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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to
Commission File Number 1-8036
wstlogoq319.jpg
WEST PHARMACEUTICAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania23-1210010
 (State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
530 Herman O. West Drive, Exton, PA
19341-1147
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: 610-594-2900
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.25 per shareWSTNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.          Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                      Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑ Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                                                      ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
As of October 22, 2024, there were 72,422,349 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS
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ITEM 1A.
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2
PART I. FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
West Pharmaceutical Services, Inc. and Subsidiaries
(in millions, except per share data)

 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2024202320242023
Net sales$746.9 $747.4 $2,144.4 $2,217.8 
Cost of goods and services sold482.2 459.1 1,419.5 1,366.8 
Gross profit264.7 288.3 724.9 851.0 
Research and development15.5 16.4 50.6 50.0 
Selling, general and administrative expenses83.5 89.0 253.2 263.4 
Other expense (income) (Note 14)4.4 5.6 10.8 22.5 
Operating profit161.3 177.3 410.3 515.1 
Interest expense, net0.7 2.9 3.8 7.8 
Interest income(4.6)(8.8)(14.8)(18.6)
Other nonoperating expense (income)0.7 (3.8)0.7 (3.9)
Income before income taxes and equity in net income of affiliated companies164.5 187.0 420.6 529.8 
Income tax expense32.4 29.4 70.7 87.8 
Equity in net income of affiliated companies(3.9)(3.7)(12.7)(14.4)
Net income$136.0 $161.3 $362.6 $456.4 
Net income per share:   
Basic$1.87 $2.17 $4.96 $6.13 
Diluted$1.85 $2.14 $4.91 $6.05 
Weighted average shares outstanding:    
Basic72.8 74.3 73.1 74.4 
Diluted73.4 75.3 73.8 75.5 

See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
West Pharmaceutical Services, Inc. and Subsidiaries
(in millions)
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2024202320242023
Net income$136.0 $161.3 $362.6 $456.4 
Other comprehensive income (loss), net of tax:   
Foreign currency translation adjustments, net of tax of $(2.5), $0.4, $(0.8) and $1.9, respectively
74.7 (40.9)6.7 (36.9)
Defined benefit pension and other postretirement plan adjustments, net of tax of $(0.2), $0.0, $(0.3), and $(0.5), respectively
(0.8)0.2 (1.2)(1.2)
Net gain (loss) on equity affiliate accumulated other comprehensive income, net of tax of $0.0, $0.0, $0.0 and $0.0, respectively
0.2 — — (0.1)
Net gain (loss) on derivatives, net of tax of $1.1, $0.8, $0.7 and $(0.3), respectively
6.5 1.2 2.0 (1.8)
Other comprehensive income (loss), net of tax80.6 (39.5)7.5 (40.0)
Comprehensive income$216.6 $121.8 $370.1 $416.4 

See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
West Pharmaceutical Services, Inc. and Subsidiaries
(in millions, except per share data)September 30,
2024		December 31,
2023
ASSETS  
Current assets:  
Cash and cash equivalents$490.9 $853.9 
Accounts receivable, net524.3 512.0 
Inventories401.2 434.7 
Other current assets134.2 135.8 
Total current assets1,550.6 1,936.4 
Property, plant and equipment2,990.7 2,738.0 
Less: accumulated depreciation and amortization1,419.7 1,324.7 
Property, plant and equipment, net1,571.0 1,413.3 
Operating lease right-of-use assets108.0 99.2 
Investments in affiliated companies217.5 210.0 
Goodwill108.8 108.5 
Intangible assets, net12.3 15.1 
Deferred income taxes37.6 25.7 
Other noncurrent assets69.3 21.3 
Total Assets$3,675.1 $3,829.5 
LIABILITIES AND EQUITY  
Current liabilities:  
Notes payable and other current debt$— $134.0 
Accounts payable224.3 242.4 
Accrued salaries, wages and benefits79.6 105.9 
Income taxes payable33.4 16.6 
Operating lease liabilities19.9 17.7 
Other current liabilities159.3 155.2 
Total current liabilities516.5 671.8 
Long-term debt202.6 72.8 
Deferred income taxes9.4 12.7 
Pension and other postretirement benefits30.2 29.6 
Operating lease liabilities82.3 84.5 
Deferred compensation benefits15.2 18.6 
Other long-term liabilities66.8 58.5 
Total Liabilities923.0 948.5 
Commitments and contingencies (Note 16)
Equity:
Preferred stock, 3.0 million shares authorized; 0 shares issued and outstanding
— — 
Common stock, par value $0.25 per share; 200.0 million shares authorized; shares issued: September 30, 2024 - 75.3 million, December 31, 2023 - 75.3 million; shares outstanding: September 30, 2024 - 72.5 million, December 31, 2023 - 73.5 million
18.8 18.8 
Capital in excess of par value23.3 120.2 
Retained earnings3,856.9 3,523.4 
Accumulated other comprehensive loss(136.3)(143.8)
Treasury stock, at cost (September 30, 2024 - 2.8 million, December 31, 2023 - 1.8 million)
(1,010.6)(637.6)
Total Equity2,752.1 2,881.0 
Total Liabilities and Equity$3,675.1 $3,829.5 
See accompanying notes to condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
West Pharmaceutical Services, Inc. and Subsidiaries
(in millions)
 Nine Months Ended
September 30,
 20242023
Cash flows from operating activities:  
Net income$362.6 $456.4 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation112.0 99.1 
Amortization2.7 2.3 
Stock-based compensation14.4 21.9 
Loss on disposal of plant— 11.6 
Asset impairments1.9 6.9 
Other non-cash items, net(9.7)(13.5)
Changes in assets and liabilities
(20.6)(47.3)
Net cash provided by operating activities463.3 537.4 
Cash flows from investing activities:  
Capital expenditures(272.1)(253.3)
Other, net(1.8)(6.6)
Net cash used in investing activities(273.9)(259.9)
Cash flows from financing activities:  
Borrowings of long-term debt164.7 — 
Repayments of long-term debt(169.0)(1.7)
Principal repayments on finance leases(23.2)— 
Dividend payments(43.8)(42.2)
Proceeds from stock-based compensation awards24.0 42.6 
Employee stock purchase plan contributions5.6 5.3 
Shares purchased under share repurchase programs(506.5)(261.3)
Shares repurchased for employee tax withholdings(5.5)(12.8)
Net cash used in financing activities(553.7)(270.1)
Effect of exchange rates on cash1.3 (3.1)
Net (decrease) increase in cash and cash equivalents(363.0)4.3 
Cash, including cash equivalents at beginning of period853.9 894.3 
Cash, including cash equivalents at end of period$490.9 $898.6 

See accompanying notes to condensed consolidated financial statements.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1:  Basis of Presentation

Basis of Presentation: The condensed consolidated financial statements included in this report are unaudited and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting and U.S. Securities and Exchange Commission (“SEC”) regulations. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, these financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, cash flows and the change in equity for the periods presented. The condensed consolidated financial statements for the three and nine months ended September 30, 2024, 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, 2023 (the “2023 Annual Report”). The results of operations for any interim period are not necessarily indicative of results for the full year.

Note 2:  New Accounting Standards

Standards Issued Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued guidance that seeks to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and enhancement of interim disclosure requirements. This guidance is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. The Company does not expect the adoption to have a material impact on the consolidated financial statements and disclosures.

In December 2023, the FASB issued guidance that seeks to enhance income tax disclosures to provide information to better assess how an entity's operations and related tax risks affect its tax rate and prospects for future cash flows. Within the income tax rate reconciliation, the amendment requires disclosure of additional categories and greater detail about individual reconciling items over a specified threshold. It also requires information pertaining to taxes paid to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions over a specified threshold. This guidance is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the impact of this guidance on our financial statements and disclosures, but we do not expect the adoption to have a material impact on the consolidated financial statements other than the expanded footnote disclosure.

7
Note 3:  Revenue

Our revenue results from the sale of goods or services and reflects the consideration to which we expect to be entitled in exchange for those goods or services. We record revenue based on a five-step model, in accordance with Accounting Standards Codification (“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.

The following table presents the approximate percentage of our net sales by market group:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Biologics
40 %
40 %
38 %
37 %
Generics
 18 %
19 %
17 %
20 %
Pharma
23 %
22 %
25 %
24 %
Contract-Manufactured Products
19 %
19 %
20 %
19 %
100 %
100 %
100 %
100 %

The following table presents the approximate percentage of our net sales by product category:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
High-Value Product ("HVP") Components
45 %
50 %
46 %
50 %
High-Value Product ("HVP") Delivery Devices
16 %
11 %
12 %
10 %
Standard Packaging
20 %
20 %
22 %
21 %
Contract-Manufactured Products
19 %
19 %
20 %
19 %
100 %
100 %
100 %
100 %

Due to the Company's reassessment of product categories, beginning in the second quarter of 2023, certain product types have been moved from HVP Components to HVP Delivery Devices. No adjustments were made to the product categorization prior to the second quarter of 2023.

The following table presents the approximate percentage of our net sales by geographic location:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Americas
48 %
46 %
44 %
45 %
Europe, Middle East, Africa
44 %
46 %
47 %
46 %
Asia Pacific
8 %
8 %
9 %
9 %
100 %
100 %
100 %
100 %

8
Contract Assets and Liabilities

The following table summarizes our contract assets and liabilities:
($ in millions)
Contract assets, December 31, 2023
$21.5 
Contract assets, September 30, 2024
42.3 
Change in contract assets - increase (decrease)$20.8 
Deferred income, December 31, 2023
$(53.9)
Deferred income, September 30, 2024
(53.8)
Change in deferred income - decrease (increase)$0.1 

Contract assets are included within other current assets and deferred income is included within other current liabilities and other long-term liabilities. During the nine months ended September 30, 2024, $32.8 million of revenue was recognized that was included in deferred income at the beginning of the year.

The majority of the performance obligations within our contracts are satisfied within one year or less. Performance obligations satisfied beyond one year are not material as of September 30, 2024.

Note 4:  Net Income Per Share

The following table reconciles the shares used in the calculation of basic net income per share to those used for diluted net income per share:
Three Months Ended
September 30,		Nine Months Ended
September 30,
($ in millions)2024202320242023
Net income$136.0 $161.3 $362.6 $456.4 
Weighted average common shares outstanding72.8 74.3 73.1 74.4 
Dilutive effect of equity awards, based on the treasury stock method
0.6 1.0 0.7 1.1 
Weighted average shares assuming dilution73.4 75.3 73.8 75.5 

During the three months ended September 30, 2024 and 2023, there were 0.3 million and less than 0.1 million shares, respectively, from stock-based compensation plans not included in the computation of diluted net income per share because their impact was antidilutive. There were 0.3 million and 0.1 million antidilutive shares excluded during the nine months ended September 30, 2024 and 2023, respectively.

9
In February 2023, the Board of Directors approved a share repurchase program under which we may repurchase up to $1.0 billion in shares of common stock. The share repurchase program does not have an expiration date under which we may repurchase common stock on the open market or in privately-negotiated transactions. The number of shares to be repurchased and the timing of such transactions will depend on a variety of factors, including market conditions. The below table summarizes the details of the Company's repurchases of common stock under this program:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Shares repurchased170,771 77,329 1,409,786 753,399 
Total cost of repurchases ($ in millions)$52.4 $27.8 $506.5 $261.3 
Average price per repurchased share$306.34 $360.25 $359.24 $346.86 

Note 5:  Inventories

Inventories are valued at the lower of cost (on a first-in, first-out basis) or net realizable value. Inventory balances were as follows:
($ in millions)September 30,
2024		December 31,
2023
Raw materials$170.3 $172.3 
Work in process80.0 87.3 
Finished goods150.9 175.1 
 $401.2 $434.7 

Note 6:  Leases

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

The components of lease expense were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
($ in millions)2024202320242023
Operating lease cost$6.4 $4.3 $18.1 $15.0 
Finance lease - amortization of right-of-use (ROU) assets0.3 — 0.6 — 
Finance lease - interest on lease liabilities0.1 — 0.1 — 
Short-term lease cost0.8 1.9 1.9 4.4 
Variable lease cost2.5 1.4 6.3 4.4 
Total lease cost$10.1 $7.6 $27.0 $23.8 

10
As of December 31, 2023, finance leases were not material. The following table summarizes the finance lease amounts in the condensed consolidated balance sheets as of September 30, 2024:
September 30,
($ in millions)Balance Sheet Classification2024
ROU assets, netOther noncurrent assets$31.9 
Lease liabilities (current)Other current liabilities$0.9 
Lease liabilities (noncurrent)Other long-term liabilities$2.2 

Supplemental cash flow information related to leases were as follows:
Nine Months Ended
September 30,
($ in millions)20242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$26.3 $14.4 
Financing cash flows from finance leases$23.2 $— 
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases$36.8 $6.6 
Finance leases$24.3 $— 

As of September 30, 2024 and December 31, 2023, the weighted average remaining lease term for operating leases was 8.5 years and 9.8 years, respectively. As of September 30, 2024, the weighted average remaining lease term for finance leases was 7.0 years. As of December 31, 2023, finance leases were not material.

As of September 30, 2024 and December 31, 2023, the weighted average discount rate for operating leases was 3.84% and 3.55%, respectively. As of September 30, 2024, the weighted average discount rate for finance leases was 4.92%. As of December 31, 2023, finance leases were not material.

Maturities of the Company's lease liabilities as of September 30, 2024 were as follows:
($ in millions)
YearOperating LeasesFinance Leases
2024 (remaining period as of September 30, 2024)
$6.2 $0.2 
202523.2 0.9 
202620.2 0.9 
202715.5 0.8 
202814.1 0.5 
Thereafter37.2 0.1 
116.4 3.4 
Less: imputed lease interest(14.2)(0.3)
Total lease liabilities$102.2 $3.1 


11
Note 7:  Affiliated Companies

The following table summarizes the aggregate carrying amounts of our investments in affiliated companies that are accounted for under the equity method and our investments in affiliated companies that are not accounted for under the equity method:
September 30,December 31,
($ in millions)20242023
Aggregate carrying value of investments in affiliated companies:
   Equity method affiliates$210.3 $203.2 
   Non-equity method affiliates7.2 6.8 
Total investments in affiliated companies$217.5 $210.0 
We have elected to record non-equity method investments, for which fair value was not readily determinable, at cost, less impairment, adjusted for subsequent observable price changes. We test these investments for impairment whenever circumstances indicate that the carrying value of the investments may not be recoverable.

The following table summarizes the amounts due to and from affiliates in the condensed consolidated balance sheets:
September 30,December 31,
($ in millions)20242023
Payables due to affiliates$24.8 $25.9 
Receivables due from affiliates$2.7 $1.6 

The following table summarizes the Company's affiliate transactions:
Three Months Ended
September 30,		Nine Months Ended
September 30,
($ in millions)2024202320242023
Purchases from (and payments to) affiliates$30.1 $34.4 $83.6 $118.5 
Sales to affiliates$3.5 $2.5 $10.7 $8.5 

The majority of the purchase transactions listed above relate to a distributorship agreement with Daikyo Seiko, Ltd. ("Daikyo") that allows us to purchase and re-sell Daikyo products.

12
Note 8:  Debt

The following table summarizes our long-term debt obligations, net of unamortized debt issuance costs and current maturities. The interest rates shown in parentheses are as of the corresponding balance sheet date reflected in the table below.
($ in millions)September 30,
2024		December 31,
2023
Term Loan, due July 2, 2027 (6.67%)
$130.0 $— 
Term Loan, due December 31, 2024 (6.32%)
— 81.0 
Series B notes, due July 5, 2024 (3.82%)
— 53.0 
Series C notes, due July 5, 2027 (4.02%)
73.0 73.0 
203.0 207.0 
Less: unamortized debt issuance costs0.4 0.2 
Total debt202.6 206.8 
Less: current portion of long-term debt— 134.0 
Long-term debt, net$202.6 $72.8 

Credit Facility

On July 2, 2024, the Company entered into the Third Amendment to the Credit Facility Agreement, which amended the Existing Credit Facility Agreement. Among other changes to the existing credit agreement, the Third Amendment established an incremental term loan in the stated principal amount of $130.0 million (the “New Term Loan”), which was fully drawn at closing and matures on July 2, 2027. The entire stated principal amount of the New Term Loan is due at maturity and there is no scheduled amortization prior to such date. Together with cash on hand, proceeds from the New Term Loan were used to repay an outstanding term loan under the Existing Credit Facility Agreement in the principal amount of $79.9 million prior to its December 31, 2024 maturity date and to repay an aggregate principal amount of $53.0 million of the Company’s 3.82% Series B Senior Notes due July 5, 2024 issued under that certain Note Purchase Agreement dated as of July 5, 2012.

At September 30, 2024, the borrowing capacity available under our $500.0 million multi-currency revolving credit facility, including outstanding letters of credit of $2.4 million, was $497.6 million.

Term Loan

At September 30, 2024, we had $130.0 million in borrowings under the New Term Loan which were classified as long-term. Please refer to Note 9, Derivative Financial Instruments, for a discussion of the foreign currency hedge associated with the New Term Loan.

Pursuant to the financial covenants in our debt agreements, we are required to maintain established interest coverage ratios and to not exceed established leverage ratios. In addition, the agreements contain other customary covenants, none of which we consider restrictive to our operations. At September 30, 2024, we were in compliance with all of our debt covenants.

Note 9:  Derivative Financial Instruments

Our ongoing business operations expose us to various risks, such as fluctuating interest rates, foreign currency exchange rates and increasing commodity prices. To manage these market risks, we periodically enter into derivative financial instruments, such as interest rate swaps, options and foreign exchange contracts for periods consistent with, and for notional amounts equal to or less than, the related underlying exposures. We do not purchase or hold any derivative financial instruments for investment or trading purposes. All derivatives are recorded in our condensed consolidated balance sheet at fair value.
13

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 September 30, 2024 the notional amount of these forward exchange contracts was Singapore Dollar (“SGD”) 421.9 million and $13.4 million. As of December 31, 2023 the notional amount of these forward exchange contracts was SGD 601.5 million and $13.4 million. We have also entered into forward exchange contracts, designated as fair value hedges, to manage our exposure to fluctuating foreign exchange rates on cross-currency intercompany demand notes which were executed at various times throughout 2023 and 2024. As of September 30, 2024, the total notional amounts of these forward exchange contracts were Euro ("EUR") 143.9 million and $47.1 million. As of December 31, 2023, the total notional amounts of these forward exchange contracts were EUR 278.6 million and SGD 94.0 million.

In addition, we have entered into several foreign currency contracts, designated as cash flow hedges, for periods of up to eighteen months, intended to hedge the currency risk associated with a portion of our forecasted transactions denominated in foreign currencies. As of September 30, 2024, we had outstanding foreign currency contracts to purchase and sell certain pairs of currencies, as follows:

(in millions)Sell
CurrencyPurchaseUSDEuroSGD
EUR24.1 26.5 — — 
Yen6,102.9 28.7 11.4 1.7 
SGD43.4 19.0 12.5 — 

In December 2019, we entered into a cross-currency swap for $90 million, which we designated as a hedge of our net investment in Daikyo. The cross-currency swap had an original maturity date of December 31, 2024, but was extinguished in July 2024. In July 2024, we entered into a new cross-currency swap for $130 million, which we designated as a hedge of our net investment in Daikyo. As of September 30, 2024, the notional amount of the cross-currency swap is ¥17.0 billion ($130.0 million) and the swap termination date is July 2, 2027. Under the cross-currency swap, we receive fixed USD interest rate payments in return for paying fixed JPY interest rate payments.

Additionally, we will periodically enter into forward exchange contracts to mitigate our exposure to fluctuating foreign exchange rates on assets and liabilities, other than the intercompany loans and demand notes referenced above, which are denominated in foreign currencies. The Company has elected not to designate these forward contracts in hedging relationships, and any change in the value of the contracts is recognized in income.

Commodity Price Risk

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

From November 2017 through September 2024, we purchased several series of call options for a total of 1,106,908 barrels of crude oil to mitigate our exposure to such oil-based surcharges and protect operating cash flows with regard to a portion of our forecasted elastomer purchases.

As of September 30, 2024, we had outstanding contracts to purchase 187,861 barrels of crude oil from September 2024 to March 2026, at a weighted-average strike price of $85.66 per barrel.

14
Effects of Derivative Instruments on Financial Position and Results of Operations

Please refer to Note 10, Fair Value Measurements, for the balance sheet location and fair values of our derivative instruments as of September 30, 2024 and December 31, 2023.

The following table summarizes the effects of derivative instruments designated as fair value hedges on the condensed consolidated statements of income:
Amount of Gain (Loss) Recognized in Income for theAmount of Gain (Loss) Recognized in Income for the
Three Months Ended
September 30,		Nine Months Ended
September 30,		Location on Statement of Income
($ in millions)2024202320242023
Fair Value Hedges:
Hedged item (intercompany loan)
$(16.6)$(1.2)$(6.2)$8.7 Other expense (income)
Derivative designated as hedging instrument
16.6 0.7 6.2 (10.0)Other expense (income)
Amount excluded from effectiveness testing
(1.8)(1.5)(5.3)(0.4)Other expense (income)
Total$(1.8)$(2.0)$(5.3)$(1.7)

We recognize in earnings the initial value of forward point components for hedges of intercompany loans on a straight-line basis over the life of the fair value hedge. The value of forward point components for hedges of intercompany demand notes is recognized currently in earnings using a market approach. The expense recognized in earnings, pre-tax, for forward point components for the three and nine months ended September 30, 2024 was $1.8 million and $5.3 million, respectively. The income recognized in earnings, pre-tax, for forward point components for the three and nine months ended September 30, 2023 was $0.2 million and $1.6 million, respectively.

15
The following tables summarize the effects of derivative instruments designated as fair value, cash flow, and net investment hedges on other comprehensive income (“OCI”) and earnings, net of tax:
 Amount of Gain (Loss) Recognized in OCI for theAmount of (Gain) Loss Reclassified from Accumulated OCI into Income for theLocation of (Gain) Loss Reclassified from Accumulated OCI into Income
Three Months Ended
September 30,		Three Months Ended
September 30,
($ in millions)2024202320242023 
Fair Value Hedges:
Foreign currency hedge contracts$0.5 $(0.3)$— $2.3 Other expense (income)
Total$0.5 $(0.3)$— $2.3 
Cash Flow Hedges:     
Foreign currency hedge contracts$0.2 $0.5 $— $0.1 Net sales
Foreign currency hedge contracts5.3 (2.5)0.5 1.1 Cost of goods and services sold
Forward treasury locks— — — — Interest expense
Total$5.5 $(2.0)$0.5 $1.2  
Net Investment Hedges:     
Cross-currency swap$(8.1)$2.9 $— $— Other expense (income)
Total$(8.1)$2.9 $— $—  
 Amount of Gain (Loss) Recognized in OCI for theAmount of (Gain) Loss Reclassified from Accumulated OCI into Income for theLocation of (Gain) Loss Reclassified from Accumulated OCI into Income
Nine Months Ended
September 30,		Nine Months Ended
September 30,
($ in millions)2024202320242023 
Fair Value Hedges:
Foreign currency hedge contracts$0.7 $(2.3)$(0.7)$4.2 Other expense (income)
Total$0.7 $(2.3)$(0.7)$4.2 
Cash Flow Hedges:     
Foreign currency hedge contracts$0.3 $(0.4)$(0.2)$1.2 Net sales
Foreign currency hedge contracts(1.3)(6.1)3.1 1.5 Cost of goods and services sold
Forward treasury locks— — 0.1 0.1 Interest expense
Total$(1.0)$(6.5)$3.0 $2.8  
Net Investment Hedges:     
Cross-currency swap$0.3 $10.1 $— $— Other expense (income)
Total$0.3 $10.1 $— $—  
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Refer to the above table which summarizes the effects of derivative instruments designated as fair value hedges within the other expense (income) line in our condensed consolidated statements of income for the three and nine months ended September 30, 2024 and September 30, 2023. The following table summarizes the effects of derivative instruments designated as cash flow and net investment hedges by line item in our condensed consolidated statements of income:
Three Months Ended
September 30,		Nine Months Ended
September 30,
($ in millions)2024202320242023
Net sales$— $0.1 $(0.2)$1.2 
Cost of goods and services sold0.5 1.1 3.1 1.5 
Interest expense— — 0.1 0.1 


The following table summarizes the effects of derivative instruments not designated as hedges on the condensed consolidated statements of income:
Amount of (Loss) Gain Recognized in Income for theAmount of Gain (Loss) Recognized in Income for the
Three Months Ended
September 30,		Nine Months Ended
September 30,		Location on Statement of Income
($ in millions)2024202320242023
Commodity call options$(0.5)$0.5 $(0.6)$(0.5)Other expense (income)
Currency Forwards(3.2)— (2.7)(0.2)Other expense (income)
Total$(3.7)$0.5 $(3.3)$(0.7)

For the three and nine months ended September 30, 2024 and 2023, there was no material ineffectiveness related to our hedges.

Note 10:  Fair Value Measurements

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

•Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

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The following tables present the assets and liabilities recorded at fair value on a recurring basis:
 Balance atBasis of Fair Value Measurements
($ in millions)September 30,
2024		Level 1Level 2Level 3
Assets:    
Deferred compensation assets$11.3 $11.3 $— $— 
Money market funds128.5 128.5 — — 
Time deposits73.5 — 73.5 — 
Foreign currency contracts19.7 — 19.7 — 
Cross-currency swap15.1 — 15.1 — 
Commodity call options0.2 — 0.2 — 
 $248.3 $139.8 $108.5 $— 
Liabilities:    
Contingent consideration$3.7 $— $— $3.7 
Deferred compensation liabilities11.4 11.4 — — 
Foreign currency contracts9.9 — 9.9 — 
 $25.0 $11.4 $9.9 $3.7 
 Balance atBasis of Fair Value Measurements
($ in millions)December 31,
2023		Level 1Level 2Level 3
Assets:    
Deferred compensation assets$10.2 $10.2 $— $— 
Money market funds404.4 404.4 — — 
Time deposits47.9 — 47.9 — 
Foreign currency contracts5.0 — 5.0 — 
Cross-currency swap18.4 — 18.4 — 
Commodity call options0.6 — 0.6 — 
 $486.5 $414.6 $71.9 $— 
Liabilities:    
Contingent consideration$3.6 $— $— $3.6 
Deferred compensation liabilities10.4 10.4 — — 
Foreign currency contracts2.2 — 2.2 — 
 $16.2 $10.4 $2.2 $3.6 

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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. Money market funds are included within cash and cash equivalents and are valued based on quoted market prices in active markets, with no valuation adjustment. Time deposits are included within cash and cash equivalents and are valued using relevant observable market inputs including quoted prices for similar assets and interest rate curves. The fair value of our foreign currency contracts, included within other current and other noncurrent assets, as well as other current and other long-term liabilities, is valued using an income approach based on quoted forward foreign exchange rates and spot rates at the reporting date. The fair value of the cross-currency swap, included within other noncurrent assets, is valued using a market approach. Please refer to Note 9, Derivative Financial Instruments, for further discussion of our derivatives. 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 the contingent consideration liability, within current and long-term liabilities, related to the SmartDose® technology platform (the “SmartDose® contingent consideration”) was initially determined using a probability-weighted income approach, and is revalued at each reporting date or more frequently if circumstances dictate. Changes in the fair value of this obligation are recorded as income or expense within other expense (income) in our condensed consolidated statements of income. 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.

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 September 30, 2024, the estimated fair value of long-term debt was $201.6 million compared to a carrying amount of $202.6 million. At December 31, 2023, the estimated fair value of short-term and long-term debt was $204.4 million and the carrying amount was $206.8 million. As of September 30, 2024, all debt is long-term.

Note 11:  Accumulated Other Comprehensive Loss

The following table presents the changes in the components of accumulated other comprehensive income ("AOCI") (loss), net of tax, for the nine months ended September 30, 2024:
($ in millions)DerivativesChange in equity affiliate investment AOCIDefined benefit
pension and other
postretirement plans		Foreign
currency
translation		Total
Balance, December 31, 2023$— $2.3 $(10.1)$(136.0)$(143.8)
Other comprehensive income (loss) before reclassifications(0.3)— (0.6)6.7 5.8 
Amounts reclassified out from accumulated other comprehensive income (loss)2.3 — (0.6)— 1.7 
Other comprehensive income (loss), net of tax2.0 — (1.2)6.7 7.5 
Balance, September 30, 2024$2.0 $2.3 $(11.3)$(129.3)$(136.3)

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The following table presents the changes in the components of accumulated other comprehensive income ("AOCI") (loss), net of tax, for the nine months ended September 30, 2023:
($ in millions)DerivativesChange in equity affiliate investment AOCIDefined benefit
pension and other
postretirement plans		Foreign
currency
translation		Total
Balance, December 31, 2022
$0.2 $1.6 $(9.4)$(175.4)$(183.0)
Other comprehensive (loss) income before reclassifications(8.8)(0.1)(0.1)(36.9)(45.9)
Amounts reclassified out from accumulated other comprehensive (loss) income7.0 — (1.1)— 5.9 
Other comprehensive (loss) income, net of tax(1.8)(0.1)(1.2)(36.9)(40.0)
Balance, September 30, 2023
$(1.6)$1.5 $(10.6)$(212.3)$(223.0)

A summary of the reclassifications out from accumulated other comprehensive loss is presented in the following table:
($ in millions)Three Months Ended
September 30,		Nine Months Ended
September 30,		Location on Statement of Income
Detail of components2024202320242023
Gains (losses) on derivatives:
Foreign currency contracts$— $(0.2)$0.2 $(1.5)Net sales
Foreign currency contracts(0.7)(1.4)(4.1)(2.0)Cost of goods and services sold
Foreign currency contracts— (3.4)1.0 (6.2)Other expense (income)
Forward treasury locks— (0.1)(0.1)(0.2)Interest expense
Total before tax(0.7)(5.1)(3.0)(9.9)
Tax benefit0.2 1.6 0.7 2.9 
Net of tax$(0.5)$(3.5)$(2.3)$(7.0)
Amortization of defined benefit pension and other postretirement plans:
Actuarial gains$0.3 $0.3 $0.8 $1.1 (a)
Other— — — 0.4 
Total before tax0.3 0.3 0.8 1.5 
Tax expense(0.1)(0.1)(0.2)(0.4)
Net of tax$0.2 $0.2 $0.6 $1.1 
Total reclassifications for the period, net of tax$(0.3)$(3.3)$(1.7)$(5.9)

(a) This component is included in the computation of net periodic benefit cost.
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Note 12: Shareholders’ Equity

The following table presents the changes in shareholders’ equity for the nine months ended September 30, 2024:
Common Shares IssuedCommon StockCapital in Excess of Par ValueNumber of Treasury SharesTreasury StockRetained earningsAccumulated other comprehensive lossTotal
(in millions)
Balance, December 31, 202375.3 $18.8 $120.2 1.8 $(637.6)$3,523.4 $(143.8)$2,881.0 
Net income— — — — — 115.3 — 115.3 
Activity related to stock-based compensation— — (65.0)(0.2)79.4 — — 14.4 
Shares purchased under share repurchase program— — — 0.7 (267.0)— — (267.0)
Dividends declared ($0.20 per share)
— — — — — (14.6)— (14.6)
Other comprehensive loss, net of tax— — — — — — (48.5)(48.5)
Balance, March 31, 202475.3 $18.8 $55.2 2.3 $(825.2)$3,624.1 $(192.3)$2,680.6 
Net income— — — — — 111.3 — 111.3 
Activity related to stock-based compensation— — (21.7)(0.1)32.8 — — 11.1 
Shares purchased under share repurchase program— — — 0.5 (187.1)— — (187.1)
Dividends declared ($0.20 per share)
— — — — — (14.5)— (14.5)
Other comprehensive loss, net of tax— — — — — — (24.6)(24.6)
Balance, June 30, 2024