10-Q
Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
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 April 27, 2016, there were 508,342,710 of the issuer’s €0.01 nominal value ordinary shares outstanding.

 


Table of Contents

MYLAN N.V. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the Quarterly Period Ended
March 31, 2016
 

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

2

Table of Contents

PART I — FINANCIAL INFORMATION


MYLAN N.V. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)
 
Three Months Ended
 
March 31,
 
2016
 
2015
Revenues:
 
 
 
Net sales
$
2,176.1

 
$
1,854.6

Other revenues
15.2

 
17.1

Total revenues
2,191.3

 
1,871.7

Cost of sales
1,284.3

 
1,041.6

Gross profit
907.0

 
830.1

Operating expenses:
 
 
 
Research and development
253.6

 
169.9

Selling, general and administrative
549.3

 
483.2

Litigation settlements, net
(1.5
)
 
17.7

Total operating expenses
801.4

 
670.8

Earnings from operations
105.6

 
159.3

Interest expense
70.3

 
79.5

Other expense, net
16.3

 
18.5

Earnings before income taxes
19.0

 
61.3

Income tax provision
5.1

 
4.7

Net earnings attributable to Mylan N.V. ordinary shareholders
$
13.9

 
$
56.6

Earnings per ordinary share attributable to Mylan N.V. ordinary shareholders:
 
 
 
Basic
$
0.03

 
$
0.14

Diluted
$
0.03

 
$
0.13

Weighted average ordinary shares outstanding:
 
 
 
Basic
489.8

 
418.0

Diluted
509.6

 
443.8




See Notes to Condensed Consolidated Financial Statements
3


Table of Contents

MYLAN N.V. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Earnings
(Unaudited; in millions)
 
Three Months Ended
 
March 31,
 
2016
 
2015
 
 
 
 
Net earnings
$
13.9

 
$
56.6

Other comprehensive earnings (loss), before tax:
 
 
 
Foreign currency translation adjustment
502.0

 
(602.6
)
Change in unrecognized (loss) gain and prior service cost related to defined benefit plans
(0.3
)
 
0.1

Net unrecognized loss on derivatives
(49.1
)
 
(34.5
)
Net unrealized gain on marketable securities
4.4

 
0.1

Other comprehensive earnings (loss), before tax
457.0

 
(636.9
)
Income tax benefit
(16.8
)
 
(13.0
)
Other comprehensive earnings (loss), net of tax
473.8

 
(623.9
)
Comprehensive earnings (loss) attributable to Mylan N.V. ordinary shareholders
$
487.7

 
$
(567.3
)




See Notes to Condensed Consolidated Financial Statements
4


Table of Contents

MYLAN N.V. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited; in millions, except share and per share amounts)
 
March 31,
2016
 
December 31,
2015
ASSETS
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,199.4

 
$
1,236.0

Accounts receivable, net
2,587.4

 
2,689.1

Inventories
2,144.1

 
1,951.0

Prepaid expenses and other current assets
696.7

 
596.6

Total current assets
6,627.6

 
6,472.7

Property, plant and equipment, net
1,998.8

 
1,983.9

Intangible assets, net
7,278.4

 
7,221.9

Goodwill
5,566.9

 
5,380.1

Deferred income tax benefit
441.0

 
457.6

Other assets
731.4

 
751.5

Total assets
$
22,644.1

 
$
22,267.7

 
 
 
 
LIABILITIES AND EQUITY
Liabilities
 
 
 
Current liabilities:
 
 
 
Trade accounts payable
$
1,076.2

 
$
1,109.6

Short-term borrowings
66.4

 
1.3

Income taxes payable
43.4

 
92.4

Current portion of long-term debt and other long-term obligations
1,082.5

 
1,077.0

Other current liabilities
1,690.9

 
1,841.9

Total current liabilities
3,959.4

 
4,122.2

Long-term debt
6,325.7

 
6,295.6

Deferred income tax liability
744.0

 
718.1

Other long-term obligations
1,340.1

 
1,366.0

Total liabilities
12,369.2

 
12,501.9

Equity
 
 
 
Mylan N.V. shareholders’ equity
 
 
 
Ordinary shares — nominal value €0.01 per ordinary share
 
 
 
Shares authorized: 1,200,000,000
 
 
 
Shares issued: 492,671,045 and 491,928,095 as of March 31, 2016 and December 31, 2015
5.5

 
5.5

Additional paid-in capital
7,149.9

 
7,128.6

Retained earnings
4,476.0

 
4,462.1

Accumulated other comprehensive loss
(1,290.5
)
 
(1,764.3
)
 
10,340.9

 
9,831.9

Noncontrolling interest
1.5

 
1.4

Less: Treasury stock — at cost

 
 
Shares: 1,311,193 as of March 31, 2016 and December 31, 2015
67.5

 
67.5

Total equity
10,274.9

 
9,765.8

Total liabilities and equity
$
22,644.1

 
$
22,267.7

 
 
 
 


See Notes to Condensed Consolidated Financial Statements
5


Table of Contents

MYLAN N.V. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited; in millions)
 
Three Months Ended
 
March 31,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net earnings
$
13.9

 
$
56.6

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
297.1

 
175.0

Share-based compensation expense
26.5

 
34.4

Deferred income tax provision
38.5

 
12.8

Loss from equity method investments
30.9

 
24.7

Other non-cash items
81.0

 
46.3

Litigation settlements, net
0.3

 
17.7

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
83.5

 
376.9

Inventories
(222.8
)
 
(136.7
)
Trade accounts payable
(57.2
)
 
(15.4
)
Income taxes
(84.7
)
 
(203.3
)
Other operating assets and liabilities, net
(126.5
)
 
(122.0
)
Net cash provided by operating activities
80.5

 
267.0

Cash flows from investing activities:
 
 
 
Capital expenditures
(51.8
)
 
(48.1
)
Purchase of marketable securities
(8.5
)
 
(40.1
)
Proceeds from sale of marketable securities
5.9

 
12.2

Payments for product rights and other, net
(105.6
)
 
(11.5
)
Net cash used in investing activities
(160.0
)
 
(87.5
)
Cash flows from financing activities:
 
 
 
Payments of financing fees
(31.6
)
 
(22.4
)
Change in short-term borrowings, net
65.1

 
(161.6
)
Proceeds from issuance of long-term debt

 
100.0

Payments of long-term debt

 
(100.0
)
Proceeds from exercise of stock options
3.6

 
67.4

Taxes paid related to net share settlement of equity awards
(6.9
)
 
(31.7
)
Other items, net
0.3

 
39.3

Net cash provided by (used in) financing activities
30.5

 
(109.0
)
Effect on cash of changes in exchange rates
12.4

 
(18.8
)
Net (decrease) increase in cash and cash equivalents
(36.6
)
 
51.7

Cash and cash equivalents — beginning of period
1,236.0

 
225.5

Cash and cash equivalents — end of period
$
1,199.4

 
$
277.2

Supplemental disclosures of cash flow information —
 
 
 
Non-cash transactions:
 
 
 
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
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 U.S. Securities and Exchange Commission (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 February 27, 2015, the Company’s interim financial statements present the accounts of Mylan Inc. and subsidiaries.
These interim financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto in Mylan N.V.’s Annual Report on Form 10-K for the year ended December 31, 2015, as amended. The December 31, 2015 Condensed Consolidated Balance Sheet was derived from audited financial statements.
The interim results of operations and comprehensive earnings for the three months ended March 31, 2016 and cash flows for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.
2.
Revenue Recognition and Accounts Receivable
The Company recognizes net sales when title and risk of loss pass to its customers and when provisions for estimates, including discounts, sales allowances, price adjustments, returns, chargebacks and other promotional programs are reasonably determinable. Accounts receivable are presented net of allowances relating to these provisions. No revisions were made to the methodology used in determining these provisions during the three months ended March 31, 2016. Such allowances were $1.55 billion and $1.84 billion at March 31, 2016 and December 31, 2015, respectively. Other current liabilities include $617.0 million and $681.8 million at March 31, 2016 and December 31, 2015, 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 $739.9 million and $914.2 million of securitized accounts receivable at March 31, 2016 and December 31, 2015, respectively.
3.
Recent Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-09, Compensation - Stock Compensation (Topic 718) (“ASU 2016-09”), which simplifies the accounting for share-based compensation payments. The new standard requires all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) to be recognized as income tax expense or benefit on the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements and disclosures.
In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 840) (“ASU 2016-02”), which provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. This guidance is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements and disclosures.

7

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


In January 2016, the FASB issued Accounting Standards Update 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income (other than those accounted for under equity method of accounting). The amendments in this update also require an entity to present separately in other comprehensive earnings the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU 2016-01 also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements and disclosures.
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09” updated with “ASU 2015-14”, “ASU 2016-08” and “ASU 2016-10”), 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 consolidated financial statements and disclosures.
4.
Acquisitions and Other Transactions
Meda AB
On February 10, 2016, the Company issued an offer announcement under the Nasdaq Stockholm’s Takeover Rules and the Swedish Takeover Act (collectively, the “Swedish Takeover Rules”) setting forth a public offer to the shareholders of Meda AB (publ.) (“Meda”) to acquire all of the outstanding shares of Meda (the “Offer”), with enterprise value, including the net debt of Meda, of approximately Swedish kroner (“SEK” or “kr”) 83.6 billion or $9.9 billion at announcement. The board of directors of the Company has unanimously approved the Offer and the board of directors of Meda has recommended that Meda shareholders accept the Offer. In addition, the two largest Meda shareholders, together holding approximately 30% of the outstanding Meda shares, have irrevocably undertaken to tender their Meda shares into the Offer, subject to limited exceptions. Under the terms of the Offer, the Company is offering each Meda shareholder total consideration of between 152kr and 165kr (based on a SEK/USD exchange rate of 8.4158) consisting of a combination of cash and the Company’s ordinary shares. The Company is offering each Meda shareholder 165kr in cash per Meda share in respect of 80% of the number of Meda shares tendered by such shareholder and a number of Mylan ordinary shares per Meda share calculated shortly prior to the closing of the Offer in respect of the remaining 20% of the number of Meda shares tendered by such shareholder. The composition of the Offer consideration is subject to adjustment in certain circumstances. The Offer is fully financed and not conditional on further due diligence. The Offer is subject to certain closing conditions customary for an offer governed by the Swedish Takeover Rules, including holders of more than 90% of the outstanding Meda shares tendering their shares into the Offer and receipt of all necessary regulatory, governmental or similar clearances, approvals and decisions, including from competition authorities. The Offer will not require a vote of Mylan shareholders. The Company expects that the Offer will close by the end of the third quarter of 2016.
Jai Pharma Limited
On November 20, 2015, the Company completed the acquisition of certain female healthcare businesses from Famy Care Limited (such businesses “Jai Pharma Limited”), a specialty women’s healthcare company with global leadership in generic oral contraceptive products, through its wholly owned subsidiary Mylan Laboratories Limited for a cash payment of $750 million plus additional contingent payments of up to $50 million for the filing for approval with, and receipt of approval from, the U.S. Food and Drug Administration of a product under development by Jai Pharma Limited.
In accordance with U.S. GAAP, the Company used the purchase method of accounting to account for this transaction. Under the purchase method of accounting, the assets acquired and liabilities assumed in the transaction were recorded at their respective estimated fair values at the acquisition date. The U.S. GAAP purchase price was $711.1 million, which excludes the

8

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


$50 million paid into escrow at closing that is contingent upon at least one of two former principal shareholders of Jai Pharma Limited continuing to provide consulting services to the acquired business for the two year post-closing period and this amount will be treated as compensation expense over the service period. The U.S. GAAP purchase price also excludes $7 million of working capital and other adjustments and includes estimated contingent consideration of approximately $18 million related to the $50 million contingent payment. During the three months ended March 31, 2016, adjustments were made to the preliminary purchase price allocation recorded at November 20, 2015. The adjustments recorded in respect of current liabilities and deferred tax liabilities are reflected in the “measurement period adjustments” column of the table below. As of March 31, 2016, the preliminary allocation of the $711.1 million purchase price to the assets acquired and liabilities assumed for Jai Pharma Limited is as follows:
(In millions)
Preliminary Purchase Price Allocation as of November 20, 2015 (a)
 
Measurement Period Adjustments (b)
 
Preliminary Purchase Price Allocation as of March 31, 2016 (as adjusted)
Current assets (excluding inventories)
$
25.7

 
$

 
$
25.7

Inventories
4.9

 

 
4.9

Property, plant and equipment
17.2

 

 
17.2

Identified intangible assets
437.0

 

 
437.0

In-process research and development
98.0

 

 
98.0

Goodwill
317.2

 
8.1

 
325.3

Other assets
0.7

 

 
0.7

Total assets acquired
900.7

 
8.1

 
908.8

Current liabilities
(9.1
)
 
(1.9
)
 
(11.0
)
Deferred tax liabilities
(180.5
)
 
(6.2
)
 
(186.7
)
Net assets acquired
$
711.1

 
$

 
$
711.1

____________ 
(a) 
As previously reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as amended.
(b) 
The measurement period adjustments are related to the recognition of certain current liabilities and adjustments to deferred tax liabilities to reflect facts and circumstances that existed as of the acquisition date.
The goodwill of $325.3 million arising from the acquisition consisted largely of the value of the employee workforce and the expected value of products to be developed in the future. All of the goodwill was assigned to the Generics segment. None of the goodwill recognized is currently expected to be deductible for income tax purposes. The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations and assumptions that are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The primary areas of those preliminary estimates that are not yet finalized relate to the determination of contingent liabilities, the finalization of the fair value of tangible and intangible assets, the finalization of the working capital adjustment and deferred income taxes.
EPD Business
On February 27, 2015 (the “EPD Transaction Closing Date”), the Company completed the acquisition of Mylan Inc. and Abbott Laboratories’ (“Abbott”) non-U.S. developed markets specialty and branded generics business (the “EPD Business”) in an all-stock transaction. Mylan N.V.’s purchase price for 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.
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 acquired EPD Business for the period from the acquisition date to March 31, 2015 were $147.4 million and the net loss, net of tax, was $54.3 million. The net loss, net of tax, includes the effects of the purchase accounting adjustments and acquisition related costs.

9

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


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, or have been achieved, 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
 
March 31,
(Unaudited, in millions, except per share amounts)
2015
Total revenues
$
2,118.7

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

Earnings per ordinary share attributable to Mylan N.V. ordinary shareholders:
 
Basic
$
0.16

Diluted
$
0.15

Weighted average ordinary shares outstanding:
 
Basic
491.3

Diluted
517.1


Other Transactions
On January 8, 2016, the Company entered into an agreement with Momenta Pharmaceuticals, Inc. (“Momenta”) to develop, manufacture and commercialize up to six of Momenta’s current biosimilar candidates, including Momenta’s biosimilar candidate, ORENCIA® (abatacept). As part of the agreement, Mylan made an up-front cash payment of $45 million to Momenta. Under the terms of the agreement, Momenta is eligible to receive additional contingent milestone payments of up to $200 million. The Company and Momenta will jointly be responsible for product development and will equally share in the costs and profits of the products. Under the agreement, Mylan will lead the worldwide commercialization efforts.
In December 2015, the Company entered into an agreement to acquire certain European intellectual property rights and marketing authorizations for a purchase price of $202.5 million. The Company accounted for this transaction as an asset acquisition and paid $10.0 million at the closing of the transaction in 2015. During the first quarter of 2016, the Company paid $90.0 million related to this asset purchase, which is included in investing activities on the Condensed Consolidated Statements of Cash Flows and was accrued for at December 31, 2015. The Company expects to pay the remaining amount of the purchase price during the fourth quarter of 2016 and first quarter of 2017, subject to certain timing conditions. The asset is being amortized over a useful life of five years.
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 market 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.

10

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


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, 2015
7,732,499

 
$
31.85

Granted
575,057

 
46.72

Exercised
(162,129
)
 
22.65

Forfeited
(66,892
)
 
50.40

Outstanding at March 31, 2016
8,078,535

 
$
32.95

Vested and expected to vest at March 31, 2016
7,724,425

 
$
32.26

Exercisable at March 31, 2016
5,560,336

 
$
25.88

As of March 31, 2016, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had average remaining contractual terms of 6.3 years, 6.2 years and 5.2 years, respectively. Also, at March 31, 2016, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had aggregate intrinsic values of $123.2 million, $122.3 million and $118.4 million, respectively.
A summary of the status of the Company’s nonvested restricted stock and restricted stock unit awards, including performance restricted stock units and restricted ordinary shares (collectively, “restricted stock awards”), as of March 31, 2016 and the changes during the three months ended March 31, 2016 are presented below:
 
Number of
Restricted
Stock Awards
 
Weighted  Average
Grant-Date
Fair Value per  Share
Nonvested at December 31, 2015
4,474,436

 
$
40.70

Granted
1,030,403

 
45.39

Released
(796,486
)
 
40.61

Forfeited
(43,532
)
 
42.67

Nonvested at March 31, 2016
4,664,821

 
$
41.85

As of March 31, 2016, the Company had $158.0 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 2.2 years. The total intrinsic value of stock awards exercised and restricted stock units released during the three months ended March 31, 2016 and 2015 was $40.1 million and $203.2 million, respectively.
6.
Pensions and Other Postretirement Benefits
Defined Benefit Plans
The Company sponsors various defined benefit pension plans in several countries. Benefits provided generally depend on length of service, pay grade and remuneration levels. The Company maintains a small fully frozen defined benefit pension plan in the U.S., and employees in the U.S. and Puerto Rico are provided retirement benefits through defined contribution plans. As a result of the EPD Transaction during 2015, the Company acquired several funded and unfunded defined benefit pension plans outside the U.S.
The Company also sponsors other postretirement benefit plans. There are plans that provide for postretirement supplemental medical coverage. Benefits from these plans are paid to employees and their spouses and dependents who meet various minimum age and service requirements. In addition, there are plans that provide for life insurance benefits and postretirement medical coverage for certain officers and management employees.

11

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


Net Periodic Benefit Cost
Components of net periodic benefit cost for the three months ended March 31, 2016 and 2015 were as follows:
 
Pension and Other Postretirement Benefits
 
March 31,
(In millions)
2016
 
2015
Service cost
$
3.9

 
$
2.8

Interest cost
1.5

 
1.2

Expected return on plan assets
(2.0
)
 
(1.4
)
Plan curtailment, settlement and termination

 
0.3

Amortization of prior service costs
0.1

 
0.1

Recognized net actuarial losses
0.2

 
0.3

Net periodic benefit cost
$
3.7

 
$
3.3

The Company is not required to make any mandatory contributions to its U.S. defined benefit pension plans in 2016. The Company expects to make total benefit payments of approximately $10.2 million in 2016, of which contributions to its U.S. defined benefit pension plan will total approximately $1.1 million.
7.
Balance Sheet Components
Selected balance sheet components consist of the following:
(In millions)
March 31,
2016
 
December 31,
2015
Inventories:
 
 
 
Raw materials
$
651.4

 
$
592.4

Work in process
419.9

 
387.0

Finished goods
1,072.8

 
971.6

 
$
2,144.1

 
$
1,951.0

Property, plant and equipment:
 
 
 
Land and improvements
$
130.1

 
$
124.5

Buildings and improvements
973.0

 
950.6

Machinery and equipment
2,002.9

 
1,928.4

Construction in progress
269.9

 
290.5

 
3,375.9

 
3,294.0

Less accumulated depreciation
1,377.1

 
1,310.1

 
$
1,998.8

 
$
1,983.9

Other current liabilities:
 
 
 
Legal and professional accruals, including litigation accruals
$
120.7

 
$
122.6

Payroll and employee benefit plan accruals
299.1

 
367.9

Accrued sales allowances
617.0

 
681.8

Accrued interest
44.7

 
25.1

Fair value of financial instruments
85.8

 
19.8

Other
523.6

 
624.7

 
$
1,690.9

 
$
1,841.9



12

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


Contingent consideration included in other current liabilities totaled $35.0 million at March 31, 2016 and December 31, 2015, respectively. Contingent consideration included in other long-term obligations was $500.8 million and $491.4 million at March 31, 2016 and December 31, 2015, respectively. Included in prepaid expenses and other current assets was $107.1 million and $106.6 million of restricted cash at March 31, 2016 and December 31, 2015, respectively. An additional $100 million of restricted cash was classified in other long-term assets at March 31, 2016 and December 31, 2015, principally related to amounts deposited in escrow, or restricted amounts, for potential contingent consideration payments related to the acquisition of Agila Specialties Private Limited (“Agila”).
8.
Equity Method Investments
The Company has five equity method investments in limited liability companies that own refined coal production plants (the “clean energy investments”), whose activities qualify for income tax credits under Section 45 of the Internal Revenue Code, as amended. The carrying value of the clean energy investments totaled $365.2 million and $379.3 million at March 31, 2016 and December 31, 2015, respectively, and are included in other assets in the Condensed Consolidated Balance Sheets. Liabilities related to these clean energy investments totaled $403.2 million and $419.3 million at March 31, 2016 and December 31, 2015, respectively. Of these liabilities, $340.0 million and $357.0 million are included in other long-term obligations in the Condensed Consolidated Balance Sheets at March 31, 2016 and December 31, 2015, respectively. The remaining $63.2 million and $62.3 million are included in other current liabilities in the Condensed Consolidated Balance Sheets at March 31, 2016 and December 31, 2015, respectively.
In addition, the Company holds a 50% 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 initial term of the venture expires upon the tenth anniversary of its formation. The carrying value of the investment in Sagent Agila included in other assets totaled $90.8 million and $96.2 million at March 31, 2016 and December 31, 2015, respectively, in the Condensed Consolidated Balance Sheets.
Summarized financial information, in the aggregate, for the Company’s significant equity method investments on a 100% basis for the three months ended March 31, 2016 and 2015 are as follows:
 
Three Months Ended
 
March 31,
(In millions)
2016
 
2015
Total revenues
$
144.0

 
$
153.7

Gross (loss) profit
(0.3
)
 
0.2

Operating and non-operating expense
5.7

 
6.1

Net loss
$
(6.0
)
 
$
(5.9
)
The Company’s net losses from the six equity method investments includes amortization expense related to the excess of the cost basis of the Company’s investment to the underlying assets of each individual investee. For the three months ended March 31, 2016 and 2015, the Company’s share of the net loss of the equity method investments was $30.9 million and $24.7 million, respectively, which was recognized as a component of other expense, net. The Company recognizes the income tax credits and benefits from the clean energy investments as part of its provision for income taxes.
9.
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 the convertible note hedge were adjusted so that the cash settlement value would be based on Mylan N.V. ordinary shares. The terms of the warrant

13

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


transactions were also adjusted so that, from and after the consummation of the EPD Transaction, the Company could settle the obligations under the warrant transactions by delivering Mylan N.V. ordinary shares. Pursuant to the warrant transactions, and a subsequent amendment in 2011, there were approximately 43.2 million warrants outstanding, with approximately 41.0 million of the warrants that had an exercise price of $30.00. The remaining warrants had an exercise price of $20.00. The warrants met the definition of derivatives under the FASB’s guidance regarding accounting for derivative instruments and hedging activities; however, because these instruments were determined to be indexed to the Company’s own ordinary shares and met the criteria for equity classification under the FASB’s guidance regarding contracts in an entity’s own equity, the warrants were recorded in shareholders’ equity in the Condensed Consolidated Balance Sheets. On April 15, 2016, in connection with the expiration and settlement of the warrants, the Company issued approximately 17.0 million Mylan N.V. ordinary shares. The dilutive impact of the warrants is included in the calculation of diluted earnings per ordinary share based upon the average market value of the Company’s ordinary shares during the period as compared to the exercise price. For the three months ended March 31, 2016 and 2015, 16.7 million and 20.8 million warrants, respectively, were included in the calculation of diluted earnings per ordinary share.
Basic and diluted earnings per ordinary share attributable to Mylan N.V. are calculated as follows:
 
Three Months Ended
 
March 31,
(In millions, except per share amounts)
2016
 
2015
Basic earnings attributable to Mylan N.V. ordinary shareholders (numerator):
 
 
 
Net earnings attributable to Mylan N.V. ordinary shareholders
$
13.9

 
$
56.6

Shares (denominator):
 
 
 
Weighted average ordinary shares outstanding
489.8

 
418.0

Basic earnings per ordinary share attributable to Mylan N.V. ordinary shareholders
$
0.03

 
$
0.14

Diluted earnings attributable to Mylan N.V. ordinary shareholders (numerator):
 
 
 
Net earnings attributable to Mylan N.V. ordinary shareholders
$
13.9

 
$
56.6

Shares (denominator):
 
 
 
Weighted average ordinary shares outstanding
489.8

 
418.0

Share-based awards and warrants
19.8

 
25.8

Total dilutive shares outstanding
509.6

 
443.8

Diluted earnings per ordinary share attributable to Mylan N.V. ordinary shareholders
$
0.03

 
$
0.13

Additional stock awards and restricted stock awards were outstanding during the periods ended March 31, 2016 and 2015, 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 March 31, 2016 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 6.2 million shares and 1.4 million shares for the three months ended March 31, 2016 and 2015, respectively.

14

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


10.
Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the three months ended March 31, 2016 are as follows:
(In millions)
Generics
Segment
 
Specialty
Segment
 
Total
Balance at December 31, 2015:
 
 
 
 
 
Goodwill
$
5,031.0

 
$
734.1

 
$
5,765.1

Accumulated impairment losses

 
(385.0
)
 
(385.0
)
 
5,031.0

 
349.1

 
5,380.1

Measurement period adjustments
8.1

 

 
8.1

Foreign currency translation
178.7

 

 
178.7

 
$
5,217.8

 
$
349.1

 
$
5,566.9

Balance at March 31, 2016:
 
 
 
 
 
Goodwill
$
5,217.8

 
$
734.1

 
$
5,951.9

Accumulated impairment losses

 
(385.0
)
 
(385.0
)
 
$
5,217.8

 
$
349.1

 
$
5,566.9


Intangible assets consist of the following components at March 31, 2016 and December 31, 2015:
(In millions)
Weighted
Average Life
(Years)
 
Original
Cost
 
Accumulated
Amortization
 
Net Book
Value
March 31, 2016
 
 
 
 
 
 
 
Amortized intangible assets:
 
 
 
 
 
 
 
Product rights and licenses
11
 
$
9,219.9

 
$
2,947.2

 
$
6,272.7

Patents and technologies
20
 
116.6

 
105.0

 
11.6

Other (1)
6
 
484.4

 
228.5

 
255.9

 
 
 
9,820.9

 
3,280.7

 
6,540.2

In-process research and development
 
 
738.2

 

 
738.2

 
 
 
$
10,559.1

 
$
3,280.7

 
$
7,278.4

December 31, 2015
 
 
 
 
 
 
 
Amortized intangible assets:
 
 
 
 
 
 
 
Product rights and licenses
11
 
$
8,848.6

 
$
2,652.7

 
$
6,195.9

Patents and technologies
20
 
116.6

 
103.8

 
12.8

Other (1)
6
 
465.3

 
189.8

 
275.5

 
 
 
9,430.5

 
2,946.3

 
6,484.2

In-process research and development
 
 
737.7

 

 
737.7

 
 
 
$
10,168.2

 
$
2,946.3

 
$
7,221.9

____________
(1) 
Other intangible assets consist principally of customer lists, contractual rights and other contracts.
Amortization expense, which is classified primarily within cost of sales in the Condensed Consolidated Statements of Operations, for the three months ended March 31, 2016 and 2015, was $242.3 million and $130.5 million, respectively. Amortization expense is expected to be approximately $731 million for the remainder of 2016 and $833 million, $779 million, $692 million and $590 million for the years ended December 31, 2017 through 2020, respectively, excluding any impact from the proposed Meda transaction.

15

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


11.
Financial Instruments and Risk Management
The Company is exposed to certain financial risks relating to its ongoing business operations. The primary financial risks that are managed by using derivative instruments are foreign currency risk and interest rate risk.
Foreign Currency Risk Management
In order to manage foreign currency risk, the Company enters into foreign exchange forward contracts to mitigate risk associated with changes in spot exchange rates of mainly non-functional currency denominated assets or liabilities. The foreign exchange forward contracts are measured at fair value and reported as current assets or current liabilities on the Condensed Consolidated Balance Sheets. Any gains or losses on the foreign exchange forward contracts are recognized in earnings in the period incurred in the Condensed Consolidated Statements of Operations.
The Company has also entered into forward contracts to hedge forecasted foreign currency denominated sales from certain international subsidiaries. These contracts are designated as cash flow hedges to manage foreign currency transaction risk and are measured at fair value and reported as current assets or current liabilities on the Condensed Consolidated Balance Sheets. Any changes in fair value are included in earnings or deferred through accumulated other comprehensive earnings (“AOCE”), depending on the nature and effectiveness of the offset. Any ineffectiveness in a cash flow hedging relationship is recognized immediately in earnings in the Condensed Consolidated Statements of Operations.
Interest Rate Risk Management
The Company enters into interest rate swaps in order to manage interest rate risk associated with the Company’s fixed-rate and floating-rate debt. These derivative instruments are measured at fair value and reported as current assets or current liabilities in the Condensed Consolidated Balance Sheets.
Cash Flow Hedging Relationships
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.
Fair Value Hedging Relationships
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. 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.
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 is not subject to any obligations to post collateral under derivative instrument contracts. 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 in a net liability position at March 31, 2016 is $4.1 million. 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.

16

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


The Effect of Derivative Instruments on the Condensed Consolidated Balance Sheets
Fair Values of Derivative Instruments
Derivatives Designated as Hedging Instruments
 
Asset Derivatives
 
March 31, 2016
 
December 31, 2015
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Interest rate swaps
Prepaid expenses and other current assets
 
$
65.8

 
Prepaid expenses and other current assets
 
$
36.3

Foreign currency forward contracts
Prepaid expenses and other current assets
 
14.5

 
Prepaid expenses and other current assets
 
8.4

Total
 
 
$
80.3

 
 
 
$
44.7

 
 
Liability Derivatives
 
March 31, 2016
 
December 31, 2015
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Interest rate swaps
Other current liabilities
 
$
69.9

 
Other current liabilities
 
$
10.5

Total
 
 
$
69.9

 
 
 
$
10.5


The Effect of Derivative Instruments on the Condensed Consolidated Balance Sheets
Fair Values of Derivative Instruments
Derivatives Not Designated as Hedging Instruments
 
Asset Derivatives
 
March 31, 2016
 
December 31, 2015
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Foreign currency forward contracts
Prepaid expenses and other current assets
 
$
4.6

 
Prepaid expenses and other current assets
 
$
20.0

Total
 
 
$
4.6

 
 
 
$
20.0

 
 
Liability Derivatives
 
March 31, 2016
 
December 31, 2015
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Foreign currency forward contracts
Other current liabilities
 
$
15.9

 
Other current liabilities
 
$
9.3

Total
 
 
$
15.9

 
 
 
$
9.3

 
The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations
Derivatives in Fair Value Hedging Relationships
 
Location of Gain
Recognized in Earnings
on Derivatives
 
Amount of Gain
Recognized in Earnings on
Derivatives
(In millions)
 
Three Months Ended
 
March 31,
 
2016
 
2015
Interest rate swaps
Interest expense
 
$
29.6

 
$
20.5

Total
 
 
$
29.6

 
$
20.5

 

17

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


 
Location of Loss
Recognized in Earnings
on Hedged Items
 
Amount of Loss
Recognized in Earnings on
Hedged Items
(In millions)
 
Three Months Ended
 
March 31,
 
2016
 
2015
2023 Senior Notes (3.125% coupon)
Interest expense
 
$
(29.6
)
 
$
(15.9
)
Total
 
 
$
(29.6
)
 
$
(15.9
)

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Comprehensive Earnings
Derivatives in Cash Flow Hedging Relationships
 
Amount of Loss
Recognized in AOCE
(Net of Tax) on Derivative
(Effective Portion)
 
 
Three Months Ended
 
 
March 31,
(In millions)
 
2016
 
2015
Foreign currency forward contracts
 
$
(4.4
)
 
$
(0.8
)
Interest rate swaps
 
(35.9
)
 
(32.4
)
Total
 
$
(40.3
)
 
$
(33.2
)

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations
Derivatives in Cash Flow Hedging Relationships
 
Location of (Loss) Gain Reclassified
from AOCE into Earnings
(Effective Portion)
 
Amount of (Loss) Gain
Reclassified from AOCE
into Earnings (Effective Portion)
 
 
Three Months Ended
 
 
March 31,
(In millions)
 
2016
 
2015
Foreign currency forward contracts
Net sales
 
$
(10.6
)
 
$
(11.7
)
Interest rate swaps
Interest expense
 
0.9

 
(0.2
)
Total
 
 
$
(9.7
)
 
$
(11.9
)
 
 
Location of Gain
Excluded from the
Assessment of
Hedge Effectiveness
 
Amount of Gain Excluded from the Assessment of Hedge Effectiveness
 
 
Three Months Ended
 
 
March 31,
(In millions)
 
2016
 
2015
Foreign currency forward contracts
Other expense, net
 
$
7.3

 
$
8.6

Total
 
 
$
7.3

 
$
8.6

 
At March 31, 2016, the Company expects that approximately $36.1 million of pre-tax net losses on cash flow hedges will be reclassified from AOCE into earnings during the next twelve months.

18

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


The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations
Derivatives Not Designated as Hedging Instruments
 
Location of (Loss) or Recognized
 in Earnings on Derivatives
 
Amount of (Loss) or Gain
Recognized in
Earnings on Derivatives
 
 
Three Months Ended
 
 
March 31,
(In millions)
 
2016
 
2015
Foreign currency forward contracts
Other expense, net
 
$
(15.0
)
 
$
0.1

Cash conversion feature of Cash Convertible Notes
Other expense, net
 

 
(127.7
)
Purchased cash convertible note hedge
Other expense, net
 

 
127.7

Total
 
 
$
(15.0
)
 
$
0.1

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.

19

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


Financial assets and liabilities carried at fair value are classified in the tables below in one of the three categories described above:
 
 
March 31, 2016
(In millions)
Level 1
 
Level 2
 
Level 3
 
Total
Recurring fair value measurements
 
 
 
 
 
 
 
Financial Assets
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
983.4

 
$

 
$

 
$
983.4

Total cash equivalents
983.4

 

 

 
983.4

Trading securities:
 
 
 
 
 
 
 
Equity securities — exchange traded funds
23.6

 

 

 
23.6

Total trading securities
23.6

 

 

 
23.6

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

 
6.3

 

 
6.3

Corporate bonds

 
15.9

 

 
15.9

Agency mortgage-backed securities

 
5.0

 

 
5.0

Asset backed securities

 
2.1

 

 
2.1

Other

 
1.4

 

 
1.4

Total available-for-sale fixed income investments

 
30.7

 

 
30.7

Available-for-sale equity securities:
 
 
 
 
 
 
 
Marketable securities
29.8

 

 

 
29.8

Total available-for-sale equity securities
29.8

 

 

 
29.8

Foreign exchange derivative assets

 
19.1




19.1

Interest rate swap derivative assets

 
65.8

 

 
65.8

Total assets at recurring fair value measurement
$
1,036.8


$
115.6


$


$
1,152.4

Financial Liabilities
 
 
 
 
 
 
 
Foreign exchange derivative liabilities
$

 
$
15.9

 
$

 
$
15.9

Interest rate swap derivative liabilities

 
69.9




69.9

Contingent consideration

 

 
535.8

 
535.8

Total liabilities at recurring fair value measurement
$

 
$
85.8

 
$
535.8

 
$
621.6



20

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


 
December 31, 2015
(In millions)
Level 1
 
Level 2
 
Level 3
 
Total
Recurring fair value measurements
 
 
 
 
 
 
 
Financial Assets
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
923.3

 
$

 
$

 
$
923.3

Total cash equivalents
923.3

 

 

 
923.3

Trading securities:
 
 
 
 
 
 
 
Equity securities — exchange traded funds
22.8

 

 

 
22.8

Total trading securities
22.8

 

 

 
22.8

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

 
4.7

 

 
4.7

Corporate bonds

 
15.7

 

 
15.7

Agency mortgage-backed securities

 
3.9

 

 
3.9

Asset backed securities

 
2.3

 

 
2.3

Other

 
1.4

 

 
1.4

Total available-for-sale fixed income investments

 
28.0

 

 
28.0

Available-for-sale equity securities:
 
 
 
 
 
 
 
Marketable securities
26.0

 

 

 
26.0

Total available-for-sale equity securities
26.0

 

 

 
26.0

Foreign exchange derivative assets

 
28.4

 

 
28.4

Interest rate swap derivative assets

 
36.3

 

 
36.3

Total assets at recurring fair value measurement
$
972.1

 
$
92.7

 
$

 
$
1,064.8

Financial Liabilities
 
 
 
 
 
 
 
Foreign exchange derivative liabilities
$

 
$
9.3

 
$

 
$
9.3

Interest rate swap derivative liabilities

 
10.5

 

 
10.5

Contingent consideration

 

 
526.4

 
526.4

Total liabilities at recurring fair value measurement
$

 
$
19.8

 
$
526.4

 
$
546.2

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 the U.S. Dollar 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.
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.

21

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


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 acquisition of Agila, the acquisition of Jai Pharma Limited and certain other acquisitions. The measurement is calculated using unobservable inputs based on the Company’s own assumptions. For the respiratory delivery platform, Jai Pharma Limited and certain other acquisitions, significant unobservable inputs in the valuation include the probability and timing of future development and commercial milestones and future profit sharing payments. A discounted cash flow method was used to value contingent consideration at March 31, 2016 and December 31, 2015, which was calculated as the present value of the estimated future net cash flows using a market rate of return. Discount rates ranging from 1.8% to 9.8% were utilized in the valuations. For the contingent consideration related to the acquisition of Agila, significant unobservable inputs in the valuation include the probability of future payments to the seller of amounts withheld at the closing date. Significant changes in unobservable inputs could result in material changes to the contingent consideration liability. During the three months ended March 31, 2016 and 2015, accretion of $10.0 million and $9.2 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 other financial assets and liabilities, any future transacted financial asset or liability will be evaluated for the fair value election.
12.
Debt
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. As of March 31, 2016 and December 31, 2015, the Company had no short-term borrowings under the Receivables Facility in the Condensed Consolidated Balance Sheets.
Long-Term Debt    
A summary of long-term debt is as follows:
(In millions)
Coupon
 
March 31,
2016
 
December 31,
2015
2015 Term Loans
 
 
$
1,600.0

 
$
1,600.0

2014 Term Loan
 
 
800.0

 
800.0

2016 Senior Notes (a)
1.800
%
 
500.0

 
500.1

2016 Senior Notes (b)
1.350
%
 
499.9

 
499.9

2018 Senior Notes (c)
2.600
%
 
649.4

 
649.3

2018 Senior Notes (c)
3.000
%
 
499.4

 
499.4

2019 Senior Notes (d)
2.550
%
 
499.3

 
499.2

2020 Senior Notes (e)
3.750
%
 
499.8

 
499.8

2023 Senior Notes (d)
3.125
%
 
814.7

 
785.2

2023 Senior Notes (f)
4.200
%
 
498.4

 
498.4

2043 Senior Notes (g)
5.400
%
 
497.0

 
497.0

Other
 
 
4.6

 
4.3

Deferred financing fees
 
 
(36.8
)
 
(38.3
)
Total long-term debt, including current portion of long-term debt
 
 
7,325.7

 
7,294.3

Less current portion
 
 
1,000.0

 
998.7

Total long-term debt
 
 
$
6,325.7

 
$
6,295.6

____________
(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. Instrument is due on June 24, 2016 and is included in current portion of long-term debt and other long-term obligations in the Condensed Consolidated Balance Sheets at March 31, 2016.

22

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


(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. Instrument is due on November 29, 2016 and is included in current portion of long-term debt and other long-term obligations in the Condensed Consolidated Balance Sheets at March 31, 2016.
(c) 
Instrument is callable by the Company at any time at the greater of 100% of the principal amount or the sum of the present values of the remaining scheduled payments of principal and interest discounted at the U.S. Treasury rate plus 0.30% plus, in each case, accrued and unpaid interest.
(d) 
Instrument is callable by the Company at any time 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.
(e) 
Instrument is callable by the Company at any time prior to the date that is one month prior to the instrument's maturity date 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 0.35% plus, in each case, accrued and unpaid interest.
(f) 
Instrument is callable by the Company at any time prior to August 29, 2023 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. On or after such date, the instrument is callable by the Company at 100% of the principal amount plus accrued and unpaid interest.
(g)
Instrument is callable by the Company at any time prior to May 29, 2043 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. On or after such date, the instrument is callable by the Company at 100% of the principal amount plus accrued and unpaid interest.
2016 Bridge Credit Agreement
On February 10, 2016, the Company entered into a Bridge Credit Agreement (the “2016 Bridge Credit Agreement”), among the Company, as borrower, Mylan Inc., as guarantor, Deutsche Bank AG Cayman Islands Branch, as administrative agent and a lender, Goldman Sachs Bank USA, as a lender, Goldman Sachs Lending Partners LLC, as a lender, and other lenders party thereto from time to time. The 2016 Bridge Credit Agreement provides for a bridge credit facility under which the Company may obtain Tranche A Loans (as defined in the 2016 Bridge Credit Agreement) in an aggregate amount up to $6.0 billion. The proceeds of the Tranche A Loans will be applied solely to finance the proposed acquisition of Meda shares and pay other costs associated with the proposed acquisition of Meda, the 2016 Bridge Credit Agreement and related transactions. The Tranche A Loans will bear interest at LIBOR (determined in accordance with the 2016 Bridge Credit Agreement), if the Company chooses to make LIBOR borrowings, or at a base rate (determined in accordance with the 2016 Bridge Credit Agreement), in each case plus an applicable margin. The applicable margin for borrowings will be determined by reference to a grid based on the Company’s Debt Rating (as defined in the 2016 Bridge Credit Agreement), and such applicable margin will range from 0.125% to 1.225% per annum with respect to base rate borrowings and 1.125% to 2.225% per annum with respect to LIBOR borrowings, in each case subject to increase by 0.25% per annum, 0.25% per annum and 0.50% per annum on the date that is 90, 180 and 270 days, respectively, after the initial funding date. The commitments under the 2016 Bridge Credit Agreement will be available until the earliest to occur of February 8, 2017 and certain events set forth in the 2016 Bridge Credit Agreement relating to the completion or termination of the Offer set forth in the 2016 Bridge Credit Agreement. The Tranche A Loans will be unsecured and will be guaranteed by Mylan Inc. The Tranche A Loans will mature on the day that is 364 days after the initial funding date. The 2016 Bridge Credit Agreement also provided for commitments in respect of Tranche B Loans (as defined in the 2016 Bridge Credit Agreement) in an aggregate amount up to $4.05 billion that were to be applied if necessary to prepay the Revolving Credit Agreement, the 2014 Term Credit Agreement and the 2015 Term Credit Agreement (in each case, as defined below) and to pay fees and expenses relating thereto. The commitments in respect of such Tranche B Loans were permanently terminated in their entirety in connection with the effectiveness of the Revolving Amendment, the 2014 Term Amendment and the 2015 Term Amendment (in each case, as defined below). Upon signing of the 2016 Bridge Credit Agreement, the Company paid financing fees of approximately $29.5 million, of which approximately $3.0 million related to the Tranche B Loans and were written off in conjunction with the termination of the Tranche B Loans. The remaining fees are included in other current assets on the Condensed Consolidated Balance Sheets.
Revolving Facility
On December 19, 2014, the Company entered into a revolving credit agreement, which was amended on May 1, 2015, and further amended on June 19, 2015 and October 28, 2015 (the “Revolving Credit Agreement”) with a syndicate of lenders, which contains a $1.65 billion revolving facility (the “Revolving Facility”), which expires on December 19, 2019. The

23

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


Revolving Facility includes a $150 million subfacility for the issuance of letters of credit and a $125 million subfacility for swingline borrowings.
At March 31, 2016 and December 31, 2015, the Company had no amounts outstanding under the Revolving Facility. The interest rate under the Revolving Facility is LIBOR plus 1.325% per annum. In addition, the Revolving Facility has a facility fee which is 0.175%.
2015 Term Loans
On July 15, 2015, the Company entered into a term credit agreement, which was amended on October 28, 2015 (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. The 2015 Term Credit Agreement provided for a term loan credit facility (the “Credit Facility”) under which the Borrower obtained loans in the 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 the amount of $600.0 million, borrowed on September 15, 2015. 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 Loan (as defined below).
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.
2014 Term Loan
On December 19, 2014, the Company entered into a term credit agreement, which was amended on May 1, 2015, and further amended on October 28, 2015 (the “2014 Term Credit Agreement”), with a syndicate of banks which provided an $800 million term loan (the “2014 Term Loan”). The 2014 Term Loan matures on December 19, 2017 and has no required amortization payments. The 2014 Term Loan bears interest at LIBOR plus 1.375% per annum.
Amendment to the Revolving Credit Facility, 2015 Term Loans and 2014 Term Loan
On February 22, 2016, the Company and Mylan Inc. (the “Borrower”) entered into (i) Amendment No. 3 (the “Revolving Amendment”) to the Revolving Credit Agreement, among the Borrower, the Company, certain lenders and issuing banks and Bank of America, N.A., as administrative agent, (ii) Amendment No. 2 (the “2015 Term Amendment”) to the 2015 Term Credit Agreement, among the Borrower, the Company, certain lenders and PNC Bank, National Association, as administrative agent and (iii) Amendment No. 3 (the “2014 Term Amendment”) to the 2014 Term Credit Agreement, among the Borrower, the Company, certain lenders and Bank of America, N.A., as administrative agent. The Revolving Amendment, 2015 Term Amendment and 2014 Term Amendment provide that the Borrower’s proposed acquisition of Meda will constitute a Qualified Acquisition (as defined in each of the Revolving Credit Agreement, the 2014 Term Credit Agreement and the 2015 Term Credit Agreement) and amends the event of default provisions to provide that any “change of control” put rights under any indebtedness of any Acquired Entity or Business (as defined in each of the Revolving Credit Agreement, the 2014 Term Credit Agreement and the 2015 Term Credit Agreement) or its subsidiaries that are triggered as a result of the acquisition of any Acquired Entity or Business will not result in an event of default so long as any such indebtedness that is put in accordance with the terms of such indebtedness is paid as required by the terms of such indebtedness.
Fair Value
At March 31, 2016 and December 31, 2015, the fair value of the Company’s 1.800% Senior Notes due 2016, 1.350% Senior Notes due 2016, 2.600% Senior Notes due 2018, 3.000% Senior Notes due 2018, 2.550% Senior Notes due 2019, 3.750% Senior Notes due 2020, 3.125% Senior Notes due 2023, 4.200% Senior Notes due 2023 and 5.400% Senior Notes due 2043 (collectively, the “Senior Notes”) was approximately $4.91 billion and $4.80 billion, respectively. The fair values of the Senior Notes were valued at quoted market prices from broker or dealer quotations and were classified as Level 2 in the fair value hierarchy. Based on quoted market rates of interest and maturity schedules of similar debt issues, the fair values of the Company’s 2015 Term Loans and 2014 Term Loan, determined based on Level 2 inputs, approximate their carrying values at March 31, 2016 and December 31, 2015.

24

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


Mandatory minimum repayments remaining on the outstanding long-term debt at March 31, 2016, excluding the discounts, premium and conversion features, are as follows for each of the periods ending December 31:
(In millions)
Total
2016
$
1,000

2017
2,400

2018
1,150

2019
500

2020
500

Thereafter
1,750

Total
$
7,300

13.
Comprehensive Earnings
Accumulated other comprehensive loss, as reflected on the Condensed Consolidated Balance Sheets, is comprised of the following:
(In millions)
March 31,
2016
 
December 31, 2015
Accumulated other comprehensive loss:
 
 
 
Net unrealized gain (loss) on marketable securities, net of tax
$
1.8

 
$
(1.0
)
Net unrecognized losses and prior service cost related to defined benefit plans, net of tax
(15.1
)
 
(14.9
)
Net unrecognized losses on derivatives, net of tax
(48.9
)
 
(18.1
)
Foreign currency translation adjustment
(1,228.3
)
 
(1,730.3
)
 
$
(1,290.5
)
 
$
(1,764.3
)


25

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


Components of accumulated other comprehensive loss, before tax, consist of the following, for the three months ended March 31, 2016 and 2015:
 
Three Months Ended March 31, 2016
Gains and Losses on Derivatives in Cash Flow Hedging Relationships
 
Gains and Losses on Marketable Securities
 
Defined Pension Plan Items
 
Foreign Currency Translation Adjustment
 
Totals
(In millions)
Foreign Currency Forward Contracts
 
Interest Rate Swaps
 
Total
 
 
 
 
 
 
 
 
Balance at December 31, 2015 net of tax
 
 
 
 
$
(18.1
)
 
$
(1.0
)
 
$
(14.9
)
 
$
(1,730.3
)
 
$
(1,764.3
)
Other comprehensive (loss) earnings before reclassifications, before tax
 
 
 
 
(39.4
)
 
4.4

 
(0.6
)
 
502.0

 
466.4

Amounts reclassified from accumulated other comprehensive (loss) earnings, before tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on foreign exchange forward contracts classified as cash flow hedges, included in net sales
(10.6
)
 
 
 
(10.6
)
 
 
 
 
 
 
 
(10.6
)
Gain on interest rate swaps classified as cash flow hedges, included in interest expense
 
 
0.9

 
0.9

 
 
 
 
 
 
 
0.9

Amortization of prior service costs included in SG&A
 
 
 
 
 
 
 
 
0.1

 
 
 
0.1

Amortization of actuarial gain included in SG&A
 
 
 
 
 
 
 
 
0.2

 
 
 
0.2

Net other comprehensive (loss) earnings, before tax
 
 
 
 
(49.1
)
 
4.4

 
(0.3
)
 
502.0

 
457.0

Income tax (benefit) provision
 
 
 
 
(18.3
)
 
1.6

 
(0.1
)
 

 
(16.8
)
Balance at March 31, 2016, net of tax
 
 
 
 
$
(48.9
)
 
$
1.8

 
$
(15.1
)
 
$
(1,228.3
)
 
$
(1,290.5
)

26

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


 
Three Months Ended March 31, 2015
Gains and Losses on Derivatives in Cash Flow Hedging Relationships
 
Gains and Losses on Marketable Securities
 
Defined Pension Plan Items
 
Foreign Currency Translation Adjustment
 
Totals
(In millions)
Foreign Currency Forward Contracts
 
Interest Rate Swaps
 
Total
 
 
 
 
 
 
 
 
Balance at December 31, 2014, net of tax
 
 
 
 
$
(28.4
)
 
$
0.3

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

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

 
(0.4
)
 


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

 
0.1

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

 
0.1

 

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

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

14.
Shareholders’ Equity
A summary of the changes in shareholders’ equity for the three months ended March 31, 2016 and 2015 is as follows:
(In millions)
Total Mylan N.V. Shareholders' Equity
 
Noncontrolling Interest
 
Total
December 31, 2015
$
9,764.4

 
$
1.4

 
$
9,765.8

Net earnings
13.9

 

 
13.9

Other comprehensive earnings, net of tax
473.8

 

 
473.8

Stock option activity
3.5

 

 
3.5

Share-based compensation expense
26.5

 

 
26.5

Shares withheld for taxes on share-based compensation
(9.9
)
 

 
(9.9
)
Tax benefit of stock option plans
1.2

 

 
1.2

Other

 
0.1

 
0.1

March 31, 2016
$
10,273.4

 
$
1.5

 
$
10,274.9



27

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


(In millions)
Total Mylan N.V. Shareholders' Equity
 
Noncontrolling Interest
 
Total
December 31, 2014
$
3,255.9

 
$
20.1

 
$
3,276.0

Net earnings
56.6

 

 
56.6

Other comprehensive loss, net of tax
(623.9
)
 

 
(623.9
)
Stock option activity
68.3

 

 
68.3

Share-based compensation expense
34.4

 

 
34.4

Shares withheld for taxes on share-based compensation
(23.8
)
 

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

 

 
6,305.8

Other

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

 
$
19.9

 
$
9,093.2


On April 3, 2015, the Company and Stichting Preferred Shares Mylan (the “Foundation”) entered into a call option agreement (the “Call Option Agreement”). Pursuant to the terms of the Call Option Agreement, Mylan N.V. granted the Foundation a call option (the “Option”), permitting the Foundation to acquire from time-to-time Mylan N.V. preferred shares up to a maximum number equal to the total number of Mylan N.V. ordinary shares issued at such time to the extent such shares are not held by the Foundation. The exercise price of the Option is €0.01 per preferred share. On April 21, 2015, the Company received a letter from the President and Chief Executive Officer of Teva Pharmaceutical Industries Ltd. ("Teva"), containing a non-binding expression of interest from Teva to acquire Mylan for $82 per Mylan ordinary share. On July 23, 2015, in response to Teva's unsolicited expression of interest in acquiring Mylan, the Foundation exercised the Option and acquired 488,388,431 Mylan preferred shares pursuant to the terms of the Call Option Agreement. In compliance with the current statutory arrangement, 25% of the nominal value of the preferred shares, approximately $1.3 million, was paid to Mylan in cash upon issuance. Each Mylan ordinary share and preferred share is entitled to one vote on each matter properly brought before a general meeting of shareholders. On July 27, 2015, Teva announced its entry into an agreement to acquire the Generic Drug Unit of Allergan plc and the withdrawal of its unsolicited, non-binding expression of interest to acquire Mylan. On September 19, 2015, the Foundation requested the redemption of the Mylan preferred shares issued on July 23, 2015, informing Mylan that it was reasonably convinced that the influences that might adversely affect or threaten the strategy, mission, independence, continuity and/or identity of Mylan and its business in a manner that is contrary to the interest of Mylan, its business, and its stakeholders had been sufficiently addressed. Mylan ordinary shareholders approved the redemption of the preferred shares on January 7, 2016 at an extraordinary general meeting of shareholders. On March 17, 2016, the redemption of the Mylan preferred shares became effective. The Foundation will continue to have the right to exercise the Option in the future in response to a new threat to the interests of Mylan, its businesses and its stakeholders from time to time.
On November 16, 2015, the Company announced that its board of directors approved the repurchase of up to $1.0 billion of the Company’s ordinary shares either in the open market through privately-negotiated transactions or in one of more self tender offers (the “Share Repurchase Program”). At March 31, 2016, the Share Repurchase Program has approximately $932.5 million remaining for ordinary share repurchases. The Share Repurchase Program does not obligate the Company to acquire any particular amount of ordinary shares and expires on August 27, 2016.
15.
Segment Information
The Company has two segments, “Generics” and “Specialty.” The Generics segment primarily develops, manufactures, sells and distributes generic or branded generic pharmaceutical products in tablet, capsule, injectable, transdermal patch, gel, cream or ointment form, as well as active pharmaceutical ingredients (“API”). The Specialty segment engages mainly in the development and sale of branded specialty nebulized and injectable products.
The Company’s chief operating decision maker is the Chief Executive Officer, who evaluates the performance of the Company’s segments based on total revenues and segment profitability. Segment profitability represents segment gross profit less direct research and development (“R&D”) expenses and direct selling, general and administrative expenses (“SG&A”). Certain general and administrative and R&D expenses not allocated to the segments, net charges for litigation settlements, impairment charges and other expenses not directly attributable to the segments, are reported in Corporate/Other. Additionally, amortization of intangible assets and other purchase accounting related items, as well as any other significant special items, are included in Corporate/Other. Items below the earnings from operations line on the Company’s Condensed Consolidated

28

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


Statements of Operations are not presented by segment, since they are excluded from the measure of segment profitability. The Company does not report depreciation expense, total assets and capital expenditures by segment, as such information is not used by the chief operating decision maker.
The accounting policies of the segments are the same as those described in the “Summary of Significant Accounting Policies” included in Mylan N.V.’s Annual Report on Form 10-K for the year ended December 31, 2015, as amended. Intersegment revenues are accounted for at current market values and are eliminated at the consolidated level.
Presented in the table below is segment information for the periods identified and a reconciliation of segment information to total consolidated information.
(In millions)
 Generics Segment
 
Specialty Segment
 
Corporate /
Other
(1)
 
Consolidated
Three Months Ended March 31, 2016
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
Third party
$
1,936.8

 
$
254.5

 
$