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United States Securities and Exchange Commission

FORM 10-K

COMMISSION FILE NUMBER 1-11846

AptarGroup, Inc.

475 WEST TERRA COTTA AVENUE, SUITE E, CRYSTAL LAKE, ILLINOIS 60014

815-477-0424

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12 (g) of the Act:

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x         No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes x         No o

The aggregate market value of the common stock held by non-affiliates as of June 30, 2004 was $1,545,905,508.

The number of shares outstanding of common stock, as of February 17, 2005, was 35,719,443 shares.

DOCUMENTS INCORPORATED BY REFERENCE

AptarGroup, Inc.

FORM 10-K

For the Year Ended December 31, 2004

INDEX

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PART I

ITEM 1.     BUSINESS

GENERAL

In this report, we may refer to AptarGroup, Inc. and its subsidiaries as “AptarGroup” or the “Company”.

FINANCIAL INFORMATION ABOUT SEGMENTS

We operate in the packaging components industry, which includes the development, manufacture and sale of consumer product dispensing systems. We are organized into five business units. The five business units sell value-added dispensing systems to global consumer product marketers. These business units utilize similar production processes, sell to similar classes of customers and markets, use the same methods to distribute products, operate in similar regulatory environments and are similar in all aspects of business except historical economic performance. One of the business units (which we refer to as “SeaquistPerfect”) has had historical economic performance lower than the other four business units and as a result is shown as a separate reportable segment for financial reporting purposes. The other four business units have similar historical economic performance and as a result have been aggregated into one reportable segment entitled “Dispensing Systems” for financial reporting purposes. A summary of revenue from external customers, profitability and total assets for each of the last three years is shown in Note 16 to the Consolidated Financial Statements in Item 8 (which is incorporated by reference herein).

DISPENSING SYSTEMS

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SEAQUISTPERFECT

NARRATIVE DESCRIPTION OF BUSINESS

GROWTH STRATEGY

PUMPS (56% OF 2004 NET SALES)

Fragrance/ Cosmetic. The fragrance/cosmetic market requires a broad range of pump dispensing systems to meet functional as well as aesthetic requirements. A considerable amount of research, time and coordination with the customers’ development staff is required to qualify a pump for use with their products. Within the market, we expect the use of pumps to continue to increase, particularly in the cosmetic sector. For example, packaging for certain products such as skin moisturizers and anti-aging lotions is undergoing a conversion to pump systems, which continue to provide us with growth opportunities. We also continue to experience growth in this market from our emerging markets. We expect demand for our patented fragrance sample systems to increase in the near future.

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Pharmaceutical. Pumps sold to the pharmaceutical market deliver medications orally, nasally or topically. Characteristics of this market include (i) governmental regulation of our pharmaceutical customers, (ii) contaminant-controlled manufacturing environments, and (iii) a significant amount of time and research from initially working with pharmaceutical companies at the molecular development stage of a medication through the eventual distribution to the market. We have clean-room manufacturing facilities in France, Germany, Switzerland, China and the United States. We believe that the conversion from traditional medication forms such as pills and syringes to the use of pumps for the dispensing of medication will continue to increase. Potential opportunities for conversion from pills and syringes to pump dispensing systems include vaccines, cold and flu treatments and hormone replacement therapies.

Personal Care. Personal care pumps include both fine mist spray as well as lotion pumps. Applications using fine mist pumps include use in hair care, sun care and deodorant products. We also supply lotion pumps to the personal care market for products such as skin moisturizers and soap.

CLOSURES (22% OF 2004 NET SALES)

Personal Care. Historically, the majority of our dispensing closure sales have been to the personal care market. Products with dispensing closures include shampoos, shower gels, sun care lotions and toothpaste. While many personal care products in the U.S. and Europe have already converted from non-dispensing to dispensing closures, we expect to benefit from similar conversions in other geographic areas.

Household. While we have had success worldwide in selling dispensing closures to this market, it has not represented a significant amount of total dispensing closure sales. Products utilizing dispensing closures include dishwashing detergents, laundry care products and household cleaners. We believe this market offers an opportunity for expansion and as a result are focusing on new product developments for this market to accelerate the conversion from non-dispensing to dispensing closures.

Food/ Beverage. Sales of dispensing closures to the food/beverage market increased approximately 26% over the prior year and double-digit growth is expected for 2005. We continue to see an increase in the amount of interest from food marketers to utilize dispensing closures for their products. Examples of food/beverage products currently utilizing dispensing closures include condiments, salad dressings, syrups, honey, water and dairy creamers. We believe there are tremendous growth opportunities in the food/beverage market reflecting the continued and growing acceptance in this market of our silicone valve dispensing technology, and additional conversion from traditional packages to packages using dispensing closure systems.

AEROSOL VALVES (14% OF 2004 NET SALES)

Personal Care. The primary applications in the personal care market are continuous spray valves for hair care products, deodorants and shaving creams. In addition, metered dose valves are used in this market for breath sprays.

Household. The primary applications for continuous spray valves in the household market include disinfectants, spray paints, insecticides and automotive products. Metered dose aerosol valves are used for air fresheners.

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Pharmaceutical. Metered dose aerosol valves are used for dispensing precise amounts of medication. Aerosol technology allows medication to be broken up into very fine particles, which enables the drug to be delivered typically via the pulmonary system. We work with pharmaceutical companies as they work to phase out the use of chlorofluorocarbon (“CFC”) propellants. We continue to increase our market share of metered dose valves to this market as pharmaceutical companies replace CFC’s with alternative propellants and we expect our market share to continue to grow.

RESEARCH AND DEVELOPMENT

PATENTS AND TRADEMARKS

TECHNOLOGY

MANUFACTURING AND SOURCING

SALES AND DISTRIBUTION

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BACKLOG

CUSTOMERS

INTERNATIONAL BUSINESS

FOREIGN CURRENCY

WORKING CAPITAL PRACTICES

EMPLOYEE AND LABOR RELATIONS

COMPETITION

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ENVIRONMENT

GOVERNMENT REGULATION

EXECUTIVE OFFICERS

     There were no arrangements or understandings between any of the executive officers and any other person(s) pursuant to which such officers were elected.

Mr. Carl Siebel has been President and Chief Executive Officer of AptarGroup since 1995.

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ITEM 2.     PROPERTIES

We lease or own our principal offices and manufacturing facilities. None of the owned principal properties is subject to a lien or other encumbrance material to our operations. We believe that existing operating leases will be renegotiated as they expire, will be acquired through purchase options or that suitable alternative properties will be leased on acceptable terms. We consider the condition and extent of utilization of our manufacturing facilities and other properties to be generally good, and the capacity of our plants to be adequate for the needs of our business. The locations of our principal manufacturing facilities, by country, are set forth below:

(1)	Locations of facilities dedicated to the SeaquistPerfect segment.
(2)	Locations that have facilities for both the SeaquistPerfect and Dispensing Systems segments. All other locations not footnoted represent locations of facilities dedicated to the Dispensing Systems segment.

     In addition to the above countries, we have sales offices or other manufacturing facilities in Australia, Canada, Indonesia, Japan and Spain. Our corporate office is located in Crystal Lake, Illinois.

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ITEM 3.     LEGAL PROCEEDINGS

Legal proceedings we are involved in generally relate to product liability and patent infringement issues. In our opinion, the outcome of pending claims and litigation is not likely to have a material adverse effect on our financial position, results of our operations or our cash flow. Currently we are the plaintiff in several patent infringement cases in Europe. The costs to defend these patents are not expected to have a significant impact on the results of operation in the future. As these cases are in early stages, no gain contingencies are recorded in the consolidated financial statements.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5.     MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR REGISTRANT’S COMMON EQUITY

Information regarding market prices of our Common Stock and dividends declared may be found in Note 21 to the Consolidated Financial Statements in Item 8 (which is incorporated by reference herein). Our Common Stock is traded on the New York Stock Exchange under the symbol ATR. As of February 17, 2005, there were approximately 500 registered holders of record.

RECENT SALES OF UNREGISTERED SECURITIES

During the quarter ended December 31, 2004, the FCP Aptar Savings Plan (the “Plan”) sold 506 shares and purchased 200 shares of our Common Stock on behalf of the participants at an average price of $48.35 and $53.17 per share, respectively, for aggregate amounts of $24,467 and $10,633, respectively. At December 31, 2004, the Plan owns 4,240 shares of our Common Stock. The employees of AptarGroup S.A.S. and Valois S.A.S., our subsidiaries, are eligible to participate in the Plan. All eligible participants are located outside of the United States. An independent agent purchases shares of Common Stock available under the Plan for cash on the open market and we do not issue shares. We do not receive any proceeds from the purchase of Common Stock under the Plan. The agent under the plan is Banque Nationale de Paris Paribas Asset Management. No underwriters are used under the Plan. All shares are sold in reliance upon the exemption from registration under the Securities Act of 1933 provided by Regulation S promulgated under that Act.

ISSUER PURCHASES OF EQUITY SECURITIES

The following table summarizes the Company’s purchases of its securities for the quarter ended December 31, 2004:

     The Company announced on October 21, 1999 that it was authorized to repurchase one million shares of its outstanding common stock. On October 19, 2000, the Company announced that it was authorized to repurchase an additional two million shares of its outstanding common stock. On July 15, 2004, the Company announced that it was authorized to repurchase an additional two million shares of its outstanding common stock bringing the cumulative total repurchase authorization to five million shares of the Company’s common stock. There is no expiration date for these repurchase programs. These repurchase programs have been approved by the Board of Directors.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA

(1)	Net income includes a charge for acquired research and development (“R&D”) of $0.8 million in 2003, a Patent Dispute Settlement of $2.7 million and Strategic Initiative charges of $1.1 million in 2002 and Strategic Initiative charges of $6.0 million in 2001.
(2)	Net income per basic and diluted common share includes the negative effects of $0.02 for an acquired R&D charge in 2003, $0.07 for a Patent Dispute Settlement, $0.03 for Strategic Initiative charges in 2002 and $0.17 for Strategic Initiative charges in 2001.
(3)	Net Debt is interest bearing debt less cash and cash equivalents.
(4)	Total Capitalization is Stockholders’ Equity plus interest bearing debt.
(5)	Net Capitalization is Stockholders’ Equity plus Net Debt.

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ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED RESULTS

INTRODUCTION

The year 2004 was one of our most successful years and marked our 39th consecutive year of increased sales. Net sales were nearly $1.3 billion in 2004, representing an increase of more than 16% over 2003. The U.S. dollar continued to weaken against foreign currencies, particularly the Euro and this accounted for nearly 7% of the 16% increase in net sales in 2004. The broad-based demand for our products and the strength of the markets we serve were key factors in the success of 2004.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage relationship of certain items to net sales:

NET SALES

Net sales increased more than 16% in 2004 to nearly $1.3 billion compared to $1.1 billion recorded in 2003. The U.S. dollar continued to weaken throughout 2004 compared to the Euro and finished nearly 8% weaker than the Euro compared to the end of 2003. Net sales excluding changes in foreign currency rates increased approximately 9% from the prior year. Approximately $26 million of the increase in 2004 relates to increased sales of custom tooling. Excluding changes in foreign currency rates, the changes in our sales by market were as follows:

	•	Sales to the personal care market increased approximately 7% or $28 million compared to the prior year. Approximately $5 million of the increase is due to increased sales of custom tooling. The remainder of the increase reflects strong volume growth of both our dispensing closure and spray pump product lines.
	•	Sales to the fragrance/cosmetic market increased approximately 6% or $21 million compared to the prior year, reflecting growth in all of our geographic areas, and was particularly strong in our emerging markets. Price competition particularly in the low-end of this market is affecting sales growth and operating margins.

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	•	Sales to the pharmaceutical market increased approximately 10% or $27 million compared to the prior year, reflecting continued strong growth of metered dose aerosol valves, increased sales of custom tooling to customers of approximately $6 million and increased licensing and other service revenue of approximately $4 million.
	•	Sales to the household market increased approximately 16% or $14 million compared to the prior year reflecting strong growth in this market across all three product lines we sell as well as an increase of approximately $3 million in sales of custom tooling.
	•	Sales to the food/beverage market increased approximately 28% or $21 million compared to the prior year reflecting continued strong growth and acceptance of our dispensing closure product range in this market. In addition, sales of custom tooling to customers increased approximately $7 million compared to the prior year.

The following table sets forth, for the periods indicated, net sales by geographic location:

COST OF SALES (EXCLUSIVE OF DEPRECIATION SHOWN BELOW)

Our cost of sales as a percentage of net sales increased in 2004 to 66.8% compared to 65.7% in 2003. The following factors influenced our cost of sales percentage in 2004:

Sale of Building. In the first quarter of 2004, we sold a production facility and realized a gain on the sale of the building of approximately $1 million. The gain is included in cost of goods sold.

Higher Quality Related Costs. We incurred higher quality related costs in 2004. The most significant issue related to a problem encountered with resin used to make pumps for one of our pharmaceutical customers. Our resin supplier had erroneously mixed and shipped a non-approved resin with an approved resin that was not detected in our statistical incoming quality control process. This problem negatively influenced the 2004 results by approximately $1.5 million. Two additional unrelated claims totaled another approximately $1.2 million. An increase in aging of some of our inventory, as well as the non-salability of product returns related to the above claims, are the primary reasons for the increase in the inventory obsolescence reserve detailed in Schedule II — Valuation and Qualifying Accounts.

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Continued Price Pressure. Pricing pressure continues to be strong in all the markets we serve, particularly in the low-end of the fragrance/cosmetic market and for dispensing closures. Directly, Asian suppliers are exporting more pumps worldwide and particularly to the U.S. and European markets. Indirectly, some fragrance/cosmetic marketers in the U.S. are sourcing their entire product in Asia and importing the finished product back into the U.S.

Strengthening of the Euro. We are a net exporter from Europe of products produced in Europe with costs denominated in Euros. As a result, when the Euro strengthens against the U.S. dollar or other currencies, products produced in Europe (with costs denominated in Euros) and sold in currencies that are weaker compared to the Euro, have a negative impact on cost of sales as a percentage of net sales.

Increased Sales of Custom Tooling. We increased sales of custom tooling $26 million in 2004. Traditionally sales of custom tooling generates lower margins than our regular product sales and thus any increased sales of custom tooling negatively impacts cost of sales as a percentage of net sales. The increase in tooling sales added approximately .4% to cost of sales as a percentage of net sales.

Operating Losses and Shut Down Expenses for a Mold Manufacturing Facility in the U.S. We closed a mold manufacturing facility in the U.S. in 2004 that employed approximately 40 people. Total operating losses of the facility, as well as shut down related expenses, were approximately $3.1 million in 2004 compared to operating losses of approximately $770 thousand in 2003. The majority of these expenses were recorded in cost of goods sold.

Rising Raw Material Costs. Raw material costs, in particular plastic resin and metal, have increased significantly during 2004. Due to delays in timing of when these raw material price increases have been passed on to customers, the net effect was a reduction in margin.

Cost Reduction Efforts. We continued to focus on reducing costs worldwide to offset the adverse effects of competitive price pressure and rising raw material costs

     Our cost of sales as a percentage of net sales increased in 2003 to 65.7% compared to 64.1% in 2002. Our cost of sales percentage was influenced by the following factors in 2003:

Introduction of New Products. The introduction of new products and new applications for our products typically generate higher margins than our existing product sales and thus had a positive impact on lowering the cost of sales as a percentage of net sales.

Cost Reduction Efforts. We continued to contain and reduce costs worldwide, which led to labor savings as well as productivity improvements, both of which reduced cost of goods sold.

Continued Price Pressure. Pricing pressure continued to be strong in all the markets we serve, particularly in the low-end of the fragrance/cosmetic market and dispensing closure product range. Directly, Asian suppliers began to export more spray pumps in particular to the U.S. market. Indirectly, some fragrance marketers in the U.S. started sourcing their entire product in Asia and importing the finished product back into the U.S. Price reductions greater than cost savings achieved through productivity gains had a negative impact on the cost of sales as a percentage of net sales.

Strengthening of the Euro. We are a net exporter from Europe of products produced in Europe with costs denominated in Euros. As a result, when the Euro strengthens against the U.S. dollar or other currencies, products produced in Europe (with costs denominated in Euros) and sold in currencies that are weaker compared to the Euro, have a negative impact on cost of sales as a percentage of net sales.

Increased Sales of Custom Tooling. We saw approximately a $29 million increase in sales of custom tooling in 2003. The increase in tooling sales added approximately .7% to the cost of sales as a percentage of net sales.

SELLING, RESEARCH & DEVELOPMENT AND ADMINISTRATIVE

Our Selling, Research & Development and Administrative expenses (“SG&A”) increased approximately 13.3% or $22.8 million in 2004. A significant portion of this increase is due to movements in exchange rates. Excluding the impact of the change in exchange rates, SG&A increased 6.6% or approximately $12.1 million. Approximately $3 million of the increase relates to research and development costs associated with the continued development of dry powder technology that we purchased in 2003. Approximately $1.7 million relates to increased audit fees primarily associated with Section 404 of the Sarbanes-Oxley legislation compliance. The remainder of the increase relates to other inflationary increases in costs such as salaries. SG&A as a percentage of sales continued to decrease to 15.0% in 2004 compared to 15.4% in 2003.

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DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense increased 10.1% or $8.6 million in 2004. Changes in currency rates accounted for approximately $5.5 million of the $8.6 million increase. The remaining increase relates to increased capital expenditures to support the growth of our business.

ACQUIRED RESEARCH AND DEVELOPMENT CHARGE

In 2003, we acquired intellectual property (patents, licenses and know how) and equipment relating to DPI technology dispensing systems for the pharmaceutical market. Approximately $1.3 million ($.8 million after-tax) of acquired intellectual property was expensed in 2003 because it was for a particular research and development project.

STRATEGIC INITIATIVE CHARGES

In April 2001, we announced a Strategic Initiative project to improve the efficiency of our operations that produce pumps for our mass-market fragrance/cosmetic and personal care customers. In addition to improving efficiency and reducing costs, another objective of the Strategic Initiative was to improve customer service through reduced lead times and the ability to customize finished products on a local basis. As part of the Strategic Initiative, we closed one molding operation in the U.S. and consolidated the molding and assembly of the base cartridge (standard internal components common to modular pumps) into one of our facilities in Italy. We also closed several of our sales offices in certain foreign countries. In addition, we rationalized our mass-market pump product lines for these two markets by discontinuing production of non-modular pumps and increasing capacity for our modular pumps. The project was essentially complete as of December 31, 2002 and we did not record any additional expense related to this project in 2004 or 2003.

PATENT DISPUTE SETTLEMENT

In 2002, we announced an agreement settling an outstanding patent dispute to avoid the time and expense of a trial that was scheduled to begin in late 2002. As part of the settlement, the parties entered into a cross-license agreement. Patent dispute settlement charges of $4.2 million are included in 2002.

OPERATING INCOME

Operating Income increased approximately $16.9 million or 13.7% to $140.9 million in 2004. The increase in operating income is due primarily to the increase in sales volumes discussed previously. Operating income as a percentage of sales decreased slightly to 10.9% in 2004 compared to 11.1% in 2003. The decrease in operating income as a percentage of sales is due primarily to the additional costs previously discussed in the cost of goods sold section above.

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NET OTHER EXPENSES

Net other expenses in 2004 decreased to $3.7 million compared to $6.7 million in 2003 principally reflecting increased interest income of $1.3 million, an increase in income of affiliates of $.4 million and a net positive change of $.9 million in foreign currency transactions. The increase in interest income related to our growing cash position in Europe during 2004. The increase in income of affiliates is due to an increase in profits for both our joint venture in Europe and our minority investment in South America. The majority of the net positive change in foreign currency transactions relates to a gain recorded on a foreign currency contract put in place for the repatriation of approximately $50 million from Europe to the U.S. in the third quarter of 2004.

EFFECTIVE TAX RATE

The reported effective tax rate for 2004 decreased slightly to 32.0% compared to 32.1% in 2003. The slight reduction in the effective tax rate reflects the mix of where our income was earned. In 2004, we did not receive any tax refunds that we have claimed in the U.S. relating to research and development credits for the years 2000 through 2002. We will record these refunds when we receive them. See “Liquidity and Capital Resources” below and Note 5 to the Consolidated Financial Statements in Item 8. We also recorded approximately $2.9 million of deferred tax assets related to foreign tax credits and net operating loss carryforwards in 2004 and recorded a corresponding valuation allowance due to our judgment about the realizability of the related deferred tax assets in future years.

NET INCOME

We reported net income of $93.3 million in 2004 compared to $79.7 million reported in 2003 and $66.6 million reported in 2002.

DISPENSING SYSTEMS SEGMENT

The Dispensing Systems segment is an aggregate of four of our five business units. The Dispensing Systems segment sells primarily non-aerosol spray and lotion pumps, dispensing closures, and metered dose aerosol valves. These products are sold to all of the markets we serve.

(1)	Segment Income is defined as earnings before net interest, corporate expenses, income taxes and unusual items. The Company evaluates performance of its business units and allocates resources based upon Segment Income. For a reconciliation of Segment Income to income before income taxes, see Note 16 to the Consolidated Financial Statements in Item 8.

     Our net sales for the Dispensing Systems segment in 2004 grew nearly 18% over 2003. Approximately $60 million of the increase in sales is due to the weaker U.S. dollar compared to the Euro and other currencies. Another $28 million of the increase is due to increased sales of custom tooling. Excluding foreign currency changes, sales of our products increased to all of the markets we served in 2004. Price competition continues to negatively impact primarily the low-end fragrance/ cosmetic market and dispensing closure product range.

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SEAQUISTPERFECT SEGMENT

SeaquistPerfect represents our fifth business unit and sells primarily aerosol valves and accessories and certain non-aerosol spray and lotion pumps. These products are sold primarily to the personal care, household and food/beverage markets.

     Net sales increased 10% in 2004. The weak U.S. dollar compared to the Euro in 2004 accounted for nearly half of the sales growth. The remainder of the sales growth can be attributed to strong U.S. sales of aerosol valves and spray and lotion pumps. The introduction of several new accessories such as a locking actuator for aerosol valves helped stimulate demand in the U.S. in 2004. Price competition and the mix of aerosol valve sales were the main reasons for the lack of sales growth in Europe in 2004. The lotion pump product line continues to grow at a higher rate than the overall personal care market. Sales of custom tooling decreased nearly $3 million compared to 2003.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash flow provided by our operations and our revolving credit facility. Cash and equivalents increased to $170.4 million from $165.0 million at the end of 2003. Total short and long-term interest bearing debt decreased to $205.9 million from $221.9 million at the end of 2003. The ratio of our Net Debt (interest bearing debt less cash and cash equivalents) to Net Capital (stockholder’s equity plus Net Debt) decreased to 4% compared to 7% as of December 31, 2003.

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     Based upon the above interest coverage ratio covenant, we could borrow additional debt up to a limit where interest expense would not exceed approximately $69 million. Interest expense in 2004 was approximately $10 million. Based upon the above debt to total capital ratio covenant we would have the ability to borrow an additional $860 million before the 55% requirement was exceeded.

OFF-BALANCE SHEET ARRANGEMENTS

We lease certain warehouse, plant and office facilities as well as certain equipment under noncancelable operating leases expiring at various dates through the year 2018. Most of the operating leases contain renewal options and certain equipment leases include options to purchase during or at the end of the lease term. We have an option on one building lease to purchase the building during or at the end of the term of the lease at approximately the amount expended by the lessor for the purchase of the building and improvements, which was the fair value of the facility at the inception of the lease. This lease has been accounted for as an operating lease. If the Company exercises its option to purchase the building, the Company would account for this transaction as a capital expenditure. If the Company does not exercise the purchase option by the end of the lease in 2006, the Company would be required to pay an amount not to exceed $9.5 million and would receive certain rights to the proceeds from the sale of the related property. The value of the rights to be obtained relating to this property is expected to exceed the amount paid if the purchase option is not exercised. Other than operating lease obligations, we do not have any off-balance sheet arrangements. See the following section “Overview of Contractual Obligations” for future payments relating to operating leases.

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OVERVIEW OF CONTRACTUAL OBLIGATIONS

Below is a table of our outstanding contractual obligations and future payments as of December 31, 2004:

(1)	The future payments listed above for capital lease obligations and long-term debt repayments reflect only principal payments.
(2)	The building lease payment indicated in the table assumes that the Company exercises its option to purchase the building at the end of the lease in 2006 for approximately $9.5 million, which represents the estimated residual value of the building at the end of the lease date.
(3)	Approximately 40% of our total interest bearing debt has variable interest rates. As it is difficult to calculate accurately future obligations relating to variable rate interest payments, they have been excluded from this table.
(4)	The amount shown represents the agreement to acquire EP Spray System SA, which was entered into subsequent to December 31, 2004 and is subject to customary closing conditions.
(5)	Aside from deferred income taxes and minority interest, we have approximately $29 million of other deferred long-term liabilities on the balance sheet, which consist primarily of retirement and deferred compensation plans. See Note 8 to the Consolidated Financial Statements in Item 8 for a schedule of estimated future benefit payments related to the Company’s defined benefit plans. Timing of future payments relating to the remaining deferred compensation and other obligations are not included in the table as they are difficult to determine because they are based upon governmental contribution requirements, which fluctuate annually, or they will be amortized in the future and will not be settled in cash.

ADOPTION OF ACCOUNTING STANDARDS

In November 2004, the Financial Accounting Standards Board, (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 151 “Inventory Costs.” SFAS No. 151 amends the guidance in Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, “Inventory Pricing,” to clarify the abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB No. 43, Chapter 4 previously stated that “...under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges...” SFAS No. 151 requires that those items be recognized as current period charges regardless of whether they meet the criterion of “so abnormal.” In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We have performed a preliminary assessment and have determined that this statement will not have a material impact on us upon adoption.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, pensions and contingencies. We base our estimates on historical experience and on a variety of other assumptions believed to be reasonable in order to make judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in preparation of our Consolidated Financial Statements. Management has discussed the development and selection of these critical accounting estimates with the audit committee of our Board of Directors and the audit committee has reviewed our disclosure relating to it in this Management’s Discussion and Analysis of Consolidated Results of Operations and Financial Condition (“MD&A”).

IMPAIRMENT OF GOODWILL

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ALLOWANCE FOR DOUBTFUL ACCOUNTS

VALUATION OF PENSION BENEFITS

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     In order to determine the 2005 net periodic benefit cost, the Company expects to use the December 31, 2004 discount rate and rate of compensation increase assumptions, and lower the expected long-term return on domestic and foreign plan assets to 7% and 6%, respectively. The estimated impact of the changes to the assumptions as noted in the table above on our 2005 net periodic benefit cost is a net increase of approximately $1 million.

INCOME TAXES ON UNDISTRIBUTED EARNINGS OF FOREIGN SUBSIDIARIES

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OUTLOOK

The year 2005 is expected to be a challenging year for us as we try to improve over 2004, which was one of our most successful years in the Company’s history. Sales of our products to all of the markets we serve are expected to continue to grow in 2005. However pricing continues to be competitive in most of the markets we serve, in particular in the low-end fragrance/cosmetic market and the dispensing closure product range.

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FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis and certain other sections of this Form 10-K contain forward-looking statements that involve a number of risks and uncertainties. Words such as “expects,” “anticipates,” “believes,” “estimates,” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to identify such forward-looking statements. Forward-looking statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are based on our beliefs as well as assumptions made by and information currently available to us. Accordingly, our actual results may differ materially from those expressed or implied in such forward-looking statements due to known or unknown risks and uncertainties that exist in our operations and business environment, including but not limited to:

	•	difficulties in product development and uncertainties related to the timing or outcome of product development;
	•	the cost and availability of raw materials;
	•	our ability to increase prices;
	•	our ability to contain costs and improve productivity;
	•	our ability to meet future cash flow estimates to support our goodwill impairment testing;
	•	direct or indirect consequences of acts of war or terrorism;
	•	difficulties in complying with government regulation;
	•	competition (particularly from Asia) and technological change;
	•	our ability to defend our intellectual property rights;
	•	the timing and magnitude of capital expenditures;
	•	our ability to identify potential acquisitions and to successfully acquire and integrate such operations or products;
	•	significant fluctuations in currency exchange rates;
	•	economic and market conditions worldwide;
	•	changes in customer spending levels;
	•	work stoppages due to labor disputes
	•	the demand for existing and new products;
	•	other risks associated with our operations.

     Although we believe that our forward-looking statements are based on reasonable assumptions, there can be no assurance that actual results, performance or achievements will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 7a.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISKS

A significant number of our operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of our entities. Our primary foreign exchange exposure is to the Euro, but we also have foreign exchange exposure to South American and Asian currencies, among others. A weakening U.S. dollar relative to foreign currencies has an additive translation effect on our financial condition and results of operations. Conversely, a strengthening U.S. dollar has a dilutive effect.

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ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AptarGroup, Inc.

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.

See accompanying notes to consolidated financial statements.

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AptarGroup, Inc.