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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 5, 2003
Cephalon, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction
of Incorporation) | | 0-19119
(Commission
File Number) | | 23-2484489
(I.R.S. Employer
Identification No.) |
145 Brandywine Parkway, West Chester, Pennsylvania 19380
(Address of Principal Executive Offices) (Zip Code) |
Registrant's telephone number, including area code(610) 344-0200
Not Applicable
Former name or former address, if changed since last report
ITEM 9. REGULATION FD DISCLOSURE.
In the fourth quarter of 2002, the Registrant recognized a gain of $116.7 million associated with an adjustment to its deferred tax valuation allowance, in accordance with SFAS 109.
U.S. generally accepted accounting principles require that the impact of shares issuable upon the conversion of convertible securities (and the tax-effected interest expense related thereto) be ignored when calculating diluted income per share if doing so would be anti-dilutive. As such, in past reporting periods, GAAP did not permit the Registrant to reflect these items in its diluted income per common share calculation. As a result of the magnitude of the aforementioned tax gain, and because the impact of these items was no longer anti-dilutive, the shares issuable upon the conversion of the convertible notes, for the first time, should have been included in (and the associated tax-effected interest expense should have been excluded from) the diluted income per common share calculation. Therefore, the amounts reported for "weighted average number of common shares outstanding—assuming dilution" and in the "Diluted income per common share" section of the Consolidated Statement of Operations, as well as the "diluted earnings per share" reported in the body of the press release should have been:
| | As originally reported
| | As adjusted
|
|---|
| | Three Months
Ended
December 31,
2002
| | Year Ended
December 31,
2002
| | Three Months
Ended
December 31,
2002
| | Year Ended
December 31,
2002
|
|---|
| Weighted average number of common shares outstanding — assuming dilution | | 56,957,000 | | 56,976,000 | | 67,619,000 | | 67,442,000 |
| Diluted income (loss) per common share: | | | | | | | | |
| | Income per common share excluding cumulative effect of changing inventory method | | $2.46 | | $3.07 | | $2.13 | | $2.84 |
| | Cumulative effect of changing inventory costing method | | — | | (0.06) | | — | | (0.05) |
| | |
| |
| |
| |
|
| | | $2.46 | | $3.01 | | $2.13 | | $2.79 |
All other amounts reported by the Registrant in the February 19, 2003 press release were correct as reported.
| | As originally reported
| | As adjusted
|
|---|
| | Three Months
Ended
December 31,
2002
| | Year Ended
December 31,
2002
| | Three Months
Ended
December 31,
2002
| | Year Ended
December 31,
2002
|
|---|
| Revenues | | $144,306,000 | | $506,897,000 | | unchanged | | unchanged |
| Net income | | $139,994,000 | | $171,528,000 | | unchanged | | unchanged |
| Basic income per common share | | $2.53 | | $3.11 | | unchanged | | unchanged |
| Diluted adjusted net income per common share | | $0.41 | | $1.26 | | unchanged | | unchanged |
Numbers that have been adjusted are noted with asterisks in the statements below.
2
Cephalon, Inc. and Subsidiaries
Consolidated Statement of Operations
(Amounts in Thousands, Except per Share)
| | Three Months Ended
December 31,
| | Year Ended
December 31,
| |
|---|
| | 2002
| | 2001
| | 2002
| | 2001
| |
|---|
| Revenues: | | | | | | | | | | | | | |
| | Product sales | | $ | 139,009 | | $ | 67,071 | | $ | 465,943 | | $ | 226,132 | |
| | Other revenues | | | 5,297 | | | 7,831 | | | 40,954 | | | 35,863 | |
| | |
| |
| |
| |
| |
| | | | 144,306 | | | 74,902 | | | 506,897 | | | 261,995 | |
| | |
| |
| |
| |
| |
| Costs and Expenses: | | | | | | | | | | | | | |
| | Cost of product sales | | | 25,418 | | | 13,034 | | | 74,237 | | | 44,946 | |
| | Research and development | | | 36,327 | | | 23,216 | | | 128,276 | | | 83,037 | |
| | Selling, general and administrative | | | 42,372 | | | 21,280 | | | 172,782 | | | 96,179 | |
| | Merger and integration costs | | | — | | | 50 | | | — | | | 50 | |
| | Acquired in-process research and development | | | — | | | 20,000 | | | — | | | 20,000 | |
| | |
| |
| |
| |
| |
| | | | 104,117 | | | 77,580 | | | 375,295 | | | 244,212 | |
| | |
| |
| |
| |
| |
| EBITDA (a) | | | 40,189 | | | (2,678 | ) | | 131,602 | | | 17,783 | |
Depreciation and amortization |
|
|
(10,407 |
) |
|
(3,736 |
) |
|
(35,457 |
) |
|
(14,434 |
) |
| Debt exchange expense | | | — | | | (52,444 | ) | | — | | | (52,444 | ) |
| Gain (charge) on early extinguishment of debt | | | — | | | — | | | (7,142 | ) | | 3,016 | |
| Other income (expense), net | | | (5,902 | ) | | (5,687 | ) | | (26,570 | ) | | (9,405 | ) |
| | |
| |
| |
| |
| |
| Income (loss) before income taxes | | | 23,880 | | | (64,545 | ) | | 62,433 | | | (55,484 | ) |
| Income tax benefit (expense), net | | | 116,114 | | | — | | | 112,629 | | | — | |
| | |
| |
| |
| |
| |
| Income before cumulative effect of changing inventory costing method | | | 139,994 | | | (64,545 | ) | | 175,062 | | | (55,484 | ) |
| Cumulative effect of changing inventory costing method from FIFO to LIFO | | | — | | | — | | | (3,534 | ) | | — | |
| | |
| |
| |
| |
| |
| Net income (loss) | | | 139,994 | | | (64,545 | ) | | 171,528 | | | (55,484 | ) |
| Dividends on convertible exchangeable preferred stock | | | — | | | — | | | — | | | (5,664 | ) |
| | |
| |
| |
| |
| |
| Income (loss) applicable to common shares | | $ | 139,994 | | $ | (64,545 | ) | $ | 171,528 | | $ | (61,148 | ) |
| | |
| |
| |
| |
| |
| Basic income (loss) per common share: | | | | | | | | | | | | | |
| Income (loss) per common share excluding cumulative effect of changing inventory method | | $ | 2.53 | | $ | (1.23 | ) | $ | 3.17 | | $ | (1.27 | ) |
| Cumulative effect of changing inventory costing method | | | — | | | — | | | (0.06 | ) | | — | |
| | |
| |
| |
| |
| |
| | | $ | 2.53 | | $ | (1.23 | ) | $ | 3.11 | | $ | (1.27 | ) |
| | |
| |
| |
| |
| |
| Diluted income (loss) per common share: | | | | | | | | | | | | | |
| | Income (loss) per common share excluding cumulative effect of changing inventory method | | $ | 2.13 | * | $ | (1.23 | ) | $ | 2.84 | * | $ | (1.27 | ) |
| | Cumulative effect of changing inventory costing method | | | — | | | — | | | (0.05 | )* | | — | |
| | |
| |
| |
| |
| |
| | | $ | 2.13 | * | $ | (1.23 | ) | $ | 2.79 | * | $ | (1.27 | ) |
| | |
| |
| |
| |
| |
| Weighted average number of common shares outstanding | | | 55,250 | | | 52,422 | | | 55,104 | | | 48,292 | |
| | |
| |
| |
| |
| |
| Weighted average number of common shares outstanding-assuming dilution | | | 67,619 | * | | 52,422 | | | 67,442 | * | | 48,292 | |
| | |
| |
| |
| |
| |
| OTHER DATA: | | | | | | | | | | | | | |
| Reconciliation of Income (Loss) Applicable to Common Shares to Adjusted Net Income: | | | | | | | | | | | | | |
| Income (loss) applicable to common shares | | $ | 139,994 | | $ | (64,545 | ) | $ | 171,528 | | $ | (61,148 | ) |
| Certain charges: | | | | | | | | | | | | | |
| | Deferred tax valuation adjustment | | | (116,720 | ) | | — | | | (116,720 | ) | | — | |
| | CNS joint venture (b) | | | — | | | — | | | 6,481 | | | — | |
| | Short-term bridge financing and other merger related expenses | | | — | | | 1,550 | | | — | | | 1,550 | |
| | Acquired in-process research and development | | | — | | | 20,000 | | | — | | | 20,000 | |
| | Debt exchange expense | | | — | | | 52,444 | | | — | | | 52,444 | |
| | (Gain) charge on early extinguishment of debt | | | — | | | — | | | 7,142 | | | (3,016 | ) |
| | Cumulative effect of changing inventory costing method | | | — | | | — | | | 3,534 | | | — | |
| | |
| |
| |
| |
| |
| Adjusted Net Income | | $ | 23,274 | | $ | 9,449 | | $ | 71,965 | | $ | 9,830 | |
| | |
| |
| |
| |
| |
| Basic adjusted net income per common share | | $ | 0.42 | | $ | 0.18 | | $ | 1.31 | | $ | 0.20 | |
| | |
| |
| |
| |
| |
| Diluted adjusted net income per common share | | $ | 0.41 | | $ | 0.17 | | $ | 1.26 | | $ | 0.19 | |
| | |
| |
| |
| |
| |
| Weighted average number of common shares outstanding | | | 55,250 | | | 52,422 | | | 55,104 | | | 48,292 | |
| | |
| |
| |
| |
| |
| Weighted average number of common shares outstanding — assuming dilution | | | 56,957 | | | 55,060 | | | 56,976 | | | 51,115 | |
| | |
| |
| |
| |
| |
- *
- As adjusted
- (a)
- Earnings (loss) before net interest, depreciation, amortization, debt exchange expense, foreign currency exchange, dividends on convertible exchangeable preferred stock, and cumulative effect of changing inventory costing method.
- (b)
- Includes $3,508,000 from selling, general and administrative expense and $2,973,000 from other expense.
3
Cephalon, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
| | December 31,
2002
| | December 31,
2001
|
|---|
| Assets | | | | | | |
| | Cash, cash equivalents and investments | | $ | 582,688 | | $ | 603,884 |
| | Receivables, net | | | 83,130 | | | 79,847 |
| | Inventory, net | | | 54,299 | | | 47,513 |
| | Other current assets | | | 9,793 | | | 7,872 |
| | Property and equipment, net | | | 90,066 | | | 64,706 |
| | Goodwill | | | 298,769 | | | 301,577 |
| | Other intangible assets, net | | | 351,719 | | | 298,269 |
| | Deferred tax asset, including current portion, net | | | 170,072 | | | — |
| | Other assets | | | 48,554 | | | 42,740 |
| | |
| |
|
| | | $ | 1,689,090 | | $ | 1,446,408 |
| | |
| |
|
Liabilities and stockholders' equity |
|
|
|
|
|
|
| | Accounts payable and accrued expenses | | $ | 103,533 | | $ | 78,561 |
| | Deferred revenue, including current portion | | | 2,680 | | | 6,866 |
| | Debt, including current portion | | | 876,299 | | | 898,789 |
| | Deferred tax liabilities | | | 52,666 | | | 52,666 |
| | Other liabilities | | | 11,327 | | | 10,795 |
| | Stockholders' equity | | | 642,585 | | | 398,731 |
| | |
| |
|
| | | $ | 1,689,090 | | $ | 1,446,408 |
| | |
| |
|
5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | CEPHALON, INC. |
Date: March 5, 2003 |
|
By: |
/s/ J. KEVIN BUCHI
J. Kevin Buchi
Senior Vice President and Chief Financial Officer
|
6
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SIGNATURES
