Mylan Inc. Reports Adjusted Diluted EPS of $0.45 for the Quarter, a 36% Increase over Prior Year Quarter; and $1.61 for the Year, a 24% Increase over Prior Year

PITTSBURGH, Feb. 24, 2011 /PRNewswire/ -- Mylan Inc. (Nasdaq: MYL) today announced its financial results for the three and twelve months ended December 31, 2010, and provided its financial guidance for 2011.

Financial Results

• Adjusted diluted EPS of $0.45 for the quarter ended December 31, 2010 compared to $0.33 for the same prior year quarter, an increase of 36%;
• Adjusted diluted EPS of $1.61 for the year ended December 31, 2010 compared to $1.30 for the prior year, an increase of 24%;
• Total revenues of $1.43 billion for the quarter ended December 31, 2010 compared to $1.35 billion for the same prior year quarter, an increase of 6%;
• Total revenues of $5.45 billion for the year ended December 31, 2010 compared to $5.09 billion for the prior year, an increase of 7%;
• On a GAAP basis, diluted EPS of $0.01 for both quarters ended December 31, 2010 and 2009;
• On a GAAP basis, diluted EPS of $0.68 for the year ended December 31, 2010 compared to $0.30 for the prior year;
• Cash flow from operating activities of $931 million for the year ended December 31, 2010 compared to $605 million for the prior year, an increase of 54%.

Robert J. Coury, Mylan’s Chairman and Chief Executive Officer stated: “I am very pleased with our performance in 2010, as we delivered solid revenue growth of 8% over the prior year and strong earnings per share growth of 24%. Through our focus on integration and rationalization, we have generated consistent quarterly earnings growth, and a compound annual growth rate (CAGR) of 10% in revenues and 42% in EPS since 2008. I would like to thank each and every one of our dedicated employees around the globe for their contribution to these achievements.”

Coury continued: “2011 marks a new inflection point for Mylan. Going forward, we expect to leverage the assets we have put in place to continue to deliver not only strong bottom-line performance, but also significant top-line expansion. As a result, we remain fully committed to our targeted CAGR of 15% in revenues and 20% in EPS through the next three years, with a targeted EPS of $2.75 in 2013.”

Heather Bresch, Mylan’s President added: “We are as excited about the next phase of our growth as we have been about the accomplishments of the last several years. We have built up the largest product pipeline in our history and combined it with a powerful commercial platform. We anticipate continued significant global product launches, further dosage and therapeutic category expansion, and a significant increase in the number of new products we manufacture internally, all of which are expected to contribute to our accelerated revenue growth. Further, we are focused on the successful execution of important strategic and business development opportunities to ensure we remain well positioned in the years ahead.”

John Sheehan, Mylan’s Chief Financial Officer said: “In addition to our financial accomplishments over the last three years, we made significant progress in de-levering our balance sheet through strong earnings growth and cash flow generation and we converted our preferred stock at the minimum ratio. These enhancements to our capital structure have pushed out the maturity profile of our debt, eliminated our preferred dividend requirement and, most importantly, left us very well-positioned to support the Company’s powerful growth trajectory.”

Mr. Sheehan added: “Additionally, we are pleased to present our financial guidance for 2011, which includes adjusted diluted earnings per share of between $1.90 and $2.10. At the midpoint, this represents a growth rate of approximately 24% over 2010. We expect that our guidance for 2011, along with our long-term targets, will be achieved while maintaining relatively stable gross margins and generating continued strong operating cash flow.”

Financial Results Summary

Total third party revenues for the quarter ended December 31, 2010, increased $82.7 million, or 6%, to $1.43 billion from $1.35 billion in the same prior year period. Total third party revenues include both net revenues and other revenues from third parties. Net revenues increased $89.1 million, or 7%, to $1.42 billion from $1.34 billion in the prior year quarter. The effect of foreign currency translation had an unfavorable impact of approximately 1% on total third party revenues primarily reflecting a weaker Euro in comparison to the US Dollar, partially offset by the strengthening of other currencies, primarily the Indian Rupee, Japanese Yen and Australian Dollar. Translating current year revenues at prior year exchange rates would have resulted in year-over-year growth in net revenues excluding foreign currency of approximately $104 million, or 8%. Other revenues for the quarter ended December 31, 2010, and 2009 were $9.9 and $16.3 million, respectively.

A tabular summary of the Company’s revenues for the quarters ended December 31, 2010, and 2009, 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 North America, Europe, the Middle East and Africa (collectively, EMEA) and Asia Pacific were $1.35 billion in the current quarter, compared to $1.28 billion in the same prior year period.

Third party net sales from North America were $647.5 million for the current quarter, compared to $533.4 million for the comparable prior year period, representing an increase of $114.1 million or 21.4%. This increase was mainly driven by new products launched in the U.S. and Canada, which contributed sales of $73.5 million in the current quarter, as well as a full quarter of contribution from Bioniche Pharma, which was acquired in September 2010.

Third party net sales from EMEA were $397.0 million for the quarter ended December 31, 2010, compared to $476.6 million for the comparable prior year quarter, a decrease of $79.6 million, or 16.7%. However, 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 $48 million, or 10%. This decrease was mainly the result of unfavorable pricing in many of the European markets in which Mylan operates and the lack of a significant product launch, partially offset by another strong quarter of performance in Italy.

Sales in Asia Pacific are derived from Mylan’s operations in India, Australia, Japan and New Zealand. Asia Pacific third party net sales were $305.1 million for the quarter ended December 31, 2010, compared to $269.2 million for the comparable prior year quarter, an increase of $36.0 million, or 13.4%. Foreign currency translation had a positive impact on sales for the current quarter, reflecting the strengthening of certain regional currencies against the U.S. Dollar. Excluding the effect of foreign currency, calculated as described above, the increase was approximately $18 million, or 7%. This increase is primarily driven by increased sales of anti-retroviral finished dosage products and higher sales of active pharmaceutical ingredients (API) by Mylan’s subsidiary in India.

For the current quarter, Specialty reported third party net sales of $75.0 million, an increase of $18.6 million, or 33%, from the comparable prior year period of $56.3 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 and increased volumes.

Gross profit for the quarter ended December 31, 2010 was $579.2 million and gross margins were 40.4%. In the same prior year period, gross profit was $516.0 million, and gross margins were 38.2%. Gross profit for the current year quarter was impacted by certain purchase accounting related items, of approximately $91.6 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 $72.4 million. Excluding such items, gross margins in the prior year would have been approximately 44%.

The increase in gross margins, excluding the items noted above, can primarily be attributed to both Generics, mainly in North America, and Specialty. In North America, favorable gross margins were primarily the result of new product introductions, while Specialty benefitted from favorable pricing, mainly on the EpiPen® Auto-Injector.

Earnings from operations were $94.2 million for the quarter ended December 31, 2010, compared to $60.0 million for the same prior year period. Excluding the impact of purchase accounting related items in both periods, as mentioned above, as well as charges for litigation settlements, net, of $112.8 million and $114.2 million for the current and prior year quarters, earnings from operations increased to $298.6 million in the current quarter from $246.6 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 December 31, 2010, totaled $91.5 million, compared to $78.3 million for the prior year quarter. The increase is primarily due to interest associated with higher net debt balances and interest rates. Included in interest expense for the current quarter and the comparable prior year period are $18.0 million and $11.2 million, respectively, primarily consisting of the accretion of the discounts on the Company’s convertible debt instruments.

Other (expense) income, net, was expense of $4.8 million in the current quarter compared to expense of $7.6 million in the comparable prior year period. Generally included in other (expense) income, net, are interest and dividend income and foreign exchange transaction gains and losses. Additionally, included in the current quarter are expenses of $22.4 million for the write-off of financing fees and payment of swap termination costs. In the prior year quarter other (expense) income, net included a loss of $11.7 million on Matrix’s sale of a subsidiary.

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 $211.8 million for the quarter ended December 31, 2010, and $156.6 million for the prior year quarter. After adjusting for certain items as further discussed below, adjusted EBITDA was $373.2 million for the current quarter and $311.5 million for the prior year quarter.

For the year ended December 31, 2010, Mylan reported total revenues of $5.45 billion compared to $5.09 billion in the comparable prior year period. Third party net sales in the current year were $5.40 billion compared to $5.02 billion for the prior year, representing an increase of $388.9 million, or 7.8%. On a year-over-year basis, the effect of foreign currency translation had a favorable impact of less than 1%.

Other revenues from third parties for the year ended December 31, 2010, were $46.3 million compared to $77.4 million in the prior year, a decrease of $31.1 million, or 40.2%. During 2009, within Generics, Mylan recognized $28.5 million of incremental other revenue resulting from the cancellation of product development agreements for which the revenue had been previously deferred. There was no such revenue recognized during the current year.

A tabular summary of the Company’s revenues for the years ended December 31, 2010, and 2009, is included at the end of this release.

Generics third party net sales were $4.98 billion in 2010, compared to $4.61 billion in prior year.

Third party net sales from North America were $2.36 billion in 2010, compared to $2.09 billion for the prior year, representing an increase of $265.0 million, or 12.6%. The increase was driven by increased volume, new product launches and incremental revenue from the Bioniche Pharma acquisition, partially offset by unfavorable pricing on certain existing products, including divalproex sodium extended-release (divalproex ER) tablets, the generic version of Abbott Laboratories’ Depakote® ER, for which Mylan had exclusivity for a portion of 2009.

New products launched in the US and Canada contributed sales of $158.6 million, over half of which consisted of valacyclovir hydrochloride tablets, the generic version of GlaxoSmithKline’s Valtrex®, and minocycline hydrochloride extended release tablets, the generic version of Medicis Pharmaceutical Corporation’s Solodyn® ER. The Company’s ability to continue to be a stable and reliable source of supply to the market resulted in the favorable volume on its existing product base.

Third party net sales from EMEA were $1.55 billion for 2010, compared to $1.64 billion for the prior year, a decrease of $90.8 million, or 5.5%. However, translating current year third party net revenues from EMEA at prior year exchange rates would result in a decrease excluding the effect of foreign currency translations of approximately $24 million, or 1%. This decrease was mainly the result of unfavorable pricing in many of the European markets in which Mylan operates, partially offset by new product launches throughout EMEA and strong performance in Italy.

In Asia Pacific, third party net sales were $1.07 billion for 2010, compared to $877.1 million for the prior year, an increase of $197.2 million, or 22.5%. However, excluding the favorable effect of foreign currency translation, calculated as described above, the increase was approximately $108 million, or 12%. This increase is primarily driven by higher third party sales by Matrix, combined with third party sales growth in Japan.

Specialty reported third party net sales for 2010 of $422.8 million, an increase of $17.5 million, or 4.3% over the prior year of $405.3 million. Intercompany sales by Specialty totaled $61.8 million for 2010, compared to $40.8 million in the prior year. This increase is due to the fact that, beginning in late 2009, certain generic products previously sold to third parties by Specialty are now sold to Mylan subsidiaries in North America who, in turn, sell the products to third parties. Excluding the sale of such products from 2009 third party net sales would have resulted in an increase in third party net sales in the current year of approximately $64 million or 18%.

This increase in third party net sales in Specialty was the result of favorable pricing and higher volumes of Dey’s EpiPen Auto-Injector, and higher sales volumes of Perforomist® Solution, Dey’s Formoterol Fumarate Inhalation Solution.

Gross profit for the current year was $2.22 billion and gross margins were 40.7%. For the prior year, gross profit was $2.07 billion, and gross margins were also 40.7%. Gross profit for both the current and prior years is impacted by certain purchase accounting related items as discussed above, of approximately $309.2 million, and $282.5 million, respectively. Excluding such items, gross margins would have been approximately 46% in both the current and prior years.

Earnings from operations were $721.6 million for 2010, compared to $523.4 million for the prior year. Excluding the impact of purchase accounting related items in both periods, as mentioned above, as well as charges for litigation settlements, net, of $127.1 million and $225.7 million for the current and prior years, earnings from operations increased to $1.16 billion in the current year from $1.03 billion in the prior year. The increase in operating income was driven by higher sales and gross profit as discussed above, partially offset by an increase in SG&A expenses, primarily as a result of increased legal costs and higher professional fees, including those related to the acquisition of Bioniche Pharma, while R&D increased only slightly year over year.

Interest expense for calendar year 2010 totaled $331.5 million, compared to $318.5 million for 2009. The increase is primarily due to higher interest associated with the 2010 debt offerings, including higher net debt balances and the amortization of discounts. Included in interest expense for the current year and the prior year are $60.0 million and $42.9 million, respectively, primarily related to the amortization of the discounts on the Company’s debt.

Other (expense) income, net, was expense of $34.2 million in the current year compared to income of $22.1 million in the prior year. In addition to interest and dividend income and foreign exchange transaction gains and losses, included in the current year is a $4.9 million loss on the sale of certain non-operating assets, charges associated with the termination of certain interest rate swaps totaling $18.6 million and the write-off of previously deferred financing fees of $18.8 million related to the repayment of the senior credit facility debt. The prior year includes a favorable adjustment of $13.9 million to the restructuring reserve as a result of a reduction in the estimated remaining spending on accrued projects, as well as a net gain of $10.4 million realized on the termination of two joint ventures by Mylan’s Matrix subsidiary, partially offset by an $11.7 million loss on the sale, by Matrix, of a majority owned subsidiary.

EBITDA was $1.12 billion for 2010, and $947.9 million for 2009. After adjusting for certain items as further discussed below, adjusted EBITDA was $1.40 billion for the current year, versus $1.25 billion for the prior year.

Cash provided by operations was $931.4 million for the year ended December 31, 2010. Contributing to the current year cash from operations are certain significant items that resulted in a net increase in cash provided by operating activities of approximately $150 million. Favorable items included the receipt of an income tax refund in the first quarter, cash received for deferred revenue and lower income taxes paid as a result of anticipated tax benefits on the indemnified litigation. These favorable items were partially offset by payments made during the year with respect to the Company’s AWP litigation settlements. For 2011, the potential reduction of deferred revenue, the timing of payments of litigation settlements, income taxes and amounts due to Merck KGaA related to the anticipated tax benefits on the indemnified litigation may lead to a reduction of $250 million or more in cash flows from operations as compared to 2010.

2011 Guidance Metrics

The Company provided the following financial guidance for 2011 on an adjusted basis, along with the significant exchange rates used in preparing the guidance, which are shown below: