UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
( ) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number: 0-13976
AKORN, INC.
(Exact Name of Registrant as Specified in its Charter)
LOUISIANA 72-0717400
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
100 Akorn Drive
Abita Springs, Louisiana 70420
(Address of Principal Executive Offices) (Zip Code)
(504) 893-9300
(Registrant's telephone number including area code)
Indicate by check mark whether the issuer (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
At October 31, 1995 there were 14,922,907 shares of common stock,
no par value, outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
The following financial statements are provided on the page
numbers indicated below:
Condensed Consolidated Balance Sheets -
September 30, 1995 and June 30, 1995 2
Condensed Consolidated Statements of Income -
Three months ended September 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows -
Three months ended September 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
The information called for by this item is provided on page 8.
<PAGE>
AKORN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995*
___________________ ___________________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 954,962 $ 767,286
Short-term investments 1,290,739 1,568,793
Accounts receivable
(less allowance for bad debts of
$266,455 and $266,329 at September 30
and June 30, respectively) 4,880,782 4,918,753
Inventory 6,419,281 5,979,707
Prepaid expenses and other assets 1,276,113 1,068,338
___________________ ___________________
TOTAL CURRENT ASSETS 14,821,877 14,302,877
OTHER ASSETS 961,403 957,099
PROPERTY, PLANT AND EQUIPMENT 17,637,086 13,820,135
Accumulated depreciation (6,935,466) (6,750,743)
___________________ ___________________
10,701,620 7,069,392
Construction in progress 339,509 3,926,553
___________________ ___________________
11,041,129 10,995,945
___________________ ___________________
TOTAL ASSETS $ 26,824,409 $ 26,255,921
=================== ===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995*
___________________ ___________________
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Current installments of long-term debt and
capital lease obligations $ 779,726 $ 641,994
Current portion of pre-funded development costs 667,000 667,000
Trade accounts payable 1,990,380 1,718,893
Income taxes payable 903,883 781,824
Accrued payroll and commissions 511,227 625,839
Accrued reorganization costs 706,322 727,423
Accrued expenses and other liabilities 1,286,907 1,237,232
___________________ ___________________
TOTAL CURRENT LIABILITIES 6,845,445 6,400,205
LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS 3,695,786 3,900,389
OTHER LONG-TERM LIABILITIES 874,607 957,043
SHAREHOLDERS' EQUITY
Common stock, no par value--
authorized 20,000,000 shares;
issued 15,115,673 shares
at September 30 and June 30;
outstanding 14,922,907 and 14,904,653
shares at September 30 and June 30, respectively 13,701,845 13,701,845
Treasury stock, at cost--
192,766 and 211,020 shares
at September 30 and June 30, respectively (254,559) (291,067)
Retained earnings 1,961,285 1,500,109
Unrealized gain on marketable equity securities - 87,397
___________________ ___________________
TOTAL SHAREHOLDERS' EQUITY 15,408,571 14,998,284
___________________ ___________________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 26,824,409 $ 26,255,921
=================== ===================
</TABLE>
*Condensed from audited consolidated financial statements.
See notes to condensed consolidated financial statements.
AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended September 30,
1995 1994
_____________________ _______________________
<S> <C> <C>
Net sales $ 7,888,548 $ 8,541,126
Cost of sales 5,001,214 4,919,793
_____________________ _______________________
GROSS PROFIT 2,887,334 3,621,333
Selling, general and
administrative expenses 1,937,853 2,232,179
Research and development 235,300 169,364
_____________________ _______________________
2,173,153 2,401,543
_____________________ _______________________
OPERATING INCOME 714,181 1,219,790
Interest expense (86,565) -
Interest and other income (expense) 103,828 28,406
_____________________ _______________________
17,263 28,406
_____________________ _______________________
INCOME BEFORE INCOME TAXES 731,444 1,248,196
Income taxes 270,634 461,833
_____________________ _______________________
NET INCOME $ 460,810 $ 786,363
===================== =======================
Per Share:
NET INCOME $ .03 $ .05
===================== =======================
WEIGHTED AVERAGE
SHARES OUTSTANDING 15,259,700 15,286,345
===================== =======================
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended September 30,
1995 1994
_____________________ _______________________
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 460,810 $ 786,363
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 199,940 195,095
Gain on sale of investments (79,859) -
Changes in operating assets and liabilities (375,673) (1,360,763)
_____________________ _______________________
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 205,218 (379,305)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (229,907) (1,338,607)
Net maturities of investments 270,516 373,874
Product licensing costs (28,154) (297,682)
_____________________ _______________________
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 12,455 (1,262,415)
FINANCING ACTIVITIES
Repayment of long-term debt (32,502) (101,875)
Proceeds from sale of stock 36,874 46,938
Reductions in capital lease obligations (34,369) (6,161)
Short-term borrowings - 225,000
_____________________ _______________________
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (29,997) 163,902
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 187,676 (1,477,818)
Cash and cash equivalents at beginning of period 767,286 1,914,735
_____________________ _______________________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 954,962 $ 436,917
===================== =======================
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Interest paid, net of amount capitalized $ 86,061 $ -
===================== =======================
Income taxes paid $ 180,000 $ 370,000
===================== =======================
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
AKORN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of Akorn, Inc. (the "Company") and its wholly owned subsidiaries,
Spectrum Scientific Pharmaceuticals, Inc. , Walnut Pharmaceuticals, Inc. and
Akorn Manufacturing, Inc., formerly Taylor Pharmacal Company. Intercompany
transactions and balances have been eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
period ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ending June 30, 1996. For further
information, refer to the consolidated financial statements and footnotes for
the year ended June 30, 1995, included in the Company's Annual Report on Form
10-KSB.
NOTE B - INCOME TAXES
The Company is currently in discussions with the Internal Revenue Service
(IRS) regarding the examination of tax return for years 1988 through 1993.
The IRS has proposed adjustments to such returns which would result in
additional taxes and interest due of approximately $1.5 million. Although the
Company does agree with approximately $600,000 of the proposed adjustments,
the Company does intend to appeal the remainder of the assessment. The
Company does not currently anticipate any adverse financial statement effect
from this proposed assessment as accruals for the financial statement effects
of these proposed adjustments have been previously recorded.
NOTE C - EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of common shares
outstanding. The computation of the weighted average number of shares
outstanding for all periods presented includes the dilutive effect of stock
options and warrants using the treasury stock method.
NOTE D - INVENTORY
The components of inventory are as follows:
September 30, June 30,
1995 1995
_________________ __________________
Finished goods $ 3,925,036 $ 3,742,411
Work in process 1,119,867 1,042,922
Raw materials and supplies 1,374,378 1,194,374
_________________ __________________
$ 6,419,281 $ 5,979,707
================= ==================
The inventories are reported net of reserves for unsaleable items of $323,765
and $344,443 as of September 30, 1995 and June 30, 1995, respectively.
NOTE E - INVESTMENTS
At June 30, 1995, the market value of the Company s marketable equity
securities exceeded the cost by $87,397; therefore, an unrealized gain was
recorded as a component of shareholders equity to reflect this increase in
value. Subsequent to year end, the Company sold the investment and recorded a
realized gain of $79,859 during the first quarter of fiscal 1996. This amount
is included in interest and other income (expense) in the 1995 statement of
income.
NOTE F - INTEREST CAPITALIZATION
Interest incurred during construction periods is capitalized as part of the
cost of the expansion project. During the quarters ended September 30, 1995
and 1994, the Company capitalized $34,682 and $13,434, respectively, in
interest costs.
NOTE G - LITIGATION
The Company is involved in various litigation and claims arising in the normal
course of business. The Company's management believes that any liability the
Company may have in these matters would not have a material effect on the
consolidated financial statements.
NOTE H - CONTINGENCIES
In April 1994, the Company entered into a series of cross-licensing agreements
with Pfizer Inc. (Pfizer), one of which provided Akorn an exclusive, royalty-
free license to manufacture and market an ophthalmic form of a Pfizer
prescription non-steroidal anti-inflammatory drug (NSAID). As part of this
agreement, in fiscal 1994 Pfizer paid the Company an advance of $1 million to
be used to fund the costs of developing the NSAID. In the event that Akorn
fails to obtain FDA approval on another product under development and licensed
to Pfizer (the licensed product) by December 31, 1996, the Company is required
to pay a performance penalty of $1,020,000 to Pfizer. A New Drug Application
(NDA) was filed for the licensed product on June 8, 1994. Given the current
status of the NDA, it is management s opinion that payment of the performance
penalty is remote.
<PAGE>
AKORN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
The following table sets forth, for the periods indicated, net sales by
segment, excluding intersegment sales:
Three Months Ended
September 30,
1995 1994
_________________________
(In thousands)
Ophthalmic distribution $ 5,616 $ 6,071
Contract manufacturing 2,273 2,470
___________ __________
Total net sales $ 7,889 $ 8,541
=========== ==========
Net sales declined 8% in the quarter ended September 30, 1995 compared to the
same period in 1994, with sales of $7.9 million versus $8.5 million. The
decline in sales is primarily due to the temporary absence of the Company s
lead allergy product, AK-Con-A, since the second quarter of fiscal 1995.
For the quarter ended September 30, 1995, ophthalmic distribution sales
declined 7% over the comparable period in 1994. This decline is primarily
related to the absence of AK-Con-A which accounted for over $1.3 million in
sales for the prior year first quarter. Ophthalmic distribution net sales for
the quarter ended September 30, 1994, exclusive of AK-Con-A sales, were $4.7
million as compared to $5.6 million in the current period, thereby
representing a 19% increase. The Company continued to see sales increase in
its core business as a result of prior year new product introductions.
As previously announced, AK-Con-A was converted to over-the-counter (OTC)
status from prescription status by the Food and Drug Administration (FDA).
Currently, the Company is awaiting approval for its OTC version, which was
licensed to Pfizer, Inc. (Pfizer). Since sales of AK-Con-A continued through
October 1994, sales growth comparisons will be affected for the second quarter
of fiscal 1996 as well. However, upon approval of the OTC version, which is
expected in the near future, the Company will begin to receive manufacturing
profits and royalties that should bring incremental profits in the range of 2
cents per share per quarter.
For the quarter ended September 30, 1995, contract manufacturing sales
declined 8% over the comparable period in 1994. This decline reflects
fluctuations in ordering patterns from contract customers which is common to
this business. As previously announced, the Company s largest contract
manufacturing customer, which accounted for 17% and 13% of consolidated net
sales for the quarters ended September 30, 1995 and 1994, respectively, has
notified the Company that it will be transferring the production of certain
products during fiscal 1996 and 1997 to its own facilities. Such products
accounted for $1.4 million in contract manufacturing sales for fiscal 1995.
This customer has also notified the Company that it will be discontinuing the
sale of two other products produced by Akorn Manufacturing, Inc. (AMI). These
products accounted for approximately $2.9 million in sales for AMI in fiscal
1995. The Company is presently in discussions with this customer to acquire
these injectable products. This would maintain current plant throughput and
provide an entre into the injectable distribution business, which would be
synergistic with the ophthalmic distribution business.
In October 1995, the Company signed a contract manufacturing agreement with
Jordan Pharmaceuticals, Inc. (Jordan) to develop and manufacture three new
generic injectable pharmaceutical products. In addition, the agreement
secured the long-term manufacture of three generic injectables currently
produced by AMI for Jordan. The three new products are exempt from FDA
approval under grandfather rules, and, as such, the first of the three new
products should be in commercial production within six months. The combined
contractual payments in the first year of the contract, including fees for
product development, are expected to approximate $2 million. Previously,
Jordan represented approximately $900,000 of the Company s contract business.
The Jordan agreement allows for Akorn to use information supporting the
development of the products to pursue recently announced strategies in the
injectable marketplace. The agreement further provides that best efforts will
be used by both parties to add two new products each year to the agreement,
under the same terms and conditions. This arrangement goes beyond mere
contract manufacturing and represents the Company s desire to enhance its
relations with contract customers.
Gross Profit
Consolidated gross profit declined 20% to $2.9 million in the quarter ended
September 30, 1995 compared to $3.6 million for the same period of the
previous year, with gross margins declining six percentage points. The loss
of higher-margin AK-Con-A sales, lower overhead absorption in contract
manufacturing and higher product costs imposed by suppliers were the primary
reasons for the decline in gross profit and margins for the quarter. Gross
margins are expected to remain lower than those experienced in the first half
of fiscal 1995 due to the loss of AK-Con-A and increased competition from our
suppliers. Gross margins are expected to be relatively stable for the
remainder of fiscal 1996.
Selling, General and Administrative Expenses
Selling, general and administrative (S,G&A) expenses declined 13% during the
quarter ended September 30, 1995, as compared to the same period in 1994.
This reduction in S,G & A expenses is partly due to lower sales and partly due
to the plan, implemented in the quarter ended March 31, 1995, to reduce
certain S,G&A expenses.
The percentage of S,G&A expenses to sales declined to 24.6% for the quarter
ended September 30, 1995 from 26.1% in the comparable prior year period. This
decline occurred, in spite of the decline in sales, due to the cost cutting
measures noted above. The Company continues to monitor the required level of
S,G&A expenses in relation to sales performance.
Research and Development
Research and development (R&D) expense increased 39% to $235,000 for the
quarter ended September 30, 1995, as compared to $169,000 for the same period
in 1994. This increase reflects a change in the mix of products under
development to a lower concentration of products which are being transferred
from the Company s previous manufacturing facilities (site transfers). The
estimated cost of these site transfers has been previously accrued and
therefore does not have an effect on R&D expense as reported in the statements
of income.
The Company also has begun the development of a non-steroidal anti-
inflammatory drug (NSAID) for ophthalmic use licensed from Pfizer. It is
anticipated that the majority of these development costs, which are expected
to be funded substantially by monies obtained from Pfizer, will be incurred
over the next 18 months. In addition, the Company recently announced its
intention to enter the generic injectable business. This entre includes the
plan to file two injectable Abbreviated New Drug Applications (ANDAs) over the
next twelve months.
The current R&D plan calls for the filing of ten to twelve ANDAs in fiscal
1996, a much more aggressive plan than in prior years. As a result, the
Company anticipates that fiscal 1996 R&D expense will be significantly higher
than the prior year amount.
Interest and Other Income/Expense
Interest costs incurred during all of the prior fiscal year and through July
1995 were capitalized as part of the cost of construction related to the
Company's expansion project at its Decatur manufacturing facilities. This
expansion is now substantially completed and ready for its intended use.
Accordingly, all future periods will include interest expense that will be
charged to operations rather than capitalized based on the total outstanding
borrowings.
Included in interest and other income for the quarter ended September 30, 1995
is a $79,859 gain recognized on the sale of the Company s only equity
investment.
Income Taxes
The effective tax rate for the quarters ended September 30, 1995 and 1994
remained consistent at 37%. The Company has been in discussions the Internal
Revenue Service (IRS) regarding the examination of tax returns for the periods
of 1988 through 1993. The IRS has proposed adjustments to such returns, some
of which the Company has agreed to and some which the Company will appeal.
The financial statement effects of these proposed agreed upon adjustments have
been previously recorded.
Net Income
Net income for the quarter ended September 30, 1995 declined to $461,000 or
three cents per share compared to the prior year amount of $786,000 or five
cents per share, as a result of the factors noted above.
FINANCIAL CONDITION AND LIQUIDITY
The net cash provided by operating activities for the three months ended
September 30, 1995 was $205,000 compared to net cash used of approximately
$379,000 for the corresponding period in 1994. While the Company's
profitability declined in the current quarter, in the prior period quarter the
Company had a significant buildup in inventory as a result of new product line
additions. This buildup has since stabilized.
In addition to the inventory buildup, final estimated tax payments for the
fiscal year ended June 30, 1994 were made during the first quarter of fiscal
1995.
In 1996, the Company will continue to fund the payment of certain previously
accrued research and development activities including the site transfer of
ANDAs and development of the NDA for an NSAID discussed previously.
Management believes that existing cash, cash flows from operations, and
available working capital line of credit are sufficient to handle these short-
term needs.
In addition to these short-term needs, the Company may be required to pay
additional interest and taxes in connection with the examination by the IRS of
tax returns for the periods of 1988 through 1993. The proposed adjustments by
the IRS would result in additional interest and taxes currently due of
approximately $1.5 million. To date, the Company and the IRS have agreed upon
issues resulting in approximately $600,000 of current net taxes and interest
due. Payment of the agreed upon items is expected to be made over the next 10
months under an agreement with the IRS or through arrangements with a
commercial bank. Payment of the remaining unsettled issues, if any, would be
based on the timing of the appeals process and the success of the Company in
arguing its position with the IRS. The Company does not currently anticipate
any adverse financial statement effect from this proposed assessment as
accruals for the financial statement effects of these proposed adjustments
have been previously recorded.
Under a previously announced cross-licensing agreement with Pfizer, the
Company is required to pay a performance penalty of $1,020,000 should it be
unsuccessful in obtaining approval, by December 31, 1996, of the NDA on the
OTC version of AK-Con-A, which was licensed to Pfizer. Given the current
status of the pending NDA, management believes the likelihood that approval
will not be obtained in this time frame is remote. Accordingly, no financial
statement reserves related to the potential penalty have been accrued.
The Company invested $230,000 in new property, plant and equipment during the
quarter ended September 30, 1995, compared to $1.3 million during the same
period in 1994. The prior year amount was primarily related to the expansion
at the Company s manufacturing facilities in Decatur, Illinois which has now
been substantially completed.
On September 30, 1994, the Company entered into a $6.3 million credit facility
with a commercial bank. The credit facility includes the following:
- a $1.3 million Term loan for the payout of existing debt and
reimbursement for the early payout of a capital lease on the
AMI manufacturing facility.
- a $3.5 million Revolver/Term construction loan to finance the
expansion of the AMI facilities.
- a $1.5 million Line of Credit for working capital purposes.
The entire Term loan was drawn in October 1994 and, as of September 30, 1995,
$2.6 million had been drawn on the Revolver/Term construction loan.
The construction project at the Decatur facilities allows for new high-speed
ophthalmic production, as well as new capabilities for suspensions, ointments
and unit-dose products. The total cost of the expansion project, including
additional equipment, was approximately $5.4 million. The Company has plans
for capital improvements of approximately $2 million to $3 million for fiscal
1996. The amount of these improvements will be funded through internal cash
flows and $900,000 remaining availability under the Revolver/Term construction
loan. The timing of these expenditures will be staged to ensure compliance
with debt covenant requirements.
The Company used $30,000 in financing activities for the quarter ended
September 30, 1995, primarily related to the repayment of certain debt
obligations. This compares with $164,000 provided by financing activities in
the prior year. In the prior year, short-term borrowings of $225,000 were
made as of September 30, 1994. As of September 30, 1995, there were no
borrowings under the line of credit.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Certain legal proceedings in which the registrant, Akorn, Inc. (the
"Company"), is involved are described in Item 3 to the Company's Form
10-KSB for the fiscal year ended June 30, 1995 and in Note R to the
consolidated financial statements included in that report.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the Company's shareholders was held on October 28, 1995
(the Meeting ). The only matter voted on at the Meeting was the election of
directors.
At the Meeting all of the nominees listed were elected by the votes indicated
below. There were no broker no-votes with respect to any nominee. No other
directors have terms of office that continued after the Meeting.
Nominee For Withheld
____________ _______ __________
Daniel E. Bruhl, M.D. 12,350,436 794,974
J. Ed Campbell, M.D. 12,348,300 797,110
George S. Ellis, M.D. 12,347,800 797,610
Doyle S. Gaw 12,282,408 863,002
John N. Kapoor, PhD. 12,900,831 244,579
Barry D. LeBlanc 12,900,135 245,275
David H. Turner, M.D. 12,281,430 863,980
Lawrence A. Yannuzzi, M.D. 12,277,801 867,609
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11.1) Computation of Earnings per Share
(27) Financial Data Schedules
(99.1) Press release issued by Akorn, Inc. on October 26,
1995 announcing its first quarter 1996 financial
results.
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AKORN, INC.
/s/ Barry D. LeBlanc
______________________
Barry D. LeBlanc
President and Chief Executive Officer
(Duly Authorized Officer)
/s/ Eric M. Wingerter
________________________
Eric M. Wingerter
Vice President - Finance and Administration
(Principal Financial Officer)
Exhibit 11
Akorn, Inc.
COMPUTATION OF NET INCOME PER SHARE
(In Thousands, Except Per Share Data)
Three Months Ended September 30,
1995 1994
_______________ _______________
Earnings
Income applicable to
common stock $ 461 $ 786
=============== ==============
Shares
Weighted average number of shares
outstanding 14,910 14,802
Additional shares assuming
conversion of options and warrants 350 484
_______________ _____________
Pro forma shares 15,260 15,286
=============== ==============
Net income per share $ .03 $ .05
=============== ==============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 954,962
<SECURITIES> 1,290,739
<RECEIVABLES> 5,147,237
<ALLOWANCES> (266,455)
<INVENTORY> 6,419,281
<CURRENT-ASSETS> 14,821,877
<PP&E> 17,976,595
<DEPRECIATION> (6,935,466)
<TOTAL-ASSETS> 26,824,409
<CURRENT-LIABILITIES> 6,845,445
<BONDS> 3,695,786
<COMMON> 13,701,845
0
0
<OTHER-SE> 1,706,726
<TOTAL-LIABILITY-AND-EQUITY> 26,824,409
<SALES> 7,888,548
<TOTAL-REVENUES> 7,888,548
<CGS> 5,001,214
<TOTAL-COSTS> 5,001,214
<OTHER-EXPENSES> 2,167,153
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> (86,565)
<INCOME-PRETAX> 731,444
<INCOME-TAX> 270,634
<INCOME-CONTINUING> 460,810
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 460,810
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
Exhibit 99.1
AT AKORN: AT FRB:
Barry LeBlanc Eric Wingerter Jenifer Estabrook Kathy Brunson
President & CEO VP-Finance General Information Analyst Contact
(504) 893-9300 (312) 640-6787 (312) 640-6696
FOR IMMEDIATE RELEASE
THURSDAY, OCTOBER 26, 1995
AKORN'S 1ST-QTR RESULTS IN LINE WITH MANAGEMENT'S EXPECTATIONS;
OUTLOOK POSITIVE
ABITA SPRINGS, LA OCTOBER 26, 1995 --Akorn, Inc. (Nasdaq: AKRN)
today announced that net income for the first quarter was
$460,000, or 3 cents per share, on sales of $7.9 million, compared
with net income of $786,000, or 5 cents per share, on sales of
$8.5 million in the year-ago period.
These results were in line with our estimates and reflect
the continued, temporary absence of our lead allergy product, AK-
Con-A, since the second quarter of fiscal 1995," said Barry
LeBlanc, Akorn's president and chief executive officer. This
product accounted for approximately $1.3 million in sales and net
income of nearly 3 cents per share in the prior-year period."
As previously announced, the Food and Drug Administration
(FDA) switched AK-Con-A to over-the-counter (OTC) status in the
second quarter of Akorn's fiscal 1995. Currently, the company is
awaiting FDA approval for its OTC version, which Akorn licensed
to Pfizer. Under terms of the agreement, Akorn will receive
manufacturing profits and royalties that, according to the
company, should bring incremental profits in the range of 2 cents
per quarter upon approval.
REVIEW OF RESULTS
Net sales for the quarter ended September 30, 1995, were
$7.9 million, down 8 percent from last year's $8.5 million.
Gross profit declined 20 percent from $3.6 million to $2.9
million. Gross margins declined considerably, primarily due to
the fact that AK-Con-A was Akorn's highest-margin product at
nearly 75 percent.
Operating expenses declined 13 percent during the quarter,
while research and development expenditures increased 39 percent,
reflecting an accelerated program to obtain Abbreviated New Drug
Applications (ANDAs). Operating expenses as a percentage of
sales declined to 24.6 percent for the quarter ended September
-more-
Akorn, Inc.
Add-1
30, 1995, from 26.1 percent for the prior-year period. The
company's effective tax rate remained stable at 37 percent.
OUTLOOK
"The absence of AK-Con-A certainly had a significant effect
on comparative results" LeBlanc noted. "However, current
indications from the FDA regarding approval of our New Drug
Application (NDA) on the OTC version of this product are very
favorable, with approval expected in the very near future."
LeBlanc added, "In response to the temporary loss of AK-
Con-A, we implemented cost-reduction strategies beginning in the
third quarter of fiscal 1995 that were designed to achieve an
average earnings run rate of 3 to 4 cents per quarter. Our
operating results since that time have indicated the success of
this strategy. With the recent approvals of several ANDAs along
with the anticipated approval of our pending NDA, our quarterly
run rate should approximate 6 to 7 cents by fiscal year end."
LeBlanc concluded, "We will continue to leverage our
existing strengths in an effort to increase both sales and
earnings. Our recent announcements to increase our presence in
the injectable pharmaceutical market are examples of that
leverage. The targeted filing of two injectable ANDAs by fiscal
year end will expand Akorn's presence in the sterile generic
pharmaceutical marketplace. In addition, our new approach to the
contract manufacture of injectables will lead to a positive
impact on sales and earnings, as early as the second half of our
current fiscal year."
Akorn, Inc. manufactures sterile ophthalmic and injectable
pharmaceuticals, and markets and distributes an extensive line of
ophthalmic products.
For additional information about Akorn, Inc. free of charge via
fax, dial 1-800-PRO-INFO and enter "AKRN."
FINANCIAL TABLES FOLLOW...
Akorn, Inc.
Add -2-
CONSOLIDATED STATEMENT OF EARNINGS
(in thousands, except per share amounts)
Three months ended September 30,
1995 1994 % Chg
__________ __________ ___________
Net sales $7,888 $8,541 -7.6%
Cost of sales 5,001 4,920 1.6%
__________ _________
Gross profit 2,887 3,621 -20.3%
Selling, general and administrative 1,938 2,232 -13.2%
Research and development 235 169 39.1%
__________ _________
Operating income 714 1,220 -41.5%
Interest & other income (expense), net 17 28 -39.3%
__________ _________
Pretax income 731 1,248 -41.4%
Income taxes 270 462 -41.6%
__________ _________
Net income $461 $786 -41.3%
========== =========
Per share:
Net income $0.03 $0.05 -40.0%
========== =========
Weighted average shares 15,260 15,286 -0.2%
========== =========
<PAGE>
Akorn, Inc.
Add -3-
CONSOLIDATED BALANCE SHEET
(in thousands)
September 30, June 30,
1995 1994
___________ ___________
Assets
Cash and investments $2,246 $2,336
Accounts receivable, net 4,881 4,919
Other current assets 7,695 7,048
___________ ___________
Total current assets 14,822 14,303
Property, plant and equipment, net 11,041 10,996
Other assets 961 957
___________ ___________
Total assets $26,824 $26,256
=========== ===========
Liabilities and shareholders' equity
Current portion of long-term debt
and capital leases $ 780 $ 642
Trade accounts payable 1,990 1,719
Income taxes payable 904 782
Accrued reorganization costs 706 727
Other accrued expenses 2,465 2,531
___________ ___________
Total current liabilities 6,845 6,401
Long-term debt and capital leases 3,696 3,900
Other long-term liabilities 874 957
Shareholders' equity 15,409 14,998
___________ ___________
Total liabilities and shareholders' equity $26,824 $26,256
=========== ===========
