Impax Reports Solid Second Quarter 2017 Results with Total Revenues Increasing 17% to $202 Million
HAYWARD, Calif., Aug. 9, 2017 /PRNewswire/ -- Impax Laboratories, Inc. (NASDAQ: IPXL), today announced second quarter 2017 financial results.
Total revenues in the second quarter 2017 were $202.1 million, an increase of 17.1%, compared to $172.6 million in the prior year period, driven by a 24.0% increase in generic product sales.
GAAP net loss was $20.4 million or a loss of $0.28 per share for the second quarter 2017, compared to a loss of $2.7 million or a loss of $0.04 per share in the prior year period, primarily due to restructuring and severance charges related to the Company's previously announced consolidation and improvement plan, charges related to certain potential legal settlements, and higher acquisition-related amortization expenses compared to the prior year period.
Adjusted net income was $13.1 million or $0.18 per share in the second quarter 2017, compared to $15.0 million or $0.21 per share in the prior year period. Refer to the attached "Non-GAAP Financial Measures" for a reconciliation of all GAAP to non-GAAP items.
For the second quarter 2017, EBITDA (earnings before interest, taxes, depreciation and amortization) was $16.6 million, a decrease of 28.8%, compared to $23.4 million in the prior year period. Adjusted EBITDA was $39.2 million, a decrease of 3.6%, compared to the prior year period. Cash and cash equivalents were $171.4 million as of June 30, 2017.
"This was a solid quarter for Impax led by the growth in our Generics division," said Paul Bisaro, President and Chief Executive Officer of Impax. "Our results benefited from the prior year's acquisition of products from Teva Pharmaceuticals, as well as the successful second quarter launch of generic Vytorin(®) and continued growth of our epinephrine auto-injector product. In addition, we are pleased with the recent generic product approvals that should benefit future results, including our AB-rated generic version of Concerta(®), which we expect to launch later this year."
"In our Specialty Pharma division, a 27% increase in sales of Rytary(®) helped to offset a decline in sales of Albenza(®), which experienced a temporary supply disruption during the quarter."
"We continue to make progress on our consolidation and improvement plan aimed at enhancing operating efficiencies and improving our overall cost structure. We have completed the closure of the Middlesex manufacturing and R&D site, and expect to close the packaging facility by the end of the first quarter of 2018. Additionally, we recently divested a number of non-strategic approved products, the vast majority of which were not marketed, for $12 million and continue to work towards an efficient and timely exit of the Taiwan facility. These efforts better position us to advance our strategic objectives of driving earnings growth and maximizing shareholder value," concluded Bisaro.
Business Segment Information
The Company has two reportable segments, the Impax Generics division and the Impax Specialty Pharma division and does not allocate general corporate services to either segment. All information presented is on a GAAP basis unless otherwise noted.
Impax Generics Division Information
(Unaudited; In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Revenues:
Impax Generics Product sales, net $150,889 $121,695 $285,036 $291,774
-------- -------- -------- --------
Cost of revenues 108,901 82,794 212,236 192,916
Cost of revenues impairment charges - 1,545 39,280 1,545
--- ----- ------ -----
Gross profit 41,988 37,356 33,520 97,313
------ ------ ------ ------
Operating expenses:
Selling, general and administrative 8,034 1,565 14,502 6,339
Research and development 20,995 16,143 38,391 30,738
In-process research and development - 946 6,079 946
impairment charges
Patent litigation expense 319 155 687 269
Total operating expenses 29,348 18,809 59,659 38,292
------ ------ ------ ------
Income (loss) from operations $12,640 $18,547 $(26,139) $59,021
======= ======= ======== =======
Gross margin 27.8% 30.7% 11.8% 33.4%
Adjusted gross profit (a) $64,113 $48,945 $116,097 $115,760
Adjusted gross margin (a) 42.5% 40.2% 40.7% 39.7%
(a) Adjusted gross profit is
calculated as total revenues
less adjusted cost of revenues.
Adjusted gross margin is
calculated as adjusted gross
profit divided by total
revenues. Refer to the "Non-
GAAP Financial Measures" for a
reconciliation of GAAP to non-
GAAP items.
Total revenues for the Impax Generics division in the second quarter 2017 were $150.9 million, an increase of 24.0%, compared to the prior year period. The increase was primarily due to the addition of products acquired as part of the products acquisition from Teva (the "Teva Transaction") and sales from new product launches including generic Vytorin, as well as higher sales of epinephrine auto-injector.
Gross margin in the second quarter 2017 was 27.8%, compared to 30.7% in the prior year period. Adjusted gross margin in the second quarter 2017 was 42.5%, compared to 40.2% in the prior year period, driven largely by product sales mix.
Total operating expenses in the second quarter 2017 were $29.3 million, compared to $18.8 million in the prior year period, primarily due to higher selling, general and administrative expenses as a result of higher failure-to-supply fees in the current period, while the prior year period included a credit for such fees, and increased investments in research and development projects during the current period.
Impax Specialty Pharma Division Information
(Unaudited; In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Revenues:
Rytary(R) sales, net $21,922 $17,297 $41,827 $32,223
Zomig(R) sales, net 12,325 13,256 22,182 24,706
All Other Specialty Pharma Product sales, net 16,946 20,342 37,440 49,395
Total revenues 51,193 50,895 101,449 106,324
------ ------ ------- -------
Cost of revenues 20,775 15,267 37,672 28,063
------ ------ ------ ------
Gross profit 30,418 35,628 63,777 78,261
------ ------ ------ ------
Operating expenses:
Selling, general and administrative 16,814 16,133 33,144 29,951
Research and development 5,852 4,657 10,945 9,084
Patent litigation expense 851 1,774 1,555 2,979
Total operating expenses 23,517 22,564 45,644 42,014
------ ------ ------ ------
Income from operations $6,901 $13,064 $18,133 $36,247
====== ======= ======= =======
Gross margin 59.4% 70.0% 62.9% 73.6%
Adjusted gross profit (a) $36,258 $43,044 $73,451 $89,320
Adjusted gross margin (a) 70.8% 84.6% 72.4% 84.0%
(a) Adjusted gross profit is
calculated as total revenues
less adjusted cost of revenues.
Adjusted gross margin is
calculated as adjusted gross
profit divided by total
revenues. Refer to the "Non-
GAAP Financial Measures" for a
reconciliation of GAAP to non-
GAAP items.
Total revenues for the Impax Specialty Pharma division in the second quarter 2017 were $51.2 million, an increase of 0.6%, compared to the prior year period, as higher sales of Rytary were primarily offset by lower sales of anthelmintic products due to a temporary supply disruption of Albenza during the second quarter of 2017.
Gross margin in the second quarter 2017 was 59.4%, compared to 70.0% in the prior year period. Adjusted gross margin in the second quarter 2017 was 70.8%, compared to 84.6% in the prior year period, primarily due to product sales mix.
Total operating expenses in the second quarter 2017 were $23.5 million, compared to $22.6 million in the prior year period, primarily due to higher research and development expenses partially offset by lower patent litigation expenses.
Corporate and Other Information
(Unaudited; In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
General and administrative expenses $26,767 $27,210 $51,024 $52,916
------- ------- ------- -------
Unallocated corporate expenses $(26,767) $(27,210) $(51,024) $(52,916)
======== ======== ======== ========
General and administrative expenses in the second quarter 2017 were $26.8 million, a decrease of 1.6% compared to the prior year period.
Interest expense in the second quarter 2017 was $13.4 million, an increase of $4.9 million compared to the prior year period, due to the $400.0 million Term Loan Facility entered into by the Company in the third quarter 2016 to finance the Teva Transaction.
2017 Financial Guidance
The Company's full year 2017 financial guidance is noted below. The Company's full year 2017 estimates are based on management's current expectations, including with respect to prescription trends, pricing levels, inventory levels, and the anticipated timing of future product launches and events. The estimates exclude the cost savings and one-time charges from the new cost savings initiatives of $85.0 million as outlined in the consolidation and improvement plan announced on May 10, 2017.
The Company does not provide forward-looking guidance metrics as outlined below on a GAAP basis as certain financial information, such as restructuring and impairment charges and other items used to determine such measures are not available and cannot be reasonably estimated. The following statements are forward looking and actual results could differ materially depending on market conditions and the factors set forth under "Safe Harbor" below.
-- Adjusted gross margins as a percent of total revenue are expected to be
approximately 47% to 49%.
-- UPDATED - Adjusted research and development expenses, including patent
litigation expenses, across the generic and brand divisions of
approximately $93 million to $97 million (previously $90 million to $95
million).
-- Adjusted selling, general and administrative expenses of approximately
$190 million to $195 million.
-- Adjusted interest expense of approximately $28 million.
-- Capital expenditures of approximately $25 million to $30 million.
-- UPDATED - Effective tax rate of approximately 33% (previously 33% to
34%).
-- Full year 2017 adjusted net income per share of $0.55 to $0.70
Conference Call Information
The Company will host a conference call with a slide presentation on August 9, 2017 at 8:30 a.m. ET to discuss its results. The call and presentation can also be accessed via a live Webcast through the Investor Relations section of the Company's Web site, www.impaxlabs.com. The number to call from within the United States is (877) 356-3814 and (706) 758-0033 internationally. The conference ID is 48618927. A replay of the conference call will be available shortly after the call for a period of seven days. To access the replay, dial (855) 859-2056 (in the U.S.) and (404) 537-3406 (international callers).
About Impax Laboratories, Inc.
Impax Laboratories, Inc. (Impax) is a specialty pharmaceutical company applying its formulation expertise and drug delivery technology to the development of controlled-release and specialty generics in addition to the development of central nervous system disorder branded products. Impax markets its generic products through its Impax Generics division and markets its branded products through the Impax Specialty Pharma division. Additionally, where strategically appropriate, Impax develops marketing partnerships to fully leverage its technology platform and pursues partnership opportunities that offer alternative dosage form technologies, such as injectables, nasal sprays, inhalers, patches, creams, and ointments. For more information, please visit the Company's Web site at: www.impaxlabs.com.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995:
To the extent any statements made in this news release contain information that is not historical; these statements are forward-looking in nature and express the beliefs and expectations of management. Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the Company's future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: fluctuations in the Company's operating results and financial condition; the volatility of the market price of the Company's common stock; the Company's ability to successfully develop and commercialize pharmaceutical products in a timely manner; the impact of competition; the effect of any manufacturing or quality control problems; the Company's ability to manage its growth; risks related to acquisitions of or investments in technologies, products or businesses; the risks related to the sale or closure of our Taiwan manufacturing facility; effects from fluctuations in currency exchange rates between the U.S. dollar and the Taiwan dollar; risks relating to goodwill and intangibles; the reduction or loss of business with any significant customer; the substantial portion of the Company's total revenues derived from sales of a limited number of products; the impact of consolidation of the Company's customer base; the Company's ability to sustain profitability and positive cash flows; the impact of any valuation allowance on the Company's deferred tax assets; the restrictions imposed by the Company's credit facility and indenture; the Company's level of indebtedness and liabilities and the potential impact on cash flow available for operations; the availability of additional funds in the future; any delays or unanticipated expenses in connection with the operation of the Company's manufacturing facilities; the effect of foreign economic, political, legal and other risks on the Company's operations abroad; the uncertainty of patent litigation and other legal proceedings; the increased government scrutiny on the Company's agreements to settle patent litigations, product development risks and the difficulty of predicting FDA filings and approvals; consumer acceptance and demand for new pharmaceutical products; the impact of market perceptions of the Company and the safety and quality of the Company's products; the Company's determinations to discontinue the manufacture and distribution of certain products; the Company's ability to achieve returns on its investments in research and development activities; changes to FDA approval requirements; the Company's ability to successfully conduct clinical trials; the Company's reliance on third parties to conduct clinical trials and testing; the Company's lack of a license partner for commercialization of Numient® (IPX066) outside of the United States; impact of illegal distribution and sale by third parties of counterfeits or stolen products; the availability of raw materials and impact of interruptions in the Company's supply chain; the Company's policies regarding returns, rebates, allowances and chargebacks; the use of controlled substances in the Company's products; the effect of current economic conditions on the Company's industry, business, results of operations and financial condition; disruptions or failures in the Company's information technology systems and network infrastructure caused by third party breaches or other events; the Company's reliance on alliance and collaboration agreements; the Company's reliance on licenses to proprietary technologies; the Company's dependence on certain employees; the Company's ability to comply with legal and regulatory requirements governing the healthcare industry; the regulatory environment; the effect of certain provisions in the Company's government contracts; the Company's ability to protect its intellectual property; exposure to product liability claims; changes in tax regulations; uncertainties involved in the preparation of the Company's financial statements; the Company's ability to maintain an effective system of internal control over financial reporting; the effect of terrorist attacks on the Company's business; the location of the Company's manufacturing and research and development facilities near earthquake fault lines; expansion of social media platforms and other risks described in the Company's periodic reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as to the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, regardless of whether new information becomes available, future developments occur or otherwise.
Company Contact:
Mark Donohue
Investor Relations and Corporate Communications
(215) 558-4526
www.impaxlabs.com
Impax Laboratories, Inc.
Consolidated Statements of Operations
(Unaudited; In thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Revenues:
Impax Generics, net $150,889 $121,695 $285,036 $291,774
Impax Specialty Pharma, net 51,193 50,895 101,449 106,324
------ ------ ------- -------
Total revenues 202,082 172,590 386,485 398,098
------- ------- ------- -------
Cost of revenues 129,676 98,061 249,908 220,979
Cost of revenues impairment charges - 1,545 39,280 1,545
--- ----- ------ -----
Gross profit 72,406 72,984 97,297 175,574
------ ------ ------ -------
Operating expenses:
Selling, general and administrative 51,615 44,908 98,670 89,206
Research and development 26,847 20,800 49,336 39,822
In-process research and development - 946 6,079 946
impairment charges
Patent litigation 1,170 1,929 2,242 3,248
Total operating expenses 79,632 68,583 156,327 133,222
------ ------ ------- -------
(Loss) income from operations (7,226) 4,401 (59,030) 42,352
------ ----- ------- ------
Other income (expense):
Interest expense (13,369) (8,454) (26,749) (16,785)
Interest income 155 340 309 673
Reserve for Turing receivable (2,353) - (2,670) (48,043)
Gain on sale of intangible assets 11,850 - 11,850 -
Loss on debt extinguishment - - (1,215) -
Other, net (9,994) (237) (10,962) 359
------ ---- ------- ---
Loss before income taxes (20,937) (3,950) (88,467) (21,444)
(Benefit from) provision for income taxes (520) (1,249) 30,381 (8,335)
---- ------ ------ ------
Net loss $(20,417) $(2,701) $(118,848) $(13,109)
======== ======= ========= ========
Net loss per common share:
Basic $(0.28) $(0.04) $(1.66) $(0.18)
====== ====== ====== ======
Diluted $(0.28) $(0.04) $(1.66) $(0.18)
====== ====== ====== ======
Weighted-average common shares outstanding:
Basic 71,803,920 71,100,123 71,699,775 70,882,759
========== ========== ========== ==========
Diluted 71,803,920 71,100,123 71,699,775 70,882,759
========== ========== ========== ==========
Impax Laboratories, Inc.
Condensed Consolidated Balance Sheets
(Unaudited; In thousands)
June 30, December 31,
2017 2016
---- ----
Assets
Current assets:
Cash and cash equivalents $171,396 $180,133
Accounts receivable, net 219,735 257,368
Inventory, net 200,410 175,230
Prepaid expenses and other current assets 36,936 18,410
Total current assets 628,477 631,141
------- -------
Property, plant and equipment, net 232,480 233,372
Intangible assets, net 540,655 620,466
Goodwill 207,329 207,329
Deferred income taxes, net 35,825 69,866
Other non-current assets 56,342 60,844
Total assets $1,701,108 $1,823,018
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $322,678 $303,605
Current portion of contingent consideration 18,746 -
Current portion of long-term debt, net 17,824 17,719
Total current liabilities 359,248 321,324
------- -------
Long-term debt, net 766,460 813,545
Other non-current liabilities 49,963 64,175
------ ------
Total liabilities 1,175,671 1,199,044
Total stockholders' equity 525,437 623,974
Total liabilities and stockholders' equity $1,701,108 $1,823,018
========== ==========
Impax Laboratories, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited; In thousands)
Six Months Ended
June 30,
--------
2017 2016
---- ----
Cash flows from operating activities:
Net loss $(118,848) $(13,109)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 53,964 36,419
Non-cash interest expense 12,742 10,714
Share-based compensation expense 13,182 15,662
Deferred income taxes, net and uncertain tax positions 35,437 (21,294)
Intangible asset impairment charges 45,359 2,491
Reserve for Turing receivable 2,670 48,043
Gain on sale of intangible assets (11,850) -
Loss on debt extinguishment 1,215 -
Other 1,663 (144)
Changes in assets and liabilities which provided cash 22,657 (50,196)
------
Net cash provided by operating activities 58,191 28,586
------
Cash flows from investing activities:
Purchases of property, plant and equipment (18,993) (20,512)
Proceeds from sales of property, plant and equipment 350 1,346
Proceeds from sales of intangible assets 11,850 -
Proceeds from cash surrender value of life insurance policy 529 -
Payments for licensing agreements - (3,500)
Proceeds from repayment of Tolmar loan - 15,000
------------------------------
Net cash used in investing activities (6,264) (7,666)
-------
Cash flows from financing activities:
Repayment of term loan (60,000) -
Payment of deferred financing fees (818) -
Payment of withholding taxes related to restricted stock awards (1,889) (4,263)
Proceeds from exercise of stock options and ESPP 591 9,178
---
Net cash (used in) provided by financing activities (62,116) 4,915
--------
Effect of exchange rate changes on cash and cash equivalents 1,452 660
----- ---
Net (decrease) increase in cash and cash equivalents (8,737) 26,495
Cash and cash equivalents, beginning of period 180,133 340,351
Cash and cash equivalents, end of period $171,396 $366,846
======== ========
Impax Laboratories, Inc.
Non-GAAP Financial Measures
Adjusted net income, adjusted net income per diluted share, EBITDA, adjusted EBITDA, adjusted cost of revenues, adjusted research and development expenses and adjusted selling, general and administrative expenses are not measures of
financial performance under generally accepted accounting principles (GAAP) and should not be construed as substitutes for, or superior to, GAAP net loss, GAAP net loss per diluted share, GAAP cost of revenues, GAAP research and
development expenses and GAAP selling, general and administrative expenses as a measure of financial performance. However, management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate
and manage the Company's operations and to better understand its business. Further, management believes the addition of non-GAAP financial measures provides meaningful supplementary information to, and facilitates analysis by, investors
in evaluating the Company's financial performance, results of operations and trends. The Company's calculations of adjusted net income, adjusted net income per diluted share, EBITDA, adjusted EBITDA, adjusted cost of revenues, adjusted
research and development expenses and adjusted selling, general and administrative expenses, may not be comparable to similarly designated measures reported by other companies, since companies and investors may differ as to what type of
events warrant adjustment.
The following table reconciles reported net loss to adjusted net income:
(Unaudited; In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Net loss $(20,417) $(2,701) $(118,848) $(13,109)
Adjusted to add (deduct):
Amortization (a) 17,219 12,469 34,451 21,237
Non-cash interest expense (b) 6,430 5,409 12,742 10,714
Business development expenses (c) 99 1,448 150 2,216
Intangible asset impairment charges (d) - 2,491 45,359 2,491
Reserve for Turing receivable (e) 2,353 - 2,670 48,043
Turing legal expenses (f) 89 - (406) -
Restructuring and severance charges (g) 10,599 5,022 16,737 6,590
Fixed asset impairment charges (h) 1,894 - 1,894 -
Gain on sale of intangible assets (i) (11,850) - (11,850) -
Gain on sale of property plant and equipment (j) (350) - (350) -
Loss on debt extinguishment (k) - - 1,215 -
Middlesex plant closure (l) 3,344 - 4,980 -
Legal settlements(m) 7,900 - 7,900 -
Other (n) 2,286 - 3,217 300
Income tax effect (o) (6,456) (9,130) 21,007 (32,620)
Adjusted net income $13,140 $15,008 $20,868 $45,862
======= ======= ======= =======
Adjusted net income per diluted share $0.18 $0.21 $0.29 $0.64
===== ===== ===== =====
Net loss per diluted share $(0.28) $(0.04) $(1.66) $(0.18)
====== ====== ====== ======
Impax Laboratories, Inc.
Non-GAAP Financial Measures
(a) Reflects amortization of intangible
assets from the portfolio of products
acquired from Teva Pharmaceuticals
Industries Ltd. and affiliates of
Allergan plc (the "Teva Transaction")
in August 2016 and from the acquisition
of Tower Holdings, Inc. and its
subsidiaries in March 2015 (the "Tower
Acquisition").
(b) Related to non-cash accretion of debt
discount attributable to deferred
financing costs associated with the
$400.0 million Term Loan Facility to
finance the Teva Transaction and the
$600.0 million of outstanding 2%
convertible senior notes, as well as
bifurcation of the conversion option of
the convertible notes.
(c) Professional fees primarily related to
the Teva Transaction.
(d) The Company recognized a total of $45.4
million in intangible asset impairment
charges, of which $39.3 million was
recognized in cost of revenues
impairment charges and $6.1 million was
recognized in in process research and
development ("IPR&D") impairment
charges, almost entirely attributable
to three products (two currently
marketed and one IPR&D), acquired as
part of the Teva Transaction. For the
currently marketed products, the
impairment charge was the result of
continued significant price and volume
erosion during the quarter with no
offsetting increase in customer demand,
resulting in lower expected future cash
flows. For the IPR&D product, the
impairment charge was the result of
increased expected research and
development expenses and a delay in
anticipated product launch due to a
change in the regulatory strategy to
secure FDA approval.
(e) The Company recorded a reserve in the
amount of $48.0 million during the
first quarter 2016, representing the
full amount of the estimated receivable
due from Turing Pharmaceuticals AG as a
result of the uncertainty of the
Company collecting the reimbursement
amounts owed by Turing related to the
Company's sale of Daraprim(R) to
Turing. During the fourth quarter of
2016, the Company received $7.7 million
in payments from Turing. During the six
month period ended June 30, 2017, the
Company increased the reserve balance
by $3.6 million to reflect additional
estimated Medicaid rebate claims due
from Turing. The Company received an
additional $0.9 million of payments
from Turing during the second quarter
of 2017. As of June 30, 2017, the $43.0
million estimated receivable due from
Turing was fully reserved.
(f) The Company recorded a credit in the
first quarter 2017 for legal fees
incurred as a result of the Company's
litigation against Turing alleging
breach of the terms of the Turing Asset
Purchase Agreement in the Company's
sale of Daraprim(R) resulting from
Turing's failure to reimburse the
Company for chargebacks and Medicaid
rebate liability.
(g) During the second quarter 2017, the
Company recorded restructuring and
severance charges of $4.9 million
related to the March 2016 announced
closure of the Company's Middlesex, New
Jersey manufacturing and packaging
site. Additionally, the Company
recorded restructuring and severance
charges of $5.7 million in the second
quarter 2017 primarily related to the
closure of generic research and
development activities in Middlesex as
well as the sale or closure of its
Taiwan manufacturing facility as part
of the Company's consolidation and
improvement plan announced in May 2017.
During the second quarter of 2016, the
Company recorded restructuring and
severance charges of $5.0 million
related to the closure of its Middlesex
manufacturing and packaging site.
(h) The Company recorded an impairment
charge relating to obsolete software in
the second quarter 2017.
(i) During the second quarter 2017, the
Company recorded a gain on the sale of
29 ANDAs and one NDA for non-strategic
approved generic products, the vast
majority of which were not marketed,
and all acquired as part of the Tower
Acquisition.
(j) The Company received a non-refundable
deposit related to the then pending
sale of a storage warehouse located in
Hayward, California. The sale
subsequently closed in July 2017.
(k) In the first quarter 2017, the Company
voluntarily prepaid $50.0 million of
principal on its $400.0 million Term
Loan Facility, resulting in a loss on
debt extinguishment of $1.2 million
incurred to write-off a pro-rated
portion of the related deferred debt
issuance costs.
(l) During the second quarter 2017, the
Company recorded underabsorption
charges in cost of goods sold related
to the closure of its Middlesex, New
Jersey facility, which ceased
production activities at the end of the
first quarter 2017.
(m) During the second quarter 2017, the
Company recorded $7.9 million of legal
settlement expenses related to the
potential settlement of certain current
outstanding litigation, a portion of
which includes the expenses related to
the settlement of the contract dispute
with Endo International plc.
(n) During the second quarter 2017, the
Company recorded charges totaling $2.3
million related to a milestone payment
to a third party partner under the
terms of a research and development
agreement and the change in the fair
value of a contingent consideration due
to Teva related to methylphenidate
hydrochloride.
(o) Adjusted income taxes are calculated by
tax effecting adjusted pre-tax income
at the applicable effective tax rate
that will be determined by reference to
statutory tax rates in the relevant
jurisdiction in which the Company
operates and includes current and
deferred income tax expense
commensurate with the non-GAAP measure
of profitability.
The following table reconciles reported net loss to adjusted EBITDA:
(Unaudited, In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Net loss $(20,417) $(2,701) $(118,848) $(13,109)
Adjusted to add (deduct):
Interest expense 13,369 8,454 26,749 16,785
Interest income (155) (340) (309) (673)
Income taxes (520) (1,249) 30,381 (8,335)
Depreciation and amortization 24,355 19,195 48,453 34,293
EBITDA 16,632 23,359 (13,574) 28,961
------ ------ ------- ------
Adjusted to add (deduct):
Share-based compensation expense 6,225 8,384 13,182 15,662
Business development expenses 99 1,448 150 2,216
Intangible asset impairment charges - 2,491 45,359 2,491
Reserve for Turing receivable 2,353 - 2,670 48,043
Turing legal expenses 89 - (406) -
Restructuring and severance charges 10,599 5,022 16,737 6,590
Fixed asset impairment charges 1,894 - 1,894 -
Gain on sale of intangible assets (11,850) - (11,850) -
Gain on sale of property, plant and equipment (350) - (350) -
Loss on debt extinguishment - - 1,215 -
Middlesex plant closure 3,344 - 4,980 -
Legal settlements 7,900 - 7,900 -
Other 2,286 - 3,217 300
Adjusted EBITDA $39,221 $40,704 $71,124 $104,263
======= ======= ======= ========
Impax Laboratories, Inc.
Non-GAAP Financial Measures
(Unaudited; In thousands)
The following table reconciles reported cost of revenues, research and development expenses, and selling, general and administrative expenses to adjusted cost of revenues, adjusted gross profit, adjusted gross margin, adjusted research and development
expenses, and adjusted selling, general and administrative expenses:
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Cost of revenues $129,676 $98,061 $249,908 $220,979
Cost of revenues impairment charges - 1,545 39,280 1,545
Adjusted to deduct:
Amortization 17,219 12,469 34,451 21,237
Intangible asset impairment charges - 1,545 39,280 1,545
Business development 49 - 58 -
Restructuring and severance charges 7,402 4,991 13,540 6,724
Middlesex plant closure 3,344 - 4,980 -
Adjusted cost of revenues $101,662 $80,601 $196,879 $193,018
======== ======= ======== ========
Adjusted gross profit (a) $100,420 $91,989 $189,606 $205,080
Adjusted gross margin (a) 49.7% 53.3% 49.1% 51.5%
Research and development expenses $26,847 $20,800 $49,336 $39,822
In-process research and development impairment charges - 946 6,079 946
Adjusted to deduct:
Intangible asset impairment charges - 946 6,079 946
Restructuring and severance charges 2,926 - 2,926 -
Other 1,825 - 2,475 300
Adjusted research and development expenses $22,096 $20,800 $43,935 $39,522
======= ======= ======= =======
Selling, general and administrative expenses $51,615 $44,908 $98,670 $89,206
Adjusted to deduct:
Business development expenses 50 1,448 92 2,216
Turing legal expenses 89 - (406) -
Restructuring and severance charges 271 31 271 41
Adjusted selling, general and administrative expenses $51,205 $43,429 $98,713 $86,949
======= ======= ======= =======
(a) Adjusted gross profit is
calculated as total
revenues less adjusted
cost of revenues. Adjusted
gross margin is calculated
as adjusted gross profit
divided by total revenues.
Impax Laboratories, Inc.
Non-GAAP Financial Measures
(Unaudited; In thousands)
The following tables reconcile the Impax Generics and Impax Specialty Pharma Divisions reported cost of revenues to adjusted cost of revenues, adjusted gross profit and adjusted gross margin:
Impax Generics Division Information
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Cost of revenues $108,901 $82,794 $212,236 $192,916
Cost of revenues impairment charges - 1,545 39,280 1,545
Adjusted to deduct:
Amortization 13,385 5,053 26,783 10,178
Intangible asset impairment charges - 1,545 39,280 1,545
Restructuring and severance charges 5,396 4,991 11,534 6,724
Middlesex plant closure 3,344 - 4,980 -
Adjusted cost of revenues $86,776 $72,750 $168,939 $176,014
======= ======= ======== ========
Adjusted gross profit (a) $64,113 $48,945 $116,097 $115,760
Adjusted gross margin (a) 42.5% 40.2% 40.7% 39.7%
Impax Specialty Pharma Division Information
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Cost of revenues $20,775 $15,267 $37,672 $28,063
Adjusted to deduct:
Amortization 3,834 7,416 7,668 11,059
Restructuring and severance charges 2,006 - 2,006 -
----- --- ----- ---
Adjusted cost of revenues $14,935 $7,851 $27,998 $17,004
======= ====== ======= =======
Adjusted gross profit (a) $36,258 $43,044 $73,451 $89,320
Adjusted gross margin (a) 70.8% 84.6% 72.4% 84.0%
(a) Adjusted gross profit is
calculated as total
revenues less adjusted
cost of revenues. Adjusted
gross margin is calculated
as adjusted gross profit
divided by total revenues.
Impax Laboratories, Inc.
Non-GAAP Financial Measures
(Unaudited; In thousands)
The following tables reconcile the Impax Generics and Impax Specialty Pharma Divisions reported (loss) income from operations to adjusted income from operations:
Impax Generics Division Information
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
GAAP income (loss) from operations $12,640 $18,547 $(26,139) $59,021
Adjusted to add (deduct):
Amortization 13,385 5,053 26,783 10,178
Intangible asset impairment charges - 2,491 45,359 2,491
Restructuring and severance charges 8,322 4,991 14,460 6,724
Payments for licensing agreements 1,825 - 2,475 300
Middlesex plant closure 3,344 - 4,980 -
Adjusted income from operations $39,516 $31,082 $67,918 $78,714
======= ======= ======= =======
Impax Specialty Pharma Division Information
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
GAAP income from operations $6,901 $13,064 $18,133 $36,247
Adjusted to add:
Amortization 3,834 7,416 7,668 11,059
Restructuring and severance charges 2,006 - 2,006 -
----- --- ----- ---
Adjusted income from operations $12,741 $20,480 $27,807 $47,306
======= ======= ======= =======
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SOURCE Impax Laboratories, Inc.
