Mylan Reports Third Quarter 2018 Results and Reaffirms 2018 Guidance
HERTFORDSHIRE, England and PITTSBURGH, Nov. 5, 2018 /PRNewswire/ -- Mylan N.V. (NASDAQ: MYL) today announced its financial results for the quarter and nine months ended September 30, 2018.
Third Quarter 2018 Financial Highlights
-- U.S. GAAP diluted earnings per ordinary share ("U.S. GAAP EPS") of
$0.34, up 113% over the prior year period.
-- Total revenues of $2.86 billion, down 4% compared to the prior year
period and adjusted diluted earnings per ordinary share ("adjusted EPS")
of $1.25, up 14% over the prior year period.
-- Revenue Highlights:
-- Rest of World segment net sales of $773.7 million, up 4%, up 11% on
a constant currency basis.
-- Europe segment net sales of $1.04 billion, flat, up 2% on a constant
currency basis.
-- North America segment net sales of $1.01 billion, down 14%, down 13%
on a constant currency basis, primarily due to the combined impact
of the implementation of new accounting standards, lower volumes
including EpiPen® Auto-Injector sales, the divestiture of certain
contract manufacturing assets, the loss of exclusivity of a product
and actions associated with the restructuring and remediation
program at the Morgantown manufacturing facility.
-- U.S. GAAP net cash provided by operating activities for the nine months
ended September 30, 2018 of $1.71 billion, up 9% compared to $1.57
billion in the prior year period.
-- Adjusted free cash flow for the nine months ended September 30, 2018 of
$2.02 billion, up 6% compared to $1.91 billion in the prior year period.
-- 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 said: "Mylan's third quarter performance was in line with our expectations and we delivered solid year-over-year growth. Our confidence in the company's bright future extends well beyond any single factor or particular quarter, including the current, short-term macro market turbulence our industry is experiencing. Year-to-date, we have launched nearly 475 new products across our segments, including a record number of complex generics and biosimilars for Mylan. These medicines represent many different therapeutic categories, channels and dosage forms.
We remain committed to our full-year 2018 guidance, and this confirmation is not dependent on any single product approval or launch. As we look ahead, we're very optimistic about our long-term growth prospects as we have secured almost all regulatory approvals necessary for our key 2019 product drivers around the world."
Mylan President Rajiv Malik continued: "This record year of scientific accomplishments represents a significant milestone in the company's nearly 60-year history. Our recent successes demonstrate the strength of our scientific platform and our ability to manage and execute on new products, including complex generics and biologics. These milestones are the culmination of years-long scientific investments and reinforce our dedication to enhance access to patients. The Mylan teams managing the science and working closely with our partners have consistently delivered remarkable results, and we look forward to continuing this momentum as we close out 2018."
Mylan CFO Ken Parks added: "Mylan continues to generate strong cash flow with more than $2.0 billion of adjusted free cash flow for the first nine months of 2018, up 6% from the prior year and a healthy 119% of adjusted net earnings of $1.7 billion. We remain confident in our full year adjusted free cash flow outlook. As anticipated, our capital deployment priority is focused on deleveraging in the second half of 2018, and we expect this to continue into 2019. We intend to repay at least $1.2 billion of debt maturing through year end 2019 and remain fully committed to maintaining our investment grade credit rating."
Financial Summary
Three Months Ended
Nine Months Ended
September 30,
September 30,
(Unaudited; in millions, except per share
amounts and %s) 2018 2017 Percent 2018 2017 Percent
Change Change
Total Revenues (1) $
2,862.4 $
2,987.1 (4)% $
8,355.2 $
8,668.8 (4)%
North America Net Sales 1,012.3 1,172.2 (14)% 2,998.4 3,666.7 (18)%
Europe Net Sales 1,041.3 1,040.8 -% 3,070.3 2,887.1 6%
Rest of World Net Sales 773.7 743.3 4% 2,164.5 2,016.4 7%
Other Revenues 35.1 30.8 14% 122.0 98.6 24%
US GAAP Gross Profit $
1,039.2 $
1,178.1 (12)% $
2,986.0 $
3,488.5 (14)%
US GAAP Gross Margin 36.3
% 39.4
% 35.7
% 40.2
%
Adjusted Gross Profit (2) $
1,584.7 $
1,572.6 1% $
4,500.2 $
4,621.8 (3)%
Adjusted Gross Margin (2) 55.4
% 52.6
% 53.9
% 53.3
%
US GAAP Net Earnings $
176.7 $
88.3 100% $
301.3 $
451.7 (33)%
US GAAP EPS $
0.34 $
0.16 113% $
0.58 $
0.84 (31)%
Adjusted Net Earnings (2) $
648.0 $
589.7 10% $
1,695.1 $
1,679.5 1%
Adjusted EPS (2) $
1.25 $
1.10 14% $
3.28 $
3.13 5%
EBITDA (2) $
841.6 $
776.9 8% $
2,188.1 $
2,339.2 (6)%
Adjusted EBITDA (2) $
935.9 $
923.8 1% $
2,616.4 $
2,667.2 (2)%
___________
(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.
The U.S. Food and Drug Administration ("FDA") completed an inspection at Mylan's plant in Morgantown, West Virginia earlier this year and made observations through a Form 483. The Company has submitted a comprehensive response to the FDA and committed to a robust improvement plan. During the second quarter of 2018, the Company commenced a restructuring and remediation program aimed at reducing complexity at the Morgantown manufacturing facility. The program includes the discontinuation and transfer to other manufacturing sites of a number of products, a reduction of the workforce and extensive remediation activities. These actions have led to a temporary disruption in supply of certain products.
Once the remediation and restructuring activities in Morgantown are completed, the Company anticipates improved costs, efficiencies and profitability from the operations at the plant. The value and profitability related to the rationalized products is not proportionate to the reduced volumes of those products as the Company expects that manufacturing costs related to transferred products will be reduced and many of the discontinued products have lower than average gross margins. In addition, as it relates to North America, no significant new product revenue is forecasted from the Morgantown facility in 2019, and only eight of our top 50 gross margin generating products and only one out of the top 10 are currently manufactured in Morgantown.
The Company has incurred expenses amounting to approximately $97.7 million and $184.2 million for the three and nine months ended September 30, 2018, respectively, for incremental manufacturing variances, site remediation and restructuring charges. Mylan remains committed to maintaining the highest quality manufacturing standards at its facilities around the world and to continuous improvement in a time of evolving industry dynamics and regulatory expectations.
On August 31, 2018, the Company completed an agreement with certain subsidiaries of Novartis AG ("Novartis") to purchase the worldwide rights to their global cystic fibrosis products consisting of the TOBI Podhaler® and TOBI® solution. Tobramycin is the standard of care for treatment of pseudomonas aeruginosa, a leading driver of infection in cystic fibrosis. These products further strengthen our existing presence in cystic fibrosis, especially with our Creon Franchise in Europe, Australia, Japan and Canada. The asset acquisition allows us to further extend our respiratory franchise into rare/orphan disease indications and broaden our portfolio into dry powdered inhalers and nebulized products. Tobi Podhaler (TM) is manufactured using a proprietary Pulmosphere technology for which we have acquired exclusive rights for use, hence we expect a high barrier for generic entry.
Third Quarter 2018 Financial Results
Total revenues were $2.86 billion, compared to $2.99 billion for the comparable prior year period, representing a decrease of $124.7 million, or 4%. Total revenues include both net sales and other revenues from third parties. Net sales for the current quarter were $2.83 billion, compared to $2.96 billion for the comparable prior year period, representing a decrease of $129.0 million, or 4%. Other revenues for the current quarter were $35.1 million, compared to $30.8 million for the comparable prior year period, an increase of $4.3 million.
The decrease in total revenues included lower net sales in the North America segment of 14%. This decrease was partially offset by increased net sales in the Rest of World segment of 4%. Net sales in the Europe segment were essentially flat. The overall decrease in total revenues was primarily driven by a decrease in net sales from existing products. Net sales from existing products, partially offset by new product launches, decreased on a constant currency basis by approximately $14.6 million primarily as a result of lower volumes, and to a lesser extent, pricing. Net sales were also negatively impacted by approximately $39.8 million due to the adoption of new accounting standards. Mylan's total revenues 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 quarter total revenues was approximately $75.0 million, resulting in a decrease in constant currency total revenues of approximately $49.7 million, or 2%.
-- Net sales in the North America segment totaled $1.01 billion in the
current quarter, a decrease of $159.9 million or 14% when compared to
the prior year period. This decrease was due primarily to lower volumes
on existing products, including the EpiPen® Auto-Injector, partially
offset by new product sales including the recent launch of Fulphila(TM),
a biosimilar to Neulasta® (pegfilgrastim). The decline in volumes was
primarily driven by the timing of purchases of our products by
customers, the divestiture of certain contract manufacturing assets, the
loss of exclusivity of a product, and actions associated with the
restructuring and remediation program at the Morgantown manufacturing
facility. In addition, net sales were negatively impacted by
approximately $50.4 million related to the implementation of new
accounting standards. Pricing slightly decreased 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 in the Europe segment totaled $1.04 billion in the current
quarter, an increase of $0.5 million, when compared to the prior year
period. This increase was primarily the result of new product sales and
higher volumes on existing products. These were partially offset by
lower pricing and the unfavorable impact of foreign currency translation
which was approximately $17.2 million, or 2%. Constant currency net
sales increased by approximately $17.7 million, or 2% when compared to
the prior year period.
-- Net sales in the Rest of World segment totaled $773.7 million in the
current quarter, an increase of $30.4 million, or 4% when compared to
the prior year period. This increase was primarily the result of new
product sales, partially offset by the unfavorable impact of foreign
currency translation and lower pricing. The increase in net sales as a
result of new products was primarily due to new product sales from the
Company's anti-retroviral therapy franchise combined with new product
sales in Australia and China. Also, volumes were essentially flat as an
increase in sales of key brands in China was offset by decreases in
other markets. Overall, net sales from Rest of World were unfavorably
impacted by the effect of foreign currency translation by approximately
$55.0 million, or 7% during the three months ended September 30, 2018.
Constant currency net sales increased by approximately $85.4 million, or
11%.
U.S. GAAP gross profit was $1.04 billion and $1.18 billion for the third quarter of 2018 and 2017, respectively. U.S. GAAP gross margins were 36% and 39% in the third quarter of 2018 and 2017, respectively. U.S. GAAP gross margins were negatively impacted by approximately 230 basis points related to the incremental amortization from product acquisitions and in-process research and development ("IPR&D") impairment charges. Gross margins were also negatively affected by approximately 340 basis points as a result of incremental manufacturing expenses, site remediation expenses and incremental restructuring charges incurred during the current quarter principally as a result of the activities at the Company's Morgantown facility. In addition, gross margins were negatively impacted in the current quarter as a result of lower gross profit from the sales of existing products in North America. The unfavorable impact of these items was partially offset by the impact from new product sales and the impact of incremental sales of certain key global brands. Adjusted gross profit was $1.58 billion and adjusted gross margins were 55% for the third quarter of 2018 compared to adjusted gross profit of $1.57 billion and adjusted gross margins of 53% in the prior year period. Adjusted gross margins were favorably impacted by new product sales and the impact of incremental sales of certain global key brands.
R&D expense for the three months ended September 30, 2018 was $144.1 million, compared to $182.3 million for the comparable prior year period, a decrease of $38.2 million. This decrease was primarily due to lower expenditures related to the Company's respiratory programs, lower expenses due to the reprioritization of global programs, and to higher payments in the prior year period related to licensing arrangements for products in development.
SG&A expense for the three months ended September 30, 2018 was $577.3 million, compared to $664.1 million for the comparable prior year period, a decrease of $86.8 million. The decrease is due to ongoing integration activities and reduced share-based compensation expense primarily due to the Company's determination that it was no longer probable that the minimum performance condition would be met and the reversal of all of the remaining cumulative expense related to the Company's One-Time Special Performance-Based Five-Year Realizable Value Incentive Program (the "2014 Program") that resulted in the Company recognizing a net reduction in share-based compensation expense of approximately $27.1 million during the three months ended September 30, 2018. In addition, the Company experienced lower restructuring and acquisition-related expenses in the current quarter when compared to the prior year period.
During the third quarter of 2018, the Company recorded a net gain of $20.4 million in Litigation settlements and other contingencies, net compared to a net charge of $15.2 million in the comparable prior year period. During the three months ended September 30, 2018, the Company recorded a gain of approximately $19.3 million for a fair value adjustment related to the contingent consideration for the acquisition of the exclusive worldwide rights to develop, manufacture and commercialize a generic equivalent to GlaxoSmithKline's Advair® Diskus and Seretide® Diskus incorporating Pfizer Inc.'s proprietary dry powder inhaler delivery platform (the "respiratory delivery platform"). The fair value adjustment was the result of changes to assumptions relating to the timing of product launch along with other competitive and market factors. The net charge in the prior year period consists primarily of an increase to a litigation accrual for an anti-trust related matter.
U.S. GAAP net earnings increased by $88.4 million to $176.7 million for the three months ended September 30, 2018, compared to $88.3 million for the prior year period and U.S. GAAP EPS increased from $0.16 in the prior year period to $0.34 in the current quarter. The Company recognized a U.S. GAAP income tax provision of $15.5 million, compared to a U.S. GAAP income tax provision of $91.3 million for the comparable prior year period. Adjusted net earnings increased to $648.0 million compared to $589.7 million for the prior year period. Adjusted EPS increased to $1.25 from $1.10 in the prior year period.
EBITDA was $841.6 million for the current quarter and $776.9 million for the comparable prior year period. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $935.9 million for the current quarter and $923.8 million for the comparable prior year period.
Nine Months Ended September 30, 2018 Financial Results
Total Revenues for the nine months ended September 30, 2018 were $8.36 billion, compared to $8.67 billion for the comparable prior year period, representing a decrease of $313.6 million, or 4%. Total revenues include both net sales and other revenues from third parties. Net sales for the nine months ended September 30, 2018 were $8.23 billion, compared to $8.57 billion for the comparable prior year period, representing a decrease of $337.0 million, or 4%. Other revenues for the nine months ended September 30, 2018 were $122.0 million, compared to $98.6 million for the comparable prior year period. The increase in other revenues was primarily the result of consideration received from a license of intellectual property during the current year period.
The decrease in total revenues included lower net sales in the North America segment of 18%. This decrease was partially offset by increased net sales in the Europe segment of 6%, and in the Rest of World segment of 7%. The overall decrease in total revenues was primarily driven by a decrease in net sales from existing products. Net sales from existing products, partially offset by new product sales, decreased on a constant currency basis by approximately $426.5 million primarily as a result of lower volumes, and to a lesser extent, pricing. Net sales were also negatively impacted by approximately $64.4 million due to the adoption of new accounting standards. Mylan's total revenues were favorably 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 the European Union, the United Kingdom and Japan. The favorable impact of foreign currency translation on current year total revenues was approximately $156.4 million. On a constant currency basis, the decline in total revenues for the nine months ended September 30, 2018 was approximately $470.0 million, or 5%.
-- Net sales from North America segment totaled $3.00 billion during the
nine months ended September 30, 2018, a decrease of $668.3 million or
18% when compared to the prior year period. This decrease was due
primarily to lower volumes on existing products, including the EpiPen®
Auto-Injector, partially offset by new product sales. The decline in
volumes was primarily driven by the timing of purchases of our products
by customers, the divestiture of certain contract manufacturing assets,
the loss of exclusivity of certain products, and actions associated with
the restructuring and remediation program at the Morgantown
manufacturing facility. In addition, net sales were negatively impacted
by $99.1 million related to the implementation of new accounting
standards. Pricing also declined when compared to the prior year. The
impact of foreign currency translation on current period net sales was
insignificant within North America.
-- Net sales from Europe segment totaled $3.07 billion during the nine
months ended September 30, 2018, an increase of $183.2 million or 6%
when compared to the prior year period. This increase was primarily the
result of the favorable impact of foreign currency translation, new
product sales, and to a lesser extent, higher volumes of existing
products. The favorable impact of foreign currency translation was
approximately $184.0 million or 6%. Partially offsetting these items was
lower pricing on existing products. Constant currency net sales were
essentially flat compared to the prior year period.
-- Net sales from Rest of World segment totaled $2.16 billion during the
nine months ended September 30, 2018, an increase of $148.1 million or
7% when compared to the prior year period. This increase was primarily
the result of new product sales, and to a lesser extent, higher volumes
of existing products including higher sales of key brands in China. The
increase in net sales as a result of new products was primarily due to
new product sales from the Company's anti-retroviral therapy franchise
combined with new product sales in Australia, Japan and China. This
increase was partially offset by lower pricing on existing products and
the unfavorable impact of foreign currency translation. Overall, net
sales from Rest of World were unfavorably impacted by the effect of
foreign currency translation of approximately $33.4 million, or 2%.
Constant currency net sales increased by approximately $181.5 million or
9% when compared to the prior year period.
U.S. GAAP gross profit was $2.99 billion and $3.49 billion for the nine months ended September 30, 2018 and 2017, respectively. U.S. GAAP gross margins were 36% and 40% for the nine months ended September 30, 2018 and 2017, respectively. U.S. GAAP gross margins were negatively impacted by approximately 260 basis points related to the incremental amortization from product acquisitions and IPR&D impairment charges. Gross margins were also negatively affected by approximately 220 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 facility. In addition, gross margins were negatively impacted in the current quarter as a result of lower gross profit from the sales of existing products in North America. The unfavorable impact of these items was partially offset by the favorable impact from new product sales. Adjusted gross profit was $4.50 billion and adjusted gross margins were 54% for the nine months ended September 30, 2018 compared to adjusted gross profit of $4.62 billion and adjusted gross margins of 53% in the prior year period.
R&D expense for the nine months ended September 30, 2018 was $555.7 million, compared to $580.9 million for the comparable prior year period, a decrease of $25.2 million. This decrease was primarily due to lower expenditures related to the Company's respiratory programs, and lower expenses due to the reprioritization of global programs. Partially offsetting this decrease were slightly higher payments in the current year related to licensing arrangements for products in development which totaled approximately $100.5 million during the nine months ended September 30, 2018, compared to approximately $89.9 million in the prior year period.
SG&A expense for the nine months ended September 30, 2018 was $1.81 billion, compared to $1.92 billion for the comparable prior year period, a decrease of $107.3 million. The decrease is primarily due to ongoing integration activities, lower acquisition-related costs of approximately $41.8 million, and reduced share-based compensation expense primarily due to the reversal of all of the remaining cumulative expense related to the 2014 Program that resulted in the Company recognizing a net reduction in share-based compensation expense of approximately $50.6 million during the nine months ended September 30, 2018. These decreases were partially offset by an increase in bad debt expense of approximately $23.0 million primarily related to a special business interruption event for one customer.
During the nine months ended September 30, 2018, the Company recorded a net gain of $50.6 million in Litigation settlements and other contingencies, net compared to a net gain of $25.8 million in the comparable prior year period. During the nine months ended September 30, 2018, the Company recognized a net gain of $49.3 million for fair value adjustments related to the respiratory delivery platform contingent consideration. The fair value adjustments were the net result of changes to assumptions relating to the timing of product launch along with other competitive and market factors. In addition, the Company recognized a gain of approximately $14.7 million related to a favorable litigation settlement, which was partially offset by litigation related charges of approximately $13.3 million, primarily related to an anti-trust matter and a patent infringement matter. During the nine months ended September 30, 2017, the Company recorded a gain of approximately $88.1 million for fair value adjustments related to the contingent consideration for the respiratory delivery platform. Offsetting this gain were accruals of approximately $52.5 million primarily related to the modafinil and EpiPen® Auto-Injector litigation matters and an accrual increase related to an anti-trust related matter. In addition, a fair value loss of $9.9 million related to the contingent consideration related to the acquisition of certain female healthcare businesses from Famy Care Limited was recognized during the prior year period.
U.S. GAAP net earnings decreased by $150.4 million to $301.3 million for the nine months ended September 30, 2018, compared to $451.7 million for the prior year period and U.S. GAAP EPS decreased from $0.84 in the prior year period to $0.58 for the nine months ended September 30, 2018. The Company recognized a U.S. GAAP income tax benefit of $79.9 million, compared to an income tax provision of $124.2 million for the comparable prior year period. Adjusted net earnings increased to $1.70 billion compared to $1.68 billion for the prior year period. Adjusted EPS increased to $3.28 from $3.13 in the prior year period.
EBITDA was $2.19 billion for the nine months ended September 30, 2018, and $2.34 billion for the comparable prior year period. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $2.62 billion for the nine months ended September 30, 2018 and $2.67 billion for the comparable prior year period.
Cash Flow
U.S. GAAP net cash provided by operating activities was $1.71 billion for the nine months ended September 30, 2018 compared to $1.57 billion for the prior year period. Capital expenditures were approximately $137.4 million for the nine months ended September 30, 2018 compared to approximately $156.4 million for the comparable prior year. Adjusted net cash provided by operating activities was $2.16 billion for the nine months ended September 30, 2018 compared to $2.06 billion for the prior year period. Adjusted free cash flow, defined as adjusted net cash provided by operating activities less capital expenditures, was $2.02 billion for the nine months ended September 30, 2018, compared to $1.91 billion in the prior year period.
Conference Call and Earnings Materials
Mylan N.V. will host a conference call and live webcast, today at 5:00 p.m. ET, to review the Company's financial results for the third quarter ended September 30, 2018. The briefing can be accessed live by calling 800.514.4861 or 678.809.2405 for international callers (ID#: 9798175) or at the following address on the company's website: investor.mylan.com. The "Q3 2018 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 effective tax rate, 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. In addition, primarily due to acquisitions, 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 were 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 the 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 three and nine months ended September 30, 2018 and 2017 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 September 30, 2018 (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 including those related to the acquisition of Meda AB (publ.), 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 Adjusted Net Earnings and 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 and nine months ended September 30, 2018 compared to the prior year period:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions, except per share amounts) 2018 2017 2018 2017
U.S. GAAP net earnings and U.S. GAAP EPS $
176.7 $
0.34 $
88.3 $
0.16 $
301.3 $
0.58 $
451.7 $
0.84
Purchase accounting related amortization (primarily included in cost of sales) (a) 428.7 370.7 1,282.4 1,074.9
Litigation settlements and other contingencies, net (20.4) 15.2 (50.6) (25.8)
Interest expense (primarily clean energy investment financing and accretion of contingent
consideration) 12.1 10.3 31.0 37.2
Clean energy investments pre-tax loss 12.6 22.4 58.6 66.4
Acquisition related costs (primarily included in SG&A and cost of sales) (b) 4.9 15.2 17.4 60.2
Restructuring related costs (c) 80.8 73.4 202.3 112.8
Other special items included in:
Cost of sales (d) 65.4 12.3 139.4 39.2
Research and development expense (e) 3.2 15.1 100.3 89.9
Selling, general and administrative expense (f) (0.7) 4.0 33.2 12.7
Other expense, net (g) 1.3 (3.1) 25.5 4.8
Tax effect of the above items and other income tax related items (116.6) (34.1) (445.7) (244.5)
Adjusted net earnings and adjusted EPS $
648.0 $
1.25 $
589.7 $
1.10 $
1,695.1 $
3.28 $
1,679.5 $
3.13
Weighted average diluted ordinary shares outstanding 516.5 537.0 516.5 537.0
____________
Significant items for the three and nine months
ended September 30, 2018 include the
following:
(a) The increase in purchase accounting
related amortization is primarily
due to the increase in amortization
expense as a result of the full
impact of certain product rights
acquisitions which occurred in
2017, the current year impact of
the 2018 product rights
acquisitions and IPR&D impairment
charges of $15.5 million and $87.5
million during the three and nine
months ended September 30, 2018,
respectively.
(b) Acquisition related costs incurred
in 2017 and through the nine months
ended September 30, 2018 consist
primarily of integration
activities.
(c) For the three months ended September
30, 2018, approximately $51.8
million is included in cost of
sales, $0.3 million is included in
R&D, and $28.7 million is included
in SG&A. For the nine months ended
September 30, 2018, approximately
$97.2 million is included in cost
of sales, $17.0 million is included
in R&D, and $88.4 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) The three and nine months ended
September 30, 2018 increases relate
primarily to expenses of $48.9
million and $104.9 million,
respectively, for certain
incremental manufacturing variances
and site remediation activities as
a result of the activities at the
Company's Morgantown facility.
(e) R&D expense for the three months
ended September 30, 2018 includes
expenses related to on-going
collaboration agreements, including
Momenta. For the nine months ended
September 30, 2018, R&D expense
includes $73.5 million related to
four non-refundable upfront
payments for development agreements
entered into during the current
period. The remaining expense
relates to the on-going
collaboration agreements, including
Momenta. R&D expense for the three
months ended September 30, 2017
includes $8.0 million related to
Momenta collaboration expense. For
the nine months ended September 30,
2017, R&D expense includes an
upfront expense of approximately
$50.0 million related to a joint
development and marketing agreement
for a respiratory product, $22.5
million related to Momenta
collaboration expense, and other
similar smaller agreements.
(f) The decrease for the three months
ended September 30, 2018 is
primarily related to a gain from
the sale of assets. The increase
for the nine months ended September
30, 2018 is primarily related to
bad debt expense of approximately
$26.5 million related to a special
business interruption event for one
customer.
(g) The increase for the nine months
ended September 30, 2018 is
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.
Below is a reconciliation of U.S. GAAP net earnings to EBITDA and adjusted EBITDA for the three and nine months ended September 30, 2018 compared to the prior year period (in millions):
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
U.S. GAAP net earnings $
176.7 $
88.3 $
301.3 $
451.7
Add /(subtract)
adjustments:
Net contribution
attributable to equity
method investments 12.6 22.4 58.6 77.2
Income tax provision
(benefit) 15.5 91.3 (79.9) 124.2
Interest expense 136.2 131.8 407.1 406.3
Depreciation and
amortization 500.6 443.1 1,501.0 1,279.8
EBITDA $
841.6 $
776.9 $
2,188.1 $
2,339.2
Add /(subtract)
adjustments:
Share-based compensation
(income) expense (29.2) 22.2 (8.6) 64.2
Litigation settlements and
other contingencies, net (20.4) 15.2 (50.6) (25.8)
Restructuring & other
special items 143.9 109.5 487.5 289.6
Adjusted EBITDA $
935.9 $
923.8 $
2,616.4 $
2,667.2
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, reaffirming our 2018 guidance; that our confidence in the company's bright future extends well beyond any single factor or particular quarter, including the current, short-term macro market turbulence our industry is experiencing; that we remain committed to our full-year 2018 guidance ranges, and this confirmation is not dependent on any single product approval or launch; as we look ahead, we're very optimistic about our long-term growth prospects as we have secured almost all regulatory approvals necessary for our key 2019 product drivers around the world; our recent successes demonstrate the strength of our scientific program and our ability to manage and execute on new products, including complex generics and biologics; these milestones are the culmination of years-long scientific investments and reinforce our dedication to enhance access to patients; the Mylan teams managing the science and working closely with our partners have consistently delivered remarkable results, and we look forward to continuing this momentum as we close out 2018; we remain confident in our full year adjusted free cash flow outlook; as anticipated, our capital deployment priority is focused on deleveraging in the second half of 2018, and we expect this to continue into 2019; we intend to repay at least $1.2 billion of debt maturing through year end 2019; and we remain fully committed to maintaining our investment grade credit rating. 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" 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, 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 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, 2017, 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.
Mylan N.V. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
Revenues:
Net sales $
2,827.3 $
2,956.3 $
8,233.2 $
8,570.2
Other revenues 35.1 30.8 122.0 98.6
Total revenues 2,862.4 2,987.1 8,355.2 8,668.8
Cost of sales 1,823.2 1,809.0 5,369.2 5,180.3
Gross profit 1,039.2 1,178.1 2,986.0 3,488.5
Operating expenses:
Research and development 144.1 182.3 555.7 580.9
Selling, general and
administrative 577.3 664.1 1,808.1 1,915.4
Litigation settlements
and other contingencies,
net (20.4) 15.2 (50.6) (25.8)
Total operating expenses 701.0 861.6 2,313.2 2,470.5
Earnings from operations 338.2 316.5 672.8 1,018.0
Interest expense 136.2 131.8 407.1 406.3
Other expense, net 9.8 5.1 44.3 35.8
Earnings before income
taxes 192.2 179.6 221.4 575.9
Income tax provision
(benefit) 15.5 91.3 (79.9) 124.2
Net earnings 176.7 88.3 301.3 451.7
Earnings per ordinary share:
Basic $
0.34 $
0.17 $
0.59 $
0.84
Diluted $
0.34 $
0.16 $
0.58 $
0.84
Weighted average ordinary shares
outstanding:
Basic 514.5 535.2 514.4 534.9
Diluted 516.5 537.0 516.5 537.0
Mylan N.V. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited; in millions)
September 30, December 31,
2018 2017
---
ASSETS
Assets
Current assets:
Cash and cash equivalents $
449.2 $
292.1
Accounts receivable, net 2,948.7 3,612.4
Inventories 2,560.6 2,542.7
Prepaid expenses and other
current assets 583.2 766.1
Total current assets 6,541.7 7,213.3
Intangible assets, net 14,239.0 15,245.8
Goodwill 9,796.6 10,205.7
Other non-current assets 2,878.3 3,141.5
Total assets $
33,455.6 $
35,806.3
LIABILITIES AND EQUITY
Liabilities
Current portion of long-
term debt and other long-
term obligations $
1,176.4 $
1,808.9
Current liabilities 4,005.6 4,576.4
Long-term debt 13,291.4 12,865.3
Other non-current
liabilities 2,916.0 3,248.1
Total liabilities 21,389.4 22,498.7
Mylan N.V. shareholders'
equity 12,066.2 13,307.6
Total liabilities and
equity $
33,455.6 $
35,806.3
Mylan N.V. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
(Unaudited; in millions)
Summary of Total Revenues by Segment
Three Months Ended
September 30,
(In millions) 2018 2017 % Change 2018 2018 Constant
Currency Constant Currency %
Impact (1) Currency Change (2)
Revenues
---
Net sales
North America $
1,012.3 $
1,172.2 (14)
%
% $
2.5 $
1,014.8 (13)
Europe 1,041.3 1,040.8 % 17.2 1,058.5 2
%
Rest of World 773.7 743.3 4 55.0 828.7 11
% %
Total net sales 2,827.3 2,956.3 (4)
%
% 74.7 2,902.0 (2)
Other revenues (3) 35.1 30.8 14 0.3 35.4 15
% %
Consolidated total revenues (4) $
2,862.4 $
2,987.1 (4)
%
% $
75.0 $
2,937.4 (2)
Nine Months Ended
September 30,
(In millions) 2018 2017 % Change 2018 2018 Constant
Currency Constant Currency %
Impact (1) Currency Change (2)
Revenues
---
Net sales
North America $
2,998.4 $
3,666.7 (18)
%
% $
(3.2) $
2,995.2 (18)
Europe 3,070.3 2,887.1 6
% (184.0) 2,886.3
%
Rest of World 2,164.5 2,016.4 7 33.4 2,197.9 9
% %
Total net sales 8,233.2 8,570.2 (4)
%
% (153.8) 8,079.4 (6)
Other revenues (3) 122.0 98.6 24 (2.6) 119.4 21
% %
Consolidated total revenues (4) $
8,355.2 $
8,668.8 (4)
%
% $
(156.4) $
8,198.8 (5)
____________
(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 2018
constant currency net sales or
revenues to the corresponding
amount in the prior year.
(3) For the three months ended
September 30, 2018, other revenues
in North America, Europe, and Rest
of World were approximately $20.9
million, $7.4 million, and $6.8
million, respectively. For the
nine months ended September 30,
2018, other revenues in North
America, Europe, and Rest of World
were approximately $84.5 million,
$19.8 million, and $17.7 million,
respectively.
(4) Amounts exclude intersegment
revenue that eliminates on a
consolidated basis.
Reconciliation of Income Statement Line Items
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
U.S. GAAP cost of sales $
1,823.2 $
1,809.0 $
5,369.2 $
5,180.3
Deduct:
Purchase accounting
amortization and other
related items (426.9) (361.4) (1,275.2) (1,054.9)
Acquisition related items (1.4) 0.2 (2.4) (1.9)
Restructuring and related
costs (51.8) (21.0) (97.2) (37.3)
Other special items (65.4) (12.3) (139.4) (39.2)
Adjusted cost of sales $
1,277.7 $
1,414.5 $
3,855.0 $
4,047.0
Adjusted gross profit (a) $
1,584.7 $
1,572.6 $
4,500.2 $
4,621.8
Adjusted gross margin (a) 55
% 53
% 54
% 53
%
===
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
U.S. GAAP R&D $
144.1 $
182.3 $
555.7 $
580.9
Deduct:
Acquisition related costs (0.2) (0.8) (0.7) (1.5)
Restructuring and related
costs (0.3) (1.1) (17.0) (2.5)
Purchase accounting
amortization and other
related items (0.1) (0.2) (0.2) (0.2)
Other special items (3.2) (15.1) (100.3) (89.9)
Adjusted R&D $
140.3 $
165.1 $
437.5 $
486.8
Adjusted R&D as % of
total revenues 5
% 6
% 5
% 6
%
===
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
U.S. GAAP SG&A $
577.3 $
664.1 $
1,808.1 $
1,915.4
Add / (deduct):
Acquisition related costs (3.2) (14.5) (14.3) (56.1)
Restructuring and related
costs (28.7) (51.4) (88.4) (73.0)
Purchase accounting
amortization and other
related items (1.7) (9.1) (7.0) (14.1)
Other special items 0.7 (4.0) (33.2) (12.7)
Adjusted SG&A $
544.4 $
585.1 $
1,665.2 $
1,759.5
Adjusted SG&A as % of
total revenues 19
% 20
% 20
% 20
%
===
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
U.S. GAAP total operating
expenses $
701.0 $
861.6 $
2,313.2 $
2,470.5
Add / (deduct):
Litigation settlements
and other contingencies,
net 20.4 (15.2) 50.6 25.8
R&D adjustments (3.8) (17.2) (118.2) (94.1)
SG&A adjustments (32.9) (79.0) (142.9) (155.9)
Adjusted total operating
expenses $
684.7 $
750.2 $
2,102.7 $
2,246.3
Adjusted earnings from
operations (b) $
900.0 $
822.4 $
2,397.5 $
2,375.5
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
U.S. GAAP interest
expense $
136.2 $
131.8 $
407.1 $
406.3
Deduct:
Interest expense related
to clean energy
investments (2.1) (3.0) (6.5) (9.4)
Accretion of contingent
consideration liability (5.3) (5.5) (16.3) (22.2)
Acquisition related costs - (0.2)
Other special items (4.7) (1.8) (8.2) (5.4)
Adjusted interest expense $
124.1 $
121.5 $
376.1 $
369.1
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
U.S. GAAP other expense,
net $
9.8 $
5.1 $
44.3 $
35.8
Add / (deduct):
Clean energy investments
pre-tax loss (c) (12.6) (22.4) (58.6) (66.4)
Net loss on Sagent Agila
joint venture
termination - (5.7)
Acquisition related costs - (0.8)
Restructuring and related
costs - 0.3
Other items (d) (1.3) 3.1 (25.5) (4.8)
Adjusted other income $
(4.1) $
(14.2) $
(39.5) $
(41.9)
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
U.S. GAAP earnings before
income taxes $
192.2 $
179.6 $
221.4 $
575.9
Total pre-tax non-GAAP
adjustments 587.8 535.5 1,839.5 1,472.3
Adjusted earnings before
income taxes $
780.0 $
715.1 $
2,060.9 $
2,048.2
U.S. GAAP income tax
(benefit) provision $
15.5 $
91.3 $
(79.9) $
124.2
Adjusted tax expense 116.5 34.1 445.7 244.5
Adjusted income tax
provision $
132.0 $
125.4 $
365.8 $
368.7
Adjusted effective tax 16.9 17.5 17.7 18.0
rate % % % %
===
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
U.S. GAAP net cash
provided by operating
activities $
653.6 $
548.6 $
1,705.6 $
1,569.3
Add:
Restructuring and related
costs (e) 75.8 14.9 203.2 104.4
Financing related expense - 2.6
Corporate contingencies 5.5 275.2 115.7 307.7
Acquisition related costs - 2.0 3.7 54.3
R&D expense 25.0 22.4 125.0 27.4
Other - 5.0
Adjusted net cash
provided by operating
activities $
759.9 $
863.1 $
2,160.8 $
2,063.1
Deduct:
Capital expenditures (61.5) (47.1) (137.4) (156.4)
Adjusted free cash flow $
698.4 $
816.0 $
2,023.4 $
1,906.7
___________
(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 net
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) 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 and nine months ended
September 30, 2018 includes
approximately $48.9 million and
$104.9 million, respectively, of
certain incremental manufacturing
variances and site remediation
expenses as a result of the
activities at the Company's
Morgantown facility.
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 (in millions):
Three Months Ended
(in millions, except ratio) December 31, March 31, June 30, September 30,
2017 2018 2018 2018
U.S. GAAP net earnings $
244.3 $
87.1 $
37.5 $
176.7
Add /(subtract)
adjustments:
Net contribution
attributable to equity
method investments (19.2) 23.1 22.9 12.6
Income tax provision
(benefit) 82.8 (76.6) (18.8) 15.5
Interest expense 128.3 131.7 139.2 136.2
Depreciation and
amortization 526.0 498.5 501.9 500.6
EBITDA $
962.2 $
663.8 $
682.7 $
841.6
Add /(subtract)
adjustments:
Share-based compensation
expense (income) 10.5 21.4 (0.8) (29.2)
Litigation settlements and
other contingencies, net 12.7 16.2 (46.4) (20.4)
Restructuring & other
special items 138.2 112.5 231.1 143.9
Adjusted EBITDA $
1,123.6 $
813.9 $
866.6 $
935.9
September 30, 2018 Notional Debt to Twelve Months Ended September 30, 2018 Mylan N.V. Adjusted EBITDA as calculated under our Credit Agreements ("Credit Agreement Adjusted EBITDA") Leverage Ratio
The stated non-GAAP financial measure September 30, 2018 notional debt to twelve months ended September 30, 2018 Credit Agreement Adjusted EBITDA leverage ratio is based on the sum of (i) Mylan's adjusted EBITDA for the quarters ended December 31, 2017, March 31, 2018, June 30, 2018 and September 30, 2018 and (ii) certain adjustments permitted to be included in Credit Agreement Adjusted EBITDA as of September 30, 2018 pursuant to the Company's 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 September 30, 2018 total debt and other current obligations at notional amounts.
Three Months Ended Twelve Months Ended
December 31, March 31, June 30, September 30, September 30,
2017 2018 2018 2018 2018
Mylan N.V. Adjusted EBITDA $
1,123.6 $
813.9 $
866.6 $
935.9 $
3,740.0
Add: other adjustments including estimated
synergies 118.7
Credit Agreement Adjusted EBITDA $
3,858.7
Reported debt balances:
Long-term debt, including current portion $
14,427.0
Short-term borrowings and other current
obligations 283.4
Total $
14,710.4
Add:
Net discount on various debt issuances 38.0
Deferred financing fees 77.9
Fair value of hedged debt 11.8
Total debt at notional amounts $
14,838.1
Notional debt to Credit Agreement Adjusted EBITDA
Leverage Ratio 3.8
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.
