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Press release from PR Newswire

Valeant Pharmaceuticals Reports Fourth Quarter And Full Year 2013 Financial Results

Thursday, February 27, 2014

Valeant Pharmaceuticals Reports Fourth Quarter And Full Year 2013 Financial Results

06:00 EST Thursday, February 27, 2014

LAVAL, Quebec, Feb. 27, 2014 /PRNewswire/ -- Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces fourth quarter financial results for 2013.

Fourth Quarter 2013

  • 2013 Fourth Quarter Total Revenue $2.1 billion; an increase of 109% over the prior year
    • 2% organic growth (same store sales) including impact from genericized products; 6% organic growth (pro forma) for total Company
      • 10% organic growth for Bausch + Lomb in Q4 and since close
    • 13% organic growth (same store sales) for the Developed Markets segment, excluding the impact from certain generic products
    • 7% organic growth (same store sales) for the Emerging Markets segment
  • 2013 Fourth Quarter GAAP EPS of $0.36; Cash EPS $2.15, an increase of 76% over the prior year
  • 2013 Fourth Quarter GAAP Operating Cash Flow $280 million; Adjusted Operating Cash Flow $607 million 

Full Year 2013

  • Total 2013 revenue was $5.8 billion; an increase of 66% over the prior year
    • 9% organic growth (same store sales) for the Developed Markets segment, excluding the impact from certain generic products
    • 11% organic growth (same store sales) for the Emerging Markets segment
    • 10% organic growth for Bausch + Lomb since the close
  • Total 2013 GAAP EPS loss of $2.70; Cash EPS $6.24, an increase of 51% over the prior year
  • Total 2013 GAAP Operating Cash Flow $1.0 billion; Adjusted Operating Cash Flow $1.8 billion

"Our dedicated team of professionals continued to deliver strong top line and bottom line results," stated J. Michael Pearson, chairman and chief executive officer.  "We are particularly pleased with the outperformance of the Bausch + Lomb businesses, coupled with the fact that the Company returned to positive organic growth. Valeant's focus on cash pay businesses, diversification, durable assets, key geographies, and lower risk R&D will continue to benefit our shareholders as we look forward to continuing our track record of outperformance in 2014." 

Valeant Fourth Quarter Financial Results

Valeant's total revenues were $2.1 billion, up 109% compared to the fourth quarter of 2012. Same store organic product sales growth for Valeant was 11%, excluding the impact of the genericization of the Zovirax franchise, Retin-A Micro and BenzaClin. These products accounted for approximately $78 million in lost sales as compared to the year-ago quarter. Including the generic impact of these products, same store organic product sales growth for Valeant was 2% and pro forma organic growth was 6%.

Valeant's Developed Markets revenue was $1.6 billion, up 122% as compared to the fourth quarter of 2012. This increase was primarily led by the acquisition of Bausch+ Lomb, which was completed on August 5, 2013. Same store organic product sales growth was 13%, excluding the impact of the genericization of the Zovirax franchise, Retin-A Micro and BenzaClin. The growth in the Developed Markets was driven by continued growth in certain dermatology prescription brands, our aesthetics, consumer, neurology and other and oral health portfolios, and our Canadian business unit.

Valeant's Emerging Markets revenue was $493 million, up 77% as compared to the fourth quarter of 2012.  This increase was also primarily led by the acquisition of Bausch + Lomb.  Total same store sales growth was 7% for the segment, with pro forma organic growth at 13%. This increase was driven by continued strong growth in all of our emerging market regions, particularly Poland, Russia, China and the Middle East. 

The Company reported net income of $124 million for the fourth quarter of 2013, or $0.36 per diluted share, which included restructuring, integration and other charges of $128 million primarily related to the acquisition of Bausch + Lomb. 

On a Cash EPS basis, adjusted income was $732 million, or $2.15 per diluted share, an increase of 76% over the prior year. 

GAAP cash flow from operations was $280 million in the fourth quarter of 2013, and adjusted cash flow from operations was $607 million, an increase of 43% over the prior year. This increase in adjusted cash flow from operations was driven by growth across all our businesses and an investment in working capital due to the integration of Bausch + Lomb.

The Company's cost of goods sold (COGS) was 26% of product sales in the fourth quarter of 2013, after backing out the fair value adjustment to inventory and other items related to acquisitions.

Selling, General and Administrative expenses were $450 million in the fourth quarter of 2013, or approximately 22% of revenue.  Research and Development expenses were $60 million in the fourth quarter of 2013, or approximately 3% of revenue.

2014 Guidance

The Company is reaffirming its 2014 Cash EPS guidance of $8.25 to $8.75, which includes overcoming the negative impact from currency fluctuations since the beginning of the year of approximately $0.10 per share.  This guidance does not include the positive impact of the PreCision Dermatology, Inc. acquisition, which is expected to close in the second quarter of 2014.  Total revenue for 2014 is expected to be in the range of $8.2 billion to $8.6 billion and adjusted Cash Flow from Operations is expected to be in the range of $2.4 billion to $2.6 billion. The Company expects to raise guidance on Cash EPS, revenue and adjusted cash flow from operations once the acquisition of PreCision has closed.

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), February 27, 2014 to discuss its fourth quarter financial results for 2013. The dial-in number to participate on this call is (877) 876-8393 confirmation code 68673247. International callers should dial (973) 200-3961, confirmation code 68673247. A replay will be available approximately two hours following the conclusion of the conference call through March 7, 2014 and can be accessed by dialing (855) 859-2056, or (404) 537-3406, confirmation code 68673247. 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, manufactures and markets a broad range of pharmaceutical products primarily in the areas of dermatology, eye health, neurology 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 future benefits to shareholders, and our expected future performance, including 2014 guidance with respect to Cash EPS, total revenue and adjusted cash flow from operations and our expectations with respect to updating guidance.  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 and the Canadian Securities Administrators, 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.

Non-GAAP Information 

To supplement the financial measures prepared in accordance with U.S. 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 & property, plant and equipment step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, acquisition-related and other costs, In-process research and development, impairments and other charges, ("IPR&D"), legal settlements outside the ordinary course of business, the impact of currency fluctuations, amortization and other non-cash charges, amortization including intangible asset impairments and write-down of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets sold/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.

Contact Information:Laurie W. Little949-461-6002laurie.little@valeant.com                                               

Financial Tables follow.

 

Valeant Pharmaceuticals International, Inc.

 Table 1 

Condensed Consolidated Statements of Income (Loss)

For the Three and Twelve Months Ended December 31, 2013 and 2012

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In thousands, except per share data)

2013

2012

2013

2012

Product sales

$ 2,031,532

$  941,993

$ 5,640,333

$ 3,288,592

Alliance and royalty

12,955

23,493

52,606

105,591

Service and other

19,270

20,807

76,666

86,193

Total revenues

2,063,757

986,293

5,769,605

3,480,376

Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)

717,372

271,477

1,846,314

905,095

Cost of alliance and service revenues

14,565

15,184

58,806

64,601

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

450,254

204,697

1,305,164

756,083

Research and development

59,510

20,165

156,783

79,052

Acquisition-related contingent consideration

4,252

(28,464)

(29,259)

(5,266)

In-process research and development impairments and other charges

24,828

40,033

153,639

189,901

Other (Income)/Expense

79,269

-

234,442

59,349

Restructuring, integration, acquisition-related and other costs

128,274

261,801

551,241

422,991

Amortization and impairments of finite-lived intangible assets

361,956

299,485

1,901,977

928,885

1,840,280

1,084,378

6,179,107

3,400,691

Operating income (loss)

223,477

(98,085)

(409,502)

79,685

Interest expense, net

(260,215)

(160,228)

(836,293)

(475,610)

Gain (loss) on extinguishment of debt

(35,474)

(17,625)

(65,014)

(20,080)

Gain (loss) on investments, net

-

32

5,822

2,056

Foreign exchange and other

(5,902)

1,263

(9,465)

19,721

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

(78,114)

(274,643)

(1,314,452)

(394,228)

(Recovery of) provision for income taxes

(203,083)

(185,501)

(450,783)

(278,203)

Net income (loss)

124,969

(89,142)

(863,669)

(116,025)

Less:  Net income (loss) attributable to noncontrolling interest

1,205

-

2,473

-

Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$    123,764

$  (89,142)

$  (866,142)

$  (116,025)

Earnings (loss) per share:

Basic:

Earnings (loss)

$          0.37

$      (0.29)

$        (2.70)

$        (0.38)

Shares used in per share computation

334,444

305,131

320,996

305,446

Diluted:

Earnings (loss)

$          0.36

$      (0.29)

$        (2.70)

$        (0.38)

Shares used in per share computation

340,865

305,131

320,996

305,446

 

Valeant Pharmaceuticals International, Inc.

 Table 2 

Reconciliation of GAAP EPS to Cash EPS 

For the Three and Twelve Months Ended December 31, 2013 and 2012

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In thousands, except per share data)

2013

2012

2013

2012

Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$ 123,764

$ (89,142)

$  (866,142)

$  (116,025)

Non-GAAP adjustments (a):

Inventory step-up (b)

153,291

29,421

372,450

78,822

Alliance product assets & PP&E step-up/down (c)

21,064

(336)

22,668

50,434

Stock-based compensation (d)

371

2,720

21,254

29,484

Acquisition-related contingent consideration (e)

4,252

(28,464)

(29,259)

(5,266)

In-process research and development impairments and other charges (f)

24,828

40,033

153,639

189,901

Legal settlements and related fees (g)

65,322

-

220,495

56,779

Restructuring, integration, acquisition-related and other costs (h)

128,274

261,801

551,241

422,991

Amortization and impairments of finite-lived intangible assets and other non-GAAP charges (i)

385,438

311,834

1,957,310

963,248

782,840

617,009

3,269,798

1,786,393

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

18,963

22,188

89,461

36,402

(Gain) loss on extinguishment of debt

35,474

17,625

65,014

20,080

(Gain) loss on disposal of fixed assets and assets held for sale/impairment, net (k)

-

3,701

-

4,703

Foreign exchange and other (l)

193

-

776

-

Tax (m)

(229,698)

(191,801)

(515,884)

(319,603)

Total adjustments

607,772

468,722

2,909,165

1,527,975

Adjusted net income attributable to Valeant Pharmaceuticals International, Inc.

$ 731,536

$ 379,580

$ 2,043,023

$ 1,411,950

GAAP earnings (loss) per share - diluted

$       0.36

$     (0.29)

$        (2.70)

$        (0.38)

Cash earnings per share - diluted

$       2.15

$       1.22

$          6.24

$          4.51

Cash earnings per share excluding one-time items - diluted

$       2.15

$       1.22

$          6.24

$          4.14

Shares used in diluted per share calculation - GAAP earnings per share

340,865

305,131

320,996

305,446

Shares used in diluted per share calculation - Cash earnings per share

340,865

311,739

327,466

313,123

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

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

(c) See footnote (h) to Table 2a and Table 2b.

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

(e) See footnote (f) to Table 2a and Table 2b.

(f) See footnote (g) to Table 2a and Table 2b.

(g) See footnote (h) to Table 2a and Table 2b.

(h) See footnote (i)(j) to Table 2a and Table 2b.

(i) See footnote (c) to Table 2a and Table 2b.

(j) See footnote (k) to Table 2a and Table 2b.

(k) See footnote (e) to Table 2a and Table 2b.

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

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

 

Valeant Pharmaceuticals International, Inc.

 Table 2a 

Reconciliation of GAAP EPS to Cash EPS 

For the Three Months Ended December 31, 2013 and 2012

Non-GAAP Adjustments(a) for

Three Months Ended

December 31,

(In thousands, except per share data)

2013

2012

Product sales

$          -

$          -

Alliance and royalty

-

-

Service and other

-

-

Total revenues

-

-

Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)

(183,892)

 (b)(c) 

(41,838)

 (b)(c) 

Cost of alliance and service revenues

-

-

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

(369)

 (d) 

(6,017)

 (d)(e) 

Research and development

-

-

Acquisition-related contingent consideration

(4,252)

 (f) 

28,464

 (f) 

In-process research and development impairments and other charges

(24,828)

 (g) 

(40,033)

 (g) 

Other Income/(Expense)

(79,269)

 (h) 

-

Restructuring, integration, acquisition-related and other costs

(128,274)

 (i) 

(261,801)

 (j) 

Amortization and impairments of finite-lived intangible assets

(361,956)

(299,485)

(782,840)

(620,710)

Operating income (loss)

782,840

620,710

Interest expense, net

18,963

 (j) 

22,188

 (k) 

Gain (loss) on extinguishment of debt

35,474

17,625

Foreign exchange and other

193

 (l) 

-

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

837,470

660,523

(Recovery of) provision for income taxes

(229,698)

 (m) 

(191,801)

 (m) 

Total adjustments to net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$ 607,772

$ 468,722

Earnings (loss) per share:

Diluted:

Total adjustments to earnings (loss)

$       1.78

$       1.50

Shares used in per share computation

340,865

311,739

(a) To supplement the financial measures prepared in accordance with U.S. 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 & property, plant and equipment step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, integration, acquisition-related and other costs, In-process research and development, impairments and other charges, ("IPR&D"), legal settlements outside the ordinary course of business, the impact of currency fluctuations, amortization including intangible asset impairments and other non-cash charges, amortization and write-down of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets sold/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 December 31, 2013 is $153.3 million primarily relating to the acquisitions of Bausch & Lomb Holdings Incorporated on August 5, 2013.  For the three months ended December 31, 2012 the impact of inventory fair value step-up is $29.4 million primarily relating to the acquisitions of Medicis Pharmaceutical Corporation on December 11, 2012.

(c) For the three months ended December 31, 2013 and 2012 cost of goods sold include costs associated with integration related tech transfers, $22.0 million and $10.1 million, respectively.  For the three months ended December 31, 2013 cost of goods sold includes PP&E step up of $7.1 million related to the acquisition of Bausch & Lomb and amortization of a BMS fair value inventory adjustment of $1.5 million.

(d) For the three months ended December 31, 2013 and 2012 SG&A primarily includes $0.4 million and $2.7 million of stock-based compensation, respectively, which reflects the acceleration of certain equity instruments and the amortization of the fair value step-up increment resulting from the merger of Legacy Valeant into Legacy Biovail.

(e) SG&A includes $3.7 million loss on disposal of fixed assets for the three months ended December 31, 2012.

(f) Net gain (expense) from the changes in acquisition-related contingent consideration for the three months ended December 31, 2013 and 2012 of ($4.3) million and $28.5 million, respectively.

(g) In-process research and development impairments and other charges for the three months ended December 31, 2013 of $24.8 million primarily due to the write-off of IPR&D assets acquired as part of Bausch & Lomb acquisition in August 2013 of $14.4 million and an impairment related to Xerese Ointment of $8.8 million.  In-process research and development impairments and other charges for the three months ended December 31, 2012 of $40.0 million relates primarily to an impairment of $24.7 million related to Xerese ® life-cycle management project, $5.0 million related to upfront payment to acquire North America rights to Emervel ® and $5.0 million related to the IDP-108 program.

(h) For the three months ended December 31, 2013 other income/(expense) of $79.3 million primarily relates to a settlement agreement with Anacor Pharmaceuticals, Inc. and an AntiGrippin® litigation as well as a loss on the sale of certain Australian skin care products.

(i) Restructuring, integration, acquisition-related and other costs of $128.3 million primarily represent costs relating to the acquisitions of Bausch & Lomb Holdings Incorporation, Medicis Pharmaceutical Corporation, Obagi Medical Products, Inc. and other Valeant restructuring and integration initiatives.  These include $83.6 million relating to duplicative labor, contract terminations, integration consulting, transition services, and other, $24.3 million relating to facility closure costs, $12.0 million relating to acquisition costs, $4.9 million relating to other, $4.4 million relating to non-personnel manufacturing integration costs, $0.3 million stock-based compensation, $0.5 million of other non-cash charges offset by $1.7 million reduction to employee severance costs.

(j) Restructuring, integration, acquisition-related and other costs of $261.8 million represent costs related to the acquisitions of Medicis, internal Valeant restructuring and integration initiatives, iNova, Dermik, OraPharma, Sanitas, Visudyne and Swiss Herbal. These include $52.6 million related to acquisition costs, $98.2 million related to employee severance costs, $77.3 million of stock-based compensation, $30.5 million related to integration consulting, duplicative labor, transition services, and other, and $3.2 million related to facility closure costs.

(k) Non-cash interest expense associated with amortization and write-down of deferred financing costs and debt discounts for the three months ended December 31, 2013 is $19.0 million.  For the three months ended December 31, 2012 non-cash interest expense associated with amortization and write-down of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest is $22.2 million.

(l) Unrealized foreign exchange loss on intercompany financing arrangements of $0.2 million.

(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.

 Table 2b 

Reconciliation of GAAP EPS to Cash EPS 

For the Twelve Months Ended December 31, 2013 and 2012

 

Non-GAAP Adjustments(a) for

Twelve Months Ended

December 31,

(In thousands, except per share data)

2013

2012

Product sales

$              -

$                -

Alliance and royalty

-

-

Service and other

-

-

Total revenues

-

-

Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)

(436,050)

 (b)(c) 

(112,273)

 (b)(c) 

Cost of alliance and service revenues

-

-

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

(21,708)

 (d) 

(34,575)

 (d)(e) 

Research and development

-

-

Acquisition-related contingent consideration

29,259

 (f) 

5,266

 (f) 

In-process research and development impairments and other charges

(153,639)

 (g) 

(189,901)

 (g) 

Other Income/(Expense)

(234,442)

 (h) 

(107,737)

 (h) 

Restructuring, integration, acquisition-related and other costs

(551,241)

 (i) 

(422,991)

 (j) 

Amortization and impairments of finite-lived intangible assets

(1,901,977)

(928,885)

(3,269,798)

(1,791,096)

Operating income (loss)

3,269,798

1,791,096

Interest expense, net

89,461

 (k) 

36,402

 (k) 

Gain (loss) on extinguishment of debt

65,014

20,080

Foreign exchange and other

776

 (l) 

-

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

3,425,049

1,847,578

(Recovery of) provision for income taxes

(515,884)

 (m) 

(319,603)

 (m) 

Total adjustments to net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$  2,909,165

$   1,527,975

Earnings (loss) per share:

Diluted:

Total adjustments to earnings (loss)

$           8.88

$            4.88

Shares used in per share computation

327,466

313,123

(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 twelve months ended December 31, 2013 is $372.5 million primarily relating to the acquisition of Bausch & Lomb Holdings Incorporated on August 5, 2013 and Medicis Pharmaceutical Corporation on December 11, 2012.  For the twelve months ended December 31, 2012 the impact of inventory fair value step-up is $78.8 million primarily relating to the acquisitions of  Medicis Pharmaceutical Corporation on December 11, 2012, iNova on December 21, 2011, Dermik on December 16, 2011, Afexa Life Sciences on October 17, 2011, Ortho Dermatologics on December 12, 2011 and Pedinol Pharmacal, Inc. on April 11, 2012.

(c) For the twelve months ended December 31, 2013 and 2012 cost of goods sold include costs associated with integration related tech transfers, $47.7 million and $28.9 million, respectively.  For the twelve months ended December 31, 2013 cost of goods sold include amortization of a BMS fair value inventory adjustment of $6.5 million and PP&E step up related to the acquisition of Bausch & Lomb of $7.1 million.

(d) For the twelve months ended December 31, 2013 and 2012 SG&A primarily includes $21.3 million and $29.5 million of stock-based compensation, respectively, which reflects the one time modification and cash settlement of certain board of directors equity instruments, acceleration of certain equity instruments and the amortization of the fair value step-up increment resulting from the merger of Legacy Valeant into Legacy Biovail.

(e) SG&A includes $1.0 million loss on assets held for sale/impairment and $3.7 million loss on disposal of fixed assets for the twelve months ended December 31, 2012.

(f) Net gain from the changes in acquisition-related contingent consideration for the twelve months ended December 31, 2013 and 2012 is $29.3 million and $5.3 million, respectively.

(g) In-process research and development impairments and other charges for the twelve months ended December 31, 2013 of $153.6 million primarily due to the write-off of IPR&D assets relating to the modified-release formulation of ezogabine/retigabine of $93.8 million, IPR&D assets acquired as part of Aton Pharma, Inc. acquisition in May 2010 of $27.3 million, IPR&D assets acquired as part of Bausch & Lomb acquisition in August 2013 of $14.4 million and an impairment related to Xerese Ointment of $8.8 million.  In-process research and development impairments and other charges for the twelve months ended December 31, 2012 of $189.9 million relates primarily to the write-off of the IPR&D asset related to the IDP-107 dermatology program of $133.4 million, an impairment of $24.7 million related to Xerese ® life-cycle management project, a $12.0 million payment to terminate a research and development commitment with a third party, $5.0 million related to upfront payment to acquire North America rights to Emervel ®, $5.0 million related to the IDP-108 program and $4.3 million related to the termination of the MC5 program acquired from Ortho Dermatologics.

(h) For the twelve months ended December 31, 2013 other income/(expense) of $234.4 million primarily relating to a settlement agreement with Anacor Pharmaceuticals, Inc. and an AntiGrippin® litigation as well as a loss on the sale of certain Australian skin care products.  For the twelve months ended December 31, 2012 other income/(expense) of $107.7 million relates to the litigation settlement and associated legal fees of patent-related and anti-trust litigations and a loss on the sale of 5FU and IDP-111 resulting from the acquisition of Dermik.

(i) Restructuring, integration, acquisition-related and other costs of $551.2 million primarily represent costs relating to the acquisitions of Bausch & Lomb Holdings Incorporated, Medicis Pharmaceutical Corporation, Obagi Medical Products, Inc. and other Valeant restructuring and integration initiatives.   These include $199.7 million relating to duplicative labor, contract terminations, integration consulting,  transition services, and other, $190.9 million relating to employee severance costs, $56.6 million relating to stock-based compensation, $39.1 million relating to facility closure costs, $36.4 million relating to acquisition costs, $14.7 million relating to other, $9.1 million relating to non-personnel manufacturing integration costs and $4.7 million of other non-cash charges.

(j) Restructuring, integration, acquisition-related and other costs of $423.0 million represent costs related to the acquisitions of Medicis, internal Valeant restructuring and integration initiatives, iNova, Dermik, OraPharma, Sanitas, Pedinol, Ortho Dermatologics, University Medical, Afexa, Swiss Herbal and Eyetech.  These include $144.5 million related to employee severance costs, $78.6 million related to acquisition costs, $77.3 million stock-based compensation, $73.6 million related to integration consulting, duplicative labor, transition services, and other, $30.8 million related to facility closure costs, $14.0 million related to other, and $4.2 million related to non-personnel manufacturing integration costs.

(k) Non-cash interest expense associated with amortization and write-down of deferred financing costs and debt discounts for the twelve months ended December 31, 2013 is $89.5 million.  For the twelve months ended December 31, 2012 non-cash interest expense associated with amortization and write-down of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest is $36.4 million.

(l) Unrealized foreign exchange loss on intercompany financing arrangements of $0.8 million.

(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.

 Table 3 

Statement of Revenues - by Segment

For the Three and Twelve Months Ended December 31, 2013 and 2012

(In thousands)

 Three Months Ended 

December 31,

Revenues(a)(b)

2013GAAP

2012GAAP

%   Change

2013 currency impact

2013 excluding currency impact non-GAAP

%   Change

    Total U.S.

$   1,085,610

$     547,610

98%

$            -

$  1,085,610

98%

    ROW Developed

484,772

160,071

203%

15,036

499,808

212%

Developed Markets

1,570,382

707,681

122%

15,036

1,585,418

124%

    Emerging Markets-Europe/Middle East

244,735

159,480

53%

(874)

243,861

53%

    Emerging Markets-Latin America

121,421

95,071

28%

8,074

129,495

36%

    Emerging Markets-Asia/Africa

127,219

24,061

429%

1,580

128,799

435%

Emerging Markets

493,375

278,612

77%

8,780

502,155

80%

Total revenues

$   2,063,757

$     986,293

109%

$    23,816

$  2,087,573

112%

 Twelve Months Ended 

December 31,

Revenues(a)(b)

2013GAAP

2012GAAP

%   Change

2013 currency impact

2013 excluding currency impact non-GAAP

%   Change

    Total U.S. 

$   3,194,531

$  1,915,304

67%

$            -

$  3,194,531

67%

    ROW Developed

1,098,685

586,960

87%

32,873

1,131,558

93%

Developed Markets

4,293,216

2,502,264

72%

32,873

4,326,089

73%

     Emerging Markets-Europe/Middle East

809,657

574,876

41%

(9,299)

800,358

39%

     Emerging Markets-Latin America

392,767

319,940

23%

14,854

407,621

27%

     Emerging Markets-Asia/Africa

273,965

83,296

229%

7,921

281,886

238%

Emerging Markets

1,476,389

978,112

51%

13,476

1,489,865

52%

Total revenues

$   5,769,605

$  3,480,376

66%

$    46,349

$  5,815,954

67%

(a) Note: Currency effect for constant currency sales is determined by comparing 2013 reported amounts adjusted to exclude currency impact, calculated using 2012 monthly average exchange rates, to the actual 2012 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.

 

Valeant Pharmaceuticals International, Inc.

Table 4

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

For the Three and Twelve Months Ended December 31, 2013 

(In thousands)

4.1

Cost of goods sold (a)

Three Months Ended

December 31,

2013as reportedGAAP

% of product sales

2013 fair value step-up adjustment to inventory and other non-GAAP    (b)

2013 excluding fair value step-up adjustment to inventory and othernon-GAAP

% of product sales

Developed Markets

$    482,296

31%

$     139,632

$     342,664

22%

Emerging Markets

235,076

48%

44,260

190,816

39%

$    717,372

35%

$     183,892

$     533,480

26%

 Twelve Months Ended 

December 31,

2013as reportedGAAP

% of product sales

2013 fair value step-up adjustment to inventory and other non-GAAP    (c)

2013 excluding fair value step-up adjustment to inventory and othernon-GAAP

% of product sales

Developed Markets

$ 1,184,071

28%

$     347,478

$     836,593

20%

Emerging Markets

662,243

46%

88,572

573,671

40%

$ 1,846,314

33%

$     436,050

$  1,410,264

25%

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

(b) Developed Markets include $119.6 million of fair value step-up adjustment to inventory, $11.9 million of integration related tech transfer costs and $1.5 million BMS fair value inventory adjustment and PP&E net step up adjustment of $6.6 million.  Emerging Markets include $33.7 million of fair value step up adjustment to inventory, $10.1 million of integration related tech transfer costs and $0.5 million of PP&E step up adjustment.

(c) Developed Markets include $307.3 million of fair value step-up adjustment to inventory, $27.7 million of integration related tech transfer costs and $6.5 million BMS fair value inventory adjustment and PP&E net step up adjustment of $6.0 million.  Emerging Markets include $65.1 million of fair value step up adjustment to inventory, $20.0 million of integration related tech transfer costs and $3.5 million of PP&E step up adjustment and other.

 

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

2013

2012

Cash and cash equivalents 

$      600,340

$      916,091

Marketable securities 

-

4,410

Total cash and marketable securities

$      600,340

$      920,501

Debt

Series A-1 Tranche A Term Loan Facility

$      258,985

$   2,083,462

Series A-2 Tranche A Term Loan Facility

228,145

-

Series A-3 Tranche A Term Loan Facility

1,935,713

-

Series D-2 Tranche B Term Loan Facility

1,256,704

1,275,167

Series C-2 Tranche B Term Loan Facility

966,808

973,988

Series E Tranche B Term Loan Facility

3,090,506

-

Senior Notes 

9,618,829

6,448,317

Medicis Convertible Notes

209

233,793

Other

11,803

898

17,367,702

11,015,625

Less: current portion

(204,756)

(480,182)

Total long-term debt

$ 17,162,946

$ 10,535,443

5.2

Summary of Cash Flow Statements

Three Months Ended

December 31,

2013

2012

Cash flow provided by (used in):

Net cash provided by operating activities (GAAP)

$      279,868

$        67,920

Restructuring, integration and acquisition-related costs(c)

127,749

261,801

Payment of accrued legal settlements

166,151

-

Payment of accreted interest on convertible debt

-

-

Tax benefit from stock options exercised (a)

(24,428)

6,699

Cash settlement of BOD equity awards

-

18,391

Working capital change related to business development activities

-

-

Non-cash adjustments to income taxes payable

-

-

Changes in working capital related to restructuring, integration and acquisition-related costs(c)

58,117

68,580

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

$      607,457

$      423,391

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

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

(c) Total restructuring, integration and acquisition-related costs cash payments of $185,866 which include $21,330 of payments related to transaction costs incurred by B&L in connection with the acqusition, are broken down as follows:

Project Type

Amount Paid

Bausch & Lomb

147,156

Medicis

10,866

Intellectual property migration

8,655

Vital Science Corp (Dermaglow)

5,982

Other

5,040

Europe (including Nature Produkt, Lek-Am, Croma & Ekomir)

2,728

Manufacturing integration (various deals)

2,362

Obagi

1,808

OraPharma

991

Solta

166

Systems Integration

112

Total

$              185,866

Expense Type

Amount Paid

Integration related consulting, duplicative labor, transition services, and other

100,391

Severance payments

56,431

Facility closure costs, other manufacturing integration, and other

20,470

Acquisition-related costs paid to 3rd parties

7,746

Stock-based compensation

828

Total

$              185,866

 

Valeant Pharmaceuticals International, Inc.

Table 6

Organic Growth - by Segment

For the Three and Twelve Months Ended December 31, 2013

(In thousands)

As reported

 For the Three Months Ended December 31, 2013

Organic growth

(a)

(b)

(b)

(b)

 (1)QTD2013

 (2)Acq impact

 (3)QTDSame store

 (4)QTD2012

 (5) Pro Forma Adj

 (6)Pro Forma 2012

 (7) Currency impact Same store

 (8) Currency impact Acq

 (9)Divestitures / Discontinuations (e)

Pro Forma(1)+(7)+(8)+(9) / (6)

Same store(3)+(7) / (4)-(9)

Total U.S.    (c) (g)

1,073.5

550.3

523.3

539.1

495.3

1,034.5

-

-

(2.7)

4%

-3%

ROW Developed (d) (h)

476.2

344.8

131.4

137.6

343.9

481.5

9.8

6.2

11.8

5%

12%

               Developed Markets

1,549.7

895.1

654.7

676.7

839.2

1,516.0

9.8

6.2

9.1

4%

0%

               Emerging Markets (i)

486.5

203.5

283.0

269.4

172.3

441.7

2.9

6.5

3.5

13%

8%

Total product Sales

2,036.2

1,098.6

937.7

946.1

1,011.5

1,957.7

12.7

12.7

12.6

6%

2%

Excludes Generics

 For the Three Months Ended December 31, 2013

Organic growth

(a)

(b)

(b)

(b)

 (1)QTD2013

 (2)Acq impact

 (3) QTDSame store

 (4) QTD2012

 (5) Pro Forma Adj

 (6) Pro Forma 2012

 (7)Currency impact Same store

 (8) Currency impact Acq

 (9)Divestitures / Discontinuations (e)

Pro Forma(1)+(7)+(8)+(9) / (6)

Same store(3)+(7) / (4)-(9)

Total U.S.    (c) (f) (g)

1,036.6

550.3

486.4

424.6

495.3

919.9

-

-

(2.7)

12%

14%

ROW Developed (d) (h)

476.2

344.8

131.4

137.6

343.9

481.5

9.8

6.2

11.8

5%

12%

               Developed Markets

1,512.8

895.1

617.8

562.2

839.2

1,401.4

9.8

6.2

9.1

10%

13%

               Emerging Markets (i)

486.5

203.5

283.0

269.4

172.3

441.7

2.9

6.5

3.5

13%

8%

Total product sales

1,999.3

1,098.6

900.8

831.6

1,011.5

1,843.1

12.7

12.7

12.6

11%

12%

As reported

 For the Twelve Months Ended December 31, 2013

Organic growth

(a)

(b)

(b)

(b)

 (1) YTD2013

 (2)Acq impact

 (3) YTDSame store

 (4)YTD2012

 (5)Pro Forma Adj

 (6) Pro Forma 2012

 (7)Currency impact Same store

 (8)Currency impact Acq

 (9) Divestitures / Discontinuations (e)

Pro Forma(1)+(7)+(8)+(9) / (6)

Same store(3)+(7) / (4)-(9)

Total U.S.    (c) (g)

3,150.7

1,484.5

1,666.2

1,820.1

1,415.2

3,235.3

-

-

20.7

-2%

-7%

ROW Developed (d) (h)

1,048.5

566.5

482.0

517.1

568.7

1,085.8

21.1

12.5

24.1

2%

2%

               Developed Markets

4,199.2

2,051.0

2,148.2

2,337.2

1,983.9

4,321.1

21.1

12.5

44.8

-1%

-5%

               Emerging Markets (i)

1,458.3

415.6

1,042.7

963.2

367.0

1,330.2

4.9

9.7

23.0

12%

11%

Total product Sales

5,657.5

2,466.6

3,190.9

3,300.4

2,350.9

5,651.3

26.0

22.2

67.8

2%

0%

Excludes Generics

 For the Twelve Months Ended December 31, 2013

Organic growth

(a)

(b)

(b)

(b)

 (1)YTD2013

 (2)Acq impact

 (3)YTDSame store

 (4)YTD2012

 (5)Pro Forma Adj

 (6)Pro Forma 2012

 (7)Currency impact Same store

 (8)Currency impact Acq

 (9)Divestitures / Discontinuations (e)

Pro Forma(1)+(7)+(8)+(9) / (6)

Same store(3)+(7) / (4)-(9)

Total U.S. (c) (f) (g)

3,056.1

1,484.5

1,571.6

1,450.6

1,415.2

2,865.7

-

-

20.7

7%

10%

ROW Developed (d) (h)

1,042.7

566.5

478.7

492.4

568.7

1,085.8

21.1

12.5

24.1

1%

7%

Developed Markets

4,098.8

2,051.0

2,050.3

1,943.0

1,983.9

3,951.5

21.1

12.5

44.8

6%

9%

Emerging Markets (i)

1,458.3

415.6

1,042.7

963.2

367.0

1,330.2

4.9

9.7

23.0

12%

11%

Total product sales

5,557.1

2,466.6

3,093.0

2,906.2

2,350.9

5,281.7

26.0

22.2

67.8

7%

10%

(a) Note: Currency effect for constant currency sales is determined by comparing 2013 reported amounts adjusted to exclude currency impact, calculated using 2012 monthly average exchange rates, to the actual 2012 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) Includes Valeant's attributable portion of revenue from joint ventures (JV) -  $1.6M Q4'12 and $1.3M Q4'13 and $3.5M FY'12 and $6.2M FY'13.

(d) Includes Valeant's attributable portion of revenue from joint ventures (JV) -  $2.5M Q4'12 and $3.4M Q4'13 and $8.2M FY'12 and $11.0M FY'13.

(e) Includes divestitures, discontinuations and supply interruptions.

(f) Excludes revenue from genericized products of $114.6M Q4'12 and $36.9M Q4'13 and $394.3M FY'12 and $100.4M FY'13.

(g) Reflects Bausch & Lomb post-acquisition revenue of $355.5M for Q4'13 and $572.0M FY'13 and $302.6M Q4'12 and $491.1M FY'12 pro forma revenue adjustments.

(h) Reflects Bausch & Lomb post-acquisition revenue of $333.9M Q4'13 and $517.3M FY'13, currency impact of $5.1M Q4'13 and $10.4M FY'13 and $334.1M Q4'12 and $518.1M FY'12 pro forma revenue adjustments.

(i) Reflects Bausch & Lomb post-acquisition revenue of $153.6M Q4'13 and $253.8M FY'13, currency impact of $4.9M Q4'13 and $7.3M FY'13 and $136.7M Q4'12 and $226.7M FY'12 pro forma revenue adjustments.

 

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

SOURCE Valeant Pharmaceuticals International, Inc.

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