Welcome to the West Pharmaceutical Services Fourth and Full Year 2014 Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] This call is being recorded on behalf of West and is copyrighted material. It cannot be rerecorded or rebroadcast without the company's expressed permission. Your participation in this call implies your consent to our taping. If you have any objection, you may disconnect at this time. Now, I would like to turn today's meeting over to Mr. John Woolford from Westwicke Partners. Sir, you may begin. John Woolford Good morning, everyone, and welcome to West's fourth quarter and full year 2014 results conference call. We issued our financial results this morning and the release has been posted in the Investors section on the company's website located at www.westpharma.com. If you have not received a copy of this announcement, please call Westwicke Partners at 443-213-0500 and a copy will be sent to you immediately. Posted on the company's web site under Investors on the Presentation Materials tab is a slide presentation that management will refer to in their remarks today. The presentation is in PDF format. Should you require a link to a free download of software that will enable users to view the presentation, it's also available on the website. I remind you that statements made by management on this call and in the presentation will contain forward-looking statements within the meaning of U.S. federal securities laws and that are based on management's beliefs and assumptions, current expectations, estimates and forecasts. Many of the factors that will determine the company's future results are beyond the ability of the company to control or predict. These statements are subject to known or unknown risks or uncertainties, and therefore actual results could differ materially from past results and those expressed or implied in any forward-looking statement. For a non-exclusive list of factors that could cause actual results to differ from expectations, please refer to today's press release as well as any further disclosures the company makes on related subjects in the Company's 10-K, 10-Q, and 8-K reports. In addition, during today's call management may make reference to non-GAAP financial measures, including adjusted operating profit and adjusted diluted EPS. Reconciliations and limitations of the non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in materials accompanying this morning's earnings release. At this time, I would like to turn the call over to Don Morel, West's Chairman and CEO. Don?

Thank you very much John and good morning everyone. Welcome to West's 2014 year-end earnings call. Joining me on the call today are West's Chief Financial Officer, Bill Federici; and Mike Anderson our Treasurer and Primary Investor Relations contact. In our prepared remarks, Bill and I will briefly review our results for the fourth quarter; we will talk on our accomplishments for 2014 and discuss our outlook for 2015. During our commentary, we will once again refer to a PowerPoint slide deck, which can be accessed through our website at www.westpharma.com under Investors. If for some reason you cannot access the presentation, our discussion will cover the information both, in this morning's release and the slides. Let me begin with Slide 3, which provides a high-level summary of our fourth quarter results. Although 2014 started slower than expected as a result of inventory adjustments by several European customers and weakness in certain generic accounts, West finished the year on a strong note with demand improving across virtually all key product lines. For the quarter, sales increased to $349.8 million or just over 7% excluding the effects of currency and the Q3 2014 disposition of a small tooling operation in Europe. Our gross margin was up slightly to 31.4% and our adjusted operating profit was $44.6 million, an increase of approximately 29% at constant exchange rates. The improvement in our operating profit yielded adjusted fully diluted earnings per share of $0.45 versus $0.38 in the fourth quarter of 2014. Slide number four was operating highlights for the two business segments. Revenue growth in Packaging System benefited from stronger sales in North America and South America and Europe, increasing 7.7% versus a year ago. High-value product sales grew just over 12%, driven by Weststar and Daikyo RSV. The favorable product mix, pricing…

Thank you, Don. Good morning, everyone. We issued our fourth quarter results this morning. Excluding the effects of special items from both periods, fourth quarter 2014 earnings were $0.45 per diluted share versus the $0.38 we earned in Q4 2013. A reconciliation of these non-GAAP measures is provided on Slides 13 and 14. Turning to sales, Slide 7 shows the components of a consolidated sales increase. Consolidated fourth quarter sales were $349.8 million, an increase of 7.4% over fourth quarter 2013 sales, excluding exchange and the disposition of a small business. Packaging Systems' sales increased by $18.5 million or 7.7% over same quarter 2013 sales excluding exchange. A favorable sales mix and volume growth accounted for 6.8 percentage points of the increase, modestly higher selling prices in Packaging Systems contributed to the remainder of the increase. High-value product sales increased 12.1% versus the prior year quarter excluding exchange. For the full year 2014, high-value product sales increased 3.5% versus 2013, excluding exchange. Delivery Systems sales increased $3 million or 2.9% over sales in the prior quarter, excluding exchange effects. The sales increase was driven by our proprietary businesses. Sales of proprietary products increased 14.2% to $28.6 million or 27.4% of the segment's revenues in the quarter. CZ sales and development activity were approximately $4 million and SmartDose sample sales were $3.5 million in Q4. On the full year basis, total 2014 proprietary product sales grew 13.6% over 2013. As provided on Side 8, our consolidated gross profit margin for Q4 2014 was 31.4% versus the 31.1% margin we achieved in the fourth quarter of 2013. Packaging Systems' fourth quarter gross margin of 36.2% is 1.3 margin points higher than the 34.9% achieved in the fourth quarter of '13. The favorable mix and volume of product sold, modest sales price increases…

Thanks very much, Bill. This concludes our prepared remarks for this morning. We would now be pleased to answer any questions? Operator?

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

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

Good morning, Larry.

Good morning, Larry.

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

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

Okay. Just in terms of the marketplace competitive pressures and what not, there has been a lot of chatter or some chatter on the competitive front, the OmniPod from Unilife and Aptar Stelmi, I think, they recently introduced the new coated stopper. Maybe you could take opportunity to discuss a couple of these things?

Well, you know, competitive landscape continuously shifts. The OmniPod is the unique device that is being used by one customer that has a very unique time release requirement within that system and they began work on that a number of years ago. It does not directly compete in many applications with the SmartDose, where we want high volume delivery over the lengthy period of time. With regard to competitors in coated closure market, our position there is well-known, our brands are well-established. I believe that the product that was introduced is only on serum closure, so it is somewhat limited niche in the marketplace, but I continue to like our position there and I like all of the new product iterations that we have been introducing, including NovaPure, so we are in a good position.

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

Thanks, Larry.

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

Hi. Good morning and thanks for the question.

Hey, good morning, Rafael.

Good morning, Rafael.

Just want to dig in a little bit more on the guidance for the full-year and for Q1, so let me start off with the full year. It looks like you are raising a constant currency outlook just slightly. Previously it was 528 now upper-end of 628. Is that mainly driven on where the backlog levels stand today or any other or are there any other indicators that are providing you with greater confidence on the guide?

Yes. I think it is a combination of things. One, we like the composition and the timing of the orders in the backlog, so we are going to see an up lift on the HVP side of the business, we believe, throughout the year. Second thing is that we have got a little more confidence in some of the orders that were doubly done in '13, '14 that impacted us coming back and returning to a more normal pattern. We also have the unpredictable nature of some of the product launches that we expect to happen throughout the year, but I think conservatively we expect that that will also give us a slight uptick.

Okay. That is helpful. With regard to Q1, if I remember correctly that is when the company in 2014 experienced the a bigger hit from they have inventory management the year-over-year comparison is 1%. For Q1, in 2014, it was 1% and it is probably the easiest year-over-year comparison. What is baked in into the 2015 Q1 5 to 7 constant currency growth? Is that just a slower rollout, is there any inventory management issues here or is it just the pacing of the year?

It is a little bit of the pacing of the year, but if you remember and you started to hit on it. In the first quarter of 2014, our high-value product growth was very much impacted by inventory management that had happened at the back end of ’13, so high-value products were down 7% in the first quarter of 2014. You are going to see, again, a more natural, we think progression of sales growth in 2015, and we expect to see return to more normalize growth in high-value products for 2015. As a reminder, I mentioned it in my script, but I will mention it again. In terms of currency headwind, the currency headwind in the first quarter of ‘15 will be pretty dramatic versus Q1 2014. The average exchange rate in 2014's first quarter was $1.37, and right now obviously we are talking about a using a rate of $1.15.

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

Again, we think good high value product growth will translate into a favorable mix. We believe that we will have some favorability in the oil prices as you are suggesting. We think that general inflationary cost will be about where we expect them to be relatively tame. We are going to get a little better prices, we believe, somewhere on the order of less than 1%, so when you factor all of those things in and the continuation of our lien programs, we believe that we should be able to see margin expansion in both sides of the business both, in the Packaging business and in the Delivery Systems.

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

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

Okay. I do appreciate the update on the CEO search. Don the timing should we still be expecting a transition by May of this year?

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

Okay. I appreciate it. Thank you very much.

Thanks, Rafael.

Thanks, Rafael.

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

Hey, there.

Good morning, Dana.

Good morning. Bill, I think you may have confused people. If the Q1 comparison is easy as the 5% to 7% is that a constant currency numbers or is that a reported number?

That is a constant currency 5% to 7%.

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

Correct.

Okay.

It is still some and all of those factors that we have talk about high-value products returning, continued progress in the delivery system space, but it is not in immediate, it is not turn the lights switch off at the end of ’14 and turning on in ‘15. It will build, so our best guess based on the backlog that we have today and the timing of those the orders we just believe that 5% to 7% ex-currency is the best estimate we have today.

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

As you can expect, there are certain things we can do in certain regions, we have got the natural hedging that takes place, where we can make and sell basically in the same current. We do hedge oil and some of our raw materials as it is appropriate, but do not actively hedge in the translation issue. There are some things that we can control on the OpEx side that we will. Oil is a little bit complicated, because of the nature of our supply contracts and the way that is consumed in the manufacturing process, so we expect a bit of the tailwind from that in the latter half of the year. Collectively, all those things are going to allows to mitigate some of the FX impact, but the change has been so dramatic over the last three to five months, we are not going to be able to mitigate all of it.

I suppose early in a year, no need in trying to be terribly precise and tight and yet your range seems to be quite large. Can you talk about the variables that would apply at the lower end of your range versus those that might apply to the higher end?

Yes. I mean we talked about all of them, so we will repeat them. It is the uptake of the return to a more normal patterns for the high-value products, it is the timing of devices and the proprietary device portfolio and a lot of the programs that Don talked about, the sampling involved with them and hopeful eventual increase in sales resulting from those. On the pricing side, we know we are going to have very modest ability to pass among pricing, Don talked about oil, it won't be as nearly a benefit today as it is perhaps in the second half of the year, if of course, if oil prices remain paying the way we are now in that $50 to $60 range, we should get a nice tailwind from that. Lean operations and the efficiencies in our plant continuing to work on the cost side of the equation. We will of course do that and try everything we can. When we look at the totality of the picture, Dana, and we think about all of those variables and the volatility of some of the factors with our customers and how they operate in around their own inventories and the regulators, and how the regulators impact on our customers. As a reminder, we have $340 million worth of backlog. In current business, we have over $1 billion of sales, so there is a big piece of that that will all roll in over the rest of the ensuing months in the next few quarters. At this time of year, we try to be as thoughtful as we can about how all those variables will impact and the 174 to 192 is the best estimate that we had at this point and time.

Understood, Don. You talked about the therapeutic categories that are most visible for some of your proprietary products on the delivery front. Can you shed some additional light if you can about your view as to what proportion of the customer needs might come within CZ or within SmartDose versus some other option?

It is hard to say because of the way our customers look at a device as part of their overall product launch and life extension strategy, as I look at it currently, we are participating on virtually all of these, mostly with closure systems for the vial and the syringe presentations. In the larger categories, many of those such as the PD1s are going to be mostly infusion, so they are going to be done in a care center as opposed to a home environment. On the other drugs, we are in a good position, so I would say the lifestyle devices, they are going to become more and more important to chronic diseases on things like cancer and MS it is not so much.

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

Yes. CZ potentially applies to all of them. The high value therapeutics where you have issues with breakage either in manufacturing or presentations in an auto-injector or the drug is just aggressive, we think CZ is the primary container, has broader application. SmartDose is going to be, again, those applications, where a high-volume has to be delivered over time and they can be done in a home setting or somewhere else. A lot of the oncologic drugs you do not want to do that, because of the toxic nature, so the categories that you mentioned, SmartDose for rheumatoid arthritis potentially for cholesterol reduction and others is going to be its biggest area of application.

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

Well, it all comes back to the timing of when the drugs that are on formal stability, come off-formal stability. We know of some customers that began trials in the latter part of '13, early part of '14 that data will be coming through the end of its two-year shelf life study at the close of '15, beginning of the '16. We are hoping that we have a pretty good picture as to the commercialization potential for those molecules as we move towards the fourth quarter.

I will step back. Thank you. Good stuff.

Thank you, Dana.

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

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