Valeant Delays Results

The company also omits its dividend.
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Valeant Pharmaceuticals

(VRX)

on Thursday said it wouldn't release full third-quarter financial data until it completes an investigation of its stock-options practices.

The company also cancelled its third-quarter dividend, which had been 7.75 cents a share, because of the probe. The review will force Valeant to delay its filing of a 10-Q with the

Securities and Exchange Commission

.

Valeant warned that because of conditions contained in certain debt instruments, "the decision not to pay a dividend for the quarter will limit

our ability to declare or pay dividends in the future."

The news sent shares of the Costa Mesa, Calif.-based drugmaker down 26 cents, or 1.4%, to $18.24. The stock fell as low as $17.51.

Last week, Valeant said independent directors were examining the accounting for stock options going back to Dec. 31, 1997. Valeant now says none of the quarterly or annual reports filed since that date are reliable, adding that it can't predict the size of any potential restatement or the periods that would be affected.

When directors complete their review, Valeant said it "may need to record additional noncash charges for stock-based compensation expense, and these charges could be material."

Valeant previously announced that the SEC has asked for information about stock-option practices since Jan. 1, 2000. Valeant said the request is part of an informal inquiry. The company said its internal investigation has revealed that it should have used different measurement dates for calculating the expense of stock options.

Most errors occurred before a mid-2002 change in management and in the board. "Errors also were noted in accounting for certain options granted to employees since the change of the board and management, but none of the errors related to options granted to the current chief executive officer or chief financial officer," Valeant said last week.

Because of the ongoing options probe, Valeant didn't compare third-quarter results to those of the year-ago period. It recorded sales of $219.4 million, income from continuing operations of $3.9 million and earnings per share of 4 cents on a GAAP basis. Excluding one-time items, Valeant earned $13.6 million from continuing operations, or 14 cents a share.

"While we continue to see overall positive results, our sales growth for the quarter was weaker than expected," said Timothy Tyson, president and CEO, in a prepared statement. "We are taking appropriate measures to increase our efforts for those products for which we have experienced recent deceleration or reductions."

Valeant said it took a $15 million charge in the third quarter for restructuring, adding that full-year restructuring charges will be $90 million to $115 million. Valeant also said it had renegotiated a settlement with Milan Panic, former chairman and CEO, in a compensation dispute. Panic has paid the company $15 million and will pay another $5 million by July.