UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
FORM 10-Q |
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
WEST PHARMACEUTICAL SERVICES, INC. (Exact name of registrant as specified in its charter) |
Pennsylvania | 23-1210010 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
530 Herman O. West Drive, Exton, PA | 19341-0645 |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | þ | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | o |
Page | ||
FINANCIAL STATEMENTS (UNAUDITED) | ||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||
CONTROLS AND PROCEDURES | ||
LEGAL PROCEEDINGS | ||
RISK FACTORS | ||
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | ||
EXHIBITS | ||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net sales | $ | 344.5 | $ | 324.8 | $ | 683.9 | $ | 641.1 | |||||||
Cost of goods and services sold | 233.6 | 226.1 | 461.3 | 441.3 | |||||||||||
Gross profit | 110.9 | 98.7 | 222.6 | 199.8 | |||||||||||
Research and development | 9.5 | 8.2 | 18.6 | 16.5 | |||||||||||
Selling, general and administrative expenses | 59.7 | 54.4 | 118.7 | 105.7 | |||||||||||
Restructuring and other items (Note 2) | (0.8 | ) | 0.5 | (0.6 | ) | 0.3 | |||||||||
Operating profit | 42.5 | 35.6 | 85.9 | 77.3 | |||||||||||
Loss on debt extinguishment | — | 11.6 | 0.2 | 11.6 | |||||||||||
Interest expense | 4.1 | 4.6 | 8.7 | 8.8 | |||||||||||
Interest income | 0.4 | 0.6 | 1.0 | 1.0 | |||||||||||
Income before income taxes | 38.8 | 20.0 | 78.0 | 57.9 | |||||||||||
Income tax expense | 10.3 | 6.5 | 18.9 | 16.4 | |||||||||||
Equity in net income of affiliated companies | 1.7 | 2.1 | 2.8 | 3.3 | |||||||||||
Net income | $ | 30.2 | $ | 15.6 | $ | 61.9 | $ | 44.8 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.87 | $ | 0.46 | $ | 1.79 | $ | 1.32 | |||||||
Diluted | $ | 0.86 | $ | 0.45 | $ | 1.76 | $ | 1.27 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 34.7 | 34.0 | 34.6 | 33.9 | |||||||||||
Diluted | 35.4 | 36.6 | 35.3 | 36.9 | |||||||||||
Dividends declared per share | $ | 0.19 | $ | 0.18 | $ | 0.38 | $ | 0.36 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income | $ | 30.2 | $ | 15.6 | $ | 61.9 | $ | 44.8 | |||||||
Other comprehensive (loss) income, net of tax: | |||||||||||||||
Foreign currency translation adjustments | (0.8 | ) | (29.4 | ) | (19.1 | ) | (17.2 | ) | |||||||
Defined benefit pension and other postretirement plan adjustments, net of tax of $0.7, $0.8, $1.8 and $1.4, respectively | 1.1 | 1.5 | 3.2 | 2.3 | |||||||||||
Net gains (losses) on derivatives, net of tax of $0.5, $(1.5), $0.1 and $(1.5), respectively | 0.7 | (2.4 | ) | 0.4 | (2.4 | ) | |||||||||
Other comprehensive income (loss), net of tax | 1.0 | (30.3 | ) | (15.5 | ) | (17.3 | ) | ||||||||
Comprehensive income (loss) | $ | 31.2 | $ | (14.7 | ) | $ | 46.4 | $ | 27.5 |
June 30, 2013 | December 31, 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 190.6 | $ | 161.9 | |||
Short-term investments | 7.5 | 12.4 | |||||
Accounts receivable, net | 195.3 | 175.0 | |||||
Inventories | 176.5 | 162.2 | |||||
Deferred income taxes | 9.6 | 7.7 | |||||
Other current assets | 33.8 | 38.1 | |||||
Total current assets | 613.3 | 557.3 | |||||
Property, plant and equipment | 1,289.1 | 1,274.8 | |||||
Less accumulated depreciation and amortization | 625.7 | 605.8 | |||||
Property, plant and equipment, net | 663.4 | 669.0 | |||||
Investments in affiliated companies | 58.0 | 59.8 | |||||
Goodwill | 111.7 | 112.5 | |||||
Deferred income taxes | 92.0 | 90.3 | |||||
Intangible assets, net | 49.1 | 50.6 | |||||
Other noncurrent assets | 25.2 | 24.5 | |||||
Total Assets | $ | 1,612.7 | $ | 1,564.0 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Notes payable and other current debt | $ | 0.1 | $ | 32.7 | |||
Accounts payable | 88.4 | 102.9 | |||||
Pension and other postretirement benefits | 2.9 | 2.8 | |||||
Accrued salaries, wages and benefits | 50.0 | 56.5 | |||||
Income taxes payable | 24.2 | 15.6 | |||||
Taxes other than income | 8.0 | 7.8 | |||||
Other current liabilities | 45.1 | 43.5 | |||||
Total current liabilities | 218.7 | 261.8 | |||||
Long-term debt | 394.7 | 378.8 | |||||
Deferred income taxes | 19.3 | 20.8 | |||||
Pension and other postretirement benefits | 138.0 | 135.4 | |||||
Other long-term liabilities | 57.8 | 38.3 | |||||
Total Liabilities | 828.5 | 835.1 | |||||
Commitments and contingencies (Note 13) | |||||||
Total Equity | 784.2 | 728.9 | |||||
Total Liabilities and Equity | $ | 1,612.7 | $ | 1,564.0 |
Common Shares Issued | Common Stock | Capital in Excess of Par Value | Treasury Stock | Retained earnings | Accumulated other comprehensive loss | Total | ||||||||||||||||||||
Balance, December 31, 2012 | 34.4 | $ | 8.6 | $ | 79.3 | $ | (3.0 | ) | $ | 719.9 | $ | (75.9 | ) | $ | 728.9 | |||||||||||
Net income | 61.9 | 61.9 | ||||||||||||||||||||||||
Stock-based compensation | 6.0 | 6.0 | ||||||||||||||||||||||||
Shares issued under stock plans | 0.5 | 0.1 | 14.1 | (0.7 | ) | 13.5 | ||||||||||||||||||||
Shares repurchased for employee tax withholdings | (0.1 | ) | (5.2 | ) | (5.2 | ) | ||||||||||||||||||||
Excess tax benefit from employee stock plans | 1.1 | 1.1 | ||||||||||||||||||||||||
Dividends declared | (6.5 | ) | (6.5 | ) | ||||||||||||||||||||||
Other comprehensive loss, net of tax | (15.5 | ) | (15.5 | ) | ||||||||||||||||||||||
Balance, June 30, 2013 | 34.8 | $ | 8.7 | $ | 95.3 | $ | (3.7 | ) | $ | 775.3 | $ | (91.4 | ) | $ | 784.2 |
Six Months Ended June 30, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 61.9 | $ | 44.8 | |||
Depreciation | 39.1 | 35.2 | |||||
Amortization | 2.1 | 2.2 | |||||
Loss on debt extinguishment | 0.2 | 11.6 | |||||
Asset impairment charges | — | 3.8 | |||||
Other non-cash items, net | 7.7 | 4.7 | |||||
Changes in assets and liabilities | (12.6 | ) | (36.3 | ) | |||
Net cash provided by operating activities | 98.4 | 66.0 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (83.8 | ) | (69.4 | ) | |||
Purchases of short-term investments | (8.8 | ) | (26.0 | ) | |||
Sales and maturities of short-term investments | 13.7 | 27.3 | |||||
Other, net | (3.0 | ) | 0.3 | ||||
Net cash used in investing activities | (81.9 | ) | (67.8 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings under revolving credit agreements, net | 6.7 | 198.6 | |||||
Repayments of long-term debt | (29.3 | ) | (165.7 | ) | |||
Issuance of long-term debt | 43.3 | — | |||||
Debt issuance costs | — | (6.2 | ) | ||||
Dividend payments | (13.1 | ) | (12.2 | ) | |||
Excess tax benefit from employee stock plans | 1.1 | 2.1 | |||||
Shares repurchased for employee tax withholdings | (5.2 | ) | (2.2 | ) | |||
Proceeds from stock option exercises | 10.7 | 2.9 | |||||
Employee stock purchase plan contributions | 1.1 | 1.1 | |||||
Net cash provided by financing activities | 15.3 | 18.4 | |||||
Effect of exchange rates on cash | (3.1 | ) | (1.4 | ) | |||
Net increase in cash and cash equivalents | 28.7 | 15.2 | |||||
Cash, including cash equivalents at beginning of period | 161.9 | 91.8 | |||||
Cash, including cash equivalents at end of period | $ | 190.6 | $ | 107.0 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Restructuring and related charges (reversals): | |||||||||||||||
Severance and post-employment benefits | $ | — | $ | (0.2 | ) | $ | — | $ | (0.2 | ) | |||||
Impairments and asset write-offs | — | 0.3 | — | 0.4 | |||||||||||
Other restructuring charges | — | 0.2 | — | 0.5 | |||||||||||
Total restructuring and related charges | — | 0.3 | — | 0.7 | |||||||||||
Impairment charge | — | 3.4 | — | 3.4 | |||||||||||
Development income | (0.5 | ) | (3.8 | ) | (0.8 | ) | (3.8 | ) | |||||||
Acquisition-related contingencies | 0.2 | 0.2 | 0.2 | 0.4 | |||||||||||
Foreign exchange and other | (0.5 | ) | 0.4 | — | (0.4 | ) | |||||||||
Total restructuring and other items | $ | (0.8 | ) | $ | 0.5 | $ | (0.6 | ) | $ | 0.3 |
($ in millions) | Severance and benefits | ||
Balance, December 31, 2012 | $ | 2.8 | |
Cash payments | (2.6 | ) | |
Balance, June 30, 2013 | $ | 0.2 |
Amount of Gain (Loss) Recognized in OCI for | Amount of Loss Reclassified from Accumulated OCI into Income for | Location of Loss Reclassified from Accumulated OCI into Income | |||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Cash Flow Hedges: | |||||||||||||||||
Foreign currency hedge contracts | $ | (0.1 | ) | $ | — | $ | — | $ | — | Net sales | |||||||
Foreign currency hedge contracts | (1.0 | ) | 0.6 | 0.9 | — | Cost of goods and services sold | |||||||||||
Interest rate swap contracts | 0.4 | (1.0 | ) | 0.4 | 0.8 | Interest expense | |||||||||||
Forward treasury locks | — | (2.8 | ) | 0.1 | — | Interest expense | |||||||||||
Total | $ | (0.7 | ) | $ | (3.2 | ) | $ | 1.4 | $ | 0.8 | |||||||
Net Investment Hedges: | |||||||||||||||||
Foreign currency-denominated debt | $ | (1.0 | ) | $ | 4.1 | $ | — | $ | — | Foreign exchange and other | |||||||
Total | $ | (1.0 | ) | $ | 4.1 | $ | — | $ | — |
Amount of Gain (Loss) Recognized in OCI for | Amount of Loss Reclassified from Accumulated OCI into Income for | Location of Loss Reclassified from Accumulated OCI into Income | |||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Cash Flow Hedges: | |||||||||||||||||
Foreign currency hedge contracts | $ | 0.2 | $ | — | $ | — | $ | — | Net sales | ||||||||
Foreign currency hedge contracts | (2.7 | ) | 0.3 | 1.5 | — | Cost of goods and services sold | |||||||||||
Interest rate swap contracts | 0.5 | (1.4 | ) | 0.8 | 1.5 | Interest expense | |||||||||||
Forward treasury locks | — | (2.8 | ) | 0.1 | — | Interest expense | |||||||||||
Total | $ | (2.0 | ) | $ | (3.9 | ) | $ | 2.4 | $ | 1.5 | |||||||
Net Investment Hedges: | |||||||||||||||||
Foreign currency-denominated debt | $ | 1.4 | $ | 2.4 | $ | — | $ | — | Foreign exchange and other | ||||||||
Total | $ | 1.4 | $ | 2.4 | $ | — | $ | — |
• | Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. |
• | 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. |
• | Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. |
Balance at | Basis of Fair Value Measurements | ||||||||||||||
($ in millions) | June 30, 2013 | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Short-term investments | $ | 7.5 | $ | 7.5 | $ | — | $ | — | |||||||
Deferred compensation assets | 4.8 | 4.8 | — | — | |||||||||||
$ | 12.3 | $ | 12.3 | $ | — | $ | — | ||||||||
Liabilities: | |||||||||||||||
Contingent consideration | $ | 3.5 | $ | — | $ | — | $ | 3.5 | |||||||
Deferred compensation liabilities | 9.8 | 9.8 | — | — | |||||||||||
Interest rate swap contracts | 6.6 | — | 6.6 | — | |||||||||||
Foreign currency contracts | 3.2 | — | 3.2 | — | |||||||||||
Long-term debt | 400.1 | — | 400.1 | — | |||||||||||
$ | 423.2 | $ | 9.8 | $ | 409.9 | $ | 3.5 |
Balance at | Basis of Fair Value Measurements | ||||||||||||||
($ in millions) | December 31, 2012 | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Short-term investments | $ | 12.4 | $ | 12.4 | $ | — | $ | — | |||||||
Deferred compensation assets | 4.0 | 4.0 | — | — | |||||||||||
$ | 16.4 | $ | 16.4 | $ | — | $ | — | ||||||||
Liabilities: | |||||||||||||||
Contingent consideration | $ | 3.3 | $ | — | $ | — | $ | 3.3 | |||||||
Deferred compensation liabilities | 7.6 | 7.6 | — | — | |||||||||||
Interest rate swap contracts | 8.6 | — | 8.6 | — | |||||||||||
Foreign currency contracts | 1.4 | — | 1.4 | — | |||||||||||
Long-term debt | 386.0 | — | 386.0 | — | |||||||||||
$ | 406.9 | $ | 7.6 | $ | 396.0 | $ | 3.3 |
Six Months Ended June 30, | |||||||
2013 | 2012 | ||||||
Beginning Balance | $ | 3.3 | $ | 2.1 | |||
Increase in fair value recorded in earnings | 0.2 | 0.4 | |||||
Ending Balance | $ | 3.5 | $ | 2.5 |
($ in millions) | June 30, 2013 | December 31, 2012 | |||||
Finished goods | $ | 75.5 | $ | 70.9 | |||
Work in process | 28.8 | 23.6 | |||||
Raw materials | 72.2 | 67.7 | |||||
$ | 176.5 | $ | 162.2 |
($ in millions) | June 30, 2013 | December 31, 2012 | |||||
Euro note A, due 2013 | $ | — | $ | 26.9 | |||
Term loan, due 2014 | 0.2 | 0.2 | |||||
Series B floating rate notes, due 2015 | 25.0 | 25.0 | |||||
Euro note B, due 2016 | 79.6 | 80.8 | |||||
Capital leases, due through 2016 | 0.5 | 0.7 | |||||
Revolving credit facility, due 2017 | 77.5 | 71.5 | |||||
Term loan, due 2018 | 42.2 | 35.3 | |||||
Note payable, due 2019 | 0.4 | — | |||||
Series A notes, due 2022 | 42.0 | 42.0 | |||||
Series B notes, due 2024 | 53.0 | 53.0 | |||||
Series C notes, due 2027 | 73.0 | 73.0 | |||||
Convertible debt, due 2047 | 1.4 | 3.1 | |||||
394.8 | 411.5 | ||||||
Less: current portion of long-term debt | 0.1 | 32.7 | |||||
$ | 394.7 | $ | 378.8 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net income, as reported, for basic net income per share | $ | 30.2 | $ | 15.6 | $ | 61.9 | $ | 44.8 | |||||||
Plus: interest expense on convertible debt, net of tax | — | 0.8 | — | 1.9 | |||||||||||
Net income for diluted net income per share | $ | 30.2 | $ | 16.4 | $ | 61.9 | $ | 46.7 | |||||||
Weighted average common shares outstanding | 34.7 | 34.0 | 34.6 | 33.9 | |||||||||||
Assumed stock options exercised and awards vested, based on the treasury stock method | 0.7 | 0.5 | 0.6 | 0.5 | |||||||||||
Assumed conversion of convertible debt, based on the if-converted method | — | 2.1 | 0.1 | 2.5 | |||||||||||
Weighted average shares assuming dilution | 35.4 | 36.6 | 35.3 | 36.9 |
($ in millions) | Losses on cash flow hedges | Unrealized gains on investment securities | Defined benefit pension and other postretirement plans | Foreign currency translation | Total | ||||||||||
Balance, December 31, 2012 | $ | (9.0 | ) | $ | 0.8 | $ | (84.9 | ) | $ | 17.2 | $ | (75.9 | ) | ||
Other comprehensive (loss) income before reclassifications | (2.0 | ) | — | 0.6 | (19.1 | ) | (20.5 | ) | |||||||
Amounts reclassified out | 2.4 | — | 2.6 | — | 5.0 | ||||||||||
Other comprehensive income (loss), net of tax | 0.4 | — | 3.2 | (19.1 | ) | (15.5 | ) | ||||||||
Balance, June 30, 2013 | $ | (8.6 | ) | $ | 0.8 | $ | (81.7 | ) | $ | (1.9 | ) | $ | (91.4 | ) |
Detail of components | Three Months Ended June 30, 2013 | Six Months Ended June 30, 2013 | Location on Statement of Income | ||||
Losses on cash flow hedges: | |||||||
Foreign currency contracts | $ | (1.4 | ) | $ | (2.4 | ) | Cost of goods and services sold |
Interest rate swap contracts | (0.7 | ) | (1.3 | ) | Interest expense | ||
Forward treasury locks | (0.1 | ) | (0.2 | ) | Interest expense | ||
Total before tax | (2.2 | ) | (3.9 | ) | |||
Tax expense | 0.8 | 1.5 | |||||
Net of tax | $ | (1.4 | ) | $ | (2.4 | ) | |
Amortization of defined benefit pension and other postretirement plans: | |||||||
Transition obligation | $ | — | $ | (0.1 | ) | (a) | |
Prior service cost | 0.3 | $ | 0.7 | (a) | |||
Actuarial losses | (2.3 | ) | (4.7 | ) | (a) | ||
Total before tax | (2.0 | ) | (4.1 | ) | |||
Tax expense | 0.7 | 1.5 | |||||
Net of tax | $ | (1.3 | ) | $ | (2.6 | ) | |
Total reclassifications for the period, net of tax | $ | (2.7 | ) | $ | (5.0 | ) |
Pension benefits | Other retirement benefits | Total | |||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
Service cost | $ | 2.5 | $ | 2.3 | $ | 0.3 | $ | 0.4 | $ | 2.8 | $ | 2.7 | |||||||||||
Interest cost | 3.7 | 3.8 | 0.3 | 0.2 | 4.0 | 4.0 | |||||||||||||||||
Expected return on assets | (4.3 | ) | (4.1 | ) | — | — | (4.3 | ) | (4.1 | ) | |||||||||||||
Amortization of prior service credit | (0.3 | ) | (0.4 | ) | — | — | (0.3 | ) | (0.4 | ) | |||||||||||||
Recognized actuarial losses | 2.3 | 2.2 | — | — | 2.3 | 2.2 | |||||||||||||||||
Net periodic benefit cost | $ | 3.9 | $ | 3.8 | $ | 0.6 | $ | 0.6 | $ | 4.5 | $ | 4.4 |
Pension benefits | Other retirement benefits | Total | |||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
U.S. plans | $ | 3.1 | $ | 3.2 | $ | 0.6 | $ | 0.6 | $ | 3.7 | $ | 3.8 | |||||||||||
International plans | 0.8 | 0.6 | — | — | 0.8 | 0.6 | |||||||||||||||||
Net periodic benefit cost | $ | 3.9 | $ | 3.8 | $ | 0.6 | $ | 0.6 | $ | 4.5 | $ | 4.4 |
Pension benefits | Other retirement benefits | Total | |||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
Service cost | $ | 5.0 | $ | 4.6 | $ | 0.7 | $ | 0.7 | $ | 5.7 | $ | 5.3 | |||||||||||
Interest cost | 7.4 | 7.7 | 0.5 | 0.5 | 7.9 | 8.2 | |||||||||||||||||
Expected return on assets | (8.6 | ) | (8.1 | ) | — | — | (8.6 | ) | (8.1 | ) | |||||||||||||
Amortization of transition obligation | 0.1 | — | — | — | 0.1 | — | |||||||||||||||||
Amortization of prior service credit | (0.7 | ) | (0.8 | ) | — | — | (0.7 | ) | (0.8 | ) | |||||||||||||
Recognized actuarial losses | 4.7 | 4.3 | — | — | 4.7 | 4.3 | |||||||||||||||||
Net periodic benefit cost | $ | 7.9 | $ | 7.7 | $ | 1.2 | $ | 1.2 | $ | 9.1 | $ | 8.9 |
Pension benefits | Other retirement benefits | Total | |||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
U.S. plans | $ | 6.3 | $ | 6.4 | $ | 1.2 | $ | 1.2 | $ | 7.5 | $ | 7.6 | |||||||||||
International plans | 1.6 | 1.3 | — | — | 1.6 | 1.3 | |||||||||||||||||
Net periodic benefit cost | $ | 7.9 | $ | 7.7 | $ | 1.2 | $ | 1.2 | $ | 9.1 | $ | 8.9 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net sales: | |||||||||||||||
Packaging Systems | $ | 251.5 | $ | 235.8 | $ | 503.0 | $ | 471.5 | |||||||
Delivery Systems | 93.3 | 89.2 | 181.5 | 169.9 | |||||||||||
Intersegment sales | (0.3 | ) | (0.2 | ) | (0.6 | ) | (0.3 | ) | |||||||
Total net sales | $ | 344.5 | $ | 324.8 | $ | 683.9 | $ | 641.1 |
Operating profit: | |||||||||||||||
Packaging Systems | $ | 56.8 | $ | 50.5 | $ | 115.5 | $ | 104.1 | |||||||
Delivery Systems | 2.3 | 5.5 | 3.5 | 7.8 | |||||||||||
Corporate | (16.6 | ) | (16.5 | ) | (33.1 | ) | (30.1 | ) | |||||||
Other unallocated items | — | (3.9 | ) | — | (4.5 | ) | |||||||||
Total operating profit | $ | 42.5 | $ | 35.6 | $ | 85.9 | $ | 77.3 | |||||||
Loss on debt extinguishment | — | 11.6 | 0.2 | 11.6 | |||||||||||
Interest expense | 4.1 | 4.6 | 8.7 | 8.8 | |||||||||||
Interest income | 0.4 | 0.6 | 1.0 | 1.0 | |||||||||||
Income before income taxes | $ | 38.8 | $ | 20.0 | $ | 78.0 | $ | 57.9 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income per share, basic | $ | 0.435 | $ | 0.230 | $ | 0.895 | $ | 0.660 | |||||||
Net income per share, diluted | 0.430 | 0.225 | 0.880 | 0.635 | |||||||||||
Dividends declared per share | 0.095 | 0.090 | 0.190 | 0.180 |
• | Net sales were $344.5 million, an increase of 6.1% from the same period in 2012 (5.7% excluding foreign currency effects). |
• | Gross profit was $110.9 million, an increase of 12.4% from the same period in 2012, and our gross margin increased by 1.8 margin points to 32.2%. |
• | Operating profit was $42.5 million, an increase of 19.4% from the same period in 2012. |
• | Net income was $30.2 million, an increase of 93.6% from the same period in 2012. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Packaging Systems | $ | 251.5 | $ | 235.8 | $ | 503.0 | $ | 471.5 | |||||||
Delivery Systems | 93.3 | 89.2 | 181.5 | 169.9 | |||||||||||
Intersegment sales elimination | (0.3 | ) | (0.2 | ) | (0.6 | ) | (0.3 | ) | |||||||
Consolidated net sales | $ | 344.5 | $ | 324.8 | $ | 683.9 | $ | 641.1 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Packaging Systems: | |||||||||||||||
Gross Profit | $ | 92.7 | $ | 82.7 | $ | 187.5 | $ | 167.9 | |||||||
Gross Margin | 36.9 | % | 35.1 | % | 37.3 | % | 35.6 | % | |||||||
Delivery Systems: | |||||||||||||||
Gross Profit | $ | 18.2 | $ | 16.0 | $ | 35.1 | $ | 31.9 | |||||||
Gross Margin | 19.5 | % | 17.9 | % | 19.3 | % | 18.8 | % | |||||||
Consolidated Gross Profit | $ | 110.9 | $ | 98.7 | $ | 222.6 | $ | 199.8 | |||||||
Consolidated Gross Margin | 32.2 | % | 30.4 | % | 32.6 | % | 31.2 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Packaging Systems | $ | 3.6 | $ | 3.3 | $ | 7.0 | $ | 6.5 | |||||||
Delivery Systems | 5.9 | 4.9 | 11.6 | 10.0 | |||||||||||
Consolidated R&D Costs | $ | 9.5 | $ | 8.2 | $ | 18.6 | $ | 16.5 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Packaging Systems | $ | 32.4 | $ | 28.7 | $ | 64.5 | $ | 57.6 | |||||||
Delivery Systems | 10.7 | 9.2 | 21.1 | 18.0 | |||||||||||
Corporate | 16.6 | 16.5 | 33.1 | 30.1 | |||||||||||
Consolidated SG&A costs | $ | 59.7 | $ | 54.4 | $ | 118.7 | $ | 105.7 | |||||||
SG&A as a % of net sales | 17.3 | % | 16.8 | % | 17.4 | % | 16.5 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) Expense (income) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Packaging Systems | $ | (0.1 | ) | $ | 0.2 | $ | 0.5 | $ | (0.3 | ) | |||||
Delivery Systems | (0.7 | ) | (3.6 | ) | (1.1 | ) | (3.9 | ) | |||||||
Corporate and other unallocated items: | |||||||||||||||
Restructuring and related charges | — | 0.3 | — | 0.7 | |||||||||||
Impairment charge | — | 3.4 | — | 3.4 | |||||||||||
Acquisition-related contingencies | — | 0.2 | — | 0.4 | |||||||||||
Consolidated restructuring and other items | $ | (0.8 | ) | $ | 0.5 | $ | (0.6 | ) | $ | 0.3 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Segments: | |||||||||||||||
Packaging Systems | $ | 56.8 | $ | 50.5 | $ | 115.5 | $ | 104.1 | |||||||
Delivery Systems | 2.3 | 5.5 | 3.5 | 7.8 | |||||||||||
Corporate and other unallocated items: | |||||||||||||||
Corporate | (16.6 | ) | (16.5 | ) | (33.1 | ) | (30.1 | ) | |||||||
Other unallocated expense | — | (3.9 | ) | — | (4.5 | ) | |||||||||
Consolidated operating profit | $ | 42.5 | $ | 35.6 | $ | 85.9 | $ | 77.3 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Interest expense | $ | 4.7 | $ | 4.9 | $ | 9.5 | $ | 9.5 | |||||||
Capitalized interest | (0.6 | ) | (0.3 | ) | (0.8 | ) | (0.7 | ) | |||||||
Interest income | (0.4 | ) | (0.6 | ) | (1.0 | ) | (1.0 | ) | |||||||
Interest expense, net | $ | 3.7 | $ | 4.0 | $ | 7.7 | $ | 7.8 |
($ in millions) | 2013 | 2012 | |||||
Net cash provided by operating activities | $ | 98.4 | $ | 66.0 | |||
Net cash used in investing activities | (81.9 | ) | (67.8 | ) | |||
Net cash provided by financing activities | 15.3 | 18.4 |
($ in millions) | June 30, 2013 | December 31, 2012 | |||||
Cash and cash equivalents | $ | 190.6 | $ | 161.9 | |||
Short-term investments | 7.5 | 12.4 | |||||
Working capital | 394.6 | 295.5 | |||||
Total debt | 394.8 | 411.5 | |||||
Total equity | 784.2 | 728.9 | |||||
Net debt-to-total invested capital | 20.7 | % | 25.5 | % |
• | 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 but not limited to CZ prefilled syringes, cartridges and vials, and the ConfiDose®, SelfDose™, SmartDose, NovaGuard™ SA and éris 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; |
• | average profitability, or mix, of products sold in any reporting period, including lower-than-expected sales growth of our high-value pharmaceutical packaging products, of CZ products, and of other proprietary safety and administration devices; |
• | maintaining or improving production efficiencies and overhead absorption; |
• | dependence on third-party suppliers and partners, some of which are single-source suppliers of critical materials 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; |
• | the successful and timely implementation of price increases necessary to offset rising production costs, including raw material prices, particularly petroleum-based raw materials; |
• | 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 purchased under the plans or programs | |||||||||
April 1 – 30, 2013 | — | $ | — | — | — | ||||||||
May 1 – 31, 2013 | 163,146 | 67.57 | — | — | |||||||||
June 1 – 30, 2013 | 35 | 67.33 | — | — | |||||||||
Total | 163,181 | $ | 67.57 | — | — |
(1) | Includes 245 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. |
(2) | Includes 129,484 shares of common stock acquired from employees who tendered already-owned shares to satisfy the exercise price on option exercises, as part of the 2011 Plan. |
(3) | Includes 33,452 shares of common stock acquired from employees who tendered already-owned shares to satisfy the withholding tax obligations on option exercises, as part of the 2011 Plan. |
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 | Certificate of Amendment of our Amended and Restated Articles of Incorporation, is incorporated by reference from our Form 8-K filed on May 6, 2011. |
3.3 | 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 | First Amendment to Credit Agreement, dated February 1, 2013, among West Pharmaceutical Services, Inc., certain of its subsidiaries, the several banks and other financial institutions party thereto, and PNC Bank, National Association, as administrative agent for the Lenders incorporated by reference from our Form 8-K filed on February 6, 2013. |
10.2 | Note Purchase Agreement, dated July 5, 2012, among the Company and the Purchasers named therein is incorporated by reference from our Form 8-K filed on July 10, 2012. |
10.3 | Credit Agreement, dated April 27, 2012, 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 May 3, 2012. |
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 | Certificate of Amendment of our Amended and Restated Articles of Incorporation, is incorporated by reference from our Form 8-K filed on May 6, 2011. |
3.3 | 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 | First Amendment to Credit Agreement, dated February 1, 2013, among West Pharmaceutical Services, Inc., certain of its subsidiaries, the several banks and other financial institutions party thereto, and PNC Bank, National Association, as administrative agent for the Lenders incorporated by reference from our Form 8-K filed on February 6, 2013. |
10.2 | Note Purchase Agreement, dated July 5, 2012, among the Company and the Purchasers named therein is incorporated by reference from our Form 8-K filed on July 10, 2012. |
10.3 | Credit Agreement, dated April 27, 2012, 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 May 3, 2012. |
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. |
Stock-Based Compensation
|
6 Months Ended |
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Jun. 30, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation At June 30, 2013, there were 2,935,331 shares remaining in the 2011 Omnibus Incentive Compensation Plan (the “2011 Plan”) for future grants. 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. The Compensation Committee of the Board of Directors determines the terms and conditions of awards to be granted. Vesting requirements vary by award. In the first half of 2013, we granted 461,174 stock options at a weighted average exercise price of $59.43 per share based on the grant-date fair value of our stock to key employees under the 2011 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 $11.46 per share as determined by the Black-Scholes option valuation model using the following weighted average assumptions: a risk-free interest rate of 0.89%; expected life of 6 years based on prior experience; stock volatility of 22.5% based on historical data; and a dividend yield of 1.3%. Stock option expense is recognized over the vesting period, net of forfeitures. In addition, during the first half of 2013, we granted 88,476 performance-vesting share (“PVS”) awards at a weighted grant-date fair value of $59.42 per share to key employees under the 2011 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. Total stock-based compensation expense was $5.0 million and $10.4 million for the three and six months ended June 30, 2013, respectively. For the three and six months ended June 30, 2012, total stock-based compensation expense was $4.3 million and $7.5 million, respectively. |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
|
Jun. 30, 2013
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Jun. 30, 2012
|
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Statement of Other Comprehensive Income [Abstract] | ||||
Defined benefit pension and other postretirement plan adjustments, tax | $ 0.7 | $ 0.8 | $ 1.8 | $ 1.4 |
Net gains (losses) on derivatives, tax | $ 0.5 | $ (1.5) | $ 0.1 | $ (1.5) |
Income Taxes
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Income Tax Disclosure [Abstract] | |
Income Taxes | 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. For the three and six months ended June 30, 2013, our effective tax rate was 26.5% and 24.2% respectively, compared with 32.7% and 28.4% for the same periods in 2012. The decrease in the effective tax rate for the three month periods presented reflects the nondeductibility of the purchase premium paid related to the extinguishment of our convertible debt during the second quarter of 2012. The decrease in the effective tax rate for the six month periods presented reflects the item mentioned above, as well as a $1.3 million discrete tax benefit related to the American Taxpayers Relief Act of 2012, which was signed into law in January 2013 and includes a retroactive reinstatement of the research and development tax credit to January 1, 2012. In addition, during the six months ended June 30, 2012, we recorded a $0.3 million reduction of our deferred tax assets associated with the legal restructuring of the ownership of our Puerto Rico operations. 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. During 2012, the statute of limitations for the 2008 U.S. federal tax year lapsed, leaving tax years 2009 through 2012 open to examination. For U.S. state and local jurisdictions, tax years 2007 through 2012 are open to examination. We are also subject to examination in various foreign jurisdictions for tax years 2006 through 2012. It is reasonably possible that, due to the expiration of statutes and the closing of tax audits, the liability for unrecognized tax benefits may be reduced by approximately $2.0 million during the next twelve months, which would favorably impact our effective tax rate. Accrued interest and penalties related to unrecognized tax benefits was $0.6 million and $0.5 million at June 30, 2013 and December 31, 2012, respectively. |
Restructuring and Other Items (Tables)
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Jun. 30, 2013
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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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Activity related to restructuring obligations | The following table presents activity related to our restructuring obligations:
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Benefit Plans
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Plans | Benefit Plans The components of net periodic benefit cost for the three months ended June 30 were as follows ($ in millions):
The components of net periodic benefit cost for the six months ended June 30 were as follows ($ in millions):
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Subsequent Events (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
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Subsequent Event [Line Items] | ||||
Subsequent Event, Date | Aug. 01, 2013 | |||
Subsequent Event, Description | two-for-one stock split of our outstanding shares of common stock, to be effected in the form of a stock dividend, payable on September 26, 2013 to shareholders of record on September 12, 2013 | |||
Net income per share, basic | $ 0.87 | $ 0.46 | $ 1.79 | $ 1.32 |
Net income per share, diluted | $ 0.86 | $ 0.45 | $ 1.76 | $ 1.27 |
Dividends declared per share | $ 0.19 | $ 0.18 | $ 0.38 | $ 0.36 |
Pro Forma [Member] | Two-for-One Stock Split [Member]
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||||
Subsequent Event [Line Items] | ||||
Net income per share, basic | $ 0.435 | $ 0.230 | $ 0.895 | $ 0.660 |
Net income per share, diluted | $ 0.430 | $ 0.225 | $ 0.880 | $ 0.635 |
Dividends declared per share | $ 0.095 | $ 0.090 | $ 0.190 | $ 0.180 |
Derivative Financial Instruments Effects of Derivative Instruments on OCI and Earnings (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
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Cash Flow Hedges [Member]
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in OCI | $ (0.7) | $ (3.2) | $ (2.0) | $ (3.9) |
Amount of Loss Reclassified from Accumulated OCI into Income | 1.4 | 0.8 | 2.4 | 1.5 |
Net Investment Hedges [Member]
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in OCI | (1.0) | 4.1 | 1.4 | 2.4 |
Amount of Loss Reclassified from Accumulated OCI into Income | 0 | 0 | 0 | 0 |
Foreign Currency Hedge Contracts [Member] | Net Sales [Member] | Cash Flow Hedges [Member]
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in OCI | (0.1) | 0 | 0.2 | 0 |
Amount of Loss Reclassified from Accumulated OCI into Income | 0 | 0 | 0 | 0 |
Foreign Currency Hedge Contracts [Member] | Cost of Goods and Services Sold [Member] | Cash Flow Hedges [Member]
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in OCI | (1.0) | 0.6 | (2.7) | 0.3 |
Amount of Loss Reclassified from Accumulated OCI into Income | 0.9 | 0 | 1.5 | 0 |
Interest Rate Swap Contracts [Member] | Interest Expense [Member] | Cash Flow Hedges [Member]
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in OCI | 0.4 | (1.0) | 0.5 | (1.4) |
Amount of Loss Reclassified from Accumulated OCI into Income | 0.4 | 0.8 | 0.8 | 1.5 |
Foreign Currency - Denominated Debt [Member] | Foreign Exchange and Other [Member] | Net Investment Hedges [Member]
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in OCI | (1.0) | 4.1 | 1.4 | 2.4 |
Amount of Loss Reclassified from Accumulated OCI into Income | 0 | 0 | 0 | 0 |
Forward Treasury Locks [Member] | Interest Expense [Member] | Cash Flow Hedges [Member]
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||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in OCI | 0 | (2.8) | 0 | (2.8) |
Amount of Loss Reclassified from Accumulated OCI into Income | $ 0.1 | $ 0 | $ 0.1 | $ 0 |
Inventories (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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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:
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Fair Value Measurements (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured at fair value on a recurring basis | The following tables present, by level within the fair value hierarchy, certain of our financial assets and liabilities:
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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:
|
Restructuring and Other Items (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Restructuring and Other Items [Abstract] | ||||
Increase in contingent consideration liability | $ 0.2 | $ 0.2 | $ 0.2 | $ 0.4 |
Restructuring and related charges: | ||||
Severance and post-employment benefits | 0 | (0.2) | 0 | (0.2) |
Impairments and asset write-offs | 0 | 0.3 | 0 | 0.4 |
Other restructuring charges | 0 | 0.2 | 0 | 0.5 |
Total restructuring and related charges | 0 | 0.3 | 0 | 0.7 |
Impairment charge | 0 | 3.4 | 0 | 3.4 |
Development income | (0.5) | (3.8) | (0.8) | (3.8) |
Acquisition-related contingencies | 0.2 | 0.2 | 0.2 | 0.4 |
Foreign exchange and other | (0.5) | 0.4 | 0 | (0.4) |
Total restructuring and other items | (0.8) | 0.5 | (0.6) | 0.3 |
Severance and benefits [Member]
|
||||
Restructuring Reserve [Roll Forward] | ||||
Balance, beginning of period | 2.8 | |||
Cash payments | (2.6) | |||
Balance, end of period | $ 0.2 | $ 0.2 |
Inventories (Details) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Inventory Disclosure [Abstract] | ||
Finished goods | $ 75.5 | $ 70.9 |
Work in process | 28.8 | 23.6 |
Raw materials | 72.2 | 67.7 |
Total inventories | $ 176.5 | $ 162.2 |
Benefit Plans (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of net periodic benefit cost | The components of net periodic benefit cost for the three months ended June 30 were as follows ($ in millions):
The components of net periodic benefit cost for the six months ended June 30 were as follows ($ in millions):
|
Derivative Financial Instruments (Tables)
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Jun. 30, 2013
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Derivative Instruments and Hedging Activities Disclosure [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, net of tax:
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CONDENSED CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED) (USD $)
In Millions, unless otherwise specified |
Total
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Common Stock [Member]
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Capital in Excess of Par Value [Member]
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Treasury Stock [Member]
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Retained Earnings [Member]
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Accumulated Other Comprehensive Loss [Member]
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Balance at Dec. 31, 2012 | $ 728.9 | $ 8.6 | $ 79.3 | $ (3.0) | $ 719.9 | $ (75.9) |
Balance (in shares) at Dec. 31, 2012 | 34.4 | |||||
Increase (Decrease) in Equity [Roll Forward] | ||||||
Net income | 61.9 | 61.9 | ||||
Stock-based compensation | 6.0 | 6.0 | ||||
Shares issued under stock plans | 13.5 | 0.1 | 14.1 | (0.7) | ||
Shares repurchased for employee tax withholdings (in shares) | (0.1) | |||||
Shares issued under stock plans (in shares) | 0.5 | |||||
Shares repurchased for employee tax withholdings | (5.2) | (5.2) | ||||
Excess tax benefit from employee stock plans | 1.1 | 1.1 | ||||
Dividends declared | (6.5) | (6.5) | ||||
Other comprehensive loss, net of tax | (15.5) | (15.5) | ||||
Balance at Jun. 30, 2013 | $ 784.2 | $ 8.7 | $ 95.3 | $ (3.7) | $ 775.3 | $ (91.4) |
Balance (in shares) at Jun. 30, 2013 | 34.8 |
Summary of Significant Accounting Policies
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6 Months Ended |
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Jun. 30, 2013
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Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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, but does not include all disclosures required by U.S. GAAP. 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 six month periods ended June 30, 2013 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, 2012 (“2012 Annual Report”). The results of operations for any interim period are not necessarily indicative of results for the full year. Reclassifications: Certain reclassifications were made to prior period financial statements to conform to the current year presentation. |
Derivative Financial Instruments
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Jun. 30, 2013
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | 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 In February 2013, we borrowed $42.8 million pursuant to a five-year term loan with a variable interest rate, related to the purchase of our new corporate office and research building. In anticipation of this debt, we entered into a forward-start interest rate swap for the same notional amount to hedge the variability in cash flows due to changes in the applicable interest rate over the stated period. Under this swap, we 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 this swap as a cash flow hedge. We also have an interest rate swap agreement outstanding as of June 30, 2013, that is designated as a cash flow hedge to protect against volatility in the interest rate payable on $25.0 million of floating rate notes maturing on July 28, 2015 (“Series B Notes”). Under this swap, we 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 agreement effectively fixes the interest rate payable on the Series B Notes at 5.51%. Foreign Exchange Rate Risk During 2012, we entered into several foreign currency hedge contracts that were designated as cash flow hedges of forecasted transactions denominated in foreign currencies, which are described in more detail below. We entered into a series of foreign currency contracts intended to hedge the currency risk associated with a portion of our forecasted Japanese Yen (“Yen”) denominated purchases of inventory from Daikyo Seiko Ltd. (“Daikyo”) made by West in the United States. As of June 30, 2013, there were six monthly contracts outstanding at ¥200.8 million ($2.5 million) each, for an aggregate notional amount of ¥1.2 billion ($15.0 million). We 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 made by certain European subsidiaries. As of June 30, 2013, there were six monthly contracts outstanding at an average monthly amount of $1.1 million, for an aggregate notional amount of $6.8 million. In addition we entered into a series of foreign currency contracts to hedge the currency risk associated with a portion of our forecasted Yen-denominated inventory purchases made by certain European subsidiaries. As of June 30, 2013, there were six monthly contracts outstanding at an average monthly amount of ¥46.2 million (approximately $0.5 million), for an aggregate notional amount of ¥185.0 million ($1.9 million). Lastly, 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 June 30, 2013, there were six monthly contracts outstanding at $1.4 million each, for an aggregate notional amount of $8.4 million. A portion of our debt consists of borrowings denominated in currencies other than the U.S. dollar. We designated our €82.1 million Euro-denominated debt as a hedge of our net investment in certain European subsidiaries. A cumulative foreign currency translation gain of $0.3 million pre-tax ($0.2 million after tax) on this debt was recorded within accumulated other comprehensive loss as of June 30, 2013. We have also designated our ¥500.0 million Yen-denominated note payable as a hedge of our net investment in a Japanese affiliate. At June 30, 2013, there was a cumulative foreign currency translation gain on this Yen-denominated debt of $0.3 million pre-tax ($0.2 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. The following economic hedges did not qualify for hedge accounting treatment since they did not meet the highly effective requirement at inception. In February 2013, we purchased a series of call options for a total of 58,000 barrels of crude oil 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 July through December 2013. With these contracts we may benefit from a decline in crude oil prices, as there is no downward exposure other than the $0.1 million premium that we paid to purchase the contracts. During the three and six months ended June 30, 2013, we recorded a $0.1 million loss in cost of goods and services sold related to these outstanding call options. During the three and six months ended June 30, 2012, a loss of $0.1 million was recorded in cost of goods and services sold relating to 2012 crude-oil options. 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 June 30, 2013 and December 31, 2012. The following tables summarize the effects of derivative instruments designated as hedges on other comprehensive income (“OCI”) and earnings, net of tax:
For the three and six month periods ended June 30, 2013 and 2012, there was no material ineffectiveness related to our cash flow and net investment hedges. |
Restructuring and Other Items
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Jun. 30, 2013
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Restructuring and Other Items [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Other Items | Restructuring and Other Items Restructuring and other items consisted of:
Restructuring and Related Charges Total restructuring and related charges incurred during the three and six months ended June 30, 2012 were associated with the restructuring plan announced in December 2010 (the "2010 plan"). These charges consisted of costs associated with the 2011 closure of a plant in the United States, the reduction of operations at a manufacturing facility in England and the elimination of certain operational and administrative functions at other locations. We do not expect to incur any future charges related to this plan. The following table presents activity related to our restructuring obligations:
We expect all payments to be completed by the end of 2013. Other Items During the three and six months ended June 30, 2013, we recorded development income of $0.5 million and $0.8 million, respectively, within the Pharmaceutical Delivery Systems segment ("Delivery Systems"). Included in these amounts was $0.3 million of income related to a nonrefundable payment of $20.0 million received from a customer in June 2013 in return for the exclusive use of SmartDose™ within a specific therapeutic area. Unearned income related to this payment of $1.5 million and $18.2 million was included within other current liabilities and other long-term liabilities, respectively, at June 30, 2013. The unearned income is being recognized as development income on a straight-line basis over the remaining term of the agreement, which is thirteen years. The agreement does not include a future minimum purchase commitment from the customer. During the three and six months ended June 30, 2012, we recorded development income of $3.8 million attributable to services and the reimbursement of certain costs. The liability for contingent consideration related to our 2010 acquisition of technology used in SmartDose (“SmartDose contingent consideration”) increased by $0.2 million during the three and six months ended June 30, 2013 due to fair value adjustments. During the three and six months ended June 30, 2012, the fair value of the SmartDose contingent consideration increased by $0.2 million and $0.4 million, respectively. In addition, during the second quarter of 2012, as a result of continuing delays and lower-than-expected demand, we updated the sales projections related to one of our product lines in Delivery Systems. The revised projections triggered an impairment review of the associated assets. Our review concluded that the estimated fair value of the product no longer exceeded the carrying value of the related assembly equipment and intangible asset and, therefore, an impairment charge of $3.4 million was recorded during the second quarter of 2012. We estimated the fair value of the asset group using an income approach based on discounted cash flows. |
Debt (Tables)
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Jun. 30, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt obligations , net of current maturities | The following table summarizes our long-term debt obligations, net of current maturities:
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Segment Information (Tables)
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | The following table presents information about our reportable segments, reconciled to consolidated totals:
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Derivative Financial Instruments (Details)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | 6 Months Ended | ||||||||||||||
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Jun. 30, 2013
USD ($)
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Jun. 30, 2012
USD ($)
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Jun. 30, 2013
USD ($)
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Jun. 30, 2012
USD ($)
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Jun. 30, 2013
Forward-Start Interest Rate Swap [Member]
USD ($)
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Jun. 30, 2013
Interest Rate Swap, Series B Note [Member]
USD ($)
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Jun. 30, 2013
Foreign Currency Hedge, Euro-Denominated Sales [Member]
USD ($)
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Jun. 30, 2013
Foreign Currency Hedge, U.S. Inventory Purchases, Yen
USD ($)
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Jun. 30, 2013
Foreign Currency Hedge, U.S. Inventory Purchases, Yen
JPY (¥)
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Jun. 30, 2013
Foreign Currency Hedge, Europe Inventory Purchases, Dollars
USD ($)
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Jun. 30, 2013
Foreign Currency Hedge Europe Inventory Purchases, Yen [Member]
USD ($)
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Jun. 30, 2013
Foreign Currency Hedge Europe Inventory Purchases, Yen [Member]
JPY (¥)
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Jun. 30, 2013
Euro-Denominated Note [Member]
USD ($)
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Jun. 30, 2013
Euro-Denominated Note [Member]
EUR (€)
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Jun. 30, 2013
Yen-Denominated Note [Member]
USD ($)
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Jun. 30, 2013
Yen-Denominated Note [Member]
JPY (¥)
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Jun. 30, 2013
Commodity Call Options [Member]
USD ($)
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Derivative [Line Items] | |||||||||||||||||
Loss recorded in cost of goods and services sold, call options | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.1 | |||||||||||||
Notional amount | 1.4 | 2.5 | 200.8 | 1.1 | 0.5 | 46.2 | |||||||||||
Amount of hedged item | 42.8 | 25.0 | |||||||||||||||
Maximum term (in years) | 5 years | ||||||||||||||||
Fixed interest rate | 5.41% | 5.51% | |||||||||||||||
Maturity date of debt | Jul. 28, 2015 | ||||||||||||||||
Variable rate basis | one-month London Interbank Offering Rates (“LIBOR”) | three-month LIBOR | |||||||||||||||
Number of monthly contracts remaining | 6 | 6 | 6 | 6 | 6 | 6 | |||||||||||
Aggregate notional amount of remaining contracts | 8.4 | 15.0 | 1,200.0 | 6.8 | 1.9 | 185.0 | |||||||||||
Notional amount, nonderivative instruments | 82.1 | 500.0 | |||||||||||||||
Cumulative foreign currency translation loss (gain) | (0.3) | (0.3) | |||||||||||||||
Cumulative foreign currency translation loss (gain), net of tax | (0.2) | (0.2) | |||||||||||||||
Purchased call options, barrels of crude oil (in barrels) | 58,000 | ||||||||||||||||
Premium paid to purchase call options | $ 0.1 |