Matt DellaMaria - SVP, IR Stephan Tanda - President and CEO Bob Kuhn - EVP, CFO and Secretary.

Matt Krueger - Baird Molly Baum - Bank of America Mark Wilde - BMO Kyle White - Deutsche Bank Adam Josephson - KeyBanc Capital Chris Manuel - Wells Fargo Securities Brian Rafn - Morgan Dempsey John Anderson - William Blair.

Ladies and gentlemen, thank you for standing by. Welcome to Aptar's 2017 Fourth Quarter and Year End Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. 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 of the financial details and then 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 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 website and we undertake no obligation to update the forward-looking information contained therein.

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

Thank you, Matt, and good morning everyone and thanks for joining us this morning. As you saw yesterday, we reported a good fourth quarter. We realized a robust top line performance. Each segment achieved core growth that exceeded the high end of our long-term targets.

I was particularly pleased by the fact that sales increased in each end market and in each geographic region. There were several items impacting our bottom line results, Bob will review those, some of the details in a few minutes and I will come back later to discuss our business transformation plan which is off to a good start.

Our Beauty & Home segment achieved core sales growth of 10% in the quarter, thanks to a particularly strong recovery in the beauty market. Both the U.S. and Europe had good retail sales and our transformation initiatives are starting to take root and deliver growth. Profit margins in the segment were negatively impacted by rising raw material costs.

We're making progress, improving the performance of our decorative facility in Europe; however, we still have further to go; and compared to the prior year, this is still an earnings drag albeit getting smaller. Our Pharma segment kept another excellent year with strong finish and core sales growth of 11% in the quarter.

This business continues to excel in drug delivery innovation in meeting and exceeding increasingly challenging regulatory standards and in participating and partnering with customers to bring to market extraordinary medicines and treatments some of which are life saving, such as Narcan the antidote for suspected opioid overdoses, delivered by our easy to use single dose nasal delivery system.

In the quarter, demand for our nasal spray and saline systems was particularly strong due in part to the aggressive flu season in the U.S. and in Europe. As many of you are aware, we have invested in additional capacity at Congers, New York facility to better serve our U.S. customers in the injectables market.

Our customers have demonstrated great interest in our new capabilities. After extensive audits and tests, I am pleased to say that our new capacity has been validated for key product references. Customers have begun to receive samples and we expect the gradual ramp up in activities throughout 2018.

Our Food & Beverage segment also had a strong fourth quarter with core sales growth of 11%. This segment continued to expand and grow in new categories like infant nutrition and premium bottled water while growing our market shares in key mainstay categories like condiments.

Looking back to my first year at Aptar, it's been a rewarding year yet marked without some challenges; however, true to our name our great team has rallied to adapt to strategy, reignite passion around the customer and power challenge the people and set the direction for future growth.

The progress through the year was very gratifying and solidifies my optimism for our future. Our strategy for the coming years can be summarized in the following points. Number one, successfully execute the transformation with a focus on Beauty & Home and select G&A functions.

Number two, drive organic profitable sales growth included in added emphasis on high growth economies such as Asia and the Middle East. Number three, raise the bar on innovation, operations and commercial practices towards best in class.

Number four, to develop and recruit international talent with an eye on greater reclusiveness and diversity and higher expectations for leadership up and down the lines. And last not least, number five, pursue strategic M&A including partnerships that will enable us to gain new technologies and/or enter new markets.

Executing these strategies will ensure that we will achieve our long-term financial objectives and position the Company for continued success for many years to come. We have great people, great products and knowhow and our markets are very attractive.

Further our ability to generate strong cash flows with an already strong balance sheet enables us to take advantage of strategic opportunities, while we continue to return value to shareholders. With that, I will turn it over to Bob who is going to walk through some of the financial details that is impacted the quarter.

Afterwards, I will come back and elaborate a bit more on our business transformation..

Thank you, Stephan, and good morning everyone. I'll briefly walk through some of the details concerning our fourth quarter results. If you're following the slides we published with the press release, you can to Slide 4. We reported excellent sales growth of 16% that was comprised of core growth of 10% and currency effects of 6%.

Sales increased across each end market and geographic region. As you saw on our press release, Beauty & Home core sales keeping currencies constant increased 10%. Looking at sales growth by market on a constant currency basis, core sales to the beauty market increased 12%. This was mostly due to the continued strength of the cosmetic market.

Core sales for the personal care market increased 8% due to broad based market growth, and finally core sales to the home care market increased 3% from the prior year. When we look at profitability, our Beauty & Home segment had an adjusted EBITDA margin of 13%.

Margins were negatively impacted by higher raw material cost of approximately $3 million and operational issues at our new decorative facility in Europe that accounted for approximately $2 million compared to the prior year. Our Pharma segment achieved a core sales growth of 11% and an EBITDA margin of over 34%.

Core sales to the prescription markets increased 17% primarily due to increased demand for our nasal spray system used with allergy treatments as well as increased demand for our metered dose inhalers for asthma.

Core sales to the consumer healthcare market increased 7%, driven primarily by increased demand for nasal spray systems used with the over-the-counter decongestant formulas as well as spray systems for nasal sealing rinses. Lastly, core sales to the injectables market increased 4%.

It was also a very good quarter for our Food & Beverage segment, which achieved core sales growth of 11% and an adjusted EBITDA margin of 16%. Margins were negatively impacted by higher raw material cost of approximately $1 million.

Looking at each market, core sales for the food market increased 8% primarily due to continued growth in our infant nutrition and premium bottled water business and steady growth in the condiment business.

Core sales for the beverage market increased 18% in part due to strong demand for our range of sport closures for the dynamic bottled water market and also due to an increase in custom tooling sales. If we isolate product sales, we were up 12% in the beverage market. Tooling sales accounted for the other 6% of total core sales growth.

Comparable adjusted earnings per share totaled $0.81 compared to $0.77 in the prior year. On Slide 5, we can see that our adjusted EBITDA for the fourth quarter rose 9% and was negatively impacted by the higher raw materials and higher corporate costs. I'm going to jump to Slide 8 and touch a bit on U.S. tax reform as this is a hot topic.

Because of our international structure, the reform has a neutral impact on our effective tax rate in the near term. There were certain taxes that are outlined in Slide 9 that will put us back to an effective tax rate range very similar to what we had before the reform legislation. Slide 10 refers to our outlook.

We are expecting earnings per share for the first quarter to be in the range of $0.90 to $0.95 per share using an expected tax rate for the first quarter of 27% to 29%. This compares to currency adjusted prior year earnings per share of $0.91 at a lower 26% effective tax rate. I have a few other details to share and then I'll hand it back to Stephan.

Cash flow from operations in the quarter was approximately $53 million. Capital expenditures were approximately $37 million. And our free cash flow was approximately $16 million compared to $87 million a year ago.

The primary reason for the decrease in free cash flow relates to our decision to make an additional contribution of $20 million to our pension plan and changes in working capital. For the year, free cash flow was $160 million compared to $197 million a year ago.

The primary difference being capital expenditures, which totaled to $158 million this year compared to a $129 million last year.

Looking at our balance sheet capitalization on our growth basis, debt to capital was approximately 49% while on a net basis it was approximately 29%, and we remain slightly over one-times levered compared to our trailing 12 months adjusted EBITDA. At this time, Stephan will briefly comment on our business transformation plan..

On Slide 11, we have summarized our expectations regarding the incremental EBITDA coming from the business transformation. We expect to achieve an increment of approximately $80 million on an annual run rate basis at the end of year three.

We will gradually see some of the incremental EBITDA in 2018 and expect that it will be fully realized over the course of the next three years. A key goal of this transformation is to reignite our entrepreneurial spirit, if you want to return to our entrepreneurial roots throughout the organization.

We are taking a customer centric approach to everything we do. The transformation plan primarily focuses on our Beauty & Home segments along with several G&A functions.

We have scoped out a significant range of specific detailed projects and initiatives expanding across commercial activities and strategies, procurement, operations and general and admin functions.

We anticipate one-time cost to implement of approximately $90 million over the three-year period with the cost being similar to a typical program of this nature and being more frontend loaded than the incremental EBITDA, which is more ratably realized over the three years.

These costs are really an investment in our future to raise the performance for the long-term including making sure we have the right skills and resources in place to succeed. We will also have some capital investment and as Bob mentioned, those are included in our 2018 forecasted capital numbers.

We expect to fund those additional project through cash generated from improvements of working capital. Also included in our transformation plan are steps to improve our organizational health and effectiveness.

I am the firm believer in best practices around safety performance and for reengagements leadership and open frequent communication at all the levels within our great company. Slide 12 is a reminder of our long-term financial targets by segment and for Aptar overall.

We are reaffirming these targets after completing an update to our five year plan including this business transformation that we have begun. One additional point I would like to make is related to our incentive compensation both short-term and long-term.

With the creation of more empowered accountable regional teams, we want to closely align performance with reward and our short-term incentive compensation will be primarily tied to EBITDA and growth. For our long-term compensation, we want to continue to fully align with shareholder interest and grant equity awards.

However, we are moving away from stock options to a mix of restricted stock and performance shares tied to total shareholder return and return on invested capital. For 2018, this new plan has been implemented for senior management and will be put in place for all other employees receiving incentive compensation in 2019.

In closing as noted on Slide 13, I'd like to sum up our key messages as follows. We've returned to core sales growth across all segments and for Aptar overall. Our business transformation is underway and it will reenergize our customer centric approach and entrepreneurial spirit and is already starting to create opportunities. The effects of the U.S.

tax reform are more or less neutral for us giving our relatively large international presence, and we've a positive outlook on the first quarter of 2018. With that, I'd like to open it up for questions..

[Operator Instructions] Our first question comes from Ghansham Panjabi with Baird..

This is actually Matt Krueger sitting in for Ghansham.

Can you talk a bit about how the business performed during 4Q versus your own internal expectations? And can you provide some added detail on any variation relative to what you were originally thinking when you gave guidance in October?.

Obviously, we are quite happy with the performance and it really has gained theme as the quarter progressed and clearly stronger than what we guided you. And it's probably a number of factors. One is, need to see the result of all economies growing in sync and consumer confidence being strong.

Secondly, related to that it's just the absence of any surprises that usually happen and that you guard for. And last but not least, clearly the transformational efforts in particular some of the commercial excellence efforts that we started early in the year particularly in North America really starting to bear fruits.

So, it's really a combination of all of these factors..

And then given that your release cited an expectation for continued momentum into 2018 and in the first quarter.

What are your volume expectations across each of your three businesses for the upcoming quarter and then for 2018 overall as well?.

We really don't give guidance by segment, but clearly I think we've all seen that we had good retail season, the end of the year which bodes well for the first quarter and the trading environment looks positive..

And then just as my for my following question, I think one of your beauty customers reported a strong quarter in China recently.

Have you seen any acceleration in that market then beauty performance by region would be helpful as well?.

So, we did have a really strong Q4 in Beauty & Home in Asia. So if going back throughout the year, it was a bit lumpy. We started to see some growth in Q3, but it really did start to accelerate in Q4. So, you're correct we've got assumption.

And then actually if I look -- yes, if I look at all the, look at all the segments combined, we were up 9% in the fourth quarter in the U.S., 9% in Europe, 16% in Latin America and 19% in Asia for an average of 10% core sales growth..

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

Hi, this is actually Molly [ph] sitting in for George. Thanks for taking my question.

So, what I wanted to ask was; what are the major sources of performance improvement in your transformation program? And related to that, why are you confident that it will improve growth in the Beauty & Home segment?.

We talked about some of this before, but maybe I think it’s helpful for everybody to lay out what are the key pillars of the transformation. Clearly, commercial practices and sales growth are on the top of the list, that starts with basis things like going after business, we lost in the past for example in aerosol valves in closures.

That involves installing a very rigorous sales pipeline management system with a weekly cadence to drive business, to drive product launches, to support the sales force in North America that is up and running and functioning very well.

It's about accelerating new product introduction and it’s also about better segmenting our customers and market segment, and adjust pricing particularly for low volume or lower margin product.

On the manufacturing side, it’s really all about improving operations and just give some examples, for example adding collaborative robots to reduce the amount of repetitive labor and while also improving quality for installing automation at to eliminate the manual loading and unloading of components.

We have several major scrap reduction initiatives at different sites going on. And also initiatives to reduce downtime, but installing software to better measure the different components of downtime and then systematically eliminate them.

In purchasing, it’s really the whole toolkit for example leveraging our supplier network in metal parts to design and manufacture components with less material waste or lower thickness. Packaging cost reductions by consolidating our purchasing across sites.

Raw material substitutions to lower great materials in non-critical components, consolidation of suppliers, reduction of STUs in our MRO spare parts department; and then also several activities around G&A, which maybe Bob can elaborate on..

Sure, Molly. So on the G&A side, while not the biggest part of the transformation, it is a very important enabler to the growth of the business.

So on the G&A side what we're looking for specifically is to implement more automation, more harmonization and centralization of some of our finance and HR functions, so that we can better flex and leverage with the expected growth of the business.

On the [IS] front, we are looking to accelerate the implementation of some of our standardized ERP platform, which is going to help us to better support of the finance and HR, and the manufacturing size of business as well as allow us to some set some of our older legacy systems and reduced some of the overall maintenance costs..

Our next question comes from Mark Wilde with BMO..

I wanted if you can just talk with us a little bit about sort of where you are from and M&A perspective? As you said, you've been in for a year now you're are very familiar with kind of company and the different segments.

Where are you in terms of looking at kind of potential opportunities for growth through acquisition?.

Yes, look growth through acquisition as I mentioned, clearly one of our key strategies. I think both as not as secret as we had went after one in Q3, but in the end they didn’t make it on price. So I guess the good news and bad news, we remain disciplined around price.

Clearly, it's a challenging environment from a pricing point of view, but we continue to evaluate opportunities to across all three of our segments. And if we commence, we can create value than we will go for that and clearly maybe the future will bring additional opportunities with clearly the valuation are rich and we need to be disciplined.

I have to say the best investment is certainly investing in our own company. And when you look at the returns of our capital expenditures as well as sort of transformation, those are very attractive returns. And I think that's a best use of our shareholder funding at the moment..

Okay and if I could just follow on. When you first came in, you talked about being more focused on Asia that if you looked at sort of where that growth potential was in your business it was greatest in Asia.

Is that something that you would say still hold through, so if we see you making acquisitions, we should assume they are going to be skewed toward Asia?.

Look with acquisitions, you can kind of cast the pretty broad net, but in the end you cannot schedule them in. And certainly, the right acquisition in Asia would be very welcome, but it needs to perform to the same criteria as any acquisition would.

But clearly what's going on in China, I mean I cannot say there any strong or China is the nation up to the United States and to Europe. And there are plenty of opportunities, but it's a competitive environment. And you need to compete for the opportunities. We are adding talent in the region.

I'm very happy with our new Head of China and these putting strategies in place and strengthen the talent bench below him. So this is continued to be a focus..

Our next question comes from Kyle White with Deutsche Bank..

I'm just wondering actually Bob you said LATAM sales were up 16%, if you can chime in just dig into that a little bit.

What was driving that? Do you expect this kind of demand to continue on in 2018?.

Yes, I mean for us the biggest waiting in Latin America is going to be in our Beauty & Home business. And really what we saw as we saw really solid growth in both the personal care and the beauty markets..

Our next question comes from Adam Josephson with KeyBanc Capital..

Stephan just a couple for you, I think if I heard you correctly, you've talked about returning to the companies entrepreneurial roots in your prepared remarks as it relates to the transformation plan. That seems to apply to the Company, if you're aware from roots in nearest past.

Can you elaborate on that?.

Well, I mean you really have to draw a very broad arc if you remember it, and not going back into the 80s and 90s. The Company was put together by combining probably a dozen entrepreneurial companies built by owner founders over the years. And then that was all came together under the upfront umbrella and brought to the stock market in '93.

By the way, we celebrate 25 years later this year as a public company. Then the management team has really done a nice job of building a global company, U.S. publicly traded company, and the last let's say decade really putting all the governance processes in place and that you would need for publicly traded company the ERP systems.

So I couldn't be happier with all of that in place and now it's just time again to reinvigorate the top line and having all these systems in place allows me to focus on the frontend of the business and rejuvenate the front end of the business.

And in our particular segments, that's really done the best way by giving regional teams the autonomy and accountability to perform the markets, and we've also seen a shift in our customers even when you look at companies like Nestle or L'Oreal, they are giving much more accountability to the regional teams because at the end of the day the new consumers, they make their decisions on their purchases locally, and that means our customers make purchases the purchasing decisions locally, that means our teams need to be able to put their best foot forward locally.

So long story, but basically part of the transformation is to in part partly create and then partly really make sure that these regional teams had all the things they need to be successful and have the right leadership in place and that they're held accountable and rewarded to perform at very favorably this competition..

And just one more for your Stephan and one for Bob before I go, on the change in incentive comp, correct me if I am wrong. I think short-term comp has been tied to EPS and ROE for the past many years and now you're saying I think EBITDA and some growth that I couldn't hear what the growth was.

But why do you think EBITDA and whatever the growth was are better benchmarks for you than EPS and ROE? And same question goes for the long-term comp?.

Well, let me kick off and then Bob, please fill the -- one is the short-term comp was really versus the three year trailing average. So the big change here is really the -- really tied to the annual performance, the short-term compensation really rewards annual performance.

And indeed something that particularly the local team can really put their arms around -- get their arms around and EBITDA and top line growth, but with much more emphasis on EBITDA is something they can easily get their arms around. And at the long-term..

Yes, the long-term while even in the short-term, I was going to say if you looked at it the top line we've been struggling the last several years and EBITDA has also been somewhat ranged down over the last several years part of that due to currency.

So I mean those are two areas that we want to place a lot of emphasis on in growing the top line and obviously the bottom line and then that kind of why we're on those metrics as it comes to the short-term incentive. On the long-term incentive, we’re essentially trying to better align ourselves with shareholder value, right.

So components of the long-term incentive is going to be based on total shareholder returns as well as focusing on return in invested capital. So, again a good balance between the short-term top line bottom line growth as well as investing the shareholders' money effectively in growing both of those two capital returns..

Thank you, Stephan. And just one on the reaffirming the long-term growth targets so I know you had your best core sales growth quarter in four years which is really exceptional.

Even with that though your full year core sales growth of 4% was at the low end of that long-term range and over the last three years that's the best you've done to be at the low end of that long-term range.

So I guess what gives you confidence that that 4% to 7% long-term range is in fact achievable? I know that this transformation plan is part of it, but can you just talk a little bit about that?.

Sure, and I think I've been in the job for one year and several you rightfully asked me, hey, you inherited those targets, they were last updated I think in the fall of '16.

What do you think about them? And I think the qualitative answer I provided looking at our end markets that a really positively supported by macro trends from demographic to geographic development in aging populations so on.

I see no reason why we shouldn't grow kind of in the mid single digits and given our technological strength why we shouldn't have this returning portfolio. That was qualitatively. Now at the year end, we have done this over a process of updating our five year plan.

We've done a very thorough bottom up design of the transformation and putting this altogether really gives me confidence that, yes, indeed we should with the market we're serving with the capabilities we have and with the plans we have in place that we should perform in those ranges..

Thank you. Our next question comes from Chris Manuel of Wells Fargo Securities..

A couple of questions regarding some of the targets in the thinking here. As you kind of talked about things, Stephan, you talked about doing some work.

I guess where I'm coming is, do you think you can add some capacity in this process? It sounds like you're trying to free up some manufacturing, do things more efficiently, but where do you stand on capacity standpoint? Will this help you perhaps defer some capital a few years down the road? Or how do you think about that?.

Well certainly every time you improve the efficiency of operations, you cannot find the hidden factory. That serves certainly from a footprint point of view. We got plenty of real estate and plenty of factories to create capacity. So that will not be an unreasonable assumption, but let me leave it there..

Well, the second question I want to ask kind of along these lines in the same topic where when you think of this 80 million saving.

Is it kind of come a third to third as you work through? Does it take a little more time to get some attraction? Is there -- how do you think about? Are there certain efforts on the sales side that may take longer to get after or some on the cost side that are quicker?.

All of the above, so we don’t want to give you to multiply with 33% for the first year and then second and third year. Clearly, the one-time cost of frontend loaded and then the EBITDA benefits are coming in, starting this year, for next year and the year thereafter.

I also would like to say that really the heavy lifting of the transformation is the first two years and we've already begun within the benefits really rolling over into the third year. So this is not that we are going to be doing projects for three years in row, but the heavy lifting is in the first two years..

Just last kind of follow-up on the topics for Bob. If I will take your working capital or the portion of sales, it's been 14% to 16% I think you finished the year close to 16%. The 50 million you take out that will take you down a couple of percentage points.

Where do you think is the long-term reasonable spot for that to be? I mean I've always spot that Aptar's perhaps could be a little higher than some others because you are managing a faster growing business than some other folks, but a lot other companies and your peers and your spacer in that 12% to 13%.

Is there opportunity to even go further through time? Or how do you think about that?.

It's a good question, Chris. We haven't picked the target, but I think with our footprint and primarily being European base, I would expect that to be a slight bit higher than some of our peers who tend to be more domestic base.

Having said that, a lot of the efforts in this transformation are around manufacturing and supply chain, and procurement as Stephan mentioned. So the area that we would like to drive down is the inventory side of the business and that's certainly something that we can control.

On the payable side, we're also going to put a strong effort in there and we think that's scenario that we can make some significant improvements in. The big challenge remains for us is on the AR side, right.

I mean on the AR side, you've seen a lot of customers push out terms particularly in the lower interest environment, using discounting with banks at very low interest rates. If you want to get paid sooner certainly with our strong balance sheet that doesn’t make a lot of sense to us.

If we wanted to artificially drive or down even further, should we need to cash, we could certainly discount some of those with some of our customers.

So long and short of it is, is the focused area for us right now is around inventory and payables, and I think there will always be a slight delta probably between us and some of our more domestic based competition..

Our next question comes from the line of Brian Rafn with Morgan Dempsey..

Can you give me a sense, how was your Christmas season maybe in the cosmetic and beauty area, and then if you can just kind of segment maybe the mass market perfume market from the prestige the high-end premium?.

Look overall clearly a consumer sentiment is positive both in Europe and in the U.S. and if you may have followed the Europe had its best quarter, the economic performance in the long time. And also France doing very well and that really then accounts for the prestige but also for the more the assets side of things.

And now of course, if things move really nicely in the shop in December, that doesn't impact our sales, the supply chain is too long but it certainly bodes well for replenishment.

The other thing I would like to highlight in those -- some of a lot our sales are into Europe in the prestige segment, those -- the finished products tend to up increasingly in Asia, the luxury and in China is growing rapidly, the same for travel retail, across Asia and those wealthy Chinese also spend very heavily when they are on the road so to speak..

Stephan, you mentioned a little bit about regional teams and more localized markets.

Does that fragment the product line launches or the life span of product cycles? Where you might have something in the container packaging, there might have been a three or four or five year product, 10s of millions of units, as you become more localized, does that mean shorter term products and not the same volume, but certainly a broader because you had so many little local fragmented niche markets?.

Well, it's an excellent question and certainly something most of our customers are wrestling with, if you think about the challenges that the big CBG companies had is, they're let's say all the approach of global brand, global SKUs just didn't win the day anymore and customers were voting with their feet to kind of go with smaller independent brands with local brands.

And the response is now that those local companies buy up those smaller brands and independent brands and integrate them into the supply chain, and we just need to be responsive to that. I think the main part of what we do is really making sure that the local teams have all the capabilities.

They need to be responsive to customers and make sure that we have a winning proposition on the table. Most of the time that still includes the same engine for the pump, for example that we use globally but tailored with maybe local decoration, local package.

And most importantly being able -- having the right people around the table to make the sale to the customer and then ensure their confidence that we can deliver locally.

So, it's more about how we organize ourselves and kind of making the value proposition to the customer, not necessarily that we're going to proliferate a whole bunch of products, we are still going to keep a small group globally to kind of overlook to the long range product line up..

And then just by product some of the innovations you guys had over the years, I am just wondering if you have any new applications, I am thinking SimpliSqueeze, your BAP Bonded Aluminum to Plastic, Blister Packs, Mega Airless, Bag On Valve, anything that you're certainly your nasal sprays with the metered dosage.

Any developments there, new products, new areas, you mentioned a little bit of growth I think in the condiment area, you get a very broad section there.

I am just looking at kind of new product application?.

I appreciate the question. I know usually, we kind of rattle off a whole bunch of new product introductions.

We thought this time, we had enough news not to do that, but clearly innovation is our reason for being allowing our customers to innovate using our innovative dispensing closures and we have new adoptions in all the things that you talk about whether it’s a bath, whether it’s a value, whether it's a pharma adoption.

And that is what we're doing for a living..

I would say Brian, probably, the most significant and it's not new, it's been out in the market for a while, but one that we're seeing is to gain some really nice traction as the ophthalmic device in our Pharma business. I mean that's a new type of dispensing system that we continue to see good wins from.

And then we talk about earlier in the year how we're investing into some connected device technologies to add on to the ophthalmic device. So I mean we're focusing really on all three areas of innovation, right.

Improving the existing products, revolutionizing some of that and then also spending a little bit of time looking at disruptive type technology as well, so that's probably all I can say at this point..

Our next question comes from John Anderson with William Blair..

Wanted to ask about pricing with raw materials up, to what extent did pricing contribute to the core growth or maybe to what extent did pricing contribute relative to recent quarters? And then if you look to 2018, particularly the first quarter what are your expectations for pricing contribution there?.

John, I can take the impact on the quarter so I mean in terms of pass-through raw materials, it added about 1% to the Beauty & Home top line that was insignificant for the other two segments. And if I were to look at it over the full year, it added about 1% to Food & Beverage over the full year and was insignificant for the other two segments..

And in terms of outlook look we have a mixed bag in the U.S. clearly your raw material is more stronger firmer tone, but in Europe it’s actually the opposite. So let’s see how the quarter plays out..

Okay and you typically still working with is it about a 90 day lag on the pricing pass through?.

Yes, it's from one to three months depending really on the application the customer is on..

Okay, and then one kind of broader question as more volume or customers' volume moves online and I understand that's happening at a different pace in different end markets in different geographies.

To what extent you know if any does that affect how you go to market, your innovation focus and the overall complexion of your business? And how you serve those customers as that kind of end market migration occurs?.

Net-net, I would say it’s really a positive because the nature of dispensing closures that is dispensing something, but you don't want to dispense into the package while it’s on route.

So clearly customers look for better locking mechanisms, better safety devices to make sure that the package survives the proverbial UPS truck, and that allows us more opportunities to discuss the innovations or new adoptions with customers.

And yes, some of those brands might be smaller and independent, but then we also go through distribution and we catch them that way. Basically more demand in package is always good for us..

[Operator Instructions] Our next question comes from Adam Josephson with KeyBanc Capital..

Bob, one quick one on the core sales in the quarter.

How much of that outsized growth would you say came from improving market conditions versus just much better execution and you expected or have had in recent quarters and years?.

We've talked about that internally I mean I would say it's a little bit of both to be honest with you. I think some the initiatives that we had mentioned early in the year primarily focused on North America really started to take routes in the third and the fourth quarter.

So, we're positively impressed by that, and then I think the other side was just broad based geographic growth also helped. So I mean it's a little bit of above particular for us to kind of pin specifically how much on each one of those variables..

And Bob, a couple more, on the cost associated with the transformation plan, see the 90 million of cost plus the 45 of CapEx.

Can you just talk about what exactly is in those two buckets? And then, are we to assume that you'll just exclude that entire 90 million of cost from your adjusted earnings and future quarters?.

Sure, so the 90 -- I mean just the 90 million and 90 million is going to be made up of some project management cost, some advisors helping this implement some of these, some personal redundancy related cost overtime. And then there is some miscellaneous operating investments in training and things like that.

Our, yes, expectations is that we would highlight those as one time cost going forward in the 45 million of capital, it's a number of things it's investing in automation in our plans I mentioned a little bit I mean I have tried that we're accelerating some IS implementations to automate some manual processes, and it's a combination really of both of those two things, investments in the plans and some IS investments as well..

And then in terms of your 1Q guidance, the 90 to 95, what is the magnitude of the transformation cost that you are excluding from that number? And is there anything in that number other than the typical $0.06 of stock options comp that that are always drags down 1Q relative to the other three quarters?.

So as it relates to transformation, there was nothing baked into that in terms of any cost or anything. So we are really giving you kind of an operational comparative number in there, nothing in there on the positive or the negative side.

You are right on the $0.06 more heavy hit in Q1 and equity awards, the only other item that I would mentioned that's baked in there is because we prepaid about 159 million in the fourth quarter of some of our long-term debt, we're -- that had about a $5 million negative impact and interest expense in the fourth quarter.

We are anticipating in 2018 that we would get a slight reduction of the interest expense run rate of anywhere between the 1 million and 1.5 million for the quarter. So that would be one additional item that was baked into the Q1 forecast..

And Stephan, just one last one on the incentive comp change. Some companies are obviously reluctant to have sales growth as one of the metrics because managers would be incentivized the chase sales of the expensive profitability, right.

So what makes you comfortable that that won't happen at Atpar?.

One is that I tried to indicate that the weighting is heavily biased towards EBITDA, but we also wanted to frankly make a point that in the long run the company needs to grow and therefore there is a component although much less than EBITDA weighting on the sales growth..

Our next question comes from Kyle White with Deutsche Bank..

I was just curious on the transformation. I appreciate all the color and examples given, but the 80 million incremental EBITDA.

How much of that is driven by cost savings, operational efficiencies versus kind of the top line commercial activities and higher sales? Is there any way to kind of break that out?.

Yes, we really don't want to break it out indeed though, but probably the way I talk through them is kind of the order in terms of magnitude..

And then I was curious in terms of the U.S. tax reform.

Are you guys seeing any type of behavior -- change in behavior from the customers or from your competitors? Are you seeing any increased competition maybe potentially from competitors using the savings to investment price?.

No, I would pick out too early at this point I mean it is truly far more complex than what you're hearing out in the market from an interpretation standpoint. So other than some industries talking about on-shoring more manufacturing, I mean in our specific space what I have seen any changeable changes in behavior related to the reform act.

But it is definitely something that's got everybody looking at studying, how to minimize some of these additional add on taxes, so to speak. But right now, we're not seeing any changed behavior in the market, it's probably too early for that and again it's far too complex of the tax reform..

Our next question comes from Brian Rafn with Morgan Dempsey..

Yes, Bob, question for you on the -- you talked about the tax act and I think you kind of said not a whole lot on the statutory rates. I am wondering if with that tax in the U.S., if there's any more maybe fluidity or funds flow from the standpoint of repatriating money back to the U.S. in the future going forward.

Is there anymore movement of capital across sovereign borders versus just the issue about the statutory tax rates?.

So, Brian, one of the things that we did in 2017 is we actually had preemptively brought back about the $1 billion from Europe that left roughly about 700 million overseas and that was part of the additional transition tax that we recorded in the fourth quarter.

That does give us the ability to bring that back albeit with some potential withholding taxes, tax fluid, but certainly much less than in the past. So the beauty of the reform act is that again excluding of holding taxes, we will have the ability to bring cash back on a more regular basis should we desire to do so.

The negative is that all these hidden minimum taxes on foreign earnings and things that are baked in there..

I appreciate the color and the CapEx I think was up I think you guys in your comments 158 versus 129. You guys get a budget for '18.

And is there any you know geographic specificity or allocation by business segment where that CapEx spending is going to go in '18?.

Good question Brian, it was in the slide deck but I didn't touch on it in my remarks. So we're anticipating CapEx in 2018 to be approximately 200 million now that includes the 45 million of capital for the transformation project, so roughly about a 175 million on the normal business.

I don't have a breakout by region, but I would say you know certainly there's you know most of it is going to follow the waiting of where we are with the slight emphasis in some of the Asian and Latin American regions. And then from a DNA perspective, we're expecting that to move up slightly higher a 170 million.

Again big caveat on that is going to be where exchange rates are right, so with the bigger base of our business being outside the U.S. and the weakening of the dollar, we're going to see that the DNA number move up..

And then just one final one for Stephan. You talked a little bit I think about price discipline. You talked certainly about expensive valuations. I'm wondering more from a theoretical standpoint or more of a strategy.

Is there a preference on your side in looking at M&A deals between maybe the larger restructuring turnaround deal versus maybe the smaller niche play that might have a novel science or a novel technology that you can leverage and scale across your massive distribution globally?.

Well, I think we discussed before certainly the technology acquisition, the venturing acquisition, we will always look very favorably at for this very reason that you talked about is that you think kind of plug it into the system.

And the other one I would say certainly my experience is that bolt-on acquisitions that kind of you can clearly describe what the operational synergies are and then organize against lifting those synergies certainly have a better track record than large transformative deals.

So my preference certainly would be the bolt-on acquisitions and the kind of venturing type acquisitions as opposed to large transformative deals..

Our next question comes from Chris Manuel with Wells Fargo Securities..

Just two follow ups, one in relation with CapEx question. So 200 is the CapEx for this year and I think you said 175 would be a normal, so that's kind of half of that 45 million this year and then the other remainder comes next year.

Is that the way to think about that?.

Yes, it's hard to say. I mean again the total if I took the two would be about 220 obviously, it’s all going to be on the timing one, I can't tell you exactly when it, I would -- if I were venturing a guess I would think that most of the 45 would probably be spent in 2018 and the push out into probably more on the regular CapEx..

Okay, that's helpful. And then if I could go to Slide 11 for a second and perhaps this is just for illustrative purposes, but if I look at the transformation bucket then I think about your growth and efficiency bucket actually looks bigger the next couple of years offset by little bit inflation.

So I guess my question is, if normal growth efficiency stuff can be greater than this 80 million over the next three years that would suggest that perhaps contribution margin from added businesses is a little bit better then where it's been recently. How would I think about that? Number one.

And then number two, when you're thinking normal inflationary headwinds, how do we think of those? Is that something that 10 or so million a year?.

This is not intended as a precise bridge, but kind of more like what are the buckets. We try to indicate this with the fussy ends kind of it's more of illustrated purposes that you think through in those three buckets.

And then that's why we are also very firmly reaffirmed our long-term targets and we believe we will be in the long-term targets including in the transformation. So I wouldn’t read more than that into that..

I'm showing not showing any further questions at this time. I'd like to turn the call back over to Mr. Tanda for closing remarks..

Very good and thanks everybody for joining us and have a good first quarter..

Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day..