UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q - - ---------------------------------------------------------------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________to__________ Commission file number 1-9114 MYLAN LABORATORIES INC. (Exact Name of registrant as specified in its charter) Pennsylvania 25-1211621 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 130 Seventh Street 1030 Century Building Pittsburgh, Pennsylvania 15222 (Address of principal executive offices) (Zip Code) 412-232-0100 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date Outstanding at Class of Common Stock July 29, 1994 --------------------- ------------- $.50 par value 79,268,371 __________________________________________________________________________ MYLAN LABORATORIES INC. AND SUBSIDIARIES ---------------------------------------- INDEX ----- Page Number ------ PART I. FINANCIAL INFORMATION Consolidated Balance Sheets - June 30, 1994 and March 31, 1994 2A and 2B Consolidated Statements of Earnings - Three Months Ended June 30, 1994 and 1993 3 Consolidated Statements of Cash Flows - Three Months Ended June 30, 1994 and 1993 4 Notes to Consolidated Financial Statements - Three Months Ended June 30, 1994 5 Management's Discussion and Analysis of Financial Condition and Results of Operations 6 and 7 PART II. OTHER INFORMATION 8 MYLAN LABORATORIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS --------------------------- ASSETS ------ See Notes to Consolidated Financial Statements -2A-
June 30, March 31, 1994 1994 Unaudited Audited --------- ------- Current Assets Cash and cash equivalents $ 83,331,000 $ 75,526,000 Short-term Investments 10,122,000 12,925,000 Accounts receivable 75,127,000 55,430,000 Inventories: Raw materials 27,400,000 26,138,000 Work in process 16,322,000 14,978,000 Finished goods 23,776,000 16,880,000 ------------ ----------- 67,498,000 57,996,000 Prepaid Income Taxes - 1,265,000 Deferred tax benefit 2,039,000 2,082,000 Other current assets 5,683,000 4,349,000 ----------- ----------- Total Current Assets 243,800,000 209,573,000 Property, Plant and Equipment - at cost 117,470,000 115,114,000 Less accumulated depreciation 34,375,000 32,600,000 ----------- ----------- 83,095,000 82,514,000 Investment in and Advances to Somerset 20,444,000 17,763,000 Intangible Assets net of accumulated amortization 32,005,000 33,228,000 Other Assets 68,177,000 60,247,000 ------------ ------------ Total Assets $447,521,000 $403,325,000 ============ ============ LIABILITIES AND SHAREH0LDERS' EQUITY ------------------------------------ See Notes to Consolidated Financial Statements -2B-
June 30, March 31, 1994 1994 Unaudited Audited --------- ------- Current Liabilities Trade accounts payable $ 11,597,000 $ 6,699,000 Income taxes payable 10,036,000 - Other current liabilities 12,784,000 8,056,000 Cash dividend payable 3,171,000 3,171,000 ------------ ------------ Total Current Liabilities 37,588,000 17,926,000 Long-Term Obligations 4,917,000 4,609,000 Deferred Income Taxes 821,000 821,000 Shareholders' Equity: Preferred stock, par value $.50 per share, authorized 5,000,000 shares, issued and outstanding - none - - Common stock, par value $.50 per share, authorized 300,000,000 shares, issued 79,736,757 shares at June 30, 1994 79,697,295 shares at March 31, 1994 39,868,000 39,849,000 Additional paid in capital 54,519,000 54,272,000 Retained earnings 312,317,000 288,357,000 ------------ ------------ 406,704,000 382,478,000 Less Treasury stock - at cost, 495,864 shares at June 30, 1994 and March 31, 1994 2,509,000 2,509,000 ------------ ------------ Net Worth 404,195,000 379,969,000 ------------ ------------ Total Liabilities and Shareholders' Equity $447,521,000 $403,325,000 ============ ============ MYLAN LABORATORIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE MONTHS ENDED JUNE 30, 1994 AND 1993 UNAUDITED --------- The Company paid a regular quarterly cash dividend of $.025 per share from July 1990 to July 1992, $.03 per share from October 1992 to July 1993 and $.04 per share since October of 1993. See Notes to Consolidated Financial Statements -3-
1994 1993 ---- ---- NET SALES $ 85,146,000 $ 58,507,000 COST AND EXPENSES: Cost of Sales 32,996,000 28,555,000 Research and Development 6,344,000 4,722,000 Selling and Administrative 14,405,000 11,073,000 Interest Expense 7,000 8,000 ------------ ------------ 53,752,000 44,358,000 EQUITY IN EARNINGS OF SOMERSET 5,348,000 5,682,000 OTHER INCOME 939,000 1,273,000 ------------ ------------ EARNINGS BEFORE INCOME TAXES 37,681,000 21,104,000 INCOME TAX RATE 28% 24% INCOME TAXES 10,551,000 4,996,000 ------------ ------------ NET EARNINGS $ 27,130,000 $ 16,108,000 ============ ============ EARNINGS PER SHARE $ .34 $ .21 ============ ============ WEIGHTED AVERAGE COMMON SHARES 79,218,000 78,520,000 ============ ============ MYLAN LABORATORIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 1994 AND 1993 UNAUDITED --------- See Notes to Consolidated Financial Statements -4-
1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net Earnings $ 27,130,000 $ 16,108,000 Adjustments to reconcile net earnings to net cash provided from operating activities: Depreciation and amortization 3,026,000 2,723,000 Deferred income taxes 43,000 (529,000) Equity in the earnings of Somerset (5,348,000) (5,682,000) Cash received from Somerset 2,667,000 5,173,000 Other non-cash items 13,518,000 (1,518,000) Changes in operating assets and liabilities: Accounts receivable (31,121,000) (5,217,000) Inventories (9,735,000) (1,519,000) Trade accounts payable 4,898,000 759,000 Income taxes 11,301,000 (413,000) Other operating assets and liabilities 3,394,000 (855,000) ------------ ------------ Net cash provided from operating activities 19,773,000 9,030,000 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (2,356,000) (4,714,000) Increase in intangible and other assets (9,504,000) (1,599,000) Other investment proceeds 2,803,000 - ------------ ------------ Net cash used in investing activities (9,057,000) (6,313,000) CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends paid (3,170,000) (2,357,000) Payments on long-term obligations (7,000) (14,000) Payments on acquisition obligations - (772,000) Proceeds from exercise of stock options 266,000 88,000 ------------ ------------ Net cash used in financing activities (2,911,000) (3,055,000) ------------ ------------ Net Increase (Decrease) in Cash and Cash Equivalents 7,805,000 (338,000) Cash and Cash Equivalents - Beginning of Period 75,526,000 98,246,000 ------------ ------------ Cash and Cash Equivalents - End of Period $ 83,331,000 $ 97,908,000 ============ ============ CASH PAID DURING THE PERIOD FOR: Interest $ 7,000 $ 8,000 Income Taxes $ 463,000 $ 5,938,000 MYLAN LABORATORIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTH PERIOD ENDED June 30, 1994 Unaudited --------- A. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of June 30, 1994 and March 31, 1994 together with the results of operations and cash flows for the interim periods ended June 30, 1994 and 1993. The consolidated results of operations for the three months ended June 30, 1994 and 1993 are not necessarily indicative of the results to be expected for the full year. B. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company's 1994 Annual Report and Report on Form 10-K. C. Equity in Earnings of Somerset includes the Company's 50% portion of the net earnings of Somerset Pharmaceuticals Inc. (Somerset), certain management fees and amortization of intangible assets resulting from the acquisition of Somerset. Such intangible assets are being amortized over a 15 year period using the straight line method. Condensed unaudited financial information of Somerset for the three month periods ended June 30, 1994 and 1993 are as follows: (in thousands) June 30, June 30, 1994 1993 ------- ------- Net Sales $ 25,021 $ 28,592 Costs and Expenses (12,240) (12,196) Income Taxes (3,692) (6,460) Net Earnings $ 9,089 $ 9,936 The above information represents 100% of Somerset's operations of which the Company has a 50% interest. -5- PART 1 - FINANCIAL INFORMATION ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - - --------------------- Net sales for the three months ended June 30, 1994 were a record high $85,146,000 representing a 46% increase over sales for the same period a year ago. This improvement is primarily attributable to the launch of three new generic products, cimetidine, flurbiprofen and glipizide, which the Company began shipping during the quarter ended June 30, 1994. Gross margin as a percent of sales increased to 61% from 51% for the first quarter last year. The rate for the current quarter reflects the higher margins generally realized on new generic products in the short term after introduction. Due to the competitive nature of the pharmaceutical industry the sales and gross margin recognized in the quarter ended June 30, 1994 are not necessarily indicative of the results to be expected in future quarters. Research and development expenditures increased 34% from $4,722,000 for the quarter ended June 30, 1993 to $6,344,000 for the current quarter. This increase is indicative of the Company's commitment to new and increased product development throughout the Company. Selling and administrative expenses were 17% of net sales for the current quarter as compared to 19% for the quarter ended June 30, 1993. Factors contributing to the overall rise in selling and administrative expenses include advertising, promotion and legal expenses associated with new products and payroll and related costs. Equity in earnings of Somerset continues to provide a solid return for the Company. Somerset's contribution to net earnings was $.06 per share for the quarters ended June 30, 1994 and 1993. -6- Liquidity and Capital Resources and Financial Condition ------------------------------------------------------- Working capital increased from $191,647,000 at March 31, 1994 to $206,212,000 at June 30, 1994 as a result of continued strong operations. The ratio of current assets to current liabilities was 6.5 to 1 at June 30, 1994 and 11.7 to 1 at March 31, 1994. Net cash provided from operating activities was $19,773,000 for the three months ended June 30, 1994 compared to $9,030,000 for the same period last year. The change is due to higher net earnings and the timing of tax payments and cash receipts from Somerset. Other non-cash items includes allowances for potential credits and rebates generally associated with new product launches. Additions to property, plant and equipment amounted to $2,356,000 for the three months ended June 30, 1994 as the Company continues to upgrade and modernize its facilities. Increase in intangible and other assets is due to the shifting from short-term to long-term investment. -7- PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K - there were no reports on Form 8-K filed during the three months ended June 30, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Mylan Laboratories Inc. (Registrant) DATE 08/03/94 /S/ MILAN PUSKAR _________________ ______________________________________ Milan Puskar Chairman of the Board, Chief Executive Officer and President DATE 08/03/94 /S/ FRANK A. DE GEORGE __________________ ______________________________________ Frank A. DeGeorge Director of Accounting and Taxation -8-