This excerpt taken from the ELN 6-K filed Mar 31, 2006.
Exceptional Operating Income and Expenses
The principal items classified as exceptional operating income and expenses include severance, relocation and exit costs, litigation settlement receipts, and losses incurred from litigation or regulatory actions, including the shareholder class action litigation and the SEC investigation. These items have been treated consistently from period to period. Our management believes that disclosure
Elan Corporation, plc 2005 Annual Report 45
During 2005, we recorded a net gain of $7.4 million related primarily to the Pfizer litigation settlement in which we received a payment of $7.0 million. The nature of this action and its settlement is described in Note 30 to the Consolidated Financial Statements.
During 2005, we incurred severance, relocation and exit costs of $14.4 million arising from a reduction in the scope of our activities, termination of certain operating leases and a reduction in employee headcount. We also released $2.6 million of restructuring accruals which were no longer required.
The $56.0 million charge recorded in 2004 arose primarily as a result of a $55.0 million provision made in relation to the settlement of the SEC investigation and the related shareholder class action lawsuit. We and certain of our former and current officers and directors were named as defendants in a class action filed in early 2002 alleging that our financial statements were not prepared in accordance with generally accepted accounting principles, and that the defendants disseminated materially false and misleading information concerning our business and financial results. We agreed to settle the action in October 2004 and the settlement was formally approved by the U.S. District Court for the Southern District of New York in February 2005. The terms of the class action settlement received final court approval in April 2005. Under the class action settlement, all claims against us and the other named defendants were dismissed with no admission or finding of wrongdoing on the part of any defendant. The principal terms of the settlement provide for an aggregate cash payment to class members of $75.0 million, out of which the court awarded attorneys fees to plaintiffs counsel, and $35.0 million was paid by our insurance carrier.
We were also the subject of an investigation by the SECs Division of Enforcement regarding matters similar to those alleged in the class action. We provisionally settled the investigation in October 2004 and the SEC formally approved the settlement in February 2005. Under the settlement agreement reached with the SEC, we neither admitted nor denied the allegations contained in the SECs civil complaint, which included allegations of violations of certain provisions of the federal securities laws. The settlement contains a final judgement restraining and enjoining us from future violations of these provisions. In addition, under the final judgement, we paid a civil penalty of $15.0 million. In connection with the settlement, we were not required to restate or adjust any of our historical financial results or information.
For additional information on litigation we are involved in, please refer to Note 30 to the Consolidated Financial Statements.
46 Elan Corporation, plc 2005 Annual Report