Warner Chilcott Reports Operating Results for the Quarter ended March 31, 2006 |
HAMILTON, Bermuda, May 15 /PRNewswire/ -- Warner Chilcott Holdings
Company III, Limited today announced its results for the quarter ended
March 31, 2006. Revenue in the quarter rose to $166.5 million, a 24.5%
increase over the first quarter of 2005. The Company reported a net loss of
$18.6 million for the quarter compared with a net loss of $361.6 million in
the prior year quarter. In the quarter ended March 31, 2005, we recorded a
number of expenses directly related to our January 2005 acquisition of
Warner Chilcott PLC.
References in this release to adjusted EBITDA for the quarter ended
March 31, 2006 mean the Company's earnings before interest, taxes,
depreciation, amortization and certain other adjustments as defined in the
indenture governing the Company's 8-3/4% Senior Subordinated Notes due
2015. A reconciliation of the Company's reported results in accordance with
U.S. GAAP to adjusted EBITDA for the quarters ended March 31, 2006 and 2005
is presented in the table at the end of this press release. Adjusted EBITDA
increased 33.8% to $94.9 million compared with the same quarter in the
prior year.
CEO Roger Boissonneault said, "We had another productive quarter. In
January we closed the acquisition of DOVONEX(R) and the FDA approved
TACLONEX(R). In February we received FDA approval of our novel oral
contraceptive LOESTRIN(R) 24 FE. Our commercial team, led by Carl Reichel,
and particularly our specialty sales forces delivered strong prescription
growth for our oral contraceptive ESTROSTEP(R) and our oral antibiotic for
acne, DORYX(R), while, at the same time, preparing for the April launches
of LOESTRIN(R) 24 FE and TACLONEX(R). The addition of DOVONEX(R) and the
two new products provides us with opportunities to generate profitable
growth for the next several years."
Revenue
Our revenue in the quarter increased 24.5% to $166.5 million from
$133.7 million in the prior year quarter. Net sales of DOVONEX(R), acquired
on January 1, 2006, accounted for a significant portion of the increase
compared with the prior year quarter. Excluding DOVONEX(R) net sales from
the current year quarter and DOVONEX(R) co-promotion revenue from the prior
year quarter, our revenue increased $4.2 million (+3.3%).
Sales of our oral contraceptives increased $9.2 million or 21.9%.
Beginning in July 2005 and continuing through March 2006, ESTROSTEP(R) was
our top promotional priority in contraception, which resulted in strong
growth in filled prescriptions and drove a $6.6 million (+34.5%) increase
in ESTROSTEP(R) net sales in the current quarter. OVCON(R) net sales in the
quarter increased a modest $1.2 million (+5.3%) as the growth in
prescription demand compared with the prior year slowed following the July
2005 shift in our promotional emphasis to ESTROSTEP(R). During the quarter
we recorded $1.4 million of net sales of LOESTRIN(R) 24 FE representing our
initial sales of the product to the channel in preparation for the April
1st start of promotional activities.
In dermatology, net sales of DORYX(R), increased $1.1 million (+4.5%).
Prescription demand in the quarter increased more than 10% compared with
the prior year; however, contraction of wholesale pipeline inventories of
DORYX(R) in the current year quarter reduced sales growth. We acquired
DOVONEX(R) on January 1, 2006 and posted net sales of $33.8 million in the
quarter. During 2005 we promoted DOVONEX(R) under an agreement with
Bristol-Myers Squibb and recorded $5.4 million of co-promotion revenue in
the first quarter of 2005.
Sales of our hormone therapy (HT) products declined $2.9 million
(-8.2%) compared with the first quarter of 2005. A portion of the decline
in our HT product sales was due to the contraction of wholesale pipeline
inventories of FEMHRT(R), FEMRING(R) and ESTRACE(R) tablets in the current
quarter relative to the first quarter of 2005. Sales of our PMDD product,
SARAFEM(R), declined $1.6 million (-13.4%) due to decreased prescription
demand, offset in part by price increases.
Gross Profit on Product Net Sales (excluding amortization)
Reported gross profit on product net sales in the quarter increased
$47.8 million or 55.0% compared with the prior year quarter. Reported gross
profit margin on product net sales increased to 80.9% in the current
quarter from 67.7% in the prior year. Cost of sales in the quarters ended
March 31, 2006 and 2005 included $1.5 million and $22.4 million
respectively representing the opening values of inventory recorded through
the allocation of purchase prices flowing through cost of sales in the
periods. Excluding the impact of these items, our adjusted gross profit on
product net sales increased $26.9 million or 24.6% over the prior year
quarter. The addition of DOVONEX(R) net sales was the principal factor
generating the increase in gross profit. Gross profit margin on product net
sales, similarly adjusted, declined to 81.8% in the current quarter from
85.1% in the prior year. The reduction in gross profit margin was
principally due to the addition of DOVONEX(R) and TACLONEX(R) net sales.
The costs of sales for DOVONEX(R) and TACLONEX(R) products are
significantly higher than the costs for our other products.
Selling, General and Administrative Expenses
Selling, general and administrative expense decreased $8.3 million
(17.9%) in the current quarter compared with the same quarter in 2005.
Expenses included in SG&A in the prior year quarter and directly
attributable to the transaction by which we acquired the predecessor
company were $5.9 million. Excluding these costs, SG&A decreased $2.4
million as spending on promotional programs in the quarter were $2.9
million less than in the prior year while adjusted general and
administrative costs increased $0.7 million. We expect advertising and
promotional program costs to increase significantly in the second quarter
of 2006 in comparison with the first quarter of 2006 due to expenses in
support of the launches of TACLONEX(R) and LOESTRIN(R) 24 FE.
Research and Development Activities
Investment in research and development in the current quarter totaled
$9.6 million, a $4.6 million increase over the prior year quarter. During
the quarter we paid $3.0 million to acquire an option to purchase certain
rights to a topical dermatology product to be developed, by LEO Pharma. The
payment was included in research and development expense in the quarter.
Net Interest Expense
Net interest expense in the current quarter increased $16.5 million to
$45.1 million compared with $28.6 million in the prior year. The prior year
quarter does not include a full quarter's interest expense associated with
the debt financing used to fund our acquisition of the predecessor company.
Funding of the acquisition debt occurred on January 18, 2005. Also
contributing to the increase is the additional interest costs associated
with $240.0 million of incremental debt incurred by the Company to complete
the acquisition of the rights to DOVONEX(R) and the final milestone payment
to acquire the rights to TACLONEX(R). Interest rates on our un-hedged
variable rate debt were also higher in the current quarter in comparison
with the prior year.
Tax Rate
The Company operates in five primary tax jurisdictions, the United
Kingdom, the United States, the Republic of Ireland, Bermuda and Puerto
Rico. Based on the current forecast of income (loss) in each jurisdiction,
the expected annual income tax rate for 2006 is 8.4%. The recording of a
tax provision on a pre-tax loss is a result of the Company's taxable income
mix among the various tax jurisdictions.
Balance Sheet and Cash Flows
At March 31, 2006 the Company's cash and cash equivalents totaled $20.8
million and funded debt outstanding totaled $2,205.2 million with no
borrowings outstanding under the Company's revolving credit facility. The
Company generated $21.8 million of cash from operating activities in the
quarter ended March 31, 2006 and used $41.1 million of cash in operations
in the quarter ended March 31, 2005. Cash generated from operations in the
current quarter were reduced by our increased investment in working capital
mainly due to the acquisition of DOVONEX(R). The investments to acquire the
rights to DOVONEX(R) and TACLONEX(R) were funded primarily by $240.0
million of borrowings under the delayed-draw term loan portion of our
credit agreement. Capital expenditures in the quarter totaled $3.2 million
and included continued investments in our Fajardo, Puerto Rico
manufacturing facility and the implementation of a corporate-wide
enterprise resource planning system.
Subsequent Events
On April 21, 2006 the Company's S-4 Registration Statement was declared
effective. The Registration Statement covers $600.0 million of 8-3/4%
Senior Subordinated Notes due 2015 of Warner Chilcott Corporation that may
be exchanged for an equal principal amount of outstanding notes, which were
issued January 18, 2005. As of April 21, 2006 the interest rate on the
Senior Subordinated Notes reverted to the stated 8-3/4% rate.
On April 25, 2006 the Company entered into an amendment to its Senior
Secured Credit Facility under which the interest rates applicable to
outstanding and future term loans were reduced by 0.25%. These interest
rates would be reduced by an additional 0.25% if: (i) the Company's term
loans receive a rating of B1 or higher from Moody's Investor Services, Inc.
and B+ or higher from Standard & Poor's or (ii) the Company's leverage
ratio, as defined, is equal to or less than 5.75 to 1.00.
Investor Conference Call
The Company will host a conference call, open to all interested
parties, on Thursday, May 18, 2006 beginning at 10:00 AM EDT. The number to
call within the United States is (800) 895-1549. Participants outside the
United States should call (785) 424-1057. The conference ID is "WARNER". A
replay of the conference call will be available from May 18, 2006 through
June 5, 2006 and can be accessed by dialing (800) 659-2533 from within the
United States or (402) 530-9029 from outside the United States.
The Company
Warner Chilcott is a leading U.S. specialty pharmaceutical company
focused on developing, manufacturing, marketing and selling branded
prescription products in the women's healthcare and dermatology therapeutic
categories.
Forward Looking Statements
This press release contains forward-looking statements, including
statements concerning our operations, our economic performance and
financial condition, and our business plans and 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: our substantial
indebtedness; competitive factors in the industry in which we operate; our
ability to protect our intellectual property; a delay in qualifying our
manufacturing facility to produce our products or production or regulatory
problems with either third party manufacturers upon whom we may rely for
some of our products or our own manufacturing facility; pricing pressures
from reimbursement policies of private managed care organizations and other
third party payors, government sponsored health systems, the continued
consolidation of the distribution network through which we sell our
products, including wholesale drug distributors and the growth of large
retail drug store chains; the loss of key senior management or scientific
staff; an increase in litigation, including product liability claims and
patent litigation; government regulation 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; our ability to successfully complete the
implementation of a company-wide enterprise resource planning system
without disrupting our business; our ability to manage the growth of our
business by successfully identifying, developing, acquiring or licensing
and marketing new products, obtain regulatory approval and customer
acceptance of those products, and continued customer acceptance of our
existing products; and other risks detailed from time-to-time in our
financial statements and 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.
Reconciliation of Adjusted EBITDA to GAAP Earnings
To supplement its condensed consolidated financial statements presented
in accordance with accounting principles generally accepted in the United
States of America ("GAAP"), the Company is providing a summary to show the
computation of adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) taking into account certain charges that were taken
in the quarters ended March 31, 2006 and 2005. The computation of adjusted
EBITDA for the quarters ended March 31, 2006 and 2005 are based on the
definition of "EBITDA" in the indenture governing the Company's 8-3/4%
Senior Subordinated Notes due 2015. The Company believes that the
presentation of adjusted EBITDA provides useful information to both
management and investors concerning the approximate impact of the above
items. The Company also believes that considering the effect of these items
allows management and investors to better compare the Company's financial
performance from period-to-period, and to better compare the Company's
financial performance with that of its 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.
Financial Report for the Quarter Ended March 31, 2006
Copies of the Company's Report on Form 10-Q as of and for the quarter
ended March 31, 2006 are available on EDGAR or directly from the Company
beginning on May 15, 2006. Requests for the report should be e-mailed
tobkozinski@wcrx.com.
WARNER CHILCOTT HOLDINGS COMPANY III, LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars)
(Unaudited)
Quarter Ended Quarter Ended
Mar-31-06 Mar-31-05
REVENUE:
Product net sales $166,461 $128,392
Other revenue - 5,350
Total revenue 166,461 133,742
COSTS & EXPENSES:
Cost of sales 31,807 41,531
Selling, general and administrative 38,286 46,640
Research and development 9,571 4,943
Amortization of intangible assets 58,826 61,300
Acquired in-process R&D - 280,700
Transaction costs - 35,975
Interest income (404) (298)
Interest expense 45,496 28,946
(LOSS) BEFORE TAXES (17,121) (365,995)
Provision (benefit) for income taxes 1,434 (4,356)
NET (LOSS) $(18,555) $(361,639)
RECONCILIATION TO ADJUSTED EBITDA:
Net (loss) $(18,555) $(361,639)
+ Interest expense, net 45,092 28,648
+ Provision for income taxes 1,434 (4,356)
+ Stepped up basis of inventory
in cost of sales 1,464 22,381
+ Transaction related expenses in SG&A - 5,879
+ Sponsors' management fee in SG&A 1,250 1,181
+ Non-cash share-based compensation expense 762 191
+ Depreciation 1,595 633
+ Amortization 58,826 61,300
+ Permitted Investments expensed as R&D 3,000 -
+ Acquired in-process research
and development - 280,700
+ Transaction costs - 35,975
ADJUSTED EBITDA $94,868 $70,893
WARNER CHILCOTT HOLDINGS COMPANY III, LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
(Unaudited)
As of As of
Mar-31-06 Dec-31-05
ASSETS
Current assets:
Cash & cash equivalents $20,809 $11,502
Accounts receivable, net 39,624 29,765
Inventories 57,361 31,398
Prepaid expenses & other current assets 41,980 46,900
Total current assets 159,774 119,565
Property, plant and equipment, net 39,197 37,102
Intangible assets, net 1,706,756 1,519,847
Goodwill 1,260,777 1,260,777
Other non-current assets 80,460 80,924
TOTAL ASSETS $3,246,964 $3,018,215
LIABILITIES
Current liabilities:
Accounts payable $27,931 $17,629
Accrued expenses & other
current liabilities 108,255 114,054
Current portion of long-term debt 16,400 14,000
Accrued income taxes 3,633 -
Total current liabilities 156,219 145,683
Other liabilities:
Long-term debt, excluding
current portion 2,209,600 1,975,500
Other non-current liabilities 128,511 128,597
Total liabilities 2,494,330 2,249,780
SHAREHOLDER'S EQUITY 752,634 768,435
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $3,246,964 $3,018,215
WARNER CHILCOTT HOLDINGS COMPANY III, LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands of U.S. dollars)
(Unaudited)
Quarter Ended Quarter Ended
Mar-31-06 Mar-31-05
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(18,555) $(361,639)
Adjustments to reconcile net (loss)
to net cash provided by / (used in)
operating activities:
Depreciation 1,595 633
Amortization of intangibles 58,826 61,300
Acquired in-process research & development - 280,700
Amortization of debt finance costs 2,757 2,174
Stock compensation expense 762 191
Changes in assets and liabilities:
(Increase) in accounts receivable,
prepaid and other assets (8,154) (11,055)
(Increase) / decrease in inventories (25,962) 21,426
Increase / (decrease) in accounts payable,
accrued and other liabilities 2,840 (24,215)
Increase / (decrease) in income taxes
and other, net 7,665 (10,572)
Net cash provided by/(used in)
operating activities 21,774 (41,057)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of intangible assets (245,736) (7,200)
Purchase of business, net of cash acquired - (2,922,555)
Proceeds from sale of fixed assets - 48
Capital expenditures (3,156) (578)
Net cash (used in) investing activities $(248,892) $(2,930,285)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank term credit facility 240,000 1,400,000
Proceeds from issuance of
senior subordinated notes - 600,000
Repayments on predecessor long-term debt - (195,000)
(Repayments) under senior secured
credit term loan facility (3,500) -
Borrowings under revolving
credit facilities 20,000 20,000
(Repayment) of revolving credit facilities (20,000) -
Proceeds from share capital issue,
net of expenses - 1,282,166
Payments for debt finance costs - (82,662)
Other (75) 1
Net cash provided by financing activities 236,425 3,024,505
Net increase in cash and cash equivalents 9,307 53,163
Cash and cash equivalents,
beginning of period 11,502 -
Cash and cash equivalents,
end of period $20,809 $53,163
SOURCE Warner Chilcott Holdings Company III, Limited
back to topCONTACT:
Paul Herendeen, Executive Vice President and
CFO of Warner Chilcott Holdings Company III, Limited,
+1-973-442-3369, pherendeen@wcrx.com
