Valeant Pharmaceuticals Reports 2012 Third Quarter Financial Results

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

  • 2012 Third Quarter Total Revenue $884 million
    • Organic growth (same store sales) was approximately 14%
    • Pro forma organic growth was approximately 12%
  • 2012 Third Quarter GAAP EPS $0.02; Cash EPS $1.15
  • 2012 Third Quarter GAAP Cash Flow from Operations was $167 million; Adjusted Cash Flow from Operations was $241 million
  • Updated Guidance for 2012:
    • Narrowing Cash EPS guidance for the fourth quarter to $1.30 to $1.35, which excludes new interest expense of $0.12 from $2.75 billion Medicis related financing
      • Previous Guidance for the fourth quarter was $1.25 to $1.45 Cash EPS
    • Lowering Adjusted Cash Flow from Operations from greater than $1.4 billion to $1.2 to $1.3 billion due to the increased investment in working capital

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

"The third quarter results again demonstrate our ability to deliver strong growth and profitability," said J. Michael Pearson, chairman and chief executive officer.  "We are very pleased with the third quarter's double-digit organic growth and record Cash EPS.  Our U.S. Dermatology business had an outstanding quarter, the trends in our U.S. Neurology and Other business are clearly improving, and our businesses outside the U.S. continue to perform strongly.  This continued strength in our base business, coupled with the potential approval of efinaconazole (IDP-108) and the pending acquisition of Medicis, should provide us with a solid foundation to deliver strong continued growth in 2013 and beyond."

Business Performance

Valeant's business continued to perform well in the third quarter of 2012 with all businesses achieving results within or above expectations.  Same store organic growth was approximately 14% and pro forma organic growth was approximately 12% for the third quarter of 2012 (See Table 6).  Total revenue was $884.1 million in the third quarter of 2012, as compared to $600.6 million in the third quarter of 2011, an increase of 47%.  Product sales were $856.9 million in the third quarter of 2012, as compared to $570.4 million in the year-ago quarter, an increase of 50%.   

Valeant's base business also continued to deliver strong organic growth.  Particularly positive was Valeant's U.S. Dermatology business, which continued its exceptional growth performance in the third quarter.  Key contributors to organic growth included Zovirax®, Elidel®, Retin-A Micro®, Acanya® and CeraVe®.

Our U.S. Neurology and Other portfolio declined slightly in the quarter, but the rate of decline improved significantly, reflecting the diminishing impact of the year over year negative impact from generic competitors of Wellbutrin XL®, Ultram® ER and Cardizem® CD. Excluding these products, the remaining U.S. Neurology and Other segment increased 9% (same store sales), as compared to the third quarter of 2011. We expect that this segment will return to positive organic growth in 2013.

The Canadian and Australian segment delivered negative organic 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 12% organic growth (same store sales).

Finally, our Emerging Markets segment provided pro forma organic growth of 9%, primarily driven by our operations in Latin America and South East Asia/South Africa. While overall market rates in Central and Eastern Europe slowed, our European operations significantly outperformed and delivered organic growth levels well above the market. 

Financial Performance

The Company reported net income of $7.6 million for the third quarter of 2012, or $0.02 per diluted share.  On a Cash EPS basis, adjusted income was $357.5 million, or $1.15 per diluted share.  

GAAP cash flow from operations was $166.8 million in the third quarter of 2012, and adjusted cash flow from operations was $241.2 million.  Cash flow was negatively impacted by an increase in accounts receivable principally due to sequential revenue growth as compared to the second quarter, and the strong seasonal sales in the month of September, primarily in U.S. Dermatology and Europe; the Wellbutrin XL litigation settlement costs of $37.7 million; and restructuring charges from our acquisitions.  

The Company's cost of goods sold (COGS) was $219.7 million in the third quarter of 2012.  After backing out the fair value adjustment to inventory, amortization expense and other items related to acquisitions of $20.0 million, COGS represented 23% of product sales. COGS for the third quarter of 2012 were positively impacted by the strong growth in our U.S. Dermatology segment which has a lower COGS profile than other segments.

Selling, General and Administrative expenses were $188.7 million in the third quarter of 2012, which includes a $9.1 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 20% of revenue. Research and Development expenses were $19.2 million in the third quarter of 2012, or approximately 2% of revenue.

2012 Guidance

The Company is updating previous 2012 Guidance from $4.55 to $4.75 Cash EPS, or $1.25 to $1.45 Cash EPS for the fourth quarter 2012, to $4.60 - $4.65 Cash EPS, or $1.30 to $1.35 Cash EPS for the fourth quarter of 2012, which excludes the interest expense of $0.12 Cash EPS from the $2.75 billion Medicis related financing. Valeant is lowering 2012 adjusted cash flow from operations expectations from greater than $1.4 billion to $1.2 to $1.3 billion due to increased investment in working capital associated with the growth in emerging markets, asset deals which require an investment in working capital post-closing, and plant consolidations including the closing of the Bourdon facility in Canada and the exiting of a legacy Valeant contract manufacturer in Puerto Rico.  Valeant is maintaining prior guidance of total revenue in the range of $3.4 to $3.6 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), November 2, 2012 to discuss its third quarter financial results for 2012. The dial-in number to participate on this call is (877) 281-0402, confirmation code 39252322. International callers should dial (631) 813-4869, confirmation code 39252322. A replay will be available approximately two hours following the conclusion of the conference call through November 9, 2012 and can be accessed by dialing (855) 859-2056, or (404) 537-3406, confirmation code 39252322. 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 the closing of the Medicis acquisitions, the approval of efinaconazole (IDP-108), future results and performance and financial guidance, including expected revenue and adjusted cash flow from operations and anticipated Cash EPS for 2012 and the fourth quarter of 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 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.

Note on Guidance

The guidance contained in this press release is only effective as of the date given, November 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 Nine Months Ended September 30, 2012 and 2011












Three Months Ended


Nine Months Ended



September 30,


September 30,

(In thousands, except per share data)


2012


2011


2012


2011










Product sales


$  856,892


$     570,423


$  2,363,226


$   1,600,879

Alliance and royalty


12,248


22,471


148,348


146,873

Service and other (a)


15,000


7,690


48,759


27,245

Total revenues


884,140


600,584


2,560,333


1,774,997










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


219,670


162,568


646,395


501,767

Cost of services


10,582


3,078


36,640


9,683

Cost of alliances


-


-


68,820


30,735

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


188,660


134,801


551,386


423,964

Research and development


19,170


17,476


58,887


48,910

Contingent consideration fair value adjustments


5,630


6,904


23,198


9,042

Acquired in-process research and development


145,300


-


149,868


4,000

Legal settlements


-


-


56,779


2,400

Restructuring, acquisition-related and other costs


47,477


25,372


161,190


73,913

Amortization of intangible assets


218,187


138,027


629,400


365,016



854,676


488,226


2,382,563


1,469,430

Operating income


29,464


112,358


177,770


305,567










Interest expense, net


(114,886)


(86,452)


(315,382)


(236,387)

Loss on extinguishment of debt


(2,322)


(10,315)


(2,455)


(33,325)

Gain (loss) on investments, net


-


(140)


2,024


22,787

Other income, net including translation and exchange


(1,603)


(3,590)


18,458


64










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


(89,347)


11,861


(119,585)


58,706










Recovery of income taxes 


(96,992)


(29,001)


(92,702)


(44,998)










Net income (loss)


$     7,645


$      40,862


$     (26,883)


$     103,704










Earnings per share:


















Basic:









Net income (loss)


$       0.03


$          0.13


$        (0.09)


$           0.34

Shares used in per share computation


304,075


302,702


305,550


303,285










Diluted:









Net income (loss)


$       0.02


$          0.13


$        (0.09)


$           0.32

Shares used in per share computation


311,743


322,783


305,550


329,010











(a) Service and Other revenue includes contract manufacturing revenue of $10.3 million and $30.1 million for the three and nine months ended September 30, 2012, respectively.










Valeant Pharmaceuticals International, Inc.

 Table 2 

Reconciliation of GAAP EPS to Cash EPS 

For the Three and Nine Months Ended September 30, 2012 and 2011





















Three Months Ended


Nine Months Ended



September 30,


September 30,

(In thousands, except per share data)


2012


2011


2012


2011










Net income (loss)


$       7,645


$     40,862


$     (26,883)


$     103,704










Non-GAAP adjustments(a):









Inventory step-up (b)


6,009


2,768


49,401


48,939

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


(264)


138


50,770


19,478

Stock-based compensation step-up (d)


9,061


11,149


24,624


50,556

Contingent consideration fair value adjustment(e)


5,630


6,904


23,198


9,042

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


145,300


-


149,868


4,000

Legal settlements(g)


-


-


56,779


2,400

Restructuring, acquisition-related and other costs(h)


47,477


25,372


161,190


73,913

Amortization and other non-gaap charges(i)


232,560


140,321


653,554


371,897



445,773


186,652


1,169,384


580,225

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


8,859


12,686


14,214


19,034

Loss on extinguishment of debt


2,322


10,315


2,455


33,325

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


-


-


1,002


-

(Gain) loss on investments, net


-


-


-


(1,769)

Tax(l)


(107,093)


(38,601)


(127,802)


(77,098)

Total adjustments


349,861


171,052


1,059,253


553,717










Adjusted income


$   357,506


$   211,914


$ 1,032,370


$     657,421










GAAP earnings per share - diluted


$         0.02


$         0.13


$         (0.09)


$           0.32










Cash earnings per share - diluted


$         1.15


$         0.66


$          3.29


$           2.00










Cash earnings per share excluding one-time items - diluted


$         1.15


$         0.66


$          2.93


$           1.76










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


311,743


322,783


313,584


329,010




















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

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

(g) See footnote (j) to Table 2b.

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

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

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

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

(l) See footnote (k) 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 September 30, 2012 and 2011










Non-GAAP Adjustments(a)for




Three Months Ended




September 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)


(20,030)

 (b)(c)(d) 

(5,031)

 (b)(c) 

Cost of services


-


-


Cost of alliances


-


-


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


(9,149)

 (c)(e) 

(11,050)

 (c)(e) 

Research and development


-


-


Contingent consideration fair value adjustments


(5,630)

 (f) 

(6,904)

 (f) 

Acquired in-process research and development


(145,300)

 (g) 

-


Legal settlements


-


-


Restructuring, acquisition-related and other costs


(47,477)

 (h) 

(25,372)

 (i) 

Amortization of intangible assets


(218,187)


(138,027)




(445,773)


(186,384)


Operating income


445,773


186,652








Interest expense, net


8,859

 (j) 

12,686

 (j) 

(Gain) loss on extinguishment of debt


2,322


10,315


Gain (loss) on investments, net


-


-


Other income (expense), net including translation and exchange 


-


-








Income before (recovery of) provision for income taxes


456,954


209,653








Provision for income taxes


107,093

 (k) 

38,601

 (k) 







Total Adjustments to Net income 


$  349,861


$     171,052








Earnings per share:












Diluted:






Total Adjustments to Net income


$       1.12


$          0.53


Shares used in per share computation


311,743


322,783















(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 September 30, 2012 is $6.0 million primarily relating to the acquisitions of Afexa on October 17, 2011, Pedinol Pharmacal, Inc. on April 11, 2012 and BC Pharma B.V. on July 1, 2012.  For the three months ended September 30, 2011 the impact of inventory fair value step-up is $2.8 million primarily relating to the acquisition of Sanitas on August 19, 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, $14.4 million.


(e) For the three months ended September 30, 2012 SG&A primarily includes $9.1 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 and the acceleration of certain equity instruments.  For the three months ended September 30, 2011 SG&A primarily includes $11.1 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) Net expenses from the changes in fair value of contingent consideration for the three months ended September 30, 2012 and 2011 of $5.6 million and $6.9 million, respectively.


(g) Total Acquired IPR&D for the three months ended September 30, 2012 of $145.3 million is the write-off of the IPR&D asset related to the IDP-107 dermatology program, $133.4 million, and a $12.0 million payment to terminate a research and development commitment with a third party.


(h) Restructuring, acquisition-related and other costs of $47.5 million represent costs related to the acquisitions of Sanitas, Dermik, iNova, Probiotica, OraPharma, University Medical, and Swiss Herbal as well as other internal restructuring and integration initiatives. These include $4.6 million related to acquisition costs, $14.4 million related to employee severance costs, $18.5 million related to integration consulting, duplicative labor, and transition services, $3.8 million related to facility closure costs, and $6.2 million related to other.


(i) Restructuring, acquisition-related and other costs of $25.4 million represent costs related to the merger of Legacy Valeant into Legacy Biovail and include $0.9 million related to facility closure costs, $8.9 million related to contract cancellation fees, consulting, legal and other costs, $5.0 million related to severance, $9.5 million related to acquisition costs, and $1.1 million related to manufacturing integration.


(j) 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 nine months ended September 30, 2012 and September 30, 2011 are $8.9 million and $12.7 million, respectively.


(k) 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 Nine Months Ended September 30, 2012 and 2011














Nine Months Ended




September 30,


(In thousands, except per share data)


2012


2011








Product sales


$              -


$                -


Alliance and royalty


-


804


Service and other


-


-


Total revenues


-


804








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


(70,435)

 (b)(c)(d) 

(55,892)

 (b)(c) 

Cost of services


-


-


Cost of alliances


(50,958)

 (e) 

(18,835)

 (e) 

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


(28,558)

 (c)(f)(g) 

(50,323)

 (c)(f) 

Research and development


-


-


Contingent consideration fair value adjustments


(23,198)

 (h) 

(9,042)

 (h) 

Acquired in-process research and development


(149,868)

 (i) 

(4,000)

 (i) 

Legal settlements


(56,779)

 (j) 

(2,400)


Restructuring, acquisition-related and other costs


(161,190)

 (k) 

(73,913)

 (l) 

Amortization of intangible assets


(629,400)


(365,016)




(1,170,386)


(579,421)


Operating income


1,170,386


580,225








Interest expense, net


14,214

 (m) 

19,034

 (m) 

(Gain) loss on extinguishment of debt


2,455


33,325


Gain (loss) on investments, net


-


(1,769)


Other income (expense), net including translation and exchange 


-


-








Income before (recovery of) provision for income taxes


1,187,055


630,815








Provision for income taxes


127,802

 (n) 

77,098

 (n) 







Total Adjustments to Net income 


$  1,059,253


$     553,717








Earnings per share:












Diluted:






Total Adjustments to Net income


$           3.38


$           1.68


Shares used in per share computation


313,584


329,010















(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 nine months ended September 30, 2012 is $49.4 million primarily relating to the acquisitions of iNova on December 21, 2011, Ortho Dermatologics on December 12, 2011, Dermik on December 16, 2011, Afexa on October 17, 2011, and Pedinol Pharmacal, Inc. on April 11, 2012.  For the nine months ended September 30, 2011 the impact of inventory fair value step-up is $48.9 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 integration related tech transfers, $18.9 million.


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


(f)  For the nine months ended September 30, 2012 SG&A primarily includes $26.8 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 nine months ended September 30, 2011 SG&A primarily includes $50.0 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.


(h) Net expenses from the changes in fair value of contingent consideration for the nine months ended September 30, 2012 and 2011 of $23.2 million and $9.0 million, respectively.


(i)  Total Acquired IPR&D for the nine months ended September 30, 2012 of $149.9 million is primarily the write-off of the IPR&D asset related to the IDP-107 dermatology program, $133.4 million, a $12.0 million payment to terminate a research and development commitment with a third party, and $4.3 million related to the termination of the MC5 program acquired from Ortho Dermatologics.  Total Acquired IPR&D for the nine months ended September 30, 2011 of $4.0 million relates to the acquisition of the Canadian rights to Lodalis TM.


(j) For the nine months ended September 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 $161.2 million represent costs related to the acquisitions of Sanitas, Afexa, Ortho Dermatologics, Dermik, iNova, Probiotica, Eyetech, OraPharma, University Medical, Gerot Lannach, Atlantis, Swiss Herbal, and Pedinol as well as other internal restructuring and integration initiatives.   These include $26.0 million related to acquisition costs, $46.4 million related to employee severance costs, $46.6 million related to integration consulting, duplicative labor, and transition services, $27.5 million related to facility closure costs, $10.7 million related to other, and $4.0 million related to non-personnel manufacturing integration costs.


(l) Restructuring, acquisition-related and other costs of $73.9 million represent costs related to the merger of Legacy Valeant into Legacy Biovail and the acquisitions of PharmaSwiss SA and Sanitas.  These costs include $18.0 million related to facility closure costs, $24.3 million related to contract cancellation fees, consulting, legal and other costs, $14.3 million related to severance, $12.9 million related to acquisition costs, and $4.4 million related to manufacturing integration.


(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 nine months ended September 30, 2012 and September 30, 2011 are $14.2 million and $19.0 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 Nine Months Ended September 30, 2012 and 2011

(In thousands)



 Three Months Ended 



September 30,

Revenue(a)(b)



2012
GAAP



2011
GAAP


%   Change


2012 currency impact


2012 excluding currency impact
 non-GAAP


%   Change

  U.S. Dermatology 


$      312,449


$     133,649


134%


$          -


$     312,449


134%

  U.S. Neurology & Other


180,909


180,281


0%


-


180,909


0%

Canada/Australia 


141,072


84,644


67%


1,911


142,983


69%

Emerging Markets


249,709


202,010


24%


29,820


279,529


38%

Total Revenue


$      884,140


$     600,584


47%


$  31,731


$     915,870


52%





























 Nine Months Ended 



September 30,

Revenue(a)(b)



2012
GAAP



2011
GAAP


%   Change


2012 currency impact


2012 excluding currency impact
 non-GAAP


%   Change

U.S. Dermatology 


$      822,714


$     399,833


106%


$          -


$     822,714


106%

U.S. Neurology & Other


591,582


620,759


-5%


-


591,582


-5%

Canada/Australia


402,001


238,888


68%


6,779


408,780


71%

Emerging Markets


744,035


515,517


44%


92,136


836,171


62%

Total Revenue


$   2,560,333


$  1,774,997


44%


$  98,915


$  2,659,247


50%















(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 Valeant 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 Nine Months Ended September 30, 2012 and 2011

(In thousands)














 Three Months Ended 

4.1

Cost of goods sold (a)


September 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 


$    28,802


9%


$        4,594


$      24,208


8%


U.S. Neurology & Other 


33,680


19%


355


33,325


19%


Canada/Australia (d)


42,197


33%


4,427


37,770


29%


Emerging Markets


114,991


46%


10,654


104,337


42%














Corporate/other


-




-


-


















$  219,670


26%


$       20,030


$     199,640


23%




















































 Nine Months Ended 




September 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 


$    88,734


12%


$       18,165


$       70,569


10%


U.S. Neurology & Other 


102,160


19%


5,920


96,240


18%


Canada/Australia(d)


129,377


35%


33,656


95,721


26%


Emerging Markets


326,138


44%


12,694


313,444


42%














Corporate/other


-




-


-


















$  646,395


27%


$       70,435


$     575,974


24%



























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




(b) U.S. Dermatology includes $1.9 million of fair value step-up adjustment to inventory and $2.7 million of integration related tech transfer costs, U.S. Neurology and Other includes $0.4 million of integration related tech transfer costs.  Canada/Australia includes $2.8 million of fair value step up adjustment to inventory, -$0.6 million PP&E step-down and $2.2M of integration related tech transfer costs and other. Emerging Markets includes $1.3 million of fair value step up adjustment to inventory, $9.1M of integration related tech transfer costs and $0.3 million of PP&E step up.




(c) U.S. Dermatology includes $14.8 million of fair value step-up adjustment to inventory and $3.4 million of integration related tech transfer costs, U.S. Neurology and Other includes $3.2 million of integration related tech transfer costs and $2.6 million of amortization.  Canada/Australia includes $32.5 million of fair value step up adjustment to inventory, -$1.2 million PP&E step-down and $2.4M of integration related tech transfer costs and other. Emerging Markets includes $2.1 million of fair value step up adjustment to inventory, $9.8M of integration related tech transfer costs and $0.8 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



September 30,


December 31,

5.1

Cash

2012


2011







Cash and cash equivalents

$    257,730


$    164,111


Marketable securities

-


6,338


Total cash and marketable securities

$    257,730


$    170,449












Debt










New Revolving Credit Facility

$      25,000


$    220,000


Term loan A Facility

2,108,964


2,185,520


New Term Loan B Facility

1,265,854


-


Senior notes

4,230,428


4,228,480


Convertible notes

-


17,011


Other

-


-



7,630,246


6,651,011


Less: Current portion

(207,688)


(111,250)



$ 7,422,558


$ 6,539,761






5.2

Summary of Cash Flow Statement

Three Months Ended



September 30,



2012


2011


Cash flow provided by (used in):










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

$    166,824


$    173,707


Restructuring and acquisition-related costs (c)

47,477


25,372


Payment of accrued legal settlements

37,739


-


Payment of Accreted Interest on Convertible Debt

-


3,362


Tax Benefit from Stock Options Exercised(a)

2,367


2,042


Working Capital change related to Business Development Activities

-


-


Non-Cash adjustments to Income Taxes Payable

-


-


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

(13,251)


3,918


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

$    241,156


$    208,401


Proceeds from sale of intangible assets

-


-


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

$    241,156


$    208,401













(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 $34,226 are broken down as follows:





Project Type

Amount Paid









iNova

5,736




Intellectual Property Migration

5,390




Dermik

4,560




Other (Probiotica, University Medical, Swiss Herbal)

3,475




Europe (PharmaSwiss, Sanitas, Gernot Lannach)

2,621




Manufacturing Integration (Various Deals)

2,266




Atlantis

1,849




OraPharma

1,798




Ortho

1,784




Pedinol

1,722




US Restructuring

1,553




Afexa

801




Eyetech

669









Total

$            34,226









Expense Type

Amount Paid









Integration related consulting, duplicative labor, and transition services

15,269




Severance Payments

11,614




Acquisition Related Costs Paid to 3rd Parties

3,712




Travel/Other

2,362




Facility Closure Costs

679




Other Manufacturing integration

591









Total

$            34,226








 

 

 

Valeant Pharmaceuticals International, Inc.

Table 6

Organic Growth - by Segment

For the Three Months Ended September 30th, 2012

(In thousands)


 For the Three Months Ended September 30th, 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

305.8

128.1

177.6


112.7

116.2

228.8


-

-


3.1


35%


62%

U.S. Neurology & Other (c)

174.5

0.5

174.0


175.5

0.5

176.0


-

-


0.3


-1%


-1%

Canada/Australia (d)

131.3

53.8

77.4


84.2

56.6

140.8


1.2

0.5


0.4


-5%


-6%

Emerging Markets - Central/Eastern Europe

144.0

23.9

120.1


131.1

30.3

161.4


13.4

3.8


5.9


3%


7%

Emerging Markets - Latin America

80.6

18.5

62.1


68.0

15.0

83.0


6.8

4.0


5.4


17%


10%

Emerging Markets - Southeast Asia/Africa (e)

23.7

23.6

0.1


-

21.9

21.9


0.0

1.7


-


16%



Emerging Markets

248.3

66.0

182.2


199.0

67.1

266.2


20.3

9.4


11.3


9%


8%

Total product sales

859.8

248.5

611.3


571.4

240.3

811.8


21.4

9.9


15.0


12%


14%


















Less: Neuro

174.5

0.5

174.0


175.5

0.5

176.0


-

-


0.3






















Total product sales less Neuro

685.3

248.0

437.3


395.9

239.9

635.8


21.4

9.9


14.7


15%


20%



















(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 Valeant 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) -  $0.9 million Q3'12.  QTD 2012 includes a $16.5 million reduction in Revenues of Cardizem CD, Ultram ER, Diastat and Wellbutrin XL versus prior year.  Excluding these products, organic growth is 9% on a same store basis.


(d) Includes Valeant's attributable portion of revenue from joint ventures (JV) -  $1.1 million Q3'11 and $2 million Q3'12.  QTD 2012 includes a $13.4 million reduction in Cesamet sales versus prior year.  Excluding Cesamet sales, organic growth is 12% on a same store basis.


(e) QTD 2012 excludes $0.3 million that has been reclassed to Australia in order to align current quarter with historical reporting of same store export sales.







































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

 

SOURCE Valeant Pharmaceuticals International, Inc.



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