West Pharmaceutical Services Inc. ( WST)

Q3 2010 Earnings Call

November 2, 2010 9:00 am ET


Donald J. Morel, Jr. – Chairman, Chief Executive Officer

William Federici – Vice President, Chief Financial Officer

Michael Anderson – Vice President, Treasurer


Arnie Ursaner – CJS Securities

David Windley – Jefferies & Company

Derek DeBruin – UBS Securities

Ross Taylor – CL King and Associates

James Sidoti – Sidoti & Company



Good morning and welcome to the West Pharmaceutical Services Third Quarter Earnings conference call. At this time all participants are in a listen-only mode. If at any time you require operator assistance, please press star followed by zero and we will be happy to assist you. Today’s conference is being recorded. If you have any objection, you may disconnect at this time.

And now I’d like to turn today’s meeting over to Mr. John Woolford from Westwicke Partners. Sir, you may begin.

John Wo olford

Thank you, Operator. Good morning and welcome to West’s Third Quarter 2010 results conference call. We issued our financial results this morning and the release has been posted in the Investor Section on the Company’s website located at www.westpharma.com. If you have not received a copy of this announcement, please call Westwicke Partners at 443-213-0500 and a copy will be sent to you immediately. There is also posted on the Company’s website a slide presentation that management will refer to in their remarks today. You may need additional software in order to view the .pdf formatted presentation, and a link to a free download of that software is also provided at the website.

I remind you that statements will be made by management that may contain forward-looking statements within the meaning of U.S. federal securities law and that are based on management’s beliefs and assumptions, current expectations, estimates and forecasts. Statements that are not historical facts, including statements that are preceded by, followed by, or that include words such as estimate, expect, intend, believe, plan, anticipate, and other words and terms of similar meaning are forward-looking statements. West’s estimated or anticipated future results, product performance or other non-historical facts are forward-looking and reflect our current perspective on existing trends and information.

Many of the factors that will determine the Company’s future results are beyond the ability of the Company to control or predict. These statements are subject to known or unknown risks or uncertainties and therefore actual results could differ materially from past results and those expressed or implied in any forward-looking statement. You should bear this in mind as you consider forward-looking statements.

For a non-exclusive list of those factors which could cause actual results to differ from expectations, please refer to today’s press release. Investors are also advised to consult any further disclosures the Company makes on related subjects in the Company’s 10-K, 10-Q, and AK reports. Except as required by applicable securities laws, the Company undertakes no obligation to publicly update forward-looking statements whether as a result of new information, future events, or otherwise.

In addition, during today’s call management may make reference to non-GAAP financial measures including adjusting operating profit and adjusted diluted EPS. These measures have no standardized meaning prescribed by U.S. GAAP and therefore may not be comparable to and should not be viewed as a substitute for U.S. GAAP operating income and diluted EPS. Reconciliations of the non-GAAP financial measures to the most comparable financial results compared in conformity to GAAP are provided in materials accompanying this morning’s earnings release.

This call is being recorded on behalf of West and is copyrighted material. It cannot be rerecorded or rebroadcast without the Company’s express permission. Your participation in this call implies your consent to our taping.

At this time, I would like to turn the call over to Don Morel, Chairman and CEO.

Donald Morel, Jr.

Thank you, John, and good morning everyone. Welcome to West’s third quarter conference call. Joining me for the call today are Bill Federici, our Chief Financial Officer; and Mike Anderson, West’s Treasurer and primary investor relations contact. Please note that you can follow our presentation this morning via the PowerPoint slide deck uploaded on the Company’s website. We will call out the slide number we are referring to during the course of our remarks. For those who are unable to view the slides during the call, they will remain available on our website and the information they contain will be covered in both the release and our remarks.

Let me begin with a quick snapshot of our third quarter performance, the highlights of which are summarized on Slide No. 3. I’m pleased to report that consolidated sales were quite strong, coming in at just over $271 million versus 258.9 million for the third quarter of 2009, an increase of 4.8% at actual rates or 8.7% excluding the effects of currency.

The strong increase in sales is particularly noteworthy due to the fact that in the third quarter of 2009, H1N1 vaccine sales were $9.7 million which did not recur in 2010, and we also benefitted from a more favorable euro-dollar exchange rate. In effect, we had to grow other sales at a 12% rate to overcome these two issues and achieve the 5% reported gain.

Our consolidated gross margin showed a slight decline of 0.2 percentage points to 27.5%, which is not unusual given the seasonal impact of planned shutdowns and the costs that we incur for preventative maintenance and the restart of production. Adjusted operating profit grew 7.7% and adjusted diluted earnings per share grew just over 2% to $0.46 per share. Excluding currency effects, adjusted diluted earnings per share were up just under 9%.

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