Akorn Reports 2012 Fourth Quarter and Year-End Financial Results

  Akorn Reports 2012 Fourth Quarter and Year-End Financial Results

  -Reports Record Q4 Revenue of $71.5 million and Q4 Adjusted EPS of $0.13-

Business Wire

LAKE FOREST, Ill. -- February 26, 2013

Akorn, Inc. (NASDAQ: AKRX), a niche generic pharmaceutical company, today
reported financial results for the fourth quarter and year ended December 31,
2012.

Raj Rai, Chief Executive Officer commented, “We achieved record growth in
revenues and profits in 2012 as a result of our strategic growth initiatives –
acquisitions, revival of products impacted by hospital drug shortages and new
product launches. In addition, we continued to build a robust R&D pipeline.
Looking ahead, we plan to further invest in R&D domestically, while expanding
the infrastructure in our India facilities to build new capacities, seek
growth from new markets and prepare for FDA inspection.”

2012 Key Highlights and Accomplishments

  *Achieved record fourth quarter 2012 consolidated revenue of $71.5 million,
    up 68% over the prior year quarter.
  *Achieved record year ended 2012 consolidated revenue of $256.2 million, up
    87% over the prior year.
  *Maintained gross margins at 58.0%, near the record level achieved in 2011.
  *Completed the acquisition of certain assets of Kilitch Drugs in India
    which expands the Company’s capacity and capabilities in sterile
    injectables.
  *Received FDA approval on 5 new ANDAs with a combined addressable IMS
    market of $655 million.
  *Launched 10 new products including vancomycin hydrochloride capsules,
    latanaprost ophthalmic solution, progesterone capsules and the first to
    market generic of pantoprazole sodium for injection. The 2012 product
    launches have an addressable IMS market of $900 million.
  *Re-launched 8 products with a combined addressable IMS market of $120
    million.
  *Filed a record 25 ANDAs and completed the development on an additional 10
    ANDAs with a combined annual IMS market size of approximately $2.9
    billion.

Financial Results for the Quarter Ended December 31, 2012

Consolidated revenue for the fourth quarter of 2012 was $71.5 million, up 68%
over the prior year quarter’s consolidated revenue of $42.6 million. The
increase in consolidated revenue was driven by the Lundbeck and Kilitch
acquisitions, the sale of newly approved and re-launched products, and organic
growth of established products, offset by decreases in the US contract
services business. The Company launched three new products in the fourth
quarter of 2012: progesterone capsules, pantoprazole sodium for injection and
a tetanus-diphtheria (Td) vaccine. The revenue impact of Hurricane Sandy was
partially offset by earlier than anticipated sales of pantoprazole and Td
vaccine. Consolidated gross margin for the fourth quarter of 2012 was 58.7%
compared to 60.0% in the comparable prior year period. The decrease in gross
margin was the result of lower margins from Akorn India, which began
operations in February 2012 through the acquisition of certain assets from
Kilitch Drugs (India) Limited as well as the impact of Hurricane Sandy, which
resulted in a two week disruption in manufacturing from our Somerset, New
Jersey ophthalmic plant.

Net income for the fourth quarter of 2012 was $8.8 million, or $0.08 per
diluted share, compared to net income of $5.7 million, or $0.05 per diluted
share, in the prior year quarter. Non-GAAP adjusted net income for the fourth
quarter of 2012 was $14.6 million, or $0.13 per diluted share, compared to
non-GAAP adjusted net income of $11.4 million, or $0.11 per diluted share, in
the prior year quarter.

Financial Results for the Year Ended December 31, 2012

Consolidated revenue for the year 2012 was $256.2 million, up 87% over the
prior year consolidated revenue of $136.9 million. The increase in
consolidated revenue was driven by the Lundbeck, Kilitch and AVR acquisitions,
the sale of newly approved and re-launched products, and organic growth of
established products, offset by decreases in the US contract services
business. The Company launched ten new products in 2012, including vancomycin
hydrochloride capsules, latanaprost ophthalmic solution, progesterone
capsules, pantoprazole sodium for injection and Td vaccine. Additionally, the
Company re-launched eight products in 2012. Consolidated gross margin for 2012
was 58.0% compared to 58.2% in the prior year. In 2012, the revenue from
higher margin products acquired from Lundbeck in December 2011 largely offset
the lower margins from Akorn India.

Net income for 2012 was $35.4 million, or $0.32 per diluted share, compared to
net income of $43.0 million, or $0.41 per diluted share, in the prior year.
Our 2011 net income benefited from a $13.4 million gain on the sale of the
Akorn-Strides joint venture as well as a full year income tax benefit of $1.7
million, compared with an effective tax rate in 2012 of 38.5%. Non-GAAP
adjusted net income for 2012 was $57.6 million, or $0.52 per diluted share,
compared to non-GAAP adjusted net income of $36.1 million, or $0.35 per
diluted share, in the prior year.

Akorn’s R&D Pipeline

The Company has 56 ANDAs filed with the FDA with a combined annual addressable
IMS market size of approximately $5.8 billion. The Company has completed
development work on 10 additional products with a combined annual addressable
IMS market size of approximately $0.3 billion and expects to file these
products with the FDA shortly.

Fourth Quarter 2012 Conference Call

The Company will host a conference call at 10:00 a.m. Eastern Time on Tuesday,
February 26, 2013, to discuss fourth quarter 2012 results followed by a Q&A
session. The domestic call-in number is 888-438-5448 and the international
call-in number is 719-785-1753. The confirmation code for all callers is
3343969. The URL for the webcast is
http://www.videonewswire.com/event.asp?id=92105. A live broadcast of the
conference call will also be available online at www.akorn.com under the
Investor Relations tab and available for replay for 30 days.

About Akorn, Inc.

Akorn, Inc. is a niche pharmaceutical company engaged in the development,
manufacture and marketing of multisource and branded pharmaceuticals. Akorn
has manufacturing facilities located in Decatur, Illinois, Somerset, New
Jersey and Paonta Sahib, India where the Company manufactures ophthalmic and
injectable pharmaceuticals. Additional information is available on the
Company’s website at www.akorn.com.

Forward Looking Statements

This press release includes statements that may constitute "forward-looking
statements", including projections of certain measures of Akorn's results of
operations, projections of sales, projections of certain charges and expenses,
projections related to the number and potential market size of ANDAs and other
statements regarding Akorn's goals, regulatory approvals and strategy. Akorn
cautions that these forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially from those
indicated in the forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Because such statements inherently involve risks and
uncertainties, actual future results may differ materially from those
expressed or implied by such forward-looking statements. You can identify
these statements by the fact that they do not relate strictly to historical or
current facts. They use words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," and other words and terms of similar
meaning in connection with a discussion of future operating or financial
performance. Factors that could cause or contribute to such differences
include, but are not limited to: statements relating to future steps we may
take, prospective products, future performance or results of current and
anticipated products, sales efforts, expenses, the outcome of contingencies
such as legal proceedings, and financial results. These cautionary statements
should be considered in connection with any subsequent written or oral
forward-looking statements that may be made by the Company or by persons
acting on its behalf and in conjunction with its periodic SEC filings. You are
advised, however, to consult any further disclosures we make on related
subjects in our reports filed with the SEC. In particular, you should read the
discussion in the section entitled "Cautionary Statement Regarding
Forward-Looking Statements" in our most recent Annual Report on Form 10-K, as
it may be updated in subsequent reports filed with the SEC. That discussion
covers certain risks, uncertainties and possibly inaccurate assumptions that
could cause our actual results to differ materially from expected and
historical results. Other factors besides those listed there could also
adversely affect our results.

Non-GAAP Financial Measures

In addition to reporting all financial information required in accordance with
generally accepted accounting principles (GAAP), Akorn is also reporting
Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted
share, which are non-GAAP financial measures. Since Adjusted EBITDA, Adjusted
net income and Adjusted net income per diluted share are not GAAP financial
measures, they should not be used in isolation or as a substitute for
consolidated statements of operations and cash flow data prepared in
accordance with GAAP. In addition, Akorn’s definitions of Adjusted EBITDA,
Adjusted net income and Adjusted net income per diluted share may not be
comparable to similarly titled non-GAAP financial measures reported by other
companies. For a full reconciliation of Adjusted EBITDA and Adjusted net
income to GAAP net income, please see the attachments to this earnings
release.

Adjusted EBITDA, as defined by the Company, is calculated as follows:

Net income, plus:

  *Interest income (expense), net
  *Provision for income taxes
  *Depreciation and amortization
  *Non-cash expenses, such as share-based compensation expense, changes in
    the fair value of warrants, and deferred financing cost amortization
  *Other adjustments, such as equity in earnings of unconsolidated joint
    venture related to the sale of the joint venture's assets, amortization of
    the fair value adjustment to inventory acquired through business
    acquisitions, and Kilitch Drugs (India) Limited acquisition related
    expenses

The Company believes that Adjusted EBITDA is a meaningful indicator, to both
Company management and investors, of the past and expected ongoing operating
performance of the Company. EBITDA is a commonly used and widely accepted
measure of financial performance. Adjusted EBITDA is deemed by the Company to
be a useful performance indicator because it includes an add back of non-cash
and non-recurring operating expenses which have little to no bearing on cash
flows and may be subject to uncontrollable factors not reflective of the
Company’s true operational performance (i.e. fair value adjustments to the
carrying value of stock warrants liability).

Adjusted net income, as defined by the Company, is calculated as follows:

Net income, plus:

  *The recorded provision for income taxes
  *Intangible asset amortization
  *Non-cash expenses, such as non-cash interest, share-based compensation
    expense, changes in the fair value of warrants, and deferred financing
    cost amortization
  *Other adjustments, such as equity in earnings of unconsolidated joint
    venture related to the sale of the joint venture's assets, amortization of
    the fair value adjustment to inventory acquired through business
    acquisitions, and Kilitch Drugs (India) Limited acquisition related
    expense
  *Less an estimated cash tax provision, net of the benefit from utilizing
    NOL carry-forwards.

Adjusted net income per diluted share is equal to Adjusted net income divided
by the actual or anticipated diluted share count for the applicable period.

The Company believes that Adjusted net income and Adjusted net income per
diluted shares are meaningful financial indicators, to both Company management
and investors, in that they exclude non-cash income and expense items that
have no impact on current or future cash flows, as well as other income and
expense items that are not expected to recur and therefore are not reflective
of continuing operating performance. Adjusted net income and Adjusted net
income per diluted share provide the Company and investors with income figures
that would be expected to be more aligned with cash flows than GAAP net
income, which includes a host of non-cash income and expense items.

While the Company uses Adjusted EBITDA, Adjusted net income and Adjusted net
income per diluted share in managing and analyzing its business and financial
condition and believes these non-GAAP financial measures to be useful to
investors in evaluating the Company’s performance, each of these financial
measures has certain shortcomings. Adjusted EBITDA does not take into account
the impact of capital expenditures on either the liquidity or the GAAP
financial performance of the Company and likewise omits share-based
compensation expenses, which may vary over time and may represent a material
portion of overall compensation expense. Adjusted net income does not take
into account non-cash expenses that reflect the amortization of past
expenditures, or include stock-based compensation, which is an important and
material element of the Company’s compensation package for its directors,
officers and other key employees. Due to the inherent limitations of each of
these non-GAAP financial measures, the Company’s management utilizes
comparable GAAP financial measures to evaluate the business in conjunction
with Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted
share and encourages investors to do likewise.

AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
                                                           
                                                                   
                         THREE MONTHS ENDED          TWELVE MONTHS ENDED
                         DECEMBER 31,                DECEMBER 31,
                         2012          2011          2012          2011
                                                                   
Revenues                 $ 71,520      $ 42,625      $ 256,158     $ 136,920
Cost of sales             29,549      17,050      107,466     57,231  
         GROSS PROFIT      41,971        25,575        148,692       79,689
                                                                   
Selling, general and
administrative             14,428        9,409         48,053        32,392
expenses
Acquisition-related        -             187           9,155         743
costs
Research and               6,034         3,792         15,858        11,555
development expenses
Amortization of           1,794       659         6,870       1,733   
intangibles
         TOTAL
         OPERATING        22,256      14,047      79,936      46,423  
         EXPENSES
                                                                   
         OPERATING         19,715        11,528        68,756        33,266
         INCOME
                                                                   
Amortization of
deferred financing         (201    )     (187    )     (782    )     (1,948  )
costs
Non-cash interest          (2,821  )     (914    )     (6,436  )     (2,109  )
expense
Interest expense, net      (1,029  )     (997    )     (4,038  )     (2,283  )
Equity in earnings of
unconsolidated joint       -             20            -             14,550
venture
Other non-operating                    (170    )                 (170    )
expenses
         INCOME BEFORE     15,664        9,280         57,500        41,306
         INCOME TAXES
Income tax provision      6,853       3,547       22,122      (1,707  )
(benefit)
         NET INCOME      $ 8,811      $ 5,733      $ 35,378     $ 43,013  
                                                                   
NET INCOME PER SHARE:
         BASIC           $ 0.09       $ 0.06       $ 0.37       $ 0.45    
         DILUTED         $ 0.08       $ 0.05       $ 0.32       $ 0.41    
                                                                   
SHARES USED IN
COMPUTING NET INCOME
PER SHARE:
         BASIC            95,520      94,761      95,189      94,549  
         DILUTED          110,757     105,985     110,510     103,912 
                                                                   
COMPREHENSIVE INCOME:
         Net income        8,811         5,733         35,378        43,013
         Foreign
         currency         (2,212  )    -           (5,904  )    -       
         translation
         loss
         Comprehensive    6,599       5,733       29,474      43,013  
         income
                                                                             

AKORN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
IN THOUSANDS, EXCEPT SHARE DATA
                                                            
                                                                  
                                                   DECEMBER 31,   DECEMBER 31,
                                                   2012           2011
                                                   (Unaudited)    (Audited)
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                        $  40,781      $  83,962
  Trade accounts receivable, net                      51,017         25,307
  Inventories                                         52,495         35,456
  Deferred taxes, current                             9,190          8,153
  Prepaid expenses and other current assets          5,224        3,071   
  TOTAL CURRENT ASSETS                                158,707        155,949
PROPERTY, PLANT AND EQUIPMENT, NET                    80,679         44,389
OTHER LONG-TERM ASSETS:
  Goodwill                                            32,159         11,863
  Product licensing rights, net                       63,654         67,822
  Other intangibles, net                              16,731         13,016
  Deferred financing costs                            3,078          3,864
  Deferred taxes, non-current                         930
  Long-term investments                               10,299         10,137
  Other                                              3,328        105     
  TOTAL OTHER LONG-TERM ASSETS                       130,179      106,807 
  TOTAL ASSETS                                     $  369,565    $  307,145 
                                                                  
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Trade accounts payable                           $  21,784      $  17,874
  Accrued compensation                                7,533          5,094
  Contingent consideration payable                    -              -
  Accrued expenses and other liabilities              13,974         5,321
  Advance from unconsolidated joint venture          -            -       
  TOTAL CURRENT LIABILITIES                           43,291         28,289
LONG-TERM LIABILITIES:
  Convertible notes due 2016                          104,637        100,808
  Purchase consideration payable                      16,113         13,841
  Deferred taxes, non-current                         1,991          3,742
  Product warranty liability                          1,299          1,299
  Lease incentive obligations and Other              1,153        958     
  long-term liabilities
  TOTAL LONG-TERM LIABILITIES                        125,193      120,648 
  TOTAL LIABILITIES                                  168,484      148,937 
SHAREHOLDERS' EQUITY:
  Common stock, no par value -- 150,000,000
  shares authorized, 95,844,012 and 94,936,282        226,035        212,636
  shares issued and outstanding at December 31,
  2012 and December 31, 2011, respectively
  Warrants to acquire common stock                    17,946         17,946
  Accumulated deficit                                 (36,996 )      (72,374 )
  Accumulated other comprehensive loss               (5,904  )     -       
  TOTAL SHAREHOLDERS' EQUITY                         201,081      158,208 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $  369,565    $  307,145 
                                                                             

AKORN, INC.                                                              
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
IN THOUSANDS (UNAUDITED)
                                                       
                                                                           
                    THREE MONTHS ENDED         TWELVE MONTHS ENDED
                    DECEMBER 30,               DECEMBER 30,
                    2012         2011          2012          2011
                                 (Restated)                  (Restated)
OPERATING
ACTIVITIES
Net income          $ 8,811      $ 5,733       $ 35,378      $ 43,013
Adjustments to
reconcile net
income to net
cash provided by
operating
activities:
Depreciation and      3,215        1,545         11,455        5,246
amortization
Write-off and
amortization of       201          187           782           1,948
deferred
financing fees
Amortization of
unfavorable           (635   )     -             (635    )     -
contract
liability
Non-cash stock
compensation          1,983        1,392         7,032         5,159
expense
Non-cash interest     2,821        914           6,436         2,109
expense
Deferred tax          (133   )     2,277         67            (4,411  )
assets, net
Excess tax
benefit from          (2,081 )     -             (4,488  )     -
stock
compensation
Equity in
earnings of           -            (20     )     -             (14,550 )
unconsolidated
joint venture
Changes in
operating assets                   -
and liabilities:
Trade accounts        (6,648 )     (5,601  )     (23,856 )     (13,581 )
receivable
Inventories           (2,367 )     (1,143  )     (15,447 )     (9,307  )
Prepaid expenses      (4,637 )     33            (5,689  )     (183    )
and other assets
Trade accounts        5,222        (520    )     4,489         2,546       (1)
payable
Accrued expenses
and other            (820   )    644         10,720      1,668   
liabilities
NET CASH PROVIDED
BY OPERATING          4,932        5,441         26,244        19,657
ACTIVITIES
                                                                           
INVESTING
ACTIVITIES
Payments for
acquisitions and      177          (45,000 )     (55,047 )     (87,412 )
equity
investments
Purchases of
property, plant       (5,698 )     (3,141  )     (20,454 )     (11,503 )   (1)
and equipment
Distribution from
unconsolidated       -          -           -           3,881   
joint venture
NET CASH USED IN
INVESTING             (5,521 )     (48,141 )     (75,501 )     (95,034 )
ACTIVITIES
                                                                           
FINANCING
ACTIVITIES
Proceeds from
issuance of           -            -             -             120,000
convertible notes
Debt financing        -            (415    )     -             (5,098  )
costs
Net proceeds from
common stock          -            -             -             1,727
offering and
warrant exercises
Excess tax
benefit from          2,081        -             4,488         -
stock
compensation
Proceeds under
stock option and     906        469         1,878       1,087   
stock purchase
plans
NET CASH PROVIDED
BY FINANCING          2,987        54            6,366         117,716
ACTIVITIES
                                                                           
Effect of changes
in exchange rates    (19    )    -           (290    )    -       
on cash & cash
equivalents
INCREASE
(DECREASE) IN         2,379        (42,646 )     (43,181 )     42,339
CASH AND CASH
EQUIVALENTS
Cash and cash
equivalents at       38,402     126,608     83,962      41,623  
beginning of
period
CASH AND CASH
EQUIVALENTS AT      $ 40,781    $ 83,962     $ 40,781     $ 83,962  
END OF PERIOD
                                                                           
(1) The 2011 numbers are restated to correct the classification of
accrued but unpaid purchases of property, plant and equipment.
                                                                           

AKORN, INC.
RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED EBITDA
IN THOUSANDS (UNAUDITED)
                                                              
                                  THREE MONTHS ENDED    TWELVE MONTHS ENDED
                                  DECEMBER 31,          DECEMBER 31,
                                  2012       2011       2012       2011
                                                                   
NET INCOME                        $ 8,811    $ 5,733    $ 35,378   $ 43,013
                                                                   
ADJUSTMENTS TO ARRIVE AT EBITDA:
   Depreciation expense             1,427      886        4,585      3,513
   Amortization expense             1,794      659        6,870      1,733
   Interest expense, net            1,029      997        4,038      2,283
   Non-cash interest expense        2,821      914        6,436      2,109
   Income tax provision            6,853     3,547     22,122    (1,707  )
EBITDA                            $ 22,735   $ 12,736   $ 79,429   $ 50,944
                                                                   
NON-CASH AND OTHER NON-RECURRING
INCOME AND EXPENSES:
   Kilith acquisition related       -          -          8,835      -
   expense
   Non-cash stock compensation      1,983      1,392      7,032      5,159
   expense
   Write-off and amortization of    201        187        782        1,948
   deferred financing costs
   Equity in earnings of
   unconsolidated joint venture     -          -          -          (13,380 )
   that is related to the sale of
   the joint venture's assets
   Amortization of the fair value
   adjustment to AVR's acquired    -         47        -         600     
   inventory
ADJUSTED EBITDA                   $ 24,919   $ 14,362   $ 96,078   $ 45,271  
                                                                             

AKORN, INC.
RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED NET INCOME
IN THOUSANDS, EXCEPT PER SHARE DATA (UNAUDITED)
                                                             
                                  THREE MONTHS ENDED    TWELVE MONTHS ENDED
                                  DECEMBER 31,          DECEMBER 31,
                                  2012       2011       2012       2011
                                                                   
NET INCOME                        $ 8,811    $ 5,733    $ 35,378   $ 43,013
                                                                   
INCOME TAX PROVISION (BENEFIT)     6,853     3,547     22,122    (1,707  )
                                                                   
INCOME BEFORE INCOME TAXES          15,664     9,280      57,500     41,306
                                                                   
ADJUSTMENTS TO ARRIVE AT ADJUSTED NET INCOME:
  Kilitch acquisition related       -          -          8,835      -
  expense
  Non-cash stock compensation       1,983      1,392      7,032      5,159
  expense
  Non-cash interest expense         2,821      914        6,436      2,109
  Amortization expense              1,794      659        6,870      1,733
  Write-off and amortization of     201        187        782        1,948
  deferred financing costs
  Equity in earnings of
  unconsolidated joint venture      -          -          -          (13,380 )
  that is related to the sale
  of the joint venture's assets
  Amortization of the fair
  value adjustment to AVR's        -         47        -         600     
  acquired inventory
                                                                   
ADJUSTED INCOME BEFORE INCOME       22,463     12,479     87,455     39,475
TAXES
                                                                   
ADJUSTED INCOME TAX PROVISION      7,857     1,061     29,810    3,355   
                                                                   
ADJUSTED NET INCOME               $ 14,606   $ 11,418   $ 57,645   $ 36,120  
                                                                   
ADJUSTED NET INCOME PER DILUTED   $ 0.13     $ 0.11     $ 0.52     $ 0.35    
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Contact:

Akorn, Inc.
Tim Dick, 847-279-6150
Chief Financial Officer
 
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