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, 1997
----------------
Commission File Number 1-8036
---------
THE WEST COMPANY, INCORPORATED
--------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1210010
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645
- --------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-594-2900
------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ----------------------- -----------------------------------------
Common Stock, par value New York Stock Exchange
$.25 per share
Securities registered pursuant to Section 12(g) of the Act:
None
----
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of March 16, 1998, the Registrant had 16,844,735 shares of its Common Stock
outstanding. The market value of Common Stock held by non-affiliates of the
Registrant as of that date was $514,817,213.
Exhibit Index appears on pages F-1, F-2, F-3, and F-4.
DOCUMENTS INCORPORATED BY REFERENCE
------------------------------------
Documents incorporated by reference: 1) portions of the Registrant's Annual
Report to Shareholders for the Company's 1997 fiscal year (the "1997 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>
PART I
Item l. Business
--------
The Company
-----------
The West Company, Incorporated is one of the world's premiere suppliers of
products and services for packaging and delivery of healthcare and consumer
products. Over 85% of the Company's revenue is generated by the healthcare
markets, mainly from sales to large, multinational pharmaceutical and medical
device companies. The Company also provides contract packaging and contract
manufacturing services for the pharmaceutical and consumer products markets in
the United States and Puerto Rico. As of December 31, 1997, the Company and its
subsidiaries had 4,800 employees.
The Company, a Pennsylvania business corporation, was founded 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
in this Item, the term "Company" includes The West Company, Incorporated and its
consolidated subsidiaries, unless the context otherwise indicates.
Principal Products
Pharmaceutical Industry
-------------------------
Pharmaceutical Stoppers
The Company is the world's largest independent manufacturer of stoppers for
sealing drug vials and other pharmaceutical containers. Several hundred
proprietary formulations are molded from natural rubber and synthetic elastomers
into a variety of stopper sizes, shapes and colors. The stoppers are 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. New rubber
compounds must be tested to show that they do not leach into the customer's
product or affect its potency, sterility, effectiveness, color or clarity. The
Company's laboratories conduct tests to determine the compatibility of its
stoppers with customers' drugs and, in the United States, file formulation
information with the Food and Drug Administration in support of customers' new
drug applications.
Stoppers usually are washed, sterilized and subject to other pre-use processes
by the customer or a third-party before they are fitted on the container.
However, the Company has recently introduced a value-added line of stoppers that
are pre-washed and ready to be sterilized, eliminating several steps in
customers' incoming processes. The Company is also marketing a line of
pre-sterilized stoppers that can be introduced directly into customers' sterile
drug-filling operations.
Metal Seals
The Company also offers a broad line of aluminum seals in various sizes, shapes
and colors. The seals are crimped onto glass or plastic pharmaceutical
containers to hold the stoppers securely in place. The top of aluminum seals
often contain tamper-evident tabs or plastic covers, which must be removed
before the drug can be withdrawn.
Some aluminum seals are sold with specially formulated rubber or elastomeric
discs pre-fitted inside the seal. These "lined" seals may be placed directly
onto the pharmaceutical container, thus eliminating the need for a separate
stopper.
Other Products
Other products for the pharmaceutical industry include:
o Products used in the packaging of non-injectable drugs such as
rubber dropper bulbs, plastic contraceptive drug packages and
child-resistant and tamper-evident plastic closures
o Plastic bottles and containers for the pharmaceutical industry
<PAGE>
o Rubber and plastic components for empty and pre-filled disposable
syringes such as plungers, hubs and needle covers
o Blood-sampling system components, including vacuum tube stoppers and
needle valves, and a number of specialized rubber and plastic
components for blood-analyzing systems and other medical devices
o Disposable infant nursers and individual nurser components
Research and Development
The Company maintains its own laboratories for testing raw materials and
finished goods to assure conformity to customer specifications and to safeguard
product quality. Laboratory facilities are also used for research and
development of new materials and products. Engineering staffs are 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. Approximately 111 professional
employees were engaged full time in these activities in 1997. Including drug
delivery development expenses (discussed later in this report), research,
development and engineering expenditures for the creation and application of new
and improved products and processes were approximately $12.0 million in 1997,
$11.2 million in 1996 and $12.0 million in 1995, net of cost reimbursements by
customers.
Recent Developments
The Company has taken steps to expand its product offerings and improve
competitiveness in its core pharmaceutical packaging business.
In 1994, the Company acquired 100% ownership of certain European subsidiaries
through the buyout of their minority shareholders. This acquisition allowed
management to gain better control over its operations and more fully integrate
European operations.
The Company increased its capacity in the components area with the acquisition
of 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."
<PAGE>
The Company also entered into the pharmaceutical services market in 1995 with
its acquisition of Paco Pharmaceutical Services, Inc. ("Paco") for $52.4
million. Paco's business is described below under the caption "Principal
Services -- Contract Manufacturing and Contract Packaging."
In 1996 and 1997, the Company implemented a major restructuring plan announced
in 1996. The plan included the closing or downsizing of six manufacturing
facilities, withdrawal from the machinery business and an approximate 5%
reduction in the workforce. The restructuring was designed to reduce the cost
associated with multiple plant sites and shift certain production capacity to
lower-cost locations. (Additional information pertaining to these activities is
incorporated by reference to the Note "Restructuring Charge" of Notes to
Consolidated Financial Statements of the 1997 Annual Report to Shareholders.)
<PAGE>
Principal Products
Consumer Products Industries
------------------------------------------------------------
The Company manufactures a wide range of standard and custom-designed plastic
threaded caps and containers for the personal-care industry. The caps, produced
mainly for cosmetics and toiletries, come in many different sizes and colors.
The Company also makes closures for food and beverage processors. The Company
focuses its efforts on multiple-piece closures that require high-speed assembly.
Principal Services
Contract Packaging and Contract Manufacturing
--------------------------------------------------
Paco is a contract manufacturer and packager of products for pharmaceutical and
consumer-products companies. With its flexible manufacturing environment and
workforce, Paco has the capability to quickly gear up to make and package
products according to customers' specifications, usually employing
customer-supplied raw materials. Once the operation is complete, Paco delivers
the finished product to the customer for final sale and distribution to the end
user.
Customers typically use Paco's services on a temporary basis to supplement their
own manufacturing or packaging capability during a new-product introduction or
special promotion. However, Paco does retain long-term business in both the
manufacturing and packaging areas. Paco operates facilities in Lakewood, New
Jersey and Canovanas, Puerto Rico.
Paco's contract packaging and manufacturing processes and services are subject
to the Good Manufacturing Practice standards applicable to the pharmaceutical
industry as well as to numerous other federal and state laws and regulations
governing the manufacture, handling and packaging of drugs and other regulated
substances.
Paco manufactures liquids and creams, solids, suspensions, and powders. These
products produced include
o headache and cold medications
o skin lotions
<PAGE>
o deodorants
o toothpaste and mouthwash
o 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
o "blister" packages (i.e., a plastic film with a foil backing)
o bottles and tubes
o laminated and other flexible pouches or strip packages
o aluminum and plastic liquid cup containers
o paperboard specialty packages
o innovative tamper-evident and child-resistant packages
Although 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.
Principal Services
Development of Novel Drug Delivery Systems
---------------------------------------------------------
In 1993, the Company began developing drug-delivery systems for
bio-pharmaceuticals and other drugs that are difficult to administer effectively
through traditional injectable or oral routes. Improving the therapeutic
performance of these drugs in an economical fashion calls for sophisticated
delivery solutions.
To advance the Company's efforts in this area, the Company has acquired 30% of
DanBioSyst UK Ltd. (DBS), and is considering further investments. DBS is a
research company located in Nottingham, England, which specializes in contract
research utilizing their patented delivery systems for such drugs. In
partnership with biopharmaceutical and other drug companies, DBS works to apply
its delivery system technology to improve the performance of hard-to-deliver
drugs or to assist in delivering these drugs to a specific site in the body.
<PAGE>
The Company's internal group dedicated to drug delivery systems is focused on
the Ocufit SR system, a silicone rod small enough to fit behind 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 products based on DBS patented technology. The Company had 31
employees directly engaged in these activities as of December 31, 1997.
Order Backlog
--------------
Product orders on hand at December 31, 1997 were approximately $88 million,
compared with approximately $94 million at the end of 1996. 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 $18
million at December 31, 1997 compared with $24 million at December 31, 1996.
Backlog is defined at Paco as orders written and included in production
schedules during the next 12 months. Such orders generally may be cancelled by
the customer without penalty.
Raw Materials
--------------
The Company uses three basic raw materials in the manufacture of its products:
rubber; aluminum; and plastic. 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.
<PAGE>
The Company is pursuing a supply chain management strategy, which involves
purchasing from integrated suppliers that control their own sources of supply.
This strategy has reduced the number of raw-materials suppliers used by the
Company. In some cases, the Company will purchase raw materials from a single
source to assure quality and reduce costs. This strategy increases the risks
that the Company's supply lines may be interrupted in the event of a supplier
production problem. These risks are managed by selecting suppliers with multiple
manufacturing sites, rigid-quality control systems, surplus inventory levels and
other methods of maintaining supply in the face of interrupted production.
Patents and Licenses
---------------------
The Company's patents and trademarks have been useful 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 trademark.
Although not material at this time, the Company believes its investment in DBS
and in 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 a significant
amount of its 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 1997 consolidated net sales. The principal products sold to B-D are
rubber, metal and plastic components used in B-D's disposable syringes and blood
sampling and analysis devices. The Company expects to continue as a major B-D
supplier.
<PAGE>
Excluding B-D, the next ten largest customers accounted for approximately 26% of
the Company's consolidated net sales in 1997, but no one of these customers
accounted for more than 6% of 1997 consolidated net sales.
Competition
------------
The Company competes with several companies, some of which are larger than the
Company, across its major pharmaceutical packaging product lines. In addition,
many companies worldwide compete with the Company for business related to
specific product lines. However, the Company believes that it supplies a major
portion of the U.S. market 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 increasingly
more important as pharmaceutical companies initiate aggressive cost-control
measures across their entire operations. Competitors often compete on the basis
of price. The Company differentiates itself from its competition as a
"full-service" supplier, which is able to provide pre-sale compatibility studies
and other services and sophisticated post-sale technical support on a global
basis.
The Company competes against numerous competitors in the field of plastic
closures for consumer products, many of which are larger than the Company and
command dominant market shares. The Company attempts to differentiate itself
through its expertise in high-speed assembly of multiple-piece closures.
The U.S. contract-packaging and -manufacturing service industry is highly
competitive. For packaging services, Paco competes with three significant
companies, only two of which are larger than Paco. For contract-manufacturing
services, Paco competes with four major competitors and several smaller regional
companies; several of these competitors are larger than Paco. In addition, most
domestic pharmaceutical companies maintain in-house manufacturing and packaging
capabilities and at times will offer their excess capacity to manufacture or
package 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.
<PAGE>
Environmental Regulations
---------------------------------------------------
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 1997 Annual Report to Shareholders, incorporated by reference herein.
International
---------------
The Note "Affiliated Companies" and the Note "Industry Segment and Operations by
Geographic Area" of Notes to Consolidated Financial Statements of the 1997
Annual Report to Shareholders are incorporated herein by reference.
The Company believes that its international business does not involve a
substantially greater business risk than its domestic business. Current
financial crises in the Asia/Pacific region have resulted in a decline in demand
for the Company's products in this region, however, direct sales to customers in
these markets have historically not been significant representing approximately
5% of consolidated sales.
The Company's financial condition and results are impacted by fluctuations in
exchange-rate markets (See Notes "Summary of Significant Accounting Policies
Foreign Currency Translation" and "Other Income (Expense)" of Notes to
Consolidated Financial Statements of the 1997 Annual Report to Shareholders,
incorporated herein by reference). Hedging by the Company of these exposures is
discussed in the Note "Debt" and in the Note "Fair Value of Financial
Instruments" of Notes to Consolidated Financial Statements of the 1997 Annual
Report to Shareholders, incorporated herein by reference.
Item 2. Properties
-----------
The Company maintains ten manufacturing plants and two mold and die production
facilities in the United States, two manufacturing plants in Puerto Rico, and a
total of seven manufacturing plants and one mold and die production facility in
Germany, England, France, Denmark, Brazil and Singapore.
<PAGE>
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 997,000 square feet of
leased space in Pennsylvania, New Jersey, Florida, Nebraska, North
Carolina and Puerto Rico.
The principal international facilities are as follows:
- - Approximately 530,000 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 354,000 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
1997 Annual Report to Shareholders, which information is incorporated herein by
reference.
Sales office facilities in separate locations are leased under short-term
arrangements.
The Company also holds for sale former manufacturing facility space in Puerto
Rico - totaling 42,000 square feet; and in Germany totaling 4,000 square feet.
<PAGE>
Item 3. Legal Proceedings.
-----------------
On February 21, 1992, R. P. Scherer ("Scherer"), the former parent company of
Paco Pharmaceutical Services, Inc. ("Paco") agreed to sell Paco and its
subsidiaries to OCAP Acquisition corp. ("OCAP"). After Scherer terminated the
sale contract in March of that year, OCAP sued Scherer and Paco, alleging breach
of contract and breach of the implied covenant of good faith. Scherer brought
counterclaims against OCAP of a similar nature. Following a trial in March 1996,
the court dismissed all of OCAP's claims and all of Scherer's counterclaims.
Both plaintiffs and defendants appealed. On October 16, 1997 defendants won
their appeal. The plaintiffs did not file a motion for permission to appeal to
the New York Court of Appeals, and this litigation has ended.
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, 1998 were as follows:
<TABLE>
<CAPTION>
Name Age Business Experience During Past Five Years
- ---- --- -----------------------------------------
<S> <C> <C>
George R. Bennyhoff 1 54 Senior Vice President, Human Resources and Public Affairs.
Jerry E. Dorsey 1 53 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.
Steven A. Ellers 1 47 Senior Vice President, Finance and Administration since March 1998;
previously Group President from August 1997 to February 1998;
Corporate Vice President, Sales from April 1996 to July 1997; 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 III 1 43 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. Heumann 1 56 Vice President since May 1994 and Treasurer.
Lawrence P. Higgins 58 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.
</TABLE>
1 Holds position as corporate officer elected by the Board of Directors for one
year term.
<PAGE>
<TABLE>
<CAPTION>
Name Age Business Experience During Past Five Years
- ---- --- ------------------------------------------
<S> <C> <C>
William G. Little 1 55 Chairman of the Board since May 1995 and Director, President and
Chief Executive Officer for the Company.
Donald E. Morel, Jr. 1 40 Group President since March 1998; previously, Corporate Vice
President, Scientific Services from May 1995 to February 1998; 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.
Anna Mae Papso 1 54 Vice President and Corporate Controller
</TABLE>
1 Holds position as corporate officer elected by the Board of Directors for one
year term.
<PAGE>
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 1997 and 1996 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>
1997 29 1/4 27 30 27 1/8 34 3/16 28 1/2 35 1/16 28 7/8 35 1/16 27
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
</TABLE>
As of December 31, 1997, the Company had 1098 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 $.13 per share in each of the first three
quarters of 1996; $.14 per share in the fourth quarter of 1996 and each of the
first three quarters of 1997; and $.15 per share in the fourth quarter of 1997.
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 (basic and assuming
dilution) 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 1997 Annual Report to Shareholders. Information
with respect to total assets and total debt is incorporated by reference to the
line items corresponding to those categories under the heading "Ten-Year Summary
- - Year End Financial Position" of the 1997 Annual Report to Shareholders.
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 1997 Annual Report to
Shareholders.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
---------------------------------------------------------
The information called for by this Item is incorporated by reference to the Note
"Financial Instruments" "Summary of Significant Accounting Policies" the
Consolidated Financial Statements in the 1997 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
The information called for by this Item is incorporated by reference to
"Consolidated Financial Statements", "Notes to the Consolidated Financial
Statements", and "Quarterly Operating and Per Share Data (Unaudited)" of the
1997 Annual Report to Shareholders.
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 "PROPOSAL #1
ELECTION OF DIRECTORS"; "OWNERSHIP OF COMPANY STOCK"; and "Section 16(a)
Beneficial Ownership Reporting Compliance" 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 "PROPOSAL #1
ELECTION OF DIRECTORS" Compensation of Directors; BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION; COMPENSATION OF NAMED EXECUTIVE OFFICERS"
contained in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------
Information called for by this Item is incorporated by reference to "OWNERSHIP
OF COMPANY STOCK" 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.
-------------------------------------------------------
(a) 1. The following report and consolidated financial statements,
included in the 1997 Annual Report to Shareholders, have been
incorporated herein by reference:
Consolidated Statements of Income for the years ended December 31,
1997, 1996 and 1995
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended December
31, 1997, 1996 and 1995
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 1997.
(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>
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/ Steven A. Ellers
--------------------------------
Steven A. Ellers
Senior Vice President,
Finance and Administration
March 31, 1998
--------------------------------
Date
<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>
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ William G. Little Chairman, Director, March 31, 1998
- --------------------------------- President,and Chief
William G. Little* Executive Officer
(Principal Executive Officer)
/s/ Tenley E. Albright Director March 31, 1998
- ---------------------------------
Tenley E. Albright *
/s/ John W. Conway Director March 31, 1998
- ---------------------------------
John W. Conway*
/s/ George W. Ebright Director March 31, 1998
- ---------------------------------
George W. Ebright*
/s/ Steven A. Ellers Senior Vice President March 31, 1998
- --------------------------------- Finance and Administration
Steven A. Ellers*
/s/ L. Robert Johnson Director March 31, 1998
- ---------------------------------
L. Robert Johnson*
/s/ William H. Longfield Director March 31, 1998
- ---------------------------------
William H. Longfield*
<CAPTION>
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ John P. Neafsey Director March 31, 1998
- ---------------------------------
John P. Neafsey*
/s/ Anna Mae Papso Vice President and March 31, 1998
- --------------------------------- Corporate Controller
Anna Mae Papso (Principal Accounting Officer)
/s/ Monroe E. Trout Director March 31, 1998
- ---------------------------------
Monroe E. Trout*
/s/ Anthony Welters Director March 31, 1998
- ---------------------------------
Anthony Welters*
/s/ J. Roffe Wike, II Director March 31, 1998
- ---------------------------------
J. Roffe Wike, II*
/s/ Geoffrey F. Worden Director March 31, 1998
- ---------------------------------
Geoffrey F. Worden*
* By William G. Little pursuant to a power of attorney.
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <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
<CAPTION>
Exhibit
Number
- ------
<S> <C>
(10) (e) Executive Incentive Bonus Plan 1998.
(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 (File No. 1-8036).
(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
<CAPTION>
Exhibit
Number
- ------
<S> <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) 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) (t) 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) (u) 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
<PAGE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
(10) (v) 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) (w) Collective Bargaining Agreement, dated December 1, 1997, by and
between Paco Pharmaceutical Services, Inc. and Teamster Local 35
(affiliated with the International Brotherhood of Teamsters).
(10) (x) 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).
(10) (y) 1998 Key Employee Incentive Compensation Plan, dated March 10,
1998.
(11) Not Applicable.
(12) Not Applicable.
(13) 1997 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
(27.1) Financial Data Schedules. (3, 6, 9 and 12 mos., 1996; 12-mos 1995)
(27.2) Financial Data Schedules. (3 and 12 mos. 1997)
(27.3) Financial Data Schedules. (6 and 9 mos. 1997)
F - 4
<PAGE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
(99) None.
</TABLE>
Exhibit 10 (e)
<PAGE>
EXECUTIVE
INCENTIVE
BONUS
PLAN
1998
<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, 1998) 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:
* 75% 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 1998.
* 25% of the bonus calculation will be based on achievement of our
corporate goals related to the development of new business for The
West Company.
1. our success in growing West's current business revenues through new
business
2. our success with increasing West's revenues through new business
opportunities (acquisitons, mergers, licensing agreements, etc.)
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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EPS % of Bonus
Achieved Achieved
$2.80 -maximum- 150
2.74 140
2.68 130
2.63 120
2.57 110
2.51 -target- 100
2.45 90
2.39 80
2.34 70
2.28 60
2.22 50
Below $2.22 0
Interim EPS amounts will be calculated usisng $.01 = 1.67%
</TABLE>
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 achieves an EPA of $2.52 and is
awarded 100% for revenue growth.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Target Bonus% Achieved Bonus % Bonus $
EPS 75% x Bonus = Opp. x (from scale) = Earned x Salary = Earned
Rev. Target Bonus Bonus $
Growth 25% x Bonus = Opp. x % Achieved = Earned x Salary = Earned
EPS 75% x 30% = 22.5% x 101.67% = 22.88 x 120,000 = $27,456
Rev.
Growth 25% x 30% = 7.5% x 100% = 7.5% x 120,000 = $9,000
TOTAL BONUS EARNED 30.38% $36,456
</TABLE>
<PAGE>
STOCK BONUS PLAN
o 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.
o 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.
o 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.
o 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.
o 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.
o Ownership records will be reviewed annually to verify continuous
ownership.
o 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
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.
ELIGIBIILITY
Eligibility and the amount and type of awards under this plan are solely at the
discretion of management and are not guaranteed under any circumstances.
Participants must be active employees on December 31, 1998 to be eligible for
bonus payment consideration.
Exhibit 10 (w)
AGREEMENT
by and between
PACO PHARMACEUTICAL SERVICES, INC.
and
TEAMSTERS LOCAL NO. 35
EFFECTIVE:
DECEMBER 1, 1997
EXPIRATION:
NOVEMBER 30, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
PREAMBLE 1
ARTICLE 1 - PURPOSE 1
ARTICLE 3 - UNION RECOGNITION 1
ARTICLE 4 - UNION SECURITY 2
ARTICLE 5 - SEPARABILITY AND SAVINGS CLAUSE 3
ARTICLE 6 - HIRING EMPLOYEES 4
ARTICLE 7 - CHECKOFF 5
ARTICLE 8 - MANAGEMENT RIGHTS 5
ARTICLE 9 - NON-DISCRIMINATION 6
ARTICLE 10 - INSPECTION PRIVILEGES 7
ARTICLE 11 - FAIR DAY'S WORK 7
ARTICLE 12 - JOB STEWARDS 7
ARTICLE 13 - DISCHARGE OR SUSPENSION 9
ARTICLE 14 - GRIEVANCE AND ARBITRATION PROCEDURE 10
ARTICLE 15 - NO STRIKE - NO LOCKOUT 14
ARTICLE 16 - BREAK PERIODS 15
ARTICLE 17 - LEAVE OF ABSENCE 15
ARTICLE 18 - MILITARY DUTY 17
ARTICLE 19 - LIE DETECTOR TEST 18
ARTICLE 20 - SAFETY AND HEALTH 18
ARTICLE 21 - NEW EQUIPMENT 20
ARTICLE 22 - TRANSFER OF TITLE 20
ARTICLE 23 - BULLETIN BOARDS 21
ARTICLE 24 - SPECIAL SHIFTS 21
ARTICLE 25 - FLEXIBLE WORK WEEK 21
ARTICLE 26 - DIFFERENTIALS FOR LATE SHIFTS 25
ARTICLE 27 - WORK DAY AND WEEK 25
ARTICLE 28 - DAILY GUARANTEES 26
ARTICLE 29 - FUNERAL LEAVE 26
ARTICLE 30 - JURY DUTY 27
ARTICLE 31 - PREMIUM RATES 27
ARTICLE 32 - HEALTH AND WELFARE 31
ARTICLE 33 - HOLIDAY PAY 34
ARTICLE 34 - VACATIONS 35
ARTICLE 35 - SENIORITY 37
ARTICLE 36 - JOB OPENINGS 40
ARTICLE 37 - TRANSFERS 42
ARTICLE 38 - SUPERVISION 43
ARTICLE 39 - PENSION 44
ARTICLE 40 - PLANT RULES 45
ARTICLE 41 - WAGES 45
ARTICLE 42 - TERMS OF AGREEMENT 50
</TABLE>
<PAGE>
PREAMBLE
---------
This Agreement by and between Paco Pharmaceutical Services, Inc.,
located in Lakewood, New Jersey, hereinafter referred to as the "Company," or
the "Employer," and Teamsters Local No. 35, 620 U.S. Route 130, Trenton, New
Jersey, affiliated with the International Brotherhood of Teamsters, hereinafter
referred to as the "Union."
1 - PURPOSE
- ---------
Whereas, the parties hereto desire to establish uniform standards
and hours of labor, rates of pay and other conditions under which the employees
classified herein shall work for the Employer during the life of this Agreement
and thereby promote a relationship between the parties hereto providing for more
harmonious and efficient cooperation and mutual benefit.
2 - CONSIDERATION
-------------------
Now, therefore, in consideration of the performances in good faith
by both parties, individually and collectively, of the terms and conditions of
this Agreement, the parties agree to and with each other as follows.
3 - UNION RECOGNITION
---------------------
The Employer agrees to recognize Teamsters Local 35 as the
exclusive bargaining representative for all of its production and maintenance
employees as classified herein employed by the Employer at its locations in
Lakewood, New Jersey, excluding all office clerical employees, quality control
and quality assurance employees, mechanics and mechanic trainees, technical
employees, professional employees, guards and supervisors within the meaning of
the National Labor Relations Act, as amended.
Whenever the masculine pronoun or possessive is used in this
Agreement, the feminine pronoun or possessive is also intended.
4 - UNION SECURITY
-------------------
All present employees in the bargaining unit who are members of
the Local Union on the effective date of this subsection or on the date of
execution of this Agreement, whichever is the later, shall remain members of the
Union in good standing as a condition of employment. All present employees in
the bargaining unit who are not members of the Union and all employees who are
hired hereafter shall become and remain members in good standing of the Union as
a condition of employment on and after the thirty-first (31st) calendar day
following the beginning of their employment or on and after the thirty-first
(31st) calendar day following the effective date of this subsection or the date
of this Agreement, whichever is the later. This provision shall be made and
become effective as of such time as it may be made and become effective under
the provisions of the National Labor Relations Act, but not retroactively.
At the conclusion of the thirty-one (31) calendar day period, the
Employer will send to the Union an authorization for check-off form within a
reasonable period of time.
The failure of any person to become a member of the Union at the
required time shall obligate the Employer, upon written notice from the Union to
such effect and to the further effect that Union membership was available to
such person on the same terms and conditions generally available to other
members, to forthwith discharge such person. Furthermore, the failure of any
person to maintain his Union membership in good standing as required herein
shall, upon written notice to the Employer by the Union to such effect, obligate
the Employer to discharge such person.
In the event of any change in the law during the term of this
Agreement, the Employer agrees that the Union will be entitled to receive the
maximum union security which may be lawfully permissible.
No provision of this Article shall apply in any state to the
extent that it may be prohibited by state law. If under applicable state law
additional requirements must be met before any such provision may become
effective, such additional requirements shall first be met.
If any provision of this Article is invalid under the law of any
state wherein this Agreement is executed, such provision shall be modified to
comply with the requirements of state law or shall be renegotiated for the
purpose of adequate replacement. If such negotiations shall not result in a
mutually satisfactory agreement, the Union shall be permitted all legal or
economic recourse.
5 - SEPARABILITY AND SAVINGS CLAUSE
- ----------------------------------
If any Article or Section of this Agreement or of any supplements
or riders thereto should be held invalid by operation of law or by any tribunal
of competent jurisdiction, or if compliance with, or enforcement of any Article
or Section should be restrained by such tribunal pending a final determination
as to its validity, the remainder of this Agreement and of any supplement or
riders thereto or the application of such Article or Section to persons or
circumstances with or enforcement of has been restrained, shall not be affected
thereby.
In the event that any Article or Section is held invalid or
enforcement of or compliance with which has been restrained as above set forth,
the parties affected thereby shall enter into immediate collective bargaining
negotiations upon the request of the Union or Company, for the purpose of
arriving at a mutually satisfactory replacement for such Article or Section
during the period of invalidity or restraint. If the parties do not agree on a
mutually satisfactory replacement within sixty (60) days after beginning of the
period of invalidity or restraint, the matter shall be referred to arbitration.
6 - HIRING EMPLOYEES
--------------------
1. Probationary Employees
- -----------------------------
Every new employee shall be on probation for a period of sixty
(60) days worked, and during such period the Employer may dispense with his or
her services for any reason without any question or objection by the Union or
employee.
2. Shift Preference
- -----------------------
No new employee shall be hired for day work until night shift
employees have been given the opportunity to bid on jobs that are vacant on the
day shifts; provided, that such transfers will not be made where they interfere
with requirements of reasonable training periods, not to exceed thirty (30) days
worked.
This section relates to rated jobs only. Employees hired for the
first shift, second or third shift can only be switched to a different shift at
the discretion of the Company and only if it does not interfere with the
operation of the business.
3. Part Time Employees
- ---------------------------
The Employer agrees that it will not make use of part time
employees in the classifications covered by this Agreement.
7 - CHECKOFF
-------------
The Employer agrees to deduct from the last pay each month of all
employees covered by this Agreement the dues, the initiation fees, and/or
uniform assessments of the Union having jurisdiction over such employees as
specified by the Union from time to time, and agrees to remit to said Union all
such deductions in a manner described by the Union prior to the tenth (10th) of
the month for which the deduction is made. Where written authorization is
required by law, the same is to be furnished by the Union in the form required.
No deduction shall be made which is prohibited by applicable law.
8 - MANAGEMENT RIGHTS
---------------------
1.
- --
It is recognized that the well-being of both parties is directly
dependent upon the skill and efficiency and methods of operation with which the
business of the Employer is conducted, and that any assumption of the functions
of the management by representative of the Union is contrary to the intent and
purpose of this Agreement. Union agrees to do everything within its power by
full cooperation with the Employer to bring about the most efficient operation.
2.
- --
The authority and responsibility for the management of the business shall
repose exclusively on the Employer and its appointed representatives, and the
Union or its representatives shall not interfere with the exercise of such
authority or responsibility. The Employer maintains its inherent right to
transfer employees from one department or assignment to another or to assign
employees as operating procedures may require, and to introduce mechanization
changes or palletized loading or the use of other equipment as may arise out of
the requirements of its business; however, the Employer agrees to negotiate in
advance with the Union any broad changes in its operation which would result in
the elimination of jobs for members of the Union. No provision of this section
shall be binding if it conflicts with other provisions of this Agreement.
9 - NON-DISCRIMINATION
---------------------
1.
- --
The Employer and the Union agree to not discriminate against any individual
with respect to hiring, compensation, terms or conditions of employment because
of such individual's race, color, religion, sex, national origin or age, nor
will they limit, segregate or classify employees in any way to deprive any
individual employee of employment opportunity because of race, color, religion,
sex, national origin or age, and will comply with the Rehabilitation Act of 1973
(Sec. 503) and the Vietnam Era Veterans Readjustment Act of 1974 (Sec. 402) and
the Americans With Disabilities Act.
2.
- --
The Company and the Union agree that there will be no
discrimination by the Company or the Union against any employee because of his
or her membership in the Union or because of any employee's lawful activity in
the Union.
3.
- --
Employees shall be free from interference, restraint or coercion
by the Employer in their activities on behalf of the Union. Employees shall
refrain from participation in Union matters during working hours, except as
provided in this Agreement.
10 - INSPECTION PRIVILEGES
--------------------------
Authorized agents of the Union shall have access to the Employer's
establishment during working hours for the purpose of adjusting disputes,
investigating working conditions, collection of dues and ascertaining whether
the Agreement is being adhered to, provided however, that there is no
interruption of the firm's working schedule, and management is notified of the
Union's presence in the Plant.
11 - FAIR DAY'S WORK
-- --------------------
It is agreed that each employee is obligated to give a fair day's
work. Such obligation shall not be measured by use of industrially engineered
standards, but may be measured by other applicable criteria. Failure to give a
fair day's work shall be cause for discipline.
12 - JOB STEWARDS
-----------------
The Employer recognizes the right of the Union to designate Job
Stewards and Alternates.
The authority of Job Stewards and Alternates so designated by the
Union shall be limited to and shall not exceed the following duties and
activities:
1. The investigation and presentation of grievances in
accordance with the provisions of collective bargaining
agreement;
2. The collection of dues when authorized by appropriate
Union action;
3. The transmission of such messages and information which
shall originate with, and are authorized by the Union or
its officers, provided such messages and information:
b. Have been reduced to writing, or
c. If not reduced to writing, are of a routine
nature and do not involve work stoppages,
slowdowns, refusal to handle goods, or any other
interference with the Employer's business.
Job Stewards and Alternates have no authority to take strike
action, or any other action interrupting the Employer's business.
The Employer recognizes these limitations upon the authority of
Job Stewards and Alternates and shall not hold the union liable for any
unauthorized acts. The Employer in so recognizing such limitations shall have
the authority to impose proper discipline, including discharge, in the event the
Job Steward has taken unauthorized strike action, slowdown, or work stoppage in
violation of this Agreement.
Stewards shall be permitted to investigate, present and process
grievances on or off the property of the Employer without loss of time or pay.
Such time spent in handling grievances shall be considered working hours in
computing daily and/or weekly overtime.
The Union shall have the right to designate Stewards and Alternate
Stewards and shall attempt to limit Stewards to one (1) Steward for every one
hundred (100) employees; provided, however, there shall always be not less than
one (1) Steward for each shift of employees within each building regardless of
the number of employees on such shift and regardless of the total number of
Stewards. Job Stewards, while serving in that capacity, shall receive top
seniority in their classification for the purpose of lay-off.
13 - DISCHARGE OR SUSPENSION
-----------------------------
1.
- --
The Employer shall not discharge nor suspend any employee without just
cause. In all cases involving the discharge or suspension of an employee, the
Employer must immediately notify the employee in writing of his discharge or
suspension and the reason therefore. Such written notice shall also be given to
the Job Steward and a copy mailed to the Union office within two (2) working
days from the time of the discharge or suspension.
2.
- --
In respect to a discharge, the Employer must give one (1) warning notice of
the specific complaint against such employee in writing and a copy of the same
to the Union and the Job Steward. It is understood that the posted plant rules
may require varying degrees of disciplinary action. If the violation is one
which is cause for immediate dismissal then no warning is required. The warning
notice as herein provided shall not remain in effect for a period of more than
twelve (12) months from the date of the occurrence upon which the complaint and
warning notice are based. No rules may be in conflict with the provisions of
this Agreement.
3.
- --
Any employee who resigns, retires or is discharged must be paid in full for
all wages owed him by the Employer, including earned vacation pay, if any,
within the later of five (5) days from the date of discharge or by the next
payroll period.
4.
- --
A discharged or suspended employee must advise the Union in writing within
two (2) working days after receiving notification of such action against him of
his desire to appeal the discharge or suspension. Notice of appeal from
discharge or suspension must be made to the Employer in writing within five (5)
days from the date of discharge or suspension.
5.
- --
Should it be proven that an injustice has been done to a discharged or
suspended employee, he shall be fully reinstated in his position and compensated
at his usual rate of pay for lost work opportunity. If the Union and the
Employer are unable to agree as to the settlement of the case, then it may be
referred to the Grievance Procedure as set forth in this Agreement, within ten
(10) days after the above notice of appeal is given to the Employer.
14 - GRIEVANCE AND ARBITRATION PROCEDURE
------------------------------------
1.
- --
A grievance is hereby jointly defined to be any controversy, complaint,
misunderstanding or dispute.
Any grievance arising between the Company and the Union or an
employee represented by the Union shall be settled in the following manner:
The aggrieved employee or employees and/or Job Steward must orally
present the grievance immediately or as soon as practical to the immediate
foreman in whose area the grievance arose. The foreman, employee and/or Job
Steward shall orally attempt to resolve the grievance at that time, if no
satisfactory settlement is reached following the oral attempt, the aggrieved
employee must present the grievance in writing to the Job Steward within three
(3) working days after the foreman's oral answer or within five (5) working days
after the reason for the grievance occurred. The Job Steward shall present the
grievance in writing to the foreman within one (1) working day after receiving
same and the foreman shall answer such grievance in writing to the Job Steward
within one (1) working day. No time limits shall apply in case of violation of
wage provisions of this Agreement. If no satisfactory settlement is reached then
the grievance shall proceed to STEP 2.
2. The Job Steward and the employee shall within two (2) working days following
the written answer from the foreman in STEP 1 submit the grievance in writing to
the Union's Business Representative. Within five (5) working days, the Business
Representative shall meet with a representative of the Company with authority to
act to attempt to resolve said grievance, unless such time limit is actually
extended by the parties. A decision must be made and a written answer given
within five (5) working days after conclusion of the above meeting.
If the Company fails to comply with any settlement of the
grievance or fails to comply with the procedures of this Article, the Union has
the right to take all legal and economic action to enforce its demands;
provided, however, no sanction by way of strike or otherwise shall be imposed by
the Union on the Employer until after the parties have met to determine the time
when the settlement made shall be implemented. The notice shall be given by the
Union to the Employer that such a meeting is requested by the Union. The meeting
shall be held within three (3) working days after notice shall be given by the
Union to the Company that such a meeting is requested by the Union.
2.
- --
In accordance with Article 12, any Job Steward shall be permitted
to leave work with all reasonable speed to investigate and adjust the grievance
of any employee within his jurisdiction, after notification to his supervisor.
Employees shall have the right to have the Job Steward, or a representative of
the Union, present during the discussion of any grievance with representatives
of the Company.
3.
- --
If no satisfactory settlement can be agreed upon, the parties
shall select a mutually agreeable and impartial Arbitrator within five (5)
working days after receipt of a written answer in STEP 2 above. In the event
they are unable to agree upon an Arbitrator, the matter shall be referred to the
American Arbitration Association within ten (10) working days after receipt of
written answer above and the Arbitrator shall be selected in accordance with the
rules of that agency. The expense of the Arbitrator selected or appointed shall
be borne equally by the Company and the Union.
4.
- --
The Arbitrator shall have no authority to amend or modify this Agreement or
establish new terms and conditions under this Agreement. The Arbitrator shall
determine any question of arbitrability. In the event the position of the Union
is sustained, the aggrieved party shall be entitled to all the Health and
Welfare and Pension benefits of this Agreement which would have accrued to him
had there been no grievance.
5.
- --
Both parties agree to accept the decision of the Arbitrator as
final and binding. If the Company fails within the time fixed by the Arbitrator
to comply with the award of the Arbitrator or with the procedures of this
Article, the Union has the right to take all legal action enforcing compliance.
6.
- --
Notwithstanding anything contained herein, it is agreed that in
the event the Employer is delinquent at the end of a period in the payment of
contributions to the Health and Welfare Fund created under this Agreement in
accordance with the rules and regulations of the Trustees of such funds, after
the principal officer or his designated representative of the Union has given
seventy-two (72) hours notice to the Employer of such delinquency in Health and
Welfare payments, the employees or their respective representatives shall have
the right to take such action as may be necessary until such delinquent payments
are made and it is further agreed that in the event such action is taken, the
Employer shall be responsible to the employees for losses resulting therefrom.
The Union agrees to save the Employer harmless if the delinquency
is proven to be through no fault of the Employer.
15 - NO STRIKE - NO LOCKOUT
--------------------------
1.
- --
The Company agrees that during the term of this Agreement, it will
not engage in any lockout in whole or in part of its employees.
2.
- --
Except as otherwise provided in this Agreement, during the term of
this Agreement, the employees covered hereby shall not engage in, encourage or
sanction any strike, sitdown, picketing or any such actions which will interrupt
or interfere with the operations of the Company. No suit or claim of damages
shall be instituted or initiated by the Company against the Union, its
representatives or members by reason of such strike if the Union has taken the
steps described herein. The Union agrees that during the term of this Agreement,
neither it nor its officers or agents will engage in, encourage or sanction any
strike, sitdown, picketing or such actions which will interrupt or interfere
with the operations of the Company. In the event of any unauthorized violation
of this Agreement, the Union agrees that upon telegraphic notification by the
Company, it will take affirmative steps with the employees concerned to bring
about a resumption of the normal operation of the Company.
3.
- --
It is further agreed that in the event of any violation of this
Article, except as provided otherwise in Article 32, Section 32.03, the Company
may discharge or otherwise discipline any employee (whether individually or in a
group) who has violated such Article. In such event, an employee discharged or
otherwise disciplined may file a grievance under the grievance provisions of
this Agreement.
16 - BREAK PERIODS
-------------------
The Employer will pay breaks and wash-up time as follows: a
fifteen (15) minute break in the morning and a fifteen (15) minute break in the
afternoon. In addition, a five (5) minute period will be provided for work area
clean-up time. Such time will commence ten (10) minutes prior to the end of the
shift and terminate five (5) minutes prior to the end of the shift. At this time
the employee will be permitted to leave his work area for personal clean-up time
and/or to ring out. The above time will be designated by ringing of an alarm. In
addition, the Employer will provide a fifteen (15) minute break to employees
scheduled to work more than ten (10) hours in any day. Such breaks shall begin
not later than the start of the tenth (10th) hour.
17 - LEAVE OF ABSENCE
---------------------
1.
- --
An employee desiring a leave of absence from employment shall
submit a written request fully explaining the reason for the leave. Requests for
medical leave must be supported by a proper certificate from a physician. The
initial period for all leaves shall not exceed three (3) months. Permission will
not be unreasonably withheld. The Employer will make its response in writing to
the employee. Employees on leave of absence will not earn or receive holiday
pay, vacation pay, funeral pay or jury pay, except employees on approved sick
leave of absence may accrue vacation pay on the basis of a maximum of three (3)
month accrual credit.
2.
- --
During the leave period, the employee will not engage in gainful
employment. Failure to comply with this provision may result in termination for
the employee involved.
3.
- --
Extensions of the original leave for periods not to exceed thirty
(30) days shall be granted, provided proper certificate from the employee's
attending physician is presented to support requests for such extension.
4.
- --
Six (6) consecutive months shall be the maximum period for which a
sick leave and subsequent extensions, as defined above, shall be granted.
Further extensions may be granted by mutual consent between the Employer and the
Union.
5.
- --
Any employee who is absent from work for more than two (2)
calendar weeks because of sickness shall be required to obtain sick leaves as
provided in Section 18.01. Failure to obtain such approval shall result in his
being separated from the payroll as having voluntarily quit.
6.
- --
Maternity leave will be treated as a medical leave. Maternity
leave will commence when the employee's condition substantially interferes with
job performance, or when a physician so recommends, whichever is sooner.
7.
- --
Leaves in accordance with the Family and Medical Leave Act
("FMLA") shall comply with the West Company's Medical and Family Leaves of
Absence Policy, Policy No. POL-PER 435, except that in accordance with the New
Jersey Medical Leave Act, an eligible employee shall be one who has worked one
thousand or more base hours during the preceding twelve (12) month period.
Notwithstanding anything contained within that policy, no employee shall be
required to use otherwise available leave before becoming eligible for FMLA
leave.
18 - MILITARY DUTY
--- --------------------
1.
- --
Any employee who shall enter into the Armed Services of the
Country shall, at the end of such Service, if physically and mentally fit, be
reinstated to his former position with full seniority, provided however:
He shall make application for reinstatement within ninety (90)
days from his Honorable Discharge from the Armed Forces, or within such further
period as may hereafter be prescribed by law, and the Employer's circumstances
have not so changed as to make it impossible to provide employment.
2.
- --
Reserve servicemen will be allowed two (2) weeks time to train
under Government regulation and this time may not be charged against the
employee's vacation unless the employee requests his vacation at that time.
19 - LIE DETECTOR TEST
--------------------
The Employer shall not require, request or suggest that an
employee or applicant for employment take a polygraph or any other form of lie
detector test.
20 - SAFETY AND HEALTH
----------------------
1. Sanitary Conditions
- --------------------------
Heating, lighting, toilet, locker and sanitary facilities and all
protective devices necessary to protect the health of employees shall be
provided by the Employer. The Union will at all times cooperate with and assist
the Employer in maintaining safety and health conditions in the plant.
Grievances which arise under Section 20.01 and which are not
settled in the Joint Safety Committee may be filed under Article 14 as a regular
grievance.
2. Safety Committee
- -----------------------
A safety committee shall be established consisting of one (1) member
appointed by the Union and one (1) member appointed by the Employer. The
Employer shall pay for time spent by the Union member of the committee to a
maximum of four (4) hours per month.
3. Committee Functions
- ---------------------------
It shall be the function of the Joint Safety Committee to:
1. Recommend improvements in safety, sanitation and health
conditions affecting employees.
2. Investigate the cause of industrial accidents and compensable
industrial illness.
4. On-the-Job Injuries
- ---------------------------
Should an employee be injured at work and unable to continue
working as a result of the injury as determined by medical authority, he or she
shall be paid for the entire day. Should he/she lose time during any day
thereafter for treatment for injuries suffered while employed, he/she shall be
paid for lost time, not to exceed one (1) hour, and the same is to be counted as
time worked for the purpose of computing overtime pay. However, for purposes of
this Section, an employee shall not be compensated more than eight (8) hours of
lost time for treatment of any single occurrence. No employee shall lose his/her
job as a result of such injury. If he/she is physically able to perform after
he/she has recovered from his/her injury, he/she shall be entitled to resume
his/her job. In the event of injury, the Company has the right to send the
injured employee to the Company's designated compensation doctor approved by
their insurance coverage. If an injured employee desires the services of a
Doctor it shall be granted as soon as possible. The Company shall provide
transportation where necessary for medical attention on the day of the accident.
The Company agrees to notify the Steward within a reasonable time of the
occurrence of any accident or injury on the Employer's premises during working
hours involving a bargaining unit employee or employees.
5.
- --
The Company and Union agree to adopt The West Company's Controlled
Substances Policy, Policy No. POL-PER 446, dated July 30, 1997, except that it
is agreed that the Company will not engage in random drug testing as described
within that Policy, nor engage in the search of automobiles for the purchase of
determining compliance with the Policy.
As further clarification, in the event that the Company requires
an employee to test under this Policy, and that employee tests negative, the
Company will be responsible for the payment of wages for all missed work time
relating to the negative drug test. As a further clarification, upon return to
work, an employee will be required only to successfully complete a controlled
substance screening. Employees will not be required to contact their physicians
to alter drug dosages or treatment as provided for by the West policy.
21 - NEW EQUIPMENT
-----------------
Whenever the introduction of new equipment or machinery or the
creation of a new classification or the combination of existing classification
causes a substantial change in the kind of duties performed by any employee,
then the Employer and the Union shall discuss the appropriate rate for the new
or substantially altered job classification. Should the parties be unable to
reach agreement on the appropriate rate, then the Employer may set a rate and
the job will be posted and bid and the work will proceed, provided that the
Union may process the issue of permanent appropriate rate through the grievance
and arbitration procedure.
22 - TRANSFER OF TITLE
----------------------
In the event during the term of this contract, the Employer sells,
leases, assigns, merges or in any other way give overall or any part of its
existing operation, the present contract will continue to be binding upon
whatever new enterprise operates the Employer's business or any part thereof.
This provision shall be fully applicable regardless of the form or extent to
which the transfer takes place and all members of the bargaining unit shall
continue to have full rights under the contract with the new or altered
operations, and the contract shall be fully applicable upon all aspects of the
operation, both those transferred and those which may not be.
23 - BULLETIN BOARDS
------------------
The Employer agrees to provide suitable bulletin boards for the
exclusive use of the Union in a place accessible to all employees covered
hereunder.
24 - SPECIAL SHIFTS
-------------------------
The Employer may continue as is the practice to establish Special
Shifts of work which require earlier start times and/or later stop times than
established in this Agreement.
The Employer agrees that it will post the usual notice for this
purpose for six (6) work days.
The required positions will be filled using the principle of
classification seniority for rated positions and general seniority for unrated
positions.
Any such shift and the employees selected to staff same shall not
remain in effect for more than 90 calendar days without a new bid being
implemented.
25 - FLEXIBLE WORK WEEK
1.
- ---
The Employer may designate certain projects to be performed by
employees working a flexible work week, something other than a Monday through
Friday work schedule as established within Section 27.01.
2.
- ---
A flexible work week project will be posted by the Employer. Employees can
bid on the flexible work week by using the principle of classification seniority
for rated positions and general seniority for unrated positions.
1. If there are not a sufficient number of employees bidding
for the flexible work week assignments, then employees
hired after December 1, 1997 shall be assigned to the
position on the flexible work week schedule. No one shall
be assigned to a flexible work week schedule until bidding
has been extended to all rated and unrated employees.
2. All employees hired after December 1, 1997 shall be
advised at the time of hire that their schedule may become
a flexible work week schedule in the event that there are
not a sufficient number of employees bidding to work that
schedule.
3.
- --
A flexible work week is any five (5) consecutive day period.
Employees working a flexible work week will not be provided premium rates as
established by Article 31.01 and 31.03. Instead, employees working a flexible
work week will receive a flex premium.
1. The flex premium will be eighteen dollars ($18.00) for a
scheduled work week which includes only a Saturday,
twenty-four dollars ($24.00) for a scheduled work week
including only a Sunday.
2. The flex premium will be forty-two dollars ($42.00) for a
scheduled work week which includes both a Saturday and a
Sunday.
3. Effective December 1, 1999, the above rates shall be
increased to twenty dollars ($20.00) for Saturday only, to
twenty-six dollars ($26.00) for Sunday only, and to
forty-six dollars ($46.00) for both days.
4. In order to receive the flex premium, the employee must
work each scheduled day during that work week. An employee
who has not worked, but been paid for vacation, holiday,
sick/personal or bereavement and who works at least three
(3) days in the scheduled week including all scheduled
weekend days, shall remain eligible for the flex premium.
4.
- --
Employees working a flexible work week shall be returned to a
regular Monday to Friday work week at the conclusion of the flexible work week
assignment. Upon return they shall be compensated at premium rates in accordance
with Article 31. Flexible work week workers shall be ineligible for Article
31.01 and 31.03 premiums only during these weeks when assigned to and working a
flexible work week.
5.
- --
The flexible work week must last four (4) weeks or longer. Regular
and routine overtime assignments shall continue to be scheduled and assigned in
accordance with Section 31.06. The Company shall have the discretion to
determine whether, and for how long, the flexible work week is to be used. These
assignments are project(s) based in response to customer demands.
1. Employees who successfully bid on flexible work week
assignments may after eight (8) weeks provide notice to
Human Resources of a desire to return to a regular work
schedule and will be accommodated as soon as a replacement
can be secured but not later than two (2) weeks after
notice of intent to return is provided.
2. Employees with compelling personal reasons will be given
the opportunity to return to a regular schedule prior to
eight (8) weeks.
3. An employee working a regular work week who is notified of
layoff will be permitted to use seniority to bump a less
senior employee, provided they have previously held the
classification or have the present ability to perform the
work. By bumping into a flexible work week assignment, the
employee shall then be scheduled and compensated as a
flexible week worker. This shall continue until the
employee is recalled to their former position.
6.
- --
Holidays which fall on a non-scheduled work day shall be
compensated. The employee will accordingly be compensated for six (6) days for
five (5) days worked during such a week. The Company will not schedule Easter
Sunday as part of a flexible work week schedule.
26 - DIFFERENTIALS FOR LATE SHIFTS
---------------------------------
1.
- --
A second shift is any eight (8) hour shift that begins no earlier
than 2:00 p.m. and no later than 6:30 p.m. Employees required to work this shift
shall be paid forty-five cents ($.45) higher hourly rate for all hours worked
than the rate paid for work in the same classification on the day shift.
2.
- --
A third shift is any eight (8) hour shift that begins no earlier
than 10:00 p.m. and no later than 1:00 a.m. Employees required to work this
shift shall be paid fifty-cents ($.50) higher hourly rate for all hours worked
than the rate paid for work in the same classification on the day shift.
27 - WORK DAY AND WEEK
-------------------------
1.
- --
The work week shall consist of not more than forty (40) hours to
be performed in not more than five (5) consecutive days of eight (8) hours each,
Monday through Friday.
2.
- --
The work day shall consist of eight (8) consecutive hours,
exclusive of the lunch period.
3.
- --
A day shift is any eight (8) hour shift that shall begin not
earlier than 5:00 a.m. and not later than 8:00 a.m. Day employees required to
report before 5:00 a.m. or required to work more than eight (8) hours or after
6:00 p.m. shall be paid at a premium rate of time and one-half (1-1/2) their
regular hourly rate for all time worked outside the regular day shift schedule.
The Employer agrees that employees who are late may be docked but
only to the extent of lateness. In no event will an employee be required to work
during any dock period.
28 - DAILY GUARANTEES
----------------------
Employees reporting for work at the regular starting time of their
shifts, Monday through Friday, shall be afforded four (4) hours of work or pay,
unless notified before the end of their previous shift not to report.
On snow days or hazardous weather days, if an employee reports to
work, and is working; and the company closes the plant, the employee will
receive a minimum of four (4) hours pay.
This Article shall not apply when the Employer is unable to afford
four (4) hours of work or less because of an Act of God or other emergency.
29 - FUNERAL LEAVE
----------------------
An employee who suffers the death of a spouse, mother, father,
son, daughter, brother, or sister, will receive a leave of absence with pay for
three (3) regularly scheduled work days. An employee who suffers the death of a
grandfather or grandmother, will receive a leave of absence with pay for two (2)
scheduled work days. An employee who suffers the death of a father-in-law or
mother-in-law will receive a leave of absence with pay for one (1) scheduled
work day. (A day's pay under this Article means eight (8) hours straight time
pay. Normally scheduled work day for this Article shall mean any days scheduled
for a basic forty (40) hour work week. Any day over the basic forty (40) hour
work week shall not be part of this three (3) day leave of absence.)
Since the above leave of absence is intended as a time to complete
necessary arrangements, and not a monetary gain, it will not apply to any
vacation, partial vacation or any portion thereof.
30 - JURY DUTY
------------------------
Employees on the active payroll for more than one (1) year shall
be entitled to jury duty leave not to exceed two (2) weeks in a calendar year,
but such jury duty leave shall not be allowed more than once in any two (2)
consecutive calendar years. The Employer agrees to pay eligible employees for
each day of jury service an amount equal to the difference between the
employee's daily straight time earnings and the payment received for jury duty.
This section shall not apply to any employee who voluntarily seeks jury service.
- PREMIUM RATES
------------------
1.
- --
For all hours worked by regular full time employees on Saturday,
employees shall be paid at the rate of one and one-half (1-1/2) times the rate
for the job.
2.
- --
For all hours worked by regular full time employees on holidays,
employees shall be paid at the rate of one and one-half (1-1/2) times the rate
for the job in addition to the pay for the holiday.
3.
- --
For all hours worked on Sunday, employees shall be paid at the
rate of two (2) times the rate for the job.
4.
- ---
All hours worked on any shift shall be deemed to be worked on the
day the shift started.
5.
- --
For all hours worked in excess of eight (8) hours in a day, the
employees shall be paid one and one-half (1-1/2) times their regular rate for
the job. For all hours worked in excess of forty (40) hours per week, and for
all hours worked in excess of thirty-two (32) hours per week in a week in which
a holiday occurs during the normal work week, the employees shall be paid one
and one-half (1-1/2) times their regular rate.
6.
- --
a. Overtime Work Monday through Friday -- When a need for
overtime work develops, it shall be offered in the
following order:
1. To those employees working on that specific line
or job in seniority order;
2. To those employees permanently assigned to the
building and classification in seniority order;
3. To those employees within the department (Paco
Packaging or Paco Labs) able to perform the work
required in seniority order.
If overtime on that specific line is scheduled for more
than one (1) day, the Employer will do everything it reasonably
can to move higher seniority people within that specific building
on that specific shift within the classification to that line.
b. Overtime Work Saturdays, Sundays and Holidays -- When a
need for overtime develops, such work shall be offered in
the following order:
The Employer will make every reasonable effort to
distribute overtime equally among shifts.
1. To employees presently working and permanently
assigned within the building, department and
classification in seniority order;
2. To employees presently working and permanently
assigned within the department and classification
in seniority order;
3. To employees presently working within the
building and classification who are transferred
from the other department;
4. To employees able to perform the required work
who are presently working and employed by the
Employer in seniority order.
Notwithstanding anything to the contrary, employees who
sign up for any temporary voluntary transfer requested by the Employer
shall be offered Saturday, Sunday and Holiday work immediately following
such offering made to employees permanently assigned to the classification
and building in which such work is required (Step 1). Such offer of
overtime work shall be made first to the employees voluntarily transferring
within the department in which the work is required in the order of
seniority and thereafter to the employees voluntarily transferring from the
other department in seniority order.
It is expressly understood that the overtime schedule on non-rated
jobs shall first be offered to the appropriate employees permanently assigned in
the building where the work is to be done in seniority order and thereafter in
seniority order based upon total departmental service. The Employer agrees that
it will post all overtime postings in both Departments in all buildings when
lists are not filled at the time of the original applicable posting.
Any regular employee or group working overtime shall not be given
time off to offset overtime work.
The Employer has the right to schedule overtime work. The Union
will do everything in its power to have a sufficient number of employees
available to perform the job in overtime assignments. Although the parties
recognize that individual overtime is voluntary, a failure to report for
overtime accepted shall be cause for discipline. Furthermore, any concerted
refusal to work overtime is a violation of this Agreement and shall subject each
employee participating in the refusal to disciplinary action.
7.
- --
Premium and/or overtime rates shall not be pyramided.
8.
- --
The term Department is defined to mean Paco Packaging and/or Paco Labs.
9.
- --
In the event an employee works prior to his regular scheduled
starting time, (early starts) he or she shall be paid at the rate of time and
one-half (1-1/2) for all hours worked prior to his regular scheduled starting
time and shall be guaranteed in addition the right to work his regular shift in
accordance with this contract, but must work his regularly scheduled shift in
order to qualify for the overtime pay, unless the failure to work such regular
shift is due to the action of the employer in which case the employee will
receive time and one-half (1-1/2) for the time worked on an early start. All
such starts shall be voluntary. An early start shall be defined as a starting
time prior to the time that the employee was regularly scheduled.
32 - HEALTH AND WELFARE
-------------------------------
1.
- --
1. The Employer agrees to make payments to the Fund in the current
month for such current month, i.e. payment for December benefit
coverage to be received by Teamsters Local 35 Welfare Fund on or
before that December Tenth (10th).
2. The Employer shall contribute the sum each month in accordance
with the schedule set forth in Section 32.02 for each employee who
has worked, or reported for work on one (1) day of such calendar
month, except that no contributions shall be required for persons
until they have completed eighty (80) days worked.
3. If the employee is on lay-off status on the last day of the month,
the payment for the next month will not be made until said
employee returns to work.
4 Contributions set forth herein shall continue to be made by the
Employer for three (3) calendar month for employees who are on
sick leave or absent due to a compensable injury or illness.
2.
- --
1. Effective December 1, 1997, and continuing for the life of this
Agreement, contributions shall be remitted in the following
amounts and as revised pursuant to Section 32.04:
<TABLE>
<CAPTION>
<S> <C>
12/1/97
--------
A. Blue Cross/Blue Shield $255.95
(employee only)
B. Blue Cross/Blue Shield (40.00)
dependant contribution
(max. allowable when
applicable)
C. Dental Contribution (per 7.00
employee)
TOTAL $262.95
----- -------
</TABLE>
2. Employer shall provide life insurance coverage through a
carrier of its choice and provide the premiums therefor on each employee's life
as follows:
$10,000.00 of Life Insurance
Upon separation of employment notwithstanding the reason,
employees may elect to purchase this life insurance benefit by paying those
premiums established by the carrier to maintain such benefits.
3.
- --
Contributions shall be remitted to the Fund no later than the
tenth (10th) of each month for that calendar month. All remittances to the Fund
shall be in a manner described by the Fund, and failure on the part of the
Employer to comply shall be considered a violation of this Agreement and shall
permit the Union to take any action including strike action after seventy-two
(72) hours notice to the Employer of such intended action unless the Employer
shall comply within said period except that the Union will hold the Employer
harmless for any delay which is not the fault of the Employer.
4.
- --
The Union agrees to make an adjustment and reimbursement in the
event rate decreases are effected by New Jersey Blue Cross and Blue Shield
during the life of this Agreement. There shall be no modification in contract
rates for coverages other than Blue Cross and Blue Shield during the life of
this Agreement.
5.
- --
The Company agrees to provide Workman's Compensation Insurance as
provided as provided by law and Temporary Disability Insurance from a provider
or providers of its selection to the employees covered hereunder at no cost to
such employee.
33 - HOLIDAY PAY
----------------
1.
- --
Eligibility qualifications for Holiday Pay:
1. Regular bargaining unit employees must have been in the employ of
the Employer for at least sixty (60) working days prior to
the Holiday.
2. These employees must work the full regularly scheduled plant work
day immediately preceding and the full regularly plant work day
immediately following the Holiday, except that active (i.e., not
those on Leave of Absence, see Article 18) employees who are
absent or leave early due to illness or injury, or other serious
circumstance and are excused by the Company will receive eight
(8) hours pay at straight time for such Holiday. Such excuse and
pay shall not be unreasonably withheld. It is understood that an
employee who is absent from work on the day before or following
the Holiday shall be required to support same with a Doctor's
certificate in order to be eligible for Holiday Pay.
In no event shall an employee be entitled to Holiday pay when
such employee is absent for more than two (2) consecutive
calendar weeks.
Holidays December 1, 1997 through November 30, 2000:
1. New Year's Day 2. Good Friday
3. Easter Monday 4. Memorial Day
5. Independence Day 6. Labor Day
7. Thanksgiving Day 8. Day after Thanksgiving
9. Christmas Eve (as applicable)
10. Christmas Day
11. Three (3) Sick/Personal Days
Employees will be permitted to use the Personal Days if
twenty-four (24) hours notice is given to Management and approval granted. Such
approval shall not be unreasonably withheld.
Employees will be eligible for the Sick Days with pay provided he
or she notifies personnel on the day of absence and reports the reason for the
absence.
On each December 31, the Company will allow as many employees as
is practicable, who so desire, to use available leave (vacation or personal
days) or to take that day off without pay if not entitled to such leave (and
without consequences for an absence) based upon their seniority and business
requirements.
34 - VACATIONS
---------------------
A. Vacations earned as of June 30th equal to or less than the Employer's
scheduled shutdown period (falling within the period May 15th to September 15th)
must be taken during the shutdown period. Any additional earned vacation must be
taken during the period May 15th through May 14th of the following year. The
date for determining number of years or months on the payroll for the purpose of
subparagraph D of this Article shall be June 30th.
B. All vacation pay shall be calculated on the employees basic straight
time hourly rate.
C. Vacation selection will be granted on a seniority (length of continuous
on-the-job service) basis, so far as possible preference as to dates being given
in the order of length of such service. Vacation schedules must be so arranged
as not to interfere with the regular and efficient conduct of business of the
Employer.
D. All employees who have been on the Employer's payroll for the periods
indicated below, shall receive the indicated vacations and vacation pay at their
current basic straight time hourly rate:
SERVICE
VACATION
After 13 weeks but less than 1 year - 3 Days
1 Year but less than 2 Years - 5 Days
2 Years but less than 3 Years - 7 1/2 Days
3 Years but less than 8 Years - 2 Weeks
8 Years but less than 15 Years - 3 Weeks
15 Years but less than 20 Years - 4 Weeks
20 Years and longer - 5 Weeks
E. Employees whose vacations occur in a period in which a holiday falls
shall receive an extra day's pay for the holiday.
F. No later than June 15th of each year of the Agreement, the Employer will
notify employees as to whether the employees will have an additional day's pay
or day off with pay in the event a holiday provided for in Article 33 falls
within the scheduled shutdown.
G. All vacations shall be taken in time off except under extenuating
circumstances. When an employee is laid off or his employment is terminated for
any reason, either he or (in case of death) his beneficiary will be entitled to
the vacation pay that had accrued at the time of separation.
H. The Employer may at his discretion designate a vacation period of up to
but not more than two (2) weeks during the months of July and August after
giving the employees at least three (3) month's notice.
35 - SENIORITY
-------------
A. Seniority shall be computed from an employee's original date of hire unless
broken for the following reasons:
1. Resignation;
2. Dismissal for cause;
3. Six (6) consecutive months of unemployment, unless upon approved
leave of absence;
4. Failure to report when notified to return to work in accordance
with Article 35(C);
5. Three (3) consecutive days of unexcused absence defined as three
(3) or more consecutive working days without notification to the
Employer during regular business hours, Monday through Friday,
except under proven extreme circumstances.
6. Absence from work for any reason for 24 consecutive months,
except if the absence is the subject of arbitration under the
agreement.
B. Layoffs
-------
1. Temporary Layoff - A temporary layoff is a layoff for lack of
work and shall be for a period no longer than one (1) week. Notice of a
temporary layoff must be given to the Job Steward no later than the middle of
the employee's shift preceding the day of layoff, or pay in lieu thereof, unless
the layoff is caused by acts of God, power failure, or other reasons beyond the
Employer's control.
Employees in the classification or classifications affected by a
lack of work shall be laid off in reverse order of their seniority in accordance
with Department seniority lists (Paco Packaging and Paco Laboratories).
Thereafter, laid off employees shall have the right to bump into lower
classifications within the building where the layoff occurred provided they have
more seniority and previously held the classification or have the present
ability to perform the work of such lower classification taking the rate of the
classification, in which event employees having junior seniority in such lower
classification shall be laid off. However, no employee affected by a temporary
layoff and having bumping rights hereunder shall have the right to bump into a
job other than a job in the building in which he is working at the time of
temporary layoff.
2. Indefinite Layoff - An indefinite layoff is a layoff for lack
of work for a period longer than one (1) week. Notice of an indefinite layoff
must be given to the Job Steward forty-eight (48) hours in advance, or pay in
lieu thereof, unless the layoff is caused by acts of God, power failure, or
other reasons beyond the control of the Employer.
Employees in classification(s) affected by a lack of work shall
be laid off in the reverse order of their seniority. Thereafter, those laid off
employees shall have the right to bump into lower classifications provided they
have more seniority and they have previously held the classifications or have
the present ability to perform the work of such lower classification taking the
rate for the classification, in which event employees with less seniority in
such lower classification shall be laid off.
A laid off employee having bumping rights hereunder and who
otherwise qualifies hereunder to bump into a classification on another shift or
in another Department (Labs or Packaging) shall have forty-eight (48) hours from
the receipt of Notice of Intent to Layoff to decide whether he/she desires to
exercise such bumping right.
It is the intent of the parties to afford senior employees the
privilege of bumping prior to layoff from work, and that no junior employees
work while senior employees are actually laid off.
If an employee elects to take the indefinite layoff option, he or
she shall remain on layoff until qualified under the recall provisions of this
Article to recall to the shift or Department (Labs or Packaging) from which he
or she was laid off; unless the Employer determines a need on another shift or
Department (Labs or Packaging) whereupon the employee shall be recalled to such
other shift or Department (Labs or Packaging) provided he or she qualifies under
the recall provisions of this Article.
3. An indefinite layoff shall become a permanent layoff and a break in
service shall occur when such layoff extends six (6) consecutive months.
4. Job Stewards, while serving in that capacity, shall receive top
seniority in their classification for the purpose of layoff.
5. It is expressly understood that in no event shall an employee be
permitted to bump to a higher rated classification or pay.
C. Recall - The Employer shall notify the employee when recalling and the
employee must respond to said notice within forty-eight (48) hours of his
intention to return within seventy-two (72) hours from the time of notice of
recall.
When returning from layoff, employees shall be returned to their
original job when that position becomes available.
When employees are recalled from layoff, they shall be recalled
in the reverse order of layoff provided they are qualified to perform the
required work.
In no event shall the Company hire new employees while there are
employees on layoff.
36 - JOB OPENINGS
----------------
Job openings are defined as but not limited to the following:
1. Permanent vacancies.
2. Additions to existing jobs.
3. New jobs declared by the Employer.
All such job openings shall be posted separately according to
wage rates on appropriate bulletin boards in locations where employees eligible
to bid are working.
A copy of such bid posting sheet shall be given to Union Stewards
at the time of posting and the Employer will make a reasonable effort to notify
employees on vacation.
Bid postings shall indicate the openings, department, building,
classification, shift, wage rate and range and other information the Employer
may have to assist the employees in the bid process.
Certain rated positions, as designated below, shall require an
employee to satisfactorily complete a basic test in order to successfully bid
for that rated position. An employee who has already satisfactorily completed
that test will not be required to retest in response to other postings for other
designated positions.
Employees currently in a rated position which requires the
successful passing of that test will not be required to retest should they bid
on another rated job so designated. The positions designated requiring a test to
successfully bid include the following: Class 100 Sterile Room; Form, Fill, &
Seal Operator; Label Machine Operator; Class 10000 Sterile Room; Bartelt & Pouch
Fill Operator; Filler Operator; Line Leader; Vivus Class 100,000 Room; Carton
Machine Operator; Slitter/Brown/Atlas Vac Operator; Pump Placer.
All bid sheets shall remain posted for a period of six (6)
working days.
Employees may use departmental (Paco Packaging or Paco
Laboratories) seniority to bid for any opening whether above, on a level with,
or below their current wage rate by placing their name on the bid sheet.
The Employer agrees to provide copies of the bid sheet containing
the names of bidders to Stewards when removing them from posting at the
conclusion of the bid period.
Each posting shall be valid for a period of sixty (60) calendar
days from the removal date. The same or additional openings offered must be
rebid if not filled within said period.
The Employer shall have the right to fill such vacancies on a
temporary basis for a period not exceeding three (3) weeks. The Employer agrees
to fill the openings on a permanent basis of departmental (Paco Packaging or
Paco Laboratories) seniority and ability to do the required work. Where ability
is relatively equal between applicants, departmental (Paco Packaging or Paco
Laboratories) seniority shall govern.
In the event there are no bidders within the appropriate
Department, the Employer will make the same posting in the other Department
(Paco Packaging or Paco Laboratories). Then, if there are no bidders, the
Employer shall have the right to fill such openings with a new employee.
37 - TRANSFERS
--------------
1.
- --
To accomplish the work within the plants, the Employer may
temporarily transfer employees from one classification to another for a period
not to exceed three (3) weeks. When transferring employees, the Company will
transfer less senior employees first.
2.
- --
An employee temporarily transferred to a higher, lower or equal
classification shall receive the rate of his regular classification for time
worked not to exceed three (3) weeks.
3.
- --
An employee temporarily transferred to a higher classification
shall be credited with days worked in that classification. If the transferred
person(s) bid(s) for a permanent opening in that same job classification at a
later date and is successful, those credited days will be applied to reduce the
thirty (30) day qualifying period.
4.
- --
An employee transferred must be returned to the position worked
prior to the transfer at the conclusion of the transfer period, provided that
position still exists.
5.
- --
Temporary openings no matter which shift or building are not covered by a
six (6) day job bid requirement. The Employer shall not be required to post
temporary transfers for bid. The Employer may, at any time, post an inquiry
notice and transfer signers.
38 - SUPERVISION
-----------------
It shall be the policy of the Employer to use production
employees to perform all production operations. Therefore, no Supervisor or
Foremen (except Maintenance Foremen) or others not included in the bargaining
unit shall perform the duties normally assigned to employees in the bargaining
unit, except for purposes of instruction, in cases of emergency which do not
deprive regular employees of their regular work, including overtime, or for
development and experimental work to determine production processes and costs.
Supervisors or Foremen or others not included in the bargaining
unit who perform bargaining unit work as prohibited in this Section shall be in
violation of the Agreement.
39 - PENSION
------------
The Employer shall contribute the sum each month in accordance
with the schedule set forth in part (a) hereinbelow for each employee who has
worked or reported for work on one (1) day of such calendar month.
Such contributions shall be remitted to said Fund not later than
the fifteenth (15th) of each month for that month thereafter for the life of
this Agreement and continuing. To be eligible for Pension contributions an
employee must have one (1) full year of service with the Company.
a. Effective beginning December 1, 1997 - $35.00 per month per
member. Effective beginning December 1, 1998 - $45.00 per month per member.
Effective beginning December 1, 1999 - $55.00 per month per member.
b. Contributions shall continue to be made by the Employer for
one (1) full calendar month after the actual month of layoff.
c. Contributions shall continue to be made by the Employer for a
period of one full calendar month following the month in which sickness or
accident occurs for employees on sick leave or workman's compensation.
All remittances to the Fund shall be in manner described by the
Fund, and failure on the part of the Employer to comply shall be considered a
violation of this Agreement and permit the Union to take any action including
strike action after seventy-two (72) hours notice to the Employer of such
intended action, unless the Employer shall comply within said period.
40 - PLANT RULES
-- ----------------
1.
- --
The Union recognizes that it is necessary for the Employer to
issue and post rules from time to time governing the conduct of employees and
that it is the duty of each employee to familiarize himself with such rules and
regulations. The Company shall have the right to post such rules and regulations
provided they are not in violation of the contract.
2.
- --
No employee shall be required to produce a doctor's note until he
or she has been absent for three (3) or more days.
41 - WAGES
------------
Effective December 1, 1997 through November 30, 2000
A. NEW HIRES
Newly hired employees shall be paid in accordance with the
following procedure:
1. Start Rate
Effective December 1, 1997 - $6.05 per hour, or $.15 above the
minimum wage in effect.
2. After receiving the applicable start rate for thirty
(30) calendar days, such employee will receive twenty
cents ($.20) additional per hour. After completing the
probationary period, (Article 6, Section 6.01), such
employee will receive an additional twenty-five cents
($.25) per hour.
3. Thereafter, such employee will receive ten cents ($.10)
additional per hour for each forty (40) days worked
until such employee reaches the top job rate of assembly
worker.
4. The Employer reserves the right, in its discretion, to
pay new hires at pay rates higher than those set forth
herein, but not to exceed the base rate of any employee
who is then currently employed and has completed the
probationary period. Such action will be taken only if
the Employer determines that it is unable to hire and/or
retain qualified employees at the new hire rates set
forth herein.
B. JOB CLASSIFICATIONS AND TOP RATES
A General Annual Wage Increase for all classifications covered for
employees in such classifications and the top job rates on the dates
indicated are:
December 1, 1997 - Thirty Cents ($.30) December 1, 1998 - Thirty Cents
($.30) December 1, 1999 - Thirty Cents ($.30)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
12/1/97 12/1/98 12/1/99
"Non-Rated" Job Classifications
- -------------------------------
Assembly Worker 9.05 9.35 9.65
"Rated" Job classifications
- ----------------------------
1. Form, Fill & Seal Operator 9.65 10.00 10.35
2. Carton Machine Operator 9.45 9.80 10.15
3. Carton Machine Loaders 9.25 9.60 9.95
4. Bartelt Pouch Fill Operator 9.65 10.00 10.35
5. Label Machine Operator 9.35 9.70 10.05
6. Filler Operator 9.35 9.70 10.05
7. Pump Placer 9.35 9.70 10.05
8. Overwrap/Shrinkwrap 9.35 9.70 10.05
9. Trimmer (Operator) 9.35 9.70 10.05
10. Clorox Fill Team 10.05 10.40 10.75
11. Secondary Heat Seal Feeder 9.35 9.70 10.05
12. Class 100 Sterile Room 9.55 9.90 10.25
13. Line Leader 10.40 10.45 10.80
14. Class 10000 Sterile Room 9.35 9.70 10.05
*15. Neck Bander Operator 9.35 9.70 10.05
16. Truck Driver 10.50 10.85 11.20
17. Company 10.15 10.50 10.85
18. Stockperson 9.50 9.85 10.20
19. Forklift Operator 9.75 10.10 10.45
20. Slitter/Brown/Atlas Vac 9.40 9.75 10.10
21. Janitor/Matron 9.50 9.85 10.20
22. Auxiliary Line Checker 9.25 9.60 9.95
23. Class 100,000 Sterile Room 9.55 9.90 10.25
</TABLE>
*Classifications designated by asterisk will continue as rated jobs only for so
long as there are employees classified as of December 1, 1997 in such positions.
These employees will continue to receive all general increases. However, the
Company shall have no obligation to post or fill vacancies in those
classifications after December 1, 1997 with that work to be assigned by the
Company to any qualified employee who shall perform at their own current rate of
pay.
C. PROGRESSION
1. Any employee who is currently paid at the top rate of his/her
classification and is assigned a higher rated classification in
accordance with the Labor Agreement shall receive the top rate of
the classification to which they are assigned upon completion of
thirty (30) days worked in that new classification.
2. Any employee who is not currently paid at the top rate of his/her
classification and is assigned a higher rated classification in
accordance with the Labor Agreement shall receive an increase
which shall equal the difference between the top rate of his/her
existing classification and upon completion of (30) days worked
in that new classification. Such employee shall then receive a
progression increase of ten cents ($.10) per hour each forty (40)
days worked until such employee reaches the top rate of his/her
classification.
3. Any employee whose position was consolidated as a result of
contract negotiations, and not already at the highest rate of pay
shall receive progressive increases of ten cents ($.10) per hour
each forty (40) days worked until such employee reaches the top
rate of his/her classification.
4. Any employee who shall have completed the probationary period
shall receive the annual contract scale increases as they become
effective in addition to any progression increases he or she may
be entitled to and receive in accordance with this Section "C."
D. BONUS
1. In lieu of an attendance bonus, all active employees as of
December 1, 1997 shall receive a lump sum bonus of $450.00, less
appropriate withholding taxes. Employees not actively at work as
of December 1, 1997, who subsequently return to work from layoff,
leave of absence, or other approved leave on or before March 1,
1998 shall be entitled to that bonus upon completion of thirty
days of work.
2. A second bonus shall likewise be provided on or about December 1,
1998 also in the amount of $450.00 less appropriate withholding
taxes. Employees shall be entitled to that second bonus only if
they were eligible for and received the bonus set forth in
paragraph 1, above. Employees who received that first bonus, but
not actively at work on December 1, 1998, who shall return to
work from layoff, leave of absence or other approved leave by or
before March 1, 1999 shall be entitled to that bonus upon
completion of thirty days of work.
E. CREDIT UNION
The Employer agrees to payroll deductions for a credit union provided that it
shall be at no additional cost to the Employer.
42 - TERMS OF AGREEMENT
-- ---------------------
This Agreement shall be in full force and effect from December 1,
1997 to and including November 30, 2000, and shall continue thereafter from year
to year unless written notice of intention to change or modify by either part at
least sixty (60) days prior to November 30, 2000, or the expiration of each
contract year thereafter.
For the Union: For the Employer:
TEAMSTERS LOCAL NO. 35 PACO PHARMACEUTICAL SERVICES
By___________________________ By___________________________
Gregory Lucidi Bruce Decker
President General Manager
By___________________________ By___________________________
Carol Beebe Richard O'Brien
Director, Human Resources
Exhibit 10 (y)
1998 KEY EMPLOYEE INCENTIVE COMPENSATION PLAN
SECTION 1
GENERAL
1.1 Purpose. The Plan has been established by the Company (i) to attract
and retain persons eligible to participate in the Plan; (ii) motivate
participants, by means of appropriate incentives, to achieve long-range goals;
and (iii) link participants' interests with those of the Company's other
shareholders through compensation that is based on the Company's common stock,
and thereby promote the continued growth and financial success of the Company.
1.2 Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Employees, those persons who will be granted one or more awards under
the Plan, and thereby become "Participants" in the Plan. Persons eligible to
participate shall be limited to those officers and key employees of the Company
who, in the opinion of the Committee, are in positions in which their decisions,
actions, and counsel significantly affect the growth and financial success of
the Company. Directors of the Company who are not otherwise officers or
employees of the Company shall not be eligible to participate in the Plan.
1.3 Operation, Administration and Definitions. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 7).
SECTION 2
OPTIONS AND SARS
2.1 Definitions.
a) The grant of an "Option" entitles the Participant to
purchase shares of Common Stock at an Exercise Price
established by the Committee. Options granted under this
Section 2 may be either Incentive Stock Options or
Non-Qualified Options, as determined in the discretion
of the Committee. An "Incentive Stock Option" is an
Option that is intended to satisfy the requirements
applicable to an "incentive stock option" described in
section 422A of the Code. A "Non-Qualified Option" is an
Option that is not intended to be an "incentive stock
option" as that term is described in section 422A of the
Code.
b) A stock appreciation right (an "SAR") entitles the
Participant to receive, in cash or Stock (as determined
in accordance with subsection 2.5), value equal to all
or a portion of the excess of: (a) the Fair Market Value
of a specified number of shares of Common Stock at the
time of exercise; over (b) an Exercise Price established
by the Committee.
2.2 Exercise Price. The "Exercise Price" of each Option and SAR granted
under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; except that the Exercise Price shall not be less than 100
percent of the Fair Market Value of a share of Common Stock as of the Pricing
Date. As used in this subparagraph the "Pricing Date" shall be the date on which
the Option or SAR is granted, except that the Committee may provide that the
Pricing Date is the date on which the recipient is hired or promoted (or similar
event), if the grant of the Option or SAR occurs not more than 90 days after the
date of such hiring, promotion or other event.
2.3 Exercise. An Option and an SAR shall be exercisable in accordance with
such terms and conditions and during such periods as may be established by the
Committee. The Committee shall have the power to permit in its discretion an
acceleration of the previously determined exercise or vesting periods of, and
the expiration of the applicable restriction period with respect to, any Option
or SAR, under such circumstances, including a change in control of the Company,
and upon such terms and conditions as it deems appropriate.
2.4 Expiration Date. The "Expiration Date" with respect to an Option means
the date established as the Expiration Date by the Committee at the time of the
grant; provided, however, that the Expiration Date with respect to any Option
shall not be later than the earliest to occur of:
a) the ten-year anniversary of the date on which the Option is
granted (the five-year anniversary in the case of an Incentive
Stock Option granted to an individual who owns stock possessing
more than 10 percent of the total combined voting power of all
classes of stock of the Company);
b) if the Participant's Date of Termination occurs by reason of
Retirement, death or disability. the one-year anniversary after
such Termination Date; or
c) if the Participant's Date of Termination occurs by reasons other
than Retirement, death or disability, the 90-day anniversary of
such Date of Termination.
The existence of Retirement and the existence of and the date of
disability shall be determined by the Committee in its sole
discretion.
2.5 Payment of Option Exercise Price. The payment of the Exercise Price of
an Option granted under this Section 2 shall be subject to the following:
a) Subject to the following provisions of this subsection 2.5, the
full Exercise Price for shares of Common Stock purchased upon the
exercise of any Option shall be paid at the time of such exercise
(except that, in the case of an exercise arrangement approved by
the Committee and described in paragraph 2.5 (c), payment may be
made as soon as practical after the exercise).
b) The Exercise Price shall be payable in cash or by tendering
shares of Common Stock (by either actual delivery of shares or by
attestation, with such shares valued at Fair Market Value as of
the date of exercise), or in any combination thereof, as
determined by the Committee. Such determination may include a
restriction on the use of any shares of Common Stock unless they
have been held by the Participant for at least six months before
delivery, and have not been used for another exercise during such
period.
c) The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by authorizing a
third party to sell shares of Common Stock (or a sufficient
portion of the shares) acquired upon exercise and remit to the
Company a sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding resulting from such
exercise.
2.6 Settlement of Award. Distribution following exercise of an Option or
SAR, and shares of Common Stock distributed pursuant to such exercise, shall be
subject to such conditions, restrictions and contingencies as the Committee may
establish. Settlement of SARs may be made in shares of Common Stock (valued at
their Fair Market Value at the time of exercise), or in any combination thereof,
as determined by the Committee. The Committee, in its discretion, may impose
such conditions, restrictions and contingencies with respect to shares of Common
Stock acquired pursuant to the exercise of an Option or an SAR as the Committee
determines to be desirable.
SECTION 3
----------
OTHER STOCK AWARDS
------------------
3.1 Definition. A Stock Award is a grant of shares of Common Stock or of a
right to receive shares of Common Stock (or their cash equivalent or a
combination of both) in the future.
3.2 Restrictions on Stock Awards. Each Stock Award shall be subject to such
conditions, restrictions and contingencies as the Committee shall determine.
These may include continuous service and/or the achievement of performance
measures. At any time prior to the payment of the Stock Awards, the Committee
may adjust previously established performance targets and other terms and
conditions, including the Company's financial performance for Plan purposes, to
reflect major unforeseen events such as changes in laws, regulations or
accounting practice, mergers, acquisitions or divestitures or extraordinary,
unusual or nonrecurring items or events.
<PAGE>
SECTION 4
----------
OPERATION AND ADMINISTRATION
----------------------------
4.1 Effective Date. Subject to the approval of the shareholders of the
Company at the Company's 1998 annual meeting of shareholders, the Plan shall be
effective as of March 10, 1998 (the "Effective Date"); provided, however, that
any Awards made under the Plan prior to its approval by shareholders shall be
contingent on approval of the Plan by the shareholders of the Company. The Plan
shall be unlimited in duration and, in the event of Plan termination, shall
remain in effect as long as any Awards under it are outstanding; provided,
however, that, no Award may be made under the Plan more than ten years from the
Effective Date.
4.2 Shares Subject to the Plan. a)
i) Subject to the following provisions of this subsection 4.2, the
maximum number of shares that may be delivered to Participants
and their beneficiaries under the Plan shall not exceed 1,500,000
shares of Common Stock. Such shares may be authorized and
unissued shares or treasury shares.
ii) Any shares of Common Stock granted under the Plan that are
forfeited because of the failure to meet an Award contingency or
condition shall again be available for delivery pursuant to new
Awards granted under the Plan. To the extent any shares of Common
Stock covered by an Award are not delivered to a Participant or
beneficiary because the Award is forfeited or canceled, or the
shares are not delivered because the Award is settled in cash,
such shares shall not be deemed to have been delivered for
purposes of determining the maximum number of shares of Common
Stock available for delivery under the Plan.
iii) If the Exercise Price of any stock option granted under the Plan
is satisfied by tendering shares of Common Stock to the Company
(by either actual delivery or by attestation), only the number of
shares issued net of the shares of Common Stock tendered shall be
deemed delivered for purposes of determining the maximum number
of shares of Common Stock available for delivery under the Plan.
iv) Shares of Common Stock delivered under the Plan in settlement,
assumption or substitution of outstanding awards (or obligations
to grant future awards) under the plans or arrangements of
another entity shall not reduce the maximum number of shares of
Common Stock available for delivery under the Plan, to the extent
that such settlement, assumption or substitution is a result of
the Company or a Subsidiary acquiring another entity (or an
interest in another entity).
b) Subject to paragraph 4.2 (c), the following additional maximums
are imposed under the Plan.
i) The maximum number of shares of Common Stock that may be issued
by Options intended to be Incentive Stock Options shall be
1,500,000 shares.
ii) The maximum number of shares of Common Stock that may be covered
by Awards granted to any one individual pursuant to Section 2
(relating to Options and SARs) shall be 200,000 shares during any
calendar year.
iii) The maximum payment that can be made for awards granted to any
one individual pursuant to Section 3 (relating to Stock Awards)
shall be $300,000 for any single or combined performance goals
established for any performance period. If an Award granted under
Section 3 is, at the time of grant, denominated in shares, the
value of the shares of Common Stock for determining this maximum
individual payment amount will be the Fair Market Value of a
share of Common Stock on the date of award.
c) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend or
distribution, stock split, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination or
exchange of shares), the Committee may adjust Awards to preserve
the benefits or potential benefits of the Awards. Action by the
Committee may include adjustments of: (i) the number and kind of
shares that may be delivered under the Plan; (ii) the number and
kind of shares subject to outstanding Awards; and (iii) the
Exercise Price of outstanding Options and SARs; as well as any
other adjustments that the Committee determines to be equitable.
4.3 Limits on Distribution. Distribution of shares of Common Stock or other
amounts under the Plan shall be subject to the following:
a) Notwithstanding any other provision of the Plan, if at any time
the Committee shall determine that (i) the listing, registration
or qualification of the shares of Common Stock subject or related
thereto upon any securities exchange or under any state or
federal law, (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the recipient of an
Award with respect to the disposition of shares of Common Stock,
is necessary or desirable as a condition of, or in connection
with the Plan or the granting of such Award or the issue or
purchase of shares of Common Stock thereunder, the Company shall
have no liability to deliver any shares of Common Stock under the
Plan or make any other distribution of benefits under the Plan
unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free
of any conditions not acceptable to the Committee.
b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Common Stock,
the issuance may be effected on a non-certificate basis, to the
extent not prohibited by applicable law or the applicable rules
of any stock exchange.
4.4 Tax Withholding. Whenever the Company proposes or is required to issue
or transfer shares of Common Stock under the Plan, the Company shall have the
right to require the recipient to remit to the Company an amount sufficient to
satisfy any Federal, state or local withholding tax requirements prior to the
delivery of any certificate for such shares, or in the discretion of the
Committee, the Company may withhold from the shares to be delivered shares
sufficient to satisfy all or a portion of such tax withholding requirements.
Whenever under the Plan payments are to be made in cash, such payments may be
net of an amount sufficient to satisfy any Federal, state and local tax
withholding requirements.
4.5 Dividends. An Award may provide the Participant with the right to
receive dividends with respect to Common Stock, which may be either paid
currently or credited to an account for the Participant, and may be settled in
cash or Common Stock as determined by the Committee. Any such settlements, and
any such crediting of dividends or reinvestment in shares of Common Stock, may
be subject to such conditions, restrictions and contingencies as the Committee
shall establish.
4.6 Payments. Awards may be settled through cash payments, the delivery of
shares of Common Stock, or combination thereof as the Committee shall determine.
Any Award settlement may be subject to such conditions, restrictions and
contingencies as the Committee shall determine.
4.7 Transferability. No Awards may be transferred by the Participant
otherwise than by will, by the laws of descent and distribution or pursuant to a
qualified domestic relations order, and during the Participant's lifetime the
Option may be exercised only by him or her; provided, however, that the
Committee, in its discretion, may allow for transferability of Non-Qualified
Options by the Participant to "Immediate Family Members."
"Immediate Family Members" means children, grandchildren, spouse or common
law spouse, siblings or parents of the Participant or to bona fide trusts,
partnerships or other entities controlled by and of which the beneficiaries
are Immediate Family Members of the Participant. Any Option grants that are
transferable are further conditioned on the Participant and Immediate
Family Members agreeing to abide by the Company's then current stock option
transfer guidelines.
4.8 Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by a Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Secretary of the Company
or other person designated by the Committee at such times, in such form, and
subject to such restrictions and limitations, not inconsistent with the terms of
the Plan, as the Committee shall require.
4.9 Agreement with the Company. At the time of an Award to a Participant,
the Committee may require a Participant to enter into an agreement with the
Company (the "Agreement") in a form specified by the Committee, agreeing to the
terms and conditions of the Plan and to such additional terms and conditions,
not inconsistent with the Plan, as the Committee may, in its sole discretion,
prescribe.
4.10 Limitation of Implied Rights.
a) Neither a Participant nor any other person shall, by reason of
the Plan, acquire any right in or title to any assets, funds or
property of the Company or any Subsidiary whatsoever, including,
without limitation, any specific funds, assets, or other property
which the Company or any Subsidiary, in their sole discretion,
may set aside in anticipation of a liability under the Plan. A
Participant shall have only a contractual right to the stock or
amounts, if any, payable under the Plan, unsecured by any assets
of the Company or any Subsidiary. Nothing contained in the Plan
shall constitute a guarantee that the assets of such companies
shall be sufficient to pay any benefits to any person.
b) Nothing in the Plan or in any agreement entered into pursuant to
the Plan shall confer upon any Participant the right to continue
in the employment of the Company or any Subsidiary or affect any
right which the Company or any Subsidiary may have to terminate
the employment of such Participant.
4.11 Stock Forfeiture Provision. Notwithstanding any other provision of
this Plan to the contrary, the Committee may provide for the forfeiture of
Awards under the Plan and the benefits derived therefrom, in the event a
Participant engages in conduct deemed to be harmful to, or not in the best
interests of, the Company. Such forfeiture may include, without limitation, the
cancellation of unexercised Options and the forfeiture of gain realized from the
exercise thereof. Such provisions shall be included in the Option agreements
approved from time to time by the Committee. The Committee, or its duly
appointed agent, may waive any or all of the restrictions authorized under this
subsection whenever it (or its duly appointed agent) determines in its sole
discretion that such action is in the best interests of the Company.
SECTION 5
COMMITTEE
5.1 Administration. The authority to control and manage the operation and
administration of the Plan shall be vested in a committee (the "Committee") in
accordance with this Section 5.
5.2 Selection of Committee. The Committee shall be selected by the Board,
and shall consist of two or more members of the Board. The Committee shall be
composed solely of directors who: (i) meet the requirements necessary to be
considered "non-employee directors" as that term is defined in Rule 16b-3 of the
Securities Exchange Act of 1934. In addition, no member of the Committee shall
participate in any compensation decision under the Plan who is not, at the time
of the decision, an "outside director" as that term is defined under Code
section 162(m).
5.3 Powers of Committee. The authority to manage and control the operation
and administration of the Plan shall be vested in the Committee, subject to the
following:
a) Subject to the provisions of the Plan, the Committee will have
the authority and discretion to select from among the Eligible
Employees those persons who shall receive Awards, to determine
the time or times of receipt, to determine the types of Awards
and the number of shares covered by the Awards, to establish the
terms, conditions, performance criteria, restrictions and other
provisions of such Awards, and (subject to the restrictions
imposed by Section 6) to cancel or suspend Awards. In making such
Award determinations, the Committee may take into account the
nature of services rendered by the individual, the individual's
present and potential contribution to the Company's success and
such other factors as the Committee deems relevant.
b) The Committee will have the authority and discretion to interpret
the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, to determine the terms and
provisions of any agreements made pursuant to the Plan, and to
make all other determinations that may be necessary or advisable
for the administration of the Plan.
c) Any interpretation of the Plan by the Committee and any decision
made by it under the Plan is final and binding.
5.4 Delegation by Committee. Except to the extent prohibited by applicable
law or the applicable rules of a stock exchange, the Committee may allocate all
or any portion of its responsibilities and powers to any one or more of its
members and may delegate all or any part of its responsibilities and powers to
any person or persons selected by it. Any such allocation or delegation may be
revoked by the Committee at any time.
SECTION 6
---------
AMENDMENT AND TERMINATION
-------------------------
The Board may amend or terminate the Plan at any time, except that without
shareholder approval, the Board may not increase the maximum number of shares
which may be issued under the Plan (other than increases pursuant to Paragraph
4.2(c) hereof) or change the class of Eligible Employees. The termination or any
modification or amendment of the Plan shall not, without the consent of a
participant, affect a Participant's rights under an Award previously granted.
<PAGE>
SECTION 7
---------
DEFINED TERMS
---------------
For purposes of the Plan, the following terms shall have the meanings set
forth below:
a) "Award" means any award or benefit granted to any Participant under the
Plan, including, without limitation, the grant of Options, SARs, and Stock
Awards.
b) "Board" means the Board of Directors of the Company.
c) "Code" means the Internal Revenue Code of 1986, as amended. A reference to
any provision of the Code shall include reference to any successor
provision of the Code.
d) "Common Stock" means shares of the Company's common stock, $.25 par value
per share.
e) "Date of Termination" means the date on which a Participant ceases to be
employed by the Company or any Subsidiary. In the event of employment
termination due to Retirement, the Date of Termination shall be: (i) with
respect to a Pension Optionee, the date on which such an optionee is
immediately eligible to collect pension benefits under any Pension Plan;
and (ii) with respect to a Non-Pension Optionee, a date determined by the
Committee.
f) "Eligible Employee" means any employee of the Company or a Subsidiary
providing key services to the Company or a Subsidiary.
g) "Fair Market Value" of Common Stock on any given date shall be determined
according to the following rules:
i) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, then the "Fair Market Value" shall be the
mean between the highest and lowest prices of the Common Stock on
the date in question on the principal national securities
exchange on which it is then listed or admitted to trading. If no
reported sale of Common Stock takes place on the date in question
on the principal exchange, then the reported closing asked price
of the Common Stock on such date on the principal exchange shall
be determinative of "Fair Market Value."
ii) If the Common Stock is not at the time listed or admitted to
trading on a stock exchange, the "Fair Market Value" shall be the
mean between the highest reported asked price and lowest reported
bid price of the Common Stock on the date in question in the
over-the-counter market, as such prices are reported in a
publication of general circulation selected by the Committee and
regularly reporting the market price of Common Stock in such
market.
iii) If the Common Stock is not listed or admitted to trading on any
stock exchange or traded in the over-the-counter market, the
"Fair Market Value" shall be as determined in good faith by the
Committee.
h) "Pension Plan" means an individual pension scheme or pension plan sponsored
by the Company or a Subsidiary.
i) "Pension Optionee" means an optionee under the Plan who is an active
participant in any Pension Plan and a "Non-Pension Optionee" means an
optionee under the Plan who is not an active participant in any Pension
Plan.
j) "Subsidiary" means any "subsidiary corporation" (as that term is defined in
Code section 424(f)) with respect to the Company.
k) "Retirement" means: (i) with respect to a Pension Optionee, termination of
employment with the Company or a Subsidiary under the provisions of any
Pension Plan; and (ii) with respect to a Non-Pension Optionee, termination
of employment with the Company or a Subsidiary under the procedures
established by the Committee.
Exhibit 13
FINANCIAL REVIEW
- --------------------
The West Company (the Company) manufactures and markets 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, 1997 and its financial position
as of year-end 1997. 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 1997 net income was $44.4 million, or $2.69 per share. This net
income includes a $7.9 million net tax benefit associated mainly with the tax
reorganization of the Company's German subsidiaries in 1997. The 1996 net income
of $16.4 million, or $1.00 per share, reflects a $15 million net charge to
income in the first quarter of 1996 related to a restructuring plan. Excluding
the tax benefit in 1997 and restructuring charge in 1996, the Company's 1997 net
income was $36.5 million, or $2.21 per share, which compares with 1996 net
income of $31.3 million, or $1.91 per share, and 1995 net income of $28.7
million, or $1.73 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
December 1995, the Company purchased the remaining 49% minority interest in
Schubert Seals A/S (Schubert). The terms of these transactions are described in
the Note "Acquisitions and Investments" to the Consolidated Financial
Statements.
During 1996 and 1997, the Company implemented a major restructuring plan
adopted in the first quarter of 1996. The plan included downsizing or closing
manufacturing
95
<PAGE>
facilities. Three manufacturing facilities in Argentina, Puerto Rico and
Germany were closed and the machinery business was sold. Facilities in Brazil
and Pennsylvania were downsized and a development facility in Colorado was
closed. An approximate 5% reduction in the workforce was completed. The total
restructuring charge was $21.5 million, approximately $7.3 million of which
represented severance and benefits. The remaining charge covered the facility
closing costs and reduction to net realizable value of the facilities and
equipment made excess by the restructuring actions. The restructuring plan is
part of an overall strategy that includes enhanced technical capabilities and
product offerings for customers. Specifically, the actions created focused, more
efficient factories, and shifted certain production to lower-cost locations
so that the Company can meet the demands of the healthcare industry for high
quality, cost-effective products.
NET SALES
- ----------
Net sales were $452.5 million in 1997, a decrease of $6.3 million, or 1%,
compared with net sales of $458.8 million in 1996. Without the effect of the
strong U.S. dollar, which reduced reported sales by about $12.9 million, and
without the 1996 machinery sales, a business sold in 1996, sales in 1997 were 2%
higher. Contract service sales increased 13% in 1997 compared with 1996 largely
as a result of stronger demand for Paco's contract packaging and manufacturing
services, and because Paco supplied a larger portion of the materials used in
1997 production.
Sales of core products manufactured for the healthcare markets increased 1%
(measured at constant exchange rates) in 1997 compared with 1996. Sales in
domestic markets increased at modest growth rates reflective of the market, and
the product mix was favorable. Sales in international markets were lower, and
the product mix was unfavorable. Continued consumer and government pressure to
control and even reduce the cost of healthcare delivery is transforming the
healthcare markets. Customers have responded by establishing aggressive cost
reduction programs and in certain instances reducing inventory levels. The
Company's ability to increase prices is becoming more limited and competitive
activity is increasing. Future results are becoming more difficult to predict in
these circumstances, but the current forecast indicates that soft sales demand
96
<PAGE>
will continue in the first half of 1998. The Companycontinues to focus on the
needs of its customers with planned introductions of new services and products.
Sales to consumer markets decreased 4% compared with 1996. The decline occurred
in the last quarter of 1997. The decrease in consumer sales is in part due to
lower demand for Spout-Pak(R), a fitment for gable-carton juice containers, low
demand for certain customers' products, and the loss of customers' replacement
products to other suppliers. Spout-Pak' demand has been declining since mid-1997
when a competitive fitment was introduced. The Company is currently working with
its customer on expansion into additional markets with a new fitment.
In 1996, net sales increased by 11%, or $45.9 million, compared with 1995.
Paco's sales were responsible for the majority of this sales increase. Reported
Paco sales increased 84%, a combination of full year ownership and strong
demand.
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 domestic 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 compared to
1995. However, the Company did experience strong demand for Spout-Pak', with a
volume increase of 10% compared with 1995. Machinery sales were flat compared
with 1995, despite the sale of this business 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.
GROSS PROFIT
- -------------
The consolidated gross margin in 1997 was 29.2%, and gross profit was $132.1
million. These results compare with a 27.5% gross margin and gross profit of
$126.1 million in 1996.
97
<PAGE>
Margins on core healthcare product sales increased again by more than one
percentage point. Margins in domestic markets improved significantly due to cost
savings initiatives, which more than offset inflation, and to a more profitable
product mix. However, margins in international markets were lower due to lower
sales volume and a less profitable product mix.
Paco gross margins doubled due to sales volumes and efficiencies achieved. The
management of Paco was strengthened, and Paco's equipment is being upgraded to
attract higher-margin, longer-running sales opportunities.
Margins on consumer product sales increased, despite the lower sales volume, due
to lower resin raw material costs which are passed through to the customer in
lower prices and cost savings initiatives.
The gross margin of 27.5% in 1996 represented a decline from the 28.6% margin
achieved in 1995. However, gross profit increased 4.8% to $126.1 million. The
margin decline reflected 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 to improve the cost structure and increase
efficiencies offset inflation and the less favorable product mix.
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.
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 business generated a small gross profit in 1996 compared with
a loss in 1995.
EXPENSES
- ---------
Selling, general and administrative expenses as a percentage of sales were 15.5%
in 1997, 15.9% in 1996, and 16.9% in 1995.
98
<PAGE>
Selling, general and administrative expenses totaled $70.2 million in 1997,
$72.8 million in 1996, and $69.9 million in 1995. The 4% decrease in these
expenses in 1997 compared with 1996 was primarily the result of lower pension
costs due to higher income on pension plan assets and the impact of the stronger
U.S. dollar. These decreases more than offset the following factors:
inflationary cost increases, increased bad debt expense primarily related to the
bankruptcy of a customer and higher expenses in Asia Pacific due to the recent
financial crisis in that market, an increase in estimated expenses associated
with environmental remediation activity, and higher spending related to
drug delivery system development.
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 compared with no incentive compensation payment being earned for
1995, 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.
Transactions included in the other income category netted to income of $1.1
million in 1997, $.9 million in 1996, and $1.5 million in 1995. Interest income,
included therein, totaled $2.0 million in 1997, $1.3 million in 1996, and $2.0
million in 1995. In the most recent two years, cash balances available for
investment have increased significantly. Historically, interest income was
generated mainly in Brazil but has declined since mid-1994 when Brazil adopted
an economic plan designed to reduce inflation and stabilize the currency,
consequently reducing interest rates. Beginning in 1998, the Company's
subsidiary in Brazil will no longer be accounted for as operating in a
hyperinflationary economy since its cumulative inflation rate has dropped
dramatically over the past three years. 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 totaling $.1 million in both 1997 and 1996, and $1.4 million
in 1995. The large loss in 1995 reflects 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 1997 of
$.1 million, $.2 million in 1996, and $.6 million in 1995
99
<PAGE>
reflect realignment of European currencies. Net losses on real estate and
investments totaled $.7 million in 1997, and $.2 million in both 1996 and 1995.
Losses on disposition of obsolete equipment were lower in 1997 after having
increased in 1996.
INTEREST
- ---------
Interest costs totaled $6.0 million in 1997 compared with $7.3 million in 1996
and $7.8 million in 1995, of which $.4 million, in 1997 and 1996 and $.5 million
in 1995 were capitalized as part of the cost of capital asset acquisitions.
The average consolidated debt level decreased in both 1997 and 1996. Higher debt
levels in 1995 reflect the acquisitions made in 1995 and 1994. Interest rates
also were lower in both 1997 and 1996 compared with the prior year.
INCOME TAXES
- -------------
The effective tax rate on consolidated income was 23.2% in 1997, 41.8% in
1996 and 32.8% in 1995.
The low tax rate for 1997 was significantly affected by two events; 1) a tax
reorganization of the Company's German subsidiaries which resulted in a
significant increase in tax basis for the assets of these entities and resulted
in tax credit refunds, and 2)repatriation of cash dividends from certain
subsidiaries. The net impact of these events was a net $7.9 million tax benefit.
The net benefit was originally recorded in the third quarter at the time of the
events. Subsequent tax law changes and completion of a tax audit in December
1997 reduced the benefit recorded in the third quarter. Excluding this benefit,
the 1997 effective tax rate is 37%, which includes the impact of an increase in
the statutory tax rate of France, enacted in the fourth quarter.
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 have been 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 Service Procedure released late in 1994.
100
<PAGE>
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%.
101
<PAGE>
MINORITY INTERESTS AND EQUITY IN AFFILIATES
- -------------------------------------------
Minority interests in net income of subsidiaries are insignificant since the
Company's late 1995 purchase of the remaining minority interest in Schubert.
Only a small minority ownership interest in a subsidiary in Spain remains.
Income from investments in affiliated companies totaled $.5 million in 1997,
$1.5 million in 1996, and $.9 million in 1995. The decrease in 1997 mainly
reflects much lower operating margins at Daikyo Seiko, Ltd., a Japanese company
in which the Company owns a 25% equity stake, and net expenses related to the
Company's investment in DanBioSyst UK Ltd., a contract research firm
specializing in drug delivery systems. The decline in Daikyo's contribution
reflects significant new plant investment and higher administrative costs
related to a newly-introduced product line, Resin CZ(R) vials, and a weaker
Japanese yen. The investment in DanBioSyst was recognized on an equity basis for
the first time in 1997.
The increase in affiliate contributions in 1996 was mainly the result of higher
sales and improved margins for Daikyo. The 1996 improvements were offset, in
part, by the September 30, 1995 sale of the Company's 40% partnership interest
in Schott West Pharmaceutical Glass Company and a weaker Japanese yen. Results
of the Company's investment in affiliates in Mexico were lower in 1997 due to
sales declines but were improved in 1996 compared with 1995 due to lower
currency translation losses.
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 $67.7 million in 1997. Working capital at December 31, 1997,
totaled $112.7 million, a ratio of current assets to current liabilities of 2.9
to 1, and includes a cash balance of $52.3 million. Debt to total invested
capital (total debt, minority interests and shareholders' equity) was 24.2%; the
outstanding debt balance was $89 million at December 31, 1997, compared with
$98.4 million at year-end 1996.
The cash flow from operations of $67.7 million, combined with cash from exercise
of employee stock options totaling $4 million, funded $34.4 million of 1997
capital
102
<PAGE>
expenditures, $1.7 million of debt reduction and $9.4 million of cash
dividends to shareholders ($.57 per share). The balance is reflected in a $25
million increase in cash and cash investments.
The Company has two revolving credit facilities which were amended and increased
in 1997. The first facility now provides for borrowings up to $70 million and
has a term of 364 days, renewable at the lender's option. The second facility
provides for borrowings up to $55 million through August 2002. At year-end 1997,
the Company had $70 million and $32.9 million available under the short-term and
long-term facilities, respectively. In addition, unused short-term committed
credit facilities totaling $21 million and unused long-term credit facilities
totaling $9 million at December 31, 1997, were available to subsidiaries.
The asset turnover ratio declined slightly to .95 in 1997 due to the sales
decrease. Return on average shareholders' equity was 16.7% for 1997, increasing
significantly over the 1996 return of 6.5%. The unusual restructuring charge and
tax benefit recorded in 1996 and 1997, respectively, are the reasons for the
significant difference.
1998 REQUIREMENTS
- ------------------
Cash requirements for capital projects in 1998 are estimated at $45 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 drug delivery
systems also are planned. Acquisition and implementation of new information
management systems will continue, as will maintenance and improvements to the
existing production capacity.
The Company is in the process of addressing the impact of the Year 2000 on the
conduct of the business. The Company has been implementing a plan over the past
two years and expects the work to continue into 1999. New software applications
have been installed or are in implementation stage which address Year 2000
compliance in the Company's information systems. Other potential exposure areas
are being addressed throughout the Company. Equipment is being reviewed with
vendors and internal tests are being conducted on critical items of equipment.
Non-compliant equipment is expected to be repaired by year end 1998 or replaced
before year end 1999. All principal material, supply and equipment vendors have
been contacted to
103
<PAGE>
determine their progress. Government agencies, financial institutions and other
service providers are being contacted to determine the programs that are being
followed with certification sought from all providers indicating their
completion of Year 2000 programs. The Company believes that it is addressing all
of the areas critical to its ability to conduct business in the future without
interruption due to the Year 2000. Significant time is being spent to install
compliant software but in most instances the system is being implemented mainly
for its improved functionality. Internal resources are being used in other areas
to carry out the Year 2000 program and the Company does not anticipate any other
significant costs related to these activities.
In accordance with the Company's foreign exchange management policy, the adverse
consequences resulting from foreign currency exposure are mitigated in part 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 Note
"Financial 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 1998. In 1997, payments related to
environmental cleanup totaled $.4 million. The Company has been indemnified by
other financially responsible parties against future government claims relating
to groundwater contamination at a Puerto Rico site, and the Company does not
anticipate any remedial expenses with respect to this site.
In 1998, in addition to cash flow from operations, the Company expects proceeds
from employee stock option exercises to equal the average of the past several
years. Management believes these sources of cash, available credit facilities
and the Company's current capitalization provide sufficient flexibility to meet
future cash flow requirements and pursue its stated acquisition strategy.
Statements about anticipated 1998 earnings and the timing and nature of
contributors to 1998 results are forward-looking statements that involve risks
and uncertainties. The following important factors have affected, and in
104
<PAGE>
the future could effect, the Company's actual results and could cause the
Company's results to differ materially from those expressed in any forward
looking statements made by, or on behalf of, the Company. These, include but are
not limited to, sales demand, the timing of customers' product introductions,
competitive pressures, the strength or weakness of the U.S. dollar, inflation,
the cost of raw materials, successful continuance of cost-improvement programs,
the potential dilution from acquisitions of other businesses, and the cost of
borrowing funds.
105
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
THE WEST COMPANY, INCORPORATED AND
SUBSIDIARIES FOR THE YEARS
ENDED DECEMBER 31, 1997, 1996 AND 1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------
Net sales $452,500 100% $458,800 100% $412,900 100%
Cost of goods sold 320,400 71 332,700 73 294,700 71
------------------------------------------------------------------
Gross profit 132,100 29 126,100 27 118,200 29
Selling, general and
administrative expenses 70,200 16 72,800 16 69,900 17
Restructuring charge -- -- 21,500 5 -- --
Other income, net (1,100) (1) (900) (1) (1,500) --
------------------------------------------------------------------
Operating profit 63,000 14 32,700 7 49,800 12
Interest expense 5,600 1 6,900 1 7,300 2
------------------------------------------------------------------
Income before income taxes and
minority interests 57,400 13 25,800 6 42,500 10
Provision for income taxes 13,300 3 10,800 2 13,900 3
Minority interests 200 -- 100 -- 800 --
------------------------------------------------------------------
Income from consolidated operations 43,900 10% 14,900 4% 27,800 7%
Equity in net income of -- -- --
affiliated companies 500 1,500 900
------------------------------------------------------------------
Net income $ 44,400 $ 16,400 $ 28,700
------------------------------------------------------------------
Net income per share:
Basic $ 2.69 $ 1.00 $ 1.73
Assuming Dilution $ 2.68 $ .99 $ 1.71
------------------------------------------------------------------
106
<PAGE>
Average Common Shares Outstanding 16,475 16,418 16,557
Average Shares Assuming Dilution 16,572 16,500 16,705
</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
AT DECEMBER 31, 1997 AND 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS 1997 1996
----------------------
<S> <C> <C>
Current assets:
Cash, including equivalents (1997--$41,700; 1996--$10,400) $ 52,300 $ 27,300
Accounts receivable, less allowance (1997--$3,000; 1996--$1,900) 60,400 69,300
Inventories 38,300 44,000
Current deferred income tax benefit 9,400 10,200
Other current assets 10,300 5,900
----------------------
Total current assets 170,700 156,700
----------------------
Property, plant and equipment 428,600 431,600
Less accumulated depreciation and amortization 226,400 221,300
----------------------
202,200 210,300
Investments in affiliated companies 22,700 24,100
Goodwill 51,600 58,900
Deferred charges and other assets 30,700 27,400
----------------------
$477,900 $477,400
----------------------
107
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 700 $ 1,000
Notes payable 900 1,900
Accounts payable 18,600 23,900
Accrued expenses:
Salaries, wages and benefits 13,400 13,900
Income taxes payable 5,400 3,100
Other 19,000 21,800
----------------------
Total current liabilities 58,000 65,600
----------------------
Long-term debt, excluding current portion 87,400 95,500
Deferred income taxes 30,100 39,700
Other long-term liabilities 24,300 24,300
Minority interests 400 300
Shareholders' equity:
Preferred Stock, shares authorized: 3,000;
shares issued and outstanding: 1997-0; 1996-0
Common Stock, par value $.25 per share; shares authorized: 50,000;
shares issued: 1997--16,845; 1996--16,845;
shares outstanding: 1997--16,568; 1996--16,383 4,200 4,200
Capital in excess of par value 24,000 24,000
Cumulative foreign currency translation adjustments 3,400 16,300
Unrealized holding gains (losses) on securities, net 100 400
Retained earnings 252,500 217,700
----------------------
284,200 262,600
Less Treasury Stock (1997--277 shares; 1996--462 shares) 6,500 10,600
----------------------
Total shareholders' equity 277,700 252,000
----------------------
$477,900 $477,400
----------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
108
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996 AND 1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
Capital in
Common excess of Retained Treasury
Stock par value Other earnings Stock Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $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 ($.54 per share) (8,900) (8,900)
Foreign currency translation adjustments (3,800) (3,800)
Unrealized gains (losses) on
securities, net 100 100
---------------------------------------------------------------------------
Balance, December 31, 1996 4,200 24,000 16,700 217,700 (10,600) 252,000
---------------------------------------------------------------------------
109
<PAGE>
Net income 44,400 44,400
Shares issued under stock plans 4,100 4,100
Cash dividends declared ($.58 per share) (9,600) (9,000)
Foreign currency translation adjustments (12,900) (12,900)
Unrealized gains (losses) on
securities, net (300) (300)
----------------------------------------------------------------------------
Balance, December 31, 1997 $ 4,200 $ 24,000 $ 3,500 $252,500 $ (6,500) $277,700
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
110
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $44,400 $16,400 $28,700
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 31,900 30,700 29,600
Restructuring charge - 21,500 -
Loss on sales of real estate and investments 700 200 200
Deferred income taxes (7,500) (5,700) 2,000
Pension and other retirement plans (4,100) (600) 1,400
Equity in undistributed earnings of affiliated
companies, net (100) (1,100) (700)
Decrease (increase) in accounts receivable 1,000 (3,400) 1,400
Decrease (increase) in inventories 2,700 (2,700) (4,500)
Decrease (increase) in other current assets 400 (300) 500
(Decrease) increase in other current liabilities (1,300) 5,900 (13,100)
Other operating items (400) 2,500 600
----------------------------------------------
Net cash provided by operating activities 67,700 63,400 46,100
----------------------------------------------
Cash flows from investing activities:
Property, plant and equipment acquired (34,400) (31,700) (31,300)
Proceeds from sales of assets 1,700 7,200 4,500
Payments for acquisitions, net of cash acquired - (1,600) (72,200)
Customer advances, net of repayments (300) 1,600 (1,600)
----------------------------------------------
Net cash used in investing activities (33,000) (24,500) (100,600)
----------------------------------------------
111
<PAGE>
Cash flows from financing activities:
Borrowings under long-term
revolving credit agreements, net 200 1,500 20,200
Proceeds from other long-term debt - - 50,800
Repayment of long-term debt (1,200) (9,000) (27,300)
Notes payable, net (700) (6,200) 5,500
Issuance of Common Stock, net 4,000 3,500 2,800
Dividend payments (9,400) (8,700) (8,100)
Purchase of treasury stock - (10,000) -
-------------------------------------------------
Net cash (used in) provided by financing activities (7,100) (28,900) 43,900
-------------------------------------------------
Effect of exchange rates on cash (2,600) (100) 800
-------------------------------------------------
Net increase (decrease) in cash and cash equivalents 25,000 9,900 (9,800)
Cash and cash equivalents at beginning of year 27,300 17,400 27,200
-------------------------------------------------
Cash and cash equivalents at end of year $52,300 $27,300 $17,400
-------------------------------------------------
Supplemental cash flow information:
Interest paid net of amounts capitalized $ 5,700 $ 6,200 $ 6,300
Income taxes paid $20,000 $14,300 $12,800
-------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
112
<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.
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, and presented in the financial statements on a
net basis. 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
113
<PAGE>
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 classifies its investments in debt and
marketable securities under one of three categories: held-to-maturity,
available-for-sale and trading. Unrealized gains and losses on securities
available-for-sale are recorded in stockholders' equity and are not material.
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 continually evaluates the appropriateness of the remaining estimated
useful life and the carrying value of its operating assets, goodwill and other
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 $12,000 in 1997 and $11,200 in 1996 and $12,000 in
1995, 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
114
<PAGE>
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, "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: Basic net income per share is computed by dividing
net income by the weighted-average number of shares of Common Stock outstanding
during each period. Net income per share, assuming dilution, considers the
potential issuance of common shares under the Company's stock option and award
plans, based on the treasury method. The treasury method assumes use of exercise
proceeds to repurchase Common Stock at the average fair market value in the
period.
OTHER INCOME (EXPENSE)
Other income (expense) includes the following:
1997 1996 1995
---- ---- ----
Interest income $ 2,000 $ 1,300 $ 2,000
Foreign exchange losses -- (100) (1,400)
Loss on sales of real estate
and investments (700) (200) (200)
Other (200) (100) 1,100
------- ------- -------
$ 1,100 $ 900 $ 1,500
------- ------- -------
RESTRUCTURING CHARGE
On March 29, 1996, the Company approved a major restructuring plan which
included the closing or substantial downsizing of six manufacturing facilities,
disposition of related excess equipment
115
<PAGE>
and properties and an approximate 5% reduction of the workforce. The total
estimated charge related to these planned actions was $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 related to reduction in personnel, including
manufacturing and staff positions, and covered severance pay and other benefits
to be provided to terminated employees. At December 31, 1997, 225 employees have
been terminated and total payout of severance and benefits to date is $6,700.
The remaining accrued net charge covered facility close down costs and reduced
to estimated net realizable value the carrying value of equipment and
facilities made excess by the restructuring plan. Facilities in Puerto Rico,
Colorado, Germany and Argentina were closed; two of four buildings idled have
been sold to date. Facilities in Brazil and Pennsylvania were downsized and the
machinery manufacturing operations were sold. Restructuring activities, except
for sale of two buildings and certain excess equipment and payout of remaining
severance have been completed.
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, 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 purchase price
for the minority owner's interest was DK40,000 ($7,200 at December 18, 1995) and
was financed through new debt facilities. The excess of the purchase price over
the net assets acquired approximates $4,500 and is being amortized over 40
years.
These acquisitions were accounted for as purchases. The following table
presents selected financial information for the year ended December 31, 1995, on
a pro forma basis (unaudited) assuming the acquisitions noted above had occurred
on January 1, 1995:
1995
---------
Net sales $433,000
Income before taxes 40,000
Income from consolidated
operations 26,600
Net income 27,500
Basic net income per share $ 1.66
---------
The Company acquired in each of the years 1996 and 1995 a 10% ownership interest
in DanBioSyst UK Ltd.(DBS), a contract reseach company specializing in
noninvasive drug delivery methods. The total consideration for these
acquisitions was $1,600 in cash and $500 in Common Stock in 1996 and cash of
$2,500 in 1995. The Company currently holds a 30% ownership interest in DBS.
INCOME TAXES
Income before income taxes and minority interests was derived as follows:
1997 1996 1995
---- ---- ----
Domestic operations $39,500 $ 11,500 $ 26,700
International operations 17,900 14,300 15,800
------- -------- --------
$57,400 $ 25,800 $ 42,500
------- -------- --------
The related provision for income taxes consists of:
1997 1996 1995
-------- -------- --------
Currently payable:
Federal $ 16,000 $ 8,000 $ 5,600
State 600 700 600
International 4,200 7,800 5,700
-------- -------- --------
20,800 16,500 11,900
-------- -------- --------
116
<PAGE>
Deferred:
Federal 1,800 (3,600) 1,200
State -- (200) 100
International (9,300) (1,900) 700
-------- -------- --------
(7,500) (5,700) 2,000
-------- -------- --------
13,300 $ 10,800 $ 13,900
-------- -------- --------
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:
1997 1996 1995
------- ------- ------
Statutory corporate tax rate 35.0% 35.0% 35.0%
Tax on international operations
in excess of
United States tax rate 4.7 2.4 1.6
German tax reorganization benefit (21.7) - -
U.S. tax on repatriated
international earnings 4.3 1.0 .1
Puerto Rico tax accounting change - - (1.9)
State income taxes, net of Federal
tax benefit .7 1.8 1.0
Other .2 1.6 (3.0)
------- ------- ------
Effective tax rate 23.2% 41.8% 32.8%
------- ------- ------
In the third quarter of 1997, the Company completed a tax reorganization of
certain German subsidiaries. The benefit of this reorganization was reduced in
the fourth quarter due to a tax law change and completion of a tax audit.
The net current and noncurrent components of deferred income taxes
recognized in the balance sheet at December 31 are as follows:
1997 1996
------- -------
Net current assets $ 9,000 $10,200
Net noncurrent liabilities 19,500 29,800
------- -------
117
<PAGE>
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of December 31:
1997 1996
------- -------
Deferred tax assets:
Loss on asset dispositions
and plant closings $2,500 $ 2,900
Severance and deferred
compensation 9,200 9,100
German tax reorganization 8,300 -
Net operating loss carryovers 2,300 2,300
Foreign tax credit carryovers 900 900
Restructuring charge 1,200 3,500
Other 4,000 3,000
Valuation allowance (2,500) (2,900)
------- -------
Total $25,900 $18,800
------- -------
1997 1996
------- -------
Deferred tax liabilities:
Accelerated depreciation $26,900 $31,500
Severance and deferred compensation 4,300 1,900
Other 5,200 5,000
------- -------
Total $36,400 $38,400
------- -------
At December 31, 1997, subsidiaries had operating tax loss carryovers of
$37,300, which will be available to apply against the future taxable income of
such subsidiaries. The carryover periods expire beginning with $400 in 1998 and
continue through 2002.
In 1997, the Company repatriated $12,000 of undistributed earnings of
international subsidiaries and $2,400 of tax was recorded. At December 31, 1997,
remaining undistributed earnings of international subsidiaries, on which
deferred income taxes have not been provided, amounted to $74,600. It is the
Company's intention to reinvest these 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,
118
<PAGE>
1997, the
Company had available foreign tax credit carryovers of approximately $900
expiring in 1998 through 2002.
Net Income Per Share
- --------------------
In 1997, the Financial Accounting Standards Board (FASB) issued a new
standard for calculating and presenting net income per share. The Note "Summary
of Significant Accounting Policies" describes the calculation of income per
share for the Company based on this new standard. Basic net income per share is
identical to the Company's historical presentation of net income per share,
which had been calculated using the weighted average number of common shares
outstanding, because dilution from the Company's common stock equivalents was
immaterial. The Company's income per share in all financial statements has been
amended to reflect the new standard.
The following table reconciles shares used in basic net income per share to
the shares used in net income per share assuming dilution. There is no
adjustment to the net income of the Company in the calculation of net income per
share assuming dilution.
1997 1996 1995
------ ------ ------
Net Income $44,400 $16,400 $28,700
- --------------------------------------------------------------------------------
Basic Average Common
Shares outstanding 16,475 16,418 16,557
Assumed stock options exercised
and awards vested 97 82 161
------- ------- -------
Average common shares,
assuming dilution 16,572 16,500 16,718
- --------------------------------------------------------------------------------
In June 1997, the FASB issued Financial Accounting Standard No. 130, "Reporting
Comprehensive Income", that establishes rules for reporting and displaying
comprehensive income. The Company will display comprehensive income and its
components in the Consolidated Statement of Shareholders' Equity beginning in
1998. Comprehensive income includes the net income reported and other revenue,
expenses, gains and losses which generally accepted accounting principles
exclude from current net income. For the Company, the items
119
<PAGE>
excluded from current net income are unrealized gains or losses on
available-for-sale securities and foreign currency adjustments.
INVENTORIES
Inventories at December 31 include the following:
1997 1996
----------------------------------
Finished goods $15,800 $18,000
Work in process 8,100 8,500
Raw materials 14,400 17,500
----------------------------------
$38,300 $44,000
----------------------------------
Included above are inventories located in the United States that are valued
on the LIFO basis, amounting to $12,600 and $11,000 at December 31, 1997 and
1996, respectively, which are approximately $7,600 and $8,600, respectively,
lower than replacement value.
PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment at December 31 is presented in the
following table:
Years of
Expected
Useful
Life 1997 1996
----------------------------------
Land $ 3,500 $ 4,300
Buildings and improvements 7-50 97,000 105,500
Machinery and equipment 3-20 261,800 249,200
Molds and dies 4-6 52,600 55,200
Construction in progress 13,700 17,400
-------------------------
$428,600 $431,600
-------------------------
AFFILIATED COMPANIES
At December 31, 1997, the following affiliated companies were accounted for
under the equity method:
120
<PAGE>
Fiscal
Year Ownership
Location End Interest
-------------------------------------------
The West Company de Mexico S.A. Mexico December 31 49%
Aluplast S.A. de C.V. Mexico December 31 49%
Pharma-Tap S.A. de C.V. Mexico December 31 49%
Daikyo Seiko, Ltd. Japan October 31 25%
DanBioSyst U.K. Ltd. United Kingdom March 31 30%
-------------------------------------------
A summary of the financial information for these companies is presented below:
1997 1996
------------------------
Balance Sheet:
Current assets $ 80,500 $ 82,400
Noncurrent assets 91,900 77,500
------------------------
Total assets $172,400 $159,900
------------------------
Current liabilities $ 47,600 $ 36,800
Noncurrent liabilities 66,500 65,300
Owners' equity 58,300 57,800
------------------------
Total liabilities and owners' equity $172,400 $159,900
------------------------
1997 1996 1995
----------------------------------------------
Income Statement:
Net sales $79,300 $80,800 $80,400
Gross profit 19,800 25,500 23,600
Net income 3,300 5,900 3,400
-----------------------------------------------
121
<PAGE>
Unremitted income of affiliated companies included in consolidated retained
earnings amounted to $11,100, $11,000 and $9,800 at December 31, 1997, 1996 and
1995, respectively. Dividends received from affiliated companies were $400 in
1997, $400 in 1996 and $200 in 1995.
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
income. Unrealized holding gains and losses, net of the related tax effect, on
available-for-sale securities 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 included in the Company's
shareholders' equity was $100, $400 and $300 at December 31, 1997, 1996 and
1995, respectively.
DEBT
SHORT-TERM: Notes payable in the amounts of $900 and $1,900 at December 31, 1997
and 1996, respectively, are payable within one year and bear interest at a
weighted-average interest rate of 4% and 5.7%, respectively. At December 31,
1996, short-term debt (under a credit line) of $15,800 and short-term debt of
BPS 6,950 ($11,900) were classified as long-term because of the Company's intent
to renew the borrowings using available long-term credit facilities.
LONG TERM:
At December 31 1997 1996
------- -------
Unsecured:
Revolving credit facility,
due 2002 (5.7% to 8.05%) $22,100 $15,800
Tax-exempt industrial revenue bonds,
due 2005 (4.2% to 5.95%) (a) 11,100 11,100
Subordinated debentures, due 2007 (6.5%) 3,200 3,100
Other notes, due 1998 to 2002 (3.93% to 9.5%) 40,300 52,300
Collateralized:
Mortgage notes, due 1998 to 2016 (3.5% to
12.5%) (b) 11,400 14,200
------- -------
Total long-term debt 88,100 96,500
Less current portion 700 1,000
------- -------
$87,400 $95,500
------- -------
122
<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 $11,900 at
December 31, 1997 are pledged as collateral.
In 1997, the Company amended an existing revolving credit facility, increasing
the amount available for borrowing and adjusting the interest rate and facility
fees. The amended agreement provides for borrowings up to $70,000 and $55,000
with a term of 364 days and five years through August 2002, respectively,
renewable at the lenders' option. At December 31, 1997, $70,000 is available
under the short-term facility. Interest is charged at a floating rate based on
Libor, and 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
FF47,100 ($7,800) at a floating rate based on PIBOR plus 2/5% and a commitment
fee up to 3/10% per annum. At December 31, 1997, FF37,100 ($6,200) is available
under these facilities. In addition, a subsidiary has a long term line of credit
providing up to DM35,000 ($19,500) at floating rates based on DM LIBOR plus
3/10% and a commitment fee of 1/10% per annum. At December 31, 1997, DM5,900
($3,300) is available under this facility.
At December 31, 1997, $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 $1,100
and $1,200 at December 31, 1997 and 1996, 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 1998 is: $700 in 1999, $41,200 in
2000, $700 in 2001 and $24,500 in 2002.
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 at December 31, 1997
retained earnings free of restriction were $108,400.
123
<PAGE>
Interest costs incurred during 1997, 1996 and 1995 were $6,000, $7,300 and
$7,800, respectively, of which $400, $400 and $500, respectively, were
capitalized as part of the cost of acquiring certain assets.
At December 31, 1997, the Company has three interest rate swap contracts
outstanding, with notional value of $3,000 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 1997 and 1996.
FINANCIAL INSTRUMENTS
The following disclosure reflects the estimated fair value of financial
instruments of the Company as of December 31:
Carrying Value Estimated Fair Value
-------------------------------------------
1997 1996 1997 1996
------- ------- ------- -------
Cash and cash equivalents $52,300 $27,300 $52,300 $27,300
Short-and long-term debt 89,000 98,400 88,400 98,100
Interest rate swaps(a) - -
Forward exchange contracts - 300
------- ------- ------- -------
(a) The estimated fair value of the interest rate swaps was less than $100
at December 31, 1997 and 1996. The estimated fair value of forward exchange
contracts was less than $100 at December 31, 1997.
Methods used to estimate the fair market values of the above listed
financial instruments are as follows: cash and cash equivalents due to their
short maturity are estimated at carrying values that approximate market; 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.
124
<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 interest 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 to hedge raw material and equipment
purchase commitments and foreign-currency-denominated receivables and payables.
At December 31, 1997 and 1996, the Company had forward exchange rate contracts
that totaled $600 and $5,300, respectively. Forward exchange contracts related
to equipment and raw material purchases are denominated in German marks and
Italian lira; generally, these contracts expire monthly through July 31, 1998.
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 1997, 1996 and 1995 includes the
following:
1997 1996 1995
-------------------------------------
Service cost $ 3,600 $ 3,900 $ 2,800
Interest cost 8,000 7,700 6,800
Actual return on assets (27,000) (20,100) (30,000)
Net amortization and deferral 11,800 8,000 20,600
-------------------------------------
Pension (income) expense $(3,600) $ (500) $ 200
-------------------------------------
125
<PAGE>
The following sets forth the funded status of the employee pension plans
and the amounts included in the accompanying balance sheets at December 31:
<TABLE>
<CAPTION>
United States Plans International Plans
------------------------- -------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Vested benefit
obligations (VBO) $ (90,900) $ (81,900) $ (6,700) $ (6,500)
--------- --------- --------- ---------
Accumulated benefit
obligations (ABO) $ (92,700) $ (83,300) $ (7,400) $ (7,300)
--------- --------- --------- ---------
Projected benefit
obligations (PBO) $(111,200) $ (99,800) $ (7,800) $ (7,700)
Plan assets at fair value 161,200 140,200 4,700 4,000
--------- --------- --------- ---------
Assets in excess of (less
than) PBO 50,000 40,400 (3,100) (3,700)
Unrecognized net
(gain) loss (38,100) (31,900) 200 300
Unrecognized prior
service cost -- (400) -- --
Unamortized transition
asset (4,100) (4,900) -- --
--------- --------- --------- ---------
Prepaid pension cost
(accrued liability) $ 7,800 $ 3,200 $ (2,900) $ (3,400)
--------- --------- --------- ---------
</TABLE>
126
<PAGE>
Information with respect to the unfunded pension plan for the Company's
non-employee directors is as follows:
1997 1996
------- -------
VBO $(1,100) $ (900)
------- -------
ABO $(1,200) $(1,000)
------- -------
PBO $(1,400) $(1,300)
Unrecognized net gain (200) (100)
Unrecognized prior service
cost 200 200
------- -------
Accrued liability $(1,400) $(1,200)
------- -------
United States Plans International Plans
-------------------------------------------
1997 1996 1997 1996
-------------------------------------------
Assumptions: --
Discount rate 7.0% 7.5% 6.5% 6.5%
Rate of increase in
compensation 6.0% 6.0% 5.0% 3.0%
Directors' retainer
increase 5.5% 5.5% -- --
Long-term rate of
return on assets 9.5% 9.5% 9.25% 9.25%
--- --- ---- ----
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 1996, the Company changed the plan to mandate Medicare Risk (HMO) coverage
wherever possible, capped the total contribution for non-HMO coverage and
limited eligibility for the plan to active employees 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.
127
<PAGE>
Total (income) expense recognized with respect to these non-pension
retirement benefits includes:
1997 1996 1995
------- ------- -------
Service cost $ 400 $ 500 $ 400
Interest cost 500 600 900
Net amortization and deferral (1,400) (1,200) (100)
------- ------- -------
Total (income) expense $ (500) $ (100) $ 1,200
------- ------- -------
The accrued obligation included in the accompanying balance sheets at December
31, 1997 and 1996, applicable to each employee group for non-pension retirement
benefits is:
1997 1996
-------- --------
Retired employees $ (3,100) $ (3,400)
Active employees--fully eligible (1,900) (1,400)
Active employees--not fully eligible (2,400) (1,800)
-------- --------
Total (7,400) (6,600)
Unrecognized net loss 900 1,000
Unrecognized gain from plan changes (7,500) (9,000)
-------- --------
Accrued liability $(14,000) $(14,600)
-------- --------
The discount rates used were 7% for 1997 and 7.5% for 1996; the healthcare cost
trend used is 9% in 1998, decreasing to 5.5% by 2005. Increasing the assumed
trend rate for healthcare costs by one percentage point would result in an
accrued obligation of $7,800 at December 31, 1997, for these retirement benefits
and an increase of less than $100 in the related 1997 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 the participant's base
compensation. Total expense of $900 was incurred for Company contributions in
each of the last three years.
CAPITAL STOCK
Purchases (sales) of Common Stock held in treasury during
128
<PAGE>
the three years ended December 31, 1997 are as follows:
1997 1996 1995
-------- -------- --------
Shares held at January 1 462,200 224,000 381,100
Purchases, net,
at fair market value 40,200 507,200 38,600
Shares issued for acquisition -- (19,600) --
Stock option exercises (225,200) (249,400) (195,700)
-------- -------- --------
Shares held at December 31 277,200 462,200 224,000
-------- -------- --------
In 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 has been extended to December
31, 1999. Shares are purchased in the open market, or treasury shares are used.
129
<PAGE>
STOCK OPTION AND AWARD PLANS
The Company has a long-term incentive plan for officers and key management
employees of the Company and its subsidiaries that provides for the grant
through March 8, 1998 of stock options, stock appreciation rights, restricted
stock awards and performance awards. A maximum of 2,925,000 shares of common
stock or stock equivalents are available for issue under this plan, of which
107,900 shares are available as of December 31, 1997, 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, 1997,
is summarized below:
1997 1996 1995
---------- -------- --------
Options outstanding,
January 1 750,400 854,600 726,400
Granted 748,500 209,800 332,400
Exercised (213,700) (249,400) (191,200)
Forfeited -- (64,600) (13,000)
---------- -------- --------
Options outstanding,
December 31 1,285,200 750,400 854,600
---------- -------- --------
Options exercisable,
December 31 640,200 630,400 734,600
---------- -------- --------
Weighted-Average
Exercise Price 1997 1996 1995
---------- -------- --------
Options outstanding,
January 1 $ 23.42 $ 22.60 19.62
Granted 28.82 22.45 27.44
Exercised 21.45 20.00 19.28
Forfeited -- 22.73 18.80
---------- -------- --------
Options outstanding,
December 31 27.23 23.42 22.60
Options exercisable,
December 31 27.04 22.13 21.37
---------- -------- --------
130
<PAGE>
The range of exercise prices at December 31, 1997 is $15.13 to $30.13 per share.
The weighted-average remaining contractual life at December 31, 1997, is 6
years.
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 2,900 shares in 1997 and 3,000 shares in 1995, and in 1997, 1996 and
1995, respectively, 300 shares, 1,700 shares and 200 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: $27.57 per share in 1997
and $25.31 per share in 1995.
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 117,500 shares are available as of December 31,
1997, for future grants. Option activity under this plan during the three years
ended December 31, 1997, is summarized below:
1997 1996 1995
------ ------ ------
Options outstanding,
January 1 61,500 48,000 36,000
Granted 13,500 13,500 16,500
Exercised (11,500) -- (4,500)
------ ------ -----
Options outstanding and
exercisable, December 31 63,500 61,500 48,000
------ ------ ------
1997 1996 1995
------ ------ ------
Weighted-Average Price
Options outstanding,
January 1 $24.18 $24.60 $22.66
Granted 28.13 22.69 28.25
Exercised 22.28 -- 22.42
------ ------ ------
Options outstanding and
exercisable, December 31 25.49 24.18 24.60
------ ------ ------
131
<PAGE>
The range of exercise prices at December 31, 1997 is $22.69 to $28.25 per share.
The weighted-average remaining contractual life at December 31, 1997 is 2 years.
The Company has elected to measure compensation cost using the intrinsic value
method of accounting. Accordingly, no compensation cost has been recognized
related to stock option plans because grants are at 100% of fair market value on
the grant date. If the fair-value based method of accounting has been applied to
stock option grants in the most recent three years, the Company's net income and
basic net income per share would had been reduced as summarized below:
1997 1996 1995
------- ------- -------
Net income:
As reported $44,400 $16,400 $28,700
Pro forma 43,200 15,700 27,600
Net income per share:
As reported $ 2.69 $ 1.00 $ 1.73
Pro forma 2.62 .96 1.67
The following assumptions were used in 1997, 1996 and 1995 to compute the fair
value of the option grants in 1997, 1996 and 1995 using the Black-Scholes
option-pricing model: a risk-free interest rate of 6.15%, 5.87% and 6.57%,
respectively, stock volatility of 22.2%, 25.7% and 19.4%, respectively; dividend
yield of 2% for all years; and expected option lives of three years for the
long-term plan and two years for the non-employee directors plan.
132
<PAGE>
COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company was obligated under various operating lease
agreements with terms ranging from one month to 20 years. Rental expense in
1997, 1996 and 1995 was $7,600, $7,900 and $6,600, respectively. Minimum rentals
for noncancelable operating leases with initial or remaining terms in excess of
one year are: 1998--$6,800; 1999--$6,600; 2000--$5,600; 2001--$5,400;
2002--$5,600 and thereafter $54,200. Minimum operating lease payments have been
reduced by related minimum sublease income.
At December 31, 1997, outstanding contractual commitments for the purchase of
equipment and raw materials amounted to $7,800, all of which is due to be paid
in 1998.
The Company has accrued the estimated cost of environmental compliance expenses
related to soil or groundwater contamination at current and former manufacturing
facilities. The ultimate cost to be incurred by the Company and the timing of
such payments cannot be fully determined. However, based on consultants'
estimates of the costs of remediation in accordance with applicable regulatory
requirements, the Company believes the accrued liability of $1,600 at December
31, 1997 is sufficient to cover the future costs of these remedial actions,
which will be carried out over the next two to five years. The Company has not
anticipated any possible recovery from insurance or other sources.
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 $50,500, $48,300 and $43,700 in 1997, 1996 and 1995,
respectively. Operating information and identifiable assets by geographic area
of manufacture are shown below:
133
<PAGE>
1997 1996 1995
-------- -------- --------
Net sales:
United States $293,200 $283,900 $247,400
Europe 123,100 136,200 128,000
Other 36,200 38,700 37,500
-------- -------- --------
Total $452,500 $458,800 $412,900
-------- -------- --------
Net income from consolidated operations:
United States $ 20,500 $ 5,900 $ 19,000
Europe 19,000 6,800 5,000
Other 4,400 2,200 3,800
-------- -------- --------
Total $ 43,900 $ 14,900 $ 27,800
-------- -------- --------
Identifiable assets:
United States $268,100 $246,700 $251,900
Europe 145,100 153,800 158,500
Other 42,100 52,800 48,100
-------- -------- --------
$455,300 $453,300 $458,500
-------- -------- --------
Investments in affiliated companies:
United States $ 300 $ 700 $ 700
Europe 7,000 7,300 4,600
Other 15,400 16,100 16,300
-------- -------- --------
$ 22,700 $ 24,100 $ 21,600
-------- -------- --------
Total assets $477,900 $477,400 $480,100
-------- -------- --------
In June 1997, the [FASB Financial Accounting Standards Board] issued Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information", which requires that the Company report financial and
descriptive information about its reportable operating segments beginning at
year end 1998. Operating segments are defined as components of a business about
which separate financial information is available and evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. Management is still in process of evaluating the impact
this statement will have on its public reporting.
134
<PAGE>
QUARTERLY OPERATING AND PER SHARE DATA (UNAUDITED)
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Net Income (Loss) Per Share
Net ---------------------------
Net Gross Income Assuming
Quarter Ended Sales Profit (Loss) Basic Dilution
- ------------- -------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
March 31, 1997 $114,700 $ 32,700 $ 8,400 $ .51 $ .51
June 30, 1997 123,100 36,300 10,100 .61 .61
September 30, 1997(1) 105,200 29,200 17,300 1.05 1.05
December 31, 1997(1) 109,500 33,900 8,600 .52 .51
-------- -------- -------- ----- -----
$452,500 $132,100 $ 44,400 $2.69 $2.68
-------- -------- -------- ----- -----
March 31, 1996 $113,900 $ 31,300 $ (8,200) $(.49) $(.49)
June 30, 1996 119,000 31,900 8,100 .50 .49
September 30, 1996 111,300 29,600 6,600 .40 .40
December 31, 1996 114,600 33,300 9,900 .60 .60
-------- -------- -------- ----- -----
$458,800 $126,100 $ 16,400 $1.00 $ .99
-------- -------- -------- ----- -----
</TABLE>
- ----------
(1) Third quarter 1997 results include net tax benefits related mainly to the
tax reorganization of subsidiaries located in Germany; fourth quarter 1997
includes adjustment to these net tax benefits related to changes in the tax
law and a tax audit. See Note "Income Taxes" on page 23.
(2) First quarter 1996 results include charges related to restructuring actions
described in the Note "Restructuring Charge" on page 23.
135
<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, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 18, 1998
136
<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 and for the year ended December 31, 1997, 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 to assure the
safety 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
137
<PAGE>
TEN YEAR SUMMARY
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
(in thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $452,500 458,800 412,900
Operating profit (loss) $ 63,000 32,700 49,800
Income (loss) before income taxes and minority interests $ 57,400 25,800 42,500
Provision for income taxes $ 13,300 10,800 13,900
Minority interests $ 200 100 800
------------------------------------
Income (loss) from consolidated operations $ 43,900 14,900 27,800
Equity in net income of affiliated companies $ 500 1,500 900
------------------------------------
Income (loss) before change in accounting method $ 44,400 16,400 28,700
------------------------------------
Income (loss) before change in accounting method per share:
Basic (a) $ 2.69 1.00 1.73
Assuming dilution (b) $ 2.68 .99 1.71
Average common shares outstanding, $ 16,475 16,418 16,557
Average shares outstanding, assuming dilution $ 16,572 16,500 16,718
Dividends paid per common share $ .57 .53 .49
------------------------------------
Research, development and engineering expenses $ 12,000 11,200 12,000
Capital expenditures $ 34,400 31,700 31,300
------------------------------------
YEAR-END FINANCIAL POSITION
Working capital $112,700 91,100 86,600
Total assets $477,900 477,400 480,100
</TABLE>
138
<PAGE>
<TABLE>
<S> <C> <C> <C>
Total invested capital:
Total debt $ 89,000 98,400 114,300
Minority interests $ 400 300 200
Shareholders' equity $ 277,700 252,000 254,100
------------------------------------
Total $ 367,100 350,700 368,600
------------------------------------
PERFORMANCE MEASUREMENTS
Gross margin (c) % 29.2 27.5 28.6
Operating profitability (d) % 13.9 7.1 12.1
Tax rate % 23.2 41.8 32.8
Asset turnover ratio (e) .95 .96 .94
Return on average shareholders' equity % 16.7 6.5 11.9
Total debt as a percentage of total invested capital % 24.2 28.1 31.0
------------------------------------
Shareholders' equity per share $ 16.76 15.39 15.29
Stock price range $35-1/16-27 30-22-1/8 30-5/8-22-5/8
</TABLE>
(a) Based on average common shares outstanding.
(b) Based on average common shares outstanding, assuming dilution.
(c) Net sales minus cost of goods sold, including applicable depreciation and
amortization, divided by net sales.
(d) Operating profit (loss) divided by net sales.
(e) Net sales divided by average total assets; 1993 asset turnover ratio is
based on 12 months' sales for international subsidiaries.
1997 includes the net tax benefit mainly from a German tax reorganization which
increased basic net income per share by $.48.
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.
139
<PAGE>
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.
140
<PAGE>
TEN YEAR SUMMARY
THE WEST COMPANY, INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
(in thousands, except per share data)
1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
365,100 348,700 337,500 328,900 323,200 308,700 285,400
45,400 40,600 38,700 (1,600) 15,600 38,700 30,100
42,100 37,500 34,800 (7,700) 9,600 34,400 26,100
13,400 14,300 14,300 4,700 6,400 13,200 10,100
1,900 1,700 1,700 (2,400) 300 2,100 1,400
--------------------------------------------------------
26,800 21,500 18,800 (10,000) 2,900 19,100 14,600
500 1,000 900 1,500 1,400 1,600 2,800
--------------------------------------------------------
27,300 22,500 19,700 (8,500) 4,300 20,700 17,400
--------------------------------------------------------
1.70 1.42 1.26 (.55) .27 1.28 1.07
1.69 1.41 1.25 (.55) .27 1.27 1.07
16,054 15,838 15,641 15,527 15,793 16,235 16,249
16,215 16,010 15,776 15,527 15,816 16,301 16,261
.45 .41 .40 .40 .40 .31 .29
--------------------------------------------------------
12,000 11,400 11,100 10,800 10,900 11,900 11,300
27,100 33,500 22,400 25,600 33,200 34,300 29,700
--------------------------------------------------------
50,400 46,400 37,700 26,500 36,500 50,400 53,000
397,400 309,200 304,400 313,200 343,500 313,000 298,900
57,800 32,300 42,000 58,400 78,500 58,100 55,200
1,900 10,900 10,100 8,400 11,700 9,100 10,600
227,300 188,100 168,600 152,600 176,100 179,700 171,400
</TABLE>
141
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
287,000 231,300 220,700 219,400 266,300 246,900 237,200
--------------------------------------------------------
32.1 30.2 28.8 25.6 24.4 26.5 25.0
12.4 11.7 11.5 (.5) 4.8 12.5 10.5
31.8 38.2 41.1 61.7 66.5 38.5 38.6
1.04 1.11 1.10 1.00 .98 1.01 .99
13.2 13.2 12.3 (8.9) 2.4 11.8 10.6
20.1 14.0 19.1 26.6 29.5 23.5 23.3
--------------------------------------------------------
13.81 11.82 10.71 9.81 11.37 11.15 10.53
29 1/8-21 1/4 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
--------------------------------------------------------
</TABLE>
142
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
State/Jurisdiction Direct
Incorporation Stock
Ownership
<S> <C> <C>
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
The West Company Hispania S. A. Spain 27.4(5)
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 Argentina S.A. Argentina 100.0
The West Company Brasil S.A. Brasil 100.0
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
</TABLE>
- ----------
(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, 54.7% is owned directly by The West Company, Inc.; 17.9% is
owned by one shareholder.
143
<PAGE>
Exhibit 23
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 18, 1998 on our audits of the consolidated financial
statements The West Company, Incorporated and subsidiaries as of December 31,
1997 and 1996, and for the years ended December 31, 1997, 1996 and 1995, which
report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 31, 1998
144
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John A.
Vigna, and each of them, as her attorneys-in-fact to sign on her behalf and in
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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 6, 1998 /s/ Tenley E. Albright, M.D.
------------- ------------------------
Tenley E. Albright, M.D.
145
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John Vigna,
and each of them, as his attorneys-in-fact to sign on his behalf and in his
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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 6, 1998 /s/ John W. Conway
------------- --------------
John W. Conway
146
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John A.
Vigna, and each of them, as his attorneys-in-fact to sign on his behalf and in
his 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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 6, 1998 /s/ G. W. Ebright
------------- -----------------
George W. Ebright
147
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John A.
Vigna, and each of them, as his attorneys-in-fact to sign on his behalf and in
his 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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 7, 1997 /s/ L. Robert Johnson
------------- -----------------
L. Robert Johnson
148
<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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 6, 1998 /s/ William G. Little
------------- ---------------------
William G. Little
149
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John A.
Vigna, and each of them, as his attorneys-in-fact to sign on his behalf and in
his 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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 6, 1998 /s/ William H. Longfield
------------- --------------------
William H. Longfield
150
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John A.
Vigna, and each of them, as his attorneys-in-fact to sign on his behalf and in
his 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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 6, 1998 /s/ J. P. Neafsey
------------- -------------------
John P. Neafsey
151
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John A.
Vigna, and each of them, as his attorneys-in-fact to sign on his behalf and in
his 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 6, 1998 /s/ Monroe E. Trout
------------- -------------------------
Monroe E. Trout, M.D.
152
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John A.
Vigna, and each of them, as his attorneys-in-fact to sign on his behalf and in
his 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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 6, 1998 /s/ Anthony Welters
------------- -------------------
Anthony Welters
153
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John A.
Vigna, and each of them, as his attorneys-in-fact to sign on his behalf and in
his 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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 6, 1998 /s/ J. Roffe Wike, II
------------- ---------------------
J. Roffe Wike, II
154
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G. Little and John A.
Vigna, and each of them, as his attorneys-in-fact to sign on his behalf and in
his 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, 1997
and all amendments, exhibits and supplements thereto.
Date: March 6, 1998 /s/ Geoffrey F. Worden
------------- -------------------
Geoffrey F. Worden
155
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C> <C>
<RESTATED>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1996 MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1995
<CASH> 27,300 14,300 15,000 22,100 17,400
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 69,300 69,800 72,200 68,700 67,900
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 44,000 50,400 49,200 45,100 48,300
<CURRENT-ASSETS> 156,700 16,900 12,700 11,800 148,400
<PP&E> 431,600 426,900 429,800 434,900 440,100
<DEPRECIATION> 221,300 215,400 218,600 233,700 210,800
<TOTAL-ASSETS> 477,400 469,700 467,400 468,000 480,100
<CURRENT-LIABILITIES> 65,600 73,800 67,800 74,700 61,800
<BONDS> 98,400 97,900 106,900 95,000 114,300
0 0 200 0 0
0 0 0 0 0
<COMMON> 4,200 4,200 4,200 4,200 4,200
<OTHER-SE> 247,800 237,700 233,500 239,600 249,900
<TOTAL-LIABILITY-AND-EQUITY> 477,400 469,700 467,400 468,000 480,100
<SALES> 458,800 113,900 232,900 344,200 412,900
<TOTAL-REVENUES> 458,800 113,900 232,900 344,200 412,900
<CGS> 332,700 82,600 169,700 251,400 294,700
<TOTAL-COSTS> 332,700 82,600 169,700 251,400 294,700
<OTHER-EXPENSES> 20,600 21,400 21,300 21,100 (1,500)
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 6,900 1,600 3,400 5,400 7,300
<INCOME-PRETAX> 25,800 (10,800) 1,300 11,000 42,500
<INCOME-TAX> 10,800 (2,400) 2,200 5,900 13,900
<INCOME-CONTINUING> 16,400 (8,200) (100) 6,500 28,700
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 16,400 (8,200) (100) 6,500 28,700
<EPS-PRIMARY> 1.00 (.49) .00 .40 1.73
<EPS-DILUTED> .99 (.49) .0 .40 1.71
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> DEC-31-1997 MAR-31-1997
<CASH> 52,300 28,900
<SECURITIES> 0 0
<RECEIVABLES> 60,400 76,800
<ALLOWANCES> 0 0
<INVENTORY> 38,300 43,700
<CURRENT-ASSETS> 19,700 17,900
<PP&E> 428,600 424,100
<DEPRECIATION> 226,400 221,800
<TOTAL-ASSETS> 477,900 476,500
<CURRENT-LIABILITIES> 58,000 69,700
<BONDS> 87,400 90,600
0 0
0 0
<COMMON> 4,200 4,200
<OTHER-SE> 273,500 249,200
<TOTAL-LIABILITY-AND-EQUITY> 477,900 476,500
<SALES> 452,500 114,700
<TOTAL-REVENUES> 452,500 114,700
<CGS> 320,400 82,000
<TOTAL-COSTS> 320,400 82,000
<OTHER-EXPENSES> (1,100) (300)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,600 1,400
<INCOME-PRETAX> 57,400 13,600
<INCOME-TAX> 13,300 5,200
<INCOME-CONTINUING> 44,400 8,400
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 44,400 8,400
<EPS-PRIMARY> 2.69 .51
<EPS-DILUTED> 2.68 .51
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<RESTATED>
<PERIOD-TYPE> 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 SEP-30-1997
<CASH> 41,400 53,100
<SECURITIES> 0 0
<RECEIVABLES> 70,800 62,400
<ALLOWANCES> 0 0
<INVENTORY> 40,100 39,600
<CURRENT-ASSETS> 15,400 19,500
<PP&E> 428,300 431,600
<DEPRECIATION> 226,900 231,700
<TOTAL-ASSETS> 475,600 485,800
<CURRENT-LIABILITIES> 64,200 66,400
<BONDS> 89,100 88,000
0 0
0 0
<COMMON> 4,200 4,200
<OTHER-SE> 255,200 270,600
<TOTAL-LIABILITY-AND-EQUITY> 475,600 485,800
<SALES> 237,800 343,000
<TOTAL-REVENUES> 237,800 343,000
<CGS> 168,800 244,800
<TOTAL-COSTS> 168,800 244,800
<OTHER-EXPENSES> (500) (1,400)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,800 4,200
<INCOME-PRETAX> 29,600 42,000
<INCOME-TAX> 11,300 6,700
<INCOME-CONTINUING> 18,200 35,200
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 18,500 35,200
<EPS-PRIMARY> 1.12 2.18
<EPS-DILUTED> 1.12 2.18
</TABLE>
