AptarGroup (ATR) Q4 2018 Earnings Conference Call Transcript

AptarGroup (ATR 0.47%)
Q4 2018 Earnings Conference Call
Feb. 21, 2019 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants
  
  See all our earnings call transcripts.

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to AptarGroup's 2018 fourth-quarter and year-end conference call. [Operator instructions] Introducing today's conference call is Mr. Matt DellaMaria, senior vice president, investor relations and communications.

Please go ahead, sir.

Matt DellaMaria -- Senior Vice President, Investor Relations and Communications

Thank you, Howard, and welcome, everyone. Participating on the call today are Stephan Tanda, president and chief executive officer; and Bob Kuhn, executive vice president, chief financial officer, and secretary. You can find a copy of our press release as well as a slide presentation that summarizes our results on our website. We will also post a replay of this conference call on the website.

Lastly, today's call include some forward-looking statements. Please refer to our SEC filings to review factors that could cause actual results to differ materially from those projected or contained in the forward-looking statements. Aptar undertakes no obligation to update the forward-looking information contained therein. I would now like to turn the conference call over to Stephan.

Stephan Tanda -- President and Chief Executive Officer

Thank you, Matt, and good morning, everyone, and thanks for joining us. As you saw yesterday, we reported fourth-quarter results, that included very robust core sales growth across seven of our eight end markets and in each geographic region. Bob will share some details regarding our financial results, and afterwards, I will briefly recap the year. But first, I would like to comment on a few important topics that are an inherent part of our strategy.

If you're following along with the presentation that accompanies our press release and is posted to our website, I'm referring now to Slide 4. The first topic is sustainability. The increased level of interest in this topic by our customers is driving new innovation projects that will drive future growth. You may also have seen that Aptar has signed the Ellen MacArthur New Plastics Economy Global Commitment and we have joined the World Business Council for Sustainable Development.

Joining these important organizations further underscores our efforts to work closely with customers and industry stakeholders to accelerate progress toward a circular economy. Some of our closures and pumps did feature post-consumer recycled resin, or PCR, can already be found on products in the market today. For example, most recently, we announced the launch of a dispensing closures that uses 50% PCR for Ecover's brand of liquid soap called Washing Up. We're also actively collaborating with our customers on refillable products, we're supporting our customers participation in the circular e-commerce platform called Loop by providing lotion pumps to key customers Unilever and Procter & Gamble.

Finally, Aptar was recently made by Barron's one of the Top 100 Most Sustainable Companies in the U.S. as part of their 2019 sustainability rankings. Another important topic is innovation. As you know, from our prior discussions about our strategic priorities, we have a dedicated innovation excellence group and we are very excited about the implementation of new tools and methods as the team works to identify opportunities in each business and in each geographic region.

We continue to explore ways to leverage new technologies including our active packaging technology that we recently acquired as part of CSP and our growing platform of connected devices. I would like to share a few recent examples of interesting innovations that we are bringing to market. So turning to Slide 5. I will highlight the first three examples starting with a product from our Beauty + Home segment, the so-called indie brands, or independent brands, are gaining more prominence within the beauty industry.

And many of these players require direct connection with key suppliers. Small business owners and founders of indie brands are turning to Aptar due to our expertise in dispensing, local supply chain and industry knowledge to help their brands succeed. The photo on the left shows a moisturizing gel lotion by IT Cosmetics, the indie brand that L'Oreal has acquired, which features Aptar's Airless dispensing system. Moving to the next product from our Pharma segment, we recently launched our QuickStart Injectables solution that is available to order online via our website.

This solution is a sterile, ready-to-use offering designed to accelerate the development time for start ups, biotechs, universities and early stage developers. The QuickStart solution offers everything needed for the small volume filling of high-value formulations including various sizes, configuration of vial stoppers, push-off caps as well as technical documentation that proactively addressed regular dates -- regulated needs and accelerate approval. Turning to Food + Beverage products. We continue to help our customers convert their packaging from a non-dispensing format, such as a top of sour cream, to inverted dispensing solutions featuring our closure and SimpliSqueeze valves.

The example on this slide shows KEMPS new inverted easy squeeze bottle for their sour cream. As we look to grow our business and manage near-term challenges and opportunities, we will also focus on long-term results by investing in sustainable solutions and accelerating our innovation we are committing to a bright future for customers and for our planet. With that, I will now turn it over to Bob, who's going to walk through some of the financial details and come back afterwards. Bob?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Thank you, Stephan, and good morning, everyone. I'll briefly walk through some of the details concerning our fourth-quarter results. If you are following the slides we published with the press release, you can refer to Slide 6. We reported sales growth of 9%, that was comprised of core sales growth of 7%, with a positive impact from acquisitions of 6% and a negative impact from currency rates of minus 4%.

Sales increased across each geographic region and in all end markets other than beverage. As you saw on our press release, Beauty + Home core sales, excluding acquisitions and keeping currencies constant, increased 4%. Looking at sales growth by market on a core basis, core sales to the beauty market increased 3%. This was mostly due to strong demand for facial skin care and color cosmetic products.

Core sales for the personal care market increased 4% due to an increased demand for dispensing pumps for body care and baby care. Core sales to the home care market increased 10% due primarily to increased demand for dispensing solutions for household cleaners and air fresheners. When we look at profitability, our Beauty + Home segment had an adjusted EBITDA margin of 13%. Margins were negatively impacted by headwinds from the timing of passing through rising raw material cost, start-up losses at Reboul and some isolated operational challenges at other facilities.

Our Pharma segment achieved the core sales growth of 15% and an adjusted EBITDA margin of 36%. The strong sales volumes along with the gain recognized on the sale of an equity investment contributed to strong pharma margins. Core sales to the prescription market increased 17% primarily due to increased demand of our metered dose inhalers and nasal spray systems used with allergy and central nervous system treatments. Core sales to the consumer healthcare market increased 21%, driven primarily by increased demand for ophthalmic dispensers for eye care and other solutions for cold and cough treatments.

Lastly, core sales to the injectables market increased 5%. Turning to our Food + Beverage segment. Core sales were flat in the quarter due to lower custom tooling sales and the segment had an adjusted EBITDA margin of 12%. Margins were negatively affected by the write-off of a prepaid license fee related to our bonded aluminum to plastic technology.

This write-off is related to a prepaid license fee that has concluded, and this does not affect the future use of our technology. Looking at each market, core sales to the food market increased 2% in spite of a negative impact from lower custom tooling sales of about 12%. Demand increased for our leading dispensing solutions for condiments and sauces as well as infant nutrition products. Core sales to the beverage market decreased 6% due to weaker demand in the China beverage market.

Comparable adjusted earnings per share totaled $0.92, compared to $0.77 adjusted earnings per share in the prior year, including comparable exchange rates. On Slide 8, you can see that our adjusted EBITDA for the fourth quarter increased 20% due to year-on-year improvement from our pharma and Beauty + Home segments. Slide 9 refers to our outlook. We are expecting earnings per share for the first quarter to be in the range of $0.95 to $1 per share using an expected tax rate range for the first quarter of 29% to 31%.

I'd like to point out that when we compared to the prior year adjusted earnings per share and we compare using similar exchange and tax rates, the midpoint of our range represents an increase of approximately 9%. I've a few other details to share and then I will hand it back to Stephan. In the quarter, cash flow from operations was approximately $104 million, capital expenditures were approximately $66 million, and our free cash flow was approximately $38 million, compared to $24 million a year ago. For the year, cash flow from operations was approximately $314 million, capital expenditures were approximately $211 million, and our free cash flow is approximately $102 million, compared to $168 million a year ago.

The primary reasons for the decrease in cash flow relate to $64 million of cash outflows related to our restructuring and acquisition costs and higher capital expenditures compared to the prior year, primarily related to our business transformation. Looking at our balance sheet capitalization on a gross basis, debt-to-capital was approximately 48%, while on a net basis, it was approximately 42%. And we remained slightly less than two times levered compared to our 2018 annual adjusted EBITDA. At this time, Stephan will provide a few comments before we move to Q&A.

Stephan Tanda -- President and Chief Executive Officer

Thanks, Bob. So a few key takeaways. It was clearly a good quarter and a good year. In 2018, we made significant progress on our strategic priorities.

I'd like to leave you with a key -- few key takeaways as shown on Slide 10. We achieved excellent organic growth with our Beauty + Home business reporting strong top-line improvement, helped in part by our transformation initiatives and also remarkably strong end-market demand. Our business segments grew nicely in Beauty + Home and Pharma well -- finished well ahead of their long-term targets as Food + Beverage slightly below their target range for core sales growth. We also finished the year with a strong EBITDA improvement when we exclude costs related to our acquisitions and restructuring initiatives.

As highlighted last quarter, we continued to add key external talent to our executive ranks and accelerate and strengthened our internal leadership development activities. As part of our balanced capital allocation, we completed strategic acquisitions and equity investments. We also increase our dividend and 2018 was our 25th consecutive year of paying an increased dividend. Furthermore, we invested in our business in 2018 and will continue to do so in 2019.

About half of the expected capital expenditures for 2019 will be related to additional capacity and to new products, including those related to our recently acquired businesses. In closing, Aptar is a company with a very resilient business model with the industry's broadest portfolio of differentiated solutions. Our business is diversified across attractive end markets, across geographic regions and across thousands of high-quality customers. There's a lot of discussion these days about our potential economic slowdown, while we are not recession proof, we are able to leverage our great diversity and along with our strong balance sheet, we can withstand economic slowdown should they occur.

We only need to look to the last great recession to understand that even with the decline in sales, our margins were very stable. And postrecession, we had back-to-back record sales growth and our portfolio has become even more resilient since then. So just to be clear, while we read the same headlines as you do, we do not see a slowdown in our business at this time, and our customers see robust demand. Aptar is a unique company with a tremendous long-term track record that we tend to protect.

With that, we would like to open it up for your questions. 

Questions and Answers:

Operator

[Operator instructions] Our first question or comment comes from the line of Daniel Rizzo from Jefferies. Your line is open.

Daniel Rizzo -- Jefferies -- Analyst

Good morning, guys. Just a quick question on costs, what you're seeing. I mean, I assume that this kind of leveled off now. I was wondering how long it takes for you guys to pass price increase or cost increase through to your customers? I mean what's the lag?

Stephan Tanda -- President and Chief Executive Officer

Yes. Thanks, Daniel. Usually, anywhere between 30 to 90 days. So a quarter to make the adjustment.

Now realize, when you get to the end of that period, by the time you see the effect, that can be up to six months because you have the trailing effect.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

So Daniel, just to put some context around it. We did pass-throughs in the quarter, which positively impacted the top line by between that and general price increase about 1.5%. But when we look at the EBITDA impact, it was about a $3 million negative primarily in Beauty + Home and predominantly from raw material or input costs other than resin.

Daniel Rizzo -- Jefferies -- Analyst

And what are we seeing with those costs now?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Well, I mean in the first quarter, we're seeing a continued reduction in the resin costs. And so we're anticipating a modest positive to EBITDA in the first-quarter projection.

Daniel Rizzo -- Jefferies -- Analyst

And then it looks like your CAPEX is stepping up a bit in 2019, I was wondering if you could provide some color on that and what was it relating to.

Stephan Tanda -- President and Chief Executive Officer

Sure. I mean, when you step back, we really after an extended period of slow or no growth, we've now experienced some 6 quarters of risk growth and expect that growth to continue. So we are starting to experience shortages in several areas of our business that is not only causing service issues to clients, but also contribute to some of our operational challenges. So we need to ramp-up capacity to ensure we meet the customer demand to take advantage of the growth opportunities in an efficient manner.

I mean remember, these organic investments provide some of the best returns that we can generate. So -- but may be Bob can add some more color to the investments.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Yes. I mean, I think Stephan mentioned in his opening remarks as well, about half of the expected cash outlays next year are going to be coming from these capacity growth initiatives, including capital for the newly acquired CSP and Reboul in 2018. We do have some additional cash outlays for transformation that we have highlighted earlier in 2018 where the cash is expected to be spent in 2019. And then really everything else is, I would call more in line normally with maintenance and systems-type investments.

Daniel Rizzo -- Jefferies -- Analyst

And final question, the -- to alleviate the operational issues, you just pointed to. How long do they -- how long is it going to take? Are you going to be able to, I mean, will take mostly a year to kind of catch up to -- catch with your's utilization where you wanted to be?

Stephan Tanda -- President and Chief Executive Officer

Well, I mean, let's put it in the context of the transformation. If you remember this transformation really has four elements. The first and the biggest impact is top-line growth, and the second was to significant proof operations in the factories, the third one was around G&A reductions, and then the fourth one was all about the streamline to support infrastructure. You can almost also look at it this from a time point of view.

If you're focused on accelerating the top line first, this year will be all about improving operations. Some of those things do need investments and the G&A reductions will come toward the end of the transformation program.

Daniel Rizzo -- Jefferies -- Analyst

Thank you very much.

Operator

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

Matt Krueger -- Baird -- Analyst

Hi. Good morning. This is actually Matt Krueger sitting in for Ghansham. So I was hoping that you could provide a further breakdown of core sales in terms of volume contributions versus pricing contributions for your segments? And then could you provide some added detail on kind of the strict volume outlook for 2019 as it relates to your segments or even by region would be helpful.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Sure. So on the top line, when I mentioned we had about positive 1% to 1.5% of pass-through. But 3% of that is impacting the Food + Beverage side, and then 1% is for Beauty + Home.

Matt Krueger -- Baird -- Analyst

OK, that's helpful. And then just in terms of the outlook?

Stephan Tanda -- President and Chief Executive Officer

Well, I mean, we don't really provide guidance for top line. As you know, we gave a target range for our top line growth for the company of 4% to 7%, and then that splits into Beauty + Home, 3% to 6%; and then pharma, 6% to 10%; and Food + Beverage, 6% to 10%. Clearly, pharma has done significantly better with growth in the teens now for quite a few quarters, which is also driving some of the need to expand capacity in pharma, and then certainly had a place where we don't want to shortchange customers. And yes, we are committed to these guided ranges, but not every quarter, yes.

So there will be differences by quarter.

Matt Krueger -- Baird -- Analyst

OK, understood. And then my next question is, can you provide some added detail on your outlook for margin recovery, specifically across the Home and Beauty and Food + Beverage segments as we progress through 2019? Just trying to get a sense as to when you guys could be kind of turning the corner to margin positive for year over year?

Stephan Tanda -- President and Chief Executive Officer

Yes. We totally expect the transformation to continue to impact us positively, not only on the top line but also the margin improvement. So we will expect margin expansion both for Beauty + Home and Food + Beverage to gradually come in over the year.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Yes. One thing I would like to point out is that, I think in Q1 last year, Beauty + Home margin was about 14%. And we -- I mentioned in my comments the start up losses at Reboul. Reboul didn't come in to the Beauty + Home results until sometime in the second quarter.

So we will have a little bit of overhang on those start-up losses in Q1, but we should be pretty close relatively speaking to where the first quarter was last year. And then we should see a gradual increase, as Stephan mentioned, moving through the rest of '19.

Matt Krueger -- Baird -- Analyst

Great. And then my last question related to the business transformation. I was hoping, we could just dig a little further into what savings you've already achieved from the transformation initiatives and where those savings can be attributed. I know it's focused on corporate and Home + Beauty segment.

What's the spending that's been required to achieve these savings? And then what are your -- what's your outlook for 2019 for both of those factors as well?

Stephan Tanda -- President and Chief Executive Officer

Yes. So let's break up again. So the fundamental numbers of $90 million of onetime cost to achieve a $80 million EBITDA improvement over a three-year period, plus capital expenditure. And the three-year program, biggest impact is from top line growth, I think you have seen that.

We have achieved quite a few also cost improvements last year, but they are obscured and partially offset by the operational challenges that we've been very transparent about. Nevertheless, those are occurring. And as I said this year, we'll be all about improving the factories addressing some of -- more of these operational issues so that the obscuration of those transformation savings goes away. And then toward the end of the transformation will be, some of the G&A reductions that we are working and detailing now specifically.

Matt Krueger -- Baird -- Analyst

OK, great. Thank you very much.

Operator

Thank you. Our next question or comment comes from the line of George Staphos from Bank of America. Your line is open.

George Staphos -- Bank of America -- Analyst

Thank you. Hi, everyone. Good morning. Thanks for all the details and congratulations.

Congratulations on the year. I guess, the first question I had was on beverage trends and kind of a two-part. One, the -- in China, you've been managing against this issue now for probably, I don't know, one and a half years. When should we, if it's possible to discern anniversary that beverage closure issue in China? When will the comps turn flat to positive at least in terms of that issue? And relatedly, what are your customers saying more broadly about their use of plastic for beverages, from water to -- in everything else, energy drinks, etc.?

Stephan Tanda -- President and Chief Executive Officer

Yes. On the first topic or question, you're being very kind with the term managing. That's the reality.

George Staphos -- Bank of America -- Analyst

That's how we are, Stephan.

Stephan Tanda -- President and Chief Executive Officer

Yes. The China beverage customer is constitutes a very good business, but we have very limited visibility both on the end-user demand as well as on the customer orders. So I've called the anniversary before, so I'm not going to do it, again, since I've been wrong. I'll bet that this business, it will continue to surprise both on the upside and on the downside, and it just depends which quarters you compare.

And the fourth quarter was kind of a perfect storm, next what it might be the opposite. And I cannot give you a better answer, unfortunately. Now on your second question, the big debate or the big question was bottle. More that is really the flat top caps, how can you eliminate the screwing after the caps throwing away, because those single caps are one of the highest volume items that ends up in the sea.

So that drives people more to the sports cap closures that drives more to the solutions where the cap stays with the bottle and, hopefully, also the Flip Lid product that we are discussing with customers and our technologies already in the market that in some countries with that, again where the lid stays with a bottle and gets recycled with the bottle. I mean, the overall theme here is really all about circularity. Plastic is a very good energy-efficient products, but it needs to come back, it can't be a one-way street.

George Staphos -- Bank of America -- Analyst

So that's helpful, Stephan. So from your customer standpoint and from what they're hearing from the consumer, the bigger issue is on the cap on the one hand, which presumably that's an opportunity and you can solve that, and less on the actual use of plastic as long as it's recyclable and returnable and your customers are comfortable that, that will be resolved.

Stephan Tanda -- President and Chief Executive Officer

Yes. And you see initiatives around having them to pay a fee that you get returned when you return the bottle. That's been standard in places like Germany for a long time.

George Staphos -- Bank of America -- Analyst

OK. My last two questions, I'll turn it over. Can you talk us about, this is because of the real good comparison the other segments within pharma, it kind of stands out. But injectables, was the 5% core growth, which would be better than most of the other sectors that I look at period and packaging, but was it in line with what you were expecting? How were trends injectables playing out relative your expectations? And then I'm not sure I heard and perhaps you're not in a position to provide, but did you comment on how much cash outlay there will be this year for the transformation both in terms of cash cost for redundancies and capital? Thank you.

Stephan Tanda -- President and Chief Executive Officer

On the injectable market, this is certainly in line. So with market demand. Market demand is even a little bit higher to be perfectly honest, we are -- that's one of the areas where we have service issues from a capacity point of view. So -- but that certainly continues to be a very interesting area with good growth prospects.

Now I'll turn it to Bob.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

And George, you were looking at 2019 for the cash outlays for transformation?

George Staphos -- Bank of America -- Analyst

Yes. Both, If you can, redundancy and other costs and then capital associated with it. Thank you.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Sure. So in total, it's around $40 million is what we're anticipating for 2019.

George Staphos -- Bank of America -- Analyst

OK. Thank you, Bob.

Operator

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

Debbie Jones -- Deutsche Bank -- Analyst

Hi. Good morning. I wanted to go back to the volume that you're calling in Beauty + Home. I know some of this -- on the core sales side is raw materials, but it does seem like it's been a little better than expected in the last couple of quarters.

And I'm just trying to get a sense of how sustainable the growth you're seeing in this segment is? And specifically, are you -- is this -- is the growth you're seeing in line with what your customers are doing? Or are you benefited -- benefiting from winning more new product developments or other types of ways? And how should we think about that in 2019?

Stephan Tanda -- President and Chief Executive Officer

Yes. It's really both. When -- If you remember, when we kicked off the transformation, we were very transparent that in some areas, we had lost some market share and we're being much more proactive with customers tracking things like win rates and customer projects on a weekly basis. That certainly has allowed us to regain some of the lost business, that is a contributor.

Secondly, of course, the market demand is strong. And when you read the earnings announcement of some of our customers, whether it's L'Oreal or Estée Lauder or LVMH, you will find them pointing to very robust consumer growth particular in the Asia luxury and Asia premium consumer. And while we all read the headlines about China slowing down with respect to automobile sales, may be mobile phone sales, we don't see that, we don't hear that from our customers in the Beauty segment.

Debbie Jones -- Deutsche Bank -- Analyst

OK. Thank you. My second question. I was just noting that your cash balance is a lot lower that it normally is.

And if I just look historically, I think it was the same level kind of in Q3, as well, but I tend to be it could be running around $400 million. So I was just wondering if there was anything there to note? And if we should expect that to kind of change over time.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

No. I mean, The cash balance, was clearly, we had a big outflow for the CSP transaction. But I mean, we had peaked out around $700 million prior to that and we're running around $300 million roughly in Q3 and a little bit below that in Q4. That's really just some of the cash outlays we've had for the transformation and for the increase in CAPEX that we had in the fourth quarter.

Debbie Jones -- Deutsche Bank -- Analyst

OK. Thanks. I'll turn it over.

Operator

Thank you. Our next question or comment comes from the line of Edlain Rodriguez from UBS. Your line is open.

Edlain Rodriguez -- UBS -- Analyst

Thank you. Good morning, guys. Just one quick one on the guidance for 1Q. I mean, clearly, a little lower than most of us have expected.

But outside of currency, like anything else that we should be thinking of that kind of, like goes in on the shortfall? And is that related to the share repurchase? And again, like what's you're thinking of, what should do we think in terms of, like the cadence for sale repurchase and pace?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

So one of the things that I mean, I hesitate to kind of looking to what was in your model going forward. But I mean, if we just first look at acquisitions, CSP is performing as we expected, adding between $0.02 and $0.03 per share in Q4. What's offsetting that a little bit is the Reboul start-up losses, which were about to $0.02. So may be there's some of that.

As well we expect that start up loss to continue to go into Q1 as I mentioned earlier, and then slowly abated as the year goes on. I'm sorry, what was the other question?

Stephan Tanda -- President and Chief Executive Officer

Share buyback.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Share buyback. So, yes. So we were on the sidelines in Q3 and Q4 because of the CSP acquisition, and we'll continue to be in the market from time to time. We've got about $80 million remaining on our existing authorization, and then we'll continue to evaluate, we've had our 25th consecutive year of paying an increased dividend.

We've talked a little bit about slightly higher spending on CAPEX, and then we'll continue to evaluate M&A opportunities as they present themselves.

Edlain Rodriguez -- UBS -- Analyst

OK. And one last one. On the whole sustainability issue. I mean, do you see it as a positive or negative for Aptar, especially if there's a shift away from plastics, not to metals and papers? So at the end of the day, is that how do you see Aptar positioned now...

Stephan Tanda -- President and Chief Executive Officer

Thanks. We actually see this as a tremendous opportunity because it accelerates customer dialogue around creating new solutions, creating recyclable versions of products. And at the end of the day, whenever you innovate, have a new customer projects then, when we can bring all our assets and all our differentiation to bear. So we actually are encouraged by the pickup in our customer project pipeline that's driven by sustainability.

One of our customers have made significant commitments around either full recyclability of their packaging or high PCR contents. And they need companies like Aptar to help them fulfill their commitment. Of course, in the pharma world, this is almost a nontopic to be honest in the -- in that luxury beauty world, it's also not a big topic where it is the biggest topic as we discussed earlier in some of the beverage markets. And we are not a player in the large bottled water market today.

We are a player more in the specialty sports drink market. And we offer solutions as we discussed earlier for the flat cap problem. Now, if I put my engineering hat on, plastic by far is the most sustainable product from an LCA footprint, but it has to be recycled. This -- if you recycle plastic, there is nothing that can come close to it from an environmental footprint.

I realize that it has the marketing problem. But in the end, I think the fundamental economics and including all the environmental footprint, I think will rule the day.

Edlain Rodriguez -- UBS -- Analyst

OK. Thank you much.

Operator

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

Adam Josephson -- KeyBank Capital Markets -- Analyst

Stephan, Matt, Bob, good morning. Bob, just a couple on cash flow. The -- your cash in '18, your free cash of $102 million. Was there any working capital drag in there? And was the cash flow performance as you expected?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

I would say, there the working capital wasn't a big drag, we're starting to see some pickup on the -- on our payables initiatives and increasing terms on suppliers that's going to gradually ramp-up as we move forward. Yes, the cash flow is where we expected it to be. We knew we had all the transformation cost to pay for, we had the acquisition costs in the year. And what we're reporting to you is a reported free cash flow number rather than an adjusted number taking those things out.

CAPEX, we view based on the project pipeline in Q4 would be a little bit higher than it was in the prior year. But then I would say overall, it didn't really shock us, it's where we -- it came in where we expected it to be.

Adam Josephson -- KeyBank Capital Markets -- Analyst

OK. And then Bob, just on the restructuring costs. So I think you said you had $64 million in '18. I think in response to a question, you said you expect another $40 million in '19, so that totals to about $100 million.

And when I go back to the...

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Yes. The $40 million included also capital outlays.

Adam Josephson -- KeyBank Capital Markets -- Analyst

Right. So when you made the announcement, you said I think, $90 million of cost and then $45 million of CAPEX associated with the restructuring, so call it $135 million total, assuming that the $90 million of costs were all cash, right?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

That's correct. And then we also said that the capital would be funded through working capital initiatives and improvements, which we're kind of there now.

Adam Josephson -- KeyBank Capital Markets -- Analyst

So the cost you own -- the additional cost you incur in '19, would that be -- how much left would you have post '19 related to the restructuring in terms of cash costs?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Well, we have a $58 million, if my memory serves me right, on cash outlays of the $64 million. So I mean, we've got that delta. So I mean, you're looking at probably $30 million something then on cash outlays.

Stephan Tanda -- President and Chief Executive Officer

I think that the bulk of the $90 million will be done by the end of the year with some playing into 2020.

Adam Josephson -- KeyBank Capital Markets -- Analyst

OK. And on the CAPEX, Bob, the $240 million. I know you said you have some growth projects in there, presumably of growth projects every year. So I'm just trying to understand, is it -- would you see that $240 million is a normal-ish number given that you have growth projects every year, would you say that's an unusually high number for Aptar, given that you having on just more growth projects than normal coming up in '19?

Stephan Tanda -- President and Chief Executive Officer

Maybe I just want to remind back, when you talk normally, we have changed the growth trajectory quite a bit. So what was normal in the kind of a flattish environment is not normal in the growth environment, when you need to add capacity to meet demand and add capacity already, I mean, it pains me not to be able to supply customers so.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Yes. I mean, and then included in that growth is also the additional amount of capital that we've got for both the CSP and the Reboul acquisitions as well. So we're lumping that into the capacity and upside.

Adam Josephson -- KeyBank Capital Markets -- Analyst

Thanks, Bob. And just my last one, just back to sustainability for a moment. Stephan, and you talked about sustainability being a big opportunity for Aptar, appreciating that you're not much in just water bottles, so you wouldn't get hurt to the extent that water bottles go out of favor. But we're hearing from other packaging companies most notably those that make aluminum beverage cans that the sustainability is a massive opportunity for them, not only in bottled water but other forms of beverage.

And you're saying, you don't expect any pain associated with sustainability. So can you just help us square why seemingly, every purveyor of packaging is saying this is an opportunity because presumably someone would get hurt in all of this?

Stephan Tanda -- President and Chief Executive Officer

Well, look, I mean, once we peel back the onion, I don't want this to make aluminum versus plastics. But if you run the LCA numbers, the answers are pretty stark. But even if you take the Loop example that we participate in, so some customers say, OK, we're going to switch shampoo bottle from plastic to aluminum and then we'll recycle or wash the aluminum bottle. It still needs to dispense it, it still needs to pump on top.

And then you have a solution, either you have a recyclable pumps or when it comes back, you have recycled the pump. So customer needs a recyclable pump, that will not be an aluminum pump I can guarantee you that will be a plastic pump. Or it is a multiuse bomb that needs very different engineering. In both cases, we are one of the go-to partner in developing that, either a fully recyclable pump or one that has a multiuse solution.

Adam Josephson -- KeyBank Capital Markets -- Analyst

Thank you, Stephan.

Operator

Thank you. Our next question or comment comes from the line of Anojja Shah from BMO Capital. Your line is open.

Anojja Shah -- BMO Capital Markets -- Analyst

Hi. Good morning. I just wanted to get some clarity. Is China still a target region for you for M&A? I'm only asking, because given the current trade climate and your experience in beverages there, is that still an area you're targeting? And if so, are you seeing -- what kinds of valuations are you seeing and have they come down any with recent market volatility?

Stephan Tanda -- President and Chief Executive Officer

Yes. Look, I mean, China is a peer economy to the U.S. and to the Europe. So we're not going to take an economy that signs off the table on anything.

And we have significant customer challenge in each region at one point in time. So this one happens to be in China but it's not with that -- paint the whole country with that brush. Now on the valuation question, it really depends on the target, on the specific situation, attractiveness, we have walked away from the target 18 months ago, I think we've been quite transparent on that where it became too pricey, but other targets might be interesting. So that's like with any other M&A, you look at the target, you make your own judgment and then if you can make it work, it gets deal and if not you walk away.

And again there is no difference in any other situation. The most important thing is that you have good people on the ground locally. You cannot manage China from the U.S. and you cannot manage the U.S.

from China. You need to have good people and we're strengthening our people, you've seen we've added Jesse Wu to our board, we've added Xiangwei Gong to our ex com, we've added a senior leader to run China. If you have good people, you will have good results in the end.

Anojja Shah -- BMO Capital Markets -- Analyst

OK. Thank you. And then just switching over. You mentioned in your prepared comments I believe that all these, a lot of independent beauty brands are actually reaching out to you, with smaller beauty brands.

What do you think that you're doing or how do you think you've successfully work with these smaller brands? Because traditionally, I think it's been quite difficult for packaging companies to serve small-run-customers?

Stephan Tanda -- President and Chief Executive Officer

Yes. You may remember that early on, when we started to kick off our commercial excellence efforts, we started to subsegment our sales force that we had different people dealing with the small brands then, but the big brands and frankly, different people dealing with fragrance than with the large shampoo customers, so that we have our go-to-market force to be more tailored to the needs of the individual customers or the segments. The second one is of course, we can provide local solutions around the world so we can be very responsive no matter where that indie brand player comes from. And in some cases, or in many cases, we're able to take what we call stock products and slightly customized them or not at all customized them.

And that is something that the indie brand can run and go with, which significantly shortens their time-to-market.

Anojja Shah -- BMO Capital Markets -- Analyst

All right. Thank you. That does it for me.

Operator

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

Chip Dillon -- Vertical Research Partners -- Analyst

Good morning, Stephane and Bob. Appreciate all the comments. Could you just, I don't think you gave us this detail, but you mentioned a gain in pharma and a write-off of some licensing -- licenses in other segment. Could you give us an idea of the magnitude of those two numbers? And I believe they were included in the adjusted earnings, if I'm not mistaken.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

No. OK, so Chip, let me -- I'll take both of those. So the gain that we referred to is approximately $6 million. That was on an equity investment we made in the connected device company, which was sold in late 2018.

So we recognized an equity gain on that. And then the write-off of the prepaid royalty was related to our bonds aluminum plastic. We had period in the contract where we had minimum annual royalty payments, and then those concluded in 2018. The license continues to go on but we had a close out period.

And in fact, that our -- while we remain very optimistic on the pipeline of projects that we have using that technology. We -- the delay in getting the volume that we thought we're going to get when we signed a contract, we didn't get there to eat up all the prepaid royalties by the end of 2018. They were not in our adjusted numbers. I'm sorry, they were included in the $0.92, they weren't adjusted out.

Chip Dillon -- Vertical Research Partners -- Analyst

OK. And I'm sorry, the prepaid was how much in the quarter?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

It was about $2 million.

Chip Dillon -- Vertical Research Partners -- Analyst

OK. And then the second question follow-up is, the -- it looks like year to year, your's -- you looked like you bought about 1% of your stock during the year, 668,000 shares. I think you mentioned you didn't buy any in the fourth quarter. And the share count, I'm going to guess is up to about $65.5 million.

So that would suggest that about 2.5% more shares were issued through options exercises, is that roughly correct?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Yes. We're not quite at $65.5 million, my numbers have to say about $65.3 million, but we're close there.

Chip Dillon -- Vertical Research Partners -- Analyst

OK. Gotcha. Thank you.

Operator

Thank you. Our next question or comment comes from the line of the Gabe Hajde from Wells Fargo. Your line is open.

Gabrial Hajde -- Wells Fargo -- Analyst

Good morning, gentlemen. Thanks for taking the question. Stephan, if you can maybe elaborate a little bit on the investments that you're making specific to the CSP Technologies acquisition. Is this more in the traditional sort of diabetes end market? Or is there a new application that you're expanding on? And are you targeting any specific geography with that or is it spread across the footprint?

Stephan Tanda -- President and Chief Executive Officer

Yes. I don't think we want to get into that level of detail. I mean, clearly, our first investment priority is to expand capacity in our pharma business, where we have some places or some areas where we're supply constraint, which we need to remedy as soon as possible. We see good opportunity in the CSP business to grow it further.

We've been open with the fact that one of the synergies we see that we have an existing facility that comes online in China in Guangzhou and that will accelerate expansion for CSP there based -- compared to their plans pre-Aptar. And I think that's about where it's going to leave us.

Gabrial Hajde -- Wells Fargo -- Analyst

All right. Thank you. And then, I guess, switching gears to the Pharma segment, just looking at comps, they become a little bit more difficult. And I was curious, if you could help us with either new pipeline of products or how that looks in the 12 to 18-month horizon or something like that, may be where inventories are.

I know it's sort of a difficult thing, but any color you could give us would be helpful.

Stephan Tanda -- President and Chief Executive Officer

Yes. So we put quite an emphasis on continuing us to build the pipeline. Where I'm hesitating a little bit is with your 12 to 18 months pipeline is really built for our five, six, seven, eight years. So what we're putting in now is there.

Now what's coming out of the pipeline in the next 12 to 18 months is very good. So we're quite encouraged with the pipeline that we have, that -- or things that we can see. Now you always have FDA approvals that need to happen and sometimes, that's misjudged. But what we see is very encouraging.

We see the allergic rhinitis business to continue to go from strength to strength, partly that is driven by broader distribution in club stores, online, partly that is driven by increased, just incidence of allergy as a disease. And part of that is driven by switching from pill form to using nasal spray because sometimes the pills increase, decongestions increase blood pressure, for example. And in the more larger case, we see also some conversion of other drugs specifically in the central nervous system category, from old delivery forms of being injected or being injected in the pill, to being delivered via nasal device. So you've seen of course, the unfortunate example with Narcan, but we also see other central nervous system drugs like antidepressants and painkillers going that way.

Gabrial Hajde -- Wells Fargo -- Analyst

All right. Thank you very much.

Operator

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

Adam Josephson -- KeyBank Capital Markets -- Analyst

Thanks again, everyone. Bob, I think you mentioned you're expecting a modest positive to EBITDA in the first quarter from lower resin. Obviously, polypropylene fell quite substantially in the U.S. in the fourth quarter, I don't remember Europe offhand.

But can you help me with why you're not, I don't know, could you help me with what modest means? And why you may not be expecting a bigger benefit than a modest one?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Well, it's a very difficult calculation. I mean, I'm not sitting with a number that I can give you that this is exactly what's baked in. It depends on the timing of the pass-throughs, the customers, their volumes in the quarter, how much is linked to closure pass-throughs, how much is linked through the raw material that's in lotion pumps. So there's really a lot of factors in there.

So I'd rather stick with modest because directionally, that's what we've got in the quarter rather than try to hang an exact number out there.

Adam Josephson -- KeyBank Capital Markets -- Analyst

And just based on what's happened thus far, Bob, would you expect further benefits beyond 1Q just based on those pass-throughs?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

I mean, it all depends on -- again, it depends on the volatility and what happens beyond Q1, right? I mean, we've got lots of data over the years that depending on where we can typically catch up is when the resin prices stabilized a little bit. But we'll have to see where it goes for the remainder of the year.

Adam Josephson -- KeyBank Capital Markets -- Analyst

I appreciate that. And just on -- Stephan, on Beauty + Home and Food + Beverage, I know you talked about focusing more on operations than perhaps just on top line growth. So are you expecting slower -- appreciably slower top line growth in those segments but much better margin improvement? Is that -- did I refer that from your comments earlier?

Stephan Tanda -- President and Chief Executive Officer

No, not really. It's just, you got to think one thing at a time directionally. And actually as a follow-up, it's very well, as the transformation savings that we're working on, we are getting those but they've been obscured with all this activity, plans are very busy and hit other operational bottlenecks that we are addressing so that's really what I referred to, when I'm speaking about priority this year. I don't see this as a trade-off, we clearly will make investments to expand capacity that we are able to meet demand and improve operations.

So I don't see that as a trade-off. We don't intend to throttle back on the top line. Of course, the markets will do, what the markets will do. But the visibility we have is -- doesn't -- we will not shy away from our guidance or from our external targets for top line growth.

Adam Josephson -- KeyBank Capital Markets -- Analyst

I appreciate that. So -- and just forgive me if I missed this, but I know you've said, you expected $80 million of eventual EBITDA -- total EBITDA -- cumulative EBITDA benefits from the restructuring. How much of that $80 million have you realized today?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Well, I mean, it's a difficult question. I mean, in terms of what's tracked in our system, we're probably around the $50 million range and then offset by additional headwinds that weren't anticipated when we started the project.

Adam Josephson -- KeyBank Capital Markets -- Analyst

OK. And those were all in Beauty + Home, that $50 million, Bob?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

There were some that were across some of the other segments, some of the procurement savings and the G&A savings. But predominantly around Beauty + Home.

Adam Josephson -- KeyBank Capital Markets -- Analyst

Got it. OK. Thank you.

Operator

Thank you. Our next question or comment is a follow-up from Mr. George Staphos from Bank of America. Your line is open.

George Staphos -- Bank of America -- Analyst

Thanks. Hi, guys. Thanks for taking my folllow-on. Mostly around growth, just to finish up.

If fragrance, I don't recall, Bob, you're calling out if there was -- what the growth rate was in the quarter, if you have that handy, I'd be interested. And then more importantly, what kind of market do you see developing in fragrance this year? What's the backlog on projects and fragrances through the year, so to the extent, you can comment, fragrance has been something of on-again, off-again business, you used to have a lot -- larger order size way back when now it seems like they've been smaller, what's the outlook for this year, No. 1. And then I had a quick follow-on.

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

So George, on the fragrance question, we don't break out fragrance specifically. But the overall beauty market grew 3% in the quarter. Yes, that also includes skincare and color cosmetics.

George Staphos -- Bank of America -- Analyst

So the more broad question, in terms of how the markets evolving for 2019?

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

I mean it's doing well. I mean, we're seeing good growth. Again there's going to be a higher growth rate in there for skincare and cosmetics. And just generally, as Stephan said, we're in that 3% to 6% range overall for Beauty + Home in total as a segment.

George Staphos -- Bank of America -- Analyst

OK. And then I was just curious, the sale on the equity investment in the active device, what prompted that? Because that seems to be a future area development it is only one where we would expect Aptar to be innovating as well.

Stephan Tanda -- President and Chief Executive Officer

Yes. That was really, we had a small share in that company, and the company was sold. The collaboration continues now with the new owners. So in terms of collaboration, what we do in terms of to allow them connected devices together and here we have, is continuing under the new owner, it's just the ownership change.

George Staphos -- Bank of America -- Analyst

Thank you, Stephan.

Operator

Thank you. I'm showing no additional questions in the queue at this time. I would like to turn the conference back over to Mr. Tanda for any closing remarks.

Stephan Tanda -- President and Chief Executive Officer

Thanks very much for joining us. We look forward to see you on the road and talk to you at the next quarter.

Operator

[Operator signoff]

Duration: 60 minutes

Call Participants:

Matt DellaMaria -- Senior Vice President, Investor Relations and Communications

Stephan Tanda -- President and Chief Executive Officer

Bob Kuhn -- Executive Vice President, Chief Financial Officer, and Secretary

Daniel Rizzo -- Jefferies -- Analyst

Matt Krueger -- Baird -- Analyst

George Staphos -- Bank of America -- Analyst

Debbie Jones -- Deutsche Bank -- Analyst

Edlain Rodriguez -- UBS -- Analyst

Adam Josephson -- KeyBank Capital Markets -- Analyst

Anojja Shah -- BMO Capital Markets -- Analyst

Chip Dillon -- Vertical Research Partners -- Analyst

Gabrial Hajde -- Wells Fargo -- Analyst

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