SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30, 1999
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Commission File Number 1-8036
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WEST PHARMACEUTICAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-1210010
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 Gordon Drive, PO Box 645,
Lionville, PA 19341-0645
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code 610-594-2900
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N/A
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Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve
months, and (2) has been subject to such filing requirements for
the past 90 days. Yes X . No .
--- ---
June 30, 1999 -- 14,872,419
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Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Page 2
Index
Form 10-Q for the
Quarter Ended June 30, 1999
Page
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Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations for the
Three and Six Months ended June 30, 1999 and
June 30, 1998 3
Condensed Consolidated Balance Sheets at June 30,
1999 and December 31, 1998 4
Condensed Consolidated Statements of Cash Flows
for the Six Months ended June 30, 1999 and
June 30, 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Item 3. Quantitative and Qualitative Disclosure
about Market Risk 16
Part II - Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of
Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
Index to Exhibits F-1
Page 3
Part I. Financial Information
Item 1. Financial Statements
West Pharmaceutical Services, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)
<TABLE> Quarter Ended Six Months Ended
<CAPTION>
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
---------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $124,400 100% $115,800 100% $238,600 100% $221,000 100%
Cost of goods sold 84,600 68 81,000 70 164,400 69 154,900 70
----------------------------------------------------------------------------------------------------
Gross profit 39,800 32 34,800 30 74,200 31 66,100 30
Selling, general and
administrative expenses 19,700 16 18,400 16 36,700 15 35,200 16
Acquired research and development - - - - - - 28,200 13
Other expense (income), net 300 - (800) (1) 300 - (1,400) (1)
----------------------------------------------------------------------------------------------------
Operating profit 19,800 16 17,200 15 37,200 16 4,100 2
Interest expense 2,800 2 1,900 2 4,800 2 3,100 1
----------------------------------------------------------------------------------------------------
Income before income taxes
and minority interests 17,000 14 15,300 13 32,400 14 1,000 1
Provision for income taxes 6,600 6 5,800 5 12,500 6 11,200 5
Minority interests - - 100 - 100 - 100 -
----------------------------------------------------------------------------------------------------
Income (loss) from consolidated
operations 10,400 8% 9,400 8% 19,800 8% (10,300) (4)%
--- --- --- ----
Equity in net income of
affiliated companies - 500 100 500
----------------------------------------------------------------------------------------------------
Net income (loss) $ 10,400 $9,900 $ 19,900 $ (9,800)
----------------------------------------------------------------------------------------------------
Net income (loss) per share:
Basic $ 0.70 $ .58 $ 1.33 $ (0.59)
Assuming dilution $ 0.69 $ .58 $ 1.32 $ (0.59)
----------------------------------------------------------------------------------------------------
Average common shares
outstanding 14,945 16,991 15,017 16,798
Average shares
assuming dilution 15,043 17,071 15,113 16,798
Page 4
See accompanying notes to consolidated financial statements.
</TABLE>
Page 5
West Pharmaceutical Services, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION> Unaudited
June 30, 1999 Dec. 31, 1998
ASSETS -------------- -------------
<S> <C> <C>
Current assets:
Cash, including equivalents $ 39,600 $ 31,300
Accounts receivable 75,200 64,400
Inventories 40,500 43,500
Current deferred income tax benefits 9,600 9,700
Other current assets 11,500 10,800
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Total current assets 176,400 159,700
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Net property, plant and equipment 214,500 220,300
Investments in affiliated companies 15,500 15,700
Goodwill 71,300 61,200
Deferred charges and other assets 52,300 48,700
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Total Assets $530,000 $ 505,600
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,700 $ 800
Notes payable 2,400 35,300
Accounts payable 19,900 20,800
Accrued expenses:
Salaries, wages, benefits 14,800 17,100
Income taxes payable 9,900 8,500
Other 28,500 21,700
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Total current liabilities 78,200 104,200
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Long-term debt, excluding current portion 160,300 105,000
Deferred income taxes 39,300 39,100
Other long-term liabilities 26,700 26,600
Minority interests 600 600
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Shareholders' equity 224,900 230,100
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Page 6
Total Liabilities and Shareholders' Equity $530,000 $505,600
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</TABLE>
See accompanying notes to consolidated financial statements.
Page 7
West Pharmaceutical Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 June 30, 1998
---------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income, plus net non-cash items $ 35,000 $ 31,500
Changes in assets and liabilities (4,700) (15,200)
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Net cash provided by operating activities 30,300 16,300
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Cash flows from investing activities:
Property, plant and equipment acquired (19,500) (18,700)
Proceeds from sale of assets 100 800
Payment for acquisitions, net of cash acquired (15,900) (6,900)
Customer advances, net of repayments (1,400) 1,000
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Net cash used in investing activities (36,700) (23,800)
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Cash flows from financing activities:
Proceeds from long-term debt 100,000 -
Net (repayments) borrowings under revolving
credit agreements (71,600) 9,700
Repayment of other long-term debt (900) (1,900)
Notes payable, net 1,600 (500)
Dividend payments (4,800) (5,000)
Sale of common stock, net 1,600 1,800
Purchase of treasury stock (9,000) -
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Net cash provided by financing activities 16,900 4,100
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Effect of exchange rates on cash (2,200) (300)
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Net increase (decrease) in cash, including equivalents $ 8,300 $ (3,700)
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</TABLE>
See accompanying notes to consolidated financial statements.
Page 8
West Pharmaceutical Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(In thousands, except share and per share data)
The interim consolidated financial statements for the six-month
period ended June 30, 1999 should be read in conjunction with the
consolidated financial statements and notes thereto of West
Pharmaceutical Services, Inc., appearing in the Company's 1998
Annual Report on Form 10-K. The year-end condensed consolidated
balance sheet data was derived from audited financial statements,
but does not include all disclosures required by generally
accepted accounting principles. Interim results are based on the
Company's accounts without audit.
1. Interim Period Accounting Policy
---------------------------------
In the opinion of management, the unaudited Condensed
Consolidated Balance Sheet as of June 30, 1999 and the
related unaudited Consolidated Statements of Operations for
the three and six-month periods then ended, and the unaudited
Condensed Consolidated Statement of Cash Flows for the six-
month period then ended and for the comparative period in
1998 contain all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the financial
position as of June 30, 1999 and the results of operations
and cash flows for the respective periods. The results of
operations for any interim period are not necessarily
indicative of results for the full year.
Operating Expenses
------------------
To better relate costs to benefits received or activity in an
interim period, certain operating expenses have been
annualized for interim reporting purposes. Such expenses
include certain employee benefit costs, annual quantity
discounts and advertising.
Income Taxes
-------------
The tax rate used for interim periods is the estimated annual
effective consolidated tax rate, based on the current
estimate of full year results (excluding the charge for
acquired research and development in 1998), except that taxes
applicable to operating results in Brazil and prior year
adjustments, if any, are recorded as identified.
Net Loss Per Share
---------------------
For the six months ended June 30, 1998, because of the
reported net loss, the incremental shares from potential
issuance of common stock under the Company's stock option and
award plans are not included in average shares assuming
dilution.
Page 9
West Pharmaceutical Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(continued)
2. Inventories at June 30, 1999 and December 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
-------- --------
Finished goods $ 13,800 $ 15,700
Work in process 13,700 13,700
Raw materials 13,000 14,100
-------- --------
$ 40,500 $ 43,500
-------- --------
-------- --------
</TABLE>
3. The carrying value of property, plant and equipment at June
30, 1999 and December 31, 1998 is determined as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
-------- --------
Property, plant and equipment $471,700 $472,200
Less accumulated depreciation
and amortization 257,200 251,900
-------- --------
Net property, plant
and equipment $214,500 $220,300
-------- --------
-------- --------
</TABLE>
4. For the three and six months ended June 30, 1999 and 1998,
the Company's comprehensive income (loss) is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
6/30/99 6/30/98 6/30/99 6/30/98
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) $10,400 $ 9,900 $19,900 $(9,800)
Foreign currency
translation adjustments (4,600) (100) (13,200) (2,700)
------- ------- ------- -------
Comprehensive income
(loss) $5,800 $9,800 $ 6,700 $(12,500)
------- ------- ------- -------
------- ------- ------- -------
Page 10
</TABLE>
West Pharmaceutical Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(Continued)
5. Net sales to external customers and operating profit (loss) by
operating segment for the three and six months ended June 30, 1999 and
June 30, 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
<S> <C> <C> <C> <C>
Net Sales: 1999 1998 1999 1998
---------- ---- ---- ---- ----
Device product development $100,800 $93,400 $194,200 $179,500
Contract services 23,400 21,800 44,000 40,900
Drug delivery research
and development 200 600 400 600
------- ------- -------- --------
Consolidated Total $124,400 $115,800 $238,600 $221,000
------- ------- -------- --------
------- ------- -------- --------
Three Months Ended Six Months Ended
Operating Profit (Loss): 1999 1998 1999 1998
------------------------ ---- ---- ---- ----
Device product development $26,000 $21,700 $47,500 $41,600
Contract services 1,800 2,000 4,000 2,900
Drug delivery research
and development (1,600) (1,300) (3,000) (2,100)
Corporate and unallocated
items (6,400) (5,200) (11,300) (38,300)
------- ------- ------- -------
Consolidated Total $19,800 $17,200 $37,200 $4,100
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Compared with December 31, 1998, the only material change in operating
segment assets as of June 30, 1999 was the acquisition of the Clinical
Services Division of Collaborative Clinical Research, Inc. on April
20, 1999 (see Note 9). This business unit is included in the Contract
Services segment.
6. Common stock issued at June 30, 1999 was 17,165,141 shares, of which
2,292,722 shares were held in treasury. Dividends of $.16 per common
share were paid in the first quarter of 1999 and a dividend of $.16
per share payable to holders of record on July 21, 1999 was declared
on April 27, 1999.
7. The Company has accrued the estimated cost of environmental compliance
expenses related to soil or ground water 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
Page 11
West Pharmaceutical Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(Continued)
accordance with applicable regulatory requirements, the Company
believes the accrued liability of $1,000 at June 30, 1999 is
sufficient to cover the future costs of these remedial actions, which
will be carried out over the next several years. The Company has not
anticipated any possible recovery from insurance or other sources.
8. On September 8, 1998, the Company recorded a pre-tax charge of $4,000.
The charge is related to employee reductions associated with
identified manufacturing and other efficiencies. The charge covers
severance and benefits for 92 employees and other related charges.
Through June 30, 1999, the total payout of severance and benefits
associated with this charge was $3,000.
9. On April 20, 1999, the Company acquired the assets of the Clinical
Services Division (CSD) of Collaborative Clinical Research, Inc.. The
cash purchase price was $15,900, which was financed with available
cash, and the Company assumed $2,300 of current liabilities of CSD.
The acquisition was accounted for as a purchase and CSD was
consolidated on May 1, 1999. The preliminary allocation of the
purchase price is as follows:
Current assets $ 2,900
Equipment and
leasehold improvements 800
Goodwill 14,500
-------
$18,200
-------
-------
Pro forma results assuming acquisition of CSD as of January 1, 1999
would not have had any material effect on consolidated results.
10. On April 8, 1999, the Company entered into an agreement with five
insurance companies to borrow a total of $100,000 for ten years at a
coupon rate of 6.81%; the effective interest rate is 6.91%. Interest
is payable quarterly. The proceeds were used to repay debt under
existing lines of credit, for the acquisition of CSD, and for general
corporate purposes.
Page 12
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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Results of Operations for the Three and Six Months ended June
30, 1999 Versus Comparable 1998 Periods
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Net Sales
---------
Net sales for the second quarter of 1999 were $124.4 million; a
7.5% increase compared with 1998's second quarter sales of $115.8
million. At constant exchange rates, consolidated net sales
increased 9.5% in the second quarter.
Device product development segment sales increased $7.4 million,
or 7.9%, to $100.8 million; at constant exchange rates the
increase was 10.5%. For this segment, sales showed strong
increases in all regions with the exception of the South
America region where sales were essentially flat at constant
exchange rates. The primary growth driver for this segment was
demand for packaging components for parenteral pharmaceuticals.
Management believes three factors were the major reasons for this
strong demand. First, customer demand for components for insulin
and vaccines, typically high-value components, increased.
Second, certain customers switched to higher value components to
improve their production efficiency. Third, customers increased
certain product inventories. The inventory adjustments relate in
part to an earlier summer shutdown schedule in Europe compared
with 1998, an event which normally prompts some customers to
place additional orders ahead of shutdown to secure supply.
Medical device component sales grew modestly, excluding the
impact of the acquisition of Betraine Limited in July 1998.
Personal care and food dispensing components declined, mainly due
to lower Spout-Pak sales compared with last year.
Contract services segment sales increased 7.6% to $23.4 million,
with the growth attributable to the clinical services business
unit acquired in April 1999. The contract manufacturing and
packaging unit's sales were $1.1 million lower due to the switch
by two customers to in-house production, as expected, and due to
disappointing sales of several customers' new products resulting
in customer reductions or stoppages of production. Revenues in
the start-up contract labs business and in the drug delivery
research and development segment were not significant, as
expected.
Net sales for the first half of 1999 were $238.6 million, 8%
higher than sales in the same period of 1998 and 9.1% higher at
constant exchange rates. Device product development sales were
8.2% higher and the contract services segment sales were 7.6%
higher than first half 1998 sales. The major drivers for these
increases are noted above.
Page 13
Results of Operations for the Three and Six Months ended June 30,
1999 Versus Comparable 1998 Periods
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Gross Profit
------------
The 32% consolidated gross margin in the second quarter of 1999
was unusually high and resulted in gross profit of $39.8 million;
a 14.3% increase compared with the same period of 1998. The
margins in both the device product development segment and the
contract services segment showed significant improvement. The
high-margin product mix and another quarter of successful cost
saving programs more than offset the impact of price competition
in the device product development segment. In the contract
services segment, the gross margin improvement reflects the
combination of the addition of the higher-margin clinical
services business unit and the successful operating efficiency
initiatives and elimination of loss/low-margin business at the
contract manufacturing and packaging business unit.
The consolidated gross profit margin for the six-month period was
31.1% compared with 29.9% in the same period of 1998. The
favorable product mix in second quarter sales of the device
product development segment and the May 1999 addition of the
higher margin clinical services business unit combined with
continued operating efficiency improvements in both segments were
the primary factors in the margin increase.
Selling, General and Administrative Expenses
--------------------------------------------
Selling, general and administrative (SG&A) expenses totaled $19.7
million, or 15.8% of net sales, in the second quarter of 1999
compared with $18.4 million, or 15.9% of net sales, in the
comparable 1998 quarter. The increase of $1.3 million in total
expenses includes $1.4 million of expenses related to acquired
businesses; namely, Betraine Limited in July 1998 and the
clinical services business unit in April 1999. In addition, the
quarter includes expenses related to the completion of upgrades
in our desktop computers for Year 2000 issues and related systems
upgrades. Offsetting these increases, in part, were higher
income from pension plan assets and a favorable exchange rate
impact. These same factors were evident in the SG&A expense
comparison for the first half of 1999 and 1998. Of the total 1999
SG&A expense increase of $1.5 million, acquired companies added
$2.6 million. Higher income from pension plan assets and the
impact of a stronger U.S. dollar offset the majority of the
increased expenses. SG&A spending is being tightly controlled as
the Company invests in drug delivery system research and
development and the core manufacturing operations.
Other (Income) Expense
----------------------
Net losses on foreign currency transactions and the decline in
interest income due to lower cash investments were largely
responsible for the other expense in the quarter and first half
of 1999 compared with income in the same periods of 1998.
Page 14
Results of Operations for the Three and Six Months ended June 30,
1999 Versus Comparable 1998 Periods
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Interest Expense
----------------
Interest expense increased $.9 million and $1.7 million in
comparisons of second quarter and first half 1999 results with
comparable 1998 periods. Average borrowings have increased as a
result of stock buybacks of two million shares in October 1998 at
an average cost of $30.20 per share and 265,800 shares in 1999 at
an average cost of $33.79 per share, and due to acquisitions of
three business units since March 31, 1998.
Equity in Affiliates
--------------------
Equity in net income of affiliates located in Japan and Mexico
declined in both the quarter and the six months compared with
1998 due to poor market demand in those countries due largely to
government spending and reimbursement policies.
Income Taxes
------------
The effective tax rate for the quarter and first half of 1999 was
38.5%, slightly higher than the tax rate in second quarter of
1998 but flat with the first-half 1998 tax rate, excluding the
charge for the acquired research and development. The effective
tax rate for the full year 1998, excluding the impact of the
charge for acquired research and development, was 37.8%. The
estimated increase in the 1999 tax rate reflects the geographic
mix of earnings forecasted.
Net Income (Loss)
-----------------
The net income for the second quarter of 1999 was $10.4 million,
or $.70 per share, compared with $9.9 million, or $.58 per share,
in 1998. Average common shares outstanding in the 1999 quarter
were 14.9 million compared with 17.0 million in second quarter
1998.
For the six-month period 1999 net income was $19.9 million, or
$1.33 per share, compared to a loss of $9.8 million, or $.59 per
share, in the same period of 1998. The net loss for the first
six months includes a $28.2 million charge for acquired research
and development related to the acquisition of DanBioSyst U.K.
Ltd.; excluding the charge, net income for the first half of 1998
was $18.4 million, or $1.10 per share. Average shares
outstanding for the first six months of 1999 were 15.0 million
compared with 16.8 million in the like period of 1998. The
reduction in average common shares outstanding reflects the
Company's buyback of common shares as noted above.
Financial Position
------------------
Working capital at June 30, 1999 was $98.2 million compared with
$55.5 million at December 31, 1998. The working capital ratio at
June 30, 1999 was 2.3 to 1. The primary reason for the increase
in working capital is the Company's ability to finance $37.6
million
Page 15
Results of Operations for the Three and Six Months ended June 30,
1999 Versus Comparable 1998 Periods
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of short-term notes payable on a long-term basis using proceeds
from a $100 million, 10-year private debt placement closed on
April 9, 1999. This private debt placement has a coupon rate of
6.81%, and an effective interest rate of 6.91%. Total debt
outstanding at June 30, 1999 was $165.4 million, an increase of
$24.3 million compared with year end 1998. Debt as a percentage
of total invested capital at June 30, 1999 was 42.3% compared
with 37.9% at December 31, 1998.
In 1999, funds generated from operations covered capital spending
of $19.5 million, cash dividends of $.32 per share, and
repurchase of 265,800 shares of common stock at an average price
of $33.79 per share. The stock repurchases were made pursuant to
a plan authorized by the Company's Board of Directors and
announced on March 10, 1999. The plan provides for purchase of
up to one million shares of the Company's common stock in open
market or privately negotiated transactions.
The Company believes its financial condition and current
capitalization indicate an ability to finance substantial future
growth.
Market Risk
-----------
The Company is exposed to various market risk factors such as
fluctuating interest rates and foreign currency rate
fluctuations. These risk factors can impact results of
operations, cash flows and financial position. These risks are
managed periodically with the use of derivative financial
instruments such as interest rate swaps and forward exchange
contracts. In accordance with Company policy, derivative
financial instruments are not used for speculation or trading
purposes.
At June 30, 1999 and December 31, 1998 the Company had three
interest rate swap agreements in effect, with an estimated fair
value less than $0.1 million. There were no forward exchange
contracts in effect at June 30, 1999.
Year 2000
---------
The Company continues to execute a comprehensive plan
to address the Year 2000 issue. Using internal and
external resources the Company identified and prioritized
critical business processes and plant locations, and completed
an inventory of all computer hardware and software and
computer-controlled equipment. As a result of this work,
which started in April 1997, decisions were made to
remediate or replace mission-critical items.
Page 16
Results of Operations for the Three and Six Months ended June 30,
1999 Versus Comparable 1998 Periods
-----------------------------------------------------------------
At June 30, 1999, the Company had completed remediation or
replacement of all critical information systems that support
business functions. This includes all manufacturing, financial-
reporting and payroll systems, desktop computer hardware and
software and software-dependent systems and equipment used in
research and development, manufacturing processes and facility
management.
The Company also has received Year-2000 readiness certifications
from its major supplier base. As a follow-up measure to the
certification program, the Company completed on-site
assessments of the 20 key suppliers to its device product
development segment. On-site assessments of 15 additional
suppliers are planned through the end of the year.
The Company believes it has completed all modifications required
to address critical information systems. Nonetheless, the
Company is actively developing contingency plans and conducting
related training to cover an unexpected interruption of critical
systems and operations due to the Year 2000 problem.
In addition, efforts to address any modifications to non-
critical systems will continue through the end of the year and
possibly into 2000, but the failure of such systems is not
considered to have any significant impact on the Company's
business or financial position or results.
Total pretax costs incurred through June 30 are approximately
$5.5 million, of which $4.9 million has been capitalized. The
Company expects to spend approximately $2.0 million in the
remainder of 1999 on the project.
The cost of the Year 2000 project and the date on which the
Company believes it will substantially complete all modifications
are based on management's best estimates. The estimates are
based on numerous assumptions of future events, including the
continued availability of certain resources and other factors.
Because none of these estimates can be guaranteed, actual time
and cost to complete the project plan could differ materially
from those anticipated. Specific factors that might cause such
differences include, but are not limited to, the reliability and
timely receipt of vendor certifications, the appropriateness and
effectiveness of testing and validation methods, the availability
and cost of trained personnel and the timely availability of
replacement computer hardware, software and equipment and similar
uncertainties.
Page 17
Item 3.
Quantitive and Qualitative Disclosure about Market Risk
-------------------------------------------------------
The information called for by this item is
incorporated by reference to the text appearing in
Item 2 "Management's Discussion and Analysis of
Financial Condition and Results of Operations-
Market Risk".
Page 18
Part II - Other Information
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item. 4. Submission of Matters to a Vote of Security
Holders
--------------------------------------------------
(a) The Company held its annual meeting of
shareholders on April 27, 1999.
(c) Class II directors (with a term expiring in
2002) were elected by a vote of :
For Against
--- -------
Tenley E. Albright 9,100,521 168,652
John Conway 9,100,521 168,652
J. Roffe Wike, II 9,100,346 168,737
George W. Ebright, L. Robert Johnson, William
G. Little, William H. Longfield, John P.
Neafsey, Monroe E. Trout, Anthony Welters and
Geoffrey F. Worden continued their term of
office after the meeting.
The appointment of PricewaterhouseCoopers LLP
as the Company's independent accountants for
the year ending December 31, 1999 was
approved by a vote of 9,260,257 for the
appointment and 4,840 against, with 4,076
abstentions.
The 1999 Non-Qualified Stock Option Plan for
Non-Employee Directors was approved by a vote
of 8,243,031 for the Plan and 939,978
against, with 86,161 abstentions.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) See Index to Exhibits on pages F-1 and F-2 of this
Report.
Page 19
(b) No reports on Form 8-K have been filed for the
quarter ended June 30, 1999.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WEST PHARMACEUTICAL SERVICES,INC.
-----------------------------------
(Registrant)
August 16, 1999 /s/ Steven A. Ellers
------------- ---------------------------------
Date (Signature)
Steven A. Ellers
Senior Vice President and
Chief Financial Officer
Page 20
INDEX TO EXHIBITS
Exhibit
Number
(3) (a) Amended and Restated Articles of
Incorporation of the Company through January
4, 1999, incorporated by reference to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1998 (File No. 1-
8036).
(3) (b) ByLaws of the Company, as amended through
October 27, 1998, incorporated by reference
to Exhibit (3)(b) to the Company's Form 10-Q
for the quarter ended September 30, 1998
(File No. 1-8036).
(4) (a) Form of stock certificate for common stock,
incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1998 (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) Retirement Plan for Non-Employee Directors reflecting
amendments effective on November 5, 1991, April 28,
1998 and May 27, 1999.
(10) (b) Deferred Compensation Plan for Outside Directors, as
amended and restated effective May 27, 1999.
(10) (c) 1999 Non-Qualified Stock Option Plan for Non-Employee
Directors, effective as of April 27, 1999.
(10) (d) Form of Director Stock Option Agreement
(11) Not Applicable.
(12) Not Applicable.
(15) None.
F - 1
Page 21
Exhibit
Number
(16) Not applicable.
(18) None.
(19) None.
(22) None.
(23) None.
(24) None.
(27) Financial Data Schedule
(99) None.
F - 2
Exhibit 10 (a)
WEST PHARMACEUTICAL SERVICES, INC.
RETIREMENT PLAN
FOR
NON-EMPLOYEE DIRECTORS
Adopted October 30, 1990
Reflecting Amendments
Effective on November 5, 1991, April 28, 1998 and May 27, 1999
-----------------------------------------------------------------
PLAN DOCUMENT
-----------------------------------------------------------------
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
1. Background and Purpose. This Retirement Plan was first
adopted to give appropriate recognition to the past services
of non-employee Directors of the Company and to assist in
attracting and retaining individuals of superior talent and
achievement as Directors of the Company. In April 1999 the
Board of Directors agreed to discontinue the Plan, allowing
current Directors to elect a distribution of stock-
equivalents in lieu of retirement benefits and closing the
Plan to future Directors. As a result of this decision, the
Compensation Committee of the Board, under authority
delegated to it by the Board, adopted amendments to the
Plan, effective May 27, 1999.
2. Definitions. For purposes of this Plan, the following words
and phrases shall have the meanings indicated below:
a) "Plan" means the West Pharmaceutical Services, Inc.
Retirement Plan for Non-Employee Directors, as amended
through May 27, 1999.
b) "Company" means West Pharmaceutical Services, Inc.
(formerly named "The West Company, Incorporated").
c) "Director" means a duly elected member of the Board.
d) "Participant" means a Director eligible to receive
benefits under the Plan pursuant to Section 4 hereof.
e) "Board" means the Board of Directors of the Company.
f) "Years of Service" means the number of completed,
twelve consecutive month periods beginning on the first
day an individual becomes a Director and on each
anniversary thereof, throughout which the Director was
a member of the Board. Years of Service include such
twelve consecutive month periods of membership on the
Board before and after January 1, 1990.
g) "Base Retainer" means the amount of annual retainer
payable to non-employee Directors for service on the
Board. The Base Retainer shall not include any Board
meeting fees or other payments for membership or
attendance, chairmanship of Board Committees or
otherwise.
h) "Disability" means that a physician acceptable to the
Compensation Committee has concluded that the
Participant is unable to engage in substantial gainful
activity by reason of a physical or mental impairment
which will be of long-continued and indefinite
duration.
i) "Electing Director" means any Participant in office on
May 27, 1999 who makes an election to continue to
receive benefits at retirement under paragraph 3b) ii)
of the Stock-Equivalents Plan
j) "Stock-Equivalents Plan" means the West Pharmaceutical
Services, Inc. Stock-Equivalents Compensation Plan.
3. Effective Date. The Plan shall be effective as of January 1,
1990.
4. Eligiblity for Participation. Directors who have not been
employees of the Company or any of its subsidiaries or
affiliates shall be eligible to receive a retirement benefit
under the Plan to the extent set forth below:
a) Any Participant receiving retirement benefits as of May
27, 1999 under the Plan shall continue to be eligible
to receive the benefits set forth in Section 5 a)
hereof.
b) Any Electing Director shall be entitled to receive the
retirement benefits specified in the Stock-Equivalents
Plan.
c) No other person shall be entitled to any benefits
whatsoever under the Plan.
5. Retirement Benefits.
a) Normal Retirement Benefit. A Participant who has
completed a minimum of five (5) Years of Service as a
Director and who ceases to be a Director before May 27,
1999 shall be entitled to receive an annual retirement
benefit commencing at age sixty (60) computed as
follows:
1) An amount equal to fifty percent (50%) of the
Participant s Base Retainer at the time of
retirement, plus
2) An amount equal to ten percent (10%) of the
Participant's Base Retainer at the time of
retirement for each full Year of Service in excess
of five (5) Years of Service, but not in excess of
ten (10) Years of Service.
b) Retirement Benefit for Electing Directors. An Electing
Director who ceases to be a Director on or after May
27, 1999 shall be entitled to receive an annual
retirement benefit in the amount set forth in the
Stock-Equivalents Plan, payable in accordance with
Section 6 hereof.
c) Maximum Retirement Benefit. The maximum annual
retirement benefit payable under this Plan shall be
equal to one-hundred percent (100%) of the
Participant's Base Retainer at the time of retirement.
d) Disability Retirement Benefit. In the event an
Electing Director ceases to be a Director by reason of
Disability, the Electing Director shall be entitled to
receive disability benefits determined in accordance
with the Stock-Equivalents Plan. The Electing
Director's disability benefit shall be paid in
accordance with the provisions of Section 6 hereof.
6. Payment and Duration of Retirement Benefits.
a) All retirement benefits shall be payable in quarterly
installments on the first day of the calendar quarter.
b) Retirement benefits shall continue for no more than
fifteen (15) years. Upon the death of a retired
Participant, benefit payments will cease with the month
immediately following the date of the retired
Participant's death. Spousal payments may then begin as
described in Section 6 c).
c) If a retired Participant dies before receiving the full
fifteen (15) years of benefits, the surviving spouse,
if any, shall receive fifty percent (50%) of any
remaining benefit payments. If there is no surviving
spouse at the time of a retired Participant's death or
if the surviving spouse dies before receiving the
remaining benefit payments, then there will be no
further payment obligations under the Plan.
7. No Funding. This Plan shall not be deemed to create any
trust, escrow or other funding arrangement. No retirement
benefit payable under the Plan shall be considered
segregated funds and all such amounts shall, at all times
prior to the payment of same, be and continue to be the
property of the Company commingled with its other assets.
The right of any Participant or his or her eligible spouse
to benefits under this Plan shall be an unsecured claim
against the general assets of the Company.
8. Plan Administration. The general administration of the Plan
and the responsibility for interpreting the Plan and
carrying out its provisions shall be vested in the
Compensation Committee. The Compensation Committee may adopt
such rules and regulations as it may deem necessary for the
proper administration of this Plan, and its decision in all
matters shall be final, conclusive and binding. If one or
more members of the Committee are disqualified by personal
interest from taking part in a particular decision, the
remaining member or members of the Committee (although less
than a quorum) shall have full power to act on the matter.
9. Termination of the Plan. The Board reserves the right to
terminate the Plan at any time without the consent of any
current or former Director. Upon termination of the Plan,
all Participants shall continue to have the right to receive
benefits earned and accrued hereunder prior to such
termination.
10. Amendment of the Plan. The Board has the right to amend the
Plan at any time and from time to time without the consent
of any current or former Director.
11. Change in Control.
a) Notwithstanding any other provision of this Plan, in
the event of a Change in Control (as defined herein),
each Electing Director in service on the Board
immediately prior to the effective time of the Change
in Control shall, at the Electing Director's option, be
entitled to either:
A) a $20,000 annual retirement benefit
commencing at age sixty (60), payable in
accordance with Section 6 hereof; or
B) a lump sum payment in the amount of the
present value of an annuity equal to $20,000
paid annually for fifteen years, such lump
sum payment to be in lieu of any payment
under Sections 5 or 6 hereof or under the
Stock-Equivalents Plan.
b) Within sixty (60) days following a Change in Control as
defined herein, a Participant or surviving spouse who
is already receiving payments under the Plan at the
time of a Change in Control will be paid a lump sum
equal to the present value of the remaining annuity
payments as of the time of the Change in Control.
c) A "Change in Control" shall mean a change in control of
a nature that would be required to be reported in
response to Item 1 of the Current Report on Form 8-K as
in effect on April 28, 1998 pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as
amended (the "Act"), provided, that, without
limitation, a Change in Control shall be deemed to have
occurred if:
1) any "Person" (as such term is used in Sections
13(d) and 14(d) of the Act), other than:
the Company,
any Person who on the date hereof is a
director or officer of the Company, or
a trustee or fiduciary holding securities
under an employee benefit plan of the
Company,
is or becomes the "beneficial owner" (as defined
in Rule 13-d3 under the Act), directly or
indirectly, of securities of the Company
representing more than 50% of the combined voting
power of the Company's then outstanding
securities; or
2) during any period of two consecutive years during
the term of this Plan, individuals who at the
beginning of such period constitute the Board
cease for any reason to constitute at least a
majority thereof, unless the election of each
director who was not a director at the beginning
of such period has been approved in advance by
directors representing at least two-thirds of the
directors then in office who were directors at the
beginning of the period; or
3) the shareholders of the Company approve: (1) a
plan of complete liquidation of the Company; or
(2) an agreement for the sale or disposition of
all or substantially all of the Company's assets;
or (3) a merger, consolidation, or reorganization
of the Company with or involving any other
corporation, other than a merger, consolidation,
or reorganization that would result in the voting
securities of the Company outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity), at
least fifty percent (50%) of the combined voting
power of the voting securities of the Company (or
the surviving entity, or an entity which as a
result of such transaction owns the Company or all
or substantially all of the Company's assets
either directly or through one or more
subsidiaries) outstanding immediately after such
merger, consolidation, or reorganization.
d) For purposes of this Section, present value will be
calculated using the Pension Benefit Guaranty
Corporation interest rate that would be used on that
date for purposes of determining lump sum distributions
upon Plan termination.
e) Notwithstanding any other provisions of this Plan, this
Section 11 shall apply only to Directors who have not
been employed by the Company or any of its subsidiaries
or affiliates and whether or not any such person has
attained five or more Years of Service.
12. Miscellaneous.
a) No Agreement to Retain Directors. The Plan does not in
any way obligate the shareholders to continue to retain
a Director on the Board, nor does this Plan limit the
right of the shareholders to terminate a Director's
service on the Board.
b) Rights Non-Assignable. No retirement benefit payable
hereunder may be assigned, pledged, mortgaged or
hypothecated and, to the extent permitted by law, no
such retirement benefit shall be subject to legal
process or attachment for the payment of any claims
against any person entitled to receive the same.
c) Withholding. Payments made by the Company under this
Plan to any eligible Participant shall be subject to
such withholding as shall, at the time of such payment,
be required under any income tax or other laws, whether
of the United States or any other jurisdiction.
d) Successorship. It is the intent that the obligation of
the Company to pay benefits accrued or payable
hereunder shall be binding upon any successor
corporation or organization which shall succeed to
substantially all of the assets and business of the
Company. The term Company wherever used herein shall
mean and include any such corporation or organization
after such succession, and such obligations shall be
deemed to have been expressly assured by any such
corporation or other organization.
e) Governing Law. This Plan shall be governed by the laws
of the Commonwealth of Pennsylvania and shall be
construed for all purposes in accordance with the laws
of said Commonwealth.
* * * *
Certified True and Correct Copy of the Plan as Amended Through
May 27, 1999.
[CORPORATE SEAL] WEST PHARMACEUTICAL SERVICES, INC.
Date: By:
----------------- ---------------------------
John R. Gailey III
Secretary
Exhibit 10 (b)
WEST PHARMACEUTICAL SERVICES, INC.
DEFERRED COMPENSATION PLAN
FOR
OUTSIDE DIRECTORS
-----------------------------------------------------------------
PLAN DOCUMENT
-----------------------------------------------------------------
As Amended and Restated Effective May 27, 1999
NON-QUALIFIED DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS
(As Amended and Restated Effective May 27, 1999)
The Board of Directors of West Pharmaceutical Services, Inc.
(the "Company") hereby adopts the West Pharmaceutical Services,
Inc. Non-Qualified Deferred Compensation Plan for Outside
Directors, as amended and restated (the "Plan"), effective May
27, 1999, except as otherwise provided herein. The Plan was
formerly known as The West Company, Incorporated Non-Qualified
Deferred Compensation Plan for Outside Directors. The purpose of
the Plan is to defer the receipt of all or a portion of the
Directors' Fees payable to the Company's Eligible Directors.
The Plan also provides for the crediting, using a separate
account, of stock equivalents (the "Stock Equivalents") that (i)
are awarded to a Director under the West Pharmaceutical Services,
Inc. Stock-Equivalents Compensation Plan for Non-Employee
Directors (the "Stock-Equivalents Plan"), or (ii) were credited
to the Director pursuant to the conversion of the Director's
benefit under the Company's Retirement Plan for Non-Employee
Directors under the terms of the Stock-Equivalents Plan.
-----------------------------
1. Eligible Directors. Duly elected members of the Board of
Directors of the Company ("Directors") eligible to
participate in this Plan shall be those Directors who are
not officers or employees of the Company or any of its
subsidiaries as defined in section 425 (f) of the Internal
Revenue Code of 1986, as amended.
2. Deferrable Compensation. An Eligible Director may elect to
defer all or any part or none of the compensation payable to
such Eligible Director by the Company for services rendered
as a director ("Directors' Fees").
3 Crediting of Stock Equivalents. An Eligible Director shall
also be credited with any Stock Equivalents awarded or
credited to the Director under the Stock-Equivalents Plan,
in accordance with the terms and conditions contained therein.
4. Election to Defer. An Eligible Director who desires to
defer payment of his or her Directors' Fees in any calendar
year shall notify the Company's Secretary in writing on or
before December 15 of the prior year, stating how much of
his or her Directors' Fees shall be deferred. An election
so made shall be irrevocable and shall apply to payments
made in each calendar year thereafter until the Director
shall, on or before December 15, notify the Company's
Secretary in writing that a different election shall apply
to the following calendar years. Any such election shall
likewise continue in effect until similarly changed.
5. Non-Deferred Compensation. Any Directors' Fees that are not
deferred under this Plan shall be paid in line with normal
Company policy.
6. Deferred Compensation Accounts.
a) Credits. At the time that a Director makes an election
to defer under Paragraph 4 above, the Director shall
also indicate whether the amount he or she chooses to
defer shall be credited to an "A" Account or to a "B"
Account, as described below. The Company shall then
establish such an Account for that Director. The
Company shall also establish a "C" Account for purposes
of crediting Stock Equivalents awarded or credited
under the Stock-Equivalents Plan.
i) "A" Account. If a Director elects an "A" Account,
his or her account shall be credited on the last
business day of each calendar quarter with the
amount of his or her Directors' Fees earned during
that quarter but deferred pursuant to Paragraph 4.
ii) "B" Account. If a Director elects a "B" Account,
his or her account shall be credited on the last
business day of each calendar quarter with a
number of Stock Equivalents equal to that number
(including fractions) obtained by dividing the
amount of his or her Directors' Fees earned during
that quarter but deferred under Paragraph 4, by
the Fair Market Value of the Company's common
stock (the "Common Stock") on the last business
day of such calendar quarter.
iii) "C" Account. A Director's "C" Account shall be
credited, from time to time, with the Stock
Equivalents, if any, that are awarded to the
Director under the Stock-Equivalents Plan.
iv) "Fair Market Value" (for all purposes of this
Plan) shall mean on any given date the mean
between the highest and lowest prices of actual
sales of Common Stock on the New York Stock
Exchange (or other principal exchange on which it
is traded) on such date. If no sales were made on
such date, then the mean shall be calculated using
the highest and lowest prices of sales on the last
preceding date on which the Common Stock was
traded.
b) Earnings. In addition, the Company shall credit the
indicated Account as follows:
i) "A" Account. As of January 1, April 1, July 1 and
October 1 of each year, the Company shall credit,
as earnings to each "A" Account established on
behalf of a Director, an amount equal to a
percentage of the balance in each such A Account
at the end of the preceding calendar quarter,
determined without regard to any additions made to
such "A" Account as of the last business day of
that calendar quarter. Such percentage shall be
equal to one-fourth of the prime rate of interest
at the Company's principal commercial bank in
effect on the last day of such quarter.
ii) "B" Account. As of January 1, April 1, July 1 and
October 1 of each year, the Company shall credit
as earnings to each "B" Account, an additional
number of Stock Equivalents. The number of
additional Stock Equivalents to be credited shall
be determined by dividing the dividends paid
during the preceding calendar quarter with respect
to the number of shares of Common Stock equal to
the Stock Equivalents in the B Account on the
relevant dividend record dates, by the Fair Market
Value of the Common Stock on the last business day
of the previous calendar quarter.
iii) "C" Account. As of January 1, April 1, July 1 and
October 1 of each year, the Company shall credit
as earnings to each "C" Account an additional
number of Stock Equivalents. The number of
additional Stock Equivalents to be credited shall
be determined by dividing the dividends paid
during the preceding calendar quarter with respect
to the number of shares of Common Stock equal to
the Stock Equivalents in the "C" Account on the
relevant dividend record dates, by the Fair Market
Value of the Common Stock on the last business day
of the previous calendar quarter.
7. Adjustments. In the event of any change in the Common
Stock, the value and attributes of each Stock Equivalent
shall be appropriately adjusted consistent with such change
to the same extent as if such Stock Equivalents were
instead, issued and outstanding shares of Common Stock. A
change referred to in this Paragraph includes, without
limitation, a stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination
or exchange of shares, or rights offering to purchase Common
Stock at a price substantially below fair market value, or
any similar change affecting the Common Stock
8. Payment of Deferred Compensation. The balance in a
Director's Account shall be determined on the first day of
the calendar quarter following the calendar quarter in which
he or she ceases to be a Director of the Company, whether by
reason of death, resignation, removal, failure of re-
election, or otherwise ("Termination Date").
a) The balance in a Director's "A" Account shall be the
dollar amount credited to such Account as of the
Termination Date. The balance in a Director's "B" and
"C" Accounts shall be the dollar amount that would be
derived if shares of Common Stock equal in number to
the Stock Equivalents credited to such Account as of
the Termination Date were sold at Fair Market Value on
the Termination Date.
b) The balance in a Director's "A" Account, "B" Account
and "C" Account, as determined in the preceding
paragraph, shall be paid to him or her in cash in a
lump sum payable during the month following the
Termination Date. An election to receive a lump sum
payment of the balance in a Director's Accounts must be
made no later than at the time the Director makes his
or her election to defer under Paragraph 4 above.
c) If no election to receive a lump sum is made, a
Director shall receive the balance in each of his or
her Accounts in ten equal installments. The first
installment shall be paid on the January 15 immediately
following the Termination Date, and the others shall be
paid on January 15 of the second through tenth years
following the Termination Date. The second through
tenth installments shall be increased by earnings that
would have been credited to the remaining balance if it
had been held in an "A" Account during the year.
9. Designation of Beneficiary. If a Director dies before
receiving the entire balance of his or her Accounts, any
balance remaining in the Accounts shall be paid in a lump
sum to the Director's designated beneficiary. If the
Director has not designated a beneficiary in writing to the
Company's Secretary, then the balance shall be paid to the
Director's estate. Any designation of beneficiary may be
revoked or modified at any time by the Director.
10. Unsecured Obligation of Company. The Company's obligations
to establish and maintain Accounts for each electing
Eligible Director and to make payments of deferred
compensation to such Eligible Director under this Plan shall
be the general unsecured obligations of the Company. The
Company shall have no obligation to establish any separate
fund, purchase any annuity contract or in any other way make
special provision or specially earmark any funds for the
payment of any amounts called for under this Plan. Neither
this Plan nor any actions taken under or pursuant to this
Plan shall be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any Eligible
Director, his or her designated beneficiary, executors or
administrators, or any other person or entity. If the
Company chooses to establish such a fund or purchase such an
annuity contract or make any other arrangement to provide
for the payment of any amounts called for under this Plan,
such fund, contract or arrangement shall remain part of the
general assets of the Company. No person claiming benefits
under this Plan shall have any right, title, or interest in
or to any such fund, contract or arrangement.
11. Withholding of Taxes. The rights of a Director to payments
under this Plan shall be subject to the Company's
obligations to withhold from such payments all applicable
federal, state, local or foreign withholding taxes.
12. Assignability. Except as described in Paragraph 9, no
portion of a Director's Account may be assigned or
transferred in any manner, and no Account shall be subject
to anticipation or to voluntary or involuntary alienation.
13. Amendments and Termination.
a) The Plan may be amended at any time by the entire Board
of Directors or by a Committee of the Board of
Directors consisting only of Directors not eligible to
defer compensation under the Plan. The Board may amend
or terminate the Plan at any time; provided that no
amendment may be made without:
i) the appropriate approval of the Company's
shareholders if such approval is necessary to
comply with any tax or other regulatory
requirement, including any shareholder approval
required as a condition to the exemptive relief
under Section 16(b) of the Securities Exchange Act
of 1934, as amended from time to time, and the
regulations promulgated thereunder (the "Exchange
Act'); or
ii) the Director's consent, if such amendment would
adversely impair or affect any rights or
obligations of the Director under the Plan.
b) Prior Shareholder and Eligible Director Approval.
Anything herein to the contrary notwithstanding, the
Board may amend the Plan without the consent of
Eligible Directors or shareholders to comply with the
requirements of Rule 16b-3 issued under the Exchange
Act, or any successor rules promulgated by the
Securities and Exchange Commission.
14. Effective Date. The Plan shall be effective with respect to
Director's Fees payable by the Company after May 27, 1999.
*********************
As adopted by the Compensation Committee of the Board of
Directors under delegated authority this 27th day of May, 1999.
[CORPORATE SEAL] WEST PHARMACEUTICAL SERVICES,
INC.
By:
-------------------------
John R. Gailey, Secretary
Exhibit 10 (c)
WEST PHARMACEUTICAL SERVICES, INC.
1999 NON-QUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
-----------------------------------------------------------------
PLAN DOCUMENT
-----------------------------------------------------------------
Adopted March 6, 1999, effective as of April 27, 1999
1999 NON-QUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose. The purpose of the Plan is to attract and retain
the services of knowledgeable and experienced non-employee
directors by providing incentive to such directors to
achieve long-term and consistent growth in shareholder
value, as measured by relative stock price growth. In doing
so, the Plan is intended to promote the continued growth and
financial success of the Company.
2. Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
a) "Board" means the Board of Directors of the Company.
b) "Code" means the Internal Revenue Code of 1986, as
amended.
c) "Common Stock" means the common stock, par value $0.25
per share, of the Company.
d) "Company" means West Pharmaceutical Services, Inc.
e) "Current Eligible Director" means each Eligible
Director in office on April 27, 1999.
f) "Eligible Director' means each director of the Company
who is not an employee of the Company or any of the
Company's subsidiaries (as defined in section 424 (f)
of the Code), which term shall include both Current
Eligible Directors and Future Eligible Directors.
g) "Exercise Price" means the purchase price per Share
purchasable under an Option, which shall be 100% of the
Fair Market Value of a Share on the Grant Date.
h) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
i) "Fair Market Value" means on any given date the mean
between the highest and lowest prices of actual sales
of Common Stock on the New York Stock Exchange (or
other principal exchange on which it is traded) on such
date. If no sales were made on such date, then the
mean shall be calculated using the highest and lowest
prices of sales on the last preceding day on which the
Common Stock was traded.
j) "Future Eligible Director" means each person not a
Current Eligible Director who becomes an Eligible
Director at any time during the term of the Plan.
k) "Grant Date" means the date on which an Option is
granted under the Plan. For each Current Eligible
Director, the Grant Dates shall be April 27, 1999, and
the date on which the 2002 Annual Meeting of
Shareholders is held. For each FutureEligible
Director, the Grant Date(s) shall depend on the date
the individual first becomes a Future Eligible Director
and is set forth in the Table of Grant Date(s) and
Shares Underlying Option Grant(s), attached hereto as
Exhibit "A".
l) "1992 Option Plan" means the 1992 Non-Qualified Stock
Option Plan for Outside Directors, as amended, which
shall be terminated upon adoption by the shareholders
of the Plan.
m) "Option" means any right granted to an Optionee
allowing such Optionee to purchase Shares at their Fair
Market Value on the Grant Date and during such period
or periods as are set forth in the Plan. All Options
shall be non-qualified options and shall not be
qualified for the favorable tax treatment afforded
under section 422 of the Code.
n) "Optionee" means an Eligible Director who receives an
Option under the Plan.
o) "Shares" means shares of Common Stock.
3. Administration. Subject to the terms of the Plan, the Board
shall have the power to interpret the provisions and
supervise the administration of the Plan.
4. Shares Subject to the Plan.
a) Total Number. Subject to the following provisions of
this Section 4, the maximum number of Shares that may
be delivered to Optionees and their beneficiaries under
the Plan shall be 125,000 Shares, which shall include:
(i) any Shares remaining available for future delivery
under the 1992 Option Plan and not subject to
outstanding stock options thereunder; and (ii) any
Shares subject to outstanding options under the 1992
Option Plan, which lapse, expire, are canceled or
otherwise terminate without delivery of Shares.
b) Reduction in Number of Shares Available.
i) The grant of an Option shall reduce the Shares as
to which Options may be granted by the number of
Shares subject to such Option.
ii) Any Shares issued by the Company under any other
stock option plan of the Company shall not reduce
the Shares available for grants under this Plan.
c) Increase in Number of Shares Available.
i) The lapse, expiration, cancellation or other
termination of an Option that has not been fully
exercised shall increase the number of Shares as
to which Options may be granted by the number of
Shares that have not been issued upon exercise of
such Option.
ii) To the extent any Shares covered by an Option are
not delivered to an Eligible Director or
beneficiary because the Option expires or is
terminated, such Shares shall not be deemed to
have been delivered for purposes of determining
the maximum number of Shares available for
delivery under the Plan.
d) Maximum Number of Shares Available. Subject to Section
4 e), the following additional maximums are imposed
under the Plan:
i) The maximum number of Shares that may be covered
by Options granted to any single Eligible Director
pursuant to Section 5 (relating to the grant of
Options) shall be 9,000 Shares.
ii) If the Exercise Price of any Option is satisfied
by tendering Shares to the Company (by either
actual delivery or by attestation), only the
number of Shares issued net of the Shares tendered
shall be deemed delivered for purposes of
determining the maximum number of Shares available
for delivery under the Plan.
e) Change in Number and Kind of Shares. 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 Board may adjust Options to
preserve the benefits or potential benefits of the
Options. Action by the Board 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 Options; and (iii) the
Exercise Price of outstanding Options; as well as any
other adjustments that the Board determines to be
equitable.
5. Grant of Options. Each Eligible Director shall be granted
an Option to purchase the number of Shares and on the Grant
Date(s) that are set forth on Exhibit A. Each Option shall
become exercisable in three equal annual installments on the
first through third anniversaries of the relevant Grant
Date; provided, however, that an Option shall become
immediately exercisable (i) upon the Optionee's retirement
from the Board, and (ii) in the event the market price of
the Shares reaches a level that is at least equal to a 10%
annual growth rate measured over the three-year vesting
term.
6. General Terms. The following provisions shall apply to each
Option.
a) Expiration Date. Options shall expire upon the
earliest to occur of:
i) the ten-year anniversary of the Option's Grant
Date;
ii) if the Optionee's service as a director of the
Company terminates by reason of retirement, the
one-year anniversary of the date of such
termination, provided, however, that if the
Director dies during the one-year period after
retirement, the earlier of such anniversary date
or 90 days after death;
iii) if the Optionee's service as a director of the
Company terminates by reasons other than
retirement (including death or disability), the
90-day anniversary of the date of such
termination;
The existence of retirement and the existence of
and the date of disability shall be determined by
the Board in its sole discretion.
b) Removal for Cause. Notwithstanding any other provision
of this Plan, in the event an Eligible Director is
removed from office for cause, all unexercised Options
outstanding at that time shall terminate.
c) Method of Exercise. Any portion of an Option that has
become exercisable in accordance with Section 5 may be
exercised by the Optionee in whole or in part at any
time until it expires or is terminated.
d) Transferability. No Options may be transferred by the
Optionee otherwise than by will, by the laws of descent
and distribution or pursuant to a qualified domestic
relations order. During the Optionee's lifetime the
Option may be exercised only by him or her.
e) Payment of Option Exercise Price. The payment of the
Exercise Price of an Option granted under Section 5
shall be subject to the following:
i) The full Exercise Price for Shares purchased upon
the exercise of any Option shall be paid at the
time of such exercise.
ii) The Exercise Price shall be payable in cash or by
tendering Shares (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 Board. Such determination may include a
restriction on the use of any Shares unless they
have been held by the Optionee for at least six
months before delivery, and have not been used for
another exercise during such period.
f) Issuance of Certificates; Payment of Cash. Only whole
Shares shall be issuable upon exercise of Options. Any
right to a fractional Share shall be satisfied in cash.
Upon payment to the Company of the Exercise Price, the
Company shall deliver to the Optionee the number of
whole Shares and a check for the Fair Market Value on
the date of exercise of the fractional share to which
the Optionee is entitled.
7. Change in Control
a) Effect of Change in Control. Notwithstanding anything
in this Plan to the contrary, all Options shall become
immediately exercisable upon the occurrence of a Change
in Control, provided that if a proposed transaction
involving a Change in Control is affirmatively
recommended by a majority of the Board to the Company's
shareholders, the Company may, at any time on or after
the third business day preceding the consummation of
such transaction, with respect to the any unexercisable
Option which is or may become exercisable prior to such
consummation, require the surrender of the Option by
the Optionee upon the payment by the Company to the
Optionee in cash of an amount equal to the difference
between the Exercise Price and the Fair Market Value of
the Shares that are subject to purchase under the terms
thereof.
b) Definition. For purposes of this Plan, a "Change in
Control' shall mean a change in control of a nature
that would be required to be reported in response to
Item 1 of the Current Report on Form 8-K as in effect
on April 27, 1998 pursuant to Section 13 or 15(d) of
the Exchange Act, provided, that, without limitation, a
Change in Control shall be deemed to have occurred if:
i) any "Person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than:
the Company,
any Person who on the date hereof is a
director or officer of the Company, or
a trustee or fiduciary holding securities
under an employee benefit plan of the
Company,
is or becomes the "beneficial owner," (as defined
in Rule 13-d3 under the Exchange Act), directly or
indirectly, of securities of the Company
representing more than 50% of the combined voting
power of the Company's then-outstanding
securities; or
ii) during any period of two consecutive years during
the term of the Plan, individuals who at the
beginning of such period constitute the Board
cease for any reason to constitute at least a
majority thereof, unless the election of each
director who was not a director at the beginning
of such period has been approved in advance by
directors representing at least two-thirds of the
directors then in office who were directors at the
beginning of the period; or
iii) the shareholders of the Company approve: (A) a
plan of complete liquidation of the Company; or
(B) an agreement for the sale or disposition of
all or substantially all of the Company's assets;
or (C) a merger, consolidation, or reorganization
of the Company with or involving any other
corporation, other than a merger, consolidation,
or reorganization that would result in the voting
securities of the Company outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity), at
least fifty percent (50%) of the combined voting
power of the voting securities of the Company (or
the surviving entity, or an entity which as a
result of such transaction owns the Company or all
or substantially all of the Company's assets
either directly or through one or more
subsidiaries) outstanding immediately after such
merger, consolidation, or reorganization.
8. Amendments and Termination.
a) Board Authority. The Board may amend, alter, or
terminate the Plan, but no amendment, alteration, or
termination shall be made (i) that would impair or
adversely affect the rights of an Optionee under an
Option theretofore granted, without the Optionee's
consent, or (ii) without the approval of the
shareholders if such approval is necessary to comply
with any tax or regulatory requirement, including for
these purposes any approval requirement that is a
prerequisite for exemptive relief from Section 16(b) of
the Exchange Act, or if the proposed alteration or
amendment would increase the aggregate number of Shares
that may be issued upon the exercise of Options (other
than pursuant to Section 4 e)); provided, however, that
in no event shall this Plan be amended more frequently
than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
b) Prior Shareholder and Optionee Approval.
Notwithstanding anything in this Plan to the contrary,
in the event that amendments to the Plan are required
in order that the Plan or any other stock-based
compensation plan of the Company comply with the
requirements of Rule 16b-3 promulgated under the
Exchange Act or any successor rule promulgated by the
Securities and Exchange Commission related to the
treatment of benefit and compensation plans under
Section 16 of the Exchange Act, the Board is authorized
to make such amendments without the consent of
Optionees or the shareholders of the Company.
9. General Provisions.
a) Limits on Distribution. Distribution of Shares or
other amounts under the Plan shall be subject to the
following:
i) Notwithstanding any other provision of the Plan,
if at any time the Board shall determine that (i)
the listing, registration or qualification of the
Shares 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 an Optionee with respect to the disposition of
Shares, is necessary or desirable as a condition
of, or in connection with the Plan or the granting
of such Option or the issue or purchase of Shares
thereunder, the Company shall have no liability to
deliver any Shares 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 Board.
ii) To the extent that the Plan provides for issuance
of stock certificates to reflect the issuance of
Shares, 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.
b) Other Plans. Nothing contained in the Plan shall
prevent the Board from adopting other or additional
compensation arrangements, subject to shareholder
approval if such approval is required by applicable law
or the rules of any stock exchange on which the Common
Stock is then listed; and such arrangements may be
either generally applicable or applicable only in
specific cases.
c) Withholding of Taxes. Each Optionee shall pay to the
Company, upon the Company's request, all amounts
necessary to satisfy the Company's federal, state and
local tax withholding obligations with respect to the
grant or exercise of any Option.
d) Conformity With Law. If any provision of the Plan is
or becomes or is deemed invalid, illegal, or
unenforceable in any jurisdiction, or would disqualify
the Plan or any Option under any law deemed applicable
by the Board, such provision shall be construed or
deemed amended in such jurisdiction to conform to
applicable laws or if it cannot be construed or deemed
amended without, in the determination of the Board,
materially altering the intent of the Plan, it shall be
stricken and the remainder of the Plan shall remain in
full force and effect.
10. Effective Date and Termination. The Plan shall become
effective on April 27, 1999, upon the approval of the
shareholders of the Company at the 1999 Annual Meeting of
Shareholders, and shall terminate on January 1, 2005. No
Options shall be granted after the termination date. Any
Options outstanding on the termination date shall expire or
terminate in accordance with the terms of any written
instrument evidencing such Option and the terms and
provisions of this Plan.
Certified True and Correct Copy of the Plan
************
[CORPORATE SEAL] WEST PHARMACEUTICAL SERVICES, INC.
Date: By:
------------------------ ---------------------------
John R. Gailey III, Secretary
Exhibit A
Table of Grant Date(s) and Shares Underlying Option Grant(s)
---------------------------------------------------------------
Shares Underlying Stock Options and Date of Option Grant
Annual Meeting Date
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Date Director
Joins Board Election Date 1999 2000 2001 2002 2003 2004 2005 Totals
------------------------------------------------------------------------------------------
On or before 1999
Annual Meeting 4,500 4,500 9,000
After 1999 Annual
Meeting and before
January 1, 2000 750 3,000 4,500 8,250
Between January 1, 2000
and 2000 Annual Meeting 3,000 4,500 7,500
After 2000 Annual
Meeting and before
January 1, 2001 750 1,500 4,500 6,750
Date Director
Joins Board Election Date 1999 2000 2001 2002 2003 2004 2005 Totals
------------------------------------------------------------------------------------------
Between January 1, 2001
and 2001 Annual Meeting 1,500 4,500 6,000
After 2001 Annual
Meeting and before
January 1, 2002 750 4,500 5,250
Between January 1, 2002
and 2002 Annual Meeting 4,500 4,500
After 2002 Annual
Meeting and before
January 1, 2003 750 3,000 3,750
Between January 1, 2003
and 2003 Annual Meeting 3,000 3,000
After 2003 Annual
Meeting and before
January 1, 2004 750 1,500 2,250
Between January 1, 2004
and 2004 Annual Meeting 1,500 1,500
After 2004 Annual
Meeting and before
January 1, 2005 750 750
</TABLE>
Exhibit 10 (d)
West Pharmaceutical Services
The Law Department
DIRECTOR STOCK OPTION AGREEMENT
GRANT DATE: APRIL 27, 1999
-----------------------------------------------------------------
West Pharmaceutical Services, Inc. (the "Company") and
<<FirstName>> << LastName>> ("Director") agree:
8. Definitions. As used herein:
a) "Board" means the Board of Directors of the Company.
b) "Business Day" means a day on which the New York Stock
Exchange is open for the transaction of business in New
York City and at least one share of the Company's
common stock is traded.
c) "Expiration Date" means the earliest of the following:
1) April 27, 2009;
2) if the Director's service as a director of the
Company terminates by reason of retirement, the
one-year anniversary of the date of such
termination, provided, however, that if the
Director dies during the one-year period after
retirement, the earlier of such anniversary date
or 90 days after death;
3) if the Director's service as a director of the
Company terminates by reasons other than
retirement (including death or disability), the
90-day anniversary of the date of such
termination; or
4) If the Director is removed for cause, the date of
such removal.
d) "Fair Market Value" means the Fair Market Value of a
share of Company common stock as determined pursuant to
the Plan.
e) "Grant Date" means April 27, 1999, the date on which
the Company awarded the Stock Option.
f) "Stock Option" means the option to purchase the Option
Shares hereby granted.
g) "Plan" means the West Pharmaceutical Services, Inc.
1999 Non-Qualified Stock Option Plan for Non-Employee
Directors, the terms of which are incorporated herein
by reference.
h) "Share Price" means the closing price of the Company's
common stock quoted in the New York Stock Exchange
Composite Transactions as published in the New York
edition of The Wall Street Journal.
i) "Option Shares" means the 4,500 shares of the Company's
common stock, par value $.25 per share, which are the
subject of the Stock Option hereby granted
2. Grant of Stock Option. The Company grants to the Director,
as of the Grant Date, the Stock Option to purchase any or
all of the Option Shares at a price of $32.8438 per Share,
on the terms and conditions set forth herein and in the
Plan. The Stock Option hereby granted is a non-qualified
stock option.
3. Time of Exercise. The Stock Option shall become exercisable
in three equal installments of 1,500 Option Shares as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
No. of Option Shares Date of Exercisability
-------------------- ---------------------------
1,500 The first anniversary of the
Grant Date;
1,500 The second anniversary of the
Grant Date;
1,500 The third anniversary of the
Grant Date;
</TABLE>
Provided, however, that the Stock Option shall become
immediately exercisable in full as follows:
1) upon the Director's retirement from the Board; and
2) on the day after both of the following occur: (A) the
Share Price exceeds $43.7150; and (B) the average Share
Price over the next 30 consecutive Business Days
exceeds $43.7150;
3) upon the occurrence of a Change in Control (as that
term is defined in the Plan) to the extent and in the
manner set forth therein.
4. Payment for Option Shares. Full payment for Option Shares
purchased upon the exercise of the Stock Option shall be
made in cash, common stock of the Company valued at its Fair
Market Value on the date of exercise, or in a combination
thereof, as the Board may determine.
5. Manner and Date of Exercise. The Stock Option shall be
exercised by giving written notice of exercise to the Board,
in care of the Secretary, at the Company's main office in
Lionville, Pennsylvania. The date of exercise shall be the
date on which such notice is hand-delivered, placed in the
United States mail, or transmitted via facsimile. Any such
notice shall be irrevocable once given.
6. Issuance of Certificates. Subject to the terms of the Plan,
a certificate for Option Shares issuable on exercise of the
Stock Option shall be delivered to the Director or to his
personal representative, heir or legatee as promptly as
possible after the date of exercise. Fractional Option
Shares shall not be issued and will be accounted for in
accordance with the Plan. Neither the Director nor his
personal representative, heir or legatee shall have any of
the rights of a shareholder with respect to any Option
Shares until the date of the issuance of such certificate.
9. Interpretation. The Board shall have the sole power to
resolve any dispute or disagreement arising out of this
Agreement. The interpretation and construction of any
provision of this Stock Option or the Plan made by the Board
shall be final and conclusive and, insofar as possible,
shall be consistent with the requirements of a non-qualified
stock option.
10. Entire Agreement. This Agreement, including the terms and
conditions of the Plan incorporated herein by reference, is
intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein.
This Agreement supersedes all prior agreements and
understandings between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement in
two counterparts as of the Grant Date.
WEST PHARMACEUTICAL SERVICES, INC.
---------------------------------------------
By: John R. Gailey III
Vice President, General Counsel and Secretary
Witness:
------------------ ---------------------------------------------
<<FirstName>> <<LastName>>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 39,600
<SECURITIES> 0
<RECEIVABLES> 75,200
<ALLOWANCES> 0
<INVENTORY> 40,500
<CURRENT-ASSETS> 21,100
<PP&E> 471,700
<DEPRECIATION> 257,200
<TOTAL-ASSETS> 530,000
<CURRENT-LIABILITIES> 78,200
<BONDS> 160,300
0
0
<COMMON> 4,300
<OTHER-SE> 220,600
<TOTAL-LIABILITY-AND-EQUITY> 530,000
<SALES> 238,600
<TOTAL-REVENUES> 238,600
<CGS> 164,400
<TOTAL-COSTS> 164,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,800
<INCOME-PRETAX> 32,400
<INCOME-TAX> 12,500
<INCOME-CONTINUING> 19,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,900
<EPS-BASIC> 1.33
<EPS-DILUTED> 1.32
</TABLE>
