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 September 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 October 31, 1994
$.50 par value 79,328,229
MYLAN LABORATORIES INC. AND SUBSIDIARIES
INDEX
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Page
Number
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PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets - September 30, 1994
and March 31, 1994 2A and 2B
Consolidated Statements of Earnings - Three and
Six Months Ended September 30, 1994 and 1993 3
Consolidated Statements of Cash Flows - Six
Months Ended September 30, 1994 and 1993 4
Notes to Consolidated Financial Statements -
Six Months Ended September 30, 1994 5 and 6
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
-----------
September 30, March 31,
1994 1994
Unaudited Audited
------------ ---------
Current Assets
Cash and cash equivalents $128,540,000 $ 75,526,000
Short-term investments 7,907,000 12,925,000
Accounts receivable 55,884,000 55,430,000
Inventories:
Raw materials 29,999,000 26,138,000
Work in process 14,936,000 14,978,000
Finished goods 26,713,000 16,880,000
------------ -------------
71,648,000 57,996,000
Prepaid income taxes - 1,265,000
Deferred tax benefit 2,442,000 2,082,000
Other current assets 5,168,000 4,349,000
------------ -----------
Total Current Assets 271,589,000 209,573,000
Property, Plant and Equipment - at cost 122,879,000 115,114,000
Less accumulated depreciation 36,100,000 32,600,000
------------ -------------
86,779,000 82,514,000
Investment in and Advances to Somerset 19,030,000 17,763,000
Intangible Assets net of accumulated amortization 30,776,000 33,228,000
Other Assets 67,825,000 60,247,000
------------ ------------
Total Assets $475,999,000 $403,325,000
============ ============
See Notes to Consolidated Financial Statements
-2A-
LIABILITIES AND SHAREH0LDERS' EQUITY
September 30, March 31,
1994 1994
Unaudited Audited
------------ --------
Current Liabilities
Trade accounts payable $ 10,954,000 $ 6,699,000
Income taxes payable 8,906,000 -
Other current liabilities 15,741,000 8,056,000
Cash dividend payable 3,967,000 3,171,000
----------- ------------
Total Current Liabilities 39,568,000 17,926,000
Long-Term Obligations 5,223,000 4,609,000
Deferred Income Taxes 1,789,000 821,000
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
79,794,448 shares at September 30, 1994
79,697,295 shares at March 31, 1994 39,897,000 39,849,000
Additional paid in capital 54,933,000 54,272,000
Retained earnings 337,010,000 288,357,000
------------ ------------
431,840,000 382,478,000
Less Treasury stock - at cost, 476,523
shares at September 30, 1994 and 495,864
shares at March 31, 1994
Net Worth 2,421,000 2,509,000
------------ ------------
429,419,000 379,969,000
------------ ------------
Total Liabilities and Shareholders' Equity $475,999,000 $403,325,000
============ ============
See Notes to Consolidated Financial Statements
-2B-
MYLAN LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
Three Months Ended September 30, Six Months Ended September 30,
------------------------------- -----------------------------
1994 1993 1994 1993
NET SALES $ 96,013,000 $ 57,756,000 $ 181,159,000 $ 116,263,000
COST AND EXPENSES:
Cost of Sales 40,222,000 29,908,000 73,218,000 58,463,000
Research and Development 6,863,000 6,232,000 13,207,000 10,954,000
Selling and Administrative 14,923,000 11,388,000 29,328,000 22,461,000
Interest Expense 6,000 7,000 13,000 15,000
------------ ------------ ------------ -------------
62,014,000 47,535,000 115,766,000 91,893,000
EQUITY IN EARNINGS OF SOMERSET 6,141,000 5,727,000 11,489,000 11,409,000
OTHER INCOME 1,580,000 1,574,000 2,519,000 2,847,000
EARNINGS BEFORE INCOME TAXES 41,720,000 17,522,000 79,401,000 38,626,000
INCOME TAX RATE 31% - 30% 13%
INCOME TAXES 13,062,000 80,000 23,613,000 5,076,000
NET EARNINGS $ 28,658,000 $ 17,442,000 $ 55,788,000 $ 33,550,000
EARNINGS PER SHARE $ .36 $ .22 $ .70 $ .43
WEIGHTED AVERAGE COMMON SHARES 79,272,000 79,016,000 79,245,000 78,768,000
The Company paid regular quarterly cash dividends of $.03 per share from October 1992 to July 1993.
The Company paid a regular quarterly cash dividend of $.04 per share from October 1993 to July 1994
and a regular quarterly cash dividend of $.05 per share on October 14, 1994.
See Notes to Consolidated Financial Statements
-3-
MYLAN LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
UNAUDITED
---------
1994 1993
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings $ 55,788,000 $ 33,550,000
Adjustments to reconcile net earnings to net
cash provided from operating activities:
Depreciation and amortization 6,002,000 5,568,000
Deferred income taxes 608,000 (526,000)
Equity in the earnings of Somerset (11,489,000) (11,409,000)
Cash received from Somerset 10,221,000 10,289,000
Other non-cash items 14,117,000 (960,000)
Changes in operating assets and liabilities:
Accounts receivable (12,002,000) (6,804,000)
Inventories (13,885,000) (5,846,000)
Trade accounts payable 4,255,000 (1,515,000)
Income taxes payable 10,171,000 (8,772,000)
Other operating assets and liabilities 6,866,000 (1,351,000)
------------- ------------
Net cash provided from operating activities 70,652,000 12,224,000
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (7,765,000) (7,264,000)
Increase in intangible and other assets (9,245,000) (2,100,000)
Other investment proceeds 5,018,000 -
------------- ------------
Net cash used in investing activities (11,992,000) (9,364,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividend paid (6,339,000) (4,710,000)
Payments on long-term obligations (16,000) (14,000)
Payments on acquisition obligations - (977,000)
Proceeds from exercise of stock options 709,000 482,000
------------ ------------
Net cash used in financing activities (5,646,000) (5,219,000)
------------ ------------
Net Increase (Decrease) in Cash and
Cash Equivalents 53,014,000 (2,359,000)
Cash and Cash Equivalents - Beginning of Period 75,526,000 98,246,000
------------- ------------
Cash and Cash Equivalents - End of Period $128,540,000 $ 95,887,000
============ ============
CASH PAID DURING THE PERIOD FOR:
Interest $ 13,000 $ 15,000
Income Taxes $ 12,835,000 $ 14,373,000
See Notes to Consolidated Financial Statements
-4-
MYLAN LABORATORIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTH PERIOD ENDED
September 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 September 30,
1994 and March 31, 1994 together with the results of
operations and cash flows for the interim periods ended
September 30, 1994 and 1993. The consolidated results of
operations for the three and six months ended September 30,
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 agreement the Company will distribute a generic
form of Lilly's oral antibiotic Ceclor on behalf of STC.
The Company will initially be 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 generic product
described in the agreement.
D. 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.
-5-
MYLAN LABORATORIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTH PERIOD ENDED
September 30, 1994
Unaudited
D. (continued)
Condensed unaudited financial information of Somerset for the
three and six month periods ended September 30, 1994 and 1993
are as follows: (in thousands)
Three Months Ended Six Months Ended
September 30, September 30,
1994 1993 1994 1993
---- ---- ---- ----
Net Sales $31,474 $23,093 $56,495 $51,685
Costs and Expenses (15,897) (9,123) (28,137) (21,319)
Income Taxes (4,864) (3,690) (8,556) (10,150)
-------- -------- -------- ---------
Net Earnings $10,713 $10,280 $19,802 $20,216
======== ======== ======== ========
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 six months ended September 30,
1994 were a record high $96,013,000 and $181,159,000 representing
increases over the prior year comparable periods of 66% and 56%
respectively. These improvements are 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 net sales increased from 48% for
the quarter ended September 30, 1993 to 58% this year and from
50% for the six months ended September 30, 1993 to 60% 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 six months ended September 30, 1994 are not
necessarily indicative of the results to be expected in future
quarters.
Research and development expenditures for the three and six
month periods ended September 30, 1994 increased 10% to
$6,863,000 and 21% to $13,207,000 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 16% of net sales for
the three and six months ended September 30, 1994 as compared to
20% and 19% for the three and six months ended September 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
per share for the three and six month periods was $.07 and $.13
in 1994 and 1993.
-7-
Liquidity and Capital Resources and Financial Condition
- - ---------------------------------------------------------
Working capital increased from $191,647,000 at March 31, 1994
to $232,021,000 at September 30, 1994 as a result of continued
strong operations. The ratio of current assets to current
liabilities was 6.9 to 1 at September 30, 1994 and 11.7 to 1 at
March 31, 1994.
Net cash provided from operating activities was $70,652,000
for the six months ended September 30, 1994 compared to
$12,224,000 for the same period last year. The change is
primarily due to higher net earnings and the timing of tax
payments. 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
$7,765,000 for the six months ended September 30, 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.
Increase in intangible and other assets is due to the
shifting from short-term to long-term investment.
-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 six months ended September 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 November 9, 1994 /S/ Milan Puskar
-------------------- ---------------------------------
Milan Puskar
Chairman of the Board, Chief
Executive Officer and President
DATE November 9, 1994 /S/ Frank A. DeGeorge
--------------------- ----------------------------------
Frank A. DeGeorge
Director of Accounting and Taxation
-9-