EX-99.1 2 amrxexhibit991pressrelease.htm EXHIBIT 99.1 Exhibit
exhibit991892018image1a01.jpg                                    

FOR IMMEDIATE RELEASE

CONTACT:
Mark Donohue
(908) 409-6718
                        

AMNEAL ANNOUNCES SOLID THIRD QUARTER 2018 FINANCIAL RESULTS

‒ Net Revenue of $476 Million; Diluted EPS of $0.05; Adjusted Diluted EPS of $0.28 ‒
‒ Integration of Amneal and Impax Nearing Completion; On Track to Achieve More Than $200 Million in Cost Synergies ‒
‒ Company Tightens Existing 2018 Financial Guidance ‒

BRIDGEWATER, NJ, November 7, 2018 - Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the “Company”) announced its results today for the quarter ended September 30, 2018.

“The third quarter was defined by solid financial performance and strategic accomplishments as we advanced the integration of Impax and Amneal, completed two strategic partnerships that strengthen our portfolio and launched 11 new generic products,” said Rob Stewart, President and CEO of Amneal. “We delivered revenue of $476 million and adjusted EBITDA1 of $163 million as both our Generics and Specialty Pharma businesses grew sequentially, on a combined basis, compared with the second quarter of 2018.

“The Generics business benefited from higher sales of Yuvafem® and the seasonality of Epinephrine Auto-injector despite the product’s ongoing supply constraints. Additionally, our large and diverse generic pipeline has delivered 27 new product launches through September of this year including the 11 launched in the third quarter. Within our Specialty Pharma business, we delivered solid sequential growth led by revenue increases for Rytary®, Emverm® and Zomig®.

“We are focused on long-term strategic initiatives to position Amneal for future growth. In August, we announced partnership agreements with Jerome Stevens Pharmaceuticals, Inc. for Levothyroxine and with American Regent for a generic alternative to Makena®, important steps forward in our strategy to enhance our portfolio. Pursuing additional external growth opportunities to fuel growth remains a strategic priority.

“The integration of Impax is essentially finished and all actions required to deliver our synergy target of at least $200 million annually within three years of closing the combination are completed. We have tightened our existing 2018 guidance range to reflect the late third quarter generic competition on a few key products including Yuvafem, Aspirin Dipyridamole ER, and Oseltamivir, together with the slow start to the flu season, and ongoing Epinephrine Auto-Injector supply constraints. Despite this, we continue to focus on building Amneal from our position of strength and deploying our capital to support long-term growth initiatives that will maintain double-digit earnings growth,” concluded Stewart.







_____________________________
1 Please see “Non-GAAP Financial Measures” below.



Page 1 of 24



Summary of GAAP and Combined Adjusted Results

 
Three Months Ended
 
Variance
(Unaudited; In thousands)
Sept. 30, 2018
June 30, 2018
Sept. 30, 2017
 
Sequential
Year/ Year
GAAP Results1
 
 
 
 
 
 
Net revenue
$
476,487

$
413,787

$
254,733

 
15.2
%
87.1
%
Net income (loss)
$
17,465

$
(250,090
)
$
27,122

 
107.0
%
35.6
%
Diluted EPS
$
0.05

$
(0.15
)
N/A

 
133.3
%
N/A

 
 
 
 
 
 
 
Non-GAAP Results2
 
 
 
 
 
 
Combined net revenue
$
476,487

$
462,328

$
474,598

 
3.1
%
0.4
%
Combined adjusted net income
$
82,154

$
70,153

$
79,465

 
17.1
%
3.4
%
Combined adjusted EBITDA
$
162,917

$
138,836

$
147,823

 
17.3
%
10.2
%
Combined adjusted diluted EPS
$
0.28

$
0.24

N/A

 
16.7
%
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.

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. 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.


GAAP Basis Results
GAAP net revenue in the third quarter of 2018 was $476.5 million, an increase of 87.1%, compared to the third quarter of 2017, primarily due to the combination with Impax and the acquisition of Gemini Laboratories, LLC in May 2018, as well as new generic product launches.
GAAP net income in the third quarter of 2018 was $17.5 million, compared to net income of $27.1 million for the third quarter of 2017. The third quarter’s results were impacted by the combination with Impax and Gemini, including approximately $24.0 million of incremental interest expense.
GAAP diluted EPS in the third quarter of 2018 was $0.05. GAAP diluted EPS for the third quarter of 2017 is not available as Amneal Pharmaceuticals LLC was a privately-held company for the period presented.

Non-GAAP Combined Results
Net revenue in the third quarter of 2018 was $476.5 million, an increase of 0.4%, compared to the third quarter of 2017, primarily due to a 24.0% increase in Specialty Pharma business revenue, partially offset by a 3.6% decline in Generics business revenue.
Adjusted net income in the third quarter of 2018 was $82.2 million, an increase of 3.4%, compared to the third quarter of 2017, primarily due to favorable product sales mix.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter of 2018 was $162.9 million, an increase of 10.2%, compared to the third quarter of 2017, primarily due to favorable product sales mix and cost synergies from the combination with Impax.
Combined adjusted diluted EPS in the third quarter of 2018 was $0.28.






Page 2 of 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 Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax
Combined
 
Actual
Impax
Combined
Revenues
 
 
 
 
 
 
 
Generics, net
$
391,175

$

$
391,175

 
$
254,733

$
151,098

$
405,831

Cost of goods sold
237,866


237,866

 
119,720

154,756

274,476

Gross profit
153,309


153,309

 
135,013

(3,658)

131,355

Selling, general, and administrative
21,030


21,030

 
15,030

5,570

20,600

Research and development
38,997


38,997

 
41,323

12,241

53,564

Intellectual property legal development expenses
3,929


3,929

 
6,693

28

6,721

Legal settlement gain



 
(21,467
)

(21,467
)
Restructuring
(2,885
)

(2,885
)
 



Operating profit (loss)
$
92,238

$

$
92,238

 
$
93,434

$
(21,497
)
$
71,937

 
 
 
 
 
 
 
 
Gross margin
39.2
%

39.2
%
 
53.0
%
(2.4
)%
32.4
%
Adjusted gross profit
$
194,368


$
194,368

 
$
138,968

$
52,203

$
191,171

Adjusted gross margin
49.7
%

49.7
%
 
54.6
%
34.5
 %
47.1
%

 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax
Combined
 
Actual
Impax
Combined
Revenues
 
 
 
 
 
 
 
Generics, net
$
1,028,134

$
102,237

$
1,130,371

 
$
740,285

$
436,134

$
1,176,419

Cost of goods sold
579,994

122,761

702,755

 
365,523

408,278

773,801

Gross profit
448,140

(20,524)

427,616

 
374,762

27,856

402,618

Selling, general, and administrative
48,854

11,896

60,750

 
44,838

20,072

64,910

Research and development
130,412

13,623

144,035

 
127,926

56,711

184,637

Intellectual property legal development expenses
12,509


12,509

 
17,786

715

18,501

Litigation, settlements and related charges

84,597

84,597

 



Legal settlement gain



 
(21,467
)

(21,467
)
Acquisition, integration and transaction related expenses
114,622


114,622

 



Restructuring
21,912


21,912

 



Operating profit (loss)
$
119,831

$
(130,640
)
$
(10,809
)
 
$
205,679

$
(49,642
)
$
156,037

 
 
 
 
 
 
 
 
Gross margin
43.6
%
(20.1
)%
37.8
%
 
50.6
%
6.4
%
34.2
%
Adjusted gross profit
$
527,686

$
3,193

$
530,879

 
$
397,095

$
166,352

$
563,447

Adjusted gross margin
51.3
%
3.1
 %
47.0
%
 
53.6
%
38.1
%
47.9
%

(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.

Page 3 of 24




GAAP Results

Generics business revenues of $391.2 million increased 53.6% for the third quarter of 2018, compared to the prior year period. The increase is primarily attributable to the combination with Impax as well as strong 2018 launches, including Potassium Chloride oral solution, Phytonadione tablets and Methylphenidate Hydrochloride extended release tablets, higher demand for Yuvafem, Spironoctalone cream and Diclofenac Sodium gel 1%. These increases are partially offset by lower demand for Oseltamivir, Diclofenac sodium gel 3%, and Epinephrine auto-injector due to supply constraints.

Gross margin for the third quarter of 2018 was 39.2%, compared to 53.0% for the third quarter of 2017. The decrease is primarily as a result of higher cost of sales due to incremental amortization and inventory acquisition accounting adjustments, inventory related charges, manufacturing plant closure charges, impairment of product intangible assets and lower margin products in the Impax portfolio.

Non-GAAP Combined Results

Generics business combined net revenue in the third quarter of 2018 was $391.2 million, a decrease of 3.6%, compared to $405.8 million in the prior year period. The decrease is primarily due to lower sales of Epinephrine Auto-Injector due to an ongoing supply shortage at the Company’s third-party manufacturer, increased competition on Budesonide, Lidocaine, Aspirin Dipyridamole ER and Diclofenac Sodium Gel 3%. The decrease was partially offset by increased revenue from new product launches and increased sales of Yuvafem, Spironoctalone cream and Diclofenac Sodium gel 1%.

Gross margin for the third quarter of 2018 on a combined basis was 39.2%, compared to 32.4% for the third quarter of 2017, primarily due to a decline in inventory related charges and amortization expense. Adjusted gross margin on a combined adjusted basis was 49.7% for the third quarter of 2018, compared to 47.1% in the prior year period.



Page 4 of 24



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 Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Revenues
 
 
 
 
 
 
 
Rytary®, net
$
33,073

$

$
33,073

 
$

$
21,520

$
21,520

Zomig®, net
15,445


15,445

 

13,899

13,899

All Other Specialty Pharma Products sales, net
36,794


36,794

 

33,348

33,348

Total revenues
85,312


85,312

 

68,767

68,767

Cost of goods sold
38,516


38,516

 

23,026

23,026

Gross profit
46,796


46,796

 

45,741

45,741

Selling, general, and administrative
19,716


19,716

 

19,213

19,213

Research and development
4,002


4,002

 

3,640

3,640

Intellectual property legal development expenses
472


472

 

1,612

1,612

Restructuring
(27
)

(27
)
 



Operating profit
$
22,633

$

$
22,633

 
$

$
21,276

$
21,276

 
 
 
 
 
 
 
 
Gross margin
54.9
%

54.9
%
 

66.5
%
66.5
%
Adjusted gross profit
$
67,304


$
67,304

 

$
54,903

$
54,903

Adjusted gross margin
78.9
%

78.9
%
 

79.8
%
79.8
%

 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Revenues
 
 
 
 
 
 
 
Rytary®, net
$
53,593

$
35,086

$
88,679

 
$

$
63,347

$
63,347

Zomig®, net
25,140

14,411

39,551

 

36,081

36,081

All Other Specialty Pharma Products sales, net
58,596

46,748

105,344

 

94,550

94,550

Total revenues
137,329

96,245

233,574

 

193,978

193,978

Cost of goods sold
62,474

26,731

89,205

 

68,103

68,103

Gross profit
74,855

69,514

144,369

 

125,875

125,875

Selling, general, and administrative
33,265

27,942

61,207

 

58,029

58,029

Research and development
7,131

3,664

10,795

 

14,585

14,585

Intellectual property legal development expenses
515

23

538

 

3,167

3,167

Litigation, settlements and related charges

940

940

 



Restructuring
2,394


2,394

 



Operating profit
$
31,550

$
36,945

$
68,495

 
$

$
50,094

$
50,094

 
 
 
 
 
 
 
 
Gross margin
54.5
%
72.2
%
61.8
%
 

64.9
%
64.9
%
Adjusted gross profit
$
107,964

$
75,626

$
183,590

 

$
144,711

$
144,711

Adjusted gross margin
78.6
%
78.6
%
78.6
%
 

74.6
%
74.6
%

(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.


Page 5 of 24



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 net revenue in the third quarter 2018 was $85.3 million, an increase of 24.1%, compared to $68.8 million in the prior year period, driven by higher revenue from Rytary®, Zomig® and the anthelmintic products franchise.

Gross margin for the third quarter of 2018 was 54.9%, compared to 66.5% for the third quarter of 2017, driven primarily by higher amortization expense. Adjusted gross margin was 78.9% for the third quarter of 2018, compared to 79.8% in the prior year period, primarily due to product sales mix.

Corporate and Other Information
(Unaudited; In thousands)

 
Three months ended Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax
Combined
 
Actual
Impax
Combined
 
 
 
 
 
 
 
 
General and administrative expenses
$
(37,329
)
$

$
(37,329
)
 
$
(12,410
)
$
(31,880
)
$
(44,290
)
Unallocated corporate expenses
$
(37,329
)
$

$
(37,329
)
 
$
(12,410
)
$
(31,880
)
$
(44,290
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax
Combined
 
Actual
Impax
Combined

 
 
 
 
 
 
 
 
General and administrative expenses
$
(74,080
)
$
(40,404
)
$
(114,484
)
 
$
(37,242
)
$
(82,904
)
$
(120,146
)
Unallocated corporate expenses
$
(74,080
)
$
(40,404
)
$
(114,484
)
 
$
(37,242
)
$
(82,904
)
$
(120,146
)


GAAP Results

General and administrative expenses in the third quarter of 2018 were $37.3 million, an increase of $24.9 million, compared to the third quarter of 2018, primarily due to general and administrative expenses of the Impax organization since 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 third quarter of 2018 were $37.3 million, a decrease of $7.0 million, compared to the third quarter of 2017, primarily due to cost synergies as a result of the business combination with Impax.

Other Information
Interest expense, net for the third quarter of 2018 was $43.0 million, compared to $19.2 million in the third quarter of 2017, 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. Management believes that using additional non-GAAP measures on a combined company basis will facilitate the evaluation of the

Page 6 of 24



financial performance of the Company and its ongoing operations. The Company does not provide forward-looking guidance metrics 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.

2018 Key Guidance Assumptions
Tightened the range of full year 2018 adjusted EBITDA and adjusted EPS guidance due to generic competition, which occurred late in the third quarter on Yuvafem, Aspirin Dipyridamole ER, Diclofenac Sodium Gel 1%, and Oseltamivir (including the slow start to flu season), the loss of exclusivity on Albenza® and the ongoing supply constraints for Epinephrine Auto-Injector.
Generics business growth driven by new product launches which are expected to more than offset additional competition on existing portfolio.
Potential opportunity to launch up to 47 generic products in 2018 including 8 the last two months of 2018
Specialty Pharma business growth driven by Rytary®, Zomig® nasal spray and Emverm®.  

 
Full Year 2018 Financial Guidance
 
Prior
Updated
Adjusted Gross Margins
50% to 55%
51% to 53%
Adjusted R&D as a % of Net Revenues
10% to 15%
11% to 12%
Adjusted SG&A as a % of Net Revenues
13% to 16%
15% to 16%
Adjusted EBITDA
$580 to $620 million
$580 to $585 million
Adjusted EPS
$0.90 to $1.00
$0.90 to $0.92
Adjusted Effective Tax Rate
20% to 22%
Approximately 21%
Capital Expenditures
$80 to $100 million
Approximately $90 million
Diluted Shares Outstanding
Approximately 300 million
Approximately 300 million

Conference Call Information

Amneal will hold a conference call on November 7, 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/1821566/B0F8BD4D6CEF9543C52C47B3B3FA1A30. The number to call from within the United States is (877) 356-3814 and (706) 758-0033 internationally. The conference ID is 3488019. 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 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 also markets a portfolio of branded pharmaceutical products through its 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 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,”

Page 7 of 24



“intend,” “believe,” “estimate,” “assume,” “continue,” and similar words are intended to identify estimates and forward-looking statements.

The reader is cautioned not to rely on these forward-looking statements. These forward-looking statements are based on current expectations of future events. If the underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the expectations and projections of Amneal Pharmaceuticals, Inc. (the “Company”). Such risks and uncertainties include, but are not limited to: the impact of global economic conditions; 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; the illegal distribution and sale by third parties of counterfeit versions of our products or of stolen products; market perceptions of us and the safety and quality of our products; our dependence on the sales of a limited number of products for a substantial portion of our total revenues; our ability to develop, license or acquire and introduce new products on a timely basis; the ability of our approved products to achieve expected levels of market acceptance; the risk that we may discontinue the manufacture and distribution of certain existing products; the impact of manufacturing or quality control problems; 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; our dependence on a few locations that produce a majority of our products; relationships with our major customers; 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 time necessary to develop generic and branded drug products; our dependence on third parties for testing required for regulatory approval of our products; 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; regulatory oversight related to our international operations; our increased exposure to tax liabilities due to our international operations and the impact of recent U.S. tax legislation; payments required by our Tax Receivable Agreement; our involvement in various legal proceedings, including those brought by third parties alleging infringement of their intellectual property rights; 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; risks inherent in conducting clinical trials; our reporting and payment obligations under the Medicaid rebate program and other government purchase and rebate programs; quarterly fluctuations in our operating results; adjustments to our reserves based on price adjustments and sales allowances; investigations and litigation concerning the calculation of average wholesale prices; 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 Quarterly Report on Form 10-Q and in the Company’s subsequent filings with the Securities and Exchange Commission. 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 8 of 24



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


 
Three months ended
 
Nine months ended
 
Sept. 30, 2018
Sept. 30, 2017
 
Sept. 30, 2018
Sept. 30, 2017
Net Revenue
$
476,487

$
254,733

 
$
1,165,463

$
740,285

Cost of goods sold
276,382

119,720

 
642,468

365,523

Gross profit
200,105

135,013

 
522,995

374,762

Selling, general and administrative
78,075

27,440

 
156,199

82,080

Research and development
42,999

41,323

 
137,543

127,926

Intellectual property legal development expenses
4,401

6,693

 
13,024

17,786

Legal settlement gain

(21,467
)
 

(21,467
)
Acquisition, transaction-related and integration expenses
2,231

2,271

 
216,873

2,353

Restructuring expenses
(2,156
)

 
42,309


Operating income (loss)
74,555

78,753

 
(42,953)

166,084

Other (expense) income:
 
 
 
 
 
   Interest expense, net
(43,018)

(19,218)

 
(100,691)

(51,105)

   Foreign exchange (loss) gain
(5,137)

(4,178)

 
(22,518)

25,751

   Loss on extinguishment of debt


 
(19,667)

(2,531)

   Loss on sale of international operations
(2,812
)
(28,880
)
 
(2,812
)
(28,880
)
   Other (expense) income
(1,014
)
(93
)
 
725

(71
)
Total other expense, net
(51,981)

(52,369)

 
(144,963)

(56,836)

Income (loss) before income taxes
22,574

26,384

 
(187,916)

109,248

Provision for (benefit from) income taxes
5,109

(738
)
 
(6,943
)
2,117

Net income (loss)
17,465

27,122

 
(180,973)

107,131

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

(26,780)

 
148,806

(106,079)

Less: Net (income) loss attributable to non-controlling interests
(10,577
)
(342)

 
21,191

(1,052
)
Net income (loss) attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest
6,888


 
(10,976)


Accretion of redeemable non-controlling interest
64


 
(1,176)


Net income (loss) attributable to Amneal Pharmaceuticals, Inc.
$
6,952

$

 
$
(12,152
)
$

 
 
 
 
 
 
Net income (loss) per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders:
 
 
 
 
 
     Class A and Class B-1 basic
$
0.05

 
 
$
(0.10
)
 
     Class A and Class B-1 diluted
$
0.05

 
 
$
(0.10
)
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
     Class A and Class B-1 basic
127,247

 
 
127,196

 
     Class A and Class B-1 diluted
128,222

 
 
127,196

 



Page 9 of 24



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

 
September 30, 2018
 
December 31, 2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
165,192

 
$
74,166

Restricted cash
7,001

 
3,756

Trade accounts receivable, net
641,029

 
351,367

Inventories
490,768

 
284,038

Prepaid expenses and other current assets
126,386

 
42,396

Related party receivables
925

 
16,210

Total current assets
1,431,301

 
771,933

Property, plant and equipment, net
567,498

 
486,758

Goodwill
410,616

 
26,444

Intangible assets, net
1,733,020

 
44,599

Deferred tax asset, net
365,971

 
898

Other assets
73,642

 
11,257

Total assets
$
4,582,048

 
$
1,341,889

 
 
 
 
Liabilities and Stockholders' Equity / Members' Deficit
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
513,122

 
$
194,779

Note payable-related party
78,126

 

Current portion of long-term debt and financing obligations, net
121,694

 
89,482

Related party payables
36,329

 
12,622

Total current liabilities
749,271

 
296,883

Long-term debt and financing obligations, net
2,675,108

 
1,395,261

Deferred income taxes
1,761

 
2,491

Liabilities under tax receivable agreement
195,820

 

Other long-term liabilities
44,769

 
7,793

Related party payable- long term

 
15,043

Total long-term liabilities
2,917,458

 
1,420,588

Total stockholders' equity / members' deficit
915,319

 
(375,582)

Total liabilities and stockholders' / members’ deficit
$
4,582,048

 
$
1,341,889



Page 10 of 24



Amneal Pharmaceutical, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited; In thousands)
 
Nine Months Ended
 
September 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(180,973
)
 
$
107,131

Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
89,910

 
33,094

Unrealized foreign currency loss (gain)
21,560

 
(27,692
)
Amortization of debt issuance costs
4,220

 
3,895

Loss on extinguishment of debt
19,667

 
2,531

Loss on sale of certain international businesses
2,812

 
28,880

Transaction costs paid by Amneal Holdings, LLC

 
2,008

Intangible asset impairment charges
8,474

 

Deferred tax provision
(9,111)

 
(534
)
Stock-based compensation and PPU expense
163,991

 
0

Inventory provision
20,755

 
1,510

Other operating charges and credits, net
(1,955)

 
431

Changes in assets and liabilities:
 
 
 
Trade accounts receivable, net
(74,711)

 
48,468

Inventories
(53,708)

 
(25,186
)
Prepaid expenses, other current assets and other assets
9,803

 
(18,604
)
Related party receivables
10,828

 
1,397

Accounts payable, accrued expenses and other liabilities
(26,858)

 
5,583

Related party payables
(14,125)

 
6,010

Net cash (used in) provided by operating activities
(9,421)

 
168,922

Investing activities:
 
 
 
Purchases of property, plant and equipment
(63,065)

 
(70,153)

Acquisition of product rights and licenses
(14,000)

 
(19,500
)
Acquisitions, net of cash acquired
(324,634)

 

Net cash used in investing activities
(401,699)

 
(89,653)

Financing activities:
 
 
 
Payments of deferred financing costs and debt extinguishment costs
(54,955)

 
(5,026)

Proceeds from issuance of debt
1,325,383

 
250,000

Payments of principal on debt, financing obligations and capital leases
(610,482
)
 
(10,260
)
Net borrowings on revolving credit line
25,000

 
25,000

Proceeds from exercise of stock options
3,162

 

Equity contributions
27,742

 
40

Capital contribution from non-controlling interest
360

 

Acquisition of redeemable non-controlling interest
(11,775)

 

Distributions to members
(182,998)

 
(355,265)

Repayment of related party note
(14,842)

 

Net cash provided by (used in) financing activities
506,595

 
(95,511)

Effect of foreign exchange rate on cash
(1,204)

 
50

Net increase (decrease) in cash, cash equivalents, and restricted cash
94,271

 
(16,192)

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

 
37,546

Cash, cash equivalents, and restricted cash - end of period
$
172,193

 
$
21,354


Page 11 of 24



Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures

Combined adjusted revenue, adjusted net income, adjusted diluted EPS, EBITDA, adjusted EBITDA, adjusted cost of goods sold, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expenses and adjusted research and development expenses 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, adjusted cost of goods sold, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expenses and adjusted research and development expenses 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 actual results to combined results:

 
Three months ended Sept. 30, 2018
 
Three months ended Sept. 30, 2017
(Unaudited: In thousands)
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Revenues:
 
 
 
 
 
 
 
Generics, net
$
391,175

$

$
391,175

 
$
254,733

$
151,098

$
405,831

Specialty Pharma, net
85,312


85,312

 

68,767

68,767

Total revenues
476,487


476,487

 
254,733

219,865

474,598

Cost of goods sold
276,382


276,382

 
119,720

177,782

297,502

Gross profit
200,105


200,105

 
135,013

42,083

177,096

Selling, general and administrative
78,075


78,075

 
27,440

56,663

84,103

Research and development
42,999


42,999

 
41,323

15,881

57,204

Intellectual property legal development expenses
4,401


4,401

 
6,693

1,640

8,333

Impairment loss on tangible assets



 

828

828

Gain on sale of assets



 

(4,708
)
(4,708
)
Change in FV of contingent consideration



 

6,333

6,333

Legal settlement gain



 
(21,467
)

(21,467
)
Acquisition, transaction-related and integration expenses
2,231


2,231

 
2,271


2,271

Restructuring expenses
(2,156
)

(2,156
)
 



Operating income (loss)
74,555


74,555

 
78,753

(34,554)

44,199

Other (expense) income:
 
 
 
 
 
 
 
Interest expense, net
(43,018)


(43,018
)
 
(19,218)

(13,300)

(32,518
)
Foreign exchange (loss) gain
(5,137)


(5,137
)
 
(4,178
)

(4,178
)
Loss on sale of international operations
(2,812)


(2,812
)
 
(28,880)


(28,880
)
Other (expense) income
(1,014)


(1,014
)
 
(93)

352

259

Total other (expense) income, net
(51,981
)

(51,981
)
 
(52,369
)
(12,948
)
(65,317
)
Income (loss) before income taxes
22,574


22,574

 
26,384

(47,502)

(21,118)

Provision for (benefit from) income taxes
5,109


5,109

 
(738
)
(3,045
)
(3,783
)
Net income (loss)
17,465


17,465

 
27,122

(44,457
)
(17,335)

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

 
 
 
(26,780)

 
 
Less: Net income attributable to non-controlling interests
(10,577)

 
 
 
(342)

 
 
Accretion of redeemable non-controlling interest
64

 
 
 

 
 
Net income attributable to Amneal Pharmaceuticals, Inc.
$
6,952

 
 
 
$

 
 

Page 12 of 24



Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures


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


 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini

Combined
 
Actual
Impax/ Gemini

Combined
Revenues:
 
 
 
 
 
 
 
Generics, net
$
1,028,134

$
102,237

$
1,130,371

 
$
740,285

$
436,134

$
1,176,419

Specialty Pharma, net
137,329

96,245

233,574

 

193,978

193,978

Total revenues
1,165,463

198,482

1,363,945

 
740,285

630,112

1,370,397

Cost of goods sold
642,468

149,492

791,960

 
365,523

476,381

841,904

Gross profit
522,995

48,990

571,985

 
374,762

153,731

528,493

Selling, general and administrative
156,199

80,242

236,441

 
82,080

161,005

243,085

Research and development
137,543

17,287

154,830

 
127,926

71,296

199,222

Intellectual property legal development expenses
13,024

23

13,047

 
17,786

3,882

21,668

Impairment loss on tangible assets



 

828

828

Gain on sale of assets



 

(4,708
)
(4,708
)
Change in FV of contingent consideration



 

6,333

6,333

Legal settlement gain



 
(21,467
)

(21,467
)
Litigation, settlements and related charges

85,537

85,537

 



Acquisition, transaction-related and integration expenses
216,873

4,381

221,254

 
2,353


2,353

Restructuring expenses
42,309


42,309

 



Operating (loss) income
(42,953)

(138,480)

(181,433)

 
166,084

(84,905)

81,179

Other (expense) income:
 
 
 
 
 
 
 
   Interest expense, net
(100,691
)
(18,231
)
(118,922
)
 
(51,105
)
(39,740
)
(90,845
)
   Foreign exchange (loss) gain
(22,518
)
921

(21,597
)
 
25,751


25,751

   Loss on early extinguishment of debt
(19,667
)

(19,667
)
 
(2,531
)
(1,215
)
(3,746
)
   Loss on sale of international operations
(2,812
)

(2,812
)
 
(28,880
)

(28,880
)
   Other income (expense)
725

(638
)
87

 
(71
)
(1,430
)
(1,501
)
Total other (expense) income, net
(144,963)

(17,948)

(162,911)

 
(56,836)

(42,385)

(99,221)

(Loss) income before income taxes
(187,916)

(156,428)

(344,344)

 
109,248

(127,290)

(18,042)

(Benefit from) provision for income taxes
(6,943)

(6,273)

(13,216)

 
2,117

27,336

29,453

Net (loss) income
(180,973)

(150,155)

(331,128)

 
107,131

(154,626)

(47,495)

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

 
 
 
(106,079)

 
 
Less: Net loss (income) attributable to non-controlling interests
21,191

 
 
 
(1,052)

 
 
Accretion of redeemable non-controlling interest
(1,176)

 
 
 

 
 
Net (loss) attributable to Amneal Pharmaceuticals, Inc.
$
(12,152
)
 
 
 
$

 
 

Page 13 of 24



Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures

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


 
Three months ended Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net income (loss)
$
17,465

$

$
17,465

 
$
27,122

$
(44,457
)
$
(17,335
)
Adjusted to add (deduct):
 
 
 
 
 
 
 
Non-cash interest
1,452


1,452

 
1,432

6,547

7,979

GAAP Income taxes
5,109


5,109

 
(738
)
(3,045
)
(3,783
)
Amortization
25,655


25,655

 
1,278

17,088

18,366

Share-based compensation expense
3,590


3,590

 

6,490

6,490

Acquisition, transaction and integration
2,231


2,231

 
2,271


2,271

Restructuring and severance charges
(2,156
)

(2,156
)
 

10,937

10,937

Inventory related charges
17,422


17,422

 
2,677

20,478

23,155

Litigation, settlements and related charges
2,589


2,589

 



Gain on sale of assets



 

(4,379
)
(4,379
)
Asset impairment charges
8,541


8,541

 

13,623

13,623

Plant closure
10,199


10,199

 

4,334

4,334

Exchange loss
5,137


5,137

 
4,178


4,178

Loss on sale of international operations
2,812


2,812

 
28,880


28,880

Other
3,947


3,947

 
1,700

9,495

11,195

Income tax at 21%
(21,839
)

(21,839
)
 
(14,448
)
(11,998
)
(26,446
)
Adjusted net income
$
82,154

$

$
82,154

 
$
54,352

$
25,113

$
79,465

Adjusted diluted earnings per share
 
 
$
0.28

 
 
 
 


Page 14 of 24



Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures

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


 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net income (loss)
$
(180,973
)
$
(150,155
)
$
(331,128
)
 
$
107,131

$
(154,626
)
$
(47,495
)
Adjusted to add (deduct):
 
 
 
 
 
 
 
Non-cash interest
7,029

9,413

16,442

 
3,895

19,289

23,184

GAAP Income taxes
(6,943
)
(6,273
)
(13,216
)
 
2,117

27,336

29,453

Amortization
44,109

19,935

64,044

 
3,051

51,539

54,590

Share-based compensation expense
5,234

4,816

10,050

 

19,672

19,672

Acquisition, transaction and integration
217,969

9,829

227,798

 
2,353

150

2,503

Restructuring and severance charges
42,309

5,123

47,432

 
1,761

32,654

34,415

Loss on extinguishment of debt
19,667


19,667

 
2,531

1,215

3,746

Inventory related charges
44,905

9,894

54,799

 
19,282

20,478

39,760

Litigation, settlements and related charges
2,589

90,099

92,688

 

7,494

7,494

Loss/(gain) on sale of assets
878


878

 

(16,579
)
(16,579
)
Asset impairment charges
8,541

53

8,594

 

60,876

60,876

Plant closure
15,235


15,235

 

4,334

4,334

Royalty expense



 
8,684


8,684

Exchange loss (gain)
22,518

(921
)
21,597

 
(25,751
)

(25,751
)
Loss on sale of international operations
2,812


2,812

 
28,880


28,880

Other
5,827

1,953

7,780

 
4,158

15,382

19,540

Income tax at 21%
(52,858
)
1,309

(51,549
)
 
(33,199
)
(22,934
)
(56,133
)
Adjusted net income (loss)
$
198,848

$
(4,925
)
$
193,923

 
$
124,893

$
66,280

$
191,173

Adjusted diluted earnings per share
 
 
$
0.65

 
 
 
 

Page 15 of 24



Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures


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


 
Three months ended Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net income (loss)
$
17,465

$

$
17,465

 
$
27,122

$
(44,457
)
$
(17,335
)
Adjusted to add (deduct):
 
 
 
 
 
 
 
Interest expense, net
43,018


43,018

 
19,218

13,300

32,518

Income taxes
5,109


5,109

 
(738
)
(3,045
)
(3,783
)
Depreciation and amortization
43,013


43,013

 
11,958

23,781

35,739

EBITDA
108,605


108,605

 
57,560

(10,421)

47,139

 
 
 
 
 
 
 
 
Adjusted to add (deduct):
 
 
 
 
 
 
 
Share-based compensation expense
3,590


3,590

 

6,490

6,490

Acquisition, transaction and integration
2,231


2,231

 
2,271


2,271

Restructuring and severance charges
(2,156
)

(2,156
)
 

10,937

10,937

Inventory related charges
17,422


17,422

 
2,677

20,478

23,155

Litigation, settlements and related charges
2,589


2,589

 



(Gain)/loss on sale of assets



 

(4,379
)
(4,379
)
Asset impairment charges
8,541


8,541

 

13,623

13,623

Plant closure
10,199


10,199

 

4,334

4,334

Exchange loss
5,137


5,137

 
4,178


4,178

Loss on sale of international operations
2,812


2,812

 
28,880


28,880

Other
3,947


3,947

 
1,700

9,495

11,195

Adjusted EBITDA
$
162,917

$

$
162,917

 
$
97,266

$
50,557

$
147,823

























Page 16 of 24



Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures


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


 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Net (loss) income
$
(180,973
)
$
(150,155
)
$
(331,128
)
 
$
107,131

$
(154,626
)
$
(47,495
)
Adjusted to add (deduct):
 
 
 
 
 
 
 
Interest expense, net
100,691

18,445

119,136

 
51,105

39,740

90,845

Income taxes
(6,943)

(6,273)

(13,216
)
 
2,117

27,336

29,453

Depreciation and amortization
89,910

24,902

114,812

 
33,094

72,234

105,328

EBITDA
2,685

(113,081)

(110,396)

 
193,447

(15,316)

178,131

 
 
 
 
 
 
 
 
Adjusted to add (deduct):
 
 
 
 
 
 
 
Share-based compensation expense
5,234

4,816

10,050

 

19,672

19,672

Acquisition, transaction and integration
217,969

9,829

227,798

 
2,353

150

2,503

Restructuring and severance charges
42,309

5,123

47,432

 
1,761

32,654

34,415

Loss on extinguishment of debt
19,667


19,667

 
2,531

1,215

3,746

Inventory related charges
44,905

9,894

54,799

 
19,282

20,478

39,760

Litigation, settlements and related charges
2,589

90,099

92,688

 

7,494

7,494

Loss/(gain) on sale of assets
878


878

 

(16,579
)
(16,579
)
Asset impairment charges
8,541

53

8,594

 

60,876

60,876

Plant closure
15,235


15,235

 

4,334

4,334

Royalty expense



 
8,684


8,684

Exchange loss (gain)
22,518

(921
)
21,597

 
(25,751
)

(25,751
)
Loss on sale of international operations
2,812


2,812

 
28,880


28,880

Other
5,827

653

6,480

 
4,158

15,382

19,540

Adjusted EBITDA
$
391,169

$
6,465

$
397,634

 
$
235,345

$
130,360

$
365,705
















Page 17 of 24



Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures

The following tables reconcile actual 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 Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
276,382

$

$
276,382

 
$
119,720

$
177,782

$
297,502

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
25,655


25,655

 
1,278

17,086

18,364

Inventory step-up
17,050


17,050

 



Plant closure
10,199


10,199

 

4,334

4,334

Asset impairment charges
7,891


7,891

 

13,623

13,623

Share-based compensation expense
400


400

 



Restructuring and severance



 

9,502

9,502

Other inventory related charges
372


372

 
2,677

20,478

23,155

Adjusted cost of goods sold
$
214,815

$

$
214,815

 
$
115,765

$
112,759

$
228,524

 
 
 
 
 
 
 
 
Adjusted gross profit
$
261,672


$
261,672

 
$
138,968

$
107,106

$
246,074

Adjusted gross margin
54.9
%

54.9
%
 
54.6
%
48.7
%
51.8
%



 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
642,468

$
149,492

$
791,960

 
$
365,523

$
476,381

$
841,904

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
44,109

19,935

64,044

 
3,051

51,537

54,588

Inventory step-up
32,250


32,250

 



Plant closure
15,235

 
15,235

 

4,334

4,334

Asset impairment charges
7,891


7,891

 

52,903

52,903

Share-based compensation expense
515

 
515

 



Restructuring and severance



 

28,080

28,080

Other inventory related charges
12,655

9,894

22,549

 
19,282

20,478

39,760

Adjusted cost of goods sold
$
529,813

$
119,663

$
649,476

 
$
343,190

$
319,049

$
662,239

 
 
 
 
 
 
 
 
Adjusted gross profit
$
635,650

$
78,819

$
707,586

 
$
397,095

$
311,063

$
708,158

Adjusted gross margin
54.5
%
39.7
%
52.4
%
 
53.6
%
49.4
%
51.7
%




Page 18 of 24



Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures

The following tables reconcile the actual 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 Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
237,866

$

$
237,866

 
$
119,720

$
154,756

$
274,476

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
6,107


6,107

 
1,278

13,181

14,459

Inventory step-up
16,090


16,090

 



Plant closure
10,199


10,199

 

4,334

4,334

Asset impairment charges
7,891


7,891

 

13,623

13,623

Share-based compensation expense
400


400

 



Restructuring and severance



 

4,245

4,245

Other inventory related charges
372


372

 
2,677

20,478

23,155

Adjusted cost of goods sold
$
196,807

$

$
196,807

 
$
115,765

$
98,895

$
214,660

 
 
 
 
 
 
 
 
Adjusted gross profit
$
194,368


$
194,368

 
$
138,968

$
52,203

$
191,171

Adjusted gross margin
49.7
%

49.7
%
 
54.6
%
34.5
%
47.1
%




 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
579,994

$
122,761

$
702,755

 
$
365,523

$
408,278

$
773,801

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
13,910

13,823

27,733

 
3,051

39,964

43,015

Inventory step-up
29,340


29,340

 



Plant closure
15,235


15,235

 

4,334

4,334

Asset impairment charges
7,891


7,891

 

52,903

52,903

Share-based compensation expense
515


515

 



Restructuring and severance



 

20,817

20,817

Other inventory related charges
12,655

9,894

22,549

 
19,282

20,478

39,760

Adjusted cost of goods sold
$
500,448

$
99,044

$
599,492

 
$
343,190

$
269,782

$
612,972

 
 
 
 
 
 
 
 
Adjusted gross profit
$
527,686

$
3,193

$
530,879

 
$
397,095

$
166,352

$
563,447

Adjusted gross margin
51.3
%
3.1
%
47.0
%
 
53.6
%
38.1
%
47.9
%


Page 19 of 24



Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures

The following tables reconcile the actual 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 Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
38,516

$

$
38,516

 
$

$
23,026

$
23,026

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
19,548


19,548

 

3,905

3,905

Inventory step-up
960


960

 



Restructuring and severance



 

5,257

5,257

Adjusted cost of goods sold
$
18,008

$

$
18,008

 
$

$
13,864

$
13,864

 
 
 
 
 
 
 
 
Adjusted gross profit
$
67,304


$
67,304

 

$
54,903

$
54,903

Adjusted gross margin
78.9
%

78.9
%
 

79.8
%
79.8
%


 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Cost of goods sold
$
62,474

$
26,731

$
89,205

 
$

$
68,103

$
68,103

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
30,199

6,112

36,311

 

11,573

11,573

Inventory step-up
2,910


2,910

 



Restructuring and severance



 

7,263

7,263

Adjusted cost of goods sold
$
29,365

$
20,619

$
49,984

 
$

$
49,267

$
49,267

 
 
 
 
 
 
 
 
Adjusted gross profit
$
107,964

$
75,626

$
183,590

 

$
144,711

$
144,711

Adjusted gross margin
78.6
%
78.6
%
78.6
%
 

74.6
%
74.6
%
















Amneal Pharmaceutical, Inc.

Page 20 of 24



Non-GAAP Financial Measures

The following tables reconcile the actual selling, general and administrative expenses to combined adjusted selling, general and administrative expenses: (Unaudited; In thousands)

Consolidated Total Company

 
Three months ended Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Selling, general and administrative expenses
$
78,075

$

$
78,075

 
$
27,440

$
56,663

$
84,103

Adjusted to deduct:
 
 
 
 
 
 
 
Business development expenses



 

2,833

2,833

Share-based compensation expense
2,836


2,836

 



Legal expenses
2,589


2,589

 

214

214

Restructuring and severance charges



 

511

511

Other
3,409


3,409

 



Adjusted selling, general and administrative expenses
$
69,241

$

$
69,241

 
$
27,440

$
53,105

$
80,545


 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Selling, general and administrative expenses
$
156,199

$
80,242

$
236,441

 
$
82,080

$
161,005

$
243,085

Adjusted to deduct:
 
 
 
 
 
 
 
Business development expenses



 

2,925

2,925

Share-based compensation expense
4,259

5,037

9,296

 



Legal expenses
2,589


2,589

 

(191
)
(191
)
Restructuring and severance charges



 

782

782

Other
6,167

2,006

8,173

 



Adjusted selling, general and administrative expenses
$
143,184

$
73,199

$
216,383

 
$
82,080

$
157,489

$
239,569




















Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures

Page 21 of 24




The following tables reconcile the actual research and development expenses to combined adjusted research and development expenses: (Unaudited; In thousands)

 
Three months ended Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Research and development expenses
$
42,999

$

$
42,999

 
$
41,323

$
15,881

$
57,204

Intellectual property legal development expenses
4,401


4,401

 
6,693

1,640

8,333

Adjusted to deduct:
 
 
 
 
 
 
 
Intangible asset impairment charges
650


650

 



Share-based compensation expense
354


354

 



Restructuring and severance charges



 

356

356

Other
(414
)

(414
)
 

60

60

Adjusted research and development expenses
$
46,810

$

$
46,810

 
$
48,016

$
17,105

$
65,121


 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Research and development expenses
$
137,543

$
17,287

$
154,830

 
$
127,926

$
71,296

$
199,222

Intellectual property legal development expenses
13,024

23

13,047

 
17,786

3,882

21,668

Adjusted to deduct:
 
 
 
 
 
 
 
Intangible asset impairment charges
650


650

 

6,079

6,079

Share-based compensation expense
460


460

 



Restructuring and severance charges



 

3,281

3,281

Other
(414
)

(414
)
 

2,535

2,535

Adjusted research and development expenses
$
149,871

$
17,310

$
167,181

 
$
145,712

$
63,283

$
208,995


























Page 22 of 24



The following tables reconcile the actual income (loss) from operations to combined adjusted income (loss) from operations: (Unaudited; In thousands)

Generics Business

 
Three months ended Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Income (loss) from operations
$
92,238

$

$
92,238

 
$
93,434

$
(21,497
)
$
71,937

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
6,107


6,107

 
1,278

13,181

14,459

Inventory related charges including inventory step-up
16,462


16,462

 
2,677

20,478

23,155

Plant closure
10,199


10,199

 

4,334

4,334

Asset impairment charges
8,541


8,541

 

13,623

13,623

Share-based compensation expense
1,201


1,201

 



Restructuring and severance
(2,885
)

(2,885
)
 

4,601

4,601

Other
(314
)

(314
)
 

60

60

Adjusted income from operations
$
131,549

$

$
131,549

 
$
97,389

$
34,780

$
132,169





 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Income (loss) from operations
$
119,831

$
(130,640
)
$
(10,809
)
 
$
205,679

$
(49,642
)
$
156,037

Adjusted to deduct:
 
 
 
 
 
 
 
Acquisition, transaction and integration
114,622


114,622

 



Amortization
13,910

13,823

27,733

 
3,051

39,964

43,015

Inventory related charges including inventory step-up
41,995

9,894

51,889

 
19,282

20,478

39,760

Plant closure
15,235


15,235

 

4,334

4,334

Asset impairment charges
8,541


8,541

 

58,982

58,982

Share-based compensation expense
1,422


1,422

 



Restructuring and severance
21,912


21,912

 

23,183

23,183

Litigation, settlements and related charges

84,597

84,597

 



Other
(314
)

(314
)
 

2,535

2,535

Adjusted income from operations
$
337,154

$
(22,326
)
$
314,828

 
$
228,012

$
99,834

$
327,846














Page 23 of 24



The following tables reconcile the actual income from operations to combined adjusted income from operations: (Unaudited; In thousands)

Specialty Pharma Business

 
Three months ended Sept. 30, 2018
 
Three months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Income from operations
$
22,633

$

$
22,633

 
$

$
21,276

$
21,276

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
19,548


19,548

 

3,905

3,905

Inventory related charges including inventory step-up
960


960

 



Restructuring and severance
(27
)

(27
)
 

5,257

5,257

Other
474


474

 



Adjusted income from operations
$
43,588

$

$
43,588

 
$

$
30,438

$
30,438





 
Nine months ended Sept. 30, 2018
 
Nine months ended Sept. 30, 2017
 
 
Add:
 
 
 
Add:
 
 
Actual
Impax/ Gemini
Combined
 
Actual
Impax/ Gemini
Combined
Income (loss) from operations
$
31,550

$
37,885

$
69,435

 
$

$
50,094

$
50,094

Adjusted to deduct:
 
 
 
 
 
 
 
Amortization
30,199

6,112

36,311

 

11,573

11,573

Inventory related charges including inventory step-up
2,910


2,910

 



Restructuring and severance
2,394


2,394

 

8,178

8,178

Other
474


474

 



Adjusted income from operations
$
67,527

$
43,997

$
111,524

 
$

$
69,845

$
69,845



Page 24 of 24