Cephalon Reports Record Earnings and Raises 2010 Guidance

Quarterly Sales and Earnings Exceed Top End of Guidance

Quarterly Sales of $707 Million Increased 32 Percent

Quarterly Basic Adjusted EPS of $2.27 Increased 34 Percent

Quarterly Cash from Operations Totaled $272 Million

Oct 28, 2010, 16:10 ET from Cephalon, Inc.

FRAZER, Pa., Oct. 28 /PRNewswire-FirstCall/ -- Cephalon, Inc. (Nasdaq: CEPH) today reported third quarter 2010 sales of $707.1 million, a 32 percent increase compared to sales of $535.2 million for the third quarter 2009.  Basic income per common share for the quarter was $1.76.  Excluding amortization expense and certain other items, basic adjusted income per common share for the quarter was $2.27, a 34 percent increase over the $1.70 for the third quarter of 2009.   Adjusted net income for the third quarter of 2010 was $170.7 million, a 35 percent increase over the $126.7 million for the third quarter of 2009.

Central nervous system (CNS) franchise sales were $354.3 million during the quarter, a 19 percent increase compared to the same period last year.  Pain franchise sales were $131.2 million, a 10 percent increase versus third quarter 2009.  Oncology franchise sales were $132.9 million, a 60 percent increase over the same period last year due to strong sales of TREANDA® (bendamustine HCL) for Injection.  Other product sales were $88.8 million, an increase of 153 percent versus third quarter of 2009 primarily due to the acquisition of Mepha in the second quarter of 2010.  

"We achieved record earnings and cash flow from operations in the quarter while continuing to expand our global product offerings," said Kevin Buchi, Chief Operating Officer. "Our robust cash flow generation gives us the flexibility to invest in our rich pipeline while continuing our active business development efforts, positioning us very well for the future."

The company is updating its guidance for full year 2010.  Total sales guidance is $2.69-$2.73 billion. This includes expected CNS franchise sales of $1.34-$1.37 billion, pain franchise sales of $510-$530 million, oncology franchise sales of $500-$520 million, and other product sales of $325-$345 million.  Full year R&D and SG&A guidance is $430-$450 million and $910-$930 million, respectively.  Adjusted net income guidance is increased to $617-$632 million and basic adjusted income per common share guidance is increased to $8.20-$8.40, assuming 75.2 million basic shares outstanding.

Cephalon is introducing full year 2011 sales guidance of $2.96-$3.04 billion.  This includes CNS franchise sales of $1.39-$1.43 billion, pain franchise sales of $540-$570 million, oncology franchise sales of $570-$600 million, and other product sales of $420-$450 million. R&D and SG&A guidance for 2011 are $505-$525 million and $970 million-$1 billion, respectively.

The company also is introducing adjusted net income guidance for full year 2011 of $652-$668 million.  Cephalon is introducing 2011 adjusted net income per common share guidance of $8.45-$8.65, assuming 77.2 million basic shares outstanding.  

Basic adjusted income per common share guidance for both the full-year 2010 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 refer to those metrics on an "attributable to Cephalon" basis and do not include any income or losses attributable to noncontrolling interests.

The Cephalon management will discuss the company's third quarter 2010 performance in a conference call with investors beginning at 5:00 p.m. U.S. EDT today.  To participate in the conference call, dial +913-312-0678 and refer to conference code 4886405. Investors can listen to the call live by logging on to the company's website at www.cephalon.com and clicking on "Investor Information," 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 nearly 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 full-year 2010 and full-year 2011 and SG&A and R&D guidance for the full-year 2010 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:

Candace Steele Flippin

Robert (Chip) Merritt

610-727-6231

610-738-6376

csteele@cephalon.com

cmerritt@cephalon.com






Joseph Marczely


610-883-5894


jmarczely@cephalon.com



CEPHALON, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



Three Months Ended


Nine Months Ended


September 30,


September 30,


2010


2009


2010


2009

REVENUES:








Net sales

$      707,077


$      535,223


$      1,996,193


$      1,588,610

Other revenues

9,916


14,189


44,295


28,583


716,993


549,412


2,040,488


1,617,193

COSTS AND EXPENSES:








Cost of sales

151,939


90,456


427,721


293,633

Research and development

110,966


99,157


317,604


304,266

Selling, general and administrative

226,791


194,068


689,900


618,314

Change in fair value of contingent consideration

5,247


-


6,314


-

Restructuring charges

2,313


1,062


7,638


3,944

Acquired in-process research and development

-


6,000


-


46,118


497,256


390,743


1,449,177


1,266,275









INCOME FROM OPERATIONS

219,737


158,669


591,311


350,918









OTHER INCOME (EXPENSE):








Interest income

908


1,821


4,138


3,455

Interest expense

(24,989)


(26,495)


(78,895)


(63,213)

Other income (expense), net

(2,846)


3,775


(19,449)


42,418


(26,927)


(20,899)


(94,206)


(17,340)









INCOME BEFORE INCOME TAXES

192,810


137,770


497,105


333,578









INCOME TAX EXPENSE

61,262


42,673


172,827


122,659









NET INCOME

131,548


95,097


324,278


210,919









NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

952


7,625


7,851


35,150









NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$      132,500


$      102,722


$         332,129


$         246,069

















BASIC INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC.

$            1.76


$            1.38


$               4.42


$               3.44









DILUTED INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC.

$            1.66


$            1.31


$               4.11


$               3.17









WEIGHTED AVERAGE NUMBER OF COMMON








SHARES OUTSTANDING ATTRIBUTABLE TO








CEPHALON, INC.

75,201


74,647


75,128


71,541









WEIGHTED AVERAGE NUMBER OF COMMON








SHARES OUTSTANDING-ASSUMING DILUTION








ATTRIBUTABLE TO CEPHALON, INC.

79,773


78,431


80,761


77,552



CEPHALON, INC. AND SUBSIDIARIES


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

(Unaudited)




Three Months Ended



September 30,



2010


2009







GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$            132,500


$            102,722







Cost of sales adjustments

41,050

(1)

21,968

(1)

Research and development adjustments

2,014

(2)

1,318

(2)

Selling, general and administrative adjustments

(1,921)

(3)

635

(3)

Change in fair value of contingent consideration adjustment

5,247

(4)

-


Restructuring charges

2,313

(5)

1,062

(5)

In-process research and development adjustments

-


6,000

(6)

Interest expense adjustment

15,084

(7)

16,959

(7)

Other income adjustment

-


(484)

(8)

Income tax adjustment

(25,603)

(9)

(23,475)

(9)

*Noncontrolling Interest adjustments:





Other revenues

-


(3)


Research and development

283


6,295


Selling, general and administrative    

240


827


Other expense

-


128


Interest income

-


(37)


Interest expense

-


299


Income taxes

-


23


Less amount attributable to noncontrolling interest

(523)


(7,532)



38,184


23,983







ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$            170,684


$            126,705












BASIC ADJUSTED INCOME PER COMMON SHARE

$                  2.27


$                  1.70







DILUTED ADJUSTED INCOME PER COMMON SHARE

$                  2.14


$                  1.62







WEIGHTED AVERAGE NUMBER OF COMMON





SHARES OUTSTANDING

75,201


74,647







WEIGHTED AVERAGE NUMBER OF COMMON





SHARES OUTSTANDING-ASSUMING DILUTION

79,773


78,431







* 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 ($31.4M in 2010; $26.4M in 2009), accelerated depreciation related to restructuring ($4.2M in 2010; $5.0M in 2009), amortization of inventory revaluation related to Mepha ($5.2M in 2010), offset by the gain recognized in connection with an agreement to reduce our excess modafinil purchase commitments ($9.5M in 2009).


(2) In 2010, to exclude the impairment of an investment ($2.0M).  In 2009, to exclude accelerated depreciation related to restructuring ($0.3M) and charges related to payment for research and development collaboration ($1.0M).


(3) In 2010, to exclude proceeds related to the settlement of litigation in Europe ($2.1M), offset by charges related to the acquisition of Mepha ($0.2M). In 2009, to exclude charges related to the acquisition of Arana Therapeutics Limited ($0.6M).  


(4) To exclude the change in fair value of the Ception contingent consideration.


(5) To exclude costs related to restructurings.


(6) To exclude charges incurred in exchange for license rights to certain of XOMA Ltd.’s proprietary antibody library materials.


(7) To exclude imputed interest expense associated with convertible debt ($15.1M in 2010; $17.0M in 2009).


(8) In 2009, to exclude $0.4M gain on foreign exchange of Australian Dollar acquisition funds.  


(9) 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)




Nine Months Ended



September 30,



2010


2009







GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$       332,129


$        246,069







Cost of sales adjustments

         124,225

(1)

            78,146

(1)

Research and development adjustments

             2,690

(2)

              4,404

(2)

Selling, general and administrative adjustments

             9,581

(3)

            14,379

(3)

Change in fair value of contingent consideration adjustment

             6,314

(4)

                     -


Restructuring charges

             7,638

(5)

              3,944

(5)

In-process research and development adjustments

                     -


            46,118

(6)

Interest expense adjustment

           50,072

(7)

            40,459

(7)

Other (income) expense adjustment

           11,567

(8)

          (40,011)

(8)

Arana noncontrolling interest adjustments

                     -


               (819)

(9)

Income tax adjustment

          (64,293)

(10)

          (54,192)

(10)

*Noncontrolling Interest adjustments:





Other revenues

                 (31)


                   30


Research and development

             6,377


            25,519


Selling, general and administrative    

             3,462


              7,373


Interest income

                   (7)


               (182)


Interest expense

                154


              1,299


Other expense

                166


                   33


Income taxes

            (3,848)


                   47


Less amount attributable to noncontrolling interest

            (6,273)


          (34,119)



         147,794


            92,428







ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

$       479,923


$        338,497












BASIC ADJUSTED INCOME PER COMMON SHARE

$             6.39


$              4.73







DILUTED ADJUSTED INCOME PER COMMON SHARE

$             5.94


$              4.36







WEIGHTED AVERAGE NUMBER OF COMMON





SHARES OUTSTANDING

75,128


71,541







WEIGHTED AVERAGE NUMBER OF COMMON





SHARES OUTSTANDING-ASSUMING DILUTION

           80,761


            77,552







* 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 ($89.4M in 2010; $70.6M in 2009), accelerated depreciation related to restructuring ($14.9M in 2010; $14.0M in 2009), amortization of inventory revaluation related to Mepha ($10.5M in 2010) and the write-off of modafinil purchase commitments in excess of estimated requirements ($9.4M in 2010; $3.0M 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; $0.9M in 2009), the impairment of an investment ($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 related to the acquisition of Mepha ($10.3M), the acquisition of Ception noncontrolling interest ($1.4M), 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 ($7.8M) and charges related to our settlement with Takeda ($6.5M) to resolve our remaining contractual arrangements.  


(4) To exclude the change in fair value of the Ception contingent consideration.


(5) To exclude costs related to restructurings.


(6) In 2009, to exclude charges related to the deconsolidation of Acusphere ($9.3M), the acquisition of worldwide license rights related to LUPUZOR from ImmuPharma ($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).


(7) To exclude imputed interest expense associated with convertible debt ($50.1M in 2010; $40.5M in 2009).


(8) In 2010, to exclude the following losses related to the acquisition of Mepha AG:

- $9.1M loss on foreign exchange derivative instruments; 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 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 shares.


(9) To exclude the portion of non-cash charges related to our acquisition of Arana Therapeutics Limited that are reflected in (8) above but do not affect net income because they are attributed to noncontrolling interests.


(10) 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


%


September 30,


Increase


2010


2009


(Decrease)


United States


Europe


Total


United States


Europe


Total


United States


Europe


Total

Sales:


















CNS


















Proprietary CNS


















    PROVIGIL

$     267,751


$       13,279


$     281,030


$     241,301


$       16,693


$     257,994


11%


(20%)


9%

    NUVIGIL

51,437


-


51,437


20,991


-


20,991


145


-


145

    GABITRIL

9,577


1,025


10,602


11,560


1,340


12,900


(17)


(24)


(18)

    Other Proprietary CNS

-


2,580


2,580


-


3,575


3,575


-


(28)


(28)

Generic CNS

-


8,609


8,609


-


2,642


2,642


-


226


226

         CNS

328,765


25,493


354,258


273,852


24,250


298,102


20


5


19



















Pain


















Proprietary Pain


















    FENTORA

37,368


5,549


42,917


35,779


1,201


36,980


4


362


16

    AMRIX

26,784


-


26,784


26,703


-


26,703


0


-


0

Other Proprietary Pain

-


91


91


-


89


89


-


2


2

Generic Pain


















    ACTIQ

16,170


17,855


34,025


16,521


16,721


33,242


(2)


7


2

    Generic OTFC

8,295


-


8,295


19,332


-


19,332


(57)


0


(57)

    Other Generic Pain

-


19,040


19,040


-


2,360


2,360


0


707


707

         Pain

88,617


42,535


131,152


98,335


20,371


118,706


(10)


109


10



















Oncology


















Proprietary Oncology


















    TREANDA

103,911


-


103,911


54,532


-


54,532


91


-


91

    Other Proprietary Oncology

5,123


18,330


23,453


4,010


19,732


23,742


28


(7)


(1)

    Generic Oncology

-


5,552


5,552


-


5,021


5,021


-


11


11

         Oncology

109,034


23,882


132,916


58,542


24,753


83,295


86


(4)


60



















Other


















Other Proprietary

2,975


2,354


5,329


3,168


-


3,168


(6)


-


68

Other Generic

3,526


79,896


83,422


3,464


28,488


31,952


2


180


161

         Other

6,501


82,250


88,751


6,632


28,488


35,120


(2)


189


153




















$     532,917


$     174,160


$     707,077


$     437,361


$       97,862


$     535,223


22%


78%


32%









































Nine Months Ended


%


September 30,


Increase


2010


2009


(Decrease)


United States


Europe


Total


United States


Europe


Total


United States


Europe


Total

Sales:


















CNS


















Proprietary CNS


















    PROVIGIL

$     780,902


$       47,409


$     828,311


$     726,313


$       47,111


$     773,424


8%


1%


7%

    NUVIGIL

127,327


-


127,327


37,777


-


37,777


237


-


237

    GABITRIL

28,994


3,511


32,505


37,058


3,871


40,929


(22)


(9)


(21)

    Other Proprietary CNS

-


8,238


8,238


-


9,645


9,645


-


(15)


(15)

Generic CNS

-


19,494


19,494


-


8,078


8,078


-


141


141

         CNS

937,223


78,652


1,015,875


801,148


68,705


869,853


17


14


17



















Pain


















Proprietary Pain


















    FENTORA

114,709


14,939


129,648


99,686


2,438


102,124


15


513


27

    AMRIX

80,467


-


80,467


83,807


-


83,807


(4)


-


(4)

Other Proprietary Pain

-


199


199


-


216


216


-


(8)


(8)

Generic Pain


















    ACTIQ

45,581


50,413


95,994


56,692


52,579


109,271


(20)


(4)


(12)

    Generic OTFC

32,609


-


32,609


66,834


-


66,834


(51)


0


(51)

    Other Generic Pain

-


42,738


42,738


-


6,259


6,259


0


583


583

         Pain

273,366


108,289


381,655


307,019


61,492


368,511


(11)


76


4



















Oncology


















Proprietary Oncology


















    TREANDA

284,900


-


284,900


160,549


-


160,549


77


-


77

    Other Proprietary Oncology

15,931


57,290


73,221


13,530


53,733


67,263


18


7


9

    Generic Oncology

-


15,410


15,410


-


14,685


14,685


-


5


5

         Oncology

300,831


72,700


373,531


174,079


68,418


242,497


73


6


54



















Other


















Other Proprietary

11,222


4,108


15,330


13,277


-


13,277


(15)


-


15

Other Generic

10,680


199,122


209,802


12,889


81,583


94,472


(17)


144


122

         Other

21,902


203,230


225,132


26,166


81,583


107,749


(16)


149


109




















$  1,533,322


$     462,871


$  1,996,193


$  1,308,412


$     280,198


$  1,588,610


17%


65%


26%



















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)







September 30,


December 31,


2010


2009

CURRENT ASSETS:




  Cash and cash equivalents

$          1,208,990


$          1,647,635

  Receivables, net

450,614


376,076

  Inventory, net

295,880


240,576

  Deferred tax assets, net

225,031


243,246

  Other current assets

66,787


58,423

      Total current assets

2,247,302


2,565,956





  INVESTMENTS

12,594


12,427

  PROPERTY AND EQUIPMENT, net

500,013


451,879

  GOODWILL

833,358


590,284

  INTANGIBLE ASSETS, net

1,234,181


981,857

  DEBT ISSUANCE COSTS

15,362


18,862

  OTHER ASSETS

43,582


36,830


$          4,886,392


$          4,658,095





CURRENT LIABILITIES:




  Current portion of long-term debt, net

$             644,097


$             818,925

  Accounts payable

100,917


88,829

  Accrued expenses

507,408


430,209

      Total current liabilities

1,252,422


1,337,963





  LONG-TERM DEBT

384,638


363,696

  DEFERRED TAX LIABILITIES, net

219,091


159,328

  OTHER LIABILITIES

279,049


111,728

      Total liabilities

2,135,200


1,972,715





REDEEMABLE EQUITY

178,245


207,307





EQUITY:




Cephalon Stockholders' Equity




  Common stock, $0.01 par value

784


780

  Additional paid-in capital

2,407,563


2,534,070

  Treasury stock, at cost

(216,597)


(208,427)

  Accumulated earnings (deficit)

153,470


(178,659)

  Accumulated other comprehensive income

164,888


114,194

      Total Cephalon stockholders' equity

2,510,108


2,261,958

Noncontrolling Interest

62,839


216,115

      Total equity

2,572,947


2,478,073


$          4,886,392


$          4,658,095



CEPHALON, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



Nine Months Ended


September 30,


2010


2009

CASH FLOWS FROM OPERATING ACTIVITIES:




    Net income

$               324,278


$      210,919

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




          Deferred income tax expense (benefit)

(27,976)


(40,182)

          Depreciation and amortization

163,049


136,403

          Stock-based compensation expense

31,740


36,710

          Amortization of debt discount and debt issuance costs

51,318


41,273

          Loss (gain) on foreign exchange contracts

9,499


(26,754)

          Gain on acquisition of Arana

-


(10,008)

          IPR&D from Acusphere deconsolidation

-


8,366

          Other

1,749


(5,079)

          Changes in operating assets and liabilities:




              Receivables

(1,006)


94,204

              Inventory

31,967


(7,060)

              Other assets

7,480


32,206

              Accounts payable, accrued expenses and deferred revenues

53,395


89,192

              Other liabilities

5,047


(43,059)

              Net cash provided by operating activities

650,540


517,131





CASH FLOWS FROM INVESTING ACTIVITIES:




    Purchases of property and equipment

(34,989)


(43,647)

    Proceeds from sale of property and equipment

4,748


-

    Cash balance from consolidation of variable interest entity

-


52,563

    Investment in Ception

-


(75,000)

   Acquisition of Arana, net of cash acquired

-


(232,527)

   Acquisition of Mepha, net of cash acquired

(549,463)


-

    Purchases of investments

(60)


(9,292)

    (Cash settlements of) proceeds from foreign exchange contracts

(9,499)


26,754

    Sales and maturities of available-for-sale investments

-


5,074

              Net cash used for investing activities

(589,263)


(276,075)





CASH FLOWS FROM FINANCING ACTIVITIES:




    Proceeds from sale of common stock

-


288,000

    Proceeds from exercises of common stock options

15,183


6,701

    Windfall tax benefits from stock-based compensation

-


1,259

    Acquisition of treasury stock

(33)


(29)

    Acquisition of Ception NCI

(299,289)


-

    Payments on and retirements of long-term debt

(222,079)


(11,246)

    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 (used for) provided by financing activities

(506,218)


686,004





EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

6,296


2,295





NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(438,645)


929,355





CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

1,647,635


524,459





CASH AND CASH EQUIVALENTS, END OF PERIOD

$            1,208,990


$   1,453,814



CEPHALON, INC. AND SUBSIDIARIES


Reconciliation of Projected GAAP Basic Income per Common Share

to Basic Adjusted Income Per Common Share Guidance

(Unaudited)










Twelve Months Ended


Twelve Months Ended


December 31, 2010


December 31, 2011









Projected GAAP basic income per common share

$         5.94

$         6.14


$         6.91

$         7.11









Amortization of current intangibles

1.57

1.57


1.41

1.41

Accelerated depreciation adjustment- CIMA

0.10

0.10


0.01

0.01

Accelerated depreciation adjustment- Mitry-Mory

0.10

0.10


-

-

Cost of sales adjustments

0.27

0.27


-

-

Research and development adjustments

0.03

0.03


-

-

Selling, general and administrative adjustments

0.13

0.13


-

-

Change in fair value of contingent consideration adjustments

0.08

0.08


-

-

Restructuring adjustments

0.11

0.11


0.04

0.04

Other income (expense) adjustments

0.15

0.15


-

-

Interest expense adjustments

0.87

0.87


0.84

0.84









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

(1.15)

(1.15)


(0.76)

(0.76)









Basic adjusted income per common share guidance

$8.20

$8.40


$8.45

$8.65

















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


- Adjusted effective tax rate of approximately 33.5% in 2010 and 33.0% in 2011;

- Weighted average number of common shares outstanding of 75.2 and 77.2 million shares for the years ended December 31, 2010  and 2011, respectively; and

- No generic competition for AMRIX and FENTORA in 2011.



SOURCE Cephalon, Inc.



RELATED LINKS

http://www.cephalon.com