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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
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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.
2004
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 SEC’s
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 SEC’s 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
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