Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the “Company”) announced its results today for the second quarter ended June 30, 2019.
Summary of GAAP and Non-GAAP Combined and Adjusted Results (Unaudited; In thousands, except per share amounts) | ||||||||||
Three Months Ended | ||||||||||
June 30, 2019 | June 30, 2018 | Year/ Year Variance | ||||||||
GAAP Results(2) | ||||||||||
Net revenue | $ | 404,642 | $ | 413,787 | (2.2)% | |||||
Net loss attributable to Amneal Pharmaceuticals, Inc. | $ | (16,902 | ) | $ | (19,104 | ) | 11.5% | |||
Diluted loss per share attributable to Amneal Pharmaceuticals, Inc. | $ | (0.13 | ) | $ | (0.15 | ) | 13.3% | |||
Non-GAAP Results(1)(3) | ||||||||||
Combined net revenue | $ | 404,642 | $ | 462,328 | (12.5)% | |||||
Combined adjusted net income | $ | 26,669 | $ | 69,895 | (61.8)% | |||||
Combined adjusted EBITDA | $ | 92,081 | $ | 138,622 | (33.6)% | |||||
Combined adjusted diluted EPS | $ | 0.09 | $ | 0.23 | (60.9)% | |||||
(1) See “Non-GAAP Financial Measures” below.
(2) Prior year financials reflect the results of Amneal Pharmaceuticals LLC consolidating the results of Impax Laboratories, LLC from the transaction closing date on May 4, 2018.
(3) For the three months ended June 30, 2018, assumes the combination between Amneal Pharmaceuticals LLC and Impax Laboratories, LLC, and the acquisition of Gemini Laboratories, LLC, excluding the impact of financing and acquisition accounting adjustments, occurred on January 1, 2018.
Second Quarter 2019 Performance
Net revenue in the second quarter of 2019 was $405 million, a decrease of 2.2% compared to the second quarter of 2018, due to lower Generics segment revenue partially offset by an increase in Specialty segment revenue. Net loss attributable to Amneal Pharmaceuticals, Inc. was $17 million in the second quarter of 2019 compared to a net loss of $19 million in the prior year period. Diluted EPS in the second quarter of 2019 was a loss of $0.13 compared to a loss of $0.15 in the prior year period.
Combined net revenue(1) in the second quarter of 2019 was $405 million, a decrease of 12.5% compared to the second quarter of 2018, due to a decline in revenue from both the Generics and Specialty segments. Combined adjusted net income(1) in the second quarter of 2019 was $27 million, a decrease of 61.8% compared to the prior year period. Combined adjusted EBITDA(1) in the second quarter of 2019 was $92 million, a decrease of 33.6% compared to the prior year period, due to lower revenue and lower gross margins, partially offset by lower operating expenses as a result of cost synergies from the business combination with Impax. Combined adjusted diluted EPS in the second quarter of 2019 was $0.09, compared to $0.23 for the prior year period.
(1) See “Non-GAAP Financial Measures” below.
Amneal Pharmaceuticals, Inc. Reconciliation of Generics Operating Income (Loss) to Generics Combined Operating Income (Loss) (Unaudited; In thousands) | |||||||||||||||||||||||
Generics | Three months ended June 30, 2019 | Three months ended June 30, 2018 | |||||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||||||
Net revenue - Generics | $ | 335,064 | $ | — | $ | 335,064 | $ | 361,770 | $ | 20,995 | $ | 382,765 | |||||||||||
Cost of goods sold | 263,423 | — | 263,423 | 211,534 | 29,624 | 241,158 | |||||||||||||||||
Cost of goods sold impairment charges | 3,012 | — | 3,012 | — | — | — | |||||||||||||||||
Gross profit | 68,629 | — | 68,629 | 150,236 | (8,629 | ) | 141,607 | ||||||||||||||||
Selling, general, and administrative | 14,379 | — | 14,379 | 19,621 | 4,340 | 23,961 | |||||||||||||||||
Research and development | 45,448 | — | 45,448 | 47,206 | 3,984 | 51,190 | |||||||||||||||||
Restructuring and other charges | 418 | — | 418 | 24,797 | — | 24,797 | |||||||||||||||||
Legal settlement gains | — | — | — | (3,000 | ) | — | (3,000 | ) | |||||||||||||||
Intellectual property legal development expenses | 2,511 | — | 2,511 | 4,004 | — | 4,004 | |||||||||||||||||
Acquisition, integration and transaction related expenses | 987 | — | 987 | 114,622 | — | 114,622 | |||||||||||||||||
Operating income (loss) | $ | 4,886 | $ | — | $ | 4,886 | $ | (57,014 | ) | $ | (16,953 | ) | $ | (73,967 | ) | ||||||||
Gross margin | 20.5 | % | — | % | 20.5 | % | 41.5 | % | (41.1 | %) | 37.0 | % | |||||||||||
Adjusted gross profit (Non-GAAP)(4) | $ | 115,434 | $ | — | $ | 115,434 | $ | 186,848 | $ | (1,690 | ) | $ | 185,158 | ||||||||||
Adjusted gross margin (Non-GAAP)(5) | 34.5 | % | — | % | 34.5 | % | 51.6 | % | (8.0 | %) | 48.4 | % | |||||||||||
Adjusted operating income (Non-GAAP) | $ | 64,748 | $ | — | $ | 64,748 | $ | 120,662 | $ | (11,339 | ) | $ | 109,323 | ||||||||||
(4) Adjusted gross profit is calculated as combined net revenue less adjusted cost of goods sold. See Non-GAAP reconciliations below for calculation of adjusted cost of goods sold.
(5) Adjusted gross margin is calculated as adjusted gross profit divided by combined net revenue.
Amneal Pharmaceuticals, Inc. Reconciliation of Generics Operating (Loss) Income to Generics Combined Operating Loss (Unaudited; In thousands) | |||||||||||||||||||||||
Generics | Six months ended June 30, 2019 | Six months ended June 30, 2018 | |||||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||||||
Net revenue - Generics | $ | 717,541 | $ | — | $ | 717,541 | $ | 636,959 | $ | 102,237 | $ | 739,196 | |||||||||||
Cost of goods sold | 542,301 | — | 542,301 | 342,128 | 122,761 | 464,889 | |||||||||||||||||
Cost of goods sold impairment charges | 56,309 | — | 56,309 | — | — | — | |||||||||||||||||
Gross profit | 118,931 | — | 118,931 | 294,831 | (20,524 | ) | 274,307 | ||||||||||||||||
Selling, general, and administrative | 38,527 | — | 38,527 | 30,824 | 7,334 | 38,158 | |||||||||||||||||
Research and development | 95,599 | — | 95,599 | 91,415 | 13,623 | 105,038 | |||||||||||||||||
In-process research and development impairment charges | 22,787 | — | 22,787 | — | — | — | |||||||||||||||||
Restructuring and other charges | 2,499 | — | 2,499 | 24,797 | — | 24,797 | |||||||||||||||||
Litigation, settlements and related charges | — | — | — | — | 89,159 | 89,159 | |||||||||||||||||
Legal settlement gains | — | — | — | (3,000 | ) | — | (3,000 | ) | |||||||||||||||
Intellectual property legal development expenses | 5,632 | — | 5,632 | 8,580 | 23 | 8,603 | |||||||||||||||||
Acquisition, integration and transaction related expenses | 3,584 | — | 3,584 | 114,622 | — | 114,622 | |||||||||||||||||
Operating (loss) income | $ | (49,697 | ) | $ | — | $ | (49,697 | ) | $ | 27,593 | $ | (130,663 | ) | $ | (103,070 | ) | |||||||
Gross margin | 16.6 | % | — | % | 16.6 | % | 46.3 | % | (20.1 | %) | 37.1 | % | |||||||||||
Adjusted gross profit (Non-GAAP)(4) | $ | 277,711 | $ | — | $ | 277,711 | $ | 333,203 | $ | 3,246 | $ | 336,449 | |||||||||||
Adjusted gross margin (Non-GAAP)(5) | 38.7 | % | — | % | 38.7 | % | 52.3 | % | 3.2 | % | 45.5 | % | |||||||||||
Adjusted operating income (Non-GAAP) | $ | 161,567 | $ | — | $ | 161,567 | $ | 208,125 | $ | (16,752 | ) | $ | 191,373 | ||||||||||
(4) Adjusted gross profit is calculated as combined net revenue less adjusted cost of goods sold. See Non-GAAP reconciliations below for calculation of adjusted cost of goods sold.
(5) Adjusted gross margin is calculated as adjusted gross profit divided by combined net revenue.
Generics net revenue of $335 million decreased 7.4% for the second quarter of 2019 compared to $362 million for the second quarter of 2018. Generics combined net revenue(1) in the second quarter of 2019 was $335 million, a decrease of 12.5% compared to $383 million in the prior year period. The decrease is primarily attributable to additional competition on the base generic portfolio including key products Aspirin Dipyridamole ER Capsules, Yuvafem and Diclofenac Gel 1% and the sale of two of the Company's international businesses, partially offset by sales of Levothyroxine and Guanfacine HCL.
Generics gross margin for the second quarter of 2019 was 20.5% compared to 41.5% for the second quarter of 2018. Generics combined adjusted gross margin(1) for the second quarter of 2019 was 34.5% compared to 48.4% for the prior year period. The decrease is primarily related to unfavorable generics revenue mix including the impact of price erosion, and inventory obsolescence charges.
Generics operating income for the second quarter of 2019 was $5 million compared to an operating loss of $57 million for the second quarter of 2018, primarily due to acquisition, integration and restructuring charges related to the business combination with Impax in May 2018. Generics combined adjusted operating income(1) for the second quarter of 2019 was $65 million, a decrease of 40.8% compared to $109 million in the prior year period, primarily due to lower revenues and gross margin as noted above.
(1) See “Non-GAAP Financial Measures” below.
Amneal Pharmaceuticals, Inc. Reconciliation of Specialty Operating Income to Specialty Combined Operating Income (Unaudited; In thousands) | |||||||||||||||||||
Specialty | Three months ended June 30, 2019 | Three months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Net revenue - Specialty: | |||||||||||||||||||
Rytary® | $ | 33,000 | $ | — | $ | 33,000 | $ | 20,520 | $ | 8,578 | $ | 29,098 | |||||||
Unithroid® | 8,904 | — | 8,904 | 4,424 | 3,207 | 7,631 | |||||||||||||
Zomig® | 14,427 | — | 14,427 | 9,695 | 3,933 | 13,628 | |||||||||||||
All other specialty products | 13,247 | — | 13,247 | 17,378 | 11,828 | 29,206 | |||||||||||||
Total net revenue - Specialty | 69,578 | — | 69,578 | 52,017 | 27,546 | 79,563 | |||||||||||||
Cost of goods sold | 32,958 | — | 32,958 | 23,958 | 6,711 | 30,669 | |||||||||||||
Gross profit | 36,620 | — | 36,620 | 28,059 | 20,835 | 48,894 | |||||||||||||
Selling, general, and administrative | 16,150 | — | 16,150 | 13,549 | 7,707 | 21,256 | |||||||||||||
Research and development | 2,568 | — | 2,568 | 3,129 | 1,007 | 4,136 | |||||||||||||
Intellectual property legal development expenses | — | — | — | 43 | — | 43 | |||||||||||||
Restructuring and other charges | — | — | — | 2,421 | — | 2,421 | |||||||||||||
Acquisition, integration and transaction related expenses | 1,366 | — | 1,366 | — | — | — | |||||||||||||
Operating income | $ | 16,536 | $ | — | $ | 16,536 | $ | 8,917 | $ | 12,121 | $ | 21,038 | |||||||
Gross margin | 52.6 | % | — | % | 52.6 | % | 53.9 | % | 75.6 | % | 61.5 | % | |||||||
Adjusted gross profit (Non-GAAP)(4) | $ | 56,780 | $ | — | $ | 56,780 | $ | 40,660 | $ | 22,363 | $ | 63,023 | |||||||
Adjusted gross margin (Non-GAAP)(5) | 81.6 | % | — | % | 81.6 | % | 78.2 | % | 81.2 | % | 79.2 | % | |||||||
Adjusted operating income (Non-GAAP) | $ | 39,313 | $ | — | $ | 39,313 | $ | 23,939 | $ | 13,649 | $ | 37,588 | |||||||
(4) Adjusted gross profit is calculated as combined net revenue less adjusted cost of goods sold. See Non-GAAP reconciliations below for calculation of adjusted cost of goods sold.
(5) Adjusted gross margin is calculated as adjusted gross profit divided by combined net revenue.
Amneal Pharmaceuticals, Inc. Reconciliation of Specialty Operating Income to Specialty Combined Operating Income (Unaudited; In thousands) | |||||||||||||||||||
Specialty | Six months ended June 30, 2019 | Six months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Net revenue - Specialty: | |||||||||||||||||||
Rytary® | $ | 61,828 | $ | — | $ | 61,828 | $ | 20,520 | $ | 35,086 | $ | 55,606 | |||||||
Unithroid® | 18,625 | — | 18,625 | 4,424 | 9,716 | 14,140 | |||||||||||||
Zomig® | 25,551 | — | 25,551 | 9,695 | 14,411 | 24,106 | |||||||||||||
All other specialty products | 27,217 | — | 27,217 | 17,378 | 37,032 | 54,410 | |||||||||||||
Total net revenue - Specialty | 133,221 | — | 133,221 | 52,017 | 96,245 | 148,262 | |||||||||||||
Cost of goods sold | 63,823 | — | 63,823 | 23,958 | 26,731 | 50,689 | |||||||||||||
Gross profit | 69,398 | — | 69,398 | 28,059 | 69,514 | 97,573 | |||||||||||||
Selling, general, and administrative | 37,477 | — | 37,477 | 13,549 | 27,942 | 41,491 | |||||||||||||
Research and development | 6,275 | — | 6,275 | 3,129 | 3,664 | 6,793 | |||||||||||||
Intellectual property legal development expenses | 1,045 | — | 1,045 | 43 | — | 43 | |||||||||||||
Restructuring and other charges | 178 | — | 178 | 2,421 | — | 2,421 | |||||||||||||
Litigation, settlements and related charges | — | — | — | — | 940 | 940 | |||||||||||||
Acquisition, integration and transaction related expenses | 3,250 | — | 3,250 | — | — | — | |||||||||||||
Operating income | $ | 21,173 | $ | — | $ | 21,173 | $ | 8,917 | $ | 36,968 | $ | 45,885 | |||||||
Gross margin | 52.1 | % | — | % | 52.1 | % | 53.9 | % | 72.2 | % | 65.8 | % | |||||||
Adjusted gross profit (Non-GAAP)(4) | $ | 109,769 | $ | — | $ | 109,769 | $ | 40,660 | $ | 75,626 | $ | 116,286 | |||||||
Adjusted gross margin (Non-GAAP)(5) | 82.4 | % | — | % | 82.4 | % | 78.2 | % | 78.6 | % | 78.4 | % | |||||||
Adjusted operating income (Non-GAAP) | $ | 68,038 | $ | — | $ | 68,038 | $ | 23,939 | $ | 45,144 | $ | 69,083 | |||||||
(4) Adjusted gross profit is calculated as combined net revenue less adjusted cost of goods sold. See Non-GAAP reconciliations below for calculation of adjusted cost of goods sold.
(5) Adjusted gross margin is calculated as adjusted gross profit divided by combined net revenue.
The Specialty segment is comprised of the Impax Specialty business acquired on May 4, 2018 and the Gemini Laboratories, LLC business acquired on May 7, 2018. Prior to these two transactions, Amneal did not have a Specialty segment.
Specialty net revenue in the second quarter of 2019 increased to $70 million compared to $52 million for the second quarter of 2018, primarily due to the timing of the combination with Impax and the Gemini acquisition. Specialty combined net revenue(1) in the second quarter of 2019 was $70 million, a decrease of 12.5% compared to the prior year period, driven primarily by lower revenue from Albenza® as a result of the loss of exclusivity in September of 2018, partially offset by higher revenue from Rytary® and Unithroid®.
Specialty gross margin for the second quarter of 2019 was 52.6% compared to 53.9% for the second quarter of 2018. Specialty combined adjusted gross margin(5) was 81.6% for the second quarter of 2019 compared to 79.2% in the prior year period, primarily due to product sales mix.
Specialty operating income for the second quarter of 2019 was $17 million compared to $9 million for the second quarter of 2018, primarily due to higher revenue. Specialty combined adjusted operating income(1) for the second quarter of 2019 was $39 million, an increase of $1 million compared to the prior year period, primarily due to lower expenses and favorable product sales mix.
(1) See “Non-GAAP Financial Measures” below.
Corporate and Other Information (Unaudited; In thousands) | |||||||||||||||||||
Three months ended June 30, 2019 | Three months ended June 30, 2018 | ||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
General and administrative expense | $ | 36,752 | $ | — | $ | 36,752 | $ | 22,833 | $ | 8,000 | $ | 30,833 | |||||||
Acquisition, transaction-related and integration expenses | 1,166 | — | 1,166 | 92,885 | 4,381 | 97,266 | |||||||||||||
Restructuring and other charges | 2,417 | — | 2,417 | 17,247 | 223 | 17,470 | |||||||||||||
Total general, administrative and other operating expenses | $ | 40,335 | $ | — | $ | 40,335 | $ | 132,965 | $ | 12,604 | $ | 145,569 | |||||||
Six months ended June 30, 2019 | Six months ended June 30, 2018 | ||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
General and administrative expense | $ | 75,713 | $ | — | $ | 75,713 | $ | 36,751 | $ | 28,737 | $ | 65,488 | |||||||
Acquisition, transaction-related and integration expenses | 2,717 | — | 2,717 | 100,020 | 10,925 | 110,945 | |||||||||||||
Restructuring and other charges | 6,319 | — | 6,319 | 17,247 | 5,123 | 22,370 | |||||||||||||
Total general, administrative and other operating expenses | $ | 84,749 | $ | — | $ | 84,749 | $ | 154,018 | $ | 44,785 | $ | 198,803 | |||||||
General and administrative and other operating expenses in the second quarter of 2019 decreased to $40 million compared to $133 million in the prior year period. General and administrative and other operating expenses on a combined basis(1) in the second quarter of 2019 decreased to $40 million compared to $146 million in the prior year period. The decrease is primarily due to costs associated with the Combination with Impax and Gemini acquisition including lower acquisition, transaction-related and integration expenses, and lower restructuring and other charges.
2019 Financial Outlook
Amneal’s full year 2019 estimates are based on management's current expectations, including with respect to prescription trends, pricing levels, inventory levels, and the anticipated timing of future product launches and events. The Company cannot provide a reconciliation between non-GAAP projections and the most directly comparable GAAP measures without unreasonable efforts because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for the reconciliation. The items include, but are not limited to, acquisition-related expenses, restructuring expenses, asset impairments and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for 2019.
Amneal is updating certain of its previously provided 2019 guidance as follows:
Full Year 2019 Financial Guidance | ||
Prior | Updated | |
Adjusted gross margin | 47% - 50% | 47% - 50% |
Adjusted R&D as a % of net revenue | 9% - 10% | 9.5% - 10.5% |
Adjusted SG&A as a % of net revenue | 11% - 12% | 14% - 15% |
Adjusted EBITDA | $600 million - $650 million(6) | $425 million - $475 million |
Adjusted diluted EPS | $0.94 - $1.04 | $0.52 - $0.62 |
Adjusted effective tax rate | 19% - 21% | 19% - 21% |
Capital expenditures | Approximately $100 million | $65 million - $85 million |
Weighted average diluted shares outstanding | Approximately 300 million | Approximately 300 million |
(6) The Company issued revised Adjusted EBITDA guidance on July 10, 2019. Prior to the July 10 update, the Company’s original guidance with respect to 2019 Adjusted EBITDA was $600 million - $650 million.
Conference Call Information
Amneal will hold a conference call on August 5, 2019 at 8:30 a.m. Eastern Time to discuss its results. The call and presentation can also be accessed via a live Webcast through the Investor Relations section of Amneal’s Web site at https://investors.amneal.com/investor-relations, or directly at https://event.on24.com/wcc/r/2021447/323A22AA88A202DFC94FA94090002247. The number to call from within the United States is (844) 746-0741 and (412) 317-5273 internationally. A replay of the conference call will be available shortly after the call for a period of seven days. To access the replay, dial (877) 344-7529 (in the U.S.) and (412) 317-0088 (international callers). The access code for the replay is 10133264.
About Amneal
Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is an integrated pharmaceutical company focused on developing, manufacturing and distributing generic, brand and biosimilar products. The Company has operations in North America, Asia, and Europe, working together to bring high-quality medicines to patients primarily within the United States.
Amneal has an extensive portfolio of more than 300 generic medicines, and is expanding its portfolio to include complex dosage forms in a broad range of therapeutic areas. The Company also markets a portfolio of branded pharmaceutical products through its Specialty segment focused principally on central nervous system disorders and parasitic infections. For more information, visit www.amneal.com.
Non-GAAP Financial Measures
This release includes certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted gross profit, adjusted gross margin and adjusted operating income, which are intended as supplemental measures of the Company’s performance that are not required by or presented in accordance with GAAP. In addition, this release includes these non-GAAP measures and our reported results on a non-GAAP combined basis to include the historical results of Impax and Gemini, not adjusted for financing and acquisition accounting impacts of the combination, as if the transaction closing dates had occurred on the first day of all periods presented herein. All combined business results presented in this release are not prepared in accordance with Article 11 of Regulation S-X. The calculation of Non-GAAP adjusted diluted earnings per share assumes the conversion of all outstanding shares of Class B Common Stock to shares of Class A Common stock.
Management uses these non-GAAP historical and combined measures internally to evaluate and manage the Company’s operations and to better understand its business because they facilitate a comparative assessment of the Company's operating performance relative to its performance based on results calculated under GAAP. These non-GAAP measures also isolate the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company's operations and underlying operational performance. The compensation committee of the Company’s board of directors also uses certain of these measures to evaluate management's performance and set its compensation. The Company believes that these non-GAAP measures also provide useful information to investors regarding certain financial and business trends relating to the Company’s financial condition and operating results, and doing so on a combined basis facilitates an evaluation of the financial performance of the Company and its operations on a consistent basis. Providing this information therefore allows investors to make independent assessments of the Company’s financial performance, results of operation and trends while viewing the information through the eyes of management.
These non-GAAP measures are subject to limitations. The non-GAAP measures presented in this release may not be comparable to similarly titled measures used by other companies because other companies may not calculate one or more in the same manner. Additionally, the non-GAAP performance measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements; do not reflect changes in, or cash requirements for, working capital needs; and do not reflect interest expense, or the requirements necessary to service interest or principal payments on debt. Further, the combined results may not represent what our combined results of operations and financial position would have been had the transactions occurred on the dates indicated, nor are they intended to project our combined results of operations or financial position for any future period. To compensate for these limitations, management presents and considers these non-GAAP measures in conjunction with the Company’s GAAP results; no non-GAAP measure should be considered in isolation from or as alternatives to net income, diluted earnings per share or any other measure determined in accordance with GAAP. Readers should review the reconciliations included below, and should not rely on any single financial measure to evaluate the Company’s business.
A reconciliation of each non-GAAP measure to the most directly comparable GAAP measure is set forth below.
Safe Harbor Statement
Certain statements contained herein, regarding matters that are not historical facts, may be forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). Such forward-looking statements include statements regarding management’s intentions, plans, beliefs, expectations or forecasts for the future, including, among other things, future operating results and financial performance, product development and launches, integration strategies and resulting cost reduction, market position and business strategy. Words such as “may,” “will,” “could,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “assume,” “continue,” and similar words are intended to identify estimates and forward-looking statements.
The reader is cautioned not to rely on these forward-looking statements. These forward-looking statements are based on current expectations of future events. If the underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the expectations and projections of Amneal Pharmaceuticals, Inc. (the “Company”). Such risks and uncertainties include, but are not limited to: our ability to integrate the operations of Amneal Pharmaceuticals LLC and Impax Laboratories, LLC pursuant to the business combination completed on May 4, 2018, and our ability to realize the anticipated synergies and other benefits of the combination; our ability to successfully develop and commercialize new products; our ability to obtain exclusive marketing rights for our products and to introduce products on a timely basis; the competition we face in the pharmaceutical industry from brand and generic drug product companies, and the impact of that competition on our ability to set prices; our ability to manage our growth; our dependence on the sales of a limited number of products for a substantial portion of our total revenues; the risk of product liability and other claims against us by consumers and other third parties; risks related to changes in the regulatory environment, including United States federal and state laws related to healthcare fraud abuse and health information privacy and security and changes in such laws; changes to FDA product approval requirements; risks related to federal regulation of arrangements between manufacturers of branded and generic products; the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers; the continuing trend of consolidation of certain customer groups; our reliance on certain licenses to proprietary technologies from time to time; our dependence on third party suppliers and distributors for raw materials for our products and certain finished goods; the impact of global economic conditions; our dependence on third party agreements for a portion of our product offerings; our ability to make acquisitions of or investments in complementary businesses and products on advantageous terms; legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives; the significant amount of resources we expend on research and development; our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the future, and the impact of interest rate fluctuations on such indebtedness; the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by a group of stockholders. A further list and descriptions of these risks, uncertainties and other factors can be found in the Company’s most recently filed Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as supplemented by any subsequently filed Quarterly Reports on Form 10-Q. Copies of these filings are available online at www.sec.gov, www.amneal.com or on request from the Company.
Forward-looking statements included herein speak only as of the date hereof and we undertake no obligation to revise or update such statements to reflect the occurrence of events or circumstances after the date hereof.
Trademarks referenced herein are the property of their respective owner.
Amneal Pharmaceuticals, Inc. Consolidated Statements of Operations (Unaudited; In thousands, except per share amounts) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net revenue | $ | 404,642 | $ | 413,787 | $ | 850,762 | $ | 688,976 | |||||||
Cost of goods sold | 296,381 | 235,492 | 606,124 | 366,086 | |||||||||||
Cost of goods sold impairment charges | 3,012 | — | 56,309 | — | |||||||||||
Gross profit | 105,249 | 178,295 | 188,329 | 322,890 | |||||||||||
Selling, general and administrative | 67,281 | 56,003 | 151,717 | 81,124 | |||||||||||
Research and development | 48,016 | 50,335 | 101,874 | 94,544 | |||||||||||
In-process research and development impairment charges | — | — | 22,787 | — | |||||||||||
Acquisition, transaction-related and integration expenses | 3,519 | 207,507 | 9,551 | 214,642 | |||||||||||
Restructuring and other charges | 2,835 | 44,465 | 8,996 | 44,465 | |||||||||||
Legal settlement gains | — | (3,000 | ) | — | (3,000 | ) | |||||||||
Intellectual property legal development expenses | 2,511 | 4,047 | 6,677 | 8,623 | |||||||||||
Operating loss | (18,913 | ) | (181,062 | ) | (113,273 | ) | (117,508 | ) | |||||||
Other (expense) income: | |||||||||||||||
Interest expense, net | (43,886 | ) | (36,622 | ) | (87,167 | ) | (57,673 | ) | |||||||
Foreign exchange gain (loss), net | 8,311 | (25,946 | ) | 2,847 | (17,381 | ) | |||||||||
Loss on extinguishment of debt | — | (19,667 | ) | — | (19,667 | ) | |||||||||
(Loss) gain on sale of international businesses, net | (1,888 | ) | — | 6,930 | — | ||||||||||
Other income, net | 149 | 791 | 1,256 | 1,739 | |||||||||||
Total other expense, net | (37,314 | ) | (81,444 | ) | (76,134 | ) | (92,982 | ) | |||||||
Loss before income taxes | (56,227 | ) | (262,506 | ) | (189,407 | ) | (210,490 | ) | |||||||
Benefit from income taxes | (5,701 | ) | (12,416 | ) | (14,129 | ) | (12,052 | ) | |||||||
Net loss | (50,526 | ) | (250,090 | ) | (175,278 | ) | (198,438 | ) | |||||||
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-Combination | — | 200,341 | — | 148,806 | |||||||||||
Less: Net loss attributable to non-controlling interests | 33,624 | 31,885 | 110,495 | 31,768 | |||||||||||
Net loss attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest | (16,902 | ) | (17,864 | ) | (64,783 | ) | (17,864 | ) | |||||||
Accretion of redeemable non-controlling interest | — | (1,240 | ) | — | (1,240 | ) | |||||||||
Net loss attributable to Amneal Pharmaceuticals, Inc. | $ | (16,902 | ) | $ | (19,104 | ) | $ | (64,783 | ) | $ | (19,104 | ) | |||
Net loss per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders: | |||||||||||||||
Class A and Class B-1 basic and diluted | $ | (0.13 | ) | $ | (0.15 | ) | $ | (0.51 | ) | $ | (0.15 | ) | |||
Weighted-average common shares outstanding: | |||||||||||||||
Class A and Class B-1 basic and diluted | 128,016 | 127,112 | 127,852 | 127,112 | |||||||||||
Amneal Pharmaceuticals, Inc. Condensed Consolidated Balance Sheets (Unaudited; In thousands) | |||||||
June 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 54,893 | $ | 213,394 | |||
Restricted cash | 2,129 | 5,385 | |||||
Trade accounts receivable, net | 634,666 | 481,495 | |||||
Inventories | 414,627 | 457,219 | |||||
Prepaid expenses and other current assets | 77,062 | 128,321 | |||||
Related party receivables | 2,470 | 830 | |||||
Total current assets | 1,185,847 | 1,286,644 | |||||
Property, plant and equipment, net | 508,086 | 544,146 | |||||
Goodwill | 420,017 | 426,226 | |||||
Intangible assets, net | 1,553,330 | 1,654,969 | |||||
Deferred tax asset, net | 391,881 | 373,159 | |||||
Operating lease right-of-use assets | 59,900 | — | |||||
Operating lease right-of-use assets - related party | 17,031 | — | |||||
Financing lease right-of-use assets - related party | 62,588 | — | |||||
Other assets | 63,459 | 67,592 | |||||
Total assets | $ | 4,262,139 | $ | 4,352,736 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 505,143 | $ | 514,440 | |||
Current portion of long-term debt, net | 21,445 | 21,449 | |||||
Current portion of operating lease liabilities | 13,313 | — | |||||
Current portion of operating and financing lease liabilities - related party | 3,293 | — | |||||
Related party payables | 2,965 | 17,695 | |||||
Current portion of financing obligation - related party | — | 266 | |||||
Total current liabilities | 546,159 | 553,850 | |||||
Long-term debt, net | 2,619,788 | 2,630,598 | |||||
Deferred income taxes | — | 1,178 | |||||
Liabilities under tax receivable agreement | 193,499 | 192,884 | |||||
Operating lease liabilities | 47,836 | — | |||||
Operating lease liabilities - related party | 14,862 | — | |||||
Financing lease liabilities - related party | 61,990 | — | |||||
Financing obligation - related party | — | 39,083 | |||||
Other liabilities | 28,653 | 38,780 | |||||
Total long-term liabilities | 2,966,628 | 2,902,523 | |||||
Total stockholders' equity | 749,352 | 896,363 | |||||
Total liabilities and stockholders' equity | $ | 4,262,139 | $ | 4,352,736 | |||
Amneal Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (Unaudited; In thousands) | |||||||
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (175,278 | ) | $ | (198,438 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 99,574 | 46,897 | |||||
Amortization of Levothyroxine Transition Agreement asset | 36,393 | — | |||||
Unrealized foreign currency (gain) loss | (3,695 | ) | 17,032 | ||||
Amortization of debt issuance costs | 3,218 | 2,577 | |||||
Loss on extinguishment of debt | — | 19,667 | |||||
Gain on sale of international businesses, net | (6,930 | ) | — | ||||
Gain on termination of lease | — | (3,524 | ) | ||||
Intangible asset impairment charges
| 79,096 | — | |||||
Non-cash restructuring and asset-related charges | 1,314 | — | |||||
Deferred tax benefit | (18,209 | ) | (14,993 | ) | |||
Stock-based compensation and PPU expense | 10,571 | 160,401 | |||||
Inventory provision | 50,410 | 17,426 | |||||
Other operating charges and credits, net | 3,155 | 927 | |||||
Changes in assets and liabilities: | |||||||
Trade accounts receivable, net | (162,954 | ) | (60,051 | ) | |||
Inventories | (19,658 | ) | (71,655 | ) | |||
Prepaid expenses, other current assets and other assets | 28,614 | (5,107 | ) | ||||
Related party receivables | (1,624 | ) | 11,017 | ||||
Accounts payable, accrued expenses and other liabilities | (13,538 | ) | 19,630 | ||||
Related party payables | 2,225 | (13,356 | ) | ||||
Net cash used in operating activities | (87,316 | ) | (71,550 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property, plant and equipment | (29,629 | ) | (36,600 | ) | |||
Acquisition of product rights and licenses | (50,000 | ) | (3,000 | ) | |||
Acquisitions, net of cash acquired | — | (321,324 | ) | ||||
Proceeds from sale of international businesses, net of cash sold
| 34,834 | — | |||||
Net cash used in investing activities | (44,795 | ) | (360,924 | ) | |||
Cash flows from financing activities: | |||||||
Payments of deferred financing costs and debt extinguishment costs | — | (54,955 | ) | ||||
Proceeds from issuance of debt | — | 1,325,383 | |||||
Payments of principal on debt and capital leases | (13,500 | ) | (603,551 | ) | |||
Payments on revolving credit line | — | (75,000 | ) | ||||
Payments of principal on financing lease - related party | (866 | ) | — | ||||
Payments of financing obligation - related party | — | (121 | ) | ||||
Proceeds from exercise of stock options | 1,385 | 1,977 | |||||
Employee payroll tax withholding on restricted stock unit vesting | (921 | ) | — | ||||
Equity contributions | — | 27,742 | |||||
Capital contribution from non-controlling interest | — | 360 | |||||
Acquisition of non-controlling interest | (3,543 | ) | — | ||||
Tax distribution to non-controlling interest | (13,494 | ) | — | ||||
Distributions to members | — | (182,998 | ) | ||||
Repayment of related party note | — | (14,842 | ) | ||||
Net cash (used in) provided by financing activities | (30,939 | ) | 423,995 | ||||
Effect of foreign exchange rate on cash | 1,293 | (853 | ) | ||||
Net decrease in cash, cash equivalents, and restricted cash | (161,757 | ) | (9,332 | ) | |||
Cash, cash equivalents, and restricted cash - beginning of period | 218,779 | 77,922 | |||||
Cash, cash equivalents, and restricted cash - end of period | $ | 57,022 | $ | 68,590 | |||
Cash and cash equivalents - end of period | $ | 54,893 | $ | 61,521 | |||
Restricted cash - end of period | 2,129 | 7,069 | |||||
Cash, cash equivalents, and restricted cash - end of period | $ | 57,022 | $ | 68,590 | |||
Amneal Pharmaceuticals, Inc. Reconciliation of Non-GAAP Combined Results of Operations (Unaudited; In thousands) | |||||||||||||||||||
Three months ended June 30, 2019 | Three months ended June 30, 2018 | ||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Net revenue: | |||||||||||||||||||
Generics | $ | 335,064 | $ | — | $ | 335,064 | $ | 361,770 | $ | 20,995 | $ | 382,765 | |||||||
Specialty | 69,578 | — | 69,578 | 52,017 | 27,546 | 79,563 | |||||||||||||
Total net revenue | 404,642 | — | 404,642 | 413,787 | 48,541 | 462,328 | |||||||||||||
Cost of goods sold | 296,381 | — | 296,381 | 235,492 | 36,335 | 271,827 | |||||||||||||
Cost of goods sold impairment charges | 3,012 | — | 3,012 | — | — | — | |||||||||||||
Gross profit | 105,249 | — | 105,249 | 178,295 | 12,206 | 190,501 | |||||||||||||
Selling, general and administrative | 67,281 | — | 67,281 | 56,003 | 20,047 | 76,050 | |||||||||||||
Research and development | 48,016 | — | 48,016 | 50,335 | 4,991 | 55,326 | |||||||||||||
Acquisition, transaction-related and integration expenses | 3,519 | — | 3,519 | 207,507 | 4,381 | 211,888 | |||||||||||||
Restructuring and other charges | 2,835 | — | 2,835 | 44,465 | 223 | 44,688 | |||||||||||||
Legal settlement gains | — | — | — | (3,000 | ) | — | (3,000 | ) | |||||||||||
Intellectual property legal development expenses | 2,511 | — | 2,511 | 4,047 | — | 4,047 | |||||||||||||
Operating loss | (18,913 | ) | — | (18,913 | ) | (181,062 | ) | (17,436 | ) | (198,498 | ) | ||||||||
Other (expense) income: | |||||||||||||||||||
Interest expense, net | (43,886 | ) | — | (43,886 | ) | (36,622 | ) | (4,539 | ) | (41,161 | ) | ||||||||
Foreign exchange gain (loss), net | 8,311 | — | 8,311 | (25,946 | ) | — | (25,946 | ) | |||||||||||
Loss on extinguishment of debt | — | — | — | (19,667 | ) | — | (19,667 | ) | |||||||||||
Loss on sale of international businesses | (1,888 | ) | — | (1,888 | ) | — | — | — | |||||||||||
Other income (expense), net | 149 | — | 149 | 791 | (14 | ) | 777 | ||||||||||||
Total other expense, net | (37,314 | ) | — | (37,314 | ) | (81,444 | ) | (4,553 | ) | (85,997 | ) | ||||||||
Loss before income taxes | (56,227 | ) | — | (56,227 | ) | (262,506 | ) | (21,989 | ) | (284,495 | ) | ||||||||
(Benefit from) provision for income taxes | (5,701 | ) | — | (5,701 | ) | (12,416 | ) | 1,017 | (11,399 | ) | |||||||||
Net loss | (50,526 | ) | — | (50,526 | ) | (250,090 | ) | (23,006 | ) | (273,096 | ) | ||||||||
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-Combination | — | — | — | 200,341 | |||||||||||||||
Less: Net loss attributable to non-controlling interests | 33,624 | — | 33,624 | 31,885 | |||||||||||||||
Accretion of redeemable non-controlling interest | — | — | — | (1,240 | ) | ||||||||||||||
Net loss attributable to Amneal Pharmaceuticals, Inc. | $ | (16,902 | ) | $ | — | $ | (16,902 | ) | $ | (19,104 | ) | ||||||||
Amneal Pharmaceuticals, Inc. Reconciliation of Non-GAAP Combined Results of Operations (Unaudited; In thousands) | |||||||||||||||||||
Six months ended June 30, 2019 | Six months ended June 30, 2018 | ||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Net revenue: | |||||||||||||||||||
Generics | $ | 717,541 | $ | — | $ | 717,541 | $ | 636,959 | $ | 102,237 | $ | 739,196 | |||||||
Specialty | 133,221 | — | 133,221 | 52,017 | 96,245 | 148,262 | |||||||||||||
Total net revenue | 850,762 | — | 850,762 | 688,976 | 198,482 | 887,458 | |||||||||||||
Cost of goods sold | 606,124 | — | 606,124 | 366,086 | 149,492 | 515,578 | |||||||||||||
Cost of goods sold impairment charges | 56,309 | — | 56,309 | — | — | — | |||||||||||||
Gross profit | 188,329 | — | 188,329 | 322,890 | 48,990 | 371,880 | |||||||||||||
Selling, general and administrative | 151,717 | — | 151,717 | 81,124 | 64,013 | 145,137 | |||||||||||||
Research and development | 101,874 | — | 101,874 | 94,544 | 17,287 | 111,831 | |||||||||||||
In-process research and development impairment charges | 22,787 | — | 22,787 | — | — | — | |||||||||||||
Acquisition, transaction-related and integration expenses | 9,551 | — | 9,551 | 214,642 | 10,925 | 225,567 | |||||||||||||
Restructuring and other charges | 8,996 | — | 8,996 | 44,465 | 5,123 | 49,588 | |||||||||||||
Legal settlement gains | — | — | — | (3,000 | ) | — | (3,000 | ) | |||||||||||
Intellectual property legal development expenses | 6,677 | — | 6,677 | 8,623 | 23 | 8,646 | |||||||||||||
Litigation, settlements and related charges | — | — | — | — | 90,099 | 90,099 | |||||||||||||
Operating loss | (113,273 | ) | — | (113,273 | ) | (117,508 | ) | (138,480 | ) | (255,988 | ) | ||||||||
Other (expense) income: | |||||||||||||||||||
Interest expense, net | (87,167 | ) | — | (87,167 | ) | (57,673 | ) | (18,231 | ) | (75,904 | ) | ||||||||
Foreign exchange gain (loss) | 2,847 | — | 2,847 | (17,381 | ) | 921 | (16,460 | ) | |||||||||||
Loss on extinguishment of debt | — | — | — | (19,667 | ) | — | (19,667 | ) | |||||||||||
Gain on sale of international businesses | 6,930 | — | 6,930 | — | — | — | |||||||||||||
Other income (expense) | 1,256 | — | 1,256 | 1,739 | (638 | ) | 1,101 | ||||||||||||
Total other expense, net | (76,134 | ) | — | (76,134 | ) | (92,982 | ) | (17,948 | ) | (110,930 | ) | ||||||||
Loss before income taxes | (189,407 | ) | — | (189,407 | ) | (210,490 | ) | (156,428 | ) | (366,918 | ) | ||||||||
Benefit from income taxes | (14,129 | ) | — | (14,129 | ) | (12,052 | ) | (6,273 | ) | (18,325 | ) | ||||||||
Net loss | (175,278 | ) | — | (175,278 | ) | (198,438 | ) | (150,155 | ) | (348,593 | ) | ||||||||
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-Combination | — | — | — | 148,806 | |||||||||||||||
Less: Net loss attributable to non-controlling interests | 110,495 | — | 110,495 | 31,768 | |||||||||||||||
Accretion of redeemable non-controlling interest | — | — | — | (1,240 | ) | ||||||||||||||
Net loss attributable to Amneal Pharmaceuticals, Inc. | $ | (64,783 | ) | $ | — | $ | (64,783 | ) | $ | (19,104 | ) | ||||||||
Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited; In thousands) | |||||||||||||||||||
Reconciliations of Generics Cost of Goods Sold to Combined Adjusted Cost of Goods Sold | |||||||||||||||||||
Generics | Three months ended June 30, 2019 | Three months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Cost of goods sold | $ | 263,423 | $ | — | $ | 263,423 | $ | 211,534 | $ | 29,624 | $ | 241,158 | |||||||
Cost of goods sold impairment charges | 3,012 | — | 3,012 | — | — | — | |||||||||||||
Adjusted to deduct (add): | |||||||||||||||||||
Amortization | 14,636 | — | 14,636 | 6,043 | 3,934 | 9,977 | |||||||||||||
Inventory related charges(7) | 21,443 | — | 21,443 | 30,569 | 3,005 | 33,574 | |||||||||||||
Acquisition and site closure expenses(8) | 6,969 | — | 6,969 | — | — | — | |||||||||||||
Asset impairment charges(9) | 3,012 | — | 3,012 | — | — | — | |||||||||||||
Stock-based compensation expense | 813 | — | 813 | — | — | — | |||||||||||||
Other | (68 | ) | — | (68 | ) | — | — | — | |||||||||||
Adjusted cost of goods sold (Non-GAAP) | $ | 219,630 | $ | — | $ | 219,630 | $ | 174,922 | $ | 22,685 | $ | 197,607 | |||||||
Generics | Six months ended June 30, 2019 | Six months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Cost of goods sold | $ | 542,301 | $ | — | $ | 542,301 | $ | 342,128 | $ | 122,761 | $ | 464,889 | |||||||
Cost of goods sold impairment charges | 56,309 | — | 56,309 | — | — | — | |||||||||||||
Adjusted to deduct (add): | |||||||||||||||||||
Amortization | 25,388 | — | 25,388 | 7,803 | 13,823 | 21,626 | |||||||||||||
Inventory related charges(7) | 21,777 | — | 21,777 | 30,569 | 9,894 | 40,463 | |||||||||||||
Acquisition and site closure expenses(8) | 16,480 | — | 16,480 | — | — | — | |||||||||||||
Asset impairment charges(9) | 56,309 | — | 56,309 | — | 53 | 53 | |||||||||||||
Stock-based compensation expense | 1,409 | — | 1,409 | — | — | — | |||||||||||||
Amortization of upfront payment(11) | 36,393 | — | 36,393 | — | — | — | |||||||||||||
Other | 1,024 | — | 1,024 | — | — | — | |||||||||||||
Adjusted cost of goods sold (Non-GAAP) | $ | 439,830 | $ | — | $ | 439,830 | $ | 303,756 | $ | 98,991 | $ | 402,747 | |||||||
Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited; In thousands) | |||||||||||||||||||
Reconciliations of Specialty Cost of Goods Sold to Combined Adjusted Cost of Goods Sold | |||||||||||||||||||
Specialty | Three months ended June 30, 2019 | Three months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Cost of goods sold | $ | 32,958 | $ | — | $ | 32,958 | $ | 23,958 | $ | 6,711 | $ | 30,669 | |||||||
Adjusted to deduct: | |||||||||||||||||||
Amortization | 20,160 | — | 20,160 | 10,651 | 1,528 | 12,179 | |||||||||||||
Inventory related charges(7) | — | — | — | 1,950 | — | 1,950 | |||||||||||||
Adjusted cost of goods sold (Non-GAAP) | $ | 12,798 | $ | — | $ | 12,798 | $ | 11,357 | $ | 5,183 | $ | 16,540 | |||||||
Specialty | Six months ended June 30, 2019 | Six months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Cost of goods sold | $ | 63,823 | $ | — | $ | 63,823 | $ | 23,958 | $ | 26,731 | $ | 50,689 | |||||||
Adjusted to deduct: | |||||||||||||||||||
Amortization | 40,371 | — | 40,371 | 10,651 | 6,112 | 16,763 | |||||||||||||
Inventory related charges(7) | — | — | — | 1,950 | — | 1,950 | |||||||||||||
Adjusted cost of goods sold (Non-GAAP) | $ | 23,452 | $ | — | $ | 23,452 | $ | 11,357 | $ | 20,619 | $ | 31,976 | |||||||
Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited; In thousands) | |||||||||||||||||||
Reconciliations of Generics Operating Income (Loss) to Combined Adjusted Operating Income | |||||||||||||||||||
Generics | Three months ended June 30, 2019 | Three months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Operating income (loss) | $ | 4,886 | $ | — | $ | 4,886 | $ | (57,014 | ) | $ | (16,953 | ) | $ | (73,967 | ) | ||||
Adjusted to add (deduct): | |||||||||||||||||||
Acquisition and site closure expenses(8) | 10,885 | — | 10,885 | 114,622 | — | 114,622 | |||||||||||||
Amortization | 14,636 | — | 14,636 | 6,043 | 3,934 | 9,977 | |||||||||||||
Inventory related charges(7) | 21,443 | — | 21,443 | 30,569 | 3,005 | 33,574 | |||||||||||||
Stock-based compensation expense | 3,875 | — | 3,875 | 221 | — | 221 | |||||||||||||
Asset impairment charges(9) | 3,059 | — | 3,059 | — | — | — | |||||||||||||
Restructuring and other charges(10) | 418 | — | 418 | 24,797 | — | 24,797 | |||||||||||||
R&D milestone payment | 5,614 | — | 5,614 | 1,424 | — | 1,424 | |||||||||||||
Other | (68 | ) | — | (68 | ) | — | (1,325 | ) | (1,325 | ) | |||||||||
Adjusted operating income (Non-GAAP) | $ | 64,748 | $ | — | $ | 64,748 | $ | 120,662 | $ | (11,339 | ) | $ | 109,323 | ||||||
Generics | Six months ended June 30, 2019 | Six months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Operating (loss) income | $ | (49,697 | ) | $ | — | $ | (49,697 | ) | $ | 27,593 | $ | (130,663 | ) | $ | (103,070 | ) | |||
Adjusted to add (deduct): | |||||||||||||||||||
Acquisition and site closure expenses(8) | 29,670 | — | 29,670 | 114,622 | — | 114,622 | |||||||||||||
Amortization | 25,388 | — | 25,388 | 7,803 | 13,823 | 21,626 | |||||||||||||
Inventory related charges(7) | 21,777 | — | 21,777 | 30,569 | 9,894 | 40,463 | |||||||||||||
Stock-based compensation expense | 5,373 | — | 5,373 | 221 | 982 | 1,203 | |||||||||||||
Asset impairment charges(9) | 79,211 | 79,211 | 53 | 53 | |||||||||||||||
Restructuring and other charges(10) | 2,499 | — | 2,499 | 24,797 | — | 24,797 | |||||||||||||
Litigation, settlements and related charges(12) | — | — | — | — | 89,159 | 89,159 | |||||||||||||
Amortization of upfront payment(11) | 36,393 | — | 36,393 | — | — | — | |||||||||||||
R&D milestone payment | 9,929 | — | 9,929 | 2,700 | — | 2,700 | |||||||||||||
Other | 1,024 | — | 1,024 | (180 | ) | — | (180 | ) | |||||||||||
Adjusted operating income (Non-GAAP) | $ | 161,567 | $ | — | $ | 161,567 | $ | 208,125 | $ | (16,752 | ) | $ | 191,373 | ||||||
Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited; In thousands) | |||||||||||||||||||
Reconciliations of Specialty Operating Income to Combined Adjusted Operating Income | |||||||||||||||||||
Specialty | Three months ended June 30, 2019 | Three months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Operating income | $ | 16,536 | $ | — | $ | 16,536 | $ | 8,917 | $ | 12,121 | $ | 21,038 | |||||||
Adjusted to add: | |||||||||||||||||||
Amortization | 20,160 | — | 20,160 | 10,651 | 1,528 | 12,179 | |||||||||||||
Inventory related charges(7) | — | — | — | 1,950 | — | 1,950 | |||||||||||||
Acquisition and site closure expenses(8) | 2,251 | — | 2,251 | — | — | — | |||||||||||||
Stock-based compensation expense | 366 | — | 366 | — | — | — | |||||||||||||
Restructuring and other charges(10) | — | — | — | 2,421 | — | 2,421 | |||||||||||||
Adjusted operating income (Non-GAAP) | $ | 39,313 | $ | — | $ | 39,313 | $ | 23,939 | $ | 13,649 | $ | 37,588 | |||||||
Specialty | Six months ended June 30, 2019 | Six months ended June 30, 2018 | |||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Operating income | $ | 21,173 | $ | — | $ | 21,173 | $ | 8,917 | $ | 36,968 | $ | 45,885 | |||||||
Adjusted to add: | |||||||||||||||||||
Amortization | 40,371 | — | 40,371 | 10,651 | 6,112 | 16,763 | |||||||||||||
Inventory related charges(7) | — | — | — | 1,950 | — | 1,950 | |||||||||||||
Acquisition and site closure expenses(8) | 5,806 | — | 5,806 | — | — | — | |||||||||||||
Stock-based compensation expense | 510 | — | 510 | — | 1,124 | 1,124 | |||||||||||||
Restructuring and other charges(10) | 178 | — | 178 | 2,421 | — | 2,421 | |||||||||||||
Litigation, settlements and related charges | — | — | — | — | 940 | 940 | |||||||||||||
Adjusted operating income (Non-GAAP) | $ | 68,038 | $ | — | $ | 68,038 | $ | 23,939 | $ | 45,144 | $ | 69,083 | |||||||
Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited; In thousands, except per share amounts) | |||||||||||||||||||
Reconciliation of Net Loss to Combined Adjusted Net Income and Calculation of Adjusted Diluted EPS | |||||||||||||||||||
Three months ended June 30, 2019 | Three months ended June 30, 2018 | ||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Net loss | $ | (50,526 | ) | $ | — | $ | (50,526 | ) | $ | (250,090 | ) | $ | (23,006 | ) | $ | (273,096 | ) | ||
Adjusted to add (deduct): | |||||||||||||||||||
Non-cash interest | 1,617 | — | 1,617 | 4,407 | 2,549 | 6,956 | |||||||||||||
GAAP Income tax (benefit) expense | (5,701 | ) | — | (5,701 | ) | (12,416 | ) | 1,017 | (11,399 | ) | |||||||||
Amortization | 34,796 | — | 34,796 | 16,694 | 5,462 | 22,156 | |||||||||||||
Stock-based compensation expense | 6,224 | — | 6,224 | 1,644 | — | 1,644 | |||||||||||||
Acquisition and site closure expenses(8) | 19,056 | — | 19,056 | 207,507 | 4,381 | 211,888 | |||||||||||||
Restructuring and other charges(10) | 2,835 | — | 2,835 | 44,465 | 223 | 44,688 | |||||||||||||
Loss on extinguishment of debt | — | — | — | 19,667 | — | 19,667 | |||||||||||||
Inventory related charges(7) | 21,443 | — | 21,443 | 32,519 | 3,005 | 35,524 | |||||||||||||
Loss on sale of assets | — | — | — | 878 | — | 878 | |||||||||||||
Asset impairment charges(9) | 4,408 | — | 4,408 | — | — | — | |||||||||||||
Foreign exchange (gain) loss | (8,311 | ) | — | (8,311 | ) | 25,946 | — | 25,946 | |||||||||||
Loss on sale of international business(13) | 1,888 | — | 1,888 | — | — | — | |||||||||||||
R&D milestone payments | 5,614 | — | 5,614 | 1,424 | — | 1,424 | |||||||||||||
Other | 491 | — | 491 | 1,225 | 1,300 | 2,525 | |||||||||||||
Income tax at 21% | (7,104 | ) | — | (7,104 | ) | (19,943 | ) | 1,064 | (18,879 | ) | |||||||||
Net income attributable to NCI not associated with our Class B shares
| (61 | ) | — | (61 | ) | (27 | ) | — | (27 | ) | |||||||||
Adjusted net income (Non-GAAP) | $ | 26,669 | $ | — | $ | 26,669 | $ | 73,900 | $ | (4,005 | ) | $ | 69,895 | ||||||
Adjusted diluted EPS (Non-GAAP)(14) | $ | 0.09 | $ | 0.23 | |||||||||||||||
(14) Under the if-converted method, for the three months ended June 30, 2019, utilizes weighted average diluted shares outstanding of 299,139, which consists of Class A & Class B shares. Under the if-converted method, for the three months ended June 30, 2018, utilizes weighted average diluted shares outstanding of 299,029, which consists of Class A, Class B & Class B-1 shares.
Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited; In thousands, except per share amounts) | |||||||||||||||||||
Reconciliation of Net Loss to Combined Adjusted Net Income and Calculation of Adjusted Diluted EPS | |||||||||||||||||||
Six months ended June 30, 2019 | Six months ended June 30, 2018 | ||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Net loss | $ | (175,278 | ) | $ | — | $ | (175,278 | ) | $ | (198,438 | ) | $ | (150,155 | ) | $ | (348,593 | ) | ||
Adjusted to add (deduct): | |||||||||||||||||||
Non-cash interest | 3,218 | — | 3,218 | 5,577 | 9,413 | 14,990 | |||||||||||||
GAAP Income tax benefit | (14,129 | ) | — | (14,129 | ) | (12,052 | ) | (6,273 | ) | (18,325 | ) | ||||||||
Amortization | 65,759 | — | 65,759 | 18,454 | 19,935 | 38,389 | |||||||||||||
Stock-based compensation expense | 10,571 | — | 10,571 | 1,644 | 4,816 | 6,460 | |||||||||||||
Acquisition and site closure expenses(8) | 47,258 | — | 47,258 | 214,642 | 10,925 | 225,567 | |||||||||||||
Restructuring and other charges(10) | 8,996 | — | 8,996 | 44,465 | 5,123 | 49,588 | |||||||||||||
Loss on extinguishment of debt | — | — | — | 19,667 | — | 19,667 | |||||||||||||
Inventory related charges(7) | 21,777 | — | 21,777 | 32,519 | 9,894 | 42,413 | |||||||||||||
Litigation, settlements and related charges(12) | — | — | — | — | 90,099 | 90,099 | |||||||||||||
Loss on sale of assets | — | — | — | 878 | — | 878 | |||||||||||||
Asset impairment charges(9) | 81,008 | — | 81,008 | — | 53 | 53 | |||||||||||||
Amortization of upfront payment | 36,393 | — | 36,393 | — | — | — | |||||||||||||
Foreign exchange (gain) loss | (2,847 | ) | — | (2,847 | ) | 17,381 | (921 | ) | 16,460 | ||||||||||
Gain on sale of international businesses, net (13) | (6,930 | ) | — | (6,930 | ) | — | — | — | |||||||||||
R&D milestone payments | 9,929 | — | 9,929 | 2,700 | — | 2,700 | |||||||||||||
Other | 1,583 | — | 1,583 | (820 | ) | 1,953 | 1,133 | ||||||||||||
Income tax at 21% | (18,334 | ) | — | (18,334 | ) | (31,020 | ) | 1,309 | (29,711 | ) | |||||||||
Net income attributable to NCI not associated with our Class B shares
| (140 | ) | — | (140 | ) | (144 | ) | — | (144 | ) | |||||||||
Adjusted net income (Non-GAAP) | $ | 68,834 | $ | — | $ | 68,834 | $ | 115,453 | $ | (3,829 | ) | $ | 111,624 | ||||||
Adjusted diluted EPS (Non-GAAP)(15) | $ | 0.23 | $ | 0.37 | |||||||||||||||
(15) Under the if-converted method, for the six months ended June 30, 2019, utilizes weighted average diluted shares outstanding of 299,117, which consists of Class A & Class B shares. Under the if-converted method, for the six months ended June 30, 2018, utilizes weighted average diluted shares outstanding of 299,029, which consists of Class A, Class B & Class B-1 shares.
Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited, In thousands) | |||||||||||||||||||
Reconciliation of Net Loss to EBITDA and Combined Adjusted EBITDA | |||||||||||||||||||
Three months ended June 30, 2019 | Three months ended June 30, 2018 | ||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Net loss | $ | (50,526 | ) | $ | — | $ | (50,526 | ) | $ | (250,090 | ) | $ | (23,006 | ) | $ | (273,096 | ) | ||
Adjusted to add (deduct): | |||||||||||||||||||
Interest expense, net | 43,886 | — | 43,886 | 36,622 | 4,539 | 41,161 | |||||||||||||
Income tax (benefit) expense | (5,701 | ) | — | (5,701 | ) | (12,416 | ) | 1,017 | (11,399 | ) | |||||||||
Depreciation and amortization | 50,706 | — | 50,706 | 32,147 | 6,925 | 39,072 | |||||||||||||
EBITDA (Non-GAAP) | $ | 38,365 | $ | — | $ | 38,365 | $ | (193,737 | ) | $ | (10,525 | ) | $ | (204,262 | ) | ||||
Adjusted to add (deduct): | |||||||||||||||||||
Stock-based compensation expense | $ | 6,224 | $ | — | $ | 6,224 | $ | 1,644 | $ | — | $ | 1,644 | |||||||
Acquisition and site closure expenses(8) | 19,056 | — | 19,056 | 207,507 | 4,381 | 211,888 | |||||||||||||
Restructuring and other charges(10) | 2,835 | — | 2,835 | 44,465 | 223 | 44,688 | |||||||||||||
Loss on extinguishment of debt | — | — | — | 19,667 | — | 19,667 | |||||||||||||
Inventory related charges(7) | 21,443 | — | 21,443 | 32,519 | 3,005 | 35,524 | |||||||||||||
Loss on sale of assets | — | — | — | 878 | — | 878 | |||||||||||||
Asset impairment charges(9) | 4,408 | — | 4,408 | — | — | — | |||||||||||||
Foreign exchange (gain) loss | (8,311 | ) | — | (8,311 | ) | 25,946 | — | 25,946 | |||||||||||
Loss on sale of international businesses(13) | 1,888 | — | 1,888 | — | — | — | |||||||||||||
R&D milestone payments | 5,614 | — | 5,614 | 1,424 | — | 1,424 | |||||||||||||
Other | 559 | — | 559 | 1,225 | — | 1,225 | |||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 92,081 | $ | — | $ | 92,081 | $ | 141,538 | $ | (2,916 | ) | $ | 138,622 | ||||||
Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited; In thousands) | |||||||||||||||||||
Reconciliation of Net Loss to EBITDA and Combined Adjusted EBITDA | |||||||||||||||||||
Six months ended June 30, 2019 | Six months ended June 30, 2018 | ||||||||||||||||||
Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||
Actual | Impax/ Gemini | Combined | Actual | Impax/ Gemini | Combined | ||||||||||||||
Net loss | $ | (175,278 | ) | $ | — | $ | (175,278 | ) | $ | (198,438 | ) | $ | (150,155 | ) | $ | (348,593 | ) | ||
Adjusted to add (deduct): | |||||||||||||||||||
Interest expense, net | 87,167 | — | 87,167 | 57,673 | 18,231 | 75,904 | |||||||||||||
Income tax benefit | (14,129 | ) | — | (14,129 | ) | (12,052 | ) | (6,273 | ) | (18,325 | ) | ||||||||
Depreciation and amortization | 99,574 | — | 99,574 | 46,898 | 24,900 | 71,798 | |||||||||||||
EBITDA (Non-GAAP) | $ | (2,666 | ) | $ | — | $ | (2,666 | ) | $ | (105,919 | ) | $ | (113,297 | ) | $ | (219,216 | ) | ||
Adjusted to add (deduct): | |||||||||||||||||||
Stock-based compensation expense | $ | 10,571 | $ | — | $ | 10,571 | $ | 1,644 | $ | 4,816 | $ | 6,460 | |||||||
Acquisition and site closure expenses(8) | 47,258 | — | 47,258 | 214,642 | 10,925 | 225,567 | |||||||||||||
Restructuring and other charges(10) | 8,996 | — | 8,996 | 44,465 | 5,123 | 49,588 | |||||||||||||
Loss on extinguishment of debt | — | — | — | 19,667 | — | 19,667 | |||||||||||||
Inventory related charges(7) | 21,777 | — | 21,777 | 32,519 | 9,894 | 42,413 | |||||||||||||
Litigation, settlements and related charges(12) | — | — | — | — | 90,099 | 90,099 | |||||||||||||
Loss on sale of assets | — | — | — | 878 | — | 878 | |||||||||||||
Asset impairment charges(9) | 81,008 | — | 81,008 | — | 53 | 53 | |||||||||||||
Amortization of upfront payment(11) | 36,393 | — | 36,393 | — | — | — | |||||||||||||
Foreign exchange (gain) loss | (2,847 | ) | — | (2,847 | ) | 17,381 | (921 | ) | 16,460 | ||||||||||
Gain on sale of international businesses, net (13) | (6,930 | ) | — | (6,930 | ) | — | — | — | |||||||||||
R&D milestone payments | 9,929 | — | 9,929 | 2,700 | — | 2,700 | |||||||||||||
Other | 559 | — | 559 | (820 | ) | 653 | (167 | ) | |||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 204,048 | $ | — | $ | 204,048 | $ | 227,157 | $ | 7,345 | $ | 234,502 | |||||||
(7) For the three and six months ended June 30, 2019, inventory related charges primarily represent inventory obsolescence resulting from new initiatives and policies adopted with our restructuring effort. For the three and six months ended June 30, 2018, inventory related charges represents a reserve for an unfavorable supply arrangement and the amortization of the Impax inventory step-up to fair value in purchase accounting.
(8) Acquisition and site closure expenses for the three and six months ended June 30, 2019 includes costs related to (i) plant closure and redundant employee costs and (ii) third party costs associated with the combination of Impax and related integration including legal, investment banking, accounting and information technology. For the three and six months ended June 30, 2018, acquisition and site closure expenses also includes costs associated with the Impax sale of its Middlesex, NJ and Taiwan facilities.
(9) Asset impairment charges for the three and six months ended June 30, 2019 are primarily associated with the write-off of in process research and development product rights and intangible asset impairment charges primarily related to products acquired in the Impax combination.
(10) Restructuring and other charges includes employee separation costs associated with the consolidation of sites, as well as the write-off of property, plant, and equipment at those sites.
(11) Amortization of upfront payment represents the amortization of the upfront payment made to Lannett in connection with our Transition Agreement with Levothyroxine.
(12) Litigation, settlements and related charges represents an Impax litigation settlement charge for the three and six months ended June 30, 2018 related to a settlement of claims with the plaintiffs in the class action antitrust suits related to Solodyn®.
(13) For the three months ended June 30, 2019, loss on the sale of international business represents the loss from the sale of our Amneal Deutschland GmbH subsidiary, which comprised substantially all of the Company's operations in Germany. For the six months ended June 30, 2019, gain on the sale of international businesses, net represents the gain from the sale of our Creo Pharma Holding Limited subsidiary, which comprised substantially all of the Company's operations in the United Kingdom partially offset by the loss from the sale of our Amneal Deutschland GmbH subsidiary, which comprised substantially all of the Company's operations in Germany.
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