<PAGE>
Exhibit U
BIOVAIL CORPORATION
CONSOLIDATED BALANCE SHEETS
IN ACCORDANCE WITH CANADIAN GAAP
(All dollar amounts are expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
(UNAUDITED) (Audited)
----------- ------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $475,670 $178,086
Short-term investments 19,547 65,893
Accounts receivable 75,577 60,571
Inventories 18,130 12,701
Assets held for disposal -- 20,000
Deposits and prepaid expenses 1,984 3,172
-------- --------
590,908 340,423
LONG-TERM INVESTMENTS 2,297 12
CAPITAL ASSETS, NET 47,193 45,300
OTHER ASSETS, NET 214,467 249,402
-------- --------
$854,865 $635,137
======== ========
LIABILITIES
CURRENT
Accounts payable $ 26,521 $ 22,685
Accrued liabilities 26,813 31,107
Income taxes payable 3,412 3,585
Customer prepayments 4,473 4,962
Future income taxes (Note 1) 3,814 --
Current portion of long-term debt 1,318 12,016
-------- --------
66,351 74,355
FUTURE INCOME TAXES (NOTE 1) 12,660 --
LONG-TERM DEBT -- 125,488
-------- --------
79,011 199,843
-------- --------
SHAREHOLDERS' EQUITY
Convertible subordinated preferred equivalent debentures
(Note 2) 300,343 --
Share capital 470,046 368,538
Warrants 8,244 8,244
Retained earnings (deficit) (3,601) 57,252
Cumulative translation adjustment 822 1,260
-------- --------
775,854 435,294
-------- --------
$854,865 $635,137
======== ========
</TABLE>
<PAGE>
BIOVAIL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
IN ACCORDANCE WITH CANADIAN GAAP
(All dollar amounts except per share data are expressed in thousands of U.S.
dollars)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
REVENUE $48,141 $28,231
EXPENSES
Cost of goods sold 11,035 5,039
Research and development 13,957 5,324
Selling, general and administrative 9,459 6,245
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34,451 16,608
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OPERATING INCOME 13,690 11,623
INTEREST INCOME (EXPENSE), NET 184 (2,792)
PREMIUM PAID ON EARLY EXTINGUISHMENT OF U.S. DOLLAR SENIOR
NOTES (20,039) --
------- -------
INCOME (LOSS) BEFORE INCOME TAXES (6,165) 8,831
PROVISION FOR (RECOVERY OF) INCOME TAXES (NOTE 1) (1,556) 533
------- -------
NET INCOME (LOSS) (4,609) 8,298
INTEREST EXPENSE ON CONVERTIBLE SUBORDINATED PREFERRED
EQUIVALENT DEBENTURES (793) --
------- -------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $(5,402) $ 8,298
======= =======
BASIC EARNINGS (LOSS) PER SHARE $ (0.09) $ 0.17
======= =======
FULLY DILUTED EARNINGS (LOSS) PER SHARE $ (0.09) $ 0.16
======= =======
SEGMENTED INFORMATION
REVENUE FROM EXTERNAL CUSTOMERS
Product sales $33,631 $12,562
Research and development 11,782 6,717
Royalty and licensing 2,728 8,952
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$48,141 $28,231
======= =======
SEGMENT OPERATING INCOME (LOSS)
Product sales $16,463 $ 3,147
Research and development (3,703) 942
Royalty and licensing 2,688 8,753
Unallocated (1,758) (1,219)
------- -------
$13,690 $11,623
======= =======
</TABLE>
<PAGE>
BIOVAIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN ACCORDANCE WITH CANADIAN GAAP
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (4,609) $ 8,298
Depreciation and amortization 7,350 1,489
Future income tax recovery (Note 1) (2,453) --
Premium paid on early extinguishment of U.S. Dollar Senior
Notes 20,039 --
-------- -------
20,327 9,787
Change in non-cash operating items:
Decrease (increase) in accounts receivable (12,340) 1,466
Increase in inventories (5,550) (3,030)
Decrease in deposits and prepaid expenses 1,188 103
Decrease in accounts payable and accrued liabilities (3,689) (383)
Decrease in income taxes payable (177) (386)
Increase (decrease) in customer prepayments (489) 9,440
-------- -------
(21,057) 7,210
-------- -------
(730) 16,997
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to capital assets, net (3,929) (1,611)
Acquisition of product rights -- --
Maturity of short-term investments, net 46,346 --
Acquisition of long-term investments (2,285) --
Proceeds from assets held for disposal 17,000 --
Decrease in other assets 261 --
Advance of executive stock purchase plan loans -- (52)
-------- -------
57,393 (1,663)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of share capital 102,298 1,424
Repurchase of share capital -- (14,933)
Issuance of convertible subordinated preferred equivalent
debentures, net of financing costs (Note 2) 290,312 --
Repurchase of U.S. Dollar Senior Notes (141,017) --
Reduction in other long-term debt (10,651) (300)
-------- -------
240,942 (13,809)
-------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (21) (548)
-------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 297,584 977
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 178,086 78,279
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $475,670 $79,256
======== =======
</TABLE>
<PAGE>
BIOVAIL CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN ACCORDANCE WITH CANADIAN GAAP
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
1. FUTURE INCOME TAXES
Effective January 1, 2000, Biovail Corporation (the "Company") changed its
method of accounting for income taxes from the deferral method to the
liability method of tax allocation as required by the Canadian Institute of
Chartered Accountants. As permitted under the new rules, prior-year
financial statements have not been restated. The cumulative effect of this
change at January 1, 2000 was a decrease in opening retained earnings of
$55,451,000, a decrease in goodwill of $36,524,000 and an increase in the
future income tax liability of $18,927,000, reflecting the net liability
which existed at that date for the difference between the accounting and tax
value of the Company's assets and liabilities. For the three months ended
March 31, 2000, application of the new income tax rules increased net income
by $2,934,000 reflecting the reduction of the difference between the
accounting and tax values, the reduction in goodwill amortization and the
recognition of losses incurred by the Company's subsidiary Biovail
Technologies Ltd. during the period.
2. CONVERTIBLE SUBORDINATED PREFERRED EQUIVALENT DEBENTURES
On March 22, 2000, the Company issued $300 million of 6.75% Convertible
Subordinated Preferred Equivalent Debentures, due March 31, 2025 (the
"Convertible Preferred Securities"). The Convertible Preferred Securities
are unsecured and subordinated to all Senior Indebtedness, as defined, of
the Company. The Convertible Preferred Securities are convertible at any
time into common shares at $60.675 per common share and may be redeemed at
the option of the Company beginning on March 31, 2003 at a redemption price
of 104.725% declining each year as prescribed in the indenture agreement to
100% by March 31, 2010. The Company has a special right to redeem the
Convertible Preferred Securities prior to March 31, 2003 at 106.75% if the
trading price of the Company's stock equals or exceeds $91.01 per share on
the NYSE for a specified period, subject to certain conditions. Interest is
payable quarterly in arrears commencing June 30, 2000. Subject to certain
conditions, the Company has the right to defer payment of interest on the
Convertible Preferred Securities for up to 20 consecutive quarterly periods.
Interest and principal are payable in cash or, at the option of the Company,
from the proceeds on the sale of equity securities of the Company delivered
to the trustee of the Convertible Preferred Securities.
For purposes of accounting under Canadian GAAP, the Convertible Preferred
Securities are presented within shareholders' equity and are comprised of
the holder conversion option and the interest and principal component. The
value ascribed to the option component of $43,506,000 has been determined
using the residual method after calculating the component attributable to
the present value of the required interest and principal repayments at a
rate approximating the interest rate that would have been applicable to
non-convertible debt at the time the Convertible Preferred Securities were
issued. The present value of the interest and principal repayments amounted
to $256,837,000 and is also shown as a component of shareholders' equity
reflecting the option the Company has to pay the liability from the sale of
equity securities. The present value will be accreted to the face value of
the payments over the 25 year term of the indenture as a charge to income
attributable to common shareholders.
<PAGE>
[BIOVAIL LOGO]
May 29, 2000
Dear Fellow Shareholder,
Biovail Corporation changed its accounting reporting convention from Canadian
Generally Accepted Accounting Principles to U.S. Generally Accepted Accounting
Principles effective January 1, 2000.
Enclosed you will find our Letter to Shareholders and quarterly financial
statements prepared under U.S. GAAP. Additionally, Biovail Corporation will
continue to provide and has enclosed its financial results under Canadian GAAP
for your information.
Thank you for your continued support and if you have any questions regarding the
enclosures, please do not hesitate to contact Kenneth Howling at
(416) 285-6000.
Sincerely,
/S/
Bruce Brydon
Chief Executive Officer
