2014

Valeant Pharmaceuticals Reports 2012 Fourth Quarter Financial Results

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

(Logo: http://photos.prnewswire.com/prnh/20101025/LA87217LOGO)

SOURCE Valeant Pharmaceuticals International, Inc.



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