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