AMNEAL PHARMACEUTICALS, INC., 10-Q filed on 11/8/2021
Quarterly Report
v3.21.2
Cover - shares
9 Months Ended
Sep. 30, 2021
Oct. 29, 2021
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2021  
Document Transition Report false  
Entity File Number 001-38485  
Entity Registrant Name Amneal Pharmaceuticals, Inc.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 32-0546926  
Entity Address, Address Line One 400 Crossing Boulevard,  
Entity Address, City or Town Bridgewater  
Entity Address, State or Province NJ  
Entity Address, Postal Zip Code 08807  
City Area Code 908  
Local Phone Number 947-3120  
Title of 12(b) Security Class A Common Stock, par value $0.01 per share  
Trading Symbol AMRX  
Security Exchange Name NYSE  
Entity Current Reporting Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0001723128  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Class A Common Stock    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding (in shares)   149,371,355
Class B Common Stock    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding (in shares)   152,116,890
v3.21.2
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Income Statement [Abstract]        
Net revenue $ 528,593 $ 519,294 $ 1,556,773 $ 1,482,489
Cost of goods sold 329,394 353,345 953,514 986,589
Cost of goods sold impairment charges 688 32,364 688 34,579
Gross profit 198,511 133,585 602,571 461,321
Selling, general and administrative 91,397 83,120 268,280 242,040
Research and development 48,927 44,519 149,973 126,470
In-process research and development impairment charges 0 0 710 960
Intellectual property legal development expenses 1,627 2,134 6,574 6,954
Acquisition, transaction-related and integration expenses 134 1,041 7,219 5,403
Charges related to legal matters, net 19,000 60 19,000 5,860
Restructuring and other charges 425 276 788 2,657
Change in fair value of contingent consideration 300 0 300 0
Property losses and associated expenses 8,186 0 8,186 0
Operating income 28,515 2,435 141,541 70,977
Other (expense) income:        
Interest expense, net (34,400) (34,895) (102,368) (111,463)
Foreign exchange (loss) gain, net (29) 9,673 (185) 7,958
Gain on sale of international businesses, net 0 0 0 123
Other income, net 3,871 898 8,697 2,102
Total other expense, net (30,558) (24,324) (93,856) (101,280)
(Loss) income before income taxes (2,043) (21,889) 47,685 (30,303)
Provision for (benefit from) income taxes 4,049 144 7,056 (105,843)
Net (loss) income (6,092) (22,033) 40,629 75,540
Less: Net loss (income) attributable to non-controlling interests 1,855 13,058 (23,628) 18,556
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. $ (4,237) $ (8,975) $ 17,001 $ 94,096
Net (loss) income per share attributable to Amneal Pharmaceuticals, Inc.'s class A common stockholders:        
Basic (in usd per share) $ (0.03) $ (0.06) $ 0.11 $ 0.64
Diluted (in usd per share) $ (0.03) $ (0.06) $ 0.11 $ 0.63
Weighted-average common shares outstanding:        
Basic (in shares) 149,290 147,558 148,771 147,377
Diluted (in shares) 149,290 147,558 151,655 148,622
v3.21.2
Consolidated Statements of Comprehensive (Loss) Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Statement of Other Comprehensive Income [Abstract]        
Net (loss) income $ (6,092) $ (22,033) $ 40,629 $ 75,540
Less: Net loss (income) attributable to non-controlling interests 1,855 13,058 (23,628) 18,556
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. (4,237) (8,975) 17,001 94,096
Other comprehensive income (loss):        
Foreign currency translation adjustments arising during the period (1,164) (1,646) (7,348) (9,748)
Unrealized gain (loss) on cash flow hedge, net of tax 2,711 (1,599) 24,187 (74,031)
Less: Other comprehensive (income) loss attributable to non-controlling interests (781) 1,648 (8,531) 42,575
Other comprehensive income (loss) attributable to Amneal Pharmaceuticals, Inc. 766 (1,597) 8,308 (41,204)
Comprehensive (loss) income attributable to Amneal Pharmaceuticals, Inc. $ (3,471) $ (10,572) $ 25,309 $ 52,892
v3.21.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 302,655 $ 341,378
Restricted cash 7,964 5,743
Trade accounts receivable, net 627,954 638,895
Inventories 520,245 490,649
Prepaid expenses and other current assets 110,212 73,467
Related party receivables 1,307 1,407
Total current assets 1,570,337 1,551,539
Property, plant and equipment, net 459,651 477,754
Goodwill 566,406 522,814
Intangible assets, net 1,232,727 1,304,626
Financing lease right-of-use assets   10,000
Other assets 19,528 22,344
Total assets 3,974,409 4,006,033
Current liabilities:    
Accounts payable and accrued expenses 589,412 611,867
Current portion of long-term debt, net 30,471 44,228
Current portion of financing lease liabilities   2,000
Related party payable - short term 32,474 7,561
Total current liabilities 667,335 676,902
Long-term debt, net 2,687,668 2,735,264
Note payable - related party 37,629 36,440
Financing lease liabilities   2,000
Related party payable - long term 9,566 1,584
Other long-term liabilities 60,795 83,365
Total long-term liabilities 2,908,648 2,972,395
Commitments and contingencies (Notes 5 and 13)
Redeemable non-controlling interests 15,260 11,804
Stockholders' Equity    
Preferred stock, $0.01 par value, 2,000 shares authorized; none issued at both September 30, 2021 and December 31, 2020 0 0
Additional paid-in capital 650,539 628,413
Stockholders' accumulated deficit (269,820) (286,821)
Accumulated other comprehensive loss (33,227) (41,318)
Total Amneal Pharmaceuticals, Inc. stockholders' equity 350,506 303,271
Non-controlling interests 32,660 41,661
Total stockholders' equity 383,166 344,932
Total liabilities and stockholders' equity 3,974,409 4,006,033
Class A Common Stock    
Stockholders' Equity    
Common stock 1,492 1,475
Class B Common Stock    
Stockholders' Equity    
Common stock 1,522 1,522
Excluding Related Party    
Current assets:    
Operating lease right-of-use assets 38,993 33,947
Financing lease right-of-use assets 65,682 9,541
Current liabilities:    
Current portion of operating lease liabilities 9,180 6,474
Current portion of financing lease liabilities 3,218 1,794
Operating lease liabilities 32,562 30,182
Financing lease liabilities 60,966 2,318
Related Party    
Current assets:    
Operating lease right-of-use assets 21,085 24,792
Financing lease right-of-use assets 0 58,676
Current liabilities:    
Current portion of operating and financing lease liabilities - related party 2,580 3,978
Current portion of note payable - related party 0 1,000
Operating lease liabilities 19,462 23,049
Financing lease liabilities $ 0 $ 60,193
v3.21.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2021
Dec. 31, 2020
Preferred stock, par value (in usd per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 2,000,000 2,000,000
Preferred stock, shares issued (in shares) 0 0
Class A Common Stock    
Common stock, par value (in usd per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 900,000,000 900,000,000
Common stock, shares issued (in shares) 149,332,000 147,674,000
Class B Common Stock    
Common stock, par value (in usd per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 300,000,000 300,000,000
Common stock, shares issued (in shares) 152,117,000 152,117,000
v3.21.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Cash flows from operating activities:    
Net (loss) income $ 40,629 $ 75,540
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 172,223 175,514
Unrealized foreign currency loss (94) (7,779)
Amortization of debt issuance costs and discount 6,873 6,449
Gain on sale of international businesses, net 0 (123)
Intangible asset impairment charges 1,398 35,539
Asset-related credit 0 (536)
Change in fair value of contingent consideration 300 0
Stock-based compensation 20,670 15,617
Inventory provision 39,290 56,198
Non-cash property losses 5,152 0
Other operating charges and credits, net 3,965 6,248
Changes in assets and liabilities:    
Trade accounts receivable, net 10,894 (50,748)
Inventories (65,643) (80,722)
Prepaid expenses, other current assets and other assets (27,493) 17,638
Related party receivables 7,201 870
Accounts payable, accrued expenses and other liabilities (32,819) 21,737
Related party payables (3,987) 1,601
Net cash provided by operating activities 178,559 273,043
Cash flows from investing activities:    
Purchases of property, plant and equipment (30,230) (26,912)
Deposits for future acquisition of property, plant, and equipment (2,655) (4,229)
Acquisition of intangible assets (500) (3,250)
Acquisitions, net of cash acquired (73,828) (251,360)
Net cash used in investing activities (107,213) (285,751)
Cash flows from financing activities:    
Proceeds from issuance of debt 0 180,000
Payments of principal on debt, financing leases and other (68,240) (26,500)
Payments of deferred financing costs 0 (4,102)
Proceeds from exercise of stock options 834 216
Employee payroll tax withholding on restricted stock unit vesting (2,595) (795)
Tax distributions to non-controlling interests (36,678) (1,628)
Distribution of earnings to and acquisition of non-controlling interests 0 (3,300)
Payments of principal on financing lease - related party (93) (802)
Repayment of related party note (1,000) 0
Net cash (used in) provided by financing activities (107,772) 143,089
Effect of foreign exchange rate on cash (76) 447
Net (decrease) increase in cash, cash equivalents, and restricted cash (36,502) 130,828
Cash, cash equivalents, and restricted cash - beginning of period 347,121 152,822
Cash, cash equivalents, and restricted cash - end of period 310,619 283,650
Cash and cash equivalents - end of period 302,655 281,278
Restricted cash - end of period 7,964 2,372
Supplemental disclosure of cash flow information:    
Cash paid for interest 91,678 99,207
Cash (paid) received for income taxes, net (11,583) 109,444
Supplemental disclosure of non-cash investing and financing activity:    
Notes payable for acquisitions - related party 0 36,033
Deferred consideration for acquisition - related party 30,099 0
Contingent consideration for acquisition - related party 6,100 0
Payments for restricted stock unit tax vesting 9 6
Payable for acquisition of product rights and licenses $ 1,500 $ 0
v3.21.2
Consolidated Statement of Stockholders' Equity - USD ($)
$ in Thousands
Total
Subsequent To Combination
Common Stock
Class A Common Stock
Common Stock
Class B Common Stock
Additional Paid-in Capital
Stockholders' Accumulated Deficit
Accumulated Other Comprehensive (Loss) Income
Non-Controlling Interests
Non-Controlling Interests
Subsequent To Combination
Shares beginning balance (in shares) at Dec. 31, 2019     147,070,000 152,117,000          
Stockholders' equity beginning balance at Dec. 31, 2019 $ 346,788   $ 1,470 $ 1,522 $ 606,966 $ (377,880) $ (68) $ 114,778  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net (loss) income 74,625         94,096   (19,471)  
Foreign currency translation adjustment (9,748)           (4,795) (4,953)  
Stock-based compensation 15,617       15,617        
Exercise of stock options (in shares)     79,000            
Exercise of stock options 216   $ 1   217   (9) 7  
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (in shares)     438,000            
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (801)   $ 4   227   (25) (1,007)  
Unrealized gain (loss) on cash flow hedge, net of tax (74,031)           (36,409) (37,622)  
Tax distributions (1,170)             (1,170)  
Distribution of earnings to and acquisition of non-controlling interests (3,300)       106     (3,406)  
Shares ending balance (in shares) at Sep. 30, 2020     147,587,000 152,117,000          
Stockholders' equity ending balance at Sep. 30, 2020 348,196   $ 1,475 $ 1,522 623,133 (283,784) (41,306) 47,156  
Redeemable Non-Controlling Interests, beginning balance at Dec. 31, 2019 0                
Increase (Decrease) in Temporary Equity [Roll Forward]                  
Net (loss) income 915                
Tax distributions (458)                
Non-controlling interests from Rondo transaction 11,475                
Distribution of earnings to and acquisition of non-controlling interests 0                
Redeemable Non-Controlling Interests, ending balance at Sep. 30, 2020 11,932                
Shares beginning balance (in shares) at Jun. 30, 2020     147,493,000 152,117,000          
Stockholders' equity beginning balance at Jun. 30, 2020 371,016   $ 1,474 $ 1,522 617,504 (274,809) (39,696) 65,021  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net (loss) income (21,640)         (8,975)   (12,665)  
Foreign currency translation adjustment (1,646)           (810) (836)  
Stock-based compensation 5,415       5,415        
Exercise of stock options (in shares)     21,000            
Exercise of stock options 58   $ 0   59   (3) 2  
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (in shares)     73,000            
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (108)   $ 1   49   (10) (148)  
Unrealized gain (loss) on cash flow hedge, net of tax (1,599)           (787) (812)  
Distribution of earnings to and acquisition of non-controlling interests (3,300)       106     (3,406)  
Shares ending balance (in shares) at Sep. 30, 2020     147,587,000 152,117,000          
Stockholders' equity ending balance at Sep. 30, 2020 348,196   $ 1,475 $ 1,522 623,133 (283,784) (41,306) 47,156  
Redeemable Non-Controlling Interests, beginning balance at Jun. 30, 2020 12,380                
Increase (Decrease) in Temporary Equity [Roll Forward]                  
Net (loss) income (393)                
Tax distributions (55)                
Redeemable Non-Controlling Interests, ending balance at Sep. 30, 2020 11,932                
Shares beginning balance (in shares) at Dec. 31, 2020     147,674,000 152,117,000          
Stockholders' equity beginning balance at Dec. 31, 2020 344,932   $ 1,475 $ 1,522 628,413 (286,821) (41,318) 41,661  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net (loss) income 34,959         17,001   17,958  
Foreign currency translation adjustment (7,348)           (3,626) (3,722)  
Stock-based compensation 20,670       20,670        
Exercise of stock options (in shares)     302,000            
Exercise of stock options 834   $ 3   835   (40) 36  
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (in shares)     1,356,000            
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (2,604)   $ 14   621   (177) (3,062)  
Unrealized gain (loss) on cash flow hedge, net of tax 24,187           11,934 12,253  
Tax distributions   $ (34,464)             $ (34,464)
Non-controlling interests from the KSP Acquisition 2,000             2,000  
Shares ending balance (in shares) at Sep. 30, 2021     149,332,000 152,117,000          
Stockholders' equity ending balance at Sep. 30, 2021 383,166   $ 1,492 $ 1,522 650,539 (269,820) (33,227) 32,660  
Redeemable Non-Controlling Interests, beginning balance at Dec. 31, 2020 11,804                
Increase (Decrease) in Temporary Equity [Roll Forward]                  
Net (loss) income 5,670                
Tax distributions (2,214)                
Redeemable Non-Controlling Interests, ending balance at Sep. 30, 2021 15,260                
Shares beginning balance (in shares) at Jun. 30, 2021     149,209,000 152,117,000          
Stockholders' equity beginning balance at Jun. 30, 2021 390,272   $ 1,490 $ 1,522 642,657 (265,583) (33,979) 44,165  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net (loss) income (7,783)         (4,237)   (3,546)  
Foreign currency translation adjustment (1,164)           (577) (587)  
Stock-based compensation 7,708       7,708        
Exercise of stock options (in shares)     53,000            
Exercise of stock options 153   $ 1   149   (6) 9  
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (in shares)     70,000            
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (147)   $ 1   25   (8) (165)  
Unrealized gain (loss) on cash flow hedge, net of tax 2,711           1,343 1,368  
Tax distributions   $ (8,584)             $ (8,584)
Shares ending balance (in shares) at Sep. 30, 2021     149,332,000 152,117,000          
Stockholders' equity ending balance at Sep. 30, 2021 383,166   $ 1,492 $ 1,522 $ 650,539 $ (269,820) $ (33,227) $ 32,660  
Redeemable Non-Controlling Interests, beginning balance at Jun. 30, 2021 14,112                
Increase (Decrease) in Temporary Equity [Roll Forward]                  
Net (loss) income 1,691                
Tax distributions (543)                
Redeemable Non-Controlling Interests, ending balance at Sep. 30, 2021 $ 15,260                
v3.21.2
Nature of Operations
9 Months Ended
Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations Nature of Operations
Amneal Pharmaceuticals, Inc. (the “Company”) is a pharmaceutical company specializing in developing, manufacturing, marketing and distributing high-value generic and branded specialty pharmaceutical products across a broad array of dosage forms and therapeutic areas. The Company operates principally in the United States, India, and Ireland, and sells to wholesalers, distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly. The Company is a holding company, whose principal assets are common units (“Amneal Common Units”) of Amneal Pharmaceuticals, LLC (“Amneal”). In 2018, Amneal completed the acquisition of Impax Laboratories, Inc. (“Impax”), a generic and specialty pharmaceutical company.
The group, together with their affiliates and certain assignees, who owned Amneal when it was a private company (the “Amneal Group”) held 50.5% of Amneal Common Units and the Company held the remaining 49.5% as of September 30, 2021. Although the Company has a minority economic interest in Amneal, it is Amneal’s sole managing member, having the sole voting power to make all of Amneal’s business decisions and control its management. Therefore, the Company consolidates the financial statements of Amneal and its subsidiaries. The Company records non-controlling interests for the portion of Amneal’s economic interests that it does not hold.
v3.21.2
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States of America, should be read in conjunction with Amneal’s annual audited financial statements for the year ended December 31, 2020 included in the Company’s 2020 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in annual financial statements have been omitted from the accompanying unaudited consolidated financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of September 30, 2021, cash flows for the nine months ended September 30, 2021 and 2020 and the results of its operations, its comprehensive income (loss) and its changes in stockholders' equity for the three and nine months ended September 30, 2021 and 2020. The consolidated balance sheet data at December 31, 2020 was derived from the Company's audited annual financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America.
Except for the updates included in this Note, the accounting policies of the Company are set forth in Note 2. Summary of Significant Accounting Policies contained in the Company’s 2020 Annual Report on Form 10-K.
Contingent consideration
Business acquisitions may include future payments that are contingent upon the occurrence of certain pharmaceutical regulatory milestones or net sales of pharmaceutical products. For acquisitions that are accounted for as a business combination, the obligations for such contingent consideration payments are recorded at fair value on the acquisition date. For contingent milestone payments, the Company uses a probability-weighted income approach utilizing an appropriate discount rate. For contingent tiered royalties on net sales, the Company uses a Monte Carlo simulation model. Contingent consideration liabilities are revalued to fair value at the end of each reporting period. Changes in the fair value of contingent consideration, other than changes due to payments, are recognized as a gain or loss and recorded within change in fair value of contingent consideration in the consolidated statements of operations. Refer to Note 3. Acquisitions and Note 10. Fair Value Measurements for additional information.
Foreign Currencies

The Company has operations in the U.S., India, Ireland, and other international jurisdictions. Generally, foreign subsidiaries’ functional currency is the local currency of operations and the net assets of foreign operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that arise from such translation, as well as exchange gains and losses on intercompany balances of a long-term investment nature, are included in the foreign currency translation adjustments in accumulated other comprehensive loss.
Use of Estimates
The preparation of financial statements requires the Company's management to make estimates and assumptions that affect the reported financial position at the date of the financial statements and the reported results of operations during the reporting period. Such estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The following are some, but not all, of such estimates: the determination of chargebacks, sales returns, rebates, billbacks, valuation of intangible and other assets acquired in business combinations, allowances for accounts receivable, accrued liabilities, initial and subsequent valuation of contingent consideration recognized in business combinations, stock-based compensation, valuation of inventory balances, the determination of useful lives for product rights and the assessment of expected cash flows used in evaluating goodwill and other long-lived assets for impairment. Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides elective amendments for entities that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.  These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), to expand and clarify the scope of Topic 848 to include derivative instruments on discounting transactions. The amendments in this ASU are effective in the same timeframe as ASU 2020-04. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
Reclassification

Prior period balances related to (i) financing lease right-of-use assets of $10 million formerly included in other assets, (ii) current portion of financing lease liabilities of $2 million formerly included in accounts payable and accrued expenses, and (iii) long-term lease liabilities of $2 million formerly included in other long-term liabilities as of December 31, 2020 have been reclassified to their respective balance sheet captions to conform to the current period presentation in the consolidated balance sheets.
v3.21.2
Acquisitions
9 Months Ended
Sep. 30, 2021
Business Combination and Asset Acquisition [Abstract]  
Acquisitions Acquisitions
Kashiv Specialty Pharmaceuticals, LLC Acquisition
On January 11, 2021, the Company and Kashiv Biosciences, LLC (a related party, see Note 15. Related Party Transactions) (“Kashiv”) entered into a definitive agreement for Amneal to acquire a 98% interest in Kashiv Specialty Pharmaceuticals, LLC (“KSP”), a subsidiary of Kashiv focused on the development of innovative drug delivery platforms, novel 505(b)(2) drugs and complex generics (the “KSP Acquisition”).
On April 2, 2021, the Company completed the KSP Acquisition.  Under the terms of the transaction, the cash portion of the consideration was $104 million, comprised of a purchase price of $100 million (including initial and deferred consideration) and a working capital adjustment of $4 million.  The initial cash purchase price was funded by cash on hand. For further detail of the purchase price, refer to the table below.
For the nine months ended September 30, 2021, the Company incurred $3 million in transaction costs associated with the KSP Acquisition, which is recorded in acquisition, transaction-related and integration expenses. Transaction costs associated with the KSP Acquisition were immaterial for the three months ended September 30, 2021 and for both of the three and nine months ended September 30, 2020.

The KSP Acquisition was accounted for under the acquisition method of accounting, with Amneal as the accounting acquirer.
The preliminary purchase price was calculated as follows (in thousands):
Cash, including working capital payments$74,440 
Deferred consideration (1)
30,099 
Contingent consideration (regulatory milestones) (2)
500 
Contingent consideration (royalties) (2)
5,600 
Settlement of Amneal trade accounts payable due to KSP (3)
(7,117)
Fair value consideration transferred$103,522 

(1)The deferred consideration is stated at the preliminary fair value estimate of $30.1 million, which is the $30.5 million contractually stated amount less a $0.4 million discount. The deferred consideration consists of $30 million due on January 11, 2022 and $0.5 million due on March 10, 2022. As the deferred consideration is non-interest bearing, the Company, using guideline companies and market borrowings with comparable risk profiles, discounted the deferred consideration at 1.7% over the period from April 2, 2021 to the maturity dates, for a fair value of $30 million on the date of acquisition. This discount will be amortized to interest expense over the life of the deferred consideration utilizing the effective interest rate method.
(2)Kashiv is eligible to receive up to an additional $8 million in contingent payments upon the achievement of certain regulatory milestones and potential royalty payments from high single-digits to mid double-digits, depending on the amount of aggregate annual net sales for certain future pharmaceutical products. The estimated fair value of contingent consideration on the acquisition date was $6 million and was based on significant Level 3 inputs that were not observable in the market. Key assumptions included the discount rate, probability of achievement of milestones, projected year of payments and expected net product sales. Refer to Note 10. Fair Value Measurements, for additional information on the methodology and determination of this liability.
(3)Represents trade accounts payable due to KSP that were effectively settled upon closing of the KSP Acquisition.
The following is a summary of the preliminary purchase price allocation for the KSP Acquisition (in thousands):
Preliminary Fair Values as of
April 2, 2021
Cash$112 
Restricted cash500 
Prepaid expenses and other current assets381 
Property, plant and equipment5,375 
Goodwill43,830 
Intangible assets56,500 
Operating lease right-of-use assets9,367 
Total assets acquired116,065 
Accounts payable and accrued expenses1,239 
Operating lease liability9,177 
Related party payable127 
Total liabilities assumed10,543 
Non-controlling interests2,000 
Fair value of consideration transferred$103,522 
Total acquired intangible assets of $56.5 million were comprised of marketed product rights of $29.4 million and in-process research and development (“IPR&D”) of $27.1 million.
The acquired intangible assets are being amortized over their estimated useful lives as follows (in thousands):

Fair Value
Weighted-Average
Useful Life (in years)
Marketed product rights$29,400 5.9
The estimated fair value of the in-process research and development and identifiable intangible assets was determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. The assumptions, including the expected projected cash flows, utilized in the purchase price allocation and in determining the purchase price were based on management's best estimates as of the closing date of the KSP Acquisition on April 2, 2021.
Some of the more significant assumptions inherent in the development of those asset valuations included the estimated net cash flows for each year for each asset or product (including net revenues, cost of sales, R&D, selling and marketing costs and working capital / contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and commercial success risks, competitive trends impacting the asset and each cash flow stream, as well as other factors. The underlying assumptions used to prepare the discounted cash flow analysis may change; accordingly, for these and other reasons, actual results may vary significantly from estimated results.
Goodwill is calculated as the excess of the consideration transferred and fair value of the non-controlling interests over the net assets recognized. Of the total goodwill acquired in connection with the KSP Acquisition, $41 million was allocated to the Company’s Generics segment and $3 million was allocated to the Specialty segment, based on the probability weighted cash flows of the assets acquired as of the date of acquisition.
For the three and nine months ended September 30, 2021, the KSP Acquisition contributed operating loss of $8 million and $14 million, respectively, which included approximately $2 million and $4 million of amortization expense from intangible assets acquired in the KSP Acquisition, to the Company’s consolidated results of operations in the corresponding periods. Offsetting the operating loss was a reduction of third-party consulting services and the elimination of royalties due to KSP.
AvKARE and R&S Acquisitions
On December 10, 2019, the Company, through its investment in Rondo Partners, LLC (“Rondo”), entered into an equity purchase agreement (“Rondo Equity Purchase Agreement”) and an operating agreement to acquire approximately a 65.1% controlling financing interest in both AvKARE Inc., a Tennessee corporation, and Dixon-Shane, LLC d/b/a R&S Northeast LLC, a Kentucky limited liability company (“R&S”) (collectively the “Rondo Acquisitions”). Prior to closing, AvKARE, Inc. converted to a limited liability company, AvKARE, LLC. AvKARE, LLC is one of the largest private label providers of generic pharmaceuticals in the U.S. federal agency sector, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. R&S is a national pharmaceutical wholesaler focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.
On January 31, 2020, the Company completed the Rondo Acquisitions.  The purchase price of $294 million, included cash of $254 million and the issuance of long-term promissory notes to the sellers with an aggregate principal amount of $44 million (estimated fair value of $35 million) (the “Sellers Notes”) and a short-term promissory note (the “Short-Term Seller Note”) with a principal amount of $1 million to the sellers.  The cash purchase price was funded by $76 million of cash on hand and $178 million of proceeds from a $180 million term loan.  The remaining $2 million consisted of working capital costs. The Company is not party to or a guarantor of the term loan, Sellers Notes or Short-Term Sellers Note. For further detail of the purchase price, refer to the table below.
For the nine months ended September 30, 2020, there were $1 million of transaction costs associated with the Rondo Acquisitions recorded in acquisition, transaction-related and integration expenses (none for the three and nine months ended September 30, 2021 or three months ended September 30, 2020).
The Rondo Acquisitions were accounted for under the acquisition method of accounting, with Amneal as the accounting acquirer of AvKARE, LLC and R&S.
The purchase price was calculated as follows (in thousands):
Cash$254,000 
Sellers Notes (1)
35,033 
Settlement of Amneal trade accounts receivable from R&S (2)
6,855 
Short-Term Seller Note (3)
1,000 
Working capital adjustment (4)
(2,640)
Fair value consideration transferred$294,248 
(1)In accordance with ASC 805, Business Combinations, all consideration transferred was measured at its acquisition-date fair value. The Sellers Notes are stated at the fair value estimate of $35 million, which is the $44 million aggregate principal amount less a $9 million discount.  The fair value of the Sellers Notes was estimated using the Monte-Carlo simulation approach under the option pricing framework.
(2)Represents trade accounts receivable from R&S that were effectively settled upon closing of the Rondo Acquisitions.
(3)Represents the principal amount due on the Short-Term Seller Note, which approximates fair value. The entire Short-Term Seller Note was repaid in February 2021.
(4)Represents a working capital adjustment pursuant to the terms of the purchase agreement. The entire amount was received in cash by the Company in September 2020.
The following is a summary of the purchase price allocation for the Rondo Acquisitions (in thousands):
Final Fair Values as of
January 31, 2020
Trade accounts receivable, net$46,702 
Inventories71,908 
Prepaid expenses and other current assets11,316 
Related party receivables61 
Property, plant and equipment5,278 
Goodwill103,679 
Intangible assets, net130,800 
Operating lease right-of-use assets - related party5,544 
Total assets acquired375,288 
Accounts payable and accrued expenses62,489 
Related party payables1,532 
Operating lease liabilities - related party5,544 
Total liabilities assumed69,565 
Redeemable non-controlling interests11,475 
Fair value of consideration transferred$294,248 

The acquired intangible assets are being amortized over their estimated useful lives as follows (in thousands):

Fair Values
Weighted-Average
Useful Life
Government licenses$66,700 7 years
Government contracts22,000 4 years
National contracts28,600 5 years
Customer relationships13,000 10 years
Trade name500 6 years
$130,800 
The estimated fair value of the government licenses was determined using the “with-and-without method,” which is a valuation technique that provides an estimate of the fair value of an intangible asset that is equal to the difference between the present value of the prospective revenues and expenses for the business with and without the subject intangible asset in place. The estimated fair values of the government contracts, national contracts, and customer relationships were determined using the “income approach,” which is a valuation technique that provides an estimate of the fair value of an intangible asset based on market participant expectations of the cash flows that an intangible asset would generate over its remaining useful life. The estimated fair value of the trade name was determined using the “relief from royalty method,” which is a valuation technique that provides an estimate of the fair value of an intangible asset equal to the present value of the after-tax royalty savings attributable to owning the intangible asset. The assumptions, including the expected projected cash flows, utilized in the purchase price allocation and in determining the purchase price were based on management's best estimates as of the closing date of the Rondo Acquisitions on January 31, 2020.
Some of the more significant assumptions inherent in the development of those asset valuations included the estimated net cash flows for each year for each asset (including net revenues, cost of sales, selling and marketing costs and working capital / contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, competitive trends impacting the asset and each cash flow stream, as well as other factors. The underlying assumptions used to prepare the discounted cash flow analysis may change; accordingly, for these and other reasons, actual results may vary significantly from estimated results.
The Sellers Notes and redeemable non-controlling interests were estimated using the Monte-Carlo simulation approach under the option pricing framework. The non-controlling interests are redeemable at the option of either the non-controlling interest holder or Amneal. The fair value of the redeemable non-controlling interests considers these redemption rights.
Of the $104 million of goodwill acquired in connection with the Rondo Acquisitions, approximately $70 million was allocated to the Company’s AvKARE segment and approximately $34 million was allocated to the Generics segment.  Goodwill was allocated to the Generics segment as net revenue of products manufactured from Amneal and distributed by the Rondo Acquisitions is reflected in Generics’ segment results.  Goodwill is calculated as the excess of the fair value of the consideration transferred and the fair value of the redeemable non-controlling interests over the fair value of the net assets recognized. Factors that contributed to the recognition of goodwill include Amneal’s intent to diversify its business and open growth opportunities in the large, complex and growing federal healthcare market.
Unaudited Pro Forma Information
The unaudited pro forma combined results of operations for the three and nine months ended September 30, 2021 and 2020 (assuming the closing of the Rondo Acquisitions occurred on January 1, 2019 and the closing of the KSP Acquisition occurred on January 1, 2020) are as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net revenue$528,593 $519,349 $1,556,773 $1,513,505 
Net (loss) income$(5,964)$(24,736)$42,852 $60,923 
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.$(4,174)$(11,358)$18,115 $84,828 

The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the closing of the Rondo Acquisitions taken place on January 1, 2019 and the closing of the KSP Acquisition taken place on January 1, 2020. Furthermore, the pro forma results do not purport to project the future results of operations of the Company.
Adjustments to arrive at the unaudited pro forma information primarily related to increases in cost of goods sold and selling, general and administrative expenses for amortization of acquired intangible assets, net of the applicable tax impact.
v3.21.2
Revenue Recognition
9 Months Ended
Sep. 30, 2021
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized when the Company transfers control of its products to the customer, which typically occurs at a point-in-time, either upon shipment or delivery. Substantially all of the Company’s net revenues relate to products which are transferred to the customer at a point-in-time.
Concentration of Revenue
The following table summarizes revenues from each of our customers which individually accounted for 10% or more of our total gross revenues:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Customer A27 %32 %30 %34 %
Customer B26 %26 %26 %26 %
Customer C27 %26 %26 %24 %
Disaggregated Revenue
The Company's significant therapeutic classes for its Generics and Specialty segments and sales channels for its AvKARE segment, as determined based on net revenue for each of the three and nine months ended September 30, 2021 and 2020 are set forth below (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Generics
Anti-Infective$9,406 $9,813 $24,996 $32,589 
Hormonal107,614 93,580 325,971 271,499 
Antiviral (1)
9,762 9,236 1,560 26,015 
Central Nervous System91,263 107,139 294,182 302,949 
Cardiovascular System35,692 28,517 107,137 82,876 
Gastroenterology17,172 21,371 56,333 59,249 
Oncology21,203 13,927 73,683 45,349 
Metabolic Disease/Endocrine12,893 9,987 26,331 33,395 
Respiratory8,233 10,875 26,874 28,203 
Dermatology14,860 14,818 42,556 42,402 
Other therapeutic classes18,983 22,657 39,857 74,592 
International and other46 — 592 1,947 
Total Generics net revenue347,127 341,920 1,020,072 1,001,065 
Specialty
Hormonal/Metabolic16,422 12,934 49,230 41,033 
Central Nervous System68,869 68,061 201,710 210,428 
Other therapeutic classes7,454 6,873 26,371 18,640 
Total Specialty net revenue92,745 87,868 277,311 270,101 
AvKARE (2)
Distribution48,048 53,399 141,863 116,824 
Government Label29,898 28,902 90,142 75,353 
Institutional7,873 4,890 18,832 12,814 
Other2,902 2,315 8,553 6,332 
Total AvKARE net revenue88,721 89,506 259,390 211,323 
Total net revenue$528,593 $519,294 $1,556,773 $1,482,489 
(1) Antiviral net revenue for the nine months ended September 30, 2021 decreased from the prior year period, primarily due to a decline in Oseltamivir (generic Tamiflu®) sales from lower demand and increased returns activity above historical levels due to decreased influenza activity during the COVID-19 pandemic.
(2) The AvKARE segment consists of the businesses acquired in the Rondo Acquisitions on January 31, 2020. Net revenue for the nine months ended September 30, 2020 represents eight months of activity.
A rollforward of the major categories of sales-related deductions for the nine months ended September 30, 2021 is as follows (in thousands):
Contract
Charge - Backs
and Sales
Volume
Allowances
Cash Discount
Allowances
Accrued
Returns
Allowance
Accrued
Medicaid and
Commercial
Rebates
Balance at December 31, 2020$628,804 $22,690 $174,984 $131,088 
Provision related to sales recorded in the period2,315,814 79,229 72,052 94,421 
Credits/payments issued during the period(2,503,722)(79,526)(64,709)(130,990)
Balance at September 30, 2021$440,896 $22,393 $182,327 $94,519 
v3.21.2
Alliance and Collaboration
9 Months Ended
Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Alliance and Collaboration Alliance and Collaboration
The Company has entered into several alliance, collaboration, license, distribution and similar agreements with respect to certain of its products and services with third-party pharmaceutical companies. The consolidated statements of operations include revenue recognized under agreements the Company has entered into to develop marketing and/or distribution relationships with its partners to fully leverage the technology platform and revenue recognized under development agreements which generally obligate the Company to provide research and development services over multiple periods. The Company's significant arrangements are discussed below.
Distribution, License, Development and Supply Agreement with AstraZeneca UK Limited
In January 2012, Impax entered into an agreement with AstraZeneca UK Limited (“AstraZeneca”) to distribute branded products under the terms of a distribution, license, development and supply agreement (the “AZ Agreement”). The parties subsequently entered into a First Amendment to the AZ Agreement dated May 31, 2016 (as amended, the “AZ Amendment”). Under the terms of the AZ Agreement, AstraZeneca granted to Impax an exclusive license to commercialize the tablet, orally disintegrating tablet and nasal spray formulations of Zomig® (zolmitriptan) products for the treatment of migraine headaches in the United States and in certain U.S. territories, except during an initial transition period when AstraZeneca fulfilled all orders of Zomig® products on Impax’s behalf and AstraZeneca paid to Impax the gross profit on such Zomig® products. Pursuant to the AZ Amendment, under certain conditions, and depending on the nature and terms of the study agreed to with the FDA, Impax agreed to conduct, at its own expense, the juvenile toxicity study and pediatric study required by the FDA under the Pediatric Research Equity Act (“PREA”) for approval of the nasal formulation of Zomig® for the acute treatment of migraine in pediatric patients ages six through eleven years old, as further described in the study protocol mutually agreed to by the parties (the “PREA Study”). In consideration for Impax conducting the PREA Study at its own expense, the AZ Amendment provided for the total royalty payments payable by Impax to AstraZeneca on net sales of Zomig® products under the AZ Agreement to be reduced by an aggregate amount of $30 million to be received in quarterly amounts specified in the AZ Amendment beginning from the quarter ended June 30, 2016 and through the quarter ended December 31, 2020. In the event the royalty reduction amounts exceed the royalty payments payable by Impax to AstraZeneca pursuant to the AZ Agreement in any given quarter, AstraZeneca was required to pay Impax an amount equal to the difference between the royalty reduction amount and the royalty payment payable by Impax to AstraZeneca. Impax’s commitment to perform the PREA Study could have been terminated, without penalty, under certain circumstances as set forth in the AZ Amendment. The Company recognizes the amounts received from AstraZeneca for the PREA Study as a reduction to research and development expense. The PREA Study was completed during March 2021.
In May 2013, Impax’s exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and Impax launched authorized generic versions of those products in the United States. As discussed above, pursuant to the AZ Amendment, the total royalty payments payable by Impax to AstraZeneca on net sales of Zomig ® products under the AZ Agreement was reduced by certain specified amounts beginning from the quarter ended June 30, 2016 and through the quarter ended December 31, 2020, with such reduced royalty amounts totaling an aggregate amount of $30 million. The Company recorded cost of sales for royalties under this agreement of $3 million and $9 million for the three and nine months ended September 30, 2021, respectively, and $3 million and $12 million for the three and nine months ended September 30, 2020, respectively.
Biosimilar Licensing and Supply Agreement
On May 7, 2018, the Company entered into a licensing and supply agreement with Mabxience S.L. for its biosimilar candidate for Avastin® (bevacizumab). The supply agreement was subsequently amended on March 2, 2021 and the licensing agreement was amended on March 4, 2021. The Company will be the exclusive partner in the U.S. market. The Company will pay development and regulatory milestone payments as well as commercial milestone payments on reaching pre-agreed sales targets in the market to Mabxience, up to $78 million. For the nine months ended September 30, 2021, the Company recognized $10 million of research and development expense related to the agreement (none for the three months ended September 30, 2021). For the nine months ended September 30, 2020, the Company expensed a milestone of $5 million in research and development expense related to the agreement (none for the three months ended September 30, 2020).
Agreements with Kashiv Biosciences, LLC
For detail on the Company’s related party agreements with Kashiv Biosciences, LLC, refer to Note 15. Related Party Transactions.
v3.21.2
(Loss) Earnings per Share
9 Months Ended
Sep. 30, 2021
Earnings Per Share [Abstract]  
(Loss) Earnings per Share (Loss) Earnings per Share
Basic (loss) earnings per share of the Company’s class A common stock is computed by dividing net (loss) income attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of class A common stock outstanding during the period. Diluted (loss) earnings per share of class A common stock is computed by dividing net (loss) income attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of class A common stock outstanding, adjusted to give effect to potentially dilutive securities.
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted (loss) earnings per share of class A common stock (in thousands, except per share amounts):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Numerator:
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.$(4,237)$(8,975)$17,001 $94,096 
Denominator:
Weighted-average shares outstanding - basic149,290 147,558 148,771 147,377 
Effect of dilutive securities:
Stock options— — 785 320 
Restricted stock units— — 2,099 925 
Weighted-average shares outstanding - diluted
149,290 147,558 151,655 148,622 
Net (loss) earnings per share attributable to Amneal Pharmaceuticals, Inc.'s class A common stockholders:
Basic$(0.03)$(0.06)$0.11 $0.64 
Diluted$(0.03)$(0.06)$0.11 $0.63 
Shares of the Company's class B common stock do not share in the earnings or losses of the Company and, therefore, are not participating securities. As such, separate presentation of basic and diluted (loss) earnings per share of class B common stock under the two-class method has not been presented.
The following table presents potentially dilutive securities excluded from the computations of diluted (loss) earnings per share of class A common stock (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Stock options
3,102 
(4)
3,923 
(4)
347 
(1)
671 
(1)
Restricted stock units
8,171 
(4)
9,266 
(4)
— — 

Performance stock units
5,184 
(4)
3,001 
(4)
5,184 
(2)
3,001 
(2)
Shares of class B common stock152,117 
(3)
152,117 
(3)
152,117 
(3)
152,117 
(3)
(1)Excluded from the computation of diluted earnings per share of class A common stock because the exercise price of the stock options exceeded the average market price of the class A common stock during the period (out-of-the-money).
(2)Excluded from the computation of diluted earnings per share of class A common stock because the performance vesting conditions were not met for the nine months ended September 30, 2021 and 2020.
(3)Shares of class B common stock are considered potentially dilutive shares of class A common stock. Shares of class B common stock have been excluded from the computations of diluted earnings per common share because the effect of their inclusion would have been anti-dilutive under the if-converted method.   
(4)Excluded from the computation of diluted loss per share of class A common stock because the effect of their inclusion would have been anti-dilutive since there was a net loss attributable to the Company for both the three months ended September 30, 2021 and 2020.
v3.21.2
Income Taxes
9 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the three months ended September 30, 2021, the Company's provision for income taxes and effective tax rates were $4 million and (198.2)%, respectively, compared to $0.1 million and (0.7)%, respectively, for the three months ended September 30, 2020.
For the nine months ended September 30, 2021, the Company’s provision for (benefit from) income taxes and effective tax rates were $7 million and 14.8%, respectively, compared to $(106) million and 349.3%, respectively, for the nine months ended September 30, 2020. The year-over-year change in provision for (benefit from) income taxes was primarily related to a $110 million discrete income tax benefit from the carryback of U.S. Federal Net Operating Loss (“NOL”) deferred tax assets (“DTAs”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).
As of September 30, 2019, the Company established a valuation allowance based upon all available objective and verifiable evidence both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible tax planning strategies. The Company estimated that as of September 30, 2019, it had generated a cumulative consolidated three-year pre-tax loss, which continued as of December 31, 2020.  As a result of the initial September 30, 2019 and December 31, 2020 analyses, the Company determined that it remained more likely than not that it would not realize the benefits of its gross DTAs and therefore maintained its valuation allowance. As of December 31, 2020, this valuation allowance was $423 million, and it reduced the carrying value of these gross DTAs, net of the impact of the reversal of taxable temporary differences, to zero. As of September 30, 2021, based on its evaluation of available positive and negative evidence, the Company had maintained its position with respect to the valuation allowance.
On March 27, 2020, the CARES Act was signed into law. The CARES Act is an emergency economic stimulus package in response to the COVID-19 pandemic which, among other things, includes provisions relating to income and non-income-based tax laws. The CARES Act permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs originating in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate refunds of previously paid income taxes. As a result of the CARES Act in 2020, the Company carried back approximately $345 million in NOLs generated in 2018 to prior taxable income years.
ASC 740, Income Taxes, requires the effect from adjusting deferred tax assets or changes to valuation allowances due to the CARES Act to be recognized as a component of income taxes expense or benefit in the interim period that includes the period in which the legislation is enacted (quarter ended March 31, 2020), and it cannot be allocated to subsequent interim periods by an adjustment of the estimated annual effective tax rate. In the three months ended March 31, 2020, the Company reclassified the 2018 NOL carryback amount for previously paid income taxes to income tax receivable and reversed the corresponding valuation allowance. In carrying back the 2018 loss to an earlier year, the Company is able to benefit the losses at a 35% tax rate rather than the current U.S. corporate tax rate of 21%.  Accordingly, the Company recorded a discrete income tax benefit of $110 million, for the nine months ended September 30, 2020. During July 2020, the Company received a cash refund for $106 million of the $110 million NOL carryback, plus interest of approximately $4 million. During February 2021, the Company received an additional cash refund for $2 million, plus interest. The remainder of the NOL carryback is expected to be received in the next twelve months.
The Company entered into a tax receivable agreement (“TRA”) for which it is generally required to pay the other holders of Amneal Common Units 85% of the applicable tax savings, if any, in U.S. federal and state income tax that it is deemed to realize as a result of certain tax attributes of their Amneal Common Units sold to the Company (or exchanged in a taxable sale) and that are created as a result of (i) the sales of their Amneal Common Units for shares of class A Common Stock and (ii) tax benefits attributable to payments made under the TRA.  In conjunction with the valuation allowance recorded on the DTAs at September 30, 2019, the Company reversed the TRA liability.
The projection of future taxable income involves significant judgment. Actual taxable income may differ from the Company’s estimates, which could significantly impact the timing of the recognition of the contingent liability under the TRA. As noted above, the Company has determined it is more-likely-than-not it will be unable to utilize all of its DTAs subject to the TRA; therefore, as of September 30, 2021, the Company has not recognized the contingent liability under the TRA related to the tax savings it may realize from common units sold or exchanged. If utilization of these DTAs becomes more likely than not in the future, at such time, Amneal will recognize a liability under the TRA as a result of basis adjustments under Internal Revenue Code Section 754. As of both September 30, 2021 and December 31, 2020, the contingent liability, if recognized, amounts to approximately $206 million.
The timing and amount of any payments under the TRA may vary depending upon a number of factors, including the timing and number of Amneal common units sold or exchanged for the Company's class A Common Stock, the price of the Company's class A Common Stock on the date of sale or exchange, the timing and amount of the Company's taxable income, and the tax rate in effect at the time of realization of the Company's taxable income (the TRA liability is determined based on a percentage of the corporate tax savings from the use of the TRA's attributes). Further sales or exchanges occurring subsequent to September 30, 2021 could result in future Amneal tax deductions and obligations to pay 85% of such benefits to the holders of Amneal common units. These obligations could be incremental to and substantially larger than the approximate $206 million contingent liability as of September 30, 2021 described above. Under certain conditions, such as a change of control or other early termination event, the Company could be obligated to make TRA payments in advance of tax benefits being realized. Payments could also be in excess of the tax savings that the Company may ultimately realize.

Any future recognition of these TRA liabilities will be recorded through charges in the Company’s consolidated statements of operations.  However, if the tax attributes are not utilized in future years, it is reasonably possible no amounts would be paid under the TRA.  Should the Company determine that a DTA with a valuation allowance is realizable in a subsequent period, the related valuation allowance will be released and if a resulting TRA payment is determined to be probable, a corresponding TRA liability will be recorded.
v3.21.2
Trade Accounts Receivable, Net
9 Months Ended
Sep. 30, 2021
Receivables [Abstract]  
Trade Accounts Receivable, Net Trade Accounts Receivable, Net
Trade accounts receivable, net is comprised of the following (in thousands):
September 30,
2021
December 31,
2020
Gross accounts receivable$1,092,767 $1,291,785 
Allowance for credit losses(1,524)(1,396)
Contract charge-backs and sales volume allowances(440,896)(628,804)
Cash discount allowances(22,393)(22,690)
Subtotal(464,813)(652,890)
Trade accounts receivable, net$627,954 $638,895 
Concentration of Receivables
The following table summarizes receivables from each of our customers representing 10% or more of the Company’s gross trade receivables:
September 30,
2021
December 31,
2020
Customer A31 %39 %
Customer B24 %20 %
Customer C28 %26 %
v3.21.2
Inventories
9 Months Ended
Sep. 30, 2021
Inventory Disclosure [Abstract]  
Inventories Inventories
Inventories are comprised of the following (in thousands):
September 30,
2021
December 31,
2020
Raw materials
$214,284 $209,180 
Work in process
42,851 40,937 
Finished goods
263,110 240,532 
Total inventories$520,245 $490,649 
v3.21.2
Fair Value Measurements
9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and also includes instruments for which the determination of fair value requires significant judgment or estimation.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period. The following table sets forth the Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 (in thousands):
Fair Value Measurement Based on
September 30, 2021TotalQuoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Liabilities
Interest rate swap (1)
$29,716 $— $29,716 $— 
Deferred compensation plan liabilities (2)
$13,686 $— $13,686 $— 
Contingent consideration liability (3)
$6,400 $— $— $6,400 
December 31, 2020
Liabilities
Interest rate swap (1)
$53,903 $— $53,903 $— 
Deferred compensation plan liabilities (2)
$14,007 $— $14,007 $— 
(1)The fair value measurement of the Company’s interest rate swap classified within Level 2 of the fair value hierarchy is a model-derived valuation as of a given date in which all significant inputs are observable in active markets including certain financial information and certain assumptions regarding past, present, and future market conditions. Refer to Note 11. Financial Instruments for information on the Company's interest rate swap.
(2)As of both September 30, 2021 and December 31, 2020, deferred compensation plan liabilities of $2 million and $12 million were recorded in current and non-current liabilities, respectively. These liabilities are recorded at the value of the amount owed to the plan participants, with changes in value recognized as compensation expense. The calculation of the deferred compensation plan obligation is derived from observable market data by reference to hypothetical investments selected by the participants.
(3)The fair value measurement of contingent consideration liability has been classified as a Level 3 recurring liability as its valuation requires judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for various inputs, the estimated fair value could be higher or lower than what the Company
determined. As of September 30, 2021, contingent consideration liability of $6 million was recorded within related party payable-long term. Refer to Note 3. Acquisitions, for additional information related to the KSP Acquisition.
There were no transfers between levels in the fair value hierarchy during the nine months ended September 30, 2021.
Contingent consideration

On April 2, 2021, the Company completed the KSP Acquisition, which provided for contingent milestone payments of up to an aggregate of $8 million (undiscounted) upon the achievement of certain regulatory milestones, as well as contingent royalty payments that are tiered depending on the net sales amount of aggregate annual net sales for certain future pharmaceutical products.

The following table provides a reconciliation of the contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) through September 30, 2021 (in thousands):

Nine Months Ended
September 30, 2021
Balance, beginning of period$— 
Addition due to the KSP Acquisition6,100 
Change in fair value during period300 
Balance, end of period$6,400 


The fair value measurement of the contingent consideration liabilities was determined based on significant unobservable inputs, including the discount rate, estimated probabilities of success, timing of achieving specified regulatory milestones and the estimated amount of future sales of the acquired products. The contingent consideration liability is estimated by applying a probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for contingent royalty payments, which are then discounted to present value. Changes to the fair value of the contingent consideration liabilities can result from changes to one or a number of the aforementioned inputs. If different assumptions were used for various inputs, the estimated fair value could be higher or lower than what the Company determined.

The following table summarizes the significant unobservable inputs used in the fair value measurement of our contingent consideration liabilities as of September 30, 2021:


Contingent Consideration Liability
Fair Value as of
September 30, 2021
(in thousands)
Unobservable inputRange
Weighted Average(1)
Regulatory Milestones$500Discount rate2.8 %-4.6%3.0%
Probability of payment1.8 %-20.0%16.7%
Projected year of payment2023-20272023
Royalties$5,900Discount rate11.0 %-11.0%11.0%
Probability of payment1.8 %-20.0%18.0%
Projected year of payment2023-20322029

(1) Unobservable inputs were weighted by the relative fair value of each product candidate acquired.

Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
The carrying amounts of cash, accounts receivable and accounts payable approximate their fair values due to the short-term maturity of these instruments.
The Company's outstanding Term Loan falls into the Level 2 category within the fair value level hierarchy. The fair value was determined using market data for valuation. The fair value of the Term Loan as of both September 30, 2021 and December 31, 2020 was approximately $2.6 billion.
The Rondo Term Loan entered into on January 31, 2020 falls into the Level 2 category within the fair value level hierarchy. During the three months ended September 30, 2021, the Company prepaid $25 million towards the outstanding principal of the Rondo Term Loan. The fair value of the Rondo Term Loan at September 30, 2021 and December 31, 2020 was $141 million and $172 million, respectively.
The Sellers Notes fall into the Level 2 category within the fair value level hierarchy. The carrying value of the Sellers Notes at September 30, 2021 and December 31, 2020 was $38 million and $36 million, respectively, which approximate their fair values.
Refer to Note 17. Debt in our 2020 Annual Report on Form 10-K for detailed information about our indebtedness, including definitions of terms.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
There were no non-recurring fair value measurements during the nine months ended September 30, 2021 and 2020.
v3.21.2
Financial Instruments
9 Months Ended
Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments Financial Instruments
The Company uses an interest rate swap to manage its exposure to market risks for changes in interest rates.
Interest Rate Risk
The Company is exposed to interest rate risk on its debt obligations.  The Company's debt obligations consist of variable-rate and fixed-rate debt instruments.  The Company's primary objective is to achieve the lowest overall cost of funding while managing the variability in cash outflows within an acceptable range.  In order to achieve this objective, the Company has entered into an interest rate swap on the Term Loan.
Interest income earned on cash and cash equivalents may fluctuate as interest rates change; however, due to their relatively short maturities, the Company does not hedge these assets or their investment cash flows because the impact of interest rate risk is not material.
Interest Rate Derivative – Cash Flow Hedge
The interest rate swap involves the periodic exchange of payments without the exchange of underlying principal or notional amounts. In October 2019, the Company entered into an interest rate lock agreement for a total notional amount of $1.3 billion to hedge part of the Company's interest rate exposure associated with the variability in future cash flows from changes in the one-month LIBOR associated with its Term Loan.
As of September 30, 2021, the total loss, net of income taxes, related to the Company’s cash flow hedge was $30 million, of which $15 million was recognized in accumulated other comprehensive loss and $15 million was recognized in non-controlling interests.
A summary of the fair values of derivative instruments in the consolidated balance sheets was as follows (in thousands):
September 30, 2021December 31, 2020
Derivatives Designated as Hedging InstrumentsBalance Sheet
Classification
Fair ValueBalance Sheet
Classification
Fair Value
Variable-to-fixed interest rate swapOther long-term liabilities$29,716 Other long-term liabilities$53,903 
v3.21.2
Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Goodwill and Intangible Assets
The changes in goodwill for the nine months ended September 30, 2021 and for the year ended December 31, 2020 were as follows (in thousands):
September 30,
2021
December 31,
2020
Balance, beginning of period$522,814 $419,504 
Goodwill acquired during the period43,830 103,679 
Currency translation(238)(369)
Balance, end of period$566,406 $522,814 
As of September 30, 2021, $364 million, $133 million, and $70 million of goodwill was allocated to the Specialty, Generics, and AvKARE segments, respectively. As of December 31, 2020, $361 million, $92 million, and $70 million of goodwill was allocated to the Specialty, Generics, and AvKARE segments, respectively. Refer to Note 3. Acquisitions for additional information related to goodwill acquired during the respective periods.
Intangible assets at September 30, 2021 and December 31, 2020 were comprised of the following (in thousands):
September 30, 2021December 31, 2020
Weighted-Average
Amortization Period
(in years)
CostAccumulated
Amortization
NetCostAccumulated
Amortization
Net
Amortizing intangible assets:
Product rights8.3$1,180,005 $(434,824)$745,181 $1,153,096 $(328,587)$824,509 
Other intangible assets5.1133,800 (51,779)82,021 133,800 (33,078)100,722 
Subtotal$1,313,805 $(486,603)$827,202 $1,286,896 $(361,665)$925,231 
In-process research and development
405,525 — 405,525 379,395 — 379,395 
Total intangible assets$1,719,330 $(486,603)$1,232,727 $1,666,291 $(361,665)$1,304,626 

During the nine months ended September 30, 2021, the Company recognized $57 million of intangible assets associated with the KSP Acquisition, consisting of $29 million of product rights and $27 million of IPR&D. Product rights are amortized to cost of goods sold over their estimated useful lives. During the nine months ended September 30, 2020, the Company recognized $131 million of intangible assets associated with the Rondo Acquisitions, of which all are classified in other intangible assets in the table above.  These intangible assets consist of government licenses, government contracts, national contracts, customer relationships and a trade name and are amortized to selling, general, and administrative over their estimated useful lives.  Refer to Note 3. Acquisitions for additional information.
Amortization expense related to intangible assets recognized is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Amortization$43,809 $44,548 $129,001 $131,100 
The following table presents future amortization expense for the next five years and thereafter, excluding $406 million of IPR&D intangible assets (in thousands):
Future
Amortization
Remainder of 2021$43,701 
2022164,385 
2023150,681 
2024140,269 
2025100,177 
Thereafter227,989 
   Total$827,202 

The Company reviews intangible assets with finite lives for recoverability whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, and reviews indefinite-lived intangible assets, including IPR&D, are tested for impairment if impairment indicators arise and, at a minimum, annually.
For the three months ended September 30, 2021, the Company recognized a $0.7 million intangible asset impairment, which was recognized in cost of goods sold impairment charges. For the nine months ended September 30, 2021, the Company recognized $1.4 million of intangible asset impairments, of which $0.7 million was recognized in cost of goods sold impairment charges and $0.7 million was recognized in in-process research and development impairment charges.
The impairment charges for the three months ended September 30, 2021 was related to two marketed products which experienced significant price erosion during 2021. The impairment charges for the nine months ended September 30, 2021 related to the two aforementioned marketed products, and one IPR&D product, which experienced a delay in its estimated launch date.
For the three months ended September 30, 2020, the Company recognized a $32 million intangible asset impairment, which was recognized in cost of goods sold impairment charges. For the nine months ended September 30, 2020, the Company recognized $36 million of intangible asset impairments, of which $35 million was recognized in cost of goods sold impairment charges and $1 million was recognized in in-process research and development impairment charges.
The impairment charge for the three months ended September 30, 2020 was related to one marketed product for which the supply agreement ended under an early termination due to market conditions.
The impairment charges for the nine months ended September 30, 2020 were primarily related to six marketed products and two IPR&D products.  For the marketed products, four products experienced significant price erosion during 2020, without an offsetting increase in customer demand, resulting in significantly lower than expected future cash flows and negative margins, while one product had its contract terminated, and one product’s supply agreement ended under an early termination due to market conditions. The IPR&D charges were associated with two products, one of which experienced a delay in its estimated launch date and the other of which was canceled due to the withdrawal of our development partner.