On August 6, 2020 Bausch Health Companies Inc. (NYSE/TSX: BHC) ("Bausch Health" or the "Company" or "we") reported its second-quarter 2020 financial results (Press release, Bausch Health, AUG 6, 2020, View Source [SID1234563127]).

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"Since the COVID-19 pandemic began, our top priority has been to ensure our employees remain safe and that we have the necessary processes in place to protect our supply chain so that we can continue to provide access to our health care products to people around the world," said Joseph C. Papa, chairman and CEO, Bausch Health.

"The impact of the pandemic continues to cause uncertainty in markets globally. While our business recovery appears to be progressing more quickly in some geographies, such as the United States, other markets in Europe and Asia will take more time to return to pre-pandemic levels," continued Mr. Papa. "Given these variabilities, we are focused on driving market share for our key products, reaching customers in new ways and executing on our launches, such as the upcoming launch of BAUSCH + LOMB INFUSE SiHy daily contact lenses, while also optimizing our cost structure to protect the profitability of the Company."

Executing on Core Businesses and Advancing Pipeline
•The Bausch + Lomb/International segment comprised approximately 53% of the Company’s reported revenue in the second quarter of 2020
◦Reported revenue in the Bausch + Lomb/International segment decreased 27% compared to the second quarter of 2019; revenue in this segment decreased organically1,2 by 24% compared to the second quarter of 2019
◦Reported revenue for LUMIFY increased by 36% compared to the second quarter of 2019
◦Received 510(k) clearance from the U.S. Food and Drug Administration for BAUSCH + LOMB INFUSE daily disposable silicone hydrogel (SiHy daily) contact lenses

◦Launched the Company’s first Extended Depth of Focus intraocular lens (IOL), LuxSmart, and a new monofocal IOL, LuxGood, in Europe
◦Received approval for BAUSCH + LOMB ULTRA monthly silicone hydrogel contact lenses from the National Medical Products Administration in China
◦Entered into an exclusive licensing agreement with STADA Arzneimittel AG and its development partner, Xbrane Biopharma AB, to develop and commercialize a biosimilar candidate to Lucentis (ranibizumab) in the United States and Canada
•The Salix segment comprised approximately 24% of the Company’s reported revenue in the second quarter of 2020
◦Reported and organic1,2 revenue in the Salix segment decreased by 21% compared to the second quarter of 2019
◦Reported revenue for RELISTOR (methylnaltrexone bromide) increased by 8% compared to the second quarter of 2019
•The Ortho Dermatologics segment comprised approximately 7% of the Company’s reported revenue in the second quarter of 2020
◦Reported and organic1,2 revenue in the Ortho Dermatologics segment decreased by 5% compared to the second quarter of 2019
◦Reported revenues for the Thermage franchise and SILIQ (brodalumab) increased by 12% and 50%, respectively, compared to the second quarter of 2019
◦Launched ARAZLO (tazarotene) Lotion, 0.045%, in the United States
◦Received an expanded indication in the United States for JUBLIA (efinaconazole) Topical Solution, 10%, to treat patients as young as six years old

Debt Management
•Repaid debt by approximately $100 million in the second quarter of 2020 for a total of approximately $320 million in the first half of 2020 with cash generated from operations
•Refinanced $1.25 billion of 2022 Senior Secured Notes and prepaid $250 million of mandatory 2022 term loan amortization using net proceeds from newly issued $1.5 billion of 6.25% 2029 Senior Unsecured Notes and cash generated from operations
•Bausch Health has no debt maturities or mandatory amortization payments until 2023

Resolving Legacy Legal Matters
•Resolved the legacy investigation on July 31 by the U.S. Securities and Exchange Commission for $45 million regarding the Company’s former relationship with Philidor Rx Services, LLC and certain accounting practices and disclosures related to the 2014 and 2015 reporting periods. The Company neither denied nor admitted the charges.
•Agreed to resolve the Canadian securities class action litigation on August 4 for $94 million CAD (approximately $69 million3 USD), plus settlement administration costs, subject to court approval. The Company admits no liability and denies all allegations of wrongdoing whatsoever.

Continued Response to the COVID-19 Pandemic
Bausch Health continues to advance its relief and R&D efforts related to the COVID-19 pandemic, including the evaluation of existing medicines, such as VIRAZOLE (Ribavirin for Inhalation Solution, USP), in patients with COVID-19, as well as the donation of health care products and supplies through the Company and the Bausch Foundation. The Company has continued to execute on its business continuity plans to ensure the health and well-being of its employees while also remaining focused on supporting customers and patients around the world and maintaining an uninterrupted availability of its health care products.

Second-Quarter 2020 Revenue Performance
Total reported revenues were $1.664 billion for the second quarter of 2020, as compared to $2.152 billion in the second quarter of 2019, a decrease of $488 million, or 23%. Revenue was negatively impacted by approximately $500 million in the second quarter of 2020 primarily due to the impact of the COVID-19 pandemic. Excluding the unfavorable impact of foreign exchange of $27 million and the impact of divestitures and discontinuations of $4 million, revenue declined 21% organically1,2 compared to the second quarter of 2019.
Bausch + Lomb/International Segment
Bausch + Lomb/International segment revenues were $883 million for the second quarter of 2020, as compared to $1.208 billion for the second quarter of 2019, a decrease of $325 million, or 27%. Excluding the unfavorable impact of foreign exchange of $27 million and the impact of divestitures and discontinuations of $4 million, the Bausch + Lomb/International segment declined organically1,2 by approximately 24% compared to the second quarter of 2019 primarily due to the impact of the COVID-19 pandemic.

Salix Segment
Salix segment revenues were $404 million for the second quarter of 2020, as compared to $509 million for the second quarter of 2019, a decrease of $105 million, or 21%. The decrease was primarily due to the impact of the COVID-19 pandemic; the loss of exclusivity of products in the segment, primarily APRISO (mesalamine), which negatively impacted revenues by $39 million; and by sales of XIFAXAN (rifaximin), which declined by 12% compared to the second quarter of 2019 primarily due to the COVID-19 pandemic, including reduced channel inventories at the retail level.

Ortho Dermatologics Segment
Ortho Dermatologics segment revenues were $116 million for the second quarter of 2020, as compared to $122 million for the second quarter of 2019, a decrease of $6 million, or 5%. The decline in revenue was due to the impact of the COVID-19 pandemic.
Diversified Products Segment
Diversified Products segment revenues were $261 million for the second quarter of 2020, as compared to $313 million for the second quarter of 2019, a decrease of $52 million, or 17%. The decrease was primarily attributable to the previously reported loss of exclusivity for a basket of products and the impact of the COVID-19 pandemic.

Operating Results
Operating loss was $27 million for the second quarter of 2020, as compared to operating income of $257 million for the second quarter of 2019, a decrease of $284 million. The decrease in operating results was primarily due to decreases in revenues and gross margins as a result of the COVID-19 pandemic and the accrual of legal reserves established for the resolution of certain legacy litigation matters, partially offset by decreases in selling, general and administrative (SG&A) expenses and the amortization of intangible assets.

Net Loss
Net loss was $326 million for the second quarter of 2020, as compared to net loss of $171 million for the second quarter of 2019, an unfavorable change of $155 million. The change was primarily driven by decreased operating results discussed above, partially offset by an increase in benefit from income taxes and a decrease in interest expense.

Adjusted net income (non-GAAP)1 for the second quarter of 2020 was $165 million, as compared to $372 million for the second quarter of 2019, a decrease of $207 million, or 56%.

Cash Generated from Operations
The Company generated $200 million of cash from operations in the second quarter of 2020, as compared to $339 million in the second quarter of 2019, a decrease of $139 million. The decrease in cash from operations was primarily attributed to the decreased operating results discussed above.

EPS
GAAP Earnings Per Share (EPS) Diluted for the second quarter of 2020 was ($0.92), as compared to ($0.49) for the second quarter of 2019.

Adjusted EBITDA (non-GAAP)1
Adjusted EBITDA (non-GAAP)1 was $622 million for the second quarter of 2020, as compared to $880 million for the second quarter of 2019, a decrease of $258 million, or 29%. The decrease was primarily due to decreases in revenues and gross margins as a result of the impact of the COVID-19 pandemic, partially offset by decreases in SG&A expenses.
2020 Financial Outlook
Bausch Health tightened its revenue and Adjusted EBITDA (non-GAAP) guidance ranges for the full year of 2020, primarily due to the actual and anticipated impacts of the COVID-19 pandemic. These anticipated impacts assume that a potential resurgence of the virus in the second half of 2020 would not produce severe social restrictions put in place by governmental authorities (e.g., shelter at home, closure of non-essential businesses, deferral of elective medical procedures, etc.) and that global economies will recover as the COVID-19 pandemic runs its course and social restrictions are eased. Bausch Health’s guidance ranges are as follows:
•Narrowed full-year revenue range from $7.80 – $8.20 billion to $7.80 – $8.00 billion
•Narrowed full-year Adjusted EBITDA (non-GAAP) range from $3.15 – $3.35 billion to $3.15 – $3.30 billion

Other than with respect to GAAP Revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. In periods where significant acquisitions or divestitures are not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, which would otherwise be treated as non-GAAP to calculate projected GAAP net income (loss). However, because other deductions (such as restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP). The full-year guidance ranges have been lowered primarily due to the actual and anticipated impacts of the COVID-19 pandemic. These impacts have affected the Company’s assumptions regarding base performance and growth rates. These statements represent forward-looking information and may represent a financial outlook, and actual results may vary. Please see the risks and assumptions referred to in the Forward-looking Statements section of this news release.

Additional Highlights
•Bausch Health’s cash, cash equivalents and restricted cash were $1.907 billion5 at June 30, 2020
•The Company’s availability under the Revolving Credit Facility was $1.131 billion at June 30, 2020
•Basic weighted average shares outstanding for the quarter were 355.3 million shares. Diluted weighted average shares outstanding for the quarter were 357.3 million shares6