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Warner Chilcott Ltd. Reports Operating Results (10-Q)

August 06, 2010 | About:

Warner Chilcott Ltd. (WCRX) filed Quarterly Report for the period ended 2010-06-30.

Warner Chilcott Ltd. has a market cap of $6.66 billion; its shares were traded at around $26.42 with a P/E ratio of 10.9 and P/S ratio of 4.6. WCRX is in the portfolios of Stanley Druckenmiller of Duquesne Capital Management, LLC, Louis Moore Bacon of Moore Capital Management, LP, David Williams of Columbia Value and Restructuring Fund, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, Edward Owens of Vanguard Health Care Fund, Bruce Kovner of Caxton Associates, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

On July 30, 2010, we announced a recapitalization pursuant to which we intend to incur, subject to market and other conditions, $2.25 billion of new debt to fund a special dividend to our ordinary shareholders of $8.50 per share, or approximately $2.15 billion in the aggregate. The new debt is expected to be comprised of a combination of senior secured term loans and additional unsecured debt. The declaration of the special cash dividend is conditioned on the amendment of our existing Credit Agreement to permit, among other things, the incurrence of the additional indebtedness needed to fund the special cash dividend. We intend to declare the special cash dividend upon the successful amendment of our Credit Agreement and after obtaining debt financing under acceptable terms. We currently expect to declare and pay the special cash dividend before the end of the third quarter of 2010. If such plan is consummated, our interest expense will increase significantly.

On October 30, 2009, pursuant to the purchase agreement dated August 24, 2009 (as amended, the Purchase Agreement), between the Company and P&G, we acquired PGP for $2,919.3 million in cash and the assumption of certain liabilities (the PGP Acquisition). The purchase price remains subject to certain post-closing adjustments. Under the terms of the Purchase Agreement, we acquired P&Gs portfolio of branded pharmaceutical products, prescription drug pipeline, manufacturing facilities in Puerto Rico and Germany and a net receivable owed from P&G of approximately $60.0 million. The total purchase price of $2,919.3 million was allocated to the estimated fair value of the assets acquired and liabilities assumed as of the date of the PGP Acquisition. The purchase price allocation as of June 30, 2010 remains

preliminary pending completion of the final valuation. In order to fund the PGP Acquisition, certain of our subsidiaries entered into the New Senior Secured Credit Facilities, comprised of $2,950.0 million in aggregate term loan facilities and a $250.0 million revolving credit facility. On October 30, 2009, the Company borrowed $2,600.0 million of the aggregate $2,950.0 million of term loan facilities to finance the PGP Acquisition. On December 16, 2009, in connection with an amendment (Amendment No. 1) to the New Senior Secured Credit Facilities, (i) the committed but undrawn $350.0 million delayed-draw term loan facility was terminated, and (ii) the agreement was amended to create a new tranche of term loans which was borrowed on December 30, 2009 by our U.S. subsidiary, Warner Chilcott Corporation, in an aggregate principal amount of $350.0 million in order to finance, together with cash on hand, the repurchase or redemption of any and all of our then outstanding 8.75% senior subordinated notes (the Notes). The PGP Acquisition was accounted for as a business combination using the acquisition method of accounting. The results of operations of PGP since October 30, 2009 have been included in our condensed consolidated statement of operations.

The LEO Transaction resulted in an initial gain of $393.1 million (or $380.1 million, net of tax). During the third quarter of 2009, we recorded a deferred gain of $68.9 million relating to the sale of certain inventories to LEO in connection with the LEO Transaction. In the fourth quarter of 2009, we recognized $34.2 million of the deferred gain as a reduction to cost of sales ($33.5 million, net of tax). The remainder of the deferred gain was recognized as a reduction of cost of sales during the first two quarters of 2010. More specifically, during the quarter and six months ended June 30, 2010, we recognized $9.6 million and $34.7 million, respectively, of the deferred gain as a reduction to cost of sales ($9.4 million and $34.0 million, net of tax, respectively). The aggregate gain from the LEO Transaction was $462.0 million ($447.6 million, net of tax).

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