Table of Contents
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 65-0403311 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
30831 Huntwood Avenue, Hayward, CA | 94544 | |
(Address of principal executive offices) | (Zip Code) |
(510) 476-2000
Title of each class | Name of each exchange on which registered: | |
Common Stock, par value $0.01 per share Series A Junior Participating Preferred Stock Purchase Rights | The NASDAQ Stock Market LLC The NASDAQ Stock Market LLC |
Large accelerated filerþ | Accelerated filero | Non-accelerated filero | Smaller reporting companyo | |||
(Do not check if a smaller reporting company) |
ii | ||||||||
1 | ||||||||
1 | ||||||||
16 | ||||||||
38 | ||||||||
38 | ||||||||
39 | ||||||||
44 | ||||||||
45 | ||||||||
45 | ||||||||
48 | ||||||||
49 | ||||||||
86 | ||||||||
86 | ||||||||
86 | ||||||||
87 | ||||||||
90 | ||||||||
91 | ||||||||
91 | ||||||||
91 | ||||||||
91 | ||||||||
91 | ||||||||
91 | ||||||||
92 | ||||||||
92 | ||||||||
Exhibit 10.1.8 | ||||||||
Exhibit 10.14 | ||||||||
Exhibit 10.15 | ||||||||
Exhibit 21.1 | ||||||||
Exhibit 23.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
i
Table of Contents
ii
Table of Contents
Item 1. | Business |
• | 62 ANDAs approved by the Food and Drug Administration (“FDA”), which include generic versions of brand name pharmaceuticals such as Brethine®, Florinef®, Minocin®, Claritin-D® 12-hour, Claritin-D® 24-hour, Wellbutrin SR®, Wellbutrin XL®, Ditropan XL®, Depakote ER® and Prilosec®. | ||
• | 38 applications pending at the FDA, including 2 tentatively approved (i.e., satisfying substantive FDA requirements but remaining subject to statutory pre-approval restrictions), that address approximately $19.7 billion in recent 12 month U.S. product sales. | ||
• | 61 products in various stages of development for which applications have not yet been filed. |
1
Table of Contents
• | the“Global Product” sales channel: generic pharmaceutical prescription products we sell directly to wholesalers, large retail drug chains, and others; | ||
• | the“Private Label” sales channel: generic pharmaceutical over-the-counter (“OTC”) and prescription products we sell to unrelated third parties who in-turn sell the product under their own label, | ||
• | the“Rx Partner” sales channel: generic prescription products sold through unrelated third-party pharmaceutical entities pursuant to alliance and collaboration agreements; and | ||
• | the“OTC Partner” sales channel: sales of generic pharmaceutical OTC products sold through unrelated third-party pharmaceutical entities pursuant to alliance and collaboration agreements. |
2
Table of Contents
Product | Generic of | |
2004 OR EARLIER | ||
Methytestosterone 10mg | Android® | |
Orphenadrine 100 mg Tablets | Norflex® | |
Minocycline 50, 75 and 100 mg Capsules | Minocin® | |
Terbutaline 2.5 and 5 mg Tablets | Brethine® | |
Fludrocortisone 0.1 mg Tablets | Florinef® | |
Rimantadine 100 mg Tablets | Flumadine® | |
Pyridostigmine 60 mg Tablets | Mestinon® | |
Chloroquine 250 mg Tablets | N/A | |
Chloroquine 500 mg Tablets | Aralen® | |
Flavoxate 100 mg Tablets | Urispas® | |
Fenofibrate 67, 134 and 200 mg Capsules | Lofibra® | |
Loratadine and Pseudoephedrine Sulfate 5/120 mg ER Tablets | Claritin-D 12-hr® | |
Bupropion Hydrochloride 100 and 150 mg ER Tablets (twice daily) | Wellbutrin SR® | |
Bupropion Hydrochloride 150 mg ER Tablets (twice daily) | Zyban® | |
Loratadine and Pseudoephedrine Sulfate 10/240 mg ER Tablets | Claritin-D® 24-Hour | |
Demeclocycline Hydrochloride 150 and 300 mg Tablets | Declomycin® | |
Carbidopa/Levodopa 25/100 & 50/200 mg ER Tablets | SinemetCR® | |
Midodrine Hydrochloride 2.5, 5 and 10 mg Tablets | ProAmatine® | |
Bupropion Hydrochloride 200 mg ER Tablets (twice daily) | Wellbutrin SR® | |
2005 | ||
Dantrolene Sodium 25, 50 and 100 mg Capsules | Dantrium® | |
Carprofen 25, 75 and 100 mg Caplets (a veterinary product) | Rimadyl® | |
2006 | ||
Pilocarpine Hydrochloride 5 and 7.5 mg Tablets | Salagen® | |
Colestipol Hydrochloride 5 g Packet and 5 g Scoopful | Colestid® | |
Colestipol Hydrochloride 1 g Tablets | Colestid® | |
Bethanechol Chloride 5, 10, 25 and 50 mg Tablets (4 separate ANDAs) | Urecholine® | |
Oxybutynin Chloride 15 mg ER Tablets (1a) | Ditropan XL® | |
Bupropion Hydrochloride 300 mg ER Tablets (1b) (once daily) | Wellbutrin XL® | |
2007 | ||
Nadolol /Bendroflumethiazide 40/5 and 80/5 mg Tablets | Corzide® | |
Oxybutynin Chloride 5 and 10 mg ER Tablets (1a) | Ditropan XL® | |
Dipyridamole 25, 50, 75 mg Tablets USP | Persantine® | |
2008 | ||
Primidone 50 and 250 mg Tablets | Mysoline® | |
Promethazine 12.5, 25 and 50 mg Tablets (2 separate ANDAs) | Phenergan® | |
Fenofibrate 54 and 160 mg Tablets | Lofibra® | |
Bupropion Hydrochloride 150 mg ER Tablets (1b) (once daily) | Wellbutrin XL® | |
2009 | ||
Acarbose 25, 50 and 100 mg Tablets | Precose® | |
Divalproex Sodium ER 250 and 500 mg Tablets | Depakote® ER | |
Galantamine 8, 16 and 24 mg Capsules | Razadyne® ER | |
2010 | ||
Tamsulosin Hydrochloride 0.4 mg Capsules | Flomax® | |
Doxycycline Hyclate DR 75, and 100 mg Tablets | Doryx® | |
Digoxin 125 and 250 mcg Tablets | Lanoxin® |
(1) | Multiple products filed under same ANDA, including (i) 1a: Oxybutynin Chloride products, (ii) 1b: Bupropion Hydrochloride products, and (iii) 1c: Omeprazole products. |
3
Table of Contents
Product | Generic of | |
Colesevelam 625 mg Tablets | Welchol® | |
Colesevelam Powder 3.75 g | Welchol® | |
Cyclobenzaprine CD 15 and 30 mg Capsules | Amrix® | |
Doxycycline Hyclate DR 150 mg Tablets | Doryx® | |
Doxycycline USP 40 mg Capsules | Oracea® | |
Duloxetine HCI 20, 30 and 60 mg DR Capsules | Cymbalta® | |
Ezetimibe Simvastatin 10mg / 10, 20, 40, 80 mg | Vytorin® | |
Fenofibrate 48 and 145mg Tablets | Tricor® | |
Fenofibrate Tab 40, 120mg | Fenoglide® | |
Fenofibric Acid 45, 135 mg | Trilipix® | |
Guanfacine ER 1, 2, 3, 4mg | Intuniv® | |
Methylphenidate HCI 18, 27, 36 and 54 mg ER Tablets | Concerta® | |
Niacin ER / Simvastatin 1000/20mg Tab | Simcor® | |
Ropinirole ER 2, 3, 4, 6, 8, 12mg Tablets | Requip XL® | |
Sevelamer Carbonate 800mg Tablets | Renvela® | |
Sevelamer HCI 400 and 800 mg Tablets | Renagel® |
4
Table of Contents
5
Table of Contents
Year Ended December 31, | ||||||||||||||||||||||||
$’s in 000’s | 2010 | 2009 | 2008 | |||||||||||||||||||||
Gross Revenue and % Gross Revenue | ||||||||||||||||||||||||
Rx Partner | $ | 217,277 | 18 | % | $ | 33,835 | 6 | % | $ | 81,778 | 28 | % | ||||||||||||
OTC Partner | $ | 8,888 | 1 | % | $ | 6,842 | 1 | % | $ | 15,946 | 5 | % |
• | Wellbutrin SR® 100 and 150 mg extended release tablets | ||
• | Zyban® 150 mg extended release tablets | ||
• | Claritin-D® 12-hour 120 mg 12-hour extended release tablets | ||
• | Claritin-D® 24-hour 240 mg 24-hour extended release tablets | ||
• | Claritin Reditabs® 10 mg orally disintegrating tablets | ||
• | Ditropan XL® 5, 10 and 15 mg extended release tablets |
6
Table of Contents
• | Glucophage XR® 500 mg extended release tablets | ||
• | Concerta® 18, 27, 36 and 54 mg extended release tablets | ||
• | Wellbutrin XL® 150 and 300 mg extended release tablets |
7
Table of Contents
Upfront and | ||||||||||||||||
Aggregate | Milestone | |||||||||||||||
Upfront | Milestone | Payments | ||||||||||||||
OTC Partner | Initial Date | Payment | Payments | Received | ||||||||||||
(unaudited and $ in 000s) | ||||||||||||||||
Merck | June 2002 | $ | 2,250 | $ | 2,250 | $ | 4,500 | |||||||||
Pfizer | June 2002 | $ | 350 | $ | 4,050 | $ | 2,000 |
8
Table of Contents
• | the ability to introduce generic versions of products promptly after a patent expires; | ||
• | price; | ||
• | product quality; | ||
• | customer service (including maintenance of inventories for timely delivery); | ||
• | the ability to identify and market niche products. |
9
Table of Contents
10
Table of Contents
11
Table of Contents
12
Table of Contents
13
Table of Contents
14
Table of Contents
Name | Age | Positions with Impax | ||||
Arthur A. Koch, Jr. | 57 | Senior Vice President, Finance, and Chief Financial Officer | ||||
Charles V. Hildenbrand | 59 | Senior Vice President, Operations | ||||
Michael J. Nestor | 58 | President, Impax Pharmaceuticals Division |
15
Table of Contents
Item 1A. | Risk Factors |
16
Table of Contents
• | the timing of FDA approvals we receive; | ||
• | the timing of process validation for particular drug products; | ||
• | the timing of product launches, and market acceptance of such products launched; | ||
• | changes in the amount we spend to research, develop, acquire, license or promote new products; | ||
• | the outcome of our clinical trial programs; | ||
• | serious or unexpected health or safety concerns with our products, the brand products we have genericized, or our product candidates; | ||
• | the introduction of new products by others that render our products obsolete or noncompetitive; | ||
• | the ability to maintain selling prices and gross margins on our products; | ||
• | the outcome of our patent infringement litigation, and other litigation matters, and expenditures as a result of such litigation; | ||
• | the ability to comply with complex governmental regulations which deal with many aspects of our business; | ||
• | changes in coverage and reimbursement policies of health plans and other health insurers, including changes to Medicare, Medicaid and similar state programs; | ||
• | increases in the cost of raw materials used to manufacture our products; | ||
• | manufacturing and supply interruptions, including failure to comply with manufacturing specifications; | ||
• | the ability of our brand license partner(s) to secure regulatory approval, gain market share, sales volume, and sales milestone levels; | ||
• | timing of revenue recognition related to our alliance and collaboration agreements; | ||
• | the ability to protect our intellectual property and avoid infringing the intellectual property of others; and | ||
• | the addition or loss of customers. |
17
Table of Contents
18
Table of Contents
• | proprietary processes or delivery systems; | ||
• | larger research and development and marketing staffs; | ||
• | larger production capabilities in a particular therapeutic area; | ||
• | more experience in preclinical testing and human clinical trials; | ||
• | more experience in obtaining required regulatory approvals, including FDA approval; | ||
• | more products; or | ||
• | more experience in developing new drugs and financial resources, particularly with regard to brand manufacturers. |
19
Table of Contents
• | obtain FDA approval of our products; | ||
• | successfully launch new products; | ||
• | prevail in patent infringement litigation in which we are involved; | ||
• | continue to generate or obtain sufficient capital on acceptable terms to fund our operations; and | ||
• | comply with the many complex governmental regulations that deal with virtually every aspect of our business activities. |
20
Table of Contents
21
Table of Contents
• | the availability of alternative products from our competitors; | ||
• | the prices of our products relative to those of our competitors; | ||
• | the timing of our market entry; | ||
• | the ability to market our products effectively at the retail level; | ||
• | the perception of patients and the healthcare community, including third-party payors, regarding the safety, efficacy and benefits of our drug products compared to those of competing products; and | ||
• | the acceptance of our products by government and private formularies. |
22
Table of Contents
23
Table of Contents
24
Table of Contents
• | delays in patient enrollment, and variability in the number and types of patients available for clinical trials; | ||
• | regulators or institutional review boards may not allow us to commence or continue a clinical trial; | ||
• | our inability, or the inability of our partners, to manufacture or obtain from third parties materials sufficient to complete our clinical trials; | ||
• | delays or failure in reaching agreement on acceptable clinical trial contracts or clinical trial protocols with prospective clinical trial sites; | ||
• | risks associated with trial design, which may result in a failure of the trial to show statistically significant results even if the product candidate is effective; | ||
• | difficulty in maintaining contact with patients after treatment commences, resulting in incomplete data; | ||
• | poor effectiveness of product candidates during clinical trials; | ||
• | safety issues, including adverse events associated with product candidates; | ||
• | the failure of patients to complete clinical trials due to adverse side effects, dissatisfaction with the product candidate, or other reasons; | ||
• | governmental or regulatory delays or changes in regulatory requirements, policy and guidelines; and | ||
• | varying interpretation of data by the FDA or foreign regulatory agencies. |
25
Table of Contents
26
Table of Contents
• | greater possibility for disruption due to transportation or communication problems; | ||
• | the relative instability of some foreign governments and economies; | ||
• | interim price volatility based on labor unrest, materials or equipment shortages, export duties, restrictions on the transfer of funds, or fluctuations in currency exchange rates; and | ||
• | uncertainty regarding recourse to a dependable legal system for the enforcement of contracts and other rights. |
27
Table of Contents
28
Table of Contents
29
Table of Contents
30
Table of Contents
• | suspend or debar the contractor from doing business with the government or a specific government agency; | ||
• | terminate existing contracts, in whole or in part, for any reason or no reason; | ||
• | reduce the scope and value of contracts; | ||
• | change certain terms and conditions in contracts; | ||
• | claim rights to products, including intellectual property, developed under the contract; | ||
• | take actions that result in a longer development timeline than expected; | ||
• | direct the course of a development program in a manner not chosen by the government contractor; | ||
• | audit and object to the contractor’s contract-related costs and fees, including allocated indirect costs; and | ||
• | control and potentially prohibit the export of the contractor’s products. |
31
Table of Contents
• | revisions to the Medicaid rebate program by: (a) increasing the rebate percentage for branded drugs dispensed after December 31, 2009 to 23.1% of the average manufacturer price (“AMP”), with limited exceptions, (b) increasing the rebate for outpatient generic, multiple source drugs dispensed after December 31, 2009 to 13% of AMP; (c) changing the definition of AMP; and (d) effective January 1, 2011, the Medicaid rebate program will be extended to Medicaid managed care plans, with limited exception; | ||
• | the imposition of annual fees upon manufacturers or importers of branded prescription drugs, which fees will be in amounts determined by the Secretary of Treasury based upon market share and other data; | ||
• | providing a 50% discount on brand-name prescriptions filled in the Medicare Part D coverage gap beginning in 2011; | ||
• | imposing increased penalties for the violation of fraud and abuse laws and funding for anti-fraud activities; | ||
• | creating a new pathway for approval of biosimilar biological products and granting an exclusivity period of 12 years for branded drug manufacturers of biological products before biosimilar products can be approved for marketing in the U.S.; and | ||
• | expands the definition of “covered entities” that purchase certain outpatient drugs in the 340B Drug Pricing Program of Section 340B of the Public Health Service Act. |
32
Table of Contents
• | any of our future processes or products will be patentable; | ||
• | our processes or products will not infringe upon the patents of third parties; or | ||
• | we will have the resources to defend against charges of patent infringement by third parties or to protect our own rights against infringement by third parties. |
33
Table of Contents
• | incur additional indebtedness and grant liens on assets; | ||
• | make certain investments and restricted payments (including the ability to pay dividends and repurchase stock); | ||
• | undertake certain acquisitions or sell certain assets; and | ||
• | enter into certain transactions with our affiliates. |
34
Table of Contents
35
Table of Contents
• | our ability to maintain compliance with SEC reporting requirements; | ||
• | our ability to maintain the listing of our common stock on The NASDAQ Stock Market LLC; | ||
• | investor perception of us; | ||
• | analyst recommendations; | ||
• | market conditions relating to specialty pharmaceutical companies; | ||
• | announcements of new products by us or our competitors; | ||
• | publicity regarding actual or potential developments relating to products under development by us or our competitors; | ||
• | developments, disputes or litigation concerning patent or proprietary rights; | ||
• | delays in the development or approval of our product candidates; | ||
• | regulatory developments; | ||
• | period to period fluctuations in our financial results and those of our competitors; | ||
• | future sales of substantial amounts of common stock by stockholders; and | ||
• | economic and other external factors. |
36
Table of Contents
37
Table of Contents
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
38
Table of Contents
Item 3. | Legal Proceedings |
39
Table of Contents
40
Table of Contents
41
Table of Contents
42
Table of Contents
43
Table of Contents
Item 4. | (Removed and Reserved) |
44
Table of Contents
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Price Range | ||||||||
per Share | ||||||||
High | Low | |||||||
Year Ending December 31, 2010 | ||||||||
First Quarter | $ | 18.15 | $ | 12.87 | ||||
Second Quarter | $ | 22.39 | $ | 7.20 | ||||
Third Quarter | $ | 20.12 | $ | 14.70 | ||||
Fourth Quarter | $ | 22.00 | $ | 17.61 | ||||
Year Ended December 31, 2009 | ||||||||
First Quarter | $ | 7.74 | $ | 2.50 | ||||
Second Quarter | $ | 7.75 | $ | 4.68 | ||||
Third Quarter | $ | 9.35 | $ | 6.81 | ||||
Fourth Quarter | $ | 13.97 | $ | 8.30 |
45
Table of Contents
Total | ||||||||||||||
Number of | ||||||||||||||
Shares (or | Maximum | |||||||||||||
Units) | Number (or | |||||||||||||
Purchased | Approximate Dollar | |||||||||||||
as Part of | Value) of Shares (or | |||||||||||||
Total | Publicly | Units) that May Yet | ||||||||||||
Number of Shares | Average | Announced | Be Purchased Under | |||||||||||
(or Units) | Price Paid Per | Plans or | the Plans or | |||||||||||
Period | Purchased(1) | Share (or Unit) | Programs | Programs | ||||||||||
October 1, 2010 to October 31, 2010 | 34,492 shares of common stock | $ | 21.38 | — | — | |||||||||
November 1, 2010 to November 30, 2010 | 8,587 shares of common stock | $ | 18.97 | — | — | |||||||||
December 1, 2010 to December 31, 2010 | 3,024 shares of common stock | $ | 18.65 | — | — |
(1) | Represents shares of our common stock that we accepted during the indicated periods as a tax withholding from certain of our employees in connection with the vesting of shares of restricted stock pursuant to the terms of our Amended and Restated 2002 Equity Incentive Plan (the “2002 Plan”). |
46
Table of Contents
Number of | ||||||||||||
Securities | ||||||||||||
Remaining | ||||||||||||
Available for | ||||||||||||
Number of | Future Issuance | |||||||||||
Securities to be | Under Equity | |||||||||||
Issued Upon | Weighted Average | Compensation | ||||||||||
Exercise of | Exercise Price of | Plans (Excluding | ||||||||||
Outstanding | Outstanding | Securities reflected | ||||||||||
Options, Warrants | Options, Warrants | in | ||||||||||
and Rights | and Rights | Column (a)) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
Equity compensation plans approved by security holders | 6,514,676 | (1) | $ | 10.84 | 2,674,061 | |||||||
Equity compensation plans not approved by security holders | — | — | 283,481 | (2) | ||||||||
Total: | 6,514,676 | $ | 10.84 | 2,957,542 |
(1) | Represents options issued pursuant to the 2002 Plan, and the Impax Laboratories Inc. 1999 Equity Incentive Plan. | |
(2) | Represents 283,481 shares of common stock available for future issuance under the Impax Laboratories, Inc. 2001 Non-Qualified Employee Stock Purchase Plan. |
47
Table of Contents
Item 6. | Selected Financial Data |
For the Years Ended December 31 | ||||||||||||||||||||
($ in 000s, except per share data) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||
Total revenues | $ | 879,509 | $ | 358,409 | $ | 210,071 | $ | 273,753 | $ | 135,246 | ||||||||||
Research and development | 86,223 | 63,274 | 59,237 | 39,992 | 29,635 | |||||||||||||||
Total operating expenses | 145,939 | 117,683 | 114,179 | 89,590 | 74,245 | |||||||||||||||
Income (loss) from operations | 393,324 | 70,413 | 3,923 | 76,507 | (11,247 | ) | ||||||||||||||
Net income (loss) | 250,418 | 50,061 | 15,987 | 125,410 | (12,044 | ) | ||||||||||||||
Net income (loss) per share — basic | $ | 4.04 | $ | 0.83 | $ | 0.27 | $ | 2.13 | $ | (0.20 | ) | |||||||||
Net income (loss) per share — diluted | $ | 3.82 | $ | 0.82 | $ | 0.26 | $ | 2.05 | $ | (0.20 | ) |
As of December 31 | ||||||||||||||||||||
($ in 000s) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash, cash equivalents and short-term investments | $ | 348,401 | $ | 90,369 | $ | 119,985 | $ | 143,496 | $ | 29,834 | ||||||||||
Working capital | 394,287 | 170,143 | 126,784 | 110,108 | 81,919 | |||||||||||||||
Total assets | 693,318 | 660,756 | 514,287 | 513,745 | 343,888 | |||||||||||||||
Long-term debt | — | — | 5,990 | 16,061 | 89,603 | |||||||||||||||
Total liabilities | 185,169 | 438,529 | 354,637 | 377,697 | 347,864 | |||||||||||||||
Retained earnings (deficit) | 251,246 | 828 | (49,233 | ) | (65,220 | ) | (186,215 | ) | ||||||||||||
Total stockholders’ equity (deficit) | $ | 508,149 | $ | 222,227 | $ | 159,650 | $ | 136,048 | $ | (3,976 | ) |
48
Table of Contents
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
49
Table of Contents
50
Table of Contents
51
Table of Contents
52
Table of Contents
As of December 31, | ||||||||||||
Chargeback reserve | 2010 | 2009 | 2008 | |||||||||
($ in 000s) | ||||||||||||
Beginning balance | $ | 21,448 | $ | 4,056 | $ | 2,977 | ||||||
Provision recorded during the period | 181,566 | 126,105 | 50,144 | |||||||||
Credits issued during the period | (188,096 | ) | (108,713 | ) | (49,065 | ) | ||||||
Ending balance | $ | 14,918 | $ | 21,448 | $ | 4,056 | ||||||
Provision as a percent of gross Global Product sales | 19 | % | 24 | % | 28 | % |
53
Table of Contents
As of December 31, | ||||||||||||
Rebate reserve | 2010 | 2009 | 2008 | |||||||||
($ in 000s) | ||||||||||||
Beginning balance | $ | 37,781 | $ | 4,800 | $ | 3,603 | ||||||
Provision recorded during the period | 91,064 | 72,620 | 20,361 | |||||||||
Credits issued during the period | (107,953 | ) | (39,639 | ) | (19,164 | ) | ||||||
Ending balance | $ | 20,892 | $ | 37,781 | $ | 4,800 | ||||||
Provision as a percent of gross Global Product sales | 9 | % | 14 | % | 11 | % |
54
Table of Contents
As of December 31, | ||||||||||||
Returns reserve | 2010 | 2009 | 2008 | |||||||||
($ in 000s) | ||||||||||||
Beginning balance | $ | 22,114 | $ | 13,675 | $ | 14,261 | ||||||
Provision recorded during the period | 15,821 | 11,847 | 5,719 | |||||||||
Credits issued during the period | (4,180 | ) | (3,408 | ) | (6,305 | ) | ||||||
Ending balance | $ | 33,755 | $ | 22,114 | $ | 13,675 | ||||||
Provision as a percent of gross Global Product sales | 1.6 | % | 2.3 | % | 3.2 | % |
55
Table of Contents
56
Table of Contents
57
Table of Contents
58
Table of Contents
59
Table of Contents
60
Table of Contents
61
Table of Contents
62
Table of Contents
Year Ended | Increase/ | |||||||||||||||
December 31 | December 31 | (Decrease) | ||||||||||||||
(in $000’s) | 2010 | 2009 | $ | % | ||||||||||||
Total revenues | $ | 879,509 | $ | 358,409 | $ | 521,100 | 145 | % | ||||||||
Gross profit | 539,263 | 188,096 | 351,167 | 187 | % | |||||||||||
Income from operations | 393,324 | 70,413 | 322,911 | 459 | % | |||||||||||
Income before income taxes | 393,879 | 70,977 | 322,902 | 455 | % | |||||||||||
Provision for income taxes | 143,521 | 21,006 | 122,515 | 583 | % | |||||||||||
250,358 | 49,971 | 200,387 | 401 | % | ||||||||||||
Non-controlling interest | 60 | 90 | (30 | ) | (33 | )% | ||||||||||
Net income | $ | 250,418 | $ | 50,061 | $ | 200,357 | 400 | % | ||||||||
63
Table of Contents
Year Ended | Increase/ | |||||||||||||||
December 31 | December 31 | (Decrease) | ||||||||||||||
(in $000’s) | 2010 | 2009 | $ | % | ||||||||||||
Revenues | ||||||||||||||||
Global Product sales, net | $ | 622,889 | $ | 287,079 | $ | 335,810 | 117 | % | ||||||||
Private Label product sales | 2,074 | 5,513 | (3,439 | ) | (62 | )% | ||||||||||
Rx Partner | 217,277 | 33,835 | 183,442 | 542 | % | |||||||||||
OTC Partner | 8,888 | 6,842 | 2,046 | 30 | % | |||||||||||
Research Partner | 13,539 | 11,680 | 1,859 | 16 | % | |||||||||||
Other | — | 12 | (12 | ) | (100 | )% | ||||||||||
Total revenues | 864,667 | 344,961 | 519,706 | 151 | % | |||||||||||
Cost of revenues | 328,163 | 158,270 | 169,893 | 107 | % | |||||||||||
Gross profit | 536,504 | 186,691 | 349,813 | 187 | % | |||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 44,311 | 38,698 | 5,613 | 15 | % | |||||||||||
Patent litigation | 6,384 | 5,379 | 1,005 | 19 | % | |||||||||||
Selling, general and administrative | 15,951 | 10,891 | 5,060 | 46 | % | |||||||||||
Total operating expenses | 66,646 | 54,968 | 11,678 | 21 | % | |||||||||||
Income from operations | $ | 469,858 | $ | 131,723 | 338,135 | 257 | % | |||||||||
64
Table of Contents
65
Table of Contents
Year Ended | Increase/ | |||||||||||||||
December 31 | December 31 | (Decrease) | ||||||||||||||
(in $000’s) | 2010 | 2009 | $ | % | ||||||||||||
Promotional Partner revenue | $ | 14,073 | $ | 13,448 | 625 | 5 | % | |||||||||
Research Partner revenue | 769 | — | 769 | nm | ||||||||||||
Total revenue | 14,842 | 13,448 | 1,394 | 10 | % | |||||||||||
Cost of revenues | 12,083 | 12,043 | 40 | 0 | % | |||||||||||
Gross profit | 2,759 | 1,405 | 1,354 | 96 | % | |||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 41,912 | 24,576 | 17,336 | 71 | % | |||||||||||
Selling, general and administrative | 3,510 | 3,469 | 41 | 1 | % | |||||||||||
Total operating expenses | 45,422 | 28,045 | 17,377 | 62 | % | |||||||||||
Loss from operations | $ | (42,663 | ) | $ | (26,640 | ) | (16,023 | ) | (60 | )% | ||||||
nm-not meaningful |
66
Table of Contents
67
Table of Contents
Year Ended | Increase/ | |||||||||||||||
December 31 | December 31 | (Decrease) | ||||||||||||||
(in $000’s) | 2010 | 2009 | $ | % | ||||||||||||
Litigation settlement | $ | — | $ | 9,318 | (9,318 | ) | (100 | )% | ||||||||
General and administrative expenses | 33,871 | 25,352 | 8,519 | 34 | % | |||||||||||
Total operating expenses | 33,871 | 34,670 | (799 | ) | (2 | )% | ||||||||||
Loss from operations | (33,871 | ) | (34,670 | ) | 799 | 2 | % | |||||||||
Other (expense) income, net | (315 | ) | 57 | (372 | ) | (653 | )% | |||||||||
Interest income | 1,037 | 753 | 284 | 38 | % | |||||||||||
Interest expense | (167 | ) | (246 | ) | 79 | 32 | % | |||||||||
Loss before income taxes | (33,316 | ) | (34,106 | ) | 790 | 2 | % | |||||||||
Provision for income taxes | $ | 143,521 | $ | 21,006 | 122,515 | 583 | % |
68
Table of Contents
69
Table of Contents
Year Ended | Increase/ | |||||||||||||||
December 31 | December 31 | (Decrease) | ||||||||||||||
(in $000’s) | 2009 | 2008 | $ | % | ||||||||||||
Total revenues | $ | 358,409 | $ | 210,071 | $ | 148,338 | 71 | % | ||||||||
Gross profit | 188,096 | 118,102 | 69,994 | 59 | % | |||||||||||
Income from operations | 70,413 | 3,923 | 66,490 | nm | ||||||||||||
Income before income taxes | 70,977 | 26,009 | 44,968 | 173 | % | |||||||||||
Provision for income taxes | 21,006 | 10,069 | 10,937 | 109 | % | |||||||||||
49,971 | 15,940 | 34,031 | 213 | % | ||||||||||||
Non-controlling interest | 90 | 47 | 43 | 91 | % | |||||||||||
Net income | $ | 50,061 | $ | 15,987 | $ | 34,074 | 213 | % | ||||||||
nm — not meaningful |
70
Table of Contents
Year Ended | Increase/ | |||||||||||||||
December 31 | December 31 | (Decrease) | ||||||||||||||
(in $000’s) | 2009 | 2008 | $ | % | ||||||||||||
Revenues | ||||||||||||||||
Global Product sales, net | $ | 287,079 | $ | 96,006 | $ | 191,073 | 199 | % | ||||||||
Private Label product sales | 5,513 | 2,596 | 2,917 | 112 | % | |||||||||||
Rx Partner | 33,835 | 81,778 | (47,943 | ) | (59 | )% | ||||||||||
OTC Partner | 6,842 | 15,946 | (9,104 | ) | (57 | )% | ||||||||||
Research Partner | 11,680 | 833 | 10,847 | nm | ||||||||||||
Other | 12 | 21 | (9 | ) | (43 | )% | ||||||||||
Total revenues | 344,961 | 197,180 | 147,781 | 75 | % | |||||||||||
Cost of revenues | 158,270 | 80,724 | 77,546 | 96 | % | |||||||||||
Gross profit | 186,691 | 116,456 | 70,235 | 60 | % | |||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 38,698 | 42,930 | (4,232 | ) | (10 | )% | ||||||||||
Patent litigation | 5,379 | 6,472 | (1,093 | ) | (17 | )% | ||||||||||
Selling, general and administrative | 10,891 | 11,445 | (554 | ) | (5 | )% | ||||||||||
Total operating expenses | 54,968 | 60,847 | (5,879 | ) | (10 | )% | ||||||||||
Income from operations | $ | 131,723 | $ | 55,609 | 76,114 | 137 | % | |||||||||
nm — not meaningful |
71
Table of Contents
72
Table of Contents
Year Ended | Increase/ | |||||||||||||||
December 31 | December 31 | (Decrease) | ||||||||||||||
(in $000’s) | 2009 | 2008 | $ | % | ||||||||||||
Promotional Partner revenue | $ | 13,448 | $ | 12,891 | 557 | 4 | % | |||||||||
Cost of revenues | 12,043 | 11,245 | 798 | 7 | % | |||||||||||
Gross profit | 1,405 | 1,646 | (241 | ) | (15 | )% | ||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 24,576 | 16,307 | 8,269 | 51 | % | |||||||||||
Selling, general and administrative | 3,469 | 2,671 | 798 | 30 | % | |||||||||||
Total operating expenses | 28,045 | 18,978 | 9,067 | 48 | % | |||||||||||
Loss from operations | $ | (26,640 | ) | $ | (17,332 | ) | (9,308 | ) | (54 | )% | ||||||
73
Table of Contents
Year Ended | Increase/ | |||||||||||||||
December 31 | December 31 | (Decrease) | ||||||||||||||
(in $000’s) | 2009 | 2008 | $ | % | ||||||||||||
(as adjusted) | ||||||||||||||||
Litigation settlement | $ | 9,318 | $ | — | 9,318 | nm | % | |||||||||
General and administrative expenses | 25,352 | 34,354 | (9,002 | ) | (26 | )% | ||||||||||
Total operating expenses | 34,670 | 34,354 | 316 | 1 | % | |||||||||||
Loss from operations | (34,670 | ) | (34,354 | ) | (316 | ) | (1 | )% | ||||||||
Change in fair value of common stock purchase warrant | — | 1,234 | (1,234 | ) | (100 | )% | ||||||||||
Other income, net | 57 | 21,529 | (21,472 | ) | (100 | )% | ||||||||||
Loss on repurchase of 3.5% Debentures | — | (113 | ) | 113 | 100 | % | ||||||||||
Interest income | 753 | 4,218 | (3,465 | ) | (82 | )% | ||||||||||
Interest expense | (246 | ) | (4,782 | ) | 4,536 | 95 | % | |||||||||
Loss before income taxes | (34,106 | ) | (12,268 | ) | (21,838 | ) | (178 | )% | ||||||||
Provision for income taxes | $ | 21,006 | $ | 10,069 | 10,937 | 109 | % |
nm — not meaningful |
74
Table of Contents
75
Table of Contents
76
Table of Contents
77
Table of Contents
78
Table of Contents
• | The outstanding principal amount of all revolving credit loans, together with accrued and unpaid interest thereon, will be due and payable on the maturity date, which will occur four years following the February 11, 2011 closing date. |
• | Borrowings under the Revolving Credit Facility will bear interest, at our option, at either an Alternate Base Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 0.5% to 1.5%, or a LIBOR Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 1.5% to 2.5%. We are also required to pay an unused commitment fee ranging from 0.25% to 0.45% per annum based on the daily average undrawn portion of the Revolving Credit Facility. The applicable margin described above and the unused commitment fee in effect at any given time will be determined based on the Company’s Total Net Leverage Ratio (as defined in the Credit Agreement), which is based upon our consolidated total debt, net of unrestricted cash in excess of $100 million, compared to Consolidated EBITDA (as defined in the Credit Agreement) for the immediately preceding four quarters. |
• | We may prepay any outstanding loan under the Revolving Credit Facility without premium or penalty. |
• | We are required under the Credit Agreement and the Security Agreement to comply with a number of affirmative, negative and financial covenants. Among other things, these covenants (i) require us to provide periodic reports, notices of material events and information regarding collateral, (ii) restrict our, subject to certain exceptions and baskets, to incur additional indebtedness, grant liens on assets, undergo fundamental changes, change the nature of its business, make investments, undertake acquisitions, sell assets, make restricted payments (including the ability to pay dividends and repurchase stock) or engage in affiliate transactions, and (iii) requires us to maintain a Total Net Leverage Ratio (which is, generally, our total funded debt, net of unrestricted cash in excess of $100 million, over our EBITDA for the preceding four quarters) of less than 3.75 to 1.00, a Senior Secured Leverage Ratio (which is, generally, our total senior secured debt over our EBITDA for the preceding four quarters) of less than 2.50 to 1.00 and a Fixed Charge Coverage Ratio (which is, generally, our EBITDA for the preceding four quarters over the sum of cash interest expense, cash tax payments, scheduled funded debt payments and capital expenditures during such four quarter period) of at least 2.00 to 1.00 (with each such ratio as more particularly defined as set forth in the Credit Agreement). |
79
Table of Contents
• | The Credit Agreement contains customary events of default (subject to customary grace periods, cure rights and materiality thresholds), including, among others, failure to pay principal, interest or fees, violation of covenants, material inaccuracy of representations and warranties, cross-default and cross-acceleration of material indebtedness and other obligations, certain bankruptcy and insolvency events, certain judgments, certain events related to the Employee Retirement Income Security Act of 1974, as amended, and a change of control. |
• | Following an event of default under the Credit Agreement, the Administrative Agent would be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement and seek other remedies that may be taken by secured creditors. |
80
Table of Contents
81
Table of Contents
Payments Due by Period | ||||||||||||||||||||
Less | More | |||||||||||||||||||
Than 1 | 1-3 | 3-5 | Than 5 | |||||||||||||||||
($ in 000s) | Total | Year | Years | Years | Years | |||||||||||||||
Contractual Obligations (a) | ||||||||||||||||||||
Credit Facilities and Long-Term Debt | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Interest Expense Payable — Long-Term Debt | — | — | — | — | — | |||||||||||||||
Open Purchase Order Commitments | 18,570 | 18,570 | — | — | — | |||||||||||||||
Operating Leases(b) | 5,866 | 1,469 | 2,774 | 1,623 | — | |||||||||||||||
Construction Contracts(c) | 2,060 | 2,060 | — | — | — | |||||||||||||||
Total | $ | 26,496 | $ | 22,099 | $ | 2,774 | $ | 1,623 | $ | — |
(a) | Liabilities for uncertain tax positions FASB ASC Topic 740, Sub-topic 10, were excluded as we are not able to make a reasonably reliable estimate of the amount and period of related future payments. As of December 31, 2010, we had a $1.6 million provision for uncertain tax positions. | |
(b) | We lease office, warehouse, and laboratory facilities under non-cancelable operating leases through December 2015. We also lease certain equipment under various non-cancelable operating leases with various expiration dates through September 2015. | |
(c) | Construction contracts are related to ongoing expansion activities at our manufacturing facility in Taiwan. |
82
Table of Contents
83
Table of Contents
84
Table of Contents
85
Table of Contents
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
86
Table of Contents
Item 9A. | Controls and Procedures |
87
Table of Contents
88
Table of Contents
Impax Laboratories, Inc.
February 25, 2011
89
Table of Contents
Item 9B. | Other Information |
90
Table of Contents
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accounting Fees and Services |
91
Table of Contents
Item 15. | Exhibits and Financial Statement Schedules |
92
Table of Contents
Exhibit No. | Description of Document | |||
3.1.1 | Restated Certificate of Incorporation, dated August 30, 2004.(1) | |||
3.1.2 | Certificate of Designation of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of Delaware on January 21, 2009.(2) | |||
3.2 | Amended and Restated Bylaws, effective June 29, 2009.(3) | |||
4.1 | Specimen of Common Stock Certificate.(4) | |||
4.2 | Form of Debenture (incorporated by reference to Exhibit A to the Indenture, dated as of June 27, 2005, between the Company and HSBC Bank USA, National Association, as Trustee, listed on Exhibit 4.3) | |||
4.3 | Indenture, dated as of June 27, 2005, between the Company and HSBC Bank USA, National Association, as Trustee.(4) | |||
4.4 | Supplemental Indenture, dated as of July 6, 2005, between the Company and HSBC Bank USA, National Association, as Trustee.(4) | |||
4.5 | Registration Rights Agreement, dated as of June 27, 2005, between the Company and the Initial Purchasers named therein.(4) | |||
4.6 | Promissory Note dated June 7, 2006, issued by the Company to Solvay Pharmaceuticals, Inc.(4) | |||
4.7 | Preferred Stock Rights Agreement, dated as of January 20, 2009, by and between the Company and StockTrans, Inc., as Rights Agent.(2) | |||
10.1.1 | Amended and Restated Loan and Security Agreement, dated as of December 15, 2005, between the Company and Wachovia Bank, National Association.(4) | |||
10.1.2 | First Amendment, dated October 14, 2008, to Amended and Restated Loan and Security Agreement, dated December 15, 2005, between the Company and Wachovia Bank, National Association.(5) | |||
10.1.3 | Second Amendment to Amended and Restated Loan and Security Agreement, effective as of December 31, 2008, by and among the Company and Wachovia Bank, National Association.(6) | |||
10.1.4 | Third Amendment to Amended and Restated Loan and Security Agreement, effective as of March 31, 2009, by and among the Company and Wachovia Bank, National Association.(7) | |||
10.1.5 | Fourth Amendment to Amended and Restated Loan and Security Agreement, effective as of March 12, 2010, by and among the Company and Wachovia Bank, National Association, a Wells Fargo Company.(8) | |||
10.1.6 | Fifth Amendment to Amended and Restated Loan and Security Agreement, effective as of June 30, 2010, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.(9) | |||
10.1.7 | Sixth Amendment to Amended and Restated Loan and Security Agreement, effective as of September 30, 2010, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.(10) | |||
10.1.8 | Seventh Amendment to Amended and Restated Loan and Security Agreement, effective as of January 31, 2011, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association. | |||
10.2 | Purchase Agreement, dated June 26, 2005, between the Company and the Purchasers named therein.(4) | |||
10.3.1 | Impax Laboratories Inc. 1999 Equity Incentive Plan.*(6) | |||
10.3.2 | Form of Stock Option Grant under the Impax Laboratories, Inc. 1999 Equity Incentive Plan.*(6) | |||
10.4 | Impax Laboratories Inc. 2001 Non-Qualified Employee Stock Purchase Plan.*(4) | |||
10.5.1 | Impax Laboratories Inc. Amended and Restated 2002 Equity Incentive Plan.*(11) | |||
10.5.2 | Form of Stock Option Grant under the Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan.*(6) |
93
Table of Contents
Exhibit No. | Description of Document | |||
10.5.3 | Form of Stock Bonus Agreement under the Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan.*(6) | |||
10.6.1 | Impax Laboratories Inc. Executive Non-Qualified Deferred Compensation Plan, amended and restated effective January 1, 2008.*(8) | |||
10.6.2 | Amendment to Impax Laboratories Inc. Executive Non-Qualified Deferred Compensation Plan, effective as of January 1, 2009.* (8) | |||
10.7.1 | Employment Agreement, dated December 14, 1999, by and between the Company and Larry Hsu, Ph.D.*(5) | |||
10.7.2 | Amendment No. 1, dated May 19, 2009, to Employment Agreement, dated December 14, 1999, by and between the Company and Larry Hsu, Ph.D.*(12) | |||
10.7.3 | Employment Agreement, dated as of January 1, 2010, between the Company and Larry Hsu, Ph.D.*(13) | |||
10.8 | Employment Agreement, dated as of January 1, 2010, between the Company and Charles V. Hildenbrand.*(13) | |||
10.9 | Employment Agreement, dated as of January 1, 2010, between the Company and Arthur A. Koch, Jr.*(13) | |||
10.10 | Employment Agreement, dated as of January 1, 2010, between the Company and Michael J. Nestor.*(13) | |||
10.11.1 | Offer of Employment Letter, effective as of January 5, 2009, between the Company and Christopher Mengler.*(6) | |||
10.11.2 | Employment Agreement, dated as of January 1, 2010, between the Company and Christopher Mengler, R.Ph.*(13) | |||
10.11.3 | Separation Agreement and General Release, dated October 19, 2010, by and between the Company and Christopher Mengler, R.Ph.*(14) | |||
10.12 | License and Distribution Agreement, dated as of January 19, 2006, between the Company and Shire LLC.**(15) | |||
10.13 | Joint Development Agreement, dated as of November 26, 2008, between the Company and Medicis Pharmaceutical Corporation.**(15) | |||
10.14 | License, Development and Commercialization Agreement, dated as of December 15, 2010, by and between the Company and Glaxo Group Limited.*** | |||
10.15 | Supply Agreement, dated as of December 15, 2010, by and between the Company and Glaxo Group Limited.*** | |||
11.1 | Statement re computation of per share earnings (incorporated by reference to Note 17 to the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K). | |||
21.1 | Subsidiaries of the registrant. | |||
23.1 | Consent of Grant Thornton LLP. |
94
Table of Contents
Exhibit No. | Description of Document | |||
31.1 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
31.2 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
32.1 | Certifications of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
32.2 | Certifications of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Management contract, compensatory plan or arrangement. | |
** | Confidential treatment granted for certain portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act, which portions are omitted and filed separately with the SEC. | |
*** | Confidential treatment requested for certain portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act, which portions are omitted and filed separately with the SEC. | |
(1) | Incorporated by reference to Amendment No. 5 to the Company’s Registration Statement on Form 10 filed on December 23, 2008. | |
(2) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 22, 2009. | |
(3) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 2, 2009. | |
(4) | Incorporated by reference to the Company’s Registration Statement on Form 10 filed on October 10, 2008. | |
(5) | Incorporated by reference to Amendment No. 2 to the Company’s Registration Statement on Form 10 filed on December 2, 2008. | |
(6) | Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. | |
(7) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009. | |
(8) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010. | |
(9) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010. | |
(10) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010. | |
(11) | Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed on April 14, 2010. | |
(12) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009. | |
(13) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 14, 2010. | |
(14) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on October 22, 2010. | |
(15) | Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. |
95
Table of Contents
INDEX TO FINANCIAL STATEMENTS
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-8 | ||||
S-1 |
F-1
Table of Contents
Impax Laboratories, Inc.
/s/ Grant Thornton LLP |
February 25, 2011
F-2
Table of Contents
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 91,796 | $ | 31,770 | ||||
Short-term investments | 256,605 | 58,599 | ||||||
Accounts receivable, net | 82,054 | 185,854 | ||||||
Inventory, net | 44,549 | 49,130 | ||||||
Current portion of deferred product manufacturing costs-alliance agreements | 2,012 | 11,624 | ||||||
Current portion of deferred income taxes | 39,271 | 32,286 | ||||||
Prepaid expenses and other current assets | 4,407 | 4,748 | ||||||
Total current assets | 520,694 | 374,011 | ||||||
Property, plant and equipment, net | 106,280 | 101,650 | ||||||
Deferred product manufacturing costs-alliance agreements | 8,223 | 96,619 | ||||||
Deferred income taxes, net | 5,069 | 48,544 | ||||||
Other assets | 25,478 | 12,358 | ||||||
Goodwill | 27,574 | 27,574 | ||||||
Total assets | $ | 693,318 | $ | 660,756 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 18,812 | $ | 23,295 | ||||
Accrued expenses | 72,788 | 62,055 | ||||||
Accrued income taxes payable | 2,393 | 31,627 | ||||||
Accrued profit sharing and royalty expenses | 14,147 | 53,695 | ||||||
Current portion of deferred revenue-alliance agreements | 18,276 | 33,196 | ||||||
Total current liabilities | 126,416 | 203,868 | ||||||
Deferred revenue-alliance agreements | 44,195 | 224,522 | ||||||
Other liabilities | 14,558 | 10,139 | ||||||
Total liabilities | $ | 185,169 | $ | 438,529 | ||||
Commitments and contingencies (Notes 19 and 20) | ||||||||
Stockholders’ equity: | ||||||||
Preferred Stock, $0.01 par value, 2,000,000 shares authorized, 0 shares outstanding at December 31, 2010 and 2009 | $ | — | $ | — | ||||
Common stock, $0.01 par value, 90,000,000 shares authorized and 64,721,041 and 62,210,089 shares issued at December 31, 2010 and 2009, respectively | 647 | 622 | ||||||
Additional paid-in capital | 255,440 | 223,239 | ||||||
Treasury stock — 243,729 shares | (2,157 | ) | (2,157 | ) | ||||
Accumulated other comprehensive income (loss) | 2,811 | (524 | ) | |||||
Retained earnings | 251,246 | 828 | ||||||
507,987 | 222,008 | |||||||
Noncontrolling interest | 162 | 219 | ||||||
Total stockholders’ equity | 508,149 | 222,227 | ||||||
Total liabilities and stockholders’ equity | $ | 693,318 | $ | 660,756 | ||||
F-3
Table of Contents
Years Ended December 31 | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Revenues: | ||||||||||||
Global Product sales, net | $ | 622,889 | $ | 287,079 | $ | 96,006 | ||||||
Private Label Product sales | 2,074 | 5,513 | 2,596 | |||||||||
Rx Partner | 217,277 | 33,835 | 81,778 | |||||||||
OTC Partner | 8,888 | 6,842 | 15,946 | |||||||||
Research Partner | 14,308 | 11,680 | 833 | |||||||||
Promotional Partner | 14,073 | 13,448 | 12,891 | |||||||||
Other | — | 12 | 21 | |||||||||
Total revenues | 879,509 | 358,409 | 210,071 | |||||||||
Cost of revenues | 340,246 | 170,313 | 91,969 | |||||||||
Gross profit | 539,263 | 188,096 | 118,102 | |||||||||
Operating expenses: | ||||||||||||
Research and development | 86,223 | 63,274 | 59,237 | |||||||||
Patent litigation | 6,384 | 5,379 | 6,472 | |||||||||
Litigation settlement | — | 9,318 | — | |||||||||
Selling, general and administrative | 53,332 | 39,712 | 48,470 | |||||||||
Total operating expenses | 145,939 | 117,683 | 114,179 | |||||||||
Income from operations | 393,324 | 70,413 | 3,923 | |||||||||
Change in fair value of common stock purchase warrant | — | — | 1,234 | |||||||||
Loss on repurchase of 3.5% Debentures | — | — | (113 | ) | ||||||||
Other (expense) income, net | (315 | ) | 57 | 21,529 | ||||||||
Interest income | 1,037 | 753 | 4,218 | |||||||||
Interest expense | (167 | ) | (246 | ) | (4,782 | ) | ||||||
Income before income taxes | 393,879 | 70,977 | 26,009 | |||||||||
Provision for income taxes | 143,521 | 21,006 | 10,069 | |||||||||
Net income before noncontrolling interest | 250,358 | 49,971 | 15,940 | |||||||||
Add back loss attributable to noncontrolling interest | 60 | 90 | 47 | |||||||||
Net income | $ | 250,418 | $ | 50,061 | $ | 15,987 | ||||||
Net Income per share: | ||||||||||||
Basic | $ | 4.04 | $ | 0.83 | $ | 0.27 | ||||||
Diluted | $ | 3.82 | $ | 0.82 | $ | 0.26 | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 62,037,908 | 60,279,602 | 59,072,752 | |||||||||
Diluted | 65,565,132 | 61,080,184 | 60,782,721 | |||||||||
F-4
Table of Contents
Retained | Accumulated | |||||||||||||||||||||||||||||||
Additional | Earnings/ | Other | ||||||||||||||||||||||||||||||
Common Stock | Paid-In | Treasury | (Accumulated | Comprehensive | Noncontrolling | |||||||||||||||||||||||||||
Stockholders’ Equity | Shares | Par Value | Capital | Stock | Deficit) | Income | Interest | Total | ||||||||||||||||||||||||
Balance at December 31, 2007 | 58,822 | $ | 591 | $ | 202,715 | $ | (2,157 | ) | $ | (65,220 | ) | $ | (26 | ) | 145 | $ | 136,048 | |||||||||||||||
2008 | ||||||||||||||||||||||||||||||||
Exercise of common stock purchase warrants and stock options, issuance of restricted stock and sale of common stock under ESPP | 994 | 10 | 1,029 | 1,039 | ||||||||||||||||||||||||||||
Share-based compensation expense | 5,817 | 5,817 | ||||||||||||||||||||||||||||||
Issuance of common stock | 76 | 1 | 643 | 644 | ||||||||||||||||||||||||||||
Reversal of deferred tax liability on 3.5% Debenture conversion option as a result of repurchase | 924 | 924 | ||||||||||||||||||||||||||||||
Purchase of noncontrolling interest shares | 202 | 202 | ||||||||||||||||||||||||||||||
Currency translation adjustments | (969 | ) | (969 | ) | ||||||||||||||||||||||||||||
Net income | 15,987 | 15,987 | ||||||||||||||||||||||||||||||
Other | (42 | ) | (42 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2008 | 59,892 | $ | 602 | $ | 211,128 | $ | (2,157 | ) | $ | (49,233 | ) | $ | (995 | ) | 305 | $ | 159,650 | |||||||||||||||
2009 | ||||||||||||||||||||||||||||||||
Exercise of stock options issuance of restricted stock and sale of common stock under ESPP | 2,074 | 20 | 4,507 | 4,527 | ||||||||||||||||||||||||||||
Share-based compensation expense | 7,391 | 7,391 | ||||||||||||||||||||||||||||||
Tax benefit related to exercise of employee stock options | 213 | 213 | ||||||||||||||||||||||||||||||
Currency translation adjustments | 471 | 471 | ||||||||||||||||||||||||||||||
Net income | 50,061 | 50,061 | ||||||||||||||||||||||||||||||
Other | (86 | ) | (86 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2009 | 61,966 | $ | 622 | $ | 223,239 | $ | (2,157 | ) | $ | 828 | $ | (524 | ) | 219 | $ | 222,227 | ||||||||||||||||
2010 | ||||||||||||||||||||||||||||||||
Exercise of stock options issuance of restricted stock and sale of common stock under ESPP | 2,495 | 25 | 15,004 | 15,029 | ||||||||||||||||||||||||||||
Share-based compensation expense | 10,693 | 10,693 | ||||||||||||||||||||||||||||||
Issuance of common stock in settlement of royalty obligation | 16 | — | 332 | 332 | ||||||||||||||||||||||||||||
Tax benefit related to exercise of employee stock options | 6,172 | 6,172 | ||||||||||||||||||||||||||||||
Currency translation adjustments | 3,335 | 3,335 | ||||||||||||||||||||||||||||||
Net income | 250,418 | 250,418 | ||||||||||||||||||||||||||||||
Other | (57 | ) | (57 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2010 | 64,477 | $ | 647 | $ | 255,440 | $ | (2,157 | ) | $ | 251,246 | $ | 2,811 | 162 | $ | 508,149 | |||||||||||||||||
Years Ended December 31, | ||||||||||||
Comprehensive Income | 2010 | 2009 | 2008 | |||||||||
Net income | $ | 250,418 | $ | 50,061 | $ | 15,987 | ||||||
Currency translation adjustments | 3,335 | 471 | (969 | ) | ||||||||
Comprehensive income | $ | 253,753 | $ | 50,532 | $ | 15,018 | ||||||
F-5
Table of Contents
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 250,418 | $ | 50,061 | $ | 15,987 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation | 12,649 | 11,266 | 9,588 | |||||||||
Amortization of 3.5% Debentures discount and deferred financing costs | — | 307 | 2,416 | |||||||||
Amortization of Credit Agreement deferred financing costs | 25 | 75 | 74 | |||||||||
Bad debt expense | 277 | 229 | 568 | |||||||||
Deferred income taxes (benefit) | 42,662 | (10,379 | ) | 3,816 | ||||||||
Tax benefit related to the exercise of employee stock options | (6,172 | ) | (213 | ) | — | |||||||
Change in accrual for uncertain tax positions | 280 | (6,308 | ) | 1,397 | ||||||||
Loss, net on repurchase of 3.5% Debentures | — | — | 113 | |||||||||
Deferred revenue — Alliance Agreements | 35,704 | 49,255 | 151,275 | |||||||||
Deferred product manufacturing costs — Alliance Agreements | (10,640 | ) | (26,018 | ) | (50,018 | ) | ||||||
Deferred revenue recognized — Alliance Agreements | (230,951 | ) | (52,357 | ) | (98,557 | ) | ||||||
Amortization deferred product manufacturing costs — Alliance Agreements | 108,648 | 24,497 | 37,690 | |||||||||
Accrued profit sharing and royalty expense | 101,247 | 53,912 | 360 | |||||||||
Profit sharing and royalty payments | (140,794 | ) | (469 | ) | (656 | ) | ||||||
Payments on exclusivity period fee | — | (6,000 | ) | (12,000 | ) | |||||||
Accrued litigation settlement expense | — | 5,865 | 3,500 | |||||||||
Payments on accrued litigation settlements | (5,865 | ) | (11,495 | ) | (2,197 | ) | ||||||
Share-based compensation expense | 10,714 | 7,391 | 5,817 | |||||||||
Fair value of shares issued under severance arrangement | — | — | 561 | |||||||||
Accretion of interest income on short-term investments | (638 | ) | (519 | ) | (2,867 | ) | ||||||
Change in fair value of stock purchase warrants | — | (1,234 | ) | |||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | 103,523 | (142,777 | ) | 7,629 | ||||||||
Inventory | 4,581 | (16,825 | ) | (4,737 | ) | |||||||
Prepaid expenses and other assets | (12,092 | ) | 2,179 | (4,184 | ) | |||||||
Accounts payable and accrued expenses | (17,896 | ) | 57,059 | (517 | ) | |||||||
Other liabilities | 4,081 | 3,107 | 737 | |||||||||
Net cash provided by (used in) operating activities | $ | 249,761 | $ | (8,157 | ) | $ | 64,564 | |||||
Cash flows from investing activities: | ||||||||||||
Purchase of short-term investments | (403,086 | ) | (66,626 | ) | (202,133 | ) | ||||||
Maturities of short-term investments | 205,718 | 59,256 | 260,324 | |||||||||
Acquisition of ANDA intellectual property rights | — | (750 | ) | — | ||||||||
Purchases of property, plant and equipment | (16,267 | ) | (13,667 | ) | (25,863 | ) | ||||||
Net cash (used in) provided by investing activities | $ | (213,635 | ) | $ | (21,787 | ) | $ | 32,328 | ||||
F-6
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(dollars in thousands)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Repayment of long-term debt | — | (12,887 | ) | (65,234 | ) | |||||||
Tax benefit related to the exercise of employee stock options | 6,172 | 213 | — | |||||||||
Proceeds from exercise of stock options and purchases under the ESPP | 17,728 | 5,113 | 155 | |||||||||
Net cash provided by (used in) financing activities | $ | 23,900 | $ | (7,561 | ) | $ | (65,079 | ) | ||||
Net increase (decrease) in cash and cash equivalents | $ | 60,026 | $ | (37,505 | ) | $ | 31,813 | |||||
Cash and cash equivalents, beginning of period | $ | 31,770 | $ | 69,275 | $ | 37,462 | ||||||
Cash and cash equivalents, end of period | $ | 91,796 | $ | 31,770 | $ | 69,275 | ||||||
Years Ended December 31, | ||||||||||||
(in $000s) | 2010 | 2009 | 2008 | |||||||||
Cash paid for interest | $ | 167 | $ | 622 | $ | 2,970 | ||||||
Cash paid for income taxes | $ | 129,763 | $ | 415 | $ | 8,381 | ||||||
F-7
Table of Contents
F-8
Table of Contents
F-9
Table of Contents
Percent of Total Accounts Receivable | 2010 | 2009 | 2008 | |||||||||
Customer #1 | 28.3 | % | 19.9 | % | 22.9 | % | ||||||
Customer #2 | 18.4 | % | 18.7 | % | 20.4 | % | ||||||
Customer #3 | 15.0 | % | 43.8 | % | 20.4 | % | ||||||
Customer #4 | — | % | — | % | 13.5 | % | ||||||
Customer #5 | — | % | — | % | 6.0 | % | ||||||
Customer #6 | 13.5 | % | 3.6 | % | — | % | ||||||
Customer #7 | 2.9 | % | 2.7 | % | — | % | ||||||
Total-Five largest customers | 78.1 | % | 88.7 | % | 83.2 | % | ||||||
Percent of Gross Revenues | 2010 | 2009 | 2008 | |||||||||
Customer #1 | 19.9 | % | 22.2 | % | 18.0 | % | ||||||
Customer #2 | — | % | 5.7 | % | 14.0 | % | ||||||
Customer #3 | — | % | — | % | 13.9 | % | ||||||
Customer #4 | 14.1 | % | 26.5 | % | 11.6 | % | ||||||
Customer #5 | 14.2 | % | 15.3 | % | 10.9 | % | ||||||
Customer #6 | 6.5 | % | 3.9 | % | — | % | ||||||
Customer #7 | 3.4 | % | — | % | — | % | ||||||
Total-Five largest customers | 58.1 | % | 73.6 | % | 68.4 | % | ||||||
F-10
Table of Contents
F-11
Table of Contents
Twelve Months Ended: | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
(in $000’s except per share amounts) | 2010 | 2009 | 2008 | |||||||||
Additional interest expense | $ | — | $ | 253 | $ | 2,183 | ||||||
Reduction in gain on extinguishment of debt | — | — | (1,432 | ) | ||||||||
Benefit for income taxes | — | (89 | ) | (902 | ) | |||||||
Decrease in net income | $ | — | $ | (164 | ) | $ | (2,713 | ) | ||||
Decrease in Net income per share: | ||||||||||||
Basic | $ | — | $ | — | $ | (0.05 | ) | |||||
Diluted | $ | — | $ | — | $ | (0.04 | ) |
F-12
Table of Contents
• | the delivered item has value to the customer on a stand alone basis; and |
• | if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the control of the vendor. |
F-13
Table of Contents
F-14
Table of Contents
F-15
Table of Contents
F-16
Table of Contents
F-17
Table of Contents
F-18
Table of Contents
F-19
Table of Contents
F-20
Table of Contents
F-21
Table of Contents
F-22
Table of Contents
F-23
Table of Contents
Gross | Gross | |||||||||||||||
(in $000’s) | Amortized | Unrecognized | Unrecognized | Fair | ||||||||||||
December 31, 2010 | Cost | Gains | Losses | Value | ||||||||||||
Commercial paper | $ | 168,260 | $ | 36 | $ | (7 | ) | $ | 168,289 | |||||||
Government sponsored enterprise obligations | 56,866 | 40 | (1 | ) | 56,905 | |||||||||||
Corporate bonds | 18,316 | 15 | (13 | ) | 18,318 | |||||||||||
Certificates of deposit | 13,163 | 13 | — | 13,176 | ||||||||||||
Total short-term investments | $ | 256,605 | $ | 104 | $ | (21 | ) | $ | 256,688 | |||||||
Gross | Gross | |||||||||||||||
(in $000’s) | Amortized | Unrecognized | Unrecognized | Fair | ||||||||||||
December 31, 2009 | Cost | Gains | Losses | Value | ||||||||||||
Commercial paper | $ | 13,387 | $ | 4 | $ | (1 | ) | $ | 13,390 | |||||||
Government sponsored enterprise obligations | 41,953 | 32 | (1 | ) | 41,984 | |||||||||||
Corporate bonds | 3,021 | 1 | (1 | ) | 3,021 | |||||||||||
Certificates of deposit | 238 | — | — | 238 | ||||||||||||
Total short-term investments | $ | 58,599 | $ | 37 | $ | (3 | ) | $ | 58,633 | |||||||
F-24
Table of Contents
December 31, | December 31, | |||||||
(in $000’s) | 2010 | 2009 | ||||||
Gross accounts receivable | $ | 123,941 | $ | 254.094 | ||||
Less: Rebate reserve | (20,892 | ) | (37,781 | ) | ||||
Less: Chargeback reserve | (14,918 | ) | (21,448 | ) | ||||
Less: Other deductions | (6,077 | ) | (9,011 | ) | ||||
Accounts receivable, net | $ | 82,054 | $ | 185,854 | ||||
(in $000’s) | December 31, | December 31 | December 31 | |||||||||
Rebate reserve | 2010 | 2009 | 2008 | |||||||||
Beginning balance | $ | 37,781 | $ | 4,800 | $ | 3,603 | ||||||
Provision recorded during the period | 91,063 | 72,620 | 20,361 | |||||||||
Credits issued during the period | (107,952 | ) | (39,639 | ) | (19,164 | ) | ||||||
Ending balance | $ | 20,892 | $ | 37,781 | $ | 4,800 | ||||||
(in $000’s) | December 31, | December 31 | December 31 | |||||||||
Chargeback reserve | 2010 | 2009 | 2008 | |||||||||
Beginning balance | $ | 21,448 | $ | 4,056 | $ | 2,977 | ||||||
Provision recorded during the period | 181,566 | 126,105 | 50,144 | |||||||||
Credits issued during the period | (188,096 | ) | (108,713 | ) | (49,065 | ) | ||||||
Ending balance | $ | 14,918 | $ | 21,448 | $ | 4,056 | ||||||
F-25
Table of Contents
December 31, | December 31, | |||||||
(in $000’s) | 2010 | 2009 | ||||||
Raw materials | $ | 27,871 | $ | 30,758 | ||||
Work in process | 2,575 | 2,768 | ||||||
Finished goods | 20,545 | 17,051 | ||||||
Total inventory, net | $ | 50,991 | $ | 50,577 | ||||
Less: Non-current inventory, net | 6,442 | 1,447 | ||||||
Total inventory-current, net | $ | 44,549 | $ | 49,130 | ||||
F-26
Table of Contents
December 31, | December 31, | |||||||
(in $000’s) | 2010 | 2009 | ||||||
Land | $ | 2,270 | $ | 2,270 | ||||
Buildings and improvements | 82,836 | 77,778 | ||||||
Equipment | 70,785 | 59,612 | ||||||
Office furniture and equipment | 9,077 | 7,425 | ||||||
Construction-in-progress | 3,958 | 4,880 | ||||||
Property, plant and equipment, gross | $ | 168,926 | $ | 151,965 | ||||
Less: Accumulated depreciation | (62,646 | ) | (50,315 | ) | ||||
Property, plant and equipment, net | $ | 106,280 | $ | 101,650 | ||||
F-27
Table of Contents
December 31, | December 31 | |||||||
(in $000’s) | 2010 | 2009 | ||||||
Payroll-related expenses | $ | 16,796 | $ | 15,274 | ||||
Product returns | 33,755 | 22,114 | ||||||
Medicaid rebates | 12,475 | 9,759 | ||||||
Physician detailing sales force fees | 2,308 | 2,449 | ||||||
Legal and professional fees | 3,143 | 3,660 | ||||||
Litigation settlements | — | 5,865 | ||||||
Shelf stock price protection | 281 | 225 | ||||||
Other | 4,030 | 2,709 | ||||||
Total accrued expenses | $ | 72,788 | $ | 62,055 | ||||
(in $000’s) | December 31, | December 31 | December 31 | |||||||||
Returns Reserve | 2010 | 2009 | 2008 | |||||||||
Beginning balance | $ | 22,114 | $ | 13,675 | $ | 14,261 | ||||||
Provision related to sales recorded in the period | 15,821 | 11,847 | 5,719 | |||||||||
Credits issued during the period | (4,180 | ) | (3,408 | ) | (6,305 | ) | ||||||
Ending balance | $ | 33,755 | $ | 22,114 | $ | 13,675 | ||||||
F-28
Table of Contents
F-29
Table of Contents
For the Years Ended December 31, | ||||||||||||
(in $000’s) | 2010 | 2009 | 2008 | |||||||||
Current: | ||||||||||||
Federal taxes | $ | 96,560 | $ | 29,550 | $ | 6,315 | ||||||
State taxes | 10,471 | 1,715 | (62 | ) | ||||||||
Total current tax expense | 107,031 | 31,265 | 6,253 | |||||||||
Deferred: | ||||||||||||
Federal taxes | $ | 27,138 | $ | (11,520 | ) | $ | 4,938 | |||||
State taxes | 9,140 | 1,995 | (1,122 | ) | ||||||||
Foreign taxes | 212 | (734 | ) | — | ||||||||
Total deferred tax expense (benefit) | 36,490 | (10,259 | ) | 3,816 | ||||||||
Provision for income taxes | $ | 143,521 | $ | 21,006 | $ | 10,069 | ||||||
For the Years Ended December 31, | ||||||||||||||||||||||||
(in $000’s) | 2010 | 2009 | 2008 | |||||||||||||||||||||
Income before income taxes | $ | 393,879 | $ | 70,977 | $ | 26,009 | ||||||||||||||||||
Tax provision at the federal statutory rate | 137,858 | 35.0 | % | 24,842 | 35.0 | % | 9,103 | 35.0 | % | |||||||||||||||
Increase (decrease) in tax rate resulting from: | ||||||||||||||||||||||||
State and local taxes, net of federal benefit | 12,873 | 3.3 | % | 3,628 | 5.1 | % | 25 | 0.1 | % | |||||||||||||||
Research and development credits | (2,700 | ) | (0.7 | )% | (2,546 | ) | (3.6 | )% | (2,228 | ) | (8.6 | )% | ||||||||||||
Share-based compensation | 979 | 0.2 | % | 1,824 | 2.6 | % | 1,438 | 5.5 | % | |||||||||||||||
Domestic manufacturing deduction | (6,563 | ) | (1.7 | )% | (700 | ) | (1.0 | )% | (531 | ) | (2.0 | )% | ||||||||||||
Change in warrant fair value | — | — | % | — | — | % | (432 | ) | (1.6 | )% | ||||||||||||||
Provision for uncertain tax positions | 203 | 0.1 | % | (6,084 | ) | (8.6 | )% | 1,050 | 4.0 | % | ||||||||||||||
Other, net | 871 | 0.2 | % | 294 | 0.4 | % | 1,311 | 4.9 | % | |||||||||||||||
Change in valuation allowance | — | — | % | (252 | ) | (0.3 | )% | 333 | 1.4 | % | ||||||||||||||
Provision for income taxes | $ | 143,521 | 36.4 | % | $ | 21,006 | 29.6 | % | $ | 10,069 | 38.7 | % | ||||||||||||
F-30
Table of Contents
December 31, | ||||||||
(in $000’s) | 2010 | 2009 | ||||||
Deferred tax assets: | ||||||||
Deferred revenues | $ | 15,970 | $ | 99,160 | ||||
Accrued expenses | 28,752 | 21,115 | ||||||
Inventory reserves | 2,874 | 2,936 | ||||||
Net operating loss carryforwards | 1,317 | 1,648 | ||||||
Depreciation and amortization | 458 | 492 | ||||||
Other | 4,212 | 3,674 | ||||||
Deferred tax assets | $ | 53,583 | $ | 129,025 | ||||
Deferred tax liabilities: | ||||||||
Tax depreciation and amortization in excess of book amounts | $ | 3,862 | $ | 3,919 | ||||
Deferred manufacturing costs | 3,916 | 42,591 | ||||||
Other | 1,465 | 1,685 | ||||||
Deferred tax liabilities | $ | 9,243 | $ | 48,195 | ||||
Deferred tax assets, net | $ | 44,340 | $ | 80,830 | ||||
December 31, | ||||||||
(in $000’s) | 2010 | 2009 | ||||||
Current deferred tax assets | $ | 41,506 | $ | 38,337 | ||||
Current deferred tax liabilities | (2,235 | ) | (6.551 | ) | ||||
Current deferred tax assets, net | 39,271 | 32,286 | ||||||
Non-current deferred tax assets | 12,077 | 91,037 | ||||||
Non-current deferred tax liabilities | (7,008 | ) | (42,493 | ) | ||||
Non-current deferred tax assets, net | 5,069 | 48,544 | ||||||
Deferred tax assets, net | $ | 44,340 | $ | 80,830 | ||||
(in $000’s) | ||||
Year | Amount | |||
2021 | $ | 3,498,722 | ||
2022 | 1,954,768 | |||
2023 | 3,775,188 | |||
Total | $ | 9,228,678 | ||
F-31
Table of Contents
(in $000’s) | ||||
Balance at January 1, 2010 | $ | 1,207 | ||
Increase/(decrease) based on prior year tax positions | 108 | |||
Increase/(decrease) based on current year tax positions | 172 | |||
Interest expense | 93 | |||
Balance at December 31, 2010 | $ | 1,580 | ||
F-32
Table of Contents
• | The outstanding principal amount of all revolving credit loans, together with accrued and unpaid interest thereon, will be due and payable on the maturity date, which will occur four years following the February 11, 2011 closing date. |
• | Borrowings under the Revolving Credit Facility will bear interest, at the Company’s option, at either an Alternate Base Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 0.5% to 1.5%, or a LIBOR Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 1.5% to 2.5%. The Company is also required to pay an unused commitment fee ranging from 0.25% to 0.45% per annum based on the daily average undrawn portion of the Revolving Credit Facility. The applicable margin described above and the unused commitment fee in effect at any given time will be determined based on the Company’s Total Net Leverage Ratio (as defined in the Credit Agreement), which is based upon the Company’s consolidated total debt, net of unrestricted cash in excess of $100 million, compared to Consolidated EBITDA (as defined in the Credit Agreement) for the immediately preceding four quarters. |
• | The Company may prepay any outstanding loan under the Revolving Credit Facility without premium or penalty. |
• | The Company is required under the Credit Agreement and the Security Agreement to comply with a number of affirmative, negative and financial covenants. Among other things, these covenants (i) require the Company to provide periodic reports, notices of material events and information regarding collateral, (ii) restrict the Company’ ability, subject to certain exceptions and baskets, to incur additional indebtedness, grant liens on assets, undergo fundamental changes, change the nature of its business, make investments, undertake acquisitions, sell assets, make restricted payments (including the ability to pay dividends and repurchase stock) or engage in affiliate transactions, and (iii) require the Company to maintain a Total Net Leverage Ratio (which is, generally, our total funded debt, net of unrestricted cash in excess of $100 million, over our EBITDA for the preceding four quarters) of less than 3.75 to 1.00, a Senior Secured Leverage Ratio (which is, generally, our total senior secured debt over our EBITDA for the preceding four quarters) of less than 2.50 to 1.00 and a Fixed Charge Coverage Ratio (which is, generally, our EBITDA for the preceding four quarters over the sum of cash interest expense, cash tax payments, scheduled funded debt payments and capital expenditures during such four quarter period) of at least 2.00 to 1.00 (with each such ratio as more particularly defined as set forth in the Credit Agreement). |
F-33
Table of Contents
• | The Credit Agreement contains customary events of default (subject to customary grace periods, cure rights and materiality thresholds), including, among others, failure to pay principal, interest or fees, violation of covenants, material inaccuracy of representations and warranties, cross-default and cross-acceleration of material indebtedness and other obligations, certain bankruptcy and insolvency events, certain judgments, certain events related to the Employee Retirement Income Security Act of 1974, as amended, and a change of control. |
• | Following an event of default under the Credit Agreement, the Administrative Agent would be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement and seek other remedies that may be taken by secured creditors. |
F-34
Table of Contents
F-35
Table of Contents
Year Ended December 31: | ||||||||||||
(in $000’s) | 2010 | 2009 | 2008 | |||||||||
Contractual interest | $ | — | $ | 202 | $ | 2,084 | ||||||
Discount amortization | — | 241 | 2,078 | |||||||||
Deferred financing cost amortization | — | 66 | 338 | |||||||||
Total interest cost | $ | — | $ | 509 | $ | 4,500 | ||||||
Effective interest rate on 3.5% Debentures | — | 8.7 | % | 8.7 | % | |||||||
F-36
Table of Contents
F-37
Table of Contents
• | Contingent Stock Repurchase Option. The Teva Agreement divided the products into three categories, referred to as “product tiers.” The Tier 1 products were those pending FDA approval when the Teva Agreement was entered into, whereas Tier 2 and Tier 3 products were those for which applications to the FDA had not as yet been filed at the inception of the Teva Agreement. The Teva Agreement gave the Company the option to repurchase from Teva 243,729 shares of its common stock (one-sixth of the shares initially sold to Teva) for $1.00 contingent upon Teva achieving a commercial sale of either a Tier 2 or Tier 3 product. |
F-38
Table of Contents
• | Contingent Sale of Market Exclusivity— The Teva Agreement obligated the Company to deliver and Teva to purchase the exclusive marketing rights for four of the covered products for $22,000,000 to the extent the Company achieved specified product development milestones relating to four products. Portions of this $ 22,000,000 purchase price were assigned to milestones based on their negotiated values at the inception of the Teva Agreement. If some, but not all of the milestones were achieved, then exclusive marketing rights would transfer only for those products for which the related milestones were met. To the extent the milestones were not achieved by January 15, 2004 and Teva had not exercised the contingent option to purchase market exclusivity described below, the related exclusive marketing rights would not be transferred to Teva, the Company would be required to repay the corresponding portions of the $22,000,000 advance deposit and Teva would retain non-exclusive marketing rights with respect to the related products. The milestones and related portions to be repaid were: $2,000,000 if tentative FDA approval for one specified product was not obtained by June 15, 2002; $5,000,000 if the same product was not launched by February 15, 2003; $5,000,000 and $4,000,000, respectively, if two additional products were not launched by December 15, 2003; $1,000,000 if tentative FDA approval of a fourth product was not received by January 15, 2003; and $5,000,000 if the same product was not launched by December 15, 2003. |
• | Contingent Option to Purchase Market Exclusivity— The Company also granted Teva an option to purchase the exclusive marketing rights to the four specified products to the extent the product development milestones were not met. Teva could exercise this right by forgiving repayment of half of the foregoing portions of the $22,000,000 advance deposit payable as assigned in the Teva Agreement to the specified product. |
• | The Company’s Share Settlement Option— To the extent the Company failed to achieve the milestones and Teva failed to exercise its option to purchase market exclusivity for the four specified products and the Company was thus required to repay the advance deposit, the Company had the option to settle, or repay, the applicable portion of the advance deposit either in cash or with shares of its common stock valued at the Designated Share Price. |
• | Interest Forgiveness /FDA Approval Provision— Under the terms of the Teva Agreement, when the Company received FDA approval for any three of the covered products, the entire amount of interest payable under the advance deposit would be forgiven. The nominal amount of the accrued interest expected to be incurred over the life of the advance deposit was estimated not to exceed approximately $4,400,000. |
F-39
Table of Contents
• | Research and development related activities (the Combined Unit) — Consideration received as a result of research and development related activities performed under the Teva Agreement will initially be deferred and recognized on the straight-line method over the Company’s expected period of performance of the research and development related services, estimated to be from July 2001 (following the June 2001 effective date of the Teva Agreement) to October 2014 (with FDA approval of the ANDA for the final product under the Teva Agreement). | ||
• | Manufacture and delivery of the products — Consideration received as a result of the manufacture and delivery of the products under the Teva Agreement will be recognized under the Company’s revenue recognition policy, as proscribed by SAB 104, as follows: |
• | Product shipments — The Company will account for the shipment of products under the Teva Agreement as current period revenue in accordance with its revenue recognition policy applicable to its Global Products. | ||
• | Profit share — The Company will recognize profit share, if any, as current period revenue when earned. |
• | Gain on the repurchase of Company stock — This represents additional profit share revenue resulting from the successful December 2006 commercial sale of a Tier 2 or Tier 3 product, and was recognized as revenue in the period earned. |
F-40
Table of Contents
Inception | ||||||||||||||||
(in $000’s) | For the Years Ended December 31, | Through | ||||||||||||||
Deferred revenue | 2010 | 2009 | 2008 | Dec 31, 2007 | ||||||||||||
Beginning balance | $ | 202,032 | $ | 200,608 | $ | 181,149 | $ | — | ||||||||
Additions: | ||||||||||||||||
Product related and cost sharing | 10,096 | 35,245 | 60,406 | 321,618 | ||||||||||||
Exclusivity charges | — | — | — | (50,600 | ) | |||||||||||
Other | — | — | — | 12,527 | ||||||||||||
Total additions | $ | 10,096 | $ | 35,245 | $ | 60,406 | $ | 283,545 | ||||||||
Less: | ||||||||||||||||
Amount recognized | $ | (11,278 | ) | $ | (33,821 | ) | $ | (40,947 | ) | $ | (102,396 | ) | ||||
Accounting adjustment | (196,440 | ) | — | — | — | |||||||||||
Total deferred revenue | $ | 4,410 | $ | 202,032 | $ | 200,608 | $ | 181,149 | ||||||||
(in $000’s) | Inception | |||||||||||||||
Deferred product | For the Years Ended December 31, | Through | ||||||||||||||
manufacturing costs | 2010 | 2009 | 2008 | Dec 31, 2007 | ||||||||||||
Beginning balance | $ | 94,040 | $ | 88,361 | $ | 75,296 | $ | — | ||||||||
Additions | 7,416 | 24,089 | 33,621 | 117,855 | ||||||||||||
Less | ||||||||||||||||
Amount recognized | (6,030 | ) | (18,410 | ) | (20,556 | ) | (42,559 | ) | ||||||||
Accounting adjustment | (95,426 | ) | ||||||||||||||
Total deferred product manufacturing costs | $ | — | $ | 94,040 | $ | 88,361 | $ | 75,296 | ||||||||
Deferred | ||||
Revenue | ||||
(in $000s) | Recognition | |||
2011 | $ | 1,151 | ||
2012 | 1,151 | |||
2013 | 1,151 | |||
2014 | 957 | |||
2015 | — | |||
Thereafter | — | |||
Totals | $ | 4,410 | ||
F-41
Table of Contents
F-42
Table of Contents
Inception | ||||||||||||||||
(in $000’s) | For the Years Ended December 31, | Through | ||||||||||||||
Deferred revenue | 2010 | 2009 | 2008 | Dec 31, 2007 | ||||||||||||
Beginning balance | $ | 16,162 | $ | 21,044 | $ | 20,591 | $ | — | ||||||||
Additions: | ||||||||||||||||
Upfront fees and milestone payments | — | — | — | 8,436 | ||||||||||||
Cost sharing and other | — | — | — | 1,642 | ||||||||||||
Product related deferrals | 4,108 | 1,960 | 16,399 | 65,467 | ||||||||||||
Total additions | $ | 4,108 | $ | 1,960 | $ | 16,399 | $ | 75,545 | ||||||||
Less: amounts recognized: | (8,888 | ) | (6,842 | ) | (15,946 | ) | (54,954 | ) | ||||||||
Total deferred revenue | $ | 11,382 | $ | 16,162 | $ | 21,044 | $ | 20,591 | ||||||||
(in $000’s) | Inception | |||||||||||||||
Deferred product | For the Years Ended December 31, | Through | ||||||||||||||
manufacturing costs | 2010 | 2009 | 2008 | Dec 31, 2007 | ||||||||||||
Beginning balance | $ | 14,203 | $ | 18,361 | $ | 17,251 | $ | — | ||||||||
Additions | $ | 3,223 | $ | 1,929 | $ | 16,087 | $ | 59,854 | ||||||||
Less: amount recognized | (7,191 | ) | (6,087 | ) | (14,977 | ) | (42,603 | ) | ||||||||
Total deferred product manufacturing costs | $ | 10,235 | $ | 14,203 | $ | 18,361 | $ | 17,251 | ||||||||
Deferred | ||||||||
Deferred | Product | |||||||
Revenue | Manufacturing Costs | |||||||
(in $000s) | Recognition | Amortization | ||||||
2011 | $ | 2,268 | $ | 2,012 | ||||
2012 | 1,450 | 1,313 | ||||||
2013 | 1,450 | 1,313 | ||||||
2014 | 1,450 | 1,313 | ||||||
2015 | 1,450 | 1,313 | ||||||
Thereafter | 3,314 | 2,971 | ||||||
Total | $ | 11,382 | $ | 10,235 | ||||
F-43
Table of Contents
F-44
Table of Contents
(in $000’s) | Years Ended December 31 | |||||||||||
Deferred revenue | 2010 | 2009 | 2008 | |||||||||
Beginning balance | $ | 39,487 | $ | 39,167 | $ | — | ||||||
Additions: | ||||||||||||
Up-front fees and milestone payments | — | 12,000 | 40,000 | |||||||||
Product related deferrals | — | — | — | |||||||||
Total additions | — | 12,000 | 40,000 | |||||||||
Less: amount recognized | (13,539 | ) | (11,680 | ) | (833 | ) | ||||||
Total deferred revenue | $ | 25,948 | $ | 39,487 | $ | 39,167 | ||||||
Deferred | ||||
Revenue | ||||
(in $000s) | Recognition | |||
2011 | $ | 13,538 | ||
2012 | 12,410 | |||
2013 | — | |||
2014 | — | |||
2015 | — | |||
Thereafter | — | |||
Total | $ | 25,948 | ||
F-45
Table of Contents
Inception | ||||||||||||||||
(in $000’s) | For the Years Ended December 31, | Through | ||||||||||||||
Deferred revenue | 2010 | 2009 | 2008 | Dec 31, 2007 | ||||||||||||
Beginning balance | $ | — | $ | — | $ | 6,361 | $ | — | ||||||||
Additions: | ||||||||||||||||
Upfront fees and milestone payments | — | — | — | 10,000 | ||||||||||||
Product related deferrals | — | — | 34,470 | 117,977 | ||||||||||||
Total additions | — | — | 34,470 | 127,977 | ||||||||||||
Less: amount recognized | — | — | (40,831 | ) | (121,616 | ) | ||||||||||
Total deferred revenue | $ | — | $ | — | $ | — | $ | 6,361 | ||||||||
(in $000’s) | Inception | |||||||||||||||
Deferred product | For the Years Ended December 31, | Through | ||||||||||||||
manufacturing costs | 2010 | 2009 | 2008 | Dec 31, 2006 | ||||||||||||
Beginning balance | $ | — | $ | — | $ | 1,850 | $ | — | ||||||||
Additions | — | — | 307 | 28,737 | ||||||||||||
Less: amount recognized | — | — | (2,157 | ) | (26,887 | ) | ||||||||||
Total deferred product manufacturing costs | $ | — | $ | — | $ | — | $ | 1,850 | ||||||||
F-46
Table of Contents
F-47
Table of Contents
F-48
Table of Contents
F-49
Table of Contents
Weighted | ||||||||
Average | ||||||||
Exercise | ||||||||
Number of Shares | Price | |||||||
Stock Options | Under Option | per Share | ||||||
Outstanding at December 31, 2007 | 9,047,761 | $ | 9.90 | |||||
Options granted | 539,850 | $ | 8.80 | |||||
Options exercised | (956,824 | ) | $ | 4.18 | ||||
Options forfeited | (350,547 | ) | $ | 9.07 | ||||
Outstanding at December 31, 2008 | 8,280,240 | $ | 10.53 | |||||
Options granted | 2,489,141 | $ | 6.96 | |||||
Options exercised | (1,175,897 | ) | $ | 3.69 | ||||
Options forfeited | (1,363,666 | ) | $ | 13.86 | ||||
Outstanding at December 31, 2009 | 8,229,818 | $ | 9.87 | |||||
Options granted | 405,600 | $ | 20.22 | |||||
Options exercised | (1,900,549 | ) | $ | 8.62 | ||||
Options forfeited | (220,193 | ) | $ | 11.03 | ||||
Outstanding at December 31, 2010 | 6,514,676 | $ | 10.84 | |||||
Vested and expected to vest at December 31, 2010 | 6,898,658 | $ | 10.79 | |||||
Options exercisable at December 31, 2010 | 3,890,143 | $ | 11.73 | |||||
F-50
Table of Contents
Non-Vested | Weighted | |||||||
Restricted | Average | |||||||
Stock | Grant Date | |||||||
Restricted Stock Awards | Awards | Fair Value | ||||||
Non-vested at December 31, 2007 | 270,341 | $ | 11.45 | |||||
Granted | 210,300 | $ | 8.81 | |||||
Vested | (64,111 | ) | $ | 11.45 | ||||
Forfeited | (16,814 | ) | $ | 11.15 | ||||
Non-vested at December 31, 2008 | 399,716 | $ | 10.30 | |||||
Granted | 886,969 | $ | 6.99 | |||||
Vested | (113,204 | ) | $ | 10.25 | ||||
Forfeited | (20,558 | ) | $ | 7.87 | ||||
Non-vested at December 31, 2009 | 1,152,923 | $ | 7.72 | |||||
Granted | 727,556 | $ | 18.87 | |||||
Vested | 368,825 | $ | 8.61 | |||||
Forfeited | 76,895 | $ | 10.17 | |||||
Non-vested at December 31, 2010 | 1,434,759 | $ | 12.93 | |||||
For the Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Volatility (range) | 55.1%-56.4 | % | 58.3%-64.2 | % | 64.1%-67.7 | % | ||||||
Volatility (weighted average) | 55.9 | % | 60.4 | % | 66.8 | % | ||||||
Risk-free interest rate (range) | 1.5%-3.1 | % | 2.1%-2.9 | % | 1.6%-3.8 | % | ||||||
Risk-free interest rate (weighted average) | 2.3 | % | 2.6 | % | 3.0 | % | ||||||
Dividend yield | 0 | % | 0 | % | 0 | % | ||||||
Expected life (years) | 6.21 | 6.25 | 6.25 | |||||||||
Weighted average grant date fair value | $ | 11.08 | $ | 4.07 | $ | 5.58 |
F-51
Table of Contents
For the Years Ended December 31, | ||||||||||||
(in $000’s) | 2010 | 2009 | 2008 | |||||||||
Cost of revenues | $ | 2,377 | $ | 1,600 | $ | 1,538 | ||||||
Research and development | 3,466 | 2,677 | 2,273 | |||||||||
Selling, general and administrative | 4,871 | 3,114 | 2,006 | |||||||||
Total | $ | 10,714 | $ | 7,391 | $ | 5,817 | ||||||
F-52
Table of Contents
F-53
Table of Contents
For the Years Ended December 31, | ||||||||||||
(in $000’s, except share and per share amounts) | 2010 | 2009 | 2008 | |||||||||
Numerator: | ||||||||||||
Net income | $ | 250,418 | $ | 50,061 | $ | 15,987 | ||||||
Denominator: | ||||||||||||
Weighted average common shares outstanding | 62,037,908 | 60,279,602 | 59,072,752 | |||||||||
Effect of dilutive options and and common stock purchase warrants | 3,527,224 | 800,582 | 1,709,969 | |||||||||
Diluted weighted average common shares outstanding | 65,565,132 | 61,080,184 | 60,782,721 | |||||||||
Basic net income per share | $ | 4.04 | $ | 0.83 | $ | 0.27 | ||||||
Diluted net income per share | $ | 3.82 | $ | 0.82 | $ | 0.26 | ||||||
F-54
Table of Contents
F-55
Table of Contents
(in $000’s) | Global | Impax | Corporate | Total | ||||||||||||
Year Ended December 31, 2010 | Division | Division | and Other | Company | ||||||||||||
Revenues, net | $ | 864,667 | $ | 14,842 | $ | — | $ | 879,509 | ||||||||
Cost of revenues | 328,163 | 12,083 | — | 340,246 | ||||||||||||
Research and development | 44,311 | 41,912 | — | 86,223 | ||||||||||||
Patent Litigation | 6,384 | — | — | 6,384 | ||||||||||||
Income (loss) before income taxes | $ | 469,858 | $ | (42,663 | ) | $ | (33,316 | ) | $ | 393,879 |
Global | Impax | Corporate | Total | |||||||||||||
Year Ended December 31, 2009 | Division | Division | and Other | Company | ||||||||||||
Revenues, net | $ | 344,961 | $ | 13,448 | $ | — | $ | 358,409 | ||||||||
Cost of revenues | 158,270 | 12,043 | — | 170,313 | ||||||||||||
Research and development | 38,698 | 24,576 | — | 63,274 | ||||||||||||
Patent Litigation | 5,379 | — | — | 5,379 | ||||||||||||
Income (loss) before income taxes | $ | 131,723 | $ | (26,640 | ) | $ | (34,106 | ) | $ | 70,977 |
Global | Impax | Corporate | Total | |||||||||||||
Year Ended December 31, 2008 | Division | Division | and Other | Company | ||||||||||||
Revenues, net | $ | 197,180 | $ | 12,891 | $ | — | $ | 210,071 | ||||||||
Cost of revenues | 80,724 | 11,245 | — | 91,969 | ||||||||||||
Research and development | 42,930 | 16,307 | — | 59,237 | ||||||||||||
Patent Litigation | 6,472 | — | — | 6,472 | ||||||||||||
Income (loss) before income taxes | $ | 55,609 | $ | (17,332 | ) | $ | (12,268 | ) | $ | 26,009 |
F-56
Table of Contents
Years Ended | ||||
(in $000s) | December 31, | |||
2011 | $ | 1,469 | ||
2012 | 1,397 | |||
2013 | 1,377 | |||
2014 | 1,152 | |||
2015 | 471 | |||
Thereafter | — | |||
Total minimum lease payments | $ | 5,866 | ||
F-57
Table of Contents
F-58
Table of Contents
F-59
Table of Contents
F-60
Table of Contents
F-61
Table of Contents
F-62
Table of Contents
F-63
Table of Contents
F-64
Table of Contents
2010 Quarters Ended: | ||||||||||||||||
(in $000’s except per share amounts) | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Revenue: | ||||||||||||||||
Global Product sales, gross | $ | 425,986 | $ | 224,318 | $ | 167,759 | $ | 147,699 | ||||||||
Less: | ||||||||||||||||
Chargebacks | 56,168 | 49,420 | 36,065 | 39,913 | ||||||||||||
Rebates | 29,425 | 16,739 | 21,630 | 17,666 | ||||||||||||
Product Returns | 7,400 | 4,596 | 8,344 | (4,519 | ) | |||||||||||
Other credits | 23,888 | 15,925 | 10,669 | 9,544 | ||||||||||||
Global Product sales, net | 309,105 | 137,638 | 91,051 | 85,095 | ||||||||||||
Private Label Product sales | 672 | 339 | 528 | 535 | ||||||||||||
Rx Partner | 4,903 | 5,802 | 202,799 | 3,773 | ||||||||||||
OTC Partner | 1,765 | 2,309 | 2,365 | 2,449 | ||||||||||||
Research Partner | 3,385 | 3,494 | 3,714 | 3,715 | ||||||||||||
Promotional Partner | 3,503 | 3,500 | 3,535 | 3,535 | ||||||||||||
Other | — | — | — | — | ||||||||||||
Total revenues | 323,333 | 153,082 | 303,992 | 99,102 | ||||||||||||
Gross profit | 243,757 | 84,190 | 160,871 | 50,445 | ||||||||||||
Net income | $ | 131,485 | $ | 31,348 | $ | 75,163 | 12,422 | |||||||||
Net income per share (basic) | $ | 2.16 | $ | 0.51 | $ | 1.20 | $ | 0.20 | ||||||||
Net income per share (diluted) | $ | 2.06 | $ | 0.48 | $ | 1.15 | $ | 0.19 | ||||||||
Weighted Average: | ||||||||||||||||
common shares outstanding: | ||||||||||||||||
Basic | 61,008,015 | 61,876,599 | 62,435,116 | 62,807,768 | ||||||||||||
Diluted | 63,865,678 | 65,538,805 | 65,470,341 | 66,210,101 | ||||||||||||
F-65
Table of Contents
2009 Quarters Ended: | ||||||||||||||||
(in $000’s except per share amounts) | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Revenue: | ||||||||||||||||
Global Product sales, gross | $ | 78,696 | $ | 81,764 | $ | 82,514 | $ | 281,540 | ||||||||
Less: | ||||||||||||||||
Chargebacks | 22,638 | 24,844 | 21,265 | 57,358 | ||||||||||||
Rebates | 10,819 | 13,425 | 9,411 | 38,965 | ||||||||||||
Returns | 3,256 | 3,100 | 2,030 | 3,461 | ||||||||||||
Other credits | 2,862 | 3,008 | 3,172 | 17,821 | ||||||||||||
Global Product sales, net | 39,121 | 37,387 | 46,636 | 163,935 | ||||||||||||
Private Label Product sales | 1,297 | 2,220 | 1,752 | 244 | ||||||||||||
Rx Partner | 10,736 | 11,119 | 8,328 | 3,652 | ||||||||||||
OTC Partner | 1,858 | 1,628 | 1,769 | 1,587 | ||||||||||||
Research Partner | 2,611 | 2,833 | 2,962 | 3,274 | ||||||||||||
Promotional Partner | 3,284 | 3,224 | 3,499 | 3,441 | ||||||||||||
Other | 6 | 5 | — | 1 | ||||||||||||
Total revenues | 58,913 | 58,416 | 64,946 | 176,134 | ||||||||||||
Gross profit | 32,663 | 31,132 | 36,891 | 87,410 | ||||||||||||
Net income | $ | 2,219 | $ | 3,013 | $ | 6,685 | $ | 38,144 | ||||||||
Net income per share (basic) | $ | 0.04 | $ | 0.05 | $ | 0.11 | $ | 0.63 | ||||||||
Net income per share (diluted) | $ | 0.04 | $ | 0.05 | $ | 0.11 | $ | 0.61 | ||||||||
Weighted Average: | ||||||||||||||||
common shares outstanding: | ||||||||||||||||
Basic | 59,711,133 | 60,112,308 | 60,559,064 | 60,721,808 | ||||||||||||
Diluted | 60,222,215 | 60,552,344 | 61,247,700 | 62,288,318 | ||||||||||||
F-66
Table of Contents
(in $000’s)
Column A | Column B | Column C | Column D | Column E | ||||||||||||||||
Balance at | Charge to | Charge to | Balance at | |||||||||||||||||
Beginning of | Costs and | Other | End of | |||||||||||||||||
Description | Period | Expenses | Accounts | Deductions | Period | |||||||||||||||
Deferred tax asset valuation allowance | $ | — | $ | 333 | $ | — | $ | — | $ | 333 | ||||||||||
Inventory reserve | 3,148 | 1,257 | — | — | 4,405 | |||||||||||||||
Reserve for bad debts | 550 | 568 | — | (290 | ) | 828 |
(in $000’s)
Column A | Column B | Column C | Column D | Column E | ||||||||||||||||
Balance at | Charge to | Charge to | Balance at | |||||||||||||||||
Beginning of | Costs and | Other | End of | |||||||||||||||||
Description | Period | Expenses | Accounts | Deductions | Period | |||||||||||||||
Deferred tax asset valuation allowance | $ | 333 | $ | (333 | ) | $ | — | $ | — | $ | — | |||||||||
Inventory reserve | 4,405 | 241 | �� | — | — | 4,646 | ||||||||||||||
Reserve for bad debts | 828 | 229 | — | (685 | ) | 372 |
(in $000’s)
Column A | Column B | Column C | Column D | Column E | ||||||||||||||||
Balance at | Charge to | Charge to | Balance at | |||||||||||||||||
Beginning of | Costs and | Other | End of | |||||||||||||||||
Description | Period | Expenses | Accounts | Deductions | Period | |||||||||||||||
Deferred tax asset valuation allowance | $ | — | $ | $ | $ | — | $ | — | ||||||||||||
Inventory reserve | 4,646 | 648 | — | — | 5,294 | |||||||||||||||
Reserve for bad debts | 372 | 277 | — | (110 | ) | 539 |
S-1
Table of Contents
IMPAX LABORATORIES, INC. | ||||
By: | /s/ Larry Hsu, Ph.D. | |||
Name: | Larry Hsu, Ph.D. | |||
Title: | President and Chief Executive Officer |
Signature | Title | Date | ||
/s/Larry Hsu, Ph.D | President, Chief Executive Officer (Principal Executive Officer) and Director | February 25, 2011 | ||
/s/Arthur A. Koch, Jr. | Senior Vice President, Finance, and Chief Financial Officer (Principal Financial and Accounting Officer) | February 25, 2011 | ||
/s/Leslie Z. Benet, Ph.D. | Director | February 25, 2011 | ||
/s/Robert L. Burr | Chairman of the Board | February 25, 2011 | ||
/s/Nigel Ten Fleming, Ph.D. | Director | February 25, 2011 | ||
/s/Michael Markbreiter | Director | February 25, 2011 | ||
/s/Allen Chao, Ph.D. | Director | February 25, 2011 | ||
/s/Peter R. Terreri | Director | February 25, 2011 |
II-1
Table of Contents
Exhibit No. | Description of Document | |||
3.1.1 | Restated Certificate of Incorporation, dated August 30, 2004.(1) | |||
3.1.2 | Certificate of Designation of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of Delaware on January 21, 2009.(2) | |||
3.2 | Amended and Restated Bylaws, effective June 29, 2009.(3) | |||
4.1 | Specimen of Common Stock Certificate.(4) | |||
4.2 | Form of Debenture (incorporated by reference to Exhibit A to the Indenture, dated as of June 27, 2005, between the Company and HSBC Bank USA, National Association, as Trustee, listed on Exhibit 4.3) | |||
4.3 | Indenture, dated as of June 27, 2005, between the Company and HSBC Bank USA, National Association, as Trustee.(4) | |||
4.4 | Supplemental Indenture, dated as of July 6, 2005, between the Company and HSBC Bank USA, National Association, as Trustee.(4) | |||
4.5 | Registration Rights Agreement, dated as of June 27, 2005, between the Company and the Initial Purchasers named therein.(4) | |||
4.6 | Promissory Note dated June 7, 2006, issued by the Company to Solvay Pharmaceuticals, Inc.(4) | |||
4.7 | Preferred Stock Rights Agreement, dated as of January 20, 2009, by and between the Company and StockTrans, Inc., as Rights Agent.(2) | |||
10.1.1 | Amended and Restated Loan and Security Agreement, dated as of December 15, 2005, between the Company and Wachovia Bank, National Association.(4) | |||
10.1.2 | First Amendment, dated October 14, 2008, to Amended and Restated Loan and Security Agreement, dated December 15, 2005, between the Company and Wachovia Bank, National Association.(5) | |||
10.1.3 | Second Amendment to Amended and Restated Loan and Security Agreement, effective as of December 31, 2008, by and among the Company and Wachovia Bank, National Association.(6) | |||
10.1.4 | Third Amendment to Amended and Restated Loan and Security Agreement, effective as of March 31, 2009, by and among the Company and Wachovia Bank, National Association.(7) | |||
10.1.5 | Fourth Amendment to Amended and Restated Loan and Security Agreement, effective as of March 12, 2010, by and among the Company and Wachovia Bank, National Association, a Wells Fargo Company.(8) | |||
10.1.6 | Fifth Amendment to Amended and Restated Loan and Security Agreement, effective as of June 30, 2010, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.(9) | |||
10.1.7 | Sixth Amendment to Amended and Restated Loan and Security Agreement, effective as of September 30, 2010, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.(10) | |||
10.1.8 | Seventh Amendment to Amended and Restated Loan and Security Agreement, effective as of January 31, 2011, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association. | |||
10.2 | Purchase Agreement, dated June 26, 2005, between the Company and the Purchasers named therein.(4) | |||
10.3.1 | Impax Laboratories Inc. 1999 Equity Incentive Plan.*(6) | |||
10.3.2 | Form of Stock Option Grant under the Impax Laboratories, Inc. 1999 Equity Incentive Plan.*(6) | |||
10.4 | Impax Laboratories Inc. 2001 Non-Qualified Employee Stock Purchase Plan.*(4) | |||
10.5.1 | Impax Laboratories Inc. Amended and Restated 2002 Equity Incentive Plan.*(11) | |||
10.5.2 | Form of Stock Option Grant under the Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan.*(6) |
II-2
Table of Contents
Exhibit No. | Description of Document | |||
10.5.3 | Form of Stock Bonus Agreement under the Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan.*(6) | |||
10.6.1 | Impax Laboratories Inc. Executive Non-Qualified Deferred Compensation Plan, amended and restated effective January 1, 2008.*(8) | |||
10.6.2 | Amendment to Impax Laboratories Inc. Executive Non-Qualified Deferred Compensation Plan, effective as of January 1, 2009.* (8) | |||
10.7.1 | Employment Agreement, dated December 14, 1999, by and between the Company and Larry Hsu, Ph.D.*(5) | |||
10.7.2 | Amendment No. 1, dated May 19, 2009, to Employment Agreement, dated December 14, 1999, by and between the Company and Larry Hsu, Ph.D.*(12) | |||
10.7.3 | Employment Agreement, dated as of January 1, 2010, between the Company and Larry Hsu, Ph.D.*(13) | |||
10.8 | Employment Agreement, dated as of January 1, 2010, between the Company and Charles V. Hildenbrand.*(13) | |||
10.9 | Employment Agreement, dated as of January 1, 2010, between the Company and Arthur A. Koch, Jr.*(13) | |||
10.10 | Employment Agreement, dated as of January 1, 2010, between the Company and Michael J. Nestor.*(13) | |||
10.11.1 | Offer of Employment Letter, effective as of January 5, 2009, between the Company and Christopher Mengler.*(6) | |||
10.11.2 | Employment Agreement, dated as of January 1, 2010, between the Company and Christopher Mengler, R.Ph.*(13) | |||
10.11.3 | Separation Agreement and General Release, dated October 19, 2010, by and between the Company and Christopher Mengler, R.Ph.*(14) | |||
10.12 | License and Distribution Agreement, dated as of January 19, 2006, between the Company and Shire LLC.**(15) | |||
10.13 | Joint Development Agreement, dated as of November 26, 2008, between the Company and Medicis Pharmaceutical Corporation.**(15) | |||
10.14 | License, Development and Commercialization Agreement, dated as of December 15, 2010, by and between the Company and Glaxo Group Limited.*** | |||
10.15 | Supply Agreement, dated as of December 15, 2010, by and between the Company and Glaxo Group Limited.*** | |||
11.1 | Statement re computation of per share earnings (incorporated by reference to Note 17 to the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K). | |||
21.1 | Subsidiaries of the registrant. |
II-3
Table of Contents
Exhibit No. | Description of Document | |||
23.1 | Consent of Grant Thornton LLP. | |||
31.1 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
31.2 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
32.1 | Certifications of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
32.2 | Certifications of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Management contract, compensatory plan or arrangement. | |
** | Confidential treatment granted for certain portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act, which portions are omitted and filed separately with the SEC. | |
*** | Confidential treatment requested for certain portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act, which portions are omitted and filed separately with the SEC. | |
(1) | Incorporated by reference to Amendment No. 5 to the Company’s Registration Statement on Form 10 filed on December 23, 2008. | |
(2) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 22, 2009. | |
(3) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 2, 2009. | |
(4) | Incorporated by reference to the Company’s Registration Statement on Form 10 filed on October 10, 2008. | |
(5) | Incorporated by reference to Amendment No. 2 to the Company’s Registration Statement on Form 10 filed on December 2, 2008. | |
(6) | Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. | |
(7) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009. | |
(8) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010. | |
(9) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010. | |
(10) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010. | |
(11) | Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed on April 14, 2010. | |
(12) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009. | |
(13) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 14, 2010. | |
(14) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on October 22, 2010. | |
(15) | Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. |
II-4