Segment Information

12 Months Ended

Dec. 31, 2013

Segment Information [Abstract]

Segment Information

Note 12 — Segment Information

The Company reports its results of operations for the three-year period ended December 31, 2013 in three segments:

- Ophthalmic

- Hospital Drugs & Injectables

- Contract Services

     The ophthalmic segment manufactures, markets and distributes diagnostic and therapeutic pharmaceuticals. The hospital drugs & injectables segment manufactures, markets and distributes drugs and injectable pharmaceuticals, primarily in niche markets, as well as certain vaccines.  The majority of the drug products included in this segment are injectables, though also included are a number of drugs administered to patients by other methods.  The contract services segment manufactures products for third party pharmaceutical and biotechnology customers based on their specifications.

      The Company’s reportable segments are based upon internal financial reports that aggregate certain operating information. The Company’s chief operating decision maker, as defined in ASC Topic 280, Segment Reporting, is its chief executive officer, or CEO. The Company’s CEO oversees operational assessments and resource allocations based upon the results of the Company’s reportable segments, all of which have available discrete financial information.

Selected financial information by segment is presented below (in thousands):

	Years ended December 31,
	2013		2012		2011
REVENUES
Hospital drugs & injectables	$	179,625	$	129,723	$	55,077
Ophthalmic		114,515		103,765		68,591
Contract services		23,571		22,670		13,252
Total revenues	$	317,711	$	256,158	$	136,920
GROSS PROFIT
Hospital drugs & injectables	$	104,473	$	83,413	$	30,057
Ophthalmic		63,481		58,785		43,054
Contract services		3,950		6,494		6,578
Total gross profit	$	171,904	$	148,692	$	79,689

The Company manages its business segments to the gross profit level and manages its operating and other costs on a company-wide basis. Inter-segment activity at the gross profit level is minimal. The Company does not have discrete assets by segment, as certain manufacturing and warehouse facilities support more than one segment, and therefore does not report assets by segment.

During 2013, 2012 and 2011, approximately $27.3 million, $29.4 million and $5.3 million of the Company’s net revenue, respectively, was from customers located in foreign countries.  Sales generated by Akorn India Private Limited (“AIPL”), the Company’s wholly owned subsidiary in India, accounted for $15.8 million and $16.7 million of the foreign sales amounts for 2013 and 2012, respectively.  In these years, AIPL sold product exclusively to contract customers in India and to export customers in unregulated world markets, outside the United States.

The ophthalmic segment carries goodwill from the Company’s acquisition of Advanced Vision Research, Inc. in May 2011, and the contract services segment carries goodwill related to the Company’s acquisition of selected assets of Kilitch Drugs (India) Limited in February 2012.  The carrying amounts of goodwill by segment were as follows (in thousands):

	December 31,
Goodwill:	2013		2012
Ophthalmic segment	$	11,863	$	11,863
Contract services segment		17,968		20,296
Total	$	29,831	$	32,159

The decline in contract segment goodwill from December 31, 2012 to December 31, 2013 was due to changes in the foreign currency exchange rate between Indian rupees and U.S. dollars.  The Company performed impairment tests of its goodwill during the fourth quarter of 2013 and identified no impairment.