Press Releases
Fresenius Kabi Pharmaceuticals Holding, Inc. Releases Third Quarter Results
SCHAUMBURG, Ill.--(BUSINESS WIRE)--Nov. 3, 2008--Fresenius Kabi Pharmaceuticals Holding, Inc. (NASDAQ:APCVZ) ("FKP Holdings") the newly formed holding company that acquired APP Pharmaceuticals, Inc. ("APP") on September 10, 2008, today released financial results for the third quarter and for the nine months ended September 30, 2008. These results include APP's results for the portion of the third quarter and the nine-month period prior to the closing of the acquisition and FKP Holdings' results from July 2, 2008, through September 30, 2008, which also includes the results of operations of APP post acquisition.
Third quarter revenues were $198 million, a 29 percent increase over APP's revenue of $153 million for the same period in 2007. Revenues for the nine-month period ended September 30, 2008 were $544 million, a 20 percent increase over APP's revenue of $453 million for the same period in 2007.
For the third quarter, net loss was $242 million, as compared to a net loss of $8 million for APP in the third quarter of 2007, after inclusion of a net loss from discontinued operations of $22 million in 2007. Net loss for the nine-month period ended September 30, 2008 was $209 million compared to APP's net income of $26 million for the same period in 2007, after inclusion of a net loss from discontinued operations of $25 million during 2007. Excluding acquisition and separation-related charges net income for the quarter was $21 million and $56 million for the nine-month period ended September 30, 2008.
For the third quarter and for the nine months ending September 30, 2008, Adjusted EBITDA, as defined in the indenture governing the Contingent Value Rights (CVRs) of FKP Holdings, was $87 million and $217 million, respectively.
Revenue guidance for 2008 has been modified to be between $765 million and $785 million and Adjusted EBITDA guidance for 2008 has been modified to be between $315 million and $325 million. Guidance previously provided by APP was revenue between $800 million and $820 million and Adjusted EBITDA between $325 million and $350 million. The components of Adjusted EBITDA are reflected in APP's second quarter earnings release filed on July 31, 2008 and changes in guidance primarily related to Adjusted EBITDA result from changes in the revenue guidance noted above.
On a going forward basis, the financial results for FKP Holdings will not be reported in an earnings release and will be reported in FKP Holdings' filings with the Securities and Exchange Commission.
Use of Non-GAAP Financial Measures
Amounts reported on a combined basis (i.e., including both the successor and predecessor periods) above and in the accompanying tables are non-GAAP measures and should not be considered in isolation of, or as a substitute for, the discrete information prepared and presented for the predecessor and successor periods in accordance with GAAP. Similarly, Adjusted EBITDA is a defined term in the indenture governing the Contingent Value Rights (CVRs), however it is not a recognized term under GAAP and should not be considered in isolation of, or as a substitute for, the information prepared and presented in accordance with GAAP. Because not all companies calculate Adjusted EBITDA identically, FKP Holdings' definition of adjusted EBITDA may not be comparable to similarly titled measures of other companies. The attached financial pages provide a reconciliation of net income to Adjusted EBITDA.
About Fresenius SE
Fresenius SE is a health care group with international operations, providing products and services for dialysis, hospital and outpatient medical care. In 2007, group sales were approximately EUR 11.4 billion. On June 30, 2008 the Fresenius Group had 117,453 employees worldwide. For more information visit the company's website at www.fresenius.com.
About Fresenius Kabi Pharmaceuticals Holding, Inc.
Fresenius Kabi Pharmaceuticals Holdings, a wholly owned subsidiary of Fresenius SE, acquired the Schaumburg, Illinois-based APP Pharmaceuticals on September 10, 2008. Under the terms of the agreement, Fresenius acquired the outstanding common stock of APP for $23.00 in cash per share plus a Contingent Value Right that could deliver up to an additional $6.00 per CVR in cash, pending achievement of certain financial targets (payable in Q2 2011).
About APP Pharmaceuticals
APP is a fully-integrated pharmaceutical company that develops, manufactures and markets injectable pharmaceutical products with a primary focus on the oncology, anti-infective, anesthetic/analgesic and critical care markets. The company offers one of the most comprehensive product portfolios used in hospitals, long-term care facilities, alternate care sites and clinics within North America and manufactures a comprehensive range of dosage formulations.
Forward-Looking Statement
The statements contained in this news release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements in this news release include statements regarding our expectations, beliefs, hopes, goals, intentions, initiatives or strategies, including statements regarding financial guidance for 2008. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, the continued market acceptance and demand of new and existing products; the difficulties or delays in developing, testing, obtaining regulatory approval of, and producing and marketing of the company's products; the impact of competitive products and pricing; the availability and pricing of ingredients used in the manufacture of pharmaceutical products; and the ability to successfully manufacture products in a time-sensitive and cost effective manner. Additional relevant information concerning risks can be found in Fresenius Kabi Pharmaceuticals Holding's prospectus dated August 20, 2008, and other documents it has filed with the Securities and Exchange Commission.
The information contained in this news release is as of the date of this release. Fresenius Kabi Pharmaceuticals Holding assumes no obligations to update any forward-looking statements contained in this news release as the result of new information or future events or developments.
On September 10, 2008, APP Pharmaceuticals, Inc. ("APP") closed an Agreement and Plan of Merger entered into on July 6, 2008, with Fresenius SE and certain of its direct and indirect subsidiaries pursuant to which APP became a wholly-owned operating subsidiary of Fresenius Kabi Pharmaceuticals Holding, Inc. ("FKP Holdings or the Company"), which is a wholly owned subsidiary of Fresenius SE. For accounting purposes the Company has separated its historical financial results for the Predecessor Company (APP) for all periods prior to September 10, 2008, the effective date of the merger, and the Successor Company (FKP Holdings) for all periods after July 2, 2008, which include the results of APP from September 10, 2008. The separate presentation is required as there was a change in accounting basis, which occurred when purchase accounting was applied to the acquisition of the Predecessor. Purchase accounting requires that the historical carrying value of assets acquired and liabilities assumed be adjusted to fair value, which may yield results that are not comparable on a period-to-period basis due to the different, and sometimes higher, cost basis associated with the allocation of the purchase price.
FRESENIUS KABI PHARMACEUTICALS HOLDING, INC.
CONSOLIDATED RESULTS OF OPERATIONS
----------------------------------------------------------------------
(Unaudited, in thousands)
Three July 2 July 1
months
Ending through through
September September September 9
30, 30,
2008 2008 2008
---------- ----------- -------------
Combined (Successor) (Predecessor)
Revenues
Critical care $ 129,614 $ 29,606 $100,008
Anti-infective 53,815 13,792 40,023
Oncology 11,463 4,294 7,169
Contract manufacturing and
other 2,988 388 2,600
---------- ----------- -------------
Total revenue 197,880 48,080 149,800
Cost of sales 90,642 22,190 68,452
Amortization of inventory step-up 12,588 12,588 -
---------- ----------- -------------
Gross profit 94,650 13,302 81,348
---------- ----------- -------------
Percent to total revenue 47.8% 27.7% 54.3%
Research and development 11,036 2,066 8,970
Selling, general and
administrative 23,813 5,508 18,305
Amortization of in-process R&D 252,000 252,000 -
Amortization of merger related
intangibles 5,960 3,389 2,571
Separation costs 235 - 235
Merger related costs 44,799 1,188 43,611
---------- ----------- -------------
Total operating expenses 337,843 264,151 73,692
---------- ----------- -------------
Percent to total revenue 170.7% 549.4% 49.2%
(Loss) income from operations (243,193) (250,849) 7,656
---------- ----------- -------------
Percent to total revenue -122.9% -521.7% 5.1%
Interest income and other 215 (16) 231
Gain on contingent value right 52,241 52,241 -
Interest expense (42,363) (27,866) (14,497)
---------- ----------- -------------
(Loss) income from continuing
operations before income taxes (233,100) (226,490) (6,610)
Income tax (benefit) expense 8,761 (8,135) 16,896
---------- ----------- -------------
Net (loss) income from continuing
operations $(241,861) $(218,355) $(23,506)
========== =========== =============
Net loss from discontinued
operations, net of taxes - - -
---------- ----------- -------------
Net (loss) income $(241,861) $(218,355) $(23,506)
========== =========== =============
Selected ratios as a percentage
of total net revenues:
Research and development 5.6% 4.3% 6.0%
Selling, general and
administrative 12.0% 11.5% 12.2%
Three months
Ending Change
Favorable
September 30, (Unfavorable)
---------------
2007 $ %
------------- ---------- ----
(Predecessor)
Revenues
Critical care $ 91,584 $ 38,030 42%
Anti-infective 43,032 10,783 25%
Oncology 14,073 (2,610) -19%
Contract manufacturing and other 4,490 (1,502) -33%
------------- ---------- ----
Total revenue 153,179 44,701 29%
Cost of sales 85,055 5,587 7%
Amortization of inventory step-up - 12,588 -
------------- ---------- ----
Gross profit 68,124 26,526 39%
------------- ---------- ----
Percent to total revenue 44.5%
Research and development 11,351 (315) -3%
Selling, general and administrative 22,061 1,752 8%
Amortization of in-process R&D - 252,000 -
Amortization of merger related
intangibles 3,856 2,104 55%
Separation costs 352 (117) -33%
Merger related costs - 44,799 -
------------- ---------- ----
Total operating expenses 37,620 300,223 -
------------- ---------- ----
Percent to total revenue 24.6%
(Loss) income from operations 30,504 (273,697) -
------------- ---------- ----
Percent to total revenue 19.9%
Interest income and other 886 (671) -76%
Gain on contingent value right - 52,241
Interest expense (3,831) (38,532) -
------------- ---------- ----
(Loss) income from continuing
operations before income taxes 27,559 (260,659) -
Income tax (benefit) expense 13,449 (4,688) -35%
------------- ---------- ----
Net (loss) income from continuing
operations $ 14,110 $(255,971) -
============= ========== ====
Net loss from discontinued operations,
net of taxes (22,495) 22,495 -
------------- ---------- ----
Net (loss) income $ (8,385) $(233,476) -
============= ========== ====
Selected ratios as a percentage of
total net revenues:
Research and development 7.4%
Selling, general and administrative 14.4%
On September 10, 2008, APP Pharmaceuticals, Inc. ("APP") closed an Agreement and Plan of Merger entered into on July 6, 2008, with Fresenius SE and certain of its direct and indirect subsidiaries pursuant to which APP became a wholly-owned operating subsidiary of Fresenius Kabi Pharmaceuticals Holding, Inc. ("FKP Holdings or the Company"), which is a wholly owned subsidiary of Fresenius SE. For accounting purposes the Company has separated its historical financial results for the Predecessor Company (APP) for all periods prior to September 10, 2008, the effective date of the merger, and the Successor Company (FKP Holdings) for all periods after July 2, 2008, which include the results of APP from September 10, 2008. The separate presentation is required as there was a change in accounting basis, which occurred when purchase accounting was applied to the acquisition of the Predecessor. Purchase accounting requires that the historical carrying value of assets acquired and liabilities assumed be adjusted to fair value, which may yield results that are not comparable on a period-to-period basis due to the different, and sometimes higher, cost basis associated with the allocation of the purchase price.
FRESENIUS KABI PHARMACEUTICALS HOLDING, INC.
CONSOLIDATED RESULTS OF OPERATIONS
----------------------------------------------------------------------
(Unaudited, in thousands)
Nine July 2 January 1
months
Ending through through
September September September 9
30, 30,
2008 2008 2008
---------- ----------- -------------
Combined (Successor) (Predecessor)
Revenues
Critical care $ 334,328 $ 29,606 $304,722
Anti-infective 156,071 13,792 142,279
Oncology 44,210 4,294 39,916
Contract manufacturing and
other 9,268 388 8,880
---------- ----------- -------------
Total revenue 543,877 48,080 495,797
Cost of sales 269,827 22,190 247,637
Amortization of inventory step-up 12,588 12,588 -
---------- ----------- -------------
Gross profit 261,462 13,302 248,160
---------- ----------- -------------
Percent to total revenue 48.1% 27.7% 50.1%
Research and development 37,199 2,066 35,133
Selling, general and
administrative 69,013 5,508 63,505
Amortization of in-process R&D 252,000 252,000 -
Amortization of merger related
intangibles 13,672 3,389 10,283
Separation costs 2,239 - 2,239
Merger related costs 44,799 1,188 43,611
---------- ----------- -------------
Total operating expenses 418,922 264,151 154,771
---------- ----------- -------------
Percent to total revenue 77.0% 549.4% 31.2%
(Loss) income from operations (157,460) (250,849) 93,389
---------- ----------- -------------
Percent to total revenue -29.0% -521.7% 18.8%
Interest income and other 1,577 (16) 1,593
Gain on contingent value right 52,241 52,241 -
Interest expense (72,990) (27,866) (45,124)
---------- ----------- -------------
(Loss) income from continuing
operations before income taxes (176,632) (226,490) 49,858
Income tax (benefit) expense from
continuing
operations 32,180 (8,135) 40,315
---------- ----------- -------------
Net income from continuing
operations $(208,812) $(218,355) $ 9,543
========== =========== =============
Net loss from discontinued
operations, net of taxes - - -
---------- ----------- -------------
Net (loss) income $(208,812) $(218,355) $ 9,543
========== =========== =============
Selected ratios as a percentage
of total net revenues:
Research and development 6.8% 4.3% 7.1%
Selling, general and
administrative 12.7% 11.5% 12.8%
Nine months
Ending Change Favorable
September 30, (Unfavorable)
----------------
2007 $ %
------------- ---------- -----
(Predecessor)
Revenues
Critical care $265,858 $ 68,470 26%
Anti-infective 133,561 22,510 17%
Oncology 39,927 4,283 11%
Contract manufacturing and other 13,428 (4,160) -31%
------------- ---------- -----
Total revenue 452,774 91,103 20%
Cost of sales 239,063 30,764 13%
Amortization of inventory step-up - 12,588 -
------------- ---------- -----
Gross profit 213,711 47,751 22%
------------- ---------- -----
Percent to total revenue 47.2%
Research and development 33,994 3,205 9%
Selling, general and administrative 66,800 2,213 3%
Amortization of in-process R&D - 252,000 -
Amortization of merger related
intangibles 11,568 2,104 18%
Separation costs 1,056 1,183 112%
Merger related costs - 44,799 -
------------- ---------- -----
Total operating expenses 113,418 305,504 -
------------- ---------- -----
Percent to total revenue 25.0%
(Loss) income from operations 100,293 (257,753) -
------------- ---------- -----
Percent to total revenue 22.2%
Interest income and other 1,816 (239) -13%
Gain on contingent value right - 52,241 -
Interest expense (12,747) (60,243) -
------------- ---------- -----
(Loss) income from continuing
operations before income taxes 89,362 (265,994) -
Income tax (benefit) expense from
continuing
operations 38,843 (6,663) -17%
------------- ---------- -----
Net income from continuing operations $ 50,519 $(259,331) -
============= ========== =====
Net loss from discontinued operations,
net of taxes (24,693) 24,693 -
------------- ---------- -----
Net (loss) income $ 25,826 $(234,638) $ -
============= ========== =====
Selected ratios as a percentage of
total net revenues:
Research and development 7.5%
Selling, general and administrative 14.8%
FRESENIUS KABI PHARMACEUTICALS HOLDING, INC.
Reconciliation of Net Income to Adjusted EBITDA per the CVR Agreement
Three and Nine Months Ended September 30, 2008
(unaudited, in thousands)
The CVR (Contingent Value Rights) agreement defines Adjusted EBITDA,
including both the predecessor and successor periods as: net income,
excluding the impact of depreciation and amortization, interest
expense net of interest income, income tax expense, non-cash stock-
based compensation expense, separation related costs, pre-launch
costs associated with Puerto Rico manufacturing facility, other
taxes, technology transfer costs, the gain or loss on the sale of
fixed assets and gains or losses on our contingent value rights and
other items and limitations as defined in the CVR Indenture. The
amount payable on June 30, 2011 will be determined based on the
Adjusted EBITDA of the Company and its predecessor over the three
year period ended December 31, 2010. However, Adjusted EBITDA is not
a recognized term under GAAP and should not be considered in
isolation of, or as a substitute for, the information prepared and
presented in accordance with GAAP. Because not all companies
calculate Adjusted EBITDA identically, the definition of Adjusted
EBITDA may not be comparable to similarly titled measures of other
companies. Adjusted EBITDA for the three and nine months ended
September 30, 2008 is as follows:
Three Nine
months months
---------- ----------
Net loss $(241,861) $(208,812)
Depreciation 4,875 14,132
Amortization 273,329 289,333
Interest expense, net of interest income 42,003 71,881
Provision for income taxes 8,761 32,180
---------- ----------
EBITDA 87,107 198,714
Stock-based compensation expense 1,237 5,750
Puerto Rico pre-launch costs, net of
depreciation 5,144 16,500
(Gain) on CVR (52,241) (52,241)
Separation, merger and other non-recurring costs 44,799 46,408
Other taxes 486 908
Other non-cash charges 165 495
Technology transfer 14 119
Loss on sale of fixed assets 27 73
---------- ----------
Adjusted EBITDA $ 86,738 $ 216,726
========== ==========
FRESENIUS KABI PHARMACEUTICALS HOLDING, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
Successor Predecessor
September December
30, 31,
2008 2007
----------- -----------
(in
thousands)
Assets
Current assets:
Cash and cash equivalents $ 2,994 $ 31,788
Accounts receivable, net 78,637 85,209
Inventories 220,408 149,191
Prepaid expenses and other current assets 13,354 13,531
Current receivables from related
parties - 6,996
Income taxes receivable 23,734 -
Deferred income taxes 11,479 17,109
----------- -----------
Total current assets 350,606 303,824
Property, plant and equipment, net 143,970 132,528
Intangible assets, net 606,611 463,154
Goodwill 3,731,172 160,239
Deferred financing costs and other non-current
assets, net 114,989 17,842
----------- -----------
Total assets $4,947,348 $1,077,587
=========== ===========
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $ 37,791 $ 36,502
Accrued liabilities 43,260 45,595
Current payables from related
parties 9,580 -
Short term portion of debt 17,231 5,000
----------- -----------
Total current liabilities 107,862 87,097
----------- -----------
Long-term debt 980,269 995,000
Deferred income taxes, non-current 145,401 71,011
Payable to parent company 2,922,601 -
Other non-current liabilities 109,563 4,250
----------- -----------
Total liabilities 4,265,696 1,157,358
----------- -----------
Stockholders' equity (deficit) 681,652 (79,771)
----------- -----------
Total liabilities and stockholders'
equity $4,947,348 $1,077,587
=========== ===========
CONTACT: Investor and Media Inquiries:
Hill & Knowlton
Christine Cassiano, 310-633-9495
or Investor Inquiries:
Fresenius SE
Birgit Grund, Senior Vice President, +49-6172-608-2485
SOURCE: Fresenius Kabi Pharmaceuticals Holding, Inc.
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