Valeant Pharmaceuticals Business Office Ii: Gaap In Addition To Non-Gaap Accounts
In Part 1 I introduced Valeant Pharmaceuticals as well as its describe of piece of job concern model which is to larn pharmaceutical companies, strip them of their enquiry expense as well as earn really high gross margins on sales.
This has overstep away a hugely successful stock, nonetheless you lot could non tell yesteryear looking at the GAAP accounts. Here is the P&L for the final 5 years, latest on the left, courtesy of Capital IQ.
For the Fiscal Period Ending | LTM 12 months Mar-31-2014 | 12 months Dec-31-2013 | Reclassified 12 months Dec-31-2012 | Reclassified 12 months Dec-31-2011 | Reclassified 12 months Dec-31-2010 | Reclassified 12 months Dec-31-2009 |
Currency | USD | USD | USD | USD | USD | USD |
Revenue | 6,577.6 | 5,765.4 | 3,480.4 | 2,427.5 | 1,181.2 | 820.4 |
Other Revenue | 5.6 | - | - | - | - | - |
Total Revenue | 6,583.2 | 5,765.4 | 3,480.4 | 2,427.5 | 1,181.2 | 820.4 |
Cost Of Goods Sold | 1,784.6 | 1,528.5 | 890.9 | 636.8 | 352.1 | 218.2 |
Gross Profit | 4,798.6 | 4,236.9 | 2,589.5 | 1,790.6 | 829.2 | 602.3 |
Selling General & Admin Exp. | 1,545.3 | 1,305.2 | 756.1 | 572.5 | 256.4 | 167.6 |
R&D Exp. | 194.3 | 156.8 | 79.1 | 65.7 | 67.9 | 47.6 |
Depreciation & Amort. | - | - | - | - | - | - |
Amort. of Goodwill as well as Intangibles | 1,326.0 | 1,248.7 | 865.6 | 530.1 | 219.8 | 104.7 |
Other Operating Expense/(Income) | 37.7 | 41.1 | 18.1 | 4.1 | 89.2 | - |
Other Operating Exp., Total | 3,103.2 | 2,751.7 | 1,718.8 | 1,172.3 | 633.4 | 319.9 |
Operating Income | 1,695.4 | 1,485.2 | 870.7 | 618.3 | 195.8 | 282.3 |
Interest Expense | (935.5) | (844.3) | (481.6) | (334.5) | (90.1) | (25.4) |
Interest as well as Invest. Income | 8.2 | 8.0 | 6.0 | 4.1 | 1.3 | 1.1 |
Net Interest Exp. | (927.3) | (836.3) | (475.6) | (330.4) | (88.8) | (24.3) |
Currency Exchange Gains (Loss) | (24.3) | (9.5) | 19.7 | - | 0.6 | 0.5 |
Other Non-Operating Inc. (Exp.) | - | - | - | 7.5 | - | - |
EBT Excl. Unusual Items | 743.9 | 639.5 | 414.8 | 295.3 | 107.6 | 258.5 |
Merger & Related Restruct. Charges | (969.5) | (923.7) | (501.8) | (170.8) | (253.3) | (35.6) |
Impairment of Goodwill | - | - | (12.8) | - | - | - |
Gain (Loss) On Sale Of Invest. | 3.9 | 5.8 | 2.1 | 22.8 | (5.6) | 17.6 |
Gain (Loss) On Sale Of Assets | (10.2) | (10.2) | - | 5.3 | - | - |
Asset Writedown | (734.9) | (783.2) | (212.9) | (132.9) | - | - |
In Process R&D Exp. | (12.0) | - | - | - | - | (59.4) |
Legal Settlements | (142.5) | (192.5) | (56.8) | (11.8) | (52.6) | (6.2) |
Other Unusual Items | (133.6) | (50.2) | (26.8) | (25.9) | (32.4) | - |
EBT Incl. Unusual Items | (1,254.9) | (1,314.5) | (394.2) | (18.0) | (236.3) | 175.0 |
Income Tax Expense | (398.4) | (450.8) | (278.2) | (177.6) | (28.1) | (1.5) |
Earnings from Cont. Ops. | (856.5) | (863.7) | (116.0) | 159.6 | (208.2) | 176.5 |
Earnings of Discontinued Ops. | - | - | - | - | - | - |
Extraord. Item & Account. Change | - | - | - | - | - | - |
Net Income to Company | (856.5) | (863.7) | (116.0) | 159.6 | (208.2) | 176.5 |
Minority Int. inward Earnings | (4.8) | (2.5) | - | - | - | - |
Net Income | (861.2) | (866.1) | (116.0) | 159.6 | (208.2) | 176.5 |
It is that cyberspace income describe at the goal that form of gets you. There are losses inward all years except 2011 as well as large as well as increasing cumulative losses. The $866 meg loss inward calendar 2013 is a surprising number.
The losses are non quite as well as thence bad on an EPS Blue Planet because of a massively increasing part count, simply these are hardly typical of a fellowship amongst such a speedily increasing stock price.
The losses nonetheless are cyberspace of vast "merger as well as restructuring charges", "asset writedowns" as well as "legal settlements" - as well as thence called "one-offs".
In 2013 merger as well as related costs were $923 million, property write-downs a farther $783 meg as well as legal settlements were $192.5 million. These amounts found good over 100 per centum of the loss recorded.
Net of these costs earnings are going upwardly really nicely. The fellowship actively encourages you lot to await at it this means - as well as the marketplace has adopted that guidance (as reflected inward the stock price).
Moreover this is just how they nowadays it inward analyst conference calls. Here is a slide from the 4Q 2013 conference call:
Note that the cash EPS reported ($6.24 per part profit) is considerably to a greater extent than attractive than the GAAP EPS (a loss of $2.70 according to the press release or Capital IQ).
And herein is the rub. Do you lot desire to believe the GAAP EPS (in which illustration this fellowship is a loss-making disaster) or create you lot desire to await through the GAAP EPS as well as run into what administration directs you lot to, their Definition of "cash EPS"?
In other words create you lot believe inward the GAAP accounts or around non-GAAP accounts?
There is around other means of maxim this. To believe inward the GAAP accounts you lot involve to believe that the "one-off" charges are reasonable as well as really one-off. [They are really vast - as well as thence this matters.]
There is a possibility that the whole Valeant do is something from the Wizard of Oz. Profits are going upwardly nicely if you lot pay no attending to that human being behind the drape - the human being beingness the large restructuring as well as one-time items.
It would survive an awful for investors if Valeant made its ferociously profitable budgets yesteryear putting whatever unwanted expenses (recurring or otherwise) into the "one-off" bucket.
And this is where nosotros volition kickoff our long exam of Valeant. We desire to travel out whether the one-off charges are reasonable (in which illustration this is a slap-up company) or whether they are inflated (in which illustration this is a Wizard-of-Oz-style con-on-the-market).
Till adjacent time.
John
The losses are non quite as well as thence bad on an EPS Blue Planet because of a massively increasing part count, simply these are hardly typical of a fellowship amongst such a speedily increasing stock price.
The losses nonetheless are cyberspace of vast "merger as well as restructuring charges", "asset writedowns" as well as "legal settlements" - as well as thence called "one-offs".
In 2013 merger as well as related costs were $923 million, property write-downs a farther $783 meg as well as legal settlements were $192.5 million. These amounts found good over 100 per centum of the loss recorded.
Net of these costs earnings are going upwardly really nicely. The fellowship actively encourages you lot to await at it this means - as well as the marketplace has adopted that guidance (as reflected inward the stock price).
Moreover this is just how they nowadays it inward analyst conference calls. Here is a slide from the 4Q 2013 conference call:
Note that the cash EPS reported ($6.24 per part profit) is considerably to a greater extent than attractive than the GAAP EPS (a loss of $2.70 according to the press release or Capital IQ).
And herein is the rub. Do you lot desire to believe the GAAP EPS (in which illustration this fellowship is a loss-making disaster) or create you lot desire to await through the GAAP EPS as well as run into what administration directs you lot to, their Definition of "cash EPS"?
In other words create you lot believe inward the GAAP accounts or around non-GAAP accounts?
There is around other means of maxim this. To believe inward the GAAP accounts you lot involve to believe that the "one-off" charges are reasonable as well as really one-off. [They are really vast - as well as thence this matters.]
There is a possibility that the whole Valeant do is something from the Wizard of Oz. Profits are going upwardly nicely if you lot pay no attending to that human being behind the drape - the human being beingness the large restructuring as well as one-time items.
It would survive an awful for investors if Valeant made its ferociously profitable budgets yesteryear putting whatever unwanted expenses (recurring or otherwise) into the "one-off" bucket.
And this is where nosotros volition kickoff our long exam of Valeant. We desire to travel out whether the one-off charges are reasonable (in which illustration this is a slap-up company) or whether they are inflated (in which illustration this is a Wizard-of-Oz-style con-on-the-market).
Till adjacent time.
John
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