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 December 31, 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 January 31, 1995
--------------------- -----------------
$.50 par value 79,363,349
MYLAN LABORATORIES INC. AND SUBSIDIARIES
----------------------------------------
INDEX
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Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1: Financial Statements
Consolidated Balance Sheets - December 31, 1994
and March 31, 1994 2A and 2B
Consolidated Statements of Earnings - Three and
Nine Months Ended December 31, 1994 and 1993 3
Consolidated Statements of Cash Flows - Nine
Months Ended December 31, 1994 and 1993 4
Notes to Consolidated Financial Statements -
Three and Nine Months Ended December 31, 1994 5 and 6
ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 and 8
PART II. OTHER INFORMATION 9
MYLAN LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-------------------------------------------
ASSETS
------
December 31, March 31,
1994 1994
Unaudited Audited
--------- -------
Current Assets
Cash and cash equivalents $150,601,000 $ 75,526,000
Short-term investments 889,000 12,925,000
Accounts receivable 55,253,000 55,430,000
Inventories:
Raw materials 26,001,000 26,138,000
Work in process 15,636,000 14,978,000
Finished goods 29,243,000 16,880,000
------------ ------------
70,880,000 57,996,000
Prepaid income taxes - 1,265,000
Deferred tax benefit 2,887,000 2,082,000
Other current assets 5,297,000 4,349,000
------------ ------------
Total Current Assets 285,807,000 209,573,000
Property, Plant and Equipment - at cost 127,162,000 115,114,000
Less accumulated depreciation 38,076,000 32,600,000
------------ -----------
89,086,000 82,514,000
Investment in and Advances to Somerset 22,075,000 17,763,000
Intangible Assets
net of accumulated amortization 29,726,000 33,228,000
Other Assets 81,533,000 60,247,000
------------ ------------
Total Assets $508,227,000 $403,325,000
============ ============
See Notes to Consolidated Financial Statements
-2A-
LIABILITIES AND SHAREH0LDERS' EQUITY
------------------------------------
December 31, March 31,
1994 1994
Unaudited Audited
------------ --------
Current Liabilities
Trade accounts payable $ 9,419,000 $ 6,699,000
Income taxes payable 8,935,000 -
Other current liabilities 21,583,000 8,056,000
Cash dividend payable 11,904,000 3,171,000
------------ -------------
Total Current Liabilities 51,841,000 17,926,000
Long-Term Obligations 4,742,000 4,609,000
Deferred Income Taxes 1,531,000 821,000
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
79,829,999 shares at December 31, 1994
79,697,295 shares at March 31, 1994 39,915,000 39,849,000
Additional paid in capital 55,673,000 54,272,000
Retained earnings 356,946,000 288,357,000
------------ ------------
452,534,000 382,478,000
Less Treasury stock - at cost, 476,523
shares at December 31, 1994 and 495,864
shares at March 31, 1994
Net Worth 2,421,000 2,509,000
------------ ------------
450,113,000 379,969,000
------------ ------------
Total Liabilities and Shareholders' Equity $508,227,000 $403,325,000
============ ============
See Notes to Consolidated Financial Statements
-2B-
MYLAN LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
---------
Three Months Ended December 31, Nine Months Ended December 31,
------------------------------- -----------------------------
1994 1993 1994 1993
---- ---- ---- ----
NET SALES $104,271,000 $ 66,436,000 $285,430,000 $182,699,000
COST AND EXPENSES:
Cost of Sales 46,702,000 32,165,000 119,920,000 90,628,000
Research and Development 7,927,000 5,499,000 21,134,000 16,453,000
Selling and Administrative 14,982,000 14,292,000 44,323,000 36,768,000
------------ ------------ ------------ -------------
69,611,000 51,956,000 185,377,000 143,849,000
EQUITY IN EARNINGS OF SOMERSET 8,330,000 6,841,000 19,819,000 18,250,000
OTHER INCOME 2,494,000 4,634,000 5,013,000 7,481,000
------------ ------------ ------------ -------------
EARNINGS BEFORE INCOME TAXES 45,484,000 25,955,000 124,885,000 64,581,000
INCOME TAX RATE 30% 15% 30% 14%
INCOME TAXES 13,645,000 3,832,000 37,258,000 8,908,000
------------ ------------ ------------- -------------
NET EARNINGS $ 31,839,000 $ 22,123,000 $ 87,627,000 $ 55,673,000
============ ============ ============= =============
EARNINGS PER SHARE $ .40 $ .28 $ 1.10 $ .71
============ ============ ============= =============
WEIGHTED AVERAGE COMMON SHARES 79,336,000 79,091,000 79,275,000 78,876,000
============ ============ ============= =============
The Company paid regular quarterly cash dividends of $.03 per share from October 1992 to July 1993,
$.04 per share from October 1993 to July 1994 and $.05 per share on October 14, 1994 and January 13,
1995. In addition, the Company paid a special one-time dividend of $.10 per share on January 13,
1995.
See Notes to Consolidated Financial Statements
-3-
MYLAN LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1994 AND 1993
----------------------------------------------------
UNAUDITED
---------
1994 1993
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings $ 87,627,000 $55,673,000
Adjustments to reconcile net earnings to net
cash from operating activities:
Depreciation and amortization 9,228,000 8,232,000
Deferred income taxes (95,000) (434,000)
Equity in the earnings of Somerset (19,819,000)(18,250,000)
Cash received from Somerset 15,506,000 15,267,000
Other non-cash items 13,345,000 8,113,000
Changes in operating assets and liabilities:
Accounts receivable (11,259,000)(21,064,000)
Inventories (13,213,000)( 8,737,000)
Trade accounts payable 2,720,000 (806,000)
Income taxes payable 10,200,000 (8,869,000)
Other operating assets and liabilities 12,363,000 (3,869,000)
----------- ------------
Net cash provided from operating activities 106,603,000 25,256,000
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (12,048,000)(21,064,000)
Increase in intangible and other assets (5,853,000) (1,214,000)
Proceeds from investment securities 16,252,000 -
Purchase of investment securities (20,622,000) -
------------- -----------
Net cash used in investing activities (22,271,000)(12,424,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividend paid (10,306,000) (7,861,000)
Payments on long-term obligations (22,000) (14,000)
Payments on acquisition obligations - (977,000)
Proceeds from exercise of stock options 1,071,000 795,000
------------ ------------
Net cash used in financing activities (9,257,000) (8,057,000)
------------ ------------
Net Increase in Cash and Cash Equivalents 75,075,000 4,775,000
Cash and Cash Equivalents - Beginning of Period 75,526,000 98,246,000
------------- -----------
Cash and Cash Equivalents - End of Period $150,601,000 $103,021,000
============ ============
CASH PAID DURING THE PERIOD FOR:
Interest $ 21,000 $ 23,000
Income Taxes $ 27,153,000 $ 11,417,000
See Notes to Consolidated Financial Statements
-4-
MYLAN LABORATORIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTH PERIOD ENDED
December 31, 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 December 31, 1994 and March 31, 1994
together with the results of operations and cash flows for the
interim periods ended December 31, 1994 and 1993. The
consolidated results of operations for the three and nine months
ended December 31, 1994 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. On October 10, 1994 the Company entered into a distribution
agreement with STC Pharmaceuticals, Inc. (STC), a wholly owned
subsidiary of Eli Lilly and Company (Lilly).
Under the terms of the agreement the Company is distributing a
generic form of Lilly's oral antibiotic Ceclor on behalf of STC.
The Company is being paid a fixed monthly fee for performing
certain services related to the distribution of the product. Upon
certain events, as defined in the agreement, the fixed monthly fee
will convert to a variable amount predicated upon STC's net sales
of the product.
Under the terms of the agreement, STC prepaid a portion of the
first year's fixed fee. The portion of the prepayment relating to
services rendered in the current quarter has been recognized as
revenue and included in the Net Sales line of the Income
Statement. The portion of the prepayment which relates to future
periods is included as deferred revenue in the Other Accrued
Liabilities line of the Balance Sheet. Revenues and gross profit
resulting from this agreement did not have a material impact on
the current quarter or year to date results of operations.
-5-
MYLAN LABORATORIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTH PERIOD ENDED
December 31, 1994
-----------------
Unaudited
---------
D. On December 21, 1994 the Company paid $7,992,000 to acquire the
50% interest in a captive insurance company that it did not
previously own. The final purchase price will be adjusted to
reflect 50% of the audited net book value of the insurance company
as of December 31, 1994. This transaction will not have a
material impact on the Company's financial statements.
E. 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 and nine month periods ended December 31, 1994 and 1993 are
as follows: (in thousands)
Three Months Ended Nine Months Ended
December 31, December 31,
------------------ -----------------
1994 1993 1994 1993
---- ---- ---- ----
Net Sales $44,208 $36,422 $100,703 $88,107
Costs and Expenses (21,744) (19,470) (49,881) (40,789)
Income Taxes ( 8,017) ( 5,070) (16,573) (15,220)
-------- -------- --------- --------
Net Earnings $14,447 $11,882 $ 34,249 $32,098
======== ======== ========= ========
The above information represents 100% of Somerset's operations of
which the Company has a 50% interest.
-6-
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Results of Operations
- ---------------------
Net sales for the three and nine months ended December 31, 1994
were a record high $104,271,000 and $285,430,000 representing
increases over the prior year comparable periods of 57% and 56%
respectively. These improvements are primarily attributable to the
launch of new generic products, in particular cimetidine, flurbiprofen
and glipizide, which the Company began shipping during the quarter
ended June 30, 1994.
Gross margin as a percent of net sales increased from 52% for the
quarter ended December 31, 1993 to 55% this year and from 50% for the
nine months ended December 31, 1993 to 58% this year. The rates for
the current periods reflect the higher margins generally realized on
new generic products in the short term after introduction. Due to the
competitive nature of the generic pharmaceutical industry the sales
and gross margin recognized for the three and nine months ended
December 31, 1994 are not necessarily indicative of the results to be
expected in future quarters.
Research and development expenditures for the three and nine month
periods ended December 31, 1994 increased 44% to $7,927,000 and 28% to
$21,134,000 over the prior year comparable periods. These increases
are indicative of the Company's commitment to new and increased
product development throughout the Company.
Selling and administrative expenses were 14% and 16% of net sales
for the three and nine months ended December 31, 1994 as compared to
22% and 20% for the three and nine months ended December 31, 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 per share
for the three and nine month periods was $.09 and $.22 in 1994 and
$.08 and $.21 in 1993.
-7-
Liquidity and Capital Resources and Financial Condition
- -------------------------------------------------------
Working capital increased from $191,647,000 at March 31, 1994 to
$233,966,000 at December 31, 1994 as a result of continued strong
operations. The ratio of current assets to current liabilities was
5.5 to 1 at December 31, 1994 and 11.7 to 1 at March 31, 1994. The
decrease in the current ratio is primarily attributable to the special
one-time dividend of $.10 per share that was paid on January 15, 1995
and increases in income taxes payable, deferred revenue and accrued
payroll and related costs.
Net cash provided from operating activities was $106,603,000 for
the nine months ended December 31, 1994 compared to $25,256,000 for
the same period last year. The change is primarily due to higher net
earnings, the timing of tax payments and the increases in other
current liabilities mentioned above. Other non-cash items includes
allowances for potential credits and rebates which generally escalate
with new product launches.
Additions to property, plant and equipment amounted to $12,048,000
for the nine months ended December 31, 1994. The Company completed a
new warehouse at its distribution center in Greensboro, North Carolina
along with other capital improvement projects at its other facilities.
In December the Company began construction on a new 152,000 square
foot research and development facility in Morgantown, West Virginia.
Funding is to be provided from operations.
-8-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibit 27 required by Item 601(c) of Regulation S-X filed
herewith.
(b) Reports on Form 8-K - there were no reports on Form 8-K filed
during the nine months ended December 31, 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 February 9, 1995 /s/ Milan Puskar
------------------ ---------------------------------------
Milan Puskar
Chairman of the Board, Chief Executive
Officer and President
DATE February 7, 1995 /s/ Frank A. DeGeorge
------------------ ----------------------------------------
Frank A. DeGeorge
Director of Accounting and Taxation
-9-
5
3-MOS
MAR-31-1995
DEC-31-1994
150,601,000
889,000
55,253,000
0
70,880,000
285,807,000
127,162,000
38,076,000
508,227,000
51,841,000
0
39,915,000
0
0
410,198,000
508,227,000
285,430,000
285,430,000
119,920,000
119,920,000
65,457,000
0
21,000
124,885,000
37,258,000
87,627,000
0
0
0
87,627,000
1.10
1.10
