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Sanofi-aventis Reports Strong Growth of 25.7% in 2005 Adjusted EPS(1); Nearly 90% of synergies delivered by end 2005; Dividend increased by 26.7%
PARIS, Feb. 24 /PRNewswire-FirstCall/ -- The consolidated income statement for the year ended December 31, 2005, is provided in the appendices. Consolidated net income for the year came to euro 2,258 million, after the euro 4,077 million post-tax impact of the accounting treatment of the Aventis acquisition (including restructuring costs). In order to give a better representation of our underlying economic performance, we have decided to publish and explain adjusted consolidated income statements(1) for 2005 and the fourth quarter of 2005, and to compare them with adjusted pro forma income statements(1) for 2004 and the fourth quarter of 2004, respectively. Full-year adjusted net income for 2005 was euro 6,335 million, against euro 5,025 million for 2004. FOURTH QUARTER
-- Net sales: euro 7,007 million, up 7.0% (4.8% on a comparable basis(1));
the fourth quarter was affected by the introduction of generics of 4
products(2) in the United States
-- Significant commercial spend on the launch of Ambien CR(TM) and on
preparing for the Japanese launch of Plavix(R) and the launch of
Rimonabant
-- Adjusted net income up 20.8% at euro 1,444 million
-- Adjusted EPS up 20.0% at euro 1.08 (vs. euro 0.90 for the fourth
quarter of 2004)
2005 FULL YEAR
-- Net sales: euro 27,311 million, up 8.4% (9.3% on a comparable basis(1))
-- Increase of 18.7% in Adjusted operating income -- current
-- Adjusted net income up 26.1% at euro 6,335 million
-- Adjusted EPS up 25.7% at euro 4.74 (vs. euro 3.77 for 2004).
NEARLY 90% OF CUMULATIVE SYNERGIES DELIVERED BY END 2005
-- euro 1.4 billion of cumulative pre-tax synergies were delivered by end
2005, well ahead of the initial forecast of euro 960 million,
confirming the outstanding success of the integration process.
SEVERAL R&D PROJECTS ADVANCE TO PHASE II AND III
-- 55 projects in Phase II and III (vs. 48 in March 2005)
OUTLOOK FOR 2006
Commenting on 2006 outlook, the Chairman and CEO Mr Jean-Francois Dehecq said: "Barring major adverse events, and after taking account of the full-year impact of generics of Allegra(R), Amaryl(R), Arava(R), and DDAVP(R), we expect 2006 full-year adjusted EPS growth around 10%, based on an exchange rate of euro 1:$1.25, with sensitivity to the euro/dollar exchange rate estimated at 0.6% of growth for a 1-cent movement in the exchange rate". Adjusted consolidated income statement (unaudited) The adjusted consolidated income statement is presented in Appendix 2. Refer to Appendix 1 for definitions of "Pro forma income statement" and "Adjusted net income", and to Appendix 3 for reconciliations of the consolidated income statement to the adjusted consolidated income statement. Fourth quarter of 2005 (compared to adjusted fourth quarter of 2004) Net sales generated by sanofi-aventis in the fourth quarter of 2005 were euro 7,007 million, a rise of 4.8% on a comparable basis. Exchange rate movements had a favorable effect of 3 points, and changes in Group structure had a negative effect of 0.8 of a point. After taking account of these effects, net sales rose by 7.0% on a reported basis. Gross profit was euro 5,442 million, 9.1% higher than in the fourth quarter of 2004. Despite the introduction of generics of Allegra(R) and Amaryl(R) in the United States, the gross margin ratio (77.7%) increased by 1.5 points year-on-year thanks to tight control over cost of sales, a favorable product mix, and a 20.9% rise in "Other revenues". Research and development expenses were 6.6% up on the fourth quarter of 2004 at euro 1,150 million. Selling and general expenses rose by 11.9% relative to the fourth quarter of 2004 to euro 2,283 million, representing 32.6% of net sales (vs. 31.1% in the fourth quarter of 2004). Selling expenses rose sharply due to the launch of Ambien CR(TM) in the United States, and to preparations for the Japanese launch of Plavix(R) and the launch of Rimonabant. There were further reductions in general expenses. Other current operating income came to euro 69 million, compared with euro 129 million in the final quarter of 2004. The net change in this line includes a rise in the Group's share of profits from Actonel(R). The result of currency hedging is a small loss this year to be compared to a profit in the same period of the previous year. The Employee Share Ownership Plan implemented in the fourth quarter of 2005 generated an expense of euro 31 million for the period. This expense, which is not deductible for tax purposes, is allocated to "Cost of sales", "Research and development expenses" and "Selling and general expenses", depending on the function occupied by individual employees. Operating income -- current came to euro 2,020 million, with year-on-year growth limited to 4.0% due to the impact of generics of 4 products(2) in the United States; the significant increase in selling expenses and research and development expenses; net foreign exchange gains and losses; and the Employee Share Ownership Plan. Other operating income and expenses, which includes the reversal of a provision (euro 59 million) relating to litigation with Bayer, shows income of euro 35 million, against euro 1 million for the fourth quarter of 2004. Operating income was up 6.4% at euro 2,056 million. Net financial expense amounted to euro 21 million, compared with euro 133 million in the fourth quarter of 2004. This marked improvement was due partly to a lower cost of debt and a reduction in net debt as a result of the cash flow generated by the Group, and partly to euro 30 million of gains arising on the disposal of certain equity holdings (mainly Viropharma). Income tax expense came to euro 643 million, against euro 616 million for the fourth quarter of 2004, giving an effective tax rate of 31.6% (compared with 34.2%). The share of profit from associates was euro 140 million, against euro 101 million in the fourth quarter of 2004. This line includes the Group's share of after-tax profits from the territories managed by BMS under the Plavix(R) and Avapro(R) alliance (euro 109 million, vs. euro 96 million in the fourth quarter of 2004). There was a marked increase in the contribution from Merial. Minority interests amounted to euro 88 million, compared with euro 90 million in the fourth quarter of 2004. This line includes the share of pre-tax profits paid over to BMS from territories managed by sanofi-aventis (euro 80 million, vs. euro 82 million in the fourth quarter of 2004). Net income was 20.8% higher at euro 1,444 million, representing 20.6% of net sales (vs. 18.2% for the fourth quarter of 2004). Earnings per share (EPS) was euro 1.08, 20.0% higher than the 2004 fourth- quarter figure of euro 0.90, based on 1,338.5 million shares in the fourth quarter of 2005 and 1,333.8 million shares in the fourth quarter of 2004. 2005 full year (compared to 2004 full-year adjusted pro forma) In 2005, sanofi-aventis generated net sales of euro 27,311 million, a rise of 9.3% on a comparable basis. Over the full year, exchange rate movements had a neutral effect, while changes in Group structure had a negative effect of 0.9 of a point. After taking account of these effects, reported-basis growth was 8.4%. Gross profit was euro 21,341 million, 10.1% up on 2004. The gross margin ratio advanced by 1.2 points to 78.1%, compared with 76.9% in 2004. This improvement was achieved thanks to stronger sales, a favorable product mix, productivity gains, and the Group's purchasing policy. Research and development expenses were 2.0% higher than in 2004 at euro 4,044 million, representing 14.8% of net sales. Selling and general expenses rose by 4.6% year-on-year to euro 8,250 million, representing 30.2% of net sales. Promotional expenses grew significantly over the year as a whole, but there was a sharp fall in general expenses. Other current operating income was euro 261 million, against euro 314 million in 2004, reflecting lower foreign exchange gains than in 2004. The Group's share of profits from Actonel(R) recorded further growth. "Operating income -- current" was 18.7% higher at euro 9,072 million, representing 33.2% of net sales, an improvement of 2.9 points relative to 2004. Other operating income and expenses showed net income of euro 79 million, compared with euro 181 million in 2004, when this line included euro 410 million of gains on divestments and euro 156 million of bid defense costs. Amongst other items, the 2005 figure includes euro 102 million of gains on divestments (including euro 70 million on the sale of the oral hygiene business to Procter & Gamble) and a euro 59 million reversal of a provision related to litigation with Bayer. Operating income was up 18.7% at euro 9,119 million, representing 33.4% of net sales (vs. 30.5% in 2004). Net financial expense was euro 245 million, compared with euro 739 million in the previous year. This significant decrease in net financial expense reflects a lower cost of debt and a reduction in debt due to cash flow generated by the Group. Interest charges on debt amounted to euro 418 million, against euro 618 million in 2004. Net financial expense also benefited from a reduction in provisions for investments (euro 34 million vs. euro 120 million in 2004) gains on disposals of equity investments, mainly Transkaryotic and Viropharma, of euro 94 million (vs. euro 10 million in 2004) and gains from mark to market of financial instruments (positive effect of euro 49 million in 2005, vs. negative effect of euro 11 million in 2004). Income tax expense amounted to euro 2,774 million, against euro 2,146 million in 2004. The effective tax rate for the year was 31.3%, compared with 30.9% in 2004. The share of profit from associates came to euro 584 million, compared with euro 535 million in 2004. This line includes the Group's share of after- tax profits from the territories managed by BMS under the Plavix(R) and Avapro(R) alliance (euro 404 million, vs. euro 361 million in 2004). The contribution from Merial recorded further growth. Minority interests were euro 349 million, against euro 305 million in 2004. This line includes the share of pre-tax profits paid to over to BMS from territories managed by sanofi-aventis (euro 300 million, vs. euro 257 million in 2004). Net income was up 26.1% at euro 6,335 million, representing 23.2% of net sales (vs. 19.9% in 2004). Earnings per share (EPS) was euro 4.74, 25.7% up on the 2004 figure of euro 3.77, based on an average number of shares outstanding of 1,336.5 million in 2005 and 1,333.4 million in 2004. Consolidated cash flows and balance sheet at December 31, 2005 Net cash provided by operating activities (before changes in working capital) in 2005 amounted to euro 6,637 million. Net cash used in investing activities amounted to euro 1,101 million, with capital expenditure totaling euro 1,143 million. Acquisitions (euro 692 million) mainly comprised the buyout of the Hoechst minority shareholders, while divestments (euro 733 million) consisted of the investment in Wacker, the oral hygiene business and various minority interests in the biotechnology sector. After payment of the dividend(3), free cash flow generated in 2005 amounted to euro 4.3 billion, enabling consolidated net debt to be cut from euro 14.2 billion at end December 2004 to euro 9.9 billion at end December 2005. Gearing at end December 2005 stood at 21.2%. OUTLOOK FOR 2006 Barring major adverse events, sanofi-aventis expects full-year adjusted EPS growth for 2006 around 10%: -- despite the full-year impact of the availability of generics of
Allegra(R), Amaryl(R), Arava(R) and DDAVP(R) in the United States;
-- after taking account of substantial launch costs of Plavix(R) in Japan
and Rimonabant;
-- assuming euro 300 million after tax of selected items(4) (gain on
disposal of Exubera(R)) against euro 168 million after tax of selected
items in 2005;
-- based on an exchange rate of euro 1:$1.25, with sensitivity to the
euro/dollar exchange rate estimated at 0.6% of growth for a 1-cent
movement in the exchange rate.
Decisions of the Board of Directors
2005 dividend
The sanofi-aventis Board of Directors, at its meeting of February 23, 2006, decided to ask the Annual General Meeting of May 31, 2006 to approve a dividend of euro 1.52 per share, 26.7% higher than the euro 1.20 dividend paid in the previous year. The dividend payment date will be June 7, 2006. The Board of Directors also decided:
-- to ask the Annual General Meeting of May 31, 2006 to reappoint Lord
Douro as a director;
-- to ask the Annual General Meeting of May 31, 2006 to appoint Gerard le
Fur, Senior Executive Vice President, as a director;
-- to ask the Annual General Meeting of May 31, 2006 to set an age limit of
70 for the office of Chairman of the Board of Directors;
-- to cancel treasury shares representing 3.40% of the capital. After this
cancellation, the share capital of sanofi-aventis comprises
1,354,238,425 shares with a par value of euro 2.
Research and development update
The number of projects in late stage clinical development has increased significantly. -- 55 phase II and III projects, compared with 48 in March 2005.
Three products will move to phase III:
-- NV1FGF, a plasmid gene therapy for inducing the formation of new
vessels in patients with critical leg ischemia (presentation of phase
IIb study results planned at ACC, March 2006).
-- SSR 126517, a biotinylated long-acting pentasaccharide, will enter
phase III, as the development of idraparinux (presentation of Van Gogh
program results planned at ASH, December 2006) offers the potential of
abridged clinical development in patients with pulmonary embolism and
deep venous thrombosis.
-- M 100907, a selective 5HT2 receptor antagonist for enhancing sleep
quality, which demonstrated positive phase IIb results in insomnia.
Three compounds are moving to phase IIb:
-- AVE7688 (ACE/NEP inhibitor) in hypertension and diabetic nephropathy.
-- SL 650472 (serotonin antagonist) in peripheral arterial obstructive
disease.
-- AVE0010 (GLP1 agonist) in type 2 diabetes.
Two developments have been discontinued: meclinertant in small cell lung cancer, and SL 650155 in Alzheimer's disease. Sanofi-aventis currently has 129 projects in research and development, including more than 80 in clinical development and 55 in late stage development. Sanofi-aventis is planning to submit for regulatory approval by end 2008 11 new chemical entities, 7 vaccines and numerous line extensions. The regulatory submission of SR 121463, a V2 receptor antagonist that has demonstrated positive phase III results in the treatment of SIADH (syndrome of inappropriate antidiuretic hormone secretion), is planned in 2006. Recent Events
February 6, 2006 Sanofi Pasteur announces the shipment of additional
quantities of the H5N1 vaccine to support US
government pandemic initiatives
February 17, 2006 Sanofi-aventis announced that it has received from the
FDA an approvable letter for rimonabant for weight
management and a non approvable letter for smoking
cessation.
Financial Calendar
March 22, 2006 Analyst/Investor Meeting in New York
May 5, 2006 1st Quarter 2006 Sales and Results
May 31, 2006 Annual General Meeting
August 2, 2006 2nd Quarter and 1st Half 2006 Sales and Results
September 19, 2006 Analyst/Investor Meeting in Paris
October 31, 2006 3rd Quarter 2006 Sales and Results
About sanofi-aventis
Sanofi-aventis is the world's third largest pharmaceutical company, ranking number one in Europe. Backed by a world-class R&D organization, sanofi-aventis is developing leading positions in seven major therapeutic areas: cardiovascular, thrombosis, oncology, metabolic diseases, central nervous system, internal medicine, and vaccines. Sanofi-aventis is listed in Paris (EURONEXT: SAN) and in New York (NYSE: SNY) Forward Looking Statements This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words "expect," "anticipates," "believes," "intends," "estimates," "plans" and similar expressions. Although sanofi-aventis' management believes that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of sanofi-aventis, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the public filings with the SEC and the AMF made by sanofi-aventis, including those listed under "Risk Factors" and "Cautionary Statement Regarding Forward- Looking Statements" in sanofi-aventis' annual report on Form 20-F for the year ended December 31, 2004. Other than as required by applicable law, sanofi- aventis does not undertake any obligation to update or revise any forward- looking information or statements. APPENDICES:
List of appendices:
Appendix 1: Explanatory notes
Appendix 2: 2005 fourth-quarter and full-year adjusted consolidated
financial statements (unaudited)
Appendix 3: 2005 fourth-quarter and full-year reconciliations of
consolidated income statement to adjusted consolidated income
statement (unaudited)
Appendix 4: Sanofi-aventis simplified consolidated balance sheet and
statement of cash flows
Appendix 5: Trend in selected items of adjusted net income
Appendix 1: Explanatory notes
Comparable net sales: When we refer to the change in our sales on a "comparable" basis, we mean that we exclude the impact of exchange rate movements and changes in Group structure (acquisitions and divestments of interests in entities and rights to products, and changes in consolidation method for consolidated entities). For any two periods, we exclude the impact of exchange rates by recalculating sales for the earlier period on the basis of exchange rates used in the later period. We exclude the impact of acquisitions by including sales for a portion of the prior period equal to the portion of the current period during which we owned the entity or product rights based on sales information we receive from the party from whom we make the acquisition. Similarly, we exclude sales in the relevant portion of the prior period when we have sold an entity or rights to a product. For a change in consolidation method, the prior period is recalculated on the basis of the method used for the current period. Reconciliation of 2004 pro forma reported net sales to 2004 pro forma comparable net sales euro million 2004 full year Pro forma 2004 net sales 25,199 Impact of changes in Group structure (212) Impact of exchange rates (3) Pro forma comparable 2004 net sales 24,984 euro million Q4 2004 Pro forma Q4 2004 net sales 6,551 Impact of changes in Group structure (51) Impact of exchange rates 189 Pro forma comparable Q4 2004 net sales 6,689 Adjusted net income: We define "adjusted net income" as accounting net income (determined under IFRS) adjusted to exclude (i) the material impacts of purchase accounting for the Aventis acquisition and (ii) acquisition- related integration and restructuring costs. Sanofi-aventis believes that eliminating these impacts from net income gives investors a better understanding of the underlying economic performance of the combined Group. The material impacts of the application of purchase accounting to the acquisition are as follows: -- charges arising from the remeasurement of Aventis inventories at fair
value, net of tax;
-- amortization/impairment expense generated by the remeasurement of
Aventis intangible assets, net of tax;
-- any impairment charged against the goodwill arising on the acquisition.
Sanofi-aventis also excludes acquisition-related integration and restructuring costs from adjusted net income. A 2004 full-year adjusted pro forma income statement (prepared under IFRS) is presented for comparability purposes as though the offer for Aventis, and the transactions described below, had occurred on January 1, 2004. The basis of preparation of the pro forma income statement is as follows: -- elimination of the income statement contribution of Arixtra,
Fraxiparine and Campto;
-- elimination of Aventis Behring, divested at the start of 2004.
euro million 2005 full-year 2005 full-year 2004 full-year
consolidated adjusted adjusted
consolidated pro forma
(unaudited) (unaudited)
Net sales 27,311 27,311 25,199
Net income 2,258 6,335 5,025
Basic EPS (in euros) 1.69 4.74 3.77
En million Q4 2005 Q4 2005 Q4 2004
consolidated adjusted adjusted
consolidated
(unaudited) (unaudited) (unaudited)
Net sales 7,007 7,007 6,551
Net income 456 1,444 1,195
Basic EPS (in euros) 0.34 1.08 0.90
Appendix 2: 2005 fourth-quarter and full-year adjusted consolidated
financial statements (unaudited)
The adjusted consolidated income statements are derived from the
consolidated income statements as presented in Appendix 3.
Sanofi-aventis 2005 fourth-quarter adjusted consolidated income statement
euro million Q4 2005 as % of Q4 2004 as % of % change
Adjusted net sales Adjusted pro net sales
consolidated forma income
income statement
statement (unaudited)
(unaudited)
Net sales 7,007 100% 6,551 100% +7.0%
Other revenues 336 4.8% 278 4.2% +20.9%
Cost of sales (1,901) (27.1%) (1,839) (28.0%) +3.4%
Gross profit 5,442 77.7% 4,990 76.2% +9.1%
Research &
development
expenses (1,150) (16.4%) (1,079) (16.5%) +6.6%
Selling & general
expenses (2,283) (32.6%) (2,040) (31.1%) +11.9%
Other current
operating income 69 - 129 - -46.5%
Other current
operating expenses (30) - (29) - +3.4%
Amortization of
intangibles (28) - (28) - -
Operating income -
current 2,020 28.8% 1,943 29.7% +4.0%
Restructuring costs 5 - (11) - -
Impairment of PP&E
and intangibles (4) - 0 - -
Other operating income
and expenses 35 - 1 - -
Operating income 2,056 29.3% 1,933 29.5% +6.4%
Financial expenses (104) - (157) - -33.8%
Financial income 83 - 24 - -
Income before tax
and associates 2,035 29.0% 1,800 27.5% +13.1%
Income tax expense (643) (9.1%) (616) (9.4%) +4.4%
Effective tax rate 31.6% - 34.2% - -
Share of profit/loss
of associates 140 - 101 - +38.6%
Net income before
minority interests 1,532 21.9% 1,285 19.6% +19.2%
Minority interests (88) - (90) - -2.2%
Net income 1,444 20.6% 1,195 18.2% +20.8%
Average number of
shares outstanding
(million) 1,338.5 1,333.8 -
Earnings per share
(in euros) 1.08 0.90 +20.0%
Sanofi-aventis 2005 full-year adjusted consolidated income statement
euro million 2005 full-year as % of 2004 full-year as % of % change
Adjusted net sales Adjusted pro net sales
consolidated forma income
income statement
statement (unaudited)
(unaudited)
Net sales 27,311 100% 25,199 100% +8.4%
Other revenues 1,202 4.4% 1,109 4.4% +8.4%
Cost of sales (7,172) (26.3%) (6,918) (27.5%) +3.7%
Gross profit 21,341 78.1% 19,390 76.9% +10.1%
Research &
development
expenses (4,044) (14.8%) (3,964) (15.7%) +2.0%
Selling & general
expenses (8,250) (30.2%) (7,888) (31.3%) +4.6%
Other current
operating income 261 - 314 - +13.1%
Other current
operating expenses (124) - (98) - -10.7%
Amortization of
intangibles (112) - (114) - -1.8%
Operating income -
current 9,072 33.2% 7,640 30.3% +18.7%
Restructuring costs (25) - (141) - -82.3%
Impairment of PP&E
and intangibles (7) - - - -
Other operating income
and expenses 79 - 181 - -
Operating income 9,119 33.4% 7,680 30.5% +18.7%
Financial expenses (532) - (848) - -37.3%
Financial income 287 - 109 - -
Income before tax and
associates 8,874 32.5% 6,941 27.5% +27.8%
Income tax expense (2,774) (10.1%) (2,146) (8.5%) +29.3%
Effective tax rate 31.3% - 30.9% - -
Share of profit/loss
of associates 584 - 535 - +9.2%
Net income before
minority interests 6,684 24.5% 5,330 21.2% +25.4%
Minority interests (349) - (305) - +14.4%
Net income 6,335 23.2% 5,025 19.9% +26.1%
Average number of
shares outstanding
(million) 1,336.5 1,333.4 -
Earnings per share
(in euros) 4.74 3.77 +25.7%
Appendix 3: 2005 fourth-quarter and full-year reconciliations of
consolidated income statement to adjusted consolidated income statement
(unaudited)
2005 fourth quarter:
The adjustments to the income statement reflect the elimination of
material impacts of the application of purchase accounting to the
Aventis acquisition (euro 838 million net of deferred taxes, with no
cash impact for the Group) and restructuring charges (euro 150 million
net of tax), i.e. a total impact of euro 988 million.
2005 fourth-quarter reconciliation of consolidated income statement to
adjusted consolidated income statement (unaudited)
euro million Q4 2005 Q4 2005
consolidated Adjustments adjusted
(unaudited) consolidated
(unaudited)
Net sales 7,007 - 7,007
Other revenues 336 - 336
Cost of sales (1,904) 3(a) (1,901)
Gross profit 5,439 3 5,442
Research & development expenses (1,150) - (1,150)
Selling & general expenses (2,283) - (2,283)
Other current operating income 69 - 69
Other current operating expenses (30) - (30)
Amortization of intangibles (1,093) 1,065(b) (28)
Operating income - current 952 1,068 2,020
Restructuring costs (223) 228(c) 5
Impairment of PP&E and intangibles (215) 211(d) (4)
Other operating income and expenses 35 - 35
Operating income 549 1,507 2,056
Financial expenses (104) - (104)
Financial income 83 - 83
Income before tax and associates 528 1,507 2,035
Income tax expense (104) (539)(e) (643)
Share of profit/loss of associates 120 20(f) 140
Net income before minority interests 544 988 1,532
Minority interests (88) - (88)
Net income 456 988 1,444
Average number of shares
outstanding (million) 1,338.5 1,338.5
Earnings per share (in euros) 0.34 0.74 1.08
The material impacts of the application of purchase accounting to the Aventis acquisition and of restructuring charges on the 2005 fourth-quarter consolidated income statement are as follows: (a) A charge of euro 3 million arising from the workdown of acquired
inventories remeasured at fair value. This adjustment has no cash
impact on the Group.
(b) An amortization charge of euro 1,065 million against intangible
assets. This adjustment has no cash impact on the Group.
(c) A pre-tax restructuring charge of euro 228 million.
(d) Impairment losses of euro 211 million, relating mainly to generics in
the United States and to R&D projects recognized on the acquisition
of Aventis. This adjustment has no cash impact on the Group.
(e) The tax impact primarily comprises:
(1) Deferred taxes of euro 461 million generated by the amortization
charge of euro 1,065 million taken against intangible assets, by
impairment of intangibles of euro 211 million, and by the euro 3
million charge arising from the workdown of acquired inventories
remeasured at fair value. This adjustment has no cash impact on
the Group.
(2) A tax saving of euro 78 million related to the euro 228 million
of restructuring charges.
(f) In "Share of profit/loss from associates", a charge of euro 20
million corresponding to the amortization of intangibles (net of tax)
and the workdown of acquired inventories. This adjustment has no cash
impact on the Group.
2005 full year:
The adjustments to the income statement reflect the elimination of
material impacts of the application of purchase accounting to the Aventis
acquisition (euro 3,462 million net of deferred taxes, with no cash impact
for the Group) and restructuring charges (euro 615 million net of tax),
i.e. a total impact of euro 4,077 million.
2005 full-year reconciliation of consolidated income statement to adjusted
consolidated income statement (unaudited):
euro million 2005 full-year 2005 full-year
consolidated Adjustments adjusted
consolidated
(unaudited)
Net sales 27,311 - 27,311
Other revenues 1,202 - 1,202
Cost of sales (7,566) 394(a) (7,172)
Gross profit 20,947 394 21,341
Research & development expenses (4,044) - (4,044)
Selling & general expenses (8,250) - (8,250)
Other current operating income 261 - 261
Other current operating expenses (124) - (124)
Amortization of intangibles (4,037) 3,925(b) (112)
Operating income - current 4,753 4,319 9,072
Restructuring costs (972) 947(c) (25)
Impairment of PP&E and intangibles (972) 965(d (7)
Other operating income and expenses 79 - 79
Operating income 2,888 6,231 9,119
Financial expenses (532) - (532)
Financial income 287 - 287
Income before tax and associates 2,643 6,231 8,874
Income tax expense (477) (2,297)(e) (2,774)
Share of profit/loss of associates 427 157(f) 584
Net income before minority interests 2,593 4,091 6,684
Minority interests (335) (14)(g) (349)
Net income 2,258 4,077 6,335
Average number of shares
outstanding (million) 1,336.5 1,336.5
Earnings per share (in euros) 1.69 3.05 4.74
The material impacts of the application of purchase accounting to the Aventis acquisition and of restructuring charges on the 2005 full-year consolidated income statement are as follows: (a) A charge of euro 394 million arising from the workdown of acquired
inventories remeasured at fair value. This adjustment has no cash
impact on the Group.
(b) An amortization charge of euro 3,925 million against intangible
assets. This adjustment has no cash impact on the Group.
(c) A pre-tax restructuring charge of euro 947 million.
(d) Impairment losses of euro 965 million, relating primarily to Allegra.
This adjustment has no cash impact on the Group.
(e) The tax impact primarily comprises:
(1) Deferred taxes of euro 1,965 million generated by the
amortization charge of euro 3,925 million taken against
intangible assets, by impairment of intangibles of euro 965
million, and by the euro 394 million charge arising from the
workdown of acquired inventories remeasured at fair value. This
adjustment has no cash impact on the Group.
(2) A tax saving of euro 332 million related to the euro 947 million
of restructuring charges.
(f) In "Share of profit/loss from associates":
(1) A charge of euro 102 million corresponding to the amortization of
intangibles (net of tax) and the workdown of acquired
inventories. This adjustment has no cash impact on the Group.
(2) An impairment loss of euro 55 million (net of tax), relating to
Hexavac. This adjustment has no cash impact on the Group.
(g) In "Minority interests", an impact of euro 14 million representing
the share attributable to minority shareholders of charges for the
amortization and impairment of intangibles. This adjustment has no
cash impact on the Group.
Appendix 4: Sanofi-aventis simplified consolidated balance sheet and
statement of cash flows
Simplified consolidated statement of cash flows (unaudited)
euro million 2005
Adjusted consolidated net income 6,335
Depreciation, amortization & impairment of property, plant
& equipment and intangibles 983
Impact of restructuring costs, net of tax (530)
Other items (151)
Operating cash flow before changes in working capital 6,637
Changes in working capital (239)
Net cash provided by operating activities 6,398
Acquisitions of property, plant & equipment and intangibles (1,143)
Acquisitions of consolidated investments, net of acquired cash (692)
Proceeds from disposals of property, plant & equipment and
intangibles 733
Other items 1
Net cash used in investing activities (1,101)
Issuance of sanofi-aventis shares 314
Proceeds from sale of shares on exercise of stock options 105
Dividends (1,614)
Other items 174
Change in net debt 4,276
Sanofi-aventis simplified consolidated balance sheet
euro million
ASSETS 31/12/05 31/12/04* LIABILITIES & EQUITY 31/12/05 31/12/04*
Property,
plant and
equipment 6,184 5,892 Shareholders' equity 46,637 41,061
Intangible
assets (incl.
goodwill) 60,463 61,567 Minority interests 189 462
Non-current
financial
assets,
investments
in associates
and deferred
taxes 6,890 5,985 Total equity 46,826 41,523
Long-term debt 4,750 8,654
Non-current Provisions & other
assets 73,537 73,444 non-current liabilities 7,454 6,929
Deferred taxes 12,208 13,123
Inventories,
accounts
receivable &
current
financial Non-current
assets 11,872 10,123 liabilities 24,412 28,706
Cash and
equivalents,
short-term Accounts payable &
investments other current
& deposits 1,249 1,840 liabilities 8,995 7,790
Short-term debt 6,425 7,388
Current
assets 13,121 11,963 Current liabilities 15,420 15,178
TOTAL LIABILITIES &
TOTAL ASSETS 86,658 85,407 EQUITY 86,658 85,407
*As allowed under IFRS 3, sanofi-aventis has reviewed some aspects of the
Aventis purchase price allocation within the permitted 12-month period
Appendix 5: Trend in selected items of adjusted net income
euro million Q4 2004 Q4 2005 2004 2005
Restructuring costs
(Aventis pre-acquisition programs) (10) 5 (140) (25)
Gain/loss on divestments, bid defense
costs 35 50 263 196
Litigation with Bayer - 59 - 59
Investment provisions and financial
instruments (15) 9 (130) 15
Total before tax 10 123 (7) 245
Total after tax 7 84 (5) 168
REMINDER
9:00 AM CET The Full-Year 2005 results information meeting will
Information meeting be held today in Paris at the Palais Brongniart /
Palais de la Bourse (Place de la bourse / 75002
Paris). The meeting will be broadcast live on
www.sanofi-aventis.com in French with simultaneous
English translation; it will also be available by
conference call through listen-only call-in numbers
(see details below).
3:00 PM CET The conference call and live-video webcast in English
Conference call on Full-Year 2005 Results will be available through
www.sanofi-aventis.com. Questions will only be
accepted via telephone.
Conference call Replay Replay code* Replay code*
numbers: numbers: meeting 9:00 AM meeting 3:00 PM
France: 01 55 17 41 48 01 71 23 02 48 9479072# 9871497#
UK: +44 207 784 10 17 +44 207 806 1970
USA: +1 718 354 1158 +1 718 354 1112
*Replay available until March 5,2006
Recorded video webcast of both presentations available on
www.sanofi-aventis.com
(1) Refer to the Appendices for definitions of financial indicators
(2) Allegra(R), Amaryl(R), Arava(R), DDAVP(R)
(3) and including notably euro 110 million generated by the shares issued
under the Employee Share Ownership Plan
(4) Refer to the Appendice 5
Contact: Jean-Marc Podvin, 33 1.53.77.42.23,
jean-marc.podvin@sanofi-aventis.com
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