Amneal Reports Second Quarter 2019 Financial Results

Q2 2019 Net Revenue of $405 Million; GAAP Loss per share of $0.13; Combined Adjusted Diluted EPS(1) of $0.09

Positive cash flow from operations of $21 million

Reaffirms Full Year 2019 EBITDA Guidance

Investor Call at 8:30 a.m. ET to Discuss Second Quarter 2019 Earnings Results

BRIDGEWATER, N.J.--()--Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the “Company”) announced its results today for the second quarter ended June 30, 2019.

 

Summary of GAAP and Non-GAAP Combined and Adjusted Results

(Unaudited; In thousands, except per share amounts)

 

Three Months Ended

 

 

 

June 30, 2019

 

June 30, 2018

 

Year/ Year Variance

GAAP Results(2)

 

 

 

 

 

Net revenue

$

404,642

 

 

$

413,787

 

 

(2.2)%

Net loss attributable to Amneal Pharmaceuticals, Inc.

$

(16,902

)

 

$

(19,104

)

 

11.5%

Diluted loss per share attributable to Amneal Pharmaceuticals, Inc.

$

(0.13

)

 

$

(0.15

)

 

13.3%

 

 

 

 

 

 

Non-GAAP Results(1)(3)

 

 

 

 

 

Combined net revenue

$

404,642

 

 

$

462,328

 

 

(12.5)%

Combined adjusted net income

$

26,669

 

 

$

69,895

 

 

(61.8)%

Combined adjusted EBITDA

$

92,081

 

 

$

138,622

 

 

(33.6)%

Combined adjusted diluted EPS

$

0.09

 

 

$

0.23

 

 

(60.9)%

(1) See “Non-GAAP Financial Measures” below.

(2) Prior year financials reflect the results of Amneal Pharmaceuticals LLC consolidating the results of Impax Laboratories, LLC from the transaction closing date on May 4, 2018.

(3) For the three months ended June 30, 2018, assumes the combination between Amneal Pharmaceuticals LLC and Impax Laboratories, LLC, and the acquisition of Gemini Laboratories, LLC, excluding the impact of financing and acquisition accounting adjustments, occurred on January 1, 2018.

Second Quarter 2019 Performance

Net revenue in the second quarter of 2019 was $405 million, a decrease of 2.2% compared to the second quarter of 2018, due to lower Generics segment revenue partially offset by an increase in Specialty segment revenue. Net loss attributable to Amneal Pharmaceuticals, Inc. was $17 million in the second quarter of 2019 compared to a net loss of $19 million in the prior year period. Diluted EPS in the second quarter of 2019 was a loss of $0.13 compared to a loss of $0.15 in the prior year period.

Combined net revenue(1) in the second quarter of 2019 was $405 million, a decrease of 12.5% compared to the second quarter of 2018, due to a decline in revenue from both the Generics and Specialty segments. Combined adjusted net income(1) in the second quarter of 2019 was $27 million, a decrease of 61.8% compared to the prior year period. Combined adjusted EBITDA(1) in the second quarter of 2019 was $92 million, a decrease of 33.6% compared to the prior year period, due to lower revenue and lower gross margins, partially offset by lower operating expenses as a result of cost synergies from the business combination with Impax. Combined adjusted diluted EPS in the second quarter of 2019 was $0.09, compared to $0.23 for the prior year period.

(1) See “Non-GAAP Financial Measures” below.

 

Amneal Pharmaceuticals, Inc.

Reconciliation of Generics Operating Income (Loss) to Generics Combined Operating Income (Loss)

(Unaudited; In thousands)

 

Generics

Three months ended June 30, 2019

 

 

Three months ended June 30, 2018

 

 

 

Add:

(Non-GAAP)

 

 

 

 

Add:

 

(Non-GAAP)

 

Actual

 

Impax/

Gemini

Combined

 

 

Actual

 

Impax/ Gemini

 

Combined

Net revenue - Generics

$

335,064

 

 

$

 

$

335,064

 

 

 

$

361,770

 

 

$

20,995

 

 

$

382,765

 

Cost of goods sold

263,423

 

 

 

263,423

 

 

 

211,534

 

 

29,624

 

 

241,158

 

Cost of goods sold impairment charges

3,012

 

 

 

3,012

 

 

 

 

 

 

 

 

Gross profit

68,629

 

 

 

68,629

 

 

 

150,236

 

 

(8,629

)

 

141,607

 

Selling, general, and administrative

14,379

 

 

 

14,379

 

 

 

19,621

 

 

4,340

 

 

23,961

 

Research and development

45,448

 

 

 

45,448

 

 

 

47,206

 

 

3,984

 

 

51,190

 

Restructuring and other charges

418

 

 

 

418

 

 

 

24,797

 

 

 

 

24,797

 

Legal settlement gains

 

 

 

 

 

 

(3,000

)

 

 

 

(3,000

)

Intellectual property legal development expenses

2,511

 

 

 

2,511

 

 

 

4,004

 

 

 

 

4,004

 

Acquisition, integration and transaction related expenses

987

 

 

 

987

 

 

 

114,622

 

 

 

 

114,622

 

Operating income (loss)

$

4,886

 

 

$

 

$

4,886

 

 

 

$

(57,014

)

 

$

(16,953

)

 

$

(73,967

)

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

20.5

%

 

%

20.5

%

 

 

41.5

%

 

(41.1

%)

 

37.0

%

Adjusted gross profit (Non-GAAP)(4)

$

115,434

 

 

$

 

$

115,434

 

 

 

$

186,848

 

 

$

(1,690

)

 

$

185,158

 

Adjusted gross margin (Non-GAAP)(5)

34.5

%

 

%

34.5

%

 

 

51.6

%

 

(8.0

%)

 

48.4

%

Adjusted operating income (Non-GAAP)

$

64,748

 

 

$

 

$

64,748

 

 

 

$

120,662

 

 

$

(11,339

)

 

$

109,323

 

(4) Adjusted gross profit is calculated as combined net revenue less adjusted cost of goods sold. See Non-GAAP reconciliations below for calculation of adjusted cost of goods sold.

(5) Adjusted gross margin is calculated as adjusted gross profit divided by combined net revenue.

 

Amneal Pharmaceuticals, Inc.

Reconciliation of Generics Operating (Loss) Income to Generics Combined Operating Loss

(Unaudited; In thousands)

 

Generics

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

 

Add:

 

(Non-GAAP)

 

 

 

 

Add:

 

(Non-GAAP)

 

 

Actual

 

Impax/ Gemini

 

Combined

 

Actual

 

Impax/ Gemini

 

Combined

Net revenue - Generics

$

717,541

 

 

$

 

 

$

717,541

 

 

$

636,959

 

 

$

102,237

 

 

$

739,196

 

Cost of goods sold

542,301

 

 

 

 

542,301

 

 

342,128

 

 

122,761

 

 

464,889

 

Cost of goods sold impairment charges

56,309

 

 

 

 

56,309

 

 

 

 

 

 

 

Gross profit

118,931

 

 

 

 

118,931

 

 

294,831

 

 

(20,524

)

 

274,307

 

Selling, general, and administrative

38,527

 

 

 

 

38,527

 

 

30,824

 

 

7,334

 

 

38,158

 

Research and development

95,599

 

 

 

 

95,599

 

 

91,415

 

 

13,623

 

 

105,038

 

In-process research and development impairment charges

22,787

 

 

 

 

22,787

 

 

 

 

 

 

 

Restructuring and other charges

2,499

 

 

 

 

2,499

 

 

24,797

 

 

 

 

24,797

 

Litigation, settlements and related charges

 

 

 

 

 

 

 

 

89,159

 

 

89,159

 

Legal settlement gains

 

 

 

 

 

 

(3,000

)

 

 

 

(3,000

)

Intellectual property legal development expenses

5,632

 

 

 

 

5,632

 

 

8,580

 

 

23

 

 

8,603

 

Acquisition, integration and transaction related expenses

3,584

 

 

 

 

3,584

 

 

114,622

 

 

 

 

114,622

 

Operating (loss) income

$

(49,697

)

 

$

 

 

$

(49,697

)

 

$

27,593

 

 

$

(130,663

)

 

$

(103,070

)

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

16.6

%

 

%

 

16.6

%

 

46.3

%

 

(20.1

%)

 

37.1

%

Adjusted gross profit (Non-GAAP)(4)

$

277,711

 

 

$

 

 

$

277,711

 

 

$

333,203

 

 

$

3,246

 

 

$

336,449

 

Adjusted gross margin (Non-GAAP)(5)

38.7

%

 

%

 

38.7

%

 

52.3

%

 

3.2

%

 

45.5

%

Adjusted operating income (Non-GAAP)

$

161,567

 

 

$

 

 

$

161,567

 

 

$

208,125

 

 

$

(16,752

)

 

$

191,373

 

(4) Adjusted gross profit is calculated as combined net revenue less adjusted cost of goods sold. See Non-GAAP reconciliations below for calculation of adjusted cost of goods sold.

(5) Adjusted gross margin is calculated as adjusted gross profit divided by combined net revenue.

Generics net revenue of $335 million decreased 7.4% for the second quarter of 2019 compared to $362 million for the second quarter of 2018. Generics combined net revenue(1) in the second quarter of 2019 was $335 million, a decrease of 12.5% compared to $383 million in the prior year period. The decrease is primarily attributable to additional competition on the base generic portfolio including key products Aspirin Dipyridamole ER Capsules, Yuvafem and Diclofenac Gel 1% and the sale of two of the Company's international businesses, partially offset by sales of Levothyroxine and Guanfacine HCL.

Generics gross margin for the second quarter of 2019 was 20.5% compared to 41.5% for the second quarter of 2018. Generics combined adjusted gross margin(1) for the second quarter of 2019 was 34.5% compared to 48.4% for the prior year period. The decrease is primarily related to unfavorable generics revenue mix including the impact of price erosion, and inventory obsolescence charges.

Generics operating income for the second quarter of 2019 was $5 million compared to an operating loss of $57 million for the second quarter of 2018, primarily due to acquisition, integration and restructuring charges related to the business combination with Impax in May 2018. Generics combined adjusted operating income(1) for the second quarter of 2019 was $65 million, a decrease of 40.8% compared to $109 million in the prior year period, primarily due to lower revenues and gross margin as noted above.

(1) See “Non-GAAP Financial Measures” below.

 

Amneal Pharmaceuticals, Inc.

Reconciliation of Specialty Operating Income to Specialty Combined Operating Income

(Unaudited; In thousands)

 

Specialty

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Net revenue - Specialty:

 

 

 

 

 

 

 

Rytary®

$

33,000

 

$

 

$

33,000

 

 

$

20,520

 

$

8,578

 

$

29,098

 

Unithroid®

8,904

 

 

8,904

 

 

4,424

 

3,207

 

7,631

 

Zomig®

14,427

 

 

14,427

 

 

9,695

 

3,933

 

13,628

 

All other specialty products

13,247

 

 

13,247

 

 

17,378

 

11,828

 

29,206

 

Total net revenue - Specialty

69,578

 

 

69,578

 

 

52,017

 

27,546

 

79,563

 

Cost of goods sold

32,958

 

 

32,958

 

 

23,958

 

6,711

 

30,669

 

Gross profit

36,620

 

 

36,620

 

 

28,059

 

20,835

 

48,894

 

Selling, general, and administrative

16,150

 

 

16,150

 

 

13,549

 

7,707

 

21,256

 

Research and development

2,568

 

 

2,568

 

 

3,129

 

1,007

 

4,136

 

Intellectual property legal development expenses

 

 

 

 

43

 

 

43

 

Restructuring and other charges

 

 

 

 

2,421

 

 

2,421

 

Acquisition, integration and transaction related expenses

1,366

 

 

1,366

 

 

 

 

 

Operating income

$

16,536

 

$

 

$

16,536

 

 

$

8,917

 

$

12,121

 

$

21,038

 

 

 

 

 

 

 

 

 

Gross margin

52.6

%

%

52.6

%

 

53.9

%

75.6

%

61.5

%

Adjusted gross profit (Non-GAAP)(4)

$

56,780

 

$

 

$

56,780

 

 

$

40,660

 

$

22,363

 

$

63,023

 

Adjusted gross margin (Non-GAAP)(5)

81.6

%

%

81.6

%

 

78.2

%

81.2

%

79.2

%

Adjusted operating income (Non-GAAP)

$

39,313

 

$

 

$

39,313

 

 

$

23,939

 

$

13,649

 

$

37,588

 

(4) Adjusted gross profit is calculated as combined net revenue less adjusted cost of goods sold. See Non-GAAP reconciliations below for calculation of adjusted cost of goods sold.

(5) Adjusted gross margin is calculated as adjusted gross profit divided by combined net revenue.

Amneal Pharmaceuticals, Inc.

Reconciliation of Specialty Operating Income to Specialty Combined Operating Income

(Unaudited; In thousands)

 

Specialty

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Net revenue - Specialty:

 

 

 

 

 

 

 

Rytary®

$

61,828

 

$

 

$

61,828

 

 

$

20,520

 

$

35,086

 

$

55,606

 

Unithroid®

18,625

 

 

18,625

 

 

4,424

 

9,716

 

14,140

 

Zomig®

25,551

 

 

25,551

 

 

9,695

 

14,411

 

24,106

 

All other specialty products

27,217

 

 

27,217

 

 

17,378

 

37,032

 

54,410

 

Total net revenue - Specialty

133,221

 

 

133,221

 

 

52,017

 

96,245

 

148,262

 

Cost of goods sold

63,823

 

 

63,823

 

 

23,958

 

26,731

 

50,689

 

Gross profit

69,398

 

 

69,398

 

 

28,059

 

69,514

 

97,573

 

Selling, general, and administrative

37,477

 

 

37,477

 

 

13,549

 

27,942

 

41,491

 

Research and development

6,275

 

 

6,275

 

 

3,129

 

3,664

 

6,793

 

Intellectual property legal development expenses

1,045

 

 

1,045

 

 

43

 

 

43

 

Restructuring and other charges

178

 

 

178

 

 

2,421

 

 

2,421

 

Litigation, settlements and related charges

 

 

 

 

 

940

 

940

 

Acquisition, integration and transaction related expenses

3,250

 

 

3,250

 

 

 

 

 

Operating income

$

21,173

 

$

 

$

21,173

 

 

$

8,917

 

$

36,968

 

$

45,885

 

 

 

 

 

 

 

 

 

Gross margin

52.1

%

%

52.1

%

 

53.9

%

72.2

%

65.8

%

Adjusted gross profit (Non-GAAP)(4)

$

109,769

 

$

 

$

109,769

 

 

$

40,660

 

$

75,626

 

$

116,286

 

Adjusted gross margin (Non-GAAP)(5)

82.4

%

%

82.4

%

 

78.2

%

78.6

%

78.4

%

Adjusted operating income (Non-GAAP)

$

68,038

 

$

 

$

68,038

 

 

$

23,939

 

$

45,144

 

$

69,083

 

(4) Adjusted gross profit is calculated as combined net revenue less adjusted cost of goods sold. See Non-GAAP reconciliations below for calculation of adjusted cost of goods sold.

(5) Adjusted gross margin is calculated as adjusted gross profit divided by combined net revenue.

The Specialty segment is comprised of the Impax Specialty business acquired on May 4, 2018 and the Gemini Laboratories, LLC business acquired on May 7, 2018. Prior to these two transactions, Amneal did not have a Specialty segment.

Specialty net revenue in the second quarter of 2019 increased to $70 million compared to $52 million for the second quarter of 2018, primarily due to the timing of the combination with Impax and the Gemini acquisition. Specialty combined net revenue(1) in the second quarter of 2019 was $70 million, a decrease of 12.5% compared to the prior year period, driven primarily by lower revenue from Albenza® as a result of the loss of exclusivity in September of 2018, partially offset by higher revenue from Rytary® and Unithroid®.

Specialty gross margin for the second quarter of 2019 was 52.6% compared to 53.9% for the second quarter of 2018. Specialty combined adjusted gross margin(5) was 81.6% for the second quarter of 2019 compared to 79.2% in the prior year period, primarily due to product sales mix.

Specialty operating income for the second quarter of 2019 was $17 million compared to $9 million for the second quarter of 2018, primarily due to higher revenue. Specialty combined adjusted operating income(1) for the second quarter of 2019 was $39 million, an increase of $1 million compared to the prior year period, primarily due to lower expenses and favorable product sales mix.

(1) See “Non-GAAP Financial Measures” below.

 

Corporate and Other Information

(Unaudited; In thousands)

 

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

General and administrative expense

$

36,752

 

$

 

$

36,752

 

 

$

22,833

 

$

8,000

 

$

30,833

 

Acquisition, transaction-related and integration expenses

1,166

 

 

1,166

 

 

92,885

 

4,381

 

97,266

 

Restructuring and other charges

2,417

 

 

2,417

 

 

17,247

 

223

 

17,470

 

Total general, administrative and other operating expenses

$

40,335

 

$

 

$

40,335

 

 

$

132,965

 

$

12,604

 

$

145,569

 

 

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

General and administrative expense

$

75,713

 

$

 

$

75,713

 

 

$

36,751

 

$

28,737

 

$

65,488

 

Acquisition, transaction-related and integration expenses

2,717

 

 

2,717

 

 

100,020

 

10,925

 

110,945

 

Restructuring and other charges

6,319

 

 

6,319

 

 

17,247

 

5,123

 

22,370

 

Total general, administrative and other operating expenses

$

84,749

 

$

 

$

84,749

 

 

$

154,018

 

$

44,785

 

$

198,803

 

General and administrative and other operating expenses in the second quarter of 2019 decreased to $40 million compared to $133 million in the prior year period. General and administrative and other operating expenses on a combined basis(1) in the second quarter of 2019 decreased to $40 million compared to $146 million in the prior year period. The decrease is primarily due to costs associated with the Combination with Impax and Gemini acquisition including lower acquisition, transaction-related and integration expenses, and lower restructuring and other charges.

2019 Financial Outlook

Amneal’s full year 2019 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 Company cannot provide a reconciliation between non-GAAP projections and the most directly comparable GAAP measures without unreasonable efforts because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for the reconciliation. The items include, but are not limited to, acquisition-related expenses, restructuring expenses, asset impairments and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for 2019.

Amneal is updating certain of its previously provided 2019 guidance as follows:

 

Full Year 2019 Financial Guidance

 

Prior

Updated

Adjusted gross margin

47% - 50%

47% - 50%

Adjusted R&D as a % of net revenue

9% - 10%

9.5% - 10.5%

Adjusted SG&A as a % of net revenue

11% - 12%

14% - 15%

Adjusted EBITDA

$600 million - $650 million(6)

$425 million - $475 million

Adjusted diluted EPS

$0.94 - $1.04

$0.52 - $0.62

Adjusted effective tax rate

19% - 21%

19% - 21%

Capital expenditures

Approximately $100 million

$65 million - $85 million

Weighted average diluted shares outstanding

Approximately 300 million

Approximately 300 million

(6) The Company issued revised Adjusted EBITDA guidance on July 10, 2019. Prior to the July 10 update, the Company’s original guidance with respect to 2019 Adjusted EBITDA was $600 million - $650 million.

Conference Call Information

Amneal will hold a conference call on August 5, 2019 at 8:30 a.m. Eastern Time to discuss its results. The call and presentation can also be accessed via a live Webcast through the Investor Relations section of Amneal’s Web site at https://investors.amneal.com/investor-relations, or directly at https://event.on24.com/wcc/r/2021447/323A22AA88A202DFC94FA94090002247. The number to call from within the United States is (844) 746-0741 and (412) 317-5273 internationally. A replay of the conference call will be available shortly after the call for a period of seven days. To access the replay, dial (877) 344-7529 (in the U.S.) and (412) 317-0088 (international callers). The access code for the replay is 10133264.

About Amneal

Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is an integrated pharmaceutical company focused on developing, manufacturing and distributing generic, brand and biosimilar products. The Company has operations in North America, Asia, and Europe, working together to bring high-quality medicines to patients primarily within the United States.

Amneal has an extensive portfolio of more than 300 generic medicines, and is expanding its portfolio to include complex dosage forms in a broad range of therapeutic areas. The Company also markets a portfolio of branded pharmaceutical products through its Specialty segment focused principally on central nervous system disorders and parasitic infections. For more information, visit www.amneal.com.

Non-GAAP Financial Measures

This release includes certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted gross profit, adjusted gross margin and adjusted operating income, which are intended as supplemental measures of the Company’s performance that are not required by or presented in accordance with GAAP. In addition, this release includes these non-GAAP measures and our reported results on a non-GAAP combined basis to include the historical results of Impax and Gemini, not adjusted for financing and acquisition accounting impacts of the combination, as if the transaction closing dates had occurred on the first day of all periods presented herein. All combined business results presented in this release are not prepared in accordance with Article 11 of Regulation S-X. The calculation of Non-GAAP adjusted diluted earnings per share assumes the conversion of all outstanding shares of Class B Common Stock to shares of Class A Common stock.

Management uses these non-GAAP historical and combined measures internally to evaluate and manage the Company’s operations and to better understand its business because they facilitate a comparative assessment of the Company's operating performance relative to its performance based on results calculated under GAAP. These non-GAAP measures also isolate the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company's operations and underlying operational performance. The compensation committee of the Company’s board of directors also uses certain of these measures to evaluate management's performance and set its compensation. The Company believes that these non-GAAP measures also provide useful information to investors regarding certain financial and business trends relating to the Company’s financial condition and operating results, and doing so on a combined basis facilitates an evaluation of the financial performance of the Company and its operations on a consistent basis. Providing this information therefore allows investors to make independent assessments of the Company’s financial performance, results of operation and trends while viewing the information through the eyes of management.

These non-GAAP measures are subject to limitations. The non-GAAP measures presented in this release may not be comparable to similarly titled measures used by other companies because other companies may not calculate one or more in the same manner. Additionally, the non-GAAP performance measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements; do not reflect changes in, or cash requirements for, working capital needs; and do not reflect interest expense, or the requirements necessary to service interest or principal payments on debt. Further, the combined results may not represent what our combined results of operations and financial position would have been had the transactions occurred on the dates indicated, nor are they intended to project our combined results of operations or financial position for any future period. To compensate for these limitations, management presents and considers these non-GAAP measures in conjunction with the Company’s GAAP results; no non-GAAP measure should be considered in isolation from or as alternatives to net income, diluted earnings per share or any other measure determined in accordance with GAAP. Readers should review the reconciliations included below, and should not rely on any single financial measure to evaluate the Company’s business.

A reconciliation of each non-GAAP measure to the most directly comparable GAAP measure is set forth below.

Safe Harbor Statement

Certain statements contained herein, regarding matters that are not historical facts, may be forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). Such forward-looking statements include statements regarding management’s intentions, plans, beliefs, expectations or forecasts for the future, including, among other things, future operating results and financial performance, product development and launches, integration strategies and resulting cost reduction, market position and business strategy. Words such as “may,” “will,” “could,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “assume,” “continue,” and similar words are intended to identify estimates and forward-looking statements.

The reader is cautioned not to rely on these forward-looking statements. These forward-looking statements are based on current expectations of future events. If the underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the expectations and projections of Amneal Pharmaceuticals, Inc. (the “Company”). Such risks and uncertainties include, but are not limited to: our ability to integrate the operations of Amneal Pharmaceuticals LLC and Impax Laboratories, LLC pursuant to the business combination completed on May 4, 2018, and our ability to realize the anticipated synergies and other benefits of the combination; our ability to successfully develop and commercialize new products; our ability to obtain exclusive marketing rights for our products and to introduce products on a timely basis; the competition we face in the pharmaceutical industry from brand and generic drug product companies, and the impact of that competition on our ability to set prices; our ability to manage our growth; our dependence on the sales of a limited number of products for a substantial portion of our total revenues; the risk of product liability and other claims against us by consumers and other third parties; risks related to changes in the regulatory environment, including United States federal and state laws related to healthcare fraud abuse and health information privacy and security and changes in such laws; changes to FDA product approval requirements; risks related to federal regulation of arrangements between manufacturers of branded and generic products; the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers; the continuing trend of consolidation of certain customer groups; our reliance on certain licenses to proprietary technologies from time to time; our dependence on third party suppliers and distributors for raw materials for our products and certain finished goods; the impact of global economic conditions; our dependence on third party agreements for a portion of our product offerings; our ability to make acquisitions of or investments in complementary businesses and products on advantageous terms; legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives; the significant amount of resources we expend on research and development; our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the future, and the impact of interest rate fluctuations on such indebtedness; the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by a group of stockholders. A further list and descriptions of these risks, uncertainties and other factors can be found in the Company’s most recently filed Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as supplemented by any subsequently filed Quarterly Reports on Form 10-Q. Copies of these filings are available online at www.sec.gov, www.amneal.com or on request from the Company.

Forward-looking statements included herein speak only as of the date hereof and we undertake no obligation to revise or update such statements to reflect the occurrence of events or circumstances after the date hereof.

Trademarks referenced herein are the property of their respective owner.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Operations

(Unaudited; In thousands, except per share amounts)

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

Net revenue

$

404,642

 

 

$

413,787

 

 

$

850,762

 

 

$

688,976

 

Cost of goods sold

296,381

 

 

235,492

 

 

606,124

 

 

366,086

 

Cost of goods sold impairment charges

3,012

 

 

 

 

56,309

 

 

 

Gross profit

105,249

 

 

178,295

 

 

188,329

 

 

322,890

 

Selling, general and administrative

67,281

 

 

56,003

 

 

151,717

 

 

81,124

 

Research and development

48,016

 

 

50,335

 

 

101,874

 

 

94,544

 

In-process research and development impairment charges

 

 

 

 

22,787

 

 

 

Acquisition, transaction-related and integration expenses

3,519

 

 

207,507

 

 

9,551

 

 

214,642

 

Restructuring and other charges

2,835

 

 

44,465

 

 

8,996

 

 

44,465

 

Legal settlement gains

 

 

(3,000

)

 

 

 

(3,000

)

Intellectual property legal development expenses

2,511

 

 

4,047

 

 

6,677

 

 

8,623

 

Operating loss

(18,913

)

 

(181,062

)

 

(113,273

)

 

(117,508

)

Other (expense) income:

 

 

 

 

 

 

 

Interest expense, net

(43,886

)

 

(36,622

)

 

(87,167

)

 

(57,673

)

Foreign exchange gain (loss), net

8,311

 

 

(25,946

)

 

2,847

 

 

(17,381

)

Loss on extinguishment of debt

 

 

(19,667

)

 

 

 

(19,667

)

(Loss) gain on sale of international businesses, net

(1,888

)

 

 

 

6,930

 

 

 

Other income, net

149

 

 

791

 

 

1,256

 

 

1,739

 

Total other expense, net

(37,314

)

 

(81,444

)

 

(76,134

)

 

(92,982

)

Loss before income taxes

(56,227

)

 

(262,506

)

 

(189,407

)

 

(210,490

)

Benefit from income taxes

(5,701

)

 

(12,416

)

 

(14,129

)

 

(12,052

)

Net loss

(50,526

)

 

(250,090

)

 

(175,278

)

 

(198,438

)

Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-Combination

 

 

200,341

 

 

 

 

148,806

 

Less: Net loss attributable to non-controlling interests

33,624

 

 

31,885

 

 

110,495

 

 

31,768

 

Net loss attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest

(16,902

)

 

(17,864

)

 

(64,783

)

 

(17,864

)

Accretion of redeemable non-controlling interest

 

 

(1,240

)

 

 

 

(1,240

)

Net loss attributable to Amneal Pharmaceuticals, Inc.

$

(16,902

)

 

$

(19,104

)

 

$

(64,783

)

 

$

(19,104

)

 

 

 

 

 

 

 

 

Net loss per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders:

 

 

 

 

 

 

 

Class A and Class B-1 basic and diluted

$

(0.13

)

 

$

(0.15

)

 

$

(0.51

)

 

$

(0.15

)

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Class A and Class B-1 basic and diluted

128,016

 

 

127,112

 

 

127,852

 

 

127,112

 

 

Amneal Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited; In thousands)

 

June 30,

2019

 

December 31,

2018

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

54,893

 

 

$

213,394

 

Restricted cash

2,129

 

 

5,385

 

Trade accounts receivable, net

634,666

 

 

481,495

 

Inventories

414,627

 

 

457,219

 

Prepaid expenses and other current assets

77,062

 

 

128,321

 

Related party receivables

2,470

 

 

830

 

Total current assets

1,185,847

 

 

1,286,644

 

 

 

 

 

Property, plant and equipment, net

508,086

 

 

544,146

 

Goodwill

420,017

 

 

426,226

 

Intangible assets, net

1,553,330

 

 

1,654,969

 

Deferred tax asset, net

391,881

 

 

373,159

 

Operating lease right-of-use assets

59,900

 

 

 

Operating lease right-of-use assets - related party

17,031

 

 

 

Financing lease right-of-use assets - related party

62,588

 

 

 

Other assets

63,459

 

 

67,592

 

Total assets

$

4,262,139

 

 

$

4,352,736

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

505,143

 

 

$

514,440

 

Current portion of long-term debt, net

21,445

 

 

21,449

 

Current portion of operating lease liabilities

13,313

 

 

 

Current portion of operating and financing lease liabilities - related party

3,293

 

 

 

Related party payables

2,965

 

 

17,695

 

Current portion of financing obligation - related party

 

 

266

 

Total current liabilities

546,159

 

 

553,850

 

Long-term debt, net

2,619,788

 

 

2,630,598

 

Deferred income taxes

 

 

1,178

 

Liabilities under tax receivable agreement

193,499

 

 

192,884

 

Operating lease liabilities

47,836

 

 

 

Operating lease liabilities - related party

14,862

 

 

 

Financing lease liabilities - related party

61,990

 

 

 

Financing obligation - related party

 

 

39,083

 

Other liabilities

28,653

 

 

38,780

 

Total long-term liabilities

2,966,628

 

 

2,902,523

 

Total stockholders' equity

749,352

 

 

896,363

 

Total liabilities and stockholders' equity

$

4,262,139

 

 

$

4,352,736

 

 

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(Unaudited; In thousands)

 

Six Months Ended June 30,

 

2019

 

2018

Cash flows from operating activities:

 

 

 

Net loss

$

(175,278

)

 

$

(198,438

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

99,574

 

 

46,897

 

Amortization of Levothyroxine Transition Agreement asset

36,393

 

 

 

Unrealized foreign currency (gain) loss

(3,695

)

 

17,032

 

Amortization of debt issuance costs

3,218

 

 

2,577

 

Loss on extinguishment of debt

 

 

19,667

 

Gain on sale of international businesses, net

(6,930

)

 

 

Gain on termination of lease

 

 

(3,524

)

Intangible asset impairment charges

79,096

 

 

 

Non-cash restructuring and asset-related charges

1,314

 

 

 

Deferred tax benefit

(18,209

)

 

(14,993

)

Stock-based compensation and PPU expense

10,571

 

 

160,401

 

Inventory provision

50,410

 

 

17,426

 

Other operating charges and credits, net

3,155

 

 

927

 

Changes in assets and liabilities:

 

 

 

Trade accounts receivable, net

(162,954

)

 

(60,051

)

Inventories

(19,658

)

 

(71,655

)

Prepaid expenses, other current assets and other assets

28,614

 

 

(5,107

)

Related party receivables

(1,624

)

 

11,017

 

Accounts payable, accrued expenses and other liabilities

(13,538

)

 

19,630

 

Related party payables

2,225

 

 

(13,356

)

Net cash used in operating activities

(87,316

)

 

(71,550

)

Cash flows from investing activities:

 

 

 

Purchases of property, plant and equipment

(29,629

)

 

(36,600

)

Acquisition of product rights and licenses

(50,000

)

 

(3,000

)

Acquisitions, net of cash acquired

 

 

(321,324

)

Proceeds from sale of international businesses, net of cash sold

34,834

 

 

 

Net cash used in investing activities

(44,795

)

 

(360,924

)

Cash flows from financing activities:

 

 

 

Payments of deferred financing costs and debt extinguishment costs

 

 

(54,955

)

Proceeds from issuance of debt

 

 

1,325,383

 

Payments of principal on debt and capital leases

(13,500

)

 

(603,551

)

Payments on revolving credit line

 

 

(75,000

)

Payments of principal on financing lease - related party

(866

)

 

 

Payments of financing obligation - related party

 

 

(121

)

Proceeds from exercise of stock options

1,385

 

 

1,977

 

Employee payroll tax withholding on restricted stock unit vesting

(921

)

 

 

Equity contributions

 

 

27,742

 

Capital contribution from non-controlling interest

 

 

360

 

Acquisition of non-controlling interest

(3,543

)

 

 

Tax distribution to non-controlling interest

(13,494

)

 

 

Distributions to members

 

 

(182,998

)

Repayment of related party note

 

 

(14,842

)

Net cash (used in) provided by financing activities

(30,939

)

 

423,995

 

Effect of foreign exchange rate on cash

1,293

 

 

(853

)

Net decrease in cash, cash equivalents, and restricted cash

(161,757

)

 

(9,332

)

Cash, cash equivalents, and restricted cash - beginning of period

218,779

 

 

77,922

 

Cash, cash equivalents, and restricted cash - end of period

$

57,022

 

 

$

68,590

 

Cash and cash equivalents - end of period

$

54,893

 

 

$

61,521

 

Restricted cash - end of period

2,129

 

 

7,069

 

Cash, cash equivalents, and restricted cash - end of period

$

57,022

 

 

$

68,590

 

 

 

Amneal Pharmaceuticals, Inc.

Reconciliation of Non-GAAP Combined Results of Operations

(Unaudited; In thousands)

 

 

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

Add:

(Non-GAAP)

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Net revenue:

 

 

 

 

 

 

 

Generics

$

335,064

 

$

 

$

335,064

 

 

$

361,770

 

$

20,995

 

$

382,765

 

Specialty

69,578

 

 

69,578

 

 

52,017

 

27,546

 

79,563

 

Total net revenue

404,642

 

 

404,642

 

 

413,787

 

48,541

 

462,328

 

Cost of goods sold

296,381

 

 

296,381

 

 

235,492

 

36,335

 

271,827

 

Cost of goods sold impairment charges

3,012

 

 

3,012

 

 

 

 

 

Gross profit

105,249

 

 

105,249

 

 

178,295

 

12,206

 

190,501

 

Selling, general and administrative

67,281

 

 

67,281

 

 

56,003

 

20,047

 

76,050

 

Research and development

48,016

 

 

48,016

 

 

50,335

 

4,991

 

55,326

 

Acquisition, transaction-related and integration expenses

3,519

 

 

3,519

 

 

207,507

 

4,381

 

211,888

 

Restructuring and other charges

2,835

 

 

2,835

 

 

44,465

 

223

 

44,688

 

Legal settlement gains

 

 

 

 

(3,000

)

 

(3,000

)

Intellectual property legal development expenses

2,511

 

 

2,511

 

 

4,047

 

 

4,047

 

Operating loss

(18,913

)

 

(18,913

)

 

(181,062

)

(17,436

)

(198,498

)

Other (expense) income:

 

 

 

 

 

 

 

Interest expense, net

(43,886

)

 

(43,886

)

 

(36,622

)

(4,539

)

(41,161

)

Foreign exchange gain (loss), net

8,311

 

 

8,311

 

 

(25,946

)

 

(25,946

)

Loss on extinguishment of debt

 

 

 

 

(19,667

)

 

(19,667

)

Loss on sale of international businesses

(1,888

)

 

(1,888

)

 

 

 

 

Other income (expense), net

149

 

 

149

 

 

791

 

(14

)

777

 

Total other expense, net

(37,314

)

 

(37,314

)

 

(81,444

)

(4,553

)

(85,997

)

Loss before income taxes

(56,227

)

 

(56,227

)

 

(262,506

)

(21,989

)

(284,495

)

(Benefit from) provision for income taxes

(5,701

)

 

(5,701

)

 

(12,416

)

1,017

 

(11,399

)

Net loss

(50,526

)

 

(50,526

)

 

(250,090

)

(23,006

)

(273,096

)

Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-Combination

 

 

 

 

200,341

 

 

 

Less: Net loss attributable to non-controlling interests

33,624

 

 

33,624

 

 

31,885

 

 

 

Accretion of redeemable non-controlling interest

 

 

 

 

(1,240

)

 

 

Net loss attributable to Amneal Pharmaceuticals, Inc.

$

(16,902

)

$

 

$

(16,902

)

 

$

(19,104

)

 

 

 

Amneal Pharmaceuticals, Inc.

Reconciliation of Non-GAAP Combined Results of Operations

(Unaudited; In thousands)

 

 

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

 

Combined

 

Actual

Impax/ Gemini

 

Combined

Net revenue:

 

 

 

 

 

 

 

Generics

$

717,541

 

$

 

$

717,541

 

 

$

636,959

 

$

102,237

 

$

739,196

 

Specialty

133,221

 

 

133,221

 

 

52,017

 

96,245

 

148,262

 

Total net revenue

850,762

 

 

850,762

 

 

688,976

 

198,482

 

887,458

 

Cost of goods sold

606,124

 

 

606,124

 

 

366,086

 

149,492

 

515,578

 

Cost of goods sold impairment charges

56,309

 

 

56,309

 

 

 

 

 

Gross profit

188,329

 

 

188,329

 

 

322,890

 

48,990

 

371,880

 

Selling, general and administrative

151,717

 

 

151,717

 

 

81,124

 

64,013

 

145,137

 

Research and development

101,874

 

 

101,874

 

 

94,544

 

17,287

 

111,831

 

In-process research and development impairment charges

22,787

 

 

22,787

 

 

 

 

 

Acquisition, transaction-related and integration expenses

9,551

 

 

9,551

 

 

214,642

 

10,925

 

225,567

 

Restructuring and other charges

8,996

 

 

8,996

 

 

44,465

 

5,123

 

49,588

 

Legal settlement gains

 

 

 

 

(3,000

)

 

(3,000

)

Intellectual property legal development expenses

6,677

 

 

6,677

 

 

8,623

 

23

 

8,646

 

Litigation, settlements and related charges

 

 

 

 

 

90,099

 

90,099

 

Operating loss

(113,273

)

 

(113,273

)

 

(117,508

)

(138,480

)

(255,988

)

Other (expense) income:

 

 

 

 

 

 

 

Interest expense, net

(87,167

)

 

(87,167

)

 

(57,673

)

(18,231

)

(75,904

)

Foreign exchange gain (loss)

2,847

 

 

2,847

 

 

(17,381

)

921

 

(16,460

)

Loss on extinguishment of debt

 

 

 

 

(19,667

)

 

(19,667

)

Gain on sale of international businesses

6,930

 

 

6,930

 

 

 

 

 

Other income (expense)

1,256

 

 

1,256

 

 

1,739

 

(638

)

1,101

 

Total other expense, net

(76,134

)

 

(76,134

)

 

(92,982

)

(17,948

)

(110,930

)

Loss before income taxes

(189,407

)

 

(189,407

)

 

(210,490

)

(156,428

)

(366,918

)

Benefit from income taxes

(14,129

)

 

(14,129

)

 

(12,052

)

(6,273

)

(18,325

)

Net loss

(175,278

)

 

(175,278

)

 

(198,438

)

(150,155

)

(348,593

)

Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-Combination

 

 

 

 

148,806

 

 

 

Less: Net loss attributable to non-controlling interests

110,495

 

 

110,495

 

 

31,768

 

 

 

Accretion of redeemable non-controlling interest

 

 

 

 

(1,240

)

 

 

Net loss attributable to Amneal Pharmaceuticals, Inc.

$

(64,783

)

$

 

$

(64,783

)

 

$

(19,104

)

 

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Generics Cost of Goods Sold to Combined Adjusted Cost of Goods Sold

 

Generics

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Cost of goods sold

$

263,423

 

$

 

$

263,423

 

 

$

211,534

 

$

29,624

 

$

241,158

 

Cost of goods sold impairment charges

3,012

 

 

3,012

 

 

 

 

 

Adjusted to deduct (add):

 

 

 

 

 

 

 

Amortization

14,636

 

 

14,636

 

 

6,043

 

3,934

 

9,977

 

Inventory related charges(7)

21,443

 

 

21,443

 

 

30,569

 

3,005

 

33,574

 

Acquisition and site closure expenses(8)

6,969

 

 

6,969

 

 

 

 

 

Asset impairment charges(9)

3,012

 

 

3,012

 

 

 

 

 

Stock-based compensation expense

813

 

 

813

 

 

 

 

 

Other

(68

)

 

(68

)

 

 

 

 

Adjusted cost of goods sold (Non-GAAP)

$

219,630

 

$

 

$

219,630

 

 

$

174,922

 

$

22,685

 

$

197,607

 

Generics

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Cost of goods sold

$

542,301

 

$

 

$

542,301

 

 

$

342,128

 

$

122,761

 

$

464,889

 

Cost of goods sold impairment charges

56,309

 

 

56,309

 

 

 

 

 

Adjusted to deduct (add):

 

 

 

 

 

 

 

Amortization

25,388

 

 

25,388

 

 

7,803

 

13,823

 

21,626

 

Inventory related charges(7)

21,777

 

 

21,777

 

 

30,569

 

9,894

 

40,463

 

Acquisition and site closure expenses(8)

16,480

 

 

16,480

 

 

 

 

 

Asset impairment charges(9)

56,309

 

 

56,309

 

 

 

53

 

53

 

Stock-based compensation expense

1,409

 

 

1,409

 

 

 

 

 

Amortization of upfront payment(11)

36,393

 

 

36,393

 

 

 

 

 

Other

1,024

 

 

1,024

 

 

 

 

 

Adjusted cost of goods sold (Non-GAAP)

$

439,830

 

$

 

$

439,830

 

 

$

303,756

 

$

98,991

 

$

402,747

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Specialty Cost of Goods Sold to Combined Adjusted Cost of Goods Sold

 

Specialty

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Cost of goods sold

$

32,958

 

$

 

$

32,958

 

 

$

23,958

 

$

6,711

 

$

30,669

 

Adjusted to deduct:

 

 

 

 

 

 

 

Amortization

20,160

 

 

20,160

 

 

10,651

 

1,528

 

12,179

 

Inventory related charges(7)

 

 

 

 

1,950

 

 

1,950

 

Adjusted cost of goods sold (Non-GAAP)

$

12,798

 

$

 

$

12,798

 

 

$

11,357

 

$

5,183

 

$

16,540

 

Specialty

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Cost of goods sold

$

63,823

 

$

 

$

63,823

 

 

$

23,958

 

$

26,731

 

$

50,689

 

Adjusted to deduct:

 

 

 

 

 

 

 

Amortization

40,371

 

 

40,371

 

 

10,651

 

6,112

 

16,763

 

Inventory related charges(7)

 

 

 

 

1,950

 

 

1,950

 

Adjusted cost of goods sold (Non-GAAP)

$

23,452

 

$

 

$

23,452

 

 

$

11,357

 

$

20,619

 

$

31,976

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Generics Operating Income (Loss) to Combined Adjusted Operating Income

 

Generics

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Operating income (loss)

$

4,886

 

$

 

$

4,886

 

 

$

(57,014

)

$

(16,953

)

$

(73,967

)

Adjusted to add (deduct):

 

 

 

 

 

 

 

Acquisition and site closure expenses(8)

10,885

 

 

10,885

 

 

114,622

 

 

114,622

 

Amortization

14,636

 

 

14,636

 

 

6,043

 

3,934

 

9,977

 

Inventory related charges(7)

21,443

 

 

21,443

 

 

30,569

 

3,005

 

33,574

 

Stock-based compensation expense

3,875

 

 

3,875

 

 

221

 

 

221

 

Asset impairment charges(9)

3,059

 

 

3,059

 

 

 

 

 

Restructuring and other charges(10)

418

 

 

418

 

 

24,797

 

 

24,797

 

R&D milestone payment

5,614

 

 

5,614

 

 

1,424

 

 

1,424

 

Other

(68

)

 

(68

)

 

 

(1,325

)

(1,325

)

Adjusted operating income (Non-GAAP)

$

64,748

 

$

 

$

64,748

 

 

$

120,662

 

$

(11,339

)

$

109,323

 

Generics

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Operating (loss) income

$

(49,697

)

$

 

$

(49,697

)

 

$

27,593

 

$

(130,663

)

$

(103,070

)

Adjusted to add (deduct):

 

 

 

 

 

 

 

Acquisition and site closure expenses(8)

29,670

 

 

29,670

 

 

114,622

 

 

114,622

 

Amortization

25,388

 

 

25,388

 

 

7,803

 

13,823

 

21,626

 

Inventory related charges(7)

21,777

 

 

21,777

 

 

30,569

 

9,894

 

40,463

 

Stock-based compensation expense

5,373

 

 

5,373

 

 

221

 

982

 

1,203

 

Asset impairment charges(9)

79,211

 

 

79,211

 

 

 

53

 

53

 

Restructuring and other charges(10)

2,499

 

 

2,499

 

 

24,797

 

 

24,797

 

Litigation, settlements and related charges(12)

 

 

 

 

 

89,159

 

89,159

 

Amortization of upfront payment(11)

36,393

 

 

36,393

 

 

 

 

 

R&D milestone payment

9,929

 

 

9,929

 

 

2,700

 

 

2,700

 

Other

1,024

 

 

1,024

 

 

(180

)

 

(180

)

Adjusted operating income (Non-GAAP)

$

161,567

 

$

 

$

161,567

 

 

$

208,125

 

$

(16,752

)

$

191,373

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Specialty Operating Income to Combined Adjusted Operating Income

 

Specialty

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Operating income

$

16,536

 

$

 

$

16,536

 

 

$

8,917

 

$

12,121

 

$

21,038

 

Adjusted to add:

 

 

 

 

 

 

 

Amortization

20,160

 

 

20,160

 

 

10,651

 

1,528

 

12,179

 

Inventory related charges(7)

 

 

 

 

1,950

 

 

1,950

 

Acquisition and site closure expenses(8)

2,251

 

 

2,251

 

 

 

 

 

Stock-based compensation expense

366

 

 

366

 

 

 

 

 

Restructuring and other charges(10)

 

 

 

 

2,421

 

 

2,421

 

Adjusted operating income (Non-GAAP)

$

39,313

 

$

 

$

39,313

 

 

$

23,939

 

$

13,649

 

$

37,588

 

Specialty

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Operating income

$

21,173

 

$

 

$

21,173

 

 

$

8,917

 

$

36,968

 

$

45,885

 

Adjusted to add:

 

 

 

 

 

 

 

Amortization

40,371

 

 

40,371

 

 

10,651

 

6,112

 

16,763

 

Inventory related charges(7)

 

 

 

 

1,950

 

 

1,950

 

Acquisition and site closure expenses(8)

5,806

 

 

5,806

 

 

 

 

 

Stock-based compensation expense

510

 

 

510

 

 

 

1,124

 

1,124

 

Restructuring and other charges(10)

178

 

 

178

 

 

2,421

 

 

2,421

 

Litigation, settlements and related charges

 

 

 

 

 

940

 

940

 

Adjusted operating income (Non-GAAP)

$

68,038

 

$

 

$

68,038

 

 

$

23,939

 

$

45,144

 

$

69,083

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands, except per share amounts)

Reconciliation of Net Loss to Combined Adjusted Net Income and Calculation of Adjusted Diluted EPS

 

 

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Net loss

$

(50,526

)

$

 

$

(50,526

)

 

$

(250,090

)

$

(23,006

)

$

(273,096

)

Adjusted to add (deduct):

 

 

 

 

 

 

 

Non-cash interest

1,617

 

 

1,617

 

 

4,407

 

2,549

 

6,956

 

GAAP Income tax (benefit) expense

(5,701

)

 

(5,701

)

 

(12,416

)

1,017

 

(11,399

)

Amortization

34,796

 

 

34,796

 

 

16,694

 

5,462

 

22,156

 

Stock-based compensation expense

6,224

 

 

6,224

 

 

1,644

 

 

1,644

 

Acquisition and site closure expenses(8)

19,056

 

 

19,056

 

 

207,507

 

4,381

 

211,888

 

Restructuring and other charges(10)

2,835

 

 

2,835

 

 

44,465

 

223

 

44,688

 

Loss on extinguishment of debt

 

 

 

 

19,667

 

 

19,667

 

Inventory related charges(7)

21,443

 

 

21,443

 

 

32,519

 

3,005

 

35,524

 

Loss on sale of assets

 

 

 

 

878

 

 

878

 

Asset impairment charges(9)

4,408

 

 

4,408

 

 

 

 

 

Foreign exchange (gain) loss

(8,311

)

 

(8,311

)

 

25,946

 

 

25,946

 

Loss on sale of international business(13)

1,888

 

 

1,888

 

 

 

 

 

R&D milestone payments

5,614

 

 

5,614

 

 

1,424

 

 

1,424

 

Other

491

 

 

491

 

 

1,225

 

1,300

 

2,525

 

Income tax at 21%

(7,104

)

 

(7,104

)

 

(19,943

)

1,064

 

(18,879

)

Net income attributable to NCI not associated with our Class B shares


(61

)

 

(61

)

 

(27

)

 

(27

)

Adjusted net income (Non-GAAP)

$

26,669

 

$

 

$

26,669

 

 

$

73,900

 

$

(4,005

)

$

69,895

 

 

 

 

 

 

 

 

 

Adjusted diluted EPS (Non-GAAP)(14)

 

 

$

0.09

 

 

 

 

$

0.23

 

(14) Under the if-converted method, for the three months ended June 30, 2019, utilizes weighted average diluted shares outstanding of 299,139, which consists of Class A & Class B shares. Under the if-converted method, for the three months ended June 30, 2018, utilizes weighted average diluted shares outstanding of 299,029, which consists of Class A, Class B & Class B-1 shares.

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands, except per share amounts)

Reconciliation of Net Loss to Combined Adjusted Net Income and Calculation of Adjusted Diluted EPS

 

 

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Net loss

$

(175,278

)

$

 

$

(175,278

)

 

$

(198,438

)

$

(150,155

)

$

(348,593

)

Adjusted to add (deduct):

 

 

 

 

 

 

 

Non-cash interest

3,218

 

 

3,218

 

 

5,577

 

9,413

 

14,990

 

GAAP Income tax benefit

(14,129

)

 

(14,129

)

 

(12,052

)

(6,273

)

(18,325

)

Amortization

65,759

 

 

65,759

 

 

18,454

 

19,935

 

38,389

 

Stock-based compensation expense

10,571

 

 

10,571

 

 

1,644

 

4,816

 

6,460

 

Acquisition and site closure expenses(8)

47,258

 

 

47,258

 

 

214,642

 

10,925

 

225,567

 

Restructuring and other charges(10)

8,996

 

 

8,996

 

 

44,465

 

5,123

 

49,588

 

Loss on extinguishment of debt

 

 

 

 

19,667

 

 

19,667

 

Inventory related charges(7)

21,777

 

 

21,777

 

 

32,519

 

9,894

 

42,413

 

Litigation, settlements and related charges(12)

 

 

 

 

 

90,099

 

90,099

 

Loss on sale of assets

 

 

 

 

878

 

 

878

 

Asset impairment charges(9)

81,008

 

 

81,008

 

 

 

53

 

53

 

Amortization of upfront payment

36,393

 

 

36,393

 

 

 

 

 

Foreign exchange (gain) loss

(2,847

)

 

(2,847

)

 

17,381

 

(921

)

16,460

 

Gain on sale of international businesses, net (13)

(6,930

)

 

(6,930

)

 

 

 

 

R&D milestone payments

9,929

 

 

9,929

 

 

2,700

 

 

2,700

 

Other

1,583

 

 

1,583

 

 

(820

)

1,953

 

1,133

 

Income tax at 21%

(18,334

)

 

(18,334

)

 

(31,020

)

1,309

 

(29,711

)

Net income attributable to NCI not associated with our Class B shares


(140

)

 

(140

)

 

(144

)

 

(144

)

Adjusted net income (Non-GAAP)

$

68,834

 

$

 

$

68,834

 

 

$

115,453

 

$

(3,829

)

$

111,624

 

 

 

 

 

 

 

 

 

Adjusted diluted EPS (Non-GAAP)(15)

 

 

$

0.23

 

 

 

 

$

0.37

 

(15) Under the if-converted method, for the six months ended June 30, 2019, utilizes weighted average diluted shares outstanding of 299,117, which consists of Class A & Class B shares. Under the if-converted method, for the six months ended June 30, 2018, utilizes weighted average diluted shares outstanding of 299,029, which consists of Class A, Class B & Class B-1 shares.

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited, In thousands)

Reconciliation of Net Loss to EBITDA and Combined Adjusted EBITDA

 

 

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Net loss

$

(50,526

)

$

 

$

(50,526

)

 

$

(250,090

)

$

(23,006

)

$

(273,096

)

Adjusted to add (deduct):

 

 

 

 

 

 

 

Interest expense, net

43,886

 

 

43,886

 

 

36,622

 

4,539

 

41,161

 

Income tax (benefit) expense

(5,701

)

 

(5,701

)

 

(12,416

)

1,017

 

(11,399

)

Depreciation and amortization

50,706

 

 

50,706

 

 

32,147

 

6,925

 

39,072

 

EBITDA (Non-GAAP)

$

38,365

 

$

 

$

38,365

 

 

$

(193,737

)

$

(10,525

)

$

(204,262

)

 

 

 

 

 

 

 

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

Stock-based compensation expense

$

6,224

 

$

 

$

6,224

 

 

$

1,644

 

$

 

$

1,644

 

Acquisition and site closure expenses(8)

19,056

 

 

19,056

 

 

207,507

 

4,381

 

211,888

 

Restructuring and other charges(10)

2,835

 

 

2,835

 

 

44,465

 

223

 

44,688

 

Loss on extinguishment of debt

 

 

 

 

19,667

 

 

19,667

 

Inventory related charges(7)

21,443

 

 

21,443

 

 

32,519

 

3,005

 

35,524

 

Loss on sale of assets

 

 

 

 

878

 

 

878

 

Asset impairment charges(9)

4,408

 

 

4,408

 

 

 

 

 

Foreign exchange (gain) loss

(8,311

)

 

(8,311

)

 

25,946

 

 

25,946

 

Loss on sale of international businesses(13)

1,888

 

 

1,888

 

 

 

 

 

R&D milestone payments

5,614

 

 

5,614

 

 

1,424

 

 

1,424

 

Other

559

 

 

559

 

 

1,225

 

 

1,225

 

Adjusted EBITDA (Non-GAAP)

$

92,081

 

$

 

$

92,081

 

 

$

141,538

 

$

(2,916

)

$

138,622

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliation of Net Loss to EBITDA and Combined Adjusted EBITDA

 

 

Six months ended June 30, 2019

 

Six months ended June 30, 2018

 

 

Add:

(Non-GAAP)

 

 

 

Add:

(Non-GAAP)

 

 

Actual

Impax/ Gemini

Combined

 

Actual

Impax/ Gemini

Combined

Net loss

$

(175,278

)

$

 

$

(175,278

)

 

$

(198,438

)

$

(150,155

)

$

(348,593

)

Adjusted to add (deduct):

 

 

 

 

 

 

 

Interest expense, net

87,167

 

 

87,167

 

 

57,673

 

18,231

 

75,904

 

Income tax benefit

(14,129

)

 

(14,129

)

 

(12,052

)

(6,273

)

(18,325

)

Depreciation and amortization

99,574

 

 

99,574

 

 

46,898

 

24,900

 

71,798

 

EBITDA (Non-GAAP)

$

(2,666

)

$

 

$

(2,666

)

 

$

(105,919

)

$

(113,297

)

$

(219,216

)

 

 

 

 

 

 

 

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

Stock-based compensation expense

$

10,571

 

$

 

$

10,571

 

 

$

1,644

 

$

4,816

 

$

6,460

 

Acquisition and site closure expenses(8)

47,258

 

 

47,258

 

 

214,642

 

10,925

 

225,567

 

Restructuring and other charges(10)

8,996

 

 

8,996

 

 

44,465

 

5,123

 

49,588

 

Loss on extinguishment of debt

 

 

 

 

19,667

 

 

19,667

 

Inventory related charges(7)

21,777

 

 

21,777

 

 

32,519

 

9,894

 

42,413

 

Litigation, settlements and related charges(12)

 

 

 

 

 

90,099

 

90,099

 

Loss on sale of assets

 

 

 

 

878

 

 

878

 

Asset impairment charges(9)

81,008

 

 

81,008

 

 

 

53

 

53

 

Amortization of upfront payment(11)

36,393

 

 

36,393

 

 

 

 

 

Foreign exchange (gain) loss

(2,847

)

 

(2,847

)

 

17,381

 

(921

)

16,460

 

Gain on sale of international businesses, net (13)

(6,930

)

 

(6,930

)

 

 

 

 

R&D milestone payments

9,929

 

 

9,929

 

 

2,700

 

 

2,700

 

Other

559

 

 

559

 

 

(820

)

653

 

(167

)

Adjusted EBITDA (Non-GAAP)

$

204,048

 

$

 

$

204,048

 

 

$

227,157

 

$

7,345

 

$

234,502

 

(7) For the three and six months ended June 30, 2019, inventory related charges primarily represent inventory obsolescence resulting from new initiatives and policies adopted with our restructuring effort. For the three and six months ended June 30, 2018, inventory related charges represents a reserve for an unfavorable supply arrangement and the amortization of the Impax inventory step-up to fair value in purchase accounting.

(8) Acquisition and site closure expenses for the three and six months ended June 30, 2019 includes costs related to (i) plant closure and redundant employee costs and (ii) third party costs associated with the combination of Impax and related integration including legal, investment banking, accounting and information technology. For the three and six months ended June 30, 2018, acquisition and site closure expenses also includes costs associated with the Impax sale of its Middlesex, NJ and Taiwan facilities.

(9) Asset impairment charges for the three and six months ended June 30, 2019 are primarily associated with the write-off of in process research and development product rights and intangible asset impairment charges primarily related to products acquired in the Impax combination.

(10) Restructuring and other charges includes employee separation costs associated with the consolidation of sites, as well as the write-off of property, plant, and equipment at those sites.

(11) Amortization of upfront payment represents the amortization of the upfront payment made to Lannett in connection with our Transition Agreement with Levothyroxine.

(12) Litigation, settlements and related charges represents an Impax litigation settlement charge for the three and six months ended June 30, 2018 related to a settlement of claims with the plaintiffs in the class action antitrust suits related to Solodyn®.

(13) For the three months ended June 30, 2019, loss on the sale of international business represents the loss from the sale of our Amneal Deutschland GmbH subsidiary, which comprised substantially all of the Company's operations in Germany. For the six months ended June 30, 2019, gain on the sale of international businesses, net represents the gain from the sale of our Creo Pharma Holding Limited subsidiary, which comprised substantially all of the Company's operations in the United Kingdom partially offset by the loss from the sale of our Amneal Deutschland GmbH subsidiary, which comprised substantially all of the Company's operations in Germany.

Contacts

Mark Donohue
(908) 409-6718

Contacts

Mark Donohue
(908) 409-6718