West Announces First-Quarter 2020 Results
EXTON, Pa., April 23, 2020 /PRNewswire/ -- West Pharmaceutical Services, Inc. (NYSE: WST) today announced its financial results for the first-quarter 2020 and updated full-year 2020 financial guidance.
First-Quarter 2020 Summary (comparisons to prior-year period)
-- Net sales of $491.5 million grew 10.8%; organic sales growth was 12.7%.
-- Reported-diluted EPS of $0.99 increased 36%.
-- Adjusted-diluted EPS of $1.01 increased 36%.
-- The Company is maintaining full-year 2020 net sales guidance and is
updating full-year 2020 adjusted-diluted EPS guidance to a new range of
$3.52 to $3.62, compared to a prior range of $3.45 to $3.55.
"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.
"During these unprecedented times, our priorities are focused on the well-being and safety of our team members as well as ensuring the supply of critical, high-quality components and solutions to our customers," said Eric M. Green, President and Chief Executive Officer. "I am extremely pleased that we delivered a strong performance in the first quarter given the challenging environment that the COVID-19 pandemic has had on our customers, our suppliers and our team members. In particular, we continued to deliver strong sales growth in high-value products, as demand trends from our worldwide customer base were similar to trends we saw last year. Additionally, our teams are partnering with a broad range of customers working to support efforts to develop solutions that address the global COVID-19 pandemic such as diagnostics, anti-viral therapeutics and vaccines."
Mr. Green continued, "I am proud with the way our team across the globe is responding during these challenging times. They exemplify our One West philosophy in the way they are supporting our customers, patients and the local communities where our team members live and work."
Proprietary Products Segment
Net sales grew by 9.7% to $373.5 million. Organic sales growth was 11.8% with currency translation decreasing sales growth by 250 basis points. High-value products (components and devices) represented 63% of segment sales and generated double-digit organic sales growth. The segment saw good demand for Westar(®), Daikyo(®), NovaPure(®) and FluroTec(®) components as well as for devices such as Daikyo Crystal Zenith(®) syringes and cartridges and our self-injection platforms.
The Biologics market unit had strong double-digit organic sales growth. The Generics market unit had high-single digit organic sales growth, and the Pharma market unit had mid-single digit organic sales growth.
Contract-Manufactured Products Segment
Net sales grew by 14.5% to $118.1 million. Organic sales growth was 15.9% with currency translation decreasing sales growth by 140 basis points. Segment performance was led by sales of components for diagnostic devices as well as drug-injection delivery devices.
Financial Highlights
Operating cash flow was $57.1 million, an increase of 20%. Capital expenditures in the quarter were $32.1 million. Free cash flow (operating cash flow minus capital expenditures) was $25.0 million, an increase of 33%.
During the quarter, the Company repurchased 761,500 shares for $115.5 million at an average share price of $151.65 under its share repurchase program.
Our capital and financial resources, including overall liquidity, remain strong. We believe that cash on hand and cash generated from operations, together with availability under our Credit Facility, will be adequate to address our foreseeable liquidity needs based on our current expectations of our business operations, capital expenditures and scheduled payments of debt obligations.
Full-Year 2020 Financial Guidance
-- Full-year 2020 net sales guidance continues to be in a range of $1.95
billion to $1.97 billion.
-- Organic sales growth is expected to be approximately 8%, compared to
a prior guidance range of 7% to 8%.
-- Net sales guidance includes an estimated full-year headwind of $26
million for the full-year 2020 based on current foreign exchange
rates, compared to prior guidance of $15 million.
-- Full-year 2020 adjusted-diluted EPS is expected to be in a range of
$3.52 to $3.62, compared to prior guidance range of $3.45 to $3.55.
-- Full-year adjusted-diluted EPS guidance includes an estimated
headwind of approximately $0.07 based on current foreign currency
exchange rates, compared to prior guidance of approximately $0.04.
-- The revised guidance includes a $0.07 EPS impact from first-quarter
tax benefits from stock-based compensation.
-- 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-quarter
2020 would provide a positive adjustment to our full-year EPS
guidance.
First-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 1865786.
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, April 30, 2020, by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering conference ID 1865786.
Forward-Looking Statements
Certain forward-looking statements appear in this release and include such words as "maintaining," "updating," "ensuring," "remain," "to be," "expected," "includes," "assumes," "provide," "believe," "continues," "will be," 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 Item 1A, entitled "Risk Factors," in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
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
March 31,
2020 2019
---
Net sales $491.5 100% $443.5 100%
Cost of goods and services sold 324.5 66 296.7 67
---
Gross profit 167.0 34 146.8 33
Research and development 10.7 2 9.8 2
Selling, general and administrative expenses 71.8 14 68.6 15
Other income (3.5) (2.3) -
Operating profit 88.0 18 70.7 16
Interest expense, net 1.2 1.4 -
Other nonoperating expense (income) 0.3 (0.6) -
Income before income taxes 86.5 18 69.9 16
Income tax expense 15.0 3 16.1 4
Equity in net income of affiliated companies (2.8) (1.6) -
Net income $74.3 15% $55.4 12%
Net income per share:
Basic $1.01 $0.75
Diluted $0.99 $0.73
Average common shares outstanding 73.9 74.1
Average shares assuming dilution 75.5 75.3
WEST PHARMACEUTICAL SERVICES
REPORTING SEGMENT INFORMATION
(UNAUDITED)
(in millions)
Three Months Ended
March 31,
Net Sales: 2020 2019
---
Proprietary Products $373.5 $340.4
Contract-Manufactured Products 118.1 103.1
Eliminations (0.1)
---
Consolidated Total $491.5 $443.5
===
Gross Profit:
Proprietary Products $150.1 $132.3
Contract-Manufactured Products 16.9 14.5
---
Gross Profit $167.0 $146.8
===
Gross Profit Margin 34.0% 33.1%
Operating Profit (Loss):
Proprietary Products $93.2 $77.0
Contract-Manufactured Products 12.8 10.5
Stock-based compensation expense (5.4) (6.2)
General corporate costs (12.6) (10.0)
---
Adjusted Operating Profit $88.0 $71.3
===
Adjusted Operating Profit Margin 17.9% 16.1%
Other unallocated items - (0.6)
Reported Operating Profit $88.0 $70.7
===
Reported Operating Profit Margin 17.9% 15.9%
WEST PHARMACEUTICAL SERVICES
RECONCILIATION OF NON-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 March 31, 2020
Operating
Income
Net
Diluted
profit tax income EPS
expense
---
Reported (U.S. GAAP) $88.0 $15.0 $74.3 $0.99
Pension Settlement (1) - 0.3 1.1 0.01
Amortization of Acquisition-related Intangible Assets (2) - 1.0 0.01
Adjusted (Non-U.S. GAAP) $88.0 $15.3 $76.4 $1.01
Three months ended March 31, 2019
Operating
Income
Net
Diluted
profit tax income EPS
expense
---
Reported (U.S. GAAP) $70.7 $16.1 $55.4 $0.73
Restructuring and related charges (3) 0.6 0.2 0.4 0.01
Adjusted (Non-U.S. GAAP) $71.3 $16.3 $55.8 $0.74
(1) During the three months ended
March 31, 2020, the Company
recorded a pension settlement
charge of $1.4 million 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 months ended
March 31, 2020, the Company
recorded $1.0 million of
amortization expense associated
with an acquisition of increased
ownership interest in Daikyo.
(3) During the three months ended
March 31, 2019, the Company
recorded $0.6 million in
restructuring and related
charges.
WEST PHARMACEUTICAL SERVICES
RECONCILIATION OF NON-GAAP 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 (4)
Three months ended March 31, 2020
Proprietary
CM
Eliminations
Total
---
Reported net sales (U.S. GAAP) $373.5 $118.1 $(0.1) $491.5
Effect of acquisitions and/or divestitures (1.2) (1.2)
Effect of changes in currency translation rates 8.3 1.4 9.7
Organic net sales (Non-U.S. GAAP) (4) $380.6 $119.5 $(0.1) $500.0
(4) 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-GAAP 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
$3.47 to $3.57 8.1% to 11.2%
Restructuring and related charges 0.04 -
Gain on restructuring-related sales of (0.02) -
assets
Pension settlement 0.04 0.01 -
Amortization of acquisition-related - 0.04
intangible assets
Argentina devaluation 0.01 -
Tax recovery (0.04) -
Adjusted-diluted EPS (Non-U.S. $3.24
$3.52 to $3.62 8.6% to 11.7%
GAAP) (5)
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.
(5) 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 2020, tax benefits
associated with stock-based
compensation increased adjusted-
diluted EPS by $0.07. 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)
Three Months Ended March 31,
2020 2019
Depreciation and amortization $26.0 $25.5
Operating cash flow $57.1 $47.6
Capital expenditures $32.1 $28.8
---
WEST PHARMACEUTICAL SERVICES
FINANCIAL CONDITION
(UNAUDITED)
(in millions)
As of
As of
December 31, 2019
March 31, 2020
---
Cash and cash equivalents $335.3 $439.1
Accounts receivable, net $333.0 $319.3
Inventories $251.0 $235.7
Accounts payable $157.9 $156.8
Debt $256.7 $257.3
Equity $1,490.2 $1,573.2
Working capital $633.1 $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.
View original content to download multimedia:http://www.prnewswire.com/news-releases/west-announces-first-quarter-2020-results-301045824.html
SOURCE West Pharmaceutical Services, Inc.
