Attached files
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| EX-99.2 - EXHIBIT 99.2 - Amneal Pharmaceuticals, Inc. | exhibit992.htm |
| 8-K - 8-K - Amneal Pharmaceuticals, Inc. | amrx-8kx08x09x2018.htm |
FOR IMMEDIATE RELEASE
CONTACT:
Mark Donohue
(215) 558-4526
AMNEAL ANNOUNCES SOLID SECOND QUARTER 2018 FINANCIAL RESULTS
‒ GAAP Net Revenue of $414 Million; Adjusted Net Revenue of $462 Million on a Combined Company Basis ‒
‒ GAAP Loss Per Diluted Share of $0.15; Adjusted Income Per Share of $0.24 on a Combined Company Basis ‒
‒ Integration of Amneal and Impax Advancing Ahead of Schedule; On Track to Achieve More Than $200 Million in Cost Synergies ‒
‒ Company Updates 2018 Financial Guidance ‒
BRIDGEWATER, NJ, August 9, 2018 – Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the “Company”) announced its results today for the quarter ended June 30, 2018.
“We delivered solid sequential growth across our Generics and Specialty Pharma businesses on a combined adjusted basis compared to the first quarter of 2018 as we began to realize the benefits of our recent transformative combination with Impax,” said Rob Stewart, President and CEO of Amneal.
“On a sequential basis, our Generics business delivered solid growth as we capitalized on the 16 product launches during the first six months of 2018, including generic versions of gConcerta®, (methylphenidate HCI ER), Mephyton® (phytonadione) and Welchol® (colesevelam). We also benefited from higher sales of generic versions of Vagifem® (yuvafem), Aggrenox® (aspirin and extended-release dipyridamole) and Voltaren® Gel 1% (diclofenac sodium gel), which more than offset the seasonal decline in sales of generic gTamiflu® (oseltamivir phosphate).
In our Specialty Pharma business, we achieved sequential growth from sales of key products Rytary® and Zomig® nasal spray and across our anthelmintic product franchise.
We have made significant progress with the integration of Impax and continue to anticipate delivering at least $200 million in annual synergies within three years of the May 4th closing. Although we are revising our 2018 guidance to reflect the delayed timing of deliveries of our Epinephrine Auto-Injector product from our third-party manufacturer and the timing of certain key launches, we remain confident in the long-term growth potential for Amneal as we leverage our enhanced portfolio and focus on driving commercial and operational excellence initiatives to fuel organic growth, generate savings and strong cash flow, and deliver long-term returns for our shareholders.”
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Summary of GAAP and Combined Adjusted Results
Three Months Ended | Variance | |||||||||||||
(Unaudited; In thousands) | June 30, 2018 | March 31, 2018 | June 30, 2017 | Sequential | Year/ Year | |||||||||
GAAP Results1 | ||||||||||||||
Net revenue | $ | 413,787 | $ | 275,189 | $ | 259,871 | 50.4 | % | 59.2 | % | ||||
Net (loss) income | $ | (250,090 | ) | $ | 51,652 | $ | 37,748 | NM | NM | |||||
Diluted EPS | $ | (0.15 | ) | N/A | N/A | N/A | N/A | |||||||
Non-GAAP Results2 | ||||||||||||||
Combined net revenue | $ | 462,328 | $ | 427,030 | $ | 474,171 | 8.2 | % | (2.5 | )% | ||||
Combined adjusted net income | $ | 70,153 | $ | 38,632 | $ | 62,472 | 81.6 | % | 12.3 | % | ||||
Combined EBITDA | $ | (204,048 | ) | $ | 14,930 | $ | 88,993 | NM | NM | |||||
Combined adjusted EBITDA | $ | 138,836 | $ | 95,904 | $ | 118,853 | 44.8 | % | 16.8 | % | ||||
Combined adjusted diluted EPS | $ | 0.24 | $ | 0.14 | N/A | 71.4 | % | N/A | ||||||
1 Current year financials reflect the results of Amneal Pharmaceuticals LLC consolidating the results of Impax Laboratories, LLC from the transaction closing date on May 4, 2018. Prior year GAAP results represent Amneal Pharmaceuticals LLC only.
2 Assumes the combination between Amneal Pharmaceuticals LLC and Impax Laboratories, LLC occurred on the first day of the quarter presented.
"NM" is used when the variance is not meaningful because it is immaterial in absolute or percentage terms.
The Company’s financial results are presented in accordance with GAAP, which includes the results of Amneal Pharmaceuticals LLC consolidating the results of Impax Laboratories, LLC (“Impax”) from the transaction closing date of May 4, 2018. Management believes that using additional non-GAAP measures on a combined company basis will facilitate the evaluation of the financial performance of the Company and its ongoing operations. The adjusted results presented combine the results of Amneal with Impax as if the closing date had occurred on the first day of all periods presented. All combined business results presented in this News Release are unaudited. Such combined business results are not prepared in accordance with Article 11 of Regulation S-X. Refer to the “Non-GAAP Financial Measures” section for additional information, including reconciliations of all GAAP to non-GAAP financial measures.
GAAP Basis Results
• | GAAP net revenue in the second quarter of 2018 was $413.8 million, an increase of 59.2%, compared to the second quarter of 2017, primarily due to the combination with Impax on May 4, 2018. |
• | GAAP net loss in the second quarter of 2018 was $250.1 million, compared to net income of $37.7 million for the second quarter of 2017. The second quarter’s results were impacted by the May 4th combination with Impax and include charges relating to the vesting of profit participation units (“PPUs”), special employee bonuses and restructuring charges as a result of the combination. |
• | GAAP diluted EPS in the second quarter of 2018 was a loss of $0.15, due to the PPU, bonus and restructuring charges noted above. GAAP diluted EPS for the second quarter of 2017 is not available as Amneal Pharmaceuticals LLC was a privately-held company for the period presented. |
Non-GAAP Combined Results
• | Combined adjusted net revenue in the second quarter of 2018 was $462.3 million, a decrease of 2.5%, compared to the second quarter of 2017, primarily due to a 6.4% decline in combined net revenue for the Generics business, partially offset by a 24.1% increase in combined net revenue for the Specialty Pharma business revenue. |
• | Combined adjusted net income in the second quarter of 2018 was $70.1 million, an increase of 12.3%, compared to the second quarter of 2017, primarily due to favorable product sales mix. |
• | Earnings before interest, taxes, depreciation and amortization (EBITDA) was a loss of $204.0 million in the second quarter of 2018, compared to a gain of $89.0 million in the second quarter of 2017, primarily due to the PPU, bonus and restructuring charges noted above. Combined adjusted EBITDA in the second quarter of 2018 was $138.8 million, an increase of 16.8%, compared to the second quarter of 2017, primarily due to a more favorable product sales mix. |
• | Combined adjusted diluted EPS in the second quarter of 2018 was $0.24. |
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Business Segment Information
The Company has two reportable segments, the Generics business and the Specialty Pharma business and does not allocate general corporate services to either segment.
Generics Business Information
The following Consolidated Statements of Operations table reconciles the Generics Business GAAP results to combined results. (Unaudited; In thousands)
Three months ended June 30, 2018 | Three months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax | Combined | GAAP | Impax | Combined | ||||||||||||||
Revenues | |||||||||||||||||||
Generics, net | $ | 361,770 | $ | 20,995 | $ | 382,765 | $ | 259,871 | $ | 150,889 | $ | 410,760 | |||||||
Cost of goods sold | 211,534 | 29,624 | 241,158 | 136,138 | 108,901 | 245,039 | |||||||||||||
Gross profit | 150,236 | (8,629) | 141,607 | 123,733 | 41,988 | 165,721 | |||||||||||||
Selling, general, and administrative | 16,621 | 4,340 | 20,961 | 14,845 | 8,034 | 22,879 | |||||||||||||
Research and development | 47,206 | 3,984 | 51,190 | 47,184 | 20,995 | 68,179 | |||||||||||||
In-process R&D impairment charge | - | - | - | - | - | - | |||||||||||||
Intellectual property legal development expenses | 4,004 | - | 4,004 | 4,926 | 319 | 5,245 | |||||||||||||
Acquisition, integration and transaction related expenses | 114,622 | - | 114,622 | - | - | - | |||||||||||||
Restructuring | 24,797 | - | 24,797 | - | - | - | |||||||||||||
Operating profit | $ | (57,014 | ) | $ | (16,953 | ) | $ | (73,967 | ) | $ | 56,778 | $ | 12,640 | $ | 69,418 | ||||
GAAP and combined gross margin | 41.5 | % | (41.1 | )% | 37.0 | % | 47.6 | % | 27.8 | % | 40.3 | % | |||||||
Adjusted gross profit | $ | 186,848 | $ | (1,690 | ) | $ | 185,158 | $ | 141,224 | $ | 64,162 | $ | 205,386 | ||||||
Adjusted gross margin | 51.6 | % | (8.0 | )% | 48.4 | % | 54.3 | % | 42.5 | % | 50.0 | % | |||||||
Six months ended June 30, 2018 | Six months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax | Combined | GAAP | Impax | Combined | ||||||||||||||
Revenues | |||||||||||||||||||
Generics, net | $ | 636,959 | $ | 102,237 | $ | 739,196 | $ | 485,552 | $ | 285,036 | $ | 770,588 | |||||||
Cost of goods sold | 342,128 | 122,761 | 464,889 | 245,803 | 251,516 | 497,319 | |||||||||||||
Gross profit | 294,831 | (20,524) | 274,307 | 239,749 | 33,520 | 273,269 | |||||||||||||
Selling, general, and administrative | 27,823 | 11,896 | 39,719 | 29,808 | 14,502 | 44,310 | |||||||||||||
Research and development | 91,414 | 13,623 | 105,037 | 86,603 | 38,391 | 124,994 | |||||||||||||
In-process R&D impairment charge | - | - | - | - | 6,079 | 6,079 | |||||||||||||
Intellectual property legal development expenses | 8,580 | 84,597 | 93,177 | 11,093 | 687 | 11,780 | |||||||||||||
Acquisition, integration and transaction related expenses | 114,622 | - | 114,622 | - | - | - | |||||||||||||
Restructuring | 24,797 | - | 24,797 | - | - | - | |||||||||||||
Operating profit | $ | 27,595 | $ | (130,640 | ) | $ | (103,045 | ) | $ | 112,245 | $ | (26,139 | ) | $ | 86,106 | ||||
GAAP and combined gross margin | 46.3 | % | (20.0 | )% | 37.1 | % | 49.4 | % | 11.8 | % | 35.5 | % | |||||||
Adjusted gross profit | $ | 333,203 | $ | 3,193 | $ | 336,396 | $ | 258,126 | $ | 116,115 | $ | 374,281 | |||||||
Adjusted gross margin | 52.3 | % | 3.1 | % | 45.5 | % | 53.2 | % | 40.8 | % | 48.6 | % | |||||||
(a) Adjusted gross profit is calculated as total revenues less adjusted cost of goods sold. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the "Non-GAAP Financial Measures" for a reconciliation of GAAP to non-GAAP items.
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GAAP Results
Generics business revenues increased 39.2% for the second quarter of 2018, compared to the prior year period. The increase is primarily attributable to increased sales of Aspirin Dipyridamole ER due to higher volume, higher demand for Diclofenac Sodium Gel 1%, new launches including Methylphenidate ER Tabs and Phytonadione, and additional revenue from the combination with Impax.
Gross margin for the second quarter of 2018 was 41.5%, compared to 47.6% for the second quarter of 2017, primarily due to higher cost of sales due to purchase accounting adjustments as well as the fact that the Impax portfolio contains products with relatively lower profit margins.
Non-GAAP Combined Results
Generics business combined net revenue in the second quarter of 2018 was $382.8 million, a decrease of 6.8%, compared to $410.8 million in the prior year period. The decrease is primarily due to revenue reductions from lower sales of Epinephrine Auto-Injector due to an ongoing supply shortage at the Company’s third-party manufacturer, increased competition on Budesonide, Lidocaine, Yuvafem and Fenofibrate, and the impact of discontinued products. The decrease was partially offset by increased revenue from new product launches and increased sales of Aspirin Dipyridamole ER and Diclofenac Sodium Gel 1%.
Gross margin for the second quarter of 2018 on a combined basis was 37.0%, compared to 40.3% for the second quarter of 2017, primarily due to a charge for inventory step-up. Adjusted gross margin on a combined adjusted basis was 48.4% for the second quarter of 2018, compared to 50.0% in the prior year period.
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Specialty Pharma Business Information
The following Consolidated Statements of Operations table reconciles the Specialty Pharma business GAAP results to combined results. (Unaudited; In thousands)
Three months ended June 30, 2018 | Three months ended June 30, 2017 | ||||||||||||||||
Add: | Add: | ||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||
Revenues | |||||||||||||||||
Rytary®, net | $ | 20,520 | $ | 8,578 | $ | 29,098 | $ - | $ | 21,922 | $ | 21,922 | ||||||
Zomig®, net | 9,695 | 3,933 | 13,628 | - | 12,325 | 12,325 | |||||||||||
All Other Specialty Pharma Products sales, net | 21,802 | 15,035 | 36,837 | - | 29,164 | 29,164 | |||||||||||
Total revenues | 52,017 | 27,546 | 79,563 | - | 63,411 | 63,411 | |||||||||||
Cost of goods sold | 23,958 | 6,711 | 30,669 | - | 25,269 | 25,269 | |||||||||||
Gross profit | 28,059 | 20,835 | 48,894 | - | 38,142 | 38,142 | |||||||||||
Selling, general, and administrative | 13,549 | 7,707 | 21,256 | - | 19,693 | 19,693 | |||||||||||
Research and development | 3,129 | 1,007 | 4,136 | - | 5,852 | 5,852 | |||||||||||
Intellectual property legal development expenses | 43 | - | 43 | - | 851 | 851 | |||||||||||
Restructuring | 2,421 | - | 2,421 | - | - | - | |||||||||||
Operating profit | $ | 8,917 | $ | 12,121 | $ | 21,038 | $ - | $ | 11,746 | $ | 11,746 | ||||||
GAAP and combined gross margin | 53.9 | % | 75.6 | % | 61.5 | % | - | 60.2 | % | 60.2 | % | ||||||
Adjusted gross profit | $ | 40,660 | $ | 22,363 | $ | 63,023 | $ - | $ | 43,982 | $ | 43,982 | ||||||
Adjusted gross margin | 78.2 | % | 81.2 | % | 79.2 | % | - | 69.4 | % | 69.4 | % | ||||||
Six months ended June 30, 2018 | Six months ended June 30, 2017 | ||||||||||||||||
Add: | Add: | ||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||
Revenues | |||||||||||||||||
Rytary®, net | $ | 20,520 | $ | 35,086 | $ | 55,606 | $ - | $ | 41,827 | $ | 41,827 | ||||||
Zomig®, net | 9,695 | 14,411 | 24,106 | - | 22,182 | 22,182 | |||||||||||
All Other Specialty Pharma Products sales, net | 21,802 | 46,748 | 68,550 | - | 61,202 | 61,202 | |||||||||||
Total revenues | 52,017 | 96,245 | 148,262 | - | 125,211 | 125,211 | |||||||||||
Cost of goods sold | 23,958 | 26,731 | 50,689 | - | 47,083 | 47,083 | |||||||||||
Gross profit | 28,059 | 69,514 | 97,573 | - | 78,128 | 78,128 | |||||||||||
Selling, general, and administrative | 13,549 | 27,942 | 41,491 | - | 38,816 | 38,816 | |||||||||||
Research and development | 3,129 | 3,664 | 6,793 | - | 10,945 | 10,945 | |||||||||||
Intellectual property legal development expenses | 43 | 23 | 66 | - | 1,555 | 1,555 | |||||||||||
Restructuring | 2,421 | 940 | 3,361 | - | - | - | |||||||||||
Operating profit | $ | 8,917 | $ | 36,945 | $ | 45,862 | $ - | $ | 26,812 | $ | 26,812 | ||||||
GAAP and combined gross margin | 53.9 | % | 72.2 | % | 65.8 | % | - | 62.4 | % | 62.4 | % | ||||||
Adjusted gross profit | $ | 40,660 | $ | 75,626 | $ | 116,286 | $ - | $ | 87,802 | $ | 87,802 | ||||||
Adjusted gross margin | 78.2 | % | 78.6 | % | 78.4 | % | - | 70.1 | % | 70.1 | % | ||||||
(a) Adjusted gross profit is calculated as total revenues less adjusted cost of goods sold. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the "Non-GAAP Financial Measures" for a reconciliation of GAAP to non-GAAP items.
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GAAP Results
The Specialty Pharma business is comprised of the Impax Specialty business acquired on May 4, 2018 and the Gemini Laboratories, LLC business acquired on May 7, 2018. Prior to these two transactions, Amneal did not have a specialty business.
Non-GAAP Combined Results
Specialty Pharma business combined net revenue in the second quarter 2018 was $79.6 million, an increase of 25.5%, compared to $63.4 million in the prior year period, driven by higher revenue from Rytary®, Zomig® and the anthelmintic products franchise.
Gross margin for the second quarter of 2018 on a combined basis was 61.5%, compared to 60.2% for the second quarter of 2017. Adjusted gross margin on a combined adjusted basis was 79.2% for the second quarter of 2018, compared to 69.4% in the prior year period, primarily due to favorable product sales mix.
Corporate and Other Information
(Unaudited; In thousands)
Three months ended June 30, 2018 | Three months ended June 30, 2017 | ||||||||||||||||||||
Add: | Add: | ||||||||||||||||||||
GAAP | Impax | Combined | GAAP | Impax | Combined | ||||||||||||||||
General and administrative expenses | $ | (22,833 | ) | $ | (8,223 | ) | $ | (31,056 | ) | $ | (12,093 | ) | $ | (27,767 | ) | $ | (39,860 | ) | |||
Unallocated corporate expenses | $ | (22,833 | ) | $ | (8,223 | ) | $ | (31,056 | ) | $ | (12,093 | ) | $ | (27,767 | ) | $ | (39,860 | ) | |||
Six months ended June 30, 2017 | Six months ended June 30, 2017 | ||||||||||||||||||||
Add: | Add: | ||||||||||||||||||||
GAAP | Impax | Combined | GAAP | Impax | Combined | ||||||||||||||||
General and administrative expenses | $ | (36,751 | ) | $ | (40,404 | ) | $ | (77,155 | ) | $ | (24,832 | ) | $ | (51,024 | ) | $ | (75,856 | ) | |||
Unallocated corporate expenses | $ | (36,751 | ) | $ | (40,404 | ) | $ | (77,155 | ) | $ | (24,832 | ) | $ | (51,024 | ) | $ | (75,856 | ) | |||
GAAP Results
General and administrative expenses in the second quarter of 2018 were $22.8 million, an increase of $10.7 million, compared to the second quarter of 2018. The increase was primarily due to general and administrative expenses of the Impax organization since the closing of the combination, which includes certain public company costs that will remain on a go-forward basis. The increase is also attributable to stock-based compensation.
Non-GAAP Combined Results
General and administrative expenses in the second quarter of 2018 were $31.1 million, a decrease of 22.1%, compared to the second quarter of 2017, primarily due to cost synergies as a result of the business combination with Impax.
Other Information
Interest expense, net for the second quarter of 2018 was $36.6 million, compared to $17.7 million in the second quarter of 2018, due to an increase in long-term debt as a result of the business combination with Impax.
2018 Financial Guidance
Amneal’s full year 2018 estimates are based on management's current expectations, including with respect to prescription trends, pricing levels, inventory levels, and the anticipated timing of future product launches and events. The Company does not provide forward-looking guidance metrics as outlined below on a GAAP basis. Consequently, the Company
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cannot provide a reconciliation between non-GAAP expectations and corresponding GAAP measures without unreasonable efforts because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for the reconciliation. The items include, but are not limited to, acquisition-related expenses, restructuring expenses, asset impairments and certain and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for the guidance period. The following statements are forward looking and actual results could differ materially depending on market conditions and the factors set forth under "Safe Harbor" below.
2018 Key Guidance Assumptions
• | Revised full year 2018 adjusted EBITDA and adjusted EPS guidance primarily due to the delayed timing of deliveries of Epinephrine Auto-Injector |
• | Generics business growth driven by new product launches which are expected to more than offset additional competition on existing portfolio |
‒ | Launched 22 products through August 8, 2018. Potential opportunity to launch an additional 25 generic products the remainder of the year |
• | Specialty Pharma business growth driven by Rytary®, Zomig® nasal spray and Emverm® |
• | Targeting synergies of $30 to $35 million |
‒ | Approximately 50% R&D, 30% SG&A, 20% Manufacturing |
Financial Guidance | |
Full Year 2018 | |
Adjusted Gross Margins | 50% to 55% |
Adjusted R&D as a % of Total Revenues | 10% to 15% |
Adjusted SG&A as a % of Total Revenues | 13% to 16% |
Adjusted EBITDA1 | $580 to $620 million (previously $600 to $650 million) |
Adjusted EPS | $0.90 to $1.00 (previously $0.95 to $1.10) |
Adjusted Effective Tax Rate | 20% to 22% |
Capital Expenditures | $80 to $100 million |
Diluted Shares Outstanding | Approximately 300 million |
1 Includes $30 million to $35 million of cost synergies expected to be realized in 2018.
Conference Call Information
Amneal will hold a conference call on August 9, 2018 at 8:30 a.m. Eastern Time to discuss its results. The call and presentation can also be accessed via a live Webcast through the Investor Relations section of Amneal’s Web site at https://investors.amneal.com/investor-relations, or directly at https://event.on24.com/wcc/r/1772042/9F111678E78468805741A3106805A25B. The number to call from within the United States is (877) 356-3814 and (706) 758-0033 internationally. The conference ID is 3045719. A replay of the conference call will be available shortly after the call for a period of seven days. To access the replay, dial (855) 859-2056 (in the U.S.) and (404) 537-3406 (international callers).
About Amneal
Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is an integrated specialty pharmaceutical company focused on developing, manufacturing and distributing generic, brand and biosimilar products. The Company has approximately 6,500 employees in its operations in North America, Asia, and Europe, working together to bring high-quality medicines to patients primarily within the United States.
Amneal is one of the largest and fastest growing generic pharmaceutical manufacturers in the United States, with an expanding portfolio of generic products to include complex dosage forms in a broad range of therapeutic areas. The Company markets a portfolio of branded pharmaceutical products through its Impax Specialty Pharma division focused principally on central nervous system disorders and parasitic infections. For more information, visit www.amneal.com.
Safe Harbor Statement
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Certain statements contained herein, regarding matters that are not historical facts, may be forward-looking statements (as defined in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with the safe harbor provisions. Such forward-looking statements include statements regarding management’s intentions, plans, beliefs, expectations or forecasts for the future. The words such as “may,” “will,” “could,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “assume,” “continue,” and similar words are intended to identify estimates and forward-looking statements.
Such forward-looking statements are based on the expectations of Amneal Pharmaceuticals, Inc. (“our” or the “Company”) and involve risks and uncertainties; consequently, actual results may differ materially from those expressed or implied in the statements. Such risks and uncertainties include, but are not limited to (i) the impact of global economic conditions, (ii) our ability to integrate the operations of Amneal Pharmaceuticals LLC (“Amneal”) and Impax Laboratories, LLC (“Impax”) pursuant to the transactions (the “Combination”) contemplated by that certain Business Combination Agreement dated as of October 17, 2017 by and among the Company, Amneal, Impax and K2 Merger Sub Corporation as amended on November 21, 2017 and December 16, 2017 and our ability to realize the anticipated synergies and other benefits of the Combination, (iii) our ability to successfully develop and commercialize new products, (iv) our ability to obtain exclusive marketing rights for our products and to introduce products on a timely basis, (v) the competition we face in the pharmaceutical industry from brand and generic drug product companies, (vi) our ability to manage our growth, (vii) the illegal distribution and sale by third parties of counterfeit versions of our products or of stolen products, (viii) market perceptions of us and the safety and quality of our products, (ix) our dependence on the sales of a limited number of products for a substantial portion of our total revenues, (x) our ability to develop, license or acquire and introduce new products on a timely basis, (xi) the ability of our approved products to achieve expected levels of market acceptance, (xii) the risk that we may discontinue the manufacture and distribution of certain existing products, (xiii) the impact of manufacturing or quality control problems, (xiv) the risk of product liability and other claims against us by consumers and other third parties, (xv) risks related to changes in the regulatory environment, including United States federal and state laws related to healthcare fraud abuse and health information privacy and security and changes in such laws, (xvi) changes to FDA product approval requirements, (xvii) risks related to federal regulation of arrangements between manufacturers of branded and generic products, (xviii) the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers, (xix) our dependence on a few locations that produce a majority of our products, (xx) relationships with our major customers, (xxi) the continuing trend of consolidation of certain customer groups, (xxii) our reliance on certain licenses to proprietary technologies from time to time, (xxiii) our dependence on third party suppliers and distributors for raw materials for our products and certain finished goods, (xxiv) the time necessary to develop generic and branded drug products, (xxv) our dependence on third parties for testing required for regulatory approval of our products, (xxvi) our dependence on third party agreements for a portion of our product offerings, (xxvii) our ability to make acquisitions of or investments in complementary businesses and products on advantageous terms, (xxviii) regulatory oversight related to our international operations, (xxix) our increased exposure to tax liabilities due to our international operations and the impact of recent U.S. tax legislation, (xxx) payments required by our Tax Receivable Agreement, (xxxi) our involvement in various legal proceedings, including those brought by third parties alleging infringement of their intellectual property rights, (xxxii) legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives, (xxxiii) the significant amount of resources we expend on research and development, (xxxiv) our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the future, (xxxv) risks inherent in conducting clinical trials, (xxxvi) our reporting and payment obligations under the Medicaid rebate program and other government purchase and rebate programs, (xxxvii) quarterly fluctuations in our operating results, (xxxviii) adjustments to our reserves based on price adjustments and sales allowances, (xix) impairment of our goodwill and other intangible assets, (xl) investigations and litigation concerning the calculation of average wholesale prices, (xli) cybersecurity and data leakage risks, (xlii) our ability to attract and retain talented employees and consultants, (xliii) our ability to protect our intellectual property rights, (xliv) uncertainties involved in the preparation of our financial statements, (xlv) our ability to maintain an effective system of internal controls over financial reporting, (xlvi) the impact of terrorist attacks and other acts of violence, (xlvii) expansion of social media platforms,
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(xlviii) our need to raise additional funds in the future, (xlix) the restrictions imposed by the terms of our credit agreement, (l) the fact that we are a holding company with nominal net worth, (li) the volatility of the price of our Class A Common Stock, (lii) the impact from future sales of shares by our stockholders on the price of our Class A Common Stock, (liii) the high concentration of ownership of our Class A Common Stock, (liv) the fact that we are controlled by APHC Holdings, LLC, (lv) the impact of our charter specifying the Court of Chancery of the State of Delaware as the sole and exclusive forum for all disputes between us and our stockholders, (lvi) the impact of anti-takeover provisions under Delaware law, (lvii) our current expectation that we will not pay dividends in the future, (lviii) the impact of any changed recommendations regarding our Class A Common Stock from analysts and (lix) such other factors as may be set forth in our public filings with the Securities and Exchange Commission.
Forward-looking statements included herein speak only as of the date hereof and we undertake no obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.
Trademarks referenced herein are the property of their respective owners.
# # #
Page 9 of 21
Amneal Pharmaceutical, Inc.
Consolidated Statements of Operations
(Unaudited; In thousands, except per share amounts)
Three months ended | Six months ended | ||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||||||||
Net Revenue | $ | 413,787 | $ | 259,871 | $ | 688,976 | $ | 485,552 | |||||
Cost of goods sold | 235,492 | 136,138 | 366,086 | 245,803 | |||||||||
Gross profit | 178,295 | 123,733 | 322,890 | 239,749 | |||||||||
Selling, general and administrative | 53,003 | 26,938 | 78,124 | 54,640 | |||||||||
Research and development | 50,335 | 47,184 | 94,544 | 86,603 | |||||||||
Intellectual property legal development expenses | 4,047 | 4,926 | 8,623 | 11,093 | |||||||||
Acquisition, transaction-related and integration expenses | 207,507 | 82 | 214,642 | 82 | |||||||||
Restructuring expenses | 44,465 | - | 44,465 | - | |||||||||
Operating (loss) income | (181,062) | 44,603 | (117,508) | 87,331 | |||||||||
Other (expense) income: | |||||||||||||
Interest expense, net | (36,622) | (17,726) | (57,673) | (31,887) | |||||||||
Foreign exchange (loss) gain | (25,946) | 15,332 | (17,381) | 29,929 | |||||||||
Loss on extinguishment of debt | (19,667) | (2,531) | (19,667) | (2,531) | |||||||||
Other income (expense) | 791 | (78) | 1,739 | 22 | |||||||||
Total other expense, net | (81,444) | (5,003) | (92,982) | (4,467) | |||||||||
(Loss) income before income taxes | (262,506) | 39,600 | (210,490) | 82,864 | |||||||||
(Benefit from) provision for income taxes | (12,416) | 1,852 | (12,052) | 2,855 | |||||||||
Net (loss) income | (250,090) | 37,748 | (198,438) | 80,009 | |||||||||
Less: Net loss (income) attributable to Amneal Pharmaceuticals LLC pre-Combination | 200,341 | (37,446) | 148,806 | (79,299) | |||||||||
Less: Net loss (income) attributable to non-controlling interests | 31,885 | (302) | 31,768 | (710) | |||||||||
Net loss attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest | (17,864) | - | (17,864) | - | |||||||||
Accretion of redeemable non-controlling interest | (1,240) | - | (1,240) | - | |||||||||
Net loss attributable to Amneal Pharmaceuticals, Inc. | $ | (19,104 | ) | $ - | $ | (19,104 | ) | $ - | |||||
Net Loss per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders: | |||||||||||||
Class A and Class B-1 basic and diluted | $ | (0.15 | ) | $ - | $ | (0.15 | ) | $ - | |||||
Weighted-average common shares outstanding: | |||||||||||||
Class A and Class B-1 basic and diluted | 127,112 | 127,112 | |||||||||||
Page 10 of 21
Amneal Pharmaceutical, Inc.
Condensed Consolidated Balance Sheets
(Unaudited; In thousands)
June 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 61,521 | $ | 74,166 | |||
Restricted cash | 7,069 | 3,756 | |||||
Trade accounts receivable, net | 626,491 | 351,367 | |||||
Inventories | 512,479 | 284,038 | |||||
Prepaid expenses and other current assets | 139,596 | 42,396 | |||||
Related party receivables | 738 | 16,210 | |||||
Total current assets | 1,347,894 | 771,933 | |||||
Property, plant and equipment, net | 569,328 | 486,758 | |||||
Goodwill | 386,475 | 26,444 | |||||
Intangible assets, net | 1,788,533 | 44,599 | |||||
Deferred tax asset, net | 373,705 | 898 | |||||
Other assets | 78,653 | 11,257 | |||||
Total assets | $ | 4,544,588 | $ | 1,341,889 | |||
Liabilities and Stockholders' Equity / Members' Deficit | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 555,634 | $ | 194,779 | |||
Note payable-related party | 77,549 | - | |||||
Current portion of financing obligations | 251 | 311 | |||||
Revolving credit facility | - | 75,000 | |||||
Current portion of long-term debt, net | 21,427 | 14,171 | |||||
Related-party payables | 14,875 | 12,622 | |||||
Total current liabilities | 669,736 | 296,883 | |||||
Long-term debt, net | 2,641,305 | 1,355,274 | |||||
Long-term portion of financing obligations | 39,220 | 39,987 | |||||
Deferred income taxes | 2,491 | 2,491 | |||||
Liabilities under tax receivable agreement | 194,825 | - | |||||
Other long-term liabilities | 45,667 | 7,793 | |||||
Related-party payable- long term | - | 15,043 | |||||
Total long-term liabilities | 2,923,508 | 1,420,588 | |||||
Redeemable non-controlling interest | 11,858 | - | |||||
Total stockholders' equity / members' deficit | 939,486 | (375,582) | |||||
Total liabilities and stockholders' equity / members’ deficit | $ | 4,544,588 | $ | 1,341,889 | |||
Page 11 of 21
Amneal Pharmaceutical, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited; In thousands)
Six Months Ended | |||||||
June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net (loss) income | $ | (198,438 | ) | $ | 80,009 | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 46,897 | 21,136 | |||||
Unrealized foreign currency gain (loss) | 17,032 | (33,089) | |||||
Amortization of debt issuance costs | 2,577 | 2,463 | |||||
Loss on extinguishment and modification of debt | 19,667 | 2,531 | |||||
Gain termination of lease | (3,524) | - | |||||
Deferred tax provision | (14,993) | 244 | |||||
Inventory provision | 17,426 | 2,047 | |||||
Stock-based compensation and PPU expense | 160,401 | - | |||||
Other | 927 | 124 | |||||
Changes in assets and liabilities: | - | - | |||||
Trade accounts receivable, net | (60,051) | 28,065 | |||||
Inventories | (71,655) | (10,890) | |||||
Prepaid expenses and other assets | 5,910 | (2,692) | |||||
Accounts payable and accrued expenses | 15,299 | (3,811) | |||||
Other liabilities | 4,331 | (1,791) | |||||
Related-party payables | (13,356) | 11,063 | |||||
Net cash (used in) provided by operating activities | (71,550) | 95,409 | |||||
Investing activities: | |||||||
Purchases of property, plant and equipment | (36,600) | (54,612) | |||||
Acquisition of product rights and licenses | (3,000) | - | |||||
Acquisitions, net of cash acquired | (321,324) | - | |||||
Net cash used in investing activities | (360,924) | (54,612) | |||||
Financing activities: | |||||||
Payments of deferred financing costs and debt extinguishment costs | (54,955) | (4,889) | |||||
Proceeds from issuance of debt | 1,325,383 | 250,000 | |||||
Payments on financing obligations | (129) | (175) | |||||
Net (payments) borrowings on revolving credit line | (75,000) | 25,000 | |||||
Payments on debt | (603,543) | (6,448) | |||||
Exercise of stock options | 1,977 | - | |||||
Equity contributions | 27,742 | 40 | |||||
Capital contribution from non-controlling interest | 360 | - | |||||
Distributions to members | (182,998) | (295,265) | |||||
Repayment of related party note | (14,842) | - | |||||
Net cash provided by (used in) financing activities | 423,995 | (31,737) | |||||
Effect of foreign exchange rate on cash | (853) | 5,238 | |||||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (9,332) | 14,298 | |||||
Cash, cash equivalents, and restricted cash - beginning of period | 77,922 | 37,546 | |||||
Cash, cash equivalents, and restricted cash - end of period | 68,590 | 51,844 | |||||
Cash and cash equivalents - end of period | 61,521 | 48,217 | |||||
Restricted cash - end of period | 7,069 | 3,627 | |||||
Cash, cash equivalents, and restricted cash - end of period | $ | 68,590 | $ | 51,844 | |||
Page 12 of 21
Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures
Combined adjusted revenue, adjusted net income, adjusted diluted EPS, EBITDA, adjusted EBITDA and adjusted cost of goods sold are not measures of financial performance under generally accepted accounting principles (GAAP) and should not be construed as a measure of financial performance. However, management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate and manage the Company’s operations and to better understand its business. Further, management believes the addition of non-GAAP financial measures provides meaningful supplementary information to, and facilitates analysis by, investors in evaluating the Company’s financial performance, results of operations and trends. The Company’s calculations of combined adjusted revenue, adjusted net income, adjusted diluted EPS, EBITDA, adjusted EBITDA and adjusted cost of goods sold may not be comparable to similarly designated measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment.
The following Consolidated Statements of Operations table reconciles GAAP results to combined results: (Unaudited; In thousands)
Three months ended June 30, 2018 | Three months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Revenues: | |||||||||||||||||||
Generics, net | $ | 361,770 | $ | 20,995 | $ | 382,765 | $ | 259,871 | $ | 150,889 | $ | 410,760 | |||||||
Specialty Pharma, net | 52,017 | 27,546 | 79,563 | - | 63,411 | 63,411 | |||||||||||||
Total revenues | 413,787 | 48,541 | 462,328 | 259,871 | 214,300 | 474,171 | |||||||||||||
Cost of goods sold | 235,492 | 36,335 | 271,827 | 136,138 | 134,170 | 270,308 | |||||||||||||
Gross profit | 178,295 | 12,206 | 190,501 | 123,733 | 80,130 | 203,863 | |||||||||||||
Selling, general and administrative | 53,003 | 20,270 | 73,273 | 26,938 | 54,494 | 81,432 | |||||||||||||
Research and development | 50,335 | 4,991 | 55,326 | 47,184 | 26,847 | 74,031 | |||||||||||||
Intellectual property legal development expenses | 4,047 | - | 4,047 | 4,926 | 1,170 | 6,096 | |||||||||||||
Acquisition, transaction-related and integration expenses | 207,507 | 4,381 | 211,888 | 82 | - | 82 | |||||||||||||
Restructuring expenses | 44,465 | - | 44,465 | - | - | - | |||||||||||||
Operating (loss) income | (181,062) | (17,436) | (198,498) | 44,603 | (2,381) | 42,222 | |||||||||||||
Other (expense) income: | |||||||||||||||||||
Interest expense, net | (36,622) | (4,539) | (41,161) | (17,726) | (13,214) | (30,940) | |||||||||||||
Foreign exchange (loss) gain | (25,946) | - | (25,946) | 15,332 | - | 15,332 | |||||||||||||
Loss on extinguishment of debt | (19,667) | - | (19,667) | (2,531) | - | (2,531) | |||||||||||||
Other income (expense) | 791 | (14) | 777 | (78) | (497) | (575) | |||||||||||||
Total other (expense) income, net | 81,444) | (4,553) | (85,997) | (5,003) | (13,711) | (18,714) | |||||||||||||
(Loss) income before income taxes | (262,506) | (21,989) | (284,495) | 39,600 | (16,092) | 23,508 | |||||||||||||
Provision for income taxes | (12,416) | 1,017 | (11,399) | 1,852 | (520) | 1,332 | |||||||||||||
Net (loss) income | (250,090) | (23,006) | (273,096) | 37,748 | (15,572) | 22,176 | |||||||||||||
Less: Net loss (income) attributable to Amneal Pharmaceuticals LLC pre-Combination | 200,341 | (37,446) | |||||||||||||||||
Less: Net loss (income) attributable to non-controlling interests | 31,885 | (302) | |||||||||||||||||
Net loss attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest | (17,864) | - | |||||||||||||||||
Accretion of redeemable non-controlling interest | (1,240) | - | |||||||||||||||||
Net income (loss) attributable to Amneal Pharmaceuticals, Inc. | $ | (19,104 | ) | $ - | |||||||||||||||
Page 13 of 21
Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures
The following Consolidated Statements of Operations table reconciles GAAP results to combined results: (Unaudited; In thousands)
Six months ended June 30, 2018 | Six months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Revenues: | |||||||||||||||||||
Generics, net | $ | 636,959 | $ | 102,237 | $ | 739,196 | $ | 485,552 | $ | 285,036 | $ | 770,588 | |||||||
Specialty Pharma, net | 52,017 | 96,245 | 148,262 | - | 125,211 | 125,211 | |||||||||||||
Total revenues | $688,976 | $198,482 | $887,458 | $485,552 | $410,247 | $895,799 | |||||||||||||
Cost of goods sold | 366,086 | 149,492 | 515,578 | 245,803 | 298,599 | 544,402 | |||||||||||||
Gross profit | 322,890 | 48,990 | 371,880 | 239,749 | 111,648 | 351,397 | |||||||||||||
Selling, general and administrative | 78,124 | 80,242 | 158,366 | 54,640 | 104,342 | 158,982 | |||||||||||||
Research and development | 94,544 | 17,287 | 111,831 | 86,603 | 49,336 | 135,939 | |||||||||||||
In-process IPR&D impairment charge | - | - | - | - | 6,079 | 6,079 | |||||||||||||
Intellectual property legal development expenses | 8,623 | - | 8,623 | 11,093 | 2,242 | 13,335 | |||||||||||||
Litigation, settlements and related charges | - | 85,537 | 85,537 | - | - | - | |||||||||||||
Acquisition, transaction-related and integration expenses | 214,642 | 4,381 | 219,023 | 82 | - | 82 | |||||||||||||
Restructuring expenses | 44,465 | - | 44,465 | - | - | - | |||||||||||||
Operating (loss) income | (117,508) | (138,457) | (255,965) | 87,331 | (50,351) | 36,980 | |||||||||||||
Other (expense) (income): | |||||||||||||||||||
Interest expense, net | (57,673) | (18,231) | (75,904) | (31,887) | (26,440) | (58,327) | |||||||||||||
Foreign exchange (loss) gain | (17,381) | 921 | (16,460) | 29,929 | - | 29,929 | |||||||||||||
Loss on early extinguishment of debt | (19,667) | - | (19,667) | (2,531) | (1,215) | (3,746) | |||||||||||||
Other income (expense) | 1,739 | (638) | 1,101 | 22 | (1,782) | (1,760) | |||||||||||||
Total other (expense) income, net | (92,982) | (17,948) | (110,930) | (4,467) | (29,437) | (33,904) | |||||||||||||
(Loss) income before income taxes | (210,490) | (156,405) | (366,895) | 82,864 | (79,788) | 3,076 | |||||||||||||
Provision for income taxes | (12,052) | (6,273) | (18,325) | 2,855 | 30,381 | 33,236 | |||||||||||||
Net (loss) income | (198,438) | (150,132) | (348,570) | 80,009 | (110,169) | (30,160) | |||||||||||||
Less: Net loss (income) attributable to Amneal Pharmaceuticals LLC pre-Combination | 148,806 | (79,299) | |||||||||||||||||
Less: Net loss (income) attributable to non-controlling interests | 31,768 | (710) | |||||||||||||||||
Net loss attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest | (17,864) | - | |||||||||||||||||
Accretion of redeemable non-controlling interest | (1,240) | - | |||||||||||||||||
Net income (loss) attributable to Amneal Pharmaceuticals, Inc. | $ | (19,104 | ) | $ - | |||||||||||||||
Page 14 of 21
Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures
The following table reconciles GAAP net loss to combined adjusted net income:
(Unaudited; In thousands, except per share amounts)
Three months ended June 30, 2018 | Three months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Net loss | $ | (250,090 | ) | $ | (23,006 | ) | $ | (273,096 | ) | $ | 37,748 | $ | (15,917 | ) | $ | 21,831 | |||
Adjusted to add (deduct): | |||||||||||||||||||
Non-cash interest | 4,407 | 2,549 | 6,956 | 1,521 | 6,430 | 7,951 | |||||||||||||
GAAP Income taxes | (12,416) | 1,017 | (11,399) | 1,852 | (520) | 1,332 | |||||||||||||
Amortization | 16,694 | 5,462 | 22,156 | 886 | 17,219 | 18,105 | |||||||||||||
Share-based compensation expense | 1,644 | - | 1,644 | - | 6,225 | 6,225 | |||||||||||||
Acquisition, transaction and integration | 207,507 | 4,381 | 211,888 | 81 | 99 | 180 | |||||||||||||
Restructuring and severance charges | 44,465 | 223 | 44,688 | - | 13,943 | 13,943 | |||||||||||||
Loss on extinguishment of debt | 19,667 | - | 19,667 | - | - | - | |||||||||||||
Inventory related charges | 32,519 | 3,005 | 35,524 | 16,605 | - | 16,605 | |||||||||||||
Litigation, settlements and related charges | - | - | - | - | 7,989 | 7,989 | |||||||||||||
(Gain)/loss on sale of assets | 878 | - | 878 | - | (12,200) | (12,200) | |||||||||||||
Asset impairment charges | - | - | - | - | 1,894 | 1,894 | |||||||||||||
Royalty expense | - | - | - | 4,921 | - | 4,921 | |||||||||||||
Exchange gain | 25,946 | - | 25,946 | (15,333) | - | (15,333) | |||||||||||||
Other | 2,649 | 1,300 | 3,949 | 997 | 4,639 | 5,636 | |||||||||||||
Income tax at 21% | (19,713) | 1,064 | (18,648) | (10,348) | (6,258) | (16,607) | |||||||||||||
Adjusted Net Income | $ | 74,157 | $ | (4,005 | ) | $ | 70,153 | $ | 38,930 | $ | 23,543 | $ | 62,472 | ||||||
Adjusted Earnings per share | $ | 0.24 | |||||||||||||||||
Page 15 of 21
Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures
The following table reconciles GAAP net loss to combined adjusted net income:
(Unaudited; In thousands, except per share amounts)
Six months ended June 30, 2018 | Six months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Net loss | $ | (198,438 | ) | $ | (150,132 | ) | $ | (348,570 | ) | $ | 80,009 | $ | (110,198 | ) | $ | (30,189 | ) | ||
Adjusted to add (deduct): | |||||||||||||||||||
Non-cash interest | 5,577 | 9,413 | 14,990 | 2,463 | 12,742 | 58,397 | |||||||||||||
GAAP Income taxes | (12,052) | (6,273) | (18,325) | 2,855 | 30,381 | 33,236 | |||||||||||||
Amortization | 18,454 | 19,935 | 38,389 | 1,772 | 34,451 | 36,223 | |||||||||||||
Share-based compensation expense | 1,644 | 4,816 | 6,460 | - | 13,182 | 13,182 | |||||||||||||
Acquisition, transaction and integration | 215,738 | 9,829 | 225,567 | - | 150 | 150 | |||||||||||||
Restructuring and severance charges | 44,465 | 5,123 | 49,588 | 1,761 | 21,718 | 23,479 | |||||||||||||
Loss on extinguishment of debt | 19,667 | - | 19,667 | - | 1,215 | 1,215 | |||||||||||||
Inventory related charges | 32,519 | 9,894 | 42,413 | 16,605 | - | 16,605 | |||||||||||||
Litigation, settlements and related charges | - | 90,099 | 90,099 | - | 7,494 | 7,494 | |||||||||||||
(Gain)/loss on sale of assets | 878 | - | 878 | - | (12,200) | (12,200) | |||||||||||||
Asset impairment charges | - | 53 | 53 | - | 47,253 | 47,253 | |||||||||||||
Royalty expense | - | - | - | 8,684 | - | 8,684 | |||||||||||||
Exchange gain | 17,381 | (921) | 16,460 | (29,929) | - | (29,929) | |||||||||||||
Other | 1,880 | 1,953 | 3,833 | 2,458 | 5,887 | 8,345 | |||||||||||||
Income tax at 21% | (31,020) | 1,304 | (29,715) | (18,202) | (10,936) | (38,194) | |||||||||||||
Adjusted Net Income | $ | 116,693 | $ | (5,065 | ) | $ | (111,787 | ) | $ | 68,476 | $ | 41,138 | $ | 143,680 | |||||
Adjusted Earnings per share | $ | 0.37 | |||||||||||||||||
Page 16 of 21
Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures
The following table reconciles GAAP net loss to combined EBITDA and combined adjusted EBITDA:
(Unaudited, In thousands)
Three months ended June 30, 2018 | Three months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Net loss | $ | (250,090 | ) | $ | (23,006 | ) | $ | (273,096 | ) | $ | 37,748 | $ | (15,917 | ) | $ | 21,831 | |||
Adjusted to add (deduct): | |||||||||||||||||||
Interest expense, net | 36,622 | 4,753 | 41,375 | 17,726 | 13,214 | 30,940 | |||||||||||||
Income taxes | (12,416) | 1,017 | (11,399) | 1,852 | (520) | 1,332 | |||||||||||||
Depreciation and amortization | 32,147 | 6,925 | 39,072 | 10,535 | 24,355 | 34,890 | |||||||||||||
EBITDA | (193,737) | (10,311) | (204,048) | 67,861 | 21,132 | 88,993 | |||||||||||||
Adjusted to add (deduct): | |||||||||||||||||||
Share-based compensation expense | 1,644 | - | 1,644 | - | 6,225 | 6,225 | |||||||||||||
Acquisition, transaction and integration | 207,507 | 4,381 | 211,888 | 81 | 99 | 180 | |||||||||||||
Restructuring and severance charges | 44,465 | 223 | 44,688 | - | 13,943 | 13,943 | |||||||||||||
Loss on extinguishment of debt | 19,667 | - | 19,667 | - | - | - | |||||||||||||
Inventory related charges | 32,519 | 3,005 | 35,524 | 16,605 | - | 16,605 | |||||||||||||
Litigation, settlements and related charges | - | - | - | - | 7,989 | 7,989 | |||||||||||||
(Gain)/loss on sale of assets | 878 | - | 878 | - | (12,200) | (12,200) | |||||||||||||
Asset impairment charges | - | - | - | - | 1,894 | 1,894 | |||||||||||||
Royalty expense | - | - | - | 4,921 | - | 4,921 | |||||||||||||
Exchange gain | 25,946 | - | 25,946 | (15,333) | - | (15,333) | |||||||||||||
Other | 2,649 | - | 2,649 | 997 | 4,639 | 5,636 | |||||||||||||
Adjusted EBITDA | $ | 141,538 | $ | (2,702 | ) | $ | 138,836 | $ | 75,132 | $ | 43,721 | $ | 118,853 | ||||||
Page 17 of 21
Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures
The following table reconciles GAAP net loss to combined EBITDA and combined adjusted EBITDA:
(Unaudited; In thousands)
Six months ended June 30, 2018 | Six months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Net loss | $ | (198,438 | ) | $ | (150,132 | ) | $ | (348,570 | ) | $ | 80,009 | $ | (110,198 | ) | $ | (30,189 | ) | ||
Adjusted to add (deduct): | |||||||||||||||||||
Interest expense, net | 57,673 | 18,445 | 76,118 | 31,887 | 26,440 | 58,327 | |||||||||||||
Income taxes | (12,052) | (6,273) | (18,325) | 2,855 | 30,381 | 33,236 | |||||||||||||
Depreciation and amortization | 46,897 | 24,902 | 71,799 | 21,135 | 48,453 | 69,588 | |||||||||||||
EBITDA | (105,920) | (113,058) | (218,978) | 135,886 | (4,924) | 130,962 | |||||||||||||
Adjusted to add (deduct): | |||||||||||||||||||
Share-based compensation expense | 1,644 | 4,816 | 6,460 | - | 13,182 | 13,182 | |||||||||||||
Acquisition, transaction and integration | 215,738 | 9,829 | 225,567 | - | 150 | 150 | |||||||||||||
Restructuring and severance charges | 44,465 | 5,123 | 49,588 | 1,761 | 21,718 | 23,479 | |||||||||||||
Loss on extinguishment of debt | 19,667 | - | 19,667 | - | 1,215 | 1,215 | |||||||||||||
Inventory related charges | 32,519 | 9,894 | 42,413 | 16,605 | - | 16,605 | |||||||||||||
Litigation, settlements and related charges | - | 90,099 | 90,099 | - | 7,494 | 7,494 | |||||||||||||
(Gain)/loss on sale of assets | 878 | - | 878 | - | (12,200) | (12,200) | |||||||||||||
Asset impairment charges | - | 53 | 53 | - | 47,253 | 47,253 | |||||||||||||
Royalty expense | - | - | - | 8,684 | - | 8,684 | |||||||||||||
Exchange gain | 17,381 | (921) | 16,460 | 29,929) | - | (29,929) | |||||||||||||
Other | 1,880 | 653 | 2,533 | 2,458 | 5,887 | 8,345 | |||||||||||||
Adjusted EBITDA | $ | 228,252 | $ | 6,488 | $ | 234,740 | $ | 135,465 | $ | 79,774 | $ | 215,239 | |||||||
Page 18 of 21
Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures
The following tables reconciles GAAP cost of goods sold to combined adjusted cost of goods sold for purposes of determining combined adjusted cost of goods sold, combined adjusted gross profit and combined adjusted gross margin: (Unaudited; In thousands)
Consolidated Total Company
Three months ended June 30, 2018 | Three months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Cost of goods sold | $ | 235,492 | $ | 36,335 | $ | 271,827 | $ | 136,138 | $ | 134,170 | $ | 270,308 | |||||||
Adjusted to deduct: | |||||||||||||||||||
Amortization | 16,694 | 5,462 | 22,506 | 886 | 17,219 | 18,105 | |||||||||||||
Inventory step-up | 15,200 | - | 15,200 | - | - | - | |||||||||||||
Restructuring and severance | - | - | - | - | 10,795 | 10,795 | |||||||||||||
Other inventory related charges | 17,319 | 3,005 | 20,324 | 16,605 | - | 16,605 | |||||||||||||
Adjusted cost of goods sold | $ | 186,279 | $ | 27,868 | $ | 213,797 | $ | 118,647 | $ | 106,156 | $ | 224,803 | |||||||
Adjusted gross profit | $ | 227,508 | $ | 20,673 | $ | 248,181 | $ | 141,224 | $ | 108,144 | $ | 249,368 | |||||||
Adjusted gross margin | 55.0 | % | 42.6 | % | 53.7 | % | 54.3 | % | 50.5 | % | 52.6 | % | |||||||
Six months ended June 30, 2018 | Six months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Cost of goods sold | $ | 366,086 | $ | 149,492 | $ | 515,578 | $ | 245,803 | $ | 298,599 | $ | 544,402 | |||||||
Adjusted to deduct: | |||||||||||||||||||
Amortization | 18,454 | 19,935 | 38,389 | 1,772 | 34,451 | 36,223 | |||||||||||||
Restructuring | - | - | - | - | 18,578 | 18,520 | |||||||||||||
Intangible Asset impairment | - | - | - | - | 39,280 | 39,280 | |||||||||||||
Inventory step-up | 15,200 | - | 15,200 | - | - | - | |||||||||||||
Other inventory related charges | 17,319 | 9,894 | 27,213 | 16,605 | - | 16,605 | |||||||||||||
Adjusted cost of goods sold | $ | 315,113 | $ | 119,663 | $ | 434,776 | $ | 227,426 | $ | 206,290 | $ | 433,774 | |||||||
Adjusted gross profit | $ | 373,863 | $ | 78,819 | $ | 452,682 | $ | 258,126 | $ | 203,957 | $ | 462,083 | |||||||
Adjusted gross margin | 54.3 | % | 39.7 | % | 51.0 | % | 53.2 | % | 49.7 | % | 51.6 | % | |||||||
Page 19 of 21
Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures
The following tables reconciles the GAAP cost of goods sold to combined adjusted cost of goods sold for purposes of determining combined adjusted cost of goods sold, combined adjusted gross profit and combined adjusted gross margin: (Unaudited; In thousands)
Generics Business
Three months ended June 30, 2018 | Three months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Cost of goods sold | $ | 211,534 | $ | 29,624 | $ | 241,158 | $ | 136,138 | $ | 108,901 | $ | 245,039 | |||||||
Adjusted to deduct: | |||||||||||||||||||
Amortization | 6,043 | 3,934 | 10,327 | 886 | 13,385 | 14,271 | |||||||||||||
Restructuring and severance | - | - | - | - | 8,789 | 8,789 | |||||||||||||
Inventory step-up | 13,250 | - | 13,250 | - | - | - | |||||||||||||
Other inventory related charges | 17,319 | 3,005 | 20,324 | 16,605 | - | 16,605 | |||||||||||||
Adjusted cost of goods sold | $ | 174,922 | $ | 22,685 | $ | 197,257 | $ | 118,647 | $ | 86,727 | $ | 205,374 | |||||||
Adjusted gross profit | $ | 186,848 | $ | (1,690 | ) | $ | 185,158 | $ | 141,224 | $ | 64,162 | $ | 205,386 | ||||||
Adjusted gross margin | 51.6 | % | (8.0 | )% | 48.4 | % | 54.3 | % | 42.5 | % | 50.0 | % | |||||||
Six months ended June 30, 2018 | Six months ended June 30, 2017 | ||||||||||||||||||
Add: | Add: | ||||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | ||||||||||||||
Cost of goods sold | $ | 342,128 | $ | 122,761 | $ | 464,889 | $ | 245,803 | $ | 251,516 | $ | 497,319 | |||||||
Adjusted to deduct: | |||||||||||||||||||
Amortization | 7,803 | 13,823 | 21,626 | 1,772 | 26,783 | 28,555 | |||||||||||||
Restructuring and severance | - | - | - | - | 16,572 | 16,572 | |||||||||||||
Intangible Asset impairment | - | - | - | - | 39,280 | 39,280 | |||||||||||||
Inventory step-up | 13,250 | - | 13,250 | - | - | - | |||||||||||||
Other inventory related charges | 17,319 | 9,894 | 27,213 | 16,605 | - | 16,605 | |||||||||||||
Adjusted cost of goods sold | $ | 303,756 | $ | 99,044 | $ | 402,800 | $ | 227,426 | $ | 168,881 | $ | 396,307 | |||||||
Adjusted gross profit | $ | 333,203 | $ | 3,193 | $ | 336,396 | $ | 258,126 | $ | 116,155 | $ | 374,281 | |||||||
Adjusted gross margin | 52.3 | % | 3.1 | % | 45.5 | % | 53.2 | % | 40.8 | % | 48.6 | % | |||||||
Page 20 of 21
Amneal Pharmaceutical, Inc.
Non-GAAP Financial Measures
The following tables reconciles the GAAP cost of goods sold to combined adjusted cost of goods sold for purposes of determining combined adjusted cost of goods sold, combined adjusted gross profit and combined adjusted gross margin: (Unaudited; In thousands)
Specialty Pharma Business
Three months ended June 30, 2018 | Three months ended June 30, 2017 | |||||||||||||||||
Add: | Add: | |||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | |||||||||||||
Cost of goods sold | $ | 23,958 | $ | 6,711 | $ | 30,669 | $ - | $ | 25,269 | $ | 25,269 | |||||||
Adjusted to deduct: | ||||||||||||||||||
Amortization | 10,651 | 1,528 | 12,179 | - | 3,834 | 3,834 | ||||||||||||
Inventory step-up | 1,950 | - | 1,950 | - | - | - | ||||||||||||
Other inventory related charges | - | - | - | - | 2,006 | 2,006 | ||||||||||||
Adjusted cost of goods sold | $ | 11,357 | $ | 5,183 | $ | 16,540 | $ - | $ | 19,429 | $ | 19,429 | |||||||
Adjusted gross profit | $ | 40,660 | $ | 22,363 | $ | 63,023 | $ - | $ | 43,982 | $ | 43,982 | |||||||
Adjusted gross margin | 78.2 | % | 81.2 | % | 79.2 | % | 0.0 | % | 69.4 | % | 69.4 | % | ||||||
Six months ended June 30, 2018 | Six months ended June 30, 2017 | |||||||||||||||||
Add: | Add: | |||||||||||||||||
GAAP | Impax/ Gemini | Combined | GAAP | Impax/ Gemini | Combined | |||||||||||||
Cost of goods sold | $ | 23,958 | $ | 26,731 | $ | 50,689 | $ - | $ | 47,083 | $ | 47,083 | |||||||
Adjusted to deduct: | ||||||||||||||||||
Amortization | 10,651 | 6,112 | 16,763 | - | 7,668 | 7,668 | ||||||||||||
Restructuring | - | - | - | - | 2,006 | 2,006 | ||||||||||||
Intangible Asset impairment | - | - | - | - | - | - | ||||||||||||
Inventory step-up | 1,950 | - | 1,950 | - | - | - | ||||||||||||
Other inventory related charges | - | - | - | - | - | - | ||||||||||||
Adjusted cost of goods sold | $ | 11,357 | $ | 20,619 | $ | 31,976 | $ - | $ | 37,409 | $ | 37,409 | |||||||
Adjusted gross profit | $ | 40,660 | $ | 75,626 | $ | 116,286 | $ - | $ | 87,802 | $ | 87,802 | |||||||
Adjusted gross margin | 78.2 | % | 78.6 | % | 78.4 | % | 0.0 | % | 70.1 | % | 70.1 | % | ||||||
Page 21 of 21