and redeemed $200 million of older notes during 2022. Interest expense increased to $40.8 million from $30.3 million.
- 2022 capital spending was $310.4 million. Management expects 2023 capital investment of $260–$280 million and approximately $107 million of financing cash outlays for debt obligations.
- The company paid $99.5 million in dividends, or $1.52 per share, and repurchased $92.1 million of stock. The Board declared a $0.38 quarterly dividend for 2023; future dividends remain subject to Board approval.
Material changes, outlook and risks
- Reported sales growth was limited by foreign exchange, while price pass-throughs helped core sales. Cost of sales rose to 65.0% of revenue from 64.1%, in part due to under-absorption at certain sites and lower customer orders/inventory reductions. Operating margin nevertheless improved, helped by sales growth and lower restructuring expense.
- The effective tax rate increased to 28.4% from 24.3%, primarily due to lower share-based compensation tax benefits and a legal-entity reorganization. The filing states the rate excluding the reorganization charge was 26.7%.
- Effective January 1, 2023, Aptar reorganized its reporting segments as Aptar Pharma, Aptar Beauty and Aptar Closures, consolidating closures operations into Aptar Closures.
- For first-quarter 2023, management expected EPS of $0.85–$0.93, excluding restructuring expenses, changes in fair value of equity investments and acquisition-related costs; guidance assumed a 25.5%–27.5% effective tax rate. Management anticipated continued momentum in Pharma and selected beauty markets and emphasized fixed-cost leverage and efficiency.
- Key risks include inflation and inability to pass through costs, recession-related demand weakness, foreign-exchange movements, supply-chain disruption and dependence on certain single-source materials, labor availability and cost, competition, cybersecurity, regulatory changes affecting packaging and sustainability, and acquisition or capacity-expansion execution.
- The Ukraine war had no significant direct sales impact reported at year-end, but caused indirect input-cost and supply-chain effects. COVID-related demand patterns also shifted: some formerly pandemic-supported applications faced tougher comparisons.
- Unusual items include a $6.2 million 2022 charge for a new operational and SG&A optimization initiative, within total reported restructuring expense of $6.6 million. The filing also reports approximately $13 million of customs-duty claims plus $5–$6 million of interest and penalties, with no liability recorded because the assessment and appeal outcomes were uncertain. Purchase commitments were approximately $82.6 million over five years.
Most important facts for investors to verify
- Whether core-sales growth converts into sustainable volume and margin improvement as pricing pass-throughs and post-pandemic comparisons normalize.
- Whether the lower 2023 capital-spending plan and expansion projects support growth without weakening operating efficiency or cash generation.
- Debt maturities, interest costs and covenant headroom, particularly as rates and refinancing conditions change.
- Assumptions underlying first-quarter EPS guidance and the excluded items; the filing does not provide full-year 2023 earnings guidance.
- Potential exposure from customs-duty claims, other litigation and single-source supply dependencies.
- Execution and comparability effects of the 2023 segment realignment. The filing reports audited financial statements and effective internal controls; PwC identified revenue recognition for product sales as a critical audit matter.