EX-99.1 2 amrxq22019exhibit991.htm EXHIBIT 99.1 Exhibit
exhibit991892018image1a02.jpg
CONTACT:
Mark Donohue
(908) 409-6718
                    
AMNEAL REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS

‒ Q2 2019 Net Revenue of $405 Million; GAAP Loss per share of $0.13; Combined Adjusted Diluted EPS(1) of $0.09 ‒
‒ Positive cash flow from operations of $21 million ‒
‒ Reaffirms Full Year 2019 EBITDA Guidance ‒
‒ Investor Call at 8:30 a.m. ET to Discuss Second Quarter 2019 Earnings Results ‒

BRIDGEWATER, NJ, August 5, 2019 - Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the “Company”) announced its results today for the second quarter ended June 30, 2019.


Summary of GAAP and Non-GAAP Combined and Adjusted Results
(Unaudited; In thousands, except per share amounts)
 
Three Months Ended
 
 
 
June 30, 2019
 
June 30, 2018
 
Year/ Year Variance
GAAP Results(2)
 
 
 
 
 
Net revenue
$
404,642

 
$
413,787

 
(2.2
)%
Net loss attributable to Amneal Pharmaceuticals, Inc.
$
(16,902
)
 
$
(19,104
)
 
11.5
 %
Diluted loss per share attributable to Amneal Pharmaceuticals, Inc.
$
(0.13
)
 
$
(0.15
)
 
13.3
 %
 
 
 
 
 
 
Non-GAAP Results(1)(3)
 
 
 
 
 
Combined net revenue
$
404,642

 
$
462,328

 
(12.5
)%
Combined adjusted net income
$
26,669

 
$
69,895

 
(61.8
)%
Combined adjusted EBITDA
$
92,081

 
$
138,622

 
(33.6
)%
Combined adjusted diluted EPS
$
0.09

 
$
0.23

 
(60.9
)%

(1) See “Non-GAAP Financial Measures” below.
(2) Prior year financials reflect the results of Amneal Pharmaceuticals LLC consolidating the results of Impax Laboratories, LLC from the transaction closing date on May 4, 2018.
(3) For the three months ended June 30, 2018, assumes the combination between Amneal Pharmaceuticals LLC and Impax Laboratories, LLC, and the acquisition of Gemini Laboratories, LLC, excluding the impact of financing and acquisition accounting adjustments, occurred on January 1, 2018.

Second Quarter 2019 Performance

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

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

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

Page 1 of 23



Amneal Pharmaceuticals, Inc.
Reconciliation of Generics Operating Income (Loss) to Generics Combined Operating Income (Loss)
(Unaudited; In thousands)

Generics
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)
 
 
Add:
(Non-GAAP)
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net revenue - Generics
$
335,064

$
—

$
335,064

 
$
361,770

$
20,995

$
382,765

Cost of goods sold
263,423

—

263,423

 
211,534

29,624

241,158

Cost of goods sold impairment charges
3,012

—

3,012

 
—

—

—

Gross profit
68,629

—

68,629

 
150,236

(8,629
)
141,607

Selling, general, and administrative
14,379

—

14,379

 
19,621

4,340

23,961

Research and development
45,448

—

45,448

 
47,206

3,984

51,190

Restructuring and other charges
418

—

418

 
24,797

—

24,797

Legal settlement gains
—

—

—

 
(3,000
)
—

(3,000
)
Intellectual property legal development expenses
2,511

—

2,511

 
4,004

—

4,004

Acquisition, integration and transaction related expenses
987

—

987

 
114,622

—

114,622

Operating income (loss)
$
4,886

$
—

$
4,886

 
$
(57,014
)
$
(16,953
)
$
(73,967
)
 
 
 
 
 
 
 
 
Gross margin
20.5
%
—
%
20.5
%
 
41.5
%
(41.1
%)
37.0
%
Adjusted gross profit (Non-GAAP)(4)
$
115,434

$
—

$
115,434

 
$
186,848

$
(1,690
)
$
185,158

Adjusted gross margin (Non-GAAP)(5)
34.5
%
—
%
34.5
%
 
51.6
%
(8.0
%)
48.4
%
Adjusted operating income (Non-GAAP)
$
64,748

$
—

$
64,748

 
$
120,662

$
(11,339
)
$
109,323


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

Page 2 of 23




Amneal Pharmaceuticals, Inc.
Reconciliation of Generics Operating (Loss) Income to Generics Combined Operating Loss
(Unaudited; In thousands)

Generics
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net revenue - Generics
$
717,541

$
—

$
717,541

 
$
636,959

$
102,237

$
739,196

Cost of goods sold
542,301

—

542,301

 
342,128

122,761

464,889

Cost of goods sold impairment charges
56,309

—

56,309

 
—

—

—

Gross profit
118,931

—

118,931

 
294,831

(20,524
)
274,307

Selling, general, and administrative
38,527

—

38,527

 
30,824

7,334

38,158

Research and development
95,599

—

95,599

 
91,415

13,623

105,038

In-process research and development impairment charges
22,787

—

22,787

 
—

—

—

Restructuring and other charges
2,499

—

2,499

 
24,797

—

24,797

Litigation, settlements and related charges
—

—

—

 
—

89,159

89,159

Legal settlement gains
—

—

—

 
(3,000
)
—

(3,000
)
Intellectual property legal development expenses
5,632

—

5,632

 
8,580

23

8,603

Acquisition, integration and transaction related expenses
3,584

—

3,584

 
114,622

—

114,622

Operating (loss) income
$
(49,697
)
$
—

$
(49,697
)
 
$
27,593

$
(130,663
)
$
(103,070
)
 
 
 
 
 
 
 
 
Gross margin
16.6
%
—
%
16.6
%
 
46.3
%
(20.1
%)
37.1
%
Adjusted gross profit (Non-GAAP)(4)
$
277,711

$
—

$
277,711

 
$
333,203

$
3,246

$
336,449

Adjusted gross margin (Non-GAAP)(5)
38.7
%
—
%
38.7
%
 
52.3
%
3.2
 %
45.5
%
Adjusted operating income (Non-GAAP)
$
161,567

$
—

$
161,567

 
$
208,125

$
(16,752
)
$
191,373


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

Generics net revenue of $335 million decreased 7.4% for the second quarter of 2019 compared to $362 million for the second quarter of 2018. Generics combined net revenue(1) in the second quarter of 2019 was $335 million, a decrease of 12.5% compared to $383 million in the prior year period. The decrease is primarily attributable to additional competition on the base generic portfolio including key products Aspirin Dipyridamole ER Capsules, Yuvafem and Diclofenac Gel 1% and the sale of two of the Company's international businesses, partially offset by sales of Levothyroxine and Guanfacine HCL.
 
Generics gross margin for the second quarter of 2019 was 20.5% compared to 41.5% for the second quarter of 2018. Generics combined adjusted gross margin(1) for the second quarter of 2019 was 34.5% compared to 48.4% for the prior year period. The decrease is primarily related to unfavorable generics revenue mix including the impact of price erosion, and inventory obsolescence charges.

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

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

Page 3 of 23




Amneal Pharmaceuticals, Inc.
Reconciliation of Specialty Operating Income to Specialty Combined Operating Income
(Unaudited; In thousands)


Specialty
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net revenue - Specialty:
 
 
 
 
 
 
 
Rytary®
$
33,000

$
—

$
33,000

 
$
20,520

$
8,578

$
29,098

Unithroid®
8,904

—

8,904

 
4,424

3,207

7,631

Zomig®
14,427

—

14,427

 
9,695

3,933

13,628

All other specialty products
13,247

—

13,247

 
17,378

11,828

29,206

Total net revenue - Specialty
69,578

—

69,578

 
52,017

27,546

79,563

Cost of goods sold
32,958

—

32,958

 
23,958

6,711

30,669

Gross profit
36,620

—

36,620

 
28,059

20,835

48,894

Selling, general, and administrative
16,150

—

16,150

 
13,549

7,707

21,256

Research and development
2,568

—

2,568

 
3,129

1,007

4,136

Intellectual property legal development expenses
—

—

—

 
43

—

43

Restructuring and other charges
—

—

—

 
2,421

—

2,421

Acquisition, integration and transaction related expenses
1,366

—

1,366

 
—

—

—

Operating income
$
16,536

$
—

$
16,536

 
$
8,917

$
12,121

$
21,038

 
 
 
 
 
 
 
 
Gross margin
52.6
%
—
%
52.6
%
 
53.9
%
75.6
%
61.5
%
Adjusted gross profit (Non-GAAP)(4)
$
56,780

$
—

$
56,780

 
$
40,660

$
22,363

$
63,023

Adjusted gross margin (Non-GAAP)(5)
81.6
%
—
%
81.6
%
 
78.2
%
81.2
%
79.2
%
Adjusted operating income (Non-GAAP)
$
39,313

$
—

$
39,313

 
$
23,939

$
13,649

$
37,588


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

Page 4 of 23



Amneal Pharmaceuticals, Inc.
Reconciliation of Specialty Operating Income to Specialty Combined Operating Income
(Unaudited; In thousands)


Specialty
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net revenue - Specialty:
 
 
 
 
 
 
 
Rytary®
$
61,828

$
—

$
61,828

 
$
20,520

$
35,086

$
55,606

Unithroid®
18,625

—

18,625

 
4,424

9,716

14,140

Zomig®
25,551

—

25,551

 
9,695

14,411

24,106

All other specialty products
27,217

—

27,217

 
17,378

37,032

54,410

Total net revenue - Specialty
133,221

—

133,221

 
52,017

96,245

148,262

Cost of goods sold
63,823

—

63,823

 
23,958

26,731

50,689

Gross profit
69,398

—

69,398

 
28,059

69,514

97,573

Selling, general, and administrative
37,477

—

37,477

 
13,549

27,942

41,491

Research and development
6,275

—

6,275

 
3,129

3,664

6,793

Intellectual property legal development expenses
1,045

—

1,045

 
43

—

43

Restructuring and other charges
178

—

178

 
2,421

—

2,421

Litigation, settlements and related charges
—

—

—

 
—

940

940

Acquisition, integration and transaction related expenses
3,250

—

3,250

 
—

—

—

Operating income
$
21,173

$
—

$
21,173

 
$
8,917

$
36,968

$
45,885

 
 
 
 
 
 
 
 
Gross margin
52.1
%
—
%
52.1
%
 
53.9
%
72.2
%
65.8
%
Adjusted gross profit (Non-GAAP)(4)
$
109,769

$
—

$
109,769

 
$
40,660

$
75,626

$
116,286

Adjusted gross margin (Non-GAAP)(5)
82.4
%
—
%
82.4
%
 
78.2
%
78.6
%
78.4
%
Adjusted operating income (Non-GAAP)
$
68,038

$
—

$
68,038

 
$
23,939

$
45,144

$
69,083


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

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

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

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

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

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

Page 5 of 23



Corporate and Other Information
(Unaudited; In thousands)


 
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
General and administrative expense
$
36,752

$
—

$
36,752

 
$
22,833

$
8,000

$
30,833

Acquisition, transaction-related and integration expenses
1,166

—

1,166

 
92,885

4,381

97,266

Restructuring and other charges
2,417

—

2,417

 
17,247

223

17,470

Total general, administrative and other operating expenses
$
40,335

$
—

$
40,335

 
$
132,965

$
12,604

$
145,569




 
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
General and administrative expense
$
75,713

$
—

$
75,713

 
$
36,751

$
28,737

$
65,488

Acquisition, transaction-related and integration expenses
2,717

—

2,717

 
100,020

10,925

110,945

Restructuring and other charges
6,319

—

6,319

 
17,247

5,123

22,370

Total general, administrative and other operating expenses
$
84,749

$
—

$
84,749

 
$
154,018

$
44,785

$
198,803



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

Page 6 of 23




2019 Financial Outlook

Amneal’s full year 2019 estimates are based on management's current expectations, including with respect to prescription trends, pricing levels, inventory levels, and the anticipated timing of future product launches and events. The Company cannot provide a reconciliation between non-GAAP projections and the most directly comparable GAAP measures without unreasonable efforts because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for the reconciliation. The items include, but are not limited to, acquisition-related expenses, restructuring expenses, asset impairments and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for 2019.

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

 
Full Year 2019 Financial Guidance
 
Prior
Updated
Adjusted gross margin
47% - 50%
47% - 50%
Adjusted R&D as a % of net revenue
9% - 10%
9.5% - 10.5%
Adjusted SG&A as a % of net revenue
11% - 12%
14% - 15%
Adjusted EBITDA
$600 million - $650 million(6)
$425 million - $475 million
Adjusted diluted EPS
$0.94 - $1.04
$0.52 - $0.62
Adjusted effective tax rate
19% - 21%
19% - 21%
Capital expenditures
Approximately $100 million
$65 million - $85 million
Weighted average diluted shares outstanding
Approximately 300 million
Approximately 300 million

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

Conference Call Information

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

About Amneal

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

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



Non-GAAP Financial Measures

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

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

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

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


Page 8 of 23


Safe Harbor Statement

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

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

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

Trademarks referenced herein are the property of their respective owner.

Page 9 of 23



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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net revenue
$
404,642

 
$
413,787

 
$
850,762

 
$
688,976

Cost of goods sold
296,381

 
235,492

 
606,124

 
366,086

Cost of goods sold impairment charges
3,012

 
—

 
56,309

 
—

Gross profit
105,249

 
178,295

 
188,329

 
322,890

Selling, general and administrative
67,281

 
56,003

 
151,717

 
81,124

Research and development
48,016

 
50,335

 
101,874

 
94,544

In-process research and development impairment charges
—

 
—

 
22,787

 
—

Acquisition, transaction-related and integration expenses
3,519

 
207,507

 
9,551

 
214,642

Restructuring and other charges
2,835

 
44,465

 
8,996

 
44,465

Legal settlement gains
—

 
(3,000
)
 
—

 
(3,000
)
Intellectual property legal development expenses
2,511

 
4,047

 
6,677

 
8,623

Operating loss
(18,913
)
 
(181,062
)
 
(113,273
)
 
(117,508
)
Other (expense) income:
 
 
 
 
 
 
 
   Interest expense, net
(43,886
)
 
(36,622
)
 
(87,167
)
 
(57,673
)
   Foreign exchange gain (loss), net
8,311

 
(25,946
)
 
2,847

 
(17,381
)
   Loss on extinguishment of debt
—

 
(19,667
)
 
—

 
(19,667
)
   (Loss) gain on sale of international businesses, net
(1,888
)
 
—

 
6,930

 
—

   Other income, net
149

 
791

 
1,256

 
1,739

Total other expense, net
(37,314
)
 
(81,444
)
 
(76,134
)
 
(92,982
)
Loss before income taxes
(56,227
)
 
(262,506
)
 
(189,407
)
 
(210,490
)
Benefit from income taxes
(5,701
)
 
(12,416
)
 
(14,129
)
 
(12,052
)
Net loss
(50,526
)
 
(250,090
)
 
(175,278
)
 
(198,438
)
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-Combination
—

 
200,341

 
—

 
148,806

Less: Net loss attributable to non-controlling interests
33,624

 
31,885

 
110,495

 
31,768

Net loss attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest
(16,902
)
 
(17,864
)
 
(64,783
)
 
(17,864
)
Accretion of redeemable non-controlling interest
—

 
(1,240
)
 
—

 
(1,240
)
Net loss attributable to Amneal Pharmaceuticals, Inc.
$
(16,902
)
 
$
(19,104
)
 
$
(64,783
)
 
$
(19,104
)
 
 
 
 
 
 
 
 
Net loss per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders:
 
 
 
 
 
 
 
     Class A and Class B-1 basic and diluted
$
(0.13
)
 
$
(0.15
)
 
$
(0.51
)
 
$
(0.15
)
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
     Class A and Class B-1 basic and diluted
128,016

 
127,112

 
127,852

 
127,112


Page 10 of 23



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

 
June 30, 2019
 
December 31, 2018
Assets
 
 
 
Current assets:
 
 
 
    Cash and cash equivalents
$
54,893


$
213,394

    Restricted cash
2,129


5,385

    Trade accounts receivable, net
634,666


481,495

    Inventories
414,627


457,219

    Prepaid expenses and other current assets
77,062


128,321

    Related party receivables
2,470


830

Total current assets
1,185,847


1,286,644







Property, plant and equipment, net
508,086


544,146

Goodwill
420,017


426,226

Intangible assets, net
1,553,330


1,654,969

Deferred tax asset, net
391,881


373,159

Operating lease right-of-use assets
59,900


—

Operating lease right-of-use assets - related party
17,031


—

Financing lease right-of-use assets - related party
62,588


—

Other assets
63,459


67,592

Total assets
$
4,262,139


$
4,352,736





Liabilities and Stockholders' Equity



Current liabilities:



Accounts payable and accrued expenses
$
505,143


$
514,440

Current portion of long-term debt, net
21,445


21,449

Current portion of operating lease liabilities
13,313


—

Current portion of operating and financing lease liabilities - related party
3,293


—

Related party payables
2,965


17,695

Current portion of financing obligation - related party
—


266

Total current liabilities
546,159


553,850

Long-term debt, net
2,619,788


2,630,598

Deferred income taxes
—


1,178

Liabilities under tax receivable agreement
193,499


192,884

Operating lease liabilities
47,836


—

Operating lease liabilities - related party
14,862


—

Financing lease liabilities - related party
61,990


—

Financing obligation - related party
—


39,083

Other liabilities
28,653


38,780

Total long-term liabilities
2,966,628


2,902,523

Total stockholders' equity
749,352


896,363

    Total liabilities and stockholders' equity
$
4,262,139


$
4,352,736


Page 11 of 23

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

 
Six Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 

 
Net loss
$
(175,278
)

$
(198,438
)
Adjustments to reconcile net loss to net cash used in operating activities:



Depreciation and amortization
99,574


46,897

Amortization of Levothyroxine Transition Agreement asset
36,393


—

Unrealized foreign currency (gain) loss
(3,695
)

17,032

Amortization of debt issuance costs
3,218


2,577

Loss on extinguishment of debt
—


19,667

Gain on sale of international businesses, net
(6,930
)

—

Gain on termination of lease
—


(3,524
)
Intangible asset impairment charges
79,096


—

Non-cash restructuring and asset-related charges
1,314


—

Deferred tax benefit
(18,209
)

(14,993
)
Stock-based compensation and PPU expense
10,571


160,401

Inventory provision
50,410


17,426

Other operating charges and credits, net
3,155


927

Changes in assets and liabilities:



Trade accounts receivable, net
(162,954
)

(60,051
)
Inventories
(19,658
)

(71,655
)
Prepaid expenses, other current assets and other assets
28,614


(5,107
)
Related party receivables
(1,624
)

11,017

Accounts payable, accrued expenses and other liabilities
(13,538
)

19,630

Related party payables
2,225


(13,356
)
Net cash used in operating activities
(87,316
)

(71,550
)
Cash flows from investing activities:
 

 
Purchases of property, plant and equipment
(29,629
)

(36,600
)
Acquisition of product rights and licenses
(50,000
)

(3,000
)
Acquisitions, net of cash acquired
—


(321,324
)
Proceeds from sale of international businesses, net of cash sold
34,834


—

Net cash used in investing activities
(44,795
)

(360,924
)
Cash flows from financing activities:
 

 
Payments of deferred financing costs and debt extinguishment costs
—


(54,955
)
Proceeds from issuance of debt
—


1,325,383

Payments of principal on debt and capital leases
(13,500
)

(603,551
)
Payments on revolving credit line
—


(75,000
)
Payments of principal on financing lease - related party
(866
)

—

Payments of financing obligation - related party
—


(121
)
Proceeds from exercise of stock options
1,385


1,977

Employee payroll tax withholding on restricted stock unit vesting
(921
)

—

Equity contributions
—


27,742

Capital contribution from non-controlling interest
—


360

Acquisition of non-controlling interest
(3,543
)

—

Tax distribution to non-controlling interest
(13,494
)

—

Distributions to members
—


(182,998
)
Repayment of related party note
—


(14,842
)
          Net cash (used in) provided by financing activities
(30,939
)

423,995

Effect of foreign exchange rate on cash
1,293


(853
)
Net decrease in cash, cash equivalents, and restricted cash
(161,757
)

(9,332
)
Cash, cash equivalents, and restricted cash - beginning of period
218,779


77,922

Cash, cash equivalents, and restricted cash - end of period
$
57,022


$
68,590

Cash and cash equivalents - end of period
$
54,893


$
61,521

Restricted cash - end of period
2,129


7,069

Cash, cash equivalents, and restricted cash - end of period
$
57,022


$
68,590


Page 12 of 23



Amneal Pharmaceuticals, Inc.
Reconciliation of Non-GAAP Combined Results of Operations
(Unaudited; In thousands)

 
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)
 
 
Add:
(Non-GAAP)
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net revenue:
 
 
 
 
 
 
 
Generics
$
335,064

$
—

$
335,064

 
$
361,770

$
20,995

$
382,765

Specialty
69,578

—

69,578

 
52,017

27,546

79,563

Total net revenue
404,642

—

404,642

 
413,787

48,541

462,328

Cost of goods sold
296,381

—

296,381

 
235,492

36,335

271,827

Cost of goods sold impairment charges
3,012

—

3,012

 
—

—

—

Gross profit
105,249

—

105,249

 
178,295

12,206

190,501

Selling, general and administrative
67,281

—

67,281

 
56,003

20,047

76,050

Research and development
48,016

—

48,016

 
50,335

4,991

55,326

Acquisition, transaction-related and integration expenses
3,519

—

3,519

 
207,507

4,381

211,888

Restructuring and other charges
2,835

—

2,835

 
44,465

223

44,688

Legal settlement gains
—

—

—

 
(3,000
)
—

(3,000
)
Intellectual property legal development expenses
2,511

—

2,511

 
4,047

—

4,047

Operating loss
(18,913
)
—

(18,913
)
 
(181,062
)
(17,436
)
(198,498
)
Other (expense) income:
 
 


 
 
 


Interest expense, net
(43,886
)
—

(43,886
)
 
(36,622
)
(4,539
)
(41,161
)
Foreign exchange gain (loss), net
8,311

—

8,311

 
(25,946
)
—

(25,946
)
Loss on extinguishment of debt
—

—

—

 
(19,667
)
—

(19,667
)
Loss on sale of international businesses
(1,888
)
—

(1,888
)
 
—

—

—

Other income (expense), net
149

—

149

 
791

(14
)
777

Total other expense, net
(37,314
)
—

(37,314
)
 
(81,444
)
(4,553
)
(85,997
)
Loss before income taxes
(56,227
)
—

(56,227
)
 
(262,506
)
(21,989
)
(284,495
)
(Benefit from) provision for income taxes
(5,701
)
—

(5,701
)
 
(12,416
)
1,017

(11,399
)
Net loss
(50,526
)
—

(50,526
)
 
(250,090
)
(23,006
)
(273,096
)
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-Combination
—

—

—

 
200,341

 


Less: Net loss attributable to non-controlling interests
33,624

—

33,624

 
31,885

 


Accretion of redeemable non-controlling interest
—

—

—

 
(1,240
)
 


Net loss attributable to Amneal Pharmaceuticals, Inc.
$
(16,902
)
$
—

$
(16,902
)
 
$
(19,104
)






Page 13 of 23


Amneal Pharmaceuticals, Inc.
Reconciliation of Non-GAAP Combined Results of Operations
(Unaudited; In thousands)

 
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini

Combined
 
Actual
Impax/ Gemini

Combined
Net revenue:
 
 
 
 
 
 
 
Generics
$
717,541

$
—

$
717,541

 
$
636,959

$
102,237

$
739,196

Specialty
133,221

—

133,221

 
52,017

96,245

148,262

Total net revenue
850,762

—

850,762

 
688,976

198,482

887,458

Cost of goods sold
606,124

—

606,124

 
366,086

149,492

515,578

Cost of goods sold impairment charges
56,309

—

56,309

 
—

—

—

Gross profit
188,329

—

188,329

 
322,890

48,990

371,880

Selling, general and administrative
151,717

—

151,717

 
81,124

64,013

145,137

Research and development
101,874

—

101,874

 
94,544

17,287

111,831

In-process research and development impairment charges
22,787

—

22,787

 
—

—

—

Acquisition, transaction-related and integration expenses
9,551

—

9,551

 
214,642

10,925

225,567

Restructuring and other charges
8,996

—

8,996

 
44,465

5,123

49,588

Legal settlement gains
—

—

—

 
(3,000
)
—

(3,000
)
Intellectual property legal development expenses
6,677

—

6,677

 
8,623

23

8,646

Litigation, settlements and related charges
—

—

—

 
—

90,099

90,099

Operating loss
(113,273
)
—

(113,273
)
 
(117,508
)
(138,480
)
(255,988
)
Other (expense) income:
 
 


 
 
 


Interest expense, net
(87,167
)
—

(87,167
)
 
(57,673
)
(18,231
)
(75,904
)
Foreign exchange gain (loss)
2,847

—

2,847

 
(17,381
)
921

(16,460
)
Loss on extinguishment of debt
—

—

—

 
(19,667
)
—

(19,667
)
Gain on sale of international businesses
6,930

—

6,930

 
—

—

—

Other income (expense)
1,256

—

1,256

 
1,739

(638
)
1,101

Total other expense, net
(76,134
)
—

(76,134
)
 
(92,982
)
(17,948
)
(110,930
)
Loss before income taxes
(189,407
)
—

(189,407
)
 
(210,490
)
(156,428
)
(366,918
)
Benefit from income taxes
(14,129
)
—

(14,129
)
 
(12,052
)
(6,273
)
(18,325
)
Net loss
(175,278
)
—

(175,278
)
 
(198,438
)
(150,155
)
(348,593
)
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-Combination
—

—

—

 
148,806

 
 
Less: Net loss attributable to non-controlling interests
110,495

—

110,495

 
31,768

 
 
Accretion of redeemable non-controlling interest
—

—

—

 
(1,240
)
 
 
Net loss attributable to Amneal Pharmaceuticals, Inc.
$
(64,783
)
$
—

$
(64,783
)
 
$
(19,104
)
 
 

Page 14 of 23



Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)

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


Generics
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
263,423

$
—

$
263,423

 
$
211,534

$
29,624

$
241,158

Cost of goods sold impairment charges
3,012

—

3,012

 
—

—

—

Adjusted to deduct (add):
 
 
 
 
 

 
Amortization
14,636

—

14,636

 
6,043

3,934

9,977

Inventory related charges(7)
21,443

—

21,443

 
30,569

3,005

33,574

Acquisition and site closure expenses(8)
6,969

—

6,969

 
—

—

—

Asset impairment charges(9)
3,012

—

3,012

 
—

—

—

Stock-based compensation expense
813

—

813

 
—

—

—

Other
(68
)
—

(68
)
 
—

—

—

Adjusted cost of goods sold (Non-GAAP)
$
219,630

$
—

$
219,630

 
$
174,922

$
22,685

$
197,607






Generics
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
542,301

$
—

$
542,301

 
$
342,128

$
122,761

$
464,889

Cost of goods sold impairment charges
56,309

—

56,309

 
—

—

—

Adjusted to deduct (add):


 
 




 
Amortization
25,388

—

25,388

 
7,803

13,823

21,626

Inventory related charges(7)
21,777

—

21,777

 
30,569

9,894

40,463

Acquisition and site closure expenses(8)
16,480

—

16,480

 
—

—

—

Asset impairment charges(9)
56,309

—

56,309

 
—

53

53

Stock-based compensation expense
1,409

—

1,409

 
—

—

—

Amortization of upfront payment(11)
36,393

—

36,393

 
—

—

—

Other
1,024

—

1,024

 
—

—

—

Adjusted cost of goods sold (Non-GAAP)
$
439,830

$
—

$
439,830

 
$
303,756

$
98,991

$
402,747



Page 15 of 23


Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)

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


Specialty
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
32,958

$
—

$
32,958

 
$
23,958

$
6,711

$
30,669

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
20,160

—

20,160

 
10,651

1,528

12,179

Inventory related charges(7)
—

—

—

 
1,950

—

1,950

Adjusted cost of goods sold (Non-GAAP)
$
12,798

$
—

$
12,798

 
$
11,357

$
5,183

$
16,540









Specialty
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
63,823

$
—

$
63,823

 
$
23,958

$
26,731

$
50,689

Adjusted to deduct:



 
 


 
Amortization
40,371

—

40,371

 
10,651

6,112

16,763

Inventory related charges(7)
—

—

—

 
1,950

—

1,950

Adjusted cost of goods sold (Non-GAAP)
$
23,452

$
—

$
23,452

 
$
11,357

$
20,619

$
31,976


Page 16 of 23



Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)

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


Generics
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Operating income (loss)
$
4,886

$
—

$
4,886

 
$
(57,014
)
$
(16,953
)
$
(73,967
)
Adjusted to add (deduct):
 
 
 
 
 
 
 
Acquisition and site closure expenses(8)
10,885

—

10,885

 
114,622

—

114,622

Amortization
14,636

—

14,636

 
6,043

3,934

9,977

Inventory related charges(7)
21,443

—

21,443

 
30,569

3,005

33,574

Stock-based compensation expense
3,875

—

3,875

 
221

—

221

Asset impairment charges(9)
3,059

—

3,059

 
—

—

—

Restructuring and other charges(10) 
418

—

418

 
24,797

—

24,797

R&D milestone payment
5,614

—

5,614

 
1,424

—

1,424

Other
(68
)
—

(68
)
 
—

(1,325
)
(1,325
)
Adjusted operating income (Non-GAAP)
$
64,748

$
—

$
64,748

 
$
120,662

$
(11,339
)
$
109,323





Generics
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Operating (loss) income
$
(49,697
)
$
—

$
(49,697
)
 
$
27,593

$
(130,663
)
$
(103,070
)
Adjusted to add (deduct):


 
 


 
Acquisition and site closure expenses(8)
29,670

—

29,670

 
114,622

—

114,622

Amortization
25,388

—

25,388

 
7,803

13,823

21,626

Inventory related charges(7)
21,777

—

21,777

 
30,569

9,894

40,463

Stock-based compensation expense
5,373

—

5,373

 
221

982

1,203

Asset impairment charges(9)
79,211



79,211

 


53

53

Restructuring and other charges(10) 
2,499

—

2,499

 
24,797

—

24,797

Litigation, settlements and related charges(12)
—

—

—

 
—

89,159

89,159

Amortization of upfront payment(11)
36,393

—

36,393

 
—

—

—

R&D milestone payment
9,929

—

9,929

 
2,700

—

2,700

Other
1,024

—

1,024

 
(180
)
—

(180
)
Adjusted operating income (Non-GAAP)
$
161,567

$
—

$
161,567

 
$
208,125

$
(16,752
)
$
191,373


Page 17 of 23



Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)

Reconciliations of Specialty Operating Income to Combined Adjusted Operating Income


Specialty
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Operating income
$
16,536

$
—

$
16,536

 
$
8,917

$
12,121

$
21,038

Adjusted to add:
 
 
 
 
 
 
 
Amortization
20,160

—

20,160

 
10,651

1,528

12,179

Inventory related charges(7)
—

—

—

 
1,950

—

1,950

Acquisition and site closure expenses(8)
2,251

—

2,251

 
—

—

—

Stock-based compensation expense
366

—

366

 
—

—

—

Restructuring and other charges(10) 
—

—

—

 
2,421

—

2,421

Adjusted operating income (Non-GAAP)
$
39,313

$
—

$
39,313

 
$
23,939

$
13,649

$
37,588









Specialty
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Operating income
$
21,173

$
—

$
21,173

 
$
8,917

$
36,968

$
45,885

Adjusted to add:


 
 


 
Amortization
40,371

—

40,371

 
10,651

6,112

16,763

Inventory related charges(7)
—

—

—

 
1,950

—

1,950

Acquisition and site closure expenses(8)
5,806

—

5,806

 
—

—

—

Stock-based compensation expense
510

—

510

 
—

1,124

1,124

Restructuring and other charges(10) 
178

—

178

 
2,421

—

2,421

Litigation, settlements and related charges
—

—

—

 
—

940

940

Adjusted operating income (Non-GAAP)
$
68,038

$
—

$
68,038

 
$
23,939

$
45,144

$
69,083


Page 18 of 23



Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands, except per share amounts)

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


 
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net loss
$
(50,526
)
$
—

$
(50,526
)
 
$
(250,090
)
$
(23,006
)
$
(273,096
)
Adjusted to add (deduct):
 
 
 
 
 
 
 
Non-cash interest
1,617

—

1,617

 
4,407

2,549

6,956

GAAP Income tax (benefit) expense
(5,701
)
—

(5,701
)
 
(12,416
)
1,017

(11,399
)
Amortization
34,796

—

34,796

 
16,694

5,462

22,156

Stock-based compensation expense
6,224

—

6,224

 
1,644

—

1,644

Acquisition and site closure expenses(8)
19,056

—

19,056

 
207,507

4,381

211,888

Restructuring and other charges(10) 
2,835

—

2,835

 
44,465

223

44,688

Loss on extinguishment of debt
—

—

—

 
19,667

—

19,667

Inventory related charges(7)
21,443

—

21,443

 
32,519

3,005

35,524

Loss on sale of assets
—

—

—

 
878

—

878

Asset impairment charges(9)
4,408

—

4,408

 
—

—

—

Foreign exchange (gain) loss
(8,311
)
—

(8,311
)
 
25,946

—

25,946

Loss on sale of international business(13)
1,888

—

1,888

 
—

—

—

R&D milestone payments
5,614

—

5,614

 
1,424

—

1,424

Other
491

—

491

 
1,225

1,300

2,525

Income tax at 21%
(7,104
)
—

(7,104
)
 
(19,943
)
1,064

(18,879
)
Net income attributable to NCI not associated with our Class B shares

(61
)
—

(61
)
 
(27
)
—

(27
)
Adjusted net income (Non-GAAP)
$
26,669

$
—

$
26,669

 
$
73,900

$
(4,005
)
$
69,895

 
 
 
 
 
 
 
 
Adjusted diluted EPS (Non-GAAP)(14)
 
 
$
0.09

 
 
 
$
0.23


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

Page 19 of 23



Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands, except per share amounts)

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


 
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net loss
$
(175,278
)
$
—

$
(175,278
)
 
$
(198,438
)
$
(150,155
)
$
(348,593
)
Adjusted to add (deduct):


 
 


 
Non-cash interest
3,218

—

3,218

 
5,577

9,413

14,990

GAAP Income tax benefit
(14,129
)
—

(14,129
)
 
(12,052
)
(6,273
)
(18,325
)
Amortization
65,759

—

65,759

 
18,454

19,935

38,389

Stock-based compensation expense
10,571

—

10,571

 
1,644

4,816

6,460

Acquisition and site closure expenses(8)
47,258

—

47,258

 
214,642

10,925

225,567

Restructuring and other charges(10) 
8,996

—

8,996

 
44,465

5,123

49,588

Loss on extinguishment of debt
—

—

—

 
19,667

—

19,667

Inventory related charges(7)
21,777

—

21,777

 
32,519

9,894

42,413

Litigation, settlements and related charges(12)
—

—

—

 
—

90,099

90,099

Loss on sale of assets
—

—

—

 
878

—

878

Asset impairment charges(9)
81,008

—

81,008

 
—

53

53

Amortization of upfront payment
36,393

—

36,393

 
—

—

—

Foreign exchange (gain) loss
(2,847
)
—

(2,847
)
 
17,381

(921
)
16,460

Gain on sale of international businesses, net (13)
(6,930
)
—

(6,930
)
 
—

—

—

R&D milestone payments
9,929

—

9,929

 
2,700

—

2,700

Other
1,583

—

1,583

 
(820
)
1,953

1,133

Income tax at 21%
(18,334
)
—

(18,334
)
 
(31,020
)
1,309

(29,711
)
Net income attributable to NCI not associated with our Class B shares

(140
)
—

(140
)
 
(144
)
—

(144
)
Adjusted net income (Non-GAAP)
$
68,834

$
—

$
68,834

 
$
115,453

$
(3,829
)
$
111,624

 
 
 
 
 
 
 
 
Adjusted diluted EPS (Non-GAAP)(15)
 
 
$
0.23

 
 
 
$
0.37


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

 

Page 20 of 23



Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited, In thousands)

Reconciliation of Net Loss to EBITDA and Combined Adjusted EBITDA


 
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net loss
$
(50,526
)
$
—

$
(50,526
)
 
$
(250,090
)
$
(23,006
)
$
(273,096
)
Adjusted to add (deduct):
 
 
 
 
 
 
 
Interest expense, net
43,886

—

43,886

 
36,622

4,539

41,161

Income tax (benefit) expense
(5,701
)
—

(5,701
)
 
(12,416
)
1,017

(11,399
)
Depreciation and amortization
50,706

—

50,706

 
32,147

6,925

39,072

EBITDA (Non-GAAP)
$
38,365

$
—

$
38,365

 
$
(193,737
)
$
(10,525
)
$
(204,262
)

 
 


 
 
 


Adjusted to add (deduct):
 
 


 
 
 


Stock-based compensation expense
$
6,224

$
—

$
6,224

 
$
1,644

$
—

$
1,644

Acquisition and site closure expenses(8)
19,056

—

19,056

 
207,507

4,381

211,888

Restructuring and other charges(10) 
2,835

—

2,835

 
44,465

223

44,688

Loss on extinguishment of debt
—

—

—

 
19,667

—

19,667

Inventory related charges(7)
21,443

—

21,443

 
32,519

3,005

35,524

Loss on sale of assets
—

—

—

 
878

—

878

Asset impairment charges(9)
4,408

—

4,408

 
—

—

—

Foreign exchange (gain) loss
(8,311
)
—

(8,311
)
 
25,946

—

25,946

Loss on sale of international businesses(13)
1,888

—

1,888

 
—

—

—

R&D milestone payments
5,614

—

5,614

 
1,424

—

1,424

Other
559

—

559

 
1,225

—

1,225

Adjusted EBITDA (Non-GAAP)
$
92,081

$
—

$
92,081

 
$
141,538

$
(2,916
)
$
138,622


Page 21 of 23



Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)

Reconciliation of Net Loss to EBITDA and Combined Adjusted EBITDA


 
Six months ended June 30, 2019
 
Six months ended June 30, 2018
 
 
Add:
(Non-GAAP)

 
 
Add:
(Non-GAAP)

 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net loss
$
(175,278
)
$
—

$
(175,278
)
 
$
(198,438
)
$
(150,155
)
$
(348,593
)
Adjusted to add (deduct):


 
 


 
Interest expense, net
87,167

—

87,167

 
57,673

18,231

75,904

Income tax benefit
(14,129
)
—

(14,129
)
 
(12,052
)
(6,273
)
(18,325
)
Depreciation and amortization
99,574

—

99,574

 
46,898

24,900

71,798

EBITDA (Non-GAAP)
$
(2,666
)
$
—

$
(2,666
)
 
$
(105,919
)
$
(113,297
)
$
(219,216
)





 
 




 
Adjusted to add (deduct):




 
 




 
Stock-based compensation expense
$
10,571

$
—

$
10,571

 
$
1,644

$
4,816

$
6,460

Acquisition and site closure expenses(8)
47,258

—

47,258

 
214,642

10,925

225,567

Restructuring and other charges(10) 
8,996

—

8,996

 
44,465

5,123

49,588

Loss on extinguishment of debt
—

—

—

 
19,667

—

19,667

Inventory related charges(7)
21,777

—

21,777

 
32,519

9,894

42,413

Litigation, settlements and related charges(12)
—

—

—

 
—

90,099

90,099

Loss on sale of assets
—

—

—

 
878

—

878

Asset impairment charges(9)
81,008

—

81,008

 
—

53

53

Amortization of upfront payment(11)
36,393

—

36,393

 
—

—

—

Foreign exchange (gain) loss
(2,847
)
—

(2,847
)
 
17,381

(921
)
16,460

Gain on sale of international businesses, net (13)
(6,930
)
—

(6,930
)
 
—

—

—

R&D milestone payments
9,929

—

9,929

 
2,700

—

2,700

Other
559

—

559

 
(820
)
653

(167
)
Adjusted EBITDA (Non-GAAP)
$
204,048

$
—

$
204,048

 
$
227,157

$
7,345

$
234,502



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

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

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

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

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

Page 22 of 23



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

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


Page 23 of 23