FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
121,473,962 SHARES OF COMMON STOCK, $.10 PAR VALUE, OUTSTANDING AS OF
OCTOBER 31, 1996.
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IVAX CORPORATION
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
--------
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Operations
for the three and nine months ended
September 30, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 20
Item 6 - Exhibits and Reports on Form 8-K 20
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PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
IVAX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 15,088 $ 14,720
Accounts receivable, net 278,246 359,165
Inventories 314,408 242,260
Other current assets 100,457 60,673
----------- -----------
Total current assets 708,199 676,818
Property, plant and equipment, net 406,740 385,419
Cost in excess of net assets of acquired
companies, net 49,978 138,423
Patents, trademarks, licenses and other
intangibles, net 50,916 50,859
Other 141,334 83,791
----------- -----------
Total assets $ 1,357,167 $ 1,335,310
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 5,308 $ 4,807
Current portion of long-term debt 2,120 3,521
Accounts payable 77,429 92,343
Accrued income taxes payable 23,526 8,632
Accrued expenses and other current
liabilities 125,909 96,610
----------- -----------
Total current liabilities 234,292 205,913
Long-term debt, net of current portion 415,923 298,857
Other long-term liabilities 20,921 26,314
Minority interest 14,089 15,054
----------- -----------
Total liabilities 685,225 546,138
----------- -----------
Shareholders' equity:
Common stock 12,147 11,803
Capital in excess of par value 502,621 461,603
Retained earnings 162,936 322,117
Cumulative translation adjustment and other (5,762) (6,351)
----------- -----------
Total shareholders' equity 671,942 789,172
----------- -----------
Total liabilities and shareholders' equity $ 1,357,167 $ 1,335,310
=========== ===========
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
2
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IVAX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
PERIOD ENDED SEPTEMBER 30, THREE MONTHS NINE MONTHS
(In thousands, except per 1996 1995 1996 1995
share data) --------- -------- --------- --------
NET REVENUES $ 222,720 $310,212 $830,648 $897,976
COST OF SALES 191,713 183,469 572,361 521,680
--------- -------- --------- --------
Gross Profit 31,007 126,743 258,287 376,296
--------- -------- --------- --------
OPERATING EXPENSES:
Selling 57,566 45,241 163,064 132,886
General and administrative 45,241 30,336 106,099 80,001
Research and development 18,894 15,836 53,501 47,500
Amortization of intangible assets 2,774 2,394 8,134 7,336
Restructuring costs and asset
write-downs 118,315 - 118,315 -
Merger expenses - - 184 -
--------- -------- --------- --------
Total operating expenses 242,790 93,807 449,297 267,723
--------- -------- --------- --------
Income (loss) from operations (211,783) 32,936 (191,010) 108,573
OTHER INCOME (EXPENSE):
Interest income 198 430 690 1,376
Interest expense (6,254) (4,402) (18,151) (14,993)
Other income (expense), net (638) 947 2,528 5,227
--------- -------- --------- --------
(6,694) (3,025) (14,933) (8,390)
--------- -------- --------- --------
Income (loss) before income
taxes, minority interest
and extraordinary items (218,477) 29,911 (205,943) 100,183
PROVISION (BENEFIT) FOR
INCOME TAXES (40,553) 1,291 (53,886) 17,944
--------- -------- --------- --------
Income (loss) before minority
interest and extraordinary
items (177,924) 28,620 (152,057) 82,239
MINORITY INTEREST (745) (1,038) (4,647) (3,229)
--------- -------- --------- --------
Income (loss) before
extraordinary items (178,669) 27,582 (156,704) 79,010
Extraordinary items, net
of taxes - - (2,073) 34
--------- -------- --------- --------
NET INCOME (LOSS) $(178,669) $ 27,582 $(158,777) $ 79,044
========= ======== ========= ========
EARNINGS (LOSS) PER COMMON SHARE:
Primary:
Earnings (loss) before
extraordinary items $ (1.47) $ .23 $ (1.29) $ .67
Extraordinary items - - (.02) -
--------- -------- -------- --------
Net earnings (loss) $ (1.47) $ .23 $ (1.31) $ .67
========= ======== ======== ========
Fully Diluted:
Earnings (loss) before
extraordinary items $ (1.47) $ .23 $ (1.29) $ .66
Extraordinary items - - (.02) -
--------- -------- -------- --------
Net earnings (loss) $ (1.47) $ .23 $ (1.31) $ .66
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Primary 121,467 119,312 120,774 118,842
========= ======== ======== ========
Fully Diluted 121,467 120,692 120,774 120,578
========= ======== ======== ========
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
3
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IVAX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995
(In thousands) ---------- ---------
Cash flows from operating activities:
Net income (loss) $(158,777) $ 79,044
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Non cash charges relating to restructuring
costs and asset write-downs 118,315 -
Depreciation and amortization 41,401 39,917
Benefit for deferred taxes (43,872) (1,644)
Provision for allowances for doubtful accounts 23,669 3,720
Losses (gains) on sale of long-term assets 232 (2,921)
Losses (gains) on extinguishment of debt 1,640 (63)
Minority interest 4,647 3,229
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 66,387 (62,637)
Increase in inventories (67,511) (18,204)
Increase in other current assets (32,297) (8,791)
Increase in other assets (11,970) (2,129)
Increase (decrease) in accounts payable,
accrued expenses and other
current liabilities 6,169 (7,283)
Decrease in other long-term liabilities (7,865) (1,322)
Other, net (746) 1,132
--------- ---------
Net cash provided by (used for)
operating activities (60,578) 22,048
--------- ---------
Cash flows from investing activities:
Capital expenditures, net of proceeds from sales (61,336) (72,395)
Acquisitions of patents, trademarks, licenses,
and other intangibles, net of sales proceeds (2,698) (687)
Acquisitions of businesses, net of cash acquired (12,110) (4,831)
Other, net - (397)
--------- ---------
Net cash used for investing activities (76,144) (78,310)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt and loans payable (456,555) (50,759)
Borrowings on long-term debt and loans payable 568,643 83,429
Issuance of common stock 31,779 20,444
Cash dividends paid (6,057) (4,632)
--------- ---------
Net cash provided by financing activities 137,810 48,482
--------- ---------
Effect of exchange rate changes on cash (720) 191
--------- ---------
Net increase (decrease) in cash and
cash equivalents 368 (7,589)
Cash and cash equivalents at the beginning of the year 14,720 37,045
--------- ---------
Cash and cash equivalents at the end of the period $ 15,088 $ 29,456
========= =========
Supplemental disclosures:
Interest paid $ 18,186 $ 11,884
========= =========
Income tax payments $ 12,123 $ 11,661
========= =========
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
4
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IVAX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) GENERAL:
In management's opinion, the accompanying unaudited condensed consolidated
financial statements of IVAX Corporation and subsidiaries ("IVAX") contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position of IVAX as of September 30, 1996, and the
results of its operations for the three and nine months ended September 30, 1996
and 1995. The results of operations and cash flows for the nine months ended
September 30, 1996 are not necessarily indicative of the results of operations
or cash flows which may be reported for the remainder of 1996.
The accompanying unaudited interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission for reporting on Form 10-Q. Pursuant to such
rules and regulations, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The condensed consolidated
financial statements should be read in conjunction with the Consolidated
Financial Statements and the Notes to Consolidated Financial Statements included
in IVAX' Annual Report on Form 10-K for the year ended December 31, 1995.
The accounting policies followed for interim financial reporting are the
same as those disclosed in Note 2 of the Notes to Consolidated Financial
Statements included in IVAX' Annual Report on Form 10-K for the year ended
December 31, 1995.
(2) EARNINGS (LOSS) PER SHARE:
Primary earnings (loss) per share is computed by dividing net income
(loss) by the weighted average number of common and dilutive common equivalent
shares outstanding for each period. Common stock equivalents include the
dilutive effect of all outstanding stock options and warrants using the treasury
stock method. Fully diluted earnings (loss) per share assumes the maximum
dilutive effect from stock options and warrants, and if applicable, the
conversion equivalents of the 6-1/2% Convertible Subordinated Notes due 2001
and, for the three and nine months ended September 30, 1995, the 9.00%
Convertible Subordinated Debentures due 1995.
(3) RESTRUCTURING COSTS AND ASSET WRITE-DOWNS:
RESTRUCTURING COSTS
During the third quarter of 1996, IVAX approved and initiated a
restructuring program aimed at reducing costs and enhancing operating
efficiencies in the company's United States generic pharmaceutical operations.
The restructuring program primarily involves facility consolidations, work force
reductions and other cost saving measures. IVAX recorded a pre-tax restructuring
charge of $13,974,000 ($8,445,200 after-tax) in the 1996 third quarter,
comprised of
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$8,650,000 for the estimated loss on sale of closed manufacturing plants;
$3,000,000 for other plant closures and related costs; and $2,324,000 for
severance and other employee termination benefits associated with the work force
reductions. As of September 30, 1996, no costs had been charged against
established reserves.
ASSET WRITE-DOWNS
During the third quarter of 1996, management reevaluated the carrying
value of certain long-lived assets and goodwill related to those assets held and
used in IVAX' United States generic pharmaceutical and specialty chemical
operations. This reevaluation was necessitated by management's determination
that, based on recent results of operations and the restructuring program
described above, the expected future results of operations and cash flows from
these businesses would be substantially lower than previously expected by
management. As a result, and in accordance with Financial Accounting Standard
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," IVAX recorded a charge of $55,898,878 (pre- and
after-tax) to reduce the carrying value of goodwill related to its United States
generic pharmaceutical distribution operations, and charges of $9,752,867
($6,195,941 after-tax) and $38,689,207 (pre- and after-tax) to reduce the
carrying value of certain fixed assets and goodwill, respectively, related to
certain product lines of its specialty chemical operations. Management
determined the amount of the write-downs based on various valuation techniques,
including discounted cash flow analysis and net realizable value for assets to
be held and used.
(4) INCOME TAXES:
The provision for income taxes is based on the consolidated United States
entities' and individual foreign companies' estimated tax rates for the
applicable year. IVAX utilizes the liability method and deferred taxes are
determined based on the estimated future tax effects of differences between the
financial statement and tax basis of assets and liabilities using applicable tax
laws. Deferred income tax provisions and benefits are based on the changes in
the deferred tax asset or tax liability from period to period.
The provision (benefit) for income taxes consists of the following (in
thousands):
THREE MONTHS NINE MONTHS
Period Ended September 30, 1996 1995 1996 1995
---------- --------- ---------- ---------
Current:
United States $ (19,081) $ (859) $ (27,157) $ 10,473
Foreign, including Puerto Rico
and U.S. Virgin Islands 1,899 4,571 17,143 9,115
Deferred (23,371) (2,421) (43,872) (1,644)
--------- --------- --------- ---------
Provision (benefit) for
income taxes $ (40,553) $ 1,291 $ (53,886) $ 17,944
========= ========= ========= =========
As of September 30, 1996, other current and non-current assets and
liabilities include a $95,472,241 net deferred tax asset. A portion of the net
deferred tax asset in the amount of $20,532,954 will be realized by a refund of
federal income taxes paid in prior years and available in the carryback period.
Realization of the remaining $74,939,287 ($51,491,526 and $23,447,761
6
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domestic and foreign, respectively) is dependent upon generating sufficient
future taxable income. Although realization is not assured, management believes
it is more likely than not that the remaining deferred tax asset will be
realized based upon estimated future taxable income. Management's estimates of
future taxable income are subject to revision due to, among other things,
regulatory and competitive factors affecting the generic pharmaceutical
industry. Such factors are discussed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in IVAX' Annual Report
on Form 10-K for the year ended December 31, 1995 and Item 2 of this Quarterly
Report on Form 10-Q.
(5) BUSINESS COMBINATIONS:
On March 1, 1996, IVAX acquired Elvetium S.A. (Argentina), Alet
Laboratorios S.A.E.C.I. y E. and Elvetium S.A. (Uruguay), three affiliated
companies engaged in the manufacture and marketing of pharmaceuticals in
Argentina and Uruguay, in exchange for 1,490,909 shares of IVAX' common stock.
Although the acquisition was accounted for using the pooling of interests method
of accounting, the acquisition was recorded as of January 1, 1996 and the
accompanying historical condensed consolidated financial statements have not
been restated to give retroactive effect to the acquisition due to the
immateriality of the related amounts.
During the first half of 1996, IVAX purchased additional shares of Galena
a.s. increasing its ownership interest to approximately 74%.
(6) DEBT:
On May 14, 1996, IVAX entered into a revolving line of credit with a bank
syndicate permitting borrowings of up to $425,000,000. On November 14, 1996,
IVAX entered into an amendment to the revolving line of credit, which, among
other things, reduces permitted borrowings to $375,000,000 and shortens the
maturity of the line of credit from May 2001 to November 1999. Borrowings under
the amended credit facility generally accrue interest at the London Interbank
Offer Rate (LIBOR) plus 2% through December 31, 1996, and thereafter at LIBOR
plus between .88% and 2%, depending on certain financial ratios. Pursuant to the
terms of the amended credit facility, IVAX has agreed to pledge to the lenders
stock of certain subsidiaries and certain accounts receivable, inventory,
intangible assets, and property, plant and equipment; not dispose of any of its
assets without lender approval other than in the ordinary course of business;
not consummate any acquisitions without lender approval; not pay cash dividends;
and limit capital expenditures and indebtedness. The amended credit facility
contains various financial covenants, including required minimum levels of
earnings before income taxes, depreciation and amortization, and tangible net
worth. Proceeds from the credit facility were used to refinance previously
existing credit facilities and, as discussed below, to make an investment in and
advances to McGaw, Inc. ("McGaw"), and will be used for working capital and
general corporate purposes.
On June 17, 1996, IVAX made an investment in and advances to McGaw in the
aggregate amount of $91,150,000 using proceeds from the credit facility. McGaw
used the proceeds to redeem the remaining outstanding face value of its 10-3/8%
Senior Notes due April 1, 1999 at a purchase price of approximately 102% of
their outstanding principal of $87,420,000, plus accrued interest. The
redemption resulted in a pre-tax extraordinary loss of $3,455,000.
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(7) DIVIDENDS ON COMMON STOCK:
On June 3, 1996, IVAX paid a $.05 per share cash dividend to holders of
record of IVAX' common stock as of May 10, 1996. On November 8, 1996, IVAX'
Board of Directors did not declare a dividend for the second half of 1996. Under
the terms of the amended credit facility, as discussed in Note 6, Debt, above,
IVAX is prohibited from paying cash dividends.
(8) SUBSEQUENT EVENT:
On November 10, 1996, IVAX entered into a definitive merger agreement with
Bergen Brunswig Corporation. Bergen Brunswig Corporation, headquartered in
Orange, California, provides nationwide distribution of pharmaceuticals and
medical-surgical supplies to chain and independent pharmacies, hospitals, health
maintenance organizations, nursing homes, clinics and physician groups. The
merger is intended to be accounted for as a pooling-of-interests. Completion of
the transaction is subject to, among other things, regulatory approvals and the
approval of the transaction by the shareholders of Bergen Brunswig Corporation
and IVAX. For additional information regarding the proposed business
combination, reference is made to IVAX' Current Report on Form 8-K dated
November 12, 1996.
8
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ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, the related Notes to Consolidated
Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in IVAX' Annual Report on Form 10-K
for the year ended December 31, 1995 and the Condensed Consolidated Financial
Statements and the related Notes to Condensed Consolidated Financial Statements
included in Item 1 of this Quarterly Report on Form 10-Q. Except for historical
information contained herein, the matters discussed below are forward looking
statements made pursuant to the safe harbor provisions of the Securities
Litigation Reform Act of 1995. Such statements involve risks and uncertainties,
including but not limited to economic, competitive, governmental and
technological factors affecting IVAX' operations, markets, products and prices,
and other factors discussed elsewhere in this report and the documents filed by
IVAX with the Securities and Exchange Commission ("SEC").
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
IVAX reported a net loss of $158.8 million for the nine months ended
September 30, 1996, compared to net income of $79.0 million for the nine months
ended September 30, 1995. Loss before extraordinary items was $156.7 million for
the nine months ended September 30, 1996, compared to income of $79.0 million
for the same period of the prior year. Results for the first nine months of 1996
included $2.1 million in net extraordinary losses from the early extinguishment
of debt.
Primary loss before extraordinary items per common share was $1.29 for the
nine months ended September 30, 1996, compared to earnings of $.67 for the nine
months ended September 30, 1995. Net loss per primary common share was $1.31 for
the nine months ended September 30, 1996, compared to net earnings of $.67 for
the same period of the prior year. The net extraordinary loss of $.02 per common
share recorded in the first nine months of 1996 related to the early
extinguishment of debt.
NET REVENUES AND GROSS PROFIT BY BUSINESS SEGMENT:
Nine Months Ended September 30, 1996 1995
(In thousands) --------------------- ---------------------
NET GROSS NET GROSS
REVENUES PROFIT REVENUES PROFIT
--------- --------- --------- ---------
Pharmaceuticals $ 458,478 $ 114,803 $ 532,043 $ 227,180
Intravenous products 249,597 84,811 253,552 99,570
Other operations 124,039 58,673 113,253 49,546
Intersegment eliminations (1,466) - (872) -
--------- --------- --------- ---------
Total $ 830,648 $ 258,287 $ 897,976 $ 376,296
========= ========= ========= =========
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Net revenues for the first nine months of 1996 totaled $830.6 million, a
decrease of $67.3 million, or 7%, compared to the same period of the prior year.
Gross profit for the first nine months of 1996 decreased $118.0 million, or 31%,
from the same period of the prior year. Gross profit was $258.3 million (31.1%
of net revenues) for the first nine months of 1996, compared to $376.3 million
(41.9% of net revenues) for the first nine months of 1995.
Net revenues of IVAX' pharmaceutical operations decreased $73.6 million,
or 14%, in comparison to the first nine months of 1995 due to a reduction in net
revenues of the domestic pharmaceutical operations, partially offset by
increased net revenues from the international pharmaceutical operations.
Domestic pharmaceutical net revenues totaled $214.4 million for the first
nine months of 1996, compared to $336.0 million for the same period of 1995. The
$121.6 million, or 36%, decrease in domestic pharmaceutical net revenues was
primarily due to the factors affecting IVAX' United States generic
pharmaceutical operations during the second and third quarters of 1996 discussed
below, partially offset by increased net revenues from the sale of certain new
generic products manufactured by IVAX and introduced during the past twelve
months.
The decline in net revenues of the United States pharmaceutical operations
for the first nine months of 1996 compared to the first nine months of 1995 was
primarily attributable to significant price declines for generic drugs at a time
when customers had significant inventories of IVAX' generic drugs. These factors
resulted in depressed customer re-orders, increased customer inventory credits,
and increased reserves for expected returns. In addition, to avoid exacerbating
the inventory situation, IVAX decreased promotional activities during the 1996
third quarter which further reduced sales volume. Customer inventory credits are
made, consistent with industry practice, to adjust customer accounts for price
declines on their existing inventory. Customer inventory credits and reserves
for expected returns established during the first nine months of 1996 increased
approximately $103.8 million compared to the first nine months of 1995.
In addition to the competitive factors affecting the generic
pharmaceutical industry which are described in IVAX' Annual Report on Form 10-K
for the year ended December 31, 1995 and subsequent reports filed with the SEC,
generic drug price declines during the second and third quarters of 1996 were in
part due to programs instituted by certain national wholesalers during 1996
intended to provide cost savings to independent retail pharmacies. These
programs encouraged generic drug manufacturers to aggressively bid to be the
exclusive supplier of products under the programs. The existence of these
programs also resulted in reduced prices to other customers. Other wholesalers
have commenced or are expected to implement similar programs, and such programs
may be expanded to other product lines or other customer groups.
As noted in documents previously filed with the SEC, the United States
generic drug industry is highly price competitive, with pricing determined by
many factors, including the number and timing of regulatory approvals and
product introductions by IVAX and its competitors. Although the price of a
generic product generally declines over time as competitors introduce additional
versions of the product, the actual degree and timing of price competition
generally is not predictable. IVAX establishes reserves for customer inventory
credits in accordance with generally accepted accounting principles. Adjustments
to these reserves result from, among other things, the actual degree and
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timing of additional price declines and the magnitude of customer inventories at
the time, and are recorded when identified.
During September 1996, IVAX received FDA approval to market its patented
prescription medication Elmiron(R), used for treatment of the pain and
discomfort associated with interstitial cystitis, a debilitating urinary and
bladder disease afflicting primarily women and characterized by severe pain in
the bladder region and urinary frequency. Elmiron(R) is IVAX' first innovative
new drug approved by the FDA for marketing in the United States. Net revenues of
$4.4 million were generated from sales of this product during its third quarter
1996 launch.
Sales of cefadroxil, the generic equivalent of Bristol-Myers Squibb's
antibiotic Duricef(R), approved in March 1996, contributed $34.6 million in net
revenues for the nine months ended September 30, 1996. IVAX experienced limited
price competition with respect to sales of cefadroxil during the 1996 second and
third quarters and, consequently, customer inventory credits had a limited
impact on net revenues of this product. Although IVAX remains the only FDA
approved generic manufacturer of cefadroxil, the company marketing the brand
name version of this drug is marketing its own generic form of this product.
Sales of albuterol metered dose inhaler, the generic equivalent of Glaxo
Inc.'s Ventolin(R) Inhalation Aerosol, used in the treatment of asthma and
approved late in December 1995, generated $28.8 million of net revenues during
the first nine months of 1996. Net revenues attributable to sales of albuterol
metered dose inhaler were negatively impacted during the 1996 third quarter by
price competition combined with elevated customer inventory levels following the
drug's launch. The company marketing the brand name version of this drug is also
marketing, through a third party, a generic form of the drug and, in August
1996, two other generic manufacturers received regulatory approval to market an
albuterol metered dose inhaler product in the United States.
Net revenues attributable to sales of cefaclor, approved in April 1995,
totaled $11.3 million for the first nine months of 1996 compared to $42.5
million for the first nine months of 1995, the period in which the product was
launched. The decline in net revenues of cefaclor was primarily attributable to
price and volume declines, reserves for expected returns and higher levels of
customer inventory credits as compared to the first nine months of 1995. During
the second quarter of 1996, two other generic manufacturers received regulatory
approval to market cefaclor and began marketing their products in the 1996 third
quarter.
Net revenues attributable to sales of verapamil HCl ER tablets totaled
$16.0 million in the first nine months of 1996 compared to $66.0 million in the
same period of the prior year. The decline in verapamil net revenues was due
primarily to a reduction in the net selling price and, to a lesser extent, a
decline in unit volume and a higher level of customer inventory credits as
compared to the first nine months of 1995. During the second quarter of 1996,
another generic version of one of the dosage strengths of verapamil sold by IVAX
was introduced into the market by a competitor.
As discussed in Note 8, Subsequent Event, in the Notes to Condensed
Consolidated Financial Statements, IVAX entered into a definitive merger
agreement with Bergen Brunswig Corporation, a national wholesaler. Although
ultimately expected to result in increased net revenues to IVAX,
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pending completion of the transaction and integration of the businesses, IVAX'
net revenues may be adversely affected by a decline in sales to Bergen Brunswig
Corporation's competitors.
IVAX' international pharmaceutical operations generated net revenues of
$244.0 million for the first nine months of 1996, compared to $196.0 million for
the same period of the prior year. The $48.0 million, or 24%, increase in
international pharmaceutical net revenues included an increase of $28.6 million
attributable to the combined operations of Elvetium S.A. (Argentina), Alet
Laboratorios S.A.E.C.I. y E. and Elvetium S.A. (Uruguay), (collectively,
"Elvetium"), acquired in March 1996. Although the acquisition of Elvetium was
accounted for as a pooling of interests, the acquisition was recorded as of
January 1, 1996 and IVAX' historical results of operations were not restated to
give retroactive effect to the acquisition due to the immateriality of the
related amounts. The remaining $19.4 million increase in net revenues of the
international pharmaceutical operations was primarily due to higher net revenues
of Galena a.s. as a result of increased sales of several products and higher
sales of branded products in the United Kingdom, partially offset by the
unfavorable impact of exchange rate differences in comparison to the prior year
period.
The gross profit percentage of IVAX' pharmaceutical operations was 25.0%
in the first nine months of 1996 compared to 42.7% for the first nine months of
1995. The decline in the gross profit percentage was primarily attributable to
price declines for U.S. generic drugs and higher levels of customer inventory
credits and reserves for expected returns relating to the United States generic
pharmaceutical operations discussed above.
Net revenues of the intravenous products division totaled $249.6 million
in the first nine months of 1996, compared to $253.6 million in the same period
of 1995. The $4.0 million decrease in net revenues was primarily due to price
and volume decreases for Hespan(R), McGaw's brand name blood plasma expansion
product, as a result of generic competition and decreased sales volume of
biomedical and pharmacy equipment, kits and accessories. The decrease was
partially offset by increased sales volume for basic nutrition, sets and
solutions and increased net revenues attributable to the continued growth in
alternate-site health care locations. The gross profit percentage of the
intravenous products division decreased from 39.3% for the first nine months of
1995 to 34.0% for the same period in 1996. The $14.8 million reduction in gross
profit and the decrease in the gross profit percentage were due primarily to the
reduction in the net selling price of Hespan(R) and a charge to cost of sales
due to a decrease in inventory carrying costs as a result of lower standard
manufacturing costs adopted as a result of manufacturing efficiencies achieved
in 1995. Gross profit generated by the intravenous products division is likely
to continue to decrease in 1996 as compared to 1995 as a result of competitive
pressures in the industry.
Net revenues and gross profit of IVAX' personal care products, diagnostics
and specialty chemicals operations, excluding intersegment eliminations,
collectively represent 15% and 23%, respectively, of consolidated net revenues
and consolidated gross profit for the first nine months of 1996. Combined net
revenues and combined gross profit of these other operations increased $10.8
million and $9.1 million, respectively, compared with the first nine months of
1995, primarily due to the introduction by the personal care products group of
the IMAN(TM) product line, which was acquired in November 1995.
12
<PAGE>
<TABLE>
<CAPTION>
OPERATING EXPENSES BY BUSINESS SEGMENT:
(In thousands)
RESTRUCTURING
GENERAL RESEARCH AMORTIZATION COSTS AND
AND AND OF ASSET MERGER
SELLING ADMINISTRATIVE DEVELOPMENT INTANGIBLES WRITE-DOWNS EXPENSES TOTAL
--------- -------------- ----------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 NINE MONTHS
- ----------------
Pharmaceuticals $ 85,095 $ 62,129 $ 37,474 $ 3,357 $ 69,873 $ 71 $ 257,999
Intravenous products 41,111 15,997 12,683 2,467 - - 72,258
Other operations 36,858 11,621 3,344 2,285 48,442 - 102,550
Corporate and other - 16,352 - 25 - 113 16,490
--------- -------- --------- -------- -------- ------- ---------
Total $ 163,064 $106,099 $ 53,501 $ 8,134 $118,315 $ 184 $ 449,297
========= ======== ========= ======== ======== ======= =========
1995 NINE MONTHS
- ----------------
Pharmaceuticals $ 60,550 $ 41,087 $ 32,780 $ 2,003 $ - $ - $ 136,420
Intravenous products 40,923 18,663 11,706 3,555 - - 74,847
Other operations 31,413 10,190 3,014 1,778 - - 46,395
Corporate and other - 10,061 - - - - 10,061
--------- -------- --------- -------- -------- ------- ---------
Total $ 132,886 $ 80,001 $ 47,500 $ 7,336 $ - $ - $ 267,723
========= ======== ========= ======== ======== ======= =========
</TABLE>
Selling expenses totaled $163.1 million (19.6% of net revenues) for the
first nine months of 1996, compared to $132.9 million (14.8% of net revenues)
for the first nine months of 1995. Selling expenses of Elvetium, acquired during
the first quarter of 1996, accounted for $9.9 million of the total $30.2 million
increase. The remaining $20.3 million increase was primarily due to increased
sales and marketing expenses associated with the launch of newly approved
products of IVAX' pharmaceutical operations and the introduction by the personal
care products group of the IMAN(TM) product line.
General and administrative expenses totaled $106.1 million (12.8% of net
revenues) for the first nine months of 1996, compared to $80.0 million (8.9% of
net revenues) for the first nine months of 1995, an increase of $26.1 million.
The increase was primarily a result of an increase in allowances for doubtful
accounts of the domestic pharmaceutical operations mainly resulting from a
wholesaler customer filing a Chapter 11 bankruptcy petition during the third
quarter of 1996, and, to a lesser extent, general and administrative expenses
associated with Elvetium, and increases in corporate health and business
insurance, personnel, travel and facilities costs.
Research and development expenses for the first nine months of 1996
increased $6.0 million, or 13%, compared to the first nine months of 1995, to a
total of $53.5 million. Expenditures by IVAX' pharmaceutical operations
represented 70% of the total research and development expenses for the first
nine months of 1996. The future level of research and development expenditures
will depend on, among other things, the outcome of clinical testing of products
under development, delays or changes in government required testing and approval
procedures, technological and competitive developments, and strategic marketing
decisions.
During the third quarter of 1996, IVAX approved and initiated a
restructuring program aimed at reducing costs and enhancing operating
efficiencies in the company's United States generic pharmaceutical operations.
The restructuring program primarily involves facility consolidations, work force
reductions and other cost saving measures. IVAX recorded a pre-tax restructuring
charge of $14.0 million ($8.4 million after-tax) in the 1996 third quarter,
comprised
13
<PAGE>
of $8.7 million for the estimated loss on sale of closed manufacturing plants;
$3.0 million for other plant closures and related costs; and $2.3 million for
severance and other employee termination benefits associated with the work force
reductions.
During the third quarter of 1996, management reevaluated the carrying
value of certain long-lived assets and goodwill related to those assets held and
used in IVAX' United States generic pharmaceutical and specialty chemical
operations. This reevaluation was necessitated by management's determination
that, based on recent results of operations and the restructuring program
described above, the expected future results of operations and cash flows from
these businesses would be substantially lower than previously expected by
management. As a result, and in accordance with Financial Accounting Standard
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," IVAX recorded a charge of $55.9 million (pre- and
after-tax) to reduce the carrying value of goodwill related to its United States
generic pharmaceutical distribution operations, and charges of $9.8 million
($6.2 million after-tax) and $38.7 million (pre- and after-tax) to reduce the
carrying value of certain fixed assets and goodwill, respectively, related to
certain product lines of its specialty chemical operations. Management
determined the amount of the write-downs based on various valuation techniques,
including discounted cash flow analysis and net realizable value for assets to
be held and used. The write-downs will reduce depreciation and amortization
expenses by approximately $1.1 million in the 1996 fourth quarter and by
approximately $4.3 million annually, and will increase annual net income by
approximately $3.7 million.
Other expense, net, increased $6.5 million in the first nine months of
1996, as compared to the first nine months of the prior year, primarily due to
an increase in interest expense associated with additional borrowings to fund
working capital, as well as additional income in the first nine months of 1995
resulting from gains recorded on the sale of an investment in equity securities
of an affiliated company and the sale of certain trademarks by the personal care
products group.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1995
IVAX reported a net loss of $178.7 million for the three months ended
September 30, 1996, compared to net income of $27.6 million for the three months
ended September 30, 1995. Net loss per primary common share was $1.47 for the
third quarter of 1996, compared to $.23 in net earnings per primary common share
reported for the third quarter of 1995.
NET REVENUES AND GROSS PROFIT BY BUSINESS SEGMENT:
Three Months Ended September 30, 1996 1995
(In thousands) ---------------------- ---------------------
NET GROSS NET GROSS
REVENUES PROFIT REVENUES PROFIT
---------- ---------- --------- ---------
Pharmaceuticals $ 98,351 $ (18,186) $ 191,547 $ 79,934
Intravenous products 81,554 28,414 82,713 30,581
Other operations 43,376 20,779 36,382 16,228
Intersegment eliminations (561) - (430) -
--------- --------- --------- ---------
Total $ 222,720 $ 31,007 $ 310,212 $ 126,743
========= ========= ========= =========
14
<PAGE>
Net revenues for the third quarter of 1996 totaled $222.7 million, a
decrease of $87.5 million, or 28%, compared to the same period of the prior
year. Gross profit in the third quarter of 1996 decreased $95.7 million, or 76%,
from the same period of the prior year. Gross profit was $31.0 million (13.9% of
net revenues) for the 1996 third quarter, compared to $126.7 million (40.9% of
net revenues) for the 1995 third quarter.
Net revenues of IVAX' pharmaceuticals operations decreased $93.2 million,
or 49%, in comparison to the third quarter of 1995. A decrease of $107.4 million
in net revenues of IVAX' domestic pharmaceutical operations was partially offset
by an increase of $14.2 million in net revenues of IVAX' international
pharmaceutical operations.
Domestic pharmaceutical net revenues totaled $16.5 million for the third
quarter of 1996, compared to $123.9 million for the same period of the prior
year. The $107.4 million decrease in net revenues of the domestic pharmaceutical
operations was primarily due to significant price declines for generic drugs,
lower sales volumes as a result of high customer inventory levels and reduced
promotional activities, and approximately $54.0 million of higher levels of
customer inventory credits and reserves for expected returns as compared to the
third quarter of 1995, mainly as a result of significant price declines at a
time of significant customer inventory levels as discussed in "Results of
Operations - Nine months ended September 30, 1996 compared to nine months ended
September 30, 1995."
Sales of IVAX' new drug Elmiron(R), approved and launched in September
1996, generated $4.4 million in net revenues during the third quarter of 1996.
Net revenues attributable to sales of cefadroxil, approved in March 1996,
were $7.0 million in the 1996 third quarter. IVAX experienced limited price
competition with respect to sales of cefadroxil during the 1996 third quarter
and, consequently, customer inventory credits had a limited impact on net
revenues of this product. Net revenues attributable to sales of cefadroxil were
lower during the 1996 third quarter than the 1996 second quarter primarily due
to lower sales volume subsequent to the product's launch.
Net revenues attributable to sales of cefaclor decreased by $28.3 million
during the third quarter of 1996, as compared to the third quarter of the prior
year, primarily due to a reduction in the net selling price and a decline in
sales volume, and, to a lesser extent, a higher level of customer inventory
credits and reserves for expected returns as compared to the same period of the
prior year.
Net revenues attributable to sales of verapamil HCl ER tablets decreased
by $25.1 million during the third quarter of 1996, as compared to the third
quarter of the prior year. The decline in net revenues was due primarily to a
reduction in the net selling price and a decline in sales volume, and, to a
lesser extent, a higher level of customer inventory credits as compared to the
prior year third quarter.
Sales in the 1996 third quarter of IVAX' albuterol metered dose inhaler
were substantially offset by customer inventory credits due to price declines at
a time of elevated customer inventory levels.
15
<PAGE>
IVAX' international pharmaceutical operations generated net revenues of
$81.8 million in the third quarter of 1996, compared to $67.6 million for the
same period of the prior year. The $14.2 million, or 21%, increase in
international pharmaceutical net revenues was primarily due to $8.4 million in
net revenues attributable to the operations of Elvetium, acquired in March 1996.
The remaining $5.8 million increase in net revenues of the international
pharmaceutical operations was primarily due to an increase in sales of branded
products in the United Kingdom, and, to a lesser extent, an increase in sales of
several products by Galena a.s., partially offset by the unfavorable impact of
exchange rate differences in comparison to the prior year period.
The decline in gross profit of $98.1 million in IVAX' pharmaceutical
operations is primarily due to price declines for U.S. generic drugs and the
higher levels of customer inventory credits and reserves for expected returns
relating to the United States generic pharmaceutical operations discussed in
"Results of Operations - Nine months ended September 30, 1996 compared to nine
months ended September 30, 1995."
The intravenous products division generated net revenues of $81.6 million
during the third quarter of 1996, a decrease of $1.2 million from the same
period of the prior year. The decrease in net revenues was primarily due to
decreased sales volume of biomedical and pharmacy equipment, kits and
accessories and price and volume decreases for Hespan(R), partially offset by
increased sales volume for basic nutrition, sets and solutions. The gross profit
percentage of the intravenous products division decreased from 37.0% for the
third quarter of 1995 to 34.8% for the same period in 1996. The $2.2 million
reduction in gross profit and the decrease in the gross profit percentage were
primarily due to the reduction in the net selling price of Hespan(R) and an
increase in inventory obsolescence reserves and royalty expenses.
Net revenues and gross profit of IVAX' personal care products, diagnostics
and specialty chemicals operations, excluding intersegment eliminations,
collectively represent 19% and 67%, respectively, of consolidated net revenues
and consolidated gross profit for the third quarter of 1996. Combined net
revenues and combined gross profit of these other operations increased $7.0
million and $4.6 million, respectively, compared with the third quarter of 1995,
primarily due to the introduction by the personal care products group of the
IMAN(TM) product line, acquired in November 1995, and other new Flori Roberts(R)
products.
<TABLE>
<CAPTION>
OPERATING EXPENSES BY BUSINESS SEGMENT:
(In thousands)
RESTRUCTURING
GENERAL RESEARCH AMORTIZATION COSTS AND
AND AND OF ASSET MERGER
SELLING ADMINISTRATIVE DEVELOPMENT INTANGIBLES WRITE-DOWNS EXPENSES TOTAL
--------- -------------- ----------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 THREE MONTHS
- -----------------
Pharmaceuticals $ 31,029 $ 30,112 $ 13,669 $ 1,305 $ 69,873 $ - $ 145,988
Intravenous products 13,506 5,641 4,046 726 - - 23,919
Other operations 13,031 3,883 1,179 731 48,442 - 67,266
Corporate and other - 5,605 - 12 - - 5,617
-------- -------- -------- ------- --------- ----- ---------
Total $ 57,566 $ 45,241 $ 18,894 $ 2,774 $118,315 $ - $ 242,790
======== ======== ======== ======= ========= ===== =========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
RESTRUCTURING
GENERAL RESEARCH AMORTIZATION COSTS AND
AND AND OF ASSET MERGER
SELLING ADMINISTRATIVE DEVELOPMENT INTANGIBLES WRITE-DOWNS EXPENSES TOTAL
--------- -------------- ----------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1995 THREE MONTHS
- -----------------
Pharmaceuticals $ 21,640 $ 17,200 $ 10,584 $ 601 $ - $ - $ 50,025
Intravenous products 13,336 6,506 4,279 1,210 - - 25,331
Other operations 10,265 3,555 973 583 - - 15,376
Corporate and other - 3,075 - - - - 3,075
-------- -------- -------- ------- ----- ---- --------
Total $ 45,241 $ 30,336 $ 15,836 $2,394 $ - $ - $ 93,807
======== ======== ======== ======= ===== ==== ========
</TABLE>
Selling expenses totaled $57.6 million (25.8% of net revenues) for the
third quarter of 1996, compared to $45.2 million (14.6% of net revenues) for the
third quarter of 1995. Selling expenses of Elvetium, which was acquired in the
first quarter of 1996, accounted for $4.1 million of the total $12.4 million
increase. The remaining $8.3 million increase was primarily due to increased
sales and marketing expenses associated with the launch of Elmiron(R) and the
personal care products group's IMAN(TM) product line.
General and administrative expenses totaled $45.2 million (20.3% of net
revenues) for the third quarter of 1996, compared to $30.3 million (9.8% of net
revenues) for the third quarter of 1995, an increase of $14.9 million. The
increase was primarily due to a higher allowance for doubtful accounts of the
domestic pharmaceutical operations mainly resulting from a wholesaler customer
who filed a Chapter 11 bankruptcy petition during the third quarter of 1996.
Research and development expenses for the third quarter of 1996 increased
$3.1 million, or 19%, compared to the 1995 third quarter, to a total of $18.9
million. Expenditures by IVAX' pharmaceutical operations represented 72% of the
total research and development expenses for the third quarter of 1996.
Refer to the "Results of Operations -- Nine months ended September 30,
1996 compared to the nine months ended September 30, 1995" for a discussion of
the third quarter 1996 restructuring costs and asset write-downs.
Other expense, net, increased $3.7 million from the third quarter of the
prior year primarily due to an increase in interest expense associated with
additional borrowings to fund working capital.
CURRENCY FLUCTUATIONS
For the three and nine months ended September 30, 1996, approximately 39%
and 31%, respectively, of IVAX' net revenues were attributable to operations
which principally generated revenues in currencies other than the United States
dollar, compared to approximately 23% for both the three and nine months ended
September 30, 1995. Fluctuations in the value of foreign currencies relative to
the United States dollar impact the reported results of operations for IVAX. If
the United States dollar weakens relative to the foreign currency, the earnings
generated in the foreign currency will, in effect, increase when converted into
United States dollars and vice versa. As a result of exchange rate differences,
net revenues decreased by approximately $.7 million and
17
<PAGE>
$5.4 million for the three and nine months ended September 30, 1996,
respectively, as compared to the same periods of the prior year.
INCOME TAXES
IVAX recognized a $53.9 million tax benefit for the nine months ended
September 30, 1996. The tax benefit results from domestic losses benefited at
the prevailing federal and state statutory rates, which exceeded foreign income
taxed at the prevailing generally lower foreign rates. The tax benefit also
includes the recognition in the 1996 second quarter of a deferred tax asset of
$7.1 million by McGaw following an adjustment by the Internal Revenue Service of
the tax basis amortization of certain intangible assets; the recognition in the
1996 first quarter of a $1.1 million tax incentive provided by the state of
California; the recognition of a $5.3 million deferred tax asset in connection
with the third quarter 1996 restructuring charge; and the recognition of a $3.6
million deferred tax asset in connection with the third quarter 1996 write-down
of certain fixed assets of IVAX' specialty chemicals business.
As of September 30, 1996, other current and non-current assets and
liabilities include a $95.5 million net deferred tax asset. A portion of the net
deferred tax asset in the amount of $20.5 million will be realized by a refund
of federal income taxes paid in prior years and available in the carryback
period. Realization of the remaining $74.9 million ($51.5 million and $23.4
million domestic and foreign, respectively) is dependent upon generating
sufficient future taxable income. Although realization is not assured,
management believes it is more likely than not that the remaining deferred tax
asset will be realized based upon estimated future taxable income. Management's
estimates of future taxable income are subject to revision due to, among other
things, regulatory and competitive factors affecting the generic pharmaceutical
industry. Such factors are discussed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in IVAX' Annual Report
on Form 10-K for the year ended December 31, 1995, as well as elsewhere in this
report.
LIQUIDITY AND CAPITAL RESOURCES
IVAX used $60.6 million in cash for operating activities during the first
nine months of 1996, compared to $22.0 million in cash generated from operating
activities during the first nine months of 1995. The increase in cash used for
operating activities, as compared to the first nine months of 1995, was
primarily the result of a higher rate of growth in inventories due to lower
sales during the second and third quarter of 1996 as discussed under "Results of
Operations - Nine months ended September 30, 1996 compared to the nine months
ended September 30, 1995." The decrease in accounts receivable and increase in
other current assets did not generate or use cash, respectively, because they
relate to non-cash items such as customer inventory credits and reserves for
expected returns, and the recognition of a tax receivable for a future tax
refund, respectively.
Net cash of $76.1 million was utilized for investing activities during the
first nine months of 1996 as compared to $78.3 million for the same period of
the prior year. An $11.1 million decline in capital expenditures was partially
offset by IVAX' purchase of additional shares of Galena a.s. increasing its
ownership interest to approximately 74%.
18
<PAGE>
Net cash of $137.8 million was provided by financing activities during the
first nine months of 1996, compared to $48.5 million in the same period of the
prior year, primarily reflecting additional borrowings to finance capital
expenditures and the growth in working capital, as well as the receipt of higher
levels of cash on the exercise of stock options as compared to the first nine
months of 1995.
As discussed in Note 6, Debt, in the Notes to Condensed Consolidated
Financial Statements, on November 14, 1996, IVAX entered into an amendment to
its revolving line of credit. Proceeds from the credit facility were used to
refinance previously existing credit facilities and to make an investment in and
advances to McGaw to permit it to redeem its 10-3/8% Senior Notes due 1999, and
will be used for working capital and general corporate purposes. The amended
facility permits borrowings up to $375.0 million, and at September 30, 1996, the
outstanding balance of the facility was $305.0 million. At September 30, 1996,
IVAX' working capital was approximately $473.9 million, compared to $470.9
million at December 31, 1995. Cash and cash equivalents totaled $15.1 million at
September 30, 1996, as compared to $14.7 million at year-end 1995 and $29.5
million as of September 30, 1995.
IVAX' principal sources of short-term liquidity are borrowings under the
credit facility and internally generated funds. IVAX believes that its
short-term financing needs will be satisfied by these sources. For the
long-term, IVAX believes it will be able to obtain long-term capital and
financing to the extent necessary.
On June 3, 1996, IVAX paid a $.05 per share cash dividend to holders of
record of IVAX' common stock as of May 10, 1996. In each of June and December
1995, IVAX paid cash dividends of $.04 per share. On November 8, 1996, IVAX'
Board of Directors did not declare a dividend for the second half of 1996. Under
the terms of the amended credit facility, as discussed in Note 6, Debt, in the
Notes to Condensed Consolidated Financial Statements, IVAX is prohibited from
paying cash dividends.
19
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
During July through September 1996, individuals purporting to be
shareholders of IVAX filed actions styled MARGOLIN, ET AL. VS. IVAX CORPORATION
AND PHILLIP FROST, ET AL.; TOROK, ET AL. VS. IVAX CORPORATION AND PHILLIP FROST,
ET AL.; STERN, ET AL. VS. IVAX CORPORATION AND PHILLIP FROST, ET AL.; BELL, ET
AL., VS. IVAX CORPORATION AND PHILLIP FROST, ET AL.; KREPS, ET AL. VS. IVAX
CORPORATION AND PHILLIP FROST, ET AL.; and SCHOTT, ET AL. VS. IVAX CORPORATION
AND PHILLIP FROST, ET AL. against IVAX and certain of its officers and directors
in the United States District Court for the Southern District of Florida. The
plaintiffs in the MARGOLIN, STERN, KREPS and SCHOTT actions seek to act as
representatives of a class consisting of all purchasers of IVAX' common stock
between February 26, 1996 and June 27, 1996. The plaintiffs in the TOROK and
BELL actions seek to act as representatives of a class consisting of all
purchasers of IVAX' common stock between July 31, 1995 and June 27, 1996. The
complaints allege essentially the same securities laws violations as alleged in
the shareholder actions previously reported in IVAX' Quarterly Report on Form
10-Q for the quarter ended June 30, 1996. In general, the complaints seek an
unspecified amount of compensatory damages, pre-judgment interest, litigation
costs and attorney's fees. On October 25, 1996, the Court entered an order
consolidating all of the above-described actions as well as the shareholder
actions previously reported in IVAX' Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 with the MALIN action reported in such Quarterly
Report. IVAX intends to defend the lawsuit vigorously. Although IVAX believes
that this lawsuit is without merit, its outcome cannot be predicted. If
determined adversely to IVAX, the lawsuit would likely have a material adverse
effect on IVAX' financial position and results and operations.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Amendment No. 1 to Revolving Credit and Reimbursement Agreement
by and among IVAX Corporation, Norton Healthcare, Limited and
IVAX International B.V., as Borrowers; the Lenders party thereto
or referenced therein; NationsBank, National Association, as
Administrative and Documentation Agent and Lender; and BA
Securities, Inc., as Syndication Agent, dated as of November 14,
1996. *
11 Computation of Earnings (Loss) Per Share
27 Financial Data Schedule
- ----------
*Certain exhibits and schedules to this document have not been filed. The
Registrant agrees to furnish a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request.
20
<PAGE>
(b) Current Reports on Form 8-K
On October 2, 1996, IVAX filed a Current Report on Form 8-K relating to
its September 30, 1996 press release announcing IVAX' restructuring plans and
offering its outlook for the 1996 third quarter results.
On November 12, 1996, IVAX filed a Current Report on Form 8-K reporting
the execution of a definitive merger agreement with Bergen Brunswig Corporation.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IVAX CORPORATION
Date: November 14, 1996 By: /s/ MICHAEL W. FIPPS
-------------------------------
Michael W. Fipps
Senior Vice President-Finance
Chief Financial Officer
EXHIBIT 10
AMENDMENT NO. 1
TO REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 1 TO REVOLVING CREDIT AND REIMBURSEMENT
AGREEMENT (this "Amendment Agreement") is made and entered into as
of the 14th day of November, 1996 among:
IVAX CORPORATION, a Florida corporation ("IVAX") and NORTON HEALTHCARE,
LIMITED, an organization formed under the laws of England ("NHL"; together with
IVAX, the "Old Borrowers");
IVAX INTERNATIONAL, BV, an organization formed under The Kingdom of the
Netherlands ("IVAX BV" or the "New Borrower"; together with the Old Borrowers,
the "Borrowers");
NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States of America and having
its principal place of business in Charlotte, North Carolina ("NationsBank"),
and BANK OF AMERICA ILLINOIS, an Illinois state bank existing under the laws of
the State of Illinois and having its principal place of business in Chicago,
Illinois ("BofA") and each other lender that is a signatory hereto (hereinafter
NationsBank, BofA and such other lenders may be referred to individually as a
"Lender" or collectively as the "Lenders"); and
NATIONSBANK, NATIONAL ASSOCIATION, in its capacity as the
administrative and documentation agent for the Lenders (in such capacity, the
"Administrative Agent") and BA SECURITIES, INC., in its capacity as syndication
agent for the Lenders (the "Syndication Agent"; the Administrative Agent and the
Syndication Agent being herein, in their role as agents, individually referred
to as an "Agent" and collectively referred to as the "Agents").
W I T N E S S E T H:
WHEREAS, the Old Borrowers, the Lenders and the Agents have entered
into a Revolving Credit and Reimbursement Agreement, dated as of May 14, 1996 as
amended hereby (the "Agreement") pursuant to which the Lenders agreed to make
Loans and to issue certain Letters of Credit on behalf of the Old Borrowers (the
"Loans");
WHEREAS, IVAX intends to transfer the stock of NHL to IVAX BV and
Norton (Waterford) Limited shall transfer substantially all of its assets to
IVAX BV;
1
<PAGE>
WHEREAS, the New Borrower desires to obtain working capital directly or
indirectly with the proceeds of the Loans under the Agreement, which will
materially and directly benefit the New Borrower;
WHEREAS, the Borrowers and their respective Subsidiaries, including but
not limited to the Significant Subsidiaries, acknowledge that the Obligations
outstanding under the Agreement have been, are and will be of direct interest,
benefit and advantage to each of them, and will enable them to achieve their
common goals and enterprise;
WHEREAS, IVAX and certain of its Subsidiaries have incurred significant
losses which has resulted in a failure to comply with various of the covenants
and conditions set forth in the Agreement;
WHEREAS, the Borrowers have requested that the Lenders waive such
non-compliance and amend certain provisions of the Agreement so that the
Borrowers will no longer be in violation of the Agreement and the Lenders and
the Agents have agreed to do so in the manner set forth in this Amendment
Agreement and upon the condition that the Borrowers and their Significant
Subsidiaries grant to the Agent for the benefit of the Lenders a security
interest in certain of their assets and effect the Guaranties as herein
provided;
WHEREAS, the Agreement requires that each Significant Subsidiary enter
into a Guaranty Agreement and as a condition precedent to this Amendment
Agreement, the Lenders and the Agents have required that such Subsidiaries
execute and deliver to the Administrative Agent certain Security Instruments
dated as of the date hereof;
NOW, THEREFORE, in consideration of the mutual covenants and the
fulfillment of the conditions set forth herein, the parties hereto do hereby
agree as follows:
1. DEFINITIONS. Any capitalized terms used herein without
definition shall have the meaning set forth in the Agreement.
Except as otherwise set forth herein, the term "Agreement" as used
herein and in the Agreement and other Loan Documents shall mean the
Agreement as hereby amended.
2. TEMPORARY AMENDMENTS. Notwithstanding the terms and
conditions of the Agreement, from the date hereof to (x) in the
case of clause (e) below through December 31, 1997 and (y) in the
case of the "Applicable Margin" and "Floating Rate" to the date
IVAX furnishes to the Administrative Agent a Compliance Certificate
2
<PAGE>
pursuant to Section 8.01(a) of the Agreement for the fiscal year ending December
31, 1997 demonstrating that it has complied with the financial covenants
contained in Sections 9.02 and 9.03 of the Agreement (before taking into effect
this Amendment Agreement) to the satisfaction of the Required Lenders the
following amendments to the Agreement shall apply:
(a) The definition of "Applicable Margin" is hereby
amended and restated in its entirety as follows:
"'Applicable Margin' means for each LIBOR Loan, Alternative
Currency Loan, Swing Line Loan, Letter of Credit fee and the unused fee
that number of basis points per annum set forth below, based upon the
Consolidated Debt to Capital Ratio and the Consolidated Interest
Coverage Ratio for the quarter period most recently ended as specified
below:
<TABLE>
<CAPTION>
CONSOLIDATED DEBT TO CAPITAL RATIO
EQUAL TO OR EQUAL TO OR
GREATER THAN GREATER THAN EQUAL TO OR
LESS THAN 30% BUT LESS 35% BUT LESS GREATER THAN
30% THAN 35% THAN 40% 40%
--- ---------- ---------- ----
LETTERS LETTERS LETTERS LETTERS
OF OF OF OF
CONSOLIDATED CREDIT CREDIT CREDIT CREDIT
INTEREST AND UNUSED AND UNUSED AND UNUSED AND UNUSED
COVERAGE RATIO LOANS FEE LOANS FEE LOANS FEE LOANS FEE
--------------- --------- ---------- ---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Greater than or
equal to 4.50 to 87.5 20 100 25 112.5 25 125 27.5
1.00
Greater than or
equal to 3.50 to
1.00 but less 100 25 112.5 25 125 27.5 150 31.25
than 4.50 to
1.00
Greater than or
equal to 2.50 to
1.00 but less 112.5 25 125 27.5 150 31.25 175 37.5
than 3.50 to
1.00
Less than 2.50 125 27.5 150 31.25 175 37.5 200 50
to 1.00
</TABLE>
The Applicable Margin shall be established as at the end of each fiscal
quarter of IVAX (the "Ratio Determination Date"). Except as set forth
below, any change in the Applicable Margin following each Ratio
Determination Date shall be determined based upon the computations set
forth
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<PAGE>
in a Compliance Certificate delivered to the Administrative Agent
pursuant to Section 8.01(a) and (b), subject to review and approval of
such computations by the Administrative Agent, and shall be effective
commencing on the date following the date such certificate is received
(or, if earlier, the date such certificate is required to be delivered)
until the day following the date on which a new Compliance Certificate
is delivered or is required to be delivered, whichever shall first
occur; PROVIDED however, if the Borrowers shall fail to deliver any
such certificate within the applicable period set forth in Section
8.01(a) or (b), as the case may be, then the Applicable Margin, with
respect to the Letters of Credit and Loans shall be the Applicable
Margin then in effect plus 2% and with respect to the unused fee
payable in accordance with Section 2.10, plus .5% until the appropriate
certificate is so delivered. Notwithstanding the foregoing, from the
date of Amendment No. 1 to the Business Day next following receipt of
the Compliance Certificate for the fiscal year ending December 31,
1996, the Applicable Margin shall be 200 basis points for LIBOR Loans,
Alternative Currency Loans, Swing Line Loans and Letters of Credit and
the unused fee shall be 50 basis points."
(b) The definition of "Floating Rate" is hereby amended
and restated in its entirety as follows:
"'Floating Rate' means the sum of (a) the greater of (i) the
Prime Rate or (ii) the Federal Funds Effective Rate plus one-half of
one percent (1/2%) plus (b) one-half of one percent (1/2%), each change
in the Floating Rate to be effective as of the effective date of any
change in the Prime Rate or the Federal Funds Effective Rate giving
rise thereto."
(c) The following new definitions are inserted in
appropriate alphabetical order:
"'Consolidated Debt to Capital Ratio' means the ratio of (i)
Consolidated Funded Indebtedness to (ii) the sum of (A) Consolidated
Funded Indebtedness plus (B) Consolidated Shareholders' Equity.
'Consolidated Interest Coverage Ratio' means the ratio of (i)
Consolidated EBITDA for any period of determination to (ii)
Consolidated Interest Expense for such period."
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<PAGE>
(d) "Consolidated EBITDA" and "Consolidated Interest Expense"
for the periods ending December 31, 1996, March 31, 1997 and June 30, 1997,
respectively, shall be calculated for the three, six and nine month periods then
ended, respectively; and for each quarterly period ended thereafter for a
Four-Quarter Period. For purposes of Section 9.18 and calculation of the
"Applicable Margin" only, the following shall be added back into Consolidated
Net Income to the extent actually deducted those amounts described in Schedule
1.02.
(e) Section 9.18, Section 9.19 and Section 9.20 are
hereby added to the end of Article IX:
"Section 9.18 MINIMUM CONSOLIDATED EBITDA. Permit Consolidated
EBITDA for the periods set forth on Schedule 9.18 to be less than the
amount set forth on such Schedule opposite such period.
Section 9.19 NET LOSS. Permit Consolidated Net Income for the
third fiscal quarter of 1996 to be less than a negative of
$180,000,000.
Section 9.20 CONSOLIDATED DEBT TO CAPITAL RATIO.
Permit the Consolidated Debt to Capital Ratio to be more
than 45%."
(f) During the period the above temporary amendments are
applicable, there shall be no Competitive Bid Loans made pursuant to Section
2.04 of the Agreement.
(g) After the temporary amendments are no longer applicable,
the provisions of the Agreement which were temporarily amended by the Amendment
Agreement shall be in effect as they were prior to the effectiveness of the
temporary amendments.
3. PERMANENT AMENDMENTS TO AGREEMENT. The following
amendments to the Agreement are permanent:
(a) The definition of "Available Revolving Credit
Commitment" is hereby amended and restated in its entirely as
follows:
"'Available Revolving Credit Commitment' means, as
of the effective date of Amendment No. 1, $375,000,000
(such amount to be reduced by the Kirkland Indebtedness,
if any)."
(b) The definition of "Consolidated Leverage Ratio" is
hereby amended and restated in its entirety as follows:
5
<PAGE>
"Consolidated Leverage Ratio" means the ratio of (a)
Consolidated Funded Indebtedness to (b) Consolidated EBITDA for the
Four-Quarter Period ended as of the date of determination;"
(c) The definition of "Guarantors" is hereby amended and
restated in its entirety as follows:
"'Guarantors' means (i) in the case of the Obligations of
IVAX, NHL and IVAX BV, all of the domestic Subsidiaries of IVAX (other
than IA Subsidiary, Inc., which shall at all times remain inactive),
and each additional domestic Subsidiary of IVAX which becomes a
Significant Subsidiary from time to time (ii) in the case of the
Obligations of NHL and IVAX BV, IVAX and the Significant Subsidiaries
of NHL and IVAX BV listed on Schedule 1.01 attached to Amendment No. 1
and each additional Subsidiary of NHL and IVAX BV which becomes a
Significant Subsidiary from time to time."
(d) The definition of "Guaranty" is hereby amended by
deleting the phrase "of even date herewith" therein.
(e) The definition of "Loan Documents" is hereby amended
and restated in its entirety as follows:
"'Loan Documents' means this Agreement, the Notes, the
Guaranty, the Guaranty Agreement of IVAX dated May 14, 1996,
Applications and Agreements for Letters of Credit, the LC Account
Agreement, the Security Instruments and all other instruments and
documents heretofore or hereafter executed or delivered to and in favor
of any Lender or the Administrative Agent in connection with the Loans
or the Letters of Credit made, issued or created under this Agreement
as the same may be amended, modified or supplemented from the time to
time".
(f) The definition of "NHL Guarantors" is hereby
deleted.
(g) The definition of "NHL Sublimit" is here amended and
restated in its entirety as follows:
"'NHL/IVAX BV Sublimit' means in the aggregate
$66,000,000."
(h) The definition of "Permitted Acquisition" is hereby
amended and restated in its entirety as follows:
6
<PAGE>
"'Permitted Acquisition' means (a) the Kirkland Acquisition
provided the aggregate purchase price for such acquisition does not
exceed $10,800,000, $2,000,000 payable in the third fiscal quarter of
1996 and approximately $8,800,000 payable during fiscal year 1997 and
(b) any other acquisitions approved by the Required Lenders."
(i) The definition of "Pledge Agreement" is hereby
amended and restated in its entirety as follows:
"'Pledge Agreements' means (i) the Pledge Agreements from IVAX
and certain of its domestic Subsidiaries to the Administrative Agent,
for the benefit of the Lenders, pursuant to which IVAX and such
Subsidiaries have pledged to the Administrative Agent as security for
the Obligations 100% of the issued and outstanding capital stock of
their domestic Significant Subsidiaries and 65% of the capital stock of
their first tier foreign Significant Subsidiaries and (ii) the Pledge
Agreements from IVAX BV and NHL to the Administrative Agent, for the
benefit of the Lenders, pursuant to which IVAX BV and NHL have pledged
to the Administrative Agent as security for the Obligations of IVAX BV
and NHL 100% of the issued and outstanding capital stock of their
Significant Subsidiaries other than Galena s.a."
(j) The definition of "Revolving Credit Termination Date" is
hereby amended by deleting the date "May 14, 2001" and inserting, in lieu
thereof, the date "November 14, 1999".
(k) The definition of "Significant Subsidiary" is hereby
amended and restated in its entirety as follows:
"'Significant Subsidiaries' means (a) in the case of IVAX,
each Subsidiary of IVAX which (i) represents more than 5% of the
consolidated total assets of IVAX and its Subsidiaries or (ii)
contributes more than 5% of the Consolidated Net Income of IVAX and its
Subsidiaries the timing of determination to be made by the
Administrative Agent, (b) in the case of NHL and IVAX BV, each
Subsidiary of NHL or IVAX BV, respectively, which (i) represents more
than 5% of the consolidated total assets of NHL and its Subsidiaries or
IVAX BV and its Subsidiaries, respectively, or (ii) contributes more
than 5% of the net income of NHL and its Subsidiaries or IVAX BV and
its Subsidiaries, the timing of determination to be made by the
Administrative Agent and (c) such other Subsidiaries as agreed to by
IVAX and the Administrative
7
<PAGE>
Agent. The Significant Subsidiaries at September 30, 1996
are set forth on Schedule 7.01(d)."
(l) The definition of "Total Revolving Credit Commitment" is
hereby amended by deleting the amount "$425,000,000" and inserting, in lieu
thereof, the phrase "$375,000,000 (such amount to be reduced by the Kirkland
Indebtedness, if any)."
(m) The following new definitions are inserted in the
appropriate alphabetical order:
"'Amendment No. 1' means Amendment No. 1 to this
Agreement dated as of November 14, 1996;
'Assignment of Patents, Trademarks, Service Marks and
Copyrights' means, the Assignment of Patents, Trademarks, Service Marks
and Copyrights dated as of the date of Amendment No. 1 made by the
Borrowers and the Guarantors in favor of the Administrative Agent for
the benefit of the Lenders;
'Collateral' means, collectively, all property of the
Borrowers and any Guarantor in which the Administrative Agent, for the
benefit of the Lenders, or any Lender is granted a Lien as security for
all or any portion of the Obligations under any Security Instrument or
other Loan Document;
'Debenture' means collectively those Debentures
given by certain foreign Subsidiaries to secure
Obligations of the Borrowers and Guarantors;
'Kirkland Acquisition' means the acquisition by IVAX
of a manufacturing facility located in Kirkland, Canada
pursuant to the terms of the Facility Purchase Agreement,
dated August 22, 1996, between Glaxo Wellcome Inc. and
IVAX;
'Kirkland Indebtedness' means, the amount of Indebtedness
incurred in connection with the Kirkland Acquisition from a third party
creditor; provided, however, such Indebtedness shall not exceed
$10,000,000 nor be less than 75% of the amount paid for property, plant
and equipment in connection with the Kirkland Acquisition;
'Mortgages' means collectively (i) the Mortgages
executed by IVAX, McGaw, Inc., Johnson Products Co., Inc.
and Zenith Laboratories, Inc. and (ii) in the event
Indebtedness is incurred hereunder to make the Kirkland
8
<PAGE>
Acquisition, the Mortgage granted by the IVAX Subsidiary consummating
the Kirkland Acquisition or refinancing of the Kirkland Acquisition, to
the Administrative Agent, for the benefit of the Lenders, pursuant to
which such Borrower and Guarantors have granted or will grant, as the
case may be, to the Administrative Agent a first priority security
interest in certain real property;
'NHL Transfer Event' means the transfer by IVAX of the stock
of NHL to IVAX BV and the transfer by Norton (Waterford) Limited of
substantially all of its assets to IVAX BV.
'Security Agreements' means collectively the Security
Agreements and Debentures, as the case may be, executed by the
Borrowers and certain of the Guarantors of even date with Amendment No.
1 to the Administrative Agent, for the benefit of the Lenders, pursuant
to which the Borrowers and such Guarantors have granted to the
Administrative Agent, for the benefit of the Lenders, a security
interest in the property described therein;
'Security Instruments' means, collectively, the Pledge
Agreements, the Security Agreements, the Mortgages, the Assignment of
Patents, Trademarks, Service Marks and Copyrights and all other
agreements, instruments and other documents, whether now existing or
hereafter in effect, pursuant to which the Borrowers or any Guarantor
shall grant or convey to the Administrative Agent or the Lenders a Lien
in property as security for all or any portion of the Obligations, as
any of them may be amended, modified or supplemented from time to
time;"
(n) Schedules 1.01, 7.01(d), 7.01(e), 7.01(g) 9.04 and
9.07(iii) to the Agreement are hereby deleted and replaced by new Schedules
1.01, 7.01(d), 7.01(e), 7.01(g), 9.04 and 9.07(ii) attached hereto and new
Schedules 9.02, 9.18 and 9.19 in forms attached hereto or added to the
Agreement.
(o) Exhibit A and Exhibit F to the Agreement are hereby
deleted and replaced by Exhibit A and Exhibit F hereto.
(p) Section 8.01 is hereby amended by (i) deleting the phrase
"Sections 9.01 through 9.03" in (a)(iii) thereof and inserting, in lieu thereof,
the phrase "Sections 9.16 through 9.18", (ii) deleting the first parenthetical
phrase in paragraph (b) thereof and inserting, in lieu thereof, the following
phrase "(except the last reporting period of the Fiscal Year, provided that for
Fiscal Year 1996 the following is required within 75 days after the end of such
period), (iii) deleting the word "and" at the
9
<PAGE>
end of subsection (d), (iv) deleting the period at the end of subsection (e) and
inserting in lieu thereof a semi-colon and the word "and" and (v) adding the
following additional subsection (f) thereto:
"(f) (i) not later than the last day of each month (unless
such preceding month is the end of a fiscal quarter), deliver to the
Administrative Agent (together with copies for each Lender), an
unaudited consolidated and consolidating balance sheet of IVAX and its
Subsidiaries as at the end of the immediately preceding month and the
related consolidated and consolidating statement of operations for such
month and for the period from the beginning of the Fiscal Year through
the end of such reporting period accompanied by a certificate of an
Authorized Representative to the effect that such consolidated
financial statements present fairly the financial position of IVAX and
its Subsidiaries as of the end of such reporting period and the results
of their operations for such reporting period, in conformity with
Generally Accepted Accounting Principles, subject, however, to quarter
and year end adjustments with respect to interim financials; and (ii)
not later than five (5) Business Days before the first day of each
month, a projection of cash needs for such month in form and content
acceptable to the Administrative Agent."
(q) Section 8.19 is hereby amended by (i) amending clause (a)
in its entirety so that as amended it shall read as follows:
"(a) a Guaranty and Security Agreement executed by such
Subsidiary and a Pledge Agreement executed by the owner of the
capital stock of such Significant Subsidiary;"
(ii) clause (b) is amended to provide for the delivery of an opinion or opinions
as to the Security Agreement and Pledge Agreement similar to that required with
respect to the Guaranty, (iii) deleting the period at the end of clause (c) and
inserting a semi-colon in lieu thereof and (iv) adding a new clause (d) thereto
reading as follows:
"(d) certificates representing 100% of the issued and
outstanding capital stock of any new domestic Significant Subsidiary
and 65% of the issued and outstanding capital stock of any foreign
Significant Subsidiary of IVAX, and 100% of the issued and outstanding
capital stock of any Significant Subsidiary of NHL or IVAX B.V.,
together with stock powers or other evidence of pledge that the
Administrative Agent may reasonably request."
10
<PAGE>
(r) The first sentence of Article IX is hereby amended by
deleting the phrase "Significant Subsidiary" and inserting in lieu thereof the
word "Subsidiaries". For the purposes of Sections 9.04 through 9.15 the terms
Subsidiary and Significant Subsidiary shall exclude Galena s.a.
(s) Section 9.01 is hereby amended by deleting the phrase
"$480,000,000 at December 31, 1995" and inserting, in lieu thereof, the phrase
"$525,000,000 at September 30, 1996".
(t) Section 9.04 is hereby amended and restated in its
entirety as follows:
"9.04 INDEBTEDNESS OR GUARANTEED OBLIGATIONS. Incur, create,
assume or permit to exist any Indebtedness or Guaranteed Obligations ,
howsoever evidenced, except for (i) Indebtedness or Guaranteed
Obligations incurred hereunder, (ii) additional Indebtedness or
Guaranteed Obligations, without duplication, of foreign Subsidiaries
incurred after the date of Amendment No. 1 in the aggregate outstanding
amount, when combined with what such Subsidiaries have incurred
pursuant to Section 9.07 (v), not to exceed $25,000,000, provided that
such Indebtedness shall not contain terms or covenants more restrictive
than those contained in this Agreement, (iii) Indebtedness and
Guaranteed Obligations existing on the date of Amendment No. 1 and
listed in Schedule 9.04 and 9.07(ii) attached to Amendment No.1., (iv)
additional Indebtedness incurred by IVAX and its domestic Subsidiaries
after the date of Amendment No. 1 with respect to Capital Leases not to
exceed $25,000,000 in the aggregate, (v) Indebtedness or Guaranteed
Obligations, without duplication, of the Borrowers in excess of that
permitted under clauses (ii), (iv) and (vi) of this Section 9.04 so
long as (x) the Required Lenders shall consent to incurring such
Indebtedness and the terms thereof, and (y) 100% of the net proceeds of
such Indebtedness are applied to permanently reduce the Total Revolving
Credit Commitment pursuant to Section 2.07 and (vi) the Kirkland
Indebtedness, provided that such Indebtedness shall not contain terms
or covenants more restrictive than those contained in this Agreement."
(u) Section 9.05 is hereby amended by (i) deleting the phrase
"Significant Subsidiary" everywhere it appears therein and inserting in lieu
thereof the word "Subsidiary", (ii) deleting the phrase "attached hereto" in
clause (i) thereof and inserting in lieu thereof the phrase "attached to
Amendment No. 1" and deleting the phrase "existing as of the date hereof and
as", (iii) deleting clause (vi) in its entirety, and (iv) renumbering clause
(vii) as
11
<PAGE>
clause (vi) and amending and restating clause (vi) to read as
follows:
"(vi) purchase money liens to secure Indebtedness permitted
under Section 9.04(ii),(iv) and (vi) hereof so long as such
Indebtedness is incurred to purchase fixed assets, the Indebtedness
represents not less than 75% of the purchase price of such assets, and
no other property other than the property acquired with the proceeds of
such Indebtedness secures such Indebtedness, provided that the total
amount of such Indebtedness incurred after the date of Amendment No. 1
secured by purchase money Liens at no time exceeds $10,000,000, plus
the amount of the Kirkland Indebtedness or $10,000,000 if the Kirkland
Indebtedness is not outstanding."
(v) Section 9.06 is hereby amended and restated in its
entirety as follows:
"9.06 TRANSFER OF ASSETS. Sell, lease, transfer or otherwise
dispose of any asset of Borrowers or their Subsidiaries other than,
from the date of Amendment No. 1 until payment in full of the
Obligations, termination of all commitments to make Loans and such
times as there are no Letters of Credit outstanding, (i) assets (but
not including accounts receivable) having fair market value of less
than $25,000,000 in the aggregate for all assets sold hereunder
provided that 75% of the net proceeds of such disposition are used to
permanently reduce the Revolving Credit Loans in accordance with
Section 2.07 and (ii) inventory, intellectual property, worn-out or
obsolete assets, all in the ordinary course of business."
(w) Section 9.07 is hereby amended and restated in its
entirety as follows:
"9.07 INVESTMENTS; ACQUISITIONS. Purchase, own, invest in or
otherwise acquire, directly or indirectly, any stock or other
securities or all or substantially all of the assets, or make or permit
to exist any interest whatsoever in any other Person or permit to exist
any loans or advances to any Person; PROVIDED, Borrowers and their
Subsidiaries may make loans or advances to, maintain investments or
invest in or acquire, without duplication or aggregation
(i) Eligible Securities;
(ii) loans, investments and advances
outstanding on the date of Amendment No. 1 listed
12
<PAGE>
on SCHEDULE 9.07(II) and SCHEDULE 7.01(E) attached
to Amendment No. 1;
(iii) accounts receivable arising and trade credit
granted in the ordinary course of business and any securities
received in satisfaction or partial satisfaction thereof in
connection with accounts of financially troubled Persons to
the extent reasonably necessary in order to prevent or limit
loss;
(iv) investments in securities rated BBB+ and
Baa1 or better by S&P and Moody's, respectively;
(v) additional loans and advances to and investments
in foreign Subsidiaries made subsequent to the date of
Amendment No. 1 in an aggregate outstanding amount not to
exceed, when aggregated with Indebtedness of such Subsidiaries
permitted pursuant to Section 9.04(ii), $25,000,000;
(vi) loans, advances and investments in
domestic Guarantors; and
(vii) Permitted Acquisitions."
(x) The proviso contained in Section 9.08 is hereby amended by
deleting the word "Significant" wherever it appears in clauses (i) and (ii).
(y) Section 9.09 is hereby amended and restated in its
entirety as follows:
"9.09 RESTRICTED PAYMENTS. In respect of IVAX, declare or pay
any dividends (other than those payable solely in capital stock or in
rights to purchase capital stock) or distributions, in reduction of
capital or otherwise in respect of any equity interest, or purchase,
redeem or otherwise retire any such equity interest (other than the
redemption of rights to purchase capital stock of IVAX for an aggregate
purchase price of not to exceed $1,500,000)."
(z) Sections 9.16 and 9.17 are hereby added to the end
of Article IX:
"9.16 CAPITAL EXPENDITURES. Make or become
committed to make Consolidated Capital Expenditures,
which exceed in the aggregate amounts set forth on
Schedule 9.16 in the periods set forth on Schedule 9.16
13
<PAGE>
(on a noncumulative basis, with the effect that amounts not expended in
any Fiscal Year may not be carried forward to a subsequent Fiscal Year
provided, however, that amounts not expended in any Fiscal Quarter of
1997 may be carried forward to the subsequent 1997 Fiscal Quarter
only).
9.17 REDEMPTION OF INDEBTEDNESS. (a) Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in
any manner, or make any payment in violation of any subordination terms
of, any Indebtedness, other than (i) Indebtedness incurred hereunder,
(ii) scheduled amortization payments of Indebtedness permitted under
Section 9.04, provided that in no event shall such payments include
payments due to acceleration of Indebtedness in an aggregate amount of
$10,000,000 or more, (iii) the payment in full of overdraft facilities
and (iv) refinancing of existing Indebtedness of foreign Subsidiaries
which Indebtedness is described on Schedule 9.04 and Section 9.04(ii)
so long as any such Indebtedness (x) shall not contain terms or
covenants more restrictive than those contained in this Agreement and
(y) shall not exceed the amount of the Indebtedness being refinanced
plus the reasonable costs and expenses of such refinancing or (b)
amend, modify or change in any manner any term or condition of any
Capital Lease having a present value greater than $2,500,000 or any
Indebtedness so that the terms and covenants thereof are less favorable
to the Agents and the Lenders than the terms of such Capital Lease or
Indebtedness as of the date of Amendment No. 1 and the present value of
such Capital Lease is not increased."
(aa) Clause (c) of Section 10.01 is hereby amended and
restated in its entirety as follows:
"(c) if default shall be made in the performance or observance
of any covenant set forth in Section 8.07 which is not cured within
three Business Days after receipt of notice of such default, or if
default shall be made in the performance or observance of any covenant
set forth in Sections 8.06, 8.10, 8.18 or 8.19 or Article IX hereof;"
(bb) Clause (e) of Section 10.01 is hereby amended by adding
the phrase "or Guaranteed Obligations" after the word "Indebtedness" wherever it
appears therein.
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<PAGE>
(cc) Section 10.01(C) is hereby amended by deleting the phrase
"20 basis points" and inserting, in lieu thereof, the phrase "50 basis points".
(dd) Section 11.12 is hereby added to the end of
Article XI:
"11.12 SECURITY TRUSTEE. The Administrative Agent shall be the
"Security Trustee" under any of those Security Instruments which are
expressed to be governed by English or Irish law and shall accept
without investigation, requisition or objection such title as any
person may have to the assets which are subject to the English Security
Instruments and shall not (a) be bound or concerned to examine or
inquire into the title of any person; (b) be liable for any defect or
failure in the title of any person, whether such defect or failure was
known to it or might have been discovered upon examination or inquiry
and whether capable of remedy or not; (c) be liable for any failure on
its part to give notice of such Security Instruments to any third party
or otherwise perfect or register the security created by such Security
Documents.
The Security Trustee shall hold the benefit of the English
Security Instruments upon trust for itself, the Lenders and the
Administrative Agent. Upon the appointment of any successor Security
Trustee, the resigning Security Trustee shall execute and deliver such
documents and do such other acts and things as may be necessary to vest
in the successor Security Trustee all the rights, title and interests
vested in the resigning Security Trustee.
The Administrative Agent and each Lender confirm that they do
not wish to be registered in accordance with Rule 146 of the English
Land Registration Rules 1925 as the joint proprietor of any mortgage or
charge created pursuant to any Loan Document and accordingly authorizes
the Security Trustee to hold such mortgage or charge in its sole name
as agent and trustee for the Administrative Agent and the Lenders and
requests H.M. Land Registry to register the Security Trustee as the
sole proprietor of any such mortgage or charge."
4. UNIVERSAL AMENDMENTS TO LOAN DOCUMENTS.
(a) All references in the Loan Documents to the
"Borrowers" in the Agreement and in each exhibit thereto is hereby
amended to mean, collectively, the Old Borrowers (as defined in
15
<PAGE>
this Amendment Agreement) and the New Borrower (as defined in this Amendment
Agreement). Whenever the terms "either Borrower" or "any Borrower" are used in
the Agreement or other Loan Documents such terms shall be amended to mean "any
of the Borrowers".
(b) All references to "IVAX or NHL" are hereby amended
to be "IVAX, NHL or IVAX BV."
(c) All references to "NHL" are hereby amended to mean "NHL
and IVAX BV" and in each place where the singular form of a verb or possessive
adjective follows such reference, it is hereby pluralized.
(d) IVAX agrees that its guaranty of NHL's Obligations under
the Agreement and other Loan Documents and its Guaranty will, from the date
hereof until the payment in full of the obligations (including the expiration of
all Letters of Credit issued for the benefit of NHL or IVAX BV) of NHL and IVAX
BV and termination of all commitments to make Loans to NHL and IVAX BV, be an
irrevocable, absolute and unconditional guarantee of both NHL's and IVAX BV's
Indebtedness under the Agreement.
(e) Everywhere the term "NHL Sublimit" appears in the
Agreement or the Loan Documents it is hereby replaced with the term "NHL/IVAX BV
Sublimit".
5. NEW BORROWER UNDERTAKINGS. The New Borrower acknowledges and agrees
that it is a party to and bound by, and shall observe, perform and fulfill all
of the obligations, undertakings and liabilities of NHL under the Agreement, the
Notes, the LC Account Agreement and each other Loan Document to the same extent
as if it were an original signatory thereto. The New Borrower acknowledges and
agrees to the provisions of Section 12.10 of the Agreement with respect to
itself.
6. REPRESENTATIONS AND WARRANTIES. In order to induce the
Agent and the Lender to enter into this Agreement, the Borrowers
(including the New Borrower) represent and warrant to the Agents
and the Lenders as follows:
(a) The representations and warranties made by Borrowers in
Article VII of the Agreement are true in all material respects on and as of the
date hereof, except to the extent (i) previously disclosed in writing to the
Agents and the Lenders and (ii) such representation and warranty expressly
relates to an earlier date and for changes therein permitted by the Agreement;
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrowers and their Subsidiaries,
taken as a whole, since June 30, 1996, other than
16
<PAGE>
changes in the ordinary course of business and changes which have been
previously disclosed in writing to the Lenders and the Agents by that certain
"Revised Financial Projections and Supplemental Information" dated October 30,
1996;
(c) The business and properties of the Borrowers and their
Subsidiaries, taken as a whole, are not, and since the date of the most recent
financial report of the Borrowers and their Subsidiaries received by the Agents
and the Lenders under Section 6.01(f) of the Agreement or otherwise, have not
been adversely affected in any substantial way as the result of any fire,
explosion, earthquake, accident, strike, lockout, combination of workers, flood,
embargo, riot, activities of armed forces, war or acts of God or the public
enemy, or cancellation or loss of any major contracts; and
(d) No event has occurred and no condition exists which, upon
the consummation of the transaction contemplated hereby, constituted a Default
or an Event of Default on the part of the Borrowers under the Agreement either
immediately or with the lapse of time or the giving of notice, or both, which
has not been previously disclosed in writing to the Agents and the Lenders.
7. SECURITY.
(a) As security for the full and timely payment and
performance of all Obligations, the Borrowers shall, and shall cause certain of
the Guarantors to, do or cause to be done all things necessary in the opinion of
the Administrative Agent and its counsel to grant to the Administrative Agent
for the benefit of the Lenders a duly perfected security interest in all
Collateral subject to no prior Lien or other encumbrance or restriction on
transfer (other than (1) those permitted under the Loan Documents and (ii)
restrictions on transfer imposed by applicable securities laws).
(b) At the request of the Administrative Agent, the Borrowers
will and will cause the Guarantors, as the case may be, to execute, by its duly
authorized officers, alone or with the Administrative Agent, any certificate,
instrument, statement or documents, or to procure any such certificate,
instrument, statement or document, or to take such other action (and pay all
connected costs) which the Administrative Agent reasonably deems necessary from
time to time to create, continue or preserve the liens and security interests in
Collateral (and the perfection and priority thereof) of the Administrative Agent
contemplated hereby and by the other Loan Documents.
(c) Each Borrower represents, warrants (to the best of
its knowledge, after due inquiry) and covenants that (i) the chief
17
<PAGE>
executive office of the Borrower and each other Person providing Collateral
pursuant to a Security Instrument (each, a "Grantor") is located at the address
or addresses specified on SCHEDULE 7, and (ii) SCHEDULE 7 contains a true and
complete list of (a) the name and address of each Grantor and of each other
Person that has effected any merger or consolidation with a Grantor or
contributed or transferred to a Grantor any property constituting Collateral at
any time since January 1, 1991 (excluding Persons making sales in the ordinary
course of their businesses to a Grantor of property constituting inventory in
the hands of such seller), (b) each location of the chief executive office of
each Grantor at any time since January 1, 1991, (c) each location in which goods
constituting Collateral are or have been located since January 1, 1991 (together
with the name of each owner of the property located at such address if not the
applicable Grantor, and a summary description of the relationship between the
applicable Grantor and such Person), and (d) each trade style used by any
Grantor since January 1, 1991 and the purposes for which it was used. Each
Borrower shall not change, and shall not permit any other Grantor to change, the
location of its chief executive office or any location specified in clause (c)
of the immediately preceding sentence, or use or permit any other Grantor to
use, any additional trade style, except upon giving not less than thirty (30)
days' prior written notice to the Administrative Agent and taking or causing to
be taken all such action at Borrower's or such other Grantor's expense as may be
reasonably requested by the Administrative Agent to perfect or maintain the
perfection of the Lien of the Administrative Agent in Collateral.
(d) The Administrative Agent shall engage for the benefit of
the Lenders, at the expense of IVAX, at or prior to November 30, 1996, an
independent consultant acceptable to IVAX and IVAX shall use its best efforts to
cooperate with such consultant to make by December 31, 1996,(i) an on-site
evaluation and physical audit of the receivables, and inventory of Zenith
Goldline Pharmaceuticals, Inc. and its Subsidiaries (collectively
"Pharmaceuticals") (ii) an evaluation of the adequacy of reserves established by
Pharmaceuticals for returns of inventory sold, bad debts and disallowances and
(iii) an evaluation of the "Revised Financial Projections and Supplemental
Information" dated October 30, 1996 and the means for achieving such projections
all in scope and form satisfactory to the Administrative Agent. The
Administrative Agent, the Lenders and IVAX shall have free and full access to
the consultant and the consultant's report.
The failure of IVAX to pay for or approve the consultant or
intentional interference by IVAX or its Subsidiaries with such consultant's
efforts to perform such evaluation shall constitute an Event of Default under
the Agreement.
18
<PAGE>
8. CONDITIONS PRECEDENT. This Amendment Agreement shall
become effective upon the delivery by the Borrowers to the
Administrative Agent, of the following:
(i) twenty executed counterparts of this
Amendment Agreement;
(ii) Resolutions of the Board of Directors of
Borrowers and each Guarantor existing prior to the date hereof with
respect to the approval of this Amendment Agreement and the
transactions contemplated hereby and, with respect to the Borrowers and
the Significant Subsidiaries who are assignors or pledgors, the Notes,
the Pledge Agreements and the Security Instruments;
(iii) a certificate of the Secretary or Assistant
Secretary of the Borrowers and each Guarantor existing prior to the
date hereof as to Charter, Bylaws, Resolutions and incumbency of
officers executing this Amendment Agreement, and, with respect to the
Borrowers, the Notes, the Pledge Agreements and the Security
Instruments;
(iv) Notes executed by the Borrowers in the
form of Exhibit E to the Agreement;
(v) Executed Pledge Agreements from the
Borrowers and any domestic Subsidiaries in form acceptable to the
Lenders;
(vi) Executed Security Instruments from the Borrowers
and certain of the Guarantors in the form acceptable to the Lenders and
UCC-1 financing statements and other foreign security filings, if any,
executed in connection therewith;
(vii) 100% of all the capital stock of all
domestic Significant Subsidiaries, along with executed stock powers;
(viii) 65% of all the capital stock of all first tier
foreign Significant Subsidiaries, along with executed stock powers, in
the case of IVAX's foreign Significant Subsidiaries and 100% of all the
capital stock of all foreign Significant Subsidiaries, along with
executed stock powers, in the case of IVAX BV and NHL's foreign
Significant Subsidiaries, other than Galena s.a.;
(ix) Executed Guarantees by all Guarantors in the
forms of Exhibit G to the Agreement;
19
<PAGE>
(x) Resolutions of the Board of Directors of each
Guarantor with respect to the approval of the Security Instruments,
and, in the case of additional Guarantors, the Guarantees and the
transactions contemplated thereby;
(xi) a certificate of the Secretary or Assistant
Secretary of the each Guarantor as to Charter, Bylaws,
Resolutions and incumbency of officers executing Guarantees or
Security Instruments;
(xii) opinions of domestic and foreign counsel
(including English, Irish and Dutch counsel) to the Borrowers and the
Guarantors in forms reasonably acceptable to counsel for the
Administrative Agent;
(xiii) payment of an amendment fee to each of the
Lenders in the amount of 30 basis points of the Total
Revolving Credit Commitment;
(xiv) a new Schedule 7.01(d) (Significant
Subsidiaries), Schedule 1.01 (Guarantors), Schedule 9.04
(Indebtedness), 9.07(ii)(Loans and Advances), 7.01(g)(Liens) and
7.01(e)(Investments) each of which shall be satisfactory to the
Lenders;
(xv) Notice of Appointment of Authorized
Officers by IVAX BV;
(xvi) payment of fees to the Agents;
(xvii) copies of the Management Letter dated
December 31, 1995; and
(xviii) such other instruments and documents as the
Administrative Agent or any Lender may reasonably request.
9. CONDITIONS SUBSEQUENT.
(a) Not later than 45 days after the date hereof, the
Borrowers shall cause to be delivered to the Administrative Agent such
instruments and documents as may be necessary to perfect in the Administrative
Agent for the benefit of the Lenders a valid first Lien on the following real
property together with such other instruments and documents as the
Administrative Agent may require:
Zenith Laboratories Northvale, New Jersey
McGaw Industries, Inc. Irvine, California
Johnson Products Chicago, Illinois
IVAX Corporation Miami, Florida
20
<PAGE>
(b) The Administrative Agent shall receive not later than 45
days after the date hereof UCC-11 lien search results, foreign lien search
results and intellectual property search results on the Borrowers and all
Guarantors confirming the absence of Liens other than as permitted by the
Agreement and Security Instruments.
10. WAIVER OF DEFAULTS. The Lenders hereby waive the occurrence of an
Event of Default under (i) Sections 9.02 and 9.03 of the Agreement so long as
the temporary amendments set forth in clause (e) of paragraph 2 hereof are in
effect and (ii) Section 9.05 of the Agreement through the date hereof with
respect to the existence of a lien on personal property of Baker Norton
Pharmaceuticals, Inc. Except as specifically waived, by execution of this
Amendment Agreement neither the Administrative Agent nor the Lenders shall be
deemed to have waived any other Default or Event of Default. This Amendment
Agreement shall not be deemed or construed to limit or impair any rights or
remedies of the Administrative Agent and the Lenders under the Agreement or any
of the other Loan Documents.
11. MISCELLANEOUS.
(a) All instruments and documents incident to the consummation
of the transactions contemplated hereby shall be satisfactory in form and
substance to the Administrative Agent and its counsel.
(b) This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, conditions, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and no one of them has relied on any such promise, condition, represen
tation or warranty. Each of the parties hereto acknowledges that, except as in
this Agreement otherwise expressly stated, no representations, warranties or
commitments, express or implied, have been made by any other party to the other.
None of the terms or conditions of this Amendment Agreement may be changed,
modified, waived or canceled orally or otherwise, except by writing, signed by
all the parties hereto, specifying such change, modification, waiver or
cancellation of such terms or conditions, or of any preceding or succeeding
breach thereof. The Borrowers acknowledge that time is of the essence insofar as
fulfillment of their obligations hereunder.
(c) Except as hereby specifically amended, modified or
supplemented, the terms of the Agreement and all of the other Loan
Documents are hereby confirmed and ratified in all respects and
21
<PAGE>
shall remain in full force and effect according to their respective
terms.
(d) This Amendment Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Amendment
Agreement to produce or account for more than one fully-executed counterpart.
(e) The Administrative Agent shall receive not later
than ten (10) Business Days following the transfer of the assets of
Norton (Waterford) Limited to IVAX B.V. a security interest from
IVAX B.V. in all of such assets that were formerly owned by Norton
(Waterford) Limited together with a pledge of all of the
outstanding equity interest of IVAX B.V. in Norton Healthcare Ltd.
(f) This Amendment Agreement shall be construed in
accordance with the internal laws and judicial decisions of the
State of Florida.
[Signature pages follow]
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
WITNESS: IVAX CORPORATION
Terry L. Scaggs
____________________________________
By: /s/ Andrew Zinzi
_______________________
Name: ANDREW ZINZI
_____________________
Title: Treasurer
____________________
WITNESS: NORTON HEALTHCARE LIMITED
Terry L. Scaggs
____________________________________
By: /s/ Jeffrey F. Eisenberg
_______________________
Name: Jeffrey F. Eisenberg
_____________________
Title: Attorney-in-fact
_____________________
WITNESS: IVAX INTERNATIONAL, BV
Terry L. Scaggs
____________________________________
By: /s/ Andrew Zinzi
_______________________
Name: Andrew Zinzi
_____________________
Title: Attorney-in-fact
____________________
<PAGE>
NATIONSBANK, National Association
as Administrative Agent for the Lenders
By: /s/ Ashley M. Crabtree
______________________________
Name: Ashley M. Crabtree
Title: Vice President
NATIONSBANK, National Association
By: /s/ Ashley M. Crabtree
_______________________________
Name: Ashley M. Crabtree
Title: Vice President
<PAGE>
BANK OF AMERICA ILLINOIS, as Lender
By: /s/ Laurens F. Schaad, Jr.
____________________________________
Name: Laurens F. Schaad, Jr.
Title: Vice President
<PAGE>
ABN AMRO BANK N.V.
By: ABN AMRO NORTH AMERICAN, INC.,
as Co-Agent
By: /s/ Jose Landeo
__________________________________
Name: Jose Landeo
_______________________________
Title: Group Vice President
By: /s/ Deborah Day Orozco
__________________________________
Name: Deborah Day Orozco
_______________________________
Title: Vice President
<PAGE>
CITICORP USA, as Co-Agent
By: /s/ Claire Wibroe
_______________________________
Name: Claire Wibroe
__________________________
Title: Vice President
_________________________
<PAGE>
BARNETT BANK OF SOUTH FLORIDA, N.A.
By: /s/ Guillermo Castillo
_______________________________
Name: Guillermo Castillo
__________________________
Title: Vice President
_________________________
<PAGE>
THE BANK OF NEW YORK
By: /s/ David C. Siegel
_______________________________
Name: David C. Siegel
__________________________
Title: Assistant Vice President
_________________________
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ Frank F. Sandler
_______________________________
Name: Frank F. Sandler
__________________________
Title: Relationship Manager
_________________________
SCOTIABANK (U.K.) LIMITED
By: /s/ P.D. Girling
_______________________________
Name: P.D. Girling
__________________________
Title: Relationship Manager
_________________________
<PAGE>
THE BANK OF TOKYO-MITSUBISHI TRUST CO.
By: /s/ Margaret Sunier
_______________________________
Name: Margaret Sunier
__________________________
Title: Vice President and Manager
_________________________
<PAGE>
COMMERZBANK AG, ATLANTA AGENCY
By: /s/ Harry P. Yergey
_______________________________
Name: Harry P. Yergey
__________________________
Title: Vice President
_________________________
By: /s/ Mary B. Smith
_______________________________
Name: Mary B. Smith
__________________________
Title: Assistant Vice President
_________________________
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
_______________________________
Name: Robert Ivosevich
__________________________
Title: Senior Vice President
_________________________
CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ Robert Ivosevich
_______________________________
Name: Robert Ivosevich
__________________________
Title: Senior Vice President
_________________________
<PAGE>
DEUTSCHE BANK AG NEW YORK BRANCH
and/or CAYMAN ISLANDS BRANCH
By: /s/ Iain Stewart
_______________________________
Name: Iain Stewart
__________________________
Title: Assistant Vice President
_________________________
By: /s/ Stephan A. Wiedemann
_______________________________
Name: Stephan A. Wiedemann
__________________________
Title: Vice President
_________________________
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Robert H. Wolohan
_______________________________
Name: Robert H. Wolohan
__________________________
Title: Corporate Banking Officer
_________________________
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LTD.,
ATLANTA AGENCY
By: /s/ Kazuo Iida
_______________________________
Name: Kazuo Iida
__________________________
Title: General Manager
_________________________
<PAGE>
THE SAKURA BANK, LIMITED
ATLANTA AGENCY
By: /s/ Hiroyasu Imanishi
_______________________________
Name: Hiroyasu Imanishi
__________________________
Title: V.P. & Senior Manager
_________________________
<PAGE>
THE SUMITOMO BANK, LIMITED, ATLANTA
AGENCY
By: /s/ Masayuki Fukushima
_______________________________
Name: Masayuki Fukushima
__________________________
Title: Joint General Manager
_________________________
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By: /s/ Angela R. Reilly
_______________________________
Name: Angela R. Reilly
__________________________
Title: Vice President
_________________________
By: /s/ Ian Reece
_______________________________
Name: Ian Reece
__________________________
Title: Vice President & Manager
_________________________
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Mark E. Roberts
_______________________________
Name: Mark E. Roberts
__________________________
Title: Director
_________________________
<PAGE>
NATIONAL WESTMINSTER BANK PLC,
By: /s/ J. Brett
_______________________________
Name: J. Brett
__________________________
Title: Senior Corporate Manager
_________________________
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Patrick A. Phelan
_______________________________
Name: Patrick A. Phelan
__________________________
Title: Assistant Vice President
_________________________
EXHIBIT 11
<TABLE>
<CAPTION>
IVAX CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(In thousands, except per share data)
PERIOD ENDED SEPTEMBER 30, THREE MONTHS NINE MONTHS
1996 1995 1996 1995
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary items $ (178,669) $ 27,582 $(156,704) $ 79,010
Extraordinary items, net of tax - - (2,073) 34
---------- -------- --------- ---------
Net income (loss) for primary computation $ (178,669) $ 27,582 $(158,777) $ 79,044
========== ======== ========= =========
Average number of common and dilutive
common equivalent shares-primary 121,467 119,312 120,774 118,842
========== ======== ========= =========
Earnings (loss) before
extraordinary items $ (1.47) $ .23 $ (1.29) $ .67
========== ======== ========= =========
Net earnings (loss) $ (1.47) $ .23 $ (1.31) $ .67
========== ======== ========= =========
FULLY DILUTED EARNINGS (LOSS) PER
COMMON SHARE:
Income (loss) before extraordinary items $ (178,669) $ 27,582 $(156,704) $ 79,010
Adjustment for interest expense on 9.00%
Convertible Subordinated Debentures,
net of tax - 16 - 57
---------- -------- --------- ---------
Adjusted income (loss) before
extraordinary items for fully
diluted calculation (178,669) 27,598 (156,704) 79,067
Extraordinary items, net of tax - - (2,073) 34
---------- -------- --------- ---------
Net income (loss) for fully
diluted computation $ (178,669) $ 27,598 $(158,777) $ 79,101
========== ======== ========= =========
Average number of common and dilutive
common equivalent shares-fully diluted 121,467 120,692 120,774 120,578
========== ======== ========= =========
Earnings (loss) before extraordinary
items $ (1.47) $ .23 $ (1.29) $ .66
========== ======== ========= =========
Net earnings (loss) $ (1.47) $ .23 $ (1.31) $ .66
========== ======== ========= =========
AVERAGE NUMBER OF COMMON SHARES AND
DILUTIVE COMMON SHARES EQUIVALENTS
Primary shares:
Average number of common shares
outstanding 121,467 116,165 120,774 115,468
Incremental shares for options
and warrants - 3,147 - 3,374
---------- -------- --------- ---------
121,467 119,312 120,774 118,842
========== ======== ========= =========
Fully diluted shares:
Average number of common shares
outstanding 121,467 116,165 120,774 115,468
Incremental shares for options
and warrants - 4,241 - 4,824
Conversion equivalent of 9.00%
Convertible Subordinated Debentures - 286 - 286
---------- -------- --------- ---------
121,467 120,692 120,774 120,578
========== ======== ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM IVAX
CORPORATION'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 15,088
<SECURITIES> 0
<RECEIVABLES> 278,246<F1>
<ALLOWANCES> 0
<INVENTORY> 314,408
<CURRENT-ASSETS> 708,199
<PP&E> 406,740<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,357,167
<CURRENT-LIABILITIES> 234,292
<BONDS> 415,923
0
0
<COMMON> 12,147
<OTHER-SE> 659,795
<TOTAL-LIABILITY-AND-EQUITY> 1,357,167
<SALES> 222,720
<TOTAL-REVENUES> 222,720
<CGS> 191,713
<TOTAL-COSTS> 191,713
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23,669
<INTEREST-EXPENSE> 6,254
<INCOME-PRETAX> (218,477)
<INCOME-TAX> (40,553)
<INCOME-CONTINUING> (178,669)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (178,669)
<EPS-PRIMARY> (1.47)
<EPS-DILUTED> (1.47)
<FN>
<F1>AMOUNT SHOWN IS NET OF ALLOWANCES.
<F2>AMOUNT SHOWN IS NET OF ACCUMULATED DEPRECIATION AND AMORTIZATION.
</FN>
</TABLE>
