01—Abstract
Summary
Summary of the 20-F filed February 12, 2013. Cited figures are marked; the original filing is the authoritative source.
Teva Pharmaceutical Industries Limited reported net revenues of $20.3 billiona for 2012, up from $18.3 billion in 2011, driven mainly by a full year of revenues from Cephalon and Taiyo.
Net income attributable to Teva fell to $1.96 billionb from $2.76 billion, and diluted earnings per share were $2.25 versus $3.09 in 2011. The decline was primarily due to higher impairments, loss contingencies, restructuring and other charges of $1.97 billion, including a $670 million provision related to pending generic pantoprazole patent litigation. Operating income was $2.2 billion compared with $3.1 billion a year earlier.
Specialty medicines revenues rose 26% to $8.2 billionc, led by Copaxone, whose global revenues reached $4.0 billion, while generic medicines revenues were $10.4 billion, up 2%. Cash flow from operating activities was $4.57 billion. The company refinanced $5 billion of debt, extending its average debt maturity to six years, and total debt stood at $14.7 billion at year-end.
Shareholders' equity was $22.9 billiond. Management outlines a new strategy with six pillars and expects further restructuring and impairment charges, a material decrease in Provigil sales due to generic competition, and a small decline in Copaxone sales in 2013. The filing also discloses ongoing risks, including the Copaxone patent challenges, a potential $1.4 billion loss in excess of the amount accrued on the pantoprazole matter, an Israeli Tax Authority demand of about $903 million, and federal investigations relating to the Foreign Corrupt Practices Act, whose outcomes the company describes as unpredictable.
02—Key points
Key Highlights
- Net revenues increased 11% to $20.3 billion, driven by the full-year inclusion of Cephalon and Taiyo; U.S. revenues rose 19%.
- Operating income fell to $2.2 billion from $3.1 billion, with operating margin of 10.8% versus 17.0%, mainly due to $1.1 billion in long-lived asset impairments and a $670 million loss contingency provision.
- Net income attributable to Teva declined to $1.96 billion from $2.76 billion; diluted EPS was $2.25 compared with $3.09.
- Specialty medicines revenues reached $8.2 billion (up 26%), with Copaxone sales of $4.0 billion; Provigil sales are expected to fall materially after generic entry in March 2012.
- Cash flow from operating activities was $4.57 billion, and the company repurchased about $1.2 billion of shares and paid about $0.9 billion in dividends during 2012.
- Total debt was $14.7 billion at year-end, and $5 billion of debt was refinanced during 2012, extending average maturity to six years.
- Management's new strategy includes an operating cost reduction effort, and the company expects substantial restructuring and impairment expenses in 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Teva Pharmaceutical Industries kept $0.10.
- Revenue$20.32B100.0%
- Cost of revenue−$9.66B47.6%
- Gross profit$10.65B52.4%
- Operating costs−$8.45B41.6%
- Operating income$2.21B10.9%
- Interest, other & tax−$242.0M1.2%
- Net income$1.96B9.7%
Where FY2012 revenue went
$20.32B- Cost of revenue: $9.66B, 48% of revenue
- Other operating costs: $8.37B, 41% of revenue
- Net income: $1.96B, 9.7% of revenue
- R&D: $73.0M, 0.4% of revenue
- Interest, other & tax: $242.0M, 1.2% of revenue
Kept 9.7% as net incomeNet income $1.96B · 9.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 12, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $20.32B$18.31B | +10.9% |
| Cost of Revenue | $9.66B$8.80B | +9.9% |
| Gross Profit | $10.65B$9.52B | +11.9% |
| R&D Expenses | $73.00M$15.00M | +386.7% |
| Operating Income | $2.21B$3.11B | −29.1% |
| Interest Expense | $355.00M$234.00M | +51.7% |
| Net Income | $1.96B$2.76B | −28.9% |
| EPS (Basic) | $2.25$3.10 | −27.4% |
| EPS (Diluted) | $2.25$3.09 | −27.2% |
| Shares Outstanding (Basic) | 872.00M890.00M | −2.0% |
| Shares Outstanding (Diluted) | 873.00M893.00M | −2.2% |
05—Questions
Frequently Asked Questions
Why did Teva's net income decline in 2012?
Net income attributable to Teva fell to $1.96 billion from $2.76 billion, mainly because operating income dropped on higher impairments of long-lived assets ($1.1 billion), a $670 million provision for pending pantoprazole patent litigation, higher specialty selling and marketing costs, and higher financial expenses of $386 million.
How important is Copaxone to Teva?
Copaxone, the company's leading specialty product for multiple sclerosis, generated global revenues of nearly $4 billion in 2012, up 12%, and the filing describes it as responsible for a very significant contribution to profits and cash flow. Its patents are under challenge in the U.S. and Europe, and Teva expects a small decrease in Copaxone sales in 2013.
What are the main risks flagged for 2013?
The filing highlights potential generic competition for Copaxone if patents are successfully challenged, potential losses of up to $1.4 billion above the accrued amount on the pantoprazole case, an Israeli Tax Authority demand of about $903 million, ongoing FTC and European Commission antitrust scrutiny of patent settlements, and U.S. FCPA inquiries in their early stages. It also expects material declines in Provigil sales and further restructuring and impairment charges.
What is Teva's dividend policy?
Teva has paid dividends quarterly since 1986. Dividends are declared in NIS, and the fourth-quarter 2012 dividend was NIS 1.15 per share (31.1 cents), up 15% from the third-quarter dividend of NIS 1.00. Dividends paid in 2012 totaled $1.03 per share, and the filing notes a 15% Israeli withholding tax applies to the fourth-quarter dividend.
How did Teva's acquisitions shape 2012 results?
Results reflected a full year of Cephalon (acquired October 2011 for $6.5 billion in cash) and Taiyo (acquired July 2011), which drove revenue growth in specialty medicines and Japan. The acquisitions also added substantial amortization of intangible assets, which rose to $1.27 billion, and goodwill and intangibles totaled $26.6 billion.
06—Continue