RESEARCH TRIANGLE PARK, N.C.,
April 27, 2011 /PRNewswire/ --
Talecris Biotherapeutics Holdings Corp. ("Talecris") (NASDAQ: TLCR)
today announced its financial results for the three months ended
March 31, 2011 and filed its Form
10-Q with the U.S. Securities and Exchange Commission (SEC).
First quarter 2011 net revenue increased by $25.7 million or 6.7% to $406.7 million from $381.0
million in the first quarter of 2010. Higher revenues from
Talecris' principal products Gamunex®, Immune Globulin Intravenous
(Human), 10% Caprylate/Chromatography Purified (Gamunex, Gamunex®-C
/Gamunex IGIV) and Prolastin® Alpha-1 Proteinase Inhibitor (Human)
(Prolastin, Prolastin A1PI, Prolastin-C A1PI) in the first quarter
of 2011 were partially offset by lower sales of intermediate
products and contracted PPF powder compared to the first quarter of
2010. First quarter 2011 gross margin was 42.6% compared to
42.9% in the first quarter of 2010. First quarter 2011 income
from operations was $93.8 million
versus $79.7 million for the first
quarter of 2010, a 17.7% increase. Net income was
$55.5 million for the first quarter
of 2011, an increase of $10.1 million
compared to net income of $45.3
million for the first quarter of 2010. Diluted
earnings per share were $0.43 in the
first quarter of 2011, including an after-tax charge of
$3.0 million ($0.02 per diluted share) primarily due to costs
associated with Talecris' definitive merger agreement with Grifols
S.A. and Grifols, Inc. (Grifols) compared to diluted earnings per
share of $0.35 for the first quarter
of 2010.
On a non-GAAP basis excluding merger-related items and interest
expense related to the judgment in favor of Plasma Centers of
America, LLC (PCA), Talecris' net income was $58.5 million for the first quarter of 2011, an
increase of 29.1% compared to $45.3
million for the first quarter of 2010. On the same
basis, diluted earnings per share for the 2011 first quarter were
$0.45, an increase of 28.6% from
$0.35 for the first quarter of 2010.
Additional information regarding the computation of non-GAAP
financial measures is included in Exhibit B.
"While we await approval from the U.S. Federal Trade Commission
on the proposed merger of Talecris and Grifols, I am pleased with
the organizational focus that ultimately drove our significant
increase in net income during the first quarter," said Lawrence D. Stern, Talecris' chairman and chief
executive officer. "This focus was evident in all functional
areas of the organization. Our sales team drove global growth
of 7.7% for our principal product Gamunex as well as 10.6% growth
for Prolastin. We significantly increased our volume of
plasma collection, resulting in our licensed centers collecting
approximately 79% of our plasma needs for the quarter. We
made steady progress in the construction of our new fractionation
facility, and our R&D organization continued to make progress
in our phase II study of our direct acting thrombolytic, Plasmin,
for the treatment of acute peripheral arterial occlusion."
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(in millions,
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Three Months
Ended
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except per share
amounts)
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March
31,
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Change
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2011
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2010
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$
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%
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Net revenue
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$ 406.7
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$
381.0
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$
25.7
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6.7%
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Gross margin
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42.6%
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42.9%
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(30 bps)
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Income from
operations
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$
93.8
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$
79.7
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$
14.1
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17.7%
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Operating Margin
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23.1%
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20.9%
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220 bps
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Net income
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$
55.5
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$
45.3
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$
10.1
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22.3%
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Diluted EPS
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$
0.43
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$
0.35
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$
0.08
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22.9%
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Non-GAAP net
income*
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$
58.5
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$
45.3
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$
13.2
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29.1%
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Non-GAAP diluted
EPS*
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$
0.45
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$
0.35
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$
0.10
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28.6%
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*2011 excludes merger-related
items and interest expense related to the judgment in favor of
PCA.
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Talecris' Form 10-Q is available on the SEC's website at
www.sec.gov and on Talecris' website at http://ir.talecris.com
Discussion of First Quarter 2011 Financial and Operating
Results
Net revenue for the 2011 first quarter was $406.7 million compared to $381.0 million in the first quarter of 2010, an
increase of $25.7 million or 6.7%.
Gamunex-C/Gamunex IGIV revenue increased $16.4 million or 7.7%, which consisted primarily
of $14.1 million in higher volumes.
Gamunex-C/Gamunex IGIV experienced higher volumes of
$15.3 million in the U.S.,
Europe and Canada, which were partially offset by lower
volumes in other international markets. U.S.
Gamunex-C/Gamunex IGIV revenue grew 6.2% for the first quarter of
2011 compared to the first quarter of 2010.
Prolastin-C/Prolastin A1PI revenues increased $8.5 million or 10.6%, which consisted of
$5.8 million in higher volumes as
well as $2.7 million in improved
pricing. Growth in volume was driven by increased number of
patients on Prolastin-C/Prolastin A1PI in both the U.S. and
European markets. In addition, revenues for hyperimmunes and
Thrombate® III Antithrombin III (Human) increased $2.9 million or 19.5% and $2.1 million or 31.8%, respectively. These
increases were partially offset by lower sales of intermediate
products and contracted PPF powder compared to the first quarter of
2010.
Gross profit increased to $173.0
million for the 2011 first quarter compared to $163.6 million in the first quarter of 2010.
This increase was primarily due to higher Gamunex-C/Gamunex
IGIV and Prolastin-C/Prolastin A1PI revenue, lower
non-capitalizable project spending, lower inventory impairment
provisions, as well as lower unabsorbed infrastructure and start-up
costs related to Talecris Plasma Resources, Inc. (TPR), which is
Talecris' plasma collection platform. These improvements were
partially offset by higher costs of production.
Non-capitalizable project spending during the first quarter
of 2011 decreased $5.8 million to $5.9
million as certain projects related to the company's new
fractionation facility construction progressed to the capital
phase. Inventory impairment provisions during the first
quarter of 2011 decreased by $5.2 million to
$7.1 million. Unabsorbed TPR infrastructure and
start-up costs during the first quarter of 2011 declined by
$1.6 million to $0.4 million.
Production costs during the first quarter of 2011 increased
$17.1 million driven by slower than
planned reduction in Talecris' cost per liter of plasma, yield
variability as well as inefficient plasma utilization. Gross
margin was 42.6% during the first quarter of 2011 compared to 42.9%
for the 2010 first quarter.
Operating expenses for the first quarter of 2011 were
$79.2 million, which represented a
decrease of $4.6 million or 5.5%
versus $83.9 million incurred during
the prior year period. The decrease in operating expenses
resulted from a decrease in SG&A expenses primarily driven by a
$4.1 million reduction in share-based
compensation and lower special recognition bonus expense of
$1.2 million. During the three
months ended March 31, 2011, SG&A
benefited from $1.3 million in
favorable foreign exchange transactions compared to unfavorable
foreign exchange transactions of $3.9
million the first quarter of 2010. These decreases
were partially offset by $2.9 million
in higher sales and marketing expense in the first quarter of 2011
as the result of the sales force expansion. In addition, the
company incurred $3.4 million in
merger- related expenses, including $2.3
million in retention expenses in SG&A related to the
definitive merger agreement with Grifols. R&D spending
increased slightly in the first quarter of 2011, driven by
increased activity in the phase II trial for Plasmin in the
treatment of acute peripheral arterial occlusion (aPAO).
Operating income was $93.8
million during the first quarter of 2011, which represented
a 17.7% increase over the $79.7
million reported during the first quarter of 2010.
Operating margin was 23.1% in the 2011 first quarter compared
to 20.9% in the 2010 first quarter, an increase of 220 basis
points.
Net interest expense was $10.8
million in the 2011 first quarter compared to $11.3 million in the prior year period, a
decrease of $0.5 million. The
first quarter of 2011 reflected an income tax provision of
$27.7 million resulting in a 33.3%
effective tax rate compared to $23.3
million for the first quarter of 2010 or a 33.9% effective
tax rate.
Net income was $55.5 million for
the 2011 first quarter including an after-tax charge of
$3.0 million primarily related to
Grifols merger-related expenses. This compares to
$45.3 million in the first quarter of
2010.
Diluted earnings per share for the 2011 first quarter were
$0.43 compared to $0.35 for the 2010 first quarter. The 2011
period included an after-tax charge of $0.02 per share primarily related to costs
associated with the Grifols acquisition. Total diluted shares
outstanding were 129,882,182 for the 2011 first quarter and
128,183,189 for the 2010 first quarter.
The 2011 first quarter EBITDA was $104.0
million compared to $87.9
million in the 2010 first quarter. Adjusted EBITDA was
$110.1 million in the 2011 first
quarter compared to adjusted EBITDA of $96.7
million in the 2010 first quarter. Additional
information regarding the computation of non-GAAP financial
measures is included in Exhibit B.
Recent Events
Talecris achieved a number of financial and commercial
milestones in the first quarter of 2011. These include:
- On March 4, 2011, Talecris and
Grifols announced that the "outside date" under the definitive
merger agreement for closing of their pending transaction was
extended to June 30, 2011 (from
March 6, 2011). Grifols
extended the financing and financing commitments from its lenders
to June 30, 2011 as well;
- On March 3, 2011, Talecris was
granted orphan drug designation by the European Commission for the
development of the company's direct-acting thrombolytic, Plasmin
(Human), to treat acute peripheral arterial occlusion (aPAO).
Talecris is currently investigating Plasmin in a phase II
clinical trial designed to assess its ability to treat aPAO, a
condition in which arterial blood flow to the extremities, usually
the legs, is blocked by a clot. Through the orphan drug
designation, the European Medicines Agency (EMA) will provide
Talecris with ten years of marketing exclusivity if the product is
the first to be approved in the European Union. In addition,
under this designation, EMA will provide the company with clinical
development assistance and reduced regulatory fees. Talecris
received orphan drug designation for Plasmin for aPAO from the U.S.
Food and Drug Administration (FDA) in 2009; and
- During the first quarter, Talecris converted all U.S. sales
from Gamunex IGIV labeled product to Gamunex-C IGIV labeled
product. Gamunex-C IGIV is the first and only immune globulin
to provide both the intravenous route of administration and a new
subcutaneous route of administration. The intravenous
delivery mode is approved to treat primary immune deficiency (PI),
chronic inflammatory demyelinating polyneuropathy (CIDP), and
idiopathic thrombocytopenic purpura (ITP). The subcutaneous
mode is approved to treat only PI. A required post-marketing
study will be initiated in the second half of 2011.
Use of Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP
financial measures including adjusted net income, adjusted diluted
EPS, EBITDA, adjusted EBITDA, and Consolidated Cash Flow. For
a description of these non-GAAP financial measures, including the
reasons management uses these measures and reconciliations of these
non-GAAP financial measures to the most directly comparable
financial measures prepared in accordance with U.S. Generally
Accepted Accounting Principles, please see the section titled
"Non-GAAP Financial Measures," in Exhibit B.
Cautionary Statement Regarding Forward-looking
Statements
This press release contains forward-looking statements within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These statements
include, but are not limited to, quotations from management,
statements regarding strategic and operation plans, expected
charges and pro forma financial information. Forward-looking
statements are based on current beliefs and expectations and are
subject to inherent risks and uncertainties. You are
cautioned not to place undue reliance on forward-looking
statements. Although Talecris believes that the
forward-looking statements contained in this press release are
reasonable, there is no assurance that expectations will be
fulfilled.
The following factors, among others, could cause actual results
to differ materially from those expressed or implied in
forward-looking statements: impact of the announcement of the
company's definitive merger agreement with Grifols and the
potential impact of completion, termination or delay of the
proposed merger with Grifols, including, but not limited to,
disruptions from the pending transaction, transaction costs, and
the outcome of litigation and regulatory proceedings to which
Talecris may be a party; fluctuations in the balance between supply
and demand with respect to the market for plasma-derived products;
the unprecedented volatility in the global economy and fluctuations
in financial markets; changes in economic conditions, political
tensions, trade protection measures, licensing requirements, and
tax matters in the countries in which the company conducts
business; Talecris' ability to expand its international business;
the impact of competitive products and pricing; the impact of
recently enacted and proposed additional U.S. healthcare reform
legislation, legal proceedings or regulatory action affecting,
among other things, the U.S. healthcare system, pharmaceutical
pricing and reimbursement, including Medicaid and Medicare and the
Public Health Service Program and additional legislation and
regulatory action now under consideration; legislation or
regulations in markets outside of the U.S. affecting product
pricing, reimbursement, access, or distribution channels; Talecris'
ability to procure adequate quantities of plasma and other
materials which are acceptable for use in manufacturing processes
from the company's own plasma collection centers or from
third-party vendors; Talecris' ability to maintain compliance with
government regulations and licenses, including those related to
plasma collection, production and marketing; Talecris' ability to
identify growth opportunities for existing products and Talecris'
ability to identify and develop new product candidates through the
company's research and development activities; timing of, and
Talecris' ability to obtain and/or maintain, regulatory approvals
for new product candidates, the rate and degree of market
acceptance, and the clinical utility of the company's products;
unexpected shut-downs of Talecris' manufacturing and storage
facilities or delays in opening new planned facilities; Talecris
and Talecris suppliers' ability to adhere to cGMP; potential
sanctions, if any, that the Department of Justice (DOJ) or other
federal agencies may impose on the company as a result of Talecris'
internal FCPA investigation; the impact of Talecris' appeal of the
Plasma Centers of America, LLC (PCA) judgment; Talecris' ability to
manufacture at appropriate scale to meet the markets demand for the
company's products; ability to resume or replace sales to countries
affected by the company's internal Foreign Corrupt Practices Act
(FCPA) investigation; impact of geographic and product mix on the
company's sales and gross profit; foreign currency exchange rate
fluctuations in the international markets in which Talecris
operates; the impact of the company's substantial capital plan; and
other risks identified in the company's most recent filing on Form
10-Q and in the company's Annual Report on Form 10-K for the year
ended December 31, 2010 filed with the Securities and Exchange
Commission (SEC) on February 23, 2011
(2010 Form 10-K) all of which are available on the company's
website. Talecris undertakes no duty to update any
forward-looking statement.
Exhibits
Matters Affecting Comparability (Exhibit A)
Non-GAAP Financial Measures (Exhibit B)
About Talecris Biotherapeutics: Inspiration.
Dedication. Innovation.
Talecris Biotherapeutics is a global biotherapeutic and
biotechnology company that discovers, develops and produces
critical care treatments for people with life-threatening disorders
in a variety of therapeutic areas including immunology,
pulmonology, neurology, critical care, and hemostasis.
Talecris
Biotherapeutics Holdings Corp.
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Consolidated
Income Statements
|
|
(in
thousands, except per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2011
|
|
2010
|
|
|
Net revenue:
|
|
|
|
|
|
|
Product
|
|
$ 398,980
|
|
$ 374,615
|
|
|
Other
|
|
7,683
|
|
6,346
|
|
|
Total
|
|
406,663
|
|
380,961
|
|
|
Cost of goods sold
|
|
233,619
|
|
217,351
|
|
|
Gross profit
|
|
173,044
|
|
163,610
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
62,717
|
|
67,620
|
|
|
Research and
development
|
|
16,532
|
|
16,271
|
|
|
Total
|
|
79,249
|
|
83,891
|
|
|
Income from
operations
|
|
93,795
|
|
79,719
|
|
|
|
|
|
|
|
|
|
Other non-operating (expense)
income:
|
|
|
|
|
|
|
Interest expense,
net
|
|
(10,750)
|
|
(11,263)
|
|
|
Equity in earnings of
affiliate
|
|
151
|
|
147
|
|
|
Total
|
|
(10,599)
|
|
(11,116)
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
83,196
|
|
68,603
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
(27,739)
|
|
(23,264)
|
|
|
Net income
|
|
$ 55,457
|
|
$ 45,339
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.44
|
|
$
0.37
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
0.43
|
|
$
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Talecris
Biotherapeutics Holdings Corp.
|
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Consolidated
Balance Sheets
|
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(in
thousands, except share and per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
$
185,338
|
|
$
197,876
|
|
|
Accounts receivable, net
of allowances of $3,504 and $3,253, respectively
|
|
|
151,291
|
|
134,842
|
|
|
Inventories
|
|
|
|
|
703,048
|
|
694,499
|
|
|
Deferred income
taxes
|
|
|
|
|
96,958
|
|
96,593
|
|
|
Prepaid expenses and
other
|
|
|
|
|
18,153
|
|
29,662
|
|
|
Total current assets
|
|
|
|
|
1,154,788
|
|
1,153,472
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and equipment,
net
|
|
|
|
|
426,098
|
|
382,793
|
|
|
Investment in
affiliate
|
|
|
|
|
3,077
|
|
2,926
|
|
|
Intangible assets
|
|
|
|
|
10,880
|
|
10,880
|
|
|
Goodwill
|
|
|
|
|
172,860
|
|
172,860
|
|
|
Other
|
|
|
|
|
14,576
|
|
15,522
|
|
|
Total assets
|
|
|
|
|
$ 1,782,279
|
|
$ 1,738,453
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
|
|
$
48,432
|
|
$
59,975
|
|
|
Accrued expenses and other
liabilities
|
|
|
|
|
242,734
|
|
251,726
|
|
|
Current portion of capital
lease obligations
|
|
|
|
|
887
|
|
860
|
|
|
Total current
liabilities
|
|
|
|
|
292,053
|
|
312,561
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital lease
obligations
|
|
|
|
|
605,213
|
|
605,301
|
|
|
Deferred income taxes
|
|
|
|
|
19,382
|
|
14,432
|
|
|
Other
|
|
|
|
|
13,308
|
|
11,795
|
|
|
Total liabilities
|
|
|
|
|
929,956
|
|
944,089
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value; 400,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
125,745,799 and
125,577,877 shares issued and outstanding, respectively
|
|
|
1,257
|
|
1,253
|
|
|
Additional paid-in
capital
|
|
|
|
|
815,911
|
|
813,783
|
|
|
Retained earnings
(accumulated deficit)
|
|
|
|
|
35,079
|
|
(20,378)
|
|
|
Accumulated other
comprehensive income (loss), net of tax
|
|
|
|
|
76
|
|
(294)
|
|
|
Total stockholders'
equity
|
|
|
|
|
852,323
|
|
794,364
|
|
|
Total liabilities and
stockholders' equity
|
|
|
|
|
$ 1,782,279
|
|
$ 1,738,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Talecris
Biotherapeutics Holdings Corp.
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Consolidated
Statements of Cash Flows
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(in
thousands)
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(Unaudited)
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Three Months
Ended
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March
31,
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2011
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2010
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Cash flows from operating
activities:
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Net income
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$
55,457
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$
45,339
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Adjustments to reconcile net
income to net cash provided by operating activities:
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Depreciation and
amortization
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10,017
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8,051
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Amortization of deferred
loan fees and debt discount
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1,069
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1,055
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Share-based compensation
expense
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2,212
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7,227
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Provision for doubtful
receivables
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570
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416
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Amortization of deferred
compensation
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-
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1,506
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Equity in earnings of
affiliate
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(151)
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(147)
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Loss related to foreign
currency hedges
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2,621
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-
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Decrease in deferred tax
assets
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4,950
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2,884
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Excess tax benefits from
share-based payment arrangements
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(1,077)
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(4,590)
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Other
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(60)
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(2)
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Changes in assets and
liabilities:
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Accounts
receivable
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(17,022)
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(31,252)
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Inventories
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(8,821)
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(3,136)
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Prepaid expenses and other
assets
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11,340
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7,814
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Accounts
payable
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(11,543)
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(12,386)
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Accrued expenses and other
liabilities
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(21,552)
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(3,734)
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Interest
payable
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11,624
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11,625
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Net cash provided by operating
activities
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39,634
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30,670
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Cash flows from investing
activities:
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Purchase of property,
plant, and equipment
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(53,266)
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(17,690)
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Other
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190
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174
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Net cash used in investing
activities
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(53,076)
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(17,516)
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Cash flows from financing
activities:
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Borrowings under revolving
credit facility
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302
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212
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Repayments of borrowings
under revolving credit facility
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(302)
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(212)
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Financing transaction
costs
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-
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(78)
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Repayments of capital
lease obligations
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(205)
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(176)
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Proceeds from exercises of
stock options
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1,314
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2,937
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Repurchases of common
stock
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(2,199)
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(4,917)
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Excess tax benefits from
share-based payment arrangements
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1,077
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4,590
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Net cash (used in) provided by
financing activities
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(13)
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2,356
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Effect of exchange rate changes
on cash and cash equivalents
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917
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(484)
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Net (decrease) increase in cash
and cash equivalents
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(12,538)
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15,026
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Cash and cash equivalents at
beginning of period
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197,876
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65,239
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Cash and cash equivalents at end
of period
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$
185,338
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$
80,265
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EXHIBIT A: MATTERS AFFECTING COMPARABILITY
Talecris believes that the comparability of the financial
results between the periods presented is significantly impacted by
the following items:
Definitive Merger Agreement with Grifols
The company incurred legal, accounting, and other fees of
approximately $1.1 million associated
with the definitive merger agreement with Grifols for which no
amounts were incurred during the comparable prior year period.
The company is obligated to pay additional fees totaling
$21.3 million to investment bankers
upon successful closing of the merger transaction.
Under the terms of the definitive merger agreement with Grifols,
Talecris is permitted to offer retention amounts up to $15.0 million to employees. As of
March 31, 2011, Talecris offered
retention amounts totaling approximately $9.8 million to employees of which $2.9 million was paid during 2010 and
$3.5 million was paid during the
first quarter of 2011. The remaining amounts of approximately
$3.4 million will be paid two months
after the Closing Date, or in the event of termination of the
definitive merger agreement, the earlier of four months after the
termination of the definitive merger agreement or June 3, 2011. Talecris incurred retention
expense, including fringe benefits, of $2.7
million during the three months ended March 31, 2011. The remaining retention
amounts of approximately $1.8
million, including fringe benefits, will be recognized
during the second quarter of 2011.
Share-Based Compensation Awards
The company has long-term incentive plans, which provide for the
grant of awards in the form of incentive stock options,
non-qualified stock options, share appreciation rights, restricted
stock, restricted stock units (RSUs), unrestricted shares of common
stock, deferred share units, and performance share units (PSUs), to
eligible employees, directors, and consultants.
The following table summarizes the company's share-based
compensation expense:
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Three Months
Ended
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March
31,
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2011
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2010
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SG&A
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$
1,570
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$
5,680
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R&D
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112
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538
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Total operating
expenses
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1,682
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6,218
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Cost of goods sold
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530
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1,009
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Total expense
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$
2,212
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$
7,227
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The decrease in share-based compensation expense period over
period was driven by the final vesting of awards under the 2005
Stock Option and Incentive Plan on April 1,
2010 and the majority of the awards under the company's 2006
Restricted Stock Plan on March 31,
2010.
EXHIBIT B: NON-GAAP FINANCIAL MEASURES
Description of Adjustments and Reconciliations of U.S. GAAP to
Non-GAAP Financial Measures
Merger-related Items and Interest on PCA
Judgment
Talecris believes a meaningful comparison of its results for the
periods presented is enhanced by a quantified presentation of the
impact of the 2011 Grifols merger-related expenses and interest
expense on PCA judgment. The impacts of these expenses on net
income and diluted earnings per share are illustrated in the table
below.
The adjusted net income and diluted earnings per share amounts
in the table below are non-GAAP financial measures and should not
be considered a substitute for any performance measure determined
in accordance with U.S. GAAP. Additional information
regarding the use of these non-GAAP financial measures is included
in Talecris' Form 10-Q filed with the SEC on April 27, 2011, which is available on SEC's
website at www.sec.gov and Talecris' website at
http://ir.talecris.com.
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Diluted
Earnings
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Pre-Tax
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Income
Tax
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Per
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(in thousands, except per share
amounts)
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Amount
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Benefit
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Net
Income
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Common
Share
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Three Months Ended March 31,
2011
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U.S. GAAP
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$
83,196
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$
(27,739)
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$
55,457
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$
0.43
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Grifols merger-related
expenses
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4,118
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(1,552)
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2,566
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0.02
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Interest on PCA
judgment
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740
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(289)
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451
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-
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Excluding specific
items
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$
88,054
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$
(29,580)
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$
58,474
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$
0.45
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Three Months Ended March 31,
2010
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U.S. GAAP
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$
68,603
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$
(23,264)
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$
45,339
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$
0.35
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EBITDA, Adjusted EBITDA, and Consolidated Cash
Flow
Talecris believes that a meaningful analysis of its operating
performance is enhanced by the use of EBITDA, adjusted EBITDA as
defined in Talecris' revolving credit facility and Consolidated
Cash Flow as defined in its 7.75% Notes.
EBITDA, adjusted EBITDA, and Consolidated Cash Flow are
financial measures that are not defined by accounting principles
generally accepted in the U.S. (U.S. GAAP). A non-GAAP
financial measure is a numerical measure of a company's financial
performance that (i) excludes amounts, or is subject to adjustments
that have the effect of excluding amounts, that are included in a
comparable measure calculated and presented in accordance with U.S.
GAAP in the statement of operations, such as net income, or the
statement of cash flows, such as operating cash flow, or (ii)
includes amounts, or is subject to adjustments that have the effect
of including amounts, that are excluded from the comparable
measures so calculated and presented. The non-GAAP financial
measures that Talecris uses should not be considered a substitute
for any performance measure determined in accordance with U.S.
GAAP. Talecris does not rely solely on these non-GAAP
financial measures and also considers U.S. GAAP results.
Because the non-GAAP financial measures that are used are not
calculated in the same manner by all companies, they may not be
comparable to similarly titled measures used by other companies.
To properly and prudently evaluate Talecris' business, the
company encourages you to also review its U.S. GAAP unaudited
interim consolidated financial statements included elsewhere in
this press release, and not to rely on any single financial measure
to evaluate its business. These non-GAAP financial measures
have material limitations as analytical tools and you should not
consider these measures in isolation, or as a substitute for
analysis of Talecris' results as reported under U.S. GAAP.
Additional information regarding the use of non-GAAP
financial measures is included in Talecris' Form 10-Q filed with
the SEC on April 27, 2011, which is
available on the SEC's website at www.sec.gov and Talecris' website
at http://ir.talecris.com.
In addition to the adjustments made in computing EBITDA,
adjusted EBITDA, and Consolidated Cash Flow, Talecris also
considers the impact of other items when evaluating operating
performance. Certain of these items, which impact the
comparability of Talecris' financial results, are included in the
section titled "Matters Affecting Comparability," in Exhibit A.
In the following table, Talecris has presented a reconciliation
of adjusted EBITDA and Consolidated Cash Flow to the most
comparable U.S. GAAP measure, net income:
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Three Months
Ended
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March
31,
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2011
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2010
|
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Net income
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$
55,457
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$
45,339
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Interest expense, net
(a)
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10,750
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11,263
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Income tax provision
(b)
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27,739
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23,264
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Depreciation and
amortization (c)
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10,017
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8,051
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EBITDA
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103,963
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87,917
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Non-cash share-based
compensation expense (d)
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2,212
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7,227
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Special recognition bonus
expense (e)
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43
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1,614
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Equity in earnings of
affiliate (f)
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(151)
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(147)
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Merger-related expenses
(g)
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4,118
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-
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Other (h)
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(69)
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47
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Adjusted EBITDA/Consolidated
Cash Flow as defined
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$
110,116
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$
96,658
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(a)
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Represents interest expense
associated with Talecris' debt structure and the amortization of
debt discount and issuance costs associated with the company's debt
facilities, net of interest income and capitalized interest.
During the three months ended March 31, 2011 and 2010,
Talecris' debt structure consisted of $600.0 million 7.75% Notes
and $325.0 million revolving credit facility. For the three
months ended March 31, 2011, interest expense, net, also included
interest expense of $0.7 million related to the 2010 PCA
judgment.
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(b)
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Represents Talecris' income tax
provision as presented in the company's unaudited interim
consolidated income statements.
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(c)
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Represents depreciation
and amortization expense associated with Talecris' property, plant,
and equipment.
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(d)
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Represents Talecris' non-cash
share-based compensation expense associated with stock options,
restricted stock, RSUs, and PSUs.
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(e)
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Represents compensation expense
associated with special recognition bonus awards granted to certain
of Talecris' employees and senior executives to reward their past
performance. Talecris does not anticipate granting similar
awards in the future.
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(f)
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Represents non-operating income
associated with Talecris' investment in Centric, which the company
believes is not part of the company's core operations.
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(g)
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For the three months ended March
31, 2011, the amount represents merger-related expenses associated
with Talecris' definitive merger agreement with Grifols primarily
related to legal fees, as well as retention expenses and other
bonuses.
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(h)
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For the three months ended March
31, 2011, the amount represents inventory impairment recoveries.
For the three months ended March 31, 2010, the amount
represents losses on disposals of equipment.
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SOURCE Talecris Biotherapeutics Holdings Corp.