Akorn, Inc. (Nasdaq: AKRX), a leading specialty generic
pharmaceutical company, today announced its preliminary financial
results for the second quarter of 2019.
Second Quarter 2019 and Recent Business
Highlights
- Net revenue was $178 million, up 7% from the first quarter of
2019, down 7% from the prior year quarter
- Net loss was $112 million, compared to $82 million in the first
quarter of 2019 and $88 million in the prior year quarter
- Adjusted EBITDA was $22 million, compared to $10 million in the
first quarter of 2019 and $35 million in the prior year
quarter
- Generated positive operating cash flow during the second
quarter
- Continued sequential reduction in backorders and failure to
supply penalties
- Launched three products: TheraTears® SteriLid®
Antimicrobial, the first FDA Accepted Antimicrobial Eyelid
Cleanser, Loteprednol Etabonate Ophthalmic Suspension, 0.5%, and
Dicyclomine Hydrochloride Injection, USP
- Received three ANDA approvals: Loteprednol Etabonate Ophthalmic
Suspension, 0.5%, Fluticasone Propionate Nasal Spray USP, 50 mcg
per spray (OTC), and Azelastine Hydrochloride Nasal Spray,
0.1%
- Responded to FDA warning letter related to the 2018 inspection
of our Somerset, NJ manufacturing facility
- Reached non-binding agreement in principle with lead plaintiffs
in the securities class action litigation
See "Non-GAAP Financial Measures" below.
Douglas Boothe, Akorn’s President and Chief Executive Officer,
stated, “We are pleased that our second quarter results showed
continued financial and operational improvements across the
business, a strong signal that our operational initiatives are
creating value and generating momentum. We saw reductions in
backorders and failure to supply penalties, which have a direct
impact on both financial performance and customer
satisfaction.”
Boothe continued, “As we look to the second half of 2019, we
feel confident in the fundamentals of our business and believe that
our focus on compliance, transparency, and accountability will
allow us to execute against our strategic growth objectives.
As such, we are updating our net loss guidance and affirming our
net revenue and adjusted EBITDA guidance for the full year of 2019
as we strive to return the Company to a path of long-term
profitable growth for our stakeholders.”
Summary Financial Results for the Quarter Ended June 30,
2019
Akorn reported net revenue of $178.1 million for the three month
period ended June 30, 2019, representing a decrease of $12.8
million, or 6.7%, as compared to net revenue of $190.9 million for
the three month period ended June 30, 2018. The decrease
in net revenue in the period was primarily due to $15.0 million
decline in organic revenue that was partially offset by $2.6
million net revenue increase in new products and product
relaunches. The $15.0 million decline in organic revenue was
due to approximately $29.2 million, or 15.3% in volume declines
partially offset by $14.2 million, or 7.5%, of favorable price
variance. The volume decline was principally due to the
effect of competition on a number of products, including
Fluticasone Rx, Methylene Blue and Clobetasol Cream, as well as
supply shortfalls from the continued production ramp-up at our
Somerset manufacturing facility.
Consolidated gross profit for the quarter ended June 30,
2019, was $68.0 million, or 38.2% of net revenue, compared to $81.3
million, or 42.6% of net revenue, in the corresponding prior year
quarter. The decline in the gross profit percentage was
principally due to increased operating costs associated with FDA
compliance related improvement activities as well as increased
inventory loss that was partially offset by favorable price and
product mix.
GAAP net loss for the second quarter of 2019, was $111.6
million, or $(0.89) per diluted share, compared to GAAP net loss of
$88.0 million, or $(0.70) per diluted share, for the same quarter
of 2018. After a net adjustment of $109 million to net loss
for non-GAAP items, adjusted diluted earnings per share for the
second quarter of 2019 were $(0.02), compared to $0.10 in the same
quarter of 2018, after a net adjustment of $101 million to net
income for non-GAAP items. See "Non-GAAP Financial Measures"
below.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) was $(75.4) million for the second quarter of 2019,
compared to $(73.0) million for the second quarter of 2018.
Adjusted EBITDA, which is a non-GAAP measure used by management to
evaluate the performance of the Akorn business, was $21.8 million
for the second quarter of 2019, compared to $34.8 million for the
second quarter of 2018. See "Non-GAAP Financial Measures"
below.
Summary Financial Results for the Six Months Ended June
30, 2019
Akorn reported net revenue of $343.9 million for the six month
period ended June 30, 2019, representing a decrease of $31.1
million, or 8.3%, as compared to net revenue of $375.0 million for
the six month period ended June 30, 2018. The decrease in net
revenue in the period was primarily due to $33.1 million decline in
organic revenue that was partially offset by $3.3 million net
revenue increase in new products and product relaunches. The
$33.1 million decline in organic revenue was due to approximately
$56.8 million, or 15.2% in volume declines partially offset by
$23.7 million, or 6.3%, of favorable price variance. The
volume decline was principally due to the effect of competition on
a number of products, including Nembutal, Fluticasone Rx and
Clobetasol Cream and supply shortfalls from the continued
production ramp-up at our Somerset manufacturing facility.
Consolidated gross profit for the six month period ended
June 30, 2019, was $121.5 million, or 35.3% of net revenue,
compared to $163.5 million, or 43.6% of net revenue, in the
corresponding prior year period. The decline in the gross
profit percentage was principally due to increased operating costs
associated with FDA compliance related improvement activities and
increased inventory loss.
GAAP net loss was $193.8 million for the six month period ended
June 30, 2019, or $(1.54) per diluted share, compared to GAAP
net loss of $116.7 million for the six month period ended June 30,
2018, or $(0.93) per diluted share. After a net adjustment of
$179 million to net income for non-GAAP items, adjusted diluted
earnings per share for the six months ended June 30, 2019 were
$(0.12), compared to $0.15 in the corresponding period in the prior
year, after a net adjustment of $136 million to net income for
non-GAAP items.
EBITDA was $(123.1) million for the six month period ended
June 30, 2019, compared to $(79.2) million for the six month
period ended June 30, 2018. Adjusted EBITDA, which is a
non-GAAP measure used by management to evaluate the performance of
the Akorn business, was $31.6 million for the six month period
ended June 30, 2019, compared to $59.3 million for the six
month period ended June 30, 2018. See "Non-GAAP Financial
Measures" below.
Updated Full Year 2019 Guidance
The Company is affirming its net revenue and adjusted EBITDA
guidance, and updating other guidance as noted below:
- Net revenue for the year is expected to be in the range of $690
to $710 million
- Net loss for the year is expected to be in the range of ($273)
to ($258) million, an increase of $107 million from initial
guidance, primarily driven by the estimated charge related to the
securities class action litigation non-binding agreement in
principle as well as the impact of our previously disclosed
Standstill Agreement
- Adjusted EBITDA for the year is expected to be in the range of
$71 to $86 million
- Expecting approximately $40 million in capital
expenditures
- Expecting approximately $50 million for FDA compliance and data
integrity assessment expenditures, an increase of $10 million from
initial guidance primarily driven by expected costs related to the
Somerset warning letter
Securities Class Action Litigation
As previously disclosed in our Form 8-K filed with the SEC on
July 30, 2019, the Company and the lead plaintiffs in In re Akorn,
Inc. Data Integrity Securities Litigation (the “Securities
Class Action Litigation”) have advised the court presiding over the
matter that they have entered into a non-binding agreement in
principle to resolve the Securities Class Action Litigation and the
claims of the putative class. As required by generally
accepted accounting principles, the Company recorded an estimated
charge and corresponding liability of $74 million associated with
the non-binding agreement in principle, which is reflected in the
Company’s preliminary financial statements for the quarter ended
June 30, 2019. The corresponding liability is expected to be
settled through the issuance of currently authorized Company stock
and future contingent cash payments subject to the Company
exceeding certain profitability thresholds. In addition, the
lead plaintiffs could receive up to $30 million in insurance
proceeds under the Company's insurance policies.
Status of Akorn Pending ANDA Filings
As of July 31, 2019, Akorn had 36 ANDAs pending at the FDA,
representing approximately $5.6 billion in annual branded and
generic market value according to IQVIA.
Filed |
|
Tentative Approval |
Pending |
Total |
$ in millions |
|
Count |
Value * |
Count |
Value * |
Count |
Value * |
Ophthalmic |
Brand ** |
3 |
$458 |
10 |
$3,561 |
13 |
$4,019 |
|
Generic |
1 |
13 |
3 |
111 |
4 |
124 |
Injectable |
Brand ** |
— |
— |
2 |
10 |
2 |
10 |
|
Generic |
1 |
158 |
6 |
940 |
7 |
1,099 |
Topical |
Brand ** |
— |
— |
— |
— |
— |
— |
|
Generic |
— |
— |
4 |
72 |
4 |
72 |
Other |
Brand ** |
— |
— |
— |
— |
— |
— |
|
Generic |
— |
— |
6 |
313 |
6 |
313 |
Total |
|
5 |
$630 |
31 |
$5,008 |
36 |
$5,638 |
* The value, shown in millions, is the market size
estimate based on IQVIA data for the trailing 12 months ended
May 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 9:00 a.m.
EST on August 1, 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 7567263. 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) adjusted net income, (4) adjusted diluted earnings per share,
(5) net debt, and (6) 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 these measures in 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 (loss) income before net interest income (expense),provision
(benefit) for income taxes and depreciation and amortization.
Adjusted EBITDA, as defined by the Company, is
calculated as follows:
Net (loss) income, (minus) plus:
Interest income (expense),
netProvision (benefit) 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.
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.
Net debt to adjusted EBITDA ratio, as defined
by the Company, is net debt divided by the trailing twelve months
adjusted EBITDA.
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, financial performance,
product launches, pending ANDA filings, the financial guidance for
2019, the non-binding agreement in principle to settle the
Securities Class Action Litigation, 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 of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. 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 of Chancery’s October 1, 2018 decision
against the Company and the Delaware Supreme Court’s December 7,
2018 order affirming the Chancery Court’s decision 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 against the
defendants or 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 obligation to comply with certain
covenants and other obligations under its standstill agreement with
its first lien term loan lenders (the “Standstill Agreement”),
(viii) the Company’s obligation under the Standstill Agreement to
enter into a comprehensive amendment that is satisfactory in form
and substance to the first lien term loan lenders, (ix) the risk
that the parties will not enter into a definitive settlement
agreement in connection with the Securities Class Action
Litigation, (x) the risk that the holders of a significant number
of shares may opt out of and elect not to participate in or be
bound by the proposed Securities Class Action Litigation
settlement, (xi) the risk that a definitive settlement agreement in
connection the with Securities Class Action Litigation may not
obtain the necessary approval by the court or may be terminated in
accordance with its terms, (xii) the risk that insurance proceeds,
common shares or other consideration contemplated to be exchanged
pursuant to the proposed Securities Class Action Litigation
settlement is not available at the appropriate time and (xiii) 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) and 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 (as filed with the SEC on May 9, 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 June 30, |
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenues, net |
$ |
178,057 |
|
|
$ |
190,944 |
|
|
$ |
343,928 |
|
|
$ |
375,007 |
|
Cost of sales (exclusive of
amortization of intangibles, included within operating expenses
below) |
110,073 |
|
|
109,665 |
|
|
222,431 |
|
|
211,500 |
|
GROSS PROFIT |
67,984 |
|
|
81,279 |
|
|
121,497 |
|
|
163,507 |
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
61,042 |
|
|
83,758 |
|
|
133,540 |
|
|
146,752 |
|
Research and development
expenses |
9,495 |
|
|
11,371 |
|
|
18,209 |
|
|
24,015 |
|
Amortization of
intangibles |
9,950 |
|
|
13,182 |
|
|
21,015 |
|
|
26,372 |
|
Impairment of goodwill |
— |
|
|
— |
|
|
15,955 |
|
|
— |
|
Impairment of intangible
assets |
394 |
|
|
64,534 |
|
|
10,748 |
|
|
83,349 |
|
Litigation rulings,
settlements and contingencies |
74,469 |
|
|
(400 |
) |
|
74,879 |
|
|
(400 |
) |
TOTAL OPERATING EXPENSES |
155,350 |
|
|
172,445 |
|
|
274,346 |
|
|
280,088 |
|
OPERATING (LOSS) |
(87,366 |
) |
|
(91,166 |
) |
|
(152,849 |
) |
|
(116,581 |
) |
Amortization of deferred
financing costs |
(5,655 |
) |
|
(1,304 |
) |
|
(6,959 |
) |
|
(2,608 |
) |
Interest expense, net |
(17,341 |
) |
|
(11,062 |
) |
|
(31,668 |
) |
|
(20,640 |
) |
Other non-operating income
(loss), net |
245 |
|
|
(724 |
) |
|
598 |
|
|
(454 |
) |
|
|
|
|
|
|
|
|
(LOSS) BEFORE INCOME
TAXES |
(110,117 |
) |
|
(104,256 |
) |
|
(190,878 |
) |
|
(140,283 |
) |
Income tax provision
(benefit) |
1,482 |
|
|
(16,272 |
) |
|
2,902 |
|
|
(23,552 |
) |
|
|
|
|
|
|
|
|
NET (LOSS) |
$ |
(111,599 |
) |
|
$ |
(87,984 |
) |
|
$ |
(193,780 |
) |
|
$ |
(116,731 |
) |
NET (LOSS) PER SHARE |
|
|
|
|
|
|
|
NET (LOSS) PER SHARE,
BASIC |
$ |
(0.89 |
) |
|
$ |
(0.70 |
) |
|
$ |
(1.54 |
) |
|
$ |
(0.93 |
) |
NET (LOSS) PER SHARE,
DILUTED |
$ |
(0.89 |
) |
|
$ |
(0.70 |
) |
|
$ |
(1.54 |
) |
|
$ |
(0.93 |
) |
|
|
|
|
|
|
|
|
SHARES USED IN COMPUTING NET
(LOSS) PER SHARE |
|
|
|
|
|
|
|
BASIC |
126,043 |
|
|
125,332 |
|
|
125,806 |
|
|
125,286 |
|
DILUTED |
126,043 |
|
|
125,332 |
|
|
125,806 |
|
|
125,286 |
|
|
|
|
|
|
|
|
|
COMPREHENSIVE (LOSS) |
|
|
|
|
|
|
|
Net (loss) |
$ |
(111,599 |
) |
|
$ |
(87,984 |
) |
|
$ |
(193,780 |
) |
|
$ |
(116,731 |
) |
Unrealized holding (loss) on
available-for-sale securities, net of tax of $1 and $1 for the
three month periods ended June 30, 2019 and 2018, and $1 and $1 for
the six month periods ended June 30, 2019 and 2018,
respectively. |
(3 |
) |
|
(4 |
) |
|
(3 |
) |
|
(5 |
) |
Foreign currency translation
gain (loss) |
1,380 |
|
|
(6,350 |
) |
|
956 |
|
|
(7,198 |
) |
Pension liability adjustment
(loss) gain, net of tax of ($48) and ($1) for the three month
periods ended June 30, 2019 and 2018, and ($19) and ($2) for the
six month periods ended June 30, 2019 and 2018, respectively. |
190 |
|
|
4 |
|
|
74 |
|
|
8 |
|
COMPREHENSIVE (LOSS) |
$ |
(110,032 |
) |
|
$ |
(94,334 |
) |
|
$ |
(192,753 |
) |
|
$ |
(123,926 |
) |
|
AKORN, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(In Thousands, Except
Share Data)
|
June 30, 2019 (Unaudited) |
|
December 31, 2018 |
ASSETS |
|
|
|
CURRENT ASSETS |
|
|
|
Cash and cash equivalents |
$ |
178,264 |
|
|
$ |
224,868 |
|
Trade accounts receivable, net |
172,611 |
|
|
153,126 |
|
Inventories, net |
162,593 |
|
|
173,645 |
|
Available-for-sale securities, current |
— |
|
|
— |
|
Prepaid expenses and other current assets |
24,307 |
|
|
32,180 |
|
TOTAL CURRENT ASSETS |
537,775 |
|
|
583,819 |
|
PROPERTY, PLANT AND EQUIPMENT,
NET |
325,098 |
|
|
334,853 |
|
OTHER LONG-TERM ASSETS |
|
|
|
Goodwill |
267,923 |
|
|
283,879 |
|
Intangible assets, net |
253,301 |
|
|
284,976 |
|
Right-of-use assets, net - Operating leases |
22,542 |
|
|
— |
|
Deferred tax assets |
— |
|
|
— |
|
Other non-current assets |
7,520 |
|
|
7,730 |
|
TOTAL OTHER LONG-TERM ASSETS |
551,286 |
|
|
576,585 |
|
TOTAL ASSETS |
$ |
1,414,159 |
|
|
$ |
1,495,257 |
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
|
CURRENT LIABILITIES |
|
|
|
Trade accounts payable |
$ |
38,420 |
|
|
$ |
39,570 |
|
Income taxes payable |
13,955 |
|
|
— |
|
Accrued royalties |
5,862 |
|
|
6,786 |
|
Accrued compensation |
19,762 |
|
|
19,745 |
|
Accrued administrative fees |
27,453 |
|
|
36,767 |
|
Current portion of accrued legal fees and contingencies |
82,576 |
|
|
52,413 |
|
Current portion of lease liability - Operating leases |
2,472 |
|
|
— |
|
Accrued expenses and other liabilities |
12,926 |
|
|
15,542 |
|
Current portion of long-term debt (net of deferred financing
costs) |
828,282 |
|
|
— |
|
TOTAL CURRENT LIABILITIES |
1,031,708 |
|
|
170,823 |
|
LONG-TERM LIABILITIES |
|
|
|
Long-term debt (net of non-current deferred financing costs) |
— |
|
|
820,411 |
|
Deferred tax liability |
937 |
|
|
566 |
|
Uncertain tax liabilities |
52,516 |
|
|
49,990 |
|
Long-term lease liability - Operating leases |
21,877 |
|
|
— |
|
Long-term portion of accrued legal fees and contingencies |
38,500 |
|
|
— |
|
Pension obligations and other liabilities |
7,469 |
|
|
9,601 |
|
TOTAL LONG-TERM LIABILITIES |
121,299 |
|
|
880,568 |
|
TOTAL LIABILITIES |
1,153,007 |
|
|
1,051,391 |
|
SHAREHOLDERS’ EQUITY |
|
|
|
Preferred stock, $1 par value - 5,000,000 shares authorized; no
shares issued or outstanding at June 30, 2019 and December 31,
2018. |
— |
|
|
— |
|
Common stock, no par value – 150,000,000 shares authorized;
126,107,933 and 125,492,373 shares issued and outstanding at June
30, 2019 and December 31, 2018, respectively. |
584,592 |
|
|
574,553 |
|
(Accumulated deficit) |
(300,948 |
) |
|
(107,168 |
) |
Accumulated other comprehensive (loss) |
(22,492 |
) |
|
(23,519 |
) |
TOTAL SHAREHOLDERS’ EQUITY |
261,152 |
|
|
443,866 |
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
1,414,159 |
|
|
$ |
1,495,257 |
|
|
AKORN, INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(In
Thousands)(Unaudited)
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
OPERATING ACTIVITIES: |
|
|
|
Net (loss) |
$ |
(193,780 |
) |
|
$ |
(116,731 |
) |
Adjustments to reconcile
consolidated net (loss) to net cash (used in) operating
activities: |
|
|
|
Depreciation and amortization |
36,123 |
|
|
40,439 |
|
Amortization of debt financing fees |
6,959 |
|
|
2,608 |
|
Impairment of intangible assets |
10,748 |
|
|
83,349 |
|
Goodwill impairment |
15,955 |
|
|
— |
|
Fixed asset impairment and other |
10,227 |
|
|
— |
|
Non-cash stock compensation expense |
10,308 |
|
|
11,453 |
|
Non-cash interest expense |
913 |
|
|
— |
|
Deferred income taxes, net |
366 |
|
|
(24,512 |
) |
Other |
(29 |
) |
|
481 |
|
Changes in operating assets and liabilities: |
|
|
|
Other non-current assets |
440 |
|
|
(28 |
) |
Trade accounts receivable |
(19,496 |
) |
|
(45,893 |
) |
Inventories, net |
11,186 |
|
|
(7,735 |
) |
Prepaid expenses and other current assets |
5,977 |
|
|
8,204 |
|
Trade accounts payable |
2,078 |
|
|
602 |
|
Accrued legal fees and contingencies |
68,662 |
|
|
15,387 |
|
Uncertain tax liabilities |
2,526 |
|
|
844 |
|
Accrued expenses and other liabilities |
1,526 |
|
|
259 |
|
NET CASH (USED IN) OPERATING
ACTIVITIES |
$ |
(29,311 |
) |
|
$ |
(31,273 |
) |
INVESTING ACTIVITIES: |
|
|
|
Proceeds from disposal of
assets |
— |
|
|
20 |
|
Payments for intangible
assets |
(87 |
) |
|
(50 |
) |
Purchases of property, plant
and equipment |
(16,863 |
) |
|
(35,862 |
) |
NET CASH (USED IN) INVESTING
ACTIVITIES |
$ |
(16,950 |
) |
|
$ |
(35,892 |
) |
FINANCING ACTIVITIES: |
|
|
|
Proceeds from the exercise of
stock options |
— |
|
|
254 |
|
Stock compensation plan
withholdings for employee taxes |
(269 |
) |
|
— |
|
Payment of contingent
acquisition liabilities |
— |
|
|
(4,793 |
) |
Lease payments |
(338 |
) |
|
(6 |
) |
NET CASH (USED IN) FINANCING
ACTIVITIES |
$ |
(607 |
) |
|
$ |
(4,545 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
141 |
|
|
(560 |
) |
(DECREASE) IN CASH AND CASH
EQUIVALENTS |
$ |
(46,727 |
) |
|
$ |
(72,270 |
) |
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 |
$ |
179,067 |
|
|
$ |
297,619 |
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
Amount paid for interest |
$ |
34,179 |
|
|
$ |
25,462 |
|
Amount (received) paid for
income taxes, net |
$ |
(14,859 |
) |
|
$ |
9,260 |
|
Additional capital
expenditures included in accounts payable |
$ |
3,277 |
|
|
$ |
12,010 |
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Net (Loss) to
Non-GAAP EBITDA and Adjusted EBITDA(In
Thousands)(Unaudited)
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
NET (LOSS) |
$ |
(111,599 |
) |
|
$ |
(87,984 |
) |
|
$ |
(193,780 |
) |
|
$ |
(116,731 |
) |
|
|
|
|
|
|
|
|
|
ADJUSTMENTS TO
ARRIVE AT EBITDA: |
|
|
|
|
|
|
|
|
Depreciation expense |
7,423 |
|
|
6,979 |
|
|
15,108 |
|
|
14,067 |
|
|
Amortization expense |
9,950 |
|
|
13,182 |
|
|
21,015 |
|
|
26,372 |
|
|
Interest expense, net |
17,341 |
|
|
11,062 |
|
|
31,668 |
|
|
20,640 |
|
|
Income tax (benefit)
provision |
1,482 |
|
|
(16,272 |
) |
|
2,902 |
|
|
(23,552 |
) |
EBITDA |
(75,403 |
) |
|
(73,033 |
) |
|
(123,087 |
) |
|
(79,204 |
) |
|
|
|
|
|
|
|
|
|
NON-CASH AND OTHER
NON-RECURRING INCOME AND EXPENSES |
|
|
|
|
|
|
|
|
Merger and acquisition-related
expenses |
9 |
|
|
64 |
|
|
6 |
|
|
75 |
|
|
Employee retention
expense |
1,585 |
|
|
— |
|
|
3,343 |
|
|
— |
|
|
Data integrity investigations
& assessment |
3,179 |
|
|
12,428 |
|
|
7,833 |
|
|
16,731 |
|
|
Fresenius transaction &
litigation |
1,940 |
|
|
24,857 |
|
|
3,631 |
|
|
25,462 |
|
|
Refinancing advisory fees |
4,290 |
|
|
— |
|
|
10,038 |
|
|
— |
|
|
Non-cash stock compensation
expense |
5,588 |
|
|
5,945 |
|
|
10,308 |
|
|
11,453 |
|
|
Impairment of goodwill |
— |
|
|
— |
|
|
15,955 |
|
|
— |
|
|
Impairment of intangible
assets |
394 |
|
|
64,534 |
|
|
10,748 |
|
|
83,349 |
|
|
Amortization of deferred
financing costs |
5,655 |
|
|
1,304 |
|
|
6,959 |
|
|
2,608 |
|
|
Restatement expenses |
— |
|
|
(904 |
) |
|
(26 |
) |
|
(814 |
) |
|
Executive termination
expenses |
— |
|
|
— |
|
|
835 |
|
|
— |
|
|
Impairment of fixed assets and
other |
138 |
|
|
— |
|
|
10,227 |
|
|
— |
|
|
Loss (Gain) on disposal of
fixed assets |
2 |
|
|
3 |
|
|
(29 |
) |
|
(2 |
) |
|
Litigation rulings,
settlements and contingencies |
74,469 |
|
|
(400 |
) |
|
74,879 |
|
|
(400 |
) |
|
|
|
|
|
|
|
|
|
ADJUSTED
EBITDA |
$ |
21,846 |
|
|
$ |
34,798 |
|
|
$ |
31,620 |
|
|
$ |
59,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
FDA compliance related expenses |
$ |
11,850 |
|
|
$ |
250 |
|
|
22,841 |
|
|
250 |
|
Failure to supply penalties
(recorded as a contra-revenue) |
4,687 |
|
|
$ |
1,536 |
|
|
10,225 |
|
|
11,010 |
|
TheraTears® direct-to-consumer
advertising campaign |
1,528 |
|
|
$ |
1,521 |
|
|
2,434 |
|
|
9,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
NET (LOSS) |
$ |
(111,599 |
) |
|
$ |
(87,984 |
) |
|
$ |
(193,780 |
) |
|
$ |
(116,731 |
) |
|
|
|
|
|
|
|
|
Income tax provision
(benefit) |
1,482 |
|
|
(16,272 |
) |
|
2,902 |
|
|
(23,552 |
) |
|
|
|
|
|
|
|
|
(LOSS) BEFORE INCOME
TAXES |
$ |
(110,117 |
) |
|
$ |
(104,256 |
) |
|
$ |
(190,878 |
) |
|
$ |
(140,283 |
) |
|
|
|
|
|
|
|
|
ADJUSTMENTS TO ARRIVE AT
ADJUSTED NET INCOME: |
|
|
|
|
|
|
|
Merger &
acquisition-related expenses (1) |
9 |
|
|
64 |
|
|
6 |
|
|
75 |
|
Employee retention expense (2,
3, 4) |
1,585 |
|
|
— |
|
|
3,343 |
|
|
— |
|
Data integrity investigations
& assessment (2) |
3,179 |
|
|
12,428 |
|
|
7,833 |
|
|
16,731 |
|
Fresenius transaction &
litigation (2) |
1,940 |
|
|
24,857 |
|
|
3,631 |
|
|
25,462 |
|
Refinancing advisory fees
(2) |
4,290 |
|
|
— |
|
|
10,038 |
|
|
— |
|
Restatement expenses (2) |
— |
|
|
(904 |
) |
|
(26 |
) |
|
(814 |
) |
Non-cash stock compensation
expense (2, 3, 4) |
5,588 |
|
|
5,945 |
|
|
10,308 |
|
|
11,453 |
|
Amortization expense (5) |
9,950 |
|
|
13,182 |
|
|
21,015 |
|
|
26,372 |
|
Impairment of goodwill
(7) |
— |
|
|
— |
|
|
15,955 |
|
|
— |
|
Impairment of intangible
assets (7) |
394 |
|
|
64,534 |
|
|
10,748 |
|
|
83,349 |
|
Amortization of deferred
financing costs (8) |
5,655 |
|
|
1,304 |
|
|
6,959 |
|
|
2,608 |
|
Executive termination expenses
(2) |
— |
|
|
— |
|
|
835 |
|
|
— |
|
Impairment of fixed assets and
other (9) |
138 |
|
|
— |
|
|
10,227 |
|
|
— |
|
Gain on disposal of fixed
assets (2, 6) |
2 |
|
|
3 |
|
|
(29 |
) |
|
(2 |
) |
Litigation rulings,
settlements and contingencies (10) |
74,469 |
|
|
(400 |
) |
|
74,879 |
|
|
(400 |
) |
ADJUSTED (LOSS) INCOME BEFORE
INCOME TAX |
$ |
(2,918 |
) |
|
$ |
16,757 |
|
|
$ |
(15,156 |
) |
|
$ |
24,551 |
|
|
|
|
|
|
|
|
|
Option exercise and RSU
vesting tax impact (11) |
— |
|
|
(1,138 |
) |
|
— |
|
|
(1,138 |
) |
ADJUSTMENTS TO INCOME TAX
PROVISION (BENEFIT) |
— |
|
|
5,034 |
|
|
— |
|
|
6,609 |
|
TOTAL ADJUSTED INCOME TAX
PROVISION (BENEFIT) |
$ |
— |
|
|
$ |
3,896 |
|
|
$ |
— |
|
|
$ |
5,471 |
|
|
|
|
|
|
|
|
|
ADJUSTED NET (LOSS)
INCOME |
$ |
(2,918 |
) |
|
$ |
12,861 |
|
|
$ |
(15,156 |
) |
|
$ |
19,080 |
|
|
|
|
|
|
|
|
|
ADJUSTED DILUTED EARNINGS PER
SHARE |
$ |
(0.02 |
) |
|
$ |
0.10 |
|
|
$ |
(0.12 |
) |
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
(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, settlements and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
June 30, 2019 |
GAAP Debt |
$ |
828,282 |
|
Deferred financing costs |
15,429 |
|
Total term loans
outstanding |
$ |
843,711 |
|
Cash and cash equivalents |
178,264 |
|
Net debt |
$ |
665,447 |
|
|
|
Adjusted EBITDA, trailing
twelve months ended |
$ |
21,517 |
|
|
|
Net debt to adjusted EBITDA
ratio |
30.9 |
|
|
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) |
$ |
(273 |
) |
|
$ |
(258 |
) |
|
|
|
|
Add: |
|
|
|
Depreciation expense |
31 |
|
|
31 |
|
Amortization expense |
40 |
|
|
40 |
|
Interest expense, net |
69 |
|
|
69 |
|
Income tax (benefit)
provision |
5 |
|
|
5 |
|
EBITDA |
$ |
(128 |
) |
|
$ |
(113 |
) |
|
|
|
|
Add: |
|
|
|
Employee retention
expense |
5 |
|
|
5 |
|
Data Integrity investigations
& assessment |
12 |
|
|
12 |
|
Fresenius transaction &
litigation |
6 |
|
|
6 |
|
Non-cash stock compensation
expense |
21 |
|
|
21 |
|
Refinancing advisory fees |
20 |
|
|
20 |
|
Impairment of goodwill |
16 |
|
|
16 |
|
Impairment of intangible
assets |
11 |
|
|
11 |
|
Amortization of deferred
financing costs |
22 |
|
|
22 |
|
Executive termination
expenses |
1 |
|
|
1 |
|
Impairment of fixed assets and
other |
10 |
|
|
10 |
|
Litigation rulings,
settlements and contingencies |
75 |
|
|
75 |
|
|
|
|
|
ADJUSTED EBITDA |
$ |
71 |
|
|
$ |
86 |
|
|
Investors/Media:(847)
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