UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Pennsylvania
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23-1210010
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification Number)
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101 Gordon Drive, PO Box 645,
Lionville, PA
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19341-0645
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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þ
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Accelerated filer
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o
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Non-accelerated filer
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o
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(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Page
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FINANCIAL STATEMENTS (UNAUDITED)
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3
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4
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5
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6
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7
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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18
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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30
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CONTROLS AND PROCEDURES
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30
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LEGAL PROCEEDINGS
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30
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RISK FACTORS
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30
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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31
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EXHIBITS
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31
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33
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F-1
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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|||||||||||||||
2011
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2010
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2011
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2010
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|||||||||||||
Net sales
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$ | 293.6 | $ | 271.4 | $ | 896.9 | $ | 827.9 | ||||||||
Cost of goods and services sold
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212.2 | 196.7 | 642.9 | 587.8 | ||||||||||||
Gross profit
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81.4 | 74.7 | 254.0 | 240.1 | ||||||||||||
Research and development
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7.7 | 5.9 | 21.9 | 17.0 | ||||||||||||
Selling, general and administrative expenses
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45.7 | 44.9 | 144.8 | 137.2 | ||||||||||||
Restructuring and other items (Note 2)
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1.9 | (1.4 | ) | 4.7 | 1.1 | |||||||||||
Operating profit
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26.1 | 25.3 | 82.6 | 84.8 | ||||||||||||
Interest expense
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4.5 | 4.2 | 13.8 | 12.1 | ||||||||||||
Interest income
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(0.4 | ) | (0.1 | ) | (0.9 | ) | (0.3 | ) | ||||||||
Income before income taxes
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22.0 | 21.2 | 69.7 | 73.0 | ||||||||||||
Income tax expense
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6.6 | 4.5 | 17.9 | 17.3 | ||||||||||||
Equity in net income of affiliated companies
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1.5 | 1.1 | 4.9 | 3.6 | ||||||||||||
Net income
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$ | 16.9 | $ | 17.8 | $ | 56.7 | $ | 59.3 | ||||||||
Net income per share:
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||||||||||||||||
Basic
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$ | 0.50 | $ | 0.53 | $ | 1.69 | $ | 1.78 | ||||||||
Diluted
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$ | 0.49 | $ | 0.51 | $ | 1.62 | $ | 1.70 | ||||||||
Weighted average shares outstanding:
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||||||||||||||||
Basic
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33.8 | 33.4 | 33.6 | 33.3 | ||||||||||||
Diluted
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37.0 | 36.7 | 37.0 | 36.7 | ||||||||||||
Dividends declared per share
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$ | - | $ | - | $ | 0.34 | $ | 0.32 |
September 30,
2011
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December 31,
2010
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|||||||
ASSETS
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||||||||
Current assets:
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||||||||
Cash, including cash equivalents
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$ | 119.2 | $ | 110.2 | ||||
Accounts receivable, net
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153.1 | 126.4 | ||||||
Inventories
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155.5 | 147.0 | ||||||
Deferred income taxes
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10.7 | 10.5 | ||||||
Other current assets
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65.0 | 42.5 | ||||||
Total current assets
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503.5 | 436.6 | ||||||
Property, plant and equipment
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1,135.1 | 1,077.2 | ||||||
Less accumulated depreciation and amortization
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559.0 | 522.4 | ||||||
Property, plant and equipment, net
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576.1 | 554.8 | ||||||
Investments in affiliated companies
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55.0 | 48.2 | ||||||
Goodwill
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113.6 | 112.5 | ||||||
Deferred income taxes
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68.4 | 64.5 | ||||||
Intangible assets, net
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52.6 | 55.1 | ||||||
Other noncurrent assets
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29.1 | 22.6 | ||||||
Total Assets
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$ | 1,398.3 | $ | 1,294.3 | ||||
LIABILITIES AND EQUITY
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||||||||
Current liabilities:
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||||||||
Notes payable and other current debt
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$ | 54.7 | $ | 0.3 | ||||
Accounts payable
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71.7 | 63.2 | ||||||
Pension and other postretirement benefits
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2.2 | 2.1 | ||||||
Accrued salaries, wages and benefits
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48.5 | 48.3 | ||||||
Income taxes payable
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7.9 | 5.0 | ||||||
Taxes other than income
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11.8 | 10.0 | ||||||
Other current liabilities
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32.5 | 40.8 | ||||||
Total current liabilities
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229.3 | 169.7 | ||||||
Long-term debt
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323.3 | 358.1 | ||||||
Deferred income taxes
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19.8 | 20.0 | ||||||
Pension and other postretirement benefits
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84.1 | 87.2 | ||||||
Other long-term liabilities
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50.5 | 33.6 | ||||||
Total Liabilities
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707.0 | 668.6 | ||||||
Commitments and contingencies (Note 13)
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||||||||
Total Equity
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691.3 | 625.7 | ||||||
Total Liabilities and Equity
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$ | 1,398.3 | $ | 1,294.3 |
Common Shares Issued
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Common Stock
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Capital in Excess of Par Value
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Number of Treasury Shares
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Treasury Stock
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Retained earnings
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Accumulated other comprehensive loss
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Total
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|||||||||||||||||||||||||
Balance, December 31, 2010
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34.3 | $ | 8.6 | $ | 77.3 | (1.0 | ) | $ | (41.5 | ) | $ | 612.6 | $ | (31.3 | ) | $ | 625.7 | |||||||||||||||
Net income
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56.7 | 56.7 | ||||||||||||||||||||||||||||||
Stock-based compensation
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6.8 | 6.8 | ||||||||||||||||||||||||||||||
Shares issued under stock plans
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(11.3 | ) | 0.5 | 18.4 | 7.1 | |||||||||||||||||||||||||||
Shares repurchased for employee tax withholdings
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(0.1 | ) | (3.5 | ) | (3.5 | ) | ||||||||||||||||||||||||||
Excess tax benefit from employee stock plans
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3.2 | 3.2 | ||||||||||||||||||||||||||||||
Dividends declared
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(11.5 | ) | (11.5 | ) | ||||||||||||||||||||||||||||
Other comprehensive income, net of tax
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6.8 | 6.8 | ||||||||||||||||||||||||||||||
Balance, September 30, 2011
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34.3 | $ | 8.6 | $ | 76.0 | (0.6 | ) | $ | (26.6 | ) | $ | 657.8 | $ | (24.5 | ) | $ | 691.3 |
Nine Months Ended
September 30,
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||||||||
2011
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2010
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|||||||
Cash flows from operating activities:
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||||||||
Net income
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$ | 56.7 | $ | 59.3 | ||||
Depreciation
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53.9 | 50.4 | ||||||
Amortization
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3.4 | 3.3 | ||||||
Other non-cash items, net
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2.2 | 1.4 | ||||||
Changes in assets and liabilities
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(27.3 | ) | (23.3 | ) | ||||
Net cash provided by operating activities
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88.9 | 91.1 | ||||||
Cash flows from investing activities:
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||||||||
Capital expenditures
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(62.0 | ) | (49.8 | ) | ||||
Acquisition of business, net of cash acquired
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- | (3.7 | ) | |||||
Purchases of short-term investments, net
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(22.8 | ) | (2.8 | ) | ||||
Other, net
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0.6 | 0.9 | ||||||
Net cash used in investing activities
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(84.2 | ) | (55.4 | ) | ||||
Cash flows from financing activities:
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||||||||
Borrowings under revolving credit agreements, net
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16.5 | 21.9 | ||||||
Repayment of former credit facility
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- | (26.6 | ) | |||||
Debt issuance costs
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(0.3 | ) | (1.7 | ) | ||||
Changes in other debt
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(0.6 | ) | 0.1 | |||||
Dividend payments
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(17.1 | ) | (16.0 | ) | ||||
Excess tax benefit from employee stock plans
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3.2 | 2.0 | ||||||
Shares repurchased for employee tax withholdings
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(3.5 | ) | (2.0 | ) | ||||
Issuance of common stock from treasury
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5.2 | 2.9 | ||||||
Net cash provided by (used in) financing activities
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3.4 | (19.4 | ) | |||||
Effect of exchange rates on cash
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0.9 | (2.3 | ) | |||||
Net increase in cash and cash equivalents
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9.0 | 14.0 | ||||||
Cash, including cash equivalents at beginning of period
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110.2 | 83.1 | ||||||
Cash, including cash equivalents at end of period
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$ | 119.2 | $ | 97.1 |
Three Months Ended
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Nine Months Ended
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|||||||||||||||
September 30,
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September 30,
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|||||||||||||||
($ in millions)
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2011
|
2010
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2011
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2010
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||||||||||||
Restructuring and related charges:
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||||||||||||||||
Severance and post-employment benefits
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$ | (0.3 | ) | $ | 0.1 | $ | 1.5 | $ | 0.4 | |||||||
Impairments and asset write-offs
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0.3 | 0.1 | 1.0 | 0.6 | ||||||||||||
Other restructuring charges
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1.0 | - | 1.8 | 0.2 | ||||||||||||
Total restructuring and related charges
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1.0 | 0.2 | 4.3 | 1.2 | ||||||||||||
Acquisition-related contingencies
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0.3 | (1.8 | ) | (0.4 | ) | (1.8 | ) | |||||||||
Foreign exchange losses and other
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0.6 | 0.2 | 0.8 | 1.7 | ||||||||||||
Total restructuring and other items
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$ | 1.9 | $ | (1.4 | ) | $ | 4.7 | $ | 1.1 |
($ in millions)
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Severance
and benefits
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Other
Costs
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Total
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|||||||||
Balance, December 31, 2010
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$ | 10.2 | $ | - | $ | 10.2 | ||||||
Charges
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1.5 | 1.8 | 3.3 | |||||||||
Cash payments
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(5.0 | ) | (2.0 | ) | (7.0 | ) | ||||||
Non-cash adjustment
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- | 0.2 | 0.2 | |||||||||
Balance, September 30, 2011
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$ | 6.7 | $ | - | $ | 6.7 |
Amount of Gain (Loss) Recognized in OCI for
Three Months Ended
September 30,
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Amount of Gain (Loss) Reclassified from Accumulated OCI into Income for
Three Months Ended
September 30,
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Location of Gain (Loss) Reclassified from Accumulated OCI into Income
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|||||||||||||||
($ in millions)
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2011
|
2010
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2011
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2010
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|||||||||||||
Cash Flow Hedges:
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|||||||||||||||||
Foreign currency hedge contracts
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$ | 0.2 | $ | - | $ | 0.1 | $ | - |
Net sales
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||||||||
Foreign currency hedge contracts
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0.7 | (0.2 | ) | - | 0.3 |
Cost of goods and services sold
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|||||||||||
Interest rate swap contracts
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(0.6 | ) | 0.4 | (0.8 | ) | (0.8 | ) |
Interest expense
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|||||||||
Total
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$ | 0.3 | $ | 0.2 | $ | (0.7 | ) | $ | (0.5 | ) | |||||||
Net Investment Hedges:
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|||||||||||||||||
Foreign currency-denominated debt
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$ | 3.6 | $ | (7.7 | ) | $ | - | $ | - |
Foreign exchange losses and other
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|||||||
Total
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$ | 3.6 | $ | (7.7 | ) | $ | - | $ | - |
Amount of Gain (Loss) Recognized in OCI for
Nine Months Ended
September 30,
|
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income for
Nine Months
Ended
September 30,
|
Location of Gain (Loss) Reclassified from Accumulated OCI into Income
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Cash Flow Hedges:
|
|||||||||||||||||
Foreign currency hedge contracts
|
$ | (0.3 | ) | $ | - | $ | 0.3 | $ | - |
Net sales
|
|||||||
Foreign currency hedge contracts
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0.2 | (0.1 | ) | - | 0.3 |
Cost of goods and services sold
|
|||||||||||
Interest rate swap contracts
|
0.5 | 1.2 | (2.4 | ) | (2.4 | ) |
Interest expense
|
||||||||||
Total
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$ | 0.4 | $ | 1.1 | $ | (2.1 | ) | $ | (2.1 | ) | |||||||
Net Investment Hedges:
|
|||||||||||||||||
Foreign currency-denominated debt
|
$ | (2.2 | ) | $ | 2.5 | $ | - | $ | - |
Foreign exchange losses and other
|
|||||||
Total
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$ | (2.2 | ) | $ | 2.5 | $ | - | $ | - |
·
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Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
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·
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Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
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·
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Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
|
Balance at
|
Basis of Fair Value Measurements
|
|||||||||||||||
September 30,
|
||||||||||||||||
($ in millions)
|
2011
|
Level 1
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Level 2
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Level 3
|
||||||||||||
Assets:
|
||||||||||||||||
Short-term investments
|
$ | 23.6 | $ | 23.6 | $ | - | $ | - | ||||||||
Deferred compensation assets
|
3.1 | 3.1 | - | - | ||||||||||||
Foreign currency contracts
|
0.2 | - | 0.2 | - | ||||||||||||
Commodity contracts
|
0.2 | - | 0.2 | - | ||||||||||||
$ | 27.1 | $ | 26.7 | $ | 0.4 | $ | - | |||||||||
Liabilities:
|
||||||||||||||||
Contingent consideration
|
$ | 1.9 | $ | - | $ | - | $ | 1.9 | ||||||||
Deferred compensation liabilities
|
4.4 | 4.4 | - | - | ||||||||||||
Interest rate swap contracts
|
9.2 | - | 9.2 | - | ||||||||||||
$ | 15.5 | $ | 4.4 | $ | 9.2 | $ | 1.9 |
Balance at
|
Basis of Fair Value Measurements
|
|||||||||||||||
December 31,
|
||||||||||||||||
($ in millions)
|
2010
|
Level 1
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Level 2
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Level 3
|
||||||||||||
Assets:
|
||||||||||||||||
Short-term investments
|
$ | 0.6 | $ | 0.6 | $ | - | $ | - | ||||||||
Deferred compensation assets
|
3.6 | 3.6 | - | - | ||||||||||||
$ | 4.2 | $ | 4.2 | $ | - | $ | - | |||||||||
Liabilities:
|
||||||||||||||||
Contingent consideration
|
$ | 2.3 | $ | - | $ | - | $ | 2.3 | ||||||||
Deferred compensation liabilities
|
5.4 | 5.4 | - | - | ||||||||||||
Interest rate swap contracts
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6.1 | - | 6.1 | - | ||||||||||||
$ | 13.8 | $ | 5.4 | $ | 6.1 | $ | 2.3 |
($ in millions)
|
||||
Balance, December 31, 2010
|
$ | 2.3 | ||
Increase in fair value recorded in earnings
|
0.4 | |||
Reduction in fair value recorded in earnings
|
(0.8 | ) | ||
Balance, September 30, 2011
|
$ | 1.9 |
September 30,
|
December 31,
|
|||||||
($ in millions)
|
2011
|
2010
|
||||||
Finished goods
|
$ | 68.9 | $ | 65.1 | ||||
Work in process
|
21.7 | 21.4 | ||||||
Raw materials
|
64.9 | 60.5 | ||||||
$ | 155.5 | $ | 147.0 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Net income, as reported, for basic net income per share
|
$ | 16.9 | $ | 17.8 | $ | 56.7 | $ | 59.3 | ||||||||
Plus: interest expense on convertible debt, net of tax
|
1.1 | 1.1 | 3.2 | 3.2 | ||||||||||||
Net income for diluted net income per share
|
$ | 18.0 | $ | 18.9 | $ | 59.9 | $ | 62.5 |
Weighted average common shares outstanding
|
33.8 | 33.4 | 33.6 | 33.3 | ||||||||||||
Assumed stock options exercised and awards vested,
based on the treasury stock method
|
0.3 | 0.4 | 0.5 | 0.5 | ||||||||||||
Assumed conversion of convertible debt, based on the
if-converted method
|
2.9 | 2.9 | 2.9 | 2.9 | ||||||||||||
Weighted average shares assuming dilution
|
37.0 | 36.7 | 37.0 | 36.7 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Net income
|
$ | 16.9 | $ | 17.8 | $ | 56.7 | $ | 59.3 | ||||||||
Other comprehensive income (loss), net of tax:
|
||||||||||||||||
Foreign currency translation adjustments
|
(25.1 | ) | 37.3 | 6.4 | (9.3 | ) | ||||||||||
Defined benefit pension and other postretirement plans
|
1.6 | 0.2 | 2.1 | 2.2 | ||||||||||||
Unrealized gains (losses) on derivatives:
|
||||||||||||||||
Unrealized gains arising during the period
|
0.3 | 0.2 | 0.4 | 1.1 | ||||||||||||
Losses included in net income
|
(0.7 | ) | (0.5 | ) | (2.1 | ) | (2.1 | ) | ||||||||
Net unrealized losses on derivatives
|
(0.4 | ) | (0.3 | ) | (1.7 | ) | (1.0 | ) | ||||||||
Other comprehensive (loss) income, net of tax
|
(23.9 | ) | 37.2 | 6.8 | (8.1 | ) | ||||||||||
Comprehensive (loss) income
|
$ | (7.0 | ) | $ | 55.0 | $ | 63.5 | $ | 51.2 |
Pension benefits
|
Other retirement benefits
|
Total
|
||||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||||||||
Service cost
|
$ | 2.1 | $ | 2.1 | $ | 0.3 | $ | 0.4 | $ | 2.4 | $ | 2.5 | ||||||||||||
Interest cost
|
4.1 | 4.0 | 0.3 | 0.1 | 4.4 | 4.1 | ||||||||||||||||||
Expected return on assets
|
(4.1 | ) | (4.0 | ) | - | - | (4.1 | ) | (4.0 | ) | ||||||||||||||
Amortization of prior service credit
|
(0.3 | ) | (0.3 | ) | - | - | (0.3 | ) | (0.3 | ) | ||||||||||||||
Recognized actuarial losses
|
1.7 | 1.6 | - | (0.1 | ) | 1.7 | 1.5 | |||||||||||||||||
Curtailment gain, net
|
(0.2 | ) | - | - | - | (0.2 | ) | - | ||||||||||||||||
Net periodic benefit cost
|
$ | 3.3 | $ | 3.4 | $ | 0.6 | $ | 0.4 | $ | 3.9 | $ | 3.8 |
Pension benefits
|
Other retirement benefits
|
Total
|
||||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||||||||
U.S. plans
|
$ | 2.4 | $ | 2.6 | $ | 0.6 | $ | 0.4 | $ | 3.0 | $ | 3.0 | ||||||||||||
International plans
|
0.9 | 0.8 | - | - | 0.9 | 0.8 | ||||||||||||||||||
Net periodic benefit cost
|
$ | 3.3 | $ | 3.4 | $ | 0.6 | $ | 0.4 | $ | 3.9 | $ | 3.8 |
Pension benefits
|
Other retirement benefits
|
Total
|
||||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||||||||
Service cost
|
$ | 7.0 | $ | 6.5 | $ | 0.9 | $ | 0.8 | $ | 7.9 | $ | 7.3 | ||||||||||||
Interest cost
|
12.1 | 11.5 | 0.7 | 0.6 | 12.8 | 12.1 | ||||||||||||||||||
Expected return on assets
|
(12.1 | ) | (11.0 | ) | - | - | (12.1 | ) | (11.0 | ) | ||||||||||||||
Amortization of transition obligation
|
0.1 | 0.1 | - | - | 0.1 | 0.1 | ||||||||||||||||||
Amortization of prior service (credit) cost
|
(1.2 | ) | (0.9 | ) | 0.1 | 0.1 | (1.1 | ) | (0.8 | ) | ||||||||||||||
Recognized actuarial losses
|
4.6 | 4.3 | - | (0.1 | ) | 4.6 | 4.2 | |||||||||||||||||
Curtailment gain, net
|
(0.2 | ) | - | - | - | (0.2 | ) | - | ||||||||||||||||
Net periodic benefit cost
|
$ | 10.3 | $ | 10.5 | $ | 1.7 | $ | 1.4 | $ | 12.0 | $ | 11.9 |
Pension benefits
|
Other retirement benefits
|
Total
|
||||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||||||||
U.S. plans
|
$ | 7.9 | $ | 8.8 | $ | 1.7 | $ | 1.4 | $ | 9.6 | $ | 10.2 | ||||||||||||
International plans
|
2.4 | 1.7 | - | - | 2.4 | 1.7 | ||||||||||||||||||
Net periodic benefit cost
|
$ | 10.3 | $ | 10.5 | $ | 1.7 | $ | 1.4 | $ | 12.0 | $ | 11.9 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Net sales:
|
||||||||||||||||
Packaging Systems
|
$ | 209.1 | $ | 191.5 | $ | 647.1 | $ | 591.3 | ||||||||
Delivery Systems
|
84.5 | 81.0 | 251.4 | 239.9 | ||||||||||||
Intersegment sales
|
- | (1.1 | ) | (1.6 | ) | (3.3 | ) | |||||||||
Total net sales
|
$ | 293.6 | $ | 271.4 | $ | 896.9 | $ | 827.9 |
Operating profit:
|
||||||||||||||||
Packaging Systems
|
$ | 34.8 | $ | 29.4 | $ | 114.9 | $ | 106.8 | ||||||||
Delivery Systems
|
1.7 | 3.6 | 5.9 | 8.5 | ||||||||||||
Corporate
|
(9.1 | ) | (9.3 | ) | (32.2 | ) | (31.1 | ) | ||||||||
Other unallocated items
|
(1.3 | ) | 1.6 | (6.0 | ) | 0.6 | ||||||||||
Total operating profit
|
$ | 26.1 | $ | 25.3 | $ | 82.6 | $ | 84.8 | ||||||||
Interest expense
|
4.5 | 4.2 | 13.8 | 12.1 | ||||||||||||
Interest income
|
(0.4 | ) | (0.1 | ) | (0.9 | ) | (0.3 | ) | ||||||||
Income before income taxes
|
$ | 22.0 | $ | 21.2 | $ | 69.7 | $ | 73.0 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Packaging Systems
|
$ | 209.1 | $ | 191.5 | $ | 647.1 | $ | 591.3 | ||||||||
Delivery Systems
|
84.5 | 81.0 | 251.4 | 239.9 | ||||||||||||
Intersegment sales elimination
|
- | (1.1 | ) | (1.6 | ) | (3.3 | ) | |||||||||
Consolidated net sales
|
$ | 293.6 | $ | 271.4 | $ | 896.9 | $ | 827.9 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Packaging Systems:
|
||||||||||||||||
Gross Profit
|
$ | 66.0 | $ | 58.5 | $ | 208.4 | $ | 195.2 | ||||||||
Gross Margin
|
31.6 | % | 30.5 | % | 32.2 | % | 33.0 | % | ||||||||
Delivery Systems:
|
||||||||||||||||
Gross Profit
|
$ | 15.4 | $ | 16.2 | $ | 45.6 | $ | 44.9 | ||||||||
Gross Margin
|
18.2 | % | 20.0 | % | 18.2 | % | 18.7 | % | ||||||||
Consolidated Gross Profit
|
$ | 81.4 | $ | 74.7 | $ | 254.0 | $ | 240.1 | ||||||||
Consolidated Gross Margin
|
27.7 | % | 27.5 | % | 28.3 | % | 29.0 | % |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
R&D costs
|
$ | 7.7 | $ | 5.9 | $ | 21.9 | $ | 17.0 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
SG&A costs
|
$ | 45.7 | $ | 44.9 | $ | 144.8 | $ | 137.2 | ||||||||
SG&A as a % of net sales
|
15.5 | % | 16.5 | % | 16.1 | % | 16.6 | % |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Segments
|
$ | 0.6 | $ | 0.2 | $ | 0.9 | $ | 1.8 | ||||||||
Corporate and other unallocated items:
|
||||||||||||||||
Corporate
|
- | - | (0.1 | ) | (0.1 | ) | ||||||||||
Restructuring and related charges
|
1.0 | 0.2 | 4.3 | 1.2 | ||||||||||||
Acquisition-related contingencies
|
0.3 | (1.8 | ) | (0.4 | ) | (1.8 | ) | |||||||||
Consolidated restructuring and other items
|
$ | 1.9 | $ | (1.4 | ) | $ | 4.7 | $ | 1.1 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Segments:
|
||||||||||||||||
Packaging Systems
|
$ | 34.8 | $ | 29.4 | $ | 114.9 | $ | 106.8 | ||||||||
Delivery Systems
|
1.7 | 3.6 | 5.9 | 8.5 | ||||||||||||
Corporate and other unallocated items:
|
||||||||||||||||
Corporate
|
(9.1 | ) | (9.3 | ) | (32.2 | ) | (31.1 | ) | ||||||||
Other unallocated expense
|
(1.3 | ) | 1.6 | (6.0 | ) | 0.6 | ||||||||||
Consolidated operating profit
|
$ | 26.1 | $ | 25.3 | $ | 82.6 | $ | 84.8 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
($ in millions)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Interest expense
|
$ | 4.9 | $ | 4.3 | $ | 14.6 | $ | 13.0 | ||||||||
Capitalized interest
|
(0.4 | ) | (0.1 | ) | (0.8 | ) | (0.9 | ) | ||||||||
Interest income
|
(0.4 | ) | (0.1 | ) | (0.9 | ) | (0.3 | ) | ||||||||
Consolidated interest expense, net
|
$ | 4.1 | $ | 4.1 | $ | 12.9 | $ | 11.8 |
($ in millions)
|
2011
|
2010
|
||||||
Net cash provided by operating activities
|
$ | 88.9 | $ | 91.1 | ||||
Net cash used in investing activities
|
(84.2 | ) | (55.4 | ) | ||||
Net cash provided by (used in) financing activities
|
3.4 | (19.4 | ) |
($ in millions)
|
September 30,
2011
|
December 31,
2010
|
||||||
Cash and cash equivalents
|
$ | 119.2 | $ | 110.2 | ||||
Short-term investments
|
$ | 23.6 | $ | 0.6 | ||||
Working capital
|
$ | 274.2 | $ | 266.9 | ||||
Total debt
|
$ | 378.0 | $ | 358.4 | ||||
Net debt-to-total invested capital
|
27.2 | % | 28.4 | % |
Payments Due By Period
|
||||||||||||||||||||
($ in millions)
|
Less than
1 year
|
1 - 3
years
|
3 - 5
years
|
More than
5 years
|
Total
|
|||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Capital lease obligations (1)
|
$ | 0.7 | $ | 0.4 | $ | 0.4 | $ | 0.2 | $ | 1.7 | ||||||||||
Purchase obligations (2)
|
$ | 13.2 | $ | 45.7 | $ | 3.6 | $ | 3.6 | $ | 66.1 |
(1)
|
Our estimate of future payments under capital lease obligations was reduced by $69.0 million to reflect the decision to exercise our option to purchase our new corporate office and research building instead of leasing it.
|
(2)
|
Purchase obligations were increased by $36.0 million to include the estimated purchase price under our agreement for the construction and development of our new corporate office and research building. Payment is due for the portion of the building covered by this contract upon completion, which is expected to occur by the first quarter of 2013. The actual purchase price of the building will be based on construction and development costs incurred. As of the current date, we have other agreements to purchase $6.5 million in building-related materials which are also reflected in this table. In addition to the amounts included in this table, we expect to directly incur approximately $28.6 million in capital expenditures related to the building over the next eighteen months.
|
·
|
sales demand and our ability to meet that demand;
|
·
|
competition from other providers in our businesses, including customers’ in-house operations, and from lower-cost producers in emerging markets, which can impact unit volume, price and profitability;
|
·
|
customers’ changing inventory requirements and manufacturing plans that alter existing orders or ordering patterns for the products we supply to them;
|
·
|
the timing, regulatory approval and commercial success of customer products that incorporate our packaging and delivery products and systems, including Daikyo Crystal Zenith® (“CZ”) prefilled syringes, cartridges and vials, and the Confidose®, SmartDose™ and NovaGuard™ systems;
|
·
|
whether customers agree to incorporate West’s products and delivery systems with their new and existing drug products, the ultimate timing and successful commercialization of those products and systems, which involves substantial evaluations of the functional, operational, clinical and economic viability of the Company’s products, and the rate, timing and success of regulatory approval for the drug products that incorporate the Company’s components and systems;
|
·
|
the timely and adequate availability of filling capacity, which is essential to conducting definitive stability trials and the timing of first commercialization of customers’ products in CZ prefilled syringes;
|
·
|
the timely execution and completion of our restructuring plans within the cost estimates, and the achievement of cost savings, anticipated by the plan;
|
·
|
average profitability, or mix, of products sold in any reporting period;
|
·
|
maintaining or improving production efficiencies and overhead absorption;
|
·
|
dependence on third parties for supplies, services and raw materials, some of which are single-source suppliers of critical materials, services and products, including our Japanese partner and affiliate, Daikyo;
|
·
|
the availability and cost of skilled employees required to meet increased production, managerial, research and other needs, including professional employees and persons employed under collective bargaining agreements;
|
·
|
interruptions or weaknesses in our supply chain, which could cause delivery delays or restrict the availability of raw materials, key purchased components and finished products;
|
·
|
raw material price escalation, particularly petroleum-based raw materials, and our ability to pass raw material cost increases on to customers through price increases;
|
·
|
the cost and progress of development, regulatory approval and marketing of new products as a result of our research and development efforts;
|
·
|
the relative strength of the U.S. dollar in relation to other currencies, particularly the Euro, British Pound, Danish Krone, Singapore Dollar, and Japanese Yen; and
|
·
|
the potential adverse effects of recently-enacted U.S. healthcare legislation on customer demand, product pricing and profitability.
|
Period
|
Total
number of shares purchased
(1)(2)(3)
|
Average
price paid
per share
|
Total number
of shares purchased as
part of publicly
announced plans or
programs
|
Maximum number of
shares that may
yet be urchased
under the plans or programs
|
||||||||||||
July 1 – 31, 2011
|
8 | $ | 46.10 | - | - | |||||||||||
August 1 – 31, 2011
|
593 | 41.76 | - | - | ||||||||||||
September 1 – 30, 2011
|
41 | 37.54 | - | - | ||||||||||||
Total
|
642 | $ | 41.54 | - | - |
(1)
|
Includes 642 shares purchased on behalf of employees enrolled in the Non-Qualified Deferred Compensation Plan for Designated Employees (Amended and Restated Effective January 1, 2008). Under the plan, Company match contributions are delivered to the plan’s investment administrator, who then purchases shares in the open market and credits the shares to individual plan accounts.
|
3.1
|
Our Amended and Restated Articles of Incorporation effective December 17, 2007 are incorporated by reference from our Form 8-K dated December 17, 2007.
|
3.2
|
Our Bylaws, as amended through October 14, 2008 are incorporated by reference from our Form 8-K dated October 20, 2008.
|
4.1
|
Form of stock certificate for common stock is incorporated by reference from our annual report on Form 10-K dated May 6, 1999.
|
4.2
|
Article 5, 6, 8(c) and 9 of our Amended and Restated Articles of Incorporation are incorporated by reference from our Form 8-K dated December 17, 2007.
|
4.3
|
Article I and V of our Bylaws, as amended through October 14, 2008 are incorporated by reference from our Form 8-K dated October 20, 2008.
|
4.4
|
Instruments defining the rights of holders of long-term debt securities of West and its subsidiaries have been omitted. (1)
|
10.1
|
Credit Agreement, dated June 3, 2011, by and among West Pharmaceutical Services, Inc., our direct and indirect subsidiaries from time to time parties thereto, the several banks and other financial institutions from time to time parties thereto and PNC Bank, National Association, as administrative agent for the Lenders incorporated by reference from our Form 8-K filed on June 9, 2011.
|
10.2
|
Security Agreement, dated June 3, 2011, by and among West Pharmaceutical Services, Inc., our subsidiaries listed on the signature pages thereto and PNC Bank, National Association, as administrative agent incorporated by reference from our Form 8-K filed on June 9, 2011.
|
10.3
|
Global Supply Agreement between West Pharmaceutical Services, Inc. and ExxonMobil Chemical Company incorporated by reference from our Form 8-K filed on July 1, 2011.
|
31.1
|
Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1*
|
Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2* | Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Taxonomy Extension Schema Document |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
XBRL Taxonomy Extension Presentation Linkbase Document
|
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
Exhibit Number
|
Description
|
3.1
|
Our Amended and Restated Articles of Incorporation effective December 17, 2007 are incorporated by reference from our Form 8-K dated December 17, 2007.
|
3.2
|
Our Bylaws, as amended through October 14, 2008 are incorporated by reference from our Form 8-K dated October 20, 2008.
|
4.1
|
Form of stock certificate for common stock is incorporated by reference from our annual report on Form 10-K dated May 6, 1999.
|
4.2
|
Article 5, 6, 8(c) and 9 of our Amended and Restated Articles of Incorporation are incorporated by reference from our Form 8-K dated December 17, 2007.
|
4.3
|
Article I and V of our Bylaws, as amended through October 14, 2008 are incorporated by reference from our Form 8-K dated October 20, 2008.
|
4.4
|
Instruments defining the rights of holders of long-term debt securities of West and its subsidiaries have been omitted. (1)
|
10.1
|
Credit Agreement, dated June 3, 2011, by and among West Pharmaceutical Services, Inc., our direct and indirect subsidiaries from time to time parties thereto, the several banks and other financial institutions from time to time parties thereto and PNC Bank, National Association, as administrative agent for the Lenders incorporated by reference from our Form 8-K filed on June 9, 2011.
|
10.2
|
Security Agreement, dated June 3, 2011, by and among West Pharmaceutical Services, Inc., our subsidiaries listed on the signature pages thereto and PNC Bank, National Association, as administrative agent incorporated by reference from our Form 8-K filed on June 9, 2011.
|
10.3
|
Global Supply Agreement between West Pharmaceutical Services, Inc. and ExxonMobil Chemical Company incorporated by reference from our Form 8-K filed on July 1, 2011.
|
31.1
|
Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1*
|
Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2*
|
Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of West Pharmaceutical Services, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of West Pharmaceutical Services, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED) (USD $) In Millions | Total | Common Stock [Member] | Capital in Excess of Par Value [Member] | Treasury Stock [Member] | Retained earnings [Member] | Accumulated other comprehensive (loss) income [Member] |
---|---|---|---|---|---|---|
Balance, Beginning at Dec. 31, 2010 | $ 625.7 | $ 8.6 | $ 77.3 | $ (41.5) | $ 612.6 | $ (31.3) |
Balance, Beginning (in shares) at Dec. 31, 2010 | 34.3 | (1.0) | ||||
Net income | 56.7 | 56.7 | ||||
Stock-based compensation | 6.8 | 6.8 | ||||
Shares issued under stock plans | 7.1 | (11.3) | 18.4 | |||
Shares issued under stock plans (in shares) | 0.5 | |||||
Shares repurchased for employee tax withholdings | (3.5) | (3.5) | ||||
Shares repurchased for employee tax withholdings (in shares) | (0.1) | |||||
Excess tax benefit from employee stock plans | 3.2 | 3.2 | ||||
Dividends declared | (11.5) | (11.5) | ||||
Other comprehensive income, net of tax | 6.8 | 6.8 | ||||
Balance, Ending at Sep. 30, 2011 | $ 691.3 | $ 8.6 | $ 76.0 | $ (26.6) | $ 657.8 | $ (24.5) |
Balance, Ending (in shares) at Sep. 30, 2011 | 34.3 | (0.6) |
Inventories (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories are valued at the lower of standard cost (which approximates actual cost on a first-in-first-out basis) or market. Inventory balances were as follows:
|
Document And Entity Information (USD $) | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | Oct. 31, 2011 | Jun. 30, 2010 | |
Entity Registrant Name | WEST PHARMACEUTICAL SERVICES INC | ||
Entity Central Index Key | 0000105770 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 1,213,616,750 | ||
Entity Common Stock, Shares Outstanding | 33,716,732 | ||
Document Fiscal Year Focus | 2011 | ||
Document Fiscal Period Focus | Q3 | ||
Document Type | 10-Q | ||
Amendment Flag | false | ||
Document Period End Date | Sep. 30, 2011 |
Benefit Plans (Tables) | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Benefit Plans [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of net periodic benefit cost | The components of net periodic benefit cost for the three months ended September 30 were as follows ($ in millions):
The components of net periodic benefit cost for the nine months ended September 30 were as follows ($ in millions):
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Revolving Credit Facility | 9 Months Ended |
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Sep. 30, 2011 | |
Revolving Credit Facility [Abstract] | |
Revolving Credit Facility | Note 7: Revolving Credit Facility In June 2011, we entered into a credit agreement and related document governing the terms of our new $50.0 million revolving credit facility (the “New Credit Facility”). The proceeds of the loans will be used to finance the construction and acquisition of our new corporate office and research building. We currently expect to acquire the new building during the first quarter of 2013. On the date of acquisition, the revolving loan balance will be converted to a five-year term loan. Borrowings under the loans will bear interest at a variable rate equal to one-month LIBOR plus a margin of 1.50 percentage points. The credit agreement requires us to maintain a total leverage ratio no greater than 3.50 to 1.00 and an interest coverage ratio greater than or equal to 2.50 to 1.00. In connection with the New Credit Facility, we incurred debt issuance costs of $0.3 million which are recorded in other noncurrent assets and are being amortized as additional interest expense over the term of the facility. As of September 30, 2011, we had no balance outstanding under this New Credit Facility. |
Segment Information (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | The following table presents information about our reportable segments, reconciled to consolidated totals:
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Comprehensive Income (Tables) | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Comprehensive Income [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income | Comprehensive (loss) income was as follows:
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Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Note 12: Segment Information Our operations are comprised of two reportable segments: Pharmaceutical Packaging Systems (“Packaging Systems”) and Pharmaceutical Delivery Systems (“Delivery Systems”). Packaging Systems consists of our core pharmaceutical packaging products for injectable drug delivery, including stoppers and seals for vials, closures and other components used in syringe, intravenous and blood collection systems, as well as laboratory and other services. Delivery Systems develops, manufactures and sells safety and administration systems, multi-component systems for drug administration, and a variety of custom contract-manufacturing solutions targeted to the healthcare and consumer-products industries. In addition, Delivery Systems is responsible for the continued development and commercialization of our line of proprietary, multi-component systems for injectable drug administration and other healthcare applications. Segment operating profit excludes general corporate costs, including stock-based compensation, adjustments to annual incentive plan expense for over- or under-attainment and certain pension and other retirement benefit costs. Also excluded are items that management considers not representative of ongoing operations, such as restructuring and related charges, certain asset impairments and other specifically identified gains and losses. The following table presents information about our reportable segments, reconciled to consolidated totals:
During the second quarter of 2011, we incurred $2.1 million in separation costs related to the retirement of our former President and Chief Operating Officer. These costs are included within other unallocated items and consist primarily of stock-based compensation expense. The respective equity compensation arrangements were amended to allow certain of his awards to continue to vest over the original vesting period instead of being forfeited upon separation, resulting in a revaluation of the awards and acceleration of expense. Also included within other unallocated items are restructuring and related costs, as well as other specifically identified gains and losses, which are discussed further in Note 2, Restructuring and Other Items. |
Income Taxes | 9 Months Ended |
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Sep. 30, 2011 | |
Income Taxes [Abstract] | |
Income Taxes | Note 3: Income Taxes The tax provision for interim periods is determined using the estimated annual effective consolidated tax rate, based on the current estimate of full-year earnings before taxes, adjusted for the impact of discrete quarterly items. Our effective tax rate increased to 30.0% and 25.7% for the three and nine months ended September 30, 2011, respectively, as compared to 21.3% and 23.6% for the same prior-year periods, respectively. The net increase in the effective tax rates for the three and nine months ended September 30, 2011 resulted from a combination of reclassifications of certain R&D credits and other tax items into pre-tax income due to changes in local tax laws, the impact of discrete tax items, and a change in the geographic mix of earnings. Discrete tax charges for the three and nine months ended September 30, 2011 were $0.7 million and $0.8 million, respectively, which primarily related to a change in the U.K. tax rate. Discrete tax benefits for the three months ended September 30, 2010 were $0.5 million, which primarily related to the resolution of tax contingencies relating to other periods. Discrete tax items incurred during the nine months ended September 30, 2010 did not have a significant impact on our effective tax rate. It is reasonably possible that, due to the expiration of statutes and the closing of audits during the next 12 months, the total amount of unrecognized tax benefits may be reduced by as much as $0.7 million, resulting in a favorable impact on the effective tax rate. Accrued interest related to unrecognized tax benefits was $0.5 million and $0.4 million at September 30, 2011 and December 31, 2010, respectively. Because we are a global organization, we and our subsidiaries file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. We are subject to examination in the U.S. Federal tax jurisdiction for tax years 2007 through 2010. We are also open for examination in various state and foreign jurisdictions for tax years 2005 through 2010. |
Comprehensive Income (Details) (USD $) In Millions | 3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Comprehensive Income [Abstract] | ||||
Net income | $ 16.9 | $ 17.8 | $ 56.7 | $ 59.3 |
Other comprehensive income (loss), net of tax: [Abstract] | ||||
Foreign currency translation adjustments | (25.1) | 37.3 | 6.4 | (9.3) |
Defined benefit pension and other postretirement plans | 1.6 | 0.2 | 2.1 | 2.2 |
Unrealized gains (losses) on derivatives: [Abstract] | ||||
Unrealized gains arising during the period | 0.3 | 0.2 | 0.4 | 1.1 |
Losses included in net income | (0.7) | (0.5) | (2.1) | (2.1) |
Net unrealized losses on derivatives | (0.4) | (0.3) | (1.7) | (1.0) |
Other comprehensive income (loss), net of tax | (23.9) | 37.2 | 6.8 | (8.1) |
Comprehensive income (loss) | $ (7.0) | $ 55.0 | $ 63.5 | $ 51.2 |
Comprehensive Income | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Comprehensive Income [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income | Note 9: Comprehensive (Loss) Income Comprehensive (loss) income was as follows:
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New Accounting Standards | 9 Months Ended |
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Sep. 30, 2011 | |
New Accounting Standards [Abstract] | |
New Accounting Standards | Note 14: New Accounting Standards Recently Adopted Standards In December 2010, the Financial Accounting Standards Board (“FASB”) issued amended guidance for business combinations. The update addresses diversity in the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations, and defines the periods for which pro forma information should be presented. This guidance was effective for us as of January 1, 2011 and will be applied prospectively to business combinations entered into on or after that date. In September 2009, the FASB issued revised guidance for multiple-deliverable revenue arrangements. The guidance requires companies to allocate revenue in these types of arrangements based on an element’s estimated selling price if vendor-specific or other third-party evidence is not available. This guidance also expands required disclosures. We adopted this guidance as of January 1, 2011, on a prospective basis. The adoption did not have a material impact on our financial statements. Standards Issued Not Yet Adopted In September 2011, the FASB issued guidance for the impairment testing of goodwill. The guidance permits an entity to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Management believes that the adoption will not have a material impact on our financial statements. In June 2011, the FASB issued guidance which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. This guidance eliminates the option to report components of other comprehensive income as part of the statement of equity. This guidance is effective for reporting periods beginning on or after December 15, 2011. Management believes the adoption will not have a material impact on our financial statements. In May 2011, the FASB issued guidance to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. It also changes certain fair value measurement principles and expands the disclosures for fair value measurements that are estimated using significant unobservable inputs. This guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. Management believes the adoption will not have a material impact on our financial statements. |
Stock-Based Compensation | 9 Months Ended |
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Sep. 30, 2011 | |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation | Note 10: Stock-Based Compensation In the first quarter of 2011, we granted 471,468 stock options at a weighted average exercise price of $40.85 per share based on the grant-date fair value of our stock to key employees under the 2007 Omnibus Incentive Compensation Plan (the “2007 Plan”). Stock options granted to employees vest in equal annual increments over four years of continuous service. All awards expire ten years from the date of grant. The weighted average grant date fair value of options granted was $8.76 per share as determined by the Black-Scholes option valuation model using the following weighted average assumptions: a risk-free interest rate of 2.16%; expected life of 5.5 years based on prior experience; stock volatility of 24.3% based on historical data; and a dividend yield of 1.7%. Stock option expense is recognized over the vesting period, net of forfeitures. In addition, during the first quarter of 2011, we granted 101,099 performance-vesting share (“PVS”) awards at a grant-date fair value of $40.85 per share to key employees under the 2007 Plan. Each PVS award entitles the holder to one share of our common stock if the annual growth rate of revenue and return on invested capital targets are achieved over a three-year performance period. The actual payout may vary from 0% to 200% of an employee’s targeted award. The fair value of PVS awards was based on the market price of our stock at the grant date and is recognized as an expense over the performance period, adjusted for estimated target outcomes and net of forfeitures. On May 3, 2011, the 2011 Omnibus Incentive Compensation Plan (the “2011 Plan”) was approved by our shareholders. All remaining shares available for issuance under the 2007 Plan were extinguished upon adoption of the 2011 Plan. Awards granted under previous plans remain outstanding until expiration or settlement. The 2011 Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards and performance awards to employees and non-employee directors. A committee of the Board of Directors determines the terms and conditions of awards to be granted. Vesting requirements vary by award. At inception, there were 4,800,000 shares of common stock available for issuance under the 2011 Plan. Stock options and stock appreciation rights reduce the number of shares available by one share for each award granted. All other awards that will be distributed in stock under the 2011 Plan will reduce the total number of shares available for grant by an amount equal to 2.35 times the number of shares awarded. If awards made under previous plans would entitle a plan participant to an amount of West stock in excess of the target amount, the additional shares (up to a maximum threshold amount) will be distributed under the 2011 Plan. At September 30, 2011, there were 4,738,318 shares remaining in the 2011 Plan. |
Inventories (Details) (USD $) In Millions | Sep. 30, 2011 | Dec. 31, 2010 |
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Inventories, net [Abstract] | ||
Finished goods | $ 68.9 | $ 65.1 |
Work in process | 21.7 | 21.4 |
Raw materials | 64.9 | 60.5 |
Total inventories | $ 155.5 | $ 147.0 |
Net Income Per Share | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Net income per share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share | Note 8: Net Income Per Share The following table reconciles net income and shares used in the calculation of basic net income per share to those used for diluted net income per share:
Options to purchase 1.7 million shares of our common stock for both of the three month periods ended September 30, 2011 and 2010 were not included in the computation of diluted net income per share because their impact would be antidilutive. There were 1.3 million and 1.1 million antidilutive options outstanding during the nine month periods ended September 30, 2011 and 2010, respectively. |
Summary of Significant Accounting Policies | 9 Months Ended |
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Sep. 30, 2011 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 1: Summary of Significant Accounting Policies Basis of Presentation: The condensed consolidated financial statements included in this report are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting and Securities and Exchange Commission (“SEC”) regulations. The year-end condensed consolidated balance sheet data was derived from audited financial statements. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, these financial statements include all adjustments which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, cash flows and the change in equity for the periods presented. The condensed consolidated financial statements for the three and nine month periods ended September 30, 2011 should be read in conjunction with the consolidated financial statements and notes thereto of West Pharmaceutical Services, Inc. (which may be referred to as “West”, “the Company”, “we”, “us” or “our”), appearing in our Annual Report on Form 10-K for the year ended December 31, 2010 (“2010 Annual Report”). The results of operations for any interim period are not necessarily indicative of results for the full year. |
Derivative Financial Instruments | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Note 4: Derivative Financial Instruments Our ongoing business operations expose us to various risks such as fluctuating interest rates, foreign exchange rates and increasing commodity prices. To manage these market risks, we periodically enter into derivative financial instruments such as interest rate swaps, options and foreign exchange contracts for periods consistent with and for notional amounts equal to or less than the related underlying exposures. We do not purchase or hold any derivative financial instruments for speculation or trading purposes. All derivatives are recorded on the balance sheet at fair value. Interest Rate Risk On February 25, 2011, we exercised an option to purchase our new corporate office and research building. Refer to Note 13, Commitments and Contingent Liabilities, for additional details. In conjunction with this, we anticipate that during the first quarter of 2013, we will borrow $43.0 million pursuant to a five-year term loan with a variable interest rate. In anticipation of this debt, we entered into a forward-start interest rate swap with the same notional amount in order to hedge the variability in cash flows due to changes in the applicable interest rate over the five-year period beginning January 2013. Under this swap, we will receive variable interest rate payments based on one-month London Interbank Offering Rates (“LIBOR”) plus a margin in return for making monthly fixed interest payments at 5.41%. We designated the forward-start interest rate swap as a cash flow hedge. As a result of our normal borrowing activities, we have entered into debt obligations with both fixed and variable interest rates. As of September 30, 2011, we have two interest rate swap agreements outstanding. Both swap agreements are designated as cash flow hedges to protect against volatility in the interest rates payable on our $50.0 million note maturing July 28, 2012 (“Series A Note”) and our $25.0 million note maturing July 28, 2015 (“Series B Note”). Under both of these swaps, we will receive variable interest rate payments based on three-month LIBOR in return for making quarterly fixed rate payments. Including the applicable margin, the interest rate swap agreements effectively fix the interest rates payable on the Series A and B notes at 5.32% and 5.51%, respectively. Foreign Exchange Rate Risk As described in more detail below, during 2011, we entered into several foreign currency hedge contracts that were designated as cash flow hedges of forecasted transactions denominated in foreign currencies. We entered into a series of foreign currency contracts intended to hedge the currency risk associated with a portion of our forecasted Japanese Yen (“JPY”) denominated purchases of inventory from Daikyo Seiko Ltd. made by certain European subsidiaries. As of September 30, 2011, there were three monthly contracts outstanding at ¥95.0 million each, for an aggregate notional amount of ¥285.0 million (approximately $3.7 million). We have also entered into a series of foreign currency contracts to hedge the currency risk associated with a portion of our forecasted U.S. dollar (“USD”) denominated inventory purchases by certain European subsidiaries. As of September 30, 2011, there were three monthly contracts outstanding at $0.8 million each, for an aggregate notional amount of $2.4 million. In addition, we entered into a series of foreign currency contracts to hedge the currency risk associated with a portion of our forecasted Euro-denominated sales of finished goods by one of our USD functional-currency subsidiaries. As of September 30, 2011, there were three monthly contracts outstanding at $1.2 million each, for an aggregate notional amount of $3.6 million. As of September 30, 2011 and December 31, 2010, a portion of our long-term debt consisted of borrowings denominated in currencies other than the U.S. dollar. We designated our €81.5 million Euro-denominated notes as a hedge of our net investment in certain European subsidiaries. A cumulative foreign currency translation loss of $10.7 million pre-tax ($6.6 million after tax) on this debt was recorded within accumulated other comprehensive loss as of September 30, 2011. We have also designated our 1.0 billion Yen-denominated note payable as a hedge of our net investment in a Japanese affiliate. At September 30, 2011, there was a cumulative foreign currency translation loss on this Yen-denominated debt of $2.2 million pre-tax ($1.4 million after tax) which was also included within accumulated other comprehensive loss. Commodity Price Risk Many of our Packaging Systems products are made from synthetic elastomers, which are derived from the petroleum refining process. We purchase the majority of our elastomers via long-term supply contracts, some of which contain clauses that provide for surcharges related to fluctuations in crude oil prices. We entered into the following economic hedges that did not qualify for hedge accounting treatment since they did not meet the highly effective requirement at inception. In January 2011, we purchased a series of call options for a total of 77,900 barrels of crude oil, intended to mitigate our exposure to such oil-based surcharges and protect operating cash flows with regard to a portion of our forecasted elastomer purchases during the months of May through November 2011. With these option contracts, we may benefit from a decline in crude oil prices, as there is no downward exposure other than the $0.5 million premium that we paid to purchase the contracts. During the three and nine month periods ended September 30, 2011, a loss of $0.1 million and a gain of $0.6 million, respectively, was recorded in cost of goods and services sold related to these outstanding call options. During the nine months ended September 30, 2010, a loss of $0.3 million related to crude-oil options was recorded in cost of goods and services sold. Effects of Derivative Instruments on Financial Position and Results of Operations Refer to Note 5, Fair Value Measurements, for the balance sheet location and fair values of our derivative instruments as of September 30, 2011 and December 31, 2010. The following tables summarize the effects of derivative instruments designated as hedges on other comprehensive income (“OCI”) and earnings:
For the three and nine month periods ended September 30, 2011 and 2010, there was no ineffectiveness related to our cash flow and net investment hedges. |
Fair Value of Financial Instruments | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Note 5: Fair Value Measurements We define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy classifies the inputs to valuation techniques used to measure fair value into one of three levels:
The following tables present the assets and liabilities that are measured at fair value on a recurring basis in our balance sheets:
Short-term investments, which are comprised of certificates of deposit and mutual funds, are included within other current assets and are valued using a market approach based on quoted market prices in an active market. Deferred compensation assets are included within other current assets and are also valued using a market approach based on quoted market prices in an active market. The fair value of deferred compensation liabilities is based on quoted prices of the underlying employees' investment selections and is included within other long-term liabilities. Commodity contracts are included within other current assets and are valued using an income approach. The fair value of our foreign currency contracts is included within other current assets and is valued using an income approach based on quoted forward foreign exchange rates and spot rates at the reporting date. Interest rate swaps are valued using a discounted cash flow analysis based on the terms of the contract and observable market inputs (i.e. LIBOR, Eurodollar forward rates and swap spreads. Refer to Note 4, Derivative Financial Instruments, for further discussion of our derivatives. The fair value of the contingent consideration was determined using a probability-weighted income approach at the acquisition date and is revalued at each reporting date or more frequently if circumstances dictate. Changes in the fair value of these obligations are recorded as income or expense within restructuring and other items in our consolidated statements of income. The fair value measurement is based on significant inputs not observable in the market, which are referred to as Level 3 inputs. The following table provides a summary of changes in our Level 3 fair value measurements:
Refer to Note 2, Restructuring and Other Items, for further discussion of acquisition-related contingencies. Other Financial Instruments Cash and cash equivalents, accounts receivable and short-term debt are held at carrying amounts that approximate fair value due to their near-term maturities. Quoted market prices are used to estimate the fair value of publicly traded long-term debt. Debt that is not quoted on an exchange is valued using a discounted cash flow method based on interest rates that are currently available to us for debt issuances with similar terms and maturities. At September 30, 2011, the estimated fair value of long-term debt was $302.7 million compared to a carrying amount of $323.3 million. At December 31, 2010, the estimated fair value of long-term debt was $344.2 million and the carrying amount was $358.1 million. |
Revolving Credit Facility (Details) (Revolving Credit50 Million Facility [Member], USD $) In Millions, unless otherwise specified | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Revolving Credit50 Million Facility [Member] | |
Line of Credit Facility [Line Items] | |
Initiation date | June 2011 |
Amount of revolving credit facility | $ 50.0 |
Credit facility conversion description | On the date of acquisition, the revolving loan balance will be converted to a five-year term loan |
Variable rate basis | one-month LIBOR |
Spread on variable rate (in hundredths) | 1.50% |
Credit agreement requirements | total leverage ratio no greater than 3.50 to 1.00 and an interest coverage ratio greater than or equal to 2.50 to 1.00 |
Debt issuance costs | 0.3 |
Amount outstanding | $ 0 |
Derivative Financial Instruments (Details) In Millions, unless otherwise specified | 3 Months Ended | 9 Months Ended | 1 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||||||||||||||||||||
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Sep. 30, 2011
USD ($) | Sep. 30, 2010
USD ($) | Sep. 30, 2011
USD ($) | Sep. 30, 2010
USD ($) | Sep. 30, 2011
Forward-Start Interest Rate Swap [Member]
USD ($) | Sep. 30, 2011
Interest Rate Swap, Series A Note [Member]
USD ($) | Sep. 30, 2011
Interest Rate Swap, Series B Note [Member]
USD ($) | Sep. 30, 2011
Foreign Currency Hedge, Inventory Purchases, Yen [Member]
USD ($) | Sep. 30, 2011
Foreign Currency Hedge, Inventory Purchases, Yen [Member]
JPY (¥) | Sep. 30, 2011
Foreign Currency Hedge, Euro-Denominated Sales [Member]
USD ($) | Sep. 30, 2011
Foreign Currency Hedge, Inventory Purchases, Dollars
USD ($) | Sep. 30, 2011
Euro-Denominated Note [Member]
USD ($) | Sep. 30, 2011
Euro-Denominated Note [Member]
EUR (€) | Sep. 30, 2011
Yen-Denominated Note [Member]
USD ($) | Sep. 30, 2011
Yen-Denominated Note [Member]
JPY (¥) | Jan. 31, 2011
Commodity Call Options [Member]
USD ($) | Sep. 30, 2011
Commodity Call Options [Member]
USD ($) | Sep. 30, 2011
Commodity Call Options [Member]
USD ($) | Sep. 30, 2010
Commodity Call Options [Member]
USD ($) | Sep. 30, 2011
Cash Flow Hedges [Member]
USD ($) | Sep. 30, 2010
Cash Flow Hedges [Member]
USD ($) | Sep. 30, 2011
Cash Flow Hedges [Member]
USD ($) | Sep. 30, 2010
Cash Flow Hedges [Member]
USD ($) | Sep. 30, 2011
Cash Flow Hedges [Member]
Foreign Currency Hedge Contracts [Member]
Net Sales [Member]
USD ($) | Sep. 30, 2010
Cash Flow Hedges [Member]
Foreign Currency Hedge Contracts [Member]
Net Sales [Member]
USD ($) | Sep. 30, 2011
Cash Flow Hedges [Member]
Foreign Currency Hedge Contracts [Member]
Net Sales [Member]
USD ($) | Sep. 30, 2010
Cash Flow Hedges [Member]
Foreign Currency Hedge Contracts [Member]
Net Sales [Member]
USD ($) | Sep. 30, 2011
Cash Flow Hedges [Member]
Foreign Currency Hedge Contracts [Member]
Cost of Goods and Services Sold [Member]
USD ($) | Sep. 30, 2010
Cash Flow Hedges [Member]
Foreign Currency Hedge Contracts [Member]
Cost of Goods and Services Sold [Member]
USD ($) | Sep. 30, 2011
Cash Flow Hedges [Member]
Foreign Currency Hedge Contracts [Member]
Cost of Goods and Services Sold [Member]
USD ($) | Sep. 30, 2010
Cash Flow Hedges [Member]
Foreign Currency Hedge Contracts [Member]
Cost of Goods and Services Sold [Member]
USD ($) | Sep. 30, 2011
Cash Flow Hedges [Member]
Interest Rate Swap Contracts [Member]
Interest Expense [Member]
USD ($) | Sep. 30, 2010
Cash Flow Hedges [Member]
Interest Rate Swap Contracts [Member]
Interest Expense [Member]
USD ($) | Sep. 30, 2011
Cash Flow Hedges [Member]
Interest Rate Swap Contracts [Member]
Interest Expense [Member]
USD ($) | Sep. 30, 2010
Cash Flow Hedges [Member]
Interest Rate Swap Contracts [Member]
Interest Expense [Member]
USD ($) | Sep. 30, 2011
Net Investment Hedges [Member]
USD ($) | Sep. 30, 2010
Net Investment Hedges [Member]
USD ($) | Sep. 30, 2011
Net Investment Hedges [Member]
USD ($) | Sep. 30, 2010
Net Investment Hedges [Member]
USD ($) | Sep. 30, 2011
Net Investment Hedges [Member]
Foreign Currency - Denominated Debt [Member]
Foreign Exchange (Gains) Losses and Other [Member]
USD ($) | Sep. 30, 2010
Net Investment Hedges [Member]
Foreign Currency - Denominated Debt [Member]
Foreign Exchange (Gains) Losses and Other [Member]
USD ($) | Sep. 30, 2011
Net Investment Hedges [Member]
Foreign Currency - Denominated Debt [Member]
Foreign Exchange (Gains) Losses and Other [Member]
USD ($) | Sep. 30, 2010
Net Investment Hedges [Member]
Foreign Currency - Denominated Debt [Member]
Foreign Exchange (Gains) Losses and Other [Member]
USD ($) | |
Derivative Financial Instruments [Line Items] | |||||||||||||||||||||||||||||||||||||||||||
Amount of hedged item | $ 43.0 | $ 50.0 | $ 25.0 | ||||||||||||||||||||||||||||||||||||||||
Fixed interest rate | 5.41% | 5.32% | 5.51% | ||||||||||||||||||||||||||||||||||||||||
Variable rate basis | one-month LIBOR | three-month LIBOR | three-month LIBOR | ||||||||||||||||||||||||||||||||||||||||
Maximum term (in years) | Five | ||||||||||||||||||||||||||||||||||||||||||
Maturity date of debt | Jul. 28, 2012 | Jul. 28, 2015 | |||||||||||||||||||||||||||||||||||||||||
Number of monthly contracts remaining | 3 | 3 | 3 | 3 | |||||||||||||||||||||||||||||||||||||||
Notional amount | 95.0 | 1.2 | 0.8 | ||||||||||||||||||||||||||||||||||||||||
Aggregate notional amount of remaining contracts | 3.7 | 285.0 | 3.6 | 2.4 | |||||||||||||||||||||||||||||||||||||||
Notional amount, nonderivative instruments | 81.5 | 1,000.0 | |||||||||||||||||||||||||||||||||||||||||
Cumulative foreign currency translation loss, pre-tax | 10.7 | 2.2 | |||||||||||||||||||||||||||||||||||||||||
Cumulative foreign currency translation loss, net of tax | 6.6 | 1.4 | |||||||||||||||||||||||||||||||||||||||||
Purchased call options, barrels of crude oil (in barrels) | 77,900 | ||||||||||||||||||||||||||||||||||||||||||
Premium paid to purchase call options | 0.5 | ||||||||||||||||||||||||||||||||||||||||||
Gain (loss) recorded in cost of goods and services sold, call options | (0.1) | 0.6 | (0.3) | ||||||||||||||||||||||||||||||||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||
Amount of Gain (Loss) Recognized in OCI | 0.3 | 0.2 | 0.4 | 1.1 | 0.2 | 0 | (0.3) | 0 | 0.7 | (0.2) | 0.2 | (0.1) | (0.6) | 0.4 | 0.5 | 1.2 | 3.6 | (7.7) | (2.2) | 2.5 | 3.6 | (7.7) | (2.2) | 2.5 | |||||||||||||||||||
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income | (0.7) | (0.5) | (2.1) | (2.1) | 0.1 | 0 | 0.3 | 0 | 0 | 0.3 | 0 | 0.3 | (0.8) | (0.8) | (2.4) | (2.4) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||
Ineffectiveness, cash flow hedges | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
Ineffectiveness, net investment hedges | $ 0 | $ 0 | $ 0 | $ 0 |
Commitments and Contingent Liabilities | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Commitments and Contingent Liabilities [Abstract] | |
Commitments and Contingent Liabilities | Note 13: Commitments and Contingent Liabilities From time to time, we are involved in product liability matters and other legal proceedings and claims generally incidental to our normal business activities. We accrue for loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. While the outcome of current proceedings cannot be accurately predicted, we believe their ultimate resolution should not have a material adverse effect on our business or financial position. Except as discussed below, there have been no significant changes to the commitments and contingent liabilities included in our 2010 Annual Report. The construction of our new corporate office and research building, which will replace our existing corporate office lease, commenced in the first quarter of 2011 and is expected to be completed by the end of 2012. The majority of the building will be constructed under our agreement with a real estate development company. Amounts incurred under this agreement will be accrued to property, plant and equipment and other long-term liabilities until they are paid at settlement, which is expected to occur by the first quarter of 2013. We expect to incur total construction and development costs related to this construction of approximately $66.0 million. |
Inventories | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Note 6: Inventories Inventories are valued at the lower of standard cost (which approximates actual cost on a first-in-first-out basis) or market. Inventory balances were as follows:
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Derivative Financial Instruments (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effects of Derivative Instruments on Other Comprehensive Income ('OCI') and earnings | The following tables summarize the effects of derivative instruments designated as hedges on other comprehensive income ("OCI") and earnings:
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Commitments and Contingent Liabilities (Details) (USD $) In Millions | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Commitments and Contingent Liabilities [Abstract] | |
Expected costs to construct new facility | $ 66.0 |
Income Taxes (Details) (USD $) In Millions, unless otherwise specified | 3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | Dec. 31, 2010 | |
Income Taxes [Abstract] | |||||
Effective tax rate (in hundredths) | 30.00% | 21.30% | 25.70% | 23.60% | |
Discrete tax charge | $ 0.7 | $ (0.5) | $ 0.8 | ||
Estimated reduction of unrecognized tax benefits | 0.7 | 0.7 | |||
Accrued interest | $ 0.5 | $ 0.5 | $ 0.4 |
Fair Value of Financial Instruments (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured at fair value on a recurring basis | The following tables present the assets and liabilities that are measured at fair value on a recurring basis in our balance sheets:
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Summary of changes in Level 3 fair value measurements | The following table provides a summary of changes in our Level 3 fair value measurements:
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Net Income Per Share (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Net income per share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income and shares used in basic and diluted net income per share | The following table reconciles net income and shares used in the calculation of basic net income per share to those used for diluted net income per share:
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Restructuring and Other Items | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Restructuring and Other Items [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Other Items | Note 2: Restructuring and Other Items Restructuring and other items consisted of:
Restructuring and Related Charges In December 2010, our Board of Directors approved a restructuring plan designed to reduce our cost structure and improve operating efficiency. The plan involves the 2011 closure of a plant in the United States, a longer-term reduction in operations at a manufacturing facility in England, and the elimination of certain operational and administrative positions at various other locations. Under this plan, we expect to incur total restructuring and related charges of approximately $22.0 million to $24.0 million through the end of 2012, which consist of $15.0 million to $17.0 million in cash expenditures for severance and costs associated with the plant closure and fixed asset relocation, and approximately $7.0 million in non-cash asset impairment and disposal charges. We incurred $14.5 million of restructuring and related charges, as part of this plan, in December 2010 and $4.3 million during the nine months ended September 30, 2011. We currently expect to incur additional charges of approximately $3.0 million during the fourth quarter of 2011, and the remaining charges during 2012. During the nine months ended September 30, 2010, we incurred $1.2 million in restructuring and related charges in connection with the 2009 restructuring program, which was completed in 2010. The following table presents activity related to our restructuring obligations during the nine months ended September 30, 2011:
During the third quarter of 2011, as a result of the closure of a plant in the United States, we recorded a $0.2 million net curtailment gain related to our U.S. qualified and postretirement medical plans. Other Items During the three and nine months ended September 30, 2011, we increased the liability for contingent consideration related to our 2010 acquisition of technology used in our SmartDose™ electronic patch injector system by $0.2 million and $0.3 million, respectively. During the nine months ended September 30, 2011, we also reduced the liability for contingent consideration related to our July 2009 eris™ safety syringe system acquisition by $0.8 million. Subsequent to this reduction, and as of September 30, 2011, the liability balance for the eris™ safety syringe system acquisition is zero, which reflects our assessment that none of the contractual operating targets will be achieved over the earnout period, which ends in 2014. |
Benefit Plans | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Benefit Plans [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Plans | Note 11: Benefit Plans The components of net periodic benefit cost for the three months ended September 30 were as follows ($ in millions):
The components of net periodic benefit cost for the nine months ended September 30 were as follows ($ in millions):
During the third quarter of 2011, as a result of the closure of a plant in the United States, we recorded a $0.2 million net curtailment gain in restructuring and other items related to our U.S. qualified and postretirement medical plans. Refer to Note 2, Restructuring and Other Items, for additional details regarding the 2010 restructuring program. |
Net Income Per Share (Details) (USD $) In Millions | 3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Net income per share | ||||
Net income, as reported, for basic net income per share | $ 16.9 | $ 17.8 | $ 56.7 | $ 59.3 |
Plus: interest expense on convertible debt, net of tax | 1.1 | 1.1 | 3.2 | 3.2 |
Net income for diluted net income per share | $ 18.0 | $ 18.9 | $ 59.9 | $ 62.5 |
Weighted average common shares outstanding | 33.8 | 33.4 | 33.6 | 33.3 |
Assumed stock options exercised and awards vested, based on the treasury stock method | 0.3 | 0.4 | 0.5 | 0.5 |
Assumed conversion of convertible debt, based on the if-converted method | 2.9 | 2.9 | 2.9 | 2.9 |
Weighted average shares assuming dilution | 37.0 | 36.7 | 37.0 | 36.7 |
Antidilutive options excluded from computation of diluted net income per share | 1.7 | 1.7 | 1.3 | 1.1 |
Restructuring and Other Items (Tables) | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Restructuring and Other Items [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of restructuring and other items | Restructuring and other items consisted of:
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Rollforward of restructuring obligations | The following table presents activity related to our restructuring obligations during the nine months ended September 30, 2011:
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (USD $) In Millions, except Per Share data | 3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Consolidated Statement of Income [Abstract] | ||||
Net sales | $ 293.6 | $ 271.4 | $ 896.9 | $ 827.9 |
Cost of goods and services sold | 212.2 | 196.7 | 642.9 | 587.8 |
Gross profit | 81.4 | 74.7 | 254.0 | 240.1 |
Research and development | 7.7 | 5.9 | 21.9 | 17.0 |
Selling, general and administrative expenses | 45.7 | 44.9 | 144.8 | 137.2 |
Restructuring and other items (Note 2) | 1.9 | (1.4) | 4.7 | 1.1 |
Operating profit | 26.1 | 25.3 | 82.6 | 84.8 |
Interest expense | 4.5 | 4.2 | 13.8 | 12.1 |
Interest income | (0.4) | (0.1) | (0.9) | (0.3) |
Income before income taxes | 22.0 | 21.2 | 69.7 | 73.0 |
Income tax expense | 6.6 | 4.5 | 17.9 | 17.3 |
Equity in net income of affiliated companies | 1.5 | 1.1 | 4.9 | 3.6 |
Net income | $ 16.9 | $ 17.8 | $ 56.7 | $ 59.3 |
Net income per share | ||||
Basic | $ 0.50 | $ 0.53 | $ 1.69 | $ 1.78 |
Diluted | $ 0.49 | $ 0.51 | $ 1.62 | $ 1.70 |
Weighted average shares outstanding: | ||||
Basic | 33.8 | 33.4 | 33.6 | 33.3 |
Diluted | 37.0 | 36.7 | 37.0 | 36.7 |
Dividends declared per share | $ 0.00 | $ 0.00 | $ 0.34 | $ 0.32 |