“2017 was a year of strong progress for Valeant as we delivered organic growth2 across nearly 75 percent of the Company while significantly reducing our debt and investing in our Bausch + Lomb, Salix and Ortho Dermatologics businesses,” said Joseph C. Papa, chairman and CEO, Valeant.
LAVAL, Quebec, Feb. 28, 2018 /PRNewswire/ --
Valeant Pharmaceuticals International, Inc. (NYSE: VRX and TSX: VRX) (“Valeant” or the “Company” or “we”) today announced its fourth-quarter and full-year 2017 financial results. “2017 was a year of strong progress for Valeant as we delivered organic growth2 across nearly 75 percent of the Company while significantly reducing our debt and investing in our Bausch + Lomb, Salix and Ortho Dermatologics businesses,” said Joseph C. Papa, chairman and CEO, Valeant. “Since the end of the first quarter of 2016, we’ve reduced our total debt by more than 20 percent, and we will continue to address our debt, as well as reduce expenses. Additionally, we’re committed to growth through strategic investment in our core businesses, key products and late-stage pipeline. Altogether, these will get us to the final phase of our strategic plan - the transformation of Valeant,” Mr. Papa continued. Company Highlights Executing on Core Businesses
Launching New Products and Advancing Pipeline
Reducing Debt, Extending Maturities and Resolving Legacy Issues
Fourth-Quarter and Full-Year Revenue Performance Total revenues were $8.724 billion for the full year of 2017, as compared to $9.674 billion for the full year of 2016, a decrease of $950 million, or 10%. The decline was primarily driven by the impact of divestitures, and lower volumes in the U.S. Diversified Products segment, attributed to the previously reported loss of exclusivity for a basket of products, and the Ortho Dermatologics business. Revenues were also negatively affected by the unfavorable impact of foreign exchange. The decline was partially offset by higher volumes in our Bausch + Lomb/International segment, primarily the U.S. Consumer Products business, and increased international pricing in our Bausch + Lomb/International segment. Revenues by segment were as follows: Fourth-Quarter 2017 ------------------- (in millions) 4Q 2017 4Q 2016 Reported Reported Change at Organic(2) Change Change Constant Currency4 Change --- --------- ------ Segment Bausch + Lomb/International $1,226 $1,261 ($35) (3%) (5%) 4% Branded Rx $602 $744 ($142) (19%) (19%) (8%) U.S. Diversified Products $335 $398 ($63) (16%) (16%) (12%) Total Revenues $2,163 $2,403 ($240) (10%) (11%) (2%) -------------- ------ ------ ----- ---- ---- ---
Full-Year 2017 -------------- (in millions) FY 2017 FY 2016 Reported Reported Change at Organic(2) Change Change Constant Currency4 Change --- --------- ------ Segment Bausch + Lomb/International $4,871 $4,927 ($56) (1%) 0% 6% Branded Rx $2,475 $2,828 ($353) (12%) (12%) (6%) U.S. Diversified Products $1,378 $1,919 ($541) (28%) (28%) (27%) Total Revenues $8,724 $9,674 ($950) (10%) (9%) (4%) -------------- ------ ------ ----- ---- --- ---
Bausch + Lomb/International Segment Bausch + Lomb/International segment revenues were $4.871 billion for the full year of 2017, as compared to $4.927 billion for the full year of 2016, a decrease of $56 million, or 1%. Excluding the impact of divestitures of $240 million, primarily the skin care divestiture5, and foreign exchange, the Bausch + Lomb/International segment grew organically2 by approximately 6% compared to the full year of 2016, driven primarily by our International Rx, Global Consumer and Global Vision Care businesses. Branded Rx Segment Branded Rx segment revenues were $2.475 billion for the full year of 2017, as compared to $2.828 billion for the full year of 2016, a decrease of $353 million, or 12%. The decrease primarily reflects lower volumes in the Ortho Dermatologics business, and the impact of divestitures of $194 million, particularly from the divestiture of Dendreon Pharmaceuticals. Compared to the full year of 2016, the Salix business grew revenue by 2% and generated organic growth2 of 5%. U.S. Diversified Products Segment U.S. Diversified Products segment revenues were $1.378 billion for the full year of 2017, as compared to $1.919 billion for the full year of 2016, a decrease of $541 million, or 28%. The decline was primarily driven by decreases attributed to the previously reported loss of exclusivity for a basket of products. Operating Income/Loss Operating income was $102 million for the full year of 2017, as compared to an operating loss of $566 million for the full year of 2016, an improvement of $668 million. The improvement in our operating results for the full year of 2017 reflects gains from divestitures, lower operating expenses, the net decrease in non-cash charges for impairments and net favorable adjustments to acquisition-related contingent consideration. The improvement was partially offset by lower revenues coming from divestitures, the U.S. Diversified Products segment due to the loss of exclusivity for a basket of products, and the Ortho Dermatologics business. Income Tax Net Income Net income for the full year of 2017 was $2.404 billion, as compared to a net loss of $2.409 billion for the full year of 2016, an improvement of $4.813 billion. The change in net income for the full year of 2017 is mainly attributed to an increase in the benefit from income taxes, as described above. Adjusted net income (non-GAAP) the fourth quarter of 2017 was $347 million, as compared to $443 million for the fourth quarter of 2016, a decrease of $96 million. Adjusted net income (non-GAAP) for the full year of 2017 was $1.349 billion, as compared to $1.916 billion for the full year of 2016, a decrease of $567 million. Operating Cash EPS Adjusted EBITDA (non-GAAP) Adjusted EBITDA (non-GAAP) was $3.638 billion for the full year of 2017, as compared to $4.305 billion for the full year of 2016, a decrease of $667 million. The decline for the full year of 2017 was primarily driven by lower revenues coming from divestitures, the U.S. Diversified Products segment due to the loss of exclusivity for a basket of products, and the Ortho Dermatologics business. The decline was partially offset by organic growth2 in the Bausch + Lomb/International segment and the Salix business, and improved management of operating expenses. 2018 Financial Outlook Valeant has provided guidance for the full year of 2018, as follows:
Other than with respect to GAAP Revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. In periods where significant acquisitions or divestitures are not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, which would otherwise be treated as non-GAAP to calculate projected GAAP net income (loss). However, because other deductions (such as restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP). Additional Highlights
Conference Call Details Date: Wednesday, Feb. 28, 2018 Time: 8:00 a.m. EST Web cast: http://ir.valeant.com/events-and-presentations Participant Event Dial- in: (844) 428-3520 (North America) (409) 767-8386 (International) Participant Passcode: 5287247 Replay Dial-in: (855) 859-2056 (North America) (404) 537-3406 (International) Replay Passcode: 5287247 (replay available until April 28, 2018)
About Valeant Forward-looking Statements Non-GAAP Information Use of Non-GAAP Generally However, these measures are not prepared in accordance with GAAP nor do they have any standardized meaning under GAAP. In addition, other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar non-GAAP measures. We caution investors not to place undue reliance on such non-GAAP measures, but instead to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation. They should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. The reconciliations of these historic non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below. However, as indicated above, for guidance purposes, the Company does not provide reconciliations of projected Adjusted EBITDA (non-GAAP) to projected GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. Specific Non-GAAP Measures Adjusted EBITDA (non-GAAP) reflect adjustments based on the following items:
Finally, to the extent not already adjusted for above, Adjusted EBITDA (non-GAAP) reflects adjustments for interest, taxes, depreciation and amortization (EBITDA represents earnings before interest, taxes, depreciation and amortization). Commencing in 2017, the Company assessed the methodology with which it was calculating these non-GAAP measures and made updates where it deemed appropriate to better reflect the underlying business. As a result, commencing with the first-quarter actual results of 2017, there are certain differences in the calculation of Adjusted EBITDA (non-GAAP) between the current presentation and the historic presentation. In particular, Adjusted EBITDA (non-GAAP) no longer includes adjustments for foreign exchange gain/loss arising from intercompany transactions. For the purposes of the Company’s actual results for the full year and fourth quarter of 2016, the Company has calculated and presented Adjusted EBITDA (non-GAAP) using the historic methodologies in place as of the applicable historic dates; however, the Company has also provided a reconciliation that calculates Adjusted EBITDA (non-GAAP) using the new methodology, to allow investors and readers to evaluate Adjusted EBITDA (non-GAAP) on the same basis for the periods presented. Adjusted Net Income (Loss) (non-GAAP) In addition to certain of the adjustments described above (namely restructuring and integration costs, acquired in-process research and development costs, loss on extinguishment of debt, asset impairments, acquisition-related adjustments, excluding amortization, and other non-GAAP charges), adjusted net income (non-GAAP) also reflects adjustments based on the following additional items:
As indicated above, commencing in 2017, the Company assessed the methodology with which it was calculating these non-GAAP measures and made updates where it deemed appropriate to better reflect the underlying business. As a result, commencing with the first-quarter results of 2017, there are certain differences in the calculation of adjusted net income (loss) (non-GAAP) between the current presentation and the historic presentation. In particular, adjusted net income (loss) (non-GAAP) no longer includes foreign exchange gain/loss arising from intercompany transactions and amortization of deferred financing costs and debt discounts. In addition, as of the third quarter of 2016, adjusted net income (loss) (non-GAAP) no longer includes adjustments for the following items: Depreciation resulting from a PP&E step-up resulting from acquisitions and previously accelerated vesting of certain share-based equity adjustments. For the purposes of the Company’s actual results for the full year and fourth quarter of 2016, the Company has calculated and presented adjusted net income (loss) (non-GAAP) using the historic methodologies in place as of the applicable historic dates; however, the Company has also provided a reconciliation that calculates adjusted net income (loss) (non-GAAP) using the new methodology, to allow investors and readers to evaluate as adjusted net income (loss) on the same basis for the periods presented. Organic Growth Organic Growth is growth in GAAP Revenue (its most directly comparable GAAP financial measure) adjusted for certain items, as further described below, of businesses that have been owned for one or more years. The Company uses organic revenue and organic growth to assess performance of its business units and operating and reportable segments, and the Company in total, without the impact of foreign currency exchange fluctuations and recent acquisitions, divestitures and product discontinuations. The Company believes that such measures are useful to investors as it provides a supplemental period-to-period comparison. Organic revenue growth reflects adjustments for: (i) the impact of period-over-period changes in foreign currency exchange rates on revenues and (ii) the revenues associated with acquisitions, divestitures and discontinuations of businesses divested and/ or discontinued. These adjustments are determined as follows:
Constant Currency Please also see the reconciliation tables below for further information as to how these non-GAAP measures are calculated for the periods presented. 1 Please see the tables at the end of this news release for a reconciliation of this and other non-GAAP measures to the nearest comparable GAAP measure. 2 Organic growth, a non-GAAP metric, is defined as an increase on a period-over- period basis in revenues on a constant currency basis (if applicable) excluding the impact of recent acquisitions, divestitures and discontinuations. 3 Provisional name 4 To assist investors in evaluating the Company’s performance, we have adjusted for changes in foreign currency exchange rates. Change at constant currency, a non-GAAP metric, is determined by comparing 2017 reported amounts adjusted to exclude currency impact, calculated using 2016 monthly average exchange rates, to the actual 2016 reported amounts. 5 In March 2017, Valeant sold the CeraVe(R), AcneFree(R) and AMBI(R) brands, which had been reported within the Bausch + Lomb/ International segment, as part of the skin care divestiture to L’Oréal.
FINANCIAL TABLES FOLLOW
Valeant Pharmaceuticals International, Inc. Table 1 Condensed Consolidated Statements of Operations For the Three and Twelve Months Ended December 31, 2017 and 2016 (unaudited) Three Months Ended Twelve Months Ended December 31, December 31, (in millions) 2017 2016 2017 2016 ---- ---- ---- ---- Product sales $2,133 $2,368 $8,595 $9,536 Other revenues 30 35 129 138 --- --- --- --- Total revenues 2,163 2,403 8,724 9,674 ----- ----- ----- Cost of goods sold (exclusive of amortization and impairments of 637 655 2,506 2,572 intangible assets) Cost of other revenues 10 10 42 39 Selling, general and administrative 639 665 2,582 2,810 Research and development 90 93 361 421 Amortization of intangible assets 775 658 2,690 2,673 Goodwill impairments - 28 312 1,077 Asset impairments 85 28 714 422 Restructuring and integration costs 10 54 52 132 Acquired in-process research and development costs - - 5 34 Acquisition-related contingent consideration 8 (31) (289) (13) Other expense (income), net 231 93 (353) 73 --- --- 2,485 2,253 8,622 10,240 ----- ----- ----- ------ Operating (loss) income (322) 150 102 (566) Interest income 3 2 12 8 Interest expense (448) (467) (1,840) (1,836) Loss on extinguishment of debt (57) - (122) - Foreign exchange and other 20 (45) 107 (41) --- --- --- --- Loss before (benefit from) provision for income taxes (804) (360) (1,741) (2,435) (Benefit from) provision for income taxes (1,316) 152 (4,145) (27) ------ --- ------ --- Net income (loss) 512 (512) 2,404 (2,408) Less: Net (loss) income attributable to noncontrolling interest (1) 3 - 1 --- --- --- --- Net income (loss) attributable to Valeant Pharmaceuticals International, Inc. $513 $(515) $2,404 $(2,409) ==== ===== ====== =======
Valeant Pharmaceuticals International, Inc. Table 2 Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (non-GAAP) For the Three and Twelve Months Ended December 31, 2017 and 2016 (unaudited) Three Months Ended Twelve Months Ended December 31, December 31, (in millions) 2017 2016 2017 2016 ---- ---- ---- ---- Net income (loss) attributable to Valeant Pharmaceuticals $513 $(515) $2,404 $(2,409) International, Inc. Non-GAAP adjustments: (a) Acquisition-related adjustments excluding amortization of intangible assets (b)(d) 8 (31) (289) 33 Amortization of intangible assets 775 658 2,690 2,673 Restructuring and integration costs 10 54 52 132 Acquired in-process research and development costs - - 5 34 Goodwill impairments - 28 312 1,077 Asset impairments 85 28 714 422 Other non-GAAP adjustments (c)(d) 237 100 (310) 208 Amortization of deferred financing costs and debt discounts (d) - 29 - 118 Loss on extinguishment of debt 57 - 122 - Foreign exchange and other (d) - 28 - 14 Tax effect of non-GAAP adjustments (1,338) 64 (4,351) (386) ------ ------ ---- Total non-GAAP adjustments (166) 958 (1,055) 4,325 ---- --- ------ ----- Adjusted net income attributable to Valeant Pharmaceuticals 347 443 1,349 1,916 International, Inc. (non-GAAP) (as reported) (d) Depreciation resulting from a PP&E step-up resulting from acquisitions - - - (8) Previously accelerated vesting of certain share-based equity adjustments - - - (23) Foreign exchange loss on intercompany transactions - (28) - (14) Amortization of deferred financing costs and debt discounts - (29) - (118) --- --- --- ---- Adjusted net income attributable to Valeant Pharmaceuticals $347 $386 $1,349 $1,753 International, Inc. (non-GAAP) (as revised) (e)
(a) The components of (and further details respecting) each of these non-GAAP adjustments and the financial statement line item to which each component relates can be found on Table 2a. (b) Due to the nature of Acquisition- related adjustments excluding amortization of intangible assets, the components of this non-GAAP adjustment are reflected in the following financial statement line items: Cost of goods sold, Selling, general and administrative, Research and development and Acquisition-related contingent consideration. (c) Due to the nature of Other non-GAAP adjustments, the components of this non-GAAP adjustment are reflected in the following financial statement line items: Product sales, Cost of goods sold, Selling, general and administrative, Research and development and Other expense (income), net. (d) Adjusted net income (non-GAAP) for the three and twelve months ended December 31, 2017 was determined using the methodology for calculating Adjusted net income (non-GAAP) as of December 31, 2017. (e) As of the third quarter of 2016, Adjusted net income (non-GAAP) no longer includes adjustments for the following items: Depreciation resulting from a PP&E step-up resulting from acquisitions and Previously accelerated vesting of certain share-based equity instruments. Depreciation resulting from a PP&E step-up resulting from acquisitions was a component of Acquisition-related adjustments excluding amortization of intangible assets. Previously accelerated vesting of certain share-based equity instruments was a component of Other non-GAAP adjustments. As of the first quarter of 2017, Adjusted net income (non-GAAP) also no longer includes adjustments for Foreign exchange loss/gain on intercompany transactions and Amortization of deferred financing costs and debt discounts. For the purpose of allowing investors to evaluate Adjusted net income (non-GAAP) on the same basis for the periods presented, these adjustments have been removed from the results for the three and twelve months ended December 31, 2016.
Valeant Pharmaceuticals International, Inc. Table 2a Reconciliation of GAAP to Non-GAAP Financial Information For the Three and Twelve Months Ended December 31, 2017 and 2016 (unaudited) Three Months Ended Twelve Months Ended December 31, December 31, (in millions) 2017 2016 2017 2016 ---- ---- ---- ---- Total revenues reconciliation: GAAP Total revenues $2,163 $2,403 $8,724 $9,674 Philidor Rx Services, LLC sales through deconsolidation as of January 31, 2016 (a) - - - (2) Adjusted total revenues (non-GAAP) $2,163 $2,403 $8,724 $9,672 ====== ====== ====== ====== Cost of goods sold and Cost of other revenues reconciliation: GAAP Cost of goods sold and Cost of other revenues $647 $665 $2,548 $2,611 % of GAAP Total revenues 30% 28% 29% 27% Fair value inventory step-up resulting from acquisitions (b) - - - (38) Depreciation resulting from a PP&E step-up resulting from acquisitions (b)(j) - - - (6) Integration related inventory and technology transfer costs (a) - 1 - (9) Other cost of goods sold (a) - - - (1) Adjusted cost of goods sold and cost of other revenues (non-GAAP) (j) $647 $666 $2,548 $2,557 ==== ==== ====== ====== % of Non-GAAP total revenues 30% 28% 29% 26% Selling, general and administrative reconciliation: GAAP Selling, general and administrative $639 $665 $2,582 $2,810 % of GAAP Total revenues 30% 28% 30% 29% Depreciation resulting from a PP&E step-up resulting from acquisitions (b)(j) - - - (1) CEO termination costs (a)(j) - - - (35) Legal and other professional fees (a)(k) (7) (7) (44) (65) Accelerated depreciation due to fixed assets write-offs acquired from Salix Pharmaceuticals, Inc. (a) - - - (7) Philidor Rx Services, LLC expenses through deconsolidation - - - (5) as of January 31, 2016 (a) Previously accelerated vesting of certain share-based equity instruments (a)(j) - - - 2 Other Selling, general and administrative (a) - - - (1) Adjusted selling, general and administrative (non-GAAP) (j) $632 $658 $2,538 $2,698 ==== ==== ====== ====== % of Non-GAAP total revenues 29% 27% 29% 28% Research and development reconciliation: GAAP Research and development $90 $93 $361 $421 % of GAAP Total revenues 4% 4% 4% 4% Depreciation resulting from a PP&E step-up resulting from acquisitions (b)(j) - - - (1) Settlement of certain disputed invoices related to transition services (a) - - - (16) --- --- --- --- Adjusted research and development (non-GAAP) $90 $93 $361 $404 === === ==== ==== % of Non-GAAP total revenues 4% 4% 4% 4% Table 2a (continued) Three Months Ended Twelve Months Ended December 31, December 31, (in millions) 2017 2016 2017 2016 ---- ---- ---- ---- Amortization of intangible assets reconciliation: GAAP Amortization of intangible assets $775 $658 $2,690 $2,673 Amortization of intangible assets (c) (775) (658) (2,690) (2,673) ---- ------ ------ Adjusted amortization of intangible assets (non-GAAP) $ - $ - $ - $ - === === === === === === === === Goodwill impairment reconciliation: GAAP Goodwill impairment $ - $28 $312 $1,077 Goodwill impairment - (28) (312) (1,077) --- ---- ------ Adjusted goodwill impairment (non-GAAP) $ - $ - $ - $ - === === === === === === === === Restructuring and integration costs reconciliation: GAAP Restructuring and integration costs $10 $54 $52 $132 Restructuring and integration costs (d) (10) (54) (52) (132) --- --- ---- Adjusted restructuring and integration costs (non-GAAP) $ - $ - $ - $ - === === === === === === === === Acquired in-process research and development costs reconciliation: GAAP Acquired in-process research and development costs $ - $ - $5 $34 Acquired in-process research and development costs (e) - - (5) (34) --- --- --- Adjusted acquired in-process research and development costs (non-GAAP) $ - $ - $ - $ - === === === === === === === === Asset impairments reconciliation: GAAP Asset impairments $85 $28 $714 $422 Asset impairments (85) (28) (714) (422) --- ---- ---- Adjusted asset impairments (non-GAAP) $ - $ - $ - $ - === === === === === === === === Acquisition-related contingent consideration reconciliation: GAAP Acquisition-related contingent consideration $8 $(31) $(289) $(13) Acquisition-related contingent consideration (b) (8) 31 289 13 --- --- --- Adjusted acquisition-related contingent consideration (non-GAAP) $ - $ - $ - $ - === === === === === === === === Other expense (income), net reconciliation: GAAP Other expense (income), net $231 $93 $(353) $73 Litigation and other matters (a) (116) (91) (227) (59) Net (loss)/gain on sale of assets (a) (115) (2) 580 7 Acquisition related transaction costs (a) - - - (2) Deconsolidation of Philidor (a) - - - (19) Adjusted other expense (income) (non-GAAP) $ - $ - $ - $ - === === === === === === === === Interest expense reconciliation: GAAP Interest expense $(448) $(467) $(1,840) $(1,836) Amortization of debt discounts (f)(j) - 24 - 99 Amortization of deferred financing costs (f)(j) - 4 - 15 Write-down of deferred financing costs (f)(j) - 1 - 4 --- --- Adjusted interest expense (non-GAAP) $(448) $(438) $(1,840) $(1,718) ===== ===== ======= ======= Loss on extinguishment of debt reconciliation: GAAP Loss on extinguishment of debt $(57) $ - $(122) $ - Loss on extinguishment of debt (g) 57 - 122 - --- --- Adjusted loss on extinguishment of debt (non-GAAP) $ - $ - $ - $ - === === === === === === === === Table 2a (continued) Three Months Ended Twelve Months Ended December 31, December 31, (in millions) 2017 2016 2017 2016 ---- ---- ---- ---- Foreign exchange and other reconciliation: GAAP Foreign exchange and other $20 $(45) $107 $(41) Foreign exchange loss on intercompany transactions (h)(j) - 28 - 14 Other (h) (1) - (1) - --- --- --- --- Adjusted foreign exchange and other (non-GAAP) $19 $(17) $106 $(27) === ==== ==== ==== (Benefit from) provision for income taxes reconciliation: GAAP (Benefit from) provision for income taxes $(1,316) $152 $(4,145) $(27) Tax effect of non-GAAP adjustments (i) 1,338 (64) 4,351 386 ----- --- ----- --- Adjusted provision for income taxes (non-GAAP) $22 $88 $206 $359 === === ==== ====
(a) Represents a component of the non-GAAP adjustment of “Other non-GAAP adjustments” (see Table 2). The identified components, in the aggregate, represent all components of this non-GAAP adjustment. (b) Represents a component of the non-GAAP adjustment of “Acquisition-related adjustments excluding amortization of intangible assets” (see Table 2). The identified components, in the aggregate, represent all components of this non-GAAP adjustment. (c) Represents the sole component of the non- GAAP adjustment of “Amortization of intangible assets” (see Table 2). (d) Represents the sole component of the non- GAAP adjustment of “Restructuring and integration costs” (see Table 2). (e) Represents the sole component of the non- GAAP adjustment of “Acquired in-process research and development costs” (see Table 2). (f) Represents a component of the non-GAAP adjustment of “Amortization of deferred financing costs and debt discounts” (see Table 2). The identified components, in the aggregate, represent all components of this non-GAAP adjustment. (g) Represents the sole component of the non- GAAP adjustment of “Loss on extinguishment of debt” (see Table 2). (h) Represents a component of the non-GAAP adjustment of “Foreign exchange and other” (see Table 2). The identified components, in the aggregate, represent all components of this non-GAAP adjustment. (i) Represents the sole component of the non- GAAP adjustment of “Tax effect of non- GAAP adjustments” (see Table 2). (j) As of the third quarter of 2016, Adjusted net income (loss) (non-GAAP) no longer includes adjustments for the following items: Depreciation resulting from a PP&E step-up resulting from acquisitions and Previously accelerated vesting of certain share-based equity adjustments. Depreciation resulting from a PP&E step- up resulting from acquisitions was a component of Acquisition-related adjustments excluding amortization of intangible assets. Previously accelerated vesting of certain share-based equity adjustments was a component of Other non- GAAP adjustments. As of the first quarter of 2017, Adjusted net income (non-GAAP) also no longer includes adjustments for Foreign exchange loss/gain on intercompany transactions and Amortization of deferred financing costs and debt discounts. For the purpose of allowing investors to evaluate Adjusted net income (non-GAAP) on the same basis for all periods presented, these adjustments have been removed from the results for the three and twelve months ended December 31, 2016. See reconciliation on Table 2. (k) Legal and other professional fees incurred in connection with recent legal and governmental proceedings, investigations and information requests related to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices for the three and twelve months ended December 31, 2017 and 2016.
Valeant Pharmaceuticals International, Inc. Table 2b Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA (non-GAAP) For the Three and Twelve Months Ended December 31, 2017 and 2016 (unaudited) Three Months Ended Twelve Months Ended December 31, December 31, (in millions) 2017 2016 2017 2016 ---- ---- ---- ---- Net income (loss) attributable to Valeant Pharmaceuticals $513 $(515) $2,404 $(2,409) International, Inc. Interest expense, net 445 465 1,828 1,828 (Benefit from) provision for income taxes (1,316) 152 (4,145) (27) Depreciation and amortization 819 707 2,858 2,866 EBITDA 461 809 2,945 2,258 Adjustments: Restructuring and integration costs 10 54 52 132 Acquired in-process research and development costs - - 5 34 Goodwill impairments - 28 312 1,077 Asset impairments 85 28 714 422 Share-based compensation 17 31 87 165 Acquisition-related adjustments excluding amortization of 8 (31) (289) 25 intangible assets, net of depreciation expense (d) Loss on extinguishment of debt 57 - 122 - Foreign exchange and other - 28 - 14 Other adjustments (a) 237 100 (310) 178 Adjusted EBITDA (non-GAAP) (as reported) (e) 875 1,047 3,638 4,305 Foreign exchange loss on intercompany transactions - (28) - (14) Adjusted EBITDA (non-GAAP) (as revised) (f) $875 $1,019 $3,638 $4,291 ==== ====== ====== ====== (a) Other adjustments include: $237 $100 $(310) $178 Integration related inventory and technology transfer costs - (1) - 9 CEO termination costs (cash severance payment) - - - 10 Legal and other professional fees (b) 7 8 44 65 Settlement of certain disputed invoices related to transition services - - - 16 Litigation and other matters 116 91 227 59 Net loss/(gain) on sale of assets (c) 115 2 (580) (7) Acquisition related transaction costs - - - 2 Philidor Rx Services, LLC net loss through deconsolidation as of January 31, 2016 - - - 3 Other (1) - (1) 21
(b) Legal and other professional fees incurred in connection with recent legal and governmental proceedings, investigations and information requests related to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices. (c) For the twelve months ended December 31, 2017, Net loss/(gain) on sale of assets includes the $309 million gain on the iNova sale in September of 2017, the $97 million gain on the sale of Dendreon Pharmaceuticals in June of 2017 and the $309 million gain on the sale of CeraVe, AcneFree, and AMBI skin care brands in March of 2017, offset by the $98 million loss on the sale of Sprout Pharmaceuticals in December of 2017. (d) Adjustment to Acquisition-related adjustments excluding amortization of intangible assets, net of depreciation expense, includes a fair vale adjustment of $312 million reflecting a decrease in forecasted sales for a specific product line which impacted the expected future royalty payments for the three and twelve months ended December 31, 2017. (e) Adjusted EBITDA (non-GAAP) reported by the Company for the three and twelve months ended December 31, 2017 as determined using the methodology for calculating Adjusted EBITDA (non-GAAP) as of December 31, 2017. Adjusted EBITDA (non-GAAP) reported by the Company for the three and twelve months ended December 31, 2016 as determined using the methodology for calculating Adjusted EBITDA (non-GAAP) as of December 31, 2016. (f) As of the first quarter of 2017, non- GAAP adjustments no longer include adjustments for Foreign exchange gain/ loss on intercompany transactions. For the purpose of allowing investors to evaluate Adjusted EBITDA (non-GAAP) on the same basis for all periods presented, this adjustment has been removed from the results for the three and twelve months ended December 31, 2016.
Valeant Pharmaceuticals International, Inc. Table 3 Organic Growth (non-GAAP) - by Segment For the Three and Twelve Months Ended December 31, 2017 and 2016 (unaudited) Three Months Ended December 31, (1) (2) (3) (4) (5) (6) (7) 2017 2016 Currency 2017 Revenues Excluding Impact of Organic Revenue Impact Currency Impact (b) Growth Revenue Divestitures (a) (4-(2- and 6))/(2-6) Discontinuations (c) --- (in millions) Amount Percent Change ------ Bausch+Lomb/International Global Vision Care $187 $178 $3 $184 3% $2 5% Global Surgical (d) 187 177 7 180 2% - 2% Global Consumer Products 377 397 12 365 (8%) 63 9% Global Ophtho Rx 164 159 3 161 1% - 1% International Rx (d) 311 350 7 304 (13%) 51 2% Total Bausch+Lomb/International 1,226 1,261 32 1,194 (5%) 116 4% ----- ----- --- ----- --- Branded Rx Salix 425 413 - 425 3% 10 5% Ortho Dermatologics 136 214 - 136 (36%) - (36%) Dendreon - 77 - - - 77 - Dentistry 39 39 - 39 0% 1 3% Other revenues 2 1 - 2 - - - --- --- --- --- Total Branded Rx 602 744 - 602 (19%) 88 (8%) --- --- --- --- --- U.S. Diversified Products Neuro & Other 228 276 - 228 (17%) - (17%) Generics 94 93 - 94 1% - 1% U.S. Solta 11 9 - 11 22% - 22% U.S. Obagi 2 17 - 2 - 14 - Other revenues - 3 - - - 3 - --- --- --- --- Total U.S. Diversified Products 335 398 - 335 (16%) 17 (12%) Total revenues $2,163 $2,403 $32 $2,131 (11%) $221 (2%) ====== ====== === ====== ====
Table 3 (continued) Twelve Months Ended December 31, (1) (2) (3) (4) (5) (6) (7) 2017 2016 Currency 2017 Revenues Excluding Impact of Organic Revenue Impact Currency Impact (b) Growth Revenue Divestitures (a) (4-(2- and 6))/(2-6) Discontinuations (c) --- (in millions) Amount Percent Change ------ Bausch+Lomb/International Global Vision Care $752 $743 $(2) $754 1% $12 3% Global Surgical (d) 677 672 3 674 0% 1 0% Global Consumer Products 1,523 1,577 21 1,502 (5%) 156 6% Global Ophtho Rx 623 624 - 623 0% - 0% International Rx (d) 1,296 1,311 (100) 1,396 6% 71 13% Total Bausch+Lomb/International 4,871 4,927 (78) 4,949 0% 240 6% ----- ----- --- ----- --- Branded Rx Salix 1,566 1,530 - 1,566 2% 32 5% Ortho Dermatologics 606 840 - 606 (28%) - (28%) Dendreon 164 303 - 164 - 159 - Dentistry 134 152 - 134 (12%) 3 (10%) Other revenues 5 3 - 5 - - - --- --- --- --- Total Branded Rx 2,475 2,828 - 2,475 (12%) 194 (6%) ----- ----- --- ----- --- U.S. Diversified Products Neuro & Other 946 1,364 - 946 (31%) - (31%) Generics 343 455 - 343 (25%) - (25%) U.S. Solta 35 29 - 35 21% - 21% U.S. Obagi 51 57 - 51 (11%) 14 19% Other revenues 3 14 - 3 - 11 - --- --- --- --- Total U.S. Diversified Products 1,378 1,919 - 1,378 (28%) 25 (27%) ----- --- ----- --- Total revenues $8,724 $9,674 $(78) $8,802 (9%) $459 (4%) ====== ====== ==== ====== ====
(a) The impact for changes in foreign currency exchange rates is determined as the difference in the current period reported revenues at their current period currency exchange rates and the current period reported revenues revalued using the monthly average currency exchange rates during the comparable prior period. (b) To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information about the Company’s use of such non-GAAP financial measures, refer to the body of the press release to which these tables are attached. (c) Organic Growth provides growth rates for businesses that have been owned for one year or more and is calculated as follows: ((Current Year Sales - Currency Impact)-(Prior Year Sales - Divestitures and Discontinuations))/( Prior Year Sales - Divestitures and Discontinuations) (d) As of the third quarter of 2017, one product has been removed from the Global surgical business unit and added to the International business unit. This change has been made as management believes that the product better aligns with the International business unit, as this product, although acquired as part of the acquisition of certain surgical assets, is an injectable product. For the purposes of allowing investors to evaluate the results of these two business units on the same basis for all periods presented, this change has been made for the results of the three and twelve months ended December 31, 2016.
Valeant Pharmaceuticals International, Inc. Table 4 Consolidated Balance Sheet and Other Financial Information (unaudited) (in millions) December 31, December 31, 2017 2016 ---- ---- Cash Balances Cash and cash equivalents $720 $542 Restricted cash 77 - --- Cash, cash equivalents and restricted cash $797 $542 ==== ==== Debt Balances Revolving Credit Facility $250 $875 Series A-3 Tranche A Term Loan Facility - 1,016 Series A-4 Tranche A Term Loan Facility - 658 Series D-2 Tranche B Term Loan Facility - 1,048 Series C-2 Tranche B Term Loan Facility - 805 Series E-1 Tranche B Term Loan Facility - 2,429 Series F Tranche B Term Loan Facility 3,420 3,815 Senior Notes 21,759 19,188 Other 15 12 --- --- Total long-term debt, net of unamortized discounts and issuance costs 25,444 29,846 Plus: Unamortized discounts and issuance costs 308 323 --- --- Maturities of debt $25,752 $30,169 ======= ======= Maturities of Debt 2018 $209 $3,738 2019 - 2,122 2020 2,690 7,723 2021 3,175 3,215 2022 5,115 4,281 Thereafter 14,563 9,090 ------ ----- Maturities of debt $25,752 $30,169 ======= =======
Table 4 (continued) (in millions) 2017 2016 ---- ---- Cash provided by operating activities - Three months ended December 31 $578 $512 ==== ====
Restructuring and integration costs - Three months ended December 31, 2017 Cash Paid Expense --------- ------- By project type: Restructuring initiatives $10 $8 Salix Pharmaceuticals, Ltd. - 1 Other 3 2 Total $13 $11 === === By expense type: Consulting, duplicative labor, transition services, and other $4 $ - Severance 6 8 Facility closures 3 3 --- --- Total $13 $11 === ===
Investor Contact: Media Contact: Arthur Shannon Lainie Keller arthur.shannon@valeant.com lainie.keller@valeant.com (514) 856-3855 (908) 927-0617 (877) 281-6642 (toll free)
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Company Codes: NYSE:VRX, Toronto:VRX |