UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 5, 2016
Mylan N.V.
(Exact name of registrant as specified in its charter)
The Netherlands | 333-199861 | 98-1189497 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
Building 4, Trident Place Mosquito Way, Hatfield, Hertfordshire |
AL10 9UL | |
(Address of principal executive offices) | (Zip Code) |
+44 (0) 1707 853 000
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Explanatory Note
This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by Mylan N.V. (the Company) on August 11, 2016 to include the financial statements and pro forma financial information required under Item 9.01 in connection with the Companys acquisition of Meda Aktiebolag (publ.) (Meda).
Item 9.01 Financial Statements and Exhibits.
(a) | Financial Statements of Businesses Acquired. |
The audited consolidated financial statements of Meda as of and for the years ended December 31, 2015, 2014 and 2013 and the related notes thereto are attached hereto as Exhibit 99.1 and incorporated by reference into this Item 9.01. The unaudited consolidated financial statements of Meda as of June 30, 2016 and for the three and six months ended June 30, 2016 and 2015 and the related notes thereto are attached hereto as Exhibit 99.2 and incorporated by reference into this Item 9.01.
(b) | Pro Forma Financial Information. |
The unaudited pro forma financial information of the Company as of June 30, 2016 and for the six months ended June 30, 2016 and the year ended December 31, 2015 is attached hereto as Exhibit 99.3 and incorporated by reference into this Item 9.01.
(d) | Exhibits. |
Exhibit No. |
Description | |
23.1 | Consent of PricewaterhouseCoopers AB, independent auditor. | |
99.1 | Audited Consolidated Financial Statements of Meda as of and for the years ended December 31, 2015, 2014 and 2013 and the related notes thereto. | |
99.2 | Unaudited Consolidated Financial Statements of Meda as of June 30, 2016 and for the three and six months ended June 30, 2016 and 2015 and the related notes thereto. | |
99.3 | Unaudited Pro Forma Financial Information as of June 30, 2016 and for the six months ended June 30, 2016 and the year ended December 31, 2015. |
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 hereunto duly authorized.
MYLAN N.V. | ||||||
Date: September 6, 2016 | By: | /s/ Kenneth S. Parks | ||||
Kenneth S. Parks Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
Description | |
23.1 | Consent of PricewaterhouseCoopers AB, independent auditor. | |
99.1 | Audited Consolidated Financial Statements of Meda Aktiebolag (publ.) (Meda) as of and for the years ended December 31, 2015, 2014 and 2013 and the related notes thereto. | |
99.2 | Unaudited Consolidated Financial Statements of Meda as of June 30, 2016 and for the three and six months ended June 30, 2016 and 2015 and the related notes thereto. | |
99.3 | Unaudited Pro Forma Financial Information as of June 30, 2016 and for the six months ended June 30, 2016 and the year ended December 31, 2015. |
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (File No. 333-206913) and Form S-8 (File No. 333-206912) of Mylan N.V. of our report dated April 11, 2016 relating to the financial statements of Meda AB, which appears in this Current Report on Form 8-K/A dated September 6 2016.
/s/ PricewaterhouseCoopers AB
Stockholm, Sweden
September 6, 2016
Exhibit 99.1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF MEDA AB
Audited Consolidated Financial Statements for the Years Ended December 31, 2015, 2014 and 2013
Page | ||||
Independent Auditors Report |
2 | |||
Consolidated income statement for the years ended December 31, 2015, 2014 and 2013 |
3 | |||
Consolidated statement of comprehensive income for the years ended December 31, 2015, 2014 and 2013 |
4 | |||
Consolidated balance sheet as of December 31, 2015, 2014 and 2013 |
5 | |||
Consolidated cash flow statement for the years ended December 31, 2015, 2014 and 2013 |
6 | |||
Consolidated statement of changes in equity for the years ended December 31, 2015, 2014 and 2013 |
7 | |||
Notes to the Audited Consolidated Financial Statements of Meda AB |
8 |
1
Independent Auditors Report
To the Board of Directors and Shareholders of Meda AB
We have audited the accompanying consolidated financial statements of Meda AB and its subsidiaries, which comprise the consolidated balance sheets as of December 31 2015, December 31 2014 and December 31 2013, and the related consolidated statements of income and comprehensive income, of shareholders equity and cash flows for the years then ended.
Managements Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Companys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Meda AB and its subsidiaries as of December 31 2015, December 31 2014 and December 31 2013, and the results of their operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
PricewaterhouseCoopers AB
/s/ PricewaterhouseCoopers AB
Stockholm, Sweden
April 11, 2016
2
Consolidated income statement
SEK million |
Note | 2015 | 2014 | 2013 | ||||||||||||
Net sales |
4, 5 | 19,648 | 15,352 | 13,114 | ||||||||||||
Cost of sales |
6 | 7,525 | 6,083 | 5,087 | ||||||||||||
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Gross profit |
12,123 | 9,269 | 8,027 | |||||||||||||
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Other income |
22 | 42 | | |||||||||||||
Selling expenses |
4,359 | 3,718 | 2,993 | |||||||||||||
Medicine and business development expenses |
4,086 | 3,223 | 2,794 | |||||||||||||
Administrative expenses |
981 | 883 | 692 | |||||||||||||
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Operating profit |
4, 610 | 2,719 | 1,487 | 1,548 | ||||||||||||
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Finance income |
11,12 | 37 | 8 | 22 | ||||||||||||
Finance costs |
11,12 | 1,452 | 913 | 567 | ||||||||||||
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Profit after financial items |
1,304 | 582 | 1,003 | |||||||||||||
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Tax |
13 | 112 | 180 | 198 | ||||||||||||
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Net income |
1,192 | 402 | 805 | |||||||||||||
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Earnings attributable to: |
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Parent company shareholders |
1,176 | 399 | 807 | |||||||||||||
Non-controlling interests |
16 | 3 | 2 | |||||||||||||
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1,192 | 402 | 805 | ||||||||||||||
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Earnings per share1) |
14 | |||||||||||||||
Basic, SEK |
3.22 | 1.23 | 2.57 | |||||||||||||
Diluted, SEK |
3.22 | 1.23 | 2.57 | |||||||||||||
Average number of shares1) |
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Basic (thousands) |
365,467 | 323,397 | 313,672 | |||||||||||||
Diluted (thousands) |
365,467 | 323,397 | 313,672 | |||||||||||||
Number of shares at year-end2) |
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Basic (thousands) |
365,467 | 365,467 | 313,672 | |||||||||||||
Diluted (thousands) |
365,467 | 365,467 | 313,672 | |||||||||||||
Dividend per share (SEK)2) |
2.50 | 2.50 | 2.41 |
1) | For 2013 and 2014, recalculation has been done to consider the bonus issue element in the rights issue 2014. |
2) | For 2013, recalculation has been done to consider the bonus issue element in the rights issue 2014. |
The accompanying Notes form an integral part of the consolidated financial statements.
3
Consolidated statement of comprehensive income
SEK million |
Note | 2015 | 2014 | 2013 | ||||||||||||
Net income |
1,192 | 402 | 805 | |||||||||||||
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Items that will not be reclassified to the income statement |
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Revaluation of defined benefit pension plans and similar plans, net after tax |
24 | 55 | 292 | 113 | ||||||||||||
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55 | 292 | 113 | ||||||||||||||
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Items that may be reclassified to the income statement |
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Translation difference |
24 | 376 | 2,118 | 510 | ||||||||||||
Translation differences reversed to income statement |
24 | 3 | 11 | | ||||||||||||
Net investment hedge, net after tax |
24 | 308 | 1,014 | 277 | ||||||||||||
Cash flow hedges, net after tax |
24 | 1 | 9 | 17 | ||||||||||||
Available-for-sale financial assets, net after tax |
24 | 9 | 6 | | ||||||||||||
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81 | 1,108 | 250 | ||||||||||||||
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Other comprehensive income for the period, net after tax |
26 | 816 | 363 | |||||||||||||
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Total comprehensive income |
1,166 | 1,218 | 1,168 | |||||||||||||
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Total comprehensive income attributable to: |
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Parent company shareholders |
1,150 | 1,215 | 1,168 | |||||||||||||
Non-controlling interests |
16 | 3 | 0 | |||||||||||||
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1,166 | 1,218 | 1,168 | ||||||||||||||
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The accompanying Notes form an integral part of the consolidated financial statements.
4
Consolidated balance sheet
SEK million |
Note | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | ||||||||||||
ASSETS |
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Non-current assets |
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Tangible assets |
15 | 1,504 | 1,692 | 848 | ||||||||||||
Intangible assets |
16 | 47,478 | 50,798 | 29,666 | ||||||||||||
Derivatives |
22 | | 25 | | ||||||||||||
Deferred tax assets |
17 | 1,812 | 1,640 | 918 | ||||||||||||
Available-for-sale financial assets |
18 | 23 | 45 | 5 | ||||||||||||
Other non-current receivables |
21 | 262 | 305 | 13 | ||||||||||||
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Total non-current assets |
51,079 | 54,505 | 31,450 | |||||||||||||
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Current assets |
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Inventories |
20 | 2,876 | 2,988 | 1,982 | ||||||||||||
Trade receivables |
21 | 4,295 | 4,151 | 2,151 | ||||||||||||
Other receivables |
320 | 480 | 196 | |||||||||||||
Tax assets |
225 | 203 | 106 | |||||||||||||
Prepayments and accrued income |
290 | 266 | 181 | |||||||||||||
Derivatives |
22 | 149 | 208 | 49 | ||||||||||||
Cash and cash equivalents |
23 | 1,612 | 2,311 | 178 | ||||||||||||
Total current assets |
9,767 | 10,607 | 4,843 | |||||||||||||
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TOTAL ASSETS |
60,846 | 65,112 | 36,293 | |||||||||||||
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EQUITY |
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Share capital |
24 | 365 | 365 | 302 | ||||||||||||
Other capital contributions |
24 | 13,788 | 13,788 | 8,865 | ||||||||||||
Other reserves |
24 | 375 | 401 | 415 | ||||||||||||
Retained earnings including profit for the year |
6,431 | 6,142 | 6,491 | |||||||||||||
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20,959 | 20,696 | 15,243 | ||||||||||||||
Non controlling interests |
3 | 16 | 32 | |||||||||||||
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Total equity |
20,956 | 20,680 | 15,211 | |||||||||||||
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LIABILITIES |
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Non-current liabilities |
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Borrowings |
25 | 22,507 | 26,817 | 7,792 | ||||||||||||
Derivatives |
22 | 19 | 22 | 33 | ||||||||||||
Deferred tax liabilities |
17 | 4,708 | 5,278 | 2,211 | ||||||||||||
Pension obligations |
26 | 2,273 | 2,430 | 1,107 | ||||||||||||
Other non-current liabilities |
27 | 2,474 | 2,464 | 32 | ||||||||||||
Other provisions |
28 | 337 | 375 | 209 | ||||||||||||
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Total non-current liabilities |
32,318 | 37,386 | 11,384 | |||||||||||||
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Current liabilities |
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Trade payables |
1,696 | 1,542 | 883 | |||||||||||||
Current tax liabilities |
515 | 483 | 464 | |||||||||||||
Other liabilities |
240 | 495 | 195 | |||||||||||||
Accruals and deferred income |
1,553 | 1,731 | 1,343 | |||||||||||||
Derivatives |
22 | 205 | 284 | 113 | ||||||||||||
Borrowings |
25 | 2,355 | 1,391 | 6,304 | ||||||||||||
Other provisions |
28 | 1,008 | 1,120 | 396 | ||||||||||||
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Total current liabilities |
7,572 | 7,046 | 9,698 | |||||||||||||
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Total liabilities |
39,890 | 44,432 | 21,082 | |||||||||||||
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TOTAL EQUITY AND LIABILITIES |
60,846 | 65,112 | 36,293 | |||||||||||||
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The accompanying Notes form an integral part of the consolidated financial statements.
5
Consolidated cash flow statement
SEK million |
Note | 2015 | 2014 | 2013 | ||||||||||||
Cash flow from operating activities |
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Profit after financial items |
1,304 | 582 | 1,003 | |||||||||||||
Adjustments for items not included in cash flow |
30 | 3,373 | 2,668 | 2,246 | ||||||||||||
Net change in pensions |
45 | 46 | 19 | |||||||||||||
Net change in provisions |
112 | 601 | 116 | |||||||||||||
Income taxes paid |
803 | 551 | 390 | |||||||||||||
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Cash flow from operating activities before changes in working capital |
3,717 | 3,254 | 2,956 | |||||||||||||
Cash flow from changes in working capital |
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Inventories |
198 | 182 | 97 | |||||||||||||
Receivables |
96 | 536 | 225 | |||||||||||||
Liabilities |
99 | 142 | 211 | |||||||||||||
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Cash flow from operating activities |
3,324 | 3,042 | 2,845 | |||||||||||||
Cash flow from investing activities |
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Acquisition of tangible assets |
220 | 116 | 136 | |||||||||||||
Acquisition of intangible assets |
79 | 74 | 1,123 | |||||||||||||
Acquisition of operation |
19 | 149 | 8,744 | | ||||||||||||
Divestment of operation |
19 | 695 | 25 | | ||||||||||||
Acquisition of financial assets available for sale |
| 2 | | |||||||||||||
Divestment of financial assets available for sale |
12 | | | |||||||||||||
Decrease in financial receivables |
3 | | 1 | |||||||||||||
Sale of non-current assets |
| 55 | 3 | |||||||||||||
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Cash flow from investing activities |
262 | 8,906 | 1,255 | |||||||||||||
Cash flow from financing activities |
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Loans raised |
2 ,107 | 21,433 | 997 | |||||||||||||
Loan repayments |
5,464 | 14,770 | 1,902 | |||||||||||||
New share issue |
| 2,014 | | |||||||||||||
Decrease in financial liabilities |
1 | 7 | 12 | |||||||||||||
Dividend to parent company shareholders |
914 | 756 | 680 | |||||||||||||
Cash flow from financing activities |
4,272 | 7,914 | 1,597 | |||||||||||||
Cash flow for the period |
686 | 2,050 | 7 | |||||||||||||
Cash and cash equivalents at start of the year |
2,311 | 178 | 194 | |||||||||||||
Exchange rate difference in cash and cash equivalents |
13 | 83 | 9 | |||||||||||||
Cash and cash equivalents at year-end |
23 | 1,612 | 2,311 | 178 | ||||||||||||
Interest received and paid |
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Interest received |
29 | 5 | 22 | |||||||||||||
Interest paid |
1,071 | 736 | 423 | |||||||||||||
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Total |
1,042 | 731 | 401 | |||||||||||||
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The accompanying Notes form an integral part of the consolidated financial statements.
6
Consolidated statement of changes in equity
Attributable to parent company shareholders |
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SEK million |
Share capital |
Other contributed- capital |
Other reserves |
Retained- earnings- including profit for the year |
Total | Non- controlling interests |
Total equity | |||||||||||||||||||||
Opening balance, January 1, 2013 |
302 | 8,865 | 776 | 6,364 | 14,755 | 32 | 14,723 | |||||||||||||||||||||
Other comprehensive income |
| | 361 | | 361 | 2 | 363 | |||||||||||||||||||||
Profit/loss for period |
| | | 807 | 807 | 2 | 805 | |||||||||||||||||||||
Total comprehensive income |
| | 361 | 807 | 1,168 | | 1,168 | |||||||||||||||||||||
Dividend |
| | | 680 | 680 | | 680 | |||||||||||||||||||||
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Closing balance, December 31, 2013 |
302 | 8,865 | 415 | 6,491 | 15,243 | 32 | 15,211 | |||||||||||||||||||||
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Opening balance, January 1, 2014 |
302 | 8,865 | 415 | 6,491 | 15,243 | 32 | 15,211 | |||||||||||||||||||||
Other comprehensive income |
| | 816 | | 816 | | 816 | |||||||||||||||||||||
Profit/loss for period |
| | | 399 | 399 | 3 | 402 | |||||||||||||||||||||
Total comprehensive income |
| | 816 | 399 | 1,215 | 3 | 1,218 | |||||||||||||||||||||
Non-cash issue |
30 | 2,946 | | | 2,976 | | 2,976 | |||||||||||||||||||||
Non-cash issue costs |
| 5 | | | 5 | | 5 | |||||||||||||||||||||
Tax on non-cash issue costs |
| 1 | | | 1 | | 1 | |||||||||||||||||||||
New share issue |
33 | 1,994 | | | 2,027 | | 2,027 | |||||||||||||||||||||
New share issue costs |
| 17 | | | 17 | | 17 | |||||||||||||||||||||
Tax on new share issue costs |
| 4 | | | 4 | | 4 | |||||||||||||||||||||
Divestment of operation |
| | | | | 31 | 31 | |||||||||||||||||||||
Acquisition of holdings with non-controlling interests |
| | | | | 18 | 18 | |||||||||||||||||||||
Share-based payments, settled using equity instruments |
| | | 8 | 8 | | 8 | |||||||||||||||||||||
Dividend |
| | | 756 | 756 | | 756 | |||||||||||||||||||||
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Closing balance, December 31, 2014 |
365 | 13,788 | 401 | 6,142 | 20,696 | 16 | 20,680 | |||||||||||||||||||||
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Opening balance, January 1, 2015 |
365 | 13,788 | 401 | 6,142 | 20,696 | 16 | 20,680 | |||||||||||||||||||||
Other comprehensive income |
| | 26 | | 26 | | 26 | |||||||||||||||||||||
Profit/loss for period |
| | | 1,176 | 1,176 | 16 | 1,192 | |||||||||||||||||||||
Total comprehensive income |
| | 26 | 1,176 | 1,150 | 16 | 1,166 | |||||||||||||||||||||
Divestment of operation |
| | | | | 3 | 3 | |||||||||||||||||||||
Share-based payments, settled using equity instruments |
| | | 27 | 27 | | 27 | |||||||||||||||||||||
Dividend |
| | | 914 | 914 | | 914 | |||||||||||||||||||||
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Closing balance, December 31, 2015 |
365 | 13,788 | 375 | 6,431 | 20,959 | 3 | 20,956 | |||||||||||||||||||||
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Note 24 contains additional information on share capital, other capital contributions and other reserves.
The accompanying Notes form an integral part of the consolidated financial statements.
7
Notes Group
Note 1 Accounting policies
General information
Meda is a leading international specialty pharma company with a broad product portfolio and its own sales organization in more than 60 countries. Including the markets where distributors handle sales, Medas products are sold in more than 150 countries. Meda AB is the Groups parent company and its headquarters are located in Solna, outside of Stockholm, Sweden. Meda is listed on Nasdaq Stockholm.
Basis for preparation of reports
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB, and the Swedish Financial Reporting Boards recommendation RFR 1 Supplementary Accounting Rules for Groups.
The consolidated accounts were prepared using the cost method, apart from for remeasurement of available-for-sale financial assets, and financial assets and liabilities (including derivative instruments) measured at fair value through profit or loss.
Preparing financial statements to conform to IFRS requires the use of some critical accounting estimates. It also requires management to make certain assessments in applying the companys accounting policies. Note 3 discloses the areas that require a more thorough assessment, are complex or in which assumptions and estimates are of significant importance to the consolidated financial statements.
New standards and interpretations
New and amended standards applied by the Group
The standards, amendments or interpretations that were applied by the Group for the first time for the financial year beginning on January 1, 2015 have no significant impact on the Groups financial statements.
New standards and interpretations not yet applied by the Group
The following new standards and interpretations have been published:
| IFRS 9 Financial Instruments addresses classification, measurement and recognition of financial liabilities and assets. The full version of IFRS 9 was issued in July 2014 and replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 contains a blended approach to measurement but simplifies it in some respects. There will be three measurement categories for financial assets: amortized cost, fair value through other comprehensive income and fair value through profit or loss. The classification of an instrument depends on the companys business model and the nature of the instrument. Investments in equity instruments are to be recognized at fair value through profit or loss. There is, however, an option at initial recognition to recognize the instrument at fair value through other comprehensive income. In such a case, no reclassification is made to profit or loss upon divestment of the instrument. IFRS 9 has also introduced a new model to calculate credit loss provisions based on expected credit losses. For financial liabilities, the classification and measurement are not changed other than in cases where a liability is recognized at fair value through profit or loss based on the fair value option. In these cases, changes in value attributable to changes in the entitys own credit risk are to be re-cognized in other comprehensive income. IFRS 9 lowers the criteria for the application of hedge accounting by replacing the 80125 criteria with a requirement for an economic relationship between the hedging instrument and the hedged item, and for the hedging quota to be the same as that used in risk management. The hedge |
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documentation requirement is also changed to some extent in comparison with IAS 39. The standard will be applied for the financial year starting on January 1, 2018. Early adoption is permitted. The Group has not yet assessed the impact of IFRS 9. |
| IFRS 15 Revenue from Contracts with Customers regulates how revenue is to be recognized. The principles upon which IFRS 15 is based give the users of financial statements more useful information on the entitys revenue. Under this increased disclosure requirement, information must be provided on the revenues nature, timing and uncertainty in connection with revenue recognition, as well as cash flows arising from customers with contracts. According to IFRS 15, revenue should be recognized when the customer assumes control of the sold goods or service and is able to use or benefit from the goods or service. IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts as well as the related SIC and IFRS Interpretations Committees interpretation. IFRS 15 goes into effect on January 1, 2018. Early adoption is permitted. The Group has not yet assessed the impact of IFRS 15. |
| IFRS 16 Leases. In January 2016, IASB issued a new lease standard that will replace IAS 17 Leases and the related interpretations IFRIC 4, SIC-15 and SIC-27. The standard requires assets and liabilities arising from all leases, with some exceptions, to be recognized on the balance sheet. This model reflects that, at the start of a lease, the lessee obtains the right to use an asset for a period of time and has an obligation to pay for that right. The accounting for lessors will in all material aspects be unchanged. The standard is effective for annual periods beginning on or after January 1, 2019. Early adoption is permitted. The Group has not yet assessed the impact of IFRS 16. |
No other IFRSs or IFRS Interpretations Committee interpretations that have not yet gone into effect are expected to have any significant impact on the Group.
Changes in external reporting
As of January 1, 2015, Meda reports all medical device products by geographic area and product category. These products were previously not allocated in full by geographic area and were recognized as other sales in the reporting by product category. The change has not resulted in any change in the reporting by geographic area for 2014. Other Sales by product category for 2014 have been adjusted from SEK 492 million to SEK 235 million, with SEK 28 million allocated to Rx and SEK 229 million allocated to Cx/OTC. Other sales by geographic area for 2013 have been adjusted from SEK 240 million to SEK 202 million, with SEK 38 million allocated to U.S. Other Sales by product category for 2013 have been adjusted from SEK 396 million to SEK 202 million, with SEK 15 million allocated to Rx and SEK 179 million allocated to Cx/OTC.
Consolidated accounts
Subsidiaries
Subsidiaries are companies over which the Group has a controlling influence. The Group controls a company when it is exposed to or has the right to a variable yield from its holding in the company and has the ability to affect the yield through its influence over the company. Subsidiaries are consolidated from the date on which the controlling influence is transferred to the Group. They are deconsolidated from the date the controlling influence ceases. The Group uses the acquisition method to recognize its business combinations. The purchase consideration for the acquisition of a subsidiary consists of the fair value of transferred assets, liabilities incurred to the previous owners of the acquired entity and the shares issued by the Group. The purchase consideration includes the fair value of all assets or liabilities arising from an agreement on an additional purchase consideration. Identifiable acquired assets as well as liabilities assumed in a business combination are measured initially at their fair values on the acquisition date. The excess is recognized as goodwill and consists of the difference between the purchase consideration and the fair value of the Groups share of the identifiable net assets acquired. Acquisition-related costs are expensed in the income statement in the period they arise. Intra-Group transactions, balance sheet items and unrealized gains on transactions between Group companies are fully eliminated.
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Segment reporting
Operating segments are reported in a way that is consistent with the internal reporting which is submitted to the highest executive decision-maker. The highest executive decision-maker is the person/persons responsible for allocating resources and assessing the operating segments results. For Meda, this has been identified as Executive management team. Division into geographic areas reflects the Groups internal organization and reporting system. The areas are Western Europe, US and Emerging Markets.
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Groups entities are valued using the currency of the economic environment in which the entity mainly operates (the functional currency). The consolidated financial statements are presented in Swedish kronor (SEK), which is the parent companys functional and presentation currency.
Transactions and balance sheet items
Foreign currency transactions are translated into the functional currency using the exchange rates in effect on the transaction date. Translation differences arising upon payment of such transactions and when translating monetary assets and liabilities at the exchange rate on the reporting date are recognized in net financial expense through profit or loss. Exceptions are when transactions are hedges that meet the criteria for hedge accounting of cash flows or of net investments, where gains/losses are recognized in other comprehensive income.
Translation of foreign subsidiaries
Assets and liabilities in foreign operations, including goodwill and other surplus and deficit values, are translated into Swedish kronor at the exchange rate on the reporting date. Income and expenses in a foreign operation are translated to Swedish kronor at an average rate that approximates the exchange rates on each transaction date. Translation differences arising in the translation of foreign operations are recognized in other comprehensive income.
Net investments in foreign operations
Translation differences arising in the translation of a foreign net investment and associated effects of the hedging of net investments are recognized as a separate component of other comprehensive income. When divesting foreign operations, the cumulative translation differences attributable to the divested operations, less any currency hedging, are reclassified from other comprehensive income to profit or loss for the year as part of the -capital gain/loss.
Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition less depreciation. The cost of acquisition includes expenditures that can be related directly to the acquisition of the asset. Land is not depreciated. Depreciation on other assets in order to allocate their costs of acquisition down to their estimated residual values, is calculated using the straight-line method according to plan over their estimated useful lives, as follows:
| Buildings 1450 years |
| Machinery and plant 314 years |
| Equipment and installations 314 years |
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The assets residual values and useful lives are reviewed on each reporting date and are adjusted if required. An assets carrying amount is written down immediately to its recoverable amount if the assets carrying amount exceeds its estimated recoverable amount. Gains and losses on disposals are determined by comparing sales proceeds with carrying amounts and are recognized through profit or loss.
Intangible assets
Goodwill
Goodwill arises in connection with the acquisition of subsidiaries and re-presents the amount by which the purchase consideration exceeds the fair value of the Groups share of the acquired companys identifiable net assets. Goodwill is tested for impairment annually or as needed and is -carried at cost less accumulated impairment losses. Gains or losses on divestment of an entity include the remaining carrying amount of goodwill relating to the divested entity. Goodwill is allocated to cash-generating units in impairment testing.
Product rights
Product rights have a limited useful life and are carried at cost less accumulated amortization and, where appropriate, impairment losses. Amortization is used to distribute the cost of product rights over their estimated useful life, usually 1025 years. The amortization pattern for product rights is adapted to the amount of expected earnings. The value of product rights is tested regularly to identify whether impairment exists. See also Note 3 and 16.
Software
Acquired computer software licenses are capitalized based on the costs incurred when the specific software was acquired and brought into use. These costs are amortized over the estimated useful life of the assets, -usually 37 years.
Research and development
Research expenditure is expensed immediately. Development project expenditure (for product development) is capitalized in the Group as an intangible asset to the extent this expenditure is very likely to generate future economic benefits. Acquisition costs of such intangible assets are amortized over the estimated useful life of the assets. Other development expenditure is expensed as it occurs. Expenditure must meet stringent requirements to be recognized as an asset. With stringent requirements, Meda believes that it is not very likely that a product (drug) will generate future economic benefits before being approved by the relevant registration authority. Meda has no development projects that meet these high requirements, so no development expenditure was recognized as an asset.
Impairment
Assets that have an indefinite useful life, i.e. goodwill, are not subject to amortization but are tested annually for any impairment. Assets subject to amortization are assessed for impairment of value whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less selling expenses and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
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Cash-generating units
In business combinations goodwill is allocated to the Groups cash-generating units. A cash-generating unit represents the lowest level in the Group at which the goodwill in question is monitored by internal control. Meda has four separate cash-generating units to which goodwill is allocated, see Note 16.
Financial assets
Financial assets are recognized when the Group is party to the instruments contractual terms. Purchases and sales of financial instruments are recognized on the trade date, i.e. the date on which the Group commits to purchase or sell the asset. Financial assets are removed from the balance sheet when the right to receive cash flows from the instrument expires or is transferred and the Group has transferred substantially all risks and rewards of ownership.
The Group classifies its financial assets into the following categories: loan and trade receivables, financial assets measured at fair value through profit or loss and available-for-sale financial assets. The classification depends on the purpose for which the instruments are used. The instruments are classified at initial recognition.
Financial instruments are initially recognized at fair value plus transaction costs. This applies to all financial assets with the exception of those measured at fair value through profit or loss, which are initially recognized at fair value but the related trans-action costs are recognized through profit or loss.
Loan receivables and trade receivables
Loan receivables and trade receivables are non-derivative financial assets that have fixed or determinable payments and are not quoted on an active market. They are included in current assets, except for items with maturities more than 12 months from the reporting date, which are classified as non-current assets. Loan and trade receivables are recognized at amortized cost using the effective interest method less any provision for a decrease in value.
Financial assets measured at fair value though profit or loss
Financial assets measured at fair value through profit or loss are financial assets that are held for trading. A financial asset is classified in this category if it is primarily acquired for the purpose of selling in the short-term. Derivatives are classified as if they are held for trading unless they are identified as hedging instruments. Assets in this category are classified as current assets if they are expected to be sold within 12 months, otherwise they are classified as non-current assets. Assets in this category are recognized after the date of acquisition at fair value. Changes in fair value are recognized in net financial income/expense through profit or loss in the period they arise.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative assets that are either designated in this category or not classified to any of the other categories. They are included in non-current assets unless Group management intends to divest the asset within 12 months from the end of the reporting period. Assets in this category are recognized after the date of acquisition at fair value. Changes in fair value for monetary and non-monetary securities in this category are recognized in other comprehensive income in the provision for available-for-sale financial assets. Exchange differences on monetary securities are recognized in net financial income/expense through profit or loss, while translation differences on non-monetary securities are recognized in other comprehensive income in the provision for available-for-sale financial assets. When securities in this category are sold, accumulated adjustments of fair value previously recognized in other comprehensive income are transferred to profit or loss.
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Impairment of financial assets
The Group performs an assessment on each reporting date of whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of available-for-sale financial assets, impairment is indicated if there is evidence of a material or lasting decline in the fair value of the asset below its cost. If this can be proved, the accumulated loss, -calculated as the difference between the cost of acquisition and the current fair value, less any previous impairment losses recognized through profit or loss, is moved from other comprehensive income and recognized through profit or loss. A provision for any decrease in the value of trade receivables is made when there is objective evidence that the Group will not be able to recover all past due amounts as per the receivables original terms. The reserved amount is recognized through profit or loss.
Financial liabilities
Financial liabilities are recognized when the Group is party to the instruments contractual terms. Financial liabilities are removed from the balance sheet when the liability is eliminated through completion, annulment or -termination of the agreement. The Group classifies its financial liabilities in the categories financial liabilities measured at fair value through profit or loss, i.e derivatives, and other financial liabilities.
Borrowings
Borrowings are initially recognized at fair value, net after transaction costs. Borrowings are subsequently recognized at amortized cost. Any difference between the proceeds received, net of transaction costs, and the repayment amount is recognized through profit or loss over the loan period using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer payment of the liability for at least 12 months after the reporting date.
Trade payables
Trade payables are initially recognized at fair value and thereafter at amortized cost using the effective interest method.
Derivatives and hedging
Derivatives are recognized on the balance sheet on the contract day and measured at fair value, both initially and in subsequent remeasurements. The method of recognizing the gain or loss from remeasurement depends on whether the derivative is designated as a hedging instrument and whether it also fulfills the hedge accounting criteria of IAS 39. Meda holds both derivatives that do and do not qualify for hedge accounting. Fair value disclosure for various derivatives used for hedging purposes can be found in Notes 2 and 22. Changes in the hedge reserve in equity are specified in Note 24. Derivatives are classified as a non-current asset or non-current -liabilities if the time to maturity exceeds 12 months. If the time to maturity is less than 12 months, the derivative is classified as a current asset or current liability.
Cash flow hedges
The effective part of changes in fair value of the Groups interest rate derivatives that are identified as cash flow hedges and meet the criteria for hedge accounting according to IAS 39 is recognized in other comprehensive income. The gain or loss attributable to the ineffective part is recognized immediately through profit or loss as financial income or expense. Certain transactions are hedged through currency forward contracts. The Group does not meet the criteria for hedge accounting for currency forward contracts according to IAS 39. Changes in fair value are recognized as financial income or expense through profit or loss. Accumulated amounts in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, e.g. when the forecast interest payment which is hedged takes place.
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Hedging of net investments
Hedging of net investments in foreign operations is recognized in the same way as cash flow hedges. The effective part of changes in fair value of the Groups hedging instruments is recognized in other comprehensive income. The gain or loss attributable to the ineffective part is recognized through profit or loss. Accumulated gains and losses in equity are recognized through profit or loss when foreign operations are disposed of in whole or in part.
Fair value hedges
Certain loans are hedged through currency forward contracts. The Group does not meet the criteria for hedge accounting for currency forward contracts according to IAS 39. Changes in fair value are recognized as financial income or expense through profit or loss.
Inventories
Inventories are carried at the lower of cost (weighted average price) and the net realizable value. Acquisition costs relate to raw materials, direct labor, freight, other direct costs and related indirect production costs. The net realizable value is the estimated selling price in operating activities less applicable variable selling expenses.
Cash and cash equivalents
Cash and cash equivalents include cash and bank balances and other -current investments with maturities of less than three months. Utilized bank overdrafts are recognized in the balance sheet as borrowings among -current liabilities.
Equity
Transaction costs directly attributable to the issue of new shares or -warrants are recognized, net after tax, in equity as deductions from the issue proceeds.
Taxes
Income taxes comprise current and deferred tax. Income taxes are recognized through profit or loss except when the underlying transaction is recognized directly in equity, in which case the related tax effect is recognized in equity or other comprehensive income. Current tax is tax that will be paid or received for the current year, applying the tax rates enacted or substantially enacted as of the reporting date. This includes adjustment of current tax attributable to prior periods. Deferred tax is recognized in full using the balance sheet liability method on all temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the consolidated accounts. Deferred tax is determined using the tax rates and tax rules enacted or substantially enacted by the reporting date and that are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax assets relating to deductible temporary differences and loss carry-forwards are only recognized where it is probable that they will be used and will result in lower future tax payments.
Employee benefits
The Group has various post-employment benefit plans including benefit and defined contribution pension plans and post-employment healthcare benefits.
Pension obligations
A defined contribution plan is a pension plan under which fixed contributions are paid to a separate legal entity. The Groups obligations are limited to the contributions it has undertaken to pay. The obligations with respect to
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the contributions for defined contribution plans are recognized as staff costs in profit or loss for the year as they are earned through the employees service during the period. Prepaid contributions are recognized as an asset to the extent cash payment or a reduction of future payments will accrue to the Group.
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service or salary. The liability recognized on the balance sheet for defined benefit pension plans is the present value of the defined benefit obligation on the reporting date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using interest rates on first-class corporate bonds, mortgage bonds or government bonds that are issued in the currency in which the benefits will be paid and that have terms to maturity comparable to the terms of the related pension liability. Actuarial gains and losses arising from experience-based adjustments and changes in actuarial assumptions are recognized in other comprehensive income during the period in which they arise. Costs for prior periods of service are recognized immediately through profit or loss.
Healthcare benefits
The Group offers healthcare benefit plans. The accounting method and assumptions resemble those used for defined benefit pension plans. -Actuarial gains and losses arising from experience-based adjustments and changes in actuarial assumptions are recognized in other comprehensive income during the period in which they arise. The value of these obligations is calculated annually by independent actuaries.
Share-based payment
IFRS 2 distinguishes between payments settled with cash and payments settled with equity instruments. For the Groups share based compensations that is settled with equity instruments, the cost is determined by the Companys fulfillment of performance criteria for each program. The cost is recognized in the income statement over the vesting period of 3 years with equity as offsetting entry. The number of shares to be alloted for each program is based on above fulfillment of the performance criteria divided by the volume weighted average share price of Medas class A-shares. Social security costs are recognized through profit or loss and are from allotment based on Medas class A-shares fair value at each balance date.
Cash-settled warrants give rise to a commitment to the employees which are measured at fair value and recognized as an expense with a corresponding increase in liabilities. Fair value is initially measured on the date of allotment and distributed over the vesting period including social security costs. The fair value of the cash-settled warrants is calculated according to the Black & Scholes model taking into account the terms and conditions for the allotted instruments. The liability is remeasured on each reporting date and when it is settled. All changes in fair value on liabilities are recognized through profit or loss for the year as a staff cost including social security costs.
See Note 8 for information on outstanding incentive programs as of December 31, 2015.
Provisions
A provision is recognized in the balance sheet when the Group has a pre-sent legal or informal obligation resulting from past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
A restructuring provision is recognized when the Group has established a detailed and formal restructuring plan and restructuring has either started or been publically announced. No provisions are made for future operating losses.
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The provisions are valued at the present value of the amount expected to be required to settle the obligation. The discount interest rate reflects a current market estimate of the time value of money and the risks associated with the provision. The increase in the provision dependent on the passing of time is recognized as interest expense.
Income statement classified according to function
Medas income statement is classified according to function and consist of the following cost functions:
Cost of sales
Costs directly attributable to purchase and manufacture of products sold during the period.
Selling expenses
Costs directly attributable to sales such as marketing expenses.
Medicine and business development expenses
Costs related to development, registration, pharmacovigilance, quality and business related development of recent and future product portfolio. This include amortizations on product rights.
Administrative expenses
Costs for administration not attributable to above functions.
Revenue recognition
Revenue consists of the fair value of goods and services sold excluding -value-added tax and discounts, and after eliminating sales within the Group. Revenue is recognized as:
Goods sold and contract manufacturing
Goods sold and contract manufacturing are recognized as revenue when a Group company has delivered products to a customer, the customer has accepted the products, and payment of the related receivable is reasonably assured. Revenue is adjusted for the value of expected returns which is based upon the historical rate of returns.
Royalty income
Income from royalties is accrued as prescribed in the relevant agreement.
Services sold and other income
Services sold are recognized as revenue in the accounting period in which the services are rendered.
Interest income
Interest income is recognized as interest income on a time-proportion basis using the effective interest method.
Leases
Leases in which the risks and rewards associated with ownership are essentially transferred to the Group are classified as finance leases. When the leased asset is initially recognized, it is measured at the fair value or
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present value, whichever is lowest, of the minimum lease payments. The asset is thereafter recognized according to the accounting principles that apply for the asset. The depreciation period may not, however, exceed the lease term.
All other leases are operating leases and, accordingly, the leased asset is not recognized in the balance sheet. Costs associated with operating leases are recognized through profit or loss on a straight-line basis over the lease term. Discounts received are recognized as a portion of the total lease cost over the lease term.
Dividends
Dividends to the parent companys shareholders are recognized as a liability in the Groups financial statements in the period in which the dividends are approved by the parent companys shareholders.
Earnings per share
Calculation of earnings per share is based on consolidated profit for the year attributable to parent company shareholders, divided by the weighted average number of outstanding ordinary shares during the year. When calculating diluted earnings per share, the average number of outstanding ordinary shares is adjusted where appropriate to take into account the effects of diluting potential ordinary shares. There were no potential diluted ordinary shares in 2015. The dilutive effect of potential ordinary shares is only recognized if a conversion to ordinary shares would lead to a reduction in diluted earnings per share. Further information is provided in Note 14.
Other information
The financial statements are reported in SEK million unless otherwise stated. Some tables may not add up because figures were rounded off.
Note 2 Financial risks
The Group is exposed to various financial risks through its operations. Medas management of these risks is centralized to the Groups internal bank and is regulated in the Groups financial policy. The objective is to identify, quantify, and keep risks of adverse impact on the Groups income statements, balance sheets, and cash flows at suitable levels.
Currency risk
Transaction exposure
Transaction exposure is the risk of impact on the Groups net income and cash flow due to change in the value of commercial flows in foreign currencies in conjunction with exchange rate fluctuations. Meda has sales through its own sales organizations in more than 60 countries. Sales to other -countries occur as exports in both the customers local currency and other currencies such as EUR and USD. Purchases are mainly made in EUR, SEK and USD. The Group is continually exposed to transaction risk. This exposure is however limited to a few units, and the exposure that rises in trade receivables and trade payables denominated in foreign currency is continuously hedged. On December 31, 2015, currency derivatives that hedged transaction exposure had a net fair value of SEK 36 million (13; 11). Hedge accounting is not applicable to these transactions, which means that changes of the fair value are carried to the income statement.
Translation exposure balance sheet
Most of the Groups operations are conducted in subsidiaries outside Sweden in functional currencies other than SEK. Translation exposure arises in the Group for net investments in foreign operations. Medas translation
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exposure is for the most part in EUR, but also in USD. The Group hedges risk partially by taking external loans and contracting for currency swaps in the respective currency. Hedge accounting in accordance with IAS 39 is applied for these hedging transactions. Translation differences recognized in other comprehensive income in 2015 that relate to net investments in foreign operations amounted to SEK 376 million (2,118; 510), and translation differences from hedging instruments for net investments amounted to SEK 308 million (1,014; 277) after tax.
Translation exposure income statement
Group sales are generated principally in currencies other than SEK. Changes in exchange rates therefore have a significant effect on the consolidated income statement since consolidation of the foreign subsidiaries income statements is in SEK. As the subsidiaries mainly operate in local currencies, these exposures are not hedged. Thus, fluctuations in exchange rates have no significant impact on competition or margins.
The next table shows the annual theoretical translation effect on Medas net sales and profit before tax. Calculated effects are based on recognized figures for 2015 excluding restructuring costs and other itmes affecting comparability. The 2015 average exchange rates were 9.35346 for EUR/SEK and 8.43026 for USD/SEK.
Parameter |
Change, % |
Effect on net sales, SEK m |
Effect on profit after tax, SEK m |
|||||||||
On December 31, 2015 |
||||||||||||
EUR/SEK |
+/1 | +/98 | +/31 | |||||||||
USD/SEK |
+/1 | +/36 | +/4 | |||||||||
Other currencies/SEK |
+/1 | +/49 | +/1 | |||||||||
On December 31, 2014 |
||||||||||||
EUR/SEK |
+/1 | +/84 | +/15 | |||||||||
USD/SEK |
+/1 | +/24 | +/1 | |||||||||
Other currencies/SEK |
+/1 | +/31 | +/1 | |||||||||
On December 31, 2013 |
||||||||||||
EUR/SEK |
+/1 | +/69 | +/11 | |||||||||
USD/SEK |
+/1 | +/23 | +/1 | |||||||||
Other currencies/SEK |
+/1 | +/26 | +/1 |
Undiscounted financial liabilities
On December 31, 2015 SEK million |
< 1 year | 12 years | 23 years | 34 years | 45 years | > 5 years from the reporting date |
||||||||||||||||||
Borrowings |
2,891 | 3,130 | 7,540 | 9,769 | 3,746 | | ||||||||||||||||||
Unconditional deferred payment |
| 2,458 | | | | | ||||||||||||||||||
Derivatives |
40 | 8 | | | | | ||||||||||||||||||
Trade payables |
1,696 | | | | | | ||||||||||||||||||
Other liabilities |
80 | | | | | | ||||||||||||||||||
Accrued expenses |
907 | | | | | |
On December 31, 2014 SEK million |
< 1 year | 12 years | 23 years | 34 years | 45 years | > 5 years from the reporting date |
||||||||||||||||||
Borrowings |
1,967 | 1,949 | 2,610 | 7,275 | 12,620 | 6,195 | ||||||||||||||||||
Unconditional deferred payment |
| | 2,583 | | | | ||||||||||||||||||
Derivatives |
21 | 4 | | | | | ||||||||||||||||||
Trade payables |
1,542 | | | | | | ||||||||||||||||||
Other liabilities |
257 | | | | | | ||||||||||||||||||
Accrued expenses |
981 | | | | | |
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On December 31, 2013 SEK million |
< 1 year | 12 years | 23 years | 34 years | 45 years | > 5 years from the reporting date |
||||||||||||||||||
Borrowings |
6,652 | 3,955 | 4,034 | | | | ||||||||||||||||||
Derivatives |
19 | 18 | 4 | | | | ||||||||||||||||||
Trade payables |
883 | | | | | | ||||||||||||||||||
Other liabilities |
68 | | | | | | ||||||||||||||||||
Accrued expenses |
751 | | | | | |
The Groups financial derivatives, which will be settled gross, comprised various currency forward contracts on the reporting date (see also Note 22). On the reporting date, the contractually agreed undiscounted cash flows from these instruments, maturing within 12 months, stood at SEK 23,835 million and SEK 23,895 million respectively (SEK 23,907 million and SEK 23,792 million respectively; SEK 18,494 million and SEK 18,429 million respectively).
Interest rate risk
Interest risk refers to the risk that changes in general interest rates may have an adverse effect on the Groups net income. The time taken for interest rate fluctuations to affect profit/loss depends on the fixed interest period for the loan. As per Group policy, the loan portfolios fixed interest period should be 3 -15 months on average. On December 31, 2015, the average period was 5.5 months.
Meda uses interest rate swaps to extend/shorten the period of fixed interest on underlying loans. As per Group policy, the duration of an interest rate swap may not exceed five years. Hedge accounting is applied to these transactions, and fair value is charged to other comprehensive income. In 2015, interest rate swaps had an impact on other comprehensive income of SEK 1 million (9; 17) from cash flow hedging after tax. The fair value included in the consolidated balance sheet for interest rate swaps as of December 31, 2015 was a net amount of SEK 23 million (22; 33).
On December 31, 2015, Group borrowings of SEK 24,862 million were mainly distributed as follow: EUR 1,614 million (SEK 14,834 million), USD 610 million (SEK 5,149 million), and SEK 4,879 million. The average interest rate including credit margins on December 31, 2015 was 2.5% (3.6; 2.8). Interest expense for 2016 for this loan portfolio at unchanged interest rates would thus amount to approximately SEK 600 million. If interest rates change instantaneously +/ 1 percentage point, Medas net income would change by +/ SEK 168 million (135; 119) on an annual basis, taking into account the loan amounts and fixed interest rates that existed on December 31, 2015. Further information can be found in Note 25.
Refinancing risk
Refinancing risk is the risk that the refinancing of a maturing loan is not feasible, and the risk that refinancing must be done during unfavorable market conditions at unfavorable interest rates. Meda seeks to limit refinancing risk by spreading the maturity structure of the loan portfolio over time and spreading financing over several counterparties. On December 31, 2015, Meda had SEK 28,000 million (33,000; 23,000) in available credit facilities. The basis of the Groups debt financing is syndicated bank loans of SEK 25,000 million with nine Swedish and foreign banks. This financing is augmented with borrowing via a Swedish MTN program with an upper limit of SEK 7,000 million, a Swedish commercial paper program with an upper limit of SEK 4,000 million, and a bilateral bank loan of SEK 2,000 million.
Confirmed credit facilities were as follow on December 31, 2015:
| Bond loan of SEK 400 million maturing in April 2016 |
| Bilateral bank loan of SEK 2,000 million maturing in October 2017 |
| Bond loan of SEK 600 million maturing in April 2018 |
| Bond loan of SEK 750 million maturing in April 2019 |
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| Credit facility with nine banks amounting to SEK 25,000 million -maturing 20162020 |
| Term loan of SEK 6,063 million maturing in December 2018 |
| Revolving loan of SEK 12,500 million maturing in December 2019 |
| Term loan of SEK 6,151 million maturing in December 2020 (amortization of SEK 2,578 million) |
The syndicated credit facilities are available provided that Meda meets certain key financial ratios concerning net debt in relation to EBITDA and interest coverage ratio. Meda has met its key financial ratios for 2015.
Liquidity risk
The Groups current liquidity is covered by a retained liquidity reserve (cash and bank balances, current investments and the unused portion of confirmed credit facilities) that in the long-term shall be at least 5% of the Groups annual sales. On December 31, 2015, the liquidity reserve was SEK 6,839 million, corresponding to 35% of net sales. The table on pages F-18 and F-19 shows the contractually agreed undiscounted cash flows from the Groups financial liabilities and net settled derivatives that constitute financial liabilities classified by the time that, on the closing date, remained until the contractually agreed maturity date. For derivatives with a variable interest rate, the variable rate that applied to each derivative on December 31, 2015 was used for the entire period to maturity.
Credit risk
The Groups financial transactions lead to credit risks in relation to financial counterparties. According to Medas financial policy, financial transactions may only be conducted with the Groups financing banks, or banks with a high official rating corresponding to Standard & Poors long-term A-rating or better. Investments in cash and cash equivalents can only be made in -government securities or with banks that have a high official rating.
Credit risk exists in the Groups cash and cash equivalents, derivatives, and cash balances with banks and financial institutions and in relation to distributors and wholesalers, including outstanding receivables and -committed transactions.
Medas sales are mainly to large, established distributors and whole-salers with robust financial strength in each country. Since sales occur in several countries and to many different customers, the Group has good risk distribution. Meda monitors granted credits on a continuous basis.
Group assets that entail credit risk are reported in Note 21, 22 and 23.
Capital risk
The goal of the capital structure is to secure the Groups ability to -continue its operations with the aim of generating return to shareholders and benefit for other stakeholders. The goal is also to keep the costs of capital low, through an optimal capital structure and by that strengthen Medas ability to meet its key financial ratios. Capital in the Meda Group is judged on the basis of the Groups equity/assets ratio. The Groups long-term goal is an equity/assets ratio of 30%. New shares may be issued to maintain the capital structure in conjunction with major acquisitions.
SEK million |
2015 | 2014 | 2013 | |||||||||
Equity |
20,956 | 20,680 | 15,211 | |||||||||
Total assets |
60,846 | 65,112 | 36,293 | |||||||||
Equity/assets ratio, % |
34.4 | 31.8 | 41.9 |
20
Note 3 Important estimates and assessments for accounting purposes
Preparation of the financial statements in accordance with IFRS requires management to make assessments, estimates and assumptions which affect the reported assets and liabilities and other information disclosed in the closing accounts as well as the income and expenses reported during the period. Estimates, assessments and assumptions are evaluated continually and are based on past experience and other factors, including expectations of future events that are deemed reasonable under prevailing conditions. The actual outcome may differ from these assessments, estimates and assumptions. Below is a description of the most important accounting policies applied based on assessments and the most important sources of uncertainty in estimates what may have an impact on the Groups reported results and position in future financial years.
Assessments in the application of accounting policies
Acquisitions
When making acquisitions, the Group, based on IFRS 3 Business Combinations, makes assessments as to whether the transaction is a business combination or an acquisition of assets. When a transaction is regarded as a business combination, all identifiable assets and liabilities in the acquired company are identified and valued at fair value. When the fair value cannot be reliably measured, the value is included in goodwill. When a transaction is regarded as an acquisition of assets, the individually identifiable assets and assumed liabilities are identified and recognized. The cost of acquisition is allocated to the individual assets and liabilities based on their relative fair values on the acquisition date. An acquisition of assets does not give rise to goodwill.
Legal proceedings
Meda is involved in legal proceedings typical for the business from time to time. Meda recognizes a liability when an obligation exists and the recognition criteria for provision according to IFRS are met. The Group reviews outstanding legal cases regularly in order to assess the need for provisions in the financial statements. These reviews consider the factors of the specific case by internal legal counsel and through the use of outside legal counsel and advisors when necessary. To the extent that Group managements assessment of the factors considered are not reflected in subsequent developments, the financial statements could be affected. As of December 31, 2015, provisions for legal disputes amounted to SEK 254 (73; 66) million, see Note 28. See Note 29 for a description of legal proceedings that Meda is part of and for which the recognition criteria for provisions according to IFRS are not met.
Important sources of uncertainty in estimates
Impairment testing of goodwill
The Group conducts regular impairment testing of goodwill, as per the principle described in Note 1. Recoverable amounts for cash-generating units were established through measurement of their value in use. Certain estimates must be made in order to arrive at these measurements as explained in Note 16.
Product rights
The value of product rights is measured based on certain assumptions. These assumptions relate to forecasts of future sales revenue, contribution margins and expenses for each product. Assumptions are also made on discount rates, product life and royalty rates. The Groups maximum period of amortization of product rights is 25 years. A need to re-assess the valuation of product rights cannot be ruled out and this may have a major impact on the Groups financial situation and earnings. The Group conducts regular goodwill impairment tests, as described in Note 1. On December 31, 2015, the value of product rights totaled SEK 21,869 million.
21
Pension and similar obligations
Provisions and costs for post-employment benefits, mainly pensions and healthcare benefits, are based on the assumptions made when the amounts are calculated. Special assumptions and actuarial measurements are made based on estimates of discount rates, healthcare cost trends, inflation, salary increase trends, staff turnover, mortality and other factors. Each change in these assumptions will impact the carrying amounts of the obligations. The discount rate for each country is established on the basis of the market rate of first-class corporate bonds and takes into account the estimated time to maturity of each obligation. In countries where there is no functioning market for such bonds, the market rate for government bonds or mortgage bonds is used.
In Sweden, the Group has used Swedish mortgage bonds to establish the Swedish discount rate. The Swedish mortgage bond market is considered to be first-class (AAA or AA) and liquid, therefore meeting the requirements stipulated in IAS 19. In Germany, the US and the UK, the Group uses first-class corporate bonds to establish the discount rate.
Inflation assumptions are based on analyzing external market indicators. Assumptions on salary increase trends reflect expected payroll expense trends. Staff turnover reflects the average long-term staff turn-over within Meda. Mortality is primarily based on official mortality statistics. The Group reviews actuarial assumptions annually and adjusts them when appropriate. As of December 31, 2015, provisions for pensions amounted to SEK 2,273 million, and assets of SEK 18 million were recognized. Provisions for healthcare benefits amounted to SEK 94 million. For further information on expenses and assumptions for post-employment benefits, see Note 26 and 28.
Taxes
In the preparation of the financial statements, Meda estimates the income taxes in each of the tax jurisdictions where the Group operates as well as any deferred taxes based on temporary differences. Deferred tax assets relating mainly to tax loss carry-forwards and temporary differences are recognized in those cases when future taxable income is estimated to be utilized in the various tax jurisdictions. Changes in assumptions in the projection of future taxable income as well as changes in tax rates could result in significant differences in the valuation of deferred taxes. As of December 31, 2015, Meda recognized deferred tax assets of SEK 1,812 (1,640; 918) million and deferred tax liabilities of SEK 4,708 (5,278; 2,211) million. For further information on deferred taxes, see Note 17.
Note 4 Segment information
Group management assesses operations from a geographic perspective. Earnings per geographic area are assessed on the basis of EBITDA (earnings before interest, taxes, depreciation, and amortization). On December 31, 2015, the Group was organized in three geographic areas: Western Europe, US and Emerging Markets.
2015 SEK million |
Western Europe | US | Emerging Markets |
Other Sales |
Total | |||||||||||||||
Segments sales |
13,612 | 3,421 | 3,739 | 421 | 21,193 | |||||||||||||||
Sales between segments |
1,399 | 67 | 79 | | 1,545 | |||||||||||||||
External net sales |
12,213 | 3,354 | 3,660 | 421 | 19,648 | |||||||||||||||
EBITDA |
4,247 | 1,432 | 1,281 | 957 | 6,003 | |||||||||||||||
Depreciation and amortization |
3,284 | |||||||||||||||||||
Finance income |
37 | |||||||||||||||||||
Finance costs |
1,452 | |||||||||||||||||||
Profit after financial items |
1,304 |
22
2014 SEK million |
Western Europe | US | Emerging Markets |
Other Sales |
Total | |||||||||||||||
Segments sales |
11,214 | 2,636 | 2,370 | 235 | 16,455 | |||||||||||||||
Sales between segments |
1,009 | 94 | | | 1,103 | |||||||||||||||
External net sales |
10,205 | 2,542 | 2,370 | 235 | 15,352 | |||||||||||||||
EBITDA |
3,327 | 972 | 663 | 972 | 3,990 | |||||||||||||||
Depreciation and amortization |
2,503 | |||||||||||||||||||
Finance income |
8 | |||||||||||||||||||
Finance costs |
913 | |||||||||||||||||||
Profit after financial items |
582 |
2013 SEK million |
Western Europe | US | Emerging Markets |
Other Sales |
Total | |||||||||||||||
Segments sales |
9,347 | 2,481 | 1,951 | 202 | 13,981 | |||||||||||||||
Sales between segments |
840 | 27 | | | 867 | |||||||||||||||
External net sales |
8,507 | 2,454 | 1,951 | 202 | 13,114 | |||||||||||||||
EBITDA |
3,078 | 872 | 504 | 720 | 3,734 | |||||||||||||||
Depreciation and amortization |
2,186 | |||||||||||||||||||
Finance income |
22 | |||||||||||||||||||
Finance costs |
567 | |||||||||||||||||||
Profit after financial items |
1,003 |
The company is based in Sweden. Geographic breakdown of total non-current assets other than financial instruments and deferred tax assets is shown in the table below.
Net sales | Non-current assets | |||||||||||||||||||||||
SEK million |
2015 | 2014 | 2013 | 2015 | 2014 | 2013 | ||||||||||||||||||
Western Europe1) |
12,213 | 10,205 | 8,507 | 28,821 | 31,599 | 15,606 | ||||||||||||||||||
US2) |
3,354 | 2,542 | 2,454 | 10,066 | 10,302 | 9,592 | ||||||||||||||||||
Emerging Markets |
3,660 | 2,370 | 1,951 | 10,010 | 10,533 | 5,202 | ||||||||||||||||||
Other Sales |
421 | 235 | 202 | 169 | 167 | 120 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
19,648 | 15,352 | 13,114 | 49,066 | 52,601 | 30,520 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1) whereof in Sweden |
8,818 | 9,667 | 10,925 | |||||||||||||||||||||
2) whereof in the US |
10,066 | 10,302 | 9,592 |
A breakdown of goodwill is found in Note 16.
Revenues from external customers in Germany amount to SEK 2,053 million (1,507; 1,374), France SEK 1,594 million (1,415; 1,282), Sweden SEK 1,427 million (1,409; 1,310) and Italy SEK 1,809 million (1,407; 755). Total revenues from external -customers in other countries amount to SEK 12,765 million (9,614; 8,393).
A breakdown of net sales by income type is found in Note 5.
Geographic areas
Western Europe includes western Europe excluding the Baltics, Poland, Czech Republic, Slovakia and Hungary. The US comprises the US and Canada, and Emerging Markets includes eastern Europe including the Baltics, Poland, Czech Republic, Slovakia, Hungary, Turkey, the Middle East, Mexico and other non-European markets. Other Sales concern revenues from contract manufacturing, parts of royalty and other income.
23
Note 5 Net sales disclosed by type
SEK million |
2015 | 2014 | 2013 | |||||||||
Goods sold |
19,037 | 14,796 | 12,553 | |||||||||
Royalties |
435 | 361 | 331 | |||||||||
Revenue from contract manufacturing |
133 | 145 | 173 | |||||||||
Other |
43 | 50 | 57 | |||||||||
|
|
|
|
|
|
|||||||
Total |
19,648 | 15,352 | 13,114 | |||||||||
|
|
|
|
|
|
Note 6 Expenses by type
SEK million |
2015 | 2014 | 2013 | |||||||||
Changes in stock of finished goods and work in progress |
264 | 172 | 82 | |||||||||
Raw materials and consumables |
2,315 | 1,900 | 1,457 | |||||||||
Goods for resale |
3,063 | 2,376 | 2,205 | |||||||||
Staff costs |
3,154 | 2,494 | 1,944 | |||||||||
Depreciation and amortization |
3,285 | 2,503 | 2,159 | |||||||||
Other expenses |
4,870 | 4,462 | 3,719 | |||||||||
|
|
|
|
|
|
|||||||
Total cost of sales, selling expenses, -medicine and business development expenses, and administrative expenses |
16,951 | 13,907 | 11,566 | |||||||||
|
|
|
|
|
|
24
Note 7 Personnel, number of employees
20151)2) | 20143)4) | 20135)6) | ||||||||||||||||||||||
Average no. of employees7) |
Average no. of employees7) |
Average no. of employees7) |
||||||||||||||||||||||
Women | Men | Women | Men | Women | Men | |||||||||||||||||||
Germany |
411 | 482 | 399 | 354 | 344 | 316 | ||||||||||||||||||
France |
304 | 198 | 258 | 174 | 227 | 171 | ||||||||||||||||||
US |
251 | 243 | 290 | 256 | 306 | 277 | ||||||||||||||||||
Italy |
229 | 165 | 119 | 67 | 60 | 34 | ||||||||||||||||||
China |
118 | 105 | 56 | 59 | 36 | 51 | ||||||||||||||||||
Ireland |
59 | 124 | 22 | 35 | 5 | 10 | ||||||||||||||||||
Russia |
122 | 41 | 123 | 43 | 100 | 36 | ||||||||||||||||||
Spain |
79 | 55 | 81 | 63 | 58 | 28 | ||||||||||||||||||
Sweden |
72 | 40 | 74 | 36 | 73 | 37 | ||||||||||||||||||
Turkey |
16 | 85 | 23 | 124 | 25 | 126 | ||||||||||||||||||
Thailand |
66 | 21 | 18 | 4 | | | ||||||||||||||||||
UK |
42 | 37 | 45 | 31 | 38 | 38 | ||||||||||||||||||
Portugal |
40 | 33 | 33 | 29 | 21 | 16 | ||||||||||||||||||
Belgium |
39 | 25 | 30 | 26 | 29 | 27 | ||||||||||||||||||
Mexico |
31 | 32 | 26 | 32 | 27 | 30 | ||||||||||||||||||
United Arab Emirates |
16 | 41 | 14 | 33 | 12 | 32 | ||||||||||||||||||
Egypt |
2 | 47 | | | | | ||||||||||||||||||
Netherlands |
28 | 15 | 28 | 15 | 24 | 18 | ||||||||||||||||||
Poland |
19 | 24 | 22 | 20 | 25 | 19 | ||||||||||||||||||
Austria |
22 | 20 | 21 | 22 | 15 | 21 | ||||||||||||||||||
Balkans |
24 | 18 | 29 | 14 | 25 | 17 | ||||||||||||||||||
Ukraine |
27 | 11 | 32 | 18 | 31 | 18 | ||||||||||||||||||
India |
4 | 28 | 1 | 3 | | | ||||||||||||||||||
Denmark |
27 | 3 | 24 | 4 | 25 | 5 | ||||||||||||||||||
Finland |
16 | 9 | 15 | 9 | 16 | 14 | ||||||||||||||||||
South Africa |
16 | 8 | 18 | 6 | 13 | 6 | ||||||||||||||||||
Switzerland |
17 | 7 | 16 | 7 | 14 | 6 | ||||||||||||||||||
Norway |
14 | 9 | 14 | 8 | 9 | 12 | ||||||||||||||||||
CIS |
15 | 6 | 18 | 8 | 18 | 10 | ||||||||||||||||||
Greece |
6 | 15 | 5 | 15 | 9 | 11 | ||||||||||||||||||
Baltics |
18 | 2 | 18 | 1 | 19 | 2 | ||||||||||||||||||
Australia |
14 | 5 | 15 | 5 | 3 | 2 | ||||||||||||||||||
Brazil |
8 | 10 | 7 | 3 | 4 | 1 | ||||||||||||||||||
Czech Republic |
11 | 6 | 10 | 5 | 9 | 6 | ||||||||||||||||||
Slovakia |
11 | 6 | 9 | 7 | 9 | 7 | ||||||||||||||||||
Hungary |
11 | 4 | 12 | 4 | 11 | 4 | ||||||||||||||||||
Belarus |
10 | 4 | 8 | 4 | 9 | 4 | ||||||||||||||||||
Luxembourg |
5 | | 3 | 1 | 3 | 1 | ||||||||||||||||||
Hong Kong |
1 | 3 | | 1 | | | ||||||||||||||||||
Canada |
1 | | 1 | | 1 | | ||||||||||||||||||
2,222 | 1,987 | 1,937 | 1,545 | 1,653 | 1,413 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total |
4,209 | 3,482 | 3,066 | |||||||||||||||||||||
|
|
|
|
|
|
1) | Full-time equivalents (FTE) on December 31, 2015 were 4,518, whereof 453 contractors. |
2) | Headcount on December 31, 2015 was 4,617, whereof 461 contractors. |
3) | FTEs on December 31, 2014 were 5,083, whereof 511 contractors. |
25
4) | Headcount on December 31, 2014 was 5,202, whereof 527 contractors. |
5) | FTEs on December 31, 2013 were 3,226, whereof 164 contractors. |
6) | Headcount on December 31, 2013 was 3,326, whereof 173 contractors. |
7) | Refers to FTEs. |
Gender distribution in Meda management
2015 | 2014 | 2013 | ||||||||||||||||||||||
Women | Men | Women | Men | Women | Men | |||||||||||||||||||
Boards1) |
12 | 179 | 10 | 176 | 10 | 92 | ||||||||||||||||||
CEO and other senior executives2) |
10 | 42 | 8 | 36 | 7 | 30 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
22 | 221 | 18 | 212 | 17 | 122 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1) | Boards of the Groups operating companies. |
2) | Group management and regional and country/national management. |
Note 8 Salaries, other remuneration, and social security costs
Remuneration to the board of directors and senior executives
Board of directors
The chairman and directors of the board fees are paid as resolved by the annual general meeting (AGM). The CEO does not receive a directors fee. Pursuant to these decisions, directors fees for the period until the next AGM SEK 4,750,000, of which SEK 900,000 is for the chairmans fee and SEK 650,000 is for the vice chairmans fee. The remaining amount is divided so that each non-executive director receives SEK 400,000. In addition to these amounts, according to the 2015 AGM decision, a fee totaling SEK 400,000 is paid for serving on the boards audit committee or remuneration committee. The table on page F-31 shows remuneration to the Board of Directors for 2015.
Senior executives
Since the 2015 AGM, the following guidelines for remuneration to senior executives, as determined by the AGM, have been applied:
The boards proposal for guidelines for remuneration to senior executives is to reflect Medas need to recruit and motivate qualified employees through a compensation package that is competitive in the various countries. Executive management comprises the CEO and the senior executives who represent the executive functions that report directly to the CEO.
The principles for remuneration and other employment terms are based on previously made contracts between Meda and its senior executives. These principles entail the following:
(i) | Meda shall seek to offer its senior executives market based -remuneration; |
(ii) | Remuneration criteria shall be based on the significance of their -responsibilities, skills requirements, experience, and performance; and |
(iii) | Remuneration is to consist of the following components: |
| Fixed basic salary |
| Short-term variable pay |
| Long-term variable pay |
| Pension benefits |
| Other benefits and severance terms |
26
Distribution between basic salary and variable pay must be in proportion to the executives levels of responsibility and authority. Short-term variable pay is performance based partly on Group profit and partly on individual qualitative parameters. The variable pay ceiling is 80% of fixed basic salary for the CEO and 50% of fixed basic salary for other senior executives. Long-term variable pay consists of share related incentive programs. Pension benefits shall reflect current common market terms. Pension based salary is made up of basic salary and variable salary. Other benefits primarily consist of leasing cars. Other benefits may also include commonly accepted benefits in conjunction with employment or the move abroad of the senior executive. Such benefits may include temporary housing, education fees, moving expenses, tax filing assistance and similar benefits.
Fixed salary during the period of notice for termination and severance pay shall together not exceed an amount equivalent to two years of fixed salary.
Remuneration to CEO
The CEOs remuneration consisted of basic salary of SEK 12.5 million and variable pay of SEK 17 million, which includes remuneration related to the Groups long-term performance based incentive programs in the amount of SEK 2.0 million. Other benefits amounted to SEK 0.4 million. Pension costs amounted to SEK 7.4 million. The CEO chose during the year to convert pension benefits of SEK 3.0 million to salary. The CEO has a premium based pension plan equal to 35% of fixed salary and variable pay. The pension commitment to the CEO is secured through the purchase of endowment insurance pledged to the benefit of the CEO. In his previous role as COO, the CEO is covered by a defined benefit pension plan for which the pension commitment at the end of the year amounted to SEK 45 million. No further provision is done to the defined benefit plan since the end of 2013.
If the CEO resigns or his employment contract is terminated, a mutual period of notice of 12 months applies. If the company terminates the employment contract, fixed and variable remuneration is payable during the period of notice as well as severance pay equal one time the annual base salary and one time the annual full bonus. Upon closing of a change of control defined as shareholding by one owner of more than 50% (i) each party must observe a notice period of 24 months which will be reduced pro rata, per each month, during 12 months after closing, until the mutual notice period is yet again 12 months and (ii) the CEO will receive a payment of two times the annual base salary and two times the annual full bonus. Upon termination, initiated by either party within three months from a change of control the CEO will receive an additional payment equal to two times the annual full bonus payable three months after closing of the change of control. All such payments will be made together with additional pension contribution of 35%. The CEOs total severance payment should not exceed two times the annual base salary and four times the annual full bonus payment and respective pension.
The CEOs employment terms are determined by the board of directors.
Executive vice presidents (EVP)
At year end, Medas executive management consisted of eight EVPs, in addition to the CEO. Salary and other remuneration are shown on the next table. All EVPs are covered by the companys long-term performance based incentive programs.
EVPs employed in Sweden are covered by a premium based supplementary pension plan. The plan entitles the individuals concerned to a supplement to the pension benefits based on the ITP plan. The premium paid is based upon the individuals pensionable salary (defined as fixed monthly salary including annual leave supplement). The premium is calculated at 30 percent of pensionable salary in excess of 30 income base amounts. The pension commitment for these individuals is secured through the purchase of endowment insurance pledged to the benefit of the employee.
27
Four EVPs who are not Swedish citizens are covered by a defined benefit pension plan. The pension commitment for these individuals amounted to SEK 51 million at the end of the year. Other EVPs who are not Swedish -citizens are covered by defined contribution pension plans to which -provisions are made to a maximum of 18% of fixed salary.
Total salaries, social security costs and pensions
2015 | ||||||||||||
SEK million |
Salaries and other - remuneration |
Social security costs |
Of which pension costs |
|||||||||
2,521 | 690 | 177 | ||||||||||
Pension costs |
||||||||||||
Defined contribution plans |
80 | |||||||||||
Defined benefit plans |
93 | |||||||||||
Defined benefit post-employment healthcare plans |
4 | |||||||||||
|
|
|||||||||||
Total |
177 | |||||||||||
|
|
2014 | ||||||||||||
SEK million |
Salaries and other - remuneration |
Social security costs |
Of which pension costs |
|||||||||
2,020 | 525 | 146 | ||||||||||
Pension costs |
||||||||||||
Defined contribution plans |
74 | |||||||||||
Defined benefit plans |
69 | |||||||||||
Defined benefit post-employment healthcare plans |
3 | |||||||||||
|
|
|||||||||||
Total |
146 | |||||||||||
|
|
2013 | ||||||||||||
SEK million |
Salaries and other - remuneration |
Social security costs |
Of which pension costs |
|||||||||
1,541 | 446 | 129 | ||||||||||
Pension costs |
||||||||||||
Defined contribution plans |
61 | |||||||||||
Defined benefit plans |
65 | |||||||||||
Defined benefit post-employment healthcare plans |
3 | |||||||||||
|
|
|||||||||||
Total |
129 | |||||||||||
|
|
Salaries and other remuneration
2015 | ||||||||||||||||
SEK million |
Salary/board fee |
Of which - variable pay |
Pension costs |
Average no. of people |
||||||||||||
Board, CEO and other -executives1) |
153 | 60 | 17 | 61 | ||||||||||||
Other employees |
2,368 | 274 | 160 | 4,157 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
2,521 | 334 | 177 | 4,218 | ||||||||||||
|
|
|
|
|
|
|
|
28
2014 | ||||||||||||||||
SEK million |
Salary/board fee |
Of which - variable pay |
Pension costs |
Average no. of people |
||||||||||||
Board, CEO and other - executives1) |
116 | 29 | 10 | 57 | ||||||||||||
Other employees |
1,904 | 222 | 136 | 3,433 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
2,020 | 251 | 146 | 3,490 | ||||||||||||
|
|
|
|
|
|
|
|
2013 | ||||||||||||||||
SEK million |
Salary/board fee |
Of which - variable pay |
Pension costs |
Average no. of people |
||||||||||||
Board, CEO and other - executives1) |
113 | 39 | 7 | 44 | ||||||||||||
Other employees |
1,428 | 180 | 122 | 3,029 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
1,541 | 219 | 129 | 3,073 | ||||||||||||
|
|
|
|
|
|
|
|
1) | Board of the parent company, Group management, and regional and country/national management. |
Basic salary during the period of notice for termination and severance pay shall together not exceed an amount equivalent to two years´ fixed and variable remuneration.
Against the background of a possible change of control, the EVPs participate in a retention program for 2016 which entitles them to receive an additional payment of 18 month base salary in case of completion or of 6 month base salary in case of no completion of a change of control in the year 2016.
Long-term variable pay
Long-term performance based incentive programs (LTI-programs)
As of December 31, 2015, Meda has two outstanding LTI-programs approved by the AGM in 2014 and 2015. The programs cover senior -executives and other key employees of the Group. The participants are divided into four groups: the CEO, the EVPs, and two additional groups consisting of country managers and other senior executives. The participants are given the opportunity to earn allotments of Class A shares in Meda at no cost. The board of directors believes it is advantageous to Meda when key individuals in the Group have a long-term interest in ensuring the good value performance of the companys stock. The program is also intended to increase the Groups attractiveness as an employer in the global market and promote the ability to recruit and retain key individuals.
Each program will run for three years and shares may be transferred in 2017 and 2018 provided that the individual is employed by the Group for an indefinite term at the transfer date. Exemptions from the requirement may be permitted in individual cases, such as the participants death, disability, retirement, or sale of the unit by which the participant is employed. In order to set the participants interest on par with those of shareholders, the participants shall be paid compensation equivalent to the dividends paid during the three year vesting period up to the date of transfer. Compensation will be paid only for dividends whose distribution was decided after the allotment date.
29
As of December 31, 2015, the programs cover, LTI 2014, 83 persons and, LTI 2015, 98 persons. The allotment of shares according to the programs is determined based on the participants position according to the four groups mentioned and the outcome of three performance criteria regarding 1) net sales, 2) EBITDA margin, and 3) cash flow. Each performance criterion has been divided into three levels for a total of nine equally weighted levels corresponding to 11.1% per level. The performance criteria have been adjusted for restructuring costs and other items affecting comparability. The outcome for each program is presented in the following table.
Performance criteria |
LTI 2015level | LTI 2014level | ||||||
Net sales |
2 | 2 | ||||||
EBITDA-margin |
3 | 2 | ||||||
Cash flow |
3 | 1 | ||||||
Outcome performance criteria (%) |
88.8 | % | 55.5 | % |
The number of shares to be allotted to the participants of the LTI 2014 as of December 31, 2015 is presented in the following table. The number of shares to be allotted to the participants of the LTI 2015 will be based on the market value of the share and determined when the annual report has been adopted by the board of directors and signed by the auditor.
Alloted shares |
LTI 2014 | |||
Value of shares at allotment (SEK million)1) |
48 | |||
Number of shares at allotment2) |
350,665 | |||
Additional shares due to dividend compensation |
6,844 | |||
Number of forfeited shares during the period |
19,388 | |||
|
|
|||
Total allotted shares as of December 31, 2015 |
338,121 | |||
|
|
1) | The value of allotted shares at allotment have been calculated as the volume weighted average share price of Medas class A-shares at Nasdaq Stockholm during ten trading days for the period March 13, 2015 to March 26, 2015. The program fully compensates for dividends. |
2) | The number of shares is based on a price per share of SEK 136.98. |
Cost
The total cost of the programs, which is allocated across their duration, is SEK 129 million excluding social security contributions. In 2015, the programs resulted in a cost recognized in the income statement of SEK 28 million excluding social security contributions of SEK 2 million. The total reserve for social security contributions in the balance sheet amounts to SEK 4 million.
Deliver of shares
The AGM has passed a resolution allowing the company to meet its obligations to deliver shares under the programs by entering into an equity swap agreement or other comparable agreement with a third party.
Incentive program in the US
The long-term incentive program that was introduced in 2008 for employees in the US, and adjusted in 2011, expired on December 31, 2015. The incentive program closed at the end of 2011 and included synthetic options. The premium for the options is USD 0, and the redemption price per option is 100% of the average price paid for the Meda share in January 2011. The total cost recognized in the income statement is SEK 0 million (7; 1).
Preparation and decision process
Issues concerning remuneration to Group management are dealt with by the remuneration committee in preparation for decisions by the board of directors.
30
Remuneration and benefits to board and senior executives
2015 SEK million |
Fixed basic salary/board fee |
Variable pay |
Performance share - programme |
Pension | Other - benefits |
Total | ||||||||||||||||||
CEO, Jörg-Thomas Dierks1) |
12.5 | 15.0 | 2.0 | 7.4 | 0.4 | 37.3 | ||||||||||||||||||
Board chairman, Martin Svalstedt2) |
1.0 | | | | | 1.0 | ||||||||||||||||||
Vice chairman, Luca Rovati2) |
0.5 | | | | | 0.5 | ||||||||||||||||||
Board member, Peter Claesson2) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Marianne Hamilton2)3)4) |
0.1 | | | | | 0.1 | ||||||||||||||||||
Board member, Tuve Johannesson2)3) |
0.2 | | | | | 0.2 | ||||||||||||||||||
Board member, Kimberly Lein-Mathisen5) |
0.3 | | | | | 0.3 | ||||||||||||||||||
Board member, Guido Oelkers2) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Karen Sörensen4) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Lillie Li Valeur5) |
0.3 | | | | | 0.3 | ||||||||||||||||||
Board member, Peter von Ehrenheim2)4) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Lars Westerberg2)4) |
0.5 | | | | | 0.5 | ||||||||||||||||||
Other senior executives (8 persons) |
18.2 | 13.4 | 7.1 | 4.2 | 0.9 | 43.8 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
35.2 | 28.4 | 9.1 | 11.6 | 1.3 | 85.6 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
2014 SEK million |
Fixed basic salary/board fee |
Variable pay |
Performance share - programme |
Pension | Other - benefits | Total | ||||||||||||||||||
CEO, Jörg-Thomas Dierks1) |
10.0 | 7.0 | 0.6 | 6.1 | 0.4 | 24.1 | ||||||||||||||||||
Board chairman, Martin Svalstedt2)6) |
0.6 | | | | | 0.6 | ||||||||||||||||||
Board chairman, Bert-Åke Eriksson7) |
0.3 | | | | | 0.3 | ||||||||||||||||||
Vice chairman, Luca Rovati8) |
0.2 | | | | | 0.2 | ||||||||||||||||||
Board member, Peter Claesson2) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Marianne Hamilton2)4) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Peter von Ehrenheim4) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Tuve Johannesson2) |
0.5 | | | | | 0.5 | ||||||||||||||||||
Board member, Guido Oelkers6) |
0.3 | | | | | 0.3 | ||||||||||||||||||
Board member, Lars Westerberg2)4) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Karen Sörensen4) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Other senior executives (8 persons) |
14.9 | 7.0 | 1.9 | 3.8 | 0.9 | 28.5 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
28.8 | 14.0 | 2.5 | 9.9 | 1.3 | 56.5 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
2013 SEK million |
Fixed basic salary/board fee |
Variable pay |
Performance share - programme |
Pension | Other - benefits | Total | ||||||||||||||||||
CEO, Jörg-Thomas Dierks9) |
1.0 | 1.1 | | 0.7 | 0.1 | 2.9 | ||||||||||||||||||
Former CEO, Anders Lönner10) |
14.3 | 15.0 | | 11.2 | 0.3 | 40.8 | ||||||||||||||||||
Board chairman, Bert-Åke Eriksson2) |
0.8 | | | | | 0.8 | ||||||||||||||||||
Board member, Peter Claesson2) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Marianne Hamilton2)4) |
0.4 | | | | | 0.4 | ||||||||||||||||||
Board member, Peter von Ehrenheim4) |
0.3 | | | | | 0.3 | ||||||||||||||||||
Board member, Tuve Johannesson2) |
0.5 | | | | | 0.5 | ||||||||||||||||||
Board member, Lars Westerberg2)4) |
0.3 | | | | | 0.3 | ||||||||||||||||||
Board member, Karin Sörensen4) |
0.2 | | | | | 0.2 | ||||||||||||||||||
Other senior executives (12 persons)11) |
11.0 | 4.6 | | 3.8 | 1.0 | 20.4 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
29.2 | 20.7 | | 15.7 | 1.4 | 67.0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
31
1) | CEO has during the year, in accordance with the employment contract, decided to convert pension of SEK 3 million (2.5) to salary. |
2) | Including received compensation for work in the Board committee. |
3) | Relates to the period January 2015May 2015. |
4) | In addition to this an amount of SEK 0.3 million (0.4; 0.3) corresponding social cost for the part of the invoiced fee. |
5) | Relates to the period May 2015December 2015. |
6) | Relates to the period May 2014December 2014. |
7) | Relates to the period January 2014May 2014. |
8) | Relates to the period November 6 2014December 2014. |
9) | Relates to the period October 2013December 2013. |
10) | Former CEO, Anders Lönner used his right to convert his pension benefit into salary, as per his employment contract. |
11) | Other executives includes Jörg-Thomas Dierks for the period, January 2013September 2013. |
Note 9 Fees and remuneration to auditors
The table shows the financial years expensed auditing fees and expensed fees for other assignments that the Groups auditors performed.
SEK million |
2015 | 2014 | 2013 | |||||||||
Audit assignment |
||||||||||||
PwC1) |
14 | 13 | 10 | |||||||||
Other2) |
| 3 | | |||||||||
Tax consulting |
||||||||||||
PwC |
2 | 1 | 1 | |||||||||
Other2) |
| | | |||||||||
Other services |
||||||||||||
PwC |
7 | 12 | 3) | | ||||||||
Other2) |
| | | |||||||||
|
|
|
|
|
|
|||||||
Total |
23 | 29 | 11 | |||||||||
|
|
|
|
|
|
1) | Auditing fees refer to the statutory audit, i.e. work necessary to issue the auditors report and audit advice given in connection with the audit assignment. Fees for auditing services other than regular auditing assignments amount to SEK 1 million (3; 0). |
2) | Auditing fees, tax consulting and other service to other auditors for 2014 refer to statutory audit and consulting fees for acquired Rottapharm entities. |
3) | Fees for work performed by PwC firms globally, and invoiced to the parent company Meda AB. |
Note 10 Operating leases
SEK million |
2015 | 2014 | 2013 | |||||||||
Leasing expensed during the financial year |
249 | 238 | 166 | |||||||||
The nominal value of future minimum lease -payments regarding non-cancelable leases is distributed as follows: |
||||||||||||
Payable within 1 year |
215 | 209 | 122 | |||||||||
Payable within 15 years |
467 | 387 | 202 | |||||||||
Payable after 5 years |
58 | 13 | 7 | |||||||||
|
|
|
|
|
|
|||||||
Total |
740 | 609 | 331 | |||||||||
|
|
|
|
|
|
32
The largest portion of the lease payments is for rent of premises and cars for sales representatives. The Groups largest lease contracts are in Germany, Italy, US, France, UK and Sweden. An operating lease covering office rent in Bad Homburg, Germany expires in 2019. Lease contracts for office premises in Monza, Italy and factory premises in Confienza, Italy expire in 2020. In the US, the lease for offices runs through 2021. In 2015, Meda signed a new office lease in France which runs from July 1, 2016 to July 1, 2022. In the UK, Meda has leases for offices running until 2018. A new office lease in Sweden was signed during the year and it expires in June 2020.
The Groups leasing contracts for company cars usually run for 34 years.
Note 11 Exchange gains/losses, net
SEK million |
2015 | 2014 | 2013 | |||||||||
Finance income/costs (see Note 12) |
16 | 34 | 42 | |||||||||
|
|
|
|
|
|
|||||||
Total |
16 | 34 | 42 | |||||||||
|
|
|
|
|
|
Note 12 Finance income and finance costs
SEK million |
2015 | 2014 | 2013 | |||||||||
Finance income |
||||||||||||
Interest |
37 | 8 | 22 | |||||||||
|
|
|
|
|
|
|||||||
Total finance income |
37 | 8 | 22 | |||||||||
|
|
|
|
|
|
|||||||
Finance costs |
||||||||||||
Interest |
1,067 | 591 | 456 | |||||||||
Exchange losses (see Note 11) |
16 | 34 | 42 | |||||||||
Costs of raising loans |
115 | 1) | 192 | 43 | ||||||||
Interestpensions |
57 | 50 | | |||||||||
Other finance costs |
197 | 1) | 46 | 2) | 26 | |||||||
|
|
|
|
|
|
|||||||
Total finance costs |
1,452 | 913 | 567 | |||||||||
|
|
|
|
|
|
1) | Including expenses of SEK 219 million related to redemption of the bond loan absorbed in conjunction with the acquisition of Rottapharm, which was repaid in late April 2015. |
2) | Including transactional tax of SEK 36 million for the acquisition of the shares in Rottapharm. |
Note 13 Tax
SEK million |
2015 | 2014 | 2013 | |||||||||
Current tax expense |
||||||||||||
Current tax for the year |
1,039 | 462 | 450 | |||||||||
Current tax attributable to prior years |
236 | 8 | 26 | |||||||||
|
|
|
|
|
|
|||||||
Total |
803 | 470 | 424 | |||||||||
|
|
|
|
|
|
|||||||
Deferred tax expense |
||||||||||||
Deferred tax (see Note 17) |
691 | 290 | 226 | |||||||||
|
|
|
|
|
|
|||||||
Total |
112 | 180 | 198 | |||||||||
|
|
|
|
|
|
Tax expense constituted 8.6% (30.9;19.8) of profit before tax. The difference between the recognized tax expense and the consolidated profit before tax calculated using the Swedish tax rate of 22.0% (22.0; 22.0) is illustrated in the table below. The tax expense was positively impacted by SEK 359 million due to restructuring costs and
33
other items affecting comparability and the use of a non-capitalized loss carry forward in Germany. The Groups tax expense was SEK 471 million (351; 198), corresponding to a tax rate of 23.5% (22.9; 19.8).
SEK million |
2015 | 2014 | 2013 | |||||||||
Reconciliation of effective tax |
||||||||||||
Profit before tax |
1,304 | 582 | 1,003 | |||||||||
Tax as per applicable tax rate for parent company, % |
22.0 | 22.0 | 22.0 | |||||||||
Effect of other tax rates for foreign -subsidiaries, % |
3.7 | 6.6 | 3.7 | |||||||||
Internal restructuring of subsidiaries, % |
0.3 | 3.6 | | |||||||||
Other non-deductible expenses, % |
5.5 | 3.6 | 3.6 | |||||||||
Effect of changed tax rates, % |
0.7 | 1.9 | 0.0 | |||||||||
Tax attributable to prior years, % |
15.6 | 6.4 | 2.1 | |||||||||
Recognized effective tax, % |
8.6 | 30.9 | 19.8 |
Note 14 Earnings per share
Basic earnings per share
2015 | 2014 | 2013 | ||||||||||
Profit attributable to parent company-shareholders, SEK million |
1,176 | 399 | 807 | |||||||||
Average no. of shares (thousands) |
365,467 | 323,397 | 313,672 | |||||||||
No. of shares in calculation of basic -earnings per share (thousands) |
365,467 | 323,397 | 313,672 | |||||||||
Basic earnings per share (SEK) |
3.22 | 1.23 | 2.57 |
Diluted earnings per share
2015 | 2014 | 2013 | ||||||||||
Profit attributable to parent company-shareholders, SEK million |
1,176 | 399 | 807 | |||||||||
Average no. of shares (thousands) |
365,467 | 323,397 | 313,672 | |||||||||
No. of shares in calculation of diluted -earnings per share (thousands) |
365,467 | 323,397 | 313,672 | |||||||||
Diluted earnings per share (SEK) |
3.22 | 1.23 | 2.57 |
Basic and diluted earnings per share
Calculation of earnings per share was based on net profit for the year after tax attributable to parent company shareholders in relation to a weighted -average number of outstanding shares totaling 365,467,371 (323,396,680; 313,671,718). For 2013 and 2014, the number of shares has been adjusted to consider the bonus issue element in the 2014 new share issue. There are no potential diluted ordinary shares.
34
Note 15 Tangible assets
2015 | ||||||||||||||||||||
SEK million |
Buildings and land | Machinery/plant | Equipment and- installations |
Construction in progress |
Total | |||||||||||||||
Opening cost of acquisition |
994 | 1,367 | 722 | 113 | 3,196 | |||||||||||||||
Investments |
8 | 80 | 48 | 84 | 220 | |||||||||||||||
Sales/disposals |
16 | 26 | 69 | | 111 | |||||||||||||||
Divested operation |
40 | 320 | 19 | 1 | 380 | |||||||||||||||
Reclassification |
31 | 91 | 38 | 129 | 45 | |||||||||||||||
Translation difference |
8 | 8 | 6 | 1 | 11 | |||||||||||||||
Closing cost of acquisition |
969 | 1,184 | 650 | 66 | 2,869 | |||||||||||||||
Opening depreciation |
363 | 649 | 492 | | 1,504 | |||||||||||||||
Years depreciation |
31 | 116 | 64 | | 211 | |||||||||||||||
Sales/disposals |
15 | 24 | 65 | | 104 | |||||||||||||||
Divested operation |
21 | 204 | 16 | | 241 | |||||||||||||||
Reclassification |
3 | 4 | 13 | | 14 | |||||||||||||||
Translation difference |
1 | 1 | 9 | | 9 | |||||||||||||||
Closing depreciation |
362 | 532 | 471 | | 1,365 | |||||||||||||||
Carrying amount at year-end |
607 | 652 | 179 | 66 | 1,504 | |||||||||||||||
Depreciation per function: |
||||||||||||||||||||
Cost of sales |
18 | 105 | 16 | | 139 | |||||||||||||||
Selling expenses |
| | 7 | | 7 | |||||||||||||||
Medicine and business - development expenses |
1 | | 3 | | 4 | |||||||||||||||
Administrative expenses |
12 | 11 | 38 | | 61 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
31 | 116 | 64 | | 211 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
2014 | ||||||||||||||||||||
SEK million |
Buildings and land | Machinery/plant | Equipment and- installations |
Construction in progress |
Total | |||||||||||||||
Opening cost of acquisition |
691 | 826 | 561 | 92 | 2,170 | |||||||||||||||
Investments |
11 | 42 | 22 | 41 | 116 | |||||||||||||||
Sales/disposals |
45 | 34 | 54 | | 133 | |||||||||||||||
Acquired operation |
262 | 382 | 115 | 73 | 832 | |||||||||||||||
Reclassification |
11 | 69 | 20 | 100 | 0 | |||||||||||||||
Translation difference |
64 | 82 | 58 | 7 | 211 | |||||||||||||||
Closing cost of acquisition |
994 | 1,367 | 722 | 113 | 3,196 | |||||||||||||||
Opening depreciation |
319 | 564 | 439 | | 1,322 | |||||||||||||||
Years depreciation |
23 | 63 | 47 | | 133 | |||||||||||||||
Sales/disposals |
7 | 26 | 41 | | 74 | |||||||||||||||
Translation difference |
28 | 48 | 47 | | 123 | |||||||||||||||
Closing depreciation |
363 | 649 | 492 | | 1,504 | |||||||||||||||
Carrying amount at year- end |
631 | 718 | 230 | 113 | 1,692 | |||||||||||||||
Depreciation per function: |
||||||||||||||||||||
Cost of sales |
10 | 53 | 15 | | 78 | |||||||||||||||
Selling expenses |
| | 6 | | 6 | |||||||||||||||
Medicine and business - development expenses |
1 | 1 | 6 | | 8 | |||||||||||||||
Administrative expenses |
12 | 9 | 20 | | 41 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
23 | 63 | 47 | | 133 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
35
2013 | ||||||||||||||||||||
SEK million |
Buildings and land | Machinery/plant | Equipment and- installations |
Construction in progress |
Total | |||||||||||||||
Opening cost of acquisition |
663 | 797 | 534 | 55 | 2,049 | |||||||||||||||
Investments |
12 | 31 | 25 | 68 | 136 | |||||||||||||||
Sales/disposals |
| 50 | 9 | | 59 | |||||||||||||||
Reclassification |
1 | 28 | 3 | 32 | 0 | |||||||||||||||
Translation difference |
15 | 20 | 8 | 1 | 44 | |||||||||||||||
Closing cost of acquisition |
691 | 826 | 561 | 92 | 2,170 | |||||||||||||||
Opening depreciation |
298 | 550 | 406 | | 1,254 | |||||||||||||||
Years depreciation |
16 | 48 | 36 | | 100 | |||||||||||||||
Sales/disposals |
| 50 | 9 | | 59 | |||||||||||||||
Reclassification |
| 1 | 1 | | 0 | |||||||||||||||
Translation difference |
5 | 15 | 7 | | 27 | |||||||||||||||
Closing depreciation |
319 | 564 | 439 | | 1,322 | |||||||||||||||
Carrying amount at year-end |
372 | 262 | 122 | 92 | 848 | |||||||||||||||
Depreciation per function: |
||||||||||||||||||||
Cost of sales |
8 | 37 | 10 | | 55 | |||||||||||||||
Selling expenses |
| | 6 | | 6 | |||||||||||||||
Medicine and business -development expenses |
1 | 1 | 3 | | 5 | |||||||||||||||
Administrative expenses |
7 | 10 | 17 | | 34 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
16 | 48 | 36 | | 100 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Finance leases
The Groups property, plant, and equipment include objects held via finance leases as follows:
SEK million |
2015 | 2014 | 2013 | |||||||||
Opening cost of acquisition |
33 | 50 | 91 | |||||||||
Sales/disposals |
| | 41 | |||||||||
Acquired operation |
| 33 | | |||||||||
Divested operation |
32 | | | |||||||||
Reclassification |
| 50 | | |||||||||
Translation difference |
| | | |||||||||
Closing cost of acquisition |
1 | 33 | 50 | |||||||||
Opening depreciation |
1 | 25 | 56 | |||||||||
Years depreciation |
4 | 3 | 10 | |||||||||
Sales/disposals |
| | 41 | |||||||||
Divested operation |
4 | | | |||||||||
Reclassification |
| 27 | | |||||||||
Translation difference |
| | | |||||||||
Closing depreciation |
1 | 1 | 25 | |||||||||
Carrying amount at year-end |
| 32 | 25 |
Future minimum lease payments have these due dates:
Nominal values | Present values | |||||||||||||||||||||||
SEK million |
2015 | 2014 | 2013 | 2015 | 2014 | 2013 | ||||||||||||||||||
01 year |
| 5 | 2 | | 5 | 2 | ||||||||||||||||||
15 years |
| 17 | | | 17 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
| 22 | 2 | | 22 | 2 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
36
Note 16 Intangible assets
2015 | ||||||||||||||||
SEK million |
Goodwill | Product rights | Other assets1) | Total | ||||||||||||
Opening cost of acquisition |
25,352 | 40,083 | 232 | 65,667 | ||||||||||||
Investments |
47 | 59 | 20 | 126 | ||||||||||||
Sales/disposals |
| 6 | 14 | 20 | ||||||||||||
Divested operation |
| 511 | 7 | 518 | ||||||||||||
Reclassification |
| 1 | 46 | 45 | ||||||||||||
Translation difference |
125 | 98 | 9 | 214 | ||||||||||||
Closing cost of acquisition |
25,524 | 39,722 | 268 | 65,514 | ||||||||||||
Opening amortization |
| 14,715 | 154 | 14,869 | ||||||||||||
Amortization for the year |
| 3,040 | 33 | 3,073 | ||||||||||||
Sales/disposals |
| 5 | 7 | 12 | ||||||||||||
Divested operation |
| 42 | 4 | 46 | ||||||||||||
Reclassification |
| | 14 | 14 | ||||||||||||
Translation difference |
| 145 | 7 | 138 | ||||||||||||
Closing amortization |
| 17,853 | 183 | 18,036 | ||||||||||||
Carrying amount at year-end |
25,524 | 21,869 | 85 | 47,478 | ||||||||||||
Amortization per function: |
||||||||||||||||
Cost of sales |
| | 8 | 8 | ||||||||||||
Selling expenses |
| | 4 | 4 | ||||||||||||
Medicine and business development expenses |
| 3,040 | 5 | 3,045 | ||||||||||||
Administrative expenses |
| | 16 | 16 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
| 3,040 | 33 | 3,073 | ||||||||||||
|
|
|
|
|
|
|
|
1) | Mainly refer to software. |
2014 | ||||||||||||||||
SEK million |
Goodwill | Product rights | Other assets1) | Total | ||||||||||||
Opening cost of acquisition |
13,971 | 27,352 | 171 | 41,494 | ||||||||||||
Investments |
| 12 | 26 | 38 | ||||||||||||
Sales/disposals |
| | 1 | 1 | ||||||||||||
Acquired operation |
9,758 | 11,077 | 20 | 20,855 | ||||||||||||
Divested operation |
| 96 | | 96 | ||||||||||||
Translation difference |
1,623 | 1,738 | 16 | 3,377 | ||||||||||||
Closing cost of acquisition |
25,352 | 40,083 | 232 | 65,667 | ||||||||||||
Opening amortization |
| 11,710 | 118 | 11,828 | ||||||||||||
Amortization for the year |
| 2,348 | 22 | 2,370 | ||||||||||||
Sales/disposals |
| | 1 | 1 | ||||||||||||
Divested operation |
| 26 | | 26 | ||||||||||||
Translation difference |
| 683 | 15 | 698 | ||||||||||||
Closing amortization |
| 14,715 | 154 | 14,869 | ||||||||||||
Carrying amount at year-end |
25,352 | 25,368 | 78 | 50,798 | ||||||||||||
Amortization per function: |
||||||||||||||||
Cost of sales |
| | 1 | 1 | ||||||||||||
Selling expenses |
| | 4 | 4 | ||||||||||||
Medicine and business development expenses |
| 2,348 | 5 | 2,353 | ||||||||||||
Administrative expenses |
| | 12 | 12 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
| 2,348 | 22 | 2,370 | ||||||||||||
|
|
|
|
|
|
|
|
1) | Mainly refer to software. |
37
2013 | ||||||||||||||||
SEK million |
Goodwill | Product rights | Other assets1) | Total | ||||||||||||
Opening cost of acquisition |
13,809 | 26,167 | 144 | 40,120 | ||||||||||||
Investments |
| 236 | 25 | 261 | ||||||||||||
Sales/disposals |
| 12 | | 12 | ||||||||||||
Acquired operation |
| 782 | | 782 | ||||||||||||
Translation difference |
162 | 179 | 2 | 343 | ||||||||||||
Closing cost of acquisition |
13,971 | 27,352 | 171 | 41,494 | ||||||||||||
Opening amortization |
| 9,604 | 97 | 9,701 | ||||||||||||
Amortization for the year |
| 2,067 | 19 | 2,086 | ||||||||||||
Sales/disposals |
| 12 | | 12 | ||||||||||||
Translation difference |
| 51 | 2 | 53 | ||||||||||||
Closing amortization |
| 11,710 | 118 | 11,828 | ||||||||||||
Carrying amount at year-end |
13,971 | 15,642 | 53 | 29,666 | ||||||||||||
Amortization per function: |
||||||||||||||||
Cost of sales |
| | 3 | 3 | ||||||||||||
Selling expenses |
| | 3 | 3 | ||||||||||||
Medicine and business development expenses |
| 2,067 | 4 | 2,071 | ||||||||||||
Administrative expenses |
| | 9 | 9 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
| 2,067 | 19 | 2,086 | ||||||||||||
|
|
|
|
|
|
|
|
1) | Mainly refer to software. |
Specification of major-product rights, SEK million |
2015 | Rate of amortization, years |
Remaining amortization, years |
|||||||||
Dona |
2,727 | 15 | 13.8 | |||||||||
Elidel |
1,654 | 15 | 10.2 | |||||||||
3M-products |
1,472 | 15 | 6.0 | |||||||||
Saugella |
950 | 15 | 13.8 | |||||||||
Valeant products |
848 | 15 | 7.7 | |||||||||
Alaven products |
818 | 15 | 9.7 | |||||||||
Recip products |
787 | 15 | 6.9 | |||||||||
Antula products |
738 | 25 | 20.3 | |||||||||
Treo |
629 | 25 | 20.8 | |||||||||
Jazz |
537 | 15 | 11.9 | |||||||||
Other |
10,709 | 1025 | 8.1 | |||||||||
|
|
|||||||||||
Total |
21,869 | |||||||||||
|
|
38
Impairment testing of goodwill
The next table shows the carrying amount for goodwill distributed per cashgenerating unit (CGU). Goodwill was tested for impairment regarding the US (acquisitions of MedPointe and Alaven), the Nordics (acquisitions of Recip and Antula), Western Europe excluding Nordics (acquisitions of Viatris, 3M, Valeant and Rottapharm) and Emerging Markets (acquisition of Rottapharm).
SEK million |
2015 | 2014 | 2013 | |||||||||
US |
5,997 | 5,497 | 4,564 | |||||||||
Nordics |
2,108 | 2,113 | 2,110 | |||||||||
Western Europe excluding Nordics |
12,653 | 12,888 | 7,297 | |||||||||
Emerging Markets |
4,766 | 4,854 | | |||||||||
Total |
25,524 | 25,352 | 13,971 |
The recoverable amounts of the CGUs are based on value in use. These calculations originate from estimated cash flows based on management approved financial budgets and cover a four-year period. Management established the financial budgets based on previous results, experience and expectations of market trend.
The budgets are based on growth rate, gross margin and discount rate. The growth rate includes assumptions about product launches of existing products in new markets, price developments, sales volumes and competing products estimated development, while gross margin includes assumptions about sales and cost of sales.
Cash flow beyond the four-year period has been assumed to have annual growth of 2%. This anticipated growth rate is a moderate assumption in relation to estimated long-term growth rate for the total market. According to IMS (IMS Health Market Prognosis, September 2015), the global pharmaceutical market is expected to increase by an average of 47% annually during the 20162020 period.
Average budgeted gross margin, growth rate beyond the four-year period and discount rate before tax used in the calculation of value in use are shown in the table below:
2015, Parameter, % |
US | Nordics | Western Europe excluding Nordics |
Emerging Markets |
||||||||||||
Average budgeted gross margin |
75 | 58 | 62 | 62 | ||||||||||||
Growth rate beyond the four-year period |
2 | 2 | 2 | 2 | ||||||||||||
Discount rate, before tax |
13 | 11 | 12 | 12 | ||||||||||||
2014, Parameter, % |
||||||||||||||||
Average budgeted gross margin |
77 | 58 | 61 | 61 | ||||||||||||
Growth rate beyond the four-year period |
2 | 2 | 2 | 2 | ||||||||||||
Discount rate, before tax |
13 | 11 | 12 | 12 | ||||||||||||
2013, Parameter, % |
||||||||||||||||
Average budgeted gross margin |
78 | 57 | 60 | | ||||||||||||
Growth rate beyond the four-year period |
2 | 2 | 2 | | ||||||||||||
Discount rate, before tax |
13 | 11 | 12 | |
Meda estimates that the applied discount rate is conservative because the weighted average cost of capital is lower than the discount rate. As the recoverable amount for the tested entities exceeds the carrying amount, no impairment loss was recognized.
Meda performed sensitivity analyses on the parameters growth rate, gross margin and discount rate and states that there are good margins in the calculations for the Nordic region, Western Europe and Emerging Markets. For US, the recoverable amount exceeds its carrying amount with SEK 740 million at December 31,
39
2015. The recoverable amount would equal its carrying amount if the growth rate beyond the four-year period decreased from 2% to 0.6%. Meda has assessed that reasonable change to the other parameters would not cause the carrying amount to exceed its recoverable amount. In the long-term, Medas ability to generate future deals constitutes a key factor in justifying recognized goodwill.
Note 17 Deferred tax
Amounts referring to deferred tax assets and deferred tax liabilities on the balance sheet include:
SEK million |
2015 | 2014 | 2013 | |||||||||
Deferred tax assets: |
||||||||||||
Deferred tax assets to be used after 12 months |
892 | 842 | 362 | |||||||||
Deferred tax assets to be used within 12 months |
920 | 798 | 556 | |||||||||
|
|
|
|
|
|
|||||||
Total |
1,812 | 1,640 | 918 | |||||||||
|
|
|
|
|
|
|||||||
Deferred tax liabilities: |
||||||||||||
Deferred tax liabilities payable after 12 months |
4,198 | 4,759 | 1,919 | |||||||||
Deferred tax liabilities payable within 12 months |
510 | 519 | 292 | |||||||||
|
|
|
|
|
|
|||||||
Total |
4,708 | 5,278 | 2,211 | |||||||||
|
|
|
|
|
|
Carry-forward of unused tax losses:
At year-end 2015, the Group reported deferred tax assets attributable to carry-forwards of unused tax losses of SEK 137 million, mainly related to Portugal, Spain, Sweden and USA. The tax base of loss carryforwards not accounted for is SEK 50 million, mainly attributable to Spain and Portugal. The decision not to account for the loss carry-forwards is based on the uncertainty to be able to use them. Deferred tax assets and tax liabilities on the balance sheet refer to the following:
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||
SEK million |
Receivables | Liabilities | Net | Receivables | Liabilities | Net | Receivables | Liabilities | Net | |||||||||||||||||||||||||||
Intangible non-current assets |
109 | 4,268 | -4,159 | 107 | 4,829 | -4,722 | 72 | 1,558 | -1,486 | |||||||||||||||||||||||||||
Property, plant, and equipment |
3 | 60 | -57 | 49 | 85 | -36 | 4 | 64 | -60 | |||||||||||||||||||||||||||
Stock (inventories) |
420 | 5 | 415 | 296 | 5 | 291 | 260 | 5 | 255 | |||||||||||||||||||||||||||
Accrued expenses |
698 | 72 | 626 | 526 | 23 | 503 | 317 | 125 | 192 | |||||||||||||||||||||||||||
Loss carry-forwards |
137 | | 137 | 190 | | 190 | 84 | | 84 | |||||||||||||||||||||||||||
Pensions |
474 | 8 | 466 | 494 | 7 | 487 | 204 | 5 | 199 | |||||||||||||||||||||||||||
Untaxed reserves |
| 333 | -333 | | 369 | -369 | | 492 | -492 | |||||||||||||||||||||||||||
Other |
15 | 6 | 9 | 20 | 2 | 18 | 18 | 3 | 15 | |||||||||||||||||||||||||||
Deferred tax assets and tax liabilities |
1,856 | 4,752 | -2,896 | 1,682 | 5,320 | -3,638 | 959 | 2,252 | -1,293 | |||||||||||||||||||||||||||
Offsetting of assets and liabilities |
-44 | -44 | | -42 | -42 | | -41 | -41 | | |||||||||||||||||||||||||||
Tax assets and tax liabilities, net |
1,812 | 4,708 | -2,896 | 1,640 | 5,278 | -3,638 | 918 | 2,211 | -1,293 |
40
Change regarding deferred taxes:
SEK million |
Intangible non-current assets |
Property, plant, and equipment |
Stock (inven- tories) |
Accrued expenses |
Loss carry- forwards |
Pensions | Un- taxed reserves |
Other | Total | |||||||||||||||||||||||||||
January 1, 2013 |
1,634 | 67 | 252 | 56 | 12 | 278 | 510 | 7 | 1,606 | |||||||||||||||||||||||||||
Translation difference |
7 | 1 | 1 | 3 | | 8 | | 2 | 10 | |||||||||||||||||||||||||||
Acquired operation |
8 | | | 3 | 77 | | | 2 | 90 | |||||||||||||||||||||||||||
Recognition in income statement |
147 | 8 | 2 | 57 | 5 | 5 | 18 | 4 | 226 | |||||||||||||||||||||||||||
Tax recognized in other - comprehensive income |
| | | 73 | | 66 | | | 7 | |||||||||||||||||||||||||||
December 31, 2013 |
1,486 | 60 | 255 | 192 | 84 | 199 | 492 | 15 | 1,293 | |||||||||||||||||||||||||||
January 1, 2014 |
1,486 | 60 | 255 | 192 | 84 | 199 | 492 | 15 | 1,293 | |||||||||||||||||||||||||||
Translation difference |
200 | | 6 | 29 | 14 | 6 | | 2 | 147 | |||||||||||||||||||||||||||
Acquired operation |
3,250 | 11 | 36 | 47 | 88 | 146 | | 5 | 2,919 | |||||||||||||||||||||||||||
Recognition in income statement |
214 | 13 | 6 | 47 | 4 | 12 | 123 | 1 | 290 | |||||||||||||||||||||||||||
Tax recognized in other - comprehensive income |
| | | 283 | | 149 | | | 432 | |||||||||||||||||||||||||||
December 31, 2014 |
4,722 | 36 | 291 | 503 | 190 | 487 | 369 | 18 | 3,638 | |||||||||||||||||||||||||||
January 1, 2015 |
4,722 | 36 | 291 | 503 | 190 | 487 | 369 | 18 | 3,638 | |||||||||||||||||||||||||||
Translation difference |
20 | 2 | 2 | 16 | 33 | 6 | | 1 | 8 | |||||||||||||||||||||||||||
Divested operation |
145 | 11 | | | | | | | 156 | |||||||||||||||||||||||||||
Recognition in income statement |
398 | 30 | 126 | 192 | 20 | 4 | 36 | 8 | 691 | |||||||||||||||||||||||||||
Tax recognized in other - comprehensive income |
| | | 86 | | 11 | | | 97 | |||||||||||||||||||||||||||
December 31, 2015 |
4,159 | 57 | 415 | 626 | 137 | 466 | 333 | 9 | 2,896 |
Note 18 Available-for-sale financial assets
SEK million |
2015 | 2014 | 2013 | |||||||||
Carrying amount at start of the year |
45 | 5 | 5 | |||||||||
Acquired operation |
| 31 | | |||||||||
Reclassification at acquisition of asset |
| 1 | | |||||||||
Purchase |
| 2 | | |||||||||
Disposal |
12 | | | |||||||||
Revaluation transferred to other - comprehensive income |
10 | 7 | | |||||||||
Translation difference |
| 1 | | |||||||||
Carrying amount at year-end |
23 | 45 | 5 |
The financial assets are not due for payment or in need of impairment. Available-for-sale financial assets include the following:
SEK million |
2015 | 2014 | 2013 | |||||||||
FundsUS |
16 | 26 | | |||||||||
Listed interest bearing securitiesAustria |
6 | 18 | 4 | |||||||||
Unlisted sharesNorway |
| | 1 | |||||||||
Other |
1 | 1 | | |||||||||
|
|
|
|
|
|
|||||||
Total |
23 | 45 | 5 | |||||||||
|
|
|
|
|
|
Available-for-sale financial assets are expressed in the following currencies:
SEK million |
2015 | 2014 | 2013 | |||||||||
USD |
16 | 26 | | |||||||||
EUR |
7 | 19 | 5 | |||||||||
|
|
|
|
|
|
|||||||
Total |
23 | 45 | 5 | |||||||||
|
|
|
|
|
|
41
Note 19 Business combinations and divestments
Acquisition of Rottapharm
On July 31, 2014, Meda announced that an agreement has been entered into to acquire the Italian specialty pharma company Rottapharm S.p.A. The acquisition was completed on October 10, 2014. The acquisition of Rottapharm boosts Medas earnings profile by contributing a strong brand portfolio within consumer healthcare and increasing the companys presence on Emerging Markets by roughly 50%. The acquisition is expected to lead to annual cost synergies of approximately SEK 900 million.
The purchase price amounted to SEK 17,654 million and consisted of SEK 12,309 million in cash after deduction of net debt in Rottapharm, 30 million Meda shares at a value, at the time of concluding the transaction, corresponding to SEK 2,976 million, and an unconditional deferred payment of EUR 275 million, which does not carry interest and matures in January 2017, and has therefore been measured at fair value through discounting at the present value. The fair value at the time of concluding the transaction amounted to SEK 2,369 million. Transaction costs attributable to the acquisition total SEK 157 million of which SEK 36 million corresponds to transaction tax on the acquired shares. SEK 121 million of the transaction costs is recognized under medicine and business development expenses and SEK 36 million is recognized under finance expense in the income statement.
Rottapharm contributed with net sales of SEK 1,533 million and an operating result of SEK 409 million in the fourth quarter. The operating result is adjusted for amortizations of SEK 162 million related to adjustments of product rights to fair value and restructuring costs of SEK 485 million, which is the part of the restructuring costs charged to Rottapharm. If Rottapharm had been consolidated from January 1, 2014, net sales for Meda would amount to SEK 18,705 million and operating result to SEK 2,207 million, excluding restructuring costs and other items affecting comparability of SEK 710 million.
Preliminary data on acquired net assets and goodwill follows. At present Meda is analyzing the final values of acquired net assets and uncertainties in recognized values is mainly related to deferred tax and final valuation of intangible assets. Material changes to recognized values are not expected.
There are no material changes to the value of below acquired net assets since October 10, 2014.
SEK million |
||||
Purchase price |
17,654 | |||
Non-controlling interests |
18 | |||
Fair value of net assets |
7,878 | |||
Goodwill |
9,758 |
Goodwill is mainly attributable to:
| Anticipated annual cost synergies, which are expected to derive from overlapping resources within sales and marketing, administration, and research and development. |
| Extended operations on Emerging Markets with increased opportunity to establish Medas products on new geographical markets |
| Economies of scale and efficiencies within purchase, manufacturing and distribution. |
42
None of the recognized goodwill is expected to be tax deductible.
SEK million |
Fair value | |||
Product rights |
11,036 | |||
Deferred tax assets |
374 | |||
Other non-current assets |
904 | |||
Inventories |
969 | |||
Other receivables |
1,729 | |||
Cash and cash equivalents |
3,416 | |||
Borrowings |
5,491 | |||
Deferred tax liabilities |
3,293 | |||
Pension obligations |
858 | |||
Other non-current liabilities |
147 | |||
Other current liabilities |
761 | |||
Acquired net assets |
7,878 | |||
Goodwill |
9,758 | |||
Purchase value |
17,636 | |||
Purchase price, cash |
12,309 | |||
Of which outstanding purchase consideration, paid January 2, 2015 |
149 | |||
Cash and cash equivalents in acquired entities |
3,416 | |||
Change in Group cash and cash equivalents at acquisition |
8,744 |
Fair value of the 30 million Meda shares issued as part of the consideration paid was based on the published average share price for the period 910 of October 2014. The fair value of other receivables is SEK 1,729 million and includes trade receivables with a fair value of SEK 1,281 million. The recognized trade receivables are expected to be recovered in full.
Divestments
Euromed: In December 2015, Meda divested the Euromed manufacturing unit in Spain. The selling price was SEK 762 million. The divestment resulted in a gain of SEK 22 million which has been recognized as other income.
Joint venture Hungary: In January 2015, Meda divested the joint venture in Hungary which was included in the Rottapharm acquisition in 2014. The divestment resulted in a loss of SEK 4 million which has been recognized as medicine and development expenses.
Joint venture Valeant: In April 2014, Meda reached an agreement with Valeant to terminate the joint ventures in Canada, Mexico and Australia. The divestment resulted in a gain of SEK 42 million which has been recognized as other income.
The divested net assets and the impact on the Groups cash flow are presented in the table below.
SEK million |
2015 | 2014 | 2013 | |||||||||
Divested net assets |
||||||||||||
Tangible assets |
139 | | | |||||||||
Intangible assets |
472 | | | |||||||||
Inventories |
252 | 8 | | |||||||||
Other assets |
138 | 43 | | |||||||||
Deferred tax liabilities |
156 | | | |||||||||
Other liabilities |
114 | 111 | | |||||||||
Divested net assets |
731 | 60 | | |||||||||
Cash received |
762 | 7 | | |||||||||
Less transaction costs |
16 | | | |||||||||
Less cash and cash equivalents in divested entities |
51 | 32 | | |||||||||
Impact on the Groups cash and cash equivalents |
695 | 25 | |
43
Note 20 Inventories
SEK million |
2015 | 2014 | 2013 | |||||||||
Raw materials |
740 | 866 | 388 | |||||||||
Work in progress |
134 | 191 | 90 | |||||||||
Finished goods and goods for resale |
2,002 | 1,931 | 1,504 | |||||||||
|
|
|
|
|
|
|||||||
Total |
2,876 | 2,988 | 1,982 | |||||||||
|
|
|
|
|
|
The cost of sales item contains expenditure for inventories recognized as an expense amounting to SEK 5,812 million (5,081; 4,336). Other income statement items contain expenditure for inventories recognized as an expense of SEK 0 million (0; 0).
Impairment of inventories in the Group totaled SEK 176 million (84; 174) during the year.
Note 21 Trade receivables
SEK million |
2015 | 2014 | 2013 | |||||||||
Trade receivables |
4,396 | 4,227 | 2,173 | |||||||||
Provision for bad debts |
-101 | -76 | -22 | |||||||||
|
|
|
|
|
|
|||||||
Total |
4,295 | 4,151 | 2,151 | |||||||||
|
|
|
|
|
|
Other non-current receivables include trade receivables of SEK 156 million (190; 0) which are due during 2017. The fair value of trade receivables corresponds to the carrying amount.
On December 31, 2015, the Groups trade receivables, excluding those that were past due and those impaired, were SEK 3,819 million (3,729; 1,854).
On December 31, 2015, past due but not impaired trade receivables amounted to SEK 574 million (368; 282). Their aging analysis:
SEK million |
2015 | 2014 | 2013 | |||||||||
< 3 months |
349 | 257 | 199 | |||||||||
36 months |
109 | 32 | 28 | |||||||||
> 6 months |
116 | 79 | 55 | |||||||||
|
|
|
|
|
|
|||||||
Total |
574 | 368 | 282 | |||||||||
|
|
|
|
|
|
On December 31, 2015, the Group recognized trade receivables that were impaired amounting to SEK 189 million (131; 37). The provision for bad debts totaled SEK 101 million (76; 22).
Changes in the provision for bad debts:
SEK million |
2015 | 2014 | 2013 | |||||||||
On January 1 |
76 | 22 | 19 | |||||||||
Additional provision for bad debts |
68 | 91 | 16 | |||||||||
Receivables written off during the year as non-recoverable |
29 | 29 | 12 | |||||||||
Reversed unused amounts |
8 | 5 | 2 | |||||||||
Translation difference |
6 | 3 | 1 | |||||||||
Carrying amount at year-end |
101 | 76 | 22 |
44
Note 22 Derivatives, financial assets and financial liabilities
Currency forward contracts
On December 31, 2015, the Groups open forward foreign exchange -contracts had terms of up to three months. The table below shows classification by currency.
Assets
Currency pairs |
Exchange rate |
Nominal amount, SEK million |
Fair value, SEK million |
|||||||||
EUR/SEK |
8.9578 | 4,031 | 103 | |||||||||
RUB/SEK |
0.124 | 220 | 21 | |||||||||
Other |
25 | |||||||||||
|
|
|||||||||||
Total |
149 | |||||||||||
|
|
Liabilities
Currency pairs |
Exchange rate |
Nominal amount, SEK million |
Fair value, SEK million |
|||||||||
EUR/SEK |
9.1331 | 7,137 | 43 | |||||||||
EUR/USD |
1.07 | 1,516 | 27 | |||||||||
USD/SEK |
8.079 | 2,852 | 127 | |||||||||
Other |
4 | |||||||||||
|
|
|||||||||||
Total |
201 | |||||||||||
|
|
Fair value of financial assets and liabilities
The following table comprises the consolidated financial assets and liabilities that are measured at fair value.
Interest rate swaps and currency forward contracts are reported as level 2 and used for the purpose of hedging. Fair value measurement for interest rate swaps is calculated by discounting with observable market data. -Measurement of fair value for currency forward contracts is based on published forward prices.
Available-for-sale financial assets are primarily recognized at level 1 and 2. Level 1 consists of listed interest-bearing securities. Fair value -measurement is based on quoted prices on an active market. Level 2 mainly consists of funds where fair value measurement is based on observable market data. Embedded derivatives which were linked to the bond loan repaid in late April 2015 were expensed in Q1 2015.
Group derivatives are covered by right of set-off between assets and -liabilities with the same counterparty. Offsetting of assets and liabilities has not been applied. Derivatives recognized as assets and liabilities are -presented in the table below.
No transfers have been made between level 1 and level 2 during the year.
45
The maximum exposure to credit risk at the end of the reporting period is the fair value of the derivatives that are recognized as assets in the -balance sheet.
2015 | 2014 | 2013 | ||||||||||||||||||||||
SEK million |
Level 1 | Level 2 | Level 1 | Level 2 | Level 1 | Level 2 | ||||||||||||||||||
Assets |
||||||||||||||||||||||||
Currency forward contracts |
| 149 | | 208 | | 49 | ||||||||||||||||||
Embedded derivatives |
| | 25 | | | | ||||||||||||||||||
Available-for-sale financial assets |
6 | 17 | 18 | 27 | 4 | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
6 | 166 | 43 | 235 | 4 | 50 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities |
||||||||||||||||||||||||
Interest rate swaps1) |
| 23 | | 22 | | 33 | ||||||||||||||||||
Currency forward contracts |
| 201 | | 284 | | 113 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
| 224 | | 306 | | 146 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1) | Cash flow hedging. |
The following table comprises the fair value of financial assets and liabilities by valuation category compared with their carrying amounts.
2015 SEK million |
Loans and - receivables |
Assets at fair value through profit and loss |
Derivatives used for hedging |
Available-for- sale financial assets |
Total | Fair value | ||||||||||||||||||
Available-for-sale financial assets |
| | | 23 | 23 | 23 | ||||||||||||||||||
Derivatives |
| 131 | 18 | | 149 | 149 | ||||||||||||||||||
Trade receivables and other receivables |
4,582 | 1) | | | | 4,582 | 4,582 | |||||||||||||||||
Cash and cash equivalents |
1,612 | | | | 1,612 | 1,612 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
6,194 | 131 | 18 | 23 | 6,366 | 6,366 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
2015 SEK million |
Liabilities at fair value through profit and loss |
Derivatives used for hedging |
Other financial - liabilities |
Total | Fair value | |||||||||||||||
Borrowings |
| | 24,862 | 24,862 | 24,838 | |||||||||||||||
Unconditional deferred payment |
| | 2,458 | 2,458 | 2,458 | |||||||||||||||
Trade payables |
| | 1,696 | 1,696 | 1,696 | |||||||||||||||
Derivatives |
169 | 55 | | 224 | 224 | |||||||||||||||
Other liabilities |
| | 987 | 2) | 987 | 987 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
169 | 55 | 30,003 | 30,227 | 30,203 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
2014 SEK million |
Loans and - receivables |
Assets at fair value through profit and loss |
Derivatives used for hedging |
Available-for- sale financial assets |
Total | Fair value | ||||||||||||||||||
Available-for-sale financial assets |
| | | 45 | 45 | 45 | ||||||||||||||||||
Derivatives |
| 211 | 22 | | 233 | 233 | ||||||||||||||||||
Trade receivables and other receivables |
4,665 | 1) | | | | 4,665 | 4,665 | |||||||||||||||||
Cash and cash equivalents |
2,311 | | | | 2,311 | 2,311 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
6,976 | 211 | 22 | 45 | 7,254 | 7,254 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
46
2014 SEK million |
Liabilities at fair value through profit and loss |
Derivatives used for hedging |
Other financial - liabilities |
Total | Fair value | |||||||||||||||
Borrowings |
| | 28,208 | 28,208 | 28,254 | |||||||||||||||
Unconditional deferred payment |
| | 2,447 | 2,447 | 2,447 | |||||||||||||||
Trade payables |
| | 1,542 | 1,542 | 1,542 | |||||||||||||||
Derivatives |
226 | 80 | | 306 | 306 | |||||||||||||||
Other liabilities |
| | 1,238 | 2) | 1,238 | 1,238 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
226 | 80 | 32,984 | 33,741 | 33,787 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
1) | Consists of the Groups trade receivables, parts of other non-current receivables and parts of other short-term receivables. |
2) | Consists of the parts of the Groups other short-term liabilities and accrued expenses. |
2013 SEK million |
Loans and - receivables |
Assets at fair value through profit and loss |
Derivatives used for hedging |
Available-for- sale financial assets |
Total | Fair value | ||||||||||||||||||
Available-for-sale financial assets |
| | | 5 | 5 | 5 | ||||||||||||||||||
Derivatives |
| 46 | 3 | | 49 | 49 | ||||||||||||||||||
Trade receivables and other receivables |
2,224 | 1) | | | | 2,224 | 2,224 | |||||||||||||||||
Cash and cash equivalents |
178 | | | | 178 | 178 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
2,402 | 46 | 3 | 5 | 2,456 | 2,456 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
2013 SEK million |
Liabilities at fair value through profit and loss |
Derivatives used for hedging |
Other financial - liabilities |
Total | Fair value | |||||||||||||||
Borrowings |
| | 14,096 | 14,096 | 14,138 | |||||||||||||||
Trade payables |
| | 1,542 | 1,542 | 1,542 | |||||||||||||||
Derivatives |
83 | 63 | | 146 | 146 | |||||||||||||||
Other liabilities |
| | 819 | 2) | 819 | 819 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
83 | 63 | 16,457 | 16,603 | 16,645 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
1) | Consists of the Groups trade receivables, parts of other non-current receivables and parts of other short-term receivables. |
2) | Consists of parts of the Groups other short-term liabilities and accrued expenses. |
Medas financial instruments attribute to level 1 and 2 and fair value by level is as follows:
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||
SEK million |
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||||||||||||
Financial assets |
6 | 6,360 | 6,366 | 43 | 7,211 | 7,254 | 4 | 2,452 | 2,456 | |||||||||||||||||||||||||||
Financial liabilities |
| 30,203 | 30,203 | 3,973 | 1) | 29,814 | 33,787 | | 15,986 | 15,986 |
1) | See Note 25. |
Note 23 Cash and cash equivalents
SEK million |
2015 | 2014 | 2013 | |||||||||
Cash and bank balances |
1,612 | 2,311 | 178 | |||||||||
|
|
|
|
|
|
|||||||
Total |
1,612 | 2,311 | 178 | |||||||||
|
|
|
|
|
|
47
Note 24 Equity
Share capital and other contributed capital
No. of shares, share capital and premiums increased since 2013 as follows:
SEK million (except for no. of shares) |
No. of shares | Share capital | Other contributed capital |
|||||||||
2013 |
||||||||||||
January 1, 2013 |
302,243,065 | 302 | 8,865 | |||||||||
December 31, 2013 |
302,243,065 | 302 | 8,865 | |||||||||
2014 |
||||||||||||
January 1, 2014 |
302,243,065 | 302 | 8,865 | |||||||||
Non-cash issue, net after tax |
30,000,000 | 30 | 2,942 | |||||||||
New share issue, net after tax |
33,224,306 | 33 | 1,981 | |||||||||
December 31, 2014 |
365,467,371 | 365 | 13,788 | |||||||||
2015 |
||||||||||||
January 1, 2015 |
365,467,371 | 365 | 13,788 | |||||||||
December 31, 2015 |
365,467,371 | 365 | 13,788 |
48
Dividend per share
At the AGM on April 14, 2016, a dividend of SEK 2.50 per share for a total of SEK 914 million will be proposed for 2015. Dividends for 2014 amounted to SEK 914 million (SEK 2.50 per share) and for 2013 SEK 756 million (SEK 2.41 per share, after adjustment with a factor of 1,0378 due to the bonus issue element in the rights issue in relation to the Rottapharm acquisition).
Other reserves, SEK million |
Translation -difference |
Hedging of net investment |
Cash flow hedging |
Defined benefit pension plans and similar plans |
Availableforsale financial assets |
Total | ||||||||||||||||||
January 1, 20131) |
1,318 | 763 | 43 | 178 | | 776 | ||||||||||||||||||
Translation difference |
508 | | | | | 508 | ||||||||||||||||||
Earnings from hedging net investment |
| 355 | | | | 355 | ||||||||||||||||||
Tax on earnings from hedging net investment |
| 78 | | | | 78 | ||||||||||||||||||
Earnings from revaluation of derivatives -recognized in equity |
| | 22 | | | 22 | ||||||||||||||||||
Tax on earnings from revaluation of derivatives recognized in equity |
| | 5 | | | 5 | ||||||||||||||||||
Earnings from defined benefit pension plans and similar plans |
| | | 179 | | 179 | ||||||||||||||||||
Tax on earnings from defined benefit pension plans and similar plans |
| | | 66 | | 66 | ||||||||||||||||||
December 31, 2013 |
810 | 486 | 26 | 65 | | 415 | ||||||||||||||||||
January 1, 2014 |
810 | 486 | 26 | 65 | | 415 | ||||||||||||||||||
Translation difference |
2,118 | | | | | 2,118 | ||||||||||||||||||
Translation difference transferred to the income statement |
11 | | | | | 11 | ||||||||||||||||||
Earnings from hedging net investment |
| 1,300 | | | | 1,300 | ||||||||||||||||||
Tax on earnings from hedging net investment |
| 286 | | | | 286 | ||||||||||||||||||
Earnings from revaluation of derivatives -recognized in equity |
| | 11 | | | 11 | ||||||||||||||||||
Tax on earnings from revaluation of derivatives recognized in equity |
| | 2 | | | 2 | ||||||||||||||||||
Earnings from defined benefit pension plans and similar plans |
| | | 441 | | 441 | ||||||||||||||||||
Tax on earnings from defined benefit pension plans and similar plans |
| | | 149 | | 149 | ||||||||||||||||||
Earnings from available-for-sale financial assets |
| | | | 7 | 7 | ||||||||||||||||||
Tax on earnings from available-for-sale financial assets |
| | | | 1 | 1 | ||||||||||||||||||
December 31, 2014 |
1,297 | 528 | 17 | 357 | 6 | 401 | ||||||||||||||||||
January 1, 2015 |
1,297 | 528 | 17 | 357 | 6 | 401 | ||||||||||||||||||
Translation difference |
376 | | | | | 376 | ||||||||||||||||||
Translation difference transferred to the income statement |
3 | | | | | 3 | ||||||||||||||||||
Earnings from hedging net investment |
| 395 | | | | 395 | ||||||||||||||||||
Tax on earnings from hedging net investment |
| 87 | | | | 87 | ||||||||||||||||||
Earnings from revaluation of derivatives -recognized in equity |
| | 1 | | | 1 | ||||||||||||||||||
Tax on earnings from revaluation of derivatives recognized in equity |
| | | | | | ||||||||||||||||||
Earnings from defined benefit pension plans and similar plans |
| | | 66 | | 66 | ||||||||||||||||||
Tax on earnings from defined benefit pension plans and similar plans |
| | | 11 | | 11 | ||||||||||||||||||
Earnings from available-for-sale financial assets |
| | | | 10 | 10 | ||||||||||||||||||
Tax on earnings from available-for-sale financial assets |
| | | | 1 | 1 | ||||||||||||||||||
December 31, 2015 |
918 | 220 | 18 | 302 | 3 | 375 |
1) | Recalculated on the basis of revised IAS 19. |
49
Note 25 Borrowings
SEK million |
2015 | 2014 | 2013 | |||||||||
Long-term borrowing |
||||||||||||
Bank loans |
21,150 | 21,190 | 6,295 | |||||||||
Bond loans |
1,350 | 5,611 | 1,497 | |||||||||
Finance leases (see Note 15) |
| 16 | | |||||||||
Other |
7 | | | |||||||||
|
|
|
|
|
|
|||||||
Total |
22,507 | 26,817 | 7,792 | |||||||||
|
|
|
|
|
|
|||||||
Short-term borrowing |
||||||||||||
Bank loans |
623 | 574 | 1,444 | |||||||||
Bond loans |
400 | 500 | 4,266 | |||||||||
Commercial papers |
1,331 | 182 | 593 | |||||||||
Finance leases (see Note 15) |
| 5 | 2 | |||||||||
Factoring |
1 | 130 | | |||||||||
|
|
|
|
|
|
|||||||
Total |
2,355 | 1,391 | 6,304 | |||||||||
|
|
|
|
|
|
|||||||
Total borrowings |
24,862 | 28,208 | 14,096 | |||||||||
|
|
|
|
|
|
Fair value |
2015 | 2014 | 2013 | |||||||||
Level1 |
| 3,973 | | |||||||||
Level 2 |
24,838 | 24,281 | 14,138 | |||||||||
|
|
|
|
|
|
|||||||
Total |
24,838 | 28,254 | 14,138 | |||||||||
|
|
|
|
|
|
Fair value deviates from the carrying amount on the Groups bond loans which are recognized in level 2 for 2015. Fair value measurement is based on observable market data on the OTC market. For 2014, level 1 consists of the bond loan of EUR 400 million which was absorbed in conjunction with the acquisition of Rottapharm and redeemed in late April 2015.
Maturities for long-term borrowing: |
2015 | 2014 | 2013 | |||||||||
Payable within 12 years |
2,580 | 973 | 3,807 | |||||||||
Payable within 25 years |
19,927 | 21,985 | 3,985 | |||||||||
Payable after 5 years |
| 3,859 | | |||||||||
|
|
|
|
|
|
|||||||
Total |
22,507 | 26,817 | 7,792 | |||||||||
|
|
|
|
|
|
Carrying amounts in SEK million, by currency, for the Groups -borrowing: |
2015 | 2014 | 2013 | |||||||||
EUR |
14,834 | 18,237 | | |||||||||
USD |
5,149 | 5,005 | 7,287 | |||||||||
SEK |
4,879 | 4,966 | 6,809 | |||||||||
|
|
|
|
|
|
|||||||
Total |
24,862 | 28,208 | 14,096 | |||||||||
|
|
|
|
|
|
Unused credits: |
2015 | 2014 | 2013 | |||||||||
Unused unconfirmed credits |
700 | 700 | 700 | |||||||||
Unused confirmed credits |
5,227 | 5,505 | 8,001 |
50
Note 26 Post-employment benefits
SEK million |
2015 | 2014 | 2013 | |||||||||
Present value of funded obligations |
1,262 | 1,248 | 942 | |||||||||
Fair value of plan assets |
869 | 854 | 688 | |||||||||
Deficit of the funded plans |
393 | 393 | 254 | |||||||||
Present value of unfunded obligations |
1,862 | 2,021 | 846 | |||||||||
Net |
2,255 | 2,415 | 1,100 |
SEK million |
2015 | 2014 | 2013 | |||||||||
Recognized as assets1) |
18 | 15 | 7 | |||||||||
Recognized as liabilities |
2,273 | 2,430 | 1,107 | |||||||||
Net |
2,255 | 2,415 | 1,100 |
1) | Plans with a net surplus, i.e. plans where assets exceed the defined benefit obligations, are recognized as other noncurrent receivables. |
Changes in fair value of plan assets during the year |
2015 | 2014 | 2013 | |||||||||
At years start |
854 | 688 | 679 | |||||||||
Interest income |
34 | 32 | 25 | |||||||||
Remeasurements |
||||||||||||
Return on plan assets, excluding amounts included in interest income |
35 | 36 | 27 | |||||||||
Contributions |
||||||||||||
Employers |
48 | 58 | 45 | |||||||||
Payments from plan |
||||||||||||
Benefit payments |
57 | 44 | 43 | |||||||||
Settlements |
36 | 38 | 40 | |||||||||
Exchange differences |
61 | 122 | 5 | |||||||||
At year-end |
869 | 854 | 688 |
Changes in present value of the obligations during the year |
2015 | 2014 | 2013 | |||||||||
At years start |
3,269 | 1,788 | 1,963 | |||||||||
Costs for service in current year |
30 | 17 | 19 | |||||||||
Costs for service in prior years |
| | 1 | |||||||||
Interest expense |
87 | 79 | 65 | |||||||||
Remeasurements |
||||||||||||
Gain (-)/loss from change in demographic assumptions |
16 | 37 | 2 | |||||||||
Gain (-)/loss from change in financial assumptions |
98 | 382 | 159 | |||||||||
Experience gains (-)/losses |
16 | 5 | 7 | |||||||||
Payments from plan |
||||||||||||
Benefit payments |
133 | 102 | 77 | |||||||||
Settlements |
36 | 38 | 40 | |||||||||
Acquired operation |
| 858 | | |||||||||
Exchange differences |
37 | 253 | 7 | |||||||||
At year-end |
3,124 | 3,269 | 1,788 |
The defined benefit obligation and plan assets are composed by country as follows in the table below.
2015 SEK million |
Germany | US | Sweden | UK | Other | Total | ||||||||||||||||||
Present value of obligation |
1,652 | 1,011 | 102 | 193 | 166 | 3,124 | ||||||||||||||||||
Fair value of plan assets |
| 613 | | 209 | 47 | 869 | ||||||||||||||||||
Net |
1,652 | 398 | 102 | 16 | 119 | 2,255 |
51
2014 SEK million |
Germany | US | Sweden | UK | Other | Total | ||||||||||||||||||
Present value of obligation |
1,789 | 997 | 104 | 189 | 190 | 3,269 | ||||||||||||||||||
Fair value of plan assets |
| 606 | | 203 | 45 | 854 | ||||||||||||||||||
Net |
1,789 | 391 | 104 | 14 | 145 | 2,415 |
2013 SEK million |
Germany | US | Sweden | UK | Other | Total | ||||||||||||||||||
Present value of obligation |
686 | 747 | 81 | 143 | 131 | 1,788 | ||||||||||||||||||
Fair value of plan assets |
| 495 | | 149 | 44 | 688 | ||||||||||||||||||
Net |
686 | 252 | 81 | 6 | 87 | 1,100 |
Germany
In Germany, Meda has unfunded defined benefit pension plans. These plans are closed to new members, and new employees are offered a defined contribution solution instead. The defined benefit pension plans are based on the final salary and give employees covered by the plan benefits in the form of a percentage of salary upon retirement. The level of benefits also depends on the employees period of service. Withdrawals for pensions are made for payouts to the retirees with vested pension. The pension payouts for the German plans are adjusted based on the consumer price index. The plans cover 2,477 people, whereof 549 were active employees on December 31, 2015.
One of the pension plans in Germany, which was partially financed by the employer and partially by the employees, was discontinued on December 31, 2004 and is secured by Bayer Pensionskasse. Meda is according to German law (Gesetz zur Verbesserung der betrieblichen Altersversorgung) liable to cover any future pension increase. The plan is a defined benefit plan that encompasses several employers. Meda recognizes this plan as a defined contribution plan since the Group has not had access to information that would enable this plan to be recognized as a defined benefit plan. Meda will not pay any premiums to Bayer Pensionskasse for 2016. Medas share of the total number of active participants in the plan as of December 31, 2015 was 0.2% (0.3; 0.4).
US
The defined benefit pension plan in the US is a tax-qualified plan that is subject to the Employee Retirement Income Security Act of 1974 (ERISA) minimum funding standards. The plan includes 1,821 persons whereof 104 are active employees as of December 31, 2015.
The members defined benefit are based on their compensation and service with the Company. The plan is closed since January 31, 2003 and there are no benefit accruals after that date. Thus, service and compensation with the Company earned after January 31, 2003 are not taken into account for benefit accrual purposes, but such service is taken into account for purposes of determining eligibility for early retirement benefits. A cost of living adjustment is done on the benefit payments for certain members of the plan who were hired before April 1, 1977. No cost of living adjustment is required on the portion of the benefit earned after September 30, 1980.
The defined benefit pension plan in the US reports a deficit of SEK 398 million (391; 252) as of December 2015. Meda is obliged to fund the plan according to the rules of the Pension Protection Act of 2006 in the US and subsequent amendments under HATFA and the Bipartisan Budget Act of 2015, which generally require contributions to the plan on a yearly basis so that the deficit is funded within 7 years. Any gains or losses to the plan assets will also affect the level of future contributions. Contributions in 2016 are estimated to SEK 58 million. The contribution is calculated on a yearly basis by an external actuary.
The trust fund of the defined benefit pension plan in the US is actively monitored by an investment committee and by SEI Investments (SEI). The board of Meda Pharmaceuticals Inc. has appointed an investment committee which consists of employees of the company. The committee works with SEI to determine investing decisions and allocation of funds. This work is abided by an investment policy, which is determined by the board
52
of Meda Pharmaceuticals Inc., and the SEI investment management agreement. The investments are determined within an asset-liability matching framework to achieve a long-term investment that is in line with the obligations under the pension plan. The companys overall objective is to improve the funded status of the plan. The investment committee together with SEI actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligation. The company has not changed the processes used to manage its risks from previous years. As the investments are well diversified, a decline in any single investment would not have a significant impact on the total value of the assets.
Sweden
Meda has both defined benefit and defined contribution plans based on collective agreement between the parties in the Swedish labor market.
The defined benefit plan, known as ITP 2, for employees born in 1978 or earlier. The retirement pension in the ITP 2 plan is a defined benefit obligation handled by Meda and administered and secured by PRI Pensionsgaranti which also provides credit insurance. Obligations for family pension and disability pension for salaried employees is secured through insurance with Alecta. As per UFR 3 (statement issued by the Swedish Financial Reporting Board) this is a multi-employer benefit-based plan. For the 2015 financial year, the Group did not have access to information that would enable this plan to be recognized as a defined benefit plan. These benefits as per ITP 2, secured through Alecta insurance, are therefore recognized as a defined contribution plan. Premiums for the defined benefit survivors pension plan is calculated on an individual basis and based, among other things, on salary, previously vested pension and the assumed remaining service period. The expected premiums for 2016 for ITP 2 plans with Alecta amount to SEK 7 million (6; 2). Medas share of the total contributions to the plan amounts to 0.003% (0.003; 0.002) and Medas share of the total number of active participants is 0.018% (0.017; 0.013). At the end of 2015, Alectas surplus (in the form of the collective consolidation level) was 153% (143; 148). The defined benefit ITP plan is a pension plan based on final salary and gives employees covered by the plan benefits in the form of a percentage of salary upon retirement. The level of the benefit also depends on the employees period of service. The plans are unfunded and withdrawals for pensions are made for the payouts to the retirees with vested pension. The pension payouts from the plan are not adjusted based on the consumer price index. The plan covers 332 people, 87 of whom were active employees as of December 31, 2015.
The defined contribution plan, known as ITP 1, for employees born in 1979 or later. The defined contribution plan ITP 1 or alternative ITP, for employees earning more than 10 income base amount and who have opted out of the defined benefit plan ITP 2, where rules are set by the Company and approved by each employee selected to participate.
UK
The defined benefit pension plan in the UK is a funded plan and has been closed to new members since January 1, 2007, and there are no benefit accruals after that date. New employees are currently offered a retirement solution through a defined contribution plan. The defined benefit pension plan includes 163 persons whereof none are active employees as of December 31, 2015.
The plan is a final salary pension plan, which provides benefits to members in the form of a guaranteed level of pension payable for life. The level of benefits provided also depends on members length of service. The pension payment in UK is on a yearly basis adjusted with 3% for some of the plan members. For other members of the plan the pension payments are adjusted for inflation.
The defined benefit pension plan in UK reports a surplus of SEK 16 million as of December 2015. Meda makes yearly contributions to the plan to ensure that the plan does not report a deficit. Any changes on the value of the plan assets may affect the yearly contribution to the plan. Contributions in 2016 are estimated to SEK 6 million. The contribution is monitored and calculated by an external actuary on a regular basis.
53
The funded pension plan in UK is administrated by Legal & General Investment Management Limited (LGIM). The administration is regulated by an investment management agreement. The agreement includes targets related to return on plan assets of which an investment strategy is suggested for Meda Pharmaceuticals Ltd. Investment decisions are handled by trustees, ENTs (Entity Nominated Trustees), which according to British law is designated by Meda Pharmaceuticals Ltd. The investments are determined within an asset-liability matching strategy to achieve a long-term investment that is in line with the obligations under the pension plan. The companys objective is to match assets to the pension obligations by investing in long term fixed interest securities with maturities that match the benefit payment as they fall due. The trustees and LGIM actively monitor how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligation. The company has not changed the processes used to manage its risks from previous years. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.
Other
Recognized liabilities for other pension plans as of December 31, 2015 amounted to SEK 120 million (145; 88). Other pension obligations are mainly related to France, Austria and Italy.
The significant actuarial assumptions are presented in the table below:
(weighted average, %) |
2015 | 2014 | 2013 | |||||||||
Discount rate |
2.6 | 2.3 | 3.6 | |||||||||
Future salary increase |
2.2 | 2.2 | 2.2 | |||||||||
Future pension increase |
1.6 | 1.6 | 1.3 |
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each territory. These assumptions translate into an average life expectancy in years for a person retiring at age 65.
(weighted average, %) |
2015 | 2014 | 2013 | |||||||||
Retiring at the end of the reporting period (age 65 years) |
||||||||||||
Male |
19.5 | 20.1 | 20.2 | |||||||||
Female |
23.0 | 23.4 | 23.3 | |||||||||
Retiring 25 years after the end of the reporting period (age 40 years) |
||||||||||||
Male |
19.5 | 19.7 | 19.4 | |||||||||
Female |
23.5 | 23.5 | 22.7 |
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions are:1)
SEK million |
2015 | Discount rate | Future salary increase | Future pension increase | Life expectancy | |||||||||||||||||||||||||||||||
+0.5% | 0.5% | +0.5% | 0.5% | +0.5% | 0.5% | +1 year | 1 year | |||||||||||||||||||||||||||||
Present value of funded - obligations |
1,262 | 1,205 | 1,323 | 1,264 | 1,261 | 1,273 | 1,254 | 1,283 | 1,242 | |||||||||||||||||||||||||||
Fair value of assets |
869 | 869 | 869 | 869 | 869 | 869 | 869 | 869 | 869 | |||||||||||||||||||||||||||
Present value of unfunded - obligations |
1,862 | 1,734 | 2,007 | 1,877 | 1,847 | 1,981 | 1,753 | 1,947 | 1,768 | |||||||||||||||||||||||||||
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|
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|
|
|||||||||||||||||||
Net |
2,255 | 2,070 | 2,461 | 2,272 | 2,239 | 2,385 | 2,138 | 2,361 | 2,141 | |||||||||||||||||||||||||||
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|
1) | The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (projected unit method) has been applied as when calculating the pension liability. |
54
Plan assets in the Group, which are mainly attributable to US and UK, are comprised as presented in the table below.
Quoted | 2015 Unquoted |
Total | % | Quoted | 2014 Unquoted |
Total | % | Quoted | 2013 Unquoted |
Total | % | |||||||||||||||||||||||||||||||||||||
Equity instruments |
||||||||||||||||||||||||||||||||||||||||||||||||
US |
292 | 51 | 343 | 40 | 305 | | 305 | 36 | 219 | | 219 | 32 | ||||||||||||||||||||||||||||||||||||
UK |
43 | | 43 | 5 | 42 | | 42 | 5 | 30 | | 30 | 4 | ||||||||||||||||||||||||||||||||||||
Debt instruments |
||||||||||||||||||||||||||||||||||||||||||||||||
US |
171 | 17 | 188 | 22 | 180 | | 180 | 21 | 133 | | 133 | 19 | ||||||||||||||||||||||||||||||||||||
UK |
166 | | 166 | 19 | 161 | | 161 | 19 | 119 | | 119 | 17 | ||||||||||||||||||||||||||||||||||||
Property |
||||||||||||||||||||||||||||||||||||||||||||||||
US |
| 82 | 82 | 9 | | 66 | 66 | 8 | | 27 | 27 | 4 | ||||||||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||||||||||||||
US |
| | | | 7 | 48 | 55 | 6 | 23 | 93 | 116 | 17 | ||||||||||||||||||||||||||||||||||||
Other countries |
24 | 23 | 47 | 5 | 23 | 22 | 45 | 5 | 44 | 0 | 44 | 7 | ||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|||||||||||||||||||||||||
Total |
696 | 173 | 869 | 100 | 718 | 136 | 854 | 100 | 567 | 121 | 688 | 100 | ||||||||||||||||||||||||||||||||||||
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Contributions to the Groups defined benefit pension and healthcare plans for the 2016 financial year are expected to amount to SEK 145 million. The weighted average maturity for the pension obligations is 13 years.
The maturities for expected undiscounted payouts for post-employment pension are listed below.
Maturity |
Undiscounted payouts, SEK million | |||
Within 1 year |
145 | |||
Between 12 years |
158 | |||
Between 25 years |
512 | |||
More than 5 years |
3,912 | |||
|
|
|||
Total |
4,727 | |||
|
|
Risks
Through its defined post-employment defined benefit pension and healthcare plans, the Group is exposed to a number of risks. The most significant risks are described below.
Type of risk |
||
Volatility in assets | The largest portion of the Groups plan assets are in the US and the UK. The plan liabilities are calculated using a discount rate based on corporate bonds. If the plan assets do not achieve returns corresponding to the level of the discount rate, a deficit will arise.
The US and UK plans contain equities. Although, over the long-term, the return is expected to exceed the interest on corporate bonds, the equities are associated with volatility and risk in the short-term. As the plans approach maturity, Meda intends to reduce the level of investment risk by increasing investments in assets that better match the liability. | |
Bond yield changes | A significant part of the Groups plans is unfunded and located in Germany where the discount rate is based on corporate bonds. A reduction in the interest on corporate bonds results in an increase in plan liabilities. In the US, the pension plans are funded and any increase in the liability as a result of a decrease in interest on corporate bonds is to some extent compensated for by an increase in the value of the corporate bond holding. |
55
Type of risk |
||
Inflation | In the countries where the Group has pension obligations that are linked to inflation, higher inflation in those countries would lead to higher pension liabilities. The plan assets in the US and the UK are either not affected by (fixed interest on bonds) or slightly correlated with (equities) inflation, which means that an increase in inflation will increase the deficit in these plans. | |
Life expectancy assumptions | In most of the pension plans, individuals covered by the plans will receive life-long benefits, and accordingly, higher life expectancy assumptions result in higher pension liabilities. |
Note 27 Other non-current liabilities
SEK million |
2015 | 2014 | 2013 | |||||||||
Unconditional deferred payment |
2,458 | 2,447 | | |||||||||
Other non-current liabilities |
16 | 17 | 32 | |||||||||
|
|
|
|
|
|
|||||||
Total |
2,474 | 2,464 | 32 | |||||||||
|
|
|
|
|
|
The purchase price for Rottapharm includes an unconditional deferred payment of EUR 275 million which carries no interest and matures in January 2017. This is measured at fair value by discounting to present value using an interest rate of 2.6%. Interest cost for the period, since the acquisition, which is recognized under financial expenses amounts to SEK 65 million (14; -).
Note 28 Other provisions
SEK million |
Returns | Personnel | Restructuring | Legal - disputes |
Other | Total | ||||||||||||||||||
January 1, 2015 |
513 | 141 | 620 | 73 | 148 | 1,495 | ||||||||||||||||||
Additional provisions |
488 | 76 | 273 | 213 | 30 | 1,080 | ||||||||||||||||||
Utilized during the year |
300 | 35 | 561 | 30 | 37 | 963 | ||||||||||||||||||
Reversed unused amounts |
141 | 12 | 72 | 2 | 73 | 300 | ||||||||||||||||||
Translation difference |
37 | 8 | 6 | | 6 | 33 | ||||||||||||||||||
December 31, 2015 |
597 | 178 | 254 | 254 | 62 | 1,345 |
SEK million |
2015 | 2014 | 2013 | |||||||||
Non-current provisions |
337 | 375 | 209 | |||||||||
Current provisions |
1,008 | 1,120 | 396 | |||||||||
|
|
|
|
|
|
|||||||
Total |
1,345 | 1,495 | 605 | |||||||||
|
|
|
|
|
|
Expected outflow date, SEK million |
Non-current provisions |
|||
In 23 years |
118 | |||
In 45 years |
62 | |||
After 5 years |
157 | |||
|
|
|||
Total |
337 | |||
|
|
Provisions for returns
The provision for returns mainly comprises reserves for products that Meda is obliged to buy back from the customer a short time before or after their expiry date.
56
Provisions for personnel
SEK 94 million (89; 70) of provisions for personnel relates to health benefits in the US after terminated employment which are unfunded. Accounting method, assumptions and number of evaluation points are similar to those used for defined benefit pension plans. The plans are closed and no actively employed are covered by the plan. The actuarial loss for 2015 amounted to SEK 2 million and interest expenses to SEK 4 million. Benefits paid from the plans amounted to SEK 9 million. Expected fees for 2016 amount to SEK 6 million. Weighted average maturity for the plans amount to 9 years.
The principal actuarial assumptions are the discount rate and long-term increase in the cost of healthcare which as of December 31, 2015 amounted to 4.25% (3.75; 4.5) and 4.0% (4.0; 5.0). A change in the discount rate of +/ 0.25% decrease / increase the liability with SEK +/ 2 million. A change in the long-term increase in the cost of healthcare by +/ 0.25% increase / decrease the obligation of SEK +/ 1 million.
Other personnel related provisions are mainly related to provisions for terminated contracts in Germany and Italy.
Provisions for legal disputes
SEK 189 million of the provision refers to a provision for an ongoing legal dispute in the US related to the product Reglan, which is expected to be closed during the third quarter 2016. See Note 29 for more information.
Individual assessment of ongoing disputes occurs continually.
Provisions for restructuring
The provision for restructuring amounted to SEK 254 million (620; 14) whereof SEK 249 million is related to Rottapharm. Costs for restructuring during the year relating to the integration of Rottapharm were SEK 291 million (631; -). SEK 8 million is recognized under cost of sales, SEK 227 million under selling expenses, SEK 25 million under medicine and business development expenses and SEK 47 million under administrative expenses in the income statement. The costs are mainly related to personnel expenses. SEK 196 million of the restructuring provision will be paid in 2016.
Other provisions
Other provisions include, for example, excise duties, sales commissions and provisions for ongoing tax audits.
Note 29 Contingent liabilities
Pledged collateral, SEK million |
2015 | 2014 | 2013 | |||||||||
Commitments |
||||||||||||
Guarantees |
31 | 32 | 32 |
| In-licensing of the global rights to Edluar may lead to milestone payments totaling USD 60 million when defined sales targets are reached. |
| The acquisition of the European rights to the substance sotiromod may lead to milestone payments of USD 10 million when defined development stages are reached. |
| The agreement with Ethypharm for the rights to the ketoprofenomeprazole combination may lead to milestone payments of EUR 5 million upon registration and when defined sales targets are reached. |
| In-licensing of OraDisc A for the European market may lead to milestone payments of EUR 4.8 million. |
57
| The agreement with Cipla to expand the geographic territory for Dymista and the product development partnership may lead to milestone payments of USD 35 million when defined development stages are reached and upon the launch of new products. |
| The acquisition of ZpearPoint may lead to milestone payments of NOK 40 million when defined development stages and sales targets are reached for the product EB24. |
| The in-licensed rights to Betadine from Mundipharma will expire on December 31, 2017. With this counterparty, Meda has a binding option to acquire an eternal license for the rights to Betadine under certain conditions. The parties have entered into negotiations on future rights to the product. |
| The maximum additional purchase consideration for other product rights is around SEK 74 million. |
| In conjunction with the acquisition of Carter-Wallace in 2001, Meda Pharmaceuticals Inc. (previously MedPointe Inc.) took over certain environment-related obligations. In 1982, US Environmental Protection Agency (EPA) stated that Carter-Wallace, along with more than 200 other companies, were potentially responsible for waste placed at the Lone Pine Landfill waste disposal facility. In 1989 and 1991, without admitting responsibility, Carter-Wallace and 122 other companies entered into an agreement with the EPA to decontaminate Lone Pine. The process is ongoing. The provision for decontamination costs amounted to USD 2.0 million as of December 31, 2015. |
| In conjunction with the purchase of Alaven Pharmaceuticals in 2010, Meda Pharmaceuticals Inc. assumed responsibility for ongoing US product liability cases involving the product Reglan (metoclopramide). Presently, there are slightly less than 3,300 cases in which the company is named as one of multiple defendants, with most of the cases in Philadelphia, San Francisco and New Brunswick. In general, the cases involve plaintiffs that took Reglan for long periods of time to control gastric stasis and gastroesophageal reflux and developed the side effect tardive dyskinesia, which is characterized by repetitive, involuntary muscle movements, generally of the face and extremities. Even though the Reglan labeling since 1986 has warned against the side effect if the product was taken for more than 12 weeks, the plaintiffs allege that the warning was not prominent enough. While Meda believes it has meritorious defenses to these claims, in order to avoid the expense and distraction of litigation, Meda has entered into a confidential settlement agreement which establishes a framework to resolve all of the claims. Meda has recognized a provision of USD 25 million in the third quarter 2015 whereof USD 2.5 million was paid in the fourth quarter 2015. The settlement is subject to sufficient participation by the plaintiffs as determined in Medas sole discretion. |
| From time to time, Meda is involved in legal disputes that are common in the pharmaceutical industry. Although it is not possible to issue any -guarantees about the outcome of these disputes, on the basis of Group managements present and fundamental judgment, we do not anticipate that they will have any materially negative impact on Medas financial -position. This standpoint may change over time. |
Note 30 Cash flow
Adjustments for items not included in cash flow
SEK million |
2015 | 2014 | 2013 | |||||||||
Operating activities: |
||||||||||||
Depreciation of property, plant, and equipment |
211 | 133 | 100 | |||||||||
Amortization of intangible assets |
3,073 | 2,370 | 2,086 | |||||||||
Bank charges1) |
115 | 186 | 25 | |||||||||
Other |
26 | 21 | 35 | |||||||||
|
|
|
|
|
|
|||||||
Total |
3,373 | 2,668 | 2,246 | |||||||||
|
|
|
|
|
|
1) | Bank charges taken to income during the year. |
58
Note 31 Transactions with related parties
Fidim S.r.l. owns 33,016,286 shares in Meda AB, corresponding to 9.0% of the total number of shares. Fidim S.r.l. received 30,000,000 MEDA shares as part of the purchase price for Medas acquisition of Rottapharm. Luca Rovati is a board member of Meda since November 2014 and partner in Fidim S.r.l.
To Meda related parties: |
||
Fidim S.r.l. |
Board member Luca Rovati holds shares in Fidim S.r.l. | |
RRL Immobiliare SpA |
Fidim S.r.l. owns RRL Immobiliare SpA. Luca Rovati is a board member of RRL Immobiliare SpA | |
Rottapharm Biotech S.r.l. |
Fidim S.r.l. owns Rottapharm Biotech S.r.l. | |
DemiMonde S.r.l. |
Demi-Monde S.r.l. is owned by related party to board member Luca Rovati | |
Day Spa S.r.l. |
Day Spa S.r.l. is owned by related party to board member Luca Rovati | |
Johan & Levi S.r.l. |
Johan & Levi S.r.l. is owned by related party to board member Luca Rovati |
Transactions with related parties:
Sales of goods and services and other sales, SEK million | ||||||
Rottapharm Biotech S.r.l. |
4.1 | Refers to sales of services | ||||
Other related parties |
0.2 |
Purchases of goods and services, SEK million | ||||||
RRL Immobiliare SpA |
28.1 | Refers to rental of office and factory space | ||||
Rottapharm Biotech S.r.l. |
6.8 | Refers to purchases of research and development services |
Balances as per December 31, 2015, SEK million |
||||||||
Receivables | Liabilities | |||||||
Fidim S.r.l. |
12.1 | 1) | | |||||
RRL Immobiliare SpA |
5.4 | 9.2 | ||||||
Rottapharm Biotech S.r.l. |
0.8 | 0.4 | ||||||
Other related parties |
0.1 | 0.3 |
1) | Refers to tax related expenses which have been re-charged to Fidim S.r.l. |
All transactions between related parties are based on market conditions and negotiations have taken place on an arms length basis.
Remuneration to senior executives is described in Note 8. No other related party transactions occurred in 2015.
59
Exhibit 99.2
Consolidated income statement
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||||||
SEK million |
Note | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net sales |
3, 4 | 5,015 | 5,152 | 9,330 | 9,735 | |||||||||||||||
Cost of sales |
1,996 | 1,973 | 3,624 | 3,723 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
3,019 | 3,179 | 5,706 | 6,012 | ||||||||||||||||
Selling expenses |
1,124 | 1,035 | 2,134 | 2,084 | ||||||||||||||||
Medicine and business development expenses |
973 | 975 | 2,056 | 1,942 | ||||||||||||||||
Administrative expenses |
318 | 237 | 563 | 518 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating profit |
604 | 932 | 953 | 1,468 | ||||||||||||||||
Finance income |
6 | 7 | 5 | 13 | 12 | |||||||||||||||
Finance costs |
6 | 228 | 389 | 486 | 865 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Profit after financial items |
383 | 548 | 480 | 615 | ||||||||||||||||
Tax |
85 | 156 | 109 | 3 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
298 | 392 | 589 | 618 | ||||||||||||||||
Earnings attributable to: |
||||||||||||||||||||
Parent company shareholders |
298 | 392 | 589 | 618 | ||||||||||||||||
Noncontrolling interests |
0 | 0 | 0 | 0 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
298 | 392 | 589 | 618 | |||||||||||||||||
Earnings per share |
7 | |||||||||||||||||||
basic, SEK |
0.81 | 1.07 | 1.61 | 1.69 | ||||||||||||||||
diluted, SEK |
0.81 | 1.07 | 1.61 | 1.69 | ||||||||||||||||
Average number of shares |
||||||||||||||||||||
basic (thousands) |
365,467 | 365,467 | 365,467 | 365,467 | ||||||||||||||||
diluted (thousands) |
365,467 | 365,467 | 365,467 | 365,467 | ||||||||||||||||
Actual number of shares on closing day |
||||||||||||||||||||
basic (thousands) |
365,467 | 365,467 | 365,467 | 365,467 | ||||||||||||||||
diluted (thousands) |
365,467 | 365,467 | 365,467 | 365,467 |
The accompanying Notes form an integral part of the consolidated financial statements.
1
Consolidated statement of comprehensive income
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||||||
SEK million |
Note | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net income |
298 | 392 | 589 | 618 | ||||||||||||||||
Items that will not be reclassified to the income statement |
||||||||||||||||||||
Revaluation of defined benefit pension plans and similar plans, net after tax |
14 | 53 | 46 | 177 | 27 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
53 | 46 | 177 | 27 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Items that may be reclassified to the income statement |
||||||||||||||||||||
Translation difference |
14 | 869 | 470 | 824 | 373 | |||||||||||||||
Net investment hedge, net after tax |
14 | 469 | 218 | 490 | 288 | |||||||||||||||
Cash flow hedges, net after tax |
14 | 5 | 8 | 8 | 5 | |||||||||||||||
Available-for-sale financial assets, net after tax |
14 | 2 | 4 | 3 | 5 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
403 | 264 | 339 | 95 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income for the period, net after tax |
350 | 218 | 162 | 68 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income |
648 | 174 | 751 | 550 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income attributable to: |
||||||||||||||||||||
Parent company shareholders |
648 | 174 | 751 | 550 | ||||||||||||||||
Non-controlling interests |
0 | 0 | 0 | 0 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income |
648 | 174 | 751 | 550 | ||||||||||||||||
|
|
|
|
|
|
|
|
The accompanying Notes form an integral part of the consolidated financial statements.
2
Consolidated balance sheet
SEK million |
Note | June 30 2016 |
December 31 2015 |
|||||||||
ASSETS |
||||||||||||
Non-current assets |
||||||||||||
Tangible assets |
8 | 1,490 | 1,504 | |||||||||
Intangible assets |
9 | 46,821 | 47,478 | |||||||||
Deferred tax assets |
1,931 | 1,812 | ||||||||||
Available-for-sale financial assets |
10 | 20 | 23 | |||||||||
Other non-current receivables |
12 | 112 | 262 | |||||||||
|
|
|
|
|||||||||
Total non-current assets |
50,374 | 51,079 | ||||||||||
|
|
|
|
|||||||||
Current assets |
||||||||||||
Inventories |
11 | 3,011 | 2,876 | |||||||||
Trade receivables |
12 | 4,977 | 4,295 | |||||||||
Other receivables |
314 | 320 | ||||||||||
Tax assets |
211 | 225 | ||||||||||
Prepayments and accrued income |
274 | 290 | ||||||||||
Derivatives |
13 | 216 | 149 | |||||||||
Cash and cash equivalents |
842 | 1,612 | ||||||||||
|
|
|
|
|||||||||
Total current assets |
9,845 | 9,767 | ||||||||||
|
|
|
|
|||||||||
TOTAL ASSETS |
60,219 | 60,846 | ||||||||||
|
|
|
|
The accompanying Notes form an integral part of the consolidated financial statements.
3
Consolidated balance sheet
SEK million |
Note | June 30 2016 |
December 31 2015 |
|||||||||
EQUITY AND LIABILITIES |
||||||||||||
Equity |
||||||||||||
Share capital |
365 | 365 | ||||||||||
Other capital contributions |
13,788 | 13,788 | ||||||||||
Other reserves |
14 | 537 | 375 | |||||||||
Retained earnings including profit for the year |
6,070 | 6,431 | ||||||||||
|
|
|
|
|||||||||
20,760 | 20,959 | |||||||||||
|
|
|
|
|||||||||
Non-controlling interest |
3 | 3 | ||||||||||
|
|
|
|
|||||||||
Total equity |
20,757 | 20,956 | ||||||||||
|
|
|
|
|||||||||
LIABILITIES |
||||||||||||
Non-current liabilities |
||||||||||||
Borrowings |
15 | 22,955 | 22,507 | |||||||||
Derivatives |
13 | | 19 | |||||||||
Deferred tax liabilities |
4,212 | 4,708 | ||||||||||
Pension obligations |
2,544 | 2,273 | ||||||||||
Other non-current liabilities |
16 | 13 | 2,474 | |||||||||
Other provisions |
18 | 334 | 337 | |||||||||
|
|
|
|
|||||||||
Total non-current liabilities |
30,058 | 32,318 | ||||||||||
|
|
|
|
|||||||||
Current liabilities |
||||||||||||
Trade payables |
1,510 | 1,696 | ||||||||||
Current tax liabilities |
660 | 515 | ||||||||||
Other current liabilities |
17 | 2,827 | 240 | |||||||||
Accruals and deferred income |
1,751 | 1,553 | ||||||||||
Derivatives |
13 | 359 | 205 | |||||||||
Borrowings |
15 | 1,361 | 2,355 | |||||||||
Other provisions |
18 | 936 | 1,008 | |||||||||
|
|
|
|
|||||||||
Total current liabilities |
9,404 | 7,572 | ||||||||||
|
|
|
|
|||||||||
Total liabilities |
39,462 | 39,890 | ||||||||||
|
|
|
|
|||||||||
TOTAL EQUITY AND LIABILITIES |
60,219 | 60,846 | ||||||||||
|
|
|
|
The accompanying Notes form an integral part of the consolidated financial statements.
4
Consolidated cash flow statement
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||||||
SEK million |
Note | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Cash flow from operating activities |
||||||||||||||||||||
Profit after financial items |
383 | 548 | 480 | 615 | ||||||||||||||||
Adjustments for items not included in cash flow |
20 | 870 | 629 | 1,673 | 1,638 | |||||||||||||||
Net change in pensions |
8 | 14 | 18 | 31 | ||||||||||||||||
Net change in other provisions |
17 | 143 | 58 | 386 | ||||||||||||||||
Income taxes paid |
77 | 224 | 203 | 291 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Cash flow from operating activities before changes in working capital |
1,151 | 796 | 1,874 | 1,545 | ||||||||||||||||
Cash flow from changes in working capital |
||||||||||||||||||||
Inventories |
52 | 95 | 102 | 178 | ||||||||||||||||
Receivables |
496 | 191 | 441 | 323 | ||||||||||||||||
Liabilities |
232 | 349 | 38 | 362 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Cash flow from operating activities |
939 | 351 | 1,293 | 682 | ||||||||||||||||
Cash flow from investing activities |
||||||||||||||||||||
Acquisition of tangible assets |
29 | 52 | 47 | 108 | ||||||||||||||||
Acquisition of intangible assets |
16 | 6 | 44 | 41 | ||||||||||||||||
Acquisition of operation |
| | | 149 | ||||||||||||||||
Divestment of operation |
| | | 6 | ||||||||||||||||
Divestment of financial assets available-for-sale |
| 9 | 1 | 9 | ||||||||||||||||
Increase in financial receivables |
| | 2 | | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Cash flow from investing activities |
45 | 49 | 92 | 295 | ||||||||||||||||
Cash flow from financing activities |
||||||||||||||||||||
Loans raised |
830 | 817 | 1,037 | 1,140 | ||||||||||||||||
Loan repayments |
965 | 419 | 2,100 | 1,506 | ||||||||||||||||
Decrease in financial liabilities |
| 20 | 11 | 60 | ||||||||||||||||
Dividend to parent company shareholders |
914 | 914 | 914 | 914 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Cash flow from financing activities |
1,049 | 536 | 1,988 | 1,340 | ||||||||||||||||
Cash flow for the period |
155 | 234 | 787 | 953 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents at start of period |
977 | 1,624 | 1,612 | 2,311 | ||||||||||||||||
Exchange rate difference in cash and cash equivalents |
20 | 31 | 17 | 1 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents at period´s end |
842 | 1,359 | 842 | 1,359 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Interest received and paid |
||||||||||||||||||||
Interest received |
5 | 3 | 7 | 8 | ||||||||||||||||
Interest paid |
216 | 325 | 432 | 452 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total |
211 | 322 | 425 | 444 | ||||||||||||||||
|
|
|
|
|
|
|
|
The accompanying Notes form an integral part of the consolidated financial statements.
5
Consolidated statement of changes in equity
Attributable to parent company shareholders | ||||||||||||||||||||||||||||
SEK million |
Share capital |
Other capital contri- butions |
Other reserves |
Retained earnings including profit for the period |
Total | Non- controlling interests |
Total equity |
|||||||||||||||||||||
January 1, 2015 |
365 | 13,788 | 401 | 6,142 | 20,696 | 16 | 20,680 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income |
| | 68 | 618 | 550 | 0 | 550 | |||||||||||||||||||||
Divestment of operation |
| | | | | 3 | 3 | |||||||||||||||||||||
Share-based payments, settled using equity instruments |
| | | 13 | 13 | | 13 | |||||||||||||||||||||
Dividend |
| | | 914 | 914 | 914 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
June 30, 2015 |
365 | 13,788 | 333 | 5,859 | 20,345 | 19 | 20,326 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
January 1, 2016 |
365 | 13,788 | 375 | 6,431 | 20,959 | 3 | 20,956 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income |
| | 162 | 589 | 751 | 0 | 751 | |||||||||||||||||||||
Reclassification of share-based plans from equity-settled to cash-settled |
| | | 36 | 36 | | 36 | |||||||||||||||||||||
Dividend |
| | | 914 | 914 | 914 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
June 30, 2016 |
365 | 13,788 | 537 | 6,070 | 20,760 | 3 | 20,757 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes form an integral part of the consolidated financial statements.
6
Note 1 Basis of preparation of first half-year report
This consolidated interim financial report for the first half-year reporting period ended June 30, 2016, has been prepared in accordance with Accounting Standard IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB).
This consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the audited consolidated financial statements of Meda AB for the years ended December 31, 2015, 2014 and 2013 on pages F-2 to F-59 included in the MYLAN N.V. FORM S-4/A Registration Statement for securities to be issued in business combination transactions filed 06/14/16 and any public announcements made by Meda AB during the interim reporting period.
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.
New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period. However, the Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards.
New standards and interpretations not yet applied by the Group
The following new standards and interpretations have been published:
| IFRS 9 Financial Instruments addresses classification, measurement and recognition of financial liabilities and assets. The full version of IFRS 9 was issued in July 2014 and replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 contains a blended approach to measurement but simplifies it in some respects. There will be three measurement categories for financial assets: amortized cost, fair value through other comprehensive income and fair value through profit or loss. The classification of an instrument depends on the companys business model and the nature of the instrument. Investments in equity instruments are to be recognized at fair value through profit or loss. There is, however, an option at initial recognition to recognize the instrument at fair value through other comprehensive income. In such a case, no reclassification is made to profit or loss upon divestment of the instrument. IFRS 9 has also introduced a new model to calculate credit loss provisions based on expected credit losses. For financial liabilities, the classification and measurement are not changed other than in cases where a liability is recognized at fair value through profit or loss based on the fair value option. In these cases, changes in value attributable to changes in the equitys own credit risk are to be recognized in other comprehensive income. IFRS 9 lowers the criteria for the application of hedge accounting by replacing the 80-125 criteria with a requirement for an economic relationship between the hedging instrument and the hedged item, and for the hedging quota to be the same as that used in risk management. The hedge documentation requirement is also changed to some extent in comparison with IAS 39. The standard will be applied for the financial year starting on January 1, 2018. Early adoption is permitted. The Group has not yet assessed the impact of IFRS 9. |
| IFRS 15 Revenue from Contracts with Customers regulates how revenue is to be recognized. The principles upon which IFRS 15 is based give the users of financial statements more useful information on the entitys revenue. Under the increased disclosure requirement, information must be provided on the revenues nature, timing and uncertainty in connection with revenue recognition, as well as cash flows arising from customers with contracts. According to IFRS 15, revenue should be recognized when the customer assumes control of the sold goods or services and is able to use or benefit from the goods or service. IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts as well as the related SIC and IFRS Interpretations Committees interpretation. IFRS 15 goes into effect on January 1, 2018. Early adoption is permitted. The Group has not yet assessed the impact of IFRS 15. |
| IFRS 16 Leases. In January 2016, IASB issued a new lease standard that will replace IAS 17 Leases and the related interpretations IFRIC 4, SIC-15 and SIC-27. The standard requires assets and liabilities arising from all leases, with some exceptions, to be recognized on the balance sheet. This model reflects that, at the start of the lease, the lessee obtains the right to use an asset for a period of time and has an obligation to pay for that right. The accounting for lessors will in all material aspects be unchanged. The standard is effective for annual periods beginning on or after January 1, 2019. Early adoption is permitted. The Group has not yet assessed the impact of IFRS 16. |
7
No other IFRSs or IFRS Interpretations Committee interpretations that have not yet gone into effect are expected to have any significant impact on the Group.
Note 2 Financial risks
The Group is exposed to various financial risks through its operations. Medas management of these risks is centralized to the Groups internal bank and is regulated in the Groups financial policy. The objective is to identify, quantify and keep risks of adverse impact on the Groups income statements, balance sheets and cash flows at suitable levels.
Currency risk
Transaction exposure
Transaction exposure is the risk of impact on the Groups net income and cash flow due to change in the value of commercial flows in foreign currencies in conjunction with exchange rate fluctuations. Meda has sales through its own sales organization in more than 60 countries. Sales to other countries occur as exports in both the customers local currency and other currencies such as EUR and USD. Purchases are mainly made in EUR, SEK and USD. The Group is continually exposed to transaction risk. This exposure is however limited to a few units, and the exposure that rises in trade receivables and trade payables denominated in foreign currency is continuously hedged. On June 30, 2016, currency derivatives that hedged transaction exposure had a net fair value of SEK 19 million compared to SEK 36 million at year-end 2015. Hedge accounting is not applicable to these transactions, which means that changes of the fair value are carried to the income statement.
Translation exposure balance sheet
Most of the Groups operations are conducted in subsidiaries outside Sweden in functional currencies other than SEK. Translation exposure arises in the Group for net investments in foreign operations. Medas translation exposure is for the most part in EUR, but also in USD. The Group hedges risk partially by taking external loans and contracting for currency swaps in the respective currency. Hedge accounting in accordance with IAS 39 is applied for these hedging transactions. Translation differences recognized in other comprehensive income in the first half of 2016 that relates to the net investments in foreign operations amounted to SEK 824 million (373), and translation differences from hedging instruments for the net investments amounted to SEK 490 million (288) after tax.
Translation exposure income statement
Group sales are generated principally in currencies other than SEK. Changes in exchange rates therefore have a significant effect on the consolidated income statement since consolidation of the foreign subsidiaries income statements is in SEK. As the subsidiaries mainly operate in local currencies, these exposures are not hedged. Thus, fluctuations in exchange rates have no significant impact on competition or margins. The next table shows the quarterly and annually theoretical translation effect on Medas net sales and profit before tax. Calculated effects are based on recognized figures for the first quarter 2016 excluding items affecting comparability. The average exchange rates for the first half of 2016 were 9.30187 for EUR/SEK and 8.33546 for USD/SEK.
Parameter |
Change, % |
Effect on net sales, SEK m |
Effect on profit after tax, SEK m |
|||||||||
On June 30, 2016 |
||||||||||||
EUR/SEK |
+/ | 1 | +/ | 27 | +/ | 11 | ||||||
USD/SEK |
+/ | 1 | +/ | 12 | +/ | 2 | ||||||
Other currencies/SEK |
+/ | 1 | +/ | 8 | +/ | 1 | ||||||
On December 31, 2015 |
||||||||||||
EUR/SEK |
+/ | 1 | +/ | 98 | +/ | 31 | ||||||
USD/SEK |
+/ | 1 | +/ | 36 | +/ | 4 | ||||||
Other currencies/SEK |
+/ | 1 | +/ | 49 | +/ | 1 |
8
Undiscounted financial liabilities, SEK million |
< 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | > 5 years from the reporting date |
||||||||||||||||||
On June 30, 2016 |
||||||||||||||||||||||||
Borrowings |
1,936 | 3,138 | 7,625 | 10,039 | 3,554 | | ||||||||||||||||||
Unconditional deferred payment |
2,553 | | | | | | ||||||||||||||||||
Derivatives |
17 | | | | | | ||||||||||||||||||
Trade payables |
1,510 | | | | | | ||||||||||||||||||
Other liabilities |
92 | | | | | | ||||||||||||||||||
Accrued expenses |
910 | | | | | | ||||||||||||||||||
On December 31, 2015 |
||||||||||||||||||||||||
Borrowings |
2,891 | 3,130 | 7,540 | 9,769 | 3,746 | | ||||||||||||||||||
Unconditional deferred payment |
| 2,458 | | | | | ||||||||||||||||||
Derivatives |
40 | 8 | | | | | ||||||||||||||||||
Trade payables |
1,696 | | | | | | ||||||||||||||||||
Other liabilities |
80 | | | | | | ||||||||||||||||||
Accrued expenses |
907 | | | | | |
The Groups financial derivatives, which will be settled gross, comprised various currency forward contracts on the reporting date (see also Note 13). On the reporting date, the contractually agreed undiscounted cash flows from these instruments, maturing within 12 months, stood at SEK 22,875 million and SEK 22,729 million respectively (SEK 24,445 million and SEK 24,513 million respectively).
Interest rate risk
Interest risk refers to the risk that changes in general interest rates may have an adverse effect on the Groups net income. The time taken for interest rate fluctuations to affect profit/loss depends on the fixed interest period for the loan. As per Group policy, the loan portfolios fixed interest period should be 3-15 months on average. On June 30, 2016, the average period was 4.3 months.
Meda uses interest rate swaps to extend/shorten the period of fixed interest on underlying loans. As per Group policy, the duration of an interest rate swap may not exceed five years. Hedge accounting is applied to these transactions, and fair value is charged to other comprehensive income. In the first half of 2016, interest rate swaps had an impact on other comprehensive income of SEK 8 million (5) from cash flow hedging after tax. The fair value included in the consolidated balance sheet for interest rate swaps as of June 30, 2016, was a net amount of SEK 14 million compared to SEK 23 at year-end 2015.
On June 30, 2016, Group borrowings of SEK 24,316 million were mainly distributed as follow: EUR 1,505 million (SEK 14,186 million), USD 610 million (SEK 5,178 million) and SEK 4,952 million. The average interest rate including credit margins on June 30, 2016 was 2.5% compared to 2.5% at year-end 2015. Yearly interest expense for this loan portfolio at unchanged interest rates would thus amount to approximately SEK 601 million. If interest rates change instantaneously +/ 1 percentage point, Medas net income would change by +/ SEK 40 million on a quarterly basis compared to 168 at year-end 2015 on an annual basis, taking into account the loan amounts and fixed interest rates that existed on June 30, 2016 (December 31, 2015). Further information can be found in Note 15.
9
Refinancing risk
Refinancing risk is the risk that the refinancing of a maturing loan is not feasible, and the risk that refinancing must be done during unfavorable market conditions at unfavorable interest rates. Meda seeks to limit refinancing risk by spreading the maturity structure of the loan portfolio over time and spreading financing over several counterparties. On June 30, 2016, Meda had SEK 28,000 million (28,000) in available credit facilities. The basis of the Groups debt financing is syndicated bank loans of SEK 25,000 million with nine Swedish and foreign banks. This financing is augmented with borrowing via a Swedish MTN program with an upper limit of SEK 7,000 million, a Swedish commercial paper program with an upper limit of SEK 4,000 million, and a bilateral bank loan of SEK 2,000 million.
Confirmed credit facilities were as follow on June 30, 2016:
| Bilateral bank loan of SEK 2,000 million maturing in October 2017 |
| Bond loan of SEK 600 million maturing in April 2018 |
| Bond loan of SEK 750 million maturing in April 2019 |
| Credit facility with nine banks amounting to SEK 25,000 million maturing 20162020 |
| Term loan of SEK 6,063 million maturing in December 2018 |
| Revolving loan of SEK 12,500 million maturing in December 2019 |
| Term loan of SEK 6,151 million maturing in December 2020 (amortization of SEK 2,578 million) |
The syndicated credit facilities are available provided that Meda meets certain key financial ratios concerning net debt in relation to EBITDA and interest coverage ratio. Meda has met its key financial ratios for 2016.
Liquidity risk
The Groups current liquidity is covered by a retained liquidity reserve (cash and bank balances, current investments and the unused portion of confirmed credit facilities) that in the long-term shall be at least 5% of the Groups annual sales. On June 30, 2016, the liquidity reserve was SEK 5 183 million, corresponding to 27% of net sales, rolling 12 months. The table on page 10 (table above) shows the contractually agreed undiscounted cash flows from the Groups financial liabilities and net settled derivatives that constitute financial liabilities classified by the time that, on the closing date, remained until the contractually agreed maturity date. For derivatives with a variable interest rate, the variable rate that applied to each derivative on June 30, 2016, was used for the entire period to maturity.
Credit risk
The Groups financial transactions lead to credit risks in relation to financial counterparties. According to Medas financial policy, financial transactions may only be conducted with the Groups financing banks, or banks with a high official rating corresponding to Standard & Poors long-term A rating or better. Investments in cash and cash equivalents can only be made in government securities or with banks that have a high official rating.
Credit risk exists in the Groups cash and cash equivalents, derivatives, and cash balances with banks and financial institutions and in relation to distributors and wholesalers, including outstanding receivables and committed transactions.
Medas sales are mainly to large, established distributors and wholesalers with robust financial strength in each country. Since sales occur in several countries and to many different customers, the Group has good risk distribution. Meda monitors granted credits on a continuous basis.
Group assets that entail credit risk are reported in Note 12 and 13.
Capital risk
The goal of the capital structure is to secure the Groups ability to continue its operations with the aim of generating return to shareholders and benefit for other stakeholders. The goal is also to keep the costs of capital low, through an optimal capital structure and by that strengthen Medas ability to meet its key financial ratios. Capital in the Meda Group is judged on the basis of the Groups equity/assets ratio. The Groups long-term goal is an equity/assets ratio of 30%. New shares may be issued to maintain the capital structure in conjunction with major acquisitions.
10
Note 3 Segment information
Group management assesses operations from a geographic perspective. Earnings per geographic area are assessed on the basis of EBITDA (earnings before interest, taxes, depreciation, and amortization). On June 30, 2016, the Group was organized in three geographic areas: Western Europe, the US, and Emerging Markets.
Three months ended June 30, 2016 |
|
|||||||||||||||||||
SEK million |
Western Europe |
US | Emerging Markets |
Other Sales | Total | |||||||||||||||
Segments sales |
3,577 | 751 | 1,016 | 51 | 5,395 | |||||||||||||||
Sales between segments |
380 | 0 | 0 | 0 | 380 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
External net sales |
3,197 | 751 | 1,016 | 51 | 5,015 | |||||||||||||||
EBITDA |
1,201 | 227 | 334 | 374 | 1,388 | |||||||||||||||
Depreciation and amortization |
|
784 | ||||||||||||||||||
Finance income |
7 | |||||||||||||||||||
Finance costs |
228 | |||||||||||||||||||
|
|
|||||||||||||||||||
Profit after financial income |
|
383 | ||||||||||||||||||
|
|
|||||||||||||||||||
Three months ended June 30, 2015 |
||||||||||||||||||||
SEK million |
Western Europe |
US | Emerging Markets |
Other Sales | Total | |||||||||||||||
Segments sales |
3,549 | 793 | 949 | 120 | 5,411 | |||||||||||||||
Sales between segments |
259 | 0 | 0 | 0 | 259 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
External net sales |
3,290 | 793 | 949 | 120 | 5,152 | |||||||||||||||
EBITDA |
1,260 | 325 | 343 | 180 | 1,748 | |||||||||||||||
Depreciation and amortization |
|
816 | ||||||||||||||||||
Finance income |
5 | |||||||||||||||||||
Finance costs |
389 | |||||||||||||||||||
|
|
|||||||||||||||||||
Profit after financial income |
|
548 | ||||||||||||||||||
|
|
|||||||||||||||||||
Six months ended June 30, 2016 |
||||||||||||||||||||
SEK million |
Western Europe |
US | Emerging Markets |
Other Sales | Total | |||||||||||||||
Segments sales |
6,656 | 1,420 | 1,826 | 86 | 9,988 | |||||||||||||||
Sales between segments |
658 | 0 | 0 | 0 | 658 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
External net sales |
5,998 | 1,420 | 1,826 | 86 | 9,330 | |||||||||||||||
EBITDA |
2,213 | 431 | 618 | 739 | 2,523 | |||||||||||||||
Depreciation and amortization |
|
1,570 | ||||||||||||||||||
Finance income |
13 | |||||||||||||||||||
Finance costs |
486 | |||||||||||||||||||
|
|
|||||||||||||||||||
Profit after financial income |
|
480 | ||||||||||||||||||
|
|
|||||||||||||||||||
Six months ended June 30, 2015 |
||||||||||||||||||||
SEK million |
Western Europe |
US | Emerging Markets |
Other Sales | Total | |||||||||||||||
Segments sales |
6,683 | 1,579 | 1,768 | 233 | 10,263 | |||||||||||||||
Sales between segments |
528 | 0 | 0 | 0 | 528 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
External net sales |
6,155 | 1,579 | 1,768 | 233 | 9,735 | |||||||||||||||
EBITDA |
2,201 | 633 | 639 | 379 | 3,094 | |||||||||||||||
Depreciation and amortization |
|
1,626 | ||||||||||||||||||
Finance income |
12 | |||||||||||||||||||
Finance costs |
865 | |||||||||||||||||||
|
|
|||||||||||||||||||
Profit after financial income |
|
615 | ||||||||||||||||||
|
|
11
The company is based in Sweden. Geographic breakdown of total non-current assets, other than financial instruments and deferred tax assets is shown in below table
Net sales | Non-current assets | |||||||||||||||||||||||
Three months ended June 30 |
Six months ended June 30 |
June 30 | December 31 | |||||||||||||||||||||
SEK million |
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Western Europe1) |
3,197 | 3,290 | 5,998 | 6,155 | 28,327 | 28,821 | ||||||||||||||||||
US2) |
751 | 793 | 1,420 | 1,579 | 9,814 | 10,066 | ||||||||||||||||||
Emerging Markets |
1,016 | 949 | 1,826 | 1,768 | 10,087 | 10,010 | ||||||||||||||||||
Other Sales |
51 | 120 | 86 | 233 | 163 | 169 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
5,015 | 5,152 | 9,330 | 9,735 | 48,391 | 49,066 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1) Whereof in Sweden |
8,299 | 8,818 | ||||||||||||||||||||||
2) Whereof in the US |
9,814 | 10,066 |
Three months ended June 30, 2016
Revenues from external customers in Germany amount to SEK 515 million (513), France SEK 402 million (421), Sweden SEK 352 million (351) and Italy SEK 524 million (570). Total revenues from external customers in other countries amount to SEK 3,222 million (3,297). A breakdown of net sales by income type is found in Note 4.
Six months ended June 30, 2016
Revenues from external customers in Germany amount to SEK 944 million (1,020), France SEK 793 million (810), Sweden SEK 705 million (692) and Italy SEK 929 million (969). Total revenues from external customers in other countries amount to SEK 5,959 million (6,244). A breakdown of net sales by income type is found in Note 4.
Geographic areas
Western Europe includes western Europe, excluding the Baltics, Poland, Czech Republic, Slovakia and Hungary. The US comprises the US and Canada, and Emerging Markets includes eastern Europe, including the Baltics, Poland, Czech Republic, Slovakia, Hungary, Turkey, the Middle East, Mexico and other non-European markets. Other Sales concern revenues from contract manufacturing, parts of royalty and other income.
Note 4 Net sales disclosed by type
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||
SEK million |
2016 | 2015 | 2016 | 2015 | ||||||||||||
Goods sold |
4,877 | 5,012 | 9,084 | 9,438 | ||||||||||||
Royalties |
89 | 108 | 152 | 217 | ||||||||||||
Revenue from contract manufacturing |
32 | 25 | 65 | 61 | ||||||||||||
Other |
17 | 7 | 29 | 19 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
5,015 | 5,152 | 9,330 | 9,735 |
Note 5 Long-term performance based incentive programs (LTI-programs)
As of June 30, 2016, Meda has two outstanding LTI-programs approved by the AGM in 2014 and 2015. Meda is subject to a public takeover by Mylan which may lead to a change of control (CoC). Therefore, the board of Meda AB decided to modify the programs and convert them with a cash compensation to the participants of the programs in event of CoC, provided that the individuals are still employed by Meda at that date. This means that the LTI-programs have been reclassified from equity settled programs to cash settled programs.
12
The amount of compensation will be based on the number of share rights allotted for each of the programs and the Meda share price at completion of CoC. The vesting period for each program is reduced and runs to August 2016. If CoC does not occur the LTI-programs will continue in full force and effect.
At end of June, 2016 the programs cover, LTI 2014, 82 persons and, LTI 2015, 97 persons. The number of outstanding shares is presented in the following table.
Allotted shares |
LTI 2015 | LTI 2014 | ||||||
Total allotted shares as of December 31, 2015 |
| 338,121 | ||||||
Number of allotted shares |
586,169 | | ||||||
Additional shares due to dividend compensation |
9,643 | 5,465 | ||||||
Number of forfeited shares during the period |
3,831 | 2,463 | ||||||
Number of forfeited shares due to reclassification of share-based plans from equity-settled to cash-settled |
591,981 | 341,123 | ||||||
|
|
|
|
|||||
Total allotted shares as of June 30, 2016 |
0 | 0 | ||||||
|
|
|
|
Cost
The total expense of the programs, which are allocated across their duration, are SEK 139 million excluding social security contributions. In 2016, the programs resulted in an expense of SEK 93 million recognized in the income statement excluding social security contributions of SEK 13 million. SEK 65 million is due to the reduced vesting period excluding social security contributions of SEK 9 million which have been recognized in the second quarter. The total reserve for social security contributions in the balance sheet amounts to SEK 18 million whereof SEK 5 million is related to the CEO and Executive Vice Presidents.
As of June 30, 2016 the outstanding liability related to the programs, which is based on a Meda share price of SEK 152.90 at end of June 2016, amounts to SEK 128 million whereof SEK 34 million is related to the CEO and Executive Vice Presidents.
Note 6 Finance income and finance costs
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||
SEK million |
2016 | 2015 | 2016 | 2015 | ||||||||||||
Finance income |
||||||||||||||||
Interest |
7 | 5 | 13 | 12 | ||||||||||||
Total finance income |
7 | 5 | 13 | 12 | ||||||||||||
Finance costs |
||||||||||||||||
Interest |
210 | 286 | 425 | 566 | ||||||||||||
Exchange gains/losses |
12 | 17 | 0 | 8 | ||||||||||||
Costs of raising loans |
15 | 71 | 30 | 85 | ||||||||||||
Interestpensions |
15 | 14 | 30 | 29 | ||||||||||||
Other finance costs |
0 | 1 | 1 | 193 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total finance costs |
228 | 389 | 486 | 865 |
13
Note 7 Earnings per share
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Basic earnings per share |
||||||||||||||||
Profit attributable to parent company shareholders, SEK million |
298 | 392 | 589 | 618 | ||||||||||||
Average no. of shares (thousands) |
365,467 | 365,467 | 365,467 | 365,467 | ||||||||||||
No. of shares in calculation of basic earnings per share (thousands) |
365,467 | 365,467 | 365,467 | 365,467 | ||||||||||||
Basic earnings per share (SEK) |
0.81 | 1.07 | 1.61 | 1.69 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted earnings per share |
||||||||||||||||
Profit attributable to parent company shareholders, SEK million |
298 | 392 | 589 | 618 | ||||||||||||
Average no. of shares (thousands) |
365,467 | 365,467 | 365,467 | 365,467 | ||||||||||||
No. of shares in calculation of diluted earnings per share (thousands) |
365,467 | 365,467 | 365,467 | 365,467 | ||||||||||||
Diluted earnings per share (SEK) |
0.81 | 1.07 | 1.61 | 1.69 | ||||||||||||
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
Calculation of earnings per share was based on net profit for the year after tax attributable to parent company shareholders in relation to a weighted average number of shares totaling 365,467,371 (365,467,371).
Note 8 Tangible assets
June 30, 2016 | ||||||||||||||||||||
Buildings and land |
Machinery/ plant |
Equipment and installation |
Construction in progress |
Total | ||||||||||||||||
Opening cost of acquisition, January 1, 2016 |
969 | 1,184 | 650 | 66 | 2,869 | |||||||||||||||
Investments |
| 5 | 15 | 27 | 47 | |||||||||||||||
Sales/disposals |
1 | 41 | 83 | | 125 | |||||||||||||||
Reclassification |
5 | 25 | 5 | 35 | 0 | |||||||||||||||
Translation difference |
22 | 25 | 11 | 1 | 59 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing cost of acquisition, June 30, 2016 |
995 | 1,198 | 598 | 59 | 2,850 | |||||||||||||||
Opening depreciation, January 1, 2016 |
362 | 532 | 471 | | 1,365 | |||||||||||||||
Years depreciation |
15 | 50 | 30 | | 95 | |||||||||||||||
Sales/disposals |
1 | 41 | 83 | | 125 | |||||||||||||||
Translation difference |
9 | 10 | 5 | | 24 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing depreciation, June 30 2016 |
385 | 551 | 423 | | 1,359 | |||||||||||||||
Carrying amount |
610 | 647 | 175 | 59 | 1,491 | |||||||||||||||
Depreciation per function: |
||||||||||||||||||||
Cost of sales |
9 | 46 | 7 | | 62 | |||||||||||||||
Selling expenses |
| | 3 | | 3 | |||||||||||||||
Medicine and business development expenses |
1 | | 2 | | 3 | |||||||||||||||
Administrative expenses |
5 | 4 | 18 | | 27 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
15 | 50 | 30 | | 95 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
14
December 31, 2015 | ||||||||||||||||||||
Buildings and land |
Machinery/ plant |
Equipment and installation |
Construction in progress |
Total | ||||||||||||||||
Opening cost of acquisition, January 1, 2015 |
994 | 1,367 | 722 | 113 | 3,196 | |||||||||||||||
Investments |
8 | 80 | 48 | 84 | 220 | |||||||||||||||
Sales/disposals |
16 | 26 | 69 | | 111 | |||||||||||||||
Acquired operation |
| | | | 0 | |||||||||||||||
Divested operation |
40 | 320 | 19 | 1 | 380 | |||||||||||||||
Reclassification |
31 | 91 | 38 | 129 | 45 | |||||||||||||||
Translation difference |
8 | 8 | 6 | 1 | 11 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing cost of acquisition, December 31, 2015 |
969 | 1,184 | 650 | 66 | 2,869 | |||||||||||||||
Opening depreciation, January 1, 2015 |
363 | 649 | 492 | | 1,504 | |||||||||||||||
Years depreciation |
31 | 116 | 64 | | 211 | |||||||||||||||
Sales/disposals |
15 | 24 | 65 | | 104 | |||||||||||||||
Divested operation |
21 | 204 | 16 | | 241 | |||||||||||||||
Reclassification |
3 | 4 | 13 | | 14 | |||||||||||||||
Translation difference |
1 | 1 | 9 | | 9 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Closing depreciation, December 31, 2015 |
362 | 532 | 471 | | 1,365 | |||||||||||||||
Carrying amount |
607 | 652 | 179 | 66 | 1,504 | |||||||||||||||
Depreciation per function: |
||||||||||||||||||||
Cost of sales |
18 | 105 | 16 | | 139 | |||||||||||||||
Selling expenses |
| | 7 | | 7 | |||||||||||||||
Medicine and business development expenses |
1 | | 3 | | 4 | |||||||||||||||
Administrative expenses |
12 | 11 | 38 | | 61 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
31 | 116 | 64 | | 211 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Note 9 Intangible assets
June 30, 2016 | ||||||||||||||||
Goodwill | Product rights |
Other assets | Total | |||||||||||||
Opening cost of acquisition, January 1, 2016 |
25,524 | 39,722 | 268 | 65,514 | ||||||||||||
Investments |
| 35 | 9 | 44 | ||||||||||||
Sales/disposals |
| | 7 | 7 | ||||||||||||
Translation difference |
464 | 453 | 7 | 924 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Closing cost of acquisition, June 30, 2016 |
25,988 | 40,210 | 277 | 66,475 | ||||||||||||
Opening depreciation, January 1, 2016 |
| 17,853 | 183 | 18,036 | ||||||||||||
Years depreciation |
| 1,462 | 13 | 1,475 | ||||||||||||
Sales/disposals |
| 7 | 7 | |||||||||||||
Translation difference |
| 145 | 5 | 150 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Closing depreciation, June 30, 2016 |
| 19,460 | 194 | 19,654 | ||||||||||||
Carrying amount |
25,988 | 20,750 | 83 | 46,821 | ||||||||||||
Amortization per function: |
||||||||||||||||
Cost of sales |
| | 3 | 3 | ||||||||||||
Selling expenses |
| | 1 | 1 | ||||||||||||
Medicine and business development expenses |
| 1,462 | 2 | 1,463 | ||||||||||||
Administrative expenses |
| | 7 | 8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
| 1462 | 13 | 1,475 | ||||||||||||
|
|
|
|
|
|
|
|
15
December 31, 2015 | ||||||||||||||||
Goodwill | Product rights |
Other assets | Total | |||||||||||||
Opening cost of acquisition, January 1, 2015 |
25,352 | 40,083 | 232 | 65,667 | ||||||||||||
Investments |
47 | 59 | 20 | 126 | ||||||||||||
Sales/disposals |
| 6 | 14 | 20 | ||||||||||||
Acquired operation |
| | | 0 | ||||||||||||
Divested operation |
| 511 | 7 | 518 | ||||||||||||
Reclassification |
| 1 | 46 | 45 | ||||||||||||
Translation difference |
125 | 98 | 9 | 214 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Closing cost of acquisition, December 31, 2015 |
25,524 | 39,722 | 268 | 65,514 | ||||||||||||
Opening depreciation, January 1, 2015 |
| 14,715 | 154 | 14,869 | ||||||||||||
Years depreciation |
| 3,040 | 33 | 3,073 | ||||||||||||
Sales/disposals |
| 5 | 7 | 12 | ||||||||||||
Divested operation |
| 42 | 4 | 46 | ||||||||||||
Reclassification |
| | 14 | 14 | ||||||||||||
Translation difference |
| 145 | 7 | 138 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Closing depreciation, December 31, 2015 |
| 17,853 | 183 | 18,036 | ||||||||||||
Carrying amount |
25,524 | 21,869 | 85 | 47,478 | ||||||||||||
Amortization per function: |
||||||||||||||||
Cost of sales |
| | 8 | 8 | ||||||||||||
Selling expenses |
| | 4 | 4 | ||||||||||||
Medicine and business development expenses |
| 3,040 | 5 | 3,045 | ||||||||||||
Administrative expenses |
| | 16 | 16 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
| 3,040 | 33 | 3,073 | ||||||||||||
|
|
|
|
|
|
|
|
Note 10 Available-for-sale financial assets
Available-for-sale financial assets include the following:
SEK million |
June 30, 2016 |
December 31, 2015 |
||||||
Funds US |
13 | 16 | ||||||
Listed interest-bearing securities Austria |
6 | 6 | ||||||
Other |
1 | 1 | ||||||
|
|
|
|
|||||
Total |
20 | 23 |
Note 11 Inventories
SEK million |
June 30 2016 |
December 31 2015 |
||||||
Raw materials |
771 | 740 | ||||||
Work in progress |
155 | 134 | ||||||
Finished goods and goods for resale |
2,085 | 2,002 | ||||||
|
|
|
|
|||||
Total |
3,011 | 2,876 |
Note 12 Trade receivables
SEK million |
June 30 2016 |
December 31 2015 |
||||||
Trade receivables |
5,092 | 4,396 | ||||||
Provision for bad debts |
115 | 101 | ||||||
|
|
|
|
|||||
Total |
4,977 | 4,295 |
16
Note 13 Derivatives, financial assets and financial liabilities
On June 30, 2016, the Groups open forward foreign exchange contracts had terms of up to three months. This table shows classification by currency.
Assets |
||||||||||||
Currency pairs |
Exchange rate | Nominal amount, SEK million |
Fair value, SEK million |
|||||||||
EUR/SEK |
9.1885 | 7,153 | 182 | |||||||||
EUR/USD |
1.1346 | 1,338 | 28 | |||||||||
Other |
5 | |||||||||||
|
|
|||||||||||
Total |
215 | |||||||||||
|
|
|||||||||||
Liabilities |
||||||||||||
Currency pairs |
Exchange rate | Nominal amount, SEK million |
Fair value, SEK million |
|||||||||
EUR/SEK |
9.2039 | 1,078 | 235 | |||||||||
USD/SEK |
8.2601 | 2,685 | 68 | |||||||||
Other |
42 | |||||||||||
|
|
|||||||||||
Total |
345 | |||||||||||
|
|
Fair value of financial assets and liabilities
The following table comprises the consolidated financial assets and liabilities that are measured at fair value.
Interest rate swaps and currency forward contracts are reported as level 2 and used for the purpose of hedging. Fair value measurement for interest rate swaps is calculated by discounting with observable market data. Measurement of fair value for currency forward contracts is based on published forward prices.
Available-for-sale financial assets are reported as level 1 and 2. Level 1 comprises quoted interest-bearing securities and fair value measurement is based on quoted prices on an active market. Level 2 mainly comprises fund holdings where fair value measurement is based on observable market data.
Group derivatives are covered by right of set-off between assets and liabilities with the same counterparty. Offsetting of assets and liabilities has not been applied. Derivatives recognized as assets and liabilities are presented in the table below.
No transfers have been made between level 1 and level 2 during the period.
The maximum exposure to credit risk at the end of the reporting period is the fair value of the derivatives that are recognized as assets in the -balance sheet.
June 30, 2016 | December 31, 2015 | |||||||||||||||
SEK million |
Level 1 | Level 2 | Level 1 | Level 2 | ||||||||||||
Assets |
||||||||||||||||
Currency forward contracts |
| 216 | | 149 | ||||||||||||
Available-for-sale financial assets |
6 | 14 | 6 | 17 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
6 | 230 | 6 | 166 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Interest rate swaps1) |
| 14 | | 23 | ||||||||||||
Currency forward contracts |
| 345 | | 201 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
| 359 | | 224 | ||||||||||||
|
|
|
|
|
|
|
|
1) | Cash flow hedging. |
17
The following table comprises the fair value of financial assets and liabilities by valuation category compared with their carrying amounts.
June 30, 2016 SEK million |
Loans and receivables |
Assets at fair value through profit and loss |
Derivatives used for hedging |
Available- for-sale financial assets |
Total | Fair value | ||||||||||||||||||
Available-for-sale financial assets |
| | | 20 | 20 | 20 | ||||||||||||||||||
Derivatives |
| 216 | | | 216 | 216 | ||||||||||||||||||
Trade receivables and other receivables |
5,171 | 1) | | | | 5,171 | 5,171 | |||||||||||||||||
Cash and cash equivalents |
842 | | | | 842 | 842 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
6,013 | 216 | 0 | 20 | 6,249 | 6,249 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 SEK million |
Liabilities at fair value through profit and loss |
Derivatives used for hedging |
Other financial liabilities |
Total | Fair value | |||||||||||||||
Borrowings |
| | 24,316 | 24,316 | 24,322 | |||||||||||||||
Unconditional deferred payment |
| | 2,553 | 2,553 | 2,553 | |||||||||||||||
Trade payables |
| | 1,510 | 1,510 | 1,510 | |||||||||||||||
Derivatives |
284 | 75 | | 359 | 359 | |||||||||||||||
Other liabilities |
| | 1,002 | 1,002 | 1,002 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
284 | 75 | 29,381 | 29,740 | 29,746 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
1) | Consists of the Groups trade receivables, parts of other non-current receivables and parts of other short-term receivables. |
2) | Consists of the parts of the Groups other short-term liabilities and other accrued expenses. |
December 31, 2015 SEK million |
Loans and receivables |
Assets at fair value through profit and loss |
Derivatives used for hedging |
Available- for-sale financial assets |
Total | Fair value | ||||||||||||||||||
Available-for-sale financial assets |
| | | 23 | 23 | 23 | ||||||||||||||||||
Derivatives |
| 131 | 18 | | 149 | 149 | ||||||||||||||||||
Trade receivables and other receivables |
4,582 | 1) | | | | 4,582 | 4,582 | |||||||||||||||||
Cash and cash equivalents |
1,612 | | | | 1,612 | 1,612 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
6,194 | 131 | 18 | 23 | 6,366 | 6,366 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 SEK million |
Liabilities at fair value through profit and loss |
Derivatives used for hedging |
Other financial liabilities |
Total | Fair value | |||||||||||||||
Borrowings |
| | 24,862 | 24,862 | 24,838 | |||||||||||||||
Unconditional deferred payment |
| | 2,458 | 2,458 | 2,458 | |||||||||||||||
Trade payables |
| | 1,696 | 1,696 | 1,696 | |||||||||||||||
Derivatives |
169 | 55 | | 224 | 224 | |||||||||||||||
Other liabilities |
| | 987 | 2) | 987 | 987 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
169 | 55 | 30,003 | 30,227 | 30,203 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
1) | Consists of the Groups trade receivables, parts of other non-current receivables and parts of other short-term receivables. |
2) | Consists of the parts of the Groups other short-term liabilities and other accrued expenses. |
Medas financial instruments attributable to level 1 and 2 and fair value by level are as follow:
June 30, 2016 | December 31, 2015 | |||||||||||||||||||||||
SEK million |
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | ||||||||||||||||||
Financial assets |
6 | 6,243 | 6,249 | 6 | 6,360 | 6,366 | ||||||||||||||||||
Financial liabilities |
| 29,746 | 29,746 | | 30,203 | 30,203 |
18
Note 14 Equity
Dividend per share
At the AGM on April 14, 2016, a dividend of SEK 2.50 per share for a total of SEK 914 million was decided for 2015.
Other reserves, SEK million
Translation difference |
Hedging of net investment |
Cash flow hedging |
Defined benefit pension plans and similar plans |
Available- for-sale financial assets |
Total | |||||||||||||||||||
Other reserves January 1, 2015 |
1,297 | 528 | 17 | 357 | 6 | 401 | ||||||||||||||||||
Translation difference |
376 | | | | | 376 | ||||||||||||||||||
Translation difference transferred to the income statement |
3 | | | | | 3 | ||||||||||||||||||
Earnings from hedging net investment |
| 395 | | | | 395 | ||||||||||||||||||
Tax on earnings from hedging net investment |
| 87 | | | | 87 | ||||||||||||||||||
Earnings from revaluation of derivatives recognized in equity |
| | 1 | | | 1 | ||||||||||||||||||
Tax on earnings from revaluation of derivatives recognized in equity |
| | 0 | | | 0 | ||||||||||||||||||
Earnings from defined benefit pension plans and similar plans |
| | | 66 | | 66 | ||||||||||||||||||
Tax on earnings from defined benefit pension plans and similar plans |
| | | 11 | | 11 | ||||||||||||||||||
Earnings from available-for-sale financial assets |
| | | | 10 | 10 | ||||||||||||||||||
Tax on earnings from available-for-sale financial assets |
| | | | 1 | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other reserves December 31, 2015 |
918 | 220 | 18 | 302 | 3 | 375 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other reserves January 1, 2016 |
918 | 220 | 18 | 302 | 3 | 375 | ||||||||||||||||||
Translation difference |
824 | | | | | 824 | ||||||||||||||||||
Earnings from hedging net investment |
| 628 | | | | 628 | ||||||||||||||||||
Tax on earnings from hedging net investment |
| 138 | | | | 138 | ||||||||||||||||||
Earnings from revaluation of derivatives recognized in equity |
| | 9 | | | 9 | ||||||||||||||||||
Tax on earnings from revaluation of derivatives recognized in equity |
| | 2 | | | 2 | ||||||||||||||||||
Earnings from defined benefit pension plans and similar plans |
| | | 251 | | 251 | ||||||||||||||||||
Tax on earnings from defined benefit pension plans and similar plans |
| | | 74 | | 74 | ||||||||||||||||||
Earnings from available-for-sale financial assets |
| | | | 2 | 2 | ||||||||||||||||||
Tax on earnings from available-for-sale financial assets |
| | | | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other reserves June 30, 2016 |
1,742 | 710 | 11 | 479 | 5 | 537 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
19
Note 15 Borrowings
SEK million |
June 30 2016 |
December 31 2015 |
||||||
Long-term borrowing |
||||||||
Bank loans |
21,598 | 21,150 | ||||||
Bond loans |
1,350 | 1,350 | ||||||
Finance leases |
0 | 0 | ||||||
Other |
7 | 7 | ||||||
|
|
|
|
|||||
Total |
22,955 | 22,507 | ||||||
Short-term borrowing |
||||||||
Bank loans |
585 | 623 | ||||||
Bond loans |
| 400 | ||||||
Commercial papers |
775 | 1,331 | ||||||
Finance leases |
0 | 0 | ||||||
Factoring |
1 | 1 | ||||||
|
|
|
|
|||||
Total |
1,361 | 2,355 | ||||||
Total borrowings |
24,316 | 24,862 |
Fair value deviates from the carrying amount on the Groups bond loans which are recognized in level 2. Fair value measurement is based on observable market data on the OTC market.
Fair value |
||||||||
Level 1 |
| | ||||||
Level 2 |
24,322 | 24,838 | ||||||
|
|
|
|
|||||
Total |
24,322 | 24,838 |
Maturities for long-term borrowing: |
June 30 2016 |
December 31 2015 |
||||||
Payable within 1-2 years |
2,385 | 2,580 | ||||||
Payable within 2-5 years |
20,570 | 19,927 | ||||||
Payable after 5 years |
| | ||||||
|
|
|
|
|||||
Total |
22,955 | 22,507 |
Carrying amounts in SEK million, by currency, for the Groups borrowing: |
June 30 2016 |
December 31 2015 |
||||||
EUR |
14,186 | 14,834 | ||||||
USD |
5,178 | 5,149 | ||||||
SEK |
4,952 | 4,879 | ||||||
|
|
|
|
|||||
Total |
24,316 | 24,862 |
Unused credits: |
June 30 2016 |
December 31 2015 |
||||||
Unused unconfirmed credits |
700 | 700 | ||||||
Unused confirmed credits |
4,341 | 5,227 |
Note 16 Other non-current liabilities
SEK million |
June 30 2016 |
December 31 2015 |
||||||
Unconditional deferred payment |
| 2,458 | ||||||
Other non-current liabilities |
13 | 16 | ||||||
|
|
|
|
|||||
Total |
13 | 2,474 |
20
Note 17 Other current liabilities
SEK million |
June 30 2016 |
December 31 2015 |
||||||
Unconditional deferred payment |
2,553 | | ||||||
Other liabilities |
274 | 240 | ||||||
|
|
|
|
|||||
Total |
2,827 | 240 |
The purchase price for Rottapharm includes an unconditional deferred payment of EUR 275 million which carries no interest and matures in January 2017. This is measured at fair value by discounting to present value using an interest rate of 2.6%. Interest cost for 2016, which is recognized under financial expenses, amounts to SEK 32 million (32).
Note 18 Other provisions
SEK million |
Returns | Personnel | Restructuring | Legal disputes |
Other | Total | ||||||||||||||||||
On January 1, 2016 |
597 | 178 | 254 | 254 | 62 | 1,345 | ||||||||||||||||||
Additional provisions |
241 | 19 | 2 | 1 | 16 | 279 | ||||||||||||||||||
Utilized during the year |
159 | 9 | 102 | 7 | 8 | 285 | ||||||||||||||||||
Reversed unused amounts |
75 | 2 | 9 | | | 86 | ||||||||||||||||||
Translation difference |
6 | 2 | 2 | 2 | 5 | 17 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
On June 30, 2016 |
610 | 188 | 147 | 250 | 75 | 1,270 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
SEK million |
June 30, 2016 |
|||
Non-current provisions |
334 | |||
Current provisions |
936 | |||
|
|
|||
Total |
1,270 | |||
|
|
Expected outflow date, SEK million |
Non-current provisions |
|||
In 2-3 years |
187 | |||
In 4-5 years |
62 | |||
After 5 years |
85 | |||
|
|
|||
Total |
334 | |||
|
|
SEK million |
Returns | Personnel | Restructuring | Legal disputes |
Other | Total | ||||||||||||||||||
On January 1, 2015 |
513 | 141 | 620 | 73 | 148 | 1,495 | ||||||||||||||||||
Additional provisions |
488 | 76 | 273 | 213 | 30 | 1,080 | ||||||||||||||||||
Utilized during the year |
300 | 35 | 561 | 30 | 37 | 963 | ||||||||||||||||||
Reversed unused amounts |
141 | 12 | 72 | 2 | 73 | 300 | ||||||||||||||||||
Translation difference |
37 | 8 | 6 | 0 | 6 | 33 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
On December 31, 2015 |
597 | 178 | 254 | 254 | 62 | 1,345 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
SEK million |
December 31, 2015 |
|||
Non-current provisions |
337 | |||
Current provisions |
1008 | |||
|
|
|||
Total |
1345 | |||
|
|
Expected outflow date, SEK million |
Non-current provisions |
|||
In 2-3 years |
118 | |||
In 4-5 years |
62 | |||
After 5 years |
157 | |||
|
|
|||
Total |
337 | |||
|
|
21
Provisions for return
The provision for returns mainly comprises reserves for products that Meda is obliged to buy back from the Customer a short time before or after their expiry date.
Provision for personnel
SEK 92 million compared to SEK 94 million at year-end 2015 of provisions for personnel relates to health benefits in the US after terminated employment which are unfunded. Accounting method, assumptions and number of evaluation points are similar to those used for defined benefit pension plans. The plans are closed and no actively employed are covered by the plan. Benefits paid during the first half of 2016 from the plans amounted to SEK 2 million. Weighted average maturity for the plans amount to 9 years. The principal actuarial assumptions are the discount rate and long-term Increase in the cost of health care which as of 2016-06-30 amounted to 4.25% and 4.0%.
Other personnel related provisions is mainly related to provisions for terminated contracts in Germany and Italy.
Provision for legal disputes
SEK 182 million of the provision refers to a provision for an ongoing legal dispute in the US related to the product Reglan, which is expected to be closed during the third quarter 2016. See Note 19 for more information. Individual assessment of ongoing disputes occurs continually.
Provision for restructuring
The provision for restructuring amounted to SEK 147 million compared to SEK 254 million at year-end 2015. All is related to Rottapharm and mainly expected to be paid during 2016.
Other provisions
Other provisions include, for example, excise duties, sales commissions and provisions for ongoing tax audits.
Note 19 Contingent liabilities
SEK million |
June 30 2016 |
December 31 2015 |
||||||
Commitments |
||||||||
Guarantees |
42 | 31 | ||||||
|
|
|
|
|||||
Total |
42 | 31 |
| In-licensing of the global rights to Edluar may lead to milestone payments totaling USD 60 million when defined sales targets are reached. |
| The acquisition of the European rights to the substance sotiromod may lead to milestone payments of USD 10 million when defined development stages are reached. |
| The agreement with Ethypharm for the rights to the ketoprofenomeprazole combination may lead to milestone payments of EUR 5 million upon registration and when defined sales targets are reached. |
| In-licensing of OraDisc A for the European market may lead to milestone payments of EUR 4.8 million. |
| The agreement with Cipla to expand the geographic territory for Dymista and the product development partnership may lead to milestone payments of USD 35 million when defined development stages are reached and upon the launch of new products. |
| The acquisition of ZpearPoint may lead to milestone payments of NOK 40 million when defined development stages and sales targets are reached for the product EB24. |
| The in-licensed rights to Betadine from Mundipharma will expire on December 31, 2017. With this counterparty, Meda has a binding option to acquire an eternal license for the rights to Betadine under certain conditions. The parties have entered into negotiations on future rights to the product. |
| The maximum additional purchase consideration for other product rights is around SEK 35 million. |
| In conjunction with the acquisition of Carter-Wallace in 2001, Meda Pharmaceuticals Inc. (previously MedPointe Inc.) took over certain environment- related obligations. In 1982, US Environmental Protection Agency (EPA) stated that Carter-Wallace, along with more than 200 other companies, were potentially responsible for waste placed at the Lone Pine Landfill waste disposal facility. In 1989 and 1991, without admitting responsibility, Carter-Wallace and 122 other companies entered into an agreement with the EPA to decontaminate Lone Pine. The process is ongoing. The provision for decontamination costs amounted to USD 2.0 million as of June 30, 2016. |
22
| In conjunction with the purchase of Alaven Pharmaceuticals in 2010, Meda Pharmaceuticals Inc. assumed responsibility for ongoing US product liability cases involving the product Reglan (metoclopramide). Presently, there are slightly less than 3,300 cases in which the company is named as one of multiple defendants, with most of the cases in Philadelphia, San Francisco and New Brunswick. In general, the cases involve plaintiffs that took Reglan for long periods of time to control gastric stasis and gastroesophageal reflux and developed the side effect tardive dyskinesia, which is characterized by repetitive, involuntary muscle movements, generally of the face and extremities. Even though the Reglan labeling since 1986 has warned against the side effect if the product was taken for more than 12 weeks, the plaintiffs allege that the warning was not prominent enough. While Meda believes it has meritorious defenses to these claims, in order to avoid the expense and distraction of litigation, Meda has entered into a confidential settlement agreement which establishes a framework to resolve all of the claims. Meda recognized a provision of USD 25 million in the third quarter 2015 whereof USD 2.5 million was paid in the fourth quarter 2015. The settlement is subject to sufficient participation by the plaintiffs as determined in Medas sole discretion. |
| From time to time Meda is involved in legal disputes that are common in the pharmaceutical industry. Although it is not possible to issue any guarantees about the outcome of these disputes, on the basis of Group managements present and fundamental judgment, we do not anticipate that they will have any materially negative impact on our financial position. This standpoint may naturally change over time. |
Note 20 Cash flow
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||
SEK million |
2016 | 2015 | 2016 | 2015 | ||||||||||||
Operating activities: |
||||||||||||||||
Depreciation of property, plant and equipment |
40 | 60 | 95 | 119 | ||||||||||||
Amortization of intangible assets |
744 | 756 | 1,475 | 1,507 | ||||||||||||
Bank charges1) |
14 | 89 | 29 | 85 | ||||||||||||
Other |
72 | 98 | 74 | 73 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
870 | 629 | 1,673 | 1,638 | ||||||||||||
|
|
|
|
|
|
|
|
1) Bank charges taken to income during the year
Note 21 Transactions with related parties
Fidim S.r.l. owns 33,016,286 shares in Meda AB, corresponding to 9.0% of the total number of shares. Fidim S.r.l. received 30,000,000 MEDA shares as part of the purchase price for Medas acquisition of Rottapharm. Luca Rovati is a board member of Meda since November 2014 and partner in Fidim S.r.l.
To Meda related parties: |
||||||
Fidim S.r.l. |
Board member Luca Rovati holds shares in Fidim Srl | |||||
RRL Immobiliare SpA |
Fidim Srl owns RRL Immobiliare SpA. Luca Rovati is a board member of RRL Immobiliare SpA | |||||
Rottapharm Biotech S.r.l. |
Fidim Srl owns Rottapharm Biotech Srl | |||||
DemiMonde S.r.l. |
Demi-Monde Srl is owned by related party to board member Luca Rovati | |||||
Day Spa S.r.l. |
Day Spa Srl is owned by related party to board member Luca Rovati | |||||
Johan & Levi S.r.l. |
Johan & Levi Srl is owned by related party to board member Luca Rovati |
23
Transactions with related parties: |
||||||||||
Sales of goods and services and other sales, six months, SEK million |
|
|||||||||
No sales transactions between related parties took place during the period. |
|
|||||||||
Purchases of goods and services, six months, SEK million |
|
|||||||||
RRL Immobiliare SpA |
10 | Refers to rental of office- and factory space | ||||||||
Rottapharm Biotech S.r.l. |
1 | |
Refers to purchase of research and development services | |||||||
Balances as per June 30, 2016, SEK million | ||||||||||
Receivable | Liability | |||||||||
Fidim S.r.l. |
12 | 1) | 2,553 | 2) | ||||||
RRL Immobiliare SpA |
0 | 1 | ||||||||
Rottapharm Biotech S.r.l. |
| 0 | ||||||||
Other related parties |
0 | 123 | 3)4) |
1) Refers to tax related expenses which have been re-charged to Fidim S.r.l.
2) Refer to Note 17
3) Refer to Note 5
4) SEK 84 million refers to accruals for bonuses including social security contributions related to the CEO and EVPs due the potential Mylan takeover.
All transactions between related parties are based on market conditions and negotiations have taken place on an arms length basis.
24
Exhibit 99.3
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On February 10, 2016, Mylan N.V. (Mylan, or the Company) issued an offer announcement under the Nasdaq Stockholms Takeover Rules and the Swedish Takeover Act (collectively, the Swedish Takeover Rules) setting forth a public offer to the shareholders of Meda AB (publ.) (Meda) to acquire all of the outstanding shares of Meda (the Offer). On August 2, 2016, the Company announced that the Offer was accepted by Meda shareholders holding an aggregate of approximately 343 million shares, representing approximately 94% of the total number of outstanding Meda shares, and declared the Offer unconditional. On August 5, 2016, settlement occurred with respect to the Meda shares duly tendered by July 29, 2016.
The following unaudited pro forma financial information gives effect to the acquisition of the non-U.S. developed markets specialty and branded generics business of Abbott Laboratories (the EPD Business) and the acquisition of Meda.
For purposes of preparing the unaudited pro forma condensed combined balance sheet as of June 30, 2016, Mylan has utilized the following information:
| The unaudited Mylan condensed consolidated balance sheet as of June 30, 2016; |
| The unaudited Meda consolidated balance sheet as of June 30, 2016, converted to accounting principles generally accepted in the United States of America (U.S. GAAP) and U.S. Dollars and conformed to Mylans presentation; and |
| Pro forma adjustments to reflect the acquisition of Meda as if it had occurred on June 30, 2016. |
For purposes of preparing the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2016, Mylan has utilized the following information:
| The unaudited Mylan condensed consolidated statement of operations for the six months ended June 30, 2016; |
| The unaudited Meda consolidated income statement for the six months ended June 30, 2016, converted to U.S. GAAP and U.S. Dollars and conformed to Mylans presentation; |
| Pro forma adjustments to reflect the acquisition of Meda as if it had occurred on January 1, 2015; and |
| Financing related adjustments to reflect the acquisition of Meda as if it had occurred on January 1, 2015. |
For purposes of preparing the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015, Mylan has utilized the following information:
| The audited Mylan consolidated statement of operations for the year ended December 31, 2015; |
| The audited Meda consolidated income statement for the year ended December 31, 2015, converted to U.S. GAAP and U.S. Dollars and conformed to Mylans presentation; |
| The unaudited EPD Business combined results of operations for the period from January 1, 2015 to February 27, 2015, the acquisition date of the EPD Business; |
| Pro forma adjustments to reflect the acquisition of the EPD Business as if it had occurred on January 1, 2015; |
| Pro forma adjustments to reflect the acquisition of Meda as if it had occurred on January 1, 2015; and |
| Financing related adjustments to reflect the acquisition of Meda as if it had occurred on January 1, 2015. |
The consolidated financial statements of Mylan and the EPD Business are prepared in accordance with U.S. GAAP with all amounts stated in U.S. Dollars. The consolidated financial statements of Meda are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (the IASB) with all amounts presented in Swedish kronor. The unaudited pro forma financial information has been prepared in accordance with U.S. GAAP. The unaudited pro forma financial information gives effect to the acquisition of the EPD Business and the acquisition of Meda, both of which are accounted for under the acquisition method of accounting in accordance with the Accounting Standards Codification 805, Business Combinations (ASC 805). Under ASC 805, although other factors are also relevant, the acquirer is usually the combining entity whose owners as a group retain or receive the largest portion of the voting rights in the combined entity. As a result, Mylan is treated as the acquirer in both transactions.
The historical consolidated financial information has been adjusted to give effect to pro forma events that are directly attributable to the aforementioned transactions, factually supportable and, with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the results of Mylan after the acquisitions of the EPD Business and Meda (the Combined Company). The unaudited pro forma financial information should be read in conjunction with the accompanying notes to
1
the unaudited pro forma financial information. In addition, the unaudited pro forma financial information was based on and should be read in conjunction with the unaudited condensed consolidated financial statements of Mylan for the six months ended June 30, 2016 included in Mylans Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 and the consolidated financial statements of Mylan for the year ended December 31, 2015 included in Mylans Annual Report on Form 10-K for the year ended December 31, 2015; and the consolidated financial statements of Meda for the six months ended June 30, 2016 and the year ended December 31, 2015 included in this Current Report on Form 8-K/A as Exhibit 99.1 and Exhibit 99.2, respectively.
The acquisition method of accounting, including purchase price adjustments, is dependent upon certain valuations and other studies that are preliminary at this time. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the unaudited pro forma financial information.
The unaudited pro forma financial information is for illustrative purposes only. It does not purport to indicate the results that would have actually been attained had the acquisition of Meda or the acquisition of the EPD Business been completed on the assumed dates or for the periods presented, or which may be realized in the future. To produce the unaudited pro forma financial information, Mylan allocated the purchase price for Meda using its best estimates of fair value. These estimates are based on the most recently available information. To the extent there are significant changes to the Meda business, the assumptions and estimates herein could change significantly. The allocation of the purchase price is dependent upon certain valuation and other studies that are not yet final. Accordingly, the pro forma purchase price adjustments are preliminary and subject to further adjustments as additional information becomes available, and as additional analysis is performed. There can be no assurances that the final valuation will not result in material changes to the purchase price allocation. Furthermore, Mylan could have reorganization and restructuring expenses as well as potential operating synergies as a result of the combination of Mylan, Meda and the EPD Business. The unaudited pro forma financial information does not reflect these potential expenses and synergies.
2
Mylan N.V.
Unaudited Pro Forma Condensed Combined Balance Sheet
as of June 30, 2016
(in millions)
Historical | Historical | Pro Forma | Combined | |||||||||||||||||||||||||||||||||
Mylan | Meda | Meda | Mylan/Meda | |||||||||||||||||||||||||||||||||
USD U.S. GAAP |
SEK | SEK | SEK | USD | USD | USD | ||||||||||||||||||||||||||||||
IFRS | U.S. GAAP Adjustments |
Note | U.S. GAAP |
U.S. GAAP |
Pro Forma Adjustments |
Note | Pro Forma Combined |
|||||||||||||||||||||||||||||
I | II | III | IV=II+III | V | VI | VII=I+V+VI | ||||||||||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 6,361.9 | 842.0 | | 842.0 | $ | 99.5 | $ | (5,278.6 | ) | 3 | $ | 1,074.0 | |||||||||||||||||||||||
(108.8 | ) | 4c | ||||||||||||||||||||||||||||||||||
Accounts receivable, net |
2,917.4 | 5,291.0 | | 5,291.0 | 625.4 | | 3,542.8 | |||||||||||||||||||||||||||||
Inventories |
2,191.3 | 3,011.0 | | 3,011.0 | 355.9 | 104.1 | 4d | 2,651.3 | ||||||||||||||||||||||||||||
Prepaid expenses |
716.1 | 701.0 | 331.9 | 8b | 1,032.9 | 122.1 | | 838.2 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total current assets |
12,186.7 | 9,845.0 | 331.9 | 10,176.9 | 1,202.9 | (5,283.3 | ) | 8,106.3 | ||||||||||||||||||||||||||||
Property, plant and |
2,057.6 | 1,573.0 | | 1,573.0 | 185.9 | | 4e | 2,243.5 | ||||||||||||||||||||||||||||
Intangible assets, net |
7,716.5 | 20,750.0 | | 20,750.0 | 2,452.8 | 8,600.0 | 4f | 16,316.5 | ||||||||||||||||||||||||||||
(2,452.8 | ) | 4f | ||||||||||||||||||||||||||||||||||
Goodwill |
5,830.2 | 25,988.0 | | 25,988.0 | 3,072.0 | 2,613.2 | 4g | 8,443.4 | ||||||||||||||||||||||||||||
(3,072.0 | ) | 4g | ||||||||||||||||||||||||||||||||||
Deferred income tax benefit |
326.3 | 1,931.0 | (364.9 | ) | 8b | 1,566.1 | 185.1 | | 511.4 | |||||||||||||||||||||||||||
Other assets |
719.0 | 132.0 | | 132.0 | 15.6 | | 734.6 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total assets |
$ | 28,836.3 | 60,219.0 | (33.0 | ) | 60,186.0 | $ | 7,114.3 | $ | 405.1 | $ | 36,355.7 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||||||||||||||
Trade accounts payable |
$ | 1,017.6 | 1,510.0 | | 1,510.0 | $ | 178.5 | $ | | $ | 1,196.1 | |||||||||||||||||||||||||
Short-term borrowings |
55.9 | 775.0 | | 775.0 | 91.6 | | 147.5 | |||||||||||||||||||||||||||||
Income taxes payable |
121.4 | | | | | | 121.4 | |||||||||||||||||||||||||||||
Current portion of long-term debt |
654.7 | 586.0 | | 586.0 | 69.3 | | 724.0 | |||||||||||||||||||||||||||||
Other current liabilities |
1,925.0 | 6,533.0 | | 6,533.0 | 772.2 | 431.0 | 3 | 3,131.7 | ||||||||||||||||||||||||||||
3.5 | 4h | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total current liabilities |
3,774.6 | 9,404.0 | | 9,404.0 | 1,111.6 | 434.5 | 5,320.7 | |||||||||||||||||||||||||||||
Long-term debt |
12,772.8 | 22,955.0 | | 22,955.0 | 2,713.5 | 0.7 | 4i | 15,487.0 | ||||||||||||||||||||||||||||
Deferred income tax liability |
682.5 | 4,212.0 | | 4,212.0 | 497.9 | 1,250.1 | 4j | 2,430.5 | ||||||||||||||||||||||||||||
Other long-term obligations |
1,275.1 | 2,891.0 | | 2,891.0 | 341.7 | | 1,616.8 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total liabilities |
18,505.0 | 39,462.0 | | 39,462.0 | 4,664.7 | 1,685.3 | 24,855.0 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||||||||||
Ordinary shares |
5.7 | 365.0 | | 365.0 | 43.1 | 0.3 | 4a | 6.0 | ||||||||||||||||||||||||||||
(43.1 | ) | 4b | ||||||||||||||||||||||||||||||||||
Additional paid-in capital |
7,178.6 | 13,788.0 | | 13,788.0 | 1,629.8 | 1,281.4 | 4a | 8,460.0 | ||||||||||||||||||||||||||||
(1,629.8 | ) | 4b | ||||||||||||||||||||||||||||||||||
Retained earnings |
4,644.4 | 6,070.0 | (33.0 | ) | 8b | 6,037.0 | 713.6 | (108.8 | ) | 4c | 4,532.1 | |||||||||||||||||||||||||
(3.5 | ) | 4h | ||||||||||||||||||||||||||||||||||
(713.6 | ) | 4b | ||||||||||||||||||||||||||||||||||
Accumulated other |
(1,431.3 | ) | 537.0 | | 537.0 | 63.5 | (63.5 | ) | 4b | (1,431.3 | ) | |||||||||||||||||||||||||
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10,397.4 | 20,760.0 | (33.0 | ) | 20,727.0 | 2,450.0 | (1,280.6 | ) | 11,566.8 | ||||||||||||||||||||||||||||
Noncontrolling interest |
1.4 | (3.0 | ) | | (3.0 | ) | (0.4 | ) | 0.4 | 4b | 1.4 | |||||||||||||||||||||||||
Less: Treasury Stock |
67.5 | | | | | | 67.5 | |||||||||||||||||||||||||||||
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Total equity |
10,331.3 | 20,757.0 | (33.0 | ) | 20,724.0 | 2,449.6 | (1,280.2 | ) | 11,500.7 | |||||||||||||||||||||||||||
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Total liabilities and equity |
$ | 28,836.3 | 60,219.0 | (33.0 | ) | 60,186.0 | $ | 7,114.3 | $ | 405.1 | $ | 36,355.7 | ||||||||||||||||||||||||
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3
Mylan N.V.
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Six Months Ended June 30, 2016
(in millions, except per share amounts)
Historical | Historical | Pro Forma | Combined | |||||||||||||||||||||||||||||||||||||||
Mylan | Meda | Meda | Mylan/Meda | |||||||||||||||||||||||||||||||||||||||
USD | SEK | SEK | SEK | USD | USD | USD | USD | |||||||||||||||||||||||||||||||||||
U.S. GAAP |
IFRS | U.S. GAAP Adjustments |
Note | U.S. GAAP |
U.S. GAAP |
Pro Forma Adjustments |
Note | Financing Adjustments |
Note | Pro Forma Combined |
||||||||||||||||||||||||||||||||
I | II | III | IV=II+III | V | VI | VII | VIII=I+V+VI+VII | |||||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||||||||||||
Net sales |
$ | 4,716.0 | 9,149.0 | | 9,149.0 | $ | 1,098.0 | $ | (30.5 | ) | 6a | $ | | $ | 5,783.5 | |||||||||||||||||||||||||||
Other revenues |
36.0 | 181.0 | | 181.0 | 21.7 | | | 57.7 | ||||||||||||||||||||||||||||||||||
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Total revenues |
4,752.0 | 9,330.0 | | 9,330.0 | 1,119.7 | (30.5 | ) | | 5,841.2 | |||||||||||||||||||||||||||||||||
Cost of sales |
2,673.3 | 5,086.0 | | 5,086.0 | 610.4 | 39.5 | 6b | | 3,292.7 | |||||||||||||||||||||||||||||||||
(30.5 | ) | 6a | ||||||||||||||||||||||||||||||||||||||||
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Gross profit |
2,078.7 | 4,244.0 | | 4,244.0 | 509.3 | (39.5 | ) | | 2,548.5 | |||||||||||||||||||||||||||||||||
Operating expenses: |
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Research and development |
433.1 | 82.0 | | 82.0 | 9.8 | | | 442.9 | ||||||||||||||||||||||||||||||||||
Selling, general, and |
1,130.7 | 3,238.0 | (3.4 | ) | 8a | 3,234.6 | 388.2 | (36.1 | ) | 6d | | 1,482.8 | ||||||||||||||||||||||||||||||
Litigation settlements, net |
(1.6 | ) | 0.7 | | 0.7 | 0.1 | | | (1.5 | ) | ||||||||||||||||||||||||||||||||
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Total operating expenses |
1,562.2 | 3,320.7 | (3.4 | ) | 3,317.3 | 398.1 | (36.1 | ) | | 1,924.2 | ||||||||||||||||||||||||||||||||
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Earnings from operations |
516.5 | 923.3 | 3.4 | 926.7 | 111.2 | (3.4 | ) | | 624.3 | |||||||||||||||||||||||||||||||||
Interest expense |
160.6 | 425.0 | | 425.0 | 51.0 | | 6e | 125.8 | 7a | 325.3 | ||||||||||||||||||||||||||||||||
(12.1 | ) | 6d | ||||||||||||||||||||||||||||||||||||||||
Other expense, net |
133.8 | 18.0 | | 18.0 | 2.2 | (116.1 | ) | 6d | | 19.9 | ||||||||||||||||||||||||||||||||
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Earnings before income taxes |
222.1 | 480.3 | 3.4 | 8a | 483.7 | 58.0 | 124.8 | (125.8 | ) | 279.1 | ||||||||||||||||||||||||||||||||
Income tax provision (benefit) |
39.8 | (109.0 | ) | 33.7 | 8a, 8b | (75.3 | ) | (9.0 | ) | 25.0 | 6g | (25.2 | ) | 7b | 30.6 | |||||||||||||||||||||||||||
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Net earnings attributable to |
$ | 182.3 | 589.3 | (30.3 | ) | 559.0 | $ | 67.0 | $ | 99.8 | $ | (100.6 | ) | $ | 248.5 | |||||||||||||||||||||||||||
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Earnings per ordinary share |
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Basic |
$ | 0.37 | $ | 0.47 | ||||||||||||||||||||||||||||||||||||||
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Diluted |
$ | 0.36 | $ | 0.46 | ||||||||||||||||||||||||||||||||||||||
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Weighted average ordinary |
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Basic |
497.1 | 26.4 | 6h | 523.5 | ||||||||||||||||||||||||||||||||||||||
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Diluted |
509.6 | 26.4 | 6h | 536.0 | ||||||||||||||||||||||||||||||||||||||
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4
Mylan N.V.
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended December 31, 2015
(in millions, except per share amounts)
Historical | Pro Forma | Historical | Pro Forma | Combined | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Mylan | EPD Business Jan. 1, 2015- Feb. 27, 2015 |
EPD Business Pro Forma Adjustments |
Mylan Pro Forma for EPD Business |
Meda | Meda | Mylan/Meda | ||||||||||||||||||||||||||||||||||||||||||||||||||
USD | USD | USD | USD | SEK | SEK | SEK | USD | USD | USD | USD | ||||||||||||||||||||||||||||||||||||||||||||||
U.S. GAAP |
U.S. GAAP |
U.S. GAAP |
Note | U.S. GAAP |
IFRS | U.S. GAAP Adjustments |
Note | U.S. GAAP |
U.S. GAAP |
Pro Forma Adjustments |
Note | Financing Adjustments |
Note | Pro Forma Combined |
||||||||||||||||||||||||||||||||||||||||||
I | II | III | IV=I+II+III | V | VI | VII=V+VI | VIII | IX | X | XI=IV+VIII+IX+X | ||||||||||||||||||||||||||||||||||||||||||||||
Revenues: |
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Net sales |
$ | 9,362.6 | $ | 247.0 | $ | | $ | 9,609.6 | 18,888.0 | | 18,888.0 | $ | 2,239.8 | $ | (42.8 | ) | 6a | $ | | $ | 11,806.6 | |||||||||||||||||||||||||||||||||||
Other revenues |
66.7 | | | 66.7 | 478.0 | | 478.0 | 56.7 | | | 123.4 | |||||||||||||||||||||||||||||||||||||||||||||
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Total revenues |
9,429.3 | 247.0 | | 9,676.3 | 19,366.0 | | 19,366.0 | 2,296.5 | (42.8 | ) | | 11,930.0 | ||||||||||||||||||||||||||||||||||||||||||||
Cost of sales |
5,213.2 | 90.3 | 62.3 | 5a | 5,365.9 | 10,331.8 | | 10,331.8 | 1,225.2 | 69.9 | 6b | | 6,722.3 | |||||||||||||||||||||||||||||||||||||||||||
0.1 | 5c | 104.1 | 6c | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(42.8 | ) | 6a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Gross profit |
4,216.1 | 156.7 | (62.4 | ) | 4,310.4 | 9,034.2 | | 9,034.2 | 1,071.3 | (174.0 | ) | | 5,207.7 | |||||||||||||||||||||||||||||||||||||||||||
Operating expenses: |
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Research and |
671.9 | 15.6 | | 687.5 | 207.0 | | 207.0 | 24.5 | | | 712.0 | |||||||||||||||||||||||||||||||||||||||||||||
Selling, general, |
2,180.7 | 93.4 | (86.1 | ) | 5b | 2,188.1 | 6,019.5 | 5.1 | 8a | 6,024.6 | 714.4 | | | 2,902.5 | ||||||||||||||||||||||||||||||||||||||||||
0.1 | 5c | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Litigation |
(97.4 | ) | | | (97.4 | ) | 210.0 | | 210.0 | 24.9 | | | (72.5 | ) | ||||||||||||||||||||||||||||||||||||||||||
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Total |
2,755.2 | 109.0 | (86.0 | ) | 2,778.2 | 6,436.5 | 5.1 | 6,441.6 | 763.8 | | | 3,542.0 | ||||||||||||||||||||||||||||||||||||||||||||
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Earnings from operations |
1,460.9 | 47.7 | 23.6 | 1,532.2 | 2,597.7 | (5.1 | ) | 2,592.6 | 307.5 | (174.0 | ) | | 1,665.7 | |||||||||||||||||||||||||||||||||||||||||||
Interest expense |
339.4 | | | 339.4 | 1,067.0 | | 1,067.0 | 126.5 | | 6e | 252.0 | 7a | 721.1 | |||||||||||||||||||||||||||||||||||||||||||
3.2 | 6f | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other expense, net |
206.1 | | | 206.1 | 269.0 | | 269.0 | 31.9 | | | 238.0 | |||||||||||||||||||||||||||||||||||||||||||||
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Earnings before |
915.4 | 47.7 | 23.6 | 986.7 | 1,261.7 | (5.1 | ) | 8a | 1,256.6 | 149.1 | (177.2 | ) | (252.0 | ) | 706.6 | |||||||||||||||||||||||||||||||||||||||||
Income tax |
67.7 | 8.7 | 3.7 | 5d | 80.1 | 112.0 | 32.1 | 8a, 8b | 144.1 | 17.1 | (9.7 | ) | 6g | (50.4 | ) | 7b | 37.1 | |||||||||||||||||||||||||||||||||||||||
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Net earnings |
847.7 | 39.0 | 19.9 | 906.6 | 1,149.7 | (37.2 | ) | 1,112.5 | 132.0 | (167.5 | ) | (201.6 | ) | 669.5 | ||||||||||||||||||||||||||||||||||||||||||
Net earnings |
(0.1 | ) | | | (0.1 | ) | | | | | | | (0.1 | ) | ||||||||||||||||||||||||||||||||||||||||||
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Net earnings |
$ | 847.6 | $ | 39.0 | $ | 19.9 | $ | 906.5 | 1,149.7 | (37.2 | ) | 1,112.5 | $ | 132.0 | $ | (167.5 | ) | $ | (201.6 | ) | $ | 669.4 | ||||||||||||||||||||||||||||||||||
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Earnings per ordinary |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic |
$ | 1.80 | $ | 1.29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Diluted |
$ | 1.70 | $ | 1.23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Weighted average |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic |
472.2 | 18.3 | 5e | 490.5 | 26.4 | 6h | 516.9 | |||||||||||||||||||||||||||||||||||||||||||||||||
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Diluted |
497.4 | 18.3 | 5e | 515.7 | 26.4 | 6h | 542.1 | |||||||||||||||||||||||||||||||||||||||||||||||||
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5
Notes to Unaudited Pro Forma Financial Information
1. General
On February 10, 2016, Mylan issued an offer announcement under the Swedish Takeover Rules setting forth a public offer to the shareholders of Meda to acquire all of the outstanding shares of Meda, with an enterprise value, including the net debt of Meda, of approximately Swedish kronor (SEK or kr) 83.6 billion or $9.9 billion at the announcement date (based on a SEK/USD exchange rate of 8.4158 at the time of announcement (the Announcement Exchange Rate)). On August 2, 2016, the Company announced that the Offer was accepted by Meda shareholders holding an aggregate of approximately 343 million shares, representing approximately 94% of the total number of outstanding Meda shares, and declared the Offer unconditional. On August 5, 2016, settlement occurred with respect to the Meda shares duly tendered by July 29, 2016 and total consideration of approximately $6.6 billion was transferred, of which approximately $5.3 billion was paid in cash.
On February 27, 2015, Mylan completed the acquisition of the EPD Business from Abbott Laboratories in an all-stock transaction for total consideration of $6.3 billion. Also on February 27, 2015, Moon of PA Inc. merged with and into Mylan Inc., with Mylan Inc. surviving as a wholly owned indirect subsidiary of Mylan and each share of Mylan Inc. common stock issued and outstanding immediately prior to the effective date of the merger was canceled and automatically converted into, and became the right to receive, one Mylan ordinary share (a Mylan Share) (together with Mylans acquisition of the EPD Business, the EPD Transaction). On February 18, 2015, the Office of Chief Counsel of the Division of Corporation Finance of the SEC issued a no-action letter to Mylan Inc. and Mylan that included its views that the EPD Transaction constituted a succession for purposes of Rule 12g-3(a) under the Exchange Act.
The unaudited pro forma financial information gives effect to the acquisition of the EPD Business and the acquisition of Meda, both of which are accounted for under the acquisition method of accounting in accordance with ASC 805. Under ASC 805, although other factors are also relevant, the acquirer is usually the combining entity whose owners as a group retain or receive the largest portion of the voting rights in the combined entity. As a result, Mylan is treated as the acquirer in both transactions.
The historical financial information has been adjusted in the unaudited pro forma financial information to give effect to pro forma events that are: directly attributable to the acquisition of the EPD Business and the acquisition of Meda; factually supportable; and, with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the results of the Combined Company. As such, the impact from transaction-related expenses is not included in the unaudited pro forma condensed combined statements of operations. However, the impact of the remaining transaction costs are reflected in the unaudited pro forma condensed combined balance sheet as a decrease to cash and cash equivalents with a corresponding decrease to retained earnings. The unaudited pro forma financial information does not reflect any expected synergies, including potential cost savings, or the associated costs to achieve such synergies that could result from either transaction.
Assumptions and estimates underlying the pro forma adjustments are described in the following notes. The unaudited pro forma financial information has been prepared based on preliminary estimates for Meda, which are subject to change pending further review of the assets acquired and liabilities assumed and the final purchase price and the allocation thereof. Differences from the preliminary estimates could be material.
The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the actual results of operations or financial condition that would have been achieved had either transaction been consummated on the dates indicated above, or the future consolidated results of operations or financial condition of the Combined Company.
2. Basis of Presentation
The unaudited pro forma financial information should be read in conjunction with the unaudited condensed consolidated financial statements of Mylan for the six months ended June 30, 2016 included in Mylans Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 and the consolidated financial statements of Mylan for the year ended December 31, 2015 included in Mylans Annual Report on Form 10-K for the year ended December 31, 2015; and the consolidated financial statements of Meda for the six months ended June 30, 2016 and the year ended December 31, 2015 included in this Current Report on Form 8-K/A as Exhibit 99.1 and Exhibit 99.2, respectively.
The following discussion details the process used and assumptions, including those related to recent acquisitions, that Mylan has made in preparing the unaudited pro forma financial information.
The consolidated financial statements of Mylan and the EPD Business are prepared in accordance with U.S. GAAP with all amounts presented in U.S. Dollars (USD). The consolidated financial statements of Meda are prepared in accordance with IFRS as issued by the IASB with all amounts presented in SEK.
6
The unaudited pro forma financial information has been presented in USD, which is Mylans functional and reporting currency. Medas historical financial information is translated based on the exchanges rates as quoted by Bloomberg using the following rates:
| The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2016 was translated using the average exchange rate for the period of 8.3327 SEK per USD; |
| The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 was translated using the average exchange rate for 2015 of 8.4329 SEK per USD; |
| The unaudited pro forma condensed combined balance sheet was translated at the closing rate of 8.4597 SEK per USD on June 30, 2016. |
The unaudited pro forma financial information has been prepared using the acquisition method of accounting in accordance with ASC 805. For accounting purposes, Mylan has been treated as the acquirer in the acquisition of the EPD Business and the acquisition of Meda. Acquisition accounting for Meda is dependent upon certain valuations and other studies that have yet to progress to a stage where there is sufficient information for a definitive measurement. Accordingly, the Meda pro forma adjustments included herein are preliminary, have been presented solely for the purpose of providing the unaudited pro forma financial information and will be revised as additional information becomes available and as additional analysis is performed. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of judgment in determining the appropriate assumptions and estimates. Differences between preliminary estimates in the unaudited pro forma financial information and the final acquisition accounting may occur and could have a material impact on the unaudited pro forma financial information of the Combined Companys future consolidated results of operations and financial condition.
The acquisition of Meda has been accounted for using Mylans historical information and accounting policies and combining the assets and liabilities of Meda at their respective estimated fair values. The assets and liabilities of Meda have been measured based on various estimates using assumptions that Mylans management believes are reasonable and utilizing information currently available. To the extent there are significant changes to the Meda business, the assumptions and estimates herein could change significantly. The allocation of the purchase price is dependent upon certain valuation and other studies that have not been completed. Accordingly, the pro forma purchase price adjustments are preliminary and subject to further adjustments as additional information becomes available, and as additional analysis is performed. There can be no assurances that the final valuation will not result in material changes to the purchase price allocation.
Acquisition-related transaction costs, such as fees for investment bankers, advisory and valuation services, foreign currency derivatives, legal fees and fees associated with the bridge credit facility made available to Mylan under the Bridge Credit Agreement (as defined below in Note 7) (the Bridge Credit Facility) and other professional fees, are not included as a component of consideration transferred but are expensed as incurred. These costs are not presented in the unaudited pro forma condensed combined statements of operations because they will not have a continuing impact on the consolidated results of operations of the Combined Company.
In connection with the acquisition of Meda, total acquisition-related transaction costs incurred and expected to be incurred by Mylan are estimated to be approximately $219.8 million, which includes approximately $128 million for the estimated loss on foreign currency derivatives and approximately $45 million in fees related to the Bridge Credit Agreement. Total acquisition-related costs incurred and expected to be incurred by Meda are estimated to be approximately $53.3 million. During the six months ended June 30, 2016, transaction costs incurred by Mylan and Meda totaled approximately $146.8 million and $17.5 million, respectively. These costs are included in each respective historical results of operations and income statement and are eliminated in the unaudited pro forma condensed combined statement of operations adjustments.
In connection with the acquisition of the EPD Business, during the year ended December 31, 2015, transaction costs incurred by Mylan totaled $86.1 million. These costs are included in the consolidated results of operations and eliminated through adjustments to the unaudited pro forma condensed combined statement of operations. There will be no continuing impact of these transaction costs on the consolidated results of operations of the Combined Company, and, as such, these fees are not included in the unaudited pro forma condensed combined statements of operations.
Reclassifications and Euromed Adjustment
Certain reclassifications, as detailed below, were made to the consolidated financial statements of Meda to conform to Mylans financial statement presentation. Reclassification adjustments have been included in the reported balances noted in Medas historical financial statements, as follows:
| Consolidated balance sheet as of June 30, 2016, located in column II; |
| Consolidated income statement for the six months ended June 30, 2016, located in column II; and |
| Consolidated income statement for the year ended December 31, 2015, located in column V. |
7
(in millions, SEK) | ||||||
Presentation in Medas IFRS Financial Statements |
June 30, 2016 Amount |
Presentation in Unaudited Pro Forma Condensed Combined Balance Sheet | ||||
Current Assets |
||||||
Derivatives |
216 | Prepaid expenses and other current assets | ||||
Prepayments and accrued income |
274 | Prepaid expenses and other current assets | ||||
Tax assets |
211 | Prepaid expenses and other current assets | ||||
|
|
|||||
701 | Total prepaid expenses and other current assets | |||||
|
|
|||||
Other receivables |
314 | Accounts receivable, net | ||||
Non-current Assets |
||||||
Intangible Assets |
83 | Property, plant and equipment, net | ||||
Intangible Assets |
25,988 | Goodwill | ||||
Available-for-sale financial assets |
20 | Other assets | ||||
Other non-current receivables |
112 | Other assets | ||||
|
|
|||||
132 | Total other assets | |||||
|
|
|||||
Current Liabilities |
||||||
Accruals and deferred income |
1,751 | Other current liabilities | ||||
Derivatives |
359 | Other current liabilities | ||||
Other provisions |
936 | Other current liabilities | ||||
|
|
|||||
3,046 | Total other current liabilities | |||||
|
|
|||||
Borrowings |
775 | Short-term borrowings | ||||
Borrowings |
586 | Current portion of long-term debt and other long-term obligations | ||||
Non-current Liabilities |
||||||
Borrowings |
22,955 | Long-term debt | ||||
Pension obligations |
2,544 | Other long-term obligations | ||||
Other provisions |
334 | Other long-term obligations | ||||
|
|
|||||
2,878 | Total other long-term obligations | |||||
|
|
(in millions, SEK) | ||||||||||
Presentation in Medas IFRS Financial Statements |
Six Months Ended June 30, 2016 Amount |
Year Ended December 31, 2015 Amount |
Presentation in Unaudited Pro Forma Condensed Combined Statements of Operations | |||||||
Net sales |
181 | 478 | Other revenues | |||||||
Medicine and business development expenses |
1,462 | 3,040 | Cost of sales | |||||||
Medicine and business development expenses |
82 | 207 | Research and development | |||||||
Medicine and business development expenses |
511 | 629 | Selling, general, and administrative | |||||||
Finance costs |
30 | 57 | Selling, general, and administrative | |||||||
|
|
|
|
|||||||
541 | 686 | Total selling, general, and administrative | ||||||||
|
|
|
|
|||||||
Medicine and business development expenses |
0.7 | 210 | Litigation settlements, net | |||||||
Finance costs |
425 | 1,067 | Interest expense | |||||||
Other income |
| (22 | ) | Other expense (income), net | ||||||
Finance income |
(13 | ) | (37 | ) | Other expense (income), net | |||||
Finance costs |
2 | 328 | Other expense (income), net | |||||||
|
|
|
|
|||||||
(11 | ) | 269 | Total other expense (income), net | |||||||
|
|
|
|
Mylan is currently conducting a review of Medas accounting policies in an effort to determine if differences in accounting policies require adjustment or reclassification of Medas results of operations or reclassification of assets or liabilities to conform to Mylans accounting policies and classifications. Mylan may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the consolidated financial statements of the Combined Company. At this time, Mylan is not aware of any significant accounting policy changes. Refer to Note 8 for details regarding the IFRS to U.S. GAAP adjustments.
8
Disposition of Euromed
On December 29, 2015, Meda divested the Euromed manufacturing unit in Spain for approximately EUR 82 million. The following table represents the elimination of sales, cost of sales and operating expenses related to the divestment of Euromed.
(in millions, SEK) | As Reported December 31, 2015(1) |
Disposition of Euromed Adjustment |
Adjusted Amounts December 31, 2015(2) |
|||||||||
Net sales |
19,170.0 | 282.0 | 18,888.0 | |||||||||
Cost of sales |
10,565.0 | 233.2 | 10,331.8 | |||||||||
Selling, general, and administrative |
6,026.0 | 6.5 | 6,019.5 |
(1) | Includes reclassification adjustments to conform Medas historical consolidated income statement (located in column V) for the year ended December 31, 2015 to Mylans presentation. |
(2) | Euromed adjustments have been included in the reported balances noted in Medas historical consolidated income statement (located in column V) for the year ended December 31, 2015. |
3. Meda Purchase Price
Upon consummation of the acquisition of Meda, Meda shareholders who tendered their shares received a combination of cash and Mylan Shares. Each Meda shareholder received:
| in respect of 80 percent of the number of Meda shares tendered by such shareholder, 165kr in cash per Meda share; and |
| in respect of the remaining 20 percent of the number of Meda shares tendered by such shareholder, 0.386 Mylan Shares per Meda share because the volume-weighted average sale price per Mylan Share on the NASDAQ Global Select Stock Market for the 20 consecutive trading days ending on July 29, 2016 was $45.34, which was greater than $30.78 and less than $50.74. |
As of July 29, 2016, approximately 6 percent of Meda shareholders had not tendered their shares through the Offer. The non-tendered shares will be acquired through a compulsory acquisition proceeding, in accordance with the Swedish Companies Act (Sw. aktiebolagslagen (2005:551)), with advance title to such non-tendered shares expected to be acquired over the next six to twelve months. For purposes of the unaudited pro forma financial information, it is assumed that the non-tendered Meda shares will be acquired within six months of the closing date.
9
The cash consideration paid in respect of 80 percent of the number of Meda shares tendered by each Meda shareholder is fixed at 165kr per Meda share, converted to USD using the closing SEK/USD exchange rate on August 5, 2016 of 8.5668 (as quoted by Bloomberg).
Number of Meda shares outstanding (in millions) (a) |
365.5 | |||
Percentage of Meda shareholders tendered (b) |
94 | % | ||
|
|
|||
Number of Meda shares tendered (in millions) (c)=(a)*(b) |
342.6 | |||
Equity exchange ratio (d) |
0.386 | |||
Mylan equity consideration (e) |
20 | % | ||
|
|
|||
Number of Mylan Shares issued with the transaction (in millions) (f)=(c)*(d)*(e) |
26.4 | |||
|
|
|||
Multiplied by Mylan Share closing price on August 5, 2016 (g) |
$ | 48.46 | ||
|
|
|||
Fair value of shares transferred (in millions) (h)=(f)*(g) |
$ | 1,281.7 | ||
|
|
|||
Number of Meda shares tendered (c)=(a)*(b) |
342.6 | |||
Cash consideration per each Meda share acquired (in millions) (i) |
$ | 19.26 | ||
Mylan cash consideration (j) |
80 | % | ||
|
|
|||
Total cash consideration for shares tendered (in millions) (k)=(c)*(i)*(j) |
$ | 5,278.6 | ||
|
|
|||
Fair value of total consideration transferred (in millions) (l)=(h)+(k) |
$ | 6,560.3 | ||
|
|
|||
Number of non-tendered Meda shares to be acquired in the compulsory acquisition (in millions) (m)=(a)-(c) |
22.9 | |||
Estimated cash consideration per each Meda share to be acquired in the compulsory acquisition (n) |
$ | 18.83 | ||
|
|
|||
Fair value of non-tendered shares (in millions) (o)=(m)*(n) |
$ | 431.0 | ||
|
|
|||
Goodwill (in millions) |
$ | 2,613.2 | ||
|
|
In connection with the compulsory acquisition, it has been assumed that the fair value of the non-tendered shares would be approximately 161kr per share at settlement, which is the price per share that Mylan believes it is required to pay for the non-tendered Meda shares in the compulsory acquisition proceeding. This amount has been converted to USD using the closing SEK/USD exchange rate on August 5, 2016 of 8.5668 (as quoted by Bloomberg). The non-tendered shares will be purchased with all cash. For purposes of the unaudited pro forma financial information, it is assumed that the non-tendered Meda shares will be acquired within six months of the closing date and will accrue interest as required by the Swedish Companies Act (Sw. aktiebolagslagen (2005:551)), and therefore are considered to be a current liability on the Unaudited Pro Forma Condensed Combined Balance Sheet.
For each 1 SEK change in the final per share purchase price of the non-tendered shares in the compulsory acquisition proceeding, using the closing SEK/USD exchange rate on August 5, 2016 of 8.5668 (as quoted by Bloomberg), the fair value of the non-tendered shares could change by approximately $3 million.
4. Meda Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments
The unaudited pro forma financial information has been prepared using the unaudited consolidated financial statements of Meda for the six months ended June 30, 2016 and the related notes thereto included in this Current Report on Form 8-K/A, as well as assumptions made by Mylan. Adjustments included in the unaudited pro forma condensed combined balance sheet are represented by the following:
Note | Amount | |||||||
(in millions) | ||||||||
Purchase consideration |
||||||||
Fair value of total consideration transferred |
3 | $ | 6,560.3 | |||||
Recognized amounts of identifiable assets acquired and liabilities assumed |
||||||||
Book value of Medas net assets |
4b | 2,449.6 | ||||||
Elimination of Medas historical goodwill |
4g | (3,072.0 | ) | |||||
|
|
|||||||
Net liabilities to be assumed |
(622.4 | ) | ||||||
Preliminary estimate of fair value adjustment of net assets acquired |
||||||||
Inventories |
4d | 104.1 | ||||||
Intangible assets, net |
4f | 6,147.2 | ||||||
Fair value of long-term debt |
4i | (0.7 | ) | |||||
Deferred income tax liability |
4j | (1,250.1 | ) | |||||
|
|
|||||||
Fair value adjustment, net |
5,000.5 | |||||||
Fair value of non-tendered shares |
3 | (431.0 | ) | |||||
|
|
|||||||
Goodwill |
4g | $ | 2,613.2 | |||||
|
|
a. | Reflects the nominal value of 0.01 per Mylan Share related to approximately 26.4 million shares issued, the remaining share-based consideration was recorded as additional paid-in capital of the Unaudited Pro Forma Condensed Combined Balance Sheet. |
b. | Reflects the elimination of Medas shareholders equity as of June 30, 2016. |
10
c. | Reflects the recognition of approximately $273.1 million in total transaction costs incurred and expected to be incurred. Of that total, approximately $219.8 million of transaction costs are incurred and expected to be incurred by Mylan and approximately $53.3 million are incurred and expected to be incurred by Meda. Of these costs, approximately $146.8 million and $17.5 million was included in Mylan and Medas historical condensed consolidated statement of operations and consolidated income statement, respectively, for the six months ended June 30, 2016. The remaining $108.8 million is expected to be incurred in conjunction with the transaction. The remaining transaction costs have been recorded as a reduction to cash and retained earnings solely for the purposes of this presentation. There will be no continuing impact of these transaction costs on the consolidated results of operations of the Combined Company and, as such, these fees are not included in the unaudited pro forma condensed combined statements of operations. |
d. | Represents the estimated adjustment of approximately $104.1 million to step-up inventory to fair value. The estimated step-up in inventory is preliminary and is subject to change based upon the final determination of the fair values of finished goods and work-in-process inventories. Mylan will reflect the fair value adjustment of the inventory of Meda in cost of goods sold as the acquired inventory is sold, which for purposes of the unaudited pro forma condensed combined statements of operations is assumed to occur within the first year after closing. |
e. | The estimated fair value allocated to Medas historical property, plant and equipment in the unaudited pro forma condensed combined balance sheet as of June 30, 2016 is based upon a preliminary assumption that the estimated fair value approximates the net book value. Changes in the estimated fair values are expected based on valuation studies and other analyses which have not been performed to date. This estimate is preliminary and subject to change. Accordingly, for the purposes of the unaudited pro forma financial information, Mylan believes, to the best of its knowledge, that the current net book value of Medas property, plant and equipment represent the best estimate of fair value. |
Based on estimated useful lives averaging approximately 25 years for buildings, for each $50 million change in the total fair value adjustment there could be an annual change in depreciation expense of approximately $2.0 million.
Based on estimated useful lives averaging approximately 10 years for equipment, for each $30 million change in the total fair value adjustment there could be an annual change in depreciation expense of approximately $3.0 million.
f. | Reflects the net fair value adjustment for identifiable intangible assets of $6.1 billion. The fair value adjustment for identifiable intangible assets is preliminary and is determined based on the assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset. The preliminary fair value estimate could include assets that are not intended to be used, may be sold or are intended to be used in a manner other than their best use. The final fair value determination for identified intangible assets may differ materially from this preliminary determination. |
The fair value adjustment estimate of identifiable intangible assets is preliminary and is determined using the income approach, which is a valuation technique that calculates an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of the identifiable intangible asset valuations, from the perspective of a market participant, include the estimated net cash flows for each year (including net revenues, cost of sales, development costs, selling, administrative and marketing costs, and working capital), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each assets life cycle, competitive trends impacting the asset and each cash flow stream, and other factors. The underlying assumptions used to prepare the discounted cash flow analysis may change. For these and other reasons, actual results may vary significantly from estimated results.
g. | Reflects the elimination of the historical goodwill amount and the recognition of estimated goodwill related to the acquisition of Meda. Goodwill is calculated as the difference between the fair value of the consideration transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed and finalization of the purchase price allocation. The estimated goodwill calculation is preliminary and is subject to change based upon the final determination of the fair value of assets acquired and liabilities assumed and finalization of the purchase price. Goodwill is not amortized, but is assessed at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable based on managements assessment. |
h. | Represents change in control accruals related to certain Meda employees. |
i. | Reflects an adjustment to the fair value of Medas long-term debt. |
j. | Reflects the deferred income tax liability adjustment of $1.3 billion resulting from fair value adjustments for inventory, identifiable intangible assets and long-term debt acquired. This estimate was determined based on the excess book basis over the tax basis using a 20 percent weighted average statutory tax rate. The total effective tax rate of Mylan could be significantly different depending on the post-closing geographical mix of income and other factors. This estimate of deferred income tax liabilities is preliminary and is subject to change based upon Mylans final determination of the fair values of tangible and identifiable intangible assets acquired and liabilities assumed. |
11
5. EPD Business Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments
Adjustments included in the accompanying unaudited pro forma condensed combined statement of operations are represented by the following:
a. | Represents an increase in amortization expense associated with fair value adjustments to the carrying value of intangible assets for the year ended December 31, 2015. The increase in amortization expense is recorded as follows: |
Amortization | ||||||||||||
(in millions, except for useful lives) | Useful Lives | Fair Value | January 1, 2015 - February 27, 2015 |
|||||||||
Products rights and licenses |
13 years | $ | 4,523.0 | $ | 58.0 | |||||||
Contractual rights |
2-5 years | 320.0 | 18.8 | |||||||||
|
|
|
|
|||||||||
$ | 4,843.0 | $ | 76.8 | |||||||||
Less: Historical amortization expense of the EPD Business |
14.5 | |||||||||||
|
|
|||||||||||
Amortization expense adjustment |
$ | 62.3 | ||||||||||
|
|
b. | Represents the elimination of transaction costs included in the consolidated financial statements of Mylan. An adjustment totaling $86.1 million was reflected in the unaudited pro forma condensed combined statement of operations to eliminate transaction costs incurred by Mylan for the year ended December 31, 2015. There will be no continuing impact of these transaction costs on the consolidated results of operations of the Combined Company, and, as such, these costs are not included in the unaudited pro forma condensed combined statement of operations. |
c. | Represents an adjustment to depreciation expense associated with fair value adjustments to the property, plant and equipment for the year ended December 31, 2015. |
d. | The pro forma adjustments were tax effected using the applicable statutory tax rate in the jurisdiction to which the adjustments related. The tax rate of Mylan could be significantly different depending on the post-closing geographical mix of income and other factors. |
e. | Adjustment to increase Mylan Shares outstanding after the closing of the EPD Transaction. In connection with the closing of the EPD Transaction, subsidiaries of Abbott Laboratories received 110.0 million Mylan Shares as consideration for the transfer of the EPD Business and each issued and outstanding share of Mylan Inc. common stock was converted into the right to receive one Mylan Share. For the year ended December 31, 2015 there is an adjustment of 18.3 million shares. This represents the weighted average impact of the Mylan Shares issued to affect the EPD Transaction. A weighted average is used as the transaction closed on February 27, 2015. |
6. Meda Unaudited Pro Forma Condensed Combined Statements of Operations Adjustments
Adjustments included in the accompanying unaudited pro forma condensed combined statements of operations are represented by the following:
a. | Transactions between Mylan and Meda have been eliminated as if Mylan and Meda were consolidated affiliates for the periods presented. Net third party sales and cost of sales of $30.5 million and $42.8 million, for the six months ended June 30, 2016 and the year ended December 31, 2015, respectively, have been eliminated from the unaudited pro forma condensed combined statements of operations. |
12
b. | Represents an increase in amortization expense associated with fair value adjustments to the carrying value of intangible assets for the six months ended June 30, 2016 and the year ended December 31, 2015. The increase in amortization expense is recorded as follows: |
Amortization | ||||||||||||||||
(in millions, except for useful lives) | Useful Lives | Fair Value | Six Months Ended June 30, 2016 |
Year Ended December 31, 2015 |
||||||||||||
Product rights |
20 years | $ | 8,600.0 | $ | 215.0 | $ | 430.0 | |||||||||
Less: historical amortization expense of Meda |
175.5 | 360.1 | ||||||||||||||
|
|
|
|
|||||||||||||
$ | 39.5 | $ | 69.9 | |||||||||||||
|
|
|
|
c. | Represents an adjustment to cost of goods sold for the amortization expense related to the inventory fair value adjustment of approximately $104.1 million for the year ended December 31, 2015. |
d. | Represents the elimination of transaction costs included in the historical financial statements of Mylan and Meda. An adjustment of $164.3 million was reflected in the pro forma condensed combined statements of operations to eliminate transaction costs incurred by Mylan and Meda relating to the transaction for the six months ended June 30, 2016. Approximately $36.1 million of the total transaction costs were reflected in selling, general and administrative, approximately $12.1 million of the total transaction costs were reflected in interest expense and approximately $116.1 million of the total transaction costs were reflected in other expense, net. The transaction costs reflected in the other expense, net, line item included approximately $84.2 million of unrealized mark-to-market losses related to the Mylans SEK non-designated foreign currency contracts and the write off of approximately $30.2 million of financing fees related to the termination of the Bridge Credit Agreement. |
e. | Amortization of the fair value adjustment on the long-term debt assumed in connection with the acquisition of Meda was immaterial for the six months ended June 30, 2016 and the year ended December 31, 2015 using a three year amortization period. |
f. | To record interest expense paid related to the compulsory acquisition proceeding. Under the Swedish Companies Act (Sw. aktiebolagslagen (2005:551)), the non-tendered shareholders are entitled to receive interest in addition to the cash consideration for the shares equal to the Swedish reference rate plus 2 percent. For pro formas purposes, a 1.5 percent annual interest rate was assumed for a six month period of time. |
g. | Adjustment to tax effect the pro forma adjustments. A weighted average statutory tax rate of 20 percent was applied to the applicable pro forma adjustments. The total effective tax rate of Mylan after completion of the acquisition of Meda could be significantly different depending on the post-closing geographical mix of income and other factors. |
h. | Adjustment to increase Mylan Shares outstanding after completion of the acquisition of Meda. Under the terms of the Offer, Meda shareholders that tendered received a combination of cash and Mylan Shares. Refer to Note 3 for the computation of Mylan Shares issued in connection with the acquisition of Meda. |
7. Financing Adjustments
Upon settlement of the Offer on August 5, 2016, Meda became a controlled subsidiary of Mylan. As described in Mylans Registration Statement on Form S-4 (File No. 333-210696) declared effective on June 16, 2016, Meda is party to certain debt obligations, all of which remained outstanding following the settlement of the Offer. As of June 30, 2016, approximately SEK 28.35 billion aggregate principal amount of Medas outstanding debt obligations and committed bank facilities contained change of control provisions that were triggered upon settlement of the Offer. On August 30, 2016, Meda entered into an amendment to its Facilities Agreement with the agent (Danske Bank A/S), which, among other things, waived any put rights arising thereunder in connection with the acquisition of Meda. Mylan anticipates that it will have sufficient liquidity to repurchase, repay or refinance any remaining debt obligations to the extent required.
a. | In connection with the Offer, on February 10, 2016, Mylan entered into the bridge credit agreement, among Mylan, as borrower, Mylan Inc., as guarantor, Deutsche Bank AG Cayman Islands Branch, as administrative agent and a lender, Goldman Sachs Bank USA, as a lender, Goldman Sachs Lending Partners LLC, as a lender, and other lenders party thereto from time to time (the Bridge Credit Agreement). |
Mylan incurred approximately $45.2 million in financing related fees in conjunction with the Bridge Credit Facility.
On June 9, 2016, Mylan completed a private placement of $6.5 billion aggregate principal amount of senior notes, comprised of $1.0 billion aggregate principal amount of 2.50 percent senior notes due 2019 at an issue price of 99.888 percent, $2.25 billion aggregate principal amount of 3.15 percent senior notes due 2021 at an issue price of 99.884 percent, $2.25 billion aggregate principal amount of 3.95 percent senior notes due 2026 at an issue price of 99.231 percent and $1.0 billion aggregate principal
13
amount of 5.25 percent senior notes due 2046 at an issue price of 99.984 percent (the June 2016 Senior Notes). The net proceeds from the offering of the June 2016 Senior Notes were used or will be used to (1) finance the cash portion of the consideration for the Offer and the compulsory acquisition, (2) repay, prepay, redeem or otherwise refinance the indebtedness of Mylan or any of its subsidiaries (including that of Meda and its subsidiaries) (the Refinancing) and (3) pay the costs associated with the Offer and the Refinancing, including non-periodic fees, costs and expenses, stamp registration and other taxes. On June 9, 2016, in accordance with the terms of the Bridge Credit Agreement, the commitments under the Bridge Credit Agreement were permanently terminated in their entirety in connection with the completion of the offering of the June 2016 Senior Notes.
The net proceeds from the offering of the June 2016 Senior Notes were approximately $6.4 billion. Mylan may elect to enter into interest rate swaps to convert some or all of the June 2016 Senior Notes to a variable rate; however, the adjustment to interest expense in the unaudited pro forma condensed combined statements of operations reflects the assumption of the fixed coupon rates of interest combined with the amortization of discounts and deferred financing fees for the periods presented.
Mylan incurred approximately $45.0 million in financing related fees and discounts of approximately $21.2 million in conjunction with the June 2016 Senior Notes.
b. | A weighted average statutory tax rate of 20 percent was applied to the applicable pro forma adjustments. The total effective tax rate of Mylan after completion of the acquisition of Meda could be significantly different depending on the post-closing geographical mix of income and other factors. |
8. IFRS to U.S. GAAP Adjustments
Medas consolidated financial statements were prepared in accordance with IFRS as issued by the IASB with all amounts presented in Swedish kronor, which differs in certain respects from U.S. GAAP. The following adjustments have been made to convert Medas historical balance sheet as of June 30, 2016 and income statement for the six months ended June 30, 2016 and the year ended December 31, 2015 to U.S. GAAP for purposes of the pro forma presentation.
a. | Actuarial gains and losses recognized in other comprehensive income under IFRS are recorded in profit and loss under U.S. GAAP. The adjustment is presented in the unaudited pro forma condensed combined statements of operations. A weighted average statutory tax rate of 20 percent was applied to this adjustment. The total effective tax rate of Mylan after completion of the acquisition of Meda could be significantly different depending on the post-closing geographical mix of income and other factors. |
b. | Represents differences regarding the tax effects of intercompany transfer of inventory under IFRS to conform to U.S. GAAP. Under IFRS taxes paid on intercompany transfers of inventory are recognized as tax expense as incurred. Additionally, IFRS requires the recognition of deferred taxes on temporary differences between the tax basis of assets transferred. Under U.S. GAAP taxes paid on intercompany transfers are deferred as a prepaid asset until the underlying asset is consumed or is sold to an unrelated party. |
9. Comparative Per Share Information
The following table sets forth selected historical share information of Mylan and unaudited pro forma share information of Mylan after giving effect to the acquisition of the EPD Business and the acquisition of Meda. You should read this information in conjunction with Mylans unaudited condensed consolidated financial statements of Mylan for the six months ended June 30, 2016 included in Mylans Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 and the consolidated financial statements of Mylan for the year ended December 31, 2015 included in Mylans Annual Report on Form 10-K for the year ended December 31, 2015; and the consolidated financial statements of Meda for the six months ended June 30, 2016 and the year ended December 31, 2015 included in this Current Report on Form 8-K/A as Exhibit 99.1 and Exhibit 99.2, respectively.
Six Months Ended June 30, 2016 |
Year Ended December 31, 2015 |
|||||||||||||||
(in millions, except per share amounts) | Historical | Pro Forma | Historical | Pro Forma | ||||||||||||
Earnings per ordinary share attributable to Mylan N.V. ordinary shareholders: |
||||||||||||||||
Basic |
$ | 0.37 | $ | 0.47 | $ | 1.80 | $ | 1.29 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
$ | 0.36 | $ | 0.46 | $ | 1.70 | $ | 1.23 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average ordinary shares outstanding: |
||||||||||||||||
Basic |
497.1 | 523.5 | 472.2 | 516.9 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
509.6 | 536.0 | 497.4 | 542.1 | ||||||||||||
|
|
|
|
|
|
|
|
14
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