Warner Chilcott Reports Operating Results for the Quarter Ended September 30, 2011
Copyright: | 2011 GlobeNewswire, Inc. |
Source: | GlobeNewswire |
Wordcount: | 6316 |
Total revenue in the quarter ended
We reported GAAP net income of $33 million, or
References in this press release to "cash net income" or "CNI" mean our net income adjusted for the after-tax effects of two non-cash items: amortization (including impairments, if any) of intangible assets and amortization (including write-offs, if any) of deferred loan costs related to our debt. Adjusted CNI represents CNI as further adjusted to exclude certain after-tax impacts from the Western European restructuring, the repurposing of the Manati facility, the LEO Transaction, the PGP Acquisition and the reversal of a contingent liability relating to the termination of a contract. Reconciliations from our reported results in accordance with Generally Accepted Accounting Principles in the U.S. ("GAAP") to CNI, adjusted CNI and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") for all periods presented are included in the tables at the end of this press release.
Strategic Initiatives
Western European Restructuring and Repurposing of the Manati Facility
In
We currently estimate that we will incur aggregate pretax costs as a result of the Western European restructuring and the Manati repurposing in the range of
Revenue
Total revenue in the quarter ended September 30, 2011 was $655 million, a decrease of
Global revenues of ACTONEL were
Net sales of our oral contraceptive products increased
Net sales of ESTRACE Cream increased
Net sales of ASACOL were
Net sales of DORYX decreased
Revenues of ENABLEX in the quarter ended September 30, 2011 were
Cost of Sales (Excluding Amortization of Intangible Assets)
Cost of sales (excluding amortization) decreased
Selling, General and Administrative ("SG&A") Expenses
SG&A expenses for the quarter ended September 30, 2011 were $218 million, a decrease of
Research and Development ("R&D")
Our investment in R&D for the quarter ended September 30, 2011 was $25 million, a decrease of
Amortization of Intangible Assets
Amortization of intangible assets in the quarters ended September 30, 2011 and 2010 was
Net Interest Expense
Net interest expense for the quarter ended September 30, 2011 was $63 million, an increase of
Net Income, Cash Net Income and Adjusted Cash Net Income
For the quarter ended September 30, 2011, we reported net income of $33 million, or
Liquidity, Balance Sheet and Cash Flows
As of September 30, 2011, cash on hand was
2011 Financial Guidance Update
Based on our third quarter results and current outlook for the remainder of 2011, we are reaffirming our guidance ranges for total revenue, adjusted gross margin as a percentage of total revenue, total SG&A expense, GAAP net income, adjusted CNI and adjusted CNI per share for the full year 2011. We are lowering our expectations for total R&D expense from a range of
Investor Conference Call
The Company is hosting a conference call open to all interested parties, on Friday, November 4, 2011 beginning at
The Company
Forward Looking Statements
This press release contains forward-looking statements, including statements concerning our operations, our anticipated financial performance and financial condition, and our business plans and growth strategy and product development efforts. These statements constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "may," "might," "will," "should," "estimate," "project," "plan," "anticipate," "expect," "intend," "outlook," "believe" and other similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. The following represent some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by our forward-looking statements: our substantial indebtedness, including increases in the
We caution you that the foregoing list of important factors is not exclusive. In addition, in light of these risks and uncertainties, the matters referred to in our forward-looking statements may not occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as may be required by law.
Reconciliations to GAAP Net Income
CNI and Adjusted CNI
To supplement our condensed consolidated financial statements presented in accordance with US GAAP, we provide a summary to show the computation of CNI and adjusted CNI. CNI is defined as our GAAP net income adjusted for the after-tax effects of two non-cash items: amortization (including impairments, if any) of intangible assets and amortization (including write-offs, if any) of deferred loan costs related to our debt. Adjusted CNI represents CNI as further adjusted to exclude certain after-tax impacts from the Western European restructuring, the repurposing of the Manati facility, the LEO Transaction, the PGP Acquisition and the reversal of a contingent liability relating to the termination of a contract. We did not recognize a tax benefit as a result of the repurposing of the Manati facility. We believe that the presentation of CNI and adjusted CNI provides useful information to both management and investors concerning the approximate impact of the above items. We also believe that considering the effect of these items allows management and investors to better compare our financial performance from period-to-period, and to better compare our financial performance with that of our competitors. The presentation of this additional information is not meant to be considered in isolation of, or as a substitute for, results prepared in accordance with US GAAP.
Adjusted EBITDA
To supplement our condensed consolidated financial statements presented in accordance with US GAAP, we provide a summary to show the computation of Adjusted EBITDA taking into account certain charges that were taken during the quarters and nine months ended September 30, 2011 and 2010. The computation of Adjusted EBITDA is based on the definition of Adjusted EBITDA contained in our New Senior Secured Credit Facilities.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(In thousands of U.S. dollars, except per share amounts) | ||||
(Unaudited) | ||||
Quarter Ended | Nine Months Ended | |||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | |
REVENUE: | ||||
Net sales | $ 635,145 | $ 659,650 | $ 2,013,991 | $ 2,132,843 |
Other revenue | 20,318 | 43,542 | 68,295 | 147,261 |
Total revenue | 655,463 | 703,192 | 2,082,286 | 2,280,104 |
COSTS, EXPENSES AND OTHER: | ||||
Cost of sales (excludes amortization of intangible assets) | 81,180 | 81,681 | 280,440 | 407,873 |
Selling, general and administrative | 217,516 | 251,444 | 717,106 | 852,299 |
Restructuring costs | 44,710 | — | 103,780 | — |
Research and development | 25,331 | 33,264 | 81,670 | 115,668 |
Amortization of intangible assets | 147,654 | 162,619 | 442,978 | 480,690 |
Interest expense, net | 62,862 | 60,773 | 283,066 | 176,274 |
INCOME BEFORE TAXES | 76,210 | 113,411 | 173,246 | 247,300 |
Provision for income taxes | 43,112 | 55,895 | 92,357 | 91,774 |
NET INCOME | $ 33,098 | $ 57,516 | $ 80,889 | $ 155,526 |
Earnings per share: | ||||
Basic | $ 0.13 | $ 0.23 | $ 0.32 | $ 0.62 |
Diluted | $ 0.13 | $ 0.23 | $ 0.32 | $ 0.61 |
Dividends per share: | $ — | $ 8.50 | $ — | $ 8.50 |
RECONCILIATIONS: | ||||
GAAP Net income | $ 33,098 | $ 57,516 | $ 80,889 | $ 155,526 |
+ Amortization of intangible assets, net of tax | 141,461 | 154,686 | 421,586 | 448,717 |
+ Amortization of deferred loan costs, net of tax | 9,429 | 7,220 | 99,581 | 38,499 |
CASH NET INCOME | $ 183,988 | $ 219,422 | $ 602,056 | $ 642,742 |
Non-recurring, one-time charges included above: | ||||
+ Western European restructuring costs, net of tax | 43,476 | — | 99,538 | — |
+ Charges relating to the Manati repurposing, net of tax | — | — | 30,940 | — |
+ Write-off of fair value step-up on acquired inventories, net of tax | — | — | — | 93,743 |
+ Income recognized on contract termination, net of tax | — | — | — | (18,127) |
+ Gain recognized on sale of certain LEO inventories, net of tax | — | — | — | (34,040) |
ADJUSTED CASH NET INCOME | $ 227,464 | $ 219,422 | $ 732,534 | $ 684,318 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(In thousands of U.S. dollars) | ||
(Unaudited) | ||
As of September 30, 2011 |
As of December 31, 2010 |
|
ASSETS | ||
Current assets: | ||
Cash and cash equivalents | $ 316,161 | $ 401,807 |
Accounts receivable, net | 303,831 | 368,537 |
Inventories, net | 114,610 | 119,497 |
Prepaid expenses and other current assets | 224,317 | 287,199 |
Total current assets | 958,919 | 1,177,040 |
Other assets: | ||
Property, plant and equipment, net | 214,607 | 235,709 |
Intangible assets, net | 2,574,006 | 3,016,741 |
Goodwill | 1,028,550 | 1,028,550 |
Other non-current assets | 136,563 | 193,949 |
TOTAL ASSETS | $ 4,912,645 | $ 5,651,989 |
LIABILITIES | ||
Current liabilities: | ||
Accounts payable | $ 55,331 | $ 98,525 |
Accrued expenses and other current liabilities | 744,715 | 755,006 |
Current portion of long-term debt | 161,263 | 269,911 |
Total current liabilities | 961,309 | 1,123,442 |
Other liabilities: | ||
Long-term debt, excluding current portion | 3,729,974 | 4,408,753 |
Other non-current liabilities | 180,839 | 185,436 |
Total liabilities | 4,872,122 | 5,717,631 |
SHAREHOLDERS' EQUITY / (DEFICIT) | 40,523 | (65,642) |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY / (DEFICIT) | $ 4,912,645 | $ 5,651,989 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(In thousands of U.S. dollars) | ||||
(Unaudited) | ||||
Quarter Ended | Nine Months Ended | |||
September 30, 2011 |
September 30, 2010 |
September 30, 2011 |
September 30, 2010 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net income | $ 33,098 | $ 57,516 | $ 80,889 | $ 155,526 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation | 10,336 | 7,925 | 29,488 | 22,566 |
Write-down of property, plant and equipment | — | — | 23,082 | — |
Amortization of intangible assets | 147,654 | 162,619 | 442,978 | 480,690 |
Write-off of fair value step-up on acquired inventories | — | — | — | 105,504 |
Amortization of deferred loan costs | 9,577 | 7,911 | 104,767 | 42,357 |
Stock-based compensation expense | 6,537 | 5,598 | 18,942 | 15,937 |
Changes in assets and liabilities: | ||||
(Increase) / decrease in accounts receivable, prepaid and other assets | (15,863) | (35,387) | 54,896 | (57,117) |
(Increase) / decrease in inventories | (6,935) | (3,800) | 4,156 | 10,032 |
Increase / (decrease) in accounts payable, accrued expenses and other current liabilities | 45,678 | 6,805 | 13,765 | (117,242) |
Increase / (decrease) in income taxes and other, net | 20,981 | 40,997 | 10,199 | (42,971) |
Net cash provided by operating activities | $ 251,063 | $ 250,184 | $ 783,162 | $ 615,282 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Purchase of intangible assets | — | — | — | (2,900) |
Capital expenditures | (8,137) | (19,131) | (35,720) | (74,436) |
Net cash (used in) investing activities | $ (8,137) | $ (19,131) | $ (35,720) | $ (77,336) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Cash dividends paid | — | (2,105,216) | — | (2,105,216) |
Term borrowings under New Senior Secured Credit Facilities | — | — | 3,000,000 | — |
Term borrowings under prior senior secured credit facilities | — | 1,500,000 | — | 1,500,000 |
Proceeds from issuance of 7.75% senior notes due 2018, including premium | — | 1,260,000 | — | 1,260,000 |
Redemption of 8.75% senior subordinated notes due 2015 | — | — | — | (89,460) |
Payments for loan costs, including refinancing premium | — | (83,691) | (50,976) | (83,691) |
Term repayments under prior senior secured credit facilities |
— | (28,858) | (3,418,980) | (487,605) |
Term repayments under New Senior Secured Credit Facilities | (181,876) | — | (367,501) | — |
Proceeds from the exercise of non-qualified options to purchase ordinary shares | 884 | 2,656 | 4,720 | 6,646 |
Other | 61 | (10) | (107) | (97) |
Net cash (used in) / provided by financing activities | $ (180,931) | $ 544,881 | $ (832,844) | $ 577 |
Effect of exchange rates on cash and cash equivalents | (8,191) | (1,669) | (244) | (6,536) |
Net increase / (decrease) in cash and cash equivalents | 53,804 | 774,265 | (85,646) | 531,987 |
Cash and cash equivalents, beginning of period | 262,357 | 296,728 | 401,807 | 539,006 |
Cash and cash equivalents, end of period | $ 316,161 | $ 1,070,993 | $ 316,161 | $ 1,070,993 |
SCHEDULE OF NON-CASH ACTIVITIES: | ||||
Increase in liabilities related to the special dividend | $ — | $ 39,105 | $ — | $ 39,105 |
Reconciliation of Net Income to Adjusted EBITDA | ||||
(In thousands of U.S. dollars) | ||||
(Unaudited) | ||||
Quarter Ended | Nine Months Ended | |||
September 30, 2011 |
September 30, 2010 |
September 30, 2011 |
September 30, 2010 |
|
RECONCILIATION TO ADJUSTED EBITDA: | ||||
Net income – GAAP | $ 33,098 | $ 57,516 | $ 80,889 | $ 155,526 |
+ Interest expense, as defined | 62,862 | 60,773 | 283,066 | 176,274 |
+ Provision for income taxes | 43,112 | 55,895 | 92,357 | 91,774 |
+ Non-cash stock-based compensation expense | 6,537 | 5,598 | 18,942 | 15,937 |
+ Depreciation | 10,336 | 7,925 | 29,488 | 22,566 |
+ Amortization of intangible assets | 147,654 | 162,619 | 442,978 | 480,690 |
+ R&D milestone expense | — | 6,400 | — | 26,400 |
+ Write-off of fair value step-up on acquired inventories | — | — | — | 105,504 |
+ PGP Acquisition costs | — | 2,283 | — | 21,912 |
+ Restructuring costs | 44,710 | — | 103,780 | — |
+ Write-down of property, plant and equipment | — | — | 23,082 | — |
+ Other permitted add-backs | 3,589 | 4,920 | 13,334 | 31,047 |
Adjusted EBITDA of |
$ 351,898 | $ 363,929 | $ 1,087,916 | $ 1,127,630 |
+ Expenses of |
4 | 2,861 | 2,559 | 12,610 |
Adjusted EBITDA of |
$ 351,902 | $ 366,790 | $ 1,090,475 | $ 1,140,240 |
Note:
REVENUE BY PRODUCT | ||||
(In millions of U.S. dollars) | ||||
(Unaudited) | ||||
Quarter Ended | Nine Months Ended | |||
September 30, 2011 |
September 30, 2010 |
September 30, 2011 |
September 30, 2010 |
|
Osteoporosis | ||||
ACTONEL(1) | $ 166 | $ 268 | $ 591 | $ 794 |
ATELVIA | 11 | — | 20 | — |
Total osteoporosis | 177 | 268 | 611 | 794 |
Oral Contraceptives | ||||
LOESTRIN 24 FE | 104 | 84 | 325 | 252 |
LO LOESTRIN FE | 23 | — | 42 | — |
Other Oral Contraceptives | 3 | 13 | 15 | 50 |
Total oral contraceptives | 130 | 97 | 382 | 302 |
Hormone Therapy | ||||
ESTRACE Cream | 42 | 36 | 114 | 99 |
FEMHRT | 3 | 14 | 16 | 40 |
Other Hormone Therapy | 6 | 6 | 19 | 21 |
Total hormone therapy | 51 | 56 | 149 | 160 |
Other women's healthcare products | 15 | 15 | 49 | 47 |
373 | 436 | 1,191 | 1,303 | |
Gastroenterology: | ||||
ASACOL | 190 | 181 | 565 | 538 |
Dermatology: | ||||
DORYX | 29 | 38 | 127 | 140 |
TACLONEX(2) | — | — | — | 74 |
DOVONEX(2) | — | — | — | 75 |
Total Dermatology | 29 | 38 | 127 | 289 |
Urology: | ||||
ENABLEX(3) | 45 | 23 | 131 | 63 |
Other: | ||||
Other products net sales | 11 | 20 | 45 | 59 |
Contract manufacturing product sales | 5 | 3 | 14 | 13 |
Other revenue(4) | 2 | 2 | 9 | 15 |
Total Revenue | $ 655 | $ 703 | $ 2,082 | $ 2,280 |
(1) Includes "other revenue" of
(2) Represents 2010 revenues from our distribution agreement with LEO. On September 23, 2009, we entered into a definitive asset purchase agreement with LEO pursuant to which LEO paid us
(3) Includes "other revenue" of
(4) Excludes "other revenue" of
SUMMARY OF SG&A EXPENSES | ||
(In millions of U.S. dollars) | ||
(Unaudited) | ||
Quarter Ended September 30, 2011 |
Quarter Ended September 30, 2010 |
|
A&P | $ 32 | $ 28 |
Selling and Distribution | 130 | 132 |
G&A | 56 | 91 |
Total SG&A | $ 218 | $ 251 |
Nine Months Ended |
Nine Months Ended |
|
A&P | $ 118 | $ 85 |
Selling and Distribution | 392 | 437 |
G&A | 207 | 330 |
Total SG&A | $ 717 | $ 852 |
2011 Full Year Financial Guidance | ||
(In millions of U.S. dollars, except per share amounts) | ||
Prior Guidance |
Current Guidance November 2011 |
|
Total Revenue | $ 2,700 to 2,800 | $ 2,700 to 2,800 (1) |
Adjusted Gross Margin as a % of Total Revenue | 88% to 89% | 88% to 89%(2) |
Total SG&A Expense | $ 925 to 975 | $ 925 to 975(3) |
Total R&D Expense | $ 120 to 140 | $ 110 to 130 |
Total Income Tax Provision | 10%-11% of Adjusted EBTA | 11%-12% of Adjusted EBTA(4) |
GAAP Net Income | $ 118 to 154 | $ 118 to 154 |
Adjusted CNI | $ 947 to 973 | $ 947 to 973(5) |
Adjusted CNI per share | $ 3.70 to 3.80 | $ 3.70 to 3.80(5)(6) |
(1) The 2011 guidance assumes (i) that generic equivalents of our DORYX 150 mg, ASACOL 400 mg and ESTRACE Cream products will not be approved and enter the U.S. market during 2011; and (ii) the expected impact of the loss of exclusivity for ACTONEL in Western European markets and the impact of our move to a distributor model in
(2) Adjusted gross margin percentage excludes the amortization and impairment of intangible assets and the charges recorded in the nine months ended September 30, 2011 related to the Manati repurposing (
(3) Total SG&A expense does not include any amount that may be payable in connection with the potential settlement of our outstanding litigations.
(4) The 2011 total income tax provision is estimated as a percentage of earnings before taxes and book amortization (EBTA), as adjusted for the Western European restructuring costs and charges related to the Manati repurposing incurred or expected to be incurred in 2011.
(5) A reconciliation of 2011 expected GAAP net income to expected adjusted CNI excludes the expected after tax impact of the amortization of intangibles (
(6) Expected Adjusted CNI per share is based on 256 million fully-diluted ordinary shares.
CONTACT:Emily Hill Investor Relations 973-907-7084 [email protected]
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