What drove the change in 1997 net income?

Net income rose to $44.4 million from $16.4 million in 1996. The 1996 figure reflected a $15 million net restructuring charge, and the 1997 figure included a $7.9 million net tax benefit mainly from a tax reorganization of German subsidiaries.

How did sales perform in 1997?

Net sales were $452.5 million, a decrease of $6.3 million, or 1%. Contract service sales increased 13%, while sales to consumer markets decreased 4% and core healthcare product sales rose 1% at constant exchange rates.

What are the main risks to the outlook for 1998?

The filing cites sales demand, timing of customer product introductions, competitive pressures, the strength of the U.S. dollar, inflation, raw material costs, the continuance of cost-improvement programs, acquisition dilution, and borrowing costs. It also states that soft healthcare sales demand is expected to continue in the first half of 1998.

How concentrated is the customer base?

Becton Dickinson and Company accounted for approximately 11% of 1997 consolidated net sales. The next ten largest customers, excluding B-D, accounted for approximately 26%, with none exceeding 6%.

What is the company's financial position?

At December 31, 1997, working capital was $112.7 million, the current ratio was 2.9 to 1, and cash was $52.3 million. Total debt was $89 million, and debt to total invested capital was 24.2%, down from 28.1% in 1996.

WST 10-K FY1997 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed April 1, 1998. Cited figures are marked; the original filing is the authoritative source.

The West Company, Incorporated (now West Pharmaceutical Services, Inc.) reported net sales of $452.5 million^a in 1997, a decrease of $6.3 million, or 1%, from $458.8 million in 1996.

Over 85% of revenue came from healthcare markets, mainly sales to large multinational pharmaceutical and medical device companies. The company is described as the world's largest independent manufacturer of stoppers for sealing drug vials, and it also provides contract packaging and contract manufacturing through its Paco Pharmaceutical Services subsidiary. Net income was $44.4 million^b, or $2.69 per share, which includes a $7.9 million net tax benefit mainly tied to a tax reorganization of German subsidiaries.

Excluding that benefit, net income was $36.5 million^c, or $2.21 per share, compared with $31.3 million, or $1.91 per share, in 1996 excluding the restructuring charge. Gross margin improved to 29.2% in 1997 from 27.5% in 1996, and gross profit rose to $132.1 million. Management noted that customer cost-reduction programs and increasing price pressure are making results harder to predict, and that soft sales demand is expected to continue in the first half of 1998.

Total debt declined to $89 million^d at year-end 1997 from $98.4 million, and cash flow from operations was $67.7 million. Capital expenditures of $34.4 million were made in 1997, and 1998 capital project cash requirements are estimated at $45 million. The company also reported a 1996 restructuring charge of $21.5 million, covering the closure or downsizing of six manufacturing facilities and an approximate 5% workforce reduction.

Becton Dickinson and Company accounted for approximately 11% of 1997 consolidated net sales. Asia/Pacific demand declined amid the regional financial crisis, while direct sales to that region represented approximately 5% of consolidated sales.

02—Key points

Key Highlights

Net sales of $452.5 million in 1997, down 1% from $458.8 million in 1996; the filing states sales were 2% higher excluding the strong U.S. dollar effect and the 1996 machinery business sale
Net income of $44.4 million, or $2.69 per share, including a $7.9 million net tax benefit; excluding that benefit, net income was $36.5 million, or $2.21 per share
Gross margin rose to 29.2% from 27.5%, with gross profit of $132.1 million
Over 85% of revenue generated by healthcare markets; world's largest independent manufacturer of pharmaceutical stoppers
Total debt reduced to $89 million at December 31, 1997 from $98.4 million; cash flow from operations of $67.7 million
Becton Dickinson and Company accounted for approximately 11% of 1997 consolidated net sales
Management expects soft sales demand in healthcare to continue in the first half of 1998, with customer cost-reduction pressure limiting pricing

03—Questions

Frequently Asked Questions

What drove the change in 1997 net income?
Net income rose to $44.4 million from $16.4 million in 1996. The 1996 figure reflected a $15 million net restructuring charge, and the 1997 figure included a $7.9 million net tax benefit mainly from a tax reorganization of German subsidiaries.
How did sales perform in 1997?
Net sales were $452.5 million, a decrease of $6.3 million, or 1%. Contract service sales increased 13%, while sales to consumer markets decreased 4% and core healthcare product sales rose 1% at constant exchange rates.
What are the main risks to the outlook for 1998?
The filing cites sales demand, timing of customer product introductions, competitive pressures, the strength of the U.S. dollar, inflation, raw material costs, the continuance of cost-improvement programs, acquisition dilution, and borrowing costs. It also states that soft healthcare sales demand is expected to continue in the first half of 1998.
How concentrated is the customer base?
Becton Dickinson and Company accounted for approximately 11% of 1997 consolidated net sales. The next ten largest customers, excluding B-D, accounted for approximately 26%, with none exceeding 6%.
What is the company's financial position?
At December 31, 1997, working capital was $112.7 million, the current ratio was 2.9 to 1, and cash was $52.3 million. Total debt was $89 million, and debt to total invested capital was 24.2%, down from 28.1% in 1996.

04—Continue

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