Merck, known as MSD outside the United States and Canada, said today that it has completed a preliminary assessment of the impact of the Venezuelan government’s intention to devalue its currency effective Feb. 13, 2013.
As a result of the devaluation, the company will incur a one-time, after-tax loss due to exchange of approximately $0.05 per share in the first quarter of 2013 related to the remeasurement of the local balance sheet at the date of the devaluation. Also, the company expects the impact of the devaluation on ongoing operations to be approximately $0.02 per share spread over the balance of 2013.
Since Jan. 1, 2010, Venezuela has been designated hyperinflationary and, as a result, local foreign operations are remeasured in U.S. dollars with the impact recorded in income. On Feb. 8, 2013, the Venezuelan government declared its intention to devalue its currency (bolívar fuerte). The official exchange rate is expected to move from 4.30 VEF/$ to 6.30 VEF/$.
The effects of the devaluation do not change the company’s full year 2013 GAAP (generally accepted accounting principles) or full year non-GAAP EPS (earnings per share) guidance ranges.The company is providing guidance about its expectations for the first quarter of 2013, which includes the impact of the devaluation in the quarter. Merck expects first-quarter non-GAAP EPS to be between $0.76 and $0.78, and the GAAP EPS range to be $0.37 to $0.42. A reconciliation of anticipated first-quarter 2013 EPS as reported in accordance with GAAP to non-GAAP EPS that excludes certain items is provided in the table below.
|$ in millions, except EPS amounts||First Quarter 2013|
|GAAP EPS||$0.37 to 0.42|
|Difference 1||0.39 to 0.36|
|Non-GAAP EPS that excludes items listed below 2||$0.76 to $0,78|
|Acquisition-related costs 3||$1,280 to $1,200|
|Restructuring costs||175 to 125|
|Net decrease (increase) in income before taxes||1,455 to 1,325|
|Estimated income tax (benefit) expense||(255) to (225)|
|Decrease (increase) in net income||$1,200 to $1,100|
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