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Warner Chilcott Reports Operating Results for the Quarter and Year Ended December 31, 2010
Growth in revenue and lower expenses drive higher cash net income
DUBLIN, Ireland, February 25, 2011 Warner Chilcott plc (NASDAQ: WCRX) today announced its results for the quarter and year ended December 31, 2010. As discussed more fully below, our financial position and results of operations in the quarter ended December 31, 2010 as compared to the prior year quarter were significantly impacted by several important transactions in 2009 and 2010. These transactions included our acquisition of Novartis Pharmaceuticals Corporations (Novartis) U.S. rights to ENABLEX in October 2010, our acquisition of the global branded prescription pharmaceuticals business (PGP) from The Procter & Gamble Company (P&G) in October 2009 (the PGP Acquisition), and our termination of our exclusive license to distribute LEO Pharma A/Ss (LEO) DOVONEX, TACLONEX and pipeline dermatology products in the U.S. and sale of certain related assets to LEO for $1.0 billion in cash in September 2009 (the LEO Transaction).
Revenue in the quarter ended December 31, 2010 was $694.4 million, a 1% increase over the prior year quarter. The primary drivers of the increase in revenue were products acquired from P&G and Novartis, primarily ASACOL and ENABLEX, which together contributed $91.4 million of revenue growth in the quarter ended December 31, 2010, compared to the prior year quarter. LOESTRIN 24 FE also contributed $17.3 million of revenue growth in the quarter ended December 31, 2010 compared to the prior year quarter. The growth delivered by these products was offset, in part, by the loss of revenues relating to our former products DOVONEX and TACLONEX, which totaled $82.1 million in the quarter ended December 31, 2009. In connection with the LEO Transaction, we entered into a distribution agreement pursuant to which we purchased inventories of DOVONEX and TACLONEX from LEO and distributed them in the U.S. until June 30, 2010 at nominal distributor margins. As a result, our net sales in the quarter ended December 31, 2009, included net sales of DOVONEX and TACLONEX products.
We reported GAAP net income of $15.4 million, or $0.06 per diluted share, in the quarter ended December 31, 2010, compared with a GAAP net (loss) of $(9.5) million, or $(0.04) per diluted share, in the prior year quarter. Cash net income (CNI) for the quarter ended December 31, 2010 was $205.4 million compared to $133.4 million in the prior year quarter. The calculation of CNI in the quarter ended December 31, 2009 was adjusted for two items resulting from the PGP Acquisition and the LEO Transaction. First, the application of purchase accounting increased the opening value of the inventories acquired in the PGP Acquisition which resulted in a non-recurring charge that was recorded in our cost of sales as that inventory was sold. This resulted in a $65.1 million expense, net of tax, recorded in cost of sales as a portion of this inventory was sold in the fourth quarter of 2009. Second, our results for the quarter ended December 31, 2009 included a $33.5 million gain, net of tax, that resulted from our sale of certain inventories in the LEO Transaction. Excluding these two items, adjusted CNI increased by $40.4 million, or 24%, in the quarter ended December 31, 2010 compared to the prior year quarter.
References in this press release to cash net income or CNI mean our 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. Reconciliations from our reported results in accordance with Generally Accepted Accounting Principles in the U.S. (GAAP) to CNI, adjusted CNI and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for all periods presented are included in the tables at the end of this press release.
As mentioned above, on October 18, 2010, we acquired the U.S. rights to Novartis ENABLEX product for an upfront payment of $400.0 million in cash at closing, plus future milestone payments of up to $20.0 million in the aggregate based on 2011 and 2012 net sales of ENABLEX (the ENABLEX Acquisition). Concurrent with the closing of the ENABLEX Acquisition, we and Novartis terminated our existing co-promotion agreement. We assumed full control of sales and marketing of ENABLEX in the U.S. market and began recording product net sales on a gross basis as we became the principal in the transactions with our customers. We issued $500.0 million aggregate principal amount of 7.75% senior notes due 2018 (the September 2010 7.75% Notes) on September 29, 2010 in order to fund the ENABLEX Acquisition and for general corporate purposes. In this press release, we refer to the $750.0 million aggregate principal amount of 7.75% senior notes due 2018 that we issued on August 20, 2010, together with the September 2010 7.75% Notes, as the 7.75% Notes.
The following information was filed by Warner Chilcott Plc (WCRX) on Friday, February 25, 2011 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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