Attached files
| file | filename |
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| 8-K - FORM 8-K - WEST PHARMACEUTICAL SERVICES INC | form8k.htm |
| EX-99.1 - 2Q 2011 EARNINGS RELEASE - WEST PHARMACEUTICAL SERVICES INC | prelease.htm |
Exhibit 99.2
1
Speakers:
Donald E. Morel, Jr.
Chairman and Chief Executive Officer
William J. Federici
Vice President and Chief Financial Officer
All trademarks and registered trademarks are the property of West Pharmaceutical Services, Inc., unless noted otherwise.
West Pharmaceutical Services, Inc.
Second-Quarter 2011 Analyst Conference Call
9 a.m. Eastern Time, July 28, 2011
A webcast of today’s call can be accessed in the
“Investors” section of the Company’s web site:
www.westpharma.com
“Investors” section of the Company’s web site:
www.westpharma.com
To participate in today’s call, dial:
US toll-free 800-706-7745
International 617-614-3472
The passcode is 73912733
A replay of the call will be available until
Thursday, August 4, 2011, either through the
website or by dialing:
Thursday, August 4, 2011, either through the
website or by dialing:
US toll-free 888-286-8010
International 617-801-6888
The passcode is 52543607
These presentation materials are intended to accompany today’s press release announcing the Company’s results
for the quarter and management’s discussion of those results during today’s conference call.
for the quarter and management’s discussion of those results during today’s conference call.
2
Cautionary Statement Under the Private Securities Litigation Reform Act of 1995
This presentation and any accompanying management commentary contain “forward-looking statements” as
that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, but are not
limited to statements about expected financial results for 2011 and future years.
that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, but are not
limited to statements about expected financial results for 2011 and future years.
Each of these estimates is based on preliminary information, and actual results could differ from these
preliminary estimates. We caution investors that the risk factors listed under “Cautionary Statement” in today’s
press release, as well as those set forth under the caption "Risk Factors" in our most recent Annual Report on
Form 10-K as filed with the Securities and Exchange Commission and as revised or supplemented by our
quarterly reports on Form 10-Q, could cause our actual results to differ materially from those estimated or
predicted in the forward-looking statements. You should evaluate any statement in light of these important
factors. Except as required by law or regulation, we undertake no obligation to publicly update any forward-
looking statements, whether as a result of new information, future events, or otherwise.
preliminary estimates. We caution investors that the risk factors listed under “Cautionary Statement” in today’s
press release, as well as those set forth under the caption "Risk Factors" in our most recent Annual Report on
Form 10-K as filed with the Securities and Exchange Commission and as revised or supplemented by our
quarterly reports on Form 10-Q, could cause our actual results to differ materially from those estimated or
predicted in the forward-looking statements. You should evaluate any statement in light of these important
factors. Except as required by law or regulation, we undertake no obligation to publicly update any forward-
looking statements, whether as a result of new information, future events, or otherwise.
Non-GAAP Financial Measures
Certain financial measures included in today’s press release and accompanying tables, in these presentation
materials, and which may be referred to in management’s discussion of the Company’s results and outlook, are
Non-GAAP (Generally Accepted Accounting Principles) financial measures. Please refer to the “Notes to Non-
GAAP Financial Measures” at the end of these materials for more information. Non-GAAP financial measures
should not be considered in isolation or as an alternative to such measures determined in accordance with
GAAP.
materials, and which may be referred to in management’s discussion of the Company’s results and outlook, are
Non-GAAP (Generally Accepted Accounting Principles) financial measures. Please refer to the “Notes to Non-
GAAP Financial Measures” at the end of these materials for more information. Non-GAAP financial measures
should not be considered in isolation or as an alternative to such measures determined in accordance with
GAAP.
3
Second Quarter 2011 Operations
• Consolidated Sales Growth of 9.3% (2.8% at constant currency)
– Pharmaceutical Packaging Systems 10.6% (2.4% at constant currency)
• High value products grew 9.5% (3.2% at constant currency)
– Pharmaceutical Delivery Systems 5.4% (3.1% at constant currency)
• Gross Margin Lower
– Rising Material and Production Costs
– Sales mix not as profitable
– Customer issues: Product format change, regulatory issue, price reductions
• R&D spending higher, smaller increase in SG&A
• Daikyo Seiko, Ltd operations not adversely impacted by tsunami
• China rubber plant ground breaking
• Envision products gaining traction
4
Proprietary Product Developments
• Progress on Daikyo Crystal Zenith® Insert Needle Syringe
– PDA/FDA Conference
– Production capacity expansion is on schedule
– Adding US vial capacity in response to growing interest
• Electronic-Patch-Injector: “SmartDose™”
– Increases dose volume possibilities
– Deliver larger volumes outside of clinical setting
Note: Crystal Zenith® is a registered trademark of Daikyo Seiko, Ltd.
5
Summary Results
$ millions, except per-share data
$ millions, except per-share data
(1) See “Non-GAAP Financial Measures” and “Notes to Non-GAAP Financial Measures” (Slides 12-14), “Cautionary
Statement” (Slide 2) and today’s press release.
Statement” (Slide 2) and today’s press release.
|
($ millions, except per-share data )
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Three Months Ended
June 30,
|
|
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2011
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2010
|
|
|
|
|
|
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Net Sales
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$ 307.9
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$ 281.8
|
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Gross Profit
|
84.6
|
83.2
|
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Reported Operating Profit
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27.8
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30.5
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Adjusted Operating Profit (1)
|
30.5
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30.9
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Reported Diluted EPS
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$ 0.57
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$ 0.62
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Adjusted Diluted EPS(1)
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$ 0.62
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$ 0.64
|
6
7
8
(2) 2011 amount excludes $2.1 million of “Special Separation Benefits”. See “Non-GAAP Financial Measures” and
“Notes to Non-GAAP Financial Measures”(Slides 12 - 14),“Cautionary Statement” (Slide 2) and today’s press release.
“Notes to Non-GAAP Financial Measures”(Slides 12 - 14),“Cautionary Statement” (Slide 2) and today’s press release.
9
Cash Flow Metrics
($ millions)
($ millions)
|
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Quarter Ended
June 30,
|
|
|
|
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2011
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2010
|
|
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Depreciation and
amortization |
$19.3
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$17.7
|
|
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Operating cash flow
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$39.7
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$31.6
|
|
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Capital expenditures
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$18.4
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$14.9
|
|
10
Summary Balance Sheet Information
|
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As of
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|
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June 30,
2011
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December 31,
2010
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|
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Cash and cash equivalents
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$110.4
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$110.2
|
|
|
|
|
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Debt
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$373.5
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$358.4
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Equity
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$696.0
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$625.7
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Net debt to total invested capital
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27.4%
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28.4%
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|
|
|
|
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Working capital
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$317.7
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$266.9
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11
Updated 2011 Full-year Financial Guidance
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($ millions, except EPS)
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2011 Revenue(1)
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Gross Profit %(1)
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Pharmaceutical Packaging
Systems Segment |
$840 - $860
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32.2%
|
|
|
|
|
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Pharmaceutical Delivery
Systems Segment |
$330 - $340
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19.3%
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|
|
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Consolidated
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$1,170 - $1,200
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28.6%
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2011 Adjusted Diluted EPS(1)(2)
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$2.30 - $2.40
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(1) Guidance includes various currency exchange rate assumptions, most significantly the Euro at $1.45 for the
remainder of 2011. Actual results will vary as a result of variability of exchange rates.
remainder of 2011. Actual results will vary as a result of variability of exchange rates.
(2) See “Non-GAAP Financial Measures” and “Notes to Non-GAAP Financial Measures”(Slides 12 - 14),“Cautionary
Statement” (Slide 2) and today’s press release.
Statement” (Slide 2) and today’s press release.
12
(1) See “Notes to Non-GAAP Financial Measures”(Slides 13 - 14), “Cautionary Statement” (Slide 2) and today’s press
release.
release.
Non-GAAP Financial Measures(1)
Three Months Ended June 30, 2011 and 2010
Three Months Ended June 30, 2011 and 2010
(in millions, except per share data)
|
|
As
Reported June 30,
2011
|
Restructuring
& related charges |
Acquisition-
related contingencies |
Special
separation benefits |
Non-GAAP
June 30,
2011
|
|
Operating profit
|
$27.8
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$1.3
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($0.7)
|
$2.1
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$30.5
|
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Interest expense, net
|
4.3
|
-
|
-
|
-
|
4.3
|
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Income before income taxes
|
23.5
|
1.3
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(0.7)
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2.1
|
26.2
|
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Income tax expense
|
5.3
|
0.4
|
(0.1)
|
0.8
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6.4
|
|
Equity in net income of affiliated
companies |
1.9
|
-
|
-
|
-
|
1.9
|
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Net income
|
$20.1
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$0.9
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($0.6)
|
$1.3
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$21.7
|
|
|
|
|
|
|
|
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Net income per diluted share
|
$0.57
|
$0.02
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($0.01)
|
$0.04
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$0.62
|
|
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As Reported
June 30,
2010
|
Restructuring
& related charges |
Discrete
tax items |
Non-GAAP
June 30,
2010
|
|
Operating profit
|
$30.5
|
$0.4
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$-
|
$30.9
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Interest expense, net
|
3.8
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-
|
-
|
3.8
|
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Income before income taxes
|
26.7
|
0.4
|
-
|
27.1
|
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Income tax expense
|
6.6
|
0.2
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(0.5)
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6.3
|
|
Equity in net income of affiliated companies
|
1.6
|
-
|
-
|
1.6
|
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Net income
|
$21.7
|
$0.2
|
$0.5
|
$22.4
|
|
|
|
|
|
|
|
|
|
|
|
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Net income per diluted share
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$0.62
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$0.01
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$0.01
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$0.64
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13
NOTES TO NON-GAAP FINANCIAL MEASURES
For additional details, please see today’s press release and Safe Harbor Statement.
For additional details, please see today’s press release and Safe Harbor Statement.
These slides use non-GAAP financial measures. West believes that these non-GAAP measures of financial results provide
useful information to management and investors regarding certain business trends relating to West’s financial condition, results
of operations and the Company’s overall performance. Our executive management team uses adjusted operating profit and
adjusted diluted EPS to evaluate the performance of the Company in terms of profitability and to compare operating results to
prior periods. Adjusted operating profit is also used to evaluate changes in the operating results of each segment and to allocate
resources to our segments. The Company believes that the use of these non-GAAP financial measures provides an additional
tool for investors to use in evaluating ongoing operating results and trends in comparing its financial measures with other
companies.
useful information to management and investors regarding certain business trends relating to West’s financial condition, results
of operations and the Company’s overall performance. Our executive management team uses adjusted operating profit and
adjusted diluted EPS to evaluate the performance of the Company in terms of profitability and to compare operating results to
prior periods. Adjusted operating profit is also used to evaluate changes in the operating results of each segment and to allocate
resources to our segments. The Company believes that the use of these non-GAAP financial measures provides an additional
tool for investors to use in evaluating ongoing operating results and trends in comparing its financial measures with other
companies.
Our executive management does not consider such non-GAAP measures in isolation or as an alternative to such measures
determined in accordance with GAAP. The principal limitation of such non-GAAP financial measures is that they exclude
significant expenses and income that are required by GAAP to be recorded. In addition, they are subject to inherent limitations
as they reflect the exercise of judgment by management about which items are excluded from the non-GAAP financial
measures. In order to compensate for these limitations, our executive management presents its non-GAAP financial measures
in connection with its GAAP results. We urge investors and potential investors to review the reconciliation of our non-GAAP
financial measures to the comparable GAAP financial measures, and not rely on any single financial measure to evaluate the
Company’s business.
determined in accordance with GAAP. The principal limitation of such non-GAAP financial measures is that they exclude
significant expenses and income that are required by GAAP to be recorded. In addition, they are subject to inherent limitations
as they reflect the exercise of judgment by management about which items are excluded from the non-GAAP financial
measures. In order to compensate for these limitations, our executive management presents its non-GAAP financial measures
in connection with its GAAP results. We urge investors and potential investors to review the reconciliation of our non-GAAP
financial measures to the comparable GAAP financial measures, and not rely on any single financial measure to evaluate the
Company’s business.
In calculating adjusted operating profit and adjusted diluted EPS, we exclude the impact of items that are not considered
representative of ongoing operations. Such items include restructuring and related costs, certain asset impairments, other
specifically identified gains or losses, and discrete income tax items. Reconciliations of these adjusted non-GAAP measures to
the comparable GAAP financial measures are included in the preceding (current and prior-year periods) and succeeding (2011
Guidance) slides.
representative of ongoing operations. Such items include restructuring and related costs, certain asset impairments, other
specifically identified gains or losses, and discrete income tax items. Reconciliations of these adjusted non-GAAP measures to
the comparable GAAP financial measures are included in the preceding (current and prior-year periods) and succeeding (2011
Guidance) slides.
The following is a description of the items excluded from adjusted operating profit and adjusted diluted EPS:
Restructuring & related charges: During the second quarter of 2011, we recognized restructuring and related charges totaling
$1.3 million. The majority of these charges were for employee severance and benefits and fixed asset transfer and facility
closure costs incurred as part of the restructuring program launched in December of 2010.
$1.3 million. The majority of these charges were for employee severance and benefits and fixed asset transfer and facility
closure costs incurred as part of the restructuring program launched in December of 2010.
During the second quarter of 2010, we incurred restructuring and other charges of $0.4 million as part of our restructuring plan
announced in the fourth quarter of 2009. The majority of these charges relate to fixed asset transfer and other related costs
incurred as part of a plan to consolidate certain manufacturing operations and support functions.
announced in the fourth quarter of 2009. The majority of these charges relate to fixed asset transfer and other related costs
incurred as part of a plan to consolidate certain manufacturing operations and support functions.
(continued on following slide)
14
NOTES TO NON-GAAP FINANCIAL MEASURES
For additional details, please see today’s press release and Safe Harbor Statement.
For additional details, please see today’s press release and Safe Harbor Statement.
Acquisition-related contingencies: During the second quarter of 2011, we recognized a net gain of $0.7 million
for adjustments to our liabilities for contingent consideration. The majority of this adjustment related to the
contingent consideration for our 2009 eris™ safety syringe acquisition.
for adjustments to our liabilities for contingent consideration. The majority of this adjustment related to the
contingent consideration for our 2009 eris™ safety syringe acquisition.
Special separation benefits: The charge is for certain severance costs incurred upon the retirement of our
longest-serving executive and former President and Chief Operating Officer during the quarter. The majority of
the $2.1 million charge represented accelerated stock-based compensation expense due to an amendment of
an equity compensation arrangement. The amendment allows certain of their existing unvested awards to
continue to vest over their original vesting period instead of being forfeited upon retirement, resulting in an
accounting revaluation and immediate recognition of expense for the respective awards.
longest-serving executive and former President and Chief Operating Officer during the quarter. The majority of
the $2.1 million charge represented accelerated stock-based compensation expense due to an amendment of
an equity compensation arrangement. The amendment allows certain of their existing unvested awards to
continue to vest over their original vesting period instead of being forfeited upon retirement, resulting in an
accounting revaluation and immediate recognition of expense for the respective awards.
Discrete tax items: During the second quarter of 2010, we recognized $0.5 million in discrete tax charges, the
majority of which resulted from adjustments to reconcile our estimated prior-year tax provision for certain
jurisdictions to tax returns prepared in the current year.
majority of which resulted from adjustments to reconcile our estimated prior-year tax provision for certain
jurisdictions to tax returns prepared in the current year.
Reconciliation of 2011 Adjusted Guidance to 2011 Reported Guidance:
(1) Guidance includes various currency exchange rate assumptions, most significantly the Euro at $1.45 for the remainder of 2011.
Actual results will vary as a result of variability of exchange rates.
Actual results will vary as a result of variability of exchange rates.
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Full Year 2011 Guidance (1)
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Diluted Earnings Per Share
|
|
Adjusted guidance
|
$2.30 to $2.40
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Restructuring, net of tax
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(0.10) to (0.09)
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Special retirement benefits
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(0.04)
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Acquisition-related contingencies
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0.01
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Reported guidance
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$2.17 to $2.28
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