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Salix Pharmaceuticals Reports 2Q2012 Results

For more information, please visit our Website at www.salix.com or contact the Company at 919-862-1000. Follow us on Twitter (@SalixPharma) and Facebook ( www.facebook.com/SalixPharma). Information on our Twitter feed, Face book page and web site is not incorporated in our SEC filings.

Please Note: The materials provided herein contain projections and other forward–looking statements regarding future events. Such statements are just predictions and are subject to risks and uncertainties that could cause the actual events or results to differ materially. These risks and uncertainties include, among others: the unpredictability of the duration and results of regulatory review of New Drug Applications and Investigational NDAs; generic and other competition in an increasingly global industry; litigation and the possible impairment of, or inability to obtain, intellectual property rights and the costs of obtaining such rights from third parties in an increasingly global industry; the cost, timing and results of clinical trials and other development activities involving pharmaceutical products; post-marketing approval regulation; market acceptance for approved products; revenue recognition and other critical accounting policies; and the need to acquire new products. The reader is referred to the documents that the Company files from time to time with the Securities and Exchange Commission.

Salix Pharmaceuticals, Ltd.
             
Condensed Consolidated Statements of Operations
(In thousands, except per share data) Three Months Ended Six Months Ended
  June 30, June 30, June 30, June 30,
2012 2011 2012 2011
(unaudited)     (unaudited) (unaudited)     (unaudited)
Revenues:
Net product revenues $ 181,006       $ 133,162   $ 352,139       $ 239,059  
 
Costs and Expenses:
Cost of products sold 33,257 25,242 67,447 43,828
Amortization of product rights and intangible assets 11,344 2,890 22,689 5,127
Research and development 27,157 29,477 53,858 60,480
Selling, general and administrative   65,279         44,658     125,723         91,347  
Total costs and expenses 137,037 102,267 269,717 200,782
 
Income from operations 43,969 30,895 82,422 38,277
Loss on extinguishment of debt - - (14,369 ) -
Interest expense (15,085 ) (7,997 ) (23,899 ) (15,852 )
Interest and other income   6,237         749     10,130         1,573  
Income before income tax 35,121 23,647 54,284 23,998
Income tax expense   14,987         4,400     24,197         4,473  
 
Net Income $ 20,134       $ 19,247   $ 30,087       $ 19,525  
 
Income per share, basic $ 0.35       $ 0.33   $ 0.51       $ 0.33  
Income per share, diluted $ 0.32       $ 0.32   $ 0.47       $ 0.34  
Shares used in computing net income per share, basic   58,116         58,423     58,630         58,321  
Shares used in computing net income per share, diluted   63,654         65,572     64,059         65,514  
 
Reconciliation of GAAP Amounts to Non-GAAP Amounts:
(In thousands, except per share data)  
     

We are disclosing our non-GAAP Condensed Consolidated Statements of Operations, as adjusted, to eliminate the impact of the $10.0 million Lupin payment that occured in February 2011, the loss on extinguishment of debt and non-cash adjustments related to the repurchase of a portion of our 2028 Notes in March 2012, the difference between income taxes paid and income taxes expensed, and non-cash depreciation, amortization, stock-based compensation and convertible debt interest expenses that occured in the three-month and six-month periods ended June 30, 2012 and 2011, respectively. We believe these non-GAAP measures might provide investors additional relevant information, in part for purposes of historical comparison. In addition, we use these non-GAAP measures to analyze our performance in more detail and with better historical comparability; however, you should be aware that non-GAAP measures are not superior to nor a substitute for the comparable GAAP measures. A reconciliation of our non-GAAP measures to the comparable GAAP measures follows.
 
 
Three Months Ended Three Months Ended
June 30, June 30, June 30, June 30, June 30, June 30,
2012

2012-Non-GAAP Adjustments

2012-Non-GAAP

as adjusted
2011

2011-Non-GAAP Adjustments

2011-Non-GAAP

as adjusted
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Net product revenues $ 181,006   $ -   $ 181,006   $ 133,162   $ -   $ 133,162  
 
Costs and Expenses:
Cost of products sold 33,257 - 33,257 25,242 - 25,242
Amortization of product rights and intangible assets 11,344 (11,344 ) - 2,890 (2,890 ) -
Research and development 27,157 (1,400 ) 25,757 29,477 (2,575 ) 26,902
Selling, general and administrative   65,279     (5,597 )   59,682     44,658     (4,301 )   40,357  
Total costs and expenses 137,037 (18,341 ) 118,696 102,267 (9,766 ) 92,501
 
Income from operations 43,969 18,341 62,310 30,895 9,766 40,661
Loss on extinguishment of debt - - - - - -
Interest expense (15,085 ) 9,648 (5,437 ) (7,997 ) 4,792 (3,205 )
Interest and other income   6,237     (5,659 )   578     749     -     749  
Income before income tax 35,121 22,330 57,451 23,647 14,558 38,205
Income tax expense   14,987     (7,622 )   7,365     4,400     -     4,400  
 
Net Income, as adjusted $ 20,134   $ 29,952   $ 50,086   $ 19,247   $ 14,558   $ 33,805  
 
Income per share, basic $ 0.35   $ 0.52   $ 0.86   $ 0.33   $ 0.25   $ 0.58  
Income per share, diluted $ 0.32   $ 0.47   $ 0.79   $ 0.32   $ 0.22   $ 0.54  
Shares used in computing net income per share, basic   58,116     58,116     58,116     58,423     58,423     58,423  
Shares used in computing net income per share, diluted   63,654     63,654     63,654     65,572     65,572     65,572  
 
Six Months Ended Six Months Ended
June 30, June 30, June 30, June 30, June 30, June 30,
2012

2012-Non-GAAP Adjustments

2012-Non-GAAP as adjusted
2011

2011-Non-GAAP Adjustments

2011-Non-GAAP as adjusted
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Net product revenues $ 352,139   $ -   $ 352,139   $ 239,059   $ -   $ 239,059  
 
Costs and Expenses:
Cost of products sold 67,447 - 67,447 43,828 - 43,828
Amortization of product rights and intangible assets 22,689 (22,689 ) - 5,127 (5,127 ) -
Research and development 53,858 (2,542 ) 51,316 60,480 (13,285 ) 47,195
Selling, general and administrative   125,723     (10,166 )   115,557     91,347     (7,141 )   84,206  
Total costs and expenses 269,717 (35,397 ) 234,320 200,782 (25,553 ) 175,229
 
Income from operations 82,422 35,397 117,819 38,277 25,553 63,830
Loss on extinguishment of debt (14,369 ) 14,369 - - - -
Interest expense (23,899 ) 14,882 (9,017 ) (15,852 ) 9,452 (6,400 )
Interest and other income   10,130     (9,325 )   805     1,573     -     1,573  
Income before income tax 54,284 55,323 109,607 23,998 35,005 59,003
Income tax expense   24,197     (9,365 )   14,832     4,473     -     4,473  
 
Net Income, as adjusted $ 30,087   $ 64,688   $ 94,775   $ 19,525   $ 35,005   $ 54,530  
 
Income per share, basic $ 0.51   $ 1.10   $ 1.62   $ 0.33   $ 0.60   $ 0.93  
Income per share, diluted $ 0.47   $ 1.01   $ 1.48   $ 0.34   $ 0.53   $ 0.88  
Shares used in computing net income per share, basic   58,630     58,630     58,630     58,321     58,321     58,321  
Shares used in computing net income per share, diluted   64,059     64,059     64,059     65,514     65,514     65,514  
 

Salix Pharmaceuticals, Ltd.
       

 Condensed Consolidated Balance Sheets
(In thousands) June 30, December 31,
  2012 2011
(unaudited)   (audited)
Assets
Cash and cash equivalents $ 715,927 $ 292,814
Accounts receivable, net 211,675 151,207
Inventory, net 63,636 49,205
Other assets   802,167       819,743  
 
Total Assets $ 1,793,405     $ 1,312,969  
 
Liabilities and Stockholders' Equity
Accounts payable and other liabilities $ 1,288,982     $ 763,332  
Total liabilities 1,288,982 763,332
 
Common stock 58 59
Additional paid-in-capital 610,011 685,315
Other comprehensive loss (105,539 ) (111 )
Accumulated deficit   (107 )     (135,626 )
Total stockholders' equity   504,423       549,637  
 
Total Liabilities and Stockholders' Equity $ 1,793,405     $ 1,312,969  

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