WEST PHARMACEUTICAL SERVICES INC (Form: 10-Q, Received: 08/09/2005 13:43:28)

Current assets

Property, plant and equipment

Current liabilities and deferred taxes

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2005

Commission File Number 1-8036

WEST PHARMACEUTICAL SERVICES, INC. (Exact name of registrant as specified in its charter)


Pennsylvania			23-1210010
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)


101 Gordon Drive, PO Box 645, Lionville, PA			19341-0645
(Address of principal executive offices)			(Zip Code)




Registrant’s telephone number, including area code 610-594-2900

N/A

Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes_ X _ No __
June 30, 2005 – 31,567,723

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Page 2

Index

Form 10-Q for the Quarter Ended June 30, 2005

			Page

Part I -Financial Information

	Item 1.	Financial Statements (unaudited)

		Consolidated Statements of Income for the Three Months and Six Months ended June 30, 2005 and 2004	3

		Condensed Consolidated Balance Sheets at June 30, 2005 and December 31, 2004	4

		Consolidated Statement of Shareholders’ Equity for the Six Months ended June 30, 2005	5

		Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2005 and 2004	6

		Notes to Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

	Item 3.	Quantitative and Qualitative Disclosure about Market Risk	32

	Item 4.	Controls and Procedures	32

Part II – Other Information

	Item 2.	Issuer Purchases of Equity Securities	33

	Item 4.	Submission of Matters to a Vote of Security Holders	34

	Item 6.	Exhibits	34

SIGNATURES			35

		Index to Exhibits	F-1

Page 3

Part I. Financial Information

Item 1. Financial Statements.

West Pharmaceutical Services, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	6/30/2005			6/30/2004			6/30/2005			6/30/2004
Net sales	$	173,000		$	136,100		$	322,400		$	266,600
Cost of goods sold		122,400			93,700			225,400			184,700
Gross profit		50,600			42,400			97,000			81,900
Selling, general and administrative expenses		31,900			26,300			57,100			51,400
Restructuring credit		(1,400	)		—			(1,400	)		—
Other expense, net		200			300			1,300			1,100
Operating profit		19,900			15,800			40,000			29,400
Interest expense, net		2,900			1,700			4,800			3,500
Income before income taxes		17,000			14,100			35,200			25,900
Provision for income taxes		5,500			4,500			11,300			8,400
Income from consolidated operations		11,500			9,600			23,900			17,500
Equity in net income of affiliated companies		700			900			1,300			1,900
Income from continuing operations		12,200			10,500			25,200			19,400
Discontinued operations, net of tax		600			(2,800	)		900			(4,700	)
Net income	$	12,800		$	7,700		$	26,100		$	14,700

Net income per share:
Basic
Continuing operations	$	0.39		$	0.35		$	0.82		$	0.65
Discontinued operations		0.02			(0.09	)		0.03			(0.15	)
	$	0.41		$	0.26		$	0.85		$	0.50

Assuming dilution
Continuing operations	$	0.38		$	0.34		$	0.79		$	0.64
Discontinued operations		0.02			(0.09	)		0.03			(0.16	)
	$	0.40		$	0.25		$	0.82		$	0.48

Average common shares outstanding		30,978			29,920			30,812			29,682
Average shares assuming dilution		32,155			30,704			31,994			30,406

Dividends declared per common share	$	0.110		$	0.105		$	0.22		$	0.21

See accompanying notes to condensed consolidated financial statements.

Page 4

West Pharmaceutical Services, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands)

	6/30/2005		12/31/2004
ASSETS
Current assets:
Cash, including cash equivalents	$	61,500	$	68,800
Accounts receivable, net of allowance		103,300		72,900
Inventories		64,600		56,700
Deferred income taxes		7,100		8,200
Current assets held for sale		2,200		9,100
Other current assets		17,000		10,800
Total current assets		255,700		226,500

Property, plant and equipment		623,800		605,100
Less accumulated depreciation and amortization		305,300		321,300
		318,500		283,800
Investments in and advances to affiliated companies		27,200		26,600
Goodwill		59,400		42,400
Pension asset		46,500		47,700
Deferred income taxes		18,400		17,900
Other intangible assets		48,200		1,700
Restricted cash		14,000		—
Noncurrent assets held for sale		2,200		2,200
Other assets		7,700		9,900
Total Assets	$	797,800	$	658,700

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes payable	$	700	$	10,000
Accounts payable		34,400		29,300
Current liabilities of discontinued operations		700		700
Accrued expenses:
Salaries, wages and benefits		27,000		23,000
Income taxes payable		12,400		16,900
Restructuring costs		1,000		3,400
Deferred income taxes		8,100		7,900
Other current liabilities		28,900		25,300
Total current liabilities		113,200		116,500
Long-term debt		277,300		150,800
Deferred income taxes		45,700		45,000
Other long-term liabilities		46,200		45,300
Shareholders’ equity		315,400		301,100
Total Liabilities and Shareholders’ Equity	$	797,800	$	658,700

See accompanying notes to condensed consolidated financial statements.

Page 5

West Pharmaceutical Services, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)

(in thousands)

	Common Stock											Treasury Stock
(in thousands, except per share data)	Number of shares	Amount		Capital in excess of par value		Retained earnings			Accumulated other comprehensive income (loss)			Number of shares		Amount			Total
Balance, December 31, 2004	34,330	$	8,600	$	24,500	$	287,500		$	36,400		(3,621	)	$	(55,900	)	$	301,100
Net income							26,100											26,100
Shares issued for business acquisition					800							71			1,000			1,800
Shares issued under stock plans					4,300							787			10,000			14,300
Tax benefit from stock plans					2,500													2,500
Cash dividends declared ($.22 per share)							(7,000	)										(7,000	)
Foreign currency translation adjustment										(23,900	)							(23,900	)
Minimum pension liability translation adjustment										500								500
Balance, June 30, 2005	34,330	$	8,600	$	32,100	$	306,600		$	13,000		(2,763	)	$	(44,900	)	$	315,400

See accompanying notes to condensed consolidated financial statements.

Page 6

West Pharmaceutical Services, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

	Six Months Ended
	6/30/2005			6/30/2004
Cash flows provided by operating activities:
Net income	$	26,100		$	14,700
(Income) loss from discontinued operations, net of tax		(900	)		4,700
Depreciation and amortization		20,800			16,100
Other non-cash items, net		7,300			3,700
Changes in assets and liabilities, net of effects of acquired businesses and discontinued operations		(24,300	)		(9,600	)
Net cash provided by operating activities		29,000			29,600

Cash flows (used in) provided by investing activities:
Property, plant and equipment acquired		(18,600	)		(28,700	)
Insurance proceeds received for property damage		—			31,800
Acquisition of businesses, net of cash acquired		(141,000	)		—
Repayment of affiliate loan		200			600
Customer advances, net of repayments		—			(800	)
Other		900			(100	)
Net cash (used in) provided by investing activities		(158,500	)		2,800

Cash flows provided by (used in) financing activities:
Net borrowings (repayments) under revolving credit agreements		127,700			(13,600	)
Payment of fees under revolving credit agreements		(400	)		(400	)
Repayment of other short-term debt		(10,000	)		(3,400	)
Dividend payments		(6,800	)		(6,200	)
Tax benefit from stock option exercises		1,900			—
Issuance of common stock		9,800			10,200
Net cash provided by (used in) financing activities		122,200			(13,400	)
Net cash provided by (used in) discontinued operations		5,000			(2,900	)
Effect of exchange rates on cash		(5,000	)		(1,000	)
Net (decrease) increase in cash and cash equivalents		(7,300	)		15,100
Cash, including cash equivalents at beginning of period		68,800			37,800
Cash, including cash equivalents at end of period	$	61,500		$	52,900

See accompanying notes to condensed consolidated financial statements.

Page 7

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

The interim condensed consolidated financial statements for the three- and six-month periods ended June 30, 2005 should be read in conjunction with the consolidated financial statements and notes thereto of West Pharmaceutical Services, Inc. (“West” or “the Company”), appearing in the Company’s 2004 Annual Report on Form 10-K. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles.

Interim Period Accounting Policy

In the opinion of management, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring accruals and adjustments, necessary for a fair statement of the Company’s financial position as of June 30, 2005, the results of operations and cash flows for the periods ended June 30, 2005 and 2004 and the change in shareholders’ equity for the six months ended June 30, 2005. The results of operations for any interim period are not necessarily indicative of results for the full year.

Income Taxes

The tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on the current estimate of full year results, except that taxes related to specific events, if any, are recorded in the interim period in which they occur.

On May 10, 2005, the Treasury Department and Internal Revenue Service released technical guidance for U.S. companies that elect to repatriate earnings from foreign subsidiaries subject to the temporary reduced tax rate available under the American Jobs Creation Act of 2004. After its analysis of the technical guidance, the Company finalized plans to repatriate up to $70,000 of unremitted earnings of foreign subsidiaries during 2005 and recorded a $1,100 tax provision during the second quarter of 2005. The Company is evaluating, but has not concluded, plans for any additional repatriations above the $70,000 this year.

Page 8

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

On May 20, 2005, West completed its acquisition of substantially all of the assets of the Tech Group, Inc. (“Tech”), including the outstanding stock of, or other equity interests in, Tech’s wholly owned subsidiaries in the United States, Puerto Rico, Ireland and Mexico. West did not acquire Tech’s ownership interest in Tech Group Asia. Tech provides contract design, tooling and manufacturing services and solutions using plastic injection molding and component assembly processes for the medical device, pharmaceutical, diagnostic and general healthcare and consumer industries. The total purchase price was $140,000; a portion of the purchase equal to $14,000 is held in an escrow account (restricted cash). $7,000 will be paid to the sellers contingent on the performance of the acquired business during the fiscal year ending June 26, 2005 and the remaining $7,000 based on the fiscal year June 26, 2006 performance of a specific product line.

The allocation of the purchase price is based upon the preliminary information currently available, which may be revised as additional information becomes available, such as a finalized fixed asset and intangible asset valuation. The valuation is expected to be finalized by September 30, 2005. The preliminary allocation of the purchase price, net of the $14,000 pre-acquisition contingency, is as follows:


Current assets	$	35,900
Property, plant and equipment		49,000
Goodwill		17,400
Intangible assets		46,200
Other noncurrent assets		300
Current liabilities		(20,900	)
Noncurrent liabilities and deferred taxes		(1,900	)

The acquired intangible assets and their respective remaining useful lives are as follows:

	Estimate of Fair Value		Remaining Useful Life
Trademarks	$	10,000	Indefinite
Customer Contracts		15,700	20	Years
Customer Relationships		20,500	25	Years
	$	46,200

The estimated amortization expense for the remainder of 2005 for these intangible assets is approximately $800. The estimated annual amortization expense of these intangible assets for 2006 is approximately $1,800 and for each of the next four years is approximately $2,000 per year.

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West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

The following unaudited pro forma summary combines the results of operations of West and Tech as if the acquisition had occurred at the beginning of each period presented. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made at the beginning of each period, or of results which may occur in the future.

	Three Months Ended				Six Months Ended
	6/30/05		6/30/04		6/30/05		6/30/04
Net sales	$	196,600	$	167,300	$	384,400	$	322,300
Income from continuing operations	$	12,000	$	9,400	$	24,900	$	16,900
Income from continuing operations per diluted share	$	0.37	$	0.31	$	0.78	$	0.56
Net income	$	12,600	$	6,600	$	25,800	$	12,200
Net income per diluted share	$	0.39	$	0.22	$	0.81	$	0.41

The Company’s financial statements include the results of the Tech business for periods after May 20, 2005.

In February 2005, the Company acquired the stock of Monarch Analytical Laboratories, Inc. (“Monarch”). Monarch is a contract laboratory business that performs testing of pharmaceutical packaging components specializing in plastic and glass materials. On the closing date, the Company paid $1,900 in cash and $1,800 in common stock for Monarch. Additionally, the Company assumed, and subsequently paid, debt in the amount of $1,900. The allocation of the purchase price follows:

Page 10

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

On January 1, 2005, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share Based Payment – Revised 2004”, using the modified prospective transition method. Under this method, stock-based employee compensation cost is recognized using the fair-value based method for all new awards granted after January 1, 2005. Additionally, compensation costs for unvested stock options and awards that are outstanding at January 1, 2005, will be recognized over the requisite service period based on the grant-date fair value of those options and awards as previously calculated under the pro-forma disclosures under SFAS 123. Prior to the adoption of SFAS 123(R), the Company accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. If the fair value based method prescribed in SFAS 123 had been applied in 2004 to all stock awards, the Company’s net income and basic and diluted net income per share would have been reduced as summarized below:

	Three Months Ended		Six Months Ended
	June 30, 2004
Net income, as reported	$	7,700	$	14,700

Add: Stock-based compensation expense included in net income, net of tax		1,700		1,900

Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of tax		(2,200)		(2,700)

Pro forma net income	$	7,200	$	13,900

Net income per share:

Basic, as reported	$	0.26	$	0.50
Basic, pro forma	$	0.24	$	0.47

Diluted, as reported	$	0.25	$	0.48
Diluted, pro forma	$	0.23	$	0.45

For the three and six months ended June 30, 2005, the Company recorded pretax compensation expense associated with stock options and awards of $400 and $900, respectively. Total compensation cost related to nonvested options not yet recognized was $4,200 at June 30, 2005. These costs will be recognized through 2009 based on the requisite service periods of the stock options and awards. In addition to stock option awards, the Company also recorded an expense of $1,600 for its employee stock purchase plan for both the three- and six-month periods during 2005. Had SFAS 123(R) been applied during 2004, a pre-tax expense of $400 would have been recorded for this plan.

Page 11

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

For the six months ended June 30, 2005, the Company granted 340,800 options to key employees under the 2004 Stock-Based Compensation Plan. These option awards vest based on 4 years of continuous service and have 10-year contractual terms. Upon exercise, shares are issued from treasury stock in exchange for the exercise price of the options. The fair value of each option award was estimated on the date of grant using a Black-Scholes option valuation model that used the following ranges of assumptions: average risk-free interest rate of 4.1% to 4.2%, average expected life of 6 years, expected volatility of 27.3% to 28.8% and dividend yield of 1.7% to 1.8%. Expected volatility is based upon historical volatility for the Company’s common stock and other factors. The expected life of options granted is derived from historical exercise patterns and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based upon the published U.S. Treasury yield curve in effect at the time of grant. The dividend yield is based upon the most recently declared quarterly dividend as of the grant date. The range of grant date fair values of options granted during the six months ended June 30, 2005 was $7.14 to $7.27.

In addition to stock options, the Company issues performance vesting restricted shares (“PVR shares”) under the 2004 Stock-Based Compensation Plan, with vesting depending on the achievement of certain performance targets involving annual growth rates on revenue and return on invested capital for specified performance periods. At December 31, 2004, 252,600 PVR shares were outstanding, which vest over two performance periods through 2006. During the first quarter of 2005, the Company awarded 89,330 PVR shares to key employees covering a three-year performance period ending December 31, 2007. The PVR shares are forfeited if results for the performance period are less than 70% of the performance target. Achievement of between 70% and 100% of the performance targets would result in a vesting of between 50% and 100% of the PVR shares. Achievement of between 101% and 150% of the performance targets would result in the award of up to 89,330 additional, unrestricted shares, depending on the level of achievement. The fair value of PVR shares is determined at the grant date fair market value and is generally recognized as an expense over the vesting period. Total compensation cost related to nonvested PVR shares to be recognized over the next three years is $4,900 at June 30, 2005 based on estimated probability. During the three and six months ended June 30, 2005, pretax compensation expense for all PVR shares of $1,000 and $1,700, respectively, was recorded.

5.	Inventories at June 30, 2005 and December 31, 2004 were as follows:

	6/30/05		12/31/04
Finished goods	$	27,900	$	28,800
Work in process		11,500		9,600
Raw materials		25,200		18,300
	$	64,600	$	56,700

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West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

6.	Comprehensive income (loss) for the three and six months ended June 30, 2005 and 2004 was as follows:

	Three Months Ended						Six Months Ended
	6/30/05			6/30/04			6/30/05			6/30/04
Net income	$	12,800		$	7,700		$	26,100		$	14,700
Foreign currency translation adjustments		(14,800	)		(3,400	)		(23,900	)		(6,600	)
Minimum pension liability translation adjustments		400			—			500			(100	)
Comprehensive (loss) income	$	(1,600	)	$	4,300		$	2,700		$	8,000

As a result of the acquisition of Tech in the second quarter of 2005, the Company has established two reportable segments, preliminarily labeled “Pharmaceutical Systems” and “Tech including the West Device Group”. The Pharmaceutical Systems segment focuses on the design, manufacture and distribution of elastomer and metal components used in parenteral drug delivery for customers in the pharmaceutical and biopharmaceutical industries. The Pharmaceutical Systems segment consists of two operating segments (the Americas and Europe/Asia) which are aggregated for reporting purposes as they produce and sell a similar range of products in their respective geographic regions. The Tech including the West Device Group segment, which is composed of West’s previously existing Device Group operating unit and the recently acquired Tech business, provides contract design, tooling and manufacturing services using plastic injection molding and component assembly processes for the medical device, pharmaceutical, diagnostic and general healthcare and consumer industries.

The Company has restated the composition of the reportable segment information in all prior periods.

Net sales to external customers by reporting segment for the three and six months ended June 30, 2005 and 2004 were as follows:

	Three Months Ended						Six Months Ended
Net Sales	6/30/05			6/30/04			6/30/05		6/30/04
Pharmaceutical Systems	$	139,500		$	121,200		$	274,500	$	238,400
Tech including the West Device Group Eliminations		35,800 (2,300	)		16,600 (1,700	)		52,500 (4,600)		31,800 (3,600)
Total	$	173,000		$	136,100		$	322,400	$	266,600

Page 13

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

Operating profit (loss) by reporting segment for the three and six months ended June 30, 2005 and 2004 was as follows:


			Three Months Ended				Six Months Ended
Operating Profit (Loss):		6/30/05			6/30/04			6/30/05			6/30/04
Pharmaceutical Systems	$	26,500		$	23,500		$	52,900		$	42,700
Tech including the West Device Group		2,800			900			3,900			2,300
Corporate costs		(9,500	)		(7,400	)		(15,600	)		(13,200	)
Restructuring credit		1,400			—			1,400			—
Domestic pension expense		(1,300	)		(1,200	)		(2,600	)		(2,400	)
Operating profit		19,900			15,800			40,000			29,400
Interest expense, net		(2,900	)		(1,700	)		(4,800	)		(3,500	)
Income before income taxes	$	17,000		$	14,100		$	35,200		$	25,900

The Tech including the West Device Group segment results for the three and six months ended June 30, 2005 include $1,100 of operating profit from the acquired Tech business.

Total assets by reporting segment at June 30, 2005 and December 31, 2004 were as follows:

Total Assets	6/30/05		12/31/04
Pharmaceutical Systems	$	470,300	$	496,700
Tech including the West Device Group Corporate		203,100 124,400		50,400 111,600
Total	$	797,800	$	658,700

Common stock issued at June 30, 2005 was 34,330,282 shares, of which 2,762,559 shares were held in treasury. Dividends of $.11 per common share were paid in the second quarter of 2005 and a dividend of $.11 per share payable August 3, 2005 to holders of record on July 20, 2005 was declared on June 28, 2005.

Below are the calculations of earnings per share for the three and six months ended June 30, 2005 and 2004. Options to purchase 491,000 shares of common stock outstanding during both the three and six months ended June 30, 2004 were not included in the computation of diluted earnings per share since the options’ exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. There were 28,800 and 57,600 antidilutive options outstanding during the three and six months ended June 30, 2005, respectively.

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West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

	Three Months Ended				Six Months Ended
	6/30/050		6/30/04		6/30/05		6/30/04
Net income	$	12,800	$	7,700	$	26,100	$	14,700

Average common shares outstanding		30,978		29,920		30,812		29,682
Add: Dilutive stock options and restricted shares		1,177		784		1,182		724
Average shares assuming dilution		32,155		30,704		31,994		30,406

Basic net income per share	$	0.41	$	0.26	$	0.85	$	0.50
Diluted net income per share	$	0.40	$	0.25	$	0.82	$	0.48

The Company has accrued the estimated cost of environmental compliance expenses related to soil or ground water contamination at current and former manufacturing facilities. The Company believes the accrued liability of $2,200 at June 30, 2005 is sufficient to cover the future costs of these remedial actions.

10.	Goodwill by reportable segment as of June 30, 2005 and December 31, 2004 was as follows:

	6/30/05		12/31/04
Pharmaceutical Systems	$	34,400	$	34,800
Tech including the West Device Group		25,000		7,600
	$	59,400	$	42,400

The purchase of Tech in the second quarter of 2005 increased the goodwill balance by $17,400 in the Tech including the West Device Group segment. The purchase of Monarch in 2005 increased the goodwill balance by $3,400 in the Pharmaceutical Systems segment, with foreign currency translation adjustments of $3,800 more than offsetting the increase.

11.	The following table details the activity related to the Company’s restructuring reserve, which consists of accrued severance, benefits, contract termination costs and non-cash write-offs:

	Severance and benefits		Other			Total
Balance, December 31, 2004	$	500	$	2,900		$	3,400
Non-cash write-off		—		(1,400	)		(1,400	)
Cash payments		—		(1,000	)		(1,000	)
Balance, June 30, 2005	$	500	$	500		$	1,000

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West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

In the second quarter of 2005, the Company recorded a $1,400 reduction to the reserve due to lower than expected costs in relation to the closure of a plastics manufacturing facility in the U.K. The remainder of the decrease was used for contract termination costs. The balance at June 30, 2005 consists of remaining severance and other obligations connected with the U.K. plant closure, which are expected to be paid within the next six months.

12.	Other (income) expense for the three and six months ended June 30, 2005 and 2004 was as follows:

	Three Months Ended						Six Months Ended
		6/30/05			6/30/04			6/30/05		6/30/04
Foreign currency transaction (gains) losses	$	300		$	(100	)	$	700	$	300
(Gain) loss on sales of equipment and other assets		(100	)		400			—		800
Other		—			—			600		—
	$	200		$	300		$	1,300	$	1,100

The majority of the increase in the expense for the six months ended June 30, 2005 is related to a $500 impairment of an investment in a company that had been developing genomics analysis technology, following that company’s unsuccessful efforts in finding a commercial sponsor.

13.	The components of net pension expense for domestic and international plans for the three and six months ended June 30, 2005 and 2004 were as follows:

	Pension benefits						Other retirement benefits
Three months	6/30/05			6/30/04			6/30/05		6/30/04
Service cost	$	1,300		$	1,300			300	$	200
Interest cost		2,900			2,800			200		100
Expected return on assets		(3,800	)		(3,700	)		—		—
Amortization of prior service cost		200			200			—		—
Recognized actuarial losses		700			800			—		—
Pension expense	$	1,300		$	1,400		$	500	$	300

Page 16

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

	Pension benefits				Other retirement benefits				Total
Three months	6/30/05		6/30/04		6/30/05		6/30/04		6/30/05		6/30/04
Domestic plans	$	800	$	900	$	500	$	300	$	1,300	$	1,200
International plans		500		500		—		—		500		500
	$	1,300	$	1,400	$	500	$	300	$	1,800	$	1,700

	Pension benefits						Other retirement benefits
Six months	6/30/05			6/30/04			6/30/05		6/30/04
Service cost	$	2,700		$	2,600		$	500	$	300
Interest cost		5,900			5,700			300		300
Expected return on assets		(7,600	)		(7,300	)		—		—
Amortization of prior service cost		300			400			—		—
Recognized actuarial losses		1,500			1,500			—		—
Pension expense	$	2,800		$	2,900		$	800	$	600

	Pension benefits				Other retirement benefits				Total
Six months		6/30/05		6/30/04		6/30/05		6/30/04		6/30/05		6/30/04
Domestic plans	$	1,800	$	1,800	$	800	$	600	$	2,600	$	2,400
International plans		1,000		1,100		—		—		1,000		1,100
	$	2,800	$	2,900	$	800	$	600	$	3,600	$	3,500

14.	On May 18, 2005 the Company entered into an amendment to its revolving credit facility, which, among other things:

a) increased the aggregate revolving credit facility to $200,000 from $125,000, with the Company retaining the ability to increase the facility by an additional $25,000 to an aggregate amount not to exceed $225,000;

b) extended the term of the facility by approximately one year to May 17, 2010;

c) amended the leverage ratio covenant to total indebtedness of not more than three and one-half times (3.5x) earnings before income tax, depreciation and amortization (“EBITDA”) for any period of four consecutive quarters; and

d) amended the interest rate “spread” applicable to amounts borrowed under the facility to be determined by reference to that leverage ratio.

Page 17

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

Debt covenants in the Company’s $100,000 senior notes due June 2010 were simultaneously updated to reflect the debt covenants, including the leverage ratio, contained in the amended revolving credit agreement.

As of June 30, 2005 the Company was in compliance with all debt covenants.

15.

The Company has been named a defendant in two lawsuits filed in connection with the January 2003 explosion and related fire at the Kinston, N.C. plant. In the first, plaintiffs seek unspecified compensatory and punitive damages from the Company. Because this lawsuit is in its early stages, the Company is unable to estimate the plaintiffs’ alleged damages. In the second suit, plaintiffs did not name the Company as a defendant, but the Company has been brought in as an additional party by named defendants under a North Carolina procedure. Under this procedure, a finding of liability against the Company would not result in a payment by the Company. Instead, the finding would reduce any damages awarded to plaintiffs against the named defendants by the amount that the Company and its workers’ compensation carrier would otherwise be entitled to receive by way of subrogation from the plaintiffs. In addition, the finding would extinguish the right to subrogation of amounts paid by the Company’s carrier in workers’ compensation benefits to those plaintiffs. The Company believes that overall it has sufficient insurance and reserves to cover losses from expected litigation associated with the incident therefore the Company does not expect that resolution of these matters will have a material impact on the financial statements.

16.

During 2004, the Company entered into a Share and Asset Purchase Agreement to sell its drug delivery business to Archimedes Pharma Limited, a new company formed by Warburg Pincus Private Equity VIII and Warburg Pincus International Partners to facilitate the acquisition. The Company also announced in 2004 that it intends to exit the clinical services business during 2005. The drug delivery business and the clinical services business comprised the Drug Delivery Systems segment. Accordingly, the Company restated all previous periods to present the former Drug Delivery Systems segment as a discontinued operation.

Page 18

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

Net sales and income from discontinued operations for the three and six months ended June 30, 2005 and 2004 were as follows:

	Three Months Ended					Six Months Ended
	6/30/05		6/30/04			6/30/05		6/30/04
Net sales	$	2,700	$	1,900		$	5,700	$	5,100
Pretax income (loss) from discontinued operations		400		(4,100	)		800		(7,000	)
Income tax benefit		200		1,300			100		2,300
Net income (loss) from discontinued operations	$	600	$	(2,800	)	$	900	$	(4,700	)

The Company completed the sale of its drug delivery business in the first quarter of 2005 resulting in decreased costs when compared to 2004 when the business was fully operational. The income in 2005 reflects the results of the clinical services unit, which continues to operate while the Company evaluates potential sale opportunities for that business.

Net cash provided by discontinued operations for the six months ended June 30, 2005 was $5,000 primarily due to the receipt of the proceeds from the sale of the drug delivery business. For the same six-month period in 2004, cash used in operating activities of discontinued operations was $2,900.

17.

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143” (FIN 47). Under FIN 47, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. The provisions of FIN 47 are required to be applied no later than the end of fiscal years ending after December 15, 2005, although early adoption is encouraged. The Company has determined that the adoption of FIN 47 will have no material impact on its consolidated financial statements.

18.

On August 2, 2005, the Company and its wholly owned subsidiary West Pharmaceutical Services of Delaware, Inc. acquired 90% of the equity interests in Medimop Medical Projects, Ltd. (“Medimop”) and its affiliated company Medimop USA LLC from Freddy Zinger, Medimop’s founder and President. The Company also received an option to purchase, at fair value, the remaining 10% ownership of the two companies, which generally becomes exercisable four years after the closing date.

Page 19

West Pharmaceutical Services, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share data)

(continued)

The Company paid $36,250 for the initial investment, of which $32,625 was paid in cash and the balance by delivering 128,547 shares of its common stock issued at fair value. The Company will also pay up to an additional $1,836 of contingent cash consideration, depending on the achievement of operating goals over a four-year period. Five million dollars of the purchase price was held in escrow as security for potential liabilities for breaches of representations, warranties and covenants of the seller.

Medimop, a privately owned company headquartered in Ra’anana, Israel, is a leading developer of disposable medical devices for the mixing, transfer, reconstitution and administration of injectable drugs. As part of the transaction, Mr. Zinger will enter into a four-year employment contract. In exchange for a payment of $3,750, he will also agree to certain non-competition and non-solicitation covenants during his employment and for three years following employment termination.

The acquisition was financed with proceeds from private-lender debt (See Note 19).

19.

On July 28, 2005, the Company concluded a private placement of $75,000 in senior floating rate notes. The total amount of the private placement was divided into two tranches with $50,000 maturing in 7 years on July 28, 2012 (“Series A Notes”) and $25,000 maturing in ten years on July 28, 2015 (“Series B Notes”). The two tranches have interest payable based on LIBOR rates, with the Series A Notes at LIBOR plus 80 basis points and the Series B Notes at LIBOR plus 90 basis points. Covenants included in the agreement conform to the Company’s previously existing revolving credit agreement. Proceeds from this agreement were used to fund the acquisition of Medimop (See Note 18) with the balance used to reduce borrowings under the revolving credit facility.

On July 28, 2005, the Company also entered into two interest-rate swap agreements with PNC Capital Markets Inc. to protect against volatility in the interest rates payable on the Series A and B Notes. The first interest rate swap agreement has a seven-year term at a notional amount of $50,000 under which the Company will receive variable interest rate payments based on three-month LIBOR in return for making quarterly payments at a fixed annual rate of 4.52%. The second interest rate swap agreement has a ten-year term at a notional amount of $25,000 under which the Company will receive variable interest rate payments based on 3-month LIBOR in return for making quarterly payments at a fixed annual rate of 4.61%.

Including the applicable margin, the interest-rate swap agreements effectively fix the interest rates payable on the Series A and B notes at 5.32% and 5.51%, respectively.

Page 20

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004

Tech Acquisition

On May 20, 2005, West Pharmaceutical Services, Inc (“West” or “the Company”) completed its acquisition of substantially all of the assets of the Tech Group, Inc. (“Tech”), including the outstanding stock of, or other equity interests in, Tech’s wholly owned subsidiaries in the United States, Puerto Rico, Ireland and Mexico. West did not acquire Tech’s ownership interest in Tech Group Asia. The total purchase price was $140 million; a portion of the purchase equal to $14 million is held in an escrow account (restricted cash) and will be paid to the sellers contingent on the performance of the acquired business during 2005 and 2006.

As a result of the acquisition, West has established two reportable segments, preliminarily labeled “Pharmaceutical Systems” and “Tech including the West Device Group”. The Pharmaceutical Systems segment focuses on the design, manufacture and distribution of elastomer and metal components used in parenteral drug delivery for customers in the pharmaceutical and biopharmaceutical industries. The Pharmaceutical Systems segment consists of two operating segments (the Americas and Europe/Asia) which are aggregated for reporting purposes as they produce and sell a similar range of products in their respective geographic regions. The Tech including the West Device Group segment is composed of West’s previously existing Device Group operating unit and the recently acquired Tech business and provides contract design, tooling and manufacturing services and solutions using plastic injection molding and component assembly processes for the medical device, pharmaceutical, diagnostic and general healthcare and consumer industries.

The Company’s financial statements include the results of the Tech business for periods after May 20, 2005.

Net Sales

	Three Months Ended				Six Months Ended
	June 30				June 30
In millions	2005		2004		2005		2004
Pharmaceutical Systems	$139.5		$121.2		$274.5		$238.4
Tech including the West Device Group	35.8		16.6		52.5		31.8
Eliminations	(2.3	)	(1.7	)	(4.6	)	(3.6	)
Consolidated Total	$173.0		$136.1		$322.4		$266.6

Consolidated net sales for the second quarter of 2005 were $173.0 million compared to $136.1 million reported in the second quarter of 2004. The Tech business contributed $17.5 million of the sales increase. Excluding the Tech business, net sales increased $19.4 million or 14.2% from the prior year quarter with 2.5% of the increase due to the impact of foreign currency translation. Overall price increases, primarily tied to increasing raw material costs, accounted for 1.6% of the sales increase over the quarter ended June 30, 2004.

Page 21

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

In the Pharmaceutical Systems segment, second quarter 2005 sales were $139.5 million, an $18.3 million or 15.0% increase from prior year quarter reported sales of $121.2 million. Approximately 2.8% of the increase is the result of foreign currency translation. Second quarter 2005 net sales in European markets were 20.6% higher, net of foreign currency translation, than those achieved in the prior year quarter, reflecting strong demand for pre-filled syringe components and Flip-Off ® seals. Net sales in North America increased 5.1% over the prior year quarter, with increased demand for disposable medical devices (non-filled syringe components and intra-venous fitments), Flip-Off ® seals and contract laboratory services, partially offset by lower sales of specially treated coated serum stoppers. The decline in sales of coated products followed strong demand in 2004 as customers increased their inventory levels in advance of a formulation change by our supplier.

The Tech including the West Device Group segment achieved second quarter 2005 net sales of $35.8 million, an increase of $19.2 million over reported second quarter 2004 net sales. The Tech business contributed $17.5 million of this increase, of which $12.9 million was generated by sales of molded plastic components and assemblies, with the remaining $4.6 million composed of lower margin engineering and tooling sales. Net sales of custom plastic fittings used in beverage containers produced by the Device Group operating unit were $1.1 million above those achieved in the 2004 second quarter.

Net sales in the first half of 2005 were $322.4 million, an increase of $55.8 million compared to the first six months of 2004. The Tech business contributed $17.5 million of the sales increase, while West’s ongoing businesses were $38.3 million or 14.4% above prior year levels. The Pharmaceutical Systems segment contributed $36.1 million of the year-to-date net sales increase, led by sales of pre-filled injection syringe components, including increased sales of Westar ® treated components. Foreign currency translation contributed 2.5% of net sales increase. Overall price increases accounted for 1.4% of the sales increase over the first six months of 2004.

Page 22

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Gross Profit

Gross profit in the quarter increased to $50.6 million from $42.4 million in the second quarter of 2004. The $8.2 million increase in gross profit is comprised of $6.1 million of sales volume contributions from West’s ongoing business and $2.4 million from Tech, offset by $0.3 million of various cost and sales mix related matters. The second quarter 2005 gross margin declined to 29.2% compared to 31.1% in the same period last year. The acquisition of the Tech Group accounts for the decline in gross margin, as sales of molded plastic products typically carry profit margins ranging from 15% to 20%, and tooling and development projects frequently generate margins of approximately 5%. Second quarter 2005 gross margins within the Pharmaceutical Systems segment declined by .7 basis points, primarily as a result of a change in the sales mix versus the prior year quarter reflecting the decrease in sales of higher margin coated products. Increased raw material and labor costs and higher depreciation costs connected with the new plant in Kinston N.C. partially offset the decrease in costs connected with the interim production plans that were in place during the majority of 2004 during the construction and transfer of operations to the new plant. The decline in Pharmaceutical Systems segment gross margins was almost fully offset by improved margins in the Device Group portion of the Tech including the West Device Group segment resulting from lower tooling and design costs and a decrease in plant overhead costs following the closure of the Lewes U.K. plant in 2004.

For the six-month period ending June 30, 2005, gross profit was $97.0 million, or $15.1 above that reported in the 2004 six month period. The Pharmaceutical Systems segment contributed $12.4 million of the gross profit increase, largely due to the higher sales volumes, including strong contributions from higher margin Westar processed components and advanced coated products. The Tech including the West Device Group segment contributed $2.7 million of the gross profit increase, of which $2.4 million was generated by the Tech acquired business. Gross profit margins for the six month periods ending June 30, 2005 and 2004 were 30.1% and 30.7%, respectively. The inclusion of the lower margin Tech business reduced reported six month margins by almost one percentage point, offset slightly by a favorable product mix on West’s historic businesses. Savings from decreased interim production costs were partially offset by increased depreciation, overhead and production inefficiencies at the Company’s Kinston facility.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses (“SGA”) were $31.9 million in the second quarter of 2005 compared to $26.3 million in the same quarter of 2004, but declined from 19.3% of sales in 2004 to 18.5% of sales in the current quarter.

Page 23

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

In the Pharmaceutical Systems segment, SGA expenses were $18.3 million in the second quarter of 2005, up $1.9 million from the same period in 2004. This increase is due to increased compensation and outside services costs along with the unfavorable impact of foreign exchange rates, partially offset by lower liability, property and business interruption insurance costs due to renegotiated policies.

For the Tech including the West Device Group segment, selling, general and administrative expenses increased by $1.2 million from the second quarter of 2004 to $2.6 million in the 2005 quarter. This increase was substantially due to the inclusion of Tech Group expenses in the 2005 quarter.

Corporate administration costs, including domestic pension expenses, were $11.0 million in the second quarter of 2005 compared to $8.5 million in 2004. The increase is partially due to the Company’s adoption of Statement of Financial Accounting Standard 123 “Share-Based Payment – Revised 2004” (“FAS 123(R)”) which requires that stock-based employee compensation costs be measured at fair value and recorded as an expense over the requisite service period. Second quarter 2005 results include a $1.6 million charge for shares of Company stock purchased by employees at a discount from the fair market value at the date of grant under the Company’s employee stock purchase plan. Employee stock option costs using the fair value method for the second quarter of 2005 were $0.4 million. Prior to the adoption of SFAS 123(R), neither the employee stock purchase or stock option plans resulted in expense recognition since the Company used the intrinsic value method for stock-based compensation prescribed in Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Second quarter 2005 corporate costs also include $0.7 million for stock-based director’s compensation programs and the non-qualified deferred compensation plan due to increases in the number of shares in both programs and the increase in the Company’s stock price. In addition, an increase of $0.5 million resulted from management incentive bonus programs and workers compensation and director’s insurance costs. All of these increases were partially offset by a $0.7 million reduction in restricted stock plan expenses compared to the 2004 quarter.

SGA expenses were $57.1 million (17.7% of sales) for the six months ended June 30, 2005 compared to $51.4 million (19.3% of sales) for the same period in 2004. Pharmaceutical Systems segment SGA expenses were $2.1 million higher than in the prior year six month period for the same reasons addressed above. SGA costs in the Tech including the West Device segment increased by $0.9 million due to the inclusion of the Tech business in 2005. Corporate costs, including domestic pension expenses, were $2.7 million higher in the 2005 period compared to same period in 2004, primarily reflecting increased stock compensation costs.

Page 24

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Restructuring credit

In the second quarter of 2005, the Company recorded a $1.4 million reduction to the restructuring reserve due to lower than expected costs in relation to the closure of a plastics manufacturing facility in the U.K.

Other Expense, net

Other expenses were $0.2 million and $0.3 million in the second quarter of 2005 and 2004, respectively. For the six months ended June 30, 2005, other expenses were $1.3 million compared to $1.1 million for the same period in 2004. The half year results for 2005 include a $0.5 million impairment of an investment in a company that had been developing genomics analysis technology following that company’s unsuccessful efforts in finding a commercial sponsor.

Operating profit

The Company’s operating profit (loss) by reportable segment, corporate costs and domestic pension expense is as follows:

	Three Months Ended				Six Months Ended
	June 30				June 30
In millions	2005		2004		2005		2004
Pharmaceutical Systems	$26.5		$23.5		$52.9		$42.7
Tech including the West Device Group	2.8		0.9		3.9		2.3
Corporate costs	(9.5	)	(7.4	)	(15.6	)	(13.2	)
Restructuring credit	1.4		—		1.4		—
Domestic pension expense	(1.3	)	(1.2	)	(2.6	)	(2.4	)
Consolidated Total	$19.9		$15.8		$40.0		$29.4

The Tech including the West Device Group segment results for the three and six months ended June 30, 2005 include $1.1 million of operating profit from the acquired Tech business.

Page 25

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Interest Expense, net

Net interest costs were $2.9 million in the second quarter 2005 up from $1.7 million in the prior year quarter. For the six months ended June 30, 2005, net interest costs were $4.8 million compared to $3.5 million in the prior year. The increase in interest expense is a result of higher interest rates on floating-rate debt and increased net borrowings attributed to The Tech Group acquisition.

Provision for Income Taxes

The effective tax rate for the second quarter ended June 30, 2005 was 32.4% compared to 32.0% in the prior year quarter. For the six-month period, the effective tax rate was 32.0% in 2005 compared to 32.4% in 2004.

Following regulatory guidance issued on May 10, 2005 clarifying the provisions of the American Jobs Creation of 2004, the Company finalized its plans to repatriate up to $70 million of earnings of foreign subsidiaries and recorded a second quarter 2005 provision for taxes payable at the time of the remittance of $1.1 million.

Equity in Net Income of Affiliated Companies

Earnings in net income of affiliated companies were $0.7 million in the second quarter of 2005 down slightly from the $0.9 million in the second quarter of 2004. Earnings for the six-month period were also down from the prior year with income of $1.3 million in 2005 compared to $1.9 million in 2004. The 2004 results included $0.6 million resulting from a real estate gain recorded by the Company’s 49% owned affiliate in Mexico.

Income from Continuing Operations

Income from continuing operations for the second quarter ended June 30, 2005 was $12.2 million, or $0.38 per diluted share, compared to $10.5 million, or $0.34 per diluted share, in the second quarter of 2004. Results for the second quarter of 2004 included $3.6 million ($2.5 million, or $0.08 per diluted share, net of tax) of costs associated with interim production procedures and legal expenses related to the 2003 explosion at the Kinston facility. As noted earlier, the Company adopted SFAS 123(R) in the first quarter of 2005 which required that stock-based employee compensation costs be measured at fair value and recorded as an expense over the requisite service period. Had the fair value method been applied to prior periods, reported second quarter 2004 pre-tax income would have been reduced by $0.7 million ($0.5 million, or $0.02 per diluted share, net of tax).

Page 26

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Average shares outstanding during the second quarter of 2005 were 1.5 million above those of the 2004 second quarter, primarily reflecting shares issued under employee stock plans. The increase in shares outstanding reduced second quarter 2005 results by $.02 per diluted share when compared to the 2004 second quarter.

For the six months ended June 30, 2005 and 2004, income from continuing operations was $25.2 million ($0.79 per diluted share) and $19.4 million ($0.64 per diluted share), respectively. For the 2004 period, $7.4 million ($5.0 million, or $0.16 per diluted share, net of tax) of Kinston-related business interruption and legal costs were included in income from continuing operations. Had the fair value method of accounting for stock-based compensation been applied to the six months ended June 30, 2004, reported pre-tax income would have been reduced by $1.2 million ($0.8 million, or $0.03 per diluted share, net of tax). The 2004 six-month period also includes equity income of $0.6 million, or $0.02 per share resulting from a real estate gain recorded by the Company’s affiliate in Mexico.

Average shares outstanding during the six months ended June 30, 2005, were 1.6 million above those of the same period in 2004 for the same reasons as mentioned above. The increase in shares outstanding reduced 2005 six-month results by $0.04 per diluted share when compared to the 2004 six-month period.

Discontinued Operations

During 2004, the Company entered into a Share and Asset Purchase Agreement to sell its drug delivery business to Archimedes Pharma Limited, a new company formed by Warburg Pincus Private Equity VIII and Warburg Pincus International Partners to facilitate the acquisition. The Company also announced in 2004 that it intends to exit the clinical services business during 2005. The drug delivery business and the clinical services business comprised the former Drug Delivery Systems segment. Accordingly, the Company restated all previous periods to present the former Drug Delivery Systems segment as a discontinued operation.

Discontinued operations for the second quarter of 2005 contributed net income of $0.6 million compared to a net loss of $2.8 million for the same period of 2004. Net income for the six months ended June 30, 2005 for discontinued operations was $0.9 million compared to a net loss in 2004 of $4.7 million. The Company completed the sale of its drug delivery business in the first quarter of 2005 resulting in decreased costs when comparing the 2005 to 2004 periods when the business was fully operational. The income in 2005 reflects the results of the clinical services unit, which continues to operate while the Company evaluates potential sale opportunities for that business.

Page 27

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Liquidity and Capital Resources

Working capital at June 30, 2005 was $142.5 million compared with $110.0 million at December 31, 2004. The working capital ratio at June 30, 2005 was 2.2 to 1. The June 30, 2005 day’s sales outstanding ratio was 48.4 days, increasing slightly from 48.3 in 2004. Cash flow from operations was $29.0 million for the first six months of 2005, a decrease of $0.6 million from that achieved in the prior year six-month period.

Capital spending for the six-month period ended June 30, 2005 was $18.6 million. Over 70% of the capital spending was for manufacturing equipment upgrades, tooling projects and expansion projects. The remaining expenditures were for normal equipment replacements and information systems projects. Full-year 2005 capital spending, including spending in the acquired Tech business, is projected to be approximately $60 million.

2005 cash flows from investing activities include the May 20, 2005 acquisition of the Tech business for a total purchase price of $140.0 million and the February 10, 2005 acquisition of Monarch, a contract laboratory business, for $3.8 million of cash. The contract laboratory purchase also included a non-cash payment of $1.8 million of Company stock. The cash paid to the sellers of these businesses was offset by $2.8 million of cash balances on hand within the acquired business units at the time of their acquisition.

On May 18, 2005, the Company amended its revolving credit agreement, which, among other things:

a) increased the aggregate revolving credit facility to $200 million from $125 million, with the Company retaining the ability to increase the facility by an additional $25 million to an aggregate amount not to exceed $225 million;

b) extended the term of the facility by approximately one year to May 17, 2010;

c) amended the leverage ratio covenant to total indebtedness of not more than 3.5 times earnings before income tax, depreciation and amortization (“EBITDA”) for any period of four consecutive quarters; and

d) amended the interest rate “spread” applicable to amounts borrowed under the credit agreement to be determined by reference to that leverage ratio.

Debt covenants in the Company’s $100 million senior notes due June 2010 were simultaneously amended to conform to the debt covenants, including the leverage ratio, contained in the amended revolving credit agreement.

As of June 30, 2005 the Company was in compliance with all debt covenants.

Page 28

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Borrowings under the revolving credit facility were $177.0 million at June 30, 2005 compared to $50.8 million at December 31, 2004. The increased borrowings were used to finance the Tech acquisition. Total debt was $278 million at June 30, 2005. Debt as a percentage of total invested capital at June 30, 2005 was 46.8% compared to 34.8% at December 31, 2004. Total shareholders’ equity was $314.8 million at June 30, 2005 compared to $301.1 million at December 31, 2004. The increase in equity was due to current year net income and employee stock purchase and option plan activity, partially offset by dividend payments and negative foreign currency translation adjustments.

The Company paid cash dividends totaling $6.8 million ($0.22 per share) during the six-month period ended June 30, 2005 and received $9.8 million in proceeds from employee stock option exercises and employee stock purchase plan contributions. Financing cash flows also include the excess tax benefit derived from the tax deductibility of employee stock option gains in excess of the amounts recorded as compensation expense under the fair value method prescribed in SFAS 123(R).

The discussion of the Company’s recent senior note private placement under the caption “Subsequent Event – Private Placement” is incorporated herein by reference.

The Company believes that its financial condition, current capitalization and expected income from operations will be sufficient to meet the Company’s future expected cash requirements.

New Accounting Standards

Market Risk

The Company is exposed to various market risk factors such as fluctuating interest rates and foreign currency rate fluctuations. These risk factors can impact results of operations, cash flows and financial position. These risks are managed periodically with the use of derivative financial instruments such as interest rate swaps and forward exchange contracts. Derivatives used by the Company are highly effective as all of the critical terms of the derivative instruments match the hedged item. Effectiveness is measured on a quarterly basis. In accordance with Company policy, derivative financial instruments are not used for speculation or trading purposes.

Page 29

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

During the first six months of 2005, the Company was party to a forward exchange arrangement to protect against variability in future cash flows related to raw material purchases by European subsidiaries denominated in U.S. dollars (USD). This arrangement is divided into ten monthly contracts of 0.5 million Euro each with the last contract ending on December 13, 2005. The terms of the arrangement set a base rate of 1.30 USD per Euro and a limit rate of 1.36 USD per Euro. The Company is protected against a strengthening USD by restricting the exchange rate to the base rate. The Company would participate in gains caused by a weakening USD up to the limit rate. If the limit rate is exceeded at the expiry date of any of the remaining months, the Company agrees to buy Euro at the base rate for that month. There are no cash payments required and no income statement effect of an exchange rate between the base and limit rates. In the current quarter, the USD strengthened and the exchange rate fell below the base of 1.30 USD per Euro resulting in a gain on the contracts of less than $0.1 million.

The Company periodically uses forward contracts to hedge certain transactions or to neutralize month-end balance sheet exposures on cross-currency intercompany loans. The Company has a number of forward contracts with fair values totaling $0.3 million as of June 30, 2005 to purchase various currencies in Europe and Asia.

Subsequent Event – Medimop Acquisition

The Company paid $36,250 for the initial investment, of which $32,625 was paid in cash and the balance by delivering 128,547 shares of its common stock valued at fair value. West will also pay up to an additional $1.836 million of contingent cash consideration, depending on the achievement of operating goals over a four-year period. Five million dollars of the purchase price was held in escrow as security for potential liabilities for breaches of representations, warranties and covenants of the seller.

Medimop, a privately owned company headquartered in Ra’anana, Israel, is a leading developer of disposable medical devices for the mixing, transfer, reconstitution and administration of injectable drugs. As part of the transaction, Mr. Zinger will enter into a four-year employment contract. In exchange for a payment of $3.75 million, he also will agree to certain non-competition and non-solicitation covenants during his employment and for three years following employment termination.

The acquisition was financed with proceeds from private-lender debt (See “Subsequent Event – Private Placement”).

Page 30

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Subsequent Event – Private Placement

On July 28, 2005, the Company concluded a private placement of $75.0 million in senior floating rate notes. The total amount of the private placement was divided into two tranches with $50.0 million maturing in 7 years on July 28, 2012 (“Series A Notes”) and $25.0 million maturing in ten years on July 28, 2015 (“Series B Notes”). The two tranches have interest payable based on LIBOR rates, with the Series A Notes at LIBOR plus 80 basis points and the Series B Notes at LIBOR plus 90 basis points. Covenants included in the agreement conform to the Company’s previously existing revolving credit agreement. Proceeds from this agreement were used to fund the acquisition of Medimop (See “Subsequent Event – Medimop Acquisition”) with the balance used to reduce borrowings under the revolving credit facility.

The second interest rate swap agreement has a ten-year term at a notional amount of $25.0 million under which the Company will receive variable interest rate payments based on 3-month LIBOR in return for making quarterly payments at a fixed annual rate of 4.61%.

Including the applicable margin, the interest-rate swap agreements effectively fix the interest rates payable on the Series A and B notes at 5.32% and 5.51%, respectively.

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this report or in other Company documents and certain statements that may be made by management of the Company orally may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historic or current facts. They use words such as “estimate,” “expect,” “intend,” “believe,” “plan,” “anticipate” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or condition. In particular, these include statements concerning future actions, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings and financial results.

Because actual results are affected by risks and uncertainties, the Company cautions investors that actual results may differ materially from those expressed or implied in any forward-looking statement.

Page 31

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

It is not possible to predict or identify all such risks and uncertainties, but factors that could cause the actual results to differ materially from expected and historical results include, but are not limited to: sales demand; the effects of required acquisition-related purchase price allocations on income; the availability of required financing; the timing and commercial success of customers’ products incorporating the Company’s products and services; maintaining or improving production efficiencies and overhead absorption; competition from other providers; the Company’s ability to develop and market value-added products; the successful integration of acquired businesses; the average profitability, or mix, of products sold in a reporting period; financial performance of unconsolidated affiliates; the potential impact of the Medicare Prescription Drug, Improvement and Modernization Act of 2003; strength of the US dollar in relation to other currencies, particularly the Euro, UK pound, Danish Krone, Japanese Yen and Singapore Dollar; inflation; US and international interest rates; returns on pension assets in relation to the expected returns employed in preparing the Company’s financial statements; raw material price escalation, particularly petroleum-based raw materials and energy costs; exposure to product quality and safety claims; and, realization of the Company’s investment in the clinical services operation upon disposition.

The Company assumes no obligation to update forward-looking statements as circumstances change. Investors are advised, however, to consult any further disclosures the Company makes on related subjects in the Company’s 10-K, 10-Q and 8-K reports.

Page 32

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Item 3. Quantitative and Qualitative Disclosure about Market Risk

The information called for by this item is included in the text under the caption “Market Risk” in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Item 4. Controls and Procedures

The Company has established disclosure controls and procedures (as defined under SEC Rules 13a-15(e) and 15d-15(e)) that are designed to, among other things, ensure that information required to be disclosed in the Company’s periodic reports is recorded, processed, summarized and reported on a timely basis and that such information is made known to the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report, and based on such evaluation, has concluded that such disclosure controls and procedures are effective.

Additionally, the Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the Company’s internal control over financial reporting, and based on such evaluation, has concluded that there has been no change to the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, these internal controls. The operations of the recently acquired Tech Group were included in the Company’s review of financial reporting controls at the end of the quarter.

Page 33

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Part II - Other Information

Item 2. Issuer Purchases of Equity Securities

The following table shows information with respect to purchases of common stock of the Company made during the three months ended June 30, 2005, by the Company or any “affiliated purchaser” of the Company, as defined in Rule 10b-18(a)(3) under the Exchange Act:

Period	Total number of shares purchased (1) (2) (3)	Average price paid per share	Total number of shares purchased as part of a publicly announced plan or programs	Maximum number of shares that may yet be purchased under the plan or program
April 1, 2005 – April 30, 2005	180	$26.34	—	—

May 1, 2005 – May 31, 2005	58,904	27.39	—	—

June 1, 2005 – June 30, 2005	199	28.05	—	—
Total	59,283	$27.39	—	—

(1) Includes 58,361 shares of common stock acquired from employees who tender already-owned shares to satisfy the exercise price on option exercises as part of the Company’s 2004 Stock-Based Compensation Plan.

(2) Includes 799 shares purchased on behalf of employees enrolled in the Non-Qualified Deferred Compensation Plan for Designated Officers (Amended and Restated Effective January 1, 2004). Under the plan, Company matching contributions are delivered to the plan’s investment administrator, which upon receipt of the contributions purchases shares in the open market and credits the shares to individual plan accounts.

(3)	Includes 123 shares forfeited under the executive incentive stock program.

Page 34

Management’s Discussion and Analysis of Financial Condition and Results of Operations

for the Three Months and Six Months ended June 30, 2005 versus June 30, 2004, continued

Item 4. Submission of Matters to a Vote of Security Holders.

(a)	The Company held its annual meeting of shareholders on April 26, 2005.

(c) One matter was voted on at the annual meeting: (1) the election of three directors in Class III. The results of the voting are as follows:

Proposal #1 – Election of Directors
	For	Withheld
Tenley E. Albright, M.D.	24,332,987	203,030
Donald E. Morel, Jr., Ph.D.	24,326,005	210,012
Robert C. Young, M.D.	24,436,707	99,310

Item 6. Exhibits

See Index to Exhibits on pages F-1 and F-2 of this Report.

Page 35

SIGNATURES

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 thereunto duly authorized.

		WEST PHARMACEUTICAL SERVICES, INC.
		(Registrant)


		/s/ William J. Federici
		William J. Federici
		Vice President and Chief Financial Officer
August 9, 2005
Date

INDEX TO EXHIBITS

Exhibit Number

(2)	None.

(3)(a)	Amended and Restated Articles of Incorporation of the Company through January 4, 1999 incorporated by reference to Exhibit (3)(a) of the Company’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8036).

(3)(b)	Bylaws of the Company, as amended through March 6, 2004, incorporated by reference to Exhibit (3)(b) to the Company’s Form 10-Q for the quarter ended March 31, 2004 (File No. 1-8036).

(4)(a)	Form of stock certificate for common stock incorporated by reference to Exhibit (4)(a) of the Company’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8036).

(4)(b)	Article 5, 6, 8(c) and 9 of the Amended and Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit (3)(a) of the Company’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8036).

(4)(c)	Article I and V of the Bylaws of the Company, as amended through March 6, 2004, incorporated by reference to Exhibit (4)(c) of the Company’s Form 10-Q for the quarter ended March 31, 2004 (File No. 1-8036).

(10)(a)	First Amendment, dated as of May 18, 2005, between the Company, the direct and indirect subsidiaries of the Company listed on the signature pages thereto, the several banks and other financial institutions parties to the Credit Agreement (as defined therein), and PNC Bank, National Association, as Agent for the Banks, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated May 25, 2005 (File No. 1-8036).

(10)(b)	Share and Interest Purchase Agreement, dated as of July 5, 2005, among the Company, West Pharmaceutical Services of Delaware, Inc., Medimop Medical Projects, Ltd., Medimop USA LLC and Freddy Zinger, incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K dated July 8, 2005 (File No. 1-8036).

(10)(c)	Note Purchase Agreement, dated as of July 28, 2005, among the Company and several insurance companies, incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K dated August 3, 2005 (File No. 1-8036).

F-1

(10)(d)	Agreement, effective as of January 1, 2005, between the Company and the Goodyear Tire & Rubber Company.*

(11)	Non applicable.

(15)	None.

(18)	None.

(19)	None.

(22)	None.

(23)	Non applicable.

(24)	None.

(31)(a)	Section 302 Certification by Donald E. Morel, Jr., Ph.D.

(31)(b)	Section 302 Certification by William J. Federici.

(32)(a)	Certification by Donald E. Morel, Jr., Ph.D., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(32)(b)	Certification by William J. Federici, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(99)	None.

(100)	Non applicable.

*	Certain portions of this exhibit have been omitted pursuant to a confidential treatment request submitted to the SEC.

F - 2

Exhibit (10) (d)

MATERIAL NOTED WITH [* *] IS CONFIDENTIAL AND HAS BEEN OMITTED, PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT, AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

AGREEMENT

BY AND BETWEEN

WEST PHARMACEUTICAL SERVICES, INC.

AND

THE GOODYEAR TIRE & RUBBER COMPANY

Agreement made and entered into in Akron, Ohio, as of the date written below as to each of the parties, effective as of January 1, 2005, by and between THE GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation with offices in Akron, Ohio (hereinafter called “SELLER”) and WEST PHARMACEUTICAL SERVICES, INC., a Pennsylvania Corporation with offices in Lionville, Pennsylvania, (hereinafter called “BUYER”) whereby SELLER agrees to supply and BUYER agrees to purchase synthetic rubber under the following terms and conditions:

1.	PRODUCTS :

Natsyn® [ * * ] synthetic polyisoprene rubber

(the foregoing items shall collectively be referred to as the “Natsyn Products”)

Plioflex® [ * * ] emulsion styrene-butadiene rubber

(the foregoing item shall be referred to as the “Plioflex Product”)

The Natsyn Products and the Plioflex Product shall collectively be referred to as the “Products”. Each of the Products is described more thoroughly in Exhibit “A”, attached hereto (the “Specifications”). Notwithstanding the foregoing, BUYER’s sole remedy for any failure of the Products to meet the Specifications shall be covered by the Indemnification Agreement executed of even date herewith between SELLER and BUYER.

2.	QUANTITY :

SELLER agrees to supply and BUYER agrees to purchase from SELLER a majority of BUYER’S total worldwide requirement for Natsyn Products each year this Agreement remains in effect. The parties agree that the maximum amount of Products to be supplied and purchased in any one calendar year of the Term, unless otherwise agreed to in writing by the

G:\file10q205\exh10d.htm

parties, shall be as follows: [ * * ] lbs. with respect to Natsyn Products and [ * * ] lbs. with respect to Plioflex Products. The parties may mutually agree in writing to increase the foregoing maximums, based upon demand and production capacity. BUYER agrees to purchase Products in approximately equal quantities evenly spaced throughout each of the calendar years in which this Agreement is in effect. BUYER shall provide SELLER with a forecast for BUYER’s anticipated demand for the Products for the ensuing year. BUYER shall be obligated to purchase at least 90% of the forecast during the calendar year. Both parties agree to notify the other party of any short-term disruptions in either supply or demand. SELLER shall continue to manufacture [ * * ] during the term of this Agreement, provided BUYER’s orders for same are in quantities of at least [ * * ] pounds.

3.	BASE PRICE :

The prices for the Products sold to BUYER during the Term are as follows, subject to adjustment pursuant to Section 4, below:

Natsyn® [ * * ] synthetic polyisoprene rubber	[ * * ] /lb
Natsyn® [ * * ] synthetic polyisoprene rubber	[ * * ] /lb
Natsyn® [ * * ] synthetic polyisoprene rubber	[ * * ] /lb
Natsyn® [ * * ] synthetic polyisoprene rubber	[ * * ] /lb
Plioflex® [ * * ] emulsion styrene-butadiene rubber	[ * * ] /lb

In the event that West qualifies Natsyn® [ * * ], the price for Natsyn® [ * * ] shall be reduced to [ * * ] /lb.

Notwithstanding anything to the contrary in this Agreement, if, at any time during the Term, SELLER offers to sell any or all of the Products to a competitor of BUYER at a price, adjusted for freight, which is more favorable than is provided herein, then SELLER will offer the same price to BUYER for the remainder of the Term; provided, that the foregoing shall not apply to written agreements in force as of the date of this Agreement.

4.	COST OF ENERGY AND RAW MATERIAL SURCHARGE :

The price of all Products will be subject to [ * * ] adjustments based on the cost of energy calculated on the first business day of the [ * * ] , beginning in January of 2005, as follows:

The price of all Products during a [ * * ] will be increased by [ * * ] for every [ * * ] the cost of [ * * ] increases over the benchmark of level of [ * * ]. On the first day of [* * ], the current cost for [ * * ] will be assessed based on the [ * * ] price for the prior [ * * ] months. The “last day settle” is the third to last business day of the month. For example, on the first business day in January 2005, the [ * * ] will be added together and then divided by [ * * ]. If the total is more than [ * * ] over [ * * ] than a [ * * ] surcharge per pound of Product will be added for each [ * * ] increment.

The following chart is provided for illustrative purposes and is not intended to suggest a limitation on the price of [ * * ] or the surcharge:

*Price of [ * ] per [ * * ]**	Surcharge per Product Pound

[ * * ] to [ * * ]	[ * * ]
[ * * ] to [ * * ]	[ * * ]
[ * * ] to [ * * ]	[ * * ]
[ * * ] to [ * * ]	[ * * ]

The price of Natsyn Products will be subject to [ * * ] adjustments for increased raw material costs on the first business day of each [ * * ], beginning in January of 2005, as follows:

The price of Natsyn Products will be increased by [ * * ] for every [ * * ] the cost of [ * * ] , based on the [ * * ] price, exceeds the Benchmark Cost of [ * * ] . The current price of [ * * ] shall be determined each [ * * ] by using the trailing [ * * ] -month average [ * * ] price. The parties hereto agree that the Benchmark Cost of [* * ] is [ * * ].

The following chart is provided for illustrative purposes and is not intended to suggest a limitation on the price of gasoline or the surcharge:

Price of [ * * ]	Surcharge per Product Pound

[ * * ] to [ * * ]	[ * * ]
[ * * ] to [ * * ]	[ * * ]
[ * * ] to [ * * ]	[ * * ]
[ * * ] to [ * * ]	[ * * ]

5.	TERM :

The term of this Agreement shall begin on January 1, 2005 and continue until December 31, 2015. Either party may unilaterally terminate this Agreement at any time by giving the other party not less than thirty-six (36) months advance written notice of termination.

6.	LEAD TIME :

BUYER shall furnish SELLER with an annual forecast indicating the monthly amount of Products required a minimum of one hundred and twenty (120) days prior to the beginning of the next calendar year. Such annual forecast shall include (i) the required amounts of Natsyn® [ * * ] and Natsyn® [ * * ] (“Campaigned Products”) to be manufactured and supplied by SELLER to BUYER during the next calendar year and the requested delivery dates and (ii) an estimate of all other Products required to be manufactured and supplied by SELLER to BUYER during the next calendar year. SELLER will advise BUYER of scheduled production dates for Products, including the Campaigned Products, and BUYER will furnish quarterly requirements to SELLER a minimum of thirty (30) days in advance of said production. For any Products which are not Campaign Products, BUYER may order such Products by providing SELLER at least thirty (30) days notice prior to delivery.

Abrupt changes in BUYER’S requirements will be communicated to SELLER as soon as possible; provided, however, except as expressly allowed under this Agreement, or as consented to by SELLER, abrupt changes shall not relieve BUYER from its obligations hereunder.

7.	ORDERS :

All orders for Campaigned Products will be placed by BUYER’S corporate offices for all of BUYER’S world-wide locations. [ * * ]. The terms of orders for all Products shall be F.O.B. SELLER’S plant (Beaumont, Texas for the Natsyn Products or Houston, Texas for the Plioflex Product), freight collect. Risk of loss and title to the Products shall pass from SELLER to BUYER upon delivery of the Products to the carrier at SELLER’S plant.

8.	PLANNING :

During August of each year of the term of this Agreement the parties will discuss the status of these arrangements regarding the pending year as well as initial estimations for the coming year reviewing such issues as transportation, quantities, costs and on-going communications. These discussions will not affect the terms of this Agreement unless modified by a mutually executed amendment pursuant to section 15 herein.

9.	PAYMENT AND TERMS :

SELLER shall deliver monthly invoices to BUYER for purchases of Products during the previous month. Prices due and payable on all billings shall be those in effect on the date of shipment of the Products. Payment shall be Net 30 days from BUYER’s receipt of the corresponding invoice, to be paid by check to SELLER or electronic funds transfer to an account(s) designated by SELLER or by other mutual agreement.

Should BUYER fail to make payments when due or should SELLER deem itself insecure because of reasonable question as to BUYER’S financial responsibility, SELLER shall have the right to demand immediate payment or adequate assurance of financial responsibility and to suspend further shipments or decline to deliver except for cash pending satisfaction of the demand. Failure of BUYER to satisfy either of such demands within (30) days, shall constitute a material breach and SELLER shall be entitled to terminate this Agreement pursuant to Section 12, below.

10.

WAIVER OF WARRANTY AND INDEMNIFICATION :

BUYER acknowledges that, of even date herewith, BUYER is executing that certain Indemnification Agreement, a copy of the executed form of Indemnification Agreement is attached hereto as Exhibit “B” which provides indemnification rights to SELLER with respect to the Products. BUYER further acknowledges that SELLER would not execute this Agreement without BUYER executing the Indemnification Agreement. Except as expressly stated in the Indemnification Agreement, SELLER provides no warranties with respect to the Products, and except as expressly stated in the Indemnification Agreement, BUYER waives all warranties with respect to the Product.

11.

PATENTS :

SELLER shall not be liable for any infringement of patents or patent rights by virtue of the use by BUYER of any material sold pursuant to this Agreement. The election of the use to which the Product is put is solely that of the BUYER and on it solely rests the responsibility for the exercise of its judgment. SELLER warrants only, with respect to patents, that the Product supplied hereunder and its manufacture do not infringe on any patent enforceable in the United States, and SELLER shall indemnify and hold BUYER harmless to that extent, provided BUYER shall give SELLER prompt written notice of any claims made against BUYER of such infringement and permit SELLER to defend or at its discretion to settle such claim.

12.

DEFAULT :

If one party fails to perform any material obligation of this Agreement and with respect to such default, other than a failure to pay default, shall fail to correct and rectify any such default within thirty (30) days following the receipt of written notice thereof from the other party or if one party shall be adjudged a bankrupt or make an assignment for the benefit of creditors, the other party may cancel this Agreement by giving ninety (90) days prior written notice of cancellation.

13.

FORCE MAJEURE :

Neither party shall be liable or deemed in default for failure to perform nor delay in performance due to any reason beyond its control, including, but not limited to, acts of God; acts of nature; acts of government, terrorism, fire, flood, accidents, shortages or scarcity of material or fuel; or inability to obtain transportation, providing the party invoking this provision shall give the other party notice of inability to perform or deliver. For the purposes of this Agreement, labor disturbances shall be presumed to be beyond the control of the parties. Should SELLER’S production be curtailed due to occurrence of any of the causes outlined above, SELLER shall have the right, without liability therefore, to allocate its Products for its own use and among its customers in a fair and reasonable manner and on such basis as SELLER may in good faith determine.

14.

ASSIGNMENT :

Neither this Agreement, nor the rights hereunder shall be assignable by either party, by operation of law, or otherwise, without the prior written consent of the other party, except to a purchaser of substantially all of the assets of SELLER’S Chemical Division. In any case, such consent shall not be unreasonably withheld or delayed.

15.

SCOPE OF CONTRACT :

This Agreement and the Indemnification Agreement encompass the complete understanding between the parties on the subject matter hereof. If there is a conflict between the terms of this Agreement and the Indemnification Agreement, the terms of the Indemnification

Agreement shall prevail. The terms and conditions of these agreements shall override those of orders, releases, and acknowledgements issued in performance hereunder, and it shall not be modified except by mutually executed written amendment. The failure of either party to assert any right or remedy provided herein, regardless of the incidence, shall not bar the assertion of such right or remedy thereafter.

16.

RULE OF LAW:

This Agreement shall be governed and construed under the laws of the State of Ohio without reference to conflicts of laws principles.

17.

SEVERABILITY:

If any provision of this Agreement is held to be unenforceable, such provision shall be interpreted by a court of law or equity, as the case may be, in such a way as to render the provision enforceable in a manner that most closely follows the parties’ original intent. If such provision cannot be so interpreted, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable. Nothing under this paragraph shall affect the remainder of the Agreement .

18.

COUNTERPARTS

This Agreement may be executed in multiple counterparts, either originally or by facsimile, each of which shall constitute an original and all of which shall constitute one and the same document.

IN WITNESS WHEREOF , this Agreement is executed as of the date written below with respect to each party, effective as of the latest date written below.

THE GOODYEAR TIRE & RUBBER COMPANY

By:	/s/	C. W. Clark
Name: C. W. Clark
Title:	Senior Vice President

Date: May 26, 2005

WEST PHARMACEUTICAL SERVICES, INC

By:	/s/	D. E. Morel, Jr.
Name:	D. E. Morel Jr.
Title:	Chairman, President & CEO
Date:	6/9/05

EXHIBIT B

[Executed Form of Indemnification Agreement]

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of the date written below as to each of the parties, effective as of January 1, 2005, by and between The Goodyear Tire & Rubber Company (“SELLER”) and West Pharmaceutical Services, Inc. (“BUYER”).

WITNESSETH :

WHEREAS, BUYER, a corporation organized under the laws of Pennsylvania, having a principal place of business at 101 Gordon Drive, Lionville, PA 19341, has requested Goodyear and/or its affiliates (collectively, “SELLER”) to supply synthetic polyisoprene rubber and emulsion styrene-butadiene rubber (hereinafter “Products”) to BUYER for use in components manufactured by BUYER for resale to be included in finished products (“Components”).

WHEREAS, of even date herewith, BUYER and SELLER are executing that certain agreement pursuant to which BUYER will purchase from SELLER certain Products (“Supply Agreement”).

WHEREAS, SELLER would not execute the Supply Agreement without the execution of this Agreement as additional consideration therefore.

AGREEMENT:

NOW, THEREFORE, in consideration of the premises, agreements and covenants herein set forth and for such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. BUYER represents to SELLER that it manufactures Components in full compliance with all applicable regulatory requirements including, as applicable, (1) those of the Federal Food, Drug, and Cosmetic Act, and all accompanying medical device regulations, (2) those in place in the European Union and its individuals member States, (3) those in place in the other parts of the world where it manufactures or sells the Components, and (4) the requirements of good manufacturing practice, as arising from the above and other applicable international requirements.

2. BUYER acknowledges that BUYER alone has determined that the Products is suitable for BUYER’S intended use, that SELLER makes no representation or warranty with respect to the proposed use of any Products, that SELLER has not marketed the Products for the proposed use, and that SELLER is not providing any technical support specific to the development of BUYER’S proposed use of Products. BUYER shall be solely responsible for the suitability of Products and the specifications thereof for the applications contemplated under this Agreement. SELLER represents and warrants that the Products shall conform in all material respects to the applicable specifications, as such term is defined in the Supply Agreement; provided, that BUYER’s exclusive remedy for any breach by SELLER of the foregoing representation and warranty shall be, at BUYER’s option, either SELLER’s prompt replacement of the nonconforming Products at SELLER’s sole expense or SELLER’s prompt refund of all amounts paid by BUYER for the nonconforming Products as long as BUYER provides SELLER written notice of such non-conforming Products within 30 days of delivery of such Products or at any time after the 30 days in the case where non-conformance resulting from foreign contamination while under SELLER’s control is confirmed by mutual agreement of BUYER and SELLER. BUYER’s Indemnification Obligations described below in Paragraph 4 shall not be affected by SELLER’s breach of the foregoing representation and warranty. EXCEPT FOR SUCH WARRANTIES SET FORTH EXPRESSLY HEREIN OR IN THE SUPPLY AGREEMENT, BUYER HEREBY WAIVES ANY AND ALL WARRANTIES WITH RESPECT TO THE PRODUCTS, INCLUDING BUT NOT LIMITED TO ANY WARRANTY AS TO MERCHANTABILITY OR FITNESS TO A PARTICULAR PURPOSE.

3. BUYER shall not use Products to manufacture Components designed for implantation (either temporarily or permanently) in human beings. BUYER shall not use Products in the manufacture of any Components for distinctly new applications unless BUYER first obtains SELLER’s written consent.

4. BUYER shall and does hereby agree to INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER and its respective directors, officers and employees, as well as those contractors working on-site at SELLER’s Products manufacturing plant (collectively, “Indemnified Parties”), from and against any and all actions, causes of action, suits, demands, obligations, remediation or recall costs, fines, penalties, expenses, losses, liabilities, judgments, attorneys’ fees, damages, and claims of any kind for bodily injury, death, property damage or any other liabilities, damages or losses (collectively, “Indemnification Obligations”), whether based on tort, contract or otherwise, arising out of or related to any use of or presence in any application, either alone or as a Component, of the Products purchased by BUYER under the Supply Agreement. THE PARTIES AGREE THAT THE FOREGOING INDEMNIFICATION OBLIGATIONS SHALL APPLY REGARDLESS OF ANY NEGLIGENCE OF THE INDEMNIFIED PARTIES.

5. Promptly after an Indemnified Party receives notice of the commencement of any claim, action, suit or proceeding against it resulting in an Indemnification Obligation (“Action”), the Indemnified Party shall notify BUYER of the Action, but any failure to notify shall not relieve BUYER of its Indemnification Obligation unless such failure prejudices BUYER or adversely affects the expense of providing the indemnification in any material manner. In case any such Action shall be brought against an Indemnified Party, BUYER shall be entitled to assume the defense thereof at its sole cost. If BUYER elects to assume the defense of such Action, the Indemnified Party shall have the right to employ separate counsel at its own expense and to participate in the defense thereof. If BUYER elects not to assume (or fails to assume) the defense of such Action in a reasonable period of time following BUYER’s receipt of timely notice of the Action by the Indemnified Party, the Indemnified Party shall be entitled to assume the defense of such Action with counsel of its own choice, at the expense of BUYER. If the Action is asserted against both BUYER and any Indemnified Party and there is a conflict of interest which renders it inappropriate for the same counsel to represent both BUYER and the Indemnified Party(ies), BUYER shall be responsible for paying for separate counsel selected by BUYER for the Indemnified Party(ies); provided, however, that if there is more than one Indemnified Party, BUYER shall not be responsible for paying for more than one separate firm of attorneys to represent the Indemnified Parties, regardless of the number of Indemnified Parties. If BUYER elects to assume the defense of such Action, no compromise or settlement thereof may be effected by BUYER without the Indemnified Party’s written consent (which shall not be unreasonably withheld or delayed) unless the sole relief provided is monetary damages that are paid in full by BUYER. If BUYER does not elect to assume such defense, if the Indemnified Party reaches a settlement that requires any consent or cooperation by BUYER, BUYER agrees to provide such consent or cooperation without further consideration or otherwise by the Indemnified Party.

6. Notwithstanding anything to the contrary contained in this Agreement, in no event shall BUYER’s liability to the Indemnified Parties for Indemnification Obligations arising from a mandated or voluntary recall of third party products which incorporate any of the Components exceed $2,000,000 per occurrence; provided, that the foregoing limitation shall not apply with regard to personal injury claims arising directly or indirectly out of the purchase, end use or consumption of such third party products. The term “occurrence” shall mean any recall, voluntary or mandatory, relating to a specific product as described under any statute, rule, regulation, or guidance of or relating to the Food and Drug Administration or other governmental agency associated with the recall.

7. In the event BUYER sells, assigns or otherwise transfers its interest in or responsibility for the manufacture of the Components or other approved application to a third party, including but not limited to a subsidiary company or entity, the terms of this Agreement, including but not limited to the Indemnification Obligations, shall continue to apply to BUYER, unless explicitly superseded by an indemnification agreement between SELLER and the assignee, and in the event SELLER sells, assigns or otherwise transfers the assets of its Chemical Division or assets which include SELLER’s plants which manufacture the Products, this Agreement may be assigned without consent of BUYER. The foregoing notwithstanding, all rights and obligations hereunder shall inure to the benefit of the parties and their respective successors and assigns (if assigned in accordance with the preceding sentence).

8. The term of this Agreement shall be from the date of execution hereof and shall last until the expiration of the applicable statute of limitations period relating to any incident that could give rise to an Indemnification Obligation under Paragraph 4 above.

9. The terms of this Agreement cannot be superseded or modified by any subsequent agreement between the parties hereto unless this Agreement is specifically referenced and amended in writing by the parties hereto.

10. Each Party hereto hereby represents to the other that it has the requisite power and authority to enter into and, in the case of BUYER, to the right to perform on the Indemnification Obligations of this Agreement, without necessity of obtaining any consents or approvals from any third parties or government agencies. Additionally, each Party represents that the person signing on its behalf is an officer of such Party authorized to execute this Agreement and to bind such Party to the obligations set forth herein.

11.	This Agreement shall be construed and interpreted under the laws of the State of Ohio.

12. If any provision of this Agreement is held to be unenforceable, such provision shall be interpreted by a court of law or equity, as the case may be, in such a way as to render the provision enforceable in a manner that most closely follows the parties’ original intent. If such provision cannot be so interpreted, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable. Nothing under this paragraph shall affect the remainder of the Agreement.

13. This Agreement may be executed in multiple counterparts, originally or by facsimile, each of which shall constitute an original and all of which shall constitute one and the same document.

[Signature page follows.]

IN WITNESS WHEREOF, this Agreement is executed as of the date written below with respect to each party, effective as of the latest date written below.

SELLER:

THE GOODYEAR TIRE & RUBBER COMPANY

By:	/s/	C. W. Clark
Name: C. W. Clark
Title:	Senior Vice President

Date: May 26, 2005

BUYER:

WEST PHARMACEUTICAL SERVICES, INC.

By:	/s/ D. E. Morel, Jr.
Name: D. E. Morel Jr.
Title:		Chairman, President & CEO
Date:		6/9/05

Exhibit 31 (a)

CERTIFICATION

I, Donald E. Morel, Jr., Ph.D., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of West Pharmaceutical Services, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Donald E. Morel, Jr., Ph.D.

Donald E Morel, Jr., Ph.D.

Chairman of the Board,

President and Chief Executive Officer

Date: August 9, 2005

Exhibit 31 (b)

CERTIFICATION

I, William J.Federici, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of West Pharmaceutical Services, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ William J.Federici

William J.Federici

Vice President and Chief Financial Officer

Date: August 9, 2005

Exhibit 32 (a)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of West Pharmaceutical Services, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2005 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Donald E. Morel, Jr., Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial position and results of operations of the Company.

/s/ Donald E. Morel, Jr., Ph.D.

Donald E. Morel, Jr., Ph.D.

Chairman of the Board,

President and Chief Executive Officer

August 9, 2005

Exhibit 32 (b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of West Pharmaceutical Services, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2005 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William, J. Federici, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial position and results of operations of the Company.

/s/ William J. Federici

William J. Federici

Vice President and Chief Financial Officer

August 9, 2005