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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
----------------
Commission File Number 1-8036
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WEST PHARMACEUTICAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-1210010
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-594-2900
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
-----------------------------------------------------------------
Common Stock, par value New York Stock Exchange
$.25 per share
Securities registered pursuant to Section 12(g) of the Act:
None
----
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
As of March 27, 2000, the Registrant had 14,546,434 shares of its
Common Stock outstanding. The market value of Common Stock held
by non-affiliates of the Registrant as of that date was
$382,753,045.
Exhibit Index appears on pages F-1, F-2, F-3, F-4 and F-5.
DOCUMENTS INCORPORATED BY REFERENCE
------------------------------------
Documents incorporated by reference: 1) portions of the
Registrant's Annual Report to Shareholders for the Company's 1999
fiscal year (the "1999 Annual Report to Shareholders") are
incorporated by reference in Parts I and II; and (2) portions of
the Registrant's definitive Proxy Statement (the "Proxy
Statement") are incorporated by reference in Part III.
2
PART I
Item l. Business
--------
The Company
-----------
West Pharmaceutical Services, Inc. (formerly The West Company,
Incorporated) applies value-added technologies to the process of
bringing new drug therapies and healthcare products to global
markets. West's technologies include the design and manufacture
of packaging components for pharmaceutical, healthcare and
consumer products; research and development of drug delivery
systems; contract manufacturing and packaging services; clinical
services; and contract laboratory services and other services
that support the manufacturing, filling and packaging of
pharmaceutical, healthcare and consumer products. The Company's
activities are organized in three operating segments: 1) the
Device Product Development segment (consisting of four regional
business units serving global markets) designs, manufactures and
sells stoppers, closures, medical device components and
assemblies made from elastomers, metal and plastics; 2) the
Contract Services segment (consisting of four business units
serving mainly the United States and Puerto Rico markets)
provides contract manufacturing and contract packaging services
to the pharmaceutical and personal care industries, contract
laboratory services for testing injectable drug packaging and
clinical research for Phase I, II and III studies as well as post
clinical studies; and 3) the Drug Delivery Research and
Development segment (consisting of two business units) identifies
and develops drug delivery systems for biopharmaceutical and
other drugs to improve their therapeutic performance and/or their
method of administration. As of December 31, 1999, the Company
and its subsidiaries had 4,800 employees.
The Company, a Pennsylvania business corporation, was founded in
1923. The executive offices of the Company are located at 101
Gordon Drive, PO Box 645, Lionville, Pennsylvania 19341-0645,
approximately 35 miles from Philadelphia. The telephone number
at the Company's executive offices is 610-594-2900. As used in
this Item, the term "Company" includes West Pharmaceutical
Services, Inc. and its consolidated subsidiaries, unless the
context otherwise indicates.
3
Device Product Development
Principal Products
--------------------------------------------------------
Pharmaceutical Stoppers
-----------------------
The Company is the world's largest independent manufacturer of
stoppers for sealing drug vials and other pharmaceutical
containers. Several hundred proprietary formulations are molded
from natural rubber and synthetic elastomers into a variety of
stopper sizes, shapes and colors. The stoppers are used in
packaging serums, vaccines, antibiotics, anesthetics, intravenous
solutions and other drugs and solutions.
Most stopper formulations are specially designed to be compatible
with drugs so that the drugs will remain effective and unchanged
during storage. New elastomeric compounds must be tested to show
that they do not leach into the customer's product or affect its
potency, sterility, effectiveness, color or clarity. The
Company's laboratories conduct tests to determine the
compatibility of its stoppers with customers' drugs and, in the
United States, file formulation information with the Food and
Drug Administration in support of customers' new drug
applications.
Stoppers usually are washed, sterilized and subject to other pre-
use processes by the customer or a third-party before they are
fitted on the container. The Company has introduced a value-
added line of stoppers that are pre-washed and ready to be
sterilized, eliminating several steps in customers' incoming
processes. The Company is also marketing a line of pre-
sterilized stoppers that can be introduced directly into
customers' sterile drug-filling operations.
Metal Seals
-----------
The Company also offers a broad line of aluminum seals in various
sizes, shapes and colors. The seals are crimped onto glass or
plastic pharmaceutical containers to hold the stoppers securely
in place. The top of aluminum seals often contains tamper-evident
tabs or plastic covers, which must be removed before the drug can
be withdrawn.
Some aluminum seals are sold with specially formulated rubber or
elastomeric discs pre-fitted inside the seal. These "lined"
seals may be placed directly onto the pharmaceutical container,
thus eliminating the need for a separate stopper.
4
Other Products
---------------
Other products for the pharmaceutical industry include:
* Products used in the packaging of non-injectable drugs
such as rubber dropper bulbs, plastic contraceptive drug
packages and child-resistant and tamper-evident plastic
closures
* Plastic bottles and containers for the pharmaceutical
industry
* Elastomeric and plastic components for empty and pre-
filled disposable syringes such as plungers, hubs and
needle covers
* Blood-sampling system components, including vacuum tube
stoppers and needle valves, and a number of specialized
elastomeric and plastic components for blood-analyzing
systems and other medical devices
* Components for IV Sets
* Disposable infant nursers and individual nurser components
The Company also manufactures a wide range of standard and
custom-designed plastic threaded caps and containers for the
personal-care industry. The caps, produced mainly for health and
beauty aids, come in many different sizes and colors. The Company
also makes closures for food and beverage processors. The
Company focuses its efforts on multiple-piece closures that
require high-speed assembly.
Product Development
------------------------
The Company maintains its own laboratories for testing raw
materials and finished goods to assure conformity to customer
specifications and to safeguard product quality. Laboratory
facilities are also used for development of new products.
Engineering staffs are responsible for product and tooling design
and testing and for the design and construction of processing
equipment. In addition, a corporate product development
department develops new packaging and device concepts.
Approximately 90 professional employees were engaged in these
activities in 1999. Development and engineering expenditures for
the creation and application of new and improved device products
and manufacturing processes were approximately $8.9 million in
1999, $8.9 million in 1998, and $8.8 million in 1997, net of cost
reimbursements by customers.
5
Recent Developments
-------------------
The Company has taken steps to expand its product offerings and
improve competitiveness of its Device Product Development
operating segment.
In 1996 and 1997, the Company implemented a major restructuring
plan announced in 1996. The plan included the closing or
downsizing of six manufacturing facilities, withdrawal from the
machinery business and an approximate 5% reduction in the
workforce. The restructuring was designed to reduce the costs
associated with multiple plant sites and shift certain production
capacity to lower-cost locations. In 1998, a further 1%
reduction in the workforce, made possible by manufacturing and
other operating efficiencies, was announced. (Additional
information pertaining to these activities is incorporated by
reference to the Note "Restructuring Charges" of Notes to
Consolidated Financial Statements of the 1999 Annual Report to
Shareholders.)
In 1998, the Company acquired Betraine Limited, a company located
in England, which manufactures precision injection molded plastic
components for the healthcare and consumer industries. The
acquisition expanded global capabilities in the non-injectable
market. The Company's name was changed to West Pharmaceutical
Services Lewes ("West-Lewes").
In 1999, the Company changed its business plan with respect to
its plastics strategy concerning future market demands and total
capacity requirements. As a result, the Company reversed a
portion of its 1996 restructuring reserve pertaining to its
Puerto Rico facility and wrote off the assets associated with a
proprietary plastic product line that had not gained market
acceptance.
Contract Services
Principal Services
--------------------------------
Contract Packaging and Contract Manufacturing
---------------------------------------------
The Company entered into the pharmaceutical services market in
1995 with its acquisition of Paco Pharmaceutical Services, Inc.
("Paco"). Paco's name was recently changed to West
Pharmaceutical Services Lakewood, Inc. ("West Lakewood").
West Lakewood provides contract manufacturing and packaging of
products for pharmaceutical and consumer-products companies.
With its flexible manufacturing environment and workforce, West
Lakewood has the capability to make and package a variety of
products according to customers' specifications, usually
employing customer-supplied raw materials. Once it's work is
6
complete, West Lakewood delivers the finished product to the
customer for final sale and distribution to the end user.
Customers typically use West Lakewood services on a temporary
basis to supplement their own manufacturing or packaging
capability during a new-product introduction or special
promotion. However, West Lakewood does retain long-term
business in both the manufacturing and packaging areas. West
Lakewood operates facilities in Lakewood, New Jersey and
Canovanas, Puerto Rico.
West Lakewood contract packaging and manufacturing processes and
services are subject to the Good Manufacturing Practice standards
applicable to the pharmaceutical industry as well as to numerous
other federal and state laws and regulations governing the
manufacture, handling and packaging of drugs and other regulated
substances.
West Lakewood manufactures liquids, creams, solids, suspensions,
and powders. Products produced include:
* headache and cold medications
* skin lotions
* deodorants
* toothpaste and mouthwash
* albuterol, a product used for inhalation therapy.
West Lakewood contract packaging services include the design,
assembly and filling of a broad variety of packages, including:
* blister packages (i.e., a plastic film with a foil
backing)
* bottles and tubes
* laminated and other flexible pouches or strip packages
* aluminum and plastic liquid cup containers
* paperboard specialty packages
* innovative tamper-evident and child-resistant packages
Although the type of package depends on the requirements of the
customer, blister packaging or bottles typically are used for
tablets and capsules while aluminum or plastic cups, pouches,
bottles and tubes are used for liquids, creams, ointments and
powders.
8
CLINICAL SERVICES
The Company entered into the clinical services market with its
April 1999 acquisition of the Clinical Services division of
Collaborative Clinical Research, Inc. The Clinical Services Group
operates three business units. These business units, which are
described more fully below, are : a site-management organization
(SMO) that provides assistance for clinical trial studies (the
"SMO Network"); a Phase I-through-IV Clinical Trial research
facility (the "GFI Research Center"); and a research group that
supports companies desiring to transition drugs from prescription
to over-the-counter status (the "Consumer Healthcare Research"
Unit).
The SMO Network assists sponsor companies in conducting the
clinical research necessary to obtain regulatory approval for new
drugs using its network of approximately 270 affiliated sites in
the U.S. and 52 sites in Canada. The SMO Network, focused in six
therapeutic areas, provides clinical research sites and support
services to sponsors conducting Phase II, III and IV clinical
research and managed care studies. The clinical services
consist of the following activities: identifying and recruiting
appropriate sites and investigators for a given clinical research
study, conducting prestudy start-up activities such as preparing
and organizing Investigational Review Board (IRB) documentation
and conducting pre-study site initiation visits. West's SMO
Network also provides assistance in patient recruitment and
enrollment, study progress tracking and study grant management.
Each clinical research site in the SMO Network is affiliated
with West through a written agreement that describes a cooperative
relationship between the Company and the site. The SMO
Network supports its affiliated sites by marketing their
services, credentials and capabilities to pharmaceutical
companies (Sponsors), by conducting quality audits to
assure integrity of research site quality standards, by
conducting clinical research training courses to assist
affiliated sites in enhancing their expertise and by centrally
negotiating study budgets and contracts with Sponsors.
West's Consumer Healthcare Research business unit provides
services primarily aimed at OTC pharmaceutical companies. These
services include consultation on and performance of studies
necessary for FDA approval of the conversion from prescription to
over the counter status. These studies consist of label
comprehension evaluations, consumer actual use studies and
pivotal clinical trials.
West's GFI Research Center performs clinical research and
provides other clinical research services in Phase I through
Phase IV studies at its 80-bed clinic located in Evansville,
Indiana. Phase I research is substantially more specialized and
limited than other phases of the clinical research process
because healthy volunteers or patients must typically be
sequestered for the duration of the study.
9
The Clinical Servoces Division contracts provide a fixed price for
each component or service delivered. The ultimate contract value
depends on such variables as the number of research sites
selected, the number of patients to be enrolled and other
services required by the Sponsor. These contracts range in
duration from several months to several years. As services are
performed over the life of the contract, revenue is earned under
the percentage- o- completion method utilizing units of delivery.
Costs associated with contract revenue are recognized as
incurred. Cash flows vary with each contract, although
generally a portion of the contract fee is paid at the time
the trial begins, with the balance paid as pre-determined
contract milestones are satisfied. Pre-payments received are
recorded as a liability under deferred revenue until work has
been completed and revenue has been recognized. Generally,
Sponsors may terminate a contract with the Company with or
without cause. In the event of termination, the Company is
entitled to payment for all work performed through the date of
termination and for costs associated with termination
of the study.
Contract Laboratory Services
------------------------------
In 1998, the Company established the contract laboratory services
business, which provides testing services to analyze customers'
injectable product packaging. Regulatory agencies require drug
companies to demonstrate that packaging components will not
contaminate the drug. The test data is generated in a format
acceptable for U.S. Food and Drug Administration (FDA)
submissions. The services offered include product/closure
interaction testing, extractables testing, moisture analysis of
closures, particle quantification/analysis, quantification of
closure surface silicone, and other custom services. The
Company's laboratory complies with applicable Good Manufacturing
Practice standards and is FDA registered.
10
Research and Development
Drug Delivery Systems
---------------------------------------------------------
In 1993, the Company began developing drug delivery systems for
biopharmaceuticals and other drugs that are difficult to
administer effectively through traditional injectable or oral
routes. Improving the therapeutic performance of these drugs in
an economical fashion calls for sophisticated delivery solutions.
To advance the Company's efforts in this area, in 1994 the
Company began acquiring interests in DanBioSyst UK Ltd (DBS), a
research and development company located in Nottingham, England.
The purchase was conducted in 10% annual increments in 1995,
1996, 1997, with the remaining 70% acquired in March 1998, making
DBS a wholly-owned subsidiary. In 1999, DBS was re-named West
Pharmaceutical Services Drug Delivery & Clinical Research Center,
Ltd. (West Drug Delivery). West Drug Delivery specializes in
identifying and developing systems for delivery of complex drug
molecules, or to assist in delivering drugs to a specific site in
the body. West Drug Delivery engages in research to develop
these unique systems and then patents this technology. West Drug
Delivery has patents or patent applications covering a range of
delivery platforms including nasal, oral, parenteral, pulmonary,
rectal and vaginal. West Drug Delivery enters into agreements
with biopharmaceutical and other drug companies to apply its
delivery system technology to customers' drug molecules to
achieve the desired result.
A portion of the Company's Lionville-based resources are
dedicated to development of drug delivery systems. In 1999, this
group's work was focused on developing formulations of morphine
and leuprolide using the Company's proprietary chitosan-based
nasal delivery system. The Lionville group is also developing
products based on other West Drug Delivery patented technology.
The current projects relate to nasal delivery of other
established drugs and further development of the Targit delivery
system, a coated starch capsule, designed to deliver medication
to a specific site in the body.
The Company had 59 employees directly engaged in these activities
as of December 31, 1999, and total expenses, net of revenues
received, were $7.7 million in 1999 and $5.3 million in 1998.
Order Backlog
--------------
Device product orders on hand at December 31, 1999, were
approximately $96 million, compared with approximately $90
million at the end of 1998. Orders on hand include those placed
by customers for manufacture over a period of time according to a
customer's schedule or upon confirmation by the customer. Orders
11
are generally considered firm when goods are manufactured or
orders are confirmed. The Company also has contractual
arrangements with a number of its customers, and products covered
by these contracts are included in the Company's backlog only as
orders are received from those customers.
West Lakewood's twelve-month backlog of unfilled customer orders
was approximately $9 million at December 31, 1999 and $18 million
at December 31, 1998. Backlog is defined by West Lakewood as
orders written and included in production schedules during the
next twelve months. Such orders generally may be cancelled by
the customer without penalty.
The Clinical Services division backlog consists of signed
contracts yet to be completed. Contracts included in backlog
are subject to termination or delay at any time and therefore
the backlog is not necessarily a meaningful predictor of
future results. Delayed contracts remain in the Company's
backlog until canceled. As of December 31, 1999, the Clinical
Services division's backlog was $6.2 million.
Raw Materials
--------------
The Company uses three basic raw materials in the manufacture of
its device products: elastomers, aluminum, and plastic. The
Company has been receiving adequate supplies of raw materials to
meet its production needs, and it foresees no significant
availability problems in the near future.
The Company is pursuing a supply chain management strategy, which
involves purchasing from integrated suppliers that control their
own sources of supply. This strategy has reduced the number of
raw materials suppliers used by the Company. In some cases, the
Company will purchase raw materials from a single source to
assure quality and reduce costs. This strategy increases the
risks that the Company's supply lines may be interrupted in the
event of a supplier production problem. These risks are managed
by selecting suppliers with multiple manufacturing sites, rigid
quality control systems, surplus inventory levels and other
methods of maintaining supply in case of interruption in
production.
Patents and Licenses
---------------------
The Company's device products patents and trademarks have been
useful in establishing the Company's market share and in the
growth of the Company's manufactured device product business and
may continue to be of value in the future, especially in view of
the Company's continuing development of its own proprietary
products. Nevertheless, the Company does not consider its
12
current manufactured device product business or its earnings to
be materially dependent upon any single patent or trademark.
Although not material at this time, the Company believes its drug
delivery development capabilities will play an increasingly
important role in the future. The Drug Delivery Systems Division
has a growing portfolio of patented technology, which is critical
to the Company's success because a significant amount of future
income is expected to be derived from licensing this technology
to customers.
Major Customers
-----------------
The Company provides manufactured device components and/or
contract services to major pharmaceutical, biotechnology and
hospital supply/medical device companies, many of which have
several divisions with separate purchasing responsibilities. The
Company also provides contract packaging and contract
manufacturing services for many of the leading manufacturers of
personal care products and clinical research services to full
service contract research organizations. The Company distributes
its products and services primarily through its own sales force
but also uses regional distributors in the United States and in
the Asia/Pacific region. The business units have separate sales
forces but the Company is increasing the sales effort of each
group to sell all of the Company's capabilities.
Becton Dickinson and Company ("BD") accounted for approximately
12% of the Company's 1999 consolidated net sales. The principal
products sold to BD are synthetic rubber, natural rubber, metal
and plastic components used in BD's disposable syringes and blood
sampling and analysis devices. The Company expects to continue as
a major BD supplier.
Excluding BD, the next ten largest customers accounted for
approximately 33% of the Company's consolidated net sales in
1999, but no one of these customers accounted for more than 5% of
1999 consolidated net sales.
Competition
------------
The Company competes with several companies, some of which are
larger than the Company, across its major Device Product
Development product lines. In addition, many companies worldwide
compete with the Company for business related to specific product
lines. However, the Company believes that it supplies a major
portion of the U.S. market requirements for pharmaceutical
elastomer and metal packaging components and has a significant
share of the European market for these components.
Because of the special nature of these products, competition is
based primarily on product design and performance, although total
13
cost is becoming increasingly more important as pharmaceutical
companies continue with aggressive cost control programs across
their entire operations. Competitors often compete on the basis
of price. The Company differentiates itself from its competition
as a "full-service" supplier that is able to provide pre-sale
compatibility studies and other services and sophisticated post-
sale technical support on a global basis.
The Company competes against numerous competitors in the field of
plastic closures for consumer products, many of which are larger
than the Company and command significant market shares. The
Company differentiates itself through its expertise in high-speed
assembly of multiple-piece closure systems.
The U.S. contract packaging and manufacturing service industry is
highly competitive. For packaging services, West Lakewood
competes with three significant companies, two of which are
larger than it. For contract manufacturing services, West
Lakewood competes with four major competitors and several smaller
regional companies; several of these competitors are larger than
it. In addition, most domestic pharmaceutical companies maintain
in-house manufacturing and packaging capabilities and at times
will offer their excess capacity to manufacture or package other
companies' products on a contract basis. However, most large
pharmaceutical and personal healthcare companies have
traditionally made extensive use of contract packagers and
manufacturers during times of peak demand, during the
introduction of a new product and for production of samples and
special product promotions.
The clinical research industry is highly fragmented and comprised
of several large, full-service Contract Research Organizations
(CROs) and many small CROs and limited service providers. The
major competitors in the industry include the research
departments of pharmaceutical companies, CROs and other SMOs.
The SMO Network competes in this market on the basis of ability
to provide rapid access to high quality clinical investigators and
patients through its site network, by providing specialized
know-how to design and conduct OTC clinical studies and by
providing high quality and responsive Phase I services. The
SMO Network may also face competition from other networks of
research sites in the recruitment of potential affiliated sites.
Many companies provide proprietary drug delivery technologies to
the pharmaceutical and biotechnology markets. However, unlike
West, the majority of these companies are focused on a single
route of drug administration, and very few have capabilities
necessary to take drug products through all stages of the
development process and commercial manufacture. The three
largest companies, the market leaders, have multiple-delivery
technologies, but their strong franchises are in oral,
controlled-release delivery systems. West's drug delivery
technologies, none of which is currently in commercial
14
production, are in less competitive segments that do not compete
with the market leaders.
Environmental Regulations
---------------------------------------------------
The Company does not believe that it will have any material
expenditures relating to environmental matters other than those
discussed in the Note "Commitments and Contingencies" of Notes to
Consolidated Financial Statements of the 1999 Annual Report to
Shareholders, incorporated herein by reference.
International
---------------
The Note "Affiliated Companies" and the Note "Segment
Information" of Notes to Consolidated Financial Statements of the
1999 Annual Report to Shareholders are incorporated herein by
reference.
The Company believes that its international business does not
involve a substantially greater business risk than its domestic
business. Although financial crises have been evident at various
times during recent years in the Asia/Pacific region and in our
major markets in South America and have at times resulted in a
decline in demand for the Company's products in these regions,
direct sales to customers in these markets have historically not
been significant. In 1999, such sales represented less than 10%
of consolidated sales.
The Company's financial condition and results are impacted by
fluctuations in exchange-rate markets (See Notes "Summary of
Significant Accounting Policies - Foreign Currency Translation"
and "Other Income (Expense)" of Notes to Consolidated Financial
Statements of the 1999 Annual Report to Shareholders,
incorporated herein by reference). Hedging by the Company of
these exposures is discussed in the Note "Summary of Significant
Accounting Policies -Financial Instruments" and in the Note
"Financial Instruments" of Notes to Consolidated Financial
Statements of the 1999 Annual Report to Shareholders,
incorporated herein by reference.
Item 2. Properties
-----------
In the Device Product Development operating segment, the Company
maintains eight manufacturing plants and two mold and die
production facilities in the United States, one manufacturing
plant in Puerto Rico, and a total of eight manufacturing plants
and two mold and die production facilities in Germany, England,
France, Denmark, Brazil and Singapore.
In the Contract Services operating segment, the Company maintains
one facility in the United States and one facility in Puerto Rico
to provide contract manufacturing and packaging services.
Clinical research services are provided by West Cleveland from
15
leased space in Cleveland, Ohio and Indianapolis, Indiana. West
Evansville leases office and medical space in Evansville,
Indiana. Contract laboratory services are provided from the
Company's Lionville, Pennsylvania, facility.
The Company's executive offices, U.S. research and development
center and pilot plant are located in a leased facility at
Lionville, Pennsylvania, about 35 miles from Philadelphia. The
Company conducts drug delivery research and development in a
leased facility located in Nottingham, England. All other
company facilities are used for manufacturing and distribution,
and facilities in Eschweiler, Germany, are also used for
development activities for device products.
The manufacturing production facilities of the Company are well
maintained, are operating generally on a two- or three-shift
basis and are adequate for the Company's present needs.
The principal facilities in the United States and Puerto Rico are
as follows:
- Approximately 786,000 square feet of owned and 1,212,000
square feet of leased space in Pennsylvania, New Jersey,
Florida, Nebraska, North Carolina, Ohio, Indiana and Puerto
Rico.
The principal international facilities are as follows:
- Approximately 530,000 square feet of owned space and 86,000
square feet of leased space in Germany, England, Denmark and
France.
- Approximately 200,000 square feet of owned space in Brazil.
- Approximately 92,000 square feet of owned space in Singapore.
Of the aforementioned currently owned facilities, approximately
354,000 square feet are subject to mortgages to secure the
Company's real estate mortgage notes. See the Note "Debt" of
Notes to Consolidated Financial Statements of the 1999 Annual
Report to Shareholders, which information is incorporated herein
by reference.
Sales office facilities in separate locations are leased
under short-term arrangements.
The Company also holds for sale former manufacturing facility
space in Puerto Rico - totaling 42,000 square feet.
Item 3. Legal Proceedings.
-----------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 4 (a) Executive Officers of the Registrant
-----------------------------------------
16
The executive officers of the Company at March 30, 2000 were as
follows:
Name Age Business Experience During Past Five
Years
---- --- ----------------------------------------
George R. Bennyhoff1 56 Senior Vice President, Human Resources
and Public Affairs.
Robert F. Doman 50 Division President, Device Product
Development since November 1999. Mr.
Doman previously served as Vice
President Global Accounts Management and
Marketing from May 1999 for the Company.
Prior to joining the Company, Mr. Doman
was Vice President of U.S. Operations
for Bristol Myers-Squibb-Convotec.
Steven A. Ellers1 49 Senior Vice President and Chief
Financial Officer since March 1998;
Group President from August 1997 to
February 1998; Corporate Vice President,
Sales from April 1996 to July 1997;
previously Vice President, Operations.
John R. Gailey III1 45 Vice President, since December 1995,
General Counsel since 1994 and
Secretary.
Stephen M. Heumann1 58 Vice President and Treasurer.
Lawrence P. Higgins1 60 Vice President, Operations since May
1996. Prior to joining the Company,
Mr. Higgins was an international
business consultant.
1 Holds position as corporate officer elected by the Board of
Directors for a one-year term.
17
Name Age Business Experience During Past Five
Years
---- --- --------------------------------------
Herbert F. Hugill 52 Division President, Clinical Services
since November 1999 and General
Manager of the Clinical Services Group
from its acquisition in April 1999.
Previously Mr. Hugill served as Chief
Operating Officer and Director from
December 1997 of Collaborative
Clinical Research, Inc. from which the
Company purchased the Clinical Service
Division. From 1996 to 1997 Mr.
Hugill was President and Chief
Executive Officer and a Director of
Mediscience Technology Corp., a
development stage biomedical
technology company, and prior thereto
President, RP Scherer North America, a
drug delivery systems company.
William G. Little1 57 Chairman of the Board and Chief
Executive Officer, President of the
Company until September 1998.
Donald E. Morel, Jr.1 42 Division President, Drug Delivery
Development since November 1999; Group
President from March 1998 to October
1999; Corporate Vice President,
Scientific Services from May 1995 to
February 1998; and prior thereto Vice
President, Research & Development for
the Company.
Anna Mae Papso1 56 Vice President and Corporate
Controller.
Anthony A. Sinkula 62 Vice President and Chief Scientific
Officer since July 1998 and prior to
joining the Company a consultant to
several major pharmaceutical companies
and the National Cancer Institute.
1 Holds position as corporate officer elected by the Board of
Directors for a one-year term.
18
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
----------------------------------------------------
The Company's common stock is listed on the New York Stock
Exchange and the high and low prices for the stock for each
calendar quarter in 1999 and 1998 were as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
High Low High Low High Low High Low High Low
1999 3611/16 3113/16 393/8 3113/16 407/16 375/8 381/4 307/8 407/16 307/8
1998 321/4 2815/16 33 28 30 25 3511/16 27 3511/16 25
As of December 31, 1999, the Company had 1,794 shareholders of
record. There were also 1,900 holders of shares registered in
nominee names. The Company's common stock paid a quarterly
dividend of $.15 per share in each of the first three quarters of
1998; $.16 per share in the fourth quarter of 1998 and each of
the first three quarters of 1999; and $.17 per share in the
fourth quarter of 1999.
Item 6. Selected Financial Data.
-----------------------
Information with respect to the Company's net sales, income
(loss) from consolidated operations, income (loss) before change
in accounting method, income (loss) before change in accounting
method per share (basic and assuming dilution) and dividends paid
per share is incorporated by reference to the line items
corresponding to those categories under the heading "Ten-Year
Summary - Summary of Operations" of the 1999 Annual Report to
Shareholders. Information with respect to total assets and total
debt is incorporated by reference to the line items corresponding
to those categories under the heading "Ten-Year Summary - Year-
End Financial Position" of the 1999 Annual Report to
Shareholders.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
---------------------------------------------------------
The information called for by this Item is incorporated by
reference to the text appearing in the "Financial Review" section
of the 1999 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
--------------------------------------------------------
The information called for by this Item is incorporated by
reference to the Notes "Financial Instruments" and "Summary of
Significant Accounting Policies" of Notes to Consolidated
Financial Statements of the 1999 Annual Report to Shareholders.
19
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
The information called for by this Item is incorporated by
reference to "Consolidated Financial Statements", "Notes to
Consolidated Financial Statements", and "Quarterly Operating and
Per Share Data (Unaudited)" of the 1999 Annual Report to
Shareholders.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
-------------------------------------------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
Information called for by this Item is incorporated by reference
to "PROPOSAL #1: ELECTION OF DIRECTORS" and "OWNERSHIP OF COMPANY
STOCK" in the Proxy Statement.
Information about executive officers of the Company is set forth
in Item 4 (a) of this report.
Item 11. Executive Compensation.
-----------------------
Information called for by this Item is incorporated by reference
to "INFORMATION ABOUT THE BOARD AND BOARD COMMITTEES -
Compensation of Directors"; "BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION"; and "COMPENSATION OF NAMED EXECUTIVE
OFFICERS" contained in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
---------------------------------------------------
Information called for by this Item is incorporated by reference
to "OWNERSHIP OF COMPANY STOCK" contained in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
None
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
-------------------------------------------------------
(a) 1. The following report and consolidated financial
statements, included in the 1999 Annual Report to
Shareholders, have been incorporated herein by
reference:
20
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Comprehensive
Income for the years ended December 31, 1999,
1998 and 1997
Consolidated Balance Sheets at December 31, 1999 and
1998
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Independent Accountants
(a)2. Supplementary Financial Information
Schedules are omitted because they are either not
applicable, not required or because the information
required is contained in the consolidated financial
statements or notes thereto.
(a)3. See Index to Exhibits on pages F-1, F-2, F-3, F-4 and
F-5 of this Report.
(b) There were no reports on Form 8-K filed by the
Company in the fourth quarter of 1999.
(c) The exhibits are listed in the Index to Exhibits on
pages F-1, F-2, F-3, F-4 and F-5 of this Report.
(d) Financial Statements of affiliates are omitted
because they do not meet the tests of a significant
subsidiary at the 20% level.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, West Pharmaceutical Services,
Inc. has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
WEST PHARMACEUTICAL SERVICES, INC.
(Registrant)
By /s/ Steven A. Ellers
--------------------------------
Steven A. Ellers
Senior Vice President
and Chief Financial Officer
March 30, 2000
--------------------------------
Date
22
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ------ -------
/s/ William G. Little Chairman, Director March 30, 1999
--------------------------------- and Chief Executive
William G. Little Officer
(Principal Executive Officer)
/s/ Tenley E. Albright Director March 30, 1999
-----------------------------------
Tenley E. Albright *
/s/ John W. Conway Director March 30, 1999
___________________________________
John W. Conway*
/s/ George W. Ebright Director March 30, 1999
------------------------------------
George W. Ebright*
Senior Vice President March 30, 1999
------------------------------------ and Chief Financial Officer
Steven A. Ellers
/s/ L. Robert Johnson Director March 30, 1999
------------------------------------
L. Robert Johnson*
23
Signature Title Date
--------- ------ -------
/s/ William H. Longfield Director March 30, 1999
--------------------------------------
William H. Longfield*
/s/ John P. Neafsey Director March 30, 1999
--------------------------------------
John P. Neafsey*
Vice President March 30, 1999
-------------------------------------- and Corporate Controller
Anna Mae Papso
(Principal Accounting Officer)
/s/ Monroe E. Trout Director March 30, 1999
---------------------------------------
Monroe E. Trout*
/s/ Anthony Welters Director March 30, 1999
---------------------------------------
Anthony Welters*
/s/ J. Roffe Wike, II Director March 30, 1999
- ---------------------------------------
J. Roffe Wike, II*
/s/ Geoffrey F. Worden Director March 30, 1999
----------------------------------------
Geoffrey F. Worden*
* By John R. Gailey III pursuant to a power of attorney.
24
INDEX TO EXHIBITS
Exhibit
Number
(3) (a) Amended and Restated Articles of
Incorporation of the Company through January
4, 1999 incorporated by reference to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1998 (File No. 1-
8036).
(3) (b) Bylaws of the Company, as amended through
October 27, 1998, incorporated by reference
to Exhibit (3)(b) to the Company's Form 10-Q
for the quarter ended September 30, 1998
(File No. 1-8036).
(4) (a) Form of stock certificate for common stock
incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 1-8036).
(9) None.
(10) (a) Lease dated as of December 31, 1992 between
Lion Associates, L.P. and the Company,
relating to the lease of the Company's
headquarters in Lionville, Pa., incorporated
by reference to the Company's Annual Report
on Form 10-K for the year ended December 31,
1992 (File No. 1-8036).
(10) (b) First Addendum to Lease dated as of May 22,
1995 between Lion Associates, L.P. and the
Company, incorporated by reference to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1995 (File No. 1-
8036).
(10) (c) Long-Term Incentive Plan, as amended March 2,
1993, incorporated by reference to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1992 (File No. 1-
8036).
(10) (d) Amendments to the Long Term Incentive Plan,
dated April 30, 1996, incorporated herein by
reference to the Company's Form 10Q for the
quarter ended June 30, 1996 (File No. 1-
8036).
F - 1
Exhibit
Number
(10) (f) 1999 Non-Qualified Stock Option Plan for Non-
Employee Directors, effective as of April 27,
1999, incorporated by reference to the
Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999 (File No. 1-
8036).
(10) (g) Form of Director Stock Option Agreement,
incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 (File No. 1-8036)..
(10) (h) Form of amended and restated agreement
between the Company and certain of its
executive officers, incorporated by reference
to the Company's Quarterly Report on Form 10-
Q for the quarter ended March 31, 1998 (File
No.1-8036).
(10) (i) Schedule of agreements with executive
officers.
(10) (j) Supplemental Employees' Retirement Plan,
incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1989 (File No. 1-8036).
(10) (k) Amendment No. 1 to Supplemental Employees'
Retirement Plan, incorporated by reference to
the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 (File No. 1-
8036).
(10) (l) Amendment No. 2 to Supplemental Employees'
Retirement Plan, incorporated by reference to
the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1995 (File
No. 1-8036).
(10) (m) Retirement Plan for Non-Employee Directors
reflecting amendments effective on November
5, 1991, April 28, 1998 and May 27, 1999,
incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 (File No. 1-8036).
F - 2
Exhibit
Number
(10) (n) Employment Agreement dated May 20, 1991
between the Company and William G. Little,
incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-8036).
(10) (o) Non-Qualified Deferred Compensation Plan for
Designated Executive Officers and Amendments
Nos. 1 and 2 thereto, incorporated by
reference to the Company's Annual Report on
Form 10-K for the year ended December 31,
1998 (File No. 1-8036).
(10) (p) Deferred Compensation Plan for Outside
Directors, as amended and restated effective
May 27, 1999, incorporated by reference to
the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999
(File No. 1-8036).
(10) (q) 1999 Stock-Equivalent Compensation Plan for
Non-Employee Directors, incorporated by
reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30,
1999 (File No. 1-8036).
(10) (r) Lease Agreement, dated August 31, 1978,
between Paco Packaging, Inc. and Nineteenth
Lakewood Corp., as amended by Amendment of
Lease, dated November 30, 1978, Second
Amendment of Lease, dated August 6, 1979,
Third Amendment of Lease, dated July 24, 1980
and Fourth Amendment of Lease, dated August
14, 1980, incorporated by reference to the
Exhibits to Paco Pharmaceutical Services,
Inc's Registration Statement on Form S-1,
Registration No. 33-48754, filed with the
Commission.
(10) (s) Fifth Amendment of Lease, dated May 13, 1994,
to the Lease Agreement, dated August 31,
1978, between Paco Packaging, Inc. and
Nineteenth Lakewood Corp., incorporated by
reference to the Exhibits to Paco
Pharmaceutical Services, Inc.'s Annual Report
on Form 10-K for the year ended March 31,
1994 (File number 0-20324).
F - 3
Exhibit
Number
(10) (t) Lease Agreement, dated December 9, 1977,
between Paco Packaging, Inc. and New Oak
Street Corp., as amended by the Amendment to
Lease Agreement, dated August 31, 1978,
Second Amendment of Lease, dated April 8,
1979 and Third Amendment of Lease, dated
November 16, 1983, incorporated by reference
to the Exhibits to Paco Pharmaceutical
Services, Inc.'s Registration Statement on
Form S-1, Registration No. 33-48754, filed
with the Commission.
(10) (u) Lease Agreement, dated April 7, 1986, between
Northlake Realty Co. Inc. and Paco Packaging,
Inc., as amended by Amendment to Lease, dated
July 1, 1986, Second Amendment of Lease,
dated June 15, 1987 between Paco Packaging
and C. P. Lakewood, L. P., Agreement, dated
December 29, 1987, and Lease Modification
Agreement, dated December 13, 1989,
incorporated by reference to the Exhibits to
Paco Pharmaceutical Services, Inc.'s
Registration Statement on Form S-1,
Registration No. 33-48754, filed with the
Commission.
(10) (v) Collective Bargaining Agreement, dated
December 1, 1997, by and between Paco
Pharmaceutical Services, Inc. and Teamster
Local 35 (affiliated with the International
Brotherhood of Teamsters), incorporated by
reference to the Company's Annual Report on
Form 10-K for the year ended December 31,
1997 (File No.1-8036).
(10) (w) 1998 Key Employee Incentive Compensation
Plan, dated March 10, 1998, incorporated by
reference to the Company's Annual Report on
Form 10-K for the year ended December 31,
1997 (File No.1-8036).
(10) (x) Asset Purchase Agreement Among Collaborative
Clinical Research, Inc., GFI Pharmaceutical
Services, Inc., and WCE clinical Evaluations
and West Pharmaceuticals, Inc. dated December
28, 1998, incorporated by reference to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1998 (File No.1-
8036).
(11) Not Applicable.
(12) Not Applicable.
F - 4
Exhibit
Number
(13) Portions of 1999 Annual Report to Shareholders.
(16) Not applicable.
(18) None.
(21) Subsidiaries of the Company.
(22) None.
(23) Consent of Independent Accountants.
(24) Powers of Attorney.
(27) Financial Data Schedules
(99) None.
F - 5