Amneal Reports Fourth Quarter And Full Year 2018 Financial Results
BRIDGEWATER, N.J., Feb. 28, 2019 /PRNewswire/ -- Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the "Company") announced its results today for the fourth quarter and year ended December 31, 2018.
Summary of GAAP and Non-GAAP Combined and Adjusted Results
(Unaudited; In thousands, except per share amounts)
Three Months Ended
Variance
December 31, September 30, December 31, Sequential Year/ Year
2018 2018 2017
---
GAAP Results(2)
Net revenue $
497,528 $
476,487 $
293,369 4.4 69.6
% %
Net (loss) income $
(20,330) $
17,465 $
62,194 (216.4) (132.7)
% %
Diluted (loss) earnings per share (EPS) $
(0.07) $
0.05 N/A (240.0)
% N/A
attributable to Amneal Pharmaceuticals, Inc.
Non-GAAP Results(3)
Combined net revenue $
497,528 $
476,487 $
487,383 4.4 2.1
% %
Combined adjusted net income $
99,976 $
82,101 $
76,446 21.8 30.8
% %
Combined adjusted EBITDA $
186,647 $
162,917 $
139,625 14.6 33.7
% %
Combined adjusted diluted EPS $
0.33 $
0.27 N/A 22.2
% N/A
---
Years Ended Variance
December 31, December 31, Year/Year
2018 2017
GAAP Results(2)
Net revenue $
1,662,991 $
1,033,654 60.9
%
Net (loss) income $
(201,303) $
169,325 (218.9)
%
Diluted loss per share
attributable to Amneal
Pharmaceuticals, Inc. $
(0.16) N/A N/A
Non-GAAP Results(3)
Combined net revenue $
1,861,473 $
1,857,780 0.2
%
Combined adjusted net $
293,702 $
270,511 8.6
income %
Combined adjusted EBITDA $
584,280 $
503,678 16.0
%
Combined adjusted diluted
EPS $
0.98 N/A N/A
---
(1) See "Non-GAAP Financial Measures"
below.
(2) 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.
(3) Assumes the combination between
Amneal Pharmaceuticals LLC and Impax
Laboratories, LLC occurred on the first
day of the year presented.
Executive Commentary
"We ended a year of significant progress with improved financial results in the fourth quarter," said Rob Stewart, President and CEO of Amneal. "Our fourth quarter performance is the direct result of our strategic investments, accelerated synergy capture and solid performance from our base business, which helped to offset recent competition on several of our largest products. Both our Generics and Specialty segments grew net revenue sequentially and compared to last year's fourth quarter as we delivered improved consolidated net revenue of $498 million, combined adjusted EBITDA((4)) of $187 million and combined adjusted diluted EPS((4)) of $0.33."
"The full year 2018 was marked by several key strategic milestones, most notably the reshaping of our Company through the merger of Impax and Amneal. By the end of 2018, we completed the merger integration and accelerated the capture of synergies, resulting in approximately $60 million of cost savings for the year. We strategically deployed capital with the acquisition of Gemini Laboratories and through several partnerships including agreements with Jerome Stevens Pharmaceuticals, Inc. and Lannett for Levothyroxine. Through our R&D investments, we achieved 62 ANDA approvals, 10 tentative approvals and we submitted 31 ANDAs with the FDA. We launched 42 new generic products, which contributed $171 million in revenue in 2018."
"Operationally we are doing well as we achieved industry-leading pipeline execution in 2018 with a consistent pace of new approvals and launches. However, the financial benefits of this execution have been slower to materialize than expected as market dynamics are constraining the uptake of certain products. Our 2019 financial outlook reflects the current pricing and competitive challenges within the generic industry, which is impacting our previously expected growth rate. We continue to expect to deliver at least $200 million in merger cost synergies by the end of 2020, as we focus on generating cash to invest in strategic opportunities to diversify the business and accelerate our growth."
Basis of Presentation
The Company's financial results are presented in accordance with U.S. GAAP, which include the results of operations of Impax Laboratories, LLC ("Impax") and Gemini Laboratories, LLC ("Gemini") subsequent to the transaction closing dates of May 4, 2018 and May 7, 2018, respectively. As used in this press release the term "actual" refers to measures under the accounting principles generally accepted in the United States. The Company has two reportable segments, Generics and Specialty, and does not allocate general corporate services to either segment.
Fourth Quarter 2018 Performance
Net revenue in the fourth quarter of 2018 was $498 million, an increase of 69.6%, compared to the prior year period, primarily due to the combination with Impax and the acquisition of Gemini in May 2018, as well as new generic product launches. Net loss was $20 million in the fourth quarter of 2018, compared to net income of $62 million in the fourth quarter of 2017, primarily due to charges related to the combination with Impax and the acquisition of Gemini, including approximately $23 million of incremental interest expense. Diluted EPS in the fourth quarter of 2018 was a loss of $0.07. Diluted EPS in the fourth quarter of 2017 is not available as Amneal Pharmaceuticals LLC was a privately-held company for the period presented.
Combined net revenue((4)) in the fourth quarter of 2018 was $498 million, an increase of 2.1%, compared to the prior year period, due to an increase in net revenue from both Generics and Specialty segments. Combined adjusted net income((4)) in the fourth quarter of 2018 was $100 million, an increase of 30.8%, compared to the prior year period. Combined adjusted EBITDA((4)) in the fourth quarter of 2018 was $187 million, an increase of 33.7%, compared to the prior year period. The increase in both combined adjusted net income((4)) and combined adjusted EBITDA((4)) was primarily due to higher revenues and cost synergies from the combination with Impax. Combined adjusted diluted EPS in the fourth quarter of 2018 was $0.33.
Full Year 2018 Performance
Net revenue for the full year 2018 was $1,663 million, an increase of 60.9%, compared to full year 2017, primarily due to the combination with Impax and the acquisition of Gemini in May 2018, as well as the contribution from 42 new generic product launches. Net loss was $201 million for full year 2018, compared to net income of $169 million for full year 2017, primarily due to charges related to the combination with Impax and the acquisition of Gemini, including approximately $73 million of incremental interest expense. Diluted EPS for full year 2018 was a loss of $0.16. Diluted EPS for full year 2017 is not available as Amneal Pharmaceuticals LLC was a privately-held company for the period presented.
Combined net revenue((4)) for full year 2018 was $1,861 million, a slight increase compared to full year 2017. Combined adjusted net income((4)) for full year 2018 was $294 million, an increase of 8.6%, compared to full year 2017. Combined adjusted EBITDA((4)) for full year 2018 was $584 million, an increase of 16.0%, compared to full year 2017. The increase in both combined adjusted net income((4)) and combined adjusted EBITDA((4)) was primarily due to favorable product sales mix and cost synergies from the combination with Impax. Combined adjusted diluted EPS for the full year 2018 was $0.98.
((4) )See "Non-GAAP Financial Measures" below.
Amneal Pharmaceuticals, Inc.
Reconciliation of Generics Operating Income to Generics Combined Operating Income
(Unaudited; In thousands)
Generics Three months ended December 31, 2018 Three months ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Net revenue - Generics $
410,897
$ $
410,897 $
293,369 $
112,943 $
406,312
Cost of goods sold 263,002 263,002 141,953 150,762 292,715
Gross profit 147,895 147,895 151,416 (37,819) 113,597
Selling, general, and administrative 16,572 16,572 11,210 8,223 19,433
Research and development 53,650 53,650 43,494 12,612 56,106
In-process research and development 38,609 38,609 186,731 186,731
impairment charges
Restructuring and asset-related charges 12,031 12,031
Legal settlement gains (19,300) (19,300) (7,845) (7,845)
Intellectual property legal development 3,263 3,263 2,732 2,732
expenses
Change in fair value of contingent - (38,123) (38,123)
consideration
Fixed asset impairment - 5,577 5,577
Operating income (loss) $
43,070
$ $
43,070 $
101,825 $
(212,839) $
(111,014)
Gross margin 36.0
% 36.0 51.6
% (33.5)
% % 28.0
%
Adjusted gross profit (Non-GAAP)(5) $
185,268
$ $
185,268 $
155,739 $
35,401 $
191,140
Adjusted gross margin (Non-GAAP)(6) 45.1
% 45.1
% 53.1
% 31.3
% 47.0
%
Adjusted operating income (Non-GAAP) $
150,166
$ $
150,166 $
106,148 $
16,431 $
122,579
(5) 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.
(6) Adjusted gross margin is
calculated as adjusted gross
profit divided by combined net
revenue.
Fourth Quarter 2018 Performance
Generics net revenue of $411 million increased 40.1% for the fourth quarter of 2018, compared to the prior year period. The increase is primarily attributable to the combination with Impax as well as 42 new product launches in 2018, including Methylphenidate Hydrochloride extended release tablets, Phytonadione tablets, Levothyroxine tablets, Potassium Chloride oral solution, Erythromycin instant release tablets and Colesevelam Hydrochloride tablets. Generics combined net revenue((4)) in the fourth quarter of 2018 was $411 million, an increase of 1.1%, compared to the prior year period. The increase is primarily due to new product launches as noted above, partially offset by lower sales across a number of existing products due to lower pricing and additional competition.
Generics gross margin for the fourth quarter of 2018 was 36.0%, compared to 51.6% for the fourth quarter of 2017. The decrease was primarily as a result of higher cost of sales due to incremental amortization and inventory acquisition accounting adjustments, manufacturing plant closure charges and product sales mix primarily due to additional competition on several key products. Generics combined adjusted gross margin((4)) for the fourth quarter of 2018 was 45.1%, compared to 47.0% for the fourth quarter of 2017, primarily due to product sales mix.
Generics operating income for the fourth quarter of 2018 was $43 million, compared to $102 million for the fourth quarter of 2017, primarily due to higher amortization charges, acquisition and site closure expenses, in-process research and development impairment charges and restructuring and asset-related charges, principally a result of the combination with Impax. Generics combined adjusted operating income((4)) for the fourth quarter of 2018 was $150 million, an increase of 22.5%, compared to $123 million in the prior year period, primarily due to lower selling, general and administrative expenses, lower research and development expenses and an increase in legal settlement gains.
((4) )See "Non-GAAP Financial Measures" below
Amneal Pharmaceuticals, Inc.
Reconciliation of Generics Operating Income to Generics Combined Operating Income
(Unaudited; In thousands)
Generics
Year ended December 31, 2018
Year ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Net revenue - Generics $
1,439,031 $
102,237 $
1,541,268 $
1,033,654 $
549,077 $
1,582,731
Cost of goods sold 842,996 122,761 965,757 507,476 551,776 1,059,252
Gross profit 596,035 (20,524) 575,511 526,178 (2,699) 523,479
Selling, general, and administrative 68,426 11,896 80,322 56,050 28,294 84,344
Research and development 183,412 13,623 197,035 171,420 63,245 234,665
In-process research and development 39,259 39,259 192,809 192,809
impairment charges
Acquisition, integration and transaction 114,622 114,622
related expenses
Restructuring and asset-related charges 33,943 33,943
Legal settlement gains (22,300) (22,300) (29,312) (29,312)
Intellectual property legal development 15,772 15,772 20,518 715 21,233
expenses
Litigation, settlements and related - 84,597 84,597
charges
Change in fair value of contingent - (31,048) (31,048)
consideration
Fixed asset impairment - 8,380 8,380
Operating income $
162,901 $
(130,640) $
32,261 $
307,502 $
(265,094) $
42,408
Gross margin 41.4
% (20.1) 37.3
% 50.9
% (0.5)
% % 33.1
%
Adjusted gross profit (Non-GAAP)(5) $
712,954 $
3,246 $
716,200 $
561,518 $
208,960 $
770,478
Adjusted gross margin (Non-GAAP)(6) 49.5
% 3.2
% 46.5
% 54.3
% 38.1
% 48.7
%
Adjusted operating income (Non-GAAP) $
489,520 $
(22,273) $
467,247 $
342,842 $
123,241 $
466,083
(5) 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.
(6) Adjusted gross margin is
calculated as adjusted gross
profit divided by combined net
revenue.
Full Year 2018 Performance
Generics net revenue of $1,439 million increased 39.2% for the full year 2018, compared to full year 2017. The increase is primarily attributable to the combination with Impax as well as the contribution from 42 new product launches in 2018, including Methylphenidate Hydrochloride extended release tablets, Phytonadione tablets, Levothyroxine tablets, Potassium Chloride oral solution, Erythromycin instant release tablets and Colesevelam Hydrochloride tablets. Generics combined net revenue((4)) for full year 2018 was $1,541 million, a decrease of 2.6%, compared to full year 2017. The decrease was primarily driven by lower sales of Epinephrine Auto-Injector due to an ongoing supply disruption, and lower sales of existing base business products, including Budesonide Inhalation Suspension, Lidocaine, Diclofenac Sodium Gel 3% and Loratadine/PSE as a result of lower pricing and additional competition.
Generics gross margin for full year 2018 was 41.4%, compared to 50.9% for full year 2017. The decrease was primarily as a result of higher cost of sales due to incremental amortization, inventory acquisition accounting adjustments, inventory-related charges, manufacturing plant closure charges, impairment of product intangible assets and lower margin products in the Impax portfolio. Generics combined adjusted gross margin((4)) for full year 2018 was 46.5%, compared to 48.7% for full year 2017, primarily due to product sales mix.
Generics operating income for full year 2018 was $163 million, compared to $308 million for full year 2017, primarily due to acquisition, integration and transaction-related expenses, principally a result of the combination with Impax, as noted above. Generics combined adjusted operating income((4)) for full year 2018 was $467 million, an increase of 0.2%, compared to $466 million for full year 2017.
((4) )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 December 31, 2018 Three months ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Net revenue - Specialty:
Rytary(R) $
42,680
$ $
42,680
$ $
28,290 $
28,290
Zomig(R) 18,308 18,308 15,034 15,034
All other specialty products 25,643 25,643 37,747 37,747
Total net revenue - Specialty 86,631 86,631 81,071 81,071
Cost of goods sold 41,118 41,118 23,405 23,405
Gross profit 45,513 45,513 57,666 57,666
Selling, general, and administrative 16,200 16,200 22,156 22,156
Research and development 3,647 3,647 3,077 3,077
Intellectual property legal development (26) (26)
expenses
Restructuring and asset-related charges 1,682 1,682
Litigation, settlements and related - 1,111 1,111
charges
Fixed asset impairment - 74,128 74,128
Operating income (loss) $
24,010
$ $
24,010
$ $
(42,806) $
(42,806)
Gross margin 52.5 52.5 71.1 71.1
% % % %
Adjusted gross profit (Non-GAAP)(5) $
70,058
$ $
70,058
$ $
63,368 $
63,368
Adjusted gross margin (Non-GAAP)(6) 80.9 80.9 78.2 78.2
% % % %
Adjusted operating income (Non- $
50,600
$ $
50,600
$ $
38,995 $
38,995
GAAP)
(5) 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.
(6) Adjusted gross margin is
calculated as adjusted gross
profit divided by combined net
revenue.
Fourth Quarter 2018 Performance
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 combined net revenue((4)) in the fourth quarter of 2018 was $87 million, an increase of 6.9%, compared to the prior year period, driven primarily by higher revenue from Rytary®, Zomig® and Unithroid®, partially offset by significantly lower sales of Albenza® as a result of the loss of exclusivity in September of 2018.
Specialty combined gross margin((4)) for the fourth quarter of 2018 was 52.5%, compared to 71.1% for the prior year period, driven primarily by higher amortization expense. Specialty combined adjusted gross margin((4)) was 80.9% for the fourth quarter of 2018, compared to 78.2% in the prior year period, primarily due to product sales mix.
Specialty combined operating income((4)) for the fourth quarter of 2018 was $24 million, an increase of $67 million, compared to a combined operating loss of $43 million for the fourth quarter of 2017, primarily due to fixed asset impairment charges in the fourth quarter of 2017, for which there were no comparable charges in the current year period, and increased revenue, as noted above. Specialty combined adjusted operating income((4)) for the fourth quarter of 2018 was $51 million, an increase of $12 million, compared to $39 million for the prior year period, primarily due to increased revenue and lower selling, general and administrative expenses.
((4) )See "Non-GAAP Financial Measures" below
Amneal Pharmaceuticals, Inc.
Reconciliation of Specialty Operating Income to Specialty Combined Operating Income
(Unaudited; In thousands)
Specialty Year ended December 31, 2018 Year ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Net revenue - Specialty:
Rytary(R) $
95,541 $
35,086 $
130,627
$ $
91,637 $
91,637
Zomig(R) 43,111 14,411 57,522 51,115 51,115
All other specialty products sales 85,308 46,748 132,056 132,297 132,297
Total net revenue - Specialty 223,960 96,245 320,205 275,049 275,049
Cost of goods sold 103,592 26,731 130,323 98,650 98,650
Gross profit 120,368 69,514 189,882 176,399 176,399
Selling, general, and administrative 49,465 27,942 77,407 80,185 80,185
Research and development 10,778 3,664 14,442 17,662 17,662
Intellectual property legal development 489 23 512 3,167 3,167
expenses
Restructuring and asset-related charges 4,076 4,076
Litigation, settlements and related - 940 940 1,111 1,111
charges
Fixed asset impairment - 74,128 74,128
Operating income $
55,560 $
36,945 $
92,505
$ $
146 $
146
Gross margin 53.7 72.2 59.3 64.1 64.1
% % % % %
Adjusted gross profit (Non-GAAP)(5) $
178,022 $
75,626 $
253,648
$ $
200,937 $
200,937
Adjusted gross margin (Non-GAAP)(6) 79.5 78.6 79.2 73.1 73.1
% % % % %
Adjusted operating income (Non-GAAP) $
118,127 $
43,997 $
162,124
$ $
101,698 $
101,698
(5) 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.
(6) Adjusted gross margin is
calculated as adjusted gross
profit divided by combined net
revenue.
Full Year 2018 Performance
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 combined net revenue((4)) for full year 2018 was $320 million, an increase of 16.4%, compared to full year 2017, driven primarily by higher revenue from Rytary, Zomig and Unithroid.
Specialty combined gross margin((4)) for full year 2018 was 59.3%, compared to 64.1% for full year 2017, driven primarily by higher amortization expense. Specialty combined adjusted gross margin((4)) was 79.2% for full year of 2018, compared to 73.1% for full year 2017, primarily due to product sales mix.
Specialty combined operating income((4)) for full year 2018 was $93 million compared to $146 thousand of operating income for full year 2017, primarily due to fixed asset impairment charges in 2017, for which there were no comparable charges in 2018. Specialty combined adjusted operating income((4)) for full year 2018 was $162 million, an increase of $60 million, compared to $102 million for full year 2017, primarily due to increased revenue and lower selling, general and administrative expenses.
((4) )See "Non-GAAP Financial Measures" below.
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 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 2019.
2019 Key Outlook Assumptions
Full Year 2019 Financial Outlook
Adjusted gross margin 47% - 50%
Adjusted R&D as a % of net
revenue 9% - 10%
Adjusted SG&A as a % of net
revenue 11% - 12%
Adjusted EBITDA
$600 million - $650 million
Adjusted diluted EPS
$0.94 - $1.04
Adjusted effective tax rate 19% - 21%
Capital expenditures Approximately $100 million
Weighted diluted shares
outstanding
Approximately 300 million
---
Conference Call Information
Amneal will hold a conference call on February 28, 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/1898588/19E7D09970ECDA91F9B21D94F3CEC0AB. The number to call from within the United States is (866) 652-5200 and (412) 317-6060 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 10128077.
About Amneal
Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is an integrated pharmaceutical company focused on developing, manufacturing and distributing generic, brand and biosimilar products. The Company has approximately 6,000 employees in its operations in North America, Asia, and Europe, working together to bring high-quality medicines to patients primarily within the United States.
Amneal is one of the largest and fastest growing generic pharmaceutical manufacturers in the United States, with an expanding portfolio of generic products to include complex dosage forms in a broad range of therapeutic areas. The Company also markets a portfolio of branded pharmaceutical products through its Specialty division 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, 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 results of Impax and Gemini as if the transaction closing dates had occurred on the first day of all periods presented herein. 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 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.
All combined business results presented in this release are not prepared in accordance with Article 11 of Regulation S-X. 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. 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.
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 of 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: the impact of global economic conditions; our ability to integrate the operations of Amneal Pharmaceuticals LLC and Impax Laboratories, LLC pursuant to the business combination completed on May 4, 2018, and our ability to realize the anticipated synergies and other benefits of the combination; our ability to successfully develop and commercialize new products; our ability to obtain exclusive marketing rights for our products and to introduce products on a timely basis; the competition we face in the pharmaceutical industry from brand and generic drug product companies, and the impact of that competition on our ability to set prices; our ability to manage our growth; 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; 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 Quarterly Report on Form 10-Q and in the Company's subsequent filings with the Securities and Exchange Commission, including its Annual Report on 10-K for the fiscal year ended December 31, 2018 expected to be filed on or about March 1, 2019. 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
(In thousands, except per share amounts)
(unaudited)
Three months ended
Years ended
December 31, December 31, December 31, December 31,
2018 2017 2018 2017
---
Net revenue $
497,528 $
293,369 $
1,662,991 $
1,033,654
Cost of goods sold 304,120 141,953 946,588 507,476
Gross profit 193,408 151,416 716,403 526,178
Selling, general and administrative 71,236 26,966 230,435 109,046
Research and development 57,297 43,494 194,190 171,420
In-process research and development impairment charges 38,609 39,259
Acquisition, transaction-related and integration expenses 4,945 7,050 221,818 9,403
Restructuring and asset-related charges 14,104 56,413
Legal settlement gains (19,300) (7,845) (22,300) (29,312)
Intellectual property legal development expenses 3,237 2,732 16,261 20,518
Operating income (loss) 23,280 79,019 (19,673) 245,103
Other (expense) income:
Interest expense, net (42,880) (19,956) (143,571) (71,061)
Foreign exchange gain (loss) 2,817 3,341 (19,701) 29,092
Loss on extinguishment of debt - (1) (19,667) (2,532)
Loss on sale of international operations (146) (352) (2,958) (29,232)
Other income (expense) 2,123 24 2,848 (47)
Total other expense, net (38,086) (16,944) (183,049) (73,780)
(Loss) income before income taxes (14,806) 62,075 (202,722) 171,323
Provision for (benefit from) income taxes 5,524 (119) (1,419) 1,998
Net (loss) income (20,330) 62,194 (201,303) 169,325
Less: Net (income) loss attributable to Amneal Pharmaceuticals - (61,569) 148,806 (167,648)
LLC pre-Combination
Less: Net loss (income) attributable to non-controlling interests 11,562 (625) 32,753 (1,677)
Net loss attributable to Amneal Pharmaceuticals, Inc. before (8,768) (19,744)
accretion of redeemable non-controlling interest
Accretion of redeemable non-controlling interest - (1,176)
Net loss attributable to Amneal Pharmaceuticals, Inc. $
(8,768)
$ $
(20,920)
$
Net loss per share attributable to Amneal Pharmaceuticals,
Inc.'s common stockholders:
Class A and Class B-1 basic and diluted $
(0.07) $
(0.16)
Weighted-average common shares outstanding:
Class A and Class B-1 basic and diluted 127,343 127,252
Amneal Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
December 31, 2018 December 31, 2017
Assets
Current assets:
Cash and cash equivalents $
213,394 $
74,166
Restricted cash 5,385 3,756
Trade accounts receivable, net 481,495 351,367
Inventories 457,219 284,038
Prepaid expenses and other current assets 128,321 42,396
Related party receivables 830 16,210
Total current assets 1,286,644 771,933
Property, plant and equipment, net 544,146 486,758
Goodwill 426,226 26,444
Intangible assets, net 1,654,969 44,599
Deferred tax asset, net 373,159 898
Other assets 67,592 11,257
Total assets $
4,352,736 $
1,341,889
Liabilities and Stockholders' Equity / Members' Deficit
Current liabilities:
Accounts payable and accrued expenses $
514,440 $
194,779
Current portion of long-term debt, net 21,449 89,171
Current portion of financing obligations - related party 266 311
Related party payables 17,695 12,622
Total current liabilities 553,850 296,883
Long-term debt, net 2,630,598 1,355,274
Financing obligation - related party 39,083 39,987
Deferred income taxes 1,178 2,491
Liabilities under tax receivable agreement 192,884 -
Other long-term liabilities 38,780 7,793
Related party payable- long term 15,043
Total long-term liabilities 2,902,523 1,420,588
Total stockholders' equity / members' deficit 896,363 (375,582)
Total liabilities and stockholders' / members' deficit $
4,352,736 $
1,341,889
Amneal Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Years Ended December 31,
2018 2017
Cash flows from operating activities:
Net (loss) income $
(201,303) $
169,325
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 137,403 45,936
Unrealized foreign currency loss (gain) 18,582 (30,823)
Amortization of debt issuance costs 5,859 4,585
Loss on extinguishment of debt 19,667 2,532
Loss on sale of certain international businesses 2,958 29,232
Intangible asset impairment charges 47,928 -
Non-cash restructuring and asset-related charges 11,295 -
Deferred tax (benefit) provision (9,439) 742
Stock-based compensation and PPU expense 167,597 -
Inventory provision 44,539 3,771
Other operating charges and credits, net (1,866) 9,935
Changes in assets and liabilities:
Trade accounts receivable, net 89,084 35,255
Inventories (42,875) (31,826)
Prepaid expenses, other current assets and other assets 19,198 (25,305)
Related party receivables 10,928 (5,485)
Accounts payable, accrued expenses and other liabilities (55,212) 18,105
Related party payables (14,113) 8,208
Net cash provided by operating activities 250,230 234,187
Cash flows from investing activities:
Purchases of property, plant and equipment (83,088) (94,771)
Acquisition of product rights and licenses (14,000) (19,500)
Acquisitions, net of cash acquired (324,634) -
Proceeds from sale of property, plant and equipment 25,344 -
Proceeds from sale of certain international businesses, net of cash sold 15,717
Net cash used in investing activities (396,378) (98,554)
Cash flows from financing activities:
Payments of deferred financing costs and debt extinguishment costs (54,955) (5,026)
Proceeds from issuance of debt 1,325,383 250,000
Payments of principal on debt and capital leases (617,051) (13,625)
Net (payments) borrowings on revolving credit line (75,000) 50,000
Payments of principal on financing obligation - related party (243) (274)
Proceeds from exercise of stock options 3,797 -
Equity contributions 27,742 40
Capital contribution from (dividend to) non-controlling interest 360 (865)
Acquisition of redeemable non-controlling interest (11,775) -
Tax distribution to non-controlling interest (35,543) -
Distributions to members (182,998) (375,265)
Repayment of related party note (92,042) -
Net cash provided by (used in) financing activities 287,675 (95,015)
Effect of foreign exchange rate on cash (670) (242)
Net increase in cash, cash equivalents, and restricted cash 140,857 40,376
Cash, cash equivalents, and restricted cash - beginning of period 77,922 37,546
Cash, cash equivalents, and restricted cash - end of period $
218,779 $
77,922
Amneal Pharmaceuticals, Inc.
Reconciliation of Non-GAAP Combined Results of Operations
(Unaudited: In thousands)
Three months ended December 31, 2018 Three months ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Net revenue:
Generics $
410,897
$ $
410,897 $
293,369 $
112,943 $
406,312
Specialty 86,631 86,631 81,071 81,071
Total net revenue 497,528 497,528 293,369 194,014 487,383
Cost of goods sold 304,120 304,120 141,953 174,167 316,120
Gross profit 193,408 193,408 151,416 19,847 171,263
Selling, general and administrative 71,236 71,236 26,966 59,441 86,407
Research and development 57,297 57,297 43,494 15,689 59,183
In-process research and development 38,609 38,609 186,731 186,731
impairment charges
Acquisition, transaction-related and 4,945 4,945 7,050 8,061 15,111
integration expenses
Restructuring and asset-related charges 14,104 14,104
Legal settlement gains (19,300) (19,300) (7,845) (7,845)
Intellectual property legal development 3,237 3,237 2,732 2,732
expenses
Litigation, settlements and related charges - 1,223 1,223
Impairment loss on tangible assets - 79,705 79,705
Gain on sale of assets - (656) (656)
Change in fair value of contingent - (38,123) (38,123)
consideration
Operating income (loss) 23,280 23,280 79,019 (292,224) (213,205)
Other (expense) income:
Interest expense, net (42,880) (42,880) (19,956) (13,672) (33,628)
Foreign exchange gain 2,817 2,817 3,341 3,341
Loss on extinguishment of debt - (1) (1)
Loss on sale of international (146) (146) (352) (352)
operations
Other income (expense) 2,123 2,123 24 (292) (268)
Total other (expense) income, net (38,086) (38,086) (16,944) (13,964) (30,908)
(Loss) income before income taxes (14,806) (14,806) 62,075 (306,188) (244,113)
Provision for (benefit from) income 5,524 5,524 (119) (9,010) (9,129)
taxes
Net (loss) income $
(20,330)
$ $
(20,330) $
62,194 $
(297,178) $
(234,984)
Less: Net income attributable to - (61,569)
Amneal Pharmaceuticals LLC pre-
Combination
Less: Net loss (income) attributable to 11,562 (625)
non-controlling interests
Net loss attributable to Amneal $
(8,768)
$
Pharmaceuticals, Inc.
Amneal Pharmaceuticals, Inc.
Reconciliation of Non-GAAP Combined Results of Operations
(Unaudited; In thousands)
Year ended December 31, 2018
Year ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Actual Impax/
Gemini Gemini
Combined Combined
---
Net revenue:
Generics $
1,439,031 $
102,237 $
1,541,268 $
1,033,654 $
549,077 $
1,582,731
Specialty 223,960 96,245 320,205 275,049 275,049
Total net revenue 1,662,991 198,482 1,861,473 1,033,654 824,126 1,857,780
Cost of goods sold 946,588 149,492 1,096,080 507,476 650,426 1,157,902
Gross profit 716,403 48,990 765,393 526,178 173,700 699,878
Selling, general and administrative 230,435 80,242 310,677 109,046 217,410 326,456
Research and development 194,190 17,287 211,477 171,420 80,907 252,327
In-process research and development 39,259 39,259 192,809 192,809
impairment charges
Acquisition, transaction-related and 221,818 4,381 226,199 9,403 11,097 20,500
integration expenses
Restructuring and asset-related charges 56,413 56,413
Legal settlement gains (22,300) (22,300) (29,312) (29,312)
Intellectual property legal development 16,261 23 16,284 20,518 3,882 24,400
expenses
Litigation, settlements and related - 85,537 85,537 1,223 1,223
charges
Impairment loss on tangible assets - 82,508 82,508
Gain on sale of assets - (17,236) (17,236)
Change in fair value of contingent - (31,048) (31,048)
consideration
Operating (loss) income (19,673) (138,480) (158,153) 245,103 (367,852) (122,749)
Other (expense) income:
Interest expense, net (143,571) (18,231) (161,802) (71,061) (53,412) (124,473)
Foreign exchange (loss) gain (19,701) 921 (18,780) 29,092 29,092
Loss on extinguishment of debt (19,667) (19,667) (2,532) (1,215) (3,747)
Loss on sale of international (2,958) (2,958) (29,232) (29,232)
operations
Other income (expense) 2,848 (638) 2,210 (47) (10,878) (10,925)
Total other (expense) income, net (183,049) (17,948) (200,997) (73,780) (65,505) (139,285)
(Loss) income before income taxes (202,722) (156,428) (359,150) 171,323 (433,357) (262,034)
(Benefit from) provision for income (1,419) (6,273) (7,692) 1,998 18,326 20,324
taxes
Net (loss) income $
(201,303) $
(150,155) $
(351,458) $
169,325 $
(451,683) $
(282,358)
Less: Net loss (income) attributable to 148,806 (167,648)
Amneal Pharmaceuticals LLC pre-
Combination
Less: Net loss (income) attributable to 32,753 (1,677)
non-controlling interests
Accretion of redeemable non- (1,176)
controlling interest
Net loss attributable to Amneal $
(20,920)
$
Pharmaceuticals, Inc.
Amneal Pharmaceuticals, Inc.
Reconciliation of Non-GAAP Combined Results of Operations
(Unaudited; In thousands)
The following reconciliation for the three months ended September 30, 2018 has been provided for sequential comparison.
Three months ended September 30, 2018
Add: (Non-GAAP)
Actual Impax/
Gemini
Combined
Net revenue:
Generics $
391,175
$ $
391,175
Specialty 85,312 85,312
Total net revenue 476,487 476,487
Cost of goods sold 276,382 276,382
Gross profit 200,105 200,105
Selling, general and administrative 78,075 78,075
Research and development 42,999 42,999
In-process research and development impairment charges 4,401 4,401
Acquisition, transaction-related and integration expenses 2,231 2,231
Restructuring and asset-related charges (2,156) (2,156)
Operating income 74,555 74,555
Other expense:
Interest expense, net (43,018) (43,018)
Foreign exchange loss (5,137) (5,137)
Loss on sale of international operations (2,812) (2,812)
Other expense (1,014) (1,014)
Total other expense, net (51,981) (51,981)
Income before income taxes 22,574 22,574
Provision for income taxes 5,109 5,109
Net income $
17,465
$ $
17,465
Less: Net income attributable to Amneal Pharmaceuticals LLC pre-Combination
Less: Net income attributable to non-controlling interests (10,577)
Accretion of redeemable non-controlling interest 64
Net income attributable to Amneal Pharmaceuticals, Inc. $
6,952
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)
Reconciliation of Generics Cost of Goods Sold to Generics Combined Adjusted Cost of Goods Sold
Generics Three months ended December 31, 2018 Three months ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Cost of goods sold $
263,002
$ $
263,002 $
141,953 $
150,762 $
292,715
Adjusted to deduct:
Amortization 10,030 10,030 923 13,075 13,998
Inventory related charges(7) 3,620 3,620 3,400 6,224 9,624
Acquisition and site closure 12,384 12,384
expenses(8)
Asset impairment charges(9) 510 510 43,961 43,961
Stock-based compensation expense 406 406
Restructuring and asset-related - 9,960 9,960
charges(10)
Amortization of upfront payment(11) 10,423 10,423
Adjusted cost of goods sold (Non- $
225,629
$ $
225,629 $
137,630 $
77,542 $
215,172
GAAP)
Generics Year ended December 31, 2018 Year ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Cost of goods sold $
842,996 $
122,761 $
965,757 $
507,476 $
551,776 $
1,059,252
Adjusted to deduct:
Amortization 23,940 13,823 37,763 3,974 53,039 57,013
Inventory related charges(7) 45,615 9,894 55,509 22,682 25,740 48,422
Acquisition and site closure 27,619 27,619 9,314 9,314
expenses(8)
Asset impairment charges(9) 8,401 53 8,454 96,864 96,864
Stock-based compensation expense 921 921
Restructuring and asset-related - 26,702 26,702
charges(10)
Amortization of upfront payment(11) 10,423 10,423
Royalty expense - 8,684 8,684
Adjusted cost of goods sold (Non- $
726,077 $
98,991 $
825,068 $
472,136 $
340,117 $
812,253
GAAP)
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)
Reconciliation of Specialty Cost of Goods Sold to Specialty Combined Adjusted Cost of Goods Sold
Specialty Three months ended December 31, 2018 Three months ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Cost of goods sold $
41,118
$ $
41,118
$ $
23,405 $
23,405
Adjusted to deduct:
Amortization 18,848 18,848 3,884 3,884
Inventory related charges(7) 5,697 5,697
Restructuring and asset-related - 1,818 1,818
charges(10)
Adjusted cost of goods sold (Non- $
16,573
$ $
16,573
$ $
17,703 $
17,703
GAAP)
Specialty Year ended December 31, 2018 Year ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Cost of goods sold $
103,592 $
26,731 $
130,323
$ $
98,650 $
98,650
Adjusted to deduct:
Amortization 49,047 6,112 55,159 15,457 15,457
Inventory related charges(7) 8,607 8,607
Restructuring and asset-related - 9,081 9,081
charges(10)
Adjusted cost of goods sold (Non- $
45,938 $
20,619 $
66,557
$ $
74,112 $
74,112
GAAP)
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)
Reconciliation of Generics Operating (Loss) Income to Generics Combined Adjusted Operating Income
Generics Three months ended December 31, 2018 Three months ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Operating income (loss) $
43,070
$ $
43,070 $
101,825 $
(212,839) $
(111,014)
Adjusted to add (deduct):
Acquisition and site closure 20,905 20,905
expenses(8)
Amortization 10,030 10,030 923 13,075 13,998
Inventory related charges(7) 3,620 3,620 3,400 6,224 9,624
Stock-based compensation expense 1,926 1,926 829 829
Asset impairment charges(9) 39,119 39,119 236,269 236,269
Restructuring and asset-related 12,031 12,031 10,996 10,996
charges(10)
Litigation, settlements and related (97) (97)
charges
Amortization of upfront payment (11) 10,423 10,423
R&D milestone payment 5,300 5,300
Change in fair value of contingent - (38,123) (38,123)
consideration(12)
Other 3,839 3,839
Adjusted operating income (Non- $
150,166
$ $
150,166 $
106,148 $
16,431 $
122,579
GAAP)
Generics
Year ended December 31, 2018
Year ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Operating income $
162,901 $
(130,640) $
32,261 $
307,502 $
(265,094) $
42,408
Adjusted to add (deduct):
Acquisition and site closure 150,348 150,348 9,314 9,314
expenses(8)
Amortization 23,940 13,823 37,763 3,974 53,039 57,013
Inventory related charges(7) 45,615 9,894 55,509 22,682 26,702 49,384
Stock-based compensation expense 3,348 3,348 829 829
Asset impairment charges(9) 47,660 53 47,713 298,053 298,053
Restructuring and asset-related 33,943 33,943 28,911 28,911
charges(10)
Litigation, settlements and related (97) 84,597 84,500
charges
Amortization of upfront payment (11) 10,423 10,423
Royalty expense - 8,684 8,684
R&D milestone payment 8,000 8,000
Change in fair value of contingent - (31,048) (31,048)
consideration(12)
Other 3,439 3,439 2,535 2,535
Adjusted operating income (Non- $
489,520 $
(22,273) $
467,247 $
342,842 $
123,241 $
466,083
GAAP)
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)
Reconciliation of Specialty Operating (Loss) Income to Specialty Combined Adjusted Operating Income
Specialty Three months ended December 31, 2018 Three months ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Operating income (loss) $
24,010
$ $
24,010
$ $
(42,806) $
(42,806)
Adjusted to add:
Amortization 18,848 18,848 3,884 3,884
Inventory related charges(7) 5,697 5,697
Acquisition and site closure 189 189
expenses(8)
Stock-based compensation expense 11 11 1,971 1,971
Asset impairment charges(9) - 74,128 74,128
Restructuring and asset-related 1,682 1,682 1,818 1,818
charges(10)
Litigation, settlements and related -
charges
Other 163 163
Adjusted operating income (Non- $
50,600
$ $
50,600
$ $
38,995 $
38,995
GAAP)
Specialty
Year ended December 31, 2018 Year ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Operating income $
55,560 $
36,945 $
92,505
$ $
146 $
146
Adjusted to add:
Amortization 49,047 6,112 55,159 15,457 15,457
Inventory related charges(7) 8,607 8,607
Acquisition and site closure 189 189
expenses(8)
Stock-based compensation expense 11 11 1,971 1,971
Asset impairment charges(9) - 74,128 74,128
Restructuring and asset-related 4,076 4,076 9,996 9,996
charges(10)
Litigation, settlements and related - 940 940
charges
Other 637 637
Adjusted operating income (Non- $
118,127 $
43,997 $
162,124
$ $
101,698 $
101,698
GAAP)
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands, except per share amounts)
Reconciliation of Net (Loss) Income to Combined Adjusted Net Income and Calculation of Adjusted Diluted EPS
Three months ended December 31, 2018 Three months ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Net (loss) income $
(20,330)
$ $
(20,330) $
62,194 $
(297,178) $
(234,984)
Adjusted to add (deduct):
Non-cash interest 1,640 1,640 690 6,660 7,350
GAAP Income tax expense (benefit) 5,524 5,524 (119) (9,010) (9,129)
Amortization 28,878 28,878 923 16,959 17,882
Stock-based compensation expense 3,606 3,606 6,586 6,586
Acquisition and site closure 28,966 28,966 7,050 8,061 15,111
expenses(8)
Restructuring and asset-related 14,104 14,104 245 13,483 13,728
charges(10)
Inventory related charges(7) 9,317 9,317 3,400 6,224 9,624
Litigation, settlements and related (497) (497) 642 642
charges
Gain on sale of assets - (656) (656)
Asset impairment charges(9) 39,119 39,119 310,397 310,397
Amortization of upfront payment(11) 10,423 10,423
Foreign exchange gain (2,817) (2,817) (3,341) (3,341)
Loss on sale of international 146 146 352 352
operations
R&D milestone payments 5,300 5,300
Change in fair value of contingent - (38,123) (38,123)
consideration(12)
Other 3,412 3,412 1,328 1,328
Income tax at 21% (26,626) (26,626) (14,993) (5,328) (20,321)
Net income attributable to NCI not (189) (189)
associated with our Class B shares
Adjusted net income (Non-GAAP) $
99,976
$ $
99,976 $
56,401 $
20,045 $
76,446
Adjusted diluted EPS (Non-GAAP(13) $
0.33
(13) Utilizes weighted diluted
average shares outstanding of
299,345, 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) Income to Combined Adjusted Net Income and Calculation of Adjusted Diluted EPS
Year ended December 31, 2018
Year ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Net (loss) income $
(201,303) $
(150,155) $
(351,458) $
169,325 $
(451,693) $
(282,368)
Adjusted to add (deduct):
Non-cash interest 5,859 9,413 15,272 4,585 25,949 30,534
GAAP Income tax (benefit) expense (1,419) (6,273) (7,692) 1,998 18,326 20,324
Amortization 72,987 19,935 92,922 3,974 68,496 72,470
Stock-based compensation expense 8,840 4,816 13,656 26,258 26,258
Acquisition and site closure 264,424 9,829 274,253 9,403 20,411 29,814
expenses(8)
Restructuring and asset-related 56,413 5,123 61,536 245 40,248 40,493
charges(10)
Loss on extinguishment of debt 19,667 19,667 2,531 1,215 3,746
Inventory related charges(7) 54,222 9,894 64,116 22,682 26,702 49,384
Litigation, settlements and related 2,092 90,099 92,191 8,351 8,351
charges
Loss (gain) on sale of assets 878 878 (17,236) (17,236)
Asset impairment charges(9) 47,660 53 47,713 372,181 372,181
Amortization of upfront payment(11) 10,423 10,423
Royalty expense - 8,684 8,684
Foreign exchange loss (gain) 19,701 (921) 18,780 (29,092) (29,092)
Loss on sale of international 2,958 2,958 29,232 29,232
operations
R&D milestone payments 8,000 8,000
Change in fair value of contingent - (31,048) (31,048)
consideration(12)
Other 7,095 1,953 9,048 4,158 6,534 10,692
Income tax at 21% (79,484) 1,309 (78,175) (47,822) (24,086) (71,908)
Net income attributable to NCI not (386) (386)
associated with our Class B shares
Adjusted net income (Non-GAAP) $
298,627 $
(4,925) $
293,702 $
179,903 $
90,608 $
270,511
Adjusted diluted EPS (Non-GAAP(14) $
0.98
(14) Utilizes weighted diluted
average shares outstanding of
299,328, 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 Income to Combined Adjusted Net Income and Calculation of Adjusted Diluted EPS
The following reconciliation for the three months ended September 30, 2018 has been provided for sequential comparison.
Three months ended September 30, 2018
Add: (Non-GAAP)
Actual Impax/ Combined
Gemini
---
Net income $
17,465
$ $
17,465
Adjusted to add (deduct):
Non-cash interest 1,452 1,452
GAAP Income tax expense 5,109 5,109
Amortization 25,655 25,655
Stock-based compensation expense 3,590 3,590
Acquisition and site closure expenses(8) 12,430 12,430
Restructuring and asset-related charges(10) (2,156) (2,156)
Inventory related charges(7) 17,422 17,422
Litigation, settlements and related charges 2,589 2,589
Asset impairment charges(9) 8,541 8,541
Foreign exchange loss 5,137 5,137
Loss on sale of international operations 2,812 2,812
Other 3,947 3,947
Income tax at 21% (21,839) (21,839)
Net income attributable to NCI not associated with our Class B shares (53) (53)
Adjusted net income (Non-GAAP) $
82,101
$ $
82,101
Adjusted diluted EPS (Non-GAAP)(15) $
0.27
(15) Utilizes weighted diluted
average shares outstanding of
299,483, which consists of
Class A, Class B & Class B-1
shares.
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited, In thousands)
Reconciliation of Net (Loss) Income to EBITDA and Combined Adjusted EBITDA
Three months ended December 31, 2018 Three months ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Net (loss) income $
(20,330)
$ $
(20,330) $
62,194 $
(297,178) $
(234,984)
Adjusted to add (deduct):
Interest expense, net 42,880 42,880 19,956 13,672 33,628
Income tax expense (benefit) 5,524 5,524 (119) (9,010) (9,129)
Depreciation and amortization 47,494 47,494 12,842 21,620 34,462
EBITDA (Non-GAAP) $
75,568
$ $
75,568 $
94,873 $
(270,896) $
(176,023)
Adjusted to add (deduct):
Stock-based compensation expense $
3,606
$ $
3,606
$ $
6,586 $
6,586
Acquisition and site closure 28,966 28,966 7,050 8,061 15,111
expenses(8)
Restructuring and asset-related 14,104 14,104 245 13,483 13,728
charges(10)
Inventory related charges(7) 9,317 9,317 3,400 6,224 9,624
Litigation, settlements and related (497) (497) 642 642
charges
Gain on sale of assets - (656) (656)
Asset impairment charges(9) 39,119 39,119 310,397 310,397
Amortization of upfront payment(11) 10,423 10,423
Foreign exchange gain (2,817) (2,817) (3,341) (3,341)
Loss on sale of international 146 146 352 352
operations
R&D milestone payments 5,300 5,300
Change in fair value of contingent - (38,123) (38,123)
consideration(12)
Other 3,412 3,412 1,328 1,328
Adjusted EBITDA (Non-GAAP) $
186,647
$ $
186,647 $
102,579 $
37,046 $
139,625
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)
Reconciliation of Net (Loss) Income to EBITDA and Combined Adjusted EDITBA
Year ended December 31, 2018
Year ended December 31, 2017
Add: (Non-GAAP) Add: (Non-GAAP)
Actual Impax/ Combined Actual Impax/ Combined
Gemini Gemini
---
Net (loss) income $
(201,303) $
(150,155) $
(351,458) $
169,325 $
(451,693) $
(282,368)
Adjusted to add (deduct):
Interest expense, net 143,571 18,231 161,802 71,061 53,412 124,473
Income tax expense (benefit) (1,419) (6,273) (7,692) 1,998 18,326 20,324
Depreciation and amortization 137,403 24,902 162,305 45,936 93,854 139,790
EBITDA (Non-GAAP) $
78,252 $
(113,295) $
(35,043) $
288,320 $
(286,101) $
2,219
Adjusted to add (deduct):
Stock-based compensation expense $
8,840 $
4,816 $
13,656
$ $
26,258 $
26,258
Acquisition and site closure 264,424 9,829 274,253 9,403 20,411 29,814
expenses(8)
Restructuring and asset-related 56,413 5,123 61,536 245 40,248 40,493
charges(10)
Loss on extinguishment of debt 19,667 19,667 2,531 1,215 3,746
Inventory related charges(7) 54,222 9,894 64,116 22,682 26,702 49,384
Litigation, settlements and related 2,092 90,099 92,191 8,351 8,351
charges
Loss (gain) on sale of assets 878 878 (17,236) (17,236)
Asset impairment charges(9) 47,660 53 47,713 372,181 372,181
Amortization of upfront payment(11) 10,423 10,423
Royalty expense - 8,684 8,684
Foreign exchange loss (gain) 19,701 (921) 18,780 (29,092) (29,092)
Loss on sale of international 2,958 2,958 29,232 29,232
operations
R&D milestone payments 8,000 8,000
Change in fair value of contingent - (31,048) (31,048)
consideration(12)
Other 4,285 867 5,152 4,158 6,534 10,692
Adjusted EBITDA (Non-GAAP) $
577,815 $
6,465 $
584,280 $
336,163 $
167,515 $
503,678
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)
Reconciliation of Net Income to EBITDA and Combined Adjusted EDITBA
The following reconciliation for the three months ended September 30, 2018 has been provided for sequential comparison.
Three months ended September 30, 2018
Add: (Non-GAAP)
Actual Impax/ Combined
Gemini
---
Net income $
17,465
$ $
17,465
Adjusted to add (deduct):
Interest expense, net 43,018 43,018
Income tax expense 5,109 5,109
Depreciation and amortization 43,013 43,013
EBITDA (Non-GAAP) $
108,605
$ $
108,605
Adjusted to add (deduct):
Stock-based compensation expense $
3,590
$ 3,590
Acquisition and site closure expenses(8) 12,430 12,430
Restructuring and asset-related charges(10) (2,156) (2,156)
Inventory related charges(7) 17,422 17,422
Litigation, settlements and related charges 2,589 2,589
Asset impairment charges(9) 8,541 8,541
Foreign exchange loss 5,137 5,137
Loss on sale of international operations 2,812 2,812
Other 3,947 3,947
Adjusted EBITDA (Non-GAAP) $
162,917
$ $
162,917
(7) Inventory related charges primarily
represents the amortization of the Impax
inventory step-up to fair value in
purchase accounting and write-offs of
pre-launch inventory quantities.
(8) Acquisition and site closure expenses
includes costs related to (i) accelerated
vesting of Amneal profit participation
units, (ii) special bonuses associated
with the combination and integration of
Impax, (iii) plant closure and redundant
employee costs and (iv) third party costs
associated with the combination of Impax
and related integration including legal,
investment banking, accounting and
information technology.
(9) Asset impairment charges for the year
ended December 31, 2018 are primarily
associated with the write-off of
leasehold improvements in connection with
the closing of our Hayward, CA facility.
Asset impairment charges for the year
ended December 31, 2017 are primarily
associated with a write-off of in
process research and development product
rights and impairment charges primarily
related to two products acquired in the
Teva Transaction as well as fixed asset
impairment charges primarily related to
the Taiwan and Middlesex, New Jersey
facilities.
(10) Restructuring and asset related
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) Change in fair value of contingent
consideration represents the reduction in
contingent consideration liability
related to a product acquired in the Teva
Transaction. Based on timing and
probability of product launch, and number
of competitors expected in the market,
the Company concluded that fair value of
the contingent consideration was zero at
December 31, 2017.
CONTACT:
Mark Donohue
(908) 409-6718
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SOURCE Amneal Pharmaceuticals, Inc.
