Ladies and gentlemen, thank you for standing by. Welcome to Aptar's 2022 third quarter conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Introducing today's conference call is Ms. Mary Skafidas, Senior Vice President, Investor Relations and Communications. Please go ahead. Thank you. Hello, everyone, and thanks for being with us today. Joining me on today's call are Stephan Tanda, President and CEO, and Bob Kuhn, Executive Vice President and CFO. Our press release and accompanying slide deck have been posted to our website, where we will also post a replay of this call, as is our practice. Today's call includes some forward-looking statements. Please refer to our SEC filings to review factors that could cause actual results to differ materially from what we are discussing today. Now, I would like to turn the conference call over to Stephan. Thank you, Mary, and good morning, everyone. We appreciate you joining us on our call today. Beginning on slide 3, I'm happy to report that amid a seemingly worsening economic backdrop, Aptar achieved core sales growth of 9% and delivered adjusted EPS of $0.95 per share, which is the midpoint of our previously given guidance range. The majority of the growth in the quarter was driven by our pharma segment. Later on in our call, Bob Kuhn, our CFO, will provide additional details on the quarter. I would like to cover a few key items now. Our adjusted earnings per share includes a previously announced one-time inflation payment made to certain European employees that increased to approximately $0.05 a share. Our industry-leading pharma segment grew across all end markets, with prescription, consumer healthcare, and active materials being particularly strong. We were pleased to announce that our investments in digital health are beginning to bear fruit as we recently entered into a contract with a major European pharmaceutical company. This is another validation of our strategy and our capabilities in this exciting field. Beauty and Home achieved strong growth in Europe, especially in prestige fragrance, fueled in part by Western travel retail. In addition, pandemic-related lockdowns in China affected parts of the business. Core sales in Food and Beverage were flat due to difficult comparisons with the prior year period and were impacted by softening consumer demand in North America, which is causing certain customers to work through inventory levels. Our pricing initiatives to recover increased costs resulted in a net positive inflation impact in the quarter. However, we are still facing a variety of rising costs. Even though resin prices decreased, other costs are on the rise, including energy, primarily in Europe, and labor and transportation around the world. Currency headwinds continue to be significant, especially for our pharma segment. While we remain focused on pricing initiatives with customers, we are also diligently scrutinizing and managing our costs. Now turning to slide 4, I want to highlight an announcement made earlier this month by our newest division within pharma, Aptar Digital Health. This division entered into a contract with Chiesi Group, an international research-focused biopharmaceutical and healthcare company, to bring to market a disease management platform for asthma and COPD. Our digital health platforms combine mobile and web applications, connected drug delivery systems, patient onboarding, training, and advanced data analytics services to actively empower patients and create a positive treatment journey. Bringing together healthcare, software, and device expertise is unique to Aptar. Over several years, we have made a number of bolt-on acquisitions to expand our pharmaceutical services and digital health offerings, the largest of which was Voluntis, a pioneer in digital therapeutics. We acquired Voluntis in the second quarter of 2021 for approximately $100 million. This was a significant step in building our foundation in the fast-growing digital healthcare space. If we have learned anything from the pandemic, it is that advancements in healthcare are rapidly accelerating and things like remote patient engagement and patient monitoring, whether for clinical trials or real-world treatments, will be a big part of our future. Turning to slide 5, in addition to our investments in digital healthcare solutions, we have also increased our offerings in pharmaceutical services. This is part of our long-term strategy to build an even stronger position around our leading delivery devices. Our recent acquisition of Metaphase Design Group adds the capabilities of ergonomic product design and human factors engineering, meaning how people think, how they feel, behave, and respond when using devices and systems. More than half of all drugs being developed today are developed by small to mid-sized biotech labs or universities, what we affectionately term as two people and a molecule. These early developers have limited experience with the long regulatory approval process and the hurdles they will face when bringing a new drug to market. It can take anywhere from 5-12 years or more for a new drug to come to market if the journey is successful. Our portfolio of services allows us to partner with healthcare companies early in the drug development process. These strategic capabilities further enable us also to deliver on our pharma segment's growth and margin targets. Our stated compound annual growth rate target for pharma is 6%-10%, and while the pandemic interrupted the consistency of our trajectory, it is important to note that the segment achieved an annual sales compounded rate of 8% over the previous decade. Turning to slide 6, we create value by leveraging our technology platforms across our three business segments. On the slide, you can see some examples of recent launches on the market, including innovative and sustainable solutions. In our food and beverage segment, our spray technology is being used to dispense oils and salad dressings. Our nasal spray system with child-resistant features was chosen for Children's Afrin No Drip Decongestant. In the beauty market, our same spray technology for fragrance is featured on perfume brands, including Yves Saint Laurent, Guerlain, and Calvin Klein in Europe, along with the Grupo Boticário in Latin America. Let me also briefly highlight a sustainable solution that has been very successful in the quarter, our award-winning, fully recyclable mono-material pump called Future. It is featured on several products ranging from hand soap, to lotions, to cleansers. These are only a few examples of some of the new applications brought to market during the quarter. On slide seven, I want to briefly comment on the strength of our balance sheet and our capital allocation. As you know, Aptar has historically maintained a strong and relatively conservative balance sheet. This approach has certainly served our customers and shareholders well during challenging economic times. More recently, we have focused our investments in the business and M&A towards our higher margin, fast-growing pharma segment. Dividends and share repurchases are also part of our balanced capital allocation strategy, and for the first nine months of 2022, we returned approximately $147 million to shareholders. Before handing over to Bob, I just want to mention, as previously announced, we were very pleased to welcome Matt Trerotola to our board of directors in September. Matt is the CEO of Inovus Medical, a medical technology company. He brings a breadth of experience in medical devices as well as a proven track record of driving product innovation, profitability, and continuous improvement in prestigious enterprises like Danaher and DuPont. With that, I will now turn it over to Bob, who will share detailed comments on our quarterly results. Bob, over to you. Thank you, Stephan, and good morning, everyone. Starting on slide 8, I would like to summarize the quarter. Our reported sales increased 1%, and this included currency translation headwinds of approximately 8%. Therefore, core sales grew 9%, primarily due to the strong volume growth in our pharma segment. As shown on slide 9, we reported adjusted earnings per share of $0.95, which is a 12% increase over prior year adjusted EPS when we neutralize the currency headwinds we are facing. The year-over-year improvement was driven by increased earnings in our pharma segment despite the currency headwinds. We achieved adjusted EBITDA of $154 million, which includes foreign currency headwinds of approximately $13 million and the previously announced one-time inflationary payment made to certain European employees that totaled approximately $5 million. Our reported net income and EPS includes a tax charge of $7.2 million related to a legal entity reorganization. Without the charge, our reported tax rate would have been approximately 28%. This tax charge has been excluded from adjusted EPS. Slides 10 and 11 cover our year-to-date performance with core sales growth of 11% and adjusted earnings per share growth of 5%, including comparable exchange rates. Year to date, cash flow from operations was $306 million. Free cash flow doubled from the prior year level to $97 million. Turning to some of the details by segment for the quarter. Our pharma segment's core sales increased 20%. Approximately 16% of the growth came from increased volumes. The remainder of the increase was due to higher tooling sales and price adjustments. Sales were up across all markets, led by strong results in prescription, consumer healthcare, and active materials. Looking at sales in each pharma market, prescription core sales increased 17%, primarily due to the continued recovery in demand for allergic rhinitis and asthma treatments, with a continued steady demand for emergency medicine devices. Consumer healthcare core sales increased 26% on strong demand for nasal decongestants and saline rinses as greater consumer mobility contributed to more common ailments, including colds and influenza. Consumers also turned to some of the same treatments to alleviate symptoms of COVID-19. Our elastomer solutions for the injectables market grew core sales 5%, primarily due to higher volumes for biologics and vaccines. Turning to our active material science solutions, core sales grew 33%, with tooling accounting for 21% of the 33% growth. The remaining double-digit core product sales growth came from an increase in demand across a variety of applications, including solutions for probiotics and oral solid dose medications. Pharma's adjusted EBITDA margin was 31%, which included the one-time inflationary wage payment to certain employees in Europe of approximately $2.2 million. Margins in the quarter were also affected by inflationary costs that are being passed through on a one-for-one basis, as well as higher tooling sales, which traditionally carry lower margins. Our beauty and home segment's core sales increased 4%, primarily on price adjustments related to inflation cost recovery. However, overall volumes decreased by 3%. Europe's strong growth, especially in fragrance, was offset by declines in other regions, especially in North America, due to lingering supply chain issues and softening demand. Sales were also affected by periodic lockdowns in China, which remain ongoing. Looking at each beauty and home market, beauty market core sales increased 6%, primarily due to increased sales in the prestige fragrance and color cosmetic categories. Personal care core sales increased 5%, primarily due to increased sales in the hair care and sun care dispensing systems. Home care core sales decreased 6% due to lower sales in the household cleaner and laundry care categories. This segment's adjusted EBITDA margin for the quarter was 12%, and this included the one-time inflationary wage payment to certain employees in Europe of approximately $1.9 million. The food and beverage segment was up against a difficult comparison to a strong prior year, and core sales were more or less in line with the prior year. Product volume declines were partially offset by higher custom tooling sales. Pricing had an immaterial impact, as inflationary cost pass-throughs were offset by the passing-through of lower resin costs. Looking at each market, food core sales increased 7%, of which tooling increased 9%. The decline in dispensing closures was partially offset by strong growth in our food service market, which includes food trays. Beverage core sales decreased 16%, of which lower tooling sales accounted for 14% of the decrease. Excluding the impact of tooling sales, product sales decreased slightly. The segment's adjusted EBITDA margin was 14%. Lower food closure volumes and higher tooling sales in the quarter had a negative impact on margins. Moving to slide 12, which summarizes our outlook for the fourth quarter, we expect currency headwinds to persist, reflecting the continued strengthening of the US dollar. With the majority of our sales coming from outside of the US, the stronger US dollar negatively impacts the translation of our foreign results. The euro rate for the prior year Q4 was 1.14, and our guidance for the coming fourth quarter is assuming a $0.98 euro rate. As a reminder, we have said that roughly for every 1 penny move in the euro rate, this equates to approximately $0.02 per share for the full year. For the coming quarter, we could be looking at approximately an $0.08 currency drag on earnings compared to the prior year. Considering the currency headwinds and the uncertainties we are facing, as outlined by Stephan, we expect our fourth quarter adjusted earnings per share to be in the range of $0.73-$0.83 per share, which includes approximately $0.05 per share impact due to the startup and ERP implementation costs related to our injectables division. Additionally, the strong fourth quarter 2021 sales of our Activ-Film for at-home COVID-19 antigen tests will not repeat. This guidance assumes an estimated tax rate range of 28%-30%. For the year 2022, we currently estimate depreciation and amortization to be between $230 million-$240 million, and capital expenditures net of any government grants to be between $300 million-$320 million. Even though our practice is to provide earnings per share guidance for the upcoming quarter, I would like to mention that should the U.S. dollar and euro remain at parity for the first half of 2023, we would expect a headwind of approximately $0.10. In closing, our balance sheet is in excellent condition, and our current leverage ratio is 1.8. At this time, Stephan will provide a few closing comments before we move to Q&A. Thanks, Bob. In closing on slide 12, we now turn to our outlook for the fourth quarter, which has even more moving parts than normal. Our prescription drug, consumer healthcare, and injectables business are expected to continue to grow at more normalized levels. As Bob mentioned, our active materials business is up against a difficult comparison to the prior year when we had significant orders for our Activ-Film used with at-home COVID-19 antigen tests. As you will recall, this business was recorded in the fourth quarter of 2021 and to an even greater extent in the first quarter of 2022, so we will have a difficult comparison in both of these quarters. Additionally, the startup and ERP implementation costs for our injectable division that will impact EPS in the fourth quarter will also have some effect on our quarter one earnings. We are facing a number of uncertainties as the macroeconomic backdrop continues to deteriorate and the euro and other currencies remain weak against the dollar. The North American consumer packaged goods markets in particular are decelerating at a breathtaking rate. For beauty at home, it's mixed with certain sectors seeing stronger demand, such as prestige fragrance, while others, such as personal care, are starting to see a softening demand. Regionally, the strength in the fourth quarter is expected to come from Europe and Latin America, with weakness in North America and Asia continuing. Our food and beverage segment will be up against difficult comparisons versus Q4 2021. Additionally, certain customers have built up inventory after a long period of supply chain issues, and we see a softening in demand. Due to the slowing North American demand in the food, beverage, and personal care markets, we have taken actions by periodically shutting down certain U.S. facilities that have lower capacity utilization. This is quite a change from just the previous quarter. Rising cost of energy has been covered extensively in the news, especially in Europe. For Aptar, utilities as a percentage of our cost of goods sold have typically been in the mid-single digits%. While they represent a smaller portion of our overall costs, energy prices in Europe, where our largest manufacturing footprint is, have increased dramatically. We have every intention of continuing to push for price increases and have instituted energy surcharges, including for manufacturing processes that have higher energy costs, like metallization. As an essential business, we are confident we are able to source energy and have obtained volume guarantees for the remainder of 2022 and for all of 2023. To weather the potential storm ahead, we remain focused on selective and disciplined capital allocation, as well as maintaining the strength of our balance sheet, a muscle that is well-developed at Aptar. Now, I will open the call up for your questions. Thank you, Mr. Tanda. We will now begin the Q&A session. If you'd like to ask a question, please press star one on your telephone keypad. If you'd like to remove that question, you may press star two. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. In the interest of time and fairness to all participants, please limit yourself to two questions and then come back into the queue if you have more questions as time allows. Our first question today comes from the line of George Staphos with Bank of America. Mr. Staphos, your line is now open. Hi, everyone. Good morning. Thanks for the details. I wanted to peer back into some of the headwinds you noted, Stephan, to start the year, if there's a bit more granularity that you could provide. I know it's difficult at this juncture to project when things might, you know, change or re-accelerate, but how does the current environment compare to past recessions that you've seen? That's kind of question number one. Question number two, we recognize that you're now taking action to, you know, shut down operations, you know, call it on a rolling basis where you don't have the utilization. Is it not time perhaps to take even more aggressive action within beauty and home in particular and food and beverage where, you know, the operations performance, you know, frankly haven't been, I don't think, where you would have expected margin-wise for a number of years. How do you use this bad news in terms of the environment to catalyze more aggressive action, which is, you know, what you should be doing in this kind of period? Thank you, guys. Good morning, George. Thanks. Good morning. I'm not sure that I can give you a comparable environment. In my 30 years, I've never seen a deceleration and whiplash from one quarter to the next like this one. Just to kind of back up a little bit, I think in the beginning of the summer, we were still trying to find labor, being understaffed 10%, 15%, 20%. We finally catch up with our staffing team, get our lead times down, and then retailers and customers kind of slam the brakes. I think while I don't have perfect analytics, the whole supply chain, especially in the U.S., because this is mainly a U.S. topic, has been plugged up. People have taken safety stock, have ordered what they could get, and now are waking up to the headlines of an impending recession and try to get their inventories down before the year end to just fully dressed for the party, having labor here. Clearly this is a story of undercoverage in North America, the like I've certainly not seen. Now there's even within that, there's some regional differences. This is particularly on our western plants. There's still a beauty plant where some products we don't have enough supply. It's not the European story. So it's unique in that. Now to your question about, okay, when is this gonna end? Clearly, we've seen the softening of the food market as people went from at home eating to more eating out, and some inventory actions already by customers earlier. This will probably be the second, if not the third quarter of food softness. We expect that to come out sooner. Personal care is usually an early indicator that we're heading into a economic slowdown, and that probably is a couple quarters. You know, crystal ball is gloomy. Certainly we didn't see the timing of this whiplash coming. One of the reasons why we own the guidance for the quarter. On your question about more aggressive actions, clearly, we are turning over more stones and more rocks and taking and considering what you're talking about, but this is not the time or place to discuss it. Yeah. All right. We'll turn it over out of fairness, and we'll come back. Thank you. Thank you, Mr. Staphos. The next question is from the line of Kyle White with Deutsche Bank. Mr. White, your line is now open. Hey, good morning. Thanks for taking the question. Looking forward to the fourth quarter guidance. I think you said there was a $0.05 headwind related to start-up costs and ERP implementation in pharma. Two questions on this. Just how much start-up costs have you incurred this year in pharma in total? And do those go away next year? What should we expect from the ERP implementation in terms of will it be a headwind going into the first half of 2023 as well? Sure. As a reminder, we're deploying unprecedented capital to increase capacity in our injectables division to the tune of $180 million. A good chunk of that goes into Europe, a second piece goes into the US, and the capacity is brought online in increments. Then once the increment is brought online, it needs to be operated, product produced, then shared with customers. They need to do the validation, and once, then you get revenue about 12 months to 18 months after you've started up the equipment. Basically, you have a drag on results while you have this unit staffed and the revenue comes out of it. This is typical pharma. We told you it's about, I think it's $2 million a quarter, sometimes a bit more, sometimes a bit less. Certainly throughout this year and into next year, that will be the case. I think we will mechanically complete all of this sometime middle of next year. Then again, a little revenue lag from that will be 12-18 months later. The ERP is about $0.05 for quarter four and quarter one. This is really a bit belt and suspenders because this is not an SAP upgrade from one version to the next. We really bring this business from a non-SAP environment to SAP environment, which is clearly needed to make sure we're ready for scale. The last point I want to make, yes, this is a capacity increase, but even more important, this is a dramatic mix enrichment because most of that investment goes into the totally premium product, which sells at much higher prices than the standard product. Got it. Just on price cost, can you just give us an update on where you were from a price cost standpoint this quarter as a company and what is embedded for your fourth quarter guidance on that front? Sure, Kyle, I can take that one. We looked slightly positive in the quarter. It's a little bit more than what we did in Q2. It's difficult to forecast because of the demand picture. Obviously, you know, it will all depend on where the volumes shake out. We would expect the positive to accelerate a little bit into the fourth quarter. Now, as far as margins are concerned, it wasn't significant enough segment by segment to be material in terms of margin expansion. It is looking a little bit more positive. You know, I have to still point out that we're still catching up from, you know, the net $30 million that we were behind in 2021. Got it. Thank you. I'll turn it over. Thank you, Mr. White. The next question comes from the line of Adam Josephson with KeyBank. Adam, your line is now open. Thanks a lot. Good morning, everyone. Hope you're well. Bob, one for you and then one for Stephan. Bob, just back to the 4Q guidance. To bridge from 3Q to 4Q, the $0.95 to the midpoint of $0.78, I know you talked about the $0.05 of startup and ARP costs, some of which will recur thereafter. Then FX will be a little bit worse sequentially, maybe a couple cents. Tax rate, a little bit higher. That would get me from, call it $0.95 to perhaps high eighties. I'm just trying to bridge the 3Q guidance to the 4Q guidance and think about if that 4Q earnings is a reasonable run rate to assume thereafter, or if there's any particular seasonality or any one-time items in there other than that $0.05, which is kind of one time, but not exactly, as you mentioned earlier. Sure. If you know what I mean. You know, obviously it's a lot. Yeah, no, I understand what you're saying. It is a lot of puts and takes, right? I guess the first thing, if you wanna call it a one-off going from Q3 to Q4, is we did have higher tooling sales in total in Q3 than what we're anticipating in Q4. That add another couple pennies in on that. But after that, it's really a regional demand picture story, as Stephan alluded to. In both the beauty and home and food and beverage for North America, we're seeing a worsening situation, or at least as we see it for Q4 from a demand perspective. It's a question of underabsorbed overhead in, you know, in the region. We're also seeing a slightly deteriorating situation on our beverage business in Latin America in Q4. Again, as we mentioned, we're up against, you know, a little bit more difficult comps. You are seeing in some cases from our sports cap business a trade down to more screw-off caps. We obviously sketch out what it is, you know, region by region, but primarily this is a North American volume story. Is it indicative of what to expect going forward? It's all gonna really hinge on the recovery in the North American market. No, I appreciate that. Relatedly, this I guess for you or Stephan, I mean, there have been so many mixed signals. Some of the North American CPG companies have been saying, "Look, we're raising prices by a lot, and frankly, the demand elasticity has, if anything, been more muted than what we feared." In other words, demand has held up pretty well from their perspective, given the magnitude of the price increases. On the other hand, you know, things like box demand rapidly deteriorated, beverage can demand rapidly deteriorated. We're seeing all kinds of mixed signals in North America in CPG land. Can you just kind of highlight exactly what you're seeing, and whether it's in line with what your customers have been reporting or it's different? Just any better perspective on exactly what's going on would be helpful. Yeah. I kind of come back to what I said earlier. I agree with you. It's not that the end consumer demand is falling off a cliff. For me, the best I can explain it is a supply chain whiplash. We have been supply constrained at lead times, you know, starting out with three quarters and then starting to reduce them. Of course, we were not alone. Our competitors. So everybody kind of did the best they could to kind of get what they needed and build up inventories. I think our lead times are now, after we were able to finally get the labor we needed, back to a normal level. Also true, we're not alone. All of a sudden customers say, "Hey, I can get the stuff I need. Now let's see what I have in my warehouse and what I expect consumer demand to be down the road." We just see our customers, in response to what retailers are telling them, slamming the brakes and say, "Hey, I got to get my inventory down before the end of the year because the recession is coming." That's why I call it whiplash, and a whiplash I haven't seen before. Stephan, just one more. And it- Yeah. I'm sorry. Go ahead. Yeah. Hold on a second. It's also amazing to me when you look in Europe, beauty is up double digits, fragrance is up double digits. It is a very regionalized story. Part of that fragrance demand, of course, we know is not ending up in Europe. Some of that is bought by American tourists in Paris, some of it is shipped to China, some of it is shipped here. There's also for us a particular regional dislocation of where we have the factories, where, how they're being taxed, and where the demand is. No, I appreciate it. Just one thought. Do you think it might have to do with retail or not retailers, but the CPG companies just wanting to get their inventories down by fiscal year-end such that their working capital looks better? I'm just trying to understand why they would have let their inventories get so high to begin with. Yeah. Because they couldn't get what they wanted, so they probably double placed orders. I'm speculating now. But that's one thing that I've seen repeated throughout the ages is when you are tight and you can't satisfy customer demand, they place more orders earlier so that they can rely on you and at least they get things moving. And they do that with everybody until they realize you can supply and we're, "Okay, now hold on for a quarter or two while we work off our safety stock." That is not an unusual phenomenon. Now, when you combine that with all the recession talk and the fact that year-end is coming, I think your suspicion I share. You know? That a lot of this is year-end management. Yeah. No, thank you, Stephan. Thank you, Mr. Josephson. The next question is from the line of Ghansham Panjabi with Baird. Gansham, your line is now open. Thank you. Good morning, everybody. I guess, you know, Stephan, on your comments on pharma and, you know, sort of normalization and volumes, I know there's a lot going on between the various subsegments in there. What do you think is a reasonable sort of normalized rate for 2023 at this point? Maybe you could just kind of tie it into, you know, new product pipeline in the segment, because clearly you have longer lead times in many of these products. Sure. Look, Ghansham, we feel very confident with our 6%-10% top line growth. The order book continues to be very strong in prescription, in consumer healthcare. As you know, people expect a heavy flu season. Omicron is still around. Strong order book for those two businesses. In injectable, we have very good pipeline growth as we bring up the premium capacity, and it's validated that it's being sold with our pipeline to biologics, not depending on the huge spike in vaccines, just normal growth. The active material business is doing very well. Of course, we won't have the enormous pop from the at-home COVID testing that we had in quarter one last year, or quarter one this year. That will create a difficult comparison. The one area where we continue to have limited visibility is the emergency treatment, especially NARCAN. Demand is very strong. You have generic players come on the market and who we supply, of course, as well. Teva is using that as a currency to settle some of their lawsuits. At the same time, a lot of the NARCAN out on shelves is nearing or past expiration date, so it's unclear how people will handle that. Will they just use it when it's three, four, five years old, or will they renew their stock? That's the one where we've said before, it's a lumpy business with unclear distribution, but it's pulling very strongly. Got it. For my second question, maybe for Bob on you know, 2023 guidance. I understand that you only guide one quarter out. A lot of your peers have talked about you know, below the line, sort of, headwinds, interest expense, and also, FX. Can you give us a sense as to what FX would be as a headwind if rates hold at this point on an annual EPS basis, 2023 versus 2022 and whatever else you can share in terms of interest expense, et cetera? Sure. Again, these are obviously based on assumption of parity, right? If we model out the first quarter, as I mentioned in my prepared remarks, the $0.08 is Q4. Then we get to Q1, we're looking at roughly $0.06. We'll start decreasing a little bit as we get into Q2, roughly three and a half cents. Then Q3 and Q4, we're right at or close to parity anyway. You know, we wouldn't expect anything there. On the interest expense side, you know, if you're looking at Q4 to Q4, we're actually gonna have a $0.04 headwind on higher interest expense. Now, for us, I think it's important to note that that's coming from the execution of our inaugural offering that we did earlier in this year prior to the increase in rates. If you remember, we locked in at 3.6%. If you look at our total leverage, we're about 1.8 times. We're about 94% fixed, 6% variable. It's slightly higher than its average 3% interest rate. That's how the interest affects us. Very good. Thank you. Thank you for your question. The next question is from the line of Mark Wilde with BMO Capital Markets. Mark, you may proceed. Thanks. Good morning, Stephan. Good morning, Bob. For the first question, I am curious, Stephan, if you can put any more color about this drop-off in demand that you called breathtaking. I just wanna preface by saying back in early 2009, I remember sitting down with Bob and your predecessor, Stephen J. Hagge, and Stephen J. Hagge saying, "There are customers we haven't heard from in, like, five months." Is it of that magnitude right now? Or, is there any way to just help us put a little more color around the drop-off in demand? Yeah. I'm sorry, Bob. You were here in 2009. I was not. Look, it's a very regional dislocation, and it has a lot to do with COVID, and the general way of how the U.S. responded to COVID. It also has to do with our own situation, where if you remember, we shut down two plants just the quarter before COVID to take more serious action and absorb that demand into our other plants. Of course, we got tripped up by COVID in executing that, and that has exacerbated some of our labor shortages. We just caught up with that now. Next to the general huge supply chain disruption and labor disruption that COVID caused, we had an exacerbated picture of that that led to coming to this juncture where we just caught up with staffing of our plants while demand dropped off and leading to this undercoverage. That was different from 2009. Sure. 2009 obviously was more of a financial crisis and a concern over liquidity. You know, whereas this one, you know, is very well documented, it's more pandemic-related. Then the whipsaw that Stephan's been talking about. In 2009, a lot of our customers were concerned that due to lack of liquidity, some of their supply base would disappear. Obviously the gravitation towards Aptar and its strong financial balance sheet. Was what led to those customers saying, "Hey, we, you know, we're willing to now lock up on more longer term contracts because we know you have staying power." This is a little bit different. I mean, I don't see that same effect. It's probably more based around supply and related products than it is around, you know, financial strength. Okay. Just for my follow-up, Stephan, I'm just curious, over in Europe, I mean, clearly, you've not only got a war going on in the east, you've got these big increases in energy costs. Are you seeing any signs that this is starting to really cut into consumer behavior over in Europe? Because there have definitely been some hints of this over the last few days from some of the other packagers that have reported. Yeah. Look, when we report Europe sales, we report what we make in Europe. This doesn't mean that that is sold in Europe. Again, it's we estimate that about 30% of our products in aggregate end up in Asia. A good part of European beauty sales are now going back into travel retail, either for Americans who spend it in Europe or duty-free travel retail. Our European sales are not a reflection of consumer demand in Europe. I think that's number one. Number two, for a lot of different reasons, labor flexibility, government policies, housing market, recessions don't tend to be as volatile in Europe as they are here. Most people rent, they are not affected by, you know, wealth effects like a U.S. consumer is. They tend to be more muted. I'm actually quite proud of what the team has done in terms of the performance of our European business, and on top of that, coming up with additional efficiency and cost reduction measures. The consumer doesn't tend to disappear, and Europe didn't have the kind of whiplash in supply chain because of different COVID policies as the U.S. It's just a very different situation. Now, having said that, we are facing labor increases as of January first, no doubt about it. They will not be the 2%-3% that are usual. We are in negotiations right now. Of course, energy will go up. Having said that, we have every intention of passing that on. Price increase is scheduled in for January first. Some of our customers actually benefit from the weaker euro as they sell into the dollar area. That demand elasticity to higher prices for them with these customers might be lower. I'm not saying it's easier to pass on price increases, but certainly they live in the same energy environment and inflation environment as our people do and the consumer. It is not a surprise to them. Okay, that's helpful. Thanks, Stephan. Good luck in the fourth quarter. Thanks. Thank you, Mark. The next question is from the line of Angel Castillo with Morgan Stanley. Angel, your line is now open. Hi, thanks for taking my question. I just wanted to dive a little bit deeper into the pharma expectations. We've been talking about a lot of the headwinds, but I was hoping you could talk to us a little bit about what your expectations are for the fourth quarter, particularly in prescription and consumer health, obviously both fairly robust in the third quarter. As you think about the fourth quarter, what are your core sales growth expectations? And also, could you kind of break out how much of that you think is maybe some restocking as customers have maybe destocked much more now with the demand being a lot stronger, how much of that is getting back to normal versus just underlying demand? Yeah. As I mentioned, strong order book across RX, consumer healthcare. We don't really hear from customer or see inventory build-up. Certainly, we ended last year with very low inventories. I think we're now at normalized inventories. It's an isolated case here or there where a customer might build some inventory, but we don't see inventory building those two areas. The one exception, or not the exception, but caveat I have to make is the NARCAN story. It's just for us very hard to gauge the quarter-to-quarter order pattern just because of the non-traditional supply chain and distribution channels here. Good also good order intake for injectables. Yes, it will be needed on the bottom line with the one-time cost that we talked about. The active material business also performing well. Yes, it will also have a tough comparison, given the at-home COVID test last year. Now, when you add it all up, we're still comfortable with the 6%-10%, even for a quarter with so many puts and takes. Got it. That's helpful. Then particularly in the beauty, home business, as you think about some of that strength that you kind of outlined, you know, in Europe, where it's maybe holding up and, you know, fully acknowledging that it is difficult to kind of parse out what the consumer, or what consumer is actually kind of representative of that. As you think about the fourth quarter, what is kind of baked into your assumptions? Are you assuming there is still some Are this kind of persistent, perhaps prestige, demand continuing or do you have more kind of conservative assumptions that this will kind of drop off in the fourth quarter? Yeah. Look, I've been at Luxe Pack in October. I talked with one of our largest accounts earlier this week, and we keep probing that. On the fragrance side, they want more and more and more, so I don't see that softening, certainly not in the quarter. But that's juxtaposed with what we said at the top of the call with this whiplash in the U.S. Even in the U.S., the difference is some of the beauty stuff, you know, prestige beauty is you cannot supply enough and other stuff, you know, we have plants that we need to furlough. I think that the one thing I can say with certainty, you go through any airport, whether in Europe or in the U.S., it's crazy. Clearly travel retail is back with a vengeance. It's only half the picture because clearly the Chinese consumer is not traveling. What has been covered there with travel retail to Hainan Island has also been muted because Hainan was in lockdown for a couple of weeks. Clearly, Western travel retail is back with a vengeance now. Okay. I appreciate it. Thank you. Thank you, Mr. Castillo. The next question is from the line of Gabe Hajde with Wells Fargo. Mr. Hajde, your line is open. Stephan, Bob, Mary, good morning. Maybe I don't wanna read too much into this, but you mentioned the tax charge as it relates to the legal entity reorganization. I don't wanna misinterpret this as being sort of a corporate modernization, but just curious if this was something that's been on the docket for a while in terms of, you know, you guys looking at and evaluating and wanting to do. If it inhibited you from doing something strategically, you know, maybe here in the U.S. or elsewhere, maybe in Europe, from executing. Just if any color on that. Sure, Gabe, I can take that one. No, I mean, it's part of, you know, ongoing efforts always to, you know, simplify your legal structure, your legal organization. Obviously as tax laws change in various jurisdictions, you know, you're always looking for the most efficient legal structure, particularly when you're looking at repatriating dividends from outside the U.S. So yeah, I wouldn't look too far into it. Unfortunately, sometimes when you're executing on some of these entity legal entity restructurings, they do trigger taxes, you know, because the owners have changed of that, you know, that entity. But I wouldn't look any further into that. It's just, it's more of a long-term consistent look at our overall efficient legal structure. Oh, thanks. Thanks, Bob. You call out in the press release that growth in Europe. Again, I think Stephan mentioned it as well in terms of your fragrance customers and Beauty and Home doing actually pretty well on the demand side. I think last quarter, Bob, you mentioned Europe profitability actually being kinda at that 15% threshold that you're looking for in Beauty and Home. It's really the U.S. that's been lagging. I guess confirm that, if you will. It sounds like labor issues have been resolved. Maybe outside of underutilized capacity or lower demand, is there anything that you see in the structure that would prohibit you from getting that 15% target then in Beauty and Home? Is it, you know, I heard Stephan say more work to do, it's just not the time to talk about it. Yeah. First, I think your summary is great. Can confirm that. I will put it this way. There's a lot of sweat and tears with the transformation to get European plants operating, humming again, get the commercial front end working and I'm delighted that is now working. Even though it's been a while, interrupted by COVID, that was kind of the rough cut. There's further fine-tuning to do that needs to be done carefully, gingerly. Also keeping in mind that European industrial relations are different than in the U.S., where you can just go in and do stuff. We're not done in that sense, but I'm very proud of what the team has accomplished. As I said, they keep coming up with new ideas. It's a pity that when Europe was in the workshop, so to speak, the US was cooling. Now Europe is out, the US is in the workshop. Okay. Last one, if I could squeeze it in. Sorry, guys. Just you had a large injectable producer re-report yesterday and talked a little bit, for lack of better term, a hangover from the vaccine. Given, I guess, that you guys didn't necessarily participate as largely, do you envision something like that happening for you? Or just as it sits today, the best visibility on the inventory front, you don't anticipate something like that happening for you on the injectable side? Thank you. Yeah. I have no idea who you're talking about. No, just kidding. Look, it is as you said, we had some benefit from COVID for our injectable business, but it was mainly the people got religion about the flu shot. We got some supply position for vaccines here and there, but it was not as dramatic for them for some other people. The biggest benefit of COVID for our injectable business was that we basically were validated as a technologically equivalent player and got adopted with new projects in the biologics and vaccine space. You saw the Becton Dickinson announcement some time ago, and there are many others like that we haven't announced or they haven't announced, so that we feel so strong about our order pipeline and our project pipeline to make this investment in coated products. No, I would not anticipate a COVID hangover. Thank you, guys. Good luck. Thank you, Mr. Hajde. Thank you. We have a follow-up from Mr. Staphos with Bank of America. Your line is now open, sir. Thanks very much. Hi, guys. I hope you can hear me okay. Stephan, I wanna come back to food and beverage in particular. You mentioned that understandably, your customers are now trying to destock quickly after they had ordered a fair amount. A year ago, volumes were very, very strong, and despite sort of questions about, gee, is that a sustainable growth rate or not, the view that your customers were sharing and that the company, Aptar, was sharing was that, you know, we think it's a return to more consumption at home. We think this is reasonably sustainable. Obviously, it wasn't, and we're going through a destocking period. As you sit back and look at, you know, the last 18 months, what changes do you have to make perhaps in terms of how your... You serve your customers, food and beverage, maybe even beauty and home, in terms of how much you allow them to order ahead? You know, I've covered Aptar going back to the late 1990s. I can't remember a period where food and beverage and beauty and home have sort of resisted any kind of improvement. I recognize there are macro challenges, but it seems like, you know, maybe on that front, on what you're providing your customers, you could be tightening up there. What are you doing on the sales side there to improve and get better data and analytics so you're not in a position where you're sort of going through a period right now? Then relatedly, the rebuttal could be, "Well, George, we're in a competitive market. If we didn't offer the volume to our customers, our competitor would." Can you talk to the competitive dynamic that you're seeing in food and beverage and also within beauty and home, and how, you know, you're taking steps to improve your moat over the next number of years? Thanks, guys, and good luck in the quarter. That's probably the most expensive question. A couple things. One is, I give you some examples. What we do with beauty and home, especially when we were so short of supply, is streamlining SKUs and saying, "Hey, we're making 20 shades of black for you. Can we agree on 3? Because we can't keep making 20 shades of black." That is a strong effort. Sometimes they wanna go else because they want another shade, so be it. That is certainly going on. Let's say big theme, product line rationalization. The other theme that I think is maybe in the long run much more important is sustainability. Having products that are mono-materials that are recyclable, where the cap is tethered to the bottle. The mono-material lotion pump that I mentioned in my opening remarks is highly desirable. SKU streamlining, yes, innovation with sustainability for me, those are the big themes. I guess, Stephan. There will be- What are you doing with your sales force and with, you know, the volume you allow your customers to order so that they're not over-ordering and that you have better sort of analytics and visibility into your business? I guess that's where I was going with the question in particular. Yeah. Look, when you're at supply constraint, you're automatically allocating customers. Certainly, we have prioritized global key accounts with long-term strategic relationships over smaller accounts and said that while they're on allocation, you shortchange everybody to some extent. Mm-hmm. I'm not sure I can elaborate more than that, George. Okay. Yeah. George, I think I know where you're going with it, but the reality is, you know, a lot of times the actual consumer data comes out several months afterwards, right? I think we're doing a better job from a market intelligence perspective, but there's still a lag to that. It would be virtually impossible if a customer came to us and said, "Hey, we need, you know, X million units from you," and we say, "Well, we don't think you do. You know, we're only gonna sell you 50," right? We're not gonna turn away that volume, right? Even if we think they don't need it, right? We have no idea into their supply chain and what they have in their warehouses or how they're perceiving the broader distribution outlet. I appreciate the frustration around what are we doing to manage that, but the reality is if a customer wants, You know, a certain amount on an order, we're gonna give them that order if we can supply it. Yeah. I understand, Bob. It kinda gets to ultimately though the moat within the business relative to your other businesses. I'll leave it there. We wish you good performance in the fourth quarter, and we'll see you in a few months. Thanks, guys. Thank you. Thank you, Mr. Staphos. Our last question today comes from the line of Adam Josephson with KeyBank. Mr. Josephson. Thanks very much for taking my call. Just one kind of follow-up to George's question, which is, you know, when you look at the long-term margin targets for these segments, you know, Beauty and Home is 15%-17%, and I think the trailing five-year average will have been 12%. Food and Beverage, somewhat similar story. Do you think you have the right footprint, if you will, for the demand levels and everything else that you're experiencing? Do you think those long-term targets are still actually achievable? How is that informing how much you're investing in these businesses given that, again, for years you've been—you've had real difficulty achieving those long-term targets? Yeah. Look, I fully appreciate the question. Something we are very busy with, and I will not go in all the repeating why we are where we are. Clearly we had a pandemic and all that. We remain committed to that, and we have a series of measures in mind to get us there. Clearly the capital allocation has dramatically shifted away from these businesses, if you like, towards our pharma business, and that's both in CapEx and in M&A dollars, while continuing to make sure that we return money to shareholders. We are certainly not saying we're done here, not by a far stretch, and we remain committed to those targets. Yeah. Maybe one other point, Adam, on capital. You know, we recognize that it is a changing landscape, right? We're leaning in heavily into more automation, and I would call it more flexible manufacturing, right? In years past, we geared towards very large runs, right? We're investing more heavily into more flexible work cells and things like that will enable us to better adapt to the volatile demand market that we're seeing. I think we're- Yeah We're making the investments in some of the right places and things that ultimately are more conducive to the environment that we're operating in. Yeah. No, I appreciate it. Just one last one, Bob or Stephan, which is when we think about kind of a normalized sales or demand level, it's so hard to know what it is because if your customers were in effect over-ordering in previous quarters and now they're making up for it by under-ordering, it's hard to know what's normal. You know, was previous quarter earnings levels normal? Was fourth quarter normal? Any kind of context you could give me in terms of what normal even is in terms of extrapolating from your fourth quarter guidance or the earnings you had in previous quarters in terms of what represents kind of a sustainable demand level, if you will? Yeah, I don't think we have better insight for you than our long-term targets, although on the top line, those are, of course, more on a volume basis. Inflationary price increases are if you want on top of that. Do you have wisdom beyond that with what transpired through the last three years? I'm not smart enough. I appreciate it, Stephan. Thank you. Thanks. All right. I think with that, we can conclude our call. Looking forward to have the discussion during the quarter, and we'll talk at the next quarter. Thank you. That concludes Aptar's 2022 third quarter conference call. Thank you all for your participation. You may now disconnect your lines.