Ladies and gentlemen, thank you for standing by. Welcome to Aptar’s 2020 Fourth Quarter 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 and Communications. Please go ahead, sir.

Thank you. I’d like to welcome everyone joining us on the call today and everyone listening to the webcast. Joining me on today’s call are Stephan Tanda, President and CEO; and Bob Kuhn, Executive Vice President and CFO. Our press release and accompanying slide deck have been posted to our website. If you are following along on the website, you can advance the slides by hovering over the presentation screen and clicking on the arrows on the right and on left. As always, we will also post a replay of this conference call on the website. Today’s call includes some forward-looking statements. Please refer to our SEC filings to review factors that could cause actual results to differ materially from what we are discussing today. I would now like to turn the conference call over to Stephan.

Thank you, Matt, and good morning, everyone. We appreciate you joining us today. I hope that you and your families are staying healthy and safe. Before we turn the page on 2020, I would like to take a moment to speak to slide 3 and recognize our people for their tremendous commitment to deliver on the promises we made to our customers, patients, consumers and business partners. I want to thank our teams for facing the challenges presented throughout the year with unwavering strength and resilience, and for living up to our purpose and responsibility to society, mainly to ensure that our innovative solutions are readily available to dispense critical medicines and consumer products to millions of people each day. At Aptar, we are focused on transforming ideas into products that improve everyday lives, and we are proud of the Company’s vital role in society. We are well-positioned to continue to invest and grow in 2021. Turning now to slide 4, Aptar’s steady, long-term compounding growth story, and that is how we manage the business for growth over the next 5 to 10 years and well beyond. In 2020, we continued our strong total shareholder return journey and our shareholders achieved 102% total shareholder return or TSR over the past five years. Our diversified business proved to be resilient to the significant economic and pandemic challenges, and helped us overcome temporary weaknesses in certain markets, mainly the beauty market. We also made strategic investments during the year that will add critical capacity to key areas such as lotion pumps, and components for injected medicines. And we were active on the M&A front, acquiring FusionPKG to bolster our go-to-market turnkey capabilities. In addition, we invested in selected partners such as Sonmol developing connected healthcare solutions to further strengthen our portfolio. Looking at our performance for the year, our reported sales increased 2% and on a comparative basis core sales were in line with the prior year. I am pleased that we achieved record cash flow from operations and record free cash flow through the combination of the strong performance of our Pharma segment, contributions from recent cash accretive acquisitions, cost containment efforts and working capital improvements. Further, our balance sheet remains in excellent condition, and we are well-positioned to continue to pursue strategic M&A opportunities. Another key element of our compounding growth story is our dividend program. And I’m happy to report that in 2020, we returned $93 million to shareholders. This was our 27th consecutive year of paying increased dividends. I will briefly comment on our Q4 results as shown on slide 5, before turning it over to Bob who will go into more detail. Our teams delivered a strong finish to the year with fourth quarter core sales growth of 5%, and recent acquisitions earning 3% on top of that. Broad-based demand for our industry-leading drug delivery devices and for our food dispensing closures drove double-digit core sales increases in our Pharma and Food and Beverage segments. In our Pharma segment, I am pleased with a diverse growth across our Pharma divisions, as we continue to supply critical devices for everyday in that sense, while we further engage with customers with more urgent needs related to fighting the pandemic. In our Food and Beverage segment, steady strong demand for food closures and some restocking by certain beverage customers helped in the quarter. Our Beauty and Home segment continued to make top-line progress and would have posted positive core sales growth, had it not been for lower custom tooling sales compared to the prior year. We achieved double-digit core growth in our personal care and home care applications on strong demand for our dispensing systems used for sanitizers and cleaners. We also saw a gradual improvement in the beauty fragrance market, though sales were still considerably behind the prior year. The decline in the fragrance business was partially offset by increased sales of dispensers for facial skincare products. We have successfully implemented the vast majority of our planned initiatives related to our transformation over the past three years, including implementing new commercial strategies, reducing costs and adding capabilities in Asia and in fast growing application fields that we believe will position the segment for future growth and expand profitability. However, the 2020 COVID-19 global pandemic has caused several initiatives that were expected to be completed by the end of the year to be somewhat delayed, including the planned closure of two facilities in the U.S., and resulted in a significant decline in our beauty business. While our Beauty and Home segment continues to be profitable, the disruption caused by the pandemic, including high operating costs has more than offset any expected growth in earnings from our transformation. We remain committed to completing our remaining transformation initiatives and expect the return to growth to be gradual and nonlinear. And this market is highly correlated to the return of post-pandemic normal consumer behavior, including travel, which to-date has proven to be sporadic and uncertain. We continue to invest in research and development efforts to support our growing patent portfolio of over 5,000 active patents. Our examples of recent technology and innovation solutions are found on slide 6. And I would like to highlight just a few of them. In Pharma, we announced this week that our 3-Phase Activ-Film technology was chosen to protect a new SARS rapid antigen test for COVID-19 that recently received Emergency Use Authorization from the U.S. FDA. The QuickVue of SARS antigen test is a point-of-care rapid antigen test developed by Quidel Corporation that delivers test results in 10 minutes. The visually read test requires no supplemental instrumentation and offers expanded access to affordable and accurate COVID-19 testing that will help meet the urgent testing needs in those in school systems and rural areas. In the injectables market, we have a supply position on several of the leading COVID-19 vaccines and treatments in selected parts of the world. In the consumer health care market, we helped P&G extend their Vicks Vapo Cool portfolio with our nasal spray device that delivers an ultrafine mist for their new Vapo Cool sinus congestion and pressure relief product. In Beauty and Home, we have helped a company called Lightinderm in France to launch a home-use skincare device with infrared regenerative light with photo-active packed serums to provide skin rejuvenation and regeneration. Aptar provided the airless piston system and reloadable recyclable capsules. Our airless technology is also featured on L'oréal Kiehl's brand Hydro-Plumping Hydrating Serum and was customized for an eye cream in China by their brand Infinitus. This technology comes in the right range of sizes that are a great solution for dispensing serums for facial skincare, and this is the same technology used in our Pharma business for derma products. Finally, our FusionPKG team is focused on turnkey beauty solutions and recently provided 13 packaging items for a new line of nourishing facial oil by the indie brand, Bad Habit. In Food and Beverage, our revolutionary SimpliSqueeze elastomeric valve design is one that customers turn to for its wide range of applications and for precise and accurate flow control and is used in applications within Beauty and Home and Pharma as well. This technology is featured on the new coconut paste in an inverted pouch in India. Additionally, SimpliSqueeze is bringing convenience to flexible packaging, allowing products that have historically been marketed in jars or tubs to be moved to a pouch. The new Jif Squeeze Creamy Peanut Butter and Natural Squeeze Creamy Peanut Butter Spread by Smucker’s are great examples of this ongoing conversion of the category. Using the STANDCAP Pouch Solution with Aptar’s Closure SimpliSqueeze valve and fitment, the package eliminates the need for a knife and brings convenience and ease of use. During the quarter, we also provided a new custom closure for Cappuccino powder in Latin America, using our BAP technology, which stands for Aptar’s bonded-aluminum-to-plastic patented solution, often used in the food and beverage markets where secure seal is needed and ease of opening feature is added for consumers. The same BAP technology is used by major infant formula brands in North America and is a key technology for the success of Tropicana's Orange Juice product package and for Valvoline's automotive oil package. We continue to be very successful at sharing resources and innovation across our segments, enabling significant economies of scale and a more efficient pathway to market and growth. A technology that might start in Pharma is often used in our Beauty and Home, and Food and Beverage segment as well. We also see many opportunities to leverage our active packaging and material science technology in drug delivery and consumer packaging. Our technical expertise, along with the product, manufacturing and customer synergies we have across our business have made Aptar highly successful in the past and will continue to strengthen our business model as we look to the future. Before I turn the call over to Bob, I would like to share a few additional highlights as shown on slide 7. As we closed out 2020, our steady progress on environmental and social responsibility topics resulted in Aptar achieving prestigious CDP A List status for our climate change assessment and Aptar being named a Supplier Engagement Leader. Aptar was also named in the Top 100 of America's Most Responsible Companies by Newsweek and ranked in the top 100 of Barron's Most Sustainable Companies, both for 2021. We were also recognized with Prime Status by ISS ESG, one of the world's leading rating agencies for sustainable investments. Aptar has published new policies around human rights, diversity, equity and inclusion; and Community Engagement and Global Giving on our website, which outlines our commitment to upholding human rights, the environment and the communities in which we operate. Finally, we announced earlier this week that we had partnered with CARE, a remarkable organization that works around the globe to save lives, defeat poverty and achieve social justice. Through our global partnership, Aptar will support CARE's education programming, women's economic empowerment efforts and CARE's crisis response campaign, including the Fast and Fair COVID-19 Vaccine Response Campaign. With that, I will now turn it over to Bob, who will provide additional comments on our results.

Thank you, Stephan, and good morning, everyone. I will walk through some of the details around our fourth quarter performance, starting with slide 8. In the fourth quarter 2020, reported sales, including positive effects of currency translation rates and recent acquisitions, increased 12% and core sales increased approximately 5%. As Stephan mentioned, our Pharma segment had another outstanding quarter and achieved core sales growth of 10% and an adjusted EBITDA margin of 33%. Looking at sales growth by market, core sales to the prescription market increased 12% from the prior year. The growth was primarily due to increased sales of our devices for central nervous system medications, certain customers building safety stock levels of inventory in anticipation of potential Brexit-related supply chain concerns, and higher tooling sales. Core sales to the consumer health care market increased 2%, mainly due to an increase in tooling sales. Core sales to the injectables market increased 15%, with higher demand for our elastomeric components used with vaccines and other injected medications. Core sales of our active material solutions grew 11%, primarily due to increased demand for our active solutions for probiotics and diabetes applications. Recent articles have mentioned the health benefits of probiotics in the fight against COVID-19, and this, along with new customers in this space, has contributed to our growth. Turning to our Beauty and Home segment. Core sales decreased 2% and would have been equal with the prior year, had it not been for a decrease in custom tooling sales. Beauty and Home's adjusted EBITDA margin was 11% in the quarter and was negatively impacted by lower sales to the beauty fragrance market. Looking at sales growth by market on a core basis, core sales to the beauty market decreased 15% due to a significant reduction in fragrance, travel and commercial retail sales. Core sales for the personal care market increased 10% due to increased sales of our pumps and closures used on sanitizers, soaps and personal cleansing products. Core sales to the home care market increased 20% due to higher demand for our dispensing systems for household cleaner and disinfectant products. Turning to our Food and Beverage segment. Core sales increased 13%, despite resin pass-through headwinds of 2%. Food and Beverage segment’s adjusted EBITDA margin grew to 18% due to a strong mix of products. Looking at each market, core sales to the food market increased 16%, due to increased demand for our dispensing solutions, used on pantry staples as consumers continue to cook at home during the pandemic. Core sales to the beverage market increased 4% due to increased sales or closures used on functional drinks and concentrates, which appears to be a restocking effect, as Stephan mentioned, after several quarters of declining volumes. Turning to slide 9. Fourth quarter adjusted earnings per share increased 8% to $0.92 per share on a comparable basis with the prior year, including adjusting for currency effects. Slides 10 and 11 cover our year-to-date performance and I'd like to highlight a few points. Core sales were equal to the prior year, despite the challenging year. Adjusted EBITDA decreased slightly, approximately 1%, and this includes a little over $7 million of expense related to a one-time Thank You Award given to employees in the first half of the year, an appreciation for their efforts during the pandemic. Adjusted earnings per share decreased 9% to $3.64 per share on a comparable basis with the prior year, including adjusting for currency effects and reflecting the direct and indirect impacts of the pandemic including the Employee Thank You Award. Slide 12 outlines our outlook for the first quarter. As Stephan discussed, we expect to have a mix effect in Pharma with anticipated strength in our injectables components and active material solutions and weakness in our prescription and consumer healthcare markets. In addition to the pressure on the beauty fragrance business, our Beauty and Home segment is expected to have a negative impact from rising raw material costs. Summing it up, we expect our first quarter adjusted earnings per share range to be $0.86 to $0.94 in the first quarter and this compares to $0.99 per share in the prior year when adjusting for currency effects. While the effects of the severe weather in Texas are still unfolding and we are monitoring raw material costs, it is still too early for us to assess any potential impact. Turning to Slide 13. I'd like to share a few details around our forecasted capital expenditures for the year and three important growth projects that we are excited to get underway and are in addition to our normal capital spending envelope. There are three projects that I would like to highlight. First, we've spoken a lot about the recent growth and potential opportunities in our injectables business. This is a very important part of our future and we see Aptar playing a significant role in the stable supply chain for critical injected medicines. We will be pulling forward investments that we had planned to make over the next five years and begin to increase our capacity in France and the U.S. Investments we begin to make in 2021 will be completed in 2022 and 2023. The expected cash outlay in 2021 for this phase of our injectables capacity expansion is $35 million. A second growth investment is being made in a new facility in Suzhou, China that will optimize our footprint and bring all of our existing operations in the Suzhou area under one roof. This investment is predominantly focused on Pharma and also includes state-of-the-art machinery and automation for the other segments. This also aligns with our strategy to expand our presence and capabilities in the important fast-growing Chinese market. This will begin in 2021 and be completed in 2022. The expected cash outlay in 2021 for this project is $14 million. We also are optimizing our footprint and creating a center of excellence in France for our highly valued decorative capabilities for the beauty market. We have several facilities that in the recent past were not operating efficiently and we aim to upgrade our capacity and efficiency under one roof for these activities. This will add to our competitive advantage, and many of our large beauty customers have been very supportive of this decision. This will also begin in 2021 and be completed in 2022. The expected cash outlay in 2021 for this project is $22 million. Including the above roughly $71 million, we are projecting that our 2021 capital expenditures will be in the range of $300 million to $330 million.

At this time, Stephan will provide a few closing comments before we move to Q&A. Thank you, Bob. In closing, on slide 14, we had a strong fourth quarter and a good year due to our diversified business, the growth characteristics of our product portfolio and continued investment in technology and innovation. Importantly, our business performed with great resiliency in a very difficult market environment. We generated record cash flow from operations and record free cash flow for the year. As Bob mentioned, we will be making significant growth investments in 2021, while we continue to return capital to shareholders. As a company, we have increased our ESG commitments and received additional recognition by several organizations for our work and efforts to date, to make Aptar an even more sustainable, diverse, and inclusive company. Clearly, the recovery from the pandemic and the pace of economic reopening is somewhat delayed compared to what we all thought only a quarter ago. The beauty and beverage markets continue to be under pressure and we are experiencing a drawdown of inventories by certain prescription drug and consumer healthcare customers due to fewer cold and flu illnesses resulting from pandemic-related confinements and fewer noncritical doctor visits. Some customers also built safety stock as they were concerned with potential Brexit-related supply chain disruptions. We expect continued solid growth in our Pharma injectables components, Pharma active material solutions and dispensing systems for sanitizers, cleaners and food products. Our positive mid and long-term view is unchanged, based on our strong innovation and customer project pipelines. In fact, we are encouraged and are taking significant steps to invest in growth capacity and new ways of working that will position us even better in the post-pandemic era. Our balance sheet is in excellent condition, which allows us to take advantage of strategic opportunities. When we raise our sights past this global pandemic-induced crisis, the future is promising, and we look forward to growing each of our businesses for the long-term benefit of all stakeholders. With that, I would like to open the call up for questions.

Your first question comes from John Kreger with William Blair. Please go ahead.

Hi. Thanks very much. Stephan, can you maybe expand a little bit on your injectable comments? It sounds like you're accelerating some capacity expansion. But, do you have room to satisfy some of the COVID-related orders this year before that capacity comes on line?

John, yes, thank you. Yes, indeed, what we're doing in terms of capital expenditures is really pulling forward plans that we had over the next five years, anticipating continued growth in this area. We talked previously that we've been very encouraged by customer response to our technical capabilities as everybody was investing in this proving the supply chain frenzy. And we have every reason to be optimistic about the future. So, we're bringing forward the capital investments. But, we have made capital investments only in the years past. So, we have the capacity, including search capacity to fulfill the current requirements. And clearly, in the fourth quarter, roughly 50% of our growth has now been due to COVID-related business, and the majority of that is actively supplying the vaccine supply chain.

Great. Thank you. In your planning process, are you treating the COVID orders as sort of durable and sustainable or more of a kind of a one-time bolus that will sort of fade over the next few years?

No, it's really a mix of both. I mean, most of our customers have been on the record as have many of the experts that at least for a number of years, this will probably be a recurring seasonal vaccine as the vaccine itself is adapted to new strains. And at the same time, we believe that the recognition of our technical capability bodes well for the broader supply in biotech, large molecule drugs, as well as traditional flu vaccines and treatments in general that are injected.

Great. Thanks. And then, a quick question on beauty. Do you think that business can recover before the sort of travel retail patterns get back to normal, or is this one of these where you probably just have to wait for that to eventually come back?

Well, of course, it's not a homogeneous monolithic business. We have parts of that business that are doing very well, obviously, everything that has to do with cleaning and sanitizing. We're encouraged by the growth and comeback already of skincare. Clearly, the luxury fragrance business is very much driven by travel retail and physical retail, and that will indeed have to wait to kind of snap back to the new normal, so to speak. But, what we hear from customers is that they are starting to gear for that. Clearly, there has been some encouragement that there was, let's say, a temporary reopening by consumers coming back. China, of course, leads the way, although China is not as large in fragrances at all. But, customers expect this snapback as soon as travel resumes. And certainly, anecdotally, people have pent-up travel intentions now and as soon as they can travel will resume and that will bode well for that business.

Your next question comes from George Staphos with Bank of America Securities. Please go ahead.

Hi, everyone. Good morning, Stephan, Bob, Matt. Thank you for the details. I hope you’re doing well, and congratulations on the progress. My question to start is about how you evaluate your market share and progress, considering the ongoing legacy of the company with all the new products you introduce each quarter. Are there specific sectors where you can share insights with investors and analysts regarding areas where you believe you're gaining market share or possibly losing it? Additionally, specifically regarding injectables, do you think you're capturing at least your market share, if not more, of the COVID vaccine and related products that require injectable packaging solutions?

Yes. Thanks, George. Good morning. Starting with the second part of the question, yes, we feel comfortable that we're getting at least our fair share in the injectable space. I've spoken to that previously. In fact, I think, the whole pandemic has helped our business in terms of being recognized by customers as technically equivalent to the market leader. And not only the order book, but the inquiries, the project builds are very promising. So, I feel very confident that we are getting our fair share, maybe even a bit more than that in the injectable space. In terms of market share, your larger question, that's a much harder question to answer. Our competitive set, it's really quite disposed to each segment and product platform. We are highly encouraged, of course, by the progress we are making with our active material solutions. We are highly encouraged with the progress we're making in skin care and moving down the value chain to more rapid turnkey solutions with FusionPKG, which is developing very well. Pivot to Asia, certainly should be faster, if you ask me, but Rome wasn't built in a day, but certainly, more and more of the growth is coming from there. And we are busy with making sure our footprint accommodates that, and we're serving customers where the growth is. Let me leave it there.

Okay. Thanks, Stephan. My other question broadly is on margin and profitability near term and then to longer term. So, is there a way that you could perhaps quantify what the effect of the destocking and resin impact is in your guidance for the first quarter? And then, stretching a bit here, to Beauty and Home, if we didn't have COVID and we hadn't had the transformation benefits coming, do you think this business would have still been about $100 million EBIT business in terms of profit generation? And obviously, the reason I'm asking, at some point, when we do get back to normal, can we look at your past profitability and tack on the roughly $70 million, $80 million and have that to start with, or has the world changed in your view?

Let me address the second part of your question, and perhaps Bob can take on the first part. We have embarked on a significant transformation initiative, and we have even broadened our objectives as we progressed. I’m quite pleased with what we have achieved so far, although there is still more to be done, particularly concerning some of the footprint rationalization projects. It's evident that the COVID pandemic was not part of our initial strategy. When we assess the end users benefiting from our cleaning and sanitizing efforts, we see that profitability levels are approaching our target range. While this may not be immediately visible, it indicates that our initiatives are gaining traction, and we are fully dedicated to aligning this business within the 15% to 17% EBITDA range and building from that point. Clearly, the recovery of volume from COVID will play a crucial role in that narrative.

George, I can take the first part of that question. So, as we highlighted, the destocking in the Pharma side is really primarily coming from the prescription division and the consumer health care division. So, those, as you know are our highest two margin divisions within Pharma. So, we did bake in a little bit of that fact amongst the divisions because again we still see good growth on injectables and active material solutions. Now, the ramp-up in the injectables does happen oftentimes in other things, and we saw a little bit in Q4. You end up having some additional cost as the volume starts spiking, right? You have additional overtime, you have some additional expenses that are included there. So, we did see, in Q4 this year, a little bit of negative effect on the margin in injectables due to some of those additional costs. And then, active packaging, there's also a mix effect within what is sold in the quarter. So, we had a little bit of an unfavorable mix effect in Q4. We're not really baking a lot of mix effect into Q1. But, I can't give you a specific number in terms of it more directionally. And then, as far as resin goes, we are seeing resin spiking up in Q1, at least in both North America and Europe. So far, we only saw the increase in Q4 coming from North America because it has happened in the past, the euro strengthened considerably against the dollar. So, it's somewhat neutralized any increase in resin cost. But, we are seeing rising costs for both, North America and Europe in Q1. So, we did bake in some negative effects on margin there. I will tell you though that when we did our estimates, it was still too early to put in any impact that may have come from the storms down in Texas. So, we're actively looking at that now and see if that will have any additional impact. So, we baked both divisions.

Bob, I mean before storms, $5 million, $10 million, $2 million, just anything to guide us? And thanks, guys. Good luck in the quarter.

Yes. I don't have right at my fingertips exactly what each segment is doing because it's really dependent on the pass-through, the volumes in the quarter, which customers. So, there's a whole host of additional factors that go in there.

Your next question comes from Ghansham Panjabi with Baird. Please go ahead.

So, I guess, first off, just sticking with Pharma. I mean, there is a lot going on with your various subsegments within that operating unit with the destock you referenced in the first quarter for Rx in OTC, the injectable growth? And then, the comparisons you're going to have from really three strong years and particularly so last year when there was sort of a stocking effect, if you will, for certain prescription drugs, et cetera. So, I guess, the question is, as you kind of think about 2021 versus 2020, can you sort of take us through, which of the subsegments will actually grow on a year-over-year basis, apart from injectables? And I'm just trying to get a sense as to whether we're going to be in a normalization year more broadly for pharmaceuticals in 2021.

Thanks, Ghansham. Overall, we remain very bullish on the Pharma business, and of course, bullish on the Company. Clearly, this destocking effect for Rx and CHC, in hindsight, seems obvious, but hindsight is always 20/20. Clearly, the flu season is almost nonexistent. So, with all the protective measures people take against COVID, they don't get cold, they don't get flu. They don't get bronchitis, while our customers have been making sure that the trade is stocked, consumers are stocked, and consumers themselves wanted to make sure they have their products around. So, now that there is no cold and no flu to speak of, this destocking is a logical consequence, but it's transitory. We believe Pharma will continue to grow well for the full year, obviously, more in the second half than in the first half. We continue to look at our 6% to 10% range. And I believe we will be inside that range, maybe at the lower end of that range, but the year is very early. But, clearly, we continue to see good growth. Injectables and active material solutions will do very well, but also Rx and CHC will come back.

Okay, I understand. For the beauty and fragrance segment, it appears that there was a 21% decline in Q3 year-over-year and a 15% decline in Q4. Many of your customers and suppliers have indicated that a normalization trend on a year-over-year basis began in Q4. I'm curious why you haven't observed that improvement. Additionally, could you explain your previous comments regarding the first quarter, where the impact of COVID wasn't fully felt, particularly for the first quarter of 2020 when our data shows that segment was still down 8%?

Yes. So, a couple of things. One is, clearly, customers are tasting the recovery. So, when it comes to customer projects, customer discussions, pipeline, planning, there's a lot of optimism in the industry. We have an overexposure to luxury fragrances, which is kind of trailing. Mass fragrance is doing better in places like Brazil are already growing. But luxury fragrances are still trailing. We see still also good growth in skincare. But again, our overexposure to luxury fragrances is coloring our comments. Sorry, I forgot the second part of your question.

I can answer it.

Go ahead.

I can answer the second part of the question. So, if you remember, Ghansham, back in end of Q3, beginning all of Q4 and into Q1, we were in a destocking phase on the personal care side of the business. So, beauty was still doing relatively well. So, when you got into Q1, it was more of a normalized, I would say, quarter, right, because we were at the tail end of any destocking on the personal care, so very little effect there. Really, China was the only region that was impacted in Q1. And there, our size and weight is not so significant. And you also have, every year, the Chinese New Year holiday period. It didn't have that significant impact on our Q1 results. And then, as far as the very tail end of March, we did see a weaker finish to the first quarter, primarily in Europe, but it was negligible compared to a full-blown quarter, like we saw in Q2 and Q3.

Your next question comes from Mark Wilde with BMO Capital Markets. Please go ahead.

Bob, I wondered if you can help us in just thinking about the total capital commitment on those three initiatives you outlined. You gave us the number of $71 million for this year, but what does the total look like for all three of those projects? And what does that help translate into for sort of a rough thought on where CapEx for the Company will be in '22 and '23?

Great question, Mark. If I examine the three projects, starting with the injectables expansion, we are looking at a total investment of about $88 million. We spent a little less than half of that in 2021, and the project will continue over the next couple of years. For the China facility, we plan to spend $14 million, which is part of a total investment of roughly $40 million to $42 million, with the remainder being spent in 2022. Regarding the French decorating facility, we are allocating about $22 million in 2021 out of a total cost of approximately $44 million, with completion expected by the end of 2022. The China and French decorating facilities focus largely on efficiency and cost savings through plant consolidations. Meanwhile, the injectable expansion aligns with the sector's growth, particularly in ongoing vaccine needs. I anticipate our usual capital expenditures to be around $240 million to $250 million annually, and we have discussed these specific projects in detail.

Which would sit on top of it. So, it sounds like your CapEx for '22 is probably in the $300 million, a little over $300 million range. Is that fair?

Yes, yes. I mean, that's in the ballpark, Mark. And again, I think, what we've tried to do is really put an emphasis in a focus on working capital improvement. And I think you've seen that in 2020. We did a terrific job really across all three AR inventory and payables. And we're going to focus again in 2021 and squeeze a little bit more out of that as well to help offset some of that additional increase as much as we can. So, we're really focusing, trying to offset some of those extra spend with continued working capital improvements.

Okay. And then, for my final one, Stephan, you talked during your presentation about sort of the 5,000 patents at the Company. I'm just curious, if you think about expanding in Asia and particularly, if you think about expanding the Pharma business in China, can you just talk generally about protecting intellectual property?

Sure. Look, maybe let me start with the last three intellectual property challenges we had as a company came from the U.S. and Europe. China has become a lot stronger around protecting intellectual properties in ways to enforcing it. So, I would not look at China any differently than any of our other major countries in terms of how we go about filing or protecting trade secrets compartmentalizing knowledge. We document trade secrets and we file for IP, no different than we do anywhere else.

Your next question comes from Kyle White with Deutsche Bank. Please go ahead.

I wanted to focus a bit on Pharma. First, just kind of a broader top question. We're seeing the rise of telemedicine, which makes prescription jobs look to be more accessible and widespread to everyone. Is this an opportunity for you, or are your products not really exposed to the prescriptions drugs that would be prescribed over telehealth?

Well, I'm more speculating here. I'm not sure that we've got good data. But, I found telehealth to be more about maintaining the connection with your GP and rolling over your prescription when it comes to diagnosing new noncritical conditions and actually getting new branded prescriptions, and that is clearly down. So classic, you go to the doctor, the doctor's just being bombarded by pharma salespeople, and all of a sudden, you end up with a new brand in prescription that transitions you into a better medicine, to a more contemporary medicine. That at least anecdotally still happens more by in-person visits than a telehealth at the moment. Over time, hopefully, that changes. But clearly, with doctor visits being down, we can see that new branded prescriptions are down.

Yes. That makes sense. So, it's definitely thinking long term for that. And then, also I wanted to focus on the margins in Pharma. Your long-term target is the 32% to 36% range. You're at the lower end of that range this quarter. Typically, we've always asked if you need to increase the range. But, as you invest in growing injectables, is there a risk that margins might fall below the targeted range longer term?

No. We are committed to this range. There were some one-time items. Bob can talk about one-time write-down of an asset in quarter four or about $3 million. In addition, we had needed some temporary labor in the injectable business to backfill absenteeism from COVID. So, there was some one-time margin pressure in Q4. But generally, the 32% to 36% range is the right range.

Your next question comes from Gabe Hajde with Wells Fargo. Please go ahead.

Stephan, you made some comments, and I appreciate that you talked about the interdependence of each segment, sharing of technology and manufacturing capabilities. And I also appreciate some of the difficult topic to discuss in a public format. But, should we take some of these comments that if your view or the Company's perspective that Aptar is better off together versus what could be an alternative, or was there something else you're trying to get across there?

No, not at all. I think we've discussed this quite a bit already. Aptar is an integrated business with industrial unit operations that are nearly identical, and in some cases, shared. We utilize technologies, products, talent, and our international presence. We perform precision injection molding, high-speed assembly, and metal operations. Additionally, we customize our offerings for different segments. I've previously compared this to jet engines: GE sells jet engines to airlines at one price and to power plant operators at another, but the core technology remains the same. Therefore, we are not interested in any large-scale separations. There is a question underlying your inquiries. Naturally, we will always evaluate what should be done in-house, what should be outsourced, and how we can enhance our organization's effectiveness. However, it is a cohesive industrial business that serves multiple end users. We regularly exchange technologies, insights, and innovations. When we engage with customers, we present our entire portfolio and explore interesting developments in beauty and how they could be applied to pharmaceuticals, or vice versa.

Well, I appreciate that. And I think, to your point, we really talked about TSR over long periods of time, it's proving successful. So, thank you for that. And then, on the capital allocation or redeployment side, obviously, you have an elevated internal investment cycle, which we actually like to those carry lower risk versus an acquisition-driven expansion. But, just curious if that sends a signal or tells us anything as it relates to kind of the acquisition market, whether it's evaluation or just properties available? And then, on the share repurchase front, is this something that we should think of as somewhat opportunistic or more programmatic as you guys go throughout the year? Thanks.

Maybe I should start?

Go ahead.

Yes. Let me start with the last point and we will work backwards. One of the trends we've observed over the past few years is an increasing share of our capital expenditures being directed towards Pharma, and we expect this to continue in 2020. Within the Company, we are allocating a larger percentage of our CapEx to the Pharma sector. Regarding share repurchases, we achieved record cash flow this year at $324 million, and our leverage stood at 1.6 at the end of the year, indicating a substantial reduction in debt. The decision to lift the temporary suspension is primarily driven by our confidence in cash flow generation and the steps we've taken to reduce working capital. We want to maintain some flexibility in our strategy if this trend continues and as our leverage decreases further. I'll let Stephan discuss the acquisition landscape, but we have reiterated that even when actionable assets are available, the timing may not always align perfectly. This move towards share repurchase is not a signal that we are actively back in the market every quarter; it is more a reflection of our confidence in cash flow generation. Stephan, would you like to discuss the acquisition environment?

So, look, our M&A machine has never stopped and continues to be active. At the same time, we pride ourselves to be disciplined acquirers and certainly walk away from more deals than we execute. And for everyone you execute, you look at 10, but it remains an active M&A environment. It is certainly valuations can be challenging with the debt markets being very wide open. But, we will continue to work it. And as we discussed previously, very much like bolt-on acquisitions that complement organic growth. But, we are very conscious that first and foremost, we need to be able to grow our own business and then complement with bolt-ons. And at the same time, we also complement our innovation and prospecting engine with venturing investments, and you've seen us make a few of those, and for the most part, they have proven very successful, and always bring something to the Company, whether it's a license, whether it's a board seat, whether it's an ability to increase the take rate on or collaboration agreements. So, these venture investments really give us a front row seat without having to invest fully in each and every area of technology advancement.

Your next question comes from Adam Josephson with KeyBanc. Please go ahead.

Bob, would you mind fleshing out the earnings progression comment that you made in the release and presentation, you expect progressive improvement. I know, in a normal year, the first quarter and fourth quarter are typically the lowest, just for seasonal reasons. So, I'm just wondering how much differently you expect this year to play out than normal. And will those seasonal factors be offset or more than offset by just these different demand patterns that you're expecting this year?

I'm not going to provide specifics for each quarter because we do not offer annual guidance. However, you are correct in your observation that in the last couple of years, we've experienced higher performance in the later part of the year compared to the first half. Typically, we see stronger performance in Q2 and Q3, and softer results in Q1 and Q4, and we expect that trend to continue. This is likely more related to COVID than other factors. We anticipate a significant increase in our budget allocation from Q1 to the rest of the year. Therefore, we expect to see an increase in Q2, followed by continued growth in Q3. Q4 is anticipated to be similar to our expectations for Q3.

And you're talking absolute EPS in that regard, Bob, just to be clear, not the year-over-year?

That's correct. I'm talking absolutely.

Yes, that's great. Stephan, regarding one of Gabe's questions about the possible separation of the businesses, I understand you mentioned the rationale for keeping them together and the shared technology. Can you elaborate on whether a separation is something you've considered seriously? If there are advantages to it, despite your conclusion that the rationale for keeping them together is strong enough to deem separation unnecessary, what pros and cons do you perceive in potentially pursuing that, especially considering you indicated earlier that you do not plan to separate them?

Yes, we conduct a strategic planning exercise annually and review this plan with the Board, which includes input from external advisors. The Board takes their responsibilities seriously, evaluating the plan's value and exploring alternatives. We are confident in this plan and the value creation it will generate. We appreciate our investor base, many of whom are with us for long-term growth aligned with macro trends and advantageous end-users. We believe there is a broader pool of investors interested in our approach, which is why we engage more with healthcare, consumer, international, and ESG-focused investors. To answer your question, we strongly believe this is the best plan for shareholders, and most of our long-term holders share this view.

Just one to follow-up to that, Stephan. Do you think the value in Pharma gets lost to some degree because of the fact that it's combined with this Beauty and Home business that has very, very different characteristics, or do you not necessarily think that that's happening?

Well, there is always the short term and the long term. In the short term, multiples and valuations can always be dislocated, but you don't manage a company for what the multiple is at the current moment and what you might do that you build the Company for the long term. And over time, the multiple follows as a result. The multiple is not an objective; the multiple is a result of the value you create. In the previous life, I have been in a company that moved from polyolefin to nutrition and the multiple addition with 10 points, but it took 15 years to get that multiple addition. It's a much stronger company and many of the things that made it strong are still there. So, it is the long-term compounding nature and the exposure to multiple attractive end users that make the formula within the industrial coherent operation. So, I'm not naïve that you could get a short-term pop. But, that's not the objective of running the Company for the long term.

Your next question comes from Neel Kumar with Morgan Stanley. Please go ahead.

Could you provide an overview of the increase in your new injectable capacity in the U.S. and France compared to your current capacity and the potential returns? Additionally, regarding timing, it appears that the project will not be finished until 2022 or 2023. Is this two to three-year timeline typical or longer than usual?

Well, when you think about Pharma project, this is very normal. So, part of this is the physical build, but that's actually the small part. Then the validation of equipment, the validation with customers, the quality systems, it's the flip side of business being highly differentiated and defensible. There's a lot that goes into not only building but qualifying additional capacity. So, this is quite normal.

Yes. I mean, roughly, we're adding downstream capacity probably in two to three years, which is about 25% to 30% additional capacity downstream.

Okay. That's helpful. And I'm just wondering if you can just give an update on how the integration of FusionPKG has been progressing relative to your expectations? How has the Company been performing in this type of environment?

Yes. As you see from our statement, we're very satisfied with how the FusionPKG team is performing. They have been extremely agile to adjust to the new environment. Customers have been very excited about the combined capability of FusionPKG inside of Aptar, and the linkages and combined offerings we are able to make. So, great acquisition and good performance.

Your next question comes from Salvator Tiano with Seaport Global. Please go ahead.

Firstly, following up on Neel’s question, is there some clarity you can provide with regard to the return on these investments? So, if you're investing $71 million this year, and I guess a good number after that also for the entire project, what kind of the EBITDA or EBIT benefit you expect to see? And also, can you clarify that comment about the 25% to 30% growth in the next few years? Is that just for the injectables segment or for Pharma overall?

It's definitely above our hurdle rates, and being a pharma investment, it's expected to offer a good return. However, I don't want to commit to anything specific at this moment. The projections we have indicate that it should lead to a positive return on investment. Sure. The 25% to 30% additional downstream capacity was specifically for the injectables business, not the other segments at all. And again, injectable components is a multistage process. And so, as the volumes increase, there is always additional investment at various stages, whether it's upfront and the mixing capacity or then the finishing and the washing and the drying line. So, this is just really kind of adding a total of 25% to 30% capacity for certain components that we manufacture, but does not impact the other Pharma divisions.

Okay. Lastly, can you share your thoughts on the consumer healthcare and prescription sectors post-COVID? It seems that trends like increased handwashing and more mask-wearing could lessen the impact of flu season, even after social distancing rules are ended. Is it possible that we won’t see the same level of demand as pre-COVID in a few years?

Yes, I think it's too soon to make predictions about that. People are naturally inclined to return to socializing and traveling, which will likely create favorable conditions for colds and flus. However, it's important to note that a significant portion of our growth in the fourth quarter came from the CNS category. Overall, based on our pipeline and customer feedback, we remain optimistic about growth in Pharma. That said, it's reasonable to expect that the effects of COVID will take a few quarters to fully assess and balance out once we adjust to the new environment. I also want to mention that many sectors of the economy have come to a halt. As the economy begins to reopen, it won't be a straightforward process; there are numerous details to manage, such as the availability of shipping containers for transportation. While we have been fortunate to maintain our operations, the broader economy will face challenges. You may have followed the semiconductor issues affecting automakers, and there will be many similar situations since you can't simply restart an economy that has been on pause for several quarters with a mere push of a button.

Your next question comes from Gabe Hajde with Wells Fargo. Please go ahead.

Just one quick one on the competitive landscape in Beauty and Home, maybe more specifically, fragrance, appreciating that maybe personal care is doing a little bit better because volumes are in fact positive. But, just we kind of sometimes hear through the trade channels when you have businesses potentially transacting that there can be some disruptive behavior, and there's been kind of two big deals in the past, I don't know, 36 months or so on the Beauty and Home side. Can you comment at all if you see anything change that just lifts your eyebrow in terms of competitive landscape in that business?

Not really. These assets are quite popular with sponsors and they have changed hands frequently. Sometimes they get absorbed by strategic players, which is one of the transactions you mentioned. However, I haven't noticed any significant changes in competitive dynamics. A strategic player may become a bit more responsible, but overall, the competitive landscape remains unchanged.

This concludes today's conference call. Thank you for participating. You may now disconnect.