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West Announces Second-Quarter 2020 Results

- Conference Call Scheduled for 9 a.m. EDT Today -

EXTON, Pa., July 23, 2020 /PRNewswire/ -- West Pharmaceutical Services, Inc. (NYSE: WST) today announced its financial results for the second-quarter 2020 and updated full-year 2020 financial guidance.

Second-Quarter 2020 Summary (comparisons to prior-year period)

  • Net sales of $527.2 million grew 12.2%; organic sales growth was 14.3%.
  • Reported-diluted EPS of $1.21 increased 38%.
  • Adjusted-diluted EPS of $1.25 increased 40%.
  • Company is raising full-year 2020 net sales guidance to a new range of between $2.035 billion and $2.055 billion.
  • Company is raising full-year 2020 adjusted-diluted EPS guidance to a new range of between $4.15 and $4.25.

"Adjusted-diluted EPS" and "organic sales growth" are Non-U.S. GAAP measurements.  See discussion under the heading "Non-U.S. GAAP Financial Measures" in this release. 

"Our second quarter results reflect the strength and resiliency of our business in today's environment," said Eric M. Green, President and Chief Executive Officer.  "We continue to see underlying demand growth in our existing business for our high-value products and in high adoption rates from customers who are developing therapeutics and vaccines to address the COVID-19 pandemic."   

Mr. Green continued, "The outlook for the balance of 2020 remains robust; and with our One West philosophy, broad range of innovative solutions and the ability to flex our global operating network, we are well positioned.  I am extremely proud of our colleagues' response to the challenging landscape and the dedicated focus on delivering high-quality components and solutions to our customers." 

Proprietary Products Segment
Net sales grew by 10.9% to $399.5 million. Organic sales growth was 13.3%, with currency translation decreasing sales growth by 240 basis points.  High-value products (HVP) represented 65% of segment sales and generated double-digit organic sales growth.

Our Biologics market unit had double-digit organic sales growth, led by customer purchases of film-coated components (Flurotec® and Daikyo®), self-injection platforms, Westar® and Crystal Zenith® components.  Our Generics market unit posted double-digit organic sales growth, and our Pharma market unit grew organic sales by low-single digits.  Both Generics and Pharma market units were led by sales of film-coated and Westar components.

Contract-Manufactured Products Segment
Net sales grew by 16.8% to $127.8 million.  Organic sales growth was 17.8% with currency translation decreasing sales growth by 100 basis points.  Segment performance was led by strong sales of healthcare-related injection and diagnostic devices.

Financial Highlights (first six months of 2020)
Operating cash flow was $205.2 million, an increase of 34%.  Capital expenditures were $69.2 million.  Free cash flow (operating cash flow minus capital expenditures) was $136.0 million, an increase of 42%.

Full-Year 2020 Financial Guidance 

    • Full-year 2020 net sales guidance is expected to be in a range of between $2.035 billion and $2.055 billion, compared to a prior range of between $1.95 billion and $1.97 billion.
    • Organic sales growth is expected to be approximately 12%, compared to a prior guidance range of 8%.
    • Net sales guidance includes an estimated full-year headwind of $26 million for the full-year 2020 based on current foreign exchange rates, unchanged from prior guidance.
  • Full-year 2020 adjusted-diluted EPS is expected to be in a range of between $4.15 and $4.25, compared to a prior range of between $3.52 and $3.62.
    • Full-year adjusted-diluted EPS guidance includes an estimated headwind of approximately $0.07 based on current foreign currency exchange rates, unchanged from prior guidance.
    • The revised guidance includes a $0.16 EPS impact from tax benefits from stock-based compensation in the first six months of 2020.
    • For the remainder of the year, our EPS guidance range assumes a tax rate of 24% and does not include potential tax benefits from stock-based compensation.  Any tax benefits associated with stock-based compensation beyond those recorded in the first six months of 2020 would provide a positive adjustment to our full-year EPS guidance.

Second-Quarter 2020 Conference Call
The Company will host a conference call to discuss the results and business expectations at 9:00 a.m. Eastern Time today.  To participate on the call please dial 877-930-8295 (U.S.) or 253-336-8738 (International). The conference ID is 7789173.

A live broadcast of the conference call will be available at the Company's website, www.westpharma.com, in the "Investors" section.  Management will refer to a slide presentation during the call, which will be made available on the day of the call.  To view the presentation, select "Presentations" in the "Investors" section of the Company's website.

An online archive of the broadcast will be available at the website three hours after the live call and will be available through Thursday, July 30, 2020, by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering conference ID 7789173.

Forward-Looking Statements
Certain forward-looking statements appear in this release and include such words as "raising," "continue," "see,"  "remains," "are," "expected," "to be," "includes," "estimated," "assumes," "would provide," and other similar terminology.  These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this release.  There is no certainty that actual results will be achieved in-line with current expectations.  These forward-looking statements involve a number of risks and uncertainties.  The following are some of the factors that could cause our actual results to differ materially from those expressed in or underlying our forward-looking statements: the duration and severity of the global COVID-19 pandemic, including prevailing economic conditions and general uncertainties relating thereto that may be unknown and unforeseeable; customers' changing inventory requirements and manufacturing plans and customer decisions to move forward with our new products and product categories, including any re-prioritization of product needs due to COVID-19; other potential impacts from COVID-19, including interruptions or weaknesses in our supply chain, illness in our workforce and access to transport for our products; average profitability, or mix, of the products we sell; dependence on third-party suppliers and partners; increased raw material costs; fluctuations in currency exchange; and the ability to meet development milestones with key customers.  This list of important factors is not all inclusive. For a description of certain additional factors that could cause the Company's future results to differ from those expressed in any such forward-looking statements, see Part I Item 1A and Part II Item 1A, entitled "Risk Factors," in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the period ended March 31, 2020, respectively.

Except as required by law or regulation, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-U.S. GAAP Financial Measures
For the purpose of aiding the comparison of our year-over-year results, we may refer to net sales and other financial results excluding the effects of changes in foreign currency exchange rates.  Organic net sales exclude the impact from acquisitions and/or divestitures and translate the current-period reported sales of subsidiaries whose functional currency is other than the U.S. Dollar at the applicable foreign exchange rates in effect during the comparable prior-year period.  We may also refer to financial results excluding the effects of unallocated items.  The re-measured results excluding effects from currency translation and excluding the effects of unallocated items are not in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") and should not be used as a substitute for the comparable U.S. GAAP financial measures.  The non-U.S. GAAP financial measures are incorporated into our discussion and analysis as management uses them in evaluating our results of operations and believes that this information provides users a valuable insight into our overall performance and financial position.  A reconciliation of these adjusted Non-U.S. GAAP measures to the comparable U.S. GAAP financial measures is included in the accompanying tables.

 

WEST PHARMACEUTICAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in millions, except per share data)




Three Months Ended

June 30,

Six Months Ended
June 30,


2020

2019

2020

2019

Net sales

$527.2

100%

$469.7

100%

$1,018.7

100%

$913.2

100%

Cost of goods and services sold

332.1

63

311.8

66

656.6

64

608.5

67

Gross profit

195.1

37

157.9

34

362.1

36

304.7

33

Research and development

10.8

2

9.6

2

21.5

2

19.4

2

Selling, general and administrative expenses

77.7

15

70.3

15

149.5

15

138.9

15

Other expense (income), net

3.0

-

(2.5)

-

(0.5)

-

(4.8)

(1)

Operating profit

103.6

20

80.5

17

191.6

19

151.2

17

Interest expense, net

1.8

1

1.4

-

3.0

-

2.8

-

Other nonoperating (income) expense

(0.2)

-

(0.5)

-

0.1

-

(1.1)

-

Income before income taxes

102.0

19

79.6

17

188.5

19

149.5

17

Income tax expense

16.0

3

15.5

3

31.0

3

31.6

4

Equity in net income of affiliated companies

(5.2)

(1)

(2.0)

-

(8.0)

(1)

(3.6)

-

Net income

$91.2

17%

$66.1

14%

$165.5

16%

$121.5

13%










Net income per share:









Basic

$1.24


$0.90


$2.24


$1.64


Diluted

$1.21


$0.88


$2.19


$1.61











Average common shares outstanding

73.8


73.7


73.8


73.9


Average shares assuming dilution

75.5


75.1


75.5


75.3


 

WEST PHARMACEUTICAL SERVICES

REPORTING SEGMENT INFORMATION

(UNAUDITED)

 (in millions)




Three Months Ended

Six Months Ended


June 30,

June 30,

Net Sales:

2020

2019

2020

2019

Proprietary Products

$399.5

$360.3

$773.0

$700.7

Contract-Manufactured Products

127.8

109.4

245.9

212.5

   Eliminations

(0.1)

-

(0.2)

-

Consolidated Total

$527.2

$469.7

$1,018.7

$913.2






Gross Profit:





Proprietary Products

$170.8

$142.2

$320.9

$274.5

Contract-Manufactured Products

24.3

15.7

41.2

30.2

Gross Profit

$195.1

$157.9

$362.1

$304.7

Gross Profit Margin

37.0%

33.6%

35.5%

33.4%






Operating Profit (Loss):





Proprietary Products

$112.2

$88.8

$205.4

$165.8

Contract-Manufactured Products

20.5

11.4

33.3

21.9

Stock-based compensation expense

(12.3)

(7.2)

(17.7)

(13.4)

General corporate costs

(14.4)

(11.1)

(27.0)

(21.1)

Adjusted Operating Profit

$106.0

$81.9

$194.0

$153.2

 Adjusted Operating Profit Margin

20.1%

17.4%

19.0%

16.8%

Other unallocated items

(2.4)

(1.4)

(2.4)

(2.0)

Reported Operating Profit

$103.6

$80.5

$191.6

$151.2

 Reported Operating Profit Margin

 

19.7%

17.1%

18.8%

16.6%

 

WEST PHARMACEUTICAL SERVICES

RECONCILIATION OF NON-U.S. GAAP MEASURES (UNAUDITED)

Please refer to "Non-U.S. GAAP Financial Measures" for more information

(in millions, except per share data)


Reconciliation of Reported and Adjusted Operating Profit, Net Income and Diluted EPS


Three months ended June 30, 2020

Operating
profit

Income
tax
expense

Net
income

Diluted
EPS

Reported (U.S. GAAP)

$103.6

$16.0

$91.2

$1.21

Pension Settlement (1)

-

0.2

0.7

0.01

Severance related costs (2)

2.2

0.6

1.6

0.02

Amortization of Acquisition-related Intangible Assets (3)

0.2

-

1.1

0.01

Adjusted (Non-U.S. GAAP)

$106.0

$16.8

$94.6

$1.25


Six months ended June 30, 2020

Operating
profit

Income
tax
expense

Net
income

Diluted
EPS

Reported (U.S. GAAP)

$191.6

$31.0

$165.5

$2.19

Pension Settlement (1)

-

0.5

1.8

0.02

Severance related costs (2)

2.2

0.6

1.6

0.02

Amortization of Acquisition-related Intangible Assets (3)

0.2

-

2.1

0.03

Adjusted (Non-U.S. GAAP)

$194.0

$32.1

$171.0

$2.26


Three months ended June 30, 2019

Operating
profit

Income
tax
expense

Net
income

Diluted
EPS

Reported (U.S. GAAP)

$80.5

$15.5

$66.1

$0.88

Restructuring and related charges (4)

1.4

0.3

1.1

0.01

Adjusted (Non-U.S. GAAP)

$81.9

$15.8

$67.2

$0.89


Six months ended June 30, 2019

Operating
profit

Income
tax
expense

Net
income

Diluted
EPS

Reported (U.S. GAAP)

$151.2

$31.6

$121.5

$1.61

Restructuring and related charges (4)

2.0

0.5

1.5

0.02

Adjusted (Non-U.S. GAAP)

$153.2

$32.1

$123.0

$1.63



(1)      

During the three and six months ended June 30, 2020, the Company recorded a pension settlement charge of $0.9 million and $2.3 million, respectively, within other nonoperating expense (income), as it determined that normal-course lump-sum payments for our U.S. qualified defined benefit pension plan exceeded the threshold for settlement accounting.



(2)      

During the three and six months ended June 30, 2020, the Company recorded $2.2 million of severance related costs.



(3)      

During the three and six months ended June 30, 2020, the Company recorded $0.2 million of amortization expense within operating profit associated with an acquisition of an intangible asset during the second quarter of 2020. During the three and six months ended June 30, 2020 the company recorded $1.0 million and $2.0 million, respectively, of amortization expense in association with an acquisition of increased ownership interest in Daikyo. 



(4)      

During the three and six months ended June 30, 2019, the Company recorded $1.4 million and $2.0 million, respectively, in restructuring and related charges.


 

WEST PHARMACEUTICAL SERVICES

RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED)

Please refer to "Non-U.S. GAAP Financial Measures" for more information

(in millions, except per share data)


Reconciliation of Net Sales to Organic Net Sales (5)


Three months ended June 30, 2020

Proprietary

CM

Eliminations

Total

Reported net sales (U.S. GAAP)

$399.5

$127.8

(0.1)

$527.2

Effect of acquisitions and/or divestitures

-

-

-

-

Effect of changes in currency translation rates

8.6

1.0

-

9.6

Organic net sales (Non-U.S. GAAP) (5)

$408.1

$128.8

(0.1)

$536.8


Six months ended June 30, 2020

Proprietary

CM

Eliminations

Total

Reported net sales (U.S. GAAP)

$773.0

$245.9

(0.2)

$1,018.7

Effect of acquisitions and/or divestitures

(1.2)

-

-

(1.2)

Effect of changes in currency translation rates

17.0

2.4

-

19.4

Organic net sales (Non-U.S. GAAP) (5)

$788.8

$248.3

(0.2)

$1,036.9



(5)      

Organic net sales exclude the impact from acquisitions and/or divestitures and translate the current-period reported sales of subsidiaries whose functional currency is other than the U.S. Dollar at the applicable foreign exchange rates in effect during the comparable prior-year period.

 

WEST PHARMACEUTICAL SERVICES

RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED)

Please refer to "Non-U.S. GAAP Financial Measures" for more information

(in millions, except per share data)


Reconciliation of Reported-Diluted EPS Guidance to Adjusted-Diluted EPS Guidance



2019
Actual

2020 Guidance

% Change

Reported-diluted EPS (U.S. GAAP)

$3.21

$4.06 to $4.16

26.5% to 29.6%

Restructuring and related charges

0.04

-


Gain on restructuring-related sales of assets

(0.02)

-


Pension settlement

0.04

0.02


Amortization of acquisition-related intangible assets

-

0.05


Argentina devaluation

0.01

-


Tax recovery

(0.04)

-


Severance related costs

-

0.02


Adjusted-diluted EPS (Non-U.S. GAAP) (6)

$3.24

$4.15 to $4.25

28.1% to 31.2%


Notes:



See "Full-Year 2020 Financial Guidance" and "Non-U.S. GAAP Financial Measures" in today's press release for additional information regarding adjusted-diluted EPS.



(6)    

In 2019, tax benefits associated with stock-based compensation increased adjusted-diluted EPS by $0.14.  We have opted not to forecast 2020 tax benefits from stock-based compensation in upcoming quarters, as they are out of the Company's control.  Instead, we recognize the benefits as they occur.  In the First-Quarter and Second-Quarter 2020, tax benefits associated with stock-based compensation increased adjusted-diluted EPS by $0.07 and $0.09, respectively.  Any future tax benefits associated with stock-based compensation that we receive in 2020 would provide a positive adjustment to our full-year EPS guidance.

 

WEST PHARMACEUTICAL SERVICES

CASH FLOW ITEMS

(UNAUDITED)

 (in millions)



Six Months Ended June 30,


2020

2019

Depreciation and amortization

$52.2

$51.8

Operating cash flow

$205.2

$152.7

Capital expenditures

$69.2

$57.1



WEST PHARMACEUTICAL SERVICES

FINANCIAL CONDITION

(UNAUDITED)

(in millions)



As of
June 30, 2020

As of
December 31, 2019

Cash and cash equivalents

$445.9

$439.1

Accounts receivable, net

$340.6

$319.3

Inventories

$274.8

$235.7

Accounts payable

$162.3

$156.8

Debt

$256.2

$257.3

Equity

$1,606.3

$1,573.2

Working capital

$735.4

$717.1

 

Trademark Notices

Trademarks and registered trademarks are the property of West Pharmaceutical Services, Inc., in the United States and other jurisdictions, unless noted otherwise.

Daikyo®, Daikyo Crystal Zenith® and Daikyo CZ® are registered trademarks of Daikyo Seiko, Ltd.  Daikyo Crystal Zenith technologies are licensed from Daikyo Seiko, Ltd.

 

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SOURCE West Pharmaceutical Services, Inc.

Investor Contact: Quintin Lai, Vice President, Investor Relations, (610) 594-3318, Quintin.Lai@westpharma.com; Media Contact: Michele Pelkowski, Sr. Director, Global Communications, (610) 594-3054, Michele.Pelkowski@westpharma.com