<PAGE>
This report contains 12 pages
(including cover page)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1994
--------------
Commission File Number 0-5884
--------
THE WEST COMPANY, INCORPORATED
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1210010
------------ ------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645
------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
N/A
-----------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Registrant's telephone number, including area code 215-594-2900
-------------
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 twelve 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 .
----- -----
March 31, 1994 - - - 15,981,774
-----------------------------------------------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<PAGE>
Page 2
Index
Form 10-Q for the
Quarter Ended March 31, 1994
Page
-----
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Income for
the Three Months ended March 31,
1994 and April 4, 1993 3
Condensed Consolidated Balance Sheets
as of March 31, 1994 and December
31, 1993 4
Condensed Consolidated Statements of
Cash Flows for the Three Months
ended March 31, 1994 and April 4,
1993 5
Notes to Interim Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 8
Part II - Other Information
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
Page 3
Item 1. Financial Statements
The West Company, Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended
-------------
March 31, 1994 April 4, 1993
-------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 87,100 100 % $86,900 100 %
Cost of goods sold 58,200 67 62,800 72
-------------- --------------
Gross profit 28,900 33 24,100 28
Selling, general and administrative expenses 15,500 18 14,900 17
Other expense, (income) net 700 1 (1,000) (1)
-------------- --------------
Operating profit 12,700 14 10,200 12
Interest expense 600 1 700 1
-------------- --------------
Income before income taxes and minority interests 12,100 13 9,500 11
Provision for income taxes 4,700 5 3,800 5
Minority interests 500 - 300 -
-------------- --------------
Income from consolidated operations 6,900 8 % 5,400 6 %
Equity in net income of affiliated companies 100 200
-------------- --------------
Income before cumulative effect of change
in accounting method 7,000 5,600
Cumulative effect to January 1, 1993 of the change
in accounting for income taxes - 1,000
-------------- --------------
Net income $ 7,000 $ 6,600
-------------- --------------
-------------- --------------
Net income per share:
Income before cumulative effect of change
in accounting method $ .44 $ .36
Cumulative effect of change in accounting method - .06
-------------- --------------
$ .44 $ .42
-------------- --------------
-------------- --------------
Average shares outstanding 15,956 15,764
-------------- --------------
-------------- --------------
Interim results are based on the Company's accounts without audit.
The Company adopted Financial Accounting Standards No. 109, Accounting for Income Taxes, in 1993.
</TABLE>
<PAGE>
Page 4
The West Company, Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
ASSETS March 31, 1994 Dec. 31, 1993
<S> <C> <C>
Current assets: -------------- -------------
Cash, including equivalents $ 6,900 $ 5,200
Accounts receivable 51,500 43,300
Inventories 36,500 34,500
Other current assets 12,500 10,200
----------- ----------
Total current assets 107,400 93,200
----------- ----------
Net property, plant and equipment 173,600 172,800
Investments in affiliated companies 17,600 17,800
Intangibles and other assets 27,800 23,600
----------- ----------
Total Assets $326,400 $307,400
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 4,800 $ 5,400
Notes payable 6,200 2,300
Accounts payable 14,300 14,100
Other current liabilities 29,900 25,000
----------- -----------
Total current liabilities 55,200 46,800
----------- -----------
Long-term debt, excluding current portion 25,200 24,600
Deferred income taxes 19,100 18,400
Other long-term liabilities 19,000 18,600
Minority interests 12,100 10,900
Shareholders' equity 195,800 188,100
----------- -----------
Total Liabilities and Shareholders' Equity $326,400 $307,400
----------- -----------
----------- -----------
Shareholders' equity per share $ 12.25 $ 11.82
----------- -----------
----------- -----------
</TABLE>
<PAGE>
Page 5
The West Company Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Quarter Ended
-------------
March 31, 1994 April 4, 1993
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income, plus net non-cash items $ 13,100 $ 7,200
Changes in assets and liabilities (6,100) (4,400)
----------- ----------
Net cash provided by operating activities 7,000 2,800
Cash flows from investing activities:
Property, plant and equipment acquired (4,400) (6,500)
Proceeds from sale of assets 100 6,000
Payment for acquisition, net of
cash acquired (2,900) -
----------- ----------
Net cash used in investing activities (7,200) (500)
----------- ----------
Cash flows from financing activities:
Repayment of long-term debt (900) (400)
Notes payable, net 3,600 1,100
Dividend payments (1,800) (1,600)
Sale of common stock, net 900 800
----------- ----------
Net cash provided by (used in)
financing activities 1,800 (100)
----------- ----------
Effect of exchange rates on cash 100 -
----------- ----------
Net increase in cash, including equivalents $ 1,700 $ 2,200
----------- ----------
----------- ----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Page 6
The West Company, Incorporated and Subsidiaries
-----------------------------------------------
Notes to Interim Financial Statements
-------------------------------------
The interim consolidated financial statements for the quarter ended March
31, 1994 should be read in conjunction with the consolidated financial
statements and notes thereto of The West Company, Incorporated appearing in
the Company's 1993 Annual Report on Form 10-K.
1. Interim Period Accounting Policy
--------------------------------
In the opinion of management, the unaudited Condensed Consolidated
Balance Sheet as of March 31, 1994 and the related unaudited
Consolidated Statement of Income and the unaudited Condensed
Consolidated Statement of Cash Flows for the three month period then
ended and for the comparative periods in 1993 contain all adjustments,
consisting only of normal recurring accruals, necessary to present
fairly the financial position as of March 31, 1994 and the results of
operations and cash flows for the respective periods. The results of
operations for any interim period are not necessarily indicative of
results for the full year.
In the fourth quarter of 1993, the Company standardized its reporting
year end to December 31 thereby eliminating the one month lag for all
international operations. Consequently first quarter 1994, includes the
first three calendar months for all operations, but 1993 comparative
information reflects the December 1992 through February 1993 period for
all international subsidiaries.
Operating Expenses
------------------
Certain operating expenses have been annualized for interim reporting
purposes.
Income Taxes
------------
The tax rate used for interim periods is the estimated annual effective
consolidated tax rate, based on current estimates of full year results,
except that taxes applicable to operating results in Brazil are recorded
on a basis discrete to the period and prior year adjustments, if any,
are recorded as identified.
<PAGE>
Page 7
The West Company, Incorporated and Subsidiaries
-----------------------------------------------
Notes to Interim Financial Statements
-------------------------------------
(Continued)
2. Inventories at March 31, 1994 and December 31, 1993 are summarized as
follows:
Audited
--------
(in thousands) 1994 1993
-------- --------
Finished goods $ 17,300 $ 14,100
Work in process 4,900 4,700
Raw materials and supplies 14,300 15,700
-------- --------
$ 36,500 $ 34,500
-------- --------
-------- --------
3. The carrying value of property, plant and equipment is determined as
follows:
Audited
---------
(in thousands) 1994 1993
--------- ---------
Property, plant and equipment $ 329,900 $ 322,800
Less accumulated depreciation 156,300 150,000
--------- ---------
Net property, plant and equipment $ 173,600 $ 172,800
--------- ---------
--------- ---------
4. Common stock issued at March 31, 1994 was 16,844,735 shares, of which
862,961 shares were held in treasury. Dividends of $.11 per common
share were paid in the first quarter of 1994.
5. The Company has accrued the estimated cost of environmental compliance
expenses related to current and former manufacturing facilities. The
ultimate cost to be incurred by the Company cannot be fully
determined; however, based on information currently available, the
Company believes the accrued liability is sufficient to cover the
future costs of required remedial actions.
<PAGE>
Page 8
Item 2. Management's Discussion and Analysis of Financial Condition
------------------------------------------------------------
and Results of Operations.
--------------------------
Results of Operations for the Quarter Ended March 31, 1994 Versus the
---------------------------------------------------------------------
Quarter ended April 4, 1993.
---------------------------
Net Sales
---------
Net Sales for the first quarter of 1994 increased by only $0.2 million
compared to the reported first quarter 1993 results. As disclosed, the
reporting periods were standardized in the fourth quarter of 1993; this
increased reported sales comparisons by $3.8 million. In addition sales to
Consumer Products markets increased by 5% and machinery sales were $1.3
million higher. Offsetting these increases were lower domestic health care
product sales, an absence of Tri/West Systems, Inc. sales (sold in third
quarter of 1993) and unfavorable exchange rate variances due to the
stronger U.S. dollar.
Gross Profit
------------
The Company enjoyed continuing improvement in manufacturing productivity.
Gross margins increased as a percentage of sales to 33% in 1994 from 28% in
1993. Margins improved in all operating groups, but notable was a 150%
increase in the gross margins on Consumer Products sales because of greater
efficiencies and increased sales activity. The standardization of
reporting periods accounted for $2.0 million of the increase in gross
profit compared to the reported first quarter 1993 results.
Selling, general and administrative expenses increased by $0.6 million, or
5%, in the first quarter 1994, compared to reported expenses in the first
quarter 1993. Compared to a standardized reporting period in 1993, the
increase was less than 1%. Outside service costs, rent expense and other
expenses related to the new headquarters facility, and contributions
increased 1994 spending. These expenses were offset by cost savings
because of staff reductions, sale of Tri/West Systems, Inc. and favorable
exchange rate variances.
Other expense in 1994 was $0.7 million compared to other income of $1.0
million in 1993. Continued high inflation in Brazil increased translation
losses while interest income was reduced. Also, other income for 1993
included a gain from the sale of the Company's former headquarters and
research center facilities, which added $.05 per share to first quarter
1993 net income.
<PAGE>
Page 9
Item. 2. Management Discussion and Analysis of Financial Condition
-------------------------------------------------------------
and Results of Operations. (Continued)
---------------------------------------
Interest Expense and Minority Interests
---------------------------------------
Lower average debt levels and a stronger U.S. dollar in Europe helped
reduce interest expense by $0.1 million in the first quarter 1994 compared
to 1993.
Higher minority interests primarily reflects the standardization of
reporting periods.
Taxes
-----
The estimated effective annual tax rate for 1994 is 39%. This is one
percentage point lower than the rate in the first quarter of 1993. The
lower tax rate reflects in part the reduction in the German statutory tax
rate in mid-1993. The actual effective annual tax rate for 1993 was 38%,
which also reflected the reversal of a tax reserve due to a favorable
settlement of an audit issue in the fourth quarter of 1993.
Net Income
----------
Net income for the first quarter 1994 was $7.0 million, or $.44 per share,
compared to net income for the first quarter 1993 of $5.6 million, or $.36
per share, (before the cumulative adjustment of deferred taxes to adopt
Financial Accounting Standards No. 109, Accounting for Income Taxes). The
Company's adoption of SFAS No. 109 added $1 million, or $.06 per share, to
first quarter 1993 net income.
Financial Position
------------------
Working capital at March 31, 1994 was $52.2 million compared to $46.4
million at December 31, 1993. Working capital increases reflected higher
levels of accounts receivable (higher sales late in the first quarter
compared to lower sales late in the fourth quarter of 1993) and
inventories. The working capital ratio at March 31, 1994 was 1.9 to 1.
Cash flows from operations, common stock sale proceeds and available credit
capacity were more than adequate to fund the acquisition of Senetics, Inc.,
capital expenditures and dividends. Total debt as a percentage of total
invested capital was 14.9% at March 31, 1994, compared to 14.0% at December
31, 1993. At March 31, 1994, the Company had available unused lines of
credit of $15 million.
Management believes available credit lines and the Company's current
capitalization will provide sufficient cash to meet cash flow requirements
in the future.
<PAGE>
Page 10
Part II - Other Information
-------------------------------------
Item 1. Legal Proceedings
-----------------
A. Wayne, New Jersey
-----------------
The Company is party to an Administrative Consent Order with the New Jersey
Department of Environmental Protection & Energy (DEP&E) under which the
Company is required to submit and perform a cleanup plan for property
formerly owned by the Company in Wayne, New Jersey. The DEP&E has approved
the Company's plan which permits a plastic waste disposal area to be capped
and to remain in place, subject to placing a use restriction on that
portion of the property, and subject to the DEP&E's further determination
of the extent to which groundwater monitoring will be required. The
present owner of the property has thus far declined to provide the use
restriction and the Company is considering legal action against him to
compel him to provide the use restriction. The DEP&E has not yet taken
final action with respect to any further remedial steps such as ground
water monitoring which may be required as part of the cleanup plan.
B. Vega Alta, Puerto Rico
----------------------
Since 1987 the Company, along with several other major companies, has been
considered by the Environmental Protection Agency to be potentially
responsible for costs of an environmental clean-up of ground water
contamination in an area which includes the site of one of the Company's
existing plant locations in Puerto Rico. In this connection, EPA has
issued two orders for corrective action work to clean up the ground water
and the Company has been named a defendant in a cost recovery action
brought by the United States in the United States District Court for the
District of Puerto Rico against the Company and other potentially
responsible parties.
As a result of these orders, the Company and two other potentially
responsible parties have been engaged in the design and construction of a
ground water recovery and treatment well (the Ponderosa Well) as the first
part of an overall remedy at the site.
Effective June 30, 1993, the Company entered into an agreement with General
Electric Company UNISYS Corporation, Motorola Corporation and Harman
Automotive, Inc. under which the Company has paid General Electric Company
$800,000 and General Electric and UNISYS Corporation have agreed to
indemnify the Company against all future government claims relating to the
contamination of the ground water by volatile organic compounds. As a part
of this agreement, the Company has also obtained releases of cost recovery
claims from all of the other parties to the agreement.
Under the terms of this agreement, the Company will continue to be
<PAGE>
Page 11
responsible for any required clean up of the soils at its facilities in
Puerto Rico and for any future toxic tort or natural resource damage claims
which may arise from the contamination of the ground water. The indemnity
includes protection against any possible claim by the Puerto Rico Aqueduct
and Sewer Authority, which once indicated that it might assert a claim
against the potentially responsible parties for the cost of its development
of other wellfields to replace the water formerly supplied by the
contaminated aquifer.
The Company also remains responsible with Motorola Corporation and Harman
Automotive, Inc. for completing construction of the Ponderosa Well and the
related initial testing program, the cost of which is being shared equally
by these companies. Following the completion of that program, the cost of
the operation of this well and any other remedy required for the ground
water will be the obligation of General Electric Company and UNISYS
Corporation among other potentially responsible parties.
Pursuant to the terms of this Agreement, the Company has stipulated with
the United States that it is a liable party.
As a result of this agreement, the Company will avoid the costs of
participation in the existing litigation and any further contribution to
the cost of remedying the contaminated ground water at this site.
See Notes to Interim Financial Statements beginning on page 5 of this
report.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------
(a) None
(b) No reports on Form 8-K have been filed for the quarter ended March
31, 1994.
<PAGE>
Page 12
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WEST COMPANY, INCORPORATED
------------------------------
(Registrant)
May 13, 1994 /s/ R. J. Land
--------------------------- ------------------------------
(Date) (Signature)
R. J. Land
Sr. Vice President
Finance and Administration
and Chief Financial Officer
May 13, 1994 /s/ A. M. Papso
-------------------------- ------------------------------
(Date) (Signature)
A. M. Papso
Vice President and
Corporate Controller
