Valeant Pharmaceuticals Reports 2012 Fourth Quarter Financial Results

Feb 28, 2013, 06:00 ET from Valeant Pharmaceuticals International, Inc.

MONTREAL, Feb. 28, 2013 /PRNewswire/ -- 

Fourth Quarter 2012

  • 2012 Fourth Quarter Total Revenue $986 million; an increase of 43% over the prior year
    • Organic growth (same store sales) was approximately 7%
    • Pro forma organic growth was approximately 9%
  • 2012 Fourth Quarter GAAP EPS Loss of $0.29; Cash EPS $1.22, an increase of 30% over the prior year;
    • Excluding Medicis interest expense Cash EPS $1.34, an increase of 43% over the prior year
  • 2012 Fourth Quarter GAAP Operating Cash Flow $68 million; Adjusted Operating Cash Flow $423 million 

Full Year 2012

  • Total 2012 revenue was $3.55 billion; an increase of 44% over the prior year
    • Organic growth (same store sales) was approximately 8%
    • Pro forma organic growth was approximately 10%
  • Total 2012 GAAP EPS Loss of $0.38; Cash EPS $4.51, an increase of 54% over the prior year
  • Total 2012 GAAP Operating Cash Flow $657 million; Adjusted Operating Cash Flow $1.3 billion

Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces fourth quarter financial results for 2012.

"We are pleased with our financial results for the fourth quarter and the full year," said J. Michael Pearson, chairman and chief executive officer. "The continued overall robust organic growth of our business, coupled with our strong cash flow generation, puts us in a solid position for another outstanding year in 2013."

Revenue

Valeant's business continued to perform well in the fourth quarter of 2012 with all businesses achieving results at or above expectations. Same store organic growth was approximately 7% and pro forma organic growth was approximately 9% for the fourth quarter of 2012. (See Table 6) Total revenue was $986 million in the fourth quarter of 2012, as compared to $688 million in the fourth quarter of 2011, an increase of 43%.  Product sales were $947 million in the fourth quarter of 2012, as compared to $654 million in the year-ago quarter, an increase of 45%. 

For the full year, total revenue was $3.55 billion in 2012, as compared to $2.46 billion in 2011, an increase of 44%. Product sales were $3.31 billion in 2012, as compared to $2.26 billion in 2011, an increase of 47%. These growth rates were realized even in the face of approximately $161 million of negative impact from generic competition and over $100 million of negative impact from currency translation in 2012.

Valeant's U.S. Dermatology business continued its strong product sales growth performance in the fourth quarter.  Key contributors to organic growth included Zovirax®, Retin-A Micro®, Acanya®, Carac® and CeraVe®.

Our U.S. Neurology and Other portfolio delivered positive product sales growth in the quarter, reflecting the diminishing  year over year negative impact from generic competitors of Wellbutrin XL®, Ultram® ER and Cardizem® CD.  Wellbutrin XL® scripts leveled off and product sales increased, as compared to the fourth quarter of 2011. We expect that U.S. Neurology and Other will continue to report positive organic growth in 2013.

The Canadian and Australian segment delivered negative organic product sales growth this quarter, as expected, due to the rapid genericization of Cesamet® in Canada that began in March 2012. Excluding Cesamet, the Canadian and Australian segment delivered 5% organic growth (same store sales).

Finally, our Emerging Markets segment provided pro forma organic product sales growth of 15%, driven by strong growth in all of the regions in which we operate.   

Financial Performance

The Company reported a net loss of $89 million for the fourth quarter of 2012, or a loss of $0.29 per diluted share.  On a Cash EPS basis, adjusted income was $380 million, or $1.22 per diluted share, an increase of 30% over the fourth quarter of 2011.  On December 11, 2012, Valeant completed the acquisition of Medicis Corporation, whose operations had no material impact on the results for the fourth quarter of 2012.  Excluding the interest expense related to the acquisition of Medicis, Cash EPS for the fourth quarter of 2012 was $1.34, an increase of 43% over the fourth quarter of 2011. On a Cash EPS basis for the full year 2012, adjusted income was $1.41 billion, or $4.51 per diluted share, an increase of 54% over the full year 2011. Excluding the interest expense related to the acquisition of Medicis, Cash EPS for 2012 was $4.63, an increase of 58% over 2011.

GAAP cash flow from operations was $68 million in the fourth quarter of 2012, and adjusted cash flow from operations was $423 million.  GAAP cash flow from operations for the full year 2012 was $657 million, and adjusted cash flow from operations was $1.29 billion, an increase of 40% year over year.

The Company's cost of goods sold (COGS) was $275 million in the fourth quarter of 2012.  After backing out the fair value adjustment to inventory, amortization expense and other items related to acquisitions, COGS represented 25% of product sales, comparable with the fourth quarter of 2011. On a sequential basis, COGS for the fourth quarter of 2012 increased 2% primarily due to a one-time write-off of obsolete inventory in Brazil. COGS for the full year 2012 represented 24% of product sales as compared to 27% in 2011.

Selling, General and Administrative expenses were $204.7 million in the fourth quarter of 2012, which includes a $2.7 million step-up in stock based compensation expenses related to the acquisition of Legacy Valeant and $3.7 million loss on the disposal of fixed assets.  Excluding these items, SG&A was approximately 20% of revenue. Research and Development expenses were $20.2 million in the fourth quarter of 2012, or approximately 2% of revenue.

Conference Call and Webcast Information

The Company will host a conference call and a live Internet webcast along with a slide presentation today at 8:00 a.m. ET (5:00 a.m. PT), February 28, 2013 to discuss its fourth quarter financial results for 2012. The dial-in number to participate on this call is (877) 295-5743 confirmation code 94189232. International callers should dial (973) 200-3961, confirmation code 94189232. A replay will be available approximately two hours following the conclusion of the conference call through March 7, 2013 and can be accessed by dialing (855) 859-2056, or (404) 537-3406, confirmation code 94189232. The live webcast of the conference call may be accessed through the investor relations section of the Company's corporate website at www.valeant.com.

About Valeant

Valeant Pharmaceuticals International, Inc. (NYSE/TSX:VRX) is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of dermatology, neurology and branded generics. More information about Valeant can be found at www.valeant.com.

Forward-looking Statements

This press release may contain forward-looking statements, including, but not limited to, statements regarding our performance for 2013 and expected organic growth.  Forward-looking statements may generally be identified by the use of the words "anticipates," "expects," "intends," "plans," "should," "could," "would," "may," "will," "believes," "estimates," "potential," "target", or "continue" and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in the Company's most recent annual or quarterly report and detailed from time to time in Valeant's other filings with the Securities and Exchange Commission and the Canadian Securities Administrators, which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance on any of these forward-looking statements. These forward-looking statements speak only as of the date hereof.  Valeant undertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect actual outcomes.

Non-GAAP Information 

To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, amortization of alliance product assets & pp&e step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, acquisition-related and other costs, acquired in-process research and development ("IPR&D"), legal settlements outside the ordinary course of business, the impact of currency fluctuations, amortization and other non-cash charges, amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets held for sale/impairment, net, (gain) loss on investments, net, and adjusts tax expense to cash taxes. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP.  Therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Financial Tables follow.

 

Valeant Pharmaceuticals International, Inc.

 Table 1 

Condensed Consolidated Statement of Income

For the Three and Twelve Months Ended December 31, 2012 and 2011

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In thousands, except per share data)

2012

2011

2012

2011

Product sales

$  946,669

$ 654,171

$ 3,309,895

$ 2,255,050

Alliance and royalty

23,493

25,600

171,841

172,473

Service and other (a)

16,131

8,682

64,890

35,927

Total revenues

986,293

688,453

3,546,626

2,463,450

Cost of goods sold (exclusive of amortization of intangible assets shown separately below)

275,138

181,983

921,533

683,750

Cost of services

10,629

2,628

47,269

12,311

Cost of alliances

894

36

69,714

30,771

Selling, general and administrative ("SG&A")

204,697

148,508

756,083

572,472

Research and development

20,165

16,777

79,052

65,687

Contingent consideration fair value adjustments

(28,464)

(20,028)

(5,266)

(10,986)

Acquired in-process research and development

40,033

105,200

189,901

109,200

Legal settlements

-

9,441

56,779

11,841

Restructuring, acquisition-related and other costs

261,801

56,718

422,991

130,631

Amortization of intangible assets

299,485

192,798

928,885

557,814

1,084,378

694,061

3,466,941

2,163,491

Operating income (loss)

(98,085)

(5,608)

79,685

299,959

Interest expense, net

(160,228)

(94,055)

(475,610)

(330,442)

Loss on extinguishment of debt

(17,625)

(3,519)

(20,080)

(36,844)

Gain (loss) on investments, net

32

(11)

2,056

22,776

Other income (expense), net including translation and exchange 

1,263

26,487

19,721

26,551

Income (loss) before (recovery) provision for income taxes

(274,643)

(76,706)

(394,228)

(18,000)

Recovery of income taxes 

(185,501)

(132,561)

(278,203)

(177,559)

Net income (loss)

$  (89,142)

$   55,855

$  (116,025)

$    159,559

Earnings per share:

Basic:

Net income (loss)

$      (0.29)

$       0.18

$        (0.38)

$          0.52

Shares used in per share computation

305,131

308,706

305,446

304,655

Diluted:

Net income (loss)

$      (0.29)

$       0.18

$        (0.38)

$          0.49

Shares used in per share computation

305,131

317,390

305,446

326,119

 

(a) Service and Other revenue includes contract manufacturing revenue of $9.5 million and $39.6 million for the three and twelve months ended December 31, 2012, respectively.

 

 

 

Valeant Pharmaceuticals International, Inc.

 Table 2 

Reconciliation of GAAP EPS to Cash EPS 

For the Three and Twelve Months Ended December 31, 2012 and 2011

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In thousands, except per share data)

2012

2011

2012

2011

Net income (loss)

$ (89,142)

$   55,855

$  (116,025)

$ 159,559

Non-GAAP adjustments(a):

Inventory step-up (b)

29,421

10,317

78,822

59,256

Alliance product assets & pp&e step-up/down(c)

(336)

214

50,434

19,692

Stock-based compensation step-up (d)

2,720

12,936

27,344

63,492

Contingent consideration fair value adjustment(e)

(28,464)

(20,028)

(5,266)

(10,986)

Acquired in-process research and development (IPR&D)(f)

40,033

105,200

189,901

109,200

Legal settlements(g)

-

9,441

56,779

11,841

Restructuring, acquisition-related and other costs(h)

261,801

56,718

422,991

130,631

Amortization and other non-gaap charges(i)

311,834

198,080

965,388

569,977

617,009

372,878

1,786,393

953,103

Amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest(j)

22,188

8,069

36,402

27,103

Loss on extinguishment of debt

17,625

3,519

20,080

36,844

(Gain) loss on disposal of fixed assets and assets held for sale/impairment,

net (k)(l)

3,701

3,199

4,703

3,199

(Gain) loss on investments, net

-

-

-

(1,769)

Tax(m)

(191,801)

(145,861)

(319,603)

(222,959)

Total adjustments

468,722

241,804

1,527,975

795,521

Adjusted income

$ 379,580

$ 297,659

$ 1,411,950

$ 955,080

GAAP earnings per share - diluted

$     (0.29)

$       0.18

$        (0.38)

$       0.49

Cash earnings per share - diluted

$       1.22

$       0.94

$          4.51

$       2.93

Cash earnings per share excluding one-time items - diluted

$       1.22

$       0.87

$          4.14

$       2.64

Shares used in diluted per share calculation - Cash earnings per share

311,739

317,390

313,123

326,119

 

 

(a) See footnote (a) to Table 2a.

(b) See footnote (b) to Table 2a  and Table 2b.

(c) See footnote (c) to Table 2a and footnotes (c) (e) to Table 2b.

(d) See footnote (e) to Table 2a and footnote (f) to Table 2b.

(e) See footnote (g) to Table 2a and footnote (h) to Table 2b.

(f) See footnote (h) to Table 2a and footnote (i) to Table 2b.

(g) See footnote (i) Table 2a and footnote (j) to Table 2b.

(h) See footnotes (j) (k) to Table 2a and footnotes (k) (l) to Table 2b.

(i) See footnote (d) to Table 2a and Table 2b.

(j) See footnote (l) to Table 2a and footnote (m) to Table 2b.

(k) See footnote (g) Table 2b.

(l) See footnote (f) Table 2a and footnote (g) Table 2b.

(m) See footnote (m) to Table 2a and footnote (n) Table 2b.

 

 

 

Valeant Pharmaceuticals International, Inc.

 Table 2a 

Reconciliation of GAAP EPS to Cash EPS 

For the Three Months Ended December 31, 2012 and 2011

Non-GAAP Adjustments(a) for

Three Months Ended

December 31,

(In thousands, except per share data)

2012

2011

Product sales

$          -

$          -

Alliance and royalty

-

268

Service and other

-

-

Total revenues

-

268

Cost of goods sold (exclusive of amortization of intangible assets shown separately below)

(41,838)

 (b)(c)(d) 

(18,297)

 (b)(c) 

Cost of services

-

-

Cost of alliances

-

-

Selling, general and administrative ("SG&A")

(6,017)

 (c)(e)(f) 

(13,383)

 (c)(e) 

Research and development

-

-

Contingent consideration fair value adjustments

28,464

 (g) 

20,028

 (g) 

Acquired in-process research and development

(40,033)

 (h) 

(105,200)

 (h) 

Legal settlements

-

(9,441)

 (i) 

Restructuring, acquisition-related and other costs

(261,801)

 (j) 

(56,718)

 (k) 

Amortization of intangible assets

(299,485)

(192,798)

(620,710)

(375,809)

Operating income

620,710

376,077

Interest expense, net

22,188

 (l) 

8,069

 (l) 

(Gain) loss on extinguishment of debt

17,625

3,519

Gain (loss) on investments, net

-

-

Other income (expense), net including translation and exchange 

-

-

Income before (recovery of) provision for income taxes

660,523

387,665

Provision for income taxes

191,801

 (m) 

145,861

 (m) 

Total Adjustments to Net income 

$ 468,722

$ 241,804

Earnings per share:

Diluted:

Total Adjustments to Net income

$       1.50

$       0.76

Shares used in per share computation

311,739

317,390

 

(a) To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, amortization of alliance product assets & pp&e step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, acquisition-related and other costs, acquired in-process research and development ("IPR&D"), legal settlements outside the ordinary course of business, the impact of currency fluctuations, amortization and other non-cash charges, amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets held for sale/impairment, net, (gain) loss on investments, net, and adjusts tax expense to cash taxes. 

Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP.  Therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. 

(b) ASC 805, accounting for business combinations requires an inventory fair value step-up whose total impact for the three months ended December 31, 2012 is $29.4 million primarily relating to the acquisitions of Afexa on October 17, 2011, Pedinol Pharmacal, Inc. on April 11, 2012, BC Pharma B.V. on July 1, 2012 and Medicis Pharmaceutical Corporation on December 11, 2012.  For the three months ended December 31, 2011 the impact of inventory fair value step-up is $10.3 million primarily relating to the acquisition of Sanitas on August 19, 2011, Afexa on October 17, 2011 and Ortho Dermatologics on December 12, 2011.

(c) PP&E step-up/down represents the step-up/down to fair market value from Legacy Valeant's original cost resulting from the merger of Legacy Valeant into Legacy Biovail and subsequent acquisitions.

(d) Costs associated with integration related tech transfers, $10.1 million.

(e) For the three months ended December 31, 2012 SG&A includes $2.7 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the merger of Legacy Valeant into Legacy Biovail.  For the three months ended December 31, 2011 SG&A primarily includes $12.9 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the merger of Legacy Valeant into Legacy Biovail.

(f) SG&A includes loss on disposals of fixed assets.

(g) Net expenses from the changes in fair value of contingent consideration for the three months ended December 31, 2012 and 2011 of $28.5 million and $20.0 million, respectively.

(h) Total Acquired IPR&D for the three months ended December 31, 2012 of $40.0 million relates primarily to an impairment of $24.7 million related to Xerese ® life-cycle management project, $5.0 million related to upfront payment to acquire North America rights to Emervel ® and $5.0 million related to the IDP-108 program.  Total Acquired IPR&D for the three months ended December 31, 2011 of $105.2 million relates to the impairment of acquired IPR&D assets relating to A002, A004 and A006 programs acquired as part of Aton acquisition, IDP-109 and IDP-115.

(i) For the three months ended December 31, 2011 Legal settlement costs of $9.4 million primarily due to the litigation and disputes related to revenue-sharing arrangements with, or other payment obligations to, third parties.

(j) Restructuring, acquisition-related and other costs of $261.8 million represent costs related to the acquisitions of Medicis, internal Valeant restructuring and integration initiatives, iNova, Dermik, OraPharma, Sanitas, Visudyne and Swiss Herbal. These include $52.6 million related to acquisition costs, $98.2 million related to employee severance costs, $77.3 million of stock base compensation, $30.5 million related to integration consulting, duplicative labor, transition services, and other, and $3.2 million related to facility closure costs.

(k) Restructuring, acquisition-related and other costs of $56.7 million represent costs related to the merger of Legacy Valeant into Legacy Biovail and include $5.9 million related to facility closure costs, $12.9 million related to contract cancellation fees, consulting, legal and other costs, $15.0 million related to severance, $20.1 million related to acquisition costs, and $2.8 million related to manufacturing integration.

(l) Non cash interest expense associated with amortization and write-down of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest totals for the three months ended December 31, 2012 and December 31, 2011 $22.2 million and $8.1 million, respectively.

(m) Total tax effect of non-GAAP pre-tax adjustments, resolution of uncertain tax positions and change in valuation allowance associated with deferred tax asset.

 

 

 

Valeant Pharmaceuticals International, Inc.

 Table 2b 

Reconciliation of GAAP EPS to Cash EPS 

For the Twelve Months Ended December 31, 2012 and 2011

Non-GAAP Adjustments(a) for

Twelve Months Ended

December 31,

(In thousands, except per share data)

2012

2011

Product sales

$             -

$           -

Alliance and royalty

-

1,072

Service and other

-

-

Total revenues

-

1,072

Cost of goods sold (exclusive of amortization of intangible assets shown separately below)

(112,273)

 (b)(c)(d) 

(74,189)

 (b)(c) 

Cost of services

-

-

Cost of alliances

(50,958)

 (e) 

(18,835)

 (e) 

Selling, general and administrative ("SG&A")

(34,575)

 (c)(f)(g) 

(63,706)

 (c)(f) 

Research and development

-

-

Contingent consideration fair value adjustments

5,266

 (h) 

10,986

 (h) 

Acquired in-process research and development

(189,901)

 (i) 

(109,200)

 (i) 

Legal settlements

(56,779)

 (j) 

(11,841)

 (j) 

Restructuring, acquisition-related and other costs

(422,991)

 (k) 

(130,631)

 (l) 

Amortization of intangible assets

(928,885)

(557,814)

(1,791,096)

(955,230)

Operating income

1,791,096

956,302

Interest expense, net

36,402

 (m) 

27,103

 (m) 

(Gain) loss on extinguishment of debt

20,080

36,844

Gain (loss) on investments, net

-

(1,769)

Other income (expense), net including translation and exchange 

-

-

Income before (recovery of) provision for income taxes

1,847,578

1,018,480

Provision for income taxes

319,603

 (n) 

222,959

 (n) 

Total Adjustments to Net income 

$ 1,527,975

$  795,521

Earnings per share:

Diluted:

Total Adjustments to Net income

$          4.88

$        2.44

Shares used in per share computation

313,123

326,119

 

 

 

(a) See footnote (a) to Table 2a.

(b) ASC 805, accounting for business combinations requires an inventory fair value step-up whose total impact for the twelve months ended December 31, 2012 is $78.8 million primarily relating to the acquisitions of Afexa on October 17, 2011, Ortho Dermatologics on December 12, 2011, Dermik on December 16, 2011, iNova on December 21, 2011, Pedinol Pharmacal, Inc. on April 11, 2012 and Medicis Pharmaceutical Corporation on December 11, 2012.  For the twelve months ended December 31, 2011 the impact of inventory fair value step-up is $59.3 million primarily relating to the merger of Legacy Valeant into Legacy Biovail, the acquisition of PharmaSwiss SA on March 10, 2011 and the acquisition of Sanitas on August 19th, 2011.

(c) PP&E step-up/down represents the step-up/down to fair market value from Legacy Valeant's original cost resulting from the merger of Legacy Valeant into Legacy Biovail and subsequent acquisitions.

(d) Costs associated with integration related tech transfers, $28.9 million.

(e) Cost of Alliances represents the divestiture of 5FU and IDP-111 resulting from the acquisition of Dermik, $50.9 million for the twelve months ended December 31, 2012 and the divestiture of Cloderm resulting from the Legacy Valeant into Legacy Biovail merger, $18.8 million for the twelve months ended December 31, 2011. 

(f)  For the twelve months ended December 31, 2012 SG&A primarily includes $29.5 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the merger of Legacy Valeant into Legacy Biovail, acceleration of certain equity instruments and the expense associated with certain award modifications.  For the twelve months ended December 31, 2011 SG&A primarily includes $63.5 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the merger of Legacy Valeant into Legacy Biovail.

(g) SG&A includes loss on assets held for sale/impairment and loss on disposals of fixed assets.

(h) Net expenses from the changes in fair value of contingent consideration for the twelve months ended December 31, 2012 and 2011 of $5.3 million and $11.0 million, respectively.

(i)  Total Acquired IPR&D for the twelve months ended December 31, 2012 of $189.9 million relates primarily to the write-off of the IPR&D asset related to the IDP-107 dermatology program, $133.4 million, an impairment of $24.7 million related to Xerese ® life-cycle management project, a $12.0 million payment to terminate a research and development commitment with a third party, $5.0 million related to upfront payment to acquire North America rights to Emervel ®, $5.0 million related to the IDP-108 program and $4.3 million related to the termination of the MC5 program acquired from Ortho Dermatologics.  Total Acquired IPR&D for the twelve months ended December 31, 2011 of $109.2 million relates to the impairment of acquired IPR&D assets relating to A002, A004 and A006 programs acquired as part of Aton acquisition, IDP-109 and IDP-115, $105.2 million, and the acquisition of the Canadian rights to Lodalis TM, $4.0 million.

(j) For the twelve months ended December 31, 2012 Legal settlement costs of $56.8 million primarily relate to the litigation settlement and associated legal fees with respect to a class action antitrust complaint regarding Wellbutrin XL ®.  For the twelve months ended December 31, 2011 Legal settlement costs of $11.8 million primarily due to the litigation and disputes related to revenue-sharing arrangements with, or other payment obligations to, third parties.

(k) Restructuring, acquisition-related and other costs of $423.0 million represent costs related to the acquisitions of Medicis, internal Valeant restructuring and integration initiatives, iNova, Dermik, OraPharma, Sanitas, Pedinol, Ortho Dermatologics, University Medical, Afexa, Swiss Herbal and Eyetech.   These include $78.6 million related to acquisition costs, $144.5 million related to employee severance costs, $77.3 million stock base compensation, $73.6 million related to integration consulting, duplicative labor, transition services, and other, $30.8 million related to facility closure costs, $14.0 million related to other, and $4.2 million related to non-personnel manufacturing integration costs.

(l) Restructuring, acquisition-related and other costs of $130.6 million represent costs related to the merger of Legacy Valeant into Legacy Biovail and the acquisitions of Sanitas, Dermik, Afexa, Ortho Dermatologics, PharmaSwiss SA and Inova.  These costs include $23.9 million related to facility closure costs, $37.2 million related to contract cancellation fees, consulting, legal and other costs, $29.3 million related to severance, $33.0 million related to acquisition costs, and $7.2 million related to manufacturing integration.

(m) Non cash interest expense associated with amortization and write-down of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest totals for the twelve months ended December 31, 2012 and December 31, 2011 $36.4 million and $27.1 million, respectively.

(n) Total tax effect of non-GAAP pre-tax adjustments, resolution of uncertain tax positions and change in valuation allowance associated with deferred tax asset.

 

 

Valeant Pharmaceuticals International, Inc.

Table 3

Statement of Revenue - by Segment

For the Three and Twelve Months Ended December 31, 2012 and 2011

(In thousands)

 Three Months Ended 

December 31,

Revenue (a)(b)

2012 GAAP

2011 GAAP

%   Change

2012 currency impact

2012 excluding currency impact  non-GAAP

%   Change

  U.S. Dermatology 

$      335,886

$     175,965

91%

$              -

$     335,886

91%

  U.S. Neurology & Other

201,921

201,030

0%

-

201,921

0%

Canada/Australia 

142,127

101,352

40%

(4,034)

138,093

36%

Emerging Markets

306,360

210,106

46%

6,884

313,244

49%

Total Revenue

$      986,293

$     688,453

43%

$      2,850

$     989,144

44%

 Twelve Months Ended 

December 31,

Revenue (a)(b)

2012 GAAP

2011 GAAP

%   Change

2012 currency impact

2012 excluding currency impact  non-GAAP

%   Change

U.S. Dermatology 

$   1,158,600

$     575,798

101%

$              -

$  1,158,600

101%

U.S. Neurology & Other

793,503

821,789

-3%

-

793,503

-3%

Canada/Australia

544,128

340,240

60%

2,745

546,873

61%

Emerging Markets

1,050,395

725,623

45%

99,020

1,149,415

58%

Total Revenue

$   3,546,626

$  2,463,450

44%

$  101,765

$  3,648,391

48%

(a) Note: Currency effect for constant currency sales is determined by comparing 2012 reported amounts adjusted to exclude currency impact, calculated using 2011 monthly average exchange rates, to the actual 2011 reported amounts. Constant currency sales is not a GAAP-defined measure of revenue growth. Constant currency sales as defined and presented by us may not be comparable to similar measures reported by other companies. 

(b) See footnote (a) to Table 2a.

 

 

 

Valeant Pharmaceuticals International, Inc.

Table 4

Reconciliation of GAAP Cost of Goods Sold to Non-GAAP Cost of Goods Sold - by Segment

For the Three and Twelve Months Ended December 31, 2012 and 2011

(In thousands)

 Three Months Ended 

4.1

Cost of goods sold (a)

December 31,

2012 as reported GAAP

% of product sales

2012  fair value step-up adjustment to inventory and Other non-GAAP (b)

2012 excluding fair value step-up adjustment to inventory and Other non-GAAP

% of product sales

U.S. Dermatology 

$    63,478

19%

$       29,540

$       33,938

10%

U.S. Neurology & Other 

37,434

19%

1,755

35,679

18%

Canada/Australia (d)

34,412

26%

1,045

33,367

26%

Emerging Markets

139,814

48%

9,498

130,316

45%

Corporate/other

-

-

-

$  275,138

29%

$       41,838

$     233,300

25%

 Twelve Months Ended 

December 31,

2012 as reported GAAP

% of product sales

2012  fair value step-up adjustment to inventory and Other non-GAAP (c)

2012 excluding fair value step-up adjustment to inventory and Other non-GAAP

% of product sales

U.S. Dermatology 

$  152,212

14%

$       47,705

$     104,507

10%

U.S. Neurology & Other 

139,580

19%

7,675

131,905

18%

Canada/Australia(d)

163,789

33%

34,701

129,088

26%

Emerging Markets

465,952

45%

22,192

443,760

43%

Corporate/other

-

-

-

$  921,533

28%

$     112,273

$     809,260

24%

 

 

(a) See footnote (a) to Table 2a.

(b) U.S. Dermatology includes $28.2 million of fair value step-up adjustment to inventory and $1.3 million of integration related tech transfer costs. U.S. Neurology and Other includes $1.8 million of integration related tech transfer costs.  Canada/Australia includes $0.4 million of fair value step up adjustment to inventory, -$0.1 million PP&E step-down, $0.8M of integration related tech transfer costs. Emerging Markets includes $0.8 million of fair value step up adjustment to inventory, $6.2M of integration related tech transfer costs, $2.3 million BMS fair value inventory adjustment and $0.1 million of PP&E step up.

(c) U.S. Dermatology includes $43.0 million of fair value step-up adjustment to inventory, $4.7 million of integration related tech transfer costs. U.S. Neurology and Other includes $5.1 million of integration related tech transfer costs and $2.6 million of amortization. Canada/Australia includes $32.9 million of fair value step up adjustment to inventory, -$0.7 million PP&E step-down, $2.5M of integration related tech transfer costs. Emerging Markets includes $3.0 million of fair value step up adjustment to inventory, $16.4M of integration related tech transfer costs, $2.3 million BMS inventory fair value adjustment and $0.4 million of PP&E step up.

(d) Cost of Goods Sold excludes contract manufacturing costs currently reported in Cost of Services. 

 

 

 

Valeant Pharmaceuticals International, Inc.

Table 5

Consolidated Balance Sheet and Other Data

(In thousands)

As of

As of

December 31,

December 31,

5.1

Cash

2012

2011

Cash and cash equivalents 

$      916,091

$    164,111

Marketable securities 

4,410

6,338

Total cash and marketable securities

$      920,501

$    170,449

Debt

New Revolving Credit Facility

$                   -

$    220,000

Term loan A Facility

2,083,462

2,185,520

New Term Loan B Facility

1,275,167

-

Incremental Term Loan B Facility

973,988

-

Senior notes 

6,448,317

4,228,480

Convertible notes

233,793

17,011

Other

898

-

11,015,625

6,651,011

Less: Current portion

(480,182)

(111,250)

$ 10,535,443

$ 6,539,761

5.2

Summary of Cash Flow Statement

Three Months Ended

December 31,

2012

2011

Cash flow provided by (used in):

Net cash provided by (used in) operating activities (GAAP)

$        67,920

$    189,780

Restructuring and acquisition-related costs(c)

261,801

56,718

Payment of accrued legal settlements

-

9,441

Payment of Accreted Interest on Convertible Debt

-

1,390

Tax Benefit from Stock Options Exercised (a)

6,699

(7,125)

Working Capital change related to Business Development Activities

18,391

21,434

Non-Cash adjustments to Income Taxes Payable

-

-

Changes in working capital related to restructuring and acquisition-related costs(c)

68,580

(18,510)

Adjusted cash flow from operations (Non-GAAP)(b)

$      423,391

$    253,128

Proceeds from sale of intangible assets

-

-

Adjusted cash flow from operations (Non-GAAP)(b)

$      423,391

$    253,128

 

(a) Includes stock option tax benefit which will reduce taxes in future periods.

(b) See footnote (a) to Table 2a.

(c) Total Restructuring and Acquisition-related costs cash payments of $330,381 are broken down as follows:

Project Type

Amount Paid

Medicis

286,944

(d)

Intellectual Property Migration

9,198

Manufacturing Integration (Various Deals)

6,944

Europe

4,742

US Restructuring

4,103

Other

3,895

OraPharma

2,925

Swiss Herbal

2,160

Ophthalmology (QLT and Eyetech)

2,106

Systems Integration (various deals US/Canada)

1,828

Dermik

1,635

University Medical

1,416

iNova

1,282

J & J Consumer Products

1,203

Total

$          330,381

Expense Type

Amount Paid

Stock Based Compensation

119,931

Severance Payments

105,367

Acquisition Related Costs Paid to 3rd Parties

76,750

Integration related consulting, duplicative labor, transition services, and other

24,628

Facility Closure Costs, Other Manufacturing integration, and Other

3,704

Total

$          330,381

(d)

(d) Includes Medicis advisory and legal fees of $47 million and payment of Medicis stock appreciation rights and other accrued compensation of $58 million that was accrued by Medicis prior to close and paid post close.

 

 

 

Valeant Pharmaceuticals International, Inc.

Table 6

Organic Growth - by Segment

For the Three and Twelve Months Ended December 31, 2012

(In thousands)

 For the Three Months Ended December 31, 2012 

 Organic growth 

(a)

(b)

 (b) 

 (b) 

 (1) QTD 2012 

 (2) Acq impact 

 (3) QTD Same store 

 (4) QTD 2011 

 (5) Pro Forma Adj 

 (6) Pro Forma 2011 

 (7) Currency impact Same store 

 (8) Currency impact Acq 

 (9) Divestitures / Discontinuations 

 Pro Forma (1)+(7)+(8)+(9) / (6) 

Same store (3)+(7) / (4)-(9)

U.S. Dermatology 

329.9

156.6

173.3

153.2

138.1

291.3

-

-

4.6

15%

17%

U.S. Neurology & Other    (c)

199.4

0.5

198.9

194.0

0.5

194.5

-

-

0.0

3%

3%

Canada/Australia      (d) (e)

132.9

40.8

92.1

101.1

37.1

138.2

(2.7)

(1.0)

0.0

-6%

-12%

Emerging Markets - Central/Eastern Europe

171.8

15.4

156.5

140.9

14.5

155.4

2.5

0.8

(0.1)

13%

13%

Emerging Markets - Latin America

95.1

24.7

70.3

65.8

16.9

82.7

0.6

2.5

0.7

20%

9%

Emerging Markets - Southeast Asia/Africa

21.6

20.2

1.4

0.3

18.7

18.9

0.1

0.3

-

16%

-

   Emerging Markets

288.6

60.4

228.2

206.9

50.1

257.0

3.2

3.5

0.6

15%

12%

Total product sales

950.8

258.3

692.5

655.3

225.8

881.0

0.5

2.6

5.2

9%

7%

 For the Twelve Months Ended December 31, 2012 

 Organic growth 

(a)

(b)

 (b) 

 (b) 

 (1) YTD 2012 

 (2) Acq impact 

 (3) YTD Same store 

 (4) YTD 2011 

 (5) Pro Forma Adj 

 (6) Pro Forma 2011 

 (7) Currency impact Same store 

 (8) Currency impact Acq 

 (9) Divestitures / Discontinuations 

 Pro Forma (1)+(7)+(8)+(9) / (6) 

Same store (3)+(7) / (4)-(9)

U.S. Dermatology 

1,061.2

492.3

568.9

445.3

416.8

862.0

-

-

13.4

25%

32%

U.S. Neurology & Other    (c)

729.5

2.6

726.9

759.6

1.6

761.2

-

-

1.2

-4%

-4%

Canada/Australia      (d) (e)

504.9

172.2

332.8

338.1

164.0

502.1

2.0

0.2

1.2

1%

-1%

Emerging Markets - Central/Eastern Europe

613.9

164.1

449.9

460.3

163.2

623.5

43.9

16.9

12.5

10%

10%

Emerging Markets - Latin America

320.1

68.7

251.3

254.8

53.7

308.6

21.2

11.0

10.7

18%

12%

Emerging Markets - Southeast Asia/Africa 

92.2

90.1

2.0

0.3

80.7

80.9

0.1

5.2

-

20%

-

   Emerging Markets

1,026.1

322.9

703.2

715.4

297.6

1,013.0

65.2

33.2

23.2

13%

11%

Total product sales

3,321.7

989.9

2,331.8

2,258.3

879.9

3,138.3

67.2

33.3

39.0

10%

8%

 

(a) Note: Currency effect for constant currency sales is determined by comparing 2012 reported amounts adjusted to exclude currency impact, calculated using 2011 monthly average exchange rates, to the actual 2011 reported amounts. Constant currency sales is not a GAAP-defined measure of revenue growth. Constant currency sales as defined and presented by us may not be comparable to similar measures reported by other companies.

(b) See footnote (a) to Table 2a.

(c) Includes Valeant's attributable portion of revenue from joint ventures (JV) -  $1.6M Q4'12 and $3.5M Q4'12 YTD.

(d) Includes Valeant's attributable portion of revenue from joint ventures (JV) -  $1.1M Q4'11 and $2.5M Q4'12 and $3.3M Q4'11 YTD and $8.2M Q4'12 YTD.

(e) Includes Cesamet revenue of $17.6M Q4'11 and $1.6M Q4'12 and $64.4M Q4'11 YTD and $29.4M Q4'12 YTD.  Excluding Cesamet, the Canadian/Australian segment delivered Q4 5% organic growth (same store) and 6% (pro forma).  Excluding Cesamet, the Canadian/Australian segment delivered 2012 12% organic growth (same store) and 9% (pro forma).

Contact Information: Laurie W. Little 949-461-6002 laurie.little@valeant.com

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SOURCE Valeant Pharmaceuticals International, Inc.



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