Akorn Reports 2012 Fourth Quarter and Year-End Financial Results
-Reports Record Q4 Revenue of $71.5 million and Q4 Adjusted EPS of
$0.13-
LAKE FOREST, Ill.--(BUSINESS WIRE)--
Akorn, Inc. (NASDAQ: AKRX), a niche generic pharmaceutical company,
today reported financial results for the fourth quarter and year ended
December 31, 2012.
Raj Rai, Chief Executive Officer commented, “We achieved record growth
in revenues and profits in 2012 as a result of our strategic growth
initiatives – acquisitions, revival of products impacted by hospital
drug shortages and new product launches. In addition, we continued to
build a robust R&D pipeline. Looking ahead, we plan to further invest in
R&D domestically, while expanding the infrastructure in our India
facilities to build new capacities, seek growth from new markets and
prepare for FDA inspection.”
2012 Key Highlights and Accomplishments
Achieved record fourth quarter 2012 consolidated revenue of $71.5
million, up 68% over the prior year quarter.
Achieved record year ended 2012 consolidated revenue of $256.2
million, up 87% over the prior year.
Maintained gross margins at 58.0%, near the record level achieved in
2011.
Completed the acquisition of certain assets of Kilitch Drugs in India
which expands the Company’s capacity and capabilities in sterile
injectables.
Received FDA approval on 5 new ANDAs with a combined addressable IMS
market of $655 million.
Launched 10 new products including vancomycin hydrochloride capsules,
latanaprost ophthalmic solution, progesterone capsules and the first
to market generic of pantoprazole sodium for injection. The 2012
product launches have an addressable IMS market of $900 million.
Re-launched 8 products with a combined addressable IMS market of $120
million.
Filed a record 25 ANDAs and completed the development on an additional
10 ANDAs with a combined annual IMS market size of approximately $2.9
billion.
Financial Results for the Quarter Ended December 31, 2012
Consolidated revenue for the fourth quarter of 2012 was $71.5 million,
up 68% over the prior year quarter’s consolidated revenue of $42.6
million. The increase in consolidated revenue was driven by the Lundbeck
and Kilitch acquisitions, the sale of newly approved and re-launched
products, and organic growth of established products, offset by
decreases in the US contract services business. The Company launched
three new products in the fourth quarter of 2012: progesterone capsules,
pantoprazole sodium for injection and a tetanus-diphtheria (Td) vaccine.
The revenue impact of Hurricane Sandy was partially offset by earlier
than anticipated sales of pantoprazole and Td vaccine. Consolidated
gross margin for the fourth quarter of 2012 was 58.7% compared to 60.0%
in the comparable prior year period. The decrease in gross margin was
the result of lower margins from Akorn India, which began operations in
February 2012 through the acquisition of certain assets from Kilitch
Drugs (India) Limited as well as the impact of Hurricane Sandy, which
resulted in a two week disruption in manufacturing from our Somerset,
New Jersey ophthalmic plant.
Net income for the fourth quarter of 2012 was $8.8 million, or $0.08 per
diluted share, compared to net income of $5.7 million, or $0.05 per
diluted share, in the prior year quarter. Non-GAAP adjusted net income
for the fourth quarter of 2012 was $14.6 million, or $0.13 per diluted
share, compared to non-GAAP adjusted net income of $11.4 million, or
$0.11 per diluted share, in the prior year quarter.
Financial Results for the Year Ended December 31, 2012
Consolidated revenue for the year 2012 was $256.2 million, up 87% over
the prior year consolidated revenue of $136.9 million. The increase in
consolidated revenue was driven by the Lundbeck, Kilitch and AVR
acquisitions, the sale of newly approved and re-launched products, and
organic growth of established products, offset by decreases in the US
contract services business. The Company launched ten new products in
2012, including vancomycin hydrochloride capsules, latanaprost
ophthalmic solution, progesterone capsules, pantoprazole sodium for
injection and Td vaccine. Additionally, the Company re-launched eight
products in 2012. Consolidated gross margin for 2012 was 58.0% compared
to 58.2% in the prior year. In 2012, the revenue from higher margin
products acquired from Lundbeck in December 2011 largely offset the
lower margins from Akorn India.
Net income for 2012 was $35.4 million, or $0.32 per diluted share,
compared to net income of $43.0 million, or $0.41 per diluted share, in
the prior year. Our 2011 net income benefited from a $13.4 million gain
on the sale of the Akorn-Strides joint venture as well as a full year
income tax benefit of $1.7 million, compared with an effective tax rate
in 2012 of 38.5%. Non-GAAP adjusted net income for 2012 was $57.6
million, or $0.52 per diluted share, compared to non-GAAP adjusted net
income of $36.1 million, or $0.35 per diluted share, in the prior year.
Akorn’s R&D Pipeline
The Company has 56 ANDAs filed with the FDA with a combined annual
addressable IMS market size of approximately $5.8 billion. The Company
has completed development work on 10 additional products with a combined
annual addressable IMS market size of approximately $0.3 billion and
expects to file these products with the FDA shortly.
Fourth Quarter 2012 Conference Call
The Company will host a conference call at 10:00 a.m. Eastern Time on
Tuesday, February 26, 2013, to discuss fourth quarter 2012 results
followed by a Q&A session. The domestic call-in number is 888-438-5448
and the international call-in number is 719-785-1753. The confirmation
code for all callers is 3343969. The URL for the webcast is http://www.videonewswire.com/event.asp?id=92105.
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 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 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,
future performance or results of current and anticipated products, 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 all financial information required in
accordance with 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 not 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
Non-cash expenses, such as share-based compensation expense, changes
in the fair value of warrants, and deferred financing cost amortization
Other adjustments, such as equity in earnings of unconsolidated joint
venture related to the sale of the joint venture's assets,
amortization of the fair value adjustment to inventory acquired
through business acquisitions, and Kilitch Drugs (India) Limited
acquisition related expenses
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
Non-cash expenses, such as non-cash interest, share-based compensation
expense, changes in the fair value of warrants, and deferred financing
cost amortization
Other adjustments, such as equity in earnings of unconsolidated joint
venture related to the sale of the joint venture's assets,
amortization of the fair value adjustment to inventory acquired
through business acquisitions, and Kilitch Drugs (India) Limited
acquisition related expense
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
host 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 GAAP 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,
2012
2011
2012
2011
Revenues
$
71,520
$
42,625
$
256,158
$
136,920
Cost of sales
29,549
17,050
107,466
57,231
GROSS PROFIT
41,971
25,575
148,692
79,689
Selling, general and administrative expenses
14,428
9,409
48,053
32,392
Acquisition-related costs
-
187
9,155
743
Research and development expenses
6,034
3,792
15,858
11,555
Amortization of intangibles
1,794
659
6,870
1,733
TOTAL OPERATING EXPENSES
22,256
14,047
79,936
46,423
OPERATING INCOME
19,715
11,528
68,756
33,266
Amortization of deferred financing costs
(201
)
(187
)
(782
)
(1,948
)
Non-cash interest expense
(2,821
)
(914
)
(6,436
)
(2,109
)
Interest expense, net
(1,029
)
(997
)
(4,038
)
(2,283
)
Equity in earnings of unconsolidated joint venture
-
20
-
14,550
Other non-operating expenses
(170
)
(170
)
INCOME BEFORE INCOME TAXES
15,664
9,280
57,500
41,306
Income tax provision (benefit)
6,853
3,547
22,122
(1,707
)
NET INCOME
$
8,811
$
5,733
$
35,378
$
43,013
NET INCOME PER SHARE:
BASIC
$
0.09
$
0.06
$
0.37
$
0.45
DILUTED
$
0.08
$
0.05
$
0.32
$
0.41
SHARES USED IN COMPUTING NET INCOME PER SHARE:
BASIC
95,520
94,761
95,189
94,549
DILUTED
110,757
105,985
110,510
103,912
COMPREHENSIVE INCOME:
Net income
8,811
5,733
35,378
43,013
Foreign currency translation loss
(2,212
)
-
(5,904
)
-
Comprehensive income
6,599
5,733
29,474
43,013
AKORN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
IN THOUSANDS, EXCEPT SHARE DATA
DECEMBER 31,
DECEMBER 31,
2012
2011
(Unaudited)
(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
40,781
$
83,962
Trade accounts receivable, net
51,017
25,307
Inventories
52,495
35,456
Deferred taxes, current
9,190
8,153
Prepaid expenses and other current assets
5,224
3,071
TOTAL CURRENT ASSETS
158,707
155,949
PROPERTY, PLANT AND EQUIPMENT, NET
80,679
44,389
OTHER LONG-TERM ASSETS:
Goodwill
32,159
11,863
Product licensing rights, net
63,654
67,822
Other intangibles, net
16,731
13,016
Deferred financing costs
3,078
3,864
Deferred taxes, non-current
930
Long-term investments
10,299
10,137
Other
3,328
105
TOTAL OTHER LONG-TERM ASSETS
130,179
106,807
TOTAL ASSETS
$
369,565
$
307,145
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable
$
21,784
$
17,874
Accrued compensation
7,533
5,094
Contingent consideration payable
-
-
Accrued expenses and other liabilities
13,974
5,321
Advance from unconsolidated joint venture
-
-
TOTAL CURRENT LIABILITIES
43,291
28,289
LONG-TERM LIABILITIES:
Convertible notes due 2016
104,637
100,808
Purchase consideration payable
16,113
13,841
Deferred taxes, non-current
1,991
3,742
Product warranty liability
1,299
1,299
Lease incentive obligations and Other long-term liabilities
1,153
958
TOTAL LONG-TERM LIABILITIES
125,193
120,648
TOTAL LIABILITIES
168,484
148,937
SHAREHOLDERS' EQUITY:
Common stock, no par value -- 150,000,000 shares authorized,
95,844,012 and 94,936,282 shares issued and outstanding at
December 31, 2012 and December 31, 2011, respectively
226,035
212,636
Warrants to acquire common stock
17,946
17,946
Accumulated deficit
(36,996
)
(72,374
)
Accumulated other comprehensive loss
(5,904
)
-
TOTAL SHAREHOLDERS' EQUITY
201,081
158,208
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
369,565
$
307,145
AKORN, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
IN THOUSANDS (UNAUDITED)
THREE MONTHS ENDED
TWELVE MONTHS ENDED
DECEMBER 30,
DECEMBER 30,
2012
2011
2012
2011
(Restated)
(Restated)
OPERATING ACTIVITIES
Net income
$
8,811
$
5,733
$
35,378
$
43,013
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
3,215
1,545
11,455
5,246
Write-off and amortization of deferred financing fees
201
187
782
1,948
Amortization of unfavorable contract liability
(635
)
-
(635
)
-
Non-cash stock compensation expense
1,983
1,392
7,032
5,159
Non-cash interest expense
2,821
914
6,436
2,109
Deferred tax assets, net
(133
)
2,277
67
(4,411
)
Excess tax benefit from stock compensation
(2,081
)
-
(4,488
)
-
Equity in earnings of unconsolidated joint venture
-
(20
)
-
(14,550
)
Changes in operating assets and liabilities:
-
Trade accounts receivable
(6,648
)
(5,601
)
(23,856
)
(13,581
)
Inventories
(2,367
)
(1,143
)
(15,447
)
(9,307
)
Prepaid expenses and other assets
(4,637
)
33
(5,689
)
(183
)
Trade accounts payable
5,222
(520
)
4,489
2,546
(1)
Accrued expenses and other liabilities
(820
)
644
10,720
1,668
NET CASH PROVIDED BY OPERATING ACTIVITIES
4,932
5,441
26,244
19,657
INVESTING ACTIVITIES
Payments for acquisitions and equity investments
177
(45,000
)
(55,047
)
(87,412
)
Purchases of property, plant and equipment
(5,698
)
(3,141
)
(20,454
)
(11,503
)
(1)
Distribution from unconsolidated joint venture
-
-
-
3,881
NET CASH USED IN INVESTING ACTIVITIES
(5,521
)
(48,141
)
(75,501
)
(95,034
)
FINANCING ACTIVITIES
Proceeds from issuance of convertible notes
-
-
-
120,000
Debt financing costs
-
(415
)
-
(5,098
)
Net proceeds from common stock offering and warrant exercises
-
-
-
1,727
Excess tax benefit from stock compensation
2,081
-
4,488
-
Proceeds under stock option and stock purchase plans
906
469
1,878
1,087
NET CASH PROVIDED BY FINANCING ACTIVITIES
2,987
54
6,366
117,716
Effect of changes in exchange rates on cash & cash equivalents
(19
)
-
(290
)
-
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
2,379
(42,646
)
(43,181
)
42,339
Cash and cash equivalents at beginning of period
38,402
126,608
83,962
41,623
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
40,781
$
83,962
$
40,781
$
83,962
(1) The 2011 numbers are restated to correct the classification of
accrued but unpaid purchases of property, plant and equipment.
AKORN, INC.
RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED EBITDA
IN THOUSANDS (UNAUDITED)
THREE MONTHS ENDED
TWELVE MONTHS ENDED
DECEMBER 31,
DECEMBER 31,
2012
2011
2012
2011
NET INCOME
$
8,811
$
5,733
$
35,378
$
43,013
ADJUSTMENTS TO ARRIVE AT EBITDA:
Depreciation expense
1,427
886
4,585
3,513
Amortization expense
1,794
659
6,870
1,733
Interest expense, net
1,029
997
4,038
2,283
Non-cash interest expense
2,821
914
6,436
2,109
Income tax provision
6,853
3,547
22,122
(1,707
)
EBITDA
$
22,735
$
12,736
$
79,429
$
50,944
NON-CASH AND OTHER NON-RECURRING INCOME AND EXPENSES:
Kilith acquisition related expense
-
-
8,835
-
Non-cash stock compensation expense
1,983
1,392
7,032
5,159
Write-off and amortization of deferred financing costs
201
187
782
1,948
Equity in earnings of unconsolidated joint venture that is related
to the sale of the joint venture's assets
-
-
-
(13,380
)
Amortization of the fair value adjustment to AVR's acquired
inventory
-
47
-
600
ADJUSTED EBITDA
$
24,919
$
14,362
$
96,078
$
45,271
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,
2012
2011
2012
2011
NET INCOME
$
8,811
$
5,733
$
35,378
$
43,013
INCOME TAX PROVISION (BENEFIT)
6,853
3,547
22,122
(1,707
)
INCOME BEFORE INCOME TAXES
15,664
9,280
57,500
41,306
ADJUSTMENTS TO ARRIVE AT ADJUSTED NET INCOME:
Kilitch acquisition related expense
-
-
8,835
-
Non-cash stock compensation expense
1,983
1,392
7,032
5,159
Non-cash interest expense
2,821
914
6,436
2,109
Amortization expense
1,794
659
6,870
1,733
Write-off and amortization of deferred financing costs
201
187
782
1,948
Equity in earnings of unconsolidated joint venture that is related
to the sale of the joint venture's assets
-
-
-
(13,380
)
Amortization of the fair value adjustment to AVR's acquired
inventory
-
47
-
600
ADJUSTED INCOME BEFORE INCOME TAXES
22,463
12,479
87,455
39,475
ADJUSTED INCOME TAX PROVISION
7,857
1,061
29,810
3,355
ADJUSTED NET INCOME
$
14,606
$
11,418
$
57,645
$
36,120
ADJUSTED NET INCOME PER DILUTED SHARE
$
0.13
$
0.11
$
0.52
$
0.35
Akorn, Inc. Tim Dick, 847-279-6150 Chief Financial Officer
Press Release $AKRX Akorn, Inc.
-Reports Record Q4 Revenue of $71.5 million and Q4 Adjusted EPS of $0.13-
LAKE FOREST, Ill.--(BUSINESS WIRE)-- Akorn, Inc. (NASDAQ: AKRX), a niche generic pharmaceutical company, today reported financial results for the fourth quarter and year ended December 31, 2012.
Raj Rai, Chief Executive Officer commented, “We achieved record growth in revenues and profits in 2012 as a result of our strategic growth initiatives – acquisitions, revival of products impacted by hospital drug shortages and new product launches. In addition, we continued to build a robust R&D pipeline. Looking ahead, we plan to further invest in R&D domestically, while expanding the infrastructure in our India facilities to build new capacities, seek growth from new markets and prepare for FDA inspection.”
2012 Key Highlights and Accomplishments
Financial Results for the Quarter Ended December 31, 2012
Consolidated revenue for the fourth quarter of 2012 was $71.5 million, up 68% over the prior year quarter’s consolidated revenue of $42.6 million. The increase in consolidated revenue was driven by the Lundbeck and Kilitch acquisitions, the sale of newly approved and re-launched products, and organic growth of established products, offset by decreases in the US contract services business. The Company launched three new products in the fourth quarter of 2012: progesterone capsules, pantoprazole sodium for injection and a tetanus-diphtheria (Td) vaccine. The revenue impact of Hurricane Sandy was partially offset by earlier than anticipated sales of pantoprazole and Td vaccine. Consolidated gross margin for the fourth quarter of 2012 was 58.7% compared to 60.0% in the comparable prior year period. The decrease in gross margin was the result of lower margins from Akorn India, which began operations in February 2012 through the acquisition of certain assets from Kilitch Drugs (India) Limited as well as the impact of Hurricane Sandy, which resulted in a two week disruption in manufacturing from our Somerset, New Jersey ophthalmic plant.
Net income for the fourth quarter of 2012 was $8.8 million, or $0.08 per diluted share, compared to net income of $5.7 million, or $0.05 per diluted share, in the prior year quarter. Non-GAAP adjusted net income for the fourth quarter of 2012 was $14.6 million, or $0.13 per diluted share, compared to non-GAAP adjusted net income of $11.4 million, or $0.11 per diluted share, in the prior year quarter.
Financial Results for the Year Ended December 31, 2012
Consolidated revenue for the year 2012 was $256.2 million, up 87% over the prior year consolidated revenue of $136.9 million. The increase in consolidated revenue was driven by the Lundbeck, Kilitch and AVR acquisitions, the sale of newly approved and re-launched products, and organic growth of established products, offset by decreases in the US contract services business. The Company launched ten new products in 2012, including vancomycin hydrochloride capsules, latanaprost ophthalmic solution, progesterone capsules, pantoprazole sodium for injection and Td vaccine. Additionally, the Company re-launched eight products in 2012. Consolidated gross margin for 2012 was 58.0% compared to 58.2% in the prior year. In 2012, the revenue from higher margin products acquired from Lundbeck in December 2011 largely offset the lower margins from Akorn India.
Net income for 2012 was $35.4 million, or $0.32 per diluted share, compared to net income of $43.0 million, or $0.41 per diluted share, in the prior year. Our 2011 net income benefited from a $13.4 million gain on the sale of the Akorn-Strides joint venture as well as a full year income tax benefit of $1.7 million, compared with an effective tax rate in 2012 of 38.5%. Non-GAAP adjusted net income for 2012 was $57.6 million, or $0.52 per diluted share, compared to non-GAAP adjusted net income of $36.1 million, or $0.35 per diluted share, in the prior year.
Akorn’s R&D Pipeline
The Company has 56 ANDAs filed with the FDA with a combined annual addressable IMS market size of approximately $5.8 billion. The Company has completed development work on 10 additional products with a combined annual addressable IMS market size of approximately $0.3 billion and expects to file these products with the FDA shortly.
Fourth Quarter 2012 Conference Call
The Company will host a conference call at 10:00 a.m. Eastern Time on Tuesday, February 26, 2013, to discuss fourth quarter 2012 results followed by a Q&A session. The domestic call-in number is 888-438-5448 and the international call-in number is 719-785-1753. The confirmation code for all callers is 3343969. The URL for the webcast is http://www.videonewswire.com/event.asp?id=92105. 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 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 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, future performance or results of current and anticipated products, 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 all financial information required in accordance with 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 not 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:
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:
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 host 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 GAAP 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.
SHARES USED IN COMPUTING NET INCOME PER SHARE:
Common stock, no par value -- 150,000,000 shares authorized, 95,844,012 and 94,936,282 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively
Adjustments to reconcile net income to net cash provided by operating activities:
(1)
(1)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(1) The 2011 numbers are restated to correct the classification of accrued but unpaid purchases of property, plant and equipment.
NON-CASH AND OTHER NON-RECURRING INCOME AND EXPENSES:
Equity in earnings of unconsolidated joint venture that is related to the sale of the joint venture's assets
Amortization of the fair value adjustment to AVR's acquired inventory
Equity in earnings of unconsolidated joint venture that is related to the sale of the joint venture's assets
Amortization of the fair value adjustment to AVR's acquired inventory
Akorn, Inc.
Tim Dick, 847-279-6150
Chief Financial Officer
Source: Akorn, Inc.