LAVAL, Quebec, May 9, 2017 /CNW/ --
May 9, 2017 – Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) ("Valeant" or the "Company" or "we") today announced first quarter 2017 financial results.
"Our first quarter performance demonstrates that we are delivering on our commitments. We met our internal expectations, and we are continuing to make progress on our key initiatives, focus on the turnaround of our core businesses and improve internal operating efficiencies," said Joseph C. Papa, chairman and chief executive officer, Valeant. "Our divestiture efforts and cash flow generation have led to a $3.6 billion reduction in total debt to date, since the end of the first quarter of 2016, and our successful debt refinancing provides us with a more comfortable maturity profile."
First Quarter 2017 Highlights
Strengthening the Balance Sheet
Continued Focus on Core Business
First Quarter Revenue Performance
Total revenues were $2.109 billion for the first quarter of 2017, as compared to $2.372 billion in the first quarter of 2016, a decrease of $263 million, or 11%. The decline was primarily driven by lower volumes in our U.S. Diversified Products and Branded Rx segments as a result of the loss of exclusivity for a number of products and challenging market dynamics. Revenues were also negatively affected by foreign currencies, divestitures and discontinuations, and a modest decrease in average realized pricing. These decreases were partially offset by increased volumes in our Bausch + Lomb/International segment, mainly in Europe, the Middle East, South Africa, China and Australia.
Revenues by segment were as follows:
| Three Months Ended March 31 |
||||||||||
| (in millions) |
2017 |
2016 |
Reported |
Currency |
Constant |
|||||
| Segment Revenues |
||||||||||
| Bausch + Lomb/International |
$ 1,150 |
$ 1,146 |
$ 4 |
$ (41) |
$ 45 |
|||||
| Branded Rx |
604 |
665 |
(61) |
– |
(61) |
|||||
| U.S. Diversified Products |
355 |
561 |
(206) |
– |
(206) |
|||||
| Total revenues |
$ 2,109 |
$ 2,372 |
$ (263) |
$ (41) |
$ (222) |
|||||
Bausch + Lomb/International Segment
The Bausch + Lomb/International segment revenues were $1.15 billion for the first quarter of 2017, as compared to $1.146 billion for first quarter of 2016, an increase of $4 million, or less than 1%. Growth was 4% on a constant currency basis. Gains were primarily driven by increases in our international volumes, particularly in Europe, the Middle East, South Africa, Asia and Australia, of $59 million, partially offset by declines in U.S. Bausch + Lomb volumes of $10 million. Average realized pricing across the segment increased $16 million mainly from the international business units. The U.S. Bausch + Lomb units saw average realized pricing increase by less than $1 million. Volume and pricing gains were partially offset by the unfavorable impact of foreign currencies of $41 million and the impact of divestitures and discontinuations of $21 million.
Branded Rx Segment
The Branded Rx segment revenues were $604 million for the first quarter of 2017, as compared to $665 million in the same period in 2016, a decrease of $61 million, or 9%. The decrease was primarily driven by decreased volumes in the dermatology and Salix business units due to the loss of exclusivity of certain product lines, continued generic competition and the impact of an increase in the prevalence of high deductible medical plans. The decrease in overall volume was partially offset by an increase in average realized prices across the segment. Pricing improved in the dermatology business, driven by lower customer subsidies and accommodations and higher wholesaler selling prices. In the Salix business, we benefitted from higher wholesale selling prices and from favorable chargebacks during the quarter. These increases were partially offset by higher managed care rebates particularly in the dermatology business. Segment revenues were also impacted by $7 million as a result of the divestiture of Ruconest.
U.S. Diversified Products Segment
The U.S. Diversified Products segment reported first quarter 2017 revenues of $355 million as compared to $561 million in the first quarter of 2016, reflecting a decline of $206 million, or 37%. The decrease was primarily driven by a $157 million decrease in volume and lower average realized prices of $47 million. The declines in both volume and average realized price were primarily driven by loss of exclusivity for products in the segment.
GAAP Operating Income
Operating income was $211 million for the first quarter of 2017 as compared to $66 million for the first quarter of 2016, an increase of $145 million. The decrease in operating expenses includes higher direct-to-consumer advertising expenses for Jublia® and Xifaxan® in the first quarter of 2016, which was partially offset by a higher run rate in general and administrative (G&A) expenses and asset impairments.
GAAP Net Income (Loss)
Net income for the three months ended March 31, 2017 was $628 million, as compared to a net loss of ($374) million for the same period in 2016, an increase of $1.002 billion. Net income in the first quarter of 2017 includes a one-time income tax benefit of $908 million from a non-cash internal restructuring that occurred during this time. In addition, net income included the loss on extinguishment of debt of $64 million associated with our debt refinancing and repurchases that occurred in the first quarter of 2017 and an increase in interest expense of $47 million, primarily from the increase in interest rates associated with amendments to our credit agreements in 2016.
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA (non-GAAP) was $861 million for the first quarter of 2017, as compared to $1.008 billion for the first quarter of 2016, a decrease of $147 million, primarily due to the loss of exclusivity for products in the U.S. Diversified Products segment.
GAAP Earnings Per Share (EPS) - Diluted
GAAP EPS - Diluted for the first quarter of 2017 came in at $1.79 as compared to $(1.08) in the first quarter of 2016.
GAAP Cash Flow from Operations
Cash provided by operating activities was $954 million for the first quarter of 2017, attributable to changes in our working capital and cash we received from our fulfilment arrangement with Walgreens.
2017 Guidance
Valeant has raised guidance for 2017, as follows:
This guidance reflects the impact of the sale of the CeraVe, AcneFree and AMBI skincare brands. This guidance does not reflect the impact of the sale of the Dendreon business, which is expected to close mid-year.
Other than with respect to GAAP Revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. In periods where significant acquisitions or divestitures are not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, that would otherwise be treated as non-GAAP to calculate projected GAAP net income (loss). However, because other deductions (such as restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amounts of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP). As previously discussed, the Company is no longer providing guidance with respect to Adjusted Net Income or Adjusted EPS.
Reducing and Refinancing Debt
In the first quarter of 2017, we successfully executed a debt refinancing that extended our debt maturity profile, increased our fixed vs. floating rate debt and increased flexibility under our debt covenants. During the quarter, the Company reduced its outstanding debt by $1.3 billion.
These transactions and debt payments have had the effect of lowering our cash requirements for principal debt payments over the remainder of 2017 through 2020 by an aggregate $6.32 billion, providing us with a much improved liquidity profile during this timeframe and greater flexibility to execute our business plans. In April 2017, we announced that we reduced our term loans under our Senior Secured Credit Facilities by approximately an additional $220 million.
Valeant's corporate credit ratings remained unchanged during the first quarter of 2017. The Company's availability under the Revolving Credit Facility was approximately $925 million at March 31, 2017.
Other Matters
Conference Call Details
| Date: |
Tuesday, May 9, 2017 |
| Time: |
8:00 a.m. EDT |
| Webcast: |
|
| Participant Event Dial-in: |
(877) 876-8393 (North America) |
| (443) 961-0178 (International) |
|
| Participant Passcode: |
1757022 |
| Replay Dial-in: |
(855) 859-2056 (North America) |
| (404) 537-3406 (International) |
|
| Replay Passcode: |
1757022 (replay available until June 9, 2017) |
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, gastrointestinal disorders, 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 Valeant's future prospects and performance (including the Company's revised guidance with respect to 2017 Full Year Adjusted EBITDA (non-GAAP) (as discussed and defined below)), the expected impact of the Company's debt refinancing activities, the anticipated timing of the closing of the divestiture of Dendreon Pharmaceuticals and the Company's plans and expectations for 2017. 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 and quarterly reports 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. In addition, certain material factors and assumptions are applied in making these forward-looking statements, including the Company's 2017 full year guidance, and information regarding certain of these material factors and assumptions may also be found in such filings. 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, unless required by law.
Non-GAAP Information
Recent Evaluation of Financial Performance Measures
Recently, the Company's new management team undertook an evaluation of how it would measure the financial performance of the Company going forward. In evaluating its financial performance measures, the Company considered its recent changes to its strategy (which included a transition away from growth by acquisition with a greater focus on R&D activity, strengthening of the balance sheet through the paydown of debt and rationalization of the product portfolio through divestitures of non-core assets) and sought to identify performance measures that best reflect the Company's current business operations, strategy and goals. As a result of that evaluation, new management identified the following primary financial performance measures for the Company: GAAP Revenues (measure for both guidance and actual results), GAAP Net Income (measure for actual results), Adjusted EBITDA (non-GAAP) (measure for both guidance and actual results) and GAAP Cash Flow from Operations (measure for actual results). These measures were selected as the Company believes that these measures most appropriately reflect how the Company measures the business internally and sets operational goals and incentives. For example, the Company believes that Adjusted EBITDA (non-GAAP) focuses management on the Company's underlying operational results and business performance, while GAAP Revenue focuses management on the overall growth of the business.
In addition, in connection with this evaluation of financial performance measures, the Company assessed the methodology with which it was calculating these non-GAAP measures and made updates where it deemed appropriate to better reflect the underlying business. For example, commencing with the first quarter of 2017, Adjusted EBITDA (non-GAAP) no longer includes adjustments for Foreign exchange gain/loss arising from intercompany transactions.
These new non-GAAP measures, and the new methodologies used to calculate these non-GAAP measures, are being used on a going forward basis, commencing with 2017 guidance and actual results for the first quarter of 2017. For the purposes of the Company's actual results for the first quarter of 2016, the Company has calculated and presented the non-GAAP measures using the historic methodologies in place as of the applicable historic dates; however, the Company has also provided a reconciliation that calculates the non-GAAP measures using the new methodologies, to allow investors and readers to evaluate the non-GAAP measures (such as Adjusted EBITDA) on the same basis for the periods presented.
Use of Non-GAAP Generally
To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures including (i) Adjusted EBITDA (non-GAAP) and (ii) Adjusted Net Income (non-GAAP). These measures do not have any standardized meaning under GAAP and other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar non-GAAP measures. We caution investors not to place undue reliance on such non-GAAP measures, but instead to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation. They should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
The reconciliations of these historic non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below. However, for guidance purposes, the Company does not provide reconciliations of projected Adjusted EBITDA (non-GAAP) to projected GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. In periods where significant acquisitions or divestitures are not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, that would otherwise be treated as a non-GAAP adjustment to calculate projected GAAP net income (loss). However, because other deductions (e.g., restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) may vary significantly based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amounts of these deductions may be material and, therefore, could result in GAAP net income (loss) being materially different from (including materially less than) projected Adjusted EBITDA (non-GAAP).
Management uses these non-GAAP measures as key metrics in the evaluation of Company performance and the consolidated financial results and, in part, in the determination of cash bonuses for its executive officers. The Company believes these non-GAAP measures are useful to investors in their assessment of our operating performance and the valuation of our Company. In addition, these non-GAAP measures address questions the Company routinely receives from analysts and investors and, in order to assure that all investors have access to similar data, the Company has determined that it is appropriate to make this data available to all investors. However, non-GAAP financial measures are not prepared in accordance with GAAP, as they exclude certain items as described herein. 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.
Specific Non-GAAP Measures
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA (non-GAAP) is GAAP net income (its most directly comparable GAAP financial measure) adjusted for certain items, as further described below. The Company has historically used Adjusted EBITDA to evaluate current performance. As indicated above, following an evaluation of the Company's financial performance measures, new management of the Company identified certain new primary financial performance measures that it is using, on a going forward basis, to evaluate the Company's financial performance. One of those measures is Adjusted EBITDA (non-GAAP), which the Company uses for both actual results and guidance purposes. As described above, management of the Company believes that Adjusted EBITDA (non-GAAP), along with the other new measures, most appropriately reflect how the Company measures the business internally and sets operational goals and incentives, especially in light of the Company's new strategies. In particular, the Company believes that Adjusted EBITDA (non-GAAP) focuses management on the Company's underlying operational results and business performance. As a result, going forward (commencing with 2017 guidance and first quarter 2017 actual results), the Company is using Adjusted EBITDA (non-GAAP) both to assess the actual financial performance of the Company and to forecast future results as part of its guidance. Management believes Adjusted EBITDA (non-GAAP) is a useful measure to evaluate current performance. Adjusted EBITDA (non-GAAP) is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors. In addition, commencing in 2017, cash bonuses for the Company's executive officers and other key employees will be based, in part, on the achievement of certain Adjusted EBITDA (non-GAAP) targets.
Adjusted EBITDA reflect adjustments based on the following items:
Finally, to the extent not already adjusted for above, Adjusted EBITDA (non-GAAP) reflects adjustments for interest, taxes, depreciation and amortization (EBITDA represents earnings before interest, taxes, depreciation and amortization).
As indicated above, in addition to identifying new primary financial performance measures, the Company also assessed the methodology with which it was calculating these non-GAAP measures and made updates where it deemed appropriate to better reflect the underlying business. As a result, commencing with the first quarter actual results of 2017, there are certain differences in the calculation of Adjusted EBITDA (non-GAAP) between the current presentation and the historic presentation. In particular, Adjusted EBITDA (non-GAAP) no longer includes adjustments for Foreign exchange gain/loss arising from intercompany transactions. For the purposes of the Company's actual results for the first quarter of 2016, the Company has calculated and presented the non-GAAP measures using the historic methodologies in place as of the applicable historic dates; however, the Company has also provided a reconciliation that calculates the non-GAAP measure using the new methodology, to allow investors and readers to evaluate the non-GAAP measure (such as Adjusted EBITDA) on the same basis for the periods presented.
Please also see the reconciliation tables below for further information as to how these non-GAAP measures are calculated for the periods presented.
Adjusted Net Income (Loss) (non-GAAP)
Historically, management has used adjusted net income (loss) (non-GAAP) (the most directly comparable GAAP financial measure for which is GAAP net income (loss)) for strategic decision making, forecasting future results and evaluating current performance. In addition, historically (including with respect to 2016), cash bonuses for the Company's executive officers were based, in part, on the achievement of certain adjusted EPS (non-GAAP) targets. This non-GAAP measure excludes the impact of certain items (as further described below) that may obscure trends in the Company's underlying performance. By disclosing this non-GAAP measure, it was management's intention to provide investors with a meaningful, supplemental comparison of the Company's operating results and trends for the periods presented. It was management belief that this measure was also useful to investors as such measure allowed investors to evaluate the Company's performance using the same tools that management had used to evaluate past performance and prospects for future performance. Accordingly, it was the Company's belief that adjusted net income (loss) (non-GAAP) was useful to investors in their assessment of the Company's operating performance and the valuation of the Company. It is also noted that, in recent periods, our GAAP net income was significantly lower than our adjusted net income (non-GAAP). As indicated above, following an assessment of the Company's financial performance measures, new management of the Company identified certain new primary financial performance measures that will be used to assess Company financial performance going forward. As a result, the Company no longer uses or relies on adjusted net income (loss) (non-GAAP) in assessing the financial performance of the Company. However, a reconciliation of GAAP net income (loss) to adjusted net income (loss) (non-GAAP) is presented in the tables below for the information of readers to provide readers comparable information for prior periods.
Adjusted net income (non-GAAP) reflects adjustments based on the following items:
As indicated above, in addition to identifying new primary financial performance measures, the Company also assessed the methodology with which it was calculating these non-GAAP measures and made updates where it deemed appropriate to better reflect the underlying business. As a result, commencing with the first quarter results of 2017, there are certain differences in the calculation of adjusted net income (loss) (non-GAAP) between the current presentation and the historic presentation. In particular, adjusted net income (loss) (non-GAAP) no longer includes Foreign exchange gain/loss arising from intercompany transactions and amortization of deferred financing costs and debt discounts In addition, as of the third quarter of 2016, adjusted net income (loss) (non-GAAP) no longer includes adjustments for the following items: Depreciation resulting from a PP&E step-up resulting from acquisitions and Previously accelerated vesting of certain share-based equity adjustments. For the purposes of the Company's actual results for the first quarter of 2016, the Company has calculated and presented the non-GAAP measures using the historic methodologies in place as of the applicable historic dates; however, the Company has also provided a reconciliation that calculates the non-GAAP measure using the new methodology, to allow investors and readers to evaluate the non-GAAP measure (such as adjusted net income (loss)) on the same basis for the periods presented.
Please also see the reconciliation tables below for further information as to how these non-GAAP measures are calculated for the periods presented.
| [1] |
Provisional name |
| [2] |
To assist investors in evaluating the Company's performance, we have adjusted for foreign currency effects. Constant currency impact is determined by comparing 2017 reported amounts adjusted to exclude currency impact, calculated using 2016 monthly average exchange rates, to the actual 2016 reported amounts. |
FINANCIAL TABLES FOLLOW
| Valeant Pharmaceuticals International, Inc. |
Table 1 |
|||
| Condensed Consolidated Statements of Operations |
||||
| For the Three Months Ended March 31, 2017 and 2016 |
||||
| (unaudited) |
||||
| (In millions, except per share amounts) |
||||
| Three Months Ended |
||||
| March 31, |
||||
| 2017 |
2016 |
|||
| Product sales |
$ 2,076 |
$ 2,336 |
||
| Other revenues |
33 |
36 |
||
| Total revenues |
2,109 |
2,372 |
||
| Cost of goods sold (excluding amortization and impairments of intangible assets) |
584 |
620 |
||
| Cost of other revenues |
12 |
10 |
||
| Selling, general and administrative ("SG&A") |
661 |
813 |
||
| Research and development |
96 |
103 |
||
| Amortization of intangible assets |
635 |
678 |
||
| Asset impairments |
138 |
16 |
||
| Restructuring and integration costs |
18 |
38 |
||
| Acquired in-process research and development costs |
4 |
1 |
||
| Acquisition-related contingent consideration |
(10) |
2 |
||
| Other (income) expense |
(240) |
25 |
||
| 1,898 |
2,306 |
|||
| Operating income |
211 |
66 |
||
| Interest expense, net |
(471) |
(426) |
||
| Loss on extinguishment of debt |
(64) |
- |
||
| Foreign exchange and other |
29 |
(6) |
||
| Loss before provision for (Recovery of) income taxes |
(295) |
(366) |
||
| (Recovery of) provision for income taxes |
(924) |
7 |
||
| Net income (loss) |
629 |
(373) |
||
| Less: Net income attributable to noncontrolling interest |
1 |
1 |
||
| Net income (loss) attributable to Valeant Pharmaceuticals International, Inc. |
$ 628 |
$ (374) |
||
| Earnings (loss) per share: |
||||
| Basic: |
||||
| Earnings (loss) |
$ 1.80 |
$ (1.08) |
||
| Shares used in per share computation |
349.8 |
344.9 |
||
| Diluted: |
||||
| Earnings (loss) |
$ 1.79 |
$ (1.08) |
||
| Shares used in per share computation |
350.5 |
344.9 |
||
| Valeant Pharmaceuticals International, Inc. |
Table 2 |
|||
| Reconciliation of GAAP Net Income to Adjusted Net Income (non-GAAP) |
||||
| For the Three Months Ended March 31, 2017 and 2016 |
||||
| (unaudited) |
||||
| (In millions) |
||||
| Three Months Ended |
||||
| March 31, |
||||
| 2017 |
2016 |
|||
| Net (loss) income attributable to Valeant Pharmaceuticals International, Inc. |
$ 628 |
$ (374) |
||
| Non-GAAP adjustments: (a) |
||||
| Acquisition-related adjustments excluding amortization of intangible assets (b) (d) |
(10) |
34 |
||
| Amortization of intangible assets |
635 |
678 |
||
| Restructuring and integration costs |
18 |
38 |
||
| Acquired in-process research and development costs |
4 |
1 |
||
| Asset impairments |
138 |
16 |
||
| Other non-GAAP charges (c) (d) |
(230) |
102 |
||
| Amortization of deferred financing costs and debt discounts |
- |
21 |
||
| Loss on extinguishment of debt |
64 |
- |
||
| Foreign exchange and other (d) |
- |
(2) |
||
| Tax effect of non-GAAP adjustments |
(974) |
(71) |
||
| Total non-GAAP adjustments |
(355) |
817 |
||
| Adjusted net income non-GAAP attributable to Valeant Pharmaceuticals International, Inc. (As Reported) (d) |
$ 273 |
$ 443 |
||
| Depreciation resulting from a PP&E step-up resulting from acquisitions |
(3) |
|||
| Previously accelerated vesting of certain share-based equity adjustments |
(24) |
|||
| Foreign exchange loss/gain on intercompany transactions |
2 |
|||
| Amortization of deferred financing costs and debt discounts |
(21) |
|||
| Adjusted net income non-GAAP attributable to Valeant Pharmaceuticals International, Inc. (Revised basis) (e) |
$ 273 |
$ 397 |
||
| (a) The components of (and further details respecting) each of these non-GAAP adjustments and the financial statement line item to which each component relates can be found on Table 2a. |
||||
| (b) Due to the nature of Acquisition-related adjustments excluding amortization of intangible assets, the components of this non-GAAP adjustment are reflected in various financial statement line items, as follows: Cost of goods sold, Selling, general and administrative, Research and development, and Acquisition-related contingent consideration. |
||||
| (c) Due to the nature of Other non-GAAP charges, the components of this non-GAAP adjustment are reflected in various financial statement line items, as follows: Product Sales, Cost of goods sold, Selling, general and administrative, Research and development, and Other expense. |
||||
| (d) This subtotal reflects the Adjusted Net income(loss) (non-GAAP) reported by the Company for the period ended March 31, 2016 using the methodology for calculating Adjusted Net Income(loss) (non-GAAP) as of that date. |
||||
| (e) As of the third quarter of 2016, Adjusted net income(loss) (non-GAAP) no longer includes adjustments for the following items: Depreciation resulting from a PP&E step-up resulting from acquisitions and Previously accelerated vesting of certain share-based equity adjustments. Depreciation resulting from a PP&E step-up resulting from acquisitions was a component of Acquisition-related adjustments excluding amortization of intangible assets. Previously accelerated vesting of certain share-based equity adjustments was a component of Other non-GAAP charges. As of the first quarter of 2017, Adjusted net income(loss) (non-GAAP) also no longer includes adjustments for Foreign exchange loss/gain on intercompany transactions and Amortization of deferred financing costs and debt discounts. For the purpose of allowing investors to evaluate Adjusted net income(loss) (non-GAAP) on the same basis for the periods presented, these adjustments have been removed from the results for the first quarter of 2016. |
| Valeant Pharmaceuticals International, Inc. |
Table 2a |
|||
| Reconciliation of GAAP to Non-GAAP Financial Information |
||||
| For the Three Months Ended March 31, 2017 and 2016 |
||||
| (unaudited) |
||||
| (In millions) |
||||
| Three Months Ended |
||||
| March 31, |
||||
| 2017 |
2016 |
|||
| Total Revenues reconciliation: |
||||
| GAAP Revenues |
$ 2,109 |
$ 2,372 |
||
| Philidor Rx Services, LLC sales through deconsolidation as of January 31, 2016 (a) |
- |
(2) |
||
| Adjusted revenues (non-GAAP) |
$ 2,109 |
$ 2,370 |
||
| Cost of goods sold and other revenues reconciliation: |
||||
| GAAP cost of goods sold and Cost of Other revenues |
$ 596 |
$ 630 |
||
| % of GAAP total revenues |
28% |
27% |
||
| Fair value inventory step-up resulting from acquisitions (b) (k) |
- |
(29) |
||
| Depreciation resulting from a PP&E step-up resulting from acquisitions (b) (k) |
- |
(3) |
||
| Integration related inventory and technology transfer costs (a) |
- |
(3) |
||
| Adjusted cost of goods and Cost of Other revenues (non-GAAP) (k) |
$ 596 |
$ 595 |
||
| % of Non-GAAP total revenues |
28% |
25% |
||
| Selling, general and administrative reconciliation: |
||||
| GAAP selling, general and administrative |
$ 661 |
$ 813 |
||
| % of GAAP total revenues |
31% |
34% |
||
| Depreciation resulting from a PP&E step-up resulting from acquisitions (b) (k) |
- |
(8) |
||
| CEO termination costs (a) |
- |
(35) |
||
| Legal and other professional fees (a) (j) |
(10) |
(29) |
||
| Philidor Rx Services, LLC expenses through deconsolidation as of January 31, 2016 (a) |
- |
(5) |
||
| Previously accelerated vesting of certain share-based equity instruments (a) (k) |
- |
1 |
||
| Adjusted selling, general and administrative (non-GAAP) (k) |
$ 651 |
$ 737 |
||
| % of Non-GAAP total revenues |
31% |
31% |
||
| Research and development reconciliation: |
||||
| GAAP research and development |
$ 96 |
$ 103 |
||
| % of GAAP total revenues |
5% |
4% |
||
| Adjusted research and development (non-GAAP) |
$ 96 |
$ 103 |
||
| % of Non-GAAP total revenues |
5% |
4% |
||
| Amortization of intangible assets reconciliation: |
||||
| GAAP Amortization of intangible assets |
$ 635 |
$ 678 |
||
| Amortization of intangible assets (c) |
(635) |
(678) |
||
| Adjusted Amortization of intangible assets (non-GAAP) |
$ - |
$ - |
||
| Restructuring and integration costs reconciliation: |
||||
| GAAP Restructuring and integration costs (See Table 4.2) |
$ 18 |
$ 38 |
||
| Restructuring and integration costs (d) |
(18) |
(38) |
||
| Adjusted Restructuring and integration costs (non-GAAP) |
$ - |
$ - |
||
| Acquired in-process research and development costs reconciliation: |
||||
| GAAP Acquired in-process research and development costs |
$ 4 |
$ 1 |
||
| Acquired in-process research and development costs (e) |
(4) |
(1) |
||
| Adjusted Acquired in-process research and development costs (non-GAAP) |
$ - |
$ - |
||
| Asset Impairments reconciliation: |
||||
| GAAP Asset Impairments |
$ 138 |
$ 16 |
||
| Asset Impairments (l) |
(138) |
(16) |
||
| Adjusted Asset Impairments (non-GAAP) |
$ - |
$ - |
||
| Acquisition-related contingent consideration reconciliation: |
||||
| GAAP acquisition-related contingent consideration |
$ (10) |
$ 2 |
||
| Acquisition-related contingent consideration (b) |
10 |
(2) |
||
| Adjusted acquisition-related contingent consideration (non-GAAP) |
$ - |
$ - |
||
| Other (income) expense reconciliation: |
||||
| GAAP other (income) expense |
$ (240) |
$ 25 |
||
| Legal settlements and related fees (a) |
(77) |
(2) |
||
| Net gain/(loss) on sale of assets (a) |
317 |
(2) |
||
| Acquisition related transaction costs (a) (k) |
- |
(2) |
||
| Other (primarily loss recognized upon deconsolidation of Philidor Rx Services, LLC as of January 31, 2016) (a) |
- |
(19) |
||
| Adjusted other (income) expense (non-GAAP) |
$ - |
$ - |
||
| Interest expense, net reconciliation: |
||||
| GAAP interest expense, net |
$ (471) |
$ (426) |
||
| Amortization of debt discounts (f) (k) |
- |
18 |
||
| Amortization of deferred financing costs (f) (k) |
- |
2 |
||
| Write-down of deferred financing costs (f) (k) |
- |
1 |
||
| Adjusted interest expense, net (non-GAAP) |
$ (471) |
$ (405) |
||
| Loss on extinguishment of debt reconciliation: |
||||
| GAAP loss on extinguishment of debt |
$ (64) |
$ - |
||
| Loss on extinguishment of debt (g) |
64 |
- |
||
| Adjusted loss on extinguishment of debt (non-GAAP) |
$ - |
$ - |
||
| Foreign exchange and other reconciliation: |
||||
| GAAP foreign exchange and other |
$ 29 |
$ (6) |
||
| Foreign exchange loss/gain on intercompany transactions (h) (k) |
- |
(2) |
||
| Adjusted foreign exchange and other (non-GAAP) |
$ 29 |
$ (8) |
||
| Provision for (recovery of) income taxes reconciliation: |
||||
| GAAP Provision for (recovery of) income taxes |
$ (924) |
$ 7 |
||
| Effective GAAP tax rate |
313% |
2% |
||
| Tax effect of non-GAAP adjustments (i) |
974 |
71 |
||
| Adjusted Provision for income taxes (non-GAAP) |
$ 50 |
$ 78 |
||
| Effective Non-GAAP tax rate |
15% |
15% |
||
| (a) Represents a component of the non-GAAP adjustment of "Other non-GAAP charges" (see Table 2). The identified components, in the aggregate, represent all components of this non-GAAP adjustment. |
||||
| (b) Represents a component of the non-GAAP adjustment of "Acquisition-related adjustments excluding amortization of intangible assets" (see Table 2). The identified components, in the aggregate, represent all components of this non-GAAP adjustment. |
||||
| (c) Represents the sole component of the non-GAAP adjustment of "Amortization of intangible assets" (see Table 2). |
||||
| (d) Represents the sole component of the non-GAAP adjustment of "Restructuring and Integration costs" (see Table 2). |
||||
| (e) Represents the sole component of the non-GAAP adjustment of "Acquired in-process research and development costs" (see Table 2). |
||||
| (f) Represents a component of the non-GAAP adjustment of "Amortization of deferred financing costs and debt discounts" (see Table 2). The identified components, in the aggregate, represent all components of this non-GAAP adjustment. |
||||
| (g) Represents the sole component of the non-GAAP adjustment of "Loss on extinguishment of debt" (see Table 2). |
||||
| (h) Represents a component of the non-GAAP adjustment of "Foreign exchange and other" (see Table 2). The identified components, in the aggregate, represent all components of this non-GAAP adjustment. |
||||
| (i) Represents the sole component of the non-GAAP adjustment of "Tax effect of non-GAAP adjustments" (see Table 2). |
||||
| (j) Legal and other professional fees incurred in connection with recent legal and governmental proceedings, investigations and information requests related to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices for the three months ended March 31, 2016 and March 31, 2017. |
||||
| (k) As of the third quarter of 2016, Adjusted net income(loss) (non-GAAP) no longer includes adjustments for the following items: Depreciation resulting from a PP&E step-up resulting from acquisitions and Previously accelerated vesting of certain share-based equity adjustments. Depreciation resulting from a PP&E step-up resulting from acquisitions was a component of Acquisition-related adjustments excluding amortization of intangible assets. Previously accelerated vesting of certain share-based equity adjustments was a component of Other non-GAAP charges. As of the first quarter of 2017, Adjusted net income(loss) (non-GAAP) also no longer includes adjustments for Foreign exchange loss/gain on intercompany transactions and Amortization of deferred financing costs and debt discounts. For the purpose of allowing investors to evaluate Adjusted net income(loss) (non-GAAP) on the same basis for the periods presented, these adjustments have been removed from the results for the first quarter of 2016. See reconciliation on Table 2. |
||||
| (l) Represents the sole component of the non-GAAP adjustment of "Asset Impairments" (see Table 2). Asset impairments for the three months ended March 31, 2017 include (h) impairments of $96 million to assets we classified as held for sale during the period as they were not aligned with the focus of our core business, (ii) impairments of $36 million to certain product/patent assets associated with the discontinuance of a specific product line not aligned with the focus of our core business and (iii) other adjustments. |
| Valeant Pharmaceuticals International, Inc. |
Table 2b |
||||
| Reconciliation of GAAP Net Income to Adjusted EBITDA (non-GAAP) |
|||||
| For the Three Months Ended March 31, 2017 and 2016 |
|||||
| (unaudited) |
|||||
| (In millions) |
|||||
| Three Months Ended |
|||||
| March 31, |
|||||
| 2017 |
2016 |
||||
| Net (loss) income attributable to Valeant Pharmaceuticals International, Inc. |
$ 628 |
$ (374) |
|||
| Interest expense, net |
471 |
426 |
|||
| (Recovery of) provision for income taxes |
(924) |
7 |
|||
| Depreciation and amortization |
674 |
731 |
|||
| EBITDA |
849 |
790 |
|||
| Adjustments: |
|||||
| Restructuring and integration costs |
18 |
38 |
|||
| Acquired in-process research and development costs |
4 |
1 |
|||
| Asset impairments (d) |
138 |
16 |
|||
| Share-based compensation |
28 |
64 |
|||
| Acquisition-related adjustments excluding amortization of intangible assets, net of depreciation expense |
(10) |
31 |
|||
| Loss on extinguishment of debt |
64 |
- |
|||
| Foreign exchange and other |
- |
(2) |
|||
| Other non-GAAP charges (a) |
(230) |
70 |
|||
| Adjusted EBITDA (non-GAAP) (As Reported) (e) |
$ 861 |
$ 1,008 |
|||
| Foreign exchange loss/gain on intercompany transactions |
2 |
||||
| Adjusted EBITDA (non-GAAP) (Revised basis) (f) |
$ 861 |
$ 1,010 |
|||
| (a) Other non-GAAP charges include: |
$ (230) |
$ 70 |
|||
| Integration related inventory and technology transfer costs |
- |
3 |
|||
| CEO termination costs (cash severance payment) |
- |
10 |
|||
| Legal and other professional fees (b) |
10 |
29 |
|||
| Litigation and other matters |
77 |
2 |
|||
| Net (gain)/loss on sale of assets (c) |
(317) |
2 |
|||
| Acquisition related transaction costs |
- |
2 |
|||
| Philidor Rx Services, LLC net loss through deconsolidation as of January 31, 2016 |
- |
3 |
|||
| Other |
- |
19 |
|||
| (b) Legal and other professional fees incurred in connection with recent legal and governmental proceedings, investigations and information requests related to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices. |
|||||
| (c) For the three months ended March 31, 2017, Net (gain)/loss on sale of assets of $317 million was primarily due to $319 million gain on the Skincare sale. |
|||||
| (d) Asset impairments for the three months ended March 31, 2017 include (i) impairments of $96 million to assets we classified as held for sale during the period as they were not aligned with the focus of our core business, (ii) impairments of $36 million to certain product/patent assets associated with the discontinuance of a specific product line not aligned with the focus of our core business and (iii) other adjustments. |
|||||
| (e) This subtotal reflects the Adjusted EBITDA (non-GAAP) reported by the Company for the period ended March 31, 2016 using the methodology for calculating Adjusted EBITDA (non-GAAP) as of that date. |
|||||
| (f) As of the first quarter of 2017, non-GAAP adjustments no longer include adjustments for Foreign exchange gain/loss arising from intercompany transactions. For the purpose of allowing investors to evaluate Adjusted EBITDA on the same basis for the periods presented, this adjustment has been removed from the results for the first quarter of 2016. |
| Valeant Pharmaceuticals International, Inc. Table 3 |
||||||||||||
| Organic Growth (non-GAAP) - by Segment |
||||||||||||
| For the Three Months Ended March 31, 2017 |
||||||||||||
| (In Millions) |
||||||||||||
| As reported |
||||||||||||
| For the Three Months Ended March 31, |
||||||||||||
| (1) Q1 2017 |
(2) Q1 2016 |
(3) Currency impact (a) |
(4) 2017 excluding currency impact (b) |
(5) % Change |
(6) Divestitures / Discontinuations |
Same store (4-(2-6))/(2-6) (c) |
||||||
| Bausch + Lomb / International |
1,150 |
1,146 |
41 |
1,191 |
4% |
21 |
6% |
|||||
| Branded Rx |
604 |
665 |
- |
604 |
-9% |
7 |
-8% |
|||||
| Diversified Products |
355 |
561 |
- |
355 |
-37% |
- |
-37% |
|||||
| Total revenues (d) |
$ 2,109 |
$ 2,372 |
$ 41 |
$ 2,150 |
-9% |
$ 28 |
-8% |
|||||
| (a) Currency impact for constant currency sales is determined by comparing 2017 reported amounts adjusted to exclude currency impact, calculated using 2016 monthly average exchange rates, to the actual 2016 reported amounts. |
||||||||||||
| (b) To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information about the Company's use of such non-GAAP financial measures, please refer to the body of the press release to which these tables are attached. |
||||||||||||
| (c) Organic Growth Definitions: |
||||||||||||
| Same Store: This measure provides growth rates for businesses that have been owned for one year or more. |
||||||||||||
| ((Current Year Total sales – acquisitions within the last year + YoY FX impact)- (Prior Year Total sales – divestitures & discontinuations))/( Prior Year Total sales – divestitures & discontinuations) |
||||||||||||
| (d) Numbers may not foot due to rounding. |
||||||||||||
| Valeant Pharmaceuticals International, Inc. |
Table 4 |
|||||
| Consolidated Balance Sheet and Other Data |
||||||
| (unaudited) |
||||||
| (In millions) |
||||||
| As of |
As of |
|||||
| March 31, |
December 31, |
|||||
| 4.1 |
2017 |
2016 |
||||
| Cash |
||||||
| Cash and cash equivalents |
$ 1,210 |
$ 542 |
||||
| Debt |
||||||
| Revolving Credit Facility |
$ 525 |
$ 875 |
||||
| Series A-3 Tranche A Term Loan Facility |
- |
1,016 |
||||
| Series A-4 Tranche A Term Loan Facility |
- |
658 |
||||
| Series D-2 Tranche B Term Loan Facility |
- |
1,048 |
||||
| Series C-2 Tranche B Term Loan Facility |
- |
805 |
||||
| Series E-1 Tranche B Term Loan Facility |
- |
2,429 |
||||
| Series F Tranche B Term Loan Facility |
6,680 |
3,815 |
||||
| Senior Notes |
21,327 |
19,188 |
||||
| Other |
12 |
12 |
||||
| Total long-term debt |
28,544 |
29,846 |
||||
| Less: current portion |
(346) |
(1) |
||||
| Non-current portion of long-term debt |
$ 28,198 |
$ 29,845 |
||||
| Three Months Ended |
||||||
| March 31, |
||||||
| GAAP Cash Flow |
2017 |
2016 |
||||
| Cash provided by operating activities |
$ 954 |
$ 557 |
||||
| 4.2 |
Restructuring and integration costs |
|||||
| Three Months Ended |
||||||
| March 31, 2017 |
||||||
| by project type |
Cash Paid |
Expense |
||||
| Restructuring initiatives |
$ 19 |
$ 10 |
||||
| Salix Pharmaceuticals, Ltd. |
4 |
1 |
||||
| Other (various deals) |
6 |
7 |
||||
| Total |
$ 29 |
$ 18 |
||||
| by expense type |
Cash Paid |
Expense |
||||
| Consulting, duplicative labor, transition services, and other |
$ 8 |
$ 12 |
||||
| Severance payments |
17 |
3 |
||||
| Facility closure costs and non-personnel manufacturing integration |
4 |
3 |
||||
| Total |
$ 29 |
$ 18 |
||||
Contact Information
Investors:
Elif McDonald
[email protected]
514-856-3855
877-281-6642 (toll free)
Media:
Lainie Keller
[email protected]
908-927-0617
or
Renee Soto
[email protected]
SOURCE Valeant Pharmaceuticals International, Inc.
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