01—Abstract
Summary
Summary of the 10-K filed March 26, 2003. Cited figures are marked; the original filing is the authoritative source.
West Pharmaceutical Services, Inc. (the Company) reported 2002 net sales of $419.7 milliona, up from $392.3 million in 2001 and $372.5 million in 2000.
Operating profit fell to $26.7 millionb from $39.9 million, reflecting a $9.9 million restructuring charge, and net income from continuing operations was $12.8 million, or $0.89 per share, versus $19.7 million, or $1.38 per share, in 2001. Net income was $18.4 million, or $1.28 per share, helped by a $5.6 million gain from discontinued operations that included a $5.9 million tax benefit. The Pharmaceutical Systems segment drove results, with net sales of $412.8 million and segment operating profit of $65.4 million, while the Drug Delivery Systems segment posted an operating loss of $15.1 million and sales of only $6.9 million.
The most significant post-year-end event was an explosion and fire on January 29, 2003 at the Kinston, N.C. plant, which killed six people and caused substantial damage to the building, machinery, equipment and inventories. The Company expects up to $5 millionc of sales to be delayed in the first and second quarters of 2003, expects pre-tax costs of $4.0 million to $6.0 million net of insurance recoveries in the first half of 2003, and says it is confident that property and business interruption losses, apart from these costs, are fully insured. A lawsuit filed February 24, 2003 seeks unspecified compensatory and punitive damages, and the Company cannot yet estimate the ultimate impact of liability claims.
Balance sheet figures show total assets of $536.8 milliond, total debt of $175 million and shareholders' equity of $201.5 million at December 31, 2002, with debt at 46.5% of total invested capital. Cash flow from operations was $45.7 million, and capital spending was $37.7 million, with 2003 capital spending expected to be about $45 million. Becton Dickinson and Company accounted for approximately 13% of 2002 consolidated net sales.
02—Key points
Key Highlights
- Net sales rose to $419.7 million in 2002 from $392.3 million in 2001, and the filing states the increase was 7%.
- Operating profit declined to $26.7 million from $39.9 million, including a $9.9 million restructuring charge.
- Net income from continuing operations was $12.8 million, or $0.89 per share, compared with $19.7 million, or $1.38 per share, in 2001; total net income was $18.4 million, or $1.28 per share.
- Pharmaceutical Systems segment net sales were $412.8 million with segment operating profit of $65.4 million; Drug Delivery Systems posted an operating loss of $15.1 million on sales of $6.9 million.
- January 29, 2003 explosion and fire at the Kinston, N.C. plant killed six people; the Company expects up to $5 million of delayed sales and $4.0 million to $6.0 million in pre-tax net costs in the first half of 2003.
- Total assets were $536.8 million and total debt was $175 million at December 31, 2002, with debt at 46.5% of total invested capital.
- Becton Dickinson and Company accounted for approximately 13% of 2002 consolidated net sales, and sales outside the United States were approximately 46% of consolidated net sales.
03—Questions
Frequently Asked Questions
What caused the decline in operating profit in 2002?
Operating profit fell to $26.7 million from $39.9 million in 2001. The filing attributes the decline mainly to a $9.9 million restructuring charge tied to terminating an information systems implementation project, a write-down of a technology company investment, a sales office closure and Nottingham employee terminations. Drug Delivery Systems operating losses also widened to $15.1 million from $4.3 million, reflecting lower licensing revenue and higher research and development costs.
What is the financial impact of the Kinston, N.C. plant explosion?
The Company states that the January 29, 2003 explosion and fire caused substantial damage to the building, machinery, equipment and inventories. It expects up to $5 million of sales to be delayed in the first and second quarters of 2003, with the revenue substantially recoverable in the second half, and pre-tax costs of $4.0 million to $6.0 million net of insurance recoveries in the first half of 2003. It expects to recover lost profits under business interruption insurance, but it cannot yet estimate the ultimate impact of liability claims.
How did the Company's dividend and share data change?
Quarterly dividends rose to $0.20 per share in the fourth quarter of 2002 from $0.19 in the first three quarters of 2002, and total dividends declared were $0.78 per share for 2002 compared with $0.74 for 2001. As of March 20, 2003, there were 1,665 shareholders of record, with 3,046 additional holders of shares in nominee names.
What is the outlook for the Drug Delivery Systems segment?
The Company anticipates that its 2002 development work, together with increased focus on its ChiSys nasal delivery technology, will lead to additional licensing opportunities in 2003. The filing says a key 2003 milestone is advancing one product to Phase III clinical trials, and that it does not project operating profit for the unit until 2004.
What debt obligations does the Company have?
Long-term debt at December 31, 2002 totaled $170.9 million, including $100 million of 6.81% senior notes due 2009 and a $59.2 million revolving credit facility due 2005. The principal credit agreement totals $114.5 million, and its most restrictive covenant requires the debt to total capital ratio not to exceed 55%.
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