
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-8036

WEST PHARMACEUTICAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania

23-1210010

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

530 Herman O. West Drive, Exton, PA

19341-0645

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: 610-594-2900

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.25 per share	WST	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of ~~October 18, 2021,~~April 15, 2022, there were ~~74,079,715~~74,075,617 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)
	Condensed Consolidated Statements of Income for the Three ~~and Nine~~ Months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	3
	Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	4
	Condensed Consolidated Balance Sheets at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	5

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	6
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2624
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4035
ITEM 4.	CONTROLS AND PROCEDURES	4035

PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	4035
ITEM 1A.	RISK FACTORS	4036
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4036

ITEM 6.	EXHIBITS	4036

SIGNATURE		4137

EXHIBIT INDEX		F-1

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

(in millions, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net sales	Net sales	$	706.5	$	548.0	$	2,100.8	$	1,566.7	Net sales	$	720.0	$	670.7
Cost of goods and services sold	Cost of goods and services sold	418.3		353.4		1,225.6		1,010.0		Cost of goods and services sold	435.4		398.8
Gross profit	Gross profit	288.2		194.6		875.2		556.7		Gross profit	284.6		271.9
Research and development	Research and development	13.1		12.5		39.1		34.0		Research and development	14.6		12.2
Selling, general and administrative expenses	Selling, general and administrative expenses	91.9		76.2		264.8		225.7		Selling, general and administrative expenses	83.4		80.2
Other expense (income) (Note 15)		1.8		6.7		3.0		6.2
Other (income) expense (Note 15)										Other (income) expense (Note 15)	(3.1)		3.9
Operating profit	Operating profit	181.4		99.2		568.3		290.8		Operating profit	189.7		175.6
Interest expense	Interest expense	1.8		2.1		5.6		6.1		Interest expense	2.2		1.9
Interest income	Interest income	(0.4)		(0.2)		(0.7)		(1.2)		Interest income	(0.3)		(0.1)
Other nonoperating (income) expense	Other nonoperating (income) expense	(1.1)		(0.4)		(3.6)		(0.3)		Other nonoperating (income) expense	—		(1.1)
Income before income taxes	Income before income taxes	181.1		97.7		567.0		286.2		Income before income taxes	187.8		174.9
Income tax expense	Income tax expense	12.0		21.1		73.0		52.1		Income tax expense	21.2		28.7
Equity in net income of affiliated companies	Equity in net income of affiliated companies	(6.5)		(5.7)		(20.1)		(13.7)		Equity in net income of affiliated companies	(7.2)		(5.0)
Net income	Net income	$	175.6	$	82.3	$	514.1	$	247.8	Net income	$	173.8	$	151.2

Net income per share:	Net income per share:									Net income per share:
Basic	Basic	$	2.37	$	1.11	$	6.95	$	3.35	Basic	$	2.34	$	2.04
Diluted	Diluted	$	2.31	$	1.09	$	6.78	$	3.28	Diluted	$	2.29	$	1.99

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	74.1		73.9		74.0		73.9		Basic	74.4		73.9
Diluted	Diluted	76.0		75.8		75.8		75.6		Diluted	76.0		75.8

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

(in millions)

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Net income $ 175.6 $ 82.3 $ 514.1 $ 247.8
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments (24.2) 29.4 (46.9) (4.9)
Defined benefit pension and other postretirement plan adjustments, net of tax of $0.2, $(0.1), $0.4, and $(1.2), respectively 0.4 (0.2) 1.1 (4.0)
Net gain (loss) on derivatives, net of tax of $(0.4), $(0.2), $(0.4) and $(0.4), respectively 1.3 (0.9) 0.7 (1.0)
Other comprehensive (loss) income, net of tax (22.5) 28.3 (45.1) (9.9)
Comprehensive income $ 153.1 $ 110.6 $ 469.0 $ 237.9


	Three Months Ended March 31,
	2022		2021
Net income	$	173.8	$	151.2
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(22.1)		(28.4)
Defined benefit pension and other postretirement plan adjustments, net of tax of $0.3 and $0.2	0.9		0.6

Net loss on derivatives, net of tax of $(0.8) and $(0.7)	(1.6)		(1.8)
Other comprehensive loss, net of tax	(22.8)		(29.6)
Comprehensive income	$	151.0	$	121.6

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

(in millions, except per share data) September 30,
2021 December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents $ 688.0 $ 615.5
Accounts receivable, net 476.4 385.3
Inventories 353.8 321.3
Other current assets 80.1 51.6
Total current assets 1,598.3 1,373.7
Property, plant and equipment 2,146.1 2,035.5
Less: accumulated depreciation and amortization 1,139.6 1,092.3
Property, plant and equipment, net 1,006.5 943.2
Operating lease right-of-use assets 58.5 68.3
Investments in affiliated companies 215.7 214.7
Goodwill 108.9 111.1
Intangible assets, net 26.1 30.5
Deferred income taxes 80.0 16.0
Pension and other postretirement benefits 17.0 12.9
Other noncurrent assets 31.6 23.4
Total Assets $ 3,142.6 $ 2,793.8
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and other current debt $ 44.2 $ 2.3
Accounts payable 207.7 213.1
Pension and other postretirement benefits 2.4 2.3
Accrued salaries, wages and benefits 114.0 106.0
Income taxes payable 39.5 26.0
Operating lease liabilities 8.1 10.1
Other current liabilities 142.7 143.6
Total current liabilities 558.6 503.4
Long-term debt 209.9 252.9
Deferred income taxes 11.6 10.4
Pension and other postretirement benefits 52.1 57.5
Operating lease liabilities 53.4 60.4
Deferred compensation benefits 26.9 22.9
Other long-term liabilities 27.8 31.8
Total Liabilities 940.3 939.3
Commitments and contingencies (Note 17) 0 0
Equity:
Preferred stock, 3.0 million shares authorized; 0 shares issued and outstanding — —
Common stock, par value $0.25 per share; 200.0 million shares authorized; shares issued: 75.3 million and 75.3 million, respectively; shares outstanding: 74.1 million and 74.0 million, respectively 18.8 18.8
Capital in excess of par value 251.2 267.3
Retained earnings 2,335.8 1,846.7
Accumulated other comprehensive loss (155.7) (110.6)
Treasury stock, at cost (1.2 million and 1.3 million shares, respectively) (247.8) (167.7)
Total Equity 2,202.3 1,854.5
Total Liabilities and Equity $ 3,142.6 $ 2,793.8
(in millions, except per share data)


	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	667.7	$	762.6
Accounts receivable, net	498.7		489.0
Inventories	416.5		378.4
Other current assets	107.6		112.0
Total current assets	1,690.5		1,742.0
Property, plant and equipment	2,237.0		2,215.0
Less: accumulated depreciation and amortization	1,171.1		1,157.5
Property, plant and equipment, net	1,065.9		1,057.5
Operating lease right-of-use assets	75.6		69.3
Investments in affiliated companies	208.1		207.7
Goodwill	108.8		109.9
Intangible assets, net	21.8		23.0
Deferred income taxes	66.4		48.5
Pension and other postretirement benefits	17.1		16.7
Other noncurrent assets	40.5		39.2
Total Assets	$	3,294.7	$	3,313.8

LIABILITIES AND EQUITY
Current liabilities:
Notes payable and other current debt	$	44.2	$	44.2
Accounts payable	248.2		232.2
Pension and other postretirement benefits	2.4		2.4
Accrued salaries, wages and benefits	77.5		116.3
Income taxes payable	34.7		26.3
Operating lease liabilities	9.8		9.3
Other current liabilities	168.0		163.4
Total current liabilities	584.8		594.1
Long-term debt	208.3		208.8
Deferred income taxes	3.3		4.9
Pension and other postretirement benefits	38.7		40.5
Operating lease liabilities	68.9		63.0
Deferred compensation benefits	26.3		28.9
Other long-term liabilities	38.2		38.2
Total Liabilities	968.5		978.4

Commitments and contingencies (Note 17)	0		0

Equity:
Preferred stock, 3.0 million shares authorized; 0 shares issued and outstanding	—		—
Common stock, par value $0.25 per share; 200.0 million shares authorized; shares issued: 75.3 million in 2022 and 2021; shares outstanding: 74.1 million and 74.2 million	18.8		18.8
Capital in excess of par value	219.9		249.0
Retained earnings	2,617.3		2,456.7
Accumulated other comprehensive loss	(182.4)		(159.6)
Treasury stock, at cost (1.2 million and 1.1 million shares)	(347.4)		(229.5)
Total Equity	2,326.2		2,335.4
Total Liabilities and Equity	$	3,294.7	$	3,313.8

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

(in millions)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	514.1	$	247.8	Net income	$	173.8	$	151.2
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	Depreciation	84.6		77.3		Depreciation	28.7		28.0
Amortization	Amortization	3.3		3.3		Amortization	0.9		1.1
Stock-based compensation	Stock-based compensation	27.5		27.6		Stock-based compensation	5.5		5.9

Pension settlement charge	Pension settlement charge	0.7		3.4		Pension settlement charge	0.6		0.6

Contingent consideration payments in excess of acquisition-date liability	Contingent consideration payments in excess of acquisition-date liability	(1.0)		(0.7)		Contingent consideration payments in excess of acquisition-date liability	(0.4)		(0.4)
Other non-cash items, net	Other non-cash items, net	(17.5)		(9.5)		Other non-cash items, net	(7.7)		(2.8)
Changes in assets and liabilities	Changes in assets and liabilities	(188.5)		(25.4)		Changes in assets and liabilities	(50.2)		(94.9)
Net cash provided by operating activities	Net cash provided by operating activities	423.2		323.8		Net cash provided by operating activities	151.2		88.7

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(176.9)		(116.7)		Capital expenditures	(65.8)		(54.7)

Purchase of intangibles		—		(3.8)

Other, net	Other, net	1.2		(1.4)		Other, net	(2.5)		0.2
Net cash used in investing activities	Net cash used in investing activities	(175.7)		(121.9)		Net cash used in investing activities	(68.3)		(54.5)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Repayments of long-term debt	Repayments of long-term debt	(1.1)		(1.7)		Repayments of long-term debt	(0.6)		(0.6)
Debt issuance costs						Debt issuance costs	(1.1)		—
Dividend payments	Dividend payments	(37.8)		(35.5)		Dividend payments	(13.4)		(12.6)
Proceeds from stock-based compensation awards	Proceeds from stock-based compensation awards	23.1		22.0		Proceeds from stock-based compensation awards	6.3		5.8
Employee stock purchase plan contributions	Employee stock purchase plan contributions	5.7		4.6		Employee stock purchase plan contributions	2.0		1.8
Shares purchased under share repurchase programs		(137.1)		(115.5)
Shares purchased under share repurchase program						Shares purchased under share repurchase program	(147.1)		(137.1)
Shares repurchased for employee tax withholdings	Shares repurchased for employee tax withholdings	(14.7)		(2.3)		Shares repurchased for employee tax withholdings	(18.8)		(13.7)
Net cash used in financing activities	Net cash used in financing activities	(161.9)		(128.4)		Net cash used in financing activities	(172.7)		(156.4)
Effect of exchange rates on cash	Effect of exchange rates on cash	(13.1)		6.8		Effect of exchange rates on cash	(5.1)		(9.6)
Net increase (decrease) in cash and cash equivalents		72.5		80.3
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(94.9)		(131.8)

Cash, including cash equivalents at beginning of period	Cash, including cash equivalents at beginning of period	615.5		439.1		Cash, including cash equivalents at beginning of period	762.6		615.5
Cash, including cash equivalents at end of period	Cash, including cash equivalents at end of period	$	688.0	$	519.4	Cash, including cash equivalents at end of period	$	667.7	$	483.7

See accompanying notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1: Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation: The condensed consolidated financial statements included in this report are unaudited and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting and U.S. Securities and Exchange Commission (“SEC”) regulations. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, these financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, cash flows and the change in equity for the periods presented. The condensed consolidated financial statements for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, should be read in conjunction with the consolidated financial statements and notes thereto of West Pharmaceutical Services, Inc. and its majority-owned subsidiaries (which may be referred to as ~~“West”,~~“West,” the ~~“Company”, “we”,~~“Company,” “we,” “us” or “our”) appearing in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the “~~2020~~2021 Annual Report”). The results of operations for any interim period are not necessarily indicative of results for the full year.

West has been actively monitoring the ~~novel~~ coronavirus (“COVID-19”) situation and its impact globally. ~~Throughout the COVID-19 pandemic,~~Our production facilities ~~have continued~~continue to operate as they had prior to the COVID-19 pandemic, other than for enhanced safety measures intended to prevent the spread of the ~~virus and higher levels of production at certain plant locations to meet additional customer demand.~~virus. The remote working arrangements and travel restrictions imposed by various governments ~~have~~ had limited impact on our ability to maintain operations, as our manufacturing operations have generally been exempted from stay-at-home orders.

Note 2: New Accounting Standards

Recently Adopted Standards

In November 2021, the Financial Accounting Standards Board ("FASB") issued guidance that seeks to improve the transparency of financial disclosures for government assistance received by business entities. The amendment requires disclosures for transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. This guidance is effective for fiscal years beginning after December 15, 2021. We adopted this guidance as of January 1, 2022, on a prospective basis. The adoption did not have a material impact on our financial statements.

Standards Issued Not Yet Adopted

In March 2020, the FASB issued guidance which provides optional expedients and exceptions to address the impact of reference rate reform where contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate ~~(“LIBOR”~~("LIBOR") or another reference rate need to be discontinued. This guidance was effective upon issuance and generally can be applied through December 31, 2022. We ~~are currently evaluating~~have identified the contracts impacted by reference rate reform, and have executed certain amendments to replace the use of LIBOR. The Company does not expect such adoption to cause a material impact to ~~our~~the consolidated financial ~~statements, the transition, and disclosure requirements of this guidance, and where applicable, the Company has made contract amendments to reflect the removal of the LIBOR rate.~~statements.

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Note 3: Revenue

Our revenue results from the sale of goods or services and reflects the consideration to which we expect to be entitled in exchange for those goods or services. We record revenue based on a five-step model, in accordance with ASC Topic 606. Following the identification of a contract with a customer, we identify the performance obligations (goods or services) in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize the revenue when (or as) we satisfy the performance obligations by transferring the promised goods or services to our customers. A good or service is transferred when (or as) the customer obtains control of that good or service.

~~Table of Contents~~

The following table presents the approximate percentage of our net sales by market group:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2021	2020	2021	2020		2022	2021
Biologics	Biologics	40 %	32 %	40 %	29 %	Biologics	43 %	39 %
Generics	Generics	18 %	18 %	17 %	19 %	Generics	17 %	18 %
Pharma	Pharma	24 %	27 %	24 %	28 %	Pharma	24 %	24 %
Contract-Manufactured Products	Contract-Manufactured Products	18 %	23 %	19 %	24 %	Contract-Manufactured Products	16 %	19 %
		100 %	100 %	100 %	100 %		100 %	100 %

The following table presents the approximate percentage of our net sales by product category:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2021	2020	2021	2020		2022	2021
High-Value Product Components	High-Value Product Components	55 %	47 %	54 %	45 %	High-Value Product Components	56 %	52 %
High-Value Product Delivery Devices	High-Value Product Delivery Devices	5 %	5 %	4 %	5 %	High-Value Product Delivery Devices	5 %	5 %
Standard Packaging	Standard Packaging	22 %	25 %	23 %	26 %	Standard Packaging	23 %	24 %
Contract-Manufactured Products	Contract-Manufactured Products	18 %	23 %	19 %	24 %	Contract-Manufactured Products	16 %	19 %
		100 %	100 %	100 %	100 %		100 %	100 %

The following table presents the approximate percentage of our net sales by geographic location:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2021	2020	2021	2020		2022	2021
Americas	Americas	45 %	49 %	45 %	49 %	Americas	45 %	46 %
Europe, Middle East, Africa	Europe, Middle East, Africa	45 %	42 %	45 %	43 %	Europe, Middle East, Africa	45 %	44 %
Asia Pacific	Asia Pacific	10 %	9 %	10 %	8 %	Asia Pacific	10 %	10 %
		100 %	100 %	100 %	100 %		100 %	100 %

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Contract Assets and Liabilities

The following table summarizes our contract assets and liabilities, excluding ~~amounts~~contract assets included in accounts receivable, net:


	($ in millions)
Contract assets, December 31, ~~2020~~2021	$	~~10.9~~14.6
Contract assets, ~~September 30, 2021~~March 31, 2022	~~12.8~~14.8
Change in contract assets - increase (decrease)	$	~~1.9~~0.2

Deferred income, December 31, ~~2020~~2021	$	~~(57.1)~~(61.3)
Deferred income, ~~September 30, 2021~~March 31, 2022	~~(38.1)~~(56.8)
Change in deferred income - decrease (increase)	$	~~19.0~~4.5

Starting in the third quarter of 2020, the Company entered into new capacity reservation agreements, which include the receipt of up-front cash. The decrease in the deferred income balance is primarily due to the revenue recognition associated with the capacity reservation agreements, which is to be recognized over the next 1 to 2 years.

~~Table of Contents~~

During the ~~nine~~three months ended ~~September 30, 2021, $30.0~~March 31, 2022, $9.7 million of revenue was recognized that was included in deferred income at the beginning of the year.

The majority of the performance obligations within our contracts are satisfied within one year or less. Performance obligations satisfied beyond one year include those relating 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 ~~September 30, 2021,~~March 31, 2022, there was ~~$4.1~~$3.7 million of unearned income related to this payment, of which $0.9 million was included in other current liabilities and ~~$3.2~~$2.8 million was included in other long-term liabilities. The unearned income is being recognized as 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.

Note 4: 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:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021
Net income	Net income	$	175.6	$	82.3	$	514.1	$	247.8	Net income	$	173.8	$	151.2
Weighted average common shares outstanding	Weighted average common shares outstanding	74.1		73.9		74.0		73.9		Weighted average common shares outstanding	74.4		73.9
Dilutive effect of equity awards, based on the treasury stock method	Dilutive effect of equity awards, based on the treasury stock method	1.9		1.9		1.8		1.7		Dilutive effect of equity awards, based on the treasury stock method	1.6		1.9
Weighted average shares assuming dilution	Weighted average shares assuming dilution	76.0		75.8		75.8		75.6		Weighted average shares assuming dilution	76.0		75.8

During the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ there were 0.0 million and ~~0.0~~0.1 million shares, respectively, from stock-based compensation plans not included in the computation of diluted net income per share because their impact was antidilutive. ~~There were 0.0 million and 0.2 million antidilutive shares outstanding during the nine months ended September 30, 2021 and 2020, respectively.~~

In December ~~2020, we announced~~2021, our Board of Directors approved a share repurchase program for calendar-year ~~2021~~2022 authorizing the repurchase of up to ~~631,000~~650,000 shares of our common stock from time to time on the open market ~~or in privately-negotiated transactions~~ as permitted under Exchange Act Rule ~~10b-18.~~10b-18 or in privately-negotiated transactions. The number of shares to be repurchased and the timing of such transactions will depend on a variety of factors, including market conditions. ~~There were no shares purchased during~~This share repurchase program is expected to be completed by December 31, 2022.

During the three months ended ~~September 30, 2021. During the nine months ended September 30, 2021,~~March 31, 2022, we purchased ~~479,000~~390,000 shares of our common stock under the program at a cost of ~~$137.1~~$147.1 million, or an average price of ~~$286.23~~$377.23 per share. ~~This share repurchase program is expected to be completed by December 31, 2021.~~

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Note 5: Inventories

Inventories are valued at the lower of cost (on a first-in, first-out basis) and net realizable value. Inventory balances were as follows:


($ in millions)	($ in millions)	September 30, 2021		December 31, 2020		($ in millions)	March 31, 2022		December 31, 2021
Raw materials	Raw materials	$	140.4	$	133.5	Raw materials	$	167.4	$	153.8
Work in process	Work in process	71.1		54.9		Work in process	70.2		63.5
Finished goods	Finished goods	142.3		132.9		Finished goods	178.9		161.1
		$	353.8	$	321.3		$	416.5	$	378.4

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Note 6: Leases

A lease exists when a contract conveys to the customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The definition of a lease embodies two conditions: 1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property, plant, and equipment); and 2) the customer has the right to control the use of the identified asset. Lease payments included in the measurement of the operating lease right-of-use assets and lease liabilities are comprised of fixed payments (including in-substance fixed payments), variable payments that depend on an index or rate, and the exercise price of a lessee option to purchase the underlying asset if the lessee is reasonably certain to exercise.

The components of lease expense were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in millions)	($ in millions)	2021		2020		2021		2020		($ in millions)	2022		2021
Operating lease cost	Operating lease cost	$	3.3	$	3.1	$	9.5	$	9.3	Operating lease cost	$	3.3	$	3.1
Short-term lease cost	Short-term lease cost	0.4		0.3		0.9		0.6		Short-term lease cost	0.4		0.2
Variable lease cost	Variable lease cost	1.1		1.2		3.3		2.8		Variable lease cost	1.4		0.8
Total lease cost	Total lease cost	$	4.8	$	4.6	$	13.7	$	12.7	Total lease cost	$	5.1	$	4.1

Supplemental cash flow information related to leases ~~were~~was as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in millions)	($ in millions)	2021		2020			2021		2020			($ in millions)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:											Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	2.9	$	3.2		$	9.2	$	9.6		Operating cash flows from operating leases	$	3.2	$	3.2

Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	0.3		$	0.8	$	4.6		Right-of-use assets obtained in exchange for new operating lease liabilities	$	9.7	$	0.5

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the weighted average remaining lease term for operating leases was ~~10.9~~10.4 years and ~~11.1~~10.7 years, respectively.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the weighted average discount rate was ~~3.67%~~3.52% and ~~3.68%~~3.58%, respectively.

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Maturities of operating lease liabilities were as follows:


($ in millions)	($ in millions)	September 30,		December 31,				($ in millions)	March 31,		December 31,
Year	Year	2021		2020		Year	2022		2021
2021 (remaining period as of )		$	3.0	$	12.4
2022		10.3		10.4
2022 (remaining period as of)								2022 (remaining period as of)	$	9.3	$	11.5
2023	2023	9.3		9.3				2023	11.7		10.7
2024	2024	8.5		8.7				2024	11.1		10.0
2025	2025	6.8		6.9				2025	9.4		8.2
2026								2026	8.4		7.3
Thereafter	Thereafter	36.2		37.5				Thereafter	43.8		38.7
		74.1		85.2					93.7		86.4
Less: imputed lease interest	Less: imputed lease interest	(12.6)		(14.7)				Less: imputed lease interest	(15.0)		(14.1)
Total lease liabilities	Total lease liabilities	$	61.5	$	70.5			Total lease liabilities	$	78.7	$	72.3

Note 7: Affiliated Companies

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the aggregate carrying amount of our investment in affiliated companies that are accounted for under the equity method was ~~$207.1~~$198.0 million and ~~$201.9~~$201.2 million, respectively, and the aggregate carrying amount of our investment in affiliated companies that are not accounted for under the equity method was ~~$8.6~~$10.1 million and ~~$12.8~~$6.5 million at March 31, 2022 and December 31, 2021, respectively. We have elected to record these investments, for which fair value was not readily determinable, at cost, less impairment, adjusted for subsequent observable price changes. We test these investments for impairment whenever circumstances indicate that the carrying value of the investments may not be recoverable.

Our purchases from, and royalty payments made to, affiliates totaled ~~$34.0 million and $119.6~~$58.5 million for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, as compared to ~~$36.6~~$38.0 million ~~and $97.0 million, respectively,~~ for the same ~~periods~~period in ~~2020.~~2021. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the payable balance due to affiliates was ~~$13.8~~$45.1 million and ~~$33.6~~$25.5 million, 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 ~~$2.8~~$4.0 million ~~and $8.8 million, respectively,~~ for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$2.7~~$2.9 million ~~and $7.7 million, respectively,~~ for the same ~~periods~~period in ~~2020.~~2021. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the receivable balance due from affiliates was ~~$2.2~~$3.3 million and ~~$1.4~~$2.3 million, respectively.

Please refer to Note 7, Affiliated Companies, to the consolidated financial statements in our ~~2020~~2021 Annual Report for additional details.

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Note 8: Debt

The following table summarizes our long-term debt obligations, net of unamortized debt issuance costs and current maturities. The interest rates shown in parentheses are as of ~~September 30, 2021.~~March 31, 2022.


($ in millions)	($ in millions)	September 30, 2021		December 31, 2020		($ in millions)	March 31, 2022		December 31, 2021

Term Loan, due December 31, 2024 (1.01%)		$	86.6	$	87.7
Term Loan, due December 31, 2024 (1.63%)						Term Loan, due December 31, 2024 (1.63%)	$	84.9	$	85.5
Series A notes, due July 5, 2022 (3.67%)	Series A notes, due July 5, 2022 (3.67%)	42.0		42.0		Series A notes, due July 5, 2022 (3.67%)	42.0		42.0
Series B notes, due July 5, 2024 (3.82%)	Series B notes, due July 5, 2024 (3.82%)	53.0		53.0		Series B notes, due July 5, 2024 (3.82%)	53.0		53.0
Series C notes, due July 5, 2027 (4.02%)	Series C notes, due July 5, 2027 (4.02%)	73.0		73.0		Series C notes, due July 5, 2027 (4.02%)	73.0		73.0
		254.6		255.7			252.9		253.5
Less: unamortized debt issuance costs	Less: unamortized debt issuance costs	0.5		0.5		Less: unamortized debt issuance costs	0.4		0.5
Total debt	Total debt	254.1		255.2		Total debt	252.5		253.0
Less: current portion of long-term debt	Less: current portion of long-term debt	44.2		2.3		Less: current portion of long-term debt	44.2		44.2
Long-term debt, net	Long-term debt, net	$	209.9	$	252.9	Long-term debt, net	$	208.3	$	208.8

~~Please refer to Note 8,~~ ~~Debt, to the consolidated financial statements in our~~ ~~2020 Annual Report~~ ~~for additional details regarding our debt agreements.~~

~~Credit Agreement -~~ Credit Facility

In March 2022, we amended and extended the existing credit facility (entered into in March 2019), which was scheduled to expire in March 2024, from $300.0 million to a $500.0 million senior unsecured revolving credit facility by entering into a Second Amendment and Joinder and Assumption Agreement (the "Amended Credit Agreement"), filed on Form 8-K dated March 31, 2022. The Amended Credit Agreement, which expires March 2027, contains a senior unsecured, multi-currency revolving credit facility of $500.0 million, with sublimits of up to $50.0 million for swing line loans for Domestic Borrowers in U.S. dollars and a $40.0 million swing line loan for West Pharmaceuticals Services Holding GmbH and up to $50.0 million for the issuance of standby letters of credit. The credit facility may be increased from time-to-time by the greater of (a) $929.0 million or (b) EBITDA for the preceding twelve month period in the aggregate through an increase in the revolving credit facility, subject to the satisfaction of certain conditions. Borrowings under the credit facility bear interest, at the Company’s option, at either: (a) the Term Secured Overnight Financing Rate (“SOFR”) plus 0.10% plus an applicable margin; or (b) a base rate defined as the highest of: (i) the Bank of America “prime rate”; (ii) the Federal Funds effective rate plus 0.50%; and (iii) Term SOFR plus 1.00%. The applicable margin is based on the ratio of the Company’s Net Consolidated Debt to its modified EBITDA, ranging from 0 to 37.5 basis points for base rate loans and 87.5 to 137.5 basis points for Term SOFR loans. The Amended Credit Agreement contains financial covenants providing that the Company shall not permit the ratio of the Company’s Net Consolidated Debt to its Modified EBITDA to be greater than 3.5 to 1; provided that, no more than 3 times during the term of the Amended Credit Agreement, upon the occurrence of a Qualified Acquisition for each of the 4 fiscal quarters of the Company immediately following such Qualified Acquisition, the ratio set forth above shall be increased to 4.0 to 1. The Amended Credit Agreement also contains customary limitations on liens securing indebtedness of the Company and its subsidiaries, fundamental changes (mergers, consolidations, liquidations and dissolutions), asset sales, distributions and acquisitions.

At ~~September 30, 2021,~~March 31, 2022, the borrowing capacity available under our ~~$300.0~~$500.0 million multi-currency revolving credit facility, ~~(the “Credit Facility”),~~ including outstanding letters of credit of $2.4 million, was ~~$297.6~~$497.6 million.

~~Credit Agreement Amendment -~~ Term Loan

At ~~September 30, 2021,~~March 31, 2022, we had ~~$86.6~~$84.9 million in borrowings under the Term Loan, of which $2.2 million was classified as current and ~~$84.4~~$82.7 million was classified as long-term. Please refer to Note 9, Derivative Financial Instruments, for a discussion of the foreign currency hedge associated with the Term Loan.

Please refer to Note 10, Debt, to the consolidated financial statements in our 2021 Annual Report for additional details regarding our debt agreements.

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Note 9: Derivative Financial Instruments

Our ongoing business operations expose us to various risks, such as fluctuating interest rates, foreign currency 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 in our condensed consolidated balance sheet at fair value.

Foreign Exchange Rate Risk

We have entered into forward exchange contracts, designated as fair value hedges, to manage our exposure to fluctuating foreign exchange rates on cross-currency intercompany loans. As of both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the total amount of these forward exchange contracts was Singapore Dollar (“SGD”) 601.5 million and $13.4 million.

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In addition, we have 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. As of ~~September 30, 2021,~~March 31, 2022, we had outstanding foreign currency contracts to purchase and sell certain pairs of currencies, as follows:


(in millions)	(in millions)		Sell		(in millions)		Sell
Currency	Currency	Purchase	USD	Euro	Currency	Purchase	USD	EUR
USD	USD	28.8	—	24.0	USD	14.4	—	12.1
Yen		6,131.7	24.6	27.7
JPY					JPY	5,386.8	20.0	24.2
SGD	SGD	28.7	17.8	3.0	SGD	8.3	5.6	0.6

In December 2019, we entered into a cross-currency swap for $90 million, which we designated as a hedge of our net investment in Daikyo. ~~The~~As of March 31, 2022, the notional amount of the cross-currency swap ~~is ¥9.4~~was ¥9.3 billion ($~~86.1~~84.9 million) and the swap termination date is December 31, 2024. Under the cross-currency swap, we receive floating interest rate payments based on ~~three-month U.S. Dollar (“USD”) LIBOR~~USD compounded SOFR plus a margin, in return for paying floating interest rate payments based on ~~three-month~~ Japanese Yen (“Yen”) ~~LIBOR~~Tokyo Overnight Average Rate ("TONAR") plus a margin.

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.

From November 2017 through ~~September 2021,~~March 2022, we purchased several series of call options for a total of ~~596,367~~640,267 barrels of crude oil to mitigate our exposure to such oil-based surcharges and protect operating cash flows with ~~regard~~regards to a portion of our forecasted elastomer purchases.

As of ~~September 30, 2021,~~March 31, 2022, we had outstanding contracts to purchase ~~182,495~~154,320 barrels of crude oil from ~~October 2021~~March 2022 to ~~March~~June 2023, at a weighted-average strike price of ~~$70.40~~$76.06 per barrel.

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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

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The following table summarizes the effects of derivative instruments designated as fair value hedges on the condensed consolidated statements of income:

Amount of (Gain) Loss Recognized in Income for the Amount of (Gain) Loss Recognized in Income for the
Three Months Ended
September 30, Nine Months Ended
September 30, Location on Statement of Income
($ in millions) 2021 2020 2021 2020
Fair Value Hedges:
Hedged item (intercompany loan) $ (5.9) $ 9.3 $ (11.0) $ 25.1 Other expense (income)
Derivative designated as hedging instrument 5.9 (9.3) 11.0 (25.1) Other expense (income)
Amount excluded from effectiveness testing (0.9) (1.9) (2.1) (5.9) Other expense (income)
Total $ (0.9) $ (1.9) $ (2.1) $ (5.9)


	Amount of Gain (Loss) Recognized in Income for the
	Three Months Ended March 31,				Location on Statement of Income
($ in millions)	2022		2021
Fair Value Hedges:
Hedged item (intercompany loan)	$	(9.6)	$	(9.9)		Other (income) expense
Derivative designated as hedging instrument	9.6		9.9			Other (income) expense
Amount excluded from effectiveness testing	0.8		0.6			Other (income) expense
Total	$	0.8	$	0.6

We recognize in earnings the initial value of forward point components on a straight-line basis over the life of the fair value hedge. The amounts recognized in earnings, pre-tax, for forward point components for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$0.6 million, $1.9~~$0.8 million and ~~$1.3 million, $5.0~~$0.6 million, respectively.

The following tables summarize the effects of derivative instruments designated as fair value, cash flow, and net investment hedges on other comprehensive income (“OCI”) and earnings, net of tax:


		Amount of Gain (Loss) Recognized in OCI for the				Amount of (Gain) Loss Reclassified from Accumulated OCI into Income for the				Location of (Gain) Loss Reclassified from Accumulated OCI into Income		Amount of (Loss) Gain Recognized in OCI for the				Amount of (Gain) Loss Reclassified from Accumulated OCI into Income for the				Location of (Gain) Loss Reclassified from Accumulated OCI into Income
		Three Months Ended September 30,				Three Months Ended September 30,						Three Months Ended March 31,				Three Months Ended March 31,
($ in millions)	($ in millions)	2021		2020		2021		2020			($ in millions)	2022		2021		2022		2021
Fair Value Hedges
Fair Value Hedges:											Fair Value Hedges:
Foreign currency hedge contracts	Foreign currency hedge contracts	$	(0.2)	$	(0.1)	$	0.1	$	(0.7)	Other expense (income)	Foreign currency hedge contracts	$	(1.2)	$	(0.6)	$	—	$	0.4	Other (income) expense
Total	Total	$	(0.2)	$	(0.1)	$	0.1	$	(0.7)		Total	$	(1.2)	$	(0.6)	$	—	$	0.4
Cash Flow Hedges:	Cash Flow Hedges:										Cash Flow Hedges:
Foreign currency hedge contracts	Foreign currency hedge contracts	$	0.1	$	(0.5)	$	0.1	$	0.2	Net sales	Foreign currency hedge contracts	$	0.4	$	(0.1)	$	(0.3)	$	0.3	Net sales
Foreign currency hedge contracts	Foreign currency hedge contracts	1.4		—		(0.3)		0.1		Cost of goods and services sold	Foreign currency hedge contracts	(1.1)		(1.9)		0.5		—		Cost of goods and services sold

Forward treasury locks	Forward treasury locks	—		—		0.1		0.1		Interest expense	Forward treasury locks	—		—		0.1		0.1		Interest expense
Total	Total	$	1.5	$	(0.5)	$	(0.1)	$	0.4		Total	$	(0.7)	$	(2.0)	$	0.3	$	0.4
Net Investment Hedges:	Net Investment Hedges:										Net Investment Hedges:

Cross-currency swap	Cross-currency swap	$	0.6	$	(3.0)	$	—	$	—	Other expense (income)	Cross-currency swap	$	3.3	$	5.0	$	—	$	—	Other (income) expense
Total	Total	$	0.6	$	(3.0)	$	—	$	—		Total	$	3.3	$	5.0	$	—	$	—

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Amount of Gain (Loss) Recognized in OCI for the Amount of (Gain) Loss Reclassified from Accumulated OCI into Income for the Location of (Gain) Loss Reclassified from Accumulated OCI into Income
Nine Months Ended
September 30, Nine Months Ended
September 30,
($ in millions) 2021 2020 2021 2020
Fair Value Hedges
Foreign currency hedge contracts $ (0.6) $ 2.8 $ 0.9 $ (3.3) Other expense (income)
Total $ (0.6) $ 2.8 $ 0.9 $ (3.3)
Cash Flow Hedges:
Foreign currency hedge contracts $ (0.5) $ — $ 0.9 $ (0.3) Net sales
Foreign currency hedge contracts (1.4) (0.3) 1.2 (0.1) Cost of goods and services sold
Forward treasury locks — — 0.2 0.2 Interest expense
Total $ (1.9) $ (0.3) $ 2.3 $ (0.2)
Net Investment Hedges:
Cross-currency swap $ 6.0 $ (2.0) $ — $ — Other expense (income)
Total $ 6.0 $ (2.0) $ — $ —

The following table summarizes the effects of derivative instruments designated as fair value, cash flow, and net investment hedges by line item in our condensed consolidated statements of income:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in millions)	($ in millions)	2021		2020		2021		2020		($ in millions)	2022		2021
Net sales	Net sales	$	0.1	$	0.2	$	0.9	$	(0.3)	Net sales	$	(0.3)	$	0.3
Cost of goods and services sold	Cost of goods and services sold	(0.3)		0.1		1.2		(0.1)		Cost of goods and services sold	0.5		—
Interest expense	Interest expense	0.1		0.1		0.2		0.2		Interest expense	0.1		0.1
Other expense (income)		0.1		(0.7)		0.9		(3.3)
Other (income) expense										Other (income) expense	—		0.4

The following table summarizes the effects of derivative instruments not designated as hedges on the condensed consolidated statements of income:


		Amount of Gain (Loss) Recognized in Income for the				Amount of Gain (Loss) Recognized in Income for the						Amount of Gain (Loss) Recognized in Income for the
		Three Months Ended September 30,				Nine Months Ended September 30,				Location on Statement of Income		Three Months Ended March 31,				Location on Statement of Income
($ in millions)	($ in millions)	2021		2020		2021		2020			($ in millions)	2022		2021
Commodity call options	Commodity call options	$	0.5	$	0.1	$	1.6	$	0.3	Other expense (income)	Commodity call options	$	2.8	$	(0.5)		Other (income) expense
Total	Total	$	0.5	$	0.1	$	1.6	$	0.3		Total	$	2.8	$	(0.5)

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ there was no material ineffectiveness related to our hedges.

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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.

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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) September 30,
2021 Level 1 Level 2 Level 3
Assets:
Deferred compensation assets $ 14.4 $ 14.4 $ — $ —
Foreign currency contracts 12.0 — 12.0 —
Cross-currency swap 2.2 — 2.2 —
Commodity call options 1.8 — 1.8 —
$ 30.4 $ 14.4 $ 16.0 $ —
Liabilities:
Contingent consideration $ 3.5 $ — $ — $ 3.5
Deferred compensation liabilities 15.7 15.7 — —
Foreign currency contracts 2.8 — 2.8 —
$ 22.0 $ 15.7 $ 2.8 $ 3.5


		Balance at		Basis of Fair Value Measurements							Balance at		Basis of Fair Value Measurements
($ in millions)	($ in millions)	December 31, 2020		Level 1		Level 2		Level 3		($ in millions)	March 31, 2022		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Deferred compensation assets	Deferred compensation assets	$	12.8	$	12.8	$	—	$	—	Deferred compensation assets	$	15.0	$	15.0	$	—	$	—
Foreign currency contracts	Foreign currency contracts	3.0		—		3.0		—		Foreign currency contracts	23.3		—		23.3		—
Cross-currency swap										Cross-currency swap	8.7		—		8.7		—
Commodity call options	Commodity call options	0.3		0		0.3		0		Commodity call options	3.9		—		3.9		—
		$	16.1	$	12.8	$	3.3	$	—		$	50.9	$	15.0	$	35.9	$	—
Liabilities:	Liabilities:									Liabilities:
Contingent consideration	Contingent consideration	$	3.6	$	—	$	—	$	3.6	Contingent consideration	$	4.0	$	—	$	—	$	4.0
Deferred compensation liabilities	Deferred compensation liabilities	14.5		14.5		—		—		Deferred compensation liabilities	15.4		15.4		—		—
Cross-currency swap		5.6		—		5.6		—

Foreign currency contracts	Foreign currency contracts	9.7		—		9.7		—		Foreign currency contracts	4.5		—		4.5		—
		$	33.4	$	14.5	$	15.3	$	3.6		$	23.9	$	15.4	$	4.5	$	4.0


	Balance at		Basis of Fair Value Measurements
($ in millions)	December 31, 2021		Level 1		Level 2		Level 3
Assets:
Deferred compensation assets	$	15.5	$	15.5	$	—	$	—
Foreign currency contracts	14.8		—		14.8		—
Cross-currency swap	4.4		—		4.4		—
Commodity call options	1.7		—		1.7		—
	$	36.4	$	15.5	$	20.9	$	—
Liabilities:
Contingent consideration	$	3.7	$	—	$	—	$	3.7
Deferred compensation liabilities	16.1		16.1		—		—
Foreign currency contracts	3.4		—		3.4		—
	$	23.2	$	16.1	$	3.4	$	3.7

~~Table of Contents~~

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 and other noncurrent assets, as well as other current and other long-term 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 commodity call options, included within other current and other noncurrent assets, is valued using a market approach. The fair value of our contingent consideration, included within other current and other 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. The fair value of the cross-currency swap, included within other ~~non-current~~noncurrent assets, ~~and long-term liabilities,~~ is valued using a market approach. Please refer to Note 9, Derivative Financial Instruments, for further discussion of our derivatives. ~~All derivatives are recognized on~~The fair value of our commodity call options, included within other current and other noncurrent assets, is valued using a ~~gross basis as either assets or liabilities in the balance sheet.~~

~~Level 3 Fair Value Measurements~~

market approach. The fair value of the contingent consideration liability, within current and long-term liabilities, related to the SmartDose® technology platform (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 (income) expense ~~(income)~~ in our condensed consolidated statements of income. The ~~significant unobservable inputs used in the fair value measurement of the SmartDose~~® 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. Sales projections were derived using upside, base and downside forecasted cases for each partnership and applying probability-weighted scenarios of 10%, 50% and 40% to the three cases, respectively, to reflect the likelihood of West meeting the estimated sales projection targets. The probability of success factors included the probabilities of successful FDA approval for each partnership drug, which was estimated in a range of 19% to 100% based on the development phase of each respective drug, and the probability of the successful execution of supply agreements with each partnership, which was estimated in the range of 25% to 100% based on historical, current, and future supply agreements with the respective partnerships. The fair value of ~~this liability utilized a risk-adjusted discount rate of 19% to present value the cash flows. The discount rate~~deferred compensation liabilities is ~~calculated by determining the after-tax required returns~~based on debt and equity and weighting each return by the respective percent of debt and equity to total capital. Key inputs for the discount rate include the risk-free rate on the 20-Year United States Treasury maturity, equity risk premium, company-specific risk premium, pre-tax cost of debt, and U.S. tax rate, among others. As development and commercializationquoted prices of the ~~SmartDose~~® ~~technology platform progresses, we may need to update the sales projections, the probability of success factors,~~underlying employees’ investment selections and ~~the discount rate used. This could result in an increase or decrease to the SmartDose~~® ~~contingent consideration.~~is included within other long-term liabilities.

~~The following table provides a summary of changes in our Level 3 fair value measurements:~~


	~~($ in millions)~~
~~Balance, December 31, 2019~~	$	~~3.3~~
~~Increase in fair value recorded in earnings~~	~~1.2~~
~~Payments~~	~~(0.9)~~
~~Balance, December 31, 2020~~	~~3.6~~
~~Increase in fair value recorded in earnings~~	~~0.9~~
~~Payments~~	~~(1.0)~~
~~Balance, September 30, 2021~~	$	~~3.5~~

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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.

~~Table of Contents~~

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 ~~September 30,~~March 31, 2022, the estimated fair value of long-term debt was $210.4 million compared to a carrying amount of $208.3 million. At December 31, 2021, the estimated fair value of long-term debt was ~~$220.3 million compared to a carrying amount of $209.9 million. At December 31, 2020, the estimated fair value of long-term debt was $265.7~~$217.9 million and the carrying amount was ~~$252.9~~$208.8 million.

Note 11: Accumulated Other Comprehensive Loss

The following table presents the changes in the components of accumulated other comprehensive income ("AOCI") (loss), net of tax, for the ~~nine~~three months ended ~~September 30,~~March 31, 2022:


($ in millions)	(Losses) gains on derivatives		Change in equity affiliate investment AOCI		Defined benefit pension and other postretirement plans		Foreign currency translation		Total
Balance, December 31, 2021	$	(1.2)	$	1.5	$	(31.8)	$	(128.1)	$	(159.6)
Other comprehensive (loss) income before reclassifications	(1.9)		—		0.4		(22.1)		(23.6)
Amounts reclassified out from accumulated other comprehensive (loss) income	0.3		—		0.5		—		0.8
Other comprehensive (loss) income, net of tax	(1.6)		—		0.9		(22.1)		(22.8)
Balance, March 31, 2022	$	(2.8)	$	1.5	$	(30.9)	$	(150.2)	$	(182.4)

The following table presents the changes in the components of accumulated other comprehensive income ("AOCI") (loss), net of tax, for the three months ended March 31, 2021:

($ in millions) (Losses) gains on
derivatives Change in equity affiliate investment AOCI Defined benefit
pension and other
postretirement plans Foreign
currency
translation Total
Balance, December 31, 2020 $ (1.9) $ 0.6 $ (40.5) $ (68.8) $ (110.6)
Other comprehensive income (loss) before reclassifications (2.5) — 0.6 (46.9) (48.8)
Amounts reclassified out from accumulated other comprehensive income (loss) 3.2 — 0.5 — 3.7
Other comprehensive income (loss), net of tax 0.7 — 1.1 (46.9) (45.1)
Balance, September 30, 2021 $ (1.2) $ 0.6 $ (39.4) $ (115.7) $ (155.7)


($ in millions)	(Losses) gains on derivatives		Change in equity affiliate investment AOCI		Defined benefit pension and other postretirement plans		Foreign currency translation		Total
Balance, December 31, 2020	$	(1.9)	$	0.6	$	(40.5)	$	(68.8)	$	(110.6)
Other comprehensive (loss) income before reclassifications	(2.6)		—		0.1		(28.4)		(30.9)
Amounts reclassified out from accumulated other comprehensive (loss) income	0.8		—		0.5		—		1.3
Other comprehensive (loss) income, net of tax	(1.8)		—		0.6		(28.4)		(29.6)
Balance, March 31, 2021	$	(3.7)	$	0.6	$	(39.9)	$	(97.2)	$	(140.2)

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A summary of the reclassifications out of accumulated other comprehensive loss is presented in the following table:


($ in millions)	($ in millions)	Three Months Ended September 30,				Nine Months Ended September 30,				Location on Statement of Income	($ in millions)	Three Months Ended March 31,				Location on Statement of Income
Detail of components	Detail of components	2021		2020		2021		2020			Detail of components	2022		2021
Gains (losses) on derivatives:
(Losses) gains on derivatives:											(Losses) gains on derivatives:
Foreign currency contracts	Foreign currency contracts	$	(0.1)	$	(0.3)	$	(1.1)	$	0.3	Net sales	Foreign currency contracts	$	0.3	$	(0.3)		Net sales
Foreign currency contracts	Foreign currency contracts	0.4		(0.1)		(1.9)		0.3		Cost of goods and services sold	Foreign currency contracts	(0.5)		—			Cost of goods and services sold
Foreign currency contracts	Foreign currency contracts	(0.9)		1.1		(2.1)		5.1		Other expense (income)	Foreign currency contracts	—		(0.6)			Other (income) expense
Forward treasury locks	Forward treasury locks	(0.1)		(0.1)		(0.3)		(0.3)		Interest expense	Forward treasury locks	(0.1)		(0.1)			Interest expense
Total before tax	Total before tax	(0.7)		0.6		(5.4)		5.4			Total before tax	(0.3)		(1.0)
Tax benefit (expense)		0.7		(0.3)		2.2		(1.9)
Tax benefit											Tax benefit	—		0.2
Net of tax	Net of tax	$	—	$	0.3	$	(3.2)	$	3.5		Net of tax	$	(0.3)	$	(0.8)
Amortization of defined benefit pension and other postretirement plans:	Amortization of defined benefit pension and other postretirement plans:										Amortization of defined benefit pension and other postretirement plans:

Prior service credit	Prior service credit	$	0.1	$	0.1	$	0.2	$	0.4	(a)	Prior service credit	$	—	$	0.1		(a)
Actuarial losses	Actuarial losses	0.1		0.2		(0.1)		—		(a)	Actuarial losses	—		(0.1)			(a)
Settlements	Settlements	—		(1.1)		(0.7)		(3.4)		(a)	Settlements	(0.6)		(0.6)			(a)
Total before tax	Total before tax	0.2		(0.8)		(0.6)		(3.0)			Total before tax	(0.6)		(0.6)
Tax benefit (expense)		(0.1)		0.3		0.1		0.8
Tax benefit											Tax benefit	0.1		0.1
Net of tax	Net of tax	$	0.1	$	(0.5)	$	(0.5)	$	(2.2)		Net of tax	$	(0.5)	$	(0.5)
Total reclassifications for the period, net of tax	Total reclassifications for the period, net of tax	$	0.1	$	(0.2)	$	(3.7)	$	1.3		Total reclassifications for the period, net of tax	$	(0.8)	$	(1.3)

(a) These components are included in the computation of net periodic benefit cost. Please refer to Note 14, Benefit Plans, for additional details.

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Note 12: Shareholders’ Equity

The following table presents the changes in shareholders’ equity for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:


		Common Shares Issued	Common Stock				Capital in Excess of Par Value		Number of Treasury Shares			Treasury Stock			Retained earnings		Accumulated other comprehensive loss				Total			Common Shares Issued				Common Stock					Capital in Excess of Par Value					Number of Treasury Shares		Treasury Stock			Retained earnings			Accumulated other comprehensive loss			Total
(in millions)	(in millions)													(in millions)
Balance, December 31, 2020		75.3			$	18.8				$	267.3			1.3					$	(167.7)						$	1,846.7				$	(110.6)				$	1,854.5
Balance, December 31, 2021																							Balance, December 31, 2021		75.3				$	18.8				$	249.0				1.1		$	(229.5)		$	2,456.7		$	(159.6)		$	2,335.4
Net income	Net income	—	—				—		—			—			151.2		—				151.2		Net income	—				—					—					—		—			173.8			—			173.8

Activity related to stock-based compensation	Activity related to stock-based compensation	—	—				(20.6)		(0.3)			23.1			—		—				2.5		Activity related to stock-based compensation	—				—					(29.1)					(0.3)		29.2			—			—			0.1
Shares purchased under share repurchase program	Shares purchased under share repurchase program	—	—				—		0.5			(137.1)			—		—				(137.1)		Shares purchased under share repurchase program	—				—					—					0.4		(147.1)			—			—			(147.1)

Dividends declared ($0.17 per share)		—	—				—		—			—			(12.5)		—				(12.5)
Dividends declared ($0.18 per share)																							Dividends declared ($0.18 per share)	—				—					—					—		—			(13.2)			—			(13.2)
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—				—		—			—			—		(29.6)				(29.6)		Other comprehensive loss, net of tax	—				—					—					—		—			—			(22.8)			(22.8)
Balance, March 31, 2021		75.3	$	18.8			$	246.7	1.5			$	(281.7)		$	1,985.4	$	(140.2)			$	1,829.0
Net income		—	—				—		—			—			187.3		—				187.3

Activity related to stock-based compensation		—	—				1.3		(0.2)			20.5			—		—				21.8
Balance, March 31, 2022																							Balance, March 31, 2022	75.3				$	18.8				$	219.9				1.2		$	(347.4)		$	2,617.3		$	(182.4)		$	2,326.2

Dividends declared ($0.17 per share)		—	—				—		—			—			(12.5)		—				(12.5)
Other comprehensive income, net of tax		—	—				—		—			—			—		7.0				7.0
Balance, June 30, 2021		75.3	$	18.8			$	248.0	1.3			$	(261.2)		$	2,160.2	$	(133.2)			$	2,032.6
Net income		—	—				—		—			—			175.6		—				175.6

Activity related to stock-based compensation		—	—				3.2		(0.1)			13.4			—		—				16.6

Other comprehensive loss, net of tax		—	—				—		—			—			—		(22.5)				(22.5)
Balance, September 30, 2021		75.3	$	18.8			$	251.2	1.2			$	(247.8)		$	2,335.8	$	(155.7)			$	2,202.3

~~Table of Contents~~

The following table presents the changes in shareholders’ equity for the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021:


		Common Shares Issued	Common Stock				Capital in Excess of Par Value		Number of Treasury Shares			Treasury Stock			Retained earnings		Accumulated other comprehensive loss				Total			Common Shares Issued				Common Stock					Capital in Excess of Par Value					Number of Treasury Shares		Treasury Stock			Retained earnings			Accumulated other comprehensive loss			Total
(in millions)	(in millions)													(in millions)
Balance, December 31, 2019		75.3			$	18.8				$	272.7			1.2					$	(118.1)						$	1,549.4				$	(149.6)				$	1,573.2

Effect of modified retrospective application of a new accounting standard		—	—				—		—			—			(0.1)		—				(0.1)
Balance, December 31, 2020																							Balance, December 31, 2020		75.3				$	18.8				$	267.3				1.3		$	(167.7)		$	1,846.7		$	(110.6)		$	1,854.5
Net income	Net income	—	—				—		—			—			74.3		—				74.3		Net income	—				—					—					—		—			151.2			—			151.2

Activity related to stock-based compensation	Activity related to stock-based compensation	—	—				(5.1)		(0.3)			17.9			—		—				12.8		Activity related to stock-based compensation	—				—					(20.6)					(0.3)		23.1			—			—			2.5
Shares purchased under share repurchase program	Shares purchased under share repurchase program	—	—				—		0.8			(115.5)			—		—				(115.5)		Shares purchased under share repurchase program	—				—					—					0.5		(137.1)			—			—			(137.1)

Dividends declared ($0.16 per share)		—	—				—		—			—			(11.8)		—				(11.8)
Dividends declared ($0.17 per share)																							Dividends declared ($0.17 per share)	—				—					—					—		—			(12.5)			—			(12.5)
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—				—		—			—			—		(42.7)				(42.7)		Other comprehensive loss, net of tax	—				—					—					—		—			—			(29.6)			(29.6)
Balance, March 31, 2020		75.3	$	18.8			$	267.6	1.7			$	(215.7)		$	1,611.8	$	(192.3)			$	1,490.2
Net income		—	—				—		—			—			91.2		—				91.2

Activity related to stock-based compensation		—	—				(4.5)		(0.2)			24.9			—		—				20.4
Balance, March 31, 2021																							Balance, March 31, 2021	75.3				$	18.8				$	246.7				1.5		$	(281.7)		$	1,985.4		$	(140.2)		$	1,829.0

Other comprehensive income, net of tax		—	—				—		—			—			—		4.5				4.5
Balance, June 30, 2020		75.3	$	18.8			$	263.1	1.5			$	(190.8)		$	1,703.0	$	(187.8)			$	1,606.3
Net income		—	—				—		—			—			82.3		—				82.3

Activity related to stock-based compensation		—	—				5.1		(0.1)			8.8			—		—				13.9

Dividends declared ($0.16 per share)		—	—				—		—			—			(11.9)		—				(11.9)
Other comprehensive loss, net of tax		—	—				—		—			—			—		28.3				28.3
Balance, September 30, 2020		75.3	$	18.8			$	268.2	1.4			$	(182.0)		$	1,773.4	$	(159.5)			$	1,718.9

2019

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Note 13: Stock-Based Compensation

The West Pharmaceutical Services, Inc. 2016 Omnibus Incentive Compensation Plan (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 ~~September 30, 2021,~~March 31, 2022, there were ~~2,485,724~~1,727,432 shares remaining in the 2016 Plan for future grants.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we granted ~~159,932~~109,496 stock options at a weighted average exercise price of ~~$277.23~~$369.13 per share based on the grant-date fair value of our stock to employees under the 2016 Plan. The weighted average grant date fair value of options granted was ~~$63.72~~$96.50 per share as determined by the Black-Scholes option valuation model using the following weighted average assumptions: a risk-free interest rate of ~~0.7%~~1.8%; expected life of 5.6 years based on prior experience; stock volatility of ~~23.9%~~24.9% based on historical data; and a dividend yield of ~~0.3%~~0.2%. Stock option expense is recognized over the vesting period, net of forfeitures.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we granted ~~36,902~~28,688 stock-settled performance share unit ~~(“PSU”~~("PSU") awards at a weighted average grant-date fair value of ~~$331.56~~$369.13 per share to eligible employees. These awards are earned based on the ~~Company’s~~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 stock-settled PSU awards are entitled to receive a certain ~~number~~numbers of shares of common stock. Shares earned under PSU awards may vary from 0% to 200% of an ~~employee’s~~employee's targeted award. The fair value of stock-settled PSU 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.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we granted ~~5,109~~3,427 stock-settled restricted share unit (“RSU”) awards at a weighted average grant-date fair value of ~~$292.42~~$369.13 per share to eligible employees. These awards are earned over a specified performance period. The fair value of stock-settled RSU awards is based on the market price of our stock at the grant date and is recognized as expense over the vesting period, net of forfeitures.

Stock-based compensation expense was ~~$11.4~~$5.5 million and ~~$27.5~~$5.9 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~respectively. For the three and nine months ended September 30, 2020, stock-based compensation expense was $10.0 million and $27.6 million,~~ respectively.

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Note 14: Benefit Plans

The components of net periodic benefit cost for the three months ended ~~September 30~~March 31 were as follows:


		Pension benefits				Other retirement benefits				Total					Pension benefits				Other retirement benefits				Total
($ in millions)	($ in millions)	2021		2020		2021		2020		2021		2020		($ in millions)	2022		2021		2022		2021		2022		2021
Service cost	Service cost	$	0.1	$	0.4	$	—	$	—	$	0.1	$	0.4	Service cost	$	0.4	$	0.4	$	—	$	—	$	0.4	$	0.4
Interest cost	Interest cost	1.6		1.7		—		—		1.6		1.7		Interest cost	1.6		1.4		—		0.1		1.6		1.5
Expected return on assets	Expected return on assets	(2.9)		(2.8)		—		—		(2.9)		(2.8)		Expected return on assets	(2.2)		(3.1)		—		—		(2.2)		(3.1)

Amortization of prior service credit	Amortization of prior service credit	—		0.1		(0.1)		(0.2)		(0.1)		(0.1)		Amortization of prior service credit	—		—		—		(0.1)		—		(0.1)
Recognized actuarial losses (gains)	Recognized actuarial losses (gains)	0.5		0.4		(0.3)		(0.6)		0.2		(0.2)		Recognized actuarial losses (gains)	0.4		0.5		(0.4)		(0.4)		—		0.1

Settlements	Settlements	—		1.1		—		—		—		1.1		Settlements	0.6		0.6		—		—		0.6		0.6
Net periodic benefit cost	Net periodic benefit cost	$	(0.7)	$	0.9	$	(0.4)	$	(0.8)	$	(1.1)	$	0.1	Net periodic benefit cost	$	0.8	$	(0.2)	$	(0.4)	$	(0.4)	$	0.4	$	(0.6)


		Pension benefits				Other retirement benefits				Total					Pension benefits				Other retirement benefits				Total
($ in millions)	($ in millions)	2021		2020		2021		2020		2021		2020		($ in millions)	2022		2021		2022		2021		2022		2021
U.S. plans	U.S. plans	$	(0.9)	$	0.5	$	(0.4)	$	(0.8)	$	(1.3)	$	(0.3)	U.S. plans	$	0.4	$	(0.6)	$	(0.4)	$	(0.4)	$	—	$	(1.0)
International plans	International plans	0.2		0.4		—		—		0.2		0.4		International plans	0.4		0.4		—		—		0.4		0.4
Net periodic benefit cost	Net periodic benefit cost	$	(0.7)	$	0.9	$	(0.4)	$	(0.8)	$	(1.1)	$	0.1	Net periodic benefit cost	$	0.8	$	(0.2)	$	(0.4)	$	(0.4)	$	0.4	$	(0.6)

~~The components of net periodic benefit cost for the nine months ended September 30 were as follows:~~

Pension benefits Other retirement benefits Total
($ in millions) 2021 2020 2021 2020 2021 2020
Service cost $ 0.9 $ 1.0 $ — $ — $ 0.9 $ 1.0
Interest cost 4.5 5.5 0.1 0.1 4.6 5.6
Expected return on assets (9.0) (8.8) — — (9.0) (8.8)
Amortization of prior service credit 0.1 0.1 (0.3) (0.5) (0.2) (0.4)
Recognized actuarial losses (gains) 1.5 1.4 (1.2) (1.4) 0.3 —
Settlements 0.7 3.4 — — 0.7 3.4
Net periodic benefit cost $ (1.3) $ 2.6 $ (1.4) $ (1.8) $ (2.7) $ 0.8

Pension benefits Other retirement benefits Total
($ in millions) 2021 2020 2021 2020 2021 2020
U.S. plans $ (2.4) $ 1.5 $ (1.4) $ (1.8) $ (3.8) $ (0.3)
International plans 1.1 1.1 — — 1.1 1.1
Net periodic benefit cost $ (1.3) $ 2.6 $ (1.4) $ (1.8) $ (2.7) $ 0.8

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, we recorded a ~~$0.7 million~~ pension settlement charge of $0.6 million and $0.6 million, respectively, within other nonoperating (income) expense, as we determined that normal-course lump-sum payments for our U.S. qualified defined benefit pension plan exceeded the threshold for settlement accounting under U.S. GAAP for the year.

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Note 15: Other (Income) Expense ~~(Income)~~

Other (income) expense ~~(income)~~ consists of:

Three Months Ended
September 30, Nine Months Ended
September 30,
($ in millions) 2021 2020 2021 2020
Restructuring and related charges $ 0.4 $ 4.5 $ 2.5 $ 4.5
Fixed asset impairments and loss (gain) on sale of equipment 0.2 0.9 0.6 7.2
Contingent consideration 0.1 0.8 0.9 0.9
Foreign exchange transaction losses (gains) 0.4 1.0 (2.5) (4.5)
Other items 0.7 (0.5) 1.5 (1.9)
Total other expense (income) $ 1.8 $ 6.7 $ 3.0 $ 6.2


	Three Months Ended March 31,
($ in millions)	2022		2021
Restructuring and related charges	$	—	$	1.2




Fixed asset impairments and (gain) loss on sale of equipment	(0.1)		0.1
Contingent consideration	0.8		0.7
Foreign exchange transaction gains	(1.1)		(0.3)
Other items	(2.7)		2.2
Total other (income) expense	$	(3.1)	$	3.9

Restructuring and Related Charges

In July 2020, our Board of Directors approved a restructuring plan designed to optimize certain organizational structures within the Company to better support our continued growth and business priorities. These changes are expected to be implemented over a period of up to twenty-four months from the date of approval. The plan ~~was originally~~is expected to require restructuring and related charges of approximately $15 million to $17 million, with annualized savings being in the range of $3.5 million to $4.5 million. Due to the recent increase in customer demand, the Company will no longer proceed with certain portions of the plan, thus reducing the total expected charges to be approximately $9$7 million to ~~$11 million. Similarly,~~$8 million, with annualized savings ~~are now expected to be~~ in the range of $0.9 million to $1.6 million. Since its approval, we recorded a net pre-tax amount equal to ~~$7.1~~$6.8 million in restructuring and related charges associated with this plan.

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The following table presents activity related to our restructuring obligations related to our 2020 restructuring plan:


($ in millions)	($ in millions)	Severance and benefits		Other charges		Total		($ in millions)	Severance and benefits		Other charges		Total
Balance, December 31, 2020		$	4.6	$	—	$	4.6
Balance, December 31, 2021								Balance, December 31, 2021	$	2.8	$	0.5	$	3.3
Charges	Charges	1.0		1.5		2.5		Charges	—		—		—
Cash payments	Cash payments	(1.4)		(0.9)		(2.3)		Cash payments	(0.3)		(0.1)		(0.4)
Balance, September 30, 2021		$	4.2	$	0.6	$	4.8

Balance, March 31, 2022								Balance, March 31, 2022	$	2.5	$	0.4	$	2.9

In February 2018, our Board of Directors approved a restructuring plan designed to realign our manufacturing capacity with demand. These changes were expected to be implemented over a period of up to twenty-four months from the date of approval. The plan was expected to require restructuring and related charges of approximately $16 million. Since its approval, we have recorded $13.7 million in restructuring and related charges associated with this plan. The plan is now considered complete.

~~The following table presents activity related to our restructuring obligations related to our 2018 restructuring plan:~~

($ in millions) Severance
and benefits Total
Balance, December 31, 2020 $ 0.1 $ 0.1
Cash payments (0.1) (0.1)
Balance, September 30, 2021 $ — $ —

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Contingent Consideration

Contingent consideration represents changes in the fair value of the SmartDose® contingent consideration. Please refer to Note 10, Fair Value Measurements, for additional details.

Other Items

During the three months ended ~~September 30,~~March 31, 2022 and 2021, we recorded a ~~net~~gain of $2.8 million and a loss of ~~$0.9~~$0.5 million, ~~on the sale~~respectively, related to oil hedges. Please refer to Note 9, Derivative Financial Instruments, for further discussion of ~~one of the Company's cost investments.~~ our hedging activity.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, we recorded a ~~net loss in our cost investment activity of $1.8 million, inclusive of~~ an impairment charge of $2.2 million for one of the Company's cost investments. ~~For the three and nine months ended September 30, 2020, there was no activity related to our cost investments.~~

During both the three and nine months ended September 30, 2021 and 2020, we recorded development income of $0.2 million and $0.6 million, respectively, 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. Please refer to Note 3,~~ ~~Revenue, for additional information.~~

Note 16: Income Taxes

The tax provision for interim periods is determined using the estimated annual effective consolidated tax rate, based on the current estimate of full-year earnings before taxes, adjusted for the impact of discrete quarterly items.

The provision for income taxes was ~~$12.0~~$21.2 million and ~~$21.1~~$28.7 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, and the effective tax rate was ~~6.6%~~11.3% and ~~21.6%~~16.4%, respectively. ~~The provision for income taxes was $73.0~~During the three months ended March 31, 2022 and 2021, we recorded a tax benefit of $8.9 million and ~~$52.1~~$11.1 million, ~~for the nine months ended September 30, 2021 and 2020,~~ respectively, ~~and~~associated with stock-based compensation. The decrease in the effective tax rate ~~was 12.9% and 18.2%, respectively. The reduction in effective~~is primarily due to a $5.9 million tax ~~rates~~benefit recorded as a result of a state tax valuation allowance reversal for the three ~~and nine~~ months ended ~~September 30, 2021 is~~March 31, 2022, as compared to the ~~result of the~~ ~~Company's prepayment of future royalties from one of its subsidiaries, which resulted~~same period in ~~a $20.4 million tax benefit.~~2021.

Note 17: Commitments and Contingencies

From time to time, we are involved in product liability matters and other legal proceedings and claims generally incidental to our normal business activities. 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. While the outcome of current proceedings cannot be accurately predicted, we believe their ultimate resolution should not have a material adverse effect on our business, financial condition, results of operations or liquidity.

There have been no significant changes to the commitments and contingencies included in our ~~2020~~2021 Annual Report.

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Note 18: Segment Information

Our business operations are organized into 2 reportable segments, Proprietary Products and Contract-Manufactured Products. Our Proprietary Products reportable segment offers proprietary packaging, containment and drug delivery products, along with analytical lab services and other integrated services and solutions, primarily to biologic, generic and pharmaceutical drug customers. Our Contract-Manufactured Products reportable 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.

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The Chief Operating Decision Maker ("CODM") evaluates 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, certain pension and other retirement benefit costs, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that the CODM considers 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 segment operating profit metric is what the CODM uses in evaluating our results of operations and the financial measure that provides a valuable insight into our overall performance and financial position.

The following table presents information about our reportable segments, reconciled to consolidated totals:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in millions)		2021		2020		2021		2020
( $ in millions)										( $ in millions)	2022		2021
Net sales:	Net sales:									Net sales:
Proprietary Products	Proprietary Products	$	577.0	$	421.5	$	1,708.0	$	1,194.5	Proprietary Products	$	601.3	$	543.7
Contract-Manufactured Products	Contract-Manufactured Products	129.7		126.6		393.2		372.5		Contract-Manufactured Products	118.7		127.1
Intersegment sales elimination	Intersegment sales elimination	(0.2)		(0.1)		(0.4)		(0.3)		Intersegment sales elimination	—		(0.1)
Consolidated net sales	Consolidated net sales	$	706.5	$	548.0	$	2,100.8	$	1,566.7	Consolidated net sales	$	720.0	$	670.7

The intersegment sales elimination, which is required for the presentation of consolidated net sales, represents the elimination of components sold between our segments.

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The following table provides summarized financial information for our segments:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in millions)	($ in millions)	2021		2020		2021		2020		($ in millions)	2022		2021
Operating profit (loss):
Proprietary Products	Proprietary Products	$	195.5	$	107.5	$	594.3	$	312.9	Proprietary Products	$	193.4	$	182.6
Contract-Manufactured Products	Contract-Manufactured Products	16.8		18.8		51.9		52.1		Contract-Manufactured Products	19.1		16.4
Total business and segment operating profit		$	212.3	$	126.3	$	646.2	$	365.0
Total business segment operating profit										Total business segment operating profit	$	212.5	$	199.0
Corporate and Unallocated	Corporate and Unallocated									Corporate and Unallocated
Stock-based compensation expense	Stock-based compensation expense	$	(11.4)	$	(10.0)	$	(27.5)	$	(27.6)	Stock-based compensation expense	$	(5.5)	$	(5.9)
Corporate general costs (1)	Corporate general costs (1)	(18.1)		(12.4)		(45.5)		(39.5)		Corporate general costs(1)	(17.1)		(13.9)
Unallocated Items:	Unallocated Items:									Unallocated Items:
Restructuring and severance related charges		(0.3)		(4.5)		(2.5)		(6.7)
Amortization of Acquisition-related Intangible Assets (2)		(0.2)		(0.2)		(0.6)		(0.4)
Cost investment activity		(0.9)		—		(1.8)		—
Restructuring and related charges										Restructuring and related charges	—		(1.2)
Amortization of acquisition-related intangible assets(2)										Amortization of acquisition-related intangible assets(2)	(0.2)		(0.2)
Cost investment impairment										Cost investment impairment	—		(2.2)
Total Corporate and Unallocated	Total Corporate and Unallocated	(30.9)		(27.1)		(77.9)		(74.2)		Total Corporate and Unallocated	(22.8)		(23.4)
Total consolidated operating profit	Total consolidated operating profit	$	181.4	$	99.2	$	568.3	$	290.8	Total consolidated operating profit	$	189.7	$	175.6
Other expense, net	Other expense, net	0.3		1.5		1.3		4.6		Other expense, net	1.9		0.7
Income before income taxes	Income before income taxes	$	181.1	$	97.7	$	567.0	$	286.2	Income before income taxes	$	187.8	$	174.9

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(1) Corporate general costs includes executive and director compensation, certain pension and other retirement benefit costs, and other corporate facilities and administrative expenses not allocated to the segments.

(2) During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~the Company~~we recorded $0.2 million ~~and $0.6 million, respectively,~~ of amortization expense within operating profit associated with an intangible asset acquired during the second quarter of 2020.

Please refer to Note 15, Other (Income) Expense ~~(Income)~~, for further discussion of ~~these items.~~certain unallocated items referenced above.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following discussion is intended to further the reader’s understanding of the consolidated financial condition and results of operations of our Company. It should be read in conjunction with our condensed consolidated financial statements and accompanying notes elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”) as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and accompanying notes included in our ~~2020~~2021 Annual Report. Our historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks discussed in Part I, Item 1A of our ~~2020~~2021 Annual Report and in Part II, Item 1A of this Form 10-Q.

Throughout this section, references to “Notes” refer to the notes to our condensed consolidated financial statements (unaudited) in Part I, Item 1 of this Form 10-Q, unless otherwise indicated.

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Non-U.S. GAAP Financial Measures

For the purpose of aiding the comparison of our year-over-year results, we may refer to net sales and other financial results excluding the effects of changes in foreign currency exchange rates. Organic net sales exclude the impact from acquisitions and/or divestitures and translate the current-period reported sales of subsidiaries whose functional currency is other than USD at the applicable foreign exchange rates in effect during the comparable prior-year period. We may also refer to adjusted consolidated operating profit and adjusted consolidated operating profit margin, which exclude the effects of unallocated items. The unallocated items are not representative of ongoing operations, and generally include restructuring and related charges, certain asset impairments, and other specifically-identified income or expense items. The re-measured results excluding effects from currency translation, the impact from acquisitions and/or divestitures, and excluding the effects of unallocated items are not in conformity with U.S. GAAP and should not be used as a substitute for the comparable U.S. GAAP financial measures. The non-U.S. GAAP financial measures are incorporated in our discussion and analysis as management uses them in evaluating our results of operations and believes that this information provides users with a valuable insight into our overall performance and financial position.

Our Operations

We are a leading global manufacturer in the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. Our products include a variety of primary packaging, containment solutions, reconstitution and transfer systems, and drug delivery systems, as well as contract manufacturing, analytical lab services and integrated solutions. Our customers include the leading biologic, generic, pharmaceutical, diagnostic, and ~~additional~~ medical device companies in the world. Our top priority is delivering quality products that meet the exact product specifications and quality standards customers require and expect. This focus on quality includes a commitment to excellence in manufacturing, scientific and technical expertise and management, which enables us to partner with our customers in order to deliver safe, effective drug products to patients quickly and efficiently.

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Our business operations are organized into two reportable segments, Proprietary Products and Contract-Manufactured Products. Our Proprietary Products reportable segment offers proprietary packaging, containment and drug delivery products, along with analytical lab services and other integrated services and solutions, primarily to biologic, generic and pharmaceutical drug customers. Our Contract-Manufactured Products reportable 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 also maintain collaborations to share technologies and market products with affiliates in Japan and Mexico.

Impact of COVID-19

West has been actively monitoring the COVID-19 situation and its impact globally. Our primary objectives have remained the same throughout the pandemic: to support the safety of our team members and their families and continue to support patients around the world. ~~Throughout the COVID-19 pandemic, our~~Our production facilities ~~have continued~~continue to operate as they had prior to the COVID-19 pandemic, other than for enhanced safety measures intended to prevent the spread of the ~~virus and higher levels of production at certain plant locations to meet additional customer demand.~~virus. Our capital and financial resources, including overall liquidity, remain strong. The remote working arrangements and travel restrictions imposed by various governments ~~have~~ had limited impact on our ability to maintain operations, as our manufacturing operations have generally been exempted from stay-at-home orders. However, we cannot predict the impact of the progression of the COVID-19 pandemic on future results due to a variety of factors, including the continued good health of our employees, the ability of suppliers to continue to operate and deliver, the ability of West and its customers to maintain operations, continued access to transportation resources, the changing needs and priorities of customers, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic. We will continue to closely monitor the COVID-19 pandemic in order to ensure the safety of our people and our ability to serve our customers and patients worldwide.

~~2021~~

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2022 Financial Performance Summary

The following tables present a reconciliation from U.S. GAAP to non-U.S. GAAP financial ~~measures for the three and nine months ended~~ ~~September 30, 2021:~~measures:

($ in millions, except per share data) Operating Profit Income tax expense Net income Diluted EPS
Three months ended September 30, 2021 GAAP $ 181.4 $ 12.0 $ 175.6 $ 2.31
Unallocated items:
Restructuring and related charges 0.3 0.1 0.2 —
Amortization of acquisition-related intangible assets (2)
0.2 — 0.7 0.01
Cost investment activity (3)
0.9 0.2 0.7 0.01
Royalty acceleration (5)
— 20.4 (20.4) (0.27)
Three months ended September 30, 2021 adjusted amounts (non-U.S. GAAP) $ 182.8 $ 32.7 $ 156.8 $ 2.06


($ in millions, except per share data)	Operating Profit		Income tax expense		Net income		Diluted EPS
Quarter ended March 31, 2022 GAAP	$	189.7	$	21.2	$	173.8	$	2.29
Unallocated items:

Pension settlement (1)	—		0.1		0.5		—
Amortization of acquisition-related intangible assets (2)	0.2		—		0.7		0.01

Quarter ended March 31, 2022 adjusted amounts (non-U.S. GAAP)	$	189.9	$	21.3	$	175.0	$	2.30

~~Table~~During the first quarter 2022, we recorded a tax benefit of ~~Contents~~

($ in millions, except per share data) Operating Profit Income tax expense Net income Diluted EPS
Nine months ended September 30, 2021 GAAP $ 568.3 $ 73.0 $ 514.1 $ 6.78
Unallocated items:
Restructuring and related charges 2.5 0.6 1.9 0.02
Pension settlement (1)
— 0.2 0.6 0.01
Amortization of acquisition-related intangible assets (2)
0.6 0.1 2.1 0.03
Cost investment activity (3)
1.8 (0.1) 1.9 0.02
Tax law changes (4)
— 1.4 (1.4) (0.02)
Royalty acceleration (5)
— 20.4 (20.4) (0.27)
Nine months ended September 30, 2021 adjusted amounts (non-U.S. GAAP) $ 573.2 $ 95.6 $ 498.8 $ 6.57
$8.9 million associated with stock-based compensation.


($ in millions, except per share data)	Operating Profit		Income tax expense		Net income		Diluted EPS
Quarter ended March 31, 2021 GAAP	$	175.6	$	28.7	$	151.2	$	1.99
Unallocated items:
Restructuring and related charges	1.2		0.2		1.0		0.01
Pension settlement (1)	—		0.2		0.5		0.01
Amortization of acquisition-related intangible assets (2)	0.2		—		0.7		0.01
Cost investment impairment	2.2		—		2.2		0.03
Quarter ended March 31, 2021 adjusted amounts (non-U.S. GAAP)	$	179.2	$	29.1	$	155.6	$	2.05

During the ~~three and nine months ended~~ ~~September 30,~~first quarter 2021, we recorded a tax benefit of ~~$8.4~~$11.1 million ~~and $26.9 million, respectively,~~ associated with stock-based compensation.

~~The following tables present a reconciliation from U.S. GAAP to non-U.S. GAAP financial measures for the three and nine months ended~~ ~~September 30, 2020:~~

($ in millions, except per share data) Operating Profit Income tax expense Net income Diluted EPS
Three months ended September 30, 2020 GAAP $ 99.2 $ 21.1 $ 82.3 $ 1.09
Unallocated items:
Pension settlement (1)
— 0.3 0.8 0.01
Restructuring and severance related charges 4.5 1.1 3.4 0.04
Amortization of acquisition-related intangible assets (2)
0.2 — 0.7 0.01
Three months ended September 30, 2020 adjusted amounts (non-U.S. GAAP) $ 103.9 $ 22.5 $ 87.2 $ 1.15

($ in millions, except per share data) Operating Profit Income tax expense Net income Diluted EPS
Nine months ended September 30, 2020 GAAP $ 290.8 $ 52.1 $ 247.8 $ 3.28
Unallocated items:
Pension settlement (1)
— 0.8 2.6 0.03
Restructuring and severance related charges 6.7 1.7 5.0 0.06
Amortization of acquisition-related intangible assets (2)
0.4 0.1 2.9 0.04
Nine months ended September 30, 2020 adjusted amounts (non-U.S. GAAP) $ 297.9 $ 54.7 $ 258.3 $ 3.41

~~During the~~ ~~three and nine months ended~~ ~~September 30, 2020, we recorded a tax benefit of $2.0 million and $14.0 million, respectively, associated with stock-based compensation.~~

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(1)The Company recorded a pension settlement charge within other nonoperating (income) expense, as it determined that normal-course lump-sum payments for our U.S. qualified ~~and in 2020 our non-qualified,~~ defined benefit pension plan exceeded the threshold for settlement accounting.

(2)During the three ~~and nine~~ months ended ~~September 30,~~ March 31, 2022 and 2021,, the Company recorded $0.2 million ~~and $0.6 million, respectively,~~ of amortization expense within operating profit associated with an intangible asset acquired during the second quarter of 2020. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, the Company recorded $0.5 million ~~and $1.6 million, respectively, or~~of amortization expense in association with an acquisition of increased ownership interest in Daikyo. ~~During the three and nine months ended~~ ~~September 30, 2020~~ ~~the Company recorded~~ ~~$0.2 million~~ ~~and~~ ~~$0.4 million, respectively, of amortization expense within operating profit associated with an intangible asset acquired during the second quarter of~~ ~~2020. During the three and nine months ended September 30, 2020, the Company recorded $0.5 million and $2.5 million, respectively, of amortization expense~~ ~~in association with an acquisition of increased ownership interest in Daikyo.~~

~~(3)During the~~ ~~three months ended September 30, 2021, we recorded a net loss on the sale of one of the Company's cost investments.~~ ~~During the~~ ~~nine months ended September 30, 2021, we recorded an impairment charge on one of our cost investments, partially offset by the gain on the sale of a cost investment.~~

~~(4)During thenine months ended September 30, 2021, the Company recorded a tax benefit of $1.4 million due to the impact of a United Kingdom tax law change enacted during the period.~~

~~(5)During the three and nine months ended~~ ~~September 30, 2021, the Company prepaid future royalties from one of its subsidiaries, which resulted in a $20.4 million tax benefit.~~

RESULTS OF OPERATIONS

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, 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 for which further information can be found above in the reconciliation from U.S. GAAP to non-U.S. GAAP financial measures.

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Percentages in the following tables and throughout the Results of Operations section may reflect rounding adjustments.

Net Sales

The following table presents net sales, consolidated and by reportable segment, for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Percentage Change					Three Months Ended March 31,				Percentage Change
($ in millions)	($ in millions)	2021		2020		As-Reported		Organic		($ in millions)	2022		2021		As-Reported		Organic
Proprietary Products	Proprietary Products	$	577.0	$	421.5	36.9	%	35.7	%	Proprietary Products	$	601.3	$	543.7	10.6	%	14.4	%
Contract-Manufactured Products	Contract-Manufactured Products	129.7		126.6		2.4	%	2.1	%	Contract-Manufactured Products	118.7		127.1		(6.6)	%	(3.8)	%
Intersegment sales elimination	Intersegment sales elimination	(0.2)		(0.1)		—		—		Intersegment sales elimination	—		(0.1)		—		—
Consolidated net sales	Consolidated net sales	$	706.5	$	548.0	28.9	%	27.9	%	Consolidated net sales	$	720.0	$	670.7	7.4	%	11.0	%

Consolidated net sales increased by ~~$158.5~~$49.3 million, or ~~28.9%~~7.4%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$5.5~~$24.2 million.

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Excluding foreign currency translation effects, consolidated net sales for the three months ended ~~September 30, 2021~~March 31, 2022 increased by ~~$153.0~~$73.5 million, or ~~27.9%~~11.0%, as compared to the same period in ~~2020.~~2021.

Proprietary Products – Proprietary Products net sales increased by ~~$155.5~~$57.6 million, or ~~36.9%~~10.6%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$5.0~~$20.6 million. Excluding foreign currency translation effects, net sales for the three months ended ~~September 30, 2021~~March 31, 2022 increased by ~~$150.5~~$78.2 million, or ~~35.7%~~14.4%, as compared to the same period in ~~2020,~~2021, primarily due to growth in our high-value product offerings, including ~~Westar~~®~~, NovaPure~~®,our NovaPure® products and ~~FluroTec~~®~~-coated components. The~~our Westar® components, offset by the recognition of approximately $15 million in one-time fees due to COVID supply agreements recorded during the three months ended September 30, 2021 included approximately $115 million in COVID-19 related activity for vaccines, antiviral treatments and treatment of underlying COVID-19 symptoms. The three months ended September 30, 2020 included approximately $32 million in COVID-19 related activity for antiviral treatments and treatment of underlying COVID-19 symptoms.March 31, 2021.

Contract-Manufactured Products – Contract-Manufactured Products net sales ~~increased~~decreased by ~~$3.1~~$8.4 million, or ~~2.4%~~6.6%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$0.5~~$3.6 million. Excluding foreign currency translation effects, net sales for the three months ended ~~September 30, 2021 increased~~March 31, 2022 decreased by ~~$2.6~~$4.8 million, or ~~2.1%~~3.8%, as ~~compared~~compared to the same period in ~~2020,~~2021, due to ~~an increase in the sale~~a decline of ~~healthcare-related medical devices.~~sales of components for diagnostic devices, offset by sales price increases.

The intersegment sales elimination, which is required for the presentation of consolidated net sales, represents the elimination of components sold between our segments.

~~The following table presents net sales, consolidated and by reportable segment, for the nine months ended September 30, 2021 and 2020:~~

Nine Months Ended
September 30, Percentage Change
($ in millions) 2021 2020 As-Reported Organic
Proprietary Products $ 1,708.0 $ 1,194.5 43.0 % 38.1 %
Contract-Manufactured Products 393.2 372.5 5.6 % 3.1 %
Intersegment sales elimination (0.4) (0.3) — —
Consolidated net sales $ 2,100.8 $ 1,566.7 34.1 % 29.8 %

Consolidated net sales increased by $534.1 million, or 34.1%, for the nine months ended September 30, 2021, as compared to the same period in 2020, including a favorable foreign currency translation impact of $67.2 million. Excluding foreign currency translation effects, consolidated net sales for the nine months ended September 30, 2021 increased by $466.9 million, or 29.8%, as compared to the same period in 2020.

~~Proprietary Products~~ – Proprietary Products net sales increased by $513.5 million, or 43.0%, for the nine months ended September 30, 2021, as compared to the same period in 2020, including a favorable foreign currency translation impact of $57.9 million. Excluding foreign currency translation effects, net sales for the nine months ended September 30, 2021 increased by $455.6 million, or 38.1%, as compared to the same period in 2020, primarily due to growth in our high-value product offerings, including Westar®~~, NovaPure~~®~~, Daikyo~~®~~, and FluroTec~~®-coated components. The nine months ended September 30, 2021 included approximately $335 million in COVID-19 related activity for vaccines, antiviral treatments and treatment of underlying COVID-19 symptoms. The nine months ended September 30, 2020 included approximately $52 million in COVID-19 related activity for antiviral treatments and treatment of underlying COVID-19 symptoms.

~~Contract-Manufactured Products~~ – Contract-Manufactured Products net sales increased by $20.7 million, or 5.6%, for the nine months ended September 30, 2021, as compared to the same period in 2020, including a favorable foreign currency translation impact of $9.3 million. Excluding foreign currency translation effects, net sales for the nine months ended September 30, 2021 increased by $11.4 million, or 3.1%, as compared to the same period in 2020, due to an increase in the sale of healthcare-related medical devices.

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Gross Profit

The following table presents gross profit and related gross profit margins, consolidated and by reportable segment:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
($ in millions)	($ in millions)	2021			2020			2021			2020			($ in millions)	2022			2021
Proprietary Products:	Proprietary Products:													Proprietary Products:
Gross profit	Gross profit	$	267.3		$	171.9		$	811.5		$	492.8		Gross profit	$	260.7		$	251.9
Gross profit margin	Gross profit margin	46.3		%	40.8		%	47.5		%	41.3		%	Gross profit margin	43.4		%	46.3		%
Contract-Manufactured Products:	Contract-Manufactured Products:													Contract-Manufactured Products:
Gross profit	Gross profit	$	20.9		$	22.7		$	63.7		$	63.9		Gross profit	$	23.9		$	20.0
Gross profit margin	Gross profit margin	16.1		%	17.9		%	16.2		%	17.2		%	Gross profit margin	20.1		%	15.7		%
Consolidated gross profit	Consolidated gross profit	$	288.2		$	194.6		$	875.2		$	556.7		Consolidated gross profit	$	284.6		$	271.9
Consolidated gross profit margin	Consolidated gross profit margin	40.8		%	35.5		%	41.7		%	35.5		%	Consolidated gross profit margin	39.5		%	40.5		%

Consolidated gross profit increased by ~~$93.6~~$12.7 million, or ~~48.1%~~4.7%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$1.6~~$10.3 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020.~~2021. Consolidated gross profit margin ~~increased~~decreased by ~~5.3~~1.0 margin ~~points~~point for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020.~~

Consolidated gross profit increased by $318.5 million, or 57.2% for the nine months ended September 30, 2021, as compared to the same period in 2020, including a favorable foreign currency translation impact of $25.7 million for the nine months ended September 30, 2021, as compared to the same period in 2020. Consolidated gross profit margin increased by 6.2 margin points for the nine months ended September 30, 2021, as compared to the same period in 2020.2021.

Proprietary Products - Proprietary Products gross profit increased by ~~$95.4~~$8.8 million, or ~~55.5%~~3.5%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$1.5 million~~.$9.5 million. Proprietary Products gross profit margin ~~increased~~decreased by ~~5.5~~2.9 margin points for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same periods in ~~2020,~~ 2021, due to ~~a favorable mix~~increased overhead costs, primarily within transportation and compensation, that were driven by inflation, higher allocation of ~~products sold,~~functional spend from Selling, General & Administrative expense, as well as the recognition of approximately $15 million in one-time fees due to COVID supply agreements recorded during the three months March 31, 2021.

Contract-Manufactured Products - Contract-Manufactured Products gross profit increased by $3.9 million, or 19.5%, for the three months ended March 31, 2022, as compared to the same period in 2021, including an unfavorable foreign currency translation impact of $0.8 million. Contract-Manufactured Products gross profit margin increased by 4.4 margin points for the three months ended March 31, 2022, as compared to the same period in 2021, due to sales price increases and production efficiencies, partially offset by increased overhead costs ~~including compensation costs.~~

~~Proprietary Products gross profit increased~~that were driven by $318.7 million, or 64.7%, for the nine months ended September 30, 2021, as compared to the same period in 2020, including a favorable foreign currency translation impact of $23.9 million. Proprietary Products gross profit margin increasedinflation. by 6.2 margin points for the nine months ended September 30, 2021, as compared to the same period in 2020, due to a favorable mix of products sold, sales price increases and production efficiencies, partially offset by increased overhead costs including compensation costs.

~~Contract-Manufactured Products -~~ ~~Contract-Manufactured Products gross profit decreased by $1.8 million, or 7.9%, for the three months ended September 30, 2021~~, as compared to the same period in 2020, including a favorable foreign currency translation impact of $0.1 million. Contract-Manufactured Products gross profit margin decreased by 1.8 margin points for the three months ended September 30, 2021, as compared to the same period in 2020, due to unfavorable mix of products sold and timing of the pass-through of raw material price increases to customers.

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Contract-Manufactured Products gross profit decreased by $0.2 million, or 0.3%, for the nine months ended September 30, 2021, as compared to the same period in 2020, including a favorable foreign currency translation impact of $1.8 million. Contract-Manufactured Products gross profit margin decreased by 1.0 margin points for the nine months ended September 30, 2021, as compared to the same period in 2020, due to unfavorable mix of products sold and timing of the pass-through of raw material price increases to customers, partially offset by production efficiencies.

Research and Development (“R&D”) Costs

The following table presents R&D costs, consolidated and by reportable segment:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in millions)	($ in millions)	2021		2020		2021		2020		($ in millions)	2022		2021
Proprietary Products	Proprietary Products	$	13.1	$	12.5	$	39.1	$	34.0	Proprietary Products	$	14.6	$	12.2
Contract-Manufactured Products	Contract-Manufactured Products	—		—		—		—		Contract-Manufactured Products	—		—
Consolidated R&D costs	Consolidated R&D costs	$	13.1	$	12.5	$	39.1	$	34.0	Consolidated R&D costs	$	14.6	$	12.2

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Consolidated R&D costs increased by ~~$0.6~~$2.4 million, or ~~4.8%, and $5.1 million, or 15.0%~~19.7%, for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, as compared to the same period in ~~2020.~~2021, due to additional research performed in an effort to identify new product opportunities. Efforts remain focused on the continued investment in self-injection systems development, fluid transfer admixture devices, elastomeric packaging components, and formulation development.

All of the R&D costs incurred during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 related to Proprietary Products.

Selling, General and Administrative (“SG&A”) Costs

The following table presents SG&A costs, consolidated and by reportable segment and corporate:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
($ in millions)	($ in millions)	2021			2020			2021			2020			($ in millions)	2022			2021
Proprietary Products	Proprietary Products	$	58.5		$	50.6		$	180.0		$	144.7		Proprietary Products	$	55.9		$	56.5
Contract-Manufactured Products	Contract-Manufactured Products	3.9			3.7			11.4			11.4			Contract-Manufactured Products	4.8			3.7
Corporate		29.5			21.9			73.4			69.6
Corporate and unallocated items														Corporate and unallocated items	22.7			20.0
Consolidated SG&A costs	Consolidated SG&A costs	$	91.9		$	76.2		$	264.8		$	225.7		Consolidated SG&A costs	$	83.4		$	80.2
SG&A as a % of net sales	SG&A as a % of net sales	13.0		%	13.9		%	12.6		%	14.4		%	SG&A as a % of net sales	11.6		%	12.0		%

Consolidated SG&A costs increased ~~by $15.7~~by $3.2 million, or ~~20.6%~~4.0%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, due to an increase in ~~compensation costs, costs related~~selling expenses and professional fees, offset by higher allocation of functional spend to ~~professional services~~Cost of Goods Sold and ~~an unfavorable~~a favorable foreign currency translation impact of ~~$0.4 million.~~

~~Consolidated SG&A costs increased by $39.1 million,~~ ~~or 17.3%, for the nine months ended September 30, 2021, as compared to the same period in 2020, due to an increase in compensation costs and an unfavorable foreign currency translation impact of $4.5~~$1.8 million.

Proprietary Products - Proprietary Products SG&A costs ~~increased~~decreased by ~~$7.9~~$0.6 million, or ~~15.6%~~1.1%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020.~~2021. Proprietary Products SG&A costs ~~increased~~decreased primarily due to ~~an increase in compensation costs~~a higher allocation of functional spend to Cost of Goods Sold and ~~costs related to professional services.~~

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Proprietary Products SG&A costs increased by $35.3 million, or 24.4%, for the nine months ended September 30, 2021, as compared to the same period in 2020. Proprietary Products SG&A costs increased primarily due to an increase in compensation costs, costs related to professional services and an unfavorablea favorable foreign currency translation impact of ~~$4.2 million.~~$1.5 million, offset by an increase in selling expenses and professional fees.

Contract-Manufactured Products - Contract-Manufactured Products SG&A costs increased by ~~$0.2~~$1.1 million, or ~~5.4%~~29.7% for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020, and remained consistent for the nine months ended September 30, 2021, as compared to the same period in 2020.~~2021.

Corporate - Corporate SG&A costs increased by ~~$7.6~~$2.7 million, or ~~34.7%~~13.5%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, primarily due to an increase in compensation costs and costs related to professional ~~services.~~fees.

Corporate SG&A costs increased by $3.8 million, or 5.5%, for the nine months ended September 30, 2021, as compared to the same period in 2020, primarily due to an increase in compensation costs and costs related to professional services.

Other (Income) Expense ~~(Income)~~

The following table presents other income and expense items, consolidated and by reportable segment, corporate and unallocated items:


Expense (Income)		Three Months Ended September 30,				Nine Months Ended September 30,
(Income) Expense										(Income) Expense	Three Months Ended March 31,
($ in millions)	($ in millions)	2021		2020		2021		2020		($ in millions)	2022		2021
Proprietary Products	Proprietary Products	$	0.2	$	1.3	$	(1.9)	$	1.2	Proprietary Products	$	(3.2)	$	0.6
Contract-Manufactured Products	Contract-Manufactured Products	0.2		0.2		0.4		0.4		Contract-Manufactured Products	—		(0.1)
Corporate and unallocated		1.4		5.2		4.5		4.6
Consolidated other expense		$	1.8	$	6.7	$	3.0	$	6.2
Corporate and unallocated items										Corporate and unallocated items	0.1		3.4
Consolidated other (income) expense										Consolidated other (income) expense	$	(3.1)	$	3.9

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Other income and expense items, consisting of foreign exchange transaction gains and losses, gains and losses on the sale of fixed assets, development and licensing income, contingent consideration, fixed asset impairments and miscellaneous income and charges, are generally recorded within segment results.

Consolidated other (income) expense ~~(income)~~ changed by ~~$4.9~~$7.0 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, due to ~~a decrease in restructuring and related charges, and fixed asset impairments recorded within~~ the factors described below.

Proprietary Products ~~segment, offset~~- Proprietary Products other (income) expense changed by ~~a net loss recorded in~~$3.8 million for the three months ended ~~September 30, 2021 as a result of the sale one of the Company's cost investments.~~

~~Consolidated other expense (income) changed by $3.2 million for the nine months ended September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, primarily due to a ~~decrease~~ $2.8 million gain related to oil hedges recorded during the three months ended March 31, 2022 compared to a loss of $0.5 million for the three months ended March 31, 2021.

Contract-Manufactured Products - Contract-Manufactured Products other (income) expense changed by $0.1 million for the three months ended March 31, 2022, as compared to the same period in 2021.

Corporate and unallocated items - Corporate and unallocated items changed by $3.3 million for the three months ended March 31, 2022, as compared to the same periods in 2021 primarily due to a $2.2 million cost investment impairment charge and restructuring and related charges ~~and fixed asset impairments~~ recorded ~~within~~during the ~~Proprietary Products segment, offset by a net loss recorded in the nine~~three months ended ~~September 30,~~March 31, 2021 ~~as a result of activity related to the Company's cost investments.~~that did not recur in 2022.

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Operating Profit

The following table presents operating profit and adjusted operating profit, consolidated and by reportable segment, corporate and unallocated items:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
($ in millions)	($ in millions)	2021			2020			2021			2020			($ in millions)	2022			2021
Proprietary Products	Proprietary Products	$	195.5		$	107.5		$	594.3		$	312.9		Proprietary Products	$	193.4		$	182.6
Contract-Manufactured Products	Contract-Manufactured Products	16.8			18.8			51.9			52.1			Contract-Manufactured Products	19.1			16.4
Corporate	Corporate	(29.5)			(22.4)			(73.0)			(67.1)			Corporate	(22.6)			(19.8)
Adjusted consolidated operating profit	Adjusted consolidated operating profit	$	182.8		$	103.9		$	573.2		$	297.9		Adjusted consolidated operating profit	$	189.9		$	179.2
Adjusted consolidated operating profit margin	Adjusted consolidated operating profit margin	25.9		%	19.0		%	27.3		%	19.0		%	Adjusted consolidated operating profit margin	26.4		%	26.7		%
Unallocated items	Unallocated items	(1.4)			(4.7)			(4.9)			(7.1)			Unallocated items	(0.2)			(3.6)
Consolidated operating profit	Consolidated operating profit	$	181.4		$	99.2		$	568.3		$	290.8		Consolidated operating profit	$	189.7		$	175.6
Consolidated operating profit margin	Consolidated operating profit margin	25.7		%	18.1		%	27.1		%	18.6		%	Consolidated operating profit margin	26.3		%	26.2		%

Consolidated operating profit increased by ~~$82.2~~$14.1 million, or ~~82.9%~~8.0%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$1.2~~$8.4 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020.~~

Consolidated operating profit increased by $277.5 million, or 95.4%, for the nine months ended September 30, 2021, as compared to the same period in 2020, including a favorable foreign currency translation impact of $20.8 million for the nine months ended September 30, 2021, as compared to the same period in 2020.2021.

Proprietary Products - Proprietary Products operating profit increased by ~~$88.0~~$10.8 million, or ~~81.9%~~5.9%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, including ~~a favorable~~an unfavorable foreign currency translation ~~impa~~ctimpact of ~~$1.1~~$8.0 million, due to the factors described above, most notably the sales increase in our high-value product ~~offerings, inclusive of COVID-19 related activity.~~offerings.

Proprietary Products operating profit increased by $281.4 million, or 89.9%, for the nine months ended September 30, 2021, as compared to the same period in 2020, including a favorable foreign currency translation impact of $19.3 million, due to the factors described above, most notably due to the sales increase in our high-value product offerings, inclusive of COVID-19 related activity.

Contract-Manufactured Products - Contract-Manufactured Products operating profit ~~decreased~~increased by ~~$2.0~~$2.7 million, or ~~10.6%~~16.5%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$0.1~~$0.4 million, due to the factors described above, most notably ~~due an unfavorable mix of products sold and timing of~~ the ~~pass-through of raw material~~sales price increases ~~to customers.~~and product efficiencies.

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~~Contract-Manufactured Products operating profit decreased~~Corporate- Corporate costs increased by ~~$0.2~~$2.8 million, or ~~0.4%~~14.1%, for the ~~nine~~three months ended ~~September 30, 2021, respectively,~~March 31, 2022, as compared to the same period in ~~2020, including a favorable foreign currency translation impact of $1.5 million,~~ 2021, due to the factors described above.

~~Corporate-~~ ~~Corporate costs increased by $7.1 million, or 31.7%, for the three months ended September 30, 2021, as compared~~ ~~to the same period in 2020, due to the factors described above.~~

~~Corporate costs increased by $5.9 million, or 8.8%, for the nine months ended September 30, 2021, respectively, as compared to the same period in 2020, due to the factors described above.~~

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Unallocated items –~~Other~~Other unallocated items during the three months ended ~~September 30, 2021~~March 31, 2022 consisted ~~of $0.3 million in restructuring and related costs,~~ $0.2 million of amortization expense associated with an acquisition of an intangible asset ~~during~~in the second quarter of ~~2020, and a net loss of $0.9 million on the sale of one of the Company's cost investments.~~

2020. Other unallocated items during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 consisted of ~~$2.5~~$1.2 million in restructuring and related ~~costs, $0.6~~charges, a $2.2 million impairment charge related to one of ~~amortization expense associated with an acquisition of an intangible asset during the second quarter of 2020, and a net loss in~~ our cost ~~investment activity of $1.8 million.~~

~~Other unallocated items during the~~ ~~three months ended~~ ~~September 30, 2020 consisted of $4.5 million in restructuring and related costs~~investments, and $0.2 million of amortization expense associated with an acquisition of an intangible asset ~~during~~in the second quarter of 2020. ~~Other unallocated items during the~~ nine months ended September 30, 2020 consisted of $4.5 million in restructuring and related charges, $2.2 million in severance related costs, and $0.4 million of amortization expense associated with an acquisition of an intangible asset. ~~Please refer to Note 15,~~ ~~Other Expense (Income)~~, ~~for further discussion of these items.~~

Interest Expense, Net

The following table presents interest expense, net, by significant component:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in millions)	($ in millions)	2021		2020		2021		2020		($ in millions)	2022		2021
Interest expense	Interest expense	$	2.7	$	2.4	$	7.6	$	7.1	Interest expense	$	2.7	$	2.4
Capitalized interest	Capitalized interest	(0.9)		(0.3)		(2.0)		(1.0)		Capitalized interest	(0.5)		(0.5)
Interest income	Interest income	(0.4)		(0.2)		(0.7)		(1.2)		Interest income	(0.3)		(0.1)
Interest expense, net	Interest expense, net	$	1.4	$	1.9	$	4.9	$	4.9	Interest expense, net	$	1.9	$	1.8

Interest expense, net, ~~decreased~~increased by ~~$0.5~~$0.1 million, or ~~26.3%~~5.6%, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020, and remained consistent for the nine months ended September 30, 2021, as compared to the same period in 2020.~~2021.

Other Nonoperating (Income) Expense

Other nonoperating (income) expense changed by ~~$0.7~~$1.1 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, primarily due to a reduction in pension income related to our U.S. qualified defined benefit pension plan. Additionally, in the ~~pension settlement charge recorded in 2020. In~~ ~~the three months ended September 30, 2020~~,current year and prior year, we determined that normal-course lump-sum payments for our U.S. qualified defined benefit pension plan exceeded the threshold for settlement accounting under U.S. GAAP for the year.

Other nonoperating (income) expense changed by $3.3 million for the nine months ended September 30, 2021, as compared to the same period in 2020, primarily due to a reduction in the pension settlement charge and by a decrease in U.S. pension interest cost. In each nine month period, we determined that normal-course lump-sum payments for our U.S. qualified, and non-qualified in 2020, defined benefit pension plan exceeded the threshold for settlement accounting under U.S. GAAP for the year.

Income Tax Expense

~~The decrease in the effective tax rate is primarily due to the~~ ~~Company's prepayment of future royalties from one of its subsidiaries, which resulted in a $20.4 million tax benefit for~~ ~~the three months ended September 30, 2021.~~

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~~The provision for income taxes was $73.0 million and $52.1 million for the nine months ended September 30, 2021 and 2020, respectively, and the effective tax rate was 12.9% and 18.2%~~16.4%, respectively. The decrease in the effective tax rate is primarily due to the ~~Company's prepayment of future royalties from one of its subsidiaries, which resulted in a $20.4~~$5.9 million tax benefit ~~for~~recorded as a result of the ~~nine~~state tax valuation allowance reversal for the three months ended ~~September 30,~~March 31, 2022, as compared to the same period in 2021.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated companies represents the contribution to earnings from our 49% ownership interest in Daikyo, and our 49% ownership interest in five companies majority-owned by a long-time partner located in Mexico. Please refer to Note 7,
~~Affiliated Companies, for further discussion.~~

Equity in net income of affiliated companies increased by ~~$0.8~~$2.2 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, due to favorable operating results at Daikyo and the Mexico affiliates.

~~Equity in net income~~

Table of affiliated companies increased by $6.4 million for the nine months ended September 30, 2021, as compared to the same period in 2020, due to favorable operating results at Daikyo and the Mexico affiliates and reduction in amortization expense related to our increase in ownership interest in Daikyo of $0.9 million.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

The following table presents cash flow data for the ~~nine~~three months ended ~~September 30:~~March 31:


($ in millions)	($ in millions)	2021		2020		($ in millions)	2022		2021
Net cash provided by operating activities	Net cash provided by operating activities	$	423.2	$	323.8	Net cash provided by operating activities	$	151.2	$	88.7
Net cash used in investing activities	Net cash used in investing activities	$	(175.7)	$	(121.9)	Net cash used in investing activities	$	(68.3)	$	(54.5)
Net cash used in financing activities	Net cash used in financing activities	$	(161.9)	$	(128.4)	Net cash used in financing activities	$	(172.7)	$	(156.4)

Net Cash Provided by Operating Activities – Net cash provided by operating activities increased by ~~$99.4~~$62.5 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, primarily due to improved operating results ~~offset by increases~~and decreases in the change of working ~~capital and timing of tax payments in 2021.~~capital.

Net Cash Used in Investing Activities – Net cash used in investing activities increased by ~~$53.8~~$13.8 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, primarily due to ~~the~~an increase in capital expenditures in ~~2021 to meet customer demand.~~2022.

Net Cash Used in Financing Activities – Net cash used in financing activities increased by ~~$33.5~~$16.3 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the same period in ~~2020,~~2021, primarily due to increases in purchases under our share ~~repurchases.~~repurchase programs.

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Liquidity and Capital Resources

The table below presents selected liquidity and capital measures:


($ in millions)	($ in millions)	September 30, 2021		December 31, 2020		($ in millions)	March 31, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	688.0	$	615.5	Cash and cash equivalents	$	667.7	$	762.6
Accounts receivable, net	Accounts receivable, net	$	476.4	$	385.3	Accounts receivable, net	$	498.7	$	489.0
Inventories	Inventories	$	353.8	$	321.3	Inventories	$	416.5	$	378.4
Accounts payable	Accounts payable	$	207.7	$	213.1	Accounts payable	$	248.2	$	232.2
Debt	Debt	$	254.1	$	255.2	Debt	$	252.5	$	253.0
Equity	Equity	$	2,202.3	$	1,854.5	Equity	$	2,326.2	$	2,335.4
Working capital	Working capital	$	1,039.7	$	870.3	Working capital	$	1,105.7	$	1,147.9

Cash and cash equivalents include all instruments that have maturities of ninety days or less when purchased. Working capital is defined as current assets less current liabilities.

Cash and cash equivalents – Our cash and cash equivalents balance at ~~September 30, 2021~~March 31, 2022 consisted of cash held in depository accounts with banks around the world and cash invested in high-quality, short-term investments. The cash and cash equivalents balance at ~~September 30, 2021~~March 31, 2022 included ~~$234.2~~$253.6 million of cash held by subsidiaries within the U.S., and ~~$453.8~~$414.1 million of cash held by subsidiaries outside of the U.S. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we purchased ~~479,000~~390,000 shares of our common stock under ~~the~~our calendar-year 2022 share repurchase program at a cost of ~~$137.1~~$147.1 million, or an average price of ~~$286.23~~$377.23 per share.

Working capital – Working capital at ~~September 30, 2021 increased~~March 31, 2022 decreased by ~~$169.4~~$42.2 million, or ~~19.5%~~3.7%, as compared to December 31, ~~2020,~~2021, which includes an unfavorable foreign currency translation impact of ~~$18.9~~$3.7 million. Excluding the impact of currency exchange rates, cash and cash equivalents ~~accounts receivable, inventories,~~ and total current liabilities decreased by $89.8 million and $5.6 million, respectively, while accounts receivable and inventories increased by ~~$85.5 million, $104.1 million, $42.1~~$14.0 million and ~~$66.4~~$41.3 million, respectively.

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The decrease in cash and cash equivalents was due to share repurchases and payment of annual incentive compensation during the three months ended March 31, 2022. The decline in the accrued salaries, wages and benefits caused the decrease in total current liabilities. The increase in accounts receivable was due to increased sales activity. The increase in inventories ~~that occurred in the period~~ was to ensure we have sufficient inventory on hand to support the needs of our customers. ~~The increase in total current liabilities was primarily due to the reclassification of a portion of the Company's debt from long-term to short-term.~~

Debt and credit facilities – The ~~$1.1~~$0.5 million decrease in total debt at ~~September 30, 2021,~~March 31, 2022, as compared to December 31, ~~2020,~~2021, resulted from debt repayments under our Term Loan.

Our sources of liquidity include our Credit Facility. At ~~September 30, 2021,~~March 31, 2022, we had no outstanding borrowings under the Credit Facility. At ~~September 30, 2021,~~March 31, 2022, the borrowing capacity available under the Credit Facility, including outstanding letters of credit of $2.4 million, was ~~$297.6~~$497.6 million. We do not expect any significant limitations on our ability to access this source of funds.

Pursuant to the financial covenants in our debt agreements, we are required to maintain established interest coverage ratios and not to ~~not~~ exceed established leverage ratios. In addition, the agreements contain other customary covenants, none of which we consider restrictive to our operations. At ~~September 30, 2021,~~March 31, 2022, we were in compliance with all of our debt covenants.

We believe that cash on hand and cash generated from operations, together with availability under our Credit Facility, will be adequate to address our foreseeable liquidity needs based on our current expectations of our business operations, capital expenditures and scheduled payments of debt obligations.

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Commitments and Contractual Obligations

A ~~table summarizing the amounts and estimated timing~~summary of future material cash payments resulting from commitments and contractual obligations was provided in our ~~2020~~2021 Annual Report. During the three months ended ~~September 30, 2021,~~March 31, 2022, there were no material changes outside of the ordinary course of business to our commitments and contractual obligations.

OFF-BALANCE SHEET ARRANGEMENTS

At ~~September 30, 2021,~~March 31, 2022, we had no off-balance sheet financing arrangements other than unconditional purchase obligations incurred in the ordinary course of business and outstanding letters of credit related to various insurance programs, as noted in our ~~2020~~2021 Annual Report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no changes to the Critical Accounting Policies and Estimates disclosed in Part II, Item 7 of our ~~2020~~2021 Annual Report.

NEW ACCOUNTING STANDARDS

For information on new accounting standards that were adopted, and those that were issued but not yet adopted, during the three months ended ~~September 30, 2021,~~March 31, 2022, and the impact, if any, on our financial position or results of operations, see Note 2, New Accounting Standards.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this Form 10-Q contains some forward-looking statements that are based on management’s beliefs and assumptions, current expectations, estimates and forecasts. We also provide forward-looking statements in other materials we release to the public, as well as oral forward-looking statements. Such statements provide our current expectations or forecasts of future events. They do not relate strictly to historical or current facts.

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We have attempted, wherever possible, to identify forward-looking statements by using words such as “plan,” “expect,” “believe,” “intend,” “will,” “estimate,” “continue” and other words of similar meaning in conjunction with, among other things, discussions of future operations and financial performance, as well as our strategy for growth, product development, market position and expenditures. All statements that address operating performance or events or developments that we expect or anticipate will occur in the future - including statements relating to sales and earnings per share growth, cash flows or uses, and statements expressing views about future operating results - are forward-looking statements.

Forward-looking statements are based on current expectations of future events. The forward-looking statements are, and will be, based on management’s then-current views and assumptions regarding future events and operating performance, and speak only as of their dates. Investors should realize that, if underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements.

The following are some important factors that could cause our actual results to differ from our expectations in any forward-looking statements:

•sales demand and our ability to meet that demand;

•competition from other providers in our businesses, including customers’ in-house operations, and from lower-cost producers in emerging markets, which can impact unit volume, price and profitability;

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•customers’ changing inventory requirements and manufacturing plans that alter existing orders or ordering patterns for the products we supply to them;

•interruptions or weaknesses in our supply chain, including from reasons beyond our control such as extreme weather, longer-term climate changes, natural disasters, pandemic, war, accidental damage, or unauthorized access to our or our customers’ information and systems, which could cause delivery delays or restrict the availability of raw materials, key purchased components and finished products;

•the timing, regulatory approval and commercial success of customer products that incorporate our products and systems;

•whether customers agree to incorporate our products and delivery systems with their new and existing drug products, the ultimate timing and successful commercialization of those products and systems, which involves substantial evaluations of the functional, operational, clinical and economic viability of our products, and the rate, timing and success of regulatory approval for the drug products that incorporate our components and systems;

•the timely and adequate availability of filling capacity, which is essential to conducting definitive stability trials and the timing of first commercialization of customers’ products in Crystal Zenith prefilled syringes;

•average profitability, or mix, of the products sold in any reporting period, including lower-than-expected sales growth of our high-value proprietary product offerings;

•maintaining or improving production efficiencies and overhead absorption;

•dependence on third-party suppliers and partners, some of which are single-source suppliers of critical materials and products, including our Japanese partner and affiliate, Daikyo;

•the loss of key personnel or highly-skilled employees;

•the availability and cost of skilled employees required to meet increased production, managerial, research and other needs, including professional employees and persons employed under collective bargaining agreements;

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•the successful and timely implementation of price increases necessary to offset rising production costs, including raw material prices, particularly petroleum-based raw materials;

•the cost and progress of development, regulatory approval and marketing of new products;

•our ability to obtain and maintain licenses in any jurisdiction in which we do business;

•the relative strength of USD in relation to other currencies, particularly the Euro, SGD, the Danish Krone, Yen, Colombian Peso, Brazilian Real, and the South Korean Won; and

•the potential adverse effects of global healthcare legislation on customer demand, product pricing and profitability.

This list sets forth many, but not all, of the factors that could affect our ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all of the factors and should not consider this list to be a complete statement of all potential risks and uncertainties. For further discussion of these and other factors, see the risk factors disclosed in Part I, Item 1A of our ~~2020~~2021 Annual Report as well as Part II, section 1A of this quarterly report.

Except as required by law or regulation, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk or the information provided in Part II, Item 7A of our ~~2020~~2021 Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls include some, but not all, components of our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our CEO and CFO have concluded that, as of ~~September 30, 2021,~~March 31, 2022, our disclosure controls and procedures are effective.

Changes in Internal Controls

During the quarter ended ~~September 30, 2021,~~March 31, 2022, there have been no changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

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ITEM 1A. RISK FACTORS

There are no material changes to the risk factors disclosed in Part I, Item 1A of our ~~2020~~2021 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~During the three months ended September 30, 2021, there were no~~The following table shows information with respect to purchases of our common stock made during the three months ended March 31, 2022 by us or any of our “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Exchange ~~Act.~~Act:


Period	Total number of shares purchased (1)	Average price paid per share (1)		Total number of shares purchased as part of publicly announced plans or programs (1)	Maximum number of shares that may yet be purchased under the plans or programs (1)
January 1 - 31, 2022	390,000	$	377.23	390,000	260,000
February 1 - 28, 2022	—	—		—	260,000
March 1 - 31, 2022	—	—		—	260,000
Total	390,000	$	377.23	390,000	260,000

(1)In December 2021, our Board of Directors approved a share repurchase program for calendar-year 2022 authorizing the repurchase of up to 650,000 shares of our common stock from time to time on the open market as permitted under Exchange Act Rule 10b-18 or in privately-negotiated transactions. 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 is expected to be completed by December 31, 2022.

ITEM 6. EXHIBITS

The list of exhibits in the Exhibit Index to this report is incorporated herein by reference.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, West Pharmaceutical Services, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WEST PHARMACEUTICAL SERVICES, INC.

(Registrant)

By: /s/ Bernard J. Birkett

Bernard J. Birkett

Senior Vice President and Chief Financial Officer

~~October~~April 28, ~~2021~~2022

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EXHIBIT INDEX


Exhibit Number			Description
3.1			Our Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q report for the quarter ended June 30, 2020, filed July 24, 2020).
3.2			Our Bylaws, as amended through February 23, 2021 (incorporated by reference from our Form 8-k, filed March 1, 2021).
4.1			Form of stock certificate for common stock (incorporated by reference to Exhibit 4 to the Company's 1998 Form 10-K, filed May 6, 1999).
4.2			Article 5, 6, 8(c) and 9 of our Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q report for the quarter ended June 30, 2020, filed July 24, 2020).
4.3			Article I and V of our Bylaws, as amended through ~~May 5, 2015~~February 23, 2021 (incorporated by reference ~~to Exhibit 3.2 to the Company's~~from our Form ~~10-Q report for the quarter ended~~8-k, filed March ~~31, 2015, filed May 6, 2015)~~1, 2021).
4.4 (1)			Instruments defining the rights of holders of long-term debt securities of West and its subsidiaries have been omitted.
10.1			LCredit Agreement, dated as of March 28, 2019, between West, certain of its subsidiaries, the lenders party thereto from time to time, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an Issuing Lender; Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, MUFG Bank, Ltd., and JPMorgan Chase Bank, N.A., as Joint Lead Arrangers and Joint Bookrunners, and Wells Fargo Bank, National Association, MUFG Bank, Ltd., and JPMorgan Chase Bank, N.A., as Co-Syndication Agents (incorporated by reference from our Form 8-k, filed April 1, 2019).
10.2			~~IBOR~~LIBOR Transition Amendment to the Credit Agreement, dated as of March 28, 2019, between West, each of the lenders party thereto from time to time, and Bank of America, N.A
~~10.10~~			~~Non-Qualified Deferred Compensation Plan for Designated Employees, as amended and restated effective January 1, 2020~~ (incorporated by reference to Exhibit ~~10.10~~10.1 to the Company's Form 10-Q report for the quarter ended September 30, ~~2020,~~2021, filed October ~~23, 2020)~~28, 2021).
~~10.36~~10.3			~~2016 Omnibus Incentive Compensation Plan,~~Credit Agreement Second Amendment and Joinder and Assumption Agreement, dated as ~~amended through May 4, 2021~~of March 31, 2022, between West, certain of its subsidiaries, the lenders party thereto from time-to-time, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an Issuing Lender; BOFA Securities, Inc., Wells Fargo Securities, LLC, U.S. Bank National Association, and JPMorgan Chase Bank, N.A., as Joint Lead Arrangers and Joint Bookrunners, and Wells Fargo Bank, National Association, U.S. Bank National Association, and JPMorgan Chase Bank, N.A., as Co-Syndication Agents (incorporated by reference from our Form 8-k, filed ~~May 4, 2021)~~April 1, 2022).
31.1			Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*			Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*			Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
104			Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.

(1) We agree to furnish to the SEC, upon request, a copy of each instrument with respect to issuances of long-term debt of the Company and its subsidiaries.

* Furnished, not filed.

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