Welcome to the West Pharmaceutical Services Fourth Quarter and Full Year 2013 Results Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions) This call is being recorded on behalf of West and is copyrighted material. It cannot be rerecorded or rebroadcast without the company’s expressed permission. Your participation in this call implies your consent to our taping. If you have any objections, you may disconnect at this time. And now I’d like to turn today’s meeting over to Mr. John Woolford from Westwicke Partners. Sir, you may begin.

Thank you, operator. Good morning everyone and welcome to West’s fourth quarter and full year 2013 results conference call. We issued our financial results this morning and the release has been posted in the Investors section on the company’s website located at www.westpharma.com. If you have not received a copy of this announcement, please call Westwicke Partners at 443-213-0500 and a copy will be sent to you immediately. Posted on the company’s website is a slide presentation that management will refer to in their remarks today. The presentation is in PDF format. Should you require a link to a free download of software that will enable users to view the presentation, is also available on the website. I remind you that statements made by management on this call and in the presentation will contain forward-looking statements within the meaning of U.S. Federal Securities law and that are based on management’s beliefs and assumptions, current expectations, estimates and forecasts. Many of the factors that will determine the company’s future results are beyond the ability of the company to control or predict. These statements are subject to known or unknown risks or uncertainties and therefore actual results could differ materially from past results and those expressed or implied in any forward-looking statement. For a non-exclusive list of factors that could cause actual results to differ from expectations, please refer to today’s press release, as well as any further disclosures the company makes on related subjects in the company’s 10-K, 10-Q, and 8-K reports. In addition, during today’s call, management may make reference to non-GAAP financial measures including adjusted operating profit and adjusted diluted EPS. Reconciliations and limitations of the non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in materials accompanying this morning’s earnings release. At this time, I’d like to turn the call over to Don Morel, West’s Chairman and CEO. Don?

Thank you, John and good morning everyone. Joining me for today’s call are Bill Federici, West’s Chief Financial Officer and Mike Anderson, our Treasurer and Primary Investor Relations contact. This morning Bill and I will review our fourth quarter 2013 results and discuss our outlook and financial guidance for 2014. To support our commentary, we will refer to a PowerPoint slide deck that can be accessed through our website, www.westpharma.com under Investors. In the event you cannot access the file, the information in the slides is covered in both this morning’s release and our remarks. Turning to some highlights for the fourth quarter as illustrated on Slide #3. West finished 2013 with a solid fourth quarter generating adjusted earnings of $0.38 per share versus $0.30 in the fourth quarter of 2012, an increase of more than 25%. Sales on a constant currency basis were up just over 5% at $342.7 million and our consolidated gross margin improved by 0.8 percentage points. Sales growth was driven by a slightly more favorable product mix and price increases in Pharmaceutical Packaging and higher contract manufacturing revenues and proprietary product sales in the Delivery Systems group. Slide 4 provides a summary of our fourth quarter financial performance. Slide 5 provides operating highlights for both the Packaging Systems and Delivery Systems segments. For the quarter, Packaging Systems sales increased 4.5% led by high-value Envision and FluroTec components. The backlog decreased slightly as our manufacturing team focused on reducing lead time and back orders for some key products. Sales in the Delivery Systems segment increased 7% led by increased sales of the éris safety system and contract manufacturing services. Our full year financial performance was summarized on Slide 6. 2013 was a record year for West. Sales grew 7.2% on a consolidated currency neutral basis to…

Thank you, Don and good morning everyone. We issued our fourth quarter results this morning reporting net income of $23.6 million, or $0.33 per diluted share on a post-split basis versus the $0.30 per diluted share we reported in the fourth quarter of 2012. Excluding the effects of special items from both periods, fourth quarter 2013 earnings were $0.38 per diluted share versus the $0.30 we earned in Q4 2012. A reconciliation of these non-GAAP measures is provided on Slides 15 and 16. Turning to sales. Slide 9 shows the components of our consolidated sales increase. Consolidated fourth quarter sales were $342.7 million, an increase of 5.1% over fourth quarter 2012 sales, excluding exchange. Packaging Systems sales increased by $10 million, or 4.5% over same quarter 2012 sales, excluding exchange. A favorable sales mix and volume growth accounted for 2.1 percentage points in the increase. Higher selling prices in Packaging Systems contributed to the remainder of the increase. High value product sales increased 4% versus the prior year quarter, excluding exchange. The slower growth of high value products in Q4 2013 comes on the heels of a Q3 high value product growth rate of 23% and a tough comp to the prior year Q4, where those sales grew 17%. For the full year, 2013 high value product sales increased 9.9% versus 2012, all excluding exchange. Delivery Systems sales increased $6.6 million or 7% over sales in the prior year quarter, excluding exchange. The sale increase was driven by good performances in our contract manufacturing operations and our proprietary businesses. Sales of proprietary products were $24.9 million, or 24.7% of the segment’s revenue in the quarter. CZ sales and development activity were approximately $4.7 million in Q4, roughly on par with the prior year quarter. On a full year basis, total…

Thank you very much, Bill. This concludes our prepared remarks this morning and we now look forward to answering your questions. Operator.

(Operator Instructions) Your first question comes from the line of Arnie Ursaner of CJS Securities. Please proceed.

Hi, good morning.

Good morning, Arnie.

Good morning, Arnie.

I guess my first question is going back to your backlog. So the math should be about $330 million or so. Can you give us a little better feel for elements within that backlog, I know last year you had some certainly in Q1 you had an unusual item that you highlighted in the call. Maybe just give us a little more color on the elements of the backlog and why you are so confident it will restore itself in the back part of the year?

Yes. In PPS, it’s about $336 million. Overall, it’s about $353 million. We’ve got a bit of an unusual circumstance in the quarter and that the part of the PPS backlog will be pushed into the second quarter. And that simply inventory management by two key customers that have pushed some orders out. We also had one unique item where a process change resulted in a fairly large customer in the high value product line actually ordering more than they would normally order to accommodate line trials to prove out the process change. So in fact what you got is a slightly higher percentage of the existing backlog actually being three to six months out instead of just three months out.

Okay. And then in your prepared remarks on Slide 7 you mentioned that you expect a clinical drug trial in smart dose in the second quarter to begin, can you comment on whether that’s related to the payment you received, the exclusivity payment you received is it related to that product?

I would not comment on that because of our confidentiality agreement with the customer and the timing of the trial is fully up to the design and the enrolment by the customer. Our best bet right now is second quarter it may slip into the third quarter. I think the important thing is that we began shipping clinical units from operations for that trial.

Okay. And the broad category of the PCSK9 inhibitors is an area where a lot of people are talking about injectables having a significant role replacing statins that are a lot of companies are involved in this area running trials and it could have a significant impact on the company like West if a product like SmartDose were used to deliver the PCSK9 inhibitors, can you comment any more on that pieces?

There is a lot of categories that could have a dramatic impact on SmartDose. So I think what’s encouraging for us is I said in my prepared remarks is that we have two other development agreements that we entered into in the fourth quarter, certainly if you talk to the industry, the opportunity to formulate differently is going to I think bring patch injectors of this type to the forefront over the next three to five years especially if some of these new therapies come to market. So we think we are in a good space. We like the combination of our technology with the CZ containment system. We think it’s a unique offering and hopefully we will be able to provide some more color as things unfold through the year.

Thank you.

Thank you, Arnie.

The next question comes from the line of Rafael Tejada of Bank of America-Merrill Lynch. Please proceed.

Hi, good morning and thank you for the question.

Good morning Rafael.

And I just wanted to dig in a little bit more on the EPS outlook, the midpoint basically just looks a little bit lighter than what I was expecting in terms of the outlook. So basically I just wanted to get a better sense in terms of some of the components that might be affecting the gross margin, operating margin and profitability of some of the segments. So basically can you discuss the expectations for growth in the standard versus the high value packaging products in 2014 and also wondering if contract manufacturing could be a drag to that profitability in 2014. And lastly just wondering if you can comment on your expectations for CZ contribution this year? Thanks.

Sure. Let me start with the contract and CZ contribution and Bill can comment on the packaging side. Contract manufacturing should actually have a pretty good year. We are seeing the two programs that were delayed last year coming into full production sometime by probably the middle part of the second or later part of the second quarter. So we are very encouraged by that. We have another program we expect to be substantial coming in the second half of the year. So if volumes hold steady, we think that that will be a good contributor. CZ is going to be a bit lumpy as we talked about before, it’s difficult to predict based on demands for clinical trials and line validation. We would certainly expect revenues to be on par with this year or above. So we are looking forward to good performance in both of those areas.

Rafael as it relates to the margins, we do expect high value product sales for the full year to be in the double digit range, low-double digit range for the full year despite the fact that the first quarter will be a challenge. We expect that we are going to see normal inflationary increases in costs. I mentioned that pricing is going to be less, we are going to have less pricing to our customer than we had about half of what we had in 2013 and 2014. You can imagine R&D expenses will continue to increase as we continue to work on our development programs on both sides of the business, both in the Delivery Systems and in Packaging Systems. That will grow by about $5 million versus 2013. And I mentioned that our effective tax rate because the U.S. has not yet enacted the research tax credit for 2014. That actually will have a one percentage point increase in our cash rate. So, we are expecting 26% versus the 25% you saw in 2013. Those are the big drivers. Despite the first quarter’s challenges because of the very, very high comps that we have as Don mentioned you had some things that went into the fourth quarter and third quarter of 2013 high value products, where in the third quarter were up 23% in 2013. We still think we are going to be able to grow the business nicely and end up with a 6% to 8% growth in sales for 2014.

Okay. And just a couple more, just wondering if – have you seen any changes in terms of ordering patterns from those from generic customers as opposed to branded drug customers?

Nothing, it really stands out. The biggest issue was one of the major manufacturers announced that they were going to seize production last year. We expect that volume to go to other producers. It just hasn’t shown up in our forecast yet.

Okay. And just one last clarification point for Q1, with the commentary that Q1 sales are expected to be flat in earnings, are earnings also expected to be flat?

On the revenue side, I think we are comfortable with that. This is the reason we guide the years, okay, every once in a while we get shift in order patterns that are difficult to predict. We are very confident in the full year number and we will see how the order book fills out for Q1 and talk about that when we get our call in April.

Okay, I appreciate it. Thank you.

Thank you.

(Operator Instructions) Your next question comes from the line of Ross Taylor of CL King. Please proceed.

Hi, just have two or three questions. First, I wanted to start, I wondered if you could repeat the CZ revenue number for the full year, I miss that when you gave it out in your prepared remarks?

Yes, it was $17.4 million.

Okay. And you mentioned some additional molecules coming on form of stability trials of resin CZ, and is it still best to think that those formal stability trials take about two years or is there any reason for us to estimate maybe it could be shorter than that?

Yes, two years is the best rule of thumb. We should also add a safety factor in, because remember they are going to have to run line trials to get the plastic into their operations as well. So, two years is a pretty good figure on the formal stability.

Okay. And then you are saying that you will also bake in some additional time to get it on to their lines?

Yes. For them to run plastic through their lines improve the performance of the system.

Okay, alright.

Their manufacturing line, not ours.

Right, right. And my last question just relates to capital spending, I think you said about half of your expected capital spend in 2014 would be associated with some of your new products and for how many years will kind of investments in capital are planned associated with some of these new products continue. And I guess what I am trying to figure out is kind of what to expect for the next several years in terms of your total capital spending level?

Well, what we see generally is we try to put a band around it for you. Now, 125 to 145 is a good proxy for what we see over time. The mission really comes down to what is in the composition of that 125 to 145. Clearly, there is an amount of normal maintenance capital. So, our capital intensive business it is about $65 million growing as the portfolio of underlying assets grows. We spend about $10 million to $15 million per year on IT as we upgrade systems and infrastructure. We will spend as we said in the prepared remarks somewhere in the $20 million this year relative to China and India probably a similar amount next year and perhaps even into 2016 a little bit, but then that will falloff. But at the same time, we will be continuing to put additional capacity into our high value product offerings on the component side of the business. So for instance, vision system, additions to those existing lines, infection lines, as well as clean ones to bag off the products in a clean environment, all this represents a push by not only the regulators, but our customers to go to as a higher quality cleaner product. All of those things will factor into our CapEx as we go. And on the Delivery Systems’ side, there is a little bit of maintenance as it relates to the contract manufacturing business, but the bulk of that spend over on that side of the business will be for the increased capacity relative to CZ, SmartDose and the other proprietary products.

Okay, that’s good. I appreciate the detail.

You’re welcome.

(Operator Instructions) At this time, there are no additional questions in the queue. And I would like to turn the call back over to Dan Morel for closing remarks. Please proceed sir.

Thank you very much operator and thank you everyone for your time this morning. We look forward to updating you on the year when we come to our first quarter conference call in late April. Thank you very much.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a wonderful day.