01—Abstract
Summary
Summary of the 10-K filed February 27, 2009. Cited figures are marked; the original filing is the authoritative source.
West Pharmaceutical Services, Inc. reported net sales of $1,051.1 milliona for fiscal 2008, up from $1,020.1 million in 2007, with growth driven mainly by favorable foreign currency translation and price increases, partly offset by lost sales of $63 million from regulatory and insurance reimbursement constraints and discontinued products.
Income from continuing operations rose to $86.0 millionb, or $2.50 per diluted share, versus $71.2 million, or $2.06 per diluted share, in 2007. Operating profit increased to $124.1 million from $94.9 million, with 2007 burdened by $26.4 million of unallocated charges, including the Exubera-related Nektar impairment and Brazilian tax provisions. The Pharmaceutical Systems segment generated sales of $792.1 million, up 6.8%, while the Tech Group segment's sales fell 6.5% to $270.5 million after the loss of Exubera device business.
Operating cash flow was $135.0 millionc, and total debt was $386.0 million, with net debt-to-total invested capital of 38.0%. Pension performance weakened, with the U.S. pension assets declining 25% and the net pension underfunded balance rising to $73.0 million from $14.8 million.
Management's 2009 outlook calls for consolidated sales of $1.01 billion to $1.03 billiond, a reduction of 2% to 4% from 2008 after an expected unfavorable currency impact of approximately 7%, and projects roughly $10 million of incremental pension expense. Capital spending is budgeted at approximately $140.0 million, and R&D spending is expected to rise about 25%.
02—Key points
Key Highlights
- Net sales of $1,051.1 million, up $31.0 million or 3.0% from 2007, driven mainly by favorable currency translation and price increases.
- Income from continuing operations of $86.0 million, or $2.50 per diluted share, compared with $71.2 million, or $2.06 per diluted share, in 2007.
- Operating profit of $124.1 million, up from $94.9 million, with 2007 including $26.4 million of unallocated charges.
- Pharmaceutical Systems sales rose 6.8% to $792.1 million, while Tech Group sales declined 6.5% to $270.5 million after the loss of Exubera device business.
- Operating cash flow of $135.0 million and capital spending of $138.6 million; total debt of $386.0 million and net debt-to-total invested capital of 38.0%.
- Net pension underfunded balance increased to $73.0 million from $14.8 million, reflecting poor 2008 investment performance; about $10 million of incremental 2009 pension expense is expected.
- 2009 guidance projects consolidated sales of $1.01 billion to $1.03 billion, a 2% to 4% reduction from 2008 after an expected approximately 7% unfavorable currency impact.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, West Pharmaceutical Services kept $0.08.
- Revenue$1.05B100.0%
- Cost of revenue−$748.5M71.2%
- Gross profit$302.6M28.8%
- Operating costs−$178.5M17.0%
- Operating income$124.1M11.8%
- Interest, other & tax−$38.1M3.6%
- Net income$86.0M8.2%
Where FY2008 revenue went
$1.05B- Cost of revenue: $748.5M, 71% of revenue
- SG&A: $159.3M, 15% of revenue
- Net income: $86.0M, 8.2% of revenue
- R&D: $18.7M, 1.8% of revenue
- Interest, other & tax: $38.1M, 3.6% of revenue
Kept 8.2% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 27, 2009Financial Statements
| Revenue | $1.05B |
| Cost of Revenue | $748.50M |
| Gross Profit | $302.60M |
| R&D Expenses | $18.70M |
| SG&A Expenses | $159.30M |
| Operating Income | $124.10M |
| Interest Expense | $16.00M |
| Net Income | $86.00M |
| EPS (Basic) | $2.65 |
| EPS (Diluted) | $2.50 |
| Shares Outstanding (Basic) | 32.40M |
| Shares Outstanding (Diluted) | 36.10M |
05—Questions
Frequently Asked Questions
How did West Pharmaceutical perform financially in 2008?
Net sales rose 3.0% to $1,051.1 million and income from continuing operations increased to $86.0 million, or $2.50 per diluted share, from $71.2 million, or $2.06 per diluted share, in 2007. Operating profit reached $124.1 million, compared with $94.9 million in 2007.
What drove the segment results?
Pharmaceutical Systems sales increased 6.8% to $792.1 million, supported by price increases and favorable currency translation, partly offset by lost sales from regulatory and insurance reimbursement constraints. Tech Group sales fell 6.5% to $270.5 million, mainly due to the loss of Exubera device sales of $33 million, though Tech Group operating profit rose to $17.8 million from $11.6 million.
What is the company's outlook for 2009?
Management expects consolidated sales of $1.01 billion to $1.03 billion, a reduction of 2% to 4% from 2008, after an anticipated unfavorable foreign currency impact of about 7%. Excluding currency, sales are expected to grow between 3.0% and 5.0%. Pharmaceutical Systems revenue is expected to be marginally lower than 2008, and Tech Group revenue is expected to be 5% to 7% lower. Capital spending is budgeted at approximately $140.0 million.
What are the main balance sheet and liquidity considerations?
Cash and cash equivalents were $87.2 million and total debt was $386.0 million at year-end 2008. Working capital was $207.1 million with a current ratio of 2.3 to 1. The company had $165.0 million of unused commitment under its $200.0 million revolving credit facility, which expires in 2011. Shareholders' equity was $487.1 million.
What risks did the filing highlight for investors?
The filing cites international exposure, with about 54% of consolidated net sales from outside the U.S., and currency fluctuations. It also notes raw material and energy cost pressures, reliance on single-source suppliers for many critical materials, pricing pressure, and risks from the multi-year SAP ERP implementation. Pension underfunding rose sharply after 2008 investment losses, and the filing discusses the effects of current economic conditions on customer demand.
06—Continue