HERTFORDSHIRE, England and
PITTSBURGH, May 7, 2019 /PRNewswire/ -- Mylan N.V. (NASDAQ:
MYL) today announced its financial results for the three months
ended March 31, 2019.
First Quarter 2019 Financial Highlights
- U.S. GAAP diluted loss per ordinary share ("U.S. GAAP EPS") of
$(0.05) as compared to earnings of
$0.17 per ordinary share in the prior
year period.
- Total revenues of $2.50 billion,
down 7% compared to the prior year period and adjusted diluted
earnings per ordinary share ("adjusted EPS") of $0.82, down 15% over the prior year period.
- Revenue Highlights:
-
- Rest of World segment net sales of $642.4 million, up 3%, up 11% on a constant
currency basis.
- Europe segment net sales of
$895.3 million, down 14%, down 6% on
a constant currency basis.
- North America segment net
sales of $922.9 million, down 6% on
an actual and constant currency basis, primarily driven by changes
in the competitive environment and the impact of the Morgantown plant remediation activities.
- U.S. GAAP net cash used in operating activities for the three
months ended March 31, 2019 of
$(39.7) million, compared to U.S.
GAAP net cash provided by operating activities of $621.8 million in the prior year period and
adjusted free cash flow for the three months ended March 31, 2019 of $27.1
million, compared to $663.6
million in the prior year period, driven primarily by an
increased investment in working capital.
- Mylan is not providing forward looking guidance for U.S. GAAP
reported financial measures or a quantitative reconciliation of
forward-looking non-GAAP financial measures. Please see "Non-GAAP
Financial Measures" for additional information.
Mylan CEO Heather Bresch
commented: "Mylan's first quarter represents a solid start to the
year and we remain positioned to reaffirm our guidance for 2019. We
continue to manage an increasingly diverse portfolio of products
across all three segments of our business, and given the evolution
of our commercial and geographic mix see opportunities to enhance
our investments for certain areas of our portfolio. In the U.S.,
where the industry continues to experience volatility, we are
leveraging past experience and applying key learnings to our
largest launches, like Wixela, even as we advocate for policies
that seek to put the patient first.
With that said, our top-line results fell within the range of
where we thought they would be at $2.5
billion. On the bottom line, we came in ahead of where we
expected at $0.82 of adjusted EPS,
mainly due to gross margins coming in at the high end of our
guidance range while also having some positive offsets from a
timing perspective in G&A against our increased sales and
marketing spend. We look forward to continue delivering on our
mission of access in the remaining quarters of the year and
investing in a Mylan that's built to last."
Mylan CFO Ken Parks added:
"During the first quarter, adjusted free cash flow of $27 million was slightly ahead of our
expectations. Our results reflect an anticipated increase in net
working capital required to support our topline growth expectations
for 2019, which includes over $1
billion in new product launches, as previously communicated.
Given our stable and durable cash flow profile, we remain committed
to deleveraging and intend to repay $1.1
billion of debt during 2019. We also remain fully committed
to maintaining our investment grade credit rating. For the full
year 2019, we are reaffirming our guidance and business outlook,
including our total revenue range of $11.5
billion to $12.5 billion,
adjusted EPS guidance range of $3.80
to $4.80 and adjusted free cash flow
range of $1.9 billion to $2.3 billion."
Financial Summary
|
Three Months
Ended
|
|
March
31,
|
(Unaudited; in
millions, except per share amounts and %s)
|
2019
|
|
2018
|
|
Percent
Change
|
Total Revenues
(1)
|
$
|
2,495.5
|
|
|
$
|
2,684.5
|
|
|
(7)%
|
North America Net
Sales
|
922.9
|
|
|
985.3
|
|
|
(6)%
|
Europe Net
Sales
|
895.3
|
|
|
1,038.4
|
|
|
(14)%
|
Rest of World Net
Sales
|
642.4
|
|
|
626.7
|
|
|
3%
|
Other
Revenues
|
34.9
|
|
|
34.1
|
|
|
2%
|
|
|
|
|
|
|
U.S. GAAP Gross
Profit
|
$
|
805.2
|
|
|
$
|
984.3
|
|
|
(18)%
|
U.S. GAAP Gross
Margin
|
32.3%
|
|
|
36.7%
|
|
|
|
Adjusted Gross Profit
(2)
|
$
|
1,340.7
|
|
|
$
|
1,419.8
|
|
|
(6)%
|
Adjusted Gross Margin
(2)
|
53.7%
|
|
|
52.9%
|
|
|
|
|
|
|
|
|
|
U.S. GAAP Net (Loss)
Earnings
|
$
|
(25.0)
|
|
|
$
|
87.1
|
|
|
(129)%
|
U.S. GAAP
EPS
|
$
|
(0.05)
|
|
|
$
|
0.17
|
|
|
(129)%
|
Adjusted Net Earnings
(2)
|
$
|
421.9
|
|
|
$
|
495.6
|
|
|
(15)%
|
Adjusted EPS
(2)
|
$
|
0.82
|
|
|
$
|
0.96
|
|
|
(15)%
|
|
|
|
|
|
|
EBITDA
(2)
|
$
|
534.2
|
|
|
$
|
663.8
|
|
|
(20)%
|
Adjusted EBITDA
(2)
|
$
|
710.2
|
|
|
$
|
813.9
|
|
|
(13)%
|
__________
|
(1)
|
Amounts exclude
intersegment revenue that eliminates on a consolidated
basis.
|
(2)
|
Non-GAAP financial
measures. Please see "Non-GAAP Financial Measures" for additional
information.
|
Three Months Ended March 31,
2019 Financial Results
Total Revenues for the three months ended
March 31, 2019 were $2.50
billion, compared to $2.68
billion for the comparable prior year period, representing a
decrease of $189.0 million, or 7%.
Total revenues include both net sales and other revenues from third
parties. Net sales for the three months ended March 31,
2019 were $2.46 billion, compared to
$2.65 billion for the comparable
prior year period, representing a decrease of $189.8 million, or 7%. Other revenues for
the three months ended March 31, 2019 were $34.9 million, compared to $34.1 million for the comparable prior year
period.
The decrease in net sales included a decrease in the
Europe segment of 14% and a
decrease in the North America
segment of 6%. These decreases were partially offset by an increase
in the Rest of World segment of 3%. Mylan's net sales were
unfavorably impacted by the effect of foreign currency translation,
primarily reflecting changes in the U.S. Dollar as compared to the
currencies of Mylan's subsidiaries in India, Australia, and the European Union. The
unfavorable impact of foreign currency translation on current year
net sales was approximately $132.0
million, or 5%, resulting in a decrease in constant currency
net sales of approximately $57.8
million, or 2%. This decrease was primarily driven by net
sales from existing products, partially offset by new product
sales, primarily as a result of lower volumes, and to a lesser
extent, pricing. Below is a summary of net sales in each of our
segments for the three months ended March 31, 2019:
- Net sales from North
America segment totaled $922.9
million during the three months ended March 31, 2019, a decrease of $62.4 million or 6% when compared to the prior
year period. This decrease was due primarily to lower volumes on
existing products, primarily driven by changes in the competitive
environment and the impact of the Morgantown plant remediation activities,
partially offset by new product sales, including Wixela™
Inhub™ and Fulphila™ (biosimilar to Neulasta®), and
increased market share on Glatiramer Acetate Injection. Pricing
also declined when compared to the prior year period. The impact of
foreign currency translation on current period net sales was
insignificant within North
America.
- Net sales from Europe
segment totaled $895.3 million during
the three months ended March 31,
2019, a decrease of $143.1
million or 14% when compared to the prior year period. This
decrease was primarily the result of the unfavorable impact of
foreign currency translation, lower volumes of existing products
driven by the timing of purchases of our products by customers and
temporary business disruptions due to the adoption of serialization
across Europe and, to a lesser
extent, pricing. The unfavorable impact of foreign currency
translation was approximately $77.5
million or 8%. Partially offsetting these items were new
product sales in the current period. Constant currency net sales
decreased by approximately $65.6
million or 6%, when compared to the prior year period.
- Net sales from Rest of World segment totaled
$642.4 million during the three
months ended March 31, 2019, an
increase of $15.7 million or 3% when
compared to the prior year period. This increase was primarily the
result of new product sales and higher volumes of existing
products. The increase in net sales as a result of new product
sales was primarily due to new product sales in Australia, Japan and China. Increased volume of existing products
was primarily driven by the Company's anti-retroviral therapy
franchise. This increase was partially offset primarily by the
unfavorable impact of foreign currency translation and, to a lesser
extent, by lower pricing on existing products. Overall, net sales
from Rest of World were unfavorably impacted by the effect of
foreign currency translation of approximately $51.8 million, or 8%. Constant currency net sales
increased by approximately $67.5
million or 11% when compared to the prior year period.
U.S. GAAP gross profit was $805.2
million and $984.3 million for
the three months ended March 31, 2019
and 2018, respectively. U.S. GAAP gross margins were 32% and
37% for the three months ended March 31,
2019 and 2018, respectively. U.S. GAAP gross margins were
negatively impacted by approximately 60 basis points related to the
incremental amortization from product acquisitions. U.S. GAAP gross
margins were also negatively affected by approximately 280 basis
points as a result of incremental manufacturing expenses, site
remediation expenses and incremental restructuring charges incurred
during the current period principally as a result of the activities
at the Company's Morgantown plant.
In addition, U.S. GAAP gross margins were negatively impacted as a
result of lower gross profit for sales of existing products
partially offset by the impact from new product sales, primarily in
North America. Adjusted gross
profit was $1.34 billion and
adjusted gross margins were 54% for the three months ended
March 31, 2019 compared to adjusted
gross profit of $1.42 billion and
adjusted gross margins of 53% in the prior year period.
R&D expense for the three months ended
March 31, 2019 was $172.6
million, compared to $204.9
million for the comparable prior year period, a decrease of
$32.3 million. This decrease was
primarily due to lower expenditures related to the reprioritization
of global programs, and higher payments in the prior year period
related to licensing arrangements for products in development.
SG&A expense for the three months ended
March 31, 2019 was $607.9
million, compared to $607.5
million for the comparable prior year period, an increase of
$0.4 million. This increase was
primarily due to continued investment in selling and marketing
activities, which was partially offset by savings from
restructuring activities.
During the three months ended March 31, 2019 and 2018, the
Company recorded net charges of $0.7
million and $16.2 million,
respectively, in Litigation settlements and other contingencies,
net. During the three months ended March 31, 2019, the
Company recognized litigation related charges of approximately
$4.8 million for a number of matters,
which was partially offset by a gain of $4.1
million for fair value adjustments related to the
respiratory delivery platform contingent consideration. During the
three months ended March 31, 2018, the Company recorded
litigation related charges of approximately $13.3 million, primarily related to an antitrust
matter and a patent infringement matter. In addition, the Company
recorded a loss of $2.7 million for
fair value adjustments related to the respiratory development
platform contingent consideration.
U.S. GAAP net (loss) earnings decreased by
$112.1 million to a loss of
$(25.0) million for the three months
ended March 31, 2019, compared to earnings of $87.1 million for the prior year period and
U.S. GAAP EPS decreased from $0.17 in the prior year period to $(0.05) for the three months ended March 31,
2019. The Company recognized a U.S. GAAP income tax
benefit of $89.5 million compared
to $76.6 million for the comparable
prior year period. Adjusted net earnings decreased to
$421.9 million compared to
$495.6 million for the prior year
period. Adjusted EPS decreased to $0.82 from $0.96 in
the prior year period.
EBITDA was $534.2
million for the three months ended March 31, 2019, and
$663.8 million for the comparable
prior year period. After adjusting for certain items as further
detailed in the reconciliation below, adjusted EBITDA was
$710.2 million for the three months
ended March 31, 2019 and $813.9
million for the comparable prior year period.
Cash Flow
U.S. GAAP net cash used in operating activities was
$(39.7) million for the three months
ended March 31, 2019 compared to U.S. GAAP net cash provided
by operating activities $621.8
million for the prior year period, driven primarily by
required investment in working capital. Capital expenditures were
approximately $53.1 million for the
three months ended March 31, 2019 compared to approximately
$30.7 million for the comparable
prior year period. Adjusted net cash provided by operating
activities was $80.2 million for
the three months ended March 31, 2019 compared to adjusted net
cash provided by operating activities $694.3
million for the prior year period. Adjusted free cash
flow, defined as adjusted net cash provided by operating
activities less capital expenditures, was $27.1 million for the three months ended
March 31, 2019, compared to $663.6
million in the prior year period.
Conference Call and Earnings Materials
As previously announced, Mylan N.V. will host a conference call
and live webcast, today at 10:00 a.m.
ET, to review the Company's financial results for the first
quarter ended March 31, 2019. The earnings call can be
accessed live by calling 855.493.3607 or 346.354.0950 for
international callers (ID#: 4992316) or at the following address on
the Company's website: investor.mylan.com. The Q1 2019 "Earnings
Call Presentation", which will be referenced during the call can be
found at investor.mylan.com. A replay of the webcast will also be
available on the website.
Non-GAAP Financial Measures
This press release includes the presentation and discussion of
certain financial information that differs from what is reported
under accounting principles generally accepted in the United States ("U.S. GAAP"). These
non-GAAP financial measures, including, but not limited to,
adjusted EPS, adjusted gross profit, adjusted gross margins,
adjusted net earnings, EBITDA, adjusted EBITDA, adjusted R&D
and as a % of total revenues, adjusted SG&A and as a % of total
revenues, adjusted earnings from operations, adjusted interest
expense, adjusted other income, adjusted effective tax rate,
notional debt to Credit Agreement Adjusted EBITDA leverage ratio,
long term average debt to Credit Agreement Adjusted EBITDA leverage
ratio, adjusted net cash provided by operating activities, adjusted
free cash flow, constant currency total revenues and constant
currency net sales are presented in order to supplement investors'
and other readers' understanding and assessment of the financial
performance of Mylan N.V. ("Mylan" or the "Company"). Management
uses these measures internally for forecasting, budgeting,
measuring its operating performance, and incentive-based awards.
Primarily due to acquisitions and other significant events which
may impact comparability of our periodic operating results, Mylan
believes that an evaluation of its ongoing operations (and
comparisons of its current operations with historical and future
operations) would be difficult if the disclosure of its financial
results was limited to financial measures prepared only in
accordance with U.S. GAAP. We believe that non-GAAP financial
measures are useful supplemental information for our investors and
when considered together with our U.S. GAAP financial measures and
the reconciliation to the most directly comparable U.S. GAAP
financial measure, provide a more complete understanding of the
factors and trends affecting our operations. The financial
performance of the Company is measured by senior management, in
part, using adjusted metrics included herein, along with other
performance metrics. Management's annual incentive compensation is
derived, in part, based on the adjusted EPS metric and the adjusted
free cash flow metric. In addition, the Company believes that
including EBITDA and supplemental adjustments applied in presenting
adjusted EBITDA and Credit Agreement Adjusted EBITDA (as defined
below) pursuant to our Credit Agreements is appropriate to provide
additional information to investors to demonstrate the Company's
ability to comply with financial debt covenants and assess the
Company's ability to incur additional indebtedness. We also report
sales performance using the non-GAAP financial measures of
"constant currency" total revenues and net sales. These measures
provide information on the change in total revenues and net sales
assuming that foreign currency exchange rates had not changed
between the prior and current period. The comparisons presented at
constant currency rates reflect comparative local currency sales at
the prior year's foreign exchange rates. We routinely evaluate our
net sales and total revenues performance at constant currency so
that sales results can be viewed without the impact of foreign
currency exchange rates, thereby facilitating a period-to-period
comparison of our operational activities, and believe that this
presentation also provides useful information to investors for the
same reason. The "Summary of Total Revenues by Segment" table below
compares net sales on an actual and constant currency basis for
each reportable segment for the quarters ended March 31, 2019
and 2018 as well as for total revenues. Also, set forth below,
Mylan has provided reconciliations of such non-GAAP financial
measures to the most directly comparable U.S. GAAP financial
measures. Investors and other readers are encouraged to review the
related U.S. GAAP financial measures and the reconciliations of the
non-GAAP measures to their most directly comparable U.S. GAAP
measures set forth below, and investors and other readers should
consider non-GAAP measures only as supplements to, not as
substitutes for or as superior measures to, the measures of
financial performance prepared in accordance with U.S. GAAP.
For additional information regarding the components and uses of
Non-GAAP financial measures refer to Management's Discussion and
Analysis of Financial Condition and Results of Operations-- Use of
Non-GAAP Financial Measures section of Mylan's Quarterly Report on
Form 10-Q for the three months ended March 31, 2019 (the "Form
10-Q").
Mylan is not providing forward looking guidance for U.S. GAAP
reported financial measures or a quantitative reconciliation of
forward-looking non-GAAP financial measures to the most directly
comparable U.S. GAAP measure because it is unable to predict with
reasonable certainty the ultimate outcome of certain significant
items without unreasonable effort. These items include, but are not
limited to, acquisition-related expenses, restructuring expenses,
asset impairments, litigation settlements and other contingencies,
including changes to contingent consideration and certain other
gains or losses. These items are uncertain, depend on various
factors, and could have a material impact on U.S. GAAP reported
results for the guidance period.
Reconciliation
of U.S. GAAP Net Earnings to Adjusted Net Earnings and U.S. GAAP
EPS to Adjusted EPS
|
|
Below is a
reconciliation of U.S. GAAP net earnings and U.S. GAAP EPS to
adjusted net earnings and adjusted EPS for the three months ended
March 31, 2019 compared to the prior year period:
|
|
|
Three Months Ended
March 31,
|
(in millions,
except per share amounts)
|
2019
|
|
2018
|
U.S. GAAP net (loss)
earnings and U.S. GAAP EPS
|
$
|
(25.0)
|
|
|
$
|
(0.05)
|
|
|
$
|
87.1
|
|
|
$
|
0.17
|
|
Purchase accounting
related amortization (primarily included in cost of sales)
(a)
|
435.4
|
|
|
|
|
423.4
|
|
|
|
Litigation
settlements and other contingencies, net
|
0.7
|
|
|
|
|
16.2
|
|
|
|
Interest expense
(primarily clean energy investment financing and accretion of
contingent
consideration)
|
7.3
|
|
|
|
|
9.7
|
|
|
|
Clean energy
investments pre-tax loss
|
17.0
|
|
|
|
|
23.0
|
|
|
|
Acquisition related
costs (primarily included in SG&A) (b)
|
8.1
|
|
|
|
|
2.3
|
|
|
|
Restructuring related
costs (c)
|
19.9
|
|
|
|
|
45.4
|
|
|
|
Share-based
compensation expense (d)
|
18.0
|
|
|
|
|
—
|
|
|
|
Other special items
included in:
|
|
|
|
|
|
|
|
Cost of sales
(e)
|
85.1
|
|
|
|
|
10.0
|
|
|
|
Research and
development expense (f)
|
33.1
|
|
|
|
|
46.6
|
|
|
|
Selling, general and
administrative expense
|
13.9
|
|
|
|
|
1.8
|
|
|
|
Other expense, net
(g)
|
—
|
|
|
|
|
17.4
|
|
|
|
Tax effect of the
above items and other income tax related items
|
(191.6)
|
|
|
|
|
(187.3)
|
|
|
|
Adjusted net earnings
and adjusted EPS
|
$
|
421.9
|
|
|
$
|
0.82
|
|
|
$
|
495.6
|
|
|
$
|
0.96
|
|
Weighted average
diluted ordinary shares outstanding
|
516.7
|
|
|
|
|
516.8
|
|
|
|
____________
|
Significant items for
the three months ended March 31, 2019 include the
following:
|
|
|
(a)
|
The increase in
purchase accounting related amortization is primarily due to
amortization expense related to certain product rights acquisitions
which occurred in 2018.
|
(b)
|
Acquisition related
costs consist primarily of integration activities.
|
(c)
|
For the three months
ended March 31, 2019, approximately $14.5 million is included in
cost of sales, approximately $0.1 million is included in R&D,
and approximately $5.3 million is included in SG&A. Refer to
Note 17 Restructuring included in Part I, Item 1 of the Form
10-Q for additional information.
|
(d)
|
Beginning in 2019,
share-based compensation expense is excluded from adjusted net
earnings and adjusted EPS. The full year impact for the year ended
December 31, 2018 was insignificant. As such, the 2018 quarterly
amount was not added back to U.S. GAAP net earnings for the quarter
ended March 31, 2018.
|
(e)
|
The three months
ended March 31, 2019 increases relate primarily to expenses of
$58.8 million for certain incremental manufacturing variances and
site remediation activities as a result of the activities at the
Company's Morgantown plant.
|
(f)
|
For the three months
ended March 31, 2019, R&D expense includes $23.3 million
related to non-refundable upfront licensing amounts for products in
development with the remaining expense relating on-going
development collaborations. Refer to Note 4 Acquisitions and
Other Transactions included in Part I, Item 1 of the Form 10-Q
for additional information. R&D expense for the three months
ended March 31, 2018 includes two non-refundable upfront
payments totaling approximately $43.0 million for development
agreements entered into during the quarter.
|
(g)
|
The 2018 amount
primarily related to mark-to-market losses of investments in equity
securities historically accounted for as available-for-sale
securities and the cumulative realized gains on such
investments.
|
Reconciliation
of U.S. GAAP Net Earnings to EBITDA and Adjusted
EBITDA
|
|
Below is a
reconciliation of U.S. GAAP net earnings to EBITDA and adjusted
EBITDA for the three months ended March 31, 2019 compared to
the prior year period (in millions):
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
U.S. GAAP net (loss)
earnings
|
$
|
(25.0)
|
|
|
$
|
87.1
|
|
Add / (subtract)
adjustments:
|
|
|
|
Net contribution
attributable to equity method investments
|
17.0
|
|
|
23.1
|
|
Income tax
benefit
|
(89.5)
|
|
|
(76.6)
|
|
Interest
expense
|
131.2
|
|
|
131.7
|
|
Depreciation and
amortization
|
500.5
|
|
|
498.5
|
|
EBITDA
|
$
|
534.2
|
|
|
$
|
663.8
|
|
Add
adjustments:
|
|
|
|
Share-based
compensation expense
|
18.0
|
|
|
21.4
|
|
Litigation
settlements and other contingencies, net
|
0.7
|
|
|
16.2
|
|
Restructuring & other special
items
|
157.3
|
|
|
112.5
|
|
Adjusted
EBITDA
|
$
|
710.2
|
|
|
$
|
813.9
|
|
About Mylan
Mylan is a global pharmaceutical company committed to setting
new standards in healthcare. Working together around the world to
provide 7 billion people access to high quality medicine, we
innovate to satisfy unmet needs; make reliability and service
excellence a habit; do what's right, not what's easy; and impact
the future through passionate global leadership. We offer a growing
portfolio of more than 7,500 marketed products around the world,
including antiretroviral therapies on which more than 40% of people
being treated for HIV/AIDS globally depend. We market our products
in more than 165 countries and territories. We are one of the
world's largest producers of active pharmaceutical ingredients.
Every member of our approximately 35,000-strong workforce is
dedicated to creating better health for a better world, one person
at a time. Learn more at Mylan.com. We routinely post information
that may be important to investors on our website at
investor.mylan.com.
Forward-Looking Statements
This release contains "forward-looking statements." These
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may include, without limitation, our
reaffirming our 2019 financial guidance and business outlook; that
Mylan's first quarter represents a solid start to the year and we
remain positioned to reaffirm our guidance for 2019; we continue to
manage an increasingly diverse portfolio of products across all
three segments of our business, and given the evolution of our
commercial and geographic mix see opportunities to enhance our
investments for certain areas of our portfolio; we look forward to
continue delivering on our mission of access in the remaining
quarters of the year and investing in a Mylan that's built to last;
that our results reflect an anticipated increase in net working
capital required to support our topline growth expectations for
2019, which includes over $1 billion
in new product launches; that given our stable and durable cash
flow profile, we remain committed to deleveraging and intend to
repay $1.1 billion of debt during
2019; that we also remain fully committed to maintaining our
investment grade credit rating; and any other statements about
Mylan's future operations, anticipated business levels, future
earnings, planned activities, anticipated growth, market
opportunities, strategies, competition, and other expectations and
targets for future periods. These may often be identified by the
use of words such as "will," "may," "could," "should," "would,"
"project," "believe," "anticipate," "expect," "plan," "estimate,"
"forecast," "potential," "pipeline," "intend," "continue,"
"target," "seek," and variations of these words or comparable
words. Because forward-looking statements inherently involve risks
and uncertainties, actual future results may differ materially from
those expressed or implied by such forward-looking statements.
Factors that could cause or contribute to such differences include,
but are not limited to: actions and decisions of healthcare and
pharmaceutical regulators; failure to achieve expected or targeted
future financial and operating performance and results;
uncertainties regarding future demand, pricing and reimbursement
for our products; any regulatory, legal or other impediments to
Mylan's ability to bring new products to market, including, but not
limited to, where Mylan uses its business judgment and decides to
manufacture, market and/or sell products, directly or through third
parties, notwithstanding the fact that allegations of patent
infringement(s) have not been finally resolved by the courts (i.e.,
an "at-risk launch"); success of clinical trials and Mylan's
ability to execute on new product opportunities; any changes in or
difficulties with our manufacturing facilities, including with
respect to our remediation and restructuring activities, supply
chain or inventory or our ability to meet anticipated demand; the
scope, timing and outcome of any ongoing legal proceedings,
including government investigations, and the impact of any such
proceedings on our financial condition, results of operations
and/or cash flows; the ability to meet expectations regarding the
accounting and tax treatments of acquisitions, including Mylan's
acquisition of Mylan Inc. and Abbott Laboratories' non-U.S.
developed markets specialty and branded generics business; changes
in relevant tax and other laws, including but not limited to
changes in the U.S. tax code and healthcare and pharmaceutical laws
and regulations in the U.S. and abroad; any significant breach of
data security or data privacy or disruptions to our information
technology systems; the ability to protect intellectual property
and preserve intellectual property rights; the effect of any
changes in customer and supplier relationships and customer
purchasing patterns; the ability to attract and retain key
personnel; the impact of competition; identifying, acquiring, and
integrating complementary or strategic acquisitions of other
companies, products, or assets being more difficult, time-consuming
or costly than anticipated; the possibility that Mylan may be
unable to achieve expected synergies and operating efficiencies in
connection with strategic acquisitions, strategic initiatives or
restructuring programs within the expected time-frames or at all;
uncertainties and matters beyond the control of management,
including but not limited to general political and economic
conditions and global exchange rates; and inherent uncertainties
involved in the estimates and judgments used in the preparation of
financial statements, and the providing of estimates of financial
measures, in accordance with U.S. GAAP and related standards or on
an adjusted basis. For more detailed information on the risks and
uncertainties associated with Mylan's business activities, see the
risks described in Mylan's Annual Report on Form 10-K for the year
ended December 31, 2018, as amended,
and our other filings with the Securities and Exchange Commission
(the "SEC"). You can access Mylan's filings with the SEC through
the SEC website at www.sec.gov or through our website, and Mylan
strongly encourages you to do so. Mylan routinely posts information
that may be important to investors on our website at
investor.mylan.com, and we use this website address as a means of
disclosing material information to the public in a broad,
non-exclusionary manner for purposes of the SEC's Regulation Fair
Disclosure (Reg FD). The contents of our website are not
incorporated into this release. Mylan undertakes no obligation to
update any statements herein for revisions or changes after the
date of this release other than as required by law.
Mylan N.V. and
Subsidiaries
Condensed
Consolidated Statements of Operations
(Unaudited; in
millions, except per share amounts)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
Net sales
|
$
|
2,460.6
|
|
|
$
|
2,650.4
|
|
Other
revenues
|
34.9
|
|
|
34.1
|
|
Total
revenues
|
2,495.5
|
|
|
2,684.5
|
|
Cost of
sales
|
1,690.3
|
|
|
1,700.2
|
|
Gross
profit
|
805.2
|
|
|
984.3
|
|
Operating
expenses:
|
|
|
|
Research and
development
|
172.6
|
|
|
204.9
|
|
Selling, general and
administrative
|
607.9
|
|
|
607.5
|
|
Litigation
settlements and other contingencies, net
|
0.7
|
|
|
16.2
|
|
Total operating
expenses
|
781.2
|
|
|
828.6
|
|
Earnings from
operations
|
24.0
|
|
|
155.7
|
|
Interest
expense
|
131.2
|
|
|
131.7
|
|
Other expense,
net
|
7.3
|
|
|
13.5
|
|
(Loss) Earnings
before income taxes
|
(114.5)
|
|
|
10.5
|
|
Income tax
benefit
|
(89.5)
|
|
|
(76.6)
|
|
Net (loss)
earnings
|
(25.0)
|
|
|
87.1
|
|
(Loss) Earnings per
ordinary share:
|
|
|
|
Basic
|
$
|
(0.05)
|
|
|
$
|
0.17
|
|
Diluted
|
$
|
(0.05)
|
|
|
$
|
0.17
|
|
Weighted average
ordinary shares outstanding:
|
|
|
|
Basic
|
515.0
|
|
|
514.4
|
|
Diluted
|
515.0
|
|
|
516.8
|
|
Mylan N.V. and
Subsidiaries
Condensed
Consolidated Balance Sheets
(Unaudited; in
millions)
|
|
|
March 31,
2019
|
|
December 31,
2018
|
ASSETS
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
229.8
|
|
|
$
|
388.1
|
|
Accounts receivable,
net
|
2,778.5
|
|
|
2,881.0
|
|
Inventories
|
2,708.8
|
|
|
2,580.2
|
|
Prepaid expenses and
other current assets
|
545.2
|
|
|
518.4
|
|
Total current
assets
|
6,262.3
|
|
|
6,367.7
|
|
Intangible assets,
net
|
12,955.5
|
|
|
13,664.6
|
|
Goodwill
|
9,607.9
|
|
|
9,747.8
|
|
Other non-current
assets
|
3,080.9
|
|
|
2,954.8
|
|
Total
assets
|
$
|
31,906.6
|
|
|
$
|
32,734.9
|
|
LIABILITIES AND
EQUITY
|
Liabilities
|
|
|
|
Current portion of
long-term debt and other long-term obligations
|
$
|
703.5
|
|
|
$
|
699.8
|
|
Current
liabilities
|
3,454.1
|
|
|
3,888.0
|
|
Long-term
debt
|
13,086.9
|
|
|
13,161.2
|
|
Other non-current
liabilities
|
2,770.5
|
|
|
2,818.8
|
|
Total
liabilities
|
20,015.0
|
|
|
20,567.8
|
|
Mylan N.V.
shareholders' equity
|
11,891.6
|
|
|
12,167.1
|
|
Total liabilities and
equity
|
$
|
31,906.6
|
|
|
$
|
32,734.9
|
|
Mylan N.V. and
Subsidiaries
Reconciliation of
Non-GAAP Financial Measures
(Unaudited; in
millions)
|
|
Summary of Total
Revenues by Segment
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
|
%
Change
|
|
2019
Currency
Impact (1)
|
|
2019
Constant
Currency
Revenues
|
|
Constant
Currency %
Change (2)
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
$
|
922.9
|
|
|
$
|
985.3
|
|
|
(6)
|
%
|
|
$
|
2.7
|
|
|
$
|
925.6
|
|
|
(6)
|
%
|
Europe
|
895.3
|
|
|
1,038.4
|
|
|
(14)
|
%
|
|
77.5
|
|
|
972.8
|
|
|
(6)
|
%
|
Rest of
World
|
642.4
|
|
|
626.7
|
|
|
3
|
%
|
|
51.8
|
|
|
694.2
|
|
|
11
|
%
|
Total net
sales
|
2,460.6
|
|
|
2,650.4
|
|
|
(7)
|
%
|
|
132.0
|
|
|
2,592.6
|
|
|
(2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues
(3)
|
34.9
|
|
|
34.1
|
|
|
2
|
%
|
|
0.9
|
|
|
35.8
|
|
|
5
|
%
|
Consolidated total
revenues (4)
|
$
|
2,495.5
|
|
|
$
|
2,684.5
|
|
|
(7)
|
%
|
|
$
|
132.9
|
|
|
$
|
2,628.4
|
|
|
(2)
|
%
|
____________
|
(1)
|
Currency impact is
shown as unfavorable (favorable).
|
(2)
|
The constant currency
percentage change is derived by translating net sales or revenues
for the current period at prior year comparative period exchange
rates, and in doing so shows the percentage change from 2019
constant currency net sales or revenues to the corresponding amount
in the prior year.
|
(3)
|
For the three months
ended March 31, 2019, other revenues in North America, Europe, and
Rest of World were approximately $22.1 million, $4.7 million, and
$8.1 million, respectively.
|
(4)
|
Amounts exclude
intersegment revenue that eliminates on a consolidated
basis.
|
Reconciliation of
Income Statement Line Items
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
U.S. GAAP cost of
sales
|
$
|
1,690.3
|
|
|
$
|
1,700.2
|
|
Deduct:
|
|
|
|
Purchase accounting
amortization and other related items
|
(435.4)
|
|
|
(420.9)
|
|
Acquisition related
items
|
(0.5)
|
|
|
(0.2)
|
|
Restructuring and
related costs
|
(14.5)
|
|
|
(4.4)
|
|
Other special
items
|
(85.1)
|
|
|
(10.0)
|
|
Adjusted cost of
sales
|
$
|
1,154.8
|
|
|
$
|
1,264.7
|
|
|
|
|
|
Adjusted gross profit
(a)
|
$
|
1,340.7
|
|
|
$
|
1,419.8
|
|
|
|
|
|
Adjusted gross margin
(a)
|
54
|
%
|
|
53
|
%
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
U.S. GAAP
R&D
|
$
|
172.6
|
|
|
$
|
204.9
|
|
Deduct:
|
|
|
|
Acquisition related
costs
|
(0.3)
|
|
|
(0.1)
|
|
Restructuring and
related costs
|
(0.1)
|
|
|
(4.9)
|
|
Share-based
compensation expense
|
(0.1)
|
|
|
—
|
|
Other special
items
|
(33.1)
|
|
|
(46.6)
|
|
Adjusted
R&D
|
$
|
139.0
|
|
|
$
|
153.3
|
|
|
|
|
|
Adjusted R&D as %
of total revenues
|
6
|
%
|
|
6
|
%
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
U.S. GAAP
SG&A
|
$
|
607.9
|
|
|
$
|
607.5
|
|
Deduct:
|
|
|
|
Acquisition related
costs
|
(7.3)
|
|
|
(2.0)
|
|
Restructuring and
related costs
|
(5.3)
|
|
|
(36.1)
|
|
Purchase accounting
amortization and other related items
|
—
|
|
|
(2.4)
|
|
Share-based
compensation expense
|
(17.9)
|
|
|
—
|
|
Other special
items
|
(13.9)
|
|
|
(1.8)
|
|
Adjusted
SG&A
|
$
|
563.5
|
|
|
$
|
565.2
|
|
|
|
|
|
Adjusted SG&A as
% of total revenues
|
23
|
%
|
|
21
|
%
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
U.S. GAAP total
operating expenses
|
$
|
781.2
|
|
|
$
|
828.6
|
|
Deduct:
|
|
|
|
Litigation
settlements and other contingencies, net
|
(0.7)
|
|
|
(16.2)
|
|
R&D
adjustments
|
(33.6)
|
|
|
(51.6)
|
|
SG&A
adjustments
|
(44.4)
|
|
|
(42.3)
|
|
Adjusted total
operating expenses
|
$
|
702.5
|
|
|
$
|
718.5
|
|
|
|
|
|
Adjusted earnings
from operations (b)
|
$
|
638.2
|
|
|
$
|
701.3
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
U.S. GAAP interest
expense
|
$
|
131.2
|
|
|
$
|
131.7
|
|
Deduct:
|
|
|
|
Interest expense
related to clean energy investments
|
(1.7)
|
|
|
(2.3)
|
|
Accretion of
contingent consideration liability
|
(4.3)
|
|
|
(5.5)
|
|
Other special
items
|
(1.3)
|
|
|
(1.9)
|
|
Adjusted interest
expense
|
$
|
123.9
|
|
|
$
|
122.0
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
U.S. GAAP other
expense, net
|
$
|
7.3
|
|
|
$
|
13.5
|
|
Deduct:
|
|
|
|
Clean energy
investments pre-tax loss (c)
|
(17.0)
|
|
|
(23.0)
|
|
Other items
(d)
|
—
|
|
|
(17.4)
|
|
Adjusted other
income
|
$
|
(9.7)
|
|
|
$
|
(26.9)
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
U.S. GAAP (loss)
earnings before income taxes
|
$
|
(114.5)
|
|
|
$
|
10.5
|
|
Total pre-tax
non-GAAP adjustments
|
638.5
|
|
|
595.8
|
|
Adjusted earnings
before income taxes
|
$
|
524.0
|
|
|
$
|
606.3
|
|
|
|
|
|
U.S. GAAP income
benefit provision
|
$
|
(89.5)
|
|
|
$
|
(76.6)
|
|
Adjusted tax
expense
|
191.7
|
|
|
187.2
|
|
Adjusted income tax
provision
|
$
|
102.2
|
|
|
$
|
110.6
|
|
|
|
|
|
Adjusted effective
tax rate
|
19.5
|
%
|
|
18.2
|
%
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
U.S. GAAP net cash
(used in) provided by operating activities
|
$
|
(39.7)
|
|
|
$
|
621.8
|
|
Add:
|
|
|
|
Restructuring and
related costs (e)
|
83.7
|
|
|
31.5
|
|
Acquisition related
costs
|
—
|
|
|
1.5
|
|
R&D
expense
|
36.2
|
|
|
39.5
|
|
Adjusted net cash
provided by operating activities
|
$
|
80.2
|
|
|
$
|
694.3
|
|
|
|
|
|
Deduct:
|
|
|
|
Capital
expenditures
|
(53.1)
|
|
|
(30.7)
|
|
Adjusted free cash
flow
|
$
|
27.1
|
|
|
$
|
663.6
|
|
___________
|
(a)
|
U.S. GAAP gross
profit is calculated as total revenues less U.S. GAAP cost of
sales. U.S. GAAP gross margin is calculated as U.S. GAAP gross
profit divided by total revenues. Adjusted gross profit is
calculated as total revenues less adjusted cost of sales. Adjusted
gross margin is calculated as adjusted gross profit divided by
total revenues.
|
(b)
|
U.S. GAAP earnings
from operations is calculated as U.S. GAAP gross profit less U.S.
GAAP total operating expenses. Adjusted earnings from operations is
calculated as adjusted gross profit less adjusted total operating
expenses.
|
(c)
|
Adjustment represents
exclusion of activity related to Mylan's clean energy investments,
the activities of which qualify for income tax credits under
section 45 of the U.S. Internal Revenue Code of 1986, as
amended.
|
(d)
|
2018 adjustment
primarily related to mark-to-market losses of investments in equity
securities historically accounted for as available-for-sale
securities and the cumulative realized gains on such
investments.
|
(e)
|
For the three months
ended March 31, 2019 includes approximately $69.6 million of
certain incremental manufacturing variances and site remediation
expenses as a result of the activities at the Company's Morgantown
plant.
|
Reconciliation of
EBITDA and Adjusted EBITDA
|
|
Below is a
reconciliation of U.S. GAAP net earnings to EBITDA and adjusted
EBITDA for the respective quarterly periods:
|
|
|
Three Months
Ended
|
|
June 30,
2018
|
|
September 30,
2018
|
|
December 31,
2018
|
|
March 31,
2019
|
U.S. GAAP net (loss)
earnings
|
$
|
37.5
|
|
|
$
|
176.7
|
|
|
$
|
51.2
|
|
|
$
|
(25.0)
|
|
Add / (deduct)
adjustments:
|
|
|
|
|
|
|
|
Net contribution
attributable to equity method investments
|
22.9
|
|
|
12.6
|
|
|
20.1
|
|
|
17.0
|
|
Income tax (benefit)
provision
|
(18.8)
|
|
|
15.5
|
|
|
25.8
|
|
|
(89.5)
|
|
Interest
expense
|
139.2
|
|
|
136.2
|
|
|
135.2
|
|
|
131.2
|
|
Depreciation and
amortization
|
501.9
|
|
|
500.6
|
|
|
608.9
|
|
|
500.5
|
|
EBITDA
|
$
|
682.7
|
|
|
$
|
841.6
|
|
|
$
|
841.2
|
|
|
$
|
534.2
|
|
Add / (deduct)
adjustments:
|
|
|
|
|
|
|
|
Share-based
compensation (income) expense
|
(0.8)
|
|
|
(29.2)
|
|
|
5.3
|
|
|
18.0
|
|
Litigation
settlements and other contingencies, net
|
(46.4)
|
|
|
(20.4)
|
|
|
1.1
|
|
|
0.7
|
|
Restructuring & other special
items
|
231.1
|
|
|
143.9
|
|
|
158.9
|
|
|
157.3
|
|
Adjusted
EBITDA
|
$
|
866.6
|
|
|
$
|
935.9
|
|
|
$
|
1,006.5
|
|
|
$
|
710.2
|
|
March 31,
2019 Notional Debt to Twelve Months Ended March 31, 2019 Mylan
N.V. Adjusted EBITDA as calculated under our Credit Agreements
("Credit Agreement Adjusted EBITDA") Leverage Ratio
|
|
The stated non-GAAP
financial measure March 31, 2019 notional debt to twelve
months ended March 31, 2019 Credit Agreement Adjusted EBITDA
leverage ratio is based on the sum of (i) Mylan's adjusted EBITDA
for the quarters ended June 30, 2018, September 30, 2018,
December 31, 2018 and March 31, 2019 and (ii) certain
adjustments permitted to be included in Credit Agreement Adjusted
EBITDA as of March 31, 2019 pursuant to the revolving credit
facility dated as of July 27, 2018 (as amended, supplemented or
otherwise modified from time to time), among Mylan Inc., as
borrower, the Company, as guarantor, certain affiliates and
subsidiaries of the Company from time to time party thereto as
guarantors, each lender from time to time party thereto and Bank of
America, N.A., as administrative agent and the Company's term loan
credit facility dated as of November 22, 2016 (as amended,
supplemented or otherwise modified from time to time), among the
Company, certain affiliates and subsidiaries of the Company from
time to time party thereto as guarantors, each lender from time to
time party thereto and Goldman Sachs Bank USA, as administrative
agent (together, the "Credit Agreements") as compared to Mylan's
March 31, 2019 total debt and other current obligations at
notional amounts.
|
|
|
Three Months
Ended
|
|
Twelve
Months Ended
|
|
June 30,
2018
|
|
September 30,
2018
|
|
December 31,
2018
|
|
March 31,
2019
|
|
March 31,
2019
|
Mylan N.V. Adjusted
EBITDA
|
$
|
866.6
|
|
|
$
|
935.9
|
|
|
$
|
1,006.5
|
|
|
$
|
710.2
|
|
|
$
|
3,519.2
|
|
Add: other
adjustments including estimated
synergies
|
|
|
|
|
|
|
|
|
48.3
|
|
Credit Agreement
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
$
|
3,567.5
|
|
|
|
|
|
|
|
|
|
|
|
Reported debt
balances:
|
|
|
|
|
|
|
|
|
|
Long-term debt,
including current portion
|
|
|
|
|
|
|
|
|
$
|
13,741.8
|
|
Short-term borrowings
and other current obligations
|
|
|
|
|
|
|
|
|
263.4
|
|
Total
|
|
|
|
|
|
|
|
|
$
|
14,005.2
|
|
Add /
(deduct):
|
|
|
|
|
|
|
|
|
|
Net discount on
various debt issuances
|
|
|
|
|
|
|
|
|
35.0
|
|
Deferred financing
fees
|
|
|
|
|
|
|
|
|
71.1
|
|
Fair value adjustment
for hedged debt
|
|
|
|
|
|
|
|
|
(10.5)
|
|
Total debt at
notional amounts
|
|
|
|
|
|
|
|
|
$
|
14,100.8
|
|
|
|
|
|
|
|
|
|
|
|
Notional debt to
Credit Agreement Adjusted
EBITDA Leverage Ratio
|
|
|
|
|
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term average debt to Credit Agreement Adjusted EBITDA
leverage ratio target of ~3.0x
The stated forward-looking non-GAAP financial measure, targeted
long term average leverage of ~3.0x debt-to-Credit Agreement
Adjusted EBITDA, is based on the ratio of (i) targeted long-term
average debt, and (ii) targeted long-term Credit Agreement Adjusted
EBITDA. However, the Company has not quantified future amounts to
develop the target but has stated its goal to manage long-term
average debt and adjusted earnings and EBITDA over time in order to
generally maintain the target. This target does not reflect Company
guidance.
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SOURCE Mylan N.V.