WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 INDEX TO THE FORM 10-Q
PART I Item 1.
FINANCIAL INFORMATION Consolidated Financial Statements Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 Consolidated Statements of Income for the Three and Six Months Ended June 30, 1998 and 1997 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 Notes to Consolidated Financial Statements
PAGE NUMBER
3
5
6 8
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosure About Market Risk OTHER INFORMATION AND SIGNATURES Legal Proceedings Other Information Exhibits and Reports on Form 8-K
12
Item 3.
17
PART II Item 1. Item 5. Item 6.
18 18 18
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WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 Balance Sheet
June 30, 1998 (unaudited)
December 31, 1997
ASSETS Current Cash and cash equivalents Marketable securities Accounts receivable, net of allowances for doubtful accounts of 6,372 and 2,140 Inventories: Raw materials Work-in-process Finished goods Prepaid expenses and other current assets Deferred tax assets Total current assets Property and equipment, net Investments and other assets Product rights and other intangibles, net Total assets
184,246 4,361 79,226 24,309 7,590 39,603 1,120 35,258 375,713 97,029 149,927 359,418 982,087
82,837 32,102 65,068 16,905 9,303 20,759 416 19,399 246,789 88,004 131,083 289,129 755,005
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WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 Balance Sheet
June 30, 1998 (unaudited)
December 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses Income taxes payable Current portion of long-term debt Current liability from acquisition of product rights Total current liabilities Long-term debt Long-term liability from acquisition of product rights Deferred tax liabilities Total liabilities Commitments and contingencies Minority interest 1,022 859
72,798 23,917 855 30,500 128,070 150,615 20,000 36,459 335,144
44,423 9,553 864 45,000 99,840 2,385 50,000 36,887 189,112
Stockholders' equity: Preferred stock; no par; 2,500,000 shares authorized; none outstanding Common stock; par value per share of .0033; 500,000,000 shares authorized; 89,265,819 and 87,882,233 shares issued and outstanding Additional paid-in capital Retained earnings Accumulated other comprehensive income Total stockholders' equity Total liabilities and stockholders' equity
295 288,327 319,625 37,674 645,921 982,087
290 256,682 275,037 33,025 565,034 755,005
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WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 Income Statement
Three Months Ended June 30, 1998 1997
Six Months Ended June 30, 1998
Product sales, net Cost of sales Gross profit Royalty income
141,885 54,780 87,105
63,735 26,812 36,923 7,208
263,757 99,880 163,877
Operating expenses: Research & development expense Selling, general & administrative expense Amortization expense Charge for acquired in-process research and development Merger expense Total operating expenses
8,326 23,422 5,454
4,219 9,797
13,974 44,179 10,071 18,790
5,821 37,202 19,837 87,014
Operating income Other income (expense): Equity in earnings of joint ventures Investment and other income Interest expense Total other income, net
49,903
24,294
76,863
2,180 1,498 (1,411) 2,267
3,760 3,705 (89) 7,376
3,790 2,570 (1,478) 4,882
Income before income tax provision Provision for income taxes
52,170 19,407
31,670 12,558
81,745 37,157
Net income
32,763
19,112
44,588
Basic earnings per share
0.37
0.22
0.50
Diluted earnings per share
0.36
0.22
0.49
Weighted average shares outstanding, no dilution
89,183
86,706
88,744
Weighted average shares outstanding, diluted basis
91,671
88,704
91,132
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1997
122,434 52,500 69,934 14,249
8,840 20,219
14,718 43,777
40,406
7,895 7,328 (197) 15,026
55,432 22,269
33,163
0.38
0.37
86,290
88,543
WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 Cash Flows
Six Months Ended June 30, 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities Depreciation Amortization Charge for acquired in-process research and development Deferred income tax (benefit) provision Dividends received from Somerset Equity in earnings of joint ventures Provision for (recovery of) doubtful accounts and reserves Tax benefit related to stock option plan Changes in assets and liabilities, net of effect of acquisition: Accounts and other receivables Inventories Prepaid expenses and other current assets Other assets Accounts payable and accrued expenses Income taxes payable Total adjustments Net cash provided by operating activities
44,588
33,163
4,240 10,071 18,790 (10,338) (3,194) 949 11,889
4,180
675 8,000 (6,597) (224) 7,342
108 (11,079) (704) (1,402) 8,993 17,364 45,687 90,275
(13,970) (12,059) 3,080 (752) 2,544 5,634 (2,147) 31,016
CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment Purchase of marketable securities Proceeds from maturities of marketable securities Acquisition of product rights Acquisition of business Investment in Andrx Increase in investment in joint ventures Net cash used in investing activities
(10,342) (11,277) 39,273 (35,106) (67,695) (7,189) (92,336)
(4,519) (82,799) 85,565 (46,922) (15,300) (915) (64,890)
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WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 Cash Flows
Six Months Ended June 30, 1998 1997
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt Principal payments on long-term debt Principal payments on liability for acquisition of product rights Proceeds from exercise of stock options Net cash provided by financing activities
148,662 (453) (64,500) 19,761 103,470 (1,224)
7,130 5,906
Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period
101,409 82,837
(27,968) 158,221
Cash and cash equivalents at end of period
184,246
130,253
Supplemental disclosures of cash flow information: Cash paid during the periods for: Interest Income taxes Supplemental disclosures of noncash investing and financing activities: Acquisition of product rights: Fair value of assets acquired Fair value of liabilities assumed Net cash paid Acquisition of business: Fair value of assets acquired Fair value of liabilities assumed Net cash paid
128 19,718
194 9,248
(55,106) 20,000 (35,106)
(196,922) 150,000 (46,922)
(93,339) 25,644 (67,695)
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WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 NOTE C - EARNINGS PER SHARE ("EPS")
Three Months Ended June 30, 1998 1997
Six Months Ended June 30, 1998 1997
Net income (numerator) Weighted average shares outstanding (denominator) Basic EPS
32,763 89,183 0.37
19,112 86,706 0.22
44,588 88,744 0.50
33,163 86,290 0.38
Net income (numerator) Weighted average shares outstanding Assumed exercise of all outstanding stock options and warrants Diluted weighted average shares outstanding (denominator) Diluted EPS
32,763 89,183 2,488
19,112 86,706 1,998
44,588 88,744 2,388
33,163 86,290 2,253
91,671 0.36
88,704 0.22
91,132 0.49
88,543 0.37
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WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 NOTE E - LONG-TERM INVESTMENTS
June 30, 1998 (in thousands)
December 31, 1997
Investments in joint ventures Other long-term investments Other assets
41,798 99,556 8,573
31,626 92,233 7,224
149,927
131,083
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WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 NOTE G - ADOPTION OF NEW ACCOUNTING PRINCIPLES
Three Months Ended June 30, 1998 1997
Six Months Ended June 30, 1998 1997
Net income Unrealized gain on equity securities, net of tax Comprehensive income
32,763 14,635 47,398
19,112 21,158 40,270
44,588 4,649 49,237
33,163 32,150 65,313
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WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
1997, by quarter
High
Low
First Second Third Fourth 1998, by quarter 0 First Second
26.75 38.75 45.63 47.00
15.25 20.50 31.75 28.75
38.25 42.63
24.50 28.13
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WATSON PHARMACEUTICALS INC 10-Q 08/14/1998 NO TITLE
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