1 SHAPINNG G OUR FUFUTURE
`2 CORPORATATE GOVEERNANCECE AND CSR REPOORT
`3 COMPENSASATION RREPE ORT
`4 FINANCIAL REPORT
`44 FINANCIAL RER PORTT
`
`Annual Report 2013
`
`FINANCIAL
`REPORT.
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1070, p. 41 of 82
`
`

`

`HOME
`
`CONTENTS
`
`FINANCIAL
`REVIEW
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`HOLDING
`COMPANY
`STATEMENTS
`
`PREVIOUS
`
`NEXT
`
`ACTELION ANNUAL REPORT 2013
`
`CONTENTS
`
`04
`
`12
`
`19
`
`61
`
`62
`
`66
`
`70
`
`80
`
`Financial Review
`
`Consolidated Financial Statements
`
`Notes to the Consolidated Financial Statements
`
`Management Report on Internal Control
`
`Audit Reports
`
`Holding Company Financial Statements
`
`Notes to the Holding Company Financial Statements
`
`Audit Report
`
`Actelion ensures financial integrity by
`complying with all applicable laws and
`accounting standards, using the highest
`internal standards and proper reporting
`of Actelion’s results. For the eighth
`consecutive year the Company’s internal
`controls over financial reporting were
`certified as meeting the requirements
`of SOX 404 (Sarbanes-Oxley Act 2002,
`section 404) at 31 December 2013.
`
`FINANCIAL REPORT.
`
`3
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1070, p. 42 of 82
`
`

`

`HOME
`
`CONTENTS
`
`FINANCIAL
`REVIEW
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`HOLDING
`COMPANY
`STATEMENTS
`
`PREVIOUS
`
`NEXT
`
`ACTELION ANNUAL REPORT 2013
`
`FINANCIAL REVIEW
`
`HIGHLIGHTS 2013
`• Product sales increased by 6% at constant exchange rates (CER)1 to
`CHF 1,784 million
`
`• Solid top-line performance, spending discipline and restructuring benefits
`resulted in core2 earnings growth of 20% at CER
`
`• Core earnings per share (EPS) (fully diluted) increased by 20% at CER
`
`• Financial flexibility enabled Actelion to acquire Ceptaris and to return
`significant cash to shareholders, while maintaining a strong cash position
`
`• Board’s proposal to increase the dividend by 20% to CHF 1.20 demonstrates
`its confidence in the current and future strength of the underlying business
`
`SALES
`
`In the US, despite unmitigated competitive pressures, sales increased by 9% driven by price increases and a net impact
`of CHF 24 million reversals of rebate accruals relating to patients support programs (CHF 35 million in 2013 versus
`CHF 11 million in 2012). European sales increased by 1% at CER in a negative pricing environment. Germany and the digital
`ulcer indication drove the European sales growth while Japan continued strongly at plus 14%. Sales in the rest of the world
`increased by 6% at CER driven by strong growth in PAH-emerging markets like China, Taiwan, Russia and Mexico. The
`continued strength of the Swiss franc resulted in a negative currency variance of CHF 50 million.
`
`in CHF million
`
`Tracleer
`
`Opsumit
`
`Veletri
`
`Ventavis
`
`Zavesca
`
`Others
`
`Product sales
`
`United States
`
`2013
`
`1,532
`
`5
`
`37
`
`110
`
`96
`
`4
`
`1,784
`
`2012
`
`1,500
`
`-
`
`24
`
`110
`
`85
`
`3
`
`1,722
`
`Variance
`
`CHF %
`
`CER %
`
`2
`
`-
`
`52
`
`-
`
`13
`
`-
`
`4
`
`5
`
`-
`
`60
`
`1
`
`14
`
`-
`
`6
`
`2013
`(CHF m)
`
`768
`
`660
`
`2013
`%
`
`43
`
`2012
`(CHF m)
`
`710
`
`2012
`%
`
`41
`
`Variance
`CER %
`
`9
`
`CORE PERFORMANCE
`
`Actelion continues to measure, report and issue guidance on its core operating results, which more accurately reflects the
`underlying business performance.
`
`Core results exclude contract revenues, as well as costs related to employee stock-based compensation programs,
`depreciation, amortization, impairments, certain income tax effects and other items that management deems exceptional.
`
`A full reconciliation between US GAAP and core results can be found on page 11 of the Financial Report.
`
`in CHF million
`
`Product sales
`
`Core R&D expenditure
`
`Core earnings (Core operating income)
`
`Core net income
`
`Core EPS fully diluted (in CHF)
`
`
`
`2013
`
`1,784
`
`356
`
`619
`
`509
`
`4.41
`
`2012
`
`1,722
`
`398
`
`537
`
`450
`
`3.81*
`
`Variance
`
`CHF %
`
`CER 1 %
`
`4
`
`(11)
`
`15
`
`13
`
`16
`
`6
`
`(9)
`
`20
`
`17
`
`20
`
`* 2012 Core EPS was recalculated to apply the prevailing tax rate for each adjustment (formerly CHF 3.69 using an average blended rate).
`
`(1) CER percentage changes are calculated by reconsolidating both the 2013 and 2012 results at constant currencies (the average monthly exchange rates for the year 2012).
`
`(2) Actelion continues to measure, report and issue guidance on its core operating performance, which more accurately reflects the underlying business performance. The company
`believes that these non-GAAP financial measurements provide useful supplementary information to investors. These non-GAAP measures are reported in addition to, not as a
`substitute for US GAAP financial performance.
`
`Europe
`
`Japan
`
`Rest of the World
`
`Total sales
`
`PAH Franchise
`
`188
`
`169
`
`1,784
`
`37
`
`11
`
`9
`
`100
`
`644
`
`205
`
`164
`
`1,722
`
`37
`
`12
`
`10
`
`100
`
`1
`
`14
`
`6
`
`6
`
`Opsumit®
`Opsumit, launched in November 2013 in the US, has been very well received by US-based prescribers, as evidenced by the
`strong demand since market introduction. Over the first two months, the average number of Opsumit weekly prescriptions
`were more than 200% the average weekly Tracleer prescriptions for new patients prior to the Opsumit launch.
`
`Since the Opsumit launch, the number of weekly Tracleer prescriptions for new patients are down by over 50%. As part of its
`commitment to patients, Actelion has established a patient assistance program for Opsumit. Approval was also granted in
`both Canada and European Union countries in November and December respectively, with Canadian and the first European
`launch in Germany occurring in January 2014.
`
`4
`
`FINANCIAL REPORT.
`
`5
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1070, p. 43 of 82
`
`

`

`HOME
`
`CONTENTS
`
`FINANCIAL
`REVIEW
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`HOLDING
`COMPANY
`STATEMENTS
`
`PREVIOUS
`
`NEXT
`
`ACTELION ANNUAL REPORT
`
`2013
`
`Tracleer®
`Amidst a continued challenging competitive environment in the US and continuing pricing pressure in Europe, Tracleer
`delivered a strong performance in 2013 with sales increasing by 5% at CER to reach CHF 1,532 million.
`
`Underlying global unit growth was solid at +4%, driven by Japan, Germany, PAH emerging markets and the digital ulcer
`indication in Europe. US rebates accrual reversals and price increases in the US offset widespread price erosion in Europe.
`
`In markets where generic bosentan is available (Canada, Turkey, Brazil), Actelion very successfully defended Tracleer,
`albeit at a lower unit price (approximately -20% in Canada and -27% in Turkey). Our own generic version of bosentan has
`been launched in markets like Brazil, and our branded generic Stayveer®, approved in Europe, is set to launch in selected
`markets.
`
`Veletri®
`With sales of CHF 37 million, an increase of 60% at CER, Veletri continued its strong growth trajectory. The uptake was
`particularly strong in Japan, the world’s second largest i.v. epoprostenol market, where the product was launched in June
`2013.
`
`Also in 2013, through a decentralized procedure, Actelion received approval for Veletri in some European countries, as a
`result of this, Veletri is now available in the UK and the Netherlands. Market introductions are forthcoming in France, Spain,
`Italy and other markets.
`
`Ventavis®
`Ventavis sales for 2013 increased by 1% at CER driven entirely by price increases. Underlying demand was 7% lower as
`competitive pressure continued to affect sales.
`
`Specialty Products
`
`ValchlorTM
`Our specialty franchise (Zavesca®, Toctino® and Xiaflex®) was strengthened by the acquisition of Ceptaris in September
`2013 through which Valchlor™ - an FDA-approved (in August 2013) mechlorethamine gel applied topically once a day and
`indicated for patients with stage IA or IB mycosis fungoides-type cutaneous T-cell lymphoma (MF-CTCL) who have received
`prior skin-directed therapy was added to our portfolio.
`
`Valchlor was launched in November 2013 to CTLC Centers of Excellence and will be more widely available to US prescribers
`by spring 2014, when the build-up of dedicated commercial unit will be completed.
`
`Zavesca®
`Zavesca sales increased by 14% at CER to reach CHF 96 million. Growth stems from the continued uptake ex-US in the
`Niemann-Pick type C indication, with patient numbers up by 20%, especially in Japan where the indication was launched in
`June 2012.
`
`CORE OPERATING EXPENSES
`
`2013
`
`Variance
`
`Core Cost of Sales
`Cost of sales is composed of royalties (77%) and cost of goods (23%). The gross margin of 88.3% was broadly in line with the
`previous year.
`
`Core Research & Development Expenditure
`Actelion has refocused its product portfolio, carefully balancing investment in the right programs to ensure future growth
`with delivery of appropriate shareholder returns. This resulted in a decrease of 9% in core R&D expenditure for 2013
`compared to the prior year. Main drivers of the decrease are lower fixed costs due to the 2012 cost-savings initiative as well
`as the completion of several larger clinical trials.
`
`Core R&D expenditure represented 20% of net sales in 2013. This level may increase going forward as earlier stage
`compounds advance through our pipeline.
`
`In late 2013, Actelion initiated a Phase III program to assess the efficacy and safety of cadazolid in patients with Clostridium
`difficile-associated diarrhea (CDAD). The program – which could report results by early 2016 – is designed to determine
`whether the clinical response after administration of cadazolid is non-inferior to vancomycin in patients with CDAD, and
`whether cadazolid is superior to vancomycin in terms of sustained clinical response.
`
`Actelion is also well on track to obtain top-line Phase III results by mid-2014 for the selective IP receptor agonist, selexipag,
`developed together with our partner Nippon Shinyaku. The pivotal GRIPHON study is seeking to demonstrate a reduction in
`the risk of morbidity/mortality events in PAH.
`
`Core Selling, General & Administrative Expenses
`As the company prepared for the Opsumit launch and various Veletri launches during 2013, selling costs increased, resulting in
`higher SG&A expenses. However, the G&A portion remained flat, demonstrating the company’s continued commitment to cost
`control. Core SG&A increased by 5% at CER to CHF 601 million in 2013.
`
`CORE EARNINGS
`
`in CHF million
`
`Product sales
`
`Core operating expenses
`
`Core earnings (operating income)
`
`2013
`
`1,784
`
`1,165
`
`619
`
`2012
`
`1,722
`
`1,185
`
`537
`
`Variance
`
`CHF %
`
`CER %
`
`4
`
`(2)
`
`15
`
`6
`
`1
`
`20
`
`Core earnings increased by 20% at CER to CHF 619 million, exceeding the raised guidance – provided in mid-2013 – of core
`earnings growth crossing into double-digit territory.
`
`On a like-for-like basis, excluding the net impact of afore-mentioned US rebate reversals (-4%) and the impact of the Ceptaris
`acquisition (+2%), core earnings would have increased by 17 % at CER.
`
`CORE NET INCOME
`
`Variance
`
`208
`
`356
`
`601
`
`1,165
`
`2012
`
`196
`
`398
`
`591
`
`1,185
`
`CHF %
`
`CER %
`
`6
`
`(11)
`
`2
`
`(2)
`
`8
`
`(9)
`
`5
`
`1
`
`in CHF million
`
`Core Cost of sales
`
`Core R&D
`
`Core SG&A
`
`Core operating expenses
`
`6
`
`in CHF million
`
`Core operating income
`
`Core financial expense
`
`Core tax expense
`
`Core net income
`
`2013
`
`619
`
`(13)
`
`(97)
`
`509
`
`2012
`
`537
`
`(21)
`
`(66)
`
`450
`
`CHF %
`
`CER %
`
`15
`
`-
`
`-
`
`13
`
`20
`
`-
`
`-
`
`17
`
`The core financial expense excludes the interest on the Asahi litigation provision (CHF 39 million). The core tax expense excludes
`the one-time effect of a release of the valuation allowance on the US deferred tax asset, as the Company could utilize the benefit
`of Net Operating Losses mainly relating to the Asahi provision against the deferred tax liability relating to the intangible asset
`acquired in the Ceptaris transaction.
`
`FINANCIAL REPORT.
`
`7
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1070, p. 44 of 82
`
`

`

`HOME
`
`CONTENTS
`
`FINANCIAL
`REVIEW
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`HOLDING
`COMPANY
`STATEMENTS
`
`PREVIOUS
`
`NEXT
`
`ACTELION ANNUAL REPORT
`
`2013
`
`CORE EPS
`
`CASH FLOW RECONCILED WITH UNRESTRICTED NET CASH POSITION
`
`in CHF million
`
`Core net income
`
`Number of shares
`
`Core EPS (fully diluted)
`
`in CHF million
`
`Million
`
`CHF
`
`2013
`
`509
`
`115.377
`
`4.41
`
`2012
`
`450
`
`118.120
`
`3.81
`
`Variance
`
`CHF %
`
`CER %
`
`13
`
`-
`
`16
`
`17
`
`-
`
`20
`
`Core EPS amounted to CHF 4.41, an increase of 20% at CER, compared to an increase of 17% in core net income, reflecting
`the company’s continued commitment to manage dilution through share buybacks. The decrease in share count is due to
`the share repurchase programs that are part of the company’s ongoing efforts to maximize shareholder value.
`
`CASH FLOW ANALYSIS
`
`Operating cash flow
`
`Acquisition of tangible, intangible and other assets
`
`Acquisition of a business
`
`Operating free cash flow
`
`Restricted cash for litigation
`
`Cash returned to shareholders
`
`Proceeds from exercises of Stock Options
`
`2013
`
`592
`
`(27)
`
`(231)
`
` 334
`
`(250)
`
`(588)
`
`269
`
`(10)
`
`2012
`
`572
`
`(44)
`
`(27)
`
` 501
`
`(371)
`
`(358)
`
`22
`
`(7)
`
`US GAAP RESULTS
`
`in CHF million except for per share data
`
`Revenues
`
`Operating income
`
`Net income
`
`Fully diluted earnings per share
`
`2013
`
`1,786
`
`482
`
`453
`
`3.92
`
`2012
`
`1,728
`
`421
`
`303
`
`2.57
`
`Variance
`
`CHF %
`
`CER %
`
`3
`
`14
`
`49
`
`53
`
`6
`
`20
`
`57
`
`60
`
`A full reconciliation between US GAAP and core results is available on page 11 of this Financial Report.
`
`US GAAP operating income includes the following items excluded from core earnings:
`
`• Amortization of intangible assets of CHF 45 million (CHF 39 million in 2012), which relates mostly to Ventavis, Veletri
`and Valchlor.
`
`• Other depreciation and amortization of CHF 39 million, in-line with prior year (CHF 42 million)
`
`• Stock-based compensation expenses of CHF 50 million, in-line with prior year (CHF 47 million)
`
`• Reversal of doubtful debt allowance of CHF 12 million (CHF 22 million in 2012) due to continued improved cash
`collections, notably in Southern European countries
`
`• The company incurred a CHF 13 million charge from a concluded arbitration proceeding during the first quarter of 2013.
`
`Other items
`
`Free cash flow
`
`UNRESTRICTED CASH POSITION
`
`Unrestricted net cash position - Opening balance
`
`Free cash flow
`
`Unrestricted net cash position* - Closing balance
`
`(244)
`
`2013
`
`888
`
`(244)
`
`643
`
`(213)
`
`2012
`
`1,101
`
`(213)
`
`888
`
`Rounding differences may occur
`* Unrestricted net cash includes: Cash and cash equivalents plus short-term deposits minus long-term financial debt.
`
`Actelion was highly cash generative in 2013 with operating cash flow of CHF 592 million. This strong cash flow highlights
`the strong core earnings growth, as the 2012 operating cash flow was positively impacted by large cash collections from
`Southern Europe (CHF 110 million). Actelion managed to keep its trade receivables at 77 days of sales outstanding.
`
`The main driver of the decrease in operating free cash flow was the acquisition of Ceptaris during the third quarter of 2013
`for a cash consideration of CHF 226 million (USD 250 million).
`
`The financial flexibility due to high cash generation and strong balance sheet enabled the company to return CHF 588
`million to shareholders through share buybacks and dividend payments whilst increasing by CHF 250 million the restricted
`cash for the ongoing Asahi litigation in the California court.
`
`US GAAP net income includes the following items excluded from core net income :
`
`Actelion’s unrestricted net cash position at year-end remains strong at CHF 643 million.
`
`• The financial expense also includes the interest on the Asahi litigation provision of CHF 39 million. Early in 2013, the
`company increased the cash collateral on the bail bond to 150%, in order to benefit from reduced fees. In December
`2013, the California Court of Appeal affirmed the amended final judgment that a California trial court entered against
`Actelion in November 2011. Actelion and its external advisors believe that the decision of the Court of Appeal is not
`supported by the facts and is incorrect as a matter of law; we have therefore filed a petition in the Supreme Court of
`California, requesting that the Court review the Court of Appeal’s decision.
`
`• The tax income also includes the one-time effect of the release of the valuation allowance on the US deferred tax
`asset, as the Company could utilize the benefit of Net Operating Losses mainly relating to the Asahi accrual against
`the deferred tax liability relating to the intangible asset acquired in the Ceptaris transaction. The unaffected tax rate is
`14.7%.
`
`• Resulting basic earnings per share for the full year 2013 are CHF 4.06, compared to 2.61 in the prior year. Fully diluted
`earnings per share were CHF 3.92, up 60% at CER over 2012.
`
`8
`
`FINANCIAL REPORT.
`
`9
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1070, p. 45 of 82
`
`

`

`HOME
`
`CONTENTS
`
`FINANCIAL
`REVIEW
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`HOLDING
`COMPANY
`STATEMENTS
`
`PREVIOUS
`
`NEXT
`
`ACTELION ANNUAL REPORT
`
`2013
`
`BALANCE SHEET
`
`BALANCE SHEET
`
`Gross cash position - Unrestricted
`
`Gross cash position - Restricted
`
`Trade and other receivables, net
`
`Other current assets
`
`in CHF million
`
`2013
`
`878
`
`613
`
`406
`
`123
`
`2012
`
`1,123
`
`369
`
`413
`
`95
`
`Variance
`
`(245)
`
`244
`
`(7)
`
`28
`
`RECONCILIATIONS US GAAP TO CORE RESULTS
`
`in CHF million
`
`2013
`
`Product sales
`
`Contract revenue
`
`US GAAP
` results
`
`Depreciation,
`amortization
`and impairment
`
`Stock-based
`compensation
`
`Doubtful
`debt
`movements
`
`Milestones
`or contract
`
`Litigation
`or arbitration
`
`Restructuring
`costs
`
`Business
`combination
`
`CORE
`results
`
`1,784
`
`2
`
`-
`
`-
`
`-
`
`-
`
`-
`
` -
`
`-
`
`(2)
`
`(2)
`
`-
`
` -
`
`-
`
`-
`
` -
`
`-
`
`-
`
`-
`
`-
`
`1,784
`
`-
`
`1,784
`
`Tangible assets
`
`Intangible assets
`
`Goodwill
`
`Other non-current assets
`
`Total assets
`
`Litigation provision
`
`381
`
`465
`
`126
`
`38
`
`3,030
`
`456
`
`403
`
`170
`
`74
`
`48
`
`2,694
`
`432
`
`(21)
`
`295
`
`52
`
`(10)
`
`336
`
`25
`
`Total net revenue
`
`1,786
`
`Cost of sales
`
`Research and
`development
`
`Selling, general and
`administration
`
`(209)
`
`(405)
`
`(631)
`
`(45)
`
`-
`
`-
`
`27
`
`12
`
` 45
`
`-
`
`-
`
`21
`
`28
`
`-
`
`-
`
`-
`
`-
`
`(12)
`
`-
`
`2
`
`-
`
`-
`
` -
`
`-
`
`-
`
`-
`
`-
`
` -
`
`1
`
`0
`
`-
`
`-
`
`-
`
`-
`
`-
`
`(208)
`
`(356)
`
`(601)
`
`-
`
`Other current liabilities
`
`Financial debt
`
`Other non-current liabilities
`
`Total liabilities
`
`Share capital and accumulated reserves
`
`Treasury shares
`
`516
`
`235
`
`114
`
`1,321
`
`2,252
`
`(543)
`
`460
`
`235
`
`49
`
`1,176
`
`2,238
`
`(719)
`
`56
`
`-
`
`65
`
`145
`
`14
`
`176
`
`Amortization of
`intangible assets
`
`Arbitration
`settlement
`
`Total operating
`expenses
`
`Operating income
`
`Financial Results
`
`(13)
`
`(1,303)
`
`482
`
`(53)
`
`-
`
`84
`
`84
`
`-
`
`-
`
`50
`
`50
`
`-
`
`-
`
`(12)
`
`(12)
`
`-
`
`-
`
`2
`
`0
`
`-
`
`13
`
`13
`
`13
`
`39
`
`-
`
`1
`
`1
`
`-
`
`1
`
`-
`
`-
`
`-
`
`-
`
`-
`
`-
`
`(1,165)
`
`619
`
`(13)
`
`606
`
`Total shareholders' equity
`
`Total liabilities and shareholders' equity
`
`Rounding differences may occur
`
`1,709
`
`3,030
`
`1,519
`
`2,694
`
`190
`
`336
`
`The significant changes in the balance sheet are driven by the following:
`
`• Acquisition of Ceptaris impacts intangible assets by CHF 330 million and goodwill by CHF 53 million.
`
`• Increase of restricted cash to reduce cost of bail bond related to Asahi litigation.
`
`• Decrease of treasury shares by CHF 176 million: First-line treasury shares decreased by 5.8 million shares
`(CHF 306 million at cost) mainly due to high levels of exercises of stock-options and the sale of a block of treasury
`shares to a long-term investor. Second-line treasury shares increased by 1.1 million shares (CHF 130 million at cost)
`due to the buy-back program net of share cancelation.
`
`DIVIDEND
`Retaining an appropriate balance between attractive shareholder returns, investment in the business and a strong capital
`structure will remain a priority in the future.
`
`Actelion’s Board proposes to increase the dividend payment by 20% to CHF 1.20 per share and will ask for shareholder
`approval at the upcoming Annual General Meeting on 8 May 2014.
`
`INTERNAL CONTROL OVER FINANCIAL REPORTING
`For the 8th consecutive year, the internal controls over financial reporting were certified as meeting the requirements of
`SOX 404 (Sarbanes-Oxley Act 2002, section 404) at 31 December 2013.
`
`Income before
`income tax
`
`Income tax
`
`Net income
`
`430
`
`23
`
`453
`
`Number of shares in
`calculation (million)
`
`115.377
`
`84
`
`(12)
`
`73
`
` -
`
`50
`
`(4)
`
`45
`
` -
`
`(12)
`
`1
`
`(11)
`
` -
`
`0
`
`(0)
`
`0
`
`-
`
`52
`
`(18)
`
`34
`
` -
`
`(0)
`
`1
`
` -
`
`(86)
`
`(86)
`
`(97)
`
`509
`
`-
`
`115.377
`
`Diluted EPS [CHF]
`
`3.92
`
`+0.63
`
`+0.39
`
`(0.09)
`
`+0.00
`
`+0.30
`
`+0.01
`
`(0.75)
`
`4.41
`
`Rounding differences may occur
`
`10
`
`FINANCIAL REPORT.
`
`11
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1070, p. 46 of 82
`
`

`

`HOME
`
`CONTENTS
`
`FINANCIAL
`REVIEW
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`HOLDING
`COMPANY
`STATEMENTS
`
`PREVIOUS
`
`NEXT
`
`ACTELION ANNUAL REPORT
`
`2013
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`12
`
`FINANCIAL REPORT.
`
`13
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1070, p. 47 of 82
`
`

`

`PREVIOUS
`
`NEXT
`
`
`
`ACTELION ANNUAL REPORT
`
`2013
`
`
`
`CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
`
`
`(in CHF thousands)
`
`Net income (loss)
`Other comprehensive income (loss), net of tax:
` Foreign currency translation adjustments
` Change of unrecognized components of net periodic benefit costs
` Amortization of components of net periodic benefit costs
`Other comprehensive income (loss), net of tax
`Comprehensive income (loss)
`
`The accompanying notes form an integral part of these consolidated financial statements.
`
`
`
`
`
`
`
`
`
`Twelve months ended December 31,
`2013
`2012
`
`
`452,542
`303,226
`
`
`(4,223)
`1,693
`10,970
`(6,323)
`971
`455
`7,718
`(4,175)
`460,260
`299,051
`
`HOME
`
`CONTENTS
`
`FINANCIAL
`REVIEW
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`HOLDING
`COMPANY
`STATEMENTS
`
`CONSOLIDATED FINANCIAL STATEMENTS
`
`
`
`CONSOLIDATED INCOME STATEMENTS
`
`
`(in CHF thousands, except per share amounts)
`
`
`Net revenue
`Product sales
`Contract revenue
`Total net revenue
`
`Operating expenses1
`Cost of sales2
`Research and development
`Selling, general and administration
`Amortization of acquired intangible assets
`Arbitration settlement
`Total operating expenses
`Operating income
`
`Interest on litigation
`Interest income (expense), net
`Other financial income (expense), net
`Total financial income (expense)
`
`Income before income tax benefit (expense)
`
`Income tax benefit (expense)
`Net income (loss)
`
`
`
`
`Basic net income (loss) per share
`Weighted-average number of common shares (in thousands)
`
`
`Diluted net income (loss) per share
`Weighted-average number of common shares (in thousands)
`
`1Includes stock-based compensation as follows:
`Research and development
`Selling, general and administration
`Total stock-based compensation
`
` 2 Excludes amortization of intangible assets as presented separately.
`The accompanying notes form an integral part of these consolidated financial statements.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Notes
`
`Twelve months ended December 31,
`2013
`2012
`
`
`23
`4/23
`
`
`
`
`
`
`12
`17
`
`
`
`17
`8/15
`1/8
`
`
`
`
`5
`
`
`6
`
`
`6
`
`
`
`
`
`
`
`
`1,784,198
`1,542
`1,785,740
`
`
`(209,444)
`(405,286)
`(630,521)
`(45,135)
`(12,881)
`(1,303,267)
`482,473
`
`(39,235)
`(9,514)
`(3,983)
`(52,732)
`
`429,741
`
`22,801
`452,542
`
`4.06
`111,537
`
`3.92
`115,377
`
`
`(21,290)
`(28,331)
`(49,621)
`
`
`1,722,089
`6,307
`1,728,396
`
`
`(196,336)
`(460,471)
`(610,856)
`(39,266)
`-
`(1,306,929)
`421,467
`
`(41,576)
`(10,485)
`(10,933)
`(62,994)
`
`358,473
`
`(55,247)
`303,226
`
`2.61
`116,129
`
`2.57
`118,120
`
`
`(20,964)
`(25,652)
`(46,616)
`
`14
`
`FINANCIAL REPORT.
`
`15
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1070, p. 48 of 82
`
`

`

`HOME
`
`CONTENTS
`
`FINANCIAL
`REVIEW
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`HOLDING
`COMPANY
`STATEMENTS
`
`
`
`CONSOLIDATED BALANCE SHEETS
`
`
`
`(in CHF thousands, except number of shares)
`
`
`Assets
`
`Current assets
`Cash and cash equivalents
`Cash and investments restricted for litigation
`Short-term deposits
`Derivative instruments
`Trade and other receivables, net
`Inventories
`Other current assets
`Total current assets
`
`Non-current assets
`Restricted cash for litigation
`Property, plant and equipment, net
`Intangible assets, net
`Goodwill
`Deferred tax assets
`Other non-current assets
`Total non-current assets
`Total assets
`
`
`Liabilities and shareholders' equity
`
`Current liabilities
`Trade and other payables
`Accrued expenses
`Litigation provision
`Other current liabilities
`Total current liabilities
`
`
`Non-current liabilities
`Litigation provision
`Long-term financial debt
`Pension liability
`Contingent consideration
`Other non-current liabilities
`Total non-current liabilities
`Total liabilities
`
`
`Shareholders' equity
`Common shares (par value CHF 0.50 per share, authorized 173,901,764 and
`180,850,214 shares; issued 120,275,927 and 126,773,027 shares in 2013 and
`2012, respectively)
`Additional paid-in capital
`Accumulated profit
`Treasury shares, at cost
`Accumulated other comprehensive income (loss)
`Total shareholders' equity
`Total liabilities and shareholders' equity
`
`The accompanying notes form an integral part of these consolidated financial statements.
`
`
`
`
`
`
`Notes
`
`
`December 31, 2013
`
`December 31, 2012
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`7/8
`8/17
`
`8
`9
`10
`5/11
`
`
`
`8/17
`13
`12
`12
`5
`
`
`
`
`
`
`
`
`14
`17
`2/5/8
`
`
`
`17
`15
`18
`2
`5
`
`
`
`19
`
`
`
`
`
`21
`
`
`
`
`
`627,640
`612,537
`250,747
`10,546
`405,915
`53,241
`58,937
`2,019,563
`
`
`-
`381,092
`465,224
`126,392
`16,931
`20,599
`1,010,238
`3,029,801
`
`
`
`
`103,614
`401,399
`456,118
`10,874
`972,005
`
`
`-
`235,284
`28,685
`76,776
`8,048
`348,793
`1,320,798
`
`
`
`60,138
`500,502
`1,882,266
`(542,558)
`(191,345)
`1,709,003
`3,029,801
`
`
`
`1,022,272
`-
`100,747
`7,682
`412,929
`56,389
`30,819
`1,630,838
`
`
`368,740
`402,535
`169,822
`74,331
`20,832
`27,188
`1,063,448
`2,694,286
`
`
`
`
`90,932
`351,920
`-
`17,234
`460,086
`
`
`431,534
`235,431
`38,473
`1,233
`8,885
`715,556
`1,175,642
`
`
`
`63,387
`943,580
`1,429,724
`(718,984)
`(199,063)
`1,518,644
`2,694,286
`
`PREVIOUS
`
`NEXT
`
`
`
`
`
`CONSOLIDATED STATEMENTS OF CASH FLOWS
`
`
`(in CHF thousands)
`
`Cash flow from operating activities
`Net income (loss)
`Adjustments to reconcile net income to net cash provided from operating activities:
`Depreciation and amortization
`Stock-based compensation, incl. treasury shares to members of Board of Directors
`Excess tax benefits from share-based payment arrangements
`Deferred revenue
`Deferred taxes
`(Gains) Losses on derivative instruments and marketable securities
`Interest expense on bonds and litigation
`Changes in operating assets and liabilities:
`Trade and other receivables
`Inventories
`Trade and other payables
`Changes in other operating cash flow items
`Net cash flow provided by (used in) operating activities
`
`Cash flow from investing activities
`Restricted cash for litigation
`Purchase of short-term and long-term deposits
`Proceeds from short-term and long-term deposits
`Purchase of property, plant and equipment
`Proceeds from marketable securities
`Purchase of intangible assets
`Purchase of other non-current assets
`Acquisition of a business, incl. deferred and contingent consideration payments
`Net cash flow provided by (used in) investing activities
`
`Cash flow from financing activities
`Dividend payment
`Payments on capital leases
`Proceeds from exercise of stock options, net of expense
`Purchase of treasury shares
`Proceeds from sale of treasury shares
`Excess tax benefits from share-based payment arrangements
`Net cash flow provided by (used in) financing activities
`
`Net effect of exchange rates on cash and cash equivalents
`Net change in cash and cash equivalents
`Cash and cash equivalents at beginning of period
`Cash and cash equivalents at end of period
`
`
`Supplemental disclosures of cash flow information
`Cash paid during the year for:
`Interest
`Taxes
`
`The accompanying notes form an integral part of these consolidated financial statements.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`ACTELION ANNUAL REPORT
`
`2013
`
` Twelve months ended December 31,
`2013
`2012
`
`
`
`452,542
`
`84,460
`50,589
`(3,353)
`(1,879)
`(89,592)
`(3,225)
`38,397
`
`(9,374)
`3,375
`11,155
`58,886
`591,981
`
`
`(250,000)
`(250,000)
`100,000
`(21,396)
`-
`(6,025)
`-
`(230,779)
`(658,200)
`
`
`(113,297)
`(61)
`269,169
`(570,943)
`96,734
`3,353
`(315,045)
`
`(13,368)
`(394,632)
`1,022,272
`627,640
`
`
`
`13,004
`48,717
`
`303,226
`
`81,888
`47,464
`(2,769)
`(6,110)
`19,246
`(27,208)
`38,938
`
`110,152
`7,431
`(9,314)
`9,407
`572,351
`
`
`(370,588)
`(500,747)
`450,000
`(33,708)
`4,179
`(5,570)
`(4,536)
`(27,442)
`(488,412)
`
`
`(93,686)
`(61)
`22,488
`(264,173)
`-
`2,769
`(332,663)
`
`(10,041)
`(258,765)
`1,281,037
`1,022,272
`
`
`
`14,753
`60,245
`
`16
`
`FINANCIAL REPORT.
`
`17
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1070, p. 49 of 82
`
`

`

`HOME
`
`CONTENTS
`
`FINANCIAL
`REVIEW
`
`CONSOLIDATED
`FINANCIAL
`STATEMENTS
`
`HOLDING
`COMPANY
`STATEMENTS
`
`PREVIOUS
`
`NEXT
`
`ACTELION ANNUAL REPORT
`
`2013
`
`
`
`CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
`
`
`
`
`
`Common shares
`
`
`
`
`
`
`
`
`
`
`
`Shares
`
`Amount
`
` 117,118,120
`
`65,232
`
`
`
`
`-
`-
`-
`
`-
`739,751
`(4,927,149)
`-
`
`
`-
`-
`-
`
`-
`370
`-
`-
`
`(in CHF thousands, except number of shares)
`
`
`At January 1, 2012
`
`
`Comprehensive income (loss), net of tax:
`Net income (loss)
`Other comprehensive income (loss)
`Comprehensive income (loss), net of tax
`Excess tax benefits and underrealization
`from share-based payment arrangements
`Exercise of stock options
`Transactions in treasury shares
`Stock-based compensation expense
`Cancelation treasury shares (share
`repurchase program)
`Dividend payment
`At December 31, 2012
`
`
`Comprehensive income (loss), net of tax:
`Net income (loss)
`Other comprehensive income (loss)
`Comprehensive income (loss), net of tax
`Excess tax benefits and underrealization
`from share-based payment arrangements
`Transactions in treasury shares
`Stock-based compensation expense
`Cancelation treasury shares (share
`(3,249)
`-
`repurchase program)
`-
`-
`Dividend payment
`60,138
` 111,128,427
`At December 31, 2013
`The accompanying notes form an integral part of these consolidated financial statements.
`
`-
`-
` 112,930,722
`
`(2,215)
`-
`63,387
`
`
`
`
`-
`-
`-
`
`-
`(1,802,295)
`-
`
`-
`-
`-
`
`-
`-
`-
`
`Additional
`paid-in
`capital
`
`Accum.
`profit
`
`Treasury
`shares
`
`Accum.
`other com-
`prehensive
`income
`(loss)
`
`
`
`Share-
`holders’
`equity
`
`1,213,004
`
`1,126,498
`
`(699,392)
`
`(194,888)
`
`1,510,454
`
`
`-
`-
`-
`
`
`303,226
`-
`303,226
`
`
`-
`-
`-
`
`
`-
`(4,175)
`(4,175)
`
`(2,686)
`14,693
`(72,109)
`46,348
`
`-
`-
`-
`-
`
`-
`-
`(183,791)
`-
`
`-
`-
`-
`-
`
`
`303,226
`(4,175)
`299,051
`
`(2,686)
`15,063
`(255,900)
`46,348
`
`(161,984)
`(93,686)
`943,580
`
`-
`-
`1,429,724
`
`164,199
`-
`(718,984)
`
`-
`-
`(199,063)
`
`-
`(93,686)
`1,518,644
`
`-
`-
`-
`
`452,542
`-
`452,542
`
`-
`-
`-
`
`(2,498)
`(93,732)
`49,966
`
`-
`-
`-
`
`(283,517)
`(113,297)
`500,502
`
`-
`-
`1,882,266
`
`-
`(110,340)
`-
`
`286,766
`-
`(542,558)
`
`-
`7,718
`7,718
`
`-
`-
`-
`
`452,542
`7,718
`460,260
`
`(2,498)
`(204,072)
`49,966
`
`-
`-
`(191,345)
`
`-
`(113,297)
`1,709,003
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
`(CHF thousands, except share and per share amounts)
`
`
`
`NOTE 1.
`DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
`
`Actelion Ltd (“Actelion” or the “Group”), a biopharmaceutical company headquartered in Allschwil, Switzerland,
`discovers, develops and commercializes innovative low molecular weight drugs for high unmet medical needs.
`
`Basis of presentation
`The Group’s consolidated financial statements have been prepared under Generally Accepted Accounting Principles in
`the United States (“US GAAP”). All US GAAP references relate to the Accounting Standards Codification (“ASC” or
`“Codification”) established by the Financial Accounting Standards Board (“FASB”) as the single authoritative source of
`US GAAP to be applied by non-governmental entities. All amounts are presented in Swiss francs (“CHF”), unless
`otherwise indicated. In addition, certain prior period amounts within the consolidated financial statements and related
`notes have been reclassified to conform to the current presentation.
`
`Scope of consolidation
`The consolidated financial statements include the accounts of the Group and its wholly-owned affiliated companies in
`which the Group has a direct or indirect controlling financial interest and exercises control over their operations
`(generally more than 50% of the voting rights). Investments in common stock of entities other than subsidiaries where
`the Group has the ability to exercise significant influence over the operati