First-Quarter Highlights
- Sales grew 7.3% vs. first quarter 2012
-
GAAP EPS of
$0.90 -
Adjusted diluted EPS of
$0.87 -
Raises full-year 2013 adjusted diluted EPS guidance to between
$3.05 and $3.20
Summary comparative results for the quarter were as follows:
| ($ millions, except per-share data) |
Three Months Ended March 31, |
||||
| 2013 | 2012 | ||||
| Net Sales | $ | 339.4 | $ | 316.3 | |
| Gross Profit | 111.7 | 101.1 | |||
| Reported Operating Profit | 43.3 | 41.7 | |||
| Adjusted Operating Profit(1) | 43.3 | 42.3 | |||
| Reported Diluted EPS | $ | 0.90 | $ | 0.81 | |
| Adjusted Diluted EPS(1) | $ | 0.87 | $ | 0.83 | |
| (1) Adjusted operating profit and adjusted diluted EPS are Non-GAAP measurements. See discussion under the heading "Non-GAAP Financial Measures" in this release. | |||||
Consolidated sales grew by 7.3%, or
Consolidated gross profit grew by 10.5% over the prior-year period, to
R&D costs increased by
Executive Commentary
"From an operating viewpoint, we improved on last year's record first quarter, again demonstrating the impact of successfully executing our strategy to profitably grow sales by adding value to each unit or dose," said
"We are raising our full-year 2013 adjusted EPS estimate to
"We have completed the construction of the new elastomer facility in
Pharmaceutical Packaging Systems
Pharmaceutical Packaging Systems first quarter sales of
Gross profit of
SG&A costs increased by
Pharmaceutical Delivery Systems
Pharmaceutical Delivery Systems sales grew 9.2% (9.1% excluding currency effects) compared to the prior-year period, to
The growth in sales generated a
SG&A costs of
Corporate and Other
Stock-based compensation expense increased from
Net interest expense of
The Company's expected annual effective tax rate for 2013 is 25.9% on adjusted pre-tax earnings, compared to the 27.3% actual annual effective tax rate for 2012. The expected reduction in the estimated annual rate is primarily due to the reinstatement of the U.S. tax credit for increasing research activities in 2013. The estimated annual rate excludes the tax-effects of items described in "Non-GAAP Financial Measures," including the benefit of the reinstatement of the U.S. tax credit for increasing research activities retroactive to 2012.
Financial Guidance
The Company's full-year 2013 revenue and EPS guidance is summarized below:
| (in millions, except EPS) | Current 2013 Estimated Guidance |
Prior Guidance |
| Consolidated net sales | $1,360 to $1,400 | $1,360 to $1,400 |
| Consolidated gross profit margin (% of sales) | 31.2% to 31.8% | 30.7% to 31.3% |
| Pharmaceutical Packaging Systems sales | $990 to $1,020 | $990 to $1,020 |
| Pharmaceutical Packaging Systems Gross profit margin (% of sales) | 35.3% to 35.7% | 34.7% to 35.1% |
| Pharmaceutical Delivery Systems sales Pharmaceutical Delivery SystemsGross profit margin (% of sales) |
$370 to $380 20.5% to 21.5% |
$370 to $380 20.5% to 21.5% |
| Full-Year diluted EPS | $3.08 to $3.23 | $3.00 to $3.20 |
| Full-Year adjusted diluted EPS (2) | $3.05 to $3.20 | $2.97 to $3.17 |
| (2) Adjusted diluted EPS is a Non-GAAP measurement. See discussion under the heading "Non-GAAP Financial Measures" in this release. | ||
The principal currency assumption used in preparing these estimates is the translation of the euro at
The Company's estimated guidance for 2013 includes
The Company did not change its 2013 capital spending estimate, which continues to be between
First-Quarter Conference Call
The Company will host a conference call to discuss the results and business expectations at
A live broadcast of the conference call will be available at the Company's web site, www.westpharma.com, in the "Investors" section. Management will refer to a slide presentation during the call, which will be made available on the day of the call. To view the presentation, select "Presentations" in the "Investors" section of the Company's website.
An online archive of the broadcast will be available at the site two hours after the live call and will be available through
Non-GAAP Financial Measures
This press release and the preceding discussion of our results, financial guidance and the accompanying financial tables use the following financial measures that have not been calculated in accordance with generally accepted accounting principles (GAAP) accepted in the U.S., and therefore are referred to as non-GAAP financial measures:
- Adjusted operating profit
- Adjusted net income
- Adjusted diluted EPS
- Net debt
- Total invested capital
- Net debt to total invested capital
West believes that these non-GAAP measures of financial results provide useful information to management and investors regarding business trends, results of operations, and the Company's overall performance and financial position. Our executive management team uses these financial measures to evaluate the performance of the Company in terms of profitability and efficiency, to compare operating results to prior periods, to evaluate changes in the operating results of each segment, and to measure and allocate financial resources to our segments. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in comparing its financial measures with other companies.
Our executive management does not consider such non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP. The principal limitation of these financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded. In order to compensate for these limitations, non-GAAP financial measures are presented in connection with GAAP results. We urge investors and potential investors to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures, and not to rely on any single financial measure to evaluate the Company's business.
In calculating adjusted operating profit, adjusted net income and adjusted diluted EPS, we exclude the impact of items that are not considered representative of ongoing operations. Such items include restructuring and related costs, certain asset impairments, other specifically identified gains or losses, and discrete income tax items. A reconciliation of these adjusted non-GAAP measures to the comparable GAAP financial measures is included in the accompanying tables.
The following is a description of the items excluded from adjusted operating profit, adjusted net income and adjusted diluted EPS for the three-month periods presented in the accompanying tables:
Extinguishment of debt - During the three months ended
Discrete tax items - During the three months ended
Restructuring, impairment & related charges - During the three months ended
Acquisition-related contingencies - During the three months ended
Forward-Looking Statements
Certain forward-looking statements are included in this release. They use such words as "may," "will," "expect," "believe," "plan," and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this release. These forward-looking statements involve a number of risks and uncertainties. The following are some of factors that could cause our actual results to differ materially from those expressed in or underlying our forward-looking statements: customers' changing inventory requirements and manufacturing plans; customer decisions to move forward with our new products and product categories; average profitability, or mix, of the products we sell; dependence on third-party suppliers and partners; interruptions or weaknesses in our supply chain; increased raw material costs; fluctuations in currency exchange; and the ability to meet development milestones with key customers. This list of important factors is not all inclusive.
Except as required by law or regulation, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. For a description of certain factors that could cause the Company's future results to differ from those expressed in any such forward-looking statements, see Item 1A, entitled "Risk Factors," in the company's Annual Report on Form 10-K for the year ended
Trademark Notices
Trademarks and registered trademarks are the property of
Daikyo Crystal Zenith® is a registered trademark of
| WEST PHARMACEUTICAL SERVICES, INC. | ||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| (in millions, except per share data) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| March 31, 2013 | March 31, 2012 | |||||||||||||
| Net sales | $ | 339.4 | 100 | % | $ | 316.3 | 100 | % | ||||||
| Cost of goods and services sold | 227.7 | 67 | 215.2 | 68 | ||||||||||
| Gross profit | 111.7 | 33 | 101.1 | 32 | ||||||||||
| Research and development | 9.1 | 3 | 8.3 | 3 | ||||||||||
| Selling, general and administrative expenses | 59.1 | 17 | 51.3 | 16 | ||||||||||
| Restructuring and other items | - | - | 0.6 | - | ||||||||||
| Other expense /(income), net | 0.2 | - | (0.8 | ) | - | |||||||||
| Operating profit | 43.3 | 13 | 41.7 | 13 | ||||||||||
| Loss on debt extinguishment | 0.2 | - | - | - | ||||||||||
| Interest expense, net | 4.0 | 1 | 3.9 | 1 | ||||||||||
| Income before income taxes | 39.1 | 12 | 37.8 | 12 | ||||||||||
| Income tax expense | 8.6 | 3 | 9.8 | 3 | ||||||||||
| Equity in net income of affiliated companies | 1.2 | - | 1.2 | - | ||||||||||
| Net income | $ | 31.7 | 9 | % | $ | 29.2 | 9 | % | ||||||
| Net income per share: | ||||||||||||||
| Basic | $ | 0.92 | $ | 0.86 | ||||||||||
| Assuming dilution | $ | 0.90 | $ | 0.81 | ||||||||||
| Average common shares outstanding | 34.5 | 33.9 | ||||||||||||
| Average shares assuming dilution | 35.1 | 37.1 | ||||||||||||
| WEST PHARMACEUTICAL SERVICES | |||||||||
| REPORTING SEGMENT INFORMATION | |||||||||
| (UNAUDITED) | |||||||||
| (in millions) | |||||||||
| Three Months Ended | |||||||||
| March 31 | |||||||||
| Net Sales: | 2013 | 2012 | |||||||
| Pharmaceutical Packaging Systems | $ | 251.5 | $ | 235.7 | |||||
| Pharmaceutical Delivery Systems | 88.2 | 80.7 | |||||||
| Eliminations | (0.3 | ) | (0.1 | ) | |||||
| Consolidated Total | $ | 339.4 | $ | 316.3 | |||||
| Operating Profit (Loss): | |||||||||
| Pharmaceutical Packaging Systems | $ | 58.6 | $ | 53.6 | |||||
| Pharmaceutical Delivery Systems | 1.2 | 2.3 | |||||||
| U.S. pension expense | (3.7 | ) | (3.8 | ) | |||||
| Stock-based compensation expense | (5.4 | ) | (3.2 | ) | |||||
| General corporate costs | (7.4 | ) | (6.6 | ) | |||||
| Adjusted Operating Profit | 43.3 | 42.3 | |||||||
| Restructuring and other items | - | (0.6 | ) | ||||||
| Reported Operating Profit | $ | 43.3 | $ | 41.7 | |||||
| WEST PHARMACEUTICAL SERVICES | ||||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED) | ||||||||||||||||||
| (in millions, except per share data) | ||||||||||||||||||
| Three-months ended March 31, 2013 | Operating profit | Loss on debt extinguishment | Income tax expense | Net income | Diluted EPS | |||||||||||||
| Reported (GAAP) | $ | 43.3 | $ | 0.2 | $ | 8.6 | $ | 31.7 | $ | 0.90 | ||||||||
| Extinguishment of debt | - | (0.2 | ) | - | 0.2 | 0.01 | ||||||||||||
| Discrete tax items | - | - | 1.3 | (1.3 | ) | (0.04 | ) | |||||||||||
| Adjusted (Non-GAAP) | $ | 43.3 | $ | - | $ | 9.9 | $ | 30.6 | $ | 0.87 | ||||||||
| Three-months ended March 31, 2012 | Operating profit | Income tax expense | Net income | Diluted EPS | |||||||||
| Reported (GAAP) | $ | 41.7 | $ | 9.8 | $ | 29.2 | $ | 0.81 | |||||
| Restructuring, impairment & related charges | 0.4 | 0.1 | 0.3 | 0.01 | |||||||||
| Acquisition-related contingencies | 0.2 | 0.1 | 0.1 | - | |||||||||
| Discrete tax items | - | (0.3 | ) | 0.3 | 0.01 | ||||||||
| Adjusted (Non-GAAP) | $ | 42.3 | $ | 9.7 | $ | 29.9 | $ | 0.83 | |||||
Please refer to the "Non-GAAP Financial Measures" for more information.
| WEST PHARMACEUTICAL SERVICES | |
| NON-GAAP MEASURES | |
| RECONCILIATION OF 2013 ADJUSTED DILUTED EPS GUIDANCE | |
| TO 2013 REPORTED GUIDANCE | |
| Full Year 2013 Guidance (3) (4) | |
| Adjusted diluted EPS guidance | $3.05 to $3.20 |
| Extinguishment of debt | (.01) |
| 2012 R&D tax credit | .04 |
| Reported diluted EPS guidance | $3.08 to $3.23 |
| (3) Guidance includes various currency exchange rate assumptions, most significantly the Euro at $1.30 for the remainder of 2013. Actual results will vary as a result of exchange rate variability. Please refer to "Non-GAAP Financial Measures" for additional information regarding adjusted diluted EPS. | |
| (4) The 2013 consequences of those items described in "Non-GAAP Financial Measures," and similar items that may be incurred during 2013, are excluded from the adjusted diluted EPS guidance for 2013. | |
| WEST PHARMACEUTICAL SERVICES | ||||||
| CASH FLOW ITEMS | ||||||
| (UNAUDITED) | ||||||
| (in millions) | ||||||
| Three Months Ended March 31, | ||||||
| 2013 | 2012 | |||||
| Depreciation and amortization | $ | 20.5 | $ | 18.6 | ||
| Operating cash flow | $ | 18.9 | $ | 13.8 | ||
| Capital expenditures | $ | 61.7 | $ | 32.4 | ||
| WEST PHARMACEUTICAL SERVICES | ||||||||
| FINANCIAL CONDITION | ||||||||
| (UNAUDITED) | ||||||||
| (in millions) | ||||||||
|
As of March 31, 2013 |
As of December 31, 2012 |
|||||||
| Cash and Cash Equivalents | $ | 175.0 | $ | 161.9 | ||||
| Debt | $ | 430.1 | $ | 411.5 | ||||
| Equity | $ | 745.9 | $ | 728.9 | ||||
| Net Debt to Total Invested Capital(5) | 25.5 | % | 25.5 | % | ||||
| Working Capital | $ | 381.6 | $ | 295.5 | ||||
| (5) Net Debt and Total Invested Capital are Non-GAAP measures. Net debt is determined by reducing total debt by the amount of cash and cash equivalents, and for purpose of measuring net debt to invested capital, total invested capital is the sum of net debt and shareholders' equity. Please refer to "Non-GAAP Financial Measures" in this release for additional information regarding those measures. | ||||||||