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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Akorn Inc | NASDAQ:AKRX | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.09 | 0.1398 | 0.1399 | 0 | 01:00:00 |
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2018
|
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
LOUISIANA
|
72-0717400
|
(State or Other Jurisdiction of
|
(I.R.S. Employer
|
Incorporation or Organization)
|
Identification No.)
|
|
|
1925 W. Field Court, Suite 300
|
|
Lake Forest, Illinois
|
60045
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Yes
|
þ
|
|
No
|
o
|
Yes
|
þ
|
|
No
|
o
|
Yes
|
o
|
|
No
|
þ
|
|
|
|
Page
|
PART I. FINANCIAL INFORMATION
|
|
ITEM 1. Financial Statements (unaudited).
|
|
Condensed Consolidated Balance Sheets - March 31, 2018 and December 31, 2017
|
|
Condensed Consolidated Statements of Comprehensive (Loss) Income - Three months ended March 31, 2018 and 2017
|
|
Condensed Consolidated Statement of Shareholders’ Equity - Three months ended March 31, 2018
|
|
Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 2018 and 2017
|
|
PART II. OTHER INFORMATION
|
|
|
|
SIGNATURES
|
|
|
|
EXHIBIT INDEX
|
|
|
March 31, 2018 (Unaudited)
|
|
December 31, 2017
|
||||
ASSETS
|
|
|
|
||||
CURRENT ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
309,377
|
|
|
$
|
368,119
|
|
Trade accounts receivable, net
|
177,053
|
|
|
141,383
|
|
||
Inventories, net
|
192,963
|
|
|
183,568
|
|
||
Prepaid expenses and other current assets
|
25,623
|
|
|
37,081
|
|
||
TOTAL CURRENT ASSETS
|
705,016
|
|
|
730,151
|
|
||
PROPERTY, PLANT AND EQUIPMENT, NET
|
325,218
|
|
|
313,418
|
|
||
OTHER LONG-TERM ASSETS
|
|
|
|
|
|
||
Goodwill
|
284,980
|
|
|
285,310
|
|
||
Intangible assets, net
|
537,478
|
|
|
569,484
|
|
||
Deferred tax assets
|
6,190
|
|
|
6,521
|
|
||
Other non-current assets
|
4,590
|
|
|
4,627
|
|
||
TOTAL OTHER LONG-TERM ASSETS
|
833,238
|
|
|
865,942
|
|
||
TOTAL ASSETS
|
$
|
1,863,472
|
|
|
$
|
1,909,511
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
||
CURRENT LIABILITIES
|
|
|
|
|
|
||
Trade accounts payable
|
$
|
60,337
|
|
|
$
|
51,976
|
|
Purchase consideration payable
|
201
|
|
|
3,901
|
|
||
Income taxes payable
|
7,592
|
|
|
15,775
|
|
||
Accrued royalties
|
4,973
|
|
|
5,902
|
|
||
Accrued compensation
|
14,956
|
|
|
12,286
|
|
||
Accrued administrative fees
|
30,798
|
|
|
38,598
|
|
||
Accrued expenses and other liabilities
|
33,074
|
|
|
42,651
|
|
||
TOTAL CURRENT LIABILITIES
|
151,931
|
|
|
171,089
|
|
||
LONG-TERM LIABILITIES:
|
|
|
|
|
|
||
Long-term debt (net of non-current deferred financing costs)
|
816,499
|
|
|
815,195
|
|
||
Deferred tax liability
|
35,598
|
|
|
43,404
|
|
||
Other long-term liabilities
|
48,928
|
|
|
48,578
|
|
||
TOTAL LONG-TERM LIABILITIES
|
901,025
|
|
|
907,177
|
|
||
TOTAL LIABILITIES
|
1,052,956
|
|
|
1,078,266
|
|
||
SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
||
Common stock, no par value – 150,000,000 shares authorized; 125,258,615 and 125,090,522 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively
|
559,335
|
|
|
550,472
|
|
||
Retained earnings
|
265,994
|
|
|
294,741
|
|
||
Accumulated other comprehensive loss
|
(14,813
|
)
|
|
(13,968
|
)
|
||
TOTAL SHAREHOLDERS’ EQUITY
|
810,516
|
|
|
831,245
|
|
||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
1,863,472
|
|
|
$
|
1,909,511
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Revenues, net
|
$
|
184,063
|
|
|
$
|
253,420
|
|
Cost of sales (exclusive of amortization of intangibles, included within operating expenses below)
|
101,835
|
|
|
104,651
|
|
||
GROSS PROFIT
|
82,228
|
|
|
148,769
|
|
||
|
|
|
|
||||
Selling, general and administrative expenses
|
62,983
|
|
|
47,583
|
|
||
Acquisition-related costs
|
11
|
|
|
11
|
|
||
Research and development expenses
|
30,967
|
|
|
11,291
|
|
||
Amortization of intangibles
|
13,190
|
|
|
15,471
|
|
||
Impairment of intangible assets
|
492
|
|
|
—
|
|
||
TOTAL OPERATING EXPENSES
|
107,643
|
|
|
74,356
|
|
||
|
|
|
|
|
|
||
OPERATING (LOSS) INCOME
|
(25,415
|
)
|
|
74,413
|
|
||
Amortization of deferred financing costs
|
(1,304
|
)
|
|
(1,304
|
)
|
||
Interest expense, net
|
(9,578
|
)
|
|
(9,566
|
)
|
||
Other non-operating income, net
|
270
|
|
|
1,783
|
|
||
|
|
|
|
|
|
||
(LOSS) INCOME BEFORE INCOME TAXES
|
(36,027
|
)
|
|
65,326
|
|
||
Income tax (benefit) provision
|
(7,280
|
)
|
|
24,299
|
|
||
|
|
|
|
|
|
||
CONSOLIDATED NET (LOSS) INCOME
|
$
|
(28,747
|
)
|
|
$
|
41,027
|
|
CONSOLIDATED NET (LOSS) INCOME PER SHARE
|
|
|
|
|
|
||
CONSOLIDATED NET (LOSS) INCOME PER SHARE, BASIC
|
$
|
(0.23
|
)
|
|
$
|
0.33
|
|
CONSOLIDATED NET (LOSS) INCOME PER SHARE, DILUTED
|
$
|
(0.23
|
)
|
|
$
|
0.33
|
|
|
|
|
|
|
|
||
SHARES USED IN COMPUTING NET (LOSS) INCOME PER SHARE
|
|
|
|
|
|
||
BASIC
|
125,240
|
|
|
124,421
|
|
||
DILUTED
|
125,240
|
|
|
124,666
|
|
||
|
|
|
|
|
|
||
COMPREHENSIVE (LOSS) INCOME
|
|
|
|
|
|
||
Consolidated net (loss) income
|
$
|
(28,747
|
)
|
|
$
|
41,027
|
|
Unrealized holding (loss) gain on available-for-sale securities, net of tax of $0 and $75 for the three months ended March 31, 2018 and 2017, respectively.
|
(1
|
)
|
|
128
|
|
||
Foreign currency translation (loss) gain
|
(848
|
)
|
|
4,026
|
|
||
Pension liability adjustment net of tax of ($1) and $57 for the three months ended March 31, 2018 and 2017, respectively.
|
4
|
|
|
223
|
|
||
COMPREHENSIVE (LOSS) INCOME
|
$
|
(29,592
|
)
|
|
$
|
45,404
|
|
|
|
Shares
|
|
Common Stock
|
|
Retained
Earnings
|
|
Other
Comprehensive
Loss
|
|
Total
|
|||||||||
BALANCES AT DECEMBER 31, 2017
|
|
125,091
|
|
|
$
|
550,472
|
|
|
$
|
294,741
|
|
|
$
|
(13,968
|
)
|
|
$
|
831,245
|
|
Consolidated net (loss)
|
|
—
|
|
|
—
|
|
|
(28,747
|
)
|
|
—
|
|
|
(28,747
|
)
|
||||
Exercise of stock options
|
|
22
|
|
|
546
|
|
|
—
|
|
|
—
|
|
|
546
|
|
||||
Compensation and share issuances related to restricted stock awards
|
|
—
|
|
|
2,349
|
|
|
—
|
|
|
—
|
|
|
2,349
|
|
||||
Stock-based compensation expense - stock options
|
|
—
|
|
|
3,159
|
|
|
—
|
|
|
—
|
|
|
3,159
|
|
||||
Foreign currency translation loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(848
|
)
|
|
(848
|
)
|
||||
Unrealized holding loss on available-for-sale securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Akorn AG pension liability adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||
Employee stock purchase plan
|
|
146
|
|
|
2,809
|
|
|
—
|
|
|
—
|
|
|
2,809
|
|
||||
BALANCES AT MARCH 31, 2018 (unaudited)
|
|
125,259
|
|
|
$
|
559,335
|
|
|
$
|
265,994
|
|
|
$
|
(14,813
|
)
|
|
$
|
810,516
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
OPERATING ACTIVITIES:
|
|
|
|
||||
Consolidated net (loss) income
|
$
|
(28,747
|
)
|
|
$
|
41,027
|
|
Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
20,278
|
|
|
20,914
|
|
||
Amortization of debt financing costs
|
1,304
|
|
|
1,304
|
|
||
Impairment of intangible assets
|
18,815
|
|
|
225
|
|
||
Non-cash stock compensation expense
|
5,508
|
|
|
4,709
|
|
||
Deferred income taxes, net
|
(7,833
|
)
|
|
(1,174
|
)
|
||
Other
|
218
|
|
|
31
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Trade accounts receivable
|
(35,508
|
)
|
|
49,563
|
|
||
Inventories, net
|
(9,292
|
)
|
|
2,708
|
|
||
Prepaid expenses and other current assets
|
12,034
|
|
|
3,266
|
|
||
Trade accounts payable
|
11,318
|
|
|
(4,286
|
)
|
||
Accrued expenses and other liabilities
|
(19,686
|
)
|
|
8,296
|
|
||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
$
|
(31,591
|
)
|
|
$
|
126,583
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Proceeds from disposal of assets
|
1
|
|
|
152
|
|
||
Purchases of property, plant and equipment
|
(22,341
|
)
|
|
(22,483
|
)
|
||
NET CASH USED IN INVESTING ACTIVITIES
|
$
|
(22,340
|
)
|
|
$
|
(22,331
|
)
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Proceeds from the exercise of stock options
|
546
|
|
|
1,115
|
|
||
Payment of contingent acquisition liabilities
|
(4,793
|
)
|
|
—
|
|
||
Lease payments
|
(3
|
)
|
|
—
|
|
||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
|
$
|
(4,250
|
)
|
|
$
|
1,115
|
|
Effect of exchange rate changes on cash and cash equivalents
|
41
|
|
|
529
|
|
||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
$
|
(58,140
|
)
|
|
$
|
105,896
|
|
Cash and cash equivalents, and restricted at beginning of period
|
369,889
|
|
|
204,034
|
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD
|
$
|
311,749
|
|
|
$
|
309,930
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
|
||
Amount paid for interest
|
$
|
12,262
|
|
|
$
|
11,041
|
|
Amount paid for income taxes, net
|
$
|
8,205
|
|
|
$
|
(42
|
)
|
Additional capital expenditures included in accounts payable
|
$
|
8,227
|
|
|
$
|
7,571
|
|
Cash, Cash Equivalents, and Restricted Cash
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Cash and cash equivalents
|
$
|
309,377
|
|
|
$
|
307,425
|
|
Restricted cash
|
2,372
|
|
|
2,505
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
311,749
|
|
|
$
|
309,930
|
|
-
|
Level 1
—Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities. The carrying value of the Company's cash and cash equivalents are considered Level 1 assets.
|
-
|
Level 2
—Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. The Company has no Level 2 assets or liabilities in any of the periods presented.
|
-
|
Level 3
—Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities. The portion of the fair valuation of the available-for-sale investment held in shares of Nicox stock that is subject to a lock-up provision is considered a Level 3 asset. The additional consideration payable as a result of prior years' acquisitions and other insignificant contingent amounts are considered Level 3 liabilities.
|
|
|
|
Fair Value Measurements at Reporting Date, Using:
|
||||||||||||
Description
|
March 31, 2018
|
|
Quoted Prices
in Active
Markets for
Identical Items
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Cash and cash equivalents
|
$
|
309,377
|
|
|
$
|
309,377
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Nicox stock with lockup provisions
|
34
|
|
|
—
|
|
|
—
|
|
|
34
|
|
||||
Total assets
|
$
|
309,411
|
|
|
$
|
309,377
|
|
|
$
|
—
|
|
|
$
|
34
|
|
|
|
|
|
|
|
|
|
||||||||
Purchase consideration payable
|
$
|
201
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
201
|
|
Total liabilities
|
$
|
201
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
201
|
|
Description
|
December 31, 2017
|
|
Quoted Prices
in Active
Markets for
Identical Items
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Cash and cash equivalents
|
$
|
368,119
|
|
|
$
|
368,119
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Nicox stock with lockup provisions
|
35
|
|
|
—
|
|
|
—
|
|
|
35
|
|
||||
Total assets
|
$
|
368,154
|
|
|
$
|
368,119
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
||||||||
Purchase consideration payable
|
$
|
3,901
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,901
|
|
Total liabilities
|
$
|
3,901
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,901
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Stock options
|
$
|
3,159
|
|
|
$
|
3,314
|
|
Employee stock purchase plan
|
—
|
|
|
262
|
|
||
Restricted stock units
|
2,349
|
|
|
1,133
|
|
||
Total stock-based compensation expense
|
$
|
5,508
|
|
|
$
|
4,709
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Expected volatility
|
—
|
%
|
|
50
|
%
|
||
Expected life (in years)
|
0
|
|
|
4.8
|
|
||
Risk-free interest rate
|
—
|
%
|
|
1.75
|
%
|
||
Dividend yield
|
—
|
|
|
—
|
|
||
Fair value per stock option
|
$
|
—
|
|
|
$
|
9.25
|
|
Forfeiture rate
|
—
|
%
|
|
8
|
%
|
|
Number of
Options
(in thousands)
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
|
Aggregate
Intrinsic Value
(in thousands) (1)
|
|||||
Outstanding at December 31, 2017
|
4,053
|
|
|
$
|
28.95
|
|
|
4.56
|
|
$
|
21,459
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
(22
|
)
|
|
24.99
|
|
|
|
|
|
|||
Forfeited
|
(18
|
)
|
|
29.02
|
|
|
|
|
|
|||
Outstanding at March 31, 2018
|
4,013
|
|
|
$
|
28.97
|
|
|
4.32
|
|
$
|
505
|
|
Exercisable at March 31, 2018
|
2,114
|
|
|
$
|
29.18
|
|
|
3.86
|
|
$
|
505
|
|
|
Number of Units
(in thousands)
|
|
Weighted Average Per Share
Grant Date Fair Value
|
||
Unvested at December 31, 2017
|
888
|
|
$
|
32.55
|
|
Granted
|
6
|
|
$
|
32.00
|
|
Vested
|
—
|
|
$
|
—
|
|
Forfeited
|
(10)
|
|
$
|
32.27
|
|
Unvested at March 31, 2018
|
884
|
|
$
|
32.56
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Gross accounts receivable (1)
|
$
|
382,606
|
|
|
$
|
378,759
|
|
Less reserves for:
|
|
|
|
||||
Chargebacks (2)
|
(64,698
|
)
|
|
(73,984
|
)
|
||
Rebates (2)
|
(86,468
|
)
|
|
(111,945
|
)
|
||
Product returns
|
(41,213
|
)
|
|
(41,687
|
)
|
||
Discounts and allowances
|
(10,579
|
)
|
|
(7,779
|
)
|
||
Advertising and promotions
|
(1,758
|
)
|
|
(1,301
|
)
|
||
Doubtful accounts
|
(837
|
)
|
|
(680
|
)
|
||
Trade accounts receivable, net
|
$
|
177,053
|
|
|
$
|
141,383
|
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2018
|
|
2017
|
||||
Gross sales
|
|
$
|
520,533
|
|
|
$
|
680,534
|
|
Less adjustments for:
|
|
|
|
|
||||
Chargebacks (1)
|
|
(223,963
|
)
|
|
(280,160
|
)
|
||
Rebates, administrative and other fees (1)
|
|
(92,279
|
)
|
|
(124,378
|
)
|
||
Product returns
|
|
(7,121
|
)
|
|
(8,418
|
)
|
||
Discounts and allowances
|
|
(10,238
|
)
|
|
(12,922
|
)
|
||
Advertising, promotions and others
|
|
(2,869
|
)
|
|
(1,236
|
)
|
||
Revenues, net
|
|
$
|
184,063
|
|
|
$
|
253,420
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Finished goods
|
$
|
84,523
|
|
|
$
|
79,226
|
|
Work in process
|
13,633
|
|
|
15,447
|
|
||
Raw materials and supplies
|
94,807
|
|
|
88,895
|
|
||
Inventories, net
|
$
|
192,963
|
|
|
$
|
183,568
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Land and land improvements
|
$
|
17,992
|
|
|
$
|
17,846
|
|
Buildings and leasehold improvements
|
113,343
|
|
|
106,316
|
|
||
Furniture and equipment
|
221,749
|
|
|
202,897
|
|
||
Sub-total
|
353,084
|
|
|
327,059
|
|
||
Accumulated depreciation
|
(137,753
|
)
|
|
(130,814
|
)
|
||
Property, plant and equipment in service, net
|
$
|
215,331
|
|
|
$
|
196,245
|
|
Construction in progress
|
109,887
|
|
|
117,173
|
|
||
Property, plant and equipment, net
|
$
|
325,218
|
|
|
$
|
313,418
|
|
|
Consumer
Health
|
|
Prescription
Pharmaceuticals
|
|
Total
|
||||||
Balances at December 31, 2017
|
$
|
16,717
|
|
|
$
|
268,593
|
|
|
$
|
285,310
|
|
Currency translation adjustments
|
—
|
|
|
(330
|
)
|
|
(330
|
)
|
|||
Acquisitions
|
—
|
|
|
—
|
|
|
—
|
|
|||
Impairments
|
—
|
|
|
—
|
|
|
—
|
|
|||
Dispositions
|
—
|
|
|
—
|
|
|
—
|
|
|||
Balances at March 31, 2018
|
$
|
16,717
|
|
|
$
|
268,263
|
|
|
$
|
284,980
|
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Reclass-ifications
|
|
Gross Impairment
|
|
Net
Balance
|
|
Wtd Avg Remaining
Amortization Period
(years)
|
||||||||||
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Product licensing rights
|
$
|
607,889
|
|
|
$
|
(218,006
|
)
|
|
$
|
5,300
|
|
|
$
|
(950
|
)
|
|
$
|
394,233
|
|
|
9.6
|
IPR&D
|
149,161
|
|
|
—
|
|
|
(5,300
|
)
|
|
(17,873
|
)
|
|
125,988
|
|
|
N/A - Indefinite lived
|
|||||
Trademarks
|
16,000
|
|
|
(5,608
|
)
|
|
—
|
|
|
—
|
|
|
10,392
|
|
|
17.7
|
|||||
Customer relationships
|
4,225
|
|
|
(2,123
|
)
|
|
—
|
|
|
—
|
|
|
2,102
|
|
|
8.1
|
|||||
Other intangibles
|
11,235
|
|
|
(6,472
|
)
|
|
—
|
|
|
—
|
|
|
4,763
|
|
|
5.6
|
|||||
|
$
|
788,510
|
|
|
$
|
(232,209
|
)
|
|
$
|
—
|
|
|
$
|
(18,823
|
)
|
|
$
|
537,478
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Product licensing rights
|
$
|
747,106
|
|
|
$
|
(205,549
|
)
|
|
$
|
—
|
|
|
$
|
(139,217
|
)
|
|
$
|
402,340
|
|
|
9.8
|
IPR&D
|
173,757
|
|
|
—
|
|
|
—
|
|
|
(24,596
|
)
|
|
149,161
|
|
|
N/A - Indefinite lived
|
|||||
Trademarks
|
16,000
|
|
|
(5,376
|
)
|
|
—
|
|
|
—
|
|
|
10,624
|
|
|
17.8
|
|||||
Customer relationships
|
4,225
|
|
|
(2,058
|
)
|
|
—
|
|
|
—
|
|
|
2,167
|
|
|
8.3
|
|||||
Other intangibles
|
11,235
|
|
|
(6,043
|
)
|
|
—
|
|
|
—
|
|
|
5,192
|
|
|
5.7
|
|||||
|
$
|
952,323
|
|
|
$
|
(219,026
|
)
|
|
$
|
—
|
|
|
$
|
(163,813
|
)
|
|
$
|
569,484
|
|
|
|
Ratings Level
|
Index Ratings
(Moody’s/S&P)
|
Eurodollar Spread
|
ABR Spread
|
Level I
|
B1/B+ or higher
|
4.25%
|
3.25%
|
Level II
|
B2/B
|
4.75%
|
3.75%
|
Level III
|
B3/B- or lower
|
5.50%
|
4.50%
|
(In thousands)
|
2018
|
|
2019
|
|
2020
|
|
2021
|
||||||||||||
Maturities of debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
831,938
|
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2018
|
|
2017
|
||||
Net (loss) income
|
|
$
|
(28,747
|
)
|
|
$
|
41,027
|
|
Net (loss) income per share:
|
|
|
|
|
||||
Basic
|
|
$
|
(0.23
|
)
|
|
$
|
0.33
|
|
Diluted
|
|
$
|
(0.23
|
)
|
|
$
|
0.33
|
|
Shares used in computing net (loss) income per share:
|
|
|
|
|
|
|
||
Weighted average basic shares outstanding
|
|
125,240
|
|
|
124,421
|
|
||
Dilutive securities:
|
|
|
|
|
||||
Stock option and unvested RSUs
|
|
—
|
|
|
245
|
|
||
Total dilutive securities
|
|
—
|
|
|
245
|
|
||
Weighted average diluted shares outstanding
|
|
125,240
|
|
|
124,666
|
|
||
|
|
|
|
|
||||
Shares subject to stock options omitted from the calculation of (loss) income per share as their effect would have been anti-dilutive
|
|
3,356
|
|
|
4,093
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Revenues, net:
|
|
|
|
||||
Prescription Pharmaceuticals
|
$
|
164,302
|
|
|
$
|
237,379
|
|
Consumer Health
|
19,761
|
|
|
16,041
|
|
||
Total revenues, net
|
184,063
|
|
|
253,420
|
|
||
|
|
|
|
||||
Gross Profit:
|
|
|
|
|
|
||
Prescription Pharmaceuticals
|
73,508
|
|
|
140,956
|
|
||
Consumer Health
|
8,720
|
|
|
7,813
|
|
||
Total gross profit
|
82,228
|
|
|
148,769
|
|
||
|
|
|
|
||||
Operating expenses
|
107,643
|
|
|
74,356
|
|
||
|
|
|
|
||||
Operating (loss) income
|
(25,415
|
)
|
|
74,413
|
|
||
Other expenses, net
|
(10,612
|
)
|
|
(9,087
|
)
|
||
|
|
|
|
||||
(Loss) Income before income taxes
|
$
|
(36,027
|
)
|
|
$
|
65,326
|
|
|
Three Months Ended
March 31, 2018 |
|
Three Months Ended
March 31, 2017 |
||||||||
Region
|
Amount
|
|
% of Total Revenues
|
|
Amount
|
|
% of Total Revenues
|
||||
Domestic
|
$
|
181,015
|
|
|
98.3%
|
|
$
|
245,703
|
|
|
97.0%
|
Foreign
|
3,048
|
|
|
1.7%
|
|
7,717
|
|
|
3.0%
|
||
Total Revenues
|
$
|
184,063
|
|
|
100.0%
|
|
$
|
253,420
|
|
|
100.0%
|
Year ending December 31,
|
Milestone Payments
|
||
2018
|
$
|
12,994
|
|
2019
|
5,220
|
|
|
2020
|
3,070
|
|
|
2021 and Beyond
|
950
|
|
|
Total
|
$
|
22,234
|
|
Big 3 Wholesalers combined:
|
March 31,
2018 |
|
December 31,
2017 |
Percentage of gross trade accounts receivable
|
88%
|
|
86%
|
|
|
Three Months Ended
March 31, |
||
Big 3 Wholesalers combined:
|
|
2018
|
|
2017
|
Percentage of gross sales
|
|
83%
|
|
79%
|
|
Three Months Ended
March 31, 2018 |
|
Three Months Ended
March 31, 2017 |
||||||||
Disaggregation of net revenues by major customers
|
Amount
|
|
% of Total Revenues
|
|
Amount
|
|
% of Total Revenues
|
||||
Amerisource
|
$
|
37,955
|
|
|
20.6%
|
|
$
|
43,937
|
|
|
17.3%
|
Cardinal
|
27,189
|
|
|
14.8%
|
|
48,968
|
|
|
19.3%
|
||
McKesson
|
53,221
|
|
|
28.9%
|
|
69,711
|
|
|
27.5%
|
||
Big 3 Wholesalers combined
|
118,365
|
|
|
64.3%
|
|
162,616
|
|
|
64.2%
|
||
All Others
|
65,698
|
|
|
35.7%
|
|
90,804
|
|
|
35.8%
|
||
Total Revenues
|
184,063
|
|
|
100.0%
|
|
253,420
|
|
|
100.0%
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
(Loss) Income before income taxes
|
$
|
(36,027
|
)
|
|
$
|
65,326
|
|
Income tax (benefit) provision
|
(7,280
|
)
|
|
24,299
|
|
||
Net (loss) income
|
$
|
(28,747
|
)
|
|
$
|
41,027
|
|
|
|
|
|
||||
Income tax (benefit) provision as a percentage of (loss) income before income taxes
|
20.2
|
%
|
|
37.2
|
%
|
•
|
There are material uncertainties and risks associated with the pending Merger Agreement and Merger
|
◦
|
The announcement and pendency of the Merger may impede Akorn’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
|
◦
|
The attention of our employees and management may be diverted due to activities related to the Merger, which may affect our business operations
|
◦
|
Matters relating to the Merger (including integration planning) may require substantial commitments of time and resources by Akorn management, which could harm our relationships with our employees, customers, distributors, suppliers or other business partners, and may result in a loss of or a substantial decrease in purchases by our customers
|
◦
|
The Merger Agreement restricts us from engaging in certain actions without the approval of Fresenius Kabi, which could prevent us from pursuing certain business opportunities outside the ordinary course of business that arise prior to the closing of the Merger
|
◦
|
Shareholder litigation in connection with the transactions contemplated by the Merger Agreement may result in significant costs of defense, indemnification and liability; and
|
◦
|
The outcome of the Company’s and Fresenius Kabi’s investigations into alleged breaches of FDA data integrity requirements relating to product development at the Company, and any actions taken by the Company, Fresenius Kabi, third parties or the FDA as a result of such investigations may result in significant costs
|
◦
|
The Fresenius Kabi AG’s purported termination of the Merger Agreement and the litigation related to the Merger pending in the Court of Chancery of the State of Delaware may result in significant costs and in the Merger not being completed in a timely manner or at all
|
•
|
The risk that the pending merger may not be completed in a timely manner or at all
|
•
|
Our growth depends on our ability to timely and efficiently develop and successfully launch and market new pharmaceutical products
|
•
|
We could experience business interruptions at our manufacturing facilities, which may have a material adverse effect on our business, financial position and results of operations
|
•
|
A significant portion of our revenues are generated through the sale of products manufactured by third parties, the loss or failure of any of which may have a material adverse effect on our business, financial position and results of operations
|
•
|
We depend on a small number of wholesalers to distribute our products, the loss of any of which could have a material adverse effect on our business
|
•
|
We may be subject to significant disruptions or failures in our information technology systems and network infrastructures that could have a material adverse effect on our business
|
•
|
We depend on our employees and must continue to attract and retain key personnel in order to compete successfully, and any failure to do so could hinder successful execution of our business and development plans and have a material adverse effect on our financial position and results of operation
|
•
|
Our inability to effectively manage or support our growth may have a material adverse effect on our business, financial position, results of operations and liquidity and could cause the price of our common stock to decline
|
•
|
We have entered into several strategic business alliances that may not result in marketable products and may have a material adverse effect on our business, financial position, results of operations and liquidity
|
•
|
We become involved in legal proceedings and governmental investigations from time to time, any of which may result in substantial losses, government enforcement actions, damage to our business and reputation and place a strain on our internal resources
|
•
|
Charges to earnings resulting from acquisitions could have a material adverse effect on our business, financial position and results of operations
|
•
|
Failure to obtain regulatory certification of our manufacturing facility in India for production of pharmaceutical products for export to the United States, as well as other regulated world markets, could impair our ability to grow and adversely affect our business, financial condition and results of operations
|
•
|
We may not achieve the anticipated benefits from our acquisitions and we may face integration difficulties, which could adversely affect our operating results, increase costs and place a significant strain on our management
|
•
|
John N. Kapoor, Ph.D., through his stock ownership and his right to nominate up to three directors, could have an adverse effect on the price of our common stock and have substantial influence over our business strategies and policies
|
•
|
Many of the raw materials and components used in our products come from a single source, the loss of any of which could have a material adverse effect on our business
|
•
|
Sales of our products may be adversely affected by the continuing consolidation of our customer base, which may have a material adverse effect on our business plans, financial position and results of operations
|
•
|
Our branded products may become subject to increased generic competition
|
•
|
Changes in technology could render our products obsolete
|
•
|
We are subject to extensive government regulations which if they change and or we are not in compliance with, could increase our costs, subject us to various obligations and fines, or prevent us from selling our products or operating our facilities
|
•
|
Changes in healthcare law and policy changes may adversely affect our business plans and results of operations
|
•
|
The FDA may require us to stop marketing certain unapproved drugs, which could have a material adverse effect on our business, financial position and results of operations
|
•
|
Any failure to comply with the complex reporting and payment obligations under Medicare, Medicaid and other government programs may result in litigation or sanctions
|
•
|
Failure to comply with the U.S. Foreign Corrupt Practices Act could subject us to, among other things, penalties and legal expenses that could harm our reputation and have a material adverse effect on our business, financial condition and operating results
|
•
|
The FDA may authorize sales of some prescription pharmaceuticals on a non-prescription basis, which may reduce the profitability of our prescription products
|
•
|
Third parties may claim that we infringe their proprietary rights and may prevent or delay us from manufacturing and selling some of our new products
|
•
|
Our patents and proprietary rights may be challenged, circumvented or otherwise compromised by competitors, which may result in our protected products losing their market exclusivity and becoming subject to generic competition before their patents expire
|
•
|
We may need to obtain additional capital to continue to grow our business
|
•
|
Our indebtedness reduces our financial and operating flexibility
|
•
|
We may not generate cash flow sufficient to pay interest and make required principal repayments on our Term Loans
|
•
|
Exercise of options and granting of restricted stock units, may have a substantial dilutive effect on our common stock
|
•
|
Our announced stock repurchase program could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock
|
•
|
We may issue preferred stock and the terms of such preferred stock may reduce the market value of our common stock
|
|
Three Months Ended
March 31, |
||||||||||||
|
2018
|
|
2017
|
||||||||||
|
Amount
|
|
% of
Revenue
|
|
Amount
|
|
% of
Revenue
|
||||||
Revenues, net:
|
|
|
|
|
|
|
|
|
|
|
|
||
Prescription Pharmaceuticals
|
$
|
164,302
|
|
|
89.3
|
%
|
|
$
|
237,379
|
|
|
93.7
|
%
|
Consumer Health
|
19,761
|
|
|
10.7
|
%
|
|
16,041
|
|
|
6.3
|
%
|
||
Total revenues, net
|
184,063
|
|
|
100.0
|
%
|
|
253,420
|
|
|
100.0
|
%
|
||
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
||
Prescription Pharmaceuticals
|
73,508
|
|
|
44.7
|
%
|
|
140,956
|
|
|
59.4
|
%
|
||
Consumer Health
|
8,720
|
|
|
44.1
|
%
|
|
7,813
|
|
|
48.7
|
%
|
||
Total gross profit
|
82,228
|
|
|
44.7
|
%
|
|
148,769
|
|
|
58.7
|
%
|
||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||
SG&A expenses
|
62,983
|
|
|
34.2
|
%
|
|
47,583
|
|
|
18.8
|
%
|
||
Acquisition-related costs
|
11
|
|
|
—
|
%
|
|
11
|
|
|
—
|
%
|
||
R&D expenses
|
30,967
|
|
|
16.8
|
%
|
|
11,291
|
|
|
4.5
|
%
|
||
Amortization of intangible assets
|
13,190
|
|
|
7.2
|
%
|
|
15,471
|
|
|
6.1
|
%
|
||
Impairment of intangible assets
|
492
|
|
|
0.3
|
%
|
|
—
|
|
|
—
|
%
|
||
Operating (loss) income
|
$
|
(25,415
|
)
|
|
(13.8
|
)%
|
|
$
|
74,413
|
|
|
29.4
|
%
|
Other expense, net
|
(10,612
|
)
|
|
(5.8
|
)%
|
|
(9,087
|
)
|
|
(3.6
|
)%
|
||
(Loss) Income before income taxes
|
(36,027
|
)
|
|
(19.6
|
)%
|
|
65,326
|
|
|
25.8
|
%
|
||
Income tax provision
|
(7,280
|
)
|
|
(4.0
|
)%
|
|
24,299
|
|
|
9.6
|
%
|
||
Net (loss) income
|
$
|
(28,747
|
)
|
|
(15.6
|
)%
|
|
$
|
41,027
|
|
|
16.2
|
%
|
(amounts in thousands)
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
OPERATING ACTIVITIES:
|
|
|
|
||||
Consolidated net (loss) income
|
$
|
(28,747
|
)
|
|
$
|
41,027
|
|
Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
20,278
|
|
|
20,914
|
|
||
Amortization of debt financing costs
|
1,304
|
|
|
1,304
|
|
||
Impairment of intangible assets
|
18,815
|
|
|
225
|
|
||
Non-cash stock compensation expense
|
5,508
|
|
|
4,709
|
|
||
Deferred income taxes, net
|
(7,833
|
)
|
|
(1,174
|
)
|
||
Other
|
218
|
|
|
31
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Trade accounts receivable
|
(35,508
|
)
|
|
49,563
|
|
||
Inventories, net
|
(9,292
|
)
|
|
2,708
|
|
||
Prepaid expenses and other current assets
|
12,034
|
|
|
3,266
|
|
||
Trade accounts payable
|
11,318
|
|
|
(4,286
|
)
|
||
Accrued expenses and other liabilities
|
(19,686
|
)
|
|
8,296
|
|
||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
$
|
(31,591
|
)
|
|
$
|
126,583
|
|
(amounts in thousands)
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Proceeds from disposal of assets
|
$
|
1
|
|
|
$
|
152
|
|
Purchases of property, plant and equipment
|
(22,341
|
)
|
|
(22,483
|
)
|
||
NET CASH USED IN INVESTING ACTIVITIES
|
$
|
(22,340
|
)
|
|
$
|
(22,331
|
)
|
(amounts in thousands)
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Proceeds from the exercise of stock options
|
$
|
546
|
|
|
$
|
1,115
|
|
Payment of contingent acquisition liabilities
|
(4,793
|
)
|
|
—
|
|
||
Lease payments
|
(3
|
)
|
|
—
|
|
||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
|
$
|
(4,250
|
)
|
|
$
|
1,115
|
|
|
AKORN, INC.
|
|
|
|
|
|
/s/ DUANE A. PORTWOOD
|
|
|
Duane A. Portwood
|
|
|
Chief Financial Officer
|
|
|
(on behalf of the registrant and as its
Principal Financial Officer)
|
1 Year Akorn Chart |
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