01—Abstract
Summary
Summary of the 10-K filed March 31, 1997. Cited figures are marked; the original filing is the authoritative source.
The West Company, Incorporated filed this annual report on Form 10-K for the fiscal year ended December 31, 1996.
The company operates in one industry segment, making products and providing services for packaging and delivery of healthcare and consumer products. Its core lines are pharmaceutical packaging components such as rubber stoppers, aluminum seals, and Counter Cap products, plus components for medical devices such as syringe parts and blood-sampling components. It also makes plastic closures for consumer products and provides contract packaging and manufacturing through its Paco Pharmaceutical Services subsidiary, acquired in 1995 for $52.4 milliona.
The annual report states that over 85% of revenues come from healthcare markets. Financially, 1996 net sales were $458.8 millionb, up $45.9 million, or 11%, from $412.9 million in 1995. Net income was $16.4 million, or $1.00 per share, after a $15 million net restructuring charge taken in the first quarter.
Excluding that charge, net income was $31.3 millionc, or $1.91 per share, compared with $28.7 million, or $1.73 per share, in 1995. Gross margin fell to 27.5% from 28.6%, which management attributed mainly to the full-year consolidation of lower-margin Paco operations. Cash flow from operations was $63.4 million, and debt was reduced from $114.3 million to $98.4 million.
The restructuring plan announced in March 1996 covers closing or downsizing six manufacturing facilities and cutting about 5% of the workforce, with a total estimated charge of $21.5 milliond before tax. The company also reported a pending lawsuit by OCAP Acquisition Corp. against Paco and its former parent. The trial court dismissed the plaintiff's claims, and both sides have appealed.
Management does not expect a material adverse effect, and R.P. Scherer has agreed to indemnify Paco.
02—Key points
Key Highlights
- 1996 net sales of $458.8 million, up $45.9 million, or 11%, from $412.9 million in 1995, driven mainly by the Paco acquisition and price and volume increases in core healthcare products.
- Reported 1996 net income of $16.4 million ($1.00 per share), including a $15 million net restructuring charge; excluding the charge, net income was $31.3 million ($1.91 per share) versus $28.7 million ($1.73 per share) in 1995.
- Gross margin declined to 27.5% from 28.6%, with management citing the full-year consolidation of lower-margin Paco service operations.
- Restructuring plan announced in March 1996 covers closing or downsizing six manufacturing facilities and an approximate 5% workforce reduction, with a total estimated charge of $21.5 million.
- Cash flow from operations was $63.4 million; total debt was reduced to $98.4 million from $114.3 million, and shareholders' equity was $252.0 million.
- Becton Dickinson and Company accounted for approximately 11% of consolidated 1996 net sales, and no other customer exceeded 5%.
- Dividends paid were $.53 per share in 1996, and the Company repurchased 440,000 shares for $10 million from a former director.
03—Questions
Frequently Asked Questions
What does The West Company manufacture and sell?
The company makes pharmaceutical packaging components such as rubber stoppers, aluminum seals, dropper bulbs, and Counter Cap child-resistant caps. It also makes medical device components such as syringe parts and blood-sampling components, plastic closures for personal-care and food products, and provides contract packaging and manufacturing services through Paco.
How did 1996 results compare with 1995?
Net sales rose 11% to $458.8 million from $412.9 million. Reported net income fell to $16.4 million ($1.00 per share) from $28.7 million ($1.73 per share) because of a $15 million net restructuring charge. Excluding that charge, net income was $31.3 million ($1.91 per share).
What is the restructuring plan and what does it cost?
Announced in March 1996, the plan closes or substantially downsizes six manufacturing facilities, disposes of excess equipment and properties, and reduces the workforce by about 5%. The total estimated charge is $21.5 million before tax, or $15 million net of $6.5 million in tax benefits. The filing says restructuring activities will be substantially completed in the first half of 1997.
Are there significant legal proceedings?
The OCAP Acquisition Corp. lawsuit against Paco, its subsidiaries, and R.P. Scherer Corporation sought $75 million in actual damages and $100 million in punitive damages. The trial court dismissed all of the plaintiff's claims and the defendants' counterclaims in April 1996, and both sides have appealed. Scherer has agreed to indemnify Paco, and management does not expect a material adverse effect.
How is the company's balance sheet and debt position?
Total shareholders' equity was $252.0 million and total assets were $477.4 million at year-end 1996. Debt fell to $98.4 million from $114.3 million, and working capital was $91.1 million with a current ratio of 2.4 to 1. Debt to total invested capital was 28.1%.
04—Continue