Valeant Files Overdue Annual Report, Resolving Risk of Default--Update
April 29 2016 - 9:13AM
Dow Jones News
By Michael Rapoport, Jacquie McNish and Nathan Becker
Valeant Pharmaceuticals International Inc. filed its overdue
annual report on Friday morning, resolving the looming danger of
debt default for the Canadian company.
The filing, known as a 10-K, had been delayed as Valeant sorted
out its financials after an internal investigation found an error
that prompted an earnings restatement.
Valeant had said it aimed to file the report by April 29 to
avoid being considered in default by its lenders. It said it had
received notices of default on some of its senior notes because it
hadn't filed the report on time, though they had been waived. On
Friday, Valeant said the defaults were "cured in all respects" by
the report's filing.
The filing offers more detail about what happened with its
revenue transactions through mail-order pharmacy Philidor Rx
Services LLC that forced it to restate earnings.
Valeant has previously it recognized $58 million in revenue
through Philidor too early; in the 10-K, it adds that those
transactions included "fulfillment of unusually large orders with
extended payment terms and increased pricing," an "emphasis" on
delivering product before Valeant executed an option to purchase
Philidor, and "filling a substitute order of equivalent value for
an unavailable product."
Valeant has said the internal investigation of its relationship
with Philidor is finished. It reiterated the $58 million of revenue
recognition Friday, and it said net income for the 2014 fiscal year
was dented by about $33 million and earnings by 9 cents a
share.
Valeant also offered new information about ongoing Justice
Department investigations and disclosed new state investigations.
It said two probes by districts in Massachusetts and the Southern
District of New York relate to matters including its patient
assistance program, former relationship with the specialty pharmacy
Philidor Rx Services LLC and its accounting treatment of sales to
specialty pharmacies. The company said the investigations also
focus on financial support provided by Valeant for patients, its
distribution of products and information provided to the Centers
for Medicare and Medicaid Services.
The company also disclosed in the filing that it is under
investigation by the states of North Carolina and New Jersey.
Valeant has previously disclosed that it is under investigation by
multiple regulators over its drug pricing and other issues.
The audited financial statements released Friday restate results
for the year ended Dec. 31, 2014, the three months ended Dec. 31,
2014, the three months ended March 31, 2015, the six months ended
June 30, 2015, and the nine months ended Sep. 30, 2015.
The company said it also identified misstatements in the first
quarter of 2015, consisting primarily of the reversing effect on
earnings of the 2014 misstatements, which reduce revenue by about
$21 million, increase net income by about $24 million and increase
earnings by about 7 cents a share. The company had previously
reported first-quarter earnings of $74 million, or 21 cents a
share, on revenue of $2.19 billion.
Valeant said its report was audited and found clean by
PricewaterhouseCoopers LLP.
Meanwhile, Valeant is also expected to announce, as early as
today, sweeping board changes as the company, under fire from
lawmakers and investors, looks to change the tone among its top
brass.
The Wall Street Journal had reported details of the board
turnover on Wednesday, citing people familiar with the matter.
William Ackman, a Valeant director and major shareholder, had
signaled change was coming during his testimony at a Senate
Committee hearing on Wednesday during which he, outgoing CEO
Michael Pearson and director Howard Schiller faced tough
questioning over Valeant's widespread drug price increases.
"A lot of the board is going to turn over," Mr. Ackman told the
committee. He also promised swift changes to the expensive price
tags on many Valeant drugs.
The board reshuffling follows the addition of four new
directors, including Mr. Ackman, earlier this year.
Mr. Pearson is set to depart the company soon, to be replaced as
chief executive by Joseph Papa, whom Valeant lured away from
Perrigo Co. Mr. Papa is expected to start work for Valeant on
Monday.
Write to Michael Rapoport at Michael.Rapoport@wsj.com, Jacquie
McNish at Jacquie.McNish@wsj.com and Nathan Becker at
nathan.becker@wsj.com
(END) Dow Jones Newswires
April 29, 2016 08:58 ET (12:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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