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West Pharmaceutical Services Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 4, 2012 09:32PM
West Pharmaceutical Services Inc. (WST) filed Quarterly Report for the period ended 2012-03-31. West Pharm Svc has a market cap of $1.47 billion; its shares were traded at around $43.01 with a P/E ratio of 16.9 and P/S ratio of 1.2. The dividend yield of West Pharm Svc stocks is 1.7%. West Pharm Svc had an annual average earning growth of 10% over the past 10 years.
Highlight of Business Operations:We achieved higher net sales in both the Packaging Systems and Delivery Systems segments during the three months ended March 31, 2012, as compared to the same period in 2011. The overall sales growth was primarily the result of broad-based increases in pharmaceutical packaging sales, benefiting from an improving sales mix on modest volume increases and pricing actions. Net sales originating in the United States were $142.2 million, an increase of 6.0% from the same period in 2011, reflecting higher domestic demand for pharmaceutical packaging components. Net sales generated outside of the United States were $174.1 million, an increase of 8.0% from the same period in 2011, which reflected higher demand in Europe and continued growth in the Asia-Pacific region. Excluding the unfavorable effects from currency translation, our non-U.S. net sales increased 11.7% and our consolidated net sales increased 9.1% from the same period in 2011.
Packaging Systems – Packaging Systems net sales increased by $19.9 million, or 9.2%, for the three months ended March 31, 2012, as compared to the same period in 2011, despite an unfavorable foreign exchange impact of $5.2 million. Excluding foreign exchange effects, net sales for the three months ended March 31, 2012 increased by $25.1 million, or 11.6%, as compared to the same period in 2011. A favorable mix of products and sales volume, particularly increased sales volume in Europe, contributed 8.4 percentage points of the increase, and sales price increases contributed 3.2 percentage points of the increase. During the three months ended March 31, 2012, there continued to be strong growth in sales of our high-value pharmaceutical packaging products, including the Envision™ line of vision-inspected components, Westar®-processed and coated closures, Daikyo and Daikyo RSV (ready-to-sterilize validated) products, and FluroTec™-coated closures.
The provision for income taxes was $9.8 million and $6.1 million for the three months ended March 31, 2012 and 2011, respectively, resulting in an effective tax rate of 26.1% and 24.9%, respectively. The increase in the effective tax rate for the three months ended March 31, 2012 primarily reflects the higher level of pretax income and changes in our geographic mix of earnings. During the three months ended March 31, 2012, we recorded a discrete tax charge of $0.3 million due to the reduction of deferred tax assets associated with the legal restructuring of the ownership of our Puerto Rico operations. During the three months ended March 31, 2011, we recorded a discrete tax charge of $0.2 million, resulting from the impact of changes in tax laws in certain foreign tax jurisdictions on our deferred tax balances.
Cash Flows from Investing Activities – Net cash used in investing activities for the three months ended March 31, 2012 was $31.9 million, an increase of $2.8 million from the same period in 2011. Net cash used in investing activities for the three months ended March 31, 2012 increased primarily due to a $13.0 million increase in capital spending to $32.4 million for the three months ended March 31, 2012. This increase was partially offset by a $9.8 million change related to short-term investments, as we had net sales of short-term investments of $0.2 million for the three months ended March 31, 2012, as compared to net purchases of $9.6 million in short-term investments for the three months ended March 31, 2011. The short-term investments represent certificates of deposit, primarily in Israel, with maturities between three and nine months. The majority of the increased capital spending was related to construction of our new corporate office and research building, which began in 2011 and is expected to be completed in late 2012 or early 2013, with final settlement occurring by early 2013, and construction of our new compression-molding plant in China, which is expected to be completed in late 2012.
Working capital - Working capital at March 31, 2012 decreased by $28.4 million, or 12.4%, during the three months ended March 31, 2012, as compared to December 31, 2011, including an increase of $7.3 million due to foreign currency translation. Excluding the impact of currency exchange rates, cash and cash equivalents, accounts receivable and inventories increased by $6.1 million, $23.7 million and $2.0 million, respectively, partially offset by an increase in total current liabilities of $52.8 million. The increased accounts receivable balance was primarily the result of the increase in net sales described above, while the increase in current liabilities was primarily due to reclassification from long-term debt and other long-term liabilities of our Euro note A due February 2013 and our construction and development costs for our new corporate office and research building, both of which are expected to be funded within the next twelve months.
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