UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~June 30, 2018~~March 31, 2019



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

For the transition period from to

Commission File Number 1-8036

WEST PHARMACEUTICAL SERVICES, INC.

(Exact name of registrant as specified in its charter)



Pennsylvania	23-1210010
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

530 Herman O. West Drive, Exton, PA	19341-0645
(Address of principal executive offices)	(Zip Code)

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

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ No o

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



Large accelerated filer	þ		Accelerated filer	o
Non-accelerated filer	o	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	o
			Emerging growth company	o

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

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

Yes o No þ

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



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

As of ~~June 30, 2018,~~March 31, 2019, there were ~~73,538,278~~73,483,687 shares of the ~~Registrant’s~~registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS



		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)
	Condensed Consolidated Statements of Income for the Three ~~and Six~~ Months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	3
	Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Six~~ Months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	4
	Condensed Consolidated Balance Sheets at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018	5
	~~Condensed Consolidated Statement of Equity for the Six Months ended June 30, 2018~~	6
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	76
	Notes to Condensed Consolidated Financial Statements	87
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3735
ITEM 4.	CONTROLS AND PROCEDURES	3735

PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	3836
ITEM 1A.	RISK FACTORS	3836
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3836
ITEM 5.	OTHER INFORMATION	37
ITEM 6.	EXHIBITS	3837

SIGNATURE		3938

EXHIBIT INDEX		F-1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

(in millions, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Net sales	$	447.5		$	397.6		$	863.2		$	785.3		$	443.5		$	415.7
Cost of goods and services sold	305.3			272.6			586.6			526.1			296.7			281.3
Gross profit	142.2			125.0			276.6			259.2			146.8			134.4
Research and development	10.8			10.0			20.4			20.3			9.8			9.6
Selling, general and administrative expenses	70.0			61.3			138.3			123.8			68.6			68.3
Other expense (Note 13)	1.1			11.7			4.2			12.6
Other (income) expense (Note 15)													(2.3		)	3.1
Operating profit	60.3			42.0			113.7			102.5			70.7			53.4
Interest expense	2.2			2.2			4.1			4.3			2.3			1.9
Interest income	(0.3		)	(0.3		)	(0.9		)	(0.6		)	(0.9		)	(0.6		)
Other nonoperating income	(1.7		)	(0.6		)	(3.3		)	(1.4		)	(0.6		)	(1.6		)
Income before income taxes	60.1			40.7			113.8			100.2			69.9			53.7
Income tax expense	6.0			2.9			18.5			5.1			16.1			12.5
Equity in net income of affiliated companies	(2.0		)	(1.0		)	(4.4		)	(4.6		)	(1.6		)	(2.4		)
Net income	$	56.1		$	38.8		$	99.7		$	99.7		$	55.4		$	43.6

Net income per share:
Basic	$	0.76		$	0.53		$	1.35		$	1.35		$	0.75		$	0.59
Diluted	$	0.75		$	0.51		$	1.33		$	1.32		$	0.73		$	0.58

Weighted average shares outstanding:
Basic	73.6			73.9			73.8			73.6			74.1			73.9
Diluted	75.0			75.8			75.2			75.7			75.3			75.5

Dividends declared per share	$	0.14		$	0.13		$	0.28		$	0.26

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

(in millions)

Three Months Ended
June 30, Six Months Ended
June 30,
2018 2017 2018 2017
Net income $ 56.1
$ 38.8
$ 99.7
$ 99.7
Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments (49.6 ) 36.3
(29.6 ) 42.2
Defined benefit pension and other postretirement plan adjustments, net of tax of $0.4, $(0.3), $0.1 and $(0.4), respectively 1.0
(0.8 ) 0.3
(0.9 )
Net loss on investment securities, net of tax of $(3.0) and $(2.9), respectively —
(5.4 ) —
(5.1 )
Net gain (loss) on derivatives, net of tax of $0.3, $(1.1), $1.1 and $(0.3), respectively 0.7
(2.9 ) 2.9
(1.2 )
Other comprehensive (loss) income, net of tax (47.9 ) 27.2
(26.4 ) 35.0
Comprehensive income $ 8.2
$ 66.0
$ 73.3
$ 134.7



	Three Months Ended March 31,
	2019			2018
Net income	$	55.4		$	43.6
Other comprehensive income, net of tax:
Foreign currency translation adjustments	4.4			20.0
Defined benefit pension and other postretirement plan adjustments, net of tax of $0 and $(0.3)	(0.3		)	(0.7		)
Net (loss) gain on derivatives, net of tax of $(1.6) and $0.8	(3.3		)	2.2
Other comprehensive income, net of tax	0.8			21.5
Comprehensive income	$	56.2		$	65.1

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

(in millions, except per share data)

June 30,
2018 December 31,
2017
ASSETS
Current assets:
Cash and cash equivalents $ 225.5
$ 235.9
Accounts receivable, net 296.7
253.2
Inventories 208.2
215.2
Other current assets 36.5
39.2
Total current assets 766.9
743.5
Property, plant and equipment 1,737.0
1,745.8
Less: accumulated depreciation and amortization 910.3
890.8
Property, plant and equipment, net 826.7
855.0
Investments in affiliated companies 91.8
85.8
Goodwill 106.6
107.7
Deferred income taxes 38.5
25.7
Intangible assets, net 21.7
21.7
Other noncurrent assets 21.5
23.4
Total Assets $ 1,873.7
$ 1,862.8

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable $ 126.2
$ 138.1
Pension and other postretirement benefits 2.2
2.2
Accrued salaries, wages and benefits 55.1
56.2
Income taxes payable 17.9
6.0
Other current liabilities 86.2
77.0
Total current liabilities 287.6
279.5
Long-term debt 196.4
197.0
Deferred income taxes 11.8
10.4
Pension and other postretirement benefits 53.6
53.4
Other long-term liabilities 42.4
42.6
Total Liabilities 591.8
582.9

Commitments and contingencies (Note 15)

Equity:
Preferred stock, 3.0 million shares authorized; 0 shares issued and outstanding —
—
Common stock, par value $0.25 per share; 100.0 million shares authorized; shares issued: 75.3 million and 75.2 million; shares outstanding: 73.5 million and 73.9 million 18.8
18.8
Capital in excess of par value 304.7
309.3
Retained earnings 1,258.0
1,178.2
Accumulated other comprehensive loss (143.7 ) (117.3 )
Treasury stock, at cost (1.8 million and 1.3 million shares) (155.9 ) (109.1 )
Total Equity 1,281.9
1,279.9
Total Liabilities and Equity $ 1,873.7
$ 1,862.8

~~See accompanying notes to condensed consolidated financial statements.~~

~~CONDENSED CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED)~~

~~West Pharmaceutical Services, Inc. and Subsidiaries~~

~~(in millions)~~

Common Shares Issued Common Stock Capital in Excess of Par Value Number of Treasury Shares Treasury Stock Retained earnings Accumulated other comprehensive (loss) income Total

Balance, December 31, 2017 75.2
$ 18.8
$ 309.3
1.3
$ (109.1 ) $ 1,178.2
$ (117.3 ) $ 1,279.9
Effect of modified retrospective application of a new accounting standard (see Note 3) —
—
—
—
—
11.4
—
11.4
Net income —
—
—
—
—
99.7
—
99.7
Stock-based compensation —
—
2.2
—
9.3
—
—
11.5
Shares issued under stock plans 0.1
—
(7.0 ) (0.3 ) 19.3
—
—
12.3
Shares purchased under share repurchase program —
—
—
0.8
(70.8 ) —
—
(70.8 )
Shares repurchased for employee tax withholdings —
—
0.2
—
(4.6 ) —
—
(4.4 )
Dividends declared —
—
—
—
—
(31.3 ) —
(31.3 )
Other comprehensive income, net of tax —
—
—
—
—
—
(26.4 ) (26.4 )
Balance, June 30, 2018 75.3
$ 18.8
$ 304.7
1.8
$ (155.9 ) $ 1,258.0
$ (143.7 ) $ 1,281.9



	March 31, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	265.5		$	337.4
Accounts receivable, net	318.2			288.2
Inventories	226.1			214.5
Other current assets	57.8			54.3
Total current assets	867.6			894.4
Property, plant and equipment	1,759.9			1,752.7
Less: accumulated depreciation and amortization	945.2			930.7
Property, plant and equipment, net	814.7			822.0
Operating lease right-of-use assets	75.2			—
Investments in affiliated companies	94.9			91.2
Goodwill	105.2			105.8
Deferred income taxes	32.7			24.7
Intangible assets, net	19.5			20.3
Other noncurrent assets	26.4			20.5
Total Assets	$	2,036.2		$	1,978.9

LIABILITIES AND EQUITY
Current liabilities:
Notes payable and other current debt	$	—		$	0.1
Accounts payable	137.7			130.4
Pension and other postretirement benefits	2.2			2.3
Accrued salaries, wages and benefits	53.5			64.5
Income taxes payable	17.3			9.8
Operating lease liabilities	10.2			—
Other current liabilities	80.2			76.6
Total current liabilities	301.1			283.7
Long-term debt	195.5			196.0
Deferred income taxes	14.3			13.1
Pension and other postretirement benefits	54.3			56.2
Operating lease liabilities	67.4			—
Other long-term liabilities	34.1			33.6
Total Liabilities	666.7			582.6

Commitments and contingencies (Note 17)

Equity:
Preferred stock, 3.0 million shares authorized; 0 shares issued and outstanding	—			—
Common stock, par value $0.25 per share; 100.0 million shares authorized; shares issued: 75.3 million and 75.3 million; shares outstanding: 73.5 million and 74.1 million	18.8			18.8
Capital in excess of par value	278.5			282.0
Retained earnings	1,398.2			1,353.4
Accumulated other comprehensive loss	(153.4		)	(154.2		)
Treasury stock, at cost (1.8 million and 1.2 million shares)	(172.6		)	(103.7		)
Total Equity	1,369.5			1,396.3
Total Liabilities and Equity	$	2,036.2		$	1,978.9

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

West Pharmaceutical Services, Inc. and Subsidiaries

(in millions)


	Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2019			2018
Cash flows from operating activities:
Net income	$	99.7		$	99.7		$	55.4		$	43.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	50.6			45.4			24.9			25.7
Amortization	1.3			1.4			0.6			0.7
Stock-based compensation	9.4			9.0			6.2			3.4
Non-cash restructuring charges	0.4			—			0.3			0.1
Venezuela deconsolidation	—			11.1
Contingent consideration payments in excess of acquisition-date liability	(0.5		)	—			(0.2		)	(0.2		)
Other non-cash items, net	(3.4		)	(3.6		)	(0.8		)	(2.7		)
Changes in assets and liabilities	(30.5		)	(57.0		)	(38.8		)	(25.6		)
Net cash provided by operating activities	127.0			106.0			47.6			45.0

Cash flows from investing activities:
Capital expenditures	(48.2		)	(67.0		)	(28.8		)	(28.0		)
Cash related to deconsolidated Venezuelan subsidiary	—			(6.0		)
Other, net	2.5			2.8			0.1			(0.7		)
Net cash used in investing activities	(45.7		)	(70.2		)	(28.7		)	(28.7		)

Cash flows from financing activities:
Repayments of long-term debt	—			(1.2		)
Borrowings under revolving credit agreements							28.0			—
Repayments under revolving credit agreements							(28.0		)	—
Debt issuance costs							(0.8		)	—
Dividend payments	(20.7		)	(19.1		)	(11.1		)	(10.4		)
Contingent consideration payments up to amount of acquisition-date liability	—			(0.2		)
Proceeds from exercise of stock options and stock appreciation rights	10.9			29.5
Proceeds from stock-based compensation awards							3.3			0.3
Employee stock purchase plan contributions	2.4			2.2			1.2			1.1
Shares purchased under share repurchase programs	(70.8		)	(26.9		)	(83.1		)	(47.9		)
Shares repurchased for employee tax withholdings	(4.4		)	(3.8		)
Net cash used in financing activities	(82.6		)	(19.5		)	(90.5		)	(56.9		)
Effect of exchange rates on cash	(9.1		)	7.3			(0.3		)	4.5
Net (decrease) increase in cash and cash equivalents	(10.4		)	23.6
Net decrease in cash and cash equivalents							(71.9		)	(36.1		)

Cash, including cash equivalents at beginning of period	235.9			203.0			337.4			235.9
Cash, including cash equivalents at end of period	$	225.5		$	226.6		$	265.5		$	199.8

See accompanying notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation: The condensed consolidated financial statements included in this report are unaudited and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting and U.S. Securities and Exchange Commission (“SEC”) regulations. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, these financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, cash flows and the change in equity for the periods presented. The condensed consolidated financial statements for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 should be read in conjunction with the consolidated financial statements and notes thereto of West Pharmaceutical Services, Inc. and its majority-owned subsidiaries (which may be referred to as “West”, the “Company”, “we”, “us” or “our”) appearing in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (the ~~“2017~~“2018 Annual Report”). The results of operations for any interim period are not necessarily indicative of results for the full year.

As of April 1, 2017, our consolidated financial statements exclude the results of our Venezuelan subsidiary. Please refer to Note ~~13,~~15, Other Expense, to the consolidated financial statements in our 2018 Annual Report for further discussion.

Note 2: New Accounting Standards

Recently Adopted Standards

In ~~March~~August 2018, the SEC adopted a final release which would eliminate or modify certain disclosure requirements that are redundant, outdated, or duplicative of U.S. GAAP or other regulatory requirements. Among other changes, the amendments provide that disclosure requirements related to the analysis of shareholders’ equity are expanded for interim purposes. An analysis of the changes in each caption of shareholders’ equity presented in the balance sheet must be provided in a note or separate statement, as well as the amount of dividends per share for each class of shares. We provided this disclosure beginning in the first quarter of 2019. Please refer to Note 12, Shareholders’ Equity.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued guidance which updates the income tax accounting in U.S. GAAP to reflect the SEC’s interpretive guidance released on December 22, 2017, when the Tax Cuts and Jobs Act (the “2017 Tax Act”) was signed into law. This guidance was effective immediately upon issuance. Please refer to Note 15, ~~Income Taxes, to the consolidated financial statements in our 2017 Annual Report for additional information.~~

In May 2017, the FASB issued guidance which amends the scope of modification accounting for share-based payment arrangements. The guidance focuses on changes to the terms or conditions of share-based payment awards that would require the application of modification accounting and specifies that an entity would not apply modification accounting if its fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We adopted this guidance as of January 1, 2018, on a prospective basis. The adoption did not have a material impact on our financial statements.

In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit cost (net benefit cost). The guidance requires the bifurcation of net benefit cost. The service cost component will be presented with other employee compensation costs in operating income (or capitalized in assets) and the other components will be reported separately outside of operations, and will not be eligible for capitalization. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We adopted this guidance as of January 1, 2018, on a retrospective basis. As a result of this adoption, we reclassified net benefit cost components other than service cost from operating income to outside of operations. Net periodic benefit cost for the three months ended June 30, 2018 and 2017 was $1.0 million and $2.0 million, respectively, of which $2.7 million and $2.6 million, respectively, related to service cost and $1.7 million and $0.6 million, respectively, related to net benefit cost components other than service cost. Net periodic benefit cost for the six months ended June 30, 2018 and 2017 was $2.2 million and $3.9 million, respectively, of which $5.5 million and $5.3 million, respectively, related to service cost and $3.3 million and $1.4 million, respectively, related to net benefit cost components other than service cost. The adoption of this guidance had no impact on net income.

In November 2016, the FASB issued guidance on the classification and presentation of restricted cash in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We adopted this guidance as of January 1, 2018, on a retrospective basis. As of June 30, 2018 and December 31, 2017, we had no restricted cash.

In August 2016, the FASB issued guidance to reduce the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. We adopted this guidance as of January 1, 2018, on a retrospective basis. The adoption did not have a material impact on our financial statements.

In January 2016, the FASB issued guidance that addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We adopted this guidance as of January 1, 2018, on a prospective basis. The adoption did not have a material impact on our financial statements.

In May 2014, the FASB issued guidance on the accounting for revenue from contracts with customers, Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), that supersedes most existing revenue recognition guidance, including industry-specific guidance. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, ASC 606 requires enhanced disclosures regarding the nature, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The FASB subsequently issued additional clarifying standards to address issues arising from implementation of ASC 606. We adopted ASC 606 as of January 1, 2018, on a modified retrospective basis. Please refer to Note 3, ~~Revenue, for additional information.~~

~~Standards Issued Not Yet Adopted~~

~~In June 2018, the FASB~~ issued guidance which expands the scope of accounting for share-based payment arrangements to include share-based payment transactions for acquiring goods and services from nonemployees. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption iswas permitted. We ~~are currently evaluating our adoption timing and the impact that~~adopted this guidance ~~may~~as of January 1, 2019, on a prospective basis. The adoption did not have a material impact on our financial statements.

In February 2018, the FASB issued guidance to address a specific consequence of the ~~2017~~ Tax ~~Act~~Cuts and Jobs Acts (the “2017 Tax Act”) by allowing a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the 2017 Tax Act’s reduction of the U.S. federal corporate income tax rate. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption iswas permitted. We ~~are currently evaluating our adoption timing and the impact that~~adopted this guidance ~~may have~~as of January 1, 2019, on ~~our financial statements.~~a prospective basis, but elected to not reclassify from accumulated other comprehensive income (loss) to retained earnings the stranded tax effects resulting from the 2017 Tax Act’s reduction of the U.S. federal corporate income tax rate.

In August 2017, the FASB issued guidance which expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption iswas permitted. We ~~are currently evaluating our adoption timing and the impact that~~adopted this guidance ~~will~~as of January 1, 2019, on a prospective basis. The adoption did not have a material impact on our financial statements.

In February 2016, the FASB issued guidance on the accounting for ~~leases.~~leases, Accounting Standards Codification (“ASC”) Topic 842 (“ASC 842”). This guidance requires lessees to recognize lease assets and lease liabilities on the balance sheet and to expand disclosures about leasing arrangements, both qualitative and quantitative. In terms of transition, the guidance requires adoption based upon a modified retrospective approach. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption was permitted. We adopted this guidance as of January 1, 2019, using the modified retrospective approach that allows companies to apply ASC 842 as of the effective date and on a prospective basis. Please refer to Note 6, Leases, for additional information.

Standards Issued Not Yet Adopted

In August 2018, the FASB issued guidance to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by this update. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. We are currently evaluating our adoption timing and the impact that this guidance ~~will~~may have on our financial statements. As

In August 2018, the FASB issued guidance which modifies the disclosure requirements for defined benefit pension plans and other postretirement plans. The guidance removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of ~~June 30,~~disclosures, and adds disclosure requirements identified as relevant. This guidance is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. We are currently evaluating our adoption timing and the impact that this guidance may have on our financial statements.

In August 2018, the FASB issued guidance which modifies the disclosure requirements on fair value measurements by removing, modifying, or adding certain disclosures. This guidance is effective for fiscal years, and interim periods within those years, beginning after December ~~31, 2017, future minimum rental payments under non-cancelable operating leases were $71.3 million~~15, 2019. Early adoption is permitted. We are currently evaluating our adoption timing and ~~$79.1 million, respectively.~~the impact that this guidance may have on our financial statements.

Note 3: Revenue

~~Adoption of ASC 606~~

~~On January 1, 2018, we adopted ASC 606, on a modified retrospective basis, applied to those contracts which were not completed as of January 1, 2018. As a result~~The following table presents the approximate percentage of our ~~adoption, we recorded a cumulative-effect adjustment~~net sales by market group:



	Three Months Ended March 31,
	2019		2018
Biologics	26	%	21	%
Generics	20	%	21	%
Pharma	31	%	36	%
Contract-Manufactured Products	23	%	22	%
	100	%	100	%

The following table presents the approximate percentage of ~~$11.4 million within retained earnings~~our net sales by product category:



	Three Months Ended March 31,
	2019		2018
High-Value Components	43	%	41	%
Standard Packaging	30	%	34	%
Delivery Devices	4	%	3	%
Contract-Manufactured Products	23	%	22	%
	100	%	100	%

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



	Three Months Ended March 31,
	2019		2018
Americas	46	%	45	%
Europe, Middle East, Africa	47	%	47	%
Asia Pacific	7	%	8	%
	100	%	100	%

Contract Assets and Liabilities

The following table summarizes our contract assets and liabilities, excluding contract assets included in our condensed consolidated balance sheet as of January 1, 2018, to reflect a change in the timing of revenue recognition under ASC 606, from point in time to over time, on our Contract-Manufactured Products product sales, certain Proprietary Products product sales, development and tooling agreements, as well as an acceleration on a portion of the remaining unearned income from a nonrefundable customer payment.accounts receivable, net:

Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for those periods.



	($ in millions)
Contract assets, December 31, 2018	$	9.1
Contract assets, March 31, 2019	11.9
Change in contract assets - increase (decrease)	$	2.8

Deferred income, December 31, 2018	$	(33.4	)
Deferred income, March 31, 2019	(36.5		)
Change in deferred income - decrease (increase)	$	(3.1	)

The ~~cumulative effect of the changes made to our condensed consolidated January 1, 2018 balance sheet for the adoption of ASC 606 was as follows:~~

($ in millions) Balance at December 31, 2017 Adjustments Due to ASC 606 Balance at January 1, 2018
Assets:
Accounts receivable, net $ 253.2
$ 25.0
$ 278.2
Inventories 215.2
(20.8 ) 194.4
Other current assets 39.2
(8.4 ) 30.8

Liabilities and Equity:
Other current liabilities $ 77.0
$ (13.7 ) $ 63.3
Deferred income taxes 10.4
3.0
13.4
Other long-term liabilities 42.6
(4.9 ) 37.7
Retained earnings 1,178.2
11.4
1,189.6

~~The impact of the adoption of ASC 606 on our condensed consolidated~~increase in deferred income ~~statement for~~during the three months ended ~~June 30, 2018~~March 31, 2019 was ~~as follows:~~

($ in millions) As Reported Balances without Adoption of ASC 606 Effects of Change (Lower)/Higher
Net sales $ 447.5
$ 452.6
$ (5.1 )
Cost of goods and services sold 305.3
305.9
(0.6 )
Research and development 10.8
10.9
(0.1 )
Other expense 1.1
0.9
0.2
Income tax expense 6.0
6.8
(0.8 )
Net income $ 56.1
$ 59.9
$ (3.8 )

~~The impact~~primarily due to additional cash payments of $30.6 million received in advance of satisfying future performance obligations, partially offset by the recognition of revenue of $25.8 million, including $11.1 million of revenue that was included in deferred income at the beginning of the ~~adoption of ASC 606 on our condensed consolidated income statement for the six months ended June 30, 2018 was as follows:~~

($ in millions) As Reported Balances without Adoption of ASC 606 Effects of Change (Lower)/Higher
Net sales $ 863.2
$ 870.9
$ (7.7 )
Cost of goods and services sold 586.6
588.6
(2.0 )
Research and development 20.4
20.5
(0.1 )
Other expense 4.2
3.9
0.3
Income tax expense 18.5
19.7
(1.2 )
Net income $ 99.7
$ 104.4
$ (4.7 )

~~The impact of the adoption of ASC 606 on our condensed consolidated balance sheet as of June 30, 2018 was as follows:~~

($ in millions) As Reported Balances without Adoption of ASC 606 Effects of Change Higher/(Lower)
Assets:
Accounts receivable, net $ 296.7
$ 276.8
$ 19.9
Inventories 208.2
225.0
(16.8 )
Other current assets 36.5
46.1
(9.6 )

Liabilities and Equity:
Other current liabilities $ 86.2
$ 96.5
$ (10.3 )
Deferred income taxes 11.8
10.0
1.8
Other long-term liabilities 42.4
47.1
(4.7 )
Retained earnings 1,258.0
1,251.3
6.7

~~Revenue Recognition~~

~~Our revenue results from the sale of goods or services~~year, and ~~reflects the consideration to which we expect to be entitled to~~$1.7 million in exchange for those goods or services. We record revenue based on a five-step model, in accordance with ASC 606. Following the identification of a contract with a customer, we identify the performance obligations (goods or services) in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize the revenue when (or as) we satisfy the performance obligations by transferring the promised goods or services to our customers. A good or service is transferred when (or as) the customer obtains control of that good or service.

We recognize the majority of our revenue, primarily relating to Proprietary Products product sales, at a point in time, following the transfer of control of our products to our customers, which typically occurs upon shipment or delivery, depending on the terms of the related agreements.

We recognize revenue relating to our Contract-Manufactured Products product sales and certain Proprietary Products product sales over time, as our performance does not create an asset with an alternative use to us and we have an enforceable right to payment for performance completed to date.

~~We recognize revenue relating to our development and tooling agreements over time, as our performance creates or enhances an asset that the customer controls as the asset is created or enhanced.~~

For revenue recognized over time, revenue is recognized by applying a method of measuring progress toward complete satisfaction of the related performance obligation. When selecting the method for measuring progress, we select the method that best depicts the transfer of control of goods or services promised to our customers.

Revenue for our Contract-Manufactured Products product sales, certain Proprietary Products product sales, and our development and tooling agreements is recorded under an input method, which recognizes revenue on the basis of our efforts or inputs to the satisfaction of a performance obligation (for example, resources consumed, labor hours expended, costs incurred, time elapsed, or machine hours used) relative to the total expected inputs to the satisfaction of that performance obligation. The input method that we use is based on costs incurred.other adjustments.

The majority of the performance obligations within our contracts are satisfied within one year or less. Performance obligations satisfied beyond one year include those relating to a nonrefundable customer payment of $20.0 million received in June 2013 in return for the exclusive use of the SmartDose^® technology platform within a specific therapeutic area. As of ~~June 30, 2018,~~March 31, 2019, there was ~~$6.9~~$6.3 million of unearned income related to this payment, of which $0.9 million was included in other current liabilities and ~~$6.0~~$5.4 million was included in other long-term liabilities. The unearned income is being recognized as income on a straight-line basis over the remaining term of the agreement. The agreement does not include a future minimum purchase commitment from the customer.

~~Our revenue can be generated~~

Supply Chain Financing

We have entered into supply chain financing agreements with certain banks, pursuant to which we offer for sale certain accounts receivable to such banks from contracts with multiple performance obligations. When a sales agreement involves multiple performance obligations, each obligation is separately identified and the transaction price is allocated based on the amount of consideration we expecttime to ~~be entitled to in exchange for transferring the promised good or service~~time, subject to the ~~customer.~~

~~Some customers receive pricing rebates upon attaining established sales volumes. We record rebate costs when sales occur based~~terms of the applicable agreements. These transactions result in a reduction in accounts receivable, as the agreements transfer effective control over, and credit risk related to, the receivables to the banks. These agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold. As of March 31, 2019, we derecognized $1.8 million of accounts receivable under these agreements. Discount fees related to the sale of such accounts receivable on our ~~assessment~~condensed consolidated income statements for the three months ended March 31, 2019 were not material.

Voluntary Recall

On January 24, 2019, we issued a voluntary recall of ~~the likelihood that the required volumes will be attained. We also maintain~~our Vial2Bag^® product line due to reports of potential unpredictable or variable dosing under certain conditions. Our 2018 results included an ~~allowance~~$11.3 million provision for product returns, recorded as ~~we believe that we are able to reasonably estimate the amount~~a reduction of ~~returns based on our substantial historical experience.~~

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

Three Months Ended
June 30, Six Months Ended
June 30,
2018
2017⁽¹⁾
2018
2017⁽¹⁾
Biologics 21 % 23 % 22 % 23 %
Generics 21 % 20 % 21 % 20 %
Pharma 35 % 36 % 35 % 37 %
Contract-Manufactured Products 23 % 21 % 22 % 20 %
100 % 100 % 100 % 100 %
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method.

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

Three Months Ended
June 30, Six Months Ended
June 30,
2018
2017⁽¹⁾
2018
2017⁽¹⁾
High-Value Components 43 % 41 % 42 % 42 %
Standard Packaging 31 % 34 % 32 % 34 %
Delivery Devices 3 % 4 % 4 % 4 %
Contract-Manufactured Products 23 % 21 % 22 % 20 %
100 % 100 % 100 % 100 %
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method.

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

Three Months Ended
June 30, Six Months Ended
June 30,
2018
2017⁽¹⁾
2018
2017⁽¹⁾
Americas 48 % 52 % 47 % 52 %
Europe, Middle East, Africa 44 % 41 % 45 % 41 %
Asia Pacific 8 % 7 % 8 % 7 %
100 % 100 % 100 % 100 %
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method.

~~Contract Assets and Liabilities~~

Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations, we record a contract asset. Contract assets are recorded on the condensed consolidated balance sheet in accounts receivable, net, and other assets (current and noncurrent portions, respectively). Contract assets included in accounts receivable, net, relate to the unbilled amounts of our product sales for which we have recognized revenue over time. Contract assets included in other assets represent the remaining performance obligations of our development and tooling agreements. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, we record a contract liability. Contract liabilities are recorded on the condensed consolidated balance sheet in other liabilities (current and noncurrent portions, respectively) and represent cash payments received in advance of our performance.

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

($ in millions)
Contract assets, December 31, 2017 $ 7.5
Contract assets, June 30, 2018 6.0
Change in contract assets - (decrease) increase $ (1.5 )

Deferred income, December 31, 2017 $ (33.6 )
Deferred income, June 30, 2018 (24.2 )
Change in deferred income - decrease (increase) $ 9.4

The decrease in deferred income during the six months ended June 30, 2018 was primarily due to the recognition of revenue of $48.4 million, including $25.4 million of revenue that was included in deferred income at the beginning of the year, partially offset by ~~additional cash payments~~a reduction in cost of ~~$35.3 million received in advance~~goods sold reflecting our inventory balance for these devices at December 31, 2018. During the three months ended March 31, 2019, following the completion of ~~satisfying future performance obligations along with $3.7 million in other adjustments.~~

~~Practical Expedients~~certain tests and ~~Exemptions~~

~~We have elected to disregard the effects of a significant financing component, as we expect, at the inception of our contracts, that the period between when we transfer a promised good or service~~studies related to the ~~customer~~voluntary recall, we recorded a $4.5 million provision for potential inventory returns from our customers and ~~when~~related in-house inventory, partially offset by a reduction in our provision for product returns. We continue to work to get the ~~customer pays for that good or service will be one year or less.~~

~~In addition, we have elected to omit~~products back on the ~~disclosure of the majority of our remaining performance obligations, which are satisfied within one year or less.~~market.

Note 4: Net Income Per Share

The following table reconciles the shares used in the calculation of basic net income per share to those used for diluted net income per share:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
(in millions)	2018		2017		2018		2017		2019		2018
Net income	$	56.1	$	38.8	$	99.7	$	99.7	$	55.4	$	43.6
Weighted average common shares outstanding	73.6		73.9		73.8		73.6		74.1		73.9
Dilutive effect of equity awards, based on the treasury stock method	1.4		1.9		1.4		2.1		1.2		1.6
Weighted average shares assuming dilution	75.0		75.8		75.2		75.7		75.3		75.5

During the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ there were ~~0.9~~0.6 million and ~~0.5~~0.7 million shares, respectively, from stock-based compensation plans not included in the computation of diluted net income per share because their impact was antidilutive. ~~There were~~ ~~0.8 million~~ ~~and 0.3 million antidilutive shares outstanding during the six months ended June 30, 2018 and 2017, respectively.~~

In February ~~2018,~~2019, we announced a share repurchase program for calendar-year ~~2018~~2019 authorizing the repurchase of up to 800,000 shares of our common stock from time to time on the open market or in privately-negotiated transactions as permitted under the Securities Exchange Act of 1934 Rule 10b-18. The number of shares ~~to be~~ repurchased and the timing of such transactions ~~will depend~~depended on a variety of factors, including market conditions. During the three months ended ~~June 30, 2018, we purchased 260,000 shares of our common stock under the program at a cost of $22.9 million, or an average price of $88.03 per share. During the six months ended June 30, 2018,~~March 31, 2019, we purchased 800,000 shares of our common stock under the now-completed program at a cost of ~~$70.8~~$83.1 million, or an average price of ~~$88.51~~$103.89 per share.

Note 5: Inventories

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


($ in millions)	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Raw materials	$	90.2	$	88.6	$	100.1	$	90.4
Work in process	39.0		31.8		39.0		42.2
Finished goods	79.0		94.8		87.0		81.9
	$	208.2	$	215.2	$	226.1	$	214.5

Note 6: Leases

Adoption of ASC 842

On January 1, 2019, we adopted ASC 842, using the modified retrospective approach that allows companies to apply ASC 842 as of the effective date and on a prospective basis. As a result, we were not required to adjust our comparative period financial information for effects of ASC 842 or present the new required lease disclosures for periods prior to the date of adoption. As of March 31, 2019, we had operating leases primarily related to land, buildings, and machinery and equipment, with lease terms through 2047. Certain of our operating leases include options to extend the lease term for up to five years, and certain of our operating leases include options to terminate the leases within one year. We had no finance leases as of March 31, 2019.

As a result of our adoption of ASC 842, we recorded operating lease right-of-use assets of $71.0 million and operating lease liabilities of $73.1 million for operating leases where we are the lessee in our condensed consolidated balance sheet as of January 1, 2019. The operating lease right-of-use assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. The operating lease right-of-use assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The operating lease liabilities are initially measured at the present value of the unpaid lease payments at the lease commencement date.

Judgments used in applying ASC 842 include determining: i) whether a contract is, or contains, a lease; ii) the discount rate to be used to discount the unpaid lease payments to present value; iii) the lease term; and iv) the lease payments. We determine if a contract is, or contains, a lease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The definition of a lease embodies two conditions: 1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property, plant, and equipment); and 2) the customer has the right to control the use of the identified asset. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As all of our operating leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our incremental borrowing rate for a lease is the rate of interest we would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The lease term for all of our operating leases includes the noncancellable period of the lease plus any additional periods covered by either a lessee option to extend (or not to terminate) the lease that the lessee is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Lease payments included in the measurement of the operating lease right-of-use assets and lease liabilities are comprised of fixed payments (including in-substance fixed payments), variable payments

that depend on an index or rate, and the exercise price of a lessee option to purchase the underlying asset if the lessee is reasonably certain to exercise.

The components of lease expense were as follows:



($ in millions)	Three Months Ended March 31, 2019
Operating lease cost	$	3.2
Short-term lease cost	0.2
Variable lease cost	0.6
Total lease cost	$	4.0

Lease expense for the three months ended March 31, 2018 was $3.7 million.

Supplemental information related to leases was as follows:



($ in millions)	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3.1

Right-of-use assets obtained in exchange for new operating lease liabilities	6.8

As of March 31, 2019, the weighted average remaining lease term for operating leases was 12.1 years, and the weighted average discount rate was 3.74%.

Maturities of lease liabilities as of March 31, 2019 were as follows:



($ in millions)	Operating
Year	Leases
2019 (remaining nine months)	$	9.6
2020	11.5
2021	9.8
2022	8.1
2023	7.6
Thereafter	49.0
	95.6
Less: imputed lease interest	(18.0		)
Total lease liabilities	$	77.6

Maturities of future minimum rental payments under non-cancelable operating leases as of December 31, 2018 were as follows:



($ in millions)	Operating
Year	Leases
2019	$	13.0
2020	10.5
2021	7.8
2022	6.9
2023	5.5
Thereafter	37.8
Total	$	81.5

Practical Expedients and Exemptions

We have elected to adopt the leasing package of practical expedients, which allow us to not retroactively reassess: i) any expired or existing contracts containing leases under the new definition of a lease; ii) the lease classification for any expired or existing leases; and iii) initial direct costs for any expired or existing leases. We have also elected to adopt practical expedients around land easements, the combination of lease and non-lease components, and the portfolio approach relating to discount rates. These practical expedients were applied consistently to all leases.

We have elected not to recognize operating lease right-of-use assets and lease liabilities for all short-term leases (leases with an initial lease term of 12 months or less). We recognize the lease payments associated with our short-term leases as an expense over the lease term.

Note 6:7: Affiliated Companies

At ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the aggregate carrying amount of ~~investments~~our investment in ~~equity-method affiliates~~affiliated companies that are accounted for under the equity method was ~~$78.4~~$81.5 million and ~~$72.4~~$77.8 million, respectively, and the aggregate carrying amount of ~~cost-method~~our investment in affiliated companies that are not accounted for under the equity method was $13.4 million at both period-ends. We have elected to record these investments, for which fair value was not readily determinable, ~~was $13.4 million~~ at ~~both period-ends.~~cost, less impairment, adjusted for subsequent observable price changes. We test ~~our cost-method~~these investments for impairment whenever circumstances indicate that the carrying value of the investments may not be recoverable.

Our purchases from, and royalty payments made to, affiliates totaled $24.6 million for the three months ended March 31, 2019, as compared to $23.1 million for the same period in 2018. As of March 31, 2019 and December 31, 2018, the payable balance due to affiliates was $17.2 million and $12.9 million, respectively. The majority of these transactions related to a distributorship agreement with Daikyo that allows us to purchase and re-sell Daikyo products. Sales to affiliates were $2.2 million for the three months ended March 31, 2019, as compared to $2.4 million for the same period in 2018. As of March 31, 2019 and December 31, 2018, the receivable balance due from affiliates was $1.4 million and $1.6 million, respectively.

Please refer to Note 5,6, Affiliated Companies, to the consolidated financial statements in our ~~2017~~2018 Annual Report for additional details.

Note 7:8: Debt

The following table summarizes our long-term debt obligations, net of unamortized debt issuance costs and current maturities. The interest rates shown in parentheses are as of ~~June 30, 2018.~~March 31, 2019.


($ in millions)	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Note payable, due December 31, 2019	$	0.1	$	0.1	$	—	$	0.1
Credit Facility, due October 15, 2020 (1.00%)	28.9		29.6		—		28.6
Credit Facility, due March 28, 2024 (0.875%)					28.1		—
Series A notes, due July 5, 2022 (3.67%)	42.0		42.0		42.0		42.0
Series B notes, due July 5, 2024 (3.82%)	53.0		53.0		53.0		53.0
Series C notes, due July 5, 2027 (4.02%)	73.0		73.0		73.0		73.0
	197.0		197.7		196.1		196.7
Less: unamortized debt issuance costs	0.6		0.7		0.6		0.6
Total debt	196.4		197.0		195.5		196.1
Less: current portion of long-term debt	—		—		—		0.1
Long-term debt, net	$	196.4	$	197.0	$	195.5	$	196.0

~~Please refer~~In March 2019, we entered into a new senior unsecured, multi-currency revolving credit facility agreement (the “Credit Agreement”) that replaced our prior revolving credit facility, which was scheduled to ~~Note 8,~~ ~~Debt, to the consolidated financial statements~~expire in ~~our 2017 Annual Report for additional details regarding our debt agreements.~~

At ~~June 30, 2018, we had $28.9 million~~October 2020. The Credit Agreement, which expires in ~~outstanding long-term borrowings under our $300.0 million~~March 2024, contains a senior unsecured, multi-currency revolving credit facility (the “Credit Facility”) of $300.0 million, with sublimits of up to $30.0 million for swing line loans for domestic borrowers in U.S. Dollars (“USD”) and a $20.0 million swing line loan for our German Holding Company and up to $30.0 million for the issuance of standby letters of credit, which Credit Facility may be increased from time-to-time by the greater of $350.0 million and earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the preceding twelve month period in the aggregate through an increase in the Credit Facility, subject to the satisfaction of certain conditions. Borrowings under the Credit Facility bear interest at either the base rate (the per annum interest rate of the highest of the Prime Rate, the Federal Funds Rate plus 50 basis points or the daily London Interbank Offered Rate (“LIBOR”), plus 1.00%) or at the applicable LIBOR rate, plus a tiered margin based on the ratio of our net consolidated debt to our modified EBITDA, ranging from 0 to 37.5 basis points for base rate loans and 87.5 to 137.5 basis points for LIBOR rate loans. The Credit Agreement contains financial covenants providing that we shall not permit the ratio of our net consolidated debt to our modified EBITDA to be greater than 3.5 to 1; provided that, no more than three times during the term of the Credit Agreement, upon the occurrence of a qualified acquisition for each of our four fiscal quarters immediately following such qualified acquisition, the ratio shall be increased to 4.0 to 1. The Credit Agreement also contains customary limitations on liens securing our indebtedness, fundamental changes (mergers, consolidations, liquidations and dissolutions), asset sales, distributions and acquisitions. As of March 31, 2019 and December 31, 2018, total unamortized debt issuance costs of $1.1 million and $0.6 million, respectively, were recorded in other noncurrent assets and are being amortized as additional interest expense over the term of the Credit Facility. A portion of these costs relate to our prior revolving credit facility.

At March 31, 2019, we had $28.1 million in outstanding long-term borrowings under the Credit Facility, of which $4.5 million was denominated in Japanese Yen (“Yen”) and ~~$24.4~~$23.6 million was denominated in Euro. These borrowings, together with outstanding letters of credit of ~~$2.8~~$2.5 million, resulted in a borrowing capacity available under the Credit Facility of ~~$268.3~~$269.4 million at ~~June 30, 2018.~~March 31, 2019. Please refer to Note 8,9, Derivative Financial Instruments, for a discussion of the foreign currency hedges associated with the Credit Facility.

Please refer to Note 9, Debt, to the consolidated financial statements in our 2018 Annual Report for additional details regarding our debt agreements.

Note 8:9: Derivative Financial Instruments

Our ongoing business operations expose us to various risks, such as fluctuating interest rates, foreign currency exchange rates and increasing commodity prices. To manage these market risks, we periodically enter into derivative financial instruments, such as interest rate swaps, options and foreign exchange contracts for periods consistent with, and for notional amounts equal to or less than, the related underlying exposures. We do not purchase or hold any derivative financial instruments for investment or trading purposes. All derivatives are recorded in our condensed consolidated balance sheet at fair value.

Foreign Exchange Rate Risk

We have entered into forward exchange contracts, designated as fair value hedges, to manage our exposure to fluctuating foreign exchange rates on cross-currency intercompany loans. As of ~~June 30, 2018,~~March 31, 2019, the total amount of these forward exchange contracts was ~~€10.0 million,~~ Singapore Dollar (“SGD”) 601.5 million and $13.4 million. As of December 31, ~~2017,~~2018, the total amount of these forward exchange contracts was ~~€12.0~~€10.0 million, SGD ~~171.0~~601.5 million and $13.4 million.

During the three months ended March 31, 2019, we recognized foreign exchange transaction gains of $4.8 million within other (income) expense in our condensed consolidated statements of income related to these fair value hedges. We recognize in earnings the initial value of forward point components on a straight-line basis over the life of the fair value hedge.

In addition, we have entered into several foreign currency contracts, designated as cash flow hedges, for periods of up to eighteen months, intended to hedge the currency risk associated with a portion of our forecasted transactions denominated in foreign currencies. As of ~~June 30, 2018,~~March 31, 2019, we had outstanding foreign currency contracts to purchase and sell certain pairs of currencies, as follows:


(in millions)		Sell			Sell
Currency	Purchase	U. S. Dollar (“USD”)	Euro	Purchase	USD	Euro
USD	29.6	—	24.4	31.5	—	26.8
Yen	5,375.7	28.2	17.9	5,232.0	24.4	20.5
SGD	33.5	16.3	7.3	44.0	25.1	6.4

At ~~June 30, 2018,~~March 31, 2019, a portion of our debt consisted of borrowings denominated in currencies other than USD. We have designated our €21.0 million ($~~24.4~~23.6 million) Euro-denominated borrowings under our Credit Facility as a hedge of our net investment in certain European subsidiaries. A cumulative foreign currency translation loss of ~~$0.6~~less than $0.1 million ~~pre-tax ($0.5 million~~ for both pre- and after ~~tax)~~tax on this debt was recorded within accumulated other comprehensive loss as of ~~June 30, 2018~~March 31, 2019. We have also designated our ¥500.0 million ($4.5 million) Yen-denominated borrowings under our Credit Facility as a hedge of our net investment in Daikyo Seiko, Ltd. (“Daikyo”). At ~~June 30, 2018,~~March 31, 2019, there was a cumulative foreign currency translation loss of $0.4 million pre-tax ($0.3 million after tax) on this Yen-denominated debt, which was also included within accumulated other comprehensive loss.

Commodity Price Risk

Many of our proprietary products are made from synthetic elastomers, which are derived from the petroleum refining process. We purchase the majority of our elastomers via long-term supply contracts, some of which contain clauses that provide for surcharges related to fluctuations in crude oil prices. The following economic hedges did not qualify for hedge accounting treatment since they did not meet the highly effective requirement at inception.

In November 2017, we purchased a series of call options for a total of 125,166 barrels of crude oil to mitigate our exposure to such oil-based surcharges and protect operating cash flows with regards to a portion of our forecasted elastomer purchases through May 2019. In April 2018, we purchased a series of call options for a total of 30,612 barrels of crude oil from December 2018 through August 2019. In January 2019, we purchased a series of call options for a total of 81,459 barrels of crude oil from February 2019 through May 2020.

During the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, the ~~gain~~loss recorded in cost of goods and services sold related to these call options was ~~$0.5~~less than $0.1 million.

As of ~~June 30, 2018,~~March 31, 2019, we had outstanding contracts to purchase ~~98,658~~108,891 barrels of crude oil from ~~July 2018~~April 2019 to ~~August 2019~~May 2020 at a weighted-average strike price of ~~$73.10~~$66.22 per barrel.

Effects of Derivative Instruments on Financial Position and Results of Operations

Please refer to Note 9,10, Fair Value Measurements, for the balance sheet location and fair values of our derivative instruments as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

The following table summarizes the effects of derivative instruments designated as hedges on other comprehensive income (“OCI”) and earnings, net of tax:



	Amount of Gain (Loss) Recognized in OCI for the						Amount of (Gain) Loss Reclassified from Accumulated OCI into Income for the					Location of (Gain) Loss Reclassified from Accumulated OCI into Income
	Three Months Ended March 31,						Three Months Ended March 31,
($ in millions)	2019			2018			2019			2018
Cash Flow Hedges:
Foreign currency hedge contracts	$	0.5		$	(0.4	)	$	(0.2	)	$	0.5	Net sales
Foreign currency hedge contracts	(0.1		)	1.6			(0.1		)	0.4		Cost of goods and services sold
Forward treasury locks	—			—			—			0.1		Interest expense
Total	$	0.4		$	1.2		$	(0.3	)	$	1.0
Net Investment Hedges:
Foreign currency-denominated debt	$	0.1		$	(0.7	)	$	—		$	—	Other (income) expense
Total	$	0.1		$	(0.7	)	$	—		$	—

Amount of Gain (Loss) Recognized in OCI for the Amount of Loss (Gain) Reclassified from Accumulated OCI into Income for the Location of Loss (Gain) Reclassified from Accumulated OCI into Income
Three Months Ended
June 30, Three Months Ended
June 30,
($ in millions) 2018 2017 2018 2017
Cash Flow Hedges:
Foreign currency hedge contracts $ 0.5
$ (1.2 ) $ 0.3
$ 0.2
Net sales
Foreign currency hedge contracts (0.2 ) (2.2 ) 0.1
0.1
Cost of goods and services sold
Interest rate swap contracts —
—
—
0.2
Interest expense
Total $ 0.3
$ (3.4 ) $ 0.4
$ 0.5

Net Investment Hedges:

Foreign currency-denominated debt $ 1.2
$ (0.9 ) $ —
$ —
Other expense
Total $ 1.2
$ (0.9 ) $ —
$ —

Amount of Gain (Loss) Recognized in OCI for the Amount of Loss (Gain) Reclassified from Accumulated OCI into Income for the Location of Loss (Gain) Reclassified from Accumulated OCI into Income
Six Months Ended
June 30, Six Months Ended
June 30,
($ in millions) 2018 2017 2018 2017
Cash Flow Hedges:
Foreign currency hedge contracts $ 0.1
$ (0.9 ) $ 0.8
$ 0.3
Net sales
Foreign currency hedge contracts 1.4
(1.1 ) 0.5
0.1
Cost of goods and services sold
Interest rate swap contracts —
—
—
0.3
Interest expense
Forward treasury locks —
—
0.1
0.1
Interest expense
Total $ 1.5
$ (2.0 ) $ 1.4
$ 0.8

Net Investment Hedges:

Foreign currency-denominated debt $ 0.5
$ (1.2 ) $ —
$ —
Other expense
Total $ 0.5
$ (1.2 ) $ —
$ —

For the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 and ~~2017~~2018, there was no material ineffectiveness related to our hedges.

Note 9:10: Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy classifies the inputs to valuation techniques used to measure fair value into one of three levels:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The following tables present the assets and liabilities recorded at fair value on a recurring basis:


	Balance at		Basis of Fair Value Measurements						Balance at		Basis of Fair Value Measurements
($ in millions)	June 30, 2018		Level 1		Level 2		Level 3		March 31, 2019		Level 1		Level 2		Level 3
Assets:
Deferred compensation assets	$	8.8	$	8.8	$	—	$	—	$	9.2	$	9.2	$	—	$	—
Foreign currency contracts	3.4		—		3.4		—		17.7		—		17.7		—
Commodity call options									0.2		—		0.2		—
	$	12.2	$	8.8	$	3.4	$	—	$	27.1	$	9.2	$	17.9	$	—
Liabilities:
Contingent consideration	$	5.0	$	—	$	—	$	5.0	$	1.7	$	—	$	—	$	1.7
Deferred compensation liabilities	9.9		9.9		—		—		10.5		10.5		—		—
Foreign currency contracts	8.0		—		8.0		—		0.8		—		0.8		—
	$	22.9	$	9.9	$	8.0	$	5.0	$	13.0	$	10.5	$	0.8	$	1.7


	Balance at		Basis of Fair Value Measurements						Balance at		Basis of Fair Value Measurements
($ in millions)	December 31, 2017		Level 1		Level 2		Level 3		December 31, 2018		Level 1		Level 2		Level 3
Assets:
Deferred compensation assets	$	8.9	$	8.9	$	—	$	—	$	8.7	$	8.7	$	—	$	—
Foreign currency contracts	0.5		—		0.5		—		6.5		—		6.5		—
	$	9.4	$	8.9	$	0.5	$	—	$	15.2	$	8.7	$	6.5	$	—
Liabilities:
Contingent consideration	$	4.9	$	—	$	—	$	4.9	$	1.7	$	—	$	—	$	1.7
Deferred compensation liabilities	9.9		9.9		—		—		9.8		9.8		—		—
Foreign currency contracts	5.1		—		5.1		—		0.2		—		0.2		—
	$	19.9	$	9.9	$	5.1	$	4.9	$	11.7	$	9.8	$	0.2	$	1.7

Deferred compensation assets are included within other noncurrent assets and are valued using a market approach based on quoted market prices in an active market. The fair value of our foreign currency contracts, included within other current ~~assets~~ and other noncurrent assets, as well as other current and other long-term liabilities, is valued using an income approach based on quoted forward foreign exchange rates and spot rates at the reporting date. The fair value of our commodity call options, included within other current and other noncurrent assets, is valued using a market approach. The fair value of our contingent consideration, included within other current and other long-term liabilities, is discussed further in the section related to Level 3 fair value

measurements. The fair value of deferred compensation liabilities is based on quoted prices of the underlying employees’ investment selections and is included within other long-term liabilities. Please refer to Note 9, Derivative Financial Instruments, for further discussion of our derivatives.

Level 3 Fair Value Measurements

The fair value of the contingent consideration liability related to the SmartDose technology platform (the “SmartDose contingent consideration”) was initially determined using a probability-weighted income approach, and is revalued at each reporting date or more frequently if circumstances dictate. Changes in the fair value of this obligation are recorded as income or expense within other (income) expense in our condensed consolidated statements of income. The significant unobservable inputs used in the fair value measurement of the SmartDose

contingent consideration are the sales projections, the probability of success factors, and the discount rate. Significant increases or decreases in any of those inputs in isolation would result in a significantly lower or higher fair value measurement. As development and commercialization of the SmartDose technology platform progresses, we may need to update the sales projections, the probability of success factors, and the discount rate used. This could result in a material increase or decrease to the SmartDose contingent consideration.

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


	($ in millions)			($ in millions)
Balance, December 31, 2016	$	8.0
Balance, December 31, 2017				$	4.9
Decrease in fair value recorded in earnings	(2.4		)	(2.6		)
Payments	(0.7		)	(0.6		)
Balance, December 31, 2017	4.9
Balance, December 31, 2018				1.7
Increase in fair value recorded in earnings	0.6			0.2
Payments	(0.5		)	(0.2		)
Balance, June 30, 2018	$	5.0
Balance, March 31, 2019				$	1.7

Other Financial Instruments

We believe that the carrying amounts of our cash and cash equivalents and accounts receivable approximate their fair values due to their near-term maturities.

The estimated fair value of long-term debt is based on quoted market prices for debt issuances with similar terms and maturities and is classified as Level 2 within the fair value hierarchy. At ~~June 30,~~March 31, 2019, the estimated fair value of long-term debt was $197.4 million compared to a carrying amount of $195.5 million. At December 31, 2018, the estimated fair value of long-term debt was ~~$194.6 million compared to a carrying amount of $196.4 million. At December 31, 2017, the estimated fair value of long-term debt was $201.5~~$192.6 million and the carrying amount was ~~$197.0~~$196.0 million.

Note ~~10: Stock-Based Compensation~~11: Accumulated Other Comprehensive Loss

The following table presents the changes in the components of accumulated other comprehensive loss, net of tax, for the three months endedMarch 31, 2019:

The West Pharmaceutical Services, Inc. 2016 Omnibus Incentive Compensation Plan (the “2016 Plan”) provides for the granting of stock options, stock appreciation rights, restricted stock awards and performance awards to employees and non-employee directors.



($ in millions)	Losses on derivatives			Unrealized gains on investment securities		Defined benefit pension and other postretirement plans			Foreign currency translation			Total
Balance, December 31, 2018	$	(0.4	)	$	0.4	$	(40.4	)	$	(113.8	)	$	(154.2	)
Other comprehensive (loss) income before reclassifications	(3.0		)	—		(0.2		)	4.4			1.2
Amounts reclassified out	(0.3		)	—		(0.1		)	—			(0.4		)
Other comprehensive (loss) income, net of tax	(3.3		)	—		(0.3		)	4.4			0.8
Balance, March 31, 2019	$	(3.7	)	$	0.4	$	(40.7	)	$	(109.4	)	$	(153.4	)

A ~~committee~~summary of the ~~Board~~reclassifications out of ~~Directors determines the terms and conditions of awards to be granted. Vesting requirements vary by award. At June 30, 2018, there were 3,748,019 shares remaining~~accumulated other comprehensive loss is presented in the ~~2016 Plan for future grants.~~following table:

During the six months ended June 30, 2018, we granted 477,501 stock options at a weighted average exercise price of $90.10 per share based on the grant-date fair value of our stock to employees under the 2016 Plan. The weighted average grant date fair value of options granted was $20.06 per share as determined by the Black-Scholes option valuation model using the following weighted average assumptions: a risk-free interest rate of 2.7%; expected life of 5.6 years based on prior experience; stock volatility of 19.8% based on historical data; and a dividend yield of 0.7%. Stock option expense is recognized over the vesting period, net of forfeitures.



($ in millions)	Three Months Ended March 31,						Location on Statement of Income
Detail of components	2019			2018			Location on Statement of Income
Losses on derivatives:
Foreign currency contracts	$	0.2		$	(0.6	)	Net sales
Foreign currency contracts	0.2			(0.6		)	Cost of goods and services sold
Forward treasury locks	(0.1		)	(0.1		)	Interest expense
Total before tax	0.3			(1.3		)
Tax expense	—			0.3
Net of tax	$	0.3		$	(1.0	)
Amortization of defined benefit pension and other postretirement plans:
Prior service credit	$	0.2		$	0.5		(a)
Actuarial losses	—			(0.4		)	(a)
Total before tax	0.2			0.1
Tax expense	(0.1		)	—
Net of tax	$	0.1		$	0.1
Total reclassifications for the period, net of tax	$	0.4		$	(0.9	)

~~During~~(a) These components are included in the six months ended June 30, 2018, we granted 98,065 stock-settled performance share unit (“PSU”) awards at a weighted average grant-date fair value of $89.90 per share to eligible employees. These awards are earned based on the Company’s performance against pre-established targets, including annual growth rate of revenue and return on invested capital, over a specified performance period. Depending on the achievement of the targets, recipients of stock-settled PSU awards are entitled to receive a certain number of shares of common stock. Shares earned under PSU awards may vary from 0% to 200% of an employee’s targeted award. The fair value of stock-settled PSU awards is based on the market price of our stock at the grant date and is recognized as expense over the performance period, adjusted for estimated target outcomes and net of forfeitures.

During the six months ended June 30, 2018, we granted 14,745 stock-settled restricted share unit (“RSU”) awards at a weighted average grant-date fair value of $96.12 per share to eligible employees. These awards are earned over a specified performance period. The fair value of stock-settled RSU awards is based on the market price of our stock at the grant date and is recognized as expense over the performance period, net of forfeitures.

Total stock-based compensation expense was $6.0 million and $9.4 million for the three and six months ended June 30, 2018, respectively. For the three and six months ended June 30, 2017, stock-based compensation expense was $5.5 million and $9.0 million, respectively.

~~Note 11: Benefit Plans~~

~~The components~~computation of net periodic benefit ~~cost~~cost. Please refer to Note 14, Benefit Plans, for additional details.

Note 12: Shareholders’ Equity

The following table presents the changes in shareholders’ equity for the three months ended ~~June 30 were as follows:~~March 31, 2019:

Pension benefits Other retirement benefits Total
($ in millions) 2018 2017 2018 2017 2018 2017
Service cost $ 2.7
$ 2.6
$ —
$ —
$ 2.7
$ 2.6
Interest cost 2.4
2.4
—
0.1
2.4
2.5
Expected return on assets (3.9 ) (3.3 ) —
—
(3.9 ) (3.3 )
Amortization of prior service credit (0.5 ) (0.4 ) (0.1 ) (0.2 ) (0.6 ) (0.6 )
Recognized actuarial losses (gains) 1.0
1.2
(0.6 ) (0.4 ) 0.4
0.8
Net periodic benefit cost $ 1.7
$ 2.5
$ (0.7 ) $ (0.5 ) $ 1.0
$ 2.0



	Common Shares Issued	Common Stock		Capital in Excess of Par Value			Number of Treasury Shares		Treasury Stock			Retained earnings			Accumulated other comprehensive loss			Total
($ in millions)	Common Shares Issued	Common Stock		Capital in Excess of Par Value			Number of Treasury Shares		Treasury Stock			Retained earnings			Accumulated other comprehensive loss			Total
Balance, December 31, 2018	75.3	$	18.8	$	282.0		1.2		$	(103.7	)	$	1,353.4		$	(154.2	)	$	1,396.3
Net income	—	—		—			—		—			55.4			—			55.4
Activity related to stock-based compensation	—	—		(3.5		)	(0.2	)	14.2			—			—			10.7
Shares purchased under share repurchase program	—	—		—			0.8		(83.1		)	—			—			(83.1		)
Dividends declared ($0.15 per share)	—	—		—			—		—			(10.6		)	—			(10.6		)
Other comprehensive income, net of tax	—	—		—			—		—			—			0.8			0.8
Balance, March 31, 2019	75.3	$	18.8	$	278.5		1.8		$	(172.6	)	$	1,398.2		$	(153.4	)	$	1,369.5

The following table presents the changes in shareholders’ equity for the three months ended March 31, 2018:

Pension benefits Other retirement benefits Total
($ in millions) 2018 2017 2018 2017 2018 2017
U.S. plans $ 1.2
$ 1.8
$ (0.7 ) $ (0.5 ) $ 0.5
$ 1.3
International plans 0.5
0.7
—
—
0.5
0.7
Net periodic benefit cost $ 1.7
$ 2.5
$ (0.7 ) $ (0.5 ) $ 1.0
$ 2.0



	Common Shares Issued	Common Stock		Capital in Excess of Par Value			Number of Treasury Shares		Treasury Stock			Retained earnings			Accumulated other comprehensive loss			Total
($ in millions)	Common Shares Issued	Common Stock		Capital in Excess of Par Value			Number of Treasury Shares		Treasury Stock			Retained earnings			Accumulated other comprehensive loss			Total
Balance, December 31, 2017	75.2	$	18.8	$	309.3		1.3		$	(109.1	)	$	1,178.2		$	(117.3	)	$	1,279.9
Effect of modified retrospective application of a new accounting standard	—	—		—			—		—			11.4			—			11.4
Net income	—	—		—			—		—			43.6			—			43.6
Activity related to stock-based compensation	0.1	—		(0.8		)	(0.1	)	8.0			—			—			7.2
Shares purchased under share repurchase program	—	—		—			0.5		(47.9		)	—			—			(47.9		)
Dividends declared ($0.14 per share)	—	—		—			—		—			(10.4		)	—			(10.4		)
Other comprehensive income, net of tax	—	—		—			—		—			—			21.5			21.5
Balance, March 31, 2018	75.3	$	18.8	$	308.5		1.7		$	(149.0	)	$	1,222.8		$	(95.8	)	$	1,305.3

~~The components of net periodic benefit cost for the six months ended June 30 were as follows ($ in millions):~~

Pension benefits Other retirement benefits Total
2018 2017 2018 2017 2018 2017
Service cost $ 5.5
$ 5.3
$ —
$ —
$ 5.5
$ 5.3
Interest cost 4.7
4.9
0.1
0.2
4.8
5.1
Expected return on assets (7.8 ) (6.7 ) —
—
(7.8 ) (6.7 )
Amortization of prior service credit (0.8 ) (0.7 ) (0.3 ) (0.4 ) (1.1 ) (1.1 )
Recognized actuarial losses (gains) 1.9
2.4
(1.1 ) (1.1 ) 0.8
1.3
Net periodic benefit cost $ 3.5
$ 5.2
$ (1.3 ) $ (1.3 ) $ 2.2
$ 3.9

Pension benefits Other retirement benefits Total
2018 2017 2018 2017 2018 2017
U.S. plans $ 2.5
$ 3.8
$ (1.3 ) $ (1.3 ) $ 1.2
$ 2.5
International plans 1.0
1.4
—
—
1.0
1.4
Net periodic benefit cost $ 3.5
$ 5.2
$ (1.3 ) $ (1.3 ) $ 2.2
$ 3.9

~~During the six months ended June 30, 2017, we contributed $20.0 million to our U.S. qualified pension plan.~~

~~Effective January 1, 2019, except for interest crediting, benefit accruals under our U.S. qualified and non-qualified defined benefit pension plans will cease.~~

Note ~~12: Accumulated Other Comprehensive Loss~~13: Stock-Based Compensation

The ~~following table presents~~West Pharmaceutical Services, Inc. 2016 Omnibus Incentive Compensation Plan (the “2016 Plan”) provides for the ~~changes~~granting of stock options, stock appreciation rights, restricted stock awards and performance awards to employees and non-employee directors. A committee of the Board of Directors determines the terms and conditions of awards to be granted. Vesting requirements vary by award. At March 31, 2019, there were 3,162,428 shares remaining in the 2016 Plan for future grants.

During the three months ended March 31, 2019, we granted 344,616 stock options at a weighted average exercise price of $102.51 per share based on the grant-date fair value of our stock to employees under the 2016 Plan. The weighted average grant date fair value of options granted was $24.51 per share as determined by the Black-Scholes option valuation model using the following weighted average assumptions: a risk-free interest rate of 2.3%; expected life of 5.6 years based on prior experience; stock volatility of 22.5% based on historical data; and a dividend yield of 0.7%. Stock option expense is recognized over the vesting period, net of forfeitures.

During the three months ended March 31, 2019, we granted 82,458 stock-settled performance share unit (“PSU”) awards at a weighted average grant-date fair value of $102.51 per share to eligible employees. These awards are earned based on the Company’s performance against pre-established targets, including annual growth rate of revenue and return on invested capital, over a specified performance period. Depending on the achievement of the targets, recipients of stock-settled PSU awards are entitled to receive a certain number of shares of common stock. Shares earned under PSU awards may vary from 0% to 200% of an employee’s targeted award. The fair value of stock-settled PSU awards is based on the market price of our stock at the grant date and is recognized as expense over the performance period, adjusted for estimated target outcomes and net of forfeitures.

During the three months ended March 31, 2019, we granted 7,266 stock-settled restricted share unit (“RSU”) awards at a weighted average grant-date fair value of $102.51 per share to eligible employees. These awards are earned over a specified performance period. The fair value of stock-settled RSU awards is based on the market price of our stock at the grant date and is recognized as expense over the vesting period, net of forfeitures.

Total stock-based compensation expense was $6.2 million and $3.4 million for the three months ended March 31, 2019 and 2018, respectively.

Note 14: Benefit Plans

The components of ~~accumulated other comprehensive loss,~~ net ~~of tax,~~periodic benefit cost for the ~~six~~three months ended~~June 30, 2018~~: March 31 were as follows:

($ in millions)
Losses on
cash flow
hedges

Unrealized gains
on investment
securities

Defined benefit
pension and other
postretirement plans

Foreign
currency
translation
Total
Balance, December 31, 2017 $ (4.2 ) $ 0.5
$ (39.0 ) $ (74.6 ) $ (117.3 )
Other comprehensive income (loss) before reclassifications 1.5
—
0.5
(29.6 ) (27.6 )
Amounts reclassified out 1.4
—
(0.2 ) —
1.2
Other comprehensive income (loss), net of tax 2.9
—
0.3
(29.6 ) (26.4 )
Balance, June 30, 2018 $ (1.3 ) $ 0.5
$ (38.7 ) $ (104.2 ) $ (143.7 )

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



	Pension benefits						Other retirement benefits						Total
($ in millions)	2019			2018			2019			2018			2019			2018
Service cost	$	0.4		$	2.8		$	—		$	—		$	0.4		$	2.8
Interest cost	2.4			2.3			0.1			0.1			2.5			2.4
Expected return on assets	(2.9		)	(3.9		)	—			—			(2.9		)	(3.9		)
Amortization of prior service credit	—			(0.3		)	(0.2		)	(0.2		)	(0.2		)	(0.5		)
Recognized actuarial losses (gains)	0.5			0.9			(0.5		)	(0.5		)	—			0.4
Net periodic benefit cost	$	0.4		$	1.8		$	(0.6	)	$	(0.6	)	$	(0.2	)	$	1.2

($ in millions) Three Months Ended
June 30, Six Months Ended
June 30, Location on Statement of Income
Detail of components 2018 2017 2018
2017

Losses on cash flow hedges:
Foreign currency contracts $ (0.3 ) $ (0.2 ) $ (0.9 ) $ (0.3 ) Net sales
Foreign currency contracts (0.1 ) (0.1 ) (0.7 ) (0.1 ) Cost of goods and services sold
Interest rate swap contracts —
(0.3 ) —
(0.5 ) Interest expense
Forward treasury locks (0.1 ) (0.1 ) (0.2 ) (0.2 ) Interest expense
Total before tax (0.5 ) (0.7 ) (1.8 ) (1.1 )
Tax expense 0.1
0.2
0.4
0.3

Net of tax $ (0.4 ) $ (0.5 ) $ (1.4 ) $ (0.8 )
Amortization of defined benefit pension and other postretirement plans:
Prior service credit $ 0.6
$ 0.6
$ 1.1
$ 1.1
(a)
Actuarial losses (0.4 ) (0.8 ) (0.8 ) (1.3 ) (a)
Total before tax 0.2
(0.2 ) 0.3
(0.2 )
Tax expense (0.1 ) —
(0.1 ) —

Net of tax $ 0.1
$ (0.2 ) $ 0.2
$ (0.2 )
Total reclassifications for the period, net of tax $ (0.3 ) $ (0.7 ) $ (1.2 ) $ (1.0 )



	Pension benefits					Other retirement benefits						Total
($ in millions)	2019			2018		2019			2018			2019			2018
U.S. plans	$	(0.1	)	$	1.3	$	(0.6	)	$	(0.6	)	$	(0.7	)	$	0.7
International plans	0.5			0.5		—			—			0.5			0.5
Net periodic benefit cost	$	0.4		$	1.8	$	(0.6	)	$	(0.6	)	$	(0.2	)	$	1.2

~~(a) These components are included in the computation of net periodic~~

Effective January 1, 2019, except for interest crediting, benefit ~~cost. Please refer to Note 11,~~ ~~Benefit Plans, for additional details.~~accruals under our U.S. qualified and non-qualified defined benefit pension plans ceased.

Note ~~13:~~15: Other (Income) Expense

Other (income) expense consists of:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
($ in millions)	2018			2017			2018			2017			2019			2018
Restructuring and related charges:
Severance and post-employment benefits	$	1.3		$	—		$	3.3		$	—		$	0.3		$	2.0
Asset-related charges	0.3			—			0.4			—			—			0.1
Other charges	0.6			—			1.8			—			0.3			1.2
Total restructuring and related charges	2.2			—			5.5			—			0.6			3.3
Venezuela deconsolidation	—			11.1			—			11.1
Development and licensing income	(0.2		)	(0.4		)	(0.4		)	(0.8		)	(0.2		)	(0.2		)
Contingent consideration	0.3			0.4			0.6			0.7			0.2			0.3
Other items	(1.2		)	0.6			(1.5		)	1.6			(2.9		)	(0.3		)
Total other expense	$	1.1		$	11.7		$	4.2		$	12.6
Total other (income) expense													$	(2.3	)	$	3.1

Restructuring and Related Charges

In February 2018, our Board of Directors approved a restructuring plan designed to realign our manufacturing capacity with demand. These changes are expected to be implemented over ~~the following twelve~~a period of up to twenty-four

~~months.~~ months from the date of approval. The plan will require restructuring and related charges ~~in the range~~ of ~~$8.0 million to $13.0 million and capital expenditures in the range of $9.0 million to $14.0~~approximately $15.0 million. ~~Once fully completed, we expect that the plan will provide us with annualized savings in the range of $17.0 million to $22.0 million.~~

During the three months ended ~~June 30, 2018,~~March 31, 2019, we recorded ~~$2.2~~$0.6 million in restructuring and related charges associated with this plan, consisting of ~~$1.3~~$0.3 million for severance charges and $0.3 million for other charges. During the three months ended March 31, 2018, we recorded $3.3 million in restructuring and related charges associated with this plan, consisting of $2.0 million for severance charges, $0.1 million for non-cash asset write-downs associated with the discontinued use of certain equipment, and ~~$0.6~~$1.2 million for other charges. During the six months ended June 30, 2018, we recorded $5.5 million in restructuring and related charges associated with this plan, consisting of $3.3 million for severance charges, $0.4 million for non-cash ~~asset write-downs associated with the discontinued use of certain equipment, and $1.8 million for other~~ charges.

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


($ in millions)	Severance and benefits			Asset-related charges			Other charges			Total			Severance and benefits			Asset-related charges		Other charges			Total
Balance, December 31, 2017	$	—		$	—		$	—		$	—
Balance, December 31, 2018													$	2.3		$	—	$	—		$	2.3
Charges	3.3			0.4			1.8			5.5			0.3			—		0.3			0.6
Cash payments	(0.1		)	—			—			(0.1		)	(1.1		)	—		—			(1.1		)
Non-cash asset write-downs	—			(0.4		)	(1.8		)	(2.2		)	—			—		(0.3		)	(0.3		)
Balance, June 30, 2018	$	3.2		$	—		$	—		$	3.2
Balance, March 31, 2019													$	1.5		$	—	$	—		$	1.5

On February 15, 2016, our Board of Directors approved a restructuring plan designed to repurpose several of our production facilities in support of growing high-value proprietary products and to realign operational and commercial activities to meet the needs of our new market-focused commercial organization. ~~Please refer to Note 14,~~ ~~Other Expense, to the consolidated financial statements in our 2017 Annual Report for further discussion of the 2016 Plan.~~ Our remaining restructuring obligations related to the 2016 ~~Plan~~restructuring plan as of ~~June 30, 2018~~March 31, 2019 were ~~$1.0~~$0.3 million.

Other Items

During both the three ~~and six~~ months ended June 30, 2017, as a result of the continued deterioration of conditions in Venezuela as well as our continued reduced access to USD settlement controlled by the Venezuelan government, we recorded a charge of $11.1 million related to the deconsolidation of our Venezuelan subsidiary, following our determination that we no longer met the U.S. GAAP criteria for control of that subsidiary. This charge included the derecognition of the carrying amounts of our Venezuelan subsidiary’s assetsMarch 31, 2019 and liabilities, as well as the write-off of our investment in our Venezuelan subsidiary, related unrealized translation adjustments and the elimination of intercompany accounts. As of April 1, 2017, our consolidated financial statements exclude the results of our Venezuelan subsidiary.

~~In addition, during the three and six months ended June 30,~~ 2018, we recorded development income of $0.2 million ~~and $0.4 million, respectively,~~ related to a nonrefundable customer payment of $20.0 million received in June 2013 in return for the exclusive use of the SmartDose technology platform within a specific therapeutic area. ~~During the three and six months ended June 30, 2017, we recorded development income of $0.4 million and $0.8 million, respectively, related to this nonrefundable customer payment.~~ Please refer to Note 3, Revenue, for additional information.

Contingent consideration represents changes in the fair value of the SmartDose contingent consideration. Please refer to Note 9,10, Fair Value Measurements, for additional details.

Other items consist of foreign exchange transaction gains and losses, gains and losses on the sale of fixed assets, and miscellaneous income and charges. Other items increased by $2.6 million for the three months ended March 31, 2019, as compared to the same period in 2018, primarily as a result of foreign exchange transaction gains of $3.8 million during the three months ended March 31, 2019, as compared to foreign exchange transaction losses of $0.4 million during the three months ended March 31, 2018.

Note ~~14:~~16: Income Taxes

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

The provision for income taxes was ~~$6.0~~$16.1 million and ~~$2.9~~$12.5 million for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, and the effective tax rate was ~~9.9%~~23.1% and ~~7.1%, respectively. The provision for income taxes was $18.5 million and $5.1 million for the six months ended June 30, 2018 and 2017, respectively, and the effective tax rate was 16.2% and 5.1%~~23.3%, respectively.

During the three ~~and six~~ months ended June 30, 2018, we recorded a tax benefit of $3.4 million and $5.5 million, respectively, associated with our adoption in 2017 of guidance issued by the FASB regarding share-based payment transactions, as compared to a tax benefit of $9.6 million and $25.5 million for the same periods in 2017.

During the three and six months ended June 30, 2018, we recorded a net tax benefit of $4.8 million to reflect a reduction to our one-time mandatory deemed repatriation tax of post-1986 undistributed foreign subsidiary earnings and profits. In April 2018, the U.S. Internal Revenue Service issued guidance which provided that certain foreign taxes accrued by specified corporations in the toll tax year reduce post-1986 earnings and profits. In addition, during the six months ended June 30,March 31, 2018, we recorded a net tax charge of $0.3 million ~~to adjust our estimated impact of the 2017 Tax Act. During the three and twelve months ended December 31, 2017, we had recorded a provisional charge~~ for the estimated impact of the 2017 Tax ~~Act, based upon our then-current understanding of the 2017 Tax Act and the guidance available at the time. We will continue~~Act. Please refer to ~~actively monitor the developments relating~~Note 16, Income Taxes, to the ~~2017 Tax Act, and will adjust~~consolidated financial statements in our ~~estimate as necessary during the one-year measurement period.~~2018 Annual Report for further discussion.

~~During the three and six months ended June 30, 2017, we recorded a tax benefit of $3.5 million related to a planned repatriation of cash held by non-U.S. subsidiaries.~~

In response to the 2017 Tax Act, we reevaluated our position regarding permanent reinvestment of foreign subsidiary earnings and profits through 2017 (with the exception of China and Mexico) and elected to include in our provision for income taxes for the year ended December 31, 2017 an estimated liability of $9.8 million related to foreign withholding taxes and state income taxes that will be incurred upon the distribution of those foreign subsidiary earnings and profits to the U.S. at a future date. Following additional analysis of the 2017 Tax Act, we are asserting, as of January 1, 2018, indefinite reinvestment related to our investment in all of our foreign subsidiaries.

Note ~~15:~~17: Commitments and Contingencies

From time to time, we are involved in product liability matters and other legal proceedings and claims generally incidental to our normal business activities. We accrue for loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. While the outcome of current proceedings cannot be accurately predicted, we believe their ultimate resolution should not have a material adverse effect on our business, financial condition, results of operations or liquidity.

There have been no significant changes to the commitments and contingencies included in our ~~2017~~2018 Annual Report.

On January 1, 2019, we adopted ASC 842. Please refer to Note 6, Leases, for additional information.

Note ~~16:~~18: Segment Information

design, manufacture, and automated assembly of complex devices, primarily for pharmaceutical, diagnostic, and medical device customers.

We evaluate the performance of our segments based upon, among other things, segment net sales and operating profit. Segment operating profit excludes general corporate costs, which include executive and director compensation, stock-based compensation, adjustments to annual incentive plan expense for over- or under-attainment of targets, certain pension and other retirement benefit costs, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that we consider not representative of ongoing operations. Such items are referred to as other unallocated items and generally include restructuring and related charges, certain asset impairments and other specifically-identified income or expense items.

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

Three Months Ended
June 30, Six Months Ended
June 30,
($ in millions) 2018 2017 2018 2017
Net sales:
Proprietary Products $ 346.0
$ 312.8
$ 672.2
$ 621.6
Contract-Manufactured Products 101.5
84.9
191.0
164.0
Intersegment sales elimination —
(0.1 ) —
(0.3 )
Consolidated net sales $ 447.5
$ 397.6
$ 863.2
$ 785.3
Operating profit (loss):
Proprietary Products $ 71.7
$ 56.7
$ 134.5
$ 121.8
Contract-Manufactured Products 9.0
10.5
18.5
19.3
Corporate (18.2 ) (14.1 ) (33.8 ) (27.5 )
Other unallocated items (2.2 ) (11.1 ) (5.5 ) (11.1 )
Total operating profit $ 60.3
$ 42.0
$ 113.7
$ 102.5
Interest expense 2.2
2.2
4.1
4.3
Interest income (0.3 ) (0.3 ) (0.9 ) (0.6 )
Other nonoperating income (1.7 ) (0.6 ) (3.3 ) (1.4 )
Income before income taxes $ 60.1
$ 40.7
$ 113.8
$ 100.2

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



	Three Months Ended March 31,
($ in millions)	2019			2018
Net sales:
Proprietary Products	$	340.4		$	326.2
Contract-Manufactured Products	103.1			89.5
Consolidated net sales	$	443.5		$	415.7
Operating profit (loss):
Proprietary Products	$	77.0		$	62.8
Contract-Manufactured Products	10.5			9.5
Corporate	(16.2		)	(15.6		)
Other unallocated items	(0.6		)	(3.3		)
Total operating profit	$	70.7		$	53.4
Interest expense	2.3			1.9
Interest income	(0.9		)	(0.6		)
Other nonoperating income	(0.6		)	(1.6		)
Income before income taxes	$	69.9		$	53.7

Other unallocated items during the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, consisted of ~~$2.2~~$0.6 million and ~~$5.5~~$3.3 million, respectively, in restructuring and related charges. ~~Other unallocated items during the three and six months ended June 30, 2017, consisted of a charge of $11.1 million related to the deconsolidation of our Venezuelan subsidiary.~~ Please refer to Note ~~13,~~15, Other (Income) Expense, for further discussion of these items.

In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit cost (net benefit cost). We adopted this guidance as of January 1, 2018, on a retrospective basis. As a result of this adoption, we reclassified net benefit cost components other than service cost from operating income to outside of operations. Net periodic benefit cost for the three months ended June 30, 2018 and 2017 was $1.0 million and $2.0 million, respectively, of which $2.7 million and $2.6 million, respectively, related to service cost and $1.7 million and $0.6 million, respectively, related to net benefit cost components other than service cost. Net periodic benefit cost for the six months ended June 30, 2018 and 2017 was $2.2 million and $3.9 million, respectively, of which $5.5 million and $5.3 million, respectively, related to service cost and $3.3 million and $1.4 million, respectively, related

Note 19: Subsequent Event

~~to net benefit cost components other than service cost. Please refer to Note 2,~~ ~~New Accounting Standards, for additional information.~~In April 2019, we acquired the business of our distributor in South Korea. We believe that the acquisition will not have a material impact on our financial statements.

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

OVERVIEW

The following discussion is intended to further the reader’s understanding of the consolidated financial condition and results of operations of our Company. It should be read in conjunction with our condensed consolidated financial statements and accompanying notes elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”) as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and accompanying notes included in our ~~2017~~2018 Annual Report. Our historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks discussed in Part I, Item 1A of our ~~2017~~2018 Annual Report and in Part II, Item 1A of this Form 10-Q.

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

Non-U.S. GAAP Financial Measures

For the purpose of aiding the comparison of our year-over-year results, we may refer to net sales and other financial results excluding the effects of changes in foreign currency exchange rates. The constant-currency amounts are calculated by translating the current year’s functional currency results at the prior-year period’s exchange rate. We may also refer to consolidated operating profit and consolidated operating profit margin excluding the effects of unallocated items. The re-measured results excluding effects from currency translation and excluding the effects of unallocated items are not in conformity with U.S. GAAP and should not be used as a substitute for the comparable U.S. GAAP financial measures. The non-U.S. GAAP financial measures are incorporated into our discussion and analysis as management uses them in evaluating our results of operations, and believes that this information provides users a valuable insight into our results.

Our Operations

We are a leading global manufacturer in the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. Our products include a variety of primary packaging, containment solutions, reconstitution and transfer systems, and drug delivery systems, as well as contract manufacturing and analytical lab services. Our customers include the leading biologic, generic, pharmaceutical, diagnostic, and medical device companies in the world. Our top priority is delivering quality products that meet the exact product specifications and quality standards customers require and expect. This focus on quality includes excellence in manufacturing, scientific and technical expertise and management, so we can partner with our customers to deliver safe, effective drug products to patients quickly and efficiently. The Company was incorporated under the laws of the Commonwealth of Pennsylvania on July 27, 1923.

Our business operations are organized into two reportable segments, Proprietary Products and Contract-Manufactured Products. Our Proprietary Products reportable segment offers proprietary packaging, containment and drug delivery products, along with analytical lab services, to biologic, generic and pharmaceutical drug customers. Our Contract-Manufactured Products reportable segment serves as a fully integrated business, focused on the design, manufacture, and automated assembly of complex devices, primarily for pharmaceutical, diagnostic, and medical device customers. We also maintain partnerships to share technologies and market products with affiliates in Japan and Mexico.

~~2018~~2019 Financial Performance Summary

Consolidated net sales increased by ~~$49.9~~$27.8 million, or ~~12.6%~~6.7%, for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017.~~2018. Excluding foreign currency translation effects, consolidated net sales for the three months ended ~~June 30, 2018~~March 31, 2019 increased by ~~$35.9~~$47.4 million, or ~~9.0%~~11.4%, as compared to the same period in ~~2017.~~

Consolidated net sales increased by $77.9 million, or 9.9%, for the six months ended June 30, 2018, as compared to the same period in 2017. Excluding foreign currency translation effects, consolidated net sales for the six months ended June 30, 2018 increased by $36.6 million, or 4.7%, as compared to the same period in 2017.

As announced earlier this year, our Board of Directors approved a restructuring plan in February 2018 designed to realign our manufacturing capacity with demand. These changes are expected to be implemented over the following twelve to twenty-four months. The plan will require restructuring and related charges in the range of $8.0 million to $13.0 million and capital expenditures in the range of $9.0 million to $14.0 million. Once fully completed, we expect that the plan will provide the Company with annualized savings in the range of $17.0 million to $22.0 million. During the three months ended June 30, 2018, we recorded $2.2 million in restructuring and related charges associated with this plan, consisting of $1.3 million for severance charges, $0.3 million for non-cash asset write-downs associated with the discontinued use of certain equipment, and $0.6 million for other charges. During the six months ended June 30, 2018, we recorded $5.5 million in restructuring and related charges associated with this plan, consisting of $3.3 million for severance charges, $0.4 million for non-cash asset write-downs associated with the discontinued use of certain equipment, and $1.8 million for other charges.2018.

Net income for the three months ended ~~June 30, 2018~~March 31, 2019 was ~~$56.1~~$55.4 million, or ~~$0.75~~$0.73 per diluted share, as compared to ~~$38.8~~$43.6 million, or ~~$0.51~~$0.58 per diluted share, for the same period in ~~2017.~~2018. Net income for the three months ended ~~June 30,~~March 31, 2019 included the impact of restructuring and related charges of $0.4 million (net of $0.2 million in tax), or $0.01 per diluted share and a tax benefit of $1.4 million, or $0.02 per diluted share, associated with stock-based compensation. Net income for the three months ended March 31, 2018 included the impact of restructuring and related charges of ~~$1.6~~$2.7 million (net of $0.6 million in tax), or ~~$0.01~~$0.03 per diluted share, a net tax ~~benefit~~charge of ~~$4.8~~$0.3 million, or ~~$0.06~~$0.01 per diluted share, for the estimated impact of the 2017 Tax Act, and a tax benefit of ~~$3.4~~$2.1 million, or ~~$0.04~~$0.03 per diluted share, associated with stock-based compensation.

On January 24, 2019, we issued a voluntary recall of our ~~adoption~~Vial2Bag^® product line due to reports of potential unpredictable or variable dosing under certain conditions. Our 2018 results included an $11.3 million provision for product returns, recorded as a reduction of sales, partially offset by a reduction in ~~2017~~cost of ~~guidance issued by the FASB regarding share-based payment transactions. Net income~~goods sold reflecting our inventory balance for these devices at December 31, 2018. During the three months ended ~~June 30, 2017 included~~March 31, 2019, following the ~~impact~~completion of ~~a tax benefit of $9.6 million, or $0.13 per diluted share, associated with our adoption in 2017 of guidance issued by the FASB regarding share-based payment transactions~~certain tests and ~~a charge of $11.1 million, or $0.15 per diluted share,~~studies related to the ~~deconsolidation of~~voluntary recall, we recorded a $4.5 million provision for potential inventory returns from our ~~Venezuelan subsidiary.~~

Net income for the six months ended June 30, 2018 was $99.7 million, or $1.33 per diluted share, as compared to $99.7 million, or $1.32 per diluted share, for the same period in 2017. Net income for the six months ended June 30, 2018 included the impact of restructuringcustomers and related ~~charges of $4.3 million (net of $1.2 million~~in-house inventory, partially offset by a reduction in ~~tax), or $0.05 per diluted share, a net tax benefit of $4.5 million, or $0.06 per diluted share,~~our provision for product returns. We continue to work to get the ~~estimated impact of~~products back on the 2017 Tax Act, and a tax benefit of $5.5 million, or $0.07 per diluted share, associated with our adoption in 2017 of guidance issued by the FASB regarding share-based payment transactions. Net income for the six months ended June 30, 2017 included the impact of a tax benefit of $25.5 million, or $0.34 per diluted share, associated with our adoption in 2017 of guidance issued by the FASB regarding share-based payment transactions and a charge of $11.1 million, or $0.15 per diluted share, related to the deconsolidation of our Venezuelan subsidiary.market.

At ~~June 30, 2018,~~March 31, 2019, our cash and cash equivalents balance totaled ~~$225.5~~$265.5 million and our available borrowing capacity under our Credit Facility was ~~$268.3~~$269.4 million.

RESULTS OF OPERATIONS

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

Net Sales

The following table presents net sales, consolidated and by reportable segment, for the three months ended ~~June 30, 2018~~March 31, 2019 and ~~2017:~~2018:


	Three Months Ended June 30,					% Change				Three Months Ended March 31,				% Change
($ in millions)	2018		2017			As-Reported		Ex-Currency		2019		2018		As-Reported		Ex-Currency
Proprietary Products	$	346.0	$	312.8		10.6	%	6.9	%	$	340.4	$	326.2	4.3	%	9.4	%
Contract-Manufactured Products	101.5		84.9			19.6	%	16.9	%	103.1		89.5		15.3	%	18.9	%
Intersegment sales elimination	—		(0.1		)	—		—
Consolidated net sales	$	447.5	$	397.6		12.6	%	9.0	%	$	443.5	$	415.7	6.7	%	11.4	%

Consolidated net sales increased by ~~$49.9~~$27.8 million, or ~~12.6%~~6.7%, for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$14.0~~$19.6 million. Excluding foreign currency translation effects, consolidated net sales for the three months ended ~~June 30, 2018~~March 31, 2019 increased by ~~$35.9~~$47.4 million, or ~~9.0%~~11.4%, as compared to the same period in ~~2017.~~2018.

Proprietary Products – Proprietary Products net sales increased by ~~$33.2~~$14.2 million, or ~~10.6%~~4.3%, for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$11.6~~$16.3 million. Excluding foreign currency translation effects, net sales for the three months ended ~~June 30, 2018~~March 31, 2019 increased by ~~$21.6~~$30.5 million, or ~~6.9%~~9.4%, as compared to the same period in ~~2017,~~2018, primarily due to growth in our high-value product offerings, including our ~~administration systems and our Westar~~^®~~and FluroTec~~NovaPure^®~~-coated~~ products, our ready-to-use seals, stoppers, and plungers, and our Envision^® line of vision-inspected components, as well as sales price increases.

Contract-Manufactured Products – Contract-Manufactured Products net sales increased by ~~$16.6~~$13.6 million, or ~~19.6%~~15.3%, for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$2.4~~$3.3 million. Excluding foreign currency translation effects, net sales for the three months ended ~~June 30, 2018~~March 31, 2019 increased by ~~$14.2~~$16.9 million, or ~~16.9%~~18.9%, as compared to the same period in ~~2017, despite~~2018, due to an increase in the ~~impact~~sale of ~~the loss of a consumer-product customer in early 2018. Higher sales volume, particularly in Ireland, contributed 15.0 percentage points of the increase,~~healthcare-related injection and ~~sales price increases contributed 1.9 percentage points of the increase.~~diagnostic devices.

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

~~The following table presents net sales, consolidated and by reportable segment, for the six months ended June 30, 2018 and 2017:~~

Six Months Ended
June 30, % Change
($ in millions) 2018 2017 As-Reported Ex-Currency
Proprietary Products $ 672.2
$ 621.6
8.2 % 2.6 %
Contract-Manufactured Products 191.0
164.0
16.5 % 12.5 %
Intersegment sales elimination —
(0.3 ) —
—
Consolidated net sales $ 863.2
$ 785.3
9.9 % 4.7 %

Consolidated net sales increased by $77.9 million, or 9.9%, for the six months ended June 30, 2018, as compared to the same period in 2017, including a favorable foreign currency translation impact of $41.3 million. Excluding foreign currency translation effects, consolidated net sales for the six months ended June 30, 2018 increased by $36.6 million, or 4.7%, as compared to the same period in 2017.

~~Proprietary Products –~~ Proprietary Products net sales increased by $50.6 million, or 8.2%, for the six months ended June 30, 2018, as compared to the same period in 2017, including a favorable foreign currency translation impact of $34.8 million. Excluding foreign currency translation effects, net sales for the six months ended June 30, 2018 increased by $15.8 million, or 2.6%, as compared to the same period in 2017, as growth in our high-value product offerings, including our Westar~~and FluroTec-coated components and our administration systems, and sales price increases offset the impact of the deconsolidation of our Venezuelan subsidiary as of April 1, 2017.~~

~~Contract-Manufactured Products –~~ Contract-Manufactured Products net sales increased by $27.0 million, or 16.5%, for the six months ended June 30, 2018, as compared to the same period in 2017, including a favorable foreign currency translation impact of $6.5 million. Excluding foreign currency translation effects, net sales for the six months ended June 30, 2018 increased by $20.5 million, or 12.5%, as compared to the same period in 2017, despite the impact of the loss of a consumer-product customer in early 2018. Higher sales volume, particularly in Ireland, contributed 10.9 percentage points of the increase, and sales price increases contributed 1.6 percentage points of the increase.

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

Gross Profit

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
($ in millions)	2018			2017			2018			2017			2019			2018
Proprietary Products:
Gross Profit	$	128.8		$	110.8		$	250.0		$	232.1		$	132.3		$	121.2
Gross Profit Margin	37.2		%	35.4		%	37.2		%	37.3		%	38.9		%	37.1		%
Contract-Manufactured Products:
Gross Profit	$	13.4		$	14.2		$	26.6		$	27.1		$	14.5		$	13.2
Gross Profit Margin	13.1		%	16.8		%	13.9		%	16.6		%	14.0		%	14.8		%
Consolidated Gross Profit	$	142.2		$	125.0		$	276.6		$	259.2		$	146.8		$	134.4
Consolidated Gross Profit Margin	31.8		%	31.4		%	32.0		%	33.0		%	33.1		%	32.3		%

Consolidated gross profit increased by ~~$17.2~~$12.4 million, or ~~13.8%, and $17.4 million, or 6.7%~~9.2%, for the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same ~~periods~~period in ~~2017,~~2018, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$3.8 million and $12.9 million for the three and six months ended June 30, 2018, respectively.~~$6.2 million. Consolidated gross profit margin increased by ~~0.4~~0.8 margin points for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017, and decreased by 1.0 margin points for the six months ended June 30, 2018, as compared to the same period in 2017.~~2018.

Proprietary Products – Proprietary Products gross profit increased by ~~$18.0~~$11.1 million, or ~~16.2%, and $17.9 million, or 7.7%~~9.2%, for the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, respectively, as compared to the same ~~periods~~period in ~~2017,~~2018, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$3.5 million and $11.8 million for the three and six months ended June 30, 2018, respectively.~~$5.7 million. Proprietary Products gross profit margin increased by 1.8 margin points for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, due to ~~production efficiencies,~~ a

favorable mix of products sold, ~~and~~ sales price increases and lower raw material costs, partially offset by increased labor ~~overhead,~~costs and ~~depreciation costs, as well as~~ the impact of ~~under-absorbed overhead costs from our new facility in Waterford, Ireland and higher raw material costs. Proprietary Products gross profit margin decreased by 0.1 margin points for~~ the ~~six months ended June 30, 2018, as compared to the same period in 2017, as the impact~~voluntary recall of under-absorbed overhead costs from our new facility in Waterford, Ireland and the deconsolidation of our Venezuelan subsidiary as of April 1, 2017, as well as increased labor, overhead, and depreciation costs and higher raw material costs were mostly offset by production efficiencies and sales price increases.Vial2Bag products.

Contract-Manufactured Products – Contract-Manufactured Products gross profit ~~decreased~~increased by ~~$0.8~~$1.3 million, or ~~5.6%, and $0.5 million, or 1.8%~~9.8%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the same ~~periods~~period in ~~2017,~~2018, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$0.3 million and $1.1 million for the three and six months ended June 30, 2018, respectively.~~$0.5 million. Contract-Manufactured Products gross profit margin decreased by ~~3.7~~0.8 margin points for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in 2017, due to unabsorbed overhead from plant consolidation activities, start-up costs associated with the launch of new programs, and increased sales of products with higher purchased-material content. Contract-Manufactured Products gross profit margin decreased by 2.7 margin points for the six months ended June 30, 2018, ~~as compared to the same period in 2017,~~ due to an unfavorable mix of product sales, ~~and lower profitability on development and tooling agreements,~~ increased labor ~~overhead, and depreciation~~ costs and ~~higher raw material~~under-absorbed overhead costs, partially offset by production efficiencies ~~at our recently-expanded facility in Dublin, Ireland~~ and ~~sales price increases.~~lower raw material costs.

Research and Development (“R&D”) Costs

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


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
($ in millions)	2018		2017		2018		2017		2019		2018
Proprietary Products	$	10.8	$	10.0	$	20.4	$	20.3	$	9.8	$	9.6
Contract-Manufactured Products	—		—		—		—		—		—
Consolidated R&D Costs	$	10.8	$	10.0	$	20.4	$	20.3	$	9.8	$	9.6

Consolidated R&D costs increased by ~~$0.8~~$0.2 million, or ~~8.0%, and $0.1 million, or 0.5%~~2.1%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the same ~~periods~~period in ~~2017.~~2018. Efforts remain focused on the continued investment in self-injection systems development, elastomeric packaging components, and formulation development.

All of the R&D costs incurred during the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 related to Proprietary Products.

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

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
($ in millions)	2018			2017			2018			2017			2019			2018
Proprietary Products	$	47.5		$	43.4		$	95.9		$	88.3		$	48.8		$	48.4
Contract-Manufactured Products	4.3			3.8			8.6			7.9			4.0			4.3
Corporate	18.2			14.1			33.8			27.6			15.8			15.6
Consolidated SG&A costs	$	70.0		$	61.3		$	138.3		$	123.8		$	68.6		$	68.3
SG&A as a % of net sales	15.6		%	15.4		%	16.0		%	15.8		%	15.5		%	16.4		%

Consolidated SG&A costs increased by ~~$8.7~~$0.3 million, or ~~14.2%, and $14.5 million, or 11.7%~~0.4%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the same ~~periods~~period in ~~2017,~~2018, including the impact of foreign currency translation, which ~~increased~~decreased SG&A costs by ~~$1.3~~$1.4 million ~~or 2.1%, and $3.6 million, or 2.9%,~~ for the three ~~and six~~ months ended ~~June 30, 2018, respectively.~~March 31, 2019.

Proprietary Products – Proprietary Products SG&A costs increased by ~~$4.1~~$0.4 million, or ~~9.4%, and $7.6 million, or 8.6%~~0.8%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the same ~~periods~~period in ~~2017, primarily~~2018, due to incremental costs associated with our voluntary recall and increases in compensation costs, primarily related to merit increases, both of which were partially offset by decreases in travel and miscellaneous costs. Foreign currency translation ~~increased~~decreased Proprietary Products SG&A costs by ~~$1.2 million and $3.5~~$1.4 million for the three ~~and six~~ months ended ~~June 30, 2018, respectively.~~March 31, 2019.

Contract-Manufactured Products – Contract-Manufactured Products SG&A costs ~~increased~~decreased by ~~$0.5~~$0.3 million, or ~~13.2%, and $0.7 million, or 8.9%~~7.0%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, due to ~~slight increases~~a decrease in ~~compensation and~~ miscellaneous costs.

Corporate – Corporate SG&A costs increased by ~~$4.1~~$0.2 million, or ~~29.1%~~1.3%, ~~and $6.2 million, or 22.5%~~ for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, primarily due to ~~increases~~an increase in stock-based compensation costs, offset by a decrease in U.S. pension costs due to the cessation of our U.S. qualified and ~~outside services.~~non-qualified defined benefit pension plans as of January 1, 2019 (except for interest crediting).

Other (Income) Expense

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


(Income) Expense	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
($ in millions)	2018			2017			2018			2017			2019			2018
Proprietary Products	$	(1.2	)	$	0.7		$	(0.8	)	$	1.7		$	(3.3	)	$	0.4
Contract-Manufactured Products	0.1			(0.1		)	(0.5		)	(0.1		)	—			(0.6		)
Corporate	—			—			—			(0.1		)	0.4			—
Unallocated items	2.2			11.1			5.5			11.1			0.6			3.3
Consolidated other expense	$	1.1		$	11.7		$	4.2		$	12.6
Consolidated other (income) expense													$	(2.3	)	$	3.1

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

Consolidated other (income) expense ~~decreased~~changed by ~~$10.6 million and $8.4~~$5.4 million for the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same ~~periods~~period in ~~2017.~~2018.

Proprietary Products – Proprietary Products other (income) expense changed by ~~$1.9 million and $2.5~~$3.7 million for the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, primarily due to foreign exchange transaction gains in Europe.

Contract-Manufactured Products – Contract-Manufactured Products other ~~expense (income) changed~~income decreased by ~~$0.2~~$0.6 million for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017, due to foreign exchange transaction losses in Europe. Contract-Manufactured Products other income increased by $0.4 million for the six months ended June 30,~~ 2018, ~~as compared to the same period in 2017,~~ due to gains on the sale of fixed ~~assets.~~assets during the three months ended March 31, 2018.

Corporate – Corporate other ~~income decreased~~expense increased by ~~$0.1~~$0.4 million for the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017.~~2018.

Unallocated items – During the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 we recorded ~~$2.2~~$0.6 million and ~~$5.5~~$3.3 million, respectively, in restructuring and related charges. ~~During the three and six months ended June 30, 2017,~~Once fully completed, we ~~recorded a charge~~expect that our 2018 restructuring plan will provide annualized savings of ~~$11.1 million related to the deconsolidation of our Venezuelan subsidiary.~~approximately $14.0 million. Please refer to Note ~~13,~~15, Other (Income) Expense, for further discussion of these items.

Operating Profit

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
($ in millions)	2018			2017			2018			2017			2019			2018
Proprietary Products	$	71.7		$	56.7		$	134.5		$	121.8		$	77.0		$	62.8
Contract-Manufactured Products	9.0			10.5			18.5			19.3			10.5			9.5
Corporate	(18.2		)	(14.1		)	(33.8		)	(27.5		)	(16.2		)	(15.6		)
Adjusted consolidated operating profit	$	62.5		$	53.1		$	119.2		$	113.6		$	71.3		$	56.7
Adjusted consolidated operating profit margin	14.0		%	13.4		%	13.8		%	14.5		%	16.1		%	13.6		%
Unallocated items	(2.2		)	(11.1		)	(5.5		)	(11.1		)	(0.6		)	(3.3		)
Consolidated operating profit	$	60.3		$	42.0		$	113.7		$	102.5		$	70.7		$	53.4
Consolidated operating profit margin	13.5		%	10.6		%	13.2		%	13.1		%	15.9		%	12.8		%

Consolidated operating profit increased by ~~$18.3~~$17.3 million, or ~~43.6%, and $11.2 million, or 10.9%~~32.4%, for the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same ~~periods~~period in ~~2017,~~2018, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$2.5 million and $9.1~~$5.0 million for the three ~~and six~~ months ended ~~June 30, 2018, respectively.~~March 31, 2019.

Proprietary Products – Proprietary Products operating profit increased by ~~$15.0~~$14.2 million, or ~~26.5%, and $12.7 million, or 10.4%~~22.6%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the same ~~periods~~period in ~~2017,~~2018, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$2.2~~$4.6 million, ~~and $8.1 million for the three and six months ended June 30, 2018,~~ due to the factors described above.

Contract-Manufactured Products – Contract-Manufactured Products operating profit ~~decreased~~increased by ~~$1.5~~$1.0 million, or ~~14.3%, and $0.8 million, or 4.1%~~10.5%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the same ~~periods~~period in ~~2017,~~2018, including ~~a favorable~~an unfavorable foreign currency translation impact of ~~$0.3~~$0.4 million, ~~and $1.0 million for the three and six months ended June 30, 2018,~~ due to the factors described above.

Corporate – Corporate costs increased by ~~$4.1~~$0.6 million, or ~~29.1%, and $6.3 million, or 22.9%~~3.8%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, due to the factors described above.

Unallocated items – Please refer to the Other (Income) Expense section for details.

Interest Expense, Net

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
($ in millions)	2018			2017			2018			2017			2019			2018
Interest expense	$	2.4		$	2.7		$	4.6		$	5.4		$	2.5		$	2.2
Capitalized interest	(0.2		)	(0.5		)	(0.5		)	(1.1		)	(0.2		)	(0.3		)
Interest income	(0.3		)	(0.3		)	(0.9		)	(0.6		)	(0.9		)	(0.6		)
Interest expense, net	$	1.9		$	1.9		$	3.2		$	3.7		$	1.4		$	1.3

Interest expense, net, ~~remained constant at $1.9~~increased by $0.1 million, or 7.7%, for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017, as lower~~2018, due to a decrease in capitalized interest ~~expense resulting from less debt outstanding~~ during the three months ended ~~June 30, 2018,~~March 31, 2019.

Other Nonoperating Income

Other nonoperating income decreased by $1.0 million for the three months ended March 31, 2019, as compared to the same period in ~~2017, was offset by~~2018, due to a decrease in capitalized interest due to the completion of several major projects in 2017, including certain components of our new facility in Waterford, Ireland. The Waterford facility will continue to undergo validation procedures during 2018, with commercial production expected to begin in the second half of 2018.

Interest expense, net, decreased by $0.5 million, or 13.5%, for the six months ended June 30, 2018, as compared to the same period in 2017, due to lower interest expense resulting from less debt outstanding during the six months ended June 30, 2018, as compared to the same period in 2017, partially offset by a decrease in capitalized interest due to the completion of several major projects in 2017, as described above.

~~Other Nonoperating Income~~

~~Other nonoperating income increased by $1.1 million and $1.9 million for the three and six months ended June 30, 2018, as compared to the same periods in 2017, due to an increase~~ in the expected return on ~~assets and a decrease in recognized actuarial losses for the three and six months ended June 30, 2018, as compared to the same periods in 2017. Please refer to Note 2,~~ ~~New Accounting Standards, and Note 11,~~ ~~Benefit Plans, for information on guidance issued by the FASB on the presentation of net periodic~~ pension ~~and postretirement benefit cost (net benefit cost) that we adopted as of January 1, 2018, on a retrospective basis.~~plan assets.

Income Taxes

and the guidance available at the time. We will continue to actively monitor the developments relating to the 2017 Tax Act, and will adjust our estimate as necessary during the one-year measurement period.

~~During the three and six months ended June 30, 2017, we recorded a tax benefit of $3.5 million related to a planned repatriation of cash held by non-U.S. subsidiaries.~~

Act. Please refer to Note ~~14,~~16, Income Taxes, to the consolidated financial statements in our 2018 Annual Report for further ~~discussion of our income taxes.~~discussion.

Equity in Net Income of Affiliated Companies

Equity in net income of affiliated companies represents the contribution to earnings from our 25% ownership interest in Daikyo and our 49% ownership interest in four companies in Mexico. Equity in net income of affiliated companies ~~increased~~decreased by ~~$1.0~~$0.8 million, ~~or 100.0%,~~ for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, primarily due to ~~additional facility-related~~an increase in manufacturing costs at Daikyo during the three months ended June 30, 2017. Equity in net income of affiliated companies decreased by $0.2 million, or 4.3%, for the six months ended June 30, 2018, as compared to the same period in 2017, primarily due to the impact of gains on the sale of investment securities by Daikyo during the six months ended June 30, 2017, partially offset by additional facility-related costs at Daikyo during the six months ended June 30, 2017.Daikyo.

Net Income

Net income for the three months ended ~~June 30, 2018~~March 31, 2019 was ~~$56.1~~$55.4 million, which included the impact of restructuring and related charges of ~~$1.6~~$0.4 million (net of $0.2 million in tax) and a tax benefit of $1.4 million associated with stock-based compensation.

Net income for the three months ended March 31, 2018 was $43.6 million, which included the impact of restructuring and related charges of $2.7 million (net of $0.6 million in tax), a net tax ~~benefit~~charge of ~~$4.8~~$0.3 million for the estimated impact of the 2017 Tax Act, and a tax benefit of ~~$3.4~~$2.1 million associated with our adoption in 2017 of guidance issued by the FASB regarding share-based payment transactions. Net income for the three months ended June 30, 2017 was $38.8 million, which included the impact of a tax benefit of $9.6 million associated with our adoption in 2017 of guidance issued by the FASB regarding share-based payment transactions and a charge of $11.1 million related to the deconsolidation of our Venezuelan subsidiary.stock-based compensation.

Net income for the six months ended June 30, 2018 was $99.7 million, which included the impact of restructuring and related charges of $4.3 million (net of $1.2 million in tax), a net tax benefit of $4.5 million for the estimated impact of the 2017 Tax Act, and a tax benefit of $5.5 million associated with our adoption in 2017 of guidance issued by the FASB regarding share-based payment transactions. Net income for the six months ended June 30, 2017 was $99.7 million, which included the impact of a tax benefit of $25.5 million associated with our adoption in 2017 of guidance issued by the FASB regarding share-based payment transactions and a charge of $11.1 million related to the deconsolidation of our Venezuelan subsidiary.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

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


($ in millions)	2018			2017			2019			2018
Net cash provided by operating activities	$	127.0		$	106.0		$	47.6		$	45.0
Net cash used in investing activities	$	(45.7	)	$	(70.2	)	$	(28.7	)	$	(28.7	)
Net cash used in financing activities	$	(82.6	)	$	(19.5	)	$	(90.5	)	$	(56.9	)

Net Cash Provided by Operating Activities – Net cash provided by operating activities increased by ~~$21.0~~$2.6 million for the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, primarily due to ~~a $20.0 million contribution to our U.S. qualified pension plan during the six months ended June 30, 2017.~~improved operating results, partially offset by changes in asset and liability balances.

Net Cash Used in Investing Activities – Net cash used in investing activities ~~decreased by $24.5 million~~remained constant for the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017, mostly due to~~2018, as an $0.8 million increase in capital expenditures was offset by a ~~$18.8 million~~ decrease in ~~capital spending due to the completion of several major projects in 2017, including certain components of our new facility in Waterford, Ireland.~~other investing activities.

Net Cash Used in Financing Activities – Net cash used in financing activities increased by ~~$63.1~~$33.6 million for the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the same period in ~~2017,~~2018, primarily due to an increase in purchases under our share ~~repurchase~~repurchases programs.

Liquidity and Capital Resources

The table below presents selected liquidity and capital measures:


($ in millions)	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Cash and cash equivalents	$	225.5	$	235.9	$	265.5	$	337.4
Accounts receivable, net					$	318.2	$	288.2
Inventories					$	226.1	$	214.5
Accounts payable					$	137.7	$	130.4
Debt					$	195.5	$	196.1
Equity					$	1,369.5	$	1,396.3
Working capital	$	479.3	$	464.0	$	566.5	$	610.7
Total debt	$	196.4	$	197.0
Total equity	$	1,281.9	$	1,279.9
Net debt-to-total invested capital	N/A		N/A

Cash and cash equivalents include all instruments that have maturities of ninety days or less when purchased. Working capital is defined as current assets less current liabilities. Net debt is defined as total debt less cash and cash equivalents, and total invested capital is defined as the sum of net debt and total equity. Net debt and total invested capital are non-U.S. GAAP financial measures that should not be used as a substitute for the comparable U.S. GAAP financial measures. The non-U.S. GAAP financial measures are incorporated into our discussion and analysis as management believes that this information provides users with a valuable insight into our overall performance and financial position.

Cash and cash equivalents – Our cash and cash equivalents balance at ~~June 30, 2018~~March 31, 2019 consisted of cash held in depository accounts with banks around the world and cash invested in high-quality, short-term investments. The cash and cash equivalents balance at ~~June 30, 2018~~March 31, 2019 included ~~$76.8~~$77.7 million of cash held by subsidiaries within the U.S., and ~~$148.7~~$187.8 million of cash held by subsidiaries outside of the U.S. ~~In response to~~During the ~~2017 Tax Act,~~three months ended March 31, 2019, we ~~reevaluated~~purchased 800,000 shares of our ~~position regarding permanent reinvestment of foreign subsidiary earnings and profits through 2017 (with the exception of China and Mexico) and elected to include in~~common stock under our provision for income taxes for the year ended December 31, 2017 an estimated liability of $9.8 million related to foreign withholding taxes and state income taxes that will be incurred upon the distribution of those foreign subsidiary earnings and profits to the U.S.now-completed calendar-year 2019 share repurchase program at a ~~future date. Following additional analysis~~cost of ~~the 2017 Tax Act, we are asserting, as~~$83.1 million, or an average price of ~~January 1, 2018, indefinite reinvestment related to our investment in all of our foreign subsidiaries.~~$103.89 per share.

Working capital – Working capital at ~~June 30, 2018 increased~~March 31, 2019 decreased by ~~$15.3~~$44.2 million, or ~~3.3%~~7.2%, as compared to December 31, ~~2017,~~2018, including ~~a decrease~~an increase of ~~$17.5~~$0.4 million due to foreign currency translation. Excluding the impact

of currency exchange rates, ~~cash and cash equivalents and inventories decreased by $1.3 million and $1.7 million, respectively, while~~ accounts receivable, inventories and total current liabilities increased by ~~$50.5~~$32.3 million, $13.1 million and ~~$12.8~~$19.6 million, ~~respectively.~~respectively, while cash and cash equivalents decreased by $71.6 million. The increase in accounts receivable was due to increased sales activity and longer customer payment ~~terms, and our adoption of the new revenue recognition guidance.~~terms. The increase in total current liabilities was primarily due to ~~increases~~our adoption of ASC 842, which required us to record operating lease liabilities for operating leases where we are the lessee in our condensed consolidated balance sheet as of March 31, 2019, as well as an increase in income taxes ~~payable and other current liabilities, partially offset by a decrease in accounts~~ payable.

Debt and credit facilities – The $0.6 million decrease in total debt at ~~June 30, 2018,~~March 31, 2019, as compared to December 31, ~~2017,~~2018, primarily resulted from foreign currency rate fluctuations.

Our sources of liquidity include our Credit Facility. At ~~June 30, 2018,~~March 31, 2019, we had ~~$28.9~~$28.1 million in outstanding long-term borrowings under this facility, of which $4.5 million was denominated in Yen and ~~$24.4~~$23.6 million was denominated in Euro. These borrowings, together with outstanding letters of credit of ~~$2.8~~$2.5 million, resulted in a borrowing capacity available under our Credit Facility of ~~$268.3~~$269.4 million at ~~June 30, 2018.~~March 31, 2019. We do not expect any significant limitations on our ability to access this source of funds.

~~Pursuant to the~~The Credit Agreement contains financial covenants inproviding that we shall not permit the ratio of our net consolidated 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.~~modified EBITDA to be greater than 3.5 to 1; provided that, no more than three times during the term of the Credit Agreement, upon the occurrence of a qualified acquisition for each of our four fiscal quarters immediately following such qualified acquisition, the ratio shall be increased to 4.0 to 1. The Credit Agreement also contains customary limitations on liens securing our indebtedness, fundamental changes (mergers, consolidations, liquidations and dissolutions), asset sales, distributions and acquisitions. At ~~June 30, 2018,~~March 31, 2019, we were in compliance with all of our debt covenants.

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

Commitments and Contractual Obligations

A table summarizing the amounts and estimated timing of future cash payments resulting from commitments and contractual obligations was provided in our ~~2017~~2018 Annual Report. During the three months ended ~~June 30, 2018,~~March 31, 2019, there were no material changes outside of the ordinary course of business to our commitments and contractual obligations.

In March 2019, we entered into the Credit Agreement that replaced our prior revolving credit facility, which was scheduled to expire in October 2020. The Credit Agreement expires in March 2024. Please refer to Note 8, Debt, for additional information.

On January 1, 2019, we adopted ASC 842. Please refer to Note 6, Leases, for additional information.

OFF-BALANCE SHEET ARRANGEMENTS

At ~~June 30, 2018,~~March 31, 2019, we had no off-balance sheet financing arrangements other than ~~operating leases,~~ unconditional purchase obligations incurred in the ordinary course of business, and outstanding letters of credit related to various insurance programs, as noted in our ~~2017~~2018 Annual Report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no changes to the Critical Accounting Policies and Estimates disclosed in Part II, Item 7 of our ~~2017~~2018 Annual ~~Report, except for changes relating to our adoption of ASC 606 on January 1, 2018. Please refer to Note 3,~~ ~~Revenue, for our revenue recognition policy as of January 1, 2018.~~Report.

NEW ACCOUNTING STANDARDS

For information on new accounting standards that were adopted, and those issued but not yet adopted, during the three months ended ~~June 30, 2018,~~March 31, 2019, and the impact, if any, on our financial position or results of operations, see Note 2, New Accounting Standards.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this Form 10-Q contains some forward-looking statements that are based on management’s beliefs and assumptions, current expectations, estimates and forecasts. We also provide forward-looking statements in other materials we release to the public, as well as oral forward-looking statements. Such statements provide our current expectations or forecasts of future events. They do not relate strictly to historical or current facts. We have attempted, wherever possible, to identify forward-looking statements by using words such as “plan,” “expect,” “believe,” “intend,” “will,” “estimate,” “continue” and other words of similar meaning in conjunction with, among other things, discussions of future operations and financial performance, as well as our strategy for growth, product development, market position and expenditures. All statements that address operating performance or events or developments that we expect or anticipate will occur in the future - including statements relating to sales and earnings per share growth, cash flows or uses, and statements expressing views about future operating results - are forward-looking statements.

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

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

sales demand and our ability to meet that demand;

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

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

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

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


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

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

maintaining or improving production efficiencies and overhead absorption;

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

the loss of key personnel or highly-skilled employees;

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

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

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

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

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

the relative strength of USD in relation to other currencies, particularly the Euro, SGD, the Danish Krone, Yen, ~~Venezuelan Bolivar,~~ Colombian ~~and Argentinian~~ Peso, and Brazilian Real; and

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

This list sets forth many, but not all, of the factors that could affect our ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all of the factors and should not consider this list to be a complete statement of all potential risks and uncertainties. For further discussion of these and other factors, see the risk factors disclosed in Part I, Item 1A of our ~~2017~~2018 Annual Report. Except as required by law or regulation, we do not intend to update any forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk or the information provided in Part II, Item 7A of our ~~2017~~2018 Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

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

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under

the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our CEO and CFO have concluded that, as of ~~June 30, 2018~~March 31, 2019, our disclosure controls and procedures are effective.

Changes in Internal Controls

During the quarter ended ~~June 30, 2018,~~March 31, 2019, there have been no changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On January 1, ~~2018,~~2019, we adopted ASC ~~606.~~842. Although our adoption of ASC ~~606~~842 resulted in no change to our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, we did implement changes to our internal controls relating to ~~revenue.~~leases. These changes included the development of new policies, ~~based on a five-step model provided in ASC 606,~~ enhanced contract review requirements, and other ongoing monitoring activities. These controls were designed to provide assurance at a reasonable level of the fair presentation of our condensed consolidated financial statements and related disclosures.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

There are no material changes to the risk factors disclosed in Part I, Item 1A of our ~~2017~~2018 Annual Report.

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

The following table shows information with respect to purchases of our common stock made during the three months ended ~~June 30, 2018~~March 31, 2019 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)(2)(3)

Average price paid per share (1)(2)(3)

Total number of shares purchased as part of publicly announced plans or programs (3)

Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (3)
April 1 – 30, 2018 7,716
$ 92.00
—
260,000
May 1 – 31, 2018 260,160
88.02
260,000
—
June 1 – 30, 2018 —
—
—
—
Total 267,876
$ 88.14
260,000
—



Period	Total number of shares purchased (1)	Average price paid per share (1)		Total number of shares purchased as part of publicly announced plans or programs (1)	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (1)
January 1 – 31, 2019	—	$	—	—	—
February 1 – 28, 2019	—	—		—	800,000
March 1 – 31, 2019	800,000	103.89		800,000	—
Total	800,000	$	103.89	800,000	—


(1)	Includes 160 shares purchased on behalf of employees enrolled in the Non-Qualified Deferred Compensation Plan for Designated Employees (Amended and Restated Effective January 1, 2008). Under the plan, Company match contributions are delivered to the plan’s investment administrator, who then purchases shares in the open market and credits the shares to individual plan accounts.


~~(2)~~	Includes 7,716 shares of common stock acquired from employees who tendered already-owned shares to satisfy the withholding tax obligations on the vesting of restricted stock awards, as part of the 2016. Plan.

~~(3)~~

ITEM 5. OTHER INFORMATION

Our 2019 Annual Meeting of Shareholders was held on May 7, 2019 at our corporate headquarters. Our shareholders voted on three proposals at the Annual Meeting. The proposals are described in detail in our proxy statement filed on March 22, 2019. As of March 12, 2019, the record date, there were 73,737,479 shares outstanding. Shareholders representing 68,175,507 or 92.5%, of the common shares outstanding were present in person or were represented by proxy at the Annual Meeting. The final results for the votes on each proposal are set forth below.

Proposal 1: Our shareholders elected the following directors to serve on our Board until the 2020 Annual Meeting of Shareholders:



Name	For	Against	Abstain	Broker Non-Votes
Mark A. Buthman	65,648,515	101,085	105,928	2,319,979
William F. Feehery	65,677,503	72,037	105,988	2,319,979
Eric M. Green	65,601,559	143,775	110,194	2,319,979
Thomas W. Hofmann	65,501,887	249,252	104,389	2,319,979
Paula A. Johnson	65,459,266	290,683	105,579	2,319,979
Deborah L. V. Keller	65,679,725	71,666	104,137	2,319,979
Myla P. Lai-Goldman	65,616,760	135,793	102,975	2,319,979
Douglas A. Michels	65,582,680	169,559	103,289	2,319,979
Paolo Pucci	65,656,003	94,575	104,950	2,319,979
Patrick J. Zenner	65,377,202	372,985	105,341	2,319,979

Proposal 2: Our shareholders approved, on an advisory basis, our named executive officer compensation:



For	Against	Abstain	Broker Non-Votes
64,498,770	1,199,052	157,706	2,319,979

Proposal 3: Our shareholders ratified the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2019 fiscal year. The votes regarding this proposal were as follows:



For	Against	Abstain	Broker Non-Votes
66,421,973	1,641,381	112,153	Not applicable

ITEM 6. EXHIBITS

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

SIGNATURE

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

WEST PHARMACEUTICAL SERVICES, INC.

(Registrant)

By: /s/ Bernard J. Birkett

Bernard J. Birkett

Senior Vice President, Chief Financial Officer and Treasurer

~~July 31, 2018~~May 8, 2019

EXHIBIT INDEX



Exhibit #	Description
3.1	Our Amended and Restated Articles of Incorporation are incorporated by reference from our Form 10-Q report for the quarter ended March 31, 2015.
3.2	Our Bylaws, as amended through May 5, 2015, are incorporated by reference from our Form 10-Q report for the quarter ended March 31, 2015.
4.1	Form of stock certificate for common stock is incorporated by reference from our annual report on Form 10-K dated May 6, 1999.
4.2	Article 5, 6, 8(c) and 9 of our Amended and Restated Articles of Incorporation are incorporated by reference from our Form 10-Q report for the quarter ended March 31, 2015.
4.3	Article I and V of our Bylaws, as amended through May 5, 2015, are incorporated by reference from our Form 10-Q report for the quarter ended March 31, 2015.
4.4 ⁽¹⁾	Instruments defining the rights of holders of long-term debt securities of West and its subsidiaries have been omitted.
10.1	~~Employment~~Credit Agreement, dated ~~May 29, 2018,~~as of March 28, 2019, between usWest, certain of its subsidiaries, the lenders party thereto from time to time, Bank of America, N.A., as Administrative Agent, Swing Line Lender and ~~Bernard J. Birkett,~~an Issuing Lender; Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, MUFG Bank, Ltd., and JPMorgan Chase Bank, N.A., as Joint Lead Arrangers and Joint Bookrunners, and Wells Fargo Bank, National Association, MUFG Bank, Ltd., and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, is incorporated by reference from our Form 8-K dated ~~June 21, 2018.~~April 1, 2019.
10.2⁽²⁾	~~Amended Agreement, dated and effective July 2, 2018, between Daikyo Seiko, Ltd. and us.~~Form of 2019 Performance Stock Unit (PSU) Award issued under the 2016 Omnibus Incentive Compensation Plan.
10.3	Form of 2019 Stock Option Award issued under the 2016 Omnibus Incentive Compensation Plan.
31.1	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

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

⁽²⁾~~Certain portions of this exhibit have been omitted pursuant to a confidential treatment request submitted to the SEC.~~

* Furnished, not filed.

F-1



($ in millions)	Balance at December 31, 2017		Adjustments Due to ASC 606			Balance at January 1, 2018
Assets:
Accounts receivable, net	$	253.2	$	25.0		$	278.2
Inventories	215.2		(20.8		)	194.4
Other current assets	39.2		(8.4		)	30.8

Liabilities and Equity:
Other current liabilities	$	77.0	$	(13.7	)	$	63.3
Deferred income taxes	10.4		3.0			13.4
Other long-term liabilities	42.6		(4.9		)	37.7
Retained earnings	1,178.2		11.4			1,189.6



($ in millions)	As Reported		Balances without Adoption of ASC 606		Effects of Change (Lower)/Higher
Net sales	$	447.5	$	452.6	$	(5.1	)
Cost of goods and services sold	305.3		305.9		(0.6		)
Research and development	10.8		10.9		(0.1		)
Other expense	1.1		0.9		0.2
Income tax expense	6.0		6.8		(0.8		)
Net income	$	56.1	$	59.9	$	(3.8	)



	($ in millions)
Contract assets, December 31, 2017	$	7.5
Contract assets, June 30, 2018	6.0
Change in contract assets - (decrease) increase	$	(1.5	)

Deferred income, December 31, 2017	$	(33.6	)
Deferred income, June 30, 2018	(24.2		)
Change in deferred income - decrease (increase)	$	9.4



	Amount of Gain (Loss) Recognized in OCI for the						Amount of Loss (Gain) Reclassified from Accumulated OCI into Income for the				Location of Loss (Gain) Reclassified from Accumulated OCI into Income
	Three Months Ended June 30,						Three Months Ended June 30,
($ in millions)	2018			2017			2018		2017
Cash Flow Hedges:
Foreign currency hedge contracts	$	0.5		$	(1.2	)	$	0.3	$	0.2	Net sales
Foreign currency hedge contracts	(0.2		)	(2.2		)	0.1		0.1		Cost of goods and services sold
Interest rate swap contracts	—			—			—		0.2		Interest expense
Total	$	0.3		$	(3.4	)	$	0.4	$	0.5
Net Investment Hedges:
Foreign currency-denominated debt	$	1.2		$	(0.9	)	$	—	$	—	Other expense
Total	$	1.2		$	(0.9	)	$	—	$	—



($ in millions)	Losses on cash flow hedges			Unrealized gains on investment securities		Defined benefit pension and other postretirement plans			Foreign currency translation			Total
Balance, December 31, 2017	$	(4.2	)	$	0.5	$	(39.0	)	$	(74.6	)	$	(117.3	)
Other comprehensive income (loss) before reclassifications	1.5			—		0.5			(29.6		)	(27.6		)
Amounts reclassified out	1.4			—		(0.2		)	—			1.2
Other comprehensive income (loss), net of tax	2.9			—		0.3			(29.6		)	(26.4		)
Balance, June 30, 2018	$	(1.3	)	$	0.5	$	(38.7	)	$	(104.2	)	$	(143.7	)



Period	Total number of shares purchased (1)(2)(3)	Average price paid per share (1)(2)(3)		Total number of shares purchased as part of publicly announced plans or programs (3)	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (3)
April 1 – 30, 2018	7,716	$	92.00	—	260,000
May 1 – 31, 2018	260,160	88.02		260,000	—
June 1 – 30, 2018	—	—		—	—
Total	267,876	$	88.14	260,000	—