EX-99 2 exh991.htm EXHIBIT 99.1 FINANCIALS

Exhibit 99.1

 

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements

 

The following unaudited pro forma condensed consolidated financial statements are presented to illustrate the effects of the acquisition by West Pharmaceutical Services, Inc. (“West”) of certain assets of The Tech Group, Inc. (“TGI”) for approximately $140.5 million in cash. West purchased substantially all of the assets of TGI, including all of the shares of TGI’s wholly owned subsidiaries in the United States, Puerto Rico, Ireland and Mexico. The acquisition was accounted for under the purchase method of accounting as prescribed in Statement of Financial Accounting Standard No. 141, “Business Combinations”. An unaudited pro forma condensed consolidated balance sheet is not necessary since the acquisition is included in West’s consolidated balance sheet as of December 31, 2005. The unaudited pro forma condensed consolidated statement of operations for the fiscal year ended December 31, 2004, was prepared as if the acquisition had occurred as of January 1, 2004. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2005, was prepared as if the acquisition had occurred as of January 1, 2005. The historical financial information has been adjusted to give effect to pro forma items that are: (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the consolidated results.

 

The unaudited pro forma adjustments are based upon available information and assumptions that West believes are reasonable. The notes to the unaudited pro forma condensed consolidated financial statements provide a more detailed discussion of how such adjustments were derived and presented in the unaudited pro forma condensed consolidated financial statements. Such financial statements have been compiled from historical financial statements and other information, but do not purport to represent what West’s financial position or results of operations actually would have been had the transactions occurred on the dates indicated, or to project West’s financial performance for any future periods. The unaudited pro forma condensed consolidated financial statements and related notes thereto should be read in conjunction with West’s historical consolidated financial statements as previously filed on West’s Annual Report on Form 10-K for the year ended December 31, 2005 and the historical consolidated financial statements of TGI previously filed in the Current Report on Form 8-K/A dated August 3, 2005.

 

 

 

 

PROFORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

Twelve Months Ended December 31, 2004

 

 

(in thousands, except per share data)

 

West Pharmaceutical Services, Inc.

 

The Tech Group, Inc.

 

Pro Forma Adjustments

 

 

 

Pro Forma Consolidated

 

Net sales

 

$

541,600

 

$

117,400

 

$

 

 

 

$

659,000

 

Cost of goods sold

 

 

385,700

 

 

104,400

 

 

800

 

A

 

 

490,900

 

Gross profit

 

 

155,900

 

 

13,000

 

 

(800

)

 

 

 

168,100

 

Selling, general and administrative expenses

 

 

105,200

 

 

12,600

 

 

2,000

 

B

 

 

119,800

 

Restructuring and impairment charges

 

 

1,000

 

 

 

 

 

 

 

 

1,000

 

Other expense (income), net

 

 

1,500

 

 

(500

)

 

 

 

 

 

1,000

 

Operating profit

 

 

48,200

 

 

900

 

 

(2,800

)

 

 

 

46,300

 

Interest expense, net

 

 

7,000

 

 

 

 

6,400

 

C

 

 

13,400

 

Income before income taxes

 

 

41,200

 

 

900

 

 

(9,200

)

 

 

 

32,900

 

Provision for income taxes

 

 

11,100

 

 

300

 

 

(3,200

)

D

 

 

8,200

 

Income from consolidated operations

 

 

30,100

 

 

600

 

 

(6,000

)

 

 

 

24,700

 

Equity in net income of affiliated companies

 

 

3,400

 

 

 

 

 

 

 

 

3,400

 

Income from continuing operations

 

$

33,500

 

$

600

 

$

(6,000

)

 

 

$

28,100

 

Net income per share from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.12

 

 

 

 

 

 

 

 

 

$

0.94

 

Assuming dilution

 

$

1.09

 

 

 

 

 

 

 

 

 

$

0.91

 

Average common shares outstanding

 

 

29,955

 

 

 

 

 

 

 

 

 

 

29,955

 

Average shares assuming dilution

 

 

30,842

 

 

 

 

 

 

 

 

 

 

30,842

 

Dividends declared per common share

 

$

0.43

 

 

 

 

 

 

 

 

 

$

0.43

 

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 

 

 

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

Twelve Months Ended December 31, 2005

 

 

(in thousands, except per share data)

 

West Pharmaceutical Services, Inc.

 

(1)
Historical The Tech Group, Inc. 1/1/05 – 5/20/05

 

Pro Forma Adjustments

 

 

 

Pro Forma Consolidated

 

Net sales

 

$

699,700

 

$

62,000

 

$

 

 

 

$

761,700

 

Cost of goods sold

 

 

507,100

 

 

52,200

 

 

300

 

A

 

 

559,600

 

Gross profit

 

 

192,600

 

 

9,800

 

 

(300

)

 

 

 

202,100

 

Selling, general and administrative expenses

 

 

120,300

 

 

5,000

 

 

1,000

 

B

 

 

126,300

 

Restructuring and impairment benefit

 

 

(1,300

)

 

 

 

 

 

 

 

(1,300

)

Other expense (income), net

 

 

1,400

 

 

200

 

 

 

 

 

 

1,600

 

Operating profit

 

 

72,200

 

 

4,600

 

 

(1,300

)

 

 

 

75,500

 

Interest expense, net

 

 

12,000

 

 

 

 

2,400

 

C

 

 

14,400

 

Income before income taxes

 

 

60,200

 

 

4,600

 

 

(3,700

)

 

 

 

61,100

 

Provision for income taxes

 

 

17,300

 

 

800

 

 

(500

)

D

 

 

17,600

 

Minority interest

 

 

100

 

 

 

 

 

 

 

 

100

 

Income from consolidated operations

 

 

42,800

 

 

3,800

 

 

(3,200

)

 

 

 

43,400

 

Equity in net income of affiliated companies

 

 

2,400

 

 

 

 

 

 

 

 

2,400

 

Income from continuing operations

 

$

45,200

 

$

3,800

 

$

(3,200

)

 

 

$

45,800

 

Net income per share from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.45

 

 

 

 

 

 

 

 

 

$

1.47

 

Assuming dilution

 

$

1.39

 

 

 

 

 

 

 

 

 

$

1.41

 

Average common shares outstanding

 

 

31,100

 

 

 

 

 

 

 

 

 

 

31,100

 

Average shares assuming dilution

 

 

32,525

 

 

 

 

 

 

 

 

 

 

32,525

 

Dividends declared per common share

 

$

0.46

 

 

 

 

 

 

 

 

 

$

0.46

 

 

 

(1) The historical results of TGI are included in the pro forma condensed consolidated statements of income for the period 1/1/05 through 5/20/05. Beginning with the acquisition date of 5/20/05, TGI is included in West’s reported results.

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 

 

 

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

On May 20, 2005, West completed its acquisition of substantially all of the assets of the Tech Group, Inc. (“TGI”), including the outstanding stock of, or other equity interests in, TGI’s wholly owned subsidiaries in the United States, Puerto Rico, Ireland and Mexico. West did not acquire TGI’s ownership interest in Tech Group Asia. TGI provides contract design, tooling and manufacturing services and solutions using plastic injection molding and component assembly processes for the medical device, pharmaceutical, diagnostic and general healthcare and consumer industries. The total purchase price was $140,500, of which $7,100 was held in an escrow account (restricted cash) at December 31, 2005. This restricted cash will be paid to the sellers contingent on the performance of a specific product line during the sellers’ fiscal year ending June 26, 2006.

 

The purchase accounting allocation of the purchase price is as follows:

 

 

 

 

 

 

Inventories

 

$

7,000

 

Accounts receivable

 

 

20,800

 

Other current assets

 

 

8,000

 

Property, plant and equipment, net

 

 

49,000

 

Goodwill

 

 

18,000

 

Intangible assets

 

 

53,200

 

Other noncurrent assets

 

 

300

 

Current liabilities

 

 

(21,000

)

Noncurrent liabilities and deferred taxes

 

 

(1,900

)

Cash paid to sellers

 

 

133,400

 

Restricted cash

 

 

7,100

 

Total consideration

 

$

140,500

 

 

A - Record depreciation expense for acquired fixed assets based on the fair values determined at the time of acquisition. Depreciation expense is calculated on a straight line basis over 35 years for buildings, 10 years for machinery and equipment and 3 years for automobiles and computer equipment. Leasehold improvements are depreciated on a straight line basis over the shorter of their estimated useful lives or their respective lease term as defined in FAS 13.

 

B - Record amortization expense for intangible assets based on the fair values determined at the time of acquisition. Amortization expense is calculated on a straight line basis over the remaining useful life of each asset. Trademarks are considered to have indefinite lives, therefore no amortization is calculated. Customer contracts and customer relationships have useful lives of 20 and 25 years, respectively.

 

C – Record interest expense at 4.5% for $140,500 borrowed under the revolver agreement for the acquisition. The estimated rate of 4.5% is based on the borrowing agreement (LIBOR plus applicable interest rate “spread”). In addition, amortization of loan origination fees of less than $100 was recorded for the periods.

 

D – Record income taxes based on statutory rates in effect in the various countries of operation.