UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) –
April 24, 2015
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WEST PHARMACEUTICAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
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Pennsylvania
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1-8036
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23-1210010
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(State or other jurisdiction
of Incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.)
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530 Herman O. West Drive, Exton, PA
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19341-0645
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
610-594-2900
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Not Applicable
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(Former name or address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02 Results of Operations and Financial Condition.
On April 30, 2015, West Pharmaceutical Services, Inc. (the "Company") issued a press release announcing its first quarter
2015
financial results. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Indemnification Agreement
On April 24, 2015, the Company entered into an Indemnification Agreement with Eric M. Green, Chief Executive Officer, our principal executive officer. The agreement provides indemnity, including the advancement of expenses, against liabilities incurred in the performance of an officer's duties, to the fullest extent permitted by Pennsylvania law.
A copy of the agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein.
Sign-On Retention Award
On April 24, 2015, the Company also granted a Sign-On Retention Award to Mr. Green, as referenced in his employment agreement dated April 13, 2015, filed as Exhibit 10.1 to the Report on Form 8-K that was filed on April 15, 2015.
A copy of the award is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
The information set forth in “Item 2.02 Results of Operations and Financial Condition,” including the exhibit referred to therein, is incorporated herein by reference.
A copy of the Company’s presentation materials used during the call will be available for 30 days through the Investors link at the Company’s website,
http://www.westpharma.com,
and is also attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information contained in Item 2.02 and Item 7.01 of this report (including Exhibits 99.1 and 99.2) are being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, ("Exchange Act") or otherwise subject to the liabilities of that section, nor will it be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific referencing in such filing.
Item 9.01 Financial Statements and Exhibits.
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(d)
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Exhibits
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10.1
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Indemnification Agreement, dated April 24, 2015, between West Pharmaceutical Services, Inc. and Eric M. Green.
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10.2
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Sign-On Retention Award Notice, dated April 24, 2015, from West Pharmaceutical Services, Inc. to Eric M. Green.
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99.1
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West Pharmaceutical Services, Inc. Press Release, dated April 30, 2015.
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99.2
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West Pharmaceutical Services, Inc. Presentation Slides.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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WEST PHARMACEUTICAL SERVICES, INC.
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/s/ William J. Federici
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William J. Federici
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Senior Vice President and Chief Financial Officer
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April 30, 2015
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EXHIBIT INDEX
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Exhibit No.
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Description
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10.1
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Indemnification Agreement, dated April 24, 2015, between West Pharmaceutical Services, Inc. and Eric M. Green.
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10.2
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Sign-On Retention Award Notice, dated April 24, 2015, from West Pharmaceutical Services, Inc. to Eric M. Green.
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99.1
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West Pharmaceutical Services, Inc. Press Release, dated April 30, 2015.
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99.2
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West Pharmaceutical Services, Inc. Presentation Slides.
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Exhibit 10.1
Execution Version
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the “
Agreement
”), dated April 24, 2015, is between West Pharmaceutical Services, Inc., a Pennsylvania corporation, (the “
Company
”) and Eric M. Green (the “
Indemnitee
”).
Background
The Company and the Indemnitee recognize the substantial increase in corporate litigation, in general, subjecting officers and directors to expensive litigation risks at the same time as liability insurance has been severely limited. The Indemnitee does not regard the current protection available as adequate given the present circumstances, and the Indemnitee and other officers and directors of the Company may not be willing to serve as officers and directors without adequate protection.
The Company desires to attract and retain the services of highly qualified individuals, such as the Indemnitee, to serve as officers and directors of the Company and to indemnify its officers and directors so as to provide them with the maximum protection permitted by law.
In order to accomplish these goals, the Company considers it appropriate to offer a contractual indemnification agreement on the terms set out below.
Terms
In light of the foregoing, the Company and the Indemnitee hereby agree as follows:
1.
Indemnification
.
a.
Third Party Proceedings
. The Company shall indemnify the Indemnitee if the Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that the Indemnitee is or was a director, officer, trustee, fiduciary, employee or agent of the Company, or any affiliate of the Company, by reason of any action or inaction on the part of the Indemnitee while an officer or director, or by reason of the fact that the Indemnitee is or was serving at the request of the Company as a director, officer, trustee, fiduciary, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including an employee benefit plan, against any liability, penalty, damages, excise tax assessed with respect to an employee benefit plan, costs, expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved pursuant to
Section 2(g)
) (“
Expenses
”) actually and reasonably incurred by the Indemnitee or on the Indemnitee’s behalf in connection with such action, suit or proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere
or its equivalent, shall not, in and of itself, create a presumption that (i) the Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, (ii) with respect to any criminal action or proceeding, the Indemnitee did not have reasonable cause to believe her conduct was lawful.
b.
Proceedings By or in the Right of the Company
. The Company shall indemnify the Indemnitee if the Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was a director, officer, trustee, fiduciary,
employee or agent of the Company, or any affiliate of the Company, by reason of any action or inaction on the part of the Indemnitee while an officer or director or by reason of the fact that the Indemnitee is or was serving at the request of the Company as a director, officer, trustee, fiduciary, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including an employee benefit plan, against Expenses actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such action or suit if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification shall be made in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such Expenses which the court shall deem proper.
c.
Mandatory Indemnification
. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law:
(1)
To the extent that the Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in
Sections 1(a)
and
1(b)
or in defense of any claim, issue or matter therein, the Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee in connection therewith.
(2)
If the Indemnitee is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such proceeding, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by or on behalf of the Indemnitee in connection with (i) each successfully resolved claim, issue or matter and (y) each claim, issue, or matter related to any claim, issue or matter on which the Indemnitee was successful.
For purposes of this
Section 1(c)
, and without limitation, the termination of any claim, issue or matter in such a proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
d.
Indemnification for Expenses of a Witness
. Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is, by reason of the fact that the Indemnitee is or was a director, officer, trustee, fiduciary, employee or agent of the Company, or any affiliate of the Company, by reason of any action or inaction on the part of the Indemnitee while an officer or director or by reason of the fact that the Indemnitee is or was serving at the request of the Company as a director, officer, trustee, fiduciary, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including an employee benefit plan, a witness in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) to which the Indemnitee is not a party, the Indemnitee shall be indemnified against all expenses actually and reasonably incurred by the Indemnitee or on the Indemnitee’s behalf in connection therewith.
2.
Expenses and Indemnification Procedure
.
a.
Advancement of Expenses
. The Company shall advance all Expenses actually and reasonably incurred by or on behalf of the Indemnitee in connection with any civil or criminal action, suit or proceeding referenced in
Section 1
unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists, subject to the terms and in accordance with the procedures set forth in this
Section 2
.
b.
Presumptions Regarding Advances
. For purposes of any advancement hereunder, the Indemnitee shall be deemed to have acted (i) in good faith and in a manner she reasonably believed to be in or not opposed to the best interest of the Company, and (ii) with respect to any criminal action or procedure, to have had no reasonable cause to believe her conduct was unlawful if, under either (i) or (ii), her action is based on the records or books of account of the Company, or the records or books of account of another corporation,
partnership, joint venture, trust or other enterprise (collectively, the “
other enterprises
”), including financial statements, or on information supplied to her by the officers of the Company or other enterprises in the course of their duties, or on the advice of legal counsel for the Company or other enterprises or on information or records given or reports made to the Company or other enterprises by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or other enterprises. The Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Company as authorized hereby.
c.
Notice/Cooperation by the Indemnitee
. The Indemnitee shall, as a condition precedent to her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against the Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to West Pharmaceutical Services, Inc., 530 Herman O. West Drive, Exton, Pennsylvania 19341, Facsimile: (610) 594-5931, Attention: Ryan M. Metz (or such other address as the Company may from time to time designate in writing to the Indemnitee);
provided, however
, that the failure to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company. Notice shall be deemed received on the third business day after the date postmarked if sent by domestic certified or registered mail, properly addressed; otherwise, notice shall be deemed received when such notice shall actually be received by the Company. In addition, the Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within the Indemnitee’s power.
d.
Procedure
. Any indemnification and advances provided for in
Section 1
and this
Section 2
shall be made no later than 45 days after receipt of the written request of the Indemnitee, coupled with appropriate documentation to support the requested payment. If a claim under this Agreement, under any statute, or under any provision of the Company’s Articles of Incorporation or Bylaws providing for indemnification is not paid in full by the Company within 45 days after receipt of a fully documented written request for payment thereof has first been received by the Company, the Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to
Section 13
, the Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that the Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify the Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company, and the Indemnitee shall be entitled to receive interim payments of Expenses pursuant to
Section 2(a)
unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties’ intention that if the Company contests the Indemnitee’s right to indemnification, the question of the Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its shareholders) to have made a determination that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its shareholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has or has not, as the case may be, met the applicable standard of conduct.
e.
Notice to Insurers
. If, at the time of the receipt of a notice of claim pursuant to
Section 2(c)
, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
f.
Selection of Counsel
. If the Company shall be obligated under
Section 1
or
Section 2
to pay the Expenses of any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee, upon the delivery to
the Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding; provided that (i) the Indemnitee shall have the right to employ separate counsel in any such proceeding at the Indemnitee’s expense; and (ii) if (A) the employment of counsel by the Indemnitee has been previously authorized by the Company, (B) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the reasonable fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company.
g.
Settlements
. The Company shall not be liable to the Indemnitee under the Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on the Indemnitee without the Indemnitee’s written consent, which consent will not unreasonably be withheld.
h.
Change in Control
.
(1)
If, at any time subsequent to the date of this Agreement, members of the Incumbent Board do not constitute a majority of the members of the Board of Directors, or there is otherwise a Change in Control, then upon the request of the Indemnitee, the Company shall cause the determination of indemnification and advances required by
Section 2
to be made by independent legal counsel, to be selected by the Company and the Indemnitee or failing such agreement, as determined by the Chief Judge of the Federal District Court for the Eastern District of Pennsylvania. The fees and expenses incurred by the independent legal counsel in making the determination of indemnification and advances shall be borne solely by the Company. If such independent legal counsel is unwilling and/or unable to make the determination of indemnification and advances, then the Company shall cause the indemnification and advances to be made by a majority vote or consent of a Board of Directors committee consisting solely of members of the Incumbent Board.
(2)
For purposes of this Agreement, “
Change in Control
” means the occurrence of any of the following events:
(a)
The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”)) (each, a “
Person
”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then-outstanding shares of common stock of the Company (the “
Outstanding Company Common Stock
”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “
Outstanding Company Voting Securities
”);
provided
,
however
, that, for purposes of this
clause (a)
, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any company controlled by, controlling or under common control with the Company, or (D) any acquisition by any entity pursuant to a transaction that complies with
clauses (c)(1)
,
(c)(2)
and
(c)(3)
of this definition;
(b)
Individuals who, as of April 24, 2015, constitute the Board of Directors (the “
Incumbent Board
”) cease for any reason to constitute at least a majority of the Board of Directors;
provided
,
however
, that any individual becoming a director subsequent to April 24, 2015 whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors;
(c)
Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale
or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “
Business Combination
”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for such Business Combination; or
(d)
Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
3.
Additional Indemnification Rights
:
a.
Scope
. Notwithstanding any other provision of this Agreement, the Company shall indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Articles of Incorporation, and the Company’s Bylaws or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute, or rule which expands the right of a Pennsylvania corporation to indemnify a member of its board of directors or an officer, such changes shall be,
ipso facto
, within the purview of the Indemnitee’s rights and Company’s obligations under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a Pennsylvania corporation to indemnify a member of its board of directors or an officer, such changes (to the extent not otherwise required by such law, statute or rule to be applied to this Agreement) shall have no effect on this Agreement or the parties’ rights and obligations hereunder.
b.
Non-exclusivity
. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which an the Indemnitee may be entitled under the Company’s Articles of Incorporation, its Bylaws, any agreement, any vote of Shareholders or disinterested directors, the Pennsylvania Business Corporation Law of 1988, as amended (the “
BCL
”), or otherwise, both as to action in the Indemnitee’s official capacity and as to action in another capacity while holding such office.
4.
Continuation of Indemnity
. All agreements and obligations of the Company contained herein shall vest upon the Indemnitee’s commencement of service and shall continue during the period the Indemnitee is a director, officer, employee or agent of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of other enterprises) and shall continue thereafter, so long as the Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal or investigative, by reason of the fact that the Indemnitee was a director, officer, employee or agent of the Company or serving in any other capacity referred to herein.
5.
Mutual Acknowledgment
. Both the Company and the Indemnitee acknowledge that, in certain instances, federal law or public policy may override applicable state law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. For example, the Company and the Indemnitee acknowledge that the Securities and Exchange Commission (the “
SEC
”) has taken the position that
indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain violations of the Employee Retirement Income Security Act of 1974 (“
ERISA
”). The Indemnitee understands and acknowledges that the Company has undertaken with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify the Indemnitee.
6.
Officer and Director Liability Insurance
. The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. In all policies of directors’ and officers’ liability insurance, the Indemnitee shall be insured in such a manner as to provide the Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if the Indemnitee is a director; or of the Company’s officers, if the Indemnitee is not a director of the Company but is an officer; or one of the Company’s key employees, if the Indemnitee is not an officer or director but is a key employee. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if the Indemnitee is covered by similar insurance maintained by an affiliate of the Company.
7.
Severability
. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this
Section 7
. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify the Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.
8.
Modification and Waiver.
No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
9.
Exceptions
. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:
a.
Claims Initiated by the Indemnitee
. To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under the BCL, but such indemnification or advancement of expenses may be provided by Company in specific cases if the Board of Directors, at its sole discretion, finds it to be appropriate;
b.
Insured Claims
. To indemnify the Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) which have been paid directly to the Indemnitee by an insurance carrier under a policy of officers’ and directors’ liability insurance maintained by the Company or other enterprise;
c.
Claims Under Section 16(b)
. To indemnify the Indemnitee for expenses or the payment of profits arising from the purchase and sale, or sale and purchase, by the Indemnitee of securities in violation of Section 16(b) of the Exchange Act, or any similar successor statute; or
d.
Illegal Activity
. To indemnify the Indemnitee if a court of competent jurisdiction finally adjudges that such indemnification is illegal, including, without limitation, by virtue of such indemnification being in violation of public policy or any provision of law.
10.
Interpretation; Construction of Certain Phrases
.
a.
The headings of particular provisions of this Agreement are inserted for convenience only and will not be construed as a part of this Agreement or serve as a limitation or expansion on the scope of any term or provision of this Agreement. The words “
include
,” “
includes
” or “
including
” shall be deemed to be followed by the words “
without limitation
.” The words “
hereof
,” “
herein
” and “
herewith
” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.
b.
For purposes of this Agreement:
(1)
references to the “
Company
” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that if the Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of other enterprises, the Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as the Indemnitee would have with respect to such constituent corporation if its separate existence had continued;
(2)
references to “
other enterprises
” shall include employee benefit plans; references to “
fines
” shall include any excise taxes assessed on the Indemnitee with respect to an employee benefit plan;
(3)
references to “
serving at the request of the Company
” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, the Indemnitee with respect to an employee benefit plan, its participants, or beneficiaries;
(4)
if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, the Indemnitee shall be deemed to have acted in a manner “
not opposed to the best interests of the Company
” as referred to in this Agreement;
(5)
references to “
affiliates
” shall mean any entity which, directly or indirectly, is in the control of, is controlled by, or is under common control with, the Company; and
(6)
references to “
Sections
” or “
clauses
” shall be to Sections or clauses of this Agreement.
11.
Counterparts; Effectiveness
. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but both of which shall constitute one and the same agreement. This Agreement shall become effective when each party hereto shall have received counterparts thereof signed and delivered (by telecopy or other electronic means) by the other party hereto.
12.
Successors and Assigns
. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Indemnitee and the Indemnitee’s estate, heirs, legal representatives and assigns.
13.
Attorneys’ Fees
. If any action is instituted by the Indemnitee under this Agreement to enforce or interpret any of the terms hereof, the Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees incurred by the Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by the Indemnitee as a basis for such action was not made in good faith or was frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, the Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees incurred by the Indemnitee in defense of such action (including with respect to the Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of the Indemnitee’s material defenses to such action was made in bad faith or was frivolous.
14.
Notice
. All notices, requests, demands, consents and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, or by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service). The address for notice to the Company shall be as set forth in
Section 2(c)
, and the address for notice to the Indemnitee shall be as set forth on the signature page of this Agreement, or as subsequently modified in a notice given in accordance with this
Section 14
.
15.
Consent to Jurisdiction
. The Company and the Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the Commonwealth of Pennsylvania for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement. Any action or proceeding instituted under or to enforce this Agreement shall be brought only in the state courts of the Commonwealth of Pennsylvania.
16.
Subrogation
. In the event of payment under this Agreement, Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable Company effectively to bring suit to enforce such rights.
17.
Choice of Law
. This Agreement shall be governed by and its provisions construed in accordance with the laws of the Commonwealth of Pennsylvania, as applied to contracts between Pennsylvania residents entered into and to be performed within Pennsylvania.
[
Remainder of Page Left Blank; Signature Page Follows
]
IN WITNESS WHEREOF, the parties hereto have signed this Agreement on the date first above written.
West Pharmaceutical Services, Inc.
By:
/s/ Ryan M. Metz
Ryan M. Metz, Acting Corporate Secretary
/s/ Eric M. Green
Eric M. Green
Exhibit 10.2
GLOBAL HEADQUARTERS
530 Herman O. West Drive ∙ Exton, PA 19341
TEL 610-594-3327 ∙ FAX 610-594-3013
rick.luzzi@westpharma.com
RICHARD D. LUZZI
Senior Vice President, Human Resources
April 24, 2015
Eric M. Green
Re:
Sign-On Retention Award
Dear Eric:
Pursuant to your Employment Agreement with the Company (“Employment Agreement”), the Compensation Committee of the Board approved an award under the 2011 Omnibus Incentive Compensation Plan (the “Plan”) to be made on April 24, 2015. As used herein, the terms “Cause,” “Good Reason,” “Release Agreement,” and “Initial Term” have the meanings set forth in the Employment Agreement.
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AWARD TYPE
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VALUE
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NUMBER OF SHARES
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Retention Cash:
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$500,000
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N/A
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Retention Options:
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$1,750,000
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164,320
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Retention Shares:
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$1,750,000
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30,499
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TOTAL
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$4,000,000
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194,819
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The expected value is calculated using the fair market value and Black-Scholes option value on the date of the award. The awards were made under the Plan. We have attached a summary of the terms of your awards. Please read it carefully.
I am pleased that you are a participant in this long-term incentive compensation program and trust that your participation will be beneficial to both you and the Company.
Sincerely,
/s/ Richard D. Luzzi
Enclosures
Summary of Your Retention Cash
What is the value of the Retention Cash?
The total value of the Retention Cash is fixed. It is $500,000.
When does the Retention Cash become vested?
The Retention Cash becomes vested on October 24, 2015, the date which is six months following your start date with the Company assuming you remain employed by the Company on that date. The Retention Cash will also become immediately vested if your employment is terminated by the Company without Cause, you terminate for Good Reason, you die or you become disabled, provided that, in the case of termination by the Company without Cause or by you for Good Reason, you execute a Release Agreement.
When will the Retention Cash be paid?
The Retention Cash will be paid on the first normal pay date following the date that it becomes vested as described above.
When will the Retention Cash be forfeited?
The Retention Cash is forfeited immediately if you are terminated for Cause or you terminate employment with the Company for other than Good Reason.
Summary of Your Retention Options
What is a stock option?
A stock option is the right to purchase a fixed number of shares at a set exercise price. The option granted by this award is a non-qualified stock option. The stock option gains value when the price of our common stock exceeds the exercise price.
How many shares may I purchase and what is the price?
The number of shares you may purchase and the exercise price are as follows:
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Exercise Price
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Total shares that may be purchased upon exercise
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$ 57.38
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164,320
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May I purchase the shares immediately?
No. So long as your employment with us continues (except as described below), your Retention Option becomes exercisable - or “vests” - as per the schedule below. At the end of the period, you may exercise the entire Retention Option.
The following chart shows when and what portion of your option is exercisable each year.
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Date
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Portion of the Retention Option exercisable
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Hire date (grant date)
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0
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April 24, 2018
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93,897
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April 24, 2020 and thereafter
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164,320
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However, in no event will your Retention Option be exercisable after the Expiration Date set forth below.
Will my Retention Options vest if I terminate employment?
Your Retention Options may become vested, depending on the reason for your termination. Your Retention Options will not become vested if you are terminated by the Company with Cause or you terminate employment with the Company without Good Reason. Subject to your execution of a Release Agreement, 93,897 of the Retention Options will vest immediately if you are terminated by the Company without Cause or you terminate employment for Good Reason before April 24, 2018. The remaining 70,423 will be forfeited in the event of any termination of employment before April 24, 2020 for any reason other than death or disability. For the avoidance of doubt, any notice to you by the Company of its intention not to renew the Employment Agreement beyond the Initial Term under Section 1 of the Employment Agreement shall not, in itself, preclude you from satisfying the April 24, 2018 vesting date requirement, provided you remain employed by the Company on the last day of the Initial Term and otherwise satisfy the eligibility requirements for this award.
Will my Retention Options vest if I die or become disabled?
Yes. If you die or become disabled before the Retention Options are 100% vested, you will immediately become vested in any unvested portion of the Retention Options.
When will my Retention Option expire?
If you remain employed, the Retention Option expires on the tenth anniversary of the grant date, which will be referred to as the “Expiration Date.” This means that once it becomes exercisable, the Retention Option may be exercised until
April 23, 2025
. In addition,
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•
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if you die, the Retention Option will remain exercisable for one year from your date of death;
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•
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if you terminate employment due to disability, the Retention Option will remain exercisable until the Expiration Date;
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•
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if your employment terminates for any reason other than a disability, death or termination for Cause, the Retention Option will expire 90 days after the termination date;
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•
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if we terminate your employment for Cause, the Retention Option will expire on the commencement of business on your date of termination.
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How do I exercise my stock option?
There are four ways to exercise a stock option.
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•
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Cash.
You write a check to the Company for the exercise price, plus any applicable withholding taxes.
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•
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Already owned shares
. You may deliver or attest vested shares of common stock that you own with a fair market value equal to the exercise price, plus any applicable withholding taxes.
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•
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Combination of shares and cash
. You may use a combination of cash and stock.
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•
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Reduction of proceeds
. You may elect to have shares you would otherwise receive upon the exercise reduced by an amount equal to the total exercise cost divided by the fair market value of the shares at the time of your exercise. In effect, you would receive the “net” shares otherwise due to you after deducting for the exercise cost, plus applicable withholding taxes.
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When do I have to pay for the exercise?
The full exercise price and applicable taxes must be paid within three days of exercise.
Will I receive dividends on my unexercised options?
No. Dividends are only payable to you after you exercise your option as long as you do so before the applicable dividend record date.
Summary of Your Retention Shares
What is a Retention Share?
Your Retention Shares are shares of time-vested restricted stock issued under the Plan.
Are the Retention Shares immediately vested?
No. So long as your employment with us continues (except as described below), your retention shares vest - as per the schedule below.
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Date
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Portion of the Retention Shares that are vested
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Hire date (grant date)
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0
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April 24, 2018
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17,428
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April 24, 2020 and thereafter
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30,499
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Will my Retention Shares vest if I terminate employment?
Your Retention Shares may become vested, depending on the reason for your termination. Your Retention Shares will not become vested if you are terminated by the Company with Cause or you terminate employment with the Company without Good Reason. Subject to your execution of a Release Agreement, 17,428 Retention Shares will vest immediately if you are terminated by the Company without Cause or you terminate employment for Good Reason before April 24, 2018. The remaining 13,071 will be forfeited in the event of any termination of employment before April 24, 2020 for any reason other than death or disability. For the avoidance of doubt, any notice to you by the Company of its intention not to renew the Employment Agreement beyond the Initial Term under Section 1 of the Employment Agreement shall not, in itself, preclude you from satisfying the April 24, 2018 vesting date requirement, provided you remain employed by the Company on the last day of the Initial Term and otherwise satisfy the eligibility requirements for this award.
Will my Retention Shares vest if I die or become disabled?
Yes. If you die or become disabled before the Retention Shares are 100% vested, you will immediately become vested in any unvested portion of the Retention Shares.
Will dividends be paid on the Retention Shares?
Yes. Dividends will be paid on the Retention Shares. These dividends will automatically be invested in additional shares. The additional shares credited to you will be subject to the same vesting rules as apply to the underlying Retention Shares granted to you.
May I vote my Retention Shares before they are vested?
Yes, these shares will be issued to you, upon the grant date, with a restrictive legend. Therefore, you will be permitted to vote these shares indirectly.
May I make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”) with respect to the Retention Shares?
Yes. Because these shares are issued, Section 83 will apply to the shares. Therefore, you are permitted to elect to include them in income upon the grant date and prior to vesting in accordance with Section 83(b) of the Code. This election must be made within 30 days of the date of the award. Please consult your attorney or tax advisor for more information.
May I defer receipt of my shares?
No. These shares are not eligible for further deferral under our Non-Qualified Deferred Compensation Plan.
Additional Information Applicable to Your Retention Cash, Retention Option and Retention Shares
Are there other circumstances that would lead to a forfeiture of my award or the proceeds that I receive from exercising my award?
Yes. All awards are subject to our Incentive Compensation Recovery Policy, which is attached to this award letter as Exhibit I. You are encouraged to carefully read that policy and contact me or the Law Department if you have any questions. The policy generally provides that in addition to forfeitures of all or part of your award due to your termination of employment discussed above, in certain other situations you will forfeit your award and may be required to reimburse us for the amounts you receive as a result of any option that you exercise or share of stock that you sell. Your acceptance of this award is expressly conditioned on your agreement to be subject to the Incentive Compensation Recovery Policy, including the provisions that allow us to deduct any proceeds from other sources of income payable to you. This award would not be made if you did not agree to be subject to that policy.
The clawback period described in the Incentive Compensation Recovery policy is extended for the full duration of the period of continued vesting described in this award. The Compensation Committee may determine in its sole and absolute discretion that if circumstances exist that would permit the recovery of incentive compensation paid to you during the vesting period, in addition to recovering this compensation, all vesting will immediately cease and the remainder of your awards will be forfeited immediately.
Does the Securities Trading Policy apply to my award?
Yes. All sales of shares of company stock (including Retention Shares and shares received upon exercise of the Retention Option) and all option exercise transactions are subject to our Securities Trading Policy. Option exercises and stock sales by West’s officers who are subject to Section 16 of the Securities and Exchange Act of 1934 or on the designated persons list under our policy also must meet the review and written pre-approval by our General
Counsel requirements of that policy. For information and to access the required pre-clearance form, please go to
IntraWest
and look
under the
Legal & Compliance tab.
Does my acceptance of this award guarantee me any future awards, continued employment or additional severance pay?
No. This award is granted at the sole discretion of West. Your receipt of this award does not guarantee any future awards, nor does it guarantee your continued employment with the Company. Subject to applicable law, your employment may be terminated for any reason. Additionally, this award is not part of your base pay or compensation for determination of any severance pay or benefits you may be entitled to upon termination of employment unless that is specifically agreed to in writing between you and the Company.
Where can I find additional information about my award?
This is a summary of the terms of your Retention Cash, Retention Options and Retention Shares. Your award is subject to the terms of the Plan. This award is being delivered with an Information Statement, which gives additional information about your award and the Plan under which it was granted. We encourage you to read the Information Statement. Additional terms and conditions may apply to your award under the terms of the Plan.
EXHIBIT I
Incentive Compensation Recovery Policy
The Company may seek to recover incentive compensation awarded to any recipient in accordance with the terms of this policy. Each award of annual or long-term equity-based or performance-based compensation must specify that the award is subject to this policy.
Restatement of Financial Results
. The Company will cancel or will seek to recover all or a portion of an award from any executive officer of the Company if the Company is required to significantly or materially restate its financial statements (other than to comply with changes to applicable accounting principles) with respect to any of the three fiscal years before the payment of the award. The Company also will not pay or will seek to recover all or a portion of an award from any award recipient whose fraud or misconduct causes the restatement of the Company’s financial statements with respect to any of the three fiscal years before the payment of the award.
Calculation Errors
. Even if no financial results are restated, if an award is paid or distributed, and it is subsequently determined that the award should have been less than the amount calculated due to mathematical errors, fraud, misconduct or gross negligence, the Company may seek repayment of the award from any award recipient during the three-year period following the payment of the award.
Detrimental Conduct
. If an award recipient directly or indirectly engages in conduct that competes with the Company, or any conduct that is materially inimical, contrary, harmful to, or not in the best interests of the Company or if the award recipient fails to comply with any of the material
terms and conditions of the award (unless the failure is remedied within ten days after having been notified of such failure), then the Company has the discretion to immediately cancel any and all outstanding awards and require that the award recipient repay all or any portion of an award, including the gain realized on the exercise of a stock option, stock appreciation right or the disposition of any other equity-based award. To be subject to this policy, the detrimental conduct must have occurred during the six-month period following the later of (1) the date the recipient ceases rendering service to the Company or, (2) the date the award is paid (or an option or stock appreciation right is exercised).
Exercise of Discretion
. With respect to executive officers and members of the board of directors, the compensation committee has the sole and absolute authority (unless the board determines that the whole board should have such authority) to determine whether to exercise its discretion to seek repayment or cancel an award and what portion of an award should be recovered or canceled. With respect to all other award recipients, the officers of the Company have sole and absolute authority. The compensation committee, board or officers, as appropriate, will consider all relevant facts and circumstances in exercising their discretion. These facts and circumstances include: (1) the materiality of any changes to calculations or financial results, (2) the potential windfall received by recipients, (3) the culpability and involvement of the award recipients, (4) the controls in place to limit misconduct or incorrect reporting, (5) the period during which any misconduct occurred, (6) any other negative repercussions experienced by the award recipient, (7) the period that has elapsed since the date of any misconduct and (8) the feasibility and costs of recovering the compensation.
Enforcement
. The board intends that this policy will be applied to the fullest extent permitted by applicable law. The Company has the authority to seek recovery through any available means including litigation or the filing of liens, if necessary. The Company also has the authority, to the extent permitted by law, to deduct the amount to be repaid from any amounts otherwise owed to the recipient, including wages or other compensation, fringe benefits, or vacation paid. Whether or not the Company elects to make any deduction, if the Company does not recover the full amount that it has determined should be recovered, the recipient must immediately repay the unpaid balance. By agreeing to accept an award, each award recipient consents to the Company’s right to make these deductions.
Exhibit 99.1
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Contacts:
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West
Michael A. Anderson
Vice President and Treasurer
(610) 594-3345
|
Investors and Financial Media:
Westwicke Partners
John Woolford
(443) 213-0506
|
West Announces First Quarter 2015 Results
- Conference Call Scheduled for 9 a.m. Today
-
Exton, PA April 30, 2015 - West Pharmaceutical Services, Inc. (NYSE: WST) today announced its financial results for the first quarter of 2015 and updated financial guidance for the full year 2015.
Highlights
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•
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Improved sales mix fuels wider gross margin and 21.6% growth in operating profit
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•
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First-quarter diluted EPS rose 18.4% to $0.45 per share
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•
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Reported sales declined 3.1% due to currency
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•
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6.5% growth in net sales at constant currency
(1)
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•
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Maintains 2015 constant currency sales growth estimate in the range of 6% to 8%
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•
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Reported sales expected to be 1% to 2% lower
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•
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Narrows 2015 adjusted diluted EPS estimate to between $1.69 and $1.84
(1)
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•
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Currency now expected to impact EPS comparisons to 2014 by between $0.23 to $0.25
|
Summary comparative results for the first quarter were as follows:
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($ millions, except per-share data)
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Three Months Ended
March 31,
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2015
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2014
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Reported Net Sales
|
$
|
335.9
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$
|
346.8
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Net Sales at Constant Currency
(1)
|
$
|
369.4
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|
$
|
346.8
|
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Gross Profit Margin
|
32.7
|
%
|
|
30.7
|
%
|
|
Operating Profit
|
$
|
47.8
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$
|
39.3
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Diluted EPS
|
$
|
0.45
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$
|
0.38
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(1)
|
"Net Sales at Constant Currency" and "Adjusted diluted EPS" are Non-GAAP measurements. See discussion under the heading "Non-GAAP Financial Measures" in this release.
|
Net sales at constant currency grew by 6.5%, largely due to an increase in high-value packaging component sales. Currency translation reduced reported comparative sales
growth by 9.6%. Net sales at constant currency grew 7.7% in Pharmaceutical Packaging Systems (PPS) and 3.3% in Pharmaceutical Delivery Systems (PDS).
Consolidated gross profit of $109.7 million was 3.1% higher than in the prior-year period and gross profit margin improved 2.0 margin points, to 32.7%. A more profitable sales mix and production efficiencies drove a 3.7 gross margin-point improvement in PPS, which was partially offset by a decline in the PDS gross margin attributed to lower-margin service revenues and increased overhead and depreciation related to new capabilities supporting both proprietary and contract manufacturing programs.
R&D costs were $7.5 million and 2.2% of revenue in the quarter, compared to $10.0 million and 2.9% of revenue in the prior-year period. The decline was due primarily to the reallocation of resources to customer-funded development projects. SG&A costs declined 2.1% to $55.2 million due primarily to favorable currency translation.
The gross profit increase and net decline in other operating costs, along with a $1.5 million improvement in other income, primarily from foreign exchange, yielded an operating profit increase of 21.6%, to $47.8 million, when compared to the 2014 quarter.
The estimated annual effective tax rate (ETR) for 2015 is 28.4%, compared with 27.0% in 2014. The increase in the ETR is attributable to expiration of the U.S. credit for increasing research activities and the impact of shifts in the geographic mix of earnings and tax rates, which is attributable in part to the stronger U.S. dollar.
Net income improved 21.4% to $32.9 million, compared to $27.1 million in the 2014 period, and diluted EPS increased to $0.45 in the quarter, compared to $0.38 in the prior-year period.
Executive Commentary
“West had a very good start to 2015 despite the challenge presented by the strengthening U.S. dollar,” said Donald E. Morel Jr., PhD, West’s Chairman. “The keys to our performance were the particularly strong growth in high-value packaging component sales, which had declined in the 2014 quarter, and managing our discretionary spending where possible, in an effort to mitigate the impact of currency. As a result, despite the over 9% adverse sales impact of currency, we delivered a gross profit increase and an 18.4% increase in diluted earnings per share when compared to the relatively slow start last year.”
“The first-quarter results highlight the critical, long-term importance of innovation to our business. The leading contributors to PPS’ growth in the quarter - West’s FluroTec
®
and Westar
®
lines and similar Daikyo
®
offerings - continue to drive sales growth after many years in the market, augmented by growth in Envision
®
products. PDS proprietary products also grew by over 12% in the quarter, including the more mature éris
™
safety system along with Crystal Zenith
®
vials and SmartDose
®
electronic wearable injector sales and related services in support of customers’ developmental efforts. We continue to be encouraged by the uptake of NovaPure, and by the progress of our proprietary delivery system products, including an expected mid-year customer introduction of a new CZ vial application.”
“Looking forward, our order book is strong entering the second quarter. For the full year 2015, we continue to expect year-over-year revenue growth in the 6% to 8% range, excluding currency, although our visibility into the second half of the year is somewhat limited. We expect adjusted diluted EPS to be in the range of $1.69 to $1.84 for 2015, including $0.23 to $0.25 of adverse currency effects when compared to 2014.”
“Finally, as announced on April 15
th
, Eric Green assumed his responsibilities as chief executive officer on April 24, 2015. I welcome his appointment and will be working with him to complete the transition in leadership over the next two months. I believe that West will be well led and is exceptionally positioned to grow and to achieve the long-term goals we’ve set for the company.”
“It has been an honor and my good fortune to lead West, through an existential challenge, strategic divestitures, selective acquisitions and a long period of sustained, profitable growth. That was the primary objective we set early on and it has proven more successful and rewarding than we would have dared imagine at the time. I thank all of those who helped create a new vision for West, a vision that included high, but achievable, business goals, ethical standards and growing participation in our many communities. We have been the beneficiaries of a strong and coherent leadership team and terrific partnerships with our colleagues at Daikyo and West Mexico. The persistence and hard work of West’s people have made it all possible. I am particularly proud of the men and women in our facilities around the world who, day-in and day-out, work to deliver the best possible products to our customers.”
Eric Green, West’s Chief Executive Officer, said, “I thank Don for all West's accomplishments under his leadership. I intend to build on that track record and the strategies that drove it, sustaining West as the market leader in innovative injectable drug packaging and bolstering our role in integrated delivery systems. I am honored and excited by the opportunity to lead such a well-respected and successful company and intend to work closely with Don and the Board to achieve an orderly transition.”
Pharmaceutical Packaging Systems
PPS first-quarter reported sales were $242.5 million. Net sales at constant currency were $272.4, or 7.7% higher than the $252.9 million reported in the first quarter of 2014. High-value packaging component sales grew 19.4% and comprised 46.6% of sales, compared to 42.0% in the prior-year period. Growth was attributed primarily to FluroTec-coated, Westar and Daikyo RSV
®
ready-to-sterilize, and Envision vision-inspected products. Standard packaging and disposable medical components grew at 3.4%, led by pre-fillable syringe and disposable syringe components. Constant currency sales growth was slightly higher in international markets, but was more than offset by the impact of the stronger U.S. dollar on reported sales.
Gross profit grew 6.2% to $94.9 million, and gross profit margin improved 3.7 margin points to a record 39.1%. The improvement in gross margin was attributed primarily to the impact of growth in high-value product sales and production efficiencies.
SG&A costs declined $1.0 million to $31.9 million, primarily due to the impact of currency translation, which offset increases in incentive compensation, sales commissions and merit pay increases, and were 13.2% of reported sales, compared to 13.0% in the prior-year period. Research and development costs of $3.0 million were $1.3 million lower than in the prior-year period due to reallocation of resources to commercial projects.
Operating profit grew 18.5% to $60.9 million on the improved gross profit and a $1.7 million increase in other income, primarily due to foreign exchange gains. Operating margin improved 4.8 margin points, to 25.1%.
Pharmaceutical Delivery Systems
PDS reported first-quarter 2015 sales were $93.5 million. Net sales at constant currency were $97.1 million, or 3.3% higher than in the comparable 2014 period. Comparability of prior-year period sales was also affected by $2.2 million of first-quarter 2014 sales of a contractual services business that was sold in 2014. Excluding those prior-year sales, net sales at constant currency grew by 5.8% on gains in both proprietary products and contract manufacturing. Proprietary product-related sales comprised 24.3% of segment sales compared to 22.5% in the 2014 period due to growth in SmartDose development agreement revenue and in sales of éris safety systems and Daikyo CZ products. Contract manufacturing benefited from an increase in sales of glucose monitoring devices.
Gross profit of $14.8 million was $2.2 million lower than in the comparable 2014 period and gross margin declined from 18.1% to 15.9%. The narrowing margin was due to new capacity costs for both contract services and proprietary products, as well as increased development agreement revenues, which typically carry lower margins.
SG&A costs of $10.7 million were 7.8% lower than in the 2014 period due to lower sales commissions and currency translation, net of an increase in incentive compensation. R&D costs of $4.5 million were $1.2 million lower than in the prior-year period, primarily due to redirecting personnel to production and customer-funded development activities. Efforts remain focused on the further development of SmartDose and CZ products.
The SG&A and R&D cost reductions partially mitigated the impact of lower gross profit, yielding an operating loss of $0.5 million, compared to $0.2 million in the 2014 period.
Corporate and Other
General corporate costs increased slightly to $5.9 million. Stock-based compensation expense increased $1.0 million, to $5.3 million, due to the impact of a share price increase
in the quarter. U.S. pension expense declined $0.5 million, to $1.4 million, primarily because of changes in actuarial assumptions and asset valuations at the outset of 2015.
Financial Guidance
West’s expected full-year 2015 revenue and EPS guidance is summarized below:
|
|
|
|
|
|
|
|
(in millions, except EPS)
|
2015 Estimated Guidance
|
|
Prior Guidance
|
|
Consolidated net sales
|
$1,395 to $1,425
|
|
$1,430 to $1,460
|
|
Consolidated gross profit margin (% of sales)
|
32.0% to 32.5%
|
|
32.1% to 32.6%
|
|
Pharmaceutical Packaging Systems sales
|
$990 to $1,010
|
|
$1,020 to $1,040
|
|
Pharmaceutical Packaging Systems
Gross profit margin (% of sales)
|
37.1% to 37.6%
|
|
36.9% to 37.4%
|
|
Pharmaceutical Delivery Systems sales
|
$405 to $415
|
|
$410 to $420
|
|
Pharmaceutical Delivery Systems
Gross profit margin (% of sales)
|
19.5% to 20.0%
|
|
19.9% to 20.4%
|
|
Full-Year adjusted diluted EPS
(1)
|
$1.69 to $1.84
|
|
$1.74 to $1.92
|
The estimated guidance for revenue reflects sales and results based on currently prevailing exchange rates. The Company expects 2015 net sales at constant currency to grow 6% to 8% compared with 2014.
The principal currency assumption used in preparing these estimates is the translation of the euro at $1.08 for the remainder of 2015. The comparable weighted average euro/U.S. dollar exchange rate for 2014 was $1.33. The expected adverse effects of currency on comparisons of 2015 to 2014 are approximately $120 million of sales and between $0.23 and $0.25 of adjusted diluted EPS.
The 2015 adjusted diluted EPS guidance excludes any impact of the revaluation of Venezuelan bolivar, as the Company continues to operate under the official exchange rate. It also excludes any charge associated with the Company's chief executive officer succession plan.
The Company’s estimated guidance for 2015 includes between $15 million and $20 million in net sales at constant currency from sales and development income associated with PDS’ proprietary products, including CZ vials, syringes and cartridges and the SmartDose electronic wearable injector. Those sales are associated with customers’ research and development efforts incorporating West’s proprietary products, the pre-commercial nature of which increases the risk that actual results may be lower than estimates.
The Company estimates its 2015 capital spending at between $145 million and $160 million, including approximately $25 million related to the planned new facility in Waterford, Ireland.
First-Quarter Conference Call
The Company will host a conference call to discuss the results and business expectations at 9:00 a.m. Eastern Time today. To participate on the call please dial 877-930-8295 (U.S.) or 253-336-8738 (International). The conference ID is 27364666.
A live broadcast of the conference call will be available at the Company’s web site, www.westpharma.com, in the “Investors” section. Management will refer to a slide presentation during the call, which will be made available on the day of the call. To view the presentation, select “Presentations” in the “Investors” section of the Company’s website.
An online archive of the broadcast will be available at the site three hours after the live call and will be available through Thursday, May 7, 2015, by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering conference ID 27364666.
Forward-Looking Statements
Certain forward-looking statements are included in this release. They use such words as “may,” “will,” “expect,” “believe,” “plan,” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this release. These forward-looking statements involve a number of risks and uncertainties. The following are some of the factors that could cause our actual results to differ materially from those expressed in or underlying our forward-looking statements: customers’ changing inventory requirements and manufacturing plans; customer decisions to move forward with our new products and product categories; average profitability, or mix, of the products we sell; dependence on third-party suppliers and partners; interruptions or weaknesses in our supply chain; increased raw material costs; fluctuations in currency exchange; and the ability to meet development milestones with key customers. This list of important factors is not all inclusive.
Except as required by law or regulation, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. For a description of certain factors that could cause the Company's future results to differ from those expressed in any such forward-looking statements, see Item 1A, entitled “Risk Factors,” in the company's Annual Report on Form 10-K for the year ended December 31, 2014.
Non-GAAP Financial Measures
This press release and the preceding discussion of our results, financial guidance and the accompanying financial tables use the following financial measures that have not been calculated in accordance with generally accepted accounting principles (GAAP) accepted in the U.S., and therefore are referred to as non-GAAP financial measures:
|
|
|
|
•
|
Net sales at constant currency
|
|
|
|
|
•
|
Net debt to total invested capital
|
West believes that these non-GAAP measures of financial results provide useful information to management and investors regarding business trends, results of operations, and the Company’s overall performance and financial position. Our executive management team uses these financial measures to evaluate the performance of the Company in terms of profitability and efficiency, to compare operating results to prior periods, to evaluate changes in the operating results of each segment, and to measure and allocate financial resources to our segments. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in comparing its financial measures with other companies.
Our executive management does not consider such non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded. In order to compensate for these limitations, non-GAAP financial measures are presented in connection with GAAP results. We urge investors and potential investors to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures, and not to rely on any single financial measure to evaluate the Company’s business.
Net sales at constant currency is determined by translating the current period sales of non-U.S. dollar subsidiaries into U.S. dollars using currency exchange rates that were in effect during the prior-year period. It does not capture differences associated with sales made by any entity in a currency different from its principal, or functional, currency.
In calculating adjusted diluted EPS, we exclude the impact of items that are not considered representative of ongoing operations. Such items include restructuring and related costs, certain asset impairments, other specifically identified gains or losses, and discrete income tax items.
|
WEST PHARMACEUTICAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(
in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2015
|
|
2014
|
|
Net sales
|
$
|
335.9
|
|
|
100
|
%
|
|
$
|
346.8
|
|
|
100
|
%
|
|
Cost of goods and services sold
|
226.2
|
|
|
67
|
|
|
240.4
|
|
|
69
|
|
|
Gross profit
|
109.7
|
|
|
33
|
|
|
106.4
|
|
|
31
|
|
|
Research and development
|
7.5
|
|
|
2
|
|
|
10.0
|
|
|
3
|
|
|
Selling, general and administrative expenses
|
55.2
|
|
|
16
|
|
|
56.4
|
|
|
16
|
|
|
Other income, net
|
(0.8
|
)
|
|
—
|
|
|
0.7
|
|
|
—
|
|
|
Operating profit
|
47.8
|
|
|
15
|
|
|
39.3
|
|
|
12
|
|
|
Interest expense, net
|
3.7
|
|
|
1
|
|
|
3.6
|
|
|
1
|
|
|
Income before income taxes
|
44.1
|
|
|
14
|
|
|
35.7
|
|
|
11
|
|
|
Income tax expense
|
12.5
|
|
|
4
|
|
|
9.8
|
|
|
3
|
|
|
Equity in net income of affiliated companies
|
1.3
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
Net income
|
$
|
32.9
|
|
|
10
|
%
|
|
$
|
27.1
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.46
|
|
|
|
|
|
$
|
0.38
|
|
|
|
|
|
Assuming dilution
|
$
|
0.45
|
|
|
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
|
71.7
|
|
|
|
|
|
70.6
|
|
|
|
|
|
Average shares assuming dilution
|
73.3
|
|
|
|
|
|
72.3
|
|
|
|
|
|
WEST PHARMACEUTICAL SERVICES
REPORTING SEGMENT INFORMATION
(UNAUDITED)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Net Sales
:
|
2015
|
|
2014
|
|
Pharmaceutical Packaging Systems
|
$
|
242.5
|
|
|
$
|
252.9
|
|
|
Pharmaceutical Delivery Systems
|
93.5
|
|
|
94.0
|
|
|
Eliminations
|
(0.1
|
)
|
|
(0.1
|
)
|
|
Consolidated Total
|
$
|
335.9
|
|
|
$
|
346.8
|
|
|
|
|
|
|
|
Operating Profit (Loss):
|
|
|
|
|
|
|
Pharmaceutical Packaging Systems (PPS)
|
$
|
60.9
|
|
|
$
|
51.4
|
|
|
Pharmaceutical Delivery Systems (PDS)
|
(0.5
|
)
|
|
(0.2
|
)
|
|
U.S. pension expense
|
(1.4
|
)
|
|
(1.9
|
)
|
|
Stock-based compensation expense
|
(5.3
|
)
|
|
(4.3
|
)
|
|
General corporate costs
|
(5.9
|
)
|
|
(5.7
|
)
|
|
Operating Profit
|
$
|
47.8
|
|
|
$
|
39.3
|
|
WEST PHARMACEUTICAL SERVICES
RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED)
(in millions, except per share data)
Reconciliation of Net Sales to Net Sales at Constant Currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-months ended March 31, 2015
|
PPS
|
PDS
|
Eliminations
|
Total
|
|
Reported net sales (GAAP)
|
$
|
242.5
|
|
$
|
93.5
|
|
$
|
(0.1
|
)
|
$
|
335.9
|
|
|
Effects of changes in currency translation rates
|
29.9
|
|
3.6
|
|
—
|
|
33.5
|
|
|
Net sales at constant currency (Non-GAAP)
(2)
|
$
|
272.4
|
|
$
|
97.1
|
|
$
|
(0.1
|
)
|
$
|
369.4
|
|
(2)
Net sales at constant currency translates the current-period reported sales of subsidiaries whose functional currency is other than the U.S. dollar at the applicable foreign exchange rates in effect during the comparable prior-year period.
|
WEST PHARMACEUTICAL SERVICES
CASH FLOW ITEMS
(UNAUDITED)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2015
|
|
2014
|
|
Depreciation and amortization
|
$
|
22.0
|
|
|
$
|
21.8
|
|
|
Operating cash flow
|
$
|
(1.9
|
)
|
|
$
|
8.8
|
|
|
Capital expenditures
|
$
|
30.4
|
|
|
$
|
31.7
|
|
|
WEST PHARMACEUTICAL SERVICES
FINANCIAL CONDITION
(UNAUDITED)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2015
|
|
As of
December 31, 2014
|
|
Cash and cash equivalents
|
$
|
207.1
|
|
|
$
|
255.3
|
|
|
Debt
|
$
|
330.7
|
|
|
$
|
336.7
|
|
|
Equity
|
$
|
941.1
|
|
|
$
|
956.9
|
|
|
Net debt to total invested capital
(3)
|
11.6
|
%
|
|
7.8
|
%
|
|
Working capital
|
$
|
328.5
|
|
|
$
|
406.8
|
|
(3)
Net Debt and Total Invested Capital are Non-GAAP measures. Net debt is determined by reducing total debt by the amount of cash and cash equivalents, and for purpose of measuring net debt to invested capital, total invested capital is the sum of net debt and shareholders’ equity. Please refer to “Non-GAAP Financial Measures” in this release for additional information regarding those measures.
Trademark Notices
Trademarks and registered trademarks are the property of West Pharmaceutical Services, Inc., in the United States and other jurisdictions, unless noted otherwise.
Daikyo®, Daikyo RSV®, and Crystal Zenith® are registered trademarks of Daikyo Seiko, Ltd. Daikyo Crystal Zenith® technologies are licensed from Daikyo Seiko, Ltd.
1 Speakers: Donald E. Morel, Jr. Chairman Eric M. Green Chief Executive Officer William J. Federici Senior Vice President and Chief Financial Officer All trademarks and registered trademarks are the property of West Pharmaceutical Services, Inc., unless noted otherwise. West Pharmaceutical Services, Inc. First-Quarter 2015 Analyst Conference Call 9 a.m. Eastern Time, April 30, 2015 A webcast of today’s call can be accessed in the “Investors” section of the Company’s web site www.westpharma.com To participate on the call please dial: 877-930-8295 (U.S.) 253-336-8738 (International). The conference ID is 27364666. An online archive of the broadcast will be available at the site three hours after the live call and will be available through Thursday, May 7, 2015, by dialing: 855-859-2056 (U.S.) or 404-537-3406 (International) The conference ID 27364666. These presentation materials are intended to accompany today’s press release announcing the Company’s results for the quarter and management’s discussion of those results during today’s conference call.
2 Cautionary Statement Under the Private Securities Litigation Reform Act of 1995 This presentation and any accompanying management commentary contain “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements about expected financial results for 2015 and future years. Each of these estimates is based on preliminary information, and actual results could differ from these preliminary estimates. We caution investors that the risk factors listed under “Cautionary Statement” in today’s press release, as well as those set forth under the caption "Risk Factors" in our most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission and as revised or supplemented by our quarterly reports on Form 10-Q, could cause our actual results to differ materially from those estimated or predicted in the forward-looking statements. You should evaluate any statement in light of these important factors. Except as required by law or regulation, we undertake no obligation to publicly update any forward- looking statements, whether as a result of new information, future events, or otherwise. Non-GAAP Financial Measures Certain financial measures included in today’s press release and accompanying tables, in these presentation materials, and which may be referred to in management’s discussion of the Company’s results and outlook, are Non-GAAP (Generally Accepted Accounting Principles) financial measures. Non-GAAP financial measures should not be considered in isolation or as an alternative to such measures determined in accordance with GAAP. Please refer to the “Non-GAAP Financial Measures” and “Notes to Non-GAAP Financial Measures” at the end of these materials for more information.
3 First-Quarter 2015 Summary Results $ millions, except earnings per-share (EPS) data ($ millions, except per-share data) Three Months Ended March 31, 2015 2014 Reported Net Sales $ 335.9 $ 346.8 Net Sales at Constant Currency(1) $ 369.4 $ 346.8 Gross Profit Margin 32.7% 30.7% Operating Profit $ 47.8 $ 39.3 Diluted EPS $ 0.45 $ 0.38 (1) Net sales at constant currency is a Non-GAAP measurement. See slides 13 and 14 and the discussion under the heading “Non-GAAP Financial Measures” in today’s press release for an explanation and reconciliation of these items. Except as noted, statements in these slides concerning comparative sales are measured on a constant currency basis.
4 First-Quarter Operating Results Sales comparisons to 2014 are at constant currency • Growth in high-value components and proprietary devices • Pharmaceutical Packaging Systems sales grew 7.7% High-value product sales grew 19.4% FluroTec®, Westar® and Daikyo RSV® products • Pharmaceutical Delivery Systems sales grew 3.3% • Proprietary product sales grew 12.1% • Comprise 24.3% of segment sales • Led by administration systems and development revenues • Contract manufacturing revenues also higher • Gross profit 3.1% higher High-value product growth yields a richer sales mix products Gross margin improved 200 basis points • Operating profit improved 21.6% on product mix, cost containment Daikyo RSV® is a registered trademark of Daikyo Seiko Ltd.
5 Expansion and Product Development High-Value Products: • Validation of Kinston NC capacity high-value products capacity expected Q3 • Variety of NovaPure® product offerings to grow Capacity expansion: • Waterford, Ireland – plans approved by local authorities, land preparation complete • Dublin, Ireland – expanding to meet contract manufacturing opportunities Proprietary delivery systems: • SmartDose® development: Adding second production facility in Scottsdale AZ in 2015 Includes CZ cartridge capacity • Daikyo CZ® products: Expect approvals for customers’ use of CZ vial in mid-2015 SmartDose® is a registered trademark of Medimop Medical Projects Ltd., a subsidiary of West Pharmaceutical Services, Inc. Daikyo CZ® is a registered trademark of Daikyo Seiko, Ltd.
6 2015 and Long-Term Outlook 2015 Guidance(2) PPS backlog has grown Anticipate organic growth of 6% to 8% in net sales at constant currency Currency expected to adversely impact growth by 7% - 9% PPS: HVP expected to grow in 8% to 12% at constant currency PDS: Proprietary products expected to grow 10% to 15% at constant currency • Sales growth expected to be driven by customers’ pre-commercial use Adjusted diluted EPS(2) estimate in the range of $1.69 to $1.84 • Expected comparative impact of currency: $0.23 to $0.25 Long-term Outlook Underlying markets and drivers remain attractive • Anticipate new and pending drug and bio product approvals/categories • West’s HVPs are winning new product opportunities • No fundamental change in plan or outlook (2) Adjusted diluted EPS is a Non-GAAP measurement. See discussions under the headings “Financial Guidance” and “Non-GAAP Financial Measures” in today’s press release and “Notes to Non-GAAP Financial Measures”, slide 13 for an explanation and reconciliation of these items.. Further detail on financial guidance can be found on slide 12.
7 Change in Consolidated Sales First-Quarter 2014 to 2015 ($ millions) $335.9 $33.5 $2.2 $21.5 $3.3 $346.8 2014 Volume & Mix Sales Price Currency Disposition 2015
8 Change in Consolidated Gross Profit Margin % First-Quarter 2014 to 2015 32.7% 1.0% 0.3% 2.6% 0.7% 30.7% 2015 2014
9 Change in SG&A Costs First-Quarter 2014 to 2015 ($ millions) $55.2 $2.9 $0.5 $0.5 $2.2 $0.4 $0.1 $56.4
10 Cash Flow Metrics ($ millions) Three Months Ended March 31, 2015 2014 Depreciation and amortization $22.0 $21.8 Operating cash flow ($1.9) $8.8 Capital expenditures $30.4 $31.7
11 Summary Balance Sheet Information ($ millions) † Net Debt and Total Invested Capital are Non-GAAP measures. Net debt is determined by reducing total debt by the amount of cash and cash equivalents, and for purpose of measuring net debt to invested capital, total invested capital is the sum of net debt and shareholders’ equity. As of March 31, 2015 As of December 31, 2014 Cash and Cash Equivalents $207.1 $255.3 Debt $330.7 $336.7 Equity $941.1 $956.9 Net Debt to Total Invested Capital† 11.6% 7.8% Working Capital $328.5 $406.8
12 2015 Full-year Financial Guidance ($ millions, except EPS) Estimated 2015 Revenue(3) Estimated Gross Profit %(1) Pharmaceutical Packaging Systems Segment $990 - $1,010 37.1% to 37.6% Pharmaceutical Delivery Systems Segment $405 - $415 19.5% to 20.0% Consolidated $1,395 - $1,425 32.0% - 32.5 % Capital Spending $145 - $160 Adjusted diluted EPS(3) $1.69 to $1.84 per share (3) Guidance includes various currency exchange rate assumptions, most significantly the Euro at $1.08 for the remainder of 2015. Actual results will vary as a result of variability of exchange rates, among other items. See “Financial Guidance” in today’s press release.
13 Notes to Non-GAAP Financial Measures For additional details, please see today’s press release and Safe Harbor Statement. Today’s press release, these presentation materials and associated presentation use the following financial measures that have not been calculated in accordance with generally accepted accounting principles (GAAP) accepted in the U.S., and therefore are referred to as non- GAAP financial measures: Net sales at constant currency Adjusted diluted EPS Net debt Total invested capital Net debt to total invested capital West believes that these non-GAAP measures of financial results provide useful information to management and investors regarding business trends, results of operations, and the Company’s overall performance and financial position. Our executive management team uses these financial measures to evaluate the performance of the Company in terms of profitability and efficiency, to compare operating results to prior periods, to evaluate changes in the operating results of each segment, and to measure and allocate financial resources to our segments. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in comparing its financial measures with other companies. Our executive management does not consider such non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP. The principal limitation of these financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded. In order to compensate for these limitations, non-GAAP financial measures are presented in connection with GAAP results. We urge investors and potential investors to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures, and not to rely on any single financial measure to evaluate the Company’s business. In calculating adjusted operating profit, adjusted income tax expense, adjusted net income and adjusted diluted EPS, we exclude the impact of items that are not considered representative of ongoing operations. Such items generally include restructuring and related costs, certain asset impairments, other specifically identified gains or losses, and discrete income tax items. Please see “Financial Guidance” and “Non-GAAP Financial Measures” in today’s press release for further information concerning reconciling items.
14 Notes to Non-GAAP Financial Measures(1) RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED) (3) See “Notes to Non-GAAP Financial Measures” (Slide 13), “Cautionary Statement” (Slide 2) and today’s press release for an explanation and reconciliation of these items. Three-months ended March 31, 2015 PPS PDS Eliminations Total Reported net sales (GAAP) $242.5 $93.5 ($0.1) $335.9 Effect of changes in currency translation rates 29.9 3.6 - 33.5 Net sales at constant currency (Non-GAAP)(3) $272.4 $97.1 ($0.1) $369.4 WEST PHARMACEUTICAL SERVICES RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED) (in millions, except per share data) Reconciliation of Net Sales to Net Sales at Constant Currency
