Amneal Reports Third Quarter 2019 Financial Results

‒ Q3 2019 Net Revenue of $378 million; GAAP Loss per share of ($2.03); Adjusted Diluted EPS (1) of $0.04 ‒

‒ Positive Cash Flow from Operations of $140 million ‒

‒ Executing on Near-Term Strategic Actions to Accelerate Business Performance ‒

‒ Announced Licensing Agreement to Develop and Commercialize Neurology Focused Orphan Drug to Treat Myasthenia Gravis ‒

‒ Co-Chief Executive Officers and Certain Amneal Group Legacy Owners Authorized to Purchase up to 10 Million Additional Shares ‒

‒ Updates Full Year 2019 Guidance ‒

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

Net revenue in the third quarter of 2019 was $378 million, a decrease of 21% compared to $476 million in the third quarter of 2018, primarily due to lower Generics business revenue. Net loss attributable to Amneal Pharmaceuticals, Inc. was $265 million in the third quarter of 2019 compared to a net income of $7 million in the prior year period. Diluted EPS in the third quarter of 2019 was a loss of $2.03 compared to earnings of $0.05 in the prior year period.

Adjusted net income(1) in the third quarter of 2019 was $12 million, a decrease of 86% compared to the prior year period. Adjusted EBITDA(1) in the third quarter of 2019 was $71 million, a decrease of 56% 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 savings initiatives. Adjusted diluted EPS in the third quarter of 2019 was $0.04, compared to $0.27 for the prior year period.

The Company generated positive cash flow from operations in the third quarter of 2019 of $140 million. Cash and cash equivalents, including restricted cash as of September 30, 2019 were $217 million, down slightly from year end, but increased $160 million from the second quarter ended June 30, 2019.

While we are disappointed with our third quarter results, we continue to be optimistic about Amneal and view 2019 as a transition year,” said Chirag and Chintu Patel, Co-Chief Executive Officers. “Since rejoining as Co-CEOs in early August, we have substantially completed a comprehensive review of the business and believe we have identified the root causes of Amneal’s recent underperformance. This review has reinforced our belief that Amneal is a fundamentally strong company with a diverse generics portfolio across multiple dosage forms, a growing and increasingly complex pipeline and a specialty franchise with significant opportunities. We have already implemented initiatives to accelerate the reinvigoration of our Company and are confident we will return to growth in 2020 and beyond.”

Development and Commercialization Partnership

In a separate press release today, the Company announced that it has entered into a licensing agreement with Kashiv BioSciences, LLC for the development and commercialization of Kashiv’s orphan drug K127 (pyridostigmine) for the treatment of Myasthenia Gravis. Through this partnership, Amneal gains exclusive rights within the United States to the New Drug Application and commercialization of K127.

Equity Purchase Authorization

The Board of Directors Conflicts Committee has approved a waiver of an existing standstill provision in the Second Amended and Restated Stockholders Agreement, as amended (the “Stockholders Agreement”), between the Company and certain of its stockholders, which will allow the Company’s Co-Chief Executive Officers, Chirag Patel and Chintu Patel, and certain other Amneal legacy owners (and/or affiliates thereof) that are subject to the Stockholders Agreement, to purchase up to 10 million shares of Class A common stock on the open market during permissible trading windows. The timing, price and volume of the share purchases, if any, will be determined by the buyers based on applicable securities laws and other relevant factors. The waiver is scheduled to expire on March 15, 2020.

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

Amneal Pharmaceuticals, Inc.

Generics Operating Results

(Unaudited; In thousands)

 

Generics

Three Months Ended September 30,

 

 

2019

 

2018

Net revenue - Generics

$

 

291,021

 

 

$

 

391,175

 

Cost of goods sold

 

217,773

 

 

 

230,051

 

Cost of goods sold impairment charges

 

49,115

 

 

 

7,815

 

Gross profit

 

24,133

 

 

 

153,309

 

Selling, general, and administrative

 

14,256

 

 

 

21,030

 

Research and development

 

34,316

 

 

 

38,347

 

In-process research and development impairment charges

 

23,382

 

 

 

650

 

Restructuring and other charges

 

14,702

 

 

 

(2,885

)

Charges (gains) related to legal matters, net

 

14,750

 

 

 

 

Intellectual property legal development expenses

 

2,586

 

 

 

3,929

 

Acquisition, integration and transaction related expenses

 

502

 

 

 

 

Operating (loss) income

$

 

(80,361

)

 

$

 

92,238

 

 

 

 

 

 

 

 

 

 

Gross margin

 

8.3

%

 

 

39.2

%

 

Adjusted gross profit (Non-GAAP) (2)

$

 

86,789

 

 

$

 

194,368

 

 

Adjusted gross margin (Non-GAAP) (3)

 

29.8

%

 

 

49.7

%

 

Adjusted operating income (Non-GAAP)

$

 

39,693

 

 

$

 

131,449

 

 

(1)

See “Non GAAP Financial Measures” below.

(2)

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

(3)

Adjusted gross margin is calculated as adjusted gross profit divided by net revenue. See “Non-GAAP Financial Measures” below.

Amneal Pharmaceuticals, Inc.

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

(Unaudited; In thousands)

 

Generics

 

Nine Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

Add:

 

 

(Non-GAAP)

 

 

 

 

 

 

Add:

 

 

(Non-GAAP)

 

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

Net revenue - Generics

 

$

 

1,008,562

 

 

$

 

 

 

$

 

1,008,562

 

 

$

 

1,028,134

 

 

$

 

102,237

 

 

$

 

1,130,371

 

Cost of goods sold

 

 

760,074

 

 

 

 

 

 

760,074

 

 

 

572,179

 

 

 

122,761

 

 

 

694,940

 

Cost of goods sold impairment charges

 

 

105,424

 

 

 

 

 

 

105,424

 

 

 

7,815

 

 

 

 

 

 

7,815

 

Gross profit

 

 

143,064

 

 

 

 

 

 

143,064

 

 

 

448,140

 

 

 

(20,524

)

 

 

427,616

 

Selling, general, and administrative

 

 

52,783

 

 

 

 

 

 

52,783

 

 

 

51,854

 

 

 

7,334

 

 

 

59,188

 

Research and development

 

 

129,915

 

 

 

 

 

 

129,915

 

 

 

129,762

 

 

 

13,623

 

 

 

143,385

 

In-process research and development
impairment charges

 

 

46,169

 

 

 

 

 

 

46,169

 

 

 

650

 

 

 

 

 

 

650

 

Restructuring and other charges

 

 

17,201

 

 

 

 

 

 

17,201

 

 

 

21,912

 

 

 

 

 

 

21,912

 

Charges (gains) related to legal matters, net

 

 

14,750

 

 

 

 

 

 

14,750

 

 

 

(3,000

)

 

 

89,159

 

 

 

86,159

 

Intellectual property legal development
expenses

 

 

8,218

 

 

 

 

 

 

8,218

 

 

 

12,509

 

 

 

23

 

 

 

12,532

 

Acquisition, integration and transaction
related expenses

 

 

4,086

 

 

 

 

 

 

4,086

 

 

 

114,622

 

 

 

 

 

 

114,622

 

Operating (loss) income

 

$

 

(130,058

)

 

$

 

 

 

$

 

(130,058

)

 

$

 

119,831

 

 

$

 

(130,663

)

 

$

 

(10,832

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

14.2

%

 

 

%

 

 

14.2

%

 

 

43.6

%

 

 

(20.1

)%

 

 

37.8

%

Adjusted gross profit (Non-GAAP) (2)

 

$

 

364,500

 

 

$

 

 

 

$

 

364,500

 

 

$

 

527,571

 

 

$

 

3,246

 

 

$

 

530,817

 

Adjusted gross margin (Non-GAAP) (3)

 

 

36.1

%

 

 

%

 

 

36.1

%

 

 

51.3

%

 

 

3.2

%

 

 

47.0

%

Adjusted operating income (Non-GAAP)

 

$

 

201,260

 

 

$

 

 

 

$

 

201,260

 

 

$

 

339,574

 

 

$

 

(16,752

)

 

$

 

322,822

 

(1)

See “Non-GAAP Financial Measures” below.

(2)

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

(3)

Adjusted gross margin is calculated as adjusted gross profit divided by net revenue or adjusted combined gross profit divided by combined net revenue, as applicable. See “Non-GAAP Financial Measures” below.

Generics net revenue was $291 million in the third quarter of 2019 compared to $391 million for the prior year period. The decrease is primarily attributable to additional competition on the base generic portfolio including Yuvafem, Aspirin Dipyridamole ER Capsules, and Diclofenac Gel 1%, the sale of two of the Company's international businesses earlier in 2019, the reclassification of Oxymorphone HCI to the Specialty segment during the third quarter of 2019 and the ongoing supply constraints of Epinephrine Auto-Injector. The decrease was partially offset by sales of Levothyroxine and new product launches in 2019, as well as higher sales of Triamcinolone Acetonide injection.

Generics gross margin for the third quarter of 2019 was 8% compared to 39% for the prior year period. The decrease is primarily related to impairment and inventory obsolescence charges, and the impact of price erosion. Generics adjusted gross margin(1) for the third quarter of 2019 was 30% compared to 50% for the prior year period primarily due to product sales mix and the impact of price erosion and volume declines leading to underutilization of manufacturing facilities.

Generics operating loss for the third quarter of 2019 was $80 million compared to operating income of $92 million for the 2018, primarily due to lower revenue and gross profit as noted above, and in-process research and development impairment charges, restructuring charges and legal charges relating to commercial and governmental legal proceedings and claims. Generics adjusted operating income(1) for the third quarter of 2019 was $40 million compared to $131 million for the prior year period primarily due to lower revenue and lower gross profit, partially offset by lower operating expenses as a result of cost savings initiatives.

Amneal Pharmaceuticals, Inc.

Specialty Operating Results

(Unaudited; In thousands)

 

Specialty

Three Months Ended September 30,

 

2019

 

2018

Net revenue - Specialty:

 

 

 

 

 

 

 

Rytary®

$

 

33,710

 

 

$

 

33,073

 

Unithroid®

 

10,155

 

 

 

7,829

 

Zomig®

 

13,971

 

 

 

15,445

 

All other specialty products

 

29,426

 

 

 

28,965

 

Total net revenue - Specialty

 

87,262

 

 

 

85,312

 

Cost of goods sold

 

49,944

 

 

 

38,516

 

Cost of goods sold impairment charges

 

7,017

 

 

 

 

Gross profit

 

30,301

 

 

 

46,796

 

Selling, general, and administrative

 

20,228

 

 

 

19,716

 

Research and development

 

3,809

 

 

 

4,002

 

Intellectual property legal development expenses

 

 

 

 

472

 

Restructuring and other charges

 

213

 

 

 

(27

)

Acquisition, integration and transaction related expenses

 

2,455

 

 

 

 

Operating income

$

 

3,596

 

 

$

 

22,633

 

 

 

 

 

 

 

 

 

Gross margin

 

34.7

%

 

 

54.9

%

Adjusted gross profit (Non-GAAP) (2)

$

 

64,421

 

 

$

 

67,304

 

Adjusted gross margin (Non-GAAP) (3)

 

73.8

%

 

 

78.9

%

Adjusted operating income (Non-GAAP)

$

 

40,907

 

 

$

 

43,589

 

(1)

See “Non-GAAP Financial Measures” below.

(2)

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

(3)

Adjusted gross margin is calculated as adjusted gross profit divided by net revenue. See “Non-GAAP Financial Measures” below.

Amneal Pharmaceuticals, Inc.

Reconciliation of Specialty Operating Income to Specialty Combined Operating Income

(Unaudited; In thousands)

 

Specialty

 

Nine Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

Add:

 

 

(Non-GAAP)

 

 

 

 

 

 

Add:

 

 

(Non-GAAP)

 

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

Net revenue - Specialty:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rytary®

 

$

 

95,538

 

 

$

 

 

 

$

 

95,538

 

 

$

 

53,593

 

 

$

 

35,086

 

 

$

 

88,679

 

Unithroid®

 

 

28,780

 

 

 

 

 

 

28,780

 

 

 

12,253

 

 

 

9,716

 

 

 

21,969

 

Zomig®

 

 

39,522

 

 

 

 

 

 

39,522

 

 

 

25,140

 

 

 

14,411

 

 

 

39,551

 

All other specialty products

 

 

56,643

 

 

 

 

 

 

56,643

 

 

 

46,343

 

 

 

37,032

 

 

 

83,375

 

Total net revenue - Specialty

 

 

220,483

 

 

 

 

 

 

220,483

 

 

 

137,329

 

 

 

96,245

 

 

 

233,574

 

Cost of goods sold

 

 

113,767

 

 

 

 

 

 

113,767

 

 

 

62,474

 

 

 

26,731

 

 

 

89,205

 

Cost of goods sold impairment charges

 

 

7,017

 

 

 

 

 

 

7,017

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

99,699

 

 

 

 

 

 

99,699

 

 

 

74,855

 

 

 

69,514

 

 

 

144,369

 

Selling, general, and administrative

 

 

57,705

 

 

 

 

 

 

57,705

 

 

 

33,265

 

 

 

27,942

 

 

 

61,207

 

Research and development

 

 

10,084

 

 

 

 

 

 

10,084

 

 

 

7,131

 

 

 

3,664

 

 

 

10,795

 

Intellectual property legal development
expenses

 

 

1,045

 

 

 

 

 

 

1,045

 

 

 

515

 

 

 

 

 

 

515

 

Restructuring and other charges

 

 

391

 

 

 

 

 

 

391

 

 

 

2,394

 

 

 

 

 

 

2,394

 

Charges related to legal matters, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

940

 

 

 

940

 

Acquisition, integration and transaction
related expenses

 

 

5,705

 

 

 

 

 

 

5,705

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

 

24,769

 

 

$

 

 

 

$

 

24,769

 

 

$

 

31,550

 

 

$

 

36,968

 

 

$

 

68,518

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

45.2

%

 

 

%

 

 

45.2

%

 

 

54.5

%

 

 

72.2

%

 

 

61.8

%

Adjusted gross profit (Non-GAAP) (2)

 

$

 

174,190

 

 

$

 

 

 

$

 

174,190

 

 

$

 

107,964

 

 

$

 

75,626

 

 

$

 

183,590

 

Adjusted gross margin (Non-GAAP) (3)

 

 

79.0

%

 

 

%

 

 

79.0

%

 

 

78.6

%

 

 

78.6

%

 

 

78.6

%

Adjusted operating income (Non-GAAP)

 

$

 

108,945

 

 

$

 

 

 

$

 

108,945

 

 

$

 

67,528

 

 

$

 

45,144

 

 

$

 

112,672

 

(1)

See “Non-GAAP Financial Measures” below.

(2)

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

(3)

Adjusted gross margin is calculated as adjusted gross profit divided by net revenue or adjusted combined gross profit divided by combined net revenue, as applicable. See “Non-GAAP Financial Measures” below.

Specialty net revenue was $87 million in the third quarter of 2019 compared to $85 million for the prior year period, primarily due to the reclassification of Oxymorphone HCI during the third quarter of 2019, which was previously included in the Generics segment results, and higher revenue from Rytary® and Unithroid®, partially offset by lower revenue from Albenza® as a result of the loss of exclusivity in September of 2018.

Specialty gross margin for the third quarter of 2019 was 35% compared to 55% for the prior year period primarily due to product sales mix. Specialty adjusted gross margin(1) for the third quarter of 2019 was 74% compared to 79% for the prior year period primarily due to the addition of lower margin Oxymorphone HCI as noted above.

Specialty operating income for the third quarter of 2019 was $4 million compared to $23 million for the prior year period, primarily due to higher cost of goods sold relating to Oxymorphone HCI and cost of goods sold impairment charges. Specialty adjusted operating income(1) for the third quarter of 2019 was $41 million compared to $44 million for the prior year period primarily due to the higher cost of goods sold.

Corporate and Other Information

(Unaudited; In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

2018

 

General and administrative expense

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

29,313

 

 

$

 

 

 

 

 

34,740

 

Acquisition, transaction-related and integration expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

174

 

 

 

 

 

 

 

2,231

 

Restructuring and other charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,022

 

 

 

 

 

 

 

756

 

Charges (gains) related to legal matters, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,589

 

Total general, administrative and other operating expenses

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

35,509

 

 

$

 

 

 

 

 

40,316

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

Add:

 

 

(Non-GAAP)

 

 

 

 

 

 

Add:

 

 

(Non-GAAP)

 

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

General and administrative expense

 

$

 

105,026

 

 

$

 

 

 

$

 

105,026

 

 

$

 

 

71,491

 

 

$

 

 

 

 

 

28,737

 

 

$

 

100,228

 

Acquisition, transaction-related and
integration expenses

 

 

2,891

 

 

 

 

 

 

2,891

 

 

 

 

102,251

 

 

 

 

 

 

 

 

10,925

 

 

 

113,176

 

Restructuring and other charges

 

 

12,341

 

 

 

 

 

 

12,341

 

 

 

 

18,003

 

 

 

 

 

 

 

 

5,123

 

 

 

23,126

 

Charges (gains) related to legal matters, net

 

 

 

 

 

 

 

 

 

 

 

 

2,589

 

 

 

 

 

 

 

 

 

 

2,589

 

Total general, administrative and other
operating expenses

 

$

 

120,258

 

 

$

 

 

 

$

 

120,258

 

 

$

 

 

194,334

 

 

$

 

 

 

$

 

 

44,785

 

 

$

 

239,119

 

General and administrative and other operating expenses in the third quarter of 2019 decreased to $36 million compared to $40 million in the prior year period. The decrease is primarily due to synergies associated with the Combination with Impax and the Gemini acquisition including lower acquisition, transaction-related and integration expenses, partially offset by restructuring and other charges relating to recent cost savings initiatives.

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, the costs incurred and benefits realized of restructuring activities 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 and benefits, 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%

Approximately 43%

Adjusted R&D as a % of net revenue

9.5% - 10.5%

No change

Adjusted SG&A as a % of net revenue

14% - 15%

No change

Adjusted EBITDA

$425 million - $475 million

Approximately $345 million

Adjusted diluted EPS

$0.52 - $0.62

Approximately $0.31

Adjusted effective tax rate

19% - 21%

No change

Capital expenditures

$65 million - $85 million

$55 million - $65 million

Weighted average diluted shares outstanding

Approximately 300 million

No change

Conference Call Information

Amneal will hold a conference call on November 6, 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: the risk that our goodwill may become impaired, which could adversely affect our financial condition and results of operations, 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 owners.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Operations

(Unaudited; In thousands, except per share amounts)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Net revenue

 

$

 

378,283

 

 

$

 

476,487

 

 

$

 

1,229,045

 

 

$

 

1,165,463

 

Cost of goods sold

 

 

267,717

 

 

 

268,567

 

 

 

873,841

 

 

 

634,653

 

Cost of goods sold impairment charges

 

 

56,132

 

 

 

7,815

 

 

 

112,441

 

 

 

7,815

 

Gross profit

 

 

54,434

 

 

 

200,105

 

 

 

242,763

 

 

 

522,995

 

Selling, general and administrative

 

 

63,797

 

 

 

75,486

 

 

 

215,514

 

 

 

156,610

 

Research and development

 

 

38,125

 

 

 

42,349

 

 

 

139,999

 

 

 

136,893

 

In-process research and development impairment charges

 

 

23,382

 

 

 

650

 

 

 

46,169

 

 

 

650

 

Charges (gains) related to legal matters, net

 

 

14,750

 

 

 

2,589

 

 

 

14,750

 

 

 

(411

)

Intellectual property legal development expenses

 

 

2,586

 

 

 

4,401

 

 

 

9,263

 

 

 

13,024

 

Acquisition, transaction-related and integration expenses

 

 

3,131

 

 

 

2,231

 

 

 

12,682

 

 

 

216,873

 

Restructuring and other charges

 

 

20,937

 

 

 

(2,156

)

 

 

29,933

 

 

 

42,309

 

Operating (loss) income

 

 

(112,274

)

 

 

74,555

 

 

 

(225,547

)

 

 

(42,953

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(42,209

)

 

 

(43,018

)

 

 

(129,376

)

 

 

(100,691

)

Foreign exchange loss, net

 

 

(12,531

)

 

 

(5,137

)

 

 

(9,684

)

 

 

(22,518

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(19,667

)

(Loss) gain on sale of international businesses, net

 

 

 

 

 

(2,812

)

 

 

6,930

 

 

 

(2,812

)

Gain from reduction of tax receivable agreement liability

 

 

192,844

 

 

 

 

 

 

192,844

 

 

 

 

Other income (expense), net

 

 

446

 

 

 

(1,014

)

 

 

1,702

 

 

 

725

 

Total other income (expense), net

 

 

138,550

 

 

 

(51,981

)

 

 

62,416

 

 

 

(144,963

)

Income (loss) before income taxes

 

 

26,276

 

 

 

22,574

 

 

 

(163,131

)

 

 

(187,916

)

Provision for (benefit from) income taxes

 

 

389,668

 

 

 

5,109

 

 

 

375,539

 

 

 

(6,943

)

Net (loss) income

 

 

(363,392

)

 

 

17,465

 

 

 

(538,670

)

 

 

(180,973

)

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

 

 

 

 

 

 

 

 

 

 

 

148,806

 

Less: Net loss (income) attributable to non-controlling interests

 

 

98,386

 

 

 

(10,577

)

 

 

208,881

 

 

 

21,191

 

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

 

 

(265,006

)

 

 

6,888

 

 

 

(329,789

)

 

 

(10,976

)

Accretion of redeemable non-controlling interest

 

 

 

 

 

64

 

 

 

 

 

 

(1,176

)

Net (loss) income attributable to Amneal Pharmaceuticals, Inc.

 

$

 

(265,006

)

 

$

 

6,952

 

 

$

 

(329,789

)

 

$

 

(12,152

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A and Class B-1 basic

 

$

 

(2.03

)

 

$

 

0.05

 

 

$

 

(2.56

)

 

$

 

(0.10

)

Class A and Class B-1 diluted

 

$

 

(2.03

)

 

$

 

0.05

 

 

$

 

(2.56

)

 

$

 

(0.10

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A and Class B-1 basic

 

 

130,729

 

 

 

127,247

 

 

 

128,822

 

 

 

127,196

 

Class A and Class B-1 diluted

 

 

130,729

 

 

 

128,222

 

 

 

128,822

 

 

 

127,196

 

Amneal Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited; In thousands)

 

 

 

September 30, 2019

 

December 31, 2018

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

212,738

 

 

$

213,394

 

Restricted cash

 

 

4,320

 

 

 

5,385

 

Trade accounts receivable, net

 

 

518,109

 

 

 

481,495

 

Inventories

 

 

401,827

 

 

 

457,219

 

Prepaid expenses and other current assets

 

 

66,699

 

 

 

128,321

 

Related party receivables

 

 

2,138

 

 

 

830

 

Total current assets

 

 

1,205,831

 

 

 

1,286,644

 

Property, plant and equipment, net

 

 

490,712

 

 

 

544,146

 

Goodwill

 

 

419,671

 

 

 

426,226

 

Intangible assets, net

 

 

1,435,801

 

 

 

1,654,969

 

Deferred tax asset, net

 

 

 

 

 

373,159

 

Operating lease right-of-use assets

 

 

56,455

 

 

 

 

Operating lease right-of-use assets - related party

 

 

14,930

 

 

 

 

Financing lease right-of-use assets - related party

 

 

61,936

 

 

 

 

Other assets

 

 

18,607

 

 

 

67,592

 

Total assets

 

$

3,703,943

 

 

$

4,352,736

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

495,857

 

 

$

514,440

 

Current portion of long-term debt, net

 

 

21,468

 

 

 

21,449

 

Current portion of operating lease liabilities

 

 

13,467

 

 

 

 

Current portion of operating and financing lease liabilities - related party

 

 

3,353

 

 

 

 

Related party payables

 

 

765

 

 

 

17,695

 

Current portion of financing obligation - related party

 

 

 

 

 

266

 

Total current liabilities

 

 

534,910

 

 

 

553,850

 

Long-term debt, net

 

 

2,614,412

 

 

 

2,630,598

 

Deferred income taxes

 

 

 

 

 

1,178

 

Liabilities under tax receivable agreement

 

 

 

 

 

192,884

 

Operating lease liabilities

 

 

44,375

 

 

 

 

Operating lease liabilities - related party

 

 

14,271

 

 

 

 

Financing lease liabilities - related party

 

 

61,719

 

 

 

 

Financing obligation - related party

 

 

 

 

 

39,083

 

Other liabilities

 

 

38,532

 

 

 

38,780

 

Total long-term liabilities

 

 

2,773,309

 

 

 

2,902,523

 

Total stockholders' equity

 

 

395,724

 

 

 

896,363

 

Total liabilities and stockholders' equity

 

$

3,703,943

 

 

$

4,352,736

 

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(Unaudited; In thousands)

 

 

 

Nine Months Ended September 30,

 

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(538,670

)

 

$

(180,973

)

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

 

 

 

 

 

 

 

 

Gain from reduction of tax receivable agreement liability

 

 

(192,884

)

 

 

 

Depreciation and amortization

 

 

152,932

 

 

 

89,910

 

Amortization of Levothyroxine Transition Agreement asset

 

 

36,393

 

 

 

 

Unrealized foreign currency loss

 

 

10,552

 

 

 

21,560

 

Amortization of debt issuance costs

 

 

4,849

 

 

 

4,220

 

Loss on extinguishment of debt

 

 

 

 

 

19,667

 

(Gain) loss on sale of international businesses, net

 

 

(6,930

)

 

 

2,812

 

Intangible asset impairment charges

 

 

158,610

 

 

 

8,474

 

Non-cash restructuring and asset-related charges

 

 

11,923

 

 

 

 

Deferred tax provision (benefit)

 

 

371,683

 

 

 

(9,111

)

Stock-based compensation and PPU expense

 

 

16,666

 

 

 

163,991

 

Inventory provision

 

 

67,844

 

 

 

20,755

 

Other operating charges and credits, net

 

 

5,945

 

 

 

(1,955

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable, net

 

 

(46,457

)

 

 

(74,711

)

Inventories

 

 

(25,906

)

 

 

(53,708

)

Prepaid expenses, other current assets and other assets

 

 

41,256

 

 

 

9,803

 

Related party receivables

 

 

(1,305

)

 

 

10,828

 

Accounts payable, accrued expenses and other liabilities

 

 

(13,932

)

 

 

(26,858

)

Related party payables

 

 

25

 

 

 

(14,125

)

Net cash provided by (used in) operating activities

 

 

52,594

 

 

 

(9,421

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(42,664

)

 

 

(63,065

)

Acquisition of product rights and licenses

 

 

(50,000

)

 

 

(14,000

)

Acquisitions, net of cash acquired

 

 

 

 

 

(324,634

)

Proceeds from surrender of corporate owned life insurance

 

 

43,017

 

 

 

 

Proceeds from sale of international businesses, net of cash sold

 

 

34,834

 

 

 

 

Net cash used in investing activities

 

 

(14,813

)

 

 

(401,699

)

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

 

 

(20,250

)

 

 

(610,482

)

Net borrowings on revolving credit line

 

 

 

 

 

25,000

 

Proceeds from exercise of stock options

 

 

1,385

 

 

 

3,162

 

Employee payroll tax withholding on restricted stock unit vesting

 

 

(926

)

 

 

 

Equity contributions

 

 

 

 

 

27,742

 

Capital contribution from non-controlling interest

 

 

 

 

 

360

 

Acquisition of non-controlling interest

 

 

(3,543

)

 

 

(11,775

)

Tax distribution to non-controlling interest

 

 

(13,494

)

 

 

 

Distributions to members

 

 

 

 

 

(182,998

)

Payments of principal on financing lease - related party

 

 

(1,707

)

 

 

 

Repayment of related party note

 

 

 

 

 

(14,842

)

Net cash (used in) provided by financing activities

 

 

(38,535

)

 

 

506,595

 

Effect of foreign exchange rate on cash

 

 

(967

)

 

 

(1,204

)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

(1,721

)

 

 

94,271

 

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

 

 

218,779

 

 

 

77,922

 

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

 

$

217,058

 

 

$

172,193

 

Cash and cash equivalents - end of period

 

$

212,738

 

 

$

165,192

 

Restricted cash - end of period

 

 

4,320

 

 

 

7,001

 

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

 

$

217,058

 

 

$

172,193

 

Amneal Pharmaceuticals, Inc.

Reconciliation of Non-GAAP Combined Results of Operations

(Unaudited; In thousands)

 

 

 

Nine Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

Add:

 

 

(Non-
GAAP)

 

 

 

 

 

 

Add:

 

 

(Non-
GAAP)

 

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Generics

 

$

 

1,008,562

 

 

$

 

 

 

$

 

1,008,562

 

 

$

 

1,028,134

 

 

$

 

102,237

 

 

$

 

1,130,371

 

Specialty

 

 

220,483

 

 

 

 

 

 

220,483

 

 

 

137,329

 

 

 

96,245

 

 

 

233,574

 

Total net revenue

 

 

1,229,045

 

 

 

 

 

 

1,229,045

 

 

 

1,165,463

 

 

 

198,482

 

 

 

1,363,945

 

Cost of goods sold

 

 

873,841

 

 

 

 

 

 

873,841

 

 

 

634,653

 

 

 

149,492

 

 

 

784,145

 

Cost of goods sold impairment charges

 

 

112,441

 

 

 

 

 

 

112,441

 

 

 

7,815

 

 

 

 

 

 

7,815

 

Gross profit

 

 

242,763

 

 

 

 

 

 

242,763

 

 

 

522,995

 

 

 

48,990

 

 

 

571,985

 

Selling, general and administrative

 

 

215,514

 

 

 

 

 

 

215,514

 

 

 

156,610

 

 

 

64,013

 

 

 

220,623

 

Research and development

 

 

139,999

 

 

 

 

 

 

139,999

 

 

 

136,893

 

 

 

17,287

 

 

 

154,180

 

In-process research and development impairment
charges

 

 

46,169

 

 

 

 

 

 

46,169

 

 

 

650

 

 

 

 

 

 

650

 

Acquisition, transaction-related and integration
expenses

 

 

12,682

 

 

 

 

 

 

12,682

 

 

 

216,873

 

 

 

10,925

 

 

 

227,798

 

Charges (gains) related to legal matters, net

 

 

14,750

 

 

 

 

 

 

 

14,750

 

 

 

(411

)

 

 

90,099

 

 

 

89,688

 

Restructuring and other charges

 

 

29,933

 

 

 

 

 

 

29,933

 

 

 

42,309

 

 

 

5,123

 

 

 

47,432

 

Intellectual property legal development expenses

 

 

9,263

 

 

 

 

 

 

9,263

 

 

 

13,024

 

 

 

23

 

 

 

13,047

 

Operating loss

 

 

(225,547

)

 

 

 

 

 

(225,547

)

 

 

(42,953

)

 

 

(138,480

)

 

 

(181,433

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(129,376

)

 

 

 

 

 

(129,376

)

 

 

(100,691

)

 

 

(18,231

)

 

 

(118,922

)

Foreign exchange (loss) gain, net

 

 

(9,684

)

 

 

 

 

 

(9,684

)

 

 

(22,518

)

 

 

921

 

 

 

(21,597

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(19,667

)

 

 

 

 

 

(19,667

)

Gain (loss) on sale of international businesses

 

 

6,930

 

 

 

 

 

 

6,930

 

 

 

(2,812

)

 

 

 

 

 

(2,812

)

Gain from reduction of tax receivable agreement
liability

 

 

192,844

 

 

 

 

 

 

192,844

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

1,702

 

 

 

 

 

 

1,702

 

 

 

725

 

 

 

(638

)

 

 

87

 

Total other income (expense), net

 

 

62,416

 

 

 

 

 

 

62,416

 

 

 

(144,963

)

 

 

(17,948

)

 

 

(162,911

)

Loss before income taxes

 

 

(163,131

)

 

 

 

 

 

(163,131

)

 

 

(187,916

)

 

 

(156,428

)

 

 

(344,344

)

Provision for (benefit from) income taxes

 

 

375,539

 

 

 

 

 

 

375,539

 

 

 

(6,943

)

 

 

(6,273

)

 

 

(13,216

)

Net loss

 

 

(538,670

)

 

 

 

 

 

(538,670

)

 

 

(180,973

)

 

$

 

(150,155

)

 

$

 

(331,128

)

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

 

 

 

 

 

 

 

 

 

 

 

148,806

 

 

 

 

 

 

 

 

 

Less: Net loss attributable to non-controlling interests

 

 

208,881

 

 

 

 

 

 

208,881

 

 

 

21,191

 

 

 

 

 

 

 

 

 

Accretion of redeemable non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

(1,176

)

 

 

 

 

 

 

 

 

Net loss attributable to Amneal Pharmaceuticals,
Inc.

 

$

 

(329,789

)

 

$

 

 

 

$

 

(329,789

)

 

$

 

(12,152

)

 

 

 

 

 

 

 

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Cost of Goods Sold to Adjusted Cost of Goods Sold

 

Generics

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

Cost of goods sold

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

217,773

 

 

$

 

 

 

230,051

 

Cost of goods sold impairment charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49,115

 

 

 

 

 

7,815

 

Adjusted to deduct (add):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,912

 

 

 

 

 

6,107

 

Inventory related charges (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,038

)

 

 

 

 

11,426

 

Acquisition and site closure expenses (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,956

 

 

 

 

 

15,235

 

Asset impairment charges (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49,115

 

 

 

 

 

7,891

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

711

 

 

 

 

 

400

 

Adjusted cost of goods sold (Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

204,232

 

 

$

 

 

 

196,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Generics

 

Nine Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

Add:

 

 

(Non-
GAAP)

 

 

 

 

 

 

Add:

 

(Non-
GAAP)

 

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

 

Actual

 

 

Impax/ Gemini

 

Combined

 

Cost of goods sold

 

$

 

760,074

 

 

$

 

 

 

$

 

760,074

 

 

$

 

 

572,179

 

 

$

 

 

 

122,761

 

$

 

694,940

 

Cost of goods sold impairment charges

 

 

105,424

 

 

 

 

 

 

105,424

 

 

 

 

7,815

 

 

 

 

7,815

 

Adjusted to deduct (add):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

36,300

 

 

 

 

 

 

36,300

 

 

 

 

13,910

 

 

 

13,823

 

 

27,733

 

Inventory related charges (5)

 

 

19,739

 

 

 

 

 

 

19,739

 

 

 

 

41,995

 

 

 

9,894

 

 

51,889

 

Acquisition and site closure expenses (6)

 

 

20,436

 

 

 

 

 

 

20,436

 

 

 

 

15,235

 

 

 

 

15,235

 

Asset impairment charges (7)

 

 

105,424

 

 

 

 

 

 

105,424

 

 

 

 

7,891

 

 

 

53

 

 

7,944

 

Stock-based compensation expense

 

 

2,120

 

 

 

 

 

 

2,120

 

 

 

 

400

 

 

 

 

400

 

Amortization of upfront payment (9)

 

 

36,393

 

 

 

 

 

 

36,393

 

 

 

 

 

 

 

 

Other

 

 

1,024

 

 

 

 

 

 

1,024

 

 

 

 

 

 

 

 

Adjusted cost of goods sold (Non-GAAP)

 

$

 

644,062

 

 

$

 

 

 

$

 

644,062

 

 

$

 

 

500,563

 

 

$

 

 

 

98,991

 

$

 

599,554

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

Cost of goods sold

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

49,944

 

 

$

 

 

 

38,516

 

Cost of goods sold impairment charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,017

 

 

 

 

 

 

Adjusted to deduct:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,103

 

 

 

 

 

19,548

 

Asset impairment charges (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,017

 

 

 

 

 

 

Inventory related charges (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

960

 

Adjusted cost of goods sold (Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

22,841

 

 

$

 

 

 

18,008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty

 

Nine Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

Add:

 

 

(Non-
GAAP)

 

 

 

 

 

 

Add:

 

(Non
GAAP)

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

 

Actual

 

 

Impax/ Gemini

 

Combined

Cost of goods sold

 

$

 

113,767

 

 

$

 

 

 

$

 

113,767

 

 

$

 

 

62,474

 

 

$

 

 

 

26,731

 

$

 

89,205

 

Cost of goods sold impairment charges

 

 

7,017

 

 

 

 

 

 

7,017

 

 

 

 

 

 

 

 

Adjusted to deduct:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

67,474

 

 

 

 

 

 

67,474

 

 

 

 

30,199

 

 

 

6,112

 

 

36,311

 

Asset impairment charges (7)

 

 

7,017

 

 

 

 

 

 

7,017

 

 

 

 

 

 

 

 

Inventory related charges (5)

 

 

 

 

 

 

 

 

 

 

 

 

2,910

 

 

 

 

2,910

 

Adjusted cost of goods sold (Non-GAAP)

 

$

 

46,293

 

 

$

 

 

 

$

 

46,293

 

 

$

 

 

29,365

 

 

$

 

 

 

20,619

 

$

 

49,984

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)


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

 

Generics

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

Operating (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

(80,361

)

 

$

 

 

 

92,238

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and site closure expenses (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,941

 

 

 

 

 

 

 

15,235

 

Amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,912

 

 

 

 

 

 

 

6,107

 

Inventory related charges (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,038

)

 

 

 

 

 

 

11,426

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,982

 

 

 

 

 

 

 

1,201

 

Asset impairment charges (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72,530

 

 

 

 

 

 

 

8,541

 

Restructuring and other charges (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,702

 

 

 

 

 

 

 

(2,885

)

Charges (gains) related to legal matters (10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,000

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(975

)

 

 

 

 

 

 

(414

)

Adjusted operating income (Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

39,693

 

 

$

 

 

 

131,449

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Generics

 

Nine Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

Add:

 

 

(Non-
GAAP)

 

 

 

 

 

 

Add:

 

 

(Non-
GAAP)

 

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

Operating (loss) income

 

$

(130,058

)

 

$

 

 

$

(130,058

)

 

$

119,831

 

 

$

 

 

 

(130,663

)

 

$

(10,832

)

Adjusted to add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and site closure expenses (6)

 

 

35,611

 

 

 

 

 

 

35,611

 

 

 

129,857

 

 

 

 

 

 

 

 

 

 

129,857

 

Amortization

 

 

36,300

 

 

 

 

 

 

36,300

 

 

 

13,910

 

 

 

 

 

 

 

13,823

 

 

 

27,733

 

Inventory related charges (5)

 

 

19,739

 

 

 

 

 

 

19,739

 

 

 

41,995

 

 

 

 

 

 

 

9,894

 

 

 

51,889

 

Stock-based compensation expense

 

 

9,355

 

 

 

 

 

 

9,355

 

 

 

1,422

 

 

 

 

 

 

 

982

 

 

 

2,404

 

Asset impairment charges (7)

 

 

151,741

 

 

 

 

 

 

 

151,741

 

 

 

8,541

 

 

 

 

 

 

 

53

 

 

 

8,594

 

Restructuring and other charges (8)

 

 

17,201

 

 

 

 

 

 

17,201

 

 

 

21,912

 

 

 

 

 

 

 

 

 

 

21,912

 

Charges related to legal matters, net (10)

 

 

15,000

 

 

 

 

 

 

15,000

 

 

 

 

 

 

 

 

 

 

89,159

 

 

 

89,159

 

Amortization of upfront payment (9)

 

 

36,393

 

 

 

 

 

 

36,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R&D milestone payment

 

 

9,929

 

 

 

 

 

 

9,929

 

 

 

2,700

 

 

 

 

 

 

 

 

 

 

2,700

 

Other

 

 

49

 

 

 

 

 

 

49

 

 

 

(594

)

 

 

 

 

 

 

 

 

 

(594

)

Adjusted operating income (Non-GAAP)

 

$

201,260

 

 

$

 

 

$

201,260

 

 

$

339,574

 

 

$

 

 

 

(16,752

)

 

$

322,822

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)


Reconciliations of Specialty Operating Income to Adjusted Operating Income

 

Specialty

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

Operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

3,596

 

 

$

 

 

 

 

22,633

 

Adjusted to add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,103

 

 

 

 

 

 

 

19,548

 

Inventory related charges (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

960

 

Acquisition and site closure expenses (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,522

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

456

 

 

 

 

 

 

 

 

Restructuring and other charges (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

213

 

 

 

 

 

 

 

(26

)

Asset impairment charges (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,017

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

474

 

Adjusted operating income (Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

40,907

 

 

$

 

 

 

 

43,589

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty

 

Nine Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

Add:

 

 

(Non-GAAP)

 

 

 

 

 

 

Add:

 

 

(Non-
GAAP)

 

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

Operating income

 

$

 

24,769

 

 

$

 

 

 

$

 

24,769

 

 

$

 

 

31,550

 

 

$

 

 

 

 

 

36,968

 

 

$

 

68,518

 

Adjusted to add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

67,474

 

 

 

 

 

 

67,474

 

 

 

 

30,199

 

 

 

 

 

 

 

 

6,112

 

 

 

36,311

 

Inventory related charges (5)

 

 

 

 

 

 

 

 

 

 

 

 

2,910

 

 

 

 

 

 

 

 

 

 

2,910

 

Acquisition and site closure expenses (6)

 

 

8,328

 

 

 

 

 

 

8,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

966

 

 

 

 

 

 

966

 

 

 

 

 

 

 

 

 

 

 

1,124

 

 

 

1,124

 

Restructuring and other charges (8)

 

 

391

 

 

 

 

 

 

391

 

 

 

 

2,395

 

 

 

 

 

 

 

 

 

 

2,395

 

Charges related to legal matters, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

940

 

 

 

940

 

Asset impairment charges (7)

 

 

7,017

 

 

 

 

 

 

7,017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

474

 

 

 

 

 

 

 

 

 

 

474

 

Adjusted operating income (Non-GAAP)

 

$

 

108,945

 

 

$

 

 

 

$

 

108,945

 

 

$

 

 

67,528

 

 

$

 

 

 

 

 

45,144

 

 

$

 

112,672

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands, except per share amounts)


Reconciliation of Net (Loss) Income to Adjusted Net Income and Calculation of Adjusted Diluted EPS

 

 

 

Three months ended September 30,

 

 

2019

 

2018

Net (loss) income

 

$

(363,392

)

 

$

17,465

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

 

Non-cash interest

 

 

1,631

 

 

 

1,452

 

GAAP Income tax expense

 

 

389,668

 

 

 

5,109

 

Gain from reduction of tax receivable agreement liability (4)

 

 

(192,844

)

 

 

 

Amortization

 

 

38,015

 

 

 

25,655

 

Stock-based compensation expense

 

 

6,095

 

 

 

3,590

 

Acquisition and site closure expenses (6)

 

 

11,230

 

 

 

20,816

 

Restructuring and other charges (8)

 

 

20,937

 

 

 

(2,156

)

Inventory related charges (5)

 

 

(2,038

)

 

 

12,386

 

Charges related to legal matters, net (10)

 

 

15,000

 

 

 

2,589

 

Asset impairment charges (7)

 

 

79,547

 

 

 

8,541

 

Foreign exchange loss

 

 

12,531

 

 

 

5,137

 

Loss on sale of international business (11)

 

 

 

 

 

2,812

 

Other

 

 

(1,387

)

 

 

597

 

Income tax at 21%

 

 

(3,149

)

 

 

(21,839

)

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

 

 

(91

)

 

 

(53

)

Adjusted net income (Non-GAAP)

 

$

11,753

 

 

$

82,101

 

Adjusted diluted EPS (Non-GAAP) (12)

 

$

0.04

 

 

$

0.27

 

(12)

For the three months ended September 30, 2019, utilizes weighted average diluted shares outstanding of 299,106, which consists of Class A shares and Class B shares under the if-converted method. For the three months ended September 30, 2018, utilizes weighted average diluted shares outstanding of 299,483, which consists of Class A shares and Class B shares under the if-converted method.

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

 

 

 

Nine Months Ended September 30, 2019

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

Add:

 

 

(Non-GAAP)

 

 

 

 

 

 

Add:

 

 

(Non-GAAP)

 

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

 

Actual

 

 

Impax/ Gemini

 

 

Combined

 

Net loss

 

$

 

(538,670

)

 

$

 

 

 

$

 

(538,670

)

 

$

 

(180,973

)

 

$

 

(150,155

)

 

$

 

(331,128

)

Adjusted to add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash interest

 

 

4,849

 

 

 

 

 

 

4,849

 

 

 

7,029

 

 

 

9,413

 

 

 

16,442

 

Gain from reduction of tax receivable
agreement liability (4)

 

 

(192,844

)

 

 

 

 

 

(192,844

)

 

 

 

 

 

 

 

 

 

GAAP Income tax expense (benefit)

 

 

375,539

 

 

 

 

 

 

375,539

 

 

 

(6,943

)

 

 

(6,273

)

 

 

(13,216

)

Amortization

 

 

103,774

 

 

 

 

 

 

103,774

 

 

 

44,109

 

 

 

19,935

 

 

 

64,044

 

Stock-based compensation expense

 

 

16,666

 

 

 

 

 

 

16,666

 

 

 

5,234

 

 

 

4,816

 

 

 

10,050

 

Acquisition and site closure expenses (6)

 

 

58,488

 

 

 

 

 

 

58,488

 

 

 

235,458

 

 

 

10,925

 

 

 

246,383

 

Restructuring and other charges (8)

 

 

29,933

 

 

 

 

 

 

29,933

 

 

 

42,309

 

 

 

5,123

 

 

 

47,432

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

19,667

 

 

 

 

 

 

19,667

 

Inventory related charges (5)

 

 

19,739

 

 

 

 

 

 

19,739

 

 

 

44,905

 

 

 

9,894

 

 

 

54,799

 

Charges related to legal matters, net (10)

 

 

15,000

 

 

 

 

 

 

15,000

 

 

 

2,589

 

 

 

90,099

 

 

 

92,688

 

Asset impairment charges (7)

 

 

160,555

 

 

 

 

 

 

160,555

 

 

 

8,541

 

 

 

53

 

 

 

8,594

 

Amortization of upfront payment

 

 

36,393

 

 

 

 

 

 

36,393

 

 

 

 

 

 

 

 

 

 

Foreign exchange loss (gain)

 

 

9,684

 

 

 

 

 

 

9,684

 

 

 

22,518

 

 

 

(921

)

 

 

21,597

 

(Gain) loss on sale of international businesses,
net (11)

 

 

(6,930

)

 

 

 

 

 

(6,930

)

 

 

2,812

 

 

 

 

 

 

2,812

 

R&D milestone payments

 

 

9,929

 

 

 

 

 

 

9,929

 

 

 

2,700

 

 

 

 

 

 

2,700

 

Other

 

 

196

 

 

 

 

 

 

196

 

 

 

655

 

 

 

1,953

 

 

 

2,608

 

Income tax at 21%

 

 

(21,483

)

 

 

 

 

 

(21,483

)

 

 

(52,859

)

 

 

1,309

 

 

 

(51,550

)

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

 

 

(231

)

 

 

 

 

 

(231

)

 

 

(197

)

 

 

 

 

 

(197

)

Adjusted net income (Non-GAAP)

 

$

 

80,587

 

 

$

 

 

 

$

 

80,587

 

 

$

 

197,554

 

 

$

 

(3,829

)

 

$

 

193,725

 

Adjusted diluted EPS (Non-GAAP) (13)

 

 

 

 

 

 

 

 

 

$

 

0.27

 

 

 

 

 

 

 

 

 

 

$

 

0.65

 

(13)

For the nine months ended September 30, 2019, utilizes weighted average diluted shares outstanding of 299,125, which consists of Class A shares and Class B shares under the if-converted method. For the nine months ended September 30, 2018, utilizes weighted average diluted shares outstanding of 299,156, which consists of Class A and Class B shares under the if-converted method.

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited, In thousands)


Reconciliations of Net (Loss) Income to EBITDA and Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

(363,392

)

 

$

 

 

 

17,465

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42,209

 

 

 

 

 

 

 

43,018

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

389,668

 

 

 

 

 

 

 

5,109

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53,358

 

 

 

 

 

 

 

43,013

 

EBITDA (Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

121,843

 

 

$

 

 

 

108,605

 

Adjusted to add (deduct):