UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
FORM 10-Q |
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
WEST PHARMACEUTICAL SERVICES, INC. (Exact name of registrant as specified in its charter) |
Pennsylvania | 23-1210010 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
530 Herman O. West Drive, Exton, PA | 19341-0645 |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | þ | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | o |
Emerging growth company | o |
Page | ||
FINANCIAL STATEMENTS (UNAUDITED) | ||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||
CONTROLS AND PROCEDURES | ||
LEGAL PROCEEDINGS | ||
RISK FACTORS | ||
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | ||
OTHER INFORMATION | ||
EXHIBITS | ||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 398.2 | $ | 376.7 | $ | 1,183.5 | $ | 1,126.8 | |||||||
Cost of goods and services sold | 273.2 | 255.6 | 799.4 | 749.1 | |||||||||||
Gross profit | 125.0 | 121.1 | 384.1 | 377.7 | |||||||||||
Research and development | 9.1 | 9.0 | 29.4 | 27.2 | |||||||||||
Selling, general and administrative expenses | 61.5 | 58.3 | 183.7 | 178.9 | |||||||||||
Other (income) expense (Note 12) | (9.5 | ) | 2.5 | 3.1 | 29.1 | ||||||||||
Operating profit | 63.9 | 51.3 | 167.9 | 142.5 | |||||||||||
Interest expense | 1.3 | 2.2 | 5.7 | 6.7 | |||||||||||
Interest income | 0.3 | 0.2 | 0.9 | 0.8 | |||||||||||
Income before income taxes | 62.9 | 49.3 | 163.1 | 136.6 | |||||||||||
Income tax expense | 14.0 | 14.4 | 19.1 | 38.3 | |||||||||||
Equity in net income of affiliated companies | 2.1 | 2.7 | 6.7 | 6.2 | |||||||||||
Net income | $ | 51.0 | $ | 37.6 | $ | 150.7 | $ | 104.5 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.69 | $ | 0.51 | $ | 2.04 | $ | 1.43 | |||||||
Diluted | $ | 0.67 | $ | 0.50 | $ | 1.99 | $ | 1.40 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 74.2 | 73.3 | 73.8 | 73.0 | |||||||||||
Diluted | 75.9 | 75.0 | 75.8 | 74.7 | |||||||||||
Dividends declared per share | $ | 0.14 | $ | 0.13 | $ | 0.40 | $ | 0.37 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 51.0 | $ | 37.6 | $ | 150.7 | $ | 104.5 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Foreign currency translation adjustments | 22.5 | 5.9 | 64.7 | 15.9 | |||||||||||
Defined benefit pension and other postretirement plan adjustments, net of tax of $(0.3), $0.3, $(0.7) and $0.9, respectively | (0.7 | ) | 0.6 | (1.6 | ) | 2.2 | |||||||||
Net loss on investment securities, net of tax of $(2.9) | — | — | (5.1 | ) | — | ||||||||||
Net (loss) gain on derivatives, net of tax of $(0.2), $(0.1), $(0.5) and $0.4, respectively | (0.6 | ) | — | (1.8 | ) | 0.7 | |||||||||
Other comprehensive income, net of tax | 21.2 | 6.5 | 56.2 | 18.8 | |||||||||||
Comprehensive income | $ | 72.2 | $ | 44.1 | $ | 206.9 | $ | 123.3 |
September 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 269.3 | $ | 203.0 | |||
Accounts receivable, net | 251.8 | 200.5 | |||||
Inventories | 215.8 | 199.3 | |||||
Other current assets | 40.0 | 39.1 | |||||
Total current assets | 776.9 | 641.9 | |||||
Property, plant and equipment | 1,701.2 | 1,554.7 | |||||
Less: accumulated depreciation and amortization | 865.8 | 776.4 | |||||
Property, plant and equipment, net | 835.4 | 778.3 | |||||
Investments in affiliated companies | 84.6 | 82.7 | |||||
Goodwill | 107.1 | 103.0 | |||||
Deferred income taxes | 87.2 | 66.2 | |||||
Intangible assets, net | 22.5 | 23.3 | |||||
Other noncurrent assets | 16.7 | 21.3 | |||||
Total Assets | $ | 1,930.4 | $ | 1,716.7 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Notes payable and other current debt | $ | 33.2 | $ | 2.4 | |||
Accounts payable | 121.9 | 122.0 | |||||
Pension and other postretirement benefits | 2.3 | 2.2 | |||||
Accrued salaries, wages and benefits | 62.9 | 51.6 | |||||
Income taxes payable | 7.4 | 4.5 | |||||
Other current liabilities | 72.3 | 58.3 | |||||
Total current liabilities | 300.0 | 241.0 | |||||
Long-term debt | 196.6 | 226.2 | |||||
Deferred income taxes | 8.9 | 9.2 | |||||
Pension and other postretirement benefits | 62.0 | 75.6 | |||||
Other long-term liabilities | 46.0 | 47.2 | |||||
Total Liabilities | 613.5 | 599.2 | |||||
Commitments and contingencies (Note 14) | |||||||
Equity: | |||||||
Preferred stock, 3.0 million shares authorized; 0 shares issued and outstanding | — | — | |||||
Common stock, $0.25 par value; 100.0 million shares authorized; issued: 75.1 million and 73.7 million; outstanding: 74.3 million and 73.1 million | 18.7 | 18.4 | |||||
Capital in excess of par value | 302.9 | 260.4 | |||||
Retained earnings | 1,188.6 | 1,071.6 | |||||
Accumulated other comprehensive loss | (130.6 | ) | (186.8 | ) | |||
Treasury stock, at cost (0.8 million and 0.6 million shares) | (62.7 | ) | (46.1 | ) | |||
Total Equity | 1,316.9 | 1,117.5 | |||||
Total Liabilities and Equity | $ | 1,930.4 | $ | 1,716.7 |
Common Stock | Capital in Excess of Par Value | Treasury Stock | Retained earnings | Accumulated other comprehensive (loss) income | Total | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
Balance, December 31, 2016 | 73.7 | $ | 18.4 | $ | 260.4 | $ | (46.1 | ) | $ | 1,071.6 | $ | (186.8 | ) | $ | 1,117.5 | |||||||||||
Effect of modified retrospective application of a new accounting standard (see Note 2) | — | — | — | — | (4.1 | ) | — | (4.1 | ) | |||||||||||||||||
Net income | — | — | — | — | 150.7 | — | 150.7 | |||||||||||||||||||
Stock-based compensation | — | — | 4.3 | 7.5 | — | — | 11.8 | |||||||||||||||||||
Shares issued under stock plans | 1.4 | 0.3 | 33.9 | 6.2 | — | — | 40.4 | |||||||||||||||||||
Shares purchased under share repurchase program | — | — | — | (26.9 | ) | — | — | (26.9 | ) | |||||||||||||||||
Shares repurchased for employee tax withholdings | — | — | (0.4 | ) | (3.4 | ) | — | — | (3.8 | ) | ||||||||||||||||
Dividends declared | — | — | — | — | (29.6 | ) | — | (29.6 | ) | |||||||||||||||||
Other adjustments to capital in excess of par value | — | — | 4.7 | — | — | — | 4.7 | |||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | 56.2 | 56.2 | |||||||||||||||||||
Balance, 9/30/2017 | 75.1 | $ | 18.7 | $ | 302.9 | $ | (62.7 | ) | $ | 1,188.6 | $ | (130.6 | ) | $ | 1,316.9 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 150.7 | $ | 104.5 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation | 69.9 | 65.9 | |||||
Amortization | 1.9 | 2.0 | |||||
Stock-based compensation | 13.6 | 14.1 | |||||
Non-cash restructuring charges | — | 15.9 | |||||
Venezuela deconsolidation | 11.1 | — | |||||
Other non-cash items, net | (3.2 | ) | (3.7 | ) | |||
Changes in assets and liabilities | (62.2 | ) | (51.1 | ) | |||
Net cash provided by operating activities | 181.8 | 147.6 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (101.3 | ) | (122.7 | ) | |||
Purchase of cost-method investment | — | (8.4 | ) | ||||
Cash related to deconsolidated Venezuelan subsidiary | (6.0 | ) | — | ||||
Other, net | 3.1 | 2.0 | |||||
Net cash used in investing activities | (104.2 | ) | (129.1 | ) | |||
Cash flows from financing activities: | |||||||
Repayments of long-term debt | (1.8 | ) | (69.2 | ) | |||
Dividend payments | (28.7 | ) | (26.2 | ) | |||
Excess tax benefits from employee stock plans | — | 13.9 | |||||
Shares purchased under share repurchase program | (26.9 | ) | (26.8 | ) | |||
Shares repurchased for employee tax withholdings | (3.8 | ) | (3.7 | ) | |||
Proceeds from exercise of stock options and stock appreciation rights | 36.0 | 21.8 | |||||
Employee stock purchase plan contributions | 3.2 | 2.8 | |||||
Contingent consideration payments | (0.5 | ) | (0.1 | ) | |||
Net cash used in financing activities | (22.5 | ) | (87.5 | ) | |||
Effect of exchange rates on cash | 11.2 | 0.3 | |||||
Net increase (decrease) in cash and cash equivalents | 66.3 | (68.7 | ) | ||||
Cash and cash equivalents at beginning of period | 203.0 | 274.6 | |||||
Cash and cash equivalents at end of period | $ | 269.3 | $ | 205.9 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net income | $ | 51.0 | $ | 37.6 | $ | 150.7 | $ | 104.5 | |||||||
Weighted average common shares outstanding | 74.2 | 73.3 | 73.8 | 73.0 | |||||||||||
Dilutive effect of equity awards, based on the treasury stock method | 1.7 | 1.7 | 2.0 | 1.7 | |||||||||||
Weighted average shares assuming dilution | 75.9 | 75.0 | 75.8 | 74.7 |
($ in millions) | September 30, 2017 | December 31, 2016 | |||||
Raw materials | $ | 89.2 | $ | 78.0 | |||
Work in process | 33.7 | 28.9 | |||||
Finished goods | 92.9 | 92.4 | |||||
$ | 215.8 | $ | 199.3 |
($ in millions) | September 30, 2017 | December 31, 2016 | |||||
Term loan, due January 1, 2018 (2.74%) | $ | 33.1 | $ | 34.9 | |||
Note payable, due December 31, 2019 | 0.1 | 0.2 | |||||
Credit Facility, due October 15, 2020 (1.00%) | 29.3 | 26.4 | |||||
Series A notes, due July 5, 2022 (3.67%) | 42.0 | 42.0 | |||||
Series B notes, due July 5, 2024 (3.82%) | 53.0 | 53.0 | |||||
Series C notes, due July 5, 2027 (4.02%) | 73.0 | 73.0 | |||||
230.5 | 229.5 | ||||||
Less: unamortized debt issuance costs | 0.7 | 0.9 | |||||
Total debt | 229.8 | 228.6 | |||||
Less: current portion of long-term debt | 33.2 | 2.4 | |||||
Long-term debt, net | $ | 196.6 | $ | 226.2 |
(in millions) | Sell | ||||||
Currency | Purchase | U. S. Dollar (“USD”) | Euro | ||||
USD | 46.3 | — | 41.8 | ||||
Yen | 5,255.3 | 28.3 | 16.6 | ||||
Singapore Dollar | 29.9 | 14.6 | 6.2 |
Amount of (Loss) Gain Recognized in OCI for the | Amount of Loss (Gain) Reclassified from Accumulated OCI into Income for the | Location of Loss (Gain) Reclassified from Accumulated OCI into Income | |||||||||||||||
Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||||
Cash Flow Hedges: | |||||||||||||||||
Foreign currency hedge contracts | $ | (0.7 | ) | $ | — | $ | 0.4 | $ | — | Net sales | |||||||
Foreign currency hedge contracts | (0.9 | ) | (0.3 | ) | 0.3 | — | Cost of goods and services sold | ||||||||||
Interest rate swap contracts | — | — | 0.2 | 0.2 | Interest expense | ||||||||||||
Forward treasury locks | — | — | 0.1 | 0.1 | Interest expense | ||||||||||||
Total | $ | (1.6 | ) | $ | (0.3 | ) | $ | 1.0 | $ | 0.3 | |||||||
Net Investment Hedges: | |||||||||||||||||
Foreign currency-denominated debt | $ | (0.5 | ) | $ | (0.2 | ) | $ | — | $ | — | Other (income) expense | ||||||
Total | $ | (0.5 | ) | $ | (0.2 | ) | $ | — | $ | — |
Amount of (Loss) Gain Recognized in OCI for the | Amount of Loss (Gain) Reclassified from Accumulated OCI into Income for the | Location of Loss (Gain) Reclassified from Accumulated OCI into Income | |||||||||||||||
Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||||
Cash Flow Hedges: | |||||||||||||||||
Foreign currency hedge contracts | $ | (1.6 | ) | $ | (0.3 | ) | $ | 0.7 | $ | 0.1 | Net sales | ||||||
Foreign currency hedge contracts | (2.0 | ) | 0.3 | 0.4 | — | Cost of goods and services sold | |||||||||||
Interest rate swap contracts | — | (0.2 | ) | 0.5 | 0.6 | Interest expense | |||||||||||
Forward treasury locks | — | — | 0.2 | 0.2 | Interest expense | ||||||||||||
Total | $ | (3.6 | ) | $ | (0.2 | ) | $ | 1.8 | $ | 0.9 | |||||||
Net Investment Hedges: | |||||||||||||||||
Foreign currency-denominated debt | $ | (1.7 | ) | $ | (1.3 | ) | $ | — | $ | — | Other (income) expense | ||||||
Total | $ | (1.7 | ) | $ | (1.3 | ) | $ | — | $ | — |
• | Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. |
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
• | Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. |
Balance at | Basis of Fair Value Measurements | ||||||||||||||
($ in millions) | September 30, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Deferred compensation assets | $ | 8.5 | $ | 8.5 | $ | — | $ | — | |||||||
Foreign currency contracts | 1.0 | — | 1.0 | — | |||||||||||
$ | 9.5 | $ | 8.5 | $ | 1.0 | $ | — | ||||||||
Liabilities: | |||||||||||||||
Contingent consideration | $ | 8.0 | $ | — | $ | — | $ | 8.0 | |||||||
Deferred compensation liabilities | 9.5 | 9.5 | — | — | |||||||||||
Interest rate swap contract | 0.2 | — | 0.2 | — | |||||||||||
Foreign currency contracts | 4.7 | — | 4.7 | — | |||||||||||
$ | 22.4 | $ | 9.5 | $ | 4.9 | $ | 8.0 |
Balance at | Basis of Fair Value Measurements | ||||||||||||||
($ in millions) | December 31, 2016 | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Deferred compensation assets | $ | 7.4 | $ | 7.4 | $ | — | $ | — | |||||||
Foreign currency contracts | 0.2 | — | 0.2 | — | |||||||||||
$ | 7.6 | $ | 7.4 | $ | 0.2 | $ | — | ||||||||
Liabilities: | |||||||||||||||
Contingent consideration | $ | 8.0 | $ | — | $ | — | $ | 8.0 | |||||||
Deferred compensation liabilities | 8.4 | 8.4 | — | — | |||||||||||
Interest rate swap contract | 1.0 | — | 1.0 | — | |||||||||||
Foreign currency contracts | 1.6 | — | 1.6 | — | |||||||||||
$ | 19.0 | $ | 8.4 | $ | 2.6 | $ | 8.0 |
($ in millions) | |||
Balance, December 31, 2015 | $ | 6.0 | |
Increase in fair value recorded in earnings | 2.3 | ||
Payments | (0.3 | ) | |
Balance, December 31, 2016 | 8.0 | ||
Increase in fair value recorded in earnings | 0.5 | ||
Payments | (0.5 | ) | |
Balance, September 30, 2017 | $ | 8.0 |
Pension benefits | Other retirement benefits | Total | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Service cost | $ | 2.5 | $ | 2.3 | $ | — | $ | 0.1 | $ | 2.5 | $ | 2.4 | |||||||||||
Interest cost | 2.4 | 2.7 | — | 0.1 | 2.4 | 2.8 | |||||||||||||||||
Expected return on assets | (3.4 | ) | (3.1 | ) | — | — | (3.4 | ) | (3.1 | ) | |||||||||||||
Amortization of prior service credit | (0.3 | ) | (0.3 | ) | (0.1 | ) | — | (0.4 | ) | (0.3 | ) | ||||||||||||
Recognized actuarial losses (gains) | 1.2 | 1.3 | (0.9 | ) | (0.3 | ) | 0.3 | 1.0 | |||||||||||||||
Net periodic benefit cost | $ | 2.4 | $ | 2.9 | $ | (1.0 | ) | $ | (0.1 | ) | $ | 1.4 | $ | 2.8 |
Pension benefits | Other retirement benefits | Total | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
U.S. plans | $ | 1.7 | $ | 2.3 | $ | (1.0 | ) | $ | (0.1 | ) | $ | 0.7 | $ | 2.2 | |||||||||
International plans | 0.7 | 0.6 | — | — | 0.7 | 0.6 | |||||||||||||||||
Net periodic benefit cost | $ | 2.4 | $ | 2.9 | $ | (1.0 | ) | $ | (0.1 | ) | $ | 1.4 | $ | 2.8 |
Pension benefits | Other retirement benefits | Total | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Service cost | $ | 7.8 | $ | 7.6 | $ | — | $ | 0.4 | $ | 7.8 | $ | 8.0 | |||||||||||
Interest cost | 7.3 | 7.9 | 0.2 | 0.3 | 7.5 | 8.2 | |||||||||||||||||
Expected return on assets | (10.1 | ) | (9.5 | ) | — | — | (10.1 | ) | (9.5 | ) | |||||||||||||
Amortization of transition obligation | — | 0.1 | — | — | — | 0.1 | |||||||||||||||||
Amortization of prior service credit | (1.0 | ) | (1.0 | ) | (0.5 | ) | — | (1.5 | ) | (1.0 | ) | ||||||||||||
Recognized actuarial losses (gains) | 3.6 | 3.6 | (2.0 | ) | (1.0 | ) | 1.6 | 2.6 | |||||||||||||||
Net periodic benefit cost | $ | 7.6 | $ | 8.7 | $ | (2.3 | ) | $ | (0.3 | ) | $ | 5.3 | $ | 8.4 |
Pension benefits | Other retirement benefits | Total | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
U.S. plans | $ | 5.5 | $ | 6.9 | $ | (2.3 | ) | $ | (0.3 | ) | $ | 3.2 | $ | 6.6 | |||||||||
International plans | 2.1 | 1.8 | — | — | 2.1 | 1.8 | |||||||||||||||||
Net periodic benefit cost | $ | 7.6 | $ | 8.7 | $ | (2.3 | ) | $ | (0.3 | ) | $ | 5.3 | $ | 8.4 |
($ in millions) | Losses on cash flow hedges | Unrealized gains on investment securities | Defined benefit pension and other postretirement plans | Foreign currency translation | Total | ||||||||||||||
Balance, December 31, 2016 | $ | (3.2 | ) | $ | 5.2 | $ | (45.4 | ) | $ | (143.4 | ) | $ | (186.8 | ) | |||||
Other comprehensive (loss) income before reclassifications | (3.6 | ) | (5.1 | ) | (1.8 | ) | 64.7 | 54.2 | |||||||||||
Amounts reclassified out | 1.8 | — | 0.2 | — | 2.0 | ||||||||||||||
Other comprehensive (loss) income, net of tax | (1.8 | ) | (5.1 | ) | (1.6 | ) | 64.7 | 56.2 | |||||||||||
Balance, September 30, 2017 | $ | (5.0 | ) | $ | 0.1 | $ | (47.0 | ) | $ | (78.7 | ) | $ | (130.6 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | Location on Statement of Income | ||||||||||||||||
Detail of components | 2017 | 2016 | 2017 | 2016 | ||||||||||||||
Losses on cash flow hedges: | ||||||||||||||||||
Foreign currency contracts | $ | (0.5 | ) | $ | — | $ | (0.8 | ) | $ | — | Net sales | |||||||
Foreign currency contracts | (0.5 | ) | (0.1 | ) | (0.6 | ) | (0.2 | ) | Cost of goods and services sold | |||||||||
Interest rate swap contracts | (0.2 | ) | (0.3 | ) | (0.7 | ) | (1.0 | ) | Interest expense | |||||||||
Forward treasury locks | (0.1 | ) | (0.1 | ) | (0.3 | ) | (0.2 | ) | Interest expense | |||||||||
Total before tax | (1.3 | ) | (0.5 | ) | (2.4 | ) | (1.4 | ) | ||||||||||
Tax expense | 0.3 | 0.2 | 0.6 | 0.5 | ||||||||||||||
Net of tax | $ | (1.0 | ) | $ | (0.3 | ) | $ | (1.8 | ) | $ | (0.9 | ) | ||||||
Amortization of defined benefit pension and other postretirement plans: | ||||||||||||||||||
Transition obligation | $ | — | $ | — | $ | — | $ | (0.1 | ) | (a) | ||||||||
Prior service credit | 0.4 | 0.3 | 1.5 | 1.0 | (a) | |||||||||||||
Actuarial losses | (0.3 | ) | (1.0 | ) | (1.6 | ) | (2.6 | ) | (a) | |||||||||
Total before tax | 0.1 | (0.7 | ) | (0.1 | ) | (1.7 | ) | |||||||||||
Tax expense | (0.1 | ) | 0.2 | (0.1 | ) | 0.6 | ||||||||||||
Net of tax | $ | — | $ | (0.5 | ) | $ | (0.2 | ) | $ | (1.1 | ) | |||||||
Total reclassifications for the period, net of tax | $ | (1.0 | ) | $ | (0.8 | ) | $ | (2.0 | ) | $ | (2.0 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Restructuring and related charges: | |||||||||||||||
Severance and post-employment benefits | $ | — | $ | 1.4 | $ | — | $ | 7.8 | |||||||
Asset-related charges | — | 0.9 | — | 15.9 | |||||||||||
Total restructuring and related charges | — | 2.3 | — | 23.7 | |||||||||||
Venezuela currency devaluation | — | — | — | 2.7 | |||||||||||
Venezuela deconsolidation | — | — | 11.1 | — | |||||||||||
Development and licensing income | (9.5 | ) | (0.4 | ) | (10.3 | ) | (1.2 | ) | |||||||
Contingent consideration costs | (0.2 | ) | — | 0.5 | 1.9 | ||||||||||
Other items | 0.2 | 0.6 | 1.8 | 2.0 | |||||||||||
Total other (income) expense | $ | (9.5 | ) | $ | 2.5 | $ | 3.1 | $ | 29.1 |
($ in millions) | Severance and benefits | Asset-related charges | Other charges | Total | |||||||||||
Balance, December 31, 2015 | $ | — | $ | — | $ | — | $ | — | |||||||
Charges | 8.9 | 17.3 | 0.2 | 26.4 | |||||||||||
Cash payments | (3.0 | ) | — | — | (3.0 | ) | |||||||||
Non-cash asset write-downs | — | (17.3 | ) | (0.2 | ) | (17.5 | ) | ||||||||
Balance, December 31, 2016 | 5.9 | — | — | 5.9 | |||||||||||
Cash payments | (2.9 | ) | — | — | (2.9 | ) | |||||||||
Balance, 9/30/2017 | $ | 3.0 | $ | — | $ | — | $ | 3.0 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net sales: | |||||||||||||||
Proprietary Products | $ | 308.9 | $ | 298.1 | $ | 930.5 | $ | 899.9 | |||||||
Contract-Manufactured Products | 89.3 | 79.0 | 253.3 | 227.8 | |||||||||||
Intersegment sales elimination | — | (0.4 | ) | (0.3 | ) | (0.9 | ) | ||||||||
Consolidated net sales | $ | 398.2 | $ | 376.7 | $ | 1,183.5 | $ | 1,126.8 | |||||||
Operating profit (loss): | |||||||||||||||
Proprietary Products | $ | 67.0 | $ | 57.5 | $ | 188.2 | $ | 185.6 | |||||||
Contract-Manufactured Products | 10.8 | 8.9 | 30.1 | 25.6 | |||||||||||
Corporate | (13.9 | ) | (12.8 | ) | (39.3 | ) | (42.3 | ) | |||||||
Other unallocated items | — | (2.3 | ) | (11.1 | ) | (26.4 | ) | ||||||||
Total operating profit | $ | 63.9 | $ | 51.3 | $ | 167.9 | $ | 142.5 | |||||||
Interest expense | 1.3 | 2.2 | 5.7 | 6.7 | |||||||||||
Interest income | 0.3 | 0.2 | 0.9 | 0.8 | |||||||||||
Income before income taxes | $ | 62.9 | $ | 49.3 | $ | 163.1 | $ | 136.6 |
Three Months Ended September 30, | % Change | ||||||||||||
($ in millions) | 2017 | 2016 | As-Reported | Ex-Currency | |||||||||
Proprietary Products | $ | 308.9 | $ | 298.1 | 3.6 | % | 1.5 | % | |||||
Contract-Manufactured Products | 89.3 | 79.0 | 13.1 | % | 11.5 | % | |||||||
Intersegment sales elimination | — | (0.4 | ) | — | — | ||||||||
Consolidated net sales | $ | 398.2 | $ | 376.7 | 5.7 | % | 3.7 | % |
Nine Months Ended September 30, | % Change | ||||||||||||
($ in millions) | 2017 | 2016 | As-Reported | Ex-Currency | |||||||||
Proprietary Products | $ | 930.5 | $ | 899.9 | 3.4 | % | 3.8 | % | |||||
Contract-Manufactured Products | 253.3 | 227.8 | 11.2 | % | 11.1 | % | |||||||
Intersegment sales elimination | (0.3 | ) | (0.9 | ) | — | — | |||||||
Consolidated net sales | $ | 1,183.5 | $ | 1,126.8 | 5.0 | % | 5.4 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Proprietary Products: | |||||||||||||||
Gross Profit | $ | 110.5 | $ | 108.4 | $ | 342.5 | $ | 340.9 | |||||||
Gross Profit Margin | 35.8 | % | 36.4 | % | 36.8 | % | 37.9 | % | |||||||
Contract-Manufactured Products: | |||||||||||||||
Gross Profit | $ | 14.5 | $ | 12.7 | $ | 41.6 | $ | 36.8 | |||||||
Gross Profit Margin | 16.3 | % | 16.0 | % | 16.5 | % | 16.1 | % | |||||||
Consolidated Gross Profit | $ | 125.0 | $ | 121.1 | $ | 384.1 | $ | 377.7 | |||||||
Consolidated Gross Profit Margin | 31.4 | % | 32.1 | % | 32.5 | % | 33.5 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Proprietary Products | $ | 9.1 | $ | 9.0 | $ | 29.4 | $ | 27.2 | |||||||
Contract-Manufactured Products | — | — | — | — | |||||||||||
Consolidated R&D Costs | $ | 9.1 | $ | 9.0 | $ | 29.4 | $ | 27.2 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Proprietary Products | $ | 43.8 | $ | 41.7 | $ | 132.6 | $ | 125.0 | |||||||
Contract-Manufactured Products | 3.8 | 3.8 | 11.7 | 11.6 | |||||||||||
Corporate | 13.9 | 12.8 | 39.4 | 42.3 | |||||||||||
Consolidated SG&A costs | $ | 61.5 | $ | 58.3 | $ | 183.7 | $ | 178.9 | |||||||
SG&A as a % of net sales | 15.4 | % | 15.5 | % | 15.5 | % | 15.9 | % |
(Income) Expense | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Proprietary Products | $ | (9.4 | ) | $ | 0.2 | $ | (7.7 | ) | $ | 3.1 | |||||
Contract-Manufactured Products | (0.1 | ) | — | (0.2 | ) | (0.4 | ) | ||||||||
Corporate | — | — | (0.1 | ) | — | ||||||||||
Unallocated items | — | 2.3 | 11.1 | 26.4 | |||||||||||
Consolidated other (income) expense | $ | (9.5 | ) | $ | 2.5 | $ | 3.1 | $ | 29.1 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Proprietary Products | $ | 67.0 | $ | 57.5 | $ | 188.2 | $ | 185.6 | |||||||
Contract-Manufactured Products | 10.8 | 8.9 | 30.1 | 25.6 | |||||||||||
Corporate | (13.9 | ) | (12.8 | ) | (39.3 | ) | (42.3 | ) | |||||||
Adjusted consolidated operating profit | $ | 63.9 | $ | 53.6 | $ | 179.0 | $ | 168.9 | |||||||
Adjusted consolidated operating profit margin | 16.1 | % | 14.2 | % | 15.1 | % | 15.0 | % | |||||||
Unallocated items | — | (2.3 | ) | (11.1 | ) | (26.4 | ) | ||||||||
Consolidated operating profit | $ | 63.9 | $ | 51.3 | $ | 167.9 | $ | 142.5 | |||||||
Consolidated operating profit margin | 16.1 | % | 13.6 | % | 14.2 | % | 12.6 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Interest expense | $ | 2.7 | $ | 3.0 | $ | 8.2 | $ | 9.0 | |||||||
Capitalized interest | (1.4 | ) | (0.8 | ) | (2.5 | ) | (2.3 | ) | |||||||
Interest income | (0.3 | ) | (0.2 | ) | (0.9 | ) | (0.8 | ) | |||||||
Interest expense, net | $ | 1.0 | $ | 2.0 | $ | 4.8 | $ | 5.9 |
($ in millions) | 2017 | 2016 | |||||
Net cash provided by operating activities | $ | 181.8 | $ | 147.6 | |||
Net cash used in investing activities | $ | (104.2 | ) | $ | (129.1 | ) | |
Net cash used in financing activities | $ | (22.5 | ) | $ | (87.5 | ) |
($ in millions) | September 30, 2017 | December 31, 2016 | |||||
Cash and cash equivalents | $ | 269.3 | $ | 203.0 | |||
Working capital | $ | 476.9 | $ | 400.9 | |||
Total debt | $ | 229.8 | $ | 228.6 | |||
Total equity | $ | 1,316.9 | $ | 1,117.5 | |||
Net debt-to-total invested capital | N/A | 2.2 | % |
• | sales demand and our ability to meet that demand; |
• | competition from other providers in our businesses, including customers’ in-house operations, and from lower-cost producers in emerging markets, which can impact unit volume, price and profitability; |
• | customers’ changing inventory requirements and manufacturing plans that alter existing orders or ordering patterns for the products we supply to them; |
• | the timing, regulatory approval and commercial success of customer products that incorporate our products and systems; |
• | whether customers agree to incorporate our products and delivery systems with their new and existing drug products, the ultimate timing and successful commercialization of those products and systems, which involves substantial evaluations of the functional, operational, clinical and economic viability of our products, and the rate, timing and success of regulatory approval for the drug products that incorporate our components and systems; |
• | the timely and adequate availability of filling capacity, which is essential to conducting definitive stability trials and the timing of first commercialization of customers’ products in Daikyo Crystal Zenith® prefilled syringes; |
• | average profitability, or mix, of the products sold in any reporting period, including lower-than-expected sales growth of our high-value proprietary product offerings; |
• | maintaining or improving production efficiencies and overhead absorption; |
• | dependence on third-party suppliers and partners, some of which are single-source suppliers of critical materials and products, including our Japanese partner and affiliate, Daikyo; |
• | the loss of key personnel or highly-skilled employees; |
• | the availability and cost of skilled employees required to meet increased production, managerial, research and other needs, including professional employees and persons employed under collective bargaining agreements; |
• | interruptions or weaknesses in our supply chain, including from reasons beyond our control such as extreme weather, longer-term climate changes, natural disasters, pandemic, war, accidental damage, or unauthorized access to our or our customers' information and systems, which could cause delivery delays or restrict the availability of raw materials, key purchased components and finished products; |
• | the successful and timely implementation of price increases necessary to offset rising production costs, including raw material prices, particularly petroleum-based raw materials; |
• | the cost and progress of development, regulatory approval and marketing of new products; |
• | our ability to obtain and maintain licenses in any jurisdiction in which we do business; |
• | the relative strength of USD in relation to other currencies, particularly the Euro, the Singapore Dollar, the Danish Krone, Yen, Venezuelan Bolivar, Colombian and Argentinian Peso, and Brazilian Real; and |
• | the potential adverse effects of global healthcare legislation on customer demand, product pricing and profitability. |
Period | Total number of shares purchased (1) | Average price paid per share (1) | Total number of shares purchased as part of publicly announced plans or programs (2) | Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (2) | |||||||||
July 1 – 31, 2017 | 90 | $ | 92.31 | — | 475,000 | ||||||||
August 1 – 31, 2017 | 170 | 87.20 | — | 475,000 | |||||||||
September 1 – 30, 2017 | — | — | — | 475,000 | |||||||||
Total | 260 | $ | 88.97 | — | 475,000 |
(1) | Includes 260 shares purchased on behalf of employees enrolled in the Non-Qualified Deferred Compensation Plan for Designated Employees (Amended and Restated Effective January 1, 2008). Under the plan, Company match contributions are delivered to the plan’s investment administrator, who then purchases shares in the open market and credits the shares to individual plan accounts. |
(2) | In December 2016, we announced a share repurchase program authorizing the repurchase of up to 800,000 shares of our common stock from time to time on the open market or in privately-negotiated transactions as permitted under the Securities Exchange Act of 1934 Rule 10b-18. The number of shares to be repurchased and the timing of such transactions will depend on a variety of factors, including market conditions. The program commenced on January 1, 2017 and is expected to be completed by December 31, 2017. There were no shares purchased during the three months ended September 30, 2017. During the nine months ended September 30, 2017, we purchased 325,000 shares of our common stock under the program at a cost of $26.9 million, or an average price of $82.84 per share. |
• | A new definition of “Cause” which includes acts of dishonesty, repeated failure to fulfill duties, conviction of a felony or a Code of Business Conduct violation that injures the Company. |
• | A revised definition of “Constructive Termination” to include reporting to an individual whose scope of responsibilities is less than before the CIC, a reduction in short-term incentive target compensation, and a reduction in fringe benefits unless it is broadly-based. An executive must provide notice of circumstances giving rise to CT within 45 days and then provide 30 days to remedy. |
• | Cash severance pay will be equal to two times the highest annual salary rate in effect plus target short-term incentive compensation (instead of based on prior paid short-term incentives). |
• | Incentive compensation will be paid out at pro-rated target compensation for the year of termination. |
• | Unvested equity awards will vest and performance will be deemed to be at target levels. |
• | Benefits will continue for a period of 24 months (instead of 36 months). |
• | The non-compete covenant associated with the CIC Agreement was extended from one year to two years. |
• | The other material terms of the CIC Agreements for these executives remain the same as our previously filed forms. |
Exhibit # | Description |
3.1 | |
3.2 | |
4.1 | |
4.2 | |
4.3 | |
4.4 (1) | Instruments defining the rights of holders of long-term debt securities of West and its subsidiaries have been omitted. |
10.1 | |
31.1 | |
31.2 | |
32.1* | |
32.2* | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
1. | Definitions. As used in this Agreement, the following terms will have the meanings set forth below: |
(a) | An “Affiliate” of any Person means any Person directly or indirectly controlling, controlled by or under common control with such Person. |
(b) | “Cause” means (i) an act or acts of dishonesty taken by the Executive, (ii) repeated failure by the Executive of the Executive’s duties and obligations as an employee and officer of the Company which are demonstrably willful and deliberate on the Executive’s part and which are not remedied after the receipt of written notice from the Company, (iii) the conviction of the Executive of a felony, or (iv) an intentional breach of the Company’s Code of Business Conduct which is materially and demonstrably injurious to the Company. |
(c) | “Change in Control” means a change in control of a nature that would be required to be reported in response to Item 5.01 of a Current Report on Form 8-K as in effect on the date of this Agreement pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, (the “Act”), provided, that, without limitation, a Change in Control shall be deemed to have occurred if: |
(i) | Any Person, other than: |
(1) | the Company, |
(2) | any Person who on the date hereof is a director or officer of the Company, or |
(3) | a trustee or fiduciary holding securities under an employee benefit plan of the Company, |
(ii) | During any period of two consecutive years during the term of this Agreement, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority thereof, unless the election, or nomination for election, of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least three-fourths of the directors then in office who were directors at the beginning of the period; or |
(iii) | The shareholders of the Company approve: (1) a plan of complete liquidation of the Company; or (2) an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (3) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization (collectively, a “Non-Control Transaction”), that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least 50% of the combined voting power of the voting securities of the Company (or the surviving entity, or an entity which as a result of the Non-Control Transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) outstanding immediately after the Non-Control Transaction. |
(iv) | No sale to underwriters or private placement of its capital stock by the Company, nor any acquisition initiated by the Company, through merger, purchase of assets or otherwise, effected in whole or in part by issuance or reissuance of shares of its capital stock, shall constitute a Change in Control. |
(d) | “Code” means the Internal Revenue Code of 1986, as amended. |
(e) | “Constructive Termination” means, in connection with a Change in Control, during the period commencing with the announcement of a Change in Control through the two-year period following the Effective Date (the “CT Period”), the occurrence of any of the following events unless the Executive has consented in writing or provided a written waiver to that effect: |
(i) | The Company or its successor in interest requires the Executive to assume any duties inconsistent with, or the Company makes a significant diminution or reduction in the nature or scope of the Executive’s authority or duties from, those assigned to or held by the Executive on the commencement of the CT Period, including reporting to an individual whose scope of responsibilities and authority is not as large as the person to whom the Executive reported prior to the Change in Control Event; |
(ii) | A material reduction in the Executive’s: (1) annual base salary, or (2) short term incentive target compensation; |
(iii) | A relocation of the Executive’s site of employment to a location that lengthens the Executive’s one-way commuting distance to his principal place of employment by 50 or more miles from the Executive’s site of employment on the Effective Date; |
(iv) | A material reduction in the package of employment benefits offered to the Executive as of the commencement of the CT Period, unless such reduction is applicable on a broad basis to similarly-situated employees of the Company; or |
(v) | A successor of the Company does not assume the Company’s obligations under this Agreement, or any other agreement entered into by the Executive and the Company, expressly or as a matter of law. |
(f) | “Defined Contribution Plan” means the Company’s 401(k) Plan, the Company’s Non-Qualified Deferred Compensation Plan for Designated Employees and any successor plans or other similar defined contribution plans established from time to time that may allow executive officers to defer taxation of compensation. |
(g) | “Payment” means: |
(i) | any amount due or paid to the Executive under this Agreement, |
(ii) | any amount that is due or paid to the Executive under any plan, program or arrangement of the Company and any of its Subsidiaries, and |
(iii) | any amount or benefit that is due or payable to the Executive under this Agreement or under any plan, program or arrangement of the Company and any of its Subsidiaries not otherwise covered under clause (i) or (ii) hereof which must reasonably be taken into account under Section 280G of the Code and the Regulations in determining the amount of the “parachute payments” received by the Executive, including, without limitation, any amounts which must be taken into account under the Code and Regulations as a result of (1) the acceleration of the vesting of any option, restricted stock or other equity award granted under any equity plan of the Company or otherwise, (2) the acceleration of the time at which any payment or benefit is receivable by the Executive or (3) any contingent severance or other amounts that are payable to the Executive. |
(h) | “Person” means any individual, corporation or other entity and any group as such term is used in Section 13 (d) (3) or 14 (d) (2) of the Exchange Act. Any person shall be deemed to be the beneficial owner of any shares of capital stock of the Company: |
(i) | which that person owns directly, whether or not of record, or |
(ii) | which that person has the right to acquire pursuant to any agreement or understanding or upon exercise of conversion rights, warrants, or options, or otherwise, or |
(iii) | which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (ii) above), by an “affiliate” or “associate” (as defined in the rules of the Securities and Exchange Commission under the Securities Act of 1933, as amended) of that person, or |
(iv) | which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (ii) above), by any other person with which that person or his “affiliate” or “associate” (defined as aforesaid) has any agreement, arrangement or |
(i) | “Regulations” means the proposed, temporary and final regulations under Sections 4999, 280G or 409A of the Code or any successor provisions thereto, as applicable. |
(j) | “Retirement Plan” means the West Pharmaceutical Services, Inc. Employees’ Retirement Plan and any successor plan thereto. |
(k) | “Separation from Service” is the date on which the Executive ceases to be employed by the Company or any of its Subsidiaries or Affiliates for any reason and, to the extent that Section 409A of the Code applies to the Payments under this Agreement, shall be the date that the Executive incurs a “separation from service” as defined in that Code section and the Regulations. |
(l) | “Subsidiary” has the meaning ascribed to the term by Section 425(f) of the Code. |
2. | Termination Following a Change in Control. |
(a) | Subject to Section 2(b), the Executive will be entitled to the benefits specified in Section 3 if, |
(i) | at any time within two years after a Change in Control has occurred, a Separation from Service occurs due to: (1) an involuntary termination of the Executive’s employment by the Company other than for Cause, or (2) as a result of the Executive’s resignation at any time following the Executive’s Constructive Termination; |
(ii) | the Company signs an agreement, the consummation of which would result in the occurrence of a Change in Control, and then, a Separation from Service occurs due to (1) an involuntary termination of employment by the Company other than for Cause, or (2) the Executive’s resignation at any time following the Executive’s Constructive Termination occurring after the date of such agreement (and, if such agreement expires or is terminated prior to consummation, prior to the expiration or termination of such agreement). |
(b) | The Executive will not be entitled to the benefits specified in Section 3 if the Executive’s employment terminates as a result of Cause. |
(c) | The Executive shall have no right to the benefits described in Section 3 unless the Executive executes a settlement and release in a form that is typical of that used by the Company in connection with the termination of employment of its senior-most executives prior to the announcement of the Change in Control provided, however, that settlement and release shall not amend or limit any right or obligation of Executive hereunder. |
3. | Benefits Payable Upon Termination of Employment. Following a Separation from Service due to a termination of employment described in Sections 2(a) or (b), the Executive will be entitled to the following benefits: |
(a) | Severance Compensation. The Executive will be entitled to severance compensation in an amount equal to two times the sum of: |
(i) | the Executive’s highest annual base salary rate in effect during the year of the termination of the Executive’s employment, plus |
(ii) | the target short term incentive compensation for the Executive in the year in which the termination of employment becomes effective. |
(b) | Incentive Compensation. The Executive will receive payout on short and long term incentives as follows: |
(i) | If the Executive’s employment is terminated prior to the normal payout date for short term incentive compensation for the fiscal year immediately preceding the year of termination of employment, the Executive will be paid such short-term compensation as earned in accordance with the terms of the plan or, if it is not possible to calculate said award, then at target; |
(ii) | For the year in which the Executive’s employment is terminated, the executive will receive non-equity, cash-settled short-term incentive compensation at target but subject to pro ration based on the number of calendar days the Executive was employed during such year divided by 365; and |
(iii) | For the year in which the Executive’s employment is terminated, the executive will receive non-equity, cash-settled long-term incentive compensation at target but subject to pro ration based on the number of calendar days the Executive was employed during the relevant performance period divided by the number of days in the entire original performance period. |
(c) | Equivalent of Vested Defined Contribution Plan Benefit. The Company will pay to the Executive the difference, if any, between |
(i) | the benefit the Executive would be entitled to receive under the Defined Contribution Plan if the Company’s contributions to the Defined Contribution Plan were fully vested upon the Separation from Service, and |
(ii) | the benefit the Executive is entitled to receive under the terms of the Defined Contribution Plan upon the Separation from Service. |
(d) | Unvested Equity Awards. All stock options, other equity-based awards and shares of the Company’s stock granted or awarded to the Executive pursuant to any Company compensation or benefit plan or arrangement, but which are unvested, will vest in full immediately upon the Separation from Service. If such unvested awards are dependent upon achievement of performance goals, those goals will be deemed to be satisfied at the target level. The provisions of this Section 3(d) will supersede the terms of any such grant or award made to the Executive under any such plan or arrangement to the extent there is an inconsistency between the two. For the purpose of this paragraph, the definition of Company shall include the Affiliate of the acquiring entity that may be the grantor of equity awards granted to the Executive. |
(e) | Employee and Executive Benefits. The Executive will be entitled to a continuation of all hospital, medical, dental, and similar insurance benefits not otherwise addressed in this Agreement in the same manner and amount to which the Executive was entitled on the date of the announcement of a Change in Control or on the date of Constructive Termination of the Executive’s employment (whichever benefits are more favorable to the Executive) until the earlier of: |
(i) | a period of 24 months after the Separation from Service, or |
(ii) | the Executive’s eligibility for similar benefits with a new employer. |
(f) | No Duplication of Payments. If Executive is entitled to receive any Payment under this Agreement, the Executive shall not also be entitled to receive severance payments under any other plan, program or agreement with the Company. |
(g) | Payment of Severance Compensation. The severance compensation set forth in Section 3(a) will be payable in 24 equal monthly installments commencing on the first day of the month following the month in which the Separation from Service occurs. Notwithstanding the above, in the event that the Executive is a “specified employee” within the meaning of Code Section 409A, the first six monthly installments shall be paid in a lump sum on the first day of the month following or coincident with the date that is six months following the Separation from Service and all remaining monthly installments shall be paid monthly. |
4. | Excise Tax Limitation. |
(a) | Limitation. Notwithstanding any other provisions of this Agreement to the contrary, in the event that any Payments received or to be received by the Executive in connection with the Executive’s employment with the Company (or termination thereof) under this Agreement or otherwise would subject the Executive to the excise tax (plus any related interest and penalties) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Excise Tax”), and if the net-after tax amount (taking into account all applicable taxes payable by the Executive, including any Excise Tax) that the Executive would receive with respect to such payments or benefits does not exceed the net-after tax amount the Executive would receive if the amount of such payment and benefits were reduced to the maximum amount which could otherwise be payable to the Executive without the imposition of the Excise Tax, then, to the extent necessary to eliminate the imposition of the Excise Tax, (i) such cash Payments shall first be reduced (if necessary, to zero), then (ii) all non-cash Payments (other than those relating to equity and incentive plans) shall next be reduced (if necessary, to zero,) and finally (iii) all other non-cash Payments relating to equity and incentive plans shall be reduced. |
(b) | Determination of Application of the Limitation. Subject to the provisions of Section 4(c), all determinations required under this Section 4 shall be made by the accounting firm that was the Company’s independent auditors immediately prior to the Change in Control (or, in default thereof, an accounting firm mutually agreed upon by the Company and the Executive) (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Executive and the Company within fifteen days of the Change in Control, the Separation from Service or any other date reasonably requested by the Executive or the Company on which a determination under this Section 4 is necessary or advisable. If the Accounting Firm determines that no Excise Tax is payable by the Executive, the Company shall cause the Accounting Firm to provide the Executive with an opinion that the Accounting Firm has substantial authority under the Code and Regulations |
(c) | Procedures. The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would result in Payments that would be less on an after-tax basis than had those payments been limited under Section 4(a). Such notice shall be given as soon as practicable after the Executive knows of such claim and shall apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. The Executive agrees not to pay the claim until the expiration of the thirty-day period following the date on which the Executive notifies the Company, or such shorter period ending on the date the taxes with respect to such claim are due (the “Notice Period”). If the Company notifies the Executive in writing prior to the expiration of the Notice Period that it desires to contest the claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to the claim; (ii) take such action in connection with the claim as the Company may reasonably request, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably acceptable to the Executive; (iii) cooperate with the Company in good faith in contesting the claim; and (iv) permit the Company to participate in any proceedings relating to the claim. The Executive shall permit the Company to control all proceedings related to the claim and, at its option, permit the Company to pursue or forgo any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of such claim. If requested by the Company, the Executive agrees either to pay the tax claimed and sue for a refund or contest the claim in any permissible manner and to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts as the Company shall determine; provided, however, that, if the Company directs the Executive to pay such claim and pursue a refund, the Company shall advance the amount of such payment to the Executive on an after-tax and interest-free basis (the “Advance”). The Company’s control of the contest related to the claim shall be limited to the issues related to the Payments and the Executive shall be entitled to settle or contest, as the case may be, any other issues raised by the Internal Revenue Service or other taxing authority. The Advance or other payments and the reimbursement of any related costs, expenses or taxes payable under this Section 4(c) and/or Section 4(e) shall be made on or before the end of the Executive’s taxable year following the taxable year in which any additional taxes are payable by the Executive or if no additional taxes are payable the Executive’s taxable year following the taxable year in which the audit or litigation is closed. Notwithstanding the above, to the extent required to avoid the penalty taxes and interest payable under Section 409A of the Code, if the Executive is a “specified person” within the meaning of that Code section, the Advance shall be delayed until the date that is six months following the Separation from Service. |
(d) | Repayments. If, after receipt by the Executive of an Advance, the Executive becomes entitled to a refund with respect to the claim to which such Advance relates, the Executive shall pay the Company the amount of the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after receipt by the Executive of an Advance, a determination is made that the Executive shall not be entitled to any refund with respect to the claim and the Company does not promptly notify the Executive of its intent to contest the denial of refund, then the amount of the Advance shall not be required to be repaid by the Executive. |
(e) | Further Assurances. The Company shall indemnify the Executive and hold the Executive harmless, on an after-tax basis, from any costs, expenses, penalties, fines, interest or other liabilities (“Losses”) incurred by the Executive with respect to the exercise by the Company of any of its rights under this Section 4, including, without limitation, any Losses related to the Company’s decision to contest a claim or any imputed income to the Executive resulting from any Advance or action taken on the Executive’s behalf by the Company hereunder. Subject to the last sentence of Section 4(c), the Company shall pay all reasonable and documented legal fees and expenses |
5. | Legal Fees. The Company will pay all reasonable and documented legal fees and expenses which the Executive may incur as a result of the Company’s contesting the validity or enforceability of this Agreement. |
6. | Payments Final. In the event of a termination of the Executive’s employment under the circumstances described in this Agreement, the arrangements provided for by this Agreement, and any other agreement between the Company and the Executive in effect at that time and by any other applicable plan of the Company in which the Executive then participates, will constitute the entire obligation of the Company to the Executive, and performance of that obligation will constitute full settlement of any claim that the Executive might otherwise assert against the Company on account of such termination. The Company’s obligation to pay the Executive under this Agreement will be absolute and unconditional and will not be affected by any circumstance, including without limitation, any set-off, counterclaim, defense or other rights the Company may have against the Executive or anyone else as long as the Executive is not in breach of the Executive’s obligations under this Agreement. |
7. | Non-Competition. |
(a) | During the two-year period following the Executive’s termination of employment covered by this Agreement, the Executive will not, and will not permit any of the Affiliates of a Person employing Executive (as defined below), or any other Person, directly or indirectly, to: |
(i) | engage in competition with, or acquire a direct or indirect interest or an option to acquire such an interest in any Person engaged in competition with, the Company's Business (as defined below) in the United States (other than an interest of not more than 5 percent of the outstanding stock of any publicly traded company); |
(ii) | serve as a director, officer, employee or consultant of, or furnish information to, or otherwise facilitate the efforts of, any Person engaged in competition with the Company's Business in the United States; |
(iii) | solicit, employ, interfere with or attempt to entice away from the Company any employee who has been employed by the Company or a Subsidiary in an executive or supervisory capacity within one year prior to such solicitation, employment, interference or enticement; or |
(iv) | approach, solicit or compete directly or indirectly with the Company or any Subsidiary or any Person which at any time during the 12 months immediately preceding the Termination Date: |
(1) | was a customer, client, supplier, agent or distributor of the Company or any Subsidiary; |
(2) | was a customer, client, supplier, agent or distributor of the Company or any Subsidiary with whom employees reporting to or under the direct control of the Executive had personal contact on behalf of the Company or any Subsidiary; or |
(3) | was a Person with whom the Executive had regular, substantial or a series of business dealings on behalf of the Company or any Subsidiary (whether or not a customer, client, supplier, agent or distributor of the Company or any Subsidiary). |
(b) | The "Company's Business" means: (i) the manufacture and sale of stoppers, closures, containers, medical-device components and assemblies made from elastomers, metal and plastic for the health-care and consumer-products industries, and (ii) any other business conducted by the Company or any of its Subsidiaries or Affiliates during the term of this Agreement and in which the Executive has been actively involved. |
8. | Confidentiality and Enforcement. Executive’s obligations under any Confidentiality and Non-Disclosure Agreements with the Company and the non-compete agreement described in Section 7 (collectively, the “Material Ancillary Agreements”) are hereby affirmed. A breach of any Material Ancillary Agreements is a breach of this Agreement and all Payments and obligations of the Company under this Agreement shall cease in the event of the breach of those Material Ancillary Agreements. The Executive acknowledges that a breach of the covenants contained in this Agreement and the Material Ancillary Agreements and incorporated by reference into this Agreement will cause the Company immediate and irreparable harm for which the Company’s remedies at law (such as money damages) will be inadequate. The Company shall have the right, in addition to any other rights it may have, to obtain an injunction to restrain any breach or threatened breach of such agreements. The Company may contact any Person with or for whom the Executive works after the Executive’s employment by the Company ends and may send that Person a copy of those agreements and/or this Agreement. In consideration of the benefit of having the protection afforded by this Agreement, the Executive agrees that the provisions of the Material Ancillary Agreements apply to the Executive, and the Executive will be bound by them, whether or not a Change in Control occurs or the Executive actually receives the benefits specified in Section 3. |
9. | Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its Affiliates and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other agreements with the Company or any of its Affiliates. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its Affiliates at or subsequent to the date of termination shall be payable in accordance with such plan or program. |
10. | Full Settlement. Except to the extent specifically provided herein, the Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. Payments under this Agreement shall be subject to the Company’s Incentive Compensation Recovery (Clawback) Policy attached as Exhibit I (and deemed to be incentive compensation for the purposes of that Policy). In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof, plus in each case interest. |
11. | Duration of Agreement. This Agreement shall commence on the date first above written and will continue until terminated by the mutual written consent of the Executive and the Company or the first anniversary of said date, whichever shall first occur, provided, however, that the term hereof shall automatically be renewed for subsequent one year terms unless terminated unilaterally by either party with sixty (60) days written notice to the other; further provided, however, that unilateral termination is not permitted should a Change in Control have been announced. |
12. | Notices. Each party giving or making notice, request, demand or other communication (each, a “Notice”) under this Agreement shall give the Notice in writing and use one of the following methods of delivery: personal delivery, registered or certified mail with return receipt requested, nationally recognized overnight courier, fax or e-mail. Such Notice shall be addressed to the last address provided by the party receiving Notice. Notices are not effective unless compliant with this Section and provided within the timeframes required in this Agreement. |
13. | Successors. |
(a) | This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. |
(b) | This Agreement shall inure to the benefit of and be binding upon the Company and its successors. |
(c) | The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. |
14. | Miscellaneous. |
(a) | This Agreement will be binding upon and inure to the benefit of the Executive, the Executive’s personal representatives and heirs and the Company and any successor of the Company, but neither this Agreement nor any rights arising hereunder may be assigned or pledged by the Executive. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. |
(b) | The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. |
(c) | The Executive’s failure to insist upon strict compliance with any provision hereof shall not be deemed to be waiver of such provision or any other provision thereof. |
(d) | The Executive and the Company acknowledge that the employment of the Executive by the Company is “at will”, and, prior to the effective date, may be terminated by either the Executive or the Company at any time. Except as stated in Section 2, upon a termination of the Executive’s employment or upon the Executive’s ceasing to be an officer of the Company, in each case, prior to the effective date of this Agreement, there shall be no further rights under this Agreement. |
(e) | Should any provision of this Agreement be adjudged to any extent invalid by any competent tribunal, that provision will be deemed modified to the extent necessary to make it enforceable. The invalidity or unenforceability of any provision of this Agreement (or the Material Ancillary Agreements) shall in no way affect the validity or enforceability of any other provision hereof. |
(f) | This Agreement will be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. |
(g) | This Agreement together with the Material Ancillary Agreements constitutes the entire agreement and understanding between the Company and the Executive with respect to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings between the Company and the Executive with respect to such matters including under the Executive’s Change-in-Control Agreement with the Company executed prior to the date hereof (if any). |
(h) | This Agreement may be executed in one or more counterparts, which together shall constitute a single agreement. |
1. | I have reviewed this quarterly report on Form 10-Q of West Pharmaceutical Services, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | I have reviewed this quarterly report on Form 10-Q of West Pharmaceutical Services, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Document and Entity Information |
9 Months Ended |
---|---|
Sep. 30, 2017
shares
| |
Document and Entity Information [Abstract] | |
Entity Registrant Name | WEST PHARMACEUTICAL SERVICES INC |
Entity Central Index Key | 0000105770 |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 74,252,923 |
Document Fiscal Year Focus | 2017 |
Document Fiscal Period Focus | Q3 |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2017 |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Statement [Abstract] | ||||
Net sales | $ 398.2 | $ 376.7 | $ 1,183.5 | $ 1,126.8 |
Cost of goods and services sold | 273.2 | 255.6 | 799.4 | 749.1 |
Gross profit | 125.0 | 121.1 | 384.1 | 377.7 |
Research and development | 9.1 | 9.0 | 29.4 | 27.2 |
Selling, general and administrative expenses | 61.5 | 58.3 | 183.7 | 178.9 |
Other (income) expense (Note 12) | (9.5) | 2.5 | 3.1 | 29.1 |
Operating profit | 63.9 | 51.3 | 167.9 | 142.5 |
Interest expense | 1.3 | 2.2 | 5.7 | 6.7 |
Interest income | 0.3 | 0.2 | 0.9 | 0.8 |
Income before income taxes | 62.9 | 49.3 | 163.1 | 136.6 |
Income tax expense | 14.0 | 14.4 | 19.1 | 38.3 |
Equity in net income of affiliated companies | 2.1 | 2.7 | 6.7 | 6.2 |
Net income | $ 51.0 | $ 37.6 | $ 150.7 | $ 104.5 |
Net income per share: | ||||
Basic (in dollars per share) | $ 0.69 | $ 0.51 | $ 2.04 | $ 1.43 |
Diluted (in dollars per share) | $ 0.67 | $ 0.50 | $ 1.99 | $ 1.40 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 74.2 | 73.3 | 73.8 | 73.0 |
Diluted (in shares) | 75.9 | 75.0 | 75.8 | 74.7 |
Dividends declared per share | $ 0.14 | $ 0.13 | $ 0.40 | $ 0.37 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 51.0 | $ 37.6 | $ 150.7 | $ 104.5 |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | 22.5 | 5.9 | 64.7 | 15.9 |
Defined benefit pension and other postretirement plan adjustments, net of tax of $(0.3), $0.3, $(0.7) and $0.9, respectively | (0.7) | 0.6 | (1.6) | 2.2 |
Net loss on investment securities, net of tax of $(2.9) | 0.0 | 0.0 | (5.1) | 0.0 |
Net (loss) gain on derivatives, net of tax of $(0.2), $(0.1), $(0.5) and $0.4, respectively | (0.6) | 0.0 | (1.8) | 0.7 |
Other comprehensive income, net of tax | 21.2 | 6.5 | 56.2 | 18.8 |
Comprehensive income | $ 72.2 | $ 44.1 | $ 206.9 | $ 123.3 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Defined benefit pension and other postretirement plan adjustments, tax | $ (0.3) | $ 0.3 | $ (0.7) | $ 0.9 |
Net gain on investment securities, tax | 0.0 | 0.0 | (2.9) | 0.0 |
Net gains on derivatives, tax | $ (0.2) | $ (0.1) | $ (0.5) | $ 0.4 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares shares in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Preferred stock, shares authorized (in shares) | 3.0 | 3.0 |
Preferred stock, shares issued (in shares) | 0.0 | 0.0 |
Preferred stock, shares outstanding (in shares) | 0.0 | 0.0 |
Common stock, par value (in dollars per share) | $ 0.25 | $ 0.25 |
Common stock, shares authorized (in shares) | 100.0 | 100.0 |
Common stock, shares issued (in shares) | 75.1 | 73.7 |
Common stock, shares outstanding (in shares) | 74.3 | 73.1 |
Treasury stock, at cost (in shares) | 0.8 | 0.6 |
Summary of Significant Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation: The condensed consolidated financial statements included in this report are unaudited and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting and U.S. Securities and Exchange Commission (“SEC”) regulations. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, these financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, cash flows and the change in equity for the periods presented. The condensed consolidated financial statements for the three and nine months ended September 30, 2017 should be read in conjunction with the consolidated financial statements and notes thereto of West Pharmaceutical Services, Inc. and its majority-owned subsidiaries (which may be referred to as “West”, the “Company”, “we”, “us” or “our”) appearing in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”). The results of operations for any interim period are not necessarily indicative of results for the full year. As of April 1, 2017, our consolidated financial statements exclude the results of our Venezuelan subsidiary. Please refer to Note 12, Other (Income) Expense, for further discussion. |
New Accounting Standards |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Standards | New Accounting Standards Recently Adopted Standards In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance which removes the second step of the goodwill impairment test. A goodwill impairment charge will now be the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. We adopted this guidance as of January 1, 2017, on a prospective basis. The adoption did not have a material impact on our financial statements. In January 2017, the FASB issued guidance which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We adopted this guidance as of January 1, 2017, on a prospective basis. The adoption did not have a material impact on our financial statements. In October 2016, the FASB issued guidance which requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We adopted this guidance as of January 1, 2017, on a modified retrospective basis. As a result of the adoption, a cumulative-effect adjustment of $4.1 million was recorded within retained earnings in our condensed consolidated balance sheet as of January 1, 2017, for unamortized tax expense previously deferred and previously unrecognized deferred tax assets. In March 2016, the FASB issued guidance that simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We adopted this guidance as of January 1, 2017, on a prospective basis as it relates to the timing or recognition and classification of share-based compensation award-related income tax effects. For the three and nine months ended September 30, 2017, we recorded a tax benefit of $4.8 million and $30.3 million, respectively, within income tax expense in our condensed consolidated statement of income. These tax benefits were recorded within capital in excess of par value in our condensed consolidated balance sheet in the prior-year period. Also per the amended guidance, we classified the $30.3 million of excess tax benefits within net cash provided by operating activities in our condensed consolidated statement of cash flows, rather than net cash used in financing activities, which included the excess tax benefits for the nine months ended September 30, 2016. The amended guidance allows entities to account for award forfeitures as they occur, however, we have elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. We expect to record additional tax benefits throughout 2017. In March 2016, the FASB issued guidance that simplifies the transition to the equity method of accounting. This guidance eliminates the requirement to retroactively adopt the equity method of accounting when there is an increase in the level of ownership interest or degree of influence. We adopted this guidance as of January 1, 2017, on a prospective basis. The adoption did not have a material impact on our financial statements. In July 2015, the FASB issued guidance regarding the subsequent measurement of inventory. This guidance requires inventory measured using any method other than last-in, first-out or the retail inventory method to be measured at the lower of cost and net realizable value. Net realizable value represents estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. We adopted this guidance as of January 1, 2017, on a prospective basis. The adoption did not have a material impact on our financial statements. Standards Issued Not Yet Adopted In August 2017, the FASB issued guidance which expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating our adoption timing and the impact that this guidance will have on our financial statements. In May 2017, the FASB issued guidance which amends the scope of modification accounting for share-based payment arrangements. The guidance focuses on changes to the terms or conditions of share-based payment awards that would require the application of modification accounting and specifies that an entity would not apply modification accounting if its fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements. In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit cost (net benefit cost). The guidance requires the bifurcation of net benefit cost. The service cost component will be presented with other employee compensation costs in operating income (or capitalized in assets) and the other components will be reported separately outside of operations, and will not be eligible for capitalization. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. Upon adoption, we will apply the income statement classification provisions of this guidance retrospectively, and will reclassify net benefit cost components other than service cost from operating income to outside of operations. Net periodic benefit cost for the three and nine months ended September 30, 2017 was $1.4 million and $5.3 million, respectively, of which $2.5 million and $7.8 million, respectively, related to service cost. This guidance has no impact on net income. In November 2016, the FASB issued guidance on the classification and presentation of restricted cash in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. As of September 30, 2017, we had no restricted cash. In August 2016, the FASB issued guidance to reduce the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements. In February 2016, the FASB issued guidance on the accounting for leases. This guidance requires lessees to recognize lease assets and lease liabilities on the balance sheet and to expand disclosures about leasing arrangements, both qualitative and quantitative. In terms of transition, the guidance requires adoption based upon a modified retrospective approach. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. We are currently evaluating the impact that this guidance will have on our financial statements. As of September 30, 2017, future minimum rental payments under non-cancelable operating leases were $77.6 million. In January 2016, the FASB issued guidance that addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We believe that the adoption of this guidance will not have a material impact on our financial statements. In May 2014, the FASB issued guidance on the accounting for revenue from contracts with customers that will supersede most existing revenue recognition guidance, including industry-specific guidance. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the guidance requires enhanced disclosures regarding the nature, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The FASB subsequently issued additional clarifying standards to address issues arising from implementation of the new revenue recognition standard. This guidance is effective for interim and annual reporting periods beginning on or after December 15, 2017. Early adoption is permitted as of one year prior to the current effective date. Entities can choose to apply the guidance using either a full retrospective approach or a modified retrospective approach. Based on the results of the procedures performed through September 30, 2017, which has included a review of a representative sample of our contracts across our reportable segments and revenue streams, we believe that the adoption of this guidance will not have a material impact on our financial statements, particularly as the majority of our net sales relates to the sale of packaging components. We continue to review the impact that the adoption of this guidance will have on our other revenue streams, our financial statement disclosures, as well as our accounting policies, business processes, and internal controls. We expect to apply the guidance using the modified retrospective approach. |
Net Income Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share | Net Income Per Share The following table reconciles the shares used in the calculation of basic net income per share to those used for diluted net income per share:
During the three months ended September 30, 2017 and 2016, there were 0.5 million and 0.1 million shares, respectively, from stock-based compensation plans not included in the computation of diluted net income per share because their impact was antidilutive. There were 0.4 million and 0.1 million antidilutive shares outstanding during the nine months ended September 30, 2017 and 2016, respectively. In December 2016, we announced a share repurchase program authorizing the repurchase of up to 800,000 shares of our common stock from time to time on the open market or in privately-negotiated transactions as permitted under the Securities Exchange Act of 1934 Rule 10b-18. The number of shares to be repurchased and the timing of such transactions will depend on a variety of factors, including market conditions. The program commenced on January 1, 2017 and is expected to be completed by December 31, 2017. There were no shares purchased during the three months ended September 30, 2017. During the nine months ended September 30, 2017, we purchased 325,000 shares of our common stock under the program at a cost of $26.9 million, or an average price of $82.84 per share. |
Inventories |
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Inventories | Inventories Inventories are valued at the lower of cost (on a first-in, first-out basis) and net realizable value. Inventory balances were as follows:
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Affiliated Companies |
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Equity Method Investments and Joint Ventures [Abstract] | |
Affiliated Companies | Affiliated Companies At September 30, 2017 and December 31, 2016, the aggregate carrying amount of investments in equity-method affiliates was $71.2 million and $69.3 million, respectively, and the aggregate carrying amount of cost-method investments, for which fair value was not readily determinable, was $13.4 million at both period-ends. We test our cost-method investments for impairment whenever circumstances indicate that the carrying value of the investments may not be recoverable. Please refer to Note 5, Affiliated Companies, to the consolidated financial statements in our 2016 Annual Report for additional details. |
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Debt | Debt The following table summarizes our long-term debt obligations, net of unamortized debt issuance costs and current maturities. The interest rates shown in parentheses are as of September 30, 2017.
Please refer to Note 8, Debt, to the consolidated financial statements in our 2016 Annual Report for additional details regarding our debt agreements. At September 30, 2017, we had $29.3 million in outstanding long-term borrowings under our $300.0 million multi-currency revolving credit facility (the “Credit Facility”), of which $4.5 million was denominated in Japanese Yen (“Yen”) and $24.8 million was denominated in Euro. These borrowings, together with outstanding letters of credit of $3.0 million, resulted in an available borrowing capacity under the Credit Facility of $267.7 million at September 30, 2017. Please refer to Note 7, Derivative Financial Instruments, for a discussion of the foreign currency hedges associated with this facility. In addition, at September 30, 2017, we had $33.1 million outstanding under our five-year term loan due January 2018, all of which was classified as current. Please refer to Note 7, Derivative Financial Instruments, for a discussion of the interest-rate swap agreement associated with this loan, and please refer to Note 16, Subsequent Event, for additional details regarding this loan. |
Derivative Financial Instruments |
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Derivative Financial Instruments | Derivative Financial Instruments Our ongoing business operations expose us to various risks such as fluctuating interest rates, foreign exchange rates and increasing commodity prices. To manage these market risks, we periodically enter into derivative financial instruments such as interest rate swaps, options and foreign exchange contracts for periods consistent with and for notional amounts equal to or less than the related underlying exposures. We do not purchase or hold any derivative financial instruments for investment or trading purposes. All derivatives are recorded in our condensed consolidated balance sheet at fair value. Interest Rate Risk At September 30, 2017, we had a $33.1 million forward-start interest rate swap outstanding that hedges the variability in cash flows due to changes in the applicable interest rate of our variable-rate five-year term loan. Under this swap, we receive variable interest rate payments based on one-month London Interbank Offered Rate (“LIBOR”) plus a margin in return for making monthly fixed interest payments at 5.41%. We designated this swap as a cash flow hedge. Please refer to Note 16, Subsequent Event, for additional details regarding this forward-start interest rate swap agreement. Foreign Exchange Rate Risk We have entered into forward exchange contracts, designated as fair value hedges, to manage our exposure to fluctuating foreign exchange rates on cross-currency intercompany loans. As of September 30, 2017, the total amount of these forward exchange contracts was €72.5 million and kr83.4 million. As of December 31, 2016, the total amount of these forward exchange contracts was €57.5 million. In addition, we have entered into several foreign currency contracts, designated as cash flow hedges, for periods of up to eighteen months, intended to hedge the currency risk associated with a portion of our forecasted transactions denominated in foreign currencies. As of September 30, 2017, we had outstanding foreign currency contracts to purchase and sell certain pairs of currencies, as follows:
At September 30, 2017, a portion of our debt consisted of borrowings denominated in currencies other than USD. We have designated our €21.0 million ($24.8 million) Euro-denominated borrowings under our Credit Facility as a hedge of our net investment in certain European subsidiaries. A cumulative foreign currency translation loss of $1.0 million pre-tax ($0.6 million after tax) on this debt was recorded within accumulated other comprehensive loss as of September 30, 2017. We have also designated our ¥500.0 million ($4.5 million) Yen-denominated borrowings under our Credit Facility as a hedge of our net investment in Daikyo Seiko, Ltd. (“Daikyo”). At September 30, 2017, there was a cumulative foreign currency translation loss on this Yen-denominated debt of $0.3 million pre-tax ($0.2 million after tax), which was also included within accumulated other comprehensive loss. Commodity Price Risk Many of our proprietary products are made from synthetic elastomers, which are derived from the petroleum refining process. We purchase the majority of our elastomers via long-term supply contracts, some of which contain clauses that provide for surcharges related to fluctuations in crude oil prices. The following economic hedges did not qualify for hedge accounting treatment since they did not meet the highly effective requirement at inception. In November 2016, we purchased a series of call options for a total of 96,525 barrels of crude oil to mitigate our exposure to such oil-based surcharges and protect operating cash flows with regards to a portion of our forecasted elastomer purchases through November 2017. With these contracts, we may benefit from an increase in crude oil prices, as there is no downward exposure other than the $0.2 million premium that we paid to purchase the contracts. During the three months ended September 30, 2017, the loss recorded in cost of goods and services sold related to these call options was less than $0.1 million. During the nine months ended September 30, 2017, the loss recorded in cost of goods and services sold related to these call options was $0.2 million. As of September 30, 2017, we had outstanding contracts to purchase 17,550 barrels of crude oil, at a strike price of $60 per barrel. Effects of Derivative Instruments on Financial Position and Results of Operations Please refer to Note 8, Fair Value Measurements, for the balance sheet location and fair values of our derivative instruments as of September 30, 2017 and December 31, 2016. The following table summarizes the effects of derivative instruments designated as hedges on other comprehensive income (“OCI”) and earnings, net of tax:
For the three and nine months ended September 30, 2017 and 2016, there was no material ineffectiveness related to our hedges. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy classifies the inputs to valuation techniques used to measure fair value into one of three levels:
The following tables present the assets and liabilities recorded at fair value on a recurring basis:
Deferred compensation assets are included within other noncurrent assets and are valued using a market approach based on quoted market prices in an active market. The fair value of our foreign currency contracts, included within other current assets and other current liabilities, is valued using an income approach based on quoted forward foreign exchange rates and spot rates at the reporting date. The fair value of our contingent consideration, included within other current and other long-term liabilities, is discussed further in the section related to Level 3 fair value measurements. The fair value of deferred compensation liabilities is based on quoted prices of the underlying employees’ investment selections and is included within other long-term liabilities. Our interest rate swap, included within other current and other long-term liabilities, is valued based on the terms of the contract and observable market inputs (i.e., LIBOR, Eurodollar synthetic forwards and swap spreads). Please refer to Note 7, Derivative Financial Instruments, for further discussion of our derivatives. Level 3 Fair Value Measurements The fair value of the contingent consideration liability related to the SmartDose® technology platform (the “SmartDose contingent consideration”) was initially determined using a probability-weighted income approach, and is revalued at each reporting date or more frequently if circumstances dictate. Changes in the fair value of this obligation are recorded as income or expense within other (income) expense in our condensed consolidated statements of income. The significant unobservable inputs used in the fair value measurement of the SmartDose contingent consideration are the sales projections, the probability of success factors, and the discount rate. Significant increases or decreases in any of those inputs in isolation would result in a significantly lower or higher fair value measurement. As development and commercialization of the SmartDose technology platform progresses, we may need to update the sales projections, the probability of success factors, and the discount rate used. This could result in a material increase or decrease to the SmartDose contingent consideration. The following table provides a summary of changes in our Level 3 fair value measurements:
Other Financial Instruments We believe that the carrying amounts of our cash and cash equivalents and accounts receivable approximate their fair values due to their near-term maturities. The estimated fair value of long-term debt is based on quoted market prices for debt issuances with similar terms and maturities and is classified as Level 2 within the fair value hierarchy. At September 30, 2017, the estimated fair value of long-term debt was $201.0 million compared to a carrying amount of $196.6 million. At December 31, 2016, the estimated fair value of long-term debt was $228.3 million and the carrying amount was $226.2 million. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The West Pharmaceutical Services, Inc. 2016 Omnibus Incentive Compensation Plan (the “2016 Plan”) provides for the granting of stock options, stock appreciation rights, restricted stock awards and performance awards to employees and non-employee directors. A committee of the Board of Directors determines the terms and conditions of awards to be granted. Vesting requirements vary by award. At September 30, 2017, there were 4,602,225 shares remaining in the 2016 Plan for future grants. During the nine months ended September 30, 2017, we granted 443,936 stock options at a weighted average exercise price of $83.88 per share based on the grant-date fair value of our stock to key employees under the 2016 Plan. The weighted average grant date fair value of options granted was $18.04 per share as determined by the Black-Scholes option valuation model using the following weighted average assumptions: a risk-free interest rate of 2.04%; expected life of 5.9 years based on prior experience; stock volatility of 19.9% based on historical data; and a dividend yield of 0.7%. Stock option expense is recognized over the vesting period, net of forfeitures. During the nine months ended September 30, 2017, we granted 91,803 performance share unit (“PSU”) awards at a weighted average grant-date fair value of $83.97 per share to key employees under the 2016 Plan. Each PSU award entitles the holder to one share of our common stock if the annual growth rate of revenue and return on invested capital targets are achieved over a three-year performance period. Shares earned under PSU awards may vary from 0% to 200% of an employee’s targeted award. The fair value of PSU awards is based on the market price of our stock at the grant date and is recognized as expense over the performance period, adjusted for estimated target outcomes and net of forfeitures. Total stock-based compensation expense for both the three months ended September 30, 2017 and 2016 was $4.6 million. For the nine months ended September 30, 2017 and 2016, stock-based compensation expense was $13.6 million and $14.1 million, respectively. |
Benefit Plans |
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Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Plans | Benefit Plans The components of net periodic benefit cost for the three months ended September 30 were as follows ($ in millions):
The components of net periodic benefit cost for the nine months ended September 30 were as follows ($ in millions):
During the nine months ended September 30, 2017, we contributed $20.0 million to our U.S. qualified pension plan. Effective January 1, 2019, except for interest crediting, benefit accruals under our U.S. qualified and non-qualified defined benefit pension plans will cease. |
Accumulated Other Comprehensive Loss |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The following table presents the changes in the components of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2017:
A summary of the reclassifications out of accumulated other comprehensive loss is presented in the following table ($ in millions):
(a) These components are included in the computation of net periodic benefit cost. Please refer to Note 10, Benefit Plans, for additional details. |
Other Expense |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Expense | Other (Income) Expense Other (income) expense consists of:
Restructuring and Related Charges On February 15, 2016, our Board of Directors approved a restructuring plan designed to repurpose several of our production facilities in support of growing high-value proprietary products and to realign operational and commercial activities to meet the needs of our new market-focused commercial organization. During the three months ended September 30, 2016, we recorded $2.3 million in restructuring and related charges, consisting of $1.4 million for severance charges and $0.9 million for a non-cash asset write-down associated with the discontinued use of certain equipment. During the nine months ended September 30, 2016, we incurred $23.7 million in restructuring and related charges, consisting of $7.8 million for severance charges, $10.0 million for a non-cash asset write-down associated with the discontinued use of a trademark, and $5.9 million for non-cash asset write-downs associated with the discontinued use of a patent and certain equipment. The following table presents activity related to our restructuring obligations:
The balance of the charges related to this plan will be recognized as incurred in 2017. Other Items On February 17, 2016, the Venezuelan government announced a devaluation of the Bolivar, from the previously-prevailing official exchange rate of 6.3 Bolivars to USD to 10.0 Bolivars to USD, and streamlined the previous three-tiered currency exchange mechanism into a dual currency exchange mechanism. As a result, during the nine months ended September 30, 2016, we recorded a $2.7 million charge. During the nine months ended September 30, 2017, as a result of the continued deterioration of conditions in Venezuela as well as our continued reduced access to USD settlement controlled by the Venezuelan government, we recorded a charge of $11.1 million related to the deconsolidation of our Venezuelan subsidiary, following our determination that we no longer met the U.S. GAAP criteria for control of that subsidiary. This charge included the derecognition of the carrying amounts of our Venezuelan subsidiary's assets and liabilities, as well as the write-off of our investment in our Venezuelan subsidiary, related unrealized translation adjustments and the elimination of intercompany accounts. As of April 1, 2017, our consolidated financial statements exclude the results of our Venezuelan subsidiary. We will continue to actively monitor the political and economic developments in Venezuela. In addition, during the three and nine months ended September 30, 2017, we recognized development and licensing income of $9.5 million and $10.3 million, respectively, within Proprietary Products. During the three and nine months ended September 30, 2017, we recorded income of $9.1 million attributable to the reimbursement of certain costs related to a technology that we subsequently licensed to a third party. The license of technology to the third party may result in additional income in the future, contingent on commercialization of the related product. During both the three and nine months ended September 30, 2017 and 2016, we recorded income of $0.4 million and $1.2 million related to a nonrefundable customer payment of $20.0 million received in June 2013 in return for the exclusive use of the SmartDose technology platform within a specific therapeutic area. As of September 30, 2017, there was $13.2 million of unearned income related to this payment, of which $1.5 million was included in other current liabilities and $11.7 million was included in other long-term liabilities. The unearned income is being recognized as income on a straight-line basis over the remaining term of the agreement. The agreement does not include a future minimum purchase commitment from the customer. Contingent consideration costs represent changes in the fair value of the SmartDose contingent consideration. Please refer to Note 8, Fair Value Measurements, for additional details. Other items consist of foreign exchange transaction gains and losses, gains and losses on the sale of fixed assets, and miscellaneous income and charges. |
Income Taxes |
9 Months Ended |
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Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The tax provision for interim periods is determined using the estimated annual effective consolidated tax rate, based on the current estimate of full-year earnings before taxes, adjusted for the impact of discrete quarterly items. The provision for income taxes was $14.0 million and $14.4 million for the three months ended September 30, 2017 and 2016, respectively, and the effective tax rate was 22.3% and 29.3%, respectively. The provision for income taxes was $19.1 million and $38.3 million for the nine months ended September 30, 2017 and 2016, respectively, and the effective tax rate was 11.7% and 28.1%, respectively. The decrease in the effective tax rate for the three and nine months ended September 30, 2017, as compared to the same periods in 2016, reflects the impact of a tax benefit of $4.8 million and $30.3 million for the three and nine months ended September 30, 2017, respectively, associated with our adoption of the guidance issued by the FASB regarding share-based payment transactions. Please refer to Note 2, New Accounting Standards, for further discussion of the new accounting guidance. The decrease in the effective tax rate for the nine months ended September 30, 2017, as compared to the same period in 2016, also reflects the impact of a tax benefit of $3.5 million related to a planned repatriation of approximately $65.0 million of cash held by non-U.S. subsidiaries during 2017. During the three months ended September 30, 2017, we repatriated $55.3 million of cash held by non-U.S. subsidiaries. During the remainder of 2017, we intend to repatriate approximately $10.0 million of additional cash held by non-U.S. subsidiaries. |
Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies From time to time, we are involved in product liability matters and other legal proceedings and claims generally incidental to our normal business activities. We accrue for loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. While the outcome of current proceedings cannot be accurately predicted, we believe their ultimate resolution should not have a material adverse effect on our business, financial condition, results of operations or liquidity. There have been no significant changes to the commitments and contingencies included in our 2016 Annual Report. |
Segment Information |
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Segment Information | Segment Information Our business operations are organized into two reportable segments, Proprietary Products and Contract-Manufactured Products. Our Proprietary Products reportable segment develops commercial, operational, and innovation strategies across our global network, with specific emphasis on product offerings to biotechnology, generics, and pharmaceutical customers. Our Contract-Manufactured Products reportable segment serves as a fully integrated business focused on the design, manufacture, and automated assembly of complex devices, primarily for pharmaceutical, diagnostic, and medical device customers. Segment operating profit excludes general corporate costs, which include executive and director compensation, stock-based compensation, adjustments to annual incentive plan expense for over- or under-attainment of targets, certain pension and other retirement benefit costs, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that we consider not representative of ongoing operations. Such items are referred to as other unallocated items and generally include restructuring and related charges, certain asset impairments and other specifically-identified income or expense items. The following table presents information about our reportable segments, reconciled to consolidated totals:
The intersegment sales elimination, which is required for the presentation of consolidated net sales, represents the elimination of components sold between our segments. Other unallocated items, during the nine months ended September 30, 2017, consisted of a charge of $11.1 million related to the deconsolidation of our Venezuelan subsidiary. Other unallocated items, during the three and nine months ended September 30, 2016, consisted of $2.3 million and $23.7 million, respectively, in restructuring and related charges. In addition, during the nine months ended September 30, 2016, other unallocated items included a charge of $2.7 million related to the devaluation of the Venezuelan Bolivar from the previously-prevailing official exchange rate of 6.3 Bolivars to USD to 10.0 Bolivars to USD. Please refer to Note 12, Other (Income) Expense, for further discussion of these items. |
Subsequent Events (Notes) |
9 Months Ended |
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Sep. 30, 2017 | |
Subsequent Event [Line Items] | |
Subsequent Events [Text Block] | Subsequent Event On October 2, 2017, we paid our $33.1 million five-year term loan due January 2018 and terminated the associated interest-rate swap agreement. There was no material gain or loss on the extinguishment of this loan. |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: The condensed consolidated financial statements included in this report are unaudited and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting and U.S. Securities and Exchange Commission (“SEC”) regulations. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, these financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, cash flows and the change in equity for the periods presented. The condensed consolidated financial statements for the three and nine months ended September 30, 2017 should be read in conjunction with the consolidated financial statements and notes thereto of West Pharmaceutical Services, Inc. and its majority-owned subsidiaries (which may be referred to as “West”, the “Company”, “we”, “us” or “our”) appearing in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”). The results of operations for any interim period are not necessarily indicative of results for the full year. As of April 1, 2017, our consolidated financial statements exclude the results of our Venezuelan subsidiary. Please refer to Note 12, Other (Income) Expense, for further discussion. |
New Accounting Standards | Recently Adopted Standards In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance which removes the second step of the goodwill impairment test. A goodwill impairment charge will now be the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. We adopted this guidance as of January 1, 2017, on a prospective basis. The adoption did not have a material impact on our financial statements. In January 2017, the FASB issued guidance which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We adopted this guidance as of January 1, 2017, on a prospective basis. The adoption did not have a material impact on our financial statements. In October 2016, the FASB issued guidance which requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We adopted this guidance as of January 1, 2017, on a modified retrospective basis. As a result of the adoption, a cumulative-effect adjustment of $4.1 million was recorded within retained earnings in our condensed consolidated balance sheet as of January 1, 2017, for unamortized tax expense previously deferred and previously unrecognized deferred tax assets. In March 2016, the FASB issued guidance that simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We adopted this guidance as of January 1, 2017, on a prospective basis as it relates to the timing or recognition and classification of share-based compensation award-related income tax effects. For the three and nine months ended September 30, 2017, we recorded a tax benefit of $4.8 million and $30.3 million, respectively, within income tax expense in our condensed consolidated statement of income. These tax benefits were recorded within capital in excess of par value in our condensed consolidated balance sheet in the prior-year period. Also per the amended guidance, we classified the $30.3 million of excess tax benefits within net cash provided by operating activities in our condensed consolidated statement of cash flows, rather than net cash used in financing activities, which included the excess tax benefits for the nine months ended September 30, 2016. The amended guidance allows entities to account for award forfeitures as they occur, however, we have elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. We expect to record additional tax benefits throughout 2017. In March 2016, the FASB issued guidance that simplifies the transition to the equity method of accounting. This guidance eliminates the requirement to retroactively adopt the equity method of accounting when there is an increase in the level of ownership interest or degree of influence. We adopted this guidance as of January 1, 2017, on a prospective basis. The adoption did not have a material impact on our financial statements. In July 2015, the FASB issued guidance regarding the subsequent measurement of inventory. This guidance requires inventory measured using any method other than last-in, first-out or the retail inventory method to be measured at the lower of cost and net realizable value. Net realizable value represents estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. We adopted this guidance as of January 1, 2017, on a prospective basis. The adoption did not have a material impact on our financial statements. Standards Issued Not Yet Adopted In August 2017, the FASB issued guidance which expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating our adoption timing and the impact that this guidance will have on our financial statements. In May 2017, the FASB issued guidance which amends the scope of modification accounting for share-based payment arrangements. The guidance focuses on changes to the terms or conditions of share-based payment awards that would require the application of modification accounting and specifies that an entity would not apply modification accounting if its fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements. In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit cost (net benefit cost). The guidance requires the bifurcation of net benefit cost. The service cost component will be presented with other employee compensation costs in operating income (or capitalized in assets) and the other components will be reported separately outside of operations, and will not be eligible for capitalization. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. Upon adoption, we will apply the income statement classification provisions of this guidance retrospectively, and will reclassify net benefit cost components other than service cost from operating income to outside of operations. Net periodic benefit cost for the three and nine months ended September 30, 2017 was $1.4 million and $5.3 million, respectively, of which $2.5 million and $7.8 million, respectively, related to service cost. This guidance has no impact on net income. In November 2016, the FASB issued guidance on the classification and presentation of restricted cash in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. As of September 30, 2017, we had no restricted cash. In August 2016, the FASB issued guidance to reduce the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements. In February 2016, the FASB issued guidance on the accounting for leases. This guidance requires lessees to recognize lease assets and lease liabilities on the balance sheet and to expand disclosures about leasing arrangements, both qualitative and quantitative. In terms of transition, the guidance requires adoption based upon a modified retrospective approach. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. We are currently evaluating the impact that this guidance will have on our financial statements. As of September 30, 2017, future minimum rental payments under non-cancelable operating leases were $77.6 million. In January 2016, the FASB issued guidance that addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We believe that the adoption of this guidance will not have a material impact on our financial statements. In May 2014, the FASB issued guidance on the accounting for revenue from contracts with customers that will supersede most existing revenue recognition guidance, including industry-specific guidance. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the guidance requires enhanced disclosures regarding the nature, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The FASB subsequently issued additional clarifying standards to address issues arising from implementation of the new revenue recognition standard. This guidance is effective for interim and annual reporting periods beginning on or after December 15, 2017. Early adoption is permitted as of one year prior to the current effective date. Entities can choose to apply the guidance using either a full retrospective approach or a modified retrospective approach. Based on the results of the procedures performed through September 30, 2017, which has included a review of a representative sample of our contracts across our reportable segments and revenue streams, we believe that the adoption of this guidance will not have a material impact on our financial statements, particularly as the majority of our net sales relates to the sale of packaging components. We continue to review the impact that the adoption of this guidance will have on our other revenue streams, our financial statement disclosures, as well as our accounting policies, business processes, and internal controls. We expect to apply the guidance using the modified retrospective approach. |
Net Income Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Basic to Diluted Net Income Per Share | The following table reconciles the shares used in the calculation of basic net income per share to those used for diluted net income per share:
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Inventories (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories are valued at the lower of cost (on a first-in, first-out basis) and net realizable value. Inventory balances were as follows:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt Obligations, Net of Current Maturities | The following table summarizes our long-term debt obligations, net of unamortized debt issuance costs and current maturities. The interest rates shown in parentheses are as of September 30, 2017.
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Derivative Financial Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Currency Contracts | As of September 30, 2017, we had outstanding foreign currency contracts to purchase and sell certain pairs of currencies, as follows:
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Effects of Derivative Instruments on Other Comprehensive Income ('OCI') and Earnings | The following table summarizes the effects of derivative instruments designated as hedges on other comprehensive income (“OCI”) and earnings, net of tax:
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets and Liabilities Measured at Fair Value | The following tables present the assets and liabilities recorded at fair value on a recurring basis:
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Summary of Changes in Level 3 Fair Value Measurements | The following table provides a summary of changes in our Level 3 fair value measurements:
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Benefit Plans (Tables) |
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Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Net Periodic Benefit Cost | The components of net periodic benefit cost for the three months ended September 30 were as follows ($ in millions):
The components of net periodic benefit cost for the nine months ended September 30 were as follows ($ in millions):
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Accumulated Other Comprehensive Loss (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Loss | The following table presents the changes in the components of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2017:
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Reclassification out of Accumulated Other Comprehensive Loss | A summary of the reclassifications out of accumulated other comprehensive loss is presented in the following table ($ in millions):
(a) These components are included in the computation of net periodic benefit cost. Please refer to Note 10, Benefit Plans, for additional details. |
Other Expense (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Expense | Other (income) expense consists of:
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Schedule of Restructuring Reserve | The following table presents activity related to our restructuring obligations:
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Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | The following table presents information about our reportable segments, reconciled to consolidated totals:
|
Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Earnings Per Share [Abstract] | |||||
Net income | $ 51.0 | $ 37.6 | $ 150.7 | $ 104.5 | |
Weighted average common shares outstanding (in shares) | 74,200,000 | 73,300,000 | 73,800,000 | 73,000,000 | |
Dilutive effect of stock options, stock appreciation rights and performance share awards, based on the treasury stock method (in shares) | 1,700,000 | 1,700,000 | 2,000,000 | 1,700,000 | |
Weighted average shares assuming dilution (in shares) | 75,900,000 | 75,000,000 | 75,800,000 | 74,700,000 | |
Antidilutive options excluded from computation of diluted net income per share (in shares) | 500,000 | 100,000 | 400,000 | 100,000 | |
Stock repurchase program, shares authorized | 800,000 | ||||
Stock repurchase program, shares purchased | 0 | 325,000 | |||
Stock repurchase program, cost of shares purchased | $ 0.0 | $ 26.9 | |||
Stock repurchase program, average price per share | $ 0.00 | $ 82.84 |
Inventories (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 89.2 | $ 78.0 |
Work in process | 33.7 | 28.9 |
Finished goods | 92.9 | 92.4 |
Total inventories | $ 215.8 | $ 199.3 |
Affiliated Companies (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Schedule of Equity Method Investments [Line Items] | ||
Carrying amount, equity-method investments | $ 71.2 | $ 69.3 |
Carrying amount, cost-method investments | $ 13.4 | $ 13.4 |
Fair Value Measurements (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Assets: | ||
Deferred compensation assets | $ 8.5 | $ 7.4 |
Foreign currency contracts | 1.0 | 0.2 |
Total assets at fair value | 9.5 | 7.6 |
Liabilities: | ||
Contingent consideration | 8.0 | 8.0 |
Deferred compensation liabilities | 9.5 | 8.4 |
Interest rate swap contracts | 0.2 | 1.0 |
Foreign currency contracts | 4.7 | 1.6 |
Total liabilities at fair value | 22.4 | 19.0 |
Level 1 [Member] | ||
Assets: | ||
Deferred compensation assets | 8.5 | 7.4 |
Total assets at fair value | 8.5 | 7.4 |
Liabilities: | ||
Deferred compensation liabilities | 9.5 | 8.4 |
Total liabilities at fair value | 9.5 | 8.4 |
Level 2 [Member] | ||
Assets: | ||
Foreign currency contracts | 1.0 | 0.2 |
Total assets at fair value | 1.0 | 0.2 |
Liabilities: | ||
Interest rate swap contracts | 0.2 | 1.0 |
Foreign currency contracts | 4.7 | 1.6 |
Total liabilities at fair value | 4.9 | 2.6 |
Level 3 [Member] | ||
Liabilities: | ||
Contingent consideration | 8.0 | 8.0 |
Total liabilities at fair value | $ 8.0 | $ 8.0 |
Fair Value Measurements Level 3 (Details) - USD ($) $ in Millions |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Level 3 Fair Value Measurements [Roll Forward] | ||
Balance, beginning of period | $ 8.0 | $ 6.0 |
Increase in fair value recorded in earnings | 0.5 | 2.3 |
Payments | (0.5) | (0.3) |
Balance, end of period | $ 8.0 | $ 8.0 |
Fair Value Measurements Other Financial Instruments (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Other Financial Instruments [Abstract] | ||
Long-term debt, fair value | $ 201.0 | $ 228.3 |
Long-term debt | $ 196.6 | $ 226.2 |
Other Expense (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Other Income and Expenses [Abstract] | |||||
Severance and post-employment benefits | $ 0.0 | $ 1.4 | $ 0.0 | $ 7.8 | |
Asset-related charges | 0.0 | 0.9 | 0.0 | 15.9 | |
Total restructuring and related charges | 0.0 | 2.3 | 0.0 | 23.7 | $ 26.4 |
Venezuela currency devaluation | 0.0 | 0.0 | 0.0 | 2.7 | |
Venezuela deconsolidation | 0.0 | 0.0 | 11.1 | 0.0 | |
Development and licensing income | (9.5) | (0.4) | (10.3) | (1.2) | |
Contingent consideration costs | (0.2) | 0.0 | 0.5 | 1.9 | |
Other items | 0.2 | 0.6 | 1.8 | 2.0 | |
Total other (income) expense | $ (9.5) | $ 2.5 | $ 3.1 | $ 29.1 |
Other Expense Items (Details) $ in Millions |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
Feb. 17, 2016 |
Dec. 31, 2015 |
|
Summary of Investment Holdings [Line Items] | ||||||
Venezuela currency devaluation | $ 0.0 | $ 0.0 | $ 0.0 | $ 2.7 | ||
Venezuela deconsolidation | $ 0.0 | $ 0.0 | $ (11.1) | $ 0.0 | ||
VENEZUELA | ||||||
Summary of Investment Holdings [Line Items] | ||||||
Foreign Currency Exchange Rate, Remeasurement | 10.0 | 6.3 |
Other Expense Restructuring and Related Charges (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Restructuring Cost and Reserve [Line Items] | |||||
Severance charges | $ 0.0 | $ 1.4 | $ 0.0 | $ 7.8 | |
Asset impairment charges, trademark | 10.0 | ||||
Asset impairment charges, patent and equipment | 0.9 | 5.9 | |||
Restructuring and related charges | 2.3 | 23.7 | |||
Restructuring Reserve [Roll Forward] | |||||
Balance, December 31, 2016 | 5.9 | 0.0 | $ 0.0 | ||
Charges | 0.0 | $ 2.3 | 0.0 | 23.7 | 26.4 |
Cash payments | (2.9) | (3.0) | |||
Non-cash asset-write-downs | (17.5) | ||||
Balance, September 30, 2017 | 3.0 | 3.0 | 5.9 | ||
Severance and benefits [Member] | |||||
Restructuring Reserve [Roll Forward] | |||||
Balance, December 31, 2016 | 5.9 | 0.0 | 0.0 | ||
Charges | 8.9 | ||||
Cash payments | (2.9) | (3.0) | |||
Non-cash asset-write-downs | 0.0 | ||||
Balance, September 30, 2017 | 3.0 | 3.0 | 5.9 | ||
Asset-related charges [Member] | |||||
Restructuring Reserve [Roll Forward] | |||||
Balance, December 31, 2016 | 0.0 | 0.0 | 0.0 | ||
Charges | 17.3 | ||||
Cash payments | 0.0 | 0.0 | |||
Non-cash asset-write-downs | (17.3) | ||||
Balance, September 30, 2017 | 0.0 | 0.0 | 0.0 | ||
Other charges [Member] | |||||
Restructuring Reserve [Roll Forward] | |||||
Balance, December 31, 2016 | 0.0 | $ 0.0 | 0.0 | ||
Charges | 0.2 | ||||
Cash payments | 0.0 | 0.0 | |||
Non-cash asset-write-downs | (0.2) | ||||
Balance, September 30, 2017 | $ 0.0 | $ 0.0 | $ 0.0 |
Other Expense Other (Income) Development and Licensing Income (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Jun. 30, 2013 |
|
Development and licensing income [Line Items] | |||||
Development and licensing income | $ 9.5 | $ 0.4 | $ 10.3 | $ 1.2 | |
SmartDose [Member] | |||||
Development and licensing income [Line Items] | |||||
Development and licensing income | 0.4 | $ 0.4 | 1.2 | $ 1.2 | |
Nonrefundable payment from customer | 13.2 | 13.2 | $ 20.0 | ||
Unearned income, current | 1.5 | 1.5 | |||
Unearned income, noncurrent | 11.7 | 11.7 | |||
Other [Member] | |||||
Development and licensing income [Line Items] | |||||
Development and licensing income | $ 9.1 | $ 9.1 |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Tax expense (benefit) | $ 14.0 | $ 14.4 | $ 19.1 | $ 38.3 | ||||
Cash and Cash Equivalents, at Carrying Value | 269.3 | $ 205.9 | 269.3 | $ 205.9 | $ 203.0 | $ 274.6 | ||
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Amount | $ 3.5 | |||||||
Foreign Earnings Repatriated | $ 10.0 | $ 55.3 | $ 65.0 | |||||
Effective tax rate | 22.30% | 29.30% | 11.70% | 28.10% | ||||
Accounting Standards Update 2016-09 [Member] | ||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Tax expense (benefit) | $ (4.8) | $ (30.3) |
Segment Information (Details) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
Sep. 30, 2017
USD ($)
segment
|
Sep. 30, 2016
USD ($)
|
|
Segment Reporting [Abstract] | ||||
Number of reportable segments | segment | 2 | |||
Venezuela deconsolidation | $ 0.0 | $ 0.0 | $ (11.1) | $ 0.0 |
Venezuela currency devaluation | 0.0 | 0.0 | 0.0 | 2.7 |
Restructuring and related charges | 2.3 | 23.7 | ||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Net sales | 398.2 | 376.7 | 1,183.5 | 1,126.8 |
Total operating (loss) profit | 63.9 | 51.3 | 167.9 | 142.5 |
Interest expense | 1.3 | 2.2 | 5.7 | 6.7 |
Interest income | 0.3 | 0.2 | 0.9 | 0.8 |
Income before income taxes | 62.9 | 49.3 | 163.1 | 136.6 |
Proprietary Products [Member] | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Net sales | 308.9 | 298.1 | 930.5 | 899.9 |
Total operating (loss) profit | 67.0 | 57.5 | 188.2 | 185.6 |
Contract-Manufactured Products [Member] | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Net sales | 89.3 | 79.0 | 253.3 | 227.8 |
Total operating (loss) profit | 10.8 | 8.9 | 30.1 | 25.6 |
Intersegment sales elimination [Member] | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Net sales | 0.0 | (0.4) | (0.3) | (0.9) |
Corporate [Member] | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Total operating (loss) profit | (13.9) | (12.8) | (39.3) | (42.3) |
Other unallocated items [Member] | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Total operating (loss) profit | $ 0.0 | $ (2.3) | $ (11.1) | $ (26.4) |
Subsequent Events (Details) - USD ($) $ in Millions |
Oct. 02, 2017 |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|
Subsequent Event Disclosure [Abstract] | |||
Long-term Debt, Gross | $ 33.1 | $ 229.8 | $ 228.6 |
Debt Instrument, Term | 5 years |
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