8-K 1 file8k.txt 8K 12 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) of the SECURITIES EXCHANGE ACT OF 1934 Date of earliest event reported: November 30, 2001 ---------------- Commission File Number 1-8036 --------- WEST PHARMACEUTICAL SERVICES, INC. -------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-1210010 ------------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645 ------------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 610-594-2900 -------------- N/A ------ (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets. On November 30, 2001, West Pharmaceutical Services, Inc. and its wholly-owned subsidiaries West Pharmaceutical Services Lakewood, Inc., Charter Laboratories, Inc., and Paco Laboratories, Inc. completed the sale of all the assets of its contract manufacturing and packaging business located in Lakewood, NJ to DFB Pharmaceuticals, Inc. and its wholly-owned subsidiary DPT Lakewood, Inc. The sale included inventory, property and equipment and certain other assets as well as the assumption of short term liabilities. The selling price for the net assets was approximately $30 million in cash and a note receivable and is subject to a working capital adjustment in accordance with the Asset Purchase Agreement. The proceeds from the sale will be used to pay down the Company's debt. The foregoing description of the transaction is qualified in its entirety by reference to the Asset Purchase Agreement, as amended, which is incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (b) Unaudited Pro Forma Financial Information The following unaudited pro forma financial information should be read in conjunction with the consolidated financial statements and related footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000, and Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. The following pro forma information is presented for illustrative purposes and is not necessarily indicative of future operating results or financial position. The unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2001 gives effect to the sale of the contract manufacturing and packaging business as if the transaction had occurred on September 30, 2001. The pro forma condensed consolidated statements of operations for the year ended December 31, 2000 and the nine months ended September 30, 2001 give effect to the foregoing as if the transaction had occurred on January 1, 2000. The pro forma adjustments for the purposes of the unaudited Pro Forma Consolidated Statements of Income presentation give effect to the transaction as though it had occurred at the beginning of the earliest period for which the information is presented. The pro forma adjustments have only been included to the extent they are factually supportable, directly related to the transaction and are expected to have a continuing impact on the Company's Consolidated Statements of Income. The pro forma adjustments are based upon currently available information and contain certain assumptions that management believes are reasonable under the circumstances. The pro forma adjustments on the unaudited Pro Forma Consolidated Statements of Income do not include the estimated loss of $26.1 million (net of an estimated income tax benefit of $4.9 million) from the disposition as this is a non-recurring item. West Pharmaceutical Services, Inc. Pro Forma Consolidated Balance Sheet (UNAUDITED) As of September 30, 2001 (in thousands)
Pro Forma Historical adjustments Pro Forma ASSETS ---------- ----------- --------- Current assets: Cash, including equivalents............ 41,600 28,000 (2) 45,800 (23,800)(3) Accounts receivable.................... 75,000 (9,600)(1) 65,400 Inventories............................ 42,400 (7,000)(1) 35,400 Income tax refundable.................. 4,500 - 4,500 Current deferred income tax benefits... 8,800 - 8,800 Other current assets................... 10,900 (1,100)(1) 9,800 -------- -------- ------- Total current assets...................... 183,200 (13,500) 169,700 -------- -------- ------- Net property, plant and equipment......... 241,400 (31,800)(1) 209,600 Investments in affiliated companies....... 20,200 - 20,200 Goodwill.................................. 50,000 (17,000)(4) 33,000 Prepaid pension asset..................... 46,500 - 46,500 Deferred charges and other assets......... 17,700 - 17,700 Note receivable........................... - 1,800 (2) 1,800 Other assets.............................. 17,500 (200)(1) 17,300 -------- ------- ------- Total assets.............................. 576,500 (60,700) 515,800 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt...... 500 - 500 Notes payable.......................... 24,000 - 24,000 Accounts payable....................... 24,000 (3,700)(1) 20,300 Accrued expenses: Salaries, wages, benefits............ 16,400 (100)(1) 16,300 Income taxes payable................. 5,900 (4,900)(5) 1,000 Restructuring costs.................. 3,900 - 3,900 Deferred income taxes................ 1,900 - 1,900 Other................................ 24,100 (4,100)(1) 22,000 2,000 (5) -------- ------- ------- Total current liabilities................. 100,700 (10,800) 89,900 -------- ------- ------- Long-term debt, excluding current portion 195,400 (23,800)(3) 171,600 Deferred income taxes..................... 51,000 - 51,000 Other long-term liabilities............... 24,300 - 24,300 Minority interests........................ 1,000 - 1,000 Shareholders' equity...................... 204,100 (26,100)(5) 178,000 -------- ------- -------- Total Liabilities and Shareholders' Equity 576,500 (60,700) 515,800 ======== ======== ========
(1) The disposition of Lakewood net assets. (2) Purchase price of sale of $29.8 million. Includes cash proceeds and a note receivable. (3) Cash proceeds from the sale used to reduce the Company's long term debt. Of the $28 million in cash received, approximately $4.2 million is being held in trust for the repayment of long term debt due January 2002. (4) Write-off of goodwill related to the facility sold. (5) The recognition of the estimated loss on sale, net of tax benefit and accrued transaction fees. West Pharmaceutical Services, Inc. Pro Forma Consolidated Statement of Income (UNAUDITED) Nine Months Ended September 30, 2001 (in thousands)
Pro Forma Historical adjustments (1) Pro Forma Net sales......................... 346,300 50,100 296,200 Cost of goods and services sold... 256,000 45,500 210,500 ------- ------- ------- Gross Profit.................... 90,300 4,600 85,700 Selling, general and administrative expenses........ 57,700 3,200 54,500 Restructuring charge.............. 2,800 - 2,800 Other (income)expense, net........ (900) (100) (800) ------- ------- ------- Operating Profit................ 30,700 1,500 29,200 Interest Expense.................. 10,400 1,300(2) 9,100 ------- ------- ------- Income before income taxes and minority interests......... 20,300 200 20,100 Provision for income taxes........ 6,300 300 6,000 Minority interests................ 100 - 100 ------- -------- ------- Income from consolidated operations.................... 13,900 (100) 14,000 Equity in net income of affiliated companies............ 500 - 500 ------- -------- ------- Net income (loss) from continuing operations......... 14,400 (100) 14,500 ======= ======== ======= Net income per share: Basic............................. $1.00 $1.01 Assuming dilution................. $1.00 $1.01 Average common shares outstanding 14,333 14,333 Average shares assuming dilution 14,346 14,346
(1) Pro Forma adjustments represent the elimination of Lakewood operations from the historical consolidated results of West Pharmaceutical Services, Inc. (2) Pro Forma adjustment to reduce interest expense reflects the effect on consolidated interest expense caused by the use of the cash proceeds from the sale to reduce outstanding debt. West Pharmaceutical Services, Inc. Pro Forma Consolidated Statement of Income (UNAUDITED) Year Ended December 31, 2000 (in thousands)
Pro Forma Historical adjustments (1) Pro Forma Net sales....................... 430,100 51,400 378,700 Cost of goods and services sold. 326,700 57,200 269,500 ------- ------- ------- Gross Profit.................. 103,400 (5,800) 109,200 Selling, general and administrative expenses....... 67,700 4,800 62,900 Restructuring charge............ 20,800 5,800 15,000 Other (income) expense, net..... (300) (600) 300 ------- ------- ------- Operating Profit.............. 15,200 (15,800) 31,000 Interest Expense................ 13,100 1,500 (2) 11,600 ------- ------- ------- Income before income taxes and minority interests...... 2,100 (17,300) 19,400 Provision for income taxes...... 1,500 (5,200) 6,700 Minority interests.............. 200 - 200 ------- ------- ------- Income from consolidated operations.................. 400 (12,100) 12,500 Equity in net income of affiliated companies.......... 1,200 - 1,200 ------- -------- ------- Net income (loss) from continuing operations......... 1,600 (12,100) 13,700 ======= ======== ======= Net income per share: Basic .......................... $0.11 $0.95 Assuming dilution............... $0.11 $0.95 Average common shares outstanding 14,407 14,407 Average shares assuming dilution 14,409 14,409
(1) Pro Forma adjustments represent the elimination of Lakewood operations from the historical consolidated results of West Pharmaceutical Services, Inc. (2) Pro Forma adjustment to reduce interest expense reflects the effect on consolidated interest expense caused by the use of the cash proceeds from the sale to reduce outstanding debt. (c) Exhibits: Exhibit # Description 2.1 Asset Purchase Agreement, dated as of November 15, 2001, by and among DFB Pharmaceuticals, Inc., DPT Lakewood, Inc., West Pharmaceutical Services, Inc., West Pharmaceutical Services Lakewood, Inc., Charter Laboratories, Inc. and Paco Laboratories, Inc. (incorporated by reference to Exhibit 2.1 of the Company's Form 8-K dated November 20, 2001). 2.2 Side Letter dated November 30, 2001. 99.1 West Pharmaceutical Services, Inc. Press Release, dated November 30, 2001 SIGNATURE 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. WEST PHARMACEUTICAL SERVICES, INC. Date: December 17, 2001 By: ------------------------------------- Linda R. Altemus Vice President, Finance and Administration EXHIBIT INDEX 2.1 Asset Purchase Agreement, dated as of November 15, 2001, by and among DFB Pharmaceuticals, Inc., DPT Lakewood, Inc., West Pharmaceutical Services, Inc., West Pharmaceutical Services Lakewood, Inc., Charter Laboratories, Inc. and Paco Laboratories, Inc. (incorporated by reference to Exhibit 2.1 of the Company's Form 8-K dated November 20, 2001) 2.2 Side Letter dated November 30, 2001 99.1 West Pharmaceutical Services, Inc. Press Release, dated November 30, 2001