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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, 1995
----------------
Commission File Number 1-8036
---------
THE WEST COMPANY, INCORPORATED
--------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1210010
------------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645
--------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-594-2900
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
-----------------------------------------------------------------
Common Stock, par value New York Stock Exchange
$.25 per share
Securities registered pursuant to Section 12(g) of the Act:
None
----
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 .
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
<PAGE>
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._____
As of March 18, 1996, the Registrant had 16,640,880 shares of its
Common Stock outstanding. The market value of Common Stock held
by non-affiliates of the Registrant as of that date was
$393,140,790.
Exhibit Index appears on pages F-1, F-2, F-3, and F-4.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
------------------------------------
Documents incorporated by reference: 1) portions of the
Registrant's Annual Report to Shareholders for the Company's 1995
fiscal year (the "1995 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.
<PAGE>
2
PART I
Item l. Business
--------
The Company
-----------
The West Company, Incorporated is engaged in one industry segment
- the design, development, manufacture and marketing of stoppers,
closures, containers, medical device components and assemblies
made from elastomers, metal and plastic that meet the unique
filling, sealing, dispensing and delivery needs of the health
care and consumer products markets. The Company also provides
contract packaging and contract manufacturing services to these
markets in the United States and Puerto Rico. In addition, the
Company manufactures related packaging machinery. The Company's
products include pharmaceutical packaging components (stoppers,
seals, caps, containers and dropper bulbs), components for
medical devices (parts for syringes and components for blood
sampling and analysis devices and for intravenous administration
sets) and packaging components for consumer products.
The Company was incorporated 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 herein, the term "Company"
includes The West Company, Incorporated and its consolidated
subsidiaries, unless the context otherwise indicates.
Principal Products -Pharmaceutical Packaging Components
--------------------------------------------------------
The Company manufactures a broad line of pharmaceutical stoppers
from natural rubber and a variety of synthetic elastomers.
Several hundred proprietary formulations of these substances are
molded into a range of stopper sizes used in packaging serums,
vaccines, antibiotics, anesthetics, intravenous solutions and
other drugs. Most formulae are specially designed to be
compatible with drugs so that the drugs will remain effective and
unchanged during storage. The Company's rubber laboratories not
only develop formulations, but also conduct preliminary
compatibility tests on customers' new drugs, and in the United
States file formulation information with the Food and Drug
Administration to assist its customers' new drug applications.
A broad line of aluminum seals which securely hold the stoppers
on glass or plastic containers is manufactured by the Company.
The Company also makes a wide variety of seals lined with its
specially formulated rubber discs or other materials. Aluminum
seals include closures with tamper-evident tabs or plastic
FlipOff^R buttons which must be removed before the drug can be
withdrawn. The Company also designs, manufactures and sells
capping machines for use with Company-designed metal caps and
seals and other packaging equipment.
<PAGE>
3
The majority of pharmaceutical-packaging components currently
manufactured by the Company are used in packaging injectable
drugs. Included in this category of products are syringe parts
used by pharmaceutical manufacturers to package their drugs in
pre-filled unit-dose disposable syringes.
Products used in the packaging of non-injectable drugs include
rubber dropper bulbs, plastic contraceptive drug packages and
child-resistant and tamper-evident plastic closures. The Company
also manufactures and markets a range of Counter Cap^R products.
These devices are plastic child resistant caps that advance, or
count, every time a bottle of oral medication is opened or
closed, thereby promoting compliance with medication
instructions. In addition, the Company manufactures injection
blow-molded plastic bottles and containers for the pharmaceutical
industry.
In January 1992, the Company entered into a partnership with
Schott Corporation to continue the glass vial, ampoule and
cartridge manufacturing operations formerly carried on by the
Company at its Cleona, Pennsylvania site. In September 1995 the
Company sold its 40% partnership interest to Schott Corporation.
In January 1994, the Company acquired Senetics, Inc., a Boulder
Colorado company specializing in the development of innovative
closure and delivery systems for the oral and inhalation drug
delivery markets. The purchase price of the acquisition was
$3 million. Additional amounts are due based on license fees or
royalty income and/or direct sales of the product until January
5, 1999.
The Company's German holding company, The West Company GmbH,
acquired Schubert Seals A/S, a Danish manufacturer of rubber
components and metal seals servicing the European pharmaceutical
industry. A 51% ownership interest was acquired in May 1994 and
the remainder in December 1995. The purchase price totaled DK 71
million ($12 million at exchange rates at the dates of the
acquisitions).
Principal Products - Components for Medical Devices
----------------------------------------------------
The Company manufactures rubber and plastic components for empty
disposable syringes. Typical components include plungers, hubs
and needle covers which are assembled into finished empty
disposable syringes by the Company's customers.
Blood-sampling system components manufactured by the Company
include vacuum tube stoppers and needle valves. The Company also
makes a number of specialized rubber and plastic components for
blood analyzing systems.
<PAGE>
4
Also included in this category are Company-manufactured and
Company-purchased components assembled into drug-transfer
devices.
The Company also manufactures and sells disposable infant nursers
and individual nurser components to infant formula manufacturers.
Principal Products
Packaging Components for the Consumer Products Industries
-----------------------------------------------------------------
The Company manufactures a wide range of plastic threaded
closures for the personal-care industry, mainly for such products
as cosmetics and toiletries. The Company offers many different
standard threaded closure designs in a wide range of sizes and
colors, in addition to closures designed for specific customers
and specialty packaging. The Company also manufactures custom
and stock plastic containers for personal-care products.
The Company manufactures a variety of custom-designed and/or
proprietary plastic closures, some of which are tamper evident,
for food and beverage processors.
Principal Services
Contract Packaging and Contract Manufacturing
--------------------------------------------------
In April 1995, the Company purchased Paco Pharmaceutical
Services, Inc. ("Paco") for $52.4 million. Paco with facilities
in Lakewood, New Jersey and Canovanas, Puerto Rico provides
contract manufacturing and contract packaging services to
pharmaceutical and personal-care consumer companies.
Paco's contract manufacturing services capability covers liquids,
creams, ointments, powders and semi-solids. These manufacturing
capabilities are offered to pharmaceutical, personal health care
and consumer products companies which supply the product formula
and specifications and the majority of the necessary raw
materials. Typical products manufactured by Paco are headache
and cold medications, hair care products, lotions, oral hygiene
products and deodorants. These manufactured products are
packaged by Paco in bottles, pouches or tubes depending on the
nature of the product and the customers' requirements.
Paco also manufactures sterile ophthalmic products consisting
primarily of contact lens solutions for major ophthalmic
companies and manufactures and sells metaprotirenol, a hospital
unit-dose product used for inhalation therapy.
Paco's contract-packaging services include the design, assembly
and filling of a broad variety of packages, including blister
packages (a plastic bubble with a foil backing), bottles, tubes,
laminated and other flexible pouches or strip packages, aluminum
<PAGE>
5
and plastic liquid cup containers, paperboard specialty packages
and innovative tamper evident and child-resistant packages. The
type of package depends on the requirements of the customer.
Blister packaging or bottles typically are used for tablets and
capsules while aluminum or plastic cups, pouches, bottles and
tubes are used for liquids, creams, ointments and powder. The
products to be inserted in the package are supplied by the
customer in bulk. They are inserted in the package of choice,
labeled, boxed and shipped back to the customer.
Order Backlog
--------------
Product orders on hand at December 31, 1995 were approximately
$108 million, compared with approximately $99 million at the end
of 1994. Orders on hand include those placed by customers for
manufacture over a period of time according to a customer's
schedule or upon confirmation by the customer. Orders are
generally considered firm when goods are manufactured or orders
are confirmed. 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.
Paco's twelve-month backlog of unfilled customer orders was
approximately $20 million at December 31, 1995. Backlog is
defined at Paco as orders written and included in production
schedules during the next 12 months. Such orders generally may
be cancelled by the customer without penalty.
Raw Materials
--------------
The Company uses three basic raw materials in the manufacture of
its products: rubber, aluminum and plastic. Approximately 25% of
the total rubber used by the Company is natural rubber,
substantially all of which is imported from Sri Lanka and
Malaysia. Plastic resins and aluminum are purchased as needed
from several sources. The Company has been receiving adequate
supplies of raw materials to meet its production needs, and it
foresees no significant availability problems in the near future.
However, the political stability and seasonal weather conditions
of countries which supply natural rubber are significant
factors in the continuing supply of this commodity. Synthetic
elastomers and plastics currently purchased by the Company are
made from petroleum derivatives, the cost and availability of
which are dependent on the supply of petroleum feedstocks. Also,
the Company is dependent on sole sources of supply with respect
to certain other raw material ingredients in older product
formulations. In the event the supplier discontinues production,
the Company may be required to stockpile these materials until
new formulations are qualified with customers.
The Company is pursuing a supply chain management strategy of
aligning with vertically integrated suppliers that control their
own feedstocks. This will result in reducing the number of raw
<PAGE> 6
materials suppliers. In some cases, the Company will purchase
raw materials from a single source. This strategy is expected to
assure quality, secure supply and reduce costs. However, it
could result in risks to the Company's supply lines in the event
of a supplier production problem. These risks will be managed by
selecting suppliers with backup plans and fail-safe mechanisms as
part of their operating standards.
Paco's customers supply the bulk of raw materials as part of
their contractual agreements. Items that Paco purchases for the
accounts of customers include preformed plastic tubes and bottles
and other packaging materials. Paco uses a variety of vendors
and is not dependent on any single source of supply.
Laboratory, Research and Engineering
-------------------------------------
Pharmaceutical packaging components must meet the rigid
specifications set by the pharmaceutical industry relating to the
function of the package, material compatibility, and freedom from
chemical and physical contamination. Rubber formulations that
involve contact with injectable pharmaceutical products are
required to pass shelf-life tests extending from six months to
three years. New rubber compounds must be tested to show that
they do not cause precipitation in the customer's product or
affect its potency, sterility, effectiveness, color or clarity.
In addition, in the United States the Food and Drug Admin-
istration may review and inspect certain of the Company's
facilities for adequacy of methods and procedures and
qualifications of technical personnel.
The Company maintains its own laboratories for testing raw
materials and finished goods to assure adherence to customer
specifications and to safeguard the quality of its products. The
Company also uses its laboratory facilities for research and
development of new rubber and thermoplastic compounds and for
testing and evaluating new products and materials.
The Company maintains engineering staffs responsible for product
and tooling design and testing and for the design and
construction of processing equipment. In addition, a corporate
product research department develops new packaging and device
concepts for identified market needs.
Research, development and engineering expenditures for the
creation and application of new and improved products and
processes were approximately $12 million in 1995, $12 million in
1994 and $11.4 million in 1993. Approximately 140
professional employees were engaged full time in such activity in
1995.
Employees
----------
<PAGE>
7
As of December 31, 1995, the Company and its subsidiaries had
5,210 full-time equivalent employees.
Patents and Licenses
---------------------
The patents owned by the Company and its subsidiaries have been
valuable in establishing the Company's market share and in the
growth of the Company's business and may continue to be of value
in the future, especially in view of the Company's continuing
development of its own proprietary products. Nevertheless, the
Company does not consider its business or its earnings to be
materially dependent upon any single patent or patent right.
Major Customers
-----------------
The Company serves major pharmaceutical and hospital
supply/medical device companies, many of which have several
divisions with separate purchasing responsibilities. The Company
also sells to many of the leading manufacturers of personal-care
products. The Company distributes its products primarily through
its own sales force but also uses regional distributors in the
United States and Asia/Pacific.
Becton Dickinson and Company ("B-D") accounted for approximately
11% of the Company's consolidated net sales during the Company's
last fiscal year. The principal products sold to B-D are
components made of rubber, metal and plastic used in B-D's
disposable syringes and blood sampling and analysis devices. B-D
has manufactured a portion of its own rubber components for a
number of years. The Company expects to continue as a major B-D
supplier.
Excluding B-D, the next ten largest customers accounted for
approximately 29% of the Company's consolidated net sales in
1995, and no one of these customers accounted for more than 6% of
1995 consolidated net sales.
Competition
------------
The Company competes with several companies, some of which are
larger than the Company, across its major pharmaceutical
packaging component and medical device component product lines.
In addition, many companies worldwide compete with the Company
for business related to specific product lines. However,
although there are no industry statistics available, the Company
believes that it supplies a major portion of the domestic
industry requirements for pharmaceutical rubber and metal
packaging components, and 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 more important
as healthcare markets worldwide face increasing government
controls and pressure to control overall costs.
<PAGE>
8
The Company is one of the leading domestic producers of threaded
plastic closures, although there are numerous competitors in the
field of plastics.
In addition, some of the Company's customers also manufacture a
portion of their own plastic and rubber components.
The contract packaging and manufacturing service industry is
highly competitive. The Company believes that its contract
packaging services subsidiary, Paco, competes with three
significant companies, only one of which is larger than Paco.
For contract manufacturing services, Paco competes with four
major competitors and several smaller regional companies; several
of these competitors are larger than Paco. In addition most
domestic pharmaceutical companies maintain in-house manufacturing
and packaging capabilities and at times will offer their excess
capacity to manufacture or package on a contract basis other
manufacturers' products. However, most large pharmaceutical and
personal health care companies have traditionally made extensive
use of contract packagers and manufacturers during times of peak
demand, during the introduction of a new product and for
production of samples and special product promotions.
Government Regulations and Environmental Matters
---------------------------------------------------
The Company does not believe that it will have any material
expenditures relating to environmental matters other than those
discussed in the Note "Commitments and Contingencies" of Notes to
Consolidated Financial Statements of the 1995 Annual Report to
Shareholders, incorporated by reference herein.
Paco's contract packaging and manufacturing processes and
services are subject to the Good Manufacturing Practice standards
applicable to the pharmaceutical industry. The Company's
packaging and manufacturing services are subject to the Federal,
Food, Drug and Cosmetic Act, the Comprehensive Drug Abuse
Prevention and Control Act of 1970 and various rules and
regulations of the Bureau of Alcohol, Tobacco and Firearms of the
United States Department of Treasury, the Bureau of Narcotics of
the United States Department of Justice, the Drug Enforcement
Agency and state narcotic regulatory agencies. Paco is regularly
subjected to testing and inspection of its products and
facilities by representatives of various Federal agencies.
In addition, the Company comes under the regulation of various
state and municipal health agencies in jurisdictions where the
Company has facilities.
International
---------------
The Note "Affiliated Companies" and the Note "Industry Segment
and Operations by Geographic Area" of Notes to Consolidated
Financial Statements of the 1995 Annual Report to Shareholders
are incorporated herein by reference.
<PAGE>
9
The Company believes that its international business does not
involve a substantially greater business risk than its domestic
business. However, economic and competitive factors vary in the
countries in which the Company's international subsidiaries and
affiliates do business. The future growth and performance of the
Company's international subsidiaries and affiliates are dependent
on these factors and the political stability of the countries
where they do business.
The Company's financial condition and results are impacted by
fluctuations in exchange rate markets (See Notes "Summary of
Significant Accounting Policies - "Foreign Currency" and "Other
Income (Expense)" of Notes to Consolidated Financial Statements
of the 1995 Annual Report to Shareholders, incorporated herein by
reference). Hedging by the Company of these exposures is
discussed in the Note "Debt" and in the Note "Fair Value of
Financial Instruments" of Notes to Consolidated Financial
Statements of the 1995 Annual Report to Shareholders,
incorporated herein by reference.
Item 2. Properties
-----------
The Company maintains thirteen manufacturing plants and two mold
and die production facilities in the United States, two
manufacturing plants in Puerto Rico, and a total of ten
manufacturing plants and one mold and die production facility in
Germany, England, France, Denmark, Argentina, Brazil and
Singapore.
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 and Boulder,
Colorado are also used for research and development activities.
The manufacturing facilities of the Company are well-maintained,
are operating generally on a two or three-shift basis and are
adequate for the Company's present needs.
The principal facilities in the United States and Puerto Rico,
are as follows:
- Approximately 1,036,000 square feet of owned and 996,000
square feet of leased space in Pennsylvania, New Jersey,
Florida, Colorado, Nebraska, North Carolina and Puerto Rico.
The principal international facilities are as follows:
- Approximately 300,000 square feet of owned space and 145,000
square feet of leased space in Germany, England, Denmark and
France.
<PAGE>
10
- Approximately 99,000 square feet of owned space in Argentina
and Brazil.
- Approximately 92,000 square feet of owned space in Singapore.
Of the aforementioned currently owned facilities, approximately
464,000 square feet are subject to mortgages to secure the
Company's real estate mortgage notes. See the Note "Debt" of
Notes to Consolidated Financial Statements of the 1995 Annual
Report to Shareholders, which information is incorporated herein
by reference.
Sales office facilities in separate locations are leased
under short-term arrangements.
The Company also holds for sale 106,100 square feet of former
manufacturing facility space in the United States.
11
<PAGE>
Item 3. Legal Proceedings.
-----------------
A. Wayne, New Jersey
------------------
The Company is a party to an Administrative Consent Order with
the New Jersey Department of Environmental Protection (the "DEP")
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 present owner of the property, who is currently
in bankruptcy, has agreed pursuant to a litigation settlement
between him and the Company to provide a Declaration of
Environmental Restriction required by the DEP to complete the
cleanup pursuant to the Administrative Consent Order. The
settlement agreement also provides that the Company will complete
the ongoing monitoring requirements of the cleanup plan and will
complete the closure of a plastic waste disposal area on the
property subject to the DEP's requirements for closure under a
revised closure plan. The settlement agreement is pending before
the Bankruptcy Court, which must approve it before it becomes
effective.
B. OCAP Litigation
---------------
On March 30, 1992, OCAP Acquisition Corp. ("OCAP") commenced an
action in the Supreme Court of the State of New York, County of
New York, against Paco, certain of its subsidiaries and R. P.
Scherer Corporation ("Scherer"), Paco's former parent company,
(collectively, the "defendants"), arising out of the termination
of an Asset Purchase Agreement dated February 21, 1992 (the
"Purchase Agreement") between OCAP and the defendants providing
for the purchase of substantially all the assets of Paco. On May
15, 1992, OCAP served an amended verified complaint (the "Amended
Complaint"), asserting causes of action for breach of contract
and breach of the implied covenant of good faith and fair
dealing, arising out of defendants' March 25, 1992 termination of
the Purchase Agreement, as well as two additional causes of
action that were subsequently dismissed by order of the court.
The Amended Complaint seeks $75 million in actual damages, $100
million in punitive damages, as well as OCAP's attorney fees and
other litigation expenses, costs and disbursements incurred in
bringing this action. Scherer has asserted a counterclaim
against OCAP for breach of contract and breach of the covenant of
good faith and fair dealing arising out of the termination of the
Purchase Agreement. Discovery with respect to the action has
been completed and a trial date of March 21, 1996 has been set.
Based upon the investigation conducted by the Company to date,
the Company believes that this action lacks merit and intends to
defend against it vigorously. In the opinion of management, the
ultimate outcome of this litigation will not have a material
adverse effect on the Company's business or financial condition.
Scherer has agreed to indemnify Paco against any liabilities
(including fees and expenses incurred after March 31, 1992) it
may have as a result of this litigation matter.
<PAGE> 12
See the Note "Commitments and Contingencies" of Notes to
Consolidated Financial Statements of the 1995 Annual Report to
Shareholders, which information is incorporated herein by
reference.
<PAGE>
13
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 at March 29, 1996 were as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Business Experience During Past Five
Years
---- --- ---------------------------------------
George R. Bennyhoff1 52 Senior Vice President, Human Resources
and Public Affairs since March 1986.
Wendy Dixon1 40 Group Vice President, Strategic
Planning since November 1995, and Group
Vice President, The Americas, from
March 1995 to November 1995 for the
Company; and prior to joining the
Company Executive Vice President and
General Manager of Biomaterials for
Osteotech, Inc., a medical device
company, from May 1993 to
February 1995; and prior thereto held
the following positions with Centocor,
Inc., a biotechnology pharmaceutical
company: Vice President, Business
Development from August 1992 to April
1993, Vice President, European
Marketing & Sales from October 1990 to
August 1992.
Jerry E. Dorsey1 51 Executive Vice President and Chief
Operating Officer since June 1994;
previously Group President from August
1993 to June 1994; President, Health
Care Division from May 1992 to July
1993 for the Company; and prior to
joining the Company President and Chief
Executive Officer of Foster Medical, a
medical supply company, from 1990 to
May 1992.
Steven A. Ellers 45 Vice President, Global Sales since March
1996, previously Vice President,
Operations from June 1994 to March 1996;
and prior thereto Vice President
Asia/Pacific and Managing Director,
Singapore for the Company from May 1990
to May 1994.
1 Holds position as corporate officer elected by the Board of
Directors for one year term.
14
<PAGE>
Name Age Business Experience During Past Five
Years
---- --- ---------------------------------------
John R. Gailey III1 41 Vice President since December 1995,
General Counsel since May 1994 and
Secretary since December 1991
previously Corporate Counsel for the
Company from December 1991 to May 1994
and prior to joining the Company, an
Associate with the law firm of Dechert
Price & Rhoads.
Stephen M. Heumann1 54 Vice President since May 1994; and
Treasurer since December 1990;
previously Assistant Treasurer from May
1990 through November 1990 for the
Company.
Raymond J. Land1 51 Senior Vice President, Finance and
Administration for the Company since
October 1991; prior to joining the
Company General Manager - Premium Meals
for Campbell Soup Company.
William G. Little1 53 Chairman of the Board since May 1995
and Director, President and Chief
Executive Officer since May 1991 for
the Company; and prior to joining the
Company, Division President, Kendall,
Inc., a medical device company, from
1990 to May 1991.
Donald E. Morel, Jr. 38 Corporate Vice President, Scientific
Services since May 1995; previously
Vice President, Research & Development
from August 1993 to May 1995 and prior
thereto Director Research &
Development, Health Care Products
Division from May 1993 to August 1993
for the Company; and prior to joining
the Company Director Research &
Development for Applied Research
International, a provider of contract
research in materials science, from
1988.
1 Holds position as corporate officer elected by the Board of
Directors for one year term.
<PAGE>
15
Name Age Business Experience During Past Five
Years
---- --- ---------------------------------------
Anna Mae Papso1 52 Vice President since March 1991 and
Corporate Controller since May 1989.
Victor E. Ziegler1 65 Executive Vice President since January
1992; previously Division President
from July 1991 to January 1992 and
Group President for the Company.
</TABLE>
1 Holds position as corporate officer elected by the Board of
Directors for one year term.
<PAGE>
16
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 and the high and low prices for the stock for each
calendar quarter in 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
High Low High Low High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 27 1/2 24 3/4 29 25 1/2 30 5/8 28 28 22 5/8 30 5/8 22 5/8
1994 25 3/4 23 3/4 24 3/4 21 1/4 25 3/4 21 5/8 29 1/8 25 1/2 29 1/8 21 1/4
</TABLE>
As of December 31, 1995, the Company had 1,287 shareholders of
record. There were also 2,200 holders of shares registered in
nominee names. The Company's Common Stock paid a quarterly
dividend of $.11 per share in each of the first three quarters of
1994; $.12 per share in the fourth quarter of 1994 and each of
the first three quarters of 1995; and $.13 per share in the
fourth quarter of 1995.
Item 6. Selected Financial Data.
-----------------------
Information with respect to the Company's net sales, income
(loss) from consolidated operations, income (loss) before change
in accounting method, income (loss) before change in accounting
method per share and dividends paid per share is incorporated by
reference to the line items corresponding to those categories
under the heading "Ten-Year Summary - Summary of Operations" of
the 1995 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 "Ten-Year Summary - Year End Financial Position" of the
1995 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis 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
of the 1995 Annual Report to Shareholders.
Subsequent Event
----------------
On March 28, 1996, the Company approved a plan to restructure its
global manufacturing operations. The plan provides for the closing
or substantial downsizing of six manufacturing facilities and an
approximate 5% reduction of its workforce. As part of the plan
the Company will withdraw from its machinery systems business,
which accounted for less than 1% of 1995 net sales. Implementation
of the restructuring plan will begin immediately and be
substantially complete by the end of the first quarter of 1997.
The total estimated net charge related to these planned actions
is $15 million, net of $6.5 million of income tax benefits.
Approximately one-third of the net charge relates to reduction
in personnel and covers severance pay and other benefits to be
provided to terminated employees. The remaining accrued net
charge relates to facility close down costs and to the reduction
to net realizable value of related equipment and facilities.
As a result of this net charge, the Company will report a net
loss for the quarter ending March 31, 1996.
These actions are intended to position the Company to better
meet the demands of the rapidly changing healthcare market.
Specifically the plan will create focused, more efficient
factories and will enable the Company to shift production to
lower-cost locations. These moves are made possible by the
increasing willingness of our customers to accept the Company's
products from alternate and multiple locations.
These actions are components of an overall strategy that includes
offering customers enhanced technical capabilities and product
offerings to enable the Company to preserve its leadership
position in its core business.
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
The information called for by this Item is incorporated by
reference to "Consolidated Financial Statements", "Notes to the
Consolidated Financial Statements", and "Quarterly Operating and
Per Share Data (Unaudited)" of the 1995 Annual Report to
Shareholders.
<PAGE> 17
Subsequent Event
----------------
On March 28, 1996, the Company approved a major restructuring plan
which includes the closing or substantial downsizing of six
manufacturing facilities, disposition of related excess equipment
and properties and an approximate 5% reduction of the workforce.
The total estimated charge related to these planned actions is
$15 million, net of $6.5 million of income tax benefits, and will
be accrued in the first quarter of 1996. Approximately one-third
of the net charge relates to reduction in personnel, including
manufacturing and staff positions, and covers severance pay and
other benefits to be provided to terminated employees. The
remaining accrued net charge relates to facility close down costs
and to the reduction to estimated net realizable value of the
carrying value of equipment and facilities made excess by the
restructuring plan. The restructuring activities will be
substantially complete by the end of the first quarter of 1997.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
--------------------------------------------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
Information called for by this Item is incorporated by reference
to "ELECTION OF DIRECTORS" and "ELECTION OF DIRECTORS - Section
16(a) Reporting" 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 "ELECTION OF DIRECTORS - Compensation of Directors; Board
Compensation Committee Report on Executive Compensation;
Compensation of Named Executive Officers" contained in the Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
---------------------------------------------------
Information called for by this Item is incorporated by reference
to "STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" and "ELECTION
OF DIRECTORS, Stock Ownership of Directors and Executive
Officers" contained in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
Information called for by this Item is incorporated by reference
to "ELECTIONS OF DIRECTORS - Compensation of Directors" and
"ELECTION OF DIRECTORS - Certain Transactions" in the Proxy
Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
-------------------------------------------------------
(a) 1. The following report and consolidated financial
statements, included in the 1995 Annual Report to
Shareholders, have been incorporated herein by
reference:
Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993
<PAGE> 18
Consolidated Balance Sheets at December 31, 1995 and
1994
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Accountants
(a) 2. Supplementary Financial Information
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 and
F-4 of this Report.
(b) There were no reports on Form 8-K filed by the
Company in the fourth quarter of 1995.
(c) The exhibits are listed in the Index to Exhibits on
pages F-1, F-2, F-3 and F-4 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.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, The West Company, Incorporated
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE WEST COMPANY, INCORPORATED
(Registrant)
By /s/ Raymond J. Land
--------------------------------
Raymond J. Land
Senior Vice President, Finance
and Administration
(Principal Financial Officer)
March 29, 1996
--------------------------------
Date
20
<PAGE>
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ------ -------
<S> <C> <C>
William G. Little Chairman, Director, March 29, 1996
--------------------------------- President,and Chief
William G. Little Executive Officer
(Principal Executive Officer)
Tenley E. Albright Director March 29, 1996
-----------------------------------
Tenley E. Albright *
George W. Ebright Director March 29, 1996
------------------------------------
George W. Ebright*
George J. Hauptfuhrer Director March 29, 1996
------------------------------------
George J. Hauptfuhrer*
Director March 29, 1996
-------------------------------------
L. Robert Johnson
Raymond J. Land Senior Vice President, March 29, 1996
-------------------------------------- Finance and Administration
Raymond J. Land
(Principal Financial Officer)
William H. Longfield
--------------------------------------
William H. Longfield* Director March 29, 1996
21
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Signature Title Date
------------ ------ ------
<S> <C> <C>
John P. Neafsey Director March 29, 1996
--------------------------------------
John P. Neafsey*
Anna Mae Papso Vice President and March 29, 1996
-------------------------------------- Corporate Controller
Anna Mae Papso
(Principal Accounting Officer)
Monroe E. Trout Director March 29, 1996
---------------------------------------
Monroe E. Trout*
William S. West Director, Chairman March 29, 1996
----------------------------------
William S. West*
J. Roffe Wike, II Director March 29, 1996
---------------------------------------
J. Roffe Wike, II*
Hans Wimmer Director March 29, 1996
---------------------------------------
Hans Wimmer*
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
---------- ----- ------
<S> <C> <C>
Geoffrey F. Worden Director March 29, 1996
----------------------------------------
Geoffrey F. Worden*
Victor E. Ziegler Director March 29, 1996
----------------------------------------
Victor E. Ziegler*
* By Raymond J. Land pursuant to a power of attorney.
</TABLE>
23
<PAGE> INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Number
<S> <C> <C>
(3) (a) Restated Articles of Incorporation of the Company,
incorporated by reference to Exhibit (4) to the Company's
Registration Statement on Form S-8 (Registration No.
33-37825).
(3) (b) Bylaws of the Company, as amended and restated December 13,
1994, incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994
(File No. 1-8036).
(4) (a) Form of stock certificate for common stock incorporated by
reference to Exhibit (3) (b) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1989 (File No.
1-8036).
(4) (b) Flip-In Rights Agreement between the Company and American
Stock Transfer & Trust Company, as Rights Agent, dated as
of January 16, 1990, incorporated by reference to Exhibit 1
to the Company's Form 8-A Registration Statement (File No.
1-8036).
(4) (c) Flip-Over Rights Agreement between the Company and American
Stock Transfer & Trust Company, as Rights Agent, dated as
of January 16, 1990, incorporated by reference to Exhibit 2
to the Company's Form 8-A Registration Statement (File No.
1-8036).
(5) None.
(9) None.
(10) (a) Amended and Restated Put and Call Agreement dated as of
March 23, 1993 between Hans Wimmer, Wimmer Holding GbR and
the Company, 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) Registration Rights Agreement dated March 23, 1993 between
the Company and Hans Wimmer, 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) (c) 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).
</TABLE>
F- 1
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number Number
<S> <C> <C>
(10) (d) First Addendum to Lease dated as of May 22, 1995 between
Lion Associates, L.P. and the Company.
(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), incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993
(File No. 1-8036).
(10) (f) 1996 Annual Incentive Bonus Plan, incorporated by reference
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 (File No. 1-8036).
(10) (g) Non-Qualified Stock Option Plan for Non-Employee Directors,
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) (h) Pension agreement dated February 17, 1994 between Pharma-
Gummi Wimmer West GmbH and Ulf Tychsen, incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 (File No. 1-8036).
(10) (i) Form of agreement between the Company and eight of its
executive officers, incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No.1-8036).
(10) (j) Schedule of agreements with executive officers,
incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1995 (File
No. 1-8036).
(10) (k) 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) (l) Amendment No. 1 to Employees' Supplemental Retirement Plan.
(10) (m) Amendment No. 2 to Supplemental Employee's Retirement Plan,
incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1995 (File
No. 1-8036).
(10) (n) Retirement Plan for Non-Employee Directors of the Company,
as amended November 5, 1991, incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-8036).
(10) (o) Employment Agreement dated May 20, 1991 between the Company
and William G. Little, incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-8036).
(10) (p) Management Contract dated as of March 7, 1986, between Hans
Wimmer and Pharma-Gummi Wimmer West GmbH, as amended,
incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992 (File No. 1-
8036).
F- 2
25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number Number
<S> <C> <C>
(10) (q) Contract of Employment dated April 2, 1992 between Ulf C.
Tychsen and Pharma-Gummi Wimmer West GmbH, and related
letter agreement of even date and Addendum No. 1 dated
September 26, 1994, incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-8036).
(10) (r) Non-qualified Deferred Compensation Plan for Designated
Executive Officers, incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1994 (File No. 1-8036).
(10) (s) Amendment No. 1 to Non-Qualified Deferred Compensation Plan
for Designated Executive Officers, incorporated by
reference to the Company's Annual Report on form 10-K for
the years ended December 31, 1994 (File No. 1-8036).
(10) (t) Non-qualified Deferred Compensation Plan for Outside
Directors, 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) (u) Agreement and Plan of Merger dated March 24, 1995 among the
Company, Stoudt Acquisition Corp. and Paco Pharmaceutical
Services, Inc. incorporated by reference to the Company's
Schedule 14 D-1, filed with the Commission on March 30,
1995.
(10) (v) Non-qualified Stock Option Agreement dated September 8,
1995 between the Company and William G. Little,
incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1995
(File No. 1-8036).
(10) (w) Non-Compete Agreement dated January 30, 1995 between the
Company and Wendy L. Dixon.
(10) (x) Lease Agreement, dated August 31, 1978, between Paco Packaging,
Inc. and Nineteenth Lakewood Corp., as amended by Amendment
of Lease, dated November 30, 1978, Second Amendment of Lease,
dated August 6, 1979, Third Amendment of Lease, dated July 24,
1980 and Fourth Amendment of Lease, dated August 14, 1980,
incorporated by reference to the Exhibits to Paco Pharmaceutical
Services, Inc.'s Registration Statement on Form S-1,
Registration No. 33-48754, filed with the Commission.
(10) (y) Fifth Amendment of Lease, dated May 13, 1994, to the Lease
Agreement, dated August 31, 1978, between Paco Packaging, Inc.
and Nineteenth Lakewood Corp., incorporated by reference to
the Exhibits to Paco Pharmaceutical Services, Inc.'s Annual
Report on Form 10-K for the year ended March 31, 1994,
Commission file number 0-20324.
(10) (z) Lease Agreement, dated December 9, 1977, between Paco Packaging,
Inc. and New Oak Street Corp., as amended to Lease Agreement,
dated August 31, 1978, Second Amendment of Lease, dated April 8,
1979 and Third Amendment of Lease, dated November 16, 1983,
incorporated by reference to the Exhibits to Paco Pharmacuetical
Services, Inc.'s Registration Statement on Form S-1, Registration
No. 33-48754, filed with the Commission.
(10) (aa) Lease Agreement, dated April 7, 1986, between Northlake Realty Co.
Inc. and Paco Packaging, Inc., as amended by Amendment to Lease,
dated July 1, 1986, Second Amendment of Lease, dated June 15,
1987 between Paco Packaging and C.P. Lakewood, L.P., Agreement,
dated December 29, 1987, and Lease Modification Agreement, dated
December 13, 1989, incorporated by reference to the Exhibits to
Paco Pharmaceutical Services, Inc.'s Registration Statement on
Form S-1, Registration No. 33-48754, filed with the Commission.
(10) (bb) Collective Bargaining Agreement, dated November 30, 1994, by and
between Paco Pharmaceutical Services, Inc. and Teamsters Local 35
(affiliated with the International Brotherhood of Teamsters),
incorporated by reference to the Exhibit to Paco Pharmaceutical
Services, Inc.'s Quarterly Report on Form 10-Q for the period
ended December 31, 1994, Commission file number 0-20324.
(10) (cc) Indemnification Agreement, dated June 18, 1992, between Paco
Pharmaceutical Services, Inc. and R. P. Scherer Corporation
and R. P. Scherer International Corporation, incorporated
by reference to the Exhibits to Paco Pharmaceutical Services,
Inc.'s Registration Statement on Form S-1, Registration
No. 33-48754, filed with the Commission.
(11) Not Applicable
(12) Not Applicable
(13) 1995 Annual Report to Shareholders.
(16) Not applicable.
(18) None.
(21) Subsidiaries of the Company.
(22) None.
F- 3
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
Exhibit Page
Number Number
<S> <C> <C>
(23) Consent of Independent Accountants.
(24) Powers of Attorney.
(27) Financial Data Schedules.
(28) Not applicable.
(99) None.
<PAGE>
27
F - 4
</TABLE>
<PAGE>
<PAGE> Exhibit 10 (d)
FIRST ADDENDUM TO LEASE
This is a First Addendum to Lease (the First Addendum ) dated as of
May 22, 1995, between Lion Associates, L.P. ( Landlord ) and The West
Company, Incorporated ( Tenant ).
W I T N E S S E T H:
WHEREAS, Landlord and LuMont Associates, L.P. ( LuMont ) entered
into a Lease, dated December 31, 1992 (the Lease ), relating to certain
real property located in Exton, Chester County, Pennsylvania and
improvements located thereon and referred to as the Lionville Corporate
Center;
WHEREAS, LuMont assigned the Lease to Tenant pursuant to a Master
Assignment and Assumption Agreement dated as of July 14, 1993 which Master
Assignment and Assumption Agreement is attached to this First Addendum
as Exhibit A; and
WHEREAS, Landlord and Tenant have agreed to amend the
Lease to provide for the leasing of additional square feet in the building
(the Additional Space ).
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration and intending to be legally bound
Landlord and Tenant hereby agree as follows:
I. Terms. Capitalized terms used in this Addendum and not defined
-----
herein shall have the meanings ascribed to them in the Lease.
2. Article I, Paragraph 2. Article I, Paragraph 2 is hereby amended
-----------------------
and restated in its entirety to read as follows:
As of June 1, 1995, the Demised Premises consists of approximately two
hundred sixty-two thousand nine hundred (262,900) square feet located in
a building (the Building ) owned by Landlord situatedat estate
(the Land) described on Exhibit "B" attached hereto and made a part
hereof and outlined in green on Exhibit B-1, attached hereto and made a
part hereof. The Prime Space comprises not less than two hundred
and fifty thousand (250,000) square feet of the Demised Premises and the
Basement Space (including exterior flammable storage) comprises
approximately twelve thousand nine hundred (12,900) square feet of the
Demised Premises.
3. Article II, Paragraph 2(a). Article II, Paragraph 2(a) is hereby
--------------------------
amended and restated in its entirety to read as follows:
(a) First Option. Upon completion of the term of this Lease, the Tenant
-------------
shall have the right to extend the term for five (5) years (the First
Option ) for an annual fixed rent of twenty one dollars and sixty
cents ($21.60) per square foot for the Prime Space and five dollars and
fifty cents ($5.50) per square foot for Basement Space. All other terms
covenants and conditions will remain the same.
4. Exhibit "C". Exhibit C to the Lease will be amended and restated
-----------
to read in its entirety as set forth on Exhibit C to this Addendum.
5. Other Matters.
--------------
<PAGE>
(a) Article III, Paragraph 3(d) of the Lease, captioned Inclusion of
Additional Space within Demised Premises, shall be deemed to apply
to the additional space leased pursuant to this Addendum,
notwithstanding the fact that this Addendum does not relate to the
leasing of additional space pursuant to Tenant s fixed option rights under
the Lease.
(b) The execution of this Addendum and the leasing of the additional
space contemplated by this Addendum will not impose upon Tenant the
obligation to construct a demising wall as contemplated by Article
III, Paragraph 3(f) of the Lease.
(c) Except as expressly set forth above, all other terms and
conditions of the Lease remain unchanged and Landlord and Tenant confirm
and ratify the Lease Assignment, dated July 14, 1993, from LuMont
to Tenant.
IN WITNESS WHEREOF, the parties have caused this Addendum to be
executed as of the date and year first written above.
THE WEST COMPANY, INCORPORATED
Witness By: /s/ Raymond J. Land
-----------------------------------
Raymond J. Land
Senior Vice President
Finance and Administration
LION ASSOCIATES, L.P.
Witness By: /s/ Timothy O. Fanning
------------------------------------
Timothy O. Fanning
President, Fitzpatrick-Fanning
Management Co., General Partner
Exhibit 10 (L)
AMENDMENT NO. 1
THE WEST COMPANY INCORPORATION
SUPPLEMENTAL EMPLOYEES' RETIREMENT PLAN
The West Company, Incorporated hereby amends its Supplemental Employee
Retirement Plan as set forth below:
1. Section 3 is hereby deleted and the following substituted therefor:
3. The monthly normal retirement benefit calculated under this
Plan at a Participant's attainment of age 65 shall be equal to the benefit
that would have been paid under the SERP if the amount of the monthly benefit
under the SERP as in effect when the Participant attained age 65 (assuming
payment in the form of a single life annuity with no period certain) was
calculated (i) by taking into account compensation a Participant elected to
defer under The West Company Non-Qualified Plan for Designiated Executive
Officers for purposes of determining his Average Annual Earnings, and (ii)
without taking the Code Limits into account, reduced by the offet provided
in paragraph 4.
To record the adoption of this Amendment No. 1 to the Plan, The
West Company, Incorporated has caused its authorized officers to affix its
name and seal this 1st day of November, 1994.
(CORPORATE SEAL) THE WEST COMPANY, INCORPORATED
Attest: By:
----------------------------- ---------------------------------
George R. Bennyhoff
Senior Vice President
Human Resources and Public Affairs
Exhibit 10 (W)
NON-COMPETITION AGREEMENT
-------------------------
EMPLOYEE: Wendy L. Dixon
--------------------
In consideration of your employment by The West
Company, Incorporated or any of its subsidiaries or
affiliates (the "Company") and the Company's promise to make
the payments set forth below, the Company and you agree as
follows:
Definitions: As used in this Agreement:
------------
(a) the "Restrictive Period" means that period
of time which commences on the date hereof and ends on the
first anniversary of the date on which you cease to be
employed by the Company; provided, however, the Restricted
Period shall be automatically extended for any period of
time during which you have breached, or threatened to
breach, any provision hereof;
(b) the "Company's Business" means (i) the
manufacture and sale of stoppers, closures, containers,
medical device components and assemblies made from
elastomers, metal, plastic and glass for the health care and
consumer products industries; and (ii) any other business
conducted by the Company during the Restrictive Period in
which you have been actively involved while an employee of
the Company;
(c) "Person" means an individual, a corporation,
a partnership, an association, a trust or other entity or
organization;
(d) an "Affiliate" of any Person means any
Person directly or indirectly controlling, controlled by or
under common control with such Person; and
(e) "Territory" shall mean Canada, the United
States, Mexico, Puerto Rico, Argentina, Brazil and Columbia.
2. Restriction on Competition. During the
-------------------------------
Restrictive Period, you will not, and will not permit any
of your Affiliates, or any other Person, directly or
indirectly, to:
<PAGE>
(a) engage in competition with, or acquire a
direct or indirect interest or an option to acquire such an
interest in any Person engaged in competition with, the
Company's Business in the Territory (other than an interest
of not more than 5 percent of the outstanding stock of any
publicly traded company);
(b) serve as a director, officer, employee or
consultant of, or furnish information to, or otherwise
facilitate the efforts of, any Person engaged in competition
with the Company's Business in the Territory; or
(c) solicit, employ, interfere with or attempt
to entice away from the Company any employee who has been
employed by the Company in an executive or supervisory
capacity in connection with the conduct of the Company's
Business within one year prior to such solicitation,
employment, interference or enticement.
3. Consideration. In consideration of your
-------------
agreement not to compete contained in paragraph 2, commencing
on the date on which you are no longer employed by the Company
(the "Exit Date") and until the end of the Restrictive
Period, the Company will pay you, on a biweekly basis, an
amount equal to your base salary during the twelve-month
period prior to the Exit Date, less normal deductions. During
the period from the Exit Date until the end of the
Restrictive Period, the Company will also continue on your
behalf the medical, dental and life insurance coverage
offered to active employees, provided you make any required
contributions with respect to each such plan. Notwithstanding
the foregoing, if the Company terminates your employment
for "cause", the Company shall not be obligated to make such
payments or provide such benefits. Termination shall be
deemed for cause if you are terminated for dishonesty,
disloyalty, willful misconduct, gross negligence, theft,
conviction of a crime, drunkenness, unethical business conduct,
refusal to perform your duties or a breach of this Agreement.
Your obligations under Section 2 hereof shall continue
notwithstanding termination of your employment for cause.
The foregoing description of termination for cause
notwithstanding, you or the Company may terminate your
employment relationship at any time, for cause or for no
reason at all.
4. Enforcement. You acknowledge that a breach of
--------------
this Agreement will cause the Company immediate and
irreparable harm for which the Company's remedies at law
(such as money damages) will be inadequate. The Company
<PAGE>
shall have the right, in addition to any other rights it
may have, to obtain an injunction to restrain any breach or
threatened breach of this Agreement. Should any provision of
this Agreement be adjudged to any extent invalid by any
competent tribunal, that provision will be deemed modified
to the extent necessary to make it enforceable. The Company
may contact any person with or for whom you work after my
employment by the Company ends and may send that person a copy
of this Agreement.
5. Binding Effect. Your undertakings hereunder will
--------------
bind you and your heirs and legal representatives regardless
of (a) the duration of your employment by the Company, (b)
any change in your duties or the nature of your employment,
(c) the reasons for manner of termination of your employment,
and (d) the amount of your compensation.
6. Representations by Employee. You hereby
-------------------------------
represent that you have read and fully understand your
duties and obligations as set forth herein and that such
duties and obligations would not unduly restrict or curtail
your legitimate efforts to earn a livelihood following any
termination of your employment with the Company, whether for
cause or otherwise.
7. Waivers. The waiver by the Company of a breach
-------
or threatened breach of any provision of this Agreement by you
shall not operate or be construed as a waiver of any
subsequent breach or threatened breach by you unless and to
the extent that such waiver is explicitly set forth in a
writing delivered by the Company to you.
8. Assignment. The Company may, upon written notice
----------
to you but without your consent, assign its rights and
interests hereunder to any party including, without limitation,
any successor of its business.
9. Miscellaneous. This Agreement (a) shall in no
--------------
way bind you or the Company to a specific term of employment,
(b) supersedes any prior understandings and constitutes
the entire understanding between the Company and you about
the subject matter covered by this Agreement, (c) may be
modified or varied only in writing signed by the Company
and you, (d) will inure to the benefit of the successors and
assigns of the Company, and (e) will be governed by
Pennsylvania law.
Dated: January 30, 1995 /s/ Wendy L. Dixon
------------------ --------------------
Wendy L. Dixon
THE WEST COMPANY, INCORPORATED
By: /s/ George R. Bennyhoff
------------------------------
George R. Bennyhoff
Senior Vice President,
Human Resources
<PAGE> Exhibit 13
FINANCIAL REVIEW
--------------------
The Company operates in one industry segment: manufacturing and
marketing specialized products that satisfy the unique filling,
sealing, dispensing and delivery needs of the healthcare and
consumer products industries. Over 85% of the Company's revenues
are generated by the healthcare markets. The Company's products
include stoppers, closures, containers, medical device components
and assemblies made from elastomers, metal and plastic. The
Company also provides contract packaging and contract
manufacturing services and manufactures related packaging
machinery.
The following is management's discussion and analysis of the
Company's operating results for the three years ended December
31, 1995 and its financial position as of year-end 1995. The
information should be read in conjunction with the financial
statements and accompanying notes appearing elsewhere in this
report.
RESULTS OF OPERATIONS
---------------------
The Company's 1995 net income was $28.7 million, or $1.73 per
share, compared with net income of $27.3 million, or $1.70 per
share, in 1994 and $23.5 million, or $1.48 per share, in 1993.
In 1993, the Company standardized December 31 as the reporting
year end for all consolidated subsidiaries. This change required
all international subsidiaries to report December 1993 results in
the reporting year 1993, resulting in the inclusion of 13 months
of operating results in 1993 for these subsidiaries. This change
added approximately $.01 per share to 1993 earnings compared with
1994. In 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, which changed the Company's
accounting for income taxes to the liability method. The
cumulative impact of this method of income tax accounting was to
reduce deferred tax liabilities recorded as of January 1, 1993,
adding $.06 per share to 1993 net income.
In 1995, the Company acquired Paco Pharmaceutical Services,
Inc. (Paco), a provider of contract manufacturing and contract
packaging services to pharmaceutical and consumer products
companies in the United States and Puerto Rico. Paco's operating
results have been consolidated since May 1, 1995. In 1994, the
Company acquired a 51% ownership interest in Schubert Seals A/S
(Schubert), a Danish manufacturer of metal seals for the European
pharmaceutical industry, and its operating results have been
consolidated since June 1, 1994. In December 1995, the Company
purchased the remaining 49% minority interest in Schubert.
Senetics Inc., a domestic company specializing in innovative
closure systems for oral and inhalation drug delivery, was also
acquired early in 1994. The terms of these transactions are
described in the Note "Acquisitions and Investments" to
the Consolidated Financial Statements.
<PAGE>
NET SALES
----------
Net sales were $412.9 million in 1995, an increase of 13%
compared with net sales in 1994 of $365.1 million. The sales
increase reflects the acquisition of Paco and stronger European
currencies which increased reported U.S. dollar sales amounts by
$10.6 million. Excluding these two items, consolidated net sales
were slightly lower compared with 1994.
Excluding the impact of stronger international currencies
versus the U.S. dollar, the Company's 1995 net sales from
products used by the healthcare industry worldwide were slightly
lower compared with 1994 sales levels. Government and consumer
pressure to cut healthcare costs has limited the ability to
increase prices and has caused more customers to use alternative
packaging components, which are lower priced. In 1995, product
sales to international healthcare markets increased, but net
sales to domestic markets declined. The improvement in
international healthcare market sales was attributable to the
following: inclusion of a full year of Schubert's sales in
consolidated results compared with seven months in 1994, an
increase in demand and higher prices in European markets,
continued market penetration in the Asia/ Pacific region, and
stronger demand and higher prices in markets in South America in
the first half of 1995. Domestic sales suffered, despite volume
equal to 1994, due to lower demand for certain high-value
packaging components, customer elimination of certain product
lines and the more competitive environment.
Paco's contract packaging and contract manufacturing
services to both pharmaceutical and consumer companies added
$38.9 million to 1995 net sales. As a result of the
consolidation of many pharmaceutical and medical device companies
and the pressure to reduce costs, the demand for these contract
services is expected to grow.
Consumer products sales rose 4% in 1995. This increase
reflects demand for Spout-Pak^R used on gable carton juice
containers manufactured by International Paper Company.
Machinery sales declined to almost half 1994 levels, as
customers' capital investment programs were suspended as newly
merged pharmaceutical companies combined their production
capacities.
In 1994, net sales increased by 5%, or $16.4 million, over
1993 levels, including $2.3 million due to stronger European and
Asia/Pacific currencies. December 1992 sales of international
subsidiaries totalling $8.8 million were included in 1993;
excluding this extra month of sales would increase the year-over-
year sales increase to $25.2 million, or 7%. Measured at
constant currency exchange rates, product sales to the healthcare
industry increased in 1994 by 5% over the comparable 12 months of
1993. Increased healthcare sales were generated by market
penetration in the Asia/Pacific region and acquisitions and
volume increases in European and domestic healthcare markets.
Schubert and Senetics, both acquired in 1994, added $8.4 million
to total sales. The volume increases were the result of new
2
<PAGE>
product offerings and increased demand. The sales in both U.S.
and European markets were negatively impacted by price reductions
on certain products due to government and consumer pressure to
reduce healthcare costs and by competition. Demand in Brazil
for healthcare products increased in the last half of 1994, but
sales in South America were lower compared to 1993. Sales to
consumer products markets rose 18% in 1994 reflecting demand for
Spout-Pak^R and the Safety SQUEASE^R product manufactured
for Procter & Gamble's Scope^R and Aleve^R products.
Machinery sales were also $2.4 million higher, following
1993 delays in customers' capital spending programs.
GROSS PROFIT
-------------
The consolidated gross margin in 1995 was 28.6%, and gross
profit was $118.2 million. The gross margin reflects a
significant decline from the 32.1% margin realized in 1994, and
resulted in an increase in gross profit of less than 1%. The
reduced gross margin, in part, reflects the lower-margin service
operations provided by Paco, which reduced consolidated gross
margins more than one percentage point. The Company is working
to increase Paco's margin through automation, increased
throughput and pricing that reflects current cost levels. The
remaining margin reduction reflects higher raw material costs,
higher wage costs primarily in South America and a lower-margin
product mix. In addition, labor and overhead costs at plants
prepared to support customers' launches of several new products
were only partially recovered from these customers. Customers
have either significantly delayed or, in two cases, cancelled
these new product launches. Finally, the Company has incurred
higher start-up costs as a result of shifting production to new
manufacturing sites to create centers of manufacturing excellence
as part of a program to consolidate global manufacturing. These
factors were evident in a 4% reduction in gross profit from
healthcare product sales. Despite these factors margins
increased on European and Asia/Pacific sales due to volume and
price increases, but domestic and South America sales margins
declined.
Future results are difficult to predict due to the
transformation in our healthcare markets. We believe that
pressure to decrease healthcare costs and increased competitive
activity will continue to impact the Company's margins. However,
we are evaluating our operations with the intent of being better
able to respond to these cost pressures in 1996. We will
continue to focus on delivering earnings growth and shareholder
value.
Gross profit on consumer product sales was slightly lower
than 1994, due to a lower-margin product mix, increased material
costs which were passed through to customers on a prospective
basis, and higher equipment repair costs. The low machinery
sales volume in 1995 resulted in an operating loss compared with
a positive contribution in 1994, when sales were double the 1995
level.
The Company continued to invest in the installation of
Manufacturing Resource Planning Systems (MRPII) and training in
Total Quality Management (TQM) techniques, which began in 1992.
3
<PAGE>
MRPII is an information management system that integrates data
related to sales forecasts, production scheduling, purchasing,
inventory control and capacity requirements planning. MRPII
installation will continue, including installations at newly
acquired subsidiaries. Under TQM, employees work in multi-
disciplined teams to resolve business and process problems. All
of the Company's employees are trained in basic TQM tools.
Beginning in 1996, TQM training will address improvements
in administrative processes, in addition to production
processes. The continued benefits of these programs
are expected to be evident in greater efficiencies and customer
satisfaction.
The gross margin in 1994 was 32.1% and gross profit was
$117.2 million, an 11% increase over 1993. The improvement in
the gross margin of 1.9 percentage points over 1993's gross
margin was the result, in part, of higher sales volume, but a
significant portion of the increase reflects the use of TQM
techniques, MRPII systems and new technologies, which combined to
improve productivity, yields and logistics. These factors were
evident in a 7% increase in gross profit earned on sales to
healthcare markets, with higher contributions generated from
sales to all markets served. Margins increased on sales to
domestic and South America markets, while Asia/Pacific and
European market sales generated margins comparable to 1993.
Gross profit on consumer products market sales more than
doubled in 1994 compared with 1993. This reflects the
significant increase in volume, the higher value-added product
sales made possible through the elimination of small-volume
customers and less profitable product lines begun several years
ago, and the productivity improvements generated through MRPII
systems and use of TQM techniques. Gross profit related to
machinery operations increased primarily due to the volume of
orders and higher sales in the year.
EXPENSES
---------
Selling, general and administrative expenses totalled $69.9
million in 1995 compared with $70.1 million in 1994. This
decrease represented a reduction of .4%, and these expenses
represented 16.9% of net sales compared with 19.2% in 1994.
However, selling, general and administrative expenses include the
expenses of acquired companies (Paco's expenses for the eight
months from May 1, 1995 and Schubert's expenses for an additional
five months in 1995 versus 1994) and the impact of stronger
international currencies. Eliminating these increases, which
approximate $5.5 million, would improve the year-over-year
reduction in expenses to 8.3%. This significantly lower level of
expenses primarily reflects absence of incentive bonus
compensation because the Company did not meet the 1995 financial
goals established for payout and significantly lower severance
costs in 1995. Excluding the impact of bonus and severance cost
differences would result in spending that was virtually equal to
1994 measured at constant exchange rates for the comparable
operating units. Productivity improvements due to training and
systems development have offset the inflationary increases in
wages and benefits, other outside service costs and supplies.
4
<PAGE>
Selling, general and administrative expenses increased by
$6.1 million in 1994, or 10%, over 1993 levels. The increase is
attributable, in part, to $2.8 million of higher severance costs
related to a global management reorganization and to productivity
improvements. The global reorganization established worldwide
functional responsibilities that had previously been carried out
on a regional basis, thereby increasing management efficiencies
and improving service to the Company's multi-national customers.
The organization was changed in anticipation of the year-end 1994
buyout of the minority owners of five European subsidiaries. The
increase also reflects $1.1 million of rent and other expenses
related to the Company's new headquarters facility, which was
occupied in September 1993, consolidation of $1.7 million of
expenses of acquired companies as well as higher costs related to
self-insured claims and outside service costs and exchange rate
differences.
Transactions included in the other income/expense category
netted to $1.5 million of income in 1995 compared with net
expenses totalling $1.7 million in 1994 and $.5 million in 1993.
Included in this item are foreign currency translation losses
totalling $.8 million in 1995 compared with $2.3 million and $5.4
million in 1994 and 1993, respectively. These translation losses
are driven mainly by high inflation in Brazil, which has been
significantly reduced since mid-1994 as a result of Brazil's
economic plan designed to reduce inflation and stabilize the
currency. Also included are foreign exchange transaction losses
of $.6 million in 1995, $.5 million in 1994 and $.2 million in
1993. The higher transaction losses in 1995 and 1994 were caused
generally by realignment of European currencies. Foreign
exchange losses are offset by interest income in 1995 totalling
$2 million and were offset, in part, in 1994 and 1993 by
interest income totalling $1.2 million and $2.3 million,
respectively. Historically interest income was generated mainly
in Brazil, but has been declining since mid-1994 due to the
economic program which reduced interest rates in that country.
Cash balances in other regions have grown in recent years and the
interest income has offset, in part, the decline in Brazil. Net
losses on real estate and investment sales totalled $.2 million
in 1995 and $.5 million in 1994 compared with gains of $1.4
million in 1993 from sales of the Company's former headquarters
and research center and its ownership of Tri/West Systems, Inc.
INTEREST
---------
Interest costs totalled $7.8 million in 1995 and were more
than double the levels of the previous two years. Interest
capitalized as part of the cost of capital asset acquisitions
also doubled to $.5 million in 1995 compared with the two
previous years. This increase in interest costs reflects
financing related to the acquisition of Paco in 1995, the
November 1994 acquisition of the minority ownerships in five
European subsidiaries and in Schubert, and investments in
DanBioSyst UK Ltd.
The average consolidated debt levels increased by $65
million in 1995, and interest rates also were higher in the United
States.
5
<PAGE>
In 1994, interest expense attributable to the consolidation
of companies acquired in 1994, mainly attributable to capitalized
leases, concealed a reduction in 1994 interest expense from
1993. The reduction was attributable to lower average domestic
debt levels and lower average interest rates on debt of European
subsidiaries.
INCOME TAXES
-------------
The effective tax rate on consolidated income was 32.8% for
1995. Two factors were the primary cause of the low rate.
First, the Company changed its tax accounting method for Puerto
Rico operations in accordance with a U.S. Internal Revenue
Service Procedure released late in 1994. The change related to
the calculation of transfer pricing and applied retroactively as
well as prospectively. The impact of the tax change
resulted in a 3.3 percentage point decline in the effective tax
rate. Second, the Company recorded the benefit of tax credits
which were assured realization, reducing the tax rate by 1.7
percentage points. These benefits were offset somewhat by an
increase in the statutory tax rate in France, which required
adjustment of deferred tax balances which increased the effective
rate by .6 of a percentage point. Excluding the impacts of these
adjustments associated with prior year tax accruals, the
tax rate would have been approximately 36%.
The effective tax rate in 1994 was 31.8% versus 38.2% in
1993. The low tax rate in 1994 reflects the one-time impact of a
net refund of foreign taxes paid by subsidiaries in prior years.
The refund was triggered by the payment of dividends. In
addition, foreign tax loss carryforwards were assured realization
due to the tax consolidation of several operating subsidiaries,
thereby reducing the tax asset valuation allowance previously
recorded on these potential tax benefits. The transactions were
made possible by the acquisition of the minority ownerships in
these subsidiaries at year-end 1994. Finally, the 1994 effective
income tax rate declined due to lower state income tax
liabilities and due to the higher proportion of earnings being
generated in lower tax jurisdictions.
MINORITY INTERESTS AND EQUITY IN AFFILIATES
-------------------------------------------
Minority interests in net income of subsidiaries totalled
$.8 million in 1995, and related only to Schubert and a
subsidiary in Spain. Late in 1995, the remaining minority
interest in Schubert was purchased. The large change in minority
interests compared to 1994's $1.9 million reflects the late 1994
acquisition of the minority ownerships in five European
subsidiaries. These acquisitions also are the major reason for
the change in minority interests in the 1994 comparison with
1993.
Income from investments in affiliated companies increased to
$.9 million from $.5 million in 1994. The increase reflected
higher sales and improved margins for Daikyo Seiko, Ltd., a
Japanese company in which the Company owns a 25% equity stake.
6
<PAGE>
This increase was offset, in part, by lower results for the
Schott West Pharmaceutical Glass Company in which the Company
held a 40% partnership interest through September 30, 1995, at
which point the Company sold its interest. Results of the
Company's investment in affiliates in Mexico were flat compared
with 1994 as the impact of a better than 50% devaluation of the
Mexican peso and the resulting translation loss on net monetary
assets offset operating income.
Income from affiliates decreased in 1994 to half of the 1993
level. The reduction reflected the translation loss on net
monetary assets of the Company's affiliates in Mexico due to the
initial devaluation of the Mexican peso in late December 1994.
Offsetting these losses, in part, was a continued improvement in
the glass manufacturing operations of Schott West Pharmaceutical
Glass Company. Operating results of the Company's affiliates
in Japan and Mexico were lower in 1994 due to lower margins and
sales.
FINANCIAL POSITION
--------------------
The Company's financial position continues to be strong. Cash
flow from operations totalled $46.1 million. Working capital at
December 31, 1995 totalled $86.6 million, a ratio of current
assets to current liabilities of 2.4 to 1, and includes a cash
balance of $17.4 million. Debt to total invested capital (total
debt, minority interests and shareholders' equity) was 31%,
despite a near doubling of the outstanding debt balances from
year-end 1994 levels. The Company believes that its financial
position and current capitalization indicate an ability to
finance substantial future growth.
The increase in working capital reflects the consolidation
of Paco and the early 1995 long-term financing of the final
installment on the 1994 acquisition of the minority interests in
five European subsidiaries and maturing debt instruments.
Accounts receivable balances, excluding Paco, declined from year-
end 1994 levels mainly because the December sales levels were
lower in 1995. Inventories were higher primarily in South
America and Europe reflecting lower than anticipated December
sales levels. Better production planning systems have aided the
control of inventories. Implementation at additional sites in
1996 will provide further opportunities to reduce inventory
levels.
The cash flow from operations of $46.1 million was
supplemented by $4.2 million of cash received from the sale of
the Company's interest in Schott West Pharmaceutical Glass
Company and a small division of Schubert. These funds were more
than adequate to cover $32.9 million of 1995 fixed asset
acquisitions and tooling advances to customers and $8.1 million
of dividends to shareholders ($.49 per share). The remaining
cash flow from operations, in addition to net new borrowings of
$49.2 million and available cash, was used to cover acquisition
payments for Paco, the minority-ownership interests in five
7
<PAGE>
European subsidiaries and Schubert and an additional 10%
ownership investment in DanBioSyst UK Ltd. Cash from exercise of
employee stock options totalled $2.8 million. The outstanding
debt balance was $114.3 million at December 31, 1995 compared
with $57.8 million at year-end 1994.
In July 1995, the Company entered into a new loan agreement,
providing for debt facilities totalling up to $85 million. The
agreement encompasses two revolving credit facilities. The first
facility provides for borrowings up to $30 million and has a term
of 364 days, renewable at the lender's option. The second
facility provides for borrowings up to $55 million and has a term
of five years. At year-end 1995, the Company had $23.3 million
outstanding under the 364-day facility and nothing under the
five-year facility. In addition, unused short-term committed
credit facilities totalling $10.8 million and unused long-term
credit facilities totalling $6.1 million at December 31, 1995
were available to subsidiaries.
The increase in assets related to the acquisition of Paco
and the Schubert minority interest reduced the asset turnover
ratio to .94 for 1995. Return on average shareholders' equity
was 11.9% for 1995.
1996 REQUIREMENTS
------------------
Cash requirements for capital projects in 1996 are estimated
at $36 million. These projects focus on cost reduction and
quality improvements through technology upgrades and product and
process standardization. New product tooling is also planned.
Acquisition and implementation of new information management
systems will continue as will maintenance and improvements to the
existing production capacity.
In accordance with the Company's foreign exchange management
policy, the adverse consequences resulting from foreign currency
exposure are mitigated by engaging in certain hedging activities.
Foreign exchange forward contracts are used to minimize exposure
related to foreign currency transactions and commitments for raw
material purchases. The "Fair Value of Financial Instruments"
Note to the Consolidated Financial Statements explains the impact
of such hedges on the Company's results of operations and
financial position. Although none were outstanding at year-end
1995, the Company has in the past also entered into currency and
interest rate swap agreements to minimize risk to interest rate
changes and currency movements on certain significant borrowings.
Cash requirements for remedial activity related to
environmental cleanup are not expected to exceed $1 million in
1996. In 1995, payments related to environmental cleanup
totalled $.7 million. All of the payments made in 1995 were
covered by the estimated liability recorded in prior years,
although additional liability totalling $.5 million was accrued
in 1995 because of changes in the extent of future cleanup
activities required. The Company has been indemnified by other
financially responsible parties against future government claims
relating to groundwater contamination at a Puerto Rico site, and
8
<PAGE>
no additional amounts have been accrued with respect to this
site.
In 1996, in addition to cash flow from operations, the
Company expects to receive proceeds from employee stock option
exercises although options expiring in 1996 are not significant.
Management believes these sources of cash, available credit
facilities and the Company's current capitalization provide
sufficient flexibility to meet future cash flow requirements.
9
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
(in thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $412,900 100% $365,100 100% $348,700 100%
Cost of goods sold 294,700 71 247,900 68 243,600 70
------------------------------------------------------
Gross profit 118,200 29 117,200 32 105,100 30
Selling, general and administrative expenses 69,900 17 70,100 19 64,000 18
Other (income) expense, net (1,500) - 1,700 1 500 -
------------------------------------------------------
Operating profit 49,800 12 45,400 12 40,600 12
Interest expense 7,300 2 3,300 1 3,100 1
------------------------------------------------------
Income before income taxes and minority interests 42,500 10 42,100 11 37,500 11
Provision for income taxes 13,900 3 13,400 3 14,300 4
Minority interests 800 - 1,900 1 1,700 1
-----------------------------------------------------
Income from consolidated operations 27,800 7% 26,800 7% 21,500 6%
Equity in net income of affiliated companies 900 --- 500 --- 1,000 ---
------------------------------------------------------
Income before cumulative effect of change in
accounting method 28,700 27,300 22,500
Cumulative effect to January 1, 1993 of the change
in accounting for income taxes - - 1,000
------------------------------------------------------
Net income $ 28,700 $ 27,300 $ 23,500
------------------------------------------------------
Net income per share:
Income before cumulative effect of change in
accounting method $ 1.73 $ 1.70 $ 1.42
Cumulative effect of change in accounting method - - .06
------------------------------------------------------
$ 1.73 $ 1.70 $ 1.48
------------------------------------------------------
Average shares outstanding 16,557 16,054 15,838
------------------------------------------------------
10
<PAGE>
The accompanying notes are an integral part of the financial statements.
Certain items in 1994 and 1993 have been reclassed to conform with current
classifications.
</TABLE>
11
<PAGE>
CONSOLIDATED BALANCE SHEETS
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES AT DECEMBER 31, 1995 AND 1994
(in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 1995 1994
----------------------
Current assets:
Cash, including equivalents (1995--$4,400; 1994--$15,900) $ 17,400 $ 27,200
Accounts receivable, less allowance (1995--$1,900; 1994--$1,000) 67,900 57,800
Inventories 48,300 38,100
Other current assets 14,800 13,600
----------------------
Total current assets 148,400 136,700
----------------------
Property, plant and equipment 440,100 366,800
Less accumulated depreciation and amortization 210,800 174,600
----------------------
229,300 192,200
Investments in affiliated companies 21,600 21,900
Goodwill 63,000 33,900
Deferred charges and other assets 17,800 12,700
----------------------
$ 480,100 $397,400
----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,500 $ 19,200
Notes payable 8,300 2,700
Accounts payable 22,500 17,000
Accrued expenses:
Salaries, wages and benefits 9,700 12,000
Income taxes payable 3,400 -
Other 16,400 35,400
----------------------
Total current liabilities 61,800 86,300
----------------------
Long-term debt, excluding current portion 104,500 35,900
Deferred income taxes 34,300 24,400
Other long-term liabilities 25,200 21,600
12
<PAGE>
Minority interests 200 1,900
Shareholders' equity:
Preferred Stock, shares authorized: 3,000
shares issued and outstanding: 1995 -0-; 1994 -0-
Common Stock, par value $.25 per share; shares authorized: 50,000
shares issued: 1995--16,845; 1994--16,845
shares outstanding: 1995--16,621; 1994--16,464 4,200 4,200
Capital in excess of par value 23,500 23,200
Cumulative foreign currency translation adjustments 20,100 17,100
Unrealized holding gains (losses) on securities, net 300 -
Retained earnings 210,200 189,800
----------------------
258,300 234,300
Less Treasury Stock (1995--224 shares; 1994--381 shares) 4,200 7,000
----------------------
Total shareholders' equity 254,100 227,300
----------------------
$ 480,100 $397,400
----------------------
The accompanying notes are an integral part of the financial statements.
Certain items in 1994 have been reclassed to conform with current
classifications.
</TABLE>
13
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES FOR THE YEARS
ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Capital in
Common excess of Retained Treasury
(in thousands, except per share) Stock par value Other earnings Stock Total
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $ 4,200 $19,300 $12,200 $153,100 $(20,200) $168,600
------------------------------------------------------------
Net income 23,500 23,500
Shares issued under stock plans 700 3,200 3,900
Cash dividends declared ($.42 per share) (6,700) (6,700)
Foreign currency translation adjustments (1,200) (1,200)
------------------------------------------------------------
Balance, December 31, 1993 4,200 20,000 11,000 169,900 (17,000) 188,100
------------------------------------------------------------
Net income 27,300 27,300
Shares issued under stock plans 300 3,400 3,700
Shares issued for acquisition 2,900 6,600 9,500
Cash dividends declared ($.46 per share) (7,400) (7,400)
Foreign currency translation adjustments 6,100 6,100
------------------------------------------------------------
Balance, December 31, 1994 4,200 23,200 17,100 189,800 (7,000) 227,300
------------------------------------------------------------
Net Income 28,700 28,700
Shares issued under stock plans 300 2,800 3,100
Cash dividends declared ($.50 per share) (8,300) (8,300)
Foreign currency translation adjustments 3,000 3,000
Unrealized gains (losses) on securities, net 300 300
------------------------------------------------------------
Balance, December 31, 1995 $4,200 $23,500 $20,400 $210,200 $(4,200) $254,100
------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
14
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
-------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 28,700 $27,300 $23,500
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 29,600 23,100 22,000
Loss (gain) on sales of real estate and investments 200 500 (1,400)
Deferred income taxes 2,000 (2,700) 1,400
Minority interests 800 1,900 1,800
Equity in undistributed earnings of affiliated companies, net (700) (200) (500)
(Increase) decrease in accounts receivable 1,400 (8,900) (4,900)
(Increase) decrease in inventories (4,500) (700) 2,700
Decrease in other current assets 500 2,500 3,000
Increase (decrease) in other current liabilities (13,100) 3,000 (7,100)
Other operating items 1,200 4,000 (2,000)
-------------------------------
Net cash provided by operating activities 46,100 49,800 38,500
-------------------------------
Cash flows from investing activities:
Property, plant and equipment acquired (31,300) (27,100) (33,500)
Proceeds from sales of assets 4,500 3,700 8,000
Payments for acquisitions, net of cash acquired (72,200) (13,900) -
Customer advances, net of repayments (1,600) - -
-------------------------------
Net cash used in investing activities (100,600) (37,300) (25,500)
-------------------------------
Cash flows from financing activities:
New long-term debt 80,800 18,100 1,600
Repayment of long-term debt (37,100) (3,000) (6,500)
Notes payable, net 5,500 (3,000) (2,700)
Issuance of Common Stock, net 2,800 3,400 3,900
Capital contribution by minority owner - 400 -
Dividend payments (8,100) (7,200) (7,000)
-------------------------------
Net cash provided by (used in) financing activities 43,900 8,700 (10,700)
-------------------------------
15
<PAGE:
Effect of exchange rates on cash 800 800 (100)
-------------------------------
Net (decrease) increase in cash and cash equivalents (9,800) 22,000 2,200
Cash and cash equivalents at beginning of year 27,200 5,200 3,000
-------------------------------
Cash and cash equivalents at end of year $ 17,400 $ 27,200 $ 5,200
-------------------------------
Supplemental cash flow information:
Interest paid (net of amounts capitalized) $ 6,300 $ 3,000 $ 3,000
Income taxes paid $12,800 $ 13,700 $ 11,900
-------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except
share and per share data)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The financial statements are prepared in
conformity with generally accepted accounting principles in the
United States. These principles require management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and revenue and expenses and the
disclosure of contingencies in the financial statements. Actual
amounts realized may differ from these estimates.
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include the accounts of the Company and all
significant majority-owned subsidiaries. For years ending prior
to 1993, international subsidiaries are included in consolidated
financial statements based on fiscal years ending November 30.
In 1993, international subsidiaries are included in consolidated
financial statements based on the 13 months ended December 31.
The inclusion of the additional month in 1993 added $8,100 to
revenues, $2,100 to gross profit and net income per share of
approximately $.01. Material intercompany transactions and
accounts are eliminated in consolidation. An affiliated company
reports on the basis of a fiscal year ending October 31.
Investments in affiliated companies in which ownership exceeds
20% are accounted for on the equity method.
STATEMENT OF CASH FLOWS: Cash flows from operating activities are
reported under the indirect method; cash equivalents include time
deposits, certificates of deposit and all highly liquid debt
instruments with original maturities of three months or less.
INVENTORIES: Inventories are valued at the lower of cost or
market. The cost of inventories located in the United States is
determined on the last-in, first-out (LIFO) method, except for
the cost of inventories of Paco Pharmaceutical Services, Inc.
(Paco), a wholly-owned subsidiary, which is determined on the
first-in, first-out (FIFO) method. The cost of inventories
located outside the United States is determined principally on
the average cost method.
FOREIGN CURRENCY TRANSLATION: Foreign currency transaction gains
and losses and translation gains and losses of subsidiaries
operating in high-inflation economies are recognized in the
determination of net income. Foreign currency translation
adjustments of other subsidiaries and affiliates operating
outside the United States are accumulated as a separate component
of shareholders' equity.
FINANCIAL INSTRUMENTS: The Company uses interest rate swaps and
forward exchange contracts to minimize the economic exposure
related to fluctuating interest and foreign exchange rates.
Amounts to be paid or received under interest rate swaps are
accrued as interest expense. Gains and losses on hedges of
existing assets and liabilities are recognized monthly and offset
gains and losses on the underlying transaction. Gains and losses
related to firm commitments, primarily raw material purchases
17
<PAGE>
including local needs in foreign subsidiaries, are deferred and
recognized as part of the underlying transaction.
MARKETABLE SECURITIES: The Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities,
on January 1, 1995. Under SFAS No. 115, existing debt securities
are classified as held-to-maturity. These debt securities have
an aggregate value, measured at amortized cost at December 31,
1995, of $900 and mature within one year of purchase.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are
carried at cost. Maintenance and minor repairs and renewals are
charged to expense as incurred. Upon sale or retirement of
depreciable assets, costs and related depreciation are
eliminated, and gains or losses are recognized in the
determination of net income.
DEPRECIATION AND AMORTIZATION: For financial reporting purposes,
depreciation is computed principally on the straight-line method
over the estimated useful lives of the assets, or the remaining
term of the lease if shorter. For income tax purposes,
depreciation is computed using accelerated methods. Goodwill is
being amortized on the straight-line method over periods ranging
from 15 to 40 years. The Company continually evaluates the
appropriateness of the remaining estimated useful life and the
carrying value of goodwill and other intangible assets. Carrying
values in excess of undiscounted estimates of related cash flows
are expensed when such determination is made.
RESEARCH AND DEVELOPMENT: Research, development and engineering
expenditures for the creation and application of new or improved
products and processes, which amounted to $12,000, $12,000 and
$11,400 in 1995, 1994 and 1993, respectively, are expensed as
incurred.
ENVIRONMENTAL REMEDIATION AND COMPLIANCE COSTS: Environmental
remediation costs are accrued when such costs are probable and
reasonable estimates are determinable. Cost estimates are not
discounted and include investigation, cleanup and monitoring
activities; such estimates are adjusted, if necessary, based on
additional findings. In general, environmental compliance costs
are expensed. Environmental compliance costs at current
operating sites are capitalized, if they increase the value of
the property and/or prevent environmental hazards from occurring.
INCOME TAXES: Beginning in 1993, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes, which provides that income taxes be accounted for
under the liability method. Under the liability method, deferred
income taxes are recognized by applying enacted statutory tax
rates, applicable to future years, to temporary differences
between the tax bases and financial statement carrying values of
the Company's assets and liabilities. Financial statements
prior to 1993 were not restated, and the cumulative effect of
adopting SFAS No. 109 is reported in the 1993 Consolidated
Statement of Income net of applicable minority interests.
18
<PAGE>
United States income taxes and withholding taxes are
accrued on the portion of earnings of international subsidiaries
and affiliates (which qualify as joint ventures) intended to be
remitted to the parent company.
NET INCOME PER SHARE: Net income per share is based on the
weighted average number of shares of Common Stock outstanding
during each period. Common Stock equivalents are not material.
OTHER INCOME (EXPENSE)
Other income (expense) includes the following:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------
<S> <C> <C> <C>
Interest income $ 2,000 $ 1,200 $2,300
Foreign exchange losses (1,400) (2,800) (5,600)
(Loss) gain on sales of real estate
and investments (200) (500) 1,400
Other 1,100 400 1,400
-----------------------------
$ 1,500 $ (1,700) $ (500)
-----------------------------
</TABLE>
ACQUISITIONS AND INVESTMENTS
On April 27, 1995, the Company completed its acquisition of
Paco, a company providing contract packaging and contract
manufacturing services to pharmaceutical and consumer products
companies in the United States and Puerto Rico. Paco
was a public company traded over-the-counter, and the merger
followed the completion of a cash tender offer for Paco common
stock at $12.25 per share, for a total consideration of $52,400.
The purchase was financed using available cash of $22,400 and a
long-term credit facility of $30,000. The excess of the purchase
price over the net assets acquired of $22,900 is being amortized
over 30 years. Paco has been consolidated since May 1, 1995.
On December 18, 1995, the Company acquired the remaining minority
ownership interest in Schubert Seals A/S (Schubert), a Danish
manufacturer of metal seals and related products mainly for the
pharmaceutical industry. The initial 51% ownership interest in
Schubert was acquired on May 20, 1994. The purchase price for
these acquisitions was DK40,000 ($7,200), and DK31,000 ($4,800 at
May 20, 1994), respectively, and were financed through new debt
facilities. Schubert has been consolidated since June 1, 1994.
The excess of the purchase price over the net assets acquired for
this subsidiary approximates $8,400 and is being amortized over
40 years.
On November 30, 1994, the Company acquired the remaining
minority ownership interests in five European subsidiary
companies. The total purchase price for the minority interests in
these subsidiaries was DM45,000 ($28,800 at November 30, 1994).
The cash portion of the purchase price totalled DM30,000
19
<PAGE>
($19,300) of which DM4,500 ($2,900) was paid at closing and
DM25,500 ($16,400) on January 2, 1995; the balance of the
consideration, DM15,000 ($9,500), was paid through delivery of
363,214 shares of the Company's Common Stock at closing. The
excess of the purchase price over minority interests acquired
approximates $16,800 and is being amortized over 40 years.
All of these acquisitions are being accounted for as purchases.
The following table presents selected financial information for
the years ended December 31, 1995 and 1994 on a pro forma
(unaudited) basis assuming the acquisitions noted above had
occurred on January 1, 1995 and 1994:
20
<PAGE>
<TABLE>
<CAPTION>
1995 1994
------------------
<S> <C> <C>
Net sales $433,000 $434,100
Income before taxes 40,000 40,500
Income from consolidated
operations 26,600 28,000
Net income 27,500 28,500
Net income per share $ 1.66 $ 1.78
------------------
</TABLE>
In 1994, the Company acquired Senetics, Inc. (Senetics), a
company specializing in the development of innovative delivery
technologies for oral and inhalation drug delivery markets, and
acquired in each of the years 1995 and 1994 a 10%-ownership
interest in DanBioSyst UK Ltd., a company specializing in
noninvasive drug delivery methods. The total consideration for
these acquisitions was $2,500 in 1995 and $5,600 in 1994, all of
which was paid in cash. The acquisition of Senetics is accounted
for as a purchase, and the company has been consolidated since
January 1, 1994. Additional consideration may be due depending
on sales of Senetics' products through January 5, 1999. Such
additional consideration will be accounted for as goodwill.
INCOME TAXES
Income before income taxes and minority interests was derived as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------
<S> <C> <C> <C>
Domestic operations $ 26,700 $ 26,500 $ 24,100
International operations 15,800 15,600 13,400
---------------------------
$ 42,500 $ 42,100 $ 37,500
---------------------------
</TABLE>
The related provision for income taxes consists of:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------
<S> <C> <C> <C>
Currently payable:
Federal $ 5,600 $ 9,500 $ 7,100
State 600 600 2,000
International 5,700 6,000 2,700
---------------------------
11,900 16,100 11,800
---------------------------
Deferred:
21
<PAGE>
Federal 1,200 (300) 300
State 100 - 100
International 700 (2,400) 2,100
---------------------------
2,000 (2,700) 2,500
---------------------------
$13,900 $13,400 $14,300
---------------------------
</TABLE>
A reconciliation of the United States statutory corporate tax
rate to the Company's effective consolidated tax rate on income
before income taxes and minority interests is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------
<S> <C> <C> <C>
Statutory corporate tax rate 35.0% 35.0% 35.0%
Tax on international operations
in excess of (less than)
United States tax rate 1.7 (3.4) (.3)
Prior year international
tax adjustment - - (1.1)
Puerto Rico tax accounting change (1.9) - -
State income taxes, net of Federal
tax benefit 1.0 .9 3.7
Other (3.0) (.7) .9
--------------------------
Effective tax rate 32.8% 31.8% 38.2%
--------------------------
</TABLE>
The net current and noncurrent components of deferred income
taxes recognized in the balance sheet at December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------
<S> <C> <C> <C>
Net current assets $ 5,600 $ 3,100 $ 3,000
Net noncurrent liabilities 29,700 24,400 18,400
------------------------------
</TABLE>
The following is a summary of the significant components of the
Company's deferred tax assets and liabilities as of December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------
22
<PAGE>
<S> <C> <C> <C>
Deferred tax assets:
Loss on asset dispositions
and plant closings $ 2,900 $ 700 $ 1,800
Severance and deferred
compensation 7,800 7,900 7,200
Net operating loss carryovers 3,900 2,600 3,900
Foreign tax credit carryovers 600 1,900 2,300
Other 4,000 1,900 500
Valuation allowance (2,500) (4,100) (5,700)
-------------------------------
Total $16,700 $10,900 $10,000
-------------------------------
Deferred tax liabilities:
Accelerated depreciation $36,000 $29,600 $25,200
Severance and deferred compensation 1,300 600 -
Other 3,500 2,000 200
-------------------------------
Total $40,800 $32,200 $25,400
-------------------------------
</TABLE>
At December 31, 1995, subsidiaries had operating tax loss
carryovers of $13,800, which will be available to apply against
the future taxable income of such subsidiaries. The carryover
periods expire beginning with $200 in 1996 and continue through
2009. A valuation allowance has been recognized to offset the
related deferred tax asset to the extent realization is
uncertain.
At December 31, 1995, undistributed earnings of
international subsidiaries, on which deferred income taxes have
not been provided, amounted to $64,500. It is the Company's
intention to reinvest undistributed earnings of foreign
subsidiaries, and it is not practicable to determine the amount
of income or withholding tax that would be payable upon the
remittance of those earnings. Such earnings would become taxable
upon the sale or liquidation of foreign subsidiaries or upon the
remittance of dividends. Tax credits that would become available
upon distribution of such earnings could reduce income taxes then
payable at the United States statutory rate. As of December 31,
1995, the Company had available foreign tax credit carryovers of
approximately $600 expiring in 1996 through 1999. A valuation
allowance has been recognized to offset the related deferred tax
asset to the extent realization is uncertain.
INVENTORIES
Inventories at December 31 include the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
---------------------------
Finished goods $17,600 $17,200
Work in process 10,300 4,700
Raw materials 20,400 16,200
---------------------------
$48,300 $38,100
---------------------------
23
</TABLE>
<PAGE>
Included above are inventories located in the United States that
are valued on the LIFO basis, amounting to $14,900 and $16,200 at
December 31, 1995 and 1994, respectively, which are approximately
$9,400 and $8,000, respectively, lower than replacement value.
The Company uses three basic raw materials in the manufacture of
its products: rubber, aluminum and plastic. Approximately 25% of
the total rubber used is natural rubber, substantially all of
which is imported from Sri Lanka and Malaysia. The political
stability and seasonal weather conditions of these countries are
significant factors in the continuing supply of this commodity.
Synthetic elastomers and plastics are made from petroleum
derivatives, the cost and availability of which are dependent on
the supply of petroleum feedstocks to the Company's suppliers.
PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment at December 31 is
presented in the following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Years of
Expected
Useful
Life 1995 1994
-----------------------------------------
Land $ 4,200 $ 4,000
Buildings and improvements 7-50 108,800 97,000
Machinery and equipment 3-20 247,300 196,400
Molds and dies 4-6 57,000 53,600
Construction in progress 22,800 15,800
----------------------
$440,100 $366,800
----------------------
</TABLE>
The Company intends to adopt Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of, in 1996, as required. As of December 31,
1995, no material impact would result from the adoption of this accounting
standard.
AFFILIATED COMPANIES
At December 31, 1995, the following affiliated companies were accounted for
under the equity method:
<TABLE>
<CAPTION>
<S> <C> <C>
Location Ownership
Interest
----------------------------
The West Company de Mexico S.A. Mexico 49%
Aluplast S.A. de C.V. Mexico 49%
Pharma-Tap S.A. de C.V. Mexico 49%
24
<PAGE>
Daikyo Seiko, Ltd. Japan 25%
----------------------------
The Company's partnership interest in Schott West Pharmaceutical Glass
Company was sold in 1995.
</TABLE>
A summary of the financial information for these companies is presented
below:
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
Balance Sheet:
Current assets $ 85,700 $ 91,800
Noncurrent assets 70,600 84,800
------------------------
Total assets $156,300 $176,600
------------------------
Current liabilities $ 43,300 $ 46,400
Noncurrent liabilities 55,400 64,400
Owners' equity 57,600 65,800
------------------------
Total liabilities and owners' equity $156,300 $176,600
------------------------
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------
<S> <C> <C> <C>
Income Statement:
Net sales $80,400 $89,600 $83,500
Gross profit 23,600 23,700 21,100
Net income 3,400 1,800 2,700
----------------------------
</TABLE>
Unremitted income of affiliated companies included in
consolidated retained earnings amounted to $9,800, $9,100 and
$8,900 at December 31, 1995, 1994 and 1993, respectively.
Dividends received from affiliated companies were $200 in 1995,
and $600 in 1994 and in 1993.
Daikyo Seiko, Ltd. classifies its debt and equity securities in
one of two categories, trading or available-for-sale, and carries
them at fair value. Unrealized holding gains and losses on
trading securities are included in earnings. Unrealized holding
gains and losses, net of the related tax effect, on available-
for-sale securities are excluded from earnings and are reported
as part of shareholders' equity until realized. The Company's
equity in these unrealized gains and losses increased the
Company's shareholders' equity by $300 at December 31, 1995.
DEBT
Short-Term: At December 31, 1995, the Company had available
unused short-term lines of credit amounting to $17,500; fees
25
<PAGE>
ranging up to 1/8% per annum are payable on these available credit
lines. Short-term debt of $20,200 under a credit line has been
classified as long-term because of the Company's intent to renew
the borrowing using an available long-term revolving credit
facility. Notes payable in the amounts of $8,300 and $2,700 at
December 31, 1995 and 1994, respectively, are payable within one
year and bear interest at a weighted-average interest rate of
7.4%.
<TABLE>
<CAPTION>
Long Term:
At December 31 1995 1994
-------------------
<S> <C> <C>
Unsecured:
Revolving credit facility,
due 2000 (6.07%) $ 20,200 $ -
Tax-exempt industrial revenue bonds, due 1996
to 2005 (4% to 5.95%) (a) 11,100 11,200
Subordinated debentures, due 2007 (6.5%) 3,000 -
Other notes, due 1996 to 2007
(4.18% to 9.5%) 55,000 27,500
Collateralized:
Mortgage notes, due 1996 to 2006 (3.5% to
13.6%) (b) 16,700 16,400
-------------------
Total long-term debt 106,000 55,100
Less current portion 1,500 19,200
-------------------
$104,500 $35,900
-------------------
</TABLE>
(a) The proceeds of industrial revenue bonds that were not
required for the respective construction projects have been
invested by the Company. Use of these excess funds and earnings
thereon is restricted to servicing the debt. The aggregate of
unexpended proceeds and earnings thereon of $1,400 is reflected
as a reduction of the principal outstanding on the bonds.
(b) Real estate, machinery and equipment with a carrying value of
$17,000 at December 31, 1995 are pledged as collateral.
A revolving credit facility provides for borrowings up to
$55,000 through August 2000 at a floating rate based on LIBOR. A
commitment fee ranging up to 3/20 % per annum is payable on the
unused amount. A subsidiary has long-term line of credit
providing up to FF 30,000 ($6,100) at a floating rate based on
PIBOR plus 2/5 % and a commitment fee of 3/10 % is payable per
annum. No amounts are outstanding under this facility at
December 31, 1995.
At December 31 1995, $4,300 of Paco's subordinated debentures,
at par value, were outstanding. The subordinated debentures are
reflected in the balance sheet net of a $1,300 discount, which is
26
<PAGE>
being amortized through the maturity date of the subordinated
debentures, March 1, 2007. The holders have the right to convert
such subordinated debentures into cash for an amount
approximating 50% of the par value of the subordinated debentures
converted. Interest is payable semiannually.
Long-term debt maturing in the years following 1996 is:
$11,700 in 1997, $700 in 1998, $25,100 in 1999 and $36,800 in
2000.
Certain of the financing agreements, among other things,
require the maintenance of certain working capital, interest
coverage and debt-to- capitalization ratios and tangible net
worth; restrict the sale of assets; and limit the payment of
dividends. At December 31, 1995, under the most restrictive debt
agreement, retained earnings free of restriction were $19,300.
Interest costs incurred during 1995, 1994 and 1993 were
$7,800, $3,500 and $3,400, respectively, of which $500, $200 and
$300, respectively, were capitalized as part of the cost of
acquiring certain assets.
To finance and hedge a portion of the 1986 purchase of
ownership interests in certain European subsidiaries, the Company
entered into a currency and interest rate swap agreement which
matured early in 1995. Under the agreement, the Company exchanged
$7,200 bearing interest at LIBOR plus 1/8% for DM20,000 ($12,900
at maturity) bearing interest at 7.5%. A swap agreement expired
in 1994 under which the Company agreed to swap $2,700 bearing
interest at LIBOR for DM5,000 ($2,800 at maturity) bearing
interest at 6.33%. The net interest expense recognized in
connection with these agreements was $100 in 1995, $600 in 1994
and $800 in 1993.
Principal and/or interest amounts due under swap agreements
are presented in the financial statements on a net basis.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value of
financial instruments as of December 31 is provided in accordance
with the requirements of Statement of Financial Accounting
Standards No. 119.
<TABLE>
<CAPTION>
<S> <C> <C>
Carrying Value Estimated Fair Value
-----------------------------------------
1995 1994 1995 1994
---------------------------------------
Cash and cash equivalents $ 17,400 $27,200 $ 17,400 $27,200
Short- and long-term debt 114,300 57,800 115,100 56,200
Forward exchange contracts 100 (400)
---------------------------------------
</TABLE>
Methods used to estimate the fair market values of the above
listed financial instruments are as follows: cash and cash
equivalents are estimated at carrying values that approximate
market, due to the short maturity of cash equivalents. Debt is
27
<PAGE>
estimated based on current market quotes for instruments of
similar maturity. Interest rate swaps (see preceding Debt Note)
and forward exchange rate contracts are valued at published
market prices, market prices of comparable instruments or quotes.
Forward exchange contracts are used only to hedge raw
material purchase commitments and foreign-currency-denominated
receivables and payables. At December 31, 1995 and 1994, the
Company had forward exchange rate contracts that totalled $4,100
and $14,200, respectively. Forward exchange contracts totalling
$4,100 relate to raw material purchases denominated in German
marks, French francs and British pounds sterling; these contracts
expire monthly through September 30, 1996. Gains/losses on
contracts used to hedge raw material purchases are deferred and
will adjust the cost of such inventory.
BENEFIT PLANS
Pension Plans: The Company and certain domestic and international
subsidiaries sponsor defined benefit pension plans. The United
States plans cover substantially all domestic employees and
members of the Company's Board of Directors. The plans call for
benefits to be paid to eligible participants at retirement based
on compensation rates near retirement and/or on length of
service. Contributions to the United States employee plans
reflect investment performance of plan assets, benefits
attributed to employees' service to date and service expected in
the future. Assets of the United States employee plans and one
international subsidiary plan consist primarily of common and
preferred stocks, investment-grade corporate bonds, and United
States government obligations; other international subsidiary
plans and the plan for directors are not funded.
Total pension expense for 1995, 1994 and 1993 includes the
following:
<TABLE>
<CAPTION>
<C> <C> <C>
1995 1994 1993
--------------------------------
Service cost $ 2,800 $ 2,900 $ 2,600
Interest cost 6,800 6,200 5,900
Actual return on assets (30,000) (500) (12,600)
Net amortization and deferral 20,600 (8,500) 4,500
--------------------------------
Pension expense $ 200 $ 100 $ 400
--------------------------------
</TABLE>
The following sets forth the funded status of the employee pension plans
and the amounts included in the accompanying balance sheets at December 31:
<TABLE>
<CAPTION>
United States Plans International Plans
-------------------- --------------------
<C> <C> <C> <C>
1995 1994 1995 1994
------------------------------------------
Vested benefit obligations
(VBO) $ (80,300) $(58,700) $ (5,500) $(2,900)
-------------------------------------------
Accumulated benefit
28
<PAGE>
obligations (ABO) $ (82,300) $(60,400) $ (6,000) $(3,200)
-------------------------------------------
Projected benefit
obligations (PBO) $(102,300) $(72,200) $ (6,200) $(3,300)
Plan assets at fair value 125,000 92,900 2,800 -
-------------------------------------------
Assets in excess of (less
than) PBO 22,700 20,700 (3,400) (3,300)
Unrecognized net gain (15,200) (11,300) (100) -
Unrecognized prior
service cost (400) (300) - -
Unamortized transition asset (5,600) (6,400) - -
-------------------------------------------
Prepaid pension cost
(accrued liability)
included in the balance sheet$ 1,500 $ 2,700 $ (3,500) $(3,300)
------------------------------------------
</TABLE>
Information with respect to the unfunded pension plan for the Company's
non-employee directors is as follows:
<TABLE>
<CAPTION>
<C> <C>
1995 1994
---------- ----------
VBO $ (900) $(700)
---------- ----------
ABO $(1,000) $(800)
---------- ----------
PBO $(1,200) $(900)
Unrecognized net gain (100) (200)
Unrecognized prior service 300 200
cost
----------- ----------
Balance sheet liability $ (1,000) $(900)
----------- ----------
</TABLE>
<TABLE>
<CAPTION>
United States Plans International Plans
------------------ ------------------
<C> <C> <C> <C>
1995 1994 1995 1994
-------------------------------------
Assumptions:
Discount rate 7.0% 8.25% 7.5% 7.5%
Rate of increase in
compensation 6.0% 6.0% 3.0% 3.0%
Directors' retainer
increase 5.5% 5.5% - -
Long-term rate of
return on assets 9.0% 9.0% 9.5% -
-------------------------------------
</TABLE>
Other Retirement Benefits: The Company provides minimal life
insurance benefits for certain United States retirees and pays a
portion of healthcare (medical and dental) costs for retired
United States salaried employees and their dependents. Benefits
29
<PAGE>
for plan participants age 65 and older are coordinated with
Medicare. Retirees' contributions to the cost of such benefits
may be adjusted from time to time. The Company's obligation is
unfunded.
Total expense recognized for 1995, 1994 and 1993 with
respect to these nonpension retirement benefits includes the
following:
<TABLE>
<CAPTION>
<C> <C> <C>
1995 1994 1993
----------------------------------
Service cost $ 400 $ 500 $ 500
Interest cost 900 1,000 1,000
Net amortization and deferral (100) - -
----------------------------------
$ 1,200 $ 1,500 $ 1,500
----------------------------------
</TABLE>
The following sets forth the accrued obligation included in the
accompanying balance sheets at December 31, 1995 and 1994
applicable to each employee group for nonpension retirement
benefits:
<TABLE>
<CAPTION>
<C> <C>
1995 1994
---------------------
Retired employees $ (6,200) $ (4,600)
Active employees--fully eligible (2,000) (1,700)
Active employees--
not fully eligible (5,800) (5,400)
---------------------
Total (14,000) (11,700)
Unrecognized gain from
assumption changes (700) (2,300)
Unrecognized prior service costs (500) (600)
---------------------
Balance sheet liability $(15,200) $(14,600)
---------------------
</TABLE>
The discount rates used were 7% for 1995 and 8.25% for 1994; the
healthcare cost trend was 13% for 1995 and 14% for 1994,
decreasing to 5.5% by 2007. Increasing the assumed trend rate
for healthcare costs by one percentage point would result in an
accrued obligation of $14,500 at December 31, 1995 for these
retirement benefits and an increase of $100 in the related 1995
expense.
Other: The Company provides certain postemployment benefits for
terminated and disabled employees, including severance pay,
disability-related benefits and healthcare benefits. Statement
of Financial Accounting Standards No. 112, Employer's Accounting
for Postemployment Benefits, requires these costs to be accrued
over the employee's active service period under certain
circumstances or at the date of the event triggering the benefit.
30
<PAGE>
The Company adopted this accounting practice in 1993, and the
impact was insignificant.
The Company also sponsors a defined contribution savings
plan for salaried and certain hourly United States employees.
Company contributions are equal to 50% of each participant's
contribution up to 6% of their base compensation. Total expense
under the plan in 1995, 1994 and 1993 was $900, $800 and $800,
respectively.
CAPITAL STOCK
Through December 31, 1995, the Company has acquired
1,113,900 shares of its Common Stock under a repurchase program
covering up to 1,600,000 shares announced in 1989. Purchases
(sales) of Common Stock held in treasury during
the three years ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
<C> <C> <C>
1995 1994 1993
--------------------------------
Shares held at
beginning of year 381,100 929,700 1,103,900
Purchases, net,
at fair market value 38,600 11,200 9,400
Shares issued for acquisition - (363,200) -
Stock option exercises (195,700) (196,600) (183,600)
--------------------------------
Shares held at end of year 224,000 381,100 929,700
--------------------------------
</TABLE>
The Company's Shareholders Rights Plan entitles a shareholder to
purchase 1/1000 of a share of a newly designated series of the
Company's Preferred Stock at a price of $75.00 with each Right. A
Right becomes exercisable if a person or group (acquiror)
acquires 15% or more of the Common Stock or commences a tender
offer that would result in the acquiror owning 18% or more of the
Common Stock. After the Rights become exercisable and in the
event the Company is involved in a merger or other business
combination, sale of 50% or more of its assets or earning power,
or if an acquiror purchases 18% or more of the Common Stock or
engages in self-dealing transactions, a Right will entitle its
holder to purchase common stock of the surviving company having a
market value twice the exercise price of the Right. The Rights
may be redeemed by the Company at $.001 per Right at any time
before certain events occur. Two Rights are attached to each
share of Common Stock, and such rights will not trade separately
unless they become exercisable. All Rights expire on January 15,
2000.
In 1992, the Company made an offering under an employee
stock purchase plan, which provides for the sale of the Company's
Common Stock to substantially all employees at 85% of fair market
value. An employee's purchases were limited annually to 10% of
base compensation. The offer, which expired on December 31, 1995,
has been extended to December 31, 1997. Shares are purchased in
the open market, or Treasury shares are used.
31
<PAGE>
STOCK OPTION AND AWARD PLANS
The Company has a long-term incentive plan for officers and key
management employees of the Company and its subsidiaries that
provides for the grant through March 8, 1998 of stock options,
stock appreciation rights, restricted stock awards and
performance awards. A maximum of 2,125,000 shares of Common Stock
or stock equivalents are available for issue under this plan of
which 213,800 shares are available as of December 31, 1995 for
future grant. A committee of the Board of Directors determines the
terms and conditions of grants, except that the exercise price
of certain options cannot be less than 100% of the fair market
value of the stock on the date of grant, no stock options or
stock appreciation rights can be exercised during the six
months immediately following the date of grant, and all stock
options and stock appreciation rights must expire no later than
10 years after the date of grant.
Option activity under this plan during the three years
ended December 31, 1995 is summarized below:
<TABLE>
<OPTION>
<C> <C> <C>
1995 1994 1993
-----------------------------------
Options outstanding, January 1 726,400 737,600 735,900
Granted 332,400 197,400 187,900
Exercised ($13.25 to $25.31
per share) (191,200) (193,600) (181,700)
Forfeited (13,000) (15,000) (4,500)
-----------------------------------
Options outstanding, December 31 854,600 726,400 737,600
-----------------------------------
Average option price $ 22.06 $19.62 $17.95
-----------------------------------
</TABLE>
Under the Company's management incentive plan, participants are
paid cash bonuses on the attainment of certain financial goals.
The bonuses awarded totalled $2,100 for 1994 and $2,000 for 1993.
In 1993, bonus participants were offered the opportunity to
purchase Common Stock with up to 25% of their cash bonus award.
Beginning in 1994, bonus participants are required to use 25% of
their cash bonus, after certain adjustments for taxes payable, to
purchase Common Stock of the Company at current fair market
value. Bonus participants are given a restricted stock award
equal to one share for each four shares of Common Stock purchased
with bonus awards. These stock awards vest at the end of four
years provided that the participant has not made a disqualifying
disposition of the stock purchased. In 1995, 1994 and 1993
restricted stock awards for 3,300 shares, 3,000 shares and 1,900
shares, respectively, were granted, and in 1995 and 1994, 200
shares and 500 shares, respectively, were forfeited.
Compensation expense is being recognized over the vesting period
based on the fair market value of Common Stock on the award date:
$25.31 per share in 1995, $24.94 per share in 1994 and $20.81 per
share in 1993.
32
<PAGE>
A nonqualified stock option plan for nonemployee directors
provides for an annual grant to each eligible director of options
covering 1,500 shares at an option price equal to 100% of the
fair market value of the Company's Common Stock on the date of
grant. Common Stock issued pursuant to the plan may not exceed
100,000 shares. Option activity under this plan during the three
years ended December 31, 1995 is summarized below:
<TABLE>
<CAPTION>
<C> <C> <C>
1995 1994 1993
-------------------------------
Options outstanding, January 1 36,000 27,000 15,000
Granted 16,500 16,500 15,000
Exercised (4,500) (3,000) --
Forfeited - (4,500) (3,000)
-------------------------------
Options outstanding, December 31 48,000 36,000 27,000
-------------------------------
Average option price $24.06 $22.72 $21.88
-------------------------------
The Company will adopt Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, in 1996. The Company has chosen not to report the
impact of SFAS No. 123 in reported net income, but will disclose
such impact in a footnote.
</TABLE>
COMMITMENTS AND CONTINGENCIES
At December 31, 1995, the Company was obligated under various
operating lease agreements with terms ranging from one month to
20 years. Rental expense in 1995, 1994 and 1993 was $6,600,
$5,000 and $4,000, respectively. Minimum rentals for
noncancelable operating leases with initial or remaining terms in
excess of one year are: 1996--$7,300; 1997--$6,800; 1998--$6,700;
1999--$6,500; 2000--$5,800 and thereafter $68,300.
At December 31, 1995, outstanding contractual commitments
for the purchase of equipment and raw materials amounted to
$9,800, all of which is due to be paid in 1996.
The Company has accrued the estimated cost of environmental
compliance expenses related to soil or groundwater contamination
at current and former manufacturing facilities. The ultimate
cost to be incurred by the Company and the timing of such
payments cannot be fully determined. However, based on
consultants' estimates of the costs of remediation in accordance
with applicable regulatory requirements, the Company believes the
accrued liability of $1,500 at December 31, 1995 is sufficient to
cover the future costs of these remedial actions, which will be
carried out over the next two to three years. The Company has
not anticipated any possible recovery from insurance or other
sources.
On March 30, 1992, OCAP Acquisition Corp. (OCAP) commenced
an action in the Supreme Court of the State of New York, County
of New York, against Paco, certain of its subsidiaries and R.P.
Scherer Corporation (Scherer) Paco's former parent
33
<PAGE>
company,(collectively, the defendants), arising out of the
termination of an Asset Purchase Agreement dated February 21,
1992 (the Purchase Agreement) between OCAP and the defendants
providing for the purchase of substantially all the assets of
Paco. On May 15, 1992, OCAP served an amended verified complaint
(the Amended Complaint), asserting causes of action for breach of
contract and breach of the implied covenant of good faith and
fair dealing, arising out of defendants' March 25, 1992
termination of the Purchase Agreement, as well as two additional
causes of action that were subsequently dismissed by order of the
court. The Amended Complaint seeks $75,000 in actual damages,
$100,000 in punitive damages, as well as OCAP's attorney fees and
other litigation expenses, costs and disbursements incurred in
bringing this action. Scherer has asserted a counterclaim
against OCAP for breach of contract and breach of the covenant of
good faith and fair dealing arising out of the termination of the
Purchase Agreement. Discovery with respect to the action has
been completed and a trial date of March 21, 1996 has been set.
Based upon the investigation conducted by the Company to date,
the Company believes that this action lacks merit and intends to
defend against it vigorously. In the opinion of management, the
ultimate outcome of this litigation will not have a material
adverse effect on the Company's business or financial condition.
Scherer has agreed to indemnify Paco against any
liabilities (including fees and expenses incurred after March 31,
1992) it may have as a result of this litigation matter.
INDUSTRY SEGMENT AND OPERATIONS BY GEOGRAPHIC AREA
The West Company and its affiliated companies operate in one
industry segment. The Company develops, manufactures and markets
stoppers, closures, containers, medical device components and
assemblies made from elastomers, metal and plastic and provides
contract packaging and contract manufacturing services for the
healthcare and consumer products markets. In addition, the
Company also manufactures related packaging machinery. Total
sales include sales to one customer of approximately $43,700,
$40,200 and $41,900 in 1995, 1994 and 1993, respectively.
Operating information and identifiable assets by geographic area
of manufacture are shown below:
<TABLE>
<CAPTION>
<C> <C> <C>
1995 1994 1993
---------------------------------
Net sales:
United States $247,400 $216,600 $207,500
Europe 128,000 114,200 107,000
Other 37,500 34,300 34,200
---------------------------------
Total $412,900 $365,100 $348,700
---------------------------------
Net income from consolidated operations:
United States $ 19,000 $ 16,400 $ 14,400
Europe 5,000 5,500 3,700
Other 3,800 4,900 3,400
---------------------------------
34
<PAGE>
Total $ 27,800 $ 26,800 $ 21,500
---------------------------------
Identifiable assets:
United States $ 251,900 $179,000 $156,900
Europe 158,500 151,000 97,600
Other 48,100 45,500 36,900
---------------------------------
$458,500 $375,500 $291,400
---------------------------------
Investments in affiliated companies:
United States $ 700 $ 3,300 $ 2,800
Europe 4,600 2,700 -
Other 16,300 15,900 15,000
---------------------------------
$ 21,600 $ 21,900 $ 17,800
---------------------------------
Total assets $480,100 $397,400 $309,200
---------------------------------
</TABLE>
35
<PAGE>
QUARTERLY OPERATING AND PER SHARE DATA (UNAUDITED)
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1995 Three Months Ended 1994 Three Months Ended
-------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 June 30 March 31
-------------------------------------------------------------------------
Net sales 107,600 101,100 109,000 95,200 99,100 87,400 91,500 87,100
Gross profit 29,100 24,700 31,900 32,500 32,300 25,700 30,000 29,200
Net income 7,900 3,900 8,700 8,200 7,200 5,600 7,500 7,000
Net income per share .47 .24 .52 .50 .44 .35 .47 .44
</TABLE>
36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF THE WEST
COMPANY, INCORPORATED:
We have audited the accompanying consolidated balance sheets
of The West Company, Incorporated and Subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of The West Company, Incorporated and
Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in the Summary of Significant Accounting
Policies Note to the Consolidated Financial Statements, the
Company changed its method of accounting for income taxes in
1993.
Coopers and Lybrand L.L.P.
600 Lee Road
Wayne, Pennsylvania
February 23, 1996
37
<PAGE>
REPORT OF MANAGEMENT
The Company's management is responsible for the integrity,
reliability and objectivity of publicly reported financial
information. Management believes that the financial statements
as of the year ended December 31, 1995 have been prepared in
conformity with generally accepted accounting principles and that
information presented in this Annual Report is consistent with
those statements. In preparing the financial statements,
management makes informed judgements and estimates where
necessary, with appropriate consideration given to materiality.
In meeting its responsibility for preparing financial
statements, management maintains a system of internal accounting
controls over financial reporting including the safeguard of its
assets against unauthorized acquisition, use or disposition.
This system is designed to provide reasonable assurance that
assets are safeguarded and transactions are executed in
accordance with management's authorization and recorded properly,
allowing for preparation of reliable financial statements. There
are inherent limitations in the effectiveness of all internal
control systems. The design of the Company's system recognizes
that errors or irregularities may occur and that estimates and
judgements are required to assess the relative cost and expected
benefits of the controls. Management believes that the Company's
accounting controls provide reasonable assurance that errors or
irregularities that could be material to the financial statements
are prevented or would be detected within a timely period.
The independent accountants are appointed by the Board of
Directors, with the approval of the shareholders. As part of
their engagement, the independent accountants audit the Company's
financial statements, express their opinion thereon, and review
and evaluate selected systems, accounting procedures and internal
controls to the extent they consider necessary to support their
report.
Raymond J. Land
Senior Vice President
Finance and Administration
William G. Little
Chairman, President and Chief Executive Officer
38
<PAGE>
TEN YEAR SUMMARY
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
(in thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $412,900 365,100 348,700
Operating profit (loss) $ 49,800 45,400 40,600
Income (loss) before income taxes and minority interests $ 42,500 42,100 37,500
Provision for income taxes 13,900 13,400 14,300
Minority interests 800 1,900 1,700
------------------------------------------------------
Income (loss) from consolidated operations 27,800 26,800 21,500
Equity in net income of affiliated companies 900 500 1,000
------------------------------------------------------
Income (loss) before change in accounting method $ 28,700 27,300 22,500
------------------------------------------------------
Income (loss) before change in accounting method per share (a)(b) $ 1.73 1.70 1.42
Average shares outstanding (b) 16,557 16,054 15,838
Dividends paid per common share (b) $ .49 .45 .41
------------------------------------------------------
Research, development and engineering expenses $ 12,000 12,000 11,400
Capital expenditures $ 31,300 27,100 33,500
------------------------------------------------------
YEAR-END FINANCIAL POSITION
Working capital $ 86,600 50,400 46,400
Total assets $480,100 397,400 309,200
Total invested capital:
Total debt $114,300 57,800 32,300
Minority interests 200 1,900 10,900
Shareholders' equity 254,100 227,300 188,100
------------------------------------------------------
Total $368,600 287,000 231,300
------------------------------------------------------
PERFORMANCE MEASUREMENTS
Gross margin (c) % 28.6 32.1 30.2
Operating profitability (d) % 12.1 12.4 11.7
39
<PAGE>
Tax rate % 32.8 31.8 38.2
Asset turnover ratio (e) .94 1.04 1.11
Return on average shareholders' equity % 11.9 13.2 13.2
Total debt as % of total invested capital % 31.0 20.1 14.0
-------------------------------------------------------
Shareholders' equity per share $ 15.29 13.81 11.82
Stock price range (b) 30 5/8 - 22 5/8 29 1/8 - 21 1/4 25 1/4 - 19 7/8
--------------------------------------------------------
</TABLE>
(a) Based on average shares outstanding.
(b) Adjusted for 2-for-1 stock split effective May 18, 1987.
(c) Net sales minus cost of goods sold, including applicable depreciation
and amortization, divided by net sales.
(d) Operating profit (loss) divided by net sales.
(e) Net sales divided by average total assets; 1993 asset turnover
ratio is based on 12 months' sales for international subsidiaries.
1995 includes for the first time the net operating results of Paco
from May 1.
1994 includes for the first time the results of two companies in
which majority ownership was acquired in 1994.
1993 includes 13 months of operating results for international
subsidiaries.
Beginning in 1992 the Company's ownership interest in glass
manufacturing operating results is reported as equity in net
income of affiliates. Prior to the 1992 sale of a majority interest
in such operation, operating results were fully consolidated.
1991 includes a restructuring charge that reduced operating results
by $1.37 per share.
1990 includes a restructuring charge that reduced operating results
by $.45 per share, and 1990 included for the first time the results of
two companies in which controlling ownership was acquired in 1989.
1988 included for the first time the results of an affiliate in
which majority ownership was acquired in 1988.
40
<PAGE>
TEN YEAR SUMMARY
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
(in thousands, except per share data)
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
337,500 328,900 323,200 308,700 285,400 253,300 235,600
38,700 (1,600) 15,600 38,700 30,100 25,600 31,300
34,800 (7,700) 9,600 34,400 26,100 22,100 29,400
14,300 4,700 6,400 13,200 10,100 9,500 13,200
1,700 (2,400) 300 2,100 1,400 1,000 900
- -----------------------------------------------------------------------------------------------------------------------------
18,800 (10,000) 2,900 19,100 14,600 11,600 15,300
900 1,500 1,400 1,600 2,800 2,100 1,700
- -----------------------------------------------------------------------------------------------------------------------------
19,700 (8,500) 4,300 20,700 17,400 13,700 17,000
- -----------------------------------------------------------------------------------------------------------------------------
1.26 (.55) .27 1.28 1.07 .85 1.06
15,641 15,527 15,793 16,235 16,249 16,195 16,126
.40 .40 .40 .31 .29 .27 .245
- -----------------------------------------------------------------------------------------------------------------------------
11,100 10,800 10,900 11,900 11,300 9,700 9,100
22,400 25,600 33,200 34,300 29,700 43,100 29,300
- -----------------------------------------------------------------------------------------------------------------------------
37,700 26,500 36,500 50,400 53,000 45,200 36,200
304,400 313,200 343,500 313,000 298,900 280,100 238,200
42,000 58,400 78,500 58,100 55,200 60,500 44,300
10,100 8,400 11,700 9,100 10,600 6,200 5,500
168,600 152,600 176,100 179,700 171,400 155,800 138,900
- -----------------------------------------------------------------------------------------------------------------------------
220,700 219,400 266,300 246,900 237,200 222,500 188,700
- -----------------------------------------------------------------------------------------------------------------------------
28.8 25.6 24.4 26.5 25.0 25.3 26.5
11.5 (.5) 4.8 12.5 10.5 10.1 13.3
41.1 61.7 66.5 38.5 38.6 42.9 45.0
1.10 1.00 .98 1.01 .99 .98 1.13
41
<PAGE>
12.3 (8.9) 2.4 11.8 10.6 9.3 13.2
19.1 26.6 29.5 23.5 23.3 27.2 23.5
- -----------------------------------------------------------------------------------------------------------------------------
10.71 9.81 11.37 11.15 10.53 9.61 8.61
24 1/8 - 16 3/4 18 3/4 - 11 1/8 20 - 10 1/2 22 5/8 - 14 7/8 17 1/2 - 12 1/4 22 1/8 - 12 1/2 17 1/8 - 12 1/4
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C>
State/Jurisdiction Direct
Incorporation Stock
Ownership
The West Company, Incorporated Pennsylvania Parent Co.
Paco Pharmaceutical Services, Inc. Delaware 100.0
Paco Packaging, Inc. Delaware 100.0
Paco Technologies, Inc. Delaware 100.0
Paco Laboratories, Inc. Delaware 100.0
Charter Laboratories, Inc. Delaware 100.0
Paco Puerto Rico, Inc. Delaware 100.0
Citation Plastics Co. New Jersey 100.0
The West Company of Puerto Rico, Inc. Delaware 100.0
TWC of Florida, Incorporated Florida 100.0
Senetics, Inc. Colorado 100.0
West International Sales Corporation U.S. Virgin Islands100.0
The West Company of Delaware, Inc. Delaware 100.0
The West Company de Colombia, S.A. Colombia 52.1 (1)
The West Company Holding GmbH Germany 100.0
The West Company Deutschland GmbH Germany 100.0
Pharma-Gummi Beograd Yugoslavia 84.7 (2)
The West Company (Custom & Germany 100.0
Specialty Services) GmbH
Schubert Seals A/S Denmark 100.0
The West Company Italia S.R.L. Italy 95.0 (3)
The West Company France S.A. France 99.99 (4)
The West Company (Mauritius) Ltd. Mauritius 100.0
The West Company (India) Private Ltd. India 100.0
The West Company Group Ltd. England 100.0
The West Company (UK) Ltd. England 100.0
The West Company Argentina S.A. Argentina 100.0
The West Company Brasil S.A. Brasil 100.0
The West Company Venezuela C.A. Venezuela 100.0
<PAGE>
The West Company Australia Pte. Ltd. Australia 100.0
West Company Korea Ltd. Korea 100.0
(1) In addition, 46.16 % is owned directly by The West Company,
Incorporated; 1.55% is held in treasury by The West Company
De Colombia S.A..(2) Affilated company accounted for on the
cost basis.
(3) In addition, 5 % is owned directly by The West Company,
Incorporated;
(4) In addition, .01% is owned directly by 9 Individual
Shareholders.
</TABLE>
Exhibit 23
COOPERS certified public accountants
& LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement of The West Company, Incorporated on Form S-8,
(Registration Nos. 2-95618, 2-45534, 33-32580, 33-37825, 33-61074
and 33-61076) of our report, which includes an explanatory
paragraph stating that the Company changed its method of
accounting for income taxes in 1993, dated February 23, 1996 on
our audits of the consolidated financial statements of The
West Company, Incorporated and subsidiaries as of December 31,
1995 and 1994, and for the years ended December 31, 1995, 1994
and 1993 which report is included in this Annual Report on
Form 10-K.
COOPERS & LYBRAND L.L.P.
600 Lee Road
Wayne, Pennsylvania
March 29, 1996
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ Tenley E. Albright, M.D.
--------------- ------------------------------
Tenley E. Albright, M.D.
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ G. W. Ebright
-------------- -------------------
George W. Ebright
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ George J. Hauptfuhrer, Jr.
-------------- ------------------------------
George J. Hauptfuhrer, Jr.
<PAGE>
POWER OF ATTORNEY
-------------------
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ L. Robert Johnson
-------------- -----------------------
L. Robert Johnson
<PAGE>
POWER OF ATTORNEY
----------------------
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ William H. Longfield
-------------- ------------------------------
William H. Longfield
<PAGE>
POWER OF ATTORNEY
---------------------
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ J. P. Neafsey
-------------- --------------------
John P. Neafsey
<PAGE>
POWER OF ATTORNEY
---------------------
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ Monroe E. Trout
-------------- --------------------
Monroe E. Trout, M.D.
<PAGE>
POWER OF ATTORNEY
----------------------
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ William S. West
-------------- --------------------
William S. West
<PAGE>
POWER OF ATTORNEY
------------------------
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ J. Roffe Wike, II
-------------- --------------------
J. Roffe Wike, II
<PAGE>
POWER OF ATTORNEY
---------------------
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ Geoffrey F. Worden
------------- ----------------
Geoffrey F. Worden
<PAGE>
POWER OF ATTORNEY
----------------------
The undersigned hereby authorizes and appoints William G.
Little and Raymond J. Land, and each of them, as his/her
attorneys-in-fact to sign on his/her behalf and in his/her
capacity as a director of The West Company, Incorporated, and to
file, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and all amendments, exhibits and
supplements thereto.
Date: March 9, 1996 /s/ Victor E. Ziegler
------------- ----------------
Victor E. Ziegler
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 17,400
<SECURITIES> 0
<RECEIVABLES> 67,900
<ALLOWANCES> 0
<INVENTORY> 48,300
<CURRENT-ASSETS> 148,400
<PP&E> 440,100
<DEPRECIATION> 210,800
<TOTAL-ASSETS> 480,100
<CURRENT-LIABILITIES> 61,800
<BONDS> 114,300
<COMMON> 4,200
0
0
<OTHER-SE> 249,900
<TOTAL-LIABILITY-AND-EQUITY> 480,100
<SALES> 412,900
<TOTAL-REVENUES> 412,900
<CGS> 294,700
<TOTAL-COSTS> 294,700
<OTHER-EXPENSES> 68,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,300
<INCOME-PRETAX> 42,500
<INCOME-TAX> 13,900
<INCOME-CONTINUING> 28,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,700
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 0
</TABLE>
