Exhibit 99.1
| International Headquaters | ||||||
| 4787 Levy Street | ||||||
| Montreal, Quebec, H4R 2P9 | ||||||
| Phone: 517,744.6792 | ||||||
| Fax: 514,744.6272 |
Contact Information:
Laurie W. Little
949-461-6002
laurie.little@valeant.com
VALEANT PHARMACEUTICALS REPORTS
2012 SECOND QUARTER FINANCIAL RESULTS
| • | 2012Second Quarter Total Revenue $820 million, including $45 million related toPotiga™launch milestone |
| • | Organic growth(same store sales) was approximately 6% |
| • | Pro forma organic growth was approximately 10% |
| • | 2012Second Quarter GAAP EPS Loss of $0.07; Cash EPS $1.01 |
| • | Excluding impactfrom Potiga milestone, Cash EPS was $0.87 |
| • | 2012Second Quarter GAAP Cash Flow from Operations was$255 million; Adjusted Cash Flow from Operations was$307 million |
| • | 2012 Guidance increased to $4.55 - $4.75 Cash EPS |
| • | $4.18 - $4.38 excluding one-time items |
Montreal, Quebec— August 2, 2012 — Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces second quarter financial results for 2012.
“The second quarter continued our track record of delivering solid results,” said J. Michael Pearson, chairman and chief executive officer. “With our diversified operations, we were able to mitigate headwinds caused by foreign exchange and the continued genericization impact of Cardizem® CD and Ultram® ER, and still report solid top and bottom line results. We are also pleased with our significant increase in cash flow from operations, both from a GAAP and non-GAAP basis. We look forward to a strong second half of the year.”
Business Performance
Valeant’s business continued to perform well in the second quarter of 2012 and - with the exception of the U.S. Neurology and Other segment - each business delivered positive revenue growth, both in terms of total revenue and organic growth. Total revenue was $820.1 million in the second quarter of 2012, as compared to $609.4 million in the second quarter of 2011, an increase of 35%. Product sales were $748.7 million in the second quarter of 2012, as compared to $530.0 million in the year-ago quarter, an increase of 41%.
Overall, Valeant’s business continued to deliver strong organic growth. Same store organic growth was approximately 6% and pro forma organic growth was approximately 10% for the second quarter of 2012. (See Table 5) Particularly positive was Valeant’s U.S. Dermatology business, which continued its exceptional growth performance in the second quarter. Key contributors to organic growth included Zovirax®, Acanya®, Atralin® and CeraVe®.
We are also pleased with our Emerging Markets segment, which delivered double digit organic growth. We continue to see strong performance in Poland against a tough market environment and exceptional growth from our Russian/CIS operations as we gained critical mass in this market. We remain excited about our new operations in South East Asia/South Africa, where our business demonstrated outstanding growth.
The Canadian and Australian segment delivered slower organic growth this quarter due to the genericization of Cesamet® that occurred in March 2012 and wholesaler buying patterns in Australia.
Finally, the U.S. Neurology and Other portfolio continued to decline. Wellbutrin XL®, Diastat®, Ultram® ER and Cardizem® CD all declined as expected, with generic competitors for certain strengths for the latter two products being introduced in September 2011 and November 2011, respectively. Excluding these products, the remaining U.S. Neurology and Other segment increased 3%, as compared to the second quarter of 2011.
Included in total revenue for the second quarter of 2012 was $45.0 million of alliance and royalty revenue related to the milestone payment for the U.S. launch of ezogabine (Potiga™) from GlaxoSmithKline (GSK), while the second quarter of 2011 included $40.0 million of alliance and royalty revenue related to the milestone payment from GSK for the European launch of retigabine (Trobalt™).
Financial Performance
The Company reported a net loss of $21.6 million for the second quarter of 2012, or $0.07 per diluted share. On a Cash EPS basis, adjusted income was $314.5 million, or $1.01 per diluted share. Excluding the Potiga milestone, adjusted income was $269.5 million, or $0.87 per diluted share.
GAAP cash flow from operations was $254.6 million in the second quarter of 2012, and adjusted cash flow from operations was $307.5 million in the second quarter of 2012. Both figures include the milestone payment of $45.0 million.
The Company’s cost of goods sold (COGS) was $197.3 million in the second quarter of 2012. After backing out a fair value adjustment to inventory, amortization expense and other items related to acquisitions of approximately $14.0 million, COGS represented 24% of product sales.
Selling, General and Administrative expenses were $185.4 million in the second quarter of 2012, which includes a $5.1 million step-up in stock based compensation expenses related to the acquisition of Legacy Valeant. Excluding the step-up in stock based compensation, SG&A was approximately 22% of revenue. Research and Development expenses were $17.7 million in the second quarter of 2011, or approximately 2% of revenue.
2012 Guidance
The Company is updating its previous Cash EPS guidance and is increasing Cash EPS to $4.55 to $4.75 (or $4.18 to $4.38 excluding one-time items) in 2012, up from prior guidance of $4.45 to $4.70, and maintaining prior guidance of total revenue in the range of $3.4 to $3.6 billion and adjusted cash flow from operations of greater than $1.4 billion.
Conference Call and Webcast Information
The Company will host a conference call and a live Internet webcast along with a slide presentation today at 8:00 a.m. ET (5:00 a.m. PT), August 2, 2012 to discuss its second quarter financial results for 2012. The dial-in number to participate on this call is (877) 876-8393, confirmation code 10552994. International callers should dial (973) 200-3961, confirmation code 10552994. A replay will be available approximately two hours following the conclusion of the conference call through August 8, 2012 and can be accessed by dialing (855) 859-2056, or (404) 537-3406, confirmation code 10552994. The live webcast of the conference call may be accessed through the investor relations section of the Company’s corporate website atwww.valeant.com.
About Valeant
Valeant Pharmaceuticals International, Inc. (NYSE/TSX:VRX) is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of dermatology, neurology and branded generics. More information about Valeant can be found atwww.valeant.com.
Forward-looking Statements
This press release may contain forward-looking statements, including, but not limited to, statements regarding future results and performance, financial guidance, expected revenue and adjusted cash flow from operations and anticipated Cash EPS for 2012. Forward-looking statements may generally be identified by the use of the words “anticipates,” “expects,” “intends,” “plans,” “should,” “could,” “would,” “may,” “will,” “believes,” “estimates,” “potential,” “target”, or “continue” and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to certain risks
and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in the Company’s most recent annual or quarterly report and detailed from time to time in Valeant’s other filings with the Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators (“CSA”), which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance on any of these forward-looking statements. These forward-looking statements speak only as of the date hereof. Valeant undertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect actual outcomes.
Note on Guidance
The guidance contained in this press release is only effective as of the date given, August 2, 2012, and will not be updated or confirmed until the Company publicly announces updated or affirmed guidance.
Non-GAAP Information
To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, amortization of alliance product assets & pp&e step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, acquisition-related and other costs, acquired in-process research and development (“IPR&D”), legal settlements outside the ordinary course of business, the impact of currency fluctuations, amortization and other non-cash charges, amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets held for sale/impairment, net, (gain) loss on investments, net, and adjusts tax expense to cash taxes. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the company’s core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP. Therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
Financial Tables follow.
###
Valeant Pharmaceuticals International, Inc.
Condensed Consolidated Statement of Income
For the Three and Six Months Ended June 30, 2012 and 2011
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (In thousands, except per share data) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Product sales | $ | 748,742 | $ | 530,035 | $ | 1,506,334 | $ | 1,030,456 | ||||||||
Alliance and royalty | 56,869 | 65,988 | 136,100 | 124,402 | ||||||||||||
Service and other (a) | 14,479 | 13,364 | 33,759 | 19,555 | ||||||||||||
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Total revenues | 820,090 | 609,387 | 1,676,193 | 1,174,413 | ||||||||||||
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Cost of goods sold (exclusive of amortization of intangible assets shown separately below) | 197,284 | 169,912 | 426,725 | 339,199 | ||||||||||||
Cost of services | 12,483 | 3,395 | 26,058 | 6,605 | ||||||||||||
Cost of alliances | — | — | 68,820 | 30,735 | ||||||||||||
Selling, general and administrative (“SG&A”) | 185,440 | 149,657 | 362,726 | 289,163 | ||||||||||||
Research and development | 17,711 | 17,764 | 39,717 | 31,434 | ||||||||||||
Contingent consideration fair value adjustments | 7,729 | 1,752 | 17,568 | 2,138 | ||||||||||||
Acquired in-process research and development | 4,568 | 2,000 | 4,568 | 4,000 | ||||||||||||
Legal settlements | 53,624 | 2,000 | 56,779 | 2,400 | ||||||||||||
Restructuring, acquisition-related and other costs | 43,871 | 29,495 | 113,713 | 48,541 | ||||||||||||
Amortization of intangible assets | 210,570 | 114,946 | 411,213 | 226,989 | ||||||||||||
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| 733,280 | 490,921 | 1,527,887 | 981,204 | |||||||||||||
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Operating income | 86,810 | 118,466 | 148,306 | 193,209 | ||||||||||||
Interest expense, net | (99,594 | ) | (81,987 | ) | (200,496 | ) | (149,935 | ) | ||||||||
Loss on extinguishment of debt | — | (14,748 | ) | (133 | ) | (23,010 | ) | |||||||||
Gain (loss) on investments, net | (35 | ) | 21,158 | 2,024 | 22,927 | |||||||||||
Other income (expense), net including translation and exchange | (4,238 | ) | 847 | 20,061 | 3,654 | |||||||||||
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Income (loss) before (recovery) provision for income taxes | (17,057 | ) | 43,736 | (30,238 | ) | 46,845 | ||||||||||
(Recovery of) provision for income taxes | 4,550 | (12,624 | ) | 4,290 | (15,997 | ) | ||||||||||
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Net income (loss) | $ | (21,607 | ) | $ | 56,360 | $ | (34,528 | ) | $ | 62,842 | ||||||
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Earnings per share: | ||||||||||||||||
Basic: | ||||||||||||||||
Net income (loss) | $ | (0.07 | ) | $ | 0.19 | $ | (0.11 | ) | $ | 0.21 | ||||||
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Shares used in per share computation | 304,816 | 303,426 | 306,296 | 303,587 | ||||||||||||
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Diluted: | ||||||||||||||||
Net income (loss) | $ | (0.07 | ) | $ | 0.17 | $ | (0.11 | ) | $ | 0.19 | ||||||
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Shares used in per share computation | 304,816 | 331,369 | 306,296 | 332,130 | ||||||||||||
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| (a) | Service and Other revenue includes contract manufacturing revenue of $9.0 million and $19.8 million for the three and six months ended June 30, 2012, respectively. For the three months ended March 31, 2012, Service and Other revenue was restated by $10.8 million of contract manufacturing revenue previously reported in product sales. |
Valeant Pharmaceuticals International, Inc.
Reconciliation of GAAP EPS to Cash EPS
For the Three and Six Months Ended June 30, 2012 and 2011
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (In thousands, except per share data) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Net income (loss) | $ | (21,607 | ) | $ | 56,360 | $ | (34,528 | ) | $ | 62,842 | ||||||
Non-GAAP adjustments(a): | ||||||||||||||||
Inventory step-up (b) | 10,361 | 16,262 | 43,392 | 46,171 | ||||||||||||
Alliance product assets & pp&e step-up/down (c) | 313 | 275 | 51,034 | 19,340 | ||||||||||||
Stock-based compensation step-up (d) | 5,135 | 16,070 | 15,563 | 39,407 | ||||||||||||
Contingent consideration fair value adjustment (e) | 7,729 | 1,752 | 17,568 | 2,138 | ||||||||||||
Acquired in-process research and development (IPR&D) (f) | 4,568 | 2,000 | 4,568 | 4,000 | ||||||||||||
Legal settlements (g) | 53,624 | 2,000 | 56,779 | 2,400 | ||||||||||||
Restructuring, acquisition-related and other costs (h) | 43,871 | 29,495 | 113,713 | 48,541 | ||||||||||||
Amortization and other non-gaap charges (i) | 215,791 | 117,239 | 420,994 | 231,576 | ||||||||||||
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| 341,392 | 185,093 | 723,611 | 393,573 | |||||||||||||
Amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest (j) | (395 | ) | 2,752 | 5,355 | 6,348 | |||||||||||
Loss on extinguishment of debt | — | 14,748 | 133 | 23,010 | ||||||||||||
(Gain) loss on assets held for sale/impairment, net (k) | 1,002 | — | 1,002 | — | ||||||||||||
(Gain) loss on investments, net | — | — | — | (1,769 | ) | |||||||||||
Tax (l) | (5,850 | ) | (18,724 | ) | (20,709 | ) | (38,497 | ) | ||||||||
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Total adjustments | 336,149 | 183,869 | 709,392 | 382,665 | ||||||||||||
Adjusted income | $ | 314,542 | $ | 240,229 | $ | 674,864 | $ | 445,507 | ||||||||
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GAAP earnings per share - diluted | $ | (0.07 | ) | $ | 0.17 | $ | (0.11 | ) | $ | 0.19 | ||||||
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Cash earnings per share - diluted | $ | 1.01 | $ | 0.73 | $ | 2.15 | $ | 1.34 | ||||||||
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Cash earnings per share excluding one-time items - diluted | $ | 0.87 | $ | 0.54 | $ | 1.78 | $ | 1.10 | ||||||||
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Shares used in diluted per share calculation - Cash earnings per share | 312,631 | 331,369 | 314,514 | 332,130 | ||||||||||||
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| (a) | See footnote (a) to Table 2a. |
| (b) | See footnote (b) to Table 2a and Table 2b. |
| (c) | See footnote (c) to Table 2a and footnotes (c) (e) to Table 2b. |
| (d) | See footnote (e) to Table 2a and footnote (f) to Table 2b. |
| (e) | See footnote (g) to Table 2a and footnote (h) to Table 2b. |
| (f) | See footnote (h) to Table 2a and footnote (i) to Table 2b. |
| (g) | See footnote (i) to Table 2a and footnote (j) to Table 2b. |
| (h) | See footnotes (j) (k) to Table 2a and footnotes (k) (l) to Table 2b. |
| (i) | See footnote (d) to Table 2a and Table 2b. |
| (j) | See footnote (l) to Table 2a and footnote (m) to Table 2b. |
| (k) | See footnote (f) to Table 2a and footnote (g) Table 2b. |
| (l) | See footnote (m) to Table 2a and footnote (n) Table 2b. |
Valeant Pharmaceuticals International, Inc.
Reconciliation of GAAP EPS to Cash EPS
For the Three Months Ended June 30, 2012 and 2011
| Non-GAAP Adjustments(a) for | ||||||||
| Three Months Ended | ||||||||
| June 30, | ||||||||
| (In thousands, except per share data) | 2012 | 2011 | ||||||
Product sales | $ | — | $ | — | ||||
Alliance and royalty | — | 268 | ||||||
Service and other | — | — | ||||||
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Total revenues | — | 268 | ||||||
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Cost of goods sold (exclusive of amortization of intangible assets shown separately below) | (13,984 | )(b)(c)(d) | (18,535 | )(b)(c) | ||||
Cost of services | — | — | ||||||
Cost of alliances | — | — | ||||||
Selling, general and administrative (“SG&A”) | (8,048 | )(c)(e)(f) | (16,097 | )(c)(e) | ||||
Research and development | — | — | ||||||
Contingent consideration fair value adjustments | (7,729 | )(g) | (1,752 | )(g) | ||||
Acquired in-process research and development | (4,568 | )(h) | (2,000 | )(h) | ||||
Legal settlements | (53,624 | )(i) | (2,000 | ) | ||||
Restructuring, acquisition-related and other costs | (43,871 | )(j) | (29,495 | )(k) | ||||
Amortization of intangible assets | (210,570 | ) | (114,946 | ) | ||||
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| (342,394 | ) | (184,825 | ) | |||||
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Operating income | 342,394 | 185,093 | ||||||
Interest expense, net | (395 | )(l) | 2,752 | (l) | ||||
(Gain) loss on extinguishment of debt | — | 14,748 | ||||||
Gain (loss) on investments, net | — | — | ||||||
Other income (expense), net including translation and exchange | — | — | ||||||
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Income before (recovery of) provision for income taxes | 341,999 | 202,593 | ||||||
Provision for income taxes | 5,850 | (m) | 18,724 | (m) | ||||
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Total Adjustments to Net income | $ | 336,149 | $ | 183,869 | ||||
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Earnings per share: | ||||||||
Diluted: | ||||||||
Net income | $ | 1.08 | $ | 0.56 | ||||
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Shares used in per share computation | 312,631 | 331,369 | ||||||
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| (a) | To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, amortization of alliance product assets & pp&e step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, acquisition-related and other costs, acquired in-process research and development (“IPR&D”), legal settlements outside the ordinary course of business, the impact of currency fluctuations, amortization and other non-cash charges, amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets held for sale/impairment, net, (gain) loss on investments, net, and adjusts tax expense to cash taxes. |
Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the company’s core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP. Therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
| (b) | ASC 805, accounting for business combinations requires an inventory fair value step-up whose total impact for the three months ended June 30, 2012 is $10.4 million primarily relating to the acquisitions of iNova on December 21, 2011 and Afexa on October 17, 2011. For the three months ended June 30, 2011 the impact of inventory fair value step-up is $16.3 million primarily relating to the acquisition of PharmaSwiss SA on March 10, 2011. |
| (c) | PP&E step-up/down represents the step-up/down to fair market value from Legacy Valeant’s original cost resulting from the merger of Legacy Valeant into Legacy Biovail and subsequent acquisitions. |
| (d) | Costs associated with Tech transfers of $3.0 million. |
| (e) | For the three months ended June 30, 2012 SG&A primarily includes $7.2 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the Legacy Valeant into Legacy Biovail merger and expense associated with certain award modifications. For the three months ended June 30, 2011 SG&A primarily includes $16.1 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the Legacy Valeant into Legacy Biovail merger |
| (f) | SG&A includes loss on assets held for sale/impairment. |
| (g) | Net expenses from the changes in fair value of contingent consideration for the three months ended June 30, 2012 and 2011 of $7.7 million and $1.8 million, respectively. |
| (h) | Total Acquired IPR&D for the three months ended June 30, 2012 of $4.6 million primarily relates to the termination of an IPR&D program acquired from Ortho Dermatologics and for the three months ended June 30, 2011 of $2.0 million relates to the acquisition of the Canadian rights to Cholestagel ®. |
| (i) | For the three months ended June 30, 2012 Legal settlement costs of $53.6 million primarily relate to the litigation settlement and associated legal fees with respect to a class action antitrust complaint regarding Wellbutrin XL ®. |
| (j) | Restructuring, acquisition-related and other costs of $43.9 million represent costs related to the acquisitions of PharmaSwiss SA, Sanitas, Afexa, Ortho Dermatologics, Dermik, iNova, Probiotica, Eyetech, OraPharma, University Medical, Gerot Lannach and Pedinol. These include $13.9 million related to acquisition costs, $12.2 million related to employee severance costs, $8.4 million related to integration related consulting, duplicative labor, transition services, and other, $5.1 million related to facility closure costs, $2.0 million related to other, and $2.3 million related to non-personnel manufacturing integration costs. |
| (k) | Restructuring, acquisition-related and other costs of $29.5 million represent costs related to the merger of Legacy Valeant into Legacy Biovail and include $13.0 million related to facility closure costs, $6.9 million related to contract cancellation fees, consulting, legal and other costs, $4.4 million related to severance, $3.3 million related to manufacturing integration, and $1.9 million related to acquisition costs. |
| (l) | For the three months ended June 30, 2012 non cash interest expense associated with amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest is offset by an adjustment to deferred financing costs. For the three months ended June 30, 2011 non cash interest expense totaling $2.8 million associated with amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest. |
| (m) | Total tax effect of non-GAAP pre-tax adjustments, resolution of uncertain tax positions and change in valuation allowance associated with deferred tax asset. |
Valeant Pharmaceuticals International, Inc.
Reconciliation of GAAP EPS to Cash EPS
For the Six Months Ended June 30, 2012 and 2011
| Six Months Ended | ||||||||
| June 30, | ||||||||
| (In thousands, except per share data) | 2012 | 2011 | ||||||
Product sales | $ | — | $ | — | ||||
Alliance and royalty | — | 536 | ||||||
Service and other | — | — | ||||||
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Total revenues | — | 536 | ||||||
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Cost of goods sold (exclusive of amortization of intangible assets shown separately below) | (50,405 | )(b)(c)(d) | (50,861 | )(b)(c) | ||||
Cost of services | — | — | ||||||
Cost of alliances | (50,958 | )(e) | (18,835 | )(e) | ||||
Selling, general and administrative (“SG&A”) | (19,409 | )(c)(f)(g) | (39,273 | )(c)(f) | ||||
Research and development | — | — | ||||||
Contingent consideration fair value adjustments | (17,568 | )(h) | (2,138 | )(h) | ||||
Acquired in-process research and development | (4,568 | )(i) | (4,000 | )(i) | ||||
Legal settlements | (56,779 | )(j) | (2,400 | ) | ||||
Restructuring, acquisition-related and other costs | (113,713 | )(k) | (48,541 | )(l) | ||||
Amortization of intangible assets | (411,213 | ) | (226,989 | ) | ||||
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| (724,613 | ) | (393,037 | ) | |||||
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Operating income | 724,613 | 393,573 | ||||||
Interest expense, net | 5,355 | (m) | 6,348 | (m) | ||||
(Gain) loss on extinguishment of debt | 133 | 23,010 | ||||||
Gain (loss) on investments, net | — | (1,769 | ) | |||||
Other income (expense), net including translation and exchange | — | — | ||||||
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Income before (recovery of) provision for income taxes | 730,101 | 421,162 | ||||||
Provision for income taxes | 20,709 | (n) | 38,497 | (n) | ||||
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Total Adjustments to Net income | $ | 709,392 | $ | 382,665 | ||||
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Earnings per share: | ||||||||
Diluted: | ||||||||
Net income | $ | 2.26 | $ | 1.15 | ||||
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Shares used in per share computation | 314,514 | 332,130 | ||||||
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| (a) | See footnote (a) to Table 2a. |
| (b) | ASC 805, accounting for business combinations requires an inventory fair value step-up whose total impact for the six months ended June 30, 2012 is $43.4 million primarily relating to the acquisitions of iNova on December 21, 2011, Dermik on December 16, 2011 and Afexa on October 17, 2011. For the six months ended June 30, 2011 the impact of inventory fair value step-up is $46.2 million primarily relating to the merger of Legacy Valeant into Legacy Biovail and the acquisition of PharmaSwiss SA on March 10, 2011. |
| (c) | PP&E step-up/down represents the step-up/down to fair market value from Legacy Valeant’s original cost resulting from the merger of Legacy Valeant into Legacy Biovail and subsequent acquisitions. |
| (d) | Costs associated with Tech transfers of $4.5 million. |
| (e) | Cost of Alliances represents the divestiture of 5FU and IDP-111 resulting from the acquisition of Dermik, $50.9 million for the six months ended June 30, 2012 and the divestiture of Cloderm resulting from the Legacy Valeant into Legacy Biovail merger, $18.8 million for the six months ended June 30, 2011. |
| (f) | For the six months ended June 30, 2012 SG&A primarily includes $17.7 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the Legacy Valeant into Legacy Biovail merger, acceleration of certain equity instruments and the expense associated with certain award modifications. For the six months ended June 30, 2011 SG&A primarily includes $39.4 million of Stock-based compensation which reflects the amortization of the fair value step-up increment resulting from the Legacy Valeant into Legacy Biovail merger. |
| (g) | SG&A includes loss on assets held for sale/impairment. |
| (h) | Net expenses from the changes in fair value of contingent consideration for the six months ended June 30, 2012 and 2011 of $17.6 million and $2.1 million, respectively. |
| (i) | Total Acquired IPR&D for the six months ended June 30, 2012 of $4.6 million primarily relates to the termination of an IPR&D program acquired from Ortho Dermatologics and for the six months ended June 30, 2011 of $4.0 million relates to the acquisition of the Canadian rights to Cholestagel ®. |
| (j) | For the six months ended June 30, 2012 Legal settlement costs of $56.8 million primarily relate to the litigation settlement and associated legal fees with respect to a class action antitrust complaint regarding Wellbutrin XL ®. |
| (k) | Restructuring, acquisition-related and other costs of $113.7 million represent costs related to the acquisitions of PharmaSwiss SA, Sanitas, Afexa, Ortho Dermatologics, Dermik, iNova, Probiotica, Eyetech, OraPharma, University Medical, Gerot Lannach and Pedinol. These include $21.4 million related to acquisition costs, $31.9 million related to employee severance costs, $21.4 million related to integration related consulting, duplicative labor, transition services, and other, $23.7 million related to facility closure costs, $11.2 million related to other, and $4.1 million related to non-personnel manufacturing integration costs. |
| (l) | Restructuring, acquisition-related and other costs of $48.5 million represent costs related to the merger of Legacy Valeant and Legacy Biovail and include $17.1 million related to facility closure costs, $15.4 million related to contract cancellation fees, consulting. legal and other costs, $9.3 million related to severance, $3.3 million related to manufacturing integration, and $3.4 million related to acquisition costs. |
| (m) | Non cash interest expense associated with amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest totals for the six months ended June 30, 2012 and June 30, 2011 $5.4 million and $6.3 million, respectively. |
| (n) | Total tax effect of non-GAAP pre-tax adjustments, resolution of uncertain tax positions and change in valuation allowance associated with deferred tax asset. |
Valeant Pharmaceuticals International, Inc.
Reconciliation of GAAP Cost of Goods Sold to Non-GAAP Cost of Goods Sold - by Segment
For the Three and Six Months Ended June 30, 2012 and 2011
(In thousands)
| 3.1 Cost of goods sold (a) | Three Months Ended June 30, | |||||||||||||||||||
| 2012 as reported GAAP | % of product sales | 2012 fair value step-up adjustment to inventory and Other non- GAAP (b) | 2012 excluding fair value step-up adjustment to inventory and Other non-GAAP | % of product sales | ||||||||||||||||
U.S. Dermatology | $ | 28,036 | 13 | % | $ | 4,217 | $ | 23,819 | 11 | % | ||||||||||
U.S. Neurology & Other | 32,068 | 19 | % | 1,939 | 30,129 | 18 | % | |||||||||||||
Canada/Australia (d) | 30,867 | 26 | % | 6,071 | 24,796 | 21 | % | |||||||||||||
Emerging Markets | 106,544 | 43 | % | 1,831 | 104,713 | 42 | % | |||||||||||||
Corporate/other | (231 | ) | (74 | ) | (157 | ) | ||||||||||||||
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| $ | 197,284 | 26 | % | $ | 13,984 | $ | 183,300 | 24 | % | |||||||||||
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| 2012 as reported GAAP | % of product sales | 2012 fair value step-up adjustment to inventory and Other non- GAAP (c) | 2012 excluding fair value step-up adjustment to inventory and Other non-GAAP | % of product sales | ||||||||||||||||
U.S. Dermatology | $ | 59,932 | 14 | % | $ | 13,571 | $ | 46,361 | 11 | % | ||||||||||
U.S. Neurology & Other | 68,466 | 19 | % | 5,565 | 62,901 | 18 | % | |||||||||||||
Canada/Australia (d) | 78,976 | 33 | % | 29,229 | 49,747 | 21 | % | |||||||||||||
Emerging Markets | 219,351 | 45 | % | 2,040 | 217,311 | 44 | % | |||||||||||||
Corporate/other | — | — | — | |||||||||||||||||
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| $ | 426,725 | 28 | % | $ | 50,405 | $ | 376,320 | 25 | % | |||||||||||
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| (a) | See footnote (a) to Table 2a. |
| (b) | U.S. Dermatology includes $3.6 million of fair value step-up adjustment to inventory and $0.6 million of tech transfer costs, U.S. Neurology and Other includes $1.3 million of tech transfer costs and $0.5 million of amortization. Canada/Australia includes $6.1 million of fair value step up adjustment to inventory, -$0.2 million PP&E step-down and $0.2 million of tech transfer costs. Emerging Markets includes $0.7 million of fair value step up adjustment to inventory, $0.1 million of PP&E step up and $0.9 million of tech transfer costs. Corporate includes a year to date reclass of stock base compensation step up to SG&A. |
| (c) | U.S. Dermatology includes $12.9 million of fair value step-up adjustment to inventory and $0.6 million of tech transfer costs, U.S. Neurology and Other includes $3.0 million of tech transfer costs and $2.6 million of amortization. Canada/Australia includes $29.7 million of fair value step up adjustment to inventory, -$0.7 million PP&E step-down and $0.2 million of tech transfer costs. Emerging Markets includes $0.8 million of fair value step up adjustment to inventory, $0.6 million of PP&E step up and $0.7 million of tech transfer costs. |
| (d) | Cost of Goods Sold excludes contract manufacturing costs currently reported in Cost of Services. Cost of Goods sold excluding fair value step-up adjustment to inventory and other non-gaap prior to the restatement of contract manufacturing costs to Cost of Services for the three months ended March 31, 2012 was $202,393. |
Valeant Pharmaceuticals International, Inc.
Consolidated Balance Sheet and Other Data
(In thousands)
| 4.1 Cash | As of June 30, 2012 | As of December 31, 2011 | ||||||
Cash and cash equivalents | $ | 395,266 | $ | 164,111 | ||||
Marketable securities | — | 6,338 | ||||||
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Total cash and marketable securities | $ | 395,266 | $ | 170,449 | ||||
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Debt | ||||||||
Revolving credit facility | $ | — | $ | 220,000 | ||||
Term loan A facility | 2,134,466 | 2,185,520 | ||||||
Term loan B facility | 1,170,651 | — | ||||||
Senior notes | 4,229,779 | 4,228,480 | ||||||
Convertible notes | 16,279 | 17,011 | ||||||
Other | — | — | ||||||
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| 7,551,175 | 6,651,011 | |||||||
Less: Current portion | (195,154 | ) | (111,250 | ) | ||||
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| $ | 7,356,021 | $ | 6,539,761 | |||||
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| 4.2 Summary of Cash Flow Statement | Three Months Ended June 30, | |||||||
| 2012 | 2011 | |||||||
Cash flow provided by (used in): | ||||||||
Net cash provided by (used in) operating activities (GAAP) | $ | 254,602 | $ | 190,656 | ||||
Restructuring and acquisition-related costs (c) | 43,871 | 29,495 | ||||||
Payment of accrued legal settlements | 1,752 | 2,000 | ||||||
Payment of Accreted Interest on Convertible Debt | — | 2,712 | ||||||
Tax Benefit from Stock Options Exercised(a) | 2,882 | 7,566 | ||||||
Working Capital change related to Business Development Activities | — | (20,200 | ) | |||||
Non-Cash adjustments to Income Taxes Payable | — | 13,730 | ||||||
Changes in working capital related to restructuring and acquisition-related costs(c) | 4,379 | (2,419 | ) | |||||
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Adjusted cash flow from operations (Non-GAAP)(b) | $ | 307,486 | $ | 223,540 | ||||
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Proceeds from sale of intangible assets | — | 36,000 | ||||||
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Adjusted cash flow from operations (Non-GAAP) (b) | $ | 307,486 | $ | 259,540 | ||||
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| (a) | Includes stock option tax benefit which will reduce taxes in future periods. |
| (b) | See footnote (a) to Table 2a. |
| (c) | Total Restructuring and Acquisition-related costs cash payments of $48,250 are broken down as follows: |
Project Type | Amount Paid | |||
Manufacturing Integration (Various Deals) | 10,601 | |||
Europe (PharmaSwiss, Sanitas, Gerot Lannach) | 5,981 | |||
iNova | 5,255 | |||
Dermik | 5,076 | |||
Pele Nova | 4,483 | |||
Ortho | 3,318 | |||
Eyetech | 2,865 | |||
OraPharma | 2,110 | |||
Afexa | 1,902 | |||
Pedinol | 1,815 | |||
Intellectual Property Migration | 1,099 | |||
Other (Atlantis, Probiotica, University Medical, Swiss Herbal) | 3,746 | |||
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Total | $ | 48,250 | ||
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Expense Type | Amount Paid | |||
Acquisition Related Costs Paid to 3rd Parties | 16,122 | |||
Severance Payments | 13,477 | |||
Integration related consulting, duplicative labor, transition services, and other costs | 11,513 | |||
Facility Closure Costs | 2,123 | |||
Non-Personnel Manufacturing Integration Costs | 1,904 | |||
Other costs | 3,111 | |||
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Total | $ | 48,250 | ||
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Valeant Pharmaceuticals International, Inc.
Organic Growth - by Segment
For the Three Months Ended June 30, 2012
(In thousands)
| For the Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||
| Organic growth | ||||||||||||||||||||||||||||||||||||||||||||
| (a) | (a) | (b) | (b) | |||||||||||||||||||||||||||||||||||||||||
| (1) QTD 2012 | (2) Acq impact | (3) QTD Same store | (4) QTD 2011 | (5) Pro Forma Adj | (6) Pro Forma 2011 | (7) Currency impact Same store | (8) Currency impact Acq | (9) Divestitures / Discontinuations | Pro Forma (1)+(7)+(8)+(9) / (6) | Same store (3)+(7) / (4)-(9) | ||||||||||||||||||||||||||||||||||
U.S. Dermatology | 210.6 | 107.9 | 102.8 | 79.6 | 86.0 | 165.6 | — | — | 2.2 | 29 | % | 33 | % | |||||||||||||||||||||||||||||||
U.S. Neurology & Other | 171.7 | 0.7 | 171.0 | 190.4 | 0.6 | 191.0 | — | — | 0.5 | -10 | % | -10 | % | |||||||||||||||||||||||||||||||
Canada/Australia | 117.4 | 35.4 | 82.0 | 82.5 | 38.2 | 120.7 | 3.8 | 1.5 | — | 2 | % | 4 | % | |||||||||||||||||||||||||||||||
Emerging Markets - Central/Eastern Europe | 150.9 | 48.4 | 102.5 | 112.8 | 48.8 | 161.6 | 18.9 | 9.3 | 4.7 | 14 | % | 12 | % | |||||||||||||||||||||||||||||||
Emerging Markets - Latin America | 73.4 | 16.5 | 56.9 | 64.7 | 14.5 | 79.3 | 9.7 | 3.8 | 4.3 | 15 | % | 10 | % | |||||||||||||||||||||||||||||||
Emerging Markets - Southeast Asia/Africa | 24.6 | 24.6 | 0.1 | — | 19.7 | 19.7 | — | 2.8 | — | 40 | % | |||||||||||||||||||||||||||||||||
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Emerging Markets | 249.0 | 89.5 | 159.5 | 177.6 | 83.0 | 260.5 | 28.6 | 16.0 | 9.1 | 16 | % | 12 | % | |||||||||||||||||||||||||||||||
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Total product sales | 748.7 | 233.4 | 515.3 | 530.0 | 207.7 | 737.8 | 32.4 | 17.5 | 11.8 | 10 | % | 6 | % | |||||||||||||||||||||||||||||||
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Add: JV Revenue (c) | 1.8 | — | 1.8 | 0.6 | — | 0.6 | 0.1 | — | — | 201 | % | 201 | % | |||||||||||||||||||||||||||||||
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Total | 750.6 | 233.4 | 517.1 | 530.7 | 207.7 | 738.4 | 32.5 | 17.5 | 11.8 | 10 | % | 6 | % | |||||||||||||||||||||||||||||||
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Less: Neuro | 171.7 | 0.7 | 171.0 | 190.4 | 0.6 | 191.0 | — | — | — | |||||||||||||||||||||||||||||||||||
Total product sales less Neuro | 577.0 | 232.7 | 344.3 | 339.7 | 207.1 | 546.8 | 32.4 | 17.5 | 11.8 | 17 | % | 15 | % | |||||||||||||||||||||||||||||||
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| (a) | Note: Currency effect for constant currency sales is determined by comparing 2012 reported amounts adjusted to exclude currency impact, calculated using 2011 monthly average exchange rates, to the actual 2011 reported amounts. Constant currency sales is not a GAAP-defined measure of revenue growth. Constant currency sales as defined and presented by us may not be comparable to similar measures reported by other companies. |
| (b) | See footnote (a) to Table 2a. |
| (c) | Represents Valeant’s attributable portion of revenue from joint ventures (JV) not included in Consolidated Valeant revenues. |