EXHIBIT 99.1
Akorn Reports Preliminary 2014 Third Quarter Results
Expects Strong Fourth Quarter With Revenues Between $215 Million and $225 Million and Adjusted EPS Between $0.44 and $0.46
LAKE FOREST, Ill., Nov. 6, 2014 (GLOBE NEWSWIRE) -- Akorn, Inc. (Nasdaq:AKRX), a niche pharmaceutical company, today reported preliminary financial results for the fiscal third quarter ended September 30, 2014.
Consolidated revenues for the third quarter were $132.7 million and included $39.9 million of costs associated with price increases. Excluding these costs, third quarter adjusted net income per diluted share was $0.27. The Company's prior full year guidance for revenue and adjusted net income per diluted share included an estimated $25 million in costs associated with price increases.
Third Quarter 2014 Key Highlights and Accomplishments
- Received FDA approval on four new products with a combined IMS market size of $228 million. Product approvals included: Zoledronic Acid Injection 5mg/100 mL; Adenosine Injection USP, 3mg/mL 20mL and 30mL; Tobramycin Injection USP, 40mg/mL 2mL and 30mL; and Gatifloxacin Ophthalmic Solution, 0.5%.
- Completed the acquisition of VPI Holdings Corp., the parent company of VersaPharm Incorporated, in early August.
- In early October, completed the acquisition of Xopenex® inhalation solution from Sunovion Pharmaceuticals, which is expected to add $18 million to $20 million in annual revenue and $0.07 to $0.08 adjusted net income per diluted share in 2015.
- In early October, completed the acquisition of five FDA (CVM) approved veterinary injectable brands: AnaSed®, Tolazine®, Yobine®, Butorphic® and VetaKet®, and a pipeline of four injectable drugs from LLOYD, Inc.
- Adjusts fourth quarter 2014 outlook to reflect the full impact of improved pricing. Fourth quarter revenue, excluding the impact of costs associated with price increases are projected between $215 and $225 million. Adjusted net income per diluted share is projected between $0.44 and $0.46.
Raj Rai, Chief Executive Officer commented, "Our strong business momentum continued this quarter, with double digit organic growth and strong performance from the acquisitions that were completed over the last 12 months. Our strategic initiatives to diversify our portfolio of products have allowed us to reinvent the business, which has opened numerous new market opportunities and has positioned Akorn as a much broader provider of specialty generics. Our current portfolio of marketed and pipeline products operate in strong markets with favorable competitive dynamics, which will provide us with sustainable growth opportunities as we move forward. We expect to close 2014 with record sales and earnings, which will set us firmly on the path to achieve over $1 billion in annual sales in the future."
Financial Results for the Quarter Ended September 30, 2014
Consolidated revenue for the third quarter of 2014 was $132.7 million, an increase of 62% over the third quarter 2013 consolidated revenue of $81.9 million. Third quarter 2014 consolidated revenue was reduced by $39.9 million in costs associated with third quarter price increases. The year-over-year increase, excluding the impact of these costs, was largely driven by the Hi-Tech and VersaPharm acquisitions, the addition of several branded ophthalmic products which were acquired in late 2013 and early 2014, as well as strength in Akorn's established base business.
Consolidated gross margin for the third quarter of 2014 was 39% compared with 53% in the third quarter of 2013. In addition to the costs associated with price increases, third quarter 2014 consolidated gross margin included $6.3 million in amortization of the step-up of Hi-Tech and VersaPharm acquired inventories. Excluding the impact of these items, third quarter 2014 gross margin was 57%.
GAAP net loss for the third quarter of 2014 was ($11.7) million, or a loss of ($0.11) per share compared to GAAP net income of $12.2 million, or $0.11 per diluted share in the comparable prior year quarter. Excluding the impact of costs associated with price increases and other non-GAAP adjustments, adjusted net income for the third quarter of 2014 was $32.6 million, or $0.27 per diluted share compared to adjusted net income of $16.7 million, or $0.15 per diluted share in the comparable prior year quarter. Third quarter 2014 adjustments to net income included a number of items described in the GAAP to non-GAAP reconciliation later in this release.
2014 Updated Outlook
The 2014 outlook table below includes the following:
- The prior outlook which was given with the reporting of second quarter 2014 financial results
- The prior outlook revised to exclude the impact of costs associated with price increases
- Updated 2014 outlook which excludes the impact of costs associated with price increases
All guidance figures shown are non-GAAP consistent with the Company's definition of non-GAAP adjustments which are described later in this release.
| | Prior | | Prior Outlook | Updated | |
| | Outlook | | Revised b | Outlook c | |
| | | | | | |
| Total revenues (Non-GAAP) | $580 - 600 | | $605 - 625 | $630 - 640 | million |
| | | | | | |
| Total gross margin percentage (Non-GAAP) | 56 - 57 | a | 60 - 61 | 58 | % |
| | | | | | |
| SG&A expenses (Non-GAAP) | $80 - 83 | a | $74 - 77 | $85 - 88 | million |
| | | | | | |
| R&D expenses | $39 - 41 | | $39 - 41 | $32 - 34 | million |
| | | | | | |
| Income tax rate (Non-GAAP) | 37.2 | | 37.2 | 37.7 | % |
| | | | | | |
| Adjusted net income (Non-GAAP) | $118 - 125 | | $134 - 140 | $136 - 138 | million |
| | | | | | |
| Adjusted net income per diluted share | $1.00 - 1.05 | | $1.13 - 1.18 | $1.13 - 1.15 | |
| | | | | | |
| Adjusted EBITDA (Non-GAAP) | $230 - 240 | | $255 - 265 | $265 - 270 | million |
| | | | | | |
| Capital expenditures | $35 - 40 | | $35 - 40 | $30 - 35 | million |
| | | | | | |
| Fully diluted share count | 118 | | 118 | 120 | million |
| | | | | | |
| a - Prior Outlook was provided on a GAAP-basis. |
| b - Prior Outlook revised to exclude $25 million in estimated cost of price increases |
| c - Updated Outlook which excludes the impact of costs associated with price increases |
2014 Updated Outlook Assumptions
- Revenue excludes the impact of costs associated with price increases.
- No additional product approvals for the remainder of the year are included.
- Assumes no competing generic is launched for Nembutal.
- The Company anticipates ending the year at a $20 million annual run-rate for synergies.
- Fully diluted share count is based on most recent share price.
Akorn's R&D Pipeline
The Company has 90 ANDAs filed with the FDA with a combined annual addressable IMS market size of approximately $8.6 billion. The Company has completed development work on six additional products with a combined annual addressable IMS market size of approximately $0.2 billion and expects to file these products with the FDA shortly.
During the third quarter, the Company responded to six Complete Response Letters (CRLs) and received 11 new CRLs from the FDA. Of the 90 ANDA filings pending, five are tentatively approved and 34 have received CRLs, 20 of which are pending the Company's response.
Third quarter 2014 Conference Call
Akorn, Inc. will host a conference call at 10:00 a.m. Eastern Time on Thursday, November 6, 2014, to discuss third quarter 2014 results followed by a Q&A session. The domestic call-in number is 877-415-4117 and the international call-in number is 678-224-7719. The confirmation code for all callers is 24405342. The URL for the webcast is http://www.media-server.com/m/p/hp5vjo2i. A live broadcast of the conference call will also be available online at www.akorn.com under the Investor Relations tab and available for replay for 90 days.
About Akorn, Inc.
Akorn, Inc. is a niche generic pharmaceutical company engaged in the development, manufacture and marketing of multisource and branded pharmaceuticals. Akorn has manufacturing facilities located in Decatur, Illinois; Somerset, New Jersey; Amityville, New York and Paonta Sahib, India where the Company manufactures ophthalmic, injectable and niche, non-sterile pharmaceuticals. Additional information is available on the Company's website at www.akorn.com.
Forward Looking Statements
This press release includes statements that may constitute "forward-looking statements", including projections of certain measures of Akorn's results of operations, projections of sales, projections of certain charges and expenses, projections related to the number and potential market size of ANDAs, projections with respect to timing and impact of pending acquisitions, and other statements regarding Akorn's goals, regulatory approvals and strategy. Akorn cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Because such statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Factors that could cause or contribute to such differences include, but are not limited to: statements relating to future steps we may take, prospective products, prospective acquisitions, future performance or results of current and anticipated products and acquired assets, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results. These cautionary statements should be considered in connection with any subsequent written or oral forward-looking statements that may be made by the Company or by persons acting on its behalf and in conjunction with its periodic SEC filings. You are advised, however, to consult any further disclosures we make on related subjects in our reports filed with the SEC. In particular, you should read the discussion in the section entitled "Cautionary Statement Regarding Forward-Looking Statements" in our most recent Annual Report on Form 10-K, as it may be updated in subsequent reports filed with the SEC. That discussion covers certain risks, uncertainties and possibly inaccurate assumptions that could cause our actual results to differ materially from expected and historical results. Other factors besides those listed there could also adversely affect our results.
Non-GAAP Financial Measures
In addition to reporting financial information required in accordance with U.S. generally accepted accounting principles (GAAP), Akorn is also reporting Adjusted EBITDA, Adjusted net income, which incorporates, Adjusted revenues, Adjusted cost of sales and gross margin, Adjusted SG&A, Adjusted acquisition-related costs, Adjusted amortization, Adjusted debt financing costs, Adjusted non-cash interest expense, Adjusted other non-operating income, net and Adjusted income tax provision, and Adjusted net income per diluted share, which are non-GAAP financial measures. Since Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share are non-GAAP financial measures, they should not be used in isolation or as a substitute for consolidated statements of operations and cash flow data prepared in accordance with GAAP. In addition, Akorn's definitions of Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share may not be comparable to similarly titled non-GAAP financial measures reported by other companies. For a full reconciliation of Adjusted EBITDA and Adjusted net income to GAAP net income, please see the attachments to this earnings release.
Adjusted EBITDA, as defined by the Company, is calculated as follows:
Net income, plus:
- Interest income (expense), net
- Provision for income taxes
- Depreciation and amortization
- Amortization of acquisition related inventory step-up
- Non-cash expenses, such as share-based compensation expense, and amortization of financing costs
- Other adjustments, such as costs associated with price increases, legal settlements and various acquisition and disposition related expenses
- Less settlement of product warranty liability
- Less gains (or plus losses) on foreign currency transactions
- Less gains related to acquisitions and divestitures
The Company believes that Adjusted EBITDA is a meaningful indicator, to both Company management and investors, of the past and expected ongoing operating performance of the Company. EBITDA is a commonly used and widely accepted measure of financial performance. Adjusted EBITDA is deemed by the Company to be a useful performance indicator because it includes an add back of non-cash and non-recurring operating expenses which have little to no bearing on cash flows and may be subject to uncontrollable factors not reflective of the Company's true operational performance (i.e. fair value adjustments to the carrying value of stock warrants liability).
Adjusted net income, as defined by the Company, is calculated as follows:
Net income, plus:
- The recorded provision for income taxes
- Intangible asset amortization
- Amortization of acquisition related inventory step-up
- Non-cash expenses, such as non-cash interest, share-based compensation expense, and amortization of financing costs
- Other adjustments, such as costs associated with price increases, legal settlements and various acquisition and disposition related expenses
- Less an estimated cash tax provision, net of the benefit from utilizing NOL carry-forwards
- Less settlement of product warranty liability
- Less gains (or plus losses) on foreign currency transactions
- Less gains related to acquisitions and divestitures
Adjusted net income per diluted share is equal to Adjusted net income divided by the actual or anticipated diluted share count for the applicable period.
The Company believes that Adjusted net income and Adjusted net income per diluted share are meaningful financial indicators, to both Company management and investors, in that they exclude non-cash income and expense items that have no impact on current or future cash flows, as well as other income and expense items that are not expected to recur and therefore are not reflective of continuing operating performance. Adjusted net income and Adjusted net income per diluted share provide the Company and investors with income figures that would be expected to be more aligned with cash flows than GAAP net income, which includes a number of non-cash income and expense items.
While the Company uses Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share in managing and analyzing its business and financial condition and believes these non-GAAP financial measures to be useful to investors in evaluating the Company's performance, each of these financial measures has certain shortcomings. Adjusted EBITDA does not take into account the impact of capital expenditures on either the liquidity or the financial performance of the Company and likewise omits share-based compensation expenses, which may vary over time and may represent a material portion of overall compensation expense. Adjusted net income does not take into account non-cash expenses that reflect the amortization of past expenditures, or include stock-based compensation, which is an important and material element of the Company's compensation package for its directors, officers and other key employees. Due to the inherent limitations of each of these non-GAAP financial measures, the Company's management utilizes comparable GAAP financial measures to evaluate the business in conjunction with Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share and encourages investors to do likewise.
| AKORN, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| IN THOUSANDS, EXCEPT PER SHARE DATA |
| (UNAUDITED) |
| | | | | |
| | PRELIMINARY | PRELIMINARY |
| | THREE MONTHS ENDED | NINE MONTHS ENDED |
| | September 30, | September 30, |
| | 2014 | 2013 | 2014 | 2013 |
| | | | | |
| Revenues | $ 132,732 | $ 81,892 | $ 374,103 | $ 232,758 |
| Cost of sales (excluding amortization of intangibles) | 80,998 | 38,195 | 196,042 | 107,824 |
| GROSS PROFIT | 51,734 | 43,697 | 178,061 | 124,934 |
| | | | | |
| Selling, general and administrative expenses | 27,779 | 13,645 | 66,341 | 39,093 |
| Acquisition-related costs | 8,062 | 1,459 | 29,289 | 1,978 |
| Research and development expenses | 7,918 | 4,837 | 21,389 | 15,857 |
| Amortization of intangibles | 14,017 | 1,568 | 27,381 | 4,978 |
| TOTAL OPERATING EXPENSES | 57,776 | 21,509 | 144,400 | 61,906 |
| | | | | |
| OPERATING INCOME (LOSS) | (6,042) | 22,188 | 33,661 | 63,028 |
| | | | | |
| Debt financing costs | (2,509) | (211) | (11,099) | (622) |
| Non-cash interest expense | (1,299) | (1,163) | (3,954) | (3,427) |
| Interest expense, net | (10,507) | (991) | (17,930) | (2,960) |
| Gain from product divestiture | 839 | -- | 9,807 | -- |
| Other non-operating income, net | 979 | 159 | 980 | 202 |
| INCOME (LOSS) BEFORE INCOME TAXES | (18,539) | 19,982 | 11,465 | 56,221 |
| Income tax (benefit) provision | (6,889) | 7,777 | 4,278 | 20,537 |
| NET INCOME (LOSS) FROM CONTINUING OPERATIONS | $ (11,650) | $ 12,205 | $ 7,187 | $ 35,684 |
| | | | | |
| NET LOSS FROM DISCONTINUED OPERATIONS | $ -- | $ -- | $ (503) | $ -- |
| | | | | |
| NET (LOSS) INCOME | $ (11,650) | $ 12,205 | $ 6,684 | $ 35,684 |
| | | | | |
| NET INCOME (LOSS) PER SHARE: | | | | |
| BASIC FROM CONTINUING OPERATIONS | $ (0.11) | $ 0.13 | $ 0.07 | $ 0.37 |
| DILUTED FROM CONTINUING OPERATIONS | $ (0.11) | $ 0.11 | $ 0.06 | $ 0.32 |
| BASIC | $ (0.11) | $ 0.13 | $ 0.07 | $ 0.37 |
| DILUTED | $ (0.11) | $ 0.11 | $ 0.06 | $ 0.32 |
| | | | | |
| SHARES USED IN COMPUTING NET INCOME | | | | |
| PER SHARE: | | | | |
| BASIC | 105,438 | 96,238 | 101,784 | 96,096 |
| DILUTED | 120,044 | 113,717 | 118,535 | 112,644 |
| | | | | |
| COMPREHENSIVE INCOME (LOSS): | | | | |
| Net income (loss) | (11,650) | 12,205 | 6,684 | 35,684 |
| Unrealized holding of security sale, net of tax | 1,070 | -- | 1,070 | -- |
| Foreign currency translation gain (loss) | (1,466) | (2,603) | 86 | (7,224) |
| Comprehensive income (loss) | (12,046) | 9,602 | $ 7,840 | $ 28,460 |
| | |
| | |
| AKORN, INC. |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| IN THOUSANDS, EXCEPT SHARE DATA |
| (UNAUDITED) |
| | | |
| | PRELIMINARY | |
| | SEPTEMBER 30, | DECEMBER 31, |
| | 2014 | 2013 |
| ASSETS | |
| CURRENT ASSETS: | |
| Cash and cash equivalents | $ 131,466 | $ 34,178 |
| Trade accounts receivable, net | 138,256 | 64,998 |
| Inventories | 132,830 | 55,982 |
| Deferred taxes, current | 40,708 | 7,945 |
| Available for sale security, current | 10,804 | -- |
| Prepaid expenses and other current assets | 31,517 | 5,753 |
| TOTAL CURRENT ASSETS | 485,581 | 168,856 |
| PROPERTY, PLANT AND EQUIPMENT, NET | 139,372 | 82,108 |
| OTHER LONG-TERM ASSETS: | |
| Goodwill | 290,648 | 29,831 |
| Product licensing rights, net | 670,757 | 115,900 |
| Other intangibles, net | 254,685 | 14,605 |
| Deferred financing costs | 22,942 | 5,676 |
| Deferred taxes, non-current | 3,307 | 1,643 |
| Long-term investments | 208 | 10,006 |
| Other | 2,377 | 3,180 |
| TOTAL OTHER LONG-TERM ASSETS | 1,244,924 | 180,841 |
| TOTAL ASSETS | $ 1,869,877 | $ 431,805 |
| | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY |
| CURRENT LIABILITIES: | |
| Trade accounts payable | $ 36,714 | $ 22,999 |
| Purchase consideration payable | 20,728 | 14,728 |
| Income taxes payable | -- | 1,459 |
| Accrued royalties | 14,533 | 6,004 |
| Accrued compensation | 12,625 | 7,692 |
| Current maturities of long-term debt | 10,494 | -- |
| Accrued expenses and other liabilities | 31,765 | 8,363 |
| TOTAL CURRENT LIABILITIES | 126,859 | 61,245 |
| LONG-TERM LIABILITIES: | |
| Debt, Long-term | 1,146,585 | 108,750 |
| Deferred tax liability | 274,165 | -- |
| Lease incentive obligations and other long-term liabilities | 1,946 | 1,630 |
| TOTAL LONG-TERM LIABILITIES | 1,422,696 | 110,380 |
| TOTAL LIABILITIES | 1,549,555 | 171,625 |
| SHAREHOLDERS' EQUITY: | |
| Common stock, no par value --- 150,000,000 shares authorized,107,330,516 and 96,569,186 shares issued and outstanding September 30, 2014 and December 31, 2013, respectively | 309,482 | 239,235 |
| Warrants to acquire common stock | -- | 17,946 |
| Retained earnings | 22,051 | 15,366 |
| Accumulated other comprehensive loss | (11,211) | (12,367) |
| TOTAL SHAREHOLDERS' EQUITY | 320,322 | 260,180 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 1,869,877 | $ 431,805 |
| | | | | |
| | | | | |
| AKORN, INC. |
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
| IN THOUSANDS (UNAUDITED) |
| | | | | |
| | PRELIMINARY | PRELIMINARY |
| | THREE MONTHS ENDED | NINE MONTHS ENDED |
| | SEPTEMBER 30, | SEPTEMBER 30, |
| | 2014 | 2013 | 2014 | 2013 |
| OPERATING ACTIVITIES | | | | |
| Consolidated net income | $ (11,650) | $ 12,205 | $ 6,684 | $ 35,684 |
| Loss from discontinued operations | $ -- | $ -- | $ 503 | $ -- |
| Adjustments to reconcile consolidated net income to net cash provided by operating activities: | |
| Depreciation and amortization | 18,908 | 3,274 | 37,773 | 9,925 |
| Debt financing costs | 2,510 | 211 | 11,099 | 622 |
| Amortization of favorable (unfavorable) contract asset (liability) | 18 | (157) | 53 | (475) |
| Amortization of inventory step-up | 6,285 | -- | 9,844 | -- |
| Non-cash stock compensation expense | 1,663 | 1,430 | 4,994 | 5,674 |
| Non-cash interest expense | 1,299 | 1,163 | 3,954 | 3,426 |
| Gain from product divestiture | (839) | -- | (9,807) | -- |
| Deferred tax assets, net | 17,400 | 628 | 7,441 | 1,829 |
| Excess tax benefit from stock compensation | (31,437) | (447) | (32,268) | (1,192) |
| Non-cash settlement of product warranty liability | -- | -- | -- | (1,299) |
| Equity in earnings of unconsolidated joint venture | -- | -- | -- | (76) |
| Changes in operating assets and liabilities: | | | | |
| Trade accounts receivable | 10,754 | (3,950) | (17,237) | (10,858) |
| Inventories | (9,964) | (147) | (14,177) | (4,575) |
| Prepaid expenses and other assets | (13,977) | 329 | (9,648) | 867 |
| Trade accounts payable | (2,625) | 1,595 | 2,340 | 1,444 |
| Accrued expenses and other liabilities | 3,922 | 4,878 | 12,721 | 1,414 |
| NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES | (7,733) | 21,012 | 14,269 | 42,410 |
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Payments for acquisitions and equity investments | (350,456) | -- | (929,771) | (513) |
| Proceeds from disposal of assets | 1,000 | -- | 58,750 | -- |
| Payments for other intangible assets | (2,199) | -- | (8,499) | -- |
| Purchases of property, plant and equipment | (7,464) | (2,777) | (19,393) | (7,936) |
| NET CASH USED IN INVESTING ACTIVITIES | (359,119) | (2,777) | (898,913) | (8,449) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from issuance of debt | 445,000 | -- | 1,045,000 | -- |
| Debt repayment | (81,813) | -- | (81,813) | -- |
| Debt financing costs | (8,808) | (2,557) | (28,462) | (2,557) |
| Excess tax benefit from stock compensation | 31,437 | 447 | 32,268 | 1,192 |
| Net proceeds from common stock offering and warrant exercises | -- | -- | 8,171 | -- |
| Proceeds under stock option and stock purchase plans | 4,796 | 1,174 | 6,867 | 2,439 |
| NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | 390,613 | (936) | 982,032 | 1,074 |
| | | | | |
| Effect of changes in exchange rates on cash & cash equivalents | (201) | (113) | (99) | (218) |
| INCREASE IN CASH AND CASH EQUIVALENTS | 23,559 | 17,186 | 97,288 | 34,817 |
| Cash and cash equivalents at beginning of period | 107,907 | 58,412 | 34,178 | 40,781 |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 131,466 | $ 75,598 | $ 131,466 | $ 75,598 |
| |
| |
| AKORN, INC. |
| RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED EBITDA |
| IN THOUSANDS (UNAUDITED) |
| | | | | |
| | PRELIMINARY | PRELIMINARY |
| | THREE MONTHS ENDED | NINE MONTHS ENDED |
| | September 30, | September 30, |
| | 2014 | 2013 | 2014 | 2013 |
| | | | | |
| NET INCOME (LOSS) FROM CONTINUING OPERATIONS | $ (11,650) | $ 12,205 | $ 7,187 | $ 35,684 |
| | | | | |
| ADJUSTMENTS TO ARRIVE AT EBITDA: | | | | |
| Depreciation expense | 4,891 | 1,706 | 10,392 | 4,947 |
| Amortization expense | 14,017 | 1,568 | 27,381 | 4,978 |
| Interest expense, net | 10,507 | 992 | 17,930 | 2,961 |
| Non-cash interest expense | 1,299 | 1,163 | 3,954 | 3,426 |
| Income tax provision | (6,889) | 7,777 | 4,278 | 20,537 |
| EBITDA | $ 12,175 | $ 25,411 | $ 71,122 | $ 72,533 |
| | | | | |
| NON-CASH AND OTHER NON-RECURRING INCOME AND EXPENSES: | | |
| Acquisition-related expenses | 8,062 | 1,459 | 29,289 | 2,299 |
| Non-cash stock compensation expense | 1,663 | 1,430 | 4,994 | 5,674 |
| Non-cash settlement of product warranty liability | -- | -- | -- | (1,299) |
| Gain from foreign currency forward contracts | 15 | -- | (689) | -- |
| Gain from product divestiture | (839) | -- | (9,807) | -- |
| Amortization of inventory gross-up | 6,285 | -- | 9,844 | -- |
| Debt financing costs | 2,509 | 211 | 11,099 | 622 |
| Other costs associated with acquisitions | -- | -- | 1,400 | -- |
| Revenue adjustments related to pricing changes | 39,860 | -- | 39,860 | -- |
| Accelerated depreciation on plant assets | 949 | -- | 949 | -- |
| Litigation settlement | -- | 385 | (291) | 385 |
| ADJUSTED EBITDA | $ 70,679 | $ 28,896 | $ 157,770 | $ 80,214 |
| | | | | |
| |
| |
| RECONCILIATION OF NON-GAAP MEASURES |
| IN THOUSANDS, EXCEPT PER SHARE DATA |
| (UNAUDITED) |
| | | | | | | | | |
| | Three Months Ended |
| | September 30, 2014 (Preliminary) | September 30, 2013 (Preliminary) |
| | | Non-GAAP | | | | Non-GAAP | | |
| | GAAP | Adjustments | | As Adjusted | GAAP | Adjustments | | As Adjusted |
| Revenues | $ 132,732 | $ 39,860 | a | $ 172,592 | $ 81,892 | $ -- | | $ 81,892 |
| Cost of sales (excluding amortization of intangibles) | 80,998 | (7,234) | b | 73,764 | 38,195 | -- | | 38,195 |
| GROSS PROFIT | 51,734 | 47,094 | | 98,828 | 43,697 | -- | | 43,697 |
| Selling, general and administrative expenses | 27,779 | (1,663) | c | 26,116 | 13,645 | (1,430) | c | 12,215 |
| Acquisition-related costs | 8,062 | (8,062) | d | -- | 1,459 | (1,459) | d | -- |
| Research and development expenses | 7,918 | -- | | 7,918 | 4,837 | -- | | 4,837 |
| Amortization | 14,017 | (14,017) | e | -- | 1,568 | (1,568) | e | -- |
| TOTAL OPERATING EXPENSES | 57,776 | (23,742) | | 34,034 | 21,509 | (4,457) | | 17,052 |
| OPERATING INCOME | (6,042) | 70,836 | | 64,794 | 22,188 | (4,457) | | 26,645 |
| Amortization of financing costs | (2,509) | 2,509 | f | -- | (211) | 211 | f | -- |
| Non-cash interest expense | (1,299) | 1,299 | g | -- | (1,163) | 1,163 | g | -- |
| Interest expense, net | (10,507) | -- | | (10,507) | (991) | -- | | (991) |
| Gain (loss) from product acquisitions and divestitures | 839 | (839) | h | -- | -- | -- | | -- |
| Other non-operating income, net | 979 | 15 | i | 994 | 159 | 385 | j | 544 |
| INCOME (LOSS) BEFORE TAXES FROM CONTINUING OPERATIONS | (18,539) | 73,820 | | 55,281 | 19,982 | 6,216 | | 26,198 |
| Income tax (benefit) provision | (6,889) | 29,606 | k | 22,717 | 7,777 | 1,765 | k | 9,542 |
| NET INCOME (LOSS) FROM CONTINUING OPERATIONS | $ (11,650) | $ 44,214 | | $ 32,564 | $ 12,205 | $ 4,451 | | $ 16,656 |
| DILUTED (BASIC) NET INCOME (LOSS) PER SHARE | $ (0.11) | $ 0.37 | | $ 0.27 | $ 0.11 | $ 0.04 | | $ 0.15 |
| FROM CONTINUING OPERATIONS | | | | | | | | |
| DILUTED/BASIC SHARES OUTSTANDING | 105,438 | 120,044 | | 120,044 | 113,717 | 113,717 | | 113,717 |
| Gross Margin | 39.0% | | | 57.3% | 53.4% | | | 53.4% |
| Operating Margin | -4.6% | | | 37.5% | 27.1% | | | 32.5% |
| | | | | | | | | |
| a - Costs associated with price increases |
| b - Amortization of inventory step-up and accelerated depreciation on plant assets |
| c - Stock compensation expense |
| d - Acquisition-related costs |
| e - Amortization expense |
| f - Amortization of financing costs |
| g - Non-cash interest expense on convertible debt outstanding |
| h - Includes gain (loss) from product acquisitions and divestitures |
| i - Includes foreign currency adjustments |
| j - Litigation settlement |
| k - Total tax effect from non-GAAP pre-tax adjustments |
| |
| |
| RECONCILIATION OF NON-GAAP MEASURES |
| IN THOUSANDS, EXCEPT PER SHARE DATA |
| (UNAUDITED) |
| |
| | Nine Months Ended |
| | September 30, 2014 (Preliminary) | September 30, 2013 (Preliminary) |
| | | Non-GAAP | | | | Non-GAAP | | |
| | GAAP | Adjustments | | As Adjusted | GAAP | Adjustments | | As Adjusted |
| Revenues | $ 374,103 | $ 39,860 | a | $ 413,963 | $ 232,758 | $ -- | | $ 232,758 |
| Cost of sales (excluding amortization of intangibles) | 196,042 | (10,793) | b | 185,249 | 107,824 | -- | | 107,824 |
| GROSS PROFIT | 178,061 | 50,653 | | 228,714 | 124,934 | -- | | 124,934 |
| Selling, general and administrative expenses | 66,341 | (4,994) | c | 61,347 | 39,093 | (5,674) | c | 33,419 |
| Acquisition-related costs | 29,289 | (29,289) | d | -- | 1,978 | (1,978) | d | -- |
| Research and development expenses | 21,389 | -- | | 21,389 | 15,857 | -- | | 15,857 |
| Amortization | 27,381 | (27,381) | e | -- | 4,978 | (4,978) | e | -- |
| TOTAL OPERATING EXPENSES | 144,400 | (61,664) | | 82,736 | 61,906 | (12,630) | | 49,276 |
| OPERATING INCOME | 33,661 | 112,317 | | 145,978 | 63,028 | 12,630 | | 75,658 |
| Amortization of financing costs | (11,099) | 11,099 | f | -- | (622) | 622 | f | -- |
| Non-cash interest expense | (3,954) | 3,954 | g | -- | (3,427) | 3,427 | g | -- |
| Interest expense, net | (17,930) | -- | | (17,930) | (2,960) | -- | | (2,960) |
| Gain (loss) from product acquisitions and divestitures | 9,807 | (9,807) | h | -- | | | | |
| Other non-operating income, net | 980 | 420 | i | 1,400 | 202 | (594) | j | (392) |
| INCOME BEFORE TAXES FROM CONTINUING OPERATIONS | 11,465 | 117,983 | | 129,448 | 56,221 | 16,085 | | 72,306 |
| Income tax provision | 4,278 | 44,887 | k | 49,164 | 20,537 | 5,347 | k | 25,884 |
| NET INCOME FROM CONTINUING OPERATIONS | $ 7,187 | $ 73,096 | | $ 80,284 | $ 35,684 | $ 10,738 | | $ 46,422 |
| DILUTED NET INCOME PER SHARE | $ 0.06 | $ 0.62 | | $ 0.68 | $ 0.32 | $ 0.09 | | $ 0.41 |
| FROM CONTINUING OPERATIONS | | | | | | | | |
| DILUTED SHARES OUTSTANDING | 118,535 | 118,535 | | 118,535 | 112,644 | 112,644 | | 112,644 |
| Gross Margin | 47.6% | | | 55.2% | 53.7% | | | 53.7% |
| Operating Margin | 9.0% | | | 35.3% | 27.1% | | | 32.5% |
| | | | | | | | | |
| a - Costs associated with price increases | | | | | | | | |
| b - Amortization of inventory step-up and accelerated depreciation on plant assets | | | | | | |
| c - Stock compensation expense | | | | | | | | |
| d - Acquisition-related costs | | | | | | | | |
| e - Acquisition-related amortization | | | | | | | | |
| f - Amortization of debt financing costs | | | | | | | | |
| g - Non-cash interest expense on convertible debt outstanding | | | | | | | | |
| h - Includes gain (loss) from product acquisitions and divestitures | | | | | | | |
| i - Includes other costs associated with acquisitions, litigation settlements and foreign currency adjustments | | | | |
| j - Includes non-cash settlement of product warranty liability and litigation settlements | | | | | | |
| k - Total tax effect from non-GAAP pre-tax adjustments | | | | | | | | |
| |
| |
| |
| AKORN, Inc. |
| 2014 FINANCIAL GUIDANCE |
| | | | | |
| RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED NET INCOME |
| | | | | |
| | Prior | Prior Outlook | Updated | |
| | Outlook a | Revised b | Outlook c | |
| GAAP NET INCOME | $63 - 69 | $63 - 69 | $38 - 41 | million |
| | | | | |
| Add: | | | | |
| Intangible asset amortization expense | $32 | $32 | $45 | million |
| Share-based compensation Expense | $6 | $6 | $6 | million |
| Non-cash interest expense | $5 | $5 | $5 | million |
| Amortization of deferred financing costs | $10 | $10 | $18 | million |
| Acquisition-related expenses & other adjustments | $33 - 34 | $59 | $82 | million |
| | | | | |
| Subtract: | | | | |
| Tax effect of adjustments | ($33 - 33) | ($42 - 42) | ($59) | million |
| | | | | |
| ADJUSTED NET INCOME | $118 - 125 | $134 - 140 | $136 - 138 | million |
| | | | | |
| ADJUSTED NET INCOME PER DILUTED SHARE | $1.00 - 1.05 | $1.13 - 1.18 | $1.13 - 1.15 | |
| | | | | |
| SHARES USED IN COMPUTING NET INCOME PER SHARE | 118 | 118 | 120 | million |
| | | | | |
| RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDA |
| | | | | |
| GAAP NET INCOME | $63 - 69 | $63 - 69 | $38 - 41 | million |
| | | | | |
| Add: | | | | |
| Depreciation & amortization expense | $45 | $45 | $60 | million |
| Interest expense, net (cash & non-cash) | $36 | $36 | $36 | million |
| Income tax provision | $37 - 41 | $37 - 41 | $26 - 29 | million |
| EBITDA | $181 - 190 | $181 - 190 | $161 - 166 | million |
| | | | | |
| Add: | | | | |
| Share-based compensation expense | $6 | $6 | $6 | million |
| Amortization of deferred financing costs | $10 | $10 | $18 | million |
| Acquisition-related expenses & other adjustments | $32 - 33 | $58 | $80 | million |
| ADJUSTED EBITDA | $230 - 240 | $255 - 265 | $265 - 270 | million |
| | | | | |
| a - Prior Outlook was provided on a GAAP-basis. |
| b - Prior Outlook revised to exclude $25 million in estimated cost of price increases |
| c - Updated Outlook which excludes the impact of costs associated with price increases |
CONTACT: Investor Relations:
Alpha IR Group
Chris Hodges
(312) 445-2870
At the Company:
Akorn, Inc.
Tim Dick, Chief Financial Officer
(847) 279-6150