01—Abstract
Summary
Summary of the 10-K filed February 25, 2010. Cited figures are marked; the original filing is the authoritative source.
West Pharmaceutical Services, Inc. reported net sales of $1,055.7 milliona for 2009, essentially flat versus $1,051.1 million in 2008.
Excluding foreign currency effects, net sales rose $37.1 millionb, or 3.5%. Operating profit fell to $97.5 million from $124.1 million, reflecting higher U.S. pension expense ($16.7 million versus $6.0 million), restructuring and other unallocated charges of $8.5 million, and unfavorable currency translation. Net income from continuing operations was $72.6 million, or $2.12 per diluted share, compared with $86.0 million, or $2.50 per diluted share, in 2008.
Operating cash flow rose to $137.7 millionc from $135.0 million. The company's total debt was $379.6 million at year-end 2009, down from $386.0 million, and the net debt-to-total invested capital ratio improved to 33.9% from 38.0%. Cash and cash equivalents were $83.1 million, and $174.5 million of borrowing capacity remained under the $200.0 million revolving credit agreement, which expires in February 2011.
Capital spending was $104.9 milliond in 2009, and management expects 2010 capital spending of $115 million to $130 million. The order backlog was $238.7 million at December 31, 2009.
Effective January 1, 2010, West realigned its operations into two divisions, Pharmaceutical Packaging Systems and Pharmaceutical Delivery Systems, and management expects full-year 2010 revenues to grow moderately and operating profit to increase. Risks flagged in the filing include global economic conditions, pricing pressure, raw material and energy costs, international currency exposure, and potential U.S. healthcare legislation.
02—Key points
Key Highlights
- Net sales of $1,055.7 million in 2009, up marginally from $1,051.1 million in 2008; excluding currency effects, sales rose $37.1 million, or 3.5%.
- Operating profit declined to $97.5 million from $124.1 million, driven by U.S. pension expense of $16.7 million and $8.5 million of restructuring and other items.
- Diluted earnings per share from continuing operations were $2.12, compared with $2.50 in 2008.
- Operating cash flow of $137.7 million; total debt reduced to $379.6 million and net debt-to-total invested capital improved to 33.9% from 38.0%.
- Order backlog of $238.7 million at December 31, 2009, mostly expected to be filled in fiscal 2010.
- Business realigned effective January 1, 2010 into Pharmaceutical Packaging Systems and Pharmaceutical Delivery Systems; 2010 capital spending expected at $115 million to $130 million.
- Quarterly dividend increased to $0.16 per share in the fourth quarter of 2009 from $0.15; the company acquired Plastef's business assets in France in July 2009 for $16.9 million in cash.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, West Pharmaceutical Services kept $0.07.
- Revenue$1.06B100.0%
- Cost of revenue−$752.1M71.2%
- Gross profit$303.6M28.8%
- Operating costs−$206.1M19.5%
- Operating income$97.5M9.2%
- Interest, other & tax−$24.9M2.4%
- Net income$72.6M6.9%
Where FY2009 revenue went
$1.06B- Cost of revenue: $752.1M, 71% of revenue
- SG&A: $177.7M, 17% of revenue
- Net income: $72.6M, 6.9% of revenue
- R&D: $19.9M, 1.9% of revenue
- Other operating costs: $8.5M, 0.8% of revenue
- Interest, other & tax: $24.9M, 2.4% of revenue
Kept 6.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 25, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $1.06B$1.05B | +0.4% |
| Cost of Revenue | $752.10M$748.50M | +0.5% |
| Gross Profit | $303.60M$302.60M | +0.3% |
| R&D Expenses | $19.90M$18.70M | +6.4% |
| SG&A Expenses | $177.70M$159.30M | +11.6% |
| Operating Income | $97.50M$124.10M | −21.4% |
| Interest Expense | $15.20M$16.00M | −5.0% |
| Net Income | $72.60M$86.00M | −15.6% |
| EPS (Basic) | $2.21$2.65 | −16.6% |
| EPS (Diluted) | $2.12$2.50 | −15.2% |
| Shares Outstanding (Basic) | 32.80M32.40M | +1.2% |
| Shares Outstanding (Diluted) | 36.30M36.10M | +0.6% |
05—Questions
Frequently Asked Questions
How did West Pharmaceutical's profitability change in 2009?
Net income from continuing operations fell to $72.6 million, or $2.12 per diluted share, from $86.0 million, or $2.50 per diluted share, in 2008. Operating profit dropped to $97.5 million from $124.1 million, mainly due to higher U.S. pension expense of $16.7 million, restructuring and other unallocated charges, and unfavorable currency translation.
What is the company's debt and liquidity position?
Total debt was $379.6 million at December 31, 2009, versus $386.0 million a year earlier, and cash and cash equivalents were $83.1 million. The company had $174.5 million of unused borrowing capacity under its $200.0 million revolving credit agreement, which expires in February 2011, and stated it intends to enter a replacement facility before that date.
What restructuring actions did West announce?
In November 2009, West announced restructuring plans affecting both segments. Estimated costs were about $9.0 million in total, and the company expected to eliminate an estimated 100 positions. Pharmaceutical Systems incurred $7.0 million of charges and Tech Group $0.6 million in 2009, with the balance expected through 2010.
What does the company expect for 2010?
Management expects full-year 2010 revenues to grow moderately, driven by volume and mix improvements, safety and administration systems, and innovation product launches, with selling price increases contributing a smaller portion. It believes higher revenues and a lower cost structure will provide for growth in operating profit, while pension costs remain elevated though lower than 2009.
What are the main risks identified in the filing?
Risks include a slow global economic recovery, pricing pressure from customers and competitors, reliance on single-source suppliers and volatile raw material and energy prices, international currency fluctuations, dependence on injectable drug delivery, and potential U.S. healthcare legislation such as a proposed excise tax on medical device companies that could affect the new Pharmaceutical Delivery Systems division.
06—Continue