Cephalon Net Sales Increase 9% and Net Cash from Operations Surpasses $200 Million in the Third Quarter 2009
Adjusted Net Income Surpasses Guidance
NUVIGIL Launch Exceeds Expectations
- Press Release
- Source: Cephalon, Inc.
- On 4:10 pm EDT, Tuesday October 27, 2009
FRAZER, Pa., Oct. 27 /PRNewswire-FirstCall/ -- Cephalon, Inc. (Nasdaq: CEPH - News) today reported third quarter 2009 net sales of $535.2 million, a 9 percent increase compared to net sales of $489.7 million for the third quarter 2008. Basic income per common share for the quarter was $1.38. Excluding amortization expense and certain other items, basic adjusted income per common share for the quarter was $1.70, an increase of 25 percent over the comparable figure of $1.36 for the same period in 2008. Adjusted net income for the third quarter of 2009 was $126.7 million, a 36 percent increase over the comparable $92.9 million for the third quarter of 2008. This exceeded the company's adjusted net income guidance range of $108 to $116 million.
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| CEPH | 53.91 | -5.70 |
Central nervous system (CNS) franchise net sales were $291.9 million during the quarter, a 7 percent increase compared to the same period last year. Pain franchise reported net sales of $116.3 million, a 1 percent decrease versus third quarter 2008. Oncology franchise net sales were $83.1 million, a 58 percent increase over the same period last year due to strong sales of TREANDA® (bendamustine hydrochloride) of $54.5 million.
During the quarter Cephalon recorded net cash provided by operating activities of $203.6 million bringing the year-to-date cash flow from operations to $517.1 million.
"The exceptional launch of NUVIGIL was the highlight of the quarter," said Frank Baldino, Jr., Ph.D., Chairman and CEO. "In addition, we have assembled the deepest and most diverse pipeline in our history with a variety of small molecules and biologics being studied for pain, oncology, and inflammatory diseases. We look forward to developing this diverse pipeline with the goal of creating important new medicines for patients."
The company is updating its guidance for 2009. Total net sales guidance is now $2.125-$2.175 billion. This includes CNS franchise net sales of $1.150-$1.170 billion, pain franchise net sales of $480-$500 million, oncology franchise net sales of $315-$335 million, and other product net sales of $160-$175 million. Full year R&D and SG&A expense guidance is now $400-$415 million and $800-$815 million, respectively. Adjusted net income guidance remains unchanged at $457-$464 million. Basic adjusted income per common share guidance also remains unchanged at $6.30-$6.40.
Cephalon is introducing 2010 net sales guidance of $2.325 - $2.400 billion. This includes CNS franchise net sales of $1.180 - $1.220 billion, pain franchise net sales of $535 - $570 million, oncology franchise net sales of $400 - $430 million, and other product net sales of $200 - $220 million. R&D and SG&A guidance for 2010 are $470 - $490 million and $840 - $860 million, respectively.
The company also is introducing adjusted net income for 2010 of $495 - $510 million. This represents growth of approximately 9 percent over our 2009 guidance. Cephalon is introducing 2010 adjusted net income per common share guidance of $6.50 - $6.70.
Basic adjusted income per common share for both the full-year 2009 and full-year 2010 is reconciled below and is subject to the assumptions set forth therein. References in this press release to basic income per common share, basic adjusted income per common share, basic adjusted income per common share guidance, adjusted net income, adjusted net income guidance, adjusted net income per common share, adjusted net income per common share guidance refers to those metrics on an "attributable to Cephalon" basis and does not include any income or losses attributable to noncontrolling interests.
Cephalon's management will discuss the company's third quarter 2009 performance in a conference call with investors beginning at 5:00 p.m. U.S. EDT today. To participate in the conference call, dial +1-785-830-1926 and refer to conference code number 8349052. Investors can listen to the call live by logging on to the company's website at www.cephalon.com and clicking on "Investors" then "Webcast." The conference call will be archived and available to investors for one week after the call.
About Cephalon, Inc.
Founded in 1987, Cephalon, Inc. is an international biopharmaceutical company dedicated to the discovery, development and commercialization of many unique products in four core therapeutic areas: central nervous system, inflammatory diseases, pain and oncology. A member of the Fortune 1000 and the S&P 500 Index, Cephalon currently employs approximately 3,000 people in the United States and Europe. U.S. sites include the company's headquarters in Frazer, Pennsylvania, and offices, laboratories or manufacturing facilities in West Chester, Pennsylvania, Salt Lake City, Utah, and suburban Minneapolis, Minnesota.
Cephalon has a growing presence in Europe, the Middle East and Africa. The Cephalon European headquarters and pre-clinical development center are located in Maisons-Alfort, France, just outside of Paris. Key business units are located in England, Ireland, France, Germany, Italy, Spain, the Netherlands for the Benelux countries, and Poland for Eastern and Central European countries. Cephalon Europe markets more than 30 products in four areas: central nervous system, pain, primary care and oncology.
The company's proprietary products in the United States include: AMRIX® (cyclobenzaprine hydrochloride extended-release capsules), TREANDA® for Injection, FENTORA® (fentanyl buccal tablet) [C-II], PROVIGIL® (modafinil) Tablets [C-IV], TRISENOX® (arsenic trioxide) injection, GABITRIL® (tiagabine hydrochloride), NUVIGIL® (armodafinil) Tablets [C-IV] and ACTIQ® (oral transmucosal fentanyl citrate) [C-II]. The company also markets numerous products internationally. Full prescribing information on its U.S. products is available at http://www.cephalon.com or by calling 1-800-896-5855.
In addition to historical facts or statements of current condition, this press release may contain forward-looking statements. Forward-looking statements provide Cephalon's current expectations or forecasts of future events. These may include statements regarding anticipated scientific progress on its research programs; development of potential pharmaceutical products; interpretation of clinical results; prospects for regulatory approval; manufacturing development and capabilities; market prospects for its products; net sales, adjusted net income and basic adjusted income per common share guidance for the full-year 2009 and full-year 2010 and SG&A and R&D guidance for the full-year 2009 and full-year 2010; and other statements regarding matters that are not historical facts. You may identify some of these forward-looking statements by the use of words in the statements such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" or other words and terms of similar meaning. Cephalon's performance and financial results could differ materially from those reflected in these forward-looking statements due to general financial, economic, regulatory and political conditions affecting the biotechnology and pharmaceutical industries as well as more specific risks and uncertainties facing Cephalon such as those set forth in its reports on Form 8-K, 10-Q and 10-K filed with the U.S. Securities and Exchange Commission. Given these risks and uncertainties, any or all of these forward-looking statements may prove to be incorrect. Therefore, you should not rely on any such factors or forward-looking statements. Furthermore, Cephalon does not intend to update publicly any forward-looking statement, except as required by law. The Private Securities Litigation Reform Act of 1995 permits this discussion.
This press release and/or the financial results attached to this press release include "Adjusted Net Income," "Basic Adjusted Income per Common Share," "Adjusted Net Income Guidance," "Basic Adjusted Income per Common Share Guidance," and "Diluted Adjusted Income Per Common Share," amounts that are considered "non-GAAP financial measures" under SEC rules. As required, we have provided reconciliations of these measures. Additional required information is located in the Form 8-K furnished to the SEC in connection with this press release.
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
As As
adjusted adjusted
2009 2008* 2009 2008*
------- --------- --------- ----------
REVENUES:
Net sales $535,223 $489,664 $1,588,610 $1,408,603
Other revenues 14,189 8,818 28,583 25,813
------- ------- --------- ---------
549,412 498,482 1,617,193 1,434,416
------- ------- --------- ---------
COSTS AND EXPENSES:
Cost of sales 90,456 121,477 293,633 312,711
Research and development 99,157 88,325 304,266 250,169
Selling, general and
administrative 194,068 222,948 618,314 631,832
Restructuring charges 1,062 1,497 3,944 6,973
Settlement reserve - 7,450 - 7,450
Acquired in-process
research and development 6,000 - 46,118 10,000
------- ------- --------- ---------
390,743 441,697 1,266,275 1,219,135
------- ------- --------- ---------
INCOME FROM OPERATIONS 158,669 56,785 350,918 215,281
------- ------ ------- -------
OTHER INCOME (EXPENSE):
Interest income 1,821 4,002 3,455 15,515
Interest expense (26,495) (19,013) (63,213) (62,080)
Other income (expense), net 3,775 (2,284) 42,418 1,488
------ ------ ------ -----
(20,899) (17,295) (17,340) (45,077)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 137,770 39,490 333,578 170,204
INCOME TAX EXPENSE (BENEFIT) 42,673 (66,108) 122,659 (17,727)
------ ------- ------- -------
NET INCOME 95,097 105,598 210,919 187,931
NET LOSS ATTRIBUTABLE
TO NONCONTROLLING INTEREST 7,625 - 35,150 -
----- ------- ------ -------
NET INCOME
ATTRIBUTABLE
TO CEPHALON, INC. $102,722 $105,598 $246,069 $187,931
======== ======== ======== ========
BASIC INCOME PER
COMMON SHARE
ATTRIBUTABLE
TO CEPHALON, INC. $1.38 $1.55 $3.44 $2.77
===== ===== ===== =====
DILUTED INCOME PER
COMMON SHARE
ATTRIBUTABLE
TO CEPHALON, INC. $1.31 $1.34 $3.17 $2.49
===== ===== ===== =====
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING
ATTRIBUTABLE TO
CEPHALON, INC. 74,647 68,118 71,541 67,855
====== ====== ====== ======
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING-
ASSUMING DILUTION
ATTRIBUTABLE TO CEPHALON,
INC. 78,431 78,920 77,552 75,580
====== ====== ====== ======
*As adjusted in accordance with the transition provisions of accounting
for convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement) and accounting for
noncontrolling interests in consolidated financial statements.
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income Attributable to
Cephalon, Inc.
(Unaudited)
Three Months Ended
September 30,
-------------
2009 2008
---- ----
GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC. $102,722 $105,598
======== ========
Cost of sales adjustments 21,968 (1) 54,569 (1)
Research and
development adjustments 1,318 (2) 259 (2)
Selling, general and
administrative adjustments 635 (3) 27,169 (3)
Restructuring charges 1,062 (4) 1,497 (4)
Settlement reserve - (5) 7,450 (5)
Interest expense adjustment 16,959 (6) 13,932 (6)
Other (income) expense adjustment (484) (7) - (7)
In-process research and
development adjustments 6,000 (8) - (8)
Income tax adjustment (23,475) (9) (117,569) (9)
------- --------
23,983 (12,693)
ADJUSTED NET INCOME
ATTRIBUTABLE TO CEPHALON, INC. $126,705 $92,905
======== =======
BASIC ADJUSTED INCOME PER COMMON SHARE $1.70 $1.36
===== =====
DILUTED ADJUSTED INCOME PER COMMON SHARE $1.62 $1.18
===== =====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 74,647 68,118
====== ======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 78,431 78,920
====== ======
Notes to Reconciliation of GAAP Net Income to Adjusted Net Income
(1) To exclude the on-going amortization of acquired intangible assets
($26.4M in 2009; $24.0M in 2008), accelerated depreciation related to
restructuring ($5.0M in 2009; $4.5M in 2008) and the reserve for modafinil
purchase commitments in excess of estimated requirements ($26.0M in 2008),
offset by the gain recognized in connection with an agreement to reduce
our excess modafinil purchase commitments ($9.5M in 2009).
(2) To exclude accelerated depreciation related to restructuring ($0.3M in
2009 and 2008) and charges related to payment for research and development
collaboration ($1.0M in 2009).
(3) To exclude charges related to the acquisition of Arana Therapeutics
Limited ($0.6M in 2009) and charges related to the estimated termination
payments due to Takeda Pharmaceuticals North America, Inc. ($27.2M).
(4) To exclude costs related to the CIMA restructuring.
(5) In 2008, to exclude charges related to the settlement of
investigations by the Offices of the Attorney General of Connecticut and
Massachusetts and estimated relator attorney fees.
(6) In 2009, to exclude non-cash interest expense associated with our
convertible debt ($17.0M in 2009; $10.2M in 2008) and accrued interest
related to the agreement in principle reached with the U.S. Attorney's
Office in Philadelphia ($3.7M in 2008).
(7) In 2009, to exclude foreign exchange gains on Australian Dollar
acquisition funds related to the acquisition of Arana Therapeutics
Limited.
(8) To exclude charges incurred in exchange for license rights to certain
of XOMA Ltd.'s proprietary antibody library materials.
(9) To reflect the tax effect of pre-tax adjustments at applicable tax
rates and certain other tax adjustments primarily related to the tax
benefits for the settlement with the U.S. Attorney's Office ($13.8M in
2009; $84.5M in 2008), for which the related expense was recorded in 2007
and for the states of Connecticut and Massachusetts, for which the related
expense was recorded in the third quarter of 2008.
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income Attributable
to Cephalon, Inc.
(Unaudited)
Nine Months
Ended
September 30,
-------------
2009 2008
---- ----
GAAP NET INCOME ATTRIBUTABLE
TO CEPHALON, INC. $246,069 $187,931
======== ========
Cost of sales adjustments 78,146 (1) 111,349 (1)
Research and
development adjustments 4,404 (2) 8,013 (2)
Selling, general and
administrative adjustments 14,379 (3) 30,124 (3)
Restructuring charges 3,944 (4) 6,973 (4)
Settlement reserve - 7,450 (5)
Interest expense adjustment 40,459 (6) 47,633 (6)
Other (income)expense adjustment (40,011) (7) -
In-process research and
development adjustments 46,118 (8) 10,000 (8)
Adjustment to
noncontrolling interest (819) (9) -
Income tax adjustment (54,192) (10) (156,513) (10)
------- --------
92,428 65,029
ADJUSTED NET INCOME
ATTRIBUTABLE TO CEPHALON, INC. $338,497 $252,960
======== ========
BASIC ADJUSTED INCOME
PER COMMON SHARE $4.73 $3.73
===== =====
DILUTED ADJUSTED INCOME
PER COMMON SHARE $4.36 $3.35
===== =====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 71,541 67,855
====== ======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-
ASSUMING DILUTION 77,552 75,580
====== ======
Notes to Reconciliation of GAAP Net Income to Adjusted Net Income
(1) To exclude the on-going amortization of acquired intangible
assets ($70.6M in 2009; $77.0M in 2008) and accelerated depreciation
related to restructuring ($14.0M in 2009; $8.3M in 2008) and the
reserve for modafinil purchase commitments in excess of estimated
requirements ($3.0M in 2009; $26.0M in 2008), offset by the gain
recognized in connection with an agreement to reduce our excess
modafinil purchase commitments ($9.5M in 2009).
(2) To exclude accelerated depreciation related to restructuring
($0.9M in 2009; $0.3M in 2008), charges related to payments for
several research and development collaborations ($2.0M in 2009; $6.0M
in 2008), charges related to our transaction with Arana Therapeutics
Limited ($1.5M in 2009) and other charges ($1.8M in 2008) related to
employee severance costs.
(3) In 2009, to exclude charges related to the acquisition of Arana
Therapeutics Limited ($7.8M) and charges related to our settlement
with Takeda ($6.5M) which resolves our remaining contractual
arrangements. In 2008, to exclude charges related to employee
severance costs ($3.0M) and charges related to the estimated
termination payments due to Takeda Pharmaceuticals North America,
Inc. ($27.2M).
(4) To exclude costs related to the CIMA restructuring.
(5) To exclude charges related to the settlement of investigations by
the Offices of the Attorney General of Connecticut and Massachusetts
and estimated relator attorney fees.
(6) To exclude non-cash interest expense associated with our
convertible debt ($40.5M in 2009; $36.3M in 2008) and accrued
interest related to the agreement in principle reached with the U.S.
Attorney's Office in Philadelphia ($11.3M in 2008).
(7) In 2009, to exclude the following gains and losses related
to the acquisition of Arana Therapeutics Limited:
- $6.6M gain on pre-bid Arana holdings;
- $2.8M loss on contingent consideration (90% ownership incentive
payment);
- $10.0M gain on the excess of net assets over consideration;
- $19.0M gains on foreign exchange derivative instruments;
- $5.6M foreign exchange gain on Australian Dollar acquisition funds;
and
- $1.6M dividend income related to our initial purchase of Arana
shares.
(8) To exclude charges related to the deconsolidation of Acusphere
($9.3M), the acquisition of worldwide license rights related to
LUPUZOR from ImmuPharma ($30.0M), license rights for bendamustine
hydrochloride in China and Hong Kong ($0.8M) and license rights to
certain of XOMA Ltd.'s proprietary antibody library materials ($6.0M)
in 2009 and the license of Acusphere HDDS technology for use in
oncology therapeutics in 2008.
(9) In 2009 to exclude the portion of non-cash charges related to our
acquisition of Arana Therapeutics Limited that are reflected in
adjustments (7) above but do not affect net income because they are
attributed to noncontrolling interests.
(10) To reflect the tax effect of pre-tax adjustments at applicable
tax rates and certain other tax adjustments primarily related to the
tax benefits for the settlement with the U.S. Attorney's Office
($13.8M in 2009; $84.5M in 2008), for which the related expense was
recorded in 2007 and for the states of Connecticut and Massachusetts,
for which the related expense was recorded in the third quarter of
2008.
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED SALES DETAIL
(In thousands)
(Unaudited)
Three Months Ended
September 30,
-------------
2009 2008
---- ----
United United
States Europe Total States Europe Total
------- ------ ----- ------- ------ -----
Net sales:
PROVIGIL $241,301 $16,693 $257,994 $241,366 $17,793 $259,159
NUVIGIL 20,991 - 20,991 - - -
GABITRIL 11,560 1,340 12,900 12,176 2,337 14,513
------ ----- ------ ------ ----- ------
CNS 273,852 18,033 291,885 253,542 20,130 273,672
ACTIQ 19,578 13,663 33,241 21,392 14,401 35,793
Generic OTFC 19,332 - 19,332 19,569 - 19,569
FENTORA 35,779 1,201 36,980 41,330 - 41,330
AMRIX 26,703 - 26,703 20,512 - 20,512
------ ----- ------ ------ - ------
Pain 101,392 14,864 116,256 102,803 14,401 117,204
TREANDA 54,532 - 54,532 24,551 - 24,551
Other 4,010 24,526 28,536 4,691 23,195 27,886
----- ------ ------ ----- ------ ------
Oncology 58,542 24,526 83,068 29,242 23,195 52,437
Other 6,632 37,382 44,014 11,351 35,000 46,351
------- ------ ------ ------ ------ ------
$440,418 $94,805 $535,223 $396,938 $92,726 $489,664
======== ======= ======== ======== ======= ========
%
Increase
(Decrease)
----------
United
States Europe Total
------- ------ -----
Net sales:
PROVIGIL -% (6%) -%
NUVIGIL - - -
GABITRIL (5) (43) (11)
CNS 8 (10) 7
ACTIQ (8) (5) (7)
Generic OTFC (1) - (1)
FENTORA (13) - (11)
AMRIX 30 - 30
Pain (1) 3 (1)
TREANDA 122 - 122
Other (15) 6 2
Oncology 100 6 58
Other (42) 7 (5)
11% 2% 9%
Nine Months Ended
September 30,
-------------
2009 2008
---- ----
United United
States Europe Total States Europe Total
------- ------ ------- ------- ------ -----
Net sales:
PROVIGIL $726,313 $47,111 $773,424 $658,777 $48,428 $707,205
NUVIGIL 37,777 - 37,777 - - -
GABITRIL 37,058 3,871 40,929 37,614 6,669 44,283
------ ----- ------ ------ ----- ------
CNS 801,148 50,982 852,130 696,391 55,097 751,488
ACTIQ 71,148 38,122 109,270 96,960 40,734 137,694
Generic OTFC 66,834 - 66,834 75,845 - 75,845
FENTORA 99,686 2,438 102,124 116,637 - 116,637
AMRIX 83,807 - 83,807 47,399 - 47,399
------ ------ ------ ------ - ------
Pain 321,475 40,560 362,035 336,841 40,734 377,575
TREANDA 160,549 - 160,549 38,932 - 38,932
Other 13,529 67,726 81,255 14,259 70,837 85,096
------ ------ ------ ------ ------ ------
Oncology 174,078 67,726 241,804 53,191 70,837 124,028
Other 26,167 106,474 132,641 37,995 117,517 155,512
------ ------- ------- ------ ------- -------
$1,322,868 $265,742 $1,588,610 $1,124,418 $284,185 $1,408,603
========== ======== ========== ========== ======== ==========
%
Increase
(Decrease)
----------
United
States Europe Total
------- ------ -----
Net sales:
PROVIGIL 10% (3%) 9%
NUVIGIL - - -
GABITRIL (1) (42) (8)
CNS 15 (7) 13
ACTIQ (27) (6) (21)
Generic OTFC (12) - (12)
FENTORA (15) - (12)
AMRIX 77 - 77
Pain (5) - (4)
TREANDA 312 - 312
Other (5) (4) (5)
Oncology 227 (4) 95
Other (31) (9) (15)
18% (6%) 13%
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
As adjusted
September 30, December 31,
2009 2008*
---- ----
CURRENT ASSETS:
Cash and cash equivalents $1,453,814 $524,459
Short term investments 131,403 -
Receivables, net 329,330 409,580
Inventory, net 240,349 117,297
Deferred tax assets, net 255,136 224,066
Other current assets 67,104 54,120
------ ------
Total current assets 2,477,136 1,329,522
INVESTMENTS 17,333 8,081
PROPERTY AND EQUIPMENT, net 459,381 467,449
GOODWILL 570,417 445,332
INTANGIBLE ASSETS, net 1,080,791 607,332
DEFERRED TAX ASSETS, net 1,224 46,074
DEBT ISSUANCE COSTS 20,112 11,838
OTHER ASSETS 32,313 167,314
------ -------
$4,658,707 $3,082,942
========== ==========
CURRENT LIABILITIES:
Current portion of long-term debt, net $810,081 $781,618
Accounts payable 94,982 87,079
Accrued expenses 408,752 304,415
------- -------
Total current liabilities 1,313,815 1,173,112
LONG-TERM DEBT 357,555 3,692
DEFERRED TAX LIABILITIES, net 197,333 77,932
OTHER LIABILITIES 144,877 163,123
------- -------
Total liabilities 2,013,580 1,417,859
--------- ---------
REDEEMABLE EQUITY 217,861 248,403
------- -------
EQUITY:
Cephalon Stockholders' Equity
Common stock, $0.01 par value 776 717
Additional paid-in capital 2,505,552 2,095,324
Treasury stock, at cost (201,734) (201,705)
Accumulated deficit (275,217) (521,286)
Accumulated other comprehensive income 114,146 43,630
------- ------
Total Cephalon stockholders' equity 2,143,523 1,416,680
Noncontrolling Interest 283,743 -
------- -
Total equity 2,427,266 1,416,680
--------- ---------
$4,658,707 $3,082,942
========== ==========
*As adjusted in accordance with the transition provisions of accounting
for convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement) and accounting for
noncontrolling interests in consolidated financial statements.
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months
Ended
September 30,
-------------
As
adjusted
2009 2008*
---- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $210,919 $187,931
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 136,403 128,772
Deferred income tax benefit (40,182) (22,761)
Stock-based compensation expense 36,710 32,543
Amortization of debt discount
and debt issuance costs 41,273 36,383
Gain on foreign exchange contracts (26,754) -
Gain on acquisition of Arana (10,008) -
Loss on disposals of property and equipment - 2,740
Impairment charges - 1,164
Acquired in-process research and
development from Acusphere deconsolidation 8,366 -
Shortfall tax benefits from stock-
based compensation (38) (451)
Other (5,041) (396)
Changes in operating assets and liabilities:
Receivables 94,204 (74,258)
Inventory (7,060) (14,557)
Other assets 32,206 (99,008)
Accounts payable, accrued expenses
and deferred revenues 89,192 34,526
Other liabilities (43,059) 70,149
------- ------
Net cash provided by operating activities 517,131 282,777
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (43,647) (55,689)
Acquisition of intangible assets - (25,575)
Cash balance from consolidation
of variable interest entity 52,563 -
Investment in Ception (75,000) -
Acquisition of Arana, net of cash acquired (232,527) -
Purchases of investments (9,292) (6,242)
Proceeds from foreign exchange contracts 26,754 -
Sales and maturities of
available-for-sale investments 5,074 7,596
----- -----
Net cash used for investing activities (276,075) (79,910)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 288,000 -
Proceeds from exercises of common
stock options 6,701 37,185
Windfall tax benefits from stock-based
compensation 1,259 4,592
Acquisition of treasury stock (29) (24)
Payments on and retirements of long-term debt (11,246) (216,093)
Net proceeds from issuance of
convertible subordinated notes 484,719 -
Proceeds from sale of warrants 37,640 -
Purchase of convertible note hedge (121,040) -
-------- -
Net cash provided by (used for)
financing activities 686,004 (174,340)
------- --------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS 2,295 (601)
----- ----
NET INCREASE IN CASH AND CASH EQUIVALENTS 929,355 27,926
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 524,459 818,669
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,453,814 $846,595
========== ========
*As adjusted in accordance with the transition provisions of accounting
for convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement) and accounting for
noncontrolling interests in consolidated financial statements.
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of Projected GAAP Basic Income per Common Share
to Basic Adjusted Income Per Common Share Guidance
(Unaudited)
Twelve Months Twelve Months
Ended Ended
December 31, December 31,
2009 2010
------------- ------------
Projected GAAP basic income
per common share $4.69 - $4.79 $4.95 - $5.15
===== ===== ===== =====
Amortization of current intangibles $1.34 - $1.34 $1.20 - $1.20
Accelerated depreciation
adjustment- CIMA $0.09 - $0.09 $0.08 - $0.08
Accelerated depreciation
adjustment- Mitry-Mory $0.18 - $0.18 $0.09 - $0.09
Research and development
adjustments $0.05 - $0.05 $- - $-
Selling, general and
administrative adjustments $0.20 - $0.20 $- - $-
Cost of goods sold adjustments $(0.09) - $(0.09) $- - $-
Restructuring adjustments $0.07 - $0.07 $0.08 - $0.08
Acquired in-process research
and development adjustments $0.64 - $0.64 $- - $-
Other income (expense) adjustments $(0.56) - $(0.56) $- - $-
Interest expense adjustments $0.80 - $0.80 $0.86 - $0.86
Tax effect of pre-tax adjustments
at the applicable tax rates $(1.11) - $(1.11) $(0.76) - $(0.76)
------ ------ ------ ------
Basic adjusted income
per common share guidance $6.30 - $6.40 $6.50 - $6.70
===== ===== ===== =====
The company's guidance is being issued based on certain assumptions
including:
- Adjusted effective tax rate of approximately 34.0 percent in 2009 and
33.0 percent in 2010; and
- Weighted average number of common shares outstanding of 72.5 and 76.2
million shares for the twelve months ended December 31, 2009 and 2010,
respectively.
Contacts:
Media:
Sheryl Williams
610-738-6493
swilliam@cephalon.com
Investors:
Robert (Chip) Merritt
610-738-6376
cmerritt@cephalon.com
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