-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hbTb+AlnasFYqRUTR9vxDBehwZoHp7dL1/XDuXiQIxYf4tf/MQnAER2qqqGeC7l9 jx9gZEO45Dxgfs7Xk+9Yow== 0000105770-94-000004.txt : 19940520 0000105770-94-000004.hdr.sgml : 19940520 ACCESSION NUMBER: 0000105770-94-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEST CO INC CENTRAL INDEX KEY: 0000105770 STANDARD INDUSTRIAL CLASSIFICATION: 3060 IRS NUMBER: 231210010 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08036 FILM NUMBER: 94528094 BUSINESS ADDRESS: STREET 1: 101 GORDON DR CITY: PHOENIXVILLE STATE: PA ZIP: 19460 BUSINESS PHONE: 2155942900 MAIL ADDRESS: STREET 1: 101 GORDON DRIVE STREET 2: PO BOX 645 CITY: LIONVILLE STATE: PA ZIP: 19341-0645 10-Q 1 1STQTR10Q This report contains 12 pages (including cover page) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended March 31, 1994 -------------- Commission File Number 0-5884 -------- THE WEST COMPANY, INCORPORATED ---------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-1210010 ------------ ------------ (State or other jurisdiction (I.R.S. Employer Identification of incorporation or organization) Number) 101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645 ------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) N/A ----------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Registrant's telephone number, including area code 215-594-2900 ------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ----- ----- March 31, 1994 - - - 15,981,774 ----------------------------------------------------------------------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Page 2 Index Form 10-Q for the Quarter Ended March 31, 1994 Page ----- Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Income for the Three Months ended March 31, 1994 and April 4, 1993 3 Condensed Consolidated Balance Sheets as of March 31, 1994 and December 31, 1993 4 Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 1994 and April 4, 1993 5 Notes to Interim Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II - Other Information Item 1. Legal Proceedings 10 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 Page 3 Item 1. Financial Statements The West Company, Incorporated and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)
Quarter Ended ------------- March 31, 1994 April 4, 1993 -------------- -------------- Net sales $ 87,100 100 % $86,900 100 % Cost of goods sold 58,200 67 62,800 72 -------------- -------------- Gross profit 28,900 33 24,100 28 Selling, general and administrative expenses 15,500 18 14,900 17 Other expense, (income) net 700 1 (1,000) (1) -------------- -------------- Operating profit 12,700 14 10,200 12 Interest expense 600 1 700 1 -------------- -------------- Income before income taxes and minority interests 12,100 13 9,500 11 Provision for income taxes 4,700 5 3,800 5 Minority interests 500 - 300 - -------------- -------------- Income from consolidated operations 6,900 8 % 5,400 6 % Equity in net income of affiliated companies 100 200 -------------- -------------- Income before cumulative effect of change in accounting method 7,000 5,600 Cumulative effect to January 1, 1993 of the change in accounting for income taxes - 1,000 -------------- -------------- Net income $ 7,000 $ 6,600 -------------- -------------- -------------- -------------- Net income per share: Income before cumulative effect of change in accounting method $ .44 $ .36 Cumulative effect of change in accounting method - .06 -------------- -------------- $ .44 $ .42 -------------- -------------- -------------- -------------- Average shares outstanding 15,956 15,764 -------------- -------------- -------------- -------------- Interim results are based on the Company's accounts without audit. The Company adopted Financial Accounting Standards No. 109, Accounting for Income Taxes, in 1993.
Page 4 The West Company, Incorporated and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
(Unaudited) ASSETS March 31, 1994 Dec. 31, 1993 Current assets: -------------- ------------- Cash, including equivalents $ 6,900 $ 5,200 Accounts receivable 51,500 43,300 Inventories 36,500 34,500 Other current assets 12,500 10,200 ----------- ---------- Total current assets 107,400 93,200 ----------- ---------- Net property, plant and equipment 173,600 172,800 Investments in affiliated companies 17,600 17,800 Intangibles and other assets 27,800 23,600 ----------- ---------- Total Assets $326,400 $307,400 ----------- ---------- ----------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long term debt $ 4,800 $ 5,400 Notes payable 6,200 2,300 Accounts payable 14,300 14,100 Other current liabilities 29,900 25,000 ----------- ----------- Total current liabilities 55,200 46,800 ----------- ----------- Long-term debt, excluding current portion 25,200 24,600 Deferred income taxes 19,100 18,400 Other long-term liabilities 19,000 18,600 Minority interests 12,100 10,900 Shareholders' equity 195,800 188,100 ----------- ----------- Total Liabilities and Shareholders' Equity $326,400 $307,400 ----------- ----------- ----------- ----------- Shareholders' equity per share $ 12.25 $ 11.82 ----------- ----------- ----------- -----------
Page 5 The West Company Incorporated and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
(Unaudited) Quarter Ended ------------- March 31, 1994 April 4, 1993 -------------- ------------- Cash flows from operating activities: Net income, plus net non-cash items $ 13,100 $ 7,200 Changes in assets and liabilities (6,100) (4,400) ----------- ---------- Net cash provided by operating activities 7,000 2,800 Cash flows from investing activities: Property, plant and equipment acquired (4,400) (6,500) Proceeds from sale of assets 100 6,000 Payment for acquisition, net of cash acquired (2,900) - ----------- ---------- Net cash used in investing activities (7,200) (500) ----------- ---------- Cash flows from financing activities: Repayment of long-term debt (900) (400) Notes payable, net 3,600 1,100 Dividend payments (1,800) (1,600) Sale of common stock, net 900 800 ----------- ---------- Net cash provided by (used in) financing activities 1,800 (100) ----------- ---------- Effect of exchange rates on cash 100 - ----------- ---------- Net increase in cash, including equivalents $ 1,700 $ 2,200 ----------- ---------- ----------- ---------- See accompanying notes to financial statements.
Page 6 The West Company, Incorporated and Subsidiaries ----------------------------------------------- Notes to Interim Financial Statements ------------------------------------- The interim consolidated financial statements for the quarter ended March 31, 1994 should be read in conjunction with the consolidated financial statements and notes thereto of The West Company, Incorporated appearing in the Company's 1993 Annual Report on Form 10-K. 1. Interim Period Accounting Policy -------------------------------- In the opinion of management, the unaudited Condensed Consolidated Balance Sheet as of March 31, 1994 and the related unaudited Consolidated Statement of Income and the unaudited Condensed Consolidated Statement of Cash Flows for the three month period then ended and for the comparative periods in 1993 contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial position as of March 31, 1994 and the results of operations and cash flows for the respective periods. The results of operations for any interim period are not necessarily indicative of results for the full year. In the fourth quarter of 1993, the Company standardized its reporting year end to December 31 thereby eliminating the one month lag for all international operations. Consequently first quarter 1994, includes the first three calendar months for all operations, but 1993 comparative information reflects the December 1992 through February 1993 period for all international subsidiaries. Operating Expenses ------------------ Certain operating expenses have been annualized for interim reporting purposes. Income Taxes ------------ The tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on current estimates of full year results, except that taxes applicable to operating results in Brazil are recorded on a basis discrete to the period and prior year adjustments, if any, are recorded as identified. Page 7 The West Company, Incorporated and Subsidiaries ----------------------------------------------- Notes to Interim Financial Statements ------------------------------------- (Continued) 2. Inventories at March 31, 1994 and December 31, 1993 are summarized as follows: Audited -------- (in thousands) 1994 1993 -------- -------- Finished goods $ 17,300 $ 14,100 Work in process 4,900 4,700 Raw materials and supplies 14,300 15,700 -------- -------- $ 36,500 $ 34,500 -------- -------- -------- -------- 3. The carrying value of property, plant and equipment is determined as follows: Audited --------- (in thousands) 1994 1993 --------- --------- Property, plant and equipment $ 329,900 $ 322,800 Less accumulated depreciation 156,300 150,000 --------- --------- Net property, plant and equipment $ 173,600 $ 172,800 --------- --------- --------- --------- 4. Common stock issued at March 31, 1994 was 16,844,735 shares, of which 862,961 shares were held in treasury. Dividends of $.11 per common share were paid in the first quarter of 1994. 5. The Company has accrued the estimated cost of environmental compliance expenses related to current and former manufacturing facilities. The ultimate cost to be incurred by the Company cannot be fully determined; however, based on information currently available, the Company believes the accrued liability is sufficient to cover the future costs of required remedial actions. Page 8 Item 2. Management's Discussion and Analysis of Financial Condition ------------------------------------------------------------ and Results of Operations. -------------------------- Results of Operations for the Quarter Ended March 31, 1994 Versus the --------------------------------------------------------------------- Quarter ended April 4, 1993. --------------------------- Net Sales --------- Net Sales for the first quarter of 1994 increased by only $0.2 million compared to the reported first quarter 1993 results. As disclosed, the reporting periods were standardized in the fourth quarter of 1993; this increased reported sales comparisons by $3.8 million. In addition sales to Consumer Products markets increased by 5% and machinery sales were $1.3 million higher. Offsetting these increases were lower domestic health care product sales, an absence of Tri/West Systems, Inc. sales (sold in third quarter of 1993) and unfavorable exchange rate variances due to the stronger U.S. dollar. Gross Profit ------------ The Company enjoyed continuing improvement in manufacturing productivity. Gross margins increased as a percentage of sales to 33% in 1994 from 28% in 1993. Margins improved in all operating groups, but notable was a 150% increase in the gross margins on Consumer Products sales because of greater efficiencies and increased sales activity. The standardization of reporting periods accounted for $2.0 million of the increase in gross profit compared to the reported first quarter 1993 results. Selling, general and administrative expenses increased by $0.6 million, or 5%, in the first quarter 1994, compared to reported expenses in the first quarter 1993. Compared to a standardized reporting period in 1993, the increase was less than 1%. Outside service costs, rent expense and other expenses related to the new headquarters facility, and contributions increased 1994 spending. These expenses were offset by cost savings because of staff reductions, sale of Tri/West Systems, Inc. and favorable exchange rate variances. Other expense in 1994 was $0.7 million compared to other income of $1.0 million in 1993. Continued high inflation in Brazil increased translation losses while interest income was reduced. Also, other income for 1993 included a gain from the sale of the Company's former headquarters and research center facilities, which added $.05 per share to first quarter 1993 net income. Page 9 Item. 2. Management Discussion and Analysis of Financial Condition ------------------------------------------------------------- and Results of Operations. (Continued) --------------------------------------- Interest Expense and Minority Interests --------------------------------------- Lower average debt levels and a stronger U.S. dollar in Europe helped reduce interest expense by $0.1 million in the first quarter 1994 compared to 1993. Higher minority interests primarily reflects the standardization of reporting periods. Taxes ----- The estimated effective annual tax rate for 1994 is 39%. This is one percentage point lower than the rate in the first quarter of 1993. The lower tax rate reflects in part the reduction in the German statutory tax rate in mid-1993. The actual effective annual tax rate for 1993 was 38%, which also reflected the reversal of a tax reserve due to a favorable settlement of an audit issue in the fourth quarter of 1993. Net Income ---------- Net income for the first quarter 1994 was $7.0 million, or $.44 per share, compared to net income for the first quarter 1993 of $5.6 million, or $.36 per share, (before the cumulative adjustment of deferred taxes to adopt Financial Accounting Standards No. 109, Accounting for Income Taxes). The Company's adoption of SFAS No. 109 added $1 million, or $.06 per share, to first quarter 1993 net income. Financial Position ------------------ Working capital at March 31, 1994 was $52.2 million compared to $46.4 million at December 31, 1993. Working capital increases reflected higher levels of accounts receivable (higher sales late in the first quarter compared to lower sales late in the fourth quarter of 1993) and inventories. The working capital ratio at March 31, 1994 was 1.9 to 1. Cash flows from operations, common stock sale proceeds and available credit capacity were more than adequate to fund the acquisition of Senetics, Inc., capital expenditures and dividends. Total debt as a percentage of total invested capital was 14.9% at March 31, 1994, compared to 14.0% at December 31, 1993. At March 31, 1994, the Company had available unused lines of credit of $15 million. Management believes available credit lines and the Company's current capitalization will provide sufficient cash to meet cash flow requirements in the future. Page 10 Part II - Other Information ------------------------------------- Item 1. Legal Proceedings ----------------- A. Wayne, New Jersey ----------------- The Company is party to an Administrative Consent Order with the New Jersey Department of Environmental Protection & Energy (DEP&E) under which the Company is required to submit and perform a cleanup plan for property formerly owned by the Company in Wayne, New Jersey. The DEP&E has approved the Company's plan which permits a plastic waste disposal area to be capped and to remain in place, subject to placing a use restriction on that portion of the property, and subject to the DEP&E's further determination of the extent to which groundwater monitoring will be required. The present owner of the property has thus far declined to provide the use restriction and the Company is considering legal action against him to compel him to provide the use restriction. The DEP&E has not yet taken final action with respect to any further remedial steps such as ground water monitoring which may be required as part of the cleanup plan. B. Vega Alta, Puerto Rico ---------------------- Since 1987 the Company, along with several other major companies, has been considered by the Environmental Protection Agency to be potentially responsible for costs of an environmental clean-up of ground water contamination in an area which includes the site of one of the Company's existing plant locations in Puerto Rico. In this connection, EPA has issued two orders for corrective action work to clean up the ground water and the Company has been named a defendant in a cost recovery action brought by the United States in the United States District Court for the District of Puerto Rico against the Company and other potentially responsible parties. As a result of these orders, the Company and two other potentially responsible parties have been engaged in the design and construction of a ground water recovery and treatment well (the Ponderosa Well) as the first part of an overall remedy at the site. Effective June 30, 1993, the Company entered into an agreement with General Electric Company UNISYS Corporation, Motorola Corporation and Harman Automotive, Inc. under which the Company has paid General Electric Company $800,000 and General Electric and UNISYS Corporation have agreed to indemnify the Company against all future government claims relating to the contamination of the ground water by volatile organic compounds. As a part of this agreement, the Company has also obtained releases of cost recovery claims from all of the other parties to the agreement. Under the terms of this agreement, the Company will continue to be Page 11 responsible for any required clean up of the soils at its facilities in Puerto Rico and for any future toxic tort or natural resource damage claims which may arise from the contamination of the ground water. The indemnity includes protection against any possible claim by the Puerto Rico Aqueduct and Sewer Authority, which once indicated that it might assert a claim against the potentially responsible parties for the cost of its development of other wellfields to replace the water formerly supplied by the contaminated aquifer. The Company also remains responsible with Motorola Corporation and Harman Automotive, Inc. for completing construction of the Ponderosa Well and the related initial testing program, the cost of which is being shared equally by these companies. Following the completion of that program, the cost of the operation of this well and any other remedy required for the ground water will be the obligation of General Electric Company and UNISYS Corporation among other potentially responsible parties. Pursuant to the terms of this Agreement, the Company has stipulated with the United States that it is a liable party. As a result of this agreement, the Company will avoid the costs of participation in the existing litigation and any further contribution to the cost of remedying the contaminated ground water at this site. See Notes to Interim Financial Statements beginning on page 5 of this report. Item 6. Exhibits and Reports on Form 8-K ----------------------------------- (a) None (b) No reports on Form 8-K have been filed for the quarter ended March 31, 1994. Page 12 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE WEST COMPANY, INCORPORATED ------------------------------ (Registrant) May 13, 1994 /s/ R. J. Land --------------------------- ------------------------------ (Date) (Signature) R. J. Land Sr. Vice President Finance and Administration and Chief Financial Officer May 13, 1994 /s/ A. M. Papso -------------------------- ------------------------------ (Date) (Signature) A. M. Papso Vice President and Corporate Controller -----END PRIVACY-ENHANCED MESSAGE-----