Eon Labs Reports Record Third Quarter Sales of $75.4 Million and Earnings of $14.2 Million.Business Editors LAURELTON, N.Y.--(BUSINESS WIRE)--Oct. 30, 2002 Eon Labs, Inc. (Nasdaq: ELAB Elab is a village in the state of Ngaraard, and it is north of the villages of Ngebuked and Ulimang. It is the home to Ngaraard's only private christian (Protestant) high school, Bethania Girl's High School in Ngesang, a small portion of Elab village. ) today reported net income of $14.2 million for the third quarter ended September September: see month. 30, 2002, compared to $3.6 million in the comparable period in 2001, an increase of 289.3%. For the nine months ended September 30, 2002, net income was $30.0 million, compared to $11.7 million in the comparable period in 2001, an increase of 156.9%. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of was $0.31 for the third quarter ended September 30, 2002, compared to $0.11 per share in the comparable period in 2001, up 181.8%. For the nine months ended September 30, 2002, diluted earnings per share was $0.77, compared to $0.37 per share in the comparable period in 2001, an increase of 108.1%. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight were $75.4 million for the third quarter ended September 30, 2002, compared to $42.5 million in the comparable period in 2001, an increase of 77.1%. The increase in net sales was due principally to sales of newly introduced generic pharmaceutical products. Net sales were $175.5 million for the nine months ended September 30, 2002, compared to $124.2 in the comparable period in 2001, an increase of 41.3%. The Company expects net sales and diluted earnings per share for the fourth quarter of 2002 to be approximately $60 million and $0.26 per share, respectively. For 2003, the Company anticipates reaching its target growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. for sales and net income of between 15% and 20%. Dr. Bernhard Bernhard (born June 29, 1911, Jena, Ger.—died Dec. 1, 2004, Utrecht, Neth.) Prince of The Netherlands. The son of Prince Bernhard Casimir of Lippe-Biesterfeld, Bernhard married the Dutch crown princess Juliana in 1937 and took Dutch citizenship. Hampl, President and Chief Executive Officer, commented, "We are very pleased to report another record for sales and earnings for the third quarter ended September 30, 2002. The growth in sales and earnings is largely attributable to the impact of new products that we launched in the third quarter plus those introduced late in the second quarter. During the third quarter, we received 5 final ANDA ANDA abbr. abbreviated new drug application approvals. Since the beginning of 2002, we now have received a total of 13 final ANDA approvals. In addition, Eon has 13 ANDAs pending with the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. , including 5 tentative tentative, adj not final or definite, such as an experimental or clinical finding that has not been validated. approvals, representing brand sales exceeding $7.9 billion." FINANCIAL REVIEW Gross profit as a percentage of net sales was 53.4% for the three months ended September 30, 2002 as compared to 55.6% for the comparable quarter in 2001. The gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. for the three months ended September 30, 2001 reflected the benefit of a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix. In particular, gross profit margin was favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by higher sales of Phentermine phentermine /phen·ter·mine/ (fen´ter-men) a sympathomimetic amine related to amphetamine, used as an anorectic either as the hydrochloride salt or as the base complexed with an ion exchange resin. HCl, USP USP - unique sales point and Fluvoxamine Maleate fluvoxamine maleate (flōōvak´s  mēn´ mā´lēāt),n brand name: Luvox; drug class: , which had higher margins than many of our other products. Amortization of goodwill and other intangibles decreased $0.8 million as compared to the comparable quarter in 2001 as a result of the adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No.142, "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ", effective January January: see month. 1, 2002. SFAS No.142 eliminated the requirement to amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. goodwill and certain other intangible assets. Deferred stock appreciation rights compensation decreased $3.3 million as compared to the same quarter in 2001, as a result of the conversion of our Stock Appreciation Rights Plan to a Stock Option Plan as of September 30, 2001. Research and Development expenses increased by 22.7% to $4.0 million for the third quarter ended September 30, 2002, compared to $3.2 million in the same period in 2001. The increased R&D spending reflects an acceleration of our product development activities that are focused on expanding our product offerings. Other selling, general and administrative expenses ("SG&A") increased $4.9 million, but decreased as a percentage of net sales to 15.1% from 15.2% for the same quarter in 2001. The increase in SG&A was due principally to higher insurance, legal and compensations expenses together with higher selling and distribution costs distribution costs distribute npl → Vertriebskosten pl . Interest expense decreased $2.0 million as compared to the same quarter in 2001 principally because of lower debt levels. The effective tax rate for the three months ended September 30, 2002 was 41.0%, down from 45.2% in the comparable quarter in 2001. The 2001 tax rate was higher principally because of non-deductible goodwill amortization. In order to provide a basis by which to compare our results in the current quarter and the nine months ended September 30, 2002 with results for the comparable periods in 2001, we have adjusted net income as presented under Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) for the following items: in addition to the elimination of goodwill amortization required by SFAS No.142, we have excluded deferred stock based compensation, expenses for research and development contracts unrelated to our business that were transferred prior to our IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. , and interest expense on related party debt that was paid or exchanged in connection with our IPO. In addition, and in order to provide comparability between Eon and other companies in our sector, adjusted net income also excludes amortization of pushdown intangible assets that arose from the acquisition in December December: see month. 2000 of the remaining 50% interest in Eon by Hexal Pharmaceuticals, Inc. On an as adjusted basis, net income for the third quarter ended September 30, 2002 would have been $14.9 million, as compared to $8.2 million for the comparable period in 2001, an increase of 81.7%. For the nine months ended September 30, 2002, on an as adjusted basis, net income would have been $34.0 million, as compared to $25.2 million for the comparable period in 2001, an increase of 34.9%. Eon will conduct a live webcast today at 10:00 a.m., (EST EST electroshock therapy. EST abbr. electroshock therapy ), to discuss the financial results for the third quarter of 2002. To access the live audio webcast, visit the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of our website at www.eonlabs.com and follow the link. Interested persons may listen to the live conference call by dialing (800) 946-0782 (U.S. only) and (719) 457-2657 (international). The passcode for the conference call is ELAB. A replay of the conference call will be available until 5:00 p.m. (EST), on November November: see month. 5th by dialing (888) 203-1112 (U.S. only) or (719) 457-0820 (international). The passcode for the replay is 548328. The replay will also be available on the Investor Relations section of the Eon Labs, Inc. website. Eon Labs is a generic pharmaceutical company specializing in developing, licensing, manufacturing, selling and distributing a broad range of prescription pharmaceutical products. For press releases and other information, visit the Eon Labs, Inc. website at www.eonlabs.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: This release contains statements that are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. in nature which express the beliefs and expectations of management. Such statements are based on current plans, estimates and expectations and involve a number of known and unknown risks, uncertainties and other factors 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . These factors and additional information are discussed in the Company's filings with the Securities and Exchange Commission and statements in this release should be evaluated in light of these important factors. Although we believe that these statements are based upon reasonable assumptions, we cannot guarantee future results. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Eon Labs, Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
Net sales $ 75,351 $ 42,545 $ 175,549 $ 124,227
Cost of sales 35,081 18,890 83,763 53,657
Gross profit 40,270 23,655 91,786 70,570
Operating expenses:
Selling, general and
administrative expenses:
Amortization of goodwill
and other intangibles 940 1,780 2,820 5,340
Deferred stock
appreciation rights
compensation - 3,279 - 9,837
Other selling, general
and administrative
expenses 11,399 6,475 24,627 19,035
Research and development
expenses 3,974 3,240 10,240 8,351
Total operating
expenses 16,313 14,774 37,687 42,563
Operating income 23,957 8,881 54,099 28,007
Other income and (expense):
Interest income 353 107 519 347
Interest expense (310) (2,341) (3,754) (7,027)
Other income, net 39 - 50 6
Total other income
(expense), net 82 (2,234) (3,185) (6,674)
Income before
income taxes 24,039 6,647 50,914 21,333
Provision for
income taxes (9,856) (3,004) (20,881) (9,642)
Net income $ 14,183 $ 3,643 $ 30,033 $ 11,691
Net income per share data:
Basic $ 0.33 - $ 1.44 -
Diluted $ 0.31 $ 0.11 $ 0.77 $ 0.37
Weighted average common
shares outstanding:
Basic 43,559,902 - 20,845,282 -
Diluted 45,387,515 31,680,528 39,134,205 31,680,528
Effect of Adoption of SFAS 142:
Previously reported
net income $ 3,643 $ 11,691
Goodwill amortization 835 2,505
Pro forma net income $ 4,478 $ 14,196
Pro forma net income
per share:
Basic - -
Diluted $0.14 $0.45
===== =====
Eon Labs, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, 2002 and December 31, 2001
(Dollars in thousands)
(unaudited)
September 30, December 31,
ASSETS 2002 2001
Current assets
Cash and cash equivalents $ 40,945 $ 17,624
Short-term investments 19,328 -
Other current assets 132,569 83,603
Total current assets 192,842 101,227
Property, plant and equipment, net 41,644 38,496
Goodwill and other intangible assets, net 77,814 78,805
Other assets 2,380 874
Total assets $ 314,680 $ 219,402
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 64,702 $ 72,131
Long-term liabilities 7,642 100,280
Total liabilities 72,344 172,411
Total stockholders' equity 242,336 46,991
Total liabilities and
stockholders' equity $ 314,680 $ 219,402
========= ===========
Eon Labs, Inc.
Reconciliation of Net Income
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- --------------------
2002 2001 2002 2001
---- ---- ---- ----
Net income, as reported $14.2 $3.6 $30.0 $11.7
Adjustments for
comparability:
Goodwill amortization per
SFAS No.142 (i) 0.8 2.5
Pushdown amortization
of intangibles (ii) 0.9 0.9 2.8 2.8
R&D unrelated to
generics (iii) 0.5 0.5 1.1
Interest expense on
related party debt (iv) 1.7 2.5 5.0
Deferred stock based
compensation (v) 0.3 3.3 0.9 9.8
Tax affect of above (vi) (0.5) (2.6) (2.7) (7.7)
---- ----- ----- -----
0.7 4.6 4.0 13.5
---- --- --- ----
Net income, as adjusted $14.9 $8.2 $34.0 $25.2
===== ==== ===== =====
Notes:
(i) impact of SFAS No.142 which eliminates amortization of goodwill
and indefinite life intangibles.
(ii) amortization of pushdown intangible assets.
(iii) transfer of R&D contracts unrelated to generic products
completed prior to the IPO.
(iv) elimination of interest on related party debt paid or exchanged
at IPO.
(v) charges related to SAR Plan converted to Stock Option Plan
effective September 30, 2001
(vi) tax effect of adjustments at an effective rate of 41%.
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