Attached files
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| 8-K - FORM 8-K - Sagent Pharmaceuticals, Inc. | d164250d8k.htm |
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On February 3, 2016, Sagent Pharmaceuticals, Inc., a Delaware corporation (the “Company” or “Sagent”) entered into a Share Purchase Agreement with Hong Kong King-Friend Pharmaceutical Co., Ltd., a subsidiary of Nanjing King-Friend Pharmaceutical Co., Ltd., (“NKF”) pursuant to which NKF will acquire 100% of the issued and outstanding shares of capital stock of Sagent (China) Pharmaceuticals Co., Ltd. (“SCP”) in exchange for $0.5 million, payable at the closing of the transaction. The transaction was completed on March 22, 2016. As a result of the completion of the transaction, SCP is no longer a subsidiary of the Company.
The following unaudited pro forma condensed consolidated balance sheet presents the Company’s historical financial position without SCP, as if the disposal had been completed on December 31, 2015, and includes adjustments which give effect to the events that are directly attributable to SCP and are factually supportable.
The unaudited pro forma condensed consolidated statement of operations presents the results of the Company’s operations without SCP, as if the disposal had been completed as of January 1, 2015. The unaudited pro forma condensed consolidated statement of operations includes adjustments that are directly attributable to the disposal, are not expected to have a continuing impact on the Company’s consolidated results, and are factually supportable. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the Company’s financial position or results of operations actually would have been had we completed the disposal at the dates indicated. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial position or operating results of the continuing company.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the following:
| • | Accompanying notes to the unaudited pro forma condensed consolidated financial statements; |
| • | Consolidated financial statements of Sagent included in our Annual Report on Form 10-K for the year ended December 31, 2015 and the notes relating thereto. |
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2015
(In thousands, except per-share data)
| Sagent | Adjustments | (Note) | Pro Forma Consolidated |
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| Net revenue |
$ | 318,296 | $ | (839 | ) | 3(e) | $ | 317,457 | ||||||
| Cost of sales |
230,557 | (5,401 | ) | 3(e) | 225,156 | |||||||||
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| Gross profit |
87,739 | 4,562 | 92,301 | |||||||||||
| Operating expenses: |
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| Product development |
29,145 | (283 | ) | 3(e) | 28,862 | |||||||||
| Selling, general and administrative |
49,931 | (3,216 | ) | 3(e) | 46,715 | |||||||||
| Acquisition-related costs |
2,838 | (750 | ) | 3(f) | 2,088 | |||||||||
| Management transition |
5,310 | — | 5,310 | |||||||||||
| Equity in net income of joint ventures |
(2,569 | ) | — | (2,569 | ) | |||||||||
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| Total operating expenses |
84,655 | (4,249 | ) | 80,406 | ||||||||||
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| Impairment of SCP long-lived assets |
45,158 | (45,158 | ) | 3(e) | — | |||||||||
| Legal settlement |
2,447 | — | 2,447 | |||||||||||
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| Income (loss) from operations |
(44,521 | ) | 53,969 | 9,448 | ||||||||||
| Interest income and other income (expense) |
(2,790 | ) | 1,150 | 3(e) | (1,640 | ) | ||||||||
| Interest expense |
(770 | ) | — | (770 | ) | |||||||||
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| Income (loss) before income taxes |
(48,081 | ) | 55,119 | 7,038 | ||||||||||
| Provision for income taxes |
(26,199 | ) | 30,041 | 3(g) | 3,842 | |||||||||
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| Net income (loss) |
$ | (21,882 | ) | $ | 25,078 | $ | 3,196 | |||||||
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| Net income per common share: |
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| Basic |
$ | (0.67 | ) | $ | 0.10 | |||||||||
| Diluted |
$ | (0.67 | ) | $ | 0.10 | |||||||||
| Weighted-average of shares used to compute net income per common share: |
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| Basic |
32,439 | 32,439 | ||||||||||||
| Diluted |
32,439 | 32,916 | ||||||||||||
See notes to pro forma financial statements
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2015
(In thousands, except per-share data)
| Sagent | Adjustments | Note |
Pro Forma Combined |
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| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | 28,962 | $ | (2,270 | ) | 3(a)(1); 3(a)(2) |
$ | 26,692 | ||||||
| Short-term investments |
20,060 | — | 20,060 | |||||||||||
| Accounts receivable, net of chargebacks and other deductions |
51,425 | — | 51,425 | |||||||||||
| Inventories, net |
76,453 | — | 76,453 | |||||||||||
| Due from related party |
2,678 | — | 2,678 | |||||||||||
| Prepaid assets and other current assets |
7,388 | — | 7,388 | |||||||||||
| Assets held for sale |
4,626 | (4,626 | ) | 3(b) | — | |||||||||
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| Total current assets |
191,592 | (6,896 | ) | 184,696 | ||||||||||
| Property, plant, and equipment, net |
19,761 | — | 19,761 | |||||||||||
| Investment in joint ventures |
7,108 | — | 7,108 | |||||||||||
| Goodwill |
25,184 | — | 25,184 | |||||||||||
| Intangible assets, net |
53,166 | — | 53,166 | |||||||||||
| Non-current deferred tax assets |
50,808 | — | 50,808 | |||||||||||
| Other assets |
2,113 | — | 2,113 | |||||||||||
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| Total assets |
$ | 349,732 | $ | (6,896 | ) | $ | 342,836 | |||||||
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| Liabilities and stockholders’ equity |
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| Current liabilities: |
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| Accounts payable |
$ | 43,703 | $ | — | $ | 43,703 | ||||||||
| Due to related party |
13,754 | — | 13,754 | |||||||||||
| Accrued profit sharing |
7,582 | — | 7,582 | |||||||||||
| Accrued liabilities |
15,706 | — | 15,706 | |||||||||||
| Liabilities held for sale |
2,910 | (2,910 | ) | 3(c) | — | |||||||||
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| Total current liabilities |
83,655 | (2,910 | ) | 80,745 | ||||||||||
| Long term liabilities: |
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| Long-term debt |
1,623 | — | 1,623 | |||||||||||
| Deferred income taxes |
12,021 | — | 12,021 | |||||||||||
| Other long-term liabilities |
1,340 | — | 1,340 | |||||||||||
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| Total liabilities |
98,639 | (2,910 | ) | 95,729 | ||||||||||
| Stockholders’ equity: |
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| Common stock |
328 | — | 328 | |||||||||||
| Additional paid-in capital |
367,235 | — | 367,235 | |||||||||||
| Accumulated other comprehensive income (loss) |
(17,482 | ) | 1,522 | 3(d)(1) | (15,960 | ) | ||||||||
| Accumulated retained earnings (deficit) |
(98,988 | ) | (5,508 | ) | 3(d)(2) | (104,496 | ) | |||||||
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| Total stockholders’ equity |
251,093 | (3,986 | ) | 247,107 | ||||||||||
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| Total liabilities and stockholders’ equity |
$ | 349,732 | $ | (6,896 | ) | $ | 342,836 | |||||||
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See notes to pro forma financial statements
Note 1. Basis of Presentation
The unaudited pro forma condensed consolidated financial statements were prepared in accordance with the regulations of the SEC and are intended to show the effect of the SCP sale on the historical financial statements as if it had been completed on January 1, 2015 for the purposes of the condensed consolidated statement of operations and as of December 31, 2015 for the purposes of the condensed consolidated balance sheet. The pro forma adjustments reflecting the completion of the sale are based upon the assumptions set forth herein.
The unaudited pro forma financial information should be read in conjunction with the underlying financial information from which it was extracted without material adjustment from the audited consolidated financial statements of Sagent Pharmaceuticals, Inc. as of and for the year ended December 31, 2015 included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 7, 2016.
This unaudited pro forma financial information is not intended to reflect the financial position and results of operations which would have resulted had the SCP divestiture been effected on the dates indicated. Further, the pro forma results of operations are not necessarily indicative of the results of operations that may be obtained in the future.
Note 2. Summary of Significant Accounting Policies
The unaudited pro forma financial information has been compiled in a manner consistent with the accounting policies adopted by Sagent.
Note 3. Pro Forma Adjustments
| (a) | Cash and cash equivalents |
| 1. | An adjustment to eliminate cash on hand at SCP as of December 31, 2015 of $2,770 was made to the unaudited pro forma condensed consolidated balance sheet as of that date. Cash on hand at December 31, 2015 was utilized in the ordinary course of business prior to the closing of the transaction; cash remaining at closing will be transferred to NKF. |
| 2. | Cash and cash equivalents reflects the receipt of proceeds of $500 from the sale of SCP as of December 31, 2015. |
| (b) | Assets held for sale |
An adjustment to eliminate assets held for sale of SCP has been made to the unaudited pro forma condensed consolidated balance sheet as of December 31, 2015 to reflect the sale of the entity as of that date, consisting of the following:
| Accounts receivable, net |
$ | 8 | ||
| Inventories, net |
3,529 | |||
| Property, plant and equipment, net |
500 | |||
| Other assets |
589 | |||
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| Total assets held for sale in the balance sheet |
$ | 4,626 | ||
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| (c) | Liabilities held for sale |
An adjustment to eliminate liabilities held for sale of SCP has been made to the unaudited pro forma condensed consolidated balance sheet as of December 31, 2015 to reflect the sale of the entity as of that date, consisting of the following:
| Accounts payable |
$ | 722 | ||
| Accrued liabilities |
1,876 | |||
| Other liabilities |
312 | |||
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| Total liabilities held for sale in the balance sheet |
$ | 2,910 | ||
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| (d) | Equity |
| 1. | Accumulated other comprehensive income: An adjustment to eliminate the SCP-related currency translation adjustment of $1,522 has been made to the unaudited pro forma condensed consolidated balance sheet as of December 31, 2015, reflecting the impact of the disposal of the entity. |
| 2. | Retained earnings: An adjustment to record the loss of $5,508 has been made to the unaudited pro forma condensed consolidated balance sheet as of December 31, 2015, reflecting the elimination of SCP-related activity as of that date. |
| (e) | SCP statement of operations activity |
Adjustments were made to the Statement of Operations for the year ended December 31, 2015 to eliminate the income and expense activity associated with the SCP entity, as included in the table below.
| Net revenue |
$ | 839 | ||
| Cost of sales |
5,401 | |||
| Product development |
283 | |||
| Selling, general and administrative |
3,216 | |||
| Impairment of SCP long-lived assets |
45,158 | |||
| Interest income and other income (expense) |
(1,150 | ) |
| (f) | Transaction costs |
An adjustment to eliminate transaction costs of $750 incurred to sell SCP has been made to the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2015 because these costs are directly related to the transaction and are non-recurring.
| (g) | Provision for income taxes |
An adjustment to eliminate the benefit from income taxes for the year ended December 31, 2015 of $30,041 related to the Company’s decision to sell SCP has been made to the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2015. In connection with the decision to sell SCP in December 2015, we determined that SCP’s capital stock and intercompany loans from our US parent to SCP were impaired. We made tax elections to realize this value through deductions for worthless stock and bad debt.