NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Summary of Significant Accounting Policies
Principles of Consolidation:
The consolidated financial statements include the accounts of West after the elimination of intercompany transactions. We have no participation or other rights in variable interest entities.
Use of Estimates:
The financial statements are prepared in conformity with U.S. GAAP. These principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingencies in the financial statements. Actual amounts realized may differ from these estimates.
Cash and Cash Equivalents:
Cash equivalents include time deposits, certificates of deposit and all highly liquid debt instruments with maturities of three months or less at the time of purchase.
Accounts Receivable:
Our accounts receivable balance was net of an allowance for doubtful accounts of
$0.4 million
and
$0.6 million
at
December 31, 2016
and
2015
, respectively. We record the allowance based on a specific identification methodology.
Inventories:
Inventories are valued at the lower of cost (on a first-in, first-out basis) or market. The following is a summary of inventories at December 31:
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
2015
|
Raw materials
|
$
|
78.0
|
|
$
|
74.4
|
|
Work in process
|
28.9
|
|
30.1
|
|
Finished goods
|
92.4
|
|
76.6
|
|
|
$
|
199.3
|
|
$
|
181.1
|
|
Property, Plant and Equipment
: Property, plant and equipment assets are carried at cost. Maintenance and minor repairs and renewals are charged to expense as incurred. Costs incurred for computer software developed or obtained for internal use are capitalized for application development activities and immediately expensed for preliminary project activities or post-implementation activities. Upon sale or retirement of depreciable assets, costs and related accumulated depreciation are eliminated, and gains or losses are recognized in other (income) expense. Depreciation and amortization are computed principally using the straight-line method over the estimated useful lives of the assets, or the remaining term of the lease, if shorter.
Impairment of Goodwill and Other Intangible Assets
: Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, following the completion of our annual budget and long-range planning process, or whenever circumstances indicate that the carrying value of these assets may not be recoverable. Goodwill is tested for impairment at the reporting unit level, which is the same as, or one level below, our operating segments. Recent accounting guidance allows entities to first assess qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance, to determine whether it is necessary to perform the first step of the two-step quantitative goodwill impairment test. We considered this guidance when performing our annual impairment testing, but elected to continue utilizing the two-step quantitative impairment test. The first step in the two-step analysis is to compare the fair value of each reporting unit to its carrying amount, including goodwill. If the carrying amount exceeds fair value, the second step must be performed. The second step requires the comparison of the carrying amount of the goodwill to its implied fair value, which is calculated as if the reporting unit had just been acquired as of the testing date. Any excess of the carrying amount of goodwill over the implied fair value would represent an impairment loss.
At December 31, 2015, a trademark had been determined to have an indefinite life and, therefore, was not subject to amortization. During 2016, as part of our restructuring plan, we recorded within other expense a
$10.0 million
non-cash asset write-down associated with the discontinued use of this trademark.
Intangible assets with finite lives are amortized using the straight-line method over their estimated useful lives of
5
to
25
years, and reviewed for impairment whenever circumstances indicate that the carrying value of these assets may not be recoverable. During 2016, as part of our restructuring plan, we recorded within other expense a
$2.8 million
non-cash asset write-down associated with the discontinued use of a patent.
Impairment of Long-Lived Assets
: Long-lived assets, including property, plant and equipment, are tested for impairment whenever circumstances indicate that the carrying value of these assets may not be recoverable. An asset is considered impaired if the carrying value of the asset exceeds the sum of the future expected undiscounted cash flows to be derived from the asset. Once an asset is considered impaired, an impairment loss is recorded within other (income) expense for the difference between the asset's carrying value and its fair value. For assets held and used in the business, management determines fair value using estimated future cash flows to be derived from the asset, discounted to a net present value using an appropriate discount rate. For assets held for sale or for investment purposes, management determines fair value by estimating the proceeds to be received upon sale of the asset, less disposition costs. During 2016, as part of our restructuring plan, we recorded within other expense a
$4.5 million
non-cash asset write-down associated with the discontinued use of certain equipment.
Employee Benefits:
The measurement of the obligations under our defined benefit pension and postretirement medical plans are subject to a number of assumptions. These include the rate of return on plan assets (for funded plans) and the rate at which the future obligations are discounted to present value. U.S. GAAP requires the recognition of an asset or liability for the funded status of a defined benefit postretirement plan, as measured by the difference between the fair value of plan assets, if any, and the benefit obligation. For a pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement plan, such as a retiree health plan, the benefit obligation is the accumulated postretirement benefit obligation. See Note 13,
Benefit Plans
, for a more detailed discussion of our pension and other retirement plans.
Financial Instruments
: All derivatives are recognized as either assets or liabilities in the balance sheet and recorded at their fair value. For a derivative designated as hedging the exposure to variable cash flows of a forecasted transaction (referred to as a cash flow hedge), the effective portion of the derivative's gain or loss is initially reported as a component of OCI, net of tax, and subsequently reclassified into earnings when the forecasted transaction affects earnings. For a derivative designated as hedging the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (referred to as a fair value hedge), the derivative's gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item. For a derivative designated as hedging the foreign currency exposure of a net investment in a foreign operation, the gain or loss is reported in OCI, net of tax, as part of the cumulative translation adjustment. The ineffective portion of any derivative used in a hedging transaction is recognized immediately into earnings. Derivative financial instruments that are not designated as hedges are also recorded at fair value, with the change in fair value recognized immediately into earnings. We do not purchase or hold any derivative financial instrument for investment or trading purposes.
Foreign Currency Translation
: Foreign currency transaction gains and losses are recognized in the determination of net income. Foreign currency translation adjustments of subsidiaries and affiliates operating outside of the U.S. are accumulated in other comprehensive loss, a separate component of equity.
Revenue Recognition:
Revenue is recognized when persuasive evidence of a sales arrangement exists, title and risk of loss have transferred, the selling price is fixed or determinable, and collectability is reasonably assured. Generally, sales are recognized upon shipment or upon delivery to our customers' site, based upon shipping terms or legal requirements. Some customers receive pricing rebates upon attaining established sales volumes. We record rebate costs when sales occur based on our assessment of the likelihood that the required volumes will be attained. We also maintain an allowance for product returns, as we believe that we are able to reasonably estimate the amount of returns based on our substantial historical experience.
Shipping and Handling Costs
: Shipping and handling costs are included in cost of goods and services sold. Shipping and handling costs billed to customers in connection with the sale are included in net sales.
Research and Development
: Research and development expenditures are for the creation, engineering and application of new or improved products and processes. Expenditures include primarily salaries and outside services for those directly involved in research and development activities and are expensed as incurred.
Environmental Remediation and Compliance Costs
: Environmental remediation costs are accrued when such costs are probable and reasonable estimates are determinable. Cost estimates include investigation, cleanup and monitoring activities; such estimates are adjusted, if necessary, based on additional findings. Environmental compliance costs are expensed as incurred as part of normal operations.
Litigation
: From time to time, we are involved in legal proceedings, investigations and claims generally incidental to our normal business activities. In accordance with U.S. GAAP, we accrue for loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These estimates are based on an analysis made by internal and external legal counsel considering information known at the time. Legal costs in connection with loss contingencies are expensed as incurred.
Income Taxes:
Deferred income taxes are recognized by applying enacted statutory tax rates, applicable to future years, to temporary differences between the tax basis and financial statement carrying values of our assets and liabilities. Valuation allowances are established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. No provision is made for the U.S. income taxes on the undistributed earnings of wholly-owned foreign subsidiaries as such earnings are intended to be permanently reinvested. We recognize interest costs related to income taxes in interest expense and penalties within other (income) expense. The tax law ordering approach is used for purposes of determining whether an excess tax benefit has been realized during the year.
Stock-Based Compensation
: Under the fair value provisions of U.S. GAAP, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. In order to determine the fair value of stock options on the grant date, we use the Black-Scholes valuation model.
Net Income Per Share
: Basic net income per share is computed by dividing net income attributable to common shareholders by the weighted average number of shares of common stock outstanding during each period. Net income per share assuming dilution considers the dilutive effect of outstanding stock options and other stock awards based on the treasury stock method. The treasury stock method assumes the use of exercise proceeds to repurchase common stock at the average fair market value in the period.
Note 2: New Accounting Standards
Recently Adopted Standards
In November 2015, the Financial Accounting Standards Board (“FASB”) issued guidance regarding the balance sheet classification of deferred taxes. This guidance requires that deferred tax assets and liabilities be classified as noncurrent. The requirement that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not affected by these amendments. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the amendments may be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. We adopted this guidance in the fourth quarter of 2015, on a prospective basis. The adoption did not have a material impact on our financial statements.
In September 2015, the FASB issued guidance that simplifies the accounting for measurement-period adjustments in business combinations, by eliminating the requirement to account for those adjustments retrospectively. Instead, the acquirer will be required to recognize measurement-period adjustments in the reporting period in which the amounts are determined. We adopted this guidance as of January 1, 2016, on a prospective basis. The adoption did not have a material impact on our financial statements.
In May 2015, the FASB issued amended guidance on the disclosure requirements for certain investments whose fair value was measured using the net asset value (“NAV”) per share practical expedient. In addition, the guidance eliminates the requirement to categorize such investments within the fair value hierarchy table. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, and retroactive application is required for all periods presented. We adopted this guidance in the fourth quarter of 2016. The adoption did not have a material impact on our financial statements. Please refer to Note 13,
Benefit Plans
, for additional details.
In April 2015, the FASB issued guidance regarding the classification of debt issuance costs. This guidance requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt. Subsequently, in August 2015, the FASB issued additional guidance which addressed the presentation of debt issuance costs associated with lines of credit, whereby these costs may be presented as an asset and amortized ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, and retrospective application is required for each balance sheet presented. We adopted this guidance in the fourth quarter of 2015. The adoption did not have a material impact on our financial statements.
In April 2015, the FASB issued guidance on the accounting for fees paid by a customer in a cloud computing arrangement. We adopted this guidance as of January 1, 2016, on a prospective basis. The adoption did not have a material impact on our financial statements.
In February 2015, the FASB issued amended guidance that changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. We adopted this guidance as of January 1, 2016, on a prospective basis. The adoption did not have a material impact on our financial statements.
In January 2015, the FASB issued guidance which removes the concept of extraordinary items from U.S. GAAP. This guidance eliminates the requirement for companies to spend time assessing whether items meet the criteria of being both unusual and infrequent. We adopted this guidance as of January 1, 2016. The adoption did not have a material impact on our financial statements.
In August 2014, the FASB issued guidance which defines management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. This guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We adopted this guidance in the fourth quarter of 2016. The adoption did not have an impact on our financial statements.
In June 2014, the FASB issued guidance that clarifies the accounting for share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. In this case, the performance target would be required to be treated as a performance condition, and should not be reflected in estimating the grant-date fair value of the award. The guidance also addresses when to recognize the related compensation cost. We adopted this guidance as of January 1, 2016. The adoption did not have a material impact on our financial statements.
Standards Issued Not Yet Adopted
In January 2017, the FASB issued guidance which removes the second step of the goodwill impairment test. A goodwill impairment charge will now be the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements.
In January 2017, the FASB issued guidance which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This
guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We are currently evaluating the impact that this guidance will have on our financial statements.
In November 2016, the FASB issued guidance on the classification and presentation of restricted cash in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements.
In October 2016, the FASB issued guidance which requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements.
In August 2016, the FASB issued guidance to reduce the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements.
In March 2016, the FASB issued guidance that simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements.
In March 2016, the FASB issued guidance that simplifies the transition to the equity method of accounting. This guidance eliminates the requirement to retroactively adopt the equity method of accounting when there is an increase in the level of ownership interest or degree of influence. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. We believe that the adoption of this guidance will not have a material impact on our financial statements.
In February 2016, the FASB issued guidance on the accounting for leases. This guidance requires lessees to recognize lease assets and lease liabilities on the balance sheet and to expand disclosures about leasing arrangements, both qualitative and quantitative. In terms of transition, the guidance requires adoption based upon a modified retrospective approach. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. We are continuing to evaluate the impact that this guidance will have on our financial statements.
In January 2016, the FASB issued guidance that addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We believe that the adoption of this guidance will not have a material impact on our financial statements.
In July 2015, the FASB issued guidance regarding the subsequent measurement of inventory. This guidance requires inventory measured using any method other than last-in, first-out or the retail inventory method to be measured at the lower of cost and net realizable value. Net realizable value represents estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. We believe that the adoption of this guidance will not have a material impact on our financial statements.
In May 2014, the FASB issued guidance on the accounting for revenue from contracts with customers that will supersede most existing revenue recognition guidance, including industry-specific guidance. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the guidance requires enhanced disclosures regarding the nature, timing and uncertainty of revenue and
cash flows arising from an entity's contracts with customers. The FASB subsequently issued additional clarifying standards to address issues arising from implementation of the new revenue recognition standard. This guidance is effective for interim and annual reporting periods beginning on or after December 15, 2017. Early adoption is permitted as of one year prior to the current effective date. Entities can choose to apply the guidance using either a full retrospective approach or a modified retrospective approach. We have made progress towards completion of our evaluation of the potential impact that the adoption of this guidance will have on our financial statements.
Note 3: Net Income Per Share
The following table reconciles the shares used in the calculation of basic net income per share to those used for diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
2016
|
|
2015
|
|
2014
|
Net income
|
$
|
143.6
|
|
|
$
|
95.6
|
|
|
$
|
127.1
|
|
Weighted average common shares outstanding
|
73.3
|
|
|
72.0
|
|
|
70.9
|
|
Dilutive effect of stock options, stock appreciation rights and performance share awards, based on the treasury stock method
|
1.7
|
|
|
1.8
|
|
|
1.9
|
|
Weighted average shares assuming dilution
|
75.0
|
|
|
73.8
|
|
|
72.8
|
|
During
2016
,
2015
and
2014
, there were
0.1 million
,
0.7 million
, and
0.5 million
shares from stock-based compensation plans not included in the computation of diluted net income per share because their impact was antidilutive.
In December 2015, we announced a share repurchase program authorizing the repurchase of up to
700,000
shares of our common stock from time to time on the open market or in privately-negotiated transactions as permitted under the Securities Exchange Act of 1934 Rule 10b-18. During 2016, we purchased
700,000
shares of our common stock under this program at a cost of
$52.2 million
, or an average price of
$74.54
per share. This share repurchase program expired on December 31, 2016.
In December 2016, we announced a share repurchase program authorizing the repurchase of up to
800,000
shares of our common stock from time to time on the open market or in privately-negotiated transactions as permitted under the Securities Exchange Act of 1934 Rule 10b-18. The number of shares to be repurchased and the timing of such transactions will depend on a variety of factors, including market conditions. This share repurchase program commenced on January 1, 2017 and is expected to be completed by December 31, 2017.
Note 4: Property, Plant and Equipment
A summary of gross property, plant and equipment at December 31 is presented in the following table:
|
|
|
|
|
|
|
|
|
($ in millions)
|
Expected useful lives (years)
|
2016
|
2015
|
Land
|
|
$
|
18.6
|
|
$
|
17.6
|
|
Buildings and improvements
|
5-50
|
443.3
|
|
412.8
|
|
Machinery and equipment
|
10-15
|
698.5
|
|
674.8
|
|
Molds and dies
|
4-7
|
98.3
|
|
94.4
|
|
Computer hardware and software
|
3-10
|
121.9
|
|
118.3
|
|
Construction in progress
|
|
174.1
|
|
122.4
|
|
|
|
$
|
1,554.7
|
|
$
|
1,440.3
|
|
Depreciation expense for the years ended
December 31, 2016
,
2015
and
2014
was
$88.1 million
,
$86.1 million
and
$84.8 million
, respectively.
There were no capitalized leases included in buildings and improvements at
December 31, 2016
. Capitalized leases included in machinery and equipment were
$1.5 million
at
December 31, 2016
. Capitalized leases included in buildings and improvements and machinery and equipment were
$2.0 million
and
$1.5 million
at
December 31, 2015
, respectively. Accumulated depreciation on all property, plant and equipment accounted for as capitalized leases was
$1.5 million
and
$2.1 million
at
December 31, 2016
and
2015
, respectively.
We capitalize interest on borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. Capitalized interest for the years ended
December 31, 2016
,
2015
and
2014
was
$3.6 million
,
$1.5 million
and
$1.6 million
, respectively.
During 2016, as part of our restructuring plan, we recorded within other expense a
$4.5 million
non-cash asset write-down associated with the discontinued use of certain equipment.
Note 5: Affiliated Companies
At
December 31, 2016
, the following affiliated companies were accounted for under the equity method:
|
|
|
|
|
Location
|
Ownership interest
|
The West Company Mexico, S.A. de C.V.
|
Mexico
|
49%
|
Aluplast S.A. de C.V.
|
Mexico
|
49%
|
Pharma Tap S.A. de C.V.
|
Mexico
|
49%
|
Pharma Rubber S.A. de C.V.
|
Mexico
|
49%
|
Daikyo
|
Japan
|
25%
|
Unremitted income of affiliated companies included in consolidated retained earnings amounted to
$63.0 million
,
$56.2 million
and
$51.2 million
at
December 31, 2016
,
2015
and
2014
, respectively. Dividends received from affiliated companies were
$1.4 million
in
2016
,
$0.8 million
in
2015
and
$0.8 million
in
2014
.
Our equity in net unrealized gains of Daikyo's investment securities and derivative instruments, as well as pension adjustments, included in accumulated other comprehensive loss was
$(5.3) million
,
$(5.4) million
and
$(4.7) million
at
December 31, 2016
,
2015
and
2014
, respectively.
Our purchases from, and royalty payments made to, affiliates totaled
$94.5 million
,
$65.8 million
and
$68.9 million
, respectively, in
2016
,
2015
and
2014
, of which
$9.0 million
and
$10.1 million
was due and payable as of
December 31, 2016
and
2015
, respectively. The majority of these transactions related to a distributorship agreement with Daikyo that allows us to purchase and re-sell Daikyo products. Sales to affiliates were
$6.8 million
,
$5.3 million
and
$5.1 million
, respectively, in
2016
,
2015
and
2014
, of which
$0.9 million
and
$0.5 million
was receivable as of
December 31, 2016
and
2015
, respectively.
At
December 31, 2016
and
2015
, the aggregate carrying amount of investments in equity-method affiliates was
$69.3 million
and
$56.3 million
, respectively. In addition, during 2016, we made an
$8.4 million
cost-method investment in an intradermal drug delivery company. At
December 31, 2016
and
2015
, we had cost-method investments, for which fair value was not readily determinable, with a carrying amount of
$13.4 million
and
$5.0 million
, respectively. We test our cost-method investments for impairment whenever circumstances indicate that the carrying value of the investments may not be recoverable.
Note 6: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by reportable segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
Proprietary Products
|
Contract-Manufactured Products
|
Total
|
Balance, December 31, 2014
|
$
|
78.9
|
|
$
|
29.7
|
|
$
|
108.6
|
|
Foreign currency translation
|
(3.8
|
)
|
(0.2
|
)
|
(4.0
|
)
|
Balance, December 31, 2015
|
75.1
|
|
29.5
|
|
104.6
|
|
Foreign currency translation
|
(1.4
|
)
|
(0.2
|
)
|
(1.6
|
)
|
Balance, December 31, 2016
|
$
|
73.7
|
|
$
|
29.3
|
|
$
|
103.0
|
|
As of
December 31, 2016
, we had no accumulated goodwill impairment losses.
Intangible assets and accumulated amortization as of December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
2015
|
($ in millions)
|
Cost
|
Accumulated Amortization
|
Net
|
Cost
|
Accumulated Amortization
|
Net
|
Patents and licensing
|
$
|
17.8
|
|
$
|
(13.4
|
)
|
$
|
4.4
|
|
$
|
19.7
|
|
$
|
(12.8
|
)
|
$
|
6.9
|
|
Technology
|
3.3
|
|
(0.7
|
)
|
2.6
|
|
3.4
|
|
(0.6
|
)
|
2.8
|
|
Trademarks
|
2.0
|
|
(1.6
|
)
|
0.4
|
|
12.0
|
|
(1.4
|
)
|
10.6
|
|
Customer relationships
|
29.3
|
|
(18.3
|
)
|
11.0
|
|
29.5
|
|
(17.7
|
)
|
11.8
|
|
Customer contracts
|
10.7
|
|
(5.8
|
)
|
4.9
|
|
10.8
|
|
(5.3
|
)
|
5.5
|
|
|
$
|
63.1
|
|
$
|
(39.8
|
)
|
$
|
23.3
|
|
$
|
75.4
|
|
$
|
(37.8
|
)
|
$
|
37.6
|
|
The cost basis of intangible assets includes a foreign currency translation loss of
$0.3 million
and
$0.9 million
for the years ended
December 31, 2016
and
2015
, respectively. Amortization expense for the years ended
December 31, 2016
,
2015
and
2014
was
$2.6 million
,
$3.5 million
and
$4.9 million
, respectively. Estimated annual amortization expense for the next five years is as follows: 2017 -
$4.1 million
, 2018 -
$3.5 million
, 2019 -
$3.6 million
, 2020 -
$3.6 million
and 2021 -
$3.5 million
. During 2016, as part of our restructuring plan, we recorded within other expense a
$2.8 million
non-cash asset write-down associated with the discontinued use of a patent and a
$10.0 million
non-cash asset write-down associated with the discontinued use of an indefinite-lived trademark.
Note 7: Other Current Liabilities
Other current liabilities as of December 31 included the following:
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
2015
|
Deferred income
|
$
|
13.2
|
|
$
|
14.4
|
|
Other accrued expenses
|
20.3
|
|
23.1
|
|
Dividends payable
|
9.5
|
|
8.6
|
|
Restructuring obligations
|
5.9
|
|
—
|
|
Other
|
9.4
|
|
7.7
|
|
Total other current liabilities
|
$
|
58.3
|
|
$
|
53.8
|
|
Other consisted primarily of value-added taxes payable and accrued taxes other than income.
Note 8: Debt
The following table summarizes our long-term debt obligations, net of unamortized debt issuance costs and current maturities, at December 31. The interest rates shown in parentheses are as of
December 31, 2016
.
|
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
|
2015
|
Euro note B, due February 27, 2016
|
$
|
—
|
|
|
$
|
66.8
|
|
Term loan, due January 1, 2018 (2.27%)
|
34.9
|
|
|
37.1
|
|
Note payable, due December 31, 2019
|
0.2
|
|
|
0.2
|
|
Credit Facility, due October 15, 2020 (1.00%)
|
26.4
|
|
|
27.1
|
|
Series A notes, due July 5, 2022 (3.67%)
|
42.0
|
|
|
42.0
|
|
Series B notes, due July 5, 2024 (3.82%)
|
53.0
|
|
|
53.0
|
|
Series C notes, due July 5, 2027 (4.02%)
|
73.0
|
|
|
73.0
|
|
|
229.5
|
|
|
299.2
|
|
Less: unamortized debt issuance costs
|
0.9
|
|
|
1.0
|
|
Total debt
|
228.6
|
|
|
298.2
|
|
Less: current portion of long-term debt
|
2.4
|
|
|
69.3
|
|
Long-term debt
|
$
|
226.2
|
|
|
$
|
228.9
|
|
Euro-denominated Note
Our Euro note B of
€61.1 million
(
$66.8 million
at December 31, 2015) matured in
February 2016
.
Term Loan
In 2013, we entered into a
$42.8 million
five
five
-year term loan due
January 2018
related to our corporate office and research building. Borrowings under the loan bear interest at a variable rate equal to the London Interbank Offered Rate (“
LIBOR
”) plus a margin of
1.50
percentage points. Please refer to Note 9,
Derivative Financial Instruments
, for a discussion of the interest-rate swap agreement associated with this loan. At
December 31, 2016
,
$34.9 million
was outstanding under this loan, of which
$2.4 million
was classified as current. As of
December 31, 2016
and
2015
, there were unamortized debt issuance costs remaining of
$0.1 million
and
$0.1 million
, respectively, which are being amortized as additional interest expense over the term of the loan.
Credit Facility
In October 2015, we entered into the Credit Facility, that replaced our prior revolving credit facility, which was scheduled to expire in April 2017. The Credit Facility, which expires in
October 2020
, contains a
$300.0 million
credit facility, which may be increased from time to time by up to
$100.0 million
in the aggregate, subject to the satisfaction of certain conditions and upon approval by the banks. Up to
$30.0 million
of the Credit Facility is available for swing-line loans and up to
$30.0 million
is available for the issuance of standby letters of credit. Borrowings under the Credit Facility bear interest at either the base rate or at the applicable
LIBOR
rate, plus a tiered margin based on the ratio of our total debt to modified earnings before interest, taxes, depreciation and amortization (“EBITDA”), ranging from
0
to
75
basis points for base rate loans and
100
to
175
basis points for LIBOR rate loans. Consistent with our previous revolving credit facility, the Credit Facility contains representations and covenants that require compliance with, among other restrictions, a maximum leverage ratio and a minimum interest coverage ratio. The Credit Facility also contains usual and customary default provisions, and limitations on liens securing indebtedness, asset sales, distributions and acquisitions. As of
December 31, 2016
and 2015, total unamortized debt issuance costs of
$1.3 million
and
$1.6 million
, respectively, were recorded in other noncurrent assets and are being amortized as additional interest expense over the term of the Credit Facility. A portion of these costs relate to our prior credit facility.
At
December 31, 2016
, we had
$26.4 million
in outstanding long-term borrowings under the Credit Facility, of which
$4.3 million
was denominated in Yen and
$22.1 million
in Euro. These borrowings, together with outstanding letters of credit of
$3.0 million
, resulted in a borrowing capacity available under the Credit Facility of
$270.6 million
at
December 31, 2016
.
Private Placement
In 2012, we concluded a private placement issuance of
$168.0 million
in senior unsecured notes. The total amount of the private placement issuance was divided into three tranches -
$42.0 million
3.67%
Series A Notes due
July 5, 2022
,
$53.0 million
3.82%
Series B Notes due
July 5, 2024
, and
$73.0 million
4.02%
Series C Notes due
July 5, 2027
(the “Notes”). The Notes rank pari passu with our other senior unsecured debt. The weighted average of the coupon interest rates on the Notes is
3.87%
. Related interest-rate hedging and transaction costs incurred increased the annual effective rate of interest on the Notes to an estimated
4.16%
. Please refer to Note 9,
Derivative Financial Instruments
, for additional discussion of the related interest rate hedge. As of
December 31, 2016
and
2015
, there were unamortized debt issuance costs remaining of
$0.8 million
and
$0.9 million
, respectively, which are being amortized as additional interest expense over the term of the Notes.
Covenants
Pursuant to the financial covenants in our debt agreements, we are required to maintain established interest coverage ratios and to not exceed established leverage ratios. In addition, the agreements contain other customary covenants, none of which we consider restrictive to our operations. At
December 31, 2016
, we were in compliance with all of our debt covenants, and we expect to continue to be in compliance with the terms of these agreements throughout 2017.
Interest costs incurred during
2016
,
2015
and
2014
were
$11.7 million
,
$15.6 million
and
$18.1 million
, respectively. The aggregate annual maturities of long-term debt were as follows:
2017
-
$2.4 million
,
2018
-
$32.6 million
,
2019
-
$0.1 million
,
2020
-
$26.4 million
, none in 2021, and thereafter -
$168.0 million
.
Note 9: Derivative Financial Instruments
Our ongoing business operations expose us to various risks such as fluctuating interest rates, foreign exchange rates and increasing commodity prices. To manage these market risks, we periodically enter into derivative financial instruments such as interest rate swaps, options and foreign exchange contracts for periods consistent with and for notional amounts equal to or less than the related underlying exposures. We do not purchase or hold any derivative financial instruments for investment or trading purposes. All derivatives are recorded on the balance sheet at fair value.
Interest Rate Risk
At
December 31, 2016
, we had a
$34.9 million
forward-start interest rate swap outstanding that hedges the variability in cash flows due to changes in the applicable interest rate of our variable-rate
five
-year term loan related to the purchase of our corporate office and research building. Under this swap, we receive variable interest rate payments based on
one-month LIBOR
plus a margin in return for making monthly fixed interest payments at
5.41%
. We designated this swap as a cash flow hedge.
Foreign Exchange Rate Risk
In 2016 and 2015, we entered into forward exchange contracts, designated as fair value hedges, to neutralize our exposure to fluctuating foreign exchange rates on cross-currency intercompany loans. As of December 31, 2016 and December 31, 2015, the total amount of these forward exchange contracts was
€57.5 million
and
€20.0 million
, respectively.
In addition, in the fourth quarter of 2016, we entered into several foreign currency contracts, designated as cash flow hedges, for periods of up to eighteen months, intended to hedge the currency risk associated with a portion of our forecasted transactions denominated in foreign currencies. At December 31, 2016, we had outstanding foreign currency contracts to purchase and sell certain currencies, as follows:
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
Sell
|
Currency
|
Purchase
|
|
USD
|
Euro
|
USD
|
49.0
|
|
|
—
|
|
46.1
|
|
Yen
|
6,475.0
|
|
|
31.6
|
|
23.5
|
|
Singapore Dollar
|
37.0
|
|
|
18.2
|
|
7.3
|
|
At
December 31, 2016
, a portion of our debt consisted of borrowings denominated in currencies other than USD. We have designated our
€21.0 million
(
$22.1 million
) Euro-denominated borrowings under our Credit Facility as a hedge of our net investment in certain European subsidiaries. A cumulative foreign currency translation gain of
$1.7 million
pre-tax (
$1.1 million
after tax) on this debt was recorded within accumulated other comprehensive loss as of
December 31, 2016
. We have also designated our
¥500.0 million
(
$4.3 million
) Yen-denominated borrowings under our Credit Facility as a hedge of our net investment in Daikyo. At
December 31, 2016
, there was a cumulative foreign currency translation loss on this Yen-denominated debt of less than
$0.1 million
, which was also included within accumulated other comprehensive loss.
Commodity Price Risk
Many of our proprietary products are made from synthetic elastomers, which are derived from the petroleum refining process. We purchase the majority of our elastomers via long-term supply contracts, some of which contain clauses that provide for surcharges related to fluctuations in crude oil prices. The following economic hedges did not qualify for hedge accounting treatment since they did not meet the highly effective requirement at inception.
In February 2016, we purchased a series of call options for a total of
71,900
barrels of crude oil to mitigate our exposure to such oil-based surcharges and protect operating cash flows with regards to a portion of our forecasted elastomer purchases through November 2016. With these contracts in 2016, we benefited
$0.4 million
due to increases in crude oil prices, offset by the
$0.2 million
premium that we paid to purchase the contracts.
In November 2016, we purchased a series of call options for a total of
96,525
barrels of crude oil through November 2017. During 2016, the gain recorded in cost of goods and services sold related to these options was less than
$0.1 million
.
Effects of Derivative Instruments on Financial Position and Results of Operations
Please refer to Note 10,
Fair Value Measurements
, for the balance sheet location and fair values of our derivative instruments as of
December 31, 2016
and
2015
.
The following table summarizes the effects of derivative instruments designated as hedges on OCI and earnings, net of tax, for the year ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (Loss)Gain Recognized in OCI
|
|
Amount of (Gain) Loss Reclassified from Accumulated OCI into Income
|
|
Location of (Gain) Loss Reclassified from Accumulated OCI into
Income
|
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
|
Foreign currency hedge contracts
|
$
|
(0.5
|
)
|
|
$
|
1.6
|
|
|
$
|
—
|
|
|
$
|
(1.6
|
)
|
|
Net sales
|
Foreign currency hedge contracts
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Cost of goods and services sold
|
Interest rate swap contracts
|
(0.1
|
)
|
|
(0.3
|
)
|
|
0.8
|
|
|
1.3
|
|
|
Interest expense
|
Forward treasury locks
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.2
|
|
|
Interest expense
|
Total
|
$
|
(1.2
|
)
|
|
$
|
1.3
|
|
|
$
|
1.1
|
|
|
$
|
(0.1
|
)
|
|
|
Net Investment Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency-denominated debt
|
$
|
—
|
|
|
$
|
6.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Foreign exchange and other
|
Total
|
$
|
—
|
|
|
$
|
6.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
During
2016
and
2015
, there was no material ineffectiveness related to our hedges.
Note 10: Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy classifies the inputs to valuation techniques used to measure fair value into one of three levels:
|
|
•
|
Level 1
: Unadjusted quoted prices in active markets for identical assets or liabilities.
|
|
|
•
|
Level 2
: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
|
|
|
•
|
Level 3
: Unobservable inputs that reflect the reporting entity’s own assumptions.
|
The following tables present the assets and liabilities recorded at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
Basis of Fair Value Measurements
|
($ in millions)
|
December 31,
2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
Deferred compensation assets
|
$
|
7.4
|
|
|
$
|
7.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency contracts
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
$
|
7.6
|
|
|
$
|
7.4
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
$
|
8.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8.0
|
|
Deferred compensation liabilities
|
8.4
|
|
|
8.4
|
|
|
—
|
|
|
—
|
|
Interest rate swap contract
|
1.0
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
Foreign currency contracts
|
1.6
|
|
|
—
|
|
|
1.6
|
|
|
—
|
|
|
$
|
19.0
|
|
|
$
|
8.4
|
|
|
$
|
2.6
|
|
|
$
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
Basis of Fair Value Measurements
|
($ in millions)
|
December 31,
2015
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
Deferred compensation assets
|
$
|
6.8
|
|
|
$
|
6.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency contracts
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
$
|
7.0
|
|
|
$
|
6.8
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
$
|
6.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6.0
|
|
Deferred compensation liabilities
|
8.8
|
|
|
8.8
|
|
|
—
|
|
|
—
|
|
Interest rate swap contracts
|
2.0
|
|
|
—
|
|
|
2.0
|
|
|
—
|
|
Foreign currency contracts
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
$
|
17.0
|
|
|
$
|
8.8
|
|
|
$
|
2.2
|
|
|
$
|
6.0
|
|
Deferred compensation assets are included within other noncurrent assets and are valued using a market approach based on quoted market prices in an active market. The fair value of our foreign currency contracts, included within other current assets and other current liabilities, is valued using an income approach based on quoted forward foreign exchange rates and spot rates at the reporting date. The fair value of our contingent consideration, included within other current and long-term liabilities, is discussed further in the section related to Level 3 fair value measurements. The fair value of deferred compensation liabilities is based on quoted prices of the underlying employees’ investment selections and is included within other long-term liabilities. Our interest rate swap, included within other long-term liabilities, is valued based on the terms of the contract and observable market inputs (i.e., LIBOR, Eurodollar synthetic forwards and swap spreads). Please refer to Note 9,
Derivative Financial Instruments
, for further discussion of our derivatives.
Level 3 Fair Value Measurements
The fair value of the SmartDose contingent consideration was initially determined using a probability-weighted income approach, and is revalued at each reporting date or more frequently if circumstances dictate. Changes in the fair value of this obligation are recorded as income or expense within other expense (income) in our consolidated statements of income. The significant unobservable inputs used in the fair value measurement of the contingent consideration are the sales projections, the probability of success factors, and the discount rate. Significant increases or decreases in any of those inputs in isolation would result in a significantly lower or higher fair value measurement. As development and commercialization of the SmartDose technology platform progresses, we may need to update the sales projections, the probability of success factors, and the discount rate used. This could result in a material increase or decrease to the contingent consideration liability.
The following table provides a summary of changes in our Level 3 fair value measurements:
|
|
|
|
|
|
($ in millions)
|
Balance, December 31, 2014
|
$
|
5.0
|
|
Increase in fair value recorded in earnings
|
1.1
|
|
Payments
|
(0.1
|
)
|
Balance, December 31, 2015
|
6.0
|
|
Increase in fair value recorded in earnings
|
2.3
|
|
Payments
|
(0.3
|
)
|
Balance, December 31, 2016
|
$
|
8.0
|
|
Please refer to Note 14,
Other Expense (Income),
for further discussion of acquisition-related contingencies.
Other Financial Instruments
We believe that the carrying amounts of our cash and cash equivalents and accounts receivable approximate their fair values due to their near-term maturities.
The estimated fair value of long-term debt is based on quoted market prices for debt issuances with similar terms and maturities and is classified as Level 2 within the fair value hierarchy. At
December 31, 2016
, the estimated fair value of long-term debt was
$228.3 million
compared to a carrying amount of
$226.2 million
. At
December 31, 2015
, the estimated fair value of long-term debt was
$225.0 million
and the carrying amount was
$228.9 million
.
Note 11: Accumulated Other Comprehensive Loss
The following table presents the changes in the components of accumulated other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
Losses on
cash flow
hedges
|
Unrealized gains
on investment
securities
|
Defined benefit
pension and other
postretirement plans
|
Foreign
currency
translation
|
Total
|
Balance, December 31, 2014
|
$
|
(4.3
|
)
|
$
|
4.7
|
|
$
|
(64.6
|
)
|
$
|
(55.0
|
)
|
$
|
(119.2
|
)
|
Other comprehensive income (loss) before reclassifications
|
1.3
|
|
0.7
|
|
(8.9
|
)
|
(70.3
|
)
|
(77.2
|
)
|
Amounts reclassified out
|
(0.1
|
)
|
—
|
|
33.9
|
|
—
|
|
33.8
|
|
Other comprehensive income (loss), net of tax
|
1.2
|
|
0.7
|
|
25.0
|
|
(70.3
|
)
|
(43.4
|
)
|
Balance, December 31, 2015
|
(3.1
|
)
|
5.4
|
|
(39.6
|
)
|
(125.3
|
)
|
(162.6
|
)
|
Other comprehensive loss before reclassifications
|
(1.2
|
)
|
(0.2
|
)
|
(9.2
|
)
|
(18.1
|
)
|
(28.7
|
)
|
Amounts reclassified out
|
1.1
|
|
—
|
|
3.4
|
|
—
|
|
4.5
|
|
Other comprehensive loss, net of tax
|
(0.1
|
)
|
(0.2
|
)
|
(5.8
|
)
|
(18.1
|
)
|
(24.2
|
)
|
Balance, December 31, 2016
|
$
|
(3.2
|
)
|
$
|
5.2
|
|
$
|
(45.4
|
)
|
$
|
(143.4
|
)
|
$
|
(186.8
|
)
|
A summary of the reclassifications out of accumulated other comprehensive loss is presented in the following table ($ in millions):
|
|
|
|
|
|
|
|
|
Detail of components
|
2016
|
2015
|
Location on Statement of Income
|
Losses on cash flow hedges:
|
|
|
|
Foreign currency contracts
|
$
|
—
|
|
$
|
1.8
|
|
Net sales
|
Interest rate swap contracts
|
(1.3
|
)
|
(2.1
|
)
|
Interest expense
|
Forward treasury locks
|
(0.4
|
)
|
(0.3
|
)
|
Interest expense
|
Total before tax
|
(1.7
|
)
|
(0.6
|
)
|
|
Tax expense
|
0.6
|
|
0.7
|
|
|
Net of tax
|
$
|
(1.1
|
)
|
$
|
0.1
|
|
|
Amortization of defined benefit pension and other postretirement plans:
|
|
|
|
Transition obligation
|
$
|
(0.1
|
)
|
$
|
(0.1
|
)
|
(a)
|
Prior service credit
|
1.4
|
|
1.3
|
|
(a)
|
Actuarial losses
|
(3.4
|
)
|
(4.5
|
)
|
(a)
|
Curtailment
|
(3.1
|
)
|
—
|
|
(a)
|
Settlements
|
—
|
|
(50.4
|
)
|
(a)
|
Total before tax
|
(5.2
|
)
|
(53.7
|
)
|
|
Tax expense
|
1.8
|
|
19.8
|
|
|
Net of tax
|
$
|
(3.4
|
)
|
$
|
(33.9
|
)
|
|
Total reclassifications for the period, net of tax
|
$
|
(4.5
|
)
|
$
|
(33.8
|
)
|
|
(a) These components are included in the computation of net periodic benefit cost. Please refer to Note 13,
Benefit Plans
, for additional details.
Note 12: Stock-Based Compensation
On May 3, 2016, our shareholders approved the adoption of the West Pharmaceutical Services, Inc. 2016 Omnibus Incentive Compensation Plan (the “2016 Plan”). All remaining shares available for issuance under the 2011 Omnibus Incentive Compensation Plan (the “2011 Plan”) were extinguished upon adoption of the 2016 Plan. Awards granted under previous plans remain outstanding until expiration or settlement. The 2016 Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards and performance awards to employees and non-employee directors. A committee of the Board of Directors determines the terms and conditions of awards to be granted. Vesting requirements vary by award. At
December 31, 2016
, there were
5,334,471
shares remaining in the 2016 Plan for future grants.
Stock options and stock appreciation rights reduce the number of shares available by
one
share for each award granted. All other awards under the 2016 Plan will reduce the total number of shares available for grant by an amount equal to
2.5
times the number of shares awarded. If awards made under previous plans would entitle a plan participant to an amount of West stock in excess of the target amount, the additional shares (up to a maximum threshold amount) will be distributed under the 2016 Plan.
The following table summarizes our stock-based compensation expense recorded within selling, general and administrative expenses for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
2015
|
2014
|
Stock option and appreciation rights
|
$
|
8.6
|
|
$
|
9.2
|
|
$
|
7.6
|
|
Performance-vesting shares
|
6.7
|
|
6.0
|
|
6.5
|
|
Performance-vesting units
|
0.1
|
|
0.7
|
|
1.9
|
|
Performance-vesting shares/units dividend equivalents
|
0.2
|
|
0.2
|
|
0.4
|
|
Employee stock purchase plan
|
0.7
|
|
0.6
|
|
0.5
|
|
Deferred compensation plans
|
3.2
|
|
2.5
|
|
1.7
|
|
Total stock-based compensation expense
|
$
|
19.5
|
|
$
|
19.2
|
|
$
|
18.6
|
|
In addition, we recorded a
$0.2 million
charge during 2016 as part of our restructuring plan, and we recorded a
$10.4 million
charge during 2015 related to executive retirements. Both charges were recorded within other expense. Please refer to Note 14,
Other Expense (Income)
,
for further discussion of these charges.
The amount of unrecognized compensation expense for all non-vested awards as of
December 31, 2016
, was approximately
$16.2 million
, which is expected to be recognized over a weighted average period of
1.7
years.
Stock Options
Stock options granted to employees vest in equal annual increments over
4
years of continuous service. All awards expire
10
years from the date of grant. Upon the exercise of stock options, shares are issued in exchange for the exercise price of the options.
The following table summarizes changes in outstanding options:
|
|
|
|
|
|
|
|
(in millions, except per share data)
|
2016
|
|
2015
|
|
2014
|
|
Options outstanding, January 1
|
5.0
|
|
4.6
|
|
4.8
|
|
Granted
|
0.7
|
|
0.9
|
|
0.7
|
|
Exercised
|
(1.1
|
)
|
(0.5
|
)
|
(0.7
|
)
|
Forfeited
|
(0.1
|
)
|
—
|
|
(0.2
|
)
|
Options outstanding, December 31
|
4.5
|
|
5.0
|
|
4.6
|
|
Options exercisable, December 31
|
2.7
|
|
2.9
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Exercise Price
|
2016
|
|
2015
|
|
2014
|
|
Options outstanding, January 1
|
$
|
31.77
|
|
$
|
25.49
|
|
$
|
21.99
|
|
Granted
|
61.98
|
|
56.06
|
|
47.59
|
|
Exercised
|
22.50
|
|
21.85
|
|
20.17
|
|
Forfeited
|
45.91
|
|
—
|
|
31.42
|
|
Options outstanding, December 31
|
$
|
38.11
|
|
$
|
31.77
|
|
$
|
25.49
|
|
Options exercisable, December 31
|
$
|
27.17
|
|
$
|
22.75
|
|
$
|
20.67
|
|
As of
December 31, 2016
, the weighted average remaining contractual life of options outstanding and of options exercisable was
6.3
years and
4.9
years, respectively.
As of
December 31, 2016
, the aggregate intrinsic value of total options outstanding was
$212.4 million
, of which
$153.5 million
represented vested options.
The fair value of the options was estimated on the date of grant using a Black-Scholes option valuation model that used the following weighted average assumptions in
2016
,
2015
and
2014
: a risk-free interest rate of
1.4%
,
1.7%
, and
1.6%
, respectively; stock volatility of
20.4%
,
21.0%
, and
21.9%
, respectively; and dividend yields of
0.9%
,
0.9%
, and
0.8%
, respectively. Stock volatility is estimated based on historical data and the impact from expected future trends. Expected lives, which are based on prior experience, averaged
6 years
for 2016, 2015 and 2014. The weighted average grant date fair value of options granted in
2016
,
2015
and
2014
was
$12.12
,
$10.57
and
$10.38
, respectively. Stock option expense is recognized over the vesting period, net of forfeitures.
For the years ended December 31,
2016
,
2015
and
2014
, the intrinsic value of options exercised was
$49.4 million
,
$17.7 million
and
$16.0 million
, respectively. The grant date fair value of options vested during those same periods was
$5.8 million
,
$4.8 million
and
$4.7 million
, respectively.
Stock Appreciation Rights
Stock appreciation rights (“SARs”) granted to eligible international employees vest in equal annual increments over
4 years
of continuous service. All awards expire
10 years
from the date of grant. The fair value of each cash-settled SAR is adjusted at the end of each reporting period, with the resulting change reflected in expense. As of
December 31, 2016
, SARs outstanding were
116,087
, of which
61,135
were cash-settled and
54,952
were stock-settled. Upon exercise of a cash-settled SAR, the employee receives cash for the difference between the grant date price and the fair market value of the Company's stock on the date of exercise. As a result of the cash settlement feature, cash-settled SARs are recorded within other long-term liabilities. Upon exercise of a stock-settled SAR, shares are issued in exchange for the exercise price of the stock-settled SAR. As a result of the stock settlement feature, stock-settled SARs are recorded within equity.
The following table summarizes changes in outstanding SARs:
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
SARs outstanding, January 1
|
232,930
|
|
297,714
|
|
375,104
|
|
Granted
|
3,368
|
|
12,356
|
|
7,733
|
|
Exercised
|
(114,976
|
)
|
(77,140
|
)
|
(85,123
|
)
|
Forfeited
|
(5,235
|
)
|
—
|
|
—
|
|
SARs outstanding, December 31
|
116,087
|
|
232,930
|
|
297,714
|
|
SARs exercisable, December 31
|
71,701
|
|
112,295
|
|
88,751
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Exercise Price
|
2016
|
|
2015
|
|
2014
|
|
SARs outstanding, January 1
|
$
|
27.79
|
|
$
|
25.20
|
|
$
|
24.03
|
|
Granted
|
68.40
|
|
57.25
|
|
47.74
|
|
Exercised
|
24.95
|
|
22.52
|
|
22.09
|
|
Forfeited
|
42.28
|
|
—
|
|
—
|
|
SARs outstanding, December 31
|
$
|
31.13
|
|
$
|
27.79
|
|
$
|
25.20
|
|
SARs exercisable, December 31
|
$
|
26.65
|
|
$
|
24.60
|
|
$
|
23.15
|
|
Performance Awards
In addition to stock options and SAR awards, we grant performance vesting share (“PVS”) awards and performance vesting unit (“PVU”) awards to eligible employees. These awards are earned based on the Company's performance against pre-established targets, including annual growth rate of revenue and return on invested capital, over a specified performance period. Depending on the achievement of the targets, recipients of PVS awards are entitled to receive a certain number of shares of common stock, whereas recipients of PVU awards are entitled to receive a payment in cash per unit based on the fair market value of a share of our common stock at the end of the performance period.
The following table summarizes changes in our outstanding PVS awards:
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Non-vested PVS awards, January 1
|
422,726
|
|
470,719
|
|
578,358
|
|
Granted at target level
|
115,035
|
|
147,908
|
|
133,823
|
|
Adjustments above/(below) target
|
19,339
|
|
132,444
|
|
53,438
|
|
Vested and converted
|
(173,364
|
)
|
(318,337
|
)
|
(250,205
|
)
|
Forfeited
|
(5,674
|
)
|
(10,008
|
)
|
(44,695
|
)
|
Non-vested PVS awards, December 31
|
378,062
|
|
422,726
|
|
470,719
|
|
|
|
|
|
Weighted Average Grant Date Fair Value
|
2016
|
|
2015
|
|
2014
|
|
Non-vested PVS awards, January 1
|
$
|
45.60
|
|
$
|
30.93
|
|
$
|
23.79
|
|
Granted at target level
|
60.47
|
|
55.49
|
|
47.21
|
|
Adjustments above/(below) target
|
38.71
|
|
22.97
|
|
22.86
|
|
Vested and converted
|
59.64
|
|
51.53
|
|
48.69
|
|
Forfeited
|
49.86
|
|
41.84
|
|
30.76
|
|
Non-vested PVS awards, December 31
|
$
|
54.47
|
|
$
|
45.60
|
|
$
|
30.93
|
|
Shares earned under PVS and PVU awards may vary from
0%
to
200%
of an employee's targeted award. The fair value of PVS awards is based on the market price of our stock at the grant date and is recognized as expense over the performance period, adjusted for estimated target outcomes and net of forfeitures. The weighted average grant date fair value of PVS awards granted during the years
2016
,
2015
and
2014
was
$60.47
,
$55.49
and
$47.21
, respectively. Including forfeiture and above-target achievement expectations, we expect that the PVS awards will convert to
362,939
shares to be issued over an average remaining term of
1 year
.
The fair value of PVU awards is also based on the market price of our stock at the grant date. These awards are revalued at the end of each quarter based on changes in our stock price. As a result of the cash settlement feature, PVU awards are recorded within other long-term liabilities.
The following table summarizes changes in our outstanding PVU awards:
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Non-vested PVU awards, January 1
|
29,196
|
|
55,509
|
|
79,456
|
|
Granted at target level
|
419
|
|
1,386
|
|
1,584
|
|
Adjustments above/(below) target
|
2,858
|
|
19,315
|
|
6,907
|
|
Vested and converted
|
(29,032
|
)
|
(47,014
|
)
|
(32,438
|
)
|
Forfeited
|
(990
|
)
|
—
|
|
—
|
|
Non-vested PVU awards, December 31
|
2,451
|
|
29,196
|
|
55,509
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Grant Date Fair Value
|
2016
|
|
2015
|
|
2014
|
|
Non-vested PVU awards, January 1
|
$
|
32.07
|
|
$
|
26.15
|
|
$
|
23.86
|
|
Granted at target level
|
59.64
|
|
54.14
|
|
47.34
|
|
Adjustments above/(below) target
|
30.80
|
|
22.07
|
|
22.72
|
|
Vested and converted
|
59.64
|
|
51.53
|
|
47.34
|
|
Forfeited
|
50.55
|
|
—
|
|
—
|
|
Non-vested PVU awards, December 31
|
$
|
25.28
|
|
$
|
32.07
|
|
$
|
26.15
|
|
Employee Stock Purchase Plan
We also offer an Employee Stock Purchase Plan (“ESPP”) which provides for the sale of our common stock to eligible employees at
85%
of the current market price on the last trading day of each quarterly offering period. Payroll deductions are limited to
25%
of the employee's base salary, not to exceed
$25,000
in any one calendar year. In addition, employees may not buy more than
2,000
shares during any offering period (
8,000
shares per year). Purchases under the ESPP were
60,839
shares,
61,757
shares and
76,751
shares for the years
2016
,
2015
and
2014
, respectively. At
December 31, 2016
, there were approximately
4.0 million
shares available for issuance under the ESPP.
Deferred Compensation Plans
Our deferred compensation plans include a Non-Qualified Deferred Compensation Plan for Non-Employee Directors, under which non-employee directors may defer all or part of their annual cash retainers. The deferred fees may be credited to a stock-equivalent account. Amounts credited to this account are converted into deferred stock units based on the fair market value of
one
share of our common stock on the last day of the quarter. For deferred stock units ultimately paid in cash, a liability is calculated at an amount determined by multiplying the number of units by the fair market value of our common stock at the end of each reporting period. In addition, deferred stock awards are granted on the date of our annual meeting, and are distributed in shares of common stock. In
2016
, we granted
20,077
deferred stock awards, with a grant date fair value of
$71.47
. Similarly, a non-qualified deferred compensation plan for eligible employees provides for the conversion of compensation into deferred stock units. As of
December 31, 2016
, the
two
deferred compensation plans held a total of
388,287
deferred stock units, including
24,296
units to be paid in cash.
In addition, during 2016, we granted
1,393
restricted share awards at a weighted grant-date fair value of
$71.79
per share to new executive officers under the 2016 Plan. During 2015, we granted
41,458
restricted share awards at a weighted grant-date fair value of
$57.89
per share to new executive officers under the 2011 Plan. The fair value of the awards is based on the market price of our stock at the grant date and is recognized as expense over the vesting period.
Annual Incentive Plan
Under our annual incentive plan, participants are paid bonuses on the attainment of certain financial goals, which they can elect to receive in either cash or shares of our common stock. If the employee elects payment in shares, they are also given a restricted incentive stock award equal to
one
share for each
four
bonus shares issued. The incentive stock awards vest at the end of
four years
provided that the participant has not made a disqualifying disposition of their bonus shares. Incentive stock award grants were
2,400
shares,
1,500
shares and
4,200
shares in
2016
,
2015
and
2014
, respectively. Incentive stock forfeitures of
800
shares,
200
shares and
4,100
shares occurred in
2016
,
2015
and
2014
, respectively. Compensation expense is recognized over the vesting period based on the fair market value of common stock on the award date:
$59.64
per share granted in
2016
,
$51.53
per share granted in
2015
and
$48.69
per share granted in
2014
.
Note 13: Benefit Plans
Certain of our U.S. and international subsidiaries sponsor defined benefit pension plans. In addition, we provide minimal death benefits for certain U.S. retirees and pay a portion of healthcare costs for retired U.S. salaried employees and their dependents. Benefits for participants are coordinated with Medicare and the plan mandates Medicare risk (“HMO”) coverage wherever possible and caps the total contribution for non-HMO coverage. We also sponsor a defined contribution plan for certain salaried and hourly U.S. employees. Our 401(k) plan contributions were
$4.9 million
for
2016
,
$4.8 million
for
2015
and
$4.3 million
for
2014
.
Pension and Other Retirement Benefits
The components of net periodic benefit cost and other amounts recognized in OCI were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
|
Other retirement benefits
|
($ in millions)
|
2016
|
|
2015
|
|
2014
|
|
|
2016
|
|
2015
|
|
2014
|
|
Net periodic benefit cost:
|
|
|
|
|
|
|
|
Service cost
|
$
|
10.2
|
|
$
|
10.6
|
|
$
|
9.8
|
|
|
$
|
0.5
|
|
$
|
0.5
|
|
$
|
0.4
|
|
Interest cost
|
10.5
|
|
13.8
|
|
17.1
|
|
|
0.5
|
|
0.4
|
|
0.4
|
|
Expected return on assets
|
(12.6
|
)
|
(19.5
|
)
|
(19.3
|
)
|
|
—
|
|
—
|
|
—
|
|
Amortization of prior service credit
|
(1.4
|
)
|
(1.3
|
)
|
(1.3
|
)
|
|
—
|
|
—
|
|
—
|
|
Amortization of transition obligation
|
0.1
|
|
0.1
|
|
0.1
|
|
|
—
|
|
—
|
|
—
|
|
Amortization of actuarial loss (gain)
|
4.8
|
|
5.9
|
|
4.7
|
|
|
(1.4
|
)
|
(1.4
|
)
|
(1.6
|
)
|
Curtailment
|
(2.1
|
)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
Settlement effects
|
—
|
|
50.4
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
Net periodic benefit cost
|
$
|
9.5
|
|
$
|
60.0
|
|
$
|
11.1
|
|
|
$
|
(0.4
|
)
|
$
|
(0.5
|
)
|
$
|
(0.8
|
)
|
Other changes in plan assets and benefit obligations recognized in OCI, pre-tax:
|
|
|
|
|
|
|
|
Net loss (gain) arising during period
|
$
|
19.2
|
|
$
|
17.7
|
|
$
|
31.5
|
|
|
$
|
(0.1
|
)
|
$
|
(0.8
|
)
|
$
|
0.1
|
|
Prior service credit arising during period
|
—
|
|
(0.7
|
)
|
—
|
|
|
(3.0
|
)
|
—
|
|
—
|
|
Amortization of prior service credit
|
1.4
|
|
1.3
|
|
1.3
|
|
|
—
|
|
—
|
|
—
|
|
Amortization of transition obligation
|
(0.1
|
)
|
(0.1
|
)
|
(0.1
|
)
|
|
—
|
|
—
|
|
—
|
|
Amortization of actuarial (loss) gain
|
(4.8
|
)
|
(5.9
|
)
|
(4.7
|
)
|
|
1.4
|
|
1.4
|
|
1.6
|
|
Curtailment
|
(3.1
|
)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
Settlement effects
|
—
|
|
(50.4
|
)
|
—
|
|
|
—
|
|
—
|
|
—
|
|
Foreign currency translation
|
(3.2
|
)
|
(1.6
|
)
|
(2.1
|
)
|
|
—
|
|
—
|
|
—
|
|
Total recognized in OCI
|
$
|
9.4
|
|
$
|
(39.7
|
)
|
$
|
25.9
|
|
|
$
|
(1.7
|
)
|
$
|
0.6
|
|
$
|
1.7
|
|
Total recognized in net periodic benefit cost and OCI
|
$
|
18.9
|
|
$
|
20.3
|
|
$
|
37.0
|
|
|
$
|
(2.1
|
)
|
$
|
0.1
|
|
$
|
0.9
|
|
Net periodic benefit cost by geographic location is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
|
Other retirement benefits
|
|
2016
|
|
2015
|
|
2014
|
|
|
2016
|
|
2015
|
|
2014
|
|
U.S. plans
|
$
|
7.1
|
|
$
|
57.4
|
|
$
|
8.1
|
|
|
$
|
(0.4
|
)
|
$
|
(0.5
|
)
|
$
|
(0.8
|
)
|
International plans
|
2.4
|
|
2.6
|
|
3.0
|
|
|
—
|
|
—
|
|
—
|
|
Net periodic benefit cost
|
$
|
9.5
|
|
$
|
60.0
|
|
$
|
11.1
|
|
|
$
|
(0.4
|
)
|
$
|
(0.5
|
)
|
$
|
(0.8
|
)
|
During 2016, we recorded a pension curtailment gain of
$2.1 million
in connection with our decision to freeze both our U.S. qualified and non-qualified defined benefit pension plans as of January 1, 2019.
During 2015, we recorded a
$50.4 million
pension settlement charge within other expense, of which
$47.0 million
related to our purchase of a group annuity contract from MetLife to settle
$139.4 million
of our
$313.6 million
outstanding pension benefit obligation under our U.S. qualified pension plan. MetLife assumed the obligation to pay future pension benefits and provide administrative services beginning November 1, 2015 for approximately
1,750
retirees and surviving beneficiaries who retired before January 1, 2015 and are currently receiving payments from this plan. The purchase was funded directly by plan assets. The remaining portion of the pension settlement charge related to lump-sum payouts made to terminated vested participants of our U.S. qualified pension plan.
The following table presents the changes in the benefit obligation and the fair value of plan assets, as well as the funded status of the plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
|
Other retirement benefits
|
($ in millions)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
Change in benefit obligation:
|
|
|
|
|
|
Benefit obligation, January 1
|
$
|
(246.3
|
)
|
$
|
(398.5
|
)
|
|
$
|
(10.2
|
)
|
$
|
(10.1
|
)
|
Service cost
|
(10.2
|
)
|
(10.6
|
)
|
|
(0.5
|
)
|
(0.5
|
)
|
Interest cost
|
(10.5
|
)
|
(13.8
|
)
|
|
(0.5
|
)
|
(0.4
|
)
|
Participants' contributions
|
(0.6
|
)
|
(0.6
|
)
|
|
(0.5
|
)
|
(0.6
|
)
|
Actuarial (loss) gain
|
(23.4
|
)
|
7.8
|
|
|
0.1
|
|
0.8
|
|
Amendments/transfers in
|
—
|
|
0.8
|
|
|
3.0
|
|
—
|
|
Benefits/expenses paid
|
16.2
|
|
14.6
|
|
|
0.6
|
|
0.6
|
|
Curtailment
|
5.2
|
|
—
|
|
|
—
|
|
—
|
|
Settlement
|
—
|
|
149.7
|
|
|
—
|
|
—
|
|
Foreign currency translation
|
7.4
|
|
4.3
|
|
|
—
|
|
—
|
|
Benefit obligation, December 31
|
$
|
(262.2
|
)
|
$
|
(246.3
|
)
|
|
$
|
(8.0
|
)
|
$
|
(10.2
|
)
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
Fair value of assets, January 1
|
$
|
188.9
|
|
$
|
322.3
|
|
|
$
|
—
|
|
$
|
—
|
|
Actual return on assets
|
16.8
|
|
(6.0
|
)
|
|
—
|
|
—
|
|
Employer contribution
|
6.8
|
|
38.0
|
|
|
0.1
|
|
—
|
|
Participants' contributions
|
0.6
|
|
0.6
|
|
|
0.5
|
|
0.6
|
|
Benefits/expenses paid
|
(16.2
|
)
|
(14.6
|
)
|
|
(0.6
|
)
|
(0.6
|
)
|
Settlement
|
—
|
|
(149.7
|
)
|
|
—
|
|
—
|
|
Foreign currency translation
|
(4.5
|
)
|
(1.7
|
)
|
|
—
|
|
—
|
|
Fair value of assets, December 31
|
$
|
192.4
|
|
$
|
188.9
|
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
Funded status at end of year
|
$
|
(69.8
|
)
|
$
|
(57.4
|
)
|
|
$
|
(8.0
|
)
|
$
|
(10.2
|
)
|
International pension plan assets, at fair value, included in the preceding table were
$28.8 million
and
$29.2 million
at
December 31, 2016
and
2015
, respectively.
Amounts recognized in the balance sheet were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
Other retirement benefits
|
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Current liabilities
|
$
|
(1.5
|
)
|
$
|
(5.0
|
)
|
$
|
(0.7
|
)
|
$
|
(0.6
|
)
|
Noncurrent liabilities
|
(68.3
|
)
|
(52.4
|
)
|
(7.3
|
)
|
(9.6
|
)
|
|
$
|
(69.8
|
)
|
$
|
(57.4
|
)
|
$
|
(8.0
|
)
|
$
|
(10.2
|
)
|
The amounts in accumulated other comprehensive loss, pre-tax, consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
Other retirement benefits
|
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net actuarial loss (gain)
|
$
|
86.0
|
|
$
|
79.9
|
|
$
|
(11.9
|
)
|
$
|
(13.2
|
)
|
Transition obligation
|
—
|
|
0.1
|
|
—
|
|
—
|
|
Prior service credit
|
(2.3
|
)
|
(5.7
|
)
|
(3.0
|
)
|
—
|
|
Total
|
$
|
83.7
|
|
$
|
74.3
|
|
$
|
(14.9
|
)
|
$
|
(13.2
|
)
|
The net actuarial loss and prior service credit for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are
$4.7 million
and
$1.4 million
, respectively. The net actuarial gain and prior service credit for the other retirement benefits plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is
$2.3 million
and
$0.7 million
.
The accumulated benefit obligation for all defined benefit pension plans was
$258.4 million
and
$238.9 million
at
December 31, 2016
and
2015
, respectively, including
$60.6 million
and
$55.5 million
, respectively, for international pension plans.
All of the defined benefit pension plans have projected benefit obligations and accumulated benefit obligations in excess of plan assets as of
December 31, 2016
and
2015
.
Benefit payments expected to be paid under our defined benefit pension and other retirement benefit plans in the next ten years are as follows:
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
Domestic
|
International
|
Total
|
2017
|
$
|
12.5
|
|
$
|
1.5
|
|
$
|
14.0
|
|
2018
|
13.4
|
|
1.7
|
|
15.1
|
|
2019
|
14.3
|
|
2.1
|
|
16.4
|
|
2020
|
15.3
|
|
2.7
|
|
18.0
|
|
2021
|
15.0
|
|
2.4
|
|
17.4
|
|
2022 to 2026
|
73.6
|
|
14.9
|
|
88.5
|
|
|
$
|
144.1
|
|
$
|
25.3
|
|
$
|
169.4
|
|
In 2017, we expect to contribute
$23.0 million
to pension plans, of which
$1.9 million
is for international plans. Included in this amount is a
$1.1 million
contribution to our non-qualified defined benefit pension plan. In addition, we expect to contribute
$0.7 million
for other retirement benefits in 2017. We periodically consider additional, voluntary contributions depending on the investment returns generated by pension plan assets, changes in benefit obligation projections and other factors.
Weighted average assumptions used to determine net periodic benefit cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
|
Other retirement benefits
|
|
2016
|
|
2015
|
|
2014
|
|
|
2016
|
|
2015
|
|
2014
|
|
Discount rate
|
3.99
|
%
|
4.08
|
%
|
4.50
|
%
|
|
4.30
|
%
|
3.90
|
%
|
4.55
|
%
|
Rate of compensation increase
|
4.04
|
%
|
4.07
|
%
|
4.29
|
%
|
|
—
|
|
—
|
|
—
|
|
Long-term rate of return on assets
|
6.95
|
%
|
6.84
|
%
|
7.01
|
%
|
|
—
|
|
—
|
|
—
|
|
Weighted average assumptions used to determine the benefit obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
|
|
Other retirement benefits
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
Discount rate
|
3.68
|
%
|
4.22
|
%
|
|
3.90
|
%
|
4.30
|
%
|
Rate of compensation increase
|
4.04
|
%
|
4.07
|
%
|
|
—
|
|
—
|
|
The discount rate used to determine the benefit obligations for U.S. pension plans was
4.15%
and
4.55%
as of December 31,
2016
and
2015
, respectively. The weighted average discount rate used to determine the benefit obligations for all international plans was
2.25%
and
3.19%
as of December 31,
2016
and
2015
, respectively. The rate of compensation increase for U.S. plans was
4.25%
for
2016
and
2015
, while the weighted average rate for all international plans was
2.59%
for
2016
and
2.73%
for
2015
. Other retirement benefits were only available to U.S. employees. The long-term rate of return for U.S. plans, which accounts for
85%
of global plan assets, was
7.25%
for
2016
,
2015
and
2014
.
The assumed healthcare cost trend rate used to determine benefit obligations was
6.60%
for all participants in
2016
, decreasing to
5.00%
by 2021. A change in the assumed healthcare cost trend rate by one percentage point would result in a
$0.2 million
increase or decrease in the postretirement obligation. The assumed healthcare cost trend rate used to determine net periodic benefit cost was
7.00%
for all participants in
2016
, decreasing to
5.00%
by 2021. The effect of a one percentage point increase in the rate would be a
$0.1 million
increase in the aggregate service and interest cost components, while a one percentage point decrease in the rate would have an immaterial impact.
The weighted average asset allocations by asset category for our pension plans, at December 31, were as follows:
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Equity securities
|
60
|
%
|
62
|
%
|
Debt securities
|
30
|
%
|
35
|
%
|
Other
|
10
|
%
|
3
|
%
|
|
100
|
%
|
100
|
%
|
Our U.S. pension plan is managed as a balanced portfolio comprised of two components: equity and fixed income debt securities. Equity investments are used to maximize the long-term real growth of fund assets, while fixed income investments are used to generate current income, provide for a more stable periodic return, and to provide some protection against a prolonged decline in the market value of equity investments. Temporary funds may be held as cash. We maintain a long-term strategic asset allocation policy which provides guidelines for ensuring that the fund's investments are managed with the short-term and long-term financial goals of the fund, while allowing the flexibility to react to unexpected changes in capital markets.
The following are the U.S. target asset allocations and acceptable allocation ranges:
|
|
|
|
|
Target allocation
|
Allocation range
|
Equity securities
|
65%
|
60% - 70%
|
Debt securities
|
35%
|
30% - 40%
|
Other
|
—%
|
0% - 5%
|
Diversification across and within asset classes is the primary means by which we mitigate risk. We maintain guidelines for all asset and sub-asset categories in order to avoid excessive investment concentrations. Fund assets are monitored on a regular basis. If at any time the fund asset allocation is not within the acceptable allocation range, funds will be reallocated. We also review the fund on a regular basis to ensure that the investment returns received are consistent with the short-term and long-term goals of the fund and with comparable market returns. We are
prohibited from pledging fund securities and from investing pension fund assets in our own stock, securities on margin or derivative securities.
The following tables present the fair value of our pension plan assets, utilizing the fair value hierarchy discussed in Note 10,
Fair Value Measurements
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
December 31,
|
Basis of Fair Value Measurements
|
($ in millions)
|
2016
|
Level 1
|
Level 2
|
Level 3
|
Cash
|
$
|
10.0
|
|
$
|
10.0
|
|
$
|
—
|
|
$
|
—
|
|
Equity securities:
|
|
|
|
|
Indexed mutual funds
|
8.9
|
|
8.9
|
|
—
|
|
—
|
|
International mutual funds
|
3.0
|
|
3.0
|
|
—
|
|
—
|
|
Fixed income securities:
|
|
|
|
|
Mutual funds
|
9.2
|
|
9.2
|
|
—
|
|
—
|
|
Insurance contract
|
0.5
|
|
—
|
|
0.5
|
|
—
|
|
Balanced mutual fund
|
6.3
|
|
6.3
|
|
—
|
|
—
|
|
Pension plan assets in the fair value hierarchy
|
$
|
37.9
|
|
$
|
37.4
|
|
$
|
0.5
|
|
$
|
—
|
|
Pension plan assets measured at NAV
|
154.5
|
|
|
|
|
Pension plan assets at fair value
|
$
|
192.4
|
|
|
|
|
|
|
|
In accordance with U.S. GAAP, certain pension plan assets measured at NAV have not been classified in the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
December 31,
|
Basis of Fair Value Measurements
|
($ in millions)
|
2015
|
Level 1
|
Level 2
|
Level 3
|
Cash
|
$
|
0.6
|
|
$
|
0.6
|
|
$
|
—
|
|
$
|
—
|
|
Equity securities:
|
|
|
|
|
Indexed mutual funds
|
79.2
|
|
79.2
|
|
—
|
|
—
|
|
International mutual funds
|
37.7
|
|
37.7
|
|
—
|
|
—
|
|
Fixed income securities:
|
|
|
|
|
Mutual funds
|
63.0
|
|
63.0
|
|
—
|
|
—
|
|
Insurance contract
|
0.6
|
|
—
|
|
0.6
|
|
—
|
|
Balanced mutual fund
|
7.8
|
|
7.8
|
|
—
|
|
—
|
|
Pension plan assets at fair value
|
$
|
188.9
|
|
$
|
188.3
|
|
$
|
0.6
|
|
$
|
—
|
|
Note 14: Other Expense (Income)
Other expense (income) consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
|
2015
|
|
2014
|
Restructuring and related charges:
|
|
|
|
|
|
Severance and post-employment benefits
|
$
|
8.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Asset-related charges
|
17.3
|
|
|
—
|
|
|
—
|
|
Other charges
|
0.2
|
|
|
—
|
|
|
—
|
|
Total restructuring and related charges
|
$
|
26.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Pension settlement charge
|
—
|
|
|
50.4
|
|
|
—
|
|
Pension curtailment gain
|
(2.1
|
)
|
|
—
|
|
|
—
|
|
Executive retirement and related costs
|
—
|
|
|
10.9
|
|
|
—
|
|
Venezuela currency devaluation
|
2.7
|
|
|
—
|
|
|
—
|
|
License costs
|
—
|
|
|
—
|
|
|
1.2
|
|
Development income
|
(1.5
|
)
|
|
(1.5
|
)
|
|
(1.6
|
)
|
Contingent consideration costs
|
2.3
|
|
|
1.1
|
|
|
1.0
|
|
Other items
|
(0.1
|
)
|
|
(0.8
|
)
|
|
(0.8
|
)
|
Total other expense (income)
|
$
|
27.7
|
|
|
$
|
60.1
|
|
|
$
|
(0.2
|
)
|
Restructuring and Related Charges
On February 15, 2016, our Board of Directors approved a restructuring plan designed to repurpose several of our
production facilities in support of growing high-value proprietary products and to realign operational and commercial activities to meet the needs of our new market-focused commercial organization.
During 2016, we incurred
$26.4 million
in restructuring and related charges in connection with this plan, consisting of
$8.9 million
for severance charges,
$10.0 million
for a non-cash asset write-down associated with the discontinued use of a trademark,
$7.3 million
for non-cash asset write-downs associated with the discontinued use of a patent and certain equipment, and
$0.2 million
for other charges.
The following table presents activity related to our restructuring obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
Severance and benefits
|
|
Asset-related charges
|
|
Other charges
|
|
Total
|
Balance, December 31, 2015
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Charges
|
8.9
|
|
|
17.3
|
|
|
0.2
|
|
|
26.4
|
|
Cash payments
|
(3.0
|
)
|
|
—
|
|
|
—
|
|
|
(3.0
|
)
|
Non-cash asset write-downs
|
—
|
|
|
(17.3
|
)
|
|
(0.2
|
)
|
|
(17.5
|
)
|
Balance, December 31, 2016
|
$
|
5.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.9
|
|
Other Items
During 2015, we recorded a
$50.4 million
pension settlement charge, of which
$47.0 million
related to our purchase of a group annuity contract from MetLife and
$3.4 million
related to lump-sum payouts made to terminated vested participants of our U.S. qualified pension plan. Please refer to Note 13,
Benefit Plans
, for additional details.
During 2016, we recorded a pension curtailment gain of
$2.1 million
in connection with our decision to freeze both our U.S. qualified and non-qualified defined benefit pension plans as of January 1, 2019.
In addition, during 2015, we recorded a
$10.9 million
charge for executive retirement and related costs, including
$2.4 million
for a long-term incentive plan award for our previous CEO,
$8.0 million
for the revaluation of modified outstanding awards to provide for continued vesting for our previous CEO and Senior Vice President of Human Resources in conjunction with their retirement, and
$0.5 million
for other costs, including relocation and legal fees.
On February 17, 2016, the Venezuelan government announced a devaluation of the Bolivar, from the previously-prevailing official exchange rate of
6.3
Bolivars to USD to
10.0
Bolivars to USD, and streamlined the previous
three-tiered currency exchange mechanism into a dual currency exchange mechanism. As a result, during 2016, we recorded a
$2.7 million
charge. After the remeasurement, as of December 31, 2016, we had
$1.8 million
in net monetary assets denominated in Venezuelan Bolivars, including
$0.7 million
in cash and cash equivalents, and
$4.5 million
in non-monetary assets. If there are further devaluations of the Bolivar or other changes in the currency exchange mechanisms in Venezuela in the future, a pre-tax charge of up to
$6.3 million
could be required. We will continue to actively monitor the political and economic developments in Venezuela.
During 2014, we recorded a
$1.2 million
charge for license costs associated with acquired in-process research.
Development income of
$1.5 million
was recognized within Proprietary Products during 2016, related to a nonrefundable customer payment of
$20.0 million
received in June 2013 in return for the exclusive use of the SmartDose technology platform within a specific therapeutic area. As of
December 31, 2016
, there was
$14.4 million
of unearned income related to this payment, of which
$1.5 million
was included in other current liabilities and
$12.9 million
was included in other long-term liabilities. The unearned income is being recognized as development income on a straight-line basis over the remaining term of the agreement. The agreement does not include a future minimum purchase commitment from the customer. During 2015 and 2014, we recorded development income of
$1.5 million
and
$1.6 million
, respectively, within Proprietary Products, of which
$1.5 million
for each year related to the nonrefundable customer payment described above.
Contingent consideration costs represent changes in the fair value of the SmartDose contingent consideration. Please refer to Note 10,
Fair Value Measurements
, for additional details.
Other items consist of foreign exchange transaction gains and losses, gains and losses on the sale of fixed assets, and miscellaneous income and charges.
Note 15: Income Taxes
As a global organization, we and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. During
2016
, the statute of limitations for the 2012 U.S. federal tax year lapsed, leaving tax years 2013 through
2016
open to examination. For U.S. state and local jurisdictions, tax years 2012 through
2016
are open to examination. We are also subject to examination in various foreign jurisdictions for tax years 2009 through
2016
.
A reconciliation of the beginning and ending amount of the liability for unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
|
2015
|
|
Balance at January 1
|
$
|
5.9
|
|
$
|
6.9
|
|
Increase due to current year position
|
1.0
|
|
0.8
|
|
Increase due to prior year position
|
1.2
|
|
0.9
|
|
Reduction for expiration of statute of limitations
|
(0.9
|
)
|
(1.2
|
)
|
Settlements
|
(1.0
|
)
|
(1.5
|
)
|
Balance at December 31
|
$
|
6.2
|
|
$
|
5.9
|
|
In addition, we had balances in accrued liabilities for interest and penalties of
$0.1 million
and
$0.3 million
at
December 31, 2016
and
2015
, respectively. As of
December 31, 2016
, we had
$6.2 million
of total gross unrecognized tax benefits, of which
$1.4 million
, if recognized, would favorably impact the effective income tax rate. It is reasonably possible that, due to the expiration of statutes and the closing of tax audits, the amount of gross unrecognized tax benefits may be reduced by approximately
$0.7 million
during the next twelve months, which would favorably impact our effective tax rate.
The components of income before income taxes are:
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
|
2015
|
|
2014
|
|
U.S. operations
|
$
|
84.5
|
|
$
|
(4.0
|
)
|
$
|
57.5
|
|
International operations
|
105.3
|
|
120.1
|
|
111.5
|
|
Total income before income taxes
|
$
|
189.8
|
|
$
|
116.1
|
|
$
|
169.0
|
|
The related provision for income taxes consists of:
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
|
2015
|
|
2014
|
|
Current:
|
|
|
|
Federal
|
$
|
2.5
|
|
$
|
1.0
|
|
$
|
5.2
|
|
State
|
1.0
|
|
0.9
|
|
0.5
|
|
International
|
29.4
|
|
33.3
|
|
34.5
|
|
Current income tax provision
|
32.9
|
|
35.2
|
|
40.2
|
|
Deferred:
|
|
|
|
Federal and state
|
21.8
|
|
(13.2
|
)
|
7.7
|
|
International
|
(0.3
|
)
|
4.3
|
|
(0.7
|
)
|
Deferred income tax provision
|
21.5
|
|
(8.9
|
)
|
7.0
|
|
Income tax expense
|
$
|
54.4
|
|
$
|
26.3
|
|
$
|
47.2
|
|
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.
The significant components of our deferred tax assets and liabilities at December 31 are
:
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
|
2015
|
|
Deferred tax assets
|
|
|
Net operating loss carryforwards
|
$
|
15.4
|
|
$
|
16.5
|
|
Tax credit carryforwards
|
27.9
|
|
40.8
|
|
Restructuring and impairment charges
|
2.9
|
|
—
|
|
Pension and deferred compensation
|
46.4
|
|
42.0
|
|
Other
|
19.5
|
|
19.3
|
|
Valuation allowance
|
(18.7
|
)
|
(20.1
|
)
|
Total deferred tax assets
|
93.4
|
|
98.5
|
|
Deferred tax liabilities:
|
|
|
Accelerated depreciation
|
30.3
|
|
35.0
|
|
Other
|
6.1
|
|
5.4
|
|
Total deferred tax liabilities
|
36.4
|
|
40.4
|
|
Net deferred tax asset
|
$
|
57.0
|
|
$
|
58.1
|
|
A reconciliation of the U.S. federal corporate tax rate to our effective consolidated tax rate on income before income taxes follows:
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
U.S. federal corporate tax rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
Tax on international operations less than U.S. tax rate
|
(2.9
|
)
|
(5.1
|
)
|
(6.8
|
)
|
Reversal of prior valuation allowance
|
(0.3
|
)
|
—
|
|
(0.5
|
)
|
Reversal of reserves for unrecognized tax benefits
|
(0.6
|
)
|
(1.6
|
)
|
(0.5
|
)
|
U.S. tax on international earnings, net of foreign tax credits
|
(1.3
|
)
|
(4.6
|
)
|
(0.1
|
)
|
State income taxes, net of federal tax effect
|
0.8
|
|
0.3
|
|
1.5
|
|
U.S. research and development credits
|
(0.8
|
)
|
(1.3
|
)
|
(0.9
|
)
|
Other business credits and Section 199 Deduction
|
(1.1
|
)
|
(1.3
|
)
|
(0.7
|
)
|
Other
|
(0.1
|
)
|
1.2
|
|
1.0
|
|
Effective tax rate
|
28.7
|
%
|
22.6
|
%
|
28.0
|
%
|
During 2016, we recorded a tax benefit of
$9.0 million
in connection with restructuring and related charges of
$26.4 million
, a discrete tax charge of
$0.8 million
related to the pension curtailment gain of
$2.1 million
, and a discrete tax charge of
$1.0 million
resulting from the impact of changes in enacted tax rates on our previously-recorded deferred tax asset and liability balances.
During 2015, we recorded a discrete tax benefit of
$4.0 million
related to executive retirement and related costs. In addition, we recorded a discrete tax benefit of
$18.4 million
for a pension settlement charge. In 2015, we also recorded a discrete tax charge of
$0.8 million
resulting from the impact of a change in the enacted tax rate in the United Kingdom on our previously-recorded deferred tax asset balances.
During 2014, we recorded a discrete tax charge of
$1.0 million
resulting from the impact of a change in apportionment factors on state tax rates applied to items in OCI and a discrete tax charge of
$0.8 million
as a result of the finalization of estimates of foreign tax credits available with respect to a repatriation of cash from our subsidiaries in Israel.
At
December 31, 2016
, we have fully utilized all of our U.S. federal net operating loss carryforwards. State operating loss carryforwards of
$254.8 million
created a deferred tax asset of
$14.0 million
, while foreign operating loss carryforwards of
$9.4 million
created a deferred tax asset of
$1.4 million
. Management estimates that certain state and foreign operating loss carryforwards are unlikely to be utilized and the associated deferred tax assets have been fully reserved. State loss carryforwards expire as follows:
$5.3 million
in
2017
and
$249.5 million
thereafter. Foreign loss carryforwards will begin to expire in 2024, while
$6.2 million
of the total
$9.4 million
will not expire.
As of
December 31, 2016
, we had available foreign tax credit carryforwards of
$8.2 million
expiring as follows:
$3.2 million
in
2024
and
$5.0 million
in
2025
. We have U.S. federal and state research and development credit carryforwards of
$12.0 million
and
$3.0 million
, respectively. The
$12.0 million
of U.S. federal research and development credits expire as follows:
$0.6 million
expire in
2028
,
$1.1 million
expire in
2029
,
$1.0 million
expire in
2030
,
$1.0 million
expire in
2031
,
$1.4 million
expire in
2032
,
$1.4 million
expire in
2033
and
$5.5 million
expire
after 2033
. The
$3.0 million
of state research and development credits expire as follows:
$0.2 million
expire in
2021
,
$0.8 million
expire in
2022
,
$0.5 million
expire in
2023
and
$1.5 million
expire
after 2023
. Additionally, we have available other state tax credits of
$0.9 million
which expire in 2020.
In November 2015, the FASB issued guidance regarding the balance sheet classification of deferred taxes. This guidance requires that deferred tax assets and liabilities be classified as noncurrent. The requirement that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not affected by these amendments. We adopted this guidance in the fourth quarter of 2015, on a prospective basis. Please refer to Note 2,
New Accounting Standards
, for additional details.
Undistributed earnings of foreign subsidiaries amounted to
$612.3 million
at
December 31, 2016
, on which deferred income taxes have not been provided because such earnings are intended to be reinvested indefinitely outside of the U.S. It is not practicable to estimate the tax liability that might be incurred if such earnings were remitted to the U.S.
Note 16: Commitments and Contingencies
At
December 31, 2016
, we were obligated under various operating lease agreements. Rental expense in
2016
,
2015
and
2014
was
$11.7 million
,
$10.5 million
and
10.7 million
, respectively.
At
December 31, 2016
, future minimum rental payments under non-cancelable operating leases were:
|
|
|
|
|
Year
|
($ in millions)
|
|
2017
|
$
|
12.3
|
|
2018
|
10.9
|
|
2019
|
8.5
|
|
2020
|
5.4
|
|
2021
|
4.8
|
|
Thereafter
|
26.5
|
|
Total
|
$
|
68.4
|
|
At
December 31, 2016
, outstanding unconditional contractual commitments for the purchase of raw materials and finished goods amounted to
$75.7 million
, of which
$4.2 million
is due to be paid in 2017.
We have letters of credit totaling
$3.0 million
supporting the reimbursement of workers' compensation and other claims paid on our behalf by insurance carriers. Our accrual for insurance obligations was
$4.4 million
at
December 31, 2016
, of which
$1.2 million
is in excess of our deductible and, therefore, is reimbursable by the insurance company.
Our SmartDose contingent consideration is payable to the selling shareholders based upon a percentage of product sales over the life of the underlying product patent, with no cap on total payments. Given the length of the earnout period and the uncertainty in forecasted product sales, we do not believe it is meaningful to estimate the upper end
of the range over the entire period. However, our estimated probable range which could become payable over the next
five
years is between
zero
and
$8.9 million
.
Note 17: Segment Information
In 2015, our business operations consisted of
two
reportable segments, Packaging Systems and Delivery Systems. Beginning in 2016, we changed our organization and reporting structure for our next phase of growth and development, which resulted in a change to Proprietary Products and Contract-Manufactured Products as our
reportable segments. The Proprietary Products reportable segment, which is a combination of the previous
Packaging Systems segment and the proprietary products portion of the previous Delivery Systems segment,
develops commercial, operational, and innovation strategies across our global network, with specific emphasis on
product offerings to biologic, generic, and pharmaceutical drug customers. The Contract-Manufactured Products
reportable segment, which consists of the contract manufacturing portion of the previous Delivery Systems segment,
serves as a fully integrated business focused on the design, manufacture, and automated assembly of complex devices, primarily for pharmaceutical, diagnostic, and medical device customers.
We evaluate the performance of our segments based upon, among other things, segment net sales and operating profit. Segment operating profit excludes general corporate costs, which include executive and director compensation, stock-based compensation, adjustments to annual incentive plan expense for over- or under-attainment of targets, certain pension and other retirement benefit costs, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that we consider not representative of ongoing operations. Such items are referred to as other unallocated items and generally include restructuring and related charges, certain asset impairments and other specifically-identified income or expense items.
The following table presents information about our reportable segments, reconciled to consolidated totals:
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
2016
|
2015
|
2014
|
Net sales:
|
|
|
|
|
|
|
Proprietary Products
|
$
|
1,189.9
|
|
$
|
1,098.3
|
|
$
|
1,126.3
|
|
Contract-Manufactured Products
|
320.2
|
|
302.4
|
|
295.7
|
|
Intersegment sales elimination
|
(1.0
|
)
|
(0.9
|
)
|
(0.6
|
)
|
Consolidated net sales
|
$
|
1,509.1
|
|
$
|
1,399.8
|
|
$
|
1,421.4
|
|
The intersegment sales elimination, which is required for the presentation of consolidated net sales, represents the elimination of components sold between our segments.
We do not have any customers accounting for greater than
10%
of consolidated net sales.
The following table presents net sales and property, plant and equipment, net, by the country in which the legal subsidiary is domiciled and assets are located:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
Property, Plant and Equipment, Net
|
($ in millions)
|
2016
|
2015
|
2014
|
|
2016
|
2015
|
2014
|
United States
|
$
|
738.3
|
|
$
|
667.4
|
|
$
|
630.7
|
|
|
$
|
329.3
|
|
$
|
332.3
|
|
$
|
327.5
|
|
Germany
|
200.6
|
|
194.0
|
|
219.4
|
|
|
96.8
|
|
102.9
|
|
110.9
|
|
France
|
116.3
|
|
107.6
|
|
118.2
|
|
|
37.1
|
|
38.6
|
|
40.4
|
|
Other European countries
|
268.3
|
|
252.0
|
|
285.0
|
|
|
192.3
|
|
117.6
|
|
91.5
|
|
Other
|
185.6
|
|
178.8
|
|
168.1
|
|
|
122.8
|
|
129.6
|
|
135.5
|
|
|
$
|
1,509.1
|
|
$
|
1,399.8
|
|
$
|
1,421.4
|
|
|
$
|
778.3
|
|
$
|
721.0
|
|
$
|
705.8
|
|
The following tables provide summarized financial information for our segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
Proprietary Products
|
Contract-Manufactured Products
|
Corporate and Elimination
|
Consolidated
|
2016
|
|
|
|
|
Net sales
|
$
|
1,189.9
|
|
$
|
320.2
|
|
$
|
(1.0
|
)
|
$
|
1,509.1
|
|
Operating profit
|
$
|
241.9
|
|
$
|
38.2
|
|
$
|
(83.3
|
)
|
$
|
196.8
|
|
Interest expense, net
|
—
|
|
—
|
|
(7.0
|
)
|
(7.0
|
)
|
Income before income taxes
|
$
|
241.9
|
|
$
|
38.2
|
|
$
|
(90.3
|
)
|
$
|
189.8
|
|
Segment assets
|
$
|
1,173.9
|
|
$
|
261.1
|
|
$
|
281.7
|
|
$
|
1,716.7
|
|
Capital expenditures
|
133.2
|
|
34.0
|
|
3.0
|
|
170.2
|
|
Depreciation and amortization expense
|
71.7
|
|
14.9
|
|
4.1
|
|
90.7
|
|
|
|
|
|
|
2015
|
|
|
|
|
Net sales
|
$
|
1,098.3
|
|
$
|
302.4
|
|
$
|
(0.9
|
)
|
$
|
1,399.8
|
|
Operating profit
|
$
|
212.2
|
|
$
|
35.5
|
|
$
|
(119.1
|
)
|
$
|
128.6
|
|
Interest expense, net
|
—
|
|
—
|
|
(12.5
|
)
|
(12.5
|
)
|
Income before income taxes
|
$
|
212.2
|
|
$
|
35.5
|
|
$
|
(131.6
|
)
|
$
|
116.1
|
|
Segment assets
|
$
|
1,083.7
|
|
$
|
248.5
|
|
$
|
362.9
|
|
$
|
1,695.1
|
|
Capital expenditures
|
113.2
|
|
22.1
|
|
(3.7
|
)
|
131.6
|
|
Depreciation and amortization expense
|
69.9
|
|
14.2
|
|
5.8
|
|
89.9
|
|
|
|
|
|
|
2014
|
|
|
|
|
Net sales
|
$
|
1,126.3
|
|
$
|
295.7
|
|
$
|
(0.6
|
)
|
$
|
1,421.4
|
|
Operating profit
|
$
|
199.6
|
|
$
|
36.9
|
|
$
|
(54.5
|
)
|
$
|
182.0
|
|
Interest expense, net
|
—
|
|
—
|
|
(13.0
|
)
|
(13.0
|
)
|
Income before income taxes
|
$
|
199.6
|
|
$
|
36.9
|
|
$
|
(67.5
|
)
|
$
|
169.0
|
|
Segment assets
|
$
|
1,185.5
|
|
$
|
234.0
|
|
$
|
250.2
|
|
$
|
1,669.7
|
|
Capital expenditures
|
88.4
|
|
26.9
|
|
(3.4
|
)
|
111.9
|
|
Depreciation and amortization expense
|
71.6
|
|
12.7
|
|
5.7
|
|
90.0
|
|