Akorn, Inc. (NASDAQ: AKRX), a niche generic pharmaceutical company (the “Company”), today announced certain preliminary financial results for its third quarter ended September 30, 2013. The purpose of this release is to facilitate the syndication of a $600 million term loan related to the Company’s previously announced acquisition of Hi-Tech Pharmacal Co., Inc. The acquisition is expected to close during the first quarter of 2014. The Company will issue a press release and host a conference call on November 5, 2013 to report its final third quarter financial results. Preliminary Third Quarter 2013 Financial Results
- Consolidated revenue for the third quarter of 2013 is expected to be in the range of $81 million to $82 million.
- GAAP net income is expected to be in the range of $12 million to $13 million, or from $0.10 to $0.11 per diluted share.
- Non-GAAP adjusted net income is expected to be in the range of approximately $16 million to $17 million, resulting in non-GAAP adjusted net income per diluted share of $0.14 to $0.15.
- Operating cash flows for the third quarter of 2013 are expected to be approximately $20 to $22 million, and free cash flows are expected to be approximately $17 to $18 million.
Non-GAAP Financial MeasuresIn addition to reporting various financial information in accordance with U.S. generally accepted accounting principles (GAAP), Akorn also reports Adjusted net income and Adjusted net income per diluted share, which are non-GAAP financial measures. Since Adjusted net income and Adjusted net income per diluted share are non-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 net income and Adjusted net income per diluted share may not be comparable to similarly titled non-GAAP financial measures reported by other companies. 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 acquisition related expenses and legal settlements
- Less an estimated tax provision.
While the Company uses 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 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 net income and Adjusted net income per diluted share and encourages investors to do likewise.
|RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED NET INCOME|
|IN THOUSANDS, EXCEPT PER SHARE DATA|
|(PRELIMINARY AND UNAUDITED)|
|Quarter ended Sept. 30, 2013|
|INCOME TAX PROVISION||7,500||8,100|
|INCOME BEFORE INCOME TAXES||19,200||20,800|
|ADJUSTMENTS TO ARRIVE AT ADJUSTED NET INCOME:|
|Non-cash stock compensation expense||1,400||1,400|
|Non-cash interest expense||1,200||1,200|
|Write-off and amortization of deferred financing costs||200||200|
|ADJUSTED INCOME BEFORE INCOME TAXES||25,400||27,000|
|ADJUSTED INCOME TAX PROVISION||9,300||9,900|
|ADJUSTED NET INCOME||$||16,100||$||17,100|
|ADJUSTED NET INCOME PER DILUTED SHARE||$||0.14||$||0.15|