Exhibit 99.1
For immediate release
Cephalon Reports Record Sales and Earnings in Second Quarter 2010
Quarterly Sales of $712Million Increased 32 Percent
Quarterly Basic Adjusted EPS of $2.20 Increased 41 Percent
Ex-US Sales Exceed 25 Percent of Worldwide Sales for the First Time
Frazer, Pa. — July 27, 2010 — Cephalon, Inc. (Nasdaq: CEPH) today reported second quarter 2010 sales of $712.4 million, a 32 percent increase compared to sales of $539.0 million for the second quarter 2009. Basic income per common share for the quarter was $1.18. Excluding amortization expense and certain other items, basic adjusted income per common share for the quarter was $2.20, an increase of 41 percent over the comparable figure of $1.56 for the same period in 2009. Adjusted net income for the second quarter of 2010 was $165.3 million, a 49 percent increase over the comparable $110.7 million for the second quarter of 2009.
Central nervous system (CNS) franchise sales were $337.9 million during the quarter, a 16 percent increase compared to the same period last year. Pain franchise reported sales were $113.1 million, an 8 percent decrease versus second quarter 2009. Oncology franchise sales were $129.9 million, a 58 percent increase over the same period last year due to strong sales of TREANDA® (bendamustine hydrochloride). Other product sales were $131.4 million dollars, an increase of 208 percent versus second quarter of 2009 due to the expansion of our European business.
“This was a momentous quarter as we significantly expanded our global capabilities with the addition of Mepha, continued to execute on our product life cycle strategies in the U.S. and advanced the most promising pipeline in our history,” said Frank Baldino, Jr., Ph.D., Chairman and CEO.
The company is updating its guidance for 2010. Total sales guidance is $2.630-$2.710 billion. This includes CNS franchise sales of $1.25-$1.29 billion, pain franchise sales of $440-$475 million, oncology franchise sales of $485-$515 million, and other product sales of $440-$460 million. Full year R&D and SG&A guidance is $450-$470 million and $910-$930 million, respectively. Adjusted net income guidance is increased to $562-$577 million and basic adjusted income per common share guidance is increased to $7.45-$7.65 assuming 75.4 million basic shares outstanding.
SOURCE: Cephalon, Inc. · 41 Moores Road · Frazer, PA 19355 · (610) 344-0200 · Fax (610) 344-0065
For the third quarter 2010, Cephalon is introducing sales guidance of $670-$700 million, adjusted net income guidance of $135.9-$143.5 million and basic adjusted income per common share guidance of $1.80-$1.90.
Basic adjusted income per common share guidance for both the third quarter 2010 and full-year 2010 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 second 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 +913-312-1497 and refer to conference code 3249552. 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 the third quarter 2010 and full-year 2010 and SG&A and R&D guidance for the full-year 2010; 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
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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.
Source: Cephalon, Inc.
Contacts:
Media: | | Investors: |
Candace Steele Flippin | | Robert (Chip) Merritt |
610-727-6231 | | 610-738-6376 |
csteele@cephalon.com | | cmerritt@cephalon.com |
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CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| | Three Months Ended | | Six Months Ended | |
| | June 30, | | June 30, | |
| | 2010 | | 2009 | | 2010 | | 2009 | |
REVENUES: | | | | | | | | | |
Net sales | | $ | 712,435 | | $ | 539,021 | | $ | 1,289,116 | | $ | 1,053,387 | |
Other revenues | | 14,475 | | 8,792 | | 34,379 | | 14,394 | |
| | 726,910 | | 547,813 | | 1,323,495 | | 1,067,781 | |
COSTS AND EXPENSES: | | | | | | | | | |
Cost of sales | | 170,739 | | 105,407 | | 275,782 | | 203,177 | |
Research and development | | 101,261 | | 102,085 | | 206,638 | | 205,109 | |
Selling, general and administrative | | 258,468 | | 223,656 | | 463,109 | | 424,246 | |
Restructuring charges | | 4,581 | | 1,245 | | 5,325 | | 2,882 | |
Acquired in-process research and development | | — | | 9,368 | | — | | 40,118 | |
| | 535,049 | | 441,761 | | 950,854 | | 875,532 | |
| | | | | | | | | |
INCOME FROM OPERATIONS | | 191,861 | | 106,052 | | 372,641 | | 192,249 | |
| | | | | | | | | |
OTHER INCOME (EXPENSE): | | | | | | | | | |
Interest income | | 1,300 | | 930 | | 3,230 | | 1,634 | |
Interest expense | | (28,182 | ) | (20,114 | ) | (54,973 | ) | (36,718 | ) |
Other income (expense), net | | (9,332 | ) | 32,104 | | (16,603 | ) | 38,643 | |
| | (36,214 | ) | 12,920 | | (68,346 | ) | 3,559 | |
| | | | | | | | | |
INCOME BEFORE INCOME TAXES | | 155,647 | | 118,972 | | 304,295 | | 195,808 | |
| | | | | | | | | |
INCOME TAX EXPENSE | | 63,254 | | 46,932 | | 111,565 | | 79,986 | |
| | | | | | | | | |
NET INCOME | | 92,393 | | 72,040 | | 192,730 | | 115,822 | |
| | | | | | | | | |
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTEREST | | (3,329 | ) | 12,724 | | 6,899 | | 27,525 | |
| | | | | | | | | |
NET INCOME ATTRIBUTABLE TO CEPHALON, INC. | | $ | 89,064 | | $ | 84,764 | | $ | 199,629 | | $ | 143,347 | |
| | | | | | | | | |
BASIC INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC. | | $ | 1.18 | | $ | 1.19 | | $ | 2.66 | | $ | 2.05 | |
| | | | | | | | | |
DILUTED INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC. | | $ | 1.11 | | $ | 1.11 | | $ | 2.46 | | $ | 1.87 | |
| | | | | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ATTRIBUTABLE TO CEPHALON, INC. | | 75,192 | | 71,119 | | 75,092 | | 69,962 | |
| | | | | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION ATTRIBUTABLE TO CEPHALON, INC. | | 80,507 | | 76,629 | | 81,223 | | 76,808 | |
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income Attributable to Cephalon, Inc.
(Unaudited)
| | Three Months Ended | |
| | June 30, | |
| | 2010 | | 2009 | |
| | | | | |
GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC. | | $ | 89,064 | | $ | 84,764 | |
| | | | | |
Cost of sales adjustments | | 52,209 | (1) | 30,470 | (1) |
Research and development adjustments | | 317 | (2) | 1,790 | (2) |
Selling, general and administrative adjustments | | 9,225 | (3) | 12,874 | (3) |
Restructuring charges | | 4,581 | (4) | 1,245 | (4) |
Interest expense adjustment | | 18,476 | (5) | 12,965 | (5) |
Other (income) expense adjustment | | 5,398 | (6) | (32,608 | )(6) |
In-process research and development adjustments | | — | | 9,368 | (7) |
Arana noncontrolling interest adjustments | | — | | (819 | )(8) |
Income tax adjustment | | (14,017 | )(9) | (9,341 | )(9) |
*Noncontrolling Interest adjustments: | | | | | |
Other revenues | | — | | (75 | ) |
Research and development | | (2,018 | ) | 9,993 | |
Selling, general and administrative | | 200 | | 1,795 | |
Other income (expense) | | 1 | | (99 | ) |
Interest income | | — | | (73 | ) |
Interest expense | | (3 | ) | 221 | |
Income taxes | | (2,658 | ) | 24 | |
Less amount attributable to noncontrolling interest | | 4,478 | | (11,786 | ) |
| | 76,189 | | 25,944 | |
| | | | | |
ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC. | | $ | 165,253 | | $ | 110,708 | |
| | | | | |
BASIC ADJUSTED INCOME PER COMMON SHARE | | $ | 2.20 | | $ | 1.56 | |
| | | | | |
DILUTED ADJUSTED INCOME PER COMMON SHARE | | $ | 2.05 | | $ | 1.44 | |
| | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | | 75,192 | | 71,119 | |
| | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION | | 80,507 | | 76,629 | |
* 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 ($32.2M in 2010; $23.0M in 2009), accelerated depreciation related to restructuring ($5.5M in 2010; $4.5M in 2009), amortization of inventory revaluation related to Mepha ($5.0M in 2010) and the write-off of modafinil purchase commitments in excess of estimated requirements ($9.4M in 2010; $3.0M in 2009).
(2) To exclude accelerated depreciation related to restructuring ($0.3M in 2010 and 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 ($7.9M) and the acquisition of Ception noncontrolling interest ($1.4M). In 2009, to exclude charges related to the acquisition of Arana Therapeutics Limited ($6.3M) and charges related to our settlement with Takeda ($6.5M) to resolve our remaining contractual arrangements.
(4) To exclude costs related to restructurings.
(5) To exclude imputed interest expense associated with convertible debt.
(6) In 2010, to exclude the following losses related to the acquisition of Mepha AG:
· $2.9M 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;
· $13.7M gains on foreign exchange derivative instruments; and
· $5.1M gain on foreign exchange of Australian Dollar acquisition funds.
(7) To exclude the impact of Acusphere deconsolidation.
(8) To exclude the portion of non-cash charges related to our acquisition of Arana Therapeutics Limited that are reflected in (6) above but do not affect net income because they are attributed to noncontrolling interests.
(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)
| | Six Months Ended | |
| | June 30, | |
| | 2010 | | 2009 | |
| | | | | |
GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC. | | $ | 199,629 | | $ | 143,347 | |
| | | | | |
Cost of sales adjustments | | 83,175 | (1) | 56,178 | (1) |
Research and development adjustments | | 676 | (2) | 3,086 | (2) |
Selling, general and administrative adjustments | | 11,502 | (3) | 13,744 | (3) |
Restructuring charges | | 5,325 | (4) | 2,882 | (4) |
Interest expense adjustment | | 36,055 | (5) | 23,500 | (5) |
Other (income) expense adjustment | | 11,567 | (6) | (39,527 | )(6) |
In-process research and development adjustments | | — | | 40,118 | (7) |
Arana noncontrolling interest adjustments | | — | | (819 | )(8) |
Income tax adjustment | | (38,690 | )(9) | (30,717 | )(9) |
*Noncontrolling Interest adjustments: | | | | | |
Other revenues | | (31 | ) | 33 | |
Research and development | | 6,094 | | 19,224 | |
Selling, general and administrative | | 3,222 | | 6,546 | |
Other income (expense) | | 166 | | (95 | ) |
Interest income | | (7 | ) | (145 | ) |
Interest expense | | 154 | | 1,000 | |
Income taxes | | (3,848 | ) | 24 | |
Less amount attributable to noncontrolling interest | | (5,750 | ) | (26,587 | ) |
| | 109,610 | | 68,445 | |
| | | | | |
ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC. | | $ | 309,239 | | $ | 211,792 | |
| | | | | |
BASIC ADJUSTED INCOME PER COMMON SHARE | | $ | 4.12 | | $ | 3.03 | |
| | | | | |
DILUTED ADJUSTED INCOME PER COMMON SHARE | | $ | 3.81 | | $ | 2.76 | |
| | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | | 75,092 | | 69,962 | |
| | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION | | 81,223 | | 76,808 | |
* 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 ($58.0M in 2010; $44.2M in 2009), accelerated depreciation related to restructuring ($10.7M in 2010; $9.0M in 2009), amortization of inventory revaluation related to Mepha ($5.0M in 2010) and the write-off of modafinil purchase commitments in excess of estimated requirements ($9.4M in 2010; $3.0M in 2009).
(2) To exclude accelerated depreciation related to restructuring ($0.7M in 2010; $0.6M in 2009), charges related to payments for several research and development collaborations ($1.0M 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 ($10.1M) and the acquisition of Ception noncontrolling interest ($1.4M). In 2009, to exclude charges related to the acquisition of Arana Therapeutics Limited ($7.2M) and charges related to our settlement with Takeda ($6.5M) to resolve our remaining contractual arrangements.
(4) To exclude costs related to restructurings.
(5) To exclude imputed interest expense associated with convertible debt.
(6) 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 gains on foreign exchange derivative instruments;
· $5.1M gain on foreign exchange of Australian Dollar acquisition funds; and
· $1.6M dividend income related to our initial purchase of Arana shares.
(7) To exclude charges related to the deconsolidation of Acusphere ($9.3M), the acquisition of worldwide license rights related to LUPUZOR from ImmuPharma ($30.0M) and license rights for bendamustine hydrochloride in China and Hong Kong ($0.8M) in 2009.
(8) To exclude the portion of non-cash charges related to our acquisition of Arana Therapeutics Limited that are reflected in (6) above but do not affect net income because they are attributed to noncontrolling interests.
(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
CONSOLIDATED SALES DETAIL
(In thousands)
(Unaudited)
| | Three Months Ended | | % | |
| | June 30, | | Increase | |
| | 2010 | | 2009 | | (Decrease) | |
| | United
States | | Europe | | Total | | United
States | | Europe | | Total | | United
States | | Europe | | Total | |
Net Sales: | | | | | | | | | | | | | | | | | | | |
PROVIGIL | | $ | 268,550 | | $ | 16,280 | | $ | 284,830 | | $ | 246,583 | | $ | 15,485 | | $ | 262,068 | | 9 | % | 5 | % | 9 | % |
NUVIGIL | | 40,968 | | — | | 40,968 | | 16,786 | | — | | 16,786 | | 144 | | — | | 144 | |
GABITRIL | | 11,118 | | 1,024 | | 12,142 | | 10,749 | | 1,026 | | 11,775 | | 3 | | — | | 3 | |
CNS | | 320,636 | | 17,304 | | 337,940 | | 274,118 | | 16,511 | | 290,629 | | 17 | | 5 | | 16 | |
| | | | | | | | | | | | | | | | | | | |
ACTIQ | | 14,471 | | 14,067 | | 28,538 | | 18,759 | | 19,106 | | 37,865 | | (23 | ) | (26 | ) | (25 | ) |
Generic OTFC | | 11,535 | | — | | 11,535 | | 23,390 | | — | | 23,390 | | (51 | ) | — | | (51 | ) |
FENTORA | | 38,861 | | 5,661 | | 44,522 | | 30,617 | | 814 | | 31,431 | | 27 | | 595 | | 42 | |
AMRIX | | 28,548 | | — | | 28,548 | | 30,867 | | — | | 30,867 | | (8 | ) | — | | (8 | ) |
Pain | | 93,415 | | 19,728 | | 113,143 | | 103,633 | | 19,920 | | 123,553 | | (10 | ) | (1 | ) | (8 | ) |
| | | | | | | | | | | | | | | | | | | |
TREANDA | | 99,732 | | — | | 99,732 | | 55,820 | | — | | 55,820 | | 79 | | — | | 79 | |
Other | | 6,253 | | 23,926 | | 30,179 | | 4,193 | | 22,168 | | 26,361 | | 49 | | 8 | | 14 | |
Oncology | | 105,985 | | 23,926 | | 129,911 | | 60,013 | | 22,168 | | 82,181 | | 77 | | 8 | | 58 | |
| | | | | | | | | | | | | | | | | | | |
Other | | 5,941 | | 125,500 | | 131,441 | | 8,380 | | 34,278 | | 42,658 | | (29 | ) | 266 | | 208 | |
| | | | | | | | | | | | | | | | | | | |
| | $ | 525,977 | | $ | 186,458 | | $ | 712,435 | | $ | 446,144 | | $ | 92,877 | | $ | 539,021 | | 18 | % | 101 | % | 32 | % |
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended | | % | |
| | June 30, | | Increase | |
| | 2010 | | 2009 | | (Decrease) | |
| | United
States | | Europe | | Total | | United
States | | Europe | | Total | | United
States | | Europe | | Total | |
Net Sales: | | | | | | | | | | | | | | | | | | | |
PROVIGIL | | $ | 513,151 | | $ | 34,130 | | $ | 547,281 | | $ | 485,012 | | $ | 30,418 | | $ | 515,430 | | 6 | % | 12 | % | 6 | % |
NUVIGIL | | 75,890 | | — | | 75,890 | | 16,786 | | — | | 16,786 | | 352 | | — | | 352 | |
GABITRIL | | 19,417 | | 2,486 | | 21,903 | | 25,498 | | 2,531 | | 28,029 | | (24 | ) | (2 | ) | (22 | ) |
CNS | | 608,458 | | 36,616 | | 645,074 | | 527,296 | | 32,949 | | 560,245 | | 15 | | 11 | | 15 | |
| | | | | | | | | | | | | | | | | | | |
ACTIQ | | 29,411 | | 32,558 | | 61,969 | | 40,171 | | 35,858 | | 76,029 | | (27 | ) | (9 | ) | (18 | ) |
Generic OTFC | | 24,314 | | — | | 24,314 | | 47,502 | | — | | 47,502 | | (49 | ) | — | | (49 | ) |
FENTORA | | 77,341 | | 9,390 | | 86,731 | | 63,907 | | 1,237 | | 65,144 | | 21 | | 659 | | 33 | |
AMRIX | | 53,683 | | — | | 53,683 | | 57,104 | | — | | 57,104 | | (6 | ) | — | | (6 | ) |
Pain | | 184,749 | | 41,948 | | 226,697 | | 208,684 | | 37,095 | | 245,779 | | (11 | ) | 13 | | (8 | ) |
| | | | | | | | | | | | | | | | | | | |
TREANDA | | 180,989 | | — | | 180,989 | | 106,017 | | — | | 106,017 | | 71 | | — | | 71 | |
Other | | 10,808 | | 48,124 | | 58,932 | | 9,519 | | 43,200 | | 52,719 | | 14 | | 11 | | 12 | |
Oncology | | 191,797 | | 48,124 | | 239,921 | | 115,536 | | 43,200 | | 158,736 | | 66 | | 11 | | 51 | |
| | | | | | | | | | | | | | | | | | | |
Other | | 15,401 | | 162,023 | | 177,424 | | 19,535 | | 69,092 | | 88,627 | | (21 | ) | 135 | | 100 | |
| | | | | | | | | | | | | | | | | | | |
| | $ | 1,000,405 | | $ | 288,711 | | $ | 1,289,116 | | $ | 871,051 | | $ | 182,336 | | $ | 1,053,387 | | 15 | % | 58 | % | 22 | % |
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
| | June 30 | | December 31, | |
| | 2010 | | 2009 | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 927,446 | | $ | 1,647,635 | |
Receivables, net | | 460,265 | | 376,076 | |
Inventory, net | | 293,679 | | 240,576 | |
Deferred tax assets, net | | 224,651 | | 243,246 | |
Other current assets | | 62,724 | | 58,423 | |
Total current assets | | 1,968,765 | | 2,565,956 | |
| | | | | |
INVESTMENTS | | 12,583 | | 12,427 | |
PROPERTY AND EQUIPMENT, net | | 499,578 | | 451,879 | |
GOODWILL | | 802,551 | | 590,284 | |
INTANGIBLE ASSETS, net | | 1,210,810 | | 981,857 | |
DEBT ISSUANCE COSTS | | 16,529 | | 18,862 | |
OTHER ASSETS | | 35,078 | | 36,830 | |
| | $ | 4,545,894 | | $ | 4,658,095 | |
| | | | | |
CURRENT LIABILITIES: | | | | | |
Current portion of long-term debt, net | | $ | 635,932 | | $ | 818,925 | |
Accounts payable | | 99,674 | | 88,829 | |
Accrued expenses | | 467,200 | | 430,209 | |
Total current liabilities | | 1,202,806 | | 1,337,963 | |
| | | | | |
LONG-TERM DEBT | | 378,116 | | 363,696 | |
DEFERRED TAX LIABILITIES, net | | 206,855 | | 159,328 | |
OTHER LIABILITIES | | 268,472 | | 111,728 | |
Total liabilities | | 2,056,249 | | 1,972,715 | |
| | | | | |
REDEEMABLE EQUITY | | 186,155 | | 207,307 | |
| | | | | |
EQUITY: | | | | | |
Cephalon Stockholders’ Equity | | | | | |
Common stock, $0.01 par value | | 784 | | 780 | |
Additional paid-in capital | | 2,388,730 | | 2,534,070 | |
Treasury stock, at cost | | (216,597 | ) | (208,427 | ) |
Accumulated earnings (deficit) | | 20,970 | | (178,659 | ) |
Accumulated other comprehensive income | | 46,159 | | 114,194 | |
Total Cephalon stockholders’ equity | | 2,240,046 | | 2,261,958 | |
Noncontrolling Interest | | 63,444 | | 216,115 | |
Total equity | | 2,303,490 | | 2,478,073 | |
| | $ | 4,545,894 | | $ | 4,658,095 | |
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | Six Months Ended | |
| | June 30, | |
| | 2010 | | 2009 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | |
Net income | | $ | 192,730 | | $ | 115,822 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Deferred income tax benefit | | (18,059 | ) | (385 | ) |
Depreciation and amortization | | 106,724 | | 87,029 | |
Stock-based compensation expense | | 21,630 | | 24,840 | |
Amortization of debt discount and debt issuance costs | | 35,692 | | 23,749 | |
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 | | 3,193 | | (5,283 | ) |
Changes in operating assets and liabilities: | | | | | |
Receivables | | (25,581 | ) | 74,211 | |
Inventory | | 18,985 | | (9,550 | ) |
Other assets | | 9,474 | | 31,479 | |
Accounts payable, accrued expenses and deferred revenues | | 23,955 | | 1,493 | |
Other liabilities | | (189 | ) | (1,501 | ) |
Net cash provided by operating activities | | 378,053 | | 313,508 | |
| | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | |
Purchases of property and equipment | | (22,997 | ) | (30,234 | ) |
Cash balance from consolidation of variable interest entity | | — | | 52,563 | |
Investment in Ception | | — | | (75,000 | ) |
Acquisition of Arana, net of cash acquired | | — | | (211,803 | ) |
Acquisition of Mepha, net of cash acquired | | (549,463 | ) | — | |
Purchases of investments | | (60 | ) | (9,082 | ) |
(Cash settlements of) proceeds from foreign exchange contracts | | (9,499 | ) | 26,754 | |
Sales and maturities of available-for-sale investments | | — | | 4,456 | |
Net cash used for investing activities | | (582,019 | ) | (242,346 | ) |
| | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | |
Proceeds from sale of common stock | | — | | 288,000 | |
Proceeds from exercises of common stock options | | 14,370 | | 6,271 | |
Windfall tax benefits from stock-based compensation | | — | | 197 | |
Acquisition of treasury stock | | (33 | ) | (29 | ) |
Acquisition of Ception NCI | | (299,289 | ) | — | |
Payments on and retirements of long-term debt | | (221,478 | ) | (9,131 | ) |
Net proceeds from issuance of convertible subordinated notes | | — | | 484,738 | |
Proceeds from sale of warrants | | — | | 37,640 | |
Purchase of convertible note hedge | | — | | (121,040 | ) |
Net cash (used for) provided by financing activities | | (506,430 | ) | 686,646 | |
| | | | | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | | (9,793 | ) | (341 | ) |
| | | | | |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | | (720,189 | ) | 757,467 | |
| | | | | |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | | 1,647,635 | | 524,459 | |
| | | | | |
CASH AND CASH EQUIVALENTS, END OF PERIOD | | $ | 927,446 | | $ | 1,281,926 | |
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 | |
| | September 30, 2010 | | December 31, 2010 | |
| | | | | | | | | | | | | |
Projected GAAP basic income per common share | | $ | 1.33 | | — | | $ | 1.43 | | $ | 5.31 | | — | | $ | 5.51 | |
| | | | | | | | | | | | | |
Amortization of current intangibles | | $ | 0.41 | | — | | $ | 0.41 | | $ | 1.55 | | — | | $ | 1.55 | |
Accelerated depreciation adjustment- CIMA | | $ | 0.02 | | — | | $ | 0.02 | | $ | 0.09 | | — | | $ | 0.09 | |
Accelerated depreciation adjustment- Mitry-Mory | | $ | — | | — | | $ | — | | $ | 0.10 | | — | | $ | 0.10 | |
Cost of sales adjustments | | $ | 0.07 | | — | | $ | 0.07 | | $ | 0.26 | | — | | $ | 0.26 | |
Selling, general and administrative adjustments | | $ | — | | — | | $ | — | | $ | 0.15 | | — | | $ | 0.15 | |
Restructuring adjustments | | $ | 0.01 | | — | | $ | 0.01 | | $ | 0.04 | | — | | $ | 0.04 | |
Other income (expense) adjustments | | $ | — | | — | | $ | — | | $ | 0.15 | | — | | $ | 0.15 | |
Interest expense adjustments | | $ | 0.20 | | — | | $ | 0.20 | | $ | 0.88 | | — | | $ | 0.88 | |
| | | | | | | | | | | | | |
Tax effect of pre-tax adjustments at the applicable tax rates | | $ | (0.24 | ) | — | | $ | (0.24 | ) | $ | (1.08 | ) | — | | $ | (1.08 | ) |
| | | | | | | | | | | | | |
Basic adjusted income per common share guidance | | $ | 1.80 | | — | | $ | 1.90 | | $ | 7.45 | | — | | $ | 7.65 | |
The company’s guidance is being issued based on certain assumptions including:
· Adjusted effective tax rate of approximately 33.3 percent in 2010; and
· Weighted average number of common shares outstanding of 75.5 and 75.4 million shares for the three months ended September 30, 2010 and the twelve months ended December 31, 2010, respectively.
