MYL10Q_2015.03.31_Doc

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to___________                 

Commission File Number 333-199861
MYLAN N.V.
(Exact name of registrant as specified in its charter)
The Netherlands
 
98-1189497
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. Employer
Identification No.)
Albany Gate, Darkes Lane, Potters Bar, Herts EN6 1AG, United Kingdom
(Address of principal executive offices)
+44 (0) 1707-853-000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
þ
 
Accelerated filer
 
¨
 
 
 
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 1, 2015, there were 490,033,276 of the issuer’s €0.01 nominal value ordinary shares outstanding.

 


Table of Contents

MYLAN N.V. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the Quarterly Period Ended
March 31, 2015
 

  
 
Page
 
PART I — FINANCIAL INFORMATION
 
ITEM 1.
Condensed Consolidated Financial Statements (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
 
PART II — OTHER INFORMATION
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 6.
 
 
 
 

2

Table of Contents

PART I — FINANCIAL INFORMATION


MYLAN N.V. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Revenues:
 
 
 
Net sales
$
1,854.6

 
$
1,703.0

Other revenues
17.1

 
12.6

Total revenues
1,871.7

 
1,715.6

Cost of sales
1,041.6

 
977.8

Gross profit
830.1

 
737.8

Operating expenses:
 
 
 
Research and development
169.9

 
118.0

Selling, general and administrative
483.2

 
377.7

Litigation settlements, net
17.7

 
3.1

Total operating expenses
670.8

 
498.8

Earnings from operations
159.3

 
239.0

Interest expense
79.5

 
82.7

Other expense (income), net
18.5

 
4.6

Earnings before income taxes and noncontrolling interest
61.3

 
151.7

Income tax provision
4.7

 
35.1

Net earnings
56.6

 
116.6

Net earnings attributable to the noncontrolling interest

 
(0.7
)
Net earnings attributable to Mylan N.V. ordinary shareholders
$
56.6

 
$
115.9

Earnings per ordinary share attributable to Mylan N.V. ordinary shareholders:
 
 
 
Basic
$
0.14

 
$
0.31

Diluted
$
0.13

 
$
0.29

Weighted average ordinary shares outstanding:
 
 
 
Basic
418.0

 
372.3

Diluted
443.8

 
396.7

 
 
 
 











See Notes to Condensed Consolidated Financial Statements
3


Table of Contents

MYLAN N.V. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Earnings
(Unaudited; in millions)
 
Three Months Ended
 
March 31,
 
2015
 
2014
 
 
 
 
Net earnings
$
56.6

 
$
116.6

Other comprehensive (loss) earnings, before tax:
 
 
 
Foreign currency translation adjustment
(602.6
)
 
97.2

Change in unrecognized gain (loss) and prior service cost related to defined benefit plans
0.1

 
(1.5
)
Net unrecognized loss on derivatives
(34.5
)
 
(27.4
)
Net unrealized gain on marketable securities
0.1

 

Other comprehensive (loss) earnings, before tax
(636.9
)
 
68.3

Income tax benefit
(13.0
)
 
(12.4
)
Other comprehensive (loss) earnings, net of tax
(623.9
)
 
80.7

Comprehensive (loss) earnings
(567.3
)
 
197.3

Comprehensive earnings attributable to the noncontrolling interest

 
(0.7
)
Comprehensive (loss) earnings attributable to Mylan N.V. ordinary shareholders
$
(567.3
)
 
$
196.6

 
 
 
 




See Notes to Condensed Consolidated Financial Statements
4


Table of Contents

MYLAN N.V. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited; in millions, except share and per share amounts)
 
March 31,
2015
 
December 31,
2014
ASSETS
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
277.2

 
$
225.5

Accounts receivable, net
2,264.6

 
2,268.5

Inventories
1,908.3

 
1,651.4

Deferred income tax benefit
369.9

 
345.7

Prepaid expenses and other current assets
2,606.4

 
2,295.8

Total current assets
7,426.4

 
6,786.9

Property, plant and equipment, net
1,872.3

 
1,785.7

Intangible assets, net
6,770.6

 
2,347.1

Goodwill
5,115.8

 
4,049.3

Deferred income tax benefit
87.8

 
83.4

Other assets
850.9

 
834.2

Total assets
$
22,123.8

 
$
15,886.6

 
 
 
 
LIABILITIES AND EQUITY
Liabilities
 
 
 
Current liabilities:
 
 
 
Trade accounts payable
$
997.0

 
$
905.6

Short-term borrowings
169.2

 
330.7

Income taxes payable
63.9

 
160.7

Current portion of long-term debt and other long-term obligations
2,611.4

 
2,474.4

Deferred income tax liability
7.4

 
0.2

Other current liabilities
1,439.1

 
1,434.1

Total current liabilities
5,288.0

 
5,305.7

Long-term debt
5,750.4

 
5,732.8

Deferred income tax liability
613.8

 
235.4

Other long-term obligations
1,378.4

 
1,336.7

Total liabilities
13,030.6

 
12,610.6

Equity
 
 
 
Mylan N.V. shareholders’ equity
 
 
 
Ordinary shares (1) — nominal value €0.01 per ordinary share as of March 31, 2015 and par value $0.50 per share as of December 31, 2014
 
 
 
Shares authorized: 1,200,000,000 and 1,500,000,000 as of March 31, 2015 and December 31, 2014
 
 
 
Shares issued: 489,493,548 and 546,658,507 as of March 31, 2015 and December 31, 2014
5.5

 
273.3

Additional paid-in capital
7,007.6

 
4,212.8

Retained earnings
3,671.1

 
3,614.5

Accumulated other comprehensive loss
(1,610.9
)
 
(987.0
)
 
9,073.3

 
7,113.6

Noncontrolling interest
19.9

 
20.1

Less: Treasury stock — at cost

 
 
Shares: zero and 171,435,200 as of March 31, 2015 and December 31, 2014

 
3,857.7

Total equity
9,093.2

 
3,276.0

Total liabilities and equity
$
22,123.8

 
$
15,886.6

 
 
 
 
____________
(1) 
Common stock prior to February 27, 2015.

See Notes to Condensed Consolidated Financial Statements
5


Table of Contents

MYLAN N.V. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited; in millions)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net earnings
$
56.6

 
$
116.6

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
175.0

 
135.2

Share-based compensation expense
34.4

 
15.4

Change in estimated sales allowances
(92.1
)
 
131.1

Deferred income tax benefit (provision)
12.8

 
(8.4
)
Loss from equity method investments
24.7

 
22.7

Other non-cash items
46.3

 
50.0

Litigation settlements, net
17.7

 
3.1

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
469.0

 
49.1

Inventories
(136.7
)
 
(88.0
)
Trade accounts payable
(15.4
)
 
(32.7
)
Income taxes
(203.3
)
 
(33.5
)
Other operating assets and liabilities, net
(122.0
)
 
(92.5
)
Net cash provided by operating activities
267.0

 
268.1

Cash flows from investing activities:
 
 
 
Capital expenditures
(48.1
)
 
(72.3
)
Purchase of marketable securities
(40.1
)
 
(4.8
)
Proceeds from sale of marketable securities
12.2

 
4.9

Payments for product rights and other, net
(11.5
)
 
(129.0
)
Net cash used in investing activities
(87.5
)
 
(201.2
)
Cash flows from financing activities:
 
 
 
Payment of financing fees
(22.4
)
 
(2.3
)
Change in short-term borrowings, net
(161.6
)
 
(71.1
)
Proceeds from issuance of long-term debt
100.0

 
200.0

Payment of long-term debt
(100.0
)
 
(260.0
)
Proceeds from exercise of stock options
67.4

 
21.9

Taxes paid related to net share settlement of equity awards
(31.7
)
 
(21.8
)
Other items, net
39.3

 
18.7

Net cash used in financing activities
(109.0
)
 
(114.6
)
Effect on cash of changes in exchange rates
(18.8
)
 
(0.6
)
Net increase (decrease) in cash and cash equivalents
51.7

 
(48.3
)
Cash and cash equivalents — beginning of period
225.5

 
291.3

Cash and cash equivalents — end of period
$
277.2

 
$
243.0

Supplemental disclosures of cash flow information —
 
 
 
Non-cash transaction:
 
 
 
Ordinary shares issued for acquisition
$
6,305.8

 
$

 
 
 
 

See Notes to Condensed Consolidated Financial Statements
6


Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)


1.
General
As discussed in Note 4 of the Notes to the Condensed Consolidated Financial Statements, on February 27, 2015 (the “EPD Transaction Closing Date”), Mylan N.V. completed the transaction (the “EPD Transaction”) by which it acquired Mylan Inc. and Abbott Laboratories’ (“Abbott”) non-U.S. developed markets specialty and branded generics business (the “EPD Business”). Pursuant to the terms of the Amended and Restated Business Transfer Agreement and Plan of Merger, dated as of November 4, 2014, by and among Mylan Inc., New Moon B.V. (which converted into a public limited company (naamloze vennootschap) and was renamed Mylan N.V. on the EPD Transaction Closing Date), Moon of PA Inc., and Abbott (the “EPD Transaction Agreement”) on the Closing Date, Mylan N.V. acquired the EPD Business in consideration for Mylan N.V. ordinary shares, and Moon of PA Inc. merged with and into Mylan Inc., with Mylan Inc. surviving as a wholly owned indirect subsidiary of Mylan N.V. and each share of Mylan Inc. common stock issued and outstanding immediately prior to the effective date of the EPD Transaction was canceled and automatically converted into, and became the right to receive, one Mylan N.V. ordinary share. In connection with the EPD Transaction, Mylan Inc. and the EPD Business were reorganized under Mylan N.V., a new public company organized in the Netherlands. On February 18, 2015, the Office of Chief Counsel of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) issued a no-action letter to Mylan Inc. and Mylan N.V. that included its views that the EPD Transaction constituted a “succession” for purposes of Rule 12g-3(a) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and that Mylan N.V., as successor to Mylan Inc., is deemed a large accelerated filer for purposes of Exchange Act Rule 12b-2. As of March 2, 2015, Mylan N.V., and not Mylan Inc., traded on the NASDAQ Global Select Stock Market under the symbol “MYL”.
The accompanying unaudited Condensed Consolidated Financial Statements (“interim financial statements”) of Mylan N.V. and subsidiaries (“Mylan” or the “Company”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the SEC for reporting on Form 10-Q; therefore, as permitted under these rules, certain footnotes and other financial information included in audited financial statements were condensed or omitted. The interim financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the interim results of operations, comprehensive earnings, financial position and cash flows for the periods presented. For periods prior to the EPD Transaction, the Company’s consolidated financial statements presented the accounts of Mylan Inc.
These interim financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto in Mylan Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014. The December 31, 2014 Condensed Consolidated Balance Sheet was derived from audited financial statements.
The interim results of operations, comprehensive earnings and cash flows for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period. The Company computed its provision for income taxes using an estimated effective tax rate for the full year with consideration of certain discrete tax items which occurred within the interim period. 
2.
Revenue Recognition and Accounts Receivable
The Company recognizes net sales when title and risk of loss pass to its customers and when provisions for estimates, including discounts, sales allowances, price adjustments, returns, chargebacks and other promotional programs are reasonably determinable. Accounts receivable are presented net of allowances relating to these provisions. No revisions were made to the methodology used in determining these provisions during the three months ended March 31, 2015. Such allowances were $1.58 billion and $1.63 billion at March 31, 2015 and December 31, 2014, respectively. Other current liabilities include $514.1 million and $581.3 million at March 31, 2015 and December 31, 2014, respectively, for certain sales allowances and other adjustments that are paid to indirect customers.
Through its wholly owned subsidiary Mylan Pharmaceuticals Inc. (“MPI”), the Company has access to a $400 million accounts receivable securitization facility (the “Receivables Facility”). The receivables underlying any borrowings are included in accounts receivable, net, in the Condensed Consolidated Balance Sheets. There were $620.6 million and $1.07 billion of securitized accounts receivable at March 31, 2015 and December 31, 2014, respectively.

7

Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


3.
Recent Accounting Pronouncements
In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-02, Amendments to Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 revises the guidance with respect to the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The revised guidance modifies the evaluation of whether certain limited partnerships and similar entities are variable interest entities (“VIE”) or voting interest entities, impacts the consolidation analysis of VIEs, clarifies when fees paid to a decision maker should be factors to include in the consolidation of VIEs, amends the guidance for assessing how related party relationships affect VIE consolidation analysis and provides an exemption for certain registered money market funds. This guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015 and can be applied using a modified retrospective approach. The Company is currently assessing the impact of the adoption of this guidance on its financial condition, results of operations and cash flows.
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which revised accounting guidance on revenue recognition that will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principal of this guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. This guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years, and can be applied using a full retrospective or modified retrospective approach. The Company is currently assessing the impact of the adoption of this guidance on its financial condition, results of operations and cash flows.
4.
Acquisitions and Other Transactions
EPD Business
On July 13, 2014, Mylan N.V., Mylan Inc., and Moon of PA Inc. entered into a definitive agreement with Abbott to acquire the EPD Business in an all-stock transaction. On November 4, 2014, Mylan N.V., Mylan Inc., Moon of PA Inc. and Abbott entered into the EPD Transaction Agreement. The EPD Transaction closed on February 27, 2015, after receiving approval from Mylan Inc.’s shareholders on January 29, 2015. At closing, Abbott transferred the EPD Business to Mylan N.V. in exchange for 110 million ordinary shares of Mylan N.V. Immediately after the transfer of the EPD Business, Mylan Inc. merged with Moon of PA Inc., a wholly owned subsidiary of Mylan N.V., with Mylan Inc. becoming a wholly owned subsidiary of Mylan N.V. Mylan Inc.’s outstanding common stock was exchanged on a one to one basis for Mylan N.V. ordinary shares. As a result of the EPD Transaction, Mylan N.V.’s corporate seat is located in Amsterdam, the Netherlands, and its principal executive offices are located in Potters Bar, United Kingdom.

The EPD Business includes more than 100 specialty and branded generic pharmaceutical products in five major therapeutic areas and includes several patent protected, novel and/or hard-to-manufacture products. As a result of the acquisition, Mylan N.V. has significantly expanded and strengthened its product portfolio in Europe, Japan, Canada, Australia and New Zealand.

The purchase price for Mylan N.V. of the EPD Business, which was on a debt-free basis, was $6.31 billion based on the closing price of Mylan Inc.’s stock as of the EPD Transaction Closing Date, as reported by the NASDAQ Global Select Stock Market. At the EPD Transaction Closing Date, former shareholders of Mylan Inc. owned approximately 78% of Mylan N.V.’s ordinary shares and certain affiliates of Abbott (the “Abbott Shareholders”) owned approximately 22% of Mylan N.V.’s ordinary shares. On the EPD Transaction Closing Date, Mylan N.V., Abbott and Abbott Shareholders entered into a shareholder agreement (the “Shareholder Agreement”). Following an underwritten public offering of Abbott Shareholders of a portion of Mylan N.V.’s ordinary shares held by them, which offering closed on April 6, 2015, the Abbott Shareholders collectively owned approximately 14.2% of Mylan N.V.’s outstanding ordinary shares as of May 1, 2015.

In accordance with U.S. GAAP, Mylan N.V. used the purchase method of accounting to account for the EPD Transaction, with Mylan Inc. being treated as the accounting acquirer. Under the purchase method of accounting, the assets acquired and liabilities assumed in the EPD Transaction were recorded at their respective estimated fair values at the EPD

8

Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


Transaction Closing Date. The preliminary allocation of the $6.31 billion purchase price to the assets acquired and liabilities assumed for the EPD Business is as follows:

(In millions)
 
Accounts receivable
$
462.5

Inventories
196.3

Other current assets
70.1

Property, plant and equipment
140.8

Identified intangible assets
4,843.0

Goodwill
1,285.7

Other assets
15.5

Total assets acquired
7,013.9

Current liabilities
(269.0
)
Deferred tax liabilities
(382.1
)
Other non-current liabilities
(57.0
)
Net assets acquired
$
6,305.8


The identified intangible assets of $4.84 billion are comprised of $4.52 billion of product rights and licenses that have a weighted average useful life of 13 years and $320 million of contractual rights that have weighted average useful lives ranging from two to five years. The goodwill of $1.29 billion arising from the acquisition primarily relates to the expected synergies of the combined company and the value of the employee workforce. All of the goodwill was assigned to the Generics segment. The allocation of the goodwill to the individual reporting units within the Generics segment has not been completed. Goodwill of $766.9 million is currently expected to be deductible for income tax purposes. Acquisition related costs of approximately $62.1 million and $50.2 million were incurred during the three months ended March 31, 2015 and year ended December 31, 2014, respectively, which were recorded as a component of selling, general and administrative (“SG&A”) expense in the Condensed Consolidated Statements of Operations.

Significant assumptions utilized in the valuation of identified intangible assets were based on company specific information and projections which are not observable in the market and are thus considered Level 3 measurements as defined by U.S. GAAP. The preliminary fair value estimates for assets acquired and liabilities assumed were based upon preliminary calculations, valuations and assumptions that are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The primary areas of those preliminary estimates that are not yet finalized relate to post-employment benefits, the working capital adjustment and deferred income taxes.

The operating results of the EPD Business have been included in the Company’s Condensed Consolidated Statements of Operations since February 27, 2015. The revenues of the EPD Business for the period from the acquisition date to March 31, 2015 were $147.4 million and the net loss, net of tax, was $54.3 million. The net loss, net of tax, includes the effects of the purchase accounting adjustments and acquisition related costs.

Unaudited Pro Forma Financial Results

The following table presents supplemental unaudited pro forma information as if the acquisition of the EPD Business had occurred on January 1, 2014. The unaudited pro forma results reflect certain adjustments related to past operating performance and acquisition accounting adjustments, such as increased amortization expense based on the fair valuation of assets acquired, the impact of transaction costs and the related income tax effects. The unaudited pro forma results do not include any anticipated synergies which may be achievable subsequent to the EPD Transaction Closing Date. Accordingly, the unaudited pro forma results are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on January 1, 2014, nor are they indicative of the future operating results of Mylan N.V.


9

Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


 
Three Months Ended
 
March 31, 2015
(Unaudited, in millions, except per share amounts)
2015
 
2014
Total revenues
$
2,118.7

 
$
2,166.7

Net earnings (loss) attributable to Mylan N.V. ordinary shareholders
$
76.9

 
$
(83.6
)
Earnings (loss) per ordinary share attributable to Mylan N.V. ordinary shareholders:
 
 
 
Basic
$
0.16

 
$
(0.17
)
Diluted
$
0.15

 
$
(0.16
)
Weighted average ordinary shares outstanding:
 
 
 
Basic
491.3

 
482.3

Diluted
517.1

 
506.7


Other Transactions
On April 24, 2015, Mylan N.V. issued a Rule 2.5 announcement under the Irish Takeover Rules setting forth its legally-binding commitment to commence an offer for the entire issued and to be issued share capital of Perrigo Company plc (“Perrigo”) (the “Perrigo Proposal”). Under the terms of the offer, amended on April 29, 2015, Perrigo shareholders would receive $75 in cash and 2.3 Mylan N.V. ordinary shares for each Perrigo ordinary share. The offer is subject to certain conditions and other terms set forth in the formal Rule 2.5 announcement, including approval by Mylan N.V. ordinary shareholders. The offer is fully financed, cash confirmed and not conditional on due diligence. The making of the offer is pre-conditioned on one of the following having occurred: (i) the expiration or termination of all applicable waiting periods (including any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, of the United States and the rules and regulations thereunder (the “HSR Act”), (ii) a final decision to clear or approve the consummation of the acquisition of Perrigo contemplated by the offer under the HSR Act having been obtained, irrespective of the conditions attaching thereto, or (iii) September 13, 2015. The offer is subject to customary conditions for an offer governed by the Irish Takeover Rules.

Subsequent to March 31, 2015, the Company entered into agreements with multiple counterparties to acquire certain marketed pharmaceutical products for upfront payments totaling approximately $360 million. These transactions are expected to close during 2015. In addition, under the terms of one of the agreements, the Company may be required to make future sales and other contingent milestone payments.

On February 2, 2015, the Company signed a definitive agreement to acquire certain female health care businesses from Famy Care Limited, a specialty women’s health care company with global leadership in generic oral contraceptive products. The purchase price is $750 million in cash plus additional contingent payments of up to $50 million. The transaction is expected to close in the second half of 2015, subject to regulatory approvals and certain closing conditions.

On January 30, 2015, the Company entered into a development and commercialization collaboration with Theravance Biopharma, Inc. (“Theravance Biopharma”) for the development and, subject to U.S. Food and Drug Administration (“FDA”) approval, commercialization of TD-4208, a novel once-daily nebulized long-acting muscarinic antagonist for chronic obstructive pulmonary disease (“COPD”) and other respiratory diseases. Under the terms of the agreement, Mylan and Theravance Biopharma will co-develop nebulized TD-4208 for COPD and other respiratory diseases. Theravance Biopharma will lead the U.S. registrational development program and Mylan will be responsible for reimbursement of Theravance Biopharma's development costs for that program up until the approval of the first new drug application, after which costs will be shared. In addition, Mylan will be responsible for commercial manufacturing. In the U.S., Mylan will lead commercialization and Theravance Biopharma will retain the right to co-promote the product under a profit-sharing arrangement. In addition to funding the U.S. registrational development program, the Company made a $30 million investment in Theravance Biopharma during the first quarter of 2015, which was accounted for as an available-for-sale security. The Company has accrued $15 million in upfront development costs, which will be paid to Theravance Biopharma in the second quarter of 2015. Under the terms of the agreement, Theravance Biopharma is eligible to receive potential development and sales milestone payments totaling $220 million in the aggregate.


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Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


5.
Share-Based Incentive Plan
The Company’s shareholders have approved the 2003 Long-Term Incentive Plan (as amended, the “2003 Plan”). Under the 2003 Plan, 55,300,000 ordinary shares are reserved for issuance to key employees, consultants, independent contractors and non-employee directors of the Company through a variety of incentive awards, including: stock options, stock appreciation rights (“SAR”), restricted shares and units, performance awards (“PSU”), other stock-based awards and short-term cash awards. Stock option awards are granted at the fair value of the shares underlying the options at the date of the grant, generally become exercisable over periods ranging from three to four years, and generally expire in ten years. Upon approval of the 2003 Plan, no further grants of stock options have been made under any other previous plans.
The following table summarizes stock option and SAR (“stock awards”) activity:
 
Number of Shares
Under Stock Awards
 
Weighted
Average
Exercise Price
per Share
Outstanding at December 31, 2014
16,207,777

 
$
33.21

Granted
293,010

 
55.47

Exercised
(3,775,134
)
 
22.68

Forfeited
(52,916
)
 
48.29

Outstanding at March 31, 2015
12,672,737

 
$
36.80

Vested and expected to vest at March 31, 2015
12,314,675

 
$
36.56

Exercisable at March 31, 2015
6,007,826

 
$
21.71

As of March 31, 2015, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had average remaining contractual terms of 7.2 years, 7.2 years and 5.3 years, respectively. Also, at March 31, 2015, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had aggregate intrinsic values of $285.8 million, $280.6 million and $226.1 million, respectively.
During the first quarter of 2015, the Company recorded additional share-based compensation expense of approximately $15.2 million related to the accelerated vesting of equity awards as a result of the EPD Transaction.
A summary of the status of the Company’s nonvested restricted stock and restricted stock unit awards, including PSUs (together, “restricted stock awards”), as of March 31, 2015 and the changes during the three months ended March 31, 2015 are presented below:
 
Number of
Restricted
Stock Awards
 
Weighted  Average
Grant-Date
Fair Value per  Share
Nonvested at December 31, 2014
3,670,238

 
$
34.98

Granted
935,251

 
55.61

Released
(1,448,843
)
 
33.72

Forfeited
(34,603
)
 
29.08

Nonvested at March 31, 2015
3,122,043

 
$
41.78

As of March 31, 2015, the Company had $154.9 million of total unrecognized compensation expense, net of estimated forfeitures, related to all of its stock-based awards, which will be recognized over the remaining weighted average vesting period of 2.8 years. The total intrinsic value of stock-based awards exercised and restricted stock units converted during the three months ended March 31, 2015 and 2014 was $203.2 million and $96.3 million, respectively.


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MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


6.
Balance Sheet Components
Selected balance sheet components consist of the following:
(In millions)
March 31,
2015
 
December 31,
2014
Inventories:
 
 
 
Raw materials
$
598.7

 
$
549.5

Work in process
324.6

 
298.4

Finished goods
985.0

 
803.5

 
$
1,908.3

 
$
1,651.4

Property, plant and equipment:
 
 
 
Land and improvements
$
116.9

 
$
88.3

Buildings and improvements
880.0

 
826.4

Machinery and equipment
1,779.7

 
1,739.3

Construction in progress
285.6

 
301.8

 
3,062.2

 
2,955.8

Less accumulated depreciation
1,189.9

 
1,170.1

 
$
1,872.3

 
$
1,785.7

Other current liabilities:
 
 
 
Legal and professional accruals, including litigation accruals
$
109.7

 
$
81.8

Payroll and employee benefit plan accruals
221.9

 
282.6

Accrued sales allowances
514.1

 
581.3

Accrued interest
49.4

 
63.8

Fair value of financial instruments
105.7

 
52.2

Other
438.3

 
372.4

 
$
1,439.1

 
$
1,434.1


Contingent consideration included in other current liabilities totaled $20 million at March 31, 2015 and December 31, 2014. Contingent consideration included in other long-term obligations is $459.2 million and $450.0 million at March 31, 2015 and December 31, 2014, respectively. Included in prepaid expenses and other current assets is $130.9 million and $134.1 million of restricted cash at March 31, 2015 and December 31, 2014, respectively. An additional $100 million of restricted cash is classified in other long-term assets at March 31, 2015 and December 31, 2014, principally related to amounts deposited in escrow, or restricted amounts, for potential contingent consideration payments related to the Agila acquisition.
The Company’s equity method investments in clean energy investments, whose activities qualify for income tax credits under section 45 of the U.S. Internal Revenue Code, totaled $425.3 million and $437.5 million at March 31, 2015 and December 31, 2014, respectively, and are included in other assets in the Condensed Consolidated Balance Sheets. Liabilities related to these investments totaled $462.9 million and $472.7 million at March 31, 2015 and December 31, 2014, respectively. Of these liabilities, $401.4 million and $412.9 million are included in other long-term obligations in the Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014, respectively. The remaining $61.5 million and $59.8 million are included in other current liabilities in the Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014, respectively.
The Company holds a 50% ownership interest in Sagent Agila LLC (“Sagent Agila”), which is accounted for using the equity method of accounting. Sagent Agila was established to allow for the development, manufacturing and distribution of certain generic injectable products in the U.S. market. The equity method investment included in other assets in the Condensed Consolidated Balance Sheets totaled $105.8 million and $109.9 million at March 31, 2015 and December 31, 2014, respectively.

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MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


7.
Earnings per Ordinary Share Attributable to Mylan N.V.
Basic earnings per ordinary share is computed by dividing net earnings attributable to Mylan N.V. ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per ordinary share is computed by dividing net earnings attributable to Mylan N.V. ordinary shareholders by the weighted average number of ordinary shares outstanding during the period increased by the number of additional shares that would have been outstanding related to potentially dilutive securities or instruments, if the impact is dilutive.
On September 15, 2008, concurrent with the sale of $575 million aggregate principal amount of Cash Convertible Notes due 2015 (the “Cash Convertible Notes”), Mylan Inc. entered into convertible note hedge and warrant transactions with certain counterparties. In connection with the consummation of the EPD Transaction, the terms of convertible note hedge were adjusted so that the cash settlement value will be based on Mylan N.V. ordinary shares. The terms of the warrant transactions were also adjusted so that, from and after the consummation of the EPD Transaction, the Company may settle the obligations under the warrant transaction by delivering Mylan N.V. ordinary shares. Pursuant to the warrant transactions, and a subsequent amendment in 2011, there are approximately 43.2 million warrants outstanding, with approximately 41.0 million of the warrants having an exercise price of $30.00. The remaining warrants have an exercise price of $20.00. The warrants meet the definition of derivatives under the FASB’s guidance regarding accounting for derivative instruments and hedging activities; however, because these instruments have been determined to be indexed to the Company’s own ordinary shares and meet the criteria for equity classification under the FASB’s guidance regarding contracts in an entity’s own equity, the warrants have been recorded in shareholders’ equity in the Condensed Consolidated Balance Sheets. The dilutive impact of the warrants is included in the calculation of diluted earnings per ordinary share based upon the average market value of the Company’s ordinary shares during the period as compared to the exercise price. For the three months ended March 31, 2015 and 2014, 20.8 million and 16.9 million warrants, respectively, were included in the calculation of diluted earnings per ordinary share.
Basic and diluted earnings per ordinary share attributable to Mylan N.V. are calculated as follows:
 
Three Months Ended
 
March 31,
(In millions, except per share amounts)
2015
 
2014
Basic earnings attributable to Mylan N.V. ordinary shareholders (numerator):
 
 
 
Net earnings attributable to Mylan N.V. ordinary shareholders
$
56.6

 
$
115.9

Shares (denominator):
 
 
 
Weighted average ordinary shares outstanding
418.0

 
372.3

Basic earnings per ordinary share attributable to Mylan N.V. ordinary shareholders
$
0.14

 
$
0.31

Diluted earnings attributable to Mylan N.V. ordinary shareholders (numerator):
 
 
 
Net earnings attributable to Mylan N.V. ordinary shareholders
$
56.6

 
$
115.9

Shares (denominator):
 
 
 
Weighted average ordinary shares outstanding
418.0

 
372.3

Share-based awards and warrants
25.8

 
24.4

Total dilutive shares outstanding
443.8

 
396.7

Diluted earnings per ordinary share attributable to Mylan N.V. ordinary shareholders
$
0.13

 
$
0.29

Additional stock awards and restricted stock awards were outstanding during the periods ended March 31, 2015 and 2014, but were not included in the computation of diluted earnings per ordinary share for each respective period because the effect would be anti-dilutive. Such anti-dilutive awards represented 1.4 million and 2.5 million shares for the three months ended March 31, 2015 and 2014, respectively.

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MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


8.
Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the three months ended March 31, 2015 are as follows:
(In millions)
Generics
Segment
 
Specialty
Segment
 
Total
Balance at December 31, 2014:
 
 
 
 
 
Goodwill
$
3,700.2

 
$
734.1

 
$
4,434.3

Accumulated impairment losses

 
(385.0
)
 
(385.0
)
 
3,700.2

 
349.1

 
4,049.3

Acquisitions
1,285.7

 

 
1,285.7

Foreign currency translation
(219.2
)
 

 
(219.2
)
 
$
4,766.7

 
$
349.1

 
$
5,115.8

Balance at March 31, 2015:
 
 
 
 
 
Goodwill
$
4,766.7

 
$
734.1

 
$
5,500.8

Accumulated impairment losses

 
(385.0
)
 
(385.0
)
 
$
4,766.7

 
$
349.1

 
$
5,115.8


Intangible assets consist of the following components at March 31, 2015 and December 31, 2014:
(In millions)
Weighted
Average Life
(Years)
 
Original
Cost
 
Accumulated
Amortization
 
Net Book
Value
March 31, 2015
 
 
 
 
 
 
 
Amortized intangible assets:
 
 
 
 
 
 
 
Patents and technologies
20
 
$
116.6

 
$
100.3

 
$
16.3

Product rights and licenses
12
 
7,751.9

 
2,126.6

 
5,625.3

Other (1)
6
 
458.9

 
80.0

 
378.9

 
 
 
8,327.4

 
2,306.9

 
6,020.5

In-process research and development
 
 
750.1

 

 
750.1

 
 
 
$
9,077.5

 
$
2,306.9

 
$
6,770.6

December 31, 2014
 
 
 
 
 
 
 
Amortized intangible assets:
 
 
 
 
 
 
 
Patents and technologies
20
 
$
116.6

 
$
99.2

 
$
17.4

Product rights and licenses
10
 
3,617.0

 
2,127.8

 
1,489.2

Other (1)
8
 
162.2

 
70.6

 
91.6

 
 
 
3,895.8

 
2,297.6

 
1,598.2

In-process research and development
 
 
748.9

 

 
748.9

 
 
 
$
4,644.7

 
$
2,297.6

 
$
2,347.1

____________
(1) 
Other intangible assets consist principally of customer lists and contracts.
Amortization expense, which is classified primarily within cost of sales in the Condensed Consolidated Statements of Operations, for the three months ended March 31, 2015 and 2014, was $130.5 million and $92.6 million, respectively. Amortization expense, inclusive of the intangible assets acquired as a result of the acquisition of the EPD Business in the first quarter of 2015, is expected to be approximately $612 million for the remainder of 2015 and $721 million, $615 million, $562 million and $503 million for the years ended December 31, 2016 through 2019, respectively.
During the three months ended March 31, 2014, approximately $6.9 million was reclassified from acquired in-process research and development to product rights and licenses.

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Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


9.
Financial Instruments and Risk Management
The Company is exposed to certain financial risks relating to its ongoing business operations. The primary financial risks that are managed by using derivative instruments are foreign currency risk and interest rate risk.
Foreign Currency Risk Management
In order to manage foreign currency risk, the Company enters into foreign exchange forward contracts to mitigate risk associated with changes in spot exchange rates of mainly non-functional currency denominated assets or liabilities. The foreign exchange forward contracts are measured at fair value and reported as current assets or current liabilities on the Condensed Consolidated Balance Sheets. Any gains or losses on the foreign exchange forward contracts are recognized in earnings in the period incurred in the Condensed Consolidated Statements of Operations.
The Company has also entered into forward contracts to hedge forecasted foreign currency denominated sales from certain international subsidiaries. These contracts are designated as cash flow hedges to manage foreign currency transaction risk and are measured at fair value and reported as current assets or current liabilities on the Condensed Consolidated Balance Sheets. Any changes in fair value are included in earnings or deferred through accumulated other comprehensive earnings (“AOCE”), depending on the nature and effectiveness of the offset. Any ineffectiveness in a cash flow hedging relationship is recognized immediately in earnings in the Condensed Consolidated Statements of Operations.
Interest Rate Risk Management
The Company enters into interest rate swaps in order to manage interest rate risk associated with the Company’s fixed-rate and floating-rate debt. These derivative instruments are measured at fair value and reported as current assets or current liabilities in the Condensed Consolidated Balance Sheets.
The Company’s interest rate swaps designated as cash flow hedges fix the interest rate on a portion of the Company’s variable-rate debt or hedge part of the Company’s interest rate exposure associated with variability in future cash flows attributable to changes in interest rates. Any changes in fair value are included in earnings or deferred through AOCE, depending on the nature and effectiveness of the offset. Any ineffectiveness in a cash flow hedging relationship is recognized immediately in earnings in the Condensed Consolidated Statements of Operations.
The Company’s interest rate swaps designated as fair value hedges convert the fixed rate on a portion of the Company’s fixed-rate senior notes to a variable rate. These interest rate swaps designated as fair value hedges are measured at fair value and reported as current assets or current liabilities in the Condensed Consolidated Balance Sheets. Any changes in the fair value of these derivative instruments, as well as the offsetting change in fair value of the portion of the fixed-rate debt being hedged, is included in interest expense.
Certain derivative instrument contracts entered into by the Company are governed by Master Agreements, which contain credit-risk-related contingent features that would allow the counterparties to terminate the contracts early and request immediate payment should the Company trigger an event of default on other specified borrowings.
The Company maintains significant credit exposure arising from the convertible note hedge on its Cash Convertible Notes. In connection with the consummation of the EPD Transaction, Mylan Inc. and Mylan N.V. executed a supplemental indenture that amended the indenture governing the Cash Convertible Notes so that, among other things, all relevant determinations for purposes of the cash conversion rights to which holders may be entitled from time-to-time in accordance with such indenture shall be made by reference to Mylan N.V. ordinary shares. As adjusted in connection with the consummation of the EPD Transaction, holders may convert their Cash Convertible Notes subject to certain conversion provisions determined by a) the market price of Mylan N.V.’s ordinary shares, b) specified distributions to ordinary shareholders, c) a fundamental change, as defined in the indenture, or d) certain time periods specified in the indenture. The conversion feature can only be settled in cash and, therefore, it is bifurcated from the Cash Convertible Notes and treated as a separate derivative instrument. In order to offset the cash flow risk associated with the cash conversion feature, Mylan Inc. entered into a convertible note hedge with certain counterparties. In connection with the consummation of the EPD Transaction, the terms of the convertible note hedge were adjusted so that the cash settlement value will be based on Mylan N.V. ordinary shares. Both the cash conversion feature and the purchased convertible note hedge are measured at fair value with gains and losses recorded in the Company’s Condensed Consolidated Statements of Operations. Also, in conjunction with the issuance of the Cash Convertible Notes, Mylan Inc. entered into warrant transactions with certain counterparties. In connection with the

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MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


consummation of the EPD Transaction, the terms of the warrant transactions were adjusted so that the Company may settle the obligations under the warrant transactions by delivering Mylan N.V. ordinary shares. The warrants meet the definition of derivatives; however, because these instruments have been determined to be indexed to the Company’s own ordinary shares, and have been recorded in shareholders’ equity in the Company’s Condensed Consolidated Balance Sheets, the instruments are exempt from the scope of the FASB’s guidance regarding accounting for derivative instruments and hedging activities and are not subject to the fair value provisions set forth therein.
At March 31, 2015, the convertible note hedge had a total fair value of $1.98 billion, which reflects the maximum loss that would be incurred should the parties fail to perform according to the terms of the contract. The counterparties are highly rated diversified financial institutions with both commercial and investment banking operations. The counterparties are required to post collateral against this obligation should they be downgraded below thresholds specified in the contract. Eligible collateral is comprised of a wide range of financial securities with a valuation discount percentage reflecting the associated risk.
The Company regularly reviews the creditworthiness of its financial counterparties and does not expect to incur a significant loss from failure of any counterparties to perform under any agreements.
The Company records all derivative instruments on a gross basis in the Condensed Consolidated Balance Sheets. Accordingly, there are no offsetting amounts that net assets against liabilities. The asset and liability balances presented in the tables below reflect the gross amounts of derivatives recorded in the Company’s interim financial statements. Certain immaterial prior period amounts disclosed within the tables below have been revised in the current period presentation.
Fair Values of Derivative Instruments
Derivatives Designated as Hedging Instruments
 
Asset Derivatives
 
March 31, 2015
 
December 31, 2014
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Interest rate swaps
Prepaid expenses and other current assets
 
$
46.2

 
Prepaid expenses and other current assets
 
$
30.4

Foreign currency forward contracts
Prepaid expenses and other current assets
 
26.8

 
Prepaid expenses and other current assets
 
12.9

Total
 
 
$
73.0

 
 
 
$
43.3

 
 
Liability Derivatives
 
March 31, 2015
 
December 31, 2014
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Interest rate swaps
Other current liabilities
 
$
101.1

 
Other current liabilities
 
$
49.9

Total
 
 
$
101.1

 
 
 
$
49.9


Fair Values of Derivative Instruments
Derivatives Not Designated as Hedging Instruments
 
Asset Derivatives
 
March 31, 2015
 
December 31, 2014
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Foreign currency forward contracts
Prepaid expenses and other current assets
 
$
5.7

 
Prepaid expenses and other current assets
 
$
5.5

Purchased cash convertible note hedge
Prepaid expenses and other current assets
 
1,981.2

 
Prepaid expenses and other current assets
 
1,853.5

Total
 
 
$
1,986.9

 
 
 
$
1,859.0

 

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Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


 
Liability Derivatives
 
March 31, 2015
 
December 31, 2014
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Foreign currency forward contracts
Other current liabilities
 
$
4.6

 
Other current liabilities
 
$
2.3

Cash conversion feature of Cash Convertible Notes
Current portion of long-term debt and other long-term obligations
 
1,981.2

 
Current portion of long-term debt and long-term obligations
 
1,853.5

Total
 
 
$
1,985.8

 
 
 
$
1,855.8

 
The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations
Derivatives in Fair Value Hedging Relationships
 
Location of Gain or (Loss)
Recognized in Earnings
on Derivatives
 
Amount of Gain or (Loss)
Recognized in Earnings on
Derivatives
(In millions)
 
Three Months Ended
 
March 31,
 
2015
 
2014
Interest rate swaps
Interest expense
 
$
20.5

 
$
24.1

Total
 
 
$
20.5

 
$
24.1

 
 
Location of (Loss) or Gain
Recognized in Earnings
on Hedged Items
 
Amount of (Loss) or Gain
Recognized in Earnings on
Hedged Items
(In millions)
 
Three Months Ended
 
March 31,
 
2015
 
2014
2018 Senior Notes (6.000% coupon)
Interest expense
 
$

 
$
1.1

2023 Senior Notes (3.125% coupon)
Interest expense
 
(15.9
)
 
(16.5
)
Total
 
 
$
(15.9
)
 
$
(15.4
)


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Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations
Derivatives in Cash Flow Hedging Relationships
 
 
Amount of (Loss) or Gain
Recognized in AOCE
(Net of Tax) on Derivative
(Effective Portion)
 
 
Three Months Ended
 
 
March 31,
(In millions)
 
2015
 
2014
Foreign currency forward contracts
 
$
(0.8
)
 
$
11.6

Interest rate swaps
 
(32.4
)
 
(42.5
)
  Total
 
$
(33.2
)
 
$
(30.9
)
 
 
Location of Loss Reclassified
from AOCE into Earnings
(Effective Portion)
 
Amount of Loss
Reclassified from AOCE
into Earnings (Effective Portion)
 
 
Three Months Ended
 
 
March 31,
(In millions)
 
2015
 
2014
Foreign currency forward contracts
Net sales
 
$
(11.7
)
 
$
(15.3
)
Interest rate swaps
Interest expense
 
(0.2
)
 
(0.2
)
  Total
 
 
$
(11.9
)
 
$
(15.5
)
 
 
Location of Gain
Excluded from the
Assessment of
Hedge Effectiveness
 
Amount of Gain Excluded from the Assessment of Hedge Effectiveness
 
 
Three Months Ended
 
 
March 31,
(In millions)
 
2015
 
2014
Foreign currency forward contracts
Other expense (income), net
 
$
8.6

 
$
22.8

  Total
 
 
$
8.6

 
$
22.8

 
At March 31, 2015, the Company expects that approximately $16.8 million of pre-tax net losses on cash flow hedges will be reclassified from AOCE into earnings during the next twelve months.
The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations
Derivatives Not Designated as Hedging Instruments
 
Location of Gain
or (Loss) Recognized
 in Earnings on Derivatives
 
Amount of Gain or (Loss)
Recognized in
Earnings on Derivatives
 
 
Three Months Ended
 
 
March 31,
(In millions)
 
2015
 
2014
Foreign currency forward contracts
Other expense (income), net
 
$
0.1

 
$
4.6

Cash conversion feature of Cash Convertible Notes
Other expense (income), net
 
(127.7
)
 
(231.8
)
Purchased cash convertible note hedge
Other expense (income), net
 
127.7

 
231.8

  Total
 
 
$
0.1

 
$
4.6


18

Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


Fair Value Measurement
Fair value is based on the price that would be received from the sale of an identical asset or paid to transfer an identical liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy has been established that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considers counterparty credit risk in its assessment of fair value.

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Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


Financial assets and liabilities carried at fair value are classified in the tables below in one of the three categories described above:
 
 
March 31, 2015
(In millions)
Level 1
 
Level 2
 
Level 3
 
Total
Recurring fair value measurements
 
 
 
 
 
 
 
Financial Assets
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
83.9

 
$

 
$

 
$
83.9

Total cash equivalents
83.9

 

 

 
83.9

Trading securities:
 
 
 
 
 
 
 
Equity securities — exchange traded funds
21.0

 

 

 
21.0

Total trading securities
21.0

 

 

 
21.0

Available-for-sale fixed income investments:
 
 
 
 
 
 
 
U.S. Treasuries

 
8.2

 

 
8.2

Corporate bonds

 
15.4

 

 
15.4

Agency mortgage-backed securities

 
1.2

 

 
1.2

Asset backed securities

 
2.3

 

 
2.3

Other

 
1.2

 

 
1.2

Total available-for-sale fixed income investments

 
28.3

 

 
28.3

Available-for-sale equity securities:
 
 
 
 
 
 
 
Marketable securities
27.4

 

 

 
27.4

Total available-for-sale equity securities
27.4

 

 

 
27.4

Foreign exchange derivative assets

 
32.5




32.5

Interest rate swap derivative assets

 
46.2

 

 
46.2

Purchased cash convertible note hedge

 
1,981.2

 

 
1,981.2

Total assets at recurring fair value measurement
$
132.3


$
2,088.2


$


$
2,220.5

Financial Liabilities
 
 
 
 
 
 
 
Foreign exchange derivative liabilities
$

 
$
4.6

 
$

 
$
4.6

Interest rate swap derivative liabilities

 
101.1




101.1

Cash conversion feature of Cash Convertible Notes

 
1,981.2




1,981.2

Contingent consideration

 

 
479.2

 
479.2

Total liabilities at recurring fair value measurement
$

 
$
2,086.9

 
$
479.2

 
$
2,566.1



20

Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


 
December 31, 2014
(In millions)
Level 1
 
Level 2
 
Level 3
 
Total
Recurring fair value measurements
 
 
 
 
 
 
 
Financial Assets
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
122.2

 
$

 
$

 
$
122.2

Total cash equivalents
122.2

 

 

 
122.2

Trading securities:
 
 
 
 
 
 
 
Equity securities — exchange traded funds
20.2

 

 

 
20.2

Total trading securities
20.2

 

 

 
20.2

Available-for-sale fixed income investments:
 
 
 
 
 
 
 
U.S. Treasuries

 
0.6

 

 
0.6

Corporate bonds

 
12.0

 

 
12.0

Agency mortgage-backed securities

 
13.3

 

 
13.3

Other

 
2.2

 

 
2.2

Total available-for-sale fixed income investments

 
28.1

 

 
28.1

Available-for-sale equity securities:
 
 
 
 
 
 
 
Marketable securities
0.1

 

 

 
0.1

Total available-for-sale equity securities
0.1

 

 

 
0.1

Foreign exchange derivative assets

 
18.4

 

 
18.4

Interest rate swap derivative assets

 
30.4

 

 
30.4

Purchased cash convertible note hedge

 
1,853.5

 

 
1,853.5

Total assets at recurring fair value measurement
$
142.5

 
$
1,930.4

 
$

 
$
2,072.9

Financial Liabilities
 
 
 
 
 
 
 
Foreign exchange derivative liabilities
$

 
$
2.3

 
$

 
$
2.3

Interest rate swap derivative liabilities

 
49.9

 

 
49.9

Cash conversion feature of Cash Convertible Notes

 
1,853.5

 

 
1,853.5

Contingent consideration

 

 
470.0

 
470.0

Total liabilities at recurring fair value measurement
$

 
$
1,905.7

 
$
470.0

 
$
2,375.7


For financial assets and liabilities that utilize Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including the LIBOR yield curve, foreign exchange forward prices and bank price quotes. Below is a summary of valuation techniques for Level 1 and Level 2 financial assets and liabilities:
Cash equivalents — valued at observable net asset value prices.
Trading securities — valued at the active quoted market price from broker or dealer quotations or transparent pricing sources at the reporting date.
Available-for-sale fixed income investments — valued at the quoted market price from broker or dealer quotations or transparent pricing sources at the reporting date.
Available-for-sale equity securities — valued using quoted stock prices from the London Exchange at the reporting date and translated to U.S. Dollars at prevailing spot exchange rates.
Interest rate swap derivative assets and liabilities — valued using the LIBOR/EURIBOR yield curves at the reporting date. Counterparties to these contracts are highly rated financial institutions.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices at the reporting date. Counterparties to these contracts are highly rated financial institutions.
Cash conversion feature of cash convertible notes and purchased convertible note hedge — valued using quoted prices for the Company’s cash convertible notes, its implied volatility and the quoted yield on the Company’s other long-term debt at the reporting date. Counterparties to the purchased convertible note hedge are highly rated financial institutions.
The fair value measurement of contingent consideration is determined using Level 3 inputs. The Company’s contingent consideration represents a component of the total purchase consideration for the respiratory delivery platform, the Agila acquisition and certain other acquisitions. The measurement is calculated using unobservable inputs based on the Company’s own assumptions. For the respiratory delivery platform and certain other acquisitions, significant unobservable inputs in the valuation include the probability and timing of future development and commercial milestones and future profit sharing payments. A discounted cash flow method was used to value contingent consideration at March 31, 2015 and December 31, 2014, which was calculated as the present value of the estimated future net cash flows using a market rate of return. Discount rates ranging from 0.9% to 9.8% were utilized in the valuations. For the contingent consideration related to the Agila acquisition, significant unobservable inputs in the valuation include the probability of future payments to the seller of amounts withheld at the closing date. Significant changes in unobservable inputs could result in material changes to the contingent consideration liability. During the three months ended March 31, 2015 and 2014, accretion of $9.2 million and $8.4 million, respectively was recorded in interest expense in the Condensed Consolidated Statements of Operations.
Although the Company has not elected the fair value option for financial assets and liabilities, any future transacted financial asset or liability will be evaluated for the fair value election.
10.
Debt
Bridge Credit Facility
On April 24, 2015, the Company entered into a bridge credit agreement, which bridge credit agreement was amended on April 29, 2015 (the “Bridge Credit Agreement”) among Mylan, the lenders party thereto from time to time and Goldman Sachs Bank USA, as the administrative agent (in such capacity, the “Administrative Agent”), in connection with the Perrigo Proposal. The Bridge Credit Agreement provides for a bridge credit facility (the “Bridge Facility”) under which the Company may obtain loans up to an aggregate amount of approximately $12.5 billion, consisting of a Tranche A Loan (the “Tranche A Loan”) in an aggregate amount up to $11.0 billion, and a Tranche C Loan (the “Tranche C Loan”, and collectively, the “Loans”) in an aggregate amount up to approximately $1.5 billion. The proceeds of the Tranche A Loan and Tranche C Loan will be applied solely to (i) finance the acquisition of the ordinary shares of Perrigo pursuant to the terms of the Perrigo Proposal, (ii) repay Perrigo’s outstanding term loans and (iii) pay other costs associated with the acquisition, including all non-periodic fees, expenses and taxes.
The commitments in respect of the Loans will be available until the earliest to occur of April 22, 2016 and certain events relating to the completion or termination of the Perrigo Proposal that are customary for “certain funds” financings in connection with acquisitions of Irish public companies and are specified in the Bridge Credit Agreement. The commitments will be reduced by the net cash proceeds received by the Company in connection with debt and equity issuances and non-ordinary course of business asset dispositions, other than certain debt and equity issuances, non-ordinary course asset dispositions and permitted reinvestments specified in the Bridge Credit Agreement.
The obligations of the lenders under the Bridge Credit Agreement to make the Loans are subject to the satisfaction of the following conditions precedent: (i) Mylan owns (or will own after giving effect to the application of the proceeds of the Loans) no less than 80% of the shares in the capital of Perrigo, (ii) the conditions applicable to the consummation of the Perrigo Proposal contained in the Company’s announcement under Rule 2.5 of the Irish Takeover Rules and other offer-related documents have been satisfied or amended or waived in accordance with their terms and the terms of the Bridge Credit Agreement or as otherwise agreed by the arrangers of the Bridge Facility and Mylan has declared the offer wholly unconditional, (iii) the representations specified as “certain funds representations” in the Bridge Credit Agreement are true and correct in all material respects, (iv) no event of default specified as a “certain funds event of default” in the Bridge Credit Agreement has occurred or is continuing, both before and after giving effect to the funding of the Loans, (v) the Administrative Agent and the arrangers of the Bridge Facility have been paid all fees and other amounts due to them, (vi) the making of the Loans or the consummation of the offer is not subject to any injunction or similar government order, judgment or decree or is

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


not otherwise unlawful and (vii) the Administrative Agent has received customary certifications by Mylan of certain of the foregoing and other documentary evidence that the offer may be consummated. In the event that the acquisition is consummated by a scheme of arrangement rather than an offer, the Bridge Credit Agreement contains analogous conditions precedent that would be applicable in that circumstance, including that Mylan owns (or will own after giving effect to the application of the proceeds of the Loans) 100% of the shares in the capital of Perrigo.
The Loans will bear interest at LIBOR (determined in accordance with the Bridge Credit Agreement) plus 1.500% per annum, if the Company chooses to make LIBOR borrowings, or at a base rate (determined in accordance with the Bridge Credit Agreement) plus 0.500% per annum. The applicable margins over LIBOR and the base rate for the Loans can fluctuate based on the long term unsecured senior, non-credit enhanced debt rating of the Company by Standard & Poor’s Ratings Group and Moody’s Investors Service Inc. Mylan will pay to each lender a ticking fee accruing from May 24, 2015 until the earlier of the date the Loans are funded and the date the commitments terminate at a rate equal to 0.175% per annum of each lender’s commitments to make Tranche A Loans or Tranche C Loans. If the Tranche A Loans are funded, the Company will pay to each lender duration fees equal to 0.50%, 0.75% and 1.00% (or if the Company does not meet certain criteria with respect to its debt rating, 0.75%, 1.00% and 1.25%, respectively) of the principal amount of Tranche A Loans of each lender that are outstanding on the 90th, 180th and 270th, respectively, day after the day the Loans are funded.
The Loans will be unsecured and will be guaranteed by Mylan Inc., each subsidiary of Mylan that guarantees (or is otherwise a co-obligor of) third-party indebtedness of Mylan in excess of $350 million and, following consummation of the Perrigo Proposal, Perrigo. As of April 24, 2015, no subsidiary of Mylan other than Mylan Inc. is required to provide a guarantee of the Bridge Facility.
The Bridge Credit Agreement contains customary affirmative covenants for facilities of this type, including, among others, covenants pertaining to the delivery of financial statements, notices of default and certain other material events, maintenance of corporate existence and rights, business, property, and insurance and compliance with laws, as well as customary negative covenants for facilities of this type, including, among others, limitations on the incurrence of subsidiary indebtedness, liens, mergers and certain other fundamental changes, investments and loans, acquisitions, transactions with affiliates, payments of dividends and other restricted payments and changes in the Company’s line of business. The Bridge Credit Agreement also contains certain covenants related to the Perrigo Proposal that are customary in this context. The Bridge Credit Agreement contains a financial covenant requiring maintenance of a maximum ratio of 4.75 to 1.00 for consolidated total indebtedness as of the end of any quarter to consolidated EBITDA, as defined in the agreement, for the trailing four quarters. This financial covenant will first be tested at the quarter ending June 30, 2015.
The Bridge Credit Agreement contains default provisions customary for facilities of this type, which are subject to customary grace periods and materiality thresholds, including, among others, defaults related to payment failures, failure to comply with covenants, material misrepresentations, defaults under other material indebtedness, the occurrence of a “change in control”, bankruptcy and related events, material judgments, certain events related to pension plans and the invalidity or revocation of any loan document or any guarantee agreement of Mylan or any subsidiary that becomes a guarantor as described above. If an event of default occurs under Bridge Credit Agreement, the lenders may, among other things, terminate their commitments and declare immediately payable all borrowings.
The Administrative Agent and the lenders have, from time to time, performed, are currently performing and may in the future perform, various financial advisory and commercial and investment banking services for Mylan, for which they received or will receive customary fees and expenses. The Tranche A Loans mature on the day that is 364 days after the Loans are funded, and the Tranche C Loans mature on the day that is six months after the Loans are funded. The entire principal amount on the Loans will be due and payable on their respective maturity dates. The Loans may be voluntarily prepaid without penalty or premium, other than customary breakage costs related to prepayments of LIBOR borrowings.
Receivables Facility
The Receivables Facility has a committed balance of $400 million, although from time-to-time, the available amount of the Receivables Facility may be less than $400 million based on accounts receivable concentration limits and other eligibility requirements. In January 2015, the Receivables Facility was amended and restated, and its maturity was extended through January 2018. As of March 31, 2015 and December 31, 2014, the Company’s short-term borrowings under the Receivables Facility were $150 million and $325 million, respectively in the Condensed Consolidated Balance Sheets.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


A summary of long-term debt is as follows:
(In millions)
Coupon
 
March 31,
2015
 
December 31,
2014
2014 Term Loan
 
 
$
800.0

 
$
800.0

Cash Convertible Notes
3.750
%
 
2,540.5

 
2,405.6

2016 Senior Notes (a)
1.800
%
 
500.1

 
500.2

2016 Senior Notes (b)
1.350
%
 
499.8

 
499.8

2018 Senior Notes (c)
2.600
%
 
649.1

 
649.0

2019 Senior Notes (a)
2.550
%
 
499.1

 
499.0

2020 Senior Notes (d)
7.875
%
 
1,010.1

 
1,010.5

2023 Senior Notes (a)
3.125
%
 
795.0

 
779.1

2023 Senior Notes (e)
4.200
%
 
498.3

 
498.2

2043 Senior Notes (e)
5.400
%
 
497.0

 
497.0

Other
 
 
3.7

 
0.1

 
 
 
8,292.7

 
8,138.5

Less current portion
 
 
2,542.3

 
2,405.7

Total long-term debt
 
 
$
5,750.4

 
$
5,732.8

____________ 
(a)
Instrument is callable by the Company at any time at the greater of 100% of the principal amount or the sum of the present values of the remaining scheduled payments of principal and interest discounted at the U.S. Treasury rate plus 0.20% plus, in each case, accrued and unpaid interest.
(b)
Instrument is callable by the Company at any time at the greater of 100% of the principal amount or the sum of the present values of the remaining scheduled payments of principal and interest discounted at the U.S. Treasury rate plus 0.125% plus, in each case, accrued and unpaid interest.
(c) 
Instrument is callable by the Company at any time at the greater of 100% of the principal amount or the sum of the present values of the remaining scheduled payments of principal and interest discounted at the U.S. Treasury rate plus 0.30% plus, in each case, accrued and unpaid interest.
(d) 
Instrument is callable by the Company at any time prior to July 15, 2015 at 100% of the principal amount plus the greater of 1% of the principal amount and the excess over the principal of the present value of 103.938% of the principal amount plus all scheduled interest payments from the call date through July 15, 2015 discounted at the U.S. Treasury Rate plus 0.50% plus accrued and unpaid interest. Instrument is callable by the Company at any time on or after July 15, 2015 at the redemption prices set forth in the Indenture dated May 19, 2010, plus accrued and unpaid interest.
(e) 
Instrument is callable by the Company at any time at the greater of 100% of the principal amount or the sum of the present values of the remaining scheduled payments of principal and interest discounted at the U.S. Treasury rate plus 0.25% plus, in each case, accrued and unpaid interest.
Revolving Credit Agreement
In December 2014, the Company entered into a Revolving Credit Agreement with a syndicate of lenders, which contains a $1.5 billion revolving facility (the “Revolving Facility”), which expires on December 19, 2019. At March 31, 2015 and December 31, 2014, the Company had no amounts outstanding under the Revolving Facility.
On May 1, 2015, the Company entered into Amendment No. 1 (the “Revolving Amendment”) to the Revolving Credit Agreement dated as of December 19, 2014. The Revolving Amendment provides that following the closing of the Perrigo Proposal, the financial covenant in the Revolving Credit Agreement will be modified as follows: (i) for the four fiscal quarters following the closing of the Perrigo Proposal, the Company will be required to maintain a ratio of consolidated total indebtedness as of the end of any quarter to consolidated EBITDA, as defined in the agreement, for the trailing four quarters (the “Leverage Ratio”) not to exceed 4.75 to 1.00, (ii) for each of the subsequent two fiscal quarters, the Company may be required to maintain a Leverage Ratio not to exceed 4.25 to 1.00 and (iii) for any fiscal quarter thereafter, the Company will be required to maintain a Leverage Ratio not to exceed 3.75 to 1.00. The Revolving Amendment also amends the event of default provisions to provide that any “change of control” or “change of control put rights” under any indebtedness of Perrigo or its

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subsidiaries that are triggered as a result of the closing of the Perrigo Proposal will not result in an event of default so long as the Company or its subsidiaries refinances such indebtedness within 30 days of the closing of the Perrigo Proposal or makes any change of control offer required by the terms of such indebtedness and purchases all notes validly tendered pursuant thereto, respectively. The Revolving Amendment also effects certain technical amendments.
Term Credit Agreement
On May 1, 2015, the Company entered into Amendment No. 1 (the “Term Amendment”) to the Term Credit Agreement dated as of December 19, 2014. The Term Amendment provides that following the closing of the Perrigo Proposal, the financial covenant in the Term Credit Agreement will be modified as follows: (i) for the four fiscal quarters following the closing of the Perrigo Proposal, the Company will be required to maintain a Leverage Ratio not to exceed 4.75 to 1.00, (ii) for each of the subsequent two fiscal quarters, the Company will be required to maintain a Leverage Ratio not to exceed 4.25 to 1.00, and (iii) for any fiscal quarter thereafter, the Company will be required to maintain a Leverage Ratio not to exceed 3.75 to 1.00. The Term Amendment also amends the event of default provisions to provide that any “change of control” or “change of control put rights” under any indebtedness of Perrigo or its subsidiaries that are triggered as a result of the closing of the Perrigo Proposal will not result in an event of default so long as the Company or its subsidiaries refinances such indebtedness within 30 days of the closing of the Perrigo Proposal or makes any change of control offer required by the terms of such indebtedness and purchases all notes validly tendered pursuant thereto, respectively. The Term Amendment also effects certain technical amendments.
Senior Notes
During the first quarter of 2015, Mylan Inc. and Mylan N.V. completed consent solicitations relating to Mylan Inc.'s 3.750% Cash Convertible Notes due 2015, 7.875% Senior Notes due 2020, 3.125% Senior Notes due 2023, 1.800% Senior Notes due 2016, 2.600% Senior Notes due 2018, 1.350% Senior Notes due 2016, 2.550% Senior Notes due 2019, 4.200% Senior Notes due 2023 and 5.400% Senior Notes due 2043 (collectively, the "Senior Notes"). The consent solicitations modified the reporting covenants set forth in the indentures governing the Senior Notes so that, subject to certain conditions, the reports, information and other documents required to be filed with the SEC and furnished to holders of the Senior Notes may, at the option of Mylan Inc., be filed by and be those of any direct or indirect parent entity, rather than Mylan Inc. The Company incurred approximately $21.6 million of fees, which were capitalized as deferred financing costs in the Condensed Consolidated Balance Sheet.

Cash Convertible Notes
In 2008, Mylan Inc. issued $575 million aggregate principal amount of Cash Convertible Notes due 2015. The Cash Convertible Notes bear stated interest at a rate of 3.75% per year and an effective interest rate of 9.5%. The effective interest rate is based on the rate for a similar instrument that does not have a conversion feature. In connection with the consummation of the EPD Transaction, Mylan Inc. and Mylan N.V. executed a supplemental indenture that amended the indenture governing the Cash Convertible Notes so that, among other things, all relevant determinations for purposes of the cash conversion rights to which holders may be entitled from time-to-time in accordance with such indenture shall be made by reference to Mylan N.V. ordinary shares. The Cash Convertible Notes are not convertible into ordinary shares or any other securities under any circumstance.

On September 15, 2008, concurrent with the sale of the Cash Convertible Notes, Mylan Inc. entered into convertible note hedge and warrant transactions with certain counterparties. In connection with the consummation of the EPD Transaction, the terms of the convertible note hedge were adjusted so that the cash settlement will be based on Mylan N.V.’s ordinary shares. In connection with the consummation of the EPD Transaction, the terms of the warrant transactions were also adjusted so that, from and after the consummation of the EPD Transaction, the Company may settle the obligations under the warrant transaction by delivering Mylan N.V. ordinary shares. Pursuant to the warrant transactions, and a subsequent amendment in 2011, Mylan Inc. sold to the counterparties warrants to purchase in the aggregate up to approximately 43.2 million shares of Mylan Inc. common stock, of which approximately 41.0 million have an exercise price of $30.00 and the remaining warrants have an exercise price of $20.00, subject to certain anti-dilution adjustments, which under most circumstances represents the maximum number of shares to which the Cash Convertible Notes relate (based on the conversion reference rate at the time of issuance). The warrants will be net share settled, meaning that the Company will issue a number of ordinary shares per warrant corresponding to the difference between its share price at each warrant expiration date and the exercise price. The warrants meet the definition of derivatives under the guidance in ASC 815; however, because these instruments have been determined to

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


be indexed to the Company’s own ordinary shares and meet the criteria for equity classification under ASC 815-40, the warrants have been recorded in shareholders’ equity in the Condensed Consolidated Balance Sheets.

Below is the summary of the components of the Cash Convertible Notes:

(In millions)
March 31,
2015
 
December 31,
2014
Outstanding principal
$
573.1

 
$
573.1

Equity component carrying amount
1,981.2

 
1,853.5

Unamortized discount
(13.8
)
 
(21.0
)
Net debt carrying amount (a)
$
2,540.5

 
$
2,405.6

Purchased call options (b)
$
1,981.2

 
$
1,853.5

___________ 
(a) 
As of March 31, 2015 and December 31, 2014, the cash convertible notes were classified as current portion of long-term on the Condensed Consolidated Balance Sheets.
(b) 
As of March 31, 2015 and December 31, 2014, purchased call options were classified as prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

As adjusted in connection with the consummation of the EPD Transaction, holders may convert their notes subject to certain conversion provisions including (i) during any quarter if the closing price of Mylan N.V.’s ordinary shares exceeds 130% of the respective conversion price per share during a defined period at the end of the previous quarter; (ii) during a defined period following five consecutive trading days in which the trading price per $1,000 principal amount was less than 98% of the product of the closing price of Mylan N.V.’s ordinary shares on such day and the applicable conversion reference rate; (iii) if Mylan N.V. makes specified distributions to holders of Mylan N.V.’s ordinary shares including sales of rights or ordinary shares on a preferential basis, certain distribution of assets or other securities or rights to all holders of Mylan N.V.’s ordinary shares or certain transactions resulting in substantially all of Mylan N.V.’s ordinary shares being converted into cash, securities or other property; or (iv) upon a certain business combinations or if Mylan N.V.’s ordinary shares cease to be traded on a major U.S. stock exchange.

As of March 31, 2015, because the closing price of the Company’s ordinary shares for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day in the March 31, 2015 period was more than 130% of the applicable conversion reference price of $13.32, the $573 million of Cash Convertible Notes were convertible. As of March 31, 2015, the Company received conversion requests for $131.4 million of the Cash Convertible Notes, which will be paid in the second quarter of 2015. Upon an investor’s election to convert, the Company is required to pay the full conversion value in cash. Should holders elect to convert, the Company intends to draw on the Receivables Facility and the Revolving Facility to fund any principal payments. The amount payable per $1,000 notional bond would be calculated as the product of 1) the conversion reference rate (currently 75.0751) and 2) the average Daily Volume Weighted Average Price per ordinary share for a specified period following the conversion date. Any payment above the principal amount is matched by a convertible note hedge.
Fair Value
At March 31, 2015 and December 31, 2014, the fair value of the Senior Notes was approximately $5.08 billion and $5.03 billion, respectively. At March 31, 2015 and December 31, 2014, the fair value of the Cash Convertible Notes was approximately $2.55 billion and $2.42 billion, respectively. The fair values of the Senior Notes and Cash Convertible Notes were valued at quoted market prices from broker or dealer quotations and were classified as Level 2 in the fair value hierarchy. Based on quoted market rates of interest and maturity schedules of similar debt issues, the fair values of the Company’s Term Credit Agreement which provided an $800 million term loan (the “2014 Term Loan”) and Revolving Facility, determined based on Level 2 inputs, approximate their carrying values at March 31, 2015 and December 31, 2014.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


Mandatory minimum repayments remaining on the outstanding long-term debt at March 31, 2015, excluding the discounts, premium and conversion features, are as follows for each of the periods ending December 31:
 
(In millions)
Total
2015
$
573

2016
1,000

2017
800

2018
650

2019
500

Thereafter
2,750

Total
$
6,273

11.
Comprehensive Earnings
Accumulated other comprehensive loss, as reflected on the Condensed Consolidated Balance Sheets, is comprised of the following:
(In millions)
March 31,
2015
 
December 31, 2014
Accumulated other comprehensive loss:
 
 
 
Net unrealized gains on marketable securities, net of tax
$
0.4

 
$
0.3

Net unrecognized losses and prior service cost related to defined benefit plans, net of tax
(19.5
)
 
(19.5
)
Net unrecognized losses on derivatives, net of tax
(49.8
)
 
(28.4
)
Foreign currency translation adjustment
(1,542.0
)
 
(939.4
)
 
$
(1,610.9
)
 
$
(987.0
)


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Components of accumulated other comprehensive loss, before tax, consist of the following, for the three months ended March 31, 2015 and 2014:

 
Three Months Ended March 31, 2015
Gains and Losses on Derivatives in Cash Flow Hedging Relationships
 
Gains and Losses on Marketable Securities
 
Defined Benefit Plan Items
 
Foreign Currency Translation Adjustment
 
Totals
(In millions)
Foreign currency forward contracts
 
Interest rate swaps
 
Total
 
 
 
 
 
 
 
 
Balance at December 31, 2014, net of tax
 
 
 
 
$
(28.4
)
 
$
0.3

 
$
(19.5
)
 
$
(939.4
)
 
$
(987.0
)
Other comprehensive (loss) earnings before reclassifications, before tax
 
 
 
 
(46.4
)
 
0.1

 
(0.3
)
 
(602.6
)
 
(649.2
)
Amounts reclassified from accumulated other comprehensive loss, before tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on foreign exchange forward contracts classified as cash flow hedges, included in net sales
(11.7
)
 
 
 
(11.7
)
 
 
 
 
 
 
 
(11.7
)
Loss on interest rate swaps classified as cash flow hedges, included in interest expense
 
 
(0.2
)
 
(0.2
)
 
 
 
 
 
 
 
(0.2
)
Amortization of prior service costs included in SG&A expenses
 
 
 
 
 
 
 
 
(0.1
)
 
 
 
(0.1
)
Amortization of actuarial loss included in SG&A expenses
 
 
 
 
 
 
 
 
(0.3
)
 
 
 
(0.3
)
Amounts reclassified from accumulated other comprehensive loss, before tax
 
 
 
 
(11.9
)
 

 
(0.4
)
 

 
(12.3
)
Net other comprehensive
(loss) earnings, before tax
 
 
 
 
(34.5
)
 
0.1

 
0.1

 
(602.6
)
 
(636.9
)
Income tax (benefit) provision
 
 
 
 
(13.1
)
 

 
0.1

 

 
(13.0
)
Balance at March 31, 2015, net of tax
 
 
 
 
$
(49.8
)
 
$
0.4

 
$
(19.5
)
 
$
(1,542.0
)
 
$
(1,610.9
)



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Three Months Ended March 31, 2014
Gains and Losses on Derivatives in Cash Flow Hedging Relationships
 
Gains and Losses on Marketable Securities
 
Defined Benefit Plan Items
 
Foreign Currency Translation Adjustment
 
Totals
(In millions)
Foreign currency forward contracts
 
Interest rate swaps
 
Total
 
 
 
 
 
 
 
 
Balance at December 31, 2013, net of tax
 
 
 
 
$
84.8

 
$
0.3

 
$
(8.7
)
 
$
(316.5
)
 
$
(240.1
)
Other comprehensive (loss) earnings before reclassifications, before tax
 
 
 
 
(42.9
)
 

 
(1.7
)
 
97.2

 
52.6

Amounts reclassified from accumulated other comprehensive loss, before tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on foreign exchange forward contracts classified as cash flow hedges, included in net sales
(15.3
)
 
 
 
(15.3
)
 
 
 
 
 
 
 
(15.3
)
Loss on interest rate swaps classified as cash flow hedges, included in interest expense
 
 
(0.2
)
 
(0.2
)
 
 
 
 
 
 
 
(0.2
)
Amortization of actuarial loss included in SG&A expenses
 
 
 
 
 
 
 
 
(0.2
)
 
 
 
(0.2
)
Amounts reclassified from accumulated other comprehensive loss, before tax
 
 
 
 
(15.5
)
 

 
(0.2
)
 

 
(15.7
)
Net other comprehensive (loss) earnings, before tax
 
 
 
 
(27.4
)
 

 
(1.5
)
 
97.2

 
68.3

Income tax provision
 
 
 
 
11.9

 

 
0.5

 

 
12.4

Balance at March 31, 2014, net of tax
 
 
 
 
$
69.3

 
$
0.3

 
$
(9.7
)
 
$
(219.3
)
 
$
(159.4
)
12.
Shareholders’ Equity
A summary of the changes in shareholders’ equity for the three months ended March 31, 2015 and 2014 is as follows:
(In millions)
Total Mylan N.V. Shareholders' Equity
 
Noncontrolling Interest
 
 Total
December 31, 2014
$
3,255.9

 
$
20.1

 
$
3,276.0

Net earnings
56.6

 

 
56.6

Other comprehensive loss, net of tax
(623.9
)
 

 
(623.9
)
Stock option activity
68.3

 

 
68.3

Share-based compensation expense
34.4

 

 
34.4

Issuance of restricted stock, net of shares withheld
(23.8
)
 

 
(23.8
)
Issuance of ordinary shares to purchase the EPD Business
6,305.8

 

 
6,305.8

Other

 
(0.2
)
 
(0.2
)
March 31, 2015
$
9,073.3

 
$
19.9

 
$
9,093.2


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Table of Contents
MYLAN N.V. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued



(In millions)
Total Mylan N.V. Shareholders' Equity
 
Noncontrolling Interest
 
 Total
December 31, 2013
$
2,941.8

 
$
18.1

 
$
2,959.9

Net earnings
115.9

 
0.7

 
116.6

Other comprehensive earnings, net of tax
80.7

 

 
80.7

Stock option activity
21.9

 

 
21.9

Share-based compensation expense
15.4

 

 
15.4

Issuance of restricted stock, net of shares withheld
(20.1
)
 

 
(20.1
)
Tax benefit of stock option plans
18.7