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West Pharmaceutical Services Annual Report, Year Ended Dec 31, 2005

Filing Date
Filed March 6, 2006
Period End
December 31, 2005
Security
WST
In the record · 2016–202610-K1110-Q338-K118

WST filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 118 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jan ’17Jan ’17
  2. Material agreement8-K · Apr ’19Apr ’19
  3. Leadership change8-K · Aug ’21Aug ’21
  4. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed March 6, 2006. Cited figures are marked; the original filing is the authoritative source.

West Pharmaceutical Services, Inc. reported net sales of $699.7 milliona for fiscal 2005, up from $541.6 million in 2004, with the filing stating that sales grew 29.2%, of which acquisitions contributed 19.7 percentage points and foreign exchange 0.5 percentage points.

Operating profit rose to $72.2 millionb from $48.2 million, and net income was $45.6 million, or $1.40 per diluted share, compared with $19.4 million in 2004. Income from continuing operations was $45.2 million, or $1.39 per diluted share. Gross margin declined to 27.5% from 28.8%, which management attributed largely to lower-margin revenue from the acquired Tech Group business.

Excluding acquisitions and currency effects, net sales rose 9.0%. The year was dominated by acquisitions: The Tech Group, Inc. (TGI) for $140.5 millionc, Medimop Medical Projects for $40.0 million total consideration, and Monarch Analytical Laboratories. Total debt rose to $281.0 million from $160.8 million, and the debt-to-total-invested-capital ratio increased to 45.4% from 34.8%.

Management expects 2006 revenues of $810 to $830 milliond and diluted earnings of $1.60 to $1.70 per share. In February 2006, the company refinanced its $100 million 6.81% senior notes with euro-denominated notes at a weighted average rate of 4.34%, and it amended its revolving credit facility to $250 million.

The filing also discloses risks, including a Puerto Rico environmental notice of potential CERCLA liability at a former facility, the February 2006 settlement of Kinston plant explosion litigation, and reliance on single-source raw material suppliers. Becton, Dickinson and Company was the largest customer at approximately 11% of 2005 net sales.

02—Key points

Key Highlights

  1. Net sales rose 29.2% to $699.7 million in 2005, with acquisitions contributing 19.7 percentage points and foreign exchange 0.5 percentage points; excluding those effects, sales grew 9.0%.
  2. Operating profit increased to $72.2 million from $48.2 million, and diluted earnings from continuing operations were $1.39 per share versus $1.09 in 2004.
  3. Gross margin declined to 27.5% from 28.8%, with the acquired TGI business cited as the main source of lower-margin revenue.
  4. Acquisitions totaled roughly $186.2 million in purchase price, led by TGI at $140.5 million, which expanded the Tech Group segment to $170.1 million in sales.
  5. Total debt increased to $281.0 million from $160.8 million, and the debt-to-total-invested-capital ratio rose to 45.4% from 34.8%.
  6. Management guides 2006 revenues of $810 to $830 million and diluted earnings of $1.60 to $1.70 per share.
  7. In February 2006, the company prepaid its $100 million 6.81% senior notes using euro-denominated notes at a weighted average rate of 4.34%, which it expects to reduce annual pre-tax financing costs by about $2.5 million.

03—Questions

Frequently Asked Questions

  1. How much did West Pharmaceutical's sales and earnings grow in 2005?

    Net sales were $699.7 million, up 29.2% from $541.6 million in 2004. Net income was $45.6 million, or $1.40 per diluted share, compared with $19.4 million, or $0.63 per diluted share, in 2004. Income from continuing operations was $45.2 million, or $1.39 per diluted share.

  2. What drove the increase in 2005 results?

    The filing attributes most of the sales increase to acquisitions, which added 19.7 percentage points. Excluding acquisitions and foreign exchange, net sales grew 9.0%. Pharmaceutical Systems sales rose 11.9%, and Tech Group sales rose to $170.1 million from $67.9 million, mainly because of the TGI acquisition.

  3. Did the company's debt increase significantly?

    Yes. Total debt rose to $281.0 million at December 31, 2005, from $160.8 million a year earlier, to fund 2005 acquisitions. The debt-to-total-invested-capital ratio was 45.4%, compared with 34.8% at the end of 2004. Management expects to reduce that ratio by about two percentage points by the end of 2006.

  4. What is the outlook for 2006?

    Management expects full-year 2006 revenues of $810 to $830 million under U.S. GAAP, including about ten percentage points of growth from the timing of 2005 acquisitions. Excluding acquisition timing and currency effects, revenue growth is expected to be 7% to 10%. Diluted earnings per share are expected to be $1.60 to $1.70.

  5. What significant risks or legal matters are disclosed?

    The filing discloses that Becton, Dickinson and Company accounted for about 11% of 2005 net sales, and that the company relies on single-source suppliers for many critical raw materials. It also reports that the Commonwealth of Puerto Rico notified West that it may be potentially responsible for environmental damages at a former facility, with litigation possible. The company settled Kinston plant explosion litigation on February 2, 2006, with its monetary contribution limited to insurance deductibles already recorded.

04—Continue

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