Valeant Pharmaceuticals International, Inc. Fourth Quarter and Full Year 2015 Supplemental Information

Transcription

1 Valeant Pharmaceuticals International, Inc. Fourth Quarter and Full Year Supplemental Information

2 Forward-looking Statements Forward-looking Statements Certain statements made in this presentation may constitute forward-looking statements, including, but not limited to, statements regarding the timing of the discussion of Q results and 2016 guidance for Valeant Pharmaceuticals International, Inc. ( the Company ). Forward-looking statements may generally be identified by the use of the words anticipates, expects, intends, plans, should, could, would, may, will, believes, estimates, potential, target, or continue and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in the Company's most recent annual or quarterly report and detailed from time to time in Valeant s other filings with the Securities and Exchange Commission and the Canadian Securities Administrators, which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance on any of these forward-looking statements. These forward-looking statements speak only as of the date hereof. Valeant undertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect actual outcomes, except as required by law. Non-GAAP Information 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 earnings per share ( EPS ), and (ii) Organic growth. The reconciliations of these non-gaap measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables in the appendix hereto, as well as in the tables to the Company s press release dated April 29, 2016, a copy of which can be found on the Company s website at 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 below. 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. Please see the appendix to this presentation for a more detailed description of each non-gaap financial measure used by the Company herein, including the adjustments reflected in each non-gaap measure. GAAP net income and GAAP earnings per share are significantly less than Adjusted net income (non-gaap) and Adjusted EPS (non-gaap). For additional information about the Company s use of non- GAAP financial measures, please refer to the non-gaap appendix. 1

3 Update Preliminary unaudited fourth quarter financial results were provided on March 15, 2016 Certain comparative metrics were not provided due to the ongoing restatement of the Company s financials Ad Hoc Committee Review is now complete 10-K with audited financials and updated press tables filed with the SEC April 29, 2016 No investor call scheduled to discuss final Q4 financial results Q results and 2016 guidance will be discussed on future conference calls This document provides updated and supplemental information to the Fourth Quarter press release and press tables and Form 10-K 2

4 Q4 Financial Results Q4 Q Restated Y/Y % Total Revenue $2.76 B $2.24 B 23% GAAP EPS 1 ($1.12) 1.50 (175%) Adjusted EPS (non-gaap) 2 $1.55 $2.59 (40%) GAAP Cash Flow from Operations 1 $562 M $816 M (31%) 1) Q includes investment gain of $287 million. Not included in Adjusted EPS (non-gaap). 2) Adjusted EPS (non-gaap) reported under discontinued tax presentation was $2.41 for Q4 and $2.50 for Q restated. This information is being provided solely to reconcile previous disclosures. See page 1 and Appendix hereto for further information on non-gaap measures, including the reconciliation to the applicable GAAP measure. 3

5 Full Year Financial Results FY FY 2014 Restated Y/Y % Total Revenue $10.45 B $8.20 B 27% GAAP EPS 1 ($0.85) 2.58 (133%) Adjusted EPS (non-gaap) 2 $8.14 $7.72 5% GAAP Cash Flow from Operations 1 $2.20 B $2.29 B (4%) 1) 2014 Includes investment gain of $287 million. Not included in Adjusted EPS (non-gaap). 2) Adjusted EPS (non-gaap) reported under discontinued tax presentation was $10.16 for FY and $8.23 for FY 2014 restated. This information is being provided solely to reconcile previous disclosures. See page 1 and Appendix hereto for further information on non-gaap measures, including the reconciliation to the applicable GAAP measure. 4

6 Q4 and FY Organic Growth Same Store Sales* Y/Y revenue growth rates for businesses that have been owned for one year or more Q4 FY Total U.S. (10.7%) 15.5% Total Developed (8.7%) 11.3% Total Emerging Markets 4.9% 4.7% Total Company (5.5%) 9.6% Pro Forma* Y/Y revenue growth rates for entire business, including businesses that have been acquired within the last year Q4 FY Total U.S. 30.4% 27.8% Total Developed 23.3% 21.5% Total Emerging Markets 8.0% 6.0% Total Company 19.7% 17.9% * See page 1 and Appendix hereto for further information on non-gaap measures, including the reconciliation to the applicable GAAP measure. 5

7 Adjustments Since March 15, 2016 Revenue ($M) GAAP EPS Adjusted EPS (non-gaap) 3 Preliminary 4Q Results as of March 15, 2016 $2,788.7 ($0.98) $2.50 Addyi Revenue shift from sell-in to sell-through ($16.2) ($0.04) ($0.04) Xifaxan - returns reserve adjustment ($5.1) ($0.01) ($0.01) Increased Professional Services Fees ($0.02) ($0.01) IP Related Adjustments ($0.04) Additional items post March 15, 2016 ($10.2) ($0.03) Reconciliation of 4Q Results under previous tax methodology 1 $2,757.2 ($1.12) ($0.03) $2.41 Effect of change in tax methodology ($0.87) Final 4Q Results 2 $2,757.2 ($1.12) $1.55 1) Reconciliation for Adjusted EPS (non-gaap) reported under discontinued tax presentation. The prior presentation methodology is no longer being used. This information is being provided solely to reconcile previous disclosures. 2) Reflect elimination of tax effects of use of tax attributes and other timing items, which had been under discontinued tax presentation. Total for Adjusted EPS (non-gaap) does not foot due to rounding. 3) See page 1 and Appendix hereto for further information on non-gaap measures, including the reconciliation to the applicable GAAP measure. 6

8 Q4 Top 30 Brands ($M) Product Primary Business Unit Q1 Q2 Q3 Q4 Final 1) Xifaxan 2 GI ) Wellbutrin 1 Neuro & Other ) Glumetza 2 GI ) Provenge Oncology /Urology ) SofLens 1, 2 Lens ) Jublia Dermatology ) Ocuvite / Preservision 1, 2 Consumer ) Omeprazole 2 Generics ) Nitropress Neuro & Other ) ReNu 1 Consumer Top 30 represent 52% of total company fourth quarter revenue 1) Sales depressed on 11 of top 30 products due to F/X impact. 2) Sales changed from previous presentation on March 15, 2016 due to additional adjustment. 7

9 Q4 Top 30 Brands ($M) Product Primary Business Unit Q1 Q2 Q3 Q4 Final 11) Isuprel Neuro & Other ) Xenazine 1 Neuro & Other ) Lotemax Ophthalmology ) Uceris Tablets GI ) CeraVe 1 Consumer ) PureVision 1 Consumer ) Arestin 2 Dental ) Apriso GI ) Biotrue MPS 1, 2 Consumer ) Cuprimine Neuro & Other Top 30 represent 52% of total company fourth quarter revenue 1) Sales depressed on 11 of top 30 products due to F/X impact. 2) Sales changed from previous presentation on March 15, 2016 due to additional adjustments. 8

10 Q4 Top 30 Brands ($M) Product Primary Business Unit Q1 Q2 Q3 Q4 Final 21) Solodyn 2 Dermatology ) Elidel Dermatology ) Syprine Neuro & Other ) Ammonol Neuro & Other ) Relistor GI ) Artelac 1 Ophthalmology ) Zegerid GI ) Carac Dermatology/ Generic ) Anterior Disposables 1 Surgical ) Akreos 1 Surgical Top 30 represent 52% of total company fourth quarter revenue 1) Sales depressed on 11 of top 30 products due to F/X impact. 2) Sales changed from previous presentation on March 15, 2016 due to additional adjustments. 9

11 GAAP EPS and Tax-effected Adjusted EPS (non-gaap) 1 EPS Q4 Q Restated 2014 Restated 2013 GAAP EPS 2 ($1.12) $1.50 ($0.85) $2.58 ($2.70) Adjusted EPS (Non-GAAP) 2, 3 $1.55 $2.59 $8.14 $7.72 $5.15 1) Under the previous (discontinued) tax reporting, adjusted tax provision was defined as tax provision plus effects of Non-GAAP Adjustments plus the tax effects of use of tax attributes and other timing items. The new (current) tax reporting reflects the elimination of the tax effects of the use of tax attributes and other timing items. 2) GAAP EPS previously reported was ($0.98) for preliminary Q4, $1.56 for Q4 2014, $2.67 for 2014 and ($2.70) for Adjusted EPS (non- GAAP) previously reported was $2.50 for preliminary Q4, $2.58 for Q4 2014, $8.34 for 2014 and $6.24 for No GAAP EPS or Adjusted EPS (non-gaap) for was previously reported. 3) See page 1 and Appendix hereto for further information on non-gaap measures, including the reconciliation to the applicable GAAP measure. 10

12 Appendix Fourth Quarter and Full Year Supplemental Information

13 Reconciliation of GAAP EPS to Adjusted EPS Non-GAAP (In millions) Three Months Ended Twelve Months Ended December 31, December 31, 2014 Restated 2014 Restated 2013 Net income (loss) attributable to Valeant Pharmaceuticals International, Inc. $ (385.9) $ $ (291.7) $ $ (866.1) Non-GAAP adjustments: Inventory step-up PP&E step-up/down Stock-based compensation (5.6) (2.1) Acquisition-related contingent consideration (45.6) (28.9) (23.0) (14.1) (29.2) In-process research and development impairments and other charges Philidor Rx Services wind down costs Other (income)/expense (268.7) Restructuring, integration, acquisition-related and other costs Amortization and impairments of finite-lived intangible assets and other non-gaap charges , , , , , , ,269.8 Amortization of deferred financing costs and debt discounts Loss on extinguishment of debt (Gain) loss on disposal of fixed assets and assets held for sale/impairment, net (Gain) loss on investments, net - (286.7) - (286.7) - Foreign exchange and other (1.4) Tax effect of non-gaap adjustments (234.6) 45.0 (709.6) (99.8) (872.5) Total non-gaap adjustments , , ,552.6 Adjusted net income non-gaap attributable to Valeant Pharmaceuticals International, Inc. $ $ $ 2,840.9 $ 2,635.4 $ 1,686.5 GAAP earnings (loss) per share - diluted $ (1.12) $ 1.50 $ (0.85) $ 2.58 $ (2.70) Adjusted earnings per share non-gaap - diluted $ 1.55 $ 2.59 $ 8.14 $ 7.72 $ 5.15 Shares used in diluted per share calculation - GAAP earnings per share Shares used in diluted per share calculation - Adjusted earnings per share non-gaap

14 Organic Growth As reported For the Three Months Ended December 31, Organic growth (1) Q4 (2) Acq impact (3) Q4 Same store (4) Q Restated (5) Pro Forma Adj (6) Q Restated (7) Currency impact Same store (8) Currency impact Acq (9) Divestitures / Discontinuations Pro Forma (1)+(7)+(8) / (6)-(9) Same store (3)+(7) / (4)-(9) Total U.S. 1, , , ,426.8 (0.1) % -10.7% ROW Developed % -2.5% Developed Markets 2, , , , % -8.7% Emerging Markets % 4.9% Total product sales 2, , , , % -5.5% As reported For the Twelve Months Ended December 31, Organic growth (1) FY (2) Acq impact (3) FY Same store (4) FY 2014 Restated (5) Pro Forma Adj (6) Pro Forma 2014 FY Restated (7) Currency impact Same store (8) Currency impact Acq (9) Divestitures / Discontinuations Pro Forma (1)+(7)+(8) / (6)-(9) Same store (3)+(7) / (4)-(9) Total U.S. 6, , , , , ,576.6 (0.1) % 15.5% ROW Developed 1, , , , % 0.4% Developed Markets 8, , , , , , % 11.3% Emerging Markets 1, , , , % 4.7% Total product sales 10, , , , , , % 9.6% 13

15 Non-GAAP Appendix (1/3) Description of Non-GAAP Financial Measures To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non- GAAP financial measures, as follows. 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. GAAP net income and GAAP earnings per share are significantly less than Adjusted net income (non-gaap) and Adjusted EPS (non-gaap). For additional information about the Company s use of non-gaap financial measures, please refer to the non-gaap appendix. (i) Adjusted EPS Management uses Adjusted EPS for strategic decision making, forecasting future results and evaluating current performance. In addition, cash bonuses for the Company s executive officers are based, in part, on the achievement of certain Adjusted EPS targets. Such 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, management intends to provide investors with a meaningful, consistent comparison of the Company s operating results and trends for the periods presented. Management believes this measure is also useful to investors as such measure allows investors to evaluate the Company s performance using the same tools that management uses to evaluate past performance and prospects for future performance. However, GAAP EPS is significantly less than Adjusted EPS (non- GAAP). Adjusted EPS reflect adjustments based on the following items: Inventory step-up and property, plant and equipment (PP&E) step-up/down: The Company has excluded the impact of fair value step-up/down adjustments to inventory and PP&E in connection with business combinations as such adjustments represent non-cash items, and the amount and frequency is not consistent and is significantly impacted by the timing and size of our acquisitions. Stock-based compensation: The Company has excluded the impact of previously accelerated vesting of certain stock-based equity instruments as such impact is not reflective of the ongoing and planned pattern of recognition for such expense. Acquisition-related contingent consideration: The Company has excluded the impact of acquisition-related contingent consideration non-cash adjustments due to the inherent uncertainty and volatility associated with such amounts based on changes in assumptions with respect to fair value estimates, and the amount and frequency of such adjustments is not consistent and is significantly impacted by the timing and size of our acquisitions, as well as the nature of the agreed-upon consideration. In-Process research and development impairments and other charges: The Company has excluded expenses associated with acquired in-process research and development (including any impairment charges), as these amounts are inconsistent in amount and frequency and are significantly impacted by the timing, size and nature of acquisitions. Although expenses associated with acquired in-process research and development are generally not recurring with respect to past acquisitions, the Company may incur these expenses in connection with any future acquisitions. Philidor Rx Services wind down costs : The Company has excluded certain costs associated with the wind down of the arrangement with Philidor Rx Services, LLC ( Philidor ), primarily including write-downs of fixed assets and bad debt expenses. The Company believes it is useful to understand the effect of excluding this item when evaluating ongoing performance. Amortization of deferred financing costs and debt discounts: The Company has excluded amortization of deferred financing costs and debt discounts as this represents a non-cash component of interest expense. 14

16 Non-GAAP Appendix (2/3). Other (income) expense: The Company has excluded certain other expenses that are the result of other, unplanned events to measure operating performance, primarily including costs associated with the termination of certain supply and distribution agreements, legal settlements and related fees, costs of legal proceedings, investigations and inquiries respecting certain of our distribution, marketing, pricing, disclosure and accounting practices, including our former relationship with Philidor, post-combination expenses associated with business combinations for the acceleration of employee stock awards and/or cash bonuses, and gains/losses from the sale of assets and businesses. These events are unplanned and arise outside of the ordinary course of continuing operations. The Company believes the exclusion of such amounts allows management and the users of the financial statements to better understand the financial results of the Company. Restructuring, integration, and acquisition-related expenses: In recent years, the Company completed a number of acquisitions, which resulted in operating expenses which would not otherwise have been incurred. The Company has excluded certain restructuring, integration and other acquisition-related expense items resulting from acquisitions (including legal and due diligence costs) to allow more accurate comparisons of the financial results to historical operations and forward-looking guidance. Such costs are generally not relevant to assessing or estimating the long-term performance of the acquired assets as part of the Company, and are not factored into management s evaluation of potential acquisitions or its performance after completion of acquisitions. In addition, the frequency and amount of such charges vary significantly based on the size and timing of the acquisitions and the maturities of the businesses being acquired. Also, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions. By excluding the above referenced expenses from our non-gaap measures, management is better able to evaluate the Company s ability to utilize its existing assets and estimate the long-term value that acquired assets will generate for the Company. Furthermore, the Company believes that the adjustments of these items more closely correlate with the sustainability of the Company s operating performance. Amortization and impairments of finite-lived intangible assets: The Company has excluded the impact of amortization and impairments of finite-lived intangible assets (including impairments of intangible assets related to Philidor), as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. The Company believes that the adjustments of these items more closely correlate with the sustainability of the Company s operating performance. Although the Company excludes amortization of intangible assets from its non-gaap expenses, the Company believes that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets and potential impairment charges. Loss on extinguishment of debt: The Company has excluded loss on extinguishment of debt as this represents a non-cash charge, and the amount and frequency of such charges is not consistent and is significantly impacted by the timing and size of debt financing transactions. (Gain) loss on disposal of fixed assets and assets held for sale/impairment, net: The Company has excluded the impact of (gain) loss on disposal of fixed assets and assets held for sale/impairment, net as such items are inconsistent in amount and frequency. The Company believes the exclusion of such amounts allows management and users of the financial statements to better understand the financial results of the Company. (Gain) loss on investments, net: The Company has excluded the gain on investment associated with the withdrawal of the exchange offer in the fourth quarter of 2014 to acquire all of the outstanding shares of Allergan Inc. The Company believes it is useful to understand the effect of excluding this item when evaluating ongoing performance. Foreign exchange and other: The Company has excluded foreign exchange and other to eliminate the impact of foreign currency fluctuations primarily related to intercompany financing arrangements in evaluating company performance. Tax: The Company has excluded the tax impact of the non-gaap adjustments in order to reflect an expected tax rate for the current period. 15

17 Non-GAAP Appendix (3/3) (ii) Organic Growth Organic growth measures growth rates for our businesses. The most directly comparable GAAP financial measure is change in total revenue (GAAP) over the applicable period. We show organic growth on both a same store sales basis and a pro forma basis. Same store sales organic growth provides growth rates for businesses that have been owned for one year or more. Pro forma organic growth provides year over year growth rates for the entire business, including those that have been acquired within the last year. Management uses organic growth in assessing growth rates for its business and evaluating current performance, as well as forecasting future results. By disclosing this non-gaap measure, management intends to provide investors with a meaningful, consistent comparison of revenue trends. The calculation of organic growth primarily includes the following adjustments to total revenue (GAAP): Foreign currency: The Company excludes foreign currency to eliminate the impact of foreign currency fluctuations when evaluating year over year revenue growth to show a more consistent period-to-period comparison of our revenue. Divestitures and discontinuations: The Company excludes revenues associated with divestitures and discontinuations from prior year results to allow for a more consistent period-to-period comparison of our revenue. Acquisitions: In calculating same store sales organic growth, the Company excludes revenues associated with acquisitions from the current year GAAP revenues for the period in which they are not comparable to the prior year. In calculating pro forma organic growth, the Company includes revenues associated with acquisitions to the prior year GAAP revenues for the period in which they are not comparable to the current year. Such measures are useful to investors as it allows for a more consistent period-to-period comparison of our revenue. Other Revenue: The Company excludes Other revenue in calculating organic growth on the basis that such revenue (which includes revenue from contract manufacturing and royalties) is not reflective of the growth in the Company s core businesses 16

18 Valeant Pharmaceuticals International, Inc. Fourth Quarter and Full Year Supplemental Information