MYL10Q_2015.06.30_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 June 30, 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.)
Building 4, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL, England
(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 August 3, 2015, there were 491,554,379 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
June 30, 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
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Net sales
$
2,357.0

 
$
1,816.4

 
$
4,211.6

 
$
3,519.4

Other revenues
14.7

 
20.9

 
31.8

 
33.5

Total revenues
2,371.7

 
1,837.3

 
4,243.4

 
3,552.9

Cost of sales
1,363.6

 
1,028.5

 
2,405.2

 
2,006.3

Gross profit
1,008.1

 
808.8

 
1,838.2

 
1,546.6

Operating expenses:
 
 
 
 
 
 
 
Research and development
168.2

 
155.4

 
338.1

 
273.4

Selling, general and administrative
564.2

 
404.1

 
1,047.4

 
781.8

Litigation settlements, net
(0.9
)
 
23.2

 
16.8

 
26.3

Total operating expenses
731.5

 
582.7

 
1,402.3

 
1,081.5

Earnings from operations
276.6

 
226.1

 
435.9

 
465.1

Interest expense
93.9

 
84.6

 
173.4

 
167.3

Other expense (income), net
2.0

 
3.7

 
20.5

 
8.3

Earnings before income taxes and noncontrolling interest
180.7

 
137.8

 
242.0

 
289.5

Income tax provision
12.8

 
11.2

 
17.5

 
46.3

Net earnings
167.9

 
126.6

 
224.5

 
243.2

Net earnings attributable to the noncontrolling interest
(0.1
)
 
(1.4
)
 
(0.1
)
 
(2.1
)
Net earnings attributable to Mylan N.V. ordinary shareholders
$
167.8

 
$
125.2

 
$
224.4

 
$
241.1

Earnings per ordinary share attributable to Mylan N.V. ordinary shareholders:
 
 
 
 
 
 
 
Basic
$
0.34

 
$
0.34

 
$
0.49

 
$
0.65

Diluted
$
0.32

 
$
0.32

 
$
0.46

 
$
0.61

Weighted average ordinary shares outstanding:
 
 
 
 
 
 
 
Basic
490.1

 
373.8

 
454.0

 
373.1

Diluted
521.9

 
397.4

 
482.8

 
397.0

 
 
 
 
 
 
 
 











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
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Net earnings
$
167.9

 
$
126.6

 
$
224.5

 
$
243.2

Other comprehensive earnings (loss), before tax:
 
 
 
 
 
 
 
Foreign currency translation adjustment
224.3

 
39.4

 
(378.3
)
 
136.6

Change in unrecognized gain (loss) and prior service cost related to defined benefit plans
3.8

 
(3.6
)
 
3.9

 
(5.1
)
Net unrecognized gain (loss) on derivatives
51.3

 
(47.8
)
 
16.8

 
(75.2
)
Net unrealized (loss) gain on marketable securities
(0.3
)
 
0.1

 
(0.2
)
 
0.1

Other comprehensive earnings (loss), before tax
279.1

 
(11.9
)
 
(357.8
)
 
56.4

Income tax provision (benefit)
19.8

 
(18.6
)
 
6.8

 
(31.0
)
Other comprehensive earnings (loss), net of tax
259.3

 
6.7

 
(364.6
)
 
87.4

Comprehensive earnings (loss)
427.2

 
133.3

 
(140.1
)
 
330.6

Comprehensive earnings attributable to the noncontrolling interest
(0.1
)
 
(1.4
)
 
(0.1
)
 
(2.1
)
Comprehensive earnings (loss) attributable to Mylan N.V. ordinary shareholders
$
427.1

 
$
131.9

 
$
(140.2
)
 
$
328.5

 
 
 
 
 
 
 
 




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)
 
June 30,
2015
 
December 31,
2014
ASSETS
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
439.7

 
$
225.5

Accounts receivable, net
2,861.2

 
2,268.5

Inventories
1,934.3

 
1,651.4

Deferred income tax benefit
394.3

 
345.7

Prepaid expenses and other current assets
2,261.9

 
2,295.8

Total current assets
7,891.4

 
6,786.9

Property, plant and equipment, net
1,899.3

 
1,785.7

Intangible assets, net
6,826.4

 
2,347.1

Goodwill
5,212.4

 
4,049.3

Deferred income tax benefit
87.0

 
83.4

Other assets
878.1

 
834.2

Total assets
$
22,794.6

 
$
15,886.6

 
 
 
 
LIABILITIES AND EQUITY
Liabilities
 
 
 
Current liabilities:
 
 
 
Trade accounts payable
$
1,101.8

 
$
905.6

Short-term borrowings
436.3

 
330.7

Income taxes payable
81.5

 
160.7

Current portion of long-term debt and other long-term obligations
2,163.4

 
2,474.4

Deferred income tax liability
2.3

 
0.2

Other current liabilities
1,584.1

 
1,434.1

Total current liabilities
5,369.4

 
5,305.7

Long-term debt
5,890.4

 
5,732.8

Deferred income tax liability
583.6

 
235.4

Other long-term obligations
1,381.9

 
1,336.7

Total liabilities
13,225.3

 
12,610.6

Equity
 
 
 
Mylan N.V. shareholders’ equity
 
 
 
Ordinary shares (1) — nominal value €0.01 per ordinary share as of June 30, 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 June 30, 2015 and December 31, 2014
 
 
 
Shares issued: 491,397,660 and 546,658,507 as of June 30, 2015 and December 31, 2014
5.5

 
273.3

Additional paid-in capital
7,075.1

 
4,212.8

Retained earnings
3,838.9

 
3,614.5

Accumulated other comprehensive loss
(1,351.6
)
 
(987.0
)
 
9,567.9

 
7,113.6

Noncontrolling interest
1.4

 
20.1

Less: Treasury stock — at cost

 
 
Shares: zero and 171,435,200 as of June 30, 2015 and December 31, 2014

 
3,857.7

Total equity
9,569.3

 
3,276.0

Total liabilities and equity
$
22,794.6

 
$
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)
 
Six Months Ended
 
June 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net earnings
$
224.5

 
$
243.2

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
433.7

 
264.4

Share-based compensation expense
50.3

 
32.5

Change in estimated sales allowances
6.2

 
337.1

Deferred income tax provision
(76.3
)
 
(92.9
)
Loss from equity method investments
49.7

 
43.0

Other non-cash items
142.9

 
107.4

Litigation settlements, net
16.8

 
26.3

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(140.3
)
 
(249.0
)
Inventories
(231.4
)
 
(178.2
)
Trade accounts payable
77.4

 
0.6

Income taxes
(151.0
)
 
(9.5
)
Other operating assets and liabilities, net
(20.8
)
 
(77.4
)
Net cash provided by operating activities
381.7

 
447.5

Cash flows from investing activities:
 
 
 
Capital expenditures
(122.0
)
 
(153.3
)
Cash paid for acquisitions, net

 
(33.0
)
Proceeds from sale of property, plant and equipment

 
5.0

Purchase of marketable securities
(51.6
)
 
(10.5
)
Proceeds from sale of marketable securities
21.6

 
7.8

Payments for product rights and other, net
(115.8
)
 
(135.3
)
Net cash used in investing activities
(267.8
)
 
(319.3
)
Cash flows from financing activities:
 
 
 
Payment of financing fees
(83.6
)
 
(2.6
)
Change in short-term borrowings, net
105.6

 
(193.3
)
Proceeds from convertible note hedge
667.9

 

Proceeds from issuance of long-term debt
305.0

 
240.0

Payment of long-term debt
(973.6
)
 
(300.0
)
Proceeds from exercise of stock options
86.4

 
29.9

Taxes paid related to net share settlement of equity awards
(31.7
)
 
(22.8
)
Acquisition of noncontrolling interest
(10.6
)
 

Other items, net
48.0

 
21.3

Net cash provided by (used in) financing activities
113.4

 
(227.5
)
Effect on cash of changes in exchange rates
(13.1
)
 
1.9

Net increase (decrease) in cash and cash equivalents
214.2

 
(97.4
)
Cash and cash equivalents — beginning of period
225.5

 
291.3

Cash and cash equivalents — end of period
$
439.7

 
$
193.9

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 EPD Transaction 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 an indirect wholly owned 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, as amended on April 30, 2015 and as updated by the Company’s Current Report on Form 8-K filed on June 11, 2015. 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 and six months ended June 30, 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 six months ended June 30, 2015. Such allowances were $1.60 billion and $1.63 billion at June 30, 2015 and December 31, 2014, respectively. Other current liabilities include $610.4 million and $581.3 million at June 30, 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 $1.01 billion and $1.07 billion of securitized accounts receivable at June 30, 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 April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-03, Interest – Imputation of Interest (“ASU 2015-03”), which simplifies the presentation of debt issuance costs by requiring that debt issue costs for term debt be presented on the balance sheet as a direct reduction of the term debt liability as opposed to a deferred charge within other non-current assets. The change is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2015. Retrospective application is required and early adoption is permitted. The Company is currently assessing the impact of the adoption of this guidance on its financial presentation.
In February 2015, the 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 revises 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., an indirect wholly owned subsidiary of Mylan N.V., with Mylan Inc. becoming an indirect 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, its principal executive offices are located in Hatfield, Hertfordshire, England and its global headquarters are located in Canonsburg, Pennsylvania.

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

8

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


portion of Mylan N.V.’s ordinary shares held by them, which offering closed on April 6, 2015, the Abbott Shareholders collectively own approximately 14.2% of Mylan N.V.’s outstanding ordinary shares.

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 Transaction Closing Date. 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 area of those preliminary estimates that is not yet finalized relate to deferred income taxes. During the three months ended June 30, 2015, adjustments were made to the preliminary purchase price recorded at February 27, 2015. These adjustments related to working capital amounts and liabilities for post-employment benefits. These adjustments are reflected in the values presented below. 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)
Preliminary Purchase Price Allocation as of February 27, 2015 (a)
 
Measurement Period Adjustments (b)
 
Preliminary Purchase Price Allocation as of June 30, 2015 (as adjusted)
Accounts receivable
$
462.5

 
$
(18.7
)
 
$
443.8

Inventories
196.3

 
2.2

 
198.5

Other current assets
70.1

 

 
70.1

Property, plant and equipment
140.8

 

 
140.8

Identified intangible assets
4,843.0

 

 
4,843.0

Goodwill
1,285.7

 
18.2

 
1,303.9

Other assets
15.5

 

 
15.5

Total assets acquired
7,013.9

 
1.7

 
7,015.6

Current liabilities
(269.0
)
 

 
(269.0
)
Deferred tax liabilities
(382.1
)
 

 
(382.1
)
Other non-current liabilities
(57.0
)
 
(1.7
)
 
(58.7
)
Net assets acquired
$
6,305.8

 
$

 
$
6,305.8

____________
(a) 
As previously reported in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2015.
(b) 
The measurement period adjustments are for 1) certain working capital adjustments to reflect facts and circumstances that existed as of the acquisition date, 2) an increase in the liability recorded for post-employment benefit programs to reflect updated opening balance sheet actuarial valuations and 3) the tax implications of these adjustments. These adjustments did not have a significant impact on the Company’s previously reported condensed consolidated financial statements and accordingly, the Company has not retrospectively adjusted those financial statements.

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. 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 goodwill of $1.30 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. Goodwill of $849 million is currently expected to be deductible for income tax purposes. Acquisition and integration related costs of approximately $85.1 million  were incurred during the six months ended June 30, 2015, which were recorded as a component of selling, general and administrative (“SG&A”) expense in the Condensed Consolidated Statements of Operations. During the year ended December 31, 2014, the Company incurred approximately $50.2 million of acquisition and integration related costs.

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 June 30,

9

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


2015 were $549.5 million and the net loss, net of tax, was $81.6 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 value 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.

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(Unaudited, in millions, except per share amounts)
2015
 
2014
 
2015
 
2014
Total revenues
$
2,371.6

 
$
2,328.2

 
$
4,490.3

 
$
4,494.9

Net earnings (loss) attributable to Mylan N.V. ordinary shareholders
$
216.2

 
$
11.7

 
$
293.1

 
$
(71.9
)
Earnings (loss) per ordinary share attributable to Mylan N.V. ordinary shareholders:
 
 
 
 
 
 
 
Basic
$
0.44

 
$
0.02

 
$
0.60

 
$
(0.15
)
Diluted
$
0.41

 
$
0.02

 
$
0.56

 
$
(0.14
)
Weighted average ordinary shares outstanding:
 
 
 
 
 
 
 
Basic
490.1

 
483.8

 
490.7

 
483.1

Diluted
521.9

 
507.4

 
519.5

 
507.0


Other Transactions
On April 24, 2015, Mylan N.V. issued a Rule 2.5 announcement under the Irish Takeover Panel Act, 1997, Takeover Rules, 2013 (“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. shareholders. On July 27, 2015, Mylan announced that it will hold its extraordinary general meeting of shareholders in connection with the Perrigo Proposal on Friday, August 28, 2015. 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.

During the six months ended June 30, 2015, the Company entered into agreements with multiple counterparties to acquire certain marketed pharmaceutical products for upfront payments totaling approximately $360 million. During the three months ended June 30, 2015, the Company paid approximately $85.7 million related to the closing of two of these agreements. The remaining transaction is expected to close prior to the end of 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 (“Famy Care”), 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.


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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


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’s common stock during the first quarter of 2015, which is being accounted for as an available-for-sale security. The Company incurred $15 million in upfront development costs in the first half 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.

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, 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
402,595

 
58.74

Exercised
(4,569,463
)
 
22.51

Forfeited
(120,193
)
 
45.42

Converted
(4,100,000
)
 
53.33

Outstanding at June 30, 2015
7,820,716

 
$
30.02

Vested and expected to vest at June 30, 2015
7,477,242

 
$
29.28

Exercisable at June 30, 2015
5,379,751

 
$
22.29

As of June 30, 2015, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had average remaining contractual terms of 6.4 years, 6.3 years and 5.3 years, respectively. Also, at June 30, 2015, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had aggregate intrinsic values of $296.2 million, $288.7 million and $245.2 million, respectively.
On June 10, 2015, 4.1 million shares of the Company’s performance-based SARs were converted into 1.1 million restricted Ordinary Shares (the “Restricted Ordinary Shares”) pursuant to the terms of Mylan’s One-Time Special Performance-Based Five-Year Realizable Value Incentive Program implemented in 2014 (the “2014 Program”). In addition, the maximum number of the Company’s performance restricted stock units (“PRSU”) granted under the 2014 Program that could vest was fixed at 1.4 million units. The fair value of the performance-based SARs and PRSUs were determined using a Monte Carlo simulation as both the SARs and PRSUs contain the same performance and market conditions. In determining the fair value of the performance-based SARs and PRSUs, the Company considered the achievement of the market condition in determining the estimated fair value. The Restricted Ordinary Shares and PRSUs remain subject to the achievement of the performance condition and the employee’s continued service. During the six months ended June 30, 2015, the Company recorded additional

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


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 PRSUs and Restricted Ordinary Shares (collectively, “restricted stock awards”), as of June 30, 2015 and the changes during the six months ended June 30, 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
934,922

 
55.61

Released
(1,455,797
)
 
33.77

Forfeited
(68,907
)
 
40.42

Converted
1,107,207

 
34.92

Nonvested at June 30, 2015
4,187,663

 
$
40.06

As of June 30, 2015, the Company had $139.4 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 2.6 years. The total intrinsic value of stock-based awards exercised and restricted stock units converted during the six months ended June 30, 2015 and 2014 was $241.9 million and $112.8 million, respectively.

6.
Balance Sheet Components
Selected balance sheet components consist of the following:
(In millions)
June 30,
2015
 
December 31,
2014
Inventories:
 
 
 
Raw materials
$
623.2

 
$
549.5

Work in process
365.4

 
298.4

Finished goods
945.7

 
803.5

 
$
1,934.3

 
$
1,651.4

Property, plant and equipment:
 
 
 
Land and improvements
$
117.4

 
$
88.3

Buildings and improvements
889.3

 
826.4

Machinery and equipment
1,820.1

 
1,739.3

Construction in progress
308.5

 
301.8

 
3,135.3

 
2,955.8

Less accumulated depreciation
1,236.0

 
1,170.1

 
$
1,899.3

 
$
1,785.7


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


(In millions)
June 30,
2015
 
December 31, 2014
Other current liabilities:
 
 
 
Legal and professional accruals, including litigation accruals
$
123.7

 
$
81.8

Payroll and employee benefit plan accruals
274.9

 
282.6

Accrued sales allowances
610.4

 
581.3

Accrued interest
61.6

 
63.8

Fair value of financial instruments
52.4

 
52.2

Other
461.1

 
372.4

 
$
1,584.1

 
$
1,434.1


Contingent consideration included in other current liabilities totaled $20 million at June 30, 2015 and December 31, 2014. Contingent consideration included in other long-term obligations was $468.7 million and $450.0 million at June 30, 2015 and December 31, 2014, respectively. Included in prepaid expenses and other current assets was $142.0 million and $134.1 million of restricted cash at June 30, 2015 and December 31, 2014, respectively. An additional $100 million of restricted cash was classified in other long-term assets at June 30, 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, as amended, totaled $410.1 million and $437.5 million at June 30, 2015 and December 31, 2014, respectively, and are included in other assets in the Condensed Consolidated Balance Sheets. Liabilities related to these investments totaled $449.7 million and $472.7 million at June 30, 2015 and December 31, 2014, respectively. Of these liabilities, $389.1 million and $412.9 million are included in other long-term obligations in the Condensed Consolidated Balance Sheets at June 30, 2015 and December 31, 2014, respectively. The remaining $60.6 million and $59.8 million are included in other current liabilities in the Condensed Consolidated Balance Sheets at June 30, 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 $102.6 million and $109.9 million at June 30, 2015 and December 31, 2014, respectively.
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. Settlement of the warrants will occur beginning in the fourth quarter of 2015 and ending in the second quarter of 2016. 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 and six months ended June 30, 2015, 25.1

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


million and 23.0 million warrants, respectively, were included in the calculation of diluted earnings per ordinary share. For the three and six months ended June 30, 2014, 17.3 million and 17.1 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
 
Six Months Ended
 
June 30,
 
June 30,
(In millions, except per share amounts)
2015
 
2014
 
2015
 
2014
Basic earnings attributable to Mylan N.V. ordinary shareholders (numerator):
 
 
 
 
 
 
 
Net earnings attributable to Mylan N.V. ordinary shareholders
$
167.8

 
$
125.2

 
$
224.4

 
$
241.1

Shares (denominator):
 
 
 
 
 
 
 
Weighted average ordinary shares outstanding
490.1

 
373.8

 
454.0

 
373.1

Basic earnings per ordinary share attributable to Mylan N.V. ordinary shareholders
$
0.34

 
$
0.34

 
$
0.49

 
$
0.65

Diluted earnings attributable to Mylan N.V. ordinary shareholders (numerator):
 
 
 
 
 
 
 
Net earnings attributable to Mylan N.V. ordinary shareholders
$
167.8

 
$
125.2

 
$
224.4

 
$
241.1

Shares (denominator):
 
 
 
 
 
 
 
Weighted average ordinary shares outstanding
490.1

 
373.8

 
454.0

 
373.1

Share-based awards and warrants
31.8

 
23.6

 
28.8

 
23.9

Total dilutive shares outstanding
521.9

 
397.4

 
482.8

 
397.0

Diluted earnings per ordinary share attributable to Mylan N.V. ordinary shareholders
$
0.32

 
$
0.32

 
$
0.46

 
$
0.61

Additional stock awards and restricted stock awards were outstanding during the periods ended June 30, 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. Excluded shares at June 30, 2015, include certain share based compensation awards and Restricted Ordinary Shares whose performance conditions had not been fully met. Such excluded and anti-dilutive awards represented 3.2 million and 3.1 million shares for the three and six months ended June 30, 2015, respectively, and 7.3 million and 5.2 million shares for the three and six months ended June 30, 2014, respectively.
8.
Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the six months ended June 30, 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
1,303.9

 

 
1,303.9

Foreign currency translation
(140.8
)
 

 
(140.8
)
 
$
4,863.3

 
$
349.1

 
$
5,212.4

Balance at June 30, 2015:
 
 
 
 
 
Goodwill
$
4,863.3

 
$
734.1

 
$
5,597.4

Accumulated impairment losses

 
(385.0
)
 
(385.0
)
 
$
4,863.3

 
$
349.1

 
$
5,212.4



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


Intangible assets consist of the following components at June 30, 2015 and December 31, 2014:
(In millions)
Weighted
Average Life
(Years)
 
Original
Cost
 
Accumulated
Amortization
 
Net Book
Value
June 30, 2015
 
 
 
 
 
 
 
Amortized intangible assets:
 
 
 
 
 
 
 
Patents and technologies
20
 
$
116.6

 
$
101.5

 
$
15.1

Product rights and licenses
12
 
8,041.6

 
2,336.5

 
5,705.1

Other (1)
6
 
478.9

 
117.1

 
361.8

 
 
 
8,637.1

 
2,555.1

 
6,082.0

In-process research and development
 
 
744.4

 

 
744.4

 
 
 
$
9,381.5

 
$
2,555.1

 
$
6,826.4

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 six months ended June 30, 2015 and 2014, was $345.5 million and $178.7 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, but excluding amounts related to the proposed acquisition of Famy Care, is expected to be approximately $426 million for the remainder of 2015 and $755 million, $646 million, $592 million and $532 million for the years ended December 31, 2016 through 2019, respectively.
During the six months ended June 30, 2014, approximately $6.8 million was reclassified from acquired in-process research and development to product rights and licenses.
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.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


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 aggregate fair value of all such contracts that are in a net liability position at June 30, 2015 is $18.3 million. The Company records all derivative instruments on a gross basis in the Condensed Consolidated Balance Sheets. The Company is not subject to any obligations to post collateral under derivative instrument contracts.
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 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. Settlement of the warrants will occur beginning in the fourth quarter of 2015 and ending in the second quarter of 2016. 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 June 30, 2015, the convertible note hedge had a total fair value of $1.69 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 convertible note hedge is expected to be settled in the third quarter of 2015 in conjunction with the maturity of the Cash Convertible Notes.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


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
 
June 30, 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
 
$
25.7

 
Prepaid expenses and other current assets
 
$
30.4

Foreign currency forward contracts
Prepaid expenses and other current assets
 
24.1

 
Prepaid expenses and other current assets
 
12.9

Total
 
 
$
49.8

 
 
 
$
43.3

 
 
Liability Derivatives
 
June 30, 2015
 
December 31, 2014
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Interest rate swaps
Other current liabilities
 
$
44.0

 
Other current liabilities
 
$
49.9

Total
 
 
$
44.0

 
 
 
$
49.9


Fair Values of Derivative Instruments
Derivatives Not Designated as Hedging Instruments
 
Asset Derivatives
 
June 30, 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
 
$
9.0

 
Prepaid expenses and other current assets
 
$
5.5

Purchased cash convertible note hedge
Prepaid expenses and other current assets
 
1,689.3

 
Prepaid expenses and other current assets
 
1,853.5

Total
 
 
$
1,698.3

 
 
 
$
1,859.0

 
 
Liability Derivatives
 
June 30, 2015
 
December 31, 2014
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Foreign currency forward contracts
Other current liabilities
 
$
8.4

 
Other current liabilities
 
$
2.3

Cash conversion feature of Cash Convertible Notes
Current portion of long-term debt and other long-term obligations
 
1,689.3

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

Total
 
 
$
1,697.7

 
 
 
$
1,855.8

 

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations
Derivatives in Fair Value Hedging Relationships
 
Location of (Loss) or Gain
Recognized in Earnings
on Derivatives
 
Amount of (Loss) or Gain
Recognized in Earnings on
Derivatives
(In millions)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Interest rate swaps
Interest expense
 
$
(15.9
)
 
$
23.7

 
$
4.6

 
$
47.8

Total
 
 
$
(15.9
)
 
$
23.7

 
$
4.6

 
$
47.8

 
 
Location of Gain or (Loss)
Recognized in Earnings
on Hedged Items
 
Amount of Gain or (Loss)
Recognized in Earnings on
Hedged Items
(In millions)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
2016 Senior Notes (1.800% coupon)
Interest expense
 
$

 
$
(0.9
)
 
$

 
$
(0.9
)
2018 Senior Notes (6.000% coupon)
Interest expense
 

 

 
$

 
$
1.1

2023 Senior Notes (3.125% coupon)
Interest expense
 
20.5

 
(14.4
)
 
4.6

 
(30.9
)
Total
 
 
$
20.5

 
$
(15.3
)
 
$
4.6

 
$
(30.7
)

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations
Derivatives in Cash Flow Hedging Relationships
 
 
Amount of Gain or (Loss)
Recognized in AOCE
(Net of Tax) on Derivative
(Effective Portion)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2015
 
2014
 
2015
 
2014
Foreign currency forward contracts
 
$
(14.4
)
 
$
(5.6
)
 
$
(15.2
)
 
$
6.0

Interest rate swaps
 
35.7

 
(34.4
)
 
3.3

 
(76.9
)
  Total
 
$
21.3

 
$
(40.0
)
 
$
(11.9
)
 
$
(70.9
)
 
 
Location of Loss Reclassified
from AOCE into Earnings
(Effective Portion)
 
Amount of Loss
Reclassified from AOCE
into Earnings (Effective Portion)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2015
 
2014
 
2015
 
2014
Foreign currency forward contracts
Net sales
 
$
(10.6
)
 
$
(10.0
)
 
$
(22.3
)
 
$
(25.3
)
Interest rate swaps
Interest expense
 
(0.1
)
 
(0.1
)
 
(0.3
)
 
(0.3
)
  Total
 
 
$
(10.7
)
 
$
(10.1
)
 
$
(22.6
)
 
$
(25.6
)
 

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


 
Location of Gain
Excluded from the
Assessment of
Hedge Effectiveness
 
Amount of Gain Excluded from the Assessment of Hedge Effectiveness
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2015
 
2014
 
2015
 
2014
Foreign currency forward contracts
Other expense (income), net
 
$
14.8

 
$
19.3

 
$
23.4

 
$
42.1

  Total
 
 
$
14.8

 
$
19.3

 
$
23.4

 
$
42.1

 
At June 30, 2015, the Company expects that approximately $21.9 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
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2015
 
2014
 
2015
 
2014
Foreign currency forward contracts
Other expense (income), net
 
$
7.5

 
$
3.0

 
$
7.6

 
$
7.6

Cash conversion feature of Cash Convertible Notes
Other expense (income), net
 
291.9

 
(115.2
)
 
164.2

 
(347.0
)
Purchased cash convertible note hedge
Other expense (income), net
 
(291.9
)
 
115.2

 
(164.2
)
 
347.0

  Total
 
 
$
7.5

 
$
3.0

 
$
7.6

 
$
7.6

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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Financial assets and liabilities carried at fair value are classified in the tables below in one of the three categories described above:
 
 
June 30, 2015
(In millions)
Level 1
 
Level 2
 
Level 3
 
Total
Recurring fair value measurements
 
 
 
 
 
 
 
Financial Assets
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
200.7

 
$

 
$

 
$
200.7

Total cash equivalents
200.7

 

 

 
200.7

Trading securities:
 
 
 
 
 
 
 
Equity securities — exchange traded funds
22.3

 

 

 
22.3

Total trading securities
22.3

 

 

 
22.3

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

 
7.1

 

 
7.1

Corporate bonds

 
14.8

 

 
14.8

Agency mortgage-backed securities

 
2.4

 

 
2.4

Asset backed securities

 
2.3

 

 
2.3

Other

 
1.1

 

 
1.1

Total available-for-sale fixed income investments

 
27.7

 

 
27.7

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

 
33.1




33.1

Interest rate swap derivative assets

 
25.7

 

 
25.7

Purchased cash convertible note hedge

 
1,689.3

 

 
1,689.3

Total assets at recurring fair value measurement
$
250.4


$
1,775.8


$


$
2,026.2

Financial Liabilities
 
 
 
 
 
 
 
Foreign exchange derivative liabilities
$

 
$
8.4

 
$

 
$
8.4

Interest rate swap derivative liabilities

 
44.0




44.0

Cash conversion feature of Cash Convertible Notes

 
1,689.3




1,689.3

Contingent consideration

 

 
488.7

 
488.7

Total liabilities at recurring fair value measurement
$

 
$
1,741.7

 
$
488.7

 
$
2,230.4



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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 public exchanges 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 June 30, 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 and six months ended June 30, 2015, accretion of $9.6 million and $18.8 million, respectively was recorded in interest expense in the Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2014, accretion of $8.7 million and $17.1 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
2015 Term Credit Agreement
On July 15, 2015, the Company entered into a term credit agreement (the “2015 Term Credit Agreement”) among the Company, as guarantor, Mylan Inc. (the “Borrower”), certain lenders and PNC Bank, National Association as the administrative agent (in such capacity, the “Credit Agreement Administrative Agent”). The 2015 Term Credit Agreement provides for a delayed-draw term loan credit facility (the “Credit Facility”) under which the Borrower may obtain loans up to an aggregate amount of $1.6 billion, consisting of (i) a closing date term loan (the “Closing Date Loan”) in the amount of $1.0 billion, borrowed on July 15, 2015, and (ii) a delayed draw term loan (the “Delayed Draw Loan”, and together with the Closing Date Loan, the “2015 Term Loans”) in an amount up to $600 million, which may be borrowed on or before September 15, 2015. The proceeds of the Delayed Draw Loan may be applied primarily to repay the Borrower’s Cash Convertible Notes or to refinance any other debt under the Company’s and/or the Borrower’s credit facilities.
The loans under the 2015 Term Credit Agreement bear interest at LIBOR (determined in accordance with the 2015 Term Credit Agreement) plus 1.375% per annum, if the Borrower chooses to make LIBOR borrowings, or at a base rate (determined in accordance with the 2015 Term Credit Agreement) plus 0.375% 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.
The Borrower has the option to designate the Company as a co-borrower or a successor borrower under the 2015 Term Credit Agreement, upon satisfaction of certain conditions set forth therein. The 2015 Term Loans are unsecured and are guaranteed by the Company and each subsidiary of the Company that guarantees (or is otherwise a co-obligor of) third-party indebtedness of the Company in excess of $350 million. As of July 15, 2015, no subsidiary of the Company is required to provide a guarantee of the Credit Facility.
The 2015 Term 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

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


affiliates, payments of dividends and other restricted payments and changes in the Company’s line of business. The 2015 Term Credit Agreement contains a financial covenant requiring maintenance of a maximum ratio of 3.75 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 September 30, 2015. Following certain qualifying acquisitions (other than the Perrigo Proposal), at the Company’s election, the maximum ratio of the financial covenant will be increased to 4.25 to 1.00 for the three full quarters following such qualifying acquisition. In addition, (i) for the four fiscal quarters following the closing of the Company’s offer for the entire issued and to be issued share capital of Perrigo, the maximum ratio in the financial covenant will be increased to 4.75 to 1.00, (ii) for each of the subsequent two fiscal quarters, the maximum ratio in the financial covenant will be decreased to 4.25 to 1.00, and (iii) for any fiscal quarter thereafter, the maximum ratio in the financial covenant will return to 3.75 to 1.00, subject to increase following certain qualifying acquisitions as described in the proceeding sentence.
The 2015 Term 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 the Borrower, the Company or any subsidiary that becomes a guarantor as described above. If an event of default occurs under the 2015 Term Credit Agreement, the lenders may, among other things, terminate their commitments and declare immediately payable all borrowings.
The 2015 Term Loans mature on July 15, 2017, subject to extension to the earlier of (a) December 19, 2017, and (b) if different, the maturity date of the 2014 Term Credit Agreement dated December 19, 2014, as amended by Amendment No. 1 thereto dated May 1, 2015 among the Borrower, the Company, certain lenders and Bank of America, N.A., as administrative agent.
Senior Notes Redemption
On June 15, 2015, the Company announced its intention to redeem all of its outstanding 7.875% Senior Notes due 2020 (“2020 Senior Notes”) on July 15, 2015 at a redemption price of 103.938% of the principal amount, together with accrued and unpaid interest at the redemption date. On July 15, 2015, the Company utilized the proceeds of the Closing Date Loan to complete its redemption of the 2020 Senior Notes for a total of approximately $1.04 billion, including a $39.4 million redemption premium.
Bridge Credit Facility
On April 24, 2015, the Company entered into a bridge credit agreement, which 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

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


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 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. During the second quarter of 2015, the Company paid approximately $60.9 million in commitment fees under the Bridge Facility, which are being amortized over the life of the Bridge Facility as deferred financing fees. In addition, on July 23, 2015, the Company paid approximately $28.1 million in commitment fees under the Bridge Facility.
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 June 30, 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. The Company was in compliance with the financial covenant at 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.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


On August 6, 2015, Mylan entered into Amendment No. 2 to the Bridge Credit Agreement (“Bridge Amendment No. 2”). Pursuant to Bridge Amendment No. 2, Mylan will be permitted to modify, in its discretion, the condition to its offer (the “Offer”) for the entire issued and to be issued share capital of Perrigo (the “Shares”), that the Offer be accepted in respect of not less than 80% of the Shares to require that the Offer be accepted in respect of greater than 50% of the Shares. Bridge Amendment No. 2 also effects certain technical amendments in connection with the foregoing, including that the lenders’ commitments to make the loans under the Bridge Credit Agreement (the “Commitments”) will continue to be available at the initial closing of the Offer and during any subsequent offer period in connection with the Offer, and subject to the conditions in the Bridge Credit Agreement.
Bridge Amendment No. 2 also provides that during the period, if any, starting when Mylan acquires greater than 50% of the Shares and until such time as Mylan acquires at least 80% of the Shares the aggregate amount of (a) new indebtedness that Mylan will be permitted to cause Perrigo to incur (other than any such indebtedness owing to Mylan or its subsidiaries the proceeds of which are used to refinance certain existing indebtedness of Perrigo) and (b) investments that Mylan will be permitted to make in Perrigo (other than any such investments the proceeds of which are used to refinance existing indebtedness of Perrigo), will, in each case, be limited to $350 million.
Bridge Amendment No. 2 also provides that, starting from the date Mylan first draws on the loans under the Bridge Credit Agreement, any dividends or distributions (including intercompany loans) from Perrigo to the Company that exceed an aggregate amount of $150 million will require Mylan to prepay the loans under the Bridge Credit Agreement, or if no such loans are then outstanding, will result in a reduction in the Commitments, in each case, equal to the amount of such dividends or distributions.
Bridge Amendment No. 2 also provides that, if Mylan has not launched the Offer by September 13, 2015, Mylan will pay an additional fee equal to 0.04% of the aggregate principal amount of the Commitments outstanding on September 14, 2015, and on each subsequent Monday that the Offer has not been launched. Such fee shall be payable on each such date.
Bridge Amendment No. 2 also modifies Mylan’s covenant to cause Perrigo to guarantee Mylan’s obligations under the Bridge Credit Agreement, such that Perrigo’s guarantee is required not later than the earlier of the date that is five months following Mylan having received acceptances of the Offer in respect of not less than 75% of the Shares and the date that is three months following the date on which Mylan is entitled to commence the squeeze-out procedures under the Irish takeover statute with respect to the holders of the Shares that have not been tendered into the Offer.
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 June 30, 2015 and December 31, 2014, the Company’s short-term borrowings under the Receivables Facility were $400 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
 
June 30,
2015
 
December 31,
2014
2014 Term Loan
 
 
$
800.0

 
$
800.0

Revolving Facility
 
 
160.0

 

Cash Convertible Notes
3.750
%
 
2,097.3

 
2,405.6

2016 Senior Notes (a)
1.800
%
 
500.1

 
500.2

2016 Senior Notes (b)
1.350
%
 
499.9

 
499.8

2018 Senior Notes (c)
2.600
%
 
649.2

 
649.0

2019 Senior Notes (a)
2.550
%
 
499.1

 
499.0

2020 Senior Notes (d)
7.875
%
 
1,009.7

 
1,010.5

2023 Senior Notes (a)
3.125
%
 
774.5

 
779.1

2023 Senior Notes (e)
4.200
%
 
498.3

 
498.2

2043 Senior Notes (e)
5.400
%
 
497.0

 
497.0

Other
 
 
4.5

 
0.1

 
 
 
7,989.6

 
8,138.5

Less current portion
 
 
2,099.2

 
2,405.7

Total long-term debt
 
 
$
5,890.4

 
$
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 was called by the Company on July 15, 2015 at a redemption price of 103.938% of the principal amount, together with accrued and unpaid interest at the redemption date.
(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
On December 19, 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 June 30, 2015, the Company had $160.0 million outstanding under the Revolving Facility, which was paid in connection with the conversion of $160.6 million of the notional amount of the Cash Convertible Notes during the second quarter of 2015. At December 31, 2014, the Company had no amounts outstanding under the Revolving Facility.
On May 1, 2015, the Company entered into an amendment to the Revolving Credit Agreement (“Amendment No. 1”). Amendment No. 1 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. Amendment No. 1 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

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


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. Amendment No. 1 also effects certain technical amendments.
On June 19, 2015, the Company entered into an additional credit extension amendment to the Revolving Credit Agreement (“Amendment No. 2”). Amendment No. 2 provides that ING Bank N.V. will make available $150 million of additional revolving commitments under the Revolving Facility (the “Increased Commitments”), increasing the aggregate principal amount of the revolving commitments available under the Revolving Facility from $1.5 billion to $1.65 billion. Proceeds from the Increased Commitments will be used for working capital, capital expenditures and other lawful corporate purposes.
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 “2014 Term Loan”). The Term Amendment provides that following the closing of the Perrigo Proposal, the financial covenant in the 2014 Term Loan 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.