IVAX CORP - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

Commission File Number 1-09623

IVAX CORPORATION


Florida		16-1003559
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

4400 Biscayne Boulevard, Miami, Florida		33137
(Address of principal executive offices)		(Zip Code)

(305) 575-6000

(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 ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

197,401,202 shares of Common Stock, $.10 par value, outstanding as of April 23, 2004.

IVAX CORPORATION

INDEX


		PAGE NO.
PART I - FINANCIAL INFORMATION

Item 1 -	Financial Statements

	Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003	2

	Consolidated Statements of Operations for the three months ended March 31, 2004 and 2003	3

	Consolidated Statement of Shareholders’ Equity for the three months ended March 31, 2004	4

	Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003	5

	Notes to Consolidated Financial Statements	6

Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4 -	Controls and Procedures	28

PART II - OTHER INFORMATION

Item 1 -	Legal Proceedings	29

Item 6 -	Exhibits and Reports on Form 8-K	30

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

IVAX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	March 31, 2004			December 31, 2003
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	536,829		$	146,870
Marketable securities, short-term		3,135			10,470
Accounts receivable, net of allowance for doubtful accounts of $16,729 in 2004 and $17,675 in 2003		290,281			264,317
Inventories		417,188			413,872
Other current assets		149,077			160,187

Total current assets		1,396,510			995,716
Property, plant and equipment, net		523,317			502,942
Goodwill, net		480,710			489,665
Intangible assets, net		307,786			314,361
Other assets		78,200			70,250

Total assets	$	2,786,523		$	2,372,934

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	121,501		$	139,990
Current portion of long-term debt		304,500			58,607
Loans payable		23,950			17,804
Accrued income taxes payable		15,232			27,990
Accrued expenses and other current liabilities		234,383			242,158

Total current liabilities		699,566			486,549
Long-term debt, net of current portion		1,007,749			855,335
Other long-term liabilities		58,592			56,208
Minority interest		12,535			12,531
Shareholders’ equity:
Common stock, $.10 par value, authorized 437,500 shares, issued and outstanding 197,379 shares in 2004 and 196,708 shares in 2003		19,738			19,671
Capital in excess of par value		351,810			341,231
Retained earnings		732,817			690,476
Accumulated other comprehensive loss		(96,284	)		(89,067	)

Total shareholders’ equity		1,008,081			962,311

Total liabilities and shareholders’ equity	$	2,786,523		$	2,372,934

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IVAX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


Three Months Ended March 31,	2004			2003
(In thousands, except per share data)
Net revenues	$	425,191		$	317,693
Cost of sales		225,785			171,550

Gross profit		199,406			146,143

Operating expenses:
Selling		61,371			45,595
General and administrative		36,506			25,068
Research and development		32,350			20,421
Amortization of intangible assets		5,505			4,491
Restructuring costs		633			463

Total operating expenses		136,365			96,038

Operating income		63,041			50,105
Other income (expense):
Interest income		1,092			1,234
Interest expense		(11,745	)		(10,949	)
Other income, net		338			5,623

Total other income (expense)		(10,315	)		(4,092	)

Income before income taxes and minority interest		52,726			46,013
Provision for income taxes		10,381			17,106

Income before minority interest		42,345			28,907
Minority interest		(4	)		78

Net income	$	42,341		$	28,985

Earnings per common share:
Basic	$	0.21		$	0.15

Diluted	$	0.21		$	0.15

Weighted average number of common shares outstanding:
Basic		197,074			194,969

Diluted		202,123			196,653

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IVAX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

(In thousands)


	Common Stock			Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss			Total
	Number of Shares	Amount		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss			Total
BALANCE, January 1, 2004	196,708	$	19,671	$	341,231	$	690,476	$	(89,067	)	$	962,311
Comprehensive income:
Net income	—		—		—		42,341		—			42,341
Translation adjustment	—		—		—		—		(6,622	)		(6,622	)
Unrealized net gain on available-for-sale equity securities and derivatives, net of tax	—		—		—		—		(595	)		(595	)

Comprehensive income												35,124
Exercise of stock options	651		65		7,452		—		—			7,517
Tax benefit of option exercises	—		—		2,784		—		—			2,784
Employee stock purchases	20		2		343		—		—			345

BALANCE, March 31, 2004	197,379	$	19,738	$	351,810	$	732,817	$	(96,284	)	$	1,008,081

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IVAX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three Months Ended March 31,	2004			2003
(In thousands)
Cash flows from operating activities:
Net income	$	42,341		$	28,985
Adjustments to reconcile net income to net cash flows from operating activities:
Restructuring costs		633			463
Depreciation and amortization		20,844			16,813
Deferred tax provision		232			2,763
Tax effect of stock options exercised		2,784			180
Value of stock options issued to non-employees		—			37
Provision for doubtful accounts		759			754
Provision for inventory obsolescence		10,900			7,011
Interest accretion on notes receivable and payable, net		703			748
Minority interest in loss (earnings)		4			(78	)
Equity in earnings of unconsolidated affiliates		(256	)		(392	)
Gains on sale of product rights		(3,126	)		(2,618	)
Losses on sale of assets, net		423			11
Gains on extinguishment of debt		—			(2,203	)
Changes in operating assets and liabilities:
Accounts receivable		(29,082	)		20,335
Inventories		(14,575	)		(12,968	)
Other current assets		9,563			5,632
Other assets		(8,269	)		715
Accounts payable, accrued expenses and other current liabilities		(36,839	)		(41,952	)
Other long-term liabilities		11,378			(6,578	)

Net cash flows from operating activities		8,417			17,658

Cash flows from investing activities:
Proceeds from sale of product rights		3,126			2,618
Capital expenditures		(32,480	)		(18,925	)
Proceeds from sale of assets		408			14
Acquisitions of intangible assets		(590	)		(2,863	)
Acquisitions of businesses, net of cash acquired		(7	)		30
Investment in affiliates		(657	)		2,042
Purchases of marketable securities		—			(250	)

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