REG - Indivior PLC - 3rd Quarter Results <Origin Href="QuoteRef">INDV.L</Origin> - Part 2
03/11/2015 12:02
- Part 2: For the preceding part double click ID:nRSC3497Ea
have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis for accounting in preparing these interim financial
statements.
The financial information contained in this document does not constitute
statutory accounts as defined in section 434 and 435 of the Act. The auditors
issued an unqualified opinion and did not contain a statement under section
498 of the Act on the Group's statutory financial statements for the year
ended December 31, 2014. The Group's statutory financial statements for the
year ended December 31, 2014 were approved by the Board of Directors on
November 2, 2015 and delivered to the Registrar of Companies.
2. SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker (CODM), who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the
Chief Executive Officer (CEO).
As the Indivior Group is engaged in a single business activity, which is the
development, manufacture and sale of prescription drugs that are based on
Buprenorphine for treatment of opioid dependence, the CEO reviews financial
information presented on a combined basis for evaluating financial performance
and allocating resources. Accordingly, the company reports as a single
reporting segment.
Revenues
Revenues are attributed to countries based on the country where the sale
originates. The following table represents revenue from continuing operations
attributed to countries based on the country where the sale originates and
non-current assets, net of accumulated depreciation and amortisation, by
country. Non-current assets for this purpose consist of property, plant and
equipment and intangible assets. Revenues and non-currents assets for the
nine months to September 30, 2015 and 2014 were as follows:
Revenues from sale of goods:
Q32015$m Q32014$m 9 Months2015$m 9 Months2014$m
United States 201 203 613 646
ROW 48 67 153 198
Total 249 270 766 844
Non-current assets:
Sep 30 2015$m Dec 31 2014$m
United States 77 64
ROW 25 40
Total 102 104
3. OPERATING COSTS AND EXPENSES
The table below sets out selected operating costs and expenses information:
Q32015$m Q32014$m 9 Months2015$m 9 Months2014$m
Research and Development expenses (36) (25) (91) (63)
Marketing, selling, and distribution expenses (43) (38) (122) (113)
Administrative expenses (60) (44) (150) (115)
Depreciation and amortization (6) (6) (18) (20)
Operating lease rentals (2) (1) (5) (2)
Total (111) (89) (295) (250)
Exceptional Items
Q32015$m Q32014$m 9 Months2015$m 9 Months2014$m
Reconfiguration and separation costs 2 - 7 -
Total Exceptional items 2 - 7 -
$7m (2014: $nil) of reconfiguration and separation costs consists primarily of
legal and advisory costs related to business reconfiguration activities which
have been included within operating expenses.
4. TAXATION
In the nine months ended September 30, 2015, tax on total profits amounted to
$70m and represented a nine-month effective tax rate of 27% (9 Month 2014:
29%). The Group's balance sheet at September 30, 2015 included a tax payable
liability of $21m and deferred tax asset of $75m.
5. EARNINGS PER SHARE
Q32015cents Q32014CentsPro-forma 9 Months2015cents 9 Months2014CentsPro-forma
Basic earnings per share 7 13 27 45
Diluted earnings per share 7 13 26 45
Adjusted basic earnings per share 7 13 27 45
Adjusted diluted earnings per share 7 13 27 45
Basic
Basic earnings per share ("EPS") is calculated by dividing profit for the
period attributable to owners of the Company by the weighted average number
of ordinary shares in issue during the period. 718,577,618 shares were issued
on the demerger.
For the purpose of calculating EPS, the share capital for the Company in the
period prior to the pre-demerger reorganization on December 23, 2014 is
calculated as if this reorganization was completed as at January 1 2014.
Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Company has dilutive potential ordinary shares
in the form of awards. The weighted average number of shares is adjusted for
the number of shares granted assuming the vesting of the awards.
2015Average number of shares 2014Average number of sharesPro-forma
On a basic basis 718,577,618 718,577,618
Dilution for Long Term Incentive Plan (LTIP) 14,507,535 5,307,010
Adjusted diluted earnings per share 733,085,153 723,884,628
Adjusted Earnings
The Directors believe that diluted earnings per share, adjusted for the impact
of exceptional items after the appropriate tax amount, provides additional
useful information on underlying trends to shareholders in respect of earnings
per ordinary share.
A reconciliation of net income to adjusted net income is as follows:
Q32015$m Q32014$m 9 Months2015$m 9 Months2014$m
Net income 48 93 191 326
Exceptional items 2 - 7 -
Tax effect of exceptional items - - (2) -
Adjusted net income 50 93 196 326
6. FINANCIAL LIABILITIES - BORROWINGS
Current September 302015$m December 312014$m
Bank loans and overdraft 161 17
161 17
Non-current September 302015$m December 312014$m
Bank loans 528 719
528 719
Analysis of net debt September 302015$m December 312014$m
Cash and cash equivalents 552 331
Overdrafts - (9)
Borrowings* (728) (750)
(176) (428)
*Borrowings reflects the outstanding principal amount drawn, before debt
issuance costs
Reconciliation of net debt September 302015$m December 312014$m
The movements in the period were as follows:
Net debt at beginning of period (428) 7
Increase in cash and cash equivalents 221 324
Net repayment of/(increase in) borrowings and overdraft 31 (759)
Net debt at end of period (176) (428)
The carrying value less impairment provision of current borrowings and cash at
bank, as well as trade receivables and trade payables, are assumed to
approximate their fair values.
On March 16, 2015, the Company completed syndication of its $750 million debt
facility. As a result of the syndication the new terms of the loan are as
follows:
Currency Nominal interest margin Maturity Scheduled repayments* Issuance cost$m Face value$m Carrying amount$m
Unsecured bank loan USD Libor (1%) + 6% 5 years 5% 40 644 644
Unsecured bank loan EUR Libor (1%) + 6% 5 years 5% 6 106 106
*For years 1 and 2 only; 10% thereafter
Also included within the terms of the loan were:
• A financial covenant to maintain a leverage covenant (Net debt to
Adjusted EBITDA ratio) of 3.25x with step down to 3.00x on June 30, 2016
• An additional covenant requiring minimum liquidity of $150 million
(defined as cash on hand plus the undrawn amount available under the Company's
$50 million revolving credit facility).
7. CONTINGENT LIABILITIES
The Indivior Group is currently subject to other legal proceedings and
investigations, including through subpoenas and other information requests, by
various governmental authorities.
In 2011, the USAO-NJ issued a subpoena to Reckitt Benckiser Pharmaceuticals
(RBP) requesting production of certain documents in connection with a
non-public investigation related, among other things, to the promotion,
marketing and sale of Suboxone Film, Suboxone Tablet and Subutex Tablet. RBP
responded to the USAO-NJ by producing documents and other information and has
had no communication from USAO-NJ since March 2013.
In late 2012, the FTC and the Attorney General of the State of New York
commenced non-public investigations of RB, RBP and various other entities in
the RB Group focusing on business practices relating to Suboxone Film,
Suboxone Tablet and Subutex Tablet, including alleged involvement in a scheme
to delay FDA approval of generic versions of Suboxone Tablet. RBP has
responded to both the FTC and to the Attorney General of the State of New York
by producing documents and other information. The investigations are ongoing,
and as yet no decision has been made by either agency on whether to pursue any
legal action for enforcement.
In December 2013, the USAO-VAW executed a search warrant on RBP's headquarters
in Richmond and conducted searches of the homes of four field-based employees.
The USAO-VAW has since served a number of subpoenas relating to Suboxone Film,
Suboxone Tablet, Subutex Tablet, buprenorphine and any real or potential
competitor, among other issues. The investigation is ongoing and RBP is in the
process of responding to the USAO-VAW by producing documents and other
information.
Given the limited information available to the Indivior Group regarding the
foregoing civil and criminal investigations, it is not possible at this time
to predict with any certainty if there will be a liability associated with
these investigations nor, if one were to occur, is there an ability to
quantify the potential impact on the financial statements of the Indivior
Group.
The Internal Revenue Service (IRS) commenced an examination of the Company's
U.S income tax return for the years ended December 31, 2010 through December
31, 2012 in the first quarter of 2013. In August 2015, the company received a
Notice of Proposed Adjustment (NOPA) which indicated certain deductions taken
for manufacturing costs are being disallowed for the tax years 2010-2012. The
Company believes it has provided sufficient documentation to the IRS to
satisfy the requirements to claim the deduction and is in the process of
preparing a protest to file with the IRS Office of Appeals.
8. TRADE AND OTHER PAYABLES
September 302015$m December 312014$m
Sales returns and rebates 319 273
Trade payables 75 29
Other tax and social security payables 12 7
Accruals 108 74
Total 514 383
Customer return and rebate accruals, primarily in the US, are provided for by
the Group at the point of sale in respect of the estimated rebates, discounts
or allowances payable to customers. Accruals are made at the time of sale but
the actual amounts paid are based on claims made some time after the initial
recognition of the sale. As the amounts are estimated they may not fully
reflect the final outcome and are subject to change dependent upon, amongst
other things, the channel (e.g. Medicaid, Medicare, Managed Care, etc) and
product mix. The level of accrual is reviewed and adjusted quarterly in the
light of historical experience of actual rebates, discounts or allowances
given and returns made and any changes in arrangements. Future events could
cause the assumptions on which the accruals are based to change, which could
affect the future results of the Group.
9. SHARE CAPITAL
Equity Ordinary Shares Issue price Nominal value$m
Issued and fully paid
At January 1, 2015 718,577,618 $2.00 1,437
Nominal value reduction - ($1.90) (1,365)
At September 30, 2015 718,577,618 $0.10 72
Equity Ordinary Shares Issue price Nominal value$m
Issued and fully paid
At January 1, 2014 (pro forma) 718,577,618 $2.00 1,437
At September 30, 2014 (pro forma) 718,577,618 $2.00 1,437
The holders of ordinary shares (par value $0.10) are entitled to receive
dividends as declared from time to time and are entitled to one vote per share
at general meetings of Indivior PLC.
The initial shareholders resolved, by a special resolution, passed on October
30, 2014, to reduce Indivior PLC's share capital by decreasing the nominal
value of each Indivior Ordinary Share from $2.00 to $0.10. This created
distributable reserves on the balance sheet which will provide Indivior with,
among other things, capacity for the payment of future dividends.
As required under section 645 of the Companies Act 2006, the High Court of
Justice has confirmed the reduction of the Company's share capital. Following
the registration of the Order of the Court with the Companies House, the
Capital Reduction became effective on January 21, 2015.
10. RELATED PARTIES
Subsequent to the demerger from former parent, RB, on December 23, 2014,
Indivior continues to receive certain services like office space rental and
other operational services on commercial terms and on an arm's length basis.
Adrian Hennah, the RB CFO, also sits on the Indivior PLC Board of Directors.
The amount included within administrative expenses in respect of these
services is $8M
11. POST BALANCE SHEET EVENTS
There have been no material post balance sheet events.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors declare that, to the best of their knowledge:
● This condensed set of interim financial statements, which have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union, gives a true and fair view of the assets, liabilities, financial position, and profit or loss of Indivior; and
● The interim management report gives a fair review of the information required pursuant to regulations 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules (DTR)
Indivior's Directors are listed in the Annual Report and Accounts for 2014.
Details of all current Directors are available on our website at
www.indivior.com
By order of the Board
Shaun Thaxter
Cary J. Claiborne
Chef Executive Officer
Chief Financial Officer
November 2, 2015
Independent review report to Indivior PLC
Report on the interim condensed consolidated financial statements
Our conclusion
We have reviewed Indivior PLC's interim condensed consolidated financial
statements (the "interim financial statements") in the quarterly financial
report of Indivior PLC for the three and nine month period ended 30 September
2015. Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure Rules and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
What we have reviewed
The interim financial statements comprise:
● the condensed consolidated interim balance sheet as at 30 September 2015;
● the condensed consolidated interim income statement and condensed consolidated interim statement of comprehensive income for the three and nine month periods then ended;
● the condensed consolidated interim cash flow statement for the nine month period then ended;
● the condensed consolidated interim statement of changes in equity for the nine month period then ended; and
● the explanatory notes to the interim financial statements.
The interim financial statements included in the quarterly financial report
have been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure Rules and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full
annual financial statements of the Group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The quarterly financial report, including the interim financial statements, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the quarterly financial report in accordance
with the Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the quarterly financial report based on our review. This report,
including the conclusion, has been prepared for and only for the company for
the purpose of complying with the Disclosure Rules and Transparency Rules of
the United Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and, consequently,
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
We have read the other information contained in the quarterly financial report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
3 November 2015
Notes:
a) The maintenance and integrity of the Indivior PLC website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the interim
financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdiction
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