DGAP-News: Warner Chilcott Reports Operating Results for the Quarter Ended June 30, 2013
(firmenpresse) - Warner Chilcott
24.07.2013 22:10
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Revenue Growth of DELZICOL and LO LOESTRIN FE Drive Strong Second Quarter 2013
Financial Results
DUBLIN, Ireland, 2013-07-24 22:10 CEST (GLOBE NEWSWIRE) --
Warner Chilcott plc (Nasdaq:WCRX) today announced its results for the quarter
ended June 30, 2013.
Total revenue in the quarter ended June 30, 2013 was $613 million, a decrease
of $25 million, or 4%, compared to the quarter ended June 30, 2012. This
decrease was driven primarily by a decline in ACTONEL revenues of $54 million,
due in large part to overall declines in the U.S. oral bisphosphonate market
and continued declines in ACTONEL revenues in Western Europe and Canada
following the 2010 loss of exclusivity in both regions, offset, in part, by
combined net sales growth in our gastroenterology franchise. Within our
gastroenterology franchise, a decrease in ASACOL net sales of $47 million in
the quarter ended June 30, 2013 as compared to the prior year quarter, due
primarily to our transition from ASACOL 400 mg to DELZICOL, was more than
offset by DELZICOL net sales of $67 million in the quarter ended June 30, 2013.
We also reported net sales growth in certain other promoted products, primarily
LO LOESTRIN FE, which saw an increase in net sales of $25 million, or 74%, in
the quarter ended June 30, 2013 as compared to the prior year quarter.
We reported GAAP net income of $108 million, or $0.43 per diluted share, in the
quarter ended June 30, 2013, compared to GAAP net income of $53 million, or
$0.21 per diluted share, in the quarter ended June 30, 2012. Cash net income
(or CNI, as defined below) for the quarter ended June 30, 2013 was $222
million, compared to $278 million in the prior year quarter. Adjusted CNI was
$232 million, or $0.92 per diluted share, in the quarter ended June 30, 2013,
compared to adjusted CNI of $258 million, or $1.03 per diluted share, in the
prior year quarter. In computing adjusted CNI for the quarter ended June 30,
2013, we excluded restructuring income of $1 million, net of tax, related to
the restructuring of certain of our Western European operations and $11
million, net of tax, of fees related to the Actavis Transaction (defined
below). In computing adjusted CNI for the quarter ended June 30, 2012, we
excluded a gain of $20 million, net of tax, relating to the reversal of the
liability for contingent milestone payments to Novartis Pharmaceuticals
Corporation ('Novartis') in connection with our acquisition of the U.S. rights
to ENABLEX in October 2010 (the 'ENABLEX Acquisition'), based on the
determination that it was no longer probable that we would be required to make
such payments.
References in this press release to 'cash net income' or 'CNI' mean our GAAP
net income adjusted for the after-tax effects of two non-cash items:
amortization (including impairments, if any) of intangible assets and
amortization (including write-offs, if any) of deferred loan costs related to
our debt. Adjusted CNI represents CNI as further adjusted to exclude the
impact, on an after-tax basis, of the Western European restructuring,
litigation-related charges, Actavis Transaction fees and the gain relating to
the reversal of the liability for contingent milestone payments.
Reconciliations from our reported results in accordance with Generally Accepted
Accounting Principles in theUnited States ('GAAP') to CNI, adjusted CNI and
adjusted earnings before interest, taxes, depreciation and amortization
('Adjusted EBITDA') for all periods presented are included in the tables at the
end of this press release.
Actavis Transaction
On May 19, 2013, we entered into a Transaction Agreement (the 'Transaction
Agreement') with, among others, Actavis, Inc., a Nevada corporation
('Actavis'), Actavis Limited, a private limited company organized under the
laws of Ireland ('New Actavis'), and Actavis W.C. Holding 2 LLC, a limited
liability company organized in Nevada and a wholly-owned subsidiary of New
Actavis ('U.S. Merger Sub'). Under the terms of the Transaction Agreement, (a)
New Actavis will acquire us (the 'Acquisition') pursuant to a scheme of
arrangement under Section 201 of the Irish Companies Act 1963 (the 'Scheme')
and (b) U.S. Merger Sub will merge with and into Actavis, with Actavis as the
surviving corporation in the merger (the 'Merger' and, together with the
Acquisition, the 'Transaction' or the 'Actavis Transaction'). At the effective
time of the Scheme, each of our shareholders will be entitled to receive 0.160
of a newly issued New Actavis ordinary share in exchange for each ordinary
share of ours held by such shareholder. Cash will be paid in lieu of any
fractional shares of New Actavis. At the effective time of the Merger, each
outstanding Actavis common share will be converted into the right to receive
one New Actavis ordinary share. As a result of the Transaction, both we and
Actavis will become wholly owned subsidiaries of New Actavis.
The Transaction Agreement provides that if the Transaction Agreement is
terminated (i) by us following the board of directors of Actavis changing its
recommendation to the Actavis stockholders to approve the Transaction Agreement
(except in limited circumstances) or (ii) by us or Actavis following the
failure of the Actavis stockholders to approve the Transaction Agreement
following the board of directors of Actavis changing its recommendation (except
in limited circumstances), then Actavis shall pay to us $160 million, subject
to reduction in certain circumstances. The Transaction Agreement also contains
customary representations, warranties and covenants by Actavis and us.
In addition, on May 19, 2013, we and Actavis entered into an Expenses
Reimbursement Agreement (the 'ERA'), the terms of which have been consented to
by the Irish Takeover Panel for purposes of Rule 21.2 of the Irish Takeover
Rules only. Under the ERA, we have agreed to pay to Actavis the documented,
specific and quantifiable third party costs and expenses incurred by Actavis in
connection with the Acquisition upon the termination of the Transaction
Agreement in certain specified circumstances. The maximum amount payable by us
to Actavis pursuant to the ERA is an amount equal to one percent of the
aggregate value of our issued share capital.
The proposed Transaction has been unanimously approved by our board of
directors and the board of directors of Actavis, and is supported by the
management teams of both companies. We currently expect the Transaction to
close in the second half of 2013, subject to the satisfaction of customary
closing conditions, including the approval of the shareholders of both
companies, certain regulatory approvals and the approval of the Irish High
Court. On July 11, 2013, Actavis and we announced that we had each received a
request for additional information from the Federal Trade Commission ('FTC') in
connection with the Transaction. The effect of the second request is to extend
the waiting period imposed by the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, until 30 days after Actavis and we have substantially
complied with the request, unless that period is extended voluntarily by the
parties or terminated sooner by the FTC. On July 15, 2013, the German Federal
Cartel Office granted clearance in connection with the Transaction.
New Product Approvals
In May 2013, the U.S. Food and Drug Administration ('FDA') approved a new oral
contraceptive, norethindrone acetate and ethinyl estradiol chewable tablets and
ferrous fumarate tablets, for the prevention of pregnancy. In July 2013, the
FDA approved the use of the MINASTRIN 24 FE trade name for this product, and we
anticipate that we will commercially launch this product, under the MINASTRIN
24 FE trade name, in early August 2013. We expect that MINASTRIN 24 FE will
become a promotional priority for our women's healthcare sales force upon
launch.
In April 2013, the FDA approved a 200 mg strength of DORYX (doxycycline
hyclate) Delayed-Release Tablets, a tetracycline-class oral antibiotic. We
commercially launched DORYX Delayed-Release 200 mg Tablets in July 2013.
In February 2013, the FDA approved DELZICOL (mesalamine) 400 mg delayed-release
capsules, our new 400 mg mesalamine product indicated for the treatment of
mildly to moderately active ulcerative colitis and for the maintenance of
remission of ulcerative colitis. We commercially launched DELZICOL in March
2013, and it is currently a promotional focus of our gastroenterology sales
force efforts.
Semi-Annual Dividend
On June 14, 2013, we paid a semi-annual cash dividend under our dividend policy
(the 'Dividend Policy') in the amount of $0.25 per share, or $63 million in the
aggregate. Any declaration by our Board of Directors to pay future cash
dividends subsequent to the June 2013 semi-annual dividend is subject to
Actavis's consent under the terms of the Transaction Agreement and would also
depend on our earnings and financial condition and other relevant factors at
such time.
Revenue
Total revenue in the quarter ended June 30, 2013 was $613 million, a decrease
of $25 million, or 4%, compared to the quarter ended June 30, 2012. This
decrease was driven primarily by a decline in ACTONEL revenues of $54 million,
due in large part to overall declines in the U.S. oral bisphosphonate market
and continued declines in ACTONEL revenues in Western Europe and Canada
following the 2010 loss of exclusivity in both regions, offset, in part, by
combined net sales growth in our gastroenterology franchise. Within our
gastroenterology franchise, a decrease in ASACOL net sales of $47 million in
the quarter ended June 30, 2013 as compared to the prior year quarter, due
primarily to our transition from ASACOL 400 mg to DELZICOL, was more than
offset by DELZICOL net sales of $67 million in the quarter ended June 30, 2013.
We also reported net sales growth in certain other promoted products, primarily
LO LOESTRIN FE, which saw an increase in net sales of $25 million, or 74%, in
the quarter ended June 30, 2013 as compared to the prior year quarter.
Net sales of our oral contraceptive products increased $21 million, or 16%, in
the quarter ended June 30, 2013, as compared to the prior year quarter.
LOESTRIN 24 FE generated net sales of $91 million in the quarter ended June 30,
2013, a decrease of 6%, compared with $97 million in the prior year quarter.
LOESTRIN 24 FE filled prescriptions continue to be negatively impacted by our
shift in promotional focus to LO LOESTRIN FE beginning in early 2011. More
specifically, the decrease in LOESTRIN 24 FE net sales in the quarter ended
June 30, 2013 as compared to the prior year quarter was primarily due to a
decrease in filled prescriptions of 27%, offset, in part, by higher average
selling prices and a decrease in sales-related deductions relative to the prior
year quarter. LO LOESTRIN FE, which is currently the primary promotional focus
of our women's healthcare sales force efforts, generated net sales of $59
million and $34 million in the quarters ended June 30, 2013 and 2012,
respectively, an increase of 74%. The increase in LO LOESTRIN FE net sales in
the quarter ended June 30, 2013 compared to the prior year quarter primarily
relates to an increase in filled prescriptions of 61%, a decrease in
sales-related deductions and higher average selling prices. In May 2013, the
FDA approved a new oral contraceptive, norethindrone acetate and ethinyl
estradiol chewable tablets and ferrous fumarate tablets, for the prevention of
pregnancy. In July 2013, the FDA approved the use of the MINASTRIN 24 FE trade
name for this product, and we anticipate that we will commercially launch this
product, under the MINASTRIN 24 FE trade name, in early August 2013. We expect
that MINASTRIN 24 FE will become a promotional priority for our women's
healthcare sales force upon launch.
Total ACTONEL revenues were $96 million in the quarter ended June 30, 2013, a
decrease of $54 million, or 36%, compared to the prior year quarter. Total
ACTONEL revenues were comprised of the following components:
Quarter Ended
June 30, Increase (decrease)
-----------------------------------
(dollars in millions) 2013 2012 Dollars Percent
-----------------------------------
United States $ 61 $ 90 $ (29) (32)%
Non - U.S. 23 44 (21) (48)%
-----------------------------------
Total net sales 84 134 (50) (37)%
Other revenue 12 16 (4) (25)%
-----------------------------------
Total ACTONEL revenues $ 96 $ 150 $ (54) (36)%
===================================
In the United States, ACTONEL net sales decreased $29 million, or 32%, in the
quarter ended June 30, 2013, as compared to the prior year quarter, primarily
due to a decrease in filled prescriptions of 34% and an increase in
sales-related deductions, offset, in part, by higher average selling prices and
an expansion of pipeline inventories as compared to the prior year quarter. In
the United States, ACTONEL filled prescriptions continue to decline due in part
to declines in filled prescriptions within the overall U.S. oral bisphosphonate
market. The decline in ACTONEL net sales outside of the United States in the
quarter ended June 30, 2013 was due to the continued declines in ACTONEL
revenues in Western Europe and Canada following the 2010 loss of exclusivity in
both regions. We expect to continue to experience significant declines in total
ACTONEL revenues in future periods. ATELVIA, which we began to promote in the
United States in early 2011 and in Canada in early 2012, generated net sales of
$18 million and $16 million in the quarters ended June 30, 2013 and 2012,
respectively. In the United States, ATELVIA net sales in the quarters ended
June 30, 2013 and 2012 were $16 million and $14 million, respectively, an
increase of 14%. The increase in ATELVIA net sales in the United States in the
quarter ended June 30, 2013 compared to the prior year quarter was due to
higher average selling prices and a decrease in sales-related deductions,
offset, in part, by a decrease in filled prescriptions of 13%.
Net sales of ESTRACE Cream increased $7 million, or 15%, in the quarter ended
June 30, 2013, as compared to the prior year quarter. The increase in ESTRACE
Cream net sales in the quarter ended June 30, 2013 compared to the prior year
quarter was primarily due to higher average selling prices, an increase in
filled prescriptions of 8% and a decrease in sales-related deductions relative
to the prior year quarter.
Net sales of our gastroenterology products increased $20 million, or 11%, in
the quarter ended June 30, 2013, compared to the prior year quarter. Net sales
of ASACOL were $140 million in the quarter ended June 30, 2013, a decrease of
$47 million, or 25%, compared to the prior year quarter. ASACOL net sales in
North America totaled $128 million and $175 million in the quarters ended June
30, 2013 and 2012, respectively, including net sales in the United States of
$122 million and $169 million in the quarters ended June 30, 2013 and 2012,
respectively. The decrease in ASACOL net sales in the United States in the
quarter ended June 30, 2013 as compared to the prior year quarter was due
primarily to our decision to cease trade shipments of ASACOL 400 mg in the
United States as we transitioned from ASACOL 400 mg to DELZICOL in March 2013,
offset, in part, by an increase in net sales of ASACOL HD (800 mg). In February
2013, the FDA approved DELZICOL, which we commercially launched in March 2013
and is currently a promotional focus of our gastroenterology sales force
efforts. Net sales of DELZICOL for the quarter ended June 30, 2013 were $67
million. As a result of the terms pursuant to which we shipped the initial
trade units of DELZICOL in the quarter ended March 31, 2013, we deferred $44
million of the gross revenues (which do not account for applicable
sales-related deductions) generated thereby since the criteria to record such
revenues were not met as of March 31, 2013. We recognized all of such deferred
gross revenues (as reduced to account for applicable sales-related deductions)
in our condensed consolidated statement of operations for the quarter ended
June 30, 2013 as the criteria to record such revenues were achieved. We expect
that the loss of ASACOL 400 mg net sales in the United States will be offset,
in part, by net sales of DELZICOL and increased net sales of ASACOL HD (800
mg).
Net sales of ENABLEX decreased $11 million, or 27%, in the quarter ended June
30, 2013, compared to the prior year quarter. ENABLEX net sales in the quarter
ended June 30, 2013 were impacted by a decrease in filled prescriptions of 45%
and a contraction of pipeline inventories, offset, in part, by a decrease in
sales-related deductions and higher selling prices relative to the prior year
quarter. We expect a continued decline in ENABLEX net sales in 2013 due in part
to the promotional priorities of our urology sales force.
Net sales of DORYX decreased $1 million, or 4%, in the quarter ended June 30,
2013, compared to the prior year quarter. The decrease in DORYX net sales in
the quarter ended June 30, 2013 relative to the prior year quarter was due
primarily to the introduction of generic competition for our DORYX 150 mg
product in early May 2012. In April 2013, the FDA approved a 200 mg strength of
DORYX (doxycycline hyclate) Delayed-Release Tablets, which we commercially
launched in July 2013.
Cost of Sales (Excluding Amortization and Impairment of Intangible Assets)
Cost of sales (excluding amortization and impairment) increased $11 million, or
16%, in the quarter ended June 30, 2013 as compared to the prior year quarter,
due primarily to costs incurred in the current year period in relation to
pre-launch preparation for products approved during the first half of 2013, as
well as changes in the mix and volume of products sold.
Selling, General and Administrative ('SG&A') Expenses
SG&A expenses for the quarter ended June 30, 2013 were $202 million, an
increase of $29 million, or 17%, from $173 million in the prior year quarter.
Advertising and promotion ('A&P') expenses decreased $10 million, or 40%, in
the quarter ended June 30, 2013, as compared to the prior year quarter,
primarily due to a decrease in promotional expenses relative to the prior year
quarter. Selling and distribution expenses decreased $9 million, or 9%, in the
quarter ended June 30, 2013, as compared to the prior year quarter, primarily
due to a $10 million reduction in co-promote expenses as a result of the
continued declines in ACTONEL net sales in Western Europe and Canada following
the 2010 loss of exclusivity in both regions. Specifically, included in selling
and distribution expenses were co-promote expenses of $50 million and $60
million in the quarters ended June 30, 2013 and 2012, respectively (of which,
$44 million related to the United States and Puerto Rico in each quarter).
General, administrative and other ('G&A') expenses increased $48 million, or
112%, in the quarter ended June 30, 2013 as compared to the prior year quarter.
Included in G&A expenses in the quarter ended June 30, 2013 were $11 million of
fees related to the Transaction. Included in G&A expenses in the quarter ended
June 30, 2012 was a $20 million gain relating to the reversal of the liability
for contingent milestone payments to Novartis in connection with the ENABLEX
Acquisition, as such payments have been deemed no longer probable of being paid
in accordance with ASC Topic 450 'Contingencies'. Excluding the impact of the
$11 million of Transaction fees and the $20 million contingent gain, G&A
expenses increased $17 million, or 27%, in the quarter ended June 30, 2013
relative to the prior year quarter, primarily due to an increase in legal and
professional fees.
Restructuring (Income) / Costs
In April 2011, we announced a plan to restructure our operations in Belgium,
the Netherlands, France, Germany, Italy, Spain, Switzerland and the United
Kingdom. The restructuring did not impact our operations at our headquarters in
Dublin, Ireland, our facilities in Dundalk, Ireland, Larne, Northern Ireland or
Weiterstadt, Germany or our commercial operations in the United Kingdom. We
determined to proceed with the restructuring following the completion of a
strategic review of our operations in our Western European markets where our
product ACTONEL lost exclusivity in late 2010.
In the quarter ended June 30, 2013, we recorded restructuring income of $2
million ($1 million, net of tax), which was comprised of pretax severance
income of $1 million recorded based on estimated future payments in accordance
with specific contractual terms and employee specific events and
pension-related curtailment gains of $1 million. In the quarter ended June 30,
2012, we incurred pretax severance costs of $7 million, which were offset, in
full, by pension-related curtailment gains of $7 million. In computing adjusted
CNI, we add back to CNI the after-tax impact of these restructuring (income) /
costs. We do not expect to record any material expenses relating to the Western
European restructuring in future periods.
Research and Development ('R&D')
Our investment in R&D for the quarter ended June 30, 2013 was $33 million, an
increase of $10 million, or 43%, as compared to the prior year quarter. Our R&D
expenses consist of our internal development costs, fees paid to contract
development groups, regulatory fees and license fees paid to third parties. R&D
expenditures are subject to fluctuation due to the timing and stages of
development of our various R&D projects.
Amortization and Impairment of Intangible Assets
Amortization of intangible assets in the quarters ended June 30, 2013 and 2012
was $110 million and $124 million, respectively. Our amortization methodology
is calculated on either an economic benefit model or on a straight-line basis
to match the expected useful life of the asset, with identifiable assets
assessed individually or by product family. The economic benefit model is based
on expected future cash flows and typically results in accelerated amortization
for most of our products. We continuously review the remaining useful lives of
our identified intangible assets based on each product or product family's
estimated future cash flows. In the event that we do not achieve the expected
cash flows from any of our products or lose market exclusivity for any of our
products as a result of the expiration of a patent, the expiration of FDA
exclusivity or an at-risk launch of a competing generic product, we may
accelerate amortization or record an impairment charge in respect of the
related intangible asset, which may be material. Based on our review of future
cash flows, we recorded an impairment charge in the quarter ended June 30, 2012
of $106 million, $101 million of which was attributable to the impairment of
our DORYX intangible asset following Mylan Pharmaceuticals Inc.'s introduction
of a generic product in early May 2012. We expect our 2013 amortization expense
to decline compared to 2012 as most of our intangible assets are amortized on
an accelerated basis.
Net Interest Expense
Net interest expense for the quarter ended June 30, 2013 was $60 million, an
increase of $8 million, or 15%, compared to $52 million in the prior year
quarter. Included in net interest expense in the quarter ended June 30, 2013
was $8 million relating to the write-off of deferred loan costs associated with
a $150 million optional prepayment of term loan indebtedness made during the
quarter ended June 30, 2013 under our senior secured credit facilities.
Excluding this write-off of deferred loan costs, net interest expense for the
quarter ended June 30, 2013 was flat as compared to the prior year quarter as
higher interest expense on outstanding indebtedness resulting from an increase
in the weighted average amount of indebtedness outstanding, was offset, in
full, by a reduction in the amortization of deferred loan costs.
Net Income, Cash Net Income and Adjusted Cash Net Income
For the quarter ended June 30, 2013, we reported GAAP net income of $108
million, or $0.43 per diluted share, CNI of $222 million, and adjusted CNI of
$232 million, or $0.92 per diluted share. Our earnings and adjusted CNI per
share calculations for the quarter are based on 252.8 million diluted ordinary
shares outstanding. In calculating CNI, we add back the after-tax impact of the
amortization (including impairments, if any) of intangible assets and the
amortization (including write-offs, if any) of deferred loan costs related to
our debt. These items are tax-effected at the estimated marginal rates
attributable to them. In the quarter ended June 30, 2013, the marginal tax rate
associated with the amortization of intangible assets was 5% and the marginal
tax rate for the amortization (including write-offs) of deferred loan costs was
6%. In calculating adjusted CNI in the quarter ended June 30, 2013, we excluded
the $1 million after-tax impact of restructuring income relating to the Western
European restructuring and the $11 million after-tax impact of fees related to
the Actavis Transaction.
Liquidity, Balance Sheet and Cash Flows
As of June 30, 2013, our cash on hand was $224 million and our total
outstanding debt was $3,490 million, which consisted of $2,233 million of term
loan borrowings under our senior secured credit facilities, $1,250 million
aggregate principal amount of 7.75% senior notes due 2018 (the '7.75% Notes'),
and $7 million of unamortized premium related to the 7.75% Notes. We generated
$175 million of cash from operating activities in the quarter ended June 30,
2013, compared with $156 million of cash from operating activities in the prior
year quarter, an increase of $19 million, due primarily to the timing of
movements in working capital.
Additional Information Related to Net Sales
Period-over-period changes in the net sales of our products are a function of a
number of factors, including changes in market demand, gross selling prices,
sales-related deductions from gross sales to arrive at net sales and the levels
of pipeline inventories of our products held by our direct and indirect
customers. In addition, the launch of new products, the loss of exclusivity for
our products and transactions such as product acquisitions and dispositions may
also, from time to time, impact our period over period net sales. We use IMS
Health, Inc. ('IMS') estimates of filled prescriptions for our products as a
proxy for market demand in the United States. Although these estimates provide
a broad indication of market trends for our products in the United States, the
relationship between IMS estimates of filled prescriptions and actual unit
sales can vary, and as a result, such estimates may not always be an accurate
predictor of our unit sales. When our unit sales to our direct customers in any
period exceed market demand for our products by end-users (as measured by
estimates of filled prescriptions or its equivalent in units), our sales in
excess of demand must be absorbed before our direct customers begin to order
again, thus potentially reducing our expected future unit sales. Conversely,
when market demand by end-users of our products exceeds unit sales to our
direct customers in any period, our expected future unit sales to our direct
customers may increase. We refer to the estimated amount of inventory held by
ourdirect customers and pharmacies and other organizations that purchase our
product from our direct customers, which is generally measured by the estimated
number of days of end-user demand on hand, as 'pipeline inventory.' Pipeline
inventories expand and contract in the normal course of business. As a result,
our unit sales to our direct customers in any period may exceed or be less than
actual market demand for our products by end-users (as measured by estimates of
filled prescriptions). When comparing reported product sales between periods,
it is important to not only consider market demand by end-users, but also to
consider whether estimated pipeline inventories increased or decreased during
each period.
2013 Financial Guidance Update
Based on our second quarter results and current outlook for the remainder of
2013, we are updating our guidance ranges for adjusted SG&A expenses and GAAP
net income, as well as adjusted CNI and adjusted CNI per share. The update is
due primarily to lower than expected A&P expenses, as well as the incurrence of
fees related to the Actavis Transaction. Adjusted CNI per share adds back the
after-tax impact of (i) restructuring income relating to the Western European
restructuring, (ii) litigation-related charges and (iii) fees related to the
Actavis Transaction. For a complete overview of our updated full year 2013
guidance, including material assumptions, please refer to the table at the last
page of this press release.
The Company
Warner Chilcott is a leading specialty pharmaceutical company currently focused
on the women's healthcare, gastroenterology, urology and dermatology segments
of the branded pharmaceuticals market, primarily in North America. We are a
fully integrated company with internal resources dedicated to the development,
manufacture and promotion of our products. WCRX-F
Forward Looking Statements
This press release contains forward-looking statements, including statements
concerning the proposed transaction with Actavis, our industry, our operations,
our anticipated financial performance and financial condition and our business
plans, growth strategy and product development efforts. These statements
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
The words 'may,' 'might,' 'will,' 'should,' 'estimate,' 'project,' 'plan,'
'anticipate,' 'expect,' 'intend,' 'outlook,' 'believe' and other similar
expressions are intended to identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. These forward-looking statements are based
on estimates and assumptions by our management that, although we believe to be
reasonable, are inherently uncertain and subject to a number of risks and
uncertainties. The following represent some, but not necessarily all, of the
factors that could cause actual results to differ from historical results or
those anticipated or predicted by our forward-looking statements: the timing to
consummate the proposed transaction with Actavis; the risk that a condition to
closing of the proposed transaction with Actavis may not be satisfied; the risk
that a regulatory approval that may be required for the proposed transaction
with Actavis is delayed, is not obtained or is obtained subject to conditions
that are not anticipated; New Actavis' ability to achieve the synergies and
value creation contemplated by the proposed acquisition; New Actavis' ability
to promptly and effectively integrate Actavis' and our businesses; the
diversion of management time on transaction-related issues; our substantial
indebtedness, including increases in the LIBOR rates on our variable-rate
indebtedness above the applicable floor amounts; competitive factors and market
conditions in the industry in which we operate, including the approval and
introduction of generic or branded products that compete with our products; our
ability to protect our intellectual property; a delay in qualifying any of our
manufacturing facilities that produce our products, production or regulatory
problems with either our own manufacturing facilities or those of third party
manufacturers, packagers or API suppliers upon whom we may rely for some of our
products or other disruptions within our supply chain; pricing pressures from
reimbursement policies of private managed care organizations and other third
party payors, government sponsored health systems and regulatory reforms, and
the continued consolidation of the distribution network through which we sell
our products; changes in tax laws or interpretations that could increase our
consolidated tax liabilities; government regulation, including U.S. and foreign
health care reform, affecting the development, manufacture, marketing and sale
of pharmaceutical products, including our ability and the ability of companies
with whom we do business to obtain necessary regulatory approvals; adverse
outcomes in our outstanding litigation, regulatory investigations or
arbitration matters or an increase in the number of such matters to which we
are subject; the loss of key senior management or scientific staff; our ability
to manage the growth of our business by successfully identifying, developing,
acquiring or licensing new products at favorable prices and marketing such new
products; our ability to obtain regulatory approval and customer acceptance of
new products, and continued customer acceptance of our existing products; and
the other risks identified in our periodic filings including our Annual Report
on Form 10-K for the year ended December 31, 2012, and from time-to-time in our
other investor communications.
We caution you that the foregoing list of important factors is not exclusive.
In addition, in light of these risks and uncertainties, the matters referred to
in our forward-looking statements may not occur. We undertake no obligation to
publicly update or revise any forward-looking statement as a result of new
information, future events or otherwise, except as may be required by law.
The guidance regarding GAAP net income, adjusted CNI and adjusted CNI per share
contained in this announcement constitutes a profit forecast for the purposes
of the Irish Takeover Rules. In accordance with Rule 28.4 of the Irish Takeover
Rules, this profit forecast shall be repeated in the Registration Statement on
Form S-4 filed by New Actavis with the Securities and Exchange Commission
('SEC') in connection with the Transaction Agreement and the reports required
by Rule 28.3 shall be mailed to Warner Chilcott shareholders with the
definitive proxy statement/prospectus relating to the Transaction Agreement.
Statement Required by the Takeover Rules
The directors of Warner Chilcott accept responsibility for the information
contained in this announcement. To the best of the knowledge and belief of the
directors of Warner Chilcott (who have taken all reasonable care to ensure such
is the case), the information contained in this announcement is in accordance
with the facts and does not omit anything likely to affect the import of such
information.
Deutsche Bank Securities Inc. is acting for Warner Chilcott as financial
advisor and is not acting as financial advisor to anyone else in connection
with the matters referred to in this announcement and will not be responsible
to anyone other than Warner Chilcott in connection therewith for providing
advice in relation to the matters referred to in this announcement. Deutsche
Bank Securities Inc. has delegated certain of its financial advisory functions
and responsibilities to Deutsche Bank AG, acting through its London branch.
Deutsche Bank AG, acting through its London branch is performing such delegated
functions and responsibilities exclusively for Warner Chilcott and is not
acting as a financial adviser for any other person in connection with the
matters referred to in this announcement and will not be responsible to any
such other person for providing advice in relation to the matters referred to
in this announcement.Deutsche Bank AG is authorised under German Banking Law
(competent authority: BaFin - Federal Financial Supervisory Authority) and
authorised and subject to limited regulation by the Financial Conduct
Authority. Details about the extent of Deutsche Bank AG's authorization and
regulation by the Financial Conduct Authority are available on request.
Important Information For Investors And Shareholders
This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval. New
Actavis has filed with the SEC a registration statement on Form S-4 containing
a preliminary joint proxy statement of Warner Chilcott and Actavis that also
constitutes a preliminary prospectus of New Actavis. The registration statement
has not been declared effective by the SEC. After the registration statement
has been declared effective, each of Actavis and Warner Chilcott will mail to
its stockholders or shareholders a definitive proxy statement/prospectus. In
addition, each of New Actavis, Actavis and Warner Chilcott will file with the
SEC other documents with respect to the proposed transaction. INVESTORS AND
SECURITY HOLDERS OF ACTAVIS AND WARNER CHILCOTT ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED OR TO BE FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may
obtain free copies of the registration statement and the proxy
statement/prospectus and other documents filed with the SEC by New Actavis,
Actavis and Warner Chilcott through the website maintained by the SEC at
http://www.sec.gov. Copies of the documents filed with the SEC by New Actavis
and Actavis may be obtained free of charge on Actavis's internet website at
www.actavis.com or by contacting Actavis's Investor Relations Department at
(862) 261-7488. Copies of the documents filed with the SEC by Warner Chilcott
may be obtained free of charge on Warner Chilcott's internet website at
www.wcrx.com or by contacting Warner Chilcott's Investor Relations Department
at (973) 442-3200.
Actavis, Warner Chilcott, their respective directors and certain of their
executive officers may be considered participants in the solicitation of
proxies in connection with the proposed transaction. Information about the
directors and executive officers of Warner Chilcott is set forth in its Annual
Report on Form 10-K for the year ended December 31, 2012, which was filed with
the SEC on February 22, 2013, its Quarterly Report on Form 10-Q for the quarter
ended March 31, 2013, which was filed with the SEC on May 10, 2013, its proxy
statement for its 2013 annual general meeting of shareholders, which was filed
with the SEC on April 5, 2013, and its Current Reports on Form 8-K that were
filed with the SEC on May 2, 2013 and May 8, 2013. Information about the
directors and executive officers of Actavis is set forth in its Annual Report
on Form 10-K for the year ended December 31, 2012, which was filed with the SEC
on February 28, 2013, its Quarterly Report on Form 10-Q for the quarter ended
March 31, 2013, which was filed with the SEC on May 7, 2013, its proxy
statement for its 2013 annual meeting of stockholders, which was filed with the
SEC on March 29, 2013, and its Current Reports on Form 8-K that were filed with
the SEC on January 29, 2013 and May 13, 2013. Other information regarding the
participants in the proxy solicitations and a description of their direct and
indirect interests, by security holdings or otherwise, are contained in the
preliminary proxy statement/prospectus filed with the SEC and will be contained
in the definitive proxy statement/prospectus and other relevant materials to be
filed with the SEC when they become available.
Reconciliations to GAAP Net Income
CNI and Adjusted CNI
To supplement our condensed consolidated financial statements presented in
accordance with GAAP, we provide a summary to show the computation of CNI and
adjusted CNI. CNI is defined as our GAAP net income adjusted for the after-tax
effects of two non-cash items: amortization (including impairments, if any) of
intangible assets and amortization (including write-offs, if any) of deferred
loan costs related to our debt. Adjusted CNI represents CNI as further adjusted
to exclude the impact, on an after-tax basis, of the Western European
restructuring, litigation-related charges, Actavis Transaction fees and the
gain relating to the reversal of the liability for contingent milestone
payments. We believe that the presentation of CNI and adjusted CNI provides
useful information to both management and investors concerning the approximate
impact of the above items. We also believe that considering the effect of these
items allows management and investors to better compare our financial
performance from period-to-period, and to better compare our financial
performance with that of our competitors. The presentation of this additional
information is not meant to be considered in isolation of, or as a substitute
for, results prepared in accordance with GAAP.
Adjusted EBITDA
To supplement our condensed consolidated financial statements presented in
accordance with GAAP, we provide a summary to show the computation of Adjusted
EBITDA taking into account certain charges that were taken during the quarters
and six months ended June 30, 2013 and 2012. The computation of Adjusted EBITDA
is based on the definition of Adjusted EBITDA contained in our senior secured
credit facilities.
Company Contacts: Rochelle Fuhrmann
SVP, Finance
973-442-3281
rfuhrmann(at)wcrx.com
Kevin Crissey
Director, Investor Relations
973-907-7084
kevin.crissey(at)wcrx.com
WARNER CHILCOTT PUBLIC LIMITED COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions of U.S. dollars, except per share amounts)
(Unaudited)
Quarter Ended Six Months Ended
-----------------------------------
June June June June
30, 30, 30, 30,
2013 2012 2013 2012
-----------------------------------
REVENUE
Net sales $ 599 $ 619 $ 1,177 $ 1,288
Other revenue 14 19 29 35
-----------------------------------
Total revenue 613 638 1,206 1,323
-----------------------------------
COSTS, EXPENSES AND OTHER
Cost of sales (excludes amortization and 81 70 151 142
impairment of intangible assets)
Selling, general and administrative 202 173 381 371
Restructuring (income) / costs (2) -- (3) 50
Research and development 33 23 58 48
Amortization of intangible assets 110 124 220 254
Impairment of intangible assets -- 106 -- 106
Interest expense, net60 52 125 114
-----------------------------------
INCOME BEFORE TAXES 129 90 274 238
Provision for income taxes 21 37 53 72
-----------------------------------
NET INCOME $ 108 $ 53 $ 221 $ 166
===================================
Earnings per share:
Basic $ 0.43 $ 0.21 $ 0.89 $ 0.67
===================================
Diluted $ 0.43 $ 0.21 $ 0.88 $ 0.66
===================================
Dividends per share $ 0.25 $ -- $ 0.25 $ --
===================================
RECONCILIATIONS:
GAAP Net income $ 108 $ 53 $ 221 $ 166
+ Amortization and impairment of intangible 104 221 209 345
assets, net of tax
+ Amortization and write-offs of deferred 10 4 23 16
loan costs, net of tax
-----------------------------------
CASH NET INCOME $ 222 $ 278 $ 453 $ 527
===================================
Non-recurring, one-time charges included
above:
+ Western European restructuring (income) / (1) -- (2) 42
costs, net of tax
+ Litigation-related charges, net of tax -- -- 2 --
+ Gain on reversal of the liability for -- (20) -- (20)
contingent milestone payments, net of tax
+ Actavis Transaction fees, net of tax 11 -- 11 --
-----------------------------------
ADJUSTED CASH NET INCOME $ 232 $ 258 $ 464 $ 549
===================================
WARNER CHILCOTT PUBLIC LIMITED COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of U.S. dollars)
(Unaudited)
As of As of
June 30, 2013 December 31, 2012
---------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 224 $ 474
Accounts receivable, net 265 195
Inventories, net 126113
Prepaid expenses and other current assets 294 244
---------------------------------
Total current assets 909 1,026
---------------------------------
Other assets:
Property, plant and equipment, net 208 216
Intangible assets, net 1,597 1,817
Goodwill 1,029 1,029
Other non-current assets 89 130
---------------------------------
TOTAL ASSETS $ 3,832 $ 4,218
=================================
LIABILITIES
Current liabilities:
Accounts payable $ 39 $ 29
Accrued expenses and other current 608 686
liabilities
Current portion of long-term debt 190 179
---------------------------------
Total current liabilities 837 894
---------------------------------
Other liabilities:
Long-term debt, excluding current portion 3,300 3,796
Other non-current liabilities 122 128
---------------------------------
Total liabilities 4,259 4,818
---------------------------------
SHAREHOLDERS' (DEFICIT) (427) (600)
---------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) $ 3,832 $ 4,218
=================================
WARNER CHILCOTT PUBLIC LIMITED COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of U.S. dollars)
(Unaudited)
Quarter Ended Six Months Ended
-----------------------------------
June June June June
30, 30, 30, 30,
2013 2012 2013 2012
-----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 108 $ 53 $ 221 $ 166
Adjustments to reconcile net income to netcash provided by operating activities:
Depreciation 9 10 20 19
Amortization of intangible assets 110 124 220 254
Impairment of intangible assets -- 106 -- 106
Non-cash gain relating to the reversal of -- (20) -- (20)
the liability for contingent milestone
payments
Amortization and write-off of deferred 11 5 25 17
loan costs
Stock-based compensation expense 7 6 13 12
Changes in assets and liabilities:
(Increase) in accounts receivable, prepaid (61) (25) (101) (5)
expenses and other current assets
(Increase) in inventories (9) (6) (14) (11)
Increase / (decrease) in accounts payable, 47 (60) (69) (145)
accrued expenses and other current
liabilities
(Decrease) in income taxes and other, net (47) (37) (26) (29)
-----------------------------------
Net cash provided by operating activities $ 175 $ 156 $ 289 $ 364
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 15 -- 15 --
Capital expenditures (5) (11) (12) (17)
-----------------------------------
Net cash provided by / (used in) investing $ 10 $ (11) $ 3 $ (17)
activities
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Term repayments under senior secured credit (192) (35) (484) (409)
facilities
Cash dividends paid (59) -- (59) --
Redemption of ordinary shares -- -- -- (32)
Proceeds from the exercise of non-qualified 2 2 3 8
options to purchase ordinary shares
Other (1) -- -- --
-----------------------------------
Net cash (used in) financing activities $ (250) $ (33) $ (540) $ (433)
-----------------------------------
Effect of exchange rates on cash and cash (1) (4) (2) --
equivalents
-----------------------------------
Net (decrease) / increase in cash and cash (66) 108 (250) (86)
equivalents
Cash and cash equivalents, beginning of 290 422 474 616
period
-----------------------------------
Cash and cash equivalents, end of period $ 224 $ 530 $ 224 $ 530
===================================
WARNER CHILCOTT PUBLIC LIMITED COMPANY
Reconciliation of Net Income to Adjusted EBITDA
(In millions of U.S. dollars)
(Unaudited)
Quarter Ended Six Months Ended
-----------------------------------
June June June June
30, 30, 30, 30,
2013 2012 2013 2012
-----------------------------------
RECONCILIATION TO ADJUSTED EBITDA:
Net income - GAAP $ 108 $ 53 $ 221 $ 166
+ Interest expense, as defined 60 52 125 114
+ Provision for income taxes 21 37 53 72
+ Non-cash stock-based compensation expense 7 6 13 12
+ Depreciation 9 10 20 19
+ Amortization of intangible assets 110 124 220 254
+ Impairment of intangible assets -- 106 -- 106
+ R&D milestone expense 1 2 1 2
+ Non-cash gain relating to the reversal of -- (20) -- (20)
the liability for contingent milestone
payments
+ Restructuring (income) / costs (2) -- (3) 50
+ Actavis Transaction fees 11 -- 11 --
+ Other permitted add-backs 1 -- 5 --
-----------------------------------
Adjusted EBITDA of WC plc, as defined $ 326 $ 370 $ 666 $ 775
===================================
+ Expenses of WC plc and other 1 8 2 8
-----------------------------------
Adjusted EBITDA of Warner Chilcott $ 327 $ 378 $ 668 $ 783
Holdings Company III, Limited, as
defined
===================================
Note: Warner Chilcott Holdings Company III, Limited and certain of its
subsidiaries are parties to our senior sec
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Datum: 24.07.2013 - 22:10 Uhr
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News-ID 281548
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