8-K
WEST PHARMACEUTICAL SERVICES INC (WST)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) – February 17, 2022
| WEST PHARMACEUTICAL SERVICES, INC. |
|---|
(Exact name of registrant as specified in its charter)
| Pennsylvania | 1-8036 | 23-1210010 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification No.) |
| 530 Herman O. West Drive, Exton, PA | 19341-0645 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: 610-594-2900
| Not Applicable |
|---|
| (Former name or address, if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||
|---|---|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||
| --- | --- | ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| --- | --- | ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.25 per share | WST | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On February 17, 2022, West Pharmaceutical Services, Inc. (the “Company”) issued a press release announcing its fourth-quarter and full year 2021 financial results. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
The information set forth in “Item 2.02 Results of Operations and Financial Condition,” including the exhibit referred to therein, is incorporated herein by reference.
A copy of the Company’s presentation materials used during the call will be available through the Investors link at the Company’s website, http://www.westpharma.com, and is also attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information in this report (including the exhibits attached hereto) is being furnished pursuant to Item 2.02 and Item 7.01 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that section, nor will it be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific referencing in such filing.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibit No. | Description |
|---|---|---|
| 99.1 | West Pharmaceutical Services, Inc. Press Release, dated February 17, 2022. | |
| 99.2 | West Pharmaceutical Services, Inc. Presentation, dated February 17, 2022. | |
| 104 | The cover page from the Company’s Current Report on Form 8-K, dated February 17, 2022, formatted in Inline XBRL. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WEST PHARMACEUTICAL SERVICES, INC. | |
|---|---|
| /s/ Bernard J. Birkett | |
| Bernard J. Birkett | |
| Senior Vice President and Chief Financial Officer | |
| February 17, 2022 |
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | West Pharmaceutical Services, Inc. Press Release, dated February 17, 2022. |
| 99.2 | West Pharmaceutical Services, Inc. Presentation, dated February 17, 2022. |
| 104 | The cover page from the Company’s Current Report on Form 8-K, dated February 17, 2022, formatted in Inline XBRL. |
4
Document
Exhibit 99.1
West Announces Fourth-Quarter and Full-Year 2021 Results
- Conference Call Scheduled for 9 a.m. EST Today -
Exton, PA, February 17, 2022 – West Pharmaceutical Services, Inc. (NYSE: WST) today announced its financial results for the fourth-quarter and full-year 2021 and introduced full-year 2022 financial guidance.
Fourth-Quarter and Full-Year 2021 Summary (comparisons to prior-year period)
•Fourth-quarter 2021 net sales of $730.8 million grew 26.0%; organic sales growth was 28.3%. Full-year 2021 net sales of $2.832 billion grew 31.9%; organic sales growth was 29.4%.
•Fourth-quarter 2021 reported-diluted EPS of $1.93 increased 49.6%. Full-year 2021 reported-diluted EPS of $8.67 increased 89.7%.
•Fourth-quarter 2021 adjusted-diluted EPS of $2.04 increased 52.2%. Full-year 2021 adjusted-diluted EPS of $8.58 increased 80.3%.
•Company is introducing full-year 2022 financial guidance of net sales in a range of $3.050 billion to $3.075 billion and reported-diluted EPS in a range of $9.20 to $9.35.
“Adjusted-diluted EPS” and “organic sales growth” are Non-U.S. GAAP measurements. See discussion under the heading “Non-U.S. GAAP Financial Measures” in this release.
“We had a successful 2021 with record organic sales growth and gross operating margin expansion,” said Eric M. Green, President and Chief Executive Officer. “Our performance was fueled by execution across our Proprietary market units and all geographies as we serve to improve patients’ lives. Our business generated strong double-digit organic sales growth in the fourth-quarter and full-year 2021, led by sales of high-value products (HVP).”
Mr. Green added, “Our incredible West team has continued to meet the ongoing challenges of the pandemic and deliver on the strong momentum in customer demand. Proudly, we enter the year with a strong outlook in our Proprietary Products segment and continued HVP growth. Looking ahead, our capital investments and recently announced collaboration with Corning will continue to drive future growth and innovation, as we are well positioned for success in 2022 and beyond.”
Proprietary Products Segment
In the fourth-quarter 2021, net sales grew by 34.2% to $609.3 million. Organic sales growth was 36.8%, with currency translation decreasing sales growth by 260 basis points. HVP components and devices represented approximately 74% of segment sales and generated strong double-digit organic sales growth.
All three market units had double-digit organic sales growth. The Biologics market unit had strong double-digit organic sales growth, led by NovaPure® and Westar® components. The Generics and Pharma market units' organic sales growth was led by FluroTec® and Westar components.
In the full-year 2021, net sales grew 40.6% to $2.317 billion. Organic sales growth was 37.8%, with currency translation increasing sales growth by 280 basis points. HVP components and devices represented approximately 72% of segment sales and generated double-digit organic sales growth.
Contract-Manufactured Products Segment
In the fourth-quarter 2021, net sales declined by 3.6% to $121.5 million. Organic sales declined by 2.1%, with currency translation decreasing sales growth by 150 basis points. Segment performance was led by consumer products and medical device products.
In the full-year 2021, net sales grew by 3.2% to $514.7 million. Organic sales growth was 1.7%, with currency translation increasing sales growth by 150 basis points.
Full-Year 2021 Financial Highlights
Operating cash flow was $584.0 million, an increase of 23.6%. Capital expenditures were $253.4 million, compared with $174.4 million in 2020. Free cash flow (operating cash flow minus capital expenditures) was $330.6 million, an increase of 10.9%.
Full-Year 2022 Financial Guidance
Full-year 2022 net sales are expected to be in a range of $3.050 billion to $3.075 billion.
◦Organic sales growth is expected to be approximately 10%.
◦Net sales guidance includes an estimated full-year 2022 headwind of $70 million based on current foreign exchange rates.
Full-year 2022 reported-diluted EPS is expected to be in a range of $9.20 to $9.35.
◦Full-year reported-diluted EPS guidance range includes an estimated headwind of approximately $0.21 based on current foreign currency exchange rates.
◦This reported-diluted EPS guidance range assumes a full-year 2022 tax rate of 23%, which does not include potential tax benefits from stock-based compensation. As in prior years, we are not including potential 2022 tax benefits from stock-based compensation, as they are out of the Company's control. Any tax benefits associated with stock-based compensation that we receive in 2022 would provide a positive adjustment to our full-year EPS guidance.
Full-year 2022 capital spending is expected to be $380 million. This includes incremental capital spending to support capacity expansions at existing HVP facilities.
Fourth-Quarter 2021 Conference Call
The Company will host a conference call to discuss the results and business expectations at 9:00 a.m. Eastern Time today. To participate on the call please dial 877-930-8295 (U.S.) or 253-336-8738 (International). The conference ID is 1986145.
A live broadcast of the conference call will be available at the Company’s website, www.westpharma.com, in the “Investors” section. Management will refer to a slide presentation during the call, which will be made available on the day of the call. To view the presentation, select “Presentations” in the “Investors” section of the Company’s website.
An online archive of the broadcast will be available at the website three hours after the live call and will be available through Thursday, February 24, 2022, by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering conference ID 1986145.
| Investor Contact: | Media Contact: |
|---|---|
| Quintin Lai | Michele Polinsky |
| Vice President, Investor Relations | Vice President, Global Communications |
| (610) 594-3318 | (610) 594-3054 |
| Quintin.Lai@westpharma.com | Michele.Polinsky@westpharma.com |
Forward-Looking Statements
Certain forward-looking statements appear in this release and include such words as “continued,” “growth,” “will continue,” “well-positioned,” “expected,” “to be,” “includes,” “estimated,” “assumes,” “potential,” “would provide,” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this release. There is no certainty that actual results will be achieved in-line with current expectations. These forward-looking statements involve a number of risks and uncertainties. The following are some of the factors that could cause our actual results to differ materially from those expressed in or underlying our forward-looking statements: the duration and severity of the global COVID-19 pandemic, including prevailing economic conditions and general uncertainties relating thereto that may be unknown and unforeseeable; customers’ changing inventory requirements and manufacturing plans and customer decisions to move forward with our new products and product categories, including any re-prioritization of product needs due to COVID-19; other potential impacts from COVID-19, including interruptions or weaknesses in our supply chain, illness in our workforce and access to transport for our products; average profitability, or mix, of the products we sell; dependence on third-party suppliers and partners; increased raw material costs; fluctuations in currency exchange; and the ability to meet development milestones with key customers. This list of important factors is not all inclusive. For a description of certain additional factors that could cause the Company’s future results to differ from those expressed in any such forward-looking statements, see Part I Item 1A, entitled “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Except as required by law or regulation, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
Non-U.S. GAAP Financial Measures
For the purpose of aiding the comparison of our year-over-year results, we may refer to net sales and other financial results excluding the effects of changes in foreign currency exchange rates. Organic net sales exclude the impact from acquisitions and/or divestitures and translate the current-period reported sales of subsidiaries whose functional currency is other than the U.S. Dollar at the applicable foreign exchange rates in effect during the comparable prior-year period. We may also refer to financial results excluding the effects of unallocated items. The re-measured results excluding effects from currency translation and excluding the effects of unallocated items are not in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and should not be used as a substitute for the comparable U.S. GAAP financial measures. The non-U.S. GAAP financial measures are incorporated into our discussion and analysis as management uses them in evaluating our results of operations and believes that this information provides users a valuable insight into our overall performance and financial position. A reconciliation of these adjusted Non-U.S. GAAP measures to the comparable U.S. GAAP financial measures is included in the accompanying tables.
WEST PHARMACEUTICAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in millions, except per share data)
| Three Months Ended<br><br>December 31, | Twelve Months Ended<br><br>December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Net sales | $ | 730.8 | 100% | $ | 580.2 | 100% | $ | 2,831.6 | 100% | $ | 2,146.9 | 100% |
| Cost of goods and services sold | 430.2 | 59 | 369.1 | 64 | 1,655.8 | 58 | 1,379.1 | 64 | ||||
| Gross profit | 300.6 | 41 | 211.1 | 36 | 1,175.8 | 42 | 767.8 | 36 | ||||
| Research and development | 13.7 | 2 | 12.9 | 2 | 52.8 | 2 | 46.9 | 2 | ||||
| Selling, general and administrative expenses | 98.0 | 13 | 76.3 | 13 | 362.8 | 13 | 302.0 | 14 | ||||
| Other expense (income), net | 4.9 | 1 | 5.8 | 1 | 7.9 | — | 12.0 | 1 | ||||
| Operating profit | 184.0 | 25 | 116.1 | 20 | 752.3 | 27 | 406.9 | 19 | ||||
| Interest expense, net | 2.3 | — | 1.9 | — | 7.2 | — | 6.8 | — | ||||
| Other nonoperating (income) expense | (0.2) | — | (0.9) | — | (3.8) | — | (1.2) | — | ||||
| Income before income taxes | 181.9 | 25 | 115.1 | 20 | 748.9 | 27 | 401.3 | 19 | ||||
| Income tax expense | 34.2 | 5 | 20.4 | 4 | 107.2 | 4 | 72.5 | 4 | ||||
| Equity in net income of affiliated companies | — | — | (3.7) | (1) | (20.1) | (1) | (17.4) | (1) | ||||
| Net income | $ | 147.7 | 20% | $ | 98.4 | 17% | $ | 661.8 | 24% | $ | 346.2 | 16% |
| Net income per share: | ||||||||||||
| Basic | $ | 1.98 | $ | 1.33 | $ | 8.89 | $ | 4.68 | ||||
| Diluted | $ | 1.93 | $ | 1.29 | $ | 8.67 | $ | 4.57 | ||||
| Average common shares outstanding | 74.5 | 74.0 | 74.4 | 73.9 | ||||||||
| Average shares assuming dilution | 76.4 | 76.1 | 76.3 | 75.8 |
WEST PHARMACEUTICAL SERVICES
REPORTING SEGMENT INFORMATION
(UNAUDITED)
(in millions)
| Three Months Ended<br><br>December 31, | Twelve Months Ended<br><br>December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net Sales: | 2021 | 2020 | 2021 | 2020 | ||||||||
| Proprietary Products | $ | 609.3 | $ | 454.1 | $ | 2,317.3 | $ | 1,648.6 | ||||
| Contract-Manufactured Products | 121.5 | 126.1 | 514.7 | 498.6 | ||||||||
| Eliminations | — | — | (0.4) | (0.3) | ||||||||
| Consolidated Total | $ | 730.8 | $ | 580.2 | $ | 2,831.6 | $ | 2,146.9 | ||||
| Gross Profit: | ||||||||||||
| Proprietary Products | $ | 282.4 | $ | 189.4 | $ | 1,093.9 | $ | 682.2 | ||||
| Contract-Manufactured Products | 20.1 | 21.7 | 83.8 | 85.6 | ||||||||
| Unallocated items | (1.9) | — | (1.9) | — | ||||||||
| Gross Profit | $ | 300.6 | $ | 211.1 | $ | 1,175.8 | $ | 767.8 | ||||
| Gross Profit Margin | 41.1 | % | 36.4 | % | 41.5 | % | 35.8 | % | ||||
| Operating Profit (Loss): | ||||||||||||
| Proprietary Products | $ | 201.8 | $ | 121.6 | $ | 796.1 | $ | 434.5 | ||||
| Contract-Manufactured Products | 15.3 | 16.5 | 67.2 | 68.6 | ||||||||
| Stock-based compensation expense | (10.0) | (6.4) | (37.5) | (34.0) | ||||||||
| General corporate costs | (17.9) | (12.6) | (63.4) | (52.1) | ||||||||
| Adjusted Operating Profit | $ | 189.2 | $ | 119.1 | $ | 762.4 | $ | 417.0 | ||||
| Adjusted Operating Profit Margin | 25.9 | % | 20.5 | % | 26.9 | % | 19.4 | % | ||||
| Unallocated items | (5.2) | (3.0) | (10.1) | (10.1) | ||||||||
| Reported Operating Profit | $ | 184.0 | $ | 116.1 | $ | 752.3 | $ | 406.9 | ||||
| Reported Operating Profit Margin | 25.2 | % | 20.0 | % | 26.6 | % | 19.0 | % |
WEST PHARMACEUTICAL SERVICES
RECONCILIATION OF NON-U.S. GAAP MEASURES (UNAUDITED)
Please refer to “Non-U.S. GAAP Financial Measures” for more information
(in millions, except per share data)
Reconciliation of Reported and Adjusted Operating Profit, Net Income and Diluted EPS
| Three months ended December 31, 2021 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Reported (U.S. GAAP) | $ | 184.0 | $ | 34.2 | $ | 147.7 | $ | 1.93 | ||||||||||
| Pension settlement (1) | — | 0.3 | 0.8 | 0.01 | ||||||||||||||
| Cost investment activity (2) | 2.5 | — | 2.5 | 0.03 | ||||||||||||||
| Restructuring and related charges (3) | (0.3) | (0.1) | (0.2) | — | ||||||||||||||
| Amortization of acquisition-related intangible assets (4) | 0.2 | — | 0.7 | 0.01 | ||||||||||||||
| Asset impairment (5) | 2.8 | — | 2.8 | 0.04 | ||||||||||||||
| Royalty acceleration (6) | — | (2.0) | 2.0 | 0.02 | ||||||||||||||
| Adjusted (Non-U.S. GAAP) | $ | 189.2 | $ | 32.4 | $ | 156.3 | $ | 2.04 | Twelve months ended December 31, 2021 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Reported (U.S. GAAP) | $ | 752.3 | $ | 107.2 | $ | 661.8 | $ | 8.67 | ||||||||||
| Pension settlement (1) | — | 0.5 | 1.5 | 0.02 | ||||||||||||||
| Cost investment activity (2) | 4.3 | (0.1) | 4.4 | 0.06 | ||||||||||||||
| Restructuring and related charges (3) | 2.2 | 0.4 | 1.8 | 0.02 | ||||||||||||||
| Amortization of acquisition-related intangible assets (4) | 0.8 | 0.1 | 2.8 | 0.04 | ||||||||||||||
| Asset impairment (5) | 2.8 | — | 2.8 | 0.04 | ||||||||||||||
| Royalty acceleration (6) | — | 18.5 | (18.5) | (0.25) | ||||||||||||||
| Tax law changes (7) | — | 1.4 | (1.4) | (0.02) | ||||||||||||||
| Adjusted (Non-U.S. GAAP) | $ | 762.4 | $ | 128.0 | $ | 655.2 | $ | 8.58 | ||||||||||
| Three months ended December 31, 2020 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Reported (U.S. GAAP) | $ | 116.1 | $ | 20.4 | $ | 98.4 | $ | 1.29 | ||||||||||
| Pension settlement (1) | — | 0.1 | 0.3 | 0.01 | ||||||||||||||
| Cost investment impairment (2) | 2.5 | — | 2.5 | 0.03 | ||||||||||||||
| Restructuring and severance related charges (3) | 0.3 | 0.1 | 0.2 | — | ||||||||||||||
| Amortization of acquisition-related intangible assets (4) | 0.2 | — | 0.7 | 0.01 | ||||||||||||||
| Adjusted (Non-U.S. GAAP) | $ | 119.1 | $ | 20.6 | $ | 102.1 | $ | 1.34 | ||||||||||
| Twelve months ended December 31, 2020 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Reported (U.S. GAAP) | $ | 406.9 | $ | 72.5 | $ | 346.2 | $ | 4.57 | ||||||||||
| Pension settlement (1) | — | 0.9 | 2.9 | 0.04 | ||||||||||||||
| Cost investment impairment (2) | 2.5 | — | 2.5 | 0.03 | ||||||||||||||
| Restructuring and severance related charges (3) | 7.0 | 1.7 | 5.3 | 0.07 | ||||||||||||||
| Amortization of acquisition-related intangible assets (4) | 0.6 | 0.1 | 3.6 | 0.05 | ||||||||||||||
| Adjusted (Non-U.S. GAAP) | $ | 417.0 | $ | 75.2 | $ | 360.5 | $ | 4.76 |
(1)The Company recorded a pension settlement charge within other nonoperating (income) expense, as it determined that normal-course lump-sum payments for our U.S. qualified, and in 2020 our non-qualified, defined benefit pension plan exceeded the threshold for settlement accounting.
(2)During the three months ended December 31, 2021, the Company recorded a cost investment impairment charge of $2.5 million. During the twelve months ended December 31, 2021, the net cost investment activity was $4.3 million, inclusive of an impairment charge of $4.6 million offset by a $0.3 million gain on the sale of a cost investment. During the three and twelve months ended December 31, 2020, the Company recorded a cost investment impairment charge of $2.5 million.
(3)During the three and twelve months ended December 31, 2021, the Company recorded a restructuring and severance related benefit of $0.3 million and charge of $2.2 million, respectively. During the three and twelve months ended December 31, 2020, the Company recorded $0.3 million and $7.0 million, respectively, in restructuring and severance related charges.
(4)During the three and twelve months ended December 31, 2021, the Company recorded $0.2 million and $0.8 million, respectively, of amortization expense within operating profit associated with an acquisition of an intangible asset during the second quarter of 2020. During the three and twelve months ended December 31, 2021, the company recorded $0.5 million and $2.1 million, respectively, of amortization expense in association with an acquisition of increased ownership interest in Daikyo. During the three and twelve months ended December 31, 2020, the Company recorded $0.2 million and $0.6 million, respectively, of amortization expense within operating profit associated with an acquisition of an intangible asset during the second quarter of 2020. During the three and twelve months ended December 31, 2020, the company recorded $0.5 million and $3.1 million, respectively, of amortization expense in association with an acquisition of increased ownership interest in Daikyo.
(5)During the three and twelve months ended December 31, 2021, the Company recorded $2.8 million related to an asset impairment charge for certain long-lived and intangible assets within the Proprietary Products segment as it determined the carrying value exceeded the fair value of the assets. $1.9 million of this charge is recorded in Cost of Goods Sold and $0.9 million of the charge is recorded in Selling, General, and Administrative expense, due to the nature of the impaired assets.
(6)During the twelve months ended December 31, 2021, the Company prepaid future royalties from one of its subsidiaries.
(7)During the twelve months ended December 31, 2021, the Company recorded a tax benefit of $1.4 million due to the impact of a United Kingdom tax law change enacted during the period.
WEST PHARMACEUTICAL SERVICES
RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED)
Please refer to “Non-U.S. GAAP Financial Measures” for more information
(in millions, except per share data)
Reconciliation of Net Sales to Organic Net Sales (8)
| Three months ended December 31, 2021 | Proprietary | CM | Eliminations | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Reported net sales (U.S. GAAP) | $ | 609.3 | $ | 121.5 | $ | — | $ | 730.8 |
| Effect of changes in currency translation rates | 11.8 | 1.9 | — | 13.7 | ||||
| Organic net sales (Non-U.S. GAAP) (8) | $ | 621.1 | $ | 123.4 | $ | — | $ | 744.5 |
| Twelve months ended December 31, 2021 | Proprietary | CM | Eliminations | Total | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reported net sales (U.S. GAAP) | $ | 2,317.3 | $ | 514.7 | $ | (0.4) | $ | 2,831.6 |
| Effect of changes in currency translation rates | (46.1) | (7.4) | — | (53.5) | ||||
| Organic net sales (Non-U.S. GAAP) (8) | $ | 2,271.2 | $ | 507.3 | $ | (0.4) | $ | 2,778.1 |
(8)Organic net sales exclude the impact from acquisitions and/or divestitures and translate the current-period reported sales of subsidiaries whose functional currency is other than the U.S. Dollar at the applicable foreign exchange rates in effect during the comparable prior-year period.
WEST PHARMACEUTICAL SERVICES
CASH FLOW ITEMS
(UNAUDITED)
(in millions)
| Twelve Months Ended December 31, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Depreciation and amortization | $ | 122.3 | $ | 109.1 |
| Operating cash flow | $ | 584.0 | $ | 472.5 |
| Capital expenditures | $ | 253.4 | $ | 174.4 |
WEST PHARMACEUTICAL SERVICES
FINANCIAL CONDITION
(UNAUDITED)
(in millions)
| As of<br>December 31, 2021 | As of<br>December 31, 2020 | |||
|---|---|---|---|---|
| Cash and cash equivalents | $ | 762.6 | $ | 615.5 |
| Accounts receivable, net | $ | 489.0 | $ | 385.3 |
| Inventories | $ | 378.4 | $ | 321.3 |
| Accounts payable | $ | 232.2 | $ | 213.1 |
| Debt | $ | 253.0 | $ | 255.2 |
| Equity | $ | 2,335.4 | $ | 1,854.5 |
| Working capital | $ | 1,147.9 | $ | 870.3 |
Trademark Notices
Trademarks and registered trademarks are the property of West Pharmaceutical Services, Inc., in the United States and other jurisdictions, unless noted otherwise.
Daikyo Crystal Zenith® and Daikyo CZ® are registered trademarks of Daikyo Seiko, Ltd. Daikyo Crystal Zenith technologies are licensed from Daikyo Seiko, Ltd.
westq42021final
1 Fourth-Quarter 2021 and Full Year Results Full Year Overall Net Sales $2.832B | 31.9% Diluted Earnings Per Share: $8.67 | 90% Adjusted Diluted Earnings Per Share: $8.58| 80% Eric M. Green President and Chief Executive Officer West Pharmaceutical Services, Inc. WST Q4/FY 2021 Earnings “We had a successful 2021 with record organic sales growth and gross operating margin expansion. Our performance was fueled by execution across our Proprietary market units and all geographies as we serve to improve patients’ lives. Our business generated strong double-digit organic sales growth in the fourth quarter and full-year 2021, led by sales of high- value products (HVP).” “Our incredible West team has continued to meet the ongoing challenges of the pandemic and deliver on the strong momentum in customer demand. Proudly, we enter the year with a strong outlook in our Proprietary Products segment and continued HVP growth. Looking ahead, our capital investments and recently announced collaboration with Corning will continue to drive future growth and innovation, as we are well positioned for success in 2022 and beyond.” Cautionary Statement Under the Private Securities Litigation Reform Act of 1995 This presentation and any accompanying management commentary contain “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about product development and operational performance. Each of these statements is based on preliminary information, and actual results could differ from any preliminary estimates. We caution investors that the risk factors listed under “Cautionary Statement” in our press releases, as well as those set forth under the caption "Risk Factors" in our most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission and as revised or supplemented by our quarterly reports on Form 10-Q, could cause our actual results to differ materially from those estimated or predicted in the forward-looking statements. You should evaluate any statement in light of these important factors. Except as required by law or regulation, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. Non-U.S. GAAP Financial Measures Certain financial measures included in these presentation materials, or which may be referred to in management’s discussion of the Company’s results and outlook, have not been calculated in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), and therefore are referred to as non- U.S. GAAP financial measures. Non-U.S. GAAP financial measures should not be considered in isolation or as an alternative to such measures determined in accordance with U.S. GAAP. Please refer to “Reconciliation of Non-U.S. GAAP Financial Measures” at the end of these materials for more information. Q4 2021 Overall Net Sales $730.8M | 26.0% Diluted Earnings Per Share: $1.93 | 50% Adjusted Diluted Earnings Per Share: $2.04| 52%
West Pharmaceutical Services, Inc. Eric M. Green President & CEO Bernard J. Birkett Senior Vice President & CFO Fourth-Quarter and Full Year Results 2021 Analyst Conference Call 9 a.m. Eastern Time | February 17, 2022
3 West Analyst Conference Call 9 a.m. Eastern Time February 17, 2022 A webcast of today’s call can be accessed in the “Investors” section of the Company’s website: www.westpharma.com To participate on the call, please dial: 877-930-8295 (U.S.) 253-336-8738 (International) The conference ID is 1986145 An online archive of the broadcast will be available at the website three hours after the live call and will be available through Thursday, February 24, 2022 by dialing: These presentation materials are intended to accompany today’s press release announcing the Company’s results for the fourth quarter and full year 2021 and management’s discussion of those results during today’s conference call. 855-859-2056 (U.S.) 404-537-3406 (International) The conference ID is 1986145 WST Q4/FY 2021 Earnings
4 Safe Harbor Statement This presentation and any accompanying management commentary contain “forward- looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about product development and operational performance. Each of these statements is based on preliminary information, and actual results could differ from any preliminary estimates. We caution investors that the risk factors listed under “Cautionary Statement” in our press releases, as well as those set forth under the caption "Risk Factors" in our most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission and as revised or supplemented by our quarterly reports on Form 10-Q, could cause our actual results to differ materially from those estimated or predicted in the forward-looking statements. You should evaluate any statement in light of these important factors. Except as required by law or regulation, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. Certain financial measures included in these presentation materials, or which may be referred to in management’s discussion of the Company’s results and outlook, have not been calculated in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), and therefore are referred to as non-U.S. GAAP financial measures. Non-U.S. GAAP financial measures should not be considered in isolation or as an alternative to such measures determined in accordance with U.S. GAAP. Please refer to “Reconciliation of Non-U.S. GAAP Financial Measures” at the end of these materials for more information. Cautionary Statement Under the Private Securities Litigation Reform Act of 1995 Non-U.S. GAAP Financial Measures Trademarks and registered trademarks used in this report are the property of West Pharmaceutical Services, Inc. or its subsidiaries, in the United States and other jurisdictions, unless noted otherwise. Daikyo Crystal Zenith® and Daikyo CZ® are registered trademarks of Daikyo Seiko, Ltd. Daikyo Crystal Zenith technologies are licensed from Daikyo Seiko, Ltd. Trademarks WST Q4/FY 2021 Earnings
5 OUR CORE VALUES OUR MISSION OUR VISION OUR PURPOSE We contain and deliver injectable therapies that improve patient lives. We serve to improve patient lives. To be the world leader in the integrated containment and delivery of injectable medicines. Passion for Customers Leadership in Quality One West Team MAKING AN IMPACT TO OUR STAKEHOLDERS EXECUTE | INNOVATE | GROW — ENTERPRISE STRATEGIC PLAN — WST Q4/FY 2021 Earnings
6 Financial Results • Fourth quarter 2021 net sales of $730.8 million grew 26.0%; organic sales growth was 28.3% • Fourth quarter 2021 reported-diluted EPS of $1.93 increased 49.6%; adjusted- diluted EPS of $2.04 increased 52.2% • Full year 2021 net sales of $2.832 billion grew 31.9%; organic sales growth was 29.4% • Full year 2021 reported-diluted EPS of $8.67 increased 89.7%; adjusted-diluted EPS of $8.58 increased 80.3% WST Q4/FY 2021 Earnings
7 Donated over $2.5M to our local communities to help those in greatest need Delivered over 50 scientific presentations, and published over 55 peer-reviewed and industry publications 865+ new team members joined West Shipped close to 45 billion components touching billions of patients Rose to the challenge of being a critical supplier for majority of vaccines around globe Launched DeltaCube™ Launched five HVP product extensions Advanced our Digital Journey with new global ERP system across sites, refreshed Westpharma.com and virtual experience Expanded capacity at 13 existing sites with 30 major facility modifications and over 400 pieces of equipment, ALL while keeping pace with the growing demand WST Q4/FY 2021 Earnings West is a Global Leader in Containment and Delivery of Injectable Medicines
8 Six Pillars: 250+ charitable organizations that West partnered with across the globe in absolute water consumption from 2019 to 2020 >65% of West’s C-suite comprised of women, people of color or international diversity in Energy from 2019 to 2020 in waste recycled and global waste diversion at sites in 2020 West is Driving Sustainable Business Practices • Compliance & Ethics • Philanthropy • Health & Safety • Diversity & Talent • Environmental Sustainability • Quality Progress Reduction Improvement United Nations Global Compact ESG Reporting Standards • Global Reporting Index Standards (GRI) -2020 • Task Force on Climate-Related Financial Disclosures (TFCD)* -2021 • Sustainability Accounting Standards Board ESG (SASB)*- 2021 * Published as supplement to 2020 CR reportCorporate Social Responsibility WST Q4/FY 2021 Earnings
9 STERILIZED WASHED CAMERA INSPECTED CONTAINMENT QUALITY BY DESIGN SELF-INJECTION COMPLEXITY OF PROBLEM SOLVED COATED COLLABORATION Delivering Customer Needs with High-Value Products & Services WST Q4/FY 2021 Earnings
10 Fourth-Quarter 2021 Summary Results ($ millions, except earnings-per-share (EPS) data) Three Months Ended December 31 2021 2020 Reported Net Sales $730.8 $580.2 Gross Profit Margin 41.1% 36.4% Reported Operating Profit $184.0 $116.1 Adjusted Operating Profit (1) $189.2 $119.1 Reported Operating Profit Margin 25.2% 20.0% Adjusted Operating Profit Margin (1) 25.9% 20.5% Reported-Diluted EPS $1.93 $1.29 Adjusted-Diluted EPS (1) $2.04 $1.34 “Adjusted Operating Profit,” “Adjusted Operating Profit Margin” and “Adjusted-Diluted EPS” are Non-U.S. GAAP financial measures. See slides 18-22 and the discussion under the heading “Non-U.S. GAAP Financial Measures” in today’s press release for an explanation and reconciliation of these items. (1) WST Q4 2021 Earnings
11 Overall Organic Sales Growth – 28.3% (Q4 2021) Proprietary Products Q4 2021 organic sales growth of 36.8% led by sales of high-value products, which grew double digits BIOLOGICS GENERICS PHARMA Sales led by high-value products, including NovaPure® and Westar® components Sales led by high-value products, including FluroTec® and Westar® components Sales led by high-value products, including FluroTec® and Westar® components CONTRACT MANUFACTURING Organic sales decline of 2.1%, led by sales of consumer products and medical device products Double-Digit Double-Digit (Low-Single Digit)Double-Digit Fourth-Quarter 2021 Organic Sales Growth WST Q4/FY 2021 Earnings
12 Change in Consolidated Net Sales Fourth-quarter 2020 to 2021 ($ millions) WST Q4/FY 2021 Earnings
13 Gross Profit Update ($ millions) Three Months Ended December 31, 2021 2020 Proprietary Products Gross Profit $282.4 $189.4 Proprietary Products Gross Profit Margin 46.3% 41.7% Contract-Manufactured Products Gross Profit $20.1 $21.7 Contract-Manufactured Products Gross Profit Margin 16.5% 17.2% Consolidated Gross Profit $300.6 $211.1 Consolidated Gross Profit Margin 41.1% 36.4% WST Q4/FY 2021 Earnings
14 Cash Flow and Balance Sheet Metrics ($ millions) Cash Flow Items YTD Q4 2021 YTD Q4 2020 Depreciation and Amortization $122.3 $109.1 Operating Cash Flow $584.0 $472.5 Capital Expenditures $253.4 $174.4 Financial Condition December 31, 2021 December 31, 2020 Cash and Cash Equivalents $762.6 $615.5 Debt $253.0 $255.2 Equity $2,335.4 $1,854.5 Working Capital $1,147.9 $870.3 WST Q4/FY 2021 Earnings
15 2022 Full-Year Guidance 2022 Full-Year Guidance Consolidated Net Sales $3.050 - $3.075 billion Reported-Diluted EPS $9.20 - $9.35 WST Q4/FY 2021 Earnings
16 Strong Base Business Delivering Unique Value Global Operational Effectiveness Accelerating Investments for the Future Innovating for a Healthier World We enable our customers’ ability to support patient health and fuel a brighter future with product innovation. WST Q4/FY 2021 Earnings
17 Eric M. Green President and Chief Executive Officer Bernard J. Birkett Senior Vice President and Chief Financial Officer Quintin Lai Vice President, Corporate Strategy & Investor Relations Q & A WST Q4/FY 2021 Earnings
18 Notes to Non-U.S. GAAP Financial Measures The non-U.S. GAAP financial measures are incorporated into our discussion and analysis as management uses them in evaluating our results of operations and believes that this information provides users a valuable insight into our overall performance and financial position. A reconciliation of these adjusted Non-U.S. GAAP financial measures to the comparable U.S. GAAP financial measures is included in the accompanying tables. For the purpose of aiding the comparison of our year-over-year results, we may refer to net sales and other financial results excluding the effects of changes in foreign currency exchange rates. Organic net sales exclude the impact from acquisitions and/or divestitures and translate the current-period reported sales of subsidiaries whose functional currency is other than the U.S. Dollar at the applicable foreign exchange rates in effect during the comparable prior-year period. We may also refer to financial results excluding the effects of unallocated items. The re-measured results excluding effects from currency translation, the impact from acquisitions and/or divestitures, and the effects of unallocated items are not in conformity with U.S. GAAP and should not be used as a substitute for the comparable U.S. GAAP financial measures. WST Q4/FY 2021 Earnings
19 Notes to Non-U.S. GAAP Financial Measures RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED) See “Notes to Non-U.S. GAAP Financial Measures”, “Safe Harbor Statement” (Slide 4) and today’s press release for an explanation and reconciliation of these items. Reconciliation of Reported and Adjusted Operating Profit, Net Income and Diluted EPS ($ millions, except EPS data) Three months ended December 31, 2021 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $184.0 $34.2 $147.7 $1.93 Pension settlement - 0.3 0.8 0.01 Cost investment activity 2.5 - 2.5 0.03 Restructuring and related charges (0.3) (0.1) (0.2) - Amortization of acquisition-related intangible assets 0.2 - 0.7 0.01 Asset impairment 2.8 - 2.8 0.04 Royalty acceleration - (2.0) 2.0 0.02 Adjusted (Non-U.S. GAAP) $189.2 $32.4 $156.3 $2.04 Twelve months ended December 31, 2021 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $752.3 $107.2 $661.8 $8.67 Pension settlement - 0.5 1.5 0.02 Cost investment activity 4.3 (0.1) 4.4 0.06 Restructuring and related charges 2.2 0.4 1.8 0.02 Amortization of acquisition-related intangible assets 0.8 0.1 2.8 0.04 Asset impairment 2.8 - 2.8 0.04 Royalty acceleration - 18.5 (18.5) (0.25) Tax law changes - 1.4 (1.4) (0.02) Adjusted (Non-U.S. GAAP) $762.4 $128.0 $655.2 $8.58 WST Q4/FY 2021 Earnings
20 Notes to Non-U.S. GAAP Financial Measures RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED) See “Notes to Non-U.S. GAAP Financial Measures”, “Safe Harbor Statement” (Slide 4) and today’s press release for an explanation and reconciliation of these items. Reconciliation of Reported and Adjusted Operating Profit, Net Income and Diluted EPS ($ millions, except EPS data) Three months ended December 31, 2020 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $116.1 $20.4 $98.4 $1.29 Pension settlement - 0.1 0.3 0.01 Cost investment impairment 2.5 - 2.5 0.03 Restructuring and severance related charges 0.3 0.1 0.2 - Amortization of acquisition-related intangible assets 0.2 - 0.7 0.01 Adjusted (Non-U.S. GAAP) $119.1 $20.6 $102.1 $1.34 Twelve months ended December 31, 2020 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $406.9 $72.5 $346.2 $4.57 Pension settlement - 0.9 2.9 0.04 Cost investment impairment 2.5 - 2.5 0.03 Restructuring and severance related charges 7.0 1.7 5.3 0.07 Amortization of acquisition-related intangible assets 0.6 0.1 3.6 0.05 Adjusted (Non-U.S. GAAP) $417.0 $75.2 $360.5 $4.76 WST Q4/FY 2021 Earnings
21 Notes to Non-U.S. GAAP Financial Measures RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED) See “Notes to Non-U.S. GAAP Financial Measures”, “Safe Harbor Statement” (Slide 4) and today’s press release for an explanation and reconciliation of these items. Reconciliation of Net Sales to Organic Net Sales (1) ($ millions) Organic net sales exclude the impact from acquisitions and/or divestitures and translate the current-period reported sales of subsidiaries whose functional currency is other than the U.S. Dollar at the applicable foreign exchange rates in effect during the comparable prior-year period. (1) Three months ended December 31, 2021 Proprietary CM Eliminations Total Reported net sales (U.S. GAAP) $609.3 $121.5 $ - $730.8 Effect of changes in currency translation rates 11.8 1.9 - 13.7 Organic net sales (Non-U.S. GAAP) (1) $621.1 $123.4 $ - $744.5 Twelve months ended December 31, 2021 Proprietary CM Eliminations Total Reported net sales (U.S. GAAP) $2,317.3 $514.7 $(0.4) $2,831.6 Effect of changes in currency translation rates (46.1) (7.4) - (53.5) Organic net sales (Non-U.S. GAAP) (1) $2,271.2 $507.3 $(0.4) $2,778.1 WST Q4/FY 2021 Earnings
22 Notes to Non-U.S. GAAP Financial Measures RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED) See “Notes to Non-U.S. GAAP Financial Measures”, “Safe Harbor Statement” (Slide 4) and today’s press release for an explanation and reconciliation of these items. Reconciliation of Reported-Diluted EPS Guidance to Adjusted-Diluted EPS Guidance 2021 Actual 2022 Guidance % Change Reported-diluted EPS (U.S. GAAP) $8.67 $9.20 to $9.35 6.1% to 7.8% Pension settlement 0.02 - Cost investment activity 0.06 - Restructuring and related charges 0.02 - Amortization of acquisition-related intangible assets 0.04 0.04 Asset impairment 0.04 - Royalty acceleration (0.25) - Tax law changes (0.02) - Adjusted-diluted EPS (Non-U.S. GAAP) (1) $8.58 $9.24 to $9.39 7.7% to 9.4% (1) See “Full-year 2022 Financial Guidance” and “Non-U.S. GAAP Financial Measures” in today’s press release for additional information regarding reported and adjusted-diluted EPS. We have opted not to forecast 2022 tax benefits from stock-based compensation in upcoming quarters, as they are out of the Company’s control. Instead, we recognize the benefits as they occur. In 2021, tax benefits associated with stock-based compensation increased adjusted-diluted EPS by $0.41. In 2020, tax benefits associated with stock- based compensation increased adjusted-diluted EPS by $0.27. WST Q4/FY 2021 Earnings