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What changed in West Pharmaceutical Services's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of West Pharmaceutical Services's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+191 added−202 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-21)

Top changes in West Pharmaceutical Services's 2023 10-K

191 paragraphs added · 202 removed · 156 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeTraining, Compliance and Talent Development We strongly encourage our team members to engage in continuous learning, and provide development opportunities to strengthen individual skills and gain new experiences with the goal to build talent from within. We offer resources such as our tuition reimbursement program and our online learning catalog, with approximately 42,000 courses available.
Biggest changeAs of December 31, 2023, four out of the ten members of West's Leadership Team are women, while six out of the ten members are women and/or people of color. 8 Training, Compliance and Talent Development We strongly encourage our team members to engage in continuous learning and provide development opportunities to strengthen individual skills and gain new experiences with the goal to build talent from within.
Given the cost pressures they face, many of our customers look to reduce costs by sourcing from low-cost locations. We seek to differentiate ourselves by leveraging our global capabilities and by employing new technologies such as high-speed automated assembly, insert-molding, multi-shot precision molding, and expertise with multiple-piece closure systems.
Given the cost pressures they face, many of our customers look to reduce costs by sourcing from low-cost locations. We seek to differentiate ourselves by leveraging our global capabilities and reputation and by employing new technologies such as high-speed automated assembly, insert-molding, multi-shot precision molding, and expertise with multiple-piece closure systems.
Our Contract-Manufactured Products customers include many of the world’s largest pharmaceutical, diagnostic, and medical device companies. 6 Contract-Manufactured Products components generally are incorporated into our customers’ manufacturing lines for further processing or assembly. Our products and services are sold and distributed primarily through our own sales force and distribution network, with limited use of contract sales agents and regional distributors.
Our Contract-Manufactured Products customers include many of the world’s largest pharmaceutical, diagnostic, and medical device companies. Contract-Manufactured Products components generally are incorporated into our customers’ manufacturing lines for further processing or assembly. Our products and services are sold and distributed primarily through our own sales force and distribution network, with limited use of contract sales agents and regional distributors.
Compliance with these laws, rules and regulations did not require material capital expenditures in 2022, and is not expected to have a material effect on our capital expenditures, results of operations and competitive position in 2023 as compared to prior periods. For more information on the potential impacts of government regulations affecting our business, see "Item 1A. Risk Factors ".
Compliance with these laws, rules and regulations did not require material capital expenditures in 2023 and is not expected to have a material effect on our capital expenditures, results of operations and competitive position in 2024 as compared to prior periods. For more information on the potential impacts of government regulations affecting our business, see "Item 1A. Risk Factors ".
Our HSE and employee well-being focus can also be seen in our focus on quality implementation of Leading Indicator programs and metrics to drive Lagging Indicator performance. 9 Environmental, Social and Governance (“ESG”) Commitment West has been committed to ESG topics for many years.
Our HSE and employee well-being can also be seen in our focus on quality implementation of proactive Leading Indicator programs and metrics to drive improved Lagging Indicator performance. 9 Environmental, Social and Governance (“ESG”) Commitment West has been committed to ESG topics for many years.
Dollar (“USD”), multiple tax jurisdictions and, particularly in South America, Eastern Europe, Israel, China and the Middle East, uncertain or changing regulatory regimes, or political and social issues, that could destabilize local markets and affect the demand for our products.
Dollar (“USD”), multiple tax jurisdictions and, particularly in South America, Eastern Europe, Israel, China and the Middle East, uncertain or changing regulatory regimes, or political and social issues, which could destabilize local markets and affect the demand for our products.
There were no required material capital expenditures for adherence to our government-led regulatory standards in our facilities in 2022 outside the normal course of business, and there are currently no needed or planned material expenditures for 2023.
There were no required material capital expenditures for adherence to our government-led regulatory standards in our facilities in 2023 outside the normal course of business, and there are currently no needed or planned material expenditures for 2024.
The following table presents the approximate percentage of our employees by region: North America 44% Europe 40% Asia Pacific 13% South America 3% Total 100% As of December 31, 2022, the following table presents the approximate percentage of our employees by business unit: Global Operations 83% Sales and Marketing 5% Corporate 5% Digital & Technology (D&T) 4% Research & Development 3% Total 100% 8 As of December 31, 2022, we had the following global gender demographics: Men Women West Global Employees 64% 36% Diversity, Equity and Inclusion We actively foster an inclusive and collaborative culture and positive employee experiences for our team members where different views and perspectives are welcomed and valued at West.
The following table presents the approximate percentage of our employees by region: North America 44% Europe 40% Asia Pacific 13% South America 3% Total 100% As of December 31, 2023, the following table presents the approximate percentage of our employees by business unit: Global Operations 84% Corporate 5% Sales and Marketing 4% Digital & Technology (D&T) 4% Research & Development 3% Total 100% As of December 31, 2023, we had the following global gender demographics: Men Women West Global Employees 64% 36% Diversity, Equity and Inclusion We actively foster an inclusive and collaborative culture and positive employee experiences for our team members where different views and perspectives are welcomed and valued at West.
During 2022, we continued to increase internal and external awareness of our ESG commitment by expanding our education and communication regarding our ESG program and initiatives and more closely integrating ESG considerations into our business processes.
During 2023, we continued to increase internal and external awareness of our ESG commitment by expanding our education and communication regarding our ESG program and initiatives and more closely integrating ESG considerations into our business processes.
We own or license intellectual property rights, including know-how and issued patents and pending patent applications in the U.S. and in other countries, that relate to various aspects of our business. In 2022, more than 150 patents were issued to West across the globe. Certain key value-added and proprietary products and processes are exclusively licensed from Daikyo.
We own or license intellectual property rights, including know-how and issued patents and pending patent applications in the U.S. and in other countries, that relate to various aspects of our business. In 2023, more than 190 patents were issued to West across the globe. Certain key value-added and proprietary products and processes are exclusively licensed from Daikyo.
In Part III of this Form 10-K, we incorporate by reference certain information from parts of other documents filed with the SEC and from our Proxy Statement for the 2023 Annual Meeting of Shareholders (“2023 Proxy Statement”), which will be filed with the SEC within 120 days following the end of our 2022 fiscal year.
In Part III of this Form 10-K, we incorporate by reference certain information from parts of other documents filed with the SEC and from our Proxy Statement for the 2024 Annual Meeting of Shareholders (“2024 Proxy Statement”), which will be filed with the SEC within 120 days following the end of our 2023 fiscal year.
West’s global HSE team is also a critical component in leading the safety efforts at our sites. Each manufacturing location has dedicated and trained HSE professionals, responsible for general safety oversight at the site. Our Recordable Injury Rate in 2022 was 0.67 per 100 employees.
West’s global HSE team is also a critical component in leading the safety efforts at our sites. Each manufacturing location has dedicated and trained HSE professionals, responsible for general safety oversight and regulatory compliance at the site. Our Recordable Injury Rate in 2023 was 0.74 per 100 employees.
International We have significant operations outside of the United States (“U.S.”), which are managed through the same business segments as our U.S. operations – Proprietary Products and Contract-Manufactured Products. Sales outside of the U.S. accounted for 55.4% of our net sales in 2022.
International We have significant operations outside of the United States (“U.S.”), which are managed through the same business segments as our U.S. operations – Proprietary Products and Contract-Manufactured Products. Sales outside of the U.S. accounted for 58.0% of our net sales in 2023.
Our 2023 Proxy Statement will be available on our website under the caption Investors - Annual Reports & Proxy when complete.
Our 2024 Proxy Statement will be available on our website under the caption Investors - Financial - Annual Reports & Proxy when complete.
West's commitment to the safety of our teams starts at the top and is driven throughout our business by every level of management and by every team member across the globe. West has a Health, Safety, and Environment ("HSE") Executive Council consisting of C-suite and executive operations leaders to monitor and guide our HSE process.
West's commitment to the safety of our teams starts at the top and is driven throughout our business by every level of management and by every team member across the globe. West has a Health, Safety, and Environment ("HSE") Governance Council consisting of West Leadership Team members and executive operations leaders to monitor and support our HSE process.
Human Ca pital Management Our People As of December 31, 2022, we employed approximately 10,700 people, excluding contractors and temporary workers, in our operations throughout the world. During 2022 , West hired approximately 2,850 new team members and experienced an attrition rate of approximately 22%.
Human Ca pital Management Our People As of December 31, 2023, we employed approximately 10,600 people, excluding contractors and temporary workers, in our operations throughout the world. During 2023 , West hired approximately 2,100 new team members and experienced an attrition rate of approximately 21%.
We continue to pursue strategic initiatives in drug containment components, drug containment systems, novel drug delivery devices, safety and administration systems. 7 We also continue to seek new innovative opportunities for acquisition, licensing, partnering or development of products, services and technologies. Cybersecurity Governance Our approach to cybersecurity begins with our responsibility for strong governance and controls.
We continue to pursue strategic initiatives in drug containment components, integrated drug containment systems, novel drug delivery devices, novel therapeutic experiences and administration systems. We also continue to seek new innovative opportunities for acquisition, licensing, partnering or development of products, services and technologies.
Our focus on talent acquisition, performance management, resource planning and leadership assessment are strongly aligned with our diversity, equity and inclusion strategies. We understand that diversity leads to greater innovation, more opportunities, better access to talent and stronger business performance.
Every team member is required to undergo Code of Conduct and mutual respect in the workplace training annually. Our focus on talent acquisition, performance management, resource planning and leadership assessment are strongly aligned with our diversity, equity and inclusion strategies. We understand that diversity leads to greater innovation, more opportunities, better access to talent and stronger business performance.
Marketing Our Proprietary Products customers primarily include many of the major biologic, generic, and pharmaceutical drug companies in the world, which incorporate our components and other offerings into their injectable products for distribution to the point of care and ultimate end-user, the patient.
There were no required material capital expenditures for environmental controls in our facilities in 2023 and there are currently no needed or planned material expenditures for 2024. 6 Marketing Our Proprietary Products customers primarily include many of the major biologic, generic, and pharmaceutical drug companies in the world, which incorporate our components and other offerings into their injectable products for distribution to the point of care and ultimate end-user, the patient.
Changes in tax policy or trade regulations, or the imposition of new tariffs on imported products, could have an adverse effect on our business and results of operations.
Compliance with existing and forthcoming laws and regulations can be costly and time consuming, and may require changes to our information technologies, systems and practices. Changes in tax policy or trade regulations, or the imposition of new tariffs on imported products, could have an adverse effect on our business and results of operations.
Our compliance with these laws and regulations has not had a material impact on our financial position, results of operations or cash flows. There were no required material capital expenditures for environmental controls in our facilities in 2022 and there are currently no needed or planned material expenditures for 2023.
Our compliance with these laws and regulations has not had a material impact on our financial position, results of operations or cash flows.
Our quality control, regulatory and laboratory testing capabilities are used to ensure compliance with applicable manufacturing and regulatory standards for primary and secondary pharmaceutical packaging components and delivery systems. Technological advances and scientific discoveries have accelerated the pace of change in medical technology. Commercial development of our new products and services for medical and pharmaceutical applications commonly requires several years.
Technological advances and scientific discoveries have accelerated the pace of change in primary packaging, drug delivery and administration technologies. 7 Commercial development of our new products and services for medical and pharmaceutical applications commonly requires several years.
In addition, there are a number of competitors supplying medical devices and medical device components, including a number of pharmaceutical manufacturers who are also potential customers of our medical devices and components.
Competition for these components is based primarily on product design and performance, quality, regulatory compliance, and scientific expertise, along with total cost. In addition, there are a number of competitors supplying medical devices and medical device components, including a number of pharmaceutical manufacturers who are also potential customers of our medical devices and components.
We believe, however, that no single patent, technology, trademark, intellectual property asset or license is material in relation to our business as a whole, or to any business segment.
We believe, however, that neither our business nor any business segment is wholly dependent on a single intellectual property asset, license, or technology, by itself.
We centrally manage and organize on-the-job training, instructor-led trainings and online trainings in many different languages and topics through our global Learning Management System. Our team members live our values (Passion for Customer, Leadership in Quality and One West Team) as they work together to support our mission to improve patients' lives.
Our team members live our values (Passion for Customer, Leadership in Quality and One West Team) as they work together to support our mission to improve patients' lives. West’s Code of Conduct, available in multiple languages on westpharma.com, provides guidance to our team members on appropriate and ethical conduct.
Our ten largest customers accounted for 45.6% of our consolidated net sales in 2022, but none of these customers individually accounted for more than 10% of consolidated net sales. Please refer to Note 3, Revenue , and Note 19, Segment Information , for additional information on our consolidated net sales.
Please refer to Note 3, Revenue , and Note 19, Segment Information , for additional information on our consolidated net sales. Competition With our range of proprietary technologies, we compete with several companies across our Proprietary Products product lines.
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Competition With our range of proprietary technologies, we compete with several companies across our Proprietary Products product lines. Competition for these components is based primarily on product design and performance, quality, regulatory compliance, and scientific expertise, along with total cost.
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Our ten largest customers accounted for 41.4% of our consolidated net sales in 2023, and one of these customers, individually accounted for more than 10% of consolidated net sales, at 10.9% or $322.1 million, contributing to net sales in both the Proprietary and Contract Manufacturing reporting segments.
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Security begins at the top of our organization, where Company leadership consistently communicates the requirements for vigilance and compliance throughout the organization, and then leads by example.
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Our quality control, regulatory and laboratory testing capabilities are used to ensure compliance with applicable manufacturing and regulatory standards for primary and secondary pharmaceutical packaging components and drug delivery systems.
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The cybersecurity program is led by our Digital and Transformation team, who provide quarterly updates to the Audit Committee of our Board of Directors, annual updates to the Board of Directors, and regular reports to the West Leadership Team about the program, including information about cyber risk management governance and the status of ongoing efforts to strengthen cybersecurity effectiveness.
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We offer resources such as our tuition reimbursement program and our online learning catalog, with approximately 43,000 courses available. We centrally manage and organize on-the-job training, instructor-led trainings and online trainings in many different languages and topics through our global Learning Management System.
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Security controls and processes are developed and maintained to protect sensitive and confidential information while ensuring availability and integrity. We also educate and share best practices globally with our employees to raise awareness of cybersecurity threats.
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As part of our onboarding process, we train all new employees on cybersecurity and maintain an annual retraining for all employees on cybersecurity standards, as well as how to recognize and properly respond to phishing and social engineering schemes.
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We have deployed a phishing detection system to report suspicious emails, which are flagged for further review, as well as an automated monthly process to retrain employees who do not maintain an acceptable pass rate on our phishing recognition training.
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Our cybersecurity defenses also utilize technologies such as next generation firewalls, Zero Trust Network Access intrusion detection and prevention measures, security information and event management, anti-malware, advance threat protection, multifactor authentication, network segmentation and encryption to ensure the privacy and security of our customers’ data.
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We also have a dedicated Security Operations Center, monitoring our applications and infrastructure on a 24-by-7 basis which is integrated with our enterprise crisis management framework. To round out our awareness program, we have specific and regular training for our Digital and Transformation professionals.
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As of December 31, 2022, four out of the ten members of West's Leadership Team are women, while seven out of the ten members are women and/or people of color.
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West’s Code of Conduct, available in multiple languages on westpharma.com, provides guidance to our team members on appropriate and ethical conduct. Every team member is required to undergo Code of Conduct and mutual respect in the workplace training annually.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeProduct development and commercialization is inherently uncertain and is subject to a number of factors outside of our control, including any necessary regulatory approvals and commercial acceptance for the products. The ultimate timing and successful commercialization of new products and systems requires substantial evaluations of the functional, operational, clinical, and economic viability of our products.
Biggest changeOur growth partly depends on new-product innovation and the development and commercialization of proprietary multi-component systems for injectable drug administration and other healthcare applications. Product development and commercialization is inherently uncertain and is subject to a number of factors outside of our control, including any necessary regulatory approvals and commercial acceptance for the products.
There can be no certainty that we will be able to enter into or maintain hedges of these currency risks, or that our hedges will be effective, which could have a significant effect on our financial condition and operating results. In addition, our international operations are governed by the U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws.
There can be no certainty that we will be able to enter into or maintain hedges of these currency risks, or that our hedges will be effective, which could have a significant effect on our financial condition and operating results. 12 In addition, our international operations are governed by the U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws.
We believe it is likely that the scientific and political attention to issues concerning the extent and causes of climate change will continue, with new and more restrictive legislation regulations and focus on ESG initiatives that could affect our financial condition, results of operations and cash flows.
We believe it is likely that the scientific and political attention to issues concerning the extent and causes of climate change will continue, with new and more restrictive legislation or regulations and focus on ESG initiatives that could affect our financial condition, results of operations and cash flows.
We also refer you to further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K to the SEC. 11 Global and Economic Risks Global economic conditions, including inflation and supply chain disruptions, could continue to adversely affect our operations.
We also refer you to further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K to the SEC. Global and Economic Risks Global economic conditions, including inflation and supply chain disruptions, could continue to adversely affect our operations.
Because of the special nature of these products, competition is based primarily on product design and performance, although total cost is becoming increasingly important as pharmaceutical companies continue with aggressive cost-control programs across their operations. Companies often compete on the basis of price.
Because of the special nature of these products, competition is based primarily on product design and performance, although total cost is becoming increasingly important as pharmaceutical companies continue with aggressive cost-control programs across their operations. 13 Companies often compete on the basis of price.
We currently incur costs to comply with environmental laws and regulations and these costs may become more significant, especially as the laws become more stringent and our use of materials changes. 21 Changes in reimbursement practices of third-party payers or other cost containment measures could affect the demand for our products and the prices at which they are sold.
We currently incur costs to comply with environmental laws and regulations and these costs may become more significant, especially as the laws become more stringent and our use of materials changes. 21 Changes in reimbursement practices of third-party payers or other cost containment measures, including changes to applicable laws and regulations, could affect the demand for our products and the prices at which they are sold.
Our international operations and our ability to implement our overall business strategy (including our plan to continue expanding into emerging and/or faster-growing markets outside of the U.S.) are subject to risks and uncertainties that can vary by country, and include: transportation delays and interruptions; political and economic instability and disruptions, including the United Kingdom’s withdrawal from the European Union; imposition of duties and tariffs; import and export controls; the risks of divergent business expectations or cultural incompatibility inherent in establishing and maintaining operations in foreign countries; difficulties in staffing and managing multi-national operations; labor strikes and/or disputes; and potentially adverse tax consequences.
Our international operations and our ability to implement our overall business strategy (including our plan to continue expanding into emerging and/or faster-growing markets outside of the U.S.) are subject to risks and uncertainties that can vary by country, and include: transportation delays and interruptions; political and economic instability and disruptions; imposition of duties and tariffs; import and export controls; the risks of divergent business expectations or cultural incompatibility inherent in establishing and maintaining operations in foreign countries; difficulties in staffing and managing multi-national operations; labor strikes and/or disputes; and potentially adverse tax consequences.
A substantial majority of our outstanding trade receivables are not covered by collateral or credit insurance. In addition, we have made prepayments associated with insurance premiums and other advances in the normal course of business.
A substantial majority of our outstanding trade receivables are not covered by collateral or credit insurance. In addition, we have made prepayments and other advances in the normal course of business.
For example, the European Union’s General Data Protection Regulation (the “EU GDPR”), the United Kingdom’s GDPR (the “UK GDPR”) and California’s Consumer Privacy Act of 2018, as amended (the "CCPA") impose obligations on companies regarding the handling of personal data and provide certain individual privacy rights to persons whose data is stored.
For example and not limited to, the European Union’s General Data Protection Regulation (the “EU GDPR”), the United Kingdom’s GDPR (the “UK GDPR”) and California’s Consumer Privacy Act of 2018 (the "CCPA"), as expanded by the California Privacy Rights Act of 2020 (“CPRA”), impose obligations on companies regarding the handling of personal data and provide certain individual privacy rights to persons whose data is stored.
We have manufacturing sites throughout the world. In some instances, however, the manufacturing of certain product lines is concentrated in one or only a few of our plants.
In some instances, however, the manufacturing of certain product lines is concentrated in one or only a few of our plants.
Both domestic and international markets experienced significant inflationary pressures in fiscal year 2022 and inflation rates in the U.S., as well as in other countries in which we operate, are currently expected to continue at elevated levels for the near-term.
Both domestic and international markets experienced inflationary pressures in fiscal year 2023 and inflation rates in the U.S., as well as in other countries in which we operate, could continue at elevated levels for the near-term.
Our ability to recruit such talent will depend on a number of factors, including compensation and benefits, work location and work environment. If we cannot effectively recruit and retain qualified executives and employees, our business could be adversely affected.
Competition for experienced employees, particularly for persons with specialized skills, can be intense. Our ability to recruit such talent will depend on a number of factors, including compensation and benefits, work location and work environment. If we cannot effectively recruit and retain qualified executives and employees, our business could be adversely affected.
A significant portion of our net sales and earnings are generated internationally. Sales outside of the U.S. accounted for 55.4% of our consolidated net sales in 2022 and we anticipate that sales from international operations will continue to represent a significant portion of our net sales in the future.
Sales outside of the U.S. accounted for 58.0% of our consolidated net sales in 2023 and we anticipate that sales from international operations will continue to represent a significant portion of our net sales in the future.
Changing climate, global climate change regulations and greenhouse gas effects may adversely affect our operations and financial performance There is continuing concern from members of the scientific community and the general public that emissions of GHG and other activities have or will cause significant changes in weather patterns and increase the frequency or severity of extreme weather events, including droughts, hurricanes, wildfires and flooding.
There is continuing concern from members of the scientific community and the general public that emissions of GHG and other activities have or will cause significant changes in weather patterns and increase the frequency or severity of extreme weather events, including droughts, hurricanes, wildfires and flooding.
These events could lead to recalls or safety alerts relating to our products (either voluntary or required by the FDA or similar governmental authorities in other countries), and could result, in certain cases, in the removal of a product from the market. 16 A recall could result in significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products.
These events could lead to recalls or safety alerts relating to our products (either voluntary or required by the FDA or similar governmental authorities in other countries), and could result, in certain cases, in the removal of a product from the market.
While we have procedures to monitor and limit exposure to credit risk on trade receivables and other current assets, there can be no assurance such procedures will effectively limit our credit risk and avoid losses, which could have a material adverse effect on our financial condition and operating results. 13 Industry Risks Our sales and profitability are largely dependent on the sale of drug products delivered by injection and the packaging of drug products.
While we have procedures to monitor and limit exposure to credit risk on trade receivables and other current assets, there can be no assurance such procedures will effectively limit our credit risk and avoid losses, which could have a material adverse effect on our financial condition and operating results.
The development of new or improved products, processes or technologies by other companies (such as needle-free injection technology) may reduce customer demand for our products or render some of our products or proposed products obsolete or less competitive.
The development of new or improved products, processes or technologies by other companies (such as needle-free injection technology) may reduce customer demand for our products or render some of our products or proposed products obsolete or less competitive. In addition, any failure or inability to meet increased customer quality expectations could cause a reduction in demand.
If the drug products developed by our customers in the future use another delivery system or are reconfigured to require less frequent dosing, our sales and profitability could suffer. Our business depends to a substantial extent on customers’ continued sales and development of products that are delivered by injection.
Industry Risks Our sales and profitability are largely dependent on the sale of drug products delivered by injection and the packaging of drug products. If the drug products developed by our customers in the future use another delivery system or are reconfigured to require less frequent dosing, our sales and profitability could suffer.
The price and supply of these materials and energy sources are cyclical and volatile, and may be impacted or disrupted for reasons beyond our control, including supplier shutdowns, supplier capacity constraints, transportation delays, inflationary pricing pressures, work stoppages, labor shortages, geopolitical developments and governmental regulatory actions. 15 For example, the prices of certain commodities, particularly petroleum-based raw materials, have in the recent past exhibited rapid changes, affecting the cost of synthetic elastomers and plastic.
The price and supply of these materials and energy sources are cyclical and volatile and may be impacted or disrupted for reasons beyond our control, including supplier shutdowns, supplier capacity constraints, transportation delays, inflationary pricing pressures, work stoppages, labor shortages, geopolitical developments and governmental regulatory actions.
If we cannot comply with regulations or prevent the unauthorized access, release and/or corruption of our or our customers’ confidential, classified or personally identifiable information, our reputation could be damaged, and/or we could face financial losses. 12 We may also be required to incur additional costs to modify or enhance our systems, or to try to prevent or remediate any such attacks.
If we cannot comply with regulations or prevent the unauthorized access, release and/or corruption of our or our customers’ confidential, classified or personally identifiable information, our reputation could be damaged, and/or we could face financial losses.
In addition, adverse conditions may also result in future charges to recognize impairment in the carrying value of our goodwill and other intangible assets, which could have a material adverse effect on our financial results.
Delays, interruptions or failures in developing and commercializing new-product innovations or proprietary multi-component systems could adversely affect future revenues and operating income. In addition, adverse conditions may also result in future charges to recognize impairment in the carrying value of our goodwill and other intangible assets, which could have a material adverse effect on our financial results.
In addition, any failure or inability to meet increased customer quality expectations could cause a reduction in demand. 14 Business and Operational Risks Disruption in our manufacturing facilities could have a material adverse effect on our ability to make and sell products and have a negative impact on our reputation, performance or financial condition.
Business and Operational Risks Disruption in our manufacturing facilities could have a material adverse effect on our ability to make and sell products and have a negative impact on our reputation, performance or financial condition. We have manufacturing sites throughout the world.
There is a risk that incident management systems in place may prove inadequate and that any disruption may materially adversely affect our ability to make and sell products and therefore, materially adversely affect our reputation, performance or financial condition.
There is a risk that incident management systems in place may prove inadequate and that any disruption may materially adversely affect our ability to make and sell products and therefore, materially adversely affect our reputation, performance or financial condition. 14 Our international sales and operations are subject to risks and uncertainties that vary by country and which could have a material adverse effect on our business and/or results of operations.
In some circumstances, we may not be able to increase the prices of our products due to competitive pressure and other factors. If we are unable to pass along increased raw material prices and energy costs to our customers, our profitability, and thus our financial condition, may be adversely affected.
In some circumstances, we may not be able to increase the prices of our products due to competitive pressure and other factors.
Modifying or enhancing our systems may result in unanticipated or prolonged disruption events, which could have a material adverse effect on our business and/or results of operations. We are a global company with significant revenues and earnings generated internationally, which exposes us to the impact of foreign currency fluctuations, as well as political and economic risks.
We are a global company with significant revenues and earnings generated internationally, which exposes us to the impact of foreign currency fluctuations, as well as political and economic risks. A significant portion of our net sales and earnings are generated internationally.
For example, the EU GDPR generally restricts the transfer of personal information to countries outside of the European Economic Area without appropriate safeguards or other measures.
Furthermore, multiple states in the United States have enacted data privacy laws. Additionally, laws in certain jurisdictions require data localization and impose restrictions on the transfer of personal information across border. For example, the EU GDPR generally restricts the transfer of personal information to countries outside of the European Economic Area without appropriate safeguards or other measures.
If we are not timely or successful in new-product innovation or the development and commercialization of proprietary multi-component systems, our future revenues and operating income could be adversely affected. Our growth partly depends on new-product innovation and the development and commercialization of proprietary multi-component systems for injectable drug administration and other healthcare applications.
If we are unable to pass along increased raw material prices and energy costs to our customers, our profitability, and thus our financial condition, may be adversely affected. 15 If we are not timely or successful in new-product innovation or the development and commercialization of proprietary multi-component systems, our future revenues and operating income could be adversely affected.
In addition, the timely and adequate availability of filling capacity is essential to both conducting definitive stability trials and the timing of commercialization of customers’ products in Crystal Zenith vials, syringes and cartridges. Delays, interruptions or failures in developing and commercializing new-product innovations or proprietary multi-component systems could adversely affect future revenues and operating income.
The ultimate timing and successful commercialization of new products and systems requires substantial evaluations of the functional, operational, clinical, and economic viability of our products. In addition, the timely and adequate availability of filling capacity is essential to both conducting definitive stability trials and the timing of commercialization of customers’ products in Crystal Zenith vials, syringes and cartridges.
Interest rate increases or other government actions taken to reduce inflation could also result in recessionary pressures in many parts of the world. Our results of operations and financial condition may be adversely affected by the ongoing COVID-19 pandemic and other public health epidemics.
Interest rate increases or other government actions taken to reduce inflation could also result in recessionary pressures in many parts of the world. 11 Unauthorized access to our or our customers’ information and systems could negatively impact our business.
Personal injuries relating to the use of our products can also result in product liability claims being brought against us. In some circumstances, such adverse events could also cause delays in new product approvals. A loss of key personnel or highly skilled employees could disrupt our operations.
In some circumstances, such adverse events could also cause delays in new product approvals. 16 A loss of key personnel or highly skilled employees could disrupt our operations. Our future success depends, in large part, on our ability to retain key employees, including our executive officers and individuals in technical, marketing, sales, and research positions.
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Our operations expose us to risks associated with a pandemic, or outbreak of contagious diseases in the human population, including the COVID‑19 pandemic.
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We may also be required to incur additional costs to modify or enhance our systems, or to try to prevent or remediate any such attacks. Modifying or enhancing our systems may result in unanticipated or prolonged disruption events, which could have a material adverse effect on our business and/or results of operations.
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The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains, disrupted the labor market, created significant volatility and disruption of financial markets and has resulted in governments around the world implementing stringent measures to help control the spread of the virus.
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Unstable market and economic conditions and adverse developments with respect to financial institutions and associated liquidity risk may have serious adverse consequences on our business and financial condition. The recent and potential future disruptions in access to bank deposits or lending commitments due to bank failure could materially and adversely affect our liquidity, our business and financial condition.
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We are subject to risks associated with public health crises, such as pandemics and epidemics, including the COVID-19 pandemic. The nature and extent of future impacts are highly uncertain and unpredictable.
Added
Even with our continued effort to mitigate counterparty risk by working with highly liquid, well capitalized counterparties, the failure of any bank in which we deposit our funds could reduce the amount of cash we have available for our operations or delay our ability to access such funds.
Removed
While many countries around the world have removed or reduced the restrictions taken in response to the COVID-19 pandemic, the emergence of new variants of the SARS-CoV-2 virus may result in new governmental lockdowns, quarantine requirements or other restrictions to slow the spread of the virus.
Added
Any such failure may increase the possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions. In the event we have a commercial relationship with a bank that has failed or is otherwise distressed, we may experience delays or other issues in meeting our financial obligations.
Removed
Any such measures could also impact the global economy more broadly, for example by leading to further economic slowdowns. The global outlook remains uncertain as case counts fluctuate and vaccination and booster rates remain relatively low in many parts of the world.
Added
If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our cash and cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.
Removed
The scope and duration of any future public health crisis, including the potential emergence of new variants of the SARS-CoV-2 virus, the pace at which government restrictions, including, but not limited to, quarantines, “shelter in place” and “stay at home” order, travel restrictions and other similar measures, are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global vaccination and booster rates, may significantly impact our production throughout the supply chain and constrict distribution channels.
Added
Our business depends to a substantial extent on customers’ continued sales and development of products that are delivered by injection.
Removed
We are unable to predict the potential future impact that these factors will have on our business, financial condition or results of operations. Unauthorized access to our or our customers’ information and systems could negatively impact our business.
Added
We conduct business in most of the major pharmaceutical markets in the world.
Removed
Our international sales and operations are subject to risks and uncertainties that vary by country and which could have a material adverse effect on our business and/or results of operations. We conduct business in most of the major pharmaceutical markets in the world.
Added
For example, the prices of certain commodities, particularly petroleum-based raw materials, have in the recent past exhibited rapid changes, affecting the cost of synthetic elastomers and plastic.
Removed
Our future success depends, in large part, on our ability to retain key employees, including our executive officers and individuals in technical, marketing, sales, and research positions. Competition for experienced employees, particularly for persons with specialized skills, can be intense and has intensified following the COVID-19 pandemic.
Added
A recall could result in significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products. Personal injuries relating to the use of our products can also result in product liability claims being brought against us.
Removed
In addition, it is anticipated that the California Privacy Rights Act of 2020 (“CPRA”), effective January 1, 2023, will expand the CCPA. Furthermore, multiple states in the United States have enacted data privacy laws. Additionally, laws in certain jurisdictions require data localization and impose restrictions on the transfer of personal information across border.
Added
Changing climate, global climate change regulations and greenhouse gas effects may adversely affect our operations and financial performance.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAustell Proprietary Products France Le Nouvion Proprietary Products Le Vaudreuil Proprietary Products Germany Eschweiler (1) (2) Proprietary Products Stolberg Proprietary Products Ireland Waterford Proprietary Products Dublin (2) Contract Manufactured Products Serbia Kovin Proprietary Products Asia Pacific China Qingpu Proprietary Products India Sri City Proprietary Products Singapore Jurong (2) Proprietary Products Mold-and-Die Tool Shop: North America United States of America Upper Darby, PA Proprietary Products 23 Type of Facility/ Country Location Segment Europe England Bodmin Proprietary Products Germany Stolberg Proprietary Products Contract Analytical Laboratory: North America United States of America Exton, PA Proprietary Products Technology Center: Asia Pacific India Bangalore (2) Proprietary Products, Contract Manufactured Products (1) This manufacturing facility is also used for research and development activities.
Biggest changeAustell Proprietary Products France Le Nouvion Proprietary Products Germany Eschweiler (1) (2) Proprietary Products Stolberg Proprietary Products Ireland Waterford Proprietary Products Dublin (2) Contract Manufactured Products Serbia Kovin Proprietary Products Asia Pacific China Qingpu Proprietary Products India Sri City Proprietary Products Singapore Jurong (2) Proprietary Products Mold-and-Die Tool Shop: North America United States of America Upper Darby, PA Proprietary Products 24 Type of Facility/ Country Location Segment Europe England Bodmin Proprietary Products Germany Stolberg Proprietary Products Contract Analytical Laboratory: North America United States of America Exton, PA Proprietary Products Technology Center: Asia Pacific India Bangalore (2) Proprietary Products, Contract Manufactured Products (1) This manufacturing facility is also used for research and development activities.
Type of Facility/ Country Location Segment Manufacturing: North America United States of America Phoenix, AZ (2) Contract Manufactured Products Scottsdale, AZ (1) (2) Proprietary Products Tempe, AZ (2) Contract Manufactured Products St.
Type of Facility/ Country Location Segment Manufacturing: North America United States of America Phoenix, AZ (2) Contract Manufactured Products and Proprietary Products Scottsdale, AZ (1) (2) Proprietary Products Tempe, AZ (2) Contract Manufactured Products St.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePrior to joining West, he spent more than 20 years at Merit Medical Systems, Inc., a leading manufacturer of disposable medical devices, where he served in a number of senior global leadership roles, including Chief Financial Officer and Treasurer, Controller for Europe, Middle East and Africa (EMEA) and Vice President of International Finance. 24 Annette F.
Biggest changePrior to joining West, he spent more than 20 years at Merit Medical Systems, Inc., a leading manufacturer of disposable medical devices, where he served in a number of senior global leadership roles, including Chief Financial Officer and Treasurer, Controller for Europe, Middle East and Africa (EMEA) and Vice President of International Finance. 25 Annette F.
From January 2016 to September 2017, served as Lonza Pharma and Biotech, Senior Vice President of Global Sales. Prior to Lonza, she served for over 15 years in a variety of Commercial leadership roles at SAFC, a division of Sigma-Aldrich Company. Chad R. Winters 44 Vice President, Chief Accounting Officer and Corporate Controller since May 2020.
From January 2016 to September 2017, served as Lonza Pharma and Biotech, Senior Vice President of Global Sales. Prior to Lonza, she served for over 15 years in a variety of Commercial leadership roles at SAFC, a division of Sigma-Aldrich Company. Chad R. Winters 45 Vice President, Chief Accounting Officer and Corporate Controller since May 2020.
From 2009 to 2013, he served as Vice President and Managing Director, International, where he was responsible for Asia Pacific and Latin America, and prior thereto, held various commercial and operational roles. Quintin J. Lai 56 Vice President, Strategy and Investor Relations since January 2016. In addition, Corporate Development responsibilities from January 2016 to September 2021.
From 2009 to 2013, he served as Vice President and Managing Director, International, where he was responsible for Asia Pacific and Latin America, and prior thereto, held various commercial and operational roles. Quintin J. Lai 57 Vice President, Strategy and Investor Relations since January 2016. In addition, Corporate Development responsibilities from January 2016 to September 2021.
Prior to Segal, she served for over 15 years in a variety of Legal leadership roles for Novartis, a global healthcare company, including Head of U.S. Legal for Novartis Business Service. Cindy Reiss-Clark 49 Chief Commercial Officer since May 2022. Senior Vice President, Global Markets and Commercial Solutions since November 2019.
Prior to Segal, she served for over 15 years in a variety of Legal leadership roles for Novartis, a global healthcare company, including Head of U.S. Legal for Novartis Business Service. Cindy Reiss-Clark 50 Chief Commercial Officer since May 2022. Senior Vice President, Global Markets and Commercial Solutions since November 2019.
Kimberly Banks MacKay 57 Senior Vice President, General Counsel and Corporate Secretary since December 2020. Prior to joining West, from April 2019 to November 2020, she served as Senior Vice President, General Counsel and Corporate Secretary at the Segal Group in New York, a privately held firm specializing in employee benefits and investment consulting.
Kimberly Banks MacKay 58 Senior Vice President, General Counsel and Corporate Secretary since December 2020. Prior to joining West, from April 2019 to November 2020, she served as Senior Vice President, General Counsel and Corporate Secretary at the Segal Group in New York, a privately held firm specializing in employee benefits and investment consulting.
Vice President and Corporate Controller since October 2019. Prior to joining West, he served as Senior Vice President of Finance & Accounting and Controller of Amneal Pharmaceuticals, Inc., a specialty pharmaceutical company. Prior to Amneal, he held roles of increasing responsibility at the Chemours Company, UGI Corporation, and PricewaterhouseCoopers LLP. 25 PART II
Vice President and Corporate Controller since October 2019. Prior to joining West, he served as Senior Vice President of Finance & Accounting and Controller of Amneal Pharmaceuticals, Inc., a specialty pharmaceutical company. Prior to Amneal, he held roles of increasing responsibility at the Chemours Company, UGI Corporation, and PricewaterhouseCoopers LLP. 26 PART II
Additionally, executive officers may be elected upon hire or due to a promotion. Name Age Position Silji Abraham 51 Senior Vice President, Chief Technology Officer since December 2020. Senior Vice President, Chief Digital and Transformation Officer from February 2018 to December 2020.
Additionally, executive officers may be elected upon hire or due to a promotion. Name Age Position Silji Abraham 52 Senior Vice President, Chief Technology Officer since December 2020. Senior Vice President, Chief Digital and Transformation Officer from February 2018 to December 2020.
Green 53 Chair of the Board since May 2022. Chief Executive Officer since April 2015 and President since December 2015. Prior to joining West, he was Executive Vice President and President of the Research Markets business unit at Sigma-Aldrich Corporation from 2013 to 2015.
Green 54 Chair of the Board since May 2022. Chief Executive Officer since April 2015 and President since December 2015. Prior to joining West, he was Executive Vice President and President of the Research Markets business unit at Sigma-Aldrich Corporation from 2013 to 2015.
Bernard J. Birkett 54 Senior Vice President and Chief Financial and Operations Officer since July 2022. Senior Vice President and Chief Financial Officer from June 2018 to July 2022. In addition, Treasurer from June 2018 to December 2019 and Principal Accounting Officer from October 2019 to April 2020.
Bernard J. Birkett 55 Senior Vice President and Chief Financial and Operations Officer since July 2022. Senior Vice President and Chief Financial Officer from June 2018 to July 2022. In addition, Treasurer from June 2018 to December 2019 and Principal Accounting Officer from October 2019 to April 2020.
Favorite 58 Senior Vice President and Chief Human Resources Officer since October 2015.
Favorite 59 Senior Vice President and Chief Human Resources Officer since October 2015.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+3 added−1 removed2 unchanged
Biggest changeWhen considering whether to declare a dividend, our Board of Directors will take into account: • general economic and business conditions; • our financial condition and operating results; • our available cash and current and anticipated cash needs; • our capital requirements; • contractual, legal, tax and regulatory restrictions on the payment of dividends by us; and • such other factors as our Board of Directors may deem relevant Issuer Purchases of Equity Securities In December 2021, we announced 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 or in privately-negotiated transactions.
Biggest changeWhen considering whether to declare a dividend, our Board of Directors will take into account: • general economic and business conditions; • our financial condition and operating results; • our available cash and current and anticipated cash needs; • our capital requirements; • contractual, legal, tax and regulatory restrictions on the payment of dividends by us; and • such other factors as our Board of Directors may deem relevant Issuer Purchases of Equity Securities The following table shows information with respect to purchases of our common stock made during the three months ended December 31, 2023 by us or any of our “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Exchange 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) Approximate dollar value of shares that may yet be purchased under the plans or programs (1) October 1 - 31, 2023 — $ — — $ 738,700,000 November 1 - 30, 2023 261,080 339.86 261,080 650,000,000 December 1 - 31, 2023 251,182 351.49 251,182 561,700,000 Total 512,262 $ 345.56 512,262 $ 561,700,000 (1) In February 2023, the Board of Directors approved a share repurchase program under which we may repurchase up to $1.0 billion in shares of common stock.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “WST.” As of January 25, 2023, we had 630 shareholders of record, which excludes beneficial owners whose shares were held by brokerage firms, depositaries and other institutional firms in “street names” for their customers.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “WST.” As of January 25, 2024, we had 574 shareholders of record, which excludes beneficial owners whose shares were held by brokerage firms, depositaries and other institutional firms in “street names” for their customers.
The cumulative shareholder return on our common stock is based on an investment of $100 on December 31, 2017 and is compared to the cumulative total return of the S&P indices mentioned above over the period with a like amount invested. *Five year total return data obtained from NASDAQ IR Insight ITEM 6. RESERVED 27
The cumulative shareholder return on our common stock is based on an investment of $100 on December 31, 2018 and is compared to the cumulative total return of the S&P indices mentioned above over the period with a like amount invested. *Five year total return data obtained from NASDAQ IR Insight ITEM 6. RESERVED 28
During the year ended December 31, 2022, we purchased 563,334 shares of our common stock under the now completed program at a cost of $202.8 million, or an average price of $360.03 per share.
During the year ended December 31, 2022, we purchased 563,334 shares of our common stock under the calendar-year 2022 program at a cost of $202.8 million, or an average price of $360.03 per share.
Dividends We paid a quarterly dividend of $0.17 per share on our common stock in each of the first three quarters of 2021; $0.18 per share in the fourth quarter of 2021 and each of the first three quarters of 2022; and $0.19 per share in the fourth quarter of 2022.
Dividends We paid a quarterly dividend of $0.18 per share on our common stock in each of the first three quarters of 2022; $0.19 per share in the fourth quarter of 2022 and each of the first three quarters of 2023; and $0.20 per share in the fourth quarter of 2023.
The number of shares to be repurchased and the timing of such transactions will depend on a variety of factors, including market conditions. 26 Performance Graph The following performance graph compares the cumulative total return to holders of our common stock with the cumulative total return of the Standard & Poor’s 500 Index (“S&P 500”) and the Standard & Poor's 500 Health Care Index, for the five years ended December 31, 2022.
Performance Graph The following performance graph compares the cumulative total return to holders of our common stock with the cumulative total return of the Standard & Poor’s 500 Index (“S&P 500”) and the Standard & Poor's 500 Health Care Index, for the five years ended December 31, 2023.
The share repurchase program does not have an expiration date under which we may repurchase common stock on the open market or in privately-negotiated transactions.
The share repurchase program does not have an expiration date under which we may repurchase common stock on the open market 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.
Removed
During the three months ended December 31, 2022, there were no purchases of our common stock made by us or any of our “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Exchange Act. In February 2023, the Board of Directors approved a share repurchase program under which we may repurchase up to $1.0 billion in shares of common stock.
Added
During the three months ended December 31, 2023, we purchased 512,262 shares of our common stock under the program at a cost of $177.0 million, or an average price of $345.56 per share.
Added
During the year ended December 31, 2023, we purchased 1,265,661 shares of our common stock under the program at a cost of $438.3 million, or an average price of $346.34 per share. 27 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 or in privately-negotiated transactions.
Added
The number of shares to be repurchased and the timing of such transactions depended on a variety of factors, including market conditions. This share repurchase program was completed by December 31, 2022. There were no shares purchased during the three months ended December 31, 2022 under the calendar-year 2022 program.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 6. RESERVED 27 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 28 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 41 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 43 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 86
Biggest changeITEM 6. RESERVED 28 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 29 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 42 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 44 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 88

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

68 edited+18 added−25 removed40 unchanged
Biggest changeAll of the R&D costs incurred during 2022, 2021 and 2020 related to Proprietary Products. 33 Selling, General and Administrative (“SG&A”) Costs The following table presents SG&A costs, consolidated and by reportable segment and corporate and unallocated items: Year Ended December 31, % Change ($ in millions) 2022 2021 2020 2022/2021 2021/2020 Proprietary Products $ 212.6 $ 244.8 $ 197.5 (13.2 %) 23.9 % Contract-Manufactured Products 20.9 15.9 15.5 31.4 % 2.6 % Corporate 83.4 102.1 89.0 (18.3 %) 14.7 % Consolidated SG&A costs $ 316.9 $ 362.8 $ 302.0 (12.7 %) 20.1 % SG&A as a % of net sales 11.0 % 12.8 % 14.1 % Consolidated SG&A costs decreased by $45.9 million, or 12.7%, in 2022, including a favorable foreign currency translation impact of $7.9 million.
Biggest changeAll of the R&D costs incurred during 2023, 2022 and 2021 related to Proprietary Products. 34 Selling, General and Administrative (“SG&A”) Costs The following table presents SG&A costs, consolidated and by reportable segment and corporate and unallocated items: Year Ended December 31, % Change ($ in millions) 2023 2022 2021 2023/2022 2022/2021 Proprietary Products $ 240.6 $ 212.6 $ 244.8 13.2 % (13.2 %) Contract-Manufactured Products 24.4 20.9 15.9 16.7 % 31.4 % Corporate and unallocated items 88.4 83.4 102.1 6.0 % (18.3 %) Consolidated SG&A costs $ 353.4 $ 316.9 $ 362.8 11.5 % (12.7 %) SG&A as a % of net sales 12.0 % 11.0 % 12.8 % Consolidated SG&A costs increased by $36.5 million, or 11.5%, in 2023, primarily due to higher annual incentive compensation, increased compensation costs, an increase in fees related to professional services and an unfavorable foreign currency translation impact of $1.6 million.
Factors that could trigger an impairment review include the following: 1) significant under-performance relative to historical or projected future operating results; 2) significant changes in the manner of use of the acquired assets or the strategy of the overall business; 3) significant negative industry or economic trends; and 4) recognition of goodwill impairment charges.
Factors that could trigger an impairment review include the following: 1) significant under-performance relative to historical or projected future operating results; 2) significant changes in the manner or use of the acquired assets or the strategy of the overall business; 3) significant negative industry or economic trends; and 4) recognition of goodwill impairment charges.
($ in millions) Operating profit Income tax expense Net income Diluted EPS Year ended December 31, 2021 GAAP $ 752.3 $ 107.2 $ 661.8 $ 8.67 Unallocated items: Restructuring and related charges (1) 2.2 0.4 1.8 0.02 Pension settlement (2) — 0.5 1.5 0.02 Amortization of acquisition-related intangible assets (3) 0.8 0.1 2.8 0.04 Asset impairment (4) 2.8 — 2.8 0.04 Cost investment activity (5) 4.3 (0.1) 4.4 0.06 Royalty acceleration (6) — 18.5 (18.5) (0.25) Tax law changes (7) — 1.4 (1.4) (0.02) Year ended December 31, 2021 adjusted amounts (non-U.S.
($ in millions) Operating profit Income tax expense Net income Diluted EPS Year ended December 31, 2021 GAAP $ 752.3 $ 107.2 $ 661.8 $ 8.67 Unallocated items: Restructuring and other charges (3) 2.2 0.4 1.8 0.02 Pension settlement (6) — 0.5 1.5 0.02 Amortization of acquisition-related intangible assets (4) 0.8 0.1 2.8 0.04 Asset impairment (1) 2.8 — 2.8 0.04 Cost investment activity (2) 4.3 (0.1) 4.4 0.06 Royalty acceleration (7) — 18.5 (18.5) (0.25) Tax law changes (8) — 1.4 (1.4) (0.02) Year ended December 31, 2021 adjusted amounts (non-U.S.
We believe the following accounting policies and estimates are critical to understanding and evaluating our results of operations and financial position: 38 Impairment of Long-Lived Assets: Long-lived assets, including property, plant and equipment and operating lease right-of-use assets, are tested for impairment whenever circumstances, such as a deterioration in general macroeconomic conditions or a change in company strategy, increased competition, declining product demand, plans to dispose of an asset or asset group, or recent financial or legal factors that could impact the expected cash flows, indicate that the carrying value of these assets may not be recoverable.
We believe the following accounting policies and estimates are critical to understanding and evaluating our results of operations and financial position: Impairment of Long-Lived Assets: Long-lived assets, including property, plant and equipment, operating lease right-of-use assets and finance lease right-of-use assets, are tested for impairment whenever circumstances, such as a deterioration in general macroeconomic conditions or a change in company strategy, increased competition, declining product demand, plans to dispose of an asset or asset group, or recent financial or legal factors that could impact the expected cash flows, indicate that the carrying value of these assets may not be recoverable.
Research and development expenses Research and development expenses relate to our investments in improvements to our manufacturing processes, product enhancements, and additional investments in our elastomeric packaging components, formulation development, drug containment systems, self-injection systems and drug administration consumables. We expense research and development costs as incurred.
Research and development expenses Research and development expenses relate to our investments in improvements to our manufacturing processes, product enhancements, and additional investments in our elastomeric packaging components, formulation development, integrated drug containment systems, self-injection systems and drug administration consumables. We expense research and development costs as incurred.
(2) During 2022, we recorded a gross pension settlement charge of $52.2 million within other nonoperating expense (income), which primarily relates to the full settlement of the U.S. qualified defined benefit plan (the "U.S. pension plan").
(6) During 2022, we recorded a gross pension settlement charge of $52.2 million within other nonoperating (income) expense, which primarily relates to the full settlement of the U.S. qualified defined benefit plan (the "U.S. pension plan").
(7) During 2022, the Company incurred additional tax expense of $5.7 million due to the impact of a tax law change in the state of Pennsylvania enacted during the period.
(8) During 2022, the Company incurred additional tax expense of $5.7 million due to the impact of a tax law change in the state of Pennsylvania enacted during the period.
Our research and development expenses fluctuate from period to period primarily based on the ongoing improvements to our manufacturing processes and product enhancements. Selling, general and administrative expenses Selling, general and administrative expenses primarily include personnel costs, incentive compensation, insurance, professional fees, and depreciation. 29 Financial Performance Summary The following tables present a reconciliation from U.S. GAAP to non-U.S.
Our research and development expenses fluctuate from period to period primarily based on the ongoing improvements to our manufacturing processes and product enhancements. Selling, general and administrative expenses Selling, general and administrative expenses primarily include personnel costs, incentive compensation, insurance, professional fees, and depreciation. 30 Financial Performance Summary The following tables present a reconciliation from U.S. GAAP to non-U.S.
During 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. 31 RESULTS OF OPERATIONS We evaluate the performance of our segments based upon, among other things, segment net sales and operating profit.
During 2021, the Company recorded a tax benefit of $1.4 million due to the impact of a United Kingdom tax law change enacted during the period. 32 RESULTS OF OPERATIONS We evaluate the performance of our segments based upon, among other things, segment net sales and operating profit.
Working capital is defined as current assets less current liabilities. Cash and cash equivalents – Our cash and cash equivalents balance at December 31, 2022 consisted of cash held in depository accounts with banks around the world and cash invested in high-quality, short-term investments.
Working capital is defined as current assets less current liabilities. Cash and cash equivalents – Our cash and cash equivalents balance at December 31, 2023 consisted of cash held in depository accounts with banks around the world and cash invested in high-quality, short-term investments.
GAAP financial measures: ($ in millions) Operating profit Income tax expense Net income Diluted EPS Year ended December 31, 2022 GAAP $ 734.0 $ 114.7 $ 585.9 $ 7.73 Unallocated items: Restructuring and related charges (1) 23.8 2.0 21.8 0.29 Pension settlement (2) — 20.6 31.6 0.42 Amortization of acquisition-related intangible assets (3) 0.7 0.1 2.8 0.04 Cost investment activity (5) 3.5 — 3.5 0.05 Royalty acceleration (6) — 1.3 (1.3) (0.02) Tax law changes (7) — (5.7) 5.7 0.07 Year ended December 31, 2022 adjusted amounts (non-U.S.
($ in millions) Operating profit Income tax expense Net income Diluted EPS Year ended December 31, 2022 GAAP $ 734.0 $ 114.7 $ 585.9 $ 7.73 Unallocated items: Restructuring and other charges (3) 23.8 2.0 21.8 0.29 Pension settlement (6) — 20.6 31.6 0.42 Amortization of acquisition-related intangible assets (4) 0.7 0.1 2.8 0.04 Cost investment activity (2) 3.5 — 3.5 0.05 Royalty acceleration (7) — 1.3 (1.3) (0.02) Tax law changes (8) — (5.7) 5.7 0.07 Year ended December 31, 2022 adjusted amounts (non-U.S.
(6) During 2022, the Company increased its expected tax benefit related to the prepayment of future royalties from one of its subsidiaries by $1.3 million . During 2021, the Company prepaid future royalties from one of its subsidiaries, which resulted in a $18.5 million tax benefit.
(7) During 2022, the Company increased its expected tax benefit related to the prepayment of future royalties from one of its subsidiaries by $1.3 million . During 2021, the Company prepaid future royalties from one of its subsidiaries, which resulted in a $18.5 million tax benefit.
If we determine that the carrying value of identifiable intangibles may not be recoverable based on the existence of one or more of the above indicators of impairment, we measure recoverability of assets by comparing the respective carrying value of the assets to the current and expected future cash flows, on an un-discounted basis, to be generated from such assets.
If we determine that the carrying value of identifiable intangibles may not be recoverable based on the existence of one or more of the above indicators of impairment, we measure recoverability of assets by comparing the respective carrying value of the assets to the current and expected future cash flows, on an undiscounted basis, to be generated from such assets.
At December 31, 2022, we were in compliance with all of our debt covenants, and we expect to continue to be in compliance with the terms of these agreements throughout 2023.
At December 31, 2023, we were in compliance with all of our debt covenants, and we expect to continue to be in compliance with the terms of these agreements throughout 2024.
Discussion of the year-over-year changes for the fiscal year ended December 31, 2021 compared to the fiscal year ended December 31, 2020 and the results of operations and cash flows for the fiscal year ended December 31, 2020 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Result of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 22, 2022, and is incorporated herein by reference.
Discussion of the year-over-year changes for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021 and the results of operations and cash flows for the fiscal year ended December 31, 2021 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Result of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 21, 2023, and is incorporated herein by reference.
In 2021 and 2020, we recorded a pension settlement charge each year within other nonoperating expense (income), as it was determined that normal-course lump-sum payments for our U.S. pension plan exceeded the threshold for settlement accounting. Please refer to Note 15, Benefit Plans , for further discussion of these items.
In 2021, we recorded a pension settlement charge within other nonoperating (income) expense, as it was determined that normal-course lump-sum payments for our U.S. pension plan exceeded the threshold for settlement accounting. Please refer to Note 15, Benefit Plans , for further discussion of these items.
Please refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements for additional information on our significant accounting policies. 40
Please refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements for additional information on our significant accounting policies. 41
Through the twelve months ended December 31, 2022, the war between Russia and Ukraine has not had a material impact on the Company’s business, financial condition or results of operations as we do not have manufacturing operations or significant commercial relationships in either country.
Other Macroeconomic Factors Through the twelve months ended December 31, 2023, the war between Russia and Ukraine has not had a material impact on the Company’s business, financial condition or results of operations as we do not have manufacturing operations or significant commercial relationships in either country.
Equity in Net Income of Affiliated Companies Equity in net income of affiliated companies was $20.7 million, $20.1 million, and $17.4 million for the years 2022, 2021, and 2020, respectively.
Equity in Net Income of Affiliated Companies Equity in net income of affiliated companies was $17.7 million, $20.7 million, and $20.1 million for the years 2023, 2022, and 2021, respectively.
If, based upon our assessment, we determined that it was not more likely than not that the fair value of each of our reporting units was less than its carrying amount, then it would not be necessary to perform the quantitative goodwill impairment test. Valuing identifiable intangible assets requires judgment.
If, based upon our qualitative assessment, we determined that it was not more likely than not that the fair value of each of our reporting units was less than its carrying amount, then it would not be necessary to perform the quantitative goodwill impairment test.
Accounting guidance also allows entities to first assess qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance, to determine whether it is necessary to perform the quantitative goodwill impairment test. We elected to follow this guidance for our annual impairment test.
Accounting guidance also allows entities to first assess qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance, to determine whether it is necessary to perform the quantitative goodwill impairment test.
Other Expense (Income) The following table presents other expense and income items, consolidated and by reportable segment and corporate and unallocated items: Year Ended December 31, ($ in millions) 2022 2021 2020 Proprietary Products $ (2.2) $ 0.2 $ 3.3 Contract-Manufactured Products 1.6 0.7 1.5 Corporate and unallocated items 27.4 7.0 7.2 Consolidated other expense (income) $ 26.8 $ 7.9 $ 12.0 Other expense and income items consist of foreign exchange transaction gains and losses, gains and losses on the sale of fixed assets, contingent consideration, fixed asset impairments and miscellaneous income and charges.
Other Expense (Income) The following table presents other expense and income items, consolidated and by reportable segment and corporate and unallocated items: Year Ended December 31, ($ in millions) 2023 2022 2021 Proprietary Products $ 14.9 $ (2.2) $ 0.2 Contract-Manufactured Products (0.5) 1.6 0.7 Corporate and unallocated items 17.0 27.4 7.0 Consolidated other expense (income) $ 31.4 $ 26.8 $ 7.9 Other expense and income items consist of a loss on disposal of plant, asset impairments, foreign exchange transaction gains and losses, contingent consideration and miscellaneous income and charges.
Research and Development (“R&D”) Costs The following table presents consolidated R&D costs: Year Ended December 31, % Change ($ in millions) 2022 2021 2020 2022/2021 2021/2020 Consolidated R&D costs $ 58.5 $ 52.8 $ 46.9 10.8 % 12.6 % Consolidated R&D costs increased by $5.7 million, or 10.8%, in 2022, as compared to 2021, due to additional research performed to identify new product opportunities, offset by lower annual incentive compensation.
Research and Development (“R&D”) Costs The following table presents consolidated R&D costs: Year Ended December 31, % Change ($ in millions) 2023 2022 2021 2023/2022 2022/2021 Consolidated R&D costs $ 68.4 $ 58.5 $ 52.8 16.9 % 10.8 % Consolidated R&D costs increased by $9.9 million, or 16.9%, in 2023, as compared to 2022, due to higher annual incentive compensation and additional research performed to identify new product opportunities.
Other Nonoperating Expense (Income) Other nonoperating expense (income) changed by $55.1 million in 2022, primarily due to the recording of a $52.2 million pension settlement charge in 2022, which relieved the historical balance sheet position, inclusive of accumulated other comprehensive income, of the U.S. pension plan.
Other nonoperating (income) expense changed by $54.3 million in 2023, primarily due to the recording of a $52.2 million pension settlement charge in 2022, which relieved the historical balance sheet position, inclusive of accumulated other comprehensive income, of the U.S. pension plan. This charge was not repeated in 2023.
GAAP, these purchase obligations are not reflected in the accompanying consolidated balance sheets. At December 31, 2022, our outstanding unconditional contractual commitments, including for the purchase of raw materials and finished goods, amounted to $96.8 million, of which $70.9 million is due to be paid in 2023.
GAAP, these purchase obligations are not reflected in the accompanying consolidated balance sheets. At December 31, 2023, our outstanding unconditional contractual commitments, including for the purchase of raw materials and finished goods, amounted to $298.3 million, of which $76.8 million is due to be paid in 2024. These purchase commitments are in the normal course of business.
The intersegment sales elimination, which is required for the presentation of consolidated net sales, represents the elimination of components sold between our segments. 32 Gross Profit The following table presents gross profit and related gross margins, consolidated and by reportable segment and by unallocated: Year Ended December 31, % Change ($ in millions) 2022 2021 2020 2022/2021 2021/2020 Proprietary Products: Gross profit $ 1,053.3 $ 1,093.9 $ 682.2 (3.7 %) 60.3 % Gross profit margin 43.8 % 47.2 % 41.4 % Contract-Manufactured Products: Gross profit $ 82.9 $ 83.8 $ 85.6 (1.1 %) (2.1 %) Gross profit margin 17.3 % 16.3 % 17.2 % Unallocated items $ — $ (1.9) $ — Consolidated gross profit $ 1,136.2 $ 1,175.8 $ 767.8 (3.4 %) 53.1 % Consolidated gross profit margin 39.4 % 41.5 % 35.8 % Consolidated gross profit decreased by $39.6 million, or 3.4%, in 2022, including an unfavorable foreign currency translation impact of $60.4 million.
The intersegment sales elimination, which is required for the presentation of consolidated net sales, represents the elimination of components sold between our segments. 33 Gross Profit The following table presents gross profit and related gross margins, consolidated and by reportable segment and by unallocated: Year Ended December 31, % Change ($ in millions) 2023 2022 2021 2023/2022 2022/2021 Proprietary Products: Gross profit $ 1,034.0 $ 1,053.3 $ 1,093.9 (1.8 %) (3.7 %) Gross profit margin 43.1 % 43.8 % 47.2 % Contract-Manufactured Products: Gross profit $ 96.0 $ 82.9 $ 83.8 15.8 % (1.1 %) Gross profit margin 17.4 % 17.3 % 16.3 % Unallocated items $ (0.8) $ — $ (1.9) Consolidated gross profit $ 1,129.2 $ 1,136.2 $ 1,175.8 (0.6 %) (3.4 %) Consolidated gross profit margin 38.3 % 39.4 % 41.5 % Consolidated gross profit decreased by $7.0 million, or 0.6%, in 2023, including a favorable foreign currency translation impact of $13.3 million.
Please refer to Note 10, Debt , for further discussion of our Credit Facility. Pursuant to the financial covenants in our debt agreements, we are required to maintain established interest coverage ratios and to not exceed established leverage ratios. In addition, the agreements contain other customary covenants, none of which we consider restrictive to our operations.
Pursuant to the financial covenants in our debt agreements, we are required to maintain established interest coverage ratios and to not exceed established leverage ratios. In addition, the agreements contain other customary covenants, none of which we consider restrictive to our operations.
Income Taxes The provision for income taxes was $114.7 million, $107.2 million, and $72.5 million for the years 2022, 2021, and 2020, respectively, and the effective tax rate was 16.9%, 14.3%, and 18.1%, respectively.
Income Taxes The provision for income taxes was $122.3 million, $114.7 million, and $107.2 million for the years 2023, 2022, and 2021, respectively, and the effective tax rate was 17.5%, 16.9%, and 14.3%, respectively.
Liquidity and Capital Resources The table below presents selected liquidity and capital measures as of: ($ in millions) December 31, 2022 December 31, 2021 Cash and cash equivalents $ 894.3 $ 762.6 Accounts receivable, net $ 507.4 $ 489.0 Inventories $ 414.8 $ 378.4 Accounts payable $ 215.4 $ 232.2 Debt $ 208.9 $ 253.0 Equity $ 2,684.9 $ 2,335.4 Working capital $ 1,400.5 $ 1,147.9 Cash and cash equivalents include all instruments that have maturities of ninety days or less when purchased.
Liquidity and Capital Resources The table below presents selected liquidity and capital measures as of: ($ in millions) December 31, 2023 December 31, 2022 Cash and cash equivalents $ 853.9 $ 894.3 Accounts receivable, net $ 512.0 $ 507.4 Inventories $ 434.7 $ 414.8 Accounts payable $ 242.4 $ 215.4 Debt $ 206.8 $ 208.9 Equity $ 2,881.0 $ 2,684.9 Working capital $ 1,264.6 $ 1,400.5 Cash and cash equivalents include all instruments that have maturities of ninety days or less when purchased.
(4) During 2021, the Company recorded a $2.8 million impairment charge for certain long-lived and intangible assets within the Proprietary Products segment as it determined the carrying value exceeded the fair value of the assets. $1.9 million of this charge is recorded in Cost of Goods and Services Sold and $0.9 million of the charge is recorded in Selling, General, and Administrative expense, due to the nature of the impaired assets.
During 2021, the Company recorded a $2.8 million impairment charge for certain long-lived and intangible assets related to the Company's manufacturing facility within the Proprietary Products segment that was sold during the second quarter of 2023, as it determined the carrying value was not fully recoverable. $1.9 million of this charge was recorded within cost of goods and services sold and $0.9 million of the charge is recorded in selling, general, and administrative expense, due to the nature of the impaired assets.
Unallocated items - Please refer to the Financial Performance Summary section above for details. 35 Interest Expense, Net The following table presents interest expense, net, by significant component: Year Ended December 31, % Change ($ in millions) 2022 2021 2020 2022/2021 2021/2020 Interest expense $ 11.6 $ 10.2 $ 9.6 13.7 % 6.3 % Capitalized interest (3.7) (2.0) (1.4) 85.0 % 42.9 % Interest expense, net $ 7.9 $ 8.2 $ 8.2 (3.7 %) — % Interest income $ (5.1) $ (1.0) $ (1.4) 410.0 % (28.6 %) Interest expense, net, decreased by $0.3 million, or 3.7%, in 2022, primarily due to an increase in capitalized interest driven by higher capital expenditures in 2022, as compared to 2021.
For unallocated items, please refer to the Financial Performance Summary section above for details. 36 Interest Expense, Net and Interest Income The following table presents interest expense, net, by significant component: Year Ended December 31, % Change ($ in millions) 2023 2022 2021 2023/2022 2022/2021 Interest expense $ 14.8 $ 11.6 $ 10.2 27.6 % 13.7 % Capitalized interest (5.8) (3.7) (2.0) 56.8 % 85.0 % Interest expense, net $ 9.0 $ 7.9 $ 8.2 13.9 % (3.7) % Interest income $ (28.0) $ (5.1) $ (1.0) 449.0 % 410.0 % Interest expense, net, increased by $1.1 million, or 13.9%, in 2023, primarily due to higher interest rates in 2023, as compared to 2022.
At December 31, 2022, we had no outstanding borrowings under the Credit Facility. At December 31, 2022, the borrowing capacity available under the Credit Facility, including outstanding letters of credit of $2.4 million, was $497.6 million. We do not expect any significant limitations on our ability to access this source of funds.
At December 31, 2023, the borrowing capacity available under the Credit Facility, including outstanding letters of credit of $2.4 million, was $497.6 million. We do not expect any significant limitations on our ability to access this source of funds. Please refer to Note 10, Debt , for further discussion of our Credit Facility.
(5) During 2022, the Company recorded a cost investment impairment charge of $3.5 million. During 2021, the net cost investment activity was $4.3 million, inclusive of an impairment charge of $4.6 million offset by a $0.3 million gain on the sale of a cost investment. During 2020, the Company recorded a cost investment impairment charge of $2.5 million.
During 2021, the net cost investment activity was equal to $4.3 million, inclusive of an impairment charge of $4.6 million partially offset by a $0.3 million gain on the sale of a cost investment.
Operating Profit The following table presents operating profit and adjusted operating profit, consolidated and by reportable segment, corporate and unallocated items: Year Ended December 31, % Change ($ in millions) 2022 2021 2020 2022/2021 2021/2020 Proprietary Products $ 784.4 $ 796.1 $ 434.5 (1.5 %) 83.2 % Contract-Manufactured Products 60.4 67.2 68.6 (10.1 %) (2.0 %) Corporate and unallocated (110.8) (111.0) (96.2) (0.2 %) 15.4 % Consolidated operating profit $ 734.0 $ 752.3 $ 406.9 (2.4 %) 84.9 % Consolidated operating profit margin 25.4 % 26.6 % 19.0 % Unallocated items 28.0 10.1 10.1 Adjusted consolidated operating profit $ 762.0 $ 762.4 $ 417.0 (0.1 %) 82.8 % Adjusted consolidated operating profit margin 26.4 % 26.9 % 19.4 % Consolidated operating profit decreased by $18.3 million, or 2.4%, in 2022, including an unfavorable foreign currency translation impact of $51.8 million, due to the factors described above.
Operating Profit The following table presents operating profit and adjusted operating profit, consolidated and by reportable segment, corporate and unallocated items: Year Ended December 31, % Change ($ in millions) 2023 2022 2021 2023/2022 2022/2021 Proprietary Products $ 710.1 $ 784.4 $ 796.1 (9.5 %) (1.5 %) Contract-Manufactured Products 72.1 60.4 67.2 19.4 % (10.1 %) Corporate and unallocated (106.2) (110.8) (111.0) (4.2 %) (0.2 %) Consolidated operating profit $ 676.0 $ 734.0 $ 752.3 (7.9 %) (2.4 %) Consolidated operating profit margin 22.9 % 25.4 % 26.6 % Unallocated items 14.6 28.0 10.1 Adjusted consolidated operating profit $ 690.6 $ 762.0 $ 762.4 (9.4 %) (0.1 %) Adjusted consolidated operating profit margin 23.4 % 26.4 % 26.9 % Consolidated operating profit decreased by $58.0 million, or 7.9%, in 2023, including a favorable foreign currency translation impact of $10.9 million, due to the factors described above.
CRITICAL ACCOUNTING ESTIMATES Management’s discussion and analysis addresses consolidated financial statements that are prepared in accordance with U.S. GAAP. The application of these principles requires management to make estimates and assumptions, some of which are subjective and complex, that affect the amounts reported in the consolidated financial statements.
GAAP. The application of these principles requires management to make estimates and assumptions, some of which are subjective and complex, that affect the amounts reported in the consolidated financial statements.
Equity in net income of affiliated companies increased by $0.6 million, or 3.0%, in 2022, primarily due to favorable operating results at Daikyo and the Mexico affiliates, offset by the impact of foreign currency translation. 36 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Cash Flows The following table presents cash flow data for the years ended December 31: ($ in millions) 2022 2021 2020 Net cash provided by operating activities $ 724.0 $ 584.0 $ 472.5 Net cash used in investing activities $ (288.2) $ (253.1) $ (179.5) Net cash used in financing activities $ (293.6) $ (168.1) $ (137.1) Net Cash Provided by Operating Activities Net cash provided by operating activities increased by $140.0 million in 2022, primarily due to a year over year improvement in working capital management primarily within accounts receivable and inventory, partially offset by a decrease in net income.
Equity in net income of affiliated companies decreased by $3.0 million, or 14.5%, in 2023, primarily due to less favorable operating results at the Mexico affiliates. 37 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Cash Flows The following table presents cash flow data for the years ended December 31: ($ in millions) 2023 2022 2021 Net cash provided by operating activities $ 776.5 $ 724.0 $ 584.0 Net cash used in investing activities $ (368.7) $ (288.2) $ (253.1) Net cash used in financing activities $ (459.6) $ (293.6) $ (168.1) Net Cash Provided by Operating Activities Net cash provided by operating activities increased by $52.5 million in 2023, primarily due to favorable working capital management in 2023, as compared to 2022.
Efforts remain focused on the continued investment in elastomeric packaging components, formulation development, drug containment systems, self-injection systems and drug administration consumables.
The increase in cost includes $3.5 million of incremental spend on research performed on glass systems. Efforts remain focused on the continued investment in elastomeric packaging components, formulation development, drug containment systems, self-injection systems and drug administration consumables.
GAAP) $ 417.0 $ 75.2 $ 360.5 $ 4.76 During 2020, we recorded a tax benefit of $20.8 million associated with stock-based compensation. 30 (1) During 2022, the Company recorded restructuring and related charges of $23.8 million, which primarily included $8.7 million in net severance and post-employment benefits primarily in connection with our plan to adjust our operating cost base and $15.3 million in asset-related charges associated with this plan.
During 2022, the Company recorded expense to restructuring and other charges of $23.8 million, which primarily included a charge of $8.7 million in net severance and post-employment benefits primarily in connection with our plan to adjust our operating cost base and $15.3 million in asset-related charges associated with this plan.
The Company previously entered into a material supply agreement for butyl polymers used as a principal raw material in a broad range of the Company’s polymer-based pharmaceutical packaging products. • Our long-term debt obligations, net of unamortized debt issuance costs including fixed and variable-rate debt, is further discussed in Note 10, Debt . • Our operating lease obligations primarily related to land, buildings, and machinery and equipment, with lease terms through 2047 further discussed in Note 6, Leases .
The Company previously entered into a material supply agreement for butyl polymers used as a principal raw material in a broad range of the Company’s polymer-based pharmaceutical packaging products. • Our long-term debt obligations, net of unamortized debt issuance costs including fixed and variable-rate debt, is further discussed in Note 10, Debt . • Our operating lease obligations primarily related to land, buildings, and machinery and equipment, with lease terms through 2047 further discussed in Note 6, Leases . • Our various tax-qualified and non-qualified defined benefit pension plan obligations in the U.S. and other countries that cover employees and former employees who meet eligibility requirements is further discussed in Note 15, Benefit Plans . 39 CRITICAL ACCOUNTING ESTIMATES Management’s discussion and analysis addresses consolidated financial statements that are prepared in accordance with U.S.
($ in millions) Operating profit Income tax expense Net income Diluted EPS Year ended December 31, 2020 GAAP $ 406.9 $ 72.5 $ 346.2 $ 4.57 Unallocated items: Restructuring and severance related charges (1) 7.0 1.7 5.3 0.07 Pension settlement (2) — 0.9 2.9 0.04 Amortization of acquisition-related intangible assets (3) 0.6 0.1 3.6 0.05 Cost investment activity (5) 2.5 — 2.5 0.03 Year ended December 31, 2020 adjusted amounts (non-U.S.
GAAP financial measures: ($ in millions) Operating profit Income tax expense Net income Diluted EPS Year ended December 31, 2023 GAAP $ 676.0 $ 122.3 $ 593.4 $ 7.88 Unallocated items: Loss on disposal of plant (1) 11.6 (0.7) 12.3 0.16 Cost investment activity (2) 4.3 — 4.3 0.06 Restructuring and other charges (3) (2.0) (0.9) (1.1) (0.02) Amortization of acquisition-related intangible assets (4) 0.7 0.1 2.8 0.04 Legal settlement (5) — (0.9) (2.9) (0.04) Year ended December 31, 2023 adjusted amounts (non-U.S.
Net Cash Used in Investing Activities Net cash used in investing activities increased by $35.1 million in 2022, primarily due to increases in capital expenditures for additional manufacturing capacity in 2022 to meet customer demand.
Net Cash Used in Investing Activities Net cash used in investing activities increased by $80.5 million in 2023, due to an increase in capital expenditures for additional manufacturing capacity in 2023 to meet customer demand and improve manufacturing lead times.
GAAP) $ 762.4 $ 128.0 $ 655.2 $ 8.58 During 2021, we recorded a tax benefit of $31.5 million associated with stock-based compensation.
GAAP) $ 762.4 $ 128.0 $ 655.2 $ 8.58 31 During 2021, we recorded a tax benefit of $31.5 million associated with stock-based compensation. (1) During 2023 , the Company recorded expense of $11.6 million as a result of the sale of one of the Company’s manufacturing facilities within the Proprietary Products segment.
Debt and credit facilities - The $44.1 million decrease in total debt at December 31, 2022, as compared to December 31, 2021, resulted from our $42.0 million principal repayment of the Series A notes on July 5, 2022 and quarterly repayments of principal under our Term Loan. Our sources of liquidity include our Credit Facility.
Debt and credit facilities - The $2.1 million decrease in total debt at December 31, 2023, as compared to December 31, 2022, resulted primarily from debt repayments under our Term Loan. Our sources of liquidity include our Credit Facility. At December 31, 2023, we had no outstanding borrowings under the Credit Facility.
Contract-Manufactured Products – Contract-Manufactured Products SG&A costs increased by $5.0 million, or 31.4%, in 2022, primarily due to a higher allocation of functional spend and increased salaries and fringe benefits, partially offset by a reduction in annual incentive compensation.
Contract-Manufactured Products – Contract-Manufactured Products SG&A costs increased by $3.5 million, or 16.7%, in 2023, primarily due to a higher allocation of corporate function spend and higher annual incentive compensation.
Excluding the impact of currency exchange rates, cash and cash equivalents, accounts receivable, and inventories increased by 37 $142.2 million, $35.5 million and $49.7 million, respectively, while total current liabilities decreased by $60.8 million.
Excluding the impact of currency exchange rates, inventories, other current assets and total current liabilities increased by $13.5 million, $30.4 million and $145.1 million, respectively, while cash and cash equivalents and accounts receivable decreased by $56.1 million and $4.0 million, respectively.
However, the continuation of the Russia-Ukraine military conflict and/or an escalation of the conflict beyond its current scope may further weaken the global economy and could result in additional inflationary pressures and supply chain constraints, including the unavailability and cost of energy. During 2022, we experienced higher costs for raw materials and supply chain challenges related to manufacturing equipment.
However, the continuation of the Russia-Ukraine military conflict and/or an escalation of the conflict beyond its current scope may further weaken the global economy and could result in additional inflationary pressures and supply chain constraints, including the unavailability and cost of energy. 29 We have operations based in Israel that conduct research and development activities and manufacture certain components for our devices.
Contract-Manufactured Products – Contract-Manufactured Products other expense (income) changed by $0.9 million in 2022 as compared to 2021, primarily due to increased fixed asset impairments of $0.7 million recorded in 2022 as compared to 2021. Corporate and unallocated items – Corporate and unallocated items changed by $20.4 million in 2022 as compared to 2021.
Contract-Manufactured Products – Contract-Manufactured Products other expense (income) changed by $2.1 million in 2023 as compared to 2022, primarily due to increased losses on foreign exchange transactions recorded in 2022, as compared to 2023. Corporate and unallocated items – Corporate and unallocated items changed by $10.4 million in 2023 as compared to 2022.
Net Sales Our net sales results from the sale of goods or services and reflects the net consideration which we expect to receive in exchange for those goods or services.
We believe the items discussed below provide insight into the factors that affect these key measures. Net Sales Our net sales result from the sale of goods or services and reflect the net consideration which we expect to receive in exchange for those goods or services.
Proprietary Products – Proprietary Products operating profit decreased by $11.7 million, or 1.5%, in 2022, including an unfavorable foreign currency translation impact of $48.1 million, due to the factors described above.
Proprietary Products – Proprietary Products operating profit decreased by $74.3 million, or 9.5%, in 2023, including a favorable foreign currency translation impact of $10.1 million, due to the factors described above, most notably the decline in COVID-related sales.
Proprietary Products – Proprietary Products gross profit decreased by $40.6 million, or 3.7%, in 2022, including an unfavorable foreign currency translation impact of $55.7 million. Proprietary Products gross profit margin decreased by 3.4 margin points in 2022.
Consolidated gross profit margin decreased by 1.1 margin points in 2023. Proprietary Products – Proprietary Products gross profit decreased by $19.3 million, or 1.8%, in 2023, including a favorable foreign currency translation impact of $12.3 million. Proprietary Products gross profit margin decreased by 0.7 margin points in 2023.
Net Sales The following table presents net sales, consolidated and by reportable segment: Year Ended December 31, % Change ($ in millions) 2022 2021 2020 2022/2021 2021/2020 Proprietary Products $ 2,406.8 $ 2,317.3 $ 1,648.6 3.9 % 40.6 % Contract-Manufactured Products 480.4 514.7 498.6 (6.7 %) 3.2 % Intersegment sales elimination (0.3) (0.4) (0.3) (25.0 %) 33.3 % Consolidated net sales $ 2,886.9 $ 2,831.6 $ 2,146.9 2.0 % 31.9 % Consolidated net sales increased by $55.3 million, or 2.0%, in 2022, due to sales price increases of approximately $106 million and a favorable mix of products sold despite a decline in net COVID-19 related activity for COVID-19 vaccines and antiviral treatments.
Net Sales The following table presents net sales, consolidated and by reportable segment: Year Ended December 31, % Change ($ in millions) 2023 2022 2021 2023/2022 2022/2021 Proprietary Products $ 2,397.3 $ 2,406.8 $ 2,317.3 (0.4 %) 3.9 % Contract-Manufactured Products 552.5 480.4 514.7 15.0 % (6.7 %) Intersegment sales elimination — (0.3) (0.4) (100.0 %) (25.0 %) Consolidated net sales $ 2,949.8 $ 2,886.9 $ 2,831.6 2.2 % 2.0 % Consolidated net sales increased by $62.9 million, or 2.2%, in 2023, including a favorable foreign currency translation impact of $27.9 million.
During 2021, the Company recorded $0.8 million of amortization expense within operating profit associated with an acquisition of an intangible asset during the second quarter of 2020. Additionally, the company recorded $2.1 million of amortization expense in association with an acquisition of increased ownership interest in Daikyo.
During 2021, the Company recorded expense to restructuring and other charges of $2.2 million to optimize certain organizational structures within the Company. (4) During 2023, 2022 and 2021, the Company recorded $0.7 million, $0.7 million and $0.8 million, respectively, of amortization expense within operating profit associated with an acquisition of an intangible asset during the second quarter of 2020.
Due to the uncertainty that exists relative to the duration and overall impact of the macroeconomic factors discussed above, our future operating performance, particularly in the short-term, may be subject to volatility. The impacts of macroeconomic conditions on our business, results of operations, financial condition and cash flows are dependent on certain factors, including those discussed in Item 1A.
During 2023, we also experienced higher costs for raw materials. Due to the uncertainty that exists relative to the duration and overall impact of the macroeconomic factors discussed above, our future operating performance, particularly in the short-term, may be subject to volatility.
Net Cash Used in Financing Activities Net cash used in financing activities increased by $125.5 million in 2022, primarily due to increases in purchases under our share repurchase program in 2022 and additional debt repayments in 2022 according to the maturity date.
Net Cash Used in Financing Activities Net cash used in financing activities increased by $166.0 million in 2023, primarily due to increases in purchases under our share repurchase program in 2023, as compared to 2022. This was partially offset by reduced debt repayments and increased proceeds from stock-based compensation awards in 2023, as compared to 2022.
Proprietary Products – Proprietary Products SG&A costs decreased by $32.2 million, or 13.2%, in 2022, primarily due to higher allocation of functional spend to Cost of Goods and Services Sold of approximately $18 million, lower annual incentive compensation of approximately $17 million, and a favorable foreign currency translation impact of $6.6 million.
Proprietary Products – Proprietary Products SG&A costs increased by $28.0 million, or 13.2%, in 2023, primarily due to higher annual incentive compensation, an increase in compensation costs and an unfavorable foreign currency translation impact of $1.3 million.
Risk Factors . Components of and Key Factors Influencing Our Results of Operations In assessing the performance of our business, we consider a variety of performance and financial measures. We believe the items discussed below provide insight into the factors that affect these key measures.
The impacts of macroeconomic conditions on our business, results of operations, financial condition and cash flows are dependent on certain factors, including those discussed in Item 1A. Risk Factors . Components of and Key Factors Influencing Our Results of Operations In assessing the performance of our business, we consider a variety of performance and financial measures.
If such analysis indicates that the carrying value of these assets is not recoverable, we measure an impairment based on the amount in which the net carrying amount of the assets exceeds the fair values of the assets. 39 Employee Benefits: We maintain funded and unfunded defined benefit pension plans in the U.S. and a number of other countries that cover employees who meet eligibility requirements.
If such analysis indicates that the carrying value of these assets is not recoverable, we measure an impairment based on the amount in which the net carrying amount of the assets exceeds the fair values of the assets. Income Taxes: We estimate income taxes payable based upon current domestic and international tax legislation.
Consolidated other expense (income) changed by $18.9 million in 2022 as compared to 2021, due to the factors described below, primarily an increase in restructuring and related charges in 2022 . 34 Proprietary Products – Proprietary Products other expense (income) changed by $2.4 million in 2022 as compared to 2021 , primarily due to increased gains on foreign exchange transactions of $3.1 million, offset by increased contingent consideration charges of $1.5 million recorded in 2022 as compared to 2021.
Consolidated other expense (income) changed by $4.6 million in 2023 as compared to 2022, due to the factors described below. 35 Proprietary Products – Proprietary Products other expense (income) changed by $17.1 million in 2023 as compared to 2022 , primarily due to a loss on foreign exchange transactions being recorded in 2023, while a gain on foreign exchange transactions was recorded during the same period in 2022.
Contract-Manufactured Products – Contract-Manufactured Products gross profit decreased by $0.9 million, or 1.1%, in 2022, including an unfavorable foreign currency translation impact of $4.7 million.
Contract-Manufactured Products – Contract-Manufactured Products net sales increased by $72.1 million, or 15.0%, in 2023, including a favorable foreign currency translation impact of $5.8 million.
The cash and cash equivalents balance at December 31, 2022 included $317.8 million of cash held by subsidiaries within the U.S. and $576.5 million of cash held by subsidiaries outside of the U.S. For further information on our position regarding permanent reinvestment of foreign subsidiary earnings and profits refer to Note 17, Income Taxes .
For further information on our position regarding permanent reinvestment of foreign subsidiary earnings and profits refer to Note 17, Income Taxes . 38 Working capital - Working capital at December 31, 2023 decreased by $135.9 million, or 9.7%, as compared to December 31, 2022, which includes a favorable foreign currency translation impact of $25.4 million.
Contract-Manufactured Products – Contract-Manufactured Products operating profit decreased by $6.8 million, or 10.1%, in 2022, including an unfavorable foreign currency translation impact of $3.7 million, due to the factors described above. Corporate – Excluding the unallocated items, Corporate costs decreased by $18.1 million, or 17.9%, in 2022, due to the factors described above.
Corporate and unallocated – Excluding the unallocated items, Corporate costs increased by $8.8 million, or 10.6%, in 2023, due to the factors described above.
This was offset by the tax benefit of $20.6 million recognized for the 2022 termination of our U.S. pension plan as well as a favorable geographic mix of our earnings in jurisdictions with a lower tax rate. Please refer to Note 17, Income Taxes , for further discussion of our income taxes.
This was offset by an increase in the tax benefit related to stock-based compensation in 2023 of $32.0 million, as compared to the same period in 2022, which had a tax benefit related to stock-based compensation of $16.5 million. Please refer to Note 17, Income Taxes , for further discussion of our income taxes.
(3) During 2022, the Company recorded $0.7 million of amortization expense within operating profit associated with an acquisition of an intangible asset during the second quarter of 2020. Additionally, the company recorded $2.1 million of amortization expense in association with an acquisition of increased ownership interest in Daikyo.
Additionally, during 2023, 2022 and 2021, the company recorded $2.1 million of amortization expense in association with an acquisition of increased ownership interest in Daikyo. (5) During 2023 , the Company recorded a benefit of $3.8 million within other nonoperating (income) expense as a result of a favorable legal settlement related to a matter not included in our normal operations.
This was partially offset by an unfavorable foreign currency translation impact of $162.6 million. Excluding foreign currency translation effects, consolidated net sales increased by $217.9 million, or 7.7%. Proprietary Products – Proprietary Products net sales increased by $89.5 million, or 3.9%, in 2022, including an unfavorable foreign currency translation impact of $138.6 million.
Excluding foreign currency translation effects and the impact related to the disposal of one of our plants of $11.5 million, consolidated net sales increased by $46.5 million, or 1.6%. Proprietary Products – Proprietary Products net sales decreased by $9.5 million, or 0.4%, in 2023, including a favorable foreign currency translation impact of $22.1 million.
Contract-Manufactured Products gross profit margin increased by 1.0 margin points in 2022, d ue to increased sales prices and production efficiencies, offset by an unfavorable mix of products sold and additional costs driven by inflation of approximately $16 million.
Contract-Manufactured Products – Contract-Manufactured Products gross profit increased by $13.1 million, or 15.8%, in 2023, including a favorable foreign currency translation impact of $1.0 million. Contract-Manufactured Products gross profit margin increased by 0.1 margin points in 2023, due to sales price increases and a favorable mix of products sold, offset by inflationary pressures, primarily within compensation costs.
During 2022, we recorded $23.8 million in restructuring and related charges and $3.5 million in impairment charges related to our cost investme nts within Corporate and unallocated items.
During 2022, we recorded $23.8 million in restructuring and other charges, while during 2023 we recorded a benefit to restructuring and other charges of $2.8 million.
Contract-Manufactured Products – Contract-Manufactured Products net sales decreased by $34.3 million, or 6.7%, in 2022, including an unfavorable foreign currency translation impact of $24.0 million. Excluding foreign currency translation effects, net sales decreased by $10.3 million, or 2.0%, due to a decline in sales of components for diagnostic devices, offset by sales price increases.
Contract-Manufactured Products – Contract-Manufactured Products operating profit increased by $11.7 million, or 19.4%, in 2023, including a favorable foreign currency translation impact of $0.8 million, due to the factors described above, most notably an increase in sales of components associated with medical devices and diagnostic products.
The decrease was primarily due to lower annual incentive compensation and a higher allocation of functional spend to Cost of Goods and Services Sold, offset by an increase in professional fees and salaries and fringe benefits.
Corporate and unallocated items – Corporate SG&A costs increased by $5.0 million, or 6.0%, in 2023, primarily due to an increase in fees related to professional services and higher annual incentive compensation.
Removed
Impact of COVID-19 and other Macroeconomic Factors West has been actively monitoring the impact of the COVID-19 pandemic 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.
Added
Our Israel-based facilities continue to substantially operate as they had prior to the conflict in Israel and surrounding area. We continue to monitor the impact of the conflict in Israel and surrounding areas on our operations and those of our suppliers, the possible expansion of such conflict and potential geopolitical consequences, if any, on our business and operations.
Removed
Our production facilities 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. 28 Our capital and financial resources, including overall liquidity, remain strong.
Added
GAAP) $ 690.6 $ 119.9 $ 608.8 $ 8.08 During 2023, we recorded a tax benefit of $32.0 million associated with stock-based compensation.
Removed
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.
Added
The transaction closed during the second quarter of 2023.
Removed
During 2021 and 2020, the Company recorded a restructuring and severance related charge of $2.2 million and $7.0 million, respectively, to optimize certain organizational structure within the Company. Please refer to Note 16, Other Expense (Income ) , for further discussion of these items.
Added
(2) During 2023, the Company recorded a cost investment impairment charge of $4.3 million. During 2022, the Company recorded a cost investment impairment charge of $3.5 million.
Removed
During 2020, the company recorded $0.6 million of amortization expense within operating profit associated with an acquisition of an intangible asset during the second quarter of 2020. Additionally, the company recorded $3.1 million of amortization expense in association with an acquisition of increased ownership interest in Daikyo.
Added
(3) During 2023, the Company recorded a benefit to restructuring and other charges of $2.0 million, which represents the net impact of a $2.8 million benefit within other expense (income) for revised severance estimates in connection with its 2022 restructuring plan and an inventory write down of $0.8 million within cost of goods and services sold.
Removed
Excluding foreign currency translation effects, net sales increased by $228.1 million, or 9.8%.
Added
Excluding foreign currency translation effects and the impact related to the disposal of one of our plants of $11.5 million, net sales decreased by $20.1 million, or 0.8%, primarily due to a decline in COVID-related sales of approximately $320 million, offset by growth in our high-value components, primarily Westar ® , Daikyo ® and Envision ® , as well as growth in high-value devices, such as self-injection systems and administration systems, and sales price increases.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+1 added−0 removed8 unchanged
Biggest changeIn addition, we receive periodic fixed principal payments of USD in return for paying fixed principal payments of Yen. 41 A sensitivity analysis of changes in fair value of these contracts outstanding as of December 31, 2022, while not predictive in nature, indicated that a 10% decrease or increase in the foreign currency exchange rates from their level would increase or decrease the fair value of these contracts by $8.9 million or $3.7 million, respectively, the majority of which relates to our hedges of the movement between the Euro and United States Dollar contracts.
Biggest changeA sensitivity analysis of changes in fair value of these contracts outstanding as of December 31, 2023, while not predictive in nature, indicated that a 10% decrease or increase in the foreign currency exchange rates from their level would increase or decrease the fair value of these contracts by $7.0 million or $6.9 million, respectively, the majority of which relates to our hedges of the movement between the Euro and United States Dollar contracts.
We periodically use forward exchange contracts to hedge certain transactions or to manage month-end balance sheet exposures on cross-currency intercompany loans. 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.
We periodically use forward exchange contracts to hedge certain transactions or to manage month-end balance sheet exposures on cross-currency intercompany balances. 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.
All derivatives are recorded in our consolidated balance sheet at fair value. Foreign Currency Exchange Risk Sales outside of the U.S. accounted for 55.4% of our consolidated net sales in 2022. Virtually all of these sales and related operating costs are denominated in the currency of the local country and translated into USD for consolidated reporting purposes.
All derivatives are recorded in our consolidated balance sheet at fair value. Foreign Currency Exchange Risk Sales outside of the U.S. accounted for 58.0% of our consolidated net sales in 2023. Virtually all of these sales and related operating costs are denominated in the currency of the local country and translated into USD for consolidated reporting purposes.
From November 2017 through December 2022, we purchased several series of call options for a total of 867,500 barrels of crude oil to mitigate our exposure to such oil-based surcharges and protect operating cash flows with regards to a portion of our forecas ted elastomer purchases.
From November 2017 through December 2023 , we purchased several series of call options for a total of 995,426 barrels of crude oil to mitigate our exposure to such oil-based surcharges and protect operating cash flows with regards to a portion of our forecas ted elastomer purchases.
Under the cross-currency swap, we receive floating interest rate payments based on USD compounded SOFR plus a margin, in return for paying floating interest rate payments based on Japanese Yen (“Yen”) Tokyo Overnight Average Rate ("TONAR") plus a margin.
Under the cross-currency swap, we receive floating interest rate payments based on USD compounded SOFR plus a margin, in return for paying floating interest rate payments based on Japanese Yen (“Yen”) Tokyo Overnight Average Rate 42 ("TONAR") plus a margin. In addition, we receive periodic fixed principal payments of USD in return for paying fixed principal payments of Yen.
In December 2019, we entered into a five-year floating-to-floating forward-starting cross-currency swap (the “cross-currency swap”) for $90 million, which we designated as a hedge of our net investment in Daikyo. The notional amount of the cross-currency swap is ¥9.1 billion ($83.2 million) as of December 31, 2022.
In December 2019, we entered into a five-year floating-to-floating forward-starting cross-currency swap (the “cross-currency swap”) for $90 million, which we designated as a hedge of our net investment in Daikyo. The notional amount of the cross-currency swap is ¥8.9 billion ($81.0 million) as of December 31, 2023.
The following table summarizes our interest rate risk-sensitive instruments: ($ in millions) 2023 2024 2025 2026 2027 Thereafter Carrying Value Fair Value Current Debt: U.S. dollar denominated $2.2 $2.2 $2.2 Average interest rate - variable 5.56% Long-Term Debt: U.S. dollar denominated $53.0 $73.0 $126.0 $121.1 Average interest rate - fixed 3.82% 4.02% U.S. dollar denominated $81.0 $81.0 $81.0 Average interest rate - variable 5.56% A change of 1.0% in variable interest rates would decrease or increase annual interest expense by $0.8 million based on our outstanding debt as of December 31, 2022.
The following table summarizes our interest rate risk-sensitive instruments: ($ in millions) 2024 2025 2026 2027 2028 Thereafter Carrying Value Fair Value Current Debt: U.S. dollar denominated $81.0 $81.0 $81.0 Average interest rate - variable 6.32% U.S. dollar denominated $53.0 $53.0 $52.6 Average interest rate - variable 3.82% Long-Term Debt: U.S. dollar denominated $73.0 $73.0 $71.0 Average interest rate - fixed 4.02% A change of 1.0% in variable interest rates would decrease or increase annual interest expense by $0.9 million based on our outstanding debt as of December 31, 2023.
A sensitivity analysis of changes in brent crude oil prices indicated that a 10% decrease or increase in pricing would decrease or increase the fair value of our commodity call options by $0.5 million or $0.7 million, respectively, as of December 31, 2022. 42
A sensitivity analysis of changes in brent crude oil prices indicated that a 10% decrease or increase in pricing would decrease or increase the fair value of our commodity call options by $0.3 million or $0.6 million, respectively, as of December 31, 2023. 43
As of December 31, 2022, we had outstanding foreign currency contracts to purchase and sell certain pairs of currencies, as follows: (in millions) Sell Currency Purchase USD EUR USD 1.7 — 1.2 Yen 6,123.6 31.0 15.0 SGD 62.8 21.1 23.5 In November and December 2019, in conjunction with the repayment of the outstanding long-term borrowings under our Credit Facility denominated in Euro and Japanese Yen, we de-designated these borrowings as hedges of our net investments in certain European subsidiaries and Daikyo.
As of December 31, 2023, we had outstanding foreign currency contracts to purchase and sell certain pairs of currencies, as follows: (in millions) Sell Currency Purchase USD EUR EUR 19.8 21.6 — Yen 6,065.2 30.7 13.2 SGD 41.6 13.9 15.8 In November and December 2019, in conjunction with the repayment of the outstanding long-term borrowings under our Credit Facility denominated in Euro and Japanese Yen, we de-designated these borrowings as hedges of our net investments in certain European subsidiaries and Daikyo.
During 2022, the gain recorded in other expense (income) related to these options was $1.5 million. Dur ing 2021, the gain recorded in other expense (income) related to these options was $1.7 million.
During 2023, the loss recorded in other expense (income) related to these options was $1.3 million. Dur ing 2022, the gain recorded in other expense (income) related to these options was $1.5 million.
As of December 31, 2022, we had outstanding contracts to purchase 258,597 barrels of crude oil from December 2022 to September 2024, at a weighted-average strike price of $108.28 per barrel.
As of December 31, 2023, we had outstanding contracts to purchase 206,316 barrels of crude oil from December 2023 to June 2025, at a weighted-average strike price of $88.78 per barrel.
As of December 31, 2022 and December 31, 2021, the total amount of these forward exchange contracts was Singapore Dollar ("SGD") 601.5 million and $13.4 million.
As of December 31, 2023, the total amount of these forward exchange contracts was Euro ("EUR") 278.6 million and SGD 94.0 million.
Added
As of both December 31, 2023 and December 31, 2022, the total amount of these forward exchange contracts was Singapore Dollar ("SGD") 601.5 million and $13.4 million. We have also entered into forward exchange contracts, designated as fair value hedges, to manage our exposure to fluctuating foreign exchange rates on cross-currency intercompany demand notes which were executed in June 2023.

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