On November 3, 2022 Bausch Health Companies Inc. (NYSE/TSX: BHC) ("Bausch Health" or the "Company" or "we" or "our") reported its third-quarter 2022 financial results (Press release, Bausch Health, NOV 3, 2022, View Source [SID1234623000]).
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"We are encouraged with the top line improvement in the third quarter, with four out of five segments delivering growth on an organic basis1," Thomas J. Appio, Chief Executive Officer, Bausch Health, said."The results this quarter demonstrate the resilient demand for our products in the current macro environment. Our recently completed debt exchange offer accelerated our debt reduction and we expect this will provide additional flexibility to invest, innovate and further improve our capital structure over time."
Strategic Alternatives Update
The Company continues to evaluate numerous potential options to maximize stakeholder value. This includes ongoing focus on its balance sheet and liquidity. The Company believes that the distribution of Bausch + Lomb Corporation ("Bausch + Lomb") continues to make strategic sense and is thoughtfully evaluating all considerations related to the distribution of Bausch + Lomb.
Third Quarter 2022 Revenue Performance
Total reported revenues were $2.046 billion for the third quarter of 2022, compared with $2.111 billion in the third quarter of 2021, a decrease of $65 million, or 3%. Excluding the unfavorable impact of foreign exchange of $82 million and the impact of divestitures and discontinuations of $26 million, primarily due to the divestiture of Amoun Pharmaceutical Company S.A.E. on July 26, 2021, revenue increased by 2% organically1 compared with the third quarter of 2021.
Reported revenues by segment were as follows:
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1 This is a non-GAAP measure or a non-GAAP ratio. For further information on non-GAAP measures and non-GAAP ratios, please refer to the "Non-GAAP Information" section of this news release. Please also refer to tables at the end of this news release for a reconciliation of this and other non-GAAP measures to the most directly comparable GAAP measure.
Salix Segment
Salix segment reported and organic1 revenues were $544 million for the third quarter of 2022, compared with $527 million for the third quarter of 2021, an increase of $17 million, or 3%. Sales growth was driven by Xifaxan, Relistor, Trulance and Plenvu during the quarter.
International Segment2
International segment reported revenues were $250 million for the third quarter of 2022, compared with $271 million for the third quarter of 2021, a decrease of $21 million, or 8%. Excluding the unfavorable impact of foreign exchange of $22 million and the impact of divestitures and discontinuations of $23 million, segment revenues increased organically1 by 10% compared with the third quarter of 2021, led by healthy growth in Canada and Europe.
Solta Medical Segment2
Solta Medical segment reported revenues were $72 million for the third quarter of 2022, compared with $74 million in the third quarter of 2021, a decrease of $2 million, or 3%. Excluding the unfavorable impact of foreign exchange of $5 million, segment revenues increased organically1 by 4% compared with the third quarter of 2021.
Diversified Products Segment2
Diversified Products segment reported revenues were $238 million for the third quarter of 2022, compared with $290 million for the third quarter of 2021, a decrease of $52 million, or 18%, primarily attributable to decreases in sales from neurology and generics. Excluding the impact of divestitures and discontinuations of $2 million, segment revenues decreased organically1 by 17% compared with the third quarter of 2021.
Bausch + Lomb Segment2
Bausch + Lomb segment reported revenues were $942 million for the third quarter of 2022, compared with $949 million for the third quarter of 2021, a decrease of $7 million, or 1%. Excluding the unfavorable impact of foreign exchange of $55 million and the impact of divestitures and discontinuations of $1 million, the Bausch + Lomb segment revenue increased organically1 by 5%, compared with the third quarter of 2021, driven by increases across all business units.
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2 Commencing in the first quarter of 2022, the Company realigned its segment reporting structure and now operates in the following reportable segments: Salix, International, Diversified Products, Solta Medical and Bausch + Lomb. Under the new segment structure, Ortho Dermatologics is now part of the current Diversified Products segment and the Solta reporting unit is now the sole reporting unit of the Solta Medical segment. All segment and business unit references in this news release are to this realigned segment and business unit reporting structure and prior period presentations of results have been conformed to the current segment and business unit reporting structure to allow investors to evaluate results between periods on a constant basis.
Consolidated Operating Income
Operating income was $244 million for the third quarter of 2022, compared with operating income of $574 million for the third quarter of 2021, a decrease of $330 million, primarily driven by lower revenues, higher expenses and non-recurring insurance recoveries that we received in the third quarter of 2021. Higher expenses were mainly due to a goodwill impairment of $119 million and higher favorable adjustments related to the settlement of certain litigation matters in the third quarter of 2021.
Net Income Attributable to Bausch Health
Net income attributable to Bausch Health for the third quarter of 2022 was $399 million, compared with $188 million for the third quarter of 2021, a favorable change of $211 million. The increase was primarily due to the increase in income before income taxes of $223 million, partially offset by an unfavorable change in income taxes of $11 million. Higher income before income tax was driven by a $570 million gain from debt extinguishment offset by the decline in operating income and higher interest expense.
Adjusted net income attributable to Bausch Health (non-GAAP)1 for the third quarter of 2022 was $277 million, compared with $417 million for the third quarter of 2021, a decrease of $140 million primarily due to foreign exchange headwinds, and higher operating and interest expenses.
Earnings Per Share Attributable to Bausch Health
GAAP Earnings Per Share attributable to Bausch Health for the third quarter of 2022 was $1.10, compared with $0.52 for the third quarter of 2021.
Adjusted EBITDA attributable to Bausch Health (non-GAAP)1
Adjusted EBITDA attributable to Bausch Health (non-GAAP)1 was $766 million for the third quarter of 2022, as compared to $885 million for the third quarter of 2021, a decrease of $119 million.
Cash (Used in) Provided by Operating Activities
Cash used in operating activities was $1,263 million in the third quarter of 2022, compared with cash provided by operating activities of $564 million in the third quarter of 2021, a decrease of $1,827 million, primarily due to the reduction of $1.2 billion from restricted cash in connection with the settlement of legacy U.S. securities litigation, business results and changes in working capital.
Balance Sheet Highlights as of September 30, 2022:
•Cash, cash equivalents, and restricted cash were $497 million.
•The Company successfully completed a debt exchange offer during the quarter. A total of $5.6 billion of outstanding senior unsecured notes were exchanged for $3.1 billion of newly issued, senior secured notes, resulting in the net reduction of $2.5 billion in principal balances.
•In connection with the debt exchange, the Company recorded an unamortized premium on the new secured notes of $1.8 billion on its balance sheet, which will reduce interest expense over the remaining life of the new bonds, as well as a gain from debt extinguishment of $570 million in the quarter.
•Bausch Health had availability under its 2027 revolving credit facility of approximately $485 million and Bausch + Lomb had availability of approximately $490 million under its revolving credit facility.
Bausch Health updated its consolidated guidance for the full year 2022 as follows:
•Full year revenue range of $8.0 – $8.17 billion compared with prior guidance of $8.05 – $8.22 billion
•Full year revenues flat to up 2% on an organic basis (unchanged)
•Full year Adjusted EBITDA (non-GAAP)1 range of $2.99 – $3.09 billion compared with prior guidance of $3.02 – $3.12 billion
Other than with respect to GAAP revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP)1 to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Because deductions (such as restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP)1. These statements represent forward-looking information and may represent a financial outlook, and actual results may vary. Please see the risks and assumptions referred to in the Forward-looking Statements section of this news release. The guidance in this news release is only effective as of the date given, November 3, 2022, and will not be updated or affirmed unless and until the Company publicly announces updated or affirmed guidance.