Q2 2020 Assertio Therapeutics Inc Earnings Call
So our long term outlook for the asset management platform remains positive.
You know corporate division.
All these companies currently have cash and investment available for liquidity needs in capital management activities of approximately $70 million.
All of which 80 million reside in AG out.
Adjusted operating loss.
For the corporate Division was a loss of $26 billion in both second quarter 2020, and second quarter 2019.
This is mainly can sit interest expense on the U.S. holding companies public long term debt and interest intercompany debt to the insurance companies, which were primarily used to fund the Blue Mountain acquisition.
It also includes board of directors and other corporate expenses.
On a consolidated basis, the effective tax rate may fluctuate from period to period based on the proportion of income and different tax jurisdictions.
The second quarter 2020, the effective tax rate was 14.2% compared with 21% and the second quarter 2019.
Turning to our capital management strategy in a second quarter 2020, we repurchased 6 million shares for $164 million for an average price.
Up $27.49 per share since the ended the quarter. We've purchased it purchased an additional 800000 shares for $90 million.
Got you to date repurchases as of today to over 10 million share.
Since January 2013, how successful capital management program has returned 3.5 billion dollar to shareholders, resulting in a 60% reduction in total shares outstanding.
As always feature share repurchases are contingent on available free cash our capital position and market conditions.
The cumulative effect of these repurchases was the benefit of approximately $23.56 per share in adjusted operating shareholders equity.
And approximately $42.76 in adjusted book value per share, which helped drive these important metric to new record highs of $71.34 and adjusted.
Operating shareholders equity per share and one of the import dollar and 63 cents of adjusted book value per share, which both represent record high.
I'll now turn the call over to the our operator, you gave it instructions for the Q in a period. Thank you.
Well now begin the question answer session.
Good question, we'll make bad sometime them long I mean, that's that's fine.
[laughter] many times. The question. His name is just because there's a lot to withdraw your question. Please press Star then.
[noise], that's just that's so Andrew Haag, they would be T.I.T. <unk> go ahead.
Hi, Tim Thanks for the question you mentioned in your prepared remarks that the company's taking some steps.
Proactively address situations in which municipalities aren't good financial derives I can you give some color on some of the actions you've been taking there.
Okay generally it relates to US is when you talked about we went to our most vulnerable credits reach out to be issuers and talking about the financial plans for the remainder of the year to ensure the Tommy debt service payments were going to be made if not what was going to be the issue until we help so typically the only real change it has been made any deals.
Just a thought of a future debt service payments that might be restructure. So you know extend out the term reduced the card payment to backend some further payments something or lose natures of the typical but that's been very rare.
Thanks.
Next question operator.
Your next question is from Tom Giant do with KBW. Please go ahead.
Hey, good morning, guys. Thanks for taking my question I wanted to ask about.
Andrew leaving the Matt do you have in kind of like any impact on San raising airplanes you understand they brought in time on your property body in that segment.
I think the market has the more significant impact on fund raising and other market timing I think we're actually are entering into a new phase in Blue Mountains, So you're thinking about it they've been winding down their legacy bond.
There really hasn't been any fund raising other than that CLL instruments, which is a done next to a execution. Some equity investing so as we look to the company now what are we looking to do we're looking to significantly increase or distribution capabilities, specifically in that fund raising.
Area and to to focus on the core competencies between the two organizations, where we got credit commonality as well as market commonality and there's a real you know opportunity for us and we still feel strongly about bad as a real growth for the company and as I said it kind of ships. The makeup of our female standing from blessed with just some fee bearing and.
The market opens up we think we're going to perfect position to capitalize on those opportunities.
Got it thanks, and one that might switch gear, you've done about $300 million, then and buybacks here today I'm, obviously 500, the kind of target number on annual basis can you give an update on on whether or not you thinking that's in the 500. This year just one of them off for.
But you haven't bought the whole tailwind in the all remaining operating dividend capacity or something that since it is.
Rob you want to Guy.
Well as we always said.
We could only get you about $250 million to $300 million.
Without special dividends or other sources of financing.
We have let me just say that you know game and given the activity that we have seen to date, we have already bought back.
More than we would have planned for this year as planned. So we're up to over 10 million shares then we bought back. So I think as you focus on the percentage of shares that we actually bought back but to your question without especial dividend or other sources of financing.
We could only buyback you know the limited about more most shares over the next quarter.
You want anything any is there any understanding what do you need one night, making it seems some special thing anything or <unk>.
Anything and I don't know.
Sorry, I couldn't hear the question.
Well when there are signs of Yankee then would you consider so many other sources of financing or and not something that you're not really can give me.
We're always evaluating our financing options. So yes, we could we will consider it and we will evaluate it in our current plan.
Okay, and then just last one Oh, there's the recent <unk> Mckinley not allowed.
And George so well see claims against the banks true and writing in Puerto Rico, and well get any impact going out in your and your report this quarter and just how should we think that central recoveries from though.
We're not a point of on litigation and obviously, we didn't have any impact on often interest payments for that judgment. Obviously, we would expect there's going to go through an appeal process and we'll continue to evaluate it I was looking moves along the courts.
Okay. Thank you.
Your next question.
He is found Jeffrey Donnelly Dallying. Please go ahead.
Thanks, Good morning.
Uh huh.
I'm not sure I'm completely following the commitment to the asset management business in terms of funds from insurance can can you review that again like you mentioned 354 out of 500.
And then the the to Turkey, the 100 and additional Tijuana personally should you can you split that out a little bit more swear austan, where you're doing.
Yeah, I'll, let rob over the numbers, but yes, the big take where you've got to think about Europe is as we look at all portfolios. We look at the changing capital charges to the portfolio from U.S.P. revisions last year, obviously, we wanted to start investing more up and down the spectrum of credit and probably wasn't in terms of asset class.
The same time Civil war, we're going to do that we get obviously pay a third party, where we can do it internally if we do it internally whether it'd be great that would also lead to us driving the opportunity to develop a new business, a new revenue stream and lower the veda the risk in the overall organization by looking at fee income.
So the two remodeling together, it's kind of a cohesive look you had the opportunity that we seem to increase yield because our best for good quality, though principally based on U.S.P. job drugs changes and at the same tron bomb driving business opportunity in new enterprise within the organization, Rob can give you the numbers just how the billion dollar commitment breaks down.
Obama tracking.
As you can imagine there's been power outages in New York and genetic that's kind of minutes piece meal. Some of the stuff together that people are different people's houses et cetera people on phones as opposed to <unk>, so a little difficult putting stuff together and making sure. We can presenters on his call kind of cohesively I think we're doing it in a job.
I was with Johnson Mr. balancing that you found your information we have and I said, we funded $354 million funny I guess.
We have 250 million funded in the Muni time Weve yellow.
Seal up on onto the funding of 100 million get to get to about seven now for we've got authorized 500 million dollar then a gas which is the instant investment subsidiaries.
And we've been off right $250 million for the Muni fund as well that $300 million for additional CLL for CLL activity in and I imagine, it's kinda give one 1 million one all the one thing Oh, one thing tempting.
No one to jump the two components right. One is a 500 million documented day I guess, what's your dedicated and slump city only owned by the H.M. An agency that then gets invested in goes fund and new bonds that are being developed in authorize the Blue Mountain grew 65, that's committed already so there's still some dry powder there.
The rest we're doing is on the balance sheets of age you see a Jim in terms of I am very investment management agreements, where they're going up and municipal portfolio, let's see all IP portfolio and kind of the opportunities municipal portfolio. So that's kind of how it breaks down.
And it's in a feel okay.
Tend to feel out that that I referenced in the I imagine its <unk> investment grade debt.
Okay. So.
354 funded up I'm really what was the original 500 million commitment, but I think you got shared with us.
HM 250 out of another 500.
Million authorized is funded into me any color on.
And 100 million funded them its yellows out about 300 authorization.
Yeah, you met and not enough water to around the directly I don't know.
Yeah, I bought the rise so to 50 for Muni 300 for see allowed that and and what was that was authorized when we have funded its 250 per muni and a hot your for investment grade see alone.
Okay and the differences the 354, it's coming out of a gap and <unk> to 50 or the up to 50 authorize through how did authorize it's coming directly from them.
Yeah subsidiary balance sheets rents county balance separate I am I right.
Gotcha, Okay. Thank you.
And then [laughter] I've a question Greg Garland one.
Okay.
Your next question, it's I'm John had mentioned lungs Hawkins. Please go ahead.
Hey, guys. Thanks for taking my question.
With some comments I've been or an investor.
And mustard since I'm financial crisis.
[laughter] seems that you.
Right.
One might play after another.
And ER I would just.
Appreciate it used to frame.
Why.
Mark It seems to believe.
The existential threat of state bankruptcies.
It's going to wipe out the value, but it's clearly here.
And it would make it otherwise the disconnects from.
Equity in.
Adjusted book value.
Don't make any sense is there a where you can frame why your so called <unk>.
That the.
State.
I guess stress.
It's not going to lead to that out to them.
Well I'll do my best thing like share. Your frustration is the largest individual shareholder myself in terms of the a current valuation of the stock, which I agree. It makes no sense, though if you think about it as our portfolio shrinks. It gets more granular exposure to the large states becomes smaller and smaller.
As we talked about in new Jersey's case, there's substantial amortization over the next five years dental significantly decrease.
Amount of money, we haven't really is new Jersey, Oh facilities are authorization.
So you think about it if there isn't anything there is no ability today intrastate bankruptcy.
If you really tried to authorize the stay bankruptcy you'd have to go against the U.S. Constitution, which means a constitutional amendment.
We can all talking about the political you know kind of up people or something like that but more importantly, it's the credibility and you know efficiency of the capital markets with the United States.
States have to borrow money all the time, you know their whole bunch of concept looks at potential future revenues against Karen.
Support needs and therefore, the old concept of municipal borrowing that you'd be sure very special focus in terms of tax exemption et cetera.
So we believe that there will never be the authorization of state Brian could you go also wellbeing carved up where we'd go but understand Puerto Rico has not done yet there's going to be a lot of constitutional challenges the that both the U.S. constitution as well the Puerto Rico Constitution. There was a clause in the U.S. constitution hold the takings clause or did you basically can't take away legal right that was agreed and.
Granted and they obviously have stayed back when she retroactively would be taking away legal right. So we firmly believe in that it would destroy the financial markets a return everything upside down relative to the price that you would want to get from the municipal bond such bankruptcies were allowed to happen.
So the practicality of it is it's very and possibly get there, but as we shrink overall exposures the various state it becomes less and less of an issue. We're sure. It's been on a definite track to continue to lower limits for a bike credit or we have a great credit operation in the company our credit Committee run by Steve done Wilma looks it limits every two years.
It wasn't typically the direction has been that the limits of keeps coming down which has been a very effective way to us managing risk as I've always said the easiest way for the like the company's just lower your limits and yet as we see opportunities across a broader spectrum of issuers, we think there's great opportunity relative to the growth of the business and it's the same tower was managing we don't see the arm again.
Scenario, we can all these create worst case scenarios. It wouldn't have in a major impact when you think about the overall impact to the U.S. economy as well as a whole to the U.S. financial markets for the ability to the U.S. to raise money you offshore for overseas all those things would fall apart. So at the end of the day people can think you know the Dustin disruptions.
Scenario, but it really practically can happen there will be tremendous challenges and as I said, we've got to conclude U.S. constitution depends to protect us as well.
Let me also Matt you know muti credit spreads are very very tight so the market is perceiving much less rent, which would mean that age you haven't completely undervalued.
People are buying any bonds you know we've had that historically tight credit spreads.
No in Oh listen I see the disconnect in the.
And they inconsistency in the markets and obviously, the and and and that's very helpful. I. Appreciate your dressing that Ah Ah both W. But because.
It makes no sense and obviously it goes back to be.
Comment around or the ability to repurchase shares here because it or is that the.
Assuming the Armageddon scenario it doesn't play out, which obviously is very good but then the accretion is.
At least in that 10 years, but I've been invested has never been.
More compelling than it is today.
And so we appreciate that and recognize it in and you know the one thing you got understanding is [noise].
They rely on the markets to fund capital improvements to meet certain short term obligations. Our revenue claim on them as mostly perpetual so at the end of the day, we have a lean forever in a day relative to our recovery so without some constitutional amendment, which once again would be challenged in the courts, because there is backlog the constitution.
Thank you.
You just really can't get there and as I said the destruction of the connector markets would be overwhelming the United I'd like saying that the U.S. default on the one of the Treasury notes to see what happens to be U.S. ability to borrow trillions of dollars. They just can't happen as Rob points out of which is a very good point look where yields are in the municipals based look where spreads are if you ever.
He really everybody really felt there was such a credit concern, Illinois, just got off some additional debt not very high prices. So again to the day whatever is being applied Im sure guarantee is obviously not being applied to the overall market and with the dislocation between value in price you can engineer a loss that large so we never really significantly impact that delta.
Thanks, I appreciate you address.
No problem.
[laughter] kinda [laughter] I would like to kinda conferences I called out to how the takeaway for any closing remarks.
Thank you operator, I'd like to thank everyone for joining us on todays call. If you have additional questions. Please feel free to give us a call. Thank you very much.
The conference call is now complete we did I get back I mean could discussion can you may now disconnect.
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