May 3 2011
Mylan Inc. (NASDAQ: MYL) today announced its financial results for the three months ended March 31, 2011.
Financial Highlights
- Adjusted diluted earnings per share (EPS) of $0.44 for the three months ended March 31, 2011, compared to $0.36 for the three months ended March 31, 2010; a 22% increase
- Total revenues of $1.45 billion for the three months ended March 31, 2011, compared to $1.29 billion for the three months ended March 31, 2010; a 12% increase
- On a GAAP basis, diluted EPS of $0.23 for the three months ended March 31, 2011, compared to $0.20 for the prior year quarter; a 15% increase
- Announces share repurchase program for up to $350 million of Mylan's common stock and other equity securities
Mylan's Chairman and CEO Robert J. Coury commented: "I am very pleased with our financial results for the first quarter of 2011, which developed much as we expected. Through the previous steps we have taken to strategically diversify our business, not only have we realized the benefits of a well-balanced platform, but we have put ourselves in a position to be able to better absorb the inherent dynamics of the global marketplace, while at the same time delivering accelerated revenue growth and strong bottom-line performance. We are therefore reaffirming our 2011 adjusted diluted EPS guidance of $1.90 to $2.10 per share, and our 2013 growth targets."
Mylan's President, Heather Bresch added: "Our diluted EPS of $0.44 on an adjusted basis, while in line with our expectations, would have been even stronger had we not faced headwinds on various fronts. In the current quarter, we overcame unfavorable pricing in Europe, and also absorbed three cents, on a sequential quarter basis, related to a combination of share-count dilution and a higher quarterly tax rate."
In response to the favorable movement in the Company's stock price, which leads to incremental share dilution, Mylan today announced that their Board of Directors has approved the repurchase of up to $350 million of the Company's common stock and other equity securities, either in the open market or through privately-negotiated transactions. The repurchase program is expected to be completed by June 30, 2011, and does not obligate the Company to acquire any particular amount of common stock or other equity securities.
John Sheehan, Mylan's Chief Financial Officer stated: "The planned share repurchase program represents an effective and prudent use of our Company's assets and allows us to maintain discipline with respect to the number of outstanding shares, while mitigating the impact that additional dilution could have on our EPS. Additionally, our strong operations and consistent cash flow generation have positioned us to be able to finance the repurchase program, while still allowing us to further de-lever our balance sheet and retain adequate resources to take advantage of the right strategic opportunities."
Financial Results Summary
Total revenues for the quarter ended March 31, 2011 increased $156.6 million, or 12.1% to $1.45 billion from $1.29 billion in the quarter ended March 31, 2010. Total revenues include both net revenues and other revenues from third parties. Third party net revenues for the current quarter were $1.44 billion compared to $1.28 billion for the prior year quarter, representing an increase of $158.4 million, or 12.4%. Other third party revenues for the current quarter were $12.4 million compared to $14.3 million in the prior year quarter, a decrease of $1.9 million. Revenues in the current quarter were favorably impacted by the effect of foreign currency translation, generally reflecting a weaker U.S. dollar as compared to the currencies of several other markets in which Mylan operates. Translating total current year revenues at prior year exchange rates would have resulted in year-over-year growth in total revenues excluding foreign currency, of $141 million, or approximately 11%.
A tabular summary of the Company's revenues for the quarters ended March 31, 2011 and March 31, 2010, is included at the end of this release.
Mylan has two segments, "Generics" and "Specialty." Generics third party net sales, which are derived from sales in the U.S. and Canada (collectively, North America), Europe, the Middle East and Africa (collectively, EMEA) and Asia Pacific were $1.34 billion compared to $1.20 billion in the prior year quarter.
Third party net sales from North America were $674.3 million for the current quarter, compared to $552.4 million for the prior year quarter, representing an increase of $121.8 million or 22.1%. This increase was mainly driven by increased volume partially as a result of Mylan's ability to continue to be a stable and reliable source of supply to the market; new products, which contributed sales of $81.1 million in the current quarter; and incremental revenue from the acquisition of Bioniche Pharma in September 2010; partially offset by lower pricing on certain existing products.
Third party net sales from EMEA were $389.1 million for the current quarter, compared to $406.9 million for the prior year quarter, a decrease of $17.8 million, or 4.4%. Translating current quarter third party net revenues from EMEA at prior year exchange rates would have resulted in a year-over-year decrease excluding the effect of foreign currency of approximately $15 million, or 4%. This decrease was mainly the result of unfavorable market conditions and lower pricing in a number of European markets in which Mylan operates, primarily Germany, the U.K. and Portugal, partially offset by strong performances in Italy and Spain. Local currency revenues from our business in France were essentially flat as compared to the prior year, with new product launches offsetting the impact of unfavorable pricing due to an increasingly competitive market.
Sales in Asia Pacific are derived from Mylan's operations in India, Australia, Japan and New Zealand. Asia Pacific third party net sales were $276.1 million for the current quarter, compared to $236.1 million for the prior year quarter, an increase of $40.0 million, or 16.9%. Excluding the favorable effect of foreign currency, calculated as described above, the increase was approximately $24 million, or 10%. This increase is primarily driven by increased sales of anti-retroviral finished dosage form generic products and higher sales of active pharmaceutical ingredients (API) by Mylan's Matrix subsidiary in India.
For the current quarter, Specialty reported third party net sales of $97.0 million, an increase of $14.3 million, or 17.3%, from the prior year quarter of $82.7 million. The most significant contributor to Specialty Segment revenues continues to be the EpiPen® Auto-Injector. In the current quarter, Specialty realized increased sales of the EpiPen Auto-Injector, mainly as a result of favorable pricing.
Gross profit for the quarter ended March 31, 2011 was $590.9 million and gross margins were 40.8%. In the prior year quarter, gross profit was $516.3 million, and gross margins were 40.0%. Gross profit for the current year quarter was impacted by certain purchase accounting related items, of approximately $86.7 million, which consisted primarily of amortization related to purchased intangible assets. Excluding such items, gross margins would have been approximately 47%. Prior year gross profit was also impacted by similar purchase accounting related items in the amount of $71.6 million. Excluding such items, gross margins in the prior year would have been approximately 46%.
The increase in gross margin, excluding the items noted above, can be attributed to both Generics and Specialty. The improvement in the Generics Segment was a result of new product introductions and a favorable product mix in North America. Gross margin in the Specialty Segment improved as a result of favorable pricing, mainly on the EpiPen® Auto-injector.
Earnings from operations were $211.7 million for the three months ended March 31, 2011, compared to $198.5 million for the prior year quarter. During the three months ended March 31, 2011, the Company recorded $24.0 million in net charges for litigation settlements, principally related to an adverse ruling for an anti-competition claim in France, which the Company intends to appeal. Excluding the impact of purchase accounting related items in both periods, as mentioned above, as well as net charges for litigation settlements, earnings from operations increased to $322.4 million in the current quarter from $270.9 million in the prior year quarter. The increase in operating income was driven by higher sales and gross profit as discussed above, partially offset by an increases in selling, general and administrative (SG&A) and research and development (R&D) expenses.
Interest expense for the quarter ended March 31, 2011 was $84.4 million, compared to $74.0 million for the prior year quarter. The increase is primarily due to interest associated with the 2017 and 2020 Senior Notes debt offerings in May 2010 and July 2010. Included in interest expense for the current quarter and the comparable prior year period are $11.9 million and $11.0 million, primarily related to the amortization of the discounts on our convertible debt instruments, net of amortization of the premium on our 2020 Senior Notes.
EBITDA, which is defined as net income (loss) (excluding the non-controlling interest and income from equity method investees) plus income taxes, interest expense, depreciation and amortization, was $334.6 million for the quarter ended March 31, 2011, and $302.1 million for the prior year quarter. After adjusting for certain items as further discussed below, adjusted EBITDA was $386.0 million for the current quarter and $323.0 million for the prior year quarter.