Cephalon Reports Record Sales and Earnings in Second Quarter 2010

Cephalon Reports Record Sales and Earnings in Second Quarter 2010
--Quarterly Sales of $712 Million Increased 32 Percent --Quarterly Basic Adjusted EPS of $2.20 Increased 41 Percent --Ex-US Sales Exceed 25 Percent of Worldwide Sales for the First Time 

FRAZER, Pa., July 27, 2010 /PRNewswire via COMTEX/ -- Cephalon, Inc. today reported second quarter 2010 sales of $712.4 million, a 32 percent increase compared to sales of $539.0 million for the second quarter 2009. Basic income per common share for the quarter was $1.18. Excluding amortization expense and certain other items, basic adjusted income per common share for the quarter was $2.20, an increase of 41 percent over the comparable figure of $1.56 for the same period in 2009. Adjusted net income for the second quarter of 2010 was $165.3 million, a 49 percent increase over the comparable $110.7 million for the second quarter of 2009.

Central nervous system (CNS) franchise sales were $337.9 million during the quarter, a 16 percent increase compared to the same period last year. Pain franchise reported sales were $113.1 million, an 8 percent decrease versus second quarter 2009. Oncology franchise sales were $129.9 million, a 58 percent increase over the same period last year due to strong sales of TREANDA(R) (bendamustine hydrochloride). Other product sales were $131.4 million dollars, an increase of 208 percent versus second quarter of 2009 due to the expansion of our European business.

"This was a momentous quarter as we significantly expanded our global capabilities with the addition of Mepha, continued to execute on our product life cycle strategies in the U.S. and advanced the most promising pipeline in our history," said Frank Baldino, Jr., Ph.D., Chairman and CEO.

The company is updating its guidance for 2010. Total sales guidance is $2.630-$2.710 billion. This includes CNS franchise sales of $1.25-$1.29 billion, pain franchise sales of $440-$475 million, oncology franchise sales of $485-$515 million, and other product sales of $440-$460 million. Full year R&D and SG&A guidance is $450-$470 million and $910-$930 million, respectively. Adjusted net income guidance is increased to $562-$577 million and basic adjusted income per common share guidance is increased to $7.45-$7.65 assuming 75.4 million basic shares outstanding.

For the third quarter 2010, Cephalon is introducing sales guidance of $670-$700 million, adjusted net income guidance of $135.9-$143.5 million and basic adjusted income per common share guidance of $1.80-$1.90.

Basic adjusted income per common share guidance for both the third quarter 2010 and full-year 2010 is reconciled below and is subject to the assumptions set forth therein. References in this press release to basic income per common share, basic adjusted income per common share, basic adjusted income per common share guidance, adjusted net income, adjusted net income guidance, adjusted net income per common share, adjusted net income per common share guidance refers to those metrics on an "attributable to Cephalon" basis and does not include any income or losses attributable to noncontrolling interests.

Cephalon's management will discuss the company's second quarter 2010 performance in a conference call with investors beginning at 5:00 p.m. U.S. EDT today. To participate in the conference call, dial +913-312-1497 and refer to conference code 3249552. Investors can listen to the call live by logging on to the company's website at www.cephalon.com and clicking on "Investor Information," then "Webcast." The conference call will be archived and available to investors for one week after the call.

About Cephalon, Inc.

Cephalon is a global biopharmaceutical company dedicated to discovering, developing and bringing to market medications to improve the quality of life of individuals around the world. Since its inception in 1987, Cephalon has brought first-in-class and best-in-class medicines to patients in several therapeutic areas. Cephalon has the distinction of being one of the world's fastest-growing biopharmaceutical companies, now among the Fortune 1000 and a member of the S&P 500 Index, employing approximately 4,000 people worldwide. The company sells numerous branded and generic products around the world. In total, Cephalon sells more than 150 products in nearly 100 countries. More information on Cephalon and its products is available at http://www.cephalon.com

In addition to historical facts or statements of current condition, this press release may contain forward-looking statements. Forward-looking statements provide Cephalon's current expectations or forecasts of future events. These may include statements regarding anticipated scientific progress on its research programs; development of potential pharmaceutical products; interpretation of clinical results; prospects for regulatory approval; manufacturing development and capabilities; market prospects for its products; sales, adjusted net income and basic adjusted income per common share guidance for the third quarter 2010 and full-year 2010 and SG&A and R&D guidance for the full-year 2010; and other statements regarding matters that are not historical facts. You may identify some of these forward-looking statements by the use of words in the statements such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" or other words and terms of similar meaning. Cephalon's performance and financial results could differ materially from those reflected in these forward-looking statements due to general financial, economic, regulatory and political conditions affecting the biotechnology and pharmaceutical industries as well as more specific risks and uncertainties facing Cephalon such as those set forth in its reports on Form 8-K, 10-Q and 10-K filed with the U.S. Securities and Exchange Commission. Given these risks and uncertainties, any or all of these forward-looking statements may prove to be incorrect. Therefore, you should not rely on any such factors or forward-looking statements. Furthermore, Cephalon does not intend to update publicly any forward-looking statement, except as required by law. The Private Securities Litigation Reform Act of 1995 permits this discussion.

This press release and/or the financial results attached to this press release include "Adjusted Net Income," "Basic Adjusted Income per Common Share," "Adjusted Net Income Guidance," "Basic Adjusted Income per Common Share Guidance," and "Diluted Adjusted Income Per Common Share," amounts that are considered "non-GAAP financial measures" under SEC rules. As required, we have provided reconciliations of these measures. Additional required information is located in the Form 8-K furnished to the SEC in connection with this press release.

 


    Contacts:
    Media:                                Investors:
    Candace Steele Flippin                Robert (Chip) Merritt
    610-727-6231                          610-738-6376
    [email protected]                  [email protected]

 

 

 

                     CEPHALON, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except per share data)
                               (Unaudited)

 

 


                             Three Months
                                Ended              Six Months Ended
                              June 30,                 June 30,
                              --------                 --------
                            2010           2009        2010            2009
                            ----           ----        ----            ----
    REVENUES:
      Net sales         $712,435       $539,021  $1,289,116      $1,053,387
      Other revenues      14,475          8,792      34,379          14,394
                         726,910        547,813   1,323,495       1,067,781
                         -------        -------   ---------       ---------
    COSTS AND
     EXPENSES:
      Cost of sales      170,739        105,407     275,782         203,177
      Research and
       development       101,261        102,085     206,638         205,109
      Selling, general
       and
       administrative    258,468        223,656     463,109         424,246
      Restructuring
       charges             4,581          1,245       5,325           2,882
      Acquired in-
       process research
       and development         -          9,368           -          40,118
                         535,049        441,761     950,854         875,532
                         -------        -------     -------         -------

    INCOME FROM
     OPERATIONS          191,861        106,052     372,641         192,249
                         -------        -------     -------         -------

    OTHER INCOME
     (EXPENSE):
      Interest income      1,300            930       3,230           1,634
      Interest expense   (28,182)       (20,114)    (54,973)        (36,718)
      Other income
       (expense), net     (9,332)        32,104     (16,603)         38,643
                          ------         ------     -------          ------
                         (36,214)        12,920     (68,346)          3,559
                         -------         ------     -------           -----

    INCOME BEFORE
     INCOME TAXES        155,647        118,972     304,295         195,808

    INCOME TAX
     EXPENSE              63,254         46,932     111,565          79,986
                          ------         ------     -------          ------

    NET INCOME            92,393         72,040     192,730         115,822

    NET LOSS (INCOME)
     ATTRIBUTABLE TO
     NONCONTROLLING
     INTEREST             (3,329)        12,724       6,899          27,525
                          ------         ------       -----          ------

    NET INCOME
     ATTRIBUTABLE TO
     CEPHALON, INC.      $89,064        $84,764    $199,629        $143,347
                         =======        =======    ========        ========


    BASIC INCOME PER
     COMMON SHARE
     ATTRIBUTABLE TO
     CEPHALON, INC.        $1.18          $1.19       $2.66           $2.05
                           =====          =====       =====           =====

    DILUTED INCOME
     PER COMMON SHARE
     ATTRIBUTABLE TO
     CEPHALON, INC.        $1.11          $1.11       $2.46           $1.87
                           =====          =====       =====           =====

    WEIGHTED AVERAGE
     NUMBER OF COMMON
    SHARES
     OUTSTANDING
     ATTRIBUTABLE TO
    CEPHALON, INC.        75,192         71,119      75,092          69,962
                          ======         ======      ======          ======

    WEIGHTED AVERAGE
     NUMBER OF COMMON
    SHARES
     OUTSTANDING-
     ASSUMING
     DILUTION
    ATTRIBUTABLE TO
     CEPHALON, INC.       80,507         76,629      81,223          76,808
                          ======         ======      ======          ======

 

 


                       CEPHALON, INC. AND SUBSIDIARIES

    Reconciliation of GAAP Net Income to Adjusted Net Income Attributable
                              to Cephalon, Inc.
                                 (Unaudited)

 

 


                                                  Three Months
                                                      Ended
                                                    June 30,
                                                    --------
                                                 2010            2009
                                                 ----            ----

    GAAP NET INCOME ATTRIBUTABLE TO
     CEPHALON, INC.                           $89,064         $84,764
                                              =======         =======

      Cost of sales adjustments                52,209  (1)     30,470  (1)
      Research and development adjustments        317  (2)      1,790  (2)
      Selling, general and administrative
       adjustments                              9,225  (3)     12,874  (3)
      Restructuring charges                     4,581  (4)      1,245  (4)
      Interest expense adjustment              18,476  (5)     12,965  (5)
      Other (income) expense adjustment         5,398  (6)    (32,608) (6)
      In-process research and development
       adjustments                                  -           9,368  (7)
      Arana noncontrolling interest
       adjustments                                  -            (819) (8)
      Income tax adjustment                   (14,017) (9)     (9,341) (9)
      *Noncontrolling Interest adjustments:
         Other revenues                             -             (75)
         Research and development              (2,018)          9,993
         Selling, general and administrative      200           1,795
         Other income (expense)                     1             (99)
         Interest income                            -             (73)
         Interest expense                          (3)            221
         Income taxes                          (2,658)             24
         Less amount attributable to
          noncontrolling interest               4,478         (11,786)
                                                -----         -------
                                               76,189          25,944

    ADJUSTED NET INCOME ATTRIBUTABLE TO
     CEPHALON, INC.                          $165,253        $110,708
                                             ========        ========


    BASIC ADJUSTED INCOME PER COMMON SHARE      $2.20           $1.56
                                                =====           =====

    DILUTED ADJUSTED INCOME PER COMMON
     SHARE                                      $2.05           $1.44
                                                =====           =====

    WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING                         75,192          71,119
                                               ======          ======

    WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING-ASSUMING DILUTION       80,507          76,629
                                               ======          ======

 

 

 

    * Amounts recorded by our Variable Interest Entities that have been
    excluded from net income attributable to
    Cephalon, Inc.
    Notes to Reconciliation of GAAP Net Income to Adjusted Net Income

    (1)  To exclude the on-going amortization of acquired intangible
    assets ($32.2M in 2010; $23.0M in 2009),
    accelerated depreciation related to restructuring ($5.5M in 2010;
    $4.5M in 2009), amortization of inventory
    revaluation related to Mepha ($5.0M in 2010) and the write-off of
    modafinil purchase commitments in excess of
    estimated requirements ($9.4M in 2010; $3.0M in 2009).

    (2)  To exclude accelerated depreciation related to restructuring
    ($0.3M in 2010 and 2009) and charges related
    to our transaction with Arana Therapeutics Limited ($1.5M in 2009).

    (3)  In 2010, to exclude charges related to the acquisition of Mepha
    ($7.9M) and the acquisition of Ception
    noncontrolling interest ($1.4M). In 2009, to exclude charges related
    to the acquisition of Arana Therapeutics
    Limited ($6.3M) and charges related to our settlement with Takeda
    ($6.5M) to resolve our remaining
    contractual arrangements.

    (4)  To exclude costs related to restructurings.

    (5)  To exclude imputed interest expense associated with convertible
    debt.

    (6)  In 2010, to exclude the following losses related to the
    acquisition of Mepha AG:
    - $2.9M loss on foreign exchange derivative instruments; and
    - $2.5M loss on foreign exchange of Swiss Franc acquisition funds.

    In 2009, to exclude the following gains and losses related to the
    acquisition of Arana Therapeutics Limited:
    - $6.6M gain on pre-bid Arana holding;
    -$2.8M loss on contingent consideration (90% ownership incentive
    payment);
    - $10.0M gain on excess of net assets over consideration;
    - $13.7M gains on foreign exchange derivative instruments; and
    -$5.1M gain on foreign exchange of Australian Dollar acquisition
    funds.

    (7)  To exclude the impact of Acusphere deconsolidation.

    (8)  To exclude the portion of non-cash charges related to our
    acquisition of Arana Therapeutics Limited that
    are reflected in  (6) above but do not affect net income because they
    are attributed to noncontrolling interests.

    (9)  To reflect the tax effect of pre-tax adjustments at applicable
    tax rates and certain other tax adjustments
    primarily related to changes in valuation allowances and other
    changes in tax assets and liabilities.

 

 

                       CEPHALON, INC. AND SUBSIDIARIES

    Reconciliation of GAAP Net Income to Adjusted Net Income Attributable
                              to Cephalon, Inc.
                                 (Unaudited)

 

 


                                                Six Months Ended
                                                    June 30,
                                                    --------
                                                 2010            2009
                                                 ----            ----

    GAAP NET INCOME ATTRIBUTABLE TO
     CEPHALON, INC.                          $199,629        $143,347
                                             ========        ========

      Cost of sales adjustments                83,175  (1)     56,178  (1)
      Research and development adjustments        676  (2)      3,086  (2)
      Selling, general and administrative
       adjustments                             11,502  (3)     13,744  (3)
      Restructuring charges                     5,325  (4)      2,882  (4)
      Interest expense adjustment              36,055  (5)     23,500  (5)
      Other (income) expense adjustment        11,567  (6)    (39,527) (6)
      In-process research and development
       adjustments                                  -          40,118  (7)
      Arana noncontrolling interest
       adjustments                                  -            (819) (8)
      Income tax adjustment                   (38,690) (9)    (30,717) (9)
      *Noncontrolling Interest adjustments:
         Other revenues                           (31)             33
         Research and development               6,094          19,224
         Selling, general and administrative    3,222           6,546
         Other income (expense)                   166             (95)
         Interest income                           (7)           (145)
         Interest expense                         154           1,000
         Income taxes                          (3,848)             24
         Less amount attributable to
          noncontrolling interest              (5,750)        (26,587)
                                               ------         -------
                                              109,610          68,445

    ADJUSTED NET INCOME ATTRIBUTABLE TO
     CEPHALON, INC.                          $309,239        $211,792
                                             ========        ========


    BASIC ADJUSTED INCOME PER COMMON
     SHARE                                      $4.12           $3.03
                                                =====           =====

    DILUTED ADJUSTED INCOME PER COMMON
     SHARE                                      $3.81           $2.76
                                                =====           =====

    WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING                         75,092          69,962
                                               ======          ======

    WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING-ASSUMING DILUTION       81,223          76,808
                                               ======          ======

 

 

 

    * Amounts recorded by our Variable Interest Entities that have been
    excluded from net income attributable
    to Cephalon, Inc.

    Notes to Reconciliation of GAAP Net Income to Adjusted Net Income

    (1)  To exclude the on-going amortization of acquired intangible
    assets ($58.0M in 2010; $44.2M in 2009),
    accelerated depreciation related to restructuring ($10.7M in 2010;
    $9.0M in 2009), amortization of inventory
    revaluation related to Mepha ($5.0M in 2010) and the write-off of
    modafinil purchase commitments in
    excess of estimated requirements ($9.4M in 2010; $3.0M in 2009).

    (2)  To exclude accelerated depreciation related to restructuring
    ($0.7M in 2010; $0.6M in 2009), charges
    related to payments for several research and development
    collaborations ($1.0M in 2009) and charges
    related to our transaction with Arana Therapeutics Limited ($1.5M in
    2009).

    (3)  In 2010, to exclude charges related to the acquisition of Mepha
    ($10.1M) and the acquisition of Ception
    noncontrolling interest ($1.4M). In 2009, to exclude charges related
    to the acquisition of Arana Therapeutics
    Limited ($7.2M) and charges related to our settlement with Takeda
    ($6.5M) to resolve our remaining
    contractual arrangements.

    (4)  To exclude costs related to restructurings.

    (5)  To exclude imputed interest expense associated with convertible
    debt.

    (6)  In 2010, to exclude the following losses related to the
    acquisition of Mepha AG:
    - $9.1M loss on foreign exchange derivative instruments; and
    -$2.5M loss on foreign exchange of Swiss Franc acquisition funds.

    In 2009, to exclude the following gains and losses related to the
    acquisition of Arana Therapeutics Limited:
    - $6.6M gain on pre-bid Arana holding;
    -$2.8M loss on contingent consideration (90% ownership incentive
    payment);
    - $10.0M gain on excess of net assets over consideration;
    - $19.0M gains on foreign exchange derivative instruments;
    -$5.1M gain on foreign exchange of Australian Dollar acquisition
    funds; and
    -$1.6M dividend income related to our initial purchase of Arana
    shares.

    (7)  To exclude charges related to the deconsolidation of Acusphere
    ($9.3M), the acquisition of worldwide
    license rights related to LUPUZOR from ImmuPharma ($30.0M) and
    license rights for bendamustine
    hydrochloride in China and Hong Kong ($0.8M) in 2009.

    (8)  To exclude the portion of non-cash charges related to our
    acquisition of Arana Therapeutics Limited that
    are reflected in (6) above but do not affect net income because they
    are attributed to noncontrolling
    interests.

    (9)  To reflect the tax effect of pre-tax adjustments at applicable
    tax rates and certain other tax adjustments
    primarily related to; changes in valuation allowances and other
    changes in tax assets and liabilities.

 

 


                                        CEPHALON, INC. AND SUBSIDIARIES

                                           CONSOLIDATED SALES DETAIL
                                                (In thousands)
                                                  (Unaudited)

 

 


                                   Three Months Ended
                                        June 30,
                                        --------
                                                          2010
                                                          ----
                          United
                          States        Europe         Total
                         -------        ------         -----
    Net Sales:
         PROVIGIL        $268,550       $16,280       $284,830
         NUVIGIL           40,968             -         40,968
         GABITRIL          11,118         1,024         12,142
                           ------         -----         ------
              CNS         320,636        17,304        337,940

         ACTIQ             14,471        14,067         28,538
         Generic OTFC      11,535             -         11,535
         FENTORA           38,861         5,661         44,522
         AMRIX             28,548             -         28,548
                           ------           ---         ------
              Pain         93,415        19,728        113,143

         TREANDA           99,732             -         99,732
         Other              6,253        23,926         30,179
                            -----        ------         ------
              Oncology    105,985        23,926        129,911

              Other         5,941       125,500        131,441
                            -----       -------        -------

                         $525,977      $186,458       $712,435
                         ========      ========       ========

 

 

 

                                   Three Months Ended
                                        June 30,
                                        --------
                                                         2009
                                                         ----
                         United
                         States        Europe         Total
                        -------        ------         -----
    Net Sales:
         PROVIGIL       $246,583       $15,485       $262,068
         NUVIGIL          16,786             -         16,786
         GABITRIL         10,749         1,026         11,775
                          ------         -----         ------
              CNS        274,118        16,511        290,629

         ACTIQ            18,759        19,106         37,865
         Generic OTFC     23,390             -         23,390
         FENTORA          30,617           814         31,431
         AMRIX            30,867             -         30,867
                          ------           ---         ------
              Pain       103,633        19,920        123,553

         TREANDA          55,820             -         55,820
         Other             4,193        22,168         26,361
                           -----        ------         ------
              Oncology    60,013        22,168         82,181

              Other        8,380        34,278         42,658
                           -----        ------         ------

                        $446,144       $92,877       $539,021
                        ========       =======       ========

 

 

 

                                      %
                                   Increase
                                  (Decrease)
                                  ----------
                         United
                         States       Europe       Total
                         -------      ------       -----
    Net Sales:
         PROVIGIL              9%          5%          9%
         NUVIGIL             144           -         144
         GABITRIL              3           -           3
              CNS             17           5          16

         ACTIQ               (23)        (26)        (25)
         Generic OTFC        (51)          -         (51)
         FENTORA              27         595          42
         AMRIX                (8)          -          (8)
              Pain           (10)         (1)         (8)

         TREANDA              79           -          79
         Other                49           8          14
              Oncology        77           8          58

              Other          (29)        266         208

                              18%        101%         32%

 

 


                                    Six Months Ended
                                        June 30,
                                        --------
                                                              2010
                                                              ----
                           United
                           States         Europe          Total
                          -------         ------          -----
    Net Sales:
         PROVIGIL          $513,151       $34,130         $547,281
         NUVIGIL             75,890             -           75,890
         GABITRIL            19,417         2,486           21,903
                             ------         -----           ------
              CNS           608,458        36,616          645,074

         ACTIQ               29,411        32,558           61,969
         Generic OTFC        24,314             -           24,314
         FENTORA             77,341         9,390           86,731
         AMRIX               53,683             -           53,683
                             ------           ---           ------
              Pain          184,749        41,948          226,697

         TREANDA            180,989             -          180,989
         Other               10,808        48,124           58,932
                             ------        ------           ------
              Oncology      191,797        48,124          239,921

              Other          15,401       162,023          177,424
                             ------       -------          -------

                         $1,000,405      $288,711       $1,289,116
                         ==========      ========       ==========

 

 

 

                                    Six Months Ended
                                        June 30,
                                        --------
                                                           2009
                                                           ----
                         United
                         States        Europe          Total
                        -------        ------          -----
    Net Sales:
         PROVIGIL       $485,012       $30,418         $515,430
         NUVIGIL          16,786             -           16,786
         GABITRIL         25,498         2,531           28,029
                          ------         -----           ------
              CNS        527,296        32,949          560,245

         ACTIQ            40,171        35,858           76,029
         Generic OTFC     47,502             -           47,502
         FENTORA          63,907         1,237           65,144
         AMRIX            57,104             -           57,104
                          ------           ---           ------
              Pain       208,684        37,095          245,779

         TREANDA         106,017             -          106,017
         Other             9,519        43,200           52,719
                           -----        ------           ------
              Oncology   115,536        43,200          158,736

              Other       19,535        69,092           88,627
                          ------        ------           ------

                        $871,051      $182,336       $1,053,387
                        ========      ========       ==========

 

 

 

                                       %
                                    Increase
                                   (Decrease)
                                   ----------
                         United
                         States       Europe      Total
                         -------      ------      -----
    Net Sales:
         PROVIGIL              6%         12%         6%
         NUVIGIL             352           -        352
         GABITRIL            (24)         (2)       (22)
              CNS             15          11         15

         ACTIQ               (27)         (9)       (18)
         Generic OTFC        (49)          -        (49)
         FENTORA              21         659         33
         AMRIX                (6)          -         (6)
              Pain           (11)         13         (8)

         TREANDA              71           -         71
         Other                14          11         12
              Oncology        66          11         51

              Other          (21)        135        100

                              15%         58%        22%

 

 

 

                   CEPHALON, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS
                  (In thousands, except share data)
                             (Unaudited)


                                                           December
                                           June 30            31,
                                                2010            2009
                                                ----            ----
    CURRENT ASSETS:
       Cash and cash equivalents            $927,446      $1,647,635
       Receivables, net                      460,265         376,076
       Inventory, net                        293,679         240,576
       Deferred tax assets, net              224,651         243,246
       Other current assets                   62,724          58,423
                                              ------          ------
           Total current assets            1,968,765       2,565,956

       INVESTMENTS                            12,583          12,427
       PROPERTY AND EQUIPMENT, net           499,578         451,879
       GOODWILL                              802,551         590,284
       INTANGIBLE ASSETS, net              1,210,810         981,857
       DEBT ISSUANCE COSTS                    16,529          18,862
       OTHER ASSETS                           35,078          36,830
                                          $4,545,894      $4,658,095
                                          ==========      ==========

    CURRENT LIABILITIES:
       Current portion of long-term
        debt, net                           $635,932        $818,925
       Accounts payable                       99,674          88,829
       Accrued expenses                      467,200         430,209
                                             -------         -------
           Total current liabilities       1,202,806       1,337,963

       LONG-TERM DEBT                        378,116         363,696
       DEFERRED TAX LIABILITIES, net         206,855         159,328
       OTHER LIABILITIES                     268,472         111,728
                                             -------         -------
           Total liabilities               2,056,249       1,972,715
                                           ---------       ---------

    REDEEMABLE EQUITY                        186,155         207,307
                                             -------         -------

    EQUITY:
    Cephalon Stockholders' Equity
       Common stock, $0.01 par value             784             780
       Additional paid-in capital          2,388,730       2,534,070
       Treasury stock, at cost              (216,597)       (208,427)
       Accumulated earnings (deficit)         20,970        (178,659)
       Accumulated other comprehensive
        income                                46,159         114,194
           Total Cephalon stockholders'
            equity                         2,240,046       2,261,958
    Noncontrolling Interest                   63,444         216,115
                                              ------         -------
           Total equity                    2,303,490       2,478,073
                                          $4,545,894      $4,658,095
                                          ==========      ==========

 

 

 

                        CEPHALON, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                  (Unaudited)

                                                     Six Months Ended
                                                         June 30,
                                                         --------
                                                       2010             2009
                                                       ----             ----
    CASH FLOWS FROM OPERATING ACTIVITIES:
         Net income                                $192,730         $115,822
         Adjustments to reconcile net income
          to net cash provided by operating
          activities:
               Deferred income tax benefit          (18,059)            (385)
               Depreciation and
                amortization                        106,724           87,029
               Stock-based compensation
                expense                              21,630           24,840
               Amortization of debt
                discount and debt issuance
                costs                                35,692           23,749
               Loss (gain) on foreign
                exchange contracts                    9,499          (26,754)
               Gain on acquisition of Arana               -          (10,008)
               IPR&D from Acusphere
                deconsolidation                           -            8,366
               Other                                  3,193           (5,283)
               Changes in operating assets and
                liabilities:
                   Receivables                      (25,581)          74,211
                   Inventory                         18,985           (9,550)
                   Other assets                       9,474           31,479
                   Accounts payable, accrued
                    expenses and deferred
                    revenues                         23,955            1,493
                   Other liabilities                   (189)          (1,501)
                                                       ----           ------
                   Net cash provided by
                    operating activities            378,053          313,508
                                                    -------          -------

    CASH FLOWS FROM INVESTING ACTIVITIES:
         Purchases of property and
          equipment                                 (22,997)         (30,234)
         Cash balance from
          consolidation of variable
          interest entity                                 -           52,563
         Investment in Ception                            -          (75,000)
        Acquisition of Arana, net of
         cash acquired                                    -         (211,803)
        Acquisition of Mepha, net of
         cash acquired                             (549,463)               -
         Purchases of investments                       (60)          (9,082)
         (Cash settlements of)
          proceeds from foreign
          exchange contracts                         (9,499)          26,754
         Sales and maturities of
          available-for-sale
          investments                                     -            4,456
                                                        ---            -----
                   Net cash used for investing
                    activities                     (582,019)        (242,346)
                                                   --------         --------

    CASH FLOWS FROM FINANCING ACTIVITIES:
         Proceeds from sale of common
          stock                                           -          288,000
         Proceeds from exercises of
          common stock options                       14,370            6,271
         Windfall tax benefits from
          stock-based compensation                        -              197
         Acquisition of treasury
          stock                                         (33)             (29)
         Acquisition of Ception NCI                (299,289)               -
         Payments on and retirements
          of long-term debt                        (221,478)          (9,131)
         Net proceeds from issuance
          of convertible subordinated
          notes                                           -          484,738
         Proceeds from sale of
          warrants                                        -           37,640
         Purchase of convertible note
          hedge                                           -         (121,040)
                                                        ---         --------
                   Net cash (used for) provided
                    by financing activities        (506,430)         686,646
                                                   --------          -------

    EFFECT OF EXCHANGE RATE
     CHANGES ON CASH AND CASH
     EQUIVALENTS                                     (9,793)            (341)
                                                     ------             ----

    NET (DECREASE) INCREASE IN
     CASH AND CASH EQUIVALENTS                     (720,189)         757,467

    CASH AND CASH EQUIVALENTS,
     BEGINNING OF PERIOD                          1,647,635          524,459
                                                  ---------          -------

    CASH AND CASH EQUIVALENTS,
     END OF PERIOD                                 $927,446       $1,281,926
                                                   ========       ==========

 

 


                    CEPHALON, INC. AND SUBSIDIARIES

    Reconciliation of Projected GAAP Basic Income per Common Share
          to Basic Adjusted Income Per Common Share Guidance
                              (Unaudited)

 

 


                                 Three Months          Twelve Months
                                     Ended                 Ended
                                 September 30,         December 31,
                                      2010                  2010
                                --------------         -------------

    Projected GAAP basic
     income per common share  $1.33    -    $1.43   $5.31    -    $5.51
                              =====         =====   =====         =====

    Amortization of current
     intangibles              $0.41    -    $0.41   $1.55    -    $1.55
    Accelerated depreciation
     adjustment- CIMA         $0.02    -    $0.02   $0.09    -    $0.09
    Accelerated depreciation
     adjustment- Mitry-
     Mory                        $-    -       $-   $0.10    -    $0.10
    Cost of sales
     adjustments              $0.07    -    $0.07   $0.26    -    $0.26
    Selling, general and
     administrative
     adjustments                 $-    -       $-   $0.15    -    $0.15
    Restructuring
     adjustments              $0.01    -    $0.01   $0.04    -    $0.04
    Other income (expense)
     adjustments                 $-    -       $-   $0.15    -    $0.15
    Interest expense
     adjustments              $0.20    -    $0.20   $0.88    -    $0.88

    Tax effect of pre-tax
     adjustments at the
     applicable tax rates    $(0.24)   -   $(0.24) $(1.08)   -   $(1.08)
                             ------        ------  ------        ------

    Basic adjusted income
     per common share
     guidance                 $1.80    -    $1.90   $7.45    -    $7.65

The company's guidance is being issued based on certain assumptions
    including:

     -Adjusted effective tax rate of approximately 33.3 percent in 2010;
     and
     -Weighted average number of common shares outstanding of 75.5 and
     75.4 million shares for
    the three months ended September 30, 2010 and the twelve months ended
    December 31, 2010,
    respectively.

 


 

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