2014

Valeant Pharmaceuticals Reports 2012 Second Quarter Financial Results

MONTREAL, Aug. 2, 2012 /PRNewswire/ --

  • 2012 Second Quarter Total Revenue $820 million, including $45 million related to Potiga™ launch milestone
    • Organic growth (same store sales) was approximately 6%
    • Pro forma organic growth was approximately 10%
  • 2012 Second Quarter GAAP EPS Loss of $0.07; Cash EPS $1.01
    • Excluding impact from Potiga milestone, Cash EPS was $0.87
  • 2012 Second Quarter GAAP Cash Flow from Operations was $255 million; Adjusted Cash Flow from Operations was $307 million  
  • 2012 Guidance increased to $4.55 - $4.75 Cash EPS
    • $4.18 - $4.38 excluding one-time items

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

"The second quarter continued our track record of delivering solid results," said J. Michael Pearson, chairman and chief executive officer.  "With our diversified operations, we were able to mitigate headwinds caused by foreign exchange and the continued genericization impact of Cardizem® CD and Ultram® ER, and still report solid top and bottom line results. We are also pleased with our significant increase in cash flow from operations, both from a GAAP and non-GAAP basis. We look forward to a strong second half of the year."

Business Performance

Valeant's business continued to perform well in the second quarter of 2012 and - with the exception of the U.S. Neurology and Other segment - each business delivered positive revenue growth, both in terms of total revenue and organic growth.  Total revenue was $820.1 million in the second quarter of 2012, as compared to $609.4 million in the second quarter of 2011, an increase of 35%.  Product sales were $748.7 million in the second quarter of 2012, as compared to $530.0 million in the year-ago quarter, an increase of 41%.   

Overall, Valeant's business continued to deliver strong organic growth.  Same store organic growth was approximately 6% and pro forma organic growth was approximately 10% for the second quarter of 2012. (See Table 5) Particularly positive was Valeant's U.S. Dermatology business, which continued its exceptional growth performance in the second quarter.  Key contributors to organic growth included Zovirax®, Acanya®, Atralin® and CeraVe®.

We are also pleased with our Emerging Markets segment, which delivered double digit organic growth. We continue to see strong performance in Poland against a tough market environment and exceptional growth from our Russian/CIS operations as we gained critical mass in this market. We remain excited about our new operations in South East Asia/South Africa, where our business demonstrated outstanding growth.

The Canadian and Australian segment delivered slower organic growth this quarter due to the genericization of Cesamet® that occurred in March 2012 and wholesaler buying patterns in Australia.

Finally, the U.S. Neurology and Other portfolio continued to decline.  Wellbutrin XL®, Diastat®, Ultram® ER and Cardizem® CD all declined as expected, with generic competitors for certain strengths for the latter two products being introduced in September 2011 and November 2011, respectively.  Excluding these products, the remaining U.S. Neurology and Other segment increased 3%, as compared to the second quarter of 2011.

Included in total revenue for the second quarter of 2012 was $45.0 million of alliance and royalty revenue related to the milestone payment for the U.S. launch of ezogabine (Potiga™) from GlaxoSmithKline (GSK), while the second quarter of 2011 included $40.0 million of alliance and royalty revenue related to the milestone payment from GSK for the European launch of retigabine (Trobalt™).

Financial Performance

The Company reported a net loss of $21.6 million for the second quarter of 2012, or $0.07 per diluted share.  On a Cash EPS basis, adjusted income was $314.5 million, or $1.01 per diluted share.  Excluding the Potiga milestone, adjusted income was $269.5 million, or $0.87 per diluted share.

GAAP cash flow from operations was $254.6 million in the second quarter of 2012, and adjusted cash flow from operations was $307.5 million in the second quarter of 2012.  Both figures include the milestone payment of $45.0 million

The Company's cost of goods sold (COGS) was $197.3 million in the second quarter of 2012.  After backing out a fair value adjustment to inventory, amortization expense and other items related to acquisitions of approximately $14.0 million, COGS represented 24% of product sales.

Selling, General and Administrative expenses were $185.4 million in the second quarter of 2012, which includes a $5.1 million step-up in stock based compensation expenses related to the acquisition of Legacy Valeant.  Excluding the step-up in stock based compensation, SG&A was approximately 22% of revenue. Research and Development expenses were $17.7 million in the second quarter of 2011, or approximately 2% of revenue.

2012 Guidance

The Company is updating its previous Cash EPS guidance and is increasing Cash EPS to $4.55 to $4.75 (or $4.18 to $4.38 excluding one-time items) in 2012, up from prior guidance of $4.45 to $4.70, and maintaining prior guidance of total revenue in the range of $3.4 to $3.6 billion and adjusted cash flow from operations of greater than $1.4 billion.

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), August 2, 2012 to discuss its second quarter financial results for 2012. The dial-in number to participate on this call is (877) 876-8393, confirmation code 10552994. International callers should dial (973) 200-3961, confirmation code 10552994. A replay will be available approximately two hours following the conclusion of the conference call through August 8, 2012 and can be accessed by dialing (855) 859-2056, or (404) 537-3406, confirmation code 10552994. 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 future results and performance, financial guidance, expected revenue and adjusted cash flow from operations and anticipated Cash EPS for 2012.  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 ("SEC") and the Canadian Securities Administrators ("CSA"), 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.

Note on Guidance

The guidance contained in this press release is only effective as of the date given, August 2, 2012, and will not be updated or confirmed until the Company publicly announces updated or affirmed guidance.

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.      

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

Financial Tables follow.

Valeant Pharmaceuticals International, Inc.

Table 1

Condensed Consolidated Statement of Income

For the Three and Six Months Ended June 30, 2012 and 2011












Three Months Ended


Six Months Ended



June 30,


June 30,

(In thousands, except per share data)


2012


2011


2012


2011










Product sales


$ 748,742


$ 530,035


$ 1,506,334


$ 1,030,456

Alliance and royalty


56,869


65,988


136,100


124,402

Service and other(a)


14,479


13,364


33,759


19,555

Total revenues


820,090


609,387


1,676,193


1,174,413










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


197,284


169,912


426,725


339,199

Cost of services


12,483


3,395


26,058


6,605

Cost of alliances


-


-


68,820


30,735

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


185,440


149,657


362,726


289,163

Research and development


17,711


17,764


39,717


31,434

Contingent consideration fair value adjustments


7,729


1,752


17,568


2,138

Acquired in-process research and development


4,568


2,000


4,568


4,000

Legal settlements


53,624


2,000


56,779


2,400

Restructuring, acquisition-related and other costs


43,871


29,495


113,713


48,541

Amortization of intangible assets


210,570


114,946


411,213


226,989



733,280


490,921


1,527,887


981,204

Operating income


86,810


118,466


148,306


193,209










Interest expense, net


(99,594)


(81,987)


(200,496)


(149,935)

Loss on extinguishment of debt


-


(14,748)


(133)


(23,010)

Gain (loss) on investments, net


(35)


21,158


2,024


22,927

Other income (expense), net including translation and exchange


(4,238)


847


20,061


3,654










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


(17,057)


43,736


(30,238)


46,845










(Recovery of) provision for income taxes


4,550


(12,624)


4,290


(15,997)










Net income (loss)


$ (21,607)


$ 56,360


$ (34,528)


$ 62,842










Earnings per share:


















Basic:









Net income (loss)


$ (0.07)


$ 0.19


$ (0.11)


$ 0.21

Shares used in per share computation


304,816


303,426


306,296


303,587










Diluted:









Net income (loss)


$ (0.07)


$ 0.17


$ (0.11)


$ 0.19

Shares used in per share computation


304,816


331,369


306,296


332,130










(a) Service and Other revenue includes contract manufacturing revenue of $9.0 million and $19.8 million for the three and six months ended June 30, 2012, respectively. For the three months ended March 31, 2012, Service and Other revenue was restated by $10.8 million of contract manufacturing revenue previously reported in product sales.










Valeant Pharmaceuticals International, Inc.

Table 2

Reconciliation of GAAP EPS to Cash EPS

For the Three and Six Months Ended June 30, 2012 and 2011





















Three Months Ended


Six Months Ended



June 30,


June 30,

(In thousands, except per share data)


2012


2011


2012


2011










Net income (loss)


$ (21,607)


$ 56,360


$ (34,528)


$ 62,842










Non-GAAP adjustments(a):









Inventory step-up (b)


10,361


16,262


43,392


46,171

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


313


275


51,034


19,340

Stock-based compensation step-up (d)


5,135


16,070


15,563


39,407

Contingent consideration fair value adjustment(e)


7,729


1,752


17,568


2,138

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


4,568


2,000


4,568


4,000

Legal settlements(g)


53,624


2,000


56,779


2,400

Restructuring, acquisition-related and other costs(h)


43,871


29,495


113,713


48,541

Amortization and other non-gaap charges(i)


215,791


117,239


420,994


231,576



341,392


185,093


723,611


393,573

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


(395)


2,752


5,355


6,348

Loss on extinguishment of debt


-


14,748


133


23,010

(Gain) loss on assets held for sale/impairment, net (k)


1,002


-


1,002


-

(Gain) loss on investments, net


-


-


-


(1,769)

Tax(l)


(5,850)


(18,724)


(20,709)


(38,497)

Total adjustments


336,149


183,869


709,392


382,665










Adjusted income


$ 314,542


$ 240,229


$ 674,864


$ 445,507










GAAP earnings per share - diluted


$ (0.07)


$ 0.17


$ (0.11)


$ 0.19










Cash earnings per share - diluted


$ 1.01


$ 0.73


$ 2.15


$ 1.34










Cash earnings per share excluding one-time items - diluted


$ 0.87


$ 0.54


$ 1.78


$ 1.10










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


312,631


331,369


314,514


332,130



















(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) to 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 (f) to Table 2a and footnote (g) Table 2b.

(l) 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 June 30, 2012 and 2011









Non-GAAP Adjustments(a)for




Three Months Ended




June 30,


(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)


(13,984)

(b)(c)(d)

(18,535)

(b)(c)

Cost of services


-


-


Cost of alliances


-


-


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


(8,048)

(c)(e)(f)

(16,097)

(c)(e)

Research and development


-


-


Contingent consideration fair value adjustments


(7,729)

(g)

(1,752)

(g)

Acquired in-process research and development


(4,568)

(h)

(2,000)

(h)

Legal settlements


(53,624)

(i)

(2,000)


Restructuring, acquisition-related and other costs


(43,871)

(j)

(29,495)

(k)

Amortization of intangible assets


(210,570)


(114,946)




(342,394)


(184,825)


Operating income


342,394


185,093








Interest expense, net


(395)

(l)

2,752

(l)

(Gain) loss on extinguishment of debt


-


14,748


Gain (loss) on investments, net


-


-


Other income (expense), net including translation and exchange


-


-








Income before (recovery of) provision for income taxes


341,999


202,593








Provision for income taxes


5,850

(m)

18,724

(m)







Total Adjustments to Net income


$ 336,149


$ 183,869








Earnings per share:












Diluted:






Net income


$ 1.08


$ 0.56


Shares used in per share computation


312,631


331,369














(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 June 30, 2012 is $10.4 million primarily relating to the acquisitions of iNova on December 21, 2011 and Afexa on October 17, 2011. For the three months ended June 30, 2011 the impact of inventory fair value step-up is $16.3 million primarily relating to the acquisition of PharmaSwiss SA on March 10, 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 Tech transfers of $3.0 million.


(e) For the three months ended June 30, 2012 SG&A primarily includes $7.2 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the Legacy Valeant into Legacy Biovail merger and expense associated with certain award modifications. For the three months ended June 30, 2011 SG&A primarily includes $16.1 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the Legacy Valeant into Legacy Biovail merger.


(f) SG&A includes loss on assets held for sale/impairment.


(g) Net expenses from the changes in fair value of contingent consideration for the three months ended June 30, 2012 and 2011 of $7.7 million and $1.8 million, respectively.


(h) Total Acquired IPR&D for the three months ended June 30, 2012 of $4.6 million primarily relates to the termination of an IPR&D program acquired from Ortho Dermatologics and for the three months ended June 30, 2011 of $2.0 million relates to the acquisition of the Canadian rights to Cholestagel ®.


(i) For the three months ended June 30, 2012 legal settlement costs of $53.6 million primarily relate to the litigation settlement and associated legal fees with respect to a class action antitrust complaint regarding Wellbutrin XL ®.


(j) Restructuring, acquisition-related and other costs of $43.9 million represent costs related to the acquisitions of PharmaSwiss SA, Sanitas, Afexa, Ortho Dermatologics, Dermik, iNova, Probiotica, Eyetech, OraPharma, University Medical, Gerot Lannach and Pedinol. These include $13.9 million related to acquisition costs, $12.2 million related to employee severance costs, $8.4 million related to integration related consulting, duplicative labor, transition services, and other, $5.1 million related to facility closure costs, $2.0 million related to other, and $2.3 million related to non-personnel manufacturing integration costs.


(k) Restructuring, acquisition-related and other costs of $29.5 million represent costs related to the merger of Legacy Valeant into Legacy Biovail and include $13.0 million related to facility closure costs, $6.9 million related to contract cancellation fees, consulting, legal and other costs, $4.4 million related to severance, $3.3 million related to manufacturing integration, and $1.9 million related to acquisition costs.


(l) For the three months ended June 30, 2012 non cash interest expense associated with amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest is offset by an adjustment to deferred financing costs. For the three months ended June 30, 2011 non cash interest expense totaling $2.8 million associated with amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest.


(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 Six Months Ended June 30, 2012 and 2011













Six Months Ended




June 30,


(In thousands, except per share data)


2012


2011








Product sales


$ -


$ -


Alliance and royalty


-


536


Service and other


-


-


Total revenues


-


536








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


(50,405)

(b)(c)(d)

(50,861)

(b)(c)

Cost of services


-


-


Cost of alliances


(50,958)

(e)

(18,835)

(e)

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


(19,409)

(c)(f)(g)

(39,273)

(c)(f)

Research and development


-


-


Contingent consideration fair value adjustments


(17,568)

(h)

(2,138)

(h)

Acquired in-process research and development


(4,568)

(i)

(4,000)

(i)

Legal settlements


(56,779)

(j)

(2,400)


Restructuring, acquisition-related and other costs


(113,713)

(k)

(48,541)

(l)

Amortization of intangible assets


(411,213)


(226,989)




(724,613)


(393,037)


Operating income


724,613


393,573








Interest expense, net


5,355

(m)

6,348

(m)

(Gain) loss on extinguishment of debt


133


23,010


Gain (loss) on investments, net


-


(1,769)


Other income (expense), net including translation and exchange


-


-








Income before (recovery of) provision for income taxes


730,101


421,162








Provision for income taxes


20,709

(n)

38,497

(n)







Total Adjustments to Net income


$ 709,392


$ 382,665








Earnings per share:












Diluted:






Net income


$ 2.26


$ 1.15


Shares used in per share computation


314,514


332,130














(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 six months ended June 30, 2012 is $43.4 million primarily relating to the acquisitions of iNova on December 21, 2011, Dermik on December 16, 2011 and Afexa on October 17, 2011. For the six months ended June 30, 2011 the impact of inventory fair value step-up is $46.2 million primarily relating to the merger of Legacy Valeant into Legacy Biovail and the acquisition of PharmaSwiss SA on March 10, 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 Tech transfers of $4.5 million.


(e) Cost of Alliances represents the divestiture of 5FU and IDP-111 resulting from the acquisition of Dermik, $50.9 million for the six months ended June 30, 2012 and the divestiture of Cloderm resulting from the Legacy Valeant into Legacy Biovail merger, $18.8 million for the six months ended June 30, 2011.


(f) For the six months ended June 30, 2012 SG&A primarily includes $17.7 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the Legacy Valeant into Legacy Biovail merger, acceleration of certain equity instruments and the expense associated with certain award modifications. For the six months ended June 30, 2011 SG&A primarily includes $39.4 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the Legacy Valeant into Legacy Biovail merger.


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


(h) Net expenses from the changes in fair value of contingent consideration for the six months ended June 30, 2012 and 2011 of $17.6 million and $2.1 million, respectively.


(i) Total Acquired IPR&D for the six months ended June 30, 2012 of $4.6 million primarily relates to the termination of an IPR&D program acquired from Ortho Dermatologics and for the six months ended June 30, 2011 of $4.0 million relates to the acquisition of the Canadian rights to Cholestagel ®.


(j) For the six months ended June 30, 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 ®.


(k) Restructuring, acquisition-related and other costs of $113.7 million represent costs related to the acquisitions of PharmaSwiss SA, Sanitas, Afexa, Ortho Dermatologics, Dermik, iNova, Probiotica, Eyetech, OraPharma, University Medical, Gerot Lannach and Pedinol. These include $21.4 million related to acquisition costs, $31.9 million related to employee severance costs, $21.4 million related to integration related consulting, duplicative labor, transition services, and other, $23.7 million related to facility closure costs, $11.2 million related to other, and $4.1 million related to non-personnel manufacturing integration costs.


(l) Restructuring, acquisition-related and other costs of $48.5 million represent costs related to the merger of Legacy Valeant and Legacy Biovail and include $17.1 million related to facility closure costs, $15.4 million related to contract cancellation fees, consulting, legal and other costs, $9.3 million related to severance, $3.3 million related to manufacturing integration, and $3.4 million related to acquisition costs.


(m) Non cash interest expense associated with amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest totals for the six months ended June 30, 2012 and June 30, 2011 $5.4 million and $6.3 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

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


For the Three and Six Months Ended June 30, 2012 and 2011

(In thousands)













Three Months Ended


3.1

Cost of goods sold (a)


June 30,





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


$ 28,036


13%


$ 4,217


$ 23,819


11%



U.S. Neurology & Other


32,068


19%


1,939


30,129


18%



Canada/Australia (d)


30,867


26%


6,071


24,796


21%



Emerging Markets


106,544


43%


1,831


104,713


42%
















Corporate/other


(231)




(74)


(157)




















$ 197,284


26%


$ 13,984


$ 183,300


24%

























































Six Months Ended





June 30,





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


$ 59,932


14%


$ 13,571


$ 46,361


11%



U.S. Neurology & Other


68,466


19%


5,565


62,901


18%



Canada/Australia(d)


78,976


33%


29,229


49,747


21%



Emerging Markets


219,351


45%


2,040


217,311


44%
















Corporate/other


-




-


-




















$ 426,725


28%


$ 50,405


$ 376,320


25%





























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











(b) U.S. Dermatology includes $3.6 million of fair value step-up adjustment to inventory and $0.6 million of tech transfer costs, U.S. Neurology and Other includes $1.3 million of tech transfer costs and $0.5 million of amortization. Canada/Australia includes $6.1 million of fair value step up adjustment to inventory, -$0.2 million PP&E step-down and $0.2 million of tech transfer costs. Emerging Markets includes $0.7 million of fair value step up adjustment to inventory, $0.1 million of PP&E step up and $0.9 million of tech transfer costs. Corporate includes a year to date reclass of stock base compensation step up to SG&A.






(c) U.S. Dermatology includes $12.9 million of fair value step-up adjustment to inventory and $0.6 million of tech transfer costs, U.S. Neurology and Other includes $3.0 million of tech transfer costs and $2.6 million of amortization. Canada/Australia includes $29.7 million of fair value step up adjustment to inventory, -$0.7 million PP&E step-down and $0.2 million of tech transfer costs. Emerging Markets includes $0.8 million of fair value step up adjustment to inventory, $0.6 million of PP&E step up and $0.7 million of tech transfer costs.






(d) Cost of Goods Sold excludes contract manufacturing costs currently reported in Cost of Services. Cost of Goods sold excluding fair value step-up adjustment to inventory and other non-gaap prior to the restatement of contract manufacturing costs to Cost of Services for the three months ended March 31, 2012 was $202,393.
















Valeant Pharmaceuticals International, Inc.

Table 4


Consolidated Balance Sheet and Other Data


(In thousands)



As of


As of



June 30,


December 31,

4.1

Cash

2012


2011







Cash and cash equivalents

$ 395,266


$ 164,111


Marketable securities

-


6,338


Total cash and marketable securities

$ 395,266


$ 170,449












Debt










Revolving credit facility

$ -


$ 220,000


Term loan A facility

2,134,466


2,185,520


Term loan B facility

1,170,651


-


Senior notes

4,229,779


4,228,480


Convertible notes

16,279


17,011


Other

-


-



7,551,175


6,651,011


Less: Current portion

(195,154)


(111,250)



$ 7,356,021


$ 6,539,761






4.2

Summary of Cash Flow Statement

Three Months Ended



June 30,



2012


2011


Cash flow provided by (used in):










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

$ 254,602


$ 190,656


Restructuring and acquisition-related costs(c)

43,871


29,495


Payment of accrued legal settlements

1,752


2,000


Payment of Accreted Interest on Convertible Debt

-


2,712


Tax Benefit from Stock Options Exercised (a)

2,882


7,566


Working Capital change related to Business Development Activities

-


(20,200)


Non-Cash adjustments to Income Taxes Payable

-


13,730


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

4,379


(2,419)


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

$ 307,486


$ 223,540


Proceeds from sale of intangible assets

-


36,000


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

$ 307,486


$ 259,540












(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 $48,250 are broken down as follows:


Project Type

Amount Paid









Manufacturing Integration (Various Deals)

10,601




Europe (PharmaSwiss, Sanitas, Gerot Lannach)

5,981




iNova

5,255




Dermik

5,076




Pele Nova

4,483




Ortho

3,318




Eyetech

2,865




OraPharma

2,110




Afexa

1,902




Pedinol

1,815




Intellectual Property Migration

1,099




Other (Atlantis, Probiotica, University Medical, Swiss Herbal)

3,746









Total

$ 48,250









Expense Type

Amount Paid









Acquisition Related Costs Paid to 3rd Parties

16,122




Severance Payments

13,477




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

11,513




Facility Closure Costs

2,123




Non-Personnel Manufacturing Integration Costs

1,904




Other costs

3,111









Total

$ 48,250








Valeant Pharmaceuticals International, Inc.










Table 5

Organic Growth - by Segment












For the Three Months Ended June 30, 2012











(In thousands)


































For the Three Months Ended June 30,















Organic growth










(a)

(a)




(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

210.6

107.9

102.8


79.6

86.0

165.6


-

-


2.2


29%


33%

U.S. Neurology & Other

171.7

0.7

171.0


190.4

0.6

191.0


-

-


0.5


-10%


-10%

Canada/Australia

117.4

35.4

82.0


82.5

38.2

120.7


3.8

1.5


-


2%


4%

Emerging Markets - Central/Eastern Europe

150.9

48.4

102.5


112.8

48.8

161.6


18.9

9.3


4.7


14%


12%

Emerging Markets - Latin America

73.4

16.5

56.9


64.7

14.5

79.3


9.7

3.8


4.3


15%


10%

Emerging Markets - Southeast Asia/Africa

24.6

24.6

0.1


-

19.7

19.7


-

2.8


-


40%


-

Emerging Markets

249.0

89.5

159.5


177.6

83.0

260.5


28.6

16.0


9.1


16%


12%

Total product sales

748.7

233.4

515.3


530.0

207.7

737.8


32.4

17.5


11.8


10%


6%


















Add: JV Revenue (c)

1.8

-

1.8


0.6

-

0.6


0.1

-


-


201%


201%


















Total

750.6

233.4

517.1


530.7

207.7

738.4


32.5

17.5


11.8


10%


6%


















Less: Neuro

171.7

0.7

171.0


190.4

0.6

191.0


-

-


-






















Total product sales less Neuro

577.0

232.7

344.3


339.7

207.1

546.8


32.4

17.5


11.8


17%


15%



































(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) Represents Valeant's attributable portion of revenue from joint ventures (JV) not included in Consolidated Valeant revenues.

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

SOURCE Valeant Pharmaceuticals International, Inc.



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