01—Abstract
Summary
Summary of the 10-K filed February 21, 2023. Cited figures are marked; the original filing is the authoritative source.
West Pharmaceutical Services, Inc. reported net sales of $2,886.9 milliona for 2022, up 2.0% from $2,831.6 million in 2021, with consolidated net sales growing 7.7% excluding foreign currency translation effects.
Proprietary Products net sales rose 3.9% to $2,406.8 millionb, while Contract-Manufactured Products net sales fell 6.7% to $480.4 million. Sales outside the U.S. accounted for 55.4% of net sales in 2022. Consolidated operating profit declined 2.4% to $734.0 million, and consolidated gross profit margin fell to 39.4% from 41.5%, reflecting inflationary headwinds, plant spend and higher labor and overhead costs.
Net income decreased to $585.9 millionc, or $7.73 per diluted share, from $661.8 million, or $8.67 per diluted share, largely due to a $52.2 million pension settlement charge and $23.8 million in restructuring and related charges. Cash flow and balance sheet strength improved. Net cash provided by operating activities rose to $724.0 million from $584.0 million, cash and cash equivalents reached $894.3 million, and total debt fell to $208.9 million from $253.0 million.
The company repurchased $202.8 milliond of its shares in 2022, and in February 2023 its Board approved a new share repurchase program of up to $1.0 billion. Dividends declared were $0.74 per share for 2022 and the Q4 2022 quarterly dividend was $0.19 per share. Management also reports that the Russia-Ukraine conflict has not had a material impact on the company to date, while inflation, raw material costs and supply chain constraints remain key risks.
The company's 2022 restructuring plan targets $22 million to $24 million in annualized savings, against restructuring charges of approximately $25 million to $27 million. Management expects its Credit Facility, cash on hand and operating cash flow to meet foreseeable liquidity needs, and it reported no outstanding borrowings under the $500.0 million revolving facility at December 31, 2022.
02—Key points
Key Highlights
- Net sales of $2,886.9 million in 2022, up 2.0% from $2,831.6 million in 2021; up 7.7% excluding foreign currency translation effects.
- Proprietary Products net sales increased 3.9% to $2,406.8 million, driven by high-value product growth including NovaPure, Envision and Westar products.
- Net income declined to $585.9 million ($7.73 diluted EPS) from $661.8 million ($8.67 diluted EPS), including a $52.2 million pension settlement charge.
- Adjusted (non-U.S. GAAP) diluted EPS was $8.58 in 2022, flat with 2021, excluding unallocated items.
- Gross profit margin fell to 39.4% from 41.5%, due to inflation, increased plant spend, and higher labor and overhead costs, partly offset by sales price increases.
- Operating cash flow rose to $724.0 million from $584.0 million; cash and equivalents of $894.3 million and total debt of $208.9 million at year-end 2022.
- Board approved a new share repurchase program of up to $1.0 billion in February 2023, following $202.8 million of repurchases in 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, West Pharmaceutical Services kept $0.20.
- Revenue$2.89B100.0%
- Cost of revenue−$1.75B60.6%
- Gross profit$1.14B39.4%
- Operating costs−$402.2M13.9%
- Operating income$734.0M25.4%
- Interest, other & tax−$148.1M5.1%
- Net income$585.9M20.3%
Where FY2022 revenue went
$2.89B- Cost of revenue: $1.75B, 61% of revenue
- Net income: $585.9M, 20% of revenue
- R&D: $58.5M, 2.0% of revenue
- SG&A: $316.9M, 11% of revenue
- Other operating costs: $26.8M, 0.9% of revenue
- Interest, other & tax: $148.1M, 5.1% of revenue
Kept 20% as net incomeR&D $58.5M · 2.0%Other operating costs $26.8M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 21, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $2.89B$2.83B | +2.0% |
| Cost of Revenue | $1.75B$1.66B | +5.7% |
| Gross Profit | $1.14B$1.18B | −3.4% |
| R&D Expenses | $58.50M$52.80M | +10.8% |
| SG&A Expenses | $316.90M$362.80M | −12.7% |
| Operating Income | $734.00M$752.30M | −2.4% |
| Interest Expense | $7.90M$8.20M | −3.7% |
| Net Income | $585.90M$661.80M | −11.5% |
| EPS (Basic) | $7.87$8.89 | −11.5% |
| EPS (Diluted) | $7.73$8.67 | −10.8% |
| Shares Outstanding (Basic) | 74.40M74.40M | 0.0% |
| Shares Outstanding (Diluted) | 75.80M76.30M | −0.7% |
05—Questions
Frequently Asked Questions
How did West Pharmaceutical's revenue perform in 2022?
Consolidated net sales rose 2.0% to $2,886.9 million from $2,831.6 million. Excluding foreign currency translation effects, net sales increased 7.7%, with sales price increases of approximately $106 million and a favorable product mix offsetting an unfavorable foreign currency translation impact of $162.6 million.
Why did net income decline in 2022?
Net income fell to $585.9 million from $661.8 million. The main drivers were a $52.2 million pension settlement charge related to the full settlement of the U.S. qualified defined benefit plan, $23.8 million in restructuring and related charges, and lower gross profit due to inflationary cost pressures.
What is the company's capital return and balance sheet position?
West repurchased 563,334 shares for $202.8 million in 2022 and paid dividends of $0.74 per share declared. In February 2023, the Board approved a share repurchase program of up to $1.0 billion with no expiration date. At December 31, 2022, total debt was $208.9 million, cash and cash equivalents were $894.3 million, and the $500.0 million Credit Facility had no outstanding borrowings.
What are the main risks highlighted in the filing?
Key risks include global economic conditions and inflation, supply chain disruptions and reliance on single-source raw material suppliers, foreign currency and international political exposure (55.4% of 2022 sales were outside the U.S.), pricing pressure from customers and consolidation in the pharmaceutical industry, and dependence on injectable drug delivery. The company also cites ongoing COVID-19 uncertainty and the expiration of its Daikyo license agreements in 2027.
06—Continue