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 18, 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 February 18, 2021, West Pharmaceutical Services, Inc. (the “Company”) issued a press release announcing its fourth-quarter and full year 2020 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 18, 2021. | |
| 99.2 | West Pharmaceutical Services, Inc. Presentation, dated February 18, 2021. | |
| 104 | The cover page from the Company’s Current Report on Form 8-K, dated February 18, 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 | |
| February 18, 2021 |
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | West Pharmaceutical Services, Inc. Press Release, dated February 18, 2021. |
| 99.2 | West Pharmaceutical Services, Inc. Presentation, dated February 18, 2021. |
| 104 | The cover page from the Company’s Current Report on Form 8-K, dated February 18, 2021, formatted in Inline XBRL. |
4
Document
Exhibit 99.1
West Announces Fourth-Quarter and Full-Year 2020 Results
- Conference Call Scheduled for 9 a.m. EST Today -
Exton, PA, February 18, 2021 – West Pharmaceutical Services, Inc. (NYSE: WST) today announced its financial results for the fourth-quarter, full-year 2020 and introduced full-year 2021 financial guidance.
Fourth-Quarter and Full-Year 2020 Summary (comparisons to prior-year period)
•Fourth-quarter 2020 net sales of $580.2 million grew 23.3%; organic sales growth was 19.8%. Full-year 2020 net sales of $2.147 billion grew 16.7%; organic sales growth was 16.3%.
•Fourth-quarter 2020 reported-diluted EPS of $1.29 increased 53.6%. Full-year 2020 reported-diluted EPS of $4.57 increased 42.4%.
•Fourth-quarter 2020 adjusted-diluted EPS of $1.34 increased 63.4%. Full-year 2020 adjusted-diluted EPS of $4.76 increased 46.9%.
•Company is introducing full-year 2021 financial guidance of net sales in a range of $2.500 billion to $2.525 billion and reported-diluted EPS in a range of $6.00 to $6.15.
“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 2020 with tremendous execution, dedication and resiliency of our team and, most importantly, the trust of our customers across the globe. I am proud that we finished the year with record full-year net sales, organic sales growth and operating profit margin. Fourth quarter results were robust, led by strong growth in our Biologics and Generics market units. In addition, we experienced an acceleration in COVID-19-associated sales of high-value product (HVP) components used for vaccines and therapeutics,” said Eric M. Green, President and Chief Executive Officer.
Mr. Green concluded, “As we look ahead, we believe there is strong momentum in our base business and uptake of our HVP components and devices. We will continue to operate with excellence and a sense of urgency to maintain the supply of life-saving solutions that our customers, and ultimately patients, rely upon during these challenging times.”
Proprietary Products Segment
In the fourth-quarter 2020, net sales grew by 28.7% to $454.1 million. Organic sales growth was 25.1%, with currency translation increasing sales growth by 360 basis points. HVP components and devices represented over 65% of segment sales and generated double-digit organic sales growth.
Our Biologics market unit had strong double-digit organic sales growth, led by Flurotec®, Westar®, Daikyo® and NovaPure® components. Our Generics market unit posted double-digit organic sales growth, led by Flurotec and Westar components. Our Pharma market unit had low single-digit organic sales growth, led by Westar and Flurotec components and Crystal Zenith® containers.
In the full-year 2020, net sales grew 17.9% to $1.649 billion. Organic sales growth was 17.6%, with currency translation increasing sales growth by 20 basis points. HVP components and devices represented 66% of segment sales and generated double-digit organic sales growth.
Contract-Manufactured Products Segment
In the fourth-quarter 2020, net sales grew by 7.0% to $126.1 million. Organic sales growth was 4.1%, with currency translation increasing sales growth by 290 basis points. Segment performance was led by strong sales of healthcare-related injection and diagnostic devices.
In the full-year 2020, net sales grew by 12.9% to $498.6 million. Organic sales growth was 12.1%, with currency translation increasing sales growth by 80 basis points.
Full-Year 2020 Financial Highlights
Operating cash flow was $472.5 million, an increase of 28.7%. Capital expenditures were $174.4 million. Free cash flow (operating cash flow minus capital expenditures) was $298.1 million, an increase of 23.8%.
Full-Year 2021 Financial Guidance
Full-year 2021 net sales are expected to be in a range of $2.500 billion to $2.525 billion.
◦Organic sales growth is expected to be in a range of 13% to 14%.
◦Net sales guidance includes an estimated full-year 2021 benefit of $75 million based on current foreign exchange rates.
Full-year 2021 reported-diluted EPS is expected to be in a range of $6.00 to $6.15.
◦Full-year reported-diluted EPS guidance range includes an estimated benefit of approximately $0.23 based on current foreign currency exchange rates.
◦This reported-diluted EPS guidance range assumes a full-year 2021 tax rate of 23%, which does not include potential tax benefits from stock-based compensation. As in prior years, we are not including potential 2021 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 2021 would provide a positive adjustment to our full-year EPS guidance.
◦Full-year 2021 capital spending is expected to be in a range of $230 million to $240 million. This includes incremental capital spending to support capacity expansions at existing HVP facilities to produce components to be used with treatments and vaccines related to COVID-19.
Fourth-Quarter 2020 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 4095168.
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 25, 2021, by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering conference ID 4095168.
| Investor Contact: | Media Contact: |
|---|---|
| Quintin Lai | Michele Pelkowski |
| Vice President, Investor Relations | Vice President, Global Communications |
| (610) 594-3318 | (610) 594-3054 |
| Quintin.Lai@westpharma.com | Michele.Pelkowski@westpharma.com |
Forward-Looking Statements
Certain forward-looking statements appear in this release and include such words as “believe,” “continue,” “maintain,” “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 and Part II Item 1A, entitled “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the period ended September 30, 2020, respectively.
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, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net sales | $ | 580.2 | 100% | $ | 470.6 | 100% | $ | 2,146.9 | 100% | $ | 1,839.9 | 100% |
| Cost of goods and services sold | 369.1 | 64 | 317.4 | 67 | 1,379.1 | 64 | 1,234.2 | 67 | ||||
| Gross profit | 211.1 | 36 | 153.2 | 33 | 767.8 | 36 | 605.7 | 33 | ||||
| Research and development | 12.9 | 2 | 10.2 | 2 | 46.9 | 2 | 38.9 | 2 | ||||
| Selling, general and administrative expenses | 76.3 | 13 | 69.0 | 14 | 302.0 | 14 | 272.7 | 15 | ||||
| Other expense (income), net | 5.8 | 1 | (4.1) | — | 12.0 | 1 | (2.5) | — | ||||
| Operating profit | 116.1 | 20 | 78.1 | 17 | 406.9 | 19 | 296.6 | 16 | ||||
| Interest expense, net | 1.9 | — | 0.8 | — | 6.8 | — | 4.7 | — | ||||
| Other nonoperating (income) expense | (0.9) | — | (0.1) | — | (1.2) | — | 0.1 | — | ||||
| Income before income taxes | 115.1 | 20 | 77.4 | 17 | 401.3 | 19 | 291.8 | 16 | ||||
| Income tax expense | 20.4 | 4 | 16.5 | 3 | 72.5 | 4 | 59.0 | 3 | ||||
| Equity in net income of affiliated companies | (3.7) | (1) | (3.0) | — | (17.4) | (1) | (8.9) | — | ||||
| Net income | $ | 98.4 | 17% | $ | 63.9 | 14% | $ | 346.2 | 16% | $ | 241.7 | 13% |
| Net income per share: | ||||||||||||
| Basic | $ | 1.33 | $ | 0.86 | $ | 4.68 | $ | 3.27 | ||||
| Diluted | $ | 1.29 | $ | 0.84 | $ | 4.57 | $ | 3.21 | ||||
| Average common shares outstanding | 74.0 | 74.1 | 73.9 | 74.0 | ||||||||
| Average shares assuming dilution | 76.1 | 75.7 | 75.8 | 75.4 |
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: | 2020 | 2019 | 2020 | 2019 | ||||||||
| Proprietary Products | $ | 454.1 | $ | 352.7 | $ | 1,648.6 | $ | 1,398.6 | ||||
| Contract-Manufactured Products | 126.1 | 117.9 | 498.6 | 441.5 | ||||||||
| Eliminations | — | — | (0.3) | (0.2) | ||||||||
| Consolidated Total | $ | 580.2 | $ | 470.6 | $ | 2,146.9 | $ | 1,839.9 | ||||
| Gross Profit: | ||||||||||||
| Proprietary Products | $ | 189.4 | $ | 134.1 | $ | 682.2 | $ | 540.4 | ||||
| Contract-Manufactured Products | 21.7 | 19.3 | 85.6 | 65.5 | ||||||||
| Unallocated items | — | (0.2) | — | (0.2) | ||||||||
| Gross Profit | 211.1 | 153.2 | 767.8 | 605.7 | ||||||||
| Gross Profit Margin | 36.4 | % | 32.5 | % | 35.8 | % | 32.9 | % | ||||
| Operating Profit (Loss): | ||||||||||||
| Proprietary Products | $ | 121.6 | $ | 74.9 | $ | 434.5 | $ | 313.6 | ||||
| Contract-Manufactured Products | 16.5 | 15.6 | 68.6 | 49.1 | ||||||||
| Stock-based compensation expense | (6.4) | (5.6) | (34.0) | (24.4) | ||||||||
| General corporate costs | (12.6) | (11.8) | (52.1) | (41.9) | ||||||||
| Adjusted Operating Profit | $ | 119.1 | $ | 73.1 | $ | 417.0 | $ | 296.4 | ||||
| Adjusted Operating Profit Margin | 20.5 | % | 15.5 | % | 19.4 | % | 16.1 | % | ||||
| Unallocated items | (3.0) | 5.0 | (10.1) | 0.2 | ||||||||
| Reported Operating Profit | $ | 116.1 | $ | 78.1 | $ | 406.9 | $ | 296.6 | ||||
| Reported Operating Profit Margin | 20.0 | % | 16.6 | % | 19.0 | % | 16.1 | % |
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, 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 |
| Three months ended December 31, 2019 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reported (U.S. GAAP) | $ | 78.1 | $ | 16.5 | $ | 63.9 | $ | 0.84 |
| Restructuring and related charges (3) | 1.1 | 0.3 | 0.8 | 0.02 | ||||
| Gain on restructuring-related sale of assets (5) | (1.7) | (0.4) | (1.3) | (0.02) | ||||
| Pension settlement (1) | — | 0.2 | 0.6 | 0.01 | ||||
| Argentina currency devaluation (6) | — | (0.3) | 0.3 | — | ||||
| Tax recovery (7) | (4.4) | (1.5) | (2.9) | (0.04) | ||||
| Tax law changes (8) | — | (0.7) | 0.7 | 0.01 | ||||
| Adjusted (Non-U.S. GAAP) | $ | 73.1 | $ | 14.1 | $ | 62.1 | $ | 0.82 |
| Twelve months ended December 31, 2019 | Operating<br>profit | Income<br>tax<br>expense | Net<br>income | Diluted<br>EPS | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reported (U.S. GAAP) | $ | 296.6 | $ | 59.0 | $ | 241.7 | $ | 3.21 |
| Restructuring and related charges (3) | 4.9 | 1.2 | 3.7 | 0.04 | ||||
| Gain on restructuring-related sale of assets (5) | (1.7) | (0.4) | (1.3) | (0.02) | ||||
| Pension settlement (1) | — | 0.8 | 2.7 | 0.04 | ||||
| Argentina currency devaluation (6) | 1.0 | — | 1.0 | 0.01 | ||||
| Tax recovery (7) | (4.4) | (1.5) | (2.9) | (0.04) | ||||
| Tax law changes (8) | — | 0.3 | (0.3) | — | ||||
| Adjusted (Non-U.S. GAAP) | $ | 296.4 | $ | 59.4 | $ | 244.6 | $ | 3.24 |
(1)During the three and twelve months ended December 31, 2020, the Company recorded a pension settlement charge of $0.4 million and $3.7 million, respectively, and during the three and twelve months ended December 31, 2019, the Company recorded a pension settlement charge of $0.8 million and $3.5 million, respectively. These charges are recorded within other nonoperating (income) expense, as it determined that normal-course lump-sum payments for each of its U.S. qualified and non-qualified defined benefit pension plans exceeded the threshold for settlement accounting under U.S. GAAP for the year.
(2)During the three and twelve months ended December 31, 2020, the Company recorded a $2.5 million impairment charge related to a cost investment.
(3)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. During the three and twelve months ended December 31, 2019, the Company recorded $1.1 million and $4.9 million, respectively, in restructuring and related charges.
(4)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, 2019, the Company recorded a net gain on the sale of fixed assets as a result of its restructuring plans of $1.7 million.
(6)During the twelve months ended December 31, 2019, the Company recorded a charge of $1.0 million related to the continued devaluation of Argentina's currency.
(7)During the three and twelve months ended December 31, 2019, the Company recorded a net tax recovery of $4.4 million related to previously-paid international excise taxes, following a favorable court ruling.
(8)During the three and twelve months ended December 31, 2019, the Company recorded a tax charge of $0.7 million and a net tax benefit of $0.3 million due to the impact of federal law changes enacted during the quarter and year.
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 (9)
| Three months ended December 31, 2020 | Proprietary | CM | Eliminations | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Reported net sales (U.S. GAAP) | $ | 454.1 | $ | 126.1 | $ | — | $ | 580.2 |
| Effect of changes in currency translation rates | (12.9) | (3.4) | — | (16.3) | ||||
| Organic net sales (Non-U.S. GAAP) (9) | $ | 441.2 | $ | 122.7 | $ | — | $ | 563.9 |
| Twelve months ended December 31, 2020 | Proprietary | CM | Eliminations | Total | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reported net sales (U.S. GAAP) | $ | 1,648.6 | $ | 498.6 | $ | (0.3) | $ | 2,146.9 |
| Effect of acquisitions and/or divestitures | (1.2) | — | — | (1.2) | ||||
| Effect of changes in currency translation rates | (2.2) | (3.5) | — | (5.7) | ||||
| Organic net sales (Non-U.S. GAAP) (9) | $ | 1,645.2 | $ | 495.1 | $ | (0.3) | $ | 2,140.0 |
(9)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, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Depreciation and amortization | $ | 109.1 | $ | 103.4 |
| Operating cash flow | $ | 472.5 | $ | 367.2 |
| Capital expenditures | $ | 174.4 | $ | 126.4 |
WEST PHARMACEUTICAL SERVICES
FINANCIAL CONDITION
(UNAUDITED)
(in millions)
| As of<br>December 31, 2020 | As of<br>December 31, 2019 | |||
|---|---|---|---|---|
| Cash and cash equivalents | $ | 615.5 | $ | 439.1 |
| Accounts receivable, net | $ | 385.3 | $ | 319.3 |
| Inventories | $ | 321.3 | $ | 235.7 |
| Accounts payable | $ | 213.1 | $ | 156.8 |
| Debt | $ | 255.2 | $ | 257.3 |
| Equity | $ | 1,854.5 | $ | 1,573.2 |
| Working capital | $ | 870.3 | $ | 717.1 |
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.
wstq4presentation
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 Q4 2020 organic sales growth of 25.1%, led by sales of high-value products, which grew double digits BIOLOGICS Q4 19.8% PHARMA CONTRACT MANUFACTURING GENERICS Full Year Overall Net Sales $2.147B | 16.7% MSD LSD DD DD Abbreviations: LSD – low-single digit; MSD – mid-single digit; HSD – high-single digit; DD – double digit Diluted Earnings Per Share: $4.57 | 42% Adjusted Diluted Earnings Per Share: $4.76| 47% Eric M. Green President and Chief Executive Officer West Pharmaceutical Services, Inc. “We had a successful 2020 with tremendous execution, dedication and resiliency of our team and, most importantly, the trust of our customers across the globe. I am proud that we finished the year with record full-year net sales, organic sales growth and operating profit margin. Fourth quarter results were robust, led by strong growth in our Biologics and Generics market units. In addition, we experienced an acceleration in COVID-19-associated sales of high-value product (HVP) components used for vaccines and therapeutics. As we look ahead, we believe there is strong momentum in our base business and uptake of our HVP components and devices. We will continue to operate with excellence and a sense of urgency to maintain the supply of life-saving solutions that our customers, and ultimately patients, rely upon during these challenging times.”
Eric M. Green President & CEO Fourth-Quarter and Full Year Results 2020 Analyst Conference Call 9 a.m. Eastern Time | February 18, 2021 Bernard J. Birkett Senior Vice President & CFO
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 4095168 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 25, 2021 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 2020 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 4095168
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
MISSION VALUES PRIORITIES We contain and deliver injectable therapies that improve patients’ lives Passion for Customers Leadership in Quality One West Team Keeping Team Members Safe Ensuring Uninterrupted Supply of High-Quality Containment and Delivery Devices for Customers and Patients
* December 2020 YTD Americas Europe, Middle East, Africa Asia Pacific 48%43% 9% High-Value Components Standard Packaging High-Value Delivery Devices Contract-Manufactured Products PR O PR IE TA R Y PR O D U CT S 23% 5% 26% 46% Net Sales* by GEOGRAPHY Net Sales* by PRODUCT CATEGORY Biologics Generics Pharma Contract-Manufactured Products 26% 31%23% Net Sales* by SEGMENT & UNIT 20% PR O PR IE TA R Y PR O D U CT S
West High-Quality Components on Majority of Vaccines Driven by years of pioneering science at West, the selection process for the best high-quality packaging components is complex. We are helping vaccine developers protect their sensitive biomolecules with trusted solutions. MEETING DEMAND Industry standard for packaging sensitive molecules with quality and reliability Best-in-industry component to ensure highest degree of quality and safety Leverage our global infrastructure and agility to meet increased COVID-19 demand
Gold Standard Top 25 Performer S&P 500 SAP S/4HANA® Ranked #4
Execute • Continue to build upon the Market-Led Strategy • Leverage world-class global manufacturing network for increased demand • Continue to deliver new tools such as West’s Online Store, Delta Cube and West Virtual Innovate • Connecting the dots across science and technology to realize ideas for potential value creation • Technology Scouting & New Go-to-Market Enablement • Product Life Cycle Management Grow • Create enhanced shareholder value through cash flow deployment • Increased capital expenditures to expand capacity for growing base business and incremental COVID-19 demand • Continue to invest in technology and seek Merger & Acquisition opportunities that complement and enhance current strategy
Fourth quarter 2020 net sales of $580.2 million grew 23.3%; organic sales growth was 19.8% Fourth quarter 2020 reported-diluted EPS of $1.29 increased 54%; adjusted-diluted EPS of $1.34 increased 63% Full year 2020 net sales of $2.147 billion grew 16.7%; organic sales growth was 16.3% Full year 2020 reported-diluted EPS of $4.57 increased 42%; adjusted-diluted EPS of $4.76 increased 47%
Three Months Ended December 31 2020 2019 Reported Net Sales $580.2 $470.6 Gross Profit Margin 36.4% 32.5% Reported Operating Profit $116.1 $78.1 Adjusted Operating Profit (1) $119.1 $73.1 Reported Operating Profit Margin 20.0% 16.6% Adjusted Operating Profit Margin (1) 20.5% 15.5% Reported-Diluted EPS $1.29 $0.84 Adjusted-Diluted EPS (1) $1.34 $0.82 “Adjusted Operating Profit,” “Adjusted Operating Profit Margin” and “Adjusted-Diluted EPS” are Non-U.S. GAAP financial measures. See slides 19-23 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)
Overall Organic Sales Growth – 19.8% (Q4 2020) Proprietary Products Q4 2020 organic sales growth of 25.1% 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 Crystal Zenith® components CONTRACT MANUFACTURING Organic sales growth of 4.1%, led by sales of diagnostic and healthcare-related injection devices
580.2 87.8 16.3 5.5 470.6 Q4 2019 Volume & Mix Currency Sales Price Q4 2020
Three Months Ended December 31, 2020 2019 Proprietary Products Gross Profit $189.4 $134.1 Proprietary Products Gross Profit Margin 41.7% 38.0% Contract-Manufactured Products Gross Profit $21.7 $19.3 Contract-Manufactured Products Gross Profit Margin 17.2% 16.4% Consolidated Gross Profit $211.1 $153.2 Consolidated Gross Profit Margin 36.4% 32.5%
Cash Flow Items YTD 2020 YTD 2019 Depreciation and Amortization $109.1 $103.4 Operating Cash Flow $472.5 $367.2 Capital Expenditures $174.4 $126.4 Financial Condition December 31, 2020 December 31, 2019 Cash and Cash Equivalents $615.5 $439.1 Debt $255.2 $257.3 Equity $1,854.5 $1,573.2 Working Capital $870.3 $717.1
2021 Full-Year Guidance Consolidated Net Sales $2.500 - $2.525 billion Reported-Diluted EPS $6.00 - $6.15
Today more than ever, we must deliver on our promise — every component has a patient’s name on it. Execute. Innovate. Grow. Market-led Strategy Global Operational Effectiveness Fueling Product & Service Innovations
Eric M. Green President and Chief Executive Officer Bernard J. Birkett Senior Vice President and Chief Financial Officer Quintin Lai VP, Corporate Development, Strategy & Investor Relations Q & A
The non-U.S. GAAP financial measures are incorporated into our discussion and analysis as management uses them in evaluating our results of operations and believes that this information provides users a valuable insight into our overall performance and financial position. A reconciliation of these adjusted Non-U.S. GAAP financial measures to the comparable U.S. GAAP financial measures is included in the accompanying tables. For the purpose of aiding the comparison of our year-over-year results, we may refer to net sales and other financial results excluding the effects of changes in foreign currency exchange rates. Organic net sales exclude the impact from acquisitions and/or divestitures and translate the current-period reported sales of subsidiaries whose functional currency is other than the U.S. Dollar at the applicable foreign exchange rates in effect during the comparable prior-year period. We may also refer to financial results excluding the effects of unallocated items. The re-measured results excluding effects from currency translation, the impact from acquisitions and/or divestitures, and the effects of unallocated items are not in conformity with U.S. GAAP and should not be used as a substitute for the comparable U.S. GAAP financial measures.
Reconciliation of Reported and Adjusted Operating Profit, Net Income and Diluted EPS ($ 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 $4.76
Reconciliation of Reported and Adjusted Operating Profit, Net Income and Diluted EPS ($ millions, except EPS data) Three months ended December 31, 2019 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $78.1 $16.5 $63.9 $0.84 Restructuring and related charges 1.1 0.3 0.8 0.02 Gain on restructuring-related sale of assets (1.7) (0.4) (1.3) (0.02) Pension Settlement - 0.2 0.6 0.01 Argentina currency devaluation - (0.3) 0.3 - Tax recovery (4.4) (1.5) (2.9) (0.04) Tax law changes - (0.7) 0.7 0.01 Adjusted (Non-U.S. GAAP) $73.1 $14.1 $62.1 $0.82 Twelve months ended December 31, 2019 Operating profit Income tax expense Net income Diluted EPS Reported (U.S. GAAP) $296.6 $59.0 $241.7 $3.21 Restructuring and related charges 4.9 1.2 3.7 0.04 Gain on restructuring-related sale of assets (1.7) (0.4) (1.3) (0.02) Pension Settlement - 0.8 2.7 0.04 Argentina currency devaluation 1.0 - 1.0 0.01 Tax recovery (4.4) (1.5) (2.9) (0.04) Tax law changes - 0.3 (0.3) - Adjusted (Non-U.S. GAAP) $296.4 $59.4 $244.6 $3.24
Reconciliation of Net Sales to Organic Net Sales (1) ($ 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, 2020 Proprietary CM Eliminations Total Reported net sales (U.S. GAAP) $454.1 $126.1 $ - $580.2 Effect of changes in currency translation rates (12.9) (3.4) - (16.3) Organic net sales (Non-U.S. GAAP) (1) $441.2 $122.7 $ - $563.9 Twelve months ended December 31, 2020 Proprietary CM Eliminations Total Reported net sales (U.S. GAAP) $1,648.6 $498.6 $(0.3) $2,146.9 Effect of acquisitions and/or divestitures (1.2) - - (1.2) Effect of changes in currency translation rates (2.2) (3.5) - (5.7) Organic net sales (Non-U.S. GAAP) (1) $1,645.2 $495.1 $(0.3) $2,140.0
Reconciliation of Reported-Diluted EPS Guidance to Adjusted-Diluted EPS Guidance 2020 Actual 2021 Guidance % Change Reported-diluted EPS (U.S. GAAP) $4.57 $6.00 to $6.15 31% to 35% Pension settlement 0.04 - Cost investment impairment 0.03 - Restructuring and severance related charges 0.07 - Amortization of acquisition-related intangible assets 0.05 0.03 Adjusted-diluted EPS (Non-U.S. GAAP) (1) $4.76 $6.03 to $6.18 27% to 30% (1) See “Full-year 2020 Financial Guidance” and “Non-U.S. GAAP Financial Measures” in today’s press release for additional information regarding adjusted-diluted EPS. In 2020, tax benefits associated with stock-based compensation increased adjusted-diluted EPS by $0.27. 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-Quarter, Second-Quarter, Third- Quarter, and Fourth-Quarter 2020, tax benefits associated with stock-based compensation increased adjusted-diluted EPS by $0.07, $0.09, $0.02, and $0.09, respectively. 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.