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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, 1996
----------------
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, 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. X
----
As of March 18, 1997, the Registrant had 16,425,183 shares of its
Common Stock outstanding. The market value of Common Stock held
by non-affiliates of the Registrant as of that date was $445,533,089.
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 1996
fiscal year (the "1996 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
- products and services for packaging and delivery of healthcare
and consumer products. The Company's products include
pharmaceutical packaging components (stoppers, seals, caps,
containers and dropper bulbs) and 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 also provides
contract packaging and contract manufacturing services for the
pharmaceutical and consumer products markets in the United States
and Puerto Rico.
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 stopper formulations 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.
Aluminum seals include closures with tamper-evident tabs or plastic
FlipOffR buttons which must be removed before the drug can be
withdrawn. The Company also makes a wide variety of seals lined
with its specially formulated elastomeric discs.
<PAGE> 3
The majority of the pharmaceutical-packaging components
currently manufactured by the Company are used in packaging
injectable drugs, including 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 products.
These devices are child resistant plastic caps that advance, or
count, everytime 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 and
consumer products industry.
In January 1994, the Company acquired Senetics, Inc., a Boulder
Colorado company specializing in 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 remaining 49% in December 1995. The company's name was
changed in 1996 to The West Company Danmark A/S. 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.
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.
<PAGE> 4
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 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 capabilities cover
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 customer requirements.
Paco also manufactures sterile ophthalmic products for major
ophthalmic companies and contract manufactures metaproterenol and
albuterol, products 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
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.
<PAGE> 5
Principal Services
Development of Novel Drug Delivery Systems
---------------------------------------------------------
In 1993, the Company began pursuing a strategy to develop drug-
delivery systems for bio-pharmaceuticals and other drugs that are
difficult to administer effectively through traditional intravenous
or oral routes. Improving the therapeutic performance of these
drugs in an economical fashion calls for sophisticated technical
solutions. To advance the Company's efforts in this area, the
Company has acquired 30% of DanBioSyst UK Ltd. (DBS), with an
option to acquire the remaining ownership interests within the
next few years. DBS is a research company located in Nottingham,
England, specializing in delivery systems for such drugs. In
partnership with biopharmaceutical and other drug companies, DBS
works to link its delivery system technology to improve or manage
the absorption rate of hard-to-deliver drugs or to assist in
delivering these drugs to a specific site in the body.
The Company also has an internal group focused on novel drug
delivery systems. The Company's efforts are currently focused on
the Ocufit SR system, a cylindrical rod molded from a variety of
silicone elastomer polymers and small enough to fit into the fold
between the eye and the eyelid. The Ocufit can be designed to
release a number of different drugs in predefined quantities over
time periods ranging from two weeks to several months without
physical intervention. The Ocufit SR is being jointly developed
with Escalon Medical Corporation, which owns the basic
technology. The Company is also developing other delivery
systems based on DBS patented technology.
Order Backlog
--------------
Product orders on hand at December 31, 1996 were approximately
$94 million, compared with approximately $108 million at the end
of 1995. 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 $24 million at December 31, 1996 compared with $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.
<PAGE> 6
Raw Materials
--------------
The Company uses three basic raw materials in the manufacture of
its products: rubber; aluminum; and plastic. Approximately 50%
of the total rubber used by the Company is natural rubber from
Sri Lanka, Cameroon, Vietnam, 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 that
supply natural rubber may be significant factors in the
continuing supply of this commodity. Synthetic elastomers and
plastics currently purchased by the Company are made from
petroleum derivatives. A significant portion of the world supply
of petroleum feedstocks is concentrated in specific geographic
areas, and the availability and cost of these feedstocks are
dependent on the political stability of these areas. 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 feed stocks. This will result in reducing the number of raw
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 lower 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.
<PAGE> 7
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 $11.2 million in 1996 and $12
million in each of the years 1995 and 1994, net of cost
reimbursements by customers. Approximately 120 professional
employees were engaged full time in such activity in 1996.
Employees
----------
As of December 31, 1996, the Company and its subsidiaries had
5,040 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 current business or its earnings to
be materially dependent upon any single patent or patent right.
Although not material at this time, the Company believes its
investment in DBS and its own novel drug delivery development
capabilities will play an increasingly important role in the future.
DBS has a growing portfolio of patented technology, which is
critical to its success because future income will derive from
licensing this technology to its customers.
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 provides contract packaging and contract manufacturing
services for 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
<PAGE> 8
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 25% of the Company's consolidated net sales in
1996, but no one of these customers accounted for more than 5% of
1996 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.
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 packaging 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
capability to manufacture or package other companies' products on
a contract basis. However, most large pharmaceutical and
personal healthcare 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
---------------------------------------------------
<PAGE> 9
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 1996 Annual Report to
Shareholders, incorporated by reference herein, as contained in
Exhibit 13.
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 1996 Annual Report to Shareholders
are incorporated herein by reference, as contained in Exhibit 13.
The Company believes that its international business does not
involve a substantially greater business risk than its domestic
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 1996 Annual Report to Shareholders, incorporated herein by
reference, as contained in Exhibit 13). 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 1996 Annual Report to
Shareholders, incorporated herein by reference, as contained in
Exhibit 13.
<PAGE> 10
Item 2. Properties
-----------
The Company maintains twelve manufacturing plants and two mold
and die production facilities in the United States, two
manufacturing plant in Puerto Rico, and a total of eight
manufacturing plants and one mold and die production facility in
Germany, England, France, Denmark, 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 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 839,000 square feet of owned and 996,000
square feet of leased space in Pennsylvania, New Jersey,
Florida, Nebraska, North Carolina and Puerto Rico.
The principal international facilities are as follows:
- Approximately 481,000 square feet of owned space and 15,000
square feet of leased space in Germany, England, Denmark and
France.
- Approximately 69,000 square feet of owned space in Brazil.
- Approximately 92,000 square feet of owned space in Singapore.
Of the aforementioned currently owned facilities, approximately
277,000 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 1996 Annual
Report to Shareholders, which information is incorporated herein
by reference, as contained in Exhibit 13.
Sales office facilities in separate locations are leased
under short-term arrangements.
The Company also holds for sale former manufacturing facility
space in the United States - totaling 106,000 square feet; and in
Germany and Argentina totaling 46,000 square feet.
<PAGE> 11
Item 3. Legal Proceedings.
-----------------
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 Pharmaceutical Services,
Inc. ("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 sought $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 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.
This matter went to trial in late March, 1996, and on April
10, 1996, at the close of trial, the court dismissed all of
the plaintiff's claims and all of defendants' counterclaims,
with each side to bear its own costs. Plaintiff has filed
a notice of appeal, and the defendants have filed a cross-
appeal.
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. 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.
<PAGE> 12
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 31, 1997 were as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Business Experience During Past Five
Years
---- --- ---------------------------------------
George R. Bennyhoff1 53 Senior Vice President, Human Resources
and Public Affairs.
Jerry E. Dorsey1 52 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.
Steven A. Ellers1 46 Corporate Vice President, Sales since
April 1996, previously Vice President,
Operations from June 1994 to March
1996; Vice President Asia/Pacific and
Managing Director, Singapore for the
Company from May 1990 to May 1994.
John R. Gailey III1 42 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.
Stephen M. Heumann1 55 Vice President since May 1994; and
Treasurer since December 1990.
Larry P. Higgins 57 Corporate Vice President, Operations
since May 1996 and prior to joining the
Company an international business
consultant from 1994 to 1996 and Senior
Vice President International Operations
for Revlon, Inc., a cosmetics company,
from 1992 to 1994.
1 Holds position as corporate officer elected by the Board of
Directors for one year term.
<PAGE> 13
Name Age Business Experience During Past Five
Years
---- --- ---------------------------------------
William G. Little1 54 Chairman of the Board since May 1995
and Director, President and Chief
Executive Officer since May 1991 for
the Company.
Donald E. Morel, Jr.1 39 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.
Anna Mae Papso1 53 Corporate Vice President, Accounting
Services since April 1996; previously
Vice President and Corporate
Controller.
John A. Vigna1 46 Senior Vice President, Finance and
Administration since March 1997; and
prior to joining the Company Executive
Vice President and Chief Operating
Officer for Tseng Labs Inc., supplier
of graphics accelerators and video
products for personal computer systems,
from 1995 to December 1996; Senior Vice
President Operations and Chief
Financial Officer for Polygram Group
Distribution, an audio-video manufacturing
and marketing group, from 1993 to 1995;
and Senior Vice President, U.S. Services
for Unisys Corporation, a computer company,
from 1990 to 1992.
</TABLE>
1 Holds position as corporate officer elected by the Board of
Directors for one year term.
<PAGE> 14
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 1996 and 1995 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>
1996 24 7/8 22 1/8 30 22 1/4 29 1/4 23 1/2 29 1/4 25 7/8 30 22 1/8
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
</TABLE>
As of December 31, 1996, the Company had 1,172 shareholders of
record. There were also 2,900 holders of shares registered in
nominee names. The Company's Common Stock paid a quarterly
dividend of $.12 per share in each of the first three quarters of
1995; $.13 per share in the fourth quarter of 1995 and each of
the first three quarters of 1996; and $.14 per share in the
fourth quarter of 1996.
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 1996 Annual Report to Shareholders, as contained in Exhibit
13. 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 1996 Annual Report to Shareholders, as
contained in Exhibit 13.
Item 7. Management's Discussion and Analysis of 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 1996 Annual Report to Shareholders, as contained in
Exhibit 13.
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
<PAGE> 15
Per Share Data (Unaudited)" of the 1996 Annual Report to
Shareholders, as contained in Exhibit 13.
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" 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 - BOARD 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.
-----------------------------------------------
None
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
-------------------------------------------------------
<PAGE> 16
(a) 1. The following report and consolidated financial
statements, included in the 1996 Annual Report to
Shareholders, have been incorporated herein by
reference, as contained in Exhibit 13:
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
Consolidated Balance Sheets at December 31, 1996 and
1995
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994
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 1996.
(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> 17
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/ John Vigna
--------------------------------
John Vigna
Senior Vice President,
Finance and Administration
March 31, 1997
--------------------------------
Date
18
<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 31, 1997
--------------------------------- President,and Chief
William G. Little* Executive Officer
(Principal Executive Officer)
Tenley E. Albright Director March 31, 1997
-----------------------------------
Tenley E. Albright *
George W. Ebright Director March 31, 1997
------------------------------------
George W. Ebright*
George J. Hauptfuhrer Director March 31, 1997
------------------------------------
George J. Hauptfuhrer*
L. Robert Johnson Director March 31, 1997
------------------------------------
L. Robert Johnson*
William H. Longfield Director March 31, 1997
--------------------------------------
William H. Longfield*
John P. Neafsey Director March 31, 1997
--------------------------------------
John P. Neafsey*
<PAGE> 19
Signature Title Date
--------- ------ -------
<S> <C> <C>
Anna Mae Papso Corporate Vice President March 31, 1997
-------------------------------------- Accounting Services
Anna Mae Papso
(Principal Accounting Officer)
Monroe E. Trout Director March 31, 1997
---------------------------------------
Monroe E. Trout*
John A. Vigna Senior Vice President, March 31, 1997
--------------------------------------- Finance and Administration
John A. Vigna
Anthony Welters Director March 31, 1997
---------------------------------------
Anthony Welters*
William S. West Director March 31, 1997
----------------------------------------
William S. West*
J. Roffe Wike, II Director March 31, 1997
---------------------------------------
J. Roffe Wike, II*
Geoffrey F. Worden Director March 31, 1997
----------------------------------------
Geoffrey F. Worden*
* By John A. Vigna pursuant to a power of attorney.
</TABLE>
20
<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).
(9) None.
(10) (a) 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).
(10) (b) First Addendum to Lease dated as of May 22, 1995 between
Lion Associates, L.P. and the Company, incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 (File No. 1-8036).
(10) (c) 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).
(10) (d) Amendments to the Long Term Incentive Plan, dated April 30,
1996, incorporated herein by reference to the Company's
Form 10Q for the quarter ended June 30, 1996 (File No. 1-8036).
F - 1
<PAGE> 21
Exhibit Page
Number Number
<S> <C> <C>
(10) (e) Executive Incentive Bonus Plan 1997.
(10) (f) 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) (g) Amendments to the Non-Qualified Stock Option Plan for Non-
Employee Directors, dated April 30, 1996, incorporated
herein by reference to the Company's Form 10Q for the
quarter ended June 30, 1996.
(10) (h) Form of agreement between the Company and certain 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) (i) Schedule of agreements with executive officers.
(10) (j) 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) (k) Amendment No. 1 to Supplemental Employees' Retirement Plan,
incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 (File No.
1-8036).
(10) (l) Amendment No. 2 to Supplemental Employees' 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) (m) 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) (n) 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) (o) 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).
F - 2
<PAGE> 22
Exhibit Page
Number Number
<S> <C> <C>
(10) (p) 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 year ended December 31, 1994 (File No. 1-8036).
(10) (q) 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) (r) 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) (s) 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) (t) 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) (u) 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) (v) Lease Agreement, dated December 9, 1977, between Paco
Packaging, Inc. and New Oak Street Corp., as amended by
the Amendment 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
Pharmaceutical Services, Inc.'s Registration Statement
on Form S-1, Registration No. 33- 48754, filed with the
Commission.
F - 3
23
<PAGE> Page
Number Number
<C> <C> <C>
(10) (w) 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) (x) Collective Bargaining Agreement, dated November 30, 1994,
by and between Paco Pharmaceutical Services, Inc. and
Teamster 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) (y) 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.
(10) (z) Severance and Non-Compete Agreement, dated July 8, 1996,
between Lawrence P. Higgins and the Company, incorporated
herein by reference to the Company's Form 10Q for the
quarter ended June 30, 1996 (File No. 1-8036).
(11) Not Applicable.
(12) Not Applicable.
(13) 1996 Annual Report to Shareholders.
(16) Not applicable.
(18) None.
(21) Subsidiaries of the Company.
(22) None.
(23) Consent of Independent Accountants.
(24) Powers of Attorney.
(27) Financial Data Schedules.
(99) None.
24
F - 4
</TABLE>
Exhibit 10 (e)
EXECUTIVE
INCENTIVE
BONUS
PLAN
1997
<PAGE>
The Incentive Bonus Plan for 1997 is based on the following
concepts:
* Excellent service to our customers will create
shareholder value.
* Employees must share in the Company s success.
* Return on Shareholders Equity (ROE) is the measurement
of success for the total corporation.
Here's how the plan works:
TARGET BONUS
The target bonus opportunity is a specific percentage of
your base salary (as of December 31, 1997) and represents
the amount of bonus you will receive if 100% of all
performance factors are achieved.
PERFORMANCE FACTORS
There are two performance factors which are used to
calculate bonuses:
* 80% of the bonus calculation will depend on our
achievement of the Return on Equity (ROE) target
committed to in the Company s business plan for 1997.
* 20% of the bonus calculation will be based on
achievement of our corporate goals related to the
development of new business for The West Company.
BONUS CALCULATION
When the Company s ROE results exceed the target, your bonus
will increase as results improve. If the results at least
reach the threshold but fall short of the target, your bonus
will be something less than your target bonus opportunity.
The following scale will be used for calculating bonuses:
% of Goal % of Bonus
Achieved Achieved
125 -maximum- 150
120 135
115 120
110 110
105 105
100 -target- 100
95 95
90 90
85 70
80 50
Below 80 0
<PAGE>
Please notice that as the performance of these two factors
exceeds 110% of goal, your bonus opportunity accelerates
considerably.
BONUS PAYOUTS
Once the year's results are confirmed, your bonus award will
be calculated applying appropriate tax deductions. Of the
after-tax amount, 75% will be paid in cash (check) and 25%
will be converted into shares of common stock of The West
Company. These shares will be deposited with an investment
firm where accounts are maintained for our Stock Bonus Plan.
We encourage you to retain these shares so as to accumulate
shares toward your personal stock ownership objective and to
take advantage of the Incentive Share opportunities of the
Stock Bonus Plan. Here are the highlights of the Stock Bonus
Plan and information on your personal stock ownership
guideline.
<PAGE>
EXAMPLE
An executive earning $120,000, whose target bonus is 30%,
would have his/her bonus calculated as follows if the
Company reaches 112% of its ROE target and 100% of the
new business development goals are achieved.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Target Bonus %Achieved Bonus % Bonus $
ROE 80% x Bonus = Opp. x (from scale) = Earned x Salary = Earned
NBD Target Bonus Bonus % Bonus $
Goals 20% x Bonus = Opp. x % Achieved = Earned x Salary = Earned
ROE 80% x 30% = 24% x 114% = 27.4% x $120,000 = $32,832
NBD
Goals 20% x 30% = 6% x 100% = 6% x $120,000 = $7,200
TOTAL BONUS EARNED 33.4% $40,032
</TABLE>
<PAGE>
STOCK BONUS PLAN
25% of your after-tax annual bonus is paid in shares of
The West Company common stock.
Participants may elect to commit shares ( Bonus
Shares ) to long-term holding by depositing those
shares into an authorized account. Shares will be held
in the participant's name.
If a participant commits to long-term holding, a number
of restricted shares ("Incentive Shares") equal to 25%
of the committed bonus shares will be issued to the
participant.
The incentive shares will be legended so that the
restrictions lapse at the end of four years from the
date of issuance, so long as the bonus shares are
continuously held by the participant during that four
year period.
If a participant retires under The West Company s
Salaried Employees' Retirement Plan, the restrictions
will lapse, so long as the bonus shares have been
retained continuously. He/she will be entitled to
receive a portion of the Incentive Shares according to
the following schedule:
25% with at least one but less than two years
continuous ownership of the Bonus Shares.
50% with at least two but less than three years
continuous ownership of the Bonus Shares.
75% with at least three but less than four years
continuous ownership of the Bonus Shares.
Participants will receive dividends from Bonus Shares
and restricted shares as they are declared. These
dividends will be reinvested in stock of The West
Company.
Ownership records will be reviewed annually to
verify continuous ownership.
The Plan is authorized under the LONG-TERM INCENTIVE
PLAN.
STOCK OWNERSHIP GUIDE
Your personal stock ownership guideline is ____% of your
base salary and is expected to be achieved in 5-7 years from
the time the Stock Bonus Plan was implemented (1993) or from
the year an individual becomes eligible to participate in
the Incentive Bonus Plan.
MONITORING OUR PROGRESS
<PAGE>
Our progress in achieving the ROE target will be
communicated throughout the year, and your manager will
review your individual objectives on a quarterly basis.
Use your TQM skills to lead the organization in
overachieving our business objectives. You will share in the
reward when we succeed.
Exhibit 10 (i)
SCHEDULE OF AGREEMENTS WITH EXECUTIVE OFFICERS
----------------------------------------------
The Company has entered into agreements with the
following individuals. Such agreements are substantially
identical in all material respects to the form of agreement set
forth in Exhibit (10) (h).
George R. Bennyhoff
J. E. Dorsey
John R. Gailey III
Stephen M. Heumann
Anna Mae Papso
Exhibit 13
<PAGE>
FINANCIAL REVIEW
--------------------
The West Company (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.
The following is management's discussion and analysis of the
Company's operating results for the three years ended December
31, 1996 and its financial position as of year-end 1996. 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 1996 net income was $16.4 million, or $1.00 per
share. These results reflect a $15 million net charge to
earnings in the first quarter of 1996 related to the Company's
restructuring plan. Excluding the restructuring charge, the
Company's 1996 net income was $31.3 million, or $1.91 per share,
which compares with 1995 net income of $28.7 million, or $1.73
per share, and 1994 net income of $27.3 million, or $1.70 per
share.
In May 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. The
terms of these transactions are described in the Note
"Acquisitions and Investments" to the Consolidated Financial
Statements.
NET SALES
----------
Net sales were $458.8 million in 1996, an increase of $45.9
million, or 11%, compared with net sales of $412.9 million in
1995. The sales increase mainly reflects the 1995 acquisition of
Paco and price and volume increases for core healthcare products.
Paco's sales were responsible for the majority of the year-
over-year sales increase. The full year ownership combined with
strong demand for Paco's services increased reported Paco sales
by 84%. The Company expects the strong demand for contract
packaging and manufacturing services to continue as a result of
the consolidation of pharmaceutical companies and pressure to<PAGE>
reduce costs.
Sales of core healthcare products increased 7% (measured at
constant exchange rates) in 1996 compared with 1995 due to a
combination of price increases and higher demand. Volume
increases were especially strong in European markets, although
the product mix was less profitable. In North American markets,
volume increases were smaller, although the product mix showed a
slight improvement. In other international markets served,
increased sales mainly reflect higher demand.
Lower demand in certain consumer products markets, especially
in the first half of 1996, resulted in a 10% decline in product
sales to these markets. However, the Company did experience
strong demand for Spout-Pak , its fitment for gable-carton juice
containers; Spout-Pak sales volume increased by 10% compared
with 1995. Machinery sales were flat compared with 1995, despite
the sale of these operations in the third quarter of 1996.
Reported consolidated sales were reduced by about $4.4 million
due to the stronger U.S. dollar compared with most European
currencies.
In 1995, net sales increased by 13%, or $47.8 million, over
1994 sales 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.
The Company's 1995 net sales (measured at constant exchange
rates) from products used by the healthcare industry worldwide
were slightly lower compared with 1994 sales levels. Government
and consumer pressure to cut healthcare costs limited the ability
to increase prices and led more customers to purchase alternative
lower-priced packaging components. 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 manufacturing and contract packaging services
to both pharmaceutical and consumer companies added $38.9 million
to 1995 net sales.
Consumer products sales rose 4% in 1995 attributable to demand
for Spout-Pak . Machinery sales declined to almost half 1994
levels.
2
<PAGE>
GROSS PROFIT
-------------
The consolidated gross margin in 1996 was 27.5%, and gross
profit was $126.1 million. These results compare with a 28.6%
gross margin and $118.2 million of gross profit in 1995. The
margin decline reflects the impact of the full year consolidation
of the lower- margin service operations provided by Paco.
Margins on core health care product sales increased by more
than one percentage point due primarily to price increases.
Excluding price increase impacts, margins on health care product
sales were about equal to 1995. Volume increases and programs to
create centers of manufacturing excellence by improving both the
cost structure and increase efficiencies offset inflation and the
less- favorable product mix.
Continued consumer and government pressure to control and even
reduce the cost of healthcare delivery is transforming the
healthcare markets. Therefore, future results are difficult to
predict as the ability to increase prices will be limited and
competitive activity is expected to increase. The Company
continues to focus on the long-term needs of our customers, and
the restructuring plan announced in 1996 is a part of the program
to focus factories and resources on these requirements for
quality at a low cost.
Margins on Paco sales declined year-over-year due in part to
low-priced contracts that had been negotiated prior to
acquisition and to inefficient operations especially in the first
half of the year. The Company has improved the management of
Paco, is working to attract higher-margin, longer-running sales
opportunities, and is upgrading equipment to become more
efficient.
Margins on consumer plastic sales increased, despite the lower
volume, due to cost saving initiatives, lower U.S. employee
fringe benefit costs and product mix. The machinery operation
generated a small gross profit in 1996 compared with a loss in
1995.
The gross margin of 28.6% in 1995 represented a significant
decline from the 32.1% margin achieved in 1994, and gross profit
improved less than 1%. The reduced gross margin, reflected, in
part, the lower-margin service operations provided by Paco, which
reduced consolidated gross margins more than one percentage
point. The remaining margin reduction reflected 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 subsequently cancelled, were only partially
recovered from these customers. Finally, the Company 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.
3
<PAGE>
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. 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.
EXPENSES
---------
Selling, general and administrative expenses as a percentage of
sales were 15.9% in 1996, 16.9% in 1995 and 19.2% in 1994. To a
large extent this improvement reflects price increases and the
impact of acquired companies. The improvement also reflects the
increase in productivity and headcount reductions resulting from
training and better systems which offset inflationary cost
increases in wages, supplies and outside services.
Selling, general and administrative expenses totalled $72.8
million in 1996, compared with $69.9 million in 1995 and $70.1
million in 1994. The 4% increase in these expenses in 1996
compared with 1995 were primarily the result of the following
three factors: the accrual of 1996 incentive compensation based
on the attainment of financial goals, the consolidation of four
additional months of operations of Paco, and inflationary cost
increases. These increases were offset, in part, by a reduction
in headcount related to the 1996 restructuring plan, lower U.S.
employee fringe benefit costs, lower claim costs and the impact
of a stronger U.S. dollar.
In 1995, selling, general and administrative costs declined .4%
despite the addition of 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%. This
significantly lower level of expenses primarily reflects the
absence of incentive bonus compensation (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 offset the inflationary increases in wages and
benefits, other outside service costs and supplies.
In late March 1996, the Company announced a restructuring plan,
which provided for the closing or 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 actions totaled $21.5
million. About one-third of the charge relates to reduction in
personnel, including both manufacturing and staff positions. To
date approximately $5.3 million has been paid out to terminated
employees in severance and benefits. At year-end 1996, the
reduction in staff totaled 154 for restructuring activities
completed. Facilities in Germany and Argentina have been closed
and facilities in Brazil and Pennsylvania have been downsized.
4
<PAGE>
The machinery operation has been sold. Restructuring actions
will be completed in the first half of 1997. The restructuring
plan is part of an overall strategy that includes enhanced
technical capabilities and product offerings for customers.
Specifically, the actions are designed to create focused, more
efficient factories, and to shift certain production to lower-
cost locations so that the Company can meet the demands of the
healthcare industry, for high quality, cost effective products.
Transactions included in the other income/expense category
netted $.9 million of income in 1996, compared with $1.5 million
of income in 1995 and $1.7 million of expense in 1994. Interest
income, included therein, totalled $1.3 million in 1996, $2.0
million in 1995 and $1.2 million in 1994. Historically, interest
income was generated mainly in Brazil but has been declining
since mid-1994 when Brazil adopted an economic plan designed to
reduce inflation and stabilize the currency, consequently
reducing interest rates. In addition, in 1995 the Company had a
high level of advances to customers, related to new product
programs, which have been repaid. Also included in this category
are foreign currency translation and transaction losses totalling
$.1 million, $1.4 million and $2.8 million in 1996, 1995 and
1994, respectively. Translation losses reflect accounting in the
higher-inflation countries of South America, mainly Brazil where
the economic plan noted earlier has reduced translation losses.
Foreign currency transaction gains in 1996 of $.2 million, $.6
million in 1995 and $.5 million in 1994 reflect realignment of
European currencies. Net losses on real estate and investments
totalled $.2 million in both 1996 and 1995 and $.5 million in
1994. Losses on disposition of equipment were higher in 1996
compared with both 1995 and 1994.
INTEREST
---------
Interest costs totaled $7.3 million in 1996 compared with $7.8
million in 1995 and $3.5 million in 1994, of which $.4 million,
$.5 million and $.2 million, respectively, were capitalized as
part of the cost of capital asset acquisitions.
The average consolidated debt level decreased in 1996 after
having increased significantly in 1995. Debt levels in 1995
reflect the acquisitions described in the Note "Acquisitions and
Investments" to the Consolidated Financial Statements. Interest
rates also were lower in 1996 compared with 1995 but were higher
in the United States in 1995 compared with 1994.
INCOME TAXES
-------------
The effective tax rate on consolidated income was 41.8% in
1996, 32.8% in 1995 and 31.8% in 1994. The higher 1996 tax rate
reflects the low tax benefit on certain components of the
restructuring charge. Excluding the restructuring charge and the
applicable tax benefits, the 1996 effective tax rate would be
36.6%.
Two factors were the primary cause of the low tax rate in 1995.
First, the Company changed its tax accounting method for Puerto
Rico operations in accordance with a U.S. Internal Revenue
5
<PAGE>
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, requiring adjustment of
deferred tax balances and increasing the effective rate by .6 of
a percentage point. Excluding the impacts of these adjustments
associated mainly with prior year tax accruals, the 1995
effective tax rate would have been approximately 36%.
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 ownership in these
subsidiaries at year-end 1994. Excluding the effects of these
adjustments, the effective tax rate would have been approximately
35%.
MINORITY INTERESTS AND EQUITY IN AFFILIATES
-------------------------------------------
Minority interests in net income of subsidiaries declined to
$.1 million in 1996 from $.8 million in 1995. Late in 1995, the
remaining minority interest in Schubert was purchased leaving
only a small minority ownership interest in a subsidiary in
Spain. The change in minority interests compared to 1994's $1.9
million reflects the late 1994 acquisition of the minority
ownerships in five European subsidiaries.
Income from investments in affiliated companies totalled $1.5
million in 1996, $.9 million in 1995, and $.5 million in 1994.
The increases reflect higher sales and improved margins for
Daikyo Seiko, Ltd., a Japanese company in which the Company owns
a 25% equity stake. These improvements were 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, (date of sale) and by a stronger U.S. dollar
compared with the Japanese yen in 1996. Results of the Company's
investment in affiliates in Mexico improved in 1996 due to lower
currency translation losses. In 1995, these affiliates' results
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 improvements.
FINANCIAL POSITION
--------------------
The Company believes that its financial position and current
capitalization indicate an ability to finance substantial future
growth. Cash flow from operations totaled $63.4 million in 1996.
Working capital at December 31, 1996, totalled $91.1 million, a
ratio of current assets to current liabilities of 2.4 to 1, and
6
<PAGE>
includes a cash balance of $27.3 million. Debt to total invested
capital (total debt, minority interests and shareholders' equity)
was 28.1%; the outstanding debt balance was $98.4 million at
December 31, 1996, compared with $114.3 million at year-end 1995.
The cash flow from operations of $63.4 million was supplemented
by $7.2 million of proceeds partly from sales of assets and
facilities made redundant by the restructuring plan, and by $1.6
million of repayments by customer of prior year advances related
to new product development. These funds were more than adequate
to cover $31.7 million of 1996 fixed asset acquisitions, $13.7
million of debt reduction and $8.7 million of cash dividends to
shareholders ($.53 per share). The remaining cash flow from
operations, in addition to cash from exercise of employee stock
options totalling $3.5 million, was used, in part, to purchase
Common Stock valued at $10 million from a former member of the
Board of Directors and to acquire an additional 10% interest in
DanBioSyst UK Ltd.
The Company has 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
remaining term of approximately four years. At year-end 1996,
the Company had $15.8 million outstanding under the 364-day
facility and nothing under the long-term facility. In addition,
and unused long-term credit facilities totaling $15.1 million at
December 31, 1996, were available to subsidiaries.
Asset turnover ratio improved slightly to .96 for 1996.
Return on average shareholders' equity was 6.5% for 1996, reduced
significantly by the restructuring charge.
1997 REQUIREMENTS
------------------
Cash requirements for capital projects in 1997 are estimated
at $38 million. These projects focus on cost reduction and
quality improvements through technology upgrades and product and
process standardization. New product tooling and equipment and
facilities to support the development of novel drug delivery
systems also is planned. Acquisition and implementation of new
information management systems will continue, as will maintenance
and improvements to the existing production capacity. In
addition the Company plans to exercise its option to acquire an
additional 10% interest in DanBioSyst U.K. Ltd. at the contract
price of 1.2 million pounds sterling, approximately one-third of
which is payable in Common Stock.
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 Company has entered into interest rate
swap agreements to minimize risk to interest rate increases. The
Company also enters into currency swap agreements to minimize
risk to currency movements on significant borrowings, although
none are outstanding at year end 1996. The Note "Financial
7
<PAGE>
Instruments" to the Consolidated Financial Statements explains
the impact of such hedges and interest rate swaps on the
Company's results of operations and financial position.
Cash requirements for remedial activity related to
environmental cleanup are not expected to exceed $1 million in
1997. In 1996, payments related to environmental cleanup totaled
$.7 million. Additional liability totalling $.4 million was
accrued in 1996 because of changes in the extent of future
cleanup activities and subsequent monitoring 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 no additional amounts
have been accrued with respect to this site.
In 1997, in addition to cash flow from operations, the
Company expects to receive proceeds from employee stock option
exercises. Management believes these sources of cash, available
credit facilities and the Company's current capitalization
provide sufficient flexibility to meet future cash flow
requirements.
8
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
THE WEST COMPANY, INCORPORATED AND
SUBSIDIARIES FOR THE YEARS
ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands, except per share data)
<TABLE>
<CAPTION> 1996 1995 1994
<S> <C> <C> <C> <C> <C>
------------------------------------------------------
Net sales $458,800 100 % $412,900 100% $365,100 100%
Cost of goods sold 332,700 73 294,700 71 247,900 68
------------------------------------------------------
Gross profit 126,100 27 118,200 29 117,200 32
Selling, general and
administrative expenses 72,800 16 69,900 17 70,100 19
Restructuring charge 21,500 5 - - - -
Other (income) expense, net (900) (1) (1,500) - 1,700 1
------------------------------------------------------
Operating profit 32,700 7 49,800 12 45,400 12
Interest expense 6,900 1 7,300 2 3,300 1
------------------------------------------------------
Income before income taxes and
minority interests 25,800 6 42,500 10 42,100 11
Provision for income taxes 10,800 2 13,900 3 13,400 3
Minority interests 100 - 800 - 1,900 1
------------------------------------------------------
Income from consolidated operations 14,900 4 % 27,800 7% 26,800 7%
Equity in net income of
affiliated companies 1,500 900 500
------------------------------------------------------
Net income $ 16,400 $ 28,700 $ 27,300
------------------------------------------------------
Net income per share $ 1.00 $ 1.73 $ 1.70
------------------------------------------------------
Average shares outstanding 16,418 16,557 16,054
------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
9
<PAGE>
CONSOLIDATED BALANCE SHEETS
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
AT DECEMBER 31, 1996 AND 1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 1996 1995
----------------------
Current assets:
Cash, including equivalents (1996--$10,400; 1995--$4,400) $ 27,300 $ 17,400
Accounts receivable, less allowance (1996--$1,900; 1995--$1,900) 69,300 67,900
Inventories 44,000 48,300
Current deferred income tax benefit 10,200 7,400
Other current assets 5,900 7,400
----------------------
Total current assets 156,700 148,400
----------------------
Property, plant and equipment 431,600 440,100
Less accumulated depreciation and amortization 221,300 210,800
----------------------
210,300 229,300
Investments in affiliated companies 24,100 21,600
Goodwill 58,900 63,000
Deferred charges and other assets 27,400 17,800
----------------------
$477,400 $480,100
----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,000 $ 1,500
Notes payable 1,900 8,300
Accounts payable 23,900 22,500
Accrued expenses:
Salaries, wages and benefits 13,900 9,700
Income taxes payable 3,100 3,400
Other 21,800 16,400
----------------------
Total current liabilities 65,600 61,800
----------------------
Long-term debt, excluding current portion 95,500 104,500
10
<PAGE>
Deferred income taxes 39,700 34,300
Other long-term liabilities 24,300 25,200
Minority interests 300 200
Shareholders' equity:
Preferred Stock, shares authorized: 3,000;
shares issued and outstanding: 1996-0; 1995-0
Common Stock, par value $.25 per share; shares authorized: 50,000;
shares issued: 1996--16,845; 1995--16,845
shares outstanding: 1996--16,383; 1995--16,621 4,200 4,200
Capital in excess of par value 24,000 23,500
Cumulative foreign currency translation adjustments 16,300 20,100
Unrealized holding gains (losses) on securities, net 400 300
Retained earnings 217,700 210,200
----------------------
262,600 258,300
Less Treasury Stock (1996--462 shares; 1995--224 shares) 10,600 4,200
----------------------
Total shareholders' equity 252,000 254,100
----------------------
$477,400 $480,100
----------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
11
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
(in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Capital in
Common excess of Retained Treasury
Stock par value Other earnings Stock Total
------------------------------------------------------------
Balance, January 1, 1994 $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 ($.50 per share) (8,300) (8,300)
Foreign currency translation adjustments 3,000 3,000
Unrealized gains (losses) on
securities, net 300 300
------------------------------------------------------------
Balance, December 31, 1995 4,200 23,500 20,400 210,200 (4,200) 254,100
------------------------------------------------------------
Net income 16,400 16,400
Shares issued under stock plans 400 3,200 3,600
Shares issued for acquisition 100 400 500
Shares repurchased (10,000) (10,000)
Cash dividends declared ($.54 per share) (8,900) (8,900)
Foreign currency translation adjustments (3,800) (3,800)
Unrealized gains (losses) on
securities, net 100 100
------------------------------------------------------------
Balance, December 31, 1996 $4,200 $24,000 $16,700 $217,700 $(10,600) $252,000
------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
12
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $16,400 $28,700 $27,300
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 30,700 29,600 23,100
Restructuring charge 21,500 - -
Loss on sales of real estate and investments 200 200 500
Deferred income taxes (5,700) 2,000 (2,700)
Minority interests 100 800 1,900
Equity in undistributed earnings of affiliated
companies, net (1,100) (700) (200)
(Increase) decrease in accounts receivable (3,400) 1,400 (8,900)
(Increase) in inventories (2,700) (4,500) (700)
(Increase) decrease in other current assets (300) 500 2,500
Increase (decrease) in other current liabilities 5,900 (13,100) 3,000
Other operating items 1,800 1,200 4,000
-------------------------------
Net cash provided by operating activities 63,400 46,100 49,800
-------------------------------
Cash flows from investing activities:
Property, plant and equipment acquired (31,700) (31,300) (27,100)
Proceeds from sales of assets 7,200 4,500 3,700
Payments for acquisitions, net of cash acquired (1,600) (72,200) (13,900)
Customer advances, net of repayments 1,600 (1,600) -
-------------------------------
Net cash used in investing activities (24,500) (100,600) (37,300)
-------------------------------
Cash flows from financing activities:
Borrowings under long-term
revolving credit agreements, net 1,500 20,200 -
Proceeds from other long-term debt - 50,800 18,100
13
<PAGE>
Repayment of long-term debt (9,000) (27,300) (3,000)
Notes payable, net (6,200) 5,500 (3,000)
Issuance of Common Stock, net 3,500 2,800 3,400
Capital contribution by minority owner - - 400
Dividend payments (8,700) (8,100) (7,200)
Purchase of treasury stock (10,000) - -
-------------------------------
Net cash (used in) provided by financing activities (28,900) 43,900 8,700
-------------------------------
Effect of exchange rates on cash (100) 800 800
-------------------------------
Net increase (decrease) in cash and cash equivalents 9,900 (9,800) 22,000
Cash and cash equivalents at beginning of year 17,400 27,200 5,200
-------------------------------
Cash and cash equivalents at end of year $27,300 $17,400 $27,200
-------------------------------
Supplemental cash flow information:
Interest paid (net of amounts capitalized) $ 6,200 $ 6,300 $ 3,000
Income taxes paid $14,300 $12,800 $13,700
-------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<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
majority-owned subsidiaries. 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
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
15
<PAGE>
are classified as held-to-maturity. These debt securities had an
aggregate value, measured at amortized cost of $900 at December
31, 1995, and matured 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.
The Company has adopted SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of, effective January 1, 1996. The Company continually
evaluates the appropriateness of the remaining estimated useful
life and the carrying value of tangible and intangible assets.
Carrying values in excess of undiscounted estimates of related
cash flows are expensed when such determination is made.
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.
RESEARCH AND DEVELOPMENT: Research, development and engineering
expenditures for the creation and application of new or improved
products and processes, which amounted to $11,200 in 1996 and
$12,000 in each of the years 1995 and 1994, are expensed as
incurred, and are net of customer reimbursements.
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: 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. Valuation allowances are recorded to reduce
deferred tax assets to amounts that are more likely than not to
be realized. 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.
STOCK-BASED COMPENSATION: The Company has elected to account for
stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board opinion No. 25,
16
<PAGE>
Accounting for Stock Issued to Employees, and related
Interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.
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>
<C> <C> <C>
1996 1995 1994
-----------------------------
Interest income $ 1,300 $ 2,000 $ 1,200
Foreign exchange losses (100) (1,400) (2,800)
Loss on sales of real estate
and investments (200) (200) (500)
Other (100) 1,100 400
-----------------------------
$ 900 $ 1,500 $(1,700)
-----------------------------
</TABLE>
RESTRUCTURING CHARGE
On March 29, 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
$15,000, net of $6,500 of income tax benefits, and was 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. At December 31, 1996,
154 employees have been terminated and total payout of severance
and benefits was $5,300. 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. Facilities
in Germany and Argentina have been closed and facilities in
Brazil and Pennsylvania have been downsized. The machinery
manufacturing operations have been sold. Restructuring
activities will be substantially completed in the first half of
1997.
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 personal-care consumer 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,
17
<PAGE>
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 at December 18, 1995),
and DK31,000 ($4,800 at May 20, 1994), respectively, and was
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 ($19,300),
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 were 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:
<TABLE>
<CAPTION>
<C> <C>
1995 1994
------------------
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 1996, 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 $1,600 in cash and $500 in Common Stock in
18
<PAGE>
1996, and cash of $2,500 in 1995 and $5,600 in 1994. The
acquisition of Senetics was accounted for as a purchase, and the
company has been consolidated since January 1, 1994.
Additional consideration may be due depending on sale 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>
<C> <C> <C>
1996 1995 1994
---------------------------
Domestic operations $ 11,500 $ 26,700 $ 26,500
International operations 14,300 15,800 15,600
---------------------------
$ 25,800 $ 42,500 $ 42,100
---------------------------
</TABLE>
The related provision for income taxes consists of:
<TABLE>
<CAPTION>
<C> <C> <C>
1996 1995 1994
---------------------------
Currently payable:
Federal $ 8,000 $ 5,600 $ 9,500
State 700 600 600
International 7,800 5,700 6,000
---------------------------
16,500 11,900 16,100
---------------------------
Deferred:
Federal (3,600) 1,200 (300)
State (200) 100 -
International (1,900) 700 (2,400)
---------------------------
(5,700) 2,000 (2,700)
---------------------------
$10,800 $13,900 $13,400
---------------------------
</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>
19
<PAGE>
<C> <C> <C>
1996 1995 1994
--------------------------
Statutory corporate tax rate 35.0% 35.0% 35.0%
Tax on international operations
in excess of (less than)
United States tax rate 3.4 1.7 (3.4)
Puerto Rico tax accounting change - (1.9) -
State income taxes, net of Federal
tax benefit 1.8 1.0 .9
Other 1.6 (3.0) (.7)
--------------------------
Effective tax rate 41.8% 32.8% 31.8%
</TABLE> --------------------------
The net current and noncurrent components of deferred income
taxes recognized in the balance sheet at December 31 are as
follows:
<TABLE>
<CAPTION> <C> <C> <C>
1996 1995 1994
---------------------------
Net current assets $10,200 $ 5,600 $ 3,100
Net noncurrent liabilities 29,800 29,700 24,400
---------------------------
</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>
<C> <C> <C>
1996 1995 1994
----------------------------
Deferred tax assets:
Loss on asset dispositions
and plant closings $ 2,900 $ 2,900 $ 700
Severance and deferred
compensation 9,100 7,800 7,900
Net operating loss carryovers 2,300 3,900 2,600
Foreign tax credit carryovers 900 600 1,900
Restructuring charge 3,500 - -
Other 3,000 4,000 1,900
Valuation allowance (2,900) (2,500) (4,100)
-----------------------------
Total $18,800 $16,700 $10,900
-----------------------------
Deferred tax liabilities:
Accelerated depreciation $31,500 $36,000 $29,600
Severance and deferred compensation 1,900 1,300 600
Other 5,000 3,500 2,000
-----------------------------
Total $38,400 $40,800 $32,200
-----------------------------
</TABLE>
20
<PAGE>
At December 31, 1996, subsidiaries had operating tax loss
carryovers of $21,400, which will be available to apply against
the future taxable income of such subsidiaries. The carryover
periods expire beginning with $100 in 1997 and continue through
2002.
At December 31, 1996, undistributed earnings of
international subsidiaries, on which deferred income taxes have
not been provided, amounted to $72,300. 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,
1996, the Company had available foreign tax credit carryovers of
approximately $900 expiring in 1997 through 2001.
INVENTORIES
Inventories at December 31 include the following:
<TABLE>
<CAPTION>
<C> <C>
1996 1995
---------------------------
Finished goods $18,000 $20,400
Work in process 8,500 10,300
Raw materials 17,500 17,600
---------------------------
$44,000 $48,300
---------------------------
</TABLE>
[CAPTION]
Included above are inventories located in the United States that
are valued on the LIFO basis, amounting to $11,000 and $14,900 at
December 31, 1996 and 1995, respectively, which are approximately
$8,600 and $9,400, respectively, lower than replacement value.
The Company uses three basic raw materials in the manufacture of
its products: rubber, aluminum and plastic. Approximately 50% of
the total rubber used is natural rubber, substantially all of
which is imported from Sri Lanka, Cameroon, Vietnam 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>
21
<PAGE>
<C> <C> <C>
Years of
Expected
Useful
Life 1996 1995
-------------------------
Land $ 4,300 $ 4,200
Buildings and improvements 7-50 105,500 108,800
Machinery and equipment 3-20 249,200 247,300
Molds and dies 4-6 55,200 57,000
Construction in progress 17,400 22,800
--------------------------
$431,600 $440,100
--------------------------
</TABLE>
AFFILIATED COMPANIES
At December 31, 1996, the following affiliated companies were
accounted for under the equity method:
<TABLE>
<CAPTION>
<C> <C>
Ownership
Location 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%
Daikyo Seiko, Ltd. Japan 25%
DanBioSyst U.K. Ltd. United Kingdom 30%
----------------------------
The Company sold its 40% partnership interest in Schott West
Pharmaceutical Glass Company in 1995.
</TABLE>
A summary of the financial information for these companies is
presented below:
<TABLE>
<CAPTION>
<C> <C>
1996 1995
------------------------
Balance Sheet:
Current assets $ 82,400 $ 85,700
Noncurrent assets 77,500 70,600
------------------------
Total assets $159,900 $156,300
------------------------
Current liabilities $ 36,800 $ 43,300
Noncurrent liabilities 65,300 55,400
Owners' equity 57,800 57,600
------------------------
Total liabilities and owners' equity $159,900 $156,300
------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C>
1996 1995 1994
---------------------------
Income Statement:
Net sales $80,800 $80,400 $89,600
Gross profit 25,500 23,600 23,700
Net income 5,900 3,400 1,800
----------------------------
</TABLE>
Unremitted income of affiliated companies included in
consolidated retained earnings amounted to $11,000, $9,800 and
$9,100 at December 31, 1996, 1995 and 1994, respectively.
Dividends received from affiliated companies were $400 in 1996,
$200 in 1995 and $600 in 1994.
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. Cost of
securities is determined on the moving average method. The
Company's equity in these unrealized gains and losses increased
the Company's shareholders' equity by $400 and $300 at December
31, 1996 and 1995, respectively.
DEBT
SHORT-TERM: Short-term debt under a credit line of $15,800 and
$20,200 at December 31, 1996 and 1995, respectively, and short-
term debt of BPS ($11,900) 6,950 at December 31, 1996 have been
classified as long-term because of the Company's intent to renew
the borrowings using available long-term credit facilities.
Notes payable in the amounts of $1,900 and $8,300 at December 31,
1996 and 1995, respectively, are payable within one year and bear
interest at a weighted-average interest rate of 5.7% and 7.4%,
respectively.
<TABLE>
<CAPTION>
LONG TERM: <C> <C>
At December 31 1996 1995
-------------------
Unsecured:
Revolving credit facility,
due 2000 (6.03%) $ 15,800 $ 20,200
Tax-exempt industrial revenue bonds,
due 2005 (4.2% to 5.95%) (a) 11,100 11,100
Subordinated debentures, due 2007 (6.5%) 3,100 3,000
Other notes, due 1998 to 2002 (3.55%-9.5%) 52,300 55,000
Collateralized:
Mortgage notes, due 1997 to 2016 (3.5% to
13.1%) (b) 14,200 16,700
------------------
Total long-term debt 96,500 106,000
Less current portion 1,000 1,500
-------------------
$ 95,500 $104,500
-------------------
</TABLE> 23
<PAGE>
(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
$14,100 at December 31, 1996 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
facility. Two subsidiaries have long-term lines of credit
providing up to FF 51,400 ($9,900) at a floating rate based on
PIBOR plus 2/5% and a commitment fee of 3/10% per annum. At
December 31, 1996, FF 41,400, ($8,000) is available under these
facilities. In addition, a subsidiary has a long term line of
credit providing up to DM 35,000 ($22,700) at floating rates
based on DM LIBOR plus 3/10% and a commitment fee of 1/10% per
annum. At December 31, 1996 DM 10,900 ($7,100) is available
under this facility.
At December 31, 1996, $4,300 at par value of Paco's subordinated
debentures were outstanding. The subordinated debentures are
reflected in the balance sheet net of discount, which is being
amortized through the maturity date of the subordinated
debentures, March 1, 2007. The unamortized discount totaled
$1,200 and $1,300 at December 31, 1996 and 1995, respectively.
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 1997 is:
$800 in 1998, $19,700 in 1999, $50,300 in 2000 and $1,600 in
2001.
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. Under the most restrictive debt covenant, December
31, retired earnings free of restriction were $64,000.
Interest costs incurred during 1996, 1995 and 1994 were
$7,300, $7,800 and $3,500, respectively, of which $400, $500 and
$200, respectively, were capitalized as part of the cost of
acquiring certain assets.
24
<PAGE>
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 and $600 in
1994.
At December 31, 1996, the Company has entered into three
interest rate swaps contracts outstanding, with notional value of
$3 million each, to fix the interest rates at 6.51%, 6.54% and
6.775% for a five year period. Under the terms of these
agreements, the Company makes periodic interest payments based on
these fixed rates of interest on the notional principal amounts
to a counterparty that makes payments based on a market interest
rate. The net interest expense recognized in connection with
these agreements was less than $100 in 1996.
Principal and/or interest amounts due under swap agreements
are presented in the financial statements on a net basis.
FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value of
financial instruments as of December 31 is provided in accordance
with the requirements of SFAS No. 119:
<TABLE>
<CAPTION>
<C> <C> <C> <C>
Carrying Value Estimated Fair Value
------------------------------------
1996 1995 1996 1995
------------------------------------
Cash and cash equivalents $27,300 $ 17,400 $27,300 $17,400
Short - and long-term debt 98,400 114,300 98,100 115,100
Interest rate swaps(a) - -
Forward exchange contracts 300 100
-------------------------------------
</TABLE>
(a) At December 31, 1996, the estimated fair value of the
interest rate swaps is less than $100. There were no interest
rate swaps outstanding at December 31, 1995.
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
estimated based on current market quotes for instruments of
similar maturity; interest rate swaps (see preceding Note "Debt")
and forward exchange rate contracts are valued at published
market prices, market prices of comparable instruments or quotes.
25
<PAGE>
Notional amounts upon which current interest rate swap
contracts are based do not represent amounts exchanged and are
not a measure of the Company's exposure. Failure by the contract
counterparty to make interests payments under an interest swap
contract would result in an accounting loss to the Company only
if interest rates exceeded the fixed rate to be paid by the
Company. The accounting loss corresponds to the cost to replace
the swap contract.
Forward exchange contracts are used only to hedge raw
material purchase commitments and foreign-currency-denominated
receivables and payables. At December 31, 1996 and 1995, the
Company had forward exchange rate contracts that totaled $5,300
and $4,100, respectively. Forward exchange contracts relate to
raw material purchases denominated in German marks, French francs
and British pounds sterling; generally, these contracts expire
monthly through December 31, 1997.
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
international subsidiary plans 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 (income) expense for 1996, 1995 and 1994
includes the following:
<TABLE>
<CAPTION>
<C> <C> <C>
1996 1995 1994
--------------------------------
Service cost $ 3,900 $ 2,800 $ 2,900
Interest cost 7,700 6,800 6,200
Actual return on assets (20,100) (30,000) (500)
Net amortization and deferral 8,000 20,600 (8,500)
--------------------------------
Pension (income) expense $ (500) $ 200 $ 100
--------------------------------
</TABLE>
The following table sets forth the funded status of the employee
pension plans and the amounts included in the accompanying
balance sheets at December 31:
<TABLE>
<CAPTION>
26
<PAGE>
United States Plans International Plans
----------------------------------------
<C> <C> <C> <C>
1996 1995 1996 1995
------------------------------------------
Vested benefit
obligations (VBO) $(81,900)$ (80,300) $(6,500) $(5,500)
------------------------------------------
Accumulated benefit
obligations (ABO) $(83,300)$ (82,300) $(7,300) $(6,000)
------------------------------------------
Projected benefit
obligations (PBO) $(99,800)$(102,300) $(7,700) $(6,200)
Plan assets at
fair value 140,200 125,000 4,000 2,800
------------------------------------------
Assets in excess of
(less than) PBO 40,400 22,700 (3,700) (3,400)
Unrecognized net
(gain) loss (31,900) (15,200) 300 (100)
Unrecognized prior
service cost (400) (400) - -
Unamortized transition
asset (4,900) (5,600) - -
--------------------------------------------
Prepaid pension cost
(accrued liability) $ 3,200 $ 1,500 $(3,400) $(3,500)
--------------------------------------------
</TABLE>
Information with respect to the unfunded pension plan for the
Company's non-employee directors is as follows:
<TABLE>
<CAPTION>
<C> <C>
1996 1995
----------- -----------
VBO $ (900) $ (900)
----------- -----------
ABO $(1,000) $(1,000)
----------- -----------
PBO $(1,300) $(1,200)
Unrecognized net gain (100) (100)
Unrecognized prior service
cost 200 300
----------- -----------
Accrued liability $(1,200) $(1,000)
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
United States Plans International Plans
-----------------------------------------
<C> <C> <C> <C>
1996 1995 1996 1995
-----------------------------------------
Assumptions:
Discount rate 7.5% 7.0% 6.5% 7.5%
Rate of increase in
compensation 6.0% 6.0% 3.0% 3.0%
<PAGE> 27
Directors' retainer
increase 5.5% 5.5% - -
Long-term rate of
return on assets 9.0% 9.0% 9.25% 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
for plan participants age 65 and older are coordinated with
Medicare. In March 1996, the Company changed the plan to mandate
Medicare Risk (HMO) coverage wherever possible and capped the
total contribution for non-HMO coverage. In addition, the plan
is now available only to active employees who are age 45 or
older. These plan changes reduced the accrued obligation and
such reduction is being amortized as a component of the benefit
cost. Retirees' contributions to the cost of these benefits may
be adjusted from time to time. The Company's obligation is
unfunded.
Total (income) expense recognized for 1996, 1995 and 1994
with respect to these non-pension retirement benefits includes
the following:
<TABLE>
<CAPTION>
<C> <C> <C>
1996 1995 1994
-------------------------------
Service cost $ 500 $ 400 $ 500
Interest cost 600 900 1,000
Net amortization and deferral (1,200) (100) -
-------------------------------
Total $ (100) $ 1,200 $ 1,500
-------------------------------
</TABLE>
The following sets forth the accrued obligation included in the
accompanying balance sheets at December 31, 1996 and 1995,
applicable to each employee group for non-pension retirement
benefits:
<TABLE>
<CAPTION>
<C> <C>
1996 1995
--------------------
Retired employees $ (3,400) $ (6,200)
Active employees--fully eligible (1,400) (2,000)
Active employees--not fully eligible (1,800) (5,800)
--------------------
Total (6,600) (14,000)
Unrecognized net loss (gain) 1,000 (700)
Unrecognized gain from plan changes (9,000) (500)
--------------------
Accrued liability $(14,600) $(15,200)
--------------------
</TABLE>
28
<PAGE>
The discount rates used were 7.5% for 1996 and 7% for 1995; the
healthcare cost trend used is 9.5%, 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 $7,000
at December 31, 1996, for these retirement benefits and an
increase of $100 in the related 1996 expense.
OTHER: The Company provides certain postemployment benefits for
terminated and disabled employees, including severance pay,
disability-related benefits and healthcare benefits. These costs
are accrued over the employee's active service period under
certain circumstances or at the date of the event triggering the
benefit.
The Company also sponsors a defined contribution savings
plan for certain salaried and 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 1996, 1995 and 1994 was $900, $900 and $800,
respectively.
29
<PAGE>
CAPITAL STOCK
Purchases (sales) of Common Stock held in treasury during
the three years ended December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<C> <C> <C>
1996 1995 1994
--------------------------------
Shares held at January 1 224,000 381,100 929,700
Purchases, net,
at fair market value 507,200 38,600 11,200
Shares issued for acquisition (19,600) - (363,200)
Stock option exercises (249,400) (195,700)(196,600)
--------------------------------
Shares held at December 31 462,200 224,000 381,100
--------------------------------
</TABLE>
On May 9, 1996, the Company purchased, in accordance with an
agreement approved by a majority of non-interested members of the
Board of Directors, 440,000 shares of its Common Stock owned by a
director who retired from the Board of Directors. The aggregate
purchase price was $10,000.
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.
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
30
<PAGE>
performance awards. A maximum of 2,925,000 shares of Common Stock
or stock equivalents are available for issue under this plan, of
which 870,300 shares are available as of December 31, 1996, 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, 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, 1996, is summarized below:
<PAGE>
<TABLE>
<OPTION>
<C> <C> <C>
1996 1995 1994
-----------------------------------------------------------------
Options outstanding,
January 1 854,600 726,400 737,600
Granted 209,800 332,400 197,400
Exercised (249,400) (191,200) (193,600)
Forfeited (64,600) (13,000) (15,000)
-----------------------------------------------------------------
Options outstanding,
December 31 750,400 854,600 726,400
Options exercisable, ------- --------- --------
December 31 630,400 734,600 696,400
-----------------------------------------------------------------
<C> <C> <C>
Weighted-Average
Exercise Price 1996 1995 1994
-----------------------------------------------------------------
Options outstanding,
January 1 22.60 19.62 17.95
Granted 22.45 27.44 24.94
Exercised 20.00 19.28 18.43
Forfeited 22.73 18.80 22.72
-----------------------------------------------------------------
Options outstanding,
December 31 23.42 22.60 19.62
Options exercisable,
December 31 22.13 21.37 20.47
-----------------------------------------------------------------
The range of exercise prices at December 31, 1996 is $15.13 to
$30.13 per share. The weighted-average remaining contractual
life at December 31, 1996, is five years.
31
<PAGE>
</TABLE>
Under the Company's management incentive plan, participants are
paid cash bonuses on the attainment of certain financial goals.
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. Restricted stock awards were
granted for 3,300 shares and 3,000 shares in 1995 and 1994,
respectively and in 1996, 1995 and 1994, respectively 1,700
shares, 200 shares and 500 shares, 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 and $24.94 per share in 1994.
A nonqualified stock option plan for non-employee 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
200,000 shares of which 131,000 shares are available as of
December 31, 1996, for future grants. Option activity under this
plan during the three years ended December 31, 1996, is
summarized below:
<PAGE>
<TABLE>
<OPTION>
<C> <C> <C>
1996 1995 1994
-----------------------------------------------------------------
Options outstanding,
January 48,000 36,000 27,000
Granted 13,500 16,500 16,500
Exercised - (4,500) (3,000)
Forfeited - - (4,500)
-----------------------------------------------------------------
Options outstanding 61,500 48,000 36,000
and exercisable -------- -------- --------
December 31
-----------------------------------------------------------------
Weighted-Average
Exercise Price 1996 1995 1994
-----------------------------------------------------------------
Options outstanding,
January 1 $24.60 $22.66 $21.88
Granted 22.69 28.25 23.50
Exercised - 22.42 20.63
Forfeited - - 22.19
32
<PAGE>
-----------------------------------------------------------------
Options outstanding
and exercisable
December 31 24.18 24.60 22.66
-----------------------------------------------------------------
The range of exercise prices December 31, 1996 is $20.63 to
$28.75 per share. The weighted-average remaining contractual
life at December 31, 1996 is 2.4 years.
</TABLE>
The Company has elected to continue to measure compensation cost
using the intrinsic value method of accounting prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees. Accordingly, no compensation cost has been
recognized related to its stock option and stock purchase plans.
If the fair-value based method of accounting for the 1996 and
1995 stock option grants had been applied in accordance with SFAS
No. 123, Accounting for Stock-Based Compensation, the Company's
net income and net income per share would have been reduced as
summarized below:
1996 1995
------- -------
Net income as reported $16,400 $28,700
Net income pro forma $15,700 $27,600
Net income per share
as reported $1.00 $1.73
Net income per share
pro forma $.96 $1.67
The following assumptions were used in 1996 and 1995 to compute
the fair value of the option grants in 1996 and 1995 using the
Black-Scholes option-pricing model: a risk-free interest rate of
5.87% and 6.57%, respectively, stock volatility of 25.7% and
19.4%, respectively; dividend yield of 2% in both years; and for
both years expected option lives of three years for the long-term
plan and two years for the non-employee directors plan.
COMMITMENTS AND CONTINGENCIES
At December 31, 1996, the Company was obligated under various
operating lease agreements with terms ranging from one month to
20 years. Rental expense in 1996, 1995 and 1994 was $7,900,
$6,600 and $5,000, respectively. Minimum rentals for
noncancelable operating leases with initial or remaining terms in
excess of one year are: 1997--$7,700; 1998--$7,600; 1999--$7,500;
2000--$6,300; 2001--$6,300 and thereafter $66,100.
At December 31, 1996, outstanding contractual commitments
for the purchase of equipment and raw materials amounted to
$8,000, all of which is due to be paid in 1997.
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
33
<PAGE>
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 $1,200 at December 31, 1996 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 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. This matter went to trial in late March 1996 and at
the close of the trial, the court dismissed all of the
plaintiff's claims and the defendants' counter claims, with each
side to bear its own costs. Plaintiff has filed a notice of
appeal, and the defendants have filed a cross-appeal.
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. 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.
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. Total sales include
sales to one customer of approximately $48,300, $43,700 and
$40,200 in 1996, 1995 and 1994, respectively. Operating
information and identifiable assets by geographic area of
manufacture are shown below:
<TABLE>
<CAPTION>
<C> <C> <C>
1996 1995 1994
---------------------------------
34
<PAGE>
Net sales:
United States $283,900 $247,400 $216,600
Europe 136,200 128,000 114,200
Other 38,700 37,500 34,300
---------------------------------
Total $458,800 $412,900 $365,100
---------------------------------
Net income from consolidated operations:
United States $ 5,900 $ 19,000 $ 16,400
Europe 6,800 5,000 5,500
Other 2,200 3,800 4,900
---------------------------------
Total $ 14,900 $ 27,800 $ 26,800
---------------------------------
Identifiable assets:
United States $246,700 $251,900 $179,000
Europe 153,800 158,500 151,000
Other 52,800 48,100 45,500
--------------------------------
$453,300 $458,500 $375,500
--------------------------------
Investments in affiliated companies:
United States $ 700 $ 700 $ 3,300
Europe 7,300 4,600 2,700
Other 16,100 16,300 15,900
---------------------------------
$ 24,100 $ 21,600 $ 21,900
---------------------------------
Total assets $477,400 $480,100 $397,400
---------------------------------
</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>
1996 Three Months Ended 1995 Three Months Ended
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dec. 31 Sept. 30 June 30March 31(1) Dec. 31 Sept.30 June 30March 31
------------------------------------------------------------------------
Net sales $114,600 $111,300 $119,000 $113,900 $107,600$101,100 $109,000 $95,200
Gross profit 33,300 29,600 31,900 31,300 29,100 24,700 31,900 32,500
Net (loss)income 9,900 6,600 8,100 (8,200) 7,900 3,900 8,700 8,200
Net income(loss)
per share .60 .40 .50 (.49) .47 .24 .52 .50
</TABLE>
(1) First quarter 1996 results include charges related to
restructuring actions described in the Note "Restructuring
Charge" on page 23.
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, 1996 and 1995, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. 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, 1996 and 1995, and the
consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Coopers and Lybrand L.L.P.
600 Lee Road
Wayne, Pennsylvania
February 21, 1997
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, 1996, 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.
______________________________________________
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>
<S> <C> <C> <C>
1996 1995 1994
--------------------------------------
SUMMARY OF OPERATIONS
Net sales $458,800 412,900 365,100
Operating profit (loss) $ 32,700 49,800 45,400
Income (loss) before income taxes and minority interests $ 25,800 42,500 42,100
Provision for income taxes $ 10,800 13,900 13,400
Minority interests $ 100 800 1,900
--------------------------------------
Income (loss) from consolidated operations $ 14,900 27,800 26,800
Equity in net income of affiliated companies $ 1,500 900 500
--------------------------------------
Income (loss) before change in accounting method $ 16,400 28,700 27,300
--------------------------------------
Income (loss) before change in accounting method
per share (a) $ 1.00 1.73 1.70
Average shares outstanding $ 16,418 16,557 16,054
Dividends paid per common share $ .53 .49 .45
--------------------------------------
Research, development and engineering expenses $ 11,200 12,000 12,000
Capital expenditures $ 31,700 31,300 27,100
--------------------------------------
YEAR-END FINANCIAL POSITION
Working capital $ 91,100 86,600 50,400
Total assets $477,400 480,100 397,400
Total invested capital:
Total debt $ 98,400 114,300 57,800
Minority interests $ 300 200 1,900
Shareholders' equity $252,000 254,100 227,300
--------------------------------------
Total $350,700 368,600 287,000
--------------------------------------
PERFORMANCE MEASUREMENTS
Gross margin (b) % 27.5 28.6 32.1
Operating profitability (c) % 7.1 12.1 12.4
Tax rate % 41.8 32.8 31.8
39
<PAGE>
Asset turnover ratio (d) % .96 .94 1.04
Return on average shareholders' equity % 6.5 11.9 13.2
Total debt as a percentage of total invested capital % 28.1 31.0 20.1
--------------------------------------
Shareholders' equity per share $ 15.39 15.29 13.81
Stock price range $ 30-22 1/8 30 5/8-22 5/8 29 1/8-21 1/4
--------------------------------------
</TABLE>
(a) Based on average shares outstanding.
(b) Net sales minus cost of goods sold, including applicable
depreciation and amortization, divided by net sales.
(c) Operating profit (loss) divided by net sales.
(d) Net sales divided by average total assets; 1993 asset turnover
ratio is based on 12 months' sales for international subsidiaries.
1996 includes a restructuring charge that reduced operating results
by $.91 per share.
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>
<C> <C> <C> <C> <C> <C> <C>
1993 1992 1991 1990 1989 1988 1987
-----------------------------------------------------------------------------------
348,700 337,500 328,900 323,200 308,700 285,400 253,300
40,600 38,700 (1,600) 15,600 38,700 30,100 25,600
37,500 34,800 (7,700) 9,600 34,400 26,100 22,100
14,300 14,300 4,700 6,400 13,200 10,100 9,500
1,700 1,700 (2,400) 300 2,100 1,400 1,000
-----------------------------------------------------------------------------------
21,500 18,800 (10,000) 2,900 19,100 14,600 11,600
1,000 900 1,500 1,400 1,600 2,800 2,100
-----------------------------------------------------------------------------------
22,500 19,700 (8,500) 4,300 20,700 17,400 13,700
-----------------------------------------------------------------------------------
1.42 1.26 (.55) .27 1.28 1.07 .85
15,838 15,641 15,527 15,793 16,235 16,249 16,195
.41 .40 .40 .40 .31 .29 .27
-----------------------------------------------------------------------------------
11,400 11,100 10,800 10,900 11,900 11,300 9,700
33,500 22,400 25,600 33,200 34,300 29,700 43,100
----------------------------------------------------------------------------------
46,400 37,700 26,500 36,500 50,400 53,000 45,200
309,200 304,400 313,200 343,500 313,000 298,900 280,100
32,300 42,000 58,400 78,500 58,100 55,200 60,500
10,900 10,100 8,400 11,700 9,100 10,600 6,200
188,100 168,600 152,600 176,100 179,700 171,400 155,800
-----------------------------------------------------------------------------------
231,300 220,700 219,400 266,300 246,900 237,200 222,500
-----------------------------------------------------------------------------------
30.2 28.8 25.6 24.4 26.5 25.0 25.3
11.7 11.5 (.5) 4.8 12.5 10.5 10.1
38.2 41.1 61.7 66.5 38.5 38.6 42.9
1.11 1.10 1.00 .98 1.01 .99 .98
41
<PAGE>
13.2 12.3 (8.9) 2.4 11.8 10.6 9.3
14.0 19.1 26.6 29.5 23.5 23.3 27.2
----------------------------------------------------------------------------------
11.82 10.71 9.81 11.37 11.15 10.53 9.61
25 1/4-19 7/8 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
-----------------------------------------------------------------------------------
</TABLE>
42
Exhibit 21
<PAGE>
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C>
Direct
State/Jurisdiction Stock
Incorporation 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 Islands 100.0
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
The West Company Danmark 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 Hispania S.A. Spain 54.7 (5)
The West Company Argentina S.A. Argentina 100.0
The West Company Brasil S.A. Brasil 100.0
<PAGE>
The West Company Venezuela C.A. Venezuela 100.0
The West Company Singapore Pty. Ltd. Singapore 100.0
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.
(5) In addition, 27.4% is owned directly by The West Company
Holdings GmbH; 17.9% is owned by one shareholder.
</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, 33-29506, 33-32580, 33-37825,
33-61074, 33-61076, 33-12287 and 33-12289) of our report,
dated February 21, 1997 on our audits of the consolidated
financial statements of The West Company, Incorporated
and subsidiaries as of December 31, 1996 and 1995, and for the
years ended December 31, 1996, 1995 and 1994, which report
is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND
600 Lee Road
Wayne, Pennsylvania
March 31, 1997
<PAGE> Exhibit 24
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /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 John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ G. W. Ebright
-------------- -------------------
George W. Ebright
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ George J. Hauptfuhrer, Jr.
-------------- ------------------------------
George J. Hauptfuhrer, Jr.
<PAGE>
POWER OF ATTORNEY
-------------------
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ L. Robert Johnson
-------------- -----------------------
L. Robert Johnson
<PAGE>
POWER OF ATTORNEY
-------------------
The undersigned hereby authorizes and appoints
John A. Vigna, as his attorney-in-fact to sign on his
behalf and in his capacity as Chief Executive Officer and
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, 1996 and all
amendments, exhibits and supplements thereto.
Date: March 7, 1997 /s/ William G. Little
-------------- -----------------------
William G. Little
<PAGE>
POWER OF ATTORNEY
----------------------
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ William H. Longfield
-------------- ------------------------------
William H. Longfield
<PAGE>
POWER OF ATTORNEY
---------------------
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ J. P. Neafsey
-------------- --------------------
John P. Neafsey
<PAGE>
POWER OF ATTORNEY
---------------------
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ Monroe E. Trout
-------------- --------------------
Monroe E. Trout, M.D.
<PAGE>
POWER OF ATTORNEY
----------------------
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ Anthony Welters
-------------- --------------------
Anthony Welters
<PAGE>
POWER OF ATTORNEY
----------------------
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ William S. West
-------------- --------------------
William S. West
<PAGE>
POWER OF ATTORNEY
------------------------
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ J. Roffe Wike, II
-------------- --------------------
J. Roffe Wike, II
<PAGE>
POWER OF ATTORNEY
---------------------
The undersigned hereby authorizes and appoints William G.
Little and John A. Vigna, 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, 1996 and all amendments, exhibits and supplements
thereto.
Date: March 7, 1997 /s/ Geoffrey F. Worden
------------- ------------------------
Geoffrey F. Worden
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 27,300
<SECURITIES> 0
<RECEIVABLES> 69,300
<ALLOWANCES> 0
<INVENTORY> 44,000
<CURRENT-ASSETS> 156,700
<PP&E> 431,600
<DEPRECIATION> 221,300
<TOTAL-ASSETS> 477,400
<CURRENT-LIABILITIES> 65,600
<BONDS> 98,400
<COMMON> 4,200
0
0
<OTHER-SE> 247,800
<TOTAL-LIABILITY-AND-EQUITY> 477,400
<SALES> 458,800
<TOTAL-REVENUES> 458,800
<CGS> 332,700
<TOTAL-COSTS> 332,700
<OTHER-EXPENSES> (900)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,900
<INCOME-PRETAX> 25,800
<INCOME-TAX> 10,800
<INCOME-CONTINUING> 16,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,400
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 0
</TABLE>
