Valeant Pharmaceuticals Reports 2011 Fourth Quarter Financial Results


MISSISSAUGA, Ontario, Feb. 27, 2012 /PRNewswire/ --

Fourth Quarter 2011

  • 2011 Fourth Quarter Total Revenue $688.5 million; an increase of 34% over the prior year
  • Pro forma organic growth, excluding the impact of foreign exchange and acquisitions, was 10%
  • 2011 Fourth Quarter GAAP EPS $0.18; Cash EPS $0.94
  • 2011 Fourth Quarter GAAP Operating Cash Flow $190 million; Adjusted Operating Cash Flow $253 million  


Full Year 2011

  • Total 2011 revenue was $2.46 billion
  • Total 2011 pro forma organic growth, excluding the impact of foreign exchange and acquisitions, was 9%
  • Total 2011 GAAP EPS $0.49; Cash EPS $2.93
  • Total 2011 GAAP Operating Cash Flow $676 million; Adjusted Operating Cash Flow $925 million


Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces fourth quarter financial results for 2011.

"We are pleased by our financial results for the fourth quarter and the full year," said J. Michael Pearson, chairman and chief executive officer. "Our performance continues to demonstrate the strength of our diversified model and our capacity to integrate acquisitions and still deliver strong top-line and bottom-line results."

Revenue

Total reported revenue was $688.4 million in the fourth quarter of 2011 as compared to $514.6 million in the fourth quarter of 2010 primarily attributable to acquisitions completed in 2011 and the growth of key dermatology brands, partly offset by a negative foreign exchange impact.  

Product sales were $654.2 million in the fourth quarter of 2011, as compared to $488.7 million in the 2010 year quarter.  Pro forma organic growth for the Company was 10% for the fourth quarter of 2011 and 9% for the full year 2011.

Operating Expenses

The Company's cost of goods sold was $182.0 million in the fourth quarter of 2011, and represented 28% of product sales, as compared to $210.6 million in the fourth quarter of 2010, representing 43% of product sales.  Cost of goods sold in the fourth quarter of 2011 included an $18.3 million fair value adjustment to inventory, amortization and other non-GAAP items, while the comparable quarter in 2010 included $60.4 million fair value adjustment to inventory and other non-GAAP items related to acquisitions.  Excluding the adjustments, cost of goods for the fourth quarter of 2011 and 2010 were 25% and 31% of product sales, respectively.  

Selling, General and Administrative (SG&A) expenses were $148.5 million in the fourth quarter of 2011 and included a $12.9 million step-up in stock based compensation expenses related to the acquisition of Legacy Valeant.  This compares to SG&A expenses of $127.8 million in the fourth quarter of 2010 including a $17.0 million step-up in stock based compensation.  Excluding the step-up in stock based compensation expenses related to the acquisition of Legacy Valeant, SG&A as a percentage of product sales in 2011 and 2010 was 21% and 22%, respectively.  

Research and Development expenses were $16.8 million in the fourth quarter of 2011, or 2% of revenue, as compared to $18.3 million in the fourth quarter of 2010, or 4% of revenue.

Merger Related Costs & Expenses

We recorded restructuring and acquisition-related costs of $56.7 million in the quarter, virtually all of which arise from acquisitions and are primarily employee severance costs, contract cancellations fees and facility related costs.

Net Income and Cash Flow from Operations

The Company reported net income of $55.9 million for the fourth quarter of 2011, or $0.18 per diluted share.  On an adjusted Cash EPS basis, adjusted income was $297.7 million, or $0.94 per diluted share, as compared to guidance of $0.83 to $0.87 per diluted share.

GAAP cash flow from operations, which includes acquisition transaction fees, was $189.8 million in the quarter.  Adjusted cash flow from operations was $253.1 million in the fourth quarter of 2011, as compared to guidance of greater than $230 million.

Foreign Currency Impact

Valeant's foreign operations having a functional currency other than the U.S. dollar are translated into U.S. dollars at the exchange rate prevailing at the balance sheet date, and at the average exchange rate for the reporting period for revenue and expense accounts. Due to the strengthening of the U.S. dollar in the fourth quarter of 2011, product sales were negatively impacted by approximately $36 million as compared to originally budgeted rates, consistent with previously announced expectations.  

In connection with the acquisition of iNova, Valeant entered into foreign currency forward-exchange contracts to buy AUD$625.0 million, which were settled on December 20, 2011.  The Company recorded a $16.4 million foreign exchange gain on the settlement of these contracts, which was recognized in Other Income in the consolidated statements of income for the year ended December 31, 2011.

Cash EPS for the fourth quarter of 2011 was negatively impacted by foreign currency by approximately $0.06 per diluted share, which was offset by the positive impact of approximately $0.05 related to the foreign currency forward-exchange contracts entered into as part of the iNova transaction.  

Acquisitions Completed in the Fourth Quarter

During the fourth quarter of 2011, Valeant completed four strategic transactions including: iNova, a company that sells and distributes a range of prescription and OTC products in Australia, New Zealand, Southeast Asia and South Africa; Dermik, a dermatological unit of Sanofi in the U.S. and Canada that manufactures, markets and sells a range of therapeutic and aesthetic dermatology products; Ortho Dermatologics, a division of Janssen Pharmaceuticals, Inc. that develops products to treat skin disorders; and Afexa Life Sciences, Inc., a Canadian company that markets several consumer brands, such as COLD-FX®, Canada's leading OTC cold and flu treatment, and COLDSORE-FX®, a topical OTC cold sore treatment.

2012 Guidance

The Company is not updating 2012 annual guidance of $3.95 - $4.20 Cash EPS provided on January 6, 2012.  This guidance does not include transactions announced so far in 2012 and future acquisitions.

Conference Call and Webcast Information

The Company will host a conference call and a live Internet webcast along with a slide presentation today at 10:00 a.m. ET (7:00 a.m. PT), February 27, 2012 to discuss its fourth quarter financial results for 2011. The dial-in number to participate on this call is (877) 876-8393, confirmation code 49361027. International callers should dial (973) 200-3961, confirmation code 49361027. A replay will be available approximately two hours following the conclusion of the conference call through March 5, 2012 and can be accessed by dialing (855) 859-2056, or (404) 537-3406, confirmation code 49361027. The live webcast of the conference call may be accessed through the investor relations section of the Company's corporate website at www.valeant.com.

About Valeant

Valeant Pharmaceuticals International, Inc. (NYSE/TSX:VRX) is a multinational specialty pharmaceutical company that develops and markets a broad range of pharmaceutical products primarily in the areas of neurology, dermatology and branded generics. More information about Valeant can be found at www.valeant.com.

Forward-looking Statements

This press release may contain forward-looking statements, including, but not limited to, statements regarding our business model, performance and results of operations, and anticipated Cash EPS for 2012, anticipated closing of pending acquisitions and share repurchases and financing alternatives.  Forward-looking statements may be identified by the use of the words "anticipates," "expects," "intends," "plans," "should," "could," "would," "may," "will," "believes," "estimates," "potential," 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 filed with the Securities and Exchange Commission ("SEC") and risks and uncertainties relating to future acquisitions, integration of acquired businesses and results of operations, as detailed from time to time in Valeant's filings with the 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. 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, January 6, 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, stock-based compensation step-up, restructuring and acquisition-related costs, acquired in-process research and development ("IPR&D"), legal settlements, 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, and (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.

Contact Information:

Laurie W. Little

949-461-6002

This e-mail address is being protected from spambots. You need JavaScript enabled to view it.      

(Logo:  http://photos.prnewswire.com/prnh/20101025/LA87217LOGO)

Financial Tables follow.

Valeant Pharmaceuticals International, Inc.

Table 1

Condensed Consolidated Statement of Income

For the Three and Twelve Months Ended December 31, 2011 and 2010



























Three Months Ended







Twelve Months Ended







December 31,







December 31,





(In thousands, except per share data)

2011



2010

(a)

% Change



2011



2010

(a)

% Change

























Product sales

$        654,171



$        488,721



34%



$         2,255,050



$           1,133,371



NM

Alliance and royalty

25,600



19,963



28%



172,473



35,109



NM

Service and other

8,682



5,880



48%



35,927



12,757



NM

Total revenues

688,453



514,564



34%



2,463,450



1,181,237



NM

























Cost of goods sold (exclusive amortization of intangible assets shown separately below)

181,983



210,648



-14%



683,750



395,595



NM

Cost of services

2,628



2,944



-11%



12,311



10,155



NM

Cost of alliances

36



-







30,771



-



NM

Selling, general and administrative ("SG&A")

148,508



127,752



16%



572,472



276,546



NM

Research and development

16,777



18,324



-8%



65,687



68,311



NM

Contingent consideration fair value adjustments

(20,028)



-







(10,986)



-



NM

Acquired in-process research and development

105,200



28,000



276%



109,200



89,245



NM

Legal settlements

9,441



14,110



-33%



11,841



52,610



NM

Restructuring and acquisition-related costs

56,718



44,078



29%



130,631



179,102



NM

Amortization of intangible assets

192,798



117,660



64%



557,814



219,758



NM



694,061



563,516



23%



2,163,491



1,291,322





Operating income (loss)

(5,608)



(48,952)



-89%



299,959



(110,085)





























Interest expense, net

(94,055)



(52,564)



79%



(330,442)



(88,787)





Loss on extinguishment of debt

(3,519)



(32,413)



-89%



(36,844)



(32,413)





Gain (loss) on investments, net

(11)



-







22,776



(5,552)





Other income (expense), net including translation and exchange

26,487



229



NM



26,551



574





























Income (loss) before (recovery) provision for income taxes

(76,706)



(133,700)



-43%



(18,000)



(236,263)





























Recovery of income taxes

(132,561)



(102,570)



29%



(177,559)



(28,070)





























Net income (loss)

$          55,855



$        (31,130)







$            159,559



$            (208,193)





























Earnings per share:















































Basic:























Net income (loss)

$              0.18



$            (0.10)







$                  0.52



$                  (1.06)





Shares used in per share computation

308,706



302,005







304,655



195,808





























Diluted:























Net income (loss)

$              0.18



$            (0.10)







$                  0.49



$                  (1.06)





Shares used in per share computation

317,390



302,005







326,119



195,808





























(a) Prior year amounts have been modified to conform to the 2011 disclosure.





Valeant Pharmaceuticals International, Inc.

Table 2



Reconciliation of GAAP EPS to Adjusted Non-GAAP (Cash) EPS

For the Three and Twelve Months Ended December 31, 2011 and 2010

























Three Months Ended



Twelve Months Ended







December 31,



December 31,



(In thousands, except per share data)



2011



2010

 (a)

2011



2010

(a)





















Net income (loss)



$              55,855



$            (31,130)



$             159,559



$            (208,193)























Non-GAAP adjustments (b)(c):



















Inventory step-up (d)



10,317



53,266



59,256



53,266



Alliance product assets & pp&e step-up (e)



214



-



19,692



-



Stock-based compensation step-up (f)



12,936



17,040



63,492



17,040



Contingent consideration fair value adjustment



(20,028)



-



(10,986)



-



Restructuring, integration and acquisition-related costs (g)



56,718



44,078



130,631



179,102



Acquired in-process research and development (IPR&D)



105,200



28,000



109,200



89,245



Legal settlements



9,441



14,110



11,841



52,610



Amortization and other non-cash charges



198,080



122,729



569,977



232,954







372,878



279,223



953,103



624,217



Amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest



8,069



3,624



27,103



21,472



Loss on extinguishment of debt



3,519



32,413



36,844



32,413



(Gain) loss on assets held for sale/impairment, net



3,199



-



3,199



-



(Gain) loss on investments, net



-



-



(1,769)



5,552



Tax



(145,861)



(118,870)



(222,959)



(54,370)



Total adjustments



241,804



196,390



795,521



629,284























Adjusted income



$            297,659



$            165,260



$             955,080



$             421,091























GAAP earnings  per share - diluted



$                  0.18



$                (0.10)



$                   0.49



$                  (1.06)























Adjusted Non-GAAP (Cash) earnings per share - diluted



$                  0.94



$                  0.50



$                   2.93



$                   2.05























Shares used in diluted per share calculation - Adjusted Non-GAAP (Cash) earnings per share



317,390



330,452



326,119



205,529



























(a) Prior year non-GAAP adjustments have been modified to conform to the 2011 disclosure.



(b) 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, integration and acquisition-related costs, acquired in-process research and development ("IPR&D"), legal settlements outside the ordinary course of business, 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.



(c) This table includes Adjusted Non-GAAP (Cash) Earnings Per Share, which is a non-GAAP financial measure that represents earnings per share, excluding amortization of inventory step-up, alliance product assets & pp&e step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, integration and acquisition-related costs, acquired in-process research and development ("IPR&D"), legal settlements outside the ordinary course of business, 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, (gain) loss on investments, net, and adjusts tax expense to cash taxes.



(d) ASC 805, accounting for business combinations requires an inventory fair value step-up. The impact of the amortization of this step-up is included in cost of goods sold. For the three and twelve months ended December 31, 2011 the total impact is $10.3 million and $59.3 million, respectively. For the three and twelve months ended December 31, 2011 a total of  $0.0 million and $27.3 million related to the merger with Valeant Pharmaceutical International, $0.7 million and $1.2 million related to the acquisition of Ganehill Pty Limited on April 4, 2011, $0.0 million and $18.8 million related to the acquisition of PharmaSwiss SA on March 10, 2011, $2.9 million and $5.3 million related to the acquisition of Sanitas on August 19th, 2011, $2.1 million and $2.1 million related to acquisition of Afexa on October 17th, 2011, $0.7 million and $0.7 million related to acquisition of Ortho Dermatologics on December 12th, 2011, $2.8 million and $2.8 million related to the acquisition of Dermik on December 16th, 2011, and  $1.1 million and $1.1 million related to acquisition of iNova on December 21st, 2011, respectively.



(e) Alliance product assets & pp&e step-up represents the step up to fair market value from Legacy Valeant's original cost resulting from the merger of Legacy Valeant into Legacy Biovail. The impact of the amortization of this step-up is included in cost of alliance and royalty & SG&A. For the three and twelve months ended December 31, 2011 the total impact is $0.2 million and $19.7 million, respectively.



(f) Total stock-based compensation for the three and twelve months ended December 31, 2011 was $20.6 million and $93.0 million, of which $12.9 million and $63.5 million reflect the amortization of the fair value step-up increment resulting from the merger, respectively.



(g) Restructuring, integration and acquisition-related costs for the three and twelve months ended December 31, 2011 represent costs related to the merger of Legacy Valeant and Legacy Biovail, the acquisitions of PharmaSwiss SA, Sanitas, Afexa, Ortho Dermatologics, Dermik and iNova. These include $5.9 million and $23.9 million related to facility related costs, $7.8 million and $24.7 million related to contract cancellation fees, consulting, legal and other, $15.0 million and $29.3 million related to employee severance costs, $0.5 million and $3.4 million related to increases in deferred stock unit values related to directors retired as a result of the merger between Legacy Valeant and Legacy Biovail, $20.1 million and $33.0 million related to acquisition costs, $2.8 million and $7.2 million related to manufacturing integration, $1.6 million and $1.6 million related to co-promote expenses and $3.0 million and $7.5 million related to wind down costs, respectively.





Valeant Pharmaceuticals International, Inc.

Table 2 (a)

Reconciliation of Non-GAAP Adjustments

For the Three Months Ended December 31, 2011 and 2010



















































Three Months Ended



December 31, 2011



Inventory step-up



Alliance product assets & pp&e step-up



Stock-based compensation step-up



Contingent consideration fair value adjustment



Restructuring, integration and acquisition-related costs



Acquired in-process research and development (IPR&D)



Legal settlements



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



Tax

Product Sales

- -



- -



- -



- -



- -



- -



- -



268



- -



- -



- -



- -

Cost of goods sold (exclusive amortization of intangible assets shown separately below)

10,317



57



88



- -



- -



- -



- -



5,014



- -



- -



2,797



- -

Selling, general and administrative ("SG&A")

- -



157



12,723



- -



- -



- -



- -



- -



- -



- -



402



- -

Research and development

- -



- -



125



- -



- -



- -



- -



- -



- -



- -



- -



- -

Acquired in-process research and development

- -



- -



- -



- -



- -



105,200



- -



- -



- -



- -



- -



- -

Legal settlements

- -



- -



- -



- -



- -



- -



9,441



- -



- -



- -



- -



- -

Contingent consideration fair value adjustments

- -



- -



- -



(20,028)



- -



- -



- -



- -



- -



- -



- -



- -

Restructuring and acquisition-related costs

- -



- -



- -



- -



56,718



- -



- -



- -



- -



- -



- -



- -

Amortization of intangible assets

- -



- -



- -



- -



- -



- -



- -



192,798



- -



- -



- -



- -

Interest expense, net

- -



- -



- -



- -



- -



- -



- -



- -



8,069



- -



- -



- -

Loss on extinguishment of debt

- -



- -



- -



- -



- -



- -



- -



- -



- -



3,519



- -



- -

Tax

- -



- -



- -



- -



- -



- -



- -



- -



- -



- -



- -



(145,861)

Total Adjustments

$            10,317



$                     214



$                12,936



$               (20,028)



$                 56,718



$                105,200



$              9,441



$                 198,080



$                  8,069



$                     3,519



$                       3,199



$     (145,861)



















































Three Months Ended















December 31, 2010















Inventory step-up



Stock-based compensation step-up



Restructuring, integration and acquisition-related costs



Acquired in-process research and development (IPR&D)



Legal settlements



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



Tax













Product Sales

- -



- -



- -



- -



- -



268



- -



- -



- -













Cost of goods sold (exclusive amortization of intangible assets shown separately below)

53,266



- -



- -



- -



- -



7,125



- -



- -



- -













Selling, general and administrative ("SG&A")

- -



17,040



- -



- -



- -



(2,586)



- -



- -



- -













Acquired in-process research and development

- -



- -



- -



28,000



- -



- -



- -



- -



- -













Legal settlements

- -



- -



- -



- -



14,110



- -



- -



- -



- -













Restructuring and acquisition-related costs

- -



- -



44,078



- -



- -



- -



- -



- -



- -













Amortization of intangible assets

- -



- -



- -



- -



- -



117,660



- -



- -



- -













Interest expense, net

- -



- -



- -



- -



- -



- -



3,624



- -



- -













Loss on extinguishment of debt

- -



- -



- -



- -



- -



- -



- -



32,413



- -













Tax

- -



- -



- -



- -



- -



262



- -



- -



(118,870)













Total Adjustments

$            53,266



$                17,040



$                44,078



$                28,000



$                 14,110



$                122,729



$              3,624



$                   32,413



$            (118,870)

















Valeant Pharmaceuticals International, Inc.

Table 2 (b)

Reconciliation of Non-GAAP Adjustments

For the Twelve Months Ended December 31, 2011 and 2010























































Twelve Months Ended



December 31, 2011



Inventory step-up



Alliance product assets & pp&e step-up



Stock-based compensation step-up



Contingent consideration fair value adjustment



Restructuring, integration and acquisition-related costs



Acquired in-process research and development (IPR&D)



Legal settlements



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



Tax

Product Sales

- -



- -



- -



- -



- -



- -



- -



1,072



- -



- -



- -



- -



- -

Cost of goods sold (exclusive amortization of intangible assets shown separately below)

59,256



426



617



- -



- -



- -



- -



11,091



- -



- -



2,797



- -



- -

Cost of alliances

- -



18,837



- -



- -



- -



- -



- -



- -



- -



- -



- -



- -



- -

Selling, general and administrative ("SG&A")

- -



429



62,124



- -



- -



- -



- -



- -



- -



- -



402



- -



- -

Research and development

- -



- -



751



- -



- -



- -



- -



- -



- -



- -



- -



- -



- -

Contingent consideration fair value adjustments

- -



- -



- -



(10,986)



- -



- -



- -



- -



- -



- -



- -



- -



- -

Acquired in-process research and development

- -



- -



- -



- -



- -



109,200



- -



- -



- -



- -



- -



- -



- -

Legal settlements

- -



- -



- -



- -



- -



- -



11,841



- -



- -



- -



- -



- -



- -

Restructuring and acquisition-related costs

- -



- -



- -



- -



130,631



- -



- -



- -



- -



- -



- -



- -



- -

Amortization of intangible assets

- -



- -



- -



- -



- -



- -



- -



557,814



- -



- -



- -



- -



- -

Interest expense, net

- -



- -



- -



- -



- -



- -



- -



- -



27,103



- -



- -



- -



- -

Loss on extinguishment of debt

- -



- -



- -



- -



- -



- -



- -



- -



- -



36,844



- -



- -



- -

Gain (loss) on investments, net

- -



- -



- -



- -



- -



- -



- -



- -



- -



- -



- -



(1,769)



- -

Tax

- -



- -



- -



- -



- -



- -



- -



- -



- -



- -



- -



- -



(222,959)

Total Adjustments

$     59,256



$              19,692



$                63,492



$               (10,986)



$             130,631



$              109,200



$             11,841



$                569,977



$                27,103



$                   36,844



$                         3,199



$            (1,769)



$    (222,959)























































Twelve Months Ended















December 31, 2010















Inventory step-up



Stock-based compensation step-up



Restructuring, integration and acquisition-related costs



Acquired in-process research and development (IPR&D)



Legal settlements



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 investments, net



Tax













Product Sales

- -



- -



- -



- -



- -



1,072



- -



- -



- -



- -













Cost of goods sold (exclusive amortization of intangible assets shown separately below)

53,266



- -



- -



- -



- -



13,660



- -



- -



- -



- -













Selling, general and administrative ("SG&A")

- -



17,040



- -



- -



- -



(2,586)



- -



- -



- -



- -













Legal settlements

- -



- -



- -



- -



52,610



- -



- -



- -



- -



- -













Restructuring and acquisition-related costs

- -



- -



179,102



- -



- -



- -



- -



- -



- -



- -













Acquired in-process research and development

- -



- -



- -



89,245



- -



- -



- -



- -



- -



- -













Amortization of intangible assets

- -



- -



- -



- -



- -



219,758



- -



- -



- -



- -













Interest expense, net

- -



- -



- -



- -



- -



- -



21,472



- -



- -



- -













Loss on extinguishment of debt

- -



- -



- -



- -



- -



- -



- -



32,413



- -



- -













Gain (loss) on investments, net

- -



- -



- -



- -



- -



- -



- -



- -



5,552



- -













Tax

- -



- -



- -



- -



- -



1,050



- -



- -



- -



(54,370)













Total Adjustments

$     53,266



$              17,040



$              179,102



$                89,245



$               52,610



$              232,954



$             21,472



$                  32,413



$                  5,552



$                 (54,370)

















Valeant Pharmaceuticals International, Inc.

Table 3

Statement of Revenue - by Segment

For the Three and Twelve Months Ended December 31, 2011 and 2010

(In thousands)



Three Months Ended



December 31,

Revenue (a)(b)

2011

GAAP



2010

GAAP



% Change (c)



2011 currency impact



2011 excluding currency impact non-GAAP



% Change (c)

 U.S. Neurology & Other        

$             202,899



$            212,899



-5%



$                -



$            202,899



-5%

 U.S. Dermatology

174,096



103,896



68%



(17)



174,079



68%

 Total U.S.

376,995



316,795



19%



(17)



376,978



19%

Canada/Australia

101,352



80,422



26%



1,033



102,385



27%

Specialty Pharmaceuticals

478,347



397,217



20%



1,016



479,363



21%

Branded Generics - Europe

144,335



48,310



199%



9,192



153,527



218%

Branded Generics -

Latin America

65,771



69,037



-5%



5,491



71,262



3%

Branded Generics

210,106



117,347



79%



14,683



224,789



92%

Total Revenue

$             688,453



$            514,564



34%



$        15,699



$            704,152



37%



























Twelve Months Ended



December 31,

Revenue (a)(b)

2011

GAAP



2010

GAAP



% Change (c)



2011 currency impact



2011 excluding currency impact non-GAAP



% Change (c)

 U.S. Neurology & Other

$             829,289



$            658,312



26%



$                -



$            829,289



26%

 U.S. Dermatology

568,298



219,008



159%



(371)



567,927



159%

 Total U.S.

1,397,587



877,320



59%



(371)



1,397,216



59%

Canada/Australia

340,240



161,568



111%



(17,828)



322,412



100%

Specialty Pharmaceuticals

1,737,827



1,038,888



67%



(18,199)



1,719,628



66%

Branded generics - Europe

470,783



73,312



542%



(12,220)



458,563



525%

Branded generics -

Latin America

254,840



69,037



269%



(5,823)



249,017



261%

Branded Generics

725,623



142,349



410%



(18,043)



707,580



397%

Total Revenue

$          2,463,450



$         1,181,237



109%



$      (36,242)



$         2,427,208



105%





























(a) Note: Currency effect for constant currency sales is determined by comparing 2011 reported amounts adjusted to exclude currency impact, calculated using 2010 monthly average exchange rates, to the actual 2010 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 (b) to Table 2.



(c) The % change reflects revenue for the combined company for the three months ended December 31, 2011 as compared to the combined company for the three months ended December 31, 2010.  The % change for the twelve months ended December 31, 2011 is as compared to Legacy Biovail only for nine months ended September 30, 2010 and combined company for three months ended December 31, 2010.





Valeant Pharmaceuticals International, Inc.

Table 4

Reconciliation of GAAP Statement of Cost of Goods Sold to Non-GAAP Statement Cost of Goods Sold - by Segment

For the Three and Twelve Months Ended December 31, 2011

(In thousands)





Three Months Ended

4.1

Cost of goods sold (a)

December 31,





2011

as reported

GAAP



% of  product sales



2011

fair value step-up adjustment to inventory and Other non-GAAP (b)



2011 excluding fair value step-up adjustment to inventory and Other non-GAAP



%of product sales



U.S. Neurology & Other        

$           34,937



18%



$                 2,025



$               32,912



17%



U.S. Dermatology

18,882



12%



1,721



17,161



11%



Canada/Australia

32,070



32%



8,506



23,564



23%



Branded Generics - Europe

68,900



49%



2,952



65,948



47%



Branded Generics - 

Latin America

27,085



41%



2,981



24,104



37%

























Corporate

109







88



21































$         181,983



28%



$               18,273



$             163,710



25%



























Twelve Months Ended





December 31,





2011

as reported

GAAP



% of product sales



2011

fair value step-up adjustment to inventory and Other non-GAAP (b)



2011 excluding fair value step-up adjustment to inventory and Other non-GAAP



% of product sales



U.S. Neurology & Other

$         148,128



19%



$               17,550



$             130,578



17%



U.S. Dermatology

74,179



17%



9,418



64,761



15%



Canada/Australia

106,609



31%



12,141



94,468



28%



Branded Generics - Europe

245,453



52%



26,525



218,928



48%



Branded Generics -

Latin America

108,271



42%



7,936



100,335



39%

























Corporate

1,110







617



493































$         683,750



30%



$               74,187



$             609,563



27%





























(a) See footnote (b) to Table 2.





(b) For the three and twelve months ended December 31, 2011 U.S. Neurology and Other and U.S. Dermatology include $0.0 million and $9.4 million and $1.7 million and $9.4 million of fair value step-up adjustment to inventory, respectively and in the three and twelve months ended December 31, 2011, U.S. Neurology and Other includes $2.0 million and $8.1 million of amortization.  For the three and twelve months ended December 31, 2011 Canada/Australia includes $5.7 million and $9.6 million of fair value step up adjustment to inventory, respectively and in the three and twelve months ended December 31, 2011, Canada/Australia includes $2.8 million and $2.5 million of accelerated depreciation and PP&E step-up. For the three and twelve months ended December 31, 2011 Branded Generics-Latin America includes $0.0 million and $5.0 million of fair value step up adjustment to inventory, respectively and in the three and twelve months ended December 31, 2011, Branded Generics-Latin America includes $2.9 million and $2.9 million of inventory write-offs. For the three and twelve months ended December 31, 2011 Corporate includes $0.0 million and $0.6 million of stock base compensation step up.







Valeant Pharmaceuticals International, Inc.

Table 5



Consolidated  Balance Sheet and Other Data



(In thousands)





As of



As of





December 31,



December 31,

5.1

Cash

2011



2010













Cash and cash equivalents

$            164,111



$           394,269



Marketable securities

6,338



6,083



Total cash and marketable securities

$            170,449



$           400,352













Debt



















Revolving credit facility

$            220,000



$                    -



New Term loan A facility, net of unamortized debt discount of $39,480

2,185,520



-



Term loan A facility

-



975,000



Senior notes

4,228,480



2,185,822



Convertible notes

17,011



417,555



Other

-



16,900





6,651,011



3,595,277



Less: Current portion

(111,250)



(116,900)





$         6,539,761



$        3,478,377











5.2

Summary of Cash Flow Statement

Three Months Ended





December 31,





2011



2010



Cash flow provided by (used in):



















Net cash provided by (used in) operating activities (GAAP)

$            189,780



$             (1,399)



Restructuring and acquisition-related costs

56,718



44,078



Payment of accrued legal settlements

9,441



38,500



Effect of ASC 470-20 (FSP APB 14-1)

1,390



4,934



Tax Benefit from Stock Options Exercised (a)

(7,125)



-



Working Capital changes from Ortho and Dermik

21,434



-



Changes in working capital related to restructuring and acquisition-related costs

(18,510)



122,939



Adjusted cash flow from operations (Non-GAAP) (b)

$            253,128



$           209,052













(a) Includes stock option tax benefit which will reduce taxes in future periods.





(b) See footnote (b) to Table 2.





Valeant Pharmaceuticals International

Proforma Organic Growth - by Segment

For the Three and Twelve Months Ended December 31, 2011

(In thousands)







































Three Month Ending



December 31,



(a) (b)



(a) (c)



(d)















(e)











December 2011



December 2010



Total Proforma Acquisitions



Total Proforma QTD 2010



Divestitures/ Discontinuations



% Change



December 2011 currency impact



December 2011 excluding currency impact



% Change

  U.S. Dermatology

$          151,360



$             90,330



$                 20,083



$             108,715



$                            1,698



39%



$                     -



$                          151,360



39%

  U.S. Neurology & Other (d)

195,879



201,470



-



201,470



-



-3%



-



195,879



-3%

     Total U.S.

347,239



291,800



20,083



310,185



1,698



12%



-



347,239



12%

Canada/Australia

100,017



79,573



8,312



87,885



-



14%



271



100,288



14%

     Specialty Pharmaceuticals

447,256



371,373



28,395



398,070



1,698



12%



271



447,527



12%

Branded generics -

 Latin America

65,771



69,038



-



69,038



-



-5%



5,492



71,263



3%

Branded generics - Europe

141,144



48,310



91,329



139,639



-



1%



8,695



149,839



7%

     Branded Generics

206,915



117,348



91,329



208,677



-



-1%



14,187



221,102



6%





































Total product sales

$          654,171



$           488,721



$               119,724



$             606,747



$                            1,698



8%



$              14,458



$                          668,629



10%





































Add:  JV Revenue (f)

1,048



177



-



177



-







-



1,048









































Total

$          655,219



$           488,898



$               119,724



$             606,924



$                            1,698



8%



$              14,458



$                          669,677



10%







































Twelve Months Ended



December 31,



(a) (b)



(a) (c)



(d)















(e)











December 2011



December 2010



Total Proforma Acquisitions



Total Proforma YTD 2010



Divestitures/Discontinuations



% Change



December 2011 currency impact



December 2011 excluding currency impact



% Change

  U.S. Dermatology

$          437,663



$           306,664



$                 35,614



$             336,923



$                            5,355



32%



$                     -



$                          437,663



32%

  U.S. Neurology & Other (d)

767,222



780,681



20,625



801,306



-



-4%



-



767,222



-4%

     Total U.S.

1,204,885



1,087,345



56,239



1,138,229



5,355



6%



-



1,204,885



6%

Canada/Australia

334,794



268,033



13,346



281,379



-



19%



(17,606)



317,188



13%

     Specialty Pharmaceuticals

1,539,679



1,355,378



69,585



1,419,608



5,355



9%



(17,606)



1,522,073



8%

Branded generics -

Latin America

254,840



214,406



6,471



220,877



-



15%



(5,822)



249,018



13%

Branded generics - Europe

460,531



198,138



209,260



407,398



-



13%



(11,588)



448,943



10%

     Branded Generics

715,371



412,544



215,731



628,275



-



14%



(17,410)



697,961



11%





































Total product sales

$       2,255,050



$        1,767,922



$               285,316



$          2,047,883



$                            5,355



10%



$            (35,016)



$                       2,220,034



9%





































Add:  JV Revenue (f)

3,361



659



-



659



-







-



3,361









































Total

$       2,258,411



$        1,768,581



$               285,316



$          2,048,542



$                            5,355



11%



$            (35,016)



$                       2,223,395



9%









































(a) See footnote (b) to Table 2.

(b)  Includes all acquisitions.

(c) Total Q4 revenue of $514.6 million also includes $5.5 million and $20.4 million of Service, Alliance and Royalty revenue recorded by Legacy Biovail and Legacy Valeant, respectively.  Combined YTD proforma revenue includes Legacy Biovail and Legacy Valeant product sales of $879.2 million and $888.7 million, respectively.  Total proforma revenue of $1,928.3 million also includes $27.6 million and $132.8 million of Service, Alliance and Royalty revenue recorded by Legacy Biovail and Legacy Valeant, respectively.

(d)  Includes proforma historical revenue for acquisitions with a purchase price > $20 million.

(e) See footnote (a) to Table 3.

(f) Represents Valeant's attributable portion of revenue from joint ventures (JV) not included in Consolidated Valeant revenues.





SOURCE Valeant Pharmaceuticals International, Inc.

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