Matt DellaMaria - Vice President, Investor Relations Stephan Tanda - President and Chief Executive Officer Bob Kuhn - Executive Vice President, Chief Financial Officer and Secretary.

Mark Wilde - BMO Capital Markets Matt Krueger - Robert W. Baird Adam Josephson - KeyBanc Capital Markets George Staphos - Bank of America Merrill Lynch Chip Dillon - Vertical Research Debbie Jones - Deutsche Bank Chris Manuel - Wells Fargo Brian Gary Rafn - Morgan Dempsey Capital.

Ladies and gentlemen, thank you for standing by. Welcome to AptarGroup’s 2017 Second Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. Introducing today’s conference call is Mr. Matt DellaMaria, Vice President Investor Relations. Please go ahead, sir..

Thank you, Howard. 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 quarterly performance.

Bob will then discuss a few financial details and we’ll 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 Web site. AptarGroup 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. Yesterday, we reported our second quarter results, including core sales growth of 1%. A very important element of our business model is the diversity across our eight different markets. Solid core growth in our pharma and Food & Beverage segments offset the decline in our Beauty & Home segment.

On an EBITDA basis, while our overall margin was at 20% of sales, on an absolute basis, we were below prior year strong results, mainly due to decreases in business in certain markets and higher raw material cost.

Our earnings per share improved over the prior year, primarily due to certain discreet tax benefits recognized in the quarter that offset the negative operating items. Bob will go into more detail on the specifics impacting our bottom line in a few moments.

While we have anticipated certain headwinds coming into the quarter for our Beauty & Home segment, our performance in a number of our key markets, such as fragrance and hair care, were below our exceptions. The markets in Brazil remained quite fragile due to the top economic situations.

However, we are growing our business in the surrounding region also in Mexico. Furthermore, in line with several of our large CPG customers, we are facing softer demand in our more established markets.

In addition, this quarter we experienced operational challenges at the European facility that produces back to this component sold to the beauty market, and this along with our higher raw material cost, negatively impacted the segment’s profitability.

The operational issues are isolated to this home facility and we are taking action, but expect that it will take several months before we are fully back on track. I can say that we all have a clear sense of urgency and focus on returning Beauty & Home to sustainable profitable growth.

We are building a better understanding of the issues, and have taken determined actions on several fronts, including people and operations across the Beauty & Home footprint. For example, we are in the process of recruiting a new Regional Leader for North America and the Head of Sales in North America.

We have appointed a Business Development Leader for the Asian region outside of China, and we will continue to strengthen our leadership throughout Asia. We have started to implement the commercial excellence program focused on strengthening our sales and marketing capability, and we intend to roll this out across each region.

Based on initial success in Beauty & Home, we will be extending the program to other segments overtime. We have also initiated a targeted effort to raise efficiencies at some of our Beauty & Home facilities.

We are not in a position today to discuss this in greater detail, but we will provide an update at our Analyst Day on September 7th, which will be webcast via our Web site. These initiatives will take some time to generate meaningful results. In the mean time, we remain fully committed to our customers and our markets.

There are number of very attractive long-term growth opportunities, and we plan to actively participate in this growth, particularly in facial skin care, color cosmetics and in high growth economies where we are on the representative day. We will continue to bring affordable innovation and solutions to the market.

For example, in the past quarter, we have Avon, Occitane and O Boticario along several new fragrances. Our airless serum dropper was also featured on new skin care serums in Latin America. And in addition, we have helped customers, such as S. K.

Lodder and Shiseido, who launched new makeup products in North America, featuring our customers in self actuator cosmetic pumps. Now, turning to our Pharma segment. We booked another very strong quarter with core sales increasing across each end markets.

We feel strong demand from the consumer healthcare segment, and participated in new eye care launches for Bayer and for the Abbott owned company, Laboratorios Synthesis, featuring our ophthalmic squeeze dispenser.

In the prescription market, our nazel spray pump was featured on a generic version of [indiscernible] in Canada and our cost effective twisted dry powder inhaler, which was introduced in China in 2015, has entered the market, now in India, for the first time with an asthma and COPD medication.

We continue to validate our recently added capacity in Congers, New York with our customers in the U.S. injectibles markets. We expect to begin commercially supplying from this facility by the end of the year.

In addition, we are progressing in our partnership with Kali Care to develop real time medication management technology, using digital monitoring systems and with propeller health to develop fully integrated connected meter dose inhaler. These investments and partnerships are part of our long term strategic vision for the segment.

Our Food & Beverage segment also delivered a good quarter with core sales growth across each end market. In the beverage market, we saw strong demand for our sports closures featured in bottles water and we participated on new launches in Europe, Brazil and China.

We are experiencing lower volumes, relatively to a year ago, to a single specific large beverage customer in China. We expect this to continue until the end of the year when we’re beginning to lap the situation. We also continue to see opportunity in Asia, including the infant nutrition market.

Our flip top closure with a built-in-scoop was featured on Yili’s brand for infant formula for the Chinese market. Also, in the food market, our closures with our flow controlling SimpliSqueeze valves are featured on a new line of salad dressings by Hidden Valley.

Finally, as announced in May, we have partnered with GualapackGroup, a leader in premade spouted pouches to bring a premade no-spill spouted pouch solution to the European market. This confirms our long term commitment to bring additional convenience to consumer and new innovative solutions to our customer.

As we look to the third quarter, our Beauty & Home segment is expected to continue to face headwinds in North America and Brazil. In addition, we now anticipate some risk with our business in China due to recent corrected heat wave near Shanghai that is resulting in energy restrictions and in some cases, outrages.

This impacts our facilities and also certain supplier facilities. It is a bit early to estimate the effect, but we are watching the situations closely. The business pipeline in our pharma segment remains rock solid.

Although, it will likely be difficult to report year-on-year growth due to some significant custom tuning sales that occurred in the prior year third quarter. We anticipate that our Food & Beverage segment will continue to grow over the prior year as we further leverage our capabilities and technologies across different categories.

And though we face certain near term challenges, we are optimistic about our long term growth opportunities across each business segment. We remain dedicated to executing our growth strategy investing for the future and helping our customers to grow their businesses with our innovative dispensing solutions.

At this time, I will turn it over to Bob, who will review some of our financial details..

Thank you, Stephan, and good morning, everyone. I’ll briefly cover a few details and then we will turn it over for questions. And looking at how our business segments performed in the quarter, I’ll start with our Beauty & Home segment. As you saw in our press release, core sales, keeping currencies constant, decreased 4%.

The majority of the decrease was related to operational issues at are decorative component facility and challenges in Brazil. Looking at sales growth by market on a constant currency basis, core sales to the beauty markets decreased 4%. This was mostly due to the decreases in sales of decorative components.

Core sales to the personal care market decreased to 3% due to softness in demand for our pumps and closures used with hair care and body care products. And core sales to the home care market decreased 10% from the prior year at sales of insect repellant due to the Zika virus in the prior year quarter did not repeat this quarter.

When we look at profitability, I will be referring to EBITDA margins. And in the quarter, our Beauty & Home segment achieved an EBITDA margin of 14%, which is below the prior year's margins of 16%.

Margins were negatively impacted by higher material costs, including about $2 million related to the timing of resin cost pass-throughs and about $1 million related to higher metal component costs. It's important to note that resin costs increased in Europe sequentially from Q1 and remain materially higher than a year ago.

Our Pharma segment had an excellent quarter, achieving core sales growth of 8% and an EBITDA margin of 35%. Core sales to the prescription market increased 4%, primarily due to increased demand for our meter dose inhalers for asthma and COPD, and our nasal spray devices for essential nervous system treatments.

Core sales to the consumer health care market increased 16%, driven by strong demand for spray systems for decongestants and nasal [indiscernible], and increased demand for ophthalmic squeeze dispenser. And finally, core sales to the injectibles market increased 8%.

It was also a very good quarter for our Food & Beverage segment where core sales increased 7%. Our EBITDA margin decreased from 22% a year ago to 20%, primarily due to higher resin costs, higher professional fees each about $0.5 million negative impact and a mix of the business compared to the prior year.

Looking at each market, core sales to the food market increased 10%, primarily due to strong demand for closures for condiments and granular foods. And core sales to the beverage market increased 5%, primarily due to strong demand for our closures used on bottled water.

Cash flow from operations in the quarter was approximately $111 million, capital expenditures were approximately $32 million and our free cash flow was approximately $79 million compared to $40 million a year ago. The primary reason for the increase in cash flow relates to improvements in working capital.

Looking at our balance sheet capitalization on a gross basis, debt to capital was approximately 37%, while on a net basis, that is approximately 25%. And we remain slightly under one-times levered compared to our trialing 12-months adjusted EBITDA.

As part of our strategy to improve the balance sheet capitalization of our operations in Europe and to take advantage of the favorable interest rate environment there, subsequent to the end of the quarter, we borrowed approximately $800 million in euro denominated debt and repatriated an additional $750 million in cash to the U.S.

The decision to execute this borrowing and repatriation was taken in the second quarter and this triggered a tax liability, which is offset by deductible losses related to foreign currency exchange contracts that were put in place related to the repatriation.

The net effect of both these tax items was a tax benefit of approximately $0.05 in the quarter. An additional tax benefit that we recognized in the quarter related to stock based compensation, and this has to do with the new accounting principle around stock option exercises.

We spoke about this item in the first quarter and the difficulties around forecasting the impact as there are several variables that cannot be predicted; one is the share price and another is the volume of employee stock option exercises.

When we developed our second quarter guidance, we had anticipated, based on historical exercise volumes that we would likely incur $0.02 tax benefit and this was included in our guidance range. In reality, the share price movement in the quarter and the level of exercises, we recognized a $0.9 tax benefit.

For the full year 2017, we currently expect depreciation and amortization to be approximately $150 million to $155 million, and that our capital expenditures will also be in this range.

Lastly, we expect our effective tax rate for the second half of the year to be in the range of 26.5% to 28.5%, which includes an estimate of $0.02 for the potential tax benefit related to stock-based compensation accounting method. At this time, Stephan and I will be glad to answer any of your questions..

[Operator Instructions] Our first question or comment comes from the line of Mark Wilde from BMO Capital Markets. Your line is open..

I wondered, Bob, if you can just talk a little bit about that repatriation of cash to $750 million.

What are you targeting that for?.

I mean the essence behind the repatriation really was we’ve been striving to better balance our asset base and liabilities in Europe, which as you know, is our largest region in terms of asset base. And with the interest rate environment as it was in Europe, historically low interest rates.

And also, since cash is generated out of Europe, we weren’t earning any interest on the cash that was parked over in Europe. So we took the decision to raise debt at these historically low rates and repatriate the existing cash, as well as the additional borrowed money back to the U.S.

So at this time, it was really done more for a better balance sheet capitalization of operations in Europe. And at this moment, we really don’t have any immediate need for that. But it ultimately gives us flexibility to redeploy that cash that we need to. It will add about net $1 million of additional interest expense each quarter, going forward.

But again, we felt that that was worth the price of the flexibility and ultimately to get back to the balance sheet capitalization that we’ve been trying to achieve..

If I could just as a follow-on.

I wondered if you could put a little more color around what's going in both Brazil and in China?.

Well, let me jump in here Mark. Brazil really has seen mix of the normal volatility quite some political turmoil as you know with the question around Lula is accounting for the next election and Temer being under lot of pressure, which has not helped to get consumer confidence going. So our business is down significantly in Brazil.

Fortunately, the rest of Latin America is actually up quite a bit. When you talk to folks in Brazil, we’re actually quite optimistic next to the fact that Brazil is always optimistic. And I do sense that with the election coming and looks like it goes the right way. But as we know from other countries pulling can be deceiving.

But certainly, I feel optimism there but that doesn’t take anything away from that and Q2 has been quite disappointing. When it comes from China, look this is really the hit of the last week, we had a record heat wave in Shanghai and power was curtailed due to the high needs for air condition.

And our plants has to be shut down for several days, our supplier plants had to be shut down for several days that puts quite some strain, particular on the incoming supply chain. So even if we can catch up with our own plans, we are not clear on the supply chain. So we just want to deflect this and we will watch it closely as the quarter unfolds..

Thank you. Our next question or comment comes from the line of Ghansham Panjabi from Robert W. Baird. Your line is open..

I was wondering if you could provide some added detail on your long-term growth expectations by segment.

And then maybe expand on how you can catch up to those long-term expectations in any underperforming segments, maybe Beauty & Home?.

Look, the long-term growth expectation have been set by the Company, and based on the very thorough strategic planning process, the macro trends that underlying those are all in effect just to key them off, rising population, the higher standard of living, urbanization rates going up dramatically, and then of course in ageing population.

So do not expect that we’re going to revise those targets in September. Clearly, we are, with the portfolio we have, I think as said before, we should be in the mid-single digit top line growth with the portfolio we have. Now, having said that clearly, we are not happy with the top line growth in Beauty & Home.

Quarter one looked a little bit better and clearly quarter two we had some factors, particularly with the decorative facility in France that took a bite out of top line growth and also of course over the bottom line.

This is a specialty facility that really addresses the premium client markets for beauty and it's a project based business, the plant was running at close to capacity.

And we have to stay in hindsight of course as a benefit of hindsight the team underestimated what it would take for new product launch, which brought the whole facility to its knees and had a knock on effect to some of the other customer projects. Those issues are addressable.

We've added resources we've established a task force but it will take some time to work through those issues until we get back to a performance that is acceptable to us, so that, I will see as an isolated but significant development that will be with us for a few months.

Looking further out, clearly, the beauty market is in the western park, the Beauty & Home market in the western part is challenging, the traditional retail channels our large CPG customers are struggling to create volume. On the other hand, we have a good and frankly improving pipeline of customer projects.

We see the first positive signs from the commercial excellence program that we've kicked off in North America. And of course you have new consumers entering the categories in the high growth economies particular to the luxury market in China is going quite a bit.

So again, I think this problem is solvable and we certainly have our sleeves rolled up and working hard to that..

And then can you provide some added detail on the margin decline in the Pharma segment? Just in terms of what drove the decline and then how long do you expect lower year-over-year margins to persist?.

As a reminder and speaking to the long term targets, our long term EBITDA margin target is 32 to 36 for the Pharma segment. So while it was down a percent compared to last year, we’ve been at the upper end of that range for some time.

Having said that, this quarter, the mix of the business stronger injectable business all three divisions were up in the quarter injectable and CHC were up stronger than ours. So mix is a part of it. And then you also have some start-up costs under validation of the U.S. injectable business that we spoken about..

Thank you. Our next question or comment comes from the line of Adam Josephson from KeyBanc. Your line is open..

Stephan, just one on the leadership changes in North America in Beauty & Home. You talked about recruiting a new regional leader and a new head of sales, if I heard you correctly. Correct me if I'm wrong, but before you got there, there are fairly recent leadership changes in Beauty & Home in North America, as well.

So can you just help us with precisely what the recent leadership changes have been and now what additional is happening?.

I think there was a change made looking about probably three years ago. So I think at that time the focus was really on raising profitability of the North America segment, which actually was accomplished. Now in the next phase, we really need to get growth going again.

And we really felt we needed a higher level of expertise and execution on customer engagement in the sales force. So that’s really what led to the change. So independent of the leadership transition, we’ve implemented project in the U.S.

as you know around commercial excellence, which focuses particularly on creating transparency of the customer project pipeline and of course also on the execution on the performance of the commercial leadership to sales force. And that is in full swing.

Now with that also we want to bring a new leader on board both for the overall business in North America, as well as for the sales force in those searches are pretty far advanced. I think that’s the long and short of it..

So just to be clear, the person you brought in a couple years ago, is now going to be replaced?.

Yes..

Bob, I'm going to move around a little bit your, D&A and CapEx guidance coming down by few million.

What's behind that?.

Honestly, it’s a little bit of some projects that are at the end of their depreciable lives. And as we get closer to the back half of the year, we take another midyear review of open capital projects and what's out there. So we try to reassess the timing of when those expenses are going to hit.

And it's really nothing more than a reassessment of midyear where we’re at and where we expect to finish with the cash related to those investments..

And Bob also on the raw material cost, so you mentioned I think $2 million of resin pass through drags and then $1 million of higher metal in the quarter. So it was $3 million hit from raw materials. And you talk about resin cost in Europe remaining materially higher than a year ago.

Can you just talk about what your -- just help us with what's going out with metal costs, resin in Europe and resin in North America? And what you are thinking the impacts will be in 3Q from all that and perhaps beyond just to give us any sense of what's going on there?.

So the $3 million, as you correctly stated, that relates only to the Beauty & Home segment. We had about another $0.5 million increase in raw material cost in the Food & Beverage side for second quarter as well. So total for Aptar is about $3.5 million. So if we look at what resin has done, sequentially Q1 to Q2, while it did come down in the U.S.

about 7%, it went actually up 7% in Europe. And due to the weighting of our business being stronger in Europe, obviously, that has a bigger impact on our Beauty & Home business there in Europe. If we look to year-over-year, both the U.S. and Europe are up over the second quarter last year. U.S.

is up about 5%, but Europe is actually up over 20% compared to last year. So as we look out in Q3, on a sequential basis, we are seeing resin coming down in the U.S. about 1% and looks like Europe for the time being is expected to go down essentially to 7% that they went up in the second quarter.

But nevertheless, they are still up significantly year-on-year. As far as metal, I don’t have any specific comments. It's just been a general gradual increase, nothing that I can point to that's volatile or anything, at this time..

And just based on what you said about Europe resin, would you expect the comparable raw material drag year-on-year in 3Q as you experienced in 2Q?.

It compared to Q3, yes. I mean it will be -- it's less than it is -- it's higher cost than it was last year, but not to the magnitude that we've seen in Q2..

In terms of the year-over-year change….

Just on to your reference point is if you’re comparing Q3 to Q3 or Q3 to Q2..

I'm just talking about the magnitude of the year-over-year drags, 2Q '17 versus 2Q '16 and then 3Q '17 versus 3Q '16?.

Yes, it will be less than what we experienced in Q2 is also we’re anticipating..

And just a couple others on, Stephan, how would you characterize your discussions with customers these days and what kind of costs are you seeing about the macro and North America, Brazil or elsewhere? And are you seeing any destocking?.

To start with the last question, not really. And of course, conversation with customers are very much dependent on their context, but overall, I would say good. We have a rock solid attractive pipeline in Pharma.

We see good project -- new project activity in Food & Beverage, particularly in water and infant nutrition but also in condiments, you saw in my earlier remarks. In Beauty & Home, I have to say, we see some first signs that the efforts in North America are bearing fruit with a tick up in discussions to new projects, so their pipeline is refilling.

On a macro level, of course, continue to have volume challenges of -- particularly the Western CPG customers, particularly in traditional retail channels. But we also see some good growth in independent brands and of course the rise of consumer spending in the high growth economies.

Latin America, we talked about, Brazil, It's really tail of two walls; Brazil, significant challenges and there is still some cautiousness for this year with some optimism for next year, particularly with the upcoming election. Outside of Brazil actually, Virginia, Colombia, Mexico, are doing quite well.

In general, I would say that the need for innovation is also coming back and well recognized but also with the large CPG companies. I mean they realize that the play book of just cost out and peer based budgeting and the rates to the bottom has its end and then in the end, if you’re a branded player, you need to stand out for innovation.

And clearly, that is an area we can help. But we can also help on the cost reduction with like light weighting higher cavity counts just a couple of weeks ago. We turned over a large contract just increasing cavity counts and increasing productivity. So innovation is still the core of what we bring to our clients..

[Operator Instructions] Our next question or comment comes from the line of Jason Rogers from Great Lakes Review. Your line is open..

So I was wondering about what percentage of sales in Beauty & Home segment, are generated from China?.

Overall, it's pretty much close to the overall average. It's about 7% of the overall Beauty & Home sales..

And do you think, at this point, you’re maintaining share in the Beauty & Home segment, or is complication becoming more of a factor there? And did you lose any business from the issues that you had in the plan in France?.

Yes, I think if you step back a little bit over the last few quarters or last few years, I think there is no denying that we’ve lost some share. I mean part of what we’re doing here in the improvement efforts is to make sure we’re getting back on the front foot in terms of competing for business, getting the new project pipeline built.

And that is to gain some of that business back. Clearly, when you’re not executing and not meeting customers’ delivery expectations, that had some consequences, I don’t think speaking particular about the French decoration facility. I don’t think that’s irreparable, but we will have to go hand in hand to repair these situations..

And then finally you may have touched on this. But you had strong core growth in the Pharma segment.

Why did that not translate into better leverage on the margins side?.

You’ve got a mix, as I explained earlier, Jason, on the injectables being up 8% and consumer healthcare being up 16%. And prescription, which as you know is it brings slightly higher margin was only up 4%. So you’ve got that plus you’ve got some of the start up and validation costs of the new elastomer expansion in Congers that we mentioned..

Thank you. Our next question or comment comes from the line of George Staphos from BOA Merrill Lynch. Your line is open..

I guess first question I had, Stephan, you said as far as China goes your -- and specific to Beauty & Home, you’re watching it and I guess you’ll, as a Company, you’ll report back next quarter in terms of what effect there might have been from the power outrages.

Is there a figure that you recognizing it’s hard to call that you’ve embedded in guidance in terms of what impact you expect from that development?.

No, it's really too early to tell. So I think I mean if it stays at the three days then I think we’ll have a black eye and move on. But we also wanted to put your notice if we have another heat wave growing through, we’ll start to become significant..

And then in finance, if you can talk about again what's the impact of that operational issue was. And if I could get a little bit more color in terms of how you're remediating there, whether you had to add additional equipment or people that would be helpful.

And then lastly, for my third question, if back to China this beverage issue has been a lingering one. I seem to remember it being discussed on the second quarter call last year. It now hopefully has lapped by fourth quarter this quarter, recognizing you’re talking about customers, et cetera.

What makes you most comfortable that it should be lapped by the end of this year? Thank you guys..

Talking about, France first.

The main activity here is really to bring additional resources from other facilities and additional capability in terms of people to the plant to work through planning, production, scheduling, raising yields and lowering scrap rate, so that the plants can operate at the levels that it's designed for, and should be able to operate on.

I’ve been in manufacturing game all my life. If you have a facility that runs at pretty closer capacity and they kind of get a knock in the stomach, it takes some time to settle it all out. And then it's solvable issue. We’re bringing the right capability to it.

Clearly, we haven’t planned for that in hindsight that was not the best way of going forward. But it is what it is and now we are addressing it and we are also pleased rolled up to address it..

And George, just on the impact -- I just want to add that it was about half of the decrease in the Beauty & Home sales in the quarter..

And from a profit standpoint, can you relay or should we just assume an average margin on that revenue?.

Yes, I would assume an average margin there..

And then on the China situation, I think we’re becoming increasingly transparent on that just to also give you a feeling to ring fences. Actually, our beverage business is doing that about this, when you exclude this one account as I tell my people, when you exclude the things that don’t work, it always looks great.

But at this I want to give you guys the transparency that it is one account that decided to double source and knowing a bit what the capacities available are, gives us the expectation that this will lap at the end of the year with all the qualifications around that..

Thank you. Our next question or comment comes from the line of Chip Dillon from Vertical. Your line is open..

Bob, I had a question about the repatriation. I know that when you look at the broader marketplace, people are short of sitting in on their edges of their seat hoping there’s some kind of corporate tax reform that would involve a tax holiday. And it seems like you guys are moving earlier.

Is that because -- I mean when you look at what the euro has done and the fact that it's down that maybe you have some translation losses that have -- I think that's what you were sure suggesting that might be offsetting the tax ability of bringing that money back.

And therefore, in your case, it's just a move point because again because the cash you’ve had over there is loss from value in dollar term.

Is that fair?.

Chip, indirectly it's close to that but it's a very complicated topic. So our decision to borrow money in Europe and repatriate that back to U.S. was irrespective of any pending tax legislation. So you are correct in that.

When we took the decision the dollar strengthening against the euro put us in a situation that our tax impact on repatriation would be less than it has been historically. That combined with other factors that you mentioned, which is the sense of the cash we had over there earning nothing in Europe.

And the low borrowing rates I alluded to made sense to bring that cash back now. And then obviously, pay the tax on the repatriation. Offsetting that was us locking-in at that time we took the decision to hedge the amount that we were going to bring back.

Since that time, the euro has re-strengthened and that essentially led to the loss on the hedge, which gave us the additional tax benefit..

And then I guess the next question is, I know the last two significant deals, I remember being Stelmi and then Mega Airless. As you look out the next couple of years and where would we likely see and in the name of Aptar, and I know that take for example the Stelmi deal.

I remember when you all bought them there was this expectation that because maybe the business you were buying wasn’t quite as super high end as what the Pharma business was. So nonetheless seems to have not created any diminishments in your margins.

And I just didn’t know if therefore, because of your ability to similarly businesses that maybe standalone or generating same returns but seem to improve when you buy them, if there is more out there and if it's likely to be in Pharma or just as equally likely to be in the other two segments..

Let me start and then Bob please fill. First of all, we’re active in the eight different markets and we look for opportunity across the portfolio. And pretty much for opportunities as you described, every deal you want to do is you look at how can we as the new owner, create more value.

And therefore, that did make sense both for the seller and the buyer. So there is no previous post buyer for one sector versus the other. As you can imagine, if you go straight auction assets in the pharma space can’t be hedged for enormous price.

And therefore, the value creation on top of that is very limited unless you have a very special situation, like we have with Stelmi. But if we find value creating opportunities in other of our eight markets we will act on those also.

The M&A pipeline and the M&A environment is obviously active with where equity valuations are, but that also makes it a little harder if you’re disciplined acquirer identifying those opportunities that will create value..

The only think I would add, Chip, is you’re spot on when that relates to the Stelmi transaction. I think our Pharma team did an exceptional job in integrating that with the legacy Pharma business.

And it really since that time have significantly upgraded the quality of the offerings that we have, the productivity, the value-added features that are now part of the product portfolio. And we're able to improve margins, as Stephan said.

Back then, I think we paid little bit less than 10 times EBITDA for Stelmi, and as Stephan eluted to, the environment has changed significantly since that time, which then makes finding these types of value creation M&A deals and Pharma little bit more difficult. But that doesn’t mean that we’re not looking in all areas..

Thank you. Our next question or comment comes from the line of Debbie Jones from Deutsche Bank. Your line is open..

The first question is around Pharma. I thought your comments in the release were to be a little bit more cautious. I realized your China call out the difficult comp. Can you just get a little bit more granular? I believe there was some tooling in the year ago period.

But is there anything specifically new that it's preventing you from seeing the historical growth rates that -- or more recent growth rates that you’re seeing?.

On the historical and future certainly no sign of concern in the Pharma business, the pipeline is rock solid and it keeps building the teams executing. So I think what we really want to highlight is the comparable in the short-term..

And Debbie just as a reminder, Q3 last year was one we had announced significant tooling sales of about $11 million in our consumer out care business. And then I don’t believe at that time we could mention the project, but you don’t know that that's related to the U.S. elegant project for the ophthalmic squeeze dispenser.

So that was a sizeable one time type of tooling impact, and that's a little bit what we’re calling out..

The growth in Food & Beverage, and how much of that was just related to -- I think you mentioned the benefit in China with the heat wave, I imagine that’s flowing through there.

Could you just comment on that and then just one quick question on guidance?.

On the heat wave, that actually happened earlier this week, so that would not be in our results. And we certainly didn’t bank on that when we gave guidance for Q3. But clearly, if you have a good summer, in general, that's always good for the beverage business.

I just wanted to come back on the Pharma point, because I mean we all are very happy with the Stelmi deal, which I talked about that. But recognize we are starting up the Congers facility. So until it is fully operational, we will have the start up cost, which is also part of the Q3 guidance..

And just quickly, just with the variability with the stock-based comp accounting.

In your guidance, is there any consideration of providing a different type of guidance, going forward, for us just to given that into the cost and variability or estimates?.

Debbie, it's virtually impossible to predict. I mean, I think sitting back a quarter ago this time, I don’t think any of us had expected all the packaging stocks to move up like they did in the quarter. And that obviously encouraged employees to exercise option in the quarter.

So what we plan to do is look at it on a historic leverage and give you a essentially 2% tax range guidance, going forward. And then I think I mentioned that we’re putting in bakes in that tax rate guidance is essentially $0.02 positive coming from that.

But honestly, it could be zero next quarter, it could be $0.8, a lot it is depend on what will happen..

I mean on the road, if we’re trying to be quite explicit about this effect because like you all, I find it not easy and maybe not helpful if you really only look at the EPS. Because you really have to forecast the stock price, you have to forecast exercise activity of employees. And frankly, you guys are probably better in that game than we are.

We are focused on running the Company..

Our next question or comment comes from the line of Chris Manuel from Wells Fargo. Your line is open..

Just a couple of questions, one follow-up on the Pharma piece just so I understand it right. Did I hear you correctly that tooling last year was $17 million in the quarter in the Pharma piece and that X if we make the adjustment for the tooling piece out and make it a more normalized, I don’t know 8 or so a quarter that you would still.

Is your anticipation that that business is still growing?.

I don’t have the exact figure of the Q3 Pharma tooling sale. But it was -- the specific tooling item, I called out and that we called was about $11 million in Q3 last year..

I'll come back to my notes, and I think I had 17 or something was the total tooling or the change last year, but….

It's possible I mean we ran about $5 million this quarter or so. Yes, 17, in total. The exceptional item that we’re calling out is the 11 on top of the normal tooling sales that we would have..

So I guess we’re going with this. So as you’re calling out and its going to make growth difficult.

So absent the tooling, is there any reason to expect the growth won’t still be present?.

No I mean we’re expecting product sales growth in Q3..

The second, Stephan, is as you look over the portfolio, appreciating and thinking back, it's probably been about 10 years since you bought some of this metal decorative capability, I think the piece over in France.

Are there other areas in the portfolio where perhaps -- now you’ve got to know the operations over the past six months or so, that you would say are potentially short on capacity where -- so you don’t have issues, your problems like this in the future that you want to potentially build so you don’t -- so you can stay ahead of the curve.

How do you feel about capacity across some of your key technologies?.

Chris, I just want to jump in for a second and I’ll let Stephan comment. I think what's important to note about the decorative business, as Stephan point out, it’s different than a normal molding assembly high speed high volume type activity. It is truly a job shop type operation with custom decorative very creative special projects.

So it's less the question of equipment capacity its more equipment as a capabilities and the complexity of the projects and the technologies that we have.

So as Stephan said, even though you could be running fine one-time, you get a very complex project that requires a lot more attention to that particular project and it detracts from some of your base business; so very different than our core business in terms of capacities. I mean we constantly look at capacity utilization across the business.

And I think we do a pretty good job of anticipating where we need to add capacities..

There is really nothing to add here. Of course the question behind your question is okay what's going to fight you next. So at the time, it's not going to fight us. Having said, this is quite in the attractive area in the high premium and of the Beauty world.

So that's why it has such an impact if we’re not executing on it and I guess the corresponding attention..

That really was across the question is where else might you need something. So I appreciate, now it's a little different process. With respect to the start up at Congers, is that still in a start up mode and that it's being expensed. Or when does that flip and what all stuff would you be doing there besides, I know you’re doing washing and finishing.

Are you also going to do any coating or things of that nature up there?.

So all the start-up expenses are being expensed, Chris. I mean, obviously, we had to step up. We had to hire quality people, technical people, which obviously have very different profiles than our base business. We’re doing line trails Stephan and the Board and management visited there this month.

And in fact there is a whole team already geared up running line trials and things like that. All that cost is without any sales..

So as a patient who gets their drugs injected intravenously, you will be very happy to understand how much and thorough the qualification of these things are. I mean it is minimums of quality data, quality verification by the clients, by the FDA. But there is nothing out of the ordinary it's just part of being in the Pharma business..

And specifically, Chris, to your question on coatings and things, that's done really at the frontend of the process, the mixing and the extruding side. You’re correct in saying that we’re washing and drying the components and packaging them. But the coatings side would be done back in France..

Thank you. Our next question or comment comes from the line of Brian Rafn from Morgan Dempsey. Your line is open..

Stephan, you mentioned a little, I caught it very early in your and obviously you said that I think you said the fragrance markets were below your expectations. The weakness and obviously you talked about the decorative, perhaps in France.

Is the weakness in end market and the mass market volume side, or is it on the up-skill for steep side?.

Clearly, in this quarter, the upscale prestige overshadowed everything else given this hiccup at the decorating facility, that’s really what I was referring to..

I mean the prestige the actual fragrance pumps in prestige were pretty stable. But we were down on mask pump, which again is not related at all to the decorative side that we talked here..

Is it a little early to look at expectations for Christmas orders in the fragrance side that maybe more of a third quarter comment?.

Exactly, I think, we sharpened our pencil to give you guys the best view on quarter three, but we’ll give you quarter four when we get there..

Bob, you mentioned once in the past with the depth of them all is not it really goes buy to some retailers getting a tombstone.

You had talked about the opportunity for caps and closures with the Internet retail, and you can't send stuff in a box where a bottle of detergent opens and spills all over somebody’s shirt or a book any development there, any ongoing.

Is brick and mortar dies, what's your sense of new projects in that Internet area?.

I mean I think across really all our segments, we’re seeing increased activity through the ecommerce channel and providing opportunities for using our sealing technologies and locking type actuators and things like that. Nothing I can specifically speak to right now.

But it's definitely something that is becoming much more talked about when we’re visiting customers. And certainly, we’re actively promoting all the features that we have in learning about all the challenges that our customers are facing in this channel..

With operations all over the world, I am going to ask if you look at capacity utilization, you look at overtime shifts that you’re running. If you look at the spectrum between the high and low, maybe pharmaceutical on one side Beauty & Home on another side, and then by geography.

What would be the area of your lowest capacity utilization, and what would be the boundary on the higher side?.

It's hard I think, Brian, as we spoken before. Our capacity is very much linked on a product line basis as the assembly equipment tends to be very product line specific. I would say with the decrease in volume that we’ve been experiencing in the U.S. over the past couple of years, I think our capacity is probably lower in the U.S.

We’ve done everything we can to reduce headcount commensurate with the new volumes. But certainly, I think we’re very well situated for any increase in activity to absorb that capacity. I think, Europe, is generally overall decent shape and I don’t really see any big holes or any bottle mix, at this point.

I think it's something that we’re comfortable with, going forward..

As you know, we’ve talked about it previously. The only facility we have on the books that we’ve talked about is the Guangzhou facility in China that we’ll open in 2018..

We have a follow up question from the line of Mark Wilde from BMO Capital Markets. Your line is open..

Stephan, I wondered, you’ve mentioned last quarter this sales and marketing realignment you were going to focus more on prospect targeting new business development. I think you mentioned a little bit of this earlier.

But can you just update us on that process?.

Look, like in every other -- in every function, whether its box function or it's our function, sales and marketing also has ways of doing things better or to do it. And when you come in from the outside, one of the benefits is you bring different view and maybe a calibration of what excellent looks like.

So within all the things that need to happen in sales and marketing, clearly, particularly with our growth rate challenge, we are making sure that we have very good transparency and accountability for what is the new project pipeline, what is the new project discussion with customers that we create accountability for project conversion and the project execution.

And like in every business what gets measured gets done, so just providing this accountability and the leadership that then follows up results in people getting back on the front foot with customers.

Sometimes you get thrown out the front or you come into the back door, it's just a matter of being more mindful around how you go about sales and marketing in the more competitive environment, it's important that you do that well..

Thank you. Our next question or comment is a follow up from the line of George Staphos. Your line is open..

One last one here and maybe there is a question better asked on the Analyst Day. But Stephan, if we think about the Company, you talked about trying to get on the front foot in terms of growth and you felt very good about the new product pipelines specifically in Pharma and Food & Beverage and even in Beauty & Home, that's improving.

And so that mix, I would think, would be a benefit to margin. On the other hand, you mentioned that no doubt you've lost some market share and you have to regain some momentum and those initiatives would tend to depress margin. So as you think about the margin profile for Aptar over the next number of years.

Do you think the new product pipeline can offset the downward tendency that would naturally, just for any company, as it tries to regain market share and fight off competition? Thanks guys, good luck in the quarter. See you in September..

Of course there is a third element that comes into the mix, which is innovation, which we haven’t talked about. You focused quite a bit to make sure that your new introduction at higher profitability to offset the fate that you are quite right to describe, that's the nature of every business. So we’ll talk about that more in future interactions.

But clearly, we’re also fine tuning our innovation efforts to make sure we continue to stay ahead of the phase and that we maintain our overall profitability. I would just reiterate that there is nothing here that is eminently addressable.

We have clearly tried to be transparent with the issues that preps-up in the quarter two, we’ve got our sleeves rolled up and have a sense of urgency to address them. Overall, there is a very good future for the Company. We are becoming more customer-centric with a greater focus on regional empowerment and building the pipeline.

We will aggressively fight back in the Beauty & Home business, getting back on the front foot and taking advantage of growth areas like color cosmetics and facial skin care and ecommerce.

We have ample of growth opportunities in Food & Beverage and feel very, very good about our Pharma pipeline and already Investor Day for what will drive revenue of five to 10 years from now..

Thank you. Our final question or comment is a follow up from the line of Adam Josephson from KeyBanc. Your line is open..

Just one more is longer term question I know your goal coming in was to accelerate the Company's top line growth. And I know it's very early days along those lines. But just when you look at what continues to happen in Beauty & Home with the weak macro conditions, competitive market conditions.

Those pressures have existed for three, four years and then they don’t appear to be going away. So can you just help understand what exactly you envision will be different under your leadership that didn’t exist before, because it seems like you’re dealing with the exact same problems that your predecessor did..

Look, let me not contrast but simply say what are the things that we are focused on, and I think we talked about them very clear accountability and transparency for new customer projects, clear focus on customer projects in driving growth in one regional business unit at a time, if you want some more empowerment in the regions.

I talked before about that we got to be where the growth is of course in the proxy segment that also means more in the high growth economies. And clear aggressiveness to make sure we don’t yield ground, and maintain share. I understand the concern about profitability, but of course that’s a job description you’ve got it coming with innovations.

You’ve got to work the cost side of it to make sure you -- with that share aggressiveness, you maintain your profitability. When you come in from the outside, you bring different expectations and calibrations that also mean that you bring when you raise expectations, you need to bring additional capability to the task.

We’ve been quite clear about some of the additional people we’ve brought to the game, whether it’s new business development in Asia, whether it’s leadership in North America. There are number of other leadership changes that are more internal that we haven’t talked about. So it's also just bringing the right resources to the task at hand.

And with that, every improvement effort takes a period of time. I'm not going to give you a deadline. But I certainly haven’t done anything like this that doesn’t take at least 12 to 18 months to bear significant fruit..

Ladies and gentlemen, that concludes our Q&A session. I would like to turn the conference over to Mr. Tanda for any closing remarks..

Thanks very much for joining us. I think we had a very good discussion, and see you all in September..

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day..