Amneal Announces Solid Second Quarter 2018 Financial Results

Published: Aug 09, 2018

 

BRIDGEWATER, N.J., Aug. 9, 2018 /PRNewswire/ -- Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the "Company") announced its results today for the quarter ended June 30, 2018.

"We delivered solid sequential growth across our Generics and Specialty Pharma businesses on a combined adjusted basis compared to the first quarter of 2018 as we began to realize the benefits of our recent transformative combination with Impax," said Rob Stewart, President and CEO of Amneal.

"On a sequential basis, our Generics business delivered solid growth as we capitalized on the 16 product launches during the first six months of 2018, including generic versions of gConcerta®, (methylphenidate HCI ER), Mephyton® (phytonadione) and Welchol® (colesevelam). We also benefited from higher sales of generic versions of Vagifem® (yuvafem), Aggrenox® (aspirin and extended-release dipyridamole) and Voltaren® Gel 1% (diclofenac sodium gel), which more than offset the seasonal decline in sales of generic gTamiflu® (oseltamivir phosphate).

In our Specialty Pharma business, we achieved sequential growth from sales of key products Rytary® and Zomig® nasal spray and across our anthelmintic product franchise.

We have made significant progress with the integration of Impax and continue to anticipate delivering at least $200 million in annual synergies within three years of the May 4th closing. Although we are revising our 2018 guidance to reflect the delayed timing of deliveries of our Epinephrine Auto-Injector product from our third-party manufacturer and the timing of certain key launches, we remain confident in the long-term growth potential for Amneal as we leverage our enhanced portfolio and focus on driving commercial and operational excellence initiatives to fuel organic growth, generate savings and strong cash flow, and deliver long-term returns for our shareholders."

 

    Summary of GAAP and Combined Adjusted Results


                                                                                    Three Months Ended                                                  Variance
                                                                                    ------------------                                                  --------

    (Unaudited; In thousands)                                                            June 30,                        March 31,                      June 30,                                   Sequential        Year/
                                                                                                        2018                            2018                            2017                                             Year
                                                                                                        ----                            ----                            ----                                             ----

    GAAP Results(1)

    Net revenue                                                                                     $413,787                        $275,189                        $259,871                                   50.4%           59.2%

    Net (loss) income                                                                             $(250,090)                        $51,652                         $37,748                                      NM              NM

    Diluted EPS                                                                                      $(0.15)                            N/A                            N/A                                    N/A             N/A


    Non-GAAP Results(2)

    Combined net revenue                                                                            $462,328                        $427,030                        $474,171                                    8.2%          (2.5)%

    Combined adjusted net income                                                                     $70,153                         $38,632                         $62,472                                   81.6%           12.3%

    Combined EBITDA                                                                               $(204,048)                        $14,930                         $88,993                                      NM              NM

    Combined adjusted EBITDA                                                                        $138,836                         $95,904                        $118,853                                   44.8%           16.8%

    Combined adjusted diluted EPS                                                                      $0.24                           $0.14                             N/A                                  71.4%             N/A


    (1) Current 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. Prior year GAAP
     results represent Amneal Pharmaceuticals LLC only.

    (2) Assumes the combination between Amneal Pharmaceuticals LLC and Impax Laboratories, LLC occurred on the first day of the quarter presented.

    "NM" is used when the variance is not meaningful because it is immaterial in absolute or percentage terms.

The Company's financial results are presented in accordance with GAAP, which includes the results of Amneal Pharmaceuticals LLC consolidating the results of Impax Laboratories, LLC ("Impax") from the transaction closing date of May 4, 2018. Management believes that using additional non-GAAP measures on a combined company basis will facilitate the evaluation of the financial performance of the Company and its ongoing operations. The adjusted results presented combine the results of Amneal with Impax as if the closing date had occurred on the first day of all periods presented. All combined business results presented in this News Release are unaudited. Such combined business results are not prepared in accordance with Article 11 of Regulation S-X. Refer to the "Non-GAAP Financial Measures" section for additional information, including reconciliations of all GAAP to non-GAAP financial measures.

GAAP Basis Results

  • GAAP net revenue in the second quarter of 2018 was $413.8 million, an increase of 59.2%, compared to the second quarter of 2017, primarily due to the combination with Impax on May 4, 2018.
  • GAAP net loss in the second quarter of 2018 was $250.1 million, compared to net income of $37.7 million for the second quarter of 2017. The second quarter's results were impacted by the May 4th combination with Impax and include charges relating to the vesting of profit participation units ("PPUs"), special employee bonuses and restructuring charges as a result of the combination.
  • GAAP diluted EPS in the second quarter of 2018 was a loss of $0.15, due to the PPU, bonus and restructuring charges noted above. GAAP diluted EPS for the second quarter of 2017 is not available as Amneal Pharmaceuticals LLC was a privately-held company for the period presented.

Non-GAAP Combined Results

  • Combined adjusted net revenue in the second quarter of 2018 was $462.3 million, a decrease of 2.5%, compared to the second quarter of 2017, primarily due to a 6.4% decline in combined net revenue for the Generics business, partially offset by a 24.1% increase in combined net revenue for the Specialty Pharma business revenue.
  • Combined adjusted net income in the second quarter of 2018 was $70.1 million, an increase of 12.3%, compared to the second quarter of 2017, primarily due to favorable product sales mix.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) was a loss of $204.0 million in the second quarter of 2018, compared to a gain of $89.0 million in the second quarter of 2017, primarily due to the PPU, bonus and restructuring charges noted above. Combined adjusted EBITDA in the second quarter of 2018 was $138.8 million, an increase of 16.8%, compared to the second quarter of 2017, primarily due to a more favorable product sales mix.
  • Combined adjusted diluted EPS in the second quarter of 2018 was $0.24.

Business Segment Information

The Company has two reportable segments, the Generics business and the Specialty Pharma business and does not allocate general corporate services to either segment.

 

    Generics Business Information
    The following Consolidated Statements of Operations table reconciles the Generics Business GAAP results to combined results. (Unaudited; In thousands)


                                                                                             Three months ended June 30, 2018                                    Three months ended June 30, 2017
                                                                                             --------------------------------                                    --------------------------------

                                                                                                                                           Add:                                                                                                           Add:

                                                                                                           GAAP                              Impax                           Combined                                        GAAP                           Impax              Combined
                                                                                                           ----                              -----                           --------                                        ----                           -----              --------

    Revenues

    Generics, net                                                                                                    $361,770                           $20,995                            $382,765                                     $259,871                      $150,889            $410,760
                                                                                                                     --------                           -------                            --------                                     --------                      --------            --------

    Cost of goods sold                                                                                                211,534                            29,624                             241,158                                      136,138                       108,901             245,039
                                                                                                                      -------                            ------                             -------                                      -------                       -------             -------

    Gross profit                                                                                                      150,236                           (8,629)                            141,607                                      123,733                        41,988             165,721

    Selling, general, and administrative                                                                               16,621                             4,340                              20,961                                       14,845                         8,034              22,879

    Research and development                                                                                           47,206                             3,984                              51,190                                       47,184                        20,995              68,179

    In-process R&D impairment charge                                                                                        -                                -                                  -                                           -                            -                  -

    Intellectual property legal development                                                                             4,004                                 -                              4,004                                        4,926                           319               5,245
    expenses

    Acquisition, integration and transaction                                                                          114,622                                 -                            114,622                                            -                            -                  -
    related expenses

    Restructuring                                                                                                      24,797                                 -                             24,797                                            -                            -                  -
                                                                                                                       ------                               ---                             ------                                          ---                          ---                ---

    Operating profit                                                                                                $(57,014)                        $(16,953)                          $(73,967)                                     $56,778                       $12,640             $69,418
                                                                                                                     ========                          ========                            ========                                      =======                       =======             =======


    GAAP and combined gross margin                                                                                      41.5%                          (41.1)%                              37.0%                                       47.6%                        27.8%              40.3%

    Adjusted gross profit                                                                                            $186,848                          $(1,690)                           $185,158                                     $141,224                       $64,162            $205,386

    Adjusted gross margin                                                                                               51.6%                           (8.0)%                              48.4%                                       54.3%                        42.5%              50.0%


                                                                                              Six months ended June 30, 2018                                      Six months ended June 30, 2017
                                                                                              ------------------------------                                      ------------------------------

                                                                                                                                           Add:                                                                                                           Add:

                                                                                                           GAAP                              Impax                           Combined                                        GAAP                           Impax              Combined
                                                                                                           ----                              -----                           --------                                        ----                           -----              --------

    Revenues

    Generics, net                                                                                                    $636,959                          $102,237                            $739,196                                     $485,552                      $285,036            $770,588
                                                                                                                     --------                          --------                            --------                                     --------                      --------            --------

    Cost of goods sold                                                                                                342,128                           122,761                             464,889                                      245,803                       251,516             497,319
                                                                                                                      -------                           -------                             -------                                      -------                       -------             -------

    Gross profit                                                                                                      294,831                          (20,524)                            274,307                                      239,749                        33,520             273,269

    Selling, general, and administrative                                                                               27,823                            11,896                              39,719                                       29,808                        14,502              44,310

    Research and development                                                                                           91,414                            13,623                             105,037                                       86,603                        38,391             124,994

    In-process R&D impairment charge                                                                                        -                                -                                  -                                           -                        6,079               6,079

    Intellectual property legal development                                                                             8,580                            84,597                              93,177                                       11,093                           687              11,780
    expenses

    Acquisition, integration and transaction                                                                          114,622                                 -                            114,622                                            -                            -                  -
    related expenses

    Restructuring                                                                                                      24,797                                 -                             24,797                                            -                            -                  -
                                                                                                                       ------                               ---                             ------                                          ---                          ---                ---

    Operating profit                                                                                                  $27,595                        $(130,640)                         $(103,045)                                    $112,245                     $(26,139)            $86,106
                                                                                                                      =======                         =========                           =========                                     ========                      ========             =======


    GAAP and combined gross margin                                                                                      46.3%                          (20.0)%                              37.1%                                       49.4%                        11.8%              35.5%

    Adjusted gross profit                                                                                            $333,203                            $3,193                            $336,396                                      258,126                      $116,115            $374,281

    Adjusted gross margin                                                                                               52.3%                             3.1%                              45.5%                                       53.2%                        40.8%              48.6%


    (a) Adjusted gross profit is calculated as total revenues less adjusted cost of goods sold. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the "Non-GAAP Financial Measures" for a reconciliation of GAAP to
     non-GAAP items.

 

GAAP Results

Generics business revenues increased 39.2% for the second quarter of 2018, compared to the prior year period. The increase is primarily attributable to increased sales of Aspirin Dipyridamole ER due to higher volume, higher demand for Diclofenac Sodium Gel 1%, new launches including Methylphenidate ER Tabs and Phytonadione, and additional revenue from the combination with Impax.

Gross margin for the second quarter of 2018 was 41.5%, compared to 47.6% for the second quarter of 2017, primarily due to higher cost of sales due to purchase accounting adjustments as well as the fact that the Impax portfolio contains products with relatively lower profit margins.

Non-GAAP Combined Results

Generics business combined net revenue in the second quarter of 2018 was $382.8 million, a decrease of 6.8%, compared to $410.8 million in the prior year period. The decrease is primarily due to revenue reductions from lower sales of Epinephrine Auto-Injector due to an ongoing supply shortage at the Company's third-party manufacturer, increased competition on Budesonide, Lidocaine, Yuvafem and Fenofibrate, and the impact of discontinued products. The decrease was partially offset by increased revenue from new product launches and increased sales of Aspirin Dipyridamole ER and Diclofenac Sodium Gel 1%.

Gross margin for the second quarter of 2018 on a combined basis was 37.0%, compared to 40.3% for the second quarter of 2017, primarily due to a charge for inventory step-up. Adjusted gross margin on a combined adjusted basis was 48.4% for the second quarter of 2018, compared to 50.0% in the prior year period.

 

    Specialty Pharma Business Information
    The following Consolidated Statements of Operations table reconciles the Specialty Pharma business GAAP results to combined results. (Unaudited; In thousands)


                                                                                            Three months ended June 30, 2018                                Three months ended June 30, 2017
                                                                                            --------------------------------                                --------------------------------

                                                                                                                                        Add:                                                                                                      Add:

                                                                                                          GAAP                           Impax/                          Combined                                      GAAP                        Impax/          Combined
                                                                                                                                       Gemini                                                                                                    Gemini
                                                                                                                                                                                                                                                                         ---           ---

    Revenues

    Rytary(R), net                                                                                                   $20,520                        $8,578                             $29,098                               $         -                   $21,922             $21,922

    Zomig(R), net                                                                                                      9,695                         3,933                              13,628                                         -                    12,325              12,325

    All Other Specialty Pharma Products                                                                               21,802                        15,035                              36,837                                         -                    29,164              29,164
    sales,  net

    Total revenues                                                                                                    52,017                        27,546                              79,563                                         -                    63,411              63,411
                                                                                                                      ------                        ------                              ------                                       ---                    ------              ------

    Cost of goods sold                                                                                                23,958                         6,711                              30,669                                         -                    25,269              25,269
                                                                                                                      ------                         -----                              ------                                       ---                    ------              ------

    Gross profit                                                                                                      28,059                        20,835                              48,894                                         -                    38,142              38,142

    Selling, general, and administrative                                                                              13,549                         7,707                              21,256                                         -                    19,693              19,693

    Research and development                                                                                           3,129                         1,007                               4,136                                         -                     5,852               5,852

    Intellectual property legal development                                                                               43                             -                                 43                                         -                       851                 851
    expenses

    Restructuring                                                                                                      2,421                             -                              2,421                                         -                         -                  -
                                                                                                                       -----                           ---                              -----                                                                 ---

    Operating profit                                                                                                  $8,917                       $12,121                             $21,038                               $         -                   $11,746             $11,746


    GAAP and combined gross margin                                                                                     53.9%                        75.6%                              61.5%                                        -                     60.2%              60.2%

    Adjusted gross profit                                                                                            $40,660                       $22,363                             $63,023                               $         -                   $43,982             $43,982

    Adjusted gross margin                                                                                              78.2%                        81.2%                              79.2%                                        -                     69.4%              69.4%


                                                                                             Six months ended June 30, 2018                                  Six months ended June 30, 2017
                                                                                             ------------------------------                                  ------------------------------

                                                                                                                                        Add:                                                                                                      Add:

                                                                                                          GAAP                           Impax/                          Combined                                      GAAP                        Impax/          Combined
                                                                                                                                       Gemini                                                                                                    Gemini
                                                                                                                                                                                                                                                                         ---           ---

    Revenues

    Rytary(R), net                                                                                                   $20,520                       $35,086                             $55,606                                $        -                   $41,827             $41,827

    Zomig(R), net                                                                                                      9,695                        14,411                              24,106                                         -                    22,182              22,182

    All Other Specialty Pharma  Products                                                                              21,802                        46,748                              68,550                                         -                    61,202              61,202
    sales, net

    Total revenues                                                                                                    52,017                        96,245                             148,262                                         -                   125,211             125,211
                                                                                                                      ------                        ------                             -------                                       ---                   -------             -------

    Cost of goods sold                                                                                                23,958                        26,731                              50,689                                         -                    47,083              47,083
                                                                                                                      ------                        ------                              ------                                       ---                    ------              ------

    Gross profit                                                                                                      28,059                        69,514                              97,573                                         -                    78,128              78,128

    Selling, general, and administrative                                                                              13,549                        27,942                              41,491                                         -                    38,816              38,816

    Research and development                                                                                           3,129                         3,664                               6,793                                         -                    10,945              10,945

    Intellectual property legal development                                                                               43                            23                                  66                                         -                     1,555               1,555
    expenses

    Restructuring                                                                                                      2,421                           940                               3,361                                         -                         -                  -
                                                                                                                       -----                           ---                               -----                                       ---                       ---                ---

    Operating profit                                                                                                  $8,917                       $36,945                             $45,862                                $        -                   $26,812             $26,812
                                                                                                                      ======                       =======                             =======                                ==========                   =======             =======


    GAAP and combined gross margin                                                                                     53.9%                        72.2%                              65.8%                                        -                     62.4%              62.4%

    Adjusted gross profit                                                                                            $40,660                       $75,626                            $116,286                                $        -                   $87,802             $87,802

    Adjusted gross margin                                                                                              78.2%                        78.6%                              78.4%                                        -                     70.1%              70.1%


    (a) Adjusted gross profit is calculated as total revenues less adjusted cost of goods sold. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the "Non-GAAP Financial Measures" for a reconciliation
     of GAAP to non-GAAP items.

 

GAAP Results

The Specialty Pharma business 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 business.

Non-GAAP Combined Results

Specialty Pharma business combined net revenue in the second quarter 2018 was $79.6 million, an increase of 25.5%, compared to $63.4 million in the prior year period, driven by higher revenue from Rytary®, Zomig® and the anthelmintic products franchise.

Gross margin for the second quarter of 2018 on a combined basis was 61.5%, compared to 60.2% for the second quarter of 2017. Adjusted gross margin on a combined adjusted basis was 79.2% for the second quarter of 2018, compared to 69.4% in the prior year period, primarily due to favorable product sales mix.

 

    Corporate and Other Information
    (Unaudited; In thousands)


                                        Three months ended June 30, 2018            Three months ended June 30, 2017
                                        --------------------------------            --------------------------------

                                                                            Add:                                                      Add:

                                                      GAAP                 Impax                Combined                  GAAP       Impax     Combined
                                                      ----                 -----                --------                  ----       -----     --------


    General and administrative expenses                        $(22,833)  $(8,223)                         $(31,056)   $(12,093)   $(27,767)   $(39,860)

    Unallocated corporate expenses                             $(22,833)  $(8,223)                         $(31,056)   $(12,093)   $(27,767)   $(39,860)
                                                                ========    =======                           ========     ========     ========     ========



                                         Six months ended June 30, 2017              Six months ended June 30, 2017
                                         ------------------------------              ------------------------------

                                                                            Add:                                                      Add:

                                                      GAAP                 Impax                Combined                  GAAP       Impax     Combined
                                                      ----                 -----                --------                  ----       -----     --------


    General and administrative expenses                        $(36,751) $(40,404)                         $(77,155)   $(24,832)   $(51,024)   $(75,856)

    Unallocated corporate expenses                             $(36,751) $(40,404)                         $(77,155)   $(24,832)   $(51,024)   $(75,856)
                                                                ========   ========                           ========     ========     ========     ========

GAAP Results

General and administrative expenses in the second quarter of 2018 were $22.8 million, an increase of $10.7 million, compared to the second quarter of 2018. The increase was primarily due to general and administrative expenses of the Impax organization since the closing of the combination, which includes certain public company costs that will remain on a go-forward basis. The increase is also attributable to stock-based compensation.

Non-GAAP Combined Results

General and administrative expenses in the second quarter of 2018 were $31.1 million, a decrease of 22.1%, compared to the second quarter of 2017, primarily due to cost synergies as a result of the business combination with Impax.

Other Information
Interest expense, net for the second quarter of 2018 was $36.6 million, compared to $17.7 million in the second quarter of 2018, due to an increase in long-term debt as a result of the business combination with Impax.

2018 Financial Guidance

Amneal's full year 2018 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 does not provide forward-looking guidance metrics as outlined below on a GAAP basis. Consequently, the Company cannot provide a reconciliation between non-GAAP expectations and corresponding 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 certain 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 the guidance period. The following statements are forward looking and actual results could differ materially depending on market conditions and the factors set forth under "Safe Harbor" below.

2018 Key Guidance Assumptions

  • Revised full year 2018 adjusted EBITDA and adjusted EPS guidance primarily due to the delayed timing of deliveries of Epinephrine Auto-Injector
  • Generics business growth driven by new product launches which are expected to more than offset additional competition on existing portfolio
    • Launched 22 products through August 8, 2018. Potential opportunity to launch an additional 25 generic products the remainder of the year
    • Specialty Pharma business growth driven by Rytary®, Zomig® nasal spray and Emverm®
  • Targeting synergies of $30 to $35 million
    • Approximately 50% R&D, 30% SG&A, 20% Manufacturing

 

                                                 Financial Guidance

                                                     Full Year

                                                                       2018
                                                                       ----

    Adjusted Gross Margins                                       50% to 55%

    Adjusted R&D as a % of Total
     Revenues                                                    10% to 15%

    Adjusted SG&A as a % of Total
     Revenues                                                    13% to 16%

    Adjusted EBITDA(1)                                 $580 to $620 million

                                         (previously $600 to $650 million)

    Adjusted EPS                                             $0.90 to $1.00

                                            (previously $0.95 to $1.10)

    Adjusted Effective Tax Rate                                  20% to 22%

    Capital Expenditures                                $80 to $100 million

    Diluted Shares Outstanding               Approximately 300 million


    (1) Includes $30 million to $35 million of cost synergies expected
     to be realized in 2018.

 

Conference Call Information

Amneal will hold a conference call on August 9, 2018 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/1772042/9F111678E78468805741A3106805A25B. The number to call from within the United States is (877) 356-3814 and (706) 758-0033 internationally. The conference ID is 3045719. A replay of the conference call will be available shortly after the call for a period of seven days. To access the replay, dial (855) 859-2056 (in the U.S.) and (404) 537-3406 (international callers).

About Amneal
Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is an integrated specialty pharmaceutical company focused on developing, manufacturing and distributing generic, brand and biosimilar products. The Company has approximately 6,500 employees in its operations in North America, Asia, and Europe, working together to bring high-quality medicines to patients primarily within the United States.

Amneal is one of the largest and fastest growing generic pharmaceutical manufacturers in the United States, with an expanding portfolio of generic products to include complex dosage forms in a broad range of therapeutic areas. The Company markets a portfolio of branded pharmaceutical products through its Impax Specialty Pharma division focused principally on central nervous system disorders and parasitic infections. For more information, visit www.amneal.com.

Safe Harbor Statement
Certain statements contained herein, regarding matters that are not historical facts, may be forward-looking statements (as defined in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with the safe harbor provisions. Such forward-looking statements include statements regarding management's intentions, plans, beliefs, expectations or forecasts for the future. The 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.

Such forward-looking statements are based on the expectations of Amneal Pharmaceuticals, Inc. ("our" or the "Company") and involve risks and uncertainties; consequently, actual results may differ materially from those expressed or implied in the statements. Such risks and uncertainties include, but are not limited to (i) the impact of global economic conditions, (ii) our ability to integrate the operations of Amneal Pharmaceuticals LLC ("Amneal") and Impax Laboratories, LLC ("Impax") pursuant to the transactions (the "Combination") contemplated by that certain Business Combination Agreement dated as of October 17, 2017 by and among the Company, Amneal, Impax and K2 Merger Sub Corporation as amended on November 21, 2017 and December 16, 2017 and our ability to realize the anticipated synergies and other benefits of the Combination, (iii) our ability to successfully develop and commercialize new products, (iv) our ability to obtain exclusive marketing rights for our products and to introduce products on a timely basis, (v) the competition we face in the pharmaceutical industry from brand and generic drug product companies, (vi) our ability to manage our growth, (vii) the illegal distribution and sale by third parties of counterfeit versions of our products or of stolen products, (viii) market perceptions of us and the safety and quality of our products, (ix) our dependence on the sales of a limited number of products for a substantial portion of our total revenues, (x) our ability to develop, license or acquire and introduce new products on a timely basis, (xi) the ability of our approved products to achieve expected levels of market acceptance, (xii) the risk that we may discontinue the manufacture and distribution of certain existing products, (xiii) the impact of manufacturing or quality control problems, (xiv) the risk of product liability and other claims against us by consumers and other third parties, (xv) 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, (xvi) changes to FDA product approval requirements, (xvii) risks related to federal regulation of arrangements between manufacturers of branded and generic products, (xviii) the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers, (xix) our dependence on a few locations that produce a majority of our products, (xx) relationships with our major customers, (xxi) the continuing trend of consolidation of certain customer groups, (xxii) our reliance on certain licenses to proprietary technologies from time to time, (xxiii) our dependence on third party suppliers and distributors for raw materials for our products and certain finished goods, (xxiv) the time necessary to develop generic and branded drug products, (xxv) our dependence on third parties for testing required for regulatory approval of our products, (xxvi) our dependence on third party agreements for a portion of our product offerings, (xxvii) our ability to make acquisitions of or investments in complementary businesses and products on advantageous terms, (xxviii) regulatory oversight related to our international operations, (xxix) our increased exposure to tax liabilities due to our international operations and the impact of recent U.S. tax legislation, (xxx) payments required by our Tax Receivable Agreement, (xxxi) our involvement in various legal proceedings, including those brought by third parties alleging infringement of their intellectual property rights, (xxxii) legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives, (xxxiii) the significant amount of resources we expend on research and development, (xxxiv) our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the future, (xxxv) risks inherent in conducting clinical trials, (xxxvi) our reporting and payment obligations under the Medicaid rebate program and other government purchase and rebate programs, (xxxvii) quarterly fluctuations in our operating results, (xxxviii) adjustments to our reserves based on price adjustments and sales allowances, (xix) impairment of our goodwill and other intangible assets, (xl) investigations and litigation concerning the calculation of average wholesale prices, (xli) cybersecurity and data leakage risks, (xlii) our ability to attract and retain talented employees and consultants, (xliii) our ability to protect our intellectual property rights, (xliv) uncertainties involved in the preparation of our financial statements, (xlv) our ability to maintain an effective system of internal controls over financial reporting, (xlvi) the impact of terrorist attacks and other acts of violence, (xlvii) expansion of social media platforms, (xlviii) our need to raise additional funds in the future, (xlix) the restrictions imposed by the terms of our credit agreement, (l) the fact that we are a holding company with nominal net worth, (li) the volatility of the price of our Class A Common Stock, (lii) the impact from future sales of shares by our stockholders on the price of our Class A Common Stock, (liii) the high concentration of ownership of our Class A Common Stock, (liv) the fact that we are controlled by APHC Holdings, LLC, (lv) the impact of our charter specifying the Court of Chancery of the State of Delaware as the sole and exclusive forum for all disputes between us and our stockholders, (lvi) the impact of anti-takeover provisions under Delaware law, (lvii) our current expectation that we will not pay dividends in the future, (lviii) the impact of any changed recommendations regarding our Class A Common Stock from analysts and (lix) such other factors as may be set forth in our public filings with the Securities and Exchange Commission.

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 events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.

Trademarks referenced herein are the property of their respective owners.

 

                                                                             Amneal Pharmaceutical, Inc.
                                                                        Consolidated Statements of Operations
                                                                 (Unaudited; In thousands, except per share amounts)


                                                                                                  Three months ended                        Six months ended

                                                                                                       June 30,          June 30,                            June 30,            June 30,
                                                                                                                    2018               2017                                 2018                  2017
                                                                                                                    ----               ----                                 ----                  ----

    Net Revenue                                                                                                 $413,787           $259,871                             $688,976              $485,552

    Cost of goods sold                                                                                           235,492            136,138                              366,086               245,803

    Gross profit                                                                                                 178,295            123,733                              322,890               239,749
                                                                                                                 -------            -------                              -------               -------

    Selling, general and administrative                                                                           53,003             26,938                               78,124                54,640

    Research and development                                                                                      50,335             47,184                               94,544                86,603

    Intellectual property legal development expenses                                                               4,047              4,926                                8,623                11,093

    Acquisition, transaction-related and integration expenses                                                    207,507                 82                              214,642                    82

    Restructuring expenses                                                                                        44,465                  -                              44,465                     -

    Operating (loss) income                                                                                    (181,062)            44,603                            (117,508)               87,331
                                                                                                                --------             ------                             --------                ------

    Other (expense) income:

       Interest expense, net                                                                                    (36,622)          (17,726)                            (57,673)             (31,887)

       Foreign exchange (loss) gain                                                                             (25,946)            15,332                             (17,381)               29,929

       Loss on extinguishment of debt                                                                           (19,667)           (2,531)                            (19,667)              (2,531)

       Other income (expense)                                                                                        791               (78)                               1,739                    22
                                                                                                                     ---                ---                                -----                   ---

    Total other expense, net                                                                                    (81,444)           (5,003)                            (92,982)              (4,467)
                                                                                                                 -------             ------                              -------                ------

    (Loss) income before income taxes                                                                          (262,506)            39,600                            (210,490)               82,864

    (Benefit from) provision for income taxes                                                                   (12,416)             1,852                             (12,052)                2,855
                                                                                                                 -------              -----                              -------                 -----

    Net (loss) income                                                                                          (250,090)            37,748                            (198,438)               80,009

    Less: Net loss (income) attributable to Amneal                                                               200,341           (37,446)                             148,806              (79,299)
    Pharmaceuticals LLC pre-Combination

    Less: Net loss (income) attributable to non-controlling                                                       31,885              (302)                              31,768                 (710)
    interests


    Net loss attributable to Amneal Pharmaceuticals, Inc. before                                                (17,864)                 -                            (17,864)                    -
    accretion of redeemable non-controlling interest

    Accretion of redeemable non-controlling interest                                                             (1,240)                 -                             (1,240)                    -

    Net loss attributable to Amneal Pharmaceuticals, Inc.                                                      $(19,104)   $             -                           $(19,104)         $          -
                                                                                                                ========    ===============                            ========          ============


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

         Class A and Class B-1 basic and diluted                                                                 $(0.15)   $             -                             $(0.15)      $             -
                                                                                                                  ======    ===============                              ======       ===============


    Weighted-average common shares outstanding:

         Class A and Class B-1 basic and diluted                                                                 127,112                                                127,112

 

                                                                       Amneal Pharmaceutical, Inc.
                                                                  Condensed Consolidated Balance Sheets
                                                                        (Unaudited; In thousands)


                                                                                                        June 30, 2018           December 31, 2017
                                                                                                        -------------           -----------------

    Assets

    Current assets:

    Cash and cash equivalents                                                                                           $61,521                    $74,166

    Restricted cash                                                                                                       7,069                      3,756

    Trade accounts receivable, net                                                                                      626,491                    351,367

    Inventories                                                                                                         512,479                    284,038

    Prepaid expenses and other current assets                                                                           139,596                     42,396

    Related party receivables                                                                                               738                     16,210
                                                                                                                            ---                     ------

    Total current assets                                                                                              1,347,894                    771,933

    Property, plant and equipment, net                                                                                  569,328                    486,758

    Goodwill                                                                                                            386,475                     26,444

    Intangible assets, net                                                                                            1,788,533                     44,599

    Deferred tax asset, net                                                                                             373,705                        898

    Other assets                                                                                                         78,653                     11,257

    Total assets                                                                                                     $4,544,588                 $1,341,889
                                                                                                                     ==========                 ==========


    Liabilities and Stockholders' Equity / Members' Deficit

    Current liabilities:

    Accounts payable and accrued expenses                                                                              $555,634                   $194,779

    Note payable-related party                                                                                           77,549                          -

    Current portion of financing obligations                                                                                251                        311

    Revolving credit facility                                                                                                 -                    75,000

    Current portion of long-term debt, net                                                                               21,427                     14,171

    Related-party payables                                                                                               14,875                     12,622
                                                                                                                         ------                     ------

    Total current liabilities                                                                                           669,736                    296,883

    Long-term debt, net                                                                                               2,641,305                  1,355,274

    Long-term portion of financing obligations                                                                           39,220                     39,987

    Deferred income taxes                                                                                                 2,491                      2,491

    Liabilities under tax receivable agreement                                                                          194,825                          -

    Other long-term liabilities                                                                                          45,667                      7,793

    Related-party payable- long term                                                                                          -                    15,043
                                                                                                                            ---                    ------

    Total long-term liabilities                                                                                       2,923,508                  1,420,588

    Redeemable non-controlling interest                                                                                  11,858                          -

    Total stockholders' equity / members' deficit                                                                       939,486                  (375,582)

    Total liabilities and stockholders' equity / members' deficit                                                    $4,544,588                 $1,341,889
                                                                                                                     ==========                 ==========

 

                                                                                    Amneal Pharmaceutical, Inc.
                                                                          Condensed Consolidated Statements of Cash Flows
                                                                                     (Unaudited; In thousands)


                                                                                                                            Six Months Ended

                                                                                                                                June 30,
                                                                                                                                --------

                                                                                                                                2018               2017
                                                                                                                                ----               ----

    Cash flows from operating activities:

    Net (loss) income                                                                                                     $(198,438)           $80,009

    Adjustments to reconcile net loss to net cash provided by operating activities:

    Depreciation and amortization                                                                                             46,897             21,136

    Unrealized foreign currency gain (loss)                                                                                   17,032           (33,089)

    Amortization of debt issuance costs                                                                                        2,577              2,463

    Loss on extinguishment and modification of debt                                                                           19,667              2,531

    Gain termination of lease                                                                                                (3,524)                 -

    Deferred tax provision                                                                                                  (14,993)               244

    Inventory provision                                                                                                       17,426              2,047

    Stock-based compensation and PPU expense                                                                                 160,401                  -

    Other                                                                                                                        927                124

    Changes in assets and liabilities:                                                                                             -                 -

    Trade accounts receivable, net                                                                                          (60,051)            28,065

    Inventories                                                                                                             (71,655)          (10,890)

    Prepaid expenses and other assets                                                                                          5,910            (2,692)

    Accounts payable and accrued expenses                                                                                     15,299            (3,811)

    Other liabilities                                                                                                          4,331            (1,791)

    Related-party payables                                                                                                  (13,356)            11,063

    Net cash (used in) provided by operating activities                                                                     (71,550)            95,409
                                                                                                                             -------             ------

    Investing activities:

    Purchases of property, plant and equipment                                                                              (36,600)          (54,612)

    Acquisition of product rights and licenses                                                                               (3,000)                 -

    Acquisitions, net of cash acquired                                                                                     (321,324)                 -

    Net cash used in investing activities                                                                                  (360,924)          (54,612)
                                                                                                                            --------            -------

    Financing activities:

    Payments of deferred financing costs and debt extinguishment costs                                                      (54,955)           (4,889)

    Proceeds from issuance of debt                                                                                         1,325,383            250,000

    Payments on financing obligations                                                                                          (129)             (175)

    Net (payments) borrowings on revolving credit line                                                                      (75,000)            25,000

    Payments on debt                                                                                                       (603,543)           (6,448)

    Exercise of stock options                                                                                                  1,977                  -

    Equity contributions                                                                                                      27,742                 40

    Capital contribution from non-controlling interest                                                                           360                  -

    Distributions to members                                                                                               (182,998)         (295,265)

    Repayment of related party note                                                                                         (14,842)                 -

              Net cash provided by (used in) financing activities                                                            423,995           (31,737)
                                                                                                                             -------            -------

    Effect of foreign exchange rate on cash                                                                                    (853)             5,238

    Net (decrease) increase in cash, cash equivalents, and restricted cash                                                   (9,332)            14,298

    Cash, cash equivalents, and restricted cash - beginning of period                                                         77,922             37,546

    Cash, cash equivalents, and restricted cash - end of period                                                               68,590             51,844
                                                                                                                              ======             ======

    Cash and cash equivalents - end of period                                                                                 61,521             48,217

    Restricted cash - end of period                                                                                            7,069              3,627

    Cash, cash equivalents, and restricted cash - end of period                                                              $68,590            $51,844
                                                                                                                             =======            =======

 

                                                                                                                                                      Amneal Pharmaceutical, Inc.
                                                                                                                                                      Non-GAAP Financial Measures


    Combined adjusted revenue, adjusted net income, adjusted diluted EPS, EBITDA, adjusted EBITDA and adjusted cost of goods sold are not measures of financial performance under generally accepted accounting principles (GAAP) and should not be construed as a measure of financial performance.
     However, management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate and manage the Company's operations and to better understand its business. Further, management believes the addition of non-GAAP financial measures provides
     meaningful supplementary information to, and facilitates analysis by, investors in evaluating the Company's financial performance, results of operations and trends. The Company's calculations of combined adjusted revenue, adjusted net income, adjusted diluted EPS, EBITDA, adjusted EBITDA
     and adjusted cost of goods sold may not be comparable to similarly designated measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment.


    The following Consolidated Statements of Operations table reconciles GAAP results to combined results: (Unaudited; In thousands)


                                                                                                                                            Three months ended June 30, 2018                               Three months ended June 30, 2017
                                                                                                                                            --------------------------------                               --------------------------------

                                                                                                                                                                                        Add:                                                                                                  Add:

                                                                                                                                                           GAAP                          Impax/                        Combined                                    GAAP                        Impax/              Combined
                                                                                                                                                                                       Gemini                                                                                                Gemini
                                                                                                                                                                                                                                                                                                                                          --- ---

    Revenues:

    Generics, net                                                                                                                                                   $361,770                      $20,995                            $382,765                                $259,871                     $150,889               $410,760

    Specialty Pharma, net                                                                                                                                             52,017                       27,546                              79,563                                       -                      63,411                 63,411
                                                                                                                                                                      ------                       ------                              ------                                     ---                      ------                 ------

    Total revenues                                                                                                                                                   413,787                       48,541                             462,328                                 259,871                      214,300                474,171
                                                                                                                                                                                                  ------                                                                    -------                      -------

    Cost of goods sold                                                                                                                                               235,492                       36,335                             271,827                                 136,138                      134,170                270,308
                                                                                                                                                                     -------                       ------

    Gross profit                                                                                                                                                     178,295                       12,206                             190,501                                 123,733                       80,130                203,863
                                                                                                                                                                     -------                       ------                             -------                                 -------                       ------                -------

    Selling, general and administrative                                                                                                                               53,003                       20,270                              73,273                                  26,938                       54,494                 81,432

    Research and development                                                                                                                                          50,335                        4,991                              55,326                                  47,184                       26,847                 74,031

    Intellectual property legal development expenses                                                                                                                   4,047                            -                              4,047                                   4,926                        1,170                  6,096

    Acquisition, transaction-related and integration expenses                                                                                                        207,507                        4,381                             211,888                                      82                            -                    82

    Restructuring expenses                                                                                                                                            44,465                            -                             44,465                                       -                           -                     -

    Operating (loss) income                                                                                                                                        (181,062)                    (17,436)                          (198,498)                                 44,603                      (2,381)                42,222
                                                                                                                                                                    --------                      -------                            --------                                  ------                       ------                 ------

    Other (expense) income:

       Interest expense, net                                                                                                                                        (36,622)                     (4,539)                           (41,161)                               (17,726)                    (13,214)              (30,940)

       Foreign exchange (loss) gain                                                                                                                                 (25,946)                           -                           (25,946)                                 15,332                            -                15,332

       Loss on extinguishment of debt                                                                                                                               (19,667)                           -                           (19,667)                                (2,531)                           -               (2,531)

       Other income (expense)                                                                                                                                            791                         (14)                                777                                    (78)                       (497)                 (575)

    Total other (expense) income, net                                                                                                                                81,444)                      (4,553)                           (85,997)                                (5,003)                    (13,711)              (18,714)
                                                                                                                                                                      ------                       ------                             -------                                  ------                      -------                -------

    (Loss) income before income taxes                                                                                                                              (262,506)                    (21,989)                          (284,495)                                 39,600                     (16,092)                23,508

    Provision for income taxes                                                                                                                                      (12,416)                       1,017                            (11,399)                                  1,852                        (520)                 1,332

    Net (loss) income                                                                                                                                              (250,090)                    (23,006)                          (273,096)                                 37,748                     (15,572)                22,176

    Less: Net loss (income) attributable to Amneal                                                                                                                   200,341                                                                                              (37,446 )
    Pharmaceuticals LLC pre-Combination

    Less: Net loss (income) attributable to non-controlling interests                                                                                                 31,885                                                                                                 (302 )
                                                                                                                                                                      ------                                                                                                  -----

    Net loss attributable to Amneal Pharmaceuticals, Inc.                                                                                                           (17,864)                                                                                                     -
    before accretion of redeemable non-controlling interest

    Accretion of redeemable non-controlling interest                                                                                                                 (1,240)                                                                                                     -
                                                                                                                                                                      ------                                                                                                    ---

    Net income (loss) attributable to Amneal Pharmaceuticals, Inc.                                                                                                 $(19,104)                                                                                          $          -
                                                                                                                                                                    ========                                                                                           ============

 

                                                                                                                                             Amneal Pharmaceutical, Inc.
                                                                                                                                             Non-GAAP Financial Measures


    The following Consolidated Statements of Operations table reconciles GAAP results to combined results: (Unaudited; In thousands)


                                                                                                                                     Six months ended June 30, 2018                          Six months ended June 30, 2017
                                                                                                                                     ------------------------------                          ------------------------------

                                                                                                                                                                          Add:                                                                    Add:

                                                                                                                                                  GAAP                     Impax/                       Combined              GAAP                 Impax/              Combined
                                                                                                                                                                         Gemini                                                                  Gemini
                                                                                                                                                                                                                                                                                              --- ---

    Revenues:

    Generics, net                                                                                                                                          $636,959                 $102,237                         $739,196           $485,552              $285,036               $770,588

    Specialty Pharma, net                                                                                                                                    52,017                   96,245                          148,262                  -              125,211                125,211

    Total revenues                                                                                                                                         $688,976                 $198,482                         $887,458           $485,552              $410,247               $895,799
                                                                                                                                                           --------                 --------                         --------           --------              --------               --------

    Cost of goods sold                                                                                                                                      366,086                  149,492                          515,578            245,803               298,599                544,402

    Gross profit                                                                                                                                            322,890                   48,990                          371,880            239,749               111,648                351,397
                                                                                                                                                            -------                   ------                          -------            -------               -------                -------

    Selling, general and administrative                                                                                                                      78,124                   80,242                          158,366             54,640               104,342                158,982

    Research and development                                                                                                                                 94,544                   17,287                          111,831             86,603                49,336                135,939

    In-process IPR&D impairment charge                                                                                                                            -                       -                               -                 -                6,079                  6,079

    Intellectual property legal development expenses                                                                                                          8,623                        -                           8,623             11,093                 2,242                 13,335

    Litigation, settlements and related charges                                                                                                                   -                  85,537                           85,537                  -                    -                     -

    Acquisition, transaction-related and integration expenses                                                                                               214,642                    4,381                          219,023                 82                     -                    82

    Restructuring expenses                                                                                                                                   44,465                        -                          44,465                  -                    -                     -

    Operating (loss) income                                                                                                                               (117,508)               (138,457)                       (255,965)            87,331              (50,351)                36,980
                                                                                                                                                           --------                 --------                         --------             ------               -------                 ------

    Other (expense) (income):

       Interest expense, net                                                                                                                               (57,673)                (18,231)                        (75,904)          (31,887)             (26,440)              (58,327)

       Foreign exchange (loss) gain                                                                                                                        (17,381)                     921                         (16,460)            29,929                     -                29,929

       Loss on early extinguishment of debt                                                                                                                (19,667)                       -                        (19,667)           (2,531)              (1,215)               (3,746)

       Other income (expense)                                                                                                                                 1,739                    (638)                           1,101                 22               (1,782)               (1,760)

    Total other (expense) income, net                                                                                                                      (92,982)                (17,948)                       (110,930)           (4,467)             (29,437)              (33,904)
                                                                                                                                                            -------                  -------                         --------             ------               -------                -------

    (Loss) income before income taxes                                                                                                                     (210,490)               (156,405)                       (366,895)            82,864              (79,788)                 3,076

    Provision for income taxes                                                                                                                             (12,052)                 (6,273)                        (18,325)             2,855                30,381                 33,236

    Net (loss) income                                                                                                                                     (198,438)               (150,132)                       (348,570)            80,009             (110,169)              (30,160)

    Less: Net loss (income) attributable to Amneal                                                                                                          148,806                                                                   (79,299)
    Pharmaceuticals LLC pre-Combination

    Less: Net loss (income) attributable to non-                                                                                                             31,768                                                                      (710)
    controlling interests


    Net loss attributable to Amneal Pharmaceuticals,                                                                                                       (17,864)                                                                         -
    Inc. before accretion of redeemable non-
    controlling interest

    Accretion of redeemable non-controlling interest                                                                                                        (1,240)                                                                         -
                                                                                                                                                             ------                                                                        ---

    Net income (loss) attributable to Amneal Pharmaceuticals, Inc.                                                                                        $(19,104)                                                              $          -
                                                                                                                                                           ========                                                               ============

 

 

                                                                                                              Amneal Pharmaceutical, Inc.
                                                                                                              Non-GAAP Financial Measures


    The following table reconciles GAAP net loss to combined adjusted net income:
    (Unaudited; In thousands, except per share amounts)


                                                                                  Three months ended June 30, 2018                               Three months ended June 30, 2017
                                                                                  --------------------------------                               --------------------------------

                                                                                                                              Add:                                                                     Add:

                                                                                                GAAP                           Impax/                        Combined               GAAP                Impax/              Combined
                                                                                                                             Gemini                                                                   Gemini
                                                                                                                                                                                                                                              ---   ---

    Net loss                                                                                            $(250,090)                    $(23,006)                        $(273,096)          $37,748             $(15,917)                $21,831

    Adjusted to add (deduct):

    Non-cash interest                                                                                        4,407                         2,549                              6,956             1,521                 6,430                   7,951

    GAAP Income taxes                                                                                     (12,416)                        1,017                           (11,399)            1,852                 (520)                  1,332

    Amortization                                                                                            16,694                         5,462                             22,156               886                17,219                  18,105

    Share-based compensation expense                                                                         1,644                             -                             1,644                 -                6,225                   6,225

    Acquisition, transaction and integration                                                               207,507                         4,381                            211,888                81                    99                     180

    Restructuring and severance charges                                                                     44,465                           223                             44,688                 -               13,943                  13,943

    Loss on extinguishment of debt                                                                          19,667                             -                            19,667                 -                    -                      -

    Inventory related charges                                                                               32,519                         3,005                             35,524            16,605                     -                 16,605

    Litigation, settlements and related charges                                                                  -                            -                                 -                -                7,989                   7,989

    (Gain)/loss on sale of assets                                                                              878                             -                               878                 -             (12,200)               (12,200)

    Asset impairment charges                                                                                     -                            -                                 -                -                1,894                   1,894

    Royalty expense                                                                                              -                            -                                 -            4,921                     -                  4,921

    Exchange gain                                                                                           25,946                             -                            25,946          (15,333)                    -               (15,333)

    Other                                                                                                    2,649                         1,300                              3,949               997                 4,639                   5,636

    Income tax at 21%                                                                                   (19,713)                        1,064                           (18,648)         (10,348)              (6,258)               (16,607)

    Adjusted Net Income                                                                                    $74,157                      $(4,005)                           $70,153           $38,930               $23,543                 $62,472
                                                                                                           -------                       -------                            -------           -------               -------                 -------

    Adjusted Earnings per share                                                                                                                                           $0.24
                                                                                                                                                                          =====

 

    Amneal Pharmaceutical, Inc.
    Non-GAAP Financial Measures


    The following table reconciles GAAP net loss to combined adjusted net income:
    (Unaudited; In thousands, except per share amounts)


                                                                                  Six months ended June 30, 2018                      Six months ended June 30, 2017
                                                                                  ------------------------------                      ------------------------------

                                                                                                                  Add:                                                                    Add:

                                                                                               GAAP                Impax/                        Combined              GAAP                Impax/               Combined
                                                                                                                 Gemini                                                                  Gemini
                                                                                                                                                                                                                                     --- ---

    Net loss                                                                                          $(198,438)          $(150,132)                      $(348,570)          $80,009             $(110,198)              $(30,189)

    Adjusted to add (deduct):

    Non-cash interest                                                                                      5,577                9,413                           14,990             2,463                 12,742                  58,397

    GAAP Income taxes                                                                                   (12,052)             (6,273)                        (18,325)            2,855                 30,381                  33,236

    Amortization                                                                                          18,454               19,935                           38,389             1,772                 34,451                  36,223

    Share-based compensation expense                                                                       1,644                4,816                            6,460                 -                13,182                  13,182

    Acquisition, transaction and integration                                                             215,738                9,829                          225,567                 -                   150                     150

    Restructuring and severance charges                                                                   44,465                5,123                           49,588             1,761                 21,718                  23,479

    Loss on extinguishment of debt                                                                        19,667                    -                          19,667                 -                 1,215                   1,215

    Inventory related charges                                                                             32,519                9,894                           42,413            16,605                      -                 16,605

    Litigation, settlements and related charges                                                                -              90,099                           90,099                 -                 7,494                   7,494

    (Gain)/loss on sale of assets                                                                            878                    -                             878                 -              (12,200)               (12,200)

    Asset impairment charges                                                                                   -                  53                               53                 -                47,253                  47,253

    Royalty expense                                                                                            -                   -                               -            8,684                      -                  8,684

    Exchange gain                                                                                         17,381                (921)                          16,460          (29,929)                     -               (29,929)

    Other                                                                                                  1,880                1,953                            3,833             2,458                  5,887                   8,345

    Income tax at 21%                                                                                 (31,020)               1,304                         (29,715)         (18,202)              (10,936)               (38,194)

    Adjusted Net Income                                                                                 $116,693             $(5,065)                      $(111,787)          $68,476                $41,138                $143,680
                                                                                                        --------              -------                        ---------           -------                -------                --------

    Adjusted Earnings per share                                                                                                                              $0.37
                                                                                                                                                             =====

 

    Amneal Pharmaceutical, Inc.
    Non-GAAP Financial Measures


    The following table reconciles GAAP net loss to combined EBITDA and combined adjusted EBITDA:
    (Unaudited, In thousands)


                                                                                                  Three months ended June 30, 2018                     Three months ended June 30, 2017
                                                                                                  --------------------------------                     --------------------------------

                                                                                                                                    Add:                                                                   Add:

                                                                                                                GAAP                 Impax/                        Combined               GAAP              Impax/              Combined
                                                                                                                                   Gemini                                                                 Gemini
                                                                                                                                                                                                                                               ---   ---

    Net loss                                                                                                            $(250,090)          $(23,006)                        $(273,096)        $37,748             $(15,917)             $21,831

    Adjusted to add (deduct):

    Interest expense, net                                                                                                   36,622               4,753                             41,375          17,726                13,214               30,940

    Income taxes                                                                                                          (12,416)              1,017                           (11,399)          1,852                 (520)               1,332

    Depreciation and amortization                                                                                           32,147               6,925                             39,072          10,535                24,355               34,890

    EBITDA                                                                                                               (193,737)           (10,311)                         (204,048)         67,861                21,132               88,993
                                                                                                                          --------             -------                           --------          ------                ------               ------


    Adjusted to add (deduct):

    Share-based compensation expense                                                                                         1,644                   -                             1,644               -                6,225                6,225

    Acquisition, transaction and integration                                                                               207,507               4,381                            211,888              81                    99                  180

    Restructuring and severance charges                                                                                     44,465                 223                             44,688               -               13,943               13,943

    Loss on extinguishment of debt                                                                                          19,667                   -                            19,667               -                    -                   -

    Inventory related charges                                                                                               32,519               3,005                             35,524          16,605                     -              16,605

    Litigation, settlements and related charges                                                                                  -                  -                                 -              -                7,989                7,989

    (Gain)/loss on sale of assets                                                                                              878                   -                               878               -             (12,200)            (12,200)

    Asset impairment charges                                                                                                     -                  -                                 -              -                1,894                1,894

    Royalty expense                                                                                                              -                  -                                 -          4,921                     -               4,921

    Exchange gain                                                                                                           25,946                   -                            25,946        (15,333)                    -            (15,333)

    Other                                                                                                                    2,649                   -                             2,649             997                 4,639                5,636

    Adjusted EBITDA                                                                                                       $141,538            $(2,702)                          $138,836         $75,132               $43,721             $118,853
                                                                                                                          --------             -------                           --------         -------               -------             --------

 

    Amneal Pharmaceutical, Inc.
    Non-GAAP Financial Measures


    The following table reconciles GAAP net loss to combined EBITDA and combined adjusted EBITDA:
    (Unaudited; In thousands)


                                                                                                  Six months ended June 30, 2018                      Six months ended June 30, 2017
                                                                                                  ------------------------------                      ------------------------------

                                                                                                                                  Add:                                                                  Add:

                                                                                                               GAAP                Impax/                        Combined              GAAP              Impax/               Combined
                                                                                                                                 Gemini                                                                Gemini
                                                                                                                                                                                                                                                  --- ---

    Net loss                                                                                                          $(198,438)          $(150,132)                      $(348,570)        $80,009             $(110,198)             $(30,189)

    Adjusted to add (deduct):

    Interest expense, net                                                                                                 57,673               18,445                           76,118          31,887                 26,440                 58,327

    Income taxes                                                                                                        (12,052)             (6,273)                        (18,325)          2,855                 30,381                 33,236

    Depreciation and amortization                                                                                         46,897               24,902                           71,799          21,135                 48,453                 69,588

    EBITDA                                                                                                             (105,920)           (113,058)                       (218,978)        135,886                (4,924)               130,962
                                                                                                                        --------             --------                         --------         -------                 ------                -------


    Adjusted to add (deduct):

    Share-based compensation expense                                                                                       1,644                4,816                            6,460               -                13,182                 13,182

    Acquisition, transaction and integration                                                                             215,738                9,829                          225,567               -                   150                    150

    Restructuring and severance charges                                                                                   44,465                5,123                           49,588           1,761                 21,718                 23,479

    Loss on extinguishment of debt                                                                                        19,667                    -                          19,667               -                 1,215                  1,215

    Inventory related charges                                                                                             32,519                9,894                           42,413          16,605                      -                16,605

    Litigation, settlements and related charges                                                                                -              90,099                           90,099               -                 7,494                  7,494

    (Gain)/loss on sale of assets                                                                                            878                    -                             878               -              (12,200)              (12,200)

    Asset impairment charges                                                                                                   -                  53                               53               -                47,253                 47,253

    Royalty expense                                                                                                            -                   -                               -          8,684                      -                 8,684

    Exchange gain                                                                                                         17,381                (921)                          16,460         29,929)                      -              (29,929)

    Other                                                                                                                  1,880                  653                            2,533           2,458                  5,887                  8,345

    Adjusted EBITDA                                                                                                     $228,252               $6,488                         $234,740        $135,465                $79,774               $215,239
                                                                                                                        --------               ------                         --------        --------                -------               --------

 

                                                                                                                             Amneal Pharmaceutical, Inc.
                                                                                                                             Non-GAAP Financial Measures


    The following tables reconciles GAAP cost of goods sold to combined adjusted cost of goods sold for purposes of determining combined adjusted cost of goods sold, combined adjusted gross profit and combined adjusted gross margin: (Unaudited;
     In thousands)


    Consolidated Total Company


                                                                                  Three months ended June 30, 2018                                  Three months ended June 30, 2017
                                                                                  --------------------------------                                  --------------------------------

                                                                                                                               Add:                                                                                                          Add:

                                                                                                GAAP                            Impax/                          Combined                                        GAAP                          Impax/                Combined
                                                                                                                              Gemini                                                                                                        Gemini
                                                                                                                                                                                                                                                                ---                     ---

    Cost of goods sold                                                                                    $235,492                         $36,335                            $271,827                                     $136,138                    $134,170                $270,308

    Adjusted to deduct:

    Amortization                                                                                            16,694                           5,462                              22,506                                          886                      17,219                  18,105

    Inventory step-up                                                                                       15,200                               -                             15,200                                            -                          -                      -

    Restructuring and severance                                                                                  -                              -                                  -                                           -                     10,795                  10,795

    Other inventory related charges                                                                         17,319                           3,005                              20,324                                       16,605                           -                 16,605

    Adjusted cost of goods sold                                                                           $186,279                         $27,868                            $213,797                                     $118,647                    $106,156                $224,803
                                                                                                          ========                         =======                            ========                                     ========                    ========                ========


    Adjusted gross profit                                                                                 $227,508                         $20,673                            $248,181                                     $141,224                    $108,144                $249,368

    Adjusted gross margin                                                                                    55.0%                          42.6%                              53.7%                                       54.3%                      50.5%                  52.6%


                                                                                   Six months ended June 30, 2018                                    Six months ended June 30, 2017
                                                                                   ------------------------------                                    ------------------------------

                                                                                                                               Add:                                                                                                          Add:

                                                                                                GAAP                            Impax/                          Combined                                        GAAP                          Impax/                Combined
                                                                                                                              Gemini                                                                                                        Gemini
                                                                                                                                                                                                                                                                ---                     ---

    Cost of goods sold                                                                                    $366,086                        $149,492                            $515,578                                     $245,803                    $298,599                $544,402

    Adjusted to deduct:

    Amortization                                                                                            18,454                          19,935                              38,389                                        1,772                      34,451                  36,223

    Restructuring                                                                                                -                              -                                  -                                           -                     18,578                  18,520

    Intangible Asset impairment                                                                                  -                              -                                  -                                           -                     39,280                  39,280

    Inventory step-up                                                                                       15,200                               -                             15,200                                            -                          -                      -

    Other inventory related charges                                                                         17,319                           9,894                              27,213                                       16,605                           -                 16,605

    Adjusted cost of goods sold                                                                           $315,113                        $119,663                            $434,776                                     $227,426                    $206,290                $433,774
                                                                                                          ========                        ========                            ========                                     ========                    ========                ========


    Adjusted gross profit                                                                                 $373,863                         $78,819                            $452,682                                     $258,126                    $203,957                $462,083

    Adjusted gross margin                                                                                    54.3%                          39.7%                              51.0%                                       53.2%                      49.7%                  51.6%

 

                                                                                                                             Amneal Pharmaceutical, Inc.
                                                                                                                             Non-GAAP Financial Measures


    The following tables reconciles the GAAP cost of goods sold to combined adjusted cost of goods sold for purposes of determining combined adjusted cost of goods sold, combined adjusted gross profit and combined adjusted gross margin:
     (Unaudited; In thousands)


    Generics Business


                                                                                   Three months ended June 30, 2018                                  Three months ended June 30, 2017
                                                                                   --------------------------------                                  --------------------------------

                                                                                                                                Add:                                                                                                          Add:

                                                                                                 GAAP                            Impax/                          Combined                                        GAAP                          Impax/               Combined
                                                                                                                               Gemini                                                                                                        Gemini
                                                                                                                                                                                                                                                                 ---                    ---

    Cost of goods sold                                                                                     $211,534                         $29,624                            $241,158                                     $136,138                    $108,901               $245,039

    Adjusted to deduct:

    Amortization                                                                                              6,043                           3,934                              10,327                                          886                      13,385                 14,271

    Restructuring and severance                                                                                   -                              -                                  -                                           -                      8,789                  8,789

    Inventory step-up                                                                                        13,250                               -                             13,250                                            -                          -                     -

    Other inventory related charges                                                                          17,319                           3,005                              20,324                                       16,605                           -                16,605

    Adjusted cost of goods sold                                                                            $174,922                         $22,685                            $197,257                                     $118,647                     $86,727               $205,374
                                                                                                           ========                         =======                            ========                                     ========                     =======               ========


    Adjusted gross profit                                                                                  $186,848                        $(1,690)                           $185,158                                     $141,224                     $64,162               $205,386

    Adjusted gross margin                                                                                     51.6%                         (8.0)%                              48.4%                                       54.3%                      42.5%                 50.0%


                                                                                    Six months ended June 30, 2018                                    Six months ended June 30, 2017
                                                                                    ------------------------------                                    ------------------------------

                                                                                                                                Add:                                                                                                          Add:

                                                                                                 GAAP                            Impax/                          Combined                                        GAAP                          Impax/               Combined
                                                                                                                               Gemini                                                                                                        Gemini
                                                                                                                                                                                                                                                                 ---                    ---

    Cost of goods sold                                                                                     $342,128                        $122,761                            $464,889                                     $245,803                    $251,516               $497,319

    Adjusted to deduct:

    Amortization                                                                                              7,803                          13,823                              21,626                                        1,772                      26,783                 28,555

    Restructuring and severance                                                                                   -                              -                                  -                                           -                     16,572                 16,572

    Intangible Asset impairment                                                                                   -                              -                                  -                                           -                     39,280                 39,280

    Inventory step-up                                                                                        13,250                               -                             13,250                                            -                          -                     -

    Other inventory related charges                                                                          17,319                           9,894                              27,213                                       16,605                           -                16,605

    Adjusted cost of goods sold                                                                            $303,756                         $99,044                            $402,800                                     $227,426                    $168,881               $396,307
                                                                                                           ========                         =======                            ========                                     ========                    ========               ========


    Adjusted gross profit                                                                                  $333,203                          $3,193                            $336,396                                     $258,126                    $116,155               $374,281

    Adjusted gross margin                                                                                     52.3%                           3.1%                              45.5%                                       53.2%                      40.8%                 48.6%

 

                                                                                                                           Amneal Pharmaceutical, Inc.
                                                                                                                           Non-GAAP Financial Measures


    The following tables reconciles the GAAP cost of goods sold to combined adjusted cost of goods sold for purposes of determining combined adjusted cost of goods sold, combined adjusted gross profit and combined adjusted gross margin:
     (Unaudited; In thousands)


    Specialty Pharma Business


                                                                                   Three months ended June 30, 2018                                Three months ended June 30, 2017
                                                                                   --------------------------------                                --------------------------------

                                                                                                                               Add:                                                                                                      Add:

                                                                                                 GAAP                           Impax/                          Combined                                      GAAP                        Impax/             Combined
                                                                                                                              Gemini                                                                                                    Gemini
                                                                                                                                                                                                                                                          ---                   ---

    Cost of goods sold                                                                                      $23,958                        $6,711                             $30,669                                 $       -                   $25,269               $25,269

    Adjusted to deduct:

    Amortization                                                                                             10,651                         1,528                              12,179                                         -                     3,834                 3,834

    Inventory step-up                                                                                         1,950                             -                              1,950                                         -                         -                    -

    Other inventory related charges                                                                               -                            -                                  -                                        -                     2,006                 2,006

    Adjusted cost of goods sold                                                                             $11,357                        $5,183                             $16,540                                 $       -                   $19,429               $19,429
                                                                                                            =======                        ======                             =======                                 =========                   =======               =======


    Adjusted gross profit                                                                                   $40,660                       $22,363                             $63,023                                 $       -                   $43,982               $43,982

    Adjusted gross margin                                                                                     78.2%                        81.2%                              79.2%                                     0.0%                     69.4%                69.4%


                                                                                    Six months ended June 30, 2018                                  Six months ended June 30, 2017
                                                                                    ------------------------------                                  ------------------------------

                                                                                                                               Add:                                                                                                      Add:

                                                                                                 GAAP                           Impax/                          Combined                                      GAAP                        Impax/             Combined
                                                                                                                              Gemini                                                                                                    Gemini
                                                                                                                                                                                                                                                          ---                   ---

    Cost of goods sold                                                                                      $23,958                       $26,731                             $50,689                                 $       -                   $47,083               $47,083

    Adjusted to deduct:

    Amortization                                                                                             10,651                         6,112                              16,763                                         -                     7,668                 7,668

    Restructuring                                                                                                 -                            -                                  -                                        -                     2,006                 2,006

    Intangible Asset impairment                                                                                   -                            -                                  -                                        -                         -                    -

    Inventory step-up                                                                                         1,950                             -                              1,950                                         -                         -                    -

    Other inventory related charges                                                                               -                            -                                  -                                        -                         -                    -

    Adjusted cost of goods sold                                                                             $11,357                       $20,619                             $31,976                                 $       -                   $37,409               $37,409
                                                                                                            =======                       =======                             =======                                 =========                   =======               =======


    Adjusted gross profit                                                                                   $40,660                       $75,626                            $116,286                                 $       -                   $87,802               $87,802

    Adjusted gross margin                                                                                     78.2%                        78.6%                              78.4%                                     0.0%                     70.1%                70.1%

 

 

CONTACT:
Mark Donohue
(215) 558-4526

View original content:http://www.prnewswire.com/news-releases/amneal-announces-solid-second-quarter-2018-financial-results-300694592.html

SOURCE Amneal Pharmaceuticals, Inc.

 
 
Company Codes: NYSE:AMRX
 

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