Full Press Release Details
PITTSBURGH , Nov. 8, 2021 /PRNewswire/ --
Viatris Inc. (NASDAQ: VTRS ) today reported strong results for the third quarter of 2021, highlighted by robust cash flow generation.
Viatris also announced that its Board of Directors declared a quarterly dividend of eleven cents ($0.11) for each issued and outstanding share of the company's common stock. The dividend is payable on December 16, 2021 to shareholders of record at the close of business on November 23, 2021.
Executive Comments
Viatris Chief Executive Officer Michael Goettler said, "Nearly one year after launching our new company, I could not be prouder of all that we have accomplished together. Our continued strong operational performance for three consecutive quarters has allowed us to continue to deliver on our financial commitments and, based on the strength of our results, we are again raising our full-year financial guidance for 2021.
Goettler continued, "We are near completion of a rigorous bottoms-up strategic planning effort and look forward to sharing these plans with the investment community at a virtual Investor Event now scheduled for the morning of January 7, 2022 . On that day we will provide additional detail on our two-phased strategic roadmap, including:
Viatris President Rajiv Malik said, "We are excited to host our upcoming Investor Event and provide a comprehensive review of the significant value and depth of our own pipeline and clinical programs, including biosimilars, complex generics and novel medicines that we have been building strategically over many years. Once laid out, we believe it will be recognized as one of Viatris' most underappreciated assets, which we expect will enable us to continue to deliver value, especially after synergies roll off at the end of 2023, while continuing to bring access and address patient needs."
Viatris Chief Financial Officer Sanjeev Narula said, "We are pleased with our ongoing strong execution and operational momentum, which allow us to raise our total revenues, adjusted EBITDA and free cash flow guidance ranges for the year. We continue to deliver on our financial commitments, including our ability to generate substantial cash flows. During the quarter, we generated $965 million of free cash flow, driven by strong underlying business performance and cash flow optimization initiatives, which we believe will not only benefit us in 2022 and beyond, but also create an even stronger balance sheet providing more financial flexibility as we move forward."
Financial Summary
| Three Months Ended | |||||||||||||
| September 30, | |||||||||||||
| (Unaudited; in millions, except %s) | 2021 | 2020 | Reported Change (1) | Combined Adjusted Operational Change (2)(3) | Combined LOE Adjusted Operational Change (2)(3) | ||||||||
| Total Net Sales | $ | 4,520.5 | $ | 2,948.1 | 53% | (4)% | (1)% | ||||||
| Developed Markets | 2,655.9 | 2,163.2 | 23% | (2)% | (2)% | ||||||||
| Emerging Markets | 792.5 | 471.0 | 68% | (5)% | (5)% | ||||||||
| JANZ | 505.3 | 282.4 | 79% | (18)% | 8% | ||||||||
| Greater China | 566.8 | 31.5 | nm | (2)% | (2)% | ||||||||
| Net Sales by Product Category | |||||||||||||
| Brands | $ | 2,803.1 | $ | 1,241.4 | 126% | (4)% | 1% | ||||||
| Complex Gx and Biosimilars | 332.0 | 352.3 | (6)% | (6)% | (6)% | ||||||||
| Generics | 1,385.4 | 1,354.4 | 2% | (5)% | (5)% | ||||||||
| U.S. GAAP Gross Profit | $ | 1,574.1 | $ | 1,158.5 | 36% | ||||||||
| U.S. GAAP Gross Margin | 34.7 | % | 39.0 | % | |||||||||
| Adjusted Gross Profit (4) | $ | 2,723.3 | $ | 1,629.1 | 67% | ||||||||
| Adjusted Gross Margin (4) | 60.0 | % | 54.8 | % | |||||||||
| U.S. GAAP Net Earnings | $ | 311.5 | $ | 185.7 | nm | ||||||||
| Adjusted Net Earnings (4) | $ | 1,199.1 | $ | 679.7 | 76% | ||||||||
| EBITDA (4) | $ | 1,386.5 | $ | 794.1 | 75% | ||||||||
| Adjusted EBITDA (4) | $ | 1,698.3 | $ | 1,009.7 | 68% | (8)% | (4)% | ||||||
| U.S. GAAP net cash provided by operating activities | $ | 1,085.6 | $ | 525.0 | 107% | ||||||||
| Capital expenditures | 121.0 | 38.2 | 217% | ||||||||||
| Free cash flow (4) | $ | 964.6 | $ | 486.8 | 98% | ||||||||
| Nine Months Ended | |||||||||||||
| September 30, | |||||||||||||
| (Unaudited; in millions, except %s) | 2021 | 2020 | Reported Change (1) | Combined Adjusted Operational Change (2)(3) | Combined LOE Adjusted Operational Change (2)(3) | ||||||||
| Total Net Sales | $ | 13,482.3 | $ | 8,232.2 | 64% | (4)% | —% | ||||||
| Developed Markets | 7,867.9 | 6,132.3 | 28% | (2)% | (2)% | ||||||||
| Emerging Markets | 2,417.2 | 1,224.8 | 97% | 1% | 1% | ||||||||
| JANZ | 1,488.2 | 805.8 | 85% | (22)% | 9% | ||||||||
| Greater China | 1,709.0 | 69.3 | nm | 2% | 2% | ||||||||
| Net Sales by Product Category | |||||||||||||
| Brands | $ | 8,229.4 | $ | 3,375.9 | 144% | (5)% | 1% | ||||||
| Complex Gx and Biosimilars | 993.7 | 956.7 | 4% | 2% | 2% | ||||||||
| Generics | 4,259.2 | 3,899.6 | 9% | (2)% | (2)% | ||||||||
| U.S. GAAP Gross Profit | $ | 4,029.1 | $ | 3,090.3 | 30% | ||||||||
| U.S. GAAP Gross Margin | 29.7 | % | 37.1 | % | |||||||||
| Adjusted Gross Profit (4) | $ | 8,040.4 | $ | 4,492.3 | 79% | ||||||||
| Adjusted Gross Margin (4) | 59.4 | % | 54.0 | % | |||||||||
| U.S. GAAP Net (Loss) Earnings | $ | (1,005.3) | $ | 245.9 | nm | ||||||||
| Adjusted Net Earnings (4) | $ | 3,496.1 | $ | 1,721.2 | 103% | ||||||||
| EBITDA (4) | $ | 3,836.4 | $ | 1,946.1 | 97% | ||||||||
| Adjusted EBITDA (4) | $ | 5,010.3 | $ | 2,639.0 | 90% | (10)% | (5)% | ||||||
| U.S. GAAP net cash provided by operating activities | $ | 2,493.8 | $ | 1,195.6 | 109% | ||||||||
| Capital expenditures | 259.8 | 126.1 | 106% | ||||||||||
| Free cash flow (4) | $ | 2,234.0 | $ | 1,069.5 | 109% |
| ___________ | |
| (1) | Q3 2020 and YTD 2020 represent Mylan standalone results for the respective 2020 periods. Mylan was the accounting acquiror in the combination of Mylan N.V. with Pfizer Inc.'s Upjohn business and therefore the historical financial statements of Mylan for periods prior to the combination are considered to be the historical financial statements of Viatris. |
| (2) | Represents operational change for net sales. See "Certain Key Terms" in this release for more information. |
| (3) | See "Certain Key Terms" for more information about Combined Adjusted Q3 and YTD 2020 results and Combined LOE Adjusted Q3 and YTD 2020 results. |
| (4) | Non-GAAP financial measures. See "Non-GAAP Financial Measures" for additional information. |
Third Quarter Highlights
Integration and Restructuring
Capital Allocation
COVID-19 Response
Updated 2021 Financial Guidance
As a result of the underlying strength of the business, Viatris is raising its financial guidance for 2021 as set forth below. The Company is not providing forward-looking guidance for U.S. GAAP net earnings (loss) or a quantitative reconciliation of its 2021 adjusted EBITDA guidance to the most directly comparable U.S. GAAP measure, U.S. GAAP net earnings (loss), because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items, including integration and acquisition-related expenses, restructuring expenses, asset impairments, litigation settlements and other contingencies, such as changes to contingent consideration and certain other gains or losses, as well as related income tax accounting, because certain of these items have not occurred, are out of the Company's control and/or cannot be reasonably predicted without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for the guidance period. U.S. GAAP net cash provided by operating activities for 2021 is estimated to be between $2.90 billion and $3.10 billion , with a midpoint of approximately $3.00 billion .
Updated 2021 Financial Guidance
| Updated Guidance | Previous Guidance (2) | |||||||
| (In billions) | Range | Midpoint | Range | Midpoint | ||||
| Total Revenues | $17.7 - $17.9 | $17.8 | $17.5 - $17.9 | $17.7 | ||||
| Adjusted EBITDA (1) | $6.3 - $6.5 | $6.4 | $6.15 - $6.45 | $6.3 | ||||
| Free Cash Flow (1) | $2.4 - $2.6 | $2.5 | $2.2 - $2.4 | $2.3 |
| (1) | Non-GAAP financial measures. See "Non-GAAP Financial Measures" for additional information. |
| (2) | Previous guidance provided on August 9, 2021. |
Conference Call and Earnings Materials
Viatris Inc. will host a conference call and live webcast, today at 10:00 a.m. ET , to review the Company's financial results for the third quarter ended September 30, 2021. Investors and the general public are invited to listen to a live webcast of the call at investor.viatris.com or by calling 866.342.8591 or 203.518.9713 for international callers (ID#: VTRSQ321). The "Viatris Q3 Earnings Presentation", which will be referenced during the call, can be found at investor.viatris.com. A replay of the webcast also will be available on the website.
Certain Key Terms
The combined measures described herein are calculated as indicated, are reflected as approximations and/or with rounding, and do not reflect pro forma results in accordance with ASC 805 or Article 11 of Regulation S-X. Such measures also do not reflect the effect of any purchase accounting adjustments, including but not limited to the elimination of intercompany sales and the fair value of assets and liabilities. Viatris believes these combined 2020 measures provide useful information to understanding and assessing our 2021 performance because they include both Mylan and Upjohn business results, adjusted as set forth below, whereas historical financial information of Viatris prior to November 16, 2020 only represents Mylan's historical results as Mylan is considered the accounting acquiror of the Upjohn business.
Combined Adjusted Q3 and YTD 2020 results refer to the sum of Mylan's standalone results and the standalone carve-out results from the Upjohn Business for the 2020 period presented, adjusted for product divestitures in connection with the Combination and sales to Pfizer for pharmaceutical products provided under its U.S. healthcare plan.
Combined LOE Adjusted Q3 and YTD 2020 results refer to Combined Adjusted Q3 and YTD 2020 results, adjusted for the impact of loss of exclusivity ("LOE") of Lyrica and Celebrex in Japan which occurred after Q3 2020.
New product sales, new product launches or new product revenues refer to revenue from new products launched in 2021 and the carryover impact of new products, including business development, launched within the last twelve months (e.g., acquisition of Aspen's thrombosis business in November 2020 ).
Operational change refers to constant currency percentage change and is derived by translating net sales or revenues for the current periods presented at prior year comparative period exchange rates, and in doing so shows the percentage change from 2021 constant currency net sales or revenues to the corresponding amount in the prior year.
Non-GAAP Financial Measures
This press release includes the presentation and discussion of certain financial information that differs from what is reported under accounting principles generally accepted in the United States ("U.S. GAAP"). These non-GAAP financial measures, including, but not limited to, adjusted gross profit, adjusted gross margins, adjusted net earnings, EBITDA, adjusted EBITDA, free cash flow, adjusted R&D and as a % of total revenues, adjusted SG&A and as a % of total revenues, adjusted earnings from operations, adjusted interest expense, adjusted other (income) expense, adjusted effective tax rate, constant currency total revenues and constant currency net sales are presented in order to supplement investors' and other readers' understanding and assessment of the financial performance of Viatris Inc. ("Viatris" or the "Company"). Free cash flow refers to U.S. GAAP net cash provided by operating activities, less capital expenditures. Management uses these measures internally for forecasting, budgeting, measuring its operating performance, and incentive-based awards. Primarily due to acquisitions and other significant events which may impact comparability of our periodic operating results, Viatris believes that an evaluation of its ongoing operations (and comparisons of its current operations with historical and future operations) would be difficult if the disclosure of its financial results was limited to financial measures prepared only in accordance with U.S. GAAP. We believe that non-GAAP financial measures are useful supplemental information for our investors and when considered together with our U.S. GAAP financial measures and the reconciliation to the most directly comparable U.S. GAAP financial measure, provide a more complete understanding of the factors and trends affecting our operations. The financial performance of the Company is measured by senior management, in part, using adjusted metrics included herein, along with other performance metrics. In addition, the Company believes that including EBITDA and supplemental adjustments applied in presenting adjusted EBITDA is appropriate to provide additional information to investors to demonstrate the Company's ability to comply with financial debt covenants and assess the Company's ability to incur additional indebtedness. The Company also believes that adjusted EBITDA better focuses management on the Company's underlying operational results and true business performance and, is used, in part, for management's incentive compensation. We also report sales performance using the non-GAAP financial measures of "constant currency", also referred to herein as "operational change", total revenues and net sales. These measures provide information on the change in total revenues and net sales assuming that foreign currency exchange rates had not changed between the prior and current period. The comparisons presented at constant currency rates reflect comparative local currency sales at the prior year's foreign exchange rates. We routinely evaluate our net sales and total revenues performance at constant currency so that sales results can be viewed without the impact of foreign currency exchange rates, thereby facilitating a period-to-period comparison of our operational activities and believe that this presentation also provides useful information to investors for the same reason. The "Summary of Total Revenues by Segment" table below compares net sales on an actual and constant currency basis for each reportable segment for the three and nine months ended September 30, 2021 and 2020 as well as for total revenues. Also, set forth below, Viatris has provided reconciliations of such non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures. Investors and other readers are encouraged to review the related U.S. GAAP financial measures and the reconciliations of the non-GAAP measures to their most directly comparable U.S. GAAP measures set forth below, and investors and other readers should consider non-GAAP measures only as supplements to, not as substitutes for or as superior measures to, the measures of financial performance prepared in accordance with U.S. GAAP. For additional information regarding the components and uses of Non-GAAP financial measures refer to Management's Discussion and Analysis of Financial Condition and Results of Operations--Use of Non-GAAP Financial Measures section of Viatris' Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2021.
Viatris Inc. (NASDAQ: VTRS ) is a new kind of healthcare company, empowering people worldwide to live healthier at every stage of life. We provide access to medicines, advance sustainable operations, develop innovative solutions and leverage our collective expertise to connect more people to more products and services through our one-of-a-kind Global Healthcare Gateway®. Formed in November 2020 , Viatris brings together scientific, manufacturing and distribution expertise with proven regulatory, medical and commercial capabilities to deliver high-quality medicines to patients in more than 165 countries and territories. Viatris' portfolio comprises more than 1,400 approved molecules across a wide range of therapeutic areas, spanning both non-communicable and infectious diseases, including globally recognized brands, complex generic and branded medicines, a growing portfolio of biosimilars and a variety of over-the-counter consumer products. With a global workforce of over 38,000, Viatris is headquartered in the U.S., with global centers in Pittsburgh , Shanghai and Hyderabad, India . Learn more at viatris.com and investor.viatris.com, and connect with us on Twitter at @ViatrisInc, LinkedIn and YouTube.
Forward-looking Statements
| Viatris Inc. and Subsidiaries | |||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||
| (Unaudited; in millions, except per share amounts) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenues: | |||||||||||||||
| Net sales | $ | 4,520.5 | $ | 2,948.1 | $ | 13,482.3 | $ | 8,232.2 | |||||||
| Other revenues | 16.1 | 24.0 | 62.4 | 90.3 | |||||||||||
| Total revenues | 4,536.6 | 2,972.1 | 13,544.7 | 8,322.5 | |||||||||||
| Cost of sales | 2,962.5 | 1,813.6 | 9,515.6 | 5,232.2 | |||||||||||
| Gross profit | 1,574.1 | 1,158.5 | 4,029.1 | 3,090.3 | |||||||||||
| Operating expenses: | |||||||||||||||
| Research and development | 152.1 | 129.8 | 483.9 | 400.3 | |||||||||||
| Selling, general and administrative | 1,055.0 | 658.4 | 3,446.3 | 1,983.2 | |||||||||||
| Litigation settlements and other contingencies, net | 9.4 | 18.9 | 55.3 | 36.5 | |||||||||||
| Total operating expenses | 1,216.5 | 807.1 | 3,985.5 | 2,420.0 | |||||||||||
| Earnings from operations | 357.6 | 351.4 | 43.6 | 670.3 | |||||||||||
| Interest expense | 151.9 | 117.3 | 488.0 | 353.4 | |||||||||||
| Other expense (income), net | 5.8 | (7.5) | 16.1 | 24.6 | |||||||||||
| Earnings (loss) before income taxes | 199.9 | 241.6 | (460.5) | 292.3 | |||||||||||
| Income tax (benefit) provision | (111.6) | 55.9 | 544.8 | 46.4 | |||||||||||
| Net earnings (loss) | $ | 311.5 | $ | 185.7 | $ | (1,005.3) | $ | 245.9 | |||||||
| Earnings (loss) per share attributable to Viatris Inc. shareholders | |||||||||||||||
| Basic | $ | 0.26 | $ | 0.36 | $ | (0.83) | $ | 0.48 | |||||||
| Diluted | $ | 0.26 | $ | 0.36 | $ | (0.83) | $ | 0.48 | |||||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 1,209.3 | 516.9 | 1,208.6 | 516.8 | |||||||||||
| Diluted | 1,212.6 | 517.7 | 1,208.6 | 517.3 |
| Viatris Inc. and Subsidiaries | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| (Unaudited; in millions) | |||||||
| September 30, 2021 | December 31, 2020 | ||||||
| ASSETS | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 756.6 | $ | 844.4 | |||
| Accounts receivable, net | 4,345.5 | 4,843.8 | |||||
| Inventories | 4,081.9 | 5,471.9 | |||||
| Prepaid expenses and other current assets | 2,124.4 | 1,707.4 | |||||
| Total current assets | 11,308.4 | 12,867.5 | |||||
| Intangible assets, net | 26,987.0 | 29,683.2 | |||||
| Goodwill | 12,169.5 | 12,347.0 | |||||
| Other non-current assets | 5,605.5 | 6,655.3 | |||||
| Total assets | $ | 56,070.4 | $ | 61,553.0 | |||
| LIABILITIES AND EQUITY | |||||||
| Liabilities | |||||||
| Current portion of long-term debt and other long-term obligations | $ | 1,908.1 | $ | 2,308.5 | |||
| Other current liabilities | 8,195.8 | 8,254.4 | |||||
| Long-term debt | 19,854.3 | 22,429.2 | |||||
| Other non-current liabilities | 4,970.9 | 5,606.8 | |||||
| Total liabilities | 34,929.1 | 38,598.9 | |||||
| Shareholders' equity | 21,141.3 | 22,954.1 | |||||
| Total liabilities and equity | $ | 56,070.4 | $ | 61,553.0 |
| Viatris Inc. and Subsidiaries | |||||||
| Select Key Product Net Sales, on a Consolidated Basis | |||||||
| Three and Nine Months Ended September 30, 2021 | |||||||
| (Unaudited) | |||||||
| (In millions) | Three months ended September 30, 2021 | Nine months ended September 30, 2021 | |||||
| Select Key Global Products | |||||||
| Lipitor ® | $ | 410.0 | $ | 1,272.9 | |||
| Norvasc ® | 198.4 | 635.9 | |||||
| Lyrica ® | 175.6 | 555.9 | |||||
| Viagra ® | 138.0 | 412.4 | |||||
| EpiPen® Auto-Injectors | 129.5 | 337.3 | |||||
| Celebrex ® | 86.0 | 257.3 | |||||
| Creon ® | 81.1 | 231.7 | |||||
| Effexor ® | 79.5 | 239.6 | |||||
| Zoloft ® | 61.3 | 208.8 | |||||
| Xalabrands | 55.8 | 172.0 | |||||
| Select Key Segment Products | |||||||
| Influvac ® | $ | 161.2 | $ | 165.3 | |||
| Amitiza ® | 49.5 | 147.5 | |||||
| Xanax ® | 47.6 | 141.5 | |||||
| Yupelri ® | 39.4 | 118.1 | |||||
| Dymista ® | 35.0 | 129.9 |
| ____________ | |
| (a) | The Company does not disclose net sales for any products considered competitively sensitive. |
| (b) | Products disclosed may change in future periods, including as a result of seasonality, competition or new product introductions. |
Viatris Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Measures (Unaudited)
Reconciliation of U.S. GAAP Net Earnings (Loss) to Adjusted Net Earnings
Below is a reconciliation of U.S. GAAP net earnings (loss) to adjusted net earnings for the three and nine months ended September 30, 2021 compared to the prior year period:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||
| U.S. GAAP net earnings (loss) | $ | 311.5 | $ | 185.7 | $ | (1,005.3) | $ | 245.9 | |||||||
| Purchase accounting related amortization (primarily included in cost of sales) (a) | 919.9 | 368.5 | 3,344.7 | 1,072.5 | |||||||||||
| Litigation settlements and other contingencies, net | 9.4 | 18.9 | 55.3 | 36.5 | |||||||||||
| Interest expense (primarily amortization of premiums and discounts on long term debt) | (13.6) | 5.3 | (40.3) | 16.6 | |||||||||||
| Clean energy investments pre-tax loss | 17.6 | 2.9 | 52.2 | 37.4 | |||||||||||
| Acquisition related costs (primarily included in SG&A) (b) | 41.5 | 72.3 | 149.7 | 218.2 | |||||||||||
| Restructuring related costs (c) | 169.8 | 14.5 | 741.6 | 47.0 | |||||||||||
| Share-based compensation expense | 25.0 | 15.1 | 88.7 | 49.8 | |||||||||||
| Other special items included in: | |||||||||||||||
| Cost of sales (d) | 72.7 | 83.6 | 257.1 | 299.3 | |||||||||||
| Research and development expense (e) | 3.7 | 3.7 | 12.1 | 45.8 | |||||||||||
| Selling, general and administrative expense | 9.9 | 7.5 | 39.4 | 12.9 | |||||||||||
| Other expense, net | (2.3) | — | (2.3) | (16.4) | |||||||||||
| Tax effect of the above items and other income tax related items (f) | (366.0) | (98.3) | (196.8) | (344.3) | |||||||||||
| Adjusted net earnings | $ | 1,199.1 | $ | 679.7 | $ | 3,496.1 | $ | 1,721.2 |
| ____________ | ||
| Significant items include the following: | ||
| (a) | For the three and nine months ended September 30, 2021, includes amortization of the purchase accounting inventory fair value adjustment related to the Combination totaling approximately $238.5 million and $1.19 billion, respectively. | |
| (b) | Acquisition related costs consist primarily of transaction costs including legal and consulting fees and integration activities. | |
| (c) | For the three months ended September 30, 2021, charges of approximately $151.3 million are included in cost of sales, approximately $(4.7) million are included in R&D, and approximately $23.1 million are included in SG&A. For the nine months ended September 30, 2021, charges of approximately $399.5 million are included in cost of sales, approximately $11.9 million are included in R&D, and approximately $330.1 million are included in SG&A. | |
| (d) | Costs incurred during the three and nine months ended September 30, 2021 include incremental manufacturing variances and site remediation activities as a result of the activities at the Company's Morgantown plant of approximately $18.2 million and $107.3 million, respectively, and at other plants in the 2020 restructuring program of approximately $41.0 million and $103.6 million, respectively. Costs incurred during the three and nine months ended September 30, 2020 include incremental manufacturing variances and site remediation activities as a result of the activities at the Company's Morgantown plant of approximately $57.8 million and $179.6 million, respectively. In addition, the three and nine months ended September 30, 2020 includes incremental manufacturing variances incurred as a result of the COVID-19 pandemic of approximately $8.0 million and $32.0 million, respectively. Also, the nine months ended September 30, 2020 includes $27.0 million related to a special bonus for plant employees as a result of the COVID-19 pandemic. | |
| (e) | Adjustments primarily relate to non-refundable payments related to development agreements. | |
| (f) | Adjusted for changes for uncertain tax positions and for certain impacts of the Combination. |
Reconciliation of U.S. GAAP Net Earnings (Loss) to EBITDA and Adjusted EBITDA
Below is a reconciliation of U.S. GAAP net earnings (loss) to EBITDA and adjusted EBITDA for the three and nine months ended September 30, 2021 compared to the prior year period:
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||
| U.S. GAAP net earnings (loss) | $ | 311.5 | $ | 185.7 | $ | (1,005.3) | $ | 245.9 | |||||||
| Add adjustments: | |||||||||||||||
| Net contribution attributable to equity method investments | 17.6 | 2.9 | 52.2 | 37.4 | |||||||||||
| Income tax (benefit) provision | (111.6) | 55.9 | 544.8 | 46.4 | |||||||||||
| Interest expense (a) | 151.9 | 117.3 | 488.0 | 353.4 | |||||||||||
| Depreciation and amortization (b) | 1,017.1 | 432.3 | 3,756.7 | 1,263.0 | |||||||||||
| EBITDA | $ | 1,386.5 | $ | 794.1 | $ | 3,836.4 | $ | 1,946.1 | |||||||
| Add adjustments: | |||||||||||||||
| Share-based compensation expense | 25.0 | 15.1 | 88.7 | 49.8 | |||||||||||
| Litigation settlements and other contingencies, net | 9.4 | 18.9 | 55.3 | 36.5 | |||||||||||
| Restructuring, acquisition related and other special items (c) | 277.4 | 181.6 | 1,029.9 | 606.6 | |||||||||||
| Adjusted EBITDA | $ | 1,698.3 | $ | 1,009.7 | $ | 5,010.3 | $ | 2,639.0 |
| ____________ | |
| (a) | Includes amortization of premiums and discounts on long-term debt. |
| (b) | Includes purchase accounting related amortization. |
| (c) | See items detailed in the Reconciliation of U.S. GAAP Net Earnings (Loss) to Adjusted Net Earnings. |
| Summary of Total Revenues by Segment | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| September 30, | |||||||||||||||||||||
| (In millions, except %s) | 2021 | 2020 | % Change | 2021 Currency Impact (1) | 2021 Constant Currency Revenues | Constant Currency % Change (2) | |||||||||||||||
| Net sales | |||||||||||||||||||||
| Developed Markets | $ | 2,655.9 | $ | 2,163.2 | 23 | % | $ | (17.3) | $ | 2,638.4 | 22 | % | |||||||||
| Greater China | 566.8 | 31.5 | nm | (0.3) | 566.6 | nm | |||||||||||||||
| JANZ | 505.3 | 282.4 | 79 | % | 2.5 | 507.9 | 80 | % | |||||||||||||
| Emerging Markets | 792.5 | 471.0 | 68 | % | (6.2) | 786.3 | 67 | % | |||||||||||||
| Total net sales | 4,520.5 | 2,948.1 | 53 | % | (21.3) | 4,499.2 | 53 | % | |||||||||||||
| Other revenues (3) | 16.1 | 24.0 | (33) | % | — | 16.1 | (33) | % | |||||||||||||
| Consolidated total revenues (4) | $ | 4,536.6 | $ | 2,972.1 | 53 | % | $ | (21.3) | $ | 4,515.3 | 52 | % | |||||||||
| Nine Months Ended | |||||||||||||||||||||
| September 30, | |||||||||||||||||||||
| (In millions, except %s) | 2021 | 2020 | % Change | 2021 Currency Impact (1) | 2021 Constant Currency Revenues | Constant Currency % Change (2) | |||||||||||||||
| Net sales | |||||||||||||||||||||
| Developed Markets | $ | 7,867.9 | $ | 6,132.3 | 28 | % | $ | (226.4) | $ | 7,641.4 | 25 | % | |||||||||
| Greater China | 1,709.0 | 69.3 | nm | (0.6) | 1,708.4 | nm | |||||||||||||||
| JANZ | 1,488.2 | 805.8 | 85 | % | (34.3) | 1,453.9 | 80 | % | |||||||||||||
| Emerging Markets | 2,417.2 | 1,224.8 | 97 | % | (30.8) | 2,386.4 | 95 | % | |||||||||||||
| Total net sales | 13,482.3 | 8,232.2 | 64 | % | (292.1) | 13,190.1 | 60 | % | |||||||||||||
| Other revenues (3) | 62.4 | 90.3 | (31) | % | (1.3) | 61.1 | (32) | % | |||||||||||||
| Consolidated total revenues (4) | $ | 13,544.7 | $ | 8,322.5 | 63 | % | $ | (293.4) | $ | 13,251.2 | 59 | % |
| ____________ | |
| (1) | Currency impact is shown as unfavorable (favorable). |
| (2) | The constant currency percentage change is derived by translating net sales or revenues for the current period at prior year comparative period exchange rates, and in doing so shows the percentage change from 2021 constant currency net sales or revenues to the corresponding amount in the prior year. |
| (3) | For the three months ended September 30, 2021, other revenues in Developed Markets, JANZ, and Emerging Markets were approximately $12.2 million, $0.3 million, and $3.6 million, respectively. For the nine months ended September 30, 2021, other revenues in Developed Markets, JANZ, and Emerging Markets were approximately $46.7 million, $1.3 million, and $14.4 million, respectively. |
| (4) | Amounts exclude intersegment revenue that eliminates on a consolidated basis. |
| Reconciliation of Income Statement Line Items | |||||||||||||||
| (Unaudited; in millions, except %s) | |||||||||||||||
| Three Months Ended | Nine months ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| U.S. GAAP cost of sales | $ | 2,962.5 | $ | 1,813.6 | $ | 9,515.6 | $ | 5,232.2 | |||||||
| Deduct: | |||||||||||||||
| Purchase accounting related amortization | (919.9) | (368.5) | (3,344.7) | (1,072.5) | |||||||||||
| Acquisition related items | (4.5) | (9.4) | (8.0) | (11.5) | |||||||||||
| Restructuring related costs | (151.3) | (8.7) | (399.5) | (17.6) | |||||||||||
| Share-based compensation expense | (0.8) | (0.4) | (2.0) | (1.1) | |||||||||||
| Other special items | (72.7) | (83.6) | (257.1) | (299.3) | |||||||||||
| Adjusted cost of sales | $ | 1,813.3 | $ | 1,343.0 | $ | 5,504.3 | $ | 3,830.2 | |||||||
| Adjusted gross profit (a) | $ | 2,723.3 | $ | 1,629.1 | $ | 8,040.4 | $ | 4,492.3 | |||||||
| Adjusted gross margin (a) | 60 | % | 55 | % | 59 | % | 54 | % | |||||||
| Three Months Ended | Nine months ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| U.S. GAAP R&D | $ | 152.1 | $ | 129.8 | $ | 483.9 | $ | 400.3 | |||||||
| Add / (Deduct): | |||||||||||||||
| Acquisition related costs | (0.8) | (0.1) | (1.1) | (0.3) | |||||||||||
| Restructuring and related costs | 4.7 | 0.1 | (11.9) | (0.3) | |||||||||||
| Share-based compensation expense | (1.5) | (0.5) | (3.4) | (1.6) | |||||||||||
| Other special items | (3.7) | (3.7) | (12.1) | (45.8) | |||||||||||
| Adjusted R&D | $ | 150.8 | $ | 125.6 | $ | 455.4 | $ | 352.3 | |||||||
| Adjusted R&D as % of total revenues | 3 | % | 4 | % | 3 | % | 4 | % | |||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| U.S. GAAP SG&A | $ | 1,055.0 | $ | 658.4 | $ | 3,446.3 | $ | 1,983.2 | |||||||
| Deduct: | |||||||||||||||
| Acquisition related costs | (36.2) | (62.9) | (140.6) | (206.5) | |||||||||||
| Restructuring and related costs | (23.1) | (5.7) | (330.1) | (29.0) | |||||||||||
| Share-based compensation expense | (22.7) | (14.2) | (83.2) | (47.1) | |||||||||||
| Other special items and reclassifications | (9.9) | (7.5) | (39.4) | (12.9) | |||||||||||
| Adjusted SG&A | $ | 963.1 | $ | 568.1 | $ | 2,853.0 | $ | 1,687.7 | |||||||
| Adjusted SG&A as % of total revenues | 21 | % | 19 | % | 21 | % | 20 | % | |||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| U.S. GAAP total operating expenses | $ | 1,216.5 | $ | 807.1 | $ | 3,985.5 | $ | 2,420.0 | |||||||
| Deduct: | |||||||||||||||
| Litigation settlements and other contingencies, net | (9.4) | (18.9) | (55.3) | (36.5) | |||||||||||
| R&D adjustments | (1.3) | (4.2) | (28.5) | (48.0) | |||||||||||
| SG&A adjustments | (91.9) | (90.3) | (593.3) | (295.5) | |||||||||||
| Adjusted total operating expenses | $ | 1,113.9 | $ | 693.7 | $ | 3,308.4 | $ | 2,040.0 | |||||||
| Adjusted earnings from operations (b) | $ | 1,609.4 | $ | 935.4 | $ | 4,732.0 | $ | 2,452.3 | |||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| U.S. GAAP interest expense | $ | 151.9 | $ | 117.3 | $ | 488.0 | $ | 353.4 | |||||||
| Add / (Deduct): | |||||||||||||||
| Interest expense related to clean energy investments | (0.1) | (0.9) | (0.4) | (3.0) | |||||||||||
| Accretion of contingent consideration liability | (2.3) | (3.0) | (7.3) | (9.4) | |||||||||||
| Amortization of premiums and discounts on long-term debt | 17.1 | — | 51.6 | — | |||||||||||
| Other special items | (1.2) | (1.4) | (3.6) | (4.2) | |||||||||||
| Adjusted interest expense | $ | 165.4 | $ | 112.0 | $ | 528.3 | $ | 336.8 | |||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| U.S. GAAP other expense (income), net | $ | 5.8 | $ | (7.5) | $ | 16.1 | $ | 24.6 | |||||||
| Add / (Deduct): | |||||||||||||||
| Clean energy investments pre-tax loss (c) | (17.6) | (2.9) | (52.2) | (37.4) | |||||||||||
| Other items | 2.3 | — | 2.3 | 16.4 | |||||||||||
| Adjusted other (income) expense | $ | (9.5) | $ | (10.4) | $ | (33.8) | $ | 3.6 | |||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| U.S. GAAP earnings (loss) before income taxes | $ | 199.9 | $ | 241.6 | $ | (460.5) | $ | 292.3 | |||||||
| Total pre-tax non-GAAP adjustments | 1,253.6 | 592.4 | 4,698.1 | 1,819.6 | |||||||||||
| Adjusted earnings before income taxes | $ | 1,453.5 | $ | 834.0 | $ | 4,237.6 | $ | 2,111.9 | |||||||
| U.S. GAAP income tax (benefit) provision | $ | (111.6) | $ | 55.9 | $ | 544.8 | $ | 46.4 | |||||||
| Adjusted tax expense | 366.0 | 98.4 | 196.8 | 344.3 | |||||||||||
| Adjusted income tax provision | $ | 254.4 | $ | 154.3 | $ | 741.6 | $ | 390.7 | |||||||
| Adjusted effective tax rate | 17.5 | % | 18.5 | % | 17.5 | % | 18.5 | % |
| ___________ | |
| (a) | U.S. GAAP gross profit is calculated as total revenues less U.S. GAAP cost of sales. U.S. GAAP gross margin is calculated as U.S. GAAP gross profit divided by total revenues. Adjusted gross profit is calculated as total revenues less adjusted cost of sales. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. |
| (b) | U.S. GAAP earnings from operations is calculated as U.S. GAAP gross profit less U.S. GAAP total operating expenses. Adjusted earnings from operations is calculated as adjusted gross profit less adjusted total operating expenses. |
| (c) | Adjustment represents exclusion of activity related to Mylan's clean energy investments, the activities of which qualify for income tax credits under section 45 of the U.S. Internal Revenue Code of 1986, as amended. |
Reconciliation of Estimated 2021 GAAP Net Cash Provided by Operating Activities to Free Cash Flow (Unaudited; in millions)
A reconciliation of the estimated 2021 GAAP Net Cash provided by Operating Activities to Free Cash Flow is presented below:
| Estimated GAAP Net Cash provided by Operating Activities | $2,900 - $3,100 |
| Less: Capital Expenditures | $(450) - $(550) |
| Free Cash Flow | $2,400 - $2,600 |
Combined Adjusted EBITDA - Three and nine months ended September 30, 2020
| (In millions) | Three months ended September 30, 2020 | Nine months ended September 30, 2020 | |||||
| Upjohn - U.S. GAAP Income before taxes | $ | 533.8 | $ | 2,350.2 | |||
| Interest expense | 112.5 | 223.6 | |||||
| Depreciation and amortization | 81.7 | 237.5 | |||||
| Upjohn EBITDA | $ | 728.0 | $ | 2,811.3 | |||
| Other adjustments | 102.5 | (5.3) | |||||
| Upjohn Adjusted EBITDA | $ | 830.5 | $ | 2,806.0 | |||
| Add: Mylan Adjusted EBITDA | 1,009.7 | 2,639.0 | |||||
| Combined Adjusted EBITDA | $ | 1,840.2 | $ | 5,445.0 |
SOURCE Viatris Inc.