RESEARCH TRIANGLE PARK, N.C.,
Feb. 23, 2011 /PRNewswire/ --
Talecris Biotherapeutics Holdings Corp. ("Talecris") (Nasdaq: TLCR)
today announced its financial results for the three and twelve
months ended December 31, 2010 and
filed its Form 10-K with the U.S. Securities and Exchange
Commission (SEC).
Fourth quarter 2010 net revenue increased by $20.7 million or 5.3% to $410.8 million from $390.1
million in the fourth quarter of 2009. Higher revenues
from Talecris' principal products Gamunex-C®/Gamunex® Immune
Globulin Intravenous (Human), 10% Caprylate/Chromatography Purified
(IGIV) and Prolastin® Alpha-1 Proteinase Inhibitor (Human)
(Prolastin, Prolastin A1PI, Prolastin-C A1PI) as well as Thrombate®
III Antithrombin III (Human) in the fourth quarter of 2010 were
partially offset by lower sales of albumin, hyperimmunes and
contract manufacturing compared to the fourth quarter of 2009.
Fourth quarter 2010 gross margin was 41.2% compared to 39.2%
in the fourth quarter of 2009. Fourth quarter 2010 income
from operations was $68.5 million
versus $57.4 million for the fourth
quarter of 2009, a 19.3% increase. Net income was
$17.1 million for the fourth quarter
of 2010, an increase of $15.7 million
compared to net income of $1.4
million for the fourth quarter of 2009. Diluted
earnings per share were $0.13 in the
fourth quarter of 2010, including an after-tax charge of
$6.3 million ($0.05 per diluted share) for costs associated
with Talecris' definitive merger agreement with Grifols S.A. and
Grifols, Inc. (Grifols) as well as an after-tax charge of
$26.6 million ($0.20 per diluted share) as the result of the
Plasma Centers of America, LLC (PCA) jury verdict and related
interest expense, compared to diluted earnings per share of
$0.01 (pro forma diluted EPS of
$0.00) for the fourth quarter of
2009. Talecris' fourth quarter 2009 results included the after-tax
charge of $0.5 million ($0.00 per diluted share) for CSL Limited (CSL)
merger-related expenses as well as an after-tax charge of
$26.3 million ($0.21 per diluted share) associated with the debt
refinancing transactions.
On a non-GAAP basis excluding merger-related items in both
periods, the 2010 PCA judgment and the 2009 debt refinancing
charges, Talecris' net income was $50.0
million for the fourth quarter of 2010, an increase of 77.3%
compared to $28.2 million for the
fourth quarter of 2009. On the same basis, diluted earnings
per share for the 2010 fourth quarter were $0.38, an increase of 72.7% from $0.22 for the fourth quarter of 2009.
Additional information regarding the computation of non-GAAP
financial measures is included in Exhibit B.
For the full year 2010, Talecris' net revenue increased by
$68.4 million or 4.5% to $1,601.6 million compared to $1,533.2 million for the prior year. Gross
margin for the period was 43.1% compared to 41.2% in the full year
of 2009. Diluted earnings per share for the full year 2010
were $1.29 compared to $1.50 (pro forma diluted EPS of $1.26) for the full year 2009. Talecris'
full year 2010 results included an after-tax charge of $17.3 million ($0.13 per diluted share) for costs associated
with the Grifols acquisition and an after-tax charge of
$26.6 million ($0.21 per diluted share) as the result of the PCA
judgment. The full year 2009 diluted earnings per share
included the $48.8 million after-tax
benefit of the CSL merger termination fee ($0.48 per diluted share), which was partially
offset by an after-tax charge of $9.3
million ($0.08 per diluted
share) for CSL merger-related expenses, as well as an after-tax
charge of $26.3 million ($0.26 per diluted share) associated with the
company's debt refinancing transactions.
On a non-GAAP basis excluding merger-related items in both
periods, the 2010 PCA judgment and the 2009 debt refinancing
charges, Talecris' net income was $210.0
million for the full year 2010, a 49.3% increase compared to
$140.7 million for the full year
2009. On the same basis, diluted earnings per share was
$1.63 for the full year 2010 compared
to $1.11 for the full year 2009, a
46.8% increase. Additional information regarding the
computation of non-GAAP financial measures is included in Exhibit
B.
"The support for our proposed merger was evident by the
overwhelming vote in favor of the merger by both Grifols' and
Talecris' shareholders in the recent special meetings of
shareholders," said Lawrence D.
Stern, Talecris' chairman and chief executive officer.
"While we await approval from the U.S. Federal Trade
Commission of the transaction, I am proud of the performance and
record results that our company delivered in 2010 driven by strong
growth in our U.S. and European businesses. Our focus on
demand generation through our expanded and reorganized sales force
in the U.S., combined with the features and benefits of our
products, contributed to 10.0% growth in U.S. Gamunex sales and
12.4% growth in U.S. Prolastin-C sales."
"Extracting more value from our operations is a key aspect of
our long-term strategy at Talecris. In 2010, we made
significant progress towards this goal through our capital program.
Specifically, the construction of our North Fractionation
Facility in Clayton, North
Carolina is well underway. We are on schedule to
increase our fractionation capacity to 6.0 million liters by 2015,"
continued Mr. Stern.
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(in millions,
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Three Months
Ended
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except per share
amounts)
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December
31,
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Change
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2010
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2009
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$
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%
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Net revenue
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|
$
410.8
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$
390.1
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$
20.7
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5.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
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Gross margin
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41.2%
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|
39.2%
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|
200 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
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|
$
68.5
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|
$
57.4
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|
$
11.1
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19.3%
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|
|
|
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Operating Margin
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16.7%
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14.7%
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200 bps
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|
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|
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|
|
|
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Net income
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$
17.1
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$
1.4
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|
$
15.7
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nm
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|
|
|
|
|
|
|
|
|
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Diluted EPS
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$
0.13
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$
0.01
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$
0.12
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nm
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Pro forma diluted EPS
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$
0.13
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$
-
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$
0.13
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nm
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|
|
|
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Non-GAAP net income*
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$
50.0
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|
$
28.2
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$
21.8
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77.3%
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|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted EPS*
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$
0.38
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|
$
0.22
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|
$
0.16
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|
72.7%
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|
|
|
|
|
|
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|
|
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|
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nm- not meaningful
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|
|
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*Excludes merger-related items, company’s debt refinancing
transactions and PCA judgment; EPS reflects pro forma shares in
2009 for the IPO
|
(in millions,
|
|
Twelve
Months Ended
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|
|
|
|
except per share
amounts)
|
|
December
31,
|
|
Change
|
|
|
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
|
Net revenue
|
|
$ 1,601.6
|
|
$ 1,533.2
|
|
$
68.4
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4.5%
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|
|
|
|
|
|
|
|
|
|
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Gross margin
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43.1%
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41.2%
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190 bps
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|
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Income from
operations
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$
333.0
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$
271.0
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$
62.0
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22.9%
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|
|
|
|
|
|
|
|
|
|
|
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Operating Margin
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20.8%
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17.7%
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310 bps
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Net income
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$
166.1
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$
153.9
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$
12.2
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7.9%
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|
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|
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|
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Diluted EPS
|
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$
1.29
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|
$
1.50
|
|
$
(0.21)
|
|
(14.0)%
|
|
|
Pro forma diluted EPS
|
|
$
1.29
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|
$
1.26
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|
$
0.03
|
|
2.4%
|
|
|
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|
|
|
|
|
|
|
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Non-GAAP net income*
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$
210.0
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$
140.7
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$
69.3
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49.3%
|
|
|
|
|
|
|
|
|
|
|
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Non-GAAP diluted EPS*
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$
1.63
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$
1.11
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$
0.52
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46.8%
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*Excludes merger-related items, company's debt refinancing
transactions and PCA judgment; EPS reflects pro forma shares in
2009 for the IPO
Talecris' Form 10-K is available on the SEC's website at
www.sec.gov and on Talecris' website at http://ir.talecris.com
Discussion of Fourth Quarter 2010 Financial and Operating
Results
Net revenue for the 2010 fourth quarter was $410.8 million compared to $390.1 million in the fourth quarter of 2009, an
increase of $20.7 million or 5.3%.
Gamunex-C/Gamunex IGIV revenue increased $21.2 million or 10.2%, which consisted primarily
of $17.8 million in higher volumes
partially offset by unfavorable foreign exchange.
Gamunex-C/Gamunex IGIV experienced higher volumes of
$23.3 million in the U.S. and
Europe, which were partially
offset by lower volumes of $5.5
million in other international markets and Canada. U.S. Gamunex-C/Gamunex revenue
grew 14.2% for the fourth quarter of 2010 compared to the fourth
quarter of 2009. Canadian Gamunex-C/Gamunex volumes were
negatively impacted by lower sales to Canadian Blood Services due
to their IGIV multi-source strategy. Pricing was up
$4.3 million for the period partially
offset by $0.9 million of unfavorable
foreign exchange.
Prolastin-C/Prolastin A1PI revenues increased $4.5 million or 5.0%, largely due to improved
pricing of $6.3 million partially
offset by $2.3 million of unfavorable
foreign exchange. 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, Thrombate III revenues
increased $2.5 million or 39.7%.
These increases were offset primarily by lower sales of
albumin, reduced contract manufacturing for Canadian Blood Services
due to their multi-source strategy and lower sales of hyperimmunes
due to a customer system issue.
Gross profit increased to $169.3
million for the 2010 fourth quarter compared to $152.9 million in the fourth quarter of 2009.
This increase was primarily due to lower unabsorbed
infrastructure and start-up costs related to Talecris Plasma
Resources, Inc. (TPR), which is Talecris' plasma collection
platform, higher Gamunex-C/Gamunex IGIV and Prolastin-C/Prolastin
A1PI revenue, as well as lower costs of production primarily driven
by production mix associated with the conversion to Prolastin-C.
These increases were partially offset by increases in
inventory impairment provisions. Unabsorbed TPR infrastructure and
start-up costs declined by $8.5
million or 85.9% to $1.4
million for the fourth quarter of 2010 compared to
$9.9 million for the fourth quarter
of 2009. Inventory impairment provisions during the fourth
quarter of 2010 increased $12.4 million to
$20.2 million primarily driven by higher provisions for
work-in-process inventories related to a Gamunex-C/Gamunex IGIV
production issue. Talecris believes that the company has
identified the cause of the issue and has implemented appropriate
remediation steps. Gross margin was 41.2% during the fourth
quarter of 2010 compared to 39.2% for the 2009 fourth quarter, an
increase of 200 basis points.
Operating expenses for the fourth quarter of 2010 were
$100.8 million which represented an
increase of $5.3 million or 5.6%
versus $95.5 million incurred during
the prior year period. The increase in operating expenses
resulted from an increase in SG&A expenses primarily driven by
$7.3 million in higher sales and
marketing expense in the fourth quarter of 2010 as the result of
the sales force expansion. This increase was partially offset
primarily by a $4.5 million reduction
in share-based compensation. The company incurred
$9.0 million in merger-related
expenses including $2.3 million in
retention expenses in SG&A related to the definitive merger
agreement with Grifols.
Operating income was $68.5 million
during the fourth quarter of 2010, which represented a 19.3%
increase over the $57.4 million
reported during the fourth quarter of 2009. Operating margin
was 16.7% in the 2010 fourth quarter compared to 14.7% in the 2009
fourth quarter, an increase of 200 basis points.
Total other non-operating expense for the 2010 fourth quarter
includes a $43.7 million charge,
including accrued interest, related to a judgment in favor of PCA
against TPR in a breach of contract claim. The judgment related to
the PCA litigation is discussed further in the section titled
"Management's Discussion and Analysis of Financial Condition and
Results of Operations—Matters Affecting Comparability—Plasma
Centers of America (PCA) Judgment" in Talecris' 2010 Form 10-K on
the SEC website as well as Talecris' Investor Relations
website.
Net interest expense was $10.9
million in the 2010 fourth quarter compared to $13.0 million in the prior year period, a
decrease of $2.1 million primarily
due to lower debt levels. The fourth quarter of 2010
reflected an income tax benefit of $2.8
million compared to an income tax provision of $0.1 million for the fourth quarter of 2009.
The fourth quarter 2010 income tax benefit was due to the
recognition of the full year benefit from the application of
credits for Federal Research and Experimentation and orphan drug
clinical testing expenditures that were extended in the fourth
quarter of 2010. In addition, the company settled its audits
by the Internal Revenue Service for the 2005, 2006, and 2007 tax
years. The Joint Committee on Taxation completed its review
and agreed not to take exception to the refund approved by the IRS
in its report dated 2009. The favorable resolution of this
matter resulted in a release of $4.7
million in previously unrecognized tax benefits.
Net income was $17.1 million for
the 2010 fourth quarter including an after-tax charge of
$6.3 million in Grifols
merger-related expenses and an after-tax charge of $26.6 million as the result of the PCA judgment.
This compares to $1.4 million
in the fourth quarter of 2009, which included the after-tax charges
of $0.5 million and $26.3 million for CSL merger-related expenses and
the company's debt refinancing transactions, respectively.
Diluted earnings per share for the 2010 fourth quarter were
$0.13 compared to $0.01 (pro forma diluted EPS of $0.00) for the 2009 fourth quarter. The
2010 period included an after-tax charge of $0.05 per share related to costs associated with
the Grifols acquisition as well as the after-tax charge of
$0.20 per diluted share as the result
of the PCA judgment, while the 2009 period included an after-tax
charge of $0.21 per diluted share
associated with the company's debt refinancing transactions. Total
diluted shares outstanding were 129,880,242 for the 2010 fourth
quarter and 125,025,013 for the 2009 fourth quarter.
On a non-GAAP basis excluding merger-related items in both
periods, the 2010 PCA judgment and the 2009 debt refinancing
charges, Talecris' net income of $50.0
million for the fourth quarter of 2010 increased 77.3%
compared to $28.2 million for the
fourth quarter of 2009. On the same basis, earnings per
diluted share, excluding merger-related items, the 2010 PCA
judgment and the 2009 debt refinancing charges, for the 2010 fourth
quarter were $0.38, an increase of
72.7% from $0.22 for the fourth
quarter of 2009. Additional information regarding the
computation of non-GAAP financial measures is included in Exhibit
B.
The 2010 fourth quarter EBITDA was $34.8
million compared to $22.0
million in the 2009 fourth quarter. Adjusted EBITDA
was $91.0 million in the 2010 fourth
quarter compared to adjusted EBITDA of $76.9
million in the 2009 fourth quarter.
Discussion of Full Year 2010 Financial and Operating
Results
Net revenue was $1,601.6 million
for the full year 2010 compared to $1,533.2
million during the same period of 2009, representing an
increase of $68.4 million or 4.5%.
The increase was mainly due to $45.2
million in higher Gamunex-C/Gamunex IGIV revenue, consisting
of $45.2 million in higher volumes
and improved pricing of $1.9 million,
partially offset by unfavorable foreign exchange of $1.9 million. Gamunex-C/Gamunex IGIV
revenue growth was driven primarily by U.S. sales which grew 10.0%
in the full year 2010 compared to the full year 2009. The
full year 2010 results also reflected $32.4
million in higher Prolastin-C/Prolastin A1PI sales as well
as higher revenues related to Koate® DVI Factor VIII (Human), and
Thrombate III, partially offset by reduced contract manufacturing
for Canadian Blood Services due to their multi-source strategy, as
well as lower sales of albumin, hyperimmunes and PPF powder.
Gross profit during the full year 2010 totaled $689.6 million compared to $632.1 million during the full year 2009, an
increase of $57.5 million or 9.1%,
driven primarily by higher Gamunex-C/Gamunex IGIV revenue, reduced
unabsorbed TPR infrastructure and start-up costs, as well as lower
costs of production primarily driven by production mix associated
with the conversion to Prolastin-C. These benefits were
partially offset by increases in inventory impairment provisions
and non-capitalizable capital expenditures. Unabsorbed TPR
infrastructure and start-up costs decreased $37.4 million or 85.0% to $6.6 million in the full year 2010 compared to
$44.0 million for the same period of
2009. Inventory impairment provisions during the full year
2010 increased $29.5 million to $60.6
million primarily driven by higher provisions for
work-in-process inventories related to a Gamunex-C/Gamunex IGIV
production issue. Talecris believes that the company has
identified the cause of the issue and has implemented appropriate
remediation steps. Non-capitalizable expenditures for plant
expansion during the full year 2010 were $39.9 million compared to $36.9 million during the full year 2009.
Gross margin was 43.1% during the period, an increase of 190
basis points from the gross margin of 41.2% for the full year
2009.
Operating expenses totaled $356.7
million for the full year 2010, a 1.2% decrease from the
$361.2 million incurred for the full
year 2009. The decrease in operating expenses was attributed
to a decrease in SG&A expenses primarily driven by lower
share-based compensation expense of $28.4
million, the absence of $11.0
million of legal and retention expenses related to the
company's terminated merger agreement with CSL, lower charitable
donations of $9.0 million, lower
legal expenses of $3.0 million
related to the company's internal FCPA investigation and the
absence of $5.7 million of management
fees to Talecris Holdings LLC as a result of the termination of the
management agreement at the time of Talecris' initial public
offering. These items were principally offset by higher sales
and marketing expenses of $23.3
million during the full year of 2010 largely resulting from
the sales force expansion and $25.9
million in Grifols merger-related expenses including
$5.1 million in retention expenses
within SG&A. During the full year 2010, SG&A included
$4.7 million of unfavorable foreign
exchange as compared to favorable foreign exchange of $1.9 million during the prior year. R&D
spending decreased $1.6 million
during the full year 2010 compared to the prior year.
Operating income during the full year 2010 was $333.0 million compared to $271.0 million during the full year 2009,
representing an increase of $62.0
million or 22.9%. Operating margin was 20.8% for the
full year 2010 compared to 17.7% for the full year 2009, an
increase of 310 basis points.
Total other non-operating expense for the year ended
December 31, 2010 includes a
$43.7 million charge, including
accrued interest, related to a judgment in favor of PCA against TPR
in a breach of contract claim. The judgment related to the
PCA litigation is discussed further in the section titled
"Management's Discussion and Analysis of Financial Condition and
Results of Operations—Matters Affecting Comparability—Plasma
Centers of America (PCA) Judgment" in Talecris' 2010 Form 10-K on
the SEC website as well as Talecris' Investor Relations
website.
Net interest expense was $45.8
million for the full year 2010 compared to $74.5 million for the prior year period, a
decrease of $28.7 million due largely
to lower debt levels. Income tax expense for the full year
2010 was $78.4 million resulting in a
32.1% effective tax rate compared to $75.0
million for the full year 2009 or a 32.8% effective tax
rate.
Net income for the full year 2010 was $166.1 million, an increase of $12.2 million compared to net income of
$153.9 million for the full year
2009. The 2010 period included an after-tax charge of
$17.3 million for costs associated
with the Grifols acquisition as well as the PCA judgment after-tax
charge of $26.6 million, while the
2009 period included the after-tax income from the CSL merger
termination fee of $48.8 million
which was partially offset by an after-tax charge of $9.3 million for CSL merger-related expenses, as
well as an after-tax charge of $26.3
million associated with the company's debt refinancing
transactions.
Diluted earnings per share for the full year 2010 were
$1.29 including an after-tax charge
of $0.13 per diluted share for costs
associated with the Grifols acquisition and the after-tax charge of
$0.21 per diluted share as the result
of the PCA judgment. This compares to $1.50 (pro forma diluted EPS of $1.26) in the full year 2009, which included
income of $0.48 per diluted share
related to the after-tax effect of the CSL merger termination fee
partially offset by after-tax charges of $0.08 per diluted share for merger-related
expenses and $0.26 per diluted share
associated with the company's debt refinancing transactions. Total
diluted shares outstanding were 128,927,053 for the full year 2010
compared to diluted shares outstanding of 102,514,363 for the full
year 2009.
On a non-GAAP basis excluding merger-related items in both
periods, the 2010 PCA judgment and the 2009 debt refinancing
charges, Talecris' net income of $210.0
million for the full year 2010 increased 49.3% compared to
$140.7 million for the full year
2009. On the same basis, earnings per diluted share,
excluding merger-related items, the 2010 PCA judgment and the 2009
debt refinancing charges, for the full year 2010 were $1.63, an increase of 46.8% from $1.11 for the full year 2009. Additional
information regarding the computation of non-GAAP financial
measures is included in Exhibit B.
EBITDA for the full year 2010 was $326.3
million, a decrease of $6.0
million from $332.3 million in
the full year 2009 which included income of $75.0 million related to the CSL merger
termination. In the full year of 2010, adjusted EBITDA was
$417.2 million, a decrease of
$30.1 million, compared to
$447.3 million in the full year 2009
which included income of $75.0
million related to the CSL merger termination.
Recent Events
Talecris achieved a number of financial and commercial
milestones in the fourth quarter of 2010 and since the conclusion
of the fourth quarter. These include:
- On February 14, 2011, Talecris
held a special meeting at which holders of a majority of the
company's outstanding common stock approved the adoption of the
Agreement and Plan of Merger, dated as of June 6, 2010, among Grifols and Talecris
Biotherapeutics Inc. The completion of the transaction is
subject to obtaining certain regulatory approvals and other
customary conditions;
- On January 31, 2011, Talecris
began sales promotion in the U.S. for Gamunex-C (Immune Globulin
Injection [Human], 10% Caprylate/Chromatography Purified) for
subcutaneous administration in the treatment of primary
immunodeficiency (PI). Gamunex-C 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 PI, chronic
inflammatory demyelinating polyneuropathy, and idiopathic
thrombocytopenic purpura. The subcutaneous mode is approved
to treat only PI. A required post-marketing study will be
initiated in the second half of 2011;
- On December 13, 2010, a jury in
the General Court of Justice, Superior Court Division, Wake County, North Carolina, rendered a
verdict in the amount of $37.0
million in favor of PCA against TPR in a breach of contract
claim, which was confirmed by the court in post trial motions.
The company intends to appeal. The jury verdict, if
sustained, will accrue at 8% simple interest from the date of
breach, which is approximately $6.7
million at December 31, 2010.
The company has included a charge of $43.7 million (approximately $26.6 million after tax) in its consolidated
income statement for the year ended December
31, 2010 related to the judgment;
- During the fourth quarter of 2010, Talecris initiated a Phase
II clinical trial for a direct-acting thrombolytic Plasmin for the
treatment of acute Peripheral Arterial Occlusion; and
- During the fourth quarter of 2010, Talecris initiated a
clinical trial evaluating the safety and pharmacokinetic profile of
two doses of Prolastin-C A1PI. The study will investigate the
safety and pharmacokinetic profile of a higher dose, 120 mg/kg
weekly, of Prolastin-C A1PI, versus the licensed dose of 60 mg/kg
weekly.
Use of Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP
financial measures including adjusted net income, adjusted 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 of the
accompanying tables 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; 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; 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; 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; and the 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; 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; and other risks identified in the company's most
recent filing on Form 10-K and other SEC filings, 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.
Consolidated
Income Statements
|
|
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Years
Ended
|
|
|
|
|
December 31,
|
|
December
31,
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
Net revenue:
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$ 404,658
|
|
$ 384,877
|
|
$ 1,576,936
|
|
$ 1,507,754
|
|
|
Other
|
|
6,173
|
|
5,236
|
|
24,683
|
|
25,455
|
|
|
Total
|
|
410,831
|
|
390,113
|
|
1,601,619
|
|
1,533,209
|
|
|
Cost of goods sold
|
|
241,500
|
|
237,202
|
|
911,976
|
|
901,077
|
|
|
Gross profit
|
|
169,331
|
|
152,911
|
|
689,643
|
|
632,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
82,004
|
|
76,016
|
|
287,011
|
|
289,929
|
|
|
Research and
development
|
|
18,817
|
|
19,495
|
|
69,649
|
|
71,223
|
|
|
Total
|
|
100,821
|
|
95,511
|
|
356,660
|
|
361,152
|
|
|
Income from
operations
|
|
68,510
|
|
57,400
|
|
332,983
|
|
270,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-operating (expense)
income:
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
(10,922)
|
|
(13,046)
|
|
(45,837)
|
|
(74,491)
|
|
|
PCA judgment
|
|
(43,690)
|
|
-
|
|
(43,690)
|
|
-
|
|
|
CSL merger termination
fee
|
|
-
|
|
-
|
|
-
|
|
75,000
|
|
|
Loss on extinguishment of
debt
|
|
-
|
|
(43,033)
|
|
-
|
|
(43,033)
|
|
|
Equity in earnings of
affiliate
|
|
392
|
|
145
|
|
991
|
|
441
|
|
|
Total
|
|
(54,220)
|
|
(55,934)
|
|
(88,536)
|
|
(42,083)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
14,290
|
|
1,466
|
|
244,447
|
|
228,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit (provision) for income
taxes
|
|
2,764
|
|
(94)
|
|
(78,379)
|
|
(75,008)
|
|
|
Net income
|
|
17,054
|
|
1,372
|
|
166,068
|
|
153,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less dividends to
preferred stockholders and other non-common stockholders'
charges
|
|
-
|
|
-
|
|
-
|
|
(11,744)
|
|
|
Net income available to common
stockholders
|
|
$ 17,054
|
|
$
1,372
|
|
$
166,068
|
|
$
142,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.14
|
|
$
0.01
|
|
$
1.35
|
|
$
4.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
0.13
|
|
$
0.01
|
|
$
1.29
|
|
$
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Talecris
Biotherapeutics Holdings Corp.
|
|
Consolidated
Balance Sheets
|
|
(in
thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
$
197,876
|
|
$
65,239
|
|
|
Accounts receivable, net
of allowances of $3,253 and $3,461, respectively
|
134,842
|
|
136,978
|
|
|
Inventories
|
|
|
|
|
694,499
|
|
644,054
|
|
|
Deferred income
taxes
|
|
|
|
|
96,593
|
|
88,652
|
|
|
Prepaid expenses and
other
|
|
|
|
29,662
|
|
31,466
|
|
|
Total current assets
|
|
|
|
|
1,153,472
|
|
966,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and equipment,
net
|
|
|
|
382,793
|
|
267,199
|
|
|
Investment in
affiliate
|
|
|
|
|
2,926
|
|
1,935
|
|
|
Intangible assets
|
|
|
|
|
10,880
|
|
10,880
|
|
|
Goodwill
|
|
|
|
|
|
172,860
|
|
172,860
|
|
|
Deferred income taxes
|
|
|
|
|
-
|
|
5,848
|
|
|
Other
|
|
|
|
|
|
15,522
|
|
19,894
|
|
|
Total assets
|
|
|
|
|
|
$
1,738,453
|
|
$
1,445,005
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
|
|
$
59,975
|
|
$
71,046
|
|
|
Accrued expenses and other
liabilities
|
|
|
251,726
|
|
170,533
|
|
|
Current portion of capital
lease obligations
|
|
|
860
|
|
740
|
|
|
Total current
liabilities
|
|
|
|
|
312,561
|
|
242,319
|
|
|
Long-term debt and capital lease
obligations
|
|
|
605,301
|
|
605,267
|
|
|
Deferred income taxes
|
|
|
|
|
14,432
|
|
-
|
|
|
Other
|
|
|
|
|
|
11,795
|
|
15,265
|
|
|
Total liabilities
|
|
|
|
|
944,089
|
|
862,851
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value; 400,000,000 shares authorized; 125,577,877 and
122,173,274
|
|
|
|
|
|
shares issued and
outstanding, respectively
|
|
|
1,253
|
|
1,212
|
|
|
Additional paid-in
capital
|
|
|
|
813,783
|
|
767,032
|
|
|
Accumulated
deficit
|
|
|
|
|
(20,378)
|
|
(186,446)
|
|
|
Accumulated other
comprehensive (loss) income, net of tax
|
|
(294)
|
|
356
|
|
|
Total stockholders'
equity
|
|
|
|
794,364
|
|
582,154
|
|
|
Total liabilities and
stockholders' equity
|
|
|
|
$
1,738,453
|
|
$
1,445,005
|
|
|
|
|
|
|
|
|
|
|
|
Talecris
Biotherapeutics Holdings Corp.
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$ 166,068
|
|
$
153,889
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
|
36,030
|
|
28,936
|
|
|
|
|
Amortization of deferred
loan fees and debt discount
|
|
|
|
4,262
|
|
3,785
|
|
|
|
|
Share-based compensation
expense
|
|
|
|
16,966
|
|
47,546
|
|
|
|
|
Amortization of deferred
compensation
|
|
|
|
1,983
|
|
5,714
|
|
|
|
|
Write-off of unamortized
debt issuance costs
|
|
|
|
-
|
|
12,141
|
|
|
|
|
Asset
impairment
|
|
|
|
595
|
|
3,061
|
|
|
|
|
Provision for doubtful
receivables and advances
|
|
|
|
3,519
|
|
2,858
|
|
|
|
|
Recognition of previously
deferred revenue
|
|
|
|
(230)
|
|
(230)
|
|
|
|
|
Equity in earnings of
affiliate
|
|
|
|
(991)
|
|
(441)
|
|
|
|
|
Loss on disposal of
property, plant, and equipment
|
|
|
|
896
|
|
1,196
|
|
|
|
|
Decrease (increase) in
deferred tax assets
|
|
|
|
12,339
|
|
1,215
|
|
|
|
|
Excess tax benefits from
share-based payment arrangements
|
|
|
|
(13,481)
|
|
(13,406)
|
|
|
|
|
Changes in assets and
liabilities, excluding the effects of business
acquisitions
|
|
27,526
|
|
(12,109)
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
|
255,482
|
|
234,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
plant, and equipment
|
|
|
|
(152,849)
|
|
(75,163)
|
|
|
|
|
Business acquisitions, net
of cash acquired
|
|
|
|
-
|
|
(30,431)
|
|
|
|
|
Financing arrangements
with third party suppliers, net of repayments
|
|
|
|
-
|
|
-
|
|
|
|
|
Other
|
|
|
|
765
|
|
976
|
|
|
|
|
Net cash used in investing
activities
|
|
|
|
(152,084)
|
|
(104,618)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
Borrowings under revolving
credit facility
|
|
|
|
915
|
|
1,201,749
|
|
|
|
|
Repayment of borrowings
under revolving credit facility
|
|
|
|
(915)
|
|
(1,381,690)
|
|
|
|
|
Repayments of borrowings
under term loans
|
|
|
|
-
|
|
(1,016,000)
|
|
|
|
|
Repayment of capital lease
obligations
|
|
|
|
(751)
|
|
(574)
|
|
|
|
|
Proceeds from issuance of
7.75% Notes
|
|
|
|
-
|
|
600,000
|
|
|
|
|
Discount on 7.75%
Notes
|
|
|
|
-
|
|
(4,074)
|
|
|
|
|
Financing transaction
costs
|
|
|
|
(394)
|
|
(14,879)
|
|
|
|
|
Proceeds from initial
public offering, net of issuance costs
|
|
|
|
-
|
|
519,749
|
|
|
|
|
Costs related to initial
public offering
|
|
|
|
-
|
|
(2,557)
|
|
|
|
|
Repurchases of common
stock
|
|
|
|
(4,917)
|
|
(4,183)
|
|
|
|
|
Proceeds from exercises of
stock options
|
|
|
|
22,333
|
|
7,581
|
|
|
|
|
Excess tax benefits from
share-based payment arrangements
|
|
|
|
13,481
|
|
13,406
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
|
29,752
|
|
(81,472)
|
|
|
|
|
Effect of exchange rate changes
on cash and cash equivalents
|
|
|
|
(513)
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
|
132,637
|
|
48,260
|
|
|
|
|
Cash and cash equivalents at
beginning of year
|
|
|
|
65,239
|
|
16,979
|
|
|
|
|
Cash and cash equivalents at end
of year
|
|
|
|
$ 197,876
|
|
$
65,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
Plasma Center of America (PCA) Judgment
On December 13, 2010, a jury in
the General Court of Justice, Superior Court Division, Wake County, North Carolina, rendered a
verdict in the amount of $37.0
million in favor of PCA against TPR in a breach of contract
claim, which was confirmed by the court in post trial motions.
The company intends to appeal. The jury verdict, if
sustained, will accrue at 8% simple interest from the date of
breach, which is approximately $6.7
million at December 31, 2010.
The company has included a charge of $43.7 million (approximately $26.6 million after tax) in its consolidated
income statement for the year ended December
31, 2010 related to the judgment.
Definitive Merger Agreement with Grifols
The company has entered into agreements with investment bankers
related to its definitive merger agreement with Grifols.
Talecris incurred fees totaling $2.5
million under these agreements during 2010. During 2010, the
company also incurred legal, accounting, and other fees of
$18.3 million associated with the
merger agreement. The company is obligated to pay additional
fees totaling $21.3 million upon
successful closing of the transaction.
Under the terms of the merger agreement with Grifols, the
company is permitted to offer retention amounts up to a total of
$15.0 million to employees. As
of December 31, 2010, Talecris has
offered retention amounts totaling approximately $10.2 million to employees of which $2.9 million was paid during 2010 and the
remaining amounts are expected to be paid in 2011, subject to the
terms of the retention agreements. The company incurred
retention expenses, including fringe benefits, of $6.9 million during the year ended December 31, 2010. The remaining retention
amounts will likely be recognized ratably through the second
quarter of 2011, but Talecris may offer additional retention
packages.
Financial Impact of IPO and Refinancing
Transactions
As discussed in Talecris' 2009 Form 10-K, the company completed
IPO and refinancing transactions during the fourth quarter of 2009,
which has resulted in lower average borrowings during the three
months and year ended December 31,
2010 as compared to the three months and year ended
December 31, 2009, and
correspondingly lower interest expense during the year ended
December 31, 2010. For the
three months ended December 31, 2010
and 2009, interest expense was $11.8
million and $11.1 million,
respectively, and for the year ended December 31, 2010 and 2009, interest expense was
$47.3 million and $56.9 million, respectively.
Foreign Corrupt Practices Act (FCPA)
Talecris is conducting an internal investigation into potential
violations of the FCPA that the company became aware of during the
conduct of an unrelated review. The FCPA investigation is
being conducted by outside counsel under the direction of a special
committee of the board of directors. During the years ended
December 31, 2010 and 2009, Talecris
incurred $5.0 million and
$8.0 million, respectively, of legal
costs associated with the internal investigation into this matter,
which are recorded in SG&A in the consolidated income
statement. The company expects to complete the internal FCPA
investigation and present the findings to the Department of Justice
(DOJ) in 2011. The preliminary findings of the company's
investigation indicate that it is probable that there were FCPA
violations by persons associated with the company that the DOJ or
other regulators may assert are attributable to the company.
Even though Talecris self-disclosed this matter to the DOJ,
it or other federal agencies may seek to impose sanctions on the
company that may include, among other things, debarment, injunctive
relief, disgorgement, fines, penalties, appointment of a monitor,
appointment of a new control staff or enhancements of existing
compliance and training programs. Any such sanctions or
related loss of business could have a material adverse effect on
Talecris or the company's results of operations. It is
possible, however, that any sanctions that DOJ or other federal
agencies might otherwise consider imposing would be reduced, if not
eliminated, in light of the comprehensive compliance measures that
Talecris has implemented. Given the preliminary nature of the
company's findings, Talecris' continuing investigation and the
uncertainties regarding this matter, the company is unable to
estimate the financial outcome. Additional information
regarding the investigation into potential violations of the FCPA
is included in the footnotes to the consolidated financial
statements and in the section of the 2010 Form 10-K entitled, "Risk
Factors."
Comparability of Outstanding Common Shares and Pro Forma
Diluted Earnings per Common Share
As discussed in Talecris' 2010 Form 10-K, the company completed
IPO and refinancing transactions during the fourth quarter of 2009.
Talecris' IPO consisted of 56,000,000 shares of common stock,
of which 28,947,368 shares were newly issued and sold by Talecris
and 27,052,632 shares were sold by the selling stockholder,
Talecris Holdings, LLC. The net primary proceeds to Talecris
of $519.7 million were used to repay
amounts outstanding under Talecris' then existing First and Second
Lien Term Loans. In connection with the IPO, Talecris also
converted 1,000,000 shares of the company's Series A preferred
stock and 192,310 shares of Series B preferred stock into
85,846,320 shares of common stock and issued 2,381,548 shares of
common stock to settle $45.3 million
of accrued dividends upon the conversion of Series A and B
preferred stock. The issuance of new common shares has
resulted in a significant increase in the number of common shares
used in Talecris' computation of diluted earnings per common share.
The application of the net primary proceeds to Talecris from
the IPO to repay the company's then existing indebtedness has
resulted in a significant reduction in interest expense during the
three months and year ended December 31,
2010 as compared to the prior year periods.
Talecris believes that the comparability of its financial
results for the periods presented is enhanced by the following pro
forma presentation of diluted earnings per common share. In
the table below, the pro forma diluted earnings per common share
computation for year ended December 31,
2009 reflects an adjustment to net income for reduced
interest expense as if the net primary proceeds to Talecris from
the IPO of $519.7 million had been
applied to repay debt at the beginning of 2009, net of interest
rate differences from the issuance of the 7.75% Notes. The
pro forma adjustment to the denominator reflects the impacts for
the issuance of common shares to convert preferred stock, settle
accrued dividends on the preferred stock and complete the IPO as if
these events occurred at the beginning of 2009.
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|
|
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|
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($ in thousands, except per
share amounts)
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|
|
Years Ended
December 31,
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2009
|
|
|
|
|
|
|
Actual
|
|
Actual
|
|
Pro
forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
166,068
|
|
$
153,889
|
|
$
153,889
|
|
|
Interest expense reduction due
to debt repayment
|
|
|
|
-
|
|
-
|
|
5,555
|
|
|
Net income available to common
stockholders
|
|
|
|
$
166,068
|
|
$
153,889
|
|
$
159,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
|
123,323,722
|
|
31,166,613
|
|
31,166,613
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Plus incremental shares
from assumed conversions:
|
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|
|
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|
|
|
|
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Stock options and
restricted shares
|
|
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|
5,603,331
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7,374,601
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|
7,374,601
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|
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Series A preferred
stock
|
|
|
|
-
|
|
53,654,795
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|
53,654,795
|
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|
Series B preferred
stock
|
|
|
|
-
|
|
10,318,354
|
|
10,318,354
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|
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Shares issued for
preferred stock dividend
|
|
|
|
-
|
|
-
|
|
1,774,743
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Newly issued shares for
IPO
|
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|
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-
|
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-
|
|
22,047,585
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Dilutive potential common
shares
|
|
|
|
128,927,053
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|
102,514,363
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|
126,336,691
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|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common
share
|
|
|
|
$
1.29
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|
$
1.50
|
|
$
1.26
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|
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|
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|
|
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|
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|
Definitive Merger Agreement with CSL
Talecris entered into a definitive merger agreement with CSL on
August 12, 2008, which was subject to
the receipt of certain regulatory approvals as well as other
customary conditions. The U.S. Federal Trade Commission filed
an administrative complaint before the Commission challenging the
merger and a complaint in Federal district court seeking to enjoin
the merger during the administrative process. On June 8,
2009, the merger parties agreed to terminate the definitive merger
agreement and as a result, CSL paid Talecris a merger termination
fee of $75.0 million during the 2009
second quarter. The U.S. Federal Trade Commission's
complaints were subsequently dismissed. Talecris incurred
retention expense, including fringe benefits of $9.2 million for the year ended December 31, 2009, and legal costs associated
with the regulatory review process of $6.0
million during the year ended December 31, 2009. All retention amounts
were paid during 2009.
EXHIBIT B: NON-GAAP FINANCIAL MEASURES
Description of Adjustments and Reconciliations of U.S. GAAP to
Non-GAAP Financial Measures
Merger-related Items, PCA Judgment and Charges Related to
Debt Refinancing Transactions
Talecris believes a meaningful comparison of its results for the
periods presented is enhanced by a quantified presentation of the
impact of the 2010 Grifols merger-related expenses and the PCA
judgment as well as the 2009 CSL merger termination fee, CSL
merger-related expenses, and the charges related to debt
refinancing transactions. The impacts of these items on net
income and diluted earnings per share are illustrated in the table
below.
In addition, the 2010 diluted earnings per share reflects a
significant increase in the number of common shares used in the
computation of diluted earnings per share as discussed below and in
"Exhibit A: Matters Affecting Comparability."
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-K filed with the SEC on February 23, 2011, which is available on SEC's
website at www.sec.gov and Talecris' website at
http://ir.talecris.com.
|
(in thousands, except per share
amounts)
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Diluted
Earnings
|
|
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|
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Pre-Tax
|
|
Income
Tax
|
|
|
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Per
Common
|
|
|
|
|
Amount
|
|
Effect
|
|
Net
Income
|
|
Share
|
|
|
Three Months Ended December 31,
2010
|
|
|
|
|
|
|
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U.S. GAAP
|
|
$
14,290
|
|
$
2,764
|
|
$
17,054
|
|
$
0.13
|
|
|
Grifols merger-related
expenses
|
|
9,822
|
|
(3,506)
|
|
6,316
|
|
0.05
|
|
|
PCA judgment plus interest
expense
|
|
43,690
|
|
(17,083)
|
|
26,607
|
|
0.20
|
|
|
Excluding specific
items
|
|
$
67,802
|
|
$
(17,825)
|
|
$
49,977
|
|
$
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
2009
|
|
|
|
|
|
|
|
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U.S. GAAP
|
|
$
1,466
|
|
$
(94)
|
|
$
1,372
|
|
$
0.01
|
|
|
CSL merger-related
expenses
|
|
854
|
|
(332)
|
|
522
|
|
-
|
|
|
Write-off of deferred debt
issuance costs
|
|
12,141
|
|
(4,711)
|
|
7,430
|
|
0.06
|
|
|
Loss on extinguishment of
interest rate swap contracts
|
|
30,892
|
|
(11,986)
|
|
18,906
|
|
0.15
|
|
|
Excluding specific
items
|
|
$
45,353
|
|
$
(17,123)
|
|
$
28,230
|
|
$
0.23
|
|
|
|
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|
|
|
|
|
|
|
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As adjusted for pro forma
weighted average number of shares (1)
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$
0.22
|
|
|
|
|
|
|
|
|
|
|
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|
|
Year Ended December 31,
2010
|
|
|
|
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|
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U.S. GAAP
|
|
$
244,447
|
|
$
(78,379)
|
|
$
166,068
|
|
$
1.29
|
|
|
Grifols merger-related
expenses
|
|
27,730
|
|
(10,454)
|
|
17,276
|
|
0.13
|
|
|
PCA judgment plus interest
expense
|
|
43,690
|
|
(17,083)
|
|
26,607
|
|
0.21
|
|
|
Excluding specific
items
|
|
$
315,867
|
|
$
(105,916)
|
|
$
209,951
|
|
$
1.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
|
|
$
228,897
|
|
$
(75,008)
|
|
$
153,889
|
|
$
1.50
|
|
|
CSL merger termination
fee
|
|
(75,000)
|
|
26,250
|
|
(48,750)
|
|
(0.48)
|
|
|
CSL merger-related
expenses
|
|
15,136
|
|
(5,873)
|
|
9,263
|
|
0.08
|
|
|
Write-off of deferred debt
issuance costs
|
|
12,141
|
|
(4,711)
|
|
7,430
|
|
0.07
|
|
|
Loss on extinguishment of
interest rate swap contracts
|
|
30,892
|
|
(11,986)
|
|
18,906
|
|
0.19
|
|
|
Excluding specific
items
|
|
$
212,066
|
|
$
(71,328)
|
|
$
140,738
|
|
$
1.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted for pro forma
weighted average number of shares(1)
|
|
|
|
|
|
|
$
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Talecris believes the comparability of diluted earnings per
share between the periods presented is enhanced by the use of an
adjusted share base to reflect the impact for the issuance of
common shares to convert Series A and B preferred stock, settle
accrued dividends on the preferred stock, and complete the IPO as
if these events occurred at the beginning of 2009.
EBITDA and Adjusted EBITDA
Talecris believes that a meaningful analysis of its operating
performance is enhanced by the use of adjusted EBITDA, as defined
in Talecris' Revolving Credit Facility and Consolidated Cash Flow,
as defined in its 7.75% Notes.
Both 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 adjusted EBITDA
is included in Talecris' Form 10-K filed with the SEC on
February 23, 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 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' historical
financial results, are included in the section titled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Matters Affecting Comparability," in the company's
Form 10-K.
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:
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
Net income
|
|
|
|
$
166,068
|
|
$
153,889
|
|
$
65,797
|
|
|
Interest expense, net
(a)
|
|
|
|
45,837
|
|
74,491
|
|
97,040
|
|
|
Income tax provision
(b)
|
|
|
|
78,379
|
|
75,008
|
|
36,594
|
|
|
Depreciation and
amortization (c)
|
|
|
|
36,030
|
|
28,936
|
|
20,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
326,314
|
|
332,324
|
|
219,700
|
|
|
Management fees
(d)
|
|
|
|
-
|
|
5,715
|
|
6,871
|
|
|
Non-cash share-based
compensation expense (e)
|
|
16,966
|
|
47,546
|
|
38,707
|
|
|
Special recognition bonus
expense (f)
|
|
|
|
2,091
|
|
6,310
|
|
6,622
|
|
|
Loss on extinguishment of
debt (g)
|
|
|
|
-
|
|
43,033
|
|
-
|
|
|
Equity in earnings of
affiliate (h)
|
|
|
|
(991)
|
|
(441)
|
|
(426)
|
|
|
Merger-related
expenses (i)
|
|
|
|
27,730
|
|
9,136
|
|
5,593
|
|
|
PCA judgment
(j)
|
|
|
|
43,690
|
|
-
|
|
-
|
|
|
Other (k)
|
|
|
|
1,383
|
|
3,660
|
|
10,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA under Revolving
Credit Facility
|
|
|
417,183
|
|
447,283
|
|
287,816
|
|
|
Merger termination fee
(l)
|
|
|
|
-
|
|
(75,000)
|
|
-
|
|
|
Consolidated Cash Flow under
7.75% Notes
|
|
|
|
$
417,183
|
|
$
372,283
|
|
$
287,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Represents interest expense associated with Talecris' debt
structure. Through the third quarter of 2009, the company's
debt structure consisted of facilities totaling $1.355 billion, including $700 million First Lien Term Loan, $330 million Second Lien Term Loan, and
$325 million revolving credit
facility, as well as interest rate cap and swap contracts. As
a result of the company's IPO and refinancing transactions during
October 2009, Talecris reduced the
company's credit facilities to $925
million, consisting of the company's $600 million 7.75% Notes and $325 million revolving credit facility. The
company also settled and terminated its interest rate swap
contracts.
(b) Represents income tax provision as presented in the
consolidated income statements.
(c) Represents depreciation and amortization expense associated
with Talecris' property, plant, and equipment and all other
intangible assets.
(d) Represents the advisory fees paid to Talecris Holdings, LLC,
under the Management Agreement, as amended. This agreement
was terminated in connection with the IPO.
(e) Represents non-cash share-based compensation expense
associated with stock options, restricted stock, RSU's, and
performance share units.
(f) Represents compensation expense associated with special
recognition bonus awards granted to certain employees and senior
executives to reward past performance. Talecris made the
final payments under the special recognition bonus awards during
March 2010. The company does
not anticipate granting similar awards in the future.
(g) Represents charges to write-off previously capitalized
financing charges associated with the First and Second Lien Term
Loans as a result of their repayment and termination as well as
costs associated with the settlement and termination of the
interest rate swap contracts.
(h) Represents non-operating income associated with the
company's investment in Centric, which Talecris does not consider
part of its core operations.
(i) Represents merger related retention expenses associated with
the company's terminated merger agreement with CSL for the 2009 and
2008 periods, and merger-related expenses associated with Talecris'
merger agreement with Grifols, including investment bankers, legal,
accounting, and other costs, as well as retention expenses for the
2010 period.
(j) Represents charges related to a judgment in the amount of
$37.0 million in favor of PCA against
TPR in a breach of contract claim and interest of $6.7 million from the date of the breach.
(k) For the year ended December 31,
2010, the amount represents charges/losses related to
long-lived assets, net. For the year ended December 31, 2009, the amount represents
$3.1 million of charges related
primarily to capital lease assets and leasehold improvements,
offset by recoveries of $1.9 million
related to Talecris' 2008 plasma center cGMP issue. For the
year ended December 31, 2009, the
amount also includes $1.3 million of
costs related to the company's October 6,
2009 IPO and $1.2 million of
losses on disposals of property, plant, and equipment. For
the year ended December 31, 2008, the
amount represents an inventory impairment charge, net of recoveries
of $5.8 million due to the company's
plasma center cGMP issue, an impairment charge of $3.6 million related primarily to capital lease
assets and leasehold improvements, and other long-lived asset
impairment charges of $0.7 million.
For the year ended December 31,
2008, the amount also includes $0.9
million of costs related to the initial public offering that
was discontinued during 2008, partially offset by insurance
recoveries of $0.3 million.
(l) For the year ended December 31,
2009, the amount includes a $75.0
million merger termination fee that Talecris received from
CSL in connection with the definitive merger agreement.
SOURCE Talecris Biotherapeutics Holdings Corp.