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) – October 28, 2021
| 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 October 28, 2021, West Pharmaceutical Services, Inc. (the “Company”) issued a press release announcing its third-quarter 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 October 28, 2021. | |
| 99.2 | West Pharmaceutical Services, Inc. Presentation, dated October 28, 2021. | |
| 104 | The cover page from the Company’s Current Report on Form 8-K, dated October 28, 2021, 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 | |
| October 28, 2021 |
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | West Pharmaceutical Services, Inc. Press Release, dated October 28, 2021. |
| 99.2 | West Pharmaceutical Services, Inc. Presentation, dated October 28, 2021. |
| 104 | The cover page from the Company’s Current Report on Form 8-K, dated October 28, 2021, formatted in Inline XBRL. |
4
Document
Exhibit 99.1
West Announces Third-Quarter 2021 Results and Declares Fourth-Quarter 2021 Dividend
- Conference Call Scheduled for 9 a.m. EDT Today -
Exton, PA, October 28, 2021 – West Pharmaceutical Services, Inc. (NYSE: WST) today announced its financial results for the third-quarter 2021 and updated full-year 2021 financial guidance.
Third-Quarter 2021 Summary (comparisons to prior-year period)
•Net sales of $706.5 million grew 28.9%; organic sales growth was 27.9%.
•Reported-diluted EPS of $2.31 increased 112%.
•Adjusted-diluted EPS of $2.06 increased 79%.
•Company is raising full-year 2021 net sales guidance to a new range of $2.800 billion to $2.810 billion, compared to a prior range of $2.760 billion to $2.785 billion.
•Company is raising full-year 2021 adjusted-diluted EPS guidance to a new range of $8.40 to $8.50, compared to a prior range of $8.05 to $8.20.
•The Company also announced that its Board of Directors has approved a fourth-quarter 2021 dividend of $0.18 per share, a 5.9% increase over the $0.17 per share paid in each of the four preceding quarters. This is the twenty-ninth consecutive annual increase in the Company's dividend. The dividend will be paid on November 17, 2021, to shareholders of record as of November 10, 2021.
“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 robust growth in all three of our Proprietary Products market units, led by the sales of components in our High-Value Product (HVP) portfolio,” said Eric M. Green, President and Chief Executive Officer. “This quarter’s strong performance came from both our base business, especially in the Biologics market unit, and COVID-19 related sales. Demand continues to grow for our premium offerings, such as NovaPure and FluroTec components, and, as a result, we are again increasing our planned capital expenditures, commencing next year, to expand HVP capacity at existing sites.”
Proprietary Products Segment
Net sales grew by 36.9% to $577.0 million. Organic sales growth was 35.7%, with currency translation increasing sales growth by 120 basis points. HVP sales represented over 70% of segment sales and generated double-digit organic sales growth, led by customer demand for Westar®, FluroTec® and NovaPure® components and Daikyo Crystal Zenith® containers.
All three market units - Biologics, Generics and Pharma - had strong double-digit organic sales growth.
Contract-Manufactured Products Segment
Net sales grew by 2.4% to $129.7 million. Organic sales growth was 2.1% with currency translation increasing sales growth by 30 basis points. Segment performance was led by sales of healthcare-related medical devices.
Financial Highlights (first nine months of 2021)
Operating cash flow was $423.2 million, an increase of 30.7%. Capital expenditures were $176.9 million, an increase of 51.6% over the same period last year. Free cash flow (operating cash flow minus capital expenditures) was $246.3 million, an increase of 18.9%.
During the first nine months of 2021, the Company repurchased 479,000 shares for $137.1 million at an average share price of $286.23 under its share repurchase program.
Full-Year 2021 Financial Guidance
•Full-year 2021 net sales are expected to be in a range of $2.800 billion to $2.810 billion, compared to a prior guidance range of $2.760 billion to $2.785 billion.
◦Organic sales growth is expected to be 28%, compared to a prior range of 24% to 25%.
◦Net sales guidance includes an estimated full-year 2021 benefit of $55 million based on current foreign exchange rates. This updated guidance is a reduction of $25 million, compared to a prior estimated full-year benefit of $80 million.
•Full-year 2021 adjusted-diluted EPS is expected to be in a range of $8.40 to $8.50, compared to a prior range of $8.05 to $8.20.
◦Full-year adjusted-diluted EPS guidance range includes an estimated benefit of approximately $0.19 based on current foreign currency exchange rates. This updated guidance is a reduction of $0.08, compared to a prior estimated benefit of $0.27.
◦The revised guidance includes a $0.35 EPS positive impact of tax benefits from stock-based compensation from the first nine months of 2021.
◦For the remainder of the year, our EPS guidance range assumes a tax rate of approximately 23% and does not include potential tax benefits from stock-based compensation. Any tax benefits associated with stock-based compensation beyond those recorded in the first nine months of 2021 would provide a positive adjustment to our full-year EPS guidance.
Third-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 5587559.
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, November 4, 2021, by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering conference ID 5587559.
| 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 “raising,” “continues,” “increasing,” “planned,” “expected,” “to be,” “includes,” “estimated,” “assumes,” “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>September 30, | Nine Months Ended<br>September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Net sales | $ | 706.5 | 100% | $ | 548.0 | 100% | $ | 2,100.8 | 100% | $ | 1,566.7 | 100% |
| Cost of goods and services sold | 418.3 | 59 | 353.4 | 65 | 1,225.6 | 58 | 1,010.0 | 65 | ||||
| Gross profit | 288.2 | 41 | 194.6 | 35 | 875.2 | 42 | 556.7 | 35 | ||||
| Research and development | 13.1 | 2 | 12.5 | 2 | 39.1 | 2 | 34.0 | 2 | ||||
| Selling, general and administrative expenses | 91.9 | 13 | 76.2 | 14 | 264.8 | 13 | 225.7 | 14 | ||||
| Other expense (income), net | 1.8 | — | 6.7 | 1 | 3.0 | — | 6.2 | — | ||||
| Operating profit | 181.4 | 26 | 99.2 | 18 | 568.3 | 27 | 290.8 | 19 | ||||
| Interest expense, net | 1.4 | — | 1.9 | — | 4.9 | — | 4.9 | — | ||||
| Other nonoperating (income) expense | (1.1) | — | (0.4) | — | (3.6) | — | (0.3) | — | ||||
| Income before income taxes | 181.1 | 26 | 97.7 | 18 | 567.0 | 27 | 286.2 | 18 | ||||
| Income tax expense | 12.0 | 2 | 21.1 | 4 | 73.0 | 4 | 52.1 | 3 | ||||
| Equity in net income of affiliated companies | (6.5) | (1) | (5.7) | (1) | (20.1) | (1) | (13.7) | (1) | ||||
| Net income | $ | 175.6 | 25% | $ | 82.3 | 15% | $ | 514.1 | 24% | $ | 247.8 | 16% |
| Net income per share: | ||||||||||||
| Basic | $ | 2.37 | $ | 1.11 | $ | 6.95 | $ | 3.35 | ||||
| Diluted | $ | 2.31 | $ | 1.09 | $ | 6.78 | $ | 3.28 | ||||
| Average common shares outstanding | 74.1 | 73.9 | 74.0 | 73.9 | ||||||||
| Average shares assuming dilution | 76.0 | 75.8 | 75.8 | 75.6 |
WEST PHARMACEUTICAL SERVICES
REPORTING SEGMENT INFORMATION
(UNAUDITED)
(in millions)
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net Sales: | 2021 | 2020 | 2021 | 2020 | ||||||||
| Proprietary Products | $ | 577.0 | $ | 421.5 | $ | 1,708.0 | $ | 1,194.5 | ||||
| Contract-Manufactured Products | 129.7 | 126.6 | 393.2 | 372.5 | ||||||||
| Eliminations | (0.2) | (0.1) | (0.4) | (0.3) | ||||||||
| Consolidated Total | $ | 706.5 | $ | 548.0 | $ | 2,100.8 | $ | 1,566.7 | ||||
| Gross Profit: | ||||||||||||
| Proprietary Products | $ | 267.3 | $ | 171.9 | $ | 811.5 | $ | 492.8 | ||||
| Contract-Manufactured Products | 20.9 | 22.7 | 63.7 | 63.9 | ||||||||
| Gross Profit | $ | 288.2 | $ | 194.6 | $ | 875.2 | $ | 556.7 | ||||
| Gross Profit Margin | 40.8 | % | 35.5 | % | 41.7 | % | 35.5 | % | ||||
| Operating Profit (Loss): | ||||||||||||
| Proprietary Products | $ | 195.5 | $ | 107.5 | $ | 594.3 | $ | 312.9 | ||||
| Contract-Manufactured Products | 16.8 | 18.8 | 51.9 | 52.1 | ||||||||
| Stock-based compensation expense | (11.4) | (10.0) | (27.5) | (27.6) | ||||||||
| General corporate costs | (18.1) | (12.4) | (45.5) | (39.5) | ||||||||
| Adjusted Operating Profit | $ | 182.8 | $ | 103.9 | $ | 573.2 | $ | 297.9 | ||||
| Adjusted Operating Profit Margin | 25.9 | % | 19.0 | % | 27.3 | % | 19.0 | % | ||||
| Other unallocated items | (1.4) | (4.7) | (4.9) | (7.1) | ||||||||
| Reported Operating Profit | $ | 181.4 | $ | 99.2 | $ | 568.3 | $ | 290.8 | ||||
| Reported Operating Profit Margin | 25.7 | % | 18.1 | % | 27.1 | % | 18.6 | % |
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 September 30, 2021 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Reported (U.S. GAAP) | $ | 181.4 | $ | 12.0 | $ | 175.6 | $ | 2.31 | ||||||||||
| Unallocated Items: | ||||||||||||||||||
| Restructuring and related charges(1) | 0.3 | 0.1 | 0.2 | — | ||||||||||||||
| Amortization of Acquisition-related Intangible Assets (2) | 0.2 | — | 0.7 | 0.01 | ||||||||||||||
| Cost investment activity (3) | 0.9 | 0.2 | 0.7 | 0.01 | ||||||||||||||
| Royalty acceleration (4) | — | 20.4 | (20.4) | (0.27) | ||||||||||||||
| Adjusted (Non-U.S. GAAP) | $ | 182.8 | $ | 32.7 | $ | 156.8 | $ | 2.06 | Nine months ended September 30, 2021 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Reported (U.S. GAAP) | $ | 568.3 | $ | 73.0 | $ | 514.1 | $ | 6.78 | ||||||||||
| Unallocated Items: | ||||||||||||||||||
| Restructuring and related charges(1) | 2.5 | 0.6 | 1.9 | 0.02 | ||||||||||||||
| Pension Settlement (5) | — | 0.2 | 0.6 | 0.01 | ||||||||||||||
| Amortization of Acquisition-related Intangible Assets (2) | 0.6 | 0.1 | 2.1 | 0.03 | ||||||||||||||
| Cost investment activity (3) | 1.8 | (0.1) | 1.9 | 0.02 | ||||||||||||||
| Tax law changes (6) | — | 1.4 | (1.4) | (0.02) | ||||||||||||||
| Royalty acceleration (4) | — | 20.4 | (20.4) | (0.27) | ||||||||||||||
| Adjusted (Non-U.S. GAAP) | $ | 573.2 | $ | 95.6 | $ | 498.8 | $ | 6.57 | ||||||||||
| Three months ended September 30, 2020 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Reported (U.S. GAAP) | $ | 99.2 | $ | 21.1 | $ | 82.3 | $ | 1.09 | ||||||||||
| Pension Settlement (5) | — | 0.3 | 0.8 | 0.01 | ||||||||||||||
| Restructuring and severance related charges (1) | 4.5 | 1.1 | 3.4 | 0.04 | ||||||||||||||
| Amortization of Acquisition-related Intangible Assets (2) | 0.2 | — | 0.7 | 0.01 | ||||||||||||||
| Adjusted (Non-U.S. GAAP) | $ | 103.9 | $ | 22.5 | $ | 87.2 | $ | 1.15 | ||||||||||
| Nine months ended September 30, 2020 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Reported (U.S. GAAP) | $ | 290.8 | $ | 52.1 | $ | 247.8 | $ | 3.28 | ||||||||||
| Pension Settlement (5) | — | 0.8 | 2.6 | 0.03 | ||||||||||||||
| Restructuring and severance related charges (1) | 6.7 | 1.7 | 5.0 | 0.06 | ||||||||||||||
| Amortization of Acquisition-related Intangible Assets (2) | 0.4 | 0.1 | 2.9 | 0.04 | ||||||||||||||
| Adjusted (Non-U.S. GAAP) | $ | 297.9 | $ | 54.7 | $ | 258.3 | $ | 3.41 |
(1)During the three and nine months ended September 30, 2021, the Company recorded $0.3 million and $2.5 million, respectively, in restructuring and related charges in connection with its 2020 plan to optimize certain organizational structures within the Company. During the three and nine months ended September 30, 2020, the Company recorded $4.5 million and $6.7 million, respectively, in restructuring and severance related charges in connection with its 2020 plan to optimize certain organizational structures within the Company.
(2)During the three and nine months ended September 30, 2021, the Company recorded $0.2 million and $0.6 million, respectively, of amortization expense within operating profit associated with an acquisition of intangible asset acquired during the second quarter of 2020. During the three and nine months ended September 30, 2021, the Company recorded $0.5 million and $1.6 million, respectively, or amortization expense in association with an acquisition of increased ownership interest in Daikyo. During the three and nine months ended September 30, 2020 the Company recorded $0.2 million and $0.4 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 nine months ended September 30, 2020, the Company recorded $0.5 million and $2.5 million, respectively, of amortization expense in association with an acquisition of increased ownership interest in Daikyo.
(3)During the three months ended September 30, 2021, we recorded a net loss of $0.9 million on the sale of one of the Company's cost investments. During the nine months ended September 30, 2021, we recorded a net loss in our cost investment activity of $1.8 million, inclusive of an impairment charge of $2.2 million for one of the Company's cost investments recognized in the first quarter. For the three and nine months ended September 30, 2020, there was no activity related to our cost investments.
(4)During the three and nine months ended September 30, 2021, the Company prepaid future royalties from one of its subsidiaries, which resulted in a $20.4 million net tax benefit.
(5)During the nine months ended September 30, 2021, the Company recorded a pension settlement charge of $0.7 million, within other nonoperating (income) expense, as it determined that normal-course lump-sum payments for each of our U.S. qualified defined benefit pension plan exceeded the threshold for settlement accounting.
During the three and nine months ended September 30, 2020, the Company recorded a pension settlement charge of $1.1 million and $3.4 million, respectively, within other nonoperating (income) expense, as it determined that normal-course lump-sum payments for each of our U.S. qualified and non-qualified defined benefit pension plan exceeded the threshold for settlement accounting.
(6)During the nine months ended September 30, 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 (7)
| Three months ended September 30, 2021 | Proprietary | CM | Eliminations | Total |
|---|---|---|---|---|
| Reported net sales (U.S. GAAP) | $577.0 | $129.7 | $(0.2) | $706.5 |
| Effect of changes in currency translation rates | (5.0) | (0.5) | — | (5.5) |
| Organic net sales (non-U.S. GAAP) (7) | $572.0 | $129.2 | $(0.2) | $701.0 |
| Nine months ended September 30, 2021 | Proprietary | CM | Eliminations | Total |
| --- | --- | --- | --- | --- |
| Reported net sales (U.S. GAAP) | $1,708.0 | $393.2 | $(0.4) | $2,100.8 |
| Effect of changes in currency translation rates | (57.9) | (9.3) | — | (67.2) |
| Organic net sales (non-U.S. GAAP) (7) | $1,650.1 | $383.9 | $(0.4) | $2,033.6 |
(7) 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
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 Reported-Diluted EPS Guidance to Adjusted-Diluted EPS Guidance
| 2020 Actual | 2021 Guidance | % Change | |
|---|---|---|---|
| Reported-diluted EPS (U.S. GAAP) | $4.57 | $8.60 to $8.70 | 88.2% to 90.4% |
| Restructuring and related charges | 0.07 | 0.02 | — |
| Pension settlement | 0.04 | 0.01 | — |
| Amortization of acquisition-related intangible assets | 0.05 | 0.04 | — |
| Cost investment activity | 0.03 | 0.02 | — |
| Tax law change | — | (0.02) | |
| Royalty acceleration | — | (0.27) | — |
| Adjusted-diluted EPS (Non-U.S. GAAP) (8) | $4.76 | $8.40 to $8.50 | 76.5% to 78.6% |
Notes:
See “Full-year 2021 Financial Guidance” and “Non-U.S. GAAP Financial Measures” in today’s press release for additional information regarding adjusted-diluted EPS.
(8) We have opted not to forecast 2021 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 the first nine months of 2021, tax benefits associated with stock-based compensation increased adjusted-diluted EPS by $0.35. Any future tax benefits associated with stock-based compensation that we receive in 2021 would provide a positive adjustment to our full-year EPS guidance. In full-year 2020, tax benefits associated with stock-based compensation increased adjusted-diluted EPS by $0.27.
WEST PHARMACEUTICAL SERVICES
CASH FLOW ITEMS
(UNAUDITED)
(in millions)
| Nine Months Ended September 30, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Depreciation and amortization | $ | 87.9 | $ | 80.6 |
| Operating cash flow | $ | 423.2 | $ | 323.8 |
| Capital expenditures | $ | 176.9 | $ | 116.7 |
WEST PHARMACEUTICAL SERVICES
FINANCIAL CONDITION
(UNAUDITED)
(in millions)
| As of<br><br>September 30, 2021 | As of<br>December 31, 2020 | |||
|---|---|---|---|---|
| Cash and cash equivalents | $ | 688.0 | $ | 615.5 |
| Accounts receivable, net | $ | 476.4 | $ | 385.3 |
| Inventories | $ | 353.8 | $ | 321.3 |
| Accounts payable | $ | 207.7 | $ | 213.1 |
| Debt | $ | 254.1 | $ | 255.2 |
| Equity | $ | 2,202.3 | $ | 1,854.5 |
| Working capital | $ | 1,039.7 | $ | 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®, Daikyo Crystal Zenith® and Daikyo CZ® are registered trademarks of Daikyo Seiko, Ltd. Daikyo Crystal Zenith technologies are licensed from Daikyo Seiko, Ltd.
westq32021final
1 Third-Quarter 2021 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. OVERALL ORGANIC SALES GROWTH Proprietary Products Q3 2021 organic sales growth of 35.7%, led by sales of high-value products, which grew double digits BIOLOGICS Q3 27.9% PHARMA CONTRACT MANUFACTURING GENERICS Third Quarter Overall Net Sales $706.5M | 28.9% LSD DD DD DD Abbreviations: LSD – low-single digit; MSD – mid-single digit; HSD – high-single digit; DD – double digit Diluted Earnings Per Share: $2.31 | 112% Adjusted Diluted Earnings Per Share: $2.06| 79% Eric M. Green President and Chief Executive Officer West Pharmaceutical Services, Inc. WST Q3 2021 Earnings “We had robust growth in all three of our Proprietary Products market units, led by the sales of components in our High-Value Product (HVP) portfolio. This quarter’s strong performance came from both our base business, especially in the Biologics market unit, and COVID-19 related sales. Demand continues to grow for our premium offerings, such as NovaPure and FluroTec components, and, as a result, we are again increasing our planned capital expenditures, commencing next year, to expand HVP capacity at existing sites.”
West Pharmaceutical Services, Inc. Eric M. Green President & CEO Third-Quarter Results 2021 Analyst Conference Call 9 a.m. Eastern Time | October 28, 2021 Bernard J. Birkett Senior Vice President & CFO
3 West Analyst Conference Call 9 a.m. Eastern Time October 28, 2021 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 5587559 An online archive of the broadcast will be available at the website three hours after the live call and will be available through Thursday, November 4, 2021 by dialing: These presentation materials are intended to accompany today’s press release announcing the Company’s results for the third quarter 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 5587559 WST Q3 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 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® are registered trademarks of Daikyo Seiko, Ltd. Trademarks WST Q3 2021 Earnings
5 Q3 Highlights M A R K E T - L E D S T R A T E G Y G L O B A L I Z A T I O N O F M A N U F A C T U R I N G N E T W O R K C O V I D - 1 9 P A N D E M I C E F F O R T S F I N A N C I A L S WST Q3 2021 Earnings • Third quarter 2021 net sales of $706.5 million grew 28.9%; organic sales growth was 27.9% • Third quarter 2021 reported-diluted EPS of $2.31 increased 112%; adjusted-diluted EPS of $2.06 increased 79% • Raising net sales and adjusted-diluted EPS guidance for full-year 2021 • Declaring dividend increase - 29th consecutive annual raise
6 Q3 Drivers of Growth in our High-Value Product (HVP) portfolio WST Q3 2021 Earnings
7 Continue to accelerate multi-phased investments to meet HVP demand WST Q3 2021 Earnings Completed investment across the network to increase HVP capacity Investment for additional equipment and validated lines — expected to be complete by end of 2021 Investment approved with anticipated future vaccine demand – expected to be complete by end of 2022 Additional investment approved to begin in 2022 – focus on capacity expansion of NovaPure production at HVP sites in US and Europe.
8 Six Pillars: $3.1 MILLION in corporate and foundation giving in 2020 in absolute water consumption from 2019 to 2020 >50% of West’s C-suite comprised of women, people of color or international diversity in Energy from 2019 to 2020 in waste recycled and global waste diversion at sites in 2020 West is Driving Sustainable Business Practices • Compliance & Ethics • Philanthropy • Health & Safety • Diversity & Talent • Environmental Sustainability • Quality WST Q3 2021 Earnings Progress Reduction Improvement United Nations Global Compact ESG Reporting Standards • Global Reporting Index Standards (GRI) -2020 • Task Force on Climate-Related Financial Disclosures (TFCD)* -2021 • Sustainability Accounting Standards Board ESG (SASB)*-2021 * On Track to be published as supplement to 2020 CR report
9 Third-Quarter 2021 Summary Results ($ millions, except earnings-per-share (EPS) data) Three Months Ended September 30 2021 2020 Reported Net Sales $706.5 $548.0 Gross Profit Margin 40.8% 35.5% Reported Operating Profit $181.4 $99.2 Adjusted Operating Profit (1) $182.8 $103.9 Reported Operating Profit Margin 25.7% 18.1% Adjusted Operating Profit Margin (1) 25.9% 19.0% Reported-Diluted EPS $2.31 $1.09 Adjusted-Diluted EPS (1) $2.06 $1.15 “Adjusted Operating Profit,” “Adjusted Operating Profit Margin” and “Adjusted-Diluted EPS” are Non-U.S. GAAP financial measures. See slides 17-21 and the discussion under the heading “Non-U.S. GAAP Financial Measures” in today’s press release for an explanation and reconciliation of these items. (1) WST Q3 2021 Earnings
10 Overall Organic Sales Growth – 27.9% (Q3 2021) Proprietary Products Q3 2021 organic sales growth of 35.7% led by sales of high-value products, which grew double digits BIOLOGICS GENERICS PHARMA Sales led by high-value products, including FluroTec®, Daikyo®, NovaPure® and Westar® components Sales led by high-value products, including FluroTec® and Westar® components Sales led by high-value products, including FluroTec®, Westar® and NovaPure® components CONTRACT MANUFACTURING Organic sales growth of 2.1%, led by sales of healthcare- related medical devices Double-Digit Double-Digit Low-Single DigitDouble-Digit Third-Quarter 2021 Organic Sales Growth WST Q3 2021 Earnings
11 Change in Consolidated Net Sales Third-quarter 2020 to 2021 ($ millions) WST Q3 2021 Earnings
12 Gross Profit Update ($ millions) Three Months Ended September 30, 2021 2020 Proprietary Products Gross Profit $267.3 $171.9 Proprietary Products Gross Profit Margin 46.3% 40.8% Contract-Manufactured Products Gross Profit $20.9 $22.7 Contract-Manufactured Products Gross Profit Margin 16.1% 17.9% Consolidated Gross Profit $288.2 $194.6 Consolidated Gross Profit Margin 40.8% 35.5% WST Q3 2021 Earnings
13 Cash Flow and Balance Sheet Metrics ($ millions) Cash Flow Items YTD Q3 2021 YTD Q3 2020 Depreciation and Amortization $87.9 $80.6 Operating Cash Flow $423.2 $323.8 Capital Expenditures $176.9 $116.7 Financial Condition September 30, 2021 December 31, 2020 Cash and Cash Equivalents $688.0 $615.5 Debt $254.1 $255.2 Equity $2,202.3 $1,854.5 Working Capital $1,039.7 $870.3 WST Q3 2021 Earnings
14 2021 Full-Year Guidance 2021 Full-Year Guidance Consolidated Net Sales $2.800 - $2.810 billion Adjusted-Diluted EPS $8.40 - $8.50 WST Q3 2021 Earnings
15 Strong Base Business Delivering Unique Value Propositions Global Operational Effectiveness Accelerating Investments for the Future We are proud to serve as the valuable, trusted partner for customers across the globe to support patient health. WST Q3 2021 Earnings
16 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 Q3 2021 Earnings
17 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 Q3 2021 Earnings
18 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 September 30, 2021 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $181.4 $12.0 $175.6 $2.31 Restructuring and related charges 0.3 0.1 0.2 - Amortization of Acquisition-related Intangible Assets 0.2 - 0.7 0.01 Cost investment activity 0.9 0.2 0.7 0.01 Royalty acceleration - 20.4 (20.4) (0.27) Adjusted (Non-U.S. GAAP) $182.8 $32.7 $156.8 $2.06 WST Q3 2021 Earnings Nine months ended September 30, 2021 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $568.3 $73.0 $514.1 $6.78 Restructuring and related charges 2.5 0.6 1.9 0.02 Pension Settlement - 0.2 0.6 0.01 Amortization of Acquisition-related Intangible Assets 0.6 0.1 2.1 0.03 Cost investment activity 1.8 (0.1) 1.9 0.02 Tax law changes - 1.4 (1.4) (0.02) Royalty acceleration - 20.4 (20.4) (0.27) Adjusted (Non-U.S. GAAP) $573.2 $95.6 $498.8 $6.57
19 Notes to Non-U.S. GAAP Financial Measures RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED) See “Notes to Non-U.S. GAAP Financial Measures”, “Safe Harbor Statement” (Slide 4) and today’s press release for an explanation and reconciliation of these items. Reconciliation of Reported and Adjusted Operating Profit, Net Income and Diluted EPS ($ millions, except EPS data) Three months ended September 30, 2020 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $99.2 $21.1 $82.3 $1.09 Pension Settlement - 0.3 0.8 0.01 Restructuring and severance related charges 4.5 1.1 3.4 0.04 Amortization of Acquisition-related Intangible Assets 0.2 - 0.7 0.01 Adjusted (Non-U.S. GAAP) $103.9 $22.5 $87.2 $1.15 WST Q3 2021 Earnings Nine months ended September 30, 2020 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $290.8 $52.1 $247.8 $3.28 Pension Settlement - 0.8 2.6 0.03 Restructuring and severance related charges 6.7 1.7 5.0 0.06 Amortization of Acquisition-related Intangible Assets 0.4 0.1 2.9 0.04 Adjusted (Non-U.S. GAAP) $297.9 $54.7 $258.3 $3.41
20 Notes to Non-U.S. GAAP Financial Measures RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED) See “Notes to Non-U.S. GAAP Financial Measures”, “Safe Harbor Statement” (Slide 4) and today’s press release for an explanation and reconciliation of these items. Reconciliation of Net Sales to Organic Net Sales (1) ($ 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 September 30, 2021 Proprietary CM Eliminations Total Reported net sales (U.S. GAAP) $577.0 $129.7 $(0.2) $706.5 Effect of changes in currency translation rates (5.0) (0.5) - (5.5) Organic net sales (Non-U.S. GAAP) (1) $572.0 $129.2 $(0.2) $701.0 WST Q3 2021 Earnings Nine months ended September 30, 2021 Proprietary CM Eliminations Total Reported net sales (U.S. GAAP) $1,708.0 $393.2 $(0.4) $2,100.8 Effect of changes in currency translation rates (57.9) (9.3) - (67.2) Organic net sales (Non-U.S. GAAP) (1) $1,650.1 $383.9 $(0.4) $2,033.6
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 Reported-Diluted EPS Guidance to Adjusted-Diluted EPS Guidance 2020 Actual 2021 Guidance % Change Reported-diluted EPS (U.S. GAAP) $4.57 $8.60 to $8.70 88.2% to 90.4% Restructuring and related charges 0.07 0.02 Pension Settlement 0.04 0.01 Amortization of acquisition-related intangible assets 0.05 0.04 Cost investment activity 0.03 0.02 Tax law change - (0.02) Royalty acceleration - (0.27) Adjusted-diluted EPS (Non-U.S. GAAP) (1) $4.76 $8.40 to $8.50 76.5% to 78.6% (1) See “Full-year 2021 Financial Guidance” and “Non-U.S. GAAP Financial Measures” in today’s press release for additional information regarding adjusted-diluted EPS. We have opted not to forecast 2021 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 the first nine months of 2021, tax benefits associated with stock-based compensation increased adjusted-diluted EPS by $0.35. Any future tax benefits associated with stock-based compensation that we receive in 2021 would provide a positive adjustment to our full-year EPS guidance. In 2020, tax benefits associated with stock-based compensation increased adjusted-diluted EPS by $0.27. WST Q3 2021 Earnings