UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
| x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
or
| o 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 0-20045
WATSON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its
charter)
| Nevada |
|
95-3872914 |
| (State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
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|
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| 311 Bonnie Circle | ||
| Corona, CA 92880-2882 | ||
| (Address of principal executive offices, including zip code) | ||
|
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| (909) 493-5300 | ||
| (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 |
x |
No |
o |
The number of shares outstanding of the Registrant’s only class of common stock as of November 6, 2002 was approximately 106,872,921.
WATSON PHARMACEUTICALS, INC.
TABLE OF CONTENTS
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
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| PART I. FINANCIAL INFORMATION |
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| Item 1. Consolidated Financial Statements: |
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Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 |
1 |
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2 | |
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Consolidated Statements of Cash Flows for the |
3 |
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4 | |
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| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | |
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| Item 3. Quantitative and Qualitative Disclosure about Market Risk |
19 | |
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| Item 4. Controls and Procedures |
20 | |
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| Item 1. Legal Proceedings |
21 | |
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| Item 6. Exhibits and Reports on Form 8-K |
22 | |
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| 23 | ||
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| 24 | ||
WATSON PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except share amounts)
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September 30, |
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December 31, |
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| ASSETS |
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| Current assets: |
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Cash and cash equivalents |
|
$ |
249,035 |
|
$ |
193,731 |
| |
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Marketable securities |
|
|
58,277 |
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|
135,688 |
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Accounts receivable, net |
|
|
181,180 |
|
|
173,085 |
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Assets held for disposition |
|
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11,319 |
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45,496 |
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Inventories |
|
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315,788 |
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|
252,325 |
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Prepaid expenses and other current assets |
|
|
24,187 |
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|
32,710 |
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Deferred tax assets |
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|
59,603 |
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|
56,703 |
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Total current assets |
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899,389 |
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|
889,738 |
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| Property and equipment, net |
|
|
273,478 |
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|
234,911 |
| ||
| Investments and other assets |
|
|
95,437 |
|
|
113,086 |
| ||
| Deferred tax assets |
|
|
21,675 |
|
|
21,675 |
| ||
| Product rights and other intangibles, net |
|
|
903,076 |
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825,936 |
| ||
| Goodwill |
|
|
442,988 |
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|
442,988 |
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Total Assets |
|
$ |
2,636,043 |
|
$ |
2,528,334 |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
172,541 |
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$ |
159,809 |
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Income taxes payable |
|
|
107,946 |
|
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10,766 |
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Current portion of long-term debt |
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79,392 |
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68,102 |
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Current liability incurred for acquisitions of products and businesses |
|
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2,728 |
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6,448 |
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Total current liabilities |
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362,607 |
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245,125 |
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| Long-term debt |
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355,656 |
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415,703 |
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| Long-term liability incurred for acquisitions of products and businesses |
|
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5,962 |
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9,311 |
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| Deferred tax liabilities |
|
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151,457 |
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186,145 |
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Total liabilities |
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875,682 |
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856,284 |
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| Commitments and contingencies |
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| Stockholders’ equity: |
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| Preferred stock; no par value per share; 2,500,000 shares authorized; none issued |
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— |
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— |
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| Common stock; $0.0033 par value per share; 500,000,000 shares authorized; 106,863,700 and 106,458,800 shares outstanding |
|
|
353 |
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351 |
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| Additional paid-in capital |
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796,782 |
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790,742 |
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| Retained earnings |
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955,752 |
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823,054 |
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| Accumulated other comprehensive income |
|
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7,474 |
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57,903 |
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Total stockholders’ equity |
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1,760,361 |
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1,672,050 |
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Total liabilities and stockholders’ equity |
|
$ |
2,636,043 |
|
$ |
2,528,334 |
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See accompanying Notes to Consolidated Financial Statements.
- 1 -
WATSON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share amounts)
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Three Months Ended |
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Nine Months Ended |
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2002 |
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2001 |
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2002 |
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2001 |
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| Net revenues |
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$ |
307,860 |
|
$ |
270,942 |
|
$ |
893,624 |
|
$ |
866,766 |
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| Cost of sales |
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137,015 |
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140,398 |
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398,545 |
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383,136 |
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| Gross profit |
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170,845 |
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130,544 |
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495,079 |
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483,630 |
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| Operating expenses: |
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Research and development |
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22,234 |
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14,228 |
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60,249 |
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42,732 |
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Selling, general and administrative |
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55,140 |
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48,409 |
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175,808 |
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153,118 |
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Amortization |
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16,176 |
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17,681 |
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44,012 |
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57,944 |
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Charge for asset impairment |
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— |
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147,596 |
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— |
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147,596 |
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Loss on assets held for disposition |
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8,072 |
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50,705 |
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21,817 |
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50,705 |
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Total operating expenses |
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101,622 |
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278,619 |
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301,886 |
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452,095 |
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| Operating income (loss) |
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69,223 |
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(148,075 |
) |
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193,193 |
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31,535 |
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| Other income (expense): |
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Equity in losses of joint ventures |
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(1,945 |
) |
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(1,170 |
) |
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(3,759 |
) |
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(2,950 |
) | ||
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Gain on sales of securities |
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— |
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4,495 |
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— |
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52,168 |
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Gain from legal settlement |
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— |
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60,517 |
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32,000 |
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60,517 |
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Interest and other income |
|
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2,645 |
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|
838 |
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5,937 |
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2,441 |
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Interest expense |
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(5,747 |
) |
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(7,203 |
) |
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(16,690 |
) |
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(21,881 |
) | ||
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Total other income (expense), net |
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(5,047 |
) |
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57,477 |
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17,488 |
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90,295 |
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| Income (loss) before income taxes |
|
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64,176 |
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(90,598 |
) |
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210,681 |
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121,830 |
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| Provision (benefit) for income taxes |
|
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23,519 |
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(31,965 |
) |
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77,983 |
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51,762 |
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| Net income (loss) |
|
$ |
40,657 |
|
$ |
(58,633 |
) |
$ |
132,698 |
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$ |
70,068 |
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| Earnings (loss) per share: |
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Basic |
|
$ |
0.38 |
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$ |
(0.55 |
) |
$ |
1.24 |
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$ |
0.66 |
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Diluted |
|
$ |
0.38 |
|
$ |
(0.55 |
) |
$ |
1.24 |
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$ |
0.65 |
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| Weighted average shares outstanding: |
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Basic |
|
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106,784 |
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106,343 |
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106,590 |
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106,008 |
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Diluted |
|
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107,199 |
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106,343 |
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107,284 |
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108,421 |
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See accompanying Notes to Consolidated Financial Statements.
- 2 -
WATSON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
|
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Nine Months Ended |
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2002 |
|
2001 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income |
|
$ |
132,698 |
|
$ |
70,068 |
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| Reconciliation to net cash provided by operating activites: |
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</ | |||||