Akorn Reports 2013 Fourth Quarter and Year-End Financial Results

LAKE FOREST, Ill.–(BUSINESS WIRE)–

Akorn, Inc. (AKRX), a niche generic pharmaceutical company,
today reported financial results for the fourth quarter and year-ended
December 31, 2013.

Raj Rai, Chief Executive Officer commented, “2013 was a pivotal year for
Akorn. As a result of investment in our sales infrastructure and new
product launches, we grew our business by over 20% year-over-year. In
addition, we announced the planned acquisition of Hi-Tech and completed
acquisitions that expanded our branded ophthalmic portfolio. We expect
2014 to be a transformational year as we evolve into a well diversified
company, with a variety of niche dosage forms, and a commercial platform
to launch novel ophthalmic formulations through partnerships and
acquisitions.”

2013 Key Highlights and Accomplishments

  • Achieved record year-end consolidated revenue of $317.7 million, an
    increase of 24% over the prior year.
  • Generated record operating cash flow of $57.3 million.
  • Announced the planned acquisition of Hi-Tech Pharmacal (Hi-Tech) to
    build scale, breadth of products and dosage forms, and enhance the
    diversification of the Company’s product portfolio.
  • Filed 12 ANDAs and completed the development on an additional 11 ANDAs
    with a combined annual IMS market size of approximately $2.3 billion.
  • Completed the acquisition of the U.S. rights to three branded
    ophthalmic products from Merck; AzaSite®, COSOPT® and COSOPT® PF.

Financial Results for the Quarter Ended December 31, 2013

Consolidated revenue for the fourth quarter of 2013 was $85.0 million,
which was an increase of 19% over the fourth quarter 2012 consolidated
revenue of $71.5 million. The increase in consolidated revenue was
largely driven by the sale of products launched late in the fourth
quarter of 2012 and at the beginning of 2013. Consolidated gross margin
for the fourth quarter of 2013 was 55.3% compared to 58.7% in the
comparable prior year period. The decrease in the Company’s overall
gross profit margin was due to a significant percentage of Akorn’s
revenue growth coming from products that were contract manufactured,
some of which also contain profit sharing arrangements with development
partners. Pricing pressure for various products was also a contributing
factor to the overall decrease in gross profit margin.

Net income for the fourth quarter of 2013 was $16.7 million, or $0.14
per diluted share, compared to net income of $8.8 million, or $0.08 per
diluted share, in the prior year quarter. Non-GAAP adjusted net income
for the fourth quarter of 2013 was $16.1 million, or $0.14 per diluted
share, compared to non-GAAP adjusted net income of $14.6 million, or
$0.13 per diluted share, in the prior year quarter.

Financial Results for the Year Ended December 31, 2013

Consolidated revenue for the year 2013 was $317.7 million, an increase
of by 24% over the prior year consolidated revenue of $256.2 million.
The increase in consolidated revenue was driven by increased sales of
new and revived products which accounted for approximately $48.5 million
of the increase. Sales of existing products accounted for $12.0 million
of the increase, and business and product acquisitions accounted for the
remainder.

Consolidated gross margin for 2013 was 54.1% compared to 58.0% in the
prior year. The decrease in the Company’s overall gross profit margin
was due to a significant percentage of Akorn’s revenue growth coming
from products that were contract manufactured, some of which also
contain profit sharing arrangements with development partners. Pricing
pressure for various products was also a contributing factor to the
overall decrease in gross profit margin.

Net income for 2013 was $52.4 million, or $0.46 per diluted share,
compared to net income of $35.4 million, or $0.32 per diluted share, in
the prior year. Non-GAAP adjusted net income for 2013 was $62.5 million,
or $0.55 per diluted share, compared to non-GAAP adjusted net income of
$57.6 million, or $0.52 per diluted share, in the prior year.

The Company generated $57.3 million in cash flow from operating
activities in 2013 and ended the year with $34.2 million in cash and
cash equivalents after funding the fourth quarter acquisition of branded
ophthalmic products from Merck.

Filing Extension for Form 10-K

Separately, today the Company filed a Form 12b-25, Notification of Late
Filing with the Securities and Exchange Commission that allows the
Company to extend the deadline to file its Form 10-K for the year-ended
December 31, 2013. The Company has not completed its testing and
assessment of the effectiveness of its internal control over financial
reporting due in part to identified control deficiencies related to
completeness and accuracy of underlying data used in the determination
of certain significant estimates and accounting transactions as well as
the existence of inadequate segregation of duties. The Company believes
that these deficiencies, or combination of deficiencies, represent
material weaknesses in its internal control over financial reporting.
There is a possibility that upon completion of its testing and
assessment of the effectiveness of internal controls over financial
reporting, the Company may determine that there are additional material
weaknesses. The Company expects to file within the 15-day extension
period and expects final financial results will be consistent with those
reported in this release.

2014 Outlook

The following table provides Akorn’s 2014 guidance, which assumes that
the Company’s acquisition of Hi-Tech closes on April 1, 2014. Further,
while Akorn has 65 ANDAs on file with the FDA, this guidance does not
consider the impact of new product approvals given the timing
uncertainty of the regulatory approval process.

Total revenues

 

 

 

$540 – 560

 

Million

 

Total gross margin percentage

52 – 54

%

 

SGA expenses

$98 – 103

million

 

RD expenses

$39 – 43

million

 

Intangible asset amortization expense

$30

million

 

Income tax rate

~ 37

%

 

GAAP net income

$53 – 57

million

 

GAAP net income per diluted share

$0.45 – 0.48

 

Adjusted net income

$90 – 93

million

 

Adjusted net income per diluted share

$0.76 – 0.79

 

Capital expenditures

$45 – 55

million

 

Fully diluted share count

118

Million

 

2014 Outlook Assumptions

  • Assumes no generic is launched for Nembutal.
  • Revenue has been reduced for products the Company anticipates
    divesting as a result of the Hi-Tech acquisition.
  • Cost synergies resulting from the Hi-Tech acquisition are expected to
    be realized throughout the year and will accelerate as the year
    progresses. The Company anticipates ending the year at a $20 million
    annual run-rate for synergies.
  • The Company anticipates that it will incur approximately $15 million
    in one-time acquisition-related expenses to close the Hi-Tech
    transaction and realize synergies. These expenses are reflected as an
    add-back to adjusted net income per diluted share in the GAAP to
    non-GAAP reconciliation later in this release.
  • A significant portion of the 2013 planned capital spending related to
    the expansion of our Indian facilities has rolled into the 2014
    Outlook. In addition, the Company is investing in modernization
    projects at our Decatur, Illinois sterile injectables facility.
    Finally, the 2014 Outlook also includes capital expenditures
    anticipated for Hi-Tech.
  • Fully diluted share count is based on most recent share price.

Frequently Asked Questions

Q: Will Akorn be able to maintain 2013 gross margins of approximately
54% in 2014?

A: Overall gross margins for 2014 are expected to be in the range of
52-54% as a result of the full year impact of partnered products
launched in early 2013 and the addition of Hi-Tech’s portfolio at an
estimated 48% gross margin.

Q: Are there margin improvement opportunities in the future?

A: Yes, longer-term margins are expected to improve. The vast majority
of Akorn’s active pipeline products will be manufactured by Akorn with
no partnering or shared economics and as a result are expected to have
higher margins than the products which contributed to growth in 2013.
Additionally, the Company expects improvement in the margins on its more
competitive products once it achieves US FDA approval of the Indian
manufacturing site.

Q: When will the Akorn India facilities be US FDA approved?

A: In February 2014, the Company filed its first product out of one of
Akorn India’s four facilities. Because this is a site transfer of an
approved NDA product, the Company anticipates the FDA will inspect the
facility in 2014. By that time, Akorn plans to have products filed out
of each of the remaining manufacturing facilities.

Q: Why is Akorn projecting a substantial increase in RD costs?

A: There are three primary factors contributing to the increased costs:
1) the Generic Drug User Fee Act (“GDUFA”) fees associated with the
projected 35-40 abbreviated new drug application (“ANDA”) filings for
2014; 2) the cost of bio-equivalence (“BE”) studies associated with
high-value products; and 3) the increased internal RD costs resulting
from the expansion of Akorn’s RD infrastructure, the costs associated
with product development and global filings out of Akorn India, and the
inclusion of Hi-Tech in the 2014 Outlook. The Company views ongoing
investment in RD as a key to its long-term growth objectives.

Q: Can you provide some guidance on new product approvals?

A: It has become increasingly difficult to predict timing of new
approvals given the implementation of GDUFA and the growing backlog of
filings at the FDA.

The following table shows the number and total IMS market size of our
ANDA filings based on the age of the filing (in months):

 

Filed Age

 

Tentative

 


 

24-36 months

 

36 months

 

Total

 

 

 

 

Count

 

Value*

 

Count

 

Value*

 

Count

 

Value*

 

Count

 

Value*

 

Count

 

Value*

Ophthalmic

 

Brand

 

2

 

$

274

 

8

 

$

888

 

3

 

$

35

 

 

$

 

13

 

$

1,198

 

 

Generic

 

 

$

 

8

 

$

559

 

3

 

$

102

 

 

$

 

11

 

$

661

Injectable

Brand

 

1

 

$

220

 

5

 

$

1,127

 

7

 

$

421

 

 

$

 

13

 

$

1,768

 

 

Generic

 

1

 

$

56

 

15

 

$

392

 

 

$

 

4

 

$

502

 

20

 

$

949

Other

Brand

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

Generic

 

 

$

 

2

 

$

5

 

 

$

 

6

 

$

972

 

8

 

$

977

Total

 

 

 

4

 

$

550

 

38

 

$

2,972

 

13

 

$

558

 

10

 

$

1,473

 

65

 

$

5,553

 

 

 

 

 

 

 

 

 

 

* The IMS market size, shown in millions, is based on the IMS data for
the trailing 12 months ended December 31, 2013, and excludes any trade
and customary allowances and discounts. The IMS market size is not a
forecast of our future sales.

Q: What is the impact of GDUFA on the approval timelines for your
pending filings?

A: Following the implementation of GDUFA, the FDA modified the ANDA
review process. In the past, before GDUFA implementation, the Company
used to receive regular feedback from each discipline in the form of
individual deficiencies. This regular feedback allowed the Company to
stay on top of the status of the review and resolve any issues in a
dynamic and timely fashion. Now, for all pending filings including those
filed pre-GDUFA, the feedback is less frequent, and comes in the form of
a Complete Response Letter which is not issued until the FDA has
collected the feedback from each discipline. It is our expectation that
this new Complete Response Letter process has significantly lengthened
the time to approval.

In 2013, Akorn submitted responses to six Complete Response Letters
received from the FDA. As of now, the Company has an additional 14 CRLs
that will be responded to shortly.

Fourth Quarter 2013 Conference Call

The Company will host a conference call at 10:00 a.m. Eastern Time on
Monday, March 3, 2014, to discuss fourth quarter 2013 results followed
by a QA session. The domestic call-in number is 888-461-2024 and the
international call-in number is 719-325-2454. The confirmation code for
all callers is 3623707. The URL for the webcast is http://www.videonewswire.com/event.asp?id=97915.
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 30 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 and Paonta Sahib, India where the Company
manufactures ophthalmic and injectable 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 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
  • Plus provision for income taxes
  • Plus depreciation and amortization
  • Plus non-cash expenses, such as share-based compensation expense, and
    deferred financing cost amortization
  • Plus other adjustments, such as legal settlements and various
    acquisition related expenses
  • Less settlement of product warranty liability
  • Less gains on hedging transactions
  • Less gains related to bargain purchase transactions
  • Less elimination of unfavorable contract accruals

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
  • Plus intangible asset amortization
  • Plus non-cash expenses, such as non-cash interest, share-based
    compensation expense, and deferred financing cost amortization
  • Plus other adjustments, such as legal settlements and various
    acquisition related expenses
  • Less settlement of product warranty liability
  • Less gains on hedging transactions
  • Less gains related to bargain purchase transactions
  • Less elimination of unfavorable contract accruals
  • Less an estimated cash tax provision, net of the benefit from
    utilizing NOL carry-forwards

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 shares 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)

 

 

 

 

 

THREE MONTHS ENDED

TWELVE MONTHS ENDED

DECEMBER 31,

DECEMBER 31,

2013

2012

2013

2012

 

Revenues

$

84,953

$

71,520

$

317,711

$

256,158

Cost of sales (excluding amortization of intangibles)

 

37,983

 

 

29,549

 

 

145,807

 

 

107,466

 

GROSS PROFIT

46,970

41,971

171,904

148,692

 

Selling, general and administrative expenses

14,415

14,428

53,508

48,053

Acquisition-related costs

934

2,912

9,155

Research and development expenses

4,001

6,034

19,858

15,858

Amortization of intangibles

 

2,444

 

 

1,794

 

 

7,422

 

 

6,870

 

TOTAL OPERATING EXPENSES

 

21,794

 

 

22,256

 

 

83,700

 

 

79,936

 

 

OPERATING INCOME

25,176

19,715

88,204

68,756

 

Amortization of deferred financing costs

(220

)

(201

)

(842

)

(782

)

Interest expense, net

(2,262

)

(3,850

)

(8,649

)

(10,474

)

Bargain purchase gain

3,707

3,707

Other non-operating income, net

 

273

 

 

 

 

475

 

 

 

INCOME BEFORE INCOME TAXES

26,674

15,664

82,895

57,500

Income tax provision

 

9,996

 

 

6,853

 

 

30,533

 

 

22,122

 

NET INCOME

$

16,678

 

$

8,811

 

$

52,362

 

$

35,378

 

 

NET INCOME PER SHARE:

BASIC

$

0.17

 

$

0.09

 

$

0.54

 

$

0.37

 

DILUTED

$

0.14

 

$

0.08

 

$

0.46

 

$

0.32

 

 

SHARES USED IN COMPUTING NET INCOME PER SHARE:

BASIC

 

96,431

 

 

95,520

 

 

96,181

 

 

95,189

 

DILUTED

 

116,494

 

 

110,757

 

 

113,898

 

 

110,510

 

 

COMPREHENSIVE INCOME:

Net income

16,678

8,811

52,362

35,378

Foreign currency translation gain (loss)

 

761

 

 

(2,212

)

 

(6,463

)

 

(5,904

)

Comprehensive income

 

17,439

 

 

6,599

 

$

45,899

 

$

29,474

 

 

AKORN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

IN THOUSANDS, EXCEPT SHARE DATA

(UNAUDITED)

 

 

DECEMBER 31,

DECEMBER 31,

2013

2012

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

34,178

$

40,781

Trade accounts receivable, net

64,998

51,017

Inventories

55,982

52,495

Deferred taxes, current

7,945

9,190

Prepaid expenses and other current assets

 

5,753

 

 

5,224

 

TOTAL CURRENT ASSETS

168,856

158,707

PROPERTY, PLANT AND EQUIPMENT, NET

82,108

80,679

OTHER LONG-TERM ASSETS:

Goodwill

29,831

32,159

Product licensing rights, net

115,900

63,654

Other intangibles, net

14,605

16,731

Deferred financing costs

5,676

3,078

Deferred taxes, non-current

1,643

930

Long-term investments

10,006

10,299

Other

 

3,180

 

 

3,328

 

TOTAL OTHER LONG-TERM ASSETS

 

180,841

 

 

130,179

 

TOTAL ASSETS

$

431,805

 

$

369,565

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Trade accounts payable

$

22,999

$

21,784

Accrued compensation

7,692

7,533

Accrued royalties

6,004

5,768

Accrued administration fees

2,544

2,204

Accrued expenses and other liabilities

7,278

6,002

Purchase consideration payable

 

14,728

 

 

 

TOTAL CURRENT LIABILITIES

61,245

43,291

LONG-TERM LIABILITIES:

Convertible notes due 2016

108,750

104,637

Purchase consideration payable

16,113

Deferred taxes, non-current

1,991

Product warranty liability

1,299

Lease incentive obligations and other long-term liabilities

 

1,630

 

 

1,153

 

TOTAL LONG-TERM LIABILITIES

 

110,380

 

 

125,193

 

TOTAL LIABILITIES

 

171,625

 

 

168,484

 

SHAREHOLDERS’ EQUITY:

Common stock, no par value — 150,000,000 shares authorized,
96,569,186 and 95,844,012 shares issued and outstanding December
31, 2013 and December 31, 2012, respectively

239,235

226,035

Warrants to acquire common stock

17,946

17,946

Retained earnings (accumulated deficit)

15,366

(36,996

)

Accumulated other comprehensive loss

 

(12,367

)

 

(5,904

)

TOTAL SHAREHOLDERS’ EQUITY

 

260,180

 

 

201,081

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

431,805

 

$

369,565

 

 

AKORN, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

IN THOUSANDS (UNAUDITED)

 

 

 

 

 

THREE MONTHS ENDED

TWELVE MONTHS ENDED

DECEMBER 31,

DECEMBER 31,

2013

2012

2013

2012

OPERATING ACTIVITIES

Consolidated net income

$

16,678

$

8,811

$

52,362

$

35,378

Adjustments to reconcile consolidated net income to net cash
provided by operating activities:

Depreciation and amortization

4,551

3,215

14,476

11,455

Write-off and amortization of deferred financing fees

220

201

842

782

Amortization of unfavorable contract liability

(1,430

)

(635

)

(1,905

)

(635

)

Non-cash stock compensation expense

1,376

1,983

7,050

7,032

Non-cash interest expense

1,208

2,821

4,634

6,436

Gain on bargain purchase

(3,707

)

(3,707

)

Deferred tax assets, net

262

(133

)

2,091

67

Excess tax benefit from stock compensation

(1,736

)

(2,081

)

(2,928

)

(4,488

)

Non-cash settlement of product warranty liability

(1,299

)

Equity in earnings of unconsolidated joint venture

(4

)

(80

)

Changes in operating assets and liabilities:

Trade accounts receivable

(3,419

)

(6,648

)

(14,277

)

(23,856

)

Inventories

778

(2,367

)

(3,797

)

(15,447

)

Prepaid expenses and other assets

(1,515

)

(4,637

)

(648

)

(5,689

)

Trade accounts payable

531

5,222

1,975

4,489

Accrued expenses and other liabilities

 

1,123

 

 

(820

)

 

2,537

 

 

10,720

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

14,916

4,932

57,326

26,244

 

INVESTING ACTIVITIES

Payments for acquisitions and equity investments

(54,969

)

177

(55,482

)

(55,047

)

Purchases of property, plant and equipment

(3,706

)

(5,698

)

(11,642

)

(20,454

)

Distribution from unconsolidated joint venture

 

250

 

 

 

 

250

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

(58,425

)

(5,521

)

(66,874

)

(75,501

)

 

FINANCING ACTIVITIES

Debt financing costs

(475

)

(3,032

)

Excess tax benefit from stock compensation

1,736

2,081

2,928

4,488

Proceeds under stock option and stock purchase plans

 

783

 

 

906

 

 

3,222

 

 

1,878

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

2,044

2,987

3,118

6,366

 

Effect of changes in exchange rates on cash cash equivalents

 

45

 

 

(19

)

 

(173

)

 

(290

)

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(41,420

)

2,379

(6,603

)

(43,181

)

Cash and cash equivalents at beginning of period

 

75,598

 

 

38,402

 

 

40,781

 

 

83,962

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

34,178

 

$

40,781

 

$

34,178

 

$

40,781

 

 

AKORN, INC.

RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED EBITDA

IN THOUSANDS (UNAUDITED)

 

 

 

 

THREE MONTHS ENDED

TWELVE MONTHS ENDED

DECEMBER 31,

DECEMBER 31,

2013

2012

2013

2012

 

NET INCOME

$

16,678

$

8,811

$

52,362

$

35,378

 

ADJUSTMENTS TO ARRIVE AT EBITDA:

Depreciation expense

2,107

1,427

7,054

4,585

Amortization expense

2,444

1,794

7,422

6,870

Interest expense, net

2,262

3,850

8,649

10,474

Income tax provision

 

9,996

 

 

6,853

 

30,533

 

 

22,122

EBITDA

$

33,487

$

22,735

$

106,020

$

79,429

 

NON-CASH AND OTHER NON-RECURRING INCOME

AND EXPENSES:

Acquisition-related expenses

934

3,233

8,835

Non-cash stock compensation expense

1,376

1,983

7,050

7,032

Non-cash settlement of product warranty liability

(1,299

)

Rupee hedge

(208

)

(208

)

Bargain purchase gain

(3,707

)

(3,707

)

Amortization of unfavorable contract liability

(1,270

)

(1,270

)

Write-off and amortization of deferred financing costs

220

201

842

782

Litigation settlement

 

74

 

 

 

459

 

 

ADJUSTED EBITDA

$

30,906

 

$

24,919

$

111,120

 

$

96,078

 

AKORN, INC.

RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED NET INCOME

IN THOUSANDS, EXCEPT PER SHARE DATA (UNAUDITED)

 

 

 

 

THREE MONTHS ENDED

TWELVE MONTHS ENDED

DECEMBER 31,

DECEMBER 31,

2013

2012

2013

2012

 

NET INCOME

$

16,678

$

8,811

$

52,362

$

35,378

 

INCOME TAX PROVISION

 

9,996

 

 

6,853

 

30,533

 

 

22,122

 

INCOME BEFORE INCOME TAXES

26,674

15,664

82,895

57,500

 

ADJUSTMENTS TO ARRIVE AT ADJUSTED NET INCOME:

Acquisition-related expenses

1,021

3,320

8,835

Non-cash stock compensation expense

1,376

1,983

7,050

7,032

Non-cash interest expense

1,208

2,821

4,634

6,436

Amortization expense

2,444

1,794

7,422

6,870

Non-cash settlement of product warranty liability

(1,299

)

Rupee hedge

(208

)

(208

)

Bargain purchase gain

(3,707

)

(3,707

)

Amortization of unfavorable contract liability

(1,270

)

(1,270

)

Write-off and amortization of deferred financing costs

220

201

842

782

Litigation settlement

 

74

 

 

 

459

 

 

 

ADJUSTED INCOME BEFORE INCOME TAXES

27,832

22,463

100,138

87,455

 

ADJUSTED INCOME TAX PROVISION

 

11,747

 

 

7,857

 

37,631

 

 

29,810

 

ADJUSTED NET INCOME

 

16,085

 

 

14,606

 

62,507

 

 

57,645

 

ADJUSTED NET INCOME PER DILUTED SHARE

$

0.14

 

$

0.13

$

0.55

 

$

0.52

 

AKORN, INC.

2014 FINANCIAL GUIDANCE

 

 

 

RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP ADJUSTED NET INCOME:

 

GAAP NET INCOME

$53 – 57

million

 

Add:

Intangible asset amortization expense

$30

million

Share-based compensation expense

$6

million

Non-cash interest expense

$5

million

Amortization of deferred financing costs

$3

million

Acquisition-related expenses

$15

million

 

Subtract:

Tax effect of adjustments

($22)

million

 

ADJUSTED NET INCOME

$90 – 93

million

 

ADJUSTED NET INCOME PER DILUTED SHARE

$0.76 – 0.79

million

 

SHARES USED IN COMPUTING ADJUSTED NET INCOME PER DILUTED SHARE

118

million

 

 

RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP ADJUSTED EBITDA:

 

GAAP NET INCOME

$53 – 57

million

 

Add:

Depreciation and amortization expense

$41

million

Interest expense, net (cash non-cash)

$30

million

Income tax provision

$31 – 33

million

EBITDA

$155 – 161

million

 

Add:

Share-based compensation expense

$6

million

Amortization of deferred financing costs

$3

million

Acquisition-related expenses

$15

million

ADJUSTED EBITDA

$179 – 185

million

Contact:

Investor Relations:
Alpha IR Group
Monica Gupta, 312-445-2870
or
At the Company:
Akorn, Inc.
Tim Dick, 847-279-6150
Chief Financial Officer