Cephalon Reported Record Sales, Adjusted Net Income and Cash From Operations in 2010

2010 Sales Increased 28 Percent to $2.8 Billion

Adjusted Net Income Increased 40 Percent to $657 Million

Cash From Operations Totaled $782 Million

2011 Guidance Increased

News provided by

Cephalon, Inc.

Feb 10, 2011, 04:10 ET

FRAZER, Pa., Feb. 10, 2011 /PRNewswire/ -- Cephalon, Inc. (Nasdaq: CEPH) today reported 2010 net sales of $2.761 billion, a 28 percent increase compared to net sales of $2.152 billion for 2009.  Basic income per common share for the year was $5.66.  Excluding amortization expense and certain other items, adjusted net income for full year 2010 was $657 million, a 40 percent increase over the previous year.  This exceeded the company's adjusted net income guidance range of $617 to $632 million for 2010. Basic adjusted income per common share for the year was $8.74 in 2010, a 35 percent increase over the $6.48 in 2009.  

Central nervous system (CNS) franchise net sales were $1.394 billion during the year, an 18 percent increase compared to 2009.  Pain franchise reported net sales of $526.3 million, a 6 percent increase versus last year.  Oncology franchise net sales were $513.6 million, a 53 percent increase over 2009 due to strong net sales of TREANDA® (bendamustine hydrochloride) of $393.5 million.  Sales of other products were $326.7 million, a 130 percent increase primarily due to the sales of the portfolio of products obtained through the acquisition of Mepha in April 2010.

During the fourth quarter 2010 Cephalon recorded net cash provided by operating activities of $131 million resulting in 2010 cash flow from operations of $782 million.

"As pleased as I am with our strong financial performance, I am as enthusiastic about the company we are building for tomorrow," said Kevin Buchi, Chief Executive Officer. "We now have one of the premier late stage pipelines in the industry and a geographically diversified business."

The company is updating its guidance for 2011.  Total sales guidance for 2011 is increased to $3.015 -$3.095 billion as a result of an increase in CNS franchise sales to $1.45 -$1.49 billion.  Pain franchise sales of $540 - $570 million, oncology franchise sales of $570 - $600 million, and other product sales of $420 - $450 million remain unchanged. Full year R&D guidance is increased to $520 - $540 million and SG&A guidance remains unchanged at $970 million - $1.00 billion.  Adjusted net income guidance is increased to $665-$688 million.  Basic adjusted income per common share guidance is increased to $8.70 - $9.00, assuming 76.4 million basic shares outstanding.

Cephalon is introducing first quarter 2011 sales guidance of $725 - $755 million, adjusted net income guidance of $144 - $159 million and basic adjusted income per common share guidance of $1.90 - $2.10 assuming 75.8 million basic shares outstanding.  

Basic adjusted income per common share for both the first quarter 2011 and full-year 2011 is reconciled below and is subject to the assumptions set forth therein.  References in this press release to basic income per common share, basic adjusted income per common share, basic adjusted income per common share guidance, adjusted net income, adjusted net income guidance, adjusted net income per common share, adjusted net income per common share guidance refers to those metrics on an "attributable to Cephalon" basis and does not include any income or losses attributable to noncontrolling interests.

Cephalon's management will discuss the company's full year 2010 performance in a conference call with investors beginning at 5:00 p.m. U.S. EST today.  To participate in the conference call, dial +1-913-312-0724 and refer to conference code number 3115464. Investors can listen to the call live by logging on to the company's website at www.cephalon.com and clicking on "Investors" then "Webcast."  The conference call will be archived and available to investors for one week after the call.

About Cephalon, Inc.

Cephalon is a global biopharmaceutical company dedicated to discovering, developing and bringing to market medications to improve the quality of life of individuals around the world.  Since its inception in 1987, Cephalon has brought first-in-class and best-in-class medicines to patients in several therapeutic areas.  Cephalon has the distinction of being one of the world's fastest-growing biopharmaceutical companies, now among the Fortune 1000 and a member of the S&P 500 Index, employing approximately 4,000 people worldwide.  The company sells numerous branded and generic products around the world. In total, Cephalon sells more than 150 products in approximately 100 countries.  More information on Cephalon and its products is available at http://www.cephalon.com

In addition to historical facts or statements of current condition, this press release may contain forward-looking statements. Forward-looking statements provide Cephalon's current expectations or forecasts of future events. These may include statements regarding anticipated scientific progress on its research programs; development of potential pharmaceutical products; interpretation of clinical results; prospects for regulatory approval; manufacturing development and capabilities; market prospects for its products; sales, adjusted net income and basic adjusted income per common share guidance for first-quarter 2011 and full-year 2011 and SG&A and R&D guidance for the first-quarter 2011 and full-year 2011; and other statements regarding matters that are not historical facts. You may identify some of these forward-looking statements by the use of words in the statements such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" or other words and terms of similar meaning. Cephalon's performance and financial results could differ materially from those reflected in these forward-looking statements due to general financial, economic, regulatory and political conditions affecting the biotechnology and pharmaceutical industries as well as more specific risks and uncertainties facing Cephalon such as those set forth in its reports on Form 8-K, 10-Q and 10-K filed with the U.S. Securities and Exchange Commission. Given these risks and uncertainties, any or all of these forward-looking statements may prove to be incorrect. Therefore, you should not rely on any such factors or forward-looking statements. Furthermore, Cephalon does not intend to update publicly any forward-looking statement, except as required by law. The Private Securities Litigation Reform Act of 1995 permits this discussion.

This press release and/or the financial results attached to this press release include "Adjusted Net Income," "Basic Adjusted Income per Common Share," "Adjusted Net Income Guidance," "Basic Adjusted Income per Common Share Guidance," and "Diluted Adjusted Income Per Common Share," amounts that are considered "non-GAAP financial measures" under SEC rules. As required, we have provided reconciliations of these measures. Additional required information is located in the Form 8-K furnished to the SEC in connection with this press release.

Contacts:

Media:

Investors:

Natalie deVane

Robert (Chip) Merritt

610-727-6536

610-738-6376

[email protected]

[email protected]



Joseph Marczely

610-883-5894

[email protected]


CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


Three Months Ended

Year Ended

December 31,

December 31,

2010

2009

2010

2009

REVENUES:






Net sales

$ 764,759

$ 562,938

$ 2,760,952

$ 2,151,548

Other revenues

5,810

12,177

50,105

40,760

770,569

575,115

2,811,057

2,192,308

COSTS AND EXPENSES:






Cost of sales

150,142

105,204

577,863

398,837

Research and development

122,391

91,165

439,995

395,431

Selling, general and administrative

268,504

203,738

958,404

822,052

Change in fair value of contingent consideration

205

-

6,519

-

Restructuring charges

3,081

9,881

10,719

13,825

Impairment charge

-

182,080

-

182,080

Acquired in-process research and development

100,000

-

100,000

46,118

644,323

592,068

2,093,500

1,858,343








INCOME (LOSS) FROM OPERATIONS

126,246

(16,953)

717,557

333,965








OTHER INCOME (EXPENSE):






Interest income

1,188

1,808

5,326

5,263

Interest expense

(20,362)

(27,123)

(99,257)

(90,336)

Change in fair value of investments

7,931

-

7,931

-

Other income (expense), net

6,691

(1,903)

(12,758)

40,515

(4,552)

(27,218)

(98,758)

(44,558)








INCOME (LOSS) BEFORE INCOME TAXES

121,694

(44,171)

618,799

289,407








INCOME TAX EXPENSE (BENEFIT)

28,289

(43,979)

201,116

78,680








NET INCOME  (LOSS)

93,405

(192)

417,683

210,727








NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

211

96,750

8,062

131,900








NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$   93,616

$   96,558

$    425,745

$    342,627
















BASIC INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC.

$       1.24

$       1.29

$          5.66

$          4.74








DILUTED INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC.

$       1.16

$       1.23

$          5.27

$          4.41








WEIGHTED AVERAGE NUMBER OF COMMON






SHARES OUTSTANDING ATTRIBUTABLE TO








CEPHALON, INC.

75,355

74,720

75,185

72,342








WEIGHTED AVERAGE NUMBER OF COMMON






SHARES OUTSTANDING-ASSUMING DILUTION






ATTRIBUTABLE TO CEPHALON, INC.

80,964

78,508

80,712

77,733

CEPHALON, INC. AND SUBSIDIARIES

Reconciliation of GAAP Net Income to Adjusted Net Income Attributable to Cephalon, Inc.

(Unaudited)



Three Months Ended

December 31,

2010

2009





GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$   93,616


$   96,558







Cost of sales adjustments

30,488

(1)

34,875

(1)

Research and development adjustments

2,013

(2)

343

(2)

Selling, general and administrative adjustments

8,245

(3)

232

(3)

Change in fair value of contingent consideration adjustment

205

(4)

-

Restructuring charges

2,067

(5)

9,881

(5)

Impairment charges

-

7,080

(6)

Acquired in-process research and development adjustments

100,000

(7)

-

Interest expense adjustment

15,413

(8)

17,307

(8)

Change in fair value of investments adjustment

(7,931)

(9)

-

Other income adjustment

(8,522)

(10)

-

Income tax adjustment

(58,491)

(11)

(35,787)

(11)

*Noncontrolling Interest adjustments:



Impairment charges

-

175,000

Other revenue

(244)

(11)

Research and development

26

7,140

Selling, general and administrative    

531

1,411

Interest income

(21)

(5)

Interest expense  

-

97

Restructuring charges

1,014

-

Income taxes

(1,004)

(12,647)

Impairment charge tax benefit

-

(74,235)

Less amount attributable to noncontrolling interest

(302)

(96,750)

83,487

33,931





ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$ 177,103

$ 130,489










BASIC ADJUSTED INCOME PER COMMON SHARE

$       2.35

$       1.75





DILUTED ADJUSTED INCOME PER COMMON SHARE

$       2.19

$       1.66





WEIGHTED AVERAGE NUMBER OF COMMON



SHARES OUTSTANDING

75,355

74,720





WEIGHTED AVERAGE NUMBER OF COMMON





SHARES OUTSTANDING-ASSUMING DILUTION

80,964

78,508





* Amounts recorded by our Variable Interest Entities that have been excluded from net income attributable to Cephalon, Inc.

Notes to Reconciliation of GAAP Net Income to Adjusted Net Income

(1) To exclude the on-going amortization of acquired intangible assets ($30.3M in 2010; $26.9M in 2009), accelerated depreciation related to restructuring ($0.2M in 2010; $5.0M in 2009) and the reserve for modafinil purchase commitments in excess of requirements ($3.0M in 2009).

(2) In 2010, to exclude costs associated with our collaboration with Ambit Biosciences Corporation.  In 2009, to exclude accelerated depreciation related to restructuring.

(3) In 2010, to exclude charges related to the acquisition of Mepha GmbH, Mesoblast Limited and ChemGenex Pharmaceuticals Limited ($5.0M, $3.0M and $0.2M, respectively). In 2009, to exclude charges related to the acquisition of Arana Therapeutics Limited ($0.2M).  

(4) In 2010, to exclude the change in fair value of the Ception Therapeutics, Inc. (-$0.3M) and BioAssets Development Corporation ($0.5M) contingent consideration.

(5) To exclude costs related to restructurings.

(6) In 2009, to exclude the impairment of  our investment in SymBio Pharmaceuticals Limited.

(7) In 2010, to exclude the acquisition of worldwide license rights to Mesoblast Limited's proprietary technology platform.

(8) To exclude imputed interest expense associated with convertible debt.

(9) In 2010, to exclude the change in fair value of our investment in Mesoblast Limited ($12.0M), offset by the change in fair value of our investment in ChemGenex Pharmaceuticals Limited  ($4.1M).

(10) In 2010, to exclude a gain on foreign exchange of Australian Dollar acquisition funds ($2.0M) and proceeds received in a settlement ($6.5M).  

(11) To reflect the tax effect of pre-tax adjustments at applicable tax rates and certain other tax adjustments primarily related to changes in valuation allowances and other changes in tax assets and liabilities.

CEPHALON, INC. AND SUBSIDIARIES

Reconciliation of GAAP Net Income to Adjusted Net Income Attributable to Cephalon, Inc.

(Unaudited)



Year Ended

December 31,

2010

2009





GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$ 425,745


$ 342,627







Cost of sales adjustments

154,713

(1)

113,021

(1)

Research and development adjustments

4,715

(2)

4,747

(2)

Selling, general and administrative adjustments

17,815

(3)

14,611

(3)

Change in fair value of contingent consideration adjustment

6,519

(4)

-

Restructuring charges

9,704

(5)

13,825

(5)

Impairment charge

-

7,080

(6)

Acquired in-process research and development adjustments

100,000

(7)

46,118

(7)

Interest expense adjustment

65,485

(8)

57,766

(8)

Change in fair value of investments adjustment

(7,931)

(9)

-

Other (income) expense adjustment

3,045

(10)

(40,011)

(10)

Arana noncontrolling interest adjustments

-

(819)

(11)

Income tax adjustment

(122,784)

(12)

(89,979)

(12)





*Noncontrolling Interest adjustments:



Impairment charge

-

175,000

Other revenue

(276)

19

Research and development

6,403

32,659

Selling, general and administrative    

3,994

8,784

Restructuring charges

1,014

-

Interest income

(29)

(187)

Interest expense

154

1,396

Other expense

166

33

Impairment charge tax benefit

-

(74,235)

Income taxes

(4,852)

(12,600)

Less amount attributable to noncontrolling interest

(6,574)

(130,869)

231,281

126,359





ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$ 657,026

$ 468,986










BASIC ADJUSTED INCOME PER COMMON SHARE

$       8.74

$       6.48





DILUTED ADJUSTED INCOME PER COMMON SHARE

$       8.14

$       6.03





WEIGHTED AVERAGE NUMBER OF COMMON



SHARES OUTSTANDING

75,185

72,342





WEIGHTED AVERAGE NUMBER OF COMMON



SHARES OUTSTANDING-ASSUMING DILUTION

80,712

77,733





* Amounts recorded by our Variable Interest Entities that have been excluded from net income attributable to Cephalon, Inc.

Notes to Reconciliation of GAAP Net Income to Adjusted Net Income

(1) To exclude the on-going amortization of acquired intangible assets ($119.7M in 2010; $97.5M in 2009), accelerated depreciation related to restructuring ($15.1M in 2010; $19.0M in 2009), amortization of inventory revaluation related to Mepha GmbH ($10.5M in 2010) and the reserve for modafinil purchase commitments in excess of estimated requirements ($9.4M in 2010; $6.0M in 2009), offset by the gain recognized in connection with an agreement to reduce our excess modafinil purchase commitments ($9.5M in 2009).

(2) To exclude accelerated depreciation related to restructuring ($0.7M in 2010; $1.3M in 2009), the impairment of an investment ($2.0M in 2010),  charges related to our collaboration with Ambit BioSciences Corporation ($2.0M in 2010), charges related to payments for several research and development collaborations ($2.0M in 2009) and charges related to our transaction with Arana Therapeutics Limited ($1.5M in 2009).

(3) In 2010, to exclude charges charges related to the acquisition of Mepha GmbH, Ception Therapeutics, Inc. noncontrolling interest, Mesoblast Limited and ChemGenex Pharmaceuticals Limited ($15.3M, $1.4M, $3.0M and $0.2M, respectively), offset by proceeds related to the settlement of litigation in Europe ($2.1M).  In 2009, to exclude charges related to the acquisition of Arana Therapeutics Limited ($8.1M) and charges related to our settlement with Takeda Pharmaceutical Company Limited ($6.5M) to resolve our remaining contractual arrangements.  

(4) In 2010, to exclude the change in fair value of the Ception Therapeutics, Inc. ($6.0M) and BioAssets Development Company  ($0.5M) contingent consideration.

(5) To exclude costs related to restructurings.

(6) In 2009, to exclude the loss on sale of equipment related to the VIVITROL termination.

(7) In 2010, to exclude the acquisition of worldwide license rights to Mesoblast Limited's proprietary technology platform.  In 2009, to exclude charges related to the deconsolidation of Acusphere, Inc. ($9.3M), the acquisition of worldwide license rights related to LUPUZOR from ImmuPharma AG ($30.0M), license rights for bendamustine hydrochloride in China and Hong Kong ($0.8M) and license rights to certain of XOMA Ltd.’s proprietary antibody library materials ($6.0M).

(8) To exclude imputed interest expense associated with convertible debt.

(9) In 2010, to exclude the change in fair value of our investment in Mesoblast Limited ($12.0M), offset by the change in fair value of our investment in ChemGenex Pharmaceuticals Limited ($4.1M).

(10) In 2010, to exclude the following:

  • $2.0M gain on foreign exchange of Australian Dollar acquisition funds;
  • $6.5M proceeds received in a settlement
  • $9.1M net loss on foreign exchange derivative instruments related to the acquisition of Mepha GmbH; and
  • $2.5M loss on foreign exchange of Swiss Franc acquisition funds.

In 2009, to exclude the following gains and losses related to the acquisition of Arana Therapeutics Limited:

  • $6.6M gain on pre-bid Arana Therapeutics Limited holding;
  • $2.8M loss on contingent consideration (90% ownership incentive payment);
  • $10.0M gain on excess of net assets over consideration;
  • $19.0M gain on foreign exchange derivative instruments;  
  • $5.6M gain on foreign exchange of Australian Dollar acquisition funds; and
  • $1.6M gain on dividend income related to our initial purchase of Arana Therapeutics Limited shares.

(11) In 2009, to exclude the portion of non-cash charges related to our acquisition of Arana Therapeutics Limited that are reflected in (10) above but do not affect net income because they are attributed to noncontrolling interests.

(12) To reflect the tax effect of pre-tax adjustments at applicable tax rates and certain other tax adjustments primarily related to; changes in valuation allowances and other changes in tax assets and liabilities.

CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED SALES DETAIL

(In thousands)

(Unaudited)



Three Months Ended

%


December 31

Increase


2010

2009

(Decrease)


United States

Europe

Total

United States

Europe

Total

United States

Europe

Total

Sales:

















CNS

















Proprietary CNS

















    PROVIGIL

$    278,796

$   17,387

$    296,183

$    234,757

$   16,507

$    251,264

19%

5%

18%

    NUVIGIL

58,863

-

58,863

35,614

-

35,614

65

-

65

    GABITRIL

10,734

1,249

11,983

14,042

1,515

15,557

(24)

(18)

(23)

    Other Proprietary CNS

-

2,698

2,698

-

3,647

3,647

-

(26)

(26)

Generic CNS

-

8,763

8,763

-

2,707

2,707

-

224

224

         CNS


348,393

30,097

378,490

284,413

24,376

308,789

22

23

23



















Pain

















Proprietary Pain

















    FENTORA

44,876

7,098

51,974

36,877

1,676

38,553

22

324

35

    AMRIX

28,768

-

28,768

30,628

-

30,628

(6)

-

(6)

Other Proprietary Pain

-

72

72

-

50

50

-

44

44

Generic Pain

















    ACTIQ

18,349

16,538

34,887

18,726

18,949

37,675

(2)

(13)

(7)

    Generic OTFC

8,529

-

8,529

16,198

-

16,198

(47)

-

(47)

    Other Generic Pain

-

20,406

20,406

-

2,696

2,696

-

657

657

         Pain

100,522

44,114

144,636

102,429

23,371

125,800

(2)

89

15



















Oncology

















Proprietary Oncology

















    TREANDA

108,573

-

108,573

61,563

-

61,563

76

-

76

    Other Proprietary Oncology

4,935

18,966

23,901

4,752

21,627

26,379

4

(12)

(9)

    Generic Oncology

-

7,588

7,588

-

6,255

6,255

-

21

21

         Oncology

113,508

26,554

140,062

66,315

27,882

94,197

71

(5)

49



















Other

















Other Proprietary

3,890

1,701

5,591

4,268

-

4,268

(9)

100

31

Other Generic

2,540

93,440

95,980

2,546

27,338

29,884

-

242

221

         Other

6,430

95,141

101,571

6,814

27,338

34,152

(6)

248

197





















$    568,853

$ 195,906

$    764,759

$    459,971

$ 102,967

$    562,938

24%

90%

36%








































Year Ended

%


December 31,

Increase


2010

2009

(Decrease)


United States

Europe

Total

United States

Europe

Total

United States

Europe

Total

Sales:

















CNS

















Proprietary CNS

















    PROVIGIL

$ 1,059,698

$   64,796

$ 1,124,494

$    961,070

$   63,618

$ 1,024,688

10%

2%

10%

    NUVIGIL

186,190

-

186,190

73,391

-

73,391

154

-

154

    GABITRIL

39,728

4,760

44,488

51,100

5,386

56,486

(22)

(12)

(21)

    Other Proprietary CNS

-

10,936

10,936

-

13,292

13,292

-

(18)

(18)

Generic CNS

-

28,257

28,257

-

10,785

10,785

-

162

162

         CNS


1,285,616

108,749

1,394,365

1,085,561

93,081

1,178,642

18

17

18



















Pain

















Proprietary Pain

















    FENTORA

159,585

22,037

181,622

136,563

4,114

140,677

17

436

29

    AMRIX

109,235

-

109,235

114,435

-

114,435

(5)

-

(5)

Other Proprietary Pain

-

271

271

-

267

267

-

1

1

Generic Pain

















    ACTIQ

63,930

66,951

130,881

75,418

71,527

146,945

(15)

(6)

(11)

    Generic OTFC

41,138

-

41,138

83,032

-

83,032

(50)

-

(50)

    Other Generic Pain

-

63,144

63,144

-

8,954

8,954

-

605

605

         Pain

373,888

152,403

526,291

409,448

84,862

494,310

(9)

80

6



















Oncology

















Proprietary Oncology

















    TREANDA

393,473

-

393,473

222,112

-

222,112

77

-

77

    Other Proprietary Oncology

20,866

76,256

97,122

18,281

75,360

93,641

14

1

4

    Generic Oncology

-

22,998

22,998

-

20,940

20,940

-

10

10

         Oncology

414,339

99,254

513,593

240,393

96,300

336,693

72

3

53



















Other

















Other Proprietary

15,112

5,809

20,921

17,545

-

17,545

(14)

100

19

Other Generic

13,220

292,562

305,782

15,436

108,922

124,358

(14)

169

146

         Other

28,332

298,371

326,703

32,981

108,922

141,903

(14)

174

130





















$ 2,102,175

$ 658,777

$ 2,760,952

$ 1,768,383

$ 383,165

$ 2,151,548

19%

72%

28%



















Europe- Primarily Europe, Middle East and Africa

Proprietary products are products which are sold under patent coverage.  

Generic products are products sold without patent coverage in the primary sales territory. Patent coverage may exist in other territories.  

CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)






December 31,


2010

2009

CURRENT ASSETS:


  Cash and cash equivalents

$ 1,160,239

$ 1,647,635

  Receivables, net

431,333

376,076

  Inventory, net

291,360

240,576

  Deferred tax assets, net

213,798

243,246

  Other current assets

54,845

58,423

      Total current assets

2,151,575

2,565,956




  INVESTMENTS ($155,808 at fair value in 2010)

168,494

12,427

  PROPERTY AND EQUIPMENT, net

502,856

451,879

  GOODWILL

822,071

590,284

  INTANGIBLE ASSETS, net

1,212,387

981,857

  DEBT ISSUANCE COSTS

14,196

18,862

  OTHER ASSETS

20,254

36,830

$ 4,891,833

$ 4,658,095




CURRENT LIABILITIES:


  Current portion of long-term debt, net

$    651,997

$    818,925

  Accounts payable

104,477

88,829

  Accrued expenses

460,141

430,209

      Total current liabilities

1,216,615

1,337,963




  LONG-TERM DEBT

391,416

363,696

  DEFERRED TAX LIABILITIES, net

172,589

159,328

  OTHER LIABILITIES

273,438

111,728

      Total liabilities

2,054,058

1,972,715




REDEEMABLE EQUITY

170,183

207,307




EQUITY:


Cephalon Stockholders' Equity


  Common stock, $0.01 par value

791

780

  Additional paid-in capital

2,428,450

2,534,070

  Treasury stock, at cost

(225,870)

(208,427)

  Accumulated earnings (deficit)

247,086

(178,659)

  Accumulated other comprehensive income

182,975

114,194

      Total Cephalon stockholders' equity

2,633,432

2,261,958

Noncontrolling Interest

34,160

216,115

      Total equity

2,667,592

2,478,073

$ 4,891,833

$ 4,658,095

CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


Year Ended

December 31,


2010

2009

CASH FLOWS FROM OPERATING ACTIVITIES:


    Net income

$    417,683

$    210,727

    Adjustments to reconcile net income to net cash provided by operating activities:


          Deferred income tax expense (benefit)

(36,889)

(84,155)

          Shortfall tax benefits from stock-based compensation

(3,915)

(38)

          Depreciation and amortization

212,823

186,192

          Stock-based compensation expense

49,890

50,410

          Changes in fair value of investments

(7,931)

-

          Impairment charges

-

182,080

          Amortization of debt discount and debt issuance costs

67,274

59,145

          Loss (gain) on foreign exchange contracts

9,499

(26,754)

          Gain on acquisition of Arana Therapeutics Limited

-

(10,008)

          Acquired in-process research and development

-

8,366

          Other

2,368

(3,503)

          Changes in operating assets and liabilities, net of acquisitions:


              Receivables

16,888

81,022

              Inventory

36,114

(8,604)

              Other assets

54,726

(14,348)

              Accounts payable, accrued expenses and deferred revenues

19,229

99,013

              Other liabilities

(56,002)

(48,194)

              Net cash provided by operating activities

781,757

681,351




CASH FLOWS FROM INVESTING ACTIVITIES:


    Purchases of property and equipment

(57,761)

(60,927)

    Proceeds from sale of property and equipment

4,748

-

    Cash balance from consolidation of variable interest entities

-

53,706

   Acquisition of intangible assets

-

(53,324)

    Investment in Ception Therapeutics, Inc.

-

(75,000)

    Investment in BioAssets Development Corporation

-

(30,000)

    Purchases of investments

(148,987)

(11,797)

   Acquisition of Arana Therapeutics Limited, net of cash acquired

-

(232,527)

   Acquisition of Mepha GmbH, net of cash acquired

(549,463)

-

    (Cash settlements of) proceeds from foreign exchange contracts

(9,499)

26,754

    Sales and maturities of available-for-sale investments

-

125,026

              Net cash used for investing activities

(760,962)

(258,089)




CASH FLOWS FROM FINANCING ACTIVITIES:


    Proceeds from sale of common stock

-

288,000

    Proceeds from exercises of common stock options

27,391

10,211

    Windfall tax benefits from stock-based compensation

4,644

2,017

    Acquisition of treasury stock

(9,306)

(6,722)

    Acquisition of Ception Therapeutics, Inc. noncontrolling interest

(299,289)

-

    Acquisition of BioAssets Development Corporation noncontrolling interest

(16,342)

    Payments on and retirements of long-term debt

(222,959)

(13,412)

    Net proceeds from issuance of convertible subordinated notes

-

484,719

    Proceeds from sale of warrants

-

37,640

    Purchase of convertible note hedge

-

(121,040)

              Net cash provided by (used for) financing activities

(515,861)

681,413




EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

7,670

18,501




NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(487,396)

1,123,176




CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

1,647,635

524,459




CASH AND CASH EQUIVALENTS, END OF PERIOD

$ 1,160,239

$ 1,647,635

CEPHALON, INC. AND SUBSIDIARIES

Reconciliation of Projected GAAP Basic Income per Common Share

to Basic Adjusted Income Per Common Share Guidance

(Unaudited)











Three Months Ended

Twelve Months Ended


March 31, 2011

December 31, 2011









Projected GAAP basic income per common share

$ 1.50

—

$ 1.70

$ 7.14

—

$ 7.44









Amortization of current intangibles

0.37

—

0.37

1.44

—

1.44

Restructuring adjustments

0.01

—

0.01

0.04

—

0.04

Interest expense adjustments

0.21

—

0.21

0.85

—

0.85









Tax effect of pre-tax adjustments at the applicable tax rates

(0.19)

—

(0.19)

(0.77)

—

(0.77)









Basic adjusted income per common share guidance


$1.90

—

$2.10

$8.70

—

$9.00

The company’s guidance is being issued based on certain assumptions including:

  • Adjusted effective tax rate of approximately 33.0% in 2011;
  • Weighted average number of common shares outstanding of 75.8 and 76.4 million shares for the three months ended March 31, 2011 and year ended December 31, 2011, respectively; and
  • No generic competition for AMRIX and FENTORA in 2011.

SOURCE Cephalon, Inc.

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