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, 2003
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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 Identification Number)
incorporation or organization)
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
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Common Stock, par value $.25 per share New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None.
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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
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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. [X ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No
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The aggregate market value of the Registrant's common equity held by
non-affiliates as of June 30, 2003 was approximately $355,117,000.
As of February 24 2004, there were 14,740,214 shares of the Registrant's common
stock outstanding.
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 2003 fiscal year (the "2003 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.
PART 1
Item 1. Business.
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Introduction
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West Pharmaceutical Services, Inc. (the "Company") provides closure systems and
components, primarily for use with parenterally administered drugs, and conducts
research and development of proprietary drug formulation and delivery technology
for nasal and targeted oral delivery of drugs. The Company also provides
clinical research and laboratory services. The Company is organized into two
reportable segments:
1) The Pharmaceutical Systems reporting segment consists of three
operating segments, the Americas, Europe/Asia and Devices. The
Pharmaceutical Systems reporting segment designs, manufactures and
sells stoppers, closures, medical device components and assemblies
made from elastomers, metals and plastics and provides contract
laboratory services for testing drug packaging.
2) The Drug Delivery Systems reporting segment identifies and develops
products using the Company's proprietary drug delivery technologies to
improve the pharmaceutical and biopharmaceutical drug's therapeutic
performance and/or their method of administration. This segment also
includes a clinical services organization, which conducts Phase I and
II clinical trials, with capabilities available to support later
phases of the drug development process.
Financial information about the Company's segments and geographic areas can be
found in Note 8 "Segment Information" of the Notes to Consolidated Financial
Statements included in the 2003 Annual Report to Shareholders, incorporated
herein by reference.
As of December 31, 2003, the Company and its subsidiaries had 4,365 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.
The Company makes available its periodic and current reports, and amendments to
those reports, free of charge on its website, www.westpharma.com, as soon as
reasonably practicable after such material is electronically filed with, or
furnished to, the Securities and Exchange Commission.
Pharmaceutical Systems Segment
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Pharmaceutical Closures and Components
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The Company is one of the world's largest manufacturers of rubber and
elastomeric closures and components for sealing injectable drug vials, prefilled
syringes and other pharmaceutical containers. This ranking is supported by
primary market research and the Company's own market resources. The Company
offers several hundred proprietary natural rubber and synthetic elastomer
formulations, which are molded into closures and components in a variety of
sizes, shapes and colors. The closures and components are used for containers
holding serums, vaccines, antibiotics, anesthetics, intravenous solutions and
other drugs and solutions. They are designed and manufactured to assure the
integrity of these solutions throughout the product's approved shelf life.
Many elastomer component formulations are specially designed to be compatible
with a given drug formulation so that the drug will remain safe and effective
during storage. New elastomeric components must be tested with each drug
solution to show that ingredients do not leach into the customer's product or
adversely affect the drug's safety and effectiveness.
Rubber closures and components are usually washed, sterilized and subjected to
other pre-use processes by the customer or a third party before they are fitted
on the filled container. The Company has introduced a value-added line of
closures and components that are pre-washed, packaged and ready to be
sterilized, eliminating several steps in customers' incoming processes. The
Company is also developing a line of pre-sterilized closures and components that
can be introduced directly into customers' sterile drug-filling operations.
A growing portion of the Company's closure and components business involves
elastomeric and plastic components for empty and pre-filled disposable syringes
such as plungers, tip caps and needle covers. The Company also offers
blood-collection 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.
Metal Seals
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The Company offers a broad line of aluminum seals which are crimped onto glass
or plastic pharmaceutical vials and containers to hold the rubber stoppers
securely in place. The top of the aluminum seals often contain tamper-evident
tabs or Flip-Off (R) plastic covers, which must be removed before the drug can
be withdrawn. The seals and Flip-Off covers are sold in a variety of sizes,
shapes and colors to enable customers to differentiate and distinguish their
drug solutions. The Company has introduced an improved version of its Flip-Off
covers that helps the customer protect against counterfeiting of injectable drug
products and maintains better control and integrity of in-process filled vials
prior to final labeling.
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. In recent years, the Company has expanded capacity and upgraded
production processes for metal seal manufacturing, clearly bringing the
facilities to state-of-the-art capability.
Device Group
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In 2003, the Company formed the Device Group, an operating segment within the
Pharmaceutical Systems reporting segment, to strengthen its global strategic
approach to market opportunities outside of the traditional injectable drug
delivery systems business. With design, tooling and manufacturing centers in
North America and Europe, the Device Group applies the Company's expertise in
product design, precision injection molding and assembly for manufacturing
sophisticated delivery devices and dispensing systems, with a focus on
multiple-piece closures that require high-speed assembly. This group's product
portfolio includes plastic contraceptive drug packages, child-resistant and
tamper-evident plastic closures; plastic systems used for lyophilized drug
reconstitution and delivery, which are molded and fabricated in a clean room
environment; plastic containers, bottles and closures for the consumer, medical
device and diagnostic markets; and closures for food and beverage processors.
Analytical Laboratory Services
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The Company's laboratories conduct tests to determine the compatibility of its
rubber components with customers' drugs and, in the United States, file
formulation and process information with the Food and Drug Administration
("FDA"), which is used in support of customers' drug applications. The
analytical laboratories provide specialized testing for drug delivery systems
and container closure components for customers on a contract basis.
Product Development
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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 is 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. In 2003, 56 professional employees were engaged in these activities.
Development and engineering expenditures for the creation and application of new
and improved device products and manufacturing processes were $6.4 million in
2003, $5.4 million in 2002 and $4.8 million in 2001.
Drug Delivery Systems Segment
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Drug Delivery Business Unit
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The drug delivery business unit engages in both independent and client-funded
research to develop products using drug delivery technologies, patenting these
where possible, and, subject to any rights granted or ceded in connection with
client funding, retains the rights to exploit the patented technology. The
Company has patents or patent applications covering a range of delivery
technologies for various routes of administration, including nasal, oral and
parenteral, and products that incorporate these technologies. It seeks to
license internally developed products to pharmaceutical and biotechnology
companies, as well as work with these companies to enhance their drug products
through the application of the Company's technologies. The Company will also
develop generic versions of drug products and then seek development and
marketing partners or licensees for the resulting products. The Company also
maintains laboratory capabilities that support client and internal development
projects. Research and development expenditures for the drug delivery business
unit were $12.3 million in 2003, $11.0 million in 2002 and $8.2 million in 2001.
The drug delivery business unit is focusing the majority of its efforts on
developing products using its two key nasal delivery technologies. The first is
ChiSys[trademark], a proprietary chitosan-based technology. Chitosan, a highly
purified polysaccharide, acts as a bioadhesive excipient that increases the
residence time of drugs on mucosal surfaces and may improve bioavailability.
ChiSys can be formulated as a liquid or powder. The second nasal technology is
based on proprietary pectin formulations that form gels in the nasal cavity.
Pectin, a linear polysaccharide found in fruits and vegetables, is widely used
in food and nutritional products. These pectin formulations allow the Company to
attenuate the absorption profile of certain drugs in order to reduce peak
concentrations and extend delivery times.
The Company is also developing orally delivered products using its
TARGIT[trademark] system, a proprietary technology for drug release within the
lower gastrointestinal tract. Advantages of targeted colonic delivery are its
localized disease treatment for conditions such as ulcerative colitis and
Crohn's disease (inflammatory bowel disease) and its ability to deliver
molecules sensitive to low pH or enzyme action.
The TARGIT[trademark] technology is based on the application of a combination of
enteric polymer coatings onto starch capsules. The choice and thickness of the
coating determines the site of release, as targeting is based on both pH and
time. The capsule can accommodate relatively large doses and can be filled with
a wide range of formulations - powders, granules, tablets, mini-tablets, coated
pellets, semisolids, or high-temperature liquid melts. The TARGIT[trademark]
technology can be combined with several formulation approaches such as
absorption enhancement or controlled release to provide sustained release
characteristics.
As an extension of the Company's drug delivery and formulation expertise, the
drug delivery business unit has been developing a generic version of a
commercially available nasal product. The Company is in late-stage discussions
with a potential licensing partner for the exclusive rights to market, sell and
distribute the product when approved by the FDA.
The following chart identifies products that incorporate the ChiSys, pectin and
TARGIT technologies, the products' development stage and licensing status:
PRODUCT INDICATION CLINICAL STAGE STATUS
Nasal Morphine Cancer pain Phase II Licensed
Nasal Fentanyl Cancer pain Phase I Available for licensing
Nasal Leuprolide Endometriosis Phase I Available for licensing
Nasal PTH Osteoporosis Phase I Available for licensing
Nasal Diphtheria
& Tetanus Vaccination Phase I Licensed
Nasal Pertussis Vaccination Preclinical Available for licensing
Nasal Influenza Vaccination Phase I Available for licensing
Nasal Ketoprofen Pain Preclinical Available for licensing
Nasal Zolpidem Insomnia Preclinical Available for licensing
Nasal Granisitron Nausea Preclinical Available for licensing
Nasal Morphine -6 -
Glucuronide Pain Preclinical Available for licensing
Nasal NSAID Pain Preclinical Available for licensing
Oral Budesonide
(TARGIT[trademark]) Ulcerative Colitis Phase I Available for licensing
Clinical Services
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In April 1999, the Company acquired the Clinical Services division (GFI) of
Collaborative Clinical Research, Inc., an 80-bed clinical trials research
facility in Evansville, Indiana. GFI operates as a business unit within the Drug
Delivery Systems reporting segment. GFI employs a staff of 88 people, including
nurses, medical technicians and other support staff.
GFI performs human clinical trials for pharmaceutical and biologic, medical
device, and consumer health products, which are conducted on behalf of sponsor
applicants seeking marketing approval or post-marketing support for their
products. In the pharmaceutical and biologic arena, GFI conducts primarily Phase
I and II clinical trials, with capabilities available to support later phases of
the drug development process. In addition to performing clinical trials, limited
contract research services such as protocol writing, case report form design and
various aspects of early phase project management are at times provided to
clients.
In conducting the trials, GFI contracts with licensed physicians who oversee the
administration of individual trials. In addition, an independent Institutional
Review Board that includes medical and non-medical personnel is charged with
protecting the safety of study subjects, provides review of both study protocols
and trial administration.
The Company may be subject to claims arising from the personal injury or death
of persons participating in clinical trials. The Company believes that these
risks are mitigated by the following: the oversight of the Institutional Review
Board; malpractice insurance coverage that is required to be carried by the
physicians who perform the studies; contractual indemnification of the site by
the trial sponsors; and the fact that all study subjects are required to sign an
informed consent prior to their participation. Finally, government regulations
place shared responsibility for proper study conduct and the protection of study
subjects onto the principal investigator, the Institutional Review Board and the
trial site.
Government Regulation
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The FDA extensively regulates the research, development, testing, manufacture,
labeling, promotion, advertising, distribution and marketing of drugs in the
United States under the Food, Drug and Cosmetic Act. The Company's businesses
are involved in a number of activities regulated by the FDA and by comparable
regulatory agencies in other countries.
The Company's drug packaging components, including stoppers, seals and syringe
plungers, are used to package drug products that are regulated by the FDA. To
accommodate the needs of its customers, which manufacture drug products, the
Company must maintain detailed written procedures for the receipt,
identification, storage, handling, sampling, testing and approval or rejection
of its products. Before shipment, samples from each lot of components must be
tested for conformance with applicable specifications. Manufacturing facilities
must establish and conform to written procedures for production and process
controls and must create and retain records for a specified period of time.
The Company's contract laboratory, which performs certain services for drug
manufacturers, is subject to the FDA's current good manufacturing practices
("cGMP") regulations. It must also register as a contract laboratory with the
FDA and is subject to periodic inspections by the FDA. The Drug Enforcement
Administration has licensed the contract laboratory to handle and store
controlled substances.
The FDA regulates the work of GFI in certain clinical trials. GFI must comply
with the FDA's regulations applicable to activities a sponsor of certain trials
delegates to it, such as recruitment of study subjects, documentation of the
study and conducting the trial.
To be approved for marketing in the United States, drugs must undergo an
extensive development and approval process designed to ensure that only those
products proven to be safe and effective are made available to the public. As
part of that process, applicants seeking approval must conduct, through
hospitals and other clinical research facilities, a series of clinical tests of
the drug on humans. These clinical trials involve the administration or use of a
drug in progressively larger populations of human volunteers, and in some cases,
over long periods of time and in higher doses. Human clinical trials are a
critical component of the drug development process as the FDA's ultimate
approval for marketing of an applicant's drug will depend in large measure on
the data and information obtained during the clinical trial work.
Clinical trials are typically conducted in three sequential phases, but the
phases may overlap or be combined. Phase I usually involves the initial
introduction of the investigational drug into people to evaluate its safety,
dosage tolerance, pharmacodynamics, and, if possible, to gain an early
indication of its effectiveness. Phase II usually involves trials in a limited
patient population to evaluate the appropriate dosage and dosage tolerance;
identify possible adverse effects and safety risks; and preliminarily evaluate
the efficacy of the drug for specific indications. Phase III trials usually
further evaluate clinical efficacy and test further for safety by using the drug
in its final form in an expanded patient population. The FDA sometimes requires
Phase IV studies to be conducted after a drug has been approved for marketing.
These studies are used to monitor the long-term risks and benefits of a
particular drug, to study the effect of alternative dosage levels, or to
evaluate the safety and efficacy of a drug in targeted patient populations.
Order Backlog
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At December 31, 2003, the Pharmaceutical Systems reporting segment order backlog
was $131.6 million, of which $131.0 million is expected to be filled during
fiscal year 2004, compared with $118.8 million at the end of 2002. Order backlog
in this segment includes firm orders placed by customers for manufacture over a
period of time according to a customer's schedule or upon confirmation by the
customer. 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.
Drug Delivery Systems reporting segment backlog, which is primarily related to
the clinical services business unit, 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
cancelled. As of December 31, 2003, the Drug Delivery Systems reporting segment
backlog was $3.8 million, of which $3.4 million is expected to be filled during
fiscal year 2004; at December 31, 2002 the backlog was $1.3 million.
Raw Materials
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The Company uses three basic raw materials in the manufacture of its
Pharmaceutical Systems products: elastomers, aluminum and plastic. The Company
has access to adequate supplies of raw materials to meet its production needs,
and therefore foresees no significant availability problems in the near future.
The Company is pursuing a supply chain management strategy in its Pharmaceutical
Systems reporting segment, which involves purchasing from integrated suppliers
that control their own sources of supply. This strategy has reduced the number
of raw material suppliers used by the Company. In most cases, the Company will
purchase raw materials from a single source to assure quality and reduce costs.
Due to regulatory control over our production processes, and the cost and time
involved in qualifying suppliers, the Company relies on single source suppliers
for many critical raw materials. 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.
The Company uses two main raw materials in its drug delivery business unit:
chitosan and pectin. The Company purchases highly purified chitosan from a
single source as there are limited vendors that provide the material. The
Company mitigates the risk of supply interruption by maintaining enough chitosan
in its inventory to meet demand for the foreseeable future. Although the Company
currently purchases pectin from one vendor, there are various vendors that
provide the material, and therefore the Company believes there is little risk of
supply interruption.
Patents, Trademarks and Proprietary Rights
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It is the Company's policy to maintain a strong patent position by obtaining
patent protection on products and processes deemed to possess potential
commercial significance. This policy applies to patents resulting from the
efforts of the Company's research and engineering staff or through the research
and development of others financed by the Company. As a general rule, however,
the Company does not seek patent protection on its rubber and elastomer
formulations, which it regards as trade secrets. The Company also relies upon
trademarks, know-how, continuing technological innovations and licensing
opportunities to maintain and further develop its competitive position.
Employees and consultants, outside scientific collaborators, sponsored
researchers and other advisors who receive confidential information are required
to execute confidentiality agreements upon the commencement of employment or
consulting relationships. The agreements provide that all inventions by an
employee shall be the Company's property.
The Company's patents, trademarks and proprietary rights that relate to the
Pharmaceutical Systems reporting segment have been useful in establishing the
Company's market share and in the growth of the Company's business, and are
expected to continue to be of value in the future, as the Company continues to
develop its proprietary products in this segment. Although of importance in the
aggregate, the Company does not consider its current Pharmaceutical Systems
segment business or its earnings to be materially dependent on any single
patent, trademark or proprietary right.
The Company's Drug Delivery reporting segment has developed and maintained a
significant portfolio of patents, pending patent applications and related
proprietary rights for inventions relating to drug delivery systems technologies
and products developed at its Nottingham, England and Lionville, Pennsylvania
research facilities. While this portfolio has not produced significant revenues
for the Company in the past year, it is expected to be of major value to this
segment going forward, particularly in the areas of attracting and developing
strategic alliances with ethical drug manufacturers and biotechnology and
medical device companies seeking proprietary systems for delivery of their
products, and then developing, selling and licensing the Company's proprietary
systems for use with the products of these manufacturers, as well as licensing
proprietary products taken through early stage development at the Company.
Markets and Major Customers
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The Company's Pharmaceutical Systems reporting segment provides components
and/or contract services to major pharmaceutical, biotechnology and hospital
supply/medical device companies. Products and services are distributed primarily
through the Company's own sales force, with nominal use of regional
distributors. The Company's Drug Delivery reporting segment also works with
pharmaceutical and biotech customers, primarily in the United States and Europe
in developing products using its drug delivery technologies and provides
clinical research to full service contract research organizations in the United
States.
Becton Dickinson and Company ("BD") accounted for approximately 12% of the
Company's 2003 consolidated net sales. The principal products sold to BD are
synthetic rubber, natural rubber, metal and plastic components used in BD's
disposable and pre-filled syringes and blood sampling and analysis systems. The
Company expects to continue to be a major BD supplier.
Excluding BD, the next ten largest customers accounted for approximately 31% of
the Company's consolidated net sales in 2003 but not one of these customers
accounted for more than 4% of 2003 consolidated net sales.
Competition
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The Company competes with several companies, some of which are larger than the
Company, across its major Pharmaceutical Systems 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 also 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 cost is becoming increasingly
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 value added" 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 these competitors 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 clinical research industry is highly fragmented and comprised of several
large, and many small, full-service Contract Research Organizations, as well as
limited service providers. Other major competitors in the industry also include
the research departments and owned clinical research units of pharmaceutical
companies.
The drug delivery business unit competes in the United States, Europe and
elsewhere with pharmaceutical, biotechnology and drug delivery companies,
hospitals, universities, research organizations, individual scientists and
nonprofit organizations engaged in the development of alternative drug delivery
systems and products or new drug research and testing, as well as with entities
already producing and marketing drugs. The biopharmaceutical industry is subject
to rapid and substantial technological change. Competition is intense and based
substantially on scientific and technological factors. These factors include the
availability of patents and other intellectual property, the ability to
commercialize technological developments and the ability to obtain governmental
approval for testing, manufacturing and marketing.
The Company's ChiSys[trademark] and pectin-based nasal technologies and
TARGIT[trademark] oral technologies, along with other technologies and products
based on these technologies, provide certain important competitive advantages
and are protected by patents. However, new drugs or developments in alternative
drug delivery methods may provide greater therapeutic benefits, or comparable
benefits at a lower cost. There are a number of companies currently seeking to
develop new drug delivery technologies and products, including oral, intranasal,
transdermal, buccal (or mouth cavity) and colonic absorption systems. Many of
these companies have greater research and development capabilities, experience,
manufacturing, marketing, financial and managerial resources than the Company
has committed to the drug delivery business unit. Many of these companies also
have exclusive license or co-development arrangements with market leaders for
certain products. Accordingly, there can be no assurance that competitors will
not introduce products or processes competitive with or superior to those of the
Company that could render our technologies and products less competitive or
obsolete.
Environmental Regulations
-------------------------
The Company is subject to applicable federal, state, local and foreign health,
safety and environmental laws, including those governing discharges of
pollutants to air and water, the generation, management and disposal of
hazardous materials and wastes and the remediation of contaminated sites. Some
of the Company's manufacturing facilities have been issued environmental permits
or certificates and have implemented controls to prevent or reduce discharges to
air and water. These documents are subject to modification, renewal and
revocation by the issuing authorities. The Company believes that its operations
are currently in material compliance with all environmental laws, regulations
and permits. The Company believes that ongoing environmental operating and
capital expenditures will not be material.
Information as to the material effects of compliance with federal, state and
local environmental laws, contained in Note 20 "Commitments and Contingencies"
of the Notes to Consolidated Financial Statements included in the 2003 Annual
Report to Shareholders is incorporated by reference.
International
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The Company conducts business in most of the major pharmaceutical markets in the
world. Sales outside of the United States account for approximately 50% of
consolidated net sales. Although the general business process is similar to the
domestic business, international operations are exposed to additional risks
including fluctuating foreign currency exchange rates, multiple tax
jurisdictions and, particularly in Latin and South America, political and social
issues that could destabilize local markets and affect the demand for the
Company's products.
For additional information see Note 8 "Segment Information" and Note 14
"Affiliated Companies" of the Notes to Consolidated Financial Statements
included in the 2003 Annual Report to Shareholders, incorporated herein by
reference.
The Company's financial condition and results are impacted by fluctuations in
exchange-rate markets (See Note 1 "Summary of Significant Accounting Policies -
Foreign Currency Translation" and Note 6 "Other Income (Expense)" of the Notes
to Consolidated Financial Statements included in the 2003 Annual Report to
Shareholders, incorporated herein by reference). Hedging by the Company of these
exposures is discussed in Note 1 "Summary of Significant Accounting Policies -
Financial Instruments" and in Note 17 "Financial Instruments" of the Notes to
Consolidated Financial Statements included in the 2003 Annual Report to
Shareholders, incorporated herein by reference.
Recent Developments
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On January 29, 2003, the Company's Kinston, North Carolina plant suffered an
explosion and related fire that resulted in six deaths, a number of injured
personnel and substantial damage to the building, machinery and equipment and
raw material inventories. The Company's property and business interruption
insurance coverage provides for a maximum insurance recovery of approximately
$66.0 million. In February 2004, the Company and its insurer reached a consensus
that the total losses for business interruption, insured incremental costs and
property replacement would exceed the maximum recoverable amount, resulting in
the final settlement of the insurance claim for $66.0 million. The Company began
construction of a new rubber compression-molding facility at the new Kinston
site in 2003 and expects that full production capacity will return to historical
levels by September 2004. See Note 5 "Kinston" and Note 20 "Commitments and
Contingencies" of the Notes to Consolidated Financial Statements included in the
2003 Annual Report to Shareholders, incorporated herein by reference.
In December 2003, the Company recorded a $7.0 million charge associated with a
product designed by a customer and intended for production at our plastics
device plant in the United Kingdom. As a result of delays connected with the
regulatory approval of the product, the marketing and distribution partner for
our customer terminated its involvement with the product. The operating results
of the U.K. plant are significantly dependent on the success and timing of this
product. As a result of this decision and the resulting delay in product launch,
including the possible termination of the product, management concluded that the
future cash flows to be generated by this plant will not be sufficient to cover
the book value of the property, plant and equipment at this site. Accordingly,
the Company recorded a $6.0 million impairment charge for the difference between
the carrying value and the expected fair value of these assets. A related charge
of $1.0 million was also recorded for statutory post-employment benefit costs
deemed probable of being paid. See Note 4 "Restructuring and Impairment Charges"
of the Notes to Consolidated Financial Statements included in the 2003 Annual
Report to Shareholders, incorporated herein by reference.
Item 2. Properties.
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In the Pharmaceutical Systems segment, the Company maintains eight manufacturing
plants and two mold-and-die production facilities in the United States, and a
total of nine manufacturing plants and two mold-and-die production facilities in
Germany, England, France, Denmark, Yugoslavia, Brazil and Singapore. Contract
laboratory services are provided from the Company's Lionville, Pennsylvania
facility.
In the Drug Delivery Systems segment, the Company conducts drug delivery
research and development in leased facilities located in Lionville, Pennsylvania
and Nottingham, England. Clinical research services are provided by the GFI
Research Center from leased space in Evansville, Indiana.
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. All other company facilities are used for manufacturing
and distribution, and facilities in Eschweiler, Germany, Montgomery,
Pennsylvania and Clearwater, Florida, are also used for development activities
for Pharmaceutical Systems products.
The manufacturing production facilities of the Company are well maintained and
are operating generally on a two or three shift basis. An expansion of the
Company's facility in France was completed during 2003 and an expansion of the
facility in Germany is expected to be finished in 2004. The facilities are being
expanded to meet increased customer demand.
The principal facilities in the United States are as follows:
- - Approximately 696,000 square feet of owned and 491,000 square feet of
leased space in Pennsylvania, Florida, Nebraska, North Carolina and
Indiana.
The principal international facilities are as follows:
- - Approximately 846,000 square feet of owned space and 90,000 square feet of
leased space in Germany, England, Denmark, France, Spain, Yugoslavia and
Italy.
- - Approximately 247,000 square feet of owned space in Brazil.
- - Approximately 90,000 square feet of owned space in Singapore.
Sales office facilities in separate locations are leased under short-term
arrangements.
Item 3. Legal Proceedings.
-----------------
On February 24, 2003, plaintiffs Terry Ellis, Rosalie Whitley and Gloria Young,
on behalf of themselves and a purported class of residents of Craven County,
North Carolina and the surrounding area, filed a lawsuit naming the Company and
Thomas Clagon, then its Kinston, North Carolina plant manager, as defendants.
Plaintiffs allege negligence and strict liability arising out of the explosion
at the Company's Kinston, North Carolina plant and seek unspecified compensatory
and punitive damages. The lawsuit was filed before the state court in Craven
County, North Carolina. On March 28, 2003, defendants removed the case to the
United States District Court for the Eastern District of North Carolina. On
April 22, 2003, both defendants filed answers to the complaint in federal court,
denying liability and denying that class certification is appropriate. On
September 29, 2003, the federal court remanded the case to the state court.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
None.
Item 4(a) Executive Officers of the Registrant.
------------------------------------
The executive officers of the Company were as follows:
Name Age Business Experience During Past Five Years
- ---- --- ------------------------------------------
Joseph E. Abbott 51 Vice President and Corporate Controller since April 2002 and
Corporate Controller since December 2000. Previously Director of
Internal Audit.
Linda R. Altemus 52 Vice President and Chief Compliance Officer since August 2003;
Vice President and Chief Financial Officer from March 2002 until
August 2003; Vice President, Finance and Administration from
June 2001 to March 2002; Chief Information Officer from June
2000 to June 2001; Vice President, Management Information
Systems from March 1999 to June 2000 and Director, Information
Systems from May 1997 to March 1999.
Michael A. Anderson 48 Vice President and Treasurer since June 2001; Vice President,
Finance & Administration for Drug Delivery Systems from
November 1999 to June 2001; Vice President, Business
Development from April 1997 to October 1999.
Steven A. Ellers 53 President, Pharmaceutical Systems Division since June 2002;
Executive Vice President from June 2000 to June 2002; Senior
Vice President and Chief Financial Officer from March 1998 to
June 2000; Group President from April 1997 to March 1998.
William J. Federici 44 Vice President and Chief Financial Officer since August 2003;
National Industry Director for Pharmaceuticals of KPMG LLP
(accounting firm) from June 2002 until August 2003. Prior
thereto, audit partner with Arthur Andersen, LLP.
John R. Gailey III 49 Vice President, General Counsel and Secretary.
Robert S. Hargesheimer 46 President of Device Group since April 2003; Corporate Vice
President of Strategic Operations from December 2001 until April
2003; prior thereto, General Manager of West Pharmaceutical
Services Lakewood, Inc., a former contract manufacturing and
packaging subsidiary of the Company.
Herbert L. Hugill 56 President of the Americas, Pharmaceutical Systems Division since
January 2002; President, Global Sales and Marketing from May
2001 until January 2002; President, Global Sales and Contract
Services from June 2000 until May 2001; Prior thereto, President,
Clinical Services Group from April 1999 until June 2000.
Name Age Business Experience During Past Five Years
- ---- --- ------------------------------------------
Robert J. Keating 55 President, Europe and Asia Pacific, Pharmaceutical Systems
Division since April 2002; Regional Director, Asia Pacific from
June 1998 to April 2002; General Manager from July 1997 until
June 1998.
Richard D. Luzzi 52 Vice President, Human Resources since June 2002; previously,
Vice President Human Resources of GS Industries (a steel manufacturer).
Donald E. Morel, Jr., Ph.D. 46 Chairman of the Board of the Company since March 2003 and
President and Chief Executive Officer since April 2002; President
and Chief Operating Officer from May 2001 to April 2002;
Division President, Drug Delivery Systems from October 1999 to
May 2001; Group President from April 1998 to October 1999;
previously Vice President, Scientific Services of the Company.
Bruce S. Morra, Ph.D. 49 President, Drug Delivery Systems Division since April 2003;
Executive Vice President and Chief Business Officer of Progenitor
Cell Therapy, LLC (cell-based drug development) from May 2002
until February 2003; President, Chief Operating Officer and Chief
Financial Officer of Biopore Corporation and its sister company
Polygenetics, Inc. (porous polymers for industrial, consumer and
life science applications) from January 2000 until May 2002; and
prior to that time President and Chief Operating Officer of Flamel
Technologies, Inc. (a drug delivery systems and biomaterials company)
from September 1993 until January 2000.
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. The high
and low prices for the stock for each calendar quarter in 2003 and 2002 and full
year 2003 and 2002 were as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
High Low High Low High Low High Low High Low
2003 24.87 16.65 26.16 19.90 34.75 23.20 35.80 30.90 35.80 16.65
2002 30.53 25.00 32.50 27.90 31.99 21.08 24.80 16.25 32.50 16.25
As of February 24, 2004, the Company had 1,574 shareholders of record. There
were also 3,903 holders of shares registered in nominee names. The Company's
common stock paid a quarterly dividend of $.19 per share in each of the first
three quarters of 2002; $.20 per share in the fourth quarter of 2002 and each of
the first three quarters of 2003; and $.21 per share in the fourth quarter of
2003.
Item 6. Selected Financial Data.
-----------------------
Information with respect to the Company's net sales, income from continuing
operations, income (loss) from discontinued operations, income per share from
continuing operations (basic and assuming dilution), income (loss) per share
from discontinued operations (basic and assuming dilution) and dividends paid
per share is incorporated by reference to the line items corresponding to those
categories under the heading "Five-Year Summary - Summary of Operations"
included in the 2003 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 "Five-Year Summary -
Year-End Financial Position" included in the 2003 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 included in the 2003 Annual Report
to Shareholders.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.
---------------------------------------------------------
The Company is exposed to market risk from changes in foreign currency exchange
rates and interest rates. The following describes the nature of these risks. All
debt securities and derivative instruments are considered non-trading.
Foreign Currency Exchange Risk
- ------------------------------
The Company has subsidiaries outside the United States accounting for
approximately 50% of consolidated net sales. Virtually all of these sales and
related operating costs are denominated in the currency of the local country and
translated into U.S. dollars. Although the majority of the assets and
liabilities of these subsidiaries are in the local currency of the subsidiary
and are therefore translated into U.S. dollars, the foreign subsidiaries may
hold assets or liabilities not denominated in their local currency. These items
may give rise to foreign currency transaction gains and losses. As a result, the
Company's results of operations and financial position are exposed to changing
exchange rates. The Company periodically uses forward contracts to hedge certain
transactions or to neutralize month-end balance sheet exposures on cross
currency intercompany loans. The Company has a number of small forward contracts
totaling $100,000 as of December 31, 2003 to purchase various currencies in
Europe and Asia. In order to minimize the effect of foreign currency
fluctuations, the Company attempts to pass foreign currency costs on to
customers through price increases.
Interest Rate Risk
- ------------------
As a result of its normal borrowing activities the Company is exposed to
fluctuations in interest rates, which the Company manages primarily through its
financing activities. The Company has short- and long- term debt with both fixed
and variable interest rates. Short-term debt is primarily comprised of notes
payable to banks under lines of credit at variable interest rates. Long-term
debt consists of $100,000,000 in senior notes at a fixed rate of interest and
revolving credit facilities at variable rates.
The following table summarizes the Company's interest rate risk sensitive
instruments:
(dollars in thousands) December 31, 2003
Carrying Fair
2004 2005 2006 2007 2008 Thereafter Value Value
--------------------------------------------------------------------------------------
Notes Payable and Current
Portion of Long-term Debt:
BPS denominated $ 8,000 $ 8,000 $ 8,000
Average interest rate - variable 5.1%
--------------------------------------------------------------------------------------
Long-Term Debt:
U.S. dollar denominated 100,000 100,000 110,900
Average interest rate - fixed 6.8%
U.S. dollar denominated 51,200 51,200 51,200
Average interest rate - variable 1.9%
YEN denominated 15,800 15,800 15,800
Average interest rate - variable .8%
--------------------------------------------------------------------------------------
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)" included
in the 2003 Annual Report to Shareholders.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
---------------------------------------------------------------
None.
Item 9A. Controls and Procedures.
-----------------------
The Company has established disclosure controls and procedures (as defined under
SEC Rules 13a-15(e) and 15d-15(e)) that are designed to, among other things,
ensure that information required to be disclosed in the Company's periodic
reports is recorded, processed, summarized and reported on a timely basis and
that such information is made known to the Company's Chief Executive Officer and
Chief Financial Officer regarding required disclosure.
The Company's management, with the participation of the Chief Executive Officer
and the Chief Financial Officer, has evaluated the effectiveness of the
Company's disclosure controls and procedures as of the end of the period covered
by this annual report, and based on such evaluation, have concluded that such
disclosure controls and procedures are effective.
Additionally, the Company's management, with the participation of the Chief
Executive Officer and the Chief Financial Officer, has evaluated the Company's
internal control over financial reporting, and based on such evaluation, has
concluded that there has been no change to the Company's internal control over
financial reporting that occurred during the year ended December 31, 2003 that
has materially affected, or is reasonably likely to materially affect, these
internal controls.
PART III
Item 10. Directors and Executive Officers of the Registrant.
--------------------------------------------------
Information called for by this Item is incorporated by reference to "GOVERNANCE
OF THE COMPANY - AUDIT COMMITTEE," "GOVERNANCE OF THE COMPANY - INFORMATION
ABOUT THE BOARD AND ITS COMMITTEES," "SHAREHOLDER PROPOSALS FOR 2005 ANNUAL
MEETING," "STOCK OWNERSHIP - SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE," "GOVERNANCE OF THE COMPANY - CODE OF BUSINESS CONDUCT," and
"PROPOSAL #1: ELECTION OF DIRECTORS" 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 "EXECUTIVE
COMPENSATION," "GOVERNANCE OF THE COMPANY - COMPENSATION OF DIRECTORS" and
"SHAREHOLDER RETURN PERFORMANCE GRAPH" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Shareholder Matters.
------------------------------------------------------------------
Information called for by this Item is incorporated by reference to "EQUITY
COMPENSATION PLAN INFORMATION" and "STOCK OWNERSHIP" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
None.
Item 14. Principal Accountant Fees and Services.
--------------------------------------
Information called for by this Item is incorporated by reference to "PROPOSAL #3
- - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS - AUDIT AND NON-AUDIT
FEES" and "PROPOSAL #3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS -
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES" in the Proxy Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
--------------------------------------------------------------
(a) 1. The following report and consolidated financial statements, included in
the 2003 Annual Report to Shareholders, have been incorporated herein by
reference:
Consolidated Statements of Income for the years ended December 31, 2003,
2002 and 2001
Consolidated Statements of Comprehensive Income (Loss) for the years
ended December 31, 2003, 2002 and 2001
Consolidated Balance Sheets at December 31, 2003 and 2002
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows for the years ended December 31,
2003, 2002 and 2001
Notes to Consolidated Financial Statements
Report of Independent Auditors
(a) 2. Financial Statement Schedule
Report of Independent Auditors on Financial Statement Schedule
To the Board of Directors of West Pharmaceutical Services Inc.:
Our audits of the consolidated financial statements referred to in our
report dated February 17, 2004 appearing in the 2003 Annual Report to
Shareholders of West Pharmaceutical Services Inc. (which report and
consolidated financial statements are incorporated by reference in this
Annual Report on Form 10-K) also included an audit of the financial
statement schedule listed in Item 15(a)(2) of this Form 10-K. In our
opinion, the financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/PricewaterhouseCoopers LLP
-----------------------------
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 17, 2004
Schedule II - Valuation and Qualifying Accounts
Balance at Charged to costs Translation Balance at end
beginning of period and expenses adjustments of period
-------------------- ------------------- --------------- ------------------
Deferred tax asset valuation allowance:
For the year ended December 31,
2003 $20,800 $4,300 $1,000 $26,100
2002 15,700 5,200 (100) 20,800
2001 15,500 (700) 900 15,700
All other 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) Reports on Form 8-K.
On October 21, 2003, the Company filed a Current Report on Form 8-K.
Under Item 12 of that Report, the Company furnished to the Commission
the press release dated October 21, 2003.
(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.
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/ William J. Federici
- ------------------------------------------
William J. Federici
Vice President and Chief Financial Officer
March 12, 2004
- ------------------------------------------
Date
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/ Donald E. Morel, Jr., Ph.D Director, President, Chief Executive Officer and March 12, 2004
- ------------------------------ Chairman of the Board, (Principal Executive Officer)
Donald E. Morel, Jr., Ph.D
/s/ Joseph E. Abbott Vice President and Corporate Controller (Principal March 12, 2004
- -------------------- Accounting Officer)
Joseph E. Abbott
/s/ Tenley E. Albright Director March 12, 2004
- ----------------------
Tenley E. Albright*
/s/ John W. Conway Director March 12, 2004
- ------------------
John W. Conway*
/s/ George W. Ebright Director March 12, 2004
- ---------------------
George W. Ebright*
/s/ William J. Federici Vice President and Chief Financial Officer March 12, 2004
- ----------------------- (Principal Financial Officer)
William J. Federici
/s/ L. Robert Johnson Director March 12, 2004
- ---------------------
L. Robert Johnson*
/s/ William H. Longfield Director March 12, 2004
- ------------------------
William H. Longfield*
/s/ John P. Neafsey Director March 12, 2004
- -------------------
John P. Neafsey*
/s/ Anthony Welters Director March 12, 2004
- -------------------
Anthony Welters
/s/ Geoffrey F. Worden Director March 12, 2004
- ----------------------
Geoffrey F. Worden*
/s/ Robert C. Young Director March 12, 2004
- -------------------
Robert C. Young*
/s/ Patrick J. Zenner Director March 12, 2004
- ---------------------
Patrick J. Zenner*
* By John R. Gailey III pursuant to a power of attorney.
INDEX TO EXHIBITS
Exhibit
Number
(2) None.
(3)(a) Amended and Restated Articles of Incorporation of the Company
through January 4, 1999, incorporated by reference to
Exhibit (3)(a) of 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) Form of stock certificate for common stock, incorporated by
reference to Exhibit (4) (a) of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 (File
No. 1-8036).
(4)(a)(1) Article 5, 6, 8(c) and 9 of the Amended and Restated Articles
of Incorporation of the Company, incorporated by reference to
Exhibit (3)(a) of the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 (File No. 1-8036).
(4)(a)(2) Article I and V of the Bylaws of the Company, as amended,
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).
(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
Exhibit (10)(d) of the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 (File No. 1- 8036).
(10)(c) Lease dated as of December 14, 1999 between White Deer
Warehousing & Distribution Center, Inc. and the Company
relating to the lease of the Company's site in Montgomery,
Pa. , incorporated by reference to Exhibit (10) (c) of the
Company's Annual Report on Form 10-K for the year ended
December 31, 2002 (File No. 1- 8036).
(10)(d) Discounted Stock Purchase Plan, as Amended and Restated, dated
as of November 5, 1991, incorporated by reference to
Exhibit (10)(aa) of the Company's Annual Report on Form 10-K
for the year ended December 31, 2002 (File No. 1-8036).
F-1
Exhibit
Index
(10)(d)(1) Amendment No. 1 to Discounted Stock Purchase Plan, effective
as of December 31, 2001, incorporated by reference to Exhibit
(10) (bb) of the Company's Annual Report on Form 10-K for the
year ended December 31, 2002 (File No. 1-8036).
(10)(e) 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)(f) Amendments to the Long Term Incentive Plan, dated April 30,
1996, incorporated herein by reference to Exhibit (10)(a) of
the Company's Form 10-Q for the quarter ended June 30, 1996
(File No. 1-8036).
(10)(f)(1) Amendment to the Long Term Incentive Plan, Effective October
30, 2001, incorporated by reference to Exhibit 10(d)(1) of the
Company's Annual Report on Form 10-K for the year ended
December 31, 2001 (File No. 1-8036).
(10)(g) 1999 Non-Qualified Stock Option Plan for Non-Employee
Directors, effective as of April 27, 1999, incorporated by
reference to Exhibit (10)(c) of the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999
(File No. 1- 8036).
(10)(h) Amendment No. 1 to 1999 Non-Qualified Stock Option Plan for
Non-Employee Directors, effective October 30, 2001,
incorporated by reference to Exhibit 10 (f) of the Company's
Annual Report on Form 10-K for the year ended December 31, 2001
(File No. 1-8036).
(10)(i) 2002 Management Incentive Bonus Plan, incorporated by reference
to Exhibit (10) of the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2002 (File No. 1-8036).
(10)(j) Management Incentive Plan 2003, incorporated by reference to
Exhibit (10) of the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2003 (File No. 1-8036).
(10)(k) Form of Second Amended and Restated Change-in-Control
Agreement between the Company and certain of its executive
officers dated as of March 25, 2000, incorporated by reference
to Exhibit (10)(b) of the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2000
(File No. 1-8036).
(10)(k) (1) Form of Amendment No. 1 to Second Amended and Restated
Change-in-Control Agreement dated as of May 1, 2001 between
the Company and certain of its executive officers, incorporated
by reference to Exhibit 10(g)(1) of the Company's Annual Report
on Form 10-K for the year ended December 31, 2001
(File No. 1-8036).
(10)(l) Schedule of agreements with executive officers.
F-2
Exhibit
Index
(10)(m) Non-Competition Agreement, dated as of April 30, 2002, between
the Company and William G. Little, incorporated by reference to
Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2002 (File No. 1-8036).
(10)(n) Employment Agreement, dated as of April 30, 2002, between the
Company and Donald E. Morel, Jr., incorporated by reference to
Exhibit 10 (c) of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2002 (File No. 1-8036).
(10)(o) Non-Qualified Stock Option Agreement, dated as of April 30,
2002 between the Company and Donald E. Morel, Jr.,
incorporated by reference to Exhibit 10 (d) of the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2002 (File No. 1- 8036).
(10)(p) 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)(q) Amendment No. 1 to Supplemental Employees' Retirement Plan,
incorporated by reference to Exhibit (10)(l) of the Company's
Annual Report on Form 10-K for the year ended December 31,
1995 (File No. 1-8036).
(10)(r) Amendment No. 2 to Supplemental Employees' Retirement Plan,
incorporated by reference to Exhibit (10)(c) of the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995 (File No. 1-8036).
(10)(s) Non-Qualified Deferred Compensation Plan for Designated
Executive Officers as amended and restated effective
January 1, 2004.
(10)(t) Deferred Compensation Plan for Outside Directors, as amended
and restated effective May 27, 1999, incorporated by reference
to Exhibit (10) (a) of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999
(File No. 1-8036).
(10)(u) 1999 Stock-Equivalents Compensation Plan for Non-Employee
Directors, incorporated by reference to Exhibit (10)(a) of the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 (File No. 1-8036).
(10)(v) 1998 Key Employee Incentive Compensation Plan, dated March 10,
1998, incorporated by reference to Exhibit (10)(y) of the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-8036).
(10)(v)(1) Amendment No. 1 to 1998 Key Employees Incentive Compensation
Plan, effective October 30, 2001, incorporated by reference to
Exhibit 10 (s) of the Company's Annual Report on Form 10-K for
the year ended December 31, 2001 (File No. 1-8036).
F-3
Exhibit
Index
(10)(w) Asset Purchase Agreement, dated as of November 15, 2001, by and
among DFB Pharmaceuticals, Inc., DPT Lakewood, Inc., West
Pharmaceutical Services, Inc., West Pharmaceutical Services
Lakewood, Inc., Charter Laboratories, Inc. and Paco
Laboratories, Inc., incorporated by reference to Exhibit 2.1
of the Company's Current Report on Form 8-K dated November 20,
2001 (File No. 1-8036).
(10)(x) Side letter dated November 30, 2001, incorporated by reference
to Exhibit 2.2 of the Company's Current Report on Form 8-K
dated November 20, 2001 (File No. 1-8036).
(10)(y) 2003 Employee Stock Purchase Plan, effective as of June 1,
2003, incorporated by reference to Appendix A of the
Company's 2003 Definitive Proxy Statement on Form 14A
(File No. 1-8036).
(10)(z) Confidentiality and Non-Competition Agreement, dated as of
April 7, 2003, between the Company and Bruce S. Morra,
incorporated by reference to Exhibit (10)(d) of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2003 (File No. 1-8036).
(10)(z)(1) Amendment to Non-Competition Agreement, dated as of May 1,
2003, between the Company and Bruce S. Morra, incorporated by
reference to Exhibit (10)(e) of the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2003
(File No. 1-8036).
(10)(aa) Extension Agreement, dated as of July 8, 2003, to Credit
Agreement, dated as of July 26, 2000 (the "Credit Agreement")
among the Company, the several banks and financial
institutions listed on the signature pages thereto, and PNC
Bank, National Association, as Agent, incorporated by
reference to Exhibit (10)(f)(1) of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2003 (File
No. 1-8036).
(10)(bb) Commitment and Acceptance, dated as of July 21, 2003, with
respect to the Credit Agreement among the Company,
Manufacturers and Traders Trust Company and PNC Bank, N.A.,
incorporated by reference to Exhibit (10)(f)(2) of the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003 (File No. 1-8036).
(10)(cc) Amendment to Letter Agreement, dated as of May 1, 2003, between
the Company and Robert S. Hargesheimer.
(10)(dd) 2004 Stock-Based Compensation Plan, effective as of May 5,
2004, incorporated by reference to Appendix B to the Proxy
Statement.
(11) Not Applicable.
(12) Not Applicable.
(13) Portions of 2003 Annual Report to Shareholders.
F-4
Exhibit
Index
(16) Not Applicable.
(18) None.
(21) Subsidiaries of the Company.
(22) None.
(23) Consent of Independent Accountants.
(24) Powers of Attorney.
(31)(a) Section 302 Certification by Donald E. Morel, Jr., Ph.D.
(31)(b) Section 302 Certification by William J. Federici.
(32)(a) Certification by Donald E. Morel, Jr., Ph.D., pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
(32)(b) Certification by William J. Federici, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(99) None.
F-5