West Pharmaceutical Services Inc. Reports Operating Results (10-K)

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Mar 01, 2011
West Pharmaceutical Services Inc. (WST, Financial) filed Annual Report for the period ended 2010-12-31.

West Pharmaceutical Services Inc. has a market cap of $1.37 billion; its shares were traded at around $41.11 with a P/E ratio of 19.6 and P/S ratio of 1.2. The dividend yield of West Pharmaceutical Services Inc. stocks is 1.7%. West Pharmaceutical Services Inc. had an annual average earning growth of 14.7% over the past 10 years.Hedge Fund Gurus that owns WST: Joel Greenblatt of Gotham Capital. Mutual Fund and Other Gurus that owns WST: Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Kenneth Fisher of Fisher Asset Management, LLC.

Highlight of Business Operations:

In December 2010, our Board of Directors approved a plan to reduce our cost structure and improve operating efficiency by consolidating certain operations and eliminating a limited number of operational and administrative positions. This plan affects employees and manufacturing facilities within both of our reporting segments and involves the closure of a plant in Montgomery, Pennsylvania, and a reduction in operations at a manufacturing facility in St. Austell, England. We expect to incur approximately $19.0 million to $21.0 million in restructuring charges through the end of 2012 as the work at those plants is moved to other facilities. Restructuring activities will also result in the elimination of approximately 50 administrative, engineering and other operating positions at additional locations. A total of approximately 367 positions will be eliminated as part of this plan. During 2010, we incurred actual charges of $14.5 million as part of this plan, consisting of $10.1 million in severance and employee benefits and $4.4 million in asset impairment charges.

In November 2009, we announced restructuring plans for certain business operations and support functions affecting both of our reporting segments. The Packaging Systems plan involved exiting certain specialized laboratory service offerings due to a change in market demand, reducing support personnel primarily associated with information technology applications and discontinuing other non-core initiatives and disposing of the associated assets. The Delivery Systems plan was intended to better align our available production capacity with expected levels of contract manufacturing activity by consolidating manufacturing operations and support functions. Total charges incurred during 2009 and 2010 as part of this program were $9.0 million, which consisted of $3.4 million in employee severance benefits and asset relocation costs, and $5.6 million in asset impairment and disposal charges, primarily related to removing certain laboratory equipment and plant assets from service.

At December 31, 2010, our order backlog was $250.6 million, all of which is expected to be filled during 2011. The order backlog was $238.7 million at the end of 2009. The increase is primarily due to the timing of shipments, as some of our customers focused on reducing their year-end working capital, and strengthening demand for our advanced packaging products. Order backlog includes firm orders placed by customers for manufacture over a period of time according to their schedule or upon confirmation by the customer. We also have contractual arrangements with a number of our customers. Products covered by these contracts are included in our backlog only as orders are received.

We spent $9.8 million in 2010, $9.0 million in 2009 and $8.6 million in 2008 on research and development for the Packaging Systems segment. Delivery Systems incurred research and development expenses of $14.1 million, $10.9 million, and $10.1 million in the years 2010, 2009 and 2008, respectively.

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