Business Wire | Nov 6, 2020 06:01AM EST

Amneal Reports Third Quarter 2020 Financial Results

Nov. 06, 2020

BRIDGEWATER, N.J.--(BUSINESS WIRE)--Nov. 06, 2020--Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the "Company") announced its results today for the third quarter ended September 30, 2020.

"Amneal delivered another strong quarter, providing further evidence that our Amneal 2.0 strategy is positioning the company for sustained growth," said Chirag and Chintu Patel, Co-Chief Executive Officers. "While the COVID pandemic continues to affect some aspects of the business, we continue to focus on execution, improving the productivity of our operations and building a strong, diverse platform of generic and specialty pharmaceuticals. We appreciate the hard work of our employees in achieving these results and supporting Amneal's mission of bringing affordable medicines to patients."

Net revenue in the third quarter of 2020 was $519 million, an increase of 37% compared to $378 million in the third quarter of 2019. This increase was primarily attributable to $90 million from our AvKARE acquisition, and $51 million from new product launches including EluRyng and Sucralfate Oral Suspension as well as broad generic volume growth, partially offset by competition to Levothyroxine Sodium Tabs and Diclofenac Gel 1%. Net loss attributable to Amneal Pharmaceuticals, Inc. was $9 million in the third quarter compared to a net loss of $265 million in prior year period. The year over year improvement was primarily driven by lower intangible asset impairment and restructuring charges, lower interest and taxes, favorable foreign exchange, and stronger underlying performance, partially offset by the prior year benefit of the gain from the reduction in the tax receivable agreement liability. Diluted loss per share in the third quarter was $0.06 compared to a loss of $2.03 in the prior year period.

Adjusted EBITDA(1) in the third quarter of 2020 was $114 million, an increase of 60% compared to the prior year period, primarily due to higher Generic adjusted gross profit driven primarily by new launches and the addition of AvKARE. Adjusted net income(1) of $49 million in the third quarter of 2020 compared to $12 million in prior year period, reflected higher adjusted EBITDA and lower interest expense, offset in part by higher adjusted taxes. Adjusted diluted EPS(1) in the third quarter of 2020 was $0.16 compared to $0.04 in the prior year period.

^(1) See "Non-GAAP Financial Measures" below.

Updating Full Year 2020 Financial Outlook

Amneal is updating its previously provided 2020 guidance.

Existing Full Year 2020 Revised Full Year 2020 Financial Guidance Financial Guidance

Net revenue $1,875 million - $1,975 $1,950 million - $2,000 million million

Adjusted gross margin 44% - 46% 41% - 42%

Adjusted EBITDA ^(1) $400 million - $450 $430 million - $460 million million

Adjusted diluted EPS ^(2) $0.45 - $0.60 $0.55 - $0.65

Operating cash flow ^(3) $150 million - $200 $170 million - $220 million million

Capital expenditures $60 million - $70 million $60 million - $70 million

Weighted average diluted Approximately 300 million Approximately 300shares outstanding ^(4) million

(1)

Includes 100% of EBITDA from the AvKARE acquisition.

(2)

Accounts for 35% non-controlling interest in AvKARE.

(3)

Operating cash flow excludes a $110 million cash tax refund, which was substantially received as of September 30, 2020.

(4)

Assumes the weighted average diluted shares outstanding of Class A and Class B shares under the if-converted method.

Conference Call Information

Amneal will host a conference call and live webcast at 8:30 am Eastern Time on November 6, 2020 to discuss its results. The live webcast and presentation will be accessible through the Investor Relations section of the Company's website at https://investors.amneal.com. To access the call through a conference line, dial (844) 746-0741 (in the U.S.) or (412) 317-5273 (international callers). A replay of the conference call will be posted shortly after the call and will be available for seven days. To access the replay, dial (877) 344-7529 (in the U.S.) or (412) 317-0088 (international callers). The access code for the replay is 10149078.

About Amneal

Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is a fully-integrated pharmaceutical company focused on the development, manufacturing and distribution of generic and specialty drug 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 approximately 250 product families and is expanding its portfolio to include complex dosage forms, including biosimilars, 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 and endocrine disorders.

The Company also owns 65% of AvKARE. AvKARE provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and institutional customers who are located throughout the United States focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing. For more information, visit www.amneal.com.

Cautionary Statement on Forward-Looking Statements

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 the Company. Such risks and uncertainties include, but are not limited to: the potential impact of the COVID-19 pandemic on our business, manufacturing, supply chain, financial results, financial condition, and planned capital expenditures and national and international economies; the risk that our goodwill may become impaired, which could adversely affect our financial condition and results of operations; the impact of global economic conditions; our ability to successfully develop, license, acquire and commercialize new products on a timely basis; our ability to obtain exclusive marketing rights for our products; 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 through acquisitions and otherwise; 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 identify and 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; and the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by the Amneal Group. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's filings with the Securities and Exchange Commission, including under Item 1A, "Risk Factors" in the Company's most recent Annual Report on Form 10-K and in its subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. 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.

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, adjusted operating income and adjusted cost of goods sold, which are intended as supplemental measures of the Company's performance that are not required by or presented in accordance with U.S. General Accepted Accounting Principles ("GAAP"). 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 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 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, our historical adjusted results are not intended to project our adjusted 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, gross profit, gross margin, operating income 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.

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 and benefits, asset impairments and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results.

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

^ Includes 100% of EBITDA from the AvKARE acquisition.(1)

^ Accounts for 35% non-controlling interest in AvKARE.(2)

^ Operating cash flow excludes a $110 million cash tax refund, which was(3) substantially received as of September 30, 2020.

^ Assumes the weighted average diluted shares outstanding of Class A and(4) Class B shares under the if-converted method.

Conference Call Information

Amneal will host a conference call and live webcast at 8:30 am Eastern Time on November 6, 2020 to discuss its results. The live webcast and presentation will be accessible through the Investor Relations section of the Company's website at https://investors.amneal.com. To access the call through a conference line, dial (844) 746-0741 (in the U.S.) or (412) 317-5273 (international callers). A replay of the conference call will be posted shortly after the call and will be available for seven days. To access the replay, dial (877) 344-7529 (in the U.S.) or (412) 317-0088 (international callers). The access code for the replay is 10149078.

About Amneal

Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is a fully-integrated pharmaceutical company focused on the development, manufacturing and distribution of generic and specialty drug 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 approximately 250 product families and is expanding its portfolio to include complex dosage forms, including biosimilars, 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 and endocrine disorders.

The Company also owns 65% of AvKARE. AvKARE provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and institutional customers who are located throughout the United States focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing. For more information, visit www.amneal.com.

Cautionary Statement on Forward-Looking Statements

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 the Company. Such risks and uncertainties include, but are not limited to: the potential impact of the COVID-19 pandemic on our business, manufacturing, supply chain, financial results, financial condition, and planned capital expenditures and national and international economies; the risk that our goodwill may become impaired, which could adversely affect our financial condition and results of operations; the impact of global economic conditions; our ability to successfully develop, license, acquire and commercialize new products on a timely basis; our ability to obtain exclusive marketing rights for our products; 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 through acquisitions and otherwise; 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 identify and 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; and the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by the Amneal Group. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's filings with the Securities and Exchange Commission, including under Item 1A, "Risk Factors" in the Company's most recent Annual Report on Form 10-K and in its subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. 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.

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, adjusted operating income and adjusted cost of goods sold, which are intended as supplemental measures of the Company's performance that are not required by or presented in accordance with U.S. General Accepted Accounting Principles ("GAAP"). 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 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 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, our historical adjusted results are not intended to project our adjusted 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, gross profit, gross margin, operating income 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.

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 and benefits, asset impairments and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results.

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

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Operations

(Unaudited; In thousands, except per share amounts)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Net revenue $ 519,294 $ 378,283 $ 1,482,489 $ 1,229,045

Cost of goods sold 353,345 267,717 986,589 873,841

Cost of goods sold 32,364 56,132 34,579 112,441 impairment charges

Gross profit 133,585 54,434 461,321 242,763

Selling, general and 83,120 63,797 242,040 215,514 administrative

Research and 44,519 38,125 126,470 139,999 development

In-process researchand development - 23,382 960 46,169 impairment charges

Intellectual propertylegal development 2,134 2,586 6,954 9,263 expenses

Acquisition,transaction-related 1,041 3,131 5,403 12,682 and integrationexpenses

Charges related to 60 14,750 5,860 14,750 legal matters, net

Restructuring and 276 20,937 2,657 29,933 other charges

Operating income 2,435 (112,274) 70,977 (225,547) (loss)

Other (expense) income:

Interest expense, net (34,895) (42,209) (111,463) (129,376)

Foreign exchange gain 9,673 (12,531) 7,958 (9,684) (loss), net

Gain on sale ofinternational - - 123 6,930 businesses, net

Gain from reductionof tax receivable - 192,844 - 192,844 agreement liability

Other income, net 898 446 2,102 1,702

Total other (expense) (24,324) 138,550 (101,280) 62,416 income, net

(Loss) income before (21,889) 26,276 (30,303) (163,131) income taxes

Provision for(benefit from) income 144 389,668 (105,843) 375,539 taxes

Net (loss) income (22,033) (363,392) 75,540 (538,670)

Less: Net lossattributable to 13,058 98,386 18,556 208,881 non-controllinginterests

Net (loss) incomeattributable to (8,975) (265,006) 94,096 (329,789) AmnealPharmaceuticals, Inc.

Net (loss) income pershare attributable toAmneal Pharmaceuticals,Inc.'s commonstockholders:

Class A and Class B-1 $ (0.06) $ (2.03) $ 0.64 $ (2.56) basic

Class A and Class B-1 $ (0.06) $ (2.03) $ 0.63 $ (2.56) diluted

Weighted-averagecommon shares outstanding:

Class A and Class B-1 147,558 130,729 147,377 128,822 basic

Class A and Class B-1 147,558 130,729 148,622 128,822 diluted

Amneal Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited; In thousands)

September 30, 2020

December 31, 2019

Assets

Current assets:

Cash and cash equivalents

$

281,278

$

151,197

Restricted cash

2,372

1,625

Trade accounts receivable, net

707,103

604,390

Inventories

475,760

381,067

Prepaid expenses and other current assets

76,264

70,164

Related party receivables

942

1,767

Total current assets

1,543,719

1,210,210

Property, plant and equipment, net

462,438

477,997

Goodwill

522,690

419,504

Intangible assets, net

1,349,113

1,382,753

Operating lease right-of-use assets

43,643

53,344

Operating lease right-of-use assets - related party

25,463

16,528

Financing lease right-of-use assets - related party

59,328

61,284

Other assets

31,142

44,270

Total assets

$

4,037,536

$

3,665,890

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$

613,619

$

507,483

Current portion of long-term debt, net

29,776

21,479

Current portion of operating lease liabilities

11,527

11,874

Current portion of operating and financing lease liabilities - related party

3,895

3,601

Current portion of note payable - related party

1,000

-

Related party payable - short term

8,069

5,969

Total current liabilities

667,886

550,406

Long-term debt, net

2,757,139

2,609,046

Note payable - related party

36,048

-

Operating lease liabilities

34,849

43,135

Operating lease liabilities - related party

23,777

15,469

Financing lease liabilities - related party

60,490

61,463

Related party payable - long term

1,031

-

Other long-term liabilities

96,188

39,583

Total long-term liabilities

3,009,522

2,768,696

Redeemable non-controlling interests

11,932

-

Total stockholders' equity

348,196

346,788

Total liabilities and stockholders' equity

$

4,037,536

$

3,665,890

Amneal Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited; In thousands)

September 30, December 31, 2020 2019

Assets

Current assets:

Cash and cash equivalents $ 281,278 $ 151,197

Restricted cash 2,372 1,625

Trade accounts receivable, net 707,103 604,390

Inventories 475,760 381,067

Prepaid expenses and other current assets 76,264 70,164

Related party receivables 942 1,767

Total current assets 1,543,719 1,210,210

Property, plant and equipment, net 462,438 477,997

Goodwill 522,690 419,504

Intangible assets, net 1,349,113 1,382,753

Operating lease right-of-use assets 43,643 53,344

Operating lease right-of-use assets - related 25,463 16,528 party

Financing lease right-of-use assets - related 59,328 61,284 party

Other assets 31,142 44,270

Total assets $ 4,037,536 $ 3,665,890

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses $ 613,619 $ 507,483

Current portion of long-term debt, net 29,776 21,479

Current portion of operating lease liabilities 11,527 11,874

Current portion of operating and financing lease 3,895 3,601 liabilities - related party

Current portion of note payable - related party 1,000 -

Related party payable - short term 8,069 5,969

Total current liabilities 667,886 550,406

Long-term debt, net 2,757,139 2,609,046

Note payable - related party 36,048 -

Operating lease liabilities 34,849 43,135

Operating lease liabilities - related party 23,777 15,469

Financing lease liabilities - related party 60,490 61,463

Related party payable - long term 1,031 -

Other long-term liabilities 96,188 39,583

Total long-term liabilities 3,009,522 2,768,696

Redeemable non-controlling interests 11,932 -

Total stockholders' equity 348,196 346,788

Total liabilities and stockholders' equity $ 4,037,536 $ 3,665,890

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(Unaudited; In thousands)

Nine Months Ended September 30,

2020

2019

Cash flows from operating activities:

Net income (loss)

$

75,540

$

(538,670)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Gain from reduction of tax receivable agreement liability

-

(192,884)

Depreciation and amortization

175,514

152,932

Amortization of Levothyroxine Transition Agreement asset

-

36,393

Unrealized foreign currency (gain) loss

(7,779)

10,552

Amortization of debt issuance costs and discount

6,449

4,849

Gain on sale of international businesses, net

(123)

(6,930)

Intangible asset impairment charges

35,539

158,610

Non-cash restructuring and asset-related (credit) charges

(536)

11,923

Deferred tax benefit

-

371,683

Stock-based compensation

15,617

16,666

Inventory provision

56,198

67,844

Other operating charges and credits, net

6,248

5,945

Changes in assets and liabilities:

Trade accounts receivable, net

(50,748)

(46,457)

Inventories

(80,722)

(25,906)

Prepaid expenses, other current assets and other assets

17,638

41,256

Related party receivables

870

(1,305)

Accounts payable, accrued expenses and other liabilities

21,737

(13,932)

Related party payables

1,601

25

Net cash provided by operating activities

273,043

52,594

Cash flows from investing activities:

Purchases of property, plant and equipment

(26,912)

(42,664)

Deposit for future acquisitions of property, plant and equipment

(4,229)

-

Acquisition of intangible assets

(3,250)

(50,000)

Acquisitions, net of cash acquired

(251,360)

-

Proceeds from surrender of corporate owned life insurance

-

43,017

Proceeds from sale of international businesses, net of cash sold

-

34,834

Net cash used in investing activities

(285,751)

(14,813)

Cash flows from financing activities:

Proceeds from issuance of debt

180,000

-

Payments of principal on debt, financing leases and other

(26,500)

(20,250)

Payments of deferred financing costs

(4,102)

-

Proceeds from exercise of stock options

216

1,385

Employee payroll tax withholding on restricted stock unit vesting

(795)

(926)

Tax distribution to non-controlling interest

(1,628)

(13,494)

Distribution of earnings to and acquisition of non-controlling interest

(3,300)

(3,543)

Payments of principal on financing lease - related party

(802)

(1,707)

Net cash provided by (used in) financing activities

143,089

(38,535)

Effect of foreign exchange rate on cash

447

(967)

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

130,828

(1,721)

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

152,822

218,779

Cash, cash equivalents, and restricted cash - end of period

$

283,650

$

217,058

Cash and cash equivalents - end of period

281,278

212,738

Restricted cash - end of period

2,372

4,320

Cash, cash equivalents, and restricted cash - end of period

$

283,650

$

217,058

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(Unaudited; In thousands)

Nine Months Ended September 30,

2020 2019

Cash flows from operating activities:

Net income (loss) $ 75,540 $ (538,670)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Gain from reduction of tax receivable agreement - (192,884) liability

Depreciation and amortization 175,514 152,932

Amortization of Levothyroxine Transition Agreement - 36,393 asset

Unrealized foreign currency (gain) loss (7,779) 10,552

Amortization of debt issuance costs and discount 6,449 4,849

Gain on sale of international businesses, net (123) (6,930)

Intangible asset impairment charges 35,539 158,610

Non-cash restructuring and asset-related (credit) (536) 11,923 charges

Deferred tax benefit - 371,683

Stock-based compensation 15,617 16,666

Inventory provision 56,198 67,844

Other operating charges and credits, net 6,248 5,945

Changes in assets and liabilities:

Trade accounts receivable, net (50,748) (46,457)

Inventories (80,722) (25,906)

Prepaid expenses, other current assets and other 17,638 41,256 assets

Related party receivables 870 (1,305)

Accounts payable, accrued expenses and other 21,737 (13,932) liabilities

Related party payables 1,601 25

Net cash provided by operating activities 273,043 52,594

Cash flows from investing activities:

Purchases of property, plant and equipment (26,912) (42,664)

Deposit for future acquisitions of property, plant (4,229) - and equipment

Acquisition of intangible assets (3,250) (50,000)

Acquisitions, net of cash acquired (251,360) -

Proceeds from surrender of corporate owned life - 43,017 insurance

Proceeds from sale of international businesses, net - 34,834 of cash sold

Net cash used in investing activities (285,751) (14,813)

Cash flows from financing activities:

Proceeds from issuance of debt 180,000 -

Payments of principal on debt, financing leases and (26,500) (20,250) other

Payments of deferred financing costs (4,102) -

Proceeds from exercise of stock options 216 1,385

Employee payroll tax withholding on restricted (795) (926) stock unit vesting

Tax distribution to non-controlling interest (1,628) (13,494)

Distribution of earnings to and acquisition of (3,300) (3,543) non-controlling interest

Payments of principal on financing lease - related (802) (1,707) party

Net cash provided by (used in) financing activities 143,089 (38,535)

Effect of foreign exchange rate on cash 447 (967)

Net increase (decrease) in cash, cash equivalents, 130,828 (1,721) and restricted cash

Cash, cash equivalents, and restricted cash - 152,822 218,779 beginning of period

Cash, cash equivalents, and restricted cash - end $ 283,650 $ 217,058 of period

Cash and cash equivalents - end of period 281,278 212,738

Restricted cash - end of period 2,372 4,320

Cash, cash equivalents, and restricted cash - end $ 283,650 $ 217,058 of period

Amneal Pharmaceuticals, Inc.

Generics Operating Results

(Unaudited; In thousands)

Generics

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Net revenue - Generics

$

341,920

$

291,021

$

1,001,065

$

1,008,562

Cost of goods sold

229,067

217,773

666,841

760,074

Cost of goods sold impairment charges

32,364

49,115

34,579

105,424

Gross profit

80,489

24,133

299,645

143,064

Selling, general, and administrative

13,153

14,256

42,578

52,783

Research and development

39,232

34,316

108,582

129,915

Charges related to legal matters, net

60

14,750

5,610

14,750

In-process research and development impairment charges

-

23,382

960

46,169

Intellectual property legal development expenses

2,132

2,586

6,947

8,218

Restructuring and other charges

(536)

14,702

(158)

17,201

Other operating expenses

-

502

325

4,086

Operating income (loss)

$

26,448

$

(80,361)

$

134,801

$

(130,058)

Gross margin

23.5

%

8.3

%

29.9

%

14.2

%

Adjusted gross profit (Non-GAAP) (1)

$

128,047

$

86,789

$

384,593

$

364,500

Adjusted gross margin (Non-GAAP) (2)

37.4

%

29.8

%

38.4

%

36.1

%

Adjusted operating income (Non-GAAP)

$

82,436

$

39,693

$

246,771

$

201,260

Amneal Pharmaceuticals, Inc.

Generics Operating Results

(Unaudited; In thousands)

Generics Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Net revenue - $ 341,920 $ 291,021 $ 1,001,065 $ 1,008,562 Generics

Cost of goods sold 229,067 217,773 666,841 760,074

Cost of goods sold 32,364 49,115 34,579 105,424 impairment charges

Gross profit 80,489 24,133 299,645 143,064

Selling, general, 13,153 14,256 42,578 52,783 and administrative

Research and 39,232 34,316 108,582 129,915 development

Charges related to 60 14,750 5,610 14,750 legal matters, net

In-process researchand development - 23,382 960 46,169 impairment charges

Intellectualproperty legal 2,132 2,586 6,947 8,218 development expenses

Restructuring and (536) 14,702 (158) 17,201 other charges

Other operating - 502 325 4,086 expenses

Operating income $ 26,448 $ (80,361) $ 134,801 $ (130,058) (loss)



Gross margin 23.5 % 8.3 % 29.9 % 14.2 %

Adjusted grossprofit (Non-GAAP) ^ $ 128,047 $ 86,789 $ 384,593 $ 364,500 (1)

Adjusted grossmargin (Non-GAAP) ^ 37.4 % 29.8 % 38.4 % 36.1 %(2)

Adjusted operating $ 82,436 $ 39,693 $ 246,771 $ 201,260 income (Non-GAAP)

(1)

Adjusted gross profit is calculated as net revenue less adjusted cost of goods sold.

(2)

Adjusted gross margin is calculated as adjusted gross profit divided by net revenue.

Generics net revenue was $342 million for the three months ended September 30, 2020, an increase of $51 million or 17% when compared with the same period in 2019. The year over year increase was primarily due to new product launches of $51 million, including EluRyng and Sucralfate Oral Solution, and growth in Generic volume from new commercial initiatives, partially offset by competition to Levothyroxine Sodium Tabs and Diclofenac Gel 1%.

Generics gross margin was 23.5% compared to 8.3% for the prior year period. The increase primarily related to new product launches, which contributed $36 million of gross margin growth, the impact of new volume won during 2020 and operational efficiencies and product mix, which more than offset the pricing pressures on Levothyroxine Sodium Tabs and Diclofenac Gel 1% and a $17 million decline in intangible asset impairment charges. Generics adjusted gross margin was 37% compared to 30% in the prior-year period. The increase primarily related to new product launches which contributed $36 million of gross margin growth, the impact of new volume won during 2020 and operational efficiencies and product mix, which more than offset the pricing pressures on Levothyroxine Sodium Tabs and Diclofenac Gel 1%.

Generics operating income was $26 million compared to an operating loss of $80 million in the prior year period. The improvement primarily reflected increased gross margin, an in-process research and development impairment charge of $23 million in the prior year period, a decrease in charges related to legal matters of $15 million and a decrease in restructuring and other charges of $15 million, partially offset by an increase in research and development, primarily associated with milestone achievements and upfront license payments. Generics adjusted operating income for the third quarter of 2020 was $82 million compared to $40 million for the prior year period due to improved gross margin.

^(1) Adjusted gross profit is calculated as net revenue less adjusted cost of goods sold.

^(2) Adjusted gross margin is calculated as adjusted gross profit divided by net revenue.

Generics net revenue was $342 million for the three months ended September 30, 2020, an increase of $51 million or 17% when compared with the same period in 2019. The year over year increase was primarily due to new product launches of $51 million, including EluRyng and Sucralfate Oral Solution, and growth in Generic volume from new commercial initiatives, partially offset by competition to Levothyroxine Sodium Tabs and Diclofenac Gel 1%.

Generics gross margin was 23.5% compared to 8.3% for the prior year period. The increase primarily related to new product launches, which contributed $36 million of gross margin growth, the impact of new volume won during 2020 and operational efficiencies and product mix, which more than offset the pricing pressures on Levothyroxine Sodium Tabs and Diclofenac Gel 1% and a $17 million decline in intangible asset impairment charges. Generics adjusted gross margin was 37% compared to 30% in the prior-year period. The increase primarily related to new product launches which contributed $36 million of gross margin growth, the impact of new volume won during 2020 and operational efficiencies and product mix, which more than offset the pricing pressures on Levothyroxine Sodium Tabs and Diclofenac Gel 1%.

Generics operating income was $26 million compared to an operating loss of $80 million in the prior year period. The improvement primarily reflected increased gross margin, an in-process research and development impairment charge of $23 million in the prior year period, a decrease in charges related to legal matters of $15 million and a decrease in restructuring and other charges of $15 million, partially offset by an increase in research and development, primarily associated with milestone achievements and upfront license payments. Generics adjusted operating income for the third quarter of 2020 was $82 million compared to $40 million for the prior year period due to improved gross margin.

Amneal Pharmaceuticals, Inc.

Specialty Operating Results

(Unaudited; In thousands)

Specialty Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Net revenue - Specialty:

Rytary(r) $ 37,646 $ 33,710 $ 113,881 $ 95,538

Unithroid(r) 13,079 10,155 39,805 28,780

Zomig(r) 10,842 13,971 35,330 39,522

All other specialty 26,301 29,426 81,085 56,643 products

Total net revenue - 87,868 87,262 270,101 220,483 Specialty

Cost of goods sold 47,735 49,944 145,782 113,767

Cost of goods sold - 7,017 - 7,017 impairment charges

Gross profit 40,133 30,301 124,319 99,699

Selling, general, and 19,181 20,228 56,993 57,705 administrative

Research and development 5,287 3,809 17,888 10,084

Charges related to legal - - 250 - matters, net

Intellectual property legal 2 - 7 1,045 development expenses

Other operating expense, 1 2,668 83 6,096 net

Operating income $ 15,662 $ 3,596 $ 49,098 $ 24,769



Gross margin 45.7 % 34.7 % 46.0 % 45.2 %

Adjusted gross profit $ 65,259 $ 64,421 $ 200,336 $ 174,190 (Non-GAAP) ^(1)

Adjusted gross margin 74.3 % 73.8 % 74.2 % 79.0 %(Non-GAAP) ^(2)

Adjusted operating income $ 41,546 $ 40,907 $ 130,651 $ 108,945 (Non-GAAP)

(1)

Adjusted gross profit is calculated as net revenue less adjusted cost of goods sold.

(2)

Adjusted gross margin is calculated as adjusted gross profit divided by net revenue.

Specialty net revenue for the three months ended September 30, 2020 remained consistent at approximately $88 million and $87 million, respectively, for the three months ended September 30, 2020 and 2019 as demand growth for Rytary(r) and Unithroid(r) were offset by declines in non-promoted products.

Specialty gross margin for the third quarter of 2020 was 45.7% compared to 34.7% in the prior year period primarily due to $7 million in cost of goods sold impairment charges in the prior year period. Specialty adjusted gross margin for the third quarter of 2020 of 74% was in line with prior year margin.

Specialty operating income for the third quarter of 2020 was $16 million compared to $4 million in the prior year period. The improvement primarily reflected increased gross margin and $2 million of acquisition, transaction-related and integration expenses in the prior year period. Specialty adjusted operating income for the third quarter of 2020 was $42 million compared to $41 million as adjusted gross margin and operating expenses remained flat.

^(1) Adjusted gross profit is calculated as net revenue less adjusted cost of goods sold.

^(2) Adjusted gross margin is calculated as adjusted gross profit divided by net revenue.

Specialty net revenue for the three months ended September 30, 2020 remained consistent at approximately $88 million and $87 million, respectively, for the three months ended September 30, 2020 and 2019 as demand growth for Rytary(r) and Unithroid(r) were offset by declines in non-promoted products.

Specialty gross margin for the third quarter of 2020 was 45.7% compared to 34.7% in the prior year period primarily due to $7 million in cost of goods sold impairment charges in the prior year period. Specialty adjusted gross margin for the third quarter of 2020 of 74% was in line with prior year margin.

Specialty operating income for the third quarter of 2020 was $16 million compared to $4 million in the prior year period. The improvement primarily reflected increased gross margin and $2 million of acquisition, transaction-related and integration expenses in the prior year period. Specialty adjusted operating income for the third quarter of 2020 was $42 million compared to $41 million as adjusted gross margin and operating expenses remained flat.

Amneal Pharmaceuticals, Inc.

AvKARE Operating Results

(Unaudited; In thousands)

AvKARE ^(1) Three Months Ended Nine Months Ended September 30, eptember 30,

2020 2019 2020 2019

Net revenue - AvKARE ^(2) $ 89,506 $ - $ 211,323 $ -

Cost of goods sold ^(2) 76,543 - 173,966 -

Gross profit ^(2) 12,963 - 37,357 -

Selling, general, and administrative 15,374 - 41,809 -

Operating loss $ (2,411) $ - $ (4,452) $ -



Gross margin 14.5 % - % 17.7 % - %

Adjusted gross profit (Non-GAAP) ^(3) $ 12,963 $ - $ 37,357 $ -

Adjusted gross margin (Non-GAAP) ^(3) 14.5 % - % 17.7 % - %

Adjusted operating income (Non-GAAP) $ 6,283 $ - $ 18,732 $ -

(1)

The AvKARE segment includes the results of operations of AvKARE from January 31, 2020, the date of the acquisition, to September 30, 2020.

(2)

AvKARE excludes net revenue, costs of goods sold and gross profit from sales of Amneal products through this distribution channel. These financial results are included in the Generics segment.

(3)

There are no non-GAAP adjustments associated with gross profit and gross margin.

^ The AvKARE segment includes the results of operations of AvKARE from(1) January 31, 2020, the date of the acquisition, to September 30, 2020.

^ AvKARE excludes net revenue, costs of goods sold and gross profit from(2) sales of Amneal products through this distribution channel. These financial results are included in the Generics segment.

^ There are no non-GAAP adjustments associated with gross profit and gross(3) margin.

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Cost of Goods Sold to Adjusted Cost of Goods Sold

Generics

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Cost of goods sold

$

229,067

$

217,773

$

666,841

$

760,074

Cost of goods sold impairment charges

32,364

49,115

34,579

105,424

Adjusted to deduct (add):

Amortization

10,728

10,912

31,899

36,300

Inventory related charges (4)

435

(2,038)

5,065

19,739

Acquisition and site closure expenses (2)

2,262

3,956

7,834

20,436

Asset impairment charges (3)

32,648

49,115

35,822

105,424

Stock-based compensation expense

1,151

711

3,212

2,120

Amortization of upfront payment (6)

-

-

-

36,393

Other

334

-

1,116

1,024

Adjusted cost of goods sold (Non-GAAP)

$

213,873

$

204,232

$

616,472

$

644,062

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Cost of Goods Sold to Adjusted Cost of Goods Sold

Generics Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Cost of goods sold $ 229,067 $ 217,773 $ 666,841 $ 760,074

Cost of goods sold 32,364 49,115 34,579 105,424 impairment charges

Adjusted to deduct (add):

Amortization 10,728 10,912 31,899 36,300

Inventory related charges 435 (2,038) 5,065 19,739 ^(4)

Acquisition and site 2,262 3,956 7,834 20,436 closure expenses ^(2)

Asset impairment charges 32,648 49,115 35,822 105,424 ^(3)

Stock-based compensation 1,151 711 3,212 2,120 expense

Amortization of upfront - - - 36,393 payment^ (6)

Other 334 - 1,116 1,024

Adjusted cost of goods $ 213,873 $ 204,232 $ 616,472 $ 644,062 sold (Non-GAAP)

Specialty

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Cost of goods sold

$

47,735

$

49,944

$

145,782

$

113,767

Cost of goods sold impairment charges

-

7,017

-

7,017

Adjusted to deduct:

Amortization

25,126

27,103

76,017

67,474

Asset impairment charges (3)

-

7,017

-

7,017

Adjusted cost of goods sold (Non-GAAP)

$

22,609

$

22,841

$

69,765

$

46,293

Specialty Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Cost of goods sold $ 47,735 $ 49,944 $ 145,782 $ 113,767

Cost of goods sold impairment - 7,017 - 7,017 charges

Adjusted to deduct:

Amortization 25,126 27,103 76,017 67,474

Asset impairment charges ^(3) - 7,017 - 7,017

Adjusted cost of goods sold $ 22,609 $ 22,841 $ 69,765 $ 46,293 (Non-GAAP)

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Operating Income (Loss) to Adjusted Operating Income

Generics

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Operating income (loss)

$

26,448

$

(80,361)

$

134,801

$

(130,058)

Adjusted to add (deduct):

Acquisition and site closure expenses (2)

2,849

5,941

11,637

35,611

Amortization

10,728

10,912

31,899

36,300

Inventory related charges (4)

1,053

(2,038)

5,683

19,739

Stock-based compensation expense

2,174

3,982

6,051

9,355

Asset impairment charges (3)

32,716

72,530

37,490

151,741

Restructuring and other charges (5)

(536)

14,702

(158)

17,201

Charges related to legal matters, net (7)

60

15,000

5,610

15,000

Amortization of upfront payment (6)

-

-

-

36,393

R&D milestone payment

6,304

-

13,145

9,929

Other

640

(975)

613

49

Adjusted operating income (Non-GAAP)

$

82,436

$

39,693

$

246,771

$

201,260

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Operating Income (Loss) to Adjusted Operating Income

Generics Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Operating income (loss) $ 26,448 $ (80,361) $ 134,801 $ (130,058)

Adjusted to add (deduct):

Acquisition and site 2,849 5,941 11,637 35,611 closure expenses ^(2)

Amortization 10,728 10,912 31,899 36,300

Inventory related 1,053 (2,038) 5,683 19,739 charges ^(4)

Stock-based 2,174 3,982 6,051 9,355 compensation expense

Asset impairment 32,716 72,530 37,490 151,741 charges ^(3)

Restructuring and other (536) 14,702 (158) 17,201 charges ^(5)

Charges related to 60 15,000 5,610 15,000 legal matters, net ^(7)

Amortization of upfront - - - 36,393 payment ^(6)

R&D milestone payment 6,304 - 13,145 9,929

Other 640 (975) 613 49

Adjusted operating $ 82,436 $ 39,693 $ 246,771 $ 201,260 income (Non-GAAP)

Specialty

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Operating income

$

15,662

$

3,596

$

49,098

$

24,769

Adjusted to add (deduct):

Amortization

25,126

27,103

76,017

67,474

Acquisition and site closure expenses (2)

-

2,522

83

8,328

Stock-based compensation expense

707

456

2,033

966

Restructuring and other charges (5)

-

213

-

391

R&D milestone payment

-

-

2,000

-

Asset impairment charges (3)

-

7,017

-

7,017

Other

51

-

1,420

-

Adjusted operating income (Non-GAAP)

$

41,546

$

40,907

$

130,651

$

108,945

Specialty Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Operating income $ 15,662 $ 3,596 $ 49,098 $ 24,769

Adjusted to add (deduct):

Amortization 25,126 27,103 76,017 67,474

Acquisition and site closure - 2,522 83 8,328 expenses ^(2)

Stock-based compensation expense 707 456 2,033 966

Restructuring and other charges - 213 - 391 ^(5)

R&D milestone payment - - 2,000 -

Asset impairment charges ^(3) - 7,017 - 7,017

Other 51 - 1,420 -

Adjusted operating income $ 41,546 $ 40,907 $ 130,651 $ 108,945 (Non-GAAP)

AvKARE

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Operating loss

$

(2,411)

$

-

$

(4,452)

$

-

Adjusted to add:

Amortization

8,694

-

23,184

-

Adjusted operating income (Non-GAAP)

$

6,283

$

-

$

18,732

$

-

AvKARE Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Operating loss $ (2,411) $ - $ (4,452) $ -

Adjusted to add:

Amortization 8,694 - 23,184 -

Adjusted operating income (Non-GAAP) $ 6,283 $ - $ 18,732 $ -

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands, except per share amounts)

Reconciliation of Net (Loss) Income to Adjusted Net Income and Calculation of Adjusted Diluted EPS

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Net (loss) income

$

(22,033)

$

(363,392)

$

75,540

$

(538,670)

Adjusted to add (deduct):

Non-cash interest

2,021

1,631

5,885

4,849

Gain from reduction of tax receivable agreement liability (1)

-

(192,844)

-

(192,844)

GAAP Income tax expense (benefit)

144

389,668

(105,843)

375,539

Amortization

41,514

38,015

123,009

103,774

Stock-based compensation expense

5,415

6,095

15,617

16,666

Acquisition and site closure expenses (2)

3,979

11,230

16,607

58,488

Restructuring and other charges (5)

276

20,937

2,657

29,933

Inventory related charges (4)

1,054

(2,038)

6,179

19,739

Charges related to legal matters, net (7)

60

15,000

5,610

15,000

Asset impairment charges (3)

33,350

79,547

38,124

160,555

Amortization of upfront payment (6)

-

-

-

36,393

Foreign exchange (gain) loss

(9,673)

12,531

(7,958)

9,684

Gain on sale of international businesses, net (8)

-

-

(123)

(6,930)

R&D milestone payments

6,304

-

15,145

9,929

Other

468

(1,387)

230

196

Income tax at 21%

(13,886)

(3,149)

(41,860)

(21,483)

Net loss (income) attributable to NCI not associated with our Class B shares

393

(91)

(1,151)

(231)

Adjusted net income (Non-GAAP)

$

49,386

$

11,753

$

147,668

$

80,587

Adjusted diluted EPS (Non-GAAP) (9)

$

0.16

$

0.04

$

0.49

$

0.27

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands, except per share amounts)

Reconciliation of Net (Loss) Income to Adjusted Net Income and Calculation ofAdjusted Diluted EPS

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Net (loss) income $ (22,033) $ (363,392) $ 75,540 $ (538,670)

Adjusted to add (deduct):

Non-cash interest 2,021 1,631 5,885 4,849

Gain from reductionof tax receivable - (192,844) - (192,844) agreement liability^(1)

GAAP Income tax 144 389,668 (105,843) 375,539 expense (benefit)

Amortization 41,514 38,015 123,009 103,774

Stock-based 5,415 6,095 15,617 16,666 compensation expense

Acquisition and siteclosure expenses ^ 3,979 11,230 16,607 58,488 (2)

Restructuring and 276 20,937 2,657 29,933 other charges ^(5)

Inventory related 1,054 (2,038) 6,179 19,739 charges ^(4)

Charges related tolegal matters, net ^ 60 15,000 5,610 15,000 (7)

Asset impairment 33,350 79,547 38,124 160,555 charges ^(3)

Amortization of - - - 36,393 upfront payment ^(6)

Foreign exchange (9,673) 12,531 (7,958) 9,684 (gain) loss

Gain on sale ofinternational - - (123) (6,930) businesses, net ^(8)

R&D milestone 6,304 - 15,145 9,929 payments

Other 468 (1,387) 230 196

Income tax at 21% (13,886) (3,149) (41,860) (21,483)

Net loss (income)attributable to NCI 393 (91) (1,151) (231) not associated withour Class B shares

Adjusted net income $ 49,386 $ 11,753 $ 147,668 $ 80,587 (Non-GAAP)

Adjusted diluted EPS $ 0.16 $ 0.04 $ 0.49 $ 0.27 (Non-GAAP) ^(9)

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited, In thousands)

Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Net (loss) income

$

(22,033)

$

(363,392)

$

75,540

$

(538,670)

Adjusted to add (deduct):

Interest expense, net

34,895

42,209

111,463

129,376

Income tax expense (benefit)

144

389,668

(105,843)

375,539

Depreciation and amortization

59,359

53,358

175,514

152,932

EBITDA (Non-GAAP)

$

72,365

$

121,843

$

256,674

$

119,177

Adjusted to add (deduct):

Gain from reduction of tax receivable agreement liability (1)

-

(192,844)

-

(192,844)

Stock-based compensation expense

5,415

6,095

15,617

16,666

Acquisition and site closure expenses (2)

3,979

11,230

16,607

58,488

Restructuring and other charges (5)

276

20,937

2,657

29,933

Inventory related charges (4)

1,054

(2,038)

6,179

19,739

Charges related to legal matters, net (7)

60

15,000

5,610

15,000

Asset impairment charges (3)

33,350

79,547

38,124

160,555

Amortization of upfront payment (6)

-

-

-

36,393

Foreign exchange (gain) loss

(9,673)

12,531

(7,958)

9,684

Gain on sale of international businesses, net (8)

-

-

(123)

(6,930)

R&D milestone payments

6,304

-

15,145

9,929

Other

468

(1,387)

230

(828)

Adjusted EBITDA (Non-GAAP)

$

113,598

$

70,914

$

348,762

$

274,962

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

* Gain from reduction of tax receivable agreement liability represents the reversal of the accrued liability associated with the Company's deferred tax assets created at the Combination. * Acquisition and site closure expenses for the three and nine months ended September 30, 2020, include costs related to: (i) system integration associated with the combination with Impax Laboratories, LLC ("Impax"), (ii) integration and transaction activities associated with the acquisition of AvKARE, and (iii) the planned cessation of manufacturing at our Hauppauge, NY facility. Acquisition and site closure expenses for the three and nine months ended September 30, 2019 include costs related to: (i) plant closure and redundant employee costs and (ii) third party costs associated with the combination with Impax and related integration including legal, investment banking, accounting and information technology. * Asset impairment charges for the three and nine months ended September 30, 2020 were primarily associated with equipment and intangible assets. Asset impairment charges for the three and nine months ended September 30, 2019 were primarily associated with in-process research and development and intangible assets primarily related to products acquired in the Impax combination. * For the three and nine months ended September 30, 2020, inventory related charges represented inventory obsolescence and related expenses associated with recalls. For the three and nine months ended September 30, 2019, inventory related charges primarily represented inventory obsolescence resulting from new initiatives and policies adopted with our restructuring efforts. * For the three months September 30, 2020, restructuring and other charges primarily consisted of cash severance charges associated with the cost of benefits for management employees. For the nine months ended September 30, 2020, restructuring and other charges primarily consisted of cash severance charges associated with the cost of benefits for former senior executives and management employees. For the three and nine months ended September 30, 2019, restructuring and other charges primarily consisted of cash severance charges associated with the cost of benefits for employees at our Hauppauge, NY, Hayward, CA and other facilities, as well as asset-related charges associated with the impairment of property, plant and equipment and the right of use asset associated with our Hauppauge, NY facility. * Amortization of upfront payment represents the amortization of the upfront payment made to Lannett in connection with our Transition Agreement for Levothyroxine. * For the three and nine months ended September 30, 2020, charges related to legal matters, net were approximately $0.1 million and $6 million, respectively, for commercial legal claims in our Generics segment. For the three and nine months ended September 30, 2019, charges related to legal matters, net are primarily associated with an agreement in principle with Teva Pharmaceuticals, Inc. regarding a matter associated with Impax prior to the combination with Amneal. * For the three and nine months ended September 30, 2020, gain on the sale of international businesses, net was immaterial. For the nine months ended September 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. * For the three and nine months ended September 30, 2020, utilizes weighted average diluted shares outstanding of 301,364 and 300,739, respectively, which consists of Class A shares and Class B shares under the if-converted method. For the three and nine months ended September 30, 2019, utilizes weighted average diluted shares outstanding of 299,106 and 299,125, respectively, which consists of Class A and Class B shares under the if-converted method. View source version on businesswire.com: https://www.businesswire.com/news/home/20201106005114/en/

CONTACT: Investor Relations Helen O'Donnell Solebury Trout (203) 428-3213