-Operational improvements drive sequential
growth-
Akorn, Inc. (Nasdaq: AKRX), a leading specialty generic
pharmaceutical company, today announced
its preliminary financial results for the first quarter
of 2019.
First Quarter 2019 and Recent Business
Highlights
- Net revenue was $166 million, up 8% from the fourth quarter of
2018, down 10% from the prior year quarter
- Net loss was $82 million, compared to $215 million in the
fourth quarter of 2018 and $29 million in the prior year
quarter
- Adjusted EBITDA was $10 million, compared to ($20) million in
the fourth quarter of 2018 and $25 million in the prior year
quarter
- Cash position of $184 million as of March 31, 2019
- Full year 2019 guidance anticipates continued sequential
improvement throughout the year
- Ongoing progress towards completion of FDA action items related
to the inspections of our facilities in Decatur and Somerset
- Further strengthening of leadership team and organizational
capabilities
- Significant reduction in backorders and failure to supply
penalties
- Two products launched year-to-date: Ropivacaine Hydrochloride
Injection, USP (2mg/ml) and TheraTears® SteriLid® Antimicrobial,
the 1st FDA Accepted Antimicrobial Eyelid Cleanser
- Two New Product Approvals: Loteprednol Etabonate Ophthalmic
Suspension, 0.5% and Fluticasone Propionate Nasal Spray USP, 50 mcg
per spray (OTC)
- Extended revolving credit facility and executed a Standstill
Agreement with current lending institutions
See "Non-GAAP Financial Measures" below.
Douglas Boothe, Akorn’s President and Chief Executive Officer,
stated, “We are pleased with the initial progress made across the
organization executing against our operations, quality systems and
compliance enhancement initiatives. As a result, our first
quarter financial results were stronger than anticipated and
benefited from the resumption of full operations, improvement in
product availability and strong demand across our diversified lines
of business. We believe that continued focus on these
initiatives will provide us with a path to long-term, profitable
growth.”
Boothe further commented, “As part of our confidence in our
business fundamentals and in our ability to execute on the
strategic growth objectives, we are providing guidance for the full
year 2019. We believe this is a strong step in the right
direction as we get back to running our company with a freedom to
operate and focus on creating value for our stakeholders.”
Summary Financial Results for the Quarter Ended March
31, 2019
Akorn reported net revenue of $165.9 million for the three month
period ended March 31, 2019, representing a decrease of $18.2
million, or 9.9%, as compared to net revenue of $184.1 million for
the three month period ended March 31, 2018. The
decrease in net revenue in the period was primarily due to $18.1
million decline in organic revenue that was partially offset by
$0.7 million net revenue increase in new products and product
relaunches. The $18.1 million decline in organic revenue was
due to approximately $30.5 million, or 16.6% in volume declines
partially offset by $12.3 million, or 6.7%, of price
variances. The volume decline was principally due to the
effect of competition on Ephedrine Sulfate Injection, Nembutal® and
Cosopt® PF and supply shortfalls from the continued production
ramp-up at our Somerset and Decatur manufacturing facilities.
Consolidated gross profit for the quarter ended March 31,
2019, was $53.5 million, or 32.3% of net revenue, compared to $82.2
million, or 44.7% of net revenue, in the corresponding prior year
quarter. The decline in the gross profit percentage was
principally due to unfavorable product mix shifts primarily driven
by the effect of competition on Ephedrine Sulfate Injection,
Nembutal® and Cosopt®, unfavorable variances due to decreased
production at our Somerset manufacturing facility, as well as
increased operating costs associated with FDA compliance related
improvement activities.
GAAP net loss for the first quarter 2019, was $82.2 million, or
$(0.65) per diluted share, compared to GAAP net loss of $28.7
million, or $(0.23) per diluted share, for the same quarter of
2018. Including a net adjustment of $70 million to net loss
for non-GAAP items, adjusted diluted earnings per share for the
first quarter 2019 were $(0.10), compared to $0.05 in the same
quarter 2018, after a net adjustment of $35 million to net income
for non-GAAP items.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) was $(47.7) million for the first quarter 2019, compared
to $(6.2) million for the first quarter 2018. Adjusted
EBITDA, which is non-GAAP measure used by management to evaluate
the continuing operations of the Akorn business, was $9.6 million
for the first quarter 2019, compared to $24.5 million for the first
quarter 2018. See "Non-GAAP Financial Measures" below.
Fiscal 2019 Guidance
Duane Portwood, Akorn’s Chief Financial Officer, stated, “Our
full year 2019 expectations anticipate building upon the momentum
from the first quarter with sequential improvements expected over
the course of the year, with the most significant contributions
weighted towards the fourth quarter.”
Akorn's full year 2019 guidance:
- Net revenue for the year expected to be in the range of $690 to
$710 million
- Net Loss expected in the range of ($166) to ($151) million
- Adjusted EBITDA expected in the range of $71 to $86
million
- Approximately $40 million in capital expenditures
- Approximately $40 million for data integrity investigation and
FDA compliance related expenditures
Standstill Agreement
We have been working constructively with our creditors and are
pleased to have reached an agreement that is expected to provide
Akorn time to continue to make progress on operational initiatives
and deliver improved results, while also providing the lending
institutions with additional transparency, reduced risk and
enhanced protections. For further information, we refer you
to the Current Report on Form 8-K filed earlier today, which
details the economic and non-economic terms of such agreement,
including the covenants and other protections that we are providing
to our lending institutions.
Status of Akorn Pending ANDA Filings, April 30,
2019:
In an effort to improve the efficiency of our future R&D
spend, we have recently completed a review of our pending ANDAs and
have decided to rationalize a number of pending filings.
Because of changes in the market size or competitive landscape, the
expected commercial opportunity for these ANDAs no longer justifies
further investment of time or funds required to obtain the
approval. The remaining pending ANDAs are summarized in the
table below:
Filed |
|
|
Tentative Approval |
Pending |
Total |
values in millions |
|
|
Count |
Value * |
Count |
Value * |
Count |
Value * |
Ophthalmic |
Brand
** |
|
3 |
$455 |
10 |
$3,485 |
13 |
$3,940 |
|
Generic |
|
1 |
|
14 |
3 |
|
112 |
4 |
|
126 |
Injectable |
Brand
** |
|
— |
|
— |
2 |
|
11 |
2 |
|
11 |
|
Generic |
|
1 |
|
185 |
6 |
|
974 |
7 |
|
1,159 |
Topical |
Brand
** |
|
— |
|
— |
— |
|
— |
— |
|
— |
|
Generic |
|
— |
|
— |
4 |
|
77 |
4 |
|
77 |
Other |
Brand
** |
|
— |
|
— |
— |
|
— |
— |
|
— |
|
Generic |
|
— |
|
— |
7 |
|
340 |
7 |
|
340 |
Total |
|
|
5 |
$654 |
32 |
$4,999 |
37 |
$5,653 |
* The value, shown in millions, is the market size
estimate based on IQVIA data for the trailing 12 months ended
March 31, 2019 and excludes any trade and customary allowances
and discounts. The IQVIA market size is not a forecast of our
future sales.
** The label "brand" indicates that the pending ANDA filing is
for a product that has not yet had generic competition, therefore
the market value is that of the branded reference drug. All
filings reported in the table are generic filings.
Conference Call and Webcast Details:As
previously announced, Akorn’s management will hold a conference
call with interested investors and analysts at 10:00 a.m. EST on
May 7, 2019, to discuss these results and updates in more
detail. The dial-in number to access the call is (844)
249-9382 in the U.S. and Canada and +1 (270) 823-1530 for
international callers. The conference ID is 8456549. To
access the live webcast, please go to Akorn’s Investor Relations
web site at http://investors.akorn.com. A webcast replay of
the conference call will be available shortly following the
conclusion of the call and will be available for 90 days following
the call. To access the webcast replay, please go to Akorn’s
Investor Relations web site at http://investors.akorn.com.
About Akorn:Akorn, Inc. is a specialty 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; Hettlingen, Switzerland
and Paonta Sahib, India that manufacture ophthalmic, injectable and
specialty sterile and non-sterile pharmaceuticals. Additional
information is available on Akorn’s website at www.akorn.com.
Non-GAAP Financial Measures:
To supplement Akorn’s financial results presented in accordance
with U.S. generally accepted accounting principles ("GAAP"), the
Company uses certain non-GAAP (also referred to as “adjusted” or
“non-GAAP adjusted”) financial measures in this press release and
the accompanying tables, including (1) EBITDA, (2) adjusted EBITDA,
(3) net debt, and (4) net debt to adjusted EBITDA ratio.
These non-GAAP measures adjust for certain specified items that are
described in this release. The Company believes that each of
these non-GAAP financial measures is helpful in understanding its
past financial performance and potential future results. The
non-GAAP financial measures are not meant to be considered in
isolation or as a substitute for or superior to comparable GAAP
measures.
Akorn’s management uses EBITDA, adjusted EBITDA, adjusted net
income and adjusted diluted earnings per share in managing and
analyzing its business and financial condition. Akorn’s
management believes that the presentation of these and other
non-GAAP financial measures provide investors greater transparency
into Akorn’s ongoing results of operations allowing investors to
better compare the Company’s results from period to period.
Investors should note that these non-GAAP financial measures
used to present financial guidance are not prepared under any
comprehensive set of accounting rules or principles and do not
reflect all of the amounts associated with the Company’s results of
operations as determined in accordance with GAAP. Investors
should also note that these non-GAAP financial measures have no
standardized meaning prescribed by GAAP and; therefore, have limits
in their usefulness to investors. In addition, from
time-to-time in the future there may be other items that the
Company may exclude for purposes of its non-GAAP financial
measures; likewise, the Company may in the future cease to exclude
items that it has historically excluded for purposes of its
non-GAAP financial measures. Because of the non-standardized
definitions, the non-GAAP financial measures as used by Akorn in
this press release and the accompanying tables may be calculated
differently from, and therefore may not be directly comparable to,
similarly titled measures used by the Company’s competitors and
other companies.
Set forth below is the definition of each non-GAAP financial
measure as used by the Company in this press release and a full
reconciliation of each non-GAAP financial measure to the most
directly comparable GAAP financial measures.
EBITDA, as defined by the Company, represents
net income before net interest expense, income tax expense,
depreciation and amortization.
Adjusted EBITDA, as defined by the Company, is
calculated as follows:
Net (loss) income, (minus) plus:
Interest income (expense), netProvision for income
taxesDepreciation and amortizationNon-cash expenses, such as
impairment of long-lived assets, share-based compensation expense,
and amortization of deferred financing costsOther adjustments, such
as legal settlements, restatement expenses and various merger and
acquisition-related expenses, employee retention expense,
refinancing advisory fees, fixed asset impairment, executive
termination expenses, data integrity investigations &
assessment, gain on disposal of fixed assets, andFresenius
transaction & litigation
Adjusted EBITDA is deemed by the Company to be a useful
performance indicator because it includes an add back of non-cash
or non-recurring operating expenses that have no impact on
continuing cash flows as well as other items that are not expected
to recur and therefore are not reflective of continuing operating
performance.
Adjusted net (loss) income, as defined by the
Company, is calculated as follows:
Net (loss) income, (minus) plus:Amortization expenseNon-cash
expenses, such as impairment of long-lived assets, share-based
compensation expense, and amortization of deferred financing
costsOther adjustments, such as legal settlements, restatement
expenses and various merger and acquisition-related expenses,
employee retention expense, refinancing advisory fees, fixed asset
impairment, executive termination expenses, data integrity
investigations & assessment, gain on disposal of fixed assets,
andFresenius transaction & litigationLess an estimated tax
provision, net of the benefit from utilizing net operating loss
carry-forwards effected for the adjustments noted above
Adjusted diluted earnings per share, as defined
by the Company, 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
diluted earnings per 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.
The shortcomings of non-GAAP financial measures as guidance or
performance measures are that they provide a view of the Company’s
results of operations without including all events during a
period. For example, 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
share-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 non-GAAP financial measures, investors should
consider non-GAAP measures only as a supplement to, not as a
substitute for or as a superior measure to, measures of financial
performance prepared in accordance with GAAP. Investors and
other readers are encouraged to review the related GAAP financial
measures and the reconciliation of non-GAAP measures to their most
directly comparable GAAP measures as presented in this press
release.
Cautionary Note Regarding Forward-Looking
Statements
This press release includes statements that may constitute
"forward-looking statements", including expectations regarding the
Company’s business plan and initiatives, the Company’s commitments
to the FDA, disruptions during the Standstill Period and other
statements regarding the Company’s plans and strategy. When used in
this document, the words “will,” “expect,” “continue," “believe,”
“anticipate,” “estimate,” “intend,” “could,” “strives” and similar
expressions are generally intended to identify forward-looking
statements. These statements are made pursuant to the safe harbor
provisions of Section 27A of the Securities Act and Section 21E of
the Exchange Act. A number of important factors could cause actual
results of the Company and its subsidiaries to differ materially
from those indicated by such forward-looking statements. These
factors include, but are not limited to: (i) the effect of the
Delaware court’s recent decision against the Company on the
Company’s ability to retain and hire key personnel, its ability to
maintain relationships with its customers, suppliers and others
with whom it does business, or its operating results and business
generally, (ii) the risk that ongoing or future litigation related
to the court’s decision may result in significant costs of defense,
indemnification and/or liability, (iii) the outcome of the
investigation conducted by the Company with the assistance of
outside consultants, into alleged breaches of FDA data integrity
requirements relating to product development at the Company and any
actions taken by the Company, third parties or the FDA as a result
of such investigations, (iv) the difficulty of predicting the
timing or outcome of product development efforts, including FDA and
other regulatory agency approvals and actions, if any, (v) the
timing and success of product launches, (vi) difficulties or delays
in manufacturing, (vii) the Company’s increased indebtedness and
compliance with certain covenants and other obligations under the
Standstill Agreement, which create material uncertainties and risks
to its growth and business outlook, (viii) the Company’s obligation
under the Standstill Agreement to enter into a Comprehensive
Amendment that is satisfactory in form and substance to the
Lenders, (ix) the Company’s obligation under the Standstill
Agreement to pay certain fees and expenses and increased interest
margin, (x) such other risks and uncertainties outlined in the risk
factors detailed in Part I, Item 1A, “Risk Factors,” of the
Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2018 (as filed with the Securities and Exchange
Commission (“SEC”) on March 1, 2019), to be detailed in Part II,
Item 1A, “Risk Factors,” of the Company’s Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 2019 (expected to be
filed with the SEC by May 10, 2019) and other risk factors
identified from time to time in the Company’s filings with the SEC.
Readers should carefully review these risk factors, and should not
place undue reliance on the Company’s forward-looking statements.
These forward-looking statements are based on information, plans
and estimates at the date of this press release. The Company
undertakes no obligation to update any forward-looking statements
to reflect changes in underlying assumptions or factors, new
information, future events or other changes.
AKORN, INC.CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)(In
Thousands, Except Per Share
Data)(Unaudited)
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
Revenues, net |
165,871 |
|
|
184,063 |
|
Cost of sales
(exclusive of amortization of intangibles, included within
operating expenses below) |
112,358 |
|
|
101,835 |
|
GROSS PROFIT |
53,513 |
|
|
82,228 |
|
Selling, general and
administrative expenses |
72,498 |
|
|
62,994 |
|
Research and
development expenses |
8,714 |
|
|
12,644 |
|
Amortization of
intangibles |
11,065 |
|
|
13,190 |
|
Impairment of
goodwill |
15,955 |
|
|
— |
|
Impairment of
intangible assets |
10,354 |
|
|
18,815 |
|
Litigation rulings and
settlements |
410 |
|
|
— |
|
TOTAL OPERATING
EXPENSES |
118,996 |
|
|
107,643 |
|
OPERATING (LOSS) |
(65,483 |
) |
|
(25,415 |
) |
Amortization of
deferred financing costs |
(1,304 |
) |
|
(1,304 |
) |
Interest expense,
net |
(14,327 |
) |
|
(9,578 |
) |
Other non-operating
income, net |
353 |
|
|
270 |
|
(LOSS) BEFORE INCOME
TAXES |
(80,761 |
) |
|
(36,027 |
) |
Income tax provision
(benefit) |
1,420 |
|
|
(7,280 |
) |
NET (LOSS) |
(82,181 |
) |
|
(28,747 |
) |
NET (LOSS) PER
SHARE |
|
|
|
NET (LOSS) PER SHARE,
BASIC |
(0.65 |
) |
|
(0.23 |
) |
NET (LOSS) PER SHARE,
DILUTED |
(0.65 |
) |
|
(0.23 |
) |
SHARES USED IN
COMPUTING NET (LOSS) PER SHARE |
|
|
|
BASIC |
125,566 |
|
|
125,240 |
|
DILUTED |
125,566 |
|
|
125,240 |
|
COMPREHENSIVE
(LOSS) |
|
|
|
Net (loss) |
(82,181 |
) |
|
(28,747 |
) |
Unrealized holding
(loss) on available-for-sale securities, net of tax of $0 for the
three month period ended March 31, 2018. |
— |
|
|
(1 |
) |
Foreign currency
translation (loss) |
(424 |
) |
|
(848 |
) |
Pension liability
adjustment (loss) gain, net of tax of $30 and ($1) for the three
months ended March 31, 2019 and 2018, respectively. |
(116 |
) |
|
4 |
|
COMPREHENSIVE
(LOSS) |
(82,721 |
) |
|
(29,592 |
) |
AKORN, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(In Thousands, Except
Share Data)
|
March 31, 2019 (Unaudited) |
|
December 31, 2018 |
ASSETS |
|
|
|
CURRENT ASSETS |
|
|
|
Cash and
cash equivalents |
$ |
184,090 |
|
|
$ |
224,868 |
|
Trade
accounts receivable, net |
174,325 |
|
|
153,126 |
|
Inventories, net |
162,752 |
|
|
173,645 |
|
Prepaid
expenses and other current assets |
29,286 |
|
|
32,180 |
|
TOTAL
CURRENT ASSETS |
550,453 |
|
|
583,819 |
|
PROPERTY, PLANT AND
EQUIPMENT, NET |
325,970 |
|
|
334,853 |
|
OTHER LONG-TERM
ASSETS |
|
|
|
Goodwill |
267,923 |
|
|
283,879 |
|
Intangible assets, net |
263,644 |
|
|
284,976 |
|
Right-of-use assets, net - Operating leases |
21,973 |
|
|
— |
|
Other
non-current assets |
7,228 |
|
|
7,730 |
|
TOTAL
OTHER LONG-TERM ASSETS |
560,768 |
|
|
576,585 |
|
TOTAL
ASSETS |
$ |
1,437,191 |
|
|
$ |
1,495,257 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
CURRENT
LIABILITIES |
|
|
|
Trade
accounts payable |
$ |
38,419 |
|
|
$ |
39,570 |
|
Income
taxes payable |
13,925 |
|
|
— |
|
Accrued
royalties |
7,079 |
|
|
6,786 |
|
Accrued
compensation |
16,529 |
|
|
19,745 |
|
Accrued
administrative fees |
28,165 |
|
|
36,767 |
|
Accrued
legal fees and contingencies |
49,710 |
|
|
52,413 |
|
Current
portion of lease liability - Operating leases |
2,238 |
|
|
— |
|
Accrued
expenses and other liabilities |
12,721 |
|
|
15,542 |
|
TOTAL
CURRENT LIABILITIES |
168,786 |
|
|
170,823 |
|
LONG-TERM
LIABILITIES |
|
|
|
Long-term
debt (net of non-current deferred financing costs) |
821,715 |
|
|
820,411 |
|
Deferred
tax liability |
530 |
|
|
566 |
|
FIN 48
reserve |
51,410 |
|
|
49,990 |
|
Long-term
lease liability - Operating leases |
21,480 |
|
|
— |
|
Pension
obligations and other liabilities |
7,521 |
|
|
9,601 |
|
TOTAL
LONG-TERM LIABILITIES |
902,656 |
|
|
880,568 |
|
TOTAL
LIABILITIES |
1,071,442 |
|
|
1,051,391 |
|
SHAREHOLDERS’
EQUITY |
|
|
|
Preferred stock, $1 par value - 5,000,000 shares authorized; no
shares issued or outstanding at March 31, 2019 and December 31,
2018. |
— |
|
|
— |
|
Common stock, no par value – 150,000,000 shares authorized;
125,578,913 and 125,492,373 shares issued and outstanding at March
31, 2019 and December 31, 2018, respectively. |
579,157 |
|
|
574,553 |
|
(Accumulated deficit) |
(189,349 |
) |
|
(107,168 |
) |
Accumulated other comprehensive (loss) |
(24,059 |
) |
|
(23,519 |
) |
TOTAL
SHAREHOLDERS’ EQUITY |
365,749 |
|
|
443,866 |
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
1,437,191 |
|
|
$ |
1,495,257 |
|
AKORN, INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(In
Thousands)(Unaudited)
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
OPERATING
ACTIVITIES: |
|
|
|
Net (loss) |
$ |
(82,181 |
) |
|
$ |
(28,747 |
) |
Depreciation and amortization |
18,750 |
|
|
20,278 |
|
Amortization of debt financing fees |
1,304 |
|
|
1,304 |
|
Impairment of intangible assets |
10,354 |
|
|
18,815 |
|
Goodwill
impairment |
15,955 |
|
|
— |
|
Fixed
asset impairment and other |
10,089 |
|
|
— |
|
Non-cash
stock compensation expense |
4,720 |
|
|
5,508 |
|
Deferred
income taxes, net |
(28 |
) |
|
(7,833 |
) |
Other |
(31 |
) |
|
218 |
|
Changes
in operating assets and liabilities: |
|
|
|
Other
non-current assets |
584 |
|
|
37 |
|
Trade
accounts receivable |
(21,283 |
) |
|
(35,508 |
) |
Inventories, net |
10,819 |
|
|
(9,292 |
) |
Prepaid
expenses and other current assets |
1,079 |
|
|
11,997 |
|
Trade
accounts payable |
722 |
|
|
11,318 |
|
Accrued
Legal Fees |
(2,703 |
) |
|
(12,853 |
) |
FIN 48
Reserve |
1,420 |
|
|
512 |
|
Accrued
expenses and other liabilities |
(33 |
) |
|
(7,345 |
) |
NET CASH (USED IN)
OPERATING ACTIVITIES |
$ |
(30,463 |
) |
|
$ |
(31,591 |
) |
INVESTING
ACTIVITIES: |
|
|
|
Purchases of property,
plant and equipment |
(10,059 |
) |
|
(22,340 |
) |
NET CASH (USED IN)
INVESTING ACTIVITIES |
$ |
(10,059 |
) |
|
$ |
(22,340 |
) |
FINANCING
ACTIVITIES: |
|
|
|
Proceeds from the
exercise of stock options |
— |
|
|
546 |
|
Stock compensation plan
withholdings for employee taxes |
(116 |
) |
|
— |
|
Payment of contingent
acquisition liabilities |
— |
|
|
(4,793 |
) |
Lease payments |
(335 |
) |
|
(3 |
) |
NET CASH (USED IN)
FINANCING ACTIVITIES |
$ |
(451 |
) |
|
$ |
(4,250 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
54 |
|
|
41 |
|
(DECREASE) IN
CASH AND CASH EQUIVALENTS |
$ |
(40,919 |
) |
|
$ |
(58,140 |
) |
Cash and cash
equivalents, and restricted cash at beginning of period |
225,794 |
|
|
369,889 |
|
CASH, CASH EQUIVALENTS,
AND RESTRICTED CASH AT END OF PERIOD |
$ |
184,875 |
|
|
$ |
311,749 |
|
SUPPLEMENTAL
DISCLOSURES: |
|
|
|
Amount paid for
interest |
$ |
16,314 |
|
|
$ |
12,262 |
|
Amount (received) paid
for income taxes, net |
$ |
(14,526 |
) |
|
$ |
8,205 |
|
Additional capital
expenditures included in accounts payable |
$ |
4,641 |
|
|
$ |
8,227 |
|
Reconciliation of GAAP Net (Loss) to
Non-GAAP EBITDA and Adjusted EBITDA(In
Thousands)(Unaudited)
|
Three Months Ended |
|
|
March 31, |
|
|
2019 |
|
2018 |
NET
(LOSS) |
$ |
(82,181 |
) |
|
$ |
(28,747 |
) |
|
|
|
|
|
ADJUSTMENTS
TO ARRIVE AT EBITDA: |
|
|
|
|
Depreciation
expense |
7,685 |
|
|
7,088 |
|
|
Amortization
expense |
11,065 |
|
|
13,190 |
|
|
Interest expense,
net |
14,327 |
|
|
9,578 |
|
|
Income tax (benefit)
provision |
1,420 |
|
|
(7,280 |
) |
EBITDA |
(47,684 |
) |
|
(6,171 |
) |
|
|
|
|
|
NON-CASH
AND OTHER NON-RECURRING INCOME AND EXPENSES |
|
|
|
|
Merger and
acquisition-related expenses |
(3 |
) |
|
11 |
|
|
Employee retention
expense |
1,612 |
|
|
— |
|
|
Data integrity
investigations & assessment |
4,199 |
|
|
4,907 |
|
|
Fresenius transaction
& litigation |
2,147 |
|
|
— |
|
|
Refinancing advisory
fees |
5,748 |
|
|
— |
|
|
Non-cash stock
compensation expense |
4,720 |
|
|
5,508 |
|
|
Impairment of
goodwill |
15,955 |
|
|
— |
|
|
Impairment of
intangible assets |
10,354 |
|
|
18,815 |
|
|
Amortization of
deferred financing costs |
1,304 |
|
|
1,304 |
|
|
Restatement
expenses |
(26 |
) |
|
90 |
|
|
Executive termination
expenses |
835 |
|
|
— |
|
|
Impairment of fixed
assets and other |
10,089 |
|
|
— |
|
|
Gain on disposal of
fixed assets |
(31 |
) |
|
(5 |
) |
|
Litigation rulings and
settlements |
410 |
|
|
— |
|
|
|
|
|
|
ADJUSTED
EBITDA |
$ |
9,629 |
|
|
$ |
24,459 |
|
The table below sets forth expenses included in Net (loss) that
have not been included as adjustments to arrive at EBITDA and
Adjusted EBITDA in the preceding table.
|
($ in
thousands) |
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
FDA compliance related
expenses |
$ |
10,991 |
|
|
$ |
— |
|
Failure to supply
penalties (recorded as a contra-revenue) |
$ |
5,538 |
|
|
$ |
9,473 |
|
TheraTears®
direct-to-consumer advertising campaign |
$ |
2,651 |
|
|
$ |
11,622 |
|
Reconciliation of GAAP Net (Loss) to
non-GAAP Adjusted Net (Loss) and Adjusted Diluted (Loss) Earnings
Per Share(In Thousands, Except Per Share
Data)(Unaudited)
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
NET (LOSS) |
$ |
(82,181 |
) |
|
$ |
(28,747 |
) |
|
|
|
|
Income tax provision
(benefit) |
1,420 |
|
|
(7,280 |
) |
|
|
|
|
(LOSS) BEFORE INCOME
TAXES |
$ |
(80,761 |
) |
|
$ |
(36,027 |
) |
|
|
|
|
ADJUSTMENTS TO ARRIVE
AT ADJUSTED NET INCOME: |
|
|
|
Merger &
acquisition-related expenses (1) |
(3 |
) |
|
11 |
|
Employee retention
expense (2) |
1,612 |
|
|
— |
|
Data integrity
investigations & assessment (2) |
4,199 |
|
|
4,907 |
|
Fresenius transaction
& litigation (2) |
2,147 |
|
|
— |
|
Refinancing advisory
fees (2) |
5,748 |
|
|
— |
|
Restatement expenses
(2) |
(26 |
) |
|
90 |
|
Non-cash stock
compensation expense (2, 3, 4) |
4,720 |
|
|
5,508 |
|
Non-cash interest
expense |
— |
|
|
— |
|
Amortization expense
(5) |
11,065 |
|
|
13,190 |
|
Impairment of goodwill
(7) |
15,955 |
|
|
— |
|
Impairment of
intangible assets (7) |
10,354 |
|
|
18,815 |
|
Amortization of
deferred financing costs (8) |
1,304 |
|
|
1,304 |
|
Executive termination
expenses (2) |
835 |
|
|
— |
|
Impairment of fixed
assets and other (9) |
10,089 |
|
|
— |
|
Gain on disposal of
fixed assets (2, 6) |
(31 |
) |
|
(5 |
) |
Litigation rulings and
settlements (10) |
410 |
|
|
— |
|
ADJUSTED (LOSS) INCOME
BEFORE INCOME TAX |
$ |
(12,383 |
) |
|
$ |
7,793 |
|
|
|
|
|
ADJUSTMENTS TO INCOME
TAX PROVISION (BENEFIT) |
— |
|
|
1,575 |
|
TOTAL ADJUSTED INCOME
TAX PROVISION (BENEFIT) |
$ |
— |
|
|
$ |
1,575 |
|
|
|
|
|
ADJUSTED NET
(LOSS) INCOME |
$ |
(12,383 |
) |
|
$ |
6,218 |
|
|
|
|
|
ADJUSTED DILUTED
EARNINGS PER SHARE |
$ |
(0.10 |
) |
|
$ |
0.05 |
|
|
|
|
|
(1) - Excluded from
Acquisition-related costs |
|
|
|
(2) - Excluded from
SG&A expenses |
|
|
|
(3) - Excluded from
R&D expenses |
|
|
|
(4) - Excluded from
Cost of sales |
|
|
|
(5) - Excluded from
Amortization of intangibles |
|
|
|
(6) - Excluded from
Other non-operating (expense) income, net |
|
|
|
(7) - Excluded from
Impairment of goodwill, intangible assets |
|
|
|
(8) - Excluded from
Amortization of deferred financing costs |
|
|
|
(9) - Excluded from
Impairment of fixed assets |
|
|
|
(10) - Excluded from
Litigation rulings and settlements |
|
|
|
AKORN,
INC.Reconciliation of GAAP Debt to Non-GAAP Net
Debt and Net Debt to Adjusted EBITDA Ratio(In
Thousands, Except Net Debt to Adjusted EBITDA Ratio)
|
March 31, 2019 |
GAAP Debt |
$ |
821,715 |
|
Deferred financing
costs |
10,223 |
|
Total term loans
outstanding |
$ |
831,938 |
|
Cash and cash
equivalents |
184,090 |
|
Net debt
(1) |
$ |
647,848 |
|
|
|
Adjusted EBITDA,
trailing twelve months ended |
$ |
34,452 |
|
|
|
Net debt to adjusted
EBITDA ratio (2) |
18.8 |
|
(1) Net debt, as defined by the Company, is
gross debt including Akorn’s term loan and revolving debt balances
(if applicable) less cash and cash equivalents.
(2) Net debt to Adjusted EBITDA ratio, as
defined by the Company, is net debt divided by the trailing twelve
months Adjusted EBITDA.
AKORN,
INC.Reconciliation of 2019 Financial Guidance of
GAAP Net Loss to Non-GAAP Adjusted EBITDA(In
Millions)
|
2019 Guidance |
|
Lower Range |
|
Upper Range |
NET (LOSS) |
$ |
(166 |
) |
|
$ |
(151 |
) |
|
|
|
|
Add: |
|
|
|
Depreciation
expense |
32 |
|
|
32 |
|
Amortization
expense |
40 |
|
|
40 |
|
Interest expense,
net |
58 |
|
|
58 |
|
Income tax (benefit)
provision |
6 |
|
|
6 |
|
EBITDA |
$ |
(30 |
) |
|
$ |
(15 |
) |
|
|
|
|
Add: |
|
|
|
Employee retention
expense |
6 |
|
|
6 |
|
Data Integrity
investigations & assessment |
10 |
|
|
10 |
|
Fresenius transaction
& litigation |
6 |
|
|
6 |
|
Non-cash stock
compensation expense |
21 |
|
|
21 |
|
Refinancing advisory
fees |
15 |
|
|
15 |
|
Impairment of
goodwill |
16 |
|
|
16 |
|
Impairment of
intangible assets |
10 |
|
|
10 |
|
Amortization of
deferred financing costs |
5 |
|
|
5 |
|
Executive termination
expenses |
1 |
|
|
1 |
|
Impairment of fixed
assets and other |
10 |
|
|
10 |
|
Litigation rulings and
settlements |
1 |
|
|
1 |
|
|
|
|
|
ADJUSTED EBITDA |
$ |
71 |
|
|
$ |
86 |
|
Investors/Media:(847)
279-6162Investor.relations@akorn.com
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