John Woolford - Westwicke Partners Don Morel - Chairman of the Board, Chief Executive Officer Bill Federici - Chief Financial Officer, Senior Vice President.

Larry Solow - CJS Securities Rafael Tejada - Bank of America Dana Walker - Kalmar Investments.

Welcome to the West Pharmaceutical Services Fourth and Full Year 2014 Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] This call is being recorded on behalf of West and is copyrighted material. It cannot be rerecorded or rebroadcast without the company's expressed permission.

Your participation in this call implies your consent to our taping. If you have any objection, you may disconnect at this time. Now, I would like to turn today's meeting over to Mr. John Woolford from Westwicke Partners. Sir, you may begin.

John Woolford Good morning, everyone, and welcome to West's fourth quarter and full year 2014 results conference call. We issued our financial results this morning and the release has been posted in the Investors section on the company's website located at www.westpharma.com.

If you have not received a copy of this announcement, please call Westwicke Partners at 443-213-0500 and a copy will be sent to you immediately. Posted on the company's web site under Investors on the Presentation Materials tab is a slide presentation that management will refer to in their remarks today. The presentation is in PDF format.

Should you require a link to a free download of software that will enable users to view the presentation, it's also available on the website. I remind you that statements made by management on this call and in the presentation will contain forward-looking statements within the meaning of U.S.

federal securities laws and that are based on management's beliefs and assumptions, current expectations, estimates and forecasts. Many of the factors that will determine the company's future results are beyond the ability of the company to control or predict.

These statements are subject to known or unknown risks or uncertainties, and therefore actual results could differ materially from past results and those expressed or implied in any forward-looking statement.

For a non-exclusive list of factors that could cause actual results to differ from expectations, please refer to today's press release as well as any further disclosures the company makes on related subjects in the Company's 10-K, 10-Q, and 8-K reports.

In addition, during today's call management may make reference to non-GAAP financial measures, including adjusted operating profit and adjusted diluted EPS.

Reconciliations and limitations of the non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in materials accompanying this morning's earnings release. At this time, I would like to turn the call over to Don Morel, West's Chairman and CEO.

Don?.

Thank you very much John and good morning everyone. Welcome to West's 2014 year-end earnings call. Joining me on the call today are West's Chief Financial Officer, Bill Federici; and Mike Anderson our Treasurer and Primary Investor Relations contact.

In our prepared remarks, Bill and I will briefly review our results for the fourth quarter; we will talk on our accomplishments for 2014 and discuss our outlook for 2015. During our commentary, we will once again refer to a PowerPoint slide deck, which can be accessed through our website at www.westpharma.com under Investors.

If for some reason you cannot access the presentation, our discussion will cover the information both, in this morning's release and the slides. Let me begin with Slide 3, which provides a high-level summary of our fourth quarter results.

Although 2014 started slower than expected as a result of inventory adjustments by several European customers and weakness in certain generic accounts, West finished the year on a strong note with demand improving across virtually all key product lines.

For the quarter, sales increased to $349.8 million or just over 7% excluding the effects of currency and the Q3 2014 disposition of a small tooling operation in Europe. Our gross margin was up slightly to 31.4% and our adjusted operating profit was $44.6 million, an increase of approximately 29% at constant exchange rates.

The improvement in our operating profit yielded adjusted fully diluted earnings per share of $0.45 versus $0.38 in the fourth quarter of 2014. Slide number four was operating highlights for the two business segments.

Revenue growth in Packaging System benefited from stronger sales in North America and South America and Europe, increasing 7.7% versus a year ago. High-value product sales grew just over 12%, driven by Weststar and Daikyo RSV. The favorable product mix, pricing and operating efficiencies lifted the segments gross margin by 1.3 margin points.

These factors combined with prudent as SG&A and R&D spending, generated an $8.9 million increase in operating profits during the quarter. In the Delivery Systems group, sales were up just over 1%, which translates to over 6% when the effects of currency and the interim business disposition are removed.

Gross margin in this business suffered a bit from some shifting of cost of R&D to cost of sales as projects begin to generate revenue. This contributed to the 14% increase in proprietary product sales in the quarter, but also slightly lowered margins associated with some of those revenues at this stage of their development.

Overall, the PDS group continued to make measurable progress against our long-term objectives with the cost of those efforts muted by growth in administration systems and good performance from our contract manufacturing business.

For the full year, as outlined in our release, sales grew to just over $1.4 billion or 4.3% excluding currency and adjusted diluted earnings per share increased to $1.78, a year-over-year increase of just over 9%, and our third consecutive year of record sales and earnings.

Slide number five provides an update for several of the key expansion and device development programs. Our new facility in India expands our metal field production capacity, and with more than 20 customers qualified and placing production orders is well ahead of plan and should turn profitable by early 2016.

As production shifts to this plant, our operations team in Asia will be converting the old field production space in our Singapore facility to high-value product production to meet future demands of the growing Asian market.

In our third quarter call, we also announced plans for a new facility in Waterford, Ireland to meet anticipated future demands for our proprietary insulin packaging systems and advanced finishing operation for high-value closure systems.

Site preparation will be completed by the end of the quarter and we expect to complete all necessary permitting and begin construction in the next few months.

In addition, we are adding high-value product capacity by converting our Kinston North Carolina facility, which has historically produced lower margin components for single-use devices such as syringes.

The transfer of that work and the addition of capabilities has been in process now for several years and we expect that to come online in the second half of 2015.

With regard to high-value products, we introduced the NovaPure product line in 2012, and since that time have been working with a number of customers to facilitate qualification and validation for use on existing products.

We have also been expanding the number of components we offer under the NovaPure brand and have recently received our first commercial orders. While it will not be a major revenue contributor in the near-term, the NovaPure line represents the next generation of West closure that address the market need for ultraclean high-quality products.

Turning to the Delivery Systems group, 2014 was the year of significant progress across the portfolio of proprietary device development programs currently underway. Demand for the 1 ml long CZ insert needle syringe strengthened during the latter half of the year, primarily for stability testing and line trials.

More importantly, at the end of 2014, the number of molecules undergoing formal stability testing has more than doubled from the beginning of the year. A total of eight customers funded development programs based on the SmartDose platform are now underway for a range of therapeutic applications requiring high dose volumes.

Given the expanding CZ cartridge demand we are experiencing, we are installing additional capacity at our Scottsdale, Arizona device facility to augment the Daikyo line in Japan.

We are also accelerating plans to add backup capacity for manufacture and assembly of the device in Arizona to provide added assurance of our ability to satisfy anticipated increased demand for the device.

For the year and across all programs and customers, West has now delivered more than 100,000 devices in an access of nearly 800,000 CZ cartridges for a range of pre-clinical, clinical and stability testing and the devices being on over 1,500 subjects and user studies and clinical trials.

As we look at 2015, our order book is solidified and our firm backlog has grown 15% at constant currency versus the year ago. The timing and composition of the backlog are important factors in our expectations that sales for the full-year will grow in a range of 6% to 8%, excluding the effects of currency.

Sales will again be driven by high-value products for high-value biologics, rising sales of proprietary devices and requirements for ongoing development programs utilizing CZ and SmartDose. Ex-currency high-value product sales growth in the pharmaceutical packaging group is expected to be in the high single to low double-digit range versus 2014.

Although, the underlying organic growth of the business is healthy, our full-year sales and earnings will be subject to the currency headwind from the strong US dollar.

For the full-year and 2014 the euro-dollar exchange rate averaged $1.33, whereas at the outset of 2015, that rate has been as low as $1.11 and is near the lower end of that range today.

Assuming an exchange rate of $1.15 for the remainder of the year, currency translation would be expected to reduce sales by approximately $80 million and EPS by $0.18 to $0.20 per share. On that basis, we estimate our 2015 adjusted earnings of the $1.74 to $1.92 per fully diluted share.

However, for the longer-term, the major trends we have previously highlighted remain strong indicators of the growth potential of our business. Late-stage pipelines for biologics and monoclonal antibodies in particular are very robust. During 2014, the first approvals were granted PD1 molecules for various cancer indications.

Throughout 2015, we expect a number of new biologic approval, including emerging class of PCSK9 agents for cholesterol reduction. There is also the potential for the first U.S. biosimilar PD approved under the new pathway. We are in an excellent position to capture high-value product and device sales for a substantial number of these new products.

Indeed, virtually all of these molecules undergoing clinical trials in these categories will utilize high-value West or Daikyo packaging systems of vial and pre-filled syringe format. Regarding the CEO succession plan that we announced late last year, the search process is well underway and the Board is vetting a very strong candidate list.

I have committed to the Board that I will continue to serve in my current role until my successor is in place and the transition is completed. I would now like to turn the call over the Bill Federici for a more detailed discussion of our financial results.

Bill?.

Thank you, Don. Good morning, everyone. We issued our fourth quarter results this morning. Excluding the effects of special items from both periods, fourth quarter 2014 earnings were $0.45 per diluted share versus the $0.38 we earned in Q4 2013. A reconciliation of these non-GAAP measures is provided on Slides 13 and 14.

Turning to sales, Slide 7 shows the components of a consolidated sales increase. Consolidated fourth quarter sales were $349.8 million, an increase of 7.4% over fourth quarter 2013 sales, excluding exchange and the disposition of a small business.

Packaging Systems' sales increased by $18.5 million or 7.7% over same quarter 2013 sales excluding exchange. A favorable sales mix and volume growth accounted for 6.8 percentage points of the increase, modestly higher selling prices in Packaging Systems contributed to the remainder of the increase.

High-value product sales increased 12.1% versus the prior year quarter excluding exchange. For the full year 2014, high-value product sales increased 3.5% versus 2013, excluding exchange. Delivery Systems sales increased $3 million or 2.9% over sales in the prior quarter, excluding exchange effects.

The sales increase was driven by our proprietary businesses. Sales of proprietary products increased 14.2% to $28.6 million or 27.4% of the segment's revenues in the quarter. CZ sales and development activity were approximately $4 million and SmartDose sample sales were $3.5 million in Q4.

On the full year basis, total 2014 proprietary product sales grew 13.6% over 2013. As provided on Side 8, our consolidated gross profit margin for Q4 2014 was 31.4% versus the 31.1% margin we achieved in the fourth quarter of 2013.

Packaging Systems' fourth quarter gross margin of 36.2% is 1.3 margin points higher than the 34.9% achieved in the fourth quarter of '13. The favorable mix and volume of product sold, modest sales price increases and continued lead savings and plant efficiencies, more than offset the impact of higher general inflationary costs.

Delivery Systems' fourth quarter gross margin was 19.6%, 2.2 margin points lower than the prior quarter. The lower margin was mainly due to new capacity costs and the cost associated with development projects moving to clinical production and customer funded development programs.

As reflected on Slide 9, Q4 2014 consolidated SG&A expense decreased by $1.2 million compared to the prior year quarter. The decrease is due primarily to lower estimated achievement levels on incentive comp programs, decreases on our pension costs and lower travel and entertainment costs.

As a percentage of sales, Q4 2014 SG&A expense was seven-tenths of a percentage point less than the prior year period. Slide 10 shows our key cash flow metrics.

Operating cash flow was $183 million for the full year '14, $38 million less than 2013, due primarily to the $80 million of voluntary pension contribution we made in 2014 and the $20 million non-refundable customer payment received in 2013 for SmartDose.

Capital additions of roughly $112 million made in 2014, roughly half of the spend was our new products and expansion efforts. We expect capital additions of between $150 million and $175 million in 2015, including approximately $35 million of cost associated with the new Ireland facility. Slide 11 provides some summary balance sheet information.

Our balance sheet continues to be strong and we are confident that our business will provide necessary future liquidity. Our cash balance at year end was $255 million, $25 million higher than our December 13 balance. The majority of our cash is invested overseas and is generally not available for repatriation without tax consequences.

However, we repatriated $60 million of overseas cash during Q4, a portion of which was contributed to our pension plan, and a portion was used to pay down debt. Debt at year and was $337 million, $37 million less than the prior year end.

Our net debt to total invested capital ratio at year end was 7.8%, a significant improvement from 2013's year end ratio. Working capital totaled $407 million at year-end, $7 million last than the prior year end.

Our high cash balances will partially offset by the reclassification to short-term of our $25 million Series B floating rate debt maturing in 2015. Our backlog of committed PPS orders remained strong at $340 million as of December 2014, approximately 15% higher than the 2013 balances, excluding exchange.

The high value portion of our current order backlog continues to increase versus the prior year. We have issued our full year 2015 guidance in this morning's release. That guidance is summarized on Slide 12. Our guidance is based on an exchange rate of $1.15 per euro. Our actual 2014 results are translated at $1.33 per euro rate.

Each one penny strengthening of the dollar versus the euro would result in about a $0.01 reduction in full year EPS as a result of translation. As a reminder, most of our exposure to currency is translation risk and the majority of our non-U.S. operations are naturally hedged.

In the first quarter of 2015, we expect sales to increase 5% to 10% ex-currency as compared to the prior year first quarter, which was adversely impacted by customer inventory management. As a result, we expect Q1 2015 earnings to increase by 15% to 25% ex-currency versus the prior year quarter.

The currency impact in Q1 2015 is expected to be larger than any other quarter, as Q1 2014 average dollar per euro exchange rate was $1.37 per euro, the highest of any of the 2014 quarters.

We expect to deliver on our full year earnings guidance of $1.74 to $1.92 per diluted share, which on a constant currency basis represents an increase of between 9% and 19% in diluted EPS over 2014. I would now like to turn the call back over to Don Morel.

Don?.

Thanks very much, Bill. This concludes our prepared remarks for this morning.

We would now be pleased to answer any questions? Operator?.

Thank you. [Operator Instructions] Your first question comes from Larry Solow from CJS Securities. Please go ahead..

Good morning, guys, just a couple of quick questions..

Good morning, Larry..

Good morning, Larry..

You had some pretty nice growth in your higher value especially in the quarter and even for the year. Just in terms of gross margin, I know it did go up a little bit, but I thought maybe the lift would be even a little higher.

Were there other factors that held it back a little bit?.

No. It is just the composition of the HVP growth. A large part of it was commercialization of the Daikyo RSV line. That has produced in Japan and we served as their agent, so we do not capture as much margin off of that..

Okay. Just in terms of the marketplace competitive pressures and what not, there has been a lot of chatter or some chatter on the competitive front, the OmniPod from Unilife and Aptar Stelmi, I think, they recently introduced the new coated stopper.

Maybe you could take opportunity to discuss a couple of these things?.

Well, you know, competitive landscape continuously shifts. The OmniPod is the unique device that is being used by one customer that has a very unique time release requirement within that system and they began work on that a number of years ago.

It does not directly compete in many applications with the SmartDose, where we want high volume delivery over the lengthy period of time. With regard to competitors in coated closure market, our position there is well-known, our brands are well-established.

I believe that the product that was introduced is only on serum closure, so it is somewhat limited niche in the marketplace, but I continue to like our position there and I like all of the new product iterations that we have been introducing, including NovaPure, so we are in a good position..

Great. Thanks. Thanks, Don. I appreciate it..

Thanks, Larry..

Thanks for your question. [Operator Instructions] Your next question comes from Rafael Tejada from Bank of America. Please go ahead..

Hi. Good morning and thanks for the question..

Hey, good morning, Rafael..

Good morning, Rafael..

Just want to dig in a little bit more on the guidance for the full-year and for Q1, so let me start off with the full year. It looks like you are raising a constant currency outlook just slightly. Previously it was 528 now upper-end of 628.

Is that mainly driven on where the backlog levels stand today or any other or are there any other indicators that are providing you with greater confidence on the guide?.

Yes. I think it is a combination of things. One, we like the composition and the timing of the orders in the backlog, so we are going to see an up lift on the HVP side of the business, we believe, throughout the year.

Second thing is that we have got a little more confidence in some of the orders that were doubly done in '13, '14 that impacted us coming back and returning to a more normal pattern.

We also have the unpredictable nature of some of the product launches that we expect to happen throughout the year, but I think conservatively we expect that that will also give us a slight uptick..

Okay. That is helpful. With regard to Q1, if I remember correctly that is when the company in 2014 experienced the a bigger hit from they have inventory management the year-over-year comparison is 1%. For Q1, in 2014, it was 1% and it is probably the easiest year-over-year comparison.

What is baked in into the 2015 Q1 5 to 7 constant currency growth? Is that just a slower rollout, is there any inventory management issues here or is it just the pacing of the year?.

It is a little bit of the pacing of the year, but if you remember and you started to hit on it. In the first quarter of 2014, our high-value product growth was very much impacted by inventory management that had happened at the back end of ’13, so high-value products were down 7% in the first quarter of 2014.

You are going to see, again, a more natural, we think progression of sales growth in 2015, and we expect to see return to more normalize growth in high-value products for 2015. As a reminder, I mentioned it in my script, but I will mention it again.

In terms of currency headwind, the currency headwind in the first quarter of ‘15 will be pretty dramatic versus Q1 2014. The average exchange rate in 2014's first quarter was $1.37, and right now obviously we are talking about a using a rate of $1.15..

Understood. Okay.

That kind of goes into my next question and just given all the moving parts radar in terms of the changes, the FX volatility along with lower oil prices, so how do we think about the margin expansion for 2015?.

Again, we think good high value product growth will translate into a favorable mix. We believe that we will have some favorability in the oil prices as you are suggesting. We think that general inflationary cost will be about where we expect them to be relatively tame.

We are going to get a little better prices, we believe, somewhere on the order of less than 1%, so when you factor all of those things in and the continuation of our lien programs, we believe that we should be able to see margin expansion in both sides of the business both, in the Packaging business and in the Delivery Systems..

Okay.

Just one housekeeping what tax rate are you assuming for 2015?.

We are using 27 overall, but in the first half of the year, since they have not enacted the R&D tax credit again for 2015, it picks up about half a 0.5% for the first half of the year..

Okay. I do appreciate the update on the CEO search.

Don the timing should we still be expecting a transition by May of this year?.

That is the process depend [ph] Rafael. The Board is making good progress, but as you can appreciate with some of the individuals involved, there may be special circumstances to push things out a bit. I think the important thing is that for continuity, I will be here until we are all comfortable the transition will be a smooth one..

Okay. I appreciate it. Thank you very much..

Thanks, Rafael..

Thanks, Rafael..

Thanks for your question. Next question comes from Dana Walker from Kalmar Investments. Please go ahead..

Hey, there..

Good morning, Dana..

Good morning. Bill, I think you may have confused people.

If the Q1 comparison is easy as the 5% to 7% is that a constant currency numbers or is that a reported number?.

That is a constant currency 5% to 7%..

Despite the easy compare and the likelihood that the high-value product compare would be strong that 5% to 7% would be sort of frame, the middle to the upper-middle, but not the above the top end of the range for the year?.

Correct..

Okay..

It is still some and all of those factors that we have talk about high-value products returning, continued progress in the delivery system space, but it is not in immediate, it is not turn the lights switch off at the end of ’14 and turning on in ‘15.

It will build, so our best guess based on the backlog that we have today and the timing of those the orders we just believe that 5% to 7% ex-currency is the best estimate we have today..

Question on currency, can you and do you manage the business differently amongst all the different pressure points that you might have with the adversity of the exchange rate?.

As you can expect, there are certain things we can do in certain regions, we have got the natural hedging that takes place, where we can make and sell basically in the same current. We do hedge oil and some of our raw materials as it is appropriate, but do not actively hedge in the translation issue.

There are some things that we can control on the OpEx side that we will. Oil is a little bit complicated, because of the nature of our supply contracts and the way that is consumed in the manufacturing process, so we expect a bit of the tailwind from that in the latter half of the year.

Collectively, all those things are going to allows to mitigate some of the FX impact, but the change has been so dramatic over the last three to five months, we are not going to be able to mitigate all of it..

I suppose early in a year, no need in trying to be terribly precise and tight and yet your range seems to be quite large.

Can you talk about the variables that would apply at the lower end of your range versus those that might apply to the higher end?.

Yes. I mean we talked about all of them, so we will repeat them.

It is the uptake of the return to a more normal patterns for the high-value products, it is the timing of devices and the proprietary device portfolio and a lot of the programs that Don talked about, the sampling involved with them and hopeful eventual increase in sales resulting from those.

On the pricing side, we know we are going to have very modest ability to pass among pricing, Don talked about oil, it won't be as nearly a benefit today as it is perhaps in the second half of the year, if of course, if oil prices remain paying the way we are now in that $50 to $60 range, we should get a nice tailwind from that.

Lean operations and the efficiencies in our plant continuing to work on the cost side of the equation. We will of course do that and try everything we can.

When we look at the totality of the picture, Dana, and we think about all of those variables and the volatility of some of the factors with our customers and how they operate in around their own inventories and the regulators, and how the regulators impact on our customers. As a reminder, we have $340 million worth of backlog.

In current business, we have over $1 billion of sales, so there is a big piece of that that will all roll in over the rest of the ensuing months in the next few quarters. At this time of year, we try to be as thoughtful as we can about how all those variables will impact and the 174 to 192 is the best estimate that we had at this point and time..

Understood, Don. You talked about the therapeutic categories that are most visible for some of your proprietary products on the delivery front.

Can you shed some additional light if you can about your view as to what proportion of the customer needs might come within CZ or within SmartDose versus some other option?.

It is hard to say because of the way our customers look at a device as part of their overall product launch and life extension strategy, as I look at it currently, we are participating on virtually all of these, mostly with closure systems for the vial and the syringe presentations.

In the larger categories, many of those such as the PD1s are going to be mostly infusion, so they are going to be done in a care center as opposed to a home environment.

On the other drugs, we are in a good position, so I would say the lifestyle devices, they are going to become more and more important to chronic diseases on things like cancer and MS it is not so much..

The PD1 and the PCSK9 and biosimilars, I believe, you referenced as being categories where SmartDose and where CZ would apply or is it more expansive description of where you would be involved?.

Yes. CZ potentially applies to all of them. The high value therapeutics where you have issues with breakage either in manufacturing or presentations in an auto-injector or the drug is just aggressive, we think CZ is the primary container, has broader application.

SmartDose is going to be, again, those applications, where a high-volume has to be delivered over time and they can be done in a home setting or somewhere else.

A lot of the oncologic drugs you do not want to do that, because of the toxic nature, so the categories that you mentioned, SmartDose for rheumatoid arthritis potentially for cholesterol reduction and others is going to be its biggest area of application..

One final question on that, you addressed how your understanding as to where customers would be, would be more evidenced by year-end and yet what are you able to conclude now about trial length, trial conclusion and how the regulatory pathway would be affected by these things?.

Well, it all comes back to the timing of when the drugs that are on formal stability, come off-formal stability. We know of some customers that began trials in the latter part of '13, early part of '14 that data will be coming through the end of its two-year shelf life study at the close of '15, beginning of the '16.

We are hoping that we have a pretty good picture as to the commercialization potential for those molecules as we move towards the fourth quarter..

I will step back. Thank you. Good stuff..

Thank you, Dana..

Thank you for your question. I will now pass the call over to Don Morel for closing remark..

Thank you much, everybody. We appreciate your time this morning. We look forward to speaking you again at the end of our first quarter call, which will take place in April. Thanks very much..

Thank you. Ladies and gentlemen, that concludes the call for today. You may now disconnect..