West Pharmaceutical Services, Inc. (WST)

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West Pharmaceutical Services, Inc. (WST)

Q4 2008 Earnings Call Transcript

February 19, 2009 9:00 am ET


Theresa Kelleher – IR, Financial Dynamics

Don Morel – Chairman and CEO

Bill Federici – VP and CFO


Arnie Ursaner – CJS Securities

Raphael [ph] – UBS

Adam Fizzard [ph] – Barclays Capital

Rick Dalton [ph] – Colombo Management [ph]

Christian Mikel [ph] – Orlando [ph]



Welcome to the West fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. (Operator instructions) Today's conference is being recorded. If you have any objections, you may disconnect at this time.

And now, I will turn the meeting over to Ms. Theresa Kelleher from FD. Ma'am, you may begin.

Theresa Kelleher

Thank you. Good morning everyone, and welcome to West’s fourth quarter 2008 results conference call. As you know, we issued our results this morning. The release has been posted on the company's website located at www.westpharma.com. If you have not received a copy of this announcement, please call FD at 212-850-5600, and a copy will be sent to you immediately.

Before we begin, I would like to remind you that certain statements that may be made by management of the company may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements set forth anticipated results, based on management's plans and assumptions. Such statements give our current expectations or forecast of future events. They do not relate strictly to historical or current facts. In particular, these include statements concerning future actions, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings and financial results.

We have tried, wherever possible, to identify such statements by using words such as estimate, expect, intend, believe, plan, anticipate, and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or condition. We cannot guarantee that any forward-looking statement will be realized. If known or unknown risks or uncertainties materialize, or if underlying assumptions are inaccurate, actual results could differ materially from past results, and those expressed or implied in any forward-looking statements. For a non-exclusive list of those factors, which could cause actual results to differ from expectations, please refer to the factors listed in today's press release.

Investors are advised, however, to consult any further disclosures the company makes on related subjects in the company's 10-K, 10-Q and 8-K reports. The company undertakes no obligation to publicly update forward-looking statements whether as a result of new information, future events or otherwise. In addition, management may make reference to adjusted operating profits and adjusted diluted EPS that are considered non-GAAP financial measures. These measures have no standardized meaning prescribed by US GAAP and therefore, they may not be comparable to and should not be viewed as a substitute for US GAAP operating income and diluted EPS.

Reconciliations of the non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in the materials accompanying this morning's earnings release. This call is being recorded on behalf of West and is copyrighted material. It cannot be rerecorded or rebroadcast without the company's express permission. Your participation on this call implies your consent to our taping. Once management has concluded their remarks, we will open the floor for questions.

At this time, I would like to turn the call over to Dr. Don Morel, Chairman and CEO.

Don Morel

Thanks you, Theresa, and good morning everyone. Welcome to West 2008 year-end conference call. We appreciate you taking time to join us this morning. As Theresa mentioned, joining me for the call are Bill Federici, West's Chief Financial Officer; and Mike Anderson, our Treasurer and primary Investor Relations contact.

To begin, I will briefly summarize our fourth quarter and full-year 2008 results, followed by an update on our major development projects and our capacity expansion programs and finish off with a summary of our outlook for 2009. Bill will then discuss our financial performance in greater detail before we open the call for questions.

I should point out that as we mentioned in our press release, comparisons with 2007 are difficult due to non-recurring sales of erythropoietin stimulating agent packaging components, Exubera inhaler devices, the impact of the settlement with Nectar Therapeutics, restructuring charges and several discreet tax items in both periods.

Further complicating the picture for the full year are the dramatic swings in Euro-dollar exchange rates and the swing in oil prices through the year. We will call out the impact of these factors during our commentary, where appropriate.

I am pleased to report that we finished 2008 with a strong fourth quarter. Consolidated revenues were $244.9 million, an increase of 4% over the fourth quarter of 2007, excluding lost sales and currency effects. Fourth quarter adjusted diluted earnings per share from continuing operations were $0.56 per share versus the $0.51 in 2007. Our Q4 earnings were negatively affected by $0.05 due to unfavorable exchange.

Consolidated gross margin improved by 0.9 percentage points during the quarter to 28.4%. And for the full-year revenues grew to $1.05 billion and fully diluted adjusted earnings per share were $2.38 both consistent with our guidance at the outset of the year. Adjusting our sales and earnings for the year to account for the impact of lost sales and the impact of currency translation provides a better basis for comparison, and would yield sales growth of 6.8% and earnings per share growth of 18.3% versus 2007.

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