FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
Commission File Number 1-09623
IVAX CORPORATION
FLORIDA 16-1003559
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 BISCAYNE BOULEVARD, MIAMI, FLORIDA 33137
(Address of principal executive offices) (Zip Code)
(305) 575-6000
(Registrant's telephone number, including area code)
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 12 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.
120,701,322 SHARES OF COMMON STOCK, $.10 PAR VALUE, OUTSTANDING AS OF
APRIL 30, 1996.
IVAX CORPORATION
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
--------
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 2
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 6 - Exhibits and Reports on Form 8-K 12
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
IVAX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
1996 1995
(unaudited) (audited)
---------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 7,925 $ 14,720
Accounts receivable, net 411,513 359,165
Inventories 267,227 242,260
Other current assets 66,046 60,673
---------------- -----------------
Total current assets 752,711 676,818
Property, plant and equipment, net 396,416 385,419
Cost in excess of net assets of acquired companies, net 139,742 138,423
Patents, trademarks, licenses and other intangibles, net 51,810 50,859
Other 85,792 83,791
---------------- -----------------
Total assets $ 1,426,471 $ 1,335,310
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 20,416 $ 4,807
Current portion of long-term debt 3,094 3,521
Accounts payable 82,596 92,343
Accrued income taxes payable 12,910 8,632
Accrued expenses and other current liabilities 118,761 96,610
---------------- -----------------
Total current liabilities 237,777 205,913
Long-term debt, net of current portion 305,120 298,857
Other long-term liabilities 26,011 26,314
Minority interest 15,850 15,054
--------------- ----------------
Total liabilities 584,758 546,138
--------------- ----------------
Shareholders' equity:
Common stock 12,026 11,803
Capital in excess of par value 474,038 461,603
Retained earnings 363,663 322,117
Cumulative translation adjustment and other (8,014) (6,351)
---------------- -----------------
Total shareholders' equity 841,713 789,172
---------------- -----------------
Total liabilities and shareholders' equity $ 1,426,471 $ 1,335,310
================ =================
The accompanying notes to condensed consolidated
financial statements are an integral part of
these balance sheets.
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IVAX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED MARCH 31, 1996 1995
---------------- ----------------
(In thousands, except per share data)
NET REVENUES $ 334,045 $ 281,080
COST OF SALES 189,570 161,362
--------------- ----------------
Gross profit 144,475 119,718
--------------- ----------------
OPERATING EXPENSES:
Selling 50,965 43,233
General and administrative 28,498 24,789
Research and development 16,522 15,185
Amortization of intangible assets 2,563 2,383
Merger expenses 184 -
--------------- --------------
Total operating expenses 98,732 85,590
--------------- ----------------
Income from operations 45,743 34,128
OTHER INCOME (EXPENSE):
Interest income 321 561
Interest expense (5,691) (5,401)
Other income, net 3,840 3,211
--------------- ----------------
(1,530) (1,629)
--------------- ----------------
Income before income taxes, minority interest
and extraordinary items 44,213 32,499
PROVISION FOR INCOME TAXES 6,133 7,860
--------------- ----------------
Income before minority interest and extraordinary items 38,080 24,639
MINORITY INTEREST (2,184) (1,336)
--------------- ----------------
Income before extraordinary items 35,896 23,303
Extraordinary items, net of tax (1) 54
--------------- ----------------
NET INCOME $ 35,895 $ 23,357
=============== ================
EARNINGS PER COMMON SHARE:
Primary:
Earnings before extraordinary items $ .30 $ .20
Extraordinary items - -
--------------- ----------------
Net earnings $ .30 $ .20
=============== ================
Fully Diluted:
Earnings before extraordinary items $ .30 $ .20
Extraordinary items - -
--------------- ----------------
Net earnings $ .30 $ .20
=============== ================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Primary 121,379 117,564
=============== ================
Fully Diluted 121,384 118,690
=============== ================
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-3-
IVAX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED MARCH 31, 1996 1995
------------- --------------
(In thousands)
Cash flows from operating activities:
Net income $ 35,895 $ 23,357
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 13,669 13,232
Provision for allowances for doubtful accounts 762 1,847
Gains on sale of long-term assets (105) (2,921)
Minority interest 2,184 1,336
Changes in assets and liabilities:
Increase in accounts receivable (45,550) (8,013)
Increase in inventories (21,621) (13,028)
Increase in other current assets (4,100) (2,780)
Decrease in other assets 189 61
Increase (decrease) in accounts payable, accrued expenses
and other current liabilities 2,741 (17,793)
Decrease in other long-term liabilities (2,826) (46)
Other, net (945) 172
------------- --------------
Net cash used for operating activities (19,707) (4,576)
------------- --------------
Cash flows from investing activities:
Capital expenditures, net of proceeds from sales (20,179) (25,604)
Net proceeds from sale/(acquisitions) of patents, trademarks,
licenses and other intangibles (758) 2,002
Other, net (2,006) (594)
------------- --------------
Net cash used for investing activities (22,943) (24,196)
------------- --------------
Cash flows from financing activities:
Payments on long-term debt and loans payable (37,552) (19,947)
Borrowings on long-term debt and loans payable 60,708 20,205
Issuance of common stock 10,509 2,457
------------- --------------
Net cash provided by financing activities 33,665 2,715
------------- --------------
Effect of exchange rate changes on cash 2,190 934
------------- --------------
Net decrease in cash and cash equivalents (6,795) (25,123)
Cash and cash equivalents at the beginning of the year 14,720 37,045
------------- --------------
Cash and cash equivalents at the end of the period $ 7,925 $ 11,922
============= ==============
Supplemental disclosures:
Interest paid $ 2,384 $ 1,304
============= ==============
Income tax payments $ 3,539 $ 1,843
============= ==============
The accompanying notes to condensed
consolidated financial statements are an
integral part of these statements.
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IVAX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL:
In management's opinion, the accompanying unaudited condensed
consolidated financial statements of IVAX Corporation and subsidiaries ("IVAX")
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position of IVAX as of March 31, 1996,
and the results of operations for the three months ended March 31, 1996 and
1995. The results of operations and cash flows for the three months ended March
31, 1996 are not necessarily indicative of the results of operations or cash
flows which may be reported for the remainder of 1996.
The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission for reporting on Form 10-Q. Pursuant to such rules and regulations,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The financial statements should be read in
conjunction with the consolidated financial statements and the notes included in
IVAX' Annual Report on Form 10-K for the year ended December 31, 1995.
The accounting policies followed for interim financial reporting are
the same as those disclosed in Note 2 of the Notes to Consolidated Financial
Statements included in IVAX' Annual Report on Form 10-K for the year ended
December 31, 1995.
(2) EARNINGS PER SHARE:
Primary earnings per share is computed by dividing net income by the
weighted average number of common and dilutive common equivalent shares
outstanding for each period. Common stock equivalents include the dilutive
effect of all outstanding stock options and warrants using the treasury stock
method. Fully diluted earnings per share assumes the maximum dilutive effect
from stock options and warrants, and if applicable, the conversion equivalents
of the 6-1/2% Convertible Subordinated Notes due 2001 and, for the three month
period ended March 31, 1995, the 9.00% Convertible Subordinated Debentures due
1995.
(3) INCOME TAXES:
The provision for income taxes is based on the consolidated United
States entities' and individual foreign companies' estimated tax rates for the
applicable year. IVAX utilizes the liability method and deferred taxes are
determined based on the estimated future tax effects of differences between the
financial statement and tax basis of assets and liabilities using applicable tax
laws. Deferred income tax provisions and benefits are based on the changes in
the deferred tax asset or tax liability from period to period.
-5-
The provision for income taxes consists of the following (in
thousands):
Three Months Ended March 31, 1996 1995
---------------- ---------------
Current:
United States $ (6,413) $ 5,530
Foreign, including Puerto Rico and U.S. Virgin Islands 12,541 2,243
Deferred 5 87
------------- ---------------
$ 6,133 $ 7,860
================ ===============
(4) BUSINESS COMBINATIONS:
On March 1, 1996, IVAX acquired Elvetium S.A. (Argentina), Alet
Laboratorios S.A.E.C.I. y E. and Elvetium S.A. (Uruguay), three affiliated
companies engaged in the manufacture and marketing of pharmaceuticals in
Argentina and Uruguay, in exchange for 1,490,909 shares of IVAX' common stock.
Although the acquisition was accounted for using the pooling of interests method
of accounting, the acquisition was recorded as of January 1, 1996 and the
accompanying historical condensed consolidated financial statements have not
been restated to give retroactive effect to the acquisition due to the
immateriality of the related amounts.
(5) DEBT:
On March 15, 1996, IVAX' $130,000,000 revolving line of credit was
amended to provide for an additional $45,000,000 in borrowings for a period of
ninety days, and to change the expiration date of the revolving line of credit
from March 24, 1997 to May 24, 1997. At March 31, 1996, $106,000,000 in
borrowings were outstanding under the revolving line of credit. In addition, at
March 31, 1996, $15,000,000 in borrowings were outstanding under a short-term
credit facility established February 26, 1996.
(6) SUBSEQUENT EVENTS:
On May 14, 1996, IVAX entered into a new revolving line of credit with
a bank syndicate permitting borrowings of up to $425,000,000. The facility is
secured by a pledge of the stock of McGaw, Inc. and IVAX has agreed not to
pledge or dispose of certain of IVAX' significant subsidiaries. Borrowings under
this facility generally accrue interest at the London Interbank Offer Rate
(LIBOR) plus .45% through August 19, 1996, and thereafter at LIBOR plus between
.35% to .70%, depending on certain financial ratios. The new facility has a five
year term and contains various financial covenants, including a restriction on
the payment of dividends by IVAX during any fiscal year in excess of 35% of
IVAX' consolidated net income. Proceeds from the new line of credit have been
used to refinance the credit facilities discussed in Note 5 above, and will be
used for working capital and general corporate purposes, including to finance
acquisitions and to make an investment in or extension of credit to McGaw, Inc.
to permit it to redeem its 10-3/8% Senior Notes due 1999.
On April 26, 1996, IVAX' Board of Directors declared a semi-annual cash
dividend of $.05 per share, payable on June 3, 1996 to holders of record of
IVAX' common stock on May 10, 1996.
-6-
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements, the related Notes to Consolidated
Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in IVAX' Annual Report on Form 10-K
for the year ended December 31, 1995 and the Condensed Consolidated Financial
Statements and the related Notes to Condensed Consolidated Financial Statements
included in Item 1 of this Quarterly Report on Form 10-Q. Except for historical
information contained herein, the matters discussed below are forward looking
statements that involve risks and uncertainties, including but not limited to
economic, competitive, governmental and technological factors affecting IVAX'
operations, markets, products and prices, and other factors discussed elsewhere
in this report and the documents filed by IVAX with the Securities and Exchange
Commission ("SEC").
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS
ENDED MARCH 31, 1995
IVAX reported net income of $35.9 million for the three months ended
March 31, 1996, compared to $23.4 million for the first quarter of 1995, an
increase of $12.5 million, or 54%. Primary and fully diluted earnings per common
share were $.30 for the 1996 first quarter compared to $.20 for the first
quarter of the prior year.
NET REVENUES AND GROSS PROFIT BY BUSINESS SEGMENT:
(In thousands)
Three Months Ended March 31, 1996 1995
---------------------------------- ----------------------------------
Net Gross Net Gross
Revenues Profit Revenues Profit
--------------- --------------- ---------------- ---------------
Pharmaceuticals $ 212,130 $ 99,384 $ 158,732 $ 69,768
Intravenous products 83,203 26,828 83,247 32,491
Other operations 39,244 18,263 39,181 17,459
Intersegment eliminations (532) - (80) -
--------------- --------------- ---------------- ---------------
Total $ 334,045 $ 144,475 $ 281,080 $ 119,718
=============== =============== ================ ===============
Net revenues for the first three months of 1996 totalled $334.0
million, an increase of $53.0 million, or 19%, compared to the same period of
the prior year. Gross profit for the three months ended March 31, 1996 increased
$24.8 million, or 21%, from the same period of the prior year. Gross profit was
$144.5 million (43.3% of net revenues) for the first three months of 1996,
compared to $119.7 million (42.6% of net revenues) for the first three months of
1995.
Net revenues of IVAX' pharmaceutical operations increased $53.4
million, or 34%, in comparison to the first three months of 1995. Domestic and
international pharmaceutical operations contributed 76% and 24%, respectively,
to this increase.
Domestic pharmaceutical net revenues totalled $134.2 million for the
first three months of 1996 compared to $93.6 million for the same period of
1995. The $40.6 million, or 43%, increase in domestic pharmaceuticals net
revenues was primarily attributable to the sale of new generic products
manufactured by IVAX and introduced into the market during the past twelve
months and was partially
-7-
offset by a decline of $12.2 million in domestic net revenues of other
pharmaceutical products due to competition.
During March 1996, IVAX received FDA approval to market cefadroxil, the
generic equivalent of Bristol-Myers Squibb's antibiotic Duricef(R), which
contributed $10.5 million in net revenues to the 1996 first quarter. In December
1995, IVAX introduced its albuterol metered dose inhaler, the generic equivalent
of Glaxo Inc.'s Ventolin(R) Inhalation Aerosol, used in the treatment of asthma.
The launch of this product was continued during the first quarter of 1996,
generating first quarter net revenues of $28.4 million. Although sales of these
new products were a significant factor contributing to the overall increase in
net revenues of the domestic pharmaceutical operations compared to the first
quarter of 1995, the levels of revenues generated during the introduction period
of a new generic drug are often higher than the levels experienced for routine
inventory replenishment by customers in the months following the drug's
introduction. In addition, the companies marketing the brand name versions of
cefadroxil and albuterol have each, directly or through a third party, launched
their own generic forms of these products.
Net revenues attributable to sales of cefaclor, approved in April 1995,
accounted for $16.8 million of the increase in net revenues in the first quarter
of 1996 compared to the same prior year period. Net revenues attributable to
sales of verapamil HCl ER tablets totalled $15.9 million in the 1996 first
quarter compared to $21.8 million in the same quarter of 1995. The decline in
verapamil net revenues was due primarily to a reduction in the net selling price
caused by competition, offset in part by increased unit volume caused by an
increase in the substitution rate of generic verapamil for brand name verapamil.
As noted in previous documents filed with the SEC, other manufacturers
may obtain regulatory approvals or otherwise determine to market generic
products equivalent to IVAX' manufactured generic products in 1996 and
thereafter. As additional competitors enter the generic pharmaceutical market
with products similar to those manufactured by IVAX, the resulting competition
is likely to reduce IVAX' net revenues and gross profit generated from those
products. In addition, certain raw materials and components used in the
manufacture of IVAX' pharmaceutical products, including those described above,
are available from limited sources, and in some cases a single source. Changes
in the availability of or the price charged for such raw materials may affect
IVAX' future net revenues or gross profit attributable to such products.
Furthermore, because raw material sources for pharmaceutical products must
generally be approved by regulatory authorities, changes in raw materials
suppliers could result in production delays and higher raw material costs.
IVAX' international pharmaceutical operations generated net revenues
of $77.9 million for the first three months of 1996, compared to $65.1 million
for the same period of the prior year. The $12.8 million, or 20%, increase in
international pharmaceutical net revenues included an increase of $8.4 million
attributable to the combined operations of Elvetium S.A. (Argentina), Alet
Laboratorios S.A.E.C.I. y E. and Elvetium S.A. (Uruguay), (collectively,
"Elvetium"), acquired in March 1996. Although the acquisition of Elvetium was
accounted for as a pooling of interests, the acquisition was recorded as of
January 1, 1996 and IVAX' historical results of operations were not restated to
give retroactive effect to this acquisition due to the immateriality of the
related amounts. The remaining $4.4 million increase in net revenues of the
international pharmaceutical operations was due to higher net revenues of Galena
a.s. and higher sales of branded products in the United Kingdom, partially
offset by the unfavorable impact of exchange rate differences in comparison to
the prior year period.
The gross profit percentage of IVAX' pharmaceutical operations was
46.9% for the first three months of 1996 compared to 44.0% for the first three
months of 1995. The increase in the gross
-8-
profit percentage was primarily due to sales of IVAX' recently approved generic
products and Elvetium's pharmaceutical products, which generally have a higher
gross profit percentage than IVAX' other pharmaceutical products. The increase
in the gross profit percentage was partially offset by a decrease in the gross
profit percentage of IVAX' other domestic generic pharmaceutical products,
including verapamil. Continued competition in the markets for verapamil and
cefaclor is likely to result in a lower gross profit percentage for these
products in 1996 as compared to 1995.
Net revenues of the intravenous products division totaled $83.2 million
in the first quarter of 1996 and 1995. Higher sales of needlefree intravenous
sets, and increased revenues from specialty nutrition solutions and admixture
services, were offset by lower net revenues attributable to both Hespan(R),
McGaw's brand name blood plasma expansion product, and basic nutrition
solutions. The gross profit percentage of the intravenous products division
decreased from 39.0% for the first three months of 1995 to 32.2% for the same
period in 1996. The $5.7 million reduction in gross profit and the decrease in
the gross profit percentage were primarily due to the reduction in the net
selling price of Hespan(R) caused by competition, in combination with a charge
to cost of sales due to a decrease in inventory carrying costs as a result of
lower standard manufacturing costs adopted as a result of manufacturing
efficiencies achieved in 1995. In February 1995, another pharmaceutical company
introduced a generic version of Hespan(R) in the United States resulting in both
lower prices and a reduction in the intravenous products division's share of the
market. Net revenues and gross profit derived from Hespan(R) are likely to
continue to decrease in 1996 as compared to 1995.
Net revenues and gross profit of IVAX' personal care products,
diagnostics and specialty chemicals operations, excluding intersegment
eliminations, collectively represent approximately 12% and 13%, respectively, of
consolidated net revenues and consolidated gross profit for the first quarter of
1996. Combined net revenues of these other operations were flat compared with
the first quarter of 1995. Combined gross profit was slightly higher than the
comparable period of the prior year primarily due to the introduction by the
personal care products group of the Iman(TM) product line, which was acquired in
November 1995.
OPERATING EXPENSES BY BUSINESS SEGMENT:
(In thousands)
Research Amortization
General and and of Merger
Selling Administrative Development Intangibles Expenses Total
------- --------------- --------------- ------------ ----------- --------
1996 First Quarter
- ----------------------
Pharmaceuticals $ 25,765 $ 14,682 $ 11,146 $ 750 $ 71 $ 52,414
Intravenous products 13,845 5,168 4,308 993 - 24,314
Other operations 11,355 3,743 1,068 820 - 16,986
Corporate and other - 4,905 - - 113 5,018
----------- ------------ ------------ ----------- ------------- -------------
Total $ 50,965 $ 28,498 $ 16,522 $ 2,563 $ 184 $ 98,732
=========== ============ ============ =========== ============= =============
1995 First Quarter
- ----------------------
Pharmaceuticals $ 18,862 $ 13,018 $ 10,673 $ 590 $ - $ 43,143
Intravenous products 13,868 6,127 3,547 1,172 - 24,714
Other operations 10,503 3,595 965 621 - 15,684
Corporate and other - 2,049 - - - 2,049
----------- ------------ ------------ ------------ ------------- -------------
Total $ 43,233 $ 24,789 $ 15,185 $ 2,383 $ - $ 85,590
=========== ============ ============ ============ ============= =============
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Selling expenses totalled $51.0 million (15.3% of net revenues) for the
first three months of 1996, compared to $43.2 million (15.4% of net revenues)
for the first three months of 1995, an increase of $7.7 million. Approximately
34% of the total increase, or $2.6 million, was attributable to selling expenses
of Elvetium, which was acquired in the first quarter of 1996. The remaining $5.1
million increase was primarily due to increases in sales and marketing expenses
associated with the launch of newly approved products of IVAX' pharmaceutical
operations.
General and administrative expenses totalled $28.5 million (8.5% of net
revenues) for the first quarter of 1996, compared to $24.8 million (8.8% of net
revenues) for the first quarter of 1995, an increase of $3.7 million. Corporate
general and administrative expenses increased $2.9 million from the 1995 first
quarter primarily due to increases in personnel, travel and facilities costs and
a receivable recorded in the prior year first quarter related to lower than
anticipated worker's compensation incidence rates. General and administrative
expenses associated with Elvetium, acquired during the first quarter of 1996,
were primarily responsible for the pharmaceutical operations' increase in this
expense category.
Research and development expenses for the first three months of 1996
increased $1.3 million, or 9%, compared to the 1995 first quarter, to a total of
$16.5 million. Expenditures by IVAX' pharmaceutical operations represented 67%
of the total research and development expenses for the first three months of
1996. Management intends to continue to increase the level of its research and
development efforts. Actual expenditures will depend on, among other things, the
outcome of clinical testing of products under development, delays or changes in
government required testing and approval procedures, technological and
competitive developments, and strategic marketing decisions.
CURRENCY FLUCTUATIONS
For the three months ended March 31, 1996 and 1995, approximately 25%
of IVAX' net revenues were attributable to operations which principally
generated revenues in currencies other than the United States dollar.
Fluctuations in the value of foreign currencies relative to the United States
dollar impact the reported results of operations for IVAX. If the United States
dollar weakens relative to the foreign currency, the earnings generated in the
foreign currency will, in effect, increase when converted into United States
dollars and vice versa. As a result of exchange rate differences, net revenues
decreased by approximately $1.7 million for the three months ended March 31,
1996 as compared to the three months ended March 31, 1995.
INCOME TAXES
IVAX' effective tax rate was 14% and 24% for the three months ended
March 31, 1996 and 1995, respectively. The decline in IVAX' consolidated
effective tax rate was primarily the result of a higher proportion of taxable
income generated by IVAX' operations in Ireland, Puerto Rico and the U.S. Virgin
Islands, which are taxed at lower statutory rates than IVAX' other operations,
and a tax incentive provided by the state of California. The relative
contributions to taxable income of IVAX' albuterol metered dose inhaler, which
is manufactured in Ireland and has an approximate 10% effective tax rate, as
well as cefaclor and cefadroxil, which are manufactured in the U.S. Virgin
Islands and have an approximate 5% effective tax rate, were the primary
contributors to the lower effective tax rate in the first quarter of 1996. IVAX'
future consolidated effective tax rate will, to a large extent, depend on the
tax jurisdictions in which its products are developed and manufactured, and is
expected to increase as the year progresses.
-10-
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, IVAX' working capital was approximately $514.9
million, compared to $470.9 million at December 31, 1995. Cash and cash
equivalents totalled $7.9 million at March 31, 1996, as compared to $14.7
million at year-end 1995 and $11.9 million as of March 31, 1995.
IVAX used $19.7 million in cash for operating activities during the
first quarter of 1996 compared to $4.6 million in the first quarter of 1995. The
$15.1 million increase in cash used for operating activities, as compared to the
first quarter of the prior year, was primarily the result of the higher rate of
growth in accounts receivable and inventories, partially offset by an increase
in current liabilities of $2.7 million compared to a decrease of $17.8 million
in the first quarter of 1995. The increase in accounts receivable compared to
the prior year first quarter was primarily due to the launch of new manufactured
generic products during the second half of 1995 and the first quarter of 1996
and the extension of credit terms in connection with the launch of those
products.
Investing activities used $22.9 million of cash during the first
quarter of 1996, compared to $24.2 million in the first quarter of 1995, largely
reflecting a lower level of capital expenditures. Cash utilized for capital
expenditures decreased to $20.2 million, more than 85% of which related to IVAX'
pharmaceutical and intravenous operations, from $25.6 million in the first
quarter of 1995. In addition, during the first quarter of 1995, IVAX' personal
care products group sold certain trademarks resulting in $2.8 million in
proceeds.
Net cash provided by financing activities was $33.7 million during the
first quarter of 1996, compared to $2.7 million in the first quarter of 1995,
primarily reflecting additional borrowings to finance the growth in accounts
receivable and inventories, and higher levels of cash received from the exercise
of stock options.
IVAX issued 1,490,909 shares of its common stock in March 1996 to
acquire Elvetium. The acquisition was accounted for as a pooling of interests.
As discussed in Note 6, Subsequent Events, in the Notes to Condensed
Consolidated Financial Statements, on May 14, 1996, IVAX entered into a new
revolving line of credit with a bank syndicate permitting borrowings of up to
$425 million. Proceeds from the new line of credit have been used to refinance
IVAX' existing credit facilities, and will be used for working capital and
general corporate purposes, including to finance acquisitions and to make an
investment in or extension of credit to McGaw, Inc. to permit it to redeem its
10-3/8% Senior Notes due 1999.
As discussed in Note 6, Subsequent Events, in the Notes to Condensed
Consolidated Financial Statements, on April 26, 1996, IVAX' Board of Directors
declared a semi-annual cash dividend of $.05 per share, payable on June 3, 1996
to holders of record of IVAX' common stock on May 10, 1996. In each of June and
December 1995, IVAX paid cash dividends of $.04 per share.
-11-
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
On May 10, 1996, the United States Court of Appeals for the Federal
Circuit affirmed the District Court's ruling denying Eli Lilly and Company's
motion for preliminary injunction in the patent lawsuit styled ELI LILLY AND
COMPANY V. AMERICAN CYANAMID COMPANY, BIOCRAFT LABORATORIES, INC., ZENITH
LABORATORIES, INC. AND BIOCHIMICA OPOS S.P.A. previously reported in IVAX'
Annual Report on Form 10-K for the year ended December 31, 1995.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) CURRENT REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the registrant during the three
months ended March 31, 1996.
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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.
IVAX CORPORATION
Date: May 15, 1996 By: /S/ MICHAEL W. FIPPS
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Michael W. Fipps
Senior Vice President-Finance
Chief Financial Officer